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"isp:CashFlowsFromUsedInFinancialLiabilitiesClassifiedAsOperatingactivitiesFairValueChanges", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-7": { "value": "+8.768 ", "dimensions": { "concept": "isp:CashFlowsFromUsedInFinancialLiabilitiesClassifiedAsOperatingactivitiesOtherChanges", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-907": { "value": "A.1 \u2013 GENERAL CRITERIA SECTION 1 \u2013 DECLARATION OF COMPLIANCE WITH IAS/IFRS As set forth by Legislative Decree 38 of 28 February 2005, the Intesa Sanpaolo Group\u2019s consolidated financial statements have been prepared in compliance with the IAS/IFRS issued by the International Accounting Standards Board (IASB) and the related interpretations of the International Financial Reporting Standards - Interpretations Committee (IFRS-IC) and endorsed by the European Commission as provided for by EC Regulation 1606 of 19 July 2002. The consolidated financial statements as at 31 December 2022 have been prepared based on the \u201cInstructions for the preparation of the separate and consolidated financial statements of banks and financial companies, which are parent companies of banking groups\u201d issued by the Bank of Italy, in the exercise of powers set forth by Article 43 of Legislative Decree 136/2015 ( ) , with Regulation of 22 December 2005, which issued Circular 262/2005, and with the subsequent updates of 18 November 2009, 21 January 2014, 22 December 2014, 15 December 2015, 22 December 2017, 30 November 2018 and 29 October 2021 70 . These Instructions set out compulsory financial statement forms, as well as the contents of the Notes to the consolidated financial statements. The financial statements have been prepared using the IAS/IFRS in force as at 31 December 2022 (including the SIC and IFRIC interpretation documents) as listed in the attachments to these financial statements. The table below shows the new standards or amendments to existing ones, together with the related European Commission endorsement regulations, which came into force in 2022. 69 Art. 43 of Legislative Decree 136/2015 confirmed to the Bank of Italy the powers concerning the layouts of financial statements already previously attributed to the same Authority by Legislative Decree 38/2005. 70 The 8th update of 17 November 2022, which amends Circular no. 262 to take account of the new IFRS 17 Insurance Contracts, which will be effective from 1 January 2023, will apply from the financial statements for the periods ending on or after 31 December 2023. ", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1024": { "value": "Adoption of IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments by the Group\u2019s Insurance Companies This paragraph provides disclosure on the main impacts expected from the introduction of the new IFRS 17 Insurance Contracts, as well as the application of IFRS 9 Financial Instruments for the Group\u2019s Insurance Companies, in relation to the requirements of IAS 8, paragraphs 30 and 31, and in accordance with the guidance from the European Securities and Markets Authority (ESMA) 72 . The interaction between the two standards - IFRS 17 and IFRS 9 - which the companies of the Insurance Division will apply simultaneously and for the first time from 1 January 2023 is also illustrated. Note that the disclosure on the transition to the new standards will be provided in the 2023 Interim Statement, which will be the first financial report published following the first-time adoption of the two standards, and will contain the information required by the IFRSs and by the ESMA. The new IFRS 17 published by the IASB in May 2017 and subject to subsequent amendments published on 25 June 2020 and 9 December 2021, was endorsed by Regulation (EU) No. 2036/2021 of 19 November 2021 and will be effective from 1 January 2023. The European endorsement regulation makes it possible, on an optional basis, to exempt intergenerationally- mutualised and cash flow matched contracts from the application of the obligation of grouping into annual cohorts set out by IFRS 17. Moreover, with Regulation no. 1491/2022 of 8 September 2022, several narrow-scope amendments were introduced for the preparation of comparative information upon initial application of IFRS 17 and IFRS 9. Note that IFRS 9 Financial Instruments, issued by the IASB in July 2014 and endorsed by the European Commission through Regulation No. 2067/2016, replaced IAS 39 in the requirements for the classification and measurement of financial instruments with effect from 1 January 2018. The Intesa Sanpaolo Group, as a financial conglomerate primarily engaged in banking activities, has exercised the option of adopting the Deferral Approach (or Temporary Exemption), according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39, until the entry into force of the new financial reporting standard on insurance contracts (IFRS 17) on 1 January 2023. The deferral of the adoption of IFRS 9 by the companies of the Insurance Division thus means that, starting from 1 January 2018, different accounting standards need to be applied for the financial assets and liabilities within the Group\u2019s consolidated financial statements. In this context, from 1 January 2023, the Group Insurance Division will apply IFRS 9 and IFRS 17 together for the first time. The implementation of IFRS 9 by the Insurance Division is consistent with the accounting policies defined by the Intesa Sanpaolo Group to ensure the correct and uniform application of the new standard at consolidated level. IFRS 17 Insurance Contracts Overview of IFRS 17 IFRS 17 replaces IFRS 4, which, from the time of its initial publication, was considered an interim standard and \u2013 as such \u2013 its objectives did not include establishing a single approach for the presentation of insurance contracts, referring to the accounting models set out in local regulations of the individual countries. Addressing this aspect \u2013 together with better disclosure regarding the operating performance of the insurance contracts \u2013 therefore forms the basis of the new standard. The main provisions of the standard are illustrated below: \u2012 initial recognition of the insurance liability: when the contract is signed with the policyholder, the insurance entity recognises a liability whose amount represents the sum of the present value of the expected contractual cash flows (Present Value Future Cash Flows \u2013 \u201cPVFCF\u201d), also including an appropriate Risk Adjustment (\u201cRA\u201d) to cover non- financial risks and the Contractual Service Margin (\u201cCSM\u201d), which represents the present value of the future profits on insurance contracts; \u2012 grouping of contracts: the application of IFRS 17 involves the identification of \u201cportfolios\u201d of insurance contracts (groups of contracts that are subject to similar risks and managed together). Each portfolio is further subdivided into groups consisting of contracts with similar characteristics in terms of expected profitability, thus distinguishing between profitable contracts (with a positive contractual service margin) and onerous contracts (with a negative contractual service margin); \u2012 the measurement models envisaged by the standard: IFRS 17 envisages a measurement model known as General Model (\u201cGM\u201d) applicable in principle to all contracts, except for contracts with direct participation features, for which the Variable Fee Approach (\u201cVFA\u201d) is applied, if the eligibility criteria based on the nature of the participation features are met. There is also an optional simplified model (Premium Allocation Approach \u2013 \u201cPAA\u201d) for the valuation of the Liability for Remaining Coverage (\u201cLRC\u201d, similar to the reserve for unearned premiums or premium carry-forward) for contracts with a coverage period of one year or less and for all contracts where the valuation is not materially different from that resulting from the application of the General Model; \u2012 transition: upon first-time adoption, IFRS 17 requires that all contracts in the portfolio are accounted for as if the rules introduced had always been in force; this transition approach is referred to as the Full Retrospective Approach (\u201cFRA\u201d). Given that its application can be very complex due to the unavailability of the time series of the attributes required to manage the breadth of the data model envisaged by IFRS 17, which enables its full application, the standard allows the possibility of using two other approaches, optional to each other: o the Modified Retrospective Approach (\u201cMRA\u201d), which approximates the results obtained from the FRA using a retrospective approach, including some simplifications regarding the estimation of the CSM, the level of aggregation of the contracts, the use of annual cohorts and the discount rates to be used; o the Fair Value Approach (\u201cFVA\u201d), according to which the CSM/Loss Component (in the case of onerous contracts) is calculated as the difference between the fair value of the group of contracts to which it refers and the value of the Fulfilment Cash Flows at the same date (consisting of the sum of the PVFCF and RA); \u2012 subsequent measurement of the insurance liability: IFRS 17 requires an update to the measurement at each reporting period of the above elements (cash flows and contractual service margin), to verify the consistency of the estimates with the current market conditions. The effects of any updates are recorded in the financial statements at the first reporting date: in profit or loss for changes relating to current events or events that have already occurred or as a reduction of the contractual service margin (CSM) when the changes relate to future events. Solely with regard to changes in financial variables (and not the others, i.e. mainly related to policyholder behaviour), it is left to the entities to decide \u2013 for each grouping of contracts \u2013 whether to present the effects of the changes through profit or loss or through other comprehensive income (the so called OCI option); \u2012 measurement of the insurance revenue: IFRS 17 requires the presentation in profit or loss of the earnings \u201cby margins\u201d achieved during the life of the policies, i.e. when the entity provides the services to the insured, and does not therefore require the recognition of any revenue at the time of entering into the contract. With regard to that aspect, the standard is asymmetrical, as, for groups of onerous contracts, it requires immediate recognition of losses through profit or loss; \u2012 measurement of the performance: with a view to providing disclosure that ensures better comparability of the performance of the insurance companies, a distinct and separate presentation is required of the two main components that typically contribute to making up the earnings of insurance undertakings: the first, which represents the profit from the insurance service provided (the \u201ctechnical margin\u201d) and the second, which brings together all the financial components (results of investments, effects of financial variables used in the valuations of the contracts, etc.). Changes in the future estimates of premiums linked to the outstanding contracts at the reporting date (cash flows to be received) and payments (cash flows to be paid) are recognised in profit or loss over the entire remaining contractual lifetime of the policies concerned. With reference to the representation of IFRS 17 in the consolidated financial statements of banks leading financial conglomerates, note that on 17 November 2022 the Bank of Italy published the 8th update to Circular no. 262 of 22 December 2005, which will be applicable starting from financial statements as at 31 December 2023. In order to reduce the burden of preparation for banks, in drafting the update, the Bank of Italy considered the equivalent provisions issued by IVASS 73 with reference to IAS/IFRS insurance financial statements, providing a reference to the provisions issued by IVASS for the aspects relating to insurance contracts pertaining to consolidated insurance companies. The changes introduced regard the alignment of the consolidated financial statement and the related disclosure in the notes to the consolidated financial statements to the provisions of IFRS 17, which amended IAS 1 and IFRS 7, and the alignment with the provisions issued by IVASS. Specifically, in the consolidated balance sheet, the captions \u201cInsurance liabilities\u201d and \u201cInsurance assets\u201d provide information on the insurance contracts issued and reinsurance contracts held. With reference to the consolidated income statement, income from insurance business shall distinguish between income/expenses for insurance services and net financial income/expenses relating to insurance contracts issued and reinsurance contracts held. The notes to the consolidated financial statements are aligned, according to the provisions issued by IVASS, to present disclosure on the nature and extent of risks arising from insurance contracts, pursuant to the provisions of IFRS 17. The Bank of Italy did not make changes regarding the presentation of IFRS 9 amounts. Therefore, financial instruments belonging to insurance companies (including insurance products to which IFRS 9 is applied) in the financial statement forms pursuant to Circular 262 shall be presented along with those of the bank and, where necessary, specific evidence shall be provided in the tables of the Notes. Implementation Project for the Insurance Division: organisational and information system impacts Within the Intesa Sanpaolo Group, IFRS 17 is applicable to the insurance products and investment products with discretionary participation features of the Insurance Division. The IFRS 17 implementation project for the Insurance Division started in June 2019 and is divided into several strands that have been set up uniformly for all the companies of the Insurance Division, taking into account the specific business characteristics of each company: \u2012 definition of the methodological framework: the key topics have been identified, corresponding to the related approaches set out in the Technical Papers, in terms of product classification, determination of future cash flows and calculation of the CSM; \u2012 evolution of information systems: the \u201cBig Picture\u201d of this project, which includes the mapping of applications and their IT interfaces, established in December 2020, has been maintained and implemented also for the insurance companies subsequently acquired, and envisages the same IT structure for all the companies of the Insurance Division, taking into account their specific characteristics. Moreover, the analysis and preparation of the business requirements have been carried out. As at 30 June 2022, the implementation had been completed aimed at including the part of the processes relating to the calculation of the forward-looking measures introduced by IFRS 17 (mainly cash flows, risk adjustment and CSM) into the accounting and financial reporting process. Lastly, the IT developments for the actuarial engines have been completed; \u2012 training activities: these activities were planned for the entire duration of the project and allocated across the technical and operational areas and top management, and envisage specific sessions dedicated to the directors of the companies of the Insurance Division and the Parent Company; \u2012 changes to processes and internal procedures: the target operating model has been formalised, i.e. the design and formalisation of the systems, organisational processes and the offices responsible for them, in order to control the new process for preparing the financial statements; \u2012 transition and parallel running in 2022: the work on the quantification of the opening balances as at 1 January 2022 and the calculation of the comprehensive income for 2022 has been completed. The production in the IT systems of the comparative information for the quarters of 2022 has been started for all the companies of the Insurance Division. From an organisational perspective, in addition to the process for the preparation of the financial statements, the IFRS 17 project includes the implementation of systems and processes related to planning and control and asset and liability management, in order to ensure the Group companies\u2019 management capabilities according to the new metrics introduced by IFRS 17. During 2022 a specific project was also launched at the Parent Company, which involved several departments in the CFO and COO areas, and operates in full synergy with the Insurance Division and the related project to implement IFRS 17 with regard to the presentation of the balance sheet and income statement amounts typical of IFRS 17 in the Consolidated financial statements of Intesa Sanpaolo pursuant to IFRS 10. Lastly, periodic meetings were held with the Independent Auditors EY to enable discussion of the methodological choices identified in the project. 73 Reference is made to ISVAP Regulation no. 7 of 13 July 2007, as amended by Order no. 121 of 7 June 2022. Group methodological choices The main methodological choices faced by the Group concerned the definition of the discount curve, the quantification of the cash flows according to IFRS 17, and the quantification of the CSM for the consolidated financial statements of the Intesa Sanpaolo Group, which differs from the CSM of the Insurance Division, to take the actual distribution/management costs into account in the future flows of insurance liabilities rather than the fees settled between Group companies. The main methodological choices made by the Intesa Sanpaolo Group are reported below: \u2012 Level of aggregation and carve-out option on cohorts: the level of aggregation enables the definition of the granularity to be used to assess the profitability of a group of contracts, by grouping in the same portfolio contracts that: o have similar risks and are managed together; o have the same expected profitability upon issue (profitability bucket); o belong to the same generation (annual cohort). With reference to the first point, the Group has adopted the choice of aggregating the contracts belonging to the Non-Life Business based on the Solvency II Line of Business (\u201cLoB\u201d) they belong to. For the Life Business, groups of contracts are aggregated by grouping in a single portfolio products included in the same Separate Management, Multi-Line products for each Separate Management, Unit-Linked products, products linked to Pension Funds and pure risk products (e.g. temporary death policies). With regard to contracts relating to Multi-Line products or linked to a Separate Management, the Group has decided to exercise the option not to apply the Annual Cohort requirement (so-called \u201ccarve-out\u201d), as allowed in the IFRS 17 Endorsement Regulation at European level, and therefore to aggregate these types of contracts only based on the concept of similar risks and uniform management and belonging to the same profitability bucket. \u2012 Discount curve: the Group has decided to use a bottom-up approach, which involves using risk-free rates with the addition of a liquidity premium, estimated based on the risk premium inherent in each company\u2019s securities portfolio, broken down by individual separate management, unit-linked portfolio, pension funds and free portfolio. \u2012 Risk adjustment: it is determined using a Value at Risk (VaR) approach that estimates the uncertainty of the non-financial risks based on the 75th percentile of the specific distribution of each risk considered. \u2012 Variable Fee Approach (VFA): as noted above, the VFA is a mandatory model required by the standard for contracts involving significant discretionary participation features for the policyholders. To determine whether discretionary participation features are significant, both a qualitative and quantitative test is performed to verify the requirements. Within the Insurance Division\u2019s products, all the insurance Linked contracts and all the contracts linked to a separate management, both individual and Multi-Line, are measured using the Variable Fee Approach. \u2012 Premium Allocation Approach (PAA): as already mentioned, the PAA is an optional method applicable to contracts with a duration of less than one year or to contracts with a duration of more than one year for which it is demonstrated that the application of the PAA model does not lead to results that are significantly different from those that would be obtained with the general model. The Group has decided to apply this model solely to the Non-Life Business, with the general rule being to use the PAA model for insurance policies with a duration of one year or less. \u2012 Coverage units: these are the drivers used to determine the CSM release to profit or loss, taking into account the amount of service provided to the policyholders and the expected duration of the group of contracts. The coverage units are determined differently based on whether they relate to Life Business or Non-Life Business. Specifically, for the Non-Life Business, the coverage units are identified by the earned premiums for the period, while for the Life Business, they are identified by the insured capitals for the period with respect to the whole life insured capitals, which represent the company\u2019s commitment to the policyholders during the valuation period. \u2012 Contract boundaries: the determination of the contract boundaries is used to establish whether a particular contractual option is to be included in the cash-flow projection as soon as the contract is issued or whether the exercise of that option will result in the generation of a new group of contracts. The IFRS 17 contract boundaries include all the contractual options that establish the conditions for exercising the option in terms of pricing, already at the time when the contracts are issued. If the exercise of the option does not have conditions predetermined upon issue and the conditions are only defined at a later date or at the time of exercise by the policyholder, they are not included in the IFRS 17 contract boundaries and are not projected in the cash flows of the host contract; the exercise of the option generates a new group of contracts different from that of the host contract. - Transition approach: the Group has decided to use all three transition approaches envisaged by the standard based on the availability of the historical data required by the standard for determining the CSM at the FTA date. Specifically, the Full Retrospective Approach is used for the most recent generations of contracts, except for the acquired companies (ISP RBM Salute and former UBI), for which the Fair Value Approach is used. For multi-line life contracts and older non- life contracts the Modified Retrospective Approach is used, while for the remaining products and annuities the Fair Value Approach is used. The main simplifications used by the Group in applying the Modified Retrospective Approach are: o use of annual cohorts: the Group adopts the simplifications set out in the standard and aggregates the annual cohorts into a single Unit of Account for the Life and Non-Life Businesses; o discount rate: calculation of the discount rates using the median of the last 5 curves reconstructed for the years of valuation prior to the transition date; o no calculation of the closing balances for the previous periods. \u2012 Quantification of the CSM for the Consolidated financial statements: under IFRS 17, in order to quantify cash flows, the management of intragroup transactions entails the need to \u201creplace\u201d the intragroup costs projected by the Insurance Division in the estimate of its standalone accounting values (typically fees paid to the banking distribution network) with the costs incurred by the Group with third parties. That operation may entail the recognition of expected profit (CSM) which differs between the individual Group companies and the Group as a whole. The ESMA, in its annual statement on priorities for financial reports 74 , highlights the importance of consistently applying the consolidation requirements pursuant to IFRS 10 in order to guarantee the correct application of IFRS 17 in the consolidated financial statements. Specifically, the ESMA notes that where banks of the group distribute insurance products, the consolidated CSM will often differ from the insurance CSM. 74 ESMA Public Statement \u201cEuropean common enforcement priorities for 2022 annual financial reports\u201d of 30 October 2022, referred to above. \u2012 Impacts of IFRS 17 on Alternative Performance Measures: as a result of the changes introduced by the application of the new standard, the Group is assessing the best methods for presenting the insurance business in the reclassified balance sheet and income statement. \u2012 Interaction between IFRS 17 and IFRS 9 and use of the OCI option: in some cases, the interaction between IFRS 17 and IFRS 9 may generate accounting mismatches between the way insurance contracts and related financial assets are accounted for. In order to reduce these mismatches, IFRS 17 allows for a disaggregation of financial income and expenses from insurance contracts between the profit or loss (financial result) and other comprehensive income (OCI). The choice of disaggregation is made at portfolio level for the insurance contracts and must be made consistently with the valuation approach used for the assets. In particular: o with regard to contracts valued using the General Model and the Premium Allocation Approach, the financial revaluation of future cash flows and risk adjustment at historical rates is recognised through profit or loss, while the difference between the revaluation at historical and current rates is recognised through other comprehensive income; o for contracts valued under the Variable Fee Approach, IFRS 17 requires the financial result of insurance contracts to be disaggregated between profit or loss and other comprehensive income. In essence, the difference between the financial result of insurance contracts and the financial result through profit or loss arising from the underlying financial instruments is reclassified to other comprehensive income (mirroring). In accordance with IFRS 9, the Insurance Division finalised the definition of the \u201cto be\u201d business model: Hold To Collect and Sell for debt financial instruments, except for those connected to linked products and open pension funds (to which the \u201cOther\u201d Business Model will be applied). With regard to the classification of equity instruments that come under the scope of IFRS 9, the Insurance Division will apply their fair value measurement through profit or loss. As a result, in order to reduce potential accounting mismatches, the Group has decided to adopt the OCI option on all the insurance contract portfolios, except for the unit-linked policies not connected to multi-line products and open pension funds. For more details on financial assets, see the paragraph below on the adoption of IFRS 9 by the Group\u2019s Insurance Companies. Main differences between the IFRS 17 framework and Solvency II The main differences between IFRS 17 and Solvency II in relation to the valuation of insurance liabilities primarily relate to the identification of the contract boundaries, the determination of the discount curve, and the method of calculation of the Prudent Margin (respectively Risk Adjustment or Risk Margin). In particular: \u2012 with regard to the contract boundaries, the main differences concern both the determination criteria and the frequency of the valuation. Under Solvency II, the contract boundaries are based on a risk approach for the company and are determined at each valuation date; under IFRS 17, they are based on the possibility of re-pricing by the company and are determined when the contracts are issued; \u2012 with regard to the discount curves, the main difference concerns the approach and granularity used for the calculation of the discount curve. Specifically, for Solvency II there is a single discount curve composed of a risk-free base curve plus a liquidity premium (volatility adjustment), defined by the EIOPA on the basis of an average market benchmark portfolio. In the IFRS 17 framework, on the other hand, the discount curves for each identified portfolio can be calculated on the basis of specific reference asset pools; \u2012 for the Prudent Margin, the difference between Risk Margin and Risk Adjustment is due to both a different calculation approach and a different scope of identified risks. The Solvency II Risk Margin is calculated using a Cost of Capital approach, applied to the company\u2019s capital requirement assessed with a 95% percentile, considering the technical risks, credit risk and operational risk. For the IFRS 17 Risk Adjustment, the standard does not envisage a standard approach, but only its determination on the basis of specific non-financial risks. Note that no impacts are expected on the Solvency II synthetic indicator for the Insurance Group following the introduction of IFRS 17. Income statement and balance sheet impacts The new standard envisages the introduction of new balance sheet figures and different ways of recognising the profitability of insurance products in the companies\u2019 financial statements, which will lead to both balance sheet impacts upon first-time adoption of the standard and volatility in the income statement once the standard is being implemented. Specifically, upon transition to the new standard \u2013 1 January 2022 - the captions previously recognised pursuant to IFRS 4 (technical reserves) and IFRS 3 (Value of Business Acquired, VoBA, recognised upon purchase price allocation \u2013 PPA - as intangible assets with a finite useful life), which do not meet the requirements for recognition pursuant to the new IFRS 17 will be reversed, and new IFRS 17 insurance liabilities will be recognised in the components Present Value of Future Cash Flows, Risk Adjustment and CSM. The cumulative effect of first-time adoption of IFRS 17 (impact as at 1 January 2022 and delta in the 2022 income statement) will be recognised as at 1 January 2023 as a balancing entry for a specific retained earnings reserve (also called \u201cFirst-time adoption reserve\u201d). The balance sheet impact upon first-time adoption mainly depends on the level of market rates at the transition date (a lower rate level corresponds to a higher negative balance sheet impact), as well as the transition approaches adopted. On the other hand, the income statement result is closely related to how the CSM is released over time and how it is adjusted following revisions to the operational and financial assumptions included in the cash flow and risk adjustment. Based on the analyses and implementations carried out, the following effects are estimated: \u2012 the total impact to be recognised in shareholders\u2019 equity upon transition to the new accounting standard as at 1 January 2022 is estimated to be around -1 billion euro net of tax, and is attributable: o on one hand, to the impact of the different measurement criteria for insurance liabilities pursuant to IFRS 17, in place of the previous criterion set out by IFRS 4, whose effect is attributable mainly to the measurement of separate management that has high guaranteed minimum yields; and o on the other, to the derecognition of the Value of Business Acquired (VoBA) recognised pursuant to IFRS 3 upon PPA following business combinations; \u2012 the amount of the CSM calculated at consolidated level at the transition date - 1 January 2022 - is 9.3 billion euro; \u2012 at the date of initial application of the standard - 1 January 2023 - the overall impact, which is currently under calculation, is estimated to be not significantly different from the amount estimated as at 1 January 2022; \u2012 the related prudential impacts estimated as at 1 January 2023 amount to around -20 bps on CET1, considering the application of the \u201cDanish Compromise\u201d. For regulatory purposes, note that the Intesa Sanpaolo Group, as a \u201cfinancial conglomerate\u201d, has been authorised to apply the \u201cDanish Compromise\u201d, which allows for the 370% weighting of significant investments in insurance subsidiaries instead of their deduction from CET1. IFRS 9 Financial Instruments The companies of the Insurance Division have participated, through the Insurance Parent Company Intesa Sanpaolo Vita, in the Intesa Sanpaolo Group project launched in September 2015 and aimed at investigating the various areas of influence of IFRS 9, defining its qualitative and quantitative impacts, and identifying and implementing the necessary application and organisational measures. In particular, account has been taken of the objective of pursuing the uniform adoption of the accounting standard, also in the presence of insurance operations linked in particular to the specific characteristics of products under separate management. Classification and Measurement In order to comply with the provisions of IFRS 9 \u2013 which introduces a model where the classification of financial assets is guided, on the one hand, by the contractual cash flow characteristics of the instruments and, on the other hand, by the management intent for which they are held \u2013 the methods for performing the test on the contractual cash flow characteristics (known as the SPPI Test) have been drawn up, while the definition of the \u201cto be\u201d business models has been finalised. With regard to the SPPI test on financial assets, the Insurance Division will adopt the approach defined at Intesa Sanpaolo Group level and used from 2018. The analysis has also been completed of the composition of the securities and loans portfolios currently in place, to identify their correct classification at the time of first-time adoption (FTA) of the new standard. With regard to debt securities, a detailed examination of the cash flow characteristics of instruments classified in the Financial assets available for sale category according to IAS 39 and at amortised cost has been carried out in order to identify the assets that have not passed the SPPI test and will therefore be measured at fair value through profit or loss in accordance with IFRS 9. According to the analyses conducted in the Insurance Division, only a non-material percentage of the debt securities \u2013 with respect to the portfolio as a whole \u2013 failed the SPPI test, mainly consisting of structured securities. In addition, the investment funds (open-ended and closed-end funds) will be mandatorily measured at fair value through profit or loss, with a consequent future increase in the income statement volatility for these instruments, which are currently classified as Financial assets available for sale. With regard to the classification of equity instruments in the scope of IFRS 9, the Insurance Division does not intend to exercise the option to classify the equity instruments at fair value through other comprehensive income (FVTOCI without recycling to profit or loss) upon first-time adoption of the standard. Lastly, with regard to loans, their overall contribution to the Division\u2019s financial assets is not significant and, since they mainly consist of current accounts and other short-term technical forms, no failures of the SPPI test or particular impacts are expected upon FTA. With regard to the second driver of classification of the financial assets (business model), i.e. the intention with which financial assets are held, the following is noted. For debt securities, the companies of the Insurance Division will adopt mainly a Hold To Collect and Sell business model, with the exception of portfolios connected to unit-linked products and open pension funds, for which an \u201cOther\u201d Business Model will be adopted, with measurement of the assets at fair value through profit or loss. In this regard, for debt securities, no significant changes are expected with respect to the classification according to IAS 39, except for marginal cases relating to: \u2012 debt securities currently classified as Financial assets available for sale that do not pass the SPPI test. This reclassification has no impact on the total shareholders\u2019 equity determined in accordance with IFRS 9; \u2012 debt securities currently classified under Loans & Receivables which, depending on the result of the SPPI test, will be classified either at fair value through profit or loss or at fair value through other comprehensive income. This reclassification will have a non-material impact. With regard to loans, whose immaterial contribution to the Division\u2019s financial assets as a whole has already been noted, the Hold to Collect business model will be used. Lastly, in relation to the business models under which the financial assets are held, the Business Model Rules are under update, in order to define and set out the components of the business model for the Group\u2019s Insurance Division, specifying the role with reference to the classification model governed by IFRS 9. With regard to the financial liabilities, no changes are envisaged with respect to the current methods of classification and measurement of the financial liabilities in accordance with IAS 39. Specifically, the Group adopted the option to designate as liabilities at fair value the financial products issued by the insurance companies that do not fall within the scope of IFRS 17. This was decided in order to eliminate or reduce possible \u201caccounting mismatches\u201d in relation to connected assets also measured at fair value. Impairment With regard to impairment, a common approach and a process centralised within Intesa Sanpaolo\u2019s Risk Management structure have been established by the Parent Company Intesa Sanpaolo for the quantification of the expected credit loss for all the Group companies. Accordingly, for a full description of the choices adopted by the Group regarding the application of impairment in accordance with IFRS 9, see the Accounting Policies and the description provided in Part E of the Notes to the financial statements concerning risk management. For the purpose of completeness, it is noted that the \u201cRules on the measurement of expected credit loss in accordance with IFRS 9 (Impairment Policy)\u201d will also be applicable to the Insurance Division, with reference to the methodological guidelines defined by the Intesa Sanpaolo Group in application of IFRS 9 and approved by the competent levels of governance. Please note in this regard that, for the companies of the Insurance Division, the application of the new expected credit losses model is mainly relevant for the portfolio of debt securities classified in the category Fair value through other comprehensive income. For loans, on the other hand, it is not significant. The main elements underlying the approach can be considered to be the following: \u2012 method of tracking the credit quality of portfolios of financial assets measured at amortised cost and at fair value through other comprehensive income; \u2012 definition of the parameters for determining the significant increase in credit risk, for the purposes of the correct allocation of performing exposures to Stage 1 or Stage 2, based on the change in lifetime probability of default since the time of initial recognition of the financial instrument. With regard to the impaired exposures, on the other hand, given the alignment of the definitions of accounting and regulatory default, the current criteria for classifying exposures as \u201cimpaired\u201d can be considered identical to the criteria for classifying exposures in Stage 3; \u2012 definition of models \u2013 including forward-looking information \u2013 for the staging (with respect to the use of lifetime PD as a relative indicator of impairment) and for the calculation of the one-year ECL (to be applied to Stage 1 exposures) and lifetime ECL (to be applied to Stage 2 and Stage 3 exposures). In order to take into account forward-looking information and the macroeconomic scenarios in which the Group may find itself operating, the \u201cMost likely scenario + Add-on\u201d approach has been adopted. With regard to the staging for securities, it must be considered that sales and purchases after initial recognition (made using the same ISIN) may form part of the ordinary management of the positions (with the consequent need to identify a methodology to be adopted for identifying the sales and repayments in order to determine the remaining quantities of the individual transactions that need to be allocated a credit quality/rating upon origination to be compared with that parameter at the reporting date). In this regard, in line with the choice adopted by the Intesa Sanpaolo Group from 2018, the Insurance Division will also use the \u201cfirst-in-first-out\u201d or \u201cFIFO\u201d method (for the recognition of the recorded ECL in the income statement, in the event of sales or repayments) which helps in providing a more transparent management of the portfolio, also for the front office operators, while also enabling the continued updating of the credit rating based on new purchases. Moreover, a key element for the estimation of the expected losses is the inclusion of forward-looking factors and, in particular, macroeconomic scenarios. From a methodological perspective, the approach adopted by the Intesa Sanpaolo Group is the \u201cMost likely scenario + Add-on\u201d. Under this approach, the calculation of the expected credit loss (ECL) and the stage assignment use the credit loss determined for the baseline scenario, which is considered the most likely scenario and is also used for other purposes within the Group (for example, for preparing the budget and the business plan), to which an add-on is applied to reflect the effects from the non-linearity of the variables used for the conditioning of the macro-economic parameters. A similar approach will therefore also be applied to the companies of the Insurance Division. Lastly, with regard only to the initial application of the standard - i.e. 1 January 2023 - for performing debt securities recognised at fair value through other comprehensive income, it was decided to use the low credit risk exemption set out in IFRS 9, based on which exposures that, at the date of transition to the new standard, had an investment grade (or similar) rating were identified as exposures with low credit risk and, therefore, to be considered in Stage 1. Hedge accounting With regard to hedge accounting, IFRS 9 introduces changes solely to general hedging and are closely tied to the Group\u2019s choice of exercising the opt-in / opt-out option (i.e., the possibility of implementing the new IFRS 9 rather than continuing to apply the former IAS 39). The Intesa Sanpaolo Group, on the basis of detailed studies on the management of the hedging transactions, decided to exercise the opt-out during the IFRS 9 FTA, and has maintained this choice to date. In light of this, the hedging transactions for the Insurance Division will also continue to be managed in accordance with IAS 39 (carve-out), currently in force. Organisational and information system impacts The adoption of IFRS 9 entails organisational and information system changes for the Insurance Division. The main organisational impacts have been identified and relate to the revision and adaptation of existing operating processes, the design and implementation of new processes, and the expansion of the skills available within the various operations, administration and control structures. With regard to the information systems, work was carried out on the securities management applications of the insurance companies to adapt them to the requirements of the standard, and a monthly exchange of flows has been set up between the insurance companies and the relevant Intesa Sanpaolo structures in relation to staging and expected credit losses for securities classified at fair value through other comprehensive income. Restatement of comparative information and parallel running As illustrated above, insurance companies were able to defer the date of adoption of IFRS 9 up to 1 January 2023, which is thus the initial application date of the standard. With regard to preparation of comparative periods, pursuant to IFRS 9 it is permitted, but not required, to restate the comparison periods. For financial instruments derecognised before the date of initial application (i.e. prior to 1 January 2023 for insurance companies) restatement is not permitted, even in the event of voluntary restatement of the comparison period. Vice versa, under IFRS 17, it is required that the comparison period be restated. With regard to the methods of presentation of the effects of first-time adoption of IFRS 9, the Insurance Division will exercise the option established in paragraph 7.2.15 of IFRS 9, according to which \u2013 subject to the retrospective application of the new measurement and presentation rules required by the standard \u2013 there is no requirement for the compulsory restatement on a like-for-like basis of the comparative information in the financial statements of first-time adoption of the new standard. In particular, the Insurance Division will adopt the Classification Overlay for the entire portfolio of financial assets in accordance with the provisions of paragraph C28A and following of IFRS 17 \u2013 as amended by the IASB on 9 December 2021 and endorsed by the European Commission with Regulation No. 1491/2022 of 8 September 2022 \u2013 regarding companies adopting IFRS 9 and IFRS 17 simultaneously for the first time. The Classification Overlay allows the application of the classification and measurement requirements as envisaged by IFRS 9 for the preparation of comparative periods using reasonable and supportable information. The exercise of that option will make it possible to present the comparative period on a like-for-like basis, also with reference to financial instruments already derecognised as at 1 January 2023 (for which restatement would not be permitted according to the ordinary rules of transition to IFRS 9). Moreover, as permitted by Regulation no. 1491, the Classification Overlay will be adopted without applying the ECL requirements. In the second half of 2022, the companies in the Insurance Division finished quantifying the opening balances as at 1 January 2022, and producing the comparative figures for the quarters of 2022 in accordance with the Classification Overlay. Income statement and balance sheet impacts Overall, the impact on the shareholders\u2019 equity deriving from first-time adoption of IFRS 9 by the companies in the Insurance Division was estimated as immaterial both as at 1 January 2022 and as at 1 January 2023. In light of the not material impact on the shareholders\u2019 equity deriving from first-time adoption, there are no expected impacts on CET1 in terms of bps. The table below shows the new international financial reporting standards or amendments to existing standards that have not yet been endorsed by the European Commission. IFRS not endorsed as at 31.12.2022 Standard/ Interpretation Amendments Date of issue IAS 1 Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current 23/01/2020 IAS 1 Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current - Deferral of Effective Date 15/07/2020 IAS 1 Amendments to IAS 1 Presentation of Financial Statements: Non-current Liabilities with Covenants 31/10/2022 IFRS 16 Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback 22/09/2022 As regards the IASB documents amending existing accounting standards pending endorsement, the following is noted: - Amendments to IAS 1 \u201cClassification of Liabilities as Current or Non-Current\u201d, published on 23 January 2020 to propose certain narrow-scope amendments to IAS 1 \u201cPresentation of Financial Statements\u201d in order to clarify how to classify payables and other liabilities as current or non-current. The proposal in question clarifies - without amending - the current requirements of IAS 1; the clarifications aim to promote consistency in applying IAS 1 across companies to determine whether, in the statement of financial position, payables and other liabilities with an uncertain settlement date are to be classified as current (due or potentially to be paid within one year) or non-current. A subsequent publication dated 15 July 2020 postponed the date of entry into force of the amendments by one year, until 1 January 2023 instead of 2022, without introducing additional amendments. - Amendments to IAS 1 \u201cNon-current Liabilities with Covenants\u201d On 31 October the IASB published an additional narrow-scope amendment to IAS 1 \u201cPresentation of Financial Statements\u201d, which aims to improve the information provided by entities on liabilities with covenants and the classification of those liabilities as current or non-current. The IASB expects the amendments to improve the information provided by entities, enabling investors to understand the risk that those liabilities could become repayable early. IAS 1 requires that an entity may classify a liability as non-current only where the entity has the right at the reporting date to defer settlement of the liability for at least 12 months. Nonetheless, an entity\u2019s ability to do so is often subject to compliance with covenants. For example, an entity may have a non-current payable that could become repayable within 12 months if the entity fails to comply with a covenant (for example, a working capital ratio) in the subsequent 12 months. The amendments to IAS 1 specify that covenants to be met after the reporting date do not influence the classification of the payable as current or non-current at the reporting date. Conversely, the entity is required to provide information on these covenants in the notes to the financial statements. The amendments take effect for financial years starting on or after 1 January 2024, with early adoption permitted, following endorsement by the European Commission. Considering the content of the amendments illustrated above, which are immaterial for the financial sector, as well as the obligation to apply the templates prescribed in Bank of Italy Circular 262/05, the proposed narrow-scope amendments to IAS 1 are not specifically significant for the Group. - Amendments to IFRS 16 \u201cLease Liability in a Sale and Leaseback\u201d With the publication of the narrow-scope amendments \u201cLease Liability in a Sale and Leaseback\u201d on 22 September 2022, the IASB introduced several narrow-scope amendments to IFRS 16 regarding the recognition of only sale and leaseback transactions by the seller-lessee. Sale and leaseback transactions are transactions in which an entity sells one of its assets and then immediately leases it back from the new owner. In this regard, transactions in which the transfer of the asset meets the requirements of IFRS 15 to be recognised as a sale of an asset are analysed. This amendment was requested by the IFRIC, which found a regulatory gap in terms of recognition of rights of use and lease liabilities in sale and leaseback transactions in the event of variable lease payments that do not depend on an index or rate, for example, those based on a percentage of sales of the seller-lessee generated by use of the asset. In this regard, the amendments provide several clarifications and let the individual entities define an accounting policy for the method of measuring the liability arising from the leaseback. Application of these amendments will be mandatory from 1 January 2024 - following endorsement by the European Commission, and with the possibility of early implementation \u2013 with retrospective application to sale and leaseback transactions entered into following the date of first-time adoption of IFRS 16, i.e. 1 January 2019 for the Group. In that regard, there have been few, immaterial sale and leaseback transactions entered into by the Intesa Sanpaolo Group since 2019 and, currently, there are no cases covered by the amendments. Use of estimates and assumptions in preparing financial reports The preparation of financial reports requires the use of estimates and assumptions that may have a significant effect on the amounts stated in the balance sheet and income statement, and on the contingent assets and liabilities reported in the financial statements. Estimates are based on available information and subjective evaluations, also founded on past experience, which are used to formulate reasonable assumptions in measuring operating events. Given their nature, the estimates and assumptions used may vary from year to year, and hence it cannot be excluded that current amounts carried in the financial statements may differ significantly in future financial years as a result of changes in the subjective evaluations made. If there are greater uncertainties and/or the assets being measured are particularly material, the valuation is supported by specific fairness opinions from external appraisers/experts. The main cases for which subjective evaluations are required to be made by corporate management include: - the measurement of impairment losses on loans, investments, and, generally, other financial assets; - the use of measurement models for determining the fair value of financial instruments not listed on active markets; - the evaluation of the appropriateness of amounts stated for goodwill and other intangible assets; - the fair value measurement of real estate and valuable art assets; - the measurement of personnel funds and allowances for risks and charges; - the estimates and assumptions on the collectability of deferred tax assets; - the demographic (linked to the estimated mortality of insured people) and financial (deriving from the possible trend in financial markets) suppositions used to structure insurance products and define the basis for calculating integrative reserves provided for in insurance regulations, in addition to the shadow reserves, and liability adequacy test provided for in IFRS 4. For some of the types listed above, the main factors subject to estimates by the Group and which determine the carrying value of assets and liabilities in the financial statements can be identified. The following are noted, by way of example: - to determine the fair value of financial instruments not listed on active markets, if the use of parameters that cannot be obtained from the market is necessary, the main estimates regard, on one hand, development of future cash flows (or even income flows, in the case of equities), possibly conditional on future events and, on the other, the level of specific input parameters not listed on active markets; - the estimates for the assignment of loans and debt securities classified as Financial assets measured at amortised cost and Financial assets measured at fair value through other comprehensive income to the three credit risk stages required by IFRS 9 and to calculate the related expected credit losses involve: o the determination of the parameters for a significant increase in credit risk, essentially based on models for measuring the probability of default (PD) upon origination of the financial assets and at the reporting date; o the inclusion of forward-looking factors, including macroeconomic factors, for the determination of the PD and LGD; o the determination of the likelihood of sale of impaired financial assets, through the realisation of market positions; - to determine the future cash flow estimates from non-performing loans, a number of items are considered: the expected recovery times, the presumed realisable value of guarantees and the costs to be sustained for the recovery of credit exposure; - to determine the value in use of intangible assets with an indefinite life (brand name and goodwill) with regard to the Cash-Generating Units (CGU) comprising the Group, the future cash flows in the forecasting period of the analysis and the flows used to determine the terminal value, generated by the CGU, are subject to estimate, separately and appropriately discounted. Also the cost of capital is among the items subject to estimate; - to determine the value in use of intangible assets with a finite life (asset management and insurance portfolios) with regard to the CGUs comprising the Group, the useful life is subject to estimate, on the one hand, as well as the future cash flows arising from the asset, on the other. The cost of capital is subject to estimate in the case of intangible assets with a finite life as well; - the fair value measurement of real estate and valuable art assets is based on valuations prepared by qualified independent firms. Lease rentals, selling prices, discount rates and capitalisation rates are estimated in order to conduct the appraisals of the properties, while to conduct the appraisals on the valuable art assets, the estimate of the value is gathered from the performance of the exchanges of similar works (in terms of technique, size, subject) by the same author or regional movements and schools that are close with regard to style and technique; - to measure post-employment benefits, the present value of the obligations is subject to estimate, taking into account the flows, appropriately discounted, arising from past time-series analyses and the demographic curve; - to measure allowances for risks and charges, the amount of outflows necessary to fulfil the obligations is estimated, where possible, taking into account the effective probability of having to utilise resources; - to determine the value of deferred tax items, the likelihood of an effective future tax burden is estimated (taxable temporary differences) and the level of reasonable certainty \u2013 if it exists \u2013 of future taxable amounts at the time when the tax deductibility occurs (deductible temporary differences and tax losses carried forward).", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesAccountingEstimatesAndErrorsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-908": { "value": "Adoption of IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments by the Group\u2019s Insurance Companies This paragraph provides disclosure on the main impacts expected from the introduction of the new IFRS 17 Insurance Contracts, as well as the application of IFRS 9 Financial Instruments for the Group\u2019s Insurance Companies, in relation to the requirements of IAS 8, paragraphs 30 and 31, and in accordance with the guidance from the European Securities and Markets Authority (ESMA) 72 . The interaction between the two standards - IFRS 17 and IFRS 9 - which the companies of the Insurance Division will apply simultaneously and for the first time from 1 January 2023 is also illustrated. Note that the disclosure on the transition to the new standards will be provided in the 2023 Interim Statement, which will be the first financial report published following the first-time adoption of the two standards, and will contain the information required by the IFRSs and by the ESMA. The new IFRS 17 published by the IASB in May 2017 and subject to subsequent amendments published on 25 June 2020 and 9 December 2021, was endorsed by Regulation (EU) No. 2036/2021 of 19 November 2021 and will be effective from 1 January 2023. The European endorsement regulation makes it possible, on an optional basis, to exempt intergenerationally- mutualised and cash flow matched contracts from the application of the obligation of grouping into annual cohorts set out by IFRS 17. Moreover, with Regulation no. 1491/2022 of 8 September 2022, several narrow-scope amendments were introduced for the preparation of comparative information upon initial application of IFRS 17 and IFRS 9. Note that IFRS 9 Financial Instruments, issued by the IASB in July 2014 and endorsed by the European Commission through Regulation No. 2067/2016, replaced IAS 39 in the requirements for the classification and measurement of financial instruments with effect from 1 January 2018. The Intesa Sanpaolo Group, as a financial conglomerate primarily engaged in banking activities, has exercised the option of adopting the Deferral Approach (or Temporary Exemption), according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39, until the entry into
Notes to the consolidated financial statements \u2013 Part A \u2013 Accounting policies
212
force of the new financial reporting standard on insurance contracts (IFRS 17) on 1 January 2023. The deferral of the
adoption of IFRS 9 by the companies of the Insurance Division thus means that, starting from 1 January 2018, different
accounting standards need to be applied for the financial assets and liabilities within the Group\u2019s consolidated financial
statements.
In this context, from 1 January 2023, the Group Insurance Division will apply IFRS 9 and IFRS 17 together for the first time.
The implementation of IFRS 9 by the Insurance Division is consistent with the accounting policies defined by the Intesa
Sanpaolo Group to ensure the correct and uniform application of the new standard at consolidated level.
IFRS 17 Insurance Contracts
Overview of IFRS 17
IFRS 17 replaces IFRS 4, which, from the time of its initial publication, was considered an interim standard and \u2013 as such \u2013 its
objectives did not include establishing a single approach for the presentation of insurance contracts, referring to the
accounting models set out in local regulations of the individual countries. Addressing this aspect \u2013 together with better
disclosure regarding the operating performance of the insurance contracts \u2013 therefore forms the basis of the new standard.
The main provisions of the standard are illustrated below:
\u2012 initial recognition of the insurance liability: when the contract is signed with the policyholder, the insurance entity
recognises a liability whose amount represents the sum of the present value of the expected contractual cash flows
(Present Value Future Cash Flows \u2013 \u201cPVFCF\u201d), also including an appropriate Risk Adjustment (\u201cRA\u201d) to cover non-
financial risks and the Contractual Service Margin (\u201cCSM\u201d), which represents the present value of the future profits on
insurance contracts;
\u2012 grouping of contracts: the application of IFRS 17 involves the identification of \u201cportfolios\u201d of insurance contracts (groups
of contracts that are subject to similar risks and managed together). Each portfolio is further subdivided into groups
consisting of contracts with similar characteristics in terms of expected profitability, thus distinguishing between profitable
contracts (with a positive contractual service margin) and onerous contracts (with a negative contractual service margin);
\u2012 the measurement models envisaged by the standard: IFRS 17 envisages a measurement model known as General
Model (\u201cGM\u201d) applicable in principle to all contracts, except for contracts with direct participation features, for which the
Variable Fee Approach (\u201cVFA\u201d) is applied, if the eligibility criteria based on the nature of the participation features are
met. There is also an optional simplified model (Premium Allocation Approach \u2013 \u201cPAA\u201d) for the valuation of the Liability
for Remaining Coverage (\u201cLRC\u201d, similar to the reserve for unearned premiums or premium carry-forward) for contracts
with a coverage period of one year or less and for all contracts where the valuation is not materially different from that
resulting from the application of the General Model;
\u2012 transition: upon first-time adoption, IFRS 17 requires that all contracts in the portfolio are accounted for as if the rules
introduced had always been in force; this transition approach is referred to as the Full Retrospective Approach (\u201cFRA\u201d).
Given that its application can be very complex due to the unavailability of the time series of the attributes required to
manage the breadth of the data model envisaged by IFRS 17, which enables its full application, the standard allows the
possibility of using two other approaches, optional to each other:
o the Modified Retrospective Approach (\u201cMRA\u201d), which approximates the results obtained from the FRA using a
retrospective approach, including some simplifications regarding the estimation of the CSM, the level of aggregation
of the contracts, the use of annual cohorts and the discount rates to be used;
o the Fair Value Approach (\u201cFVA\u201d), according to which the CSM/Loss Component (in the case of onerous contracts) is
calculated as the difference between the fair value of the group of contracts to which it refers and the value of the
Fulfilment Cash Flows at the same date (consisting of the sum of the PVFCF and RA);
\u2012 subsequent measurement of the insurance liability: IFRS 17 requires an update to the measurement at each reporting
period of the above elements (cash flows and contractual service margin), to verify the consistency of the estimates with
the current market conditions. The effects of any updates are recorded in the financial statements at the first reporting
date: in profit or loss for changes relating to current events or events that have already occurred or as a reduction of the
contractual service margin (CSM) when the changes relate to future events. Solely with regard to changes in financial
variables (and not the others, i.e. mainly related to policyholder behaviour), it is left to the entities to decide \u2013 for each
grouping of contracts \u2013 whether to present the effects of the changes through profit or loss or through other
comprehensive income (the so called OCI option);
\u2012 measurement of the insurance revenue: IFRS 17 requires the presentation in profit or loss of the earnings \u201cby margins\u201d
achieved during the life of the policies, i.e. when the entity provides the services to the insured, and does not therefore
require the recognition of any revenue at the time of entering into the contract. With regard to that aspect, the standard is
asymmetrical, as, for groups of onerous contracts, it requires immediate recognition of losses through profit or loss;
\u2012 measurement of the performance: with a view to providing disclosure that ensures better comparability of the
performance of the insurance companies, a distinct and separate presentation is required of the two main components
that typically contribute to making up the earnings of insurance undertakings: the first, which represents the profit from
the insurance service provided (the \u201ctechnical margin\u201d) and the second, which brings together all the financial
components (results of investments, effects of financial variables used in the valuations of the contracts, etc.). Changes
in the future estimates of premiums linked to the outstanding contracts at the reporting date (cash flows to be received)
and payments (cash flows to be paid) are recognised in profit or loss over the entire remaining contractual lifetime of the
policies concerned.
Notes to the consolidated financial statements \u2013 Part A \u2013 Accounting policies
213
With reference to the representation of IFRS 17 in the consolidated financial statements of banks leading financial
conglomerates, note that on 17 November 2022 the Bank of Italy published the 8th update to Circular no. 262 of 22
December 2005, which will be applicable starting from financial statements as at 31 December 2023.
In order to reduce the burden of preparation for banks, in drafting the update, the Bank of Italy considered the equivalent
provisions issued by IVASS
73
with reference to IAS/IFRS insurance financial statements, providing a reference to the
provisions issued by IVASS for the aspects relating to insurance contracts pertaining to consolidated insurance companies.
The changes introduced regard the alignment of the consolidated financial statement and the related disclosure in the notes
to the consolidated financial statements to the provisions of IFRS 17, which amended IAS 1 and IFRS 7, and the alignment
with the provisions issued by IVASS. Specifically, in the consolidated balance sheet, the captions \u201cInsurance liabilities\u201d and
\u201cInsurance assets\u201d provide information on the insurance contracts issued and reinsurance contracts held. With reference to
the consolidated income statement, income from insurance business shall distinguish between income/expenses for
insurance services and net financial income/expenses relating to insurance contracts issued and reinsurance contracts held.
The notes to the consolidated financial statements are aligned, according to the provisions issued by IVASS, to present
disclosure on the nature and extent of risks arising from insurance contracts, pursuant to the provisions of IFRS 17. The Bank
of Italy did not make changes regarding the presentation of IFRS 9 amounts. Therefore, financial instruments belonging to
insurance companies (including insurance products to which IFRS 9 is applied) in the financial statement forms pursuant to
Circular 262 shall be presented along with those of the bank and, where necessary, specific evidence shall be provided in the
tables of the Notes.
Implementation Project for the Insurance Division: organisational and information system impacts
Within the Intesa Sanpaolo Group, IFRS 17 is applicable to the insurance products and investment products with discretionary
participation features of the Insurance Division.
The IFRS 17 implementation project for the Insurance Division started in June 2019 and is divided into several strands that
have been set up uniformly for all the companies of the Insurance Division, taking into account the specific business
characteristics of each company:
\u2012 definition of the methodological framework: the key topics have been identified, corresponding to the related approaches
set out in the Technical Papers, in terms of product classification, determination of future cash flows and calculation of
the CSM;
\u2012 evolution of information systems: the \u201cBig Picture\u201d of this project, which includes the mapping of applications and their
IT interfaces, established in December 2020, has been maintained and implemented also for the insurance companies
subsequently acquired, and envisages the same IT structure for all the companies of the Insurance Division, taking into
account their specific characteristics. Moreover, the analysis and preparation of the business requirements have been
carried out. As at 30 June 2022, the implementation had been completed aimed at including the part of the processes
relating to the calculation of the forward-looking measures introduced by IFRS 17 (mainly cash flows, risk adjustment and
CSM) into the accounting and financial reporting process. Lastly, the IT developments for the actuarial engines have
been completed;
\u2012 training activities: these activities were planned for the entire duration of the project and allocated across the technical
and operational areas and top management, and envisage specific sessions dedicated to the directors of the companies
of the Insurance Division and the Parent Company;
\u2012 changes to processes and internal procedures: the target operating model has been formalised, i.e. the design and
formalisation of the systems, organisational processes and the offices responsible for them, in order to control the new
process for preparing the financial statements;
\u2012 transition and parallel running in 2022: the work on the quantification of the opening balances as at 1 January 2022 and
the calculation of the comprehensive income for 2022 has been completed. The production in the IT systems of the
comparative information for the quarters of 2022 has been started for all the companies of the Insurance Division.
From an organisational perspective, in addition to the process for the preparation of the financial statements, the IFRS 17
project includes the implementation of systems and processes related to planning and control and asset and liability
management, in order to ensure the Group companies\u2019 management capabilities according to the new metrics introduced by
IFRS 17.
During 2022 a specific project was also launched at the Parent Company, which involved several departments in the CFO and
COO areas, and operates in full synergy with the Insurance Division and the related project to implement IFRS 17 with regard
to the presentation of the balance sheet and income statement amounts typical of IFRS 17 in the Consolidated financial
statements of Intesa Sanpaolo pursuant to IFRS 10.
Lastly, periodic meetings were held with the Independent Auditors EY to enable discussion of the methodological choices
identified in the project.
73
Reference is made to ISVAP Regulation no. 7 of 13 July 2007, as amended by Order no. 121 of 7 June 2022.
Group methodological choices
The main methodological choices faced by the Group concerned the definition of the discount curve, the quantification of the
cash flows according to IFRS 17, and the quantification of the CSM for the consolidated financial statements of the Intesa
Sanpaolo Group, which differs from the CSM of the Insurance Division, to take the actual distribution/management costs into
account in the future flows of insurance liabilities rather than the fees settled between Group companies.
The main methodological choices made by the Intesa Sanpaolo Group are reported below:
\u2012 Level of aggregation and carve-out option on cohorts: the level of aggregation enables the definition of the granularity to
be used to assess the profitability of a group of contracts, by grouping in the same portfolio contracts that:
o have similar risks and are managed together;
o have the same expected profitability upon issue (profitability bucket);
o belong to the same generation (annual cohort).
With reference to the first point, the Group has adopted the choice of aggregating the contracts belonging to the Non-Life
Business based on the Solvency II Line of Business (\u201cLoB\u201d) they belong to. For the Life Business, groups of contracts
are aggregated by grouping in a single portfolio products included in the same Separate Management, Multi-Line
products for each Separate Management, Unit-Linked products, products linked to Pension Funds and pure risk products
(e.g. temporary death policies).
With regard to contracts relating to Multi-Line products or linked to a Separate Management, the Group has decided to
exercise the option not to apply the Annual Cohort requirement (so-called \u201ccarve-out\u201d), as allowed in the IFRS 17
Endorsement Regulation at European level, and therefore to aggregate these types of contracts only based on the
concept of similar risks and uniform management and belonging to the same profitability bucket.
\u2012 Discount curve: the Group has decided to use a bottom-up approach, which involves using risk-free rates with the
addition of a liquidity premium, estimated based on the risk premium inherent in each company\u2019s securities portfolio,
broken down by individual separate management, unit-linked portfolio, pension funds and free portfolio.
\u2012 Risk adjustment: it is determined using a Value at Risk (VaR) approach that estimates the uncertainty of the non-financial
risks based on the 75th percentile of the specific distribution of each risk considered.
\u2012 Variable Fee Approach (VFA): as noted above, the VFA is a mandatory model required by the standard for contracts
involving significant discretionary participation features for the policyholders. To determine whether discretionary
participation features are significant, both a qualitative and quantitative test is performed to verify the requirements.
Within the Insurance Division\u2019s products, all the insurance Linked contracts and all the contracts linked to a separate
management, both individual and Multi-Line, are measured using the Variable Fee Approach.
\u2012 Premium Allocation Approach (PAA): as already mentioned, the PAA is an optional method applicable to contracts with a
duration of less than one year or to contracts with a duration of more than one year for which it is demonstrated that the
application of the PAA model does not lead to results that are significantly different from those that would be obtained
with the general model. The Group has decided to apply this model solely to the Non-Life Business, with the general rule
being to use the PAA model for insurance policies with a duration of one year or less.
\u2012 Coverage units: these are the drivers used to determine the CSM release to profit or loss, taking into account the amount
of service provided to the policyholders and the expected duration of the group of contracts. The coverage units are
determined differently based on whether they relate to Life Business or Non-Life Business. Specifically, for the Non-Life
Business, the coverage units are identified by the earned premiums for the period, while for the Life Business, they are
identified by the insured capitals for the period with respect to the whole life insured capitals, which represent the
company\u2019s commitment to the policyholders during the valuation period.
\u2012 Contract boundaries: the determination of the contract boundaries is used to establish whether a particular contractual
option is to be included in the cash-flow projection as soon as the contract is issued or whether the exercise of that option
will result in the generation of a new group of contracts.
The IFRS 17 contract boundaries include all the contractual options that establish the conditions for exercising the option
in terms of pricing, already at the time when the contracts are issued. If the exercise of the option does not have
conditions predetermined upon issue and the conditions are only defined at a later date or at the time of exercise by the
policyholder, they are not included in the IFRS 17 contract boundaries and are not projected in the cash flows of the host
contract; the exercise of the option generates a new group of contracts different from that of the host contract.
- Transition approach: the Group has decided to use all three transition approaches envisaged by the standard based on
the availability of the historical data required by the standard for determining the CSM at the FTA date. Specifically, the
Full Retrospective Approach is used for the most recent generations of contracts, except for the acquired companies
(ISP RBM Salute and former UBI), for which the Fair Value Approach is used. For multi-line life contracts and older non-
life contracts the Modified Retrospective Approach is used, while for the remaining products and annuities the Fair Value
Approach is used. The main simplifications used by the Group in applying the Modified Retrospective Approach are:
o use of annual cohorts: the Group adopts the simplifications set out in the standard and aggregates the annual
cohorts into a single Unit of Account for the Life and Non-Life Businesses;
o discount rate: calculation of the discount rates using the median of the last 5 curves reconstructed for the years of
valuation prior to the transition date;
o no calculation of the closing balances for the previous periods.
\u2012 Quantification of the CSM for the Consolidated financial statements: under IFRS 17, in order to quantify cash flows, the
management of intragroup transactions entails the need to \u201creplace\u201d the intragroup costs projected by the Insurance
Division in the estimate of its standalone accounting values (typically fees paid to the banking distribution network) with
the costs incurred by the Group with third parties. That operation may entail the recognition of expected profit (CSM)
which differs between the individual Group companies and the Group as a whole. The ESMA, in its annual statement on
priorities for financial reports
74
, highlights the importance of consistently applying the consolidation requirements
pursuant to IFRS 10 in order to guarantee the correct application of IFRS 17 in the consolidated financial statements.
Specifically, the ESMA notes that where banks of the group distribute insurance products, the consolidated CSM will
often differ from the insurance CSM.
74
ESMA Public Statement \u201cEuropean common enforcement priorities for 2022 annual financial reports\u201d of 30 October 2022, referred to above.
\u2012 Impacts of IFRS 17 on Alternative Performance Measures: as a result of the changes introduced by the application of the
new standard, the Group is assessing the best methods for presenting the insurance business in the reclassified balance
sheet and income statement.
\u2012 Interaction between IFRS 17 and IFRS 9 and use of the OCI option: in some cases, the interaction between IFRS 17 and
IFRS 9 may generate accounting mismatches between the way insurance contracts and related financial assets are
accounted for. In order to reduce these mismatches, IFRS 17 allows for a disaggregation of financial income and
expenses from insurance contracts between the profit or loss (financial result) and other comprehensive income (OCI).
The choice of disaggregation is made at portfolio level for the insurance contracts and must be made consistently with
the valuation approach used for the assets. In particular:
o with regard to contracts valued using the General Model and the Premium Allocation Approach, the financial
revaluation of future cash flows and risk adjustment at historical rates is recognised through profit or loss, while the
difference between the revaluation at historical and current rates is recognised through other comprehensive
income;
o for contracts valued under the Variable Fee Approach, IFRS 17 requires the financial result of insurance contracts to
be disaggregated between profit or loss and other comprehensive income. In essence, the difference between the
financial result of insurance contracts and the financial result through profit or loss arising from the underlying
financial instruments is reclassified to other comprehensive income (mirroring).
In accordance with IFRS 9, the Insurance Division finalised the definition of the \u201cto be\u201d business model: Hold To Collect
and Sell for debt financial instruments, except for those connected to linked products and open pension funds (to which
the \u201cOther\u201d Business Model will be applied). With regard to the classification of equity instruments that come under the
scope of IFRS 9, the Insurance Division will apply their fair value measurement through profit or loss. As a result, in order
to reduce potential accounting mismatches, the Group has decided to adopt the OCI option on all the insurance contract
portfolios, except for the unit-linked policies not connected to multi-line products and open pension funds.
For more details on financial assets, see the paragraph below on the adoption of IFRS 9 by the Group\u2019s Insurance
Companies.
Main differences between the IFRS 17 framework and Solvency II
The main differences between IFRS 17 and Solvency II in relation to the valuation of insurance liabilities primarily relate to the
identification of the contract boundaries, the determination of the discount curve, and the method of calculation of the Prudent
Margin (respectively Risk Adjustment or Risk Margin). In particular:
\u2012 with regard to the contract boundaries, the main differences concern both the determination criteria and the frequency of
the valuation. Under Solvency II, the contract boundaries are based on a risk approach for the company and are
determined at each valuation date; under IFRS 17, they are based on the possibility of re-pricing by the company and are
determined when the contracts are issued;
\u2012 with regard to the discount curves, the main difference concerns the approach and granularity used for the calculation of
the discount curve. Specifically, for Solvency II there is a single discount curve composed of a risk-free base curve plus a
liquidity premium (volatility adjustment), defined by the EIOPA on the basis of an average market benchmark portfolio. In
the IFRS 17 framework, on the other hand, the discount curves for each identified portfolio can be calculated on the basis
of specific reference asset pools;
\u2012 for the Prudent Margin, the difference between Risk Margin and Risk Adjustment is due to both a different calculation
approach and a different scope of identified risks. The Solvency II Risk Margin is calculated using a Cost of Capital
approach, applied to the company\u2019s capital requirement assessed with a 95% percentile, considering the technical risks,
credit risk and operational risk. For the IFRS 17 Risk Adjustment, the standard does not envisage a standard approach,
but only its determination on the basis of specific non-financial risks.
Note that no impacts are expected on the Solvency II synthetic indicator for the Insurance Group following the introduction of
IFRS 17.
Income statement and balance sheet impacts
The new standard envisages the introduction of new balance sheet figures and different ways of recognising the profitability of
insurance products in the companies\u2019 financial statements, which will lead to both balance sheet impacts upon first-time
adoption of the standard and volatility in the income statement once the standard is being implemented.
Specifically, upon transition to the new standard \u2013 1 January 2022 - the captions previously recognised pursuant to IFRS 4
(technical reserves) and IFRS 3 (Value of Business Acquired, VoBA, recognised upon purchase price allocation \u2013 PPA - as
intangible assets with a finite useful life), which do not meet the requirements for recognition pursuant to the new IFRS 17 will
be reversed, and new IFRS 17 insurance liabilities will be recognised in the components Present Value of Future Cash Flows,
Risk Adjustment and CSM. The cumulative effect of first-time adoption of IFRS 17 (impact as at 1 January 2022 and delta in
the 2022 income statement) will be recognised as at 1 January 2023 as a balancing entry for a specific retained earnings
reserve (also called \u201cFirst-time adoption reserve\u201d).
The balance sheet impact upon first-time adoption mainly depends on the level of market rates at the transition date (a lower
rate level corresponds to a higher negative balance sheet impact), as well as the transition approaches adopted. On the other
hand, the income statement result is closely related to how the CSM is released over time and how it is adjusted following
revisions to the operational and financial assumptions included in the cash flow and risk adjustment.
Based on the analyses and implementations carried out, the following effects are estimated:
\u2012 the total impact to be recognised in shareholders\u2019 equity upon transition to the new accounting standard as at 1 January
2022 is estimated to be around -1 billion euro net of tax, and is attributable:
o on one hand, to the impact of the different measurement criteria for insurance liabilities pursuant to IFRS 17, in place
of the previous criterion set out by IFRS 4, whose effect is attributable mainly to the measurement of separate
management that has high guaranteed minimum yields; and
o on the other, to the derecognition of the Value of Business Acquired (VoBA) recognised pursuant to IFRS 3 upon PPA
following business combinations;
\u2012 the amount of the CSM calculated at consolidated level at the transition date - 1 January 2022 - is 9.3 billion euro;
\u2012 at the date of initial application of the standard - 1 January 2023 - the overall impact, which is currently under
calculation, is estimated to be not significantly different from the amount estimated as at 1 January 2022;
\u2012 the related prudential impacts estimated as at 1 January 2023 amount to around -20 bps on CET1, considering the
application of the \u201cDanish Compromise\u201d. For regulatory purposes, note that the Intesa Sanpaolo Group, as a \u201cfinancial
conglomerate\u201d, has been authorised to apply the \u201cDanish Compromise\u201d, which allows for the 370% weighting of
significant investments in insurance subsidiaries instead of their deduction from CET1.
IFRS 9 Financial Instruments
The companies of the Insurance Division have participated, through the Insurance Parent Company Intesa Sanpaolo Vita, in
the Intesa Sanpaolo Group project launched in September 2015 and aimed at investigating the various areas of influence of
IFRS 9, defining its qualitative and quantitative impacts, and identifying and implementing the necessary application and
organisational measures. In particular, account has been taken of the objective of pursuing the uniform adoption of the
accounting standard, also in the presence of insurance operations linked in particular to the specific characteristics of
products under separate management.
Classification and Measurement
In order to comply with the provisions of IFRS 9 \u2013 which introduces a model where the classification of financial assets is
guided, on the one hand, by the contractual cash flow characteristics of the instruments and, on the other hand, by the
management intent for which they are held \u2013 the methods for performing the test on the contractual cash flow characteristics
(known as the SPPI Test) have been drawn up, while the definition of the \u201cto be\u201d business models has been finalised.
With regard to the SPPI test on financial assets, the Insurance Division will adopt the approach defined at Intesa Sanpaolo
Group level and used from 2018. The analysis has also been completed of the composition of the securities and loans
portfolios currently in place, to identify their correct classification at the time of first-time adoption (FTA) of the new standard.
With regard to debt securities, a detailed examination of the cash flow characteristics of instruments classified in the Financial
assets available for sale category according to IAS 39 and at amortised cost has been carried out in order to identify the
assets that have not passed the SPPI test and will therefore be measured at fair value through profit or loss in accordance
with IFRS 9. According to the analyses conducted in the Insurance Division, only a non-material percentage of the debt
securities \u2013 with respect to the portfolio as a whole \u2013 failed the SPPI test, mainly consisting of structured securities.
In addition, the investment funds (open-ended and closed-end funds) will be mandatorily measured at fair value through profit
or loss, with a consequent future increase in the income statement volatility for these instruments, which are currently
classified as Financial assets available for sale.
With regard to the classification of equity instruments in the scope of IFRS 9, the Insurance Division does not intend to
exercise the option to classify the equity instruments at fair value through other comprehensive income (FVTOCI without
recycling to profit or loss) upon first-time adoption of the standard.
Lastly, with regard to loans, their overall contribution to the Division\u2019s financial assets is not significant and, since they mainly
consist of current accounts and other short-term technical forms, no failures of the SPPI test or particular impacts are
expected upon FTA.
With regard to the second driver of classification of the financial assets (business model), i.e. the intention with which financial
assets are held, the following is noted. For debt securities, the companies of the Insurance Division will adopt mainly a Hold
To Collect and Sell business model, with the exception of portfolios connected to unit-linked products and open pension
funds, for which an \u201cOther\u201d Business Model will be adopted, with measurement of the assets at fair value through profit or
loss. In this regard, for debt securities, no significant changes are expected with respect to the classification according to IAS
39, except for marginal cases relating to:
\u2012 debt securities currently classified as Financial assets available for sale that do not pass the SPPI test. This
reclassification has no impact on the total shareholders\u2019 equity determined in accordance with IFRS 9;
\u2012 debt securities currently classified under Loans & Receivables which, depending on the result of the SPPI test, will be
classified either at fair value through profit or loss or at fair value through other comprehensive income. This
reclassification will have a non-material impact.
With regard to loans, whose immaterial contribution to the Division\u2019s financial assets as a whole has already been noted, the
Hold to Collect business model will be used.
Lastly, in relation to the business models under which the financial assets are held, the Business Model Rules are under
update, in order to define and set out the components of the business model for the Group\u2019s Insurance Division, specifying
the role with reference to the classification model governed by IFRS 9.
With regard to the financial liabilities, no changes are envisaged with respect to the current methods of classification and
measurement of the financial liabilities in accordance with IAS 39. Specifically, the Group adopted the option to designate as
liabilities at fair value the financial products issued by the insurance companies that do not fall within the scope of IFRS 17.
This was decided in order to eliminate or reduce possible \u201caccounting mismatches\u201d in relation to connected assets also
measured at fair value.
Impairment
With regard to impairment, a common approach and a process centralised within Intesa Sanpaolo\u2019s Risk Management
structure have been established by the Parent Company Intesa Sanpaolo for the quantification of the expected credit loss for
all the Group companies. Accordingly, for a full description of the choices adopted by the Group regarding the application of
impairment in accordance with IFRS 9, see the Accounting Policies and the description provided in Part E of the Notes to the
financial statements concerning risk management.
For the purpose of completeness, it is noted that the \u201cRules on the measurement of expected credit loss in accordance with
IFRS 9 (Impairment Policy)\u201d will also be applicable to the Insurance Division, with reference to the methodological guidelines
defined by the Intesa Sanpaolo Group in application of IFRS 9 and approved by the competent levels of governance.
Please note in this regard that, for the companies of the Insurance Division, the application of the new expected credit losses
model is mainly relevant for the portfolio of debt securities classified in the category Fair value through other comprehensive
income. For loans, on the other hand, it is not significant.
The main elements underlying the approach can be considered to be the following:
\u2012 method of tracking the credit quality of portfolios of financial assets measured at amortised cost and at fair value through
other comprehensive income;
\u2012 definition of the parameters for determining the significant increase in credit risk, for the purposes of the correct allocation
of performing exposures to Stage 1 or Stage 2, based on the change in lifetime probability of default since the time of
initial recognition of the financial instrument. With regard to the impaired exposures, on the other hand, given the
alignment of the definitions of accounting and regulatory default, the current criteria for classifying exposures as
\u201cimpaired\u201d can be considered identical to the criteria for classifying exposures in Stage 3;
\u2012 definition of models \u2013 including forward-looking information \u2013 for the staging (with respect to the use of lifetime PD as a
relative indicator of impairment) and for the calculation of the one-year ECL (to be applied to Stage 1 exposures) and
lifetime ECL (to be applied to Stage 2 and Stage 3 exposures). In order to take into account forward-looking information
and the macroeconomic scenarios in which the Group may find itself operating, the \u201cMost likely scenario + Add-on\u201d
approach has been adopted.
With regard to the staging for securities, it must be considered that sales and purchases after initial recognition (made using
the same ISIN) may form part of the ordinary management of the positions (with the consequent need to identify a
methodology to be adopted for identifying the sales and repayments in order to determine the remaining quantities of the
individual transactions that need to be allocated a credit quality/rating upon origination to be compared with that parameter at
the reporting date). In this regard, in line with the choice adopted by the Intesa Sanpaolo Group from 2018, the Insurance
Division will also use the \u201cfirst-in-first-out\u201d or \u201cFIFO\u201d method (for the recognition of the recorded ECL in the income statement,
in the event of sales or repayments) which helps in providing a more transparent management of the portfolio, also for the
front office operators, while also enabling the continued updating of the credit rating based on new purchases.
Moreover, a key element for the estimation of the expected losses is the inclusion of forward-looking factors and, in particular,
macroeconomic scenarios. From a methodological perspective, the approach adopted by the Intesa Sanpaolo Group is the
\u201cMost likely scenario + Add-on\u201d. Under this approach, the calculation of the expected credit loss (ECL) and the stage
assignment use the credit loss determined for the baseline scenario, which is considered the most likely scenario and is also
used for other purposes within the Group (for example, for preparing the budget and the business plan), to which an add-on is
applied to reflect the effects from the non-linearity of the variables used for the conditioning of the macro-economic
parameters. A similar approach will therefore also be applied to the companies of the Insurance Division.
Lastly, with regard only to the initial application of the standard - i.e. 1 January 2023 - for performing debt securities
recognised at fair value through other comprehensive income, it was decided to use the low credit risk exemption set out in
IFRS 9, based on which exposures that, at the date of transition to the new standard, had an investment grade (or similar)
rating were identified as exposures with low credit risk and, therefore, to be considered in Stage 1.
Hedge accounting
With regard to hedge accounting, IFRS 9 introduces changes solely to general hedging and are closely tied to the Group\u2019s
choice of exercising the opt-in / opt-out option (i.e., the possibility of implementing the new IFRS 9 rather than continuing to
apply the former IAS 39). The Intesa Sanpaolo Group, on the basis of detailed studies on the management of the hedging
transactions, decided to exercise the opt-out during the IFRS 9 FTA, and has maintained this choice to date. In light of this,
the hedging transactions for the Insurance Division will also continue to be managed in accordance with IAS 39 (carve-out),
currently in force.
Organisational and information system impacts
The adoption of IFRS 9 entails organisational and information system changes for the Insurance Division.
The main organisational impacts have been identified and relate to the revision and adaptation of existing operating
processes, the design and implementation of new processes, and the expansion of the skills available within the various
operations, administration and control structures.
With regard to the information systems, work was carried out on the securities management applications of the insurance
companies to adapt them to the requirements of the standard, and a monthly exchange of flows has been set up between the
insurance companies and the relevant Intesa Sanpaolo structures in relation to staging and expected credit losses for
securities classified at fair value through other comprehensive income.
Restatement of comparative information and parallel running
As illustrated above, insurance companies were able to defer the date of adoption of IFRS 9 up to 1 January 2023, which is
thus the initial application date of the standard. With regard to preparation of comparative periods, pursuant to IFRS 9 it is
permitted, but not required, to restate the comparison periods. For financial instruments derecognised before the date of initial
application (i.e. prior to 1 January 2023 for insurance companies) restatement is not permitted, even in the event of voluntary
restatement of the comparison period. Vice versa, under IFRS 17, it is required that the comparison period be restated.
With regard to the methods of presentation of the effects of first-time adoption of IFRS 9, the Insurance Division will exercise
the option established in paragraph 7.2.15 of IFRS 9, according to which \u2013 subject to the retrospective application of the new
measurement and presentation rules required by the standard \u2013 there is no requirement for the compulsory restatement on a
like-for-like basis of the comparative information in the financial statements of first-time adoption of the new standard. In
particular, the Insurance Division will adopt the Classification Overlay for the entire portfolio of financial assets in accordance
with the provisions of paragraph C28A and following of IFRS 17 \u2013 as amended by the IASB on 9 December 2021 and
endorsed by the European Commission with Regulation No. 1491/2022 of 8 September 2022 \u2013 regarding companies
adopting IFRS 9 and IFRS 17 simultaneously for the first time.
The Classification Overlay allows the application of the classification and measurement requirements as envisaged by IFRS 9
for the preparation of comparative periods using reasonable and supportable information. The exercise of that option will
make it possible to present the comparative period on a like-for-like basis, also with reference to financial instruments already
derecognised as at 1 January 2023 (for which restatement would not be permitted according to the ordinary rules of transition
to IFRS 9). Moreover, as permitted by Regulation no. 1491, the Classification Overlay will be adopted without applying the
ECL requirements.
In the second half of 2022, the companies in the Insurance Division finished quantifying the opening balances as at 1 January
2022, and producing the comparative figures for the quarters of 2022 in accordance with the Classification Overlay.
Income statement and balance sheet impacts
Overall, the impact on the shareholders\u2019 equity deriving from first-time adoption of IFRS 9 by the companies in the Insurance
Division was estimated as immaterial both as at 1 January 2022 and as at 1 January 2023.
In light of the not material impact on the shareholders\u2019 equity deriving from first-time adoption, there are no expected impacts
on CET1 in terms of bps.
The table below shows the new international financial reporting standards or amendments to existing standards that have not
yet been endorsed by the European Commission.
IFRS not endorsed as at 31.12.2022
Standard/
Interpretation
Amendments
Date of issue
IAS 1
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as
Current or Non-current
23/01/2020
IAS 1
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as
Current or Non-current - Deferral of Effective Date
15/07/2020
IAS 1
Amendments to IAS 1 Presentation of Financial Statements: Non-current Liabilities with
Covenants
31/10/2022
IFRS 16
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback
22/09/2022
As regards the IASB documents amending existing accounting standards pending endorsement, the following is noted:
- Amendments to IAS 1 \u201cClassification of Liabilities as Current or Non-Current\u201d, published on 23 January 2020 to propose
certain narrow-scope amendments to IAS 1 \u201cPresentation of Financial Statements\u201d in order to clarify how to classify payables
and other liabilities as current or non-current. The proposal in question clarifies - without amending - the current requirements
of IAS 1; the clarifications aim to promote consistency in applying IAS 1 across companies to determine whether, in the
statement of financial position, payables and other liabilities with an uncertain settlement date are to be classified as current
(due or potentially to be paid within one year) or non-current. A subsequent publication dated 15 July 2020 postponed the
date of entry into force of the amendments by one year, until 1 January 2023 instead of 2022, without introducing additional
amendments.
- Amendments to IAS 1 \u201cNon-current Liabilities with Covenants\u201d
On 31 October the IASB published an additional narrow-scope amendment to IAS 1 \u201cPresentation of Financial Statements\u201d,
which aims to improve the information provided by entities on liabilities with covenants and the classification of those liabilities
as current or non-current. The IASB expects the amendments to improve the information provided by entities, enabling
investors to understand the risk that those liabilities could become repayable early.
IAS 1 requires that an entity may classify a liability as non-current only where the entity has the right at the reporting date to
defer settlement of the liability for at least 12 months. Nonetheless, an entity\u2019s ability to do so is often subject to compliance
with covenants. For example, an entity may have a non-current payable that could become repayable within 12 months if the
entity fails to comply with a covenant (for example, a working capital ratio) in the subsequent 12 months.
The amendments to IAS 1 specify that covenants to be met after the reporting date do not influence the classification of the
payable as current or non-current at the reporting date. Conversely, the entity is required to provide information on these
covenants in the notes to the financial statements.
The amendments take effect for financial years starting on or after 1 January 2024, with early adoption permitted, following
endorsement by the European Commission.
Considering the content of the amendments illustrated above, which are immaterial for the financial sector, as well as the
obligation to apply the templates prescribed in Bank of Italy Circular 262/05, the proposed narrow-scope amendments to IAS
1 are not specifically significant for the Group.
- Amendments to IFRS 16 \u201cLease Liability in a Sale and Leaseback\u201d
With the publication of the narrow-scope amendments \u201cLease Liability in a Sale and Leaseback\u201d on 22 September 2022, the
IASB introduced several narrow-scope amendments to IFRS 16 regarding the recognition of only sale and leaseback
transactions by the seller-lessee. Sale and leaseback transactions are transactions in which an entity sells one of its assets
and then immediately leases it back from the new owner. In this regard, transactions in which the transfer of the asset meets
the requirements of IFRS 15 to be recognised as a sale of an asset are analysed.
This amendment was requested by the IFRIC, which found a regulatory gap in terms of recognition of rights of use and lease
liabilities in sale and leaseback transactions in the event of variable lease payments that do not depend on an index or rate,
for example, those based on a percentage of sales of the seller-lessee generated by use of the asset.
In this regard, the amendments provide several clarifications and let the individual entities define an accounting policy for the
method of measuring the liability arising from the leaseback.
Application of these amendments will be mandatory from 1 January 2024 - following endorsement by the European
Commission, and with the possibility of early implementation \u2013 with retrospective application to sale and leaseback
transactions entered into following the date of first-time adoption of IFRS 16, i.e. 1 January 2019 for the Group.
In that regard, there have been few, immaterial sale and leaseback transactions entered into by the Intesa Sanpaolo Group
since 2019 and, currently, there are no cases covered by the amendments.
", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-909": { "value": "SECTION 2 \u2013 GENERAL PREPARATION PRINCIPLES The Consolidated financial statements are made up of the Balance sheet, the Income statement, the Statement of comprehensive income, the Changes in shareholders\u2019 equity, the Statement of cash flows, the Notes to the consolidated financial statements and the related comparative information; the Report on operations prepared by the Directors, on the economic results achieved and on the Intesa Sanpaolo Group\u2019s balance sheet and financial position has also been included. In compliance with the provisions of Article 5 of Legislative Decree 38/2005, the financial statements have been drawn up in euro as functional currency. The amounts indicated in the Consolidated financial statements and in the Notes to the consolidated financial statements as well as those in the Report on operations are expressed in millions of euro, unless otherwise specified. The financial statements are prepared with the application of the general principles set out by IAS 1 and the specific financial reporting standards endorsed by the European Commission and illustrated in Part A.2 of these Notes to the consolidated financial statements, as well as in compliance with the general assumptions set forth by the Conceptual Framework for the preparation and presentation of Financial Statements issued by IASB. No exceptions to the application of IAS/IFRS have been made. The Report on operations and the Notes to the consolidated financial statements contain all information required by the IAS/IFRS, by current regulations, by the Bank of Italy, by Consob (Italian Securities and Exchange Commission) and by the European Securities and Markets Authority - ESMA, in addition to other information which is not compulsory but is nonetheless deemed to be necessary in order to give a true and fair presentation of the Group\u2019s situation. In addition, account was taken of documents providing interpretation and support with the application of accounting standards in relation to the impacts of COVID-19 and the outbreak of the Russia-Ukraine crisis, issued by European regulatory and supervisory authorities and the standard-setters illustrated in further detail in Section 5 - Other aspects. The balance sheets and the related details in the Notes present, in accordance with IFRS 5, among components related to discontinued operations, mainly portfolios of non-performing loans that will be subject to sale as part of the Group\u2019s de-risking strategies. This caption also includes the following reclassifications: the equity investment in Zhong Ou Asset Management Co. Ltd., for which the sale is expected to be finalised in the coming months, once the authorisation process has been completed, and the assets and liabilities relating to PBZ Card\u2019s merchant acquiring business line, which will be transferred to the Nexi Group in the first half of 2023. The financial statement forms and the Notes to the financial statements show, in addition to the figures for the reference period, the comparative figures as at 31 December 2021. The Attachments include the reconciliation statements to the balance sheet and income statement figures originally published in the 2021 financial statements, together with specific reconciliations between the latter and the reclassified statements (restated and redetermined) included in the Report on operations accompanying these financial statements. Contents of financial statement forms Balance sheet and income statement The compulsory forms of the balance sheet and income statement are made up of captions, subcaptions and further detailed information (specified as the \u201cof which\u201d items in the captions and subcaptions). Following the Group\u2019s decision to exercise the option of adopting the Deferral Approach, provided for by IFRS 9 \"Financial Instruments\" also for banking-led financial conglomerates, under which the financial assets and liabilities of subsidiary insurance companies continue to be recognised in the financial statements in accordance with IAS 39, specific balance sheet and income statement captions have been added to the consolidated financial statement layouts established in Circular 262 to present the valuation of assets and liabilities pertaining to insurance companies and the related profit or loss effects measured in accordance with IAS 39. In the interests of completeness, it should be noted that with regard to the compulsory forms defined by the Bank of Italy, captions which do not have amounts for the reporting year and the previous year have also been shown. In the income statement revenues are indicated without sign, whereas costs are preceded by the minus sign. Statement of comprehensive income The statement of comprehensive income shows, starting from the net income/(loss) for the year, the income components recognised as a balancing entry in valuation reserves, net of the tax effect, in compliance with international financial reporting standards. Consolidated comprehensive income is represented by providing separate recognition of the income components that will not be reversed to the income statement in the future and those which, conversely, could later be reclassified to income/(loss) for the year under specific conditions. The statement also distinguishes between the portion of income pertaining to the Parent Company and that pertaining to minority interests. Similarly to the balance sheet and the income statement, with respect to the compulsory forms defined by the Bank of Italy, captions which do not present amounts for the reporting year and the previous year are in any case included. Negative amounts are preceded by the minus sign. Changes in shareholders\u2019 equity The statement of changes in shareholders\u2019 equity presents shareholders\u2019 equity accounts and changes which occurred in the reference year and in the previous year, broken down in share capital, reserves, reserves from retained earnings, valuation reserves and net income. Treasury shares are deducted from shareholders\u2019 equity. The table is presented by inverting the rows and the columns with respect to the same form provided for by the updating of Bank of Italy Circular 262/2005. Statement of cash flows The statement of cash flows registered in the reference year and in the previous year is prepared using the indirect method, on the basis of which cash flows from operating activities are represented by net income adjusted for the effects of non-cash transactions. Cash flows are broken down into flows from operating activities, from investing activities and from financing activities. In the form, cash flows generated in the year are indicated without sign, whereas cash flows absorbed are preceded by the minus sign. Contents of the Notes to the consolidated financial statements The Notes to the consolidated financial statements include the information provided for by International Financial Reporting Standards and Circular 262 issued by the Bank of Italy on 22 December 2005 and subsequently amended, applicable for the preparation of these financial statements. As already mentioned in relation to the financial statements, as a result of the application of the Deferral Approach by the Group\u2019s insurance companies, the disclosures in the explanatory notes envisaged by Circular 262 have been supplemented with the tables required by the previous 4th update of Circular 262 to present the information required by IAS 39. ", "dimensions": { "concept": "ifrs-full:DescriptionOfOtherAccountingPoliciesRelevantToUnderstandingOfFinancialStatements", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-903": { "value": "SECTION 2 \u2013 GENERAL PREPARATION PRINCIPLES The Consolidated financial statements are made up of the Balance sheet, the Income statement, the Statement of comprehensive income, the Changes in shareholders\u2019 equity, the Statement of cash flows, the Notes to the consolidated financial statements and the related comparative information; the Report on operations prepared by the Directors, on the economic results achieved and on the Intesa Sanpaolo Group\u2019s balance sheet and financial position has also been included. In compliance with the provisions of Article 5 of Legislative Decree 38/2005, the financial statements have been drawn up in euro as functional currency. The amounts indicated in the Consolidated financial statements and in the Notes to the consolidated financial statements as well as those in the Report on operations are expressed in millions of euro, unless otherwise specified. The financial statements are prepared with the application of the general principles set out by IAS 1 and the specific financial reporting standards endorsed by the European Commission and illustrated in Part A.2 of these Notes to the consolidated financial statements, as well as in compliance with the general assumptions set forth by the Conceptual Framework for the preparation and presentation of Financial Statements issued by IASB. No exceptions to the application of IAS/IFRS have been made. The Report on operations and the Notes to the consolidated financial statements contain all information required by the IAS/IFRS, by current regulations, by the Bank of Italy, by Consob (Italian Securities and Exchange Commission) and by the European Securities and Markets Authority - ESMA, in addition to other information which is not compulsory but is nonetheless deemed to be necessary in order to give a true and fair presentation of the Group\u2019s situation. In addition, account was taken of documents providing interpretation and support with the application of accounting standards in relation to the impacts of COVID-19 and the outbreak of the Russia-Ukraine crisis, issued by European regulatory and supervisory authorities and the standard-setters illustrated in further detail in Section 5 - Other aspects. The balance sheets and the related details in the Notes present, in accordance with IFRS 5, among components related to discontinued operations, mainly portfolios of non-performing loans that will be subject to sale as part of the Group\u2019s de-risking strategies. This caption also includes the following reclassifications: the equity investment in Zhong Ou Asset Management Co. Ltd., for which the sale is expected to be finalised in the coming months, once the authorisation process has been completed, and the assets and liabilities relating to PBZ Card\u2019s merchant acquiring business line, which will be transferred to the Nexi Group in the first half of 2023. The financial statement forms and the Notes to the financial statements show, in addition to the figures for the reference period, the comparative figures as at 31 December 2021. The Attachments include the reconciliation statements to the balance sheet and income statement figures originally published in the 2021 financial statements, together with specific reconciliations between the latter and the reclassified statements (restated and redetermined) included in the Report on operations accompanying these financial statements. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-938": { "value": "SECTION 2 \u2013 GENERAL PREPARATION PRINCIPLES The Consolidated financial statements are made up of the Balance sheet, the Income statement, the Statement of comprehensive income, the Changes in shareholders\u2019 equity, the Statement of cash flows, the Notes to the consolidated financial statements and the related comparative information; the Report on operations prepared by the Directors, on the economic results achieved and on the Intesa Sanpaolo Group\u2019s balance sheet and financial position has also been included. In compliance with the provisions of Article 5 of Legislative Decree 38/2005, the financial statements have been drawn up in euro as functional currency. The amounts indicated in the Consolidated financial statements and in the Notes to the consolidated financial statements as well as those in the Report on operations are expressed in millions of euro, unless otherwise specified. The financial statements are prepared with the application of the general principles set out by IAS 1 and the specific financial reporting standards endorsed by the European Commission and illustrated in Part A.2 of these Notes to the consolidated financial statements, as well as in compliance with the general assumptions set forth by the Conceptual Framework for the preparation and presentation of Financial Statements issued by IASB. No exceptions to the application of IAS/IFRS have been made. The Report on operations and the Notes to the consolidated financial statements contain all information required by the IAS/IFRS, by current regulations, by the Bank of Italy, by Consob (Italian Securities and Exchange Commission) and by the European Securities and Markets Authority - ESMA, in addition to other information which is not compulsory but is nonetheless deemed to be necessary in order to give a true and fair presentation of the Group\u2019s situation. In addition, account was taken of documents providing interpretation and support with the application of accounting standards in relation to the impacts of COVID-19 and the outbreak of the Russia-Ukraine crisis, issued by European regulatory and supervisory authorities and the standard-setters illustrated in further detail in Section 5 - Other aspects. The balance sheets and the related details in the Notes present, in accordance with IFRS 5, among components related to discontinued operations, mainly portfolios of non-performing loans that will be subject to sale as part of the Group\u2019s de-risking strategies. This caption also includes the following reclassifications: the equity investment in Zhong Ou Asset Management Co. Ltd., for which the sale is expected to be finalised in the coming months, once the authorisation process has been completed, and the assets and liabilities relating to PBZ Card\u2019s merchant acquiring business line, which will be transferred to the Nexi Group in the first half of 2023. The financial statement forms and the Notes to the financial statements show, in addition to the figures for the reference period, the comparative figures as at 31 December 2021. The Attachments include the reconciliation statements to the balance sheet and income statement figures originally published in the 2021 financial statements, together with specific reconciliations between the latter and the reclassified statements (restated and redetermined) included in the Report on operations accompanying these financial statements. Contents of financial statement forms Balance sheet and income statement The compulsory forms of the balance sheet and income statement are made up of captions, subcaptions and further detailed information (specified as the \u201cof which\u201d items in the captions and subcaptions). Following the Group\u2019s decision to exercise the option of adopting the Deferral Approach, provided for by IFRS 9 \"Financial Instruments\" also for banking-led financial conglomerates, under which the financial assets and liabilities of subsidiary insurance companies continue to be recognised in the financial statements in accordance with IAS 39, specific balance sheet and income statement captions have been added to the consolidated financial statement layouts established in Circular 262 to present the valuation of assets and liabilities pertaining to insurance companies and the related profit or loss effects measured in accordance with IAS 39. In the interests of completeness, it should be noted that with regard to the compulsory forms defined by the Bank of Italy, captions which do not have amounts for the reporting year and the previous year have also been shown. In the income statement revenues are indicated without sign, whereas costs are preceded by the minus sign. Statement of comprehensive income The statement of comprehensive income shows, starting from the net income/(loss) for the year, the income components recognised as a balancing entry in valuation reserves, net of the tax effect, in compliance with international financial reporting standards. Consolidated comprehensive income is represented by providing separate recognition of the income components that will not be reversed to the income statement in the future and those which, conversely, could later be reclassified to income/(loss) for the year under specific conditions. The statement also distinguishes between the portion of income pertaining to the Parent Company and that pertaining to minority interests. Similarly to the balance sheet and the income statement, with respect to the compulsory forms defined by the Bank of Italy, captions which do not present amounts for the reporting year and the previous year are in any case included. Negative amounts are preceded by the minus sign. Changes in shareholders\u2019 equity The statement of changes in shareholders\u2019 equity presents shareholders\u2019 equity accounts and changes which occurred in the reference year and in the previous year, broken down in share capital, reserves, reserves from retained earnings, valuation reserves and net income. Treasury shares are deducted from shareholders\u2019 equity. The table is presented by inverting the rows and the columns with respect to the same form provided for by the updating of Bank of Italy Circular 262/2005. Statement of cash flows The statement of cash flows registered in the reference year and in the previous year is prepared using the indirect method, on the basis of which cash flows from operating activities are represented by net income adjusted for the effects of non-cash transactions. Cash flows are broken down into flows from operating activities, from investing activities and from financing activities. In the form, cash flows generated in the year are indicated without sign, whereas cash flows absorbed are preceded by the minus sign. Contents of the Notes to the consolidated financial statements The Notes to the consolidated financial statements include the information provided for by International Financial Reporting Standards and Circular 262 issued by the Bank of Italy on 22 December 2005 and subsequently amended, applicable for the preparation of these financial statements. As already mentioned in relation to the financial statements, as a result of the application of the Deferral Approach by the Group\u2019s insurance companies, the disclosures in the explanatory notes envisaged by Circular 262 have been supplemented with the tables required by the previous 4th update of Circular 262 to present the information required by IAS 39. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-979": { "value": "SECTION 2 \u2013 GENERAL PREPARATION PRINCIPLES The Consolidated financial statements are made up of the Balance sheet, the Income statement, the Statement of comprehensive income, the Changes in shareholders\u2019 equity, the Statement of cash flows, the Notes to the consolidated financial statements and the related comparative information; the Report on operations prepared by the Directors, on the economic results achieved and on the Intesa Sanpaolo Group\u2019s balance sheet and financial position has also been included. In compliance with the provisions of Article 5 of Legislative Decree 38/2005, the financial statements have been drawn up in euro as functional currency. The amounts indicated in the Consolidated financial statements and in the Notes to the consolidated financial statements as well as those in the Report on operations are expressed in millions of euro, unless otherwise specified. The financial statements are prepared with the application of the general principles set out by IAS 1 and the specific financial reporting standards endorsed by the European Commission and illustrated in Part A.2 of these Notes to the consolidated financial statements, as well as in compliance with the general assumptions set forth by the Conceptual Framework for the preparation and presentation of Financial Statements issued by IASB. No exceptions to the application of IAS/IFRS have been made. The Report on operations and the Notes to the consolidated financial statements contain all information required by the IAS/IFRS, by current regulations, by the Bank of Italy, by Consob (Italian Securities and Exchange Commission) and by the European Securities and Markets Authority - ESMA, in addition to other information which is not compulsory but is nonetheless deemed to be necessary in order to give a true and fair presentation of the Group\u2019s situation. In addition, account was taken of documents providing interpretation and support with the application of accounting standards in relation to the impacts of COVID-19 and the outbreak of the Russia-Ukraine crisis, issued by European regulatory and supervisory authorities and the standard-setters illustrated in further detail in Section 5 - Other aspects. The balance sheets and the related details in the Notes present, in accordance with IFRS 5, among components related to discontinued operations, mainly portfolios of non-performing loans that will be subject to sale as part of the Group\u2019s de-risking strategies. This caption also includes the following reclassifications: the equity investment in Zhong Ou Asset Management Co. Ltd., for which the sale is expected to be finalised in the coming months, once the authorisation process has been completed, and the assets and liabilities relating to PBZ Card\u2019s merchant acquiring business line, which will be transferred to the Nexi Group in the first half of 2023. The financial statement forms and the Notes to the financial statements show, in addition to the figures for the reference period, the comparative figures as at 31 December 2021. The Attachments include the reconciliation statements to the balance sheet and income statement figures originally published in the 2021 financial statements, together with specific reconciliations between the latter and the reclassified statements (restated and redetermined) included in the Report on operations accompanying these financial statements. Contents of financial statement forms Balance sheet and income statement The compulsory forms of the balance sheet and income statement are made up of captions, subcaptions and further detailed information (specified as the \u201cof which\u201d items in the captions and subcaptions). Following the Group\u2019s decision to exercise the option of adopting the Deferral Approach, provided for by IFRS 9 \"Financial Instruments\" also for banking-led financial conglomerates, under which the financial assets and liabilities of subsidiary insurance companies continue to be recognised in the financial statements in accordance with IAS 39, specific balance sheet and income statement captions have been added to the consolidated financial statement layouts established in Circular 262 to present the valuation of assets and liabilities pertaining to insurance companies and the related profit or loss effects measured in accordance with IAS 39. In the interests of completeness, it should be noted that with regard to the compulsory forms defined by the Bank of Italy, captions which do not have amounts for the reporting year and the previous year have also been shown. In the income statement revenues are indicated without sign, whereas costs are preceded by the minus sign. Statement of comprehensive income The statement of comprehensive income shows, starting from the net income/(loss) for the year, the income components recognised as a balancing entry in valuation reserves, net of the tax effect, in compliance with international financial reporting standards. Consolidated comprehensive income is represented by providing separate recognition of the income components that will not be reversed to the income statement in the future and those which, conversely, could later be reclassified to income/(loss) for the year under specific conditions. The statement also distinguishes between the portion of income pertaining to the Parent Company and that pertaining to minority interests. Similarly to the balance sheet and the income statement, with respect to the compulsory forms defined by the Bank of Italy, captions which do not present amounts for the reporting year and the previous year are in any case included. Negative amounts are preceded by the minus sign. Changes in shareholders\u2019 equity The statement of changes in shareholders\u2019 equity presents shareholders\u2019 equity accounts and changes which occurred in the reference year and in the previous year, broken down in share capital, reserves, reserves from retained earnings, valuation reserves and net income. Treasury shares are deducted from shareholders\u2019 equity. The table is presented by inverting the rows and the columns with respect to the same form provided for by the updating of Bank of Italy Circular 262/2005. Statement of cash flows The statement of cash flows registered in the reference year and in the previous year is prepared using the indirect method, on the basis of which cash flows from operating activities are represented by net income adjusted for the effects of non-cash transactions. Cash flows are broken down into flows from operating activities, from investing activities and from financing activities. In the form, cash flows generated in the year are indicated without sign, whereas cash flows absorbed are preceded by the minus sign. Contents of the Notes to the consolidated financial statements The Notes to the consolidated financial statements include the information provided for by International Financial Reporting Standards and Circular 262 issued by the Bank of Italy on 22 December 2005 and subsequently amended, applicable for the preparation of these financial statements. As already mentioned in relation to the financial statements, as a result of the application of the Deferral Approach by the Group\u2019s insurance companies, the disclosures in the explanatory notes envisaged by Circular 262 have been supplemented with the tables required by the previous 4th update of Circular 262 to present the information required by IAS 39. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-904": { "value": "Statement of cash flows The statement of cash flows registered in the reference year and in the previous year is prepared using the indirect method, on the basis of which cash flows from operating activities are represented by net income adjusted for the effects of non-cash transactions. Cash flows are broken down into flows from operating activities, from investing activities and from financing activities. In the form, cash flows generated in the year are indicated without sign, whereas cash flows absorbed are preceded by the minus sign.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForCashFlowsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1025": { "value": "
SECTION 3 \u2013 SCOPE OF CONSOLIDATION AND CONSOLIDATION METHODS
Scope of consolidation
The Consolidated financial statements include Intesa Sanpaolo and the companies that it directly and indirectly controls and
consider in the scope of consolidation \u2013 as specifically set out by IAS/IFRS \u2013 also the companies operating in dissimilar
sectors from the Parent Company as well as private equity investments. Similarly, structured entities are included when the
requisite of effective control recurs, even if there is no stake in the company.
Companies are considered subsidiaries where Intesa Sanpaolo is exposed to, or has rights to, variable returns from its
involvement with them, and has the ability to affect those returns by exercising its own power over the entity in question.
Control only exists if all of the following conditions are met:
\u2212 the power to direct the relevant activities of the subsidiary;
\u2212 the exposure, or rights, to variable returns from the involvement with the investee;
\u2212 the ability to use the power over the investee to affect the amount of the investor\u2019s returns.
Companies are considered as subject to joint control if control is directly or indirectly contractually shared by the Parent
Company with one or more other parties external to the Group, or where the decisions about the relevant activities require the
unanimous consent of all the parties sharing control.
Companies are considered associates, that is subject to significant influence, when Intesa Sanpaolo, directly or indirectly,
holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or when the Parent Company \u2013 despite a lower
percentage of voting rights due to specific legal agreements such as the participation of voting syndicates \u2013 has the power of
participating in the determination of the financial and operating policies of the company.
Certain companies in which the Parent Company holds an equity stake exceeding 20% of voting share capital are excluded
from the scope of consolidation and are classified based on the provisions of IFRS 9, since they are of limited absolute
amount, or since Intesa Sanpaolo, directly or indirectly, exclusively holds rights on a portion of the rewards of the investment,
and does not have access to management policies and may exercise limited governance rights to safeguard its economic
interest.
Equity investments held, directly or through funds, in companies involved in the venture capital business are also excluded
from the line-by-line scope of consolidation. These equity investments are included in the category of Financial assets
measured at fair value through profit or loss.
Companies for which the shares have been received as pledges with voting rights exceeding 20% are not consolidated, in
consideration of the substance underlying the pledge, which has the purpose of guaranteeing loans and not of exercising
control and direction over financial and economic policies in order to benefit from the economic return on the shares.
Intesa Sanpaolo does not perform management and coordination activity over Risanamento S.p.A. and its subsidiaries
pursuant to Article 2497 et seq. of the Italian Civil Code.
With respect to 31 December 2021, the changes in the line-by-line consolidation area involved the entry of:
\u2212 Newco TPA S.p.A. (now named InSalute Servizi S.p.A.), a newly-incorporated company in the Insurance Group,
100% owned by Intesa Sanpaolo Vita;
\u2212 Compagnie de Banque Priv\u00e9e Quilvest (CBPQ), 100%-owned by Fideuram Bank (Luxembourg) S.A.;
\u2212 VUB Operating Leasing A.S., previously consolidated using the equity method;
\u2212 Acantus S.p.A. (transferee of ISP\u2019s pledged loans business line belonging to the former UBI Group), following the
exceeding of the immateriality limits that previously allowed its consolidation at equity;
\u2212 VUB Generali Dochodkova Spravcovska Spolocnost A.S, following the acquisition of an additional share of 5.26% by
VSEOBECNA UVEROVA BANKA A.S. (the total investment now amounts to 55.26%). The company was previously
consolidated at equity;
\u2212 Eurizon Capital Real Asset SGR S.p.A., following the exceeding of the immateriality limits that previously allowed its
consolidation at equity;
and the exit of:
\u2212 Intesa Sanpaolo Private Bank (Suisse) Morval, merged by incorporation into Reyl & Cie S.A.;
\u2212 VUB Leasing A.S., which was discontinued following its demerger into Vseobecna Uverova Banka A.S. for finance
leases and into VUB Operating Leasing (mentioned above) for operating leases;
\u2212 UBI Leasing S.p.A., merged by incorporation into Intesa Sanpaolo S.p.A.;
\u2212 PBZ Stambena Stedionica d.d., merged by incorporation into PBZ \u2013 Privredna Banka Zagreb d.d.;
\u2212 Intesa Sanpaolo (Qingdao) Service Company Limited, which is now consolidated using the equity method in view of the
negligible amounts of the balance sheet aggregates;
\u2212 Cargeas Assicurazioni S.p.A., merged by incorporation into Intesa Sanpaolo Assicura S.p.A.;
\u2212 Intesa Sanpaolo Smart Care S.r.l., merged by incorporation into Intesa Sanpaolo S.p.A.;
\u2212 Sanpaolo Invest SIM S.p.A., merged by incorporation into Fideuram-Intesa Sanpaolo Private Banking S.p.A.;
In the interest of completeness, it should also be noted that Mooney Group continues to be consolidated at equity for the
purposes of the accounting scope of consolidation, but is included in the prudential scope of consolidation using the
proportional method; in July, Banca 5 S.p.A. acquired an additional 20% stake in the above-mentioned company, bringing the
total interest to 50% (subject to joint control).
Lastly, for completeness, please note the following changes of name:
- Intesa Sanpaolo International Value Services Ltd. into Intesa Sanpaolo International Value Services d.o.o.;
- IW Bank S.p.A. into IW Private Investments Societ\u00e0 di Intermediazione Mobiliare S.p.A.
The following table lists the investments in exclusively controlled companies at 31 December 2022.
1. Exclusively controlled companies
Companies
Place of
business
Registered
office
Type of
relation-
ship (a)
INVESTMENT
Votes
available
(b)
Direct ownership
%
held
1
Acantus S.p.A.
Milano
Milano
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 800,000
2
Anti Financial Crime Digital HUB S.c.a.r.l. (c)
Torino
Torino
1
Intesa Sanpaolo Innovation Center S.p.A.
10.00
Capital Eur 100,000
Intesa Sanpaolo S.p.A.
60.00
70.00
3
Asteria Investment Managers S.A. (d)
Geneva
Geneva
1
REYL & Cie S.A.
100.00
Capital Chf 14,000,000
4
Banca 5 S.p.A.
Milano
Milano
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 30,000,000
5
Banca Comerciala Eximbank S.A.
Chisinau
Chisinau
1
Intesa Sanpaolo S.p.A.
100.00
Capital Mdl 1,250,000,000
6
Banca Intesa AD Beograd
Novi Beograd
Beograd
1
Intesa Sanpaolo Holding International S.A.
100.00
Capital Rsd 21,315,900,000
7
Bank of Alexandria S.A.E.
Cairo
Cairo
1
Intesa Sanpaolo S.p.A.
80.00
Capital Egp 5,000,000,000
8
Banka Intesa Sanpaolo d.d. (e)
Koper
Koper
1
Intesa Sanpaolo S.p.A.
48.13
Capital Eur 22,173,218
Privredna Banka Zagreb d.d.
51.00
99.13
9
CBP Quilvest PE Fund GP S.a r.l. (c)
Luxembourg
Luxembourg
1
Compagnie de Banque Priv\u00e9e Quilvest S.A.
100.00
Capital Usd 20,000
10
Cib Bank Ltd.
Budapest
Budapest
1
Intesa Sanpaolo S.p.A.
100.00
Capital Huf 50,000,000,003
11
CIB Insurance Broker Ltd.
Budapest
Budapest
1
Cib Bank Ltd.
100.00
Capital Huf 10,000,000
12
CIB Leasing Ltd.
Budapest
Budapest
1
Cib Bank Ltd.
100.00
Capital Huf 53,000,000
13
CIB Rent Operative Leasing Ltd.
Budapest
Budapest
1
Cib Bank Ltd.
100.00
Capital Huf 5,000,000
14
Colline e oltre S.p.A. (c)
Pavia
Pavia
1
Intesa Sanpaolo S.p.A.
51.00
Capital Eur 50,000
15
Compagnia Italiana Finanziaria - CIF S.r.l.
Milano
Milano
1
IN.FRA - Investire nelle Infrastrutture S.r.l.
61.45
Capital Eur 10,000
16
Compagnie de Banque Priv\u00e9e Quilvest S.A.
Luxembourg
Luxembourg
1
Fideuram Bank Luxembourg S.A.
100.00
Capital Eur 32,537,000
17
Consorzio Studi e ricerche fiscali Gruppo Intesa Sanpaolo (c)
Roma
Roma
1
Fideuram Intesa Sanpaolo Private Banking
S.p.A.
7.50
Capital Eur 258,228
Eurizon Capital SGR S.p.A.
5.00
Intesa Sanpaolo Vita S.p.A.
7.50
Intesa Sanpaolo S.p.A.
80.00
100.00
18
Duomo Funding Plc (f)
Dublin
Dublin
2
Intesa Sanpaolo S.p.A.
-
19
Epsilon SGR S.p.A.
Milano
Milano
1
Eurizon Capital SGR S.p.A.
100.00
Capital Eur 5,200,000
20
Etoile Fran\u00e7ois Premier S.a.r.l. (g)
Paris
Paris
1
Risanamento Europa S.r.l.
100.00
Capital Eur 5,000
21
Eurizon Asset Management Croatia D.O.O.
Zagreb
Zagreb
1
Eurizon Asset Management Slovakia Sprav.
Spol. A.S.
100.00
Capital Hrk 5,000,000
22
Eurizon Asset Management Hungary Ltd.
Budapest
Budapest
1
Eurizon Asset Management Slovakia Sprav.
Spol. A.S.
100.00
Capital Huf 600,000,000
23
Eurizon Asset Management Slovakia Sprav. Spol. A.S.
Bratislava
Bratislava
1
Eurizon Capital SGR S.p.A.
100.00
Capital Eur 4,093,560
24
Eurizon Capital Asia Limited (gi\u00e0 Eurizon Capital (HK) limited) (c)
Hong Kong
Hong Kong
1
Eurizon Capital SGR S.p.A.
100.00
Capital Hkd 78,000,000
25
Eurizon Capital Real Asset SGR S.p.a.
Milano
Milano
1
Eurizon Capital SGR S.p.A.
19.98
51,00 (*)
Capital Eur 4,166,667
Intesa Sanpaolo Vita S.p.A.
40.01
24,50 (*)
59.99
75,50 (*)
Companies
Place of
business
Registered
office
Type of
relation-
ship (a)
INVESTMENT
Votes
available
(b)
Direct ownership
%
held
26
Eurizon Capital S.A.
Luxembourg
Luxembourg
1
Eurizon Capital SGR S.p.A.
100.00
Capital Eur 7,974,600
27
Eurizon Capital SGR S.p.A.
Milano
Milano
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 99,000,000
28
Eurizon Slj Capital Ltd.
London
London
1
Eurizon Capital SGR S.p.A.
65.00
Capital Gbp 1,001,000
29
Exelia S.r.l. (c)
Brasov
Brasov
1
Intesa Sanpaolo Holding International S.A.
100.00
Capital Ron 8,252,600
30
Exetra S.p.A. (h)
Milano
Milano
1
Intesa Sanpaolo S.p.A.
85.00
Capital Eur 158,000
31
Fideuram Intesa Sanpaolo Private Banking S.p.A.
Roma
Torino
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 300,000,000
32
Fideuram Asset Management (Ireland) Dac
(gi\u00e0 Fideuram Asset Management (Ireland) Ltd.)
Dublin
Dublin
1
Fideuram Intesa Sanpaolo Private Banking
S.p.A.
100.00
Capital Eur 1,000,000
33
Fideuram Asset Management SGR S.p.A.
Milano
Milano
1
Fideuram Intesa Sanpaolo Private Banking
S.p.A.
99.52
Capital Eur 25,870,000
34
Fideuram Asset Management Uk Ltd (c)
London
London
1
Fideuram Asset Management (Ireland) Dac
100.00
Capital Gbp 1,000,000
35
Fideuram Bank ( Luxembourg) S.A.
Luxembourg
Luxembourg
1
Fideuram Intesa Sanpaolo Private Banking
S.p.A.
100.00
Capital Eur 40,000,000
36
Fideuram Vita S.p.A.
Roma
Roma
1
Intesa Sanpaolo S.p.A.
80.01
Capital Eur 357,446,836
Fideuram Intesa Sanpaolo Private Banking
S.p.A.
19.99
100.00
37
Fondo Sviluppo ecosistemi di Innovazione (c)
Torino
Torino
1
Intesa Sanpaolo Innovation Center S.p.A.
100.00
Capital Eur 15,000,000
38
Gap Manco Sarl (c)
Luxembourg
Luxembourg
1
REYL & Cie S.A.
100.00
Capital Eur 12,500
39
Iberia Distressed Assets Manager Sarl (c)
Luxembourg
Luxembourg
1
REYL Finance (MEA) Ltd.
100.00
Capital Eur 12,500
40
IIF SME Manager Ltd. (c)
George Town
George Town
1
Asteria Investment Managers S.A.
100.00
Capital Usd 1,000
41
IMI Capital Market USA Corp.
New York
New York
1
IMI Investments S.A.
100.00
Capital Usd 5,000
42
IMI Finance Luxembourg S.A. (c)
Luxembourg
Luxembourg
1
Intesa Sanpaolo Holding International S.A.
100.00
Capital Eur 100,000
43
IMI Investments S.A.
Luxembourg
Luxembourg
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 21,660,000
44
IMMIT - Immobili Italiani S.r.l.
Bergamo
Bergamo
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 185,680,000
45
Immobiliare Cascina Rubina S.r.l. (g)
Milano
Milano
1
Risanamento S.p.A.
100.00
Capital Eur 10,000
46
IN.FRA - Investire nelle Infrastrutture S.r.l.
Milano
Milano
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 10,000
47
Iniziative Logistiche S.r.l.
Milano
Milano
1
IN.FRA - Investire nelle Infrastrutture S.r.l.
60.02
Capital Eur 10,000
48
Insalute Servizi S.p.A.
Torino
Torino
1
Intesa Sanpaolo Vita S.p.A.
100.00
Capital Eur 500,000
49
Intesa Invest A.D. Beograd (c)
Beograd
Beograd
1
Banca Intesa AD Beograd
100.00
Capital Rsd 236,975,800
50
Intesa Leasing (Closed Joint-Stock Company)
Moscow
Moscow
1
Joint-Stock Company Banca Intesa
100.00
Capital Rub 3,000,000
51
Intesa Leasing d.o.o. Beograd
Beograd
Beograd
1
Banca Intesa AD Beograd
100.00
Capital Rsd 960,374,301
52
Intesa Sanpaolo (Qingdao) Service Company (c)
Qingdao
Qingdao
1
Intesa Sanpaolo S.p.A.
100.00
Capital CNY 80,000,000
53
Intesa Sanpaolo Assicura S.p.A.
Torino
Torino
1
Intesa Sanpaolo Vita S.p.A.
100.00
Capital Eur 27,912,258
Companies
Place of
business
Registered
office
Type of
relation-
ship (a)
INVESTMENT
Votes
available
(b)
Direct ownership
%
held
54
Intesa Sanpaolo Bank Albania Sh.A.
Tirana
Tirana
1
Intesa Sanpaolo S.p.A.
100.00
Capital All 5,562,517,674
55
Intesa Sanpaolo Bank Ireland Plc
Dublin
Dublin
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 400,500,000
56
Intesa Sanpaolo Bank Luxembourg S.A.
Luxembourg
Luxembourg
1
Intesa Sanpaolo Holding International S.A.
100.00
Capital Eur 1,389,370,555
57
Intesa Sanpaolo Banka d.d. Bosna I Hercegovina
Sarajevo
Sarajevo
1
Privredna Banka Zagreb d.d.
99.99
100,00
(**)
Capital Bam 44,782,000
58
Intesa Sanpaolo Brasil S.A. - Banco Multiplo
Sao Paulo
Sao Paulo
1
Intesa Sanpaolo S.p.A.
99.90
Capital Brl 945,428,281
Intesa Sanpaolo Holding International S.A.
0.10
100.00
59
Intesa Sanpaolo Casa S.p.A. (c)
Milano
Milano
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 1,000,000
60
Intesa Sanpaolo Expo Institutional Contact S.r.l. (c)
Milano
Milano
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 50,000
61
Intesa Sanpaolo Funding LLC (gi\u00e0 Intesa Funding LLC)
New York
Wilmington
Delaware
1
Intesa Sanpaolo S.p.A.
100.00
Capital Usd 25,000
62
Intesa Sanpaolo Harbourmaster III S.A.
Luxembourg
Luxembourg
1
Intesa Sanpaolo Holding International S.A.
100.00
Capital Eur 5,500,000
63
Intesa Sanpaolo Highline S.r.l. (c)
Torino
Torino
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 500,000
64
Intesa Sanpaolo Holding International S.A.
Luxembourg
Luxembourg
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 2,157,957,270
65
Intesa Sanpaolo House Luxemburg S.A.
Luxembourg
Luxembourg
1
Intesa Sanpaolo Holding International S.A.
100.00
Capital Eur 24,990,317
66
Intesa Sanpaolo Imi Securities Corp.
New York
New York
1
IMI Capital Market USA Corp.
100.00
Capital Usd 44,500,000
67
Intesa Sanpaolo Innovation Center S.p.a.
Torino
Torino
1
Intesa Sanpaolo S.p.A.
99.99
Capital Eur 9,254,940
Intesa Sanpaolo Vita S.p.A.
0.01
100.00
68
Intesa Sanpaolo Insurance Agency S.p.A.
Torino
Torino
1
Intesa Sanpaolo Vita S.p.A.
100.00
Capital Eur 500,000
69
Intesa Sanpaolo International Value Services d.o.o.
Zagreb
Zagreb
1
Intesa Sanpaolo Holding International S.A.
100.00
Capital Hrk 100,000
70
Intesa Sanpaolo Life Designed activity company (gi\u00e0 Intesa
Sanpaolo Life Ltd.)
Dublin
Dublin
1
Intesa Sanpaolo Vita S.p.A.
100.00
Capital Eur 625,000
71
Intesa Sanpaolo Private Argentina S.A. (c)
Buenos Aires
Buenos Aires
1
Fideuram Intesa Sanpaolo Private Banking
S.p.A.
4.97
Capital Ars 13,404,506
REYL & Cie S.A.
95.03
100.00
72
Intesa Sanpaolo Private Banking S.p.A.
Milano
Milano
1
Fideuram Intesa Sanpaolo Private Banking
S.p.A.
100.00
Capital Eur 117,497,424
73
Intesa Sanpaolo Provis S.p.A.
Milano
Milano
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 6,725,000
74
Intesa Sanpaolo RBM Salute S.p.A. (i)
Venezia
Venezia
1
Intesa Sanpaolo Vita S.p.A.
73.79
Capital Eur 305,208,000
75
Intesa Sanpaolo RE.O.CO. S.p.A.
Milano
Milano
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 13,000,000
76
Intesa Sanpaolo Rent Foryou S.p.A.
Torino
Torino
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 630,000
77
Intesa Sanpaolo Romania S.A. Commercial Bank
Bucarest
Bucarest
1
Intesa Sanpaolo S.p.A.
99.73
Capital Ron 1,216,639,410
Intesa Sanpaolo Holding International S.A.
0.27
100.00
Companies
Place of
business
Registered
office
Type of
relation-
ship (a)
INVESTMENT
Votes
available
(b)
Direct ownership
%
held
78
Intesa Sanpaolo Servi\u00e7os e Empreendimentos Ltda em
liquida\u00e7\u00e3o (c)
S\u00e3o Paulo
S\u00e3o Paulo
1
Intesa Sanpaolo S.p.A.
100.00
Capital Brl 3,283,320
79
Intesa Sanpaolo Servitia S.A.
Luxembourg
Luxembourg
1
Intesa Sanpaolo Holding International S.A.
100.00
Capital Eur 1,500,000
80
Intesa Sanpaolo Vita S.p.A.
Milano
Torino
1
Intesa Sanpaolo S.p.A.
99.99
Capital Eur 320,422,509
81
Inveniam S.A. en Liquidation \u00a9
Geneva
Geneva
1
REYL Private Office Luxembourg S.a.r.l.
100.00
Capital Chf 50,000
82
ISP CB Ipotecario S.r.l. (c)
Milano
Milano
1
Intesa Sanpaolo S.p.A.
60.00
Capital Eur 120,000
83
ISP CB Pubbico S.r.l. (c)
Milano
Milano
1
Intesa Sanpaolo S.p.A.
60.00
Capital Eur 120,000
84
ISP OBG S.r.l. (c)
Milano
Milano
1
Intesa Sanpaolo S.p.A.
60.00
Capital Eur 42,038
85
IW Private Investments SIM S.p.A.
Milano
Milano
1
Fideuram Intesa Sanpaolo Private Banking
S.p.A.
100.00
Capital Eur 67,950,000
86
Joint-Stock Company Banca Intesa
Moscow
Moscow
1
Intesa Sanpaolo Holding International S.A.
53.02
Capital Rub 10,820,180,800
Intesa Sanpaolo S.p.A.
46.98
100.00
87
Lux Gest Asset Management S.A.
Luxembourg
Luxembourg
1
Intesa Sanpaolo Bank Luxembourg S.A.
100.00
Capital Eur 200,000
88
Milano Santa Giulia S.p.A. (g)
Milano
Milano
1
Risanamento S.p.A.
100.00
Capital Eur 139,041
89
Morval Bank & Trust Cayman Ltd. (c)
Grand
Cayman
Grand
Cayman
1
REYL & Cie S.A.
100.00
Capital Usd 7,850,000
90
MSG Comparto Quarto S.r.l. (e)
Milano
Milano
1
Milano Santa Giulia S.p.A.
100.00
Capital Eur 20,000
91
MSG Comparto Secondo S.r.l. (g)
Milano
Milano
1
Milano Santa Giulia S.p.A.
100.00
Capital Eur 50,000
92
MSG Comparto Terzo S.r.l. (g)
Milano
Milano
1
Milano Santa Giulia S.p.A.
100.00
Capital Eur 20,000
93
Neva S.G.R. S.p.A. (gi\u00e0 Imi Fondi Chiusi S.p.A.) (c)
Torino
Torino
1
Intesa Sanpaolo Innovation Center S.p.A.
100.00
Capital Eur 2,000,000
94
OOO Intesa Realty Russia in Liquidation (c)
Moscow
Moscow
1
Intesa Sanpaolo S.p.A.
100.00
Capital Rub 10,000
95
Oro Italia Trading S.p.A. in liquidazione (c)
Arezzo
Arezzo
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 500,000
96
PBZ Card d.o.o.
Zagreb
Zagreb
1
Privredna Banka Zagreb d.d.
100.00
Capital Hrk 43,422,200
97
PBZ Leasing d.o.o.
Zagreb
Zagreb
1
Privredna Banka Zagreb d.d.
100.00
Capital Hrk 15,000,000
98
Porta Nuova Gioia (j)
Milano
Milano
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 7,054,350
99
Portugal Real Estate Opportunities Manager Sarl (c)
Luxembourg
Luxembourg
1
REYL Finance (MEA) Ltd.
100.00
Capital Eur 12,500
100
Pravex Bank Joint-Stock Company
Kiev
Kiev
1
Intesa Sanpaolo S.p.A.
100.00
Capital Uah 979,089,724
101
Prestitalia S.p.A.
Bergamo
Bergamo
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 205,722,715
102
Private Equity International S.A.
Luxembourg
Luxembourg
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 101,000,000
103
Privredna Banka Zagreb d.d.
Zagreb
Zagreb
1
Intesa Sanpaolo Holding International S.A.
100.00
Capital Hrk 1,876,574,700
104
Qingdao Yicai Fund Distribution Co. Ltd.
Qingdao
Qingdao
1
Intesa Sanpaolo S.p.A.
100.00
Capital Cny 591,000,000
105
RB Participations S.A.
Geneva
Geneva
1
Fideuram Intesa Sanpaolo Private Banking
S.p.A.
100.00
Capital Chf 100,000
Companies
Place of
business
Registered
office
Type of
relation-
ship (a)
INVESTMENT
Votes
available
(b)
Direct ownership
%
held
106
Recovery Property Utilisation and Services Zrt.
Budapest
Budapest
1
Cib Bank Ltd.
100.00
Capital Huf 20,000,000
107
REYL & Cie (Malta) Holding Ltd. (c)
Valletta
Valletta
1
REYL & Cie S.A.
100.00
Capital Eur 730,000
108
REYL & Cie (Malta) Ltd. (c)
Valletta
Valletta
1
REYL & Cie (Malta) Holding Ltd.
100.00
Capital Eur 730,000
109
REYL & Cie S.A. (k)
Geneva
Geneva
1
Fideuram Intesa Sanpaolo Private Banking
S.p.A.
39.00
Capital Chf 31,500,001
RB Participations S.A.
30.00
69.00
110
REYL & CO (UK) Llp. (c)
London
London
1
REYL & CO Holdings Ltd.
100.00
Capital Gbp 2,500,000
111
REYL & CO Holdings Ltd. (c)
London
London
1
REYL & Cie S.A.
100.00
Capital Gbp 2,400,000
112
REYL Finance (MEA) Ltd. (c)
Dubai
Dubai
1
REYL & Cie S.A.
100.00
Capital Usd 2,875,000
113
REYL Overseas AG (c)
Zurich
Zurich
1
REYL & Cie S.A.
100.00
Capital Chf 2,000,000
114
REYL Private Office Luxembourg Sarl (c)
Luxembourg
Luxembourg
1
REYL & Cie S.A.
100.00
Capital Eur 50,000
115
REYL Singapore Holding Pte. Ltd. (c)
Singapore
Singapore
1
REYL & Cie S.A.
75.00
Capital Sgd 1,201
116
REYL Singapore Pte. Ltd. (c)
Singapore
Singapore
1
REYL & Cie S.A.
76.00
Capital Sgd 500,000
REYL Singapore Holding Pte. Ltd.
24.00
100.00
117
Ri. Rental S.r.l. (g)
Milano
Milano
1
Risanamento S.p.A.
100.00
Capital Eur 10,000
118
Risanamento Europa S.r.l. (g)
Milano
Milano
1
Risanamento S.p.A.
100.00
Capital Eur 10,000
119
Risanamento S.p.A. (g)
Milano
Milano
1
Intesa Sanpaolo S.p.A.
48.88
Capital Eur 197,951,784
120
Romulus Funding Corporation (f)
New York
New York
2
Intesa Sanpaolo S.p.A.
-
121
Societ\u00e0 Benefit Cimarosa 1 S.p.A. (c)
Milano
Milano
1
Intesa Sanpaolo S.p.A.
100.00
Capital Eur 100,000
122
Societ\u00e0 Italiana di Revisione e Fiduciaria \u2013 S.I.RE.F. S.p.A.
Milano
Milano
1
Fideuram Intesa Sanpaolo Private Banking
S.p.A.
100.00
Capital Eur 2,600,000
123
SRM Studi e Ricerche per il Mezzogiorno (c)
Napoli
Napoli
1
Intesa Sanpaolo S.p.A.
60.00
20,00 (*)
Capital Eur 90,000
124
Sviluppo Comparto 3 S.r.l. (g)
Milano
Milano
1
Milano Santa Giulia S.p.A.
100.00
Capital Eur 50,000
125
UBI Finance S.r.l. (c)
Milano
Milano
1
Intesa Sanpaolo S.p.A.
60.00
Capital Eur 10,000
126
UBI Trustee S.A. (c)
Luxembourg
Luxembourg
1
Fideuram Bank Luxembourg S.A.
100.00
Capital Eur 250,000
127
Vseobecna Uverova Banka A.S.
Bratislava
Bratislava
1
Intesa Sanpaolo Holding International S.A.
100.00
Capital Eur 430,819,064
Companies
Place of
business
Registered
office
Type of
relation-
ship (a)
INVESTMENT
Votes
available
(b)
Direct ownership
%
held
128
VUB Generali Dochodkova Spravcovska Spolocnost A.S. (l)
Bratislava
Bratislava
1
Vseobecna Uverova Banka A.S.
55.26
Capital Eur 10,090,976
129
VUB Operating Leasing
Bratislava
Bratislava
1
Vseobecna Uverova Banka A.S.
100.00
Capital Eur 25,000
(a)
Type of relationship:
1 - majority of voting rights at Ordinary Shareholders' Meeting;
2 - other forms of control.
(b)
Where different from the % portion, the availability of the votes in the Ordinary Shareholders' Meeting is indicated, distinguishing between the effective (*) and potential (**) voting rights,
where applicable.
(c)
Company consolidated using the equity method given its limited materiality.
(d)
The subsidiary Asteria Investment Managers SA (\u201cAsteria\u201d) is 80% owned by Reyl & Cie SA following the acquisition of the minority interests from the minority shareholders. The remaining
20% of the share capital consists of treasury shares. These treasury shares are due to be cancelled in early 2023, resulting in an adjustment of Asteria\u2019s total share capital, after which Reyl &
Cie will hold a 100% equity investment. Asteria absorbed the subsidiary Obviam AG with accounting effect from 31 December 2022 (which was previously consolidated at equity due to its
low materiality).
(e)
Minority shareholders are subject to a legal commitment to purchase the remaining 0.7% of share capital.
(f)
Company controlled pursuant to IFRS 10, although the Group does not hold any equity stake in the company capital.
(g)
Company not subject to the management and coordination activities pursuant to art. 2497 and following of the Italian Civil Code.
(h)
In the event of liquidation of the equity investment, the minority shareholder has the right to sell, and Intesa Sanpaolo is required to purchase, the entire minority investment.
(i)
Please note that there are put and call option agreements on 26.1% of share capital held by minority shareholders.
(j)
A closed-end alternative real estate investment fund managed by COIMA SGR S.p.A.
(k)
Please note that there are put and call option agreements on 31% of share capital held by minority shareholders.
(l)
Please note that there are put and call option agreements on 44.74% of share capital held by minority shareholders.
2. Significant evaluations and assumptions in determining the scope of consolidation
As stated above, companies are considered subsidiaries where Intesa Sanpaolo is exposed to, or has rights to, variable
returns from its involvement with them, and has the ability to affect those returns by exercising its own power over the entity in
question.
Control only exists if all of the following conditions are met:
\u2212 the power to direct the relevant activities of the subsidiary;
\u2212 the exposure, or rights, to variable returns from the involvement with the investee;
\u2212 the ability to use the power over the investee to affect the amount of the investor\u2019s returns.
In particular, the Group considers the following factors in evaluating the existence of control:
\u2212 the purpose and the structure of the investee in order to identify its aims and relevant activities, or the activities that
significantly affect the investee\u2019s returns, and how those activities are governed;
\u2212 power, in order to understand whether the Group has the contractual right to manage the relevant activities;
\u2212 the exposure to variable returns from the investee in order to evaluate whether the return recognised by the Group is
subject to variations depending on the investee's returns.
Furthermore, in order to evaluate the existence of control, potential principal-agent relationships are taken into consideration.
In order to evaluate whether the investee is acting as a principal or an agent, the Group takes account of the following factors:
\u2212 the decision-making power on the relevant activities of the subsidiary;
\u2212 the rights of other parties;
\u2212 the payments to which the Group is entitled;
\u2212 the Group's exposure to variable returns resulting from any investment in the investee.
IFRS 10 identifies relevant activities as activities of the investee that significantly affect the investee's returns.
In general terms, when the relevant activities are managed through voting rights, the following factors determine evidence
of control:
\u2212 direct ownership, or indirect ownership through its subsidiaries, of more than half the voting rights of an entity, unless in
exceptional circumstances it can be clearly demonstrated that such ownership does not constitute control;
\u2212 ownership of half, or less, of the votes which can be cast at the shareholders' meeting, and the practical ability
unilaterally to govern the relevant activities through:
o the control of more than half the voting rights as enshrined in an agreement with other investors;
o the power to determine the financial and operational policies of the entity, as conferred by the Articles of Association
or by contract;
o the power to nominate or remove the majority of the members of the Board of Directors or of the equivalent
corporate governance body;
o the power to cast the majority of the votes at meetings of the Board of Directors or of the equivalent corporate
governance body.
In order to exercise power, it is necessary for the rights that the Group has over the investee to be material; to be material, the
Group must have the ability to use its rights when decisions relating to relevant activities are taken.
The existence and the effect of potential voting rights, where material, are taken into consideration in evaluating whether
power exists to shape the managerial and financial policies of another entity.
Sometimes the Group has \"de facto\" control over certain entities when it possesses rights to determine unilaterally the
relevant activities of the investee, even though it does not have the majority of the voting rights.
On the contrary, cases may emerge where the Group, though holding more than half of the voting rights, does not control the
investee since, consequently to agreements with other investors, the exposure to variable returns from the involvement with
the investees is not considered significant.
Subsidiaries can also include \"structured entities\" in which the voting rights are not the dominant factor in deciding who
controls the entity; this includes special purpose vehicles (SPEs/SPVs) and investment funds. Structured entities are
considered to be controlled where:
\u2212 the Group has powers enshrined in contractual rights allowing it to govern the relevant activities; and
\u2212 the Group is exposed to the variable returns deriving from such activities.
3. Investments in subsidiaries with significant minority interests 3.1 Minority interests, minority voting rights and dividends distributed to minority shareholders Companies Minority interests % Minority voting rights % (1) Dividends distributed to minority shareholders 1 Bank of Alexandria (2) 20.00 20.00 16 2 Banka Intesa Sanpaolo D.D. 0.87 0.87 3 Compagnia Italiana Finanziaria - CIF S.r.l. 38.55 38.55 4 Eurizon Capital Real Asset SGR S.p.A. 40.01 24.50 5 Eurizon SLJ Capital Limited 35.00 35.00 1 6 Exetra S.p.A. 15.00 15.00 7 Fideuram Asset Management SGR S.p.A. 0.48 0.48 8 Iniziative Logistiche S.r.l. 39.98 39.98 9 Intesa Sanpaolo Banka D.D. Bosna I Hercegovina 0.01 10 Intesa Sanpaolo RBM Salute S.p.A. 26.21 26.21 11 Intesa Sanpaolo Vita S.p.A. 0.01 0.01 12 Reyl & Cie S.A. 31.00 31.00 13 Risanamento S.p.A. 51.12 14 VUB Generali Dochodkova Spravcovska Spolocnost A.S. 44.74 44.74 (1) Available voting rights at Ordinary Shareholders' Meeting. (2) Dividend approved but not distributed 3.2 Investments in companies with significant minority interests: financial highlights (millions of euro) Companies Total assets Cash and cash equivalents Financial assets Property, equipment and intangible assets Financial liabilities Shareholders' equity Interest margin Net interest and other banking income Operating expenses Income (loss) before tax from continuing operations Income (loss) after tax from continuing operations Income (loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) 1 Bank of Alexandria 5,171 86 4,808 162 4,249 628 353 408 -177 191 129 - 129 -319 -190 4. Significant restrictions In terms of significant restrictions, it is noted that the Intesa Sanpaolo Group is subject to supervisory rules provided by Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR), amended by Directive 2019/878/EU (CRD V) and Regulation (EU) 2019/876 (CRR II), respectively, and controls financial institutions subject to the same or similar regulations aiming to maintain an adequate level of regulatory capital in relation to risks taken; therefore, the ability of subsidiary banks or financial institutions to distribute capital or dividends is dependent on the fulfilment of the regulatory thresholds set in those regulations. Referring, for more details, to Part A - Section 5 of the consolidated financial statements, in compliance with the provisions of IFRS 12, in this section we note the limitations currently imposed by Russian regulations which \u2013 in substance \u2013 impose restrictions on repayments and payments to parties resident in unfriendly countries. Those limitations specifically affect the subsidiary Banca Intesa Russia, which, in 2022, was unable to directly route the repayments of past due instalments referring to intragroup exposures to the creditor banks and, therefore, routed the resources allocated for those repayments (for a total of around 29 million euro at the end of 2022) to specific accounts in Russia. It must also be noted that the current legal restrictions on transferring monetary resources beyond the country\u2019s borders do not prejudice in any way the ownership of the amounts (due to the creditor banks), nor, as argued in greater detail in Part A \u2013 Section 5, do they constitute an obstacle to maintaining control over the Russian subsidiary. Lastly, within the Group, there are insurance companies subject to the Solvency Capital Requirements of Insurance companies established by the Solvency II legislation. 5. Other information In preparing the Intesa Sanpaolo consolidated financial statements, the financial statements of all subsidiaries have the same financial year-end, except for that reported below for the Ukrainian subsidiary Pravex Bank in the following paragraph on Consolidation methods. Consolidation methods Full consolidation This method involves the \u201cline by line\u201d aggregation of the individual amounts reported in the balance sheets and income statements of the subsidiary companies concerned. Following the allocation to minority shareholders of their interests, in a specific caption, in equity and in the result for the period, the residual value is eliminated against the book value of the subsidiaries concerned. Any positive differences arising on consolidation, after the allocation to the assets and liabilities of the consolidated subsidiary, are recorded under Intangible assets as goodwill or other intangible assets. Negative differences are recognised in the income statement. Assets, liabilities, income and expenses between consolidated companies are totally eliminated. Business combinations must be accounted for using the \"acquisition method\" in accordance with IFRS 3, whereby identifiable assets acquired or liabilities assumed (including contingent liabilities) are recognised at their fair value at the acquisition date. Moreover, for each business combination, any minority interest in the acquired company can be recognised at fair value or in proportion to the minority investment in the net identifiable assets of the acquired company. Any excess of the consideration transferred (being the fair value of the assets sold, the liabilities incurred and the equity instruments issued) over the fair value recognition of minority interests with respect to the fair value of the assets acquired and the liabilities assumed is recognised as goodwill. If the consideration is lower, the difference is taken to the income statement. The \"acquisition method\" is applied starting from the acquisition date, that is from the moment in which control of the acquired company is obtained. Therefore, the economic results of a subsidiary acquired in the reference period are included in the Consolidated financial statements starting from the acquisition date. Likewise, economic results of a subsidiary sold are included in the Consolidated financial statements until the date in which control ceased. The difference between sale price and book value at the date of disposal (including foreign exchange differences recorded in shareholders\u2019 equity on consolidation, over time) is accounted for in the income statement. Where necessary \u2013 and without prejudice to absolutely marginal cases \u2013 the financial statements of companies which are drawn up using different accounting criteria are restated to be compliant with the standards used by the Group. With regard to the Ukrainian subsidiary Pravex Bank, as a result of the worsening of the situation in Kyiv (where the subsidiary\u2019s offices are located) since mid-October 2022, due to the repeated Russian bombings of the main Ukrainian power plants, it was decided, with a view to reducing \u201coperational\u201d risk, that it was best to retain, in December\u2019s consolidation, the accounting values produced by Pravex for the consolidation of September 2022. Thus, for the financial statements as at 31 December, the balance sheet and income statement results of Pravex were included based on a consolidation package, drawn up in compliance with the IAS/IFRSs, as set out in the Group Accounting Policies, related to 30 September 2022, using the exchange rate as at 31 December 2022 for conversion into Euro. The decision to use the data as at 30 September 2022 for the line-by-line consolidation of Pravex, also taken in light of the slight materiality of the subsidiary, and motivated by objective operational restrictions, is also based on the indications in IFRS 10, though for specific cases 75 . 5. Investments in associates and companies subject to joint control Classification, recognition and measurement criteria The caption includes investments in companies subject to joint control and associates. Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties sharing control. Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of financial and management policies of the company based on specific juridical relations, such as the participation in voting syndicates. Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since it solely has economic rights on a portion of the returns generated by the investment, but does not have access to management policies and may exercise governance rights limited to the safeguarding of its economic interests. The investments in associates and companies subject to joint control are measured at cost and accounted for according to the equity method. If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. Derecognition criteria Investments in associates and companies subject to joint control are derecognised when the contractual rights to the cash flows from the assets expire or when the investment is sold, substantially transferring all the risks and rewards connected to the assets. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1063": { "value": "SECTION 3 \u2013 SCOPE OF CONSOLIDATION AND CONSOLIDATION METHODS Scope of consolidation The Consolidated financial statements include Intesa Sanpaolo and the companies that it directly and indirectly controls and consider in the scope of consolidation \u2013 as specifically set out by IAS/IFRS \u2013 also the companies operating in dissimilar sectors from the Parent Company as well as private equity investments. Similarly, structured entities are included when the requisite of effective control recurs, even if there is no stake in the company. Companies are considered subsidiaries where Intesa Sanpaolo is exposed to, or has rights to, variable returns from its involvement with them, and has the ability to affect those returns by exercising its own power over the entity in question. Control only exists if all of the following conditions are met: \u2212 the power to direct the relevant activities of the subsidiary; \u2212 the exposure, or rights, to variable returns from the involvement with the investee; \u2212 the ability to use the power over the investee to affect the amount of the investor\u2019s returns. Companies are considered as subject to joint control if control is directly or indirectly contractually shared by the Parent Company with one or more other parties external to the Group, or where the decisions about the relevant activities require the unanimous consent of all the parties sharing control. Companies are considered associates, that is subject to significant influence, when Intesa Sanpaolo, directly or indirectly, holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or when the Parent Company \u2013 despite a lower percentage of voting rights due to specific legal agreements such as the participation of voting syndicates \u2013 has the power of participating in the determination of the financial and operating policies of the company. Certain companies in which the Parent Company holds an equity stake exceeding 20% of voting share capital are excluded from the scope of consolidation and are classified based on the provisions of IFRS 9, since they are of limited absolute amount, or since Intesa Sanpaolo, directly or indirectly, exclusively holds rights on a portion of the rewards of the investment, and does not have access to management policies and may exercise limited governance rights to safeguard its economic interest. Equity investments held, directly or through funds, in companies involved in the venture capital business are also excluded from the line-by-line scope of consolidation. These equity investments are included in the category of Financial assets measured at fair value through profit or loss. Companies for which the shares have been received as pledges with voting rights exceeding 20% are not consolidated, in consideration of the substance underlying the pledge, which has the purpose of guaranteeing loans and not of exercising control and direction over financial and economic policies in order to benefit from the economic return on the shares. Intesa Sanpaolo does not perform management and coordination activity over Risanamento S.p.A. and its subsidiaries pursuant to Article 2497 et seq. of the Italian Civil Code. With respect to 31 December 2021, the changes in the line-by-line consolidation area involved the entry of: \u2212 Newco TPA S.p.A. (now named InSalute Servizi S.p.A.), a newly-incorporated company in the Insurance Group, 100% owned by Intesa Sanpaolo Vita; \u2212 Compagnie de Banque Priv\u00e9e Quilvest (CBPQ), 100%-owned by Fideuram Bank (Luxembourg) S.A.; \u2212 VUB Operating Leasing A.S., previously consolidated using the equity method; \u2212 Acantus S.p.A. (transferee of ISP\u2019s pledged loans business line belonging to the former UBI Group), following the exceeding of the immateriality limits that previously allowed its consolidation at equity; \u2212 VUB Generali Dochodkova Spravcovska Spolocnost A.S, following the acquisition of an additional share of 5.26% by VSEOBECNA UVEROVA BANKA A.S. (the total investment now amounts to 55.26%). The company was previously consolidated at equity; \u2212 Eurizon Capital Real Asset SGR S.p.A., following the exceeding of the immateriality limits that previously allowed its consolidation at equity; and the exit of: \u2212 Intesa Sanpaolo Private Bank (Suisse) Morval, merged by incorporation into Reyl & Cie S.A.; \u2212 VUB Leasing A.S., which was discontinued following its demerger into Vseobecna Uverova Banka A.S. for finance leases and into VUB Operating Leasing (mentioned above) for operating leases; \u2212 UBI Leasing S.p.A., merged by incorporation into Intesa Sanpaolo S.p.A.; \u2212 PBZ Stambena Stedionica d.d., merged by incorporation into PBZ \u2013 Privredna Banka Zagreb d.d.; \u2212 Intesa Sanpaolo (Qingdao) Service Company Limited, which is now consolidated using the equity method in view of the negligible amounts of the balance sheet aggregates; \u2212 Cargeas Assicurazioni S.p.A., merged by incorporation into Intesa Sanpaolo Assicura S.p.A.; \u2212 Intesa Sanpaolo Smart Care S.r.l., merged by incorporation into Intesa Sanpaolo S.p.A.; \u2212 Sanpaolo Invest SIM S.p.A., merged by incorporation into Fideuram-Intesa Sanpaolo Private Banking S.p.A.; In the interest of completeness, it should also be noted that Mooney Group continues to be consolidated at equity for the purposes of the accounting scope of consolidation, but is included in the prudential scope of consolidation using the proportional method; in July, Banca 5 S.p.A. acquired an additional 20% stake in the above-mentioned company, bringing the total interest to 50% (subject to joint control). Lastly, for completeness, please note the following changes of name: - Intesa Sanpaolo International Value Services Ltd. into Intesa Sanpaolo International Value Services d.o.o.; - IW Bank S.p.A. into IW Private Investments Societ\u00e0 di Intermediazione Mobiliare S.p.A. The following table lists the investments in exclusively controlled companies at 31 December 2022. 1. Exclusively controlled companies Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 1 Acantus S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 800,000 2 Anti Financial Crime Digital HUB S.c.a.r.l. (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 10.00 Capital Eur 100,000 Intesa Sanpaolo S.p.A. 60.00 70.00 3 Asteria Investment Managers S.A. (d) Geneva Geneva 1 REYL & Cie S.A. 100.00 Capital Chf 14,000,000 4 Banca 5 S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 30,000,000 5 Banca Comerciala Eximbank S.A. Chisinau Chisinau 1 Intesa Sanpaolo S.p.A. 100.00 Capital Mdl 1,250,000,000 6 Banca Intesa AD Beograd Novi Beograd Beograd 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Rsd 21,315,900,000 7 Bank of Alexandria S.A.E. Cairo Cairo 1 Intesa Sanpaolo S.p.A. 80.00 Capital Egp 5,000,000,000 8 Banka Intesa Sanpaolo d.d. (e) Koper Koper 1 Intesa Sanpaolo S.p.A. 48.13 Capital Eur 22,173,218 Privredna Banka Zagreb d.d. 51.00 99.13 9 CBP Quilvest PE Fund GP S.a r.l. (c) Luxembourg Luxembourg 1 Compagnie de Banque Priv\u00e9e Quilvest S.A. 100.00 Capital Usd 20,000 10 Cib Bank Ltd. Budapest Budapest 1 Intesa Sanpaolo S.p.A. 100.00 Capital Huf 50,000,000,003 11 CIB Insurance Broker Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 10,000,000 12 CIB Leasing Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 53,000,000 13 CIB Rent Operative Leasing Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 5,000,000 14 Colline e oltre S.p.A. (c) Pavia Pavia 1 Intesa Sanpaolo S.p.A. 51.00 Capital Eur 50,000 15 Compagnia Italiana Finanziaria - CIF S.r.l. Milano Milano 1 IN.FRA - Investire nelle Infrastrutture S.r.l. 61.45 Capital Eur 10,000 16 Compagnie de Banque Priv\u00e9e Quilvest S.A. Luxembourg Luxembourg 1 Fideuram Bank Luxembourg S.A. 100.00 Capital Eur 32,537,000 17 Consorzio Studi e ricerche fiscali Gruppo Intesa Sanpaolo (c) Roma Roma 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 7.50 Capital Eur 258,228 Eurizon Capital SGR S.p.A. 5.00 Intesa Sanpaolo Vita S.p.A. 7.50 Intesa Sanpaolo S.p.A. 80.00 100.00 18 Duomo Funding Plc (f) Dublin Dublin 2 Intesa Sanpaolo S.p.A. - 19 Epsilon SGR S.p.A. Milano Milano 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 5,200,000 20 Etoile Fran\u00e7ois Premier S.a.r.l. (g) Paris Paris 1 Risanamento Europa S.r.l. 100.00 Capital Eur 5,000 21 Eurizon Asset Management Croatia D.O.O. Zagreb Zagreb 1 Eurizon Asset Management Slovakia Sprav. Spol. A.S. 100.00 Capital Hrk 5,000,000 22 Eurizon Asset Management Hungary Ltd. Budapest Budapest 1 Eurizon Asset Management Slovakia Sprav. Spol. A.S. 100.00 Capital Huf 600,000,000 23 Eurizon Asset Management Slovakia Sprav. Spol. A.S. Bratislava Bratislava 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 4,093,560 24 Eurizon Capital Asia Limited (gi\u00e0 Eurizon Capital (HK) limited) (c) Hong Kong Hong Kong 1 Eurizon Capital SGR S.p.A. 100.00 Capital Hkd 78,000,000 25 Eurizon Capital Real Asset SGR S.p.a. Milano Milano 1 Eurizon Capital SGR S.p.A. 19.98 51,00 (*) Capital Eur 4,166,667 Intesa Sanpaolo Vita S.p.A. 40.01 24,50 (*) 59.99 75,50 (*) Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 26 Eurizon Capital S.A. Luxembourg Luxembourg 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 7,974,600 27 Eurizon Capital SGR S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 99,000,000 28 Eurizon Slj Capital Ltd. London London 1 Eurizon Capital SGR S.p.A. 65.00 Capital Gbp 1,001,000 29 Exelia S.r.l. (c) Brasov Brasov 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Ron 8,252,600 30 Exetra S.p.A. (h) Milano Milano 1 Intesa Sanpaolo S.p.A. 85.00 Capital Eur 158,000 31 Fideuram Intesa Sanpaolo Private Banking S.p.A. Roma Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 300,000,000 32 Fideuram Asset Management (Ireland) Dac (gi\u00e0 Fideuram Asset Management (Ireland) Ltd.) Dublin Dublin 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 1,000,000 33 Fideuram Asset Management SGR S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 99.52 Capital Eur 25,870,000 34 Fideuram Asset Management Uk Ltd (c) London London 1 Fideuram Asset Management (Ireland) Dac 100.00 Capital Gbp 1,000,000 35 Fideuram Bank ( Luxembourg) S.A. Luxembourg Luxembourg 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 40,000,000 36 Fideuram Vita S.p.A. Roma Roma 1 Intesa Sanpaolo S.p.A. 80.01 Capital Eur 357,446,836 Fideuram Intesa Sanpaolo Private Banking S.p.A. 19.99 100.00 37 Fondo Sviluppo ecosistemi di Innovazione (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 100.00 Capital Eur 15,000,000 38 Gap Manco Sarl (c) Luxembourg Luxembourg 1 REYL & Cie S.A. 100.00 Capital Eur 12,500 39 Iberia Distressed Assets Manager Sarl (c) Luxembourg Luxembourg 1 REYL Finance (MEA) Ltd. 100.00 Capital Eur 12,500 40 IIF SME Manager Ltd. (c) George Town George Town 1 Asteria Investment Managers S.A. 100.00 Capital Usd 1,000 41 IMI Capital Market USA Corp. New York New York 1 IMI Investments S.A. 100.00 Capital Usd 5,000 42 IMI Finance Luxembourg S.A. (c) Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 100,000 43 IMI Investments S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 21,660,000 44 IMMIT - Immobili Italiani S.r.l. Bergamo Bergamo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 185,680,000 45 Immobiliare Cascina Rubina S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 46 IN.FRA - Investire nelle Infrastrutture S.r.l. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 10,000 47 Iniziative Logistiche S.r.l. Milano Milano 1 IN.FRA - Investire nelle Infrastrutture S.r.l. 60.02 Capital Eur 10,000 48 Insalute Servizi S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 500,000 49 Intesa Invest A.D. Beograd (c) Beograd Beograd 1 Banca Intesa AD Beograd 100.00 Capital Rsd 236,975,800 50 Intesa Leasing (Closed Joint-Stock Company) Moscow Moscow 1 Joint-Stock Company Banca Intesa 100.00 Capital Rub 3,000,000 51 Intesa Leasing d.o.o. Beograd Beograd Beograd 1 Banca Intesa AD Beograd 100.00 Capital Rsd 960,374,301 52 Intesa Sanpaolo (Qingdao) Service Company (c) Qingdao Qingdao 1 Intesa Sanpaolo S.p.A. 100.00 Capital CNY 80,000,000 53 Intesa Sanpaolo Assicura S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 27,912,258 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 54 Intesa Sanpaolo Bank Albania Sh.A. Tirana Tirana 1 Intesa Sanpaolo S.p.A. 100.00 Capital All 5,562,517,674 55 Intesa Sanpaolo Bank Ireland Plc Dublin Dublin 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 400,500,000 56 Intesa Sanpaolo Bank Luxembourg S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 1,389,370,555 57 Intesa Sanpaolo Banka d.d. Bosna I Hercegovina Sarajevo Sarajevo 1 Privredna Banka Zagreb d.d. 99.99 100,00 (**) Capital Bam 44,782,000 58 Intesa Sanpaolo Brasil S.A. - Banco Multiplo Sao Paulo Sao Paulo 1 Intesa Sanpaolo S.p.A. 99.90 Capital Brl 945,428,281 Intesa Sanpaolo Holding International S.A. 0.10 100.00 59 Intesa Sanpaolo Casa S.p.A. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 1,000,000 60 Intesa Sanpaolo Expo Institutional Contact S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 50,000 61 Intesa Sanpaolo Funding LLC (gi\u00e0 Intesa Funding LLC) New York Wilmington Delaware 1 Intesa Sanpaolo S.p.A. 100.00 Capital Usd 25,000 62 Intesa Sanpaolo Harbourmaster III S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 5,500,000 63 Intesa Sanpaolo Highline S.r.l. (c) Torino Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 500,000 64 Intesa Sanpaolo Holding International S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 2,157,957,270 65 Intesa Sanpaolo House Luxemburg S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 24,990,317 66 Intesa Sanpaolo Imi Securities Corp. New York New York 1 IMI Capital Market USA Corp. 100.00 Capital Usd 44,500,000 67 Intesa Sanpaolo Innovation Center S.p.a. Torino Torino 1 Intesa Sanpaolo S.p.A. 99.99 Capital Eur 9,254,940 Intesa Sanpaolo Vita S.p.A. 0.01 100.00 68 Intesa Sanpaolo Insurance Agency S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 500,000 69 Intesa Sanpaolo International Value Services d.o.o. Zagreb Zagreb 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Hrk 100,000 70 Intesa Sanpaolo Life Designed activity company (gi\u00e0 Intesa Sanpaolo Life Ltd.) Dublin Dublin 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 625,000 71 Intesa Sanpaolo Private Argentina S.A. (c) Buenos Aires Buenos Aires 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 4.97 Capital Ars 13,404,506 REYL & Cie S.A. 95.03 100.00 72 Intesa Sanpaolo Private Banking S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 117,497,424 73 Intesa Sanpaolo Provis S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 6,725,000 74 Intesa Sanpaolo RBM Salute S.p.A. (i) Venezia Venezia 1 Intesa Sanpaolo Vita S.p.A. 73.79 Capital Eur 305,208,000 75 Intesa Sanpaolo RE.O.CO. S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 13,000,000 76 Intesa Sanpaolo Rent Foryou S.p.A. Torino Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 630,000 77 Intesa Sanpaolo Romania S.A. Commercial Bank Bucarest Bucarest 1 Intesa Sanpaolo S.p.A. 99.73 Capital Ron 1,216,639,410 Intesa Sanpaolo Holding International S.A. 0.27 100.00 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 78 Intesa Sanpaolo Servi\u00e7os e Empreendimentos Ltda em liquida\u00e7\u00e3o (c) S\u00e3o Paulo S\u00e3o Paulo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Brl 3,283,320 79 Intesa Sanpaolo Servitia S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 1,500,000 80 Intesa Sanpaolo Vita S.p.A. Milano Torino 1 Intesa Sanpaolo S.p.A. 99.99 Capital Eur 320,422,509 81 Inveniam S.A. en Liquidation \u00a9 Geneva Geneva 1 REYL Private Office Luxembourg S.a.r.l. 100.00 Capital Chf 50,000 82 ISP CB Ipotecario S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 120,000 83 ISP CB Pubbico S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 120,000 84 ISP OBG S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 42,038 85 IW Private Investments SIM S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 67,950,000 86 Joint-Stock Company Banca Intesa Moscow Moscow 1 Intesa Sanpaolo Holding International S.A. 53.02 Capital Rub 10,820,180,800 Intesa Sanpaolo S.p.A. 46.98 100.00 87 Lux Gest Asset Management S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Bank Luxembourg S.A. 100.00 Capital Eur 200,000 88 Milano Santa Giulia S.p.A. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 139,041 89 Morval Bank & Trust Cayman Ltd. (c) Grand Cayman Grand Cayman 1 REYL & Cie S.A. 100.00 Capital Usd 7,850,000 90 MSG Comparto Quarto S.r.l. (e) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 20,000 91 MSG Comparto Secondo S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 50,000 92 MSG Comparto Terzo S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 20,000 93 Neva S.G.R. S.p.A. (gi\u00e0 Imi Fondi Chiusi S.p.A.) (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 100.00 Capital Eur 2,000,000 94 OOO Intesa Realty Russia in Liquidation (c) Moscow Moscow 1 Intesa Sanpaolo S.p.A. 100.00 Capital Rub 10,000 95 Oro Italia Trading S.p.A. in liquidazione (c) Arezzo Arezzo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 500,000 96 PBZ Card d.o.o. Zagreb Zagreb 1 Privredna Banka Zagreb d.d. 100.00 Capital Hrk 43,422,200 97 PBZ Leasing d.o.o. Zagreb Zagreb 1 Privredna Banka Zagreb d.d. 100.00 Capital Hrk 15,000,000 98 Porta Nuova Gioia (j) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 7,054,350 99 Portugal Real Estate Opportunities Manager Sarl (c) Luxembourg Luxembourg 1 REYL Finance (MEA) Ltd. 100.00 Capital Eur 12,500 100 Pravex Bank Joint-Stock Company Kiev Kiev 1 Intesa Sanpaolo S.p.A. 100.00 Capital Uah 979,089,724 101 Prestitalia S.p.A. Bergamo Bergamo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 205,722,715 102 Private Equity International S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 101,000,000 103 Privredna Banka Zagreb d.d. Zagreb Zagreb 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Hrk 1,876,574,700 104 Qingdao Yicai Fund Distribution Co. Ltd. Qingdao Qingdao 1 Intesa Sanpaolo S.p.A. 100.00 Capital Cny 591,000,000 105 RB Participations S.A. Geneva Geneva 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Chf 100,000 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 106 Recovery Property Utilisation and Services Zrt. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 20,000,000 107 REYL & Cie (Malta) Holding Ltd. (c) Valletta Valletta 1 REYL & Cie S.A. 100.00 Capital Eur 730,000 108 REYL & Cie (Malta) Ltd. (c) Valletta Valletta 1 REYL & Cie (Malta) Holding Ltd. 100.00 Capital Eur 730,000 109 REYL & Cie S.A. (k) Geneva Geneva 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 39.00 Capital Chf 31,500,001 RB Participations S.A. 30.00 69.00 110 REYL & CO (UK) Llp. (c) London London 1 REYL & CO Holdings Ltd. 100.00 Capital Gbp 2,500,000 111 REYL & CO Holdings Ltd. (c) London London 1 REYL & Cie S.A. 100.00 Capital Gbp 2,400,000 112 REYL Finance (MEA) Ltd. (c) Dubai Dubai 1 REYL & Cie S.A. 100.00 Capital Usd 2,875,000 113 REYL Overseas AG (c) Zurich Zurich 1 REYL & Cie S.A. 100.00 Capital Chf 2,000,000 114 REYL Private Office Luxembourg Sarl (c) Luxembourg Luxembourg 1 REYL & Cie S.A. 100.00 Capital Eur 50,000 115 REYL Singapore Holding Pte. Ltd. (c) Singapore Singapore 1 REYL & Cie S.A. 75.00 Capital Sgd 1,201 116 REYL Singapore Pte. Ltd. (c) Singapore Singapore 1 REYL & Cie S.A. 76.00 Capital Sgd 500,000 REYL Singapore Holding Pte. Ltd. 24.00 100.00 117 Ri. Rental S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 118 Risanamento Europa S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 119 Risanamento S.p.A. (g) Milano Milano 1 Intesa Sanpaolo S.p.A. 48.88 Capital Eur 197,951,784 120 Romulus Funding Corporation (f) New York New York 2 Intesa Sanpaolo S.p.A. - 121 Societ\u00e0 Benefit Cimarosa 1 S.p.A. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 100,000 122 Societ\u00e0 Italiana di Revisione e Fiduciaria \u2013 S.I.RE.F. S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 2,600,000 123 SRM Studi e Ricerche per il Mezzogiorno (c) Napoli Napoli 1 Intesa Sanpaolo S.p.A. 60.00 20,00 (*) Capital Eur 90,000 124 Sviluppo Comparto 3 S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 50,000 125 UBI Finance S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 10,000 126 UBI Trustee S.A. (c) Luxembourg Luxembourg 1 Fideuram Bank Luxembourg S.A. 100.00 Capital Eur 250,000 127 Vseobecna Uverova Banka A.S. Bratislava Bratislava 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 430,819,064 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 128 VUB Generali Dochodkova Spravcovska Spolocnost A.S. (l) Bratislava Bratislava 1 Vseobecna Uverova Banka A.S. 55.26 Capital Eur 10,090,976 129 VUB Operating Leasing Bratislava Bratislava 1 Vseobecna Uverova Banka A.S. 100.00 Capital Eur 25,000 (a) Type of relationship: 1 - majority of voting rights at Ordinary Shareholders' Meeting; 2 - other forms of control. (b) Where different from the % portion, the availability of the votes in the Ordinary Shareholders' Meeting is indicated, distinguishing between the effective (*) and potential (**) voting rights, where applicable. (c) Company consolidated using the equity method given its limited materiality. (d) The subsidiary Asteria Investment Managers SA (\u201cAsteria\u201d) is 80% owned by Reyl & Cie SA following the acquisition of the minority interests from the minority shareholders. The remaining 20% of the share capital consists of treasury shares. These treasury shares are due to be cancelled in early 2023, resulting in an adjustment of Asteria\u2019s total share capital, after which Reyl & Cie will hold a 100% equity investment. Asteria absorbed the subsidiary Obviam AG with accounting effect from 31 December 2022 (which was previously consolidated at equity due to its low materiality). (e) Minority shareholders are subject to a legal commitment to purchase the remaining 0.7% of share capital. (f) Company controlled pursuant to IFRS 10, although the Group does not hold any equity stake in the company capital. (g) Company not subject to the management and coordination activities pursuant to art. 2497 and following of the Italian Civil Code. (h) In the event of liquidation of the equity investment, the minority shareholder has the right to sell, and Intesa Sanpaolo is required to purchase, the entire minority investment. (i) Please note that there are put and call option agreements on 26.1% of share capital held by minority shareholders. (j) A closed-end alternative real estate investment fund managed by COIMA SGR S.p.A. (k) Please note that there are put and call option agreements on 31% of share capital held by minority shareholders. (l) Please note that there are put and call option agreements on 44.74% of share capital held by minority shareholders. 2. Significant evaluations and assumptions in determining the scope of consolidation As stated above, companies are considered subsidiaries where Intesa Sanpaolo is exposed to, or has rights to, variable returns from its involvement with them, and has the ability to affect those returns by exercising its own power over the entity in question. Control only exists if all of the following conditions are met: \u2212 the power to direct the relevant activities of the subsidiary; \u2212 the exposure, or rights, to variable returns from the involvement with the investee; \u2212 the ability to use the power over the investee to affect the amount of the investor\u2019s returns. In particular, the Group considers the following factors in evaluating the existence of control: \u2212 the purpose and the structure of the investee in order to identify its aims and relevant activities, or the activities that significantly affect the investee\u2019s returns, and how those activities are governed; \u2212 power, in order to understand whether the Group has the contractual right to manage the relevant activities; \u2212 the exposure to variable returns from the investee in order to evaluate whether the return recognised by the Group is subject to variations depending on the investee's returns. Furthermore, in order to evaluate the existence of control, potential principal-agent relationships are taken into consideration. In order to evaluate whether the investee is acting as a principal or an agent, the Group takes account of the following factors: \u2212 the decision-making power on the relevant activities of the subsidiary; \u2212 the rights of other parties; \u2212 the payments to which the Group is entitled; \u2212 the Group's exposure to variable returns resulting from any investment in the investee. IFRS 10 identifies relevant activities as activities of the investee that significantly affect the investee's returns. In general terms, when the relevant activities are managed through voting rights, the following factors determine evidence of control: \u2212 direct ownership, or indirect ownership through its subsidiaries, of more than half the voting rights of an entity, unless in exceptional circumstances it can be clearly demonstrated that such ownership does not constitute control; \u2212 ownership of half, or less, of the votes which can be cast at the shareholders' meeting, and the practical ability unilaterally to govern the relevant activities through: o the control of more than half the voting rights as enshrined in an agreement with other investors; o the power to determine the financial and operational policies of the entity, as conferred by the Articles of Association or by contract; o the power to nominate or remove the majority of the members of the Board of Directors or of the equivalent corporate governance body; o the power to cast the majority of the votes at meetings of the Board of Directors or of the equivalent corporate governance body. In order to exercise power, it is necessary for the rights that the Group has over the investee to be material; to be material, the Group must have the ability to use its rights when decisions relating to relevant activities are taken. The existence and the effect of potential voting rights, where material, are taken into consideration in evaluating whether power exists to shape the managerial and financial policies of another entity. Sometimes the Group has \"de facto\" control over certain entities when it possesses rights to determine unilaterally the relevant activities of the investee, even though it does not have the majority of the voting rights. On the contrary, cases may emerge where the Group, though holding more than half of the voting rights, does not control the investee since, consequently to agreements with other investors, the exposure to variable returns from the involvement with the investees is not considered significant. Subsidiaries can also include \"structured entities\" in which the voting rights are not the dominant factor in deciding who controls the entity; this includes special purpose vehicles (SPEs/SPVs) and investment funds. Structured entities are considered to be controlled where: \u2212 the Group has powers enshrined in contractual rights allowing it to govern the relevant activities; and \u2212 the Group is exposed to the variable returns deriving from such activities. 3. Investments in subsidiaries with significant minority interests 3.1 Minority interests, minority voting rights and dividends distributed to minority shareholders Companies Minority interests % Minority voting rights % (1) Dividends distributed to minority shareholders 1 Bank of Alexandria (2) 20.00 20.00 16 2 Banka Intesa Sanpaolo D.D. 0.87 0.87 3 Compagnia Italiana Finanziaria - CIF S.r.l. 38.55 38.55 4 Eurizon Capital Real Asset SGR S.p.A. 40.01 24.50 5 Eurizon SLJ Capital Limited 35.00 35.00 1 6 Exetra S.p.A. 15.00 15.00 7 Fideuram Asset Management SGR S.p.A. 0.48 0.48 8 Iniziative Logistiche S.r.l. 39.98 39.98 9 Intesa Sanpaolo Banka D.D. Bosna I Hercegovina 0.01 10 Intesa Sanpaolo RBM Salute S.p.A. 26.21 26.21 11 Intesa Sanpaolo Vita S.p.A. 0.01 0.01 12 Reyl & Cie S.A. 31.00 31.00 13 Risanamento S.p.A. 51.12 14 VUB Generali Dochodkova Spravcovska Spolocnost A.S. 44.74 44.74 (1) Available voting rights at Ordinary Shareholders' Meeting. (2) Dividend approved but not distributed 3.2 Investments in companies with significant minority interests: financial highlights (millions of euro) Companies Total assets Cash and cash equivalents Financial assets Property, equipment and intangible assets Financial liabilities Shareholders' equity Interest margin Net interest and other banking income Operating expenses Income (loss) before tax from continuing operations Income (loss) after tax from continuing operations Income (loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) 1 Bank of Alexandria 5,171 86 4,808 162 4,249 628 353 408 -177 191 129 - 129 -319 -190 4. Significant restrictions In terms of significant restrictions, it is noted that the Intesa Sanpaolo Group is subject to supervisory rules provided by Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR), amended by Directive 2019/878/EU (CRD V) and Regulation (EU) 2019/876 (CRR II), respectively, and controls financial institutions subject to the same or similar regulations aiming to maintain an adequate level of regulatory capital in relation to risks taken; therefore, the ability of subsidiary banks or financial institutions to distribute capital or dividends is dependent on the fulfilment of the regulatory thresholds set in those regulations. Referring, for more details, to Part A - Section 5 of the consolidated financial statements, in compliance with the provisions of IFRS 12, in this section we note the limitations currently imposed by Russian regulations which \u2013 in substance \u2013 impose restrictions on repayments and payments to parties resident in unfriendly countries. Those limitations specifically affect the subsidiary Banca Intesa Russia, which, in 2022, was unable to directly route the repayments of past due instalments referring to intragroup exposures to the creditor banks and, therefore, routed the resources allocated for those repayments (for a total of around 29 million euro at the end of 2022) to specific accounts in Russia. It must also be noted that the current legal restrictions on transferring monetary resources beyond the country\u2019s borders do not prejudice in any way the ownership of the amounts (due to the creditor banks), nor, as argued in greater detail in Part A \u2013 Section 5, do they constitute an obstacle to maintaining control over the Russian subsidiary. Lastly, within the Group, there are insurance companies subject to the Solvency Capital Requirements of Insurance companies established by the Solvency II legislation. 5. Other information In preparing the Intesa Sanpaolo consolidated financial statements, the financial statements of all subsidiaries have the same financial year-end, except for that reported below for the Ukrainian subsidiary Pravex Bank in the following paragraph on Consolidation methods. Consolidation methods Full consolidation This method involves the \u201cline by line\u201d aggregation of the individual amounts reported in the balance sheets and income statements of the subsidiary companies concerned. Following the allocation to minority shareholders of their interests, in a specific caption, in equity and in the result for the period, the residual value is eliminated against the book value of the subsidiaries concerned. Any positive differences arising on consolidation, after the allocation to the assets and liabilities of the consolidated subsidiary, are recorded under Intangible assets as goodwill or other intangible assets. Negative differences are recognised in the income statement. Assets, liabilities, income and expenses between consolidated companies are totally eliminated. Business combinations must be accounted for using the \"acquisition method\" in accordance with IFRS 3, whereby identifiable assets acquired or liabilities assumed (including contingent liabilities) are recognised at their fair value at the acquisition date. Moreover, for each business combination, any minority interest in the acquired company can be recognised at fair value or in proportion to the minority investment in the net identifiable assets of the acquired company. Any excess of the consideration transferred (being the fair value of the assets sold, the liabilities incurred and the equity instruments issued) over the fair value recognition of minority interests with respect to the fair value of the assets acquired and the liabilities assumed is recognised as goodwill. If the consideration is lower, the difference is taken to the income statement. The \"acquisition method\" is applied starting from the acquisition date, that is from the moment in which control of the acquired company is obtained. Therefore, the economic results of a subsidiary acquired in the reference period are included in the Consolidated financial statements starting from the acquisition date. Likewise, economic results of a subsidiary sold are included in the Consolidated financial statements until the date in which control ceased. The difference between sale price and book value at the date of disposal (including foreign exchange differences recorded in shareholders\u2019 equity on consolidation, over time) is accounted for in the income statement. Where necessary \u2013 and without prejudice to absolutely marginal cases \u2013 the financial statements of companies which are drawn up using different accounting criteria are restated to be compliant with the standards used by the Group. With regard to the Ukrainian subsidiary Pravex Bank, as a result of the worsening of the situation in Kyiv (where the subsidiary\u2019s offices are located) since mid-October 2022, due to the repeated Russian bombings of the main Ukrainian power plants, it was decided, with a view to reducing \u201coperational\u201d risk, that it was best to retain, in December\u2019s consolidation, the accounting values produced by Pravex for the consolidation of September 2022. Thus, for the financial statements as at 31 December, the balance sheet and income statement results of Pravex were included based on a consolidation package, drawn up in compliance with the IAS/IFRSs, as set out in the Group Accounting Policies, related to 30 September 2022, using the exchange rate as at 31 December 2022 for conversion into Euro. The decision to use the data as at 30 September 2022 for the line-by-line consolidation of Pravex, also taken in light of the slight materiality of the subsidiary, and motivated by objective operational restrictions, is also based on the indications in IFRS 10, though for specific cases 75 . Measurement using the equity method Associates and companies subject to joint control are consolidated with the equity method. The equity method requires the initial recognition of the equity investment at cost and its subsequent value adjustment based on the stake in the shareholders\u2019 equity of the company. Any difference between the value of the equity investment and the shareholders\u2019 equity of the company involved is recorded in the book value of the company. The valuation of the portion of shareholders\u2019 equity does not consider any potential voting rights. The portion of the company\u2019s results for the period pertaining to the Group is recorded in a specific caption of the consolidated income statement. 75 IFRS 10 states that, where it is not possible to use the subsidiary\u2019s data updated to the same reporting date as the consolidated financial statements, it is permitted to use the previous accounting data, provided that previous date is no more than 3 months prior. For more details, see the following paragraphs of IFRS 10: IFRS 10.B92 \u201cThe financial statements of the parent and its subsidiaries used in the preparation of the consolidated financial statements shall have the same reporting date. When the end of the reporting period of the parent is different from that of a subsidiary, the subsidiary prepares, for consolidation purposes, additional financial information as of the same date as the financial statements of the parent to enable the parent to consolidate the financial information of the subsidiary, unless it is impracticable to do so.\u201d IFRS 10.B93 \u201cIf it is impracticable to do so, the parent shall consolidate the financial information of the subsidiary using the most recent financial statements of the subsidiary adjusted for the effects of significant transactions or events that occur between the date of those financial statements and the date of the consolidated financial statements. In any case, the difference between the date of the subsidiary\u2019s financial statements and that of the consolidated financial statements shall be no more than three months, and the length of the reporting periods and any difference between the dates of the financial statements shall be the same from period to period.\u201d If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement. For consolidation of companies subject to joint control and investments in associates, the most recent approved (annual or interim) figures have been used. In certain marginal cases, the companies do not apply IAS/IFRS and, therefore, for such companies it was verified that the adoption of IAS/IFRS would not have produced significant effects on the Intesa Sanpaolo Group\u2019s Consolidated financial statements. Conversion of financial statements in currencies other than the euro The financial statements of the companies which do not operate in the eurozone are translated into euro applying to the assets and liabilities in the balance sheet the spot exchange rate at period-end and to the income statement the average exchange rate. Foreign exchange differences from the conversion of the financial statements of such companies, deriving from the application of different foreign exchange rates to assets and liabilities and the income statement, are recorded in Valuation reserves under shareholders' equity. Foreign exchange differences on the shareholders' equity of the subsidiaries are also recorded in Valuation reserves. All foreign exchange differences are reversed to the income statement of the year in which the foreign operation is sold.
SECTION 7 \u2013 INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL \u2013 CAPTION 70
7.1 Investments in associates and companies subject to joint control: information on equity interests
Companies
Registered
office
Place
of business
Type
of
relationship
(a)
INVESTMENT
Votes
available
%
(b)
Direct ownership
%
held
A. COMPANIES SUBJECT TO JOINT CONTROL
1
Apside S.p.A.
Torino
Torino
7
Intesa Sanpaolo S.p.A.
50.00
Capital Euro 10,000 in shares of Euro 1
2
Augusto S.r.l.
Milano
Milano
7
Intesa Sanpaolo S.p.A.
5.00
Capital Euro 10,000 in shares of Euro 1
3
Diocleziano S.r.l.
Milano
Milano
7
Intesa Sanpaolo S.p.A.
5.00
Capital Euro 10,000 in shares of Euro 1
4
Immobiliare Novoli S.p.A.
Firenze
Firenze
7
Intesa Sanpaolo S.p.A.
50.00
Capital Euro 15.635.514 un shares of Euro 0,60
5
Mir Capital Management S.A.
Luxembourg
Luxembourg
7
Private Equity International S.A.
50.00
Capital Euro 31.000 in shares of Euro 1
6
Mir Capital S.C.A. SICAR
Luxembourg
Luxembourg
7
Private Equity International S.A.
50.00
Capital Euro 65.365.000 in shares of Euro 1
7
Mooney Group S.p.A.
Milano
Milano
7
Banca 5 S.p.A.
50.00
Capital Euro 10.050.000 in shares of Euro 0,20
8
PBZ Croatia Osiguranje Public Limited Company
for Compulsory Pension Fund Management
Zagreb
Zagreb
7
Privredna Banka Zagreb D.D.
50.00
Capital HRK 56.000.000 in shares of HRK 1.000
9
Responsability BOP S.A.R.L.
Luxembourg
Luxembourg
7
Asteria Investment Managers
S.A.
50.00
Capital USD 20.000 in shares of USD 50
B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE
1
1875 Finance Holding AG
Sarnen
Sarnen
4
Reyl&Cie S.A.
40.00
Capital Chf 500.000 in shares of Chf 1
2
Adriano Lease Sec S.r.l. (c)
Conegliano
Conegliano
4
Intesa Sanpaolo S.p.A.
5.00
100,00
(**)
Capital Euro 10.000 in shares of Euro 1
3
Alpian S.A.
Gen\u00e8ve
Gen\u00e8ve
4
Fideuram - Intesa Sanpaolo
Private Banking S.p.A.
14.91
Capital Chf 21.672.678 in shares of Chf 0,01
Reyl&Cie S.A.
12.93
27.84
4
Apulia Finance N. 4 S.r.l. in liquidazione (c)
Conegliano
Conegliano
4
Intesa Sanpaolo S.p.A.
10.00
Capital Euro 10.000 in shares of Euro 1
5
Back2Bonis
Milano
Milano
4
Intesa Sanpaolo S.p.A.
55.40
35,00 (*)
Capital Euro 776.381.183 in shares of Euro 476.671
6
Backtowork24 S.r.l. (d)
Milano
Milano
4
Intesa Sanpaolo S.p.A.
30.58
Capital Euro 2.892.691 in shares of Euro 0,01
7
Bancomat S.p.A.
Roma
Roma
4
Intesa Sanpaolo S.p.A.
31.55
Capital Euro 21.095.726 in shares of Euro 5
Banca 5 S.p.A.
0.01
31.56
8
Berica ABS 3 S.r.l. (c)
Vicenza
Vicenza
4
Intesa Sanpaolo S.p.A.
5.00
Capital Euro 10.000 in shares of Euro 1
9
Brera Sec S.r.l. (c)
Conegliano
Conegliano
4
Intesa Sanpaolo S.p.A.
5.00
Capital EUR 10.000 in shares of Euro 1
10
Camfin S.p.A. (e)
Milano
Milano
4
Intesa Sanpaolo S.p.A.
4.60
8,53 (*)
Capital EUR 110.800.000 in shares of Euro 0,2
11
Cassa di Risparmio di Fermo S.p.A.
Fermo
Fermo
4
Intesa Sanpaolo S.p.A.
33.33
Capital EUR 39.241.088 in shares of Euro 51,65
12
Centai Institute S.p.A.
Torino
Torino
4
Intesa Sanpaolo S.p.A.
49.00
Capital EUR 50.000 in shares of Euro 1
13
Clara Sec S.r.l.
Conegliano
Conegliano
4
Intesa Sanpaolo S.p.A.
5.00
Capital Euro 10.000 in shares of Euro 1
14
Compagnia Aerea Italiana S.p.A.
Roma
Fiumicino
4
Intesa Sanpaolo S.p.A.
27.49
Capital Euro 3.526.846 in shares of Euro 0,00004
Companies
Registered
office
Place
of business
Type
of
relationship
(a)
INVESTMENT
Votes
available
%
(b)
Direct ownership
%
held
15
Destination Gusto S.r.l.
Milano
Milano
4
Intesa Sanpaolo S.p.A.
49.00
Capital Euro 20.000 in shares of Euro 1
16
Digit'ed Holding S.p.A.
Milano
Milano
4
Intesa Sanpaolo S.p.A.
20.00
Capital Euro 1.173.822 in shares of Euro 1
17
Equiter S.p.A.
Torino
Torino
4
Intesa Sanpaolo S.p.A.
32.88
Capital Euro 150.004.017 in shares of Euro 1
18
Euromilano S.p.A.
Milano
Milano
4
Intesa Sanpaolo S.p.A.
43.43
Capital Euro 1.356.582 in shares of Euro 15,51
19
Europrogetti & Finanza S.r.l. in liquidazione
Roma
Roma
4
Intesa Sanpaolo S.p.A.
15.97
Capital Euro 5.636.400 in shares of Euro 1
20
Eusebi Holdings B.V.
Amsterdam
Amsterdam
4
Intesa Sanpaolo S.p.A.
47.00
Capital Euro 100 in shares of Euro 1
21
FI.NAV. Comparto A - Crediti
Roma
Roma
4
Intesa Sanpaolo S.p.A.
50.54
Capital USD 405.821.168 in shares of USD 1
22
Fondo di Rigenerazione Urbana Sicilia S.r.l. (f)
Palermo
Torino
4
Intesa Sanpaolo S.p.A.
100.00
Capital Euro 50.000 in shares of Euro 1
23
Fondo per la ricerca e l'innovazione S.r.l. (f)
Torino
Torino
4
Intesa Sanpaolo S.p.A.
100.00
Capital Euro 25.000 in shares of Euro 1
24
Fondo Sardegna Energia S.r.l. (f)
Cagliari
Torino
4
Intesa Sanpaolo S.p.A.
100.00
Capital Euro 25.000 in shares of Euro 1
25
Giada Sec S.r.l. (c)
Conegliano
Conegliano
4
Intesa Sanpaolo S.p.A.
5.00
Capital Euro 10.000 in shares of Euro 1
26
Gilda S.r.l.
Montesilvano
Montesilvano
4
Intesa Sanpaolo S.p.A.
13.05
15,00 (**)
Capital Euro 213.402 in shares of da Euro 1
27
Indaco Venture Partners SGR S.p.A. ( gi\u00e0 Venture Capital
Partners SGR)
Milano
Milano
4
Intesa Sanpaolo S.p.A.
24.50
Capital Euro 750.000 in shares of Euro 0,50
28
Iniziative Immobiliari Industriali S.p.A. In liquidazione
Arqu\u00e0 Polesine
Arqu\u00e0 Polesine
4
Intesa Sanpaolo S.p.A.
20.00
Capital Euro 510.000 in shares of Euro 0,51
29
Intrum Italy S.p.A.
Milano
Milano
4
Intesa Sanpaolo S.p.A.
49.00
Capital Euro 600.000 in shares of Euro 0,02
30
Ism Investimenti S.p.A.
Mantova
Mantova
4
Intesa Sanpaolo S.p.A.
27.36
Capital Euro 6.654.902 in shares of Euro 1
31
Leonardo Technology S.r.l. in liquidazione
Torino
Torino
4
Intesa Sanpaolo S.p.A.
26.60
Capital Euro 242.081 in shares of Euro 1
32
Marketwall S.r.l.
Milano
Milano
4
Intesa Sanpaolo S.p.A.
33.00
Capital Euro 2.380.409 in shares of Euro 1
33
Materias S.r.l.
Napoli
Napoli
4
Intesa Sanpaolo S.p.A.
12.87
Capital Euro 29.191 in shares of Euro 1
34
Misr Alexandria for Financial Investments Mutual Fund Co.
in liquidazione
Cairo
Cairo
4
Bank of Alexandria S.A.E.
25.00
Capital EGP 30.708.000 in shares of EGP 1000
35
Misr International Towers Co.
Cairo
Cairo
4
Bank of Alexandria S.A.E.
27.86
Capital EGP 50.000.000 in shares of EGP 10
36
Monilogi SRO
Bratislava
Bratislava
4
Vseobecna Uverova Banka A.S.
30.00
Capital Euro 250.000 in shares of Euro 1
37
Montefeltro Sviluppo Soc.cons. A.r.
Urbania
Urbania
4
Intesa Sanpaolo S.p.A.
26.37
Capital Euro 73.000 in shares of Euro 10
38
Network Impresa S.p.A. in concordato preventivo
Limena
Limena
4
Intesa Sanpaolo S.p.A.
28.95
Capital Euro 562.342 in shares of Euro 1
39
Neva First - FCC
Torino
Torino
4
Intesa Sanpaolo Innovation
Center S.p.A.
42.53
Capital Euro 237.323.232 in shares of Euro 99,80
Companies
Registered
office
Place
of business
Type
of
relationship
(a)
INVESTMENT
Votes
available
%
(b)
Direct ownership
%
held
40
NEWCO - Fondo Tematico Piani Urbani Integrati S.r.l. (f)
Torino
Torino
4
Intesa Sanpaolo S.p.A.
100.00
Capital Euro 25.000 in shares of Euro 1
41
NEWCO - Fondo Tematico Turismo S.r.l. (f)
Torino
Torino
4
Intesa Sanpaolo S.p.A.
100.00
Capital Euro 25.000 in shares of Euro 1
42
Penghua Fund Management Co. Ltd.
Shenzhen
Shenzhen
4
Eurizon Capital SGR S.p.A.
49.00
Capital CNY 150.000.000 in shares of CNY 1
43
Pietra S.r.l. In liquidazione
Milano
Milano
4
Intesa Sanpaolo S.p.A.
22.22
Capital Euro 40.000 in shares of Euro 1
44
R.C.N. Finanziaria S.p.A.
Mantova
Mantova
4
Intesa Sanpaolo S.p.A.
23.96
Capital Euro 1.000.000 in shares of Euro 0,50
45
RSCT FUND - COMPARTO CREDITI
Milano
Milano
4
Intesa Sanpaolo S.p.A.
70.07
Capital Euro 383.363.831 in shares of Euro 1
46
S.F. Consulting S.r.l.
Bergamo
Bergamo
4
Intesa Sanpaolo S.p.A.
35.00
Capital Euro 93.600 in shares of Euro 0,52
47
Sicily Investments S.a.r.l.
Luxembourg
Luxembourg
4
Intesa Sanpaolo S.p.A.
25.20
Capital Euro 12.500 in shares of Euro 25
48
Slovak Banking Credit Bureau S.r.o.
Bratislava
Bratislava
4
Vseobecna Uverova Banka A.S.
33.33
Capital Euro 9.958 in shares of Euro 3.319,39
49
Sviluppo Industriale S.p.A. in Liquidazione (gi\u00e0 Sviluppo
Industriale S.p.A. in Concordato Preventivo)
Pistoia
Pistoia
4
Intesa Sanpaolo S.p.A.
28.27
Capital Euro 628.444 in shares of Eur 22,26
50
Trinacria Capital S.a.r.l.
Luxembourg
Luxembourg
4
Intesa Sanpaolo S.p.A.
25.20
Capital Euro 12.500 in shares of Euro 25
51
UBI SPV LEASE 2016 S.r.l.
Milano
Milano
4
Intesa Sanpaolo S.p.A.
10.00
100,00
(**)
Capital Euro 10.000 in shares of Euro 1
52
Vesta OML Limited ( ex Oval Money LTD)
London
London
4
Intesa Sanpaolo S.p.A.
37.51
Capital GBP 16.692 in shares of GBP 0,0004
53
Warrant Hub S.p.A.
Correggio
Correggio
4
Intesa Sanpaolo S.p.A.
12.00
Capital Euro 113.637 in shares of Euro 1
54
Yolo Group S.p.A.
Milano
Milano
4
Intesa Sanpaolo Vita S.p.A.
1.43
Capital Euro 87.493 in shares of Euro 0,01
(a)
Type of relationship:
1 - majority of voting rights at Ordinary Shareholders' Meeting;
2 - dominant influence at Ordinary Shareholders' Meeting;
3 - agreements with other shareholders;
4 - company subject to significant influence;
5 - unitary management as defined in Art. 26.1 of \"Legislative Decree 87/92\";
6 - unitary management as defined in Art. 26.2 of \"Legislative Decree 87/92\";
7 - joint control;
8 - other relationship.
(b)
Where different from the % portion, the availability of the votes in the Ordinary Shareholders' Meeting is indicated, distinguishing between the effective (*) and potential (**)
voting rights, where applicable.
(c)
These are vehicles used for securitisation transactions within the Group.
(d)
At any moment from the date of subscription of the second capital increase (24/11/2020) to the end of the 42nd month from that date, Intesa Sanpaolo has the right to
increase, in one or more tranches, its investment in the company\u2019s share capital, obtaining a maximum total investment of 51%. Currently, the prerequisites of IFRS 10 to
classify the interest among subsidiaries are not met.
(e)
The different value between the actual share and the number of votes in the Shareholders\u2019 Meeting is linked to the presence of various categories of shares (A and B). Only
category A shares (also held by Intesa Sanpaolo) grant rights to vote in the Shareholders\u2019 Meeting.
(f)
The economic effects of the investments in equity and loans underlying the fund\u2019s operations will be borne in full by the EIB.
The illustration of the criteria and the methods for the definition of the scope of consolidation and the reasons which determine
that a company is subject to joint control or significant influence is contained in Part A \u2013 Accounting policies, to which
reference should be made.
7.2 Individually material investments in associates and companies subject to joint control: book value, fair value and
dividends received
(millions of euro)
Book value
Fair value
Dividends received
(a)
A. COMPANIES SUBJECT TO JOINT CONTROL
1
Mooney Group S.p.A.
111
-
-
B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE
1
BACK2BONIS
387
-
-
2
Penghua Fund Management Co. Ltd.
332
-
45
3
Intrum Italy S.p.A.
307
-
13
4
RSCT FUND - Comparto Crediti
256
-
-
5
FI.NAV. Comparto A - Crediti
155
-
-
6
Equiter S.p.A.
104
-
2
7
NEVA FIRST - FCC
59
-
-
TOTAL
1,711
-
60
a) Dividends are paid by Group companies accounted for using the equity method, and, though they are not included in caption \u201c250 Profits (Losses) on equity
investments\u201d, as they represent a decrease in caption \u201c70 Investments in associates and companies subject to joint control\u201d under Assets, they are still presented in
that table, as envisaged by the reference regulations.
7.3 Individually material investments in associates and companies subject to joint control: financial information
(millions of euro)
Cash and cash equivalents
Financial assets
Non-financial assets
Financial liabilities
Non-financial liabilities
Total revenues
Interest margin
Adjustments to/write
-backs on property,
equipment and intangible assets
Income (Loss) before tax from continuing
operations
Income (Loss) after tax from continuing
operations
Income (Loss) after tax from discontinued
operations
Net income (loss)
(1)
Other comprehensive income (net of tax)
(2)
Consolidated comprehensive income
(3) = (1) + (2)
A. COMPANIES SUBJECT TO JOINT CONTROL
Mooney Group S.p.A.
X
397
930
1,446
198
300
X
X
-48
-37
-
-37
-
-37
B. COMPANIES SUBJECT TO SIGNIFICANT
INFLUENCE
BACK2BONIS
X
748
22
24
3
11
X
X
-
-
-
-
-
-
Penghua Fund Management Co. Ltd.
X
826
198
221
249
596
X
X
181
136
-
136
-
136
Intrum Italy S.p.A.
X
65
86
9
60
163
X
X
46
35
-
35
-
35
RSCT FUND - Comparto Crediti
X
346
25
-
4
-
X
X
-
-
-
-
-
-
FI.NAV. Comparto A - Crediti
X
268
-
-
-
-
X
X
-
-
-
-
-
-
Equiter S.p.A.
X
296
8
-
3
13
X
X
10
8
-
8
-
8
NEVA FIRST - FCC
X
110
22
-
1
7
X
X
7
7
-
7
-
7
( millions of euro) Total Shareholders' Equity Proportionate equity Goodwill Other changes Consolidated book value A. COMPANIES SUBJECT TO JOINT CONTROL Mooney Group S.p.A. - - 111 - 111 B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE BACK2BONIS 725 402 - -15 387 Penghua Fund Management Co. Ltd. 554 272 60 - 332 Intrum Italy S.p.A. 82 40 267 - 307 RSCT FUND - Comparto Crediti 375 263 - -7 256 FI.NAV. Comparto A - Crediti 306 155 - - 155 Equiter S.p.A. 293 97 7 - 104 NEVA FIRST - FCC 138 59 - - 59 2,473 1,288 445 -22 1,711 The figures for these companies are updated to December 2022, for Intrum and Penghua; to 30 June 2022 for RSCT FUND, BACK2BONIS, NEVA FIRST and FI.NAV; and to 31 December 2021 for Equiter. For Mooney Group S.p.A., the figures shown above refer to 30 September 2022, even though the figures as at 31 December 2022 were used for the purposes of the Group\u2019s consolidated financial statements. The latter will be made public following approval by the company\u2019s Shareholders\u2019 Meeting. 7.4 Individually immaterial investments in associates and companies subject to joint control: financial information (millions of euro) Book value of investments in associates and companies subject to joint control Total assets Total liabilities Total revenues Income (loss) after tax from continuing operations Income (Loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) COMPANIES SUBJECT TO JOINT CONTROL 23 210 147 94 -1 - -1 - -1 COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE (a) 279 4,523 3,449 222 5 - 5 -46 -41 (a) This caption includes some subsidiaries excluded from the scope of consolidation as of modest amount. 7.5 Investments in associates and companies subject to joint control: annual changes (millions of euro) 31.12.2022 31.12.2021 A. Initial amount 1,652 1,996 B. Increases 942 422 B.1 purchases 528 122 of which business combinations - 10 B.2 recoveries 13 - B.3 revaluations 143 163 B.4 other changes 258 137 C. Decreases -581 -766 C.1 sales -305 -58 C.2 impairment losses -52 -39 C.3 write-downs -69 -61 C.4 other changes -155 -608 D. Final amount 2,013 1,652 E. Total revaluations 3,620 3,477 F. Total impairment losses 2,111 2,059 The sub-caption B.1 purchases includes the acquisition of the additional 20% stake in Mooney Group, Back2Bonis and other purchases, including Warrant Hub and Digit\u2019Ed Holding. The sub-caption B.3 revaluations mainly includes the profits of companies carried at equity (including Penghua Fund Management Co. Ltd.). The sub-caption B.4 Increases - other changes includes profits on disposal/reclassifications for a total of 197 million euro, attributable to the Isp Formazione transaction for 196 million euro and to Innolva for 1 million euro. The sub-caption C.1 sales includes the disposal of companies carried at equity (mainly ISP Formazione and Innolva). The sub-caption C.3 write-downs includes the losses of companies carried at equity (mainly FI.NAV and Mooney Group). The sub-caption C.4 Decreases - other changes includes the payment of dividends (mainly Penghua and Intrum), as well as reclassification from other portfolios of VUB Generali, which entered the line-by-line scope of consolidation following the purchase of an additional 5.26%. 7.6 Significant evaluations and assumptions to establish the existence of joint control or significant influence Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties sharing control. Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of financial and management policies of the company based on specific juridical relations, such as the participation in voting syndicates. Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since it solely has economic rights on a portion of the returns generated by the investment, but does not have access to management policies and may exercise governance rights limited to the safeguarding of its economic interests. 7.7 Commitments referred to investments in companies subject to joint control As at 31 December 2022, there were commitments on capital referring to MIR CAPITAL S.C.A. Sicar for a total of 35.6 million euro; to Mooney Group S.p.A. for a total of 8 million euro; and to Apside S.p.A. for a total of 17 million euro, relating to the subscription of equity instruments issued by the company. 7.8 Commitments referred to investments in companies subject to significant influence As at 31 December 2022, the following commitments are noted: the recapitalisation of Bancomat S.p.A. for around 2.7 million euro; the commitment undertaken by ISP Innovation Center S.p.A. and Neva SGR S.p.A. to pay the amounts for the call ups of the NEVA FIRST-FCC Fund for a residual 49.5 million euro; a capital increase commitment benefiting Centai Institute S.p.A. for 0.7 million euro; a commitment to subscribe equity instruments issued by the associate Destination Gusto S.r.l. for a maximum of 2.5 million euro. Lastly, there is a residual commitment on Leonardo Technology S.r.l. of a modest amount.
7.9 Significant restrictions
There is nothing to report in terms of significant restrictions.
7.10 Other information
For most of the companies subject to joint control or significant influence, the timing regarding the availability of the financial
statements at the end of the year is not compatible with the terms set for the closure of Intesa Sanpaolo\u2019s consolidated
financial statements; on this point, for the application of the equity method, reference is made to the last accounting reports
available that, in most cases, include the interim statement of the first 9 months for the listed associates or the last financial
statements or half-yearly report available for the other associates. In any case, when the accounts of the associate or joint
venture used in the application of the equity method refer to a date that is different from that of Intesa Sanpaolo\u2019s financial
statements, adjustments are made to take into account the effects of operations or significant events which took place
between that date and the reporting date of Intesa Sanpaolo\u2019s financial statements.
Impairment tests of investments in associates and companies subject to joint control
As required under IAS/IFRS, investments in associates and companies subject to joint control are subjected to impairment
testing to assess whether there is objective evidence to consider that the carrying value of the assets is not fully recoverable.
With reference to investments in associates and companies subject to joint control, the process of detection of any impairment
involves verification of the presence of impairment indicators and the determination of any write-down. The impairment
indicators are essentially divided into two categories: qualitative indicators, such as the generation of negative economic
results or in any case a significant variance with respect to the targets budgeted or established in the multi-year plans
disclosed to the market, the announcement/start-up of insolvency proceedings or restructuring plans, and the downgrading by
more than two classes of the rating; quantitative indicators, represented by a reduction in fair value of over 30% below the
carrying value or for a period of over 24 months, by market capitalisation lower than the company\u2019s net book value, in the
case of securities listed on active markets or by a carrying value of the investment in the Parent Company\u2019s financial
statements higher than the carrying value in the consolidated financial statements of the investee\u2019s net assets and goodwill or
by distribution by the latter of a dividend that is higher than its total income. If impairment indicators are detected, the
recoverable amount, represented by the higher of the fair value less costs to sell and the value in use, is calculated and if it
proves lower than the carrying value, impairment is recognised. If, subsequently, the recoverable amount is higher than the
new carrying amount and the reasons for the impairment no longer apply following an event subsequent to the recognition of
the impairment, write-backs are recognised, through profit or loss, up to the amount of the adjustment previously recognised.
In particular, where impairment indicators were recorded with respect to investments in associates or companies subject to
joint control, analyses were carried out based, as a priority, on market methodologies (direct or comparable transactions and
market multiples) or alternatively on \u201cfundamental\u201d analyses mainly based on an estimate of the expected discounted cash
flows or on the adjusted net asset value (ANAV).
The results of these assessments led to the need to recognise adjustments, mainly referring to the investments in Intrum Italy
(34 million euro), Mir Capital (8 million euro), RSCT Fund Comparto Crediti (4 million euro), Marketwall (3 million euro) and in
other minor investments for 3 million euro. The valuation of investments in associates or companies subject to joint control
also led to the recognition of a write-back of 13 million euro of the investment in FI.NAV. Comparto A Crediti.
", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1069": { "value": "SECTION 3 \u2013 SCOPE OF CONSOLIDATION AND CONSOLIDATION METHODS Scope of consolidation The Consolidated financial statements include Intesa Sanpaolo and the companies that it directly and indirectly controls and consider in the scope of consolidation \u2013 as specifically set out by IAS/IFRS \u2013 also the companies operating in dissimilar sectors from the Parent Company as well as private equity investments. Similarly, structured entities are included when the requisite of effective control recurs, even if there is no stake in the company. Companies are considered subsidiaries where Intesa Sanpaolo is exposed to, or has rights to, variable returns from its involvement with them, and has the ability to affect those returns by exercising its own power over the entity in question. Control only exists if all of the following conditions are met: \u2212 the power to direct the relevant activities of the subsidiary; \u2212 the exposure, or rights, to variable returns from the involvement with the investee; \u2212 the ability to use the power over the investee to affect the amount of the investor\u2019s returns. Companies are considered as subject to joint control if control is directly or indirectly contractually shared by the Parent Company with one or more other parties external to the Group, or where the decisions about the relevant activities require the unanimous consent of all the parties sharing control. Companies are considered associates, that is subject to significant influence, when Intesa Sanpaolo, directly or indirectly, holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or when the Parent Company \u2013 despite a lower percentage of voting rights due to specific legal agreements such as the participation of voting syndicates \u2013 has the power of participating in the determination of the financial and operating policies of the company. Certain companies in which the Parent Company holds an equity stake exceeding 20% of voting share capital are excluded from the scope of consolidation and are classified based on the provisions of IFRS 9, since they are of limited absolute amount, or since Intesa Sanpaolo, directly or indirectly, exclusively holds rights on a portion of the rewards of the investment, and does not have access to management policies and may exercise limited governance rights to safeguard its economic interest. Equity investments held, directly or through funds, in companies involved in the venture capital business are also excluded from the line-by-line scope of consolidation. These equity investments are included in the category of Financial assets measured at fair value through profit or loss. Companies for which the shares have been received as pledges with voting rights exceeding 20% are not consolidated, in consideration of the substance underlying the pledge, which has the purpose of guaranteeing loans and not of exercising control and direction over financial and economic policies in order to benefit from the economic return on the shares. Intesa Sanpaolo does not perform management and coordination activity over Risanamento S.p.A. and its subsidiaries pursuant to Article 2497 et seq. of the Italian Civil Code. With respect to 31 December 2021, the changes in the line-by-line consolidation area involved the entry of: \u2212 Newco TPA S.p.A. (now named InSalute Servizi S.p.A.), a newly-incorporated company in the Insurance Group, 100% owned by Intesa Sanpaolo Vita; \u2212 Compagnie de Banque Priv\u00e9e Quilvest (CBPQ), 100%-owned by Fideuram Bank (Luxembourg) S.A.; \u2212 VUB Operating Leasing A.S., previously consolidated using the equity method; \u2212 Acantus S.p.A. (transferee of ISP\u2019s pledged loans business line belonging to the former UBI Group), following the exceeding of the immateriality limits that previously allowed its consolidation at equity; \u2212 VUB Generali Dochodkova Spravcovska Spolocnost A.S, following the acquisition of an additional share of 5.26% by VSEOBECNA UVEROVA BANKA A.S. (the total investment now amounts to 55.26%). The company was previously consolidated at equity; \u2212 Eurizon Capital Real Asset SGR S.p.A., following the exceeding of the immateriality limits that previously allowed its consolidation at equity; and the exit of: \u2212 Intesa Sanpaolo Private Bank (Suisse) Morval, merged by incorporation into Reyl & Cie S.A.; \u2212 VUB Leasing A.S., which was discontinued following its demerger into Vseobecna Uverova Banka A.S. for finance leases and into VUB Operating Leasing (mentioned above) for operating leases; \u2212 UBI Leasing S.p.A., merged by incorporation into Intesa Sanpaolo S.p.A.; \u2212 PBZ Stambena Stedionica d.d., merged by incorporation into PBZ \u2013 Privredna Banka Zagreb d.d.; \u2212 Intesa Sanpaolo (Qingdao) Service Company Limited, which is now consolidated using the equity method in view of the negligible amounts of the balance sheet aggregates; \u2212 Cargeas Assicurazioni S.p.A., merged by incorporation into Intesa Sanpaolo Assicura S.p.A.; \u2212 Intesa Sanpaolo Smart Care S.r.l., merged by incorporation into Intesa Sanpaolo S.p.A.; \u2212 Sanpaolo Invest SIM S.p.A., merged by incorporation into Fideuram-Intesa Sanpaolo Private Banking S.p.A.; In the interest of completeness, it should also be noted that Mooney Group continues to be consolidated at equity for the purposes of the accounting scope of consolidation, but is included in the prudential scope of consolidation using the proportional method; in July, Banca 5 S.p.A. acquired an additional 20% stake in the above-mentioned company, bringing the total interest to 50% (subject to joint control). Lastly, for completeness, please note the following changes of name: - Intesa Sanpaolo International Value Services Ltd. into Intesa Sanpaolo International Value Services d.o.o.; - IW Bank S.p.A. into IW Private Investments Societ\u00e0 di Intermediazione Mobiliare S.p.A. The following table lists the investments in exclusively controlled companies at 31 December 2022. 1. Exclusively controlled companies Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 1 Acantus S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 800,000 2 Anti Financial Crime Digital HUB S.c.a.r.l. (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 10.00 Capital Eur 100,000 Intesa Sanpaolo S.p.A. 60.00 70.00 3 Asteria Investment Managers S.A. (d) Geneva Geneva 1 REYL & Cie S.A. 100.00 Capital Chf 14,000,000 4 Banca 5 S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 30,000,000 5 Banca Comerciala Eximbank S.A. Chisinau Chisinau 1 Intesa Sanpaolo S.p.A. 100.00 Capital Mdl 1,250,000,000 6 Banca Intesa AD Beograd Novi Beograd Beograd 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Rsd 21,315,900,000 7 Bank of Alexandria S.A.E. Cairo Cairo 1 Intesa Sanpaolo S.p.A. 80.00 Capital Egp 5,000,000,000 8 Banka Intesa Sanpaolo d.d. (e) Koper Koper 1 Intesa Sanpaolo S.p.A. 48.13 Capital Eur 22,173,218 Privredna Banka Zagreb d.d. 51.00 99.13 9 CBP Quilvest PE Fund GP S.a r.l. (c) Luxembourg Luxembourg 1 Compagnie de Banque Priv\u00e9e Quilvest S.A. 100.00 Capital Usd 20,000 10 Cib Bank Ltd. Budapest Budapest 1 Intesa Sanpaolo S.p.A. 100.00 Capital Huf 50,000,000,003 11 CIB Insurance Broker Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 10,000,000 12 CIB Leasing Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 53,000,000 13 CIB Rent Operative Leasing Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 5,000,000 14 Colline e oltre S.p.A. (c) Pavia Pavia 1 Intesa Sanpaolo S.p.A. 51.00 Capital Eur 50,000 15 Compagnia Italiana Finanziaria - CIF S.r.l. Milano Milano 1 IN.FRA - Investire nelle Infrastrutture S.r.l. 61.45 Capital Eur 10,000 16 Compagnie de Banque Priv\u00e9e Quilvest S.A. Luxembourg Luxembourg 1 Fideuram Bank Luxembourg S.A. 100.00 Capital Eur 32,537,000 17 Consorzio Studi e ricerche fiscali Gruppo Intesa Sanpaolo (c) Roma Roma 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 7.50 Capital Eur 258,228 Eurizon Capital SGR S.p.A. 5.00 Intesa Sanpaolo Vita S.p.A. 7.50 Intesa Sanpaolo S.p.A. 80.00 100.00 18 Duomo Funding Plc (f) Dublin Dublin 2 Intesa Sanpaolo S.p.A. - 19 Epsilon SGR S.p.A. Milano Milano 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 5,200,000 20 Etoile Fran\u00e7ois Premier S.a.r.l. (g) Paris Paris 1 Risanamento Europa S.r.l. 100.00 Capital Eur 5,000 21 Eurizon Asset Management Croatia D.O.O. Zagreb Zagreb 1 Eurizon Asset Management Slovakia Sprav. Spol. A.S. 100.00 Capital Hrk 5,000,000 22 Eurizon Asset Management Hungary Ltd. Budapest Budapest 1 Eurizon Asset Management Slovakia Sprav. Spol. A.S. 100.00 Capital Huf 600,000,000 23 Eurizon Asset Management Slovakia Sprav. Spol. A.S. Bratislava Bratislava 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 4,093,560 24 Eurizon Capital Asia Limited (gi\u00e0 Eurizon Capital (HK) limited) (c) Hong Kong Hong Kong 1 Eurizon Capital SGR S.p.A. 100.00 Capital Hkd 78,000,000 25 Eurizon Capital Real Asset SGR S.p.a. Milano Milano 1 Eurizon Capital SGR S.p.A. 19.98 51,00 (*) Capital Eur 4,166,667 Intesa Sanpaolo Vita S.p.A. 40.01 24,50 (*) 59.99 75,50 (*) Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 26 Eurizon Capital S.A. Luxembourg Luxembourg 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 7,974,600 27 Eurizon Capital SGR S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 99,000,000 28 Eurizon Slj Capital Ltd. London London 1 Eurizon Capital SGR S.p.A. 65.00 Capital Gbp 1,001,000 29 Exelia S.r.l. (c) Brasov Brasov 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Ron 8,252,600 30 Exetra S.p.A. (h) Milano Milano 1 Intesa Sanpaolo S.p.A. 85.00 Capital Eur 158,000 31 Fideuram Intesa Sanpaolo Private Banking S.p.A. Roma Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 300,000,000 32 Fideuram Asset Management (Ireland) Dac (gi\u00e0 Fideuram Asset Management (Ireland) Ltd.) Dublin Dublin 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 1,000,000 33 Fideuram Asset Management SGR S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 99.52 Capital Eur 25,870,000 34 Fideuram Asset Management Uk Ltd (c) London London 1 Fideuram Asset Management (Ireland) Dac 100.00 Capital Gbp 1,000,000 35 Fideuram Bank ( Luxembourg) S.A. Luxembourg Luxembourg 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 40,000,000 36 Fideuram Vita S.p.A. Roma Roma 1 Intesa Sanpaolo S.p.A. 80.01 Capital Eur 357,446,836 Fideuram Intesa Sanpaolo Private Banking S.p.A. 19.99 100.00 37 Fondo Sviluppo ecosistemi di Innovazione (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 100.00 Capital Eur 15,000,000 38 Gap Manco Sarl (c) Luxembourg Luxembourg 1 REYL & Cie S.A. 100.00 Capital Eur 12,500 39 Iberia Distressed Assets Manager Sarl (c) Luxembourg Luxembourg 1 REYL Finance (MEA) Ltd. 100.00 Capital Eur 12,500 40 IIF SME Manager Ltd. (c) George Town George Town 1 Asteria Investment Managers S.A. 100.00 Capital Usd 1,000 41 IMI Capital Market USA Corp. New York New York 1 IMI Investments S.A. 100.00 Capital Usd 5,000 42 IMI Finance Luxembourg S.A. (c) Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 100,000 43 IMI Investments S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 21,660,000 44 IMMIT - Immobili Italiani S.r.l. Bergamo Bergamo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 185,680,000 45 Immobiliare Cascina Rubina S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 46 IN.FRA - Investire nelle Infrastrutture S.r.l. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 10,000 47 Iniziative Logistiche S.r.l. Milano Milano 1 IN.FRA - Investire nelle Infrastrutture S.r.l. 60.02 Capital Eur 10,000 48 Insalute Servizi S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 500,000 49 Intesa Invest A.D. Beograd (c) Beograd Beograd 1 Banca Intesa AD Beograd 100.00 Capital Rsd 236,975,800 50 Intesa Leasing (Closed Joint-Stock Company) Moscow Moscow 1 Joint-Stock Company Banca Intesa 100.00 Capital Rub 3,000,000 51 Intesa Leasing d.o.o. Beograd Beograd Beograd 1 Banca Intesa AD Beograd 100.00 Capital Rsd 960,374,301 52 Intesa Sanpaolo (Qingdao) Service Company (c) Qingdao Qingdao 1 Intesa Sanpaolo S.p.A. 100.00 Capital CNY 80,000,000 53 Intesa Sanpaolo Assicura S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 27,912,258 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 54 Intesa Sanpaolo Bank Albania Sh.A. Tirana Tirana 1 Intesa Sanpaolo S.p.A. 100.00 Capital All 5,562,517,674 55 Intesa Sanpaolo Bank Ireland Plc Dublin Dublin 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 400,500,000 56 Intesa Sanpaolo Bank Luxembourg S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 1,389,370,555 57 Intesa Sanpaolo Banka d.d. Bosna I Hercegovina Sarajevo Sarajevo 1 Privredna Banka Zagreb d.d. 99.99 100,00 (**) Capital Bam 44,782,000 58 Intesa Sanpaolo Brasil S.A. - Banco Multiplo Sao Paulo Sao Paulo 1 Intesa Sanpaolo S.p.A. 99.90 Capital Brl 945,428,281 Intesa Sanpaolo Holding International S.A. 0.10 100.00 59 Intesa Sanpaolo Casa S.p.A. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 1,000,000 60 Intesa Sanpaolo Expo Institutional Contact S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 50,000 61 Intesa Sanpaolo Funding LLC (gi\u00e0 Intesa Funding LLC) New York Wilmington Delaware 1 Intesa Sanpaolo S.p.A. 100.00 Capital Usd 25,000 62 Intesa Sanpaolo Harbourmaster III S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 5,500,000 63 Intesa Sanpaolo Highline S.r.l. (c) Torino Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 500,000 64 Intesa Sanpaolo Holding International S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 2,157,957,270 65 Intesa Sanpaolo House Luxemburg S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 24,990,317 66 Intesa Sanpaolo Imi Securities Corp. New York New York 1 IMI Capital Market USA Corp. 100.00 Capital Usd 44,500,000 67 Intesa Sanpaolo Innovation Center S.p.a. Torino Torino 1 Intesa Sanpaolo S.p.A. 99.99 Capital Eur 9,254,940 Intesa Sanpaolo Vita S.p.A. 0.01 100.00 68 Intesa Sanpaolo Insurance Agency S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 500,000 69 Intesa Sanpaolo International Value Services d.o.o. Zagreb Zagreb 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Hrk 100,000 70 Intesa Sanpaolo Life Designed activity company (gi\u00e0 Intesa Sanpaolo Life Ltd.) Dublin Dublin 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 625,000 71 Intesa Sanpaolo Private Argentina S.A. (c) Buenos Aires Buenos Aires 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 4.97 Capital Ars 13,404,506 REYL & Cie S.A. 95.03 100.00 72 Intesa Sanpaolo Private Banking S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 117,497,424 73 Intesa Sanpaolo Provis S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 6,725,000 74 Intesa Sanpaolo RBM Salute S.p.A. (i) Venezia Venezia 1 Intesa Sanpaolo Vita S.p.A. 73.79 Capital Eur 305,208,000 75 Intesa Sanpaolo RE.O.CO. S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 13,000,000 76 Intesa Sanpaolo Rent Foryou S.p.A. Torino Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 630,000 77 Intesa Sanpaolo Romania S.A. Commercial Bank Bucarest Bucarest 1 Intesa Sanpaolo S.p.A. 99.73 Capital Ron 1,216,639,410 Intesa Sanpaolo Holding International S.A. 0.27 100.00 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 78 Intesa Sanpaolo Servi\u00e7os e Empreendimentos Ltda em liquida\u00e7\u00e3o (c) S\u00e3o Paulo S\u00e3o Paulo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Brl 3,283,320 79 Intesa Sanpaolo Servitia S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 1,500,000 80 Intesa Sanpaolo Vita S.p.A. Milano Torino 1 Intesa Sanpaolo S.p.A. 99.99 Capital Eur 320,422,509 81 Inveniam S.A. en Liquidation \u00a9 Geneva Geneva 1 REYL Private Office Luxembourg S.a.r.l. 100.00 Capital Chf 50,000 82 ISP CB Ipotecario S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 120,000 83 ISP CB Pubbico S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 120,000 84 ISP OBG S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 42,038 85 IW Private Investments SIM S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 67,950,000 86 Joint-Stock Company Banca Intesa Moscow Moscow 1 Intesa Sanpaolo Holding International S.A. 53.02 Capital Rub 10,820,180,800 Intesa Sanpaolo S.p.A. 46.98 100.00 87 Lux Gest Asset Management S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Bank Luxembourg S.A. 100.00 Capital Eur 200,000 88 Milano Santa Giulia S.p.A. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 139,041 89 Morval Bank & Trust Cayman Ltd. (c) Grand Cayman Grand Cayman 1 REYL & Cie S.A. 100.00 Capital Usd 7,850,000 90 MSG Comparto Quarto S.r.l. (e) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 20,000 91 MSG Comparto Secondo S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 50,000 92 MSG Comparto Terzo S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 20,000 93 Neva S.G.R. S.p.A. (gi\u00e0 Imi Fondi Chiusi S.p.A.) (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 100.00 Capital Eur 2,000,000 94 OOO Intesa Realty Russia in Liquidation (c) Moscow Moscow 1 Intesa Sanpaolo S.p.A. 100.00 Capital Rub 10,000 95 Oro Italia Trading S.p.A. in liquidazione (c) Arezzo Arezzo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 500,000 96 PBZ Card d.o.o. Zagreb Zagreb 1 Privredna Banka Zagreb d.d. 100.00 Capital Hrk 43,422,200 97 PBZ Leasing d.o.o. Zagreb Zagreb 1 Privredna Banka Zagreb d.d. 100.00 Capital Hrk 15,000,000 98 Porta Nuova Gioia (j) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 7,054,350 99 Portugal Real Estate Opportunities Manager Sarl (c) Luxembourg Luxembourg 1 REYL Finance (MEA) Ltd. 100.00 Capital Eur 12,500 100 Pravex Bank Joint-Stock Company Kiev Kiev 1 Intesa Sanpaolo S.p.A. 100.00 Capital Uah 979,089,724 101 Prestitalia S.p.A. Bergamo Bergamo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 205,722,715 102 Private Equity International S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 101,000,000 103 Privredna Banka Zagreb d.d. Zagreb Zagreb 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Hrk 1,876,574,700 104 Qingdao Yicai Fund Distribution Co. Ltd. Qingdao Qingdao 1 Intesa Sanpaolo S.p.A. 100.00 Capital Cny 591,000,000 105 RB Participations S.A. Geneva Geneva 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Chf 100,000 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 106 Recovery Property Utilisation and Services Zrt. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 20,000,000 107 REYL & Cie (Malta) Holding Ltd. (c) Valletta Valletta 1 REYL & Cie S.A. 100.00 Capital Eur 730,000 108 REYL & Cie (Malta) Ltd. (c) Valletta Valletta 1 REYL & Cie (Malta) Holding Ltd. 100.00 Capital Eur 730,000 109 REYL & Cie S.A. (k) Geneva Geneva 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 39.00 Capital Chf 31,500,001 RB Participations S.A. 30.00 69.00 110 REYL & CO (UK) Llp. (c) London London 1 REYL & CO Holdings Ltd. 100.00 Capital Gbp 2,500,000 111 REYL & CO Holdings Ltd. (c) London London 1 REYL & Cie S.A. 100.00 Capital Gbp 2,400,000 112 REYL Finance (MEA) Ltd. (c) Dubai Dubai 1 REYL & Cie S.A. 100.00 Capital Usd 2,875,000 113 REYL Overseas AG (c) Zurich Zurich 1 REYL & Cie S.A. 100.00 Capital Chf 2,000,000 114 REYL Private Office Luxembourg Sarl (c) Luxembourg Luxembourg 1 REYL & Cie S.A. 100.00 Capital Eur 50,000 115 REYL Singapore Holding Pte. Ltd. (c) Singapore Singapore 1 REYL & Cie S.A. 75.00 Capital Sgd 1,201 116 REYL Singapore Pte. Ltd. (c) Singapore Singapore 1 REYL & Cie S.A. 76.00 Capital Sgd 500,000 REYL Singapore Holding Pte. Ltd. 24.00 100.00 117 Ri. Rental S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 118 Risanamento Europa S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 119 Risanamento S.p.A. (g) Milano Milano 1 Intesa Sanpaolo S.p.A. 48.88 Capital Eur 197,951,784 120 Romulus Funding Corporation (f) New York New York 2 Intesa Sanpaolo S.p.A. - 121 Societ\u00e0 Benefit Cimarosa 1 S.p.A. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 100,000 122 Societ\u00e0 Italiana di Revisione e Fiduciaria \u2013 S.I.RE.F. S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 2,600,000 123 SRM Studi e Ricerche per il Mezzogiorno (c) Napoli Napoli 1 Intesa Sanpaolo S.p.A. 60.00 20,00 (*) Capital Eur 90,000 124 Sviluppo Comparto 3 S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 50,000 125 UBI Finance S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 10,000 126 UBI Trustee S.A. (c) Luxembourg Luxembourg 1 Fideuram Bank Luxembourg S.A. 100.00 Capital Eur 250,000 127 Vseobecna Uverova Banka A.S. Bratislava Bratislava 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 430,819,064 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 128 VUB Generali Dochodkova Spravcovska Spolocnost A.S. (l) Bratislava Bratislava 1 Vseobecna Uverova Banka A.S. 55.26 Capital Eur 10,090,976 129 VUB Operating Leasing Bratislava Bratislava 1 Vseobecna Uverova Banka A.S. 100.00 Capital Eur 25,000 (a) Type of relationship: 1 - majority of voting rights at Ordinary Shareholders' Meeting; 2 - other forms of control. (b) Where different from the % portion, the availability of the votes in the Ordinary Shareholders' Meeting is indicated, distinguishing between the effective (*) and potential (**) voting rights, where applicable. (c) Company consolidated using the equity method given its limited materiality. (d) The subsidiary Asteria Investment Managers SA (\u201cAsteria\u201d) is 80% owned by Reyl & Cie SA following the acquisition of the minority interests from the minority shareholders. The remaining 20% of the share capital consists of treasury shares. These treasury shares are due to be cancelled in early 2023, resulting in an adjustment of Asteria\u2019s total share capital, after which Reyl & Cie will hold a 100% equity investment. Asteria absorbed the subsidiary Obviam AG with accounting effect from 31 December 2022 (which was previously consolidated at equity due to its low materiality). (e) Minority shareholders are subject to a legal commitment to purchase the remaining 0.7% of share capital. (f) Company controlled pursuant to IFRS 10, although the Group does not hold any equity stake in the company capital. (g) Company not subject to the management and coordination activities pursuant to art. 2497 and following of the Italian Civil Code. (h) In the event of liquidation of the equity investment, the minority shareholder has the right to sell, and Intesa Sanpaolo is required to purchase, the entire minority investment. (i) Please note that there are put and call option agreements on 26.1% of share capital held by minority shareholders. (j) A closed-end alternative real estate investment fund managed by COIMA SGR S.p.A. (k) Please note that there are put and call option agreements on 31% of share capital held by minority shareholders. (l) Please note that there are put and call option agreements on 44.74% of share capital held by minority shareholders. 2. Significant evaluations and assumptions in determining the scope of consolidation As stated above, companies are considered subsidiaries where Intesa Sanpaolo is exposed to, or has rights to, variable returns from its involvement with them, and has the ability to affect those returns by exercising its own power over the entity in question. Control only exists if all of the following conditions are met: \u2212 the power to direct the relevant activities of the subsidiary; \u2212 the exposure, or rights, to variable returns from the involvement with the investee; \u2212 the ability to use the power over the investee to affect the amount of the investor\u2019s returns. In particular, the Group considers the following factors in evaluating the existence of control: \u2212 the purpose and the structure of the investee in order to identify its aims and relevant activities, or the activities that significantly affect the investee\u2019s returns, and how those activities are governed; \u2212 power, in order to understand whether the Group has the contractual right to manage the relevant activities; \u2212 the exposure to variable returns from the investee in order to evaluate whether the return recognised by the Group is subject to variations depending on the investee's returns. Furthermore, in order to evaluate the existence of control, potential principal-agent relationships are taken into consideration. In order to evaluate whether the investee is acting as a principal or an agent, the Group takes account of the following factors: \u2212 the decision-making power on the relevant activities of the subsidiary; \u2212 the rights of other parties; \u2212 the payments to which the Group is entitled; \u2212 the Group's exposure to variable returns resulting from any investment in the investee. IFRS 10 identifies relevant activities as activities of the investee that significantly affect the investee's returns. In general terms, when the relevant activities are managed through voting rights, the following factors determine evidence of control: \u2212 direct ownership, or indirect ownership through its subsidiaries, of more than half the voting rights of an entity, unless in exceptional circumstances it can be clearly demonstrated that such ownership does not constitute control; \u2212 ownership of half, or less, of the votes which can be cast at the shareholders' meeting, and the practical ability unilaterally to govern the relevant activities through: o the control of more than half the voting rights as enshrined in an agreement with other investors; o the power to determine the financial and operational policies of the entity, as conferred by the Articles of Association or by contract; o the power to nominate or remove the majority of the members of the Board of Directors or of the equivalent corporate governance body; o the power to cast the majority of the votes at meetings of the Board of Directors or of the equivalent corporate governance body. In order to exercise power, it is necessary for the rights that the Group has over the investee to be material; to be material, the Group must have the ability to use its rights when decisions relating to relevant activities are taken. The existence and the effect of potential voting rights, where material, are taken into consideration in evaluating whether power exists to shape the managerial and financial policies of another entity. Sometimes the Group has \"de facto\" control over certain entities when it possesses rights to determine unilaterally the relevant activities of the investee, even though it does not have the majority of the voting rights. On the contrary, cases may emerge where the Group, though holding more than half of the voting rights, does not control the investee since, consequently to agreements with other investors, the exposure to variable returns from the involvement with the investees is not considered significant. Subsidiaries can also include \"structured entities\" in which the voting rights are not the dominant factor in deciding who controls the entity; this includes special purpose vehicles (SPEs/SPVs) and investment funds. Structured entities are considered to be controlled where: \u2212 the Group has powers enshrined in contractual rights allowing it to govern the relevant activities; and \u2212 the Group is exposed to the variable returns deriving from such activities. Lastly, within the Group, there are insurance companies subject to the Solvency Capital Requirements of Insurance companies established by the Solvency II legislation. 5. Other information In preparing the Intesa Sanpaolo consolidated financial statements, the financial statements of all subsidiaries have the same financial year-end, except for that reported below for the Ukrainian subsidiary Pravex Bank in the following paragraph on Consolidation methods. Consolidation methods Full consolidation This method involves the \u201cline by line\u201d aggregation of the individual amounts reported in the balance sheets and income statements of the subsidiary companies concerned. Following the allocation to minority shareholders of their interests, in a specific caption, in equity and in the result for the period, the residual value is eliminated against the book value of the subsidiaries concerned. Any positive differences arising on consolidation, after the allocation to the assets and liabilities of the consolidated subsidiary, are recorded under Intangible assets as goodwill or other intangible assets. Negative differences are recognised in the income statement. Assets, liabilities, income and expenses between consolidated companies are totally eliminated. Business combinations must be accounted for using the \"acquisition method\" in accordance with IFRS 3, whereby identifiable assets acquired or liabilities assumed (including contingent liabilities) are recognised at their fair value at the acquisition date. Moreover, for each business combination, any minority interest in the acquired company can be recognised at fair value or in proportion to the minority investment in the net identifiable assets of the acquired company. Any excess of the consideration transferred (being the fair value of the assets sold, the liabilities incurred and the equity instruments issued) over the fair value recognition of minority interests with respect to the fair value of the assets acquired and the liabilities assumed is recognised as goodwill. If the consideration is lower, the difference is taken to the income statement. The \"acquisition method\" is applied starting from the acquisition date, that is from the moment in which control of the acquired company is obtained. Therefore, the economic results of a subsidiary acquired in the reference period are included in the Consolidated financial statements starting from the acquisition date. Likewise, economic results of a subsidiary sold are included in the Consolidated financial statements until the date in which control ceased. The difference between sale price and book value at the date of disposal (including foreign exchange differences recorded in shareholders\u2019 equity on consolidation, over time) is accounted for in the income statement. Where necessary \u2013 and without prejudice to absolutely marginal cases \u2013 the financial statements of companies which are drawn up using different accounting criteria are restated to be compliant with the standards used by the Group. With regard to the Ukrainian subsidiary Pravex Bank, as a result of the worsening of the situation in Kyiv (where the subsidiary\u2019s offices are located) since mid-October 2022, due to the repeated Russian bombings of the main Ukrainian power plants, it was decided, with a view to reducing \u201coperational\u201d risk, that it was best to retain, in December\u2019s consolidation, the accounting values produced by Pravex for the consolidation of September 2022. Thus, for the financial statements as at 31 December, the balance sheet and income statement results of Pravex were included based on a consolidation package, drawn up in compliance with the IAS/IFRSs, as set out in the Group Accounting Policies, related to 30 September 2022, using the exchange rate as at 31 December 2022 for conversion into Euro. The decision to use the data as at 30 September 2022 for the line-by-line consolidation of Pravex, also taken in light of the slight materiality of the subsidiary, and motivated by objective operational restrictions, is also based on the indications in IFRS 10, though for specific cases 75 . Measurement using the equity method Associates and companies subject to joint control are consolidated with the equity method. The equity method requires the initial recognition of the equity investment at cost and its subsequent value adjustment based on the stake in the shareholders\u2019 equity of the company. Any difference between the value of the equity investment and the shareholders\u2019 equity of the company involved is recorded in the book value of the company. The valuation of the portion of shareholders\u2019 equity does not consider any potential voting rights. The portion of the company\u2019s results for the period pertaining to the Group is recorded in a specific caption of the consolidated income statement. 75 IFRS 10 states that, where it is not possible to use the subsidiary\u2019s data updated to the same reporting date as the consolidated financial statements, it is permitted to use the previous accounting data, provided that previous date is no more than 3 months prior. For more details, see the following paragraphs of IFRS 10: IFRS 10.B92 \u201cThe financial statements of the parent and its subsidiaries used in the preparation of the consolidated financial statements shall have the same reporting date. When the end of the reporting period of the parent is different from that of a subsidiary, the subsidiary prepares, for consolidation purposes, additional financial information as of the same date as the financial statements of the parent to enable the parent to consolidate the financial information of the subsidiary, unless it is impracticable to do so.\u201d IFRS 10.B93 \u201cIf it is impracticable to do so, the parent shall consolidate the financial information of the subsidiary using the most recent financial statements of the subsidiary adjusted for the effects of significant transactions or events that occur between the date of those financial statements and the date of the consolidated financial statements. In any case, the difference between the date of the subsidiary\u2019s financial statements and that of the consolidated financial statements shall be no more than three months, and the length of the reporting periods and any difference between the dates of the financial statements shall be the same from period to period.\u201d If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement. For consolidation of companies subject to joint control and investments in associates, the most recent approved (annual or interim) figures have been used. In certain marginal cases, the companies do not apply IAS/IFRS and, therefore, for such companies it was verified that the adoption of IAS/IFRS would not have produced significant effects on the Intesa Sanpaolo Group\u2019s Consolidated financial statements. Conversion of financial statements in currencies other than the euro The financial statements of the companies which do not operate in the eurozone are translated into euro applying to the assets and liabilities in the balance sheet the spot exchange rate at period-end and to the income statement the average exchange rate. Foreign exchange differences from the conversion of the financial statements of such companies, deriving from the application of different foreign exchange rates to assets and liabilities and the income statement, are recorded in Valuation reserves under shareholders' equity. Foreign exchange differences on the shareholders' equity of the subsidiaries are also recorded in Valuation reserves. All foreign exchange differences are reversed to the income statement of the year in which the foreign operation is sold. 3. Investments in subsidiaries with significant minority interests 3.1 Minority interests, minority voting rights and dividends distributed to minority shareholders Companies Minority interests % Minority voting rights % (1) Dividends distributed to minority shareholders 1 Bank of Alexandria (2) 20.00 20.00 16 2 Banka Intesa Sanpaolo D.D. 0.87 0.87 3 Compagnia Italiana Finanziaria - CIF S.r.l. 38.55 38.55 4 Eurizon Capital Real Asset SGR S.p.A. 40.01 24.50 5 Eurizon SLJ Capital Limited 35.00 35.00 1 6 Exetra S.p.A. 15.00 15.00 7 Fideuram Asset Management SGR S.p.A. 0.48 0.48 8 Iniziative Logistiche S.r.l. 39.98 39.98 9 Intesa Sanpaolo Banka D.D. Bosna I Hercegovina 0.01 10 Intesa Sanpaolo RBM Salute S.p.A. 26.21 26.21 11 Intesa Sanpaolo Vita S.p.A. 0.01 0.01 12 Reyl & Cie S.A. 31.00 31.00 13 Risanamento S.p.A. 51.12 14 VUB Generali Dochodkova Spravcovska Spolocnost A.S. 44.74 44.74 (1) Available voting rights at Ordinary Shareholders' Meeting. (2) Dividend approved but not distributed 3.2 Investments in companies with significant minority interests: financial highlights (millions of euro) Companies Total assets Cash and cash equivalents Financial assets Property, equipment and intangible assets Financial liabilities Shareholders' equity Interest margin Net interest and other banking income Operating expenses Income (loss) before tax from continuing operations Income (loss) after tax from continuing operations Income (loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) 1 Bank of Alexandria 5,171 86 4,808 162 4,249 628 353 408 -177 191 129 - 129 -319 -190 4. Significant restrictions In terms of significant restrictions, it is noted that the Intesa Sanpaolo Group is subject to supervisory rules provided by Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR), amended by Directive 2019/878/EU (CRD V) and Regulation (EU) 2019/876 (CRR II), respectively, and controls financial institutions subject to the same or similar regulations aiming to maintain an adequate level of regulatory capital in relation to risks taken; therefore, the ability of subsidiary banks or financial institutions to distribute capital or dividends is dependent on the fulfilment of the regulatory thresholds set in those regulations. Referring, for more details, to Part A - Section 5 of the consolidated financial statements, in compliance with the provisions of IFRS 12, in this section we note the limitations currently imposed by Russian regulations which \u2013 in substance \u2013 impose restrictions on repayments and payments to parties resident in unfriendly countries. Those limitations specifically affect the subsidiary Banca Intesa Russia, which, in 2022, was unable to directly route the repayments of past due instalments referring to intragroup exposures to the creditor banks and, therefore, routed the resources allocated for those repayments (for a total of around 29 million euro at the end of 2022) to specific accounts in Russia. It must also be noted that the current legal restrictions on transferring monetary resources beyond the country\u2019s borders do not prejudice in any way the ownership of the amounts (due to the creditor banks), nor, as argued in greater detail in Part A \u2013 Section 5, do they constitute an obstacle to maintaining control over the Russian subsidiary. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1067": { "value": "SECTION 3 \u2013 SCOPE OF CONSOLIDATION AND CONSOLIDATION METHODS Scope of consolidation The Consolidated financial statements include Intesa Sanpaolo and the companies that it directly and indirectly controls and consider in the scope of consolidation \u2013 as specifically set out by IAS/IFRS \u2013 also the companies operating in dissimilar sectors from the Parent Company as well as private equity investments. Similarly, structured entities are included when the requisite of effective control recurs, even if there is no stake in the company. Companies are considered subsidiaries where Intesa Sanpaolo is exposed to, or has rights to, variable returns from its involvement with them, and has the ability to affect those returns by exercising its own power over the entity in question. Control only exists if all of the following conditions are met: \u2212 the power to direct the relevant activities of the subsidiary; \u2212 the exposure, or rights, to variable returns from the involvement with the investee; \u2212 the ability to use the power over the investee to affect the amount of the investor\u2019s returns. Companies are considered as subject to joint control if control is directly or indirectly contractually shared by the Parent Company with one or more other parties external to the Group, or where the decisions about the relevant activities require the unanimous consent of all the parties sharing control. Companies are considered associates, that is subject to significant influence, when Intesa Sanpaolo, directly or indirectly, holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or when the Parent Company \u2013 despite a lower percentage of voting rights due to specific legal agreements such as the participation of voting syndicates \u2013 has the power of participating in the determination of the financial and operating policies of the company. Certain companies in which the Parent Company holds an equity stake exceeding 20% of voting share capital are excluded from the scope of consolidation and are classified based on the provisions of IFRS 9, since they are of limited absolute amount, or since Intesa Sanpaolo, directly or indirectly, exclusively holds rights on a portion of the rewards of the investment, and does not have access to management policies and may exercise limited governance rights to safeguard its economic interest. Equity investments held, directly or through funds, in companies involved in the venture capital business are also excluded from the line-by-line scope of consolidation. These equity investments are included in the category of Financial assets measured at fair value through profit or loss. Companies for which the shares have been received as pledges with voting rights exceeding 20% are not consolidated, in consideration of the substance underlying the pledge, which has the purpose of guaranteeing loans and not of exercising control and direction over financial and economic policies in order to benefit from the economic return on the shares. Intesa Sanpaolo does not perform management and coordination activity over Risanamento S.p.A. and its subsidiaries pursuant to Article 2497 et seq. of the Italian Civil Code. With respect to 31 December 2021, the changes in the line-by-line consolidation area involved the entry of: \u2212 Newco TPA S.p.A. (now named InSalute Servizi S.p.A.), a newly-incorporated company in the Insurance Group, 100% owned by Intesa Sanpaolo Vita; \u2212 Compagnie de Banque Priv\u00e9e Quilvest (CBPQ), 100%-owned by Fideuram Bank (Luxembourg) S.A.; \u2212 VUB Operating Leasing A.S., previously consolidated using the equity method; \u2212 Acantus S.p.A. (transferee of ISP\u2019s pledged loans business line belonging to the former UBI Group), following the exceeding of the immateriality limits that previously allowed its consolidation at equity; \u2212 VUB Generali Dochodkova Spravcovska Spolocnost A.S, following the acquisition of an additional share of 5.26% by VSEOBECNA UVEROVA BANKA A.S. (the total investment now amounts to 55.26%). The company was previously consolidated at equity; \u2212 Eurizon Capital Real Asset SGR S.p.A., following the exceeding of the immateriality limits that previously allowed its consolidation at equity; and the exit of: \u2212 Intesa Sanpaolo Private Bank (Suisse) Morval, merged by incorporation into Reyl & Cie S.A.; \u2212 VUB Leasing A.S., which was discontinued following its demerger into Vseobecna Uverova Banka A.S. for finance leases and into VUB Operating Leasing (mentioned above) for operating leases; \u2212 UBI Leasing S.p.A., merged by incorporation into Intesa Sanpaolo S.p.A.; \u2212 PBZ Stambena Stedionica d.d., merged by incorporation into PBZ \u2013 Privredna Banka Zagreb d.d.; \u2212 Intesa Sanpaolo (Qingdao) Service Company Limited, which is now consolidated using the equity method in view of the negligible amounts of the balance sheet aggregates; \u2212 Cargeas Assicurazioni S.p.A., merged by incorporation into Intesa Sanpaolo Assicura S.p.A.; \u2212 Intesa Sanpaolo Smart Care S.r.l., merged by incorporation into Intesa Sanpaolo S.p.A.; \u2212 Sanpaolo Invest SIM S.p.A., merged by incorporation into Fideuram-Intesa Sanpaolo Private Banking S.p.A.; In the interest of completeness, it should also be noted that Mooney Group continues to be consolidated at equity for the purposes of the accounting scope of consolidation, but is included in the prudential scope of consolidation using the proportional method; in July, Banca 5 S.p.A. acquired an additional 20% stake in the above-mentioned company, bringing the total interest to 50% (subject to joint control). Lastly, for completeness, please note the following changes of name: - Intesa Sanpaolo International Value Services Ltd. into Intesa Sanpaolo International Value Services d.o.o.; - IW Bank S.p.A. into IW Private Investments Societ\u00e0 di Intermediazione Mobiliare S.p.A. The following table lists the investments in exclusively controlled companies at 31 December 2022. 1. Exclusively controlled companies Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 1 Acantus S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 800,000 2 Anti Financial Crime Digital HUB S.c.a.r.l. (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 10.00 Capital Eur 100,000 Intesa Sanpaolo S.p.A. 60.00 70.00 3 Asteria Investment Managers S.A. (d) Geneva Geneva 1 REYL & Cie S.A. 100.00 Capital Chf 14,000,000 4 Banca 5 S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 30,000,000 5 Banca Comerciala Eximbank S.A. Chisinau Chisinau 1 Intesa Sanpaolo S.p.A. 100.00 Capital Mdl 1,250,000,000 6 Banca Intesa AD Beograd Novi Beograd Beograd 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Rsd 21,315,900,000 7 Bank of Alexandria S.A.E. Cairo Cairo 1 Intesa Sanpaolo S.p.A. 80.00 Capital Egp 5,000,000,000 8 Banka Intesa Sanpaolo d.d. (e) Koper Koper 1 Intesa Sanpaolo S.p.A. 48.13 Capital Eur 22,173,218 Privredna Banka Zagreb d.d. 51.00 99.13 9 CBP Quilvest PE Fund GP S.a r.l. (c) Luxembourg Luxembourg 1 Compagnie de Banque Priv\u00e9e Quilvest S.A. 100.00 Capital Usd 20,000 10 Cib Bank Ltd. Budapest Budapest 1 Intesa Sanpaolo S.p.A. 100.00 Capital Huf 50,000,000,003 11 CIB Insurance Broker Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 10,000,000 12 CIB Leasing Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 53,000,000 13 CIB Rent Operative Leasing Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 5,000,000 14 Colline e oltre S.p.A. (c) Pavia Pavia 1 Intesa Sanpaolo S.p.A. 51.00 Capital Eur 50,000 15 Compagnia Italiana Finanziaria - CIF S.r.l. Milano Milano 1 IN.FRA - Investire nelle Infrastrutture S.r.l. 61.45 Capital Eur 10,000 16 Compagnie de Banque Priv\u00e9e Quilvest S.A. Luxembourg Luxembourg 1 Fideuram Bank Luxembourg S.A. 100.00 Capital Eur 32,537,000 17 Consorzio Studi e ricerche fiscali Gruppo Intesa Sanpaolo (c) Roma Roma 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 7.50 Capital Eur 258,228 Eurizon Capital SGR S.p.A. 5.00 Intesa Sanpaolo Vita S.p.A. 7.50 Intesa Sanpaolo S.p.A. 80.00 100.00 18 Duomo Funding Plc (f) Dublin Dublin 2 Intesa Sanpaolo S.p.A. - 19 Epsilon SGR S.p.A. Milano Milano 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 5,200,000 20 Etoile Fran\u00e7ois Premier S.a.r.l. (g) Paris Paris 1 Risanamento Europa S.r.l. 100.00 Capital Eur 5,000 21 Eurizon Asset Management Croatia D.O.O. Zagreb Zagreb 1 Eurizon Asset Management Slovakia Sprav. Spol. A.S. 100.00 Capital Hrk 5,000,000 22 Eurizon Asset Management Hungary Ltd. Budapest Budapest 1 Eurizon Asset Management Slovakia Sprav. Spol. A.S. 100.00 Capital Huf 600,000,000 23 Eurizon Asset Management Slovakia Sprav. Spol. A.S. Bratislava Bratislava 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 4,093,560 24 Eurizon Capital Asia Limited (gi\u00e0 Eurizon Capital (HK) limited) (c) Hong Kong Hong Kong 1 Eurizon Capital SGR S.p.A. 100.00 Capital Hkd 78,000,000 25 Eurizon Capital Real Asset SGR S.p.a. Milano Milano 1 Eurizon Capital SGR S.p.A. 19.98 51,00 (*) Capital Eur 4,166,667 Intesa Sanpaolo Vita S.p.A. 40.01 24,50 (*) 59.99 75,50 (*) Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 26 Eurizon Capital S.A. Luxembourg Luxembourg 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 7,974,600 27 Eurizon Capital SGR S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 99,000,000 28 Eurizon Slj Capital Ltd. London London 1 Eurizon Capital SGR S.p.A. 65.00 Capital Gbp 1,001,000 29 Exelia S.r.l. (c) Brasov Brasov 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Ron 8,252,600 30 Exetra S.p.A. (h) Milano Milano 1 Intesa Sanpaolo S.p.A. 85.00 Capital Eur 158,000 31 Fideuram Intesa Sanpaolo Private Banking S.p.A. Roma Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 300,000,000 32 Fideuram Asset Management (Ireland) Dac (gi\u00e0 Fideuram Asset Management (Ireland) Ltd.) Dublin Dublin 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 1,000,000 33 Fideuram Asset Management SGR S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 99.52 Capital Eur 25,870,000 34 Fideuram Asset Management Uk Ltd (c) London London 1 Fideuram Asset Management (Ireland) Dac 100.00 Capital Gbp 1,000,000 35 Fideuram Bank ( Luxembourg) S.A. Luxembourg Luxembourg 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 40,000,000 36 Fideuram Vita S.p.A. Roma Roma 1 Intesa Sanpaolo S.p.A. 80.01 Capital Eur 357,446,836 Fideuram Intesa Sanpaolo Private Banking S.p.A. 19.99 100.00 37 Fondo Sviluppo ecosistemi di Innovazione (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 100.00 Capital Eur 15,000,000 38 Gap Manco Sarl (c) Luxembourg Luxembourg 1 REYL & Cie S.A. 100.00 Capital Eur 12,500 39 Iberia Distressed Assets Manager Sarl (c) Luxembourg Luxembourg 1 REYL Finance (MEA) Ltd. 100.00 Capital Eur 12,500 40 IIF SME Manager Ltd. (c) George Town George Town 1 Asteria Investment Managers S.A. 100.00 Capital Usd 1,000 41 IMI Capital Market USA Corp. New York New York 1 IMI Investments S.A. 100.00 Capital Usd 5,000 42 IMI Finance Luxembourg S.A. (c) Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 100,000 43 IMI Investments S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 21,660,000 44 IMMIT - Immobili Italiani S.r.l. Bergamo Bergamo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 185,680,000 45 Immobiliare Cascina Rubina S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 46 IN.FRA - Investire nelle Infrastrutture S.r.l. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 10,000 47 Iniziative Logistiche S.r.l. Milano Milano 1 IN.FRA - Investire nelle Infrastrutture S.r.l. 60.02 Capital Eur 10,000 48 Insalute Servizi S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 500,000 49 Intesa Invest A.D. Beograd (c) Beograd Beograd 1 Banca Intesa AD Beograd 100.00 Capital Rsd 236,975,800 50 Intesa Leasing (Closed Joint-Stock Company) Moscow Moscow 1 Joint-Stock Company Banca Intesa 100.00 Capital Rub 3,000,000 51 Intesa Leasing d.o.o. Beograd Beograd Beograd 1 Banca Intesa AD Beograd 100.00 Capital Rsd 960,374,301 52 Intesa Sanpaolo (Qingdao) Service Company (c) Qingdao Qingdao 1 Intesa Sanpaolo S.p.A. 100.00 Capital CNY 80,000,000 53 Intesa Sanpaolo Assicura S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 27,912,258 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 54 Intesa Sanpaolo Bank Albania Sh.A. Tirana Tirana 1 Intesa Sanpaolo S.p.A. 100.00 Capital All 5,562,517,674 55 Intesa Sanpaolo Bank Ireland Plc Dublin Dublin 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 400,500,000 56 Intesa Sanpaolo Bank Luxembourg S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 1,389,370,555 57 Intesa Sanpaolo Banka d.d. Bosna I Hercegovina Sarajevo Sarajevo 1 Privredna Banka Zagreb d.d. 99.99 100,00 (**) Capital Bam 44,782,000 58 Intesa Sanpaolo Brasil S.A. - Banco Multiplo Sao Paulo Sao Paulo 1 Intesa Sanpaolo S.p.A. 99.90 Capital Brl 945,428,281 Intesa Sanpaolo Holding International S.A. 0.10 100.00 59 Intesa Sanpaolo Casa S.p.A. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 1,000,000 60 Intesa Sanpaolo Expo Institutional Contact S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 50,000 61 Intesa Sanpaolo Funding LLC (gi\u00e0 Intesa Funding LLC) New York Wilmington Delaware 1 Intesa Sanpaolo S.p.A. 100.00 Capital Usd 25,000 62 Intesa Sanpaolo Harbourmaster III S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 5,500,000 63 Intesa Sanpaolo Highline S.r.l. (c) Torino Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 500,000 64 Intesa Sanpaolo Holding International S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 2,157,957,270 65 Intesa Sanpaolo House Luxemburg S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 24,990,317 66 Intesa Sanpaolo Imi Securities Corp. New York New York 1 IMI Capital Market USA Corp. 100.00 Capital Usd 44,500,000 67 Intesa Sanpaolo Innovation Center S.p.a. Torino Torino 1 Intesa Sanpaolo S.p.A. 99.99 Capital Eur 9,254,940 Intesa Sanpaolo Vita S.p.A. 0.01 100.00 68 Intesa Sanpaolo Insurance Agency S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 500,000 69 Intesa Sanpaolo International Value Services d.o.o. Zagreb Zagreb 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Hrk 100,000 70 Intesa Sanpaolo Life Designed activity company (gi\u00e0 Intesa Sanpaolo Life Ltd.) Dublin Dublin 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 625,000 71 Intesa Sanpaolo Private Argentina S.A. (c) Buenos Aires Buenos Aires 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 4.97 Capital Ars 13,404,506 REYL & Cie S.A. 95.03 100.00 72 Intesa Sanpaolo Private Banking S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 117,497,424 73 Intesa Sanpaolo Provis S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 6,725,000 74 Intesa Sanpaolo RBM Salute S.p.A. (i) Venezia Venezia 1 Intesa Sanpaolo Vita S.p.A. 73.79 Capital Eur 305,208,000 75 Intesa Sanpaolo RE.O.CO. S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 13,000,000 76 Intesa Sanpaolo Rent Foryou S.p.A. Torino Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 630,000 77 Intesa Sanpaolo Romania S.A. Commercial Bank Bucarest Bucarest 1 Intesa Sanpaolo S.p.A. 99.73 Capital Ron 1,216,639,410 Intesa Sanpaolo Holding International S.A. 0.27 100.00 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 78 Intesa Sanpaolo Servi\u00e7os e Empreendimentos Ltda em liquida\u00e7\u00e3o (c) S\u00e3o Paulo S\u00e3o Paulo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Brl 3,283,320 79 Intesa Sanpaolo Servitia S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 1,500,000 80 Intesa Sanpaolo Vita S.p.A. Milano Torino 1 Intesa Sanpaolo S.p.A. 99.99 Capital Eur 320,422,509 81 Inveniam S.A. en Liquidation \u00a9 Geneva Geneva 1 REYL Private Office Luxembourg S.a.r.l. 100.00 Capital Chf 50,000 82 ISP CB Ipotecario S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 120,000 83 ISP CB Pubbico S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 120,000 84 ISP OBG S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 42,038 85 IW Private Investments SIM S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 67,950,000 86 Joint-Stock Company Banca Intesa Moscow Moscow 1 Intesa Sanpaolo Holding International S.A. 53.02 Capital Rub 10,820,180,800 Intesa Sanpaolo S.p.A. 46.98 100.00 87 Lux Gest Asset Management S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Bank Luxembourg S.A. 100.00 Capital Eur 200,000 88 Milano Santa Giulia S.p.A. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 139,041 89 Morval Bank & Trust Cayman Ltd. (c) Grand Cayman Grand Cayman 1 REYL & Cie S.A. 100.00 Capital Usd 7,850,000 90 MSG Comparto Quarto S.r.l. (e) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 20,000 91 MSG Comparto Secondo S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 50,000 92 MSG Comparto Terzo S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 20,000 93 Neva S.G.R. S.p.A. (gi\u00e0 Imi Fondi Chiusi S.p.A.) (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 100.00 Capital Eur 2,000,000 94 OOO Intesa Realty Russia in Liquidation (c) Moscow Moscow 1 Intesa Sanpaolo S.p.A. 100.00 Capital Rub 10,000 95 Oro Italia Trading S.p.A. in liquidazione (c) Arezzo Arezzo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 500,000 96 PBZ Card d.o.o. Zagreb Zagreb 1 Privredna Banka Zagreb d.d. 100.00 Capital Hrk 43,422,200 97 PBZ Leasing d.o.o. Zagreb Zagreb 1 Privredna Banka Zagreb d.d. 100.00 Capital Hrk 15,000,000 98 Porta Nuova Gioia (j) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 7,054,350 99 Portugal Real Estate Opportunities Manager Sarl (c) Luxembourg Luxembourg 1 REYL Finance (MEA) Ltd. 100.00 Capital Eur 12,500 100 Pravex Bank Joint-Stock Company Kiev Kiev 1 Intesa Sanpaolo S.p.A. 100.00 Capital Uah 979,089,724 101 Prestitalia S.p.A. Bergamo Bergamo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 205,722,715 102 Private Equity International S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 101,000,000 103 Privredna Banka Zagreb d.d. Zagreb Zagreb 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Hrk 1,876,574,700 104 Qingdao Yicai Fund Distribution Co. Ltd. Qingdao Qingdao 1 Intesa Sanpaolo S.p.A. 100.00 Capital Cny 591,000,000 105 RB Participations S.A. Geneva Geneva 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Chf 100,000 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 106 Recovery Property Utilisation and Services Zrt. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 20,000,000 107 REYL & Cie (Malta) Holding Ltd. (c) Valletta Valletta 1 REYL & Cie S.A. 100.00 Capital Eur 730,000 108 REYL & Cie (Malta) Ltd. (c) Valletta Valletta 1 REYL & Cie (Malta) Holding Ltd. 100.00 Capital Eur 730,000 109 REYL & Cie S.A. (k) Geneva Geneva 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 39.00 Capital Chf 31,500,001 RB Participations S.A. 30.00 69.00 110 REYL & CO (UK) Llp. (c) London London 1 REYL & CO Holdings Ltd. 100.00 Capital Gbp 2,500,000 111 REYL & CO Holdings Ltd. (c) London London 1 REYL & Cie S.A. 100.00 Capital Gbp 2,400,000 112 REYL Finance (MEA) Ltd. (c) Dubai Dubai 1 REYL & Cie S.A. 100.00 Capital Usd 2,875,000 113 REYL Overseas AG (c) Zurich Zurich 1 REYL & Cie S.A. 100.00 Capital Chf 2,000,000 114 REYL Private Office Luxembourg Sarl (c) Luxembourg Luxembourg 1 REYL & Cie S.A. 100.00 Capital Eur 50,000 115 REYL Singapore Holding Pte. Ltd. (c) Singapore Singapore 1 REYL & Cie S.A. 75.00 Capital Sgd 1,201 116 REYL Singapore Pte. Ltd. (c) Singapore Singapore 1 REYL & Cie S.A. 76.00 Capital Sgd 500,000 REYL Singapore Holding Pte. Ltd. 24.00 100.00 117 Ri. Rental S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 118 Risanamento Europa S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 119 Risanamento S.p.A. (g) Milano Milano 1 Intesa Sanpaolo S.p.A. 48.88 Capital Eur 197,951,784 120 Romulus Funding Corporation (f) New York New York 2 Intesa Sanpaolo S.p.A. - 121 Societ\u00e0 Benefit Cimarosa 1 S.p.A. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 100,000 122 Societ\u00e0 Italiana di Revisione e Fiduciaria \u2013 S.I.RE.F. S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 2,600,000 123 SRM Studi e Ricerche per il Mezzogiorno (c) Napoli Napoli 1 Intesa Sanpaolo S.p.A. 60.00 20,00 (*) Capital Eur 90,000 124 Sviluppo Comparto 3 S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 50,000 125 UBI Finance S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 10,000 126 UBI Trustee S.A. (c) Luxembourg Luxembourg 1 Fideuram Bank Luxembourg S.A. 100.00 Capital Eur 250,000 127 Vseobecna Uverova Banka A.S. Bratislava Bratislava 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 430,819,064 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 128 VUB Generali Dochodkova Spravcovska Spolocnost A.S. (l) Bratislava Bratislava 1 Vseobecna Uverova Banka A.S. 55.26 Capital Eur 10,090,976 129 VUB Operating Leasing Bratislava Bratislava 1 Vseobecna Uverova Banka A.S. 100.00 Capital Eur 25,000 (a) Type of relationship: 1 - majority of voting rights at Ordinary Shareholders' Meeting; 2 - other forms of control. (b) Where different from the % portion, the availability of the votes in the Ordinary Shareholders' Meeting is indicated, distinguishing between the effective (*) and potential (**) voting rights, where applicable. (c) Company consolidated using the equity method given its limited materiality. (d) The subsidiary Asteria Investment Managers SA (\u201cAsteria\u201d) is 80% owned by Reyl & Cie SA following the acquisition of the minority interests from the minority shareholders. The remaining 20% of the share capital consists of treasury shares. These treasury shares are due to be cancelled in early 2023, resulting in an adjustment of Asteria\u2019s total share capital, after which Reyl & Cie will hold a 100% equity investment. Asteria absorbed the subsidiary Obviam AG with accounting effect from 31 December 2022 (which was previously consolidated at equity due to its low materiality). (e) Minority shareholders are subject to a legal commitment to purchase the remaining 0.7% of share capital. (f) Company controlled pursuant to IFRS 10, although the Group does not hold any equity stake in the company capital. (g) Company not subject to the management and coordination activities pursuant to art. 2497 and following of the Italian Civil Code. (h) In the event of liquidation of the equity investment, the minority shareholder has the right to sell, and Intesa Sanpaolo is required to purchase, the entire minority investment. (i) Please note that there are put and call option agreements on 26.1% of share capital held by minority shareholders. (j) A closed-end alternative real estate investment fund managed by COIMA SGR S.p.A. (k) Please note that there are put and call option agreements on 31% of share capital held by minority shareholders. (l) Please note that there are put and call option agreements on 44.74% of share capital held by minority shareholders. 2. Significant evaluations and assumptions in determining the scope of consolidation As stated above, companies are considered subsidiaries where Intesa Sanpaolo is exposed to, or has rights to, variable returns from its involvement with them, and has the ability to affect those returns by exercising its own power over the entity in question. Control only exists if all of the following conditions are met: \u2212 the power to direct the relevant activities of the subsidiary; \u2212 the exposure, or rights, to variable returns from the involvement with the investee; \u2212 the ability to use the power over the investee to affect the amount of the investor\u2019s returns. In particular, the Group considers the following factors in evaluating the existence of control: \u2212 the purpose and the structure of the investee in order to identify its aims and relevant activities, or the activities that significantly affect the investee\u2019s returns, and how those activities are governed; \u2212 power, in order to understand whether the Group has the contractual right to manage the relevant activities; \u2212 the exposure to variable returns from the investee in order to evaluate whether the return recognised by the Group is subject to variations depending on the investee's returns. Furthermore, in order to evaluate the existence of control, potential principal-agent relationships are taken into consideration. In order to evaluate whether the investee is acting as a principal or an agent, the Group takes account of the following factors: \u2212 the decision-making power on the relevant activities of the subsidiary; \u2212 the rights of other parties; \u2212 the payments to which the Group is entitled; \u2212 the Group's exposure to variable returns resulting from any investment in the investee. IFRS 10 identifies relevant activities as activities of the investee that significantly affect the investee's returns. In general terms, when the relevant activities are managed through voting rights, the following factors determine evidence of control: \u2212 direct ownership, or indirect ownership through its subsidiaries, of more than half the voting rights of an entity, unless in exceptional circumstances it can be clearly demonstrated that such ownership does not constitute control; \u2212 ownership of half, or less, of the votes which can be cast at the shareholders' meeting, and the practical ability unilaterally to govern the relevant activities through: o the control of more than half the voting rights as enshrined in an agreement with other investors; o the power to determine the financial and operational policies of the entity, as conferred by the Articles of Association or by contract; o the power to nominate or remove the majority of the members of the Board of Directors or of the equivalent corporate governance body; o the power to cast the majority of the votes at meetings of the Board of Directors or of the equivalent corporate governance body. In order to exercise power, it is necessary for the rights that the Group has over the investee to be material; to be material, the Group must have the ability to use its rights when decisions relating to relevant activities are taken. The existence and the effect of potential voting rights, where material, are taken into consideration in evaluating whether power exists to shape the managerial and financial policies of another entity. Sometimes the Group has \"de facto\" control over certain entities when it possesses rights to determine unilaterally the relevant activities of the investee, even though it does not have the majority of the voting rights. On the contrary, cases may emerge where the Group, though holding more than half of the voting rights, does not control the investee since, consequently to agreements with other investors, the exposure to variable returns from the involvement with the investees is not considered significant. Subsidiaries can also include \"structured entities\" in which the voting rights are not the dominant factor in deciding who controls the entity; this includes special purpose vehicles (SPEs/SPVs) and investment funds. Structured entities are considered to be controlled where: \u2212 the Group has powers enshrined in contractual rights allowing it to govern the relevant activities; and \u2212 the Group is exposed to the variable returns deriving from such activities. 3. Investments in subsidiaries with significant minority interests 3.1 Minority interests, minority voting rights and dividends distributed to minority shareholders Companies Minority interests % Minority voting rights % (1) Dividends distributed to minority shareholders 1 Bank of Alexandria (2) 20.00 20.00 16 2 Banka Intesa Sanpaolo D.D. 0.87 0.87 3 Compagnia Italiana Finanziaria - CIF S.r.l. 38.55 38.55 4 Eurizon Capital Real Asset SGR S.p.A. 40.01 24.50 5 Eurizon SLJ Capital Limited 35.00 35.00 1 6 Exetra S.p.A. 15.00 15.00 7 Fideuram Asset Management SGR S.p.A. 0.48 0.48 8 Iniziative Logistiche S.r.l. 39.98 39.98 9 Intesa Sanpaolo Banka D.D. Bosna I Hercegovina 0.01 10 Intesa Sanpaolo RBM Salute S.p.A. 26.21 26.21 11 Intesa Sanpaolo Vita S.p.A. 0.01 0.01 12 Reyl & Cie S.A. 31.00 31.00 13 Risanamento S.p.A. 51.12 14 VUB Generali Dochodkova Spravcovska Spolocnost A.S. 44.74 44.74 (1) Available voting rights at Ordinary Shareholders' Meeting. (2) Dividend approved but not distributed 3.2 Investments in companies with significant minority interests: financial highlights (millions of euro) Companies Total assets Cash and cash equivalents Financial assets Property, equipment and intangible assets Financial liabilities Shareholders' equity Interest margin Net interest and other banking income Operating expenses Income (loss) before tax from continuing operations Income (loss) after tax from continuing operations Income (loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) 1 Bank of Alexandria 5,171 86 4,808 162 4,249 628 353 408 -177 191 129 - 129 -319 -190 4. Significant restrictions In terms of significant restrictions, it is noted that the Intesa Sanpaolo Group is subject to supervisory rules provided by Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR), amended by Directive 2019/878/EU (CRD V) and Regulation (EU) 2019/876 (CRR II), respectively, and controls financial institutions subject to the same or similar regulations aiming to maintain an adequate level of regulatory capital in relation to risks taken; therefore, the ability of subsidiary banks or financial institutions to distribute capital or dividends is dependent on the fulfilment of the regulatory thresholds set in those regulations. Referring, for more details, to Part A - Section 5 of the consolidated financial statements, in compliance with the provisions of IFRS 12, in this section we note the limitations currently imposed by Russian regulations which \u2013 in substance \u2013 impose restrictions on repayments and payments to parties resident in unfriendly countries. Those limitations specifically affect the subsidiary Banca Intesa Russia, which, in 2022, was unable to directly route the repayments of past due instalments referring to intragroup exposures to the creditor banks and, therefore, routed the resources allocated for those repayments (for a total of around 29 million euro at the end of 2022) to specific accounts in Russia. It must also be noted that the current legal restrictions on transferring monetary resources beyond the country\u2019s borders do not prejudice in any way the ownership of the amounts (due to the creditor banks), nor, as argued in greater detail in Part A \u2013 Section 5, do they constitute an obstacle to maintaining control over the Russian subsidiary.
Lastly, within the Group, there are insurance companies subject to the Solvency Capital Requirements of Insurance
companies established by the Solvency II legislation.
5. Other information
In preparing the Intesa Sanpaolo consolidated financial statements, the financial statements of all subsidiaries have the same
financial year-end, except for that reported below for the Ukrainian subsidiary Pravex Bank in the following paragraph on
Consolidation methods.
Consolidation methods
Full consolidation
This method involves the \u201cline by line\u201d aggregation of the individual amounts reported in the balance sheets and income
statements of the subsidiary companies concerned. Following the allocation to minority shareholders of their interests, in a
specific caption, in equity and in the result for the period, the residual value is eliminated against the book value of the
subsidiaries concerned.
Any positive differences arising on consolidation, after the allocation to the assets and liabilities of the consolidated subsidiary,
are recorded under Intangible assets as goodwill or other intangible assets. Negative differences are recognised in the
income statement.
Assets, liabilities, income and expenses between consolidated companies are totally eliminated.
Business combinations must be accounted for using the \"acquisition method\" in accordance with IFRS 3, whereby identifiable
assets acquired or liabilities assumed (including contingent liabilities) are recognised at their fair value at the acquisition date.
Moreover, for each business combination, any minority interest in the acquired company can be recognised at fair value or in
proportion to the minority investment in the net identifiable assets of the acquired company. Any excess of the consideration
transferred (being the fair value of the assets sold, the liabilities incurred and the equity instruments issued) over the fair value
recognition of minority interests with respect to the fair value of the assets acquired and the liabilities assumed is recognised
as goodwill. If the consideration is lower, the difference is taken to the income statement.
The \"acquisition method\" is applied starting from the acquisition date, that is from the moment in which control of the acquired
company is obtained. Therefore, the economic results of a subsidiary acquired in the reference period are included in the
Consolidated financial statements starting from the acquisition date. Likewise, economic results of a subsidiary sold are
included in the Consolidated financial statements until the date in which control ceased.
The difference between sale price and book value at the date of disposal (including foreign exchange differences recorded in
shareholders\u2019 equity on consolidation, over time) is accounted for in the income statement.
Where necessary \u2013 and without prejudice to absolutely marginal cases \u2013 the financial statements of companies which are
drawn up using different accounting criteria are restated to be compliant with the standards used by the Group.
With regard to the Ukrainian subsidiary Pravex Bank, as a result of the worsening of the situation in Kyiv (where the
subsidiary\u2019s offices are located) since mid-October 2022, due to the repeated Russian bombings of the main Ukrainian power
plants, it was decided, with a view to reducing \u201coperational\u201d risk, that it was best to retain, in December\u2019s consolidation, the
accounting values produced by Pravex for the consolidation of September 2022. Thus, for the financial statements as at 31
December, the balance sheet and income statement results of Pravex were included based on a consolidation package,
drawn up in compliance with the IAS/IFRSs, as set out in the Group Accounting Policies, related to 30 September 2022, using
the exchange rate as at 31 December 2022 for conversion into Euro. The decision to use the data as at 30 September 2022
for the line-by-line consolidation of Pravex, also taken in light of the slight materiality of the subsidiary, and motivated by
objective operational restrictions, is also based on the indications in IFRS 10, though for specific cases
75
.
Measurement using the equity method
Associates and companies subject to joint control are consolidated with the equity method.
The equity method requires the initial recognition of the equity investment at cost and its subsequent value adjustment based
on the stake in the shareholders\u2019 equity of the company.
Any difference between the value of the equity investment and the shareholders\u2019 equity of the company involved is recorded
in the book value of the company.
The valuation of the portion of shareholders\u2019 equity does not consider any potential voting rights.
The portion of the company\u2019s results for the period pertaining to the Group is recorded in a specific caption of the consolidated
income statement.
75
IFRS 10 states that, where it is not possible to use the subsidiary\u2019s data updated to the same reporting date as the consolidated financial statements, it
is permitted to use the previous accounting data, provided that previous date is no more than 3 months prior. For more details, see the following
paragraphs of IFRS 10: IFRS 10.B92 \u201cThe financial statements of the parent and its subsidiaries used in the preparation of the consolidated financial
statements shall have the same reporting date. When the end of the reporting period of the parent is different from that of a subsidiary, the subsidiary
prepares, for consolidation purposes, additional financial information as of the same date as the financial statements of the parent to enable the parent to
consolidate the financial information of the subsidiary, unless it is impracticable to do so.\u201d IFRS 10.B93 \u201cIf it is impracticable to do so, the parent shall
consolidate the financial information of the subsidiary using the most recent financial statements of the subsidiary adjusted for the effects of significant
transactions or events that occur between the date of those financial statements and the date of the consolidated financial statements. In any case, the
difference between the date of the subsidiary\u2019s financial statements and that of the consolidated financial statements shall be no more than three
months, and the length of the reporting periods and any difference between the dates of the financial statements shall be the same from period to
period.\u201d
If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the
future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is
lower than the carrying value, the difference is recorded in the income statement.
For consolidation of companies subject to joint control and investments in associates, the most recent approved (annual or
interim) figures have been used. In certain marginal cases, the companies do not apply IAS/IFRS and, therefore, for such
companies it was verified that the adoption of IAS/IFRS would not have produced significant effects on the Intesa Sanpaolo
Group\u2019s Consolidated financial statements.
Conversion of financial statements in currencies other than the euro
The financial statements of the companies which do not operate in the eurozone are translated into euro applying to the
assets and liabilities in the balance sheet the spot exchange rate at period-end and to the income statement the average
exchange rate.
Foreign exchange differences from the conversion of the financial statements of such companies, deriving from the
application of different foreign exchange rates to assets and liabilities and the income statement, are recorded in Valuation
reserves under shareholders' equity. Foreign exchange differences on the shareholders' equity of the subsidiaries are also
recorded in Valuation reserves.
All foreign exchange differences are reversed to the income statement of the year in which the foreign operation is sold.
7.6 Significant evaluations and assumptions to establish the existence of joint control or significant influence Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties sharing control. Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of financial and management policies of the company based on specific juridical relations, such as the participation in voting syndicates. Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since it solely has economic rights on a portion of the returns generated by the investment, but does not have access to management policies and may exercise governance rights limited to the safeguarding of its economic interests. 7.7 Commitments referred to investments in companies subject to joint control As at 31 December 2022, there were commitments on capital referring to MIR CAPITAL S.C.A. Sicar for a total of 35.6 million euro; to Mooney Group S.p.A. for a total of 8 million euro; and to Apside S.p.A. for a total of 17 million euro, relating to the subscription of equity instruments issued by the company. 7.8 Commitments referred to investments in companies subject to significant influence As at 31 December 2022, the following commitments are noted: the recapitalisation of Bancomat S.p.A. for around 2.7 million euro; the commitment undertaken by ISP Innovation Center S.p.A. and Neva SGR S.p.A. to pay the amounts for the call ups of the NEVA FIRST-FCC Fund for a residual 49.5 million euro; a capital increase commitment benefiting Centai Institute S.p.A. for 0.7 million euro; a commitment to subscribe equity instruments issued by the associate Destination Gusto S.r.l. for a maximum of 2.5 million euro. Lastly, there is a residual commitment on Leonardo Technology S.r.l. of a modest amount. B. INFORMATION ON STRUCTURED ENTITIES (OTHER THAN SECURITISATION VEHICLES) In line with IFRS 12, the Group considers structured entities to be entities set up to achieve a narrow, well-defined objective, defined through contractual arrangements which often impose strict restrictions on decision-making powers of the entity's management bodies. In that sense, structured entities are designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, as they refer to administrative tasks, while the relevant operating activities are directed by means of contractual arrangements agreed on at the time of structuring the structured entity, which are difficult to modify. The characteristics of a structured entity include: \u2013 limited activities; \u2013 a narrow and well-defined objective; \u2013 insufficient equity to permit the structured entity to finance its activities without subordinated financial support. The structured entities through which the Group operates are mainly Special Purpose Entities (SPEs) and UCIs. B.1. Consolidated structured entities There are no structured entities consolidated in the accounts other than securitisation companies that fall within the scope of the Intesa Sanpaolo Banking Group. B.2. Structured entities not consolidated in the accounts B.2.1. Prudential consolidation of structured entities There are no structured entities consolidated for prudential purposes other than securitisation companies that fall within the scope of the Intesa Sanpaolo Banking Group. B.2.2. Other structured entities Qualitative information As indicated above, the Group's operations through structured entities are also carried out through SPEs. To that end, SPEs are understood as legal entities established to pursue a specific, well-defined and limited objective: \u2013 to raise funds on the market by issuing specific financial instruments; \u2013 to develop and/or finance a specific business initiative, capable of generating, through an economic activity, cash flows which permit the complete reimbursement of the debt; \u2013 to finance the acquisition of a target company which, through its economic activity, will be capable of generating cash flows for the SPEs which permit the complete reimbursement of the debt. For the purposes of this section, operations carried out through securitisation vehicles, that is vehicles established to acquire, sell and manage specific assets, separating them from the financial statements of the Originator, for the purpose of carrying out securitisations of assets or for acquiring funding through self-securitisations and issues of Covered Bonds (CB), shall not be relevant. For those types of vehicle companies, reference should be made to section \u201cC. Securitisations\u201d and section \u201cD. Sales\u201d of Part E of the Notes to the consolidated financial statements. In some cases, the Group sponsors the SPE by structuring the transaction to pursue specific objectives, such as raising funds, securitising its own assets also for the purposes of funding or offering financial services to customers. In detail, the Group's operations are carried out through the following types of structured entities represented by special purpose entities (SPEs). Project Financing SPEs These are financing instruments for capital intensive projects, which are based on the economic or financial validity of the industrial or infrastructural project, and are independent from the standing/creditworthiness of the sponsors who developed the \u201centrepreneurial\u201d idea. The financing of the initiative is based on the project\u2019s capacity to generate positive cash flows, sufficient to reimburse loans received and guarantee an adequate risk-adjusted return on invested capital. The Intesa Sanpaolo Group finances entities of this type, as normal borrowers, without acting as sponsor. Asset Backed SPEs These are transactions aimed at acquisition/construction/management of physical assets by SPEs financed by one or more entities. Their recovery prospects mostly depend upon the cash flows generated by the assets. The assets generate cash flows in their recurring operations (e.g. rentals, goods transportation contracts, etc.) or in their non-recurring operations (e.g. a real estate development or disposal plan). Generally, the assets are also the collateral for the financing disbursed to the vehicle. The Intesa Sanpaolo Group finances entities of this type, as normal borrowers, without any direct equity investments or any other interests which might lead to presume the role of sponsor. The risk undertaken is always a normal credit risk and the benefits are represented by the return on the financing granted. Leveraged & Acquisition Finance SPEs This category includes exposures (loans granted and disbursed in relation to structured financing operations, normally medium/long-term) to legal entities in which the majority of share capital is held by private equity funds. These are mainly positions in support of Leveraged Buy-Out projects (therefore with high leverage), i.e. linked to the full or partial acquisition of companies through recourse to SPEs. After acquisition of the target company\u2019s shares/quotas package, these SPEs are normally merged into the target. The target companies generally have good economic prospects, stable cash flows in the medium term and low original leverage levels. The Intesa Sanpaolo Group finances entities of this type, as normal borrowers, without acting as sponsor. The Intesa Sanpaolo Group also has investments in/exposures to structured entities represented by UCIs. The main cases include the Group's investments in several closed-end and reserved private equity as well as venture and seed capital funds. The exposures to UCIs also include the investments in units of real estate funds deriving from transactions to contribute portions of the Group\u2019s real estate portfolio. They also consist of investments in UCIs deriving from credit recovery operations or contributions of non-performing loans, together with other banking entities, to funds managed by specialist entities. The investments in UCIs also include the units held in the Atlante Fund and the Italian Recovery Fund, alternative investment funds managed by the asset management company Quaestio Capital Management, involved in value enhancement of Non- Performing Loans of Italian banks. Lastly, the Intesa Sanpaolo Group invests in hedge funds. For more information, reference is made to the specific section in Part E of the Notes to the consolidated financial statements. The Group made further investments in UCIs through the subsidiary Eurizon Capital SGR and the companies controlled by it, in line with the financial portfolio management policies issued by the asset management company and its subsidiaries, in agreement with the Intesa Sanpaolo Group Guidelines. In detail, the asset management company and its subsidiaries have both temporary and structural available funds deriving from company equity that is not permanently invested in equity investments or other fixed assets, and from the ordinary cash flows. Based on that set out in the guidelines for managing the financial portfolio, as part of liquidity management activities, structural and temporarily available funds linked to the trend in short-term and on demand cash flows make up the liquidity portfolio net of the amount held in current accounts or invested in term deposits. In relation to the activities carried out by the asset management company and its subsidiaries and the characteristics of the available funds in question, excess liquidity must be invested in assets with moderate risk that can be easily liquidated. That portfolio includes investments in short-term money market and bond funds, both specialising in the Eurozone, established and/or managed by Eurizon Capital SGR or by its subsidiaries. The Group\u2019s investments in UCIs managed by subsidiaries do not prejudice the operational autonomy and capacity of the asset management companies to act in the exclusive interest of investors, considering the specific provisions set out in sector regulations and by the Supervisory Authorities. The table below summarises the accounting portfolios that the debit and credit transactions with unconsolidated structured entities are allocated to. Quantitative information (millions of euro) Captions / Type of structured entity Accounting portfolios under assets Total assets (A) Accounting portfolios under liabilites Total liabilities (B) NET BOOK VALUE (C = A-B) Maximum exposure to risk of loss (D) Difference between exposure to risk of loss and book value (E = D - C) 1. Special purpose vehicle 2,780 912 1,868 3,375 1,507 Financial assets held for trading 82 Due to customers 778 Other financial assets mandatorily measured at fair value 3 Financial liabilities held for trading 134 Financial assets measured at fair value through other comprehensive income 16 - Financial assets measured at amortised cost - Loans to customers 2,679 2. UCI 4,033 10 4,023 4,262 239 Financial assets held for trading 292 Due to customers - Financial assets designated at fair value 3,450 Financial liabilities held for trading 10 Assets measured at amortised cost Loans to customers 291 - The maximum exposure to risk, representing the maximum exposure of the Group to losses deriving from its interests in structured entities, is generally equal to the net book value, to which, where applicable, several types of off-balance sheet exposures are added (e.g. committed credit lines or guarantees given). The net book value equals the exposure in the financial statements net of value adjustments recorded during the current and previous years. For UCIs, the maximum risk exposure also includes the Group's commitments, not yet called up by the fund, to subscribe additional units. The table below shows the amount and type of revenues earned over the year by structured entities. The main component of the revenues recognised consists of fees deriving from the management and placement of the UCIs sponsored and managed by the Group's asset management companies and placed with customers. The fees in question are charged by the asset management company to the funds managed and partly reversed to the distribution network for the placement service. (millions of euro) Type of structured entity sponsored Interest Fees and commissions Dividends Other revenue TOTAL UCI 51 2,171 119 -160 2,181 Special-purpose vehicles 107 10 - -286 -169 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1048": { "value": "SECTION 3 \u2013 SCOPE OF CONSOLIDATION AND CONSOLIDATION METHODS Scope of consolidation The Consolidated financial statements include Intesa Sanpaolo and the companies that it directly and indirectly controls and consider in the scope of consolidation \u2013 as specifically set out by IAS/IFRS \u2013 also the companies operating in dissimilar sectors from the Parent Company as well as private equity investments. Similarly, structured entities are included when the requisite of effective control recurs, even if there is no stake in the company. Companies are considered subsidiaries where Intesa Sanpaolo is exposed to, or has rights to, variable returns from its involvement with them, and has the ability to affect those returns by exercising its own power over the entity in question. Control only exists if all of the following conditions are met: \u2212 the power to direct the relevant activities of the subsidiary; \u2212 the exposure, or rights, to variable returns from the involvement with the investee; \u2212 the ability to use the power over the investee to affect the amount of the investor\u2019s returns. Companies are considered as subject to joint control if control is directly or indirectly contractually shared by the Parent Company with one or more other parties external to the Group, or where the decisions about the relevant activities require the unanimous consent of all the parties sharing control. Companies are considered associates, that is subject to significant influence, when Intesa Sanpaolo, directly or indirectly, holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or when the Parent Company \u2013 despite a lower percentage of voting rights due to specific legal agreements such as the participation of voting syndicates \u2013 has the power of participating in the determination of the financial and operating policies of the company. Certain companies in which the Parent Company holds an equity stake exceeding 20% of voting share capital are excluded from the scope of consolidation and are classified based on the provisions of IFRS 9, since they are of limited absolute amount, or since Intesa Sanpaolo, directly or indirectly, exclusively holds rights on a portion of the rewards of the investment, and does not have access to management policies and may exercise limited governance rights to safeguard its economic interest. Equity investments held, directly or through funds, in companies involved in the venture capital business are also excluded from the line-by-line scope of consolidation. These equity investments are included in the category of Financial assets measured at fair value through profit or loss. Companies for which the shares have been received as pledges with voting rights exceeding 20% are not consolidated, in consideration of the substance underlying the pledge, which has the purpose of guaranteeing loans and not of exercising control and direction over financial and economic policies in order to benefit from the economic return on the shares. Intesa Sanpaolo does not perform management and coordination activity over Risanamento S.p.A. and its subsidiaries pursuant to Article 2497 et seq. of the Italian Civil Code. With respect to 31 December 2021, the changes in the line-by-line consolidation area involved the entry of: \u2212 Newco TPA S.p.A. (now named InSalute Servizi S.p.A.), a newly-incorporated company in the Insurance Group, 100% owned by Intesa Sanpaolo Vita; \u2212 Compagnie de Banque Priv\u00e9e Quilvest (CBPQ), 100%-owned by Fideuram Bank (Luxembourg) S.A.; \u2212 VUB Operating Leasing A.S., previously consolidated using the equity method; \u2212 Acantus S.p.A. (transferee of ISP\u2019s pledged loans business line belonging to the former UBI Group), following the exceeding of the immateriality limits that previously allowed its consolidation at equity; \u2212 VUB Generali Dochodkova Spravcovska Spolocnost A.S, following the acquisition of an additional share of 5.26% by VSEOBECNA UVEROVA BANKA A.S. (the total investment now amounts to 55.26%). The company was previously consolidated at equity; \u2212 Eurizon Capital Real Asset SGR S.p.A., following the exceeding of the immateriality limits that previously allowed its consolidation at equity; and the exit of: \u2212 Intesa Sanpaolo Private Bank (Suisse) Morval, merged by incorporation into Reyl & Cie S.A.; \u2212 VUB Leasing A.S., which was discontinued following its demerger into Vseobecna Uverova Banka A.S. for finance leases and into VUB Operating Leasing (mentioned above) for operating leases; \u2212 UBI Leasing S.p.A., merged by incorporation into Intesa Sanpaolo S.p.A.; \u2212 PBZ Stambena Stedionica d.d., merged by incorporation into PBZ \u2013 Privredna Banka Zagreb d.d.; \u2212 Intesa Sanpaolo (Qingdao) Service Company Limited, which is now consolidated using the equity method in view of the negligible amounts of the balance sheet aggregates; \u2212 Cargeas Assicurazioni S.p.A., merged by incorporation into Intesa Sanpaolo Assicura S.p.A.; \u2212 Intesa Sanpaolo Smart Care S.r.l., merged by incorporation into Intesa Sanpaolo S.p.A.; \u2212 Sanpaolo Invest SIM S.p.A., merged by incorporation into Fideuram-Intesa Sanpaolo Private Banking S.p.A.; In the interest of completeness, it should also be noted that Mooney Group continues to be consolidated at equity for the purposes of the accounting scope of consolidation, but is included in the prudential scope of consolidation using the proportional method; in July, Banca 5 S.p.A. acquired an additional 20% stake in the above-mentioned company, bringing the total interest to 50% (subject to joint control). Lastly, for completeness, please note the following changes of name: - Intesa Sanpaolo International Value Services Ltd. into Intesa Sanpaolo International Value Services d.o.o.; - IW Bank S.p.A. into IW Private Investments Societ\u00e0 di Intermediazione Mobiliare S.p.A. The following table lists the investments in exclusively controlled companies at 31 December 2022. 1. Exclusively controlled companies Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 1 Acantus S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 800,000 2 Anti Financial Crime Digital HUB S.c.a.r.l. (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 10.00 Capital Eur 100,000 Intesa Sanpaolo S.p.A. 60.00 70.00 3 Asteria Investment Managers S.A. (d) Geneva Geneva 1 REYL & Cie S.A. 100.00 Capital Chf 14,000,000 4 Banca 5 S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 30,000,000 5 Banca Comerciala Eximbank S.A. Chisinau Chisinau 1 Intesa Sanpaolo S.p.A. 100.00 Capital Mdl 1,250,000,000 6 Banca Intesa AD Beograd Novi Beograd Beograd 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Rsd 21,315,900,000 7 Bank of Alexandria S.A.E. Cairo Cairo 1 Intesa Sanpaolo S.p.A. 80.00 Capital Egp 5,000,000,000 8 Banka Intesa Sanpaolo d.d. (e) Koper Koper 1 Intesa Sanpaolo S.p.A. 48.13 Capital Eur 22,173,218 Privredna Banka Zagreb d.d. 51.00 99.13 9 CBP Quilvest PE Fund GP S.a r.l. (c) Luxembourg Luxembourg 1 Compagnie de Banque Priv\u00e9e Quilvest S.A. 100.00 Capital Usd 20,000 10 Cib Bank Ltd. Budapest Budapest 1 Intesa Sanpaolo S.p.A. 100.00 Capital Huf 50,000,000,003 11 CIB Insurance Broker Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 10,000,000 12 CIB Leasing Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 53,000,000 13 CIB Rent Operative Leasing Ltd. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 5,000,000 14 Colline e oltre S.p.A. (c) Pavia Pavia 1 Intesa Sanpaolo S.p.A. 51.00 Capital Eur 50,000 15 Compagnia Italiana Finanziaria - CIF S.r.l. Milano Milano 1 IN.FRA - Investire nelle Infrastrutture S.r.l. 61.45 Capital Eur 10,000 16 Compagnie de Banque Priv\u00e9e Quilvest S.A. Luxembourg Luxembourg 1 Fideuram Bank Luxembourg S.A. 100.00 Capital Eur 32,537,000 17 Consorzio Studi e ricerche fiscali Gruppo Intesa Sanpaolo (c) Roma Roma 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 7.50 Capital Eur 258,228 Eurizon Capital SGR S.p.A. 5.00 Intesa Sanpaolo Vita S.p.A. 7.50 Intesa Sanpaolo S.p.A. 80.00 100.00 18 Duomo Funding Plc (f) Dublin Dublin 2 Intesa Sanpaolo S.p.A. - 19 Epsilon SGR S.p.A. Milano Milano 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 5,200,000 20 Etoile Fran\u00e7ois Premier S.a.r.l. (g) Paris Paris 1 Risanamento Europa S.r.l. 100.00 Capital Eur 5,000 21 Eurizon Asset Management Croatia D.O.O. Zagreb Zagreb 1 Eurizon Asset Management Slovakia Sprav. Spol. A.S. 100.00 Capital Hrk 5,000,000 22 Eurizon Asset Management Hungary Ltd. Budapest Budapest 1 Eurizon Asset Management Slovakia Sprav. Spol. A.S. 100.00 Capital Huf 600,000,000 23 Eurizon Asset Management Slovakia Sprav. Spol. A.S. Bratislava Bratislava 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 4,093,560 24 Eurizon Capital Asia Limited (gi\u00e0 Eurizon Capital (HK) limited) (c) Hong Kong Hong Kong 1 Eurizon Capital SGR S.p.A. 100.00 Capital Hkd 78,000,000 25 Eurizon Capital Real Asset SGR S.p.a. Milano Milano 1 Eurizon Capital SGR S.p.A. 19.98 51,00 (*) Capital Eur 4,166,667 Intesa Sanpaolo Vita S.p.A. 40.01 24,50 (*) 59.99 75,50 (*) Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 26 Eurizon Capital S.A. Luxembourg Luxembourg 1 Eurizon Capital SGR S.p.A. 100.00 Capital Eur 7,974,600 27 Eurizon Capital SGR S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 99,000,000 28 Eurizon Slj Capital Ltd. London London 1 Eurizon Capital SGR S.p.A. 65.00 Capital Gbp 1,001,000 29 Exelia S.r.l. (c) Brasov Brasov 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Ron 8,252,600 30 Exetra S.p.A. (h) Milano Milano 1 Intesa Sanpaolo S.p.A. 85.00 Capital Eur 158,000 31 Fideuram Intesa Sanpaolo Private Banking S.p.A. Roma Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 300,000,000 32 Fideuram Asset Management (Ireland) Dac (gi\u00e0 Fideuram Asset Management (Ireland) Ltd.) Dublin Dublin 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 1,000,000 33 Fideuram Asset Management SGR S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 99.52 Capital Eur 25,870,000 34 Fideuram Asset Management Uk Ltd (c) London London 1 Fideuram Asset Management (Ireland) Dac 100.00 Capital Gbp 1,000,000 35 Fideuram Bank ( Luxembourg) S.A. Luxembourg Luxembourg 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 40,000,000 36 Fideuram Vita S.p.A. Roma Roma 1 Intesa Sanpaolo S.p.A. 80.01 Capital Eur 357,446,836 Fideuram Intesa Sanpaolo Private Banking S.p.A. 19.99 100.00 37 Fondo Sviluppo ecosistemi di Innovazione (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 100.00 Capital Eur 15,000,000 38 Gap Manco Sarl (c) Luxembourg Luxembourg 1 REYL & Cie S.A. 100.00 Capital Eur 12,500 39 Iberia Distressed Assets Manager Sarl (c) Luxembourg Luxembourg 1 REYL Finance (MEA) Ltd. 100.00 Capital Eur 12,500 40 IIF SME Manager Ltd. (c) George Town George Town 1 Asteria Investment Managers S.A. 100.00 Capital Usd 1,000 41 IMI Capital Market USA Corp. New York New York 1 IMI Investments S.A. 100.00 Capital Usd 5,000 42 IMI Finance Luxembourg S.A. (c) Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 100,000 43 IMI Investments S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 21,660,000 44 IMMIT - Immobili Italiani S.r.l. Bergamo Bergamo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 185,680,000 45 Immobiliare Cascina Rubina S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 46 IN.FRA - Investire nelle Infrastrutture S.r.l. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 10,000 47 Iniziative Logistiche S.r.l. Milano Milano 1 IN.FRA - Investire nelle Infrastrutture S.r.l. 60.02 Capital Eur 10,000 48 Insalute Servizi S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 500,000 49 Intesa Invest A.D. Beograd (c) Beograd Beograd 1 Banca Intesa AD Beograd 100.00 Capital Rsd 236,975,800 50 Intesa Leasing (Closed Joint-Stock Company) Moscow Moscow 1 Joint-Stock Company Banca Intesa 100.00 Capital Rub 3,000,000 51 Intesa Leasing d.o.o. Beograd Beograd Beograd 1 Banca Intesa AD Beograd 100.00 Capital Rsd 960,374,301 52 Intesa Sanpaolo (Qingdao) Service Company (c) Qingdao Qingdao 1 Intesa Sanpaolo S.p.A. 100.00 Capital CNY 80,000,000 53 Intesa Sanpaolo Assicura S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 27,912,258 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 54 Intesa Sanpaolo Bank Albania Sh.A. Tirana Tirana 1 Intesa Sanpaolo S.p.A. 100.00 Capital All 5,562,517,674 55 Intesa Sanpaolo Bank Ireland Plc Dublin Dublin 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 400,500,000 56 Intesa Sanpaolo Bank Luxembourg S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 1,389,370,555 57 Intesa Sanpaolo Banka d.d. Bosna I Hercegovina Sarajevo Sarajevo 1 Privredna Banka Zagreb d.d. 99.99 100,00 (**) Capital Bam 44,782,000 58 Intesa Sanpaolo Brasil S.A. - Banco Multiplo Sao Paulo Sao Paulo 1 Intesa Sanpaolo S.p.A. 99.90 Capital Brl 945,428,281 Intesa Sanpaolo Holding International S.A. 0.10 100.00 59 Intesa Sanpaolo Casa S.p.A. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 1,000,000 60 Intesa Sanpaolo Expo Institutional Contact S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 50,000 61 Intesa Sanpaolo Funding LLC (gi\u00e0 Intesa Funding LLC) New York Wilmington Delaware 1 Intesa Sanpaolo S.p.A. 100.00 Capital Usd 25,000 62 Intesa Sanpaolo Harbourmaster III S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 5,500,000 63 Intesa Sanpaolo Highline S.r.l. (c) Torino Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 500,000 64 Intesa Sanpaolo Holding International S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 2,157,957,270 65 Intesa Sanpaolo House Luxemburg S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 24,990,317 66 Intesa Sanpaolo Imi Securities Corp. New York New York 1 IMI Capital Market USA Corp. 100.00 Capital Usd 44,500,000 67 Intesa Sanpaolo Innovation Center S.p.a. Torino Torino 1 Intesa Sanpaolo S.p.A. 99.99 Capital Eur 9,254,940 Intesa Sanpaolo Vita S.p.A. 0.01 100.00 68 Intesa Sanpaolo Insurance Agency S.p.A. Torino Torino 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 500,000 69 Intesa Sanpaolo International Value Services d.o.o. Zagreb Zagreb 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Hrk 100,000 70 Intesa Sanpaolo Life Designed activity company (gi\u00e0 Intesa Sanpaolo Life Ltd.) Dublin Dublin 1 Intesa Sanpaolo Vita S.p.A. 100.00 Capital Eur 625,000 71 Intesa Sanpaolo Private Argentina S.A. (c) Buenos Aires Buenos Aires 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 4.97 Capital Ars 13,404,506 REYL & Cie S.A. 95.03 100.00 72 Intesa Sanpaolo Private Banking S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 117,497,424 73 Intesa Sanpaolo Provis S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 6,725,000 74 Intesa Sanpaolo RBM Salute S.p.A. (i) Venezia Venezia 1 Intesa Sanpaolo Vita S.p.A. 73.79 Capital Eur 305,208,000 75 Intesa Sanpaolo RE.O.CO. S.p.A. Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 13,000,000 76 Intesa Sanpaolo Rent Foryou S.p.A. Torino Torino 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 630,000 77 Intesa Sanpaolo Romania S.A. Commercial Bank Bucarest Bucarest 1 Intesa Sanpaolo S.p.A. 99.73 Capital Ron 1,216,639,410 Intesa Sanpaolo Holding International S.A. 0.27 100.00 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 78 Intesa Sanpaolo Servi\u00e7os e Empreendimentos Ltda em liquida\u00e7\u00e3o (c) S\u00e3o Paulo S\u00e3o Paulo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Brl 3,283,320 79 Intesa Sanpaolo Servitia S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 1,500,000 80 Intesa Sanpaolo Vita S.p.A. Milano Torino 1 Intesa Sanpaolo S.p.A. 99.99 Capital Eur 320,422,509 81 Inveniam S.A. en Liquidation \u00a9 Geneva Geneva 1 REYL Private Office Luxembourg S.a.r.l. 100.00 Capital Chf 50,000 82 ISP CB Ipotecario S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 120,000 83 ISP CB Pubbico S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 120,000 84 ISP OBG S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 42,038 85 IW Private Investments SIM S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 67,950,000 86 Joint-Stock Company Banca Intesa Moscow Moscow 1 Intesa Sanpaolo Holding International S.A. 53.02 Capital Rub 10,820,180,800 Intesa Sanpaolo S.p.A. 46.98 100.00 87 Lux Gest Asset Management S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo Bank Luxembourg S.A. 100.00 Capital Eur 200,000 88 Milano Santa Giulia S.p.A. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 139,041 89 Morval Bank & Trust Cayman Ltd. (c) Grand Cayman Grand Cayman 1 REYL & Cie S.A. 100.00 Capital Usd 7,850,000 90 MSG Comparto Quarto S.r.l. (e) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 20,000 91 MSG Comparto Secondo S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 50,000 92 MSG Comparto Terzo S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 20,000 93 Neva S.G.R. S.p.A. (gi\u00e0 Imi Fondi Chiusi S.p.A.) (c) Torino Torino 1 Intesa Sanpaolo Innovation Center S.p.A. 100.00 Capital Eur 2,000,000 94 OOO Intesa Realty Russia in Liquidation (c) Moscow Moscow 1 Intesa Sanpaolo S.p.A. 100.00 Capital Rub 10,000 95 Oro Italia Trading S.p.A. in liquidazione (c) Arezzo Arezzo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 500,000 96 PBZ Card d.o.o. Zagreb Zagreb 1 Privredna Banka Zagreb d.d. 100.00 Capital Hrk 43,422,200 97 PBZ Leasing d.o.o. Zagreb Zagreb 1 Privredna Banka Zagreb d.d. 100.00 Capital Hrk 15,000,000 98 Porta Nuova Gioia (j) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 7,054,350 99 Portugal Real Estate Opportunities Manager Sarl (c) Luxembourg Luxembourg 1 REYL Finance (MEA) Ltd. 100.00 Capital Eur 12,500 100 Pravex Bank Joint-Stock Company Kiev Kiev 1 Intesa Sanpaolo S.p.A. 100.00 Capital Uah 979,089,724 101 Prestitalia S.p.A. Bergamo Bergamo 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 205,722,715 102 Private Equity International S.A. Luxembourg Luxembourg 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 101,000,000 103 Privredna Banka Zagreb d.d. Zagreb Zagreb 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Hrk 1,876,574,700 104 Qingdao Yicai Fund Distribution Co. Ltd. Qingdao Qingdao 1 Intesa Sanpaolo S.p.A. 100.00 Capital Cny 591,000,000 105 RB Participations S.A. Geneva Geneva 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Chf 100,000 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 106 Recovery Property Utilisation and Services Zrt. Budapest Budapest 1 Cib Bank Ltd. 100.00 Capital Huf 20,000,000 107 REYL & Cie (Malta) Holding Ltd. (c) Valletta Valletta 1 REYL & Cie S.A. 100.00 Capital Eur 730,000 108 REYL & Cie (Malta) Ltd. (c) Valletta Valletta 1 REYL & Cie (Malta) Holding Ltd. 100.00 Capital Eur 730,000 109 REYL & Cie S.A. (k) Geneva Geneva 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 39.00 Capital Chf 31,500,001 RB Participations S.A. 30.00 69.00 110 REYL & CO (UK) Llp. (c) London London 1 REYL & CO Holdings Ltd. 100.00 Capital Gbp 2,500,000 111 REYL & CO Holdings Ltd. (c) London London 1 REYL & Cie S.A. 100.00 Capital Gbp 2,400,000 112 REYL Finance (MEA) Ltd. (c) Dubai Dubai 1 REYL & Cie S.A. 100.00 Capital Usd 2,875,000 113 REYL Overseas AG (c) Zurich Zurich 1 REYL & Cie S.A. 100.00 Capital Chf 2,000,000 114 REYL Private Office Luxembourg Sarl (c) Luxembourg Luxembourg 1 REYL & Cie S.A. 100.00 Capital Eur 50,000 115 REYL Singapore Holding Pte. Ltd. (c) Singapore Singapore 1 REYL & Cie S.A. 75.00 Capital Sgd 1,201 116 REYL Singapore Pte. Ltd. (c) Singapore Singapore 1 REYL & Cie S.A. 76.00 Capital Sgd 500,000 REYL Singapore Holding Pte. Ltd. 24.00 100.00 117 Ri. Rental S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 118 Risanamento Europa S.r.l. (g) Milano Milano 1 Risanamento S.p.A. 100.00 Capital Eur 10,000 119 Risanamento S.p.A. (g) Milano Milano 1 Intesa Sanpaolo S.p.A. 48.88 Capital Eur 197,951,784 120 Romulus Funding Corporation (f) New York New York 2 Intesa Sanpaolo S.p.A. - 121 Societ\u00e0 Benefit Cimarosa 1 S.p.A. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 100.00 Capital Eur 100,000 122 Societ\u00e0 Italiana di Revisione e Fiduciaria \u2013 S.I.RE.F. S.p.A. Milano Milano 1 Fideuram Intesa Sanpaolo Private Banking S.p.A. 100.00 Capital Eur 2,600,000 123 SRM Studi e Ricerche per il Mezzogiorno (c) Napoli Napoli 1 Intesa Sanpaolo S.p.A. 60.00 20,00 (*) Capital Eur 90,000 124 Sviluppo Comparto 3 S.r.l. (g) Milano Milano 1 Milano Santa Giulia S.p.A. 100.00 Capital Eur 50,000 125 UBI Finance S.r.l. (c) Milano Milano 1 Intesa Sanpaolo S.p.A. 60.00 Capital Eur 10,000 126 UBI Trustee S.A. (c) Luxembourg Luxembourg 1 Fideuram Bank Luxembourg S.A. 100.00 Capital Eur 250,000 127 Vseobecna Uverova Banka A.S. Bratislava Bratislava 1 Intesa Sanpaolo Holding International S.A. 100.00 Capital Eur 430,819,064 Companies Place of business Registered office Type of relation- ship (a) INVESTMENT Votes available (b) Direct ownership % held 128 VUB Generali Dochodkova Spravcovska Spolocnost A.S. (l) Bratislava Bratislava 1 Vseobecna Uverova Banka A.S. 55.26 Capital Eur 10,090,976 129 VUB Operating Leasing Bratislava Bratislava 1 Vseobecna Uverova Banka A.S. 100.00 Capital Eur 25,000 (a) Type of relationship: 1 - majority of voting rights at Ordinary Shareholders' Meeting; 2 - other forms of control. (b) Where different from the % portion, the availability of the votes in the Ordinary Shareholders' Meeting is indicated, distinguishing between the effective (*) and potential (**) voting rights, where applicable. (c) Company consolidated using the equity method given its limited materiality. (d) The subsidiary Asteria Investment Managers SA (\u201cAsteria\u201d) is 80% owned by Reyl & Cie SA following the acquisition of the minority interests from the minority shareholders. The remaining 20% of the share capital consists of treasury shares. These treasury shares are due to be cancelled in early 2023, resulting in an adjustment of Asteria\u2019s total share capital, after which Reyl & Cie will hold a 100% equity investment. Asteria absorbed the subsidiary Obviam AG with accounting effect from 31 December 2022 (which was previously consolidated at equity due to its low materiality). (e) Minority shareholders are subject to a legal commitment to purchase the remaining 0.7% of share capital. (f) Company controlled pursuant to IFRS 10, although the Group does not hold any equity stake in the company capital. (g) Company not subject to the management and coordination activities pursuant to art. 2497 and following of the Italian Civil Code. (h) In the event of liquidation of the equity investment, the minority shareholder has the right to sell, and Intesa Sanpaolo is required to purchase, the entire minority investment. (i) Please note that there are put and call option agreements on 26.1% of share capital held by minority shareholders. (j) A closed-end alternative real estate investment fund managed by COIMA SGR S.p.A. (k) Please note that there are put and call option agreements on 31% of share capital held by minority shareholders. (l) Please note that there are put and call option agreements on 44.74% of share capital held by minority shareholders. 2. Significant evaluations and assumptions in determining the scope of consolidation As stated above, companies are considered subsidiaries where Intesa Sanpaolo is exposed to, or has rights to, variable returns from its involvement with them, and has the ability to affect those returns by exercising its own power over the entity in question. Control only exists if all of the following conditions are met: \u2212 the power to direct the relevant activities of the subsidiary; \u2212 the exposure, or rights, to variable returns from the involvement with the investee; \u2212 the ability to use the power over the investee to affect the amount of the investor\u2019s returns. In particular, the Group considers the following factors in evaluating the existence of control: \u2212 the purpose and the structure of the investee in order to identify its aims and relevant activities, or the activities that significantly affect the investee\u2019s returns, and how those activities are governed; \u2212 power, in order to understand whether the Group has the contractual right to manage the relevant activities; \u2212 the exposure to variable returns from the investee in order to evaluate whether the return recognised by the Group is subject to variations depending on the investee's returns. Furthermore, in order to evaluate the existence of control, potential principal-agent relationships are taken into consideration. In order to evaluate whether the investee is acting as a principal or an agent, the Group takes account of the following factors: \u2212 the decision-making power on the relevant activities of the subsidiary; \u2212 the rights of other parties; \u2212 the payments to which the Group is entitled; \u2212 the Group's exposure to variable returns resulting from any investment in the investee. IFRS 10 identifies relevant activities as activities of the investee that significantly affect the investee's returns. In general terms, when the relevant activities are managed through voting rights, the following factors determine evidence of control: \u2212 direct ownership, or indirect ownership through its subsidiaries, of more than half the voting rights of an entity, unless in exceptional circumstances it can be clearly demonstrated that such ownership does not constitute control; \u2212 ownership of half, or less, of the votes which can be cast at the shareholders' meeting, and the practical ability unilaterally to govern the relevant activities through: o the control of more than half the voting rights as enshrined in an agreement with other investors; o the power to determine the financial and operational policies of the entity, as conferred by the Articles of Association or by contract; o the power to nominate or remove the majority of the members of the Board of Directors or of the equivalent corporate governance body; o the power to cast the majority of the votes at meetings of the Board of Directors or of the equivalent corporate governance body. In order to exercise power, it is necessary for the rights that the Group has over the investee to be material; to be material, the Group must have the ability to use its rights when decisions relating to relevant activities are taken. The existence and the effect of potential voting rights, where material, are taken into consideration in evaluating whether power exists to shape the managerial and financial policies of another entity. Sometimes the Group has \"de facto\" control over certain entities when it possesses rights to determine unilaterally the relevant activities of the investee, even though it does not have the majority of the voting rights. On the contrary, cases may emerge where the Group, though holding more than half of the voting rights, does not control the investee since, consequently to agreements with other investors, the exposure to variable returns from the involvement with the investees is not considered significant. Subsidiaries can also include \"structured entities\" in which the voting rights are not the dominant factor in deciding who controls the entity; this includes special purpose vehicles (SPEs/SPVs) and investment funds. Structured entities are considered to be controlled where: \u2212 the Group has powers enshrined in contractual rights allowing it to govern the relevant activities; and \u2212 the Group is exposed to the variable returns deriving from such activities. 3. Investments in subsidiaries with significant minority interests 3.1 Minority interests, minority voting rights and dividends distributed to minority shareholders Companies Minority interests % Minority voting rights % (1) Dividends distributed to minority shareholders 1 Bank of Alexandria (2) 20.00 20.00 16 2 Banka Intesa Sanpaolo D.D. 0.87 0.87 3 Compagnia Italiana Finanziaria - CIF S.r.l. 38.55 38.55 4 Eurizon Capital Real Asset SGR S.p.A. 40.01 24.50 5 Eurizon SLJ Capital Limited 35.00 35.00 1 6 Exetra S.p.A. 15.00 15.00 7 Fideuram Asset Management SGR S.p.A. 0.48 0.48 8 Iniziative Logistiche S.r.l. 39.98 39.98 9 Intesa Sanpaolo Banka D.D. Bosna I Hercegovina 0.01 10 Intesa Sanpaolo RBM Salute S.p.A. 26.21 26.21 11 Intesa Sanpaolo Vita S.p.A. 0.01 0.01 12 Reyl & Cie S.A. 31.00 31.00 13 Risanamento S.p.A. 51.12 14 VUB Generali Dochodkova Spravcovska Spolocnost A.S. 44.74 44.74 (1) Available voting rights at Ordinary Shareholders' Meeting. (2) Dividend approved but not distributed 3.2 Investments in companies with significant minority interests: financial highlights (millions of euro) Companies Total assets Cash and cash equivalents Financial assets Property, equipment and intangible assets Financial liabilities Shareholders' equity Interest margin Net interest and other banking income Operating expenses Income (loss) before tax from continuing operations Income (loss) after tax from continuing operations Income (loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) 1 Bank of Alexandria 5,171 86 4,808 162 4,249 628 353 408 -177 191 129 - 129 -319 -190 5. Other information In preparing the Intesa Sanpaolo consolidated financial statements, the financial statements of all subsidiaries have the same financial year-end, except for that reported below for the Ukrainian subsidiary Pravex Bank in the following paragraph on Consolidation methods. Consolidation methods Full consolidation This method involves the \u201cline by line\u201d aggregation of the individual amounts reported in the balance sheets and income statements of the subsidiary companies concerned. Following the allocation to minority shareholders of their interests, in a specific caption, in equity and in the result for the period, the residual value is eliminated against the book value of the subsidiaries concerned. Any positive differences arising on consolidation, after the allocation to the assets and liabilities of the consolidated subsidiary, are recorded under Intangible assets as goodwill or other intangible assets. Negative differences are recognised in the income statement. Assets, liabilities, income and expenses between consolidated companies are totally eliminated. Business combinations must be accounted for using the \"acquisition method\" in accordance with IFRS 3, whereby identifiable assets acquired or liabilities assumed (including contingent liabilities) are recognised at their fair value at the acquisition date. Moreover, for each business combination, any minority interest in the acquired company can be recognised at fair value or in proportion to the minority investment in the net identifiable assets of the acquired company. Any excess of the consideration transferred (being the fair value of the assets sold, the liabilities incurred and the equity instruments issued) over the fair value recognition of minority interests with respect to the fair value of the assets acquired and the liabilities assumed is recognised as goodwill. If the consideration is lower, the difference is taken to the income statement. The \"acquisition method\" is applied starting from the acquisition date, that is from the moment in which control of the acquired company is obtained. Therefore, the economic results of a subsidiary acquired in the reference period are included in the Consolidated financial statements starting from the acquisition date. Likewise, economic results of a subsidiary sold are included in the Consolidated financial statements until the date in which control ceased. The difference between sale price and book value at the date of disposal (including foreign exchange differences recorded in shareholders\u2019 equity on consolidation, over time) is accounted for in the income statement. Where necessary \u2013 and without prejudice to absolutely marginal cases \u2013 the financial statements of companies which are drawn up using different accounting criteria are restated to be compliant with the standards used by the Group. With regard to the Ukrainian subsidiary Pravex Bank, as a result of the worsening of the situation in Kyiv (where the subsidiary\u2019s offices are located) since mid-October 2022, due to the repeated Russian bombings of the main Ukrainian power plants, it was decided, with a view to reducing \u201coperational\u201d risk, that it was best to retain, in December\u2019s consolidation, the accounting values produced by Pravex for the consolidation of September 2022. Thus, for the financial statements as at 31 December, the balance sheet and income statement results of Pravex were included based on a consolidation package, drawn up in compliance with the IAS/IFRSs, as set out in the Group Accounting Policies, related to 30 September 2022, using the exchange rate as at 31 December 2022 for conversion into Euro. The decision to use the data as at 30 September 2022 for the line-by-line consolidation of Pravex, also taken in light of the slight materiality of the subsidiary, and motivated by objective operational restrictions, is also based on the indications in IFRS 10, though for specific cases 75 . 5. Investments in associates and companies subject to joint control Classification, recognition and measurement criteria The caption includes investments in companies subject to joint control and associates. Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties sharing control. Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of financial and management policies of the company based on specific juridical relations, such as the participation in voting syndicates. Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since it solely has economic rights on a portion of the returns generated by the investment, but does not have access to management policies and may exercise governance rights limited to the safeguarding of its economic interests. The investments in associates and companies subject to joint control are measured at cost and accounted for according to the equity method. If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. Derecognition criteria Investments in associates and companies subject to joint control are derecognised when the contractual rights to the cash flows from the assets expire or when the investment is sold, substantially transferring all the risks and rewards connected to the assets. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-910": { "value": "
3. Investments in subsidiaries with significant minority interests
3.1 Minority interests, minority voting rights and dividends distributed to minority shareholders
Companies
Minority
interests
%
Minority
voting
rights
% (1)
Dividends
distributed to
minority
shareholders
1
Bank of Alexandria (2)
20.00
20.00
16
2
Banka Intesa Sanpaolo D.D.
0.87
0.87
3
Compagnia Italiana Finanziaria - CIF S.r.l.
38.55
38.55
4
Eurizon Capital Real Asset SGR S.p.A.
40.01
24.50
5
Eurizon SLJ Capital Limited
35.00
35.00
1
6
Exetra S.p.A.
15.00
15.00
7
Fideuram Asset Management SGR S.p.A.
0.48
0.48
8
Iniziative Logistiche S.r.l.
39.98
39.98
9
Intesa Sanpaolo Banka D.D. Bosna I Hercegovina
0.01
10
Intesa Sanpaolo RBM Salute S.p.A.
26.21
26.21
11
Intesa Sanpaolo Vita S.p.A.
0.01
0.01
12
Reyl & Cie S.A.
31.00
31.00
13
Risanamento S.p.A.
51.12
14
VUB Generali Dochodkova Spravcovska Spolocnost A.S.
44.74
44.74
(1) Available voting rights at Ordinary Shareholders' Meeting.
(2) Dividend approved but not distributed
3.2 Investments in companies with significant minority interests: financial highlights
(millions of euro)
Companies
Total assets
Cash and cash equivalents
Financial assets
Property, equipment and intangible
assets
Financial liabilities
Shareholders' equity
Interest margin
Net interest and other banking income
Operating expenses
Income (loss) before tax
from continuing
operations
Income (loss) after tax from continuing
operations
Income (loss) after tax from discontinued
operations
Net income (loss)
(1)
Other comprehensive income (net of tax)
(2)
Consolidated comprehensive income
(3) = (1) + (2)
1
Bank of Alexandria
5,171
86
4,808
162
4,249
628
353
408
-177
191
129
-
129
-319
-190
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTransactionsWithNoncontrollingInterestsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-911": { "value": " 4. Significant restrictions In terms of significant restrictions, it is noted that the Intesa Sanpaolo Group is subject to supervisory rules provided by Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR), amended by Directive 2019/878/EU (CRD V) and Regulation (EU) 2019/876 (CRR II), respectively, and controls financial institutions subject to the same or similar regulations aiming to maintain an adequate level of regulatory capital in relation to risks taken; therefore, the ability of subsidiary banks or financial institutions to distribute capital or dividends is dependent on the fulfilment of the regulatory thresholds set in those regulations. Referring, for more details, to Part A - Section 5 of the consolidated financial statements, in compliance with the provisions of IFRS 12, in this section we note the limitations currently imposed by Russian regulations which \u2013 in substance \u2013 impose restrictions on repayments and payments to parties resident in unfriendly countries. Those limitations specifically affect the subsidiary Banca Intesa Russia, which, in 2022, was unable to directly route the repayments of past due instalments referring to intragroup exposures to the creditor banks and, therefore, routed the resources allocated for those repayments (for a total of around 29 million euro at the end of 2022) to specific accounts in Russia. It must also be noted that the current legal restrictions on transferring monetary resources beyond the country\u2019s borders do not prejudice in any way the ownership of the amounts (due to the creditor banks), nor, as argued in greater detail in Part A \u2013 Section 5, do they constitute an obstacle to maintaining control over the Russian subsidiary. Lastly, within the Group, there are insurance companies subject to the Solvency Capital Requirements of Insurance companies established by the Solvency II legislation. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRestrictedCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-939": { "value": "4. Significant restrictions In terms of significant restrictions, it is noted that the Intesa Sanpaolo Group is subject to supervisory rules provided by Directive 2013/36/EU (CRD IV) and Regulation (EU) 575/2013 (CRR), amended by Directive 2019/878/EU (CRD V) and Regulation (EU) 2019/876 (CRR II), respectively, and controls financial institutions subject to the same or similar regulations aiming to maintain an adequate level of regulatory capital in relation to risks taken; therefore, the ability of subsidiary banks or financial institutions to distribute capital or dividends is dependent on the fulfilment of the regulatory thresholds set in those regulations. Referring, for more details, to Part A - Section 5 of the consolidated financial statements, in compliance with the provisions of IFRS 12, in this section we note the limitations currently imposed by Russian regulations which \u2013 in substance \u2013 impose restrictions on repayments and payments to parties resident in unfriendly countries. Those limitations specifically affect the subsidiary Banca Intesa Russia, which, in 2022, was unable to directly route the repayments of past due instalments referring to intragroup exposures to the creditor banks and, therefore, routed the resources allocated for those repayments (for a total of around 29 million euro at the end of 2022) to specific accounts in Russia. It must also be noted that the current legal restrictions on transferring monetary resources beyond the country\u2019s borders do not prejudice in any way the ownership of the amounts (due to the creditor banks), nor, as argued in greater detail in Part A \u2013 Section 5, do they constitute an obstacle to maintaining control over the Russian subsidiary. Lastly, within the Group, there are insurance companies subject to the Solvency Capital Requirements of Insurance companies established by the Solvency II legislation. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRestrictedCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1056": { "value": "Consolidation methods Full consolidation This method involves the \u201cline by line\u201d aggregation of the individual amounts reported in the balance sheets and income statements of the subsidiary companies concerned. Following the allocation to minority shareholders of their interests, in a specific caption, in equity and in the result for the period, the residual value is eliminated against the book value of the subsidiaries concerned. Any positive differences arising on consolidation, after the allocation to the assets and liabilities of the consolidated subsidiary, are recorded under Intangible assets as goodwill or other intangible assets. Negative differences are recognised in the income statement. Assets, liabilities, income and expenses between consolidated companies are totally eliminated. Business combinations must be accounted for using the \"acquisition method\" in accordance with IFRS 3, whereby identifiable assets acquired or liabilities assumed (including contingent liabilities) are recognised at their fair value at the acquisition date. Moreover, for each business combination, any minority interest in the acquired company can be recognised at fair value or in proportion to the minority investment in the net identifiable assets of the acquired company. Any excess of the consideration transferred (being the fair value of the assets sold, the liabilities incurred and the equity instruments issued) over the fair value recognition of minority interests with respect to the fair value of the assets acquired and the liabilities assumed is recognised as goodwill. If the consideration is lower, the difference is taken to the income statement. The \"acquisition method\" is applied starting from the acquisition date, that is from the moment in which control of the acquired company is obtained. Therefore, the economic results of a subsidiary acquired in the reference period are included in the Consolidated financial statements starting from the acquisition date. Likewise, economic results of a subsidiary sold are included in the Consolidated financial statements until the date in which control ceased. The difference between sale price and book value at the date of disposal (including foreign exchange differences recorded in shareholders\u2019 equity on consolidation, over time) is accounted for in the income statement. Where necessary \u2013 and without prejudice to absolutely marginal cases \u2013 the financial statements of companies which are drawn up using different accounting criteria are restated to be compliant with the standards used by the Group. With regard to the Ukrainian subsidiary Pravex Bank, as a result of the worsening of the situation in Kyiv (where the subsidiary\u2019s offices are located) since mid-October 2022, due to the repeated Russian bombings of the main Ukrainian power plants, it was decided, with a view to reducing \u201coperational\u201d risk, that it was best to retain, in December\u2019s consolidation, the accounting values produced by Pravex for the consolidation of September 2022. Thus, for the financial statements as at 31 December, the balance sheet and income statement results of Pravex were included based on a consolidation package, drawn up in compliance with the IAS/IFRSs, as set out in the Group Accounting Policies, related to 30 September 2022, using the exchange rate as at 31 December 2022 for conversion into Euro. The decision to use the data as at 30 September 2022 for the line-by-line consolidation of Pravex, also taken in light of the slight materiality of the subsidiary, and motivated by objective operational restrictions, is also based on the indications in IFRS 10, though for specific cases 75 . ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1008": { "value": "Measurement using the equity method Associates and companies subject to joint control are consolidated with the equity method. The equity method requires the initial recognition of the equity investment at cost and its subsequent value adjustment based on the stake in the shareholders\u2019 equity of the company. Any difference between the value of the equity investment and the shareholders\u2019 equity of the company involved is recorded in the book value of the company. The valuation of the portion of shareholders\u2019 equity does not consider any potential voting rights. The portion of the company\u2019s results for the period pertaining to the Group is recorded in a specific caption of the consolidated income statement. If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement. For consolidation of companies subject to joint control and investments in associates, the most recent approved (annual or interim) figures have been used. In certain marginal cases, the companies do not apply IAS/IFRS and, therefore, for such companies it was verified that the adoption of IAS/IFRS would not have produced significant effects on the Intesa Sanpaolo Group\u2019s Consolidated financial statements. 5. Investments in associates and companies subject to joint control Classification, recognition and measurement criteria The caption includes investments in companies subject to joint control and associates. Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties sharing control. Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of financial and management policies of the company based on specific juridical relations, such as the participation in voting syndicates. Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since it solely has economic rights on a portion of the returns generated by the investment, but does not have access to management policies and may exercise governance rights limited to the safeguarding of its economic interests. The investments in associates and companies subject to joint control are measured at cost and accounted for according to the equity method. If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. Derecognition criteria Investments in associates and companies subject to joint control are derecognised when the contractual rights to the cash flows from the assets expire or when the investment is sold, substantially transferring all the risks and rewards connected to the assets. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-980": { "value": "Measurement using the equity method Associates and companies subject to joint control are consolidated with the equity method. The equity method requires the initial recognition of the equity investment at cost and its subsequent value adjustment based on the stake in the shareholders\u2019 equity of the company. Any difference between the value of the equity investment and the shareholders\u2019 equity of the company involved is recorded in the book value of the company. The valuation of the portion of shareholders\u2019 equity does not consider any potential voting rights. The portion of the company\u2019s results for the period pertaining to the Group is recorded in a specific caption of the consolidated income statement. If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement. For consolidation of companies subject to joint control and investments in associates, the most recent approved (annual or interim) figures have been used. In certain marginal cases, the companies do not apply IAS/IFRS and, therefore, for such companies it was verified that the adoption of IAS/IFRS would not have produced significant effects on the Intesa Sanpaolo Group\u2019s Consolidated financial statements. 5. Investments in associates and companies subject to joint control Classification, recognition and measurement criteria The caption includes investments in companies subject to joint control and associates. Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties sharing control. Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of financial and management policies of the company based on specific juridical relations, such as the participation in voting syndicates. Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since it solely has economic rights on a portion of the returns generated by the investment, but does not have access to management policies and may exercise governance rights limited to the safeguarding of its economic interests. The investments in associates and companies subject to joint control are measured at cost and accounted for according to the equity method. If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. Derecognition criteria Investments in associates and companies subject to joint control are derecognised when the contractual rights to the cash flows from the assets expire or when the investment is sold, substantially transferring all the risks and rewards connected to the assets. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsInJointVentures", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-940": { "value": "Measurement using the equity method Associates and companies subject to joint control are consolidated with the equity method. The equity method requires the initial recognition of the equity investment at cost and its subsequent value adjustment based on the stake in the shareholders\u2019 equity of the company. Any difference between the value of the equity investment and the shareholders\u2019 equity of the company involved is recorded in the book value of the company. The valuation of the portion of shareholders\u2019 equity does not consider any potential voting rights. The portion of the company\u2019s results for the period pertaining to the Group is recorded in a specific caption of the consolidated income statement. If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement. For consolidation of companies subject to joint control and investments in associates, the most recent approved (annual or interim) figures have been used. In certain marginal cases, the companies do not apply IAS/IFRS and, therefore, for such companies it was verified that the adoption of IAS/IFRS would not have produced significant effects on the Intesa Sanpaolo Group\u2019s Consolidated financial statements. 5. Investments in associates and companies subject to joint control Classification, recognition and measurement criteria The caption includes investments in companies subject to joint control and associates. Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties sharing control. Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of financial and management policies of the company based on specific juridical relations, such as the participation in voting syndicates. Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since it solely has economic rights on a portion of the returns generated by the investment, but does not have access to management policies and may exercise governance rights limited to the safeguarding of its economic interests. The investments in associates and companies subject to joint control are measured at cost and accounted for according to the equity method. If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. Derecognition criteria Investments in associates and companies subject to joint control are derecognised when the contractual rights to the cash flows from the assets expire or when the investment is sold, substantially transferring all the risks and rewards connected to the assets. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-981": { "value": "Conversion of financial statements in currencies other than the euro The financial statements of the companies which do not operate in the eurozone are translated into euro applying to the assets and liabilities in the balance sheet the spot exchange rate at period-end and to the income statement the average exchange rate. Foreign exchange differences from the conversion of the financial statements of such companies, deriving from the application of different foreign exchange rates to assets and liabilities and the income statement, are recorded in Valuation reserves under shareholders' equity. Foreign exchange differences on the shareholders' equity of the subsidiaries are also recorded in Valuation reserves. All foreign exchange differences are reversed to the income statement of the year in which the foreign operation is sold. 15. Foreign currency transactions Definition The foreign currency is a currency that is not the functional currency of the entity, which is in turn the currency of the primary economic environment in which the entity operates. Initial recognition Foreign currency transactions are recorded, on initial recognition, in the functional currency, by applying to the foreign currency amount the spot exchange rate at the date of the transaction. Subsequent measurement At every close of annual or interim financial statements, captions in foreign currency are measured as follows: - foreign currency monetary items are translated using the closing rate; - non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; - non-monetary items that are measured at fair value in a foreign currency are translated using the closing rates. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognised through profit or loss in the period in which they arise. When a gain or loss on a non-monetary item is recognised directly in equity, any exchange component of that gain or loss is recognised directly in equity. Conversely, when a gain or loss on a non-monetary item is recognised through profit or loss, any exchange component of that gain or loss is recognised through profit or loss. With regard to the \u201cConversion of financial statements in currencies other than the euro\u201d for the purposes of consolidation and accounting for the related foreign exchange differences, reference is made to the specific paragraph of Part A: Section 3 - Scope of consolidation and consolidation methods of these Notes to the consolidated financial statements. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-912": { "value": "SECTION 4 \u2013 SIGNIFICANT EVENTS AFTER THE REPORTING DATE On 1 January 2023, the amendments to the Articles of Association of Banca 5 S.p.A. took effect, with the company\u2019s new name of Isybank S.p.A. This is the first formal step in the project underway to create a new digital bank within the Group, as envisaged in the 2022-2025 Business Plan. Also on 1 January 2023 the Extraordinary Shareholders\u2019 Meetings of the two companies approved the merger by incorporation of Fideuram Bank (Luxembourg) S.A. into Compagnie de Banque Priv\u00e9e Quilvest S.A., which took the name Intesa Sanpaolo Wealth Management, with statutory and accounting effects on the same date. With reference to the purchase of own shares for annulment (buyback) for a maximum total outlay of 3,400 million euro and a number of shares not exceeding 2,615,384,615 Intesa Sanpaolo ordinary shares - approved by the Intesa Sanpaolo Shareholders\u2019 Meeting of 29 April 2022 and authorised by the ECB through the notification received on 24 June 2022 - which was carried out under an initial programme launched on 4 July and concluded on 11 October 2022 for an outlay of 1,700 million euro and the purchase of 988,632,803 shares (all of them annulled) 76 , on 6 February 2023 Intesa Sanpaolo announced the launch of the buyback for the remaining maximum outlay of 1,700 million euro and a number of shares not exceeding 1,626,751,812, as resolved by the Bank\u2019s Board of Directors on 3 February 2023. The programme, assigned to an appointed third-party intermediary, operating in full independence and without any involvement of the Intesa Sanpaolo Group, to carry out the operations on the regulated market Euronext Milan of Borsa Italiana, was launched on 13 February 2023, and will be completed by 12 May 2023, in compliance with the terms approved at the Intesa Sanpaolo Shareholders\u2019 Meeting of 29 April 2022, which establish that the purchase of own shares and their annulment should take place by the ex-right date of the dividend related to the financial statements for the year ending 31 December 2022, namely by 22 May 2023. Intesa Sanpaolo will communicate, by 18 May 2023, the final amount of the remaining dividend per share based on the number of shares annulled following the completion of the programme. 76 Detailed information on the initial programme is provided in the paragraph \u201cHighlights\u201d in the Report on operations", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-941": { "value": "SECTION 5 - OTHER ASPECTS RISKS, UNCERTAINTIES AND IMPACTS OF THE RUSSIAN/UKRAINIAN CRISIS AND THE COVID-19 PANDEMIC Introduction In terms of risk management, 2022 saw both positive aspects, such as the regression of the impacts deriving from the COVID-19 pandemic and the consequences on customer solvency, and negative aspects, mainly attributable to the Russia- Ukraine conflict and the consequences of that scenario, in terms of hikes in the prices of energy sources, the lack of certain commodities and the resulting increase in prices. The preparation of the consolidated financial statements in accordance with IFRS requires that the management make estimates and assumptions that affect the amount reported in the financial statements concerning assets, liabilities, income and expenses recognised in the financial year, as well as other comprehensive income, as indicated in greater detail in the specific paragraph of these Notes (Part A \u2013 A2: Main financial statement captions - Use of estimates and assumptions in preparing financial reports). The main areas of uncertainty in the estimates made by the management, which are based on historical experience and other assumptions that are deemed reasonable, include those relating to loan losses, the fair value of financial instruments (including derivatives), corporate income taxes, employee benefits, goodwill and intangible assets, impairment of non-financial assets, derecognition of financial assets and liabilities and provisions for risks and charges. The situation described above has caused and continues to cause greater volatility and uncertainty in the financial sector and markets, which has also been reflected in key areas for determination of estimates. Scenarios with significantly new elements that were not found in recent periods are very difficult to capture in the modelling of credit assessments, making it extremely difficult to produce forecasts for specific portfolio risks in such circumstances. The estimation methodologies set out in the Group\u2019s policies provide that, in certain circumstances \u2013 such as the current ones \u2013 the need may arise to make temporary adjustments (valuation increases) to the results of the models adopted, as a precaution. That need may arise as a result of external events that are unexpected, which the Bank cannot control and have potential consequences, also on a large scale, on the measurement of the ECL of the Bank\u2019s portfolios as a result of elements that are not adequately captured by the IFRS 9 models used. It must be noted that the IFRS 9 estimation methodologies are founded on experience-based assumptions, and are strongly anchored to historical observations, which are considered over a congruous time horizon and in a sufficiently stable backdrop. At the same time, the estimation methodologies must also reflect forward-looking conditions and adopt reasonable, sustainable approaches and forecasts (without undue cost and effort). They must be appropriately assessed in the event of increased uncertainty on the future scenario and on the possible impacts of the events in question. The guidelines provided by regulators for the COVID-19 pandemic and the conflict in Ukraine (reported in greater detail in the specific sections below) allow/invite intermediaries to adopt a flexible approach and to use their own expert judgment in making decisions in exceptional, unexpected contexts, bearing in mind that the guidelines provided do not constitute a \u201crelaxation\u201d of the rules but rather the granting of further necessary discretion in the context of extremely specific events. These considerations supported the Bank\u2019s decision to adopt post-model adjustments, increasing the Expected Credit Losses (ECL) on a managerial basis, in order to incorporate a suitable estimate of the uncertainties mentioned above. The Bank therefore used estimates, assumptions and judgments that reflect this uncertainty. In the current situation of uncertainty, the
Group's assessments are also supported, as detailed below, by sensitivity analyses, subject to specific disclosure, to provide
users of the financial statements a more complete and transparent understanding of these phenomena.
The current context, in terms of both the macroeconomic profile and the evolution of the Russian-Ukrainian conflict, is thus
marked by significant uncertainties, which were considered in drawing up the financial statements. Specifically, the potential
direct and indirect risks of that context were taken into consideration in order to measure credit positions, through prudential
adjustments to exposures to Russian and Ukrainian counterparties and the strengthening of coverage for non-performing
positions and all performing positions which, while not showing specific impairment, may suffer the consequences of a
negative evolution of the macroeconomic context and the Russian-Ukrainian conflict.
Thus, the following is set out below:
\u2212 first, several indications on the scenarios used by the Group in preparing the financial statements in this specific context,
the related sensitivity analyses and the issue of impairment testing of goodwill and deferred taxation;
\u2212 subsequently, the issues relating to the Russian-Ukrainian conflict are covered;
\u2212 lastly, the issue of COVID-19 is covered
77
.
Reference is also made to the relevant Sections of the Notes to the consolidated financial statements (as indicated below) for
a more detailed examination, including quantitative data, of the effects of the above situations, which are summarised below.
Specifically, a more complete analysis of the approach to measuring credit positions, also with specific regard to describing
the modelling used and the management overlays used in this specific context is provided in Part E - Section 2 - Credit risk
management policies. Given the importance of these issues, it is also noted that the Report on operations contains a section
specifically dedicated to \u201cThe impact for the ISP Group of the military conflict between Russia and Ukraine\u201d, which
summarises, inter alia, the initiatives of the Intesa Sanpaolo Group in favour of Ukraine, as well as the aspects regarding the
framework of sanctions against the Russian Federation and cybersecurity. An equivalent section on the \u201cImpacts of the
COVID-19 pandemic\u201d has also been included in the Report on operations.
Intesa Sanpaolo Group macroeconomic scenarios for the 2022 financial statements
With regard to the macroeconomic scenario used in the models for determining expected credit losses, note that in June
2020, following the indications from the regulators and standard setters, the Group anchored its macroeconomic forecasts to
the projections published by the central banks. In light of the context described to this point and considering the lesser
uncertainties that characterise the process of estimating the projections (compared to the extremely serious scenario at the
start of the pandemic), the Group decided to return to using the scenarios produced internally by the Parent Company\u2019s
Research Department as input to the ECL models in December 2021, thus restoring substantial uniformity between the
scenarios used in the other measurement/forecasting processes (impairment tests, budgeting, etc.), especially with regard to
the Business Plan launched in 2022. This choice, confirmed during 2022, also seems reasonable in light of the convergence
between the forecasts produced internally by the Research Department and the forecasts drawn up periodically by the
ECB/Bank of Italy.
For a table illustration of the scenarios actually used in the valuation of loans, please refer to the specific section of Part E of
these Notes which also contains, as specified below, further details on the sensitivity of the ECL to changes in
macroeconomic scenarios.
Instead, the medium-term forecasting scenario of reference to determine the value in use of the CGUs for impairment testing
is set out in Section 10 of Part B.
Sensitivity analysis in the light of alternative scenarios
As in the previous years, and as recommended by the regulators (see, for example, ESMA: \u201cEuropean common enforcement
priorities for 2021 annual financial reports\u201d and the ESMA guidelines on the Russian/Ukrainian crisis illustrated in the specific
section), in the Notes to the consolidated financial statements, the Group provides the various sensitivity analyses in order to
supplement its disclosures. These analyses related to the issues indicated below, to provide users of the financial statements
with a greater understanding of the Group\u2019s valuation choices in this specific context. Therefore, reference should be made to
the following parts of these Notes regarding:
\u2212 the effects of a change in one or more non-observable parameters used in the valuation techniques adopted to
determine the fair value, the financial assets and liabilities measured at fair value level 3 (Part A - A.4.2 Valuation
processes and sensitivity);
\u2212 sensitivity analysis for real estate assets measured at fair value. The analysis essentially concerned the properties of the
Parent Company Intesa Sanpaolo, which represent the Core perimeter of the Group's real estate assets (Part A - A.4.5
Fair value hierarchy - Sensitivity of property valuations);
\u2212 sensitivity of the Value in use of Cash Generating Units for which intangible assets with indefinite useful lives remain
(Part B \u2013 Assets: Section 10 Intangible assets);
\u2212 sensitivity to changes in interest rates of net defined benefit liabilities (Part B - Liabilities: Section 10.5 Post-employment
defined benefit plans);
\u2212 sensitivity analysis of IFRS 9 ECL in order to analyse the variability with respect to individual alternative scenarios (Part E
- Section 2 Credit risk management and policies);
\u2212 sensitivity of net interest income, assuming a change in interest rates, and sensitivity analysis of the banking book to
price risk for listed assets recognised in the HTCS category (Part E - Banking book: interest rate risk and price risk);
\u2212 scenario analysis relating to the evolution of stock prices, interest rates, credit spreads, foreign exchange rates and
commodity prices for trading activity (Part E - Trading book: interest rate risk and price risk);
77
Based on the indications provided in the specific communications from the Bank of Italy: \u201cimpacts of COVID-19 and measures to support the economy
and amendments to IAS/IFRS\u201d.
\u2212 sensitivity of the fair value of the portfolio of financial assets of insurance companies with respect to interest rate
movements, credit spreads and equity prices (Part E - Insurance risks: Financial risks).
Measurement of goodwill in the current scenario
In the current challenging market environment, measuring the recoverable amount of intangible assets is also particularly
difficult. Therefore, also for the Financial Statements as at 31 December 2022, the effects of the current situation were
carefully considered in conducting the annual impairment testing of goodwill. For more details of impairment testing on
goodwill and brand name, reference is made to Part B - Information on the consolidated balance sheet (See Part B \u2013 Assets:
Section 10 Intangible assets - Information on intangible assets and goodwill).
Probability test on deferred taxation in the current scenario
As provided for by IAS 12, a deferred tax asset (or DTA) must be recognised for all deductible temporary differences to the
extent that it is probable that taxable income will be earned that can offset the deductible temporary differences. Deferred tax
assets are then divided into \u201celigible\u201d deferred tax assets and \u201cineligible\u201d deferred tax assets. While for the former Italian
regulations set out a specific mechanism for conversion into tax credits which legitimises, in and of itself, their recognition in
the financial statements (see Part B \u2013 Assets: Section 11 Deferred Tax Assets and Liabilities), the amount of \u201cineligible\u201d
deferred tax assets is tested to determine whether it is likely that taxable income will be earned in the future that will ensure
their recovery (probability test). The Group carried out that test also in the current situation. For a more detailed illustration,
refer to Part B \u2013 Assets: Section 11 Deferred Tax Assets and Liabilities - Probability test on deferred taxation.
RISKS, UNCERTAINTIES AND IMPACTS OF THE RUSSIAN/UKRAINIAN CRISIS
On 24 February 2022, the gradually escalating tension between Russia and Ukraine erupted into a conflict, the intensity and
size of which had not been seen in Europe since the end of the Second World War. The extremely serious situation resulting
from the conflict was immediately closely monitored and assessed by Intesa Sanpaolo, also in light of the guidance provided
by the regulators on the subject, given that the Group has:
\u2212 a direct presence with two subsidiaries in the warring countries, Pravex Bank Public Joint-Stock Company (Pravex) and
Joint-Stock Company Banca Intesa (Banca Intesa Russia), and is therefore particularly exposed to the consequences of
the conflict;
\u2212 cross-border exposures stemming from its corporate and investment banking activities.
In its lending activities, the IMI C&IB Division has over time financed counterparties resident in the Russian Federation. More
than two-thirds of the loans to Russian customers disbursed before the conflict involve leading industrial groups, which have
established commercial relationships with customers belonging to the main international supply chains, a significant amount
of which derives from commodity exports. At the outbreak of hostilities, loans to Russian customers represented around 1% of
the Intesa Sanpaolo Group\u2019s total loans to customers, net of Export Credit Agency - ECA guarantees. Due to the existence of
those guarantees, the credit risk on those exposures can be considered as not referring to either Russia or Ukraine.
That being said, in this section we note some information relating to the Russian and Ukrainian subsidiaries:
\u2212 Banca Intesa Russia
78
: this is a Moscow-based corporate bank, 47% owned by Intesa Sanpaolo and 53% by Intesa
Sanpaolo Holding International, part of the IMI Corporate & Investment Banking Division. It operates with 27 branches
and 907 staff;
\u2212 Pravex is a small commercial bank, wholly owned by Intesa Sanpaolo and based in Kyiv, part of the International
Subsidiary Banks Division. It operates with 43 branches (mainly in the Kyiv region) and 735 staff.
Specific regulations issued by the EU Regulators on the Russian-Ukrainian crisis
As a result of the unexpected evolution of the Russian-Ukrainian crisis, as well as the resulting tensions that arose in relations
between the Russian Federation and the EU and NATO countries (including Italy), the main regulators issued a series of
specific measures to provide guidance on this issue. The most significant is the public statement issued by ESMA on 13 May
2022, symmetrically adopted also by CONSOB with regard to the priority accounting aspects. This public statement is based,
and provides greater details, on the previous document of 14 March 2022 (ESMA PUBLIC STATEMENT: ESMA coordinates
regulatory response to the war in Ukraine and its impact on EU financial markets \u2013 14 March 2022). That public statement
was additionally confirmed by the \u201cESMA Enforcement Priorities 2022\u201d of 28 October 2022.
In the context of the Russian-Ukrainian war, as previously for COVID-19, specific recommendations are provided for the
financial statement aspects most strongly impacted by the war regarding:
Control and going concern
\u2212 assess at Group level the going concern situation. This assessment must take account of all the information available on
the future, including expected profitability and any restrictions on immediate access to financial resources;
\u2212 assess the continuing control over the subsidiaries located in the regions involved in the conflict;
\u2212 consider existing financial restrictions on assets;
\u2212 carefully assess whether control was effectively lost in the event of disposal.
Valuation process and classification of positions
\u2212 update the valuation based on significant judgements, assumptions about the future and other tools for assessing
uncertainty;
78
In addition to the marginal company OOO Intesa Realty Russia, consolidated at equity, considering its slight materiality.
\u2212 in assessing the impairment of debt securities and loans, as well as of leases and trade receivables and contract assets,
consider the effect of the war on whether there has been a significant increase in credit risk (SICR)
79
and on the
measurement of expected credit losses (ECL) taking into account forward-looking information;
\u2212 when assessing whether recognition of impairment or write-down of assets is necessary, take into account decisions to
discontinue, dispose of, or suspend operations, or cancel investments in Ukraine, Russia or Belarus;
\u2212 focus on the classification of non-current assets held for sale and/or discontinued operations pursuant to IFRS 5.
Financial reporting
\u2212 use caution in presenting the impacts of the conflict separately in the financial statement forms, given its extensiveness.
Instead, it would be preferable to provide in the notes the qualitative and quantitative information on significant impacts,
the judgements and assumptions applied in recognising, measuring and presenting assets and liabilities, and their
related economic effects;
\u2212 adjust and potentially expand the level of detail of the information provided in the financial statements. It is also
recommended to update the disclosures on sensitivity analyses, both in general and with specific reference to exposures
to Russia and Ukraine;
\u2212 provide adequate information on the scenarios considered, updating the impairment tests on non-financial assets (such
as intangible assets with indefinite life and deferred tax assets).
Specific attention must obviously be paid to the impacts on the financial statements of any significant events occurring after
the end of the reporting period, to provide relevant supplementary information.
Control and going concern
Despite the critical situation, particularly for Pravex, the two subsidiaries resident in the warring countries are continuing to
operate with the support of the Parent Company structures, albeit with the objective limits dictated by the war and the
continued high international tensions.
Intesa Sanpaolo\u2019s continuing control over the two entities has also been confirmed. This can be identified based on several
aspects:
\u2212 in accounting/administrative terms, by acquiring the accounts for consolidation purposes. Specifically, as illustrated in
greater detail in Part A: Section 3 - Scope of consolidation and consolidation methods, for the Russian subsidiary, the
accounts as at 31 December 2022 were acquired accurately and in a timely manner, while for Pravex, it was decided to
maintain the accounts produced for consolidation as at 30 September 2022, considering the specific operating difficulties
of the subsidiary, as well as in light of the substantial immateriality of its balance sheet figures at Group level;
\u2212 in terms of statutory regulations. With specific regard to the Russian subsidiary, the Parent Company was able to
exercise its power to determine, in compliance with Russian regulations, the composition of the corporate bodies and to
appoint the management body members of Banca Intesa Russia at the Shareholders\u2019 Meeting of 8 July 2022. The
turnover involving the Board and the Audit Committee was the result of appointments proposed by the Parent Company
that passed the approval process of the Russian Central Bank, while the Board appointed before the conflict remains in
place for the Ukrainian subsidiary;
\u2212 in terms of steering the business, the two entities continue to move ahead with their commercial business following the
instructions of the Parent Company. Specifically, in its corporate operations, Banca Intesa Russia complied with the
instructions received, immediately after the conflict broke out, to gradually reduce its existing credit exposure. In lending,
that bank is not subject to external \u201cinterference\u201d, and follows the instructions of the Parent Company also in cases
where, due to the slight materiality of the disbursements, based on its existing powers, it would be entitled to make
autonomous decisions on its action;
\u2212 in terms of coordination and control, as the Parent Company\u2019s control functions (including the support function of the
Manager responsible for preparing the Company\u2019s financial reports, namely Administrative and Financial Governance)
continue to carry out their roles through the regular receipt and analysis of the planned information flows, interacting with
the structures of the subsidiaries through the communication channels available, in line with any limitations that may
arise over time, also handled using contingency solutions.
Moreover, the conclusions regarding the maintenance of control over Banca Intesa Russia are not invalidated by the
limitations currently set by Russian regulations which, substantially, impose restrictions to repayments and payments to
parties resident in \u201cunfriendly\u201d countries. Aware of the restrictions imposed by the specific regulatory framework, Banca Intesa
Russia credited to specific Russian accounts, as provided by law, the monetary resources for the repayment of intragroup
exposures that matured in the meantime.
The potential use of the resources credited to those accounts \u2013 equal to around 29 million euro at the end of December 2022
\u2013 is limited to several specific purposes within Russia. In this context, it must be considered that, also based on specific legal
opinions acquired, the current limitations do not constitute the \u201cexpropriation\u201d of the amounts in any way (nor are they even
indicators of a loss of control over the subsidiary\u2019s assets). Rather, they derive from the temporary legal \u201cfreezing\u201d of the free
availability of amounts which, based on economic rights, would otherwise be available for their owner.
Also with regard to the issue of control over assets, note the two significant de-risking operations for a total of 2.5 billion euro
in loans to leading counterparties in the Russian Federation. Those operations were completed with the collection of the
consideration agreed from the acquiring counterparties.
79
Where it is difficult to identify the effect at instrument level, it may be necessary to perform the assessment on a collective basis, on groups of financial
instruments.
Valuation process and classification of positions
In referring to Part E (Section 2 \u201cRisks of the prudential consolidation\u201d) of these Consolidated financial statements for a more
complete examination of the aspects of managing and measuring the Group\u2019s exposures to Russian
80
and Ukrainian
counterparties, it is noted that, as a result of the outbreak of the conflict, considering the presence of credit exposures of the
Group to counterparties exposed to country risk related to the conflict (specifically, resident counterparties or counterparties
controlled by residents in the Russian Federation), for the purpose of drawing up the financial reporting, a regulatory analysis
was conducted of the international accounting standards to verify any indications or rationales underlying the measurement of
the Expected Credit Loss in crisis scenarios such as the current one. The analysis of IFRS 9 \u201cFinancial Instruments\u201d and the
related Annexes shows no indications or examples aimed at setting out guidelines for the measurement of Expected Credit
Losses in contexts of war or determining specific methods of increasing credit risk due to sudden, serious geopolitical crises
such as the current one. Rather, the standard offers general indications on calculating the ECL within this framework
81
.
Therefore, in light of the significant uncertainty about the direct or indirect effects of the conflict and based on the indications
provided by the various regulators on the outbreak of the COVID-19 pandemic (see below), which also contained elements of
clear unpredictability, it was deemed consistent with the indications of the standard to identify:
\u2212 in the collective assessment, the methods for capturing the SICR, specifically if it is not possible to measure a specific
level of credit risk for the single counterparties;
\u2212 in using management overlays, for the purpose of calculating the ECL, the most suitable method for incorporating
provisions linked to country and geopolitical risk relating to the ongoing conflict.
For the purposes of the financial statements as at 31 December 2022, the main choices regarding the staging assignment
and calculation of the ECL adopted by the Group in the 2022 interim reporting for performing loans to Russian and Ukrainian
counterparties were confirmed. In light of that indicated in the previous paragraph, for these loans, the Group decided to
adopt an approach strongly guided by the emergence of geopolitical risk, thus impacted by the counterparties\u2019 country of
residence, both to determine the SICR and to calculate the ECL, also by applying management overlays. Moreover, with
specific reference to the cross-border exposures, the Russian companies financed before the outbreak of the conflict all had
high ratings and therefore, for most of them, their business outlook does not include any increased risks other than those
generated by the geopolitical situation. Consequently, for these companies, the main current risk is transfer risk, i.e. the risk
that they will fail to honour their debt repayment commitments, not because of aspects directly related to their business, but
because of government-imposed restrictions.
This was considered the most appropriate way to incorporate the provisions for country and geopolitical risk related to the
current conflict that would otherwise not be properly captured by the risk measurement systems normally used. These choices
were applied consistently to both the exposures of Pravex and of Banca Intesa Russia and cross-border positions mainly at
the Parent Company and the international subsidiary banks of the IMI CIB Division and, for smaller amounts, the banks of the
International Subsidiary Banks Division. For a more detailed examination of the main application methods of those
approaches, refer to that illustrated in greater detail in Part E - Information on risks and relative hedging policies
82
of the
Notes.
With regard to the classification of exposures to Russian and Ukrainian counterparties in the various risk stages set out in
IFRS 9, for cross-border counterparties, the constant updating of the ratings entailed their classification in Stage 2, just based
on the ordinary staging processes, except for a few Russian counterparties, for which the status of Unlikely-to-Pay was
established. The Group\u2019s approach entailed classifying performing exposures to customers of Banca Intesa Russia in Stage
2. Instead, with regard to exposures to customers of Pravex, the absolutely serious situation in all of Ukraine resulted in the
definition, for the purpose of classifying and measuring the bank\u2019s loan portfolio, of a specific approach, significantly based on
prudent rationales, in light of the worsening of the conflict and the consequent repercussions on the Ukrainian economy. For
the purposes of the financial statements as at 31 December, it was deemed appropriate to fully write down Pravex\u2019s on-
balance sheet loans to customers, with consequent classification to Stage 3. This measure reflects the ongoing war situation
that requires considering country risk, with appropriate measurement of the risk that the capital invested abroad is exposed to,
connected to the possibility that political or economic circumstances may result in non-repayment of the loan or in a write-
down of the investment made in the country. In essence, the risk of insolvency of public and private operators linked to their
geographical area of origin is independent from their intent. Lastly, these choices also consider the limited volume of loans of
the subsidiary.
The real estate assets and the financial investments in Russian securities of the two subsidiaries were also assessed, with
marginal impacts at Group level, also in light of their limited materiality.
With regard to the classification of non-current assets held for sale and/or discontinued operations pursuant to IFRS 5, the
Group did not classify any exposures to Russian or Ukrainian counterparties in that manner, as the conditions under IFRS 5
were not met.
80
For these purposes, the small exposures to Belarusian counterparties have for simplicity been treated and disclosed together with the exposures to
the Russian Federation.
81
In particular, see IFRS 9 B5.5.1, IFRS 9 B5.5.4, IFRS 9 B5.5.5, IFRS 9 B5.5.18 and IFRS 9 B5.5.52.
82
Section 2 \u2013 Risk of the prudential consolidation 1.1 Credit risk.
Financial reporting
In line with the approach adopted in the interim statements published during the year, the Group presents the impacts of the
conflict by providing in the Notes to the consolidated financial statements (in this Section or in the references indicated)
qualitative and quantitative information on significant impacts, the judgements and assumptions applied in recognising,
measuring and presenting assets and liabilities, and their related economic effects, without opting for separate presentation.
That being said, a summary is provided below of the remaining exposures of the Group to counterparties resident in Russia or
Ukraine and the related economic impacts, referring, also in this case, to that set out in Part E - Information on risks and
relative hedging policies of these Notes to the consolidated financial statements for more detailed analyses.
At the end of the year, the remaining exposures to counterparties resident in Russia or Ukraine (net of the share covered by
Export Credit Agency guarantees) amounted, in terms of gross values, to 372 million euro (205 million euro net) for Banca
Intesa Russia and 1,257 million euro (963 million euro net) for cross-border exposures to customers resident in Russia (net of
ECA guarantees). These were accompanied by exposures to banks totalling 797 million euro (782 million euro net) and in
securities totalling 73 million euro (41 million euro net). Exposures to customers resident in Ukraine amounted to 216 million
euro (103 million euro net), of which 112 million euro (book value nil in net terms) related to the subsidiary Pravex Bank.
These were accompanied by exposures to banks and in securities totalling 74 million euro (64 million euro net), for a total of
2,789 million euro.
The significant de-risking exercise set up during 2022 (which involved the finalisation of two significant positions for a total of
2,515 million euro in gross value) and the major adjustments to the residual positions contributed to more than halving the
overall net exposure (customers, banks and securities) as at 31 December 2022 to counterparties resident in Russia and
Ukraine, which amounted to 2,158 million euro, down by 3,087 million euro compared to 31 December 2021 (-59%).
Moreover, the Parent Company and two subsidiaries disbursed loans to Banca Intesa Russia for a residual book value of
211 million euro, to support the bank\u2019s operations, and also made available 200 million euro originally intended for a capital
increase. The concrete implementation of that capital increase was suspended due to the war. The loan of 211 million euro is
still supporting the operations of the bank, which, despite the difficulties caused by the context, achieved a positive operating
result in 2022. For the amount originally intended for a capital increase, the decisions will depend on the development of the
war and the Russian regulations which currently impose temporary restrictions to repayments and payments to parties
resident in \u201cunfriendly\u201d countries.
Overall, the valuation processes and the losses associated with the de-risking of the Russian exposures led to the recognition
in the year, before tax, of net charges totalling 1,415 million euro, with 1,298 million euro relating to adjustments to loans,
36 million euro to securities and 81 million euro to other balance sheet items, including the provision of 80 million euro made
upon consolidation of the subsidiary Banca Intesa Russia to zero out its equity contribution to the Group\u2019s consolidated
financial statements and factor in the impact of the limitations to the repatriation of intragroup funds by Banca Intesa Russia,
given the local regulatory restrictions.
Lastly, the Sections of Part E of these Notes dedicated to the single types of risk (market and liquidity, insurance and
operational risk) set out the information on the relevant aspects resulting from the limited impacts \u2013 where present \u2013 of the
Russian-Ukrainian crisis.
RISKS, UNCERTAINTIES AND IMPACTS OF THE COVID-19 PANDEMIC
In its communication of 15 December 2020 concerning the \u201cimpacts of COVID-19 and measures to support the economy and
amendments to IAS/IFRS\u201d (subject to a subsequent limited update on 21 December 2021), the Bank of Italy, supplemented
the provisions governing bank financial statements set out in \u201cCircular 262 - Bank financial statements: layouts and
preparation\u201d, with the aim of providing the market information on the effects that the COVID-19 outbreak and the consequent
measures to support the economy have had on the strategies, objectives and risk management policies, and on the operating
performance and financial position of intermediaries. In defining the additions, the Bank of Italy took into account the
documents published in 2020 and 2021 by the European regulatory and supervisory bodies and by the standard setters
aimed at clarifying the methods of application of the IAS/IFRS in the context of the pandemic. The following table shows the
most relevant documents and their scope of application.
Main topic
Issuing body
Date
Title
Classifications
Measurement
Financial
reporting
EBA
25.3.20
Statement on the application of the prudential framework
regarding Default, Forbearance and IFRS 9 in light of COVID-19
measures
X
ESMA
25.3.20
Public Statement. Accounting implications of the COVID-19
outbreak on the calculation of expected credit losses in
accordance with IFRS 9
X
IFRS Foundation
27.3.20
IFRS 9 and COVID-19 - Accounting for expected credit losses
applying IFRS 9 Financial Instruments in the light of current
uncertainty resulting from the COVID-19 pandemic
X
ECB
1.4.20
IFRS 9 in the context of the coronavirus (COVID-19) pandemic
X
EBA
2.4.20
Guidelines on legislative and non legislative moratoria on loan
repayments applied in the light of the COVID-19 crisis
X
ESMA
20.5.20
Implications of the COVID-19 outbreak on the half-yearly financial
reports
X
EBA
2.6.20
Guidelines on reporting and disclosure of exposures subject to
measures applied in response to the COVID-19 crisis
X
X
ESMA
28.10.20
European common enforcement priorities for 2020 annual
financial reports
X
EBA
2.12.20
Guidelines amending Guidelines EBA/GL/2020/02 on legislative
and non legislative moratoria on loan repayments applied in the
light of the COVID-19 crisis
X
ECB
4.12.20
Identification and measurement of credit risk in the context of the
coronavirus (COVID-19) pandemic
X
X
ESMA
29.10.21
European common enforcement priorities for 2021 annual
financial reports
X
X
X
ESMA
16.12.21
Report on the application of the IFRS 7 and IFRS 9 requirements
regarding banks\u2019 expected credit losses (ECL)
X
X
X
The measures adopted by the regulators were aimed essentially at clarifying the treatment of moratoria, indicating the
minimum conditions for clear financial reporting, uniformly guiding the definition of prospective scenarios and allowing
flexibility in defining credit assessments.
That being said, during 2022 the health crisis gradually and steadily improved, linked to the increasing immunity reached by
the population, both due to the vaccination campaigns and the high number of cases, in addition to decreased seriousness of
the variants of the virus in circulation. That trend made it possible to gradually eliminate the restrictive measures, with a
resulting recovery in the economic activities that had remained negatively affected by that context (such as tourism). During
2022 \u2013 in line with the developments in the health situation, and with the economic recovery under way \u2013 there was a gradual
resumption of payments for exposures that had benefited from the support measures such as moratoria. As a result, during
2022, the Group reduced the measures implemented to ensure that credit assessments were consistent with the specific
context of the pandemic.
Loan classification and valuation in the COVID-19 scenario
The COVID-19 pandemic had a significant impact on the issues of classification of credit exposures, specifically the aspects
linked to payment moratoria, as well as for the purpose of determining the Expected Credit Loss (ECL) pursuant to IFRS 9.
In terms of classification of credit exposures, the COVID-19 outbreak resulted in the need, also recognised by the banking
system and institutions (governments and regulators), to offer general payment suspension measures (moratoria) to already
performing customers, using simplified procedures and without any penalties for the parties involved \u2013 both banks and
customers. These measures, partly governed by national regulations and partly decided autonomously by the banks, were the
subject of a specific regulation, summarised in the EBA Guidelines (\u201cGuidelines on legislative and non-legislative moratoria on
loan repayments applied in the light of the COVID-19 crisis\u201d). In summary, the granting by banks and financial intermediaries -
according to the aforementioned Guidelines - of legislative moratoria, or even private ones, did not automatically constitute a
default event, with consequent classification of the loan as non-performing, or a forbearance measure, with resulting transfer
to Stage 2. The EBA set out the conditions also regarding the duration and time limit of the concession for the purposes of
applying the exemption. Those conditions gradually stopped applying during 2021. With regard to the Italian scenario, the
latest regulatory measure in terms of moratoria was the \u201cSostegni bis\u201d Law Decree, which granted the option to benefit from
an additional extension of legislative moratoria expiring as at 30 June 2021 up to 31 December 2021. The suspension from 1
July onwards only related to the principal, while the interest gradually accruing had to be paid. Considering that no additional
legislative measures were decided, any further extensions of existing moratoria/granting of new suspensions during 2022 thus
followed the ordinary credit processes, assessing whether the measure should be considered as forbearance.
With regard to loan valuation, the Group adopted a prudent approach since the Interim Statement at 31 March 2020 regarding
the adjustment of the ECL results stemming from the IFRS 9 models in use, in the context of the uncertain but expected
further worsening of economic conditions, while taking into account the effects of the public support measures made promptly
available by the national authorities and supported by the accommodative policy of the ECB. This approach was gradually
made more sophisticated and consistent over time, by defining management overlays that were gradually refined, reflecting
the best perception of the evolution of the crisis. With regard to adjustments to loans, in 2022, the management overlays
covering the vulnerability of the moratoria were gradually eliminated, given the progressive increase in moratoria that have
reached the deadline for resuming payments without displaying any significant problem issues (as at 31 December 2022 the
existing moratoria were substantially eliminated, and remaining exposures amounted to only 80 million euro).
* * *
To complete the disclosure, in line with the provisions of said Communication of 21 December 2021 of the Bank of Italy, which
supplements Circular 262, also see the quantitative information on any loans subject to COVID-19 support measures and the
related net adjustments for credit risk published, respectively:
\u2212 in Part B \u2013 Information on the consolidated balance sheet \u2013 Assets, in the tables:
o 3.3a Loans measured at fair value through other comprehensive income subject to COVID-19 support measures:
gross amount and total adjustments;
o 4.4a Loans measured at amortised cost subject to COVID-19 support measures: gross amount and total
adjustments;
\u2212 in Part C \u2013 Information on the consolidated income statement:
o 8.1a Net adjustments for credit risk associated with loans measured at amortised cost subject to COVID-19 support
measures: breakdown;
o 8.2a Net adjustments for credit risk associated with loans measured at fair value through other comprehensive
income subject to Covid-19 support measures: breakdown;
Lastly, for quantitative information on transfers between different stages of credit risk and loans subject to COVID-19 support
measures broken down by category of non-performing exposures, refer to the following tables in Part E (Section 2 \u201cRisks of
the prudential consolidation\u201d) in these consolidated financial statements:
\u2212 A.1.3a Loans subject to COVID-19 support measures: transfers between stages of credit risk (gross amounts);
\u2212 A.1.5a Loans subject to COVID-19 support measures: gross and net amounts.
CHANGES IN CONTRACTS DUE TO COVID-19
The detailed information required by the specific instructions of Circular 262 of the Bank of Italy on changes in contracts due
to COVID-19 in light of the provisions of IFRS 9 and IFRS 16 is provided below.
Changes in contracts and derecognition (IFRS 9)
The moratoria granted by the Group due to the pandemic, in line with the EBA guidelines, complied with some specific
requirements. More specifically, these:
\u2212 were offered without distinction to a large group of (performing) borrowers or following legislative provisions;
\u2212 did not provide a waiver of contractual interest or principal but solely a deferral/extension of payments.
Since the granted moratoria provided solely a deferral/extension of the period in which payments are due, the application of a
moratorium did not entail the derecognition of the loan.
Amendment to IFRS 16
Although the subject in question is not relevant for the Group, it is specified that with reference to lease contracts (on the
lessee side), having assessed the nature of the existing contracts and the active role played by the Bank in supporting the
economy, Intesa Sanpaolo decided not to apply the \u201cpractical expedient\u201d introduced under IFRS 16 - Leases on discounts
and deferral of payments on existing lease contracts payables.
", "dimensions": { "concept": "ifrs-full:ExplanationOfAssumptionAboutFutureWithSignificantRiskOfResultingInMaterialAdjustments", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-982": { "value": "SECTION 5 - OTHER ASPECTS RISKS, UNCERTAINTIES AND IMPACTS OF THE RUSSIAN/UKRAINIAN CRISIS AND THE COVID-19 PANDEMIC Introduction In terms of risk management, 2022 saw both positive aspects, such as the regression of the impacts deriving from the COVID-19 pandemic and the consequences on customer solvency, and negative aspects, mainly attributable to the Russia- Ukraine conflict and the consequences of that scenario, in terms of hikes in the prices of energy sources, the lack of certain commodities and the resulting increase in prices. The preparation of the consolidated financial statements in accordance with IFRS requires that the management make estimates and assumptions that affect the amount reported in the financial statements concerning assets, liabilities, income and expenses recognised in the financial year, as well as other comprehensive income, as indicated in greater detail in the specific paragraph of these Notes (Part A \u2013 A2: Main financial statement captions - Use of estimates and assumptions in preparing financial reports). The main areas of uncertainty in the estimates made by the management, which are based on historical experience and other assumptions that are deemed reasonable, include those relating to loan losses, the fair value of financial instruments (including derivatives), corporate income taxes, employee benefits, goodwill and intangible assets, impairment of non-financial assets, derecognition of financial assets and liabilities and provisions for risks and charges. The situation described above has caused and continues to cause greater volatility and uncertainty in the financial sector and markets, which has also been reflected in key areas for determination of estimates. Scenarios with significantly new elements that were not found in recent periods are very difficult to capture in the modelling of credit assessments, making it extremely difficult to produce forecasts for specific portfolio risks in such circumstances. The estimation methodologies set out in the Group\u2019s policies provide that, in certain circumstances \u2013 such as the current ones \u2013 the need may arise to make temporary adjustments (valuation increases) to the results of the models adopted, as a precaution. That need may arise as a result of external events that are unexpected, which the Bank cannot control and have potential consequences, also on a large scale, on the measurement of the ECL of the Bank\u2019s portfolios as a result of elements that are not adequately captured by the IFRS 9 models used. It must be noted that the IFRS 9 estimation methodologies are founded on experience-based assumptions, and are strongly anchored to historical observations, which are considered over a congruous time horizon and in a sufficiently stable backdrop. At the same time, the estimation methodologies must also reflect forward-looking conditions and adopt reasonable, sustainable approaches and forecasts (without undue cost and effort). They must be appropriately assessed in the event of increased uncertainty on the future scenario and on the possible impacts of the events in question. The guidelines provided by regulators for the COVID-19 pandemic and the conflict in Ukraine (reported in greater detail in the specific sections below) allow/invite intermediaries to adopt a flexible approach and to use their own expert judgment in making decisions in exceptional, unexpected contexts, bearing in mind that the guidelines provided do not constitute a \u201crelaxation\u201d of the rules but rather the granting of further necessary discretion in the context of extremely specific events. These considerations supported the Bank\u2019s decision to adopt post-model adjustments, increasing the Expected Credit Losses (ECL) on a managerial basis, in order to incorporate a suitable estimate of the uncertainties mentioned above. The Bank therefore used estimates, assumptions and judgments that reflect this uncertainty. In the current situation of uncertainty, the Group's assessments are also supported, as detailed below, by sensitivity analyses, subject to specific disclosure, to provide users of the financial statements a more complete and transparent understanding of these phenomena. The current context, in terms of both the macroeconomic profile and the evolution of the Russian-Ukrainian conflict, is thus marked by significant uncertainties, which were considered in drawing up the financial statements. Specifically, the potential direct and indirect risks of that context were taken into consideration in order to measure credit positions, through prudential adjustments to exposures to Russian and Ukrainian counterparties and the strengthening of coverage for non-performing positions and all performing positions which, while not showing specific impairment, may suffer the consequences of a negative evolution of the macroeconomic context and the Russian-Ukrainian conflict. Thus, the following is set out below: \u2212 first, several indications on the scenarios used by the Group in preparing the financial statements in this specific context, the related sensitivity analyses and the issue of impairment testing of goodwill and deferred taxation; \u2212 subsequently, the issues relating to the Russian-Ukrainian conflict are covered; \u2212 lastly, the issue of COVID-19 is covered 77 . Reference is also made to the relevant Sections of the Notes to the consolidated financial statements (as indicated below) for a more detailed examination, including quantitative data, of the effects of the above situations, which are summarised below. Specifically, a more complete analysis of the approach to measuring credit positions, also with specific regard to describing the modelling used and the management overlays used in this specific context is provided in Part E - Section 2 - Credit risk management policies. Given the importance of these issues, it is also noted that the Report on operations contains a section specifically dedicated to \u201cThe impact for the ISP Group of the military conflict between Russia and Ukraine\u201d, which summarises, inter alia, the initiatives of the Intesa Sanpaolo Group in favour of Ukraine, as well as the aspects regarding the framework of sanctions against the Russian Federation and cybersecurity. An equivalent section on the \u201cImpacts of the COVID-19 pandemic\u201d has also been included in the Report on operations. Intesa Sanpaolo Group macroeconomic scenarios for the 2022 financial statements With regard to the macroeconomic scenario used in the models for determining expected credit losses, note that in June 2020, following the indications from the regulators and standard setters, the Group anchored its macroeconomic forecasts to the projections published by the central banks. In light of the context described to this point and considering the lesser uncertainties that characterise the process of estimating the projections (compared to the extremely serious scenario at the start of the pandemic), the Group decided to return to using the scenarios produced internally by the Parent Company\u2019s Research Department as input to the ECL models in December 2021, thus restoring substantial uniformity between the scenarios used in the other measurement/forecasting processes (impairment tests, budgeting, etc.), especially with regard to the Business Plan launched in 2022. This choice, confirmed during 2022, also seems reasonable in light of the convergence between the forecasts produced internally by the Research Department and the forecasts drawn up periodically by the ECB/Bank of Italy. For a table illustration of the scenarios actually used in the valuation of loans, please refer to the specific section of Part E of these Notes which also contains, as specified below, further details on the sensitivity of the ECL to changes in macroeconomic scenarios. Instead, the medium-term forecasting scenario of reference to determine the value in use of the CGUs for impairment testing is set out in Section 10 of Part B. Sensitivity analysis in the light of alternative scenarios As in the previous years, and as recommended by the regulators (see, for example, ESMA: \u201cEuropean common enforcement priorities for 2021 annual financial reports\u201d and the ESMA guidelines on the Russian/Ukrainian crisis illustrated in the specific section), in the Notes to the consolidated financial statements, the Group provides the various sensitivity analyses in order to supplement its disclosures. These analyses related to the issues indicated below, to provide users of the financial statements with a greater understanding of the Group\u2019s valuation choices in this specific context. Therefore, reference should be made to the following parts of these Notes regarding: \u2212 the effects of a change in one or more non-observable parameters used in the valuation techniques adopted to determine the fair value, the financial assets and liabilities measured at fair value level 3 (Part A - A.4.2 Valuation processes and sensitivity); \u2212 sensitivity analysis for real estate assets measured at fair value. The analysis essentially concerned the properties of the Parent Company Intesa Sanpaolo, which represent the Core perimeter of the Group's real estate assets (Part A - A.4.5 Fair value hierarchy - Sensitivity of property valuations); \u2212 sensitivity of the Value in use of Cash Generating Units for which intangible assets with indefinite useful lives remain (Part B \u2013 Assets: Section 10 Intangible assets); \u2212 sensitivity to changes in interest rates of net defined benefit liabilities (Part B - Liabilities: Section 10.5 Post-employment defined benefit plans); \u2212 sensitivity analysis of IFRS 9 ECL in order to analyse the variability with respect to individual alternative scenarios (Part E - Section 2 Credit risk management and policies); \u2212 sensitivity of net interest income, assuming a change in interest rates, and sensitivity analysis of the banking book to price risk for listed assets recognised in the HTCS category (Part E - Banking book: interest rate risk and price risk); \u2212 scenario analysis relating to the evolution of stock prices, interest rates, credit spreads, foreign exchange rates and commodity prices for trading activity (Part E - Trading book: interest rate risk and price risk); 77 Based on the indications provided in the specific communications from the Bank of Italy: \u201cimpacts of COVID-19 and measures to support the economy and amendments to IAS/IFRS\u201d. \u2212 sensitivity of the fair value of the portfolio of financial assets of insurance companies with respect to interest rate movements, credit spreads and equity prices (Part E - Insurance risks: Financial risks). Measurement of goodwill in the current scenario In the current challenging market environment, measuring the recoverable amount of intangible assets is also particularly difficult. Therefore, also for the Financial Statements as at 31 December 2022, the effects of the current situation were carefully considered in conducting the annual impairment testing of goodwill. For more details of impairment testing on goodwill and brand name, reference is made to Part B - Information on the consolidated balance sheet (See Part B \u2013 Assets: Section 10 Intangible assets - Information on intangible assets and goodwill). Probability test on deferred taxation in the current scenario As provided for by IAS 12, a deferred tax asset (or DTA) must be recognised for all deductible temporary differences to the extent that it is probable that taxable income will be earned that can offset the deductible temporary differences. Deferred tax assets are then divided into \u201celigible\u201d deferred tax assets and \u201cineligible\u201d deferred tax assets. While for the former Italian regulations set out a specific mechanism for conversion into tax credits which legitimises, in and of itself, their recognition in the financial statements (see Part B \u2013 Assets: Section 11 Deferred Tax Assets and Liabilities), the amount of \u201cineligible\u201d deferred tax assets is tested to determine whether it is likely that taxable income will be earned in the future that will ensure their recovery (probability test). The Group carried out that test also in the current situation. For a more detailed illustration, refer to Part B \u2013 Assets: Section 11 Deferred Tax Assets and Liabilities - Probability test on deferred taxation. RISKS, UNCERTAINTIES AND IMPACTS OF THE RUSSIAN/UKRAINIAN CRISIS On 24 February 2022, the gradually escalating tension between Russia and Ukraine erupted into a conflict, the intensity and size of which had not been seen in Europe since the end of the Second World War. The extremely serious situation resulting from the conflict was immediately closely monitored and assessed by Intesa Sanpaolo, also in light of the guidance provided by the regulators on the subject, given that the Group has: \u2212 a direct presence with two subsidiaries in the warring countries, Pravex Bank Public Joint-Stock Company (Pravex) and Joint-Stock Company Banca Intesa (Banca Intesa Russia), and is therefore particularly exposed to the consequences of the conflict; \u2212 cross-border exposures stemming from its corporate and investment banking activities. In its lending activities, the IMI C&IB Division has over time financed counterparties resident in the Russian Federation. More than two-thirds of the loans to Russian customers disbursed before the conflict involve leading industrial groups, which have established commercial relationships with customers belonging to the main international supply chains, a significant amount of which derives from commodity exports. At the outbreak of hostilities, loans to Russian customers represented around 1% of the Intesa Sanpaolo Group\u2019s total loans to customers, net of Export Credit Agency - ECA guarantees. Due to the existence of those guarantees, the credit risk on those exposures can be considered as not referring to either Russia or Ukraine. That being said, in this section we note some information relating to the Russian and Ukrainian subsidiaries: \u2212 Banca Intesa Russia 78 : this is a Moscow-based corporate bank, 47% owned by Intesa Sanpaolo and 53% by Intesa Sanpaolo Holding International, part of the IMI Corporate & Investment Banking Division. It operates with 27 branches and 907 staff; \u2212 Pravex is a small commercial bank, wholly owned by Intesa Sanpaolo and based in Kyiv, part of the International Subsidiary Banks Division. It operates with 43 branches (mainly in the Kyiv region) and 735 staff. Specific regulations issued by the EU Regulators on the Russian-Ukrainian crisis As a result of the unexpected evolution of the Russian-Ukrainian crisis, as well as the resulting tensions that arose in relations between the Russian Federation and the EU and NATO countries (including Italy), the main regulators issued a series of specific measures to provide guidance on this issue. The most significant is the public statement issued by ESMA on 13 May 2022, symmetrically adopted also by CONSOB with regard to the priority accounting aspects. This public statement is based, and provides greater details, on the previous document of 14 March 2022 (ESMA PUBLIC STATEMENT: ESMA coordinates regulatory response to the war in Ukraine and its impact on EU financial markets \u2013 14 March 2022). That public statement was additionally confirmed by the \u201cESMA Enforcement Priorities 2022\u201d of 28 October 2022. In the context of the Russian-Ukrainian war, as previously for COVID-19, specific recommendations are provided for the financial statement aspects most strongly impacted by the war regarding: Control and going concern \u2212 assess at Group level the going concern situation. This assessment must take account of all the information available on the future, including expected profitability and any restrictions on immediate access to financial resources; \u2212 assess the continuing control over the subsidiaries located in the regions involved in the conflict; \u2212 consider existing financial restrictions on assets; \u2212 carefully assess whether control was effectively lost in the event of disposal. Valuation process and classification of positions \u2212 update the valuation based on significant judgements, assumptions about the future and other tools for assessing uncertainty; 78 In addition to the marginal company OOO Intesa Realty Russia, consolidated at equity, considering its slight materiality. \u2212 in assessing the impairment of debt securities and loans, as well as of leases and trade receivables and contract assets, consider the effect of the war on whether there has been a significant increase in credit risk (SICR) 79 and on the measurement of expected credit losses (ECL) taking into account forward-looking information; \u2212 when assessing whether recognition of impairment or write-down of assets is necessary, take into account decisions to discontinue, dispose of, or suspend operations, or cancel investments in Ukraine, Russia or Belarus; \u2212 focus on the classification of non-current assets held for sale and/or discontinued operations pursuant to IFRS 5. Financial reporting \u2212 use caution in presenting the impacts of the conflict separately in the financial statement forms, given its extensiveness. Instead, it would be preferable to provide in the notes the qualitative and quantitative information on significant impacts, the judgements and assumptions applied in recognising, measuring and presenting assets and liabilities, and their related economic effects; \u2212 adjust and potentially expand the level of detail of the information provided in the financial statements. It is also recommended to update the disclosures on sensitivity analyses, both in general and with specific reference to exposures to Russia and Ukraine; \u2212 provide adequate information on the scenarios considered, updating the impairment tests on non-financial assets (such as intangible assets with indefinite life and deferred tax assets). Specific attention must obviously be paid to the impacts on the financial statements of any significant events occurring after the end of the reporting period, to provide relevant supplementary information. Control and going concern Despite the critical situation, particularly for Pravex, the two subsidiaries resident in the warring countries are continuing to operate with the support of the Parent Company structures, albeit with the objective limits dictated by the war and the continued high international tensions. Intesa Sanpaolo\u2019s continuing control over the two entities has also been confirmed. This can be identified based on several aspects: \u2212 in accounting/administrative terms, by acquiring the accounts for consolidation purposes. Specifically, as illustrated in greater detail in Part A: Section 3 - Scope of consolidation and consolidation methods, for the Russian subsidiary, the accounts as at 31 December 2022 were acquired accurately and in a timely manner, while for Pravex, it was decided to maintain the accounts produced for consolidation as at 30 September 2022, considering the specific operating difficulties of the subsidiary, as well as in light of the substantial immateriality of its balance sheet figures at Group level; \u2212 in terms of statutory regulations. With specific regard to the Russian subsidiary, the Parent Company was able to exercise its power to determine, in compliance with Russian regulations, the composition of the corporate bodies and to appoint the management body members of Banca Intesa Russia at the Shareholders\u2019 Meeting of 8 July 2022. The turnover involving the Board and the Audit Committee was the result of appointments proposed by the Parent Company that passed the approval process of the Russian Central Bank, while the Board appointed before the conflict remains in place for the Ukrainian subsidiary; \u2212 in terms of steering the business, the two entities continue to move ahead with their commercial business following the instructions of the Parent Company. Specifically, in its corporate operations, Banca Intesa Russia complied with the instructions received, immediately after the conflict broke out, to gradually reduce its existing credit exposure. In lending, that bank is not subject to external \u201cinterference\u201d, and follows the instructions of the Parent Company also in cases where, due to the slight materiality of the disbursements, based on its existing powers, it would be entitled to make autonomous decisions on its action; \u2212 in terms of coordination and control, as the Parent Company\u2019s control functions (including the support function of the Manager responsible for preparing the Company\u2019s financial reports, namely Administrative and Financial Governance) continue to carry out their roles through the regular receipt and analysis of the planned information flows, interacting with the structures of the subsidiaries through the communication channels available, in line with any limitations that may arise over time, also handled using contingency solutions. Moreover, the conclusions regarding the maintenance of control over Banca Intesa Russia are not invalidated by the limitations currently set by Russian regulations which, substantially, impose restrictions to repayments and payments to parties resident in \u201cunfriendly\u201d countries. Aware of the restrictions imposed by the specific regulatory framework, Banca Intesa Russia credited to specific Russian accounts, as provided by law, the monetary resources for the repayment of intragroup exposures that matured in the meantime. The potential use of the resources credited to those accounts \u2013 equal to around 29 million euro at the end of December 2022 \u2013 is limited to several specific purposes within Russia. In this context, it must be considered that, also based on specific legal opinions acquired, the current limitations do not constitute the \u201cexpropriation\u201d of the amounts in any way (nor are they even indicators of a loss of control over the subsidiary\u2019s assets). Rather, they derive from the temporary legal \u201cfreezing\u201d of the free availability of amounts which, based on economic rights, would otherwise be available for their owner. Also with regard to the issue of control over assets, note the two significant de-risking operations for a total of 2.5 billion euro in loans to leading counterparties in the Russian Federation. Those operations were completed with the collection of the consideration agreed from the acquiring counterparties. 79 Where it is difficult to identify the effect at instrument level, it may be necessary to perform the assessment on a collective basis, on groups of financial instruments. Valuation process and classification of positions In referring to Part E (Section 2 \u201cRisks of the prudential consolidation\u201d) of these Consolidated financial statements for a more complete examination of the aspects of managing and measuring the Group\u2019s exposures to Russian 80 and Ukrainian counterparties, it is noted that, as a result of the outbreak of the conflict, considering the presence of credit exposures of the Group to counterparties exposed to country risk related to the conflict (specifically, resident counterparties or counterparties controlled by residents in the Russian Federation), for the purpose of drawing up the financial reporting, a regulatory analysis was conducted of the international accounting standards to verify any indications or rationales underlying the measurement of the Expected Credit Loss in crisis scenarios such as the current one. The analysis of IFRS 9 \u201cFinancial Instruments\u201d and the related Annexes shows no indications or examples aimed at setting out guidelines for the measurement of Expected Credit Losses in contexts of war or determining specific methods of increasing credit risk due to sudden, serious geopolitical crises such as the current one. Rather, the standard offers general indications on calculating the ECL within this framework 81 . Therefore, in light of the significant uncertainty about the direct or indirect effects of the conflict and based on the indications provided by the various regulators on the outbreak of the COVID-19 pandemic (see below), which also contained elements of clear unpredictability, it was deemed consistent with the indications of the standard to identify: \u2212 in the collective assessment, the methods for capturing the SICR, specifically if it is not possible to measure a specific level of credit risk for the single counterparties; \u2212 in using management overlays, for the purpose of calculating the ECL, the most suitable method for incorporating provisions linked to country and geopolitical risk relating to the ongoing conflict. For the purposes of the financial statements as at 31 December 2022, the main choices regarding the staging assignment and calculation of the ECL adopted by the Group in the 2022 interim reporting for performing loans to Russian and Ukrainian counterparties were confirmed. In light of that indicated in the previous paragraph, for these loans, the Group decided to adopt an approach strongly guided by the emergence of geopolitical risk, thus impacted by the counterparties\u2019 country of residence, both to determine the SICR and to calculate the ECL, also by applying management overlays. Moreover, with specific reference to the cross-border exposures, the Russian companies financed before the outbreak of the conflict all had high ratings and therefore, for most of them, their business outlook does not include any increased risks other than those generated by the geopolitical situation. Consequently, for these companies, the main current risk is transfer risk, i.e. the risk that they will fail to honour their debt repayment commitments, not because of aspects directly related to their business, but because of government-imposed restrictions. This was considered the most appropriate way to incorporate the provisions for country and geopolitical risk related to the current conflict that would otherwise not be properly captured by the risk measurement systems normally used. These choices were applied consistently to both the exposures of Pravex and of Banca Intesa Russia and cross-border positions mainly at the Parent Company and the international subsidiary banks of the IMI CIB Division and, for smaller amounts, the banks of the International Subsidiary Banks Division. For a more detailed examination of the main application methods of those approaches, refer to that illustrated in greater detail in Part E - Information on risks and relative hedging policies 82 of the Notes. With regard to the classification of exposures to Russian and Ukrainian counterparties in the various risk stages set out in IFRS 9, for cross-border counterparties, the constant updating of the ratings entailed their classification in Stage 2, just based on the ordinary staging processes, except for a few Russian counterparties, for which the status of Unlikely-to-Pay was established. The Group\u2019s approach entailed classifying performing exposures to customers of Banca Intesa Russia in Stage 2. Instead, with regard to exposures to customers of Pravex, the absolutely serious situation in all of Ukraine resulted in the definition, for the purpose of classifying and measuring the bank\u2019s loan portfolio, of a specific approach, significantly based on prudent rationales, in light of the worsening of the conflict and the consequent repercussions on the Ukrainian economy. For the purposes of the financial statements as at 31 December, it was deemed appropriate to fully write down Pravex\u2019s on- balance sheet loans to customers, with consequent classification to Stage 3. This measure reflects the ongoing war situation that requires considering country risk, with appropriate measurement of the risk that the capital invested abroad is exposed to, connected to the possibility that political or economic circumstances may result in non-repayment of the loan or in a write- down of the investment made in the country. In essence, the risk of insolvency of public and private operators linked to their geographical area of origin is independent from their intent. Lastly, these choices also consider the limited volume of loans of the subsidiary. The real estate assets and the financial investments in Russian securities of the two subsidiaries were also assessed, with marginal impacts at Group level, also in light of their limited materiality. With regard to the classification of non-current assets held for sale and/or discontinued operations pursuant to IFRS 5, the Group did not classify any exposures to Russian or Ukrainian counterparties in that manner, as the conditions under IFRS 5 were not met. 80 For these purposes, the small exposures to Belarusian counterparties have for simplicity been treated and disclosed together with the exposures to the Russian Federation. 81 In particular, see IFRS 9 B5.5.1, IFRS 9 B5.5.4, IFRS 9 B5.5.5, IFRS 9 B5.5.18 and IFRS 9 B5.5.52. 82 Section 2 \u2013 Risk of the prudential consolidation 1.1 Credit risk. Financial reporting In line with the approach adopted in the interim statements published during the year, the Group presents the impacts of the conflict by providing in the Notes to the consolidated financial statements (in this Section or in the references indicated) qualitative and quantitative information on significant impacts, the judgements and assumptions applied in recognising, measuring and presenting assets and liabilities, and their related economic effects, without opting for separate presentation. That being said, a summary is provided below of the remaining exposures of the Group to counterparties resident in Russia or Ukraine and the related economic impacts, referring, also in this case, to that set out in Part E - Information on risks and relative hedging policies of these Notes to the consolidated financial statements for more detailed analyses. At the end of the year, the remaining exposures to counterparties resident in Russia or Ukraine (net of the share covered by Export Credit Agency guarantees) amounted, in terms of gross values, to 372 million euro (205 million euro net) for Banca Intesa Russia and 1,257 million euro (963 million euro net) for cross-border exposures to customers resident in Russia (net of ECA guarantees). These were accompanied by exposures to banks totalling 797 million euro (782 million euro net) and in securities totalling 73 million euro (41 million euro net). Exposures to customers resident in Ukraine amounted to 216 million euro (103 million euro net), of which 112 million euro (book value nil in net terms) related to the subsidiary Pravex Bank. These were accompanied by exposures to banks and in securities totalling 74 million euro (64 million euro net), for a total of 2,789 million euro. The significant de-risking exercise set up during 2022 (which involved the finalisation of two significant positions for a total of 2,515 million euro in gross value) and the major adjustments to the residual positions contributed to more than halving the overall net exposure (customers, banks and securities) as at 31 December 2022 to counterparties resident in Russia and Ukraine, which amounted to 2,158 million euro, down by 3,087 million euro compared to 31 December 2021 (-59%). Moreover, the Parent Company and two subsidiaries disbursed loans to Banca Intesa Russia for a residual book value of 211 million euro, to support the bank\u2019s operations, and also made available 200 million euro originally intended for a capital increase. The concrete implementation of that capital increase was suspended due to the war. The loan of 211 million euro is still supporting the operations of the bank, which, despite the difficulties caused by the context, achieved a positive operating result in 2022. For the amount originally intended for a capital increase, the decisions will depend on the development of the war and the Russian regulations which currently impose temporary restrictions to repayments and payments to parties resident in \u201cunfriendly\u201d countries. Overall, the valuation processes and the losses associated with the de-risking of the Russian exposures led to the recognition in the year, before tax, of net charges totalling 1,415 million euro, with 1,298 million euro relating to adjustments to loans, 36 million euro to securities and 81 million euro to other balance sheet items, including the provision of 80 million euro made upon consolidation of the subsidiary Banca Intesa Russia to zero out its equity contribution to the Group\u2019s consolidated financial statements and factor in the impact of the limitations to the repatriation of intragroup funds by Banca Intesa Russia, given the local regulatory restrictions. Lastly, the Sections of Part E of these Notes dedicated to the single types of risk (market and liquidity, insurance and operational risk) set out the information on the relevant aspects resulting from the limited impacts \u2013 where present \u2013 of the Russian-Ukrainian crisis. RISKS, UNCERTAINTIES AND IMPACTS OF THE COVID-19 PANDEMIC In its communication of 15 December 2020 concerning the \u201cimpacts of COVID-19 and measures to support the economy and amendments to IAS/IFRS\u201d (subject to a subsequent limited update on 21 December 2021), the Bank of Italy, supplemented the provisions governing bank financial statements set out in \u201cCircular 262 - Bank financial statements: layouts and preparation\u201d, with the aim of providing the market information on the effects that the COVID-19 outbreak and the consequent measures to support the economy have had on the strategies, objectives and risk management policies, and on the operating performance and financial position of intermediaries. In defining the additions, the Bank of Italy took into account the documents published in 2020 and 2021 by the European regulatory and supervisory bodies and by the standard setters aimed at clarifying the methods of application of the IAS/IFRS in the context of the pandemic. The following table shows the most relevant documents and their scope of application. Main topic Issuing body Date Title Classifications Measurement Financial reporting EBA 25.3.20 Statement on the application of the prudential framework regarding Default, Forbearance and IFRS 9 in light of COVID-19 measures X ESMA 25.3.20 Public Statement. Accounting implications of the COVID-19 outbreak on the calculation of expected credit losses in accordance with IFRS 9 X IFRS Foundation 27.3.20 IFRS 9 and COVID-19 - Accounting for expected credit losses applying IFRS 9 Financial Instruments in the light of current uncertainty resulting from the COVID-19 pandemic X ECB 1.4.20 IFRS 9 in the context of the coronavirus (COVID-19) pandemic X EBA 2.4.20 Guidelines on legislative and non legislative moratoria on loan repayments applied in the light of the COVID-19 crisis X ESMA 20.5.20 Implications of the COVID-19 outbreak on the half-yearly financial reports X EBA 2.6.20 Guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis X X ESMA 28.10.20 European common enforcement priorities for 2020 annual financial reports X EBA 2.12.20 Guidelines amending Guidelines EBA/GL/2020/02 on legislative and non legislative moratoria on loan repayments applied in the light of the COVID-19 crisis X ECB 4.12.20 Identification and measurement of credit risk in the context of the coronavirus (COVID-19) pandemic X X ESMA 29.10.21 European common enforcement priorities for 2021 annual financial reports X X X ESMA 16.12.21 Report on the application of the IFRS 7 and IFRS 9 requirements regarding banks\u2019 expected credit losses (ECL) X X X The measures adopted by the regulators were aimed essentially at clarifying the treatment of moratoria, indicating the minimum conditions for clear financial reporting, uniformly guiding the definition of prospective scenarios and allowing flexibility in defining credit assessments. That being said, during 2022 the health crisis gradually and steadily improved, linked to the increasing immunity reached by the population, both due to the vaccination campaigns and the high number of cases, in addition to decreased seriousness of the variants of the virus in circulation. That trend made it possible to gradually eliminate the restrictive measures, with a resulting recovery in the economic activities that had remained negatively affected by that context (such as tourism). During 2022 \u2013 in line with the developments in the health situation, and with the economic recovery under way \u2013 there was a gradual resumption of payments for exposures that had benefited from the support measures such as moratoria. As a result, during 2022, the Group reduced the measures implemented to ensure that credit assessments were consistent with the specific context of the pandemic. Loan classification and valuation in the COVID-19 scenario The COVID-19 pandemic had a significant impact on the issues of classification of credit exposures, specifically the aspects linked to payment moratoria, as well as for the purpose of determining the Expected Credit Loss (ECL) pursuant to IFRS 9. In terms of classification of credit exposures, the COVID-19 outbreak resulted in the need, also recognised by the banking system and institutions (governments and regulators), to offer general payment suspension measures (moratoria) to already performing customers, using simplified procedures and without any penalties for the parties involved \u2013 both banks and customers. These measures, partly governed by national regulations and partly decided autonomously by the banks, were the subject of a specific regulation, summarised in the EBA Guidelines (\u201cGuidelines on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis\u201d). In summary, the granting by banks and financial intermediaries - according to the aforementioned Guidelines - of legislative moratoria, or even private ones, did not automatically constitute a default event, with consequent classification of the loan as non-performing, or a forbearance measure, with resulting transfer to Stage 2. The EBA set out the conditions also regarding the duration and time limit of the concession for the purposes of applying the exemption. Those conditions gradually stopped applying during 2021. With regard to the Italian scenario, the latest regulatory measure in terms of moratoria was the \u201cSostegni bis\u201d Law Decree, which granted the option to benefit from an additional extension of legislative moratoria expiring as at 30 June 2021 up to 31 December 2021. The suspension from 1 July onwards only related to the principal, while the interest gradually accruing had to be paid. Considering that no additional legislative measures were decided, any further extensions of existing moratoria/granting of new suspensions during 2022 thus followed the ordinary credit processes, assessing whether the measure should be considered as forbearance. With regard to loan valuation, the Group adopted a prudent approach since the Interim Statement at 31 March 2020 regarding the adjustment of the ECL results stemming from the IFRS 9 models in use, in the context of the uncertain but expected further worsening of economic conditions, while taking into account the effects of the public support measures made promptly available by the national authorities and supported by the accommodative policy of the ECB. This approach was gradually made more sophisticated and consistent over time, by defining management overlays that were gradually refined, reflecting the best perception of the evolution of the crisis. With regard to adjustments to loans, in 2022, the management overlays covering the vulnerability of the moratoria were gradually eliminated, given the progressive increase in moratoria that have reached the deadline for resuming payments without displaying any significant problem issues (as at 31 December 2022 the existing moratoria were substantially eliminated, and remaining exposures amounted to only 80 million euro). * * * To complete the disclosure, in line with the provisions of said Communication of 21 December 2021 of the Bank of Italy, which supplements Circular 262, also see the quantitative information on any loans subject to COVID-19 support measures and the related net adjustments for credit risk published, respectively: \u2212 in Part B \u2013 Information on the consolidated balance sheet \u2013 Assets, in the tables: o 3.3a Loans measured at fair value through other comprehensive income subject to COVID-19 support measures: gross amount and total adjustments; o 4.4a Loans measured at amortised cost subject to COVID-19 support measures: gross amount and total adjustments; \u2212 in Part C \u2013 Information on the consolidated income statement: o 8.1a Net adjustments for credit risk associated with loans measured at amortised cost subject to COVID-19 support measures: breakdown; o 8.2a Net adjustments for credit risk associated with loans measured at fair value through other comprehensive income subject to Covid-19 support measures: breakdown; Lastly, for quantitative information on transfers between different stages of credit risk and loans subject to COVID-19 support measures broken down by category of non-performing exposures, refer to the following tables in Part E (Section 2 \u201cRisks of the prudential consolidation\u201d) in these consolidated financial statements: \u2212 A.1.3a Loans subject to COVID-19 support measures: transfers between stages of credit risk (gross amounts); \u2212 A.1.5a Loans subject to COVID-19 support measures: gross and net amounts. CHANGES IN CONTRACTS DUE TO COVID-19 The detailed information required by the specific instructions of Circular 262 of the Bank of Italy on changes in contracts due to COVID-19 in light of the provisions of IFRS 9 and IFRS 16 is provided below. Changes in contracts and derecognition (IFRS 9) The moratoria granted by the Group due to the pandemic, in line with the EBA guidelines, complied with some specific requirements. More specifically, these: \u2212 were offered without distinction to a large group of (performing) borrowers or following legislative provisions; \u2212 did not provide a waiver of contractual interest or principal but solely a deferral/extension of payments. Since the granted moratoria provided solely a deferral/extension of the period in which payments are due, the application of a moratorium did not entail the derecognition of the loan. Amendment to IFRS 16 Although the subject in question is not relevant for the Group, it is specified that with reference to lease contracts (on the lessee side), having assessed the nature of the existing contracts and the active role played by the Bank in supporting the economy, Intesa Sanpaolo decided not to apply the \u201cpractical expedient\u201d introduced under IFRS 16 - Leases on discounts and deferral of payments on existing lease contracts payables. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAssetsAndLiabilitiesWithSignificantRiskOfMaterialAdjustmentExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-905": { "value": "
A.2 \u2013 MAIN FINANCIAL STATEMENT CAPTIONS
To ensure uniformity in the accounting policies used for the financial statements, the Intesa Sanpaolo Group has adopted an
internal set of rules and policies for the various operational and organisational areas.
The methodological document used for the application of the accounting standards is the Group Accounting Policies, which
describes the application models adopted by the Group, within the framework of the standards and the legislation applicable
to the various companies/subsidiaries, and sets out the choices made when the regulations envisage alternative or optional
accounting treatments.
With regard to the valuation processes, the Group, in the document \u201cGuidelines for the valuation of Balance Sheet Items\u201d, has
drawn up the principles and regulatory framework for the valuation of the balance sheet items and the roles and
responsibilities of the Corporate Bodies, the Manager responsible for preparing the Company\u2019s financial reports and the
Parent Company\u2019s corporate functions involved in the valuation process; the prerequisites for the existing valuation processes
and the control system necessary to ensure proper valuation; the general valuation processes based on accounting standards
specific to the various categories of balance sheet items being measured (assets and liabilities); and the rules for guidance
and coordination of Group Companies on the valuation of balance sheet items.
The guidelines and policies also include the Business Model Rules, the Rules on the measurement of expected credit loss in
accordance with IFRS 9 (Impairment Policy), and the \u201cRules for Valuation of Financial Instruments at Fair Value\u201d (former Fair
Value Policy), in addition to more specific documents relating to non-performing loans, equity investments, and the
management of hedging financial instruments.
Finally, with regard to prudential supervision, the Group has drawn up a specific document called Harmonised Prudential
Supervision Rules.
In general, these documents are approved by the competent Corporate Bodies. They are updated by the management
structures in response to needs arising both from external factors (e.g. changes in regulations) and from internal factors within
the Group (e.g. new operations and products). Those documents are subject to a specific approval process, based on the
significance and scope of the changes made.
The criteria adopted by the subsidiary insurance companies are discussed in a specific chapter at the bottom of this section.
In fact, as a result of the Intesa Sanpaolo Group\u2019s decision, as a financial conglomerate primarily engaged in banking
activities, to exercise the option of adopting the Deferral Approach, the financial assets and liabilities of the subsidiary
insurance companies are recognised in accordance with the provisions of IAS 39, while awaiting the entry into force of the
new international financial reporting standard on insurance contracts, IFRS 17, along with IFRS 9, starting 1 January 2023
84
.
1. Financial assets measured at fair value through profit or loss (FVTPL)
Classification criteria
This category contains the financial assets not classified as Financial assets measured at fair value through other
comprehensive income or as Financial assets measured at amortised cost. This caption includes in particular:
- financial assets held for trading, essentially consisting of debt securities and equity instruments and the positive value of
derivative contracts held for trading;
- financial assets mandatorily measured at fair value through profit or loss, consisting of financial assets that do not meet
the requirements for measurement at amortised cost or at fair value through other comprehensive income. These are
financial assets whose contractual terms do not solely envisage payments of principal and interest on the principal
amount outstanding (SPPI Test not passed) or that are not held under a Hold to Collect business model or a Hold to
Collect and Sell business model;
- financial assets designated at fair value, i.e. financial assets that are defined as such upon initial recognition and when
the conditions apply. In relation to this case, an entity may irrevocably designate a financial asset as measured at fair
value through profit or loss only if it eliminates or significantly reduces a measurement inconsistency.
This caption therefore includes:
- debt securities and loans that are included in an Other/Trading business model (i.e., that do not come under the Hold to
Collect or Hold to Collect and Sell business models) or that do not pass the SPPI Test, including the portions of
syndicated loans subscribed or other types of loans that are originally intended to be sold and are not part of a Hold to
Collect and Sell business model;
- equity instruments \u2013 that do not qualify as investments in subsidiaries, associates or joint ventures \u2013 held for trading
purposes or for which the option was not exercised, upon initial recognition, to designate them at fair value through other
comprehensive income;
- quotas of UCI (Undertakings for Collective Investment).
This caption also includes the derivatives, recognised under financial assets held for trading, which are presented as assets if
the fair value is positive and as liabilities if the fair value is negative. The positive and negative current values arising from
transactions with the same counterparty \u2013 also between derivatives allocated to the trading book and hedging derivatives, as
envisaged by the Bank of Italy Circular 262 \u2013 may be offset only when the legal right to offset amounts recognised for
accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out.
Derivatives also include those embedded in combined financial contracts \u2013 where the host contract is a financial liability \u2013
which are subject to separate accounting when:
- their economic characteristics and risks are not closely related to the characteristics of the host contract;
- the embedded instruments, even though separate, fully meet the definition of derivative;
- the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss.
According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments,
for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the
entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the
financial assets may be reclassified from those measured at fair value through profit or loss to one of the other two categories
established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through other
comprehensive income). The transfer value is the fair value at the time of the reclassification and the effects of the
reclassification apply prospectively from the reclassification date. In this case, the effective interest rate of the reclassified
financial asset is determined based on its fair value at the reclassification date and that date is considered as the initial
recognition date for the credit risk stage assignment for impairment purposes.
For more information regarding the classification criteria for the financial instruments see the paragraph below
\u201cClassification drivers for the financial assets\u201d.
Recognition criteria
Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments, at disbursement date
for loans and at trade date for derivative contracts.
On initial recognition, financial assets measured at fair value through profit or loss are recognised at fair value, without
considering transaction costs or revenues directly attributable to the instrument.
Measurement criteria
After initial recognition, the financial assets measured at fair value through profit or loss are recorded at fair value. The effects
of the application of this measurement criterion are recorded in the income statement.
For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the
market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which
consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted
instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable
transactions, etc. For equities and derivative instruments that have equities as underlying assets, which are not quoted on an
active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of
circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range
of possible measurements of fair value, in which cost represents the most significant estimate.
For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on
Fair Value\u201d.
Derecognition criteria
Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to
the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained,
they continue to be recorded in the financial statements, even though their title has been transferred.
When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where
no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets
continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets
sold and to variations in the relevant cash flows.
Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the
asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third
parties.
2. Financial assets measured at fair value through other comprehensive income (FVOCI)
Classification criteria
This category includes the financial assets that meet both the following conditions:
- the financial asset is held under a business model whose objective is achieved both through the collection of expected
contractual cash flows and through sale (Hold to Collect and Sell business model), and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding (\u201cSPPI Test\u201d passed).
This caption also includes equity instruments, not held for trading, for which the option was exercised upon initial recognition
of their designation at fair value through other comprehensive income.
In particular, this caption includes:
- debt securities that can be attributed to a Hold to Collect and Sell business model and that have passed the SPPI test;
- equity interests, that do not qualify as investments in subsidiaries, associates or joint ventures and are not held for
trading, for which the option has been exercised of their designation at fair value through other comprehensive income;
- loans that are attributable to a Hold to Collect and Sell business model and have passed the SPPI Test, including the
portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are part of a
Hold to Collect and Sell business model.
According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments,
for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the
entity changes its business model for those financial assets.
In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at
fair value through other comprehensive income to one of the other two categories established by IFRS 9 (Financial assets
measured at amortised cost or Financial assets measured at fair value through profit or loss). The transfer value is the fair
value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date.
In the event of reclassification from this category to the amortised cost category, the cumulative gain (loss) recognised in the
valuation reserve is allocated as an adjustment to the fair value of the financial asset at the reclassification date. In the event
of reclassification to the fair value through profit or loss category, the cumulative gain (loss) previously recognised in the
valuation reserve is reclassified from shareholders\u2019 equity to net income (loss).
For more information regarding the classification criteria for the financial instruments see the paragraph below
\u201cClassification drivers for the financial assets\u201d.
Recognition criteria
Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments and at disbursement
date for loans. On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly
attributable to the instrument.
Measurement criteria
After initial recognition, the Assets classified at fair value through other comprehensive income, other than equity instruments,
are measured at fair value, with the recognition in profit or loss of the impact resulting from the application of the amortised
cost, the impairment effects and any exchange rate effect, whereas the other gains and losses resulting from a change in fair
value are recognised in a specific shareholders\u2019 equity reserve until the financial asset is derecognised. Upon the total or
partial sale, the cumulative gain or loss in the valuation reserve is transferred, in whole or in part, to the income statement.
Equity instruments, for which the choice has been made to classify them in this category, are measured at fair value and the
amounts recognised in other comprehensive income cannot be subsequently transferred to profit or loss, not even if they are
sold. The only component related to these equities that is recognised through profit or loss is their dividends.
Fair value is determined on the basis of the criteria already described for Financial assets measured at fair value through
profit or loss.
For the equity instruments included in this category, which are not quoted on an active market, the cost approach is used as
the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement
methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in
which cost represents the most significant estimate.
For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on
Fair Value\u201d.
Financial assets measured at fair value through other comprehensive income \u2013 both in the form of debt securities and loans \u2013
are subject to the verification of the significant increase in credit risk (impairment) required by IFRS 9, in the same way as
Assets measured at amortised cost, with the consequent recognition through profit or loss of a value adjustment to cover the
expected losses. More specifically, for instruments classified as Stage 1 (i.e., financial assets at origination, when not
impaired, and instruments for which there has not been a significant increase in credit risk since the initial recognition date), a
12-month expected loss is recognised on the initial recognition date and at each subsequent reporting date. For instruments
classified as Stage 2 (performing for which there has been a significant increase in credit risk since the initial recognition date)
and as Stage 3 (credit-impaired exposures), a lifetime expected loss for the financial instrument is recognised.
Equity instruments are not subject to the impairment process.
See the paragraph below \u201cImpairment of financial assets\u201d for more details.
Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 3. Financial assets measured at amortised cost Classification criteria This category includes the financial assets (in particular loans and debt securities) that meet both the following conditions: - the financial asset is held under a business model whose objective is achieved through the collection of expected contractual cash flows (Hold to Collect business model), and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI Test\u201d passed). More specifically, the following are recognised in this caption: - loans to banks in their various forms that meet the requirements referred to above; - loans to customers in their various forms that meet the requirements referred to above; - debt securities that meet the requirements referred to above. This category also includes the operating loans and receivables connected to the provision of financial activities and services as defined by the Consolidated Law on Banking and the Consolidated Law on Finance (e.g. for the distribution of financial products and servicing activities). According to the general rules established by IFRS 9 on the reclassification of financial assets, reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from the amortised cost category to one of the other two categories established by IFRS 9 (Financial assets measured at fair value through other comprehensive income or Financial assets measured at fair value through profit or loss). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. Gains and losses resulting from the difference between the amortised cost of a financial asset and its fair value are recognised through profit or loss in the event of reclassification to Financial assets measured at fair value through profit or loss and under Shareholders\u2019 equity, in the specific valuation reserve, in the event of reclassification to Financial assets measured at fair value through other comprehensive income. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of the financial asset occurs at settlement date for debt securities and at disbursement date for loans. On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly attributable to the instrument. In particular, for loans, the disbursement date is usually the same as the date of signing of the contract. Should this not be the case, a commitment to disburse funds is made along with the subscription of the contract, which will cease to exist upon disbursement of the loan. The loan is recognised based on its fair value, equal to the amount disbursed or subscription price, inclusive of the costs/revenues directly attributable to the single loan and determinable from inception, even when settled at a later date. Costs that, even with the aforementioned characteristics, are reimbursed by the borrower or are classifiable as normal internal administrative costs are excluded. Repurchase agreements and reverse repurchase agreements are recognised as funding or lending transactions. Specifically, repurchase agreements are recognised as payables for the spot amount received, whereas reverse repurchase agreements are recognised as receivables for the spot amount paid. Measurement criteria After the initial recognition, these financial assets are measured at amortised cost, using the effective interest method. The assets are recognised in the balance sheet at an amount equal to their initial carrying amount less principal repayments, plus or minus the cumulative amortisation (calculated using the effective interest method) of the difference between this initial amount and the amount at maturity (typically attributable to costs/income directly attributable to the individual asset) and adjusted by any provision for losses. The effective interest rate is the rate that exactly discounts estimated future cash payments of the asset, as principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to that financial asset. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/income directly attributable to a financial asset over its expected lifetime. The amortised cost method is not used for assets, measured at historical cost, whose short duration makes the effect of discounting negligible, or for assets without a definite maturity or revocable loans. The measurement criteria, as described in more detail in the paragraph \u201cImpairment of financial assets\u201d, are closely linked to the inclusion of these instruments in one of the three stages of credit risk established by IFRS 9, the last of which (Stage 3) consists of non-performing financial assets and the remaining (Stages 1 and 2) of performing financial assets. With regard to the accounting representation of the above measurement effects, the adjustments for this type of asset are recognised in profit or loss: - on initial recognition, for an amount equal to the 12-month expected credit loss; - on subsequent measurement of the asset, when the credit risk has not increased significantly since initial recognition, in relation to changes in the amount of adjustments for the 12-month expected credit losses; - on subsequent measurement of the asset, when the credit risk has increased significantly since initial recognition, in relation to the recognition of adjustments for expected credit losses over the contractually agreed remaining lifetime of the asset; - on subsequent measurement of the asset, where \u2013 after a significant increase in credit risk has occurred since initial recognition \u2013 the increase is no longer \u201csignificant\u201d due to the alignment of the cumulative value adjustments to take account of the change from a lifetime expected credit loss to a 12-month expected credit loss for the instrument. These financial assets, when they are performing, are subject to an assessment, aimed at establishing the value adjustments to be recognised in the financial statements, at the level of individual loan (or \u201ctranches\u201d of securities), according to the risk parameters consisting of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), derived from the AIRB models, and duly adjusted to take account of the provisions of IFRS 9. If, in addition to a significant increase in credit risk, there is also objective evidence of impairment, the amount of the loss is measured as the difference between the carrying amount of the asset \u2013 classified as \u201cnon-performing\u201d, like all the other relationships with the same counterparty \u2013 and the present value of the estimated future cash flows, discounted using the original effective interest rate. The amount of the loss, to be recognised through profit or loss, is established based on individual measurement or determined according to uniform categories and, then, individually allocated to each position, and, as detailed in the paragraph \u201cImpairment of financial assets\u201d, takes account of forward-looking information and possible alternative recovery scenarios. Non-performing assets include financial assets classified as bad, unlikely-to-pay or past due by over ninety days according to the rules issued by the Bank of Italy, in line with the IAS/IFRS and EU Supervisory Regulations. The expected cash flows take into account the expected recovery times and the estimated realisable value of any guarantees. The original effective rate of each asset remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment with time value effects are recognised in net interest income. In some cases, during the lifetime of these financial assets, and of loans in particular, the original contractual conditions may be subsequently modified by the parties to the contract. When the contractual clauses are subject to change during the lifetime of an instrument, it is necessary to verify whether the original asset should continue to be recognised in the balance sheet or whether, instead, the original instrument needs to be derecognised and a new financial instrument needs to be recognised. In general, changes to a financial asset lead to its derecognition and the recognition of a new asset when they are \u201csubstantial\u201d. The assessment of the \u201csubstantial nature\u201d of the change must be made using both qualitative and quantitative information. In some cases, in fact, it may be clear, without resorting to complex analysis, that the changes introduced substantially modify the characteristics and/or contractual flows of a particular asset while, in other cases, further analysis (including quantitative analysis) will need to be carried out to assess the effects of the changes and verify whether or not to derecognise the asset and recognise a new financial instrument. The qualitative and quantitative analyses aimed at defining the \u201csubstantial nature\u201d of contractual changes made to a financial asset must therefore consider: - the purposes for which the changes were made: e.g. renegotiations for commercial reasons and forbearance measures due to financial difficulties of the counterparty: o the former, aimed at \u201cretaining\u201d the customer, involve a borrower that is not in financial difficulty. This category includes all renegotiations aimed at aligning the cost of the debt to market conditions. These operations involve a change in the original conditions of the contract, usually requested by the borrower and relating to aspects concerning the cost of the debt, with a consequent economic benefit for the borrower. In general, whenever the bank carries out a renegotiation to avoid losing its customer, that renegotiation should be considered as substantial because, if it were not carried out, the customer could borrow from another intermediary and the bank would incur a decrease in expected future revenues; o the latter, carried out for \u201creasons of credit risk\u201d (forbearance measures), relate to the bank\u2019s attempt to maximise the recovery of the cash flows of the original loan. The underlying risks and rewards, following the changes, are not normally substantially transferred and, consequently, the accounting representation that provides the most relevant information for the readers of the financial statements (apart from the triggers discussed below) is \u201cmodification accounting\u201d \u2013 which involves the recognition through profit or loss of the difference between the carrying value and the present value of the modified cash flows discounted at the original interest rate \u2013 rather than derecognition; - the presence of specific triggers that affect the contractual characteristics and/or cash flows of the financial instrument (such as, for example, a change in currency or a modification of the type of risk the financial instrument is exposed to, when correlated to equity and commodity parameters), which are considered to result in derecognition due to their impact (expected to be significant) on the original contractual cash flows. Conversely, the amendments to financial assets following the Interest Rate Benchmark Reform (so-called IBOR Reform), relating to the change in the basis for determining contractual cash flows (the replacement of the existing interest rate benchmark with an alternative benchmark rate), do not constitute a derecognition event, but are to be considered a modification from an accounting standpoint. Such amendments, if made as a direct consequence of the IBOR Reform and applied on equivalent economic bases, are represented with a prospective adjustment of the effective interest rate - by applying paragraph B5.4.5 of IFRS 9 instead of modification accounting, with impacts on net interest income in future periods. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 4. Hedging transactions The Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each type of hedge (both for micro hedges and macro hedges). Classification criteria: type of hedge Hedging transactions are aimed at neutralising potential losses on a specific item or group of items, attributable to a certain risk, if such a risk should actually occur. The following types of hedging transactions are used: - fair value hedge, which has the objective of covering exposure to changes in the fair value (attributable to the different risk categories) of assets and liabilities in the balance sheet, or on a portion of these, of groups of assets/liabilities, of binding commitments and portfolios of financial assets and liabilities, including core deposits, as permitted by IAS 39 endorsed by the European Commission. Fair value macro hedges are aimed at reducing fluctuations in the fair value, as a result of interest rate risk, of a sum of money flowing from a portfolio of financial assets or liabilities. Net amounts resulting from mismatches between assets and liabilities cannot be subject to macro hedges; - cash flow hedge, which has the objective of covering exposure to variability in future cash flows attributable to particular risks associated with balance sheet captions. This type of hedge is essentially used to stabilise the interest flow on floating rate funding to the extent that the latter finances fixed rate investments. In certain circumstances, similar transactions are carried out with respect to some types of floating rate investments; - hedges of net investments in foreign currency, which refer to the coverage of the risks of net investments in foreign operations expressed in their original currency. Only hedging transactions which involve counterparties outside the Group may qualify for hedge accounting. The choice made by the Group to take advantage of the possibility of continuing to fully apply the IAS 39 rules for hedging relationships means that the equity instruments classified as Financial assets measured at fair value through other comprehensive income (FVOCI) cannot be measured as hedged items for price or exchange rate risk, since these instruments are not recognised through profit or loss, not even if they are sold (except for dividends that are recognised through profit or loss). Recognition criteria Hedging derivatives, like all derivatives, are initially recognised and subsequently measured at fair value. A relationship qualifies as a hedging relationship, and is appropriately reported in the financial statements only if, all of the following conditions are met: - at the inception of the hedge, the hedging relationship is formally designated and documented, including the company\u2019s risk management objectives and strategy in undertaking the hedge. This documentation includes the identification of the hedging instrument, the item or transaction hedged, the nature of the risk being hedged, and how the entity will assess the hedging instrument\u2019s effectiveness in offsetting the exposures to changes in the fair value of the item hedged or in the cash flows attributable to the risk hedged; - the hedge is expected to be highly effective; - the planned transaction hedged, to hedge the cash flows, is highly probable and has an exposure to changes in cash flows that could have effects on the income statement; - the effectiveness of the hedge can be reliably measured; - the hedge is measured on an ongoing basis and is considered highly effective for all the financial years in which it was designated.
Measurement criteria
Hedging derivatives are measured at fair value. In particular:
- in the case of fair value hedges, the change in the fair value of the hedged item is offset by the change in fair value of the
hedging instrument. Offsetting is recognised via the registration in the income statement of the gains and losses referred
to both the hedged item (with regard to the variations produced by the underlying risk factor), and the hedging
instrument. Any difference, which represents the partial ineffectiveness of the hedge, is therefore the net economic effect.
In case of fair value macro hedges, fair value changes related to the hedged risk of assets and liabilities in hedged
portfolios are allocated to the balance sheet under caption 60. \u201cFair value change of financial assets in hedged portfolios\u201d
or under caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d;
- in the case of cash flow hedges, changes in fair value of the derivative are recorded in equity, for the effective portion of
the hedge, and these are registered in the income statement only when, with reference to the hedged item, there is a
variation in the flows to be offset or if the hedge is ineffective;
- hedges of net investments in foreign currency are treated in the same way as cash flow hedges.
The effectiveness of the hedge depends on the extent to which changes in the fair value of the hedged item or the relating
expected cash flows are offset by those of the hedging instrument. Therefore, effectiveness is appraised by comparing the
aforementioned changes, considering the intent pursued by the entity at the time in which it entered the hedging transaction.
A hedge is effective when the variations in fair value (or cash flows) of the hedging financial instrument almost completely
neutralise, that is within the 80-125% range, the changes in the fair value of the hedged item, for the type of risk being
hedged.
Effectiveness is assessed at every close of annual or interim financial statements using:
- prospective tests, which justify the application of hedge accounting, since these prove the expected effectiveness of
the hedge;
- retrospective tests, which demonstrate the effectiveness of the hedge for the reference period, or measure how much the
effective results diverge from perfect coverage.
Fair value hedge accounting is discontinued prospectively in the following cases:
\u2013 the hedging instrument expires or is sold, terminated, or exercised;
\u2013 the hedge no longer meets the hedge accounting criteria described above;
\u2013 the entity revokes the designation.
If such assessments do not confirm hedge effectiveness, from that moment hedge accounting is discontinued, the derivative
is reclassified in instruments held for trading and the hedged item is measured on the basis of its classification in the balance
sheet. If the assets or liabilities hedged are measured at amortised cost, the higher or lower value resulting from the fair value
measurement due to the hedge becoming ineffective is recognised through profit or loss, using the effective interest rate
method. When a fair value macrohedging relationship is discontinued, the cumulative change in fair value losses carried
under caption 60 \"Fair value change of financial assets in hedged portfolios\" or caption 50. \u201cFair value change of financial
liabilities in hedged portfolios\u201d are transferred to the income statement among interest income or expense over the residual
life of the original hedging relationships, without prejudice to verification that the requirements have been met.
An entity must discontinue cash flow hedge accounting prospectively in each of the following circumstances:
a) the hedging instrument expires or is sold, terminated, or exercised (for this purpose the replacement or exchange of one
hedging instrument with another hedging instrument is not a conclusion or termination if that replacement or exchange
forms part of an entity\u2019s documented hedging strategy). In this case the total profit (or loss) on the hedging instrument
continues to be recognised directly in shareholders\u2019 equity until the end of the reporting period in which the hedge
became effective and it continues to be recognised separately until the programmed transaction, being hedged, occurs;
b) the hedge no longer meets the criteria for hedge accounting. In this case the total profit or loss on the hedging instrument
is recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective and
continues to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs;
c) it is no longer considered that the future transaction will occur, in which case any related total profit or loss on the
hedging instrument recognised directly in equity starting from the reporting period in which the hedge became effective
must be recognised through profit or loss;
d) the entity revokes the designation. For hedges of a programmed transaction, total profits or losses on the hedging
instrument recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became
effective continue to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs or it is
expected that it will no longer occur.
As an exception to the provisions of IAS 39 discontinuation following an update of the documentation of the hedging
relationship (due to modification of the hedged risk, the hedged underlying or the hedging derivative, or of the method for
verifying hedge effectiveness) does not apply in the case of modifications required as a direct consequence of the Interest
Rate Benchmark Reform (so-called IBOR Reform) and applied on equivalent economic bases.
5. Investments in associates and companies subject to joint control
Classification, recognition and measurement criteria
The caption includes investments in companies subject to joint control and associates.
Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one
or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties
sharing control.
Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights
(including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of
financial and management policies of the company based on specific juridical relations, such as the participation in voting
syndicates.
Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since
it solely has economic rights on a portion of the returns generated by the investment, but does not have access to
management policies and may exercise governance rights limited to the safeguarding of its economic interests.
The investments in associates and companies subject to joint control are measured at cost and accounted for according to
the equity method. If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the
present value of the future cash flows which may be generated by the investment, including the final disposal value.
If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement.
If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment,
recoveries are recorded in the income statement.
Derecognition criteria
Investments in associates and companies subject to joint control are derecognised when the contractual rights to the cash
flows from the assets expire or when the investment is sold, substantially transferring all the risks and rewards connected to
the assets.
6. Property and equipment
Classification criteria
Property and equipment include land, owner-occupied property, investment property, valuable art assets, technical plants,
furniture and fittings and any type of equipment that are expected to be used during more than one period.
Property and equipment held for use in the production or supply of goods and services are classified as \u201cProperty and
equipment used in operations\u201d, in accordance with IAS 16. Real estate owned for investment purposes (to obtain rental
income or gains on the capital invested) is classified as \u201cInvestment property\u201d based on IAS 40.
This caption also includes property and equipment classified in accordance with IAS 2 - Inventories, which refer both to assets
resulting from the enforcement of guarantees or from purchase at auction that the company intends to sell in the near future,
without carrying out major renovation work, and which do not meet the requirements for classification in the previous
categories, and to the real estate portfolio of the Group\u2019s real estate companies, including building sites, properties under
construction, properties completed for sale and real estate development initiatives, held for sale.
Finally, this caption also includes the rights of use acquired through leases and relating to the use of an item of property and
equipment (for the lessee companies) and the assets leased under operating leases (for the lessor companies).
Recognition criteria
Property and equipment are initially measured at cost which comprises in addition to their purchase price any costs directly
attributable to the purchase and required for them to be operational.
Extraordinary maintenance expenses which lead to a rise in future economic benefits are attributed to increase the value of
assets, while other ordinary maintenance costs are recorded in the income statement.
Measurement criteria
Property and equipment are measured at cost, net of depreciation and impairment losses, except for owner-occupied
properties and valuable art assets, which are measured according to the revaluation model.
The investment properties are measured with the fair value method.
For the property and equipment subject to assessment according to the revaluation model:
- if the carrying value of an asset is increased following a revaluation, the increase must be recognised in the Statement of
comprehensive income and accumulated in the shareholders\u2019 equity under the caption revaluation reserve; conversely, in
the case where an impairment loss on the same asset recognised previously in the income statement is recovered, it
must be recognised as income;
- if the carrying value of an asset is decreased following the revaluation, the decrease must be recognised in the
Statement of comprehensive income to the extent in which there are possible credit balances in the revaluation reserve
referring to this asset; otherwise, this reduction is recorded in the income statement.
Property and equipment are systematically depreciated, adopting the straight-line method over their useful life. The
depreciable amount is the cost of the goods (or the net value recalculated if the method adopted for the valuation is the
revaluation model) net of the residual value at the end of the depreciation period, if significant. Buildings are depreciated for a
portion deemed to be suitable to represent their deterioration over time following their use, considering extraordinary
maintenance expenses, which are recognised in the carrying value of the assets. In order to determine the useful life of the
various types of assets and the corresponding depreciation rates, the Group\u2019s real estate assets have been divided into four
clusters: (i) historical properties (useful life of 65 years), (ii) Entire buildings (useful life of 33 years), (iii) Banking branches
(useful life of 20 years) and (iv) Other properties (useful life of 20 years). These clusters do not include the New Intesa
Sanpaolo Headquarters in Turin, for which the useful life was estimated through a specific analysis which considered the
innovative characteristics of the work, featuring strategic importance and extensive architectonic value, built using complex
technologies, and having few, or even zero peers not only within the Group\u2019s real estate assets but also in general. Other
property and equipment is depreciated based on the following useful lives: furniture from 5 to 10 years, plants from 4 to 10
years, hardware and IT equipment for a period from 4 to 8 years and, lastly, other assets from 3 to 13 years.
The following are not depreciated:
- land, irrespective of whether acquired individually or embedded in the value of buildings, since it has an indefinite useful
life;
- the valuable art assets, the other historical, artistic and decorative assets, since their useful life cannot be estimated and
their value is normally destined to increase over time;
- the investment properties, as required by IAS 40, are measured at fair value through profit or loss and therefore they
must not be depreciated.
If there is some evidence that property and equipment measured at cost may have been impaired, the carrying amount of the
asset and its recoverable amount are compared. Any impairment losses are recorded in the income statement.
If the reasons for impairment cease to exist, a value recovery is recorded and may not exceed the value that the asset would
have had, net of depreciation, determined in the absence of previous impairment losses.
With regard to the property and equipment recognised in accordance with IAS 2, these are measured at the lesser of cost and
net realisable value, without prejudice to the comparison between the asset\u2019s carrying amount and its recoverable amount
where there is an indication that the asset may have been impaired. Any impairment losses are recorded in the income
statement.
Property and equipment consisting of the right-of-use of assets subject to leases
According to IFRS 16, a lease is a contract or part of a contract that conveys the right to use an asset (the underlying asset)
for a period of time in exchange for consideration.
According to IFRS 16, leases are accounted for on the basis of the right of use model, where, at the initial date, the lessee
has a financial obligation to make payments due to the lessor to compensate for its right of use of the underlying asset during
the lease term.
When the asset is made available to the lessee for use (initial date), the lessee recognises both the liability and the asset
consisting of the right of use.
In particular, the right of use acquired with a lease is measured as the sum of the present value of the future payments over
the term of the contract, the lease payments made at or before the commencement date, the lease incentives received, if any,
the initial direct costs and any estimated costs of dismantling or restoring the underlying asset.
The financial liability recognised corresponds to the present value of the payments to be made for the lease.
With regard to the discount rate, based on the requirements of IFRS 16, the Group uses the implicit interest rate for each
lease contract, when it is available. For leases from the lessee\u2019s point of view, in some cases, for example for rental
agreements, the implicit interest rate cannot always be readily determined without using estimates and assumptions (the
lessee does not have enough information about the unguaranteed residual value of the leased asset). In these cases, the
Group has developed a methodology for setting the incremental interest rate as an alternative to the implicit interest rate and
has decided to adopt the Funds Transfer Pricing (FTP) method. This is based on an unsecured and amortising rate curve,
which envisages lease payments for the lease contract that are typically constant over the lease term, rather than a single
payment upon maturity. The FTP method takes into account the creditworthiness of the lessee, the term of the lease, as well
as the economic environment in which the transaction takes place and is therefore in line with the requirements of the
standard.
The lease term is determined taking into account:
- periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option;
- periods covered by an option to terminate the lease if the lessee is reasonably certain to exercise that option.
During the course of the lease term a lessee shall:
- measure the right-of-use at cost less accumulated depreciation and accumulated impairment losses determined and
recognised based on the provisions of IAS 36 \u201cImpairment of assets\u201d, adjusted to take account of any remeasurement of
the lease liability;
- increase the liability arising from the lease following the accrual of interest expense calculated at the interest rate implicit
in the lease or alternatively at the incremental borrowing rate, and decrease it for payments of principal and interest
made.
If changes are made to the lease payments, then the lease liability must be remeasured and the impact of the remeasurement
of the liability is recognised against the right-of-use asset.
Derecognition criteria
Property and equipment are derecognised from the balance sheet on disposal or when the asset is permanently withdrawn
from use and no future economic benefits are expected from its disposal.
7. Intangible assets
Classification criteria
Intangible assets consist of goodwill and other intangible assets governed by IAS 38. They may include the rights of use
acquired under a lease and relating to the use of an intangible asset (for lessees) and assets leased under an operating lease
(for lessors).
Intangible assets are recognised as such if they may be identified and stem from legal or contractual rights. Intangible assets
include goodwill, which represents the positive difference between purchase price and fair value of assets and liabilities
pertaining to the acquired company.
Recognition and measurement criteria
Intangible assets are recognised at cost, adjusted for any accessory charges only if it is probable that the future economic
benefits attributable to the assets will be realised and if the cost of the asset may be reliably determined. If this is not the case,
the cost of the intangible asset is recorded in the income statement in the year in which it was incurred.
For assets with finite useful life, the cost is amortised on a straight-line basis or in decreasing portions determined on the
basis of the economic benefits expected from the asset. Assets with indefinite useful life are not subject to systematic
amortisation, but are periodically subjected to impairment testing.
If there is any indication that an asset may have suffered impairment losses, the asset\u2019s recoverable amount is estimated.
The impairment loss, which is recorded in the income statement, is equal to the difference between the carrying value of the
assets and the recoverable amount.
In particular, intangible assets include:
- Technology-related intangible assets, such as software applications, which are amortised on the basis of their expected
technological obsolescence and over a maximum period of seven years. An exception is the core banking system
platforms, whose useful life is estimated on a case-by-case basis, and, as a result, amortised over longer periods (from
10 to 15 years). Moreover, the costs incurred for the development of software are considered as intangible assets and
are recognised under assets only when all the following conditions are met: i) the cost attributable to the intangible asset
during its development can be measured reliably, ii) there is the intention, the availability of financial resources and the
technical ability of making the intangible asset available for use or sale, iii) the future economic benefits to be generated
by the asset can be demonstrated. Software development capitalised costs only comprise the costs directly attributable
to the development process. Capitalised software development costs are amortised systematically over the estimated
useful life of the relevant product/service so as to reflect the pattern in which the asset\u2019s future economic benefits are
expected to be consumed by the entity from the beginning of production over the product's estimated life;
- customer-related intangibles generally represented, in business combinations, by asset management relations, non-
financial activities related to provision of services and insurance portfolios. Such assets, with a finite life, are originally
measured by the discounting, using a rate representing the time value of money and the asset\u2019s specific risks, of the
income margins on the ongoing relations at the time of the business combination over a period which expresses their
residual, contractual or estimated life. For asset management relations and non-financial activities related to provision of
services, they are amortised on a straight-line basis over the period of greater significance of the expected economic
benefits in case of relations which do not have a predetermined duration and, for relations from insurance contracts,
generally in decreasing portions corresponding to the duration of the contract in case of relations with predetermined
expiry (residual lives of the policies);
- marketing-related intangibles represented by the measurement of the brand name which is also recorded at the time of
business combinations. This asset is considered as having indefinite life since it is deemed to contribute for an indefinite
period of time to the formation of income flows.
Lastly, intangible assets include goodwill.
With respect to business combinations, goodwill may be recorded when the positive difference between the consideration
transferred and the fair value recognition, if any, of minority interests, and the fair value of shareholders\u2019 equity acquired is
representative of the future income-generation potential of the equity investment.
If this difference is negative (badwill) or if goodwill may not be attributed considering future income-generation potential of the
equity investments, the same difference is directly recorded in the income statement.
Once a year (or every time that there is evidence of impairment losses), an impairment test is carried out for goodwill. This
requires the identification of the Cash Generating Unit (or CGU) to which goodwill is allocated. The cash-generating units of
the Intesa Sanpaolo Group correspond to the operating divisions presented in segment reporting. Any impairment losses are
determined on the basis of the difference between the recognition value of goodwill and its recoverable amount, if lower.
The recoverable amount is equal to the higher between the fair value of the cash-generating unit, less any cost to sell, and
the relative value in use. The consequent adjustments are posted in the income statement.
With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill
allocated, then an independent and specific valuation is made of the intangible on the basis of the fair value certified by the
appraisal of an independent expert. If the fair value of the brand name is not higher than its carrying amount, the recoverable
amount of the CGU is estimated, calculated based on future cash flows.
It is also noted that, where a CGU which is allocated both goodwill and a brand name has a value in use lower than the
carrying amount, by an amount that exceeds the total value of the intangibles with indefinite life allocated, without prejudice to
the full write-down of goodwill, an autonomous valuation of the brand name is carried out based on the fair value stated in the
specific appraisal.
Derecognition criteria
Intangible assets are derecognised from the balance sheet on disposal and if no future economic benefits are expected.
8. Other assets
Other assets essentially consist of items awaiting classification and items not attributable to the other balance-sheet captions,
including receivables arising from the supply of goods and non-financial services, sundry tax items other than those
recognised in their own caption (e.g., connected to withholding agent activities), gold, silver and precious metal, the tax credits
connected with the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees and accrued income other than that capitalised on the related
financial assets, including the income resulting from contracts with customers in accordance with IFRS 15, paragraphs 116
and following. As required by paragraphs 91 and following of IFRS 15, the costs incurred for the acquisition and fulfilment of
long-term contracts with customers are capitalised and amortised when they are incremental and are expected to be
recovered.
9. Non-current assets held for sale and discontinued operations
Non-current assets/liabilities for which a disposal process has commenced and for which disposal is deemed to be extremely
probable are recorded in assets under Non-current assets held for sale and discontinued operations and in liabilities under
Liabilities associated with non-current assets held for sale and discontinued operations. These assets/liabilities are measured
at the lower of the carrying amount and fair value less cost to sell, except for some type of assets (e.g., financial assets within
the scope of IFRS 9) for which IFRS 5 specifically establishes that the measurement principles of the applicable accounting
standard must be used.
Non-current assets held for sale and discontinued operations may include portfolios of assets for which there are no prices in
an active market. In such case, where an agreement has been reached with the purchaser, they are measured at fair value by
referring to the sale prices resulting from that agreement. Where there is no agreement, they are measured using specific
valuation techniques based on the asset and, where necessary, by employing external fairness opinions.
The income and charges (net of tax effect) attributable to non-current assets held for sale and discontinued operations or
recorded as such in the year are recognised in the income statement in a separate caption.
10. Current and deferred tax
Taxes on income, calculated according to domestic tax regulations, are accounted for as a cost on an accruals basis, in line
with the method followed to include, in the financial statements, the costs and income that generated them. Therefore, they
represent the balance of current and deferred income taxes for the year. Current tax assets and liabilities include the balances
of the Group companies due to the relevant Italian and foreign tax authorities relating to direct taxation. More specifically,
these captions include the net balance of tax liabilities from previous years and the current year, calculated on the basis of a
prudent estimate of the tax charges due for the year, assessed according to the tax regulations currently in force, and the
current tax assets represented by advances, by withholding taxes borne or other tax credits. The risk inherent in such
proceedings and the risks inherent in proceedings where preliminary disbursements have not been requested are evaluated
in applying the principles contained in IAS 37 regarding the best estimate of the economic resources required.
Considering the Group\u2019s adoption of the national fiscal consolidation provisions, tax positions which may be referred to the
Group companies are managed separately from an administrative standpoint.
Deferred taxation is calculated according to the balance sheet liability method, taking into account the tax effect of the
temporary differences between the book value of the assets and liabilities and their value for taxation purposes, which will
determine taxable income or deductible amounts in the future. To this end, \u201ctaxable temporary differences\u201d are differences
which will give rise to taxable income in future years while \u201cdeductible temporary differences\u201d are those which will give rise to
deductible amounts in future years.
Deferred tax liabilities are calculated by applying the tax rates currently in force to taxable temporary differences that are likely
to generate a tax burden, and to the deductible temporary differences for which it is likely that there will be future taxable
amounts at the time when the related tax deductibility occurs (so-called probability test). Deferred tax assets and liabilities
related to the same tax and due in the same period are offset.
If deferred tax assets and liabilities refer to items affecting the Income statement, the balancing entry is represented by taxes
on income.
Where deferred tax assets and liabilities relate to transactions that have been recorded in shareholders\u2019 equity without
affecting earnings (such as adjustments on IAS/IFRS first-time adoption, measurements of financial assets recognised at fair
value through other comprehensive income or of cash flow hedge derivative contracts), the balancing entry is made in
shareholders\u2019 equity, under specific reserves where so provided (e.g. valuation reserves).
Latent taxation on equity reserves that will become taxable \"however used\" is charged against shareholders\u2019 equity.
Deferred taxation relating to revaluations arising on conversion to the euro, credited directly to a specific reserve named
\u201cReserve pursuant to Article 21 of Legislative Decree 213/98\u201d, which qualify for deferred taxation, is charged directly against
this reserve. No provision is made for reserves subject to latent taxation only in the event of distribution, since the size of the
available reserves which have already been taxed leads to the belief that no transactions will be undertaken which may cause
taxation of the untaxed reserves.
Deferred tax liabilities referred to companies included in the fiscal consolidation are reported in their financial statements, in
application of the accrual basis principle and in consideration of the fact that the effects of fiscal consolidation are limited to
the settlement of current tax positions.
Latent taxation on shareholders' equity items of consolidated companies is not recorded in the financial statements if it is
unlikely that any tax liability will actually arise, also bearing in mind the permanent nature of the investment.
11. Allowances for risks and charges
Allowances for risks and charges for commitments and guarantees given
This sub-caption of the allowances for risks and charges contains the allowances for credit risk recognised for loan
commitments and guarantees given that come under the scope of the IFRS 9 impairment rules. For these cases, in general,
the methods described for financial assets measured at amortised cost or at fair value through other comprehensive income
are adopted for the assignment to the three credit risk stages and the calculation of the expected credit loss.
This aggregate also includes allowances for risks and charges made to cover other types of commitments and guarantees
given that, due to their specific characteristics, do not fall under the scope of impairment pursuant to IFRS 9.
Post-employment benefits
Company post-employment benefits are based on agreements and qualify as defined benefit plans. Liabilities related to such
plans and the relative cost of current service are determined on the basis of actuarial assumptions based on the Projected
Unit Credit Method. This method sets out that future obligations are forecast using past time-series analyses and the
demographic curve and that such future cash flows are discounted based on a market interest rate. The provisions made in
each year of service are considered separately and give rise to an additional unit of benefit entitlement for the purposes of the
final obligation. The discounting rate is determined on the basis of market returns, surveyed as at the date of measurement,
on high-quality corporate bonds, taking account of the residual average life of the liability. The present value of the liability at
the reporting date is also adjusted by the fair value of any plan assets.
Actuarial profits and losses (namely the changes in the current value of the obligation resulting from changes in the actuarial
assumptions and adjustments based on past experience) are recognised in the statement of comprehensive income.
Other allowances
Other allowances for risks and charges record provisions related to legal obligations or connected to labour relationships or to
litigations, also of a fiscal nature, originating from a past event for which a disbursement will probably arise to settle the
obligations, provided that the amount of the disbursement may be estimated reliably.
Consequently, a provision is recognised when, and only when:
- there is a present obligation (legal or constructive) as a result of a past event;
- it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
- a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the
reporting date and takes into account the risks and uncertainties that inevitably surround many events and circumstances.
Where time value is significant, provisions are discounted using current market rates. Provisions and increases due to time
value are recorded in the income statement.
If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation or
when the obligation is settled, the provision should be reversed.
The caption also includes long-term benefits to employees, whose charges are determined with the same actuarial criteria
described for post-employment benefits. Actuarial profits and losses are all immediately recognised in the income statement.
12. Financial liabilities measured at amortised cost
Classification criteria
Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and
with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued
and other funding instruments in circulation, net of any amounts repurchased.
It also includes the payables recorded by the entity in the capacity of lessee in lease transactions.
Recognition criteria
Initial recognition of these financial liabilities occurs at the date of subscription of the contract, which usually coincides with the
time of collection of the sums deposited or the issue of debt securities.
Initial recognition is based on the fair value of the liabilities, normally equal to the amount collected or the issue price,
increased by any additional charges/revenues directly attributable to the single funding or issuing transaction.
Internal administrative costs are excluded.
Lease payables are recognised at the present value of the future lease payments, discounted using the implicit interest rate of
the transaction or, where it cannot be determined, the marginal financing rate.
Measurement criteria
After initial recognition, financial liabilities are measured at amortised cost with the effective interest method.
An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount.
Lease payables are remeasured when there is a lease modification (e.g. a change in the contract which is not accounted
for/considered as a separate contract); the effect of the remeasurement will be a corresponding adjustment to the right-of-use
asset.
Derecognition criteria
Financial liabilities are derecognised from the balance sheet when they have expired or extinguished. Derecognition also
occurs for repurchase of previously-issued bonds. The difference between book value of the liability and amount paid for
repurchase is recorded in the income statement.
Placement of own securities, after their repurchase, is considered a new issue with recognition at the new placement price.
13. Financial liabilities held for trading
Recognition criteria
These financial instruments are recognised at the subscription or issue date at the fair value of the instrument, without taking
into account directly attributable transaction costs or revenues.
This liability category includes, in particular, the negative fair value of trading derivatives, as well as embedded derivatives
with a negative fair value separated from liabilities measured at amortised cost.
It also includes liabilities determined by short selling generated by trading of securities and certificates forming part of the
trading business model.
Measurement criteria
All financial liabilities held for trading are measured at fair value through profit or loss.
Derecognition criteria
Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the
financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it.
14. Financial liabilities designated at fair value
Classification criteria
Financial liabilities designated at fair value are recorded under this caption, on the basis of the fair value option given to
companies by IFRS 9 and in compliance with the cases contemplated in the reference regulations.
This category of liabilities includes certificates that form part of the banking book business model.
Recognition criteria
These liabilities are recorded at fair value as at the date of issue, including the value of any embedded derivatives, net of
placement fees paid.
Measurement criteria
These liabilities are measured at fair value according to the following rules established by IFRS 9:
- changes in fair value attributable to changes in own credit risk must be recognised in the statement of comprehensive
income (shareholders\u2019 equity);
- the remaining changes in fair value must be recognised in the income statement.
The amounts recognised in the statement of comprehensive income are not subsequently recycled to the income statement.
This method of accounting must not be applied when recognition of the effects of own credit risk on shareholders\u2019 equity
results in or accentuates an accounting mismatch in the income statement. In this case, gains and losses associated with the
liability, including those resulting from changes in own credit risk, must be recognised in the income statement.
Derecognition criteria
The financial liabilities designated at fair value are derecognised when the contractual rights to the related cash flows expire
or when the financial liability is disposed with the substantial transfer of all the risks and rewards connected to it.
15. Foreign currency transactions
Definition
The foreign currency is a currency that is not the functional currency of the entity, which is in turn the currency of the primary
economic environment in which the entity operates.
Initial recognition
Foreign currency transactions are recorded, on initial recognition, in the functional currency, by applying to the foreign
currency amount the spot exchange rate at the date of the transaction.
Subsequent measurement
At every close of annual or interim financial statements, captions in foreign currency are measured as follows:
- foreign currency monetary items are translated using the closing rate;
- non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rate at the date of the transaction;
- non-monetary items that are measured at fair value in a foreign currency are translated using the closing rates.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from
those at which they were translated on initial recognition during the period or in previous financial statements are recognised
through profit or loss in the period in which they arise.
When a gain or loss on a non-monetary item is recognised directly in equity, any exchange component of that gain or loss is
recognised directly in equity. Conversely, when a gain or loss on a non-monetary item is recognised through profit or loss, any
exchange component of that gain or loss is recognised through profit or loss.
With regard to the \u201cConversion of financial statements in currencies other than the euro\u201d for the purposes of consolidation and
accounting for the related foreign exchange differences, reference is made to the specific paragraph of Part A: Section 3 -
Scope of consolidation and consolidation methods of these Notes to the consolidated financial statements.
16. Other information
Own shares
Any own shares held are directly deducted from equity. Similarly, their original cost and the profits or losses deriving from their
subsequent sale are recorded in equity.
Accruals, prepayments and deferrals
Accruals, prepayments and deferrals for the year that include income and charges for the year, accrued on assets and
liabilities, are shown in the financial statements as an increase or decrease of the assets and liabilities to which they are
related.
Leasehold improvements
The costs sustained for restructuring property belonging to third parties are capitalised in consideration of the fact that for the
duration of the rental contract the using company has control of the assets and may receive their future economic benefits.
These costs, recorded in Other assets as provided for by the instructions of the Bank of Italy, are amortised over a period
which must not exceed the duration of the rental contract.
Employee termination indemnities
Employee termination indemnities qualify as a \u201cpost-employment benefit\u201d classified as:
- a \u201cdefined contribution plan\u201d to the extent of the portions accruing from 1 January 2007 (the date the reform of the
supplementary pension schemes came into force pursuant to Legislative Decree 252 of 5 December 2005) when the
employee opted for the complementary pension scheme or decided to allocate such portions to the INPS (the Italian
Social Security Institute) Treasury fund. Therefore, the amounts, recorded under personnel expenses, are determined on
the basis of amounts due without the application of actuarial calculation;
- a \u201cdefined benefit plan\u201d to the extent of the portions of employee termination indemnities accrued until 31 December
2006.
These amounts are recognised at their actuarial value determined using the \u201cProjected Unit Credit Method\u201d, without
applying the pro-rata of the service rendered. Indeed, the current service cost of employee termination indemnities is
almost entirely accrued and its revaluation in the years to come is not expected to generate significant benefits
for employees.
For the purposes of discounting, the rate used is the market yield of high-quality corporate bonds taking into account the
average remaining life of the liability, weighted based on the percentage amount paid and advanced, for each maturity, with
respect to the total to be paid and advanced until the expiry of the entire obligation.
The plan\u2019s costs are recorded under personnel expenses, while actuarial profits and losses are recognised in the statement of
comprehensive income.
Share-based payments
Share-based payments are recorded in the income statement, with a corresponding increase in shareholders\u2019 equity, on the
basis of the fair value of financial instruments attributed at assignment date, dividing the charge over the period set forth by
the plan.
In the case of options, the fair value is calculated using a model which considers, in addition to information such as strike
price and expiry date of the option, spot price of the shares and their expected volatility, expected dividends and the risk-free
interest rate, as well as the specific characteristics of the plan. The pricing model values the option and the probability of
realisation of the condition on the basis of which the options have been assigned.
The combination of the two values supplies the fair value of the assigned instrument.
Any decrease in the number of financial instruments granted is accounted for as a cancellation of such instruments.
Employee benefits
Employee benefits are defined as all forms of consideration given by an entity in exchange for service rendered by
employees. Employee benefits are divided into:
- short-term benefits (other than termination benefits or equity compensation benefits) that are expected to be paid in full
within twelve months after the end of the period in which the employees render the related service and recognised in full
through profit or loss when they become due (this category includes, for example, wages, salaries and \u201cextraordinary\u201d
benefits);
- post-employment benefits payable after the conclusion of employment that require the entity to provide future benefits to
employees. These include employee termination indemnities and pension funds, which are in turn divided into defined
contribution plans and defined benefit plans or company pension funds;
- termination benefits, i.e. compensation that the company recognises to the staff members upon termination of the
employment agreement, following the company's decision to terminate the employment relationship prior to the normal
retirement date;
- long-term benefits, other than those above, that are not expected to be paid in full within twelve months after the end of
the period in which the employee rendered their service.
Offsetting of financial instruments
According to IAS 32, paragraph 42, financial assets and financial liabilities are offset and the net amount presented in the
financial statements when an entity:
- has a legal enforceable right of set off which is currently exercisable in all circumstances, both in the ordinary course of
business or in the event of default, insolvency or bankruptcy of the parties;
- intends to settle the transactions on a net basis or on a gross settlement basis whose substantive effects are equivalent
to a net settlement.
For derivative instruments covered by netting agreements that meet the above requirements, Bank of Italy Circular 262 also
requires the offsetting to be performed between trading and hedging derivatives, with the mismatches to be presented on a
net basis. The net balance is usually allocated to the trading book rather than to the hedging derivatives, based on the actual
amount of the mismatch between trading and hedging derivatives.
In compliance with the requirements of IFRS 7, more detailed information is provided in the tables contained in Part B \u2013 Other
information of these Notes to the financial statements, which present the following:
- the carrying amounts of assets and liabilities that meet the requirements of IAS 32, paragraph 42, before and after
offsetting;
- the exposures subject to master netting agreements that have not been offset but have the potential to be offset following
specific circumstances;
- the collateral associated with them.
Tax credits related to the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees acquired as a result of transfer by direct
beneficiaries or previous purchasers (e.g. ecobonus)
Law Decrees no. 18/2020 (\u201cCura Italia\u201d Decree) and no. 34/2020 (\u201cRilancio\u201d Decree) introduced tax incentives related to both
investment expenditure (e.g. ecobonus and seismicbonus) and current expenditure (e.g. rents for non-residential premises).
Additionally, the government once again intervened on the issue through Law Decree no. 50/2022 (\u201cDecreto Aiuti\u201d), mainly by
remodulating the base of potential re-assignees.
These tax incentives apply to households or businesses, are linked to a percentage of the expenditure incurred (in some
cases up to 110%) and are granted in the form of tax credits or tax deductions (with option for conversion into tax credits).
The main features of these tax credits are: i) the possibility of using them for offsetting; ii) their transferability to third-party
purchasers; and iii) their non-refundability by the Treasury.
The accounting for tax credits acquired from a third party (transferee of the tax credit) is not covered by a specific international
accounting standard. IAS 8 requires, in cases where there is a circumstance not explicitly addressed by an IAS/IFRS
accounting standard, that management develop an accounting policy to ensure relevant and reliable disclosure of such
transactions.
To this end, the Intesa Sanpaolo Group, in view of the guidance provided by the Authorities, in the document \u201cAccounting
treatment of tax credits connected with the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees acquired following the assignment by the
direct beneficiaries or previous purchasers\u201d published on 5 January 2021 by the Coordination Committee between the Bank of
Italy, Consob and IVASS concerning the application of IAS/IFRS has adopted an accounting policy that refers to the
accounting rules established by IFRS 9, applying the provisions that are consistent with the characteristics of the transaction.
The Group attributes:
\u2013 to a Hold to Collect business model the credits that are acquired within the limits of its tax capacity, given the objective of
holding them for future offsetting. Those credits are recognised at amortised cost and the profitability is recognised on a
pro-rata basis under net interest income in the income statement;
\u2013 to a Hold to Collect and Sell business model the excess credits acquired in relation to its tax capacity and, therefore, held
for subsequent reassignment. Those credits are measured at fair value through other comprehensive income. Given the
particular nature of these instruments, their fair value fluctuations are linked to the changes in interest rates to the extent
that these reflect on the definition of the purchase prices. The profitability is recognised on a pro-rata basis under net
interest income in the income statement.
The accounting framework set out in IFRS 9 for calculating expected credit losses is not deemed applicable to this specific
case. The ECL need not be calculated on these tax credits, as no refund is expected from the tax authorities, as the extinction
of the instrument is linked to the offsetting of the bearer\u2019s tax payables. Moreover, in cases where reassignment is planned,
the sale will be finalised by collecting the price of the instrument, without recognising a receivable due from the assignee.
Lastly, considering the operating methods implemented by the Group, the risk of non-use of the tax credits, i.e. the risk that
the Bank lacks the tax capacity, , to achieve the benefits associated with the asset, can be reasonably deemed as inexistent.
Specifically:
\u2013 with regard to the Hold to Collect business model, the amounts acquired are consistent with the overall tax capacity,
constantly monitored, so that the Bank can offset its payables;
\u2013 with regard to the Hold to Collect and Sell business model, for the credits acquired, reassignment agreements are
gradually entered into for excess volumes, binding on the customer, with multiple counterparties, whose tax capacity is
verified in advance.
As specified in the joint document from the Authorities, as mentioned above, given that the purchased tax credits do not
qualify as tax assets, public subsidies, intangible assets or financial assets under the international accounting standards, the
most appropriate classification, for their presentation in the financial statements, is the residual classification under Other
Assets in the balance sheet.
TLTRO III
The TLTRO III (Targeted Longer Term Refinancing Operations) seek to preserve favourable bank lending conditions and
support the defined monetary policy stance. Several of the parameters that characterise these operations, established by the
ECB on 6 June 2019, were subsequently recalibrated in several steps, initially improving them for banks in light of the
economic effects of the COVID-19 emergency and, recently - on 27 October 2022 - to \u201cnormalise\u201d funding costs in order to
exert downward pressure on inflation and contribute to restoring price stability over the medium term. The amount of funding
that each bank can obtain depends on the amount of loans granted to non-financial companies and households at particular
reporting dates (so-called eligible loans). The single tranches could be subscribed on a quarterly basis, from September 2019
up to December 2021, and each operation has a duration of three years.
The interest rate for each operation is set at a level equal to the average interest rate on the Eurosystem\u2019s main refinancing
operations (MROs), except for the special interest rate period from 24 June 2020 to 23 June 2022, when a rate of 50 basis
points lower applied. Banks granting net eligible loans above a preset benchmark net lending level can receive an interest
rate reduction. Specifically, the favourable rate applied is equal to the average rate on deposits with the central bank (Deposit
Facility Rate or DFR) for the entire duration of the respective operation, except for the special interest rate period where an
additional reduction of 50 basis points was added. The interest is paid in arrears at the maturity date of each TLTRO III
transaction or at the time of early repayment.
As stated, on 27 October 2022, in addition to further increasing interest rates, as part of a trend of interest rate hikes begun in
July 2022, the Governing Council of the ECB decided to recalibrate the conditions applicable to TLTRO III financing.
Specifically, it maintained the existing interest rate calculation method up to 22 November. This method provided that, in
\u201cordinary\u201d periods (i.e. periods other than special interest rate periods defined above) the applicable interest rate would equal
the average of interest rates calculated over the duration of the instrument, entailing an \u201cadjustment\u201d to the interest rate, which
would be determined by applying the interest rate in force each time, only in ordinary periods. Starting on 23 November 2022
(up to the date of maturity or early redemption of each existing TLTRO III) the interest rate is indexed to average applicable
key ECB interest rates for each operation in that period (equal to the DFR rate for banks that reached the defined
benchmarks).
Lacking specific provisions in the reference accounting standards on how to account for this case and clear indications from
IFRIC, which had been consulted on the accounting treatment of the TLTRO III, the Intesa Sanpaolo Group defined its own
accounting policy, applied consistently and with continuity over time, also following the changes made to contractual
conditions: the Group applies to TLTRO operations the accounting treatment defined by IFRS 9 for floating-rate financial
instruments - considering the refinancing conditions defined by the ECB as floating market rates as part of the monetary
policy measures of the Eurosystem - recognising the interest applicable in each case, to be estimated based on the
probability of achieving the net lending targets set.
A requirement for the recognition of the favourable interest rates \u2013 in keeping with the approach already adopted for TLTRO II
\u2013 is a reliable estimate of the achievement of the benchmark net lending, which the Group performs through forecast reports
on the lending performance monitored at set dates, approved by an appropriate level of management. These benchmarks \u2013
referring in particular to volumes as at 31 March 2021 and 31 December 2021 \u2013 were in fact achieved.
In the event of changes to the forecasts on the achievement of those targets, the IFRS 9 provisions on the revision of cash
flow estimates apply.
According to the Group\u2019s accounting policies, the revision of the conditions of the instrument by the ECB is considered as a
change to a floating rate pursuant to par. B5.4.5 of IFRS 9, with a forward-looking adjustment to the interest rate, considering
the fact that the ECB has the option to change interest rates at its discretion in defining monetary policy rates (as it did in April
and December 2020, introducing the special interest rate periods and, more recently, in October 2022, in the terms illustrated
above). The interest is therefore recognised periodically based on the interest rate of the instrument for each period (-0.5%
until 24 June 2020, -1% until 23 June 2022, and, thereafter, based on existing conditions, illustrated below) as required by
paragraph B5.4.5 of IFRS 9.
Following the increases in interest rates approved by the Governing Council of the ECB starting in July 2022, it was
necessary to redetermine the effective interest rate applicable to each operation, starting from the date of recalibration of the
interest rates, with the goal of reallocating the benefit resulting from the specific mechanism of the average of interest rates in
the reference period of the benefit. Lastly, the recalibration of the conditions applicable to TLTRO III financing defined on 27
October 2022 entailed the recognition of the residual benefit up to the date of the changes to contractual conditions (i.e., up to
22 November 2022). That approach is in line with that adopted in the past for recognising interest during special periods (i.e.,
recognition of the additional benefit of -50 bps in the period from June 2020 - June 2022), as it was considered as the
\u201cmonetary policy\u201d floating rate applicable in the reference period. Starting on 23 November 2022, interest on existing TLTRO
III financing is recognised based on the DFR in force at each time.
As previously noted in the 2021 Financial Statements, on 6 January 2021, ESMA issued a Public Statement with the aim of
promoting transparency in the banks\u2019 IFRS financial reports concerning the accounting treatment of TLTRO III: in light of the
significant numerical impacts of the operations in question and of the level of judgment required for defining the accounting
policy, ESMA highlighted the importance of providing in the financial statements an adequate level of transparency on the
accounting treatment of operations.
Therefore, in line with the requests from ESMA and in addition to the disclosure on the accounting policies adopted to
recognise the TLTRO III operations, the ISP Group provides information also on the resulting quantitative impacts of the
recognition of interest.
Recognition of revenues and costs
Revenues are gross flows of economic benefits deriving from the performance of the company's ordinary business and are
recognised when control of the goods or services is transferred to the customer, at an amount that represents the amount of
consideration that the company considers it is entitled to. In particular, revenues are recognised by applying a model that
must meet the following criteria:
- identification of the contract, defined as an agreement in which the parties are committed to perform their respective
obligations;
- identification of the individual performance obligations contained in the contract;
- determination of the transaction price, i.e. the expected consideration for the transfer of the goods or services to the
customer;
- allocation of the transaction price to each performance obligation, based on the sale prices of the individual obligation;
- recognition of revenues when (or as) the performance obligation is satisfied by transferring a promised good or service to
a customer.
The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and
services promised. It may include fixed or variable amounts or both. Revenues from variable fees are recognised in the
income statement if they can be reliably estimated and only if it is highly likely that all or a significant part of this fee will not
need to be reversed from the income statement in future periods. Where there is a high level of uncertainty related to the
nature of the consideration, it will be recognised only when this uncertainty is resolved.
Revenues may be recognised:
- at a specific point in time, when the entity satisfies a performance obligation by transferring a promised good or service to
the customer, or
- over time, as the entity satisfies a performance obligation by transferring a promised good or service to the customer.
The good is transferred when, or in the period when, the customer acquires control of the good.
In particular:
- interest is recognised on accrual on the basis of the contractual interest rate or the effective interest rate in the case of
application of amortised cost. Interest income (or interest expense) includes differentials and positive (or negative)
margins accrued up to the reporting date, relating to financial derivatives:
a) hedging interest-generating assets and liabilities;
b) classified in the balance sheet in the trading book, though related to financial assets and/or liabilities designated at
fair value through profit or loss (fair value option) in management terms;
c) related in management terms to assets and/or liabilities classified in the trading book and providing for the
settlement of differentials or margins with different maturities;
- overdue interest, which may be provided for by the relevant contracts is recorded in the income statement solely at the
time of collection;
- dividends are posted in the income statement when their distribution is approved, unless this date is not known or the
information is not immediately available, in which case they may be recognised when they are collected;
- commission income from services is recorded, on the basis of the existence of contractual agreements, in the period in
which the services have been rendered. Commission income included in the amortised cost for the purposes of
determining the effective interest rate is recognised under interest;
- profits and losses from securities trading are recognised in the income statement at the date of sale, on the basis of the
difference between the consideration paid or collected and the carrying value of such instruments;
- revenues deriving from the sale of non-financial assets are recorded at the date of sale, or when the performance
obligation towards the customer is satisfied.
Costs are recognised in the income statement on an accruals basis. Costs relating to the receipt and performance of
contracts with customers are recognised in the income statement in the periods when the related revenues are recognised.
Use of estimates and assumptions in preparing financial reports
The preparation of financial reports requires the use of estimates and assumptions that may have a significant effect on the
amounts stated in the balance sheet and income statement, and on the contingent assets and liabilities reported in the
financial statements. Estimates are based on available information and subjective evaluations, also founded on past
experience, which are used to formulate reasonable assumptions in measuring operating events. Given their nature, the
estimates and assumptions used may vary from year to year, and hence it cannot be excluded that current amounts carried in
the financial statements may differ significantly in future financial years as a result of changes in the subjective evaluations
made.
If there are greater uncertainties and/or the assets being measured are particularly material, the valuation is supported by
specific fairness opinions from external appraisers/experts.
The main cases for which subjective evaluations are required to be made by corporate management include:
- the measurement of impairment losses on loans, investments, and, generally, other financial assets;
- the use of measurement models for determining the fair value of financial instruments not listed on active markets;
- the evaluation of the appropriateness of amounts stated for goodwill and other intangible assets;
- the fair value measurement of real estate and valuable art assets;
- the measurement of personnel funds and allowances for risks and charges;
- the estimates and assumptions on the collectability of deferred tax assets;
- the demographic (linked to the estimated mortality of insured people) and financial (deriving from the possible trend in
financial markets) suppositions used to structure insurance products and define the basis for calculating
integrative reserves provided for in insurance regulations, in addition to the shadow reserves, and liability adequacy test
provided for in IFRS 4.
For some of the types listed above, the main factors subject to estimates by the Group and which determine the carrying
value of assets and liabilities in the financial statements can be identified. The following are noted, by way of example:
- to determine the fair value of financial instruments not listed on active markets, if the use of parameters that cannot be
obtained from the market is necessary, the main estimates regard, on one hand, development of future cash flows (or
even income flows, in the case of equities), possibly conditional on future events and, on the other, the level of specific
input parameters not listed on active markets;
- the estimates for the assignment of loans and debt securities classified as Financial assets measured at amortised cost
and Financial assets measured at fair value through other comprehensive income to the three credit risk stages required
by IFRS 9 and to calculate the related expected credit losses involve:
o the determination of the parameters for a significant increase in credit risk, essentially based on models for
measuring the probability of default (PD) upon origination of the financial assets and at the reporting date;
o the inclusion of forward-looking factors, including macroeconomic factors, for the determination of the PD and LGD;
o the determination of the likelihood of sale of impaired financial assets, through the realisation of market positions;
- to determine the future cash flow estimates from non-performing loans, a number of items are considered: the expected
recovery times, the presumed realisable value of guarantees and the costs to be sustained for the recovery of
credit exposure;
- to determine the value in use of intangible assets with an indefinite life (brand name and goodwill) with regard to the
Cash-Generating Units (CGU) comprising the Group, the future cash flows in the forecasting period of the analysis and
the flows used to determine the terminal value, generated by the CGU, are subject to estimate, separately and
appropriately discounted. Also the cost of capital is among the items subject to estimate;
- to determine the value in use of intangible assets with a finite life (asset management and insurance portfolios) with
regard to the CGUs comprising the Group, the useful life is subject to estimate, on the one hand, as well as the future
cash flows arising from the asset, on the other. The cost of capital is subject to estimate in the case of intangible assets
with a finite life as well;
- the fair value measurement of real estate and valuable art assets is based on valuations prepared by qualified
independent firms. Lease rentals, selling prices, discount rates and capitalisation rates are estimated in order to conduct
the appraisals of the properties, while to conduct the appraisals on the valuable art assets, the estimate of the value is
gathered from the performance of the exchanges of similar works (in terms of technique, size, subject) by the same
author or regional movements and schools that are close with regard to style and technique;
- to measure post-employment benefits, the present value of the obligations is subject to estimate, taking into account the
flows, appropriately discounted, arising from past time-series analyses and the demographic curve;
- to measure allowances for risks and charges, the amount of outflows necessary to fulfil the obligations is estimated,
where possible, taking into account the effective probability of having to utilise resources;
- to determine the value of deferred tax items, the likelihood of an effective future tax burden is estimated (taxable
temporary differences) and the level of reasonable certainty \u2013 if it exists \u2013 of future taxable amounts at the time when the
tax deductibility occurs (deductible temporary differences and tax losses carried forward).
The classification drivers for financial assets
The classification of the financial assets into the three categories established by the standard depends on two classification
drivers: the business model used to manage the financial instruments and the contractual cash flow characteristics of the
financial assets (or SPPI Test).
The classification of the financial assets derives from the combined effect of the two drivers mentioned above, as
described below:
- Financial assets measured at amortised cost: assets that pass the SPPI test and come under the Hold to Collect (HTC)
business model;
- Financial assets measured at fair value through other comprehensive income (FVOCI): assets that pass the SPPI test
and come under the Hold to Collect and Sell (HTCS) business model;
- Financial assets measured at fair value through profit or loss (FVTPL): this is a residual category, which includes
financial instruments that cannot be classified in the previous categories based on the results of the business model test
or the test of the contractual cash flow characteristics (SPPI test not passed).
SPPI test
For a financial asset to be classified as at amortised cost or at FVOCI \u2013 in addition to the analysis of the business model \u2013 the
contractual terms of the asset must also provide, on specified dates, for cash flows that are solely payments of principal and
interest (SPPI). This analysis must be carried out for loans and debt securities in particular.
The SPPI test must be carried out on each individual financial instrument at the time of recognition in the balance sheet.
After initial recognition, and as long as it is recognised in the balance sheet, the asset is no longer subject to new assessment
for the purposes of the SPPI test. If a financial instrument is derecognised and a new financial asset is recognised, the SPPI
test must be performed on the new asset.
For the application of the SPPI test, IFRS 9 provides the following definitions:
- Principal: this is the fair value of the financial asset at initial recognition. This value may change over the life of the
financial instrument, for example as a result of repayments of part of the principal;
- Interest: this is the consideration for the time value of money and for the credit risk associated with the principal amount
outstanding during a particular period of time. It can also include consideration for other basic lending risks and costs and
a profit margin.
In assessing whether the contractual flows of a financial asset can be defined as SPPI, IFRS 9 refers to the general concept
of a \u2018basic lending arrangement\u2019, which is independent of the legal form of the asset. When contract terms introduce exposure
to risks or volatility in the contractual cash flows that is inconsistent with the definition of a basic lending arrangement, such as
exposure to changes in share or commodity prices, the contractual cash flows do not meet the definition of SPPI.
The application of the classification driver based on contractual cash flows sometimes requires a subjective judgement and,
consequently, the establishment of internal application policies.
In cases of modified time value of money \u2013 for example, when the interest rate of the financial asset is recalculated
periodically, but the frequency of the recalculation or the frequency of payment of the coupons does not reflect the nature of
the interest rate (such as when the interest rate is recalculated monthly on the basis of a one-year rate) or when the interest
rate is recalculated regularly on the basis of an average of particular short or medium-to-long term rates \u2013 an entity should
assess, using both quantitative and qualitative information, whether the contractual cash flows still meet the definition of SPPI
(benchmark cash flows test). If the test shows that the (undiscounted) contractual cash flows are \u201csignificantly different\u201d from
the (also undiscounted) cash flows of a benchmark instrument (i.e. without the modified time value element), the contractual
cash flows cannot be considered to meet the definition of SPPI.
The standard requires specific analyses (\u201clook through test\u201d) to be performed and these are therefore also conducted on
multiple contractually linked instruments (CLIs) that create concentrations of credit risk for debt repayment and on non-
recourse assets, for example in cases where the loan can only be enforced on specified assets of the debtor or on the cash
flows from specified assets.
The presence of contractual clauses that may change the frequency or amount of the contractual cash flows must also be
considered to determine whether those cash flows meet the requirements to be considered as SPPIs (e.g. prepayment
options, the possibility of deferring contractually agreed cash flows, embedded derivative instruments, subordinated
instruments, etc.).
However, as envisaged by IFRS 9, a contractual cash flow characteristic does not affect the classification of the financial
asset if it could have only a de minimis effect on the contractual cash flows of the financial asset (in each year and
cumulatively). Similarly, if a cash flow characteristic is not genuine, i.e. if it affects the instrument\u2019s contractual cash flows only
on the occurrence of an event that is extremely rare, highly abnormal and very unlikely to occur, it does not affect the
classification of the financial asset.
For operations in debt securities, the Intesa Sanpaolo Group uses the services offered by well-known info-providers for the
performance of the SPPI Tests. This choice, on one hand, provides front office staff who deal in securities with an immediate
result for the performance of the test, enabling the streamlining of purchasing processes, and, on the other hand, provides
access to market approaches shared by numerous operators and audit firms. Only in cases where the securities are not
managed by info-providers, the test is carried out manually using a proprietary tool based on an internally developed
methodology (decision-making trees).
A proprietary tool based on an internally developed methodology (decision-making trees) has also been developed for
carrying out the SPPI test for the lending processes. In particular, given the significant differences in characteristics, the
procedure differs between products related to a contractual standard (typically the retail loan portfolio) and tailor-made loans
(typically the corporate loan portfolio).
For standard products, the SPPI test is carried out during the structuring of the contractual standard, through the \u201cNew
Product Coordination\u201d process, and the result of the test is applied to all the individual relationships related to the same
catalogue product. For tailor-made products, on the other hand, the SPPI test is carried out for each new credit
line/relationship submitted to the decision-making body through the use of the proprietary tool.
The decision-making trees \u2013 included in the proprietary tool \u2013 have been produced internally (both for debt securities and
loans) and capture the possible non-SPPI compliant characteristics. They take account of the instructions provided by IFRS 9,
as well as the interpretations of the standard made by the Group. The trees are used both for the implementation of the rules
of the proprietary tool and for the verification and validation of the methodology adopted by the info-providers.
Business model
With regard to the business models, IFRS 9 identifies three cases relating to the way in which cash flows and sales of
financial assets are managed:
- Hold to Collect (HTC): this is a business model whose objective is achieved by collecting the contractual cash flows of
the financial assets included in the portfolios associated to it. The inclusion of the portfolio of financial assets in this
business model does not necessarily result in the inability to sell the instruments, but the frequency, value and timing of
sales in prior periods, the reasons for the sales, and the expectations about future sales, need to be considered;
- Hold to Collect and Sell (HTCS): this is a mixed business model whose objective is achieved by collecting the contractual
cash flows of the financial assets in portfolio and (also) through the sale of the financial assets, which is an integral part
of the strategy. Both activities (collection of contractual flows and sale) are indispensable for achieving the business
model\u2019s objective. Accordingly, sales are more frequent and significant than for an HTC business model and are an
integral part of the strategies pursued;
- Other/Trading: this is a residual category that includes both financial assets held for trading and financial assets
managed with a business model that does not come under the previous categories (Hold to Collect and Hold to
Collect and Sell). In general, this classification applies to a portfolio of financial assets whose management and
performance are measured based on fair value.
The business model reflects the way in which financial assets are managed to generate cash flows for the benefit of the entity
and is defined by top management with the appropriate involvement of the business structures. It is observed by considering
the way in which financial assets are managed and, as a consequence, the extent to which the portfolio\u2019s cash flows derive
from the collection of contractual flows, from the sale of the financial assets, or from both. This assessment is not performed
on the basis of scenarios that the entity does not reasonably expect to occur, such as \u2018worst case\u2019 or \u2018stress case\u2019 scenarios.
For example, if an entity expects that it will sell a particular portfolio of financial assets only in a stress case scenario, that
scenario does not affect the entity\u2019s assessment of the business model for those assets if the entity reasonably expects that
such a scenario will not occur.
The business model does not depend on management\u2019s intentions regarding an individual financial instrument, but refers to
the way in which groups of financial assets are managed in order to achieve a specific business objective.
In summary, the business model:
- reflects the way in which financial assets are managed to generate cash flows;
- is defined by top management, with the appropriate involvement of the business structures;
- must be observable by considering the way the financial assets are managed.
In operational terms, the assessment of the business model is carried out in line with the company\u2019s organisation, the
specialisation of the business functions, the risk cascading model, and the assignment of delegated powers (limits).
All relevant factors available at the date of the assessment are used in the assessment of the business model. The above
information includes the strategy, the risks and their management, the remuneration policies, the reporting, and the amount of
the sales. In the analysis of the business model, the elements investigated must be consistent with each other and, in
particular, must be consistent with the strategy pursued. Evidence of activities not in line with the strategy must be analysed
and duly justified.
In this regard, and in relation to the business models under which the financial assets are held, a specific set of \u201cBusiness
Model Rules\u201d (approved by the competent levels of governance) has been drafted for the Parent Company and Banking
Group Companies. It defines and sets out the components of the business model in relation to the financial assets included in
the portfolios managed as part of the operations of the Intesa Sanpaolo Group\u2019s business structures. In further detail, the
mapping of the business model adopted by the various structures through which the Group operates, with regard to both
loans and receivables and debt securities, takes account of the structure of the division model and the Corporate Centre; this
structure has been identified as the relevant level for formulating and representing the various business models applied by the
Group\u2019s risk-taking centres.
Within the Chief Risk Officer Area, the Financial and Market Risks Head Office Department of the Parent Company provides
high-level supervision of the procedure required for determining the business model within which a given set of assets is held
and verifies the need for any updates (to be incorporated, at least annually, in the Business Model Rules document).
Monitoring of the business model
The monitoring of the reference business model of the various structures through which the Group operates is performed by
the Financial and Market Risks Head Office Department, which uses indicators intended to verify the consistency of the
declared strategy with that pursued within the business models; these indicators, differentiated for the various business
models, have been developed in accordance with IFRS 9 and corporate rules and procedures.
For the Hold to Collect portfolios, the Group has set limits for frequent but not significant sales to be considered eligible
(individually or in aggregate), or for infrequent sales even if their amount is significant, and the parameters have also been
established for identifying sales as being consistent with that business model because they relate to an increase in credit risk
or for securities nearing maturity.
More specifically, within an HTC business model, sales are allowed:
- in the event of an increase in credit risk, which occurs:
o for securities, when there is a downgrade of predetermined notches with respect to the rating upon origination.
The approach adopted differentiates the number of notches according to the rating upon origination, in line with the
method used to identify significant deterioration, i.e. for the staging assignment;
o for loans, if they are sales of non-performing loans or loans classified as Stage 2;
- for securities nearing maturity (i.e., according to the Group rules, in the 6 months preceding maturity), provided that the
amount collected is close to the current value of the remaining contractual flows;
- when they are frequent but not significant in terms of value or occasional even if significant in terms of value, subject to
authorisation assessment by the competent Control bodies. In order to determine these aspects, thresholds of frequency
and significance have been set:
o frequency is defined as the percentage ratio between the number of positions sold over the year and the number of
portfolio positions;
o significance is defined as the percentage ratio between the nominal value of the sales during the current year and
the nominal value of the instruments held in the portfolio.
With regard to the determination of the \u201cRisks\u201d and the \u201cReporting\u201d for the HTCS and Trading business models, the provisions
of the RAF and Market Risk Charter and of internal policies in the area of market risk controls apply in principle, and
measures are concurrently established for monitoring the consistency of the HTCS and Other/Trading business models.
With regard to the HTCS business model, IFRS 9 does not provide for the need for limits on the frequency or the value of the
sales. However, the Group has established indicators for debt securities only in order to ensure that they are properly
assigned to the chosen business model over time. These indicators are:
- The holding period, which measures the time for which a certain instrument has been held in portfolio;
- Turnover rate, which measures the speed with which positions in portfolio turn over during a predefined period of time.
Within the framework of the monitoring of the indicators set out above, limits and early-warning thresholds apply according to
the overall strategies pursued by the HTCS portfolio.
Finally, with regard to debt or equity securities held for trading, a measure of the consistency of inclusion in the chosen
business model applies, represented by the indicator of \"expected average permanence\" (so-called Vintage) which measures
the observed holding period of all securities in portfolio.
The monitoring measures relating to the various business models are subject to regular reporting through technical
committees.
Amortised cost measurement
The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial
recognition net of any principal repayments, plus or minus cumulative amortisation, calculated using the effective interest rate
method, of any difference between initial amount and amount at maturity and net of any reduction for impairment.
The effective interest rate is the rate that exactly discounts future cash payments or receipts through the expected life of the
financial instrument or through the subsequent date for recalculation of the price to the present value of the financial asset or
financial liability. In the calculation of the present value, the effective interest rate is applied to the flow of future cash receipts
or payments through the entire useful life of the financial asset or liability or for a shorter period when certain conditions recur
(for example review of market interest rates).
After initial recognition, amortised cost enables allocation of revenues and costs directly by decreasing or increasing the value
of the instrument over its entire expected life via the amortisation process. The determination of amortised cost is different
depending on the fact that financial assets/liabilities have fixed or floating rates and \u2013 in this last case \u2013 if the volatility of the
rate is known or not beforehand. For instruments with fixed rate or fixed rate by time bands, future cash flows are quantified
on the basis of the known interest rate (sole or floating) over the life of the loan. For financial assets/liabilities with a floating
rate, for which the volatility is not known beforehand (for example because it is linked to an index), the determination of cash
flows is carried out based on the last rate available. At every revision of the interest rate, the amortisation plan and the
effective interest rate for the entire life of the investment, that is, until maturity, are recalculated. Any changes are recorded in
the income statement as income or loss.
Measurement at amortised cost is applied for the financial assets measured at amortised cost and for the financial assets
measured at fair value through other comprehensive income, as well as the financial liabilities measured at amortised cost.
Financial assets and liabilities traded at market conditions are initially recognised at fair value, which normally corresponds to
the amount disbursed or paid including, for instruments measured at amortised cost, transaction costs and any directly
attributable fees.
Transaction costs include internal or external marginal costs and income attributable to the issue, the acquisition or the
disposal of a financial instrument which are not debited to the customer. These commissions, which must be directly
attributable to the single financial asset or liability, modify the original effective return, thereby the effective interest rate
associated to the transaction differs from contractual interest rate. Transaction costs do not include costs/income referred to
more than one transaction and the components related to events which may occur during the life of the financial instrument,
but which are not certain at the time of the initial agreement, such as for example: commissions for retrocession, for non-use,
for advance termination. Furthermore, amortised cost does not include costs which would be sustained independently from
the transaction (e.g. administrative and communication costs, stationery expenses), those, which though directly attributable
to the transaction are part of standard practice for the management of the financing (e.g. activities related to the loan granting
process), as well as commissions for services received following structured finance activities which would in any case have
been received independently from the subsequent financing of the transaction (e.g. facility and arrangement fees).
With reference to loans, the following costs are considered directly attributable to the financial instrument: fees paid to
distribution networks, fees paid for the origination and/or the participation in syndicated loans and lastly, up-front fees
correlated to loans disbursed at rates exceeding market rates. Income considered in the calculation of amortised cost
includes: up-front fees correlated to loans disbursed at rates below market rates, income for the participation in syndicated
loans and brokerage commissions received.
For debt securities not measured at fair value through profit or loss, the following are considered transaction costs:
commissions on contracts with brokers operating on the Italian stock exchange, commissions paid to dealers operating on the
Italian and foreign stock and bond markets defined on the basis of the commission tables. Stamp duty is not considered in
amortised cost since immaterial.
Regarding securities issued, amortised cost considers placement commissions on bond issues paid to third parties, amounts
paid to Exchanges and remuneration paid to Independent auditors for the activities performed for each single issue, while
amortised cost does not consider commissions paid to rating agencies, legal and advisory/review expenses for the annual
update of prospectuses, the costs for the use of indexes and commissions which originate during the life of the bond issue.
Amortised cost is also applied for the measurement of loss incurred by the financial instruments listed above as well as for the
measurement of instruments issued or purchased at a value other than fair value. The latter are measured at fair value,
instead of the amount collected or paid, by discounting expected future cash flows at a rate equal to the effective rate of
return of similar instruments (in terms of credit rating, contractual expiry, currency, etc.), with the simultaneous recognition in
the income statement of a financial charge or income; after initial recognition, these are measured at amortised cost with the
registration of higher or lower effective interest with respect to nominal interest. Lastly, structured liabilities that are not
measured at fair value through profit or loss, for which the embedded derivative has been separated from the financial
instrument, are also measured at amortised cost.
As specified by IFRS 9, in some cases, a financial asset is considered credit-impaired at initial recognition because the credit
risk is very high, and in the case of a purchase it is purchased at a deep discount (with respect to the initial disbursement
value). If these financial assets, based on the application of the classification drivers (SPPI Test and business model), are
classified as assets measured at amortised cost or at fair value through other comprehensive income, they are classed as
Purchased or Originated Credit Impaired (POCI) assets and are subject to special treatment for the impairment process. In
addition, for the financial assets classed as POCI, the credit-adjusted effective interest rate is calculated, at the initial
recognition date, which requires the inclusion of the initial expected credit losses in the cash flow estimates. This credit-
adjusted effective interest rate is used for the application of the amortised cost and the consequent calculation of interest.
For non-performing loans arising from business combinations, the difference between the initial recognition amount (the fair
value determined in the PPA) of the POCIs and the previous carrying amount at the acquired entity is split into two
components: one related to the lower recoverable cash flows estimated at fair value, which therefore include the expected
credit losses over their entire remaining life, and the other related to the discounting of those lower recoverable cash flows.
Please note that the reversal of discounting (connected with the estimate of recoverable cash flows attributed to non-
performing loans at the moment of the PPA) is recognised, on a pro-rata basis, among interest income so as to supplement
the contractual interest rate with the higher return resulting from the lower value attributed to the recoverable cash flows,
which, as mentioned above, take into account the expected losses over the entire remaining life of the POCI assets.
The amortised cost measurement criterion is not applied to hedged financial assets/liabilities for which fair value changes
related to the risk hedged are recorded through profit or loss. The financial instrument is again measured at amortised cost in
the case of hedge termination; from that moment the fair value changes recorded before are amortised, calculating a new
effective interest rate which considers the value of the loan adjusted by the fair value of the hedged part, until the natural
expiry of the hedge. Furthermore, as already mentioned in the paragraphs relating to financial assets and liabilities measured
at amortised cost, measurement at amortised cost is not applied to short-term assets/liabilities for which the time value is
deemed to be immaterial and to loans without a definite maturity or revocable loans.
Impairment of assets
Impairment of financial assets
At each reporting date, pursuant to IFRS 9, financial assets other than those measured at fair value through profit or loss are
subject to an assessment aimed at verifying whether there is any evidence that the carrying value of the assets may not be
fully recoverable. A similar analysis is also performed for loan commitments and for guarantees given that must be tested for
impairment under IFRS 9.
In preparation for the determination of the impairment losses, at each reporting date the financial instruments must be
assigned to the following categories (Stage Assignment or Staging):
- Stage 1: comprising financial instruments for which, from their initial recognition up to the reporting date, there is no
evidence of a significant increase in credit risk;
- Stage 2: it comprises financial assets that have had a significant increase in credit risk since initial recognition;
- Stage 3: if there is evidence of impairment, these financial assets \u2013 in line with any other assets pertaining to the same
counterparty \u2013 are considered impaired and are therefore included in Stage 3.
The impaired exposures consist of financial assets classified in the categories of bad loans, unlikely-to-pay (UTP) loans
and exposures past due by more than ninety days, defined in Bank of Italy Circular 272/2008.
Impairment of performing financial assets
For financial assets for which there is no evidence of impairment (unimpaired financial instruments), it is necessary to check
whether there are indicators that the credit risk of the individual transaction has increased significantly since initial recognition.
This check, in terms of classification (or, more precisely, staging) and measurement, has the following consequences:
- where these indicators exist, the financial asset is included in Stage 2. In this case, in compliance with international
accounting standards and despite the absence of an actual impairment, the measurement consists of the recognition of
value adjustments equal to the lifetime expected credit losses of the financial instrument. These adjustments are subject
to revision at each subsequent reporting date, both to periodically check their consistency with the continuously updated
loss estimates and to take account \u2013 if the indicators of \u201csignificantly increased\u201d credit risk are no longer present \u2013 of the
change in the forecast period for the calculation of the expected credit loss;
- where these indicators do not exist, the financial asset is included in Stage 1. In this case, in compliance with
international accounting standards and despite the absence of an actual impairment, the measurement consists of the
recognition of the 12-month expected credit losses for the specific financial instrument. These adjustments are subject to
revision at each subsequent reporting date both to periodically check their consistency with the continuously updated
loss estimates and to take into account \u2013 if there are indicators that the credit risk has \u201csignificantly increased\u201d \u2013 the
change in the forecast period for the calculation of the expected loss.
With regard to the measurement of financial assets and, in particular, the identification of the \u201csignificant increase\u201d in credit
risk (a necessary and sufficient condition for the classification of the asset being measured as Stage 2), the following factors
constitute the key elements to be taken into account, in accordance with the standard and its operational implementation by
the Intesa Sanpaolo Group:
- the variation (beyond set thresholds) of the lifetime probabilities of default compared to the time of initial recognition of
the financial instrument. This is therefore an assessment made on a \u201crelative\u201d basis, which constitutes the main driver;
- the presence of a past due position that \u2013 subject to the materiality thresholds identified by the regulations \u2013 has been in
that status for at least 30 days. If these circumstances apply, the credit risk of the exposure is considered to have
\u201csignificantly increased\u201d and the exposure is therefore transferred to Stage 2 (when the exposure was previously included
in Stage 1);
- the presence of forbearance measures, which \u2013 again on a presumption basis \u2013 result in the classification of the
exposures under those whose credit risk has \u201csignificantly increased\u201d since initial recognition;
- lastly, for banks belonging to the international scope, some of the indicators from the credit monitoring systems
specifically used by each bank are also considered for the purposes of the transfer between \u201cstages\u201d where appropriate.
This refers in particular to the watch lists, i.e. the credit monitoring systems that \u2013 based on the current credit quality of
the borrower \u2013 place performing exposures above a certain level of risk within a particular range.
Focusing on the main trigger out of those referred to above (i.e. the change in the lifetime probability of default), the significant
increase in credit risk (\u201cSICR\u201d) is determined by comparing the relative change in the lifetime probability of default recorded
between the initial recognition date of the relationship and the observation date (Lifetime PD Change) with predetermined
significance thresholds. The assignment of a Lifetime PD to the individual relationships is carried out by allocating the ratings
for each segment according to the masterscale at both the initial recognition date and the observation date. Ratings are
determined based on internal models, where available, or on business models. If there are no ratings, the Benchmark PDs
are assigned to the type of counterparty being assessed.
The significant deterioration is therefore based on the increase in the lifetime PD caused by downgrades of the position from
its origination to the reporting (observation) date, as well as the change in the forecast of the future macroeconomic factors.
The above-mentioned \u201crelative\u201d change in lifetime PD is an indicator of the increase or decrease in credit risk during the
reporting period. To establish whether, in accordance with IFRS 9, any increase in credit risk can be considered \u201csignificant\u201d
(and therefore entail a transition between stages), it is necessary to set specific thresholds. Increases in lifetime PD below
these thresholds are not considered significant and, consequently, do not result in the transfer of individual credit
lines/tranches of debt securities from Stage 1 to Stage 2. However, this transfer is required if there are relative increases in
PD above these thresholds. The thresholds used have been estimated based on a process of simulations and optimisations
of forecast performance, carried out using granular historical portfolio data. Specific thresholds are set for the Corporate,
Retail, Large Corporate and Retail SME models and extended to the other models based on methodological affinity. The
thresholds differ in terms of residual maturity, annual granularity and rating class.
The determination of the thresholds has been calibrated to find a suitable balance between the performance indicators
relating to the ability of the thresholds to:
- detect Stage 2 positions before their transition to default;
- identify positions for which a return to Stage 1 is due to an actual improvement in credit rating.
Some specific considerations apply for the \u201cstaging\u201d of the debt securities. Unlike loans, for this type of exposure, sales and
purchases after initial recognition (made using the same ISIN) may form part of the ordinary management of the positions
(with the consequent need to identify methods to be adopted for identifying the sales and repayments in order to determine
the remaining quantities of the individual transactions that need to be allocated a credit quality/rating upon origination to be
compared with that parameter at the reporting date). In this regard, the use of the \u201cfirst-in-first-out\u201d or \u201cFIFO\u201d method (for the
recognition of the recorded ECL in the income statement, in the event of sales or repayments) was considered to help in
providing a more transparent management of the portfolio, also for the front office operators, while also enabling the
continued updating of the credit rating based on new purchases.
Once the allocation of the exposures to the various credit risk stages has been established, the expected credit losses (ECL)
are determined at individual transaction or securities tranche level, using the IRB/Business models, based on the parameters
of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), to which appropriate corrections are
made to ensure compliance with the specific requirements of IFRS 9.
The following definitions apply for PD, LGD and EAD:
- PD (Probability of Default): likelihood of migrating from performing to non-performing status over the period of one year.
In models consistent with supervisory provisions, the PD factor is typically quantified through the rating. In the Intesa
Sanpaolo Group, the PD values are derived from internal rating models where available, supplemented by external
ratings or segment/portfolio average figures;
- LGD (Loss Given Default): percentage loss in the event of default. In the models consistent with supervisory provisions, it
is quantified through the historical experience of discounted recoveries on exposures that have become non-performing;
- EAD (Exposure At Default) or credit equivalent: amount of the exposure at the time of default.
As mentioned above, in order to comply with IFRS 9, specific adjustments had to be made to these factors, including in
particular:
- adoption of a Point in Time (PIT) PD compared to the Through the Cycle (TTC) PD used for Basel purposes;
- removal of some additional components from the TTC LGD, such as indirect costs (non-recurring costs) and an
additional margin of conservatism specifically introduced for the regulatory models, as well as the component linked to
the economic downturn;
- the introduction of specific treatment in relation to the regulatory provisions, in order to estimate the accounting LGD, to
include in the modelling (in line with the indications of IFRS 9 on using entity-specific information) the estimates of
internal recoveries exceeding the regulatory threshold of the Maximum Recovery Period, i.e., the maximum time limit
beyond which the Supervisory Authority assumes that nothing will be recovered;
- the use of PDs and, where necessary, multi-period LGDs, to determine the lifetime expected loss of the financial
instrument (Stages 2 and 3);
- the use of the effective interest rate of the individual transaction in the discounting of the expected future cash flows,
unlike in the regulatory models, where the individual cash flows are discounted using the discounting rates determined in
compliance with the prudential regulations.
In relation to the multi-period EAD, in line with IFRS 9 the Intesa Sanpaolo Group refers to the plans at amortised cost for both
loans and debt securities, regardless of the measurement method used (amortised cost or fair value through other
comprehensive income). For loan commitments (margins), on the other hand, the EAD is assumed to be equal to the nominal
amount weighted according to a specific Credit Conversion Factor (CCF).
The measurement of the financial assets also reflects the best estimate of the effects of current and future conditions and in
particular the economic conditions that affect the forward-looking PDs and LGDs. IFRS 9, also based on the guidance from
the international regulators, gives particular importance to information on future macroeconomic scenarios in which the Bank
may find itself and which clearly influence the situation of the debtors, with regard both to the \u201crisk\u201d of migration of exposures
to lower quality classes (and therefore concerning the staging) and to the recoverable amounts (and therefore concerning the
determination of the expected loss on the exposures). In terms of method, various possible alternative approaches designed
to take account of these elements have been analysed. Of the various alternatives considered, the Intesa Sanpaolo Group
has decided to adopt the \u201cMost likely scenario+Add-on\u201d approach. According to this approach, the macroeconomic
conditioning of PD and LGD is carried out through a baseline scenario (\u201cMost Likely\u201d, in line with the approach used for other
business purposes such as, for example, the budget and business plans) and then corrected with an Add-On to include any
differences compared to downside and upside scenarios. If the overall impact of the Add-On on the risk parameters is
positive, the decision has been made to neutralise the effect for both staging and ECL calculation purposes.
The macroeconomic scenario is determined by the Bank\u2019s Research Department using forecasting models that are disclosed
to the market to determine the consensus. Alternative upside and downside scenarios are determined through stress tests of
the input variables of the forecasting models.
In particular, the most likely scenario and alternative scenarios are determined using a set of analytical and stand-alone
forecasting instruments that determine the forecast path for several blocks of variables, namely:
- national accounts and inflation of the top 6 Eurozone countries, the United States and Japan;
- official rates (ECB, Fed, BoJ), EUR and USD swap rate curves, and several points of the government curves;
- exchange rates for EUR, USD, JPY and GBP;
- stock market indices (DJ Eurostoxx 50 and S&P 500);
- Brent price;
- some specific data for the Italian economy (industrial production, real estate prices, employment, public finance
balances).
These forecasts are then processed using the Oxford Economics multi-country structural Global Economic Model, where they
replace the forecast paths of the baseline scenario provided by the company with the periodic updating of the database. The
model is then solved to derive a consistent global forecasting framework, including variables for which no specific models
have been developed, and to obtain a simulation environment that can be used to generate alternative scenarios. This step
may require some iterations, particularly if the forecasting framework generated internally is significantly different from the one
provided by Oxford Economics. If this is the case, further fine-tuning may be needed for specific secondary variables that the
analysts consider to be inconsistent with the forecast scenario or that have an unexplainable quarterly volatility.
The alternative paths are selected using external information. In particular:
- average annual GDP growth rates of several countries: this is the key driver for the simulation and the deviations are
determined to replicate the dispersion of the growth estimates published by Consensus Economics in the most recent
report available at the date of the simulation, considering the minimum and maximum forecasts (after applying a filter to
identify and eliminate possible outliers). If there are outliers, these are discarded and the remaining maximum and
minimum values are considered. Since consensus estimates are only available for the first two years of the simulation
period, an extrapolation of the deviations identified for the first two years is used for the third year;
- stock market indices (DJ Eurostoxx 50, S&P 500) and US residential real estate prices: the minimum and maximum
forecasts of the Thomson Reuters panel are used as a reference;
- Italian residential real estate prices: since no consensus estimates are currently available, the alternative paths are
based on the distribution of the historical quarterly changes available from 1980 to the current quarter.
The percentile value identified is used, for the most likely scenario, to determine the variations corresponding to a probability
gap, calculated through statistical analysis of the historical distribution of the observations. The two (positive and negative)
changes with respect to the most-likely scenario are then used to calculate the level of the individual identified indices,
reconstructing the two alternative paths (one positive and one negative) for each of them that represent the input for the
determination of the Add-On. The probability gap used is identified based on the variability characteristics of the series, to
obtain a significant deviation from the most-likely scenario.
In addition to defining the alternative paths, a map of possible additional factors is maintained, i.e., adverse idiosyncratic
events or scenarios, not explicitly incorporated in the time series used for the construction of the most-likely scenario or in the
alternative paths, which can generate further significant effects on expected losses.
The following is assessed for these events/scenarios:
- the possible time frame;
- the degree of inclusion in the most-likely scenario or the alternative paths;
- the potential impact, assessed in qualitative terms.
The map of additional factors also draws on the list of risk factors contained in the forecast reports of the IMF (World
Economic Outlook) and the European Commission and may change over time.
Within the assessment of the time frame for the additional factors, note is made if the factor cannot be placed within a specific
time period, which makes its incorporation into the most-likely scenario or alternative paths unfeasible.
The assessments made take account of the fact that the consensus estimates may include forecasts that already incorporate
the total or partial realisation of one or more risk factors in their estimates, which means that the alternative paths may already
incorporate these additional factors to some extent.
Where there is considerable uncertainty in the national and international macroeconomic forecasts, as well as significant
deviations in terms of best-case forecasts with respect to the TTC scenario, prudential factors may be introduced in relation to
the deviations in the minimum and maximum values of the variables based on the above-mentioned consensus or historical
figures.
The above macroeconomic scenarios (most likely and alternative scenarios) are used in internal models to determine the
point-in-time (PIT) parameters.
Specifically, the time series of default rates acquired from the Bank of Italy are differentiated over the main economic macro-
sectors (e.g. consumer households, family businesses, construction) and, for each of these, specific satellite models establish
the relationships with the macroeconomic variables in order to obtain the forecast default rates. In turn, these impact the TTC
transition matrices between rating classes and thus provide the PIT transition matrices for each scenario (most likely and
alternative scenarios). These give rise to the lifetime conditional PD.
In particular, the TTC matrices are calculated using internal default rates for the Corporate, Retail SME and Retail segments,
whereas the Bank of Italy system rates are used for the Low Default segments, because the internal time series data for those
segments is less extensive. The forward-looking point-in-time matrices, on the other hand, are calculated using the system
default rates for all the segments.
A similar process is used to determine the PIT LGD grids.
Taking account of the repayment plans of the individual loans, their conditional PD and LGD, residual maturity and staging,
the impairment of performing financial assets is determined.
Impairment of non-performing financial assets
Non-performing loans are represented by bad loans, unlikely to pay and past due positions by more than 90 days.
Non-performing loans classified as bad loans are subject to the following measurement methods:
\u2212 analytical-statistical measurement, which is used for exposures of less than 2 million euro and is based on the use of
specific LGD grids, plus an Add-On to take account of information linked to the evolution of the current conditions related
to management variables highly correlated with the loss performance and forward-looking information relating to the
impact of expected future macroeconomic scenarios (as described in the previous paragraphs);
\u2212 analytical-specific measurement, which is used for customers with exposures exceeding 2 million euro and is based on
the impairment percentages allocated by the manager, following specific analysis and measurements, also based on the
evolution of the current conditions, plus an Add-On to take account of forward-looking information, and in particular
information relating to the impact of future macroeconomic scenarios (except for bad loans backed by mortgage collateral
or relating to property leases for which the impact of future scenarios is included through the method used to determine
the haircuts to the value of the properties pledged as collateral).
The measurement of unlikely-to-pay loans (UTPs) is also performed based on different approaches:
\u2212 analytical-statistical measurement, for exposures of less than 2 million euro, based on the use of specific LGD grids, plus
an Add-On to take account of the already mentioned information linked to the current conditions and the impacts of future
macroeconomic scenarios, as well as continuation in the risk status, in order to penalise positions with greater vintage or
which have no movements and/or recoveries for a particular period of time;
\u2212 analytical-specific measurement, for on-balance sheet exposures of more than 2 million euro, based on the impairment
percentages allocated by the manager, following specific analyses and assessments also based on the evolution of the
current conditions, plus an Add-On to take account, also in this case, of the impacts of future macroeconomic scenarios
and of continuation in the risk status.
For Group companies, the threshold value for analytical-statistical measurement is set by the competent bodies of the
individual companies, in coordination with the structures of Intesa Sanpaolo, at a level that is not, in any event, higher than
that set by the Parent Company.
Regardless of the division of these exposures between those subject to analytical-statistical measurement and those subject
to analytical-specific measurement (as identified above), the add-ons envisaged include the sales scenarios for the
disposable non-performing loans if the business plan and the NPL reduction plan envisage sales and those sales do not lead
to a reclassification pursuant to IFRS 5. The valuation of the disposable non-performing loans therefore considers the
possibility of also realising these loans through their sale.
Non-performing loans classified in the past-due loans category, on the other hand, are subject to analytical measurement
based on statistics, regardless of the amount of the exposure. However, also in this case, the adjustment determined based
on the LGD statistical grids is supplemented to take account of the Add-On attributable to the effect of the evolution of the
current conditions and the future macroeconomic scenarios.
Credit exposures must continue to be carried as non-performing for at least three months after they cease to meet the
requirements for being classified as such (the \u201cprobation period\u201d). Until the conditions are met for reclassification out of the
non-performing category, such exposures are retained in their respective risk classes and measured according to an
analytical-statistical or an analytical-specific approach taking account of their lower risk level.
A brief description is provided below of the methods used for the analytical-specific and analytical-statistical measurement:
- the analytical-specific measurement of bad loans and unlikely-to-pay loans above 2 million euro is a measurement
performed by the managers of the individual positions based on a qualitative and quantitative analysis of the borrower's
financial position, the riskiness of the credit relationship, the targets and strategies for reduction of the non-performing
loans, and any mitigating factors (collateral), taking into account the financial impact of the estimated recovery time.
For bad loans in particular, a series of elements are relevant, which differ according to the characteristics of the positions,
and must be thoroughly and prudently assessed, including the following, listed merely as examples:
o nature of the credit, whether preferential or unsecured;
o net asset value of the borrowers/third party collateral providers;
o complexity of existing or potential litigation and/or the underlying legal issues;
o exposure of the borrowers to the banking system and other creditors;
o last available financial statements;
o legal status of the borrowers and any pending insolvency and/or individual proceedings.
In order to determine the estimated realisable value of loans secured by real estate, and to take into account both the
time series of recoveries and the forward-looking information in accordance with IFRS 9, an approach is applied focused
on the valuation of real estate based on the expected average auction price and the related reduction in the observed
price, with the calculation of average haircuts that differ according to the type of real estate collateral (residential,
commercial, industrial and land). Accordingly, to avoid duplications, a macroeconomic Add-On is not used in the
analytical-specific measurement for bad mortgage loans, because the forward-looking component is already taken into
account through the haircut.
For real-estate bad loans arising from lease contracts, in view of the particular nature of the product (lack of auctions),
the haircut is estimated as the depreciation of the asset with respect to the appraised value observed at the time of
classification as non-performing and the actual price of sale.
In addition, for unlikely-to-pay loans, the measurement is based on a qualitative and quantitative analysis of the
borrower\u2019s financial position and on precise assessment of the risk situation.
The calculation of the impairment loss involves the valuation of the future cash flows that the borrower is considered to
be able to generate and that will also be used to service the financial debt. This estimate must be made based on two
alternative approaches:
o the going concern approach: the operating cash flows of the borrower (or the beneficial owner) continue to be
generated and are used to repay the financial debts contracted. The going concern assumption does not rule out the
realisation of collateral, but only to the extent that this can take place without affecting the borrower's ability to
generate future cash flows. The going concern approach is also used in cases where the recoverability of the
exposure is based on the possible sale of assets by the borrower or on extraordinary transactions. Similarly to the
case of bad loans, haircuts are also used in measuring real-estate collateral for unlikely-to-pay positions. For going-
concern positions, these haircuts are determined on the basis of the haircuts applied in the liquidation process
(gone-concern bad loan or UTP position), while applying a calibration factor equal to the probability of migration of
the UTP positions to the bad loan category;
o the gone concern approach: applicable in cases when it is believed that the borrower's cash flows will cease. This is
a scenario that can apply to positions that are expected to be classified as bad loans. In this context, assuming that
shareholders' interventions and/or extraordinary operations to restructure debt in turnaround situations are not
reasonably feasible, recovery of the credit is essentially based on the value of the collateral that secures the Bank's
credit claim, net of the application of a haircut (determined as for bad loans) and, alternatively, on the realisable
value of the assets, taking into account the liabilities and possible pre-emptive claims;
- the analytical-statistical measurement, performed for bad loans and unlikely-to-pay loans of less than 2 million euro and
for past-due loans has specific features according to the type of exposure involved.
With regard to bad loans, the analytical-statistical measurement is based on the Bad Loan LGD grids, where the LGD
Defaulted Asset model is mainly characterised by the differentiation of the loss rates that, in addition to the regulatory
segment, is based on the continuation in the risk status (\u201cvintage\u201d) and the possible activation of legal recovery
proceedings. The grids are also differentiated for the other significant analysis axes used in the model estimation
(e.g. product type, type of guarantee, geographical area, exposure band, etc.). The recovery time grids are mainly broken
down by regulatory segment and by additional significant analysis axes used in the modelling (e.g. recovery procedures,
exposure band, product type).
For unlikely-to-pay loans, the measurement is performed using statistical LGD grids estimated specifically for positions
classified as unlikely-to-pay loans, in line with the estimated LGD grids for bad loans. The estimation model for the LGD
grid for unlikely-to-pay loans is similar to the one described above for bad loans and calculates the expected loss rate of
the relationship being valued according to its characteristics. The LGD for unlikely-to-pay loans is obtained by
recalibrating the bad loan LGD using the Danger Rate module. The Danger Rate is a multiplying correction factor to
apply to the bad loan LGD, in order to take into account the loss rates that can be recorded in the various default
statuses (Unlikely-to-Pay and/or past due). The Danger Rate is estimated using the probability of migration to bad loans
for positions already in default, the loss rates observed in the pre-bad loans phase for positions migrating to bad loans,
and the loss rates observed in the pre-bad loans phase for positions that return to performing status or are extinguished.
In addition, for the two subclasses of the \u201cUnlikely-to-Pay Loans\u201d risk status (\u201cNon-Forborne Unlikely-to-Pay Loans\u201d and
\u201cForborne Unlikely-to-Pay Loans\u201d), differentiated grids are estimated to take into account the characteristics of the
Forborne loans, which, in addition to having lower average loss levels due to the effect of the Forbearance Measures, are
also affected by the regulatory constraints that prevent their return to performing loan status before 12 months from the
date of the renegotiation.
For past-due loans, the methods used to determine the grids are the same as those described for the unlikely-to-pay
loans (Framework Danger Rate). In this case, the vintage factor is captured by the introduction of a differentiation based
on the duration of the past-due period (Past Due at 90 days/180 days) which produces a significant variation in the loss
rates of the grids, which are also differentiated according to regulatory segment and additional analysis axes
(e.g. product type, type of guarantee, geographical area, exposure band, etc.) common to the other non-performing loan
categories.
Also in the LGD estimation models used in the analytical-statistical measurement of non-performing exposures, several
additional components specifically included for regulatory models are removed, similar to that illustrated for performing
exposures.
With regard to the inclusion of current and forward looking information, it should be noted that, for non-performing exposures,
a statistically estimated component (Add-On from macroeconomic scenario) linked to the most-likely and downside scenarios
expected over the period of the next three years is also considered, according to the criteria already described.
In fact, as required by IFRS 9, the effects of the forward-looking scenario on LGD estimates must also be considered and the
aforementioned component is aimed at capturing the non-linearity of the relationship between the macroeconomic variables
and ECL measurement, by analysing the forecast uncertainty of the variables used for the preparation of the most-likely
scenario. It is based on the methodological framework that is used for performing loans, but ignores the upside scenario from
a prudential perspective and only considers the average downside and most-likely scenarios over the period of the next three
years.
Furthermore, an additional factor is applied to the analytical/statistical measurement firmly based on internal management
variables, in particular the level of past and prospective NPL ratio, which, on the basis of long-term observation, is statistically
correlated with the loss performance. This factor makes the LGD estimate more sensitive to changes in the current and future
economic/management context.
Also in terms of future scenarios, with regard to the unlikely to pay category, which includes positions that are still performing
but show signs of difficulty, both for positions with analytical-specific measurement and those with analytical-statistical
measurement, when there are no effective forbearance measures, an additional component shall be applied (in addition to the
aforementioned add on from the macroeconomic scenario) to reduce the recoverable amount of the positions based on their
vintage in the risk status and the absence of movements and/or recoveries in a specific period of time.
With regard to the alternative recovery scenarios, the Intesa Sanpaolo Group, in relation to the objectives of reducing the
stock of outstanding non-performing loans, included in its business plans, and any commitments made to the Supervisory
Authorities, with specific regard to the NPL Strategy, considers the sale of particular portfolios as the strategy that, in certain
conditions, can maximise the cash flow recovery, also considering the recovery times.
Consequently, the \u201cordinary\u201d scenario, which assumes a recovery strategy based on the collection of credit, typically through
legal actions, mandates to credit recovery companies and the realisation of bank collateral, is also been accompanied - where
applicable and as an alternative recovery strategy - by the scenario of the sale of the loan.
Where company plans and Group strategies identify disposal objectives and, as a result, a portfolio of non-performing loans
that may be disposed of, until the disposal objectives are reached, the loans and receivables included in that portfolio shall be
measured taking account of both the amount recoverable through operating activities and market valuations (based on
external appraisals) and/or sales prices, if already defined.
In particular, where a larger loan portfolio that may be sold represented by Group loans that are disposable (thus, for
example, positions that are not involved in disputes, as per precise indication by the management structures and which are
not subject to synthetic securitisation), in relation to the sales objectives is identified, the book value of said portfolio is
determined by weighting the recoverable amount through operating activities with the amount recoverable through sale.
More specifically, the recoverable amount of disposable non-performing loans is quantified as the average between (i) the
value in the event of sale (fair value) and (ii) the collection amount, weighted on the basis of the percentage of the loans
eligible for sale - determined as the ratio between the target volume of loans to be sold and the respective non bankruptcy-
remote portfolios having the same profile, i.e. as a percentage that adequately reflects the probability of sale of the portfolios
whose disposal is considered highly probable. The \u201ccollection amount\u201d was determined according to the already shown
ordinary methods adopted by the Group for the impairment of non-performing loans, i.e. based on the individual measurement
of the exposures exceeding a defined threshold and based on an analytical-statistical measurement for the others. The
measurement of the value in the event of sale is carried out by an external expert, based on market valuations.
However, where the positions to be sold are specifically identified, those positions shall be measured exclusively taking
account of the market values established by external experts, based on a specific fairness opinion or, if already defined
through a binding agreement with the buyer, the sales price. Those loans are also reclassified as assets held for sale.
As already mentioned, the purchased or originated credit-impaired (POCI) financial assets have specific features in terms of
impairment. As a result, value adjustments equal to the lifetime ECL must be recognised on these instruments from their initial
recognition date and for their entire lifetime. At each subsequent reporting date, the amount of the lifetime ECL must therefore
be adjusted, with the recognition through profit or loss of the amount of any change in lifetime expected credit losses as a gain
or an impairment loss. In view of the above, POCI financial assets are initially recognised in Stage 3, subject to the possibility
of being subsequently transferred to the performing loans stage, even if an expected loss equal to the lifetime ECL will
continue to be recognised.
Lastly, with regard to non-performing loans, it is highlighted that the Intesa Sanpaolo Group uses the \u2013 full or partial \u2013 write-
off/derecognition of unrecoverable accounting positions and, in the following cases, the consequent allocation to loss of the
remainder that has not yet been adjusted:
\u2013 uncollectability of the debt, as a result of definite and precise elements (such as, for example, untraceability and
indigence of the debtor, lack of recovery from realisation of securities and real estate, negative foreclosures, bankruptcy
proceedings closed with no full compensation for the Bank, if there are no further guarantees that can be enforced etc.);
\u2013 disposal of the loan;
\u2013 waiver of the credit claim, due to the unilateral cancellation of the debt or residual amount as a result of
settlement agreements;
\u2013 no waiver of the credit claim. With regard to the full or partial write-offs without waiver of the credit claim, in order to avoid
maintaining loans on the balance sheet that have a very low possibility of recovery, despite continuing to be managed by
the recovery structures, they are fully or partially written off due to uncollectability even if the legal proceedings have not
been closed. The write-off can only involve the portion of the loan covered by provisions and, therefore, each loan can
only be written off up to the amount of its net book value. Therefore, on a periodic basis, the Group identifies the bad loan
portfolios to be subject to total or partial write-offs with the following macro-characteristics:
o percentage cover of 100% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >1 year;
o percentage cover of >95% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >5 years or >8
years, respectively, for non-mortgage and mortgage loans.
Portfolios to be written off can also be identified that have similar characteristics that are different from those indicated
above, but that relate to exposures that have a marginal possibility of recovering the amount of the provision, where the
minimum amount of the provision (calculated taking into account the accumulated write-offs on the position, according to
the same rule established at prudential level by the calendar provisioning framework) is at least equal to the amount
needed to bring the value of the exposures up to their fair value estimated based on the prices recorded in the latest
sales of bad loans made by the Group.
Impairment of investments in associates and companies subject to joint control
At each reporting date the investments in associates and companies subject to joint control are subjected to an impairment
test to assess whether there is objective evidence to consider that the carrying value of such assets is not fully recoverable.
The process of detection of any impairment involves the verification of the presence of impairment indicators and the
determination of any write-down. The impairment indicators are essentially divided into two categories: qualitative and
quantitative indicators.
Qualitative indicators include:
- the generation of negative economic results or in any case a significant variance with respect to the targets budgeted or
established in the multi-year plans disclosed to the market;
- the announcement/initiation of insolvency proceedings or restructuring plans;
- the downgrading by more than two rating classes;
- failure to discharge payment obligations for debt securities issued fully and in a timely manner;
- use of industrial policy tools aimed at responding to a serious crisis or allowing companies to face
restructuring/reorganisation processes.
Quantitative indicators include:
- a reduction in fair value of over 30% below the carrying value or for a period of over 24 months;
- a market capitalisation lower than the company's net book value, in the case of securities listed on active markets, a
carrying value of the investment in the Parent Company's financial statements higher than the carrying value in the
consolidated financial statements of the investee's net assets and goodwill, or distribution by the investee of a dividend
that is higher than its total income.
The presence of impairment indicators results in the recognition of a write-down to the extent that the recoverable amount is
lower than the recognition value.
The recoverable amount consists of the higher of the fair value and the value in use, less costs to sell.
For an illustration of the valuation techniques used to determine fair value, see the specific Section A.4 \u2013 Information on fair
value.
Value in use is the present value of expected future cash flows from the asset; it reflects estimated expected future cash flows
from the asset, the estimate of possible changes in the amount and/or timing of cash flows, time value of money, the price
able to repay the risk of the asset and other factors, which may affect the appreciation by market participants of expected
future cash flows from the asset.
Value in use is determined by discounting future cash flows.
Impairment of non-financial assets
Property, equipment and intangible assets with definite useful life are subject to impairment testing if there is the indication
that the book value of the asset may no longer be recovered. The recoverable amount is determined with reference to the fair
value of the property and equipment or intangible assets less costs to sell or the value in use, if determinable and if it is higher
than fair value.
For property and equipment other than real estate and valuable art assets and intangible assets (other than those recognised
following business combinations) it is assumed that the carrying amount normally corresponds to the value in use, since it is
determined by a depreciation or amortisation process estimated on the basis of the effective contribution of the asset to the
production process and since the determination of fair value is extremely subjective. The two values diverge and lead to
impairment in case of damages, exit from the production process or other similar non-recurring circumstances.
As clarified in the discussion of \u201cProperty and equipment and intangible assets\u201d, the Group measures owner-occupied
properties and valuable art assets according to the revaluation model; in this case, any impairment loss on a revalued asset
must be treated as a decrease in the revaluation up to the relevant amount, after which any difference is taken to the income
statement.
As described in the Information on fair value - Fair value of real estate and valuable art assets, for owner-occupied properties
each year a scenario analysis is conducted on trends in the real-estate market to assess whether there are any significant
deviations in the value of the assets. If significant changes are identified (+ or - 10%), an updated appraisal is prepared to
adjust the fair value of the asset to the valuations of the real estate market. If there are no significant differences, the value is
redetermined through a new expert appraisal every two years for \u201ctrophy assets\u201d (i.e. particularly prestigious properties used
by management functions located in the main cities where the bank is based or properties of particular historical and artistic
interest because they are listed by the Ministry for Cultural Heritage and Activities) and every three years for other owner-
occupied properties.
For the valuable art assets, the revaluation is carried out by means of a new expert appraisal every three years. However, a
scenario analysis is carried out annually to identify any appreciable changes in value in order to bring forward the valuation. If
the annual monitoring identifies a possible positive or negative value deviation of more than 15% for individual works of artists
in the bank\u2019s collections and comparable on the basis of objective criteria (size, technique, period of production, etc.), new
appraisals are commissioned.
Intangible assets recognised following a business combination and in application of IFRS 3 are subjected to an impairment
test at each reporting date to assess whether there is objective evidence that the asset may have been impaired.
Intangible assets with a finite life, represented by the value of the asset management portfolio and the value of the insurance
portfolio, in the presence of impairment indicators are subjected to a new valuation process to assess the recoverability of the
book values. The recoverable amount is determined on the basis of the value in use, namely the present value estimated
using a rate representing the time value of money and the asset\u2019s specific risks, of the income margins generated by the
existing relations as at the valuation date over a period which expresses their expected residual life.
Intangible assets with an indefinite life, represented by the valuation of the brand name and goodwill, do not have
independent cash flows and therefore annually undergo an assessment of the adequacy of the value recorded under the
assets with reference to the Cash-Generating Unit (CGU) to which the values are attributed at the time of the business
combinations. The amount of any impairment is determined on the basis of the difference between the CGU\u2019s book value and
its recoverable amount represented by the higher of the fair value, less costs to sell, and the value in use.
The book value of the CGUs must be determined in a manner consistent with the criterion used to determine their recoverable
amount. For a banking business, the cash flows generated by a CGU cannot be identified without considering the cash flows
deriving from financial assets/liabilities, as these form part of the core business.
In other words, the recoverable amount of the CGUs is influenced by the aforementioned cash flows and therefore the CGUs\u2019
book value must include financial assets/liabilities in accordance with the scope of the recoverable amount estimate process.
Consequently, these assets and liabilities must be properly allocated to the associated CGUs.
On this basis, the book value of Intesa Sanpaolo\u2019s CGUs may be determined in terms of contribution to consolidated
shareholders\u2019 equity including the minority interest.
Thus, the carrying amount of the CGUs consisting of companies that belong to a single operating division or consist of a
single legal entity (Asset Management, Private Banking, Insurance and International Subsidiary Banks) is determined by
summing the individual book values of each company in the consolidated financial statements, namely the contribution to
consolidated shareholders\u2019 equity and corresponding to their net book value, taking into account any goodwill and intangibles
recorded upon acquisition (net of subsequent amortisations and any write-downs) and the consolidation entries. With regard
to the determination of the carrying value of the other two divisions (Banca dei Territori and IMI Corporate & Investment
Banking), given that the Parent Company and other banks contribute to the management of these divisions, and this
subdivision is not represented in the accounting information, the overall carrying value of the CGUs cannot be determined on
the basis of book values. As a consequence, the use of operational factors is required to make the subdivision following a
detailed allocation of the intangibles and goodwill to the two CGUs in accordance with the available accounting information.
The operational driver is identified as the \"regulatory capital\" determined by the Financial and Market Risks Department
structures for each operating division: it represents the capital absorption necessary to handle the types of risk envisaged by
the regulatory supervision rules. The resulting book values already take into account the effects of any impairment of the
individual assets, including those relating to intangible assets with a finite life.
For an illustration of the valuation techniques used to determine fair value, see Section A.4 \u2013 Information on fair value.
The value in use of a CGU is determined by estimating the present value of future cash flows that may be expected to be
generated by the CGU. These cash flows are determined by using the latest publicly available business plan or, in its
absence, through the drawing up by management of an internal forecast plan or other external information available.
The forecasting period for the analysis usually consists of a maximum of five years. The cash flow of the final year of the
forecast is projected in perpetuity, using an appropriate growth rate \u201cg\u201d for the purposes of the so-called Terminal value.
The \u201cg\u201d rate is determined by assuming that the growth factor is the lower of the average growth rate for the forecasting period
of the analysis and the average rate of increase in the Gross Domestic Product in the countries where the cash flows are
generated.
For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present valuations of
the time value of money and the asset\u2019s specific risks. Specifically, the discount rates used incorporate the risk free
component and the premiums for the risk associated with the equity component observed over a sufficiently long time period
to reflect different market conditions and economic cycles. In addition, given the diverse risks of the respective operating
areas, different Beta coefficients are used for each CGU. All the resulting rates have been adjusted to take into account the
\u201cCountry Risk\u201d.
The cash flows produced by the international subsidiaries are estimated in the currency in which they are generated and
translated into euro using the spot exchange rate as at the date of the determination of the value in use.
With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill
allocated and, as a result, it is not possible to test the recoverable amount of the specific intangible as part of the impairment
test of the goodwill based on total cash flows at the level of the CGU, then an independent and specific valuation is made on
the basis of the fair value certified by the appraisal of an independent expert.
Business combinations
Business combinations are governed by IFRS 3.
The transfer of control over a company (or over a group of assets managed together as a single business) is considered a
business combination.
To this end, control is deemed to have transferred when the investor is exposed to, or has rights to, variable returns from its
involvement with the investee and has the ability to affect those returns by exercising its power over the investee.
IFRS 3 requires that an acquirer be identified in any business combination. The acquirer is identified as the combining entity
that obtains control of the other combining entities or businesses. If a controlling entity cannot be identified, following the
definition of control described above, as for example in the case of exchange of equity investments, the identification of the
acquirer must occur considering other factors such as: the entity which has a significantly higher fair value, the entity which
pays a cash consideration, the entity which issues new shares.
The acquisition, and therefore the initial consolidation of the acquired entity, must be recognised in the books on the date in
which the acquirer effectively obtains control over the acquired company or businesses. When the combination occurs via an
exchange of voting ordinary equity instruments, the date of the exchange usually coincides with the date of the acquisition.
However, it is always necessary to verify that there are no agreements which may lead to transfer of control prior to the date
of the exchange.
The consideration transferred as part of a business combination is equal to the sum of the fair value, at the exchange date, of
the transferred assets, the liabilities incurred or assumed and the equity instruments issued by the acquirer in return for
control.
In transactions which entail cash consideration (or when payment occurs via cash-equivalent financial instruments), the
purchase price is the agreed consideration. When settlement does not occur in the short-term, the fair value of any deferred
component is calculated by discounting the amounts payable to their present value; when payment occurs via an instrument
other than cash, therefore via the issue of financial instruments, the price is equal to the fair value of such instruments net of
the costs directly attributable to their issue. For the determination of fair value of financial instruments, see Section A.4 \u2013
Information on fair value and note that, in the case of shares quoted on active markets, fair value is represented by Stock
Exchange price at acquisition date or, should that not be available, the last price available.
Purchase price at acquisition date includes any adjustments to the cost contingent on future events, if provided for by the
combination agreement and only if the adjustment is probable, can be measured reliably and realised within the twelve
months subsequent to the date of acquisition of control. Instead, any restoration related to any loss in the value of the assets
used as consideration is not included in purchase price since it is already considered either in the fair value of equity
instruments or as a reduction in the premium or an increase in the discount on the initial issue of debt instruments.
Acquisition costs refer to the charges incurred by the acquirer to carry out the business combination, including, for example,
professional fees paid to independent auditors, experts, legal advisors, costs for legal opinions and audit of accounts,
preparation of information documents required by the law, as well as advisory fees sustained to identify potential acquisition
targets if the contract provides for the payment of success fees as well as debt securities' or equities' registration and issue
costs.
Acquisition costs must be recognised as charges when incurred and when the related services are provided, except for the
costs relating to the issue of debt securities or equities which must be recognised in accordance with IAS 32.
Business combinations must be accounted for using the \"acquisition method\" whereby identifiable assets acquired (including
any intangible assets which had not been previously recognised by the acquired company) or liabilities assumed (including
contingent liabilities) are recognised at their fair value at acquisition date.
Moreover, as specifically required by IFRS 3, for each business combination, any minority interest in the acquired company
can be recognised at fair value (therefore increasing the consideration transferred) or in proportion to the minority investment
in the net identifiable assets of the acquired companies.
If control is achieved in stages, the acquirer recalculates its previous interest in the acquired company at the acquisition date
fair value. Any difference with respect to the previous carrying value is taken to income statement.
Excess between the consideration transferred (being the fair value of transferred assets, liabilities incurred and equity
instruments issued by the acquirer), increased, where present, by minority interests (determined as above) as well as the fair
value of the stakes already held by the acquirer, and the fair value of acquired assets and liabilities should be recognised as
goodwill. Conversely, such difference is taken to the income statement when the latter exceed the sum of the consideration,
minority interests and the fair value of the stakes already held.
The accounting for business combination can be determined provisionally by the end of the year in which the combination is
realised and must be completed within twelve months of the acquisition date.
In accordance with IFRS 10, acquisitions of further stakes in companies which are already controlled are accounted for as a
capital transaction or as a transaction with shareholders acting in their capacity as shareholders. For this reason, the
difference between the cost of the acquisition and the book value of the minority stakes acquired is posted to group
shareholders' equity; in the same way, the sale of minority stakes without ceding control, does not generate gains or losses in
the income statement but is posted to group shareholders' equity.
The following transactions are outside the scope of business combinations: transactions aimed at acquiring control over one
or more entities which are not part of the company\u2019s business; transactions aimed at acquiring transitory control; transactions
conducted for organisational purposes, therefore between two or more companies or businesses which are already part of the
Intesa Sanpaolo Group, and which do not entail changes in control, independently of the extent of minority interests in each of
the combining entities before and after the business combinations (business combinations involving entities under common
control). These transactions are considered immaterial. Therefore, since there are no specific provisions in IAS/IFRS and in
compliance with IAS 8 which requires \u2013 in the absence of a specific Standard \u2013 that the reporting entity must use its
judgement in applying an accounting policy that results in information that is relevant, reliable, prudent and that reflects the
economic substance of the transaction, these are accounted for safeguarding the continuing values in the financial
statements of the acquirer.
Mergers are examples of combinations between companies and represent the most complete business combinations, since
they imply the legal and economic unification of the merged entities.
Mergers which entail the establishment of a new legal entity and mergers by incorporation (which entail that an entity is
absorbed by another existing entity) are treated according to the criteria illustrated above, that is:
- if the transaction leads to the transfer of control of a company, it is accounted for as a business combination as provided
for by IFRS 3;
- if the transaction does not lead to the transfer of control, it is accounted for by privileging the continuity of the values.
Criteria for the preparation of segment reporting
The Intesa Sanpaolo Group\u2019s segment reporting is based on the elements that the management uses to make its own
operating decisions (the \u201cmanagement approach\u201d) and is therefore consistent with the disclosure requirements of IFRS 8.
The Intesa Sanpaolo Group's organisational model is structured according to six business segments with specific operational
responsibilities: Banca dei Territori, IMI Corporate & Investment Banking, International Subsidiary Banks, Asset Management,
Private Banking and Insurance. In addition to these operating areas there is also the Corporate Centre which is responsible
for guidance, coordination and control of the whole Group. The Corporate Centre also includes the following support
structures: Treasury, NPE Department and the Strategic Asset & Liability Management (ALM) activities.
For the purposes of preparation of the Segment Reporting, the income statement and balance sheet results attributed to the
various business sectors were calculated according to the accounting principles used in the preparation and presentation of
the consolidated financial statements. Use of the same accounting standards allows segment data and consolidated data to
be effectively reconciled. To represent results more effectively and give a better understanding of the components that
generated them, the reclassified income statement for each reporting segment is presented with values that express the
contribution made by each segment to the Group\u2019s results.
The contribution of the various Divisions and of the Corporate Centre to the Group's overall income statement results is
determined according to the methods described below:
\u2013 application of the contribution model with Internal Fund Transfer Pricing (FTP), differentiated on the basis of the maturity
of the individual transaction, for the correct attribution of net interest income;
\u2013 application, by virtue of specific contractual agreements between the Group Banks/Companies, of retrocession rules for
economic components relative to transactions which set out the distribution of results between product factories/service
units and relationship entities/customer units;
\u2013 direct cost debiting to each Business Division and to the Corporate Centre;
\u2013 application of the Group business accounting model, for the part within its remit, for the charging of the costs for the
services provided by the head-office structures of the Parent Company belonging to the Corporate Centre to the
Business Divisions and other Structures of the Corporate Centre, as well as the costs relating to the performance of
steering and control activities;
\u2013 application of customer portfolio/segmentation logics for the assignment to each Division and to the Corporate Centre of
the economic results of operations with customers and of the net adjustments to loans.
Business units' profits are shown net of the tax effect, calculated by applying the main components underlying the effective
tax rate, in line with the Group tax policy.
The economic results of the business operational segments are disclosed net of intragroup relations within each segment and
gross of intragroup relations between different business operational segments.
For each Division and for the Corporate Centre, the absorbed capital is also calculated on the basis of the Risk Weighted
Assets (RWAs) determined in accordance with the applicable regulations and supplemented, where necessary, with
management data on \u201ceconomic\u201d capital to take into account the risks not covered by the regulatory metric.
To complete business operational segment reporting, the most relevant income statement data and balance sheet aggregates
referred to the geographical areas in which the Group operates are also given. Geographical areas are defined on the basis
of the territorial breakdown of Group activities. Three main geographical areas have been identified, based on the residence
of the legal entities making up the Group: Italy, Europe and Rest of the World.
Insurance assets and liabilities
The Intesa Sanpaolo Group has decided to exercise the option of adopting the Deferral Approach, according to which the
financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the
provisions of IAS 39, while awaiting the entry into force of the new international financial reporting standard on insurance
contracts (IFRS 17), from 1 January 2023
85
. For completeness, an outline is provided below of:
- the classification and measurement criteria for the financial assets and liabilities used by the Group\u2019s insurance
companies, with more details provided in Part A \u201cAccounting policies\u201d of the Notes to the consolidated financial
statements of the 2017 Annual Report. However, a description has not been provided of the recognition and
derecognition criteria, because they are essentially in line with the applicable provisions of IFRS 9 and IAS 39;
- the approaches adopted for specific products of the insurance segment.
For details of the treatment of financial statement captions of the insurance companies other than those of a financial nature,
see the information provided above, as the companies of the banking group and the companies of the insurance segment use
the same accounting policies.
1. Financial assets held for trading
Classification criteria
This category includes financial assets held for trading, essentially represented by debt securities and equities and the
positive value of derivative contracts held for trading. Derivative contracts also include those embedded in combined financial
instruments which are subject to separate accounting when:
- their economic characteristics and risks are not closely related to the characteristics of the host contract;
- the embedded instruments, even though separate, fully meet the definition of derivative;
- the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss.
Derivatives are stated as assets if their fair value is positive and as liabilities if their fair value is negative. The positive and
negative current values arising from transactions with the same counterparty may be offset only when the legal right to offset
amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is
carried out.
The reclassifications to other categories of financial assets are not permitted unless there is an event that is unusual and
highly unlikely to recur in the near term.
In such cases debt securities and equities not held for trading may be reclassified into other categories established by IAS 39
if the conditions for their recognition apply (Investments held to maturity, Financial assets available for sale, Loans). The
transfer value is the fair value at the time of the reclassification. On reclassification, the presence of any embedded derivative
contracts, that have to be separated, is assessed.
85
Regulation no. 2036/2021 of 19 November 2021 which endorses the new accounting standard IFRS 17 \u201cInsurance Contracts\u201d was published in the
Official Journal of the EU on 23 November 2021. In this regard we note that on 25 June 2020, the IASB published the final version of the \"Amendments
to IFRS 17 Insurance Contracts\" which confirmed the deferral of the date of first-time mandatory adoption of the Standard to 1 January 2023 (instead of
1 January 2022 previously proposed in the ED 2019/4), with the concurrent possibility of an extension to the same date of the \u201cDeferral approach\u201d in the
application of IFRS 9. This was endorsed by the European Commission with the publication of Regulation 2097/2020 \u201cExtension of the Temporary
Exemption from Applying IFRS 9 (amendments to IFRS 4)\u201d on 15 December 2020.
Measurement criteria
After initial recognition, financial assets held for trading are recorded at fair value. The effects of the application of this
measurement criterion are recorded in the income statement.
For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the
market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which
consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted
instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable
transactions, etc. Equities, quotas of UCI and derivatives which have equities as underlying assets, which are not quoted on
an active market, for which it is not possible to determine a reliable fair value according to the guidelines listed above, are
maintained at cost.
2. Financial assets available for sale
Classification criteria
This category includes the financial assets that do not fall within any of the other categories such as Loans, Financial assets
held for trading, Investments held to maturity or Financial assets measured at fair value through profit or loss. In particular,
this caption is made up of i) bonds which are not held for trading and which are not included in Loans and Receivables, in
Investments held to maturity or designated at fair value through profit or loss, ii) equity investments which are not held for
trading and do not qualify as investments in subsidiaries, associates or entities subject to joint control, including private equity
investments and private equity funds as well as iii) the portions of syndicated loans that, from inception, are destined for sale.
In the cases provided for by the accounting standards, reclassifications are only permitted towards the category Investments
held to maturity. Moreover, debt securities may be reclassified into the category Investments held to maturity as well as under
Loans, when there is the intention to hold them in the foreseeable future and when the recognition criteria are met. The
transfer value is the fair value at the time of the reclassification.
Measurement criteria
After initial recognition, Financial assets available for sale are measured at fair value, through the recording in the income
statement of the value corresponding to amortised cost, while gains or losses deriving from a change in fair value are
recorded in a specific reserve in shareholders\u2019 equity, until the financial asset is derecognised or a permanent loss occurs. On
the total or partial sale of the financial asset or on recognition of a loss, the cumulated profit or loss must be reversed, all or in
part, to the income statement.
Fair value is determined on the basis of the criteria already illustrated for financial assets held for trading.
Equities included in this category and quotas of UCI which have equities as underlying assets, which are not quoted on an
active market, for which it is not possible to determine a reliable fair value, are maintained at cost.
Financial assets available for sale are assessed to identify if they show objective evidence of an impairment loss.
If such evidence exists, the loss is measured as the difference between the carrying value of the asset and its fair value.
Should the reasons for impairment cease to exist, following an event occurred after the registration of the impairment, value
recoveries are posted through the income statement in the case of loans or debt securities, and through shareholders\u2019 equity
in the case of equities. The size of the recovery must not lead the carrying amount of the financial asset to exceed the
amortised cost had no impairment losses been recognised in previous periods.
3. Investments held to maturity
Classification criteria
Quoted debt securities with fixed or determinable payments and fixed maturity, which the entity has the positive intention and
ability to hold to maturity, are classified in this category.
In the cases provided for by the accounting standards, reclassifications are only permitted towards the category of Financial
assets available for sale. If during a year, prior to expiry, more than an insignificant amount classified under this category is
sold or reclassified, the remaining investments held to maturity are reclassified as Financial assets available for sale and the
portfolio in question may not be used for the next two years, unless the sales and reclassifications:
- are so close to maturity or the financial asset\u2019s call date that changes in the market interest rate would not have a
significant effect on the financial asset\u2019s fair value;
- occur after the entity has collected substantially all of the financial asset\u2019s original principal through scheduled payments
or prepayments; or
- are attributable to an isolated event that is beyond the entity\u2019s control, is non-recurring and could not have been
reasonably anticipated by the entity.
Measurement criteria
After the initial recognition, Investments held to maturity are measured at amortised cost, using the effective interest method.
Profits or losses referred to investments held to maturity are recorded in the income statement when assets are derecognised
or impaired, and through the amortisation process of the difference between book value and the value reimbursable at
maturity.
Investments held to maturity are assessed to identify if they show objective evidence of an impairment loss.
If such evidence exists, the loss is measured as the difference between the carrying value of the asset and the present value
of the estimated future cash flows, discounted at the original effective interest rate. The loss is recorded in the income
statement.
If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment,
recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial
asset to exceed the amortised cost had no impairment losses been recognised in previous periods.
4. Loans
Classification criteria
Loans include loans to customers and due from banks, both disbursed directly and acquired from third parties, which entail
fixed or in any case determinable payments, which are not quoted on an active market and which are not classified at
inception in Financial assets available for sale.
The caption Loans also includes commercial loans, repurchase agreements with the obligation to resell at a later date, and
securities underwritten at issue or via private placements, with determined or determinable payments, not quoted in active
markets.
Reclassifications to the other categories of financial assets established in IAS 39 are not permitted.
Measurement criteria
After initial recognition, loans are measured at amortised cost, equal to initial value increased/decreased by principal
repayments, adjustments/recoveries and amortisation \u2013 calculated applying the effective interest method \u2013 of the difference
between amount disbursed and amount to be reimbursed at maturity, typically attributable to the costs/revenues directly
connected to the single loan. The effective interest rate is the rate that exactly discounts estimated future cash payments of
the loan, for principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to the loan. This
measurement method uses a financial approach and allows distribution of the economic effect of the costs/revenues through
the expected residual maturity of the loan.
The amortised cost method is not used for loans whose short maturity implies that the application of the discounting approach
leads to immaterial effects. Such loans are recorded at historical cost. An analogous measurement criterion is applied to loans
with unspecified maturity or with notice period.
Loans are reassessed for the purpose of identifying those which, due to events occurred after initial recognition, show
objective evidence of possible impairment. These include bad loans, unlikely-to-pay or past due loans according to the rules
issued by the Bank of Italy, consistent with IAS/IFRS and EU supervisory regulations.
Non-performing loans undergo an individual measurement process, or the calculation of the expected loss for homogeneous
categories and analytical allocation to each position, and the amount of the adjustment of each loan is the difference between
its carrying value at the time of measurement (amortised cost) and the present value of expected future cash flows,
discounted using the original effective interest rate.
Expected cash flows consider forecast recovery periods, presumed realisable value of guarantees as well as the costs
sustained for the recovery of credit exposure.
The original effective rate of each loan remains unchanged over time even if the relationship has been restructured with a
variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest.
The impairment loss is recorded in the income statement.
The original value of loans is reinstated in subsequent periods to the extent that the reasons which had led to the impairment
cease to exist, provided that such valuation is objectively attributed to an event which occurred subsequent to the impairment.
The recovery is recorded in the income statement and must not lead the carrying amount of the loan to exceed the amortised
cost had no impairment losses been recognised in previous periods.
Recoveries on impairment include time value effects.
Loans for which no objective evidence of loss has emerged from individual measurement are subject to measurement of a
collective adjustment. Such measurement occurs for homogeneous loan categories in terms of credit risk and the relative loss
percentages are estimated considering past time series and other objective elements observable at measurement date, which
enable the latent loss to be estimated for each loan category. Measurement also considers the risk connected to the
borrower\u2019s country of residence.
Collective adjustments are recorded in the income statement.
5. Financial assets measured at fair value through profit or loss
Classification criteria
IAS/IFRS endorsed by the European Commission enable the classification as financial instruments measured at fair value
through profit and loss of any financial asset thus defined at the moment of acquisition, in compliance with the cases
contemplated in the reference regulations.
Reclassifications to the other categories of financial assets are not permitted.
The Group classifies investments with respect to insurance policies in this category.
Measurement criteria
After initial recognition, the financial instruments in question are measured at fair value. The effects of the application of this
measurement criterion are recorded in the income statement.
6. Payables and securities issued
Classification criteria
Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and
with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued
and other funding instruments in circulation, net of any amounts repurchased.
It also includes the payables recorded by the entity in the capacity of lessee in finance lease transactions.
Measurement criteria
After initial recognition, financial liabilities are measured at amortised cost with the effective interest method.
An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount.
7. Financial liabilities held for trading
Recognition criteria
These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the
instrument, without taking into account directly attributable transaction costs or revenues.
This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of
embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities
determined by short selling generated by securities trading activities.
Derecognition criteria
Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the
financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it.
8. Financial liabilities designated at fair value through profit or loss
Classification criteria
Financial liabilities designated at fair value through profit or loss are recorded under this caption, on the basis of the fair value
option given to companies by IAS 39, in compliance with the cases contemplated in the reference regulations.
The Group exercised the fair value option for liabilities, designating insurance products without a significant insurance risk and
which are not included under separate management, and therefore do not envisage discretionary participation features.
Investments relating to such forms of deposits, as already reported, were also designated at fair value, thereby eliminating or
considerably reducing \u201caccounting biases\u201d that would otherwise have arisen from measuring assets and liabilities on the basis
of different accounting criteria.
Measurement criteria
These liabilities are designated at fair value through profit or loss.
9. Insurance products
Products for which insurance risk is deemed significant include: temporary first class death policies and income and mixed
policies with guaranteed fixed conversion rates at the time of issue, and certain types of unit-linked policies and damage
cover. As regards these products, the IAS/IFRS substantially confirm the national accounting standards concerning insurance.
In brief, IFRS 4 sets forth that:
- gross premiums are to be recorded in the income statement under income; they include all amounts matured during the
year as a result of insurance contracts signed, net of cancellations; likewise, all premiums ceded to reinsurers are
recorded under current year costs;
- with respect to gross premiums, the corresponding commitment towards the insured is accrued in technical reserves,
such amount being calculated on a contract-by-contract basis in accordance with applicable local accounting principles;
- the insurance products entered under separate management are valued by applying \u201cshadow accounting\u201d, whereby the
differences between the carrying value and the market value of securities classified as securities available for sale are
allocated to technical reserves as regards the insured parties' portion and to shareholders\u2019 equity as regards the
insurance companies' portion. If, on the other hand, the securities are measured at fair value through profit or loss, the
difference between the carrying value and the market value is recorded in the income statement giving rise to a change
in technical reserves equal to the amount of the insured parties\u2019 portion;
- in determining shadow accounting, the Group uses the retrocession average rate and the minimum guaranteed rate
established in accordance with the contractual conditions of the various products associated with each
portfolio management;
- liabilities related to products with discretionary participation features are given as a whole with no distinction between the
guaranteed component and the discretionary participation feature.
In accordance with IFRS 4, the Group assesses the prospective adequacy of the carrying amount of recorded liabilities using
the Liability Adequacy Test (LAT).
10. Financial products included under separate management
Financial products included under separate management, despite their not being subject to significant insurance risk, and
which therefore contain discretionary participation features, include the majority of life policies and mixed first branch policies,
as well as fifth branch capitalisation policies. These are accounted for according to the principles set forth in IFRS 4:
- the products are shown in the financial statements according to principles that essentially reflect those locally in force on
the subject, any premiums, payments and changes in technical reserves being recorded in the income statement;
- as stated in the previous paragraph, shadow accounting is applied to the insurance products entered under separate
management which, therefore, have discretionary participation features;
- in determining shadow accounting, the Group uses the retrocession average rate and the minimum guaranteed rate
established in accordance with the contractual conditions of the various products associated with each
portfolio management;
- liabilities related to products with discretionary participation features are given as a whole with no distinction between the
guaranteed component and the discretionary participation feature.
11. Financial products not included under separate management
Financial products without a significant insurance risk and which are not included under separate management, and therefore
do not envisage discretionary participation features, are stated in the financial statements as financial liabilities and are
measured at fair value, on the basis of the envisaged option (Fair Value Option), or at amortised cost. These financial
products are essentially index-linked policies and part of the unit-linked ones, as well as policies with specific assets not
included under separate management. These products are accounted for according to the principles set forth in IAS 39, as
summarised below:
- the portion of index- and unit-linked policies that are considered investment contracts are measured at fair value,
whereas the specific asset products not included under separate management are measured at amortised cost;
- the income statement does not reflect the premiums relating to these products, but just the revenue components,
represented by fees and commissions, and the cost components, comprising provisions and other charges; it also
reflects the costs or revenues represented by the changes in the fair value of the liabilities incurred against these
contracts. More specifically, the international accounting and financial reporting standards, contained in IAS 39 and IFRS
15, provide that, for the liabilities designated at fair value, income and costs relating to the products in question be
identified and classified under two headings: (i) origination, to be recorded in the income statement at the time the
product is issued and (ii) investment and management services, to be amortised over the life of the product which
depends on how the service is provided. In addition, as regards specific asset products not included under separate
management, incremental cost and income items are included in the calculation of the amount to be amortised;
- the insurance component included in the index- and unit-linked products, where it can be unbundled, is independently
valued and recorded.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1073": { "value": "A.2 \u2013 MAIN FINANCIAL STATEMENT CAPTIONS To ensure uniformity in the accounting policies used for the financial statements, the Intesa Sanpaolo Group has adopted an internal set of rules and policies for the various operational and organisational areas. The methodological document used for the application of the accounting standards is the Group Accounting Policies, which describes the application models adopted by the Group, within the framework of the standards and the legislation applicable to the various companies/subsidiaries, and sets out the choices made when the regulations envisage alternative or optional accounting treatments. With regard to the valuation processes, the Group, in the document \u201cGuidelines for the valuation of Balance Sheet Items\u201d, has drawn up the principles and regulatory framework for the valuation of the balance sheet items and the roles and responsibilities of the Corporate Bodies, the Manager responsible for preparing the Company\u2019s financial reports and the Parent Company\u2019s corporate functions involved in the valuation process; the prerequisites for the existing valuation processes and the control system necessary to ensure proper valuation; the general valuation processes based on accounting standards specific to the various categories of balance sheet items being measured (assets and liabilities); and the rules for guidance and coordination of Group Companies on the valuation of balance sheet items. The guidelines and policies also include the Business Model Rules, the Rules on the measurement of expected credit loss in accordance with IFRS 9 (Impairment Policy), and the \u201cRules for Valuation of Financial Instruments at Fair Value\u201d (former Fair Value Policy), in addition to more specific documents relating to non-performing loans, equity investments, and the management of hedging financial instruments. Finally, with regard to prudential supervision, the Group has drawn up a specific document called Harmonised Prudential Supervision Rules. In general, these documents are approved by the competent Corporate Bodies. They are updated by the management structures in response to needs arising both from external factors (e.g. changes in regulations) and from internal factors within the Group (e.g. new operations and products). Those documents are subject to a specific approval process, based on the significance and scope of the changes made. The criteria adopted by the subsidiary insurance companies are discussed in a specific chapter at the bottom of this section. In fact, as a result of the Intesa Sanpaolo Group\u2019s decision, as a financial conglomerate primarily engaged in banking activities, to exercise the option of adopting the Deferral Approach, the financial assets and liabilities of the subsidiary insurance companies are recognised in accordance with the provisions of IAS 39, while awaiting the entry into force of the new international financial reporting standard on insurance contracts, IFRS 17, along with IFRS 9, starting 1 January 2023 84 . 1. Financial assets measured at fair value through profit or loss (FVTPL) Classification criteria This category contains the financial assets not classified as Financial assets measured at fair value through other comprehensive income or as Financial assets measured at amortised cost. This caption includes in particular: - financial assets held for trading, essentially consisting of debt securities and equity instruments and the positive value of derivative contracts held for trading; - financial assets mandatorily measured at fair value through profit or loss, consisting of financial assets that do not meet the requirements for measurement at amortised cost or at fair value through other comprehensive income. These are financial assets whose contractual terms do not solely envisage payments of principal and interest on the principal amount outstanding (SPPI Test not passed) or that are not held under a Hold to Collect business model or a Hold to Collect and Sell business model; - financial assets designated at fair value, i.e. financial assets that are defined as such upon initial recognition and when the conditions apply. In relation to this case, an entity may irrevocably designate a financial asset as measured at fair value through profit or loss only if it eliminates or significantly reduces a measurement inconsistency. This caption therefore includes: - debt securities and loans that are included in an Other/Trading business model (i.e., that do not come under the Hold to Collect or Hold to Collect and Sell business models) or that do not pass the SPPI Test, including the portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are not part of a Hold to Collect and Sell business model; - equity instruments \u2013 that do not qualify as investments in subsidiaries, associates or joint ventures \u2013 held for trading purposes or for which the option was not exercised, upon initial recognition, to designate them at fair value through other comprehensive income; - quotas of UCI (Undertakings for Collective Investment). This caption also includes the derivatives, recognised under financial assets held for trading, which are presented as assets if the fair value is positive and as liabilities if the fair value is negative. The positive and negative current values arising from transactions with the same counterparty \u2013 also between derivatives allocated to the trading book and hedging derivatives, as envisaged by the Bank of Italy Circular 262 \u2013 may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. Derivatives also include those embedded in combined financial contracts \u2013 where the host contract is a financial liability \u2013 which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through profit or loss to one of the other two categories established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through other comprehensive income). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In this case, the effective interest rate of the reclassified financial asset is determined based on its fair value at the reclassification date and that date is considered as the initial recognition date for the credit risk stage assignment for impairment purposes. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments, at disbursement date for loans and at trade date for derivative contracts. On initial recognition, financial assets measured at fair value through profit or loss are recognised at fair value, without considering transaction costs or revenues directly attributable to the instrument. Measurement criteria After initial recognition, the financial assets measured at fair value through profit or loss are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. For equities and derivative instruments that have equities as underlying assets, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate. For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on Fair Value\u201d. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 2. Financial assets measured at fair value through other comprehensive income (FVOCI) Classification criteria This category includes the financial assets that meet both the following conditions: - the financial asset is held under a business model whose objective is achieved both through the collection of expected contractual cash flows and through sale (Hold to Collect and Sell business model), and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI Test\u201d passed). This caption also includes equity instruments, not held for trading, for which the option was exercised upon initial recognition of their designation at fair value through other comprehensive income. In particular, this caption includes: - debt securities that can be attributed to a Hold to Collect and Sell business model and that have passed the SPPI test; - equity interests, that do not qualify as investments in subsidiaries, associates or joint ventures and are not held for trading, for which the option has been exercised of their designation at fair value through other comprehensive income; - loans that are attributable to a Hold to Collect and Sell business model and have passed the SPPI Test, including the portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are part of a Hold to Collect and Sell business model. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through other comprehensive income to one of the other two categories established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through profit or loss). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In the event of reclassification from this category to the amortised cost category, the cumulative gain (loss) recognised in the valuation reserve is allocated as an adjustment to the fair value of the financial asset at the reclassification date. In the event of reclassification to the fair value through profit or loss category, the cumulative gain (loss) previously recognised in the valuation reserve is reclassified from shareholders\u2019 equity to net income (loss). For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments and at disbursement date for loans. On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly attributable to the instrument. Measurement criteria After initial recognition, the Assets classified at fair value through other comprehensive income, other than equity instruments, are measured at fair value, with the recognition in profit or loss of the impact resulting from the application of the amortised cost, the impairment effects and any exchange rate effect, whereas the other gains and losses resulting from a change in fair value are recognised in a specific shareholders\u2019 equity reserve until the financial asset is derecognised. Upon the total or partial sale, the cumulative gain or loss in the valuation reserve is transferred, in whole or in part, to the income statement. Equity instruments, for which the choice has been made to classify them in this category, are measured at fair value and the amounts recognised in other comprehensive income cannot be subsequently transferred to profit or loss, not even if they are sold. The only component related to these equities that is recognised through profit or loss is their dividends. Fair value is determined on the basis of the criteria already described for Financial assets measured at fair value through profit or loss. For the equity instruments included in this category, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate. For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on Fair Value\u201d. Financial assets measured at fair value through other comprehensive income \u2013 both in the form of debt securities and loans \u2013 are subject to the verification of the significant increase in credit risk (impairment) required by IFRS 9, in the same way as Assets measured at amortised cost, with the consequent recognition through profit or loss of a value adjustment to cover the expected losses. More specifically, for instruments classified as Stage 1 (i.e., financial assets at origination, when not impaired, and instruments for which there has not been a significant increase in credit risk since the initial recognition date), a 12-month expected loss is recognised on the initial recognition date and at each subsequent reporting date. For instruments classified as Stage 2 (performing for which there has been a significant increase in credit risk since the initial recognition date) and as Stage 3 (credit-impaired exposures), a lifetime expected loss for the financial instrument is recognised. Equity instruments are not subject to the impairment process. See the paragraph below \u201cImpairment of financial assets\u201d for more details. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 3. Financial assets measured at amortised cost Classification criteria This category includes the financial assets (in particular loans and debt securities) that meet both the following conditions: - the financial asset is held under a business model whose objective is achieved through the collection of expected contractual cash flows (Hold to Collect business model), and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI Test\u201d passed). More specifically, the following are recognised in this caption: - loans to banks in their various forms that meet the requirements referred to above; - loans to customers in their various forms that meet the requirements referred to above; - debt securities that meet the requirements referred to above. This category also includes the operating loans and receivables connected to the provision of financial activities and services as defined by the Consolidated Law on Banking and the Consolidated Law on Finance (e.g. for the distribution of financial products and servicing activities). According to the general rules established by IFRS 9 on the reclassification of financial assets, reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from the amortised cost category to one of the other two categories established by IFRS 9 (Financial assets measured at fair value through other comprehensive income or Financial assets measured at fair value through profit or loss). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. Gains and losses resulting from the difference between the amortised cost of a financial asset and its fair value are recognised through profit or loss in the event of reclassification to Financial assets measured at fair value through profit or loss and under Shareholders\u2019 equity, in the specific valuation reserve, in the event of reclassification to Financial assets measured at fair value through other comprehensive income. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of the financial asset occurs at settlement date for debt securities and at disbursement date for loans. On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly attributable to the instrument. In particular, for loans, the disbursement date is usually the same as the date of signing of the contract. Should this not be the case, a commitment to disburse funds is made along with the subscription of the contract, which will cease to exist upon disbursement of the loan. The loan is recognised based on its fair value, equal to the amount disbursed or subscription price, inclusive of the costs/revenues directly attributable to the single loan and determinable from inception, even when settled at a later date. Costs that, even with the aforementioned characteristics, are reimbursed by the borrower or are classifiable as normal internal administrative costs are excluded. Repurchase agreements and reverse repurchase agreements are recognised as funding or lending transactions. Specifically, repurchase agreements are recognised as payables for the spot amount received, whereas reverse repurchase agreements are recognised as receivables for the spot amount paid. Measurement criteria After the initial recognition, these financial assets are measured at amortised cost, using the effective interest method. The assets are recognised in the balance sheet at an amount equal to their initial carrying amount less principal repayments, plus or minus the cumulative amortisation (calculated using the effective interest method) of the difference between this initial amount and the amount at maturity (typically attributable to costs/income directly attributable to the individual asset) and adjusted by any provision for losses. The effective interest rate is the rate that exactly discounts estimated future cash payments of the asset, as principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to that financial asset. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/income directly attributable to a financial asset over its expected lifetime. The amortised cost method is not used for assets, measured at historical cost, whose short duration makes the effect of discounting negligible, or for assets without a definite maturity or revocable loans. The measurement criteria, as described in more detail in the paragraph \u201cImpairment of financial assets\u201d, are closely linked to the inclusion of these instruments in one of the three stages of credit risk established by IFRS 9, the last of which (Stage 3) consists of non-performing financial assets and the remaining (Stages 1 and 2) of performing financial assets. With regard to the accounting representation of the above measurement effects, the adjustments for this type of asset are recognised in profit or loss: - on initial recognition, for an amount equal to the 12-month expected credit loss; - on subsequent measurement of the asset, when the credit risk has not increased significantly since initial recognition, in relation to changes in the amount of adjustments for the 12-month expected credit losses; - on subsequent measurement of the asset, when the credit risk has increased significantly since initial recognition, in relation to the recognition of adjustments for expected credit losses over the contractually agreed remaining lifetime of the asset; - on subsequent measurement of the asset, where \u2013 after a significant increase in credit risk has occurred since initial recognition \u2013 the increase is no longer \u201csignificant\u201d due to the alignment of the cumulative value adjustments to take account of the change from a lifetime expected credit loss to a 12-month expected credit loss for the instrument. These financial assets, when they are performing, are subject to an assessment, aimed at establishing the value adjustments to be recognised in the financial statements, at the level of individual loan (or \u201ctranches\u201d of securities), according to the risk parameters consisting of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), derived from the AIRB models, and duly adjusted to take account of the provisions of IFRS 9. If, in addition to a significant increase in credit risk, there is also objective evidence of impairment, the amount of the loss is measured as the difference between the carrying amount of the asset \u2013 classified as \u201cnon-performing\u201d, like all the other relationships with the same counterparty \u2013 and the present value of the estimated future cash flows, discounted using the original effective interest rate. The amount of the loss, to be recognised through profit or loss, is established based on individual measurement or determined according to uniform categories and, then, individually allocated to each position, and, as detailed in the paragraph \u201cImpairment of financial assets\u201d, takes account of forward-looking information and possible alternative recovery scenarios. Non-performing assets include financial assets classified as bad, unlikely-to-pay or past due by over ninety days according to the rules issued by the Bank of Italy, in line with the IAS/IFRS and EU Supervisory Regulations. The expected cash flows take into account the expected recovery times and the estimated realisable value of any guarantees. The original effective rate of each asset remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment with time value effects are recognised in net interest income. In some cases, during the lifetime of these financial assets, and of loans in particular, the original contractual conditions may be subsequently modified by the parties to the contract. When the contractual clauses are subject to change during the lifetime of an instrument, it is necessary to verify whether the original asset should continue to be recognised in the balance sheet or whether, instead, the original instrument needs to be derecognised and a new financial instrument needs to be recognised. In general, changes to a financial asset lead to its derecognition and the recognition of a new asset when they are \u201csubstantial\u201d. The assessment of the \u201csubstantial nature\u201d of the change must be made using both qualitative and quantitative information. In some cases, in fact, it may be clear, without resorting to complex analysis, that the changes introduced substantially modify the characteristics and/or contractual flows of a particular asset while, in other cases, further analysis (including quantitative analysis) will need to be carried out to assess the effects of the changes and verify whether or not to derecognise the asset and recognise a new financial instrument. The qualitative and quantitative analyses aimed at defining the \u201csubstantial nature\u201d of contractual changes made to a financial asset must therefore consider: - the purposes for which the changes were made: e.g. renegotiations for commercial reasons and forbearance measures due to financial difficulties of the counterparty: o the former, aimed at \u201cretaining\u201d the customer, involve a borrower that is not in financial difficulty. This category includes all renegotiations aimed at aligning the cost of the debt to market conditions. These operations involve a change in the original conditions of the contract, usually requested by the borrower and relating to aspects concerning the cost of the debt, with a consequent economic benefit for the borrower. In general, whenever the bank carries out a renegotiation to avoid losing its customer, that renegotiation should be considered as substantial because, if it were not carried out, the customer could borrow from another intermediary and the bank would incur a decrease in expected future revenues; o the latter, carried out for \u201creasons of credit risk\u201d (forbearance measures), relate to the bank\u2019s attempt to maximise the recovery of the cash flows of the original loan. The underlying risks and rewards, following the changes, are not normally substantially transferred and, consequently, the accounting representation that provides the most relevant information for the readers of the financial statements (apart from the triggers discussed below) is \u201cmodification accounting\u201d \u2013 which involves the recognition through profit or loss of the difference between the carrying value and the present value of the modified cash flows discounted at the original interest rate \u2013 rather than derecognition; - the presence of specific triggers that affect the contractual characteristics and/or cash flows of the financial instrument (such as, for example, a change in currency or a modification of the type of risk the financial instrument is exposed to, when correlated to equity and commodity parameters), which are considered to result in derecognition due to their impact (expected to be significant) on the original contractual cash flows. Conversely, the amendments to financial assets following the Interest Rate Benchmark Reform (so-called IBOR Reform), relating to the change in the basis for determining contractual cash flows (the replacement of the existing interest rate benchmark with an alternative benchmark rate), do not constitute a derecognition event, but are to be considered a modification from an accounting standpoint. Such amendments, if made as a direct consequence of the IBOR Reform and
applied on equivalent economic bases, are represented with a prospective adjustment of the effective interest rate - by
applying paragraph B5.4.5 of IFRS 9 instead of modification accounting, with impacts on net interest income in future periods.
Derecognition criteria
Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to
the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained,
they continue to be recorded in the financial statements, even though their title has been transferred.
When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where
no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets
continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets
sold and to variations in the relevant cash flows.
Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the
asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third
parties.
4. Hedging transactions
The Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply
the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each
type of hedge (both for micro hedges and macro hedges).
Classification criteria: type of hedge
Hedging transactions are aimed at neutralising potential losses on a specific item or group of items, attributable to a certain
risk, if such a risk should actually occur.
The following types of hedging transactions are used:
- fair value hedge, which has the objective of covering exposure to changes in the fair value (attributable to the different
risk categories) of assets and liabilities in the balance sheet, or on a portion of these, of groups of assets/liabilities, of
binding commitments and portfolios of financial assets and liabilities, including core deposits, as permitted by IAS 39
endorsed by the European Commission. Fair value macro hedges are aimed at reducing fluctuations in the fair value, as
a result of interest rate risk, of a sum of money flowing from a portfolio of financial assets or liabilities. Net amounts
resulting from mismatches between assets and liabilities cannot be subject to macro hedges;
- cash flow hedge, which has the objective of covering exposure to variability in future cash flows attributable to particular
risks associated with balance sheet captions. This type of hedge is essentially used to stabilise the interest flow on
floating rate funding to the extent that the latter finances fixed rate investments. In certain circumstances, similar
transactions are carried out with respect to some types of floating rate investments;
- hedges of net investments in foreign currency, which refer to the coverage of the risks of net investments in foreign
operations expressed in their original currency.
Only hedging transactions which involve counterparties outside the Group may qualify for hedge accounting.
The choice made by the Group to take advantage of the possibility of continuing to fully apply the IAS 39 rules for hedging
relationships means that the equity instruments classified as Financial assets measured at fair value through other
comprehensive income (FVOCI) cannot be measured as hedged items for price or exchange rate risk, since these
instruments are not recognised through profit or loss, not even if they are sold (except for dividends that are recognised
through profit or loss).
Recognition criteria
Hedging derivatives, like all derivatives, are initially recognised and subsequently measured at fair value.
A relationship qualifies as a hedging relationship, and is appropriately reported in the financial statements only if, all of the
following conditions are met:
- at the inception of the hedge, the hedging relationship is formally designated and documented, including the company\u2019s
risk management objectives and strategy in undertaking the hedge. This documentation includes the identification of the
hedging instrument, the item or transaction hedged, the nature of the risk being hedged, and how the entity will assess
the hedging instrument\u2019s effectiveness in offsetting the exposures to changes in the fair value of the item hedged or in
the cash flows attributable to the risk hedged;
- the hedge is expected to be highly effective;
- the planned transaction hedged, to hedge the cash flows, is highly probable and has an exposure to changes in cash
flows that could have effects on the income statement;
- the effectiveness of the hedge can be reliably measured;
- the hedge is measured on an ongoing basis and is considered highly effective for all the financial years in which it was
designated.
Measurement criteria Hedging derivatives are measured at fair value. In particular: - in the case of fair value hedges, the change in the fair value of the hedged item is offset by the change in fair value of the hedging instrument. Offsetting is recognised via the registration in the income statement of the gains and losses referred to both the hedged item (with regard to the variations produced by the underlying risk factor), and the hedging instrument. Any difference, which represents the partial ineffectiveness of the hedge, is therefore the net economic effect. In case of fair value macro hedges, fair value changes related to the hedged risk of assets and liabilities in hedged portfolios are allocated to the balance sheet under caption 60. \u201cFair value change of financial assets in hedged portfolios\u201d or under caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d; - in the case of cash flow hedges, changes in fair value of the derivative are recorded in equity, for the effective portion of the hedge, and these are registered in the income statement only when, with reference to the hedged item, there is a variation in the flows to be offset or if the hedge is ineffective; - hedges of net investments in foreign currency are treated in the same way as cash flow hedges. The effectiveness of the hedge depends on the extent to which changes in the fair value of the hedged item or the relating expected cash flows are offset by those of the hedging instrument. Therefore, effectiveness is appraised by comparing the aforementioned changes, considering the intent pursued by the entity at the time in which it entered the hedging transaction. A hedge is effective when the variations in fair value (or cash flows) of the hedging financial instrument almost completely neutralise, that is within the 80-125% range, the changes in the fair value of the hedged item, for the type of risk being hedged. Effectiveness is assessed at every close of annual or interim financial statements using: - prospective tests, which justify the application of hedge accounting, since these prove the expected effectiveness of the hedge; - retrospective tests, which demonstrate the effectiveness of the hedge for the reference period, or measure how much the effective results diverge from perfect coverage. Fair value hedge accounting is discontinued prospectively in the following cases: \u2013 the hedging instrument expires or is sold, terminated, or exercised; \u2013 the hedge no longer meets the hedge accounting criteria described above; \u2013 the entity revokes the designation. If such assessments do not confirm hedge effectiveness, from that moment hedge accounting is discontinued, the derivative is reclassified in instruments held for trading and the hedged item is measured on the basis of its classification in the balance sheet. If the assets or liabilities hedged are measured at amortised cost, the higher or lower value resulting from the fair value measurement due to the hedge becoming ineffective is recognised through profit or loss, using the effective interest rate method. When a fair value macrohedging relationship is discontinued, the cumulative change in fair value losses carried under caption 60 \"Fair value change of financial assets in hedged portfolios\" or caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d are transferred to the income statement among interest income or expense over the residual life of the original hedging relationships, without prejudice to verification that the requirements have been met. An entity must discontinue cash flow hedge accounting prospectively in each of the following circumstances: a) the hedging instrument expires or is sold, terminated, or exercised (for this purpose the replacement or exchange of one hedging instrument with another hedging instrument is not a conclusion or termination if that replacement or exchange forms part of an entity\u2019s documented hedging strategy). In this case the total profit (or loss) on the hedging instrument continues to be recognised directly in shareholders\u2019 equity until the end of the reporting period in which the hedge became effective and it continues to be recognised separately until the programmed transaction, being hedged, occurs; b) the hedge no longer meets the criteria for hedge accounting. In this case the total profit or loss on the hedging instrument is recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective and continues to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs; c) it is no longer considered that the future transaction will occur, in which case any related total profit or loss on the hedging instrument recognised directly in equity starting from the reporting period in which the hedge became effective must be recognised through profit or loss; d) the entity revokes the designation. For hedges of a programmed transaction, total profits or losses on the hedging instrument recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective continue to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs or it is expected that it will no longer occur. As an exception to the provisions of IAS 39 discontinuation following an update of the documentation of the hedging relationship (due to modification of the hedged risk, the hedged underlying or the hedging derivative, or of the method for verifying hedge effectiveness) does not apply in the case of modifications required as a direct consequence of the Interest Rate Benchmark Reform (so-called IBOR Reform) and applied on equivalent economic bases. 5. Investments in associates and companies subject to joint control Classification, recognition and measurement criteria The caption includes investments in companies subject to joint control and associates. Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties sharing control. Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of financial and management policies of the company based on specific juridical relations, such as the participation in voting syndicates. Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since it solely has economic rights on a portion of the returns generated by the investment, but does not have access to management policies and may exercise governance rights limited to the safeguarding of its economic interests. The investments in associates and companies subject to joint control are measured at cost and accounted for according to the equity method. If there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows which may be generated by the investment, including the final disposal value. If the recoverable amount is lower than the carrying value, the difference is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. Derecognition criteria Investments in associates and companies subject to joint control are derecognised when the contractual rights to the cash flows from the assets expire or when the investment is sold, substantially transferring all the risks and rewards connected to the assets. 6. Property and equipment Classification criteria Property and equipment include land, owner-occupied property, investment property, valuable art assets, technical plants, furniture and fittings and any type of equipment that are expected to be used during more than one period. Property and equipment held for use in the production or supply of goods and services are classified as \u201cProperty and equipment used in operations\u201d, in accordance with IAS 16. Real estate owned for investment purposes (to obtain rental income or gains on the capital invested) is classified as \u201cInvestment property\u201d based on IAS 40. This caption also includes property and equipment classified in accordance with IAS 2 - Inventories, which refer both to assets resulting from the enforcement of guarantees or from purchase at auction that the company intends to sell in the near future, without carrying out major renovation work, and which do not meet the requirements for classification in the previous categories, and to the real estate portfolio of the Group\u2019s real estate companies, including building sites, properties under construction, properties completed for sale and real estate development initiatives, held for sale. Finally, this caption also includes the rights of use acquired through leases and relating to the use of an item of property and equipment (for the lessee companies) and the assets leased under operating leases (for the lessor companies). Recognition criteria Property and equipment are initially measured at cost which comprises in addition to their purchase price any costs directly attributable to the purchase and required for them to be operational. Extraordinary maintenance expenses which lead to a rise in future economic benefits are attributed to increase the value of assets, while other ordinary maintenance costs are recorded in the income statement. Measurement criteria Property and equipment are measured at cost, net of depreciation and impairment losses, except for owner-occupied properties and valuable art assets, which are measured according to the revaluation model. The investment properties are measured with the fair value method. For the property and equipment subject to assessment according to the revaluation model: - if the carrying value of an asset is increased following a revaluation, the increase must be recognised in the Statement of comprehensive income and accumulated in the shareholders\u2019 equity under the caption revaluation reserve; conversely, in the case where an impairment loss on the same asset recognised previously in the income statement is recovered, it must be recognised as income; - if the carrying value of an asset is decreased following the revaluation, the decrease must be recognised in the Statement of comprehensive income to the extent in which there are possible credit balances in the revaluation reserve referring to this asset; otherwise, this reduction is recorded in the income statement. Property and equipment are systematically depreciated, adopting the straight-line method over their useful life. The depreciable amount is the cost of the goods (or the net value recalculated if the method adopted for the valuation is the revaluation model) net of the residual value at the end of the depreciation period, if significant. Buildings are depreciated for a portion deemed to be suitable to represent their deterioration over time following their use, considering extraordinary maintenance expenses, which are recognised in the carrying value of the assets. In order to determine the useful life of the various types of assets and the corresponding depreciation rates, the Group\u2019s real estate assets have been divided into four clusters: (i) historical properties (useful life of 65 years), (ii) Entire buildings (useful life of 33 years), (iii) Banking branches (useful life of 20 years) and (iv) Other properties (useful life of 20 years). These clusters do not include the New Intesa Sanpaolo Headquarters in Turin, for which the useful life was estimated through a specific analysis which considered the innovative characteristics of the work, featuring strategic importance and extensive architectonic value, built using complex technologies, and having few, or even zero peers not only within the Group\u2019s real estate assets but also in general. Other property and equipment is depreciated based on the following useful lives: furniture from 5 to 10 years, plants from 4 to 10 years, hardware and IT equipment for a period from 4 to 8 years and, lastly, other assets from 3 to 13 years. The following are not depreciated: - land, irrespective of whether acquired individually or embedded in the value of buildings, since it has an indefinite useful life; - the valuable art assets, the other historical, artistic and decorative assets, since their useful life cannot be estimated and their value is normally destined to increase over time; - the investment properties, as required by IAS 40, are measured at fair value through profit or loss and therefore they must not be depreciated. If there is some evidence that property and equipment measured at cost may have been impaired, the carrying amount of the asset and its recoverable amount are compared. Any impairment losses are recorded in the income statement. If the reasons for impairment cease to exist, a value recovery is recorded and may not exceed the value that the asset would have had, net of depreciation, determined in the absence of previous impairment losses. With regard to the property and equipment recognised in accordance with IAS 2, these are measured at the lesser of cost and net realisable value, without prejudice to the comparison between the asset\u2019s carrying amount and its recoverable amount where there is an indication that the asset may have been impaired. Any impairment losses are recorded in the income statement. Property and equipment consisting of the right-of-use of assets subject to leases According to IFRS 16, a lease is a contract or part of a contract that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. According to IFRS 16, leases are accounted for on the basis of the right of use model, where, at the initial date, the lessee has a financial obligation to make payments due to the lessor to compensate for its right of use of the underlying asset during the lease term. When the asset is made available to the lessee for use (initial date), the lessee recognises both the liability and the asset consisting of the right of use. In particular, the right of use acquired with a lease is measured as the sum of the present value of the future payments over the term of the contract, the lease payments made at or before the commencement date, the lease incentives received, if any, the initial direct costs and any estimated costs of dismantling or restoring the underlying asset. The financial liability recognised corresponds to the present value of the payments to be made for the lease. With regard to the discount rate, based on the requirements of IFRS 16, the Group uses the implicit interest rate for each lease contract, when it is available. For leases from the lessee\u2019s point of view, in some cases, for example for rental agreements, the implicit interest rate cannot always be readily determined without using estimates and assumptions (the lessee does not have enough information about the unguaranteed residual value of the leased asset). In these cases, the Group has developed a methodology for setting the incremental interest rate as an alternative to the implicit interest rate and has decided to adopt the Funds Transfer Pricing (FTP) method. This is based on an unsecured and amortising rate curve, which envisages lease payments for the lease contract that are typically constant over the lease term, rather than a single payment upon maturity. The FTP method takes into account the creditworthiness of the lessee, the term of the lease, as well as the economic environment in which the transaction takes place and is therefore in line with the requirements of the standard. The lease term is determined taking into account: - periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; - periods covered by an option to terminate the lease if the lessee is reasonably certain to exercise that option. During the course of the lease term a lessee shall: - measure the right-of-use at cost less accumulated depreciation and accumulated impairment losses determined and recognised based on the provisions of IAS 36 \u201cImpairment of assets\u201d, adjusted to take account of any remeasurement of the lease liability; - increase the liability arising from the lease following the accrual of interest expense calculated at the interest rate implicit in the lease or alternatively at the incremental borrowing rate, and decrease it for payments of principal and interest made. If changes are made to the lease payments, then the lease liability must be remeasured and the impact of the remeasurement of the liability is recognised against the right-of-use asset. Derecognition criteria Property and equipment are derecognised from the balance sheet on disposal or when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal. 7. Intangible assets Classification criteria Intangible assets consist of goodwill and other intangible assets governed by IAS 38. They may include the rights of use acquired under a lease and relating to the use of an intangible asset (for lessees) and assets leased under an operating lease (for lessors). Intangible assets are recognised as such if they may be identified and stem from legal or contractual rights. Intangible assets include goodwill, which represents the positive difference between purchase price and fair value of assets and liabilities pertaining to the acquired company. Recognition and measurement criteria Intangible assets are recognised at cost, adjusted for any accessory charges only if it is probable that the future economic benefits attributable to the assets will be realised and if the cost of the asset may be reliably determined. If this is not the case, the cost of the intangible asset is recorded in the income statement in the year in which it was incurred. For assets with finite useful life, the cost is amortised on a straight-line basis or in decreasing portions determined on the basis of the economic benefits expected from the asset. Assets with indefinite useful life are not subject to systematic amortisation, but are periodically subjected to impairment testing. If there is any indication that an asset may have suffered impairment losses, the asset\u2019s recoverable amount is estimated. The impairment loss, which is recorded in the income statement, is equal to the difference between the carrying value of the assets and the recoverable amount. In particular, intangible assets include: - Technology-related intangible assets, such as software applications, which are amortised on the basis of their expected technological obsolescence and over a maximum period of seven years. An exception is the core banking system platforms, whose useful life is estimated on a case-by-case basis, and, as a result, amortised over longer periods (from 10 to 15 years). Moreover, the costs incurred for the development of software are considered as intangible assets and are recognised under assets only when all the following conditions are met: i) the cost attributable to the intangible asset during its development can be measured reliably, ii) there is the intention, the availability of financial resources and the technical ability of making the intangible asset available for use or sale, iii) the future economic benefits to be generated by the asset can be demonstrated. Software development capitalised costs only comprise the costs directly attributable to the development process. Capitalised software development costs are amortised systematically over the estimated useful life of the relevant product/service so as to reflect the pattern in which the asset\u2019s future economic benefits are expected to be consumed by the entity from the beginning of production over the product's estimated life; - customer-related intangibles generally represented, in business combinations, by asset management relations, non- financial activities related to provision of services and insurance portfolios. Such assets, with a finite life, are originally measured by the discounting, using a rate representing the time value of money and the asset\u2019s specific risks, of the income margins on the ongoing relations at the time of the business combination over a period which expresses their residual, contractual or estimated life. For asset management relations and non-financial activities related to provision of services, they are amortised on a straight-line basis over the period of greater significance of the expected economic benefits in case of relations which do not have a predetermined duration and, for relations from insurance contracts, generally in decreasing portions corresponding to the duration of the contract in case of relations with predetermined expiry (residual lives of the policies); - marketing-related intangibles represented by the measurement of the brand name which is also recorded at the time of business combinations. This asset is considered as having indefinite life since it is deemed to contribute for an indefinite period of time to the formation of income flows. Lastly, intangible assets include goodwill. With respect to business combinations, goodwill may be recorded when the positive difference between the consideration transferred and the fair value recognition, if any, of minority interests, and the fair value of shareholders\u2019 equity acquired is representative of the future income-generation potential of the equity investment. If this difference is negative (badwill) or if goodwill may not be attributed considering future income-generation potential of the equity investments, the same difference is directly recorded in the income statement. Once a year (or every time that there is evidence of impairment losses), an impairment test is carried out for goodwill. This requires the identification of the Cash Generating Unit (or CGU) to which goodwill is allocated. The cash-generating units of the Intesa Sanpaolo Group correspond to the operating divisions presented in segment reporting. Any impairment losses are determined on the basis of the difference between the recognition value of goodwill and its recoverable amount, if lower. The recoverable amount is equal to the higher between the fair value of the cash-generating unit, less any cost to sell, and the relative value in use. The consequent adjustments are posted in the income statement. With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill allocated, then an independent and specific valuation is made of the intangible on the basis of the fair value certified by the appraisal of an independent expert. If the fair value of the brand name is not higher than its carrying amount, the recoverable amount of the CGU is estimated, calculated based on future cash flows. It is also noted that, where a CGU which is allocated both goodwill and a brand name has a value in use lower than the carrying amount, by an amount that exceeds the total value of the intangibles with indefinite life allocated, without prejudice to the full write-down of goodwill, an autonomous valuation of the brand name is carried out based on the fair value stated in the specific appraisal. Derecognition criteria Intangible assets are derecognised from the balance sheet on disposal and if no future economic benefits are expected. 8. Other assets Other assets essentially consist of items awaiting classification and items not attributable to the other balance-sheet captions, including receivables arising from the supply of goods and non-financial services, sundry tax items other than those recognised in their own caption (e.g., connected to withholding agent activities), gold, silver and precious metal, the tax credits connected with the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees and accrued income other than that capitalised on the related financial assets, including the income resulting from contracts with customers in accordance with IFRS 15, paragraphs 116 and following. As required by paragraphs 91 and following of IFRS 15, the costs incurred for the acquisition and fulfilment of long-term contracts with customers are capitalised and amortised when they are incremental and are expected to be recovered. 9. Non-current assets held for sale and discontinued operations Non-current assets/liabilities for which a disposal process has commenced and for which disposal is deemed to be extremely probable are recorded in assets under Non-current assets held for sale and discontinued operations and in liabilities under Liabilities associated with non-current assets held for sale and discontinued operations. These assets/liabilities are measured at the lower of the carrying amount and fair value less cost to sell, except for some type of assets (e.g., financial assets within the scope of IFRS 9) for which IFRS 5 specifically establishes that the measurement principles of the applicable accounting standard must be used. Non-current assets held for sale and discontinued operations may include portfolios of assets for which there are no prices in an active market. In such case, where an agreement has been reached with the purchaser, they are measured at fair value by referring to the sale prices resulting from that agreement. Where there is no agreement, they are measured using specific valuation techniques based on the asset and, where necessary, by employing external fairness opinions. The income and charges (net of tax effect) attributable to non-current assets held for sale and discontinued operations or recorded as such in the year are recognised in the income statement in a separate caption. 10. Current and deferred tax Taxes on income, calculated according to domestic tax regulations, are accounted for as a cost on an accruals basis, in line with the method followed to include, in the financial statements, the costs and income that generated them. Therefore, they represent the balance of current and deferred income taxes for the year. Current tax assets and liabilities include the balances of the Group companies due to the relevant Italian and foreign tax authorities relating to direct taxation. More specifically, these captions include the net balance of tax liabilities from previous years and the current year, calculated on the basis of a prudent estimate of the tax charges due for the year, assessed according to the tax regulations currently in force, and the current tax assets represented by advances, by withholding taxes borne or other tax credits. The risk inherent in such proceedings and the risks inherent in proceedings where preliminary disbursements have not been requested are evaluated in applying the principles contained in IAS 37 regarding the best estimate of the economic resources required. Considering the Group\u2019s adoption of the national fiscal consolidation provisions, tax positions which may be referred to the Group companies are managed separately from an administrative standpoint. Deferred taxation is calculated according to the balance sheet liability method, taking into account the tax effect of the temporary differences between the book value of the assets and liabilities and their value for taxation purposes, which will determine taxable income or deductible amounts in the future. To this end, \u201ctaxable temporary differences\u201d are differences which will give rise to taxable income in future years while \u201cdeductible temporary differences\u201d are those which will give rise to deductible amounts in future years. Deferred tax liabilities are calculated by applying the tax rates currently in force to taxable temporary differences that are likely to generate a tax burden, and to the deductible temporary differences for which it is likely that there will be future taxable amounts at the time when the related tax deductibility occurs (so-called probability test). Deferred tax assets and liabilities related to the same tax and due in the same period are offset. If deferred tax assets and liabilities refer to items affecting the Income statement, the balancing entry is represented by taxes on income. Where deferred tax assets and liabilities relate to transactions that have been recorded in shareholders\u2019 equity without affecting earnings (such as adjustments on IAS/IFRS first-time adoption, measurements of financial assets recognised at fair value through other comprehensive income or of cash flow hedge derivative contracts), the balancing entry is made in shareholders\u2019 equity, under specific reserves where so provided (e.g. valuation reserves). Latent taxation on equity reserves that will become taxable \"however used\" is charged against shareholders\u2019 equity. Deferred taxation relating to revaluations arising on conversion to the euro, credited directly to a specific reserve named \u201cReserve pursuant to Article 21 of Legislative Decree 213/98\u201d, which qualify for deferred taxation, is charged directly against this reserve. No provision is made for reserves subject to latent taxation only in the event of distribution, since the size of the available reserves which have already been taxed leads to the belief that no transactions will be undertaken which may cause taxation of the untaxed reserves. Deferred tax liabilities referred to companies included in the fiscal consolidation are reported in their financial statements, in application of the accrual basis principle and in consideration of the fact that the effects of fiscal consolidation are limited to the settlement of current tax positions. Latent taxation on shareholders' equity items of consolidated companies is not recorded in the financial statements if it is unlikely that any tax liability will actually arise, also bearing in mind the permanent nature of the investment. 11. Allowances for risks and charges Allowances for risks and charges for commitments and guarantees given This sub-caption of the allowances for risks and charges contains the allowances for credit risk recognised for loan commitments and guarantees given that come under the scope of the IFRS 9 impairment rules. For these cases, in general, the methods described for financial assets measured at amortised cost or at fair value through other comprehensive income are adopted for the assignment to the three credit risk stages and the calculation of the expected credit loss. This aggregate also includes allowances for risks and charges made to cover other types of commitments and guarantees given that, due to their specific characteristics, do not fall under the scope of impairment pursuant to IFRS 9. Post-employment benefits Company post-employment benefits are based on agreements and qualify as defined benefit plans. Liabilities related to such plans and the relative cost of current service are determined on the basis of actuarial assumptions based on the Projected Unit Credit Method. This method sets out that future obligations are forecast using past time-series analyses and the demographic curve and that such future cash flows are discounted based on a market interest rate. The provisions made in each year of service are considered separately and give rise to an additional unit of benefit entitlement for the purposes of the final obligation. The discounting rate is determined on the basis of market returns, surveyed as at the date of measurement, on high-quality corporate bonds, taking account of the residual average life of the liability. The present value of the liability at the reporting date is also adjusted by the fair value of any plan assets. Actuarial profits and losses (namely the changes in the current value of the obligation resulting from changes in the actuarial assumptions and adjustments based on past experience) are recognised in the statement of comprehensive income. Other allowances Other allowances for risks and charges record provisions related to legal obligations or connected to labour relationships or to litigations, also of a fiscal nature, originating from a past event for which a disbursement will probably arise to settle the obligations, provided that the amount of the disbursement may be estimated reliably. Consequently, a provision is recognised when, and only when: - there is a present obligation (legal or constructive) as a result of a past event; - it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and - a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the reporting date and takes into account the risks and uncertainties that inevitably surround many events and circumstances. Where time value is significant, provisions are discounted using current market rates. Provisions and increases due to time value are recorded in the income statement. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation or when the obligation is settled, the provision should be reversed. The caption also includes long-term benefits to employees, whose charges are determined with the same actuarial criteria described for post-employment benefits. Actuarial profits and losses are all immediately recognised in the income statement. 12. Financial liabilities measured at amortised cost Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in lease transactions. Recognition criteria Initial recognition of these financial liabilities occurs at the date of subscription of the contract, which usually coincides with the time of collection of the sums deposited or the issue of debt securities. Initial recognition is based on the fair value of the liabilities, normally equal to the amount collected or the issue price, increased by any additional charges/revenues directly attributable to the single funding or issuing transaction. Internal administrative costs are excluded. Lease payables are recognised at the present value of the future lease payments, discounted using the implicit interest rate of the transaction or, where it cannot be determined, the marginal financing rate. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. Lease payables are remeasured when there is a lease modification (e.g. a change in the contract which is not accounted for/considered as a separate contract); the effect of the remeasurement will be a corresponding adjustment to the right-of-use asset. Derecognition criteria Financial liabilities are derecognised from the balance sheet when they have expired or extinguished. Derecognition also occurs for repurchase of previously-issued bonds. The difference between book value of the liability and amount paid for repurchase is recorded in the income statement. Placement of own securities, after their repurchase, is considered a new issue with recognition at the new placement price. 13. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, in particular, the negative fair value of trading derivatives, as well as embedded derivatives with a negative fair value separated from liabilities measured at amortised cost. It also includes liabilities determined by short selling generated by trading of securities and certificates forming part of the trading business model. Measurement criteria All financial liabilities held for trading are measured at fair value through profit or loss. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 14. Financial liabilities designated at fair value Classification criteria Financial liabilities designated at fair value are recorded under this caption, on the basis of the fair value option given to companies by IFRS 9 and in compliance with the cases contemplated in the reference regulations. This category of liabilities includes certificates that form part of the banking book business model. Recognition criteria These liabilities are recorded at fair value as at the date of issue, including the value of any embedded derivatives, net of placement fees paid. Measurement criteria These liabilities are measured at fair value according to the following rules established by IFRS 9: - changes in fair value attributable to changes in own credit risk must be recognised in the statement of comprehensive income (shareholders\u2019 equity); - the remaining changes in fair value must be recognised in the income statement. The amounts recognised in the statement of comprehensive income are not subsequently recycled to the income statement. This method of accounting must not be applied when recognition of the effects of own credit risk on shareholders\u2019 equity results in or accentuates an accounting mismatch in the income statement. In this case, gains and losses associated with the liability, including those resulting from changes in own credit risk, must be recognised in the income statement. Derecognition criteria The financial liabilities designated at fair value are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed with the substantial transfer of all the risks and rewards connected to it. 15. Foreign currency transactions Definition The foreign currency is a currency that is not the functional currency of the entity, which is in turn the currency of the primary economic environment in which the entity operates. Initial recognition Foreign currency transactions are recorded, on initial recognition, in the functional currency, by applying to the foreign currency amount the spot exchange rate at the date of the transaction. Subsequent measurement At every close of annual or interim financial statements, captions in foreign currency are measured as follows: - foreign currency monetary items are translated using the closing rate; - non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; - non-monetary items that are measured at fair value in a foreign currency are translated using the closing rates. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognised through profit or loss in the period in which they arise. When a gain or loss on a non-monetary item is recognised directly in equity, any exchange component of that gain or loss is recognised directly in equity. Conversely, when a gain or loss on a non-monetary item is recognised through profit or loss, any exchange component of that gain or loss is recognised through profit or loss. With regard to the \u201cConversion of financial statements in currencies other than the euro\u201d for the purposes of consolidation and accounting for the related foreign exchange differences, reference is made to the specific paragraph of Part A: Section 3 - Scope of consolidation and consolidation methods of these Notes to the consolidated financial statements. 16. Other information Own shares Any own shares held are directly deducted from equity. Similarly, their original cost and the profits or losses deriving from their subsequent sale are recorded in equity. Accruals, prepayments and deferrals Accruals, prepayments and deferrals for the year that include income and charges for the year, accrued on assets and liabilities, are shown in the financial statements as an increase or decrease of the assets and liabilities to which they are related. Leasehold improvements The costs sustained for restructuring property belonging to third parties are capitalised in consideration of the fact that for the duration of the rental contract the using company has control of the assets and may receive their future economic benefits. These costs, recorded in Other assets as provided for by the instructions of the Bank of Italy, are amortised over a period which must not exceed the duration of the rental contract. Employee termination indemnities Employee termination indemnities qualify as a \u201cpost-employment benefit\u201d classified as: - a \u201cdefined contribution plan\u201d to the extent of the portions accruing from 1 January 2007 (the date the reform of the supplementary pension schemes came into force pursuant to Legislative Decree 252 of 5 December 2005) when the employee opted for the complementary pension scheme or decided to allocate such portions to the INPS (the Italian Social Security Institute) Treasury fund. Therefore, the amounts, recorded under personnel expenses, are determined on the basis of amounts due without the application of actuarial calculation; - a \u201cdefined benefit plan\u201d to the extent of the portions of employee termination indemnities accrued until 31 December 2006. These amounts are recognised at their actuarial value determined using the \u201cProjected Unit Credit Method\u201d, without applying the pro-rata of the service rendered. Indeed, the current service cost of employee termination indemnities is almost entirely accrued and its revaluation in the years to come is not expected to generate significant benefits for employees. For the purposes of discounting, the rate used is the market yield of high-quality corporate bonds taking into account the average remaining life of the liability, weighted based on the percentage amount paid and advanced, for each maturity, with respect to the total to be paid and advanced until the expiry of the entire obligation. The plan\u2019s costs are recorded under personnel expenses, while actuarial profits and losses are recognised in the statement of comprehensive income. Share-based payments Share-based payments are recorded in the income statement, with a corresponding increase in shareholders\u2019 equity, on the basis of the fair value of financial instruments attributed at assignment date, dividing the charge over the period set forth by the plan. In the case of options, the fair value is calculated using a model which considers, in addition to information such as strike price and expiry date of the option, spot price of the shares and their expected volatility, expected dividends and the risk-free interest rate, as well as the specific characteristics of the plan. The pricing model values the option and the probability of realisation of the condition on the basis of which the options have been assigned. The combination of the two values supplies the fair value of the assigned instrument. Any decrease in the number of financial instruments granted is accounted for as a cancellation of such instruments. Employee benefits Employee benefits are defined as all forms of consideration given by an entity in exchange for service rendered by employees. Employee benefits are divided into: - short-term benefits (other than termination benefits or equity compensation benefits) that are expected to be paid in full within twelve months after the end of the period in which the employees render the related service and recognised in full through profit or loss when they become due (this category includes, for example, wages, salaries and \u201cextraordinary\u201d benefits); - post-employment benefits payable after the conclusion of employment that require the entity to provide future benefits to employees. These include employee termination indemnities and pension funds, which are in turn divided into defined contribution plans and defined benefit plans or company pension funds; - termination benefits, i.e. compensation that the company recognises to the staff members upon termination of the employment agreement, following the company's decision to terminate the employment relationship prior to the normal retirement date; - long-term benefits, other than those above, that are not expected to be paid in full within twelve months after the end of the period in which the employee rendered their service. Offsetting of financial instruments According to IAS 32, paragraph 42, financial assets and financial liabilities are offset and the net amount presented in the financial statements when an entity: - has a legal enforceable right of set off which is currently exercisable in all circumstances, both in the ordinary course of business or in the event of default, insolvency or bankruptcy of the parties; - intends to settle the transactions on a net basis or on a gross settlement basis whose substantive effects are equivalent to a net settlement. For derivative instruments covered by netting agreements that meet the above requirements, Bank of Italy Circular 262 also requires the offsetting to be performed between trading and hedging derivatives, with the mismatches to be presented on a net basis. The net balance is usually allocated to the trading book rather than to the hedging derivatives, based on the actual amount of the mismatch between trading and hedging derivatives. In compliance with the requirements of IFRS 7, more detailed information is provided in the tables contained in Part B \u2013 Other information of these Notes to the financial statements, which present the following: - the carrying amounts of assets and liabilities that meet the requirements of IAS 32, paragraph 42, before and after offsetting; - the exposures subject to master netting agreements that have not been offset but have the potential to be offset following specific circumstances; - the collateral associated with them. Tax credits related to the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees acquired as a result of transfer by direct beneficiaries or previous purchasers (e.g. ecobonus) Law Decrees no. 18/2020 (\u201cCura Italia\u201d Decree) and no. 34/2020 (\u201cRilancio\u201d Decree) introduced tax incentives related to both investment expenditure (e.g. ecobonus and seismicbonus) and current expenditure (e.g. rents for non-residential premises). Additionally, the government once again intervened on the issue through Law Decree no. 50/2022 (\u201cDecreto Aiuti\u201d), mainly by remodulating the base of potential re-assignees. These tax incentives apply to households or businesses, are linked to a percentage of the expenditure incurred (in some cases up to 110%) and are granted in the form of tax credits or tax deductions (with option for conversion into tax credits). The main features of these tax credits are: i) the possibility of using them for offsetting; ii) their transferability to third-party purchasers; and iii) their non-refundability by the Treasury. The accounting for tax credits acquired from a third party (transferee of the tax credit) is not covered by a specific international accounting standard. IAS 8 requires, in cases where there is a circumstance not explicitly addressed by an IAS/IFRS accounting standard, that management develop an accounting policy to ensure relevant and reliable disclosure of such transactions. To this end, the Intesa Sanpaolo Group, in view of the guidance provided by the Authorities, in the document \u201cAccounting treatment of tax credits connected with the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees acquired following the assignment by the direct beneficiaries or previous purchasers\u201d published on 5 January 2021 by the Coordination Committee between the Bank of Italy, Consob and IVASS concerning the application of IAS/IFRS has adopted an accounting policy that refers to the accounting rules established by IFRS 9, applying the provisions that are consistent with the characteristics of the transaction. The Group attributes: \u2013 to a Hold to Collect business model the credits that are acquired within the limits of its tax capacity, given the objective of holding them for future offsetting. Those credits are recognised at amortised cost and the profitability is recognised on a pro-rata basis under net interest income in the income statement; \u2013 to a Hold to Collect and Sell business model the excess credits acquired in relation to its tax capacity and, therefore, held for subsequent reassignment. Those credits are measured at fair value through other comprehensive income. Given the particular nature of these instruments, their fair value fluctuations are linked to the changes in interest rates to the extent that these reflect on the definition of the purchase prices. The profitability is recognised on a pro-rata basis under net interest income in the income statement. The accounting framework set out in IFRS 9 for calculating expected credit losses is not deemed applicable to this specific case. The ECL need not be calculated on these tax credits, as no refund is expected from the tax authorities, as the extinction of the instrument is linked to the offsetting of the bearer\u2019s tax payables. Moreover, in cases where reassignment is planned, the sale will be finalised by collecting the price of the instrument, without recognising a receivable due from the assignee. Lastly, considering the operating methods implemented by the Group, the risk of non-use of the tax credits, i.e. the risk that the Bank lacks the tax capacity, , to achieve the benefits associated with the asset, can be reasonably deemed as inexistent. Specifically: \u2013 with regard to the Hold to Collect business model, the amounts acquired are consistent with the overall tax capacity, constantly monitored, so that the Bank can offset its payables; \u2013 with regard to the Hold to Collect and Sell business model, for the credits acquired, reassignment agreements are gradually entered into for excess volumes, binding on the customer, with multiple counterparties, whose tax capacity is verified in advance. As specified in the joint document from the Authorities, as mentioned above, given that the purchased tax credits do not qualify as tax assets, public subsidies, intangible assets or financial assets under the international accounting standards, the most appropriate classification, for their presentation in the financial statements, is the residual classification under Other Assets in the balance sheet. TLTRO III The TLTRO III (Targeted Longer Term Refinancing Operations) seek to preserve favourable bank lending conditions and support the defined monetary policy stance. Several of the parameters that characterise these operations, established by the ECB on 6 June 2019, were subsequently recalibrated in several steps, initially improving them for banks in light of the economic effects of the COVID-19 emergency and, recently - on 27 October 2022 - to \u201cnormalise\u201d funding costs in order to exert downward pressure on inflation and contribute to restoring price stability over the medium term. The amount of funding that each bank can obtain depends on the amount of loans granted to non-financial companies and households at particular reporting dates (so-called eligible loans). The single tranches could be subscribed on a quarterly basis, from September 2019 up to December 2021, and each operation has a duration of three years. The interest rate for each operation is set at a level equal to the average interest rate on the Eurosystem\u2019s main refinancing operations (MROs), except for the special interest rate period from 24 June 2020 to 23 June 2022, when a rate of 50 basis points lower applied. Banks granting net eligible loans above a preset benchmark net lending level can receive an interest rate reduction. Specifically, the favourable rate applied is equal to the average rate on deposits with the central bank (Deposit Facility Rate or DFR) for the entire duration of the respective operation, except for the special interest rate period where an additional reduction of 50 basis points was added. The interest is paid in arrears at the maturity date of each TLTRO III transaction or at the time of early repayment. As stated, on 27 October 2022, in addition to further increasing interest rates, as part of a trend of interest rate hikes begun in July 2022, the Governing Council of the ECB decided to recalibrate the conditions applicable to TLTRO III financing. Specifically, it maintained the existing interest rate calculation method up to 22 November. This method provided that, in \u201cordinary\u201d periods (i.e. periods other than special interest rate periods defined above) the applicable interest rate would equal the average of interest rates calculated over the duration of the instrument, entailing an \u201cadjustment\u201d to the interest rate, which would be determined by applying the interest rate in force each time, only in ordinary periods. Starting on 23 November 2022 (up to the date of maturity or early redemption of each existing TLTRO III) the interest rate is indexed to average applicable key ECB interest rates for each operation in that period (equal to the DFR rate for banks that reached the defined benchmarks). Lacking specific provisions in the reference accounting standards on how to account for this case and clear indications from IFRIC, which had been consulted on the accounting treatment of the TLTRO III, the Intesa Sanpaolo Group defined its own accounting policy, applied consistently and with continuity over time, also following the changes made to contractual conditions: the Group applies to TLTRO operations the accounting treatment defined by IFRS 9 for floating-rate financial instruments - considering the refinancing conditions defined by the ECB as floating market rates as part of the monetary policy measures of the Eurosystem - recognising the interest applicable in each case, to be estimated based on the probability of achieving the net lending targets set. A requirement for the recognition of the favourable interest rates \u2013 in keeping with the approach already adopted for TLTRO II \u2013 is a reliable estimate of the achievement of the benchmark net lending, which the Group performs through forecast reports on the lending performance monitored at set dates, approved by an appropriate level of management. These benchmarks \u2013 referring in particular to volumes as at 31 March 2021 and 31 December 2021 \u2013 were in fact achieved. In the event of changes to the forecasts on the achievement of those targets, the IFRS 9 provisions on the revision of cash flow estimates apply. According to the Group\u2019s accounting policies, the revision of the conditions of the instrument by the ECB is considered as a change to a floating rate pursuant to par. B5.4.5 of IFRS 9, with a forward-looking adjustment to the interest rate, considering the fact that the ECB has the option to change interest rates at its discretion in defining monetary policy rates (as it did in April and December 2020, introducing the special interest rate periods and, more recently, in October 2022, in the terms illustrated above). The interest is therefore recognised periodically based on the interest rate of the instrument for each period (-0.5% until 24 June 2020, -1% until 23 June 2022, and, thereafter, based on existing conditions, illustrated below) as required by paragraph B5.4.5 of IFRS 9. Following the increases in interest rates approved by the Governing Council of the ECB starting in July 2022, it was necessary to redetermine the effective interest rate applicable to each operation, starting from the date of recalibration of the interest rates, with the goal of reallocating the benefit resulting from the specific mechanism of the average of interest rates in the reference period of the benefit. Lastly, the recalibration of the conditions applicable to TLTRO III financing defined on 27 October 2022 entailed the recognition of the residual benefit up to the date of the changes to contractual conditions (i.e., up to 22 November 2022). That approach is in line with that adopted in the past for recognising interest during special periods (i.e., recognition of the additional benefit of -50 bps in the period from June 2020 - June 2022), as it was considered as the \u201cmonetary policy\u201d floating rate applicable in the reference period. Starting on 23 November 2022, interest on existing TLTRO III financing is recognised based on the DFR in force at each time. As previously noted in the 2021 Financial Statements, on 6 January 2021, ESMA issued a Public Statement with the aim of promoting transparency in the banks\u2019 IFRS financial reports concerning the accounting treatment of TLTRO III: in light of the significant numerical impacts of the operations in question and of the level of judgment required for defining the accounting policy, ESMA highlighted the importance of providing in the financial statements an adequate level of transparency on the accounting treatment of operations. Therefore, in line with the requests from ESMA and in addition to the disclosure on the accounting policies adopted to recognise the TLTRO III operations, the ISP Group provides information also on the resulting quantitative impacts of the recognition of interest. Recognition of revenues and costs Revenues are gross flows of economic benefits deriving from the performance of the company's ordinary business and are recognised when control of the goods or services is transferred to the customer, at an amount that represents the amount of consideration that the company considers it is entitled to. In particular, revenues are recognised by applying a model that must meet the following criteria: - identification of the contract, defined as an agreement in which the parties are committed to perform their respective obligations; - identification of the individual performance obligations contained in the contract; - determination of the transaction price, i.e. the expected consideration for the transfer of the goods or services to the customer; - allocation of the transaction price to each performance obligation, based on the sale prices of the individual obligation; - recognition of revenues when (or as) the performance obligation is satisfied by transferring a promised good or service to a customer. The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and services promised. It may include fixed or variable amounts or both. Revenues from variable fees are recognised in the income statement if they can be reliably estimated and only if it is highly likely that all or a significant part of this fee will not need to be reversed from the income statement in future periods. Where there is a high level of uncertainty related to the nature of the consideration, it will be recognised only when this uncertainty is resolved. Revenues may be recognised: - at a specific point in time, when the entity satisfies a performance obligation by transferring a promised good or service to the customer, or - over time, as the entity satisfies a performance obligation by transferring a promised good or service to the customer. The good is transferred when, or in the period when, the customer acquires control of the good. In particular: - interest is recognised on accrual on the basis of the contractual interest rate or the effective interest rate in the case of application of amortised cost. Interest income (or interest expense) includes differentials and positive (or negative) margins accrued up to the reporting date, relating to financial derivatives: a) hedging interest-generating assets and liabilities; b) classified in the balance sheet in the trading book, though related to financial assets and/or liabilities designated at fair value through profit or loss (fair value option) in management terms; c) related in management terms to assets and/or liabilities classified in the trading book and providing for the settlement of differentials or margins with different maturities; - overdue interest, which may be provided for by the relevant contracts is recorded in the income statement solely at the time of collection; - dividends are posted in the income statement when their distribution is approved, unless this date is not known or the information is not immediately available, in which case they may be recognised when they are collected; - commission income from services is recorded, on the basis of the existence of contractual agreements, in the period in which the services have been rendered. Commission income included in the amortised cost for the purposes of determining the effective interest rate is recognised under interest; - profits and losses from securities trading are recognised in the income statement at the date of sale, on the basis of the difference between the consideration paid or collected and the carrying value of such instruments; - revenues deriving from the sale of non-financial assets are recorded at the date of sale, or when the performance obligation towards the customer is satisfied. Costs are recognised in the income statement on an accruals basis. Costs relating to the receipt and performance of contracts with customers are recognised in the income statement in the periods when the related revenues are recognised. Use of estimates and assumptions in preparing financial reports The preparation of financial reports requires the use of estimates and assumptions that may have a significant effect on the amounts stated in the balance sheet and income statement, and on the contingent assets and liabilities reported in the financial statements. Estimates are based on available information and subjective evaluations, also founded on past experience, which are used to formulate reasonable assumptions in measuring operating events. Given their nature, the estimates and assumptions used may vary from year to year, and hence it cannot be excluded that current amounts carried in the financial statements may differ significantly in future financial years as a result of changes in the subjective evaluations made. If there are greater uncertainties and/or the assets being measured are particularly material, the valuation is supported by specific fairness opinions from external appraisers/experts. The main cases for which subjective evaluations are required to be made by corporate management include: - the measurement of impairment losses on loans, investments, and, generally, other financial assets; - the use of measurement models for determining the fair value of financial instruments not listed on active markets; - the evaluation of the appropriateness of amounts stated for goodwill and other intangible assets; - the fair value measurement of real estate and valuable art assets; - the measurement of personnel funds and allowances for risks and charges; - the estimates and assumptions on the collectability of deferred tax assets; - the demographic (linked to the estimated mortality of insured people) and financial (deriving from the possible trend in financial markets) suppositions used to structure insurance products and define the basis for calculating integrative reserves provided for in insurance regulations, in addition to the shadow reserves, and liability adequacy test provided for in IFRS 4. For some of the types listed above, the main factors subject to estimates by the Group and which determine the carrying value of assets and liabilities in the financial statements can be identified. The following are noted, by way of example: - to determine the fair value of financial instruments not listed on active markets, if the use of parameters that cannot be obtained from the market is necessary, the main estimates regard, on one hand, development of future cash flows (or even income flows, in the case of equities), possibly conditional on future events and, on the other, the level of specific input parameters not listed on active markets; - the estimates for the assignment of loans and debt securities classified as Financial assets measured at amortised cost and Financial assets measured at fair value through other comprehensive income to the three credit risk stages required by IFRS 9 and to calculate the related expected credit losses involve: o the determination of the parameters for a significant increase in credit risk, essentially based on models for measuring the probability of default (PD) upon origination of the financial assets and at the reporting date; o the inclusion of forward-looking factors, including macroeconomic factors, for the determination of the PD and LGD; o the determination of the likelihood of sale of impaired financial assets, through the realisation of market positions; - to determine the future cash flow estimates from non-performing loans, a number of items are considered: the expected recovery times, the presumed realisable value of guarantees and the costs to be sustained for the recovery of credit exposure; - to determine the value in use of intangible assets with an indefinite life (brand name and goodwill) with regard to the Cash-Generating Units (CGU) comprising the Group, the future cash flows in the forecasting period of the analysis and the flows used to determine the terminal value, generated by the CGU, are subject to estimate, separately and appropriately discounted. Also the cost of capital is among the items subject to estimate; - to determine the value in use of intangible assets with a finite life (asset management and insurance portfolios) with regard to the CGUs comprising the Group, the useful life is subject to estimate, on the one hand, as well as the future cash flows arising from the asset, on the other. The cost of capital is subject to estimate in the case of intangible assets with a finite life as well; - the fair value measurement of real estate and valuable art assets is based on valuations prepared by qualified independent firms. Lease rentals, selling prices, discount rates and capitalisation rates are estimated in order to conduct the appraisals of the properties, while to conduct the appraisals on the valuable art assets, the estimate of the value is gathered from the performance of the exchanges of similar works (in terms of technique, size, subject) by the same author or regional movements and schools that are close with regard to style and technique; - to measure post-employment benefits, the present value of the obligations is subject to estimate, taking into account the flows, appropriately discounted, arising from past time-series analyses and the demographic curve; - to measure allowances for risks and charges, the amount of outflows necessary to fulfil the obligations is estimated, where possible, taking into account the effective probability of having to utilise resources; - to determine the value of deferred tax items, the likelihood of an effective future tax burden is estimated (taxable temporary differences) and the level of reasonable certainty \u2013 if it exists \u2013 of future taxable amounts at the time when the tax deductibility occurs (deductible temporary differences and tax losses carried forward). The classification drivers for financial assets The classification of the financial assets into the three categories established by the standard depends on two classification drivers: the business model used to manage the financial instruments and the contractual cash flow characteristics of the financial assets (or SPPI Test). The classification of the financial assets derives from the combined effect of the two drivers mentioned above, as described below: - Financial assets measured at amortised cost: assets that pass the SPPI test and come under the Hold to Collect (HTC) business model; - Financial assets measured at fair value through other comprehensive income (FVOCI): assets that pass the SPPI test and come under the Hold to Collect and Sell (HTCS) business model; - Financial assets measured at fair value through profit or loss (FVTPL): this is a residual category, which includes financial instruments that cannot be classified in the previous categories based on the results of the business model test or the test of the contractual cash flow characteristics (SPPI test not passed). SPPI test For a financial asset to be classified as at amortised cost or at FVOCI \u2013 in addition to the analysis of the business model \u2013 the contractual terms of the asset must also provide, on specified dates, for cash flows that are solely payments of principal and interest (SPPI). This analysis must be carried out for loans and debt securities in particular. The SPPI test must be carried out on each individual financial instrument at the time of recognition in the balance sheet. After initial recognition, and as long as it is recognised in the balance sheet, the asset is no longer subject to new assessment for the purposes of the SPPI test. If a financial instrument is derecognised and a new financial asset is recognised, the SPPI test must be performed on the new asset. For the application of the SPPI test, IFRS 9 provides the following definitions: - Principal: this is the fair value of the financial asset at initial recognition. This value may change over the life of the financial instrument, for example as a result of repayments of part of the principal; - Interest: this is the consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time. It can also include consideration for other basic lending risks and costs and a profit margin. In assessing whether the contractual flows of a financial asset can be defined as SPPI, IFRS 9 refers to the general concept of a \u2018basic lending arrangement\u2019, which is independent of the legal form of the asset. When contract terms introduce exposure to risks or volatility in the contractual cash flows that is inconsistent with the definition of a basic lending arrangement, such as exposure to changes in share or commodity prices, the contractual cash flows do not meet the definition of SPPI. The application of the classification driver based on contractual cash flows sometimes requires a subjective judgement and, consequently, the establishment of internal application policies. In cases of modified time value of money \u2013 for example, when the interest rate of the financial asset is recalculated periodically, but the frequency of the recalculation or the frequency of payment of the coupons does not reflect the nature of the interest rate (such as when the interest rate is recalculated monthly on the basis of a one-year rate) or when the interest rate is recalculated regularly on the basis of an average of particular short or medium-to-long term rates \u2013 an entity should assess, using both quantitative and qualitative information, whether the contractual cash flows still meet the definition of SPPI (benchmark cash flows test). If the test shows that the (undiscounted) contractual cash flows are \u201csignificantly different\u201d from the (also undiscounted) cash flows of a benchmark instrument (i.e. without the modified time value element), the contractual cash flows cannot be considered to meet the definition of SPPI. The standard requires specific analyses (\u201clook through test\u201d) to be performed and these are therefore also conducted on multiple contractually linked instruments (CLIs) that create concentrations of credit risk for debt repayment and on non- recourse assets, for example in cases where the loan can only be enforced on specified assets of the debtor or on the cash flows from specified assets. The presence of contractual clauses that may change the frequency or amount of the contractual cash flows must also be considered to determine whether those cash flows meet the requirements to be considered as SPPIs (e.g. prepayment options, the possibility of deferring contractually agreed cash flows, embedded derivative instruments, subordinated instruments, etc.). However, as envisaged by IFRS 9, a contractual cash flow characteristic does not affect the classification of the financial asset if it could have only a de minimis effect on the contractual cash flows of the financial asset (in each year and cumulatively). Similarly, if a cash flow characteristic is not genuine, i.e. if it affects the instrument\u2019s contractual cash flows only on the occurrence of an event that is extremely rare, highly abnormal and very unlikely to occur, it does not affect the classification of the financial asset. For operations in debt securities, the Intesa Sanpaolo Group uses the services offered by well-known info-providers for the performance of the SPPI Tests. This choice, on one hand, provides front office staff who deal in securities with an immediate result for the performance of the test, enabling the streamlining of purchasing processes, and, on the other hand, provides access to market approaches shared by numerous operators and audit firms. Only in cases where the securities are not managed by info-providers, the test is carried out manually using a proprietary tool based on an internally developed methodology (decision-making trees). A proprietary tool based on an internally developed methodology (decision-making trees) has also been developed for carrying out the SPPI test for the lending processes. In particular, given the significant differences in characteristics, the procedure differs between products related to a contractual standard (typically the retail loan portfolio) and tailor-made loans (typically the corporate loan portfolio). For standard products, the SPPI test is carried out during the structuring of the contractual standard, through the \u201cNew Product Coordination\u201d process, and the result of the test is applied to all the individual relationships related to the same catalogue product. For tailor-made products, on the other hand, the SPPI test is carried out for each new credit line/relationship submitted to the decision-making body through the use of the proprietary tool. The decision-making trees \u2013 included in the proprietary tool \u2013 have been produced internally (both for debt securities and loans) and capture the possible non-SPPI compliant characteristics. They take account of the instructions provided by IFRS 9, as well as the interpretations of the standard made by the Group. The trees are used both for the implementation of the rules of the proprietary tool and for the verification and validation of the methodology adopted by the info-providers. Business model With regard to the business models, IFRS 9 identifies three cases relating to the way in which cash flows and sales of financial assets are managed: - Hold to Collect (HTC): this is a business model whose objective is achieved by collecting the contractual cash flows of the financial assets included in the portfolios associated to it. The inclusion of the portfolio of financial assets in this business model does not necessarily result in the inability to sell the instruments, but the frequency, value and timing of sales in prior periods, the reasons for the sales, and the expectations about future sales, need to be considered; - Hold to Collect and Sell (HTCS): this is a mixed business model whose objective is achieved by collecting the contractual cash flows of the financial assets in portfolio and (also) through the sale of the financial assets, which is an integral part of the strategy. Both activities (collection of contractual flows and sale) are indispensable for achieving the business model\u2019s objective. Accordingly, sales are more frequent and significant than for an HTC business model and are an integral part of the strategies pursued; - Other/Trading: this is a residual category that includes both financial assets held for trading and financial assets managed with a business model that does not come under the previous categories (Hold to Collect and Hold to Collect and Sell). In general, this classification applies to a portfolio of financial assets whose management and performance are measured based on fair value. The business model reflects the way in which financial assets are managed to generate cash flows for the benefit of the entity and is defined by top management with the appropriate involvement of the business structures. It is observed by considering the way in which financial assets are managed and, as a consequence, the extent to which the portfolio\u2019s cash flows derive from the collection of contractual flows, from the sale of the financial assets, or from both. This assessment is not performed on the basis of scenarios that the entity does not reasonably expect to occur, such as \u2018worst case\u2019 or \u2018stress case\u2019 scenarios. For example, if an entity expects that it will sell a particular portfolio of financial assets only in a stress case scenario, that scenario does not affect the entity\u2019s assessment of the business model for those assets if the entity reasonably expects that such a scenario will not occur. The business model does not depend on management\u2019s intentions regarding an individual financial instrument, but refers to the way in which groups of financial assets are managed in order to achieve a specific business objective. In summary, the business model: - reflects the way in which financial assets are managed to generate cash flows; - is defined by top management, with the appropriate involvement of the business structures; - must be observable by considering the way the financial assets are managed. In operational terms, the assessment of the business model is carried out in line with the company\u2019s organisation, the specialisation of the business functions, the risk cascading model, and the assignment of delegated powers (limits). All relevant factors available at the date of the assessment are used in the assessment of the business model. The above information includes the strategy, the risks and their management, the remuneration policies, the reporting, and the amount of the sales. In the analysis of the business model, the elements investigated must be consistent with each other and, in particular, must be consistent with the strategy pursued. Evidence of activities not in line with the strategy must be analysed and duly justified. In this regard, and in relation to the business models under which the financial assets are held, a specific set of \u201cBusiness Model Rules\u201d (approved by the competent levels of governance) has been drafted for the Parent Company and Banking Group Companies. It defines and sets out the components of the business model in relation to the financial assets included in the portfolios managed as part of the operations of the Intesa Sanpaolo Group\u2019s business structures. In further detail, the mapping of the business model adopted by the various structures through which the Group operates, with regard to both loans and receivables and debt securities, takes account of the structure of the division model and the Corporate Centre; this structure has been identified as the relevant level for formulating and representing the various business models applied by the Group\u2019s risk-taking centres. Within the Chief Risk Officer Area, the Financial and Market Risks Head Office Department of the Parent Company provides high-level supervision of the procedure required for determining the business model within which a given set of assets is held and verifies the need for any updates (to be incorporated, at least annually, in the Business Model Rules document). Monitoring of the business model The monitoring of the reference business model of the various structures through which the Group operates is performed by the Financial and Market Risks Head Office Department, which uses indicators intended to verify the consistency of the declared strategy with that pursued within the business models; these indicators, differentiated for the various business models, have been developed in accordance with IFRS 9 and corporate rules and procedures. For the Hold to Collect portfolios, the Group has set limits for frequent but not significant sales to be considered eligible (individually or in aggregate), or for infrequent sales even if their amount is significant, and the parameters have also been established for identifying sales as being consistent with that business model because they relate to an increase in credit risk or for securities nearing maturity. More specifically, within an HTC business model, sales are allowed: - in the event of an increase in credit risk, which occurs: o for securities, when there is a downgrade of predetermined notches with respect to the rating upon origination. The approach adopted differentiates the number of notches according to the rating upon origination, in line with the method used to identify significant deterioration, i.e. for the staging assignment; o for loans, if they are sales of non-performing loans or loans classified as Stage 2; - for securities nearing maturity (i.e., according to the Group rules, in the 6 months preceding maturity), provided that the amount collected is close to the current value of the remaining contractual flows; - when they are frequent but not significant in terms of value or occasional even if significant in terms of value, subject to authorisation assessment by the competent Control bodies. In order to determine these aspects, thresholds of frequency and significance have been set: o frequency is defined as the percentage ratio between the number of positions sold over the year and the number of portfolio positions; o significance is defined as the percentage ratio between the nominal value of the sales during the current year and the nominal value of the instruments held in the portfolio. With regard to the determination of the \u201cRisks\u201d and the \u201cReporting\u201d for the HTCS and Trading business models, the provisions of the RAF and Market Risk Charter and of internal policies in the area of market risk controls apply in principle, and measures are concurrently established for monitoring the consistency of the HTCS and Other/Trading business models. With regard to the HTCS business model, IFRS 9 does not provide for the need for limits on the frequency or the value of the sales. However, the Group has established indicators for debt securities only in order to ensure that they are properly assigned to the chosen business model over time. These indicators are: - The holding period, which measures the time for which a certain instrument has been held in portfolio; - Turnover rate, which measures the speed with which positions in portfolio turn over during a predefined period of time. Within the framework of the monitoring of the indicators set out above, limits and early-warning thresholds apply according to the overall strategies pursued by the HTCS portfolio. Finally, with regard to debt or equity securities held for trading, a measure of the consistency of inclusion in the chosen business model applies, represented by the indicator of \"expected average permanence\" (so-called Vintage) which measures the observed holding period of all securities in portfolio. The monitoring measures relating to the various business models are subject to regular reporting through technical committees. Amortised cost measurement The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition net of any principal repayments, plus or minus cumulative amortisation, calculated using the effective interest rate method, of any difference between initial amount and amount at maturity and net of any reduction for impairment. The effective interest rate is the rate that exactly discounts future cash payments or receipts through the expected life of the financial instrument or through the subsequent date for recalculation of the price to the present value of the financial asset or financial liability. In the calculation of the present value, the effective interest rate is applied to the flow of future cash receipts or payments through the entire useful life of the financial asset or liability or for a shorter period when certain conditions recur (for example review of market interest rates). After initial recognition, amortised cost enables allocation of revenues and costs directly by decreasing or increasing the value of the instrument over its entire expected life via the amortisation process. The determination of amortised cost is different depending on the fact that financial assets/liabilities have fixed or floating rates and \u2013 in this last case \u2013 if the volatility of the rate is known or not beforehand. For instruments with fixed rate or fixed rate by time bands, future cash flows are quantified on the basis of the known interest rate (sole or floating) over the life of the loan. For financial assets/liabilities with a floating rate, for which the volatility is not known beforehand (for example because it is linked to an index), the determination of cash flows is carried out based on the last rate available. At every revision of the interest rate, the amortisation plan and the effective interest rate for the entire life of the investment, that is, until maturity, are recalculated. Any changes are recorded in the income statement as income or loss. Measurement at amortised cost is applied for the financial assets measured at amortised cost and for the financial assets measured at fair value through other comprehensive income, as well as the financial liabilities measured at amortised cost. Financial assets and liabilities traded at market conditions are initially recognised at fair value, which normally corresponds to the amount disbursed or paid including, for instruments measured at amortised cost, transaction costs and any directly attributable fees. Transaction costs include internal or external marginal costs and income attributable to the issue, the acquisition or the disposal of a financial instrument which are not debited to the customer. These commissions, which must be directly attributable to the single financial asset or liability, modify the original effective return, thereby the effective interest rate associated to the transaction differs from contractual interest rate. Transaction costs do not include costs/income referred to more than one transaction and the components related to events which may occur during the life of the financial instrument, but which are not certain at the time of the initial agreement, such as for example: commissions for retrocession, for non-use, for advance termination. Furthermore, amortised cost does not include costs which would be sustained independently from the transaction (e.g. administrative and communication costs, stationery expenses), those, which though directly attributable to the transaction are part of standard practice for the management of the financing (e.g. activities related to the loan granting process), as well as commissions for services received following structured finance activities which would in any case have been received independently from the subsequent financing of the transaction (e.g. facility and arrangement fees). With reference to loans, the following costs are considered directly attributable to the financial instrument: fees paid to distribution networks, fees paid for the origination and/or the participation in syndicated loans and lastly, up-front fees correlated to loans disbursed at rates exceeding market rates. Income considered in the calculation of amortised cost includes: up-front fees correlated to loans disbursed at rates below market rates, income for the participation in syndicated loans and brokerage commissions received. For debt securities not measured at fair value through profit or loss, the following are considered transaction costs: commissions on contracts with brokers operating on the Italian stock exchange, commissions paid to dealers operating on the Italian and foreign stock and bond markets defined on the basis of the commission tables. Stamp duty is not considered in amortised cost since immaterial. Regarding securities issued, amortised cost considers placement commissions on bond issues paid to third parties, amounts paid to Exchanges and remuneration paid to Independent auditors for the activities performed for each single issue, while amortised cost does not consider commissions paid to rating agencies, legal and advisory/review expenses for the annual update of prospectuses, the costs for the use of indexes and commissions which originate during the life of the bond issue. Amortised cost is also applied for the measurement of loss incurred by the financial instruments listed above as well as for the measurement of instruments issued or purchased at a value other than fair value. The latter are measured at fair value, instead of the amount collected or paid, by discounting expected future cash flows at a rate equal to the effective rate of return of similar instruments (in terms of credit rating, contractual expiry, currency, etc.), with the simultaneous recognition in the income statement of a financial charge or income; after initial recognition, these are measured at amortised cost with the registration of higher or lower effective interest with respect to nominal interest. Lastly, structured liabilities that are not measured at fair value through profit or loss, for which the embedded derivative has been separated from the financial instrument, are also measured at amortised cost. As specified by IFRS 9, in some cases, a financial asset is considered credit-impaired at initial recognition because the credit risk is very high, and in the case of a purchase it is purchased at a deep discount (with respect to the initial disbursement value). If these financial assets, based on the application of the classification drivers (SPPI Test and business model), are classified as assets measured at amortised cost or at fair value through other comprehensive income, they are classed as Purchased or Originated Credit Impaired (POCI) assets and are subject to special treatment for the impairment process. In addition, for the financial assets classed as POCI, the credit-adjusted effective interest rate is calculated, at the initial recognition date, which requires the inclusion of the initial expected credit losses in the cash flow estimates. This credit- adjusted effective interest rate is used for the application of the amortised cost and the consequent calculation of interest. For non-performing loans arising from business combinations, the difference between the initial recognition amount (the fair value determined in the PPA) of the POCIs and the previous carrying amount at the acquired entity is split into two components: one related to the lower recoverable cash flows estimated at fair value, which therefore include the expected credit losses over their entire remaining life, and the other related to the discounting of those lower recoverable cash flows. Please note that the reversal of discounting (connected with the estimate of recoverable cash flows attributed to non- performing loans at the moment of the PPA) is recognised, on a pro-rata basis, among interest income so as to supplement the contractual interest rate with the higher return resulting from the lower value attributed to the recoverable cash flows, which, as mentioned above, take into account the expected losses over the entire remaining life of the POCI assets. The amortised cost measurement criterion is not applied to hedged financial assets/liabilities for which fair value changes related to the risk hedged are recorded through profit or loss. The financial instrument is again measured at amortised cost in the case of hedge termination; from that moment the fair value changes recorded before are amortised, calculating a new effective interest rate which considers the value of the loan adjusted by the fair value of the hedged part, until the natural expiry of the hedge. Furthermore, as already mentioned in the paragraphs relating to financial assets and liabilities measured at amortised cost, measurement at amortised cost is not applied to short-term assets/liabilities for which the time value is deemed to be immaterial and to loans without a definite maturity or revocable loans. Impairment of assets Impairment of financial assets At each reporting date, pursuant to IFRS 9, financial assets other than those measured at fair value through profit or loss are subject to an assessment aimed at verifying whether there is any evidence that the carrying value of the assets may not be fully recoverable. A similar analysis is also performed for loan commitments and for guarantees given that must be tested for impairment under IFRS 9. In preparation for the determination of the impairment losses, at each reporting date the financial instruments must be assigned to the following categories (Stage Assignment or Staging): - Stage 1: comprising financial instruments for which, from their initial recognition up to the reporting date, there is no evidence of a significant increase in credit risk; - Stage 2: it comprises financial assets that have had a significant increase in credit risk since initial recognition; - Stage 3: if there is evidence of impairment, these financial assets \u2013 in line with any other assets pertaining to the same counterparty \u2013 are considered impaired and are therefore included in Stage 3. The impaired exposures consist of financial assets classified in the categories of bad loans, unlikely-to-pay (UTP) loans and exposures past due by more than ninety days, defined in Bank of Italy Circular 272/2008. Impairment of performing financial assets For financial assets for which there is no evidence of impairment (unimpaired financial instruments), it is necessary to check whether there are indicators that the credit risk of the individual transaction has increased significantly since initial recognition. This check, in terms of classification (or, more precisely, staging) and measurement, has the following consequences: - where these indicators exist, the financial asset is included in Stage 2. In this case, in compliance with international accounting standards and despite the absence of an actual impairment, the measurement consists of the recognition of value adjustments equal to the lifetime expected credit losses of the financial instrument. These adjustments are subject to revision at each subsequent reporting date, both to periodically check their consistency with the continuously updated loss estimates and to take account \u2013 if the indicators of \u201csignificantly increased\u201d credit risk are no longer present \u2013 of the change in the forecast period for the calculation of the expected credit loss; - where these indicators do not exist, the financial asset is included in Stage 1. In this case, in compliance with international accounting standards and despite the absence of an actual impairment, the measurement consists of the recognition of the 12-month expected credit losses for the specific financial instrument. These adjustments are subject to revision at each subsequent reporting date both to periodically check their consistency with the continuously updated loss estimates and to take into account \u2013 if there are indicators that the credit risk has \u201csignificantly increased\u201d \u2013 the change in the forecast period for the calculation of the expected loss. With regard to the measurement of financial assets and, in particular, the identification of the \u201csignificant increase\u201d in credit risk (a necessary and sufficient condition for the classification of the asset being measured as Stage 2), the following factors constitute the key elements to be taken into account, in accordance with the standard and its operational implementation by the Intesa Sanpaolo Group: - the variation (beyond set thresholds) of the lifetime probabilities of default compared to the time of initial recognition of the financial instrument. This is therefore an assessment made on a \u201crelative\u201d basis, which constitutes the main driver; - the presence of a past due position that \u2013 subject to the materiality thresholds identified by the regulations \u2013 has been in that status for at least 30 days. If these circumstances apply, the credit risk of the exposure is considered to have \u201csignificantly increased\u201d and the exposure is therefore transferred to Stage 2 (when the exposure was previously included in Stage 1); - the presence of forbearance measures, which \u2013 again on a presumption basis \u2013 result in the classification of the exposures under those whose credit risk has \u201csignificantly increased\u201d since initial recognition; - lastly, for banks belonging to the international scope, some of the indicators from the credit monitoring systems specifically used by each bank are also considered for the purposes of the transfer between \u201cstages\u201d where appropriate. This refers in particular to the watch lists, i.e. the credit monitoring systems that \u2013 based on the current credit quality of the borrower \u2013 place performing exposures above a certain level of risk within a particular range. Focusing on the main trigger out of those referred to above (i.e. the change in the lifetime probability of default), the significant increase in credit risk (\u201cSICR\u201d) is determined by comparing the relative change in the lifetime probability of default recorded between the initial recognition date of the relationship and the observation date (Lifetime PD Change) with predetermined significance thresholds. The assignment of a Lifetime PD to the individual relationships is carried out by allocating the ratings for each segment according to the masterscale at both the initial recognition date and the observation date. Ratings are determined based on internal models, where available, or on business models. If there are no ratings, the Benchmark PDs are assigned to the type of counterparty being assessed. The significant deterioration is therefore based on the increase in the lifetime PD caused by downgrades of the position from its origination to the reporting (observation) date, as well as the change in the forecast of the future macroeconomic factors. The above-mentioned \u201crelative\u201d change in lifetime PD is an indicator of the increase or decrease in credit risk during the reporting period. To establish whether, in accordance with IFRS 9, any increase in credit risk can be considered \u201csignificant\u201d (and therefore entail a transition between stages), it is necessary to set specific thresholds. Increases in lifetime PD below these thresholds are not considered significant and, consequently, do not result in the transfer of individual credit lines/tranches of debt securities from Stage 1 to Stage 2. However, this transfer is required if there are relative increases in PD above these thresholds. The thresholds used have been estimated based on a process of simulations and optimisations of forecast performance, carried out using granular historical portfolio data. Specific thresholds are set for the Corporate, Retail, Large Corporate and Retail SME models and extended to the other models based on methodological affinity. The thresholds differ in terms of residual maturity, annual granularity and rating class. The determination of the thresholds has been calibrated to find a suitable balance between the performance indicators relating to the ability of the thresholds to: - detect Stage 2 positions before their transition to default; - identify positions for which a return to Stage 1 is due to an actual improvement in credit rating. Some specific considerations apply for the \u201cstaging\u201d of the debt securities. Unlike loans, for this type of exposure, sales and purchases after initial recognition (made using the same ISIN) may form part of the ordinary management of the positions (with the consequent need to identify methods to be adopted for identifying the sales and repayments in order to determine the remaining quantities of the individual transactions that need to be allocated a credit quality/rating upon origination to be compared with that parameter at the reporting date). In this regard, the use of the \u201cfirst-in-first-out\u201d or \u201cFIFO\u201d method (for the recognition of the recorded ECL in the income statement, in the event of sales or repayments) was considered to help in providing a more transparent management of the portfolio, also for the front office operators, while also enabling the continued updating of the credit rating based on new purchases. Once the allocation of the exposures to the various credit risk stages has been established, the expected credit losses (ECL) are determined at individual transaction or securities tranche level, using the IRB/Business models, based on the parameters of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), to which appropriate corrections are made to ensure compliance with the specific requirements of IFRS 9. The following definitions apply for PD, LGD and EAD: - PD (Probability of Default): likelihood of migrating from performing to non-performing status over the period of one year. In models consistent with supervisory provisions, the PD factor is typically quantified through the rating. In the Intesa Sanpaolo Group, the PD values are derived from internal rating models where available, supplemented by external ratings or segment/portfolio average figures; - LGD (Loss Given Default): percentage loss in the event of default. In the models consistent with supervisory provisions, it is quantified through the historical experience of discounted recoveries on exposures that have become non-performing; - EAD (Exposure At Default) or credit equivalent: amount of the exposure at the time of default. As mentioned above, in order to comply with IFRS 9, specific adjustments had to be made to these factors, including in particular: - adoption of a Point in Time (PIT) PD compared to the Through the Cycle (TTC) PD used for Basel purposes; - removal of some additional components from the TTC LGD, such as indirect costs (non-recurring costs) and an additional margin of conservatism specifically introduced for the regulatory models, as well as the component linked to the economic downturn; - the introduction of specific treatment in relation to the regulatory provisions, in order to estimate the accounting LGD, to include in the modelling (in line with the indications of IFRS 9 on using entity-specific information) the estimates of internal recoveries exceeding the regulatory threshold of the Maximum Recovery Period, i.e., the maximum time limit beyond which the Supervisory Authority assumes that nothing will be recovered; - the use of PDs and, where necessary, multi-period LGDs, to determine the lifetime expected loss of the financial instrument (Stages 2 and 3); - the use of the effective interest rate of the individual transaction in the discounting of the expected future cash flows, unlike in the regulatory models, where the individual cash flows are discounted using the discounting rates determined in compliance with the prudential regulations. In relation to the multi-period EAD, in line with IFRS 9 the Intesa Sanpaolo Group refers to the plans at amortised cost for both loans and debt securities, regardless of the measurement method used (amortised cost or fair value through other comprehensive income). For loan commitments (margins), on the other hand, the EAD is assumed to be equal to the nominal amount weighted according to a specific Credit Conversion Factor (CCF). The measurement of the financial assets also reflects the best estimate of the effects of current and future conditions and in particular the economic conditions that affect the forward-looking PDs and LGDs. IFRS 9, also based on the guidance from the international regulators, gives particular importance to information on future macroeconomic scenarios in which the Bank may find itself and which clearly influence the situation of the debtors, with regard both to the \u201crisk\u201d of migration of exposures to lower quality classes (and therefore concerning the staging) and to the recoverable amounts (and therefore concerning the determination of the expected loss on the exposures). In terms of method, various possible alternative approaches designed to take account of these elements have been analysed. Of the various alternatives considered, the Intesa Sanpaolo Group has decided to adopt the \u201cMost likely scenario+Add-on\u201d approach. According to this approach, the macroeconomic conditioning of PD and LGD is carried out through a baseline scenario (\u201cMost Likely\u201d, in line with the approach used for other business purposes such as, for example, the budget and business plans) and then corrected with an Add-On to include any differences compared to downside and upside scenarios. If the overall impact of the Add-On on the risk parameters is positive, the decision has been made to neutralise the effect for both staging and ECL calculation purposes. The macroeconomic scenario is determined by the Bank\u2019s Research Department using forecasting models that are disclosed to the market to determine the consensus. Alternative upside and downside scenarios are determined through stress tests of the input variables of the forecasting models. In particular, the most likely scenario and alternative scenarios are determined using a set of analytical and stand-alone forecasting instruments that determine the forecast path for several blocks of variables, namely: - national accounts and inflation of the top 6 Eurozone countries, the United States and Japan; - official rates (ECB, Fed, BoJ), EUR and USD swap rate curves, and several points of the government curves; - exchange rates for EUR, USD, JPY and GBP; - stock market indices (DJ Eurostoxx 50 and S&P 500); - Brent price; - some specific data for the Italian economy (industrial production, real estate prices, employment, public finance balances). These forecasts are then processed using the Oxford Economics multi-country structural Global Economic Model, where they replace the forecast paths of the baseline scenario provided by the company with the periodic updating of the database. The model is then solved to derive a consistent global forecasting framework, including variables for which no specific models have been developed, and to obtain a simulation environment that can be used to generate alternative scenarios. This step may require some iterations, particularly if the forecasting framework generated internally is significantly different from the one provided by Oxford Economics. If this is the case, further fine-tuning may be needed for specific secondary variables that the analysts consider to be inconsistent with the forecast scenario or that have an unexplainable quarterly volatility. The alternative paths are selected using external information. In particular: - average annual GDP growth rates of several countries: this is the key driver for the simulation and the deviations are determined to replicate the dispersion of the growth estimates published by Consensus Economics in the most recent report available at the date of the simulation, considering the minimum and maximum forecasts (after applying a filter to identify and eliminate possible outliers). If there are outliers, these are discarded and the remaining maximum and minimum values are considered. Since consensus estimates are only available for the first two years of the simulation period, an extrapolation of the deviations identified for the first two years is used for the third year; - stock market indices (DJ Eurostoxx 50, S&P 500) and US residential real estate prices: the minimum and maximum forecasts of the Thomson Reuters panel are used as a reference; - Italian residential real estate prices: since no consensus estimates are currently available, the alternative paths are based on the distribution of the historical quarterly changes available from 1980 to the current quarter. The percentile value identified is used, for the most likely scenario, to determine the variations corresponding to a probability gap, calculated through statistical analysis of the historical distribution of the observations. The two (positive and negative) changes with respect to the most-likely scenario are then used to calculate the level of the individual identified indices, reconstructing the two alternative paths (one positive and one negative) for each of them that represent the input for the determination of the Add-On. The probability gap used is identified based on the variability characteristics of the series, to obtain a significant deviation from the most-likely scenario. In addition to defining the alternative paths, a map of possible additional factors is maintained, i.e., adverse idiosyncratic events or scenarios, not explicitly incorporated in the time series used for the construction of the most-likely scenario or in the alternative paths, which can generate further significant effects on expected losses. The following is assessed for these events/scenarios: - the possible time frame; - the degree of inclusion in the most-likely scenario or the alternative paths; - the potential impact, assessed in qualitative terms. The map of additional factors also draws on the list of risk factors contained in the forecast reports of the IMF (World Economic Outlook) and the European Commission and may change over time. Within the assessment of the time frame for the additional factors, note is made if the factor cannot be placed within a specific time period, which makes its incorporation into the most-likely scenario or alternative paths unfeasible. The assessments made take account of the fact that the consensus estimates may include forecasts that already incorporate the total or partial realisation of one or more risk factors in their estimates, which means that the alternative paths may already incorporate these additional factors to some extent. Where there is considerable uncertainty in the national and international macroeconomic forecasts, as well as significant deviations in terms of best-case forecasts with respect to the TTC scenario, prudential factors may be introduced in relation to the deviations in the minimum and maximum values of the variables based on the above-mentioned consensus or historical figures. The above macroeconomic scenarios (most likely and alternative scenarios) are used in internal models to determine the point-in-time (PIT) parameters. Specifically, the time series of default rates acquired from the Bank of Italy are differentiated over the main economic macro- sectors (e.g. consumer households, family businesses, construction) and, for each of these, specific satellite models establish the relationships with the macroeconomic variables in order to obtain the forecast default rates. In turn, these impact the TTC transition matrices between rating classes and thus provide the PIT transition matrices for each scenario (most likely and alternative scenarios). These give rise to the lifetime conditional PD. In particular, the TTC matrices are calculated using internal default rates for the Corporate, Retail SME and Retail segments, whereas the Bank of Italy system rates are used for the Low Default segments, because the internal time series data for those segments is less extensive. The forward-looking point-in-time matrices, on the other hand, are calculated using the system default rates for all the segments. A similar process is used to determine the PIT LGD grids. Taking account of the repayment plans of the individual loans, their conditional PD and LGD, residual maturity and staging, the impairment of performing financial assets is determined. Impairment of non-performing financial assets Non-performing loans are represented by bad loans, unlikely to pay and past due positions by more than 90 days. Non-performing loans classified as bad loans are subject to the following measurement methods: \u2212 analytical-statistical measurement, which is used for exposures of less than 2 million euro and is based on the use of specific LGD grids, plus an Add-On to take account of information linked to the evolution of the current conditions related to management variables highly correlated with the loss performance and forward-looking information relating to the impact of expected future macroeconomic scenarios (as described in the previous paragraphs); \u2212 analytical-specific measurement, which is used for customers with exposures exceeding 2 million euro and is based on the impairment percentages allocated by the manager, following specific analysis and measurements, also based on the evolution of the current conditions, plus an Add-On to take account of forward-looking information, and in particular information relating to the impact of future macroeconomic scenarios (except for bad loans backed by mortgage collateral or relating to property leases for which the impact of future scenarios is included through the method used to determine the haircuts to the value of the properties pledged as collateral). The measurement of unlikely-to-pay loans (UTPs) is also performed based on different approaches: \u2212 analytical-statistical measurement, for exposures of less than 2 million euro, based on the use of specific LGD grids, plus an Add-On to take account of the already mentioned information linked to the current conditions and the impacts of future macroeconomic scenarios, as well as continuation in the risk status, in order to penalise positions with greater vintage or which have no movements and/or recoveries for a particular period of time; \u2212 analytical-specific measurement, for on-balance sheet exposures of more than 2 million euro, based on the impairment percentages allocated by the manager, following specific analyses and assessments also based on the evolution of the current conditions, plus an Add-On to take account, also in this case, of the impacts of future macroeconomic scenarios and of continuation in the risk status. For Group companies, the threshold value for analytical-statistical measurement is set by the competent bodies of the individual companies, in coordination with the structures of Intesa Sanpaolo, at a level that is not, in any event, higher than that set by the Parent Company. Regardless of the division of these exposures between those subject to analytical-statistical measurement and those subject to analytical-specific measurement (as identified above), the add-ons envisaged include the sales scenarios for the disposable non-performing loans if the business plan and the NPL reduction plan envisage sales and those sales do not lead to a reclassification pursuant to IFRS 5. The valuation of the disposable non-performing loans therefore considers the possibility of also realising these loans through their sale. Non-performing loans classified in the past-due loans category, on the other hand, are subject to analytical measurement based on statistics, regardless of the amount of the exposure. However, also in this case, the adjustment determined based on the LGD statistical grids is supplemented to take account of the Add-On attributable to the effect of the evolution of the current conditions and the future macroeconomic scenarios. Credit exposures must continue to be carried as non-performing for at least three months after they cease to meet the requirements for being classified as such (the \u201cprobation period\u201d). Until the conditions are met for reclassification out of the non-performing category, such exposures are retained in their respective risk classes and measured according to an analytical-statistical or an analytical-specific approach taking account of their lower risk level. A brief description is provided below of the methods used for the analytical-specific and analytical-statistical measurement: - the analytical-specific measurement of bad loans and unlikely-to-pay loans above 2 million euro is a measurement performed by the managers of the individual positions based on a qualitative and quantitative analysis of the borrower's financial position, the riskiness of the credit relationship, the targets and strategies for reduction of the non-performing loans, and any mitigating factors (collateral), taking into account the financial impact of the estimated recovery time. For bad loans in particular, a series of elements are relevant, which differ according to the characteristics of the positions, and must be thoroughly and prudently assessed, including the following, listed merely as examples: o nature of the credit, whether preferential or unsecured; o net asset value of the borrowers/third party collateral providers; o complexity of existing or potential litigation and/or the underlying legal issues; o exposure of the borrowers to the banking system and other creditors; o last available financial statements; o legal status of the borrowers and any pending insolvency and/or individual proceedings. In order to determine the estimated realisable value of loans secured by real estate, and to take into account both the time series of recoveries and the forward-looking information in accordance with IFRS 9, an approach is applied focused on the valuation of real estate based on the expected average auction price and the related reduction in the observed price, with the calculation of average haircuts that differ according to the type of real estate collateral (residential, commercial, industrial and land). Accordingly, to avoid duplications, a macroeconomic Add-On is not used in the analytical-specific measurement for bad mortgage loans, because the forward-looking component is already taken into account through the haircut. For real-estate bad loans arising from lease contracts, in view of the particular nature of the product (lack of auctions), the haircut is estimated as the depreciation of the asset with respect to the appraised value observed at the time of classification as non-performing and the actual price of sale. In addition, for unlikely-to-pay loans, the measurement is based on a qualitative and quantitative analysis of the borrower\u2019s financial position and on precise assessment of the risk situation. The calculation of the impairment loss involves the valuation of the future cash flows that the borrower is considered to be able to generate and that will also be used to service the financial debt. This estimate must be made based on two alternative approaches: o the going concern approach: the operating cash flows of the borrower (or the beneficial owner) continue to be generated and are used to repay the financial debts contracted. The going concern assumption does not rule out the realisation of collateral, but only to the extent that this can take place without affecting the borrower's ability to generate future cash flows. The going concern approach is also used in cases where the recoverability of the exposure is based on the possible sale of assets by the borrower or on extraordinary transactions. Similarly to the case of bad loans, haircuts are also used in measuring real-estate collateral for unlikely-to-pay positions. For going- concern positions, these haircuts are determined on the basis of the haircuts applied in the liquidation process (gone-concern bad loan or UTP position), while applying a calibration factor equal to the probability of migration of the UTP positions to the bad loan category; o the gone concern approach: applicable in cases when it is believed that the borrower's cash flows will cease. This is a scenario that can apply to positions that are expected to be classified as bad loans. In this context, assuming that shareholders' interventions and/or extraordinary operations to restructure debt in turnaround situations are not reasonably feasible, recovery of the credit is essentially based on the value of the collateral that secures the Bank's credit claim, net of the application of a haircut (determined as for bad loans) and, alternatively, on the realisable value of the assets, taking into account the liabilities and possible pre-emptive claims; - the analytical-statistical measurement, performed for bad loans and unlikely-to-pay loans of less than 2 million euro and for past-due loans has specific features according to the type of exposure involved. With regard to bad loans, the analytical-statistical measurement is based on the Bad Loan LGD grids, where the LGD Defaulted Asset model is mainly characterised by the differentiation of the loss rates that, in addition to the regulatory segment, is based on the continuation in the risk status (\u201cvintage\u201d) and the possible activation of legal recovery proceedings. The grids are also differentiated for the other significant analysis axes used in the model estimation (e.g. product type, type of guarantee, geographical area, exposure band, etc.). The recovery time grids are mainly broken down by regulatory segment and by additional significant analysis axes used in the modelling (e.g. recovery procedures, exposure band, product type). For unlikely-to-pay loans, the measurement is performed using statistical LGD grids estimated specifically for positions classified as unlikely-to-pay loans, in line with the estimated LGD grids for bad loans. The estimation model for the LGD grid for unlikely-to-pay loans is similar to the one described above for bad loans and calculates the expected loss rate of the relationship being valued according to its characteristics. The LGD for unlikely-to-pay loans is obtained by recalibrating the bad loan LGD using the Danger Rate module. The Danger Rate is a multiplying correction factor to apply to the bad loan LGD, in order to take into account the loss rates that can be recorded in the various default statuses (Unlikely-to-Pay and/or past due). The Danger Rate is estimated using the probability of migration to bad loans for positions already in default, the loss rates observed in the pre-bad loans phase for positions migrating to bad loans, and the loss rates observed in the pre-bad loans phase for positions that return to performing status or are extinguished. In addition, for the two subclasses of the \u201cUnlikely-to-Pay Loans\u201d risk status (\u201cNon-Forborne Unlikely-to-Pay Loans\u201d and \u201cForborne Unlikely-to-Pay Loans\u201d), differentiated grids are estimated to take into account the characteristics of the Forborne loans, which, in addition to having lower average loss levels due to the effect of the Forbearance Measures, are also affected by the regulatory constraints that prevent their return to performing loan status before 12 months from the date of the renegotiation. For past-due loans, the methods used to determine the grids are the same as those described for the unlikely-to-pay loans (Framework Danger Rate). In this case, the vintage factor is captured by the introduction of a differentiation based on the duration of the past-due period (Past Due at 90 days/180 days) which produces a significant variation in the loss rates of the grids, which are also differentiated according to regulatory segment and additional analysis axes (e.g. product type, type of guarantee, geographical area, exposure band, etc.) common to the other non-performing loan categories. Also in the LGD estimation models used in the analytical-statistical measurement of non-performing exposures, several additional components specifically included for regulatory models are removed, similar to that illustrated for performing exposures. With regard to the inclusion of current and forward looking information, it should be noted that, for non-performing exposures, a statistically estimated component (Add-On from macroeconomic scenario) linked to the most-likely and downside scenarios expected over the period of the next three years is also considered, according to the criteria already described. In fact, as required by IFRS 9, the effects of the forward-looking scenario on LGD estimates must also be considered and the aforementioned component is aimed at capturing the non-linearity of the relationship between the macroeconomic variables and ECL measurement, by analysing the forecast uncertainty of the variables used for the preparation of the most-likely scenario. It is based on the methodological framework that is used for performing loans, but ignores the upside scenario from a prudential perspective and only considers the average downside and most-likely scenarios over the period of the next three years. Furthermore, an additional factor is applied to the analytical/statistical measurement firmly based on internal management variables, in particular the level of past and prospective NPL ratio, which, on the basis of long-term observation, is statistically correlated with the loss performance. This factor makes the LGD estimate more sensitive to changes in the current and future economic/management context. Also in terms of future scenarios, with regard to the unlikely to pay category, which includes positions that are still performing but show signs of difficulty, both for positions with analytical-specific measurement and those with analytical-statistical measurement, when there are no effective forbearance measures, an additional component shall be applied (in addition to the aforementioned add on from the macroeconomic scenario) to reduce the recoverable amount of the positions based on their vintage in the risk status and the absence of movements and/or recoveries in a specific period of time. With regard to the alternative recovery scenarios, the Intesa Sanpaolo Group, in relation to the objectives of reducing the stock of outstanding non-performing loans, included in its business plans, and any commitments made to the Supervisory Authorities, with specific regard to the NPL Strategy, considers the sale of particular portfolios as the strategy that, in certain conditions, can maximise the cash flow recovery, also considering the recovery times. Consequently, the \u201cordinary\u201d scenario, which assumes a recovery strategy based on the collection of credit, typically through legal actions, mandates to credit recovery companies and the realisation of bank collateral, is also been accompanied - where applicable and as an alternative recovery strategy - by the scenario of the sale of the loan. Where company plans and Group strategies identify disposal objectives and, as a result, a portfolio of non-performing loans that may be disposed of, until the disposal objectives are reached, the loans and receivables included in that portfolio shall be measured taking account of both the amount recoverable through operating activities and market valuations (based on external appraisals) and/or sales prices, if already defined. In particular, where a larger loan portfolio that may be sold represented by Group loans that are disposable (thus, for example, positions that are not involved in disputes, as per precise indication by the management structures and which are not subject to synthetic securitisation), in relation to the sales objectives is identified, the book value of said portfolio is determined by weighting the recoverable amount through operating activities with the amount recoverable through sale. More specifically, the recoverable amount of disposable non-performing loans is quantified as the average between (i) the value in the event of sale (fair value) and (ii) the collection amount, weighted on the basis of the percentage of the loans eligible for sale - determined as the ratio between the target volume of loans to be sold and the respective non bankruptcy- remote portfolios having the same profile, i.e. as a percentage that adequately reflects the probability of sale of the portfolios whose disposal is considered highly probable. The \u201ccollection amount\u201d was determined according to the already shown ordinary methods adopted by the Group for the impairment of non-performing loans, i.e. based on the individual measurement of the exposures exceeding a defined threshold and based on an analytical-statistical measurement for the others. The measurement of the value in the event of sale is carried out by an external expert, based on market valuations. However, where the positions to be sold are specifically identified, those positions shall be measured exclusively taking account of the market values established by external experts, based on a specific fairness opinion or, if already defined through a binding agreement with the buyer, the sales price. Those loans are also reclassified as assets held for sale. As already mentioned, the purchased or originated credit-impaired (POCI) financial assets have specific features in terms of impairment. As a result, value adjustments equal to the lifetime ECL must be recognised on these instruments from their initial recognition date and for their entire lifetime. At each subsequent reporting date, the amount of the lifetime ECL must therefore be adjusted, with the recognition through profit or loss of the amount of any change in lifetime expected credit losses as a gain or an impairment loss. In view of the above, POCI financial assets are initially recognised in Stage 3, subject to the possibility of being subsequently transferred to the performing loans stage, even if an expected loss equal to the lifetime ECL will continue to be recognised. Lastly, with regard to non-performing loans, it is highlighted that the Intesa Sanpaolo Group uses the \u2013 full or partial \u2013 write- off/derecognition of unrecoverable accounting positions and, in the following cases, the consequent allocation to loss of the remainder that has not yet been adjusted: \u2013 uncollectability of the debt, as a result of definite and precise elements (such as, for example, untraceability and indigence of the debtor, lack of recovery from realisation of securities and real estate, negative foreclosures, bankruptcy proceedings closed with no full compensation for the Bank, if there are no further guarantees that can be enforced etc.); \u2013 disposal of the loan; \u2013 waiver of the credit claim, due to the unilateral cancellation of the debt or residual amount as a result of settlement agreements; \u2013 no waiver of the credit claim. With regard to the full or partial write-offs without waiver of the credit claim, in order to avoid maintaining loans on the balance sheet that have a very low possibility of recovery, despite continuing to be managed by the recovery structures, they are fully or partially written off due to uncollectability even if the legal proceedings have not been closed. The write-off can only involve the portion of the loan covered by provisions and, therefore, each loan can only be written off up to the amount of its net book value. Therefore, on a periodic basis, the Group identifies the bad loan portfolios to be subject to total or partial write-offs with the following macro-characteristics: o percentage cover of 100% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >1 year; o percentage cover of >95% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >5 years or >8 years, respectively, for non-mortgage and mortgage loans. Portfolios to be written off can also be identified that have similar characteristics that are different from those indicated above, but that relate to exposures that have a marginal possibility of recovering the amount of the provision, where the minimum amount of the provision (calculated taking into account the accumulated write-offs on the position, according to the same rule established at prudential level by the calendar provisioning framework) is at least equal to the amount needed to bring the value of the exposures up to their fair value estimated based on the prices recorded in the latest sales of bad loans made by the Group. Impairment of investments in associates and companies subject to joint control At each reporting date the investments in associates and companies subject to joint control are subjected to an impairment test to assess whether there is objective evidence to consider that the carrying value of such assets is not fully recoverable. The process of detection of any impairment involves the verification of the presence of impairment indicators and the determination of any write-down. The impairment indicators are essentially divided into two categories: qualitative and quantitative indicators. Qualitative indicators include: - the generation of negative economic results or in any case a significant variance with respect to the targets budgeted or established in the multi-year plans disclosed to the market; - the announcement/initiation of insolvency proceedings or restructuring plans; - the downgrading by more than two rating classes; - failure to discharge payment obligations for debt securities issued fully and in a timely manner; - use of industrial policy tools aimed at responding to a serious crisis or allowing companies to face restructuring/reorganisation processes. Quantitative indicators include: - a reduction in fair value of over 30% below the carrying value or for a period of over 24 months; - a market capitalisation lower than the company's net book value, in the case of securities listed on active markets, a carrying value of the investment in the Parent Company's financial statements higher than the carrying value in the consolidated financial statements of the investee's net assets and goodwill, or distribution by the investee of a dividend that is higher than its total income. The presence of impairment indicators results in the recognition of a write-down to the extent that the recoverable amount is lower than the recognition value. The recoverable amount consists of the higher of the fair value and the value in use, less costs to sell. For an illustration of the valuation techniques used to determine fair value, see the specific Section A.4 \u2013 Information on fair value. Value in use is the present value of expected future cash flows from the asset; it reflects estimated expected future cash flows from the asset, the estimate of possible changes in the amount and/or timing of cash flows, time value of money, the price able to repay the risk of the asset and other factors, which may affect the appreciation by market participants of expected future cash flows from the asset. Value in use is determined by discounting future cash flows. Impairment of non-financial assets Property, equipment and intangible assets with definite useful life are subject to impairment testing if there is the indication that the book value of the asset may no longer be recovered. The recoverable amount is determined with reference to the fair value of the property and equipment or intangible assets less costs to sell or the value in use, if determinable and if it is higher than fair value. For property and equipment other than real estate and valuable art assets and intangible assets (other than those recognised following business combinations) it is assumed that the carrying amount normally corresponds to the value in use, since it is determined by a depreciation or amortisation process estimated on the basis of the effective contribution of the asset to the production process and since the determination of fair value is extremely subjective. The two values diverge and lead to impairment in case of damages, exit from the production process or other similar non-recurring circumstances. As clarified in the discussion of \u201cProperty and equipment and intangible assets\u201d, the Group measures owner-occupied properties and valuable art assets according to the revaluation model; in this case, any impairment loss on a revalued asset must be treated as a decrease in the revaluation up to the relevant amount, after which any difference is taken to the income statement. As described in the Information on fair value - Fair value of real estate and valuable art assets, for owner-occupied properties each year a scenario analysis is conducted on trends in the real-estate market to assess whether there are any significant deviations in the value of the assets. If significant changes are identified (+ or - 10%), an updated appraisal is prepared to adjust the fair value of the asset to the valuations of the real estate market. If there are no significant differences, the value is redetermined through a new expert appraisal every two years for \u201ctrophy assets\u201d (i.e. particularly prestigious properties used by management functions located in the main cities where the bank is based or properties of particular historical and artistic interest because they are listed by the Ministry for Cultural Heritage and Activities) and every three years for other owner- occupied properties. For the valuable art assets, the revaluation is carried out by means of a new expert appraisal every three years. However, a scenario analysis is carried out annually to identify any appreciable changes in value in order to bring forward the valuation. If the annual monitoring identifies a possible positive or negative value deviation of more than 15% for individual works of artists in the bank\u2019s collections and comparable on the basis of objective criteria (size, technique, period of production, etc.), new appraisals are commissioned. Intangible assets recognised following a business combination and in application of IFRS 3 are subjected to an impairment test at each reporting date to assess whether there is objective evidence that the asset may have been impaired. Intangible assets with a finite life, represented by the value of the asset management portfolio and the value of the insurance portfolio, in the presence of impairment indicators are subjected to a new valuation process to assess the recoverability of the book values. The recoverable amount is determined on the basis of the value in use, namely the present value estimated using a rate representing the time value of money and the asset\u2019s specific risks, of the income margins generated by the existing relations as at the valuation date over a period which expresses their expected residual life. Intangible assets with an indefinite life, represented by the valuation of the brand name and goodwill, do not have independent cash flows and therefore annually undergo an assessment of the adequacy of the value recorded under the assets with reference to the Cash-Generating Unit (CGU) to which the values are attributed at the time of the business combinations. The amount of any impairment is determined on the basis of the difference between the CGU\u2019s book value and its recoverable amount represented by the higher of the fair value, less costs to sell, and the value in use. The book value of the CGUs must be determined in a manner consistent with the criterion used to determine their recoverable amount. For a banking business, the cash flows generated by a CGU cannot be identified without considering the cash flows deriving from financial assets/liabilities, as these form part of the core business. In other words, the recoverable amount of the CGUs is influenced by the aforementioned cash flows and therefore the CGUs\u2019 book value must include financial assets/liabilities in accordance with the scope of the recoverable amount estimate process. Consequently, these assets and liabilities must be properly allocated to the associated CGUs. On this basis, the book value of Intesa Sanpaolo\u2019s CGUs may be determined in terms of contribution to consolidated shareholders\u2019 equity including the minority interest. Thus, the carrying amount of the CGUs consisting of companies that belong to a single operating division or consist of a single legal entity (Asset Management, Private Banking, Insurance and International Subsidiary Banks) is determined by summing the individual book values of each company in the consolidated financial statements, namely the contribution to consolidated shareholders\u2019 equity and corresponding to their net book value, taking into account any goodwill and intangibles recorded upon acquisition (net of subsequent amortisations and any write-downs) and the consolidation entries. With regard to the determination of the carrying value of the other two divisions (Banca dei Territori and IMI Corporate & Investment Banking), given that the Parent Company and other banks contribute to the management of these divisions, and this subdivision is not represented in the accounting information, the overall carrying value of the CGUs cannot be determined on the basis of book values. As a consequence, the use of operational factors is required to make the subdivision following a detailed allocation of the intangibles and goodwill to the two CGUs in accordance with the available accounting information. The operational driver is identified as the \"regulatory capital\" determined by the Financial and Market Risks Department structures for each operating division: it represents the capital absorption necessary to handle the types of risk envisaged by the regulatory supervision rules. The resulting book values already take into account the effects of any impairment of the individual assets, including those relating to intangible assets with a finite life. For an illustration of the valuation techniques used to determine fair value, see Section A.4 \u2013 Information on fair value. The value in use of a CGU is determined by estimating the present value of future cash flows that may be expected to be generated by the CGU. These cash flows are determined by using the latest publicly available business plan or, in its absence, through the drawing up by management of an internal forecast plan or other external information available. The forecasting period for the analysis usually consists of a maximum of five years. The cash flow of the final year of the forecast is projected in perpetuity, using an appropriate growth rate \u201cg\u201d for the purposes of the so-called Terminal value. The \u201cg\u201d rate is determined by assuming that the growth factor is the lower of the average growth rate for the forecasting period of the analysis and the average rate of increase in the Gross Domestic Product in the countries where the cash flows are generated. For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present valuations of the time value of money and the asset\u2019s specific risks. Specifically, the discount rates used incorporate the risk free component and the premiums for the risk associated with the equity component observed over a sufficiently long time period to reflect different market conditions and economic cycles. In addition, given the diverse risks of the respective operating areas, different Beta coefficients are used for each CGU. All the resulting rates have been adjusted to take into account the \u201cCountry Risk\u201d. The cash flows produced by the international subsidiaries are estimated in the currency in which they are generated and translated into euro using the spot exchange rate as at the date of the determination of the value in use. With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill allocated and, as a result, it is not possible to test the recoverable amount of the specific intangible as part of the impairment test of the goodwill based on total cash flows at the level of the CGU, then an independent and specific valuation is made on the basis of the fair value certified by the appraisal of an independent expert. Business combinations Business combinations are governed by IFRS 3. The transfer of control over a company (or over a group of assets managed together as a single business) is considered a business combination. To this end, control is deemed to have transferred when the investor is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns by exercising its power over the investee. IFRS 3 requires that an acquirer be identified in any business combination. The acquirer is identified as the combining entity that obtains control of the other combining entities or businesses. If a controlling entity cannot be identified, following the definition of control described above, as for example in the case of exchange of equity investments, the identification of the acquirer must occur considering other factors such as: the entity which has a significantly higher fair value, the entity which pays a cash consideration, the entity which issues new shares. The acquisition, and therefore the initial consolidation of the acquired entity, must be recognised in the books on the date in which the acquirer effectively obtains control over the acquired company or businesses. When the combination occurs via an exchange of voting ordinary equity instruments, the date of the exchange usually coincides with the date of the acquisition. However, it is always necessary to verify that there are no agreements which may lead to transfer of control prior to the date of the exchange. The consideration transferred as part of a business combination is equal to the sum of the fair value, at the exchange date, of the transferred assets, the liabilities incurred or assumed and the equity instruments issued by the acquirer in return for control. In transactions which entail cash consideration (or when payment occurs via cash-equivalent financial instruments), the purchase price is the agreed consideration. When settlement does not occur in the short-term, the fair value of any deferred component is calculated by discounting the amounts payable to their present value; when payment occurs via an instrument other than cash, therefore via the issue of financial instruments, the price is equal to the fair value of such instruments net of the costs directly attributable to their issue. For the determination of fair value of financial instruments, see Section A.4 \u2013 Information on fair value and note that, in the case of shares quoted on active markets, fair value is represented by Stock Exchange price at acquisition date or, should that not be available, the last price available. Purchase price at acquisition date includes any adjustments to the cost contingent on future events, if provided for by the combination agreement and only if the adjustment is probable, can be measured reliably and realised within the twelve months subsequent to the date of acquisition of control. Instead, any restoration related to any loss in the value of the assets used as consideration is not included in purchase price since it is already considered either in the fair value of equity instruments or as a reduction in the premium or an increase in the discount on the initial issue of debt instruments. Acquisition costs refer to the charges incurred by the acquirer to carry out the business combination, including, for example, professional fees paid to independent auditors, experts, legal advisors, costs for legal opinions and audit of accounts, preparation of information documents required by the law, as well as advisory fees sustained to identify potential acquisition targets if the contract provides for the payment of success fees as well as debt securities' or equities' registration and issue costs. Acquisition costs must be recognised as charges when incurred and when the related services are provided, except for the costs relating to the issue of debt securities or equities which must be recognised in accordance with IAS 32. Business combinations must be accounted for using the \"acquisition method\" whereby identifiable assets acquired (including any intangible assets which had not been previously recognised by the acquired company) or liabilities assumed (including contingent liabilities) are recognised at their fair value at acquisition date. Moreover, as specifically required by IFRS 3, for each business combination, any minority interest in the acquired company can be recognised at fair value (therefore increasing the consideration transferred) or in proportion to the minority investment in the net identifiable assets of the acquired companies. If control is achieved in stages, the acquirer recalculates its previous interest in the acquired company at the acquisition date fair value. Any difference with respect to the previous carrying value is taken to income statement. Excess between the consideration transferred (being the fair value of transferred assets, liabilities incurred and equity instruments issued by the acquirer), increased, where present, by minority interests (determined as above) as well as the fair value of the stakes already held by the acquirer, and the fair value of acquired assets and liabilities should be recognised as goodwill. Conversely, such difference is taken to the income statement when the latter exceed the sum of the consideration, minority interests and the fair value of the stakes already held. The accounting for business combination can be determined provisionally by the end of the year in which the combination is realised and must be completed within twelve months of the acquisition date. In accordance with IFRS 10, acquisitions of further stakes in companies which are already controlled are accounted for as a capital transaction or as a transaction with shareholders acting in their capacity as shareholders. For this reason, the difference between the cost of the acquisition and the book value of the minority stakes acquired is posted to group shareholders' equity; in the same way, the sale of minority stakes without ceding control, does not generate gains or losses in the income statement but is posted to group shareholders' equity. The following transactions are outside the scope of business combinations: transactions aimed at acquiring control over one or more entities which are not part of the company\u2019s business; transactions aimed at acquiring transitory control; transactions conducted for organisational purposes, therefore between two or more companies or businesses which are already part of the Intesa Sanpaolo Group, and which do not entail changes in control, independently of the extent of minority interests in each of the combining entities before and after the business combinations (business combinations involving entities under common control). These transactions are considered immaterial. Therefore, since there are no specific provisions in IAS/IFRS and in compliance with IAS 8 which requires \u2013 in the absence of a specific Standard \u2013 that the reporting entity must use its judgement in applying an accounting policy that results in information that is relevant, reliable, prudent and that reflects the economic substance of the transaction, these are accounted for safeguarding the continuing values in the financial statements of the acquirer. Mergers are examples of combinations between companies and represent the most complete business combinations, since they imply the legal and economic unification of the merged entities. Mergers which entail the establishment of a new legal entity and mergers by incorporation (which entail that an entity is absorbed by another existing entity) are treated according to the criteria illustrated above, that is: - if the transaction leads to the transfer of control of a company, it is accounted for as a business combination as provided for by IFRS 3; - if the transaction does not lead to the transfer of control, it is accounted for by privileging the continuity of the values. Criteria for the preparation of segment reporting The Intesa Sanpaolo Group\u2019s segment reporting is based on the elements that the management uses to make its own operating decisions (the \u201cmanagement approach\u201d) and is therefore consistent with the disclosure requirements of IFRS 8. The Intesa Sanpaolo Group's organisational model is structured according to six business segments with specific operational responsibilities: Banca dei Territori, IMI Corporate & Investment Banking, International Subsidiary Banks, Asset Management, Private Banking and Insurance. In addition to these operating areas there is also the Corporate Centre which is responsible for guidance, coordination and control of the whole Group. The Corporate Centre also includes the following support structures: Treasury, NPE Department and the Strategic Asset & Liability Management (ALM) activities. For the purposes of preparation of the Segment Reporting, the income statement and balance sheet results attributed to the various business sectors were calculated according to the accounting principles used in the preparation and presentation of the consolidated financial statements. Use of the same accounting standards allows segment data and consolidated data to be effectively reconciled. To represent results more effectively and give a better understanding of the components that generated them, the reclassified income statement for each reporting segment is presented with values that express the contribution made by each segment to the Group\u2019s results. The contribution of the various Divisions and of the Corporate Centre to the Group's overall income statement results is determined according to the methods described below: \u2013 application of the contribution model with Internal Fund Transfer Pricing (FTP), differentiated on the basis of the maturity of the individual transaction, for the correct attribution of net interest income; \u2013 application, by virtue of specific contractual agreements between the Group Banks/Companies, of retrocession rules for economic components relative to transactions which set out the distribution of results between product factories/service units and relationship entities/customer units; \u2013 direct cost debiting to each Business Division and to the Corporate Centre; \u2013 application of the Group business accounting model, for the part within its remit, for the charging of the costs for the services provided by the head-office structures of the Parent Company belonging to the Corporate Centre to the Business Divisions and other Structures of the Corporate Centre, as well as the costs relating to the performance of steering and control activities; \u2013 application of customer portfolio/segmentation logics for the assignment to each Division and to the Corporate Centre of the economic results of operations with customers and of the net adjustments to loans. Business units' profits are shown net of the tax effect, calculated by applying the main components underlying the effective tax rate, in line with the Group tax policy. The economic results of the business operational segments are disclosed net of intragroup relations within each segment and gross of intragroup relations between different business operational segments. For each Division and for the Corporate Centre, the absorbed capital is also calculated on the basis of the Risk Weighted Assets (RWAs) determined in accordance with the applicable regulations and supplemented, where necessary, with management data on \u201ceconomic\u201d capital to take into account the risks not covered by the regulatory metric. To complete business operational segment reporting, the most relevant income statement data and balance sheet aggregates referred to the geographical areas in which the Group operates are also given. Geographical areas are defined on the basis of the territorial breakdown of Group activities. Three main geographical areas have been identified, based on the residence of the legal entities making up the Group: Italy, Europe and Rest of the World. Insurance assets and liabilities The Intesa Sanpaolo Group has decided to exercise the option of adopting the Deferral Approach, according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39, while awaiting the entry into force of the new international financial reporting standard on insurance contracts (IFRS 17), from 1 January 2023 85 . For completeness, an outline is provided below of: - the classification and measurement criteria for the financial assets and liabilities used by the Group\u2019s insurance companies, with more details provided in Part A \u201cAccounting policies\u201d of the Notes to the consolidated financial statements of the 2017 Annual Report. However, a description has not been provided of the recognition and derecognition criteria, because they are essentially in line with the applicable provisions of IFRS 9 and IAS 39; - the approaches adopted for specific products of the insurance segment. For details of the treatment of financial statement captions of the insurance companies other than those of a financial nature, see the information provided above, as the companies of the banking group and the companies of the insurance segment use the same accounting policies. 1. Financial assets held for trading Classification criteria This category includes financial assets held for trading, essentially represented by debt securities and equities and the positive value of derivative contracts held for trading. Derivative contracts also include those embedded in combined financial instruments which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. Derivatives are stated as assets if their fair value is positive and as liabilities if their fair value is negative. The positive and negative current values arising from transactions with the same counterparty may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. The reclassifications to other categories of financial assets are not permitted unless there is an event that is unusual and highly unlikely to recur in the near term. In such cases debt securities and equities not held for trading may be reclassified into other categories established by IAS 39 if the conditions for their recognition apply (Investments held to maturity, Financial assets available for sale, Loans). The transfer value is the fair value at the time of the reclassification. On reclassification, the presence of any embedded derivative contracts, that have to be separated, is assessed. 85 Regulation no. 2036/2021 of 19 November 2021 which endorses the new accounting standard IFRS 17 \u201cInsurance Contracts\u201d was published in the Official Journal of the EU on 23 November 2021. In this regard we note that on 25 June 2020, the IASB published the final version of the \"Amendments to IFRS 17 Insurance Contracts\" which confirmed the deferral of the date of first-time mandatory adoption of the Standard to 1 January 2023 (instead of 1 January 2022 previously proposed in the ED 2019/4), with the concurrent possibility of an extension to the same date of the \u201cDeferral approach\u201d in the application of IFRS 9. This was endorsed by the European Commission with the publication of Regulation 2097/2020 \u201cExtension of the Temporary Exemption from Applying IFRS 9 (amendments to IFRS 4)\u201d on 15 December 2020. Measurement criteria After initial recognition, financial assets held for trading are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. Equities, quotas of UCI and derivatives which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value according to the guidelines listed above, are maintained at cost. 2. Financial assets available for sale Classification criteria This category includes the financial assets that do not fall within any of the other categories such as Loans, Financial assets held for trading, Investments held to maturity or Financial assets measured at fair value through profit or loss. In particular, this caption is made up of i) bonds which are not held for trading and which are not included in Loans and Receivables, in Investments held to maturity or designated at fair value through profit or loss, ii) equity investments which are not held for trading and do not qualify as investments in subsidiaries, associates or entities subject to joint control, including private equity investments and private equity funds as well as iii) the portions of syndicated loans that, from inception, are destined for sale. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category Investments held to maturity. Moreover, debt securities may be reclassified into the category Investments held to maturity as well as under Loans, when there is the intention to hold them in the foreseeable future and when the recognition criteria are met. The transfer value is the fair value at the time of the reclassification. Measurement criteria After initial recognition, Financial assets available for sale are measured at fair value, through the recording in the income statement of the value corresponding to amortised cost, while gains or losses deriving from a change in fair value are recorded in a specific reserve in shareholders\u2019 equity, until the financial asset is derecognised or a permanent loss occurs. On the total or partial sale of the financial asset or on recognition of a loss, the cumulated profit or loss must be reversed, all or in part, to the income statement. Fair value is determined on the basis of the criteria already illustrated for financial assets held for trading. Equities included in this category and quotas of UCI which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value, are maintained at cost. Financial assets available for sale are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and its fair value. Should the reasons for impairment cease to exist, following an event occurred after the registration of the impairment, value recoveries are posted through the income statement in the case of loans or debt securities, and through shareholders\u2019 equity in the case of equities. The size of the recovery must not lead the carrying amount of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 3. Investments held to maturity Classification criteria Quoted debt securities with fixed or determinable payments and fixed maturity, which the entity has the positive intention and ability to hold to maturity, are classified in this category. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category of Financial assets available for sale. If during a year, prior to expiry, more than an insignificant amount classified under this category is sold or reclassified, the remaining investments held to maturity are reclassified as Financial assets available for sale and the portfolio in question may not be used for the next two years, unless the sales and reclassifications: - are so close to maturity or the financial asset\u2019s call date that changes in the market interest rate would not have a significant effect on the financial asset\u2019s fair value; - occur after the entity has collected substantially all of the financial asset\u2019s original principal through scheduled payments or prepayments; or - are attributable to an isolated event that is beyond the entity\u2019s control, is non-recurring and could not have been reasonably anticipated by the entity. Measurement criteria After the initial recognition, Investments held to maturity are measured at amortised cost, using the effective interest method. Profits or losses referred to investments held to maturity are recorded in the income statement when assets are derecognised or impaired, and through the amortisation process of the difference between book value and the value reimbursable at maturity. Investments held to maturity are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and the present value of the estimated future cash flows, discounted at the original effective interest rate. The loss is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 4. Loans Classification criteria Loans include loans to customers and due from banks, both disbursed directly and acquired from third parties, which entail fixed or in any case determinable payments, which are not quoted on an active market and which are not classified at inception in Financial assets available for sale. The caption Loans also includes commercial loans, repurchase agreements with the obligation to resell at a later date, and securities underwritten at issue or via private placements, with determined or determinable payments, not quoted in active markets. Reclassifications to the other categories of financial assets established in IAS 39 are not permitted. Measurement criteria After initial recognition, loans are measured at amortised cost, equal to initial value increased/decreased by principal repayments, adjustments/recoveries and amortisation \u2013 calculated applying the effective interest method \u2013 of the difference between amount disbursed and amount to be reimbursed at maturity, typically attributable to the costs/revenues directly connected to the single loan. The effective interest rate is the rate that exactly discounts estimated future cash payments of the loan, for principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to the loan. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/revenues through the expected residual maturity of the loan. The amortised cost method is not used for loans whose short maturity implies that the application of the discounting approach leads to immaterial effects. Such loans are recorded at historical cost. An analogous measurement criterion is applied to loans with unspecified maturity or with notice period. Loans are reassessed for the purpose of identifying those which, due to events occurred after initial recognition, show objective evidence of possible impairment. These include bad loans, unlikely-to-pay or past due loans according to the rules issued by the Bank of Italy, consistent with IAS/IFRS and EU supervisory regulations. Non-performing loans undergo an individual measurement process, or the calculation of the expected loss for homogeneous categories and analytical allocation to each position, and the amount of the adjustment of each loan is the difference between its carrying value at the time of measurement (amortised cost) and the present value of expected future cash flows, discounted using the original effective interest rate. Expected cash flows consider forecast recovery periods, presumed realisable value of guarantees as well as the costs sustained for the recovery of credit exposure. The original effective rate of each loan remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. The impairment loss is recorded in the income statement. The original value of loans is reinstated in subsequent periods to the extent that the reasons which had led to the impairment cease to exist, provided that such valuation is objectively attributed to an event which occurred subsequent to the impairment. The recovery is recorded in the income statement and must not lead the carrying amount of the loan to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment include time value effects. Loans for which no objective evidence of loss has emerged from individual measurement are subject to measurement of a collective adjustment. Such measurement occurs for homogeneous loan categories in terms of credit risk and the relative loss percentages are estimated considering past time series and other objective elements observable at measurement date, which enable the latent loss to be estimated for each loan category. Measurement also considers the risk connected to the borrower\u2019s country of residence. Collective adjustments are recorded in the income statement. 5. Financial assets measured at fair value through profit or loss Classification criteria IAS/IFRS endorsed by the European Commission enable the classification as financial instruments measured at fair value through profit and loss of any financial asset thus defined at the moment of acquisition, in compliance with the cases contemplated in the reference regulations. Reclassifications to the other categories of financial assets are not permitted. The Group classifies investments with respect to insurance policies in this category. Measurement criteria After initial recognition, the financial instruments in question are measured at fair value. The effects of the application of this measurement criterion are recorded in the income statement. 6. Payables and securities issued Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in finance lease transactions. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. 7. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities determined by short selling generated by securities trading activities. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 8. Financial liabilities designated at fair value through profit or loss Classification criteria Financial liabilities designated at fair value through profit or loss are recorded under this caption, on the basis of the fair value option given to companies by IAS 39, in compliance with the cases contemplated in the reference regulations. The Group exercised the fair value option for liabilities, designating insurance products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features. Investments relating to such forms of deposits, as already reported, were also designated at fair value, thereby eliminating or considerably reducing \u201caccounting biases\u201d that would otherwise have arisen from measuring assets and liabilities on the basis of different accounting criteria. Measurement criteria These liabilities are designated at fair value through profit or loss. 9. Insurance products Products for which insurance risk is deemed significant include: temporary first class death policies and income and mixed policies with guaranteed fixed conversion rates at the time of issue, and certain types of unit-linked policies and damage cover. As regards these products, the IAS/IFRS substantially confirm the national accounting standards concerning insurance. In brief, IFRS 4 sets forth that: - gross premiums are to be recorded in the income statement under income; they include all amounts matured during the year as a result of insurance contracts signed, net of cancellations; likewise, all premiums ceded to reinsurers are recorded under current year costs; - with respect to gross premiums, the corresponding commitment towards the insured is accrued in technical reserves, such amount being calculated on a contract-by-contract basis in accordance with applicable local accounting principles; - the insurance products entered under separate management are valued by applying \u201cshadow accounting\u201d, whereby the differences between the carrying value and the market value of securities classified as securities available for sale are allocated to technical reserves as regards the insured parties' portion and to shareholders\u2019 equity as regards the insurance companies' portion. If, on the other hand, the securities are measured at fair value through profit or loss, the difference between the carrying value and the market value is recorded in the income statement giving rise to a change in technical reserves equal to the amount of the insured parties\u2019 portion; - in determining shadow accounting, the Group uses the retrocession average rate and the minimum guaranteed rate established in accordance with the contractual conditions of the various products associated with each portfolio management; - liabilities related to products with discretionary participation features are given as a whole with no distinction between the guaranteed component and the discretionary participation feature. In accordance with IFRS 4, the Group assesses the prospective adequacy of the carrying amount of recorded liabilities using the Liability Adequacy Test (LAT). 10. Financial products included under separate management Financial products included under separate management, despite their not being subject to significant insurance risk, and which therefore contain discretionary participation features, include the majority of life policies and mixed first branch policies, as well as fifth branch capitalisation policies. These are accounted for according to the principles set forth in IFRS 4: - the products are shown in the financial statements according to principles that essentially reflect those locally in force on the subject, any premiums, payments and changes in technical reserves being recorded in the income statement; - as stated in the previous paragraph, shadow accounting is applied to the insurance products entered under separate management which, therefore, have discretionary participation features; - in determining shadow accounting, the Group uses the retrocession average rate and the minimum guaranteed rate established in accordance with the contractual conditions of the various products associated with each portfolio management; - liabilities related to products with discretionary participation features are given as a whole with no distinction between the guaranteed component and the discretionary participation feature. 11. Financial products not included under separate management Financial products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features, are stated in the financial statements as financial liabilities and are measured at fair value, on the basis of the envisaged option (Fair Value Option), or at amortised cost. These financial products are essentially index-linked policies and part of the unit-linked ones, as well as policies with specific assets not included under separate management. These products are accounted for according to the principles set forth in IAS 39, as summarised below: - the portion of index- and unit-linked policies that are considered investment contracts are measured at fair value, whereas the specific asset products not included under separate management are measured at amortised cost; - the income statement does not reflect the premiums relating to these products, but just the revenue components, represented by fees and commissions, and the cost components, comprising provisions and other charges; it also reflects the costs or revenues represented by the changes in the fair value of the liabilities incurred against these contracts. More specifically, the international accounting and financial reporting standards, contained in IAS 39 and IFRS 15, provide that, for the liabilities designated at fair value, income and costs relating to the products in question be identified and classified under two headings: (i) origination, to be recorded in the income statement at the time the product is issued and (ii) investment and management services, to be amortised over the life of the product which depends on how the service is provided. In addition, as regards specific asset products not included under separate management, incremental cost and income items are included in the calculation of the amount to be amortised; - the insurance component included in the index- and unit-linked products, where it can be unbundled, is independently valued and recorded. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-942": { "value": "1. Financial assets measured at fair value through profit or loss (FVTPL) Classification criteria This category contains the financial assets not classified as Financial assets measured at fair value through other comprehensive income or as Financial assets measured at amortised cost. This caption includes in particular: - financial assets held for trading, essentially consisting of debt securities and equity instruments and the positive value of derivative contracts held for trading; - financial assets mandatorily measured at fair value through profit or loss, consisting of financial assets that do not meet the requirements for measurement at amortised cost or at fair value through other comprehensive income. These are financial assets whose contractual terms do not solely envisage payments of principal and interest on the principal amount outstanding (SPPI Test not passed) or that are not held under a Hold to Collect business model or a Hold to Collect and Sell business model; - financial assets designated at fair value, i.e. financial assets that are defined as such upon initial recognition and when the conditions apply. In relation to this case, an entity may irrevocably designate a financial asset as measured at fair value through profit or loss only if it eliminates or significantly reduces a measurement inconsistency. This caption therefore includes: - debt securities and loans that are included in an Other/Trading business model (i.e., that do not come under the Hold to Collect or Hold to Collect and Sell business models) or that do not pass the SPPI Test, including the portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are not part of a Hold to Collect and Sell business model; - equity instruments \u2013 that do not qualify as investments in subsidiaries, associates or joint ventures \u2013 held for trading purposes or for which the option was not exercised, upon initial recognition, to designate them at fair value through other comprehensive income; - quotas of UCI (Undertakings for Collective Investment). This caption also includes the derivatives, recognised under financial assets held for trading, which are presented as assets if the fair value is positive and as liabilities if the fair value is negative. The positive and negative current values arising from transactions with the same counterparty \u2013 also between derivatives allocated to the trading book and hedging derivatives, as envisaged by the Bank of Italy Circular 262 \u2013 may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. Derivatives also include those embedded in combined financial contracts \u2013 where the host contract is a financial liability \u2013 which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through profit or loss to one of the other two categories established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through other comprehensive income). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In this case, the effective interest rate of the reclassified financial asset is determined based on its fair value at the reclassification date and that date is considered as the initial recognition date for the credit risk stage assignment for impairment purposes. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments, at disbursement date for loans and at trade date for derivative contracts. On initial recognition, financial assets measured at fair value through profit or loss are recognised at fair value, without considering transaction costs or revenues directly attributable to the instrument. Measurement criteria After initial recognition, the financial assets measured at fair value through profit or loss are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. For equities and derivative instruments that have equities as underlying assets, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate. For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on Fair Value\u201d. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. Recognition of revenues and costs Revenues are gross flows of economic benefits deriving from the performance of the company's ordinary business and are recognised when control of the goods or services is transferred to the customer, at an amount that represents the amount of consideration that the company considers it is entitled to. In particular, revenues are recognised by applying a model that must meet the following criteria: - identification of the contract, defined as an agreement in which the parties are committed to perform their respective obligations; - identification of the individual performance obligations contained in the contract; - determination of the transaction price, i.e. the expected consideration for the transfer of the goods or services to the customer; - allocation of the transaction price to each performance obligation, based on the sale prices of the individual obligation; - recognition of revenues when (or as) the performance obligation is satisfied by transferring a promised good or service to a customer. The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and services promised. It may include fixed or variable amounts or both. Revenues from variable fees are recognised in the income statement if they can be reliably estimated and only if it is highly likely that all or a significant part of this fee will not need to be reversed from the income statement in future periods. Where there is a high level of uncertainty related to the nature of the consideration, it will be recognised only when this uncertainty is resolved. Revenues may be recognised: - at a specific point in time, when the entity satisfies a performance obligation by transferring a promised good or service to the customer, or - over time, as the entity satisfies a performance obligation by transferring a promised good or service to the customer. The good is transferred when, or in the period when, the customer acquires control of the good. In particular: - interest is recognised on accrual on the basis of the contractual interest rate or the effective interest rate in the case of application of amortised cost. Interest income (or interest expense) includes differentials and positive (or negative) margins accrued up to the reporting date, relating to financial derivatives: a) hedging interest-generating assets and liabilities; b) classified in the balance sheet in the trading book, though related to financial assets and/or liabilities designated at fair value through profit or loss (fair value option) in management terms; c) related in management terms to assets and/or liabilities classified in the trading book and providing for the settlement of differentials or margins with different maturities; - overdue interest, which may be provided for by the relevant contracts is recorded in the income statement solely at the time of collection; - dividends are posted in the income statement when their distribution is approved, unless this date is not known or the information is not immediately available, in which case they may be recognised when they are collected; - commission income from services is recorded, on the basis of the existence of contractual agreements, in the period in which the services have been rendered. Commission income included in the amortised cost for the purposes of determining the effective interest rate is recognised under interest; - profits and losses from securities trading are recognised in the income statement at the date of sale, on the basis of the difference between the consideration paid or collected and the carrying value of such instruments; - revenues deriving from the sale of non-financial assets are recorded at the date of sale, or when the performance obligation towards the customer is satisfied. Costs are recognised in the income statement on an accruals basis. Costs relating to the receipt and performance of contracts with customers are recognised in the income statement in the periods when the related revenues are recognised. 1. Financial assets held for trading Classification criteria This category includes financial assets held for trading, essentially represented by debt securities and equities and the positive value of derivative contracts held for trading. Derivative contracts also include those embedded in combined financial instruments which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. Derivatives are stated as assets if their fair value is positive and as liabilities if their fair value is negative. The positive and negative current values arising from transactions with the same counterparty may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. The reclassifications to other categories of financial assets are not permitted unless there is an event that is unusual and highly unlikely to recur in the near term. In such cases debt securities and equities not held for trading may be reclassified into other categories established by IAS 39 if the conditions for their recognition apply (Investments held to maturity, Financial assets available for sale, Loans). The transfer value is the fair value at the time of the reclassification. On reclassification, the presence of any embedded derivative contracts, that have to be separated, is assessed. Measurement criteria After initial recognition, financial assets held for trading are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. Equities, quotas of UCI and derivatives which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value according to the guidelines listed above, are maintained at cost. 5. Financial assets measured at fair value through profit or loss Classification criteria IAS/IFRS endorsed by the European Commission enable the classification as financial instruments measured at fair value through profit and loss of any financial asset thus defined at the moment of acquisition, in compliance with the cases contemplated in the reference regulations. Reclassifications to the other categories of financial assets are not permitted. The Group classifies investments with respect to insurance policies in this category. Measurement criteria After initial recognition, the financial instruments in question are measured at fair value. The effects of the application of this measurement criterion are recorded in the income statement. 7. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities determined by short selling generated by securities trading activities. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 8. Financial liabilities designated at fair value through profit or loss Classification criteria Financial liabilities designated at fair value through profit or loss are recorded under this caption, on the basis of the fair value option given to companies by IAS 39, in compliance with the cases contemplated in the reference regulations. The Group exercised the fair value option for liabilities, designating insurance products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features. Investments relating to such forms of deposits, as already reported, were also designated at fair value, thereby eliminating or considerably reducing \u201caccounting biases\u201d that would otherwise have arisen from measuring assets and liabilities on the basis of different accounting criteria. Measurement criteria These liabilities are designated at fair value through profit or loss. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradingIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-983": { "value": "1. Financial assets measured at fair value through profit or loss (FVTPL) Classification criteria This category contains the financial assets not classified as Financial assets measured at fair value through other comprehensive income or as Financial assets measured at amortised cost. This caption includes in particular: - financial assets held for trading, essentially consisting of debt securities and equity instruments and the positive value of derivative contracts held for trading; - financial assets mandatorily measured at fair value through profit or loss, consisting of financial assets that do not meet the requirements for measurement at amortised cost or at fair value through other comprehensive income. These are financial assets whose contractual terms do not solely envisage payments of principal and interest on the principal amount outstanding (SPPI Test not passed) or that are not held under a Hold to Collect business model or a Hold to Collect and Sell business model; - financial assets designated at fair value, i.e. financial assets that are defined as such upon initial recognition and when the conditions apply. In relation to this case, an entity may irrevocably designate a financial asset as measured at fair value through profit or loss only if it eliminates or significantly reduces a measurement inconsistency. This caption therefore includes: - debt securities and loans that are included in an Other/Trading business model (i.e., that do not come under the Hold to Collect or Hold to Collect and Sell business models) or that do not pass the SPPI Test, including the portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are not part of a Hold to Collect and Sell business model; - equity instruments \u2013 that do not qualify as investments in subsidiaries, associates or joint ventures \u2013 held for trading purposes or for which the option was not exercised, upon initial recognition, to designate them at fair value through other comprehensive income; - quotas of UCI (Undertakings for Collective Investment). This caption also includes the derivatives, recognised under financial assets held for trading, which are presented as assets if the fair value is positive and as liabilities if the fair value is negative. The positive and negative current values arising from transactions with the same counterparty \u2013 also between derivatives allocated to the trading book and hedging derivatives, as envisaged by the Bank of Italy Circular 262 \u2013 may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. Derivatives also include those embedded in combined financial contracts \u2013 where the host contract is a financial liability \u2013 which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through profit or loss to one of the other two categories established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through other comprehensive income). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In this case, the effective interest rate of the reclassified financial asset is determined based on its fair value at the reclassification date and that date is considered as the initial recognition date for the credit risk stage assignment for impairment purposes. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments, at disbursement date for loans and at trade date for derivative contracts. On initial recognition, financial assets measured at fair value through profit or loss are recognised at fair value, without considering transaction costs or revenues directly attributable to the instrument. Measurement criteria After initial recognition, the financial assets measured at fair value through profit or loss are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. For equities and derivative instruments that have equities as underlying assets, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate. For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on Fair Value\u201d. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 2. Financial assets measured at fair value through other comprehensive income (FVOCI) Classification criteria This category includes the financial assets that meet both the following conditions: - the financial asset is held under a business model whose objective is achieved both through the collection of expected contractual cash flows and through sale (Hold to Collect and Sell business model), and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI Test\u201d passed). This caption also includes equity instruments, not held for trading, for which the option was exercised upon initial recognition of their designation at fair value through other comprehensive income. In particular, this caption includes: - debt securities that can be attributed to a Hold to Collect and Sell business model and that have passed the SPPI test; - equity interests, that do not qualify as investments in subsidiaries, associates or joint ventures and are not held for trading, for which the option has been exercised of their designation at fair value through other comprehensive income; - loans that are attributable to a Hold to Collect and Sell business model and have passed the SPPI Test, including the portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are part of a Hold to Collect and Sell business model. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through other comprehensive income to one of the other two categories established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through profit or loss). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In the event of reclassification from this category to the amortised cost category, the cumulative gain (loss) recognised in the valuation reserve is allocated as an adjustment to the fair value of the financial asset at the reclassification date. In the event of reclassification to the fair value through profit or loss category, the cumulative gain (loss) previously recognised in the valuation reserve is reclassified from shareholders\u2019 equity to net income (loss). For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments and at disbursement date for loans. On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly attributable to the instrument. Measurement criteria After initial recognition, the Assets classified at fair value through other comprehensive income, other than equity instruments, are measured at fair value, with the recognition in profit or loss of the impact resulting from the application of the amortised cost, the impairment effects and any exchange rate effect, whereas the other gains and losses resulting from a change in fair value are recognised in a specific shareholders\u2019 equity reserve until the financial asset is derecognised. Upon the total or partial sale, the cumulative gain or loss in the valuation reserve is transferred, in whole or in part, to the income statement. Equity instruments, for which the choice has been made to classify them in this category, are measured at fair value and the amounts recognised in other comprehensive income cannot be subsequently transferred to profit or loss, not even if they are sold. The only component related to these equities that is recognised through profit or loss is their dividends. Fair value is determined on the basis of the criteria already described for Financial assets measured at fair value through profit or loss. For the equity instruments included in this category, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate. For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on Fair Value\u201d. Financial assets measured at fair value through other comprehensive income \u2013 both in the form of debt securities and loans \u2013 are subject to the verification of the significant increase in credit risk (impairment) required by IFRS 9, in the same way as Assets measured at amortised cost, with the consequent recognition through profit or loss of a value adjustment to cover the expected losses. More specifically, for instruments classified as Stage 1 (i.e., financial assets at origination, when not impaired, and instruments for which there has not been a significant increase in credit risk since the initial recognition date), a 12-month expected loss is recognised on the initial recognition date and at each subsequent reporting date. For instruments classified as Stage 2 (performing for which there has been a significant increase in credit risk since the initial recognition date) and as Stage 3 (credit-impaired exposures), a lifetime expected loss for the financial instrument is recognised. Equity instruments are not subject to the impairment process. See the paragraph below \u201cImpairment of financial assets\u201d for more details. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 3. Financial assets measured at amortised cost Classification criteria This category includes the financial assets (in particular loans and debt securities) that meet both the following conditions: - the financial asset is held under a business model whose objective is achieved through the collection of expected contractual cash flows (Hold to Collect business model), and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI Test\u201d passed). More specifically, the following are recognised in this caption: - loans to banks in their various forms that meet the requirements referred to above; - loans to customers in their various forms that meet the requirements referred to above; - debt securities that meet the requirements referred to above. This category also includes the operating loans and receivables connected to the provision of financial activities and services as defined by the Consolidated Law on Banking and the Consolidated Law on Finance (e.g. for the distribution of financial products and servicing activities). According to the general rules established by IFRS 9 on the reclassification of financial assets, reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from the amortised cost category to one of the other two categories established by IFRS 9 (Financial assets measured at fair value through other comprehensive income or Financial assets measured at fair value through profit or loss). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. Gains and losses resulting from the difference between the amortised cost of a financial asset and its fair value are recognised through profit or loss in the event of reclassification to Financial assets measured at fair value through profit or loss and under Shareholders\u2019 equity, in the specific valuation reserve, in the event of reclassification to Financial assets measured at fair value through other comprehensive income. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of the financial asset occurs at settlement date for debt securities and at disbursement date for loans. On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly attributable to the instrument. In particular, for loans, the disbursement date is usually the same as the date of signing of the contract. Should this not be the case, a commitment to disburse funds is made along with the subscription of the contract, which will cease to exist upon disbursement of the loan. The loan is recognised based on its fair value, equal to the amount disbursed or subscription price, inclusive of the costs/revenues directly attributable to the single loan and determinable from inception, even when settled at a later date. Costs that, even with the aforementioned characteristics, are reimbursed by the borrower or are classifiable as normal internal administrative costs are excluded. Repurchase agreements and reverse repurchase agreements are recognised as funding or lending transactions. Specifically, repurchase agreements are recognised as payables for the spot amount received, whereas reverse repurchase agreements are recognised as receivables for the spot amount paid. Measurement criteria After the initial recognition, these financial assets are measured at amortised cost, using the effective interest method. The assets are recognised in the balance sheet at an amount equal to their initial carrying amount less principal repayments, plus or minus the cumulative amortisation (calculated using the effective interest method) of the difference between this initial amount and the amount at maturity (typically attributable to costs/income directly attributable to the individual asset) and adjusted by any provision for losses. The effective interest rate is the rate that exactly discounts estimated future cash payments of the asset, as principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to that financial asset. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/income directly attributable to a financial asset over its expected lifetime. The amortised cost method is not used for assets, measured at historical cost, whose short duration makes the effect of discounting negligible, or for assets without a definite maturity or revocable loans. The measurement criteria, as described in more detail in the paragraph \u201cImpairment of financial assets\u201d, are closely linked to the inclusion of these instruments in one of the three stages of credit risk established by IFRS 9, the last of which (Stage 3) consists of non-performing financial assets and the remaining (Stages 1 and 2) of performing financial assets. With regard to the accounting representation of the above measurement effects, the adjustments for this type of asset are recognised in profit or loss: - on initial recognition, for an amount equal to the 12-month expected credit loss; - on subsequent measurement of the asset, when the credit risk has not increased significantly since initial recognition, in relation to changes in the amount of adjustments for the 12-month expected credit losses; - on subsequent measurement of the asset, when the credit risk has increased significantly since initial recognition, in relation to the recognition of adjustments for expected credit losses over the contractually agreed remaining lifetime of the asset; - on subsequent measurement of the asset, where \u2013 after a significant increase in credit risk has occurred since initial recognition \u2013 the increase is no longer \u201csignificant\u201d due to the alignment of the cumulative value adjustments to take account of the change from a lifetime expected credit loss to a 12-month expected credit loss for the instrument. These financial assets, when they are performing, are subject to an assessment, aimed at establishing the value adjustments to be recognised in the financial statements, at the level of individual loan (or \u201ctranches\u201d of securities), according to the risk parameters consisting of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), derived from the AIRB models, and duly adjusted to take account of the provisions of IFRS 9. If, in addition to a significant increase in credit risk, there is also objective evidence of impairment, the amount of the loss is measured as the difference between the carrying amount of the asset \u2013 classified as \u201cnon-performing\u201d, like all the other relationships with the same counterparty \u2013 and the present value of the estimated future cash flows, discounted using the original effective interest rate. The amount of the loss, to be recognised through profit or loss, is established based on individual measurement or determined according to uniform categories and, then, individually allocated to each position, and, as detailed in the paragraph \u201cImpairment of financial assets\u201d, takes account of forward-looking information and possible alternative recovery scenarios. Non-performing assets include financial assets classified as bad, unlikely-to-pay or past due by over ninety days according to the rules issued by the Bank of Italy, in line with the IAS/IFRS and EU Supervisory Regulations. The expected cash flows take into account the expected recovery times and the estimated realisable value of any guarantees. The original effective rate of each asset remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment with time value effects are recognised in net interest income. In some cases, during the lifetime of these financial assets, and of loans in particular, the original contractual conditions may be subsequently modified by the parties to the contract. When the contractual clauses are subject to change during the lifetime of an instrument, it is necessary to verify whether the original asset should continue to be recognised in the balance sheet or whether, instead, the original instrument needs to be derecognised and a new financial instrument needs to be recognised. In general, changes to a financial asset lead to its derecognition and the recognition of a new asset when they are \u201csubstantial\u201d. The assessment of the \u201csubstantial nature\u201d of the change must be made using both qualitative and quantitative information. In some cases, in fact, it may be clear, without resorting to complex analysis, that the changes introduced substantially modify the characteristics and/or contractual flows of a particular asset while, in other cases, further analysis (including quantitative analysis) will need to be carried out to assess the effects of the changes and verify whether or not to derecognise the asset and recognise a new financial instrument. The qualitative and quantitative analyses aimed at defining the \u201csubstantial nature\u201d of contractual changes made to a financial asset must therefore consider: - the purposes for which the changes were made: e.g. renegotiations for commercial reasons and forbearance measures due to financial difficulties of the counterparty: o the former, aimed at \u201cretaining\u201d the customer, involve a borrower that is not in financial difficulty. This category includes all renegotiations aimed at aligning the cost of the debt to market conditions. These operations involve a change in the original conditions of the contract, usually requested by the borrower and relating to aspects concerning the cost of the debt, with a consequent economic benefit for the borrower. In general, whenever the bank carries out a renegotiation to avoid losing its customer, that renegotiation should be considered as substantial because, if it were not carried out, the customer could borrow from another intermediary and the bank would incur a decrease in expected future revenues; o the latter, carried out for \u201creasons of credit risk\u201d (forbearance measures), relate to the bank\u2019s attempt to maximise the recovery of the cash flows of the original loan. The underlying risks and rewards, following the changes, are not normally substantially transferred and, consequently, the accounting representation that provides the most relevant information for the readers of the financial statements (apart from the triggers discussed below) is \u201cmodification accounting\u201d \u2013 which involves the recognition through profit or loss of the difference between the carrying value and the present value of the modified cash flows discounted at the original interest rate \u2013 rather than derecognition; - the presence of specific triggers that affect the contractual characteristics and/or cash flows of the financial instrument (such as, for example, a change in currency or a modification of the type of risk the financial instrument is exposed to, when correlated to equity and commodity parameters), which are considered to result in derecognition due to their impact (expected to be significant) on the original contractual cash flows. Conversely, the amendments to financial assets following the Interest Rate Benchmark Reform (so-called IBOR Reform), relating to the change in the basis for determining contractual cash flows (the replacement of the existing interest rate benchmark with an alternative benchmark rate), do not constitute a derecognition event, but are to be considered a modification from an accounting standpoint. Such amendments, if made as a direct consequence of the IBOR Reform and applied on equivalent economic bases, are represented with a prospective adjustment of the effective interest rate - by applying paragraph B5.4.5 of IFRS 9 instead of modification accounting, with impacts on net interest income in future periods. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 4. Hedging transactions The Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each type of hedge (both for micro hedges and macro hedges). Classification criteria: type of hedge Hedging transactions are aimed at neutralising potential losses on a specific item or group of items, attributable to a certain risk, if such a risk should actually occur. The following types of hedging transactions are used: - fair value hedge, which has the objective of covering exposure to changes in the fair value (attributable to the different risk categories) of assets and liabilities in the balance sheet, or on a portion of these, of groups of assets/liabilities, of binding commitments and portfolios of financial assets and liabilities, including core deposits, as permitted by IAS 39 endorsed by the European Commission. Fair value macro hedges are aimed at reducing fluctuations in the fair value, as a result of interest rate risk, of a sum of money flowing from a portfolio of financial assets or liabilities. Net amounts resulting from mismatches between assets and liabilities cannot be subject to macro hedges; - cash flow hedge, which has the objective of covering exposure to variability in future cash flows attributable to particular risks associated with balance sheet captions. This type of hedge is essentially used to stabilise the interest flow on floating rate funding to the extent that the latter finances fixed rate investments. In certain circumstances, similar transactions are carried out with respect to some types of floating rate investments; - hedges of net investments in foreign currency, which refer to the coverage of the risks of net investments in foreign operations expressed in their original currency. Only hedging transactions which involve counterparties outside the Group may qualify for hedge accounting. The choice made by the Group to take advantage of the possibility of continuing to fully apply the IAS 39 rules for hedging relationships means that the equity instruments classified as Financial assets measured at fair value through other comprehensive income (FVOCI) cannot be measured as hedged items for price or exchange rate risk, since these instruments are not recognised through profit or loss, not even if they are sold (except for dividends that are recognised through profit or loss). Recognition criteria Hedging derivatives, like all derivatives, are initially recognised and subsequently measured at fair value. A relationship qualifies as a hedging relationship, and is appropriately reported in the financial statements only if, all of the following conditions are met: - at the inception of the hedge, the hedging relationship is formally designated and documented, including the company\u2019s risk management objectives and strategy in undertaking the hedge. This documentation includes the identification of the hedging instrument, the item or transaction hedged, the nature of the risk being hedged, and how the entity will assess the hedging instrument\u2019s effectiveness in offsetting the exposures to changes in the fair value of the item hedged or in the cash flows attributable to the risk hedged; - the hedge is expected to be highly effective; - the planned transaction hedged, to hedge the cash flows, is highly probable and has an exposure to changes in cash flows that could have effects on the income statement; - the effectiveness of the hedge can be reliably measured; - the hedge is measured on an ongoing basis and is considered highly effective for all the financial years in which it was designated. Measurement criteria Hedging derivatives are measured at fair value. In particular: - in the case of fair value hedges, the change in the fair value of the hedged item is offset by the change in fair value of the hedging instrument. Offsetting is recognised via the registration in the income statement of the gains and losses referred to both the hedged item (with regard to the variations produced by the underlying risk factor), and the hedging instrument. Any difference, which represents the partial ineffectiveness of the hedge, is therefore the net economic effect. In case of fair value macro hedges, fair value changes related to the hedged risk of assets and liabilities in hedged portfolios are allocated to the balance sheet under caption 60. \u201cFair value change of financial assets in hedged portfolios\u201d or under caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d; - in the case of cash flow hedges, changes in fair value of the derivative are recorded in equity, for the effective portion of the hedge, and these are registered in the income statement only when, with reference to the hedged item, there is a variation in the flows to be offset or if the hedge is ineffective; - hedges of net investments in foreign currency are treated in the same way as cash flow hedges. The effectiveness of the hedge depends on the extent to which changes in the fair value of the hedged item or the relating expected cash flows are offset by those of the hedging instrument. Therefore, effectiveness is appraised by comparing the aforementioned changes, considering the intent pursued by the entity at the time in which it entered the hedging transaction. A hedge is effective when the variations in fair value (or cash flows) of the hedging financial instrument almost completely neutralise, that is within the 80-125% range, the changes in the fair value of the hedged item, for the type of risk being hedged. Effectiveness is assessed at every close of annual or interim financial statements using: - prospective tests, which justify the application of hedge accounting, since these prove the expected effectiveness of the hedge; - retrospective tests, which demonstrate the effectiveness of the hedge for the reference period, or measure how much the effective results diverge from perfect coverage. Fair value hedge accounting is discontinued prospectively in the following cases: \u2013 the hedging instrument expires or is sold, terminated, or exercised; \u2013 the hedge no longer meets the hedge accounting criteria described above; \u2013 the entity revokes the designation. If such assessments do not confirm hedge effectiveness, from that moment hedge accounting is discontinued, the derivative is reclassified in instruments held for trading and the hedged item is measured on the basis of its classification in the balance sheet. If the assets or liabilities hedged are measured at amortised cost, the higher or lower value resulting from the fair value measurement due to the hedge becoming ineffective is recognised through profit or loss, using the effective interest rate method. When a fair value macrohedging relationship is discontinued, the cumulative change in fair value losses carried under caption 60 \"Fair value change of financial assets in hedged portfolios\" or caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d are transferred to the income statement among interest income or expense over the residual life of the original hedging relationships, without prejudice to verification that the requirements have been met. An entity must discontinue cash flow hedge accounting prospectively in each of the following circumstances: a) the hedging instrument expires or is sold, terminated, or exercised (for this purpose the replacement or exchange of one hedging instrument with another hedging instrument is not a conclusion or termination if that replacement or exchange forms part of an entity\u2019s documented hedging strategy). In this case the total profit (or loss) on the hedging instrument continues to be recognised directly in shareholders\u2019 equity until the end of the reporting period in which the hedge became effective and it continues to be recognised separately until the programmed transaction, being hedged, occurs; b) the hedge no longer meets the criteria for hedge accounting. In this case the total profit or loss on the hedging instrument is recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective and continues to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs; c) it is no longer considered that the future transaction will occur, in which case any related total profit or loss on the hedging instrument recognised directly in equity starting from the reporting period in which the hedge became effective must be recognised through profit or loss; d) the entity revokes the designation. For hedges of a programmed transaction, total profits or losses on the hedging instrument recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective continue to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs or it is expected that it will no longer occur. As an exception to the provisions of IAS 39 discontinuation following an update of the documentation of the hedging relationship (due to modification of the hedged risk, the hedged underlying or the hedging derivative, or of the method for verifying hedge effectiveness) does not apply in the case of modifications required as a direct consequence of the Interest Rate Benchmark Reform (so-called IBOR Reform) and applied on equivalent economic bases. Insurance assets and liabilities The Intesa Sanpaolo Group has decided to exercise the option of adopting the Deferral Approach, according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39, while awaiting the entry into force of the new international financial reporting standard on insurance contracts (IFRS 17), from 1 January 2023 85 . For completeness, an outline is provided below of: - the classification and measurement criteria for the financial assets and liabilities used by the Group\u2019s insurance companies, with more details provided in Part A \u201cAccounting policies\u201d of the Notes to the consolidated financial statements of the 2017 Annual Report. However, a description has not been provided of the recognition and derecognition criteria, because they are essentially in line with the applicable provisions of IFRS 9 and IAS 39; - the approaches adopted for specific products of the insurance segment. For details of the treatment of financial statement captions of the insurance companies other than those of a financial nature, see the information provided above, as the companies of the banking group and the companies of the insurance segment use the same accounting policies. 1. Financial assets held for trading Classification criteria This category includes financial assets held for trading, essentially represented by debt securities and equities and the positive value of derivative contracts held for trading. Derivative contracts also include those embedded in combined financial instruments which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. Derivatives are stated as assets if their fair value is positive and as liabilities if their fair value is negative. The positive and negative current values arising from transactions with the same counterparty may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. The reclassifications to other categories of financial assets are not permitted unless there is an event that is unusual and highly unlikely to recur in the near term. In such cases debt securities and equities not held for trading may be reclassified into other categories established by IAS 39 if the conditions for their recognition apply (Investments held to maturity, Financial assets available for sale, Loans). The transfer value is the fair value at the time of the reclassification. On reclassification, the presence of any embedded derivative contracts, that have to be separated, is assessed. Measurement criteria After initial recognition, financial assets held for trading are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. Equities, quotas of UCI and derivatives which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value according to the guidelines listed above, are maintained at cost. 2. Financial assets available for sale Classification criteria This category includes the financial assets that do not fall within any of the other categories such as Loans, Financial assets held for trading, Investments held to maturity or Financial assets measured at fair value through profit or loss. In particular, this caption is made up of i) bonds which are not held for trading and which are not included in Loans and Receivables, in Investments held to maturity or designated at fair value through profit or loss, ii) equity investments which are not held for trading and do not qualify as investments in subsidiaries, associates or entities subject to joint control, including private equity investments and private equity funds as well as iii) the portions of syndicated loans that, from inception, are destined for sale. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category Investments held to maturity. Moreover, debt securities may be reclassified into the category Investments held to maturity as well as under Loans, when there is the intention to hold them in the foreseeable future and when the recognition criteria are met. The transfer value is the fair value at the time of the reclassification. Measurement criteria After initial recognition, Financial assets available for sale are measured at fair value, through the recording in the income statement of the value corresponding to amortised cost, while gains or losses deriving from a change in fair value are recorded in a specific reserve in shareholders\u2019 equity, until the financial asset is derecognised or a permanent loss occurs. On the total or partial sale of the financial asset or on recognition of a loss, the cumulated profit or loss must be reversed, all or in part, to the income statement. Fair value is determined on the basis of the criteria already illustrated for financial assets held for trading. Equities included in this category and quotas of UCI which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value, are maintained at cost. Financial assets available for sale are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and its fair value. Should the reasons for impairment cease to exist, following an event occurred after the registration of the impairment, value recoveries are posted through the income statement in the case of loans or debt securities, and through shareholders\u2019 equity in the case of equities. The size of the recovery must not lead the carrying amount of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 3. Investments held to maturity Classification criteria Quoted debt securities with fixed or determinable payments and fixed maturity, which the entity has the positive intention and ability to hold to maturity, are classified in this category. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category of Financial assets available for sale. If during a year, prior to expiry, more than an insignificant amount classified under this category is sold or reclassified, the remaining investments held to maturity are reclassified as Financial assets available for sale and the portfolio in question may not be used for the next two years, unless the sales and reclassifications: - are so close to maturity or the financial asset\u2019s call date that changes in the market interest rate would not have a significant effect on the financial asset\u2019s fair value; - occur after the entity has collected substantially all of the financial asset\u2019s original principal through scheduled payments or prepayments; or - are attributable to an isolated event that is beyond the entity\u2019s control, is non-recurring and could not have been reasonably anticipated by the entity. Measurement criteria After the initial recognition, Investments held to maturity are measured at amortised cost, using the effective interest method. Profits or losses referred to investments held to maturity are recorded in the income statement when assets are derecognised or impaired, and through the amortisation process of the difference between book value and the value reimbursable at maturity. Investments held to maturity are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and the present value of the estimated future cash flows, discounted at the original effective interest rate. The loss is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 4. Loans Classification criteria Loans include loans to customers and due from banks, both disbursed directly and acquired from third parties, which entail fixed or in any case determinable payments, which are not quoted on an active market and which are not classified at inception in Financial assets available for sale. The caption Loans also includes commercial loans, repurchase agreements with the obligation to resell at a later date, and securities underwritten at issue or via private placements, with determined or determinable payments, not quoted in active markets. Reclassifications to the other categories of financial assets established in IAS 39 are not permitted. Measurement criteria After initial recognition, loans are measured at amortised cost, equal to initial value increased/decreased by principal repayments, adjustments/recoveries and amortisation \u2013 calculated applying the effective interest method \u2013 of the difference between amount disbursed and amount to be reimbursed at maturity, typically attributable to the costs/revenues directly connected to the single loan. The effective interest rate is the rate that exactly discounts estimated future cash payments of the loan, for principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to the loan. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/revenues through the expected residual maturity of the loan. The amortised cost method is not used for loans whose short maturity implies that the application of the discounting approach leads to immaterial effects. Such loans are recorded at historical cost. An analogous measurement criterion is applied to loans with unspecified maturity or with notice period. Loans are reassessed for the purpose of identifying those which, due to events occurred after initial recognition, show objective evidence of possible impairment. These include bad loans, unlikely-to-pay or past due loans according to the rules issued by the Bank of Italy, consistent with IAS/IFRS and EU supervisory regulations. Non-performing loans undergo an individual measurement process, or the calculation of the expected loss for homogeneous categories and analytical allocation to each position, and the amount of the adjustment of each loan is the difference between its carrying value at the time of measurement (amortised cost) and the present value of expected future cash flows, discounted using the original effective interest rate. Expected cash flows consider forecast recovery periods, presumed realisable value of guarantees as well as the costs sustained for the recovery of credit exposure. The original effective rate of each loan remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. The impairment loss is recorded in the income statement. The original value of loans is reinstated in subsequent periods to the extent that the reasons which had led to the impairment cease to exist, provided that such valuation is objectively attributed to an event which occurred subsequent to the impairment. The recovery is recorded in the income statement and must not lead the carrying amount of the loan to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment include time value effects. Loans for which no objective evidence of loss has emerged from individual measurement are subject to measurement of a collective adjustment. Such measurement occurs for homogeneous loan categories in terms of credit risk and the relative loss percentages are estimated considering past time series and other objective elements observable at measurement date, which enable the latent loss to be estimated for each loan category. Measurement also considers the risk connected to the borrower\u2019s country of residence. Collective adjustments are recorded in the income statement. 5. Financial assets measured at fair value through profit or loss Classification criteria IAS/IFRS endorsed by the European Commission enable the classification as financial instruments measured at fair value through profit and loss of any financial asset thus defined at the moment of acquisition, in compliance with the cases contemplated in the reference regulations. Reclassifications to the other categories of financial assets are not permitted. The Group classifies investments with respect to insurance policies in this category. Measurement criteria After initial recognition, the financial instruments in question are measured at fair value. The effects of the application of this measurement criterion are recorded in the income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1009": { "value": "1. Financial assets measured at fair value through profit or loss (FVTPL) Classification criteria This category contains the financial assets not classified as Financial assets measured at fair value through other comprehensive income or as Financial assets measured at amortised cost. This caption includes in particular: - financial assets held for trading, essentially consisting of debt securities and equity instruments and the positive value of derivative contracts held for trading; - financial assets mandatorily measured at fair value through profit or loss, consisting of financial assets that do not meet the requirements for measurement at amortised cost or at fair value through other comprehensive income. These are financial assets whose contractual terms do not solely envisage payments of principal and interest on the principal amount outstanding (SPPI Test not passed) or that are not held under a Hold to Collect business model or a Hold to Collect and Sell business model; - financial assets designated at fair value, i.e. financial assets that are defined as such upon initial recognition and when the conditions apply. In relation to this case, an entity may irrevocably designate a financial asset as measured at fair value through profit or loss only if it eliminates or significantly reduces a measurement inconsistency. This caption therefore includes: - debt securities and loans that are included in an Other/Trading business model (i.e., that do not come under the Hold to Collect or Hold to Collect and Sell business models) or that do not pass the SPPI Test, including the portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are not part of a Hold to Collect and Sell business model; - equity instruments \u2013 that do not qualify as investments in subsidiaries, associates or joint ventures \u2013 held for trading purposes or for which the option was not exercised, upon initial recognition, to designate them at fair value through other comprehensive income; - quotas of UCI (Undertakings for Collective Investment). This caption also includes the derivatives, recognised under financial assets held for trading, which are presented as assets if the fair value is positive and as liabilities if the fair value is negative. The positive and negative current values arising from transactions with the same counterparty \u2013 also between derivatives allocated to the trading book and hedging derivatives, as envisaged by the Bank of Italy Circular 262 \u2013 may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. Derivatives also include those embedded in combined financial contracts \u2013 where the host contract is a financial liability \u2013 which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through profit or loss to one of the other two categories established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through other comprehensive income). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In this case, the effective interest rate of the reclassified financial asset is determined based on its fair value at the reclassification date and that date is considered as the initial recognition date for the credit risk stage assignment for impairment purposes. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments, at disbursement date for loans and at trade date for derivative contracts. On initial recognition, financial assets measured at fair value through profit or loss are recognised at fair value, without considering transaction costs or revenues directly attributable to the instrument. Measurement criteria After initial recognition, the financial assets measured at fair value through profit or loss are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. For equities and derivative instruments that have equities as underlying assets, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate. For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on Fair Value\u201d. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 2. Financial assets measured at fair value through other comprehensive income (FVOCI) Classification criteria This category includes the financial assets that meet both the following conditions: - the financial asset is held under a business model whose objective is achieved both through the collection of expected contractual cash flows and through sale (Hold to Collect and Sell business model), and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI Test\u201d passed). This caption also includes equity instruments, not held for trading, for which the option was exercised upon initial recognition of their designation at fair value through other comprehensive income. In particular, this caption includes: - debt securities that can be attributed to a Hold to Collect and Sell business model and that have passed the SPPI test; - equity interests, that do not qualify as investments in subsidiaries, associates or joint ventures and are not held for trading, for which the option has been exercised of their designation at fair value through other comprehensive income; - loans that are attributable to a Hold to Collect and Sell business model and have passed the SPPI Test, including the portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are part of a Hold to Collect and Sell business model. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through other comprehensive income to one of the other two categories established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through profit or loss). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In the event of reclassification from this category to the amortised cost category, the cumulative gain (loss) recognised in the valuation reserve is allocated as an adjustment to the fair value of the financial asset at the reclassification date. In the event of reclassification to the fair value through profit or loss category, the cumulative gain (loss) previously recognised in the valuation reserve is reclassified from shareholders\u2019 equity to net income (loss). For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments and at disbursement date for loans. On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly attributable to the instrument. Measurement criteria After initial recognition, the Assets classified at fair value through other comprehensive income, other than equity instruments, are measured at fair value, with the recognition in profit or loss of the impact resulting from the application of the amortised cost, the impairment effects and any exchange rate effect, whereas the other gains and losses resulting from a change in fair value are recognised in a specific shareholders\u2019 equity reserve until the financial asset is derecognised. Upon the total or partial sale, the cumulative gain or loss in the valuation reserve is transferred, in whole or in part, to the income statement. Equity instruments, for which the choice has been made to classify them in this category, are measured at fair value and the amounts recognised in other comprehensive income cannot be subsequently transferred to profit or loss, not even if they are sold. The only component related to these equities that is recognised through profit or loss is their dividends. Fair value is determined on the basis of the criteria already described for Financial assets measured at fair value through profit or loss. For the equity instruments included in this category, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate. For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on Fair Value\u201d. Financial assets measured at fair value through other comprehensive income \u2013 both in the form of debt securities and loans \u2013 are subject to the verification of the significant increase in credit risk (impairment) required by IFRS 9, in the same way as Assets measured at amortised cost, with the consequent recognition through profit or loss of a value adjustment to cover the expected losses. More specifically, for instruments classified as Stage 1 (i.e., financial assets at origination, when not impaired, and instruments for which there has not been a significant increase in credit risk since the initial recognition date), a 12-month expected loss is recognised on the initial recognition date and at each subsequent reporting date. For instruments classified as Stage 2 (performing for which there has been a significant increase in credit risk since the initial recognition date) and as Stage 3 (credit-impaired exposures), a lifetime expected loss for the financial instrument is recognised. Equity instruments are not subject to the impairment process. See the paragraph below \u201cImpairment of financial assets\u201d for more details. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 3. Financial assets measured at amortised cost Classification criteria This category includes the financial assets (in particular loans and debt securities) that meet both the following conditions: - the financial asset is held under a business model whose objective is achieved through the collection of expected contractual cash flows (Hold to Collect business model), and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI Test\u201d passed). More specifically, the following are recognised in this caption: - loans to banks in their various forms that meet the requirements referred to above; - loans to customers in their various forms that meet the requirements referred to above; - debt securities that meet the requirements referred to above. This category also includes the operating loans and receivables connected to the provision of financial activities and services as defined by the Consolidated Law on Banking and the Consolidated Law on Finance (e.g. for the distribution of financial products and servicing activities). According to the general rules established by IFRS 9 on the reclassification of financial assets, reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from the amortised cost category to one of the other two categories established by IFRS 9 (Financial assets measured at fair value through other comprehensive income or Financial assets measured at fair value through profit or loss). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. Gains and losses resulting from the difference between the amortised cost of a financial asset and its fair value are recognised through profit or loss in the event of reclassification to Financial assets measured at fair value through profit or loss and under Shareholders\u2019 equity, in the specific valuation reserve, in the event of reclassification to Financial assets measured at fair value through other comprehensive income. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of the financial asset occurs at settlement date for debt securities and at disbursement date for loans. On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly attributable to the instrument. In particular, for loans, the disbursement date is usually the same as the date of signing of the contract. Should this not be the case, a commitment to disburse funds is made along with the subscription of the contract, which will cease to exist upon disbursement of the loan. The loan is recognised based on its fair value, equal to the amount disbursed or subscription price, inclusive of the costs/revenues directly attributable to the single loan and determinable from inception, even when settled at a later date. Costs that, even with the aforementioned characteristics, are reimbursed by the borrower or are classifiable as normal internal administrative costs are excluded. Repurchase agreements and reverse repurchase agreements are recognised as funding or lending transactions. Specifically, repurchase agreements are recognised as payables for the spot amount received, whereas reverse repurchase agreements are recognised as receivables for the spot amount paid. Measurement criteria After the initial recognition, these financial assets are measured at amortised cost, using the effective interest method. The assets are recognised in the balance sheet at an amount equal to their initial carrying amount less principal repayments, plus or minus the cumulative amortisation (calculated using the effective interest method) of the difference between this initial amount and the amount at maturity (typically attributable to costs/income directly attributable to the individual asset) and adjusted by any provision for losses. The effective interest rate is the rate that exactly discounts estimated future cash payments of the asset, as principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to that financial asset. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/income directly attributable to a financial asset over its expected lifetime. The amortised cost method is not used for assets, measured at historical cost, whose short duration makes the effect of discounting negligible, or for assets without a definite maturity or revocable loans. The measurement criteria, as described in more detail in the paragraph \u201cImpairment of financial assets\u201d, are closely linked to the inclusion of these instruments in one of the three stages of credit risk established by IFRS 9, the last of which (Stage 3) consists of non-performing financial assets and the remaining (Stages 1 and 2) of performing financial assets. With regard to the accounting representation of the above measurement effects, the adjustments for this type of asset are recognised in profit or loss: - on initial recognition, for an amount equal to the 12-month expected credit loss; - on subsequent measurement of the asset, when the credit risk has not increased significantly since initial recognition, in relation to changes in the amount of adjustments for the 12-month expected credit losses; - on subsequent measurement of the asset, when the credit risk has increased significantly since initial recognition, in relation to the recognition of adjustments for expected credit losses over the contractually agreed remaining lifetime of the asset; - on subsequent measurement of the asset, where \u2013 after a significant increase in credit risk has occurred since initial recognition \u2013 the increase is no longer \u201csignificant\u201d due to the alignment of the cumulative value adjustments to take account of the change from a lifetime expected credit loss to a 12-month expected credit loss for the instrument. These financial assets, when they are performing, are subject to an assessment, aimed at establishing the value adjustments to be recognised in the financial statements, at the level of individual loan (or \u201ctranches\u201d of securities), according to the risk parameters consisting of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), derived from the AIRB models, and duly adjusted to take account of the provisions of IFRS 9. If, in addition to a significant increase in credit risk, there is also objective evidence of impairment, the amount of the loss is measured as the difference between the carrying amount of the asset \u2013 classified as \u201cnon-performing\u201d, like all the other relationships with the same counterparty \u2013 and the present value of the estimated future cash flows, discounted using the original effective interest rate. The amount of the loss, to be recognised through profit or loss, is established based on individual measurement or determined according to uniform categories and, then, individually allocated to each position, and, as detailed in the paragraph \u201cImpairment of financial assets\u201d, takes account of forward-looking information and possible alternative recovery scenarios. Non-performing assets include financial assets classified as bad, unlikely-to-pay or past due by over ninety days according to the rules issued by the Bank of Italy, in line with the IAS/IFRS and EU Supervisory Regulations. The expected cash flows take into account the expected recovery times and the estimated realisable value of any guarantees. The original effective rate of each asset remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment with time value effects are recognised in net interest income. In some cases, during the lifetime of these financial assets, and of loans in particular, the original contractual conditions may be subsequently modified by the parties to the contract. When the contractual clauses are subject to change during the lifetime of an instrument, it is necessary to verify whether the original asset should continue to be recognised in the balance sheet or whether, instead, the original instrument needs to be derecognised and a new financial instrument needs to be recognised. In general, changes to a financial asset lead to its derecognition and the recognition of a new asset when they are \u201csubstantial\u201d. The assessment of the \u201csubstantial nature\u201d of the change must be made using both qualitative and quantitative information. In some cases, in fact, it may be clear, without resorting to complex analysis, that the changes introduced substantially modify the characteristics and/or contractual flows of a particular asset while, in other cases, further analysis (including quantitative analysis) will need to be carried out to assess the effects of the changes and verify whether or not to derecognise the asset and recognise a new financial instrument. The qualitative and quantitative analyses aimed at defining the \u201csubstantial nature\u201d of contractual changes made to a financial asset must therefore consider: - the purposes for which the changes were made: e.g. renegotiations for commercial reasons and forbearance measures due to financial difficulties of the counterparty: o the former, aimed at \u201cretaining\u201d the customer, involve a borrower that is not in financial difficulty. This category includes all renegotiations aimed at aligning the cost of the debt to market conditions. These operations involve a change in the original conditions of the contract, usually requested by the borrower and relating to aspects concerning the cost of the debt, with a consequent economic benefit for the borrower. In general, whenever the bank carries out a renegotiation to avoid losing its customer, that renegotiation should be considered as substantial because, if it were not carried out, the customer could borrow from another intermediary and the bank would incur a decrease in expected future revenues; o the latter, carried out for \u201creasons of credit risk\u201d (forbearance measures), relate to the bank\u2019s attempt to maximise the recovery of the cash flows of the original loan. The underlying risks and rewards, following the changes, are not normally substantially transferred and, consequently, the accounting representation that provides the most relevant information for the readers of the financial statements (apart from the triggers discussed below) is \u201cmodification accounting\u201d \u2013 which involves the recognition through profit or loss of the difference between the carrying value and the present value of the modified cash flows discounted at the original interest rate \u2013 rather than derecognition; - the presence of specific triggers that affect the contractual characteristics and/or cash flows of the financial instrument (such as, for example, a change in currency or a modification of the type of risk the financial instrument is exposed to, when correlated to equity and commodity parameters), which are considered to result in derecognition due to their impact (expected to be significant) on the original contractual cash flows. Conversely, the amendments to financial assets following the Interest Rate Benchmark Reform (so-called IBOR Reform), relating to the change in the basis for determining contractual cash flows (the replacement of the existing interest rate benchmark with an alternative benchmark rate), do not constitute a derecognition event, but are to be considered a modification from an accounting standpoint. Such amendments, if made as a direct consequence of the IBOR Reform and applied on equivalent economic bases, are represented with a prospective adjustment of the effective interest rate - by applying paragraph B5.4.5 of IFRS 9 instead of modification accounting, with impacts on net interest income in future periods. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 4. Hedging transactions The Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each type of hedge (both for micro hedges and macro hedges). Classification criteria: type of hedge Hedging transactions are aimed at neutralising potential losses on a specific item or group of items, attributable to a certain risk, if such a risk should actually occur. The following types of hedging transactions are used: - fair value hedge, which has the objective of covering exposure to changes in the fair value (attributable to the different risk categories) of assets and liabilities in the balance sheet, or on a portion of these, of groups of assets/liabilities, of binding commitments and portfolios of financial assets and liabilities, including core deposits, as permitted by IAS 39 endorsed by the European Commission. Fair value macro hedges are aimed at reducing fluctuations in the fair value, as a result of interest rate risk, of a sum of money flowing from a portfolio of financial assets or liabilities. Net amounts resulting from mismatches between assets and liabilities cannot be subject to macro hedges; - cash flow hedge, which has the objective of covering exposure to variability in future cash flows attributable to particular risks associated with balance sheet captions. This type of hedge is essentially used to stabilise the interest flow on floating rate funding to the extent that the latter finances fixed rate investments. In certain circumstances, similar transactions are carried out with respect to some types of floating rate investments; - hedges of net investments in foreign currency, which refer to the coverage of the risks of net investments in foreign operations expressed in their original currency. Only hedging transactions which involve counterparties outside the Group may qualify for hedge accounting. The choice made by the Group to take advantage of the possibility of continuing to fully apply the IAS 39 rules for hedging relationships means that the equity instruments classified as Financial assets measured at fair value through other comprehensive income (FVOCI) cannot be measured as hedged items for price or exchange rate risk, since these instruments are not recognised through profit or loss, not even if they are sold (except for dividends that are recognised through profit or loss). Recognition criteria Hedging derivatives, like all derivatives, are initially recognised and subsequently measured at fair value. A relationship qualifies as a hedging relationship, and is appropriately reported in the financial statements only if, all of the following conditions are met: - at the inception of the hedge, the hedging relationship is formally designated and documented, including the company\u2019s risk management objectives and strategy in undertaking the hedge. This documentation includes the identification of the hedging instrument, the item or transaction hedged, the nature of the risk being hedged, and how the entity will assess the hedging instrument\u2019s effectiveness in offsetting the exposures to changes in the fair value of the item hedged or in the cash flows attributable to the risk hedged; - the hedge is expected to be highly effective; - the planned transaction hedged, to hedge the cash flows, is highly probable and has an exposure to changes in cash flows that could have effects on the income statement; - the effectiveness of the hedge can be reliably measured; - the hedge is measured on an ongoing basis and is considered highly effective for all the financial years in which it was designated. Measurement criteria Hedging derivatives are measured at fair value. In particular: - in the case of fair value hedges, the change in the fair value of the hedged item is offset by the change in fair value of the hedging instrument. Offsetting is recognised via the registration in the income statement of the gains and losses referred to both the hedged item (with regard to the variations produced by the underlying risk factor), and the hedging instrument. Any difference, which represents the partial ineffectiveness of the hedge, is therefore the net economic effect. In case of fair value macro hedges, fair value changes related to the hedged risk of assets and liabilities in hedged portfolios are allocated to the balance sheet under caption 60. \u201cFair value change of financial assets in hedged portfolios\u201d or under caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d; - in the case of cash flow hedges, changes in fair value of the derivative are recorded in equity, for the effective portion of the hedge, and these are registered in the income statement only when, with reference to the hedged item, there is a variation in the flows to be offset or if the hedge is ineffective; - hedges of net investments in foreign currency are treated in the same way as cash flow hedges. The effectiveness of the hedge depends on the extent to which changes in the fair value of the hedged item or the relating expected cash flows are offset by those of the hedging instrument. Therefore, effectiveness is appraised by comparing the aforementioned changes, considering the intent pursued by the entity at the time in which it entered the hedging transaction. A hedge is effective when the variations in fair value (or cash flows) of the hedging financial instrument almost completely neutralise, that is within the 80-125% range, the changes in the fair value of the hedged item, for the type of risk being hedged. Effectiveness is assessed at every close of annual or interim financial statements using: - prospective tests, which justify the application of hedge accounting, since these prove the expected effectiveness of the hedge; - retrospective tests, which demonstrate the effectiveness of the hedge for the reference period, or measure how much the effective results diverge from perfect coverage. Fair value hedge accounting is discontinued prospectively in the following cases: \u2013 the hedging instrument expires or is sold, terminated, or exercised; \u2013 the hedge no longer meets the hedge accounting criteria described above; \u2013 the entity revokes the designation. If such assessments do not confirm hedge effectiveness, from that moment hedge accounting is discontinued, the derivative is reclassified in instruments held for trading and the hedged item is measured on the basis of its classification in the balance sheet. If the assets or liabilities hedged are measured at amortised cost, the higher or lower value resulting from the fair value measurement due to the hedge becoming ineffective is recognised through profit or loss, using the effective interest rate method. When a fair value macrohedging relationship is discontinued, the cumulative change in fair value losses carried under caption 60 \"Fair value change of financial assets in hedged portfolios\" or caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d are transferred to the income statement among interest income or expense over the residual life of the original hedging relationships, without prejudice to verification that the requirements have been met. An entity must discontinue cash flow hedge accounting prospectively in each of the following circumstances: a) the hedging instrument expires or is sold, terminated, or exercised (for this purpose the replacement or exchange of one hedging instrument with another hedging instrument is not a conclusion or termination if that replacement or exchange forms part of an entity\u2019s documented hedging strategy). In this case the total profit (or loss) on the hedging instrument continues to be recognised directly in shareholders\u2019 equity until the end of the reporting period in which the hedge became effective and it continues to be recognised separately until the programmed transaction, being hedged, occurs; b) the hedge no longer meets the criteria for hedge accounting. In this case the total profit or loss on the hedging instrument is recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective and continues to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs; c) it is no longer considered that the future transaction will occur, in which case any related total profit or loss on the hedging instrument recognised directly in equity starting from the reporting period in which the hedge became effective must be recognised through profit or loss; d) the entity revokes the designation. For hedges of a programmed transaction, total profits or losses on the hedging instrument recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective continue to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs or it is expected that it will no longer occur. As an exception to the provisions of IAS 39 discontinuation following an update of the documentation of the hedging relationship (due to modification of the hedged risk, the hedged underlying or the hedging derivative, or of the method for verifying hedge effectiveness) does not apply in the case of modifications required as a direct consequence of the Interest Rate Benchmark Reform (so-called IBOR Reform) and applied on equivalent economic bases. 12. Financial liabilities measured at amortised cost Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in lease transactions. Recognition criteria Initial recognition of these financial liabilities occurs at the date of subscription of the contract, which usually coincides with the time of collection of the sums deposited or the issue of debt securities. Initial recognition is based on the fair value of the liabilities, normally equal to the amount collected or the issue price, increased by any additional charges/revenues directly attributable to the single funding or issuing transaction. Internal administrative costs are excluded. Lease payables are recognised at the present value of the future lease payments, discounted using the implicit interest rate of the transaction or, where it cannot be determined, the marginal financing rate. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. Lease payables are remeasured when there is a lease modification (e.g. a change in the contract which is not accounted for/considered as a separate contract); the effect of the remeasurement will be a corresponding adjustment to the right-of-use asset. Derecognition criteria Financial liabilities are derecognised from the balance sheet when they have expired or extinguished. Derecognition also occurs for repurchase of previously-issued bonds. The difference between book value of the liability and amount paid for repurchase is recorded in the income statement. Placement of own securities, after their repurchase, is considered a new issue with recognition at the new placement price. 13. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, in particular, the negative fair value of trading derivatives, as well as embedded derivatives with a negative fair value separated from liabilities measured at amortised cost. It also includes liabilities determined by short selling generated by trading of securities and certificates forming part of the trading business model. Measurement criteria All financial liabilities held for trading are measured at fair value through profit or loss. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 14. Financial liabilities designated at fair value Classification criteria Financial liabilities designated at fair value are recorded under this caption, on the basis of the fair value option given to companies by IFRS 9 and in compliance with the cases contemplated in the reference regulations. This category of liabilities includes certificates that form part of the banking book business model. Recognition criteria These liabilities are recorded at fair value as at the date of issue, including the value of any embedded derivatives, net of placement fees paid. Measurement criteria These liabilities are measured at fair value according to the following rules established by IFRS 9: - changes in fair value attributable to changes in own credit risk must be recognised in the statement of comprehensive income (shareholders\u2019 equity); - the remaining changes in fair value must be recognised in the income statement. The amounts recognised in the statement of comprehensive income are not subsequently recycled to the income statement. This method of accounting must not be applied when recognition of the effects of own credit risk on shareholders\u2019 equity results in or accentuates an accounting mismatch in the income statement. In this case, gains and losses associated with the liability, including those resulting from changes in own credit risk, must be recognised in the income statement. Derecognition criteria The financial liabilities designated at fair value are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed with the substantial transfer of all the risks and rewards connected to it. 15. Foreign currency transactions Definition The foreign currency is a currency that is not the functional currency of the entity, which is in turn the currency of the primary economic environment in which the entity operates. Initial recognition Foreign currency transactions are recorded, on initial recognition, in the functional currency, by applying to the foreign currency amount the spot exchange rate at the date of the transaction. Subsequent measurement At every close of annual or interim financial statements, captions in foreign currency are measured as follows: - foreign currency monetary items are translated using the closing rate; - non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; - non-monetary items that are measured at fair value in a foreign currency are translated using the closing rates. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognised through profit or loss in the period in which they arise. When a gain or loss on a non-monetary item is recognised directly in equity, any exchange component of that gain or loss is recognised directly in equity. Conversely, when a gain or loss on a non-monetary item is recognised through profit or loss, any exchange component of that gain or loss is recognised through profit or loss. With regard to the \u201cConversion of financial statements in currencies other than the euro\u201d for the purposes of consolidation and accounting for the related foreign exchange differences, reference is made to the specific paragraph of Part A: Section 3 - Scope of consolidation and consolidation methods of these Notes to the consolidated financial statements. Insurance assets and liabilities The Intesa Sanpaolo Group has decided to exercise the option of adopting the Deferral Approach, according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39, while awaiting the entry into force of the new international financial reporting standard on insurance contracts (IFRS 17), from 1 January 2023 85 . For completeness, an outline is provided below of: - the classification and measurement criteria for the financial assets and liabilities used by the Group\u2019s insurance companies, with more details provided in Part A \u201cAccounting policies\u201d of the Notes to the consolidated financial statements of the 2017 Annual Report. However, a description has not been provided of the recognition and derecognition criteria, because they are essentially in line with the applicable provisions of IFRS 9 and IAS 39; - the approaches adopted for specific products of the insurance segment. For details of the treatment of financial statement captions of the insurance companies other than those of a financial nature, see the information provided above, as the companies of the banking group and the companies of the insurance segment use the same accounting policies. 1. Financial assets held for trading Classification criteria This category includes financial assets held for trading, essentially represented by debt securities and equities and the positive value of derivative contracts held for trading. Derivative contracts also include those embedded in combined financial instruments which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. Derivatives are stated as assets if their fair value is positive and as liabilities if their fair value is negative. The positive and negative current values arising from transactions with the same counterparty may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. The reclassifications to other categories of financial assets are not permitted unless there is an event that is unusual and highly unlikely to recur in the near term. In such cases debt securities and equities not held for trading may be reclassified into other categories established by IAS 39 if the conditions for their recognition apply (Investments held to maturity, Financial assets available for sale, Loans). The transfer value is the fair value at the time of the reclassification. On reclassification, the presence of any embedded derivative contracts, that have to be separated, is assessed. Measurement criteria After initial recognition, financial assets held for trading are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. Equities, quotas of UCI and derivatives which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value according to the guidelines listed above, are maintained at cost. 2. Financial assets available for sale Classification criteria This category includes the financial assets that do not fall within any of the other categories such as Loans, Financial assets held for trading, Investments held to maturity or Financial assets measured at fair value through profit or loss. In particular, this caption is made up of i) bonds which are not held for trading and which are not included in Loans and Receivables, in Investments held to maturity or designated at fair value through profit or loss, ii) equity investments which are not held for trading and do not qualify as investments in subsidiaries, associates or entities subject to joint control, including private equity investments and private equity funds as well as iii) the portions of syndicated loans that, from inception, are destined for sale. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category Investments held to maturity. Moreover, debt securities may be reclassified into the category Investments held to maturity as well as under Loans, when there is the intention to hold them in the foreseeable future and when the recognition criteria are met. The transfer value is the fair value at the time of the reclassification. Measurement criteria After initial recognition, Financial assets available for sale are measured at fair value, through the recording in the income statement of the value corresponding to amortised cost, while gains or losses deriving from a change in fair value are recorded in a specific reserve in shareholders\u2019 equity, until the financial asset is derecognised or a permanent loss occurs. On the total or partial sale of the financial asset or on recognition of a loss, the cumulated profit or loss must be reversed, all or in part, to the income statement. Fair value is determined on the basis of the criteria already illustrated for financial assets held for trading. Equities included in this category and quotas of UCI which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value, are maintained at cost. Financial assets available for sale are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and its fair value. Should the reasons for impairment cease to exist, following an event occurred after the registration of the impairment, value recoveries are posted through the income statement in the case of loans or debt securities, and through shareholders\u2019 equity in the case of equities. The size of the recovery must not lead the carrying amount of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 3. Investments held to maturity Classification criteria Quoted debt securities with fixed or determinable payments and fixed maturity, which the entity has the positive intention and ability to hold to maturity, are classified in this category. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category of Financial assets available for sale. If during a year, prior to expiry, more than an insignificant amount classified under this category is sold or reclassified, the remaining investments held to maturity are reclassified as Financial assets available for sale and the portfolio in question may not be used for the next two years, unless the sales and reclassifications: - are so close to maturity or the financial asset\u2019s call date that changes in the market interest rate would not have a significant effect on the financial asset\u2019s fair value; - occur after the entity has collected substantially all of the financial asset\u2019s original principal through scheduled payments or prepayments; or - are attributable to an isolated event that is beyond the entity\u2019s control, is non-recurring and could not have been reasonably anticipated by the entity. Measurement criteria After the initial recognition, Investments held to maturity are measured at amortised cost, using the effective interest method. Profits or losses referred to investments held to maturity are recorded in the income statement when assets are derecognised or impaired, and through the amortisation process of the difference between book value and the value reimbursable at maturity. Investments held to maturity are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and the present value of the estimated future cash flows, discounted at the original effective interest rate. The loss is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 4. Loans Classification criteria Loans include loans to customers and due from banks, both disbursed directly and acquired from third parties, which entail fixed or in any case determinable payments, which are not quoted on an active market and which are not classified at inception in Financial assets available for sale. The caption Loans also includes commercial loans, repurchase agreements with the obligation to resell at a later date, and securities underwritten at issue or via private placements, with determined or determinable payments, not quoted in active markets. Reclassifications to the other categories of financial assets established in IAS 39 are not permitted. Measurement criteria After initial recognition, loans are measured at amortised cost, equal to initial value increased/decreased by principal repayments, adjustments/recoveries and amortisation \u2013 calculated applying the effective interest method \u2013 of the difference between amount disbursed and amount to be reimbursed at maturity, typically attributable to the costs/revenues directly connected to the single loan. The effective interest rate is the rate that exactly discounts estimated future cash payments of the loan, for principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to the loan. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/revenues through the expected residual maturity of the loan. The amortised cost method is not used for loans whose short maturity implies that the application of the discounting approach leads to immaterial effects. Such loans are recorded at historical cost. An analogous measurement criterion is applied to loans with unspecified maturity or with notice period. Loans are reassessed for the purpose of identifying those which, due to events occurred after initial recognition, show objective evidence of possible impairment. These include bad loans, unlikely-to-pay or past due loans according to the rules issued by the Bank of Italy, consistent with IAS/IFRS and EU supervisory regulations. Non-performing loans undergo an individual measurement process, or the calculation of the expected loss for homogeneous categories and analytical allocation to each position, and the amount of the adjustment of each loan is the difference between its carrying value at the time of measurement (amortised cost) and the present value of expected future cash flows, discounted using the original effective interest rate. Expected cash flows consider forecast recovery periods, presumed realisable value of guarantees as well as the costs sustained for the recovery of credit exposure. The original effective rate of each loan remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. The impairment loss is recorded in the income statement. The original value of loans is reinstated in subsequent periods to the extent that the reasons which had led to the impairment cease to exist, provided that such valuation is objectively attributed to an event which occurred subsequent to the impairment. The recovery is recorded in the income statement and must not lead the carrying amount of the loan to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment include time value effects. Loans for which no objective evidence of loss has emerged from individual measurement are subject to measurement of a collective adjustment. Such measurement occurs for homogeneous loan categories in terms of credit risk and the relative loss percentages are estimated considering past time series and other objective elements observable at measurement date, which enable the latent loss to be estimated for each loan category. Measurement also considers the risk connected to the borrower\u2019s country of residence. Collective adjustments are recorded in the income statement. 5. Financial assets measured at fair value through profit or loss Classification criteria IAS/IFRS endorsed by the European Commission enable the classification as financial instruments measured at fair value through profit and loss of any financial asset thus defined at the moment of acquisition, in compliance with the cases contemplated in the reference regulations. Reclassifications to the other categories of financial assets are not permitted. The Group classifies investments with respect to insurance policies in this category. Measurement criteria After initial recognition, the financial instruments in question are measured at fair value. The effects of the application of this measurement criterion are recorded in the income statement. 6. Payables and securities issued Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in finance lease transactions. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. 7. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities determined by short selling generated by securities trading activities. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 8. Financial liabilities designated at fair value through profit or loss Classification criteria Financial liabilities designated at fair value through profit or loss are recorded under this caption, on the basis of the fair value option given to companies by IAS 39, in compliance with the cases contemplated in the reference regulations. The Group exercised the fair value option for liabilities, designating insurance products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features. Investments relating to such forms of deposits, as already reported, were also designated at fair value, thereby eliminating or considerably reducing \u201caccounting biases\u201d that would otherwise have arisen from measuring assets and liabilities on the basis of different accounting criteria. Measurement criteria These liabilities are designated at fair value through profit or loss. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1026": { "value": "1. Financial assets measured at fair value through profit or loss (FVTPL) Classification criteria This category contains the financial assets not classified as Financial assets measured at fair value through other comprehensive income or as Financial assets measured at amortised cost. This caption includes in particular: - financial assets held for trading, essentially consisting of debt securities and equity instruments and the positive value of derivative contracts held for trading; - financial assets mandatorily measured at fair value through profit or loss, consisting of financial assets that do not meet the requirements for measurement at amortised cost or at fair value through other comprehensive income. These are financial assets whose contractual terms do not solely envisage payments of principal and interest on the principal amount outstanding (SPPI Test not passed) or that are not held under a Hold to Collect business model or a Hold to Collect and Sell business model; - financial assets designated at fair value, i.e. financial assets that are defined as such upon initial recognition and when the conditions apply. In relation to this case, an entity may irrevocably designate a financial asset as measured at fair value through profit or loss only if it eliminates or significantly reduces a measurement inconsistency. This caption therefore includes: - debt securities and loans that are included in an Other/Trading business model (i.e., that do not come under the Hold to Collect or Hold to Collect and Sell business models) or that do not pass the SPPI Test, including the portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are not part of a Hold to Collect and Sell business model; - equity instruments \u2013 that do not qualify as investments in subsidiaries, associates or joint ventures \u2013 held for trading purposes or for which the option was not exercised, upon initial recognition, to designate them at fair value through other comprehensive income; - quotas of UCI (Undertakings for Collective Investment). This caption also includes the derivatives, recognised under financial assets held for trading, which are presented as assets if the fair value is positive and as liabilities if the fair value is negative. The positive and negative current values arising from transactions with the same counterparty \u2013 also between derivatives allocated to the trading book and hedging derivatives, as envisaged by the Bank of Italy Circular 262 \u2013 may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. Derivatives also include those embedded in combined financial contracts \u2013 where the host contract is a financial liability \u2013 which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through profit or loss to one of the other two categories established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through other comprehensive income). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In this case, the effective interest rate of the reclassified financial asset is determined based on its fair value at the reclassification date and that date is considered as the initial recognition date for the credit risk stage assignment for impairment purposes. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments, at disbursement date for loans and at trade date for derivative contracts. On initial recognition, financial assets measured at fair value through profit or loss are recognised at fair value, without considering transaction costs or revenues directly attributable to the instrument. Measurement criteria After initial recognition, the financial assets measured at fair value through profit or loss are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. For equities and derivative instruments that have equities as underlying assets, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate. For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on Fair Value\u201d. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 2. Financial assets measured at fair value through other comprehensive income (FVOCI) Classification criteria This category includes the financial assets that meet both the following conditions: - the financial asset is held under a business model whose objective is achieved both through the collection of expected contractual cash flows and through sale (Hold to Collect and Sell business model), and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI Test\u201d passed). This caption also includes equity instruments, not held for trading, for which the option was exercised upon initial recognition of their designation at fair value through other comprehensive income. In particular, this caption includes: - debt securities that can be attributed to a Hold to Collect and Sell business model and that have passed the SPPI test; - equity interests, that do not qualify as investments in subsidiaries, associates or joint ventures and are not held for trading, for which the option has been exercised of their designation at fair value through other comprehensive income; - loans that are attributable to a Hold to Collect and Sell business model and have passed the SPPI Test, including the portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are part of a Hold to Collect and Sell business model. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through other comprehensive income to one of the other two categories established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through profit or loss). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In the event of reclassification from this category to the amortised cost category, the cumulative gain (loss) recognised in the valuation reserve is allocated as an adjustment to the fair value of the financial asset at the reclassification date. In the event of reclassification to the fair value through profit or loss category, the cumulative gain (loss) previously recognised in the valuation reserve is reclassified from shareholders\u2019 equity to net income (loss). For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments and at disbursement date for loans. On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly attributable to the instrument. Measurement criteria After initial recognition, the Assets classified at fair value through other comprehensive income, other than equity instruments, are measured at fair value, with the recognition in profit or loss of the impact resulting from the application of the amortised cost, the impairment effects and any exchange rate effect, whereas the other gains and losses resulting from a change in fair value are recognised in a specific shareholders\u2019 equity reserve until the financial asset is derecognised. Upon the total or partial sale, the cumulative gain or loss in the valuation reserve is transferred, in whole or in part, to the income statement. Equity instruments, for which the choice has been made to classify them in this category, are measured at fair value and the amounts recognised in other comprehensive income cannot be subsequently transferred to profit or loss, not even if they are sold. The only component related to these equities that is recognised through profit or loss is their dividends. Fair value is determined on the basis of the criteria already described for Financial assets measured at fair value through profit or loss. For the equity instruments included in this category, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate. For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on Fair Value\u201d. Financial assets measured at fair value through other comprehensive income \u2013 both in the form of debt securities and loans \u2013 are subject to the verification of the significant increase in credit risk (impairment) required by IFRS 9, in the same way as Assets measured at amortised cost, with the consequent recognition through profit or loss of a value adjustment to cover the expected losses. More specifically, for instruments classified as Stage 1 (i.e., financial assets at origination, when not impaired, and instruments for which there has not been a significant increase in credit risk since the initial recognition date), a 12-month expected loss is recognised on the initial recognition date and at each subsequent reporting date. For instruments classified as Stage 2 (performing for which there has been a significant increase in credit risk since the initial recognition date) and as Stage 3 (credit-impaired exposures), a lifetime expected loss for the financial instrument is recognised. Equity instruments are not subject to the impairment process. See the paragraph below \u201cImpairment of financial assets\u201d for more details. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 13. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, in particular, the negative fair value of trading derivatives, as well as embedded derivatives with a negative fair value separated from liabilities measured at amortised cost. It also includes liabilities determined by short selling generated by trading of securities and certificates forming part of the trading business model. Measurement criteria All financial liabilities held for trading are measured at fair value through profit or loss. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 14. Financial liabilities designated at fair value Classification criteria Financial liabilities designated at fair value are recorded under this caption, on the basis of the fair value option given to companies by IFRS 9 and in compliance with the cases contemplated in the reference regulations. This category of liabilities includes certificates that form part of the banking book business model. Recognition criteria These liabilities are recorded at fair value as at the date of issue, including the value of any embedded derivatives, net of placement fees paid. Measurement criteria These liabilities are measured at fair value according to the following rules established by IFRS 9: - changes in fair value attributable to changes in own credit risk must be recognised in the statement of comprehensive income (shareholders\u2019 equity); - the remaining changes in fair value must be recognised in the income statement. The amounts recognised in the statement of comprehensive income are not subsequently recycled to the income statement. This method of accounting must not be applied when recognition of the effects of own credit risk on shareholders\u2019 equity results in or accentuates an accounting mismatch in the income statement. In this case, gains and losses associated with the liability, including those resulting from changes in own credit risk, must be recognised in the income statement. Derecognition criteria The financial liabilities designated at fair value are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed with the substantial transfer of all the risks and rewards connected to it. 1. Financial assets held for trading Classification criteria This category includes financial assets held for trading, essentially represented by debt securities and equities and the positive value of derivative contracts held for trading. Derivative contracts also include those embedded in combined financial instruments which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. Derivatives are stated as assets if their fair value is positive and as liabilities if their fair value is negative. The positive and negative current values arising from transactions with the same counterparty may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. The reclassifications to other categories of financial assets are not permitted unless there is an event that is unusual and highly unlikely to recur in the near term. In such cases debt securities and equities not held for trading may be reclassified into other categories established by IAS 39 if the conditions for their recognition apply (Investments held to maturity, Financial assets available for sale, Loans). The transfer value is the fair value at the time of the reclassification. On reclassification, the presence of any embedded derivative contracts, that have to be separated, is assessed. Measurement criteria After initial recognition, financial assets held for trading are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. Equities, quotas of UCI and derivatives which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value according to the guidelines listed above, are maintained at cost. 2. Financial assets available for sale Classification criteria This category includes the financial assets that do not fall within any of the other categories such as Loans, Financial assets held for trading, Investments held to maturity or Financial assets measured at fair value through profit or loss. In particular, this caption is made up of i) bonds which are not held for trading and which are not included in Loans and Receivables, in Investments held to maturity or designated at fair value through profit or loss, ii) equity investments which are not held for trading and do not qualify as investments in subsidiaries, associates or entities subject to joint control, including private equity investments and private equity funds as well as iii) the portions of syndicated loans that, from inception, are destined for sale. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category Investments held to maturity. Moreover, debt securities may be reclassified into the category Investments held to maturity as well as under Loans, when there is the intention to hold them in the foreseeable future and when the recognition criteria are met. The transfer value is the fair value at the time of the reclassification. Measurement criteria After initial recognition, Financial assets available for sale are measured at fair value, through the recording in the income statement of the value corresponding to amortised cost, while gains or losses deriving from a change in fair value are recorded in a specific reserve in shareholders\u2019 equity, until the financial asset is derecognised or a permanent loss occurs. On the total or partial sale of the financial asset or on recognition of a loss, the cumulated profit or loss must be reversed, all or in part, to the income statement. Fair value is determined on the basis of the criteria already illustrated for financial assets held for trading. Equities included in this category and quotas of UCI which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value, are maintained at cost. Financial assets available for sale are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and its fair value. Should the reasons for impairment cease to exist, following an event occurred after the registration of the impairment, value recoveries are posted through the income statement in the case of loans or debt securities, and through shareholders\u2019 equity in the case of equities. The size of the recovery must not lead the carrying amount of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 5. Financial assets measured at fair value through profit or loss Classification criteria IAS/IFRS endorsed by the European Commission enable the classification as financial instruments measured at fair value through profit and loss of any financial asset thus defined at the moment of acquisition, in compliance with the cases contemplated in the reference regulations. Reclassifications to the other categories of financial assets are not permitted. The Group classifies investments with respect to insurance policies in this category. Measurement criteria After initial recognition, the financial instruments in question are measured at fair value. The effects of the application of this measurement criterion are recorded in the income statement. 7. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities determined by short selling generated by securities trading activities. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 8. Financial liabilities designated at fair value through profit or loss Classification criteria Financial liabilities designated at fair value through profit or loss are recorded under this caption, on the basis of the fair value option given to companies by IAS 39, in compliance with the cases contemplated in the reference regulations. The Group exercised the fair value option for liabilities, designating insurance products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features. Investments relating to such forms of deposits, as already reported, were also designated at fair value, thereby eliminating or considerably reducing \u201caccounting biases\u201d that would otherwise have arisen from measuring assets and liabilities on the basis of different accounting criteria. Measurement criteria These liabilities are designated at fair value through profit or loss. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1064": { "value": "1. Financial assets measured at fair value through profit or loss (FVTPL) Classification criteria This category contains the financial assets not classified as Financial assets measured at fair value through other comprehensive income or as Financial assets measured at amortised cost. This caption includes in particular: - financial assets held for trading, essentially consisting of debt securities and equity instruments and the positive value of derivative contracts held for trading; - financial assets mandatorily measured at fair value through profit or loss, consisting of financial assets that do not meet the requirements for measurement at amortised cost or at fair value through other comprehensive income. These are financial assets whose contractual terms do not solely envisage payments of principal and interest on the principal amount outstanding (SPPI Test not passed) or that are not held under a Hold to Collect business model or a Hold to Collect and Sell business model; - financial assets designated at fair value, i.e. financial assets that are defined as such upon initial recognition and when the conditions apply. In relation to this case, an entity may irrevocably designate a financial asset as measured at fair value through profit or loss only if it eliminates or significantly reduces a measurement inconsistency. This caption therefore includes: - debt securities and loans that are included in an Other/Trading business model (i.e., that do not come under the Hold to Collect or Hold to Collect and Sell business models) or that do not pass the SPPI Test, including the portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are not part of a Hold to Collect and Sell business model; - equity instruments \u2013 that do not qualify as investments in subsidiaries, associates or joint ventures \u2013 held for trading purposes or for which the option was not exercised, upon initial recognition, to designate them at fair value through other comprehensive income; - quotas of UCI (Undertakings for Collective Investment). This caption also includes the derivatives, recognised under financial assets held for trading, which are presented as assets if the fair value is positive and as liabilities if the fair value is negative. The positive and negative current values arising from transactions with the same counterparty \u2013 also between derivatives allocated to the trading book and hedging derivatives, as envisaged by the Bank of Italy Circular 262 \u2013 may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. Derivatives also include those embedded in combined financial contracts \u2013 where the host contract is a financial liability \u2013 which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through profit or loss to one of the other two categories established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through other comprehensive income). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In this case, the effective interest rate of the reclassified financial asset is determined based on its fair value at the reclassification date and that date is considered as the initial recognition date for the credit risk stage assignment for impairment purposes. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments, at disbursement date for loans and at trade date for derivative contracts. On initial recognition, financial assets measured at fair value through profit or loss are recognised at fair value, without considering transaction costs or revenues directly attributable to the instrument. Measurement criteria After initial recognition, the financial assets measured at fair value through profit or loss are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. For equities and derivative instruments that have equities as underlying assets, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate. For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on Fair Value\u201d. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 4. Hedging transactions The Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each type of hedge (both for micro hedges and macro hedges). Classification criteria: type of hedge Hedging transactions are aimed at neutralising potential losses on a specific item or group of items, attributable to a certain risk, if such a risk should actually occur. The following types of hedging transactions are used: - fair value hedge, which has the objective of covering exposure to changes in the fair value (attributable to the different risk categories) of assets and liabilities in the balance sheet, or on a portion of these, of groups of assets/liabilities, of binding commitments and portfolios of financial assets and liabilities, including core deposits, as permitted by IAS 39 endorsed by the European Commission. Fair value macro hedges are aimed at reducing fluctuations in the fair value, as a result of interest rate risk, of a sum of money flowing from a portfolio of financial assets or liabilities. Net amounts resulting from mismatches between assets and liabilities cannot be subject to macro hedges; - cash flow hedge, which has the objective of covering exposure to variability in future cash flows attributable to particular risks associated with balance sheet captions. This type of hedge is essentially used to stabilise the interest flow on floating rate funding to the extent that the latter finances fixed rate investments. In certain circumstances, similar transactions are carried out with respect to some types of floating rate investments; - hedges of net investments in foreign currency, which refer to the coverage of the risks of net investments in foreign operations expressed in their original currency. Only hedging transactions which involve counterparties outside the Group may qualify for hedge accounting. The choice made by the Group to take advantage of the possibility of continuing to fully apply the IAS 39 rules for hedging relationships means that the equity instruments classified as Financial assets measured at fair value through other comprehensive income (FVOCI) cannot be measured as hedged items for price or exchange rate risk, since these instruments are not recognised through profit or loss, not even if they are sold (except for dividends that are recognised through profit or loss). Recognition criteria Hedging derivatives, like all derivatives, are initially recognised and subsequently measured at fair value. A relationship qualifies as a hedging relationship, and is appropriately reported in the financial statements only if, all of the following conditions are met: - at the inception of the hedge, the hedging relationship is formally designated and documented, including the company\u2019s risk management objectives and strategy in undertaking the hedge. This documentation includes the identification of the hedging instrument, the item or transaction hedged, the nature of the risk being hedged, and how the entity will assess the hedging instrument\u2019s effectiveness in offsetting the exposures to changes in the fair value of the item hedged or in the cash flows attributable to the risk hedged; - the hedge is expected to be highly effective; - the planned transaction hedged, to hedge the cash flows, is highly probable and has an exposure to changes in cash flows that could have effects on the income statement; - the effectiveness of the hedge can be reliably measured; - the hedge is measured on an ongoing basis and is considered highly effective for all the financial years in which it was designated. Measurement criteria Hedging derivatives are measured at fair value. In particular: - in the case of fair value hedges, the change in the fair value of the hedged item is offset by the change in fair value of the hedging instrument. Offsetting is recognised via the registration in the income statement of the gains and losses referred to both the hedged item (with regard to the variations produced by the underlying risk factor), and the hedging instrument. Any difference, which represents the partial ineffectiveness of the hedge, is therefore the net economic effect. In case of fair value macro hedges, fair value changes related to the hedged risk of assets and liabilities in hedged portfolios are allocated to the balance sheet under caption 60. \u201cFair value change of financial assets in hedged portfolios\u201d or under caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d; - in the case of cash flow hedges, changes in fair value of the derivative are recorded in equity, for the effective portion of the hedge, and these are registered in the income statement only when, with reference to the hedged item, there is a variation in the flows to be offset or if the hedge is ineffective; - hedges of net investments in foreign currency are treated in the same way as cash flow hedges. The effectiveness of the hedge depends on the extent to which changes in the fair value of the hedged item or the relating expected cash flows are offset by those of the hedging instrument. Therefore, effectiveness is appraised by comparing the aforementioned changes, considering the intent pursued by the entity at the time in which it entered the hedging transaction. A hedge is effective when the variations in fair value (or cash flows) of the hedging financial instrument almost completely neutralise, that is within the 80-125% range, the changes in the fair value of the hedged item, for the type of risk being hedged. Effectiveness is assessed at every close of annual or interim financial statements using: - prospective tests, which justify the application of hedge accounting, since these prove the expected effectiveness of the hedge; - retrospective tests, which demonstrate the effectiveness of the hedge for the reference period, or measure how much the effective results diverge from perfect coverage. Fair value hedge accounting is discontinued prospectively in the following cases: \u2013 the hedging instrument expires or is sold, terminated, or exercised; \u2013 the hedge no longer meets the hedge accounting criteria described above; \u2013 the entity revokes the designation. If such assessments do not confirm hedge effectiveness, from that moment hedge accounting is discontinued, the derivative is reclassified in instruments held for trading and the hedged item is measured on the basis of its classification in the balance sheet. If the assets or liabilities hedged are measured at amortised cost, the higher or lower value resulting from the fair value measurement due to the hedge becoming ineffective is recognised through profit or loss, using the effective interest rate method. When a fair value macrohedging relationship is discontinued, the cumulative change in fair value losses carried under caption 60 \"Fair value change of financial assets in hedged portfolios\" or caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d are transferred to the income statement among interest income or expense over the residual life of the original hedging relationships, without prejudice to verification that the requirements have been met. An entity must discontinue cash flow hedge accounting prospectively in each of the following circumstances: a) the hedging instrument expires or is sold, terminated, or exercised (for this purpose the replacement or exchange of one hedging instrument with another hedging instrument is not a conclusion or termination if that replacement or exchange forms part of an entity\u2019s documented hedging strategy). In this case the total profit (or loss) on the hedging instrument continues to be recognised directly in shareholders\u2019 equity until the end of the reporting period in which the hedge became effective and it continues to be recognised separately until the programmed transaction, being hedged, occurs; b) the hedge no longer meets the criteria for hedge accounting. In this case the total profit or loss on the hedging instrument is recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective and continues to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs; c) it is no longer considered that the future transaction will occur, in which case any related total profit or loss on the hedging instrument recognised directly in equity starting from the reporting period in which the hedge became effective must be recognised through profit or loss; d) the entity revokes the designation. For hedges of a programmed transaction, total profits or losses on the hedging instrument recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective continue to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs or it is expected that it will no longer occur. As an exception to the provisions of IAS 39 discontinuation following an update of the documentation of the hedging relationship (due to modification of the hedged risk, the hedged underlying or the hedging derivative, or of the method for verifying hedge effectiveness) does not apply in the case of modifications required as a direct consequence of the Interest Rate Benchmark Reform (so-called IBOR Reform) and applied on equivalent economic bases. 13. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, in particular, the negative fair value of trading derivatives, as well as embedded derivatives with a negative fair value separated from liabilities measured at amortised cost. It also includes liabilities determined by short selling generated by trading of securities and certificates forming part of the trading business model. Measurement criteria All financial liabilities held for trading are measured at fair value through profit or loss. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. Insurance assets and liabilities The Intesa Sanpaolo Group has decided to exercise the option of adopting the Deferral Approach, according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39, while awaiting the entry into force of the new international financial reporting standard on insurance contracts (IFRS 17), from 1 January 2023 85 . For completeness, an outline is provided below of: - the classification and measurement criteria for the financial assets and liabilities used by the Group\u2019s insurance companies, with more details provided in Part A \u201cAccounting policies\u201d of the Notes to the consolidated financial statements of the 2017 Annual Report. However, a description has not been provided of the recognition and derecognition criteria, because they are essentially in line with the applicable provisions of IFRS 9 and IAS 39; - the approaches adopted for specific products of the insurance segment. For details of the treatment of financial statement captions of the insurance companies other than those of a financial nature, see the information provided above, as the companies of the banking group and the companies of the insurance segment use the same accounting policies. 1. Financial assets held for trading Classification criteria This category includes financial assets held for trading, essentially represented by debt securities and equities and the positive value of derivative contracts held for trading. Derivative contracts also include those embedded in combined financial instruments which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. Derivatives are stated as assets if their fair value is positive and as liabilities if their fair value is negative. The positive and negative current values arising from transactions with the same counterparty may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. The reclassifications to other categories of financial assets are not permitted unless there is an event that is unusual and highly unlikely to recur in the near term. In such cases debt securities and equities not held for trading may be reclassified into other categories established by IAS 39 if the conditions for their recognition apply (Investments held to maturity, Financial assets available for sale, Loans). The transfer value is the fair value at the time of the reclassification. On reclassification, the presence of any embedded derivative contracts, that have to be separated, is assessed. Measurement criteria After initial recognition, financial assets held for trading are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. Equities, quotas of UCI and derivatives which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value according to the guidelines listed above, are maintained at cost. 7. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities determined by short selling generated by securities trading activities. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1068": { "value": "1. Financial assets measured at fair value through profit or loss (FVTPL) Classification criteria This category contains the financial assets not classified as Financial assets measured at fair value through other comprehensive income or as Financial assets measured at amortised cost. This caption includes in particular: - financial assets held for trading, essentially consisting of debt securities and equity instruments and the positive value of derivative contracts held for trading; - financial assets mandatorily measured at fair value through profit or loss, consisting of financial assets that do not meet the requirements for measurement at amortised cost or at fair value through other comprehensive income. These are financial assets whose contractual terms do not solely envisage payments of principal and interest on the principal amount outstanding (SPPI Test not passed) or that are not held under a Hold to Collect business model or a Hold to Collect and Sell business model; - financial assets designated at fair value, i.e. financial assets that are defined as such upon initial recognition and when the conditions apply. In relation to this case, an entity may irrevocably designate a financial asset as measured at fair value through profit or loss only if it eliminates or significantly reduces a measurement inconsistency. This caption therefore includes: - debt securities and loans that are included in an Other/Trading business model (i.e., that do not come under the Hold to Collect or Hold to Collect and Sell business models) or that do not pass the SPPI Test, including the portions of syndicated loans subscribed or other types of loans that are originally intended to be sold and are not part of a Hold to Collect and Sell business model; - equity instruments \u2013 that do not qualify as investments in subsidiaries, associates or joint ventures \u2013 held for trading purposes or for which the option was not exercised, upon initial recognition, to designate them at fair value through other comprehensive income; - quotas of UCI (Undertakings for Collective Investment). This caption also includes the derivatives, recognised under financial assets held for trading, which are presented as assets if the fair value is positive and as liabilities if the fair value is negative. The positive and negative current values arising from transactions with the same counterparty \u2013 also between derivatives allocated to the trading book and hedging derivatives, as envisaged by the Bank of Italy Circular 262 \u2013 may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. Derivatives also include those embedded in combined financial contracts \u2013 where the host contract is a financial liability \u2013 which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from those measured at fair value through profit or loss to one of the other two categories established by IFRS 9 (Financial assets measured at amortised cost or Financial assets measured at fair value through other comprehensive income). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. In this case, the effective interest rate of the reclassified financial asset is determined based on its fair value at the reclassification date and that date is considered as the initial recognition date for the credit risk stage assignment for impairment purposes. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of financial assets occurs at settlement date for debt securities and equity instruments, at disbursement date for loans and at trade date for derivative contracts. On initial recognition, financial assets measured at fair value through profit or loss are recognised at fair value, without considering transaction costs or revenues directly attributable to the instrument. Measurement criteria After initial recognition, the financial assets measured at fair value through profit or loss are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. For equities and derivative instruments that have equities as underlying assets, which are not quoted on an active market, the cost approach is used as the estimate of fair value only on a residual basis and in a small number of circumstances, i.e., when all the measurement methods referred to above cannot be applied, or when there are a wide range of possible measurements of fair value, in which cost represents the most significant estimate. For more information regarding the criteria for the determination of fair value, see the Section \u201cA.4 \u2013 Information on Fair Value\u201d. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 4. Hedging transactions The Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each type of hedge (both for micro hedges and macro hedges). Classification criteria: type of hedge Hedging transactions are aimed at neutralising potential losses on a specific item or group of items, attributable to a certain risk, if such a risk should actually occur. The following types of hedging transactions are used: - fair value hedge, which has the objective of covering exposure to changes in the fair value (attributable to the different risk categories) of assets and liabilities in the balance sheet, or on a portion of these, of groups of assets/liabilities, of binding commitments and portfolios of financial assets and liabilities, including core deposits, as permitted by IAS 39 endorsed by the European Commission. Fair value macro hedges are aimed at reducing fluctuations in the fair value, as a result of interest rate risk, of a sum of money flowing from a portfolio of financial assets or liabilities. Net amounts resulting from mismatches between assets and liabilities cannot be subject to macro hedges; - cash flow hedge, which has the objective of covering exposure to variability in future cash flows attributable to particular risks associated with balance sheet captions. This type of hedge is essentially used to stabilise the interest flow on floating rate funding to the extent that the latter finances fixed rate investments. In certain circumstances, similar transactions are carried out with respect to some types of floating rate investments; - hedges of net investments in foreign currency, which refer to the coverage of the risks of net investments in foreign operations expressed in their original currency. Only hedging transactions which involve counterparties outside the Group may qualify for hedge accounting. The choice made by the Group to take advantage of the possibility of continuing to fully apply the IAS 39 rules for hedging relationships means that the equity instruments classified as Financial assets measured at fair value through other comprehensive income (FVOCI) cannot be measured as hedged items for price or exchange rate risk, since these instruments are not recognised through profit or loss, not even if they are sold (except for dividends that are recognised through profit or loss). Recognition criteria Hedging derivatives, like all derivatives, are initially recognised and subsequently measured at fair value. A relationship qualifies as a hedging relationship, and is appropriately reported in the financial statements only if, all of the following conditions are met: - at the inception of the hedge, the hedging relationship is formally designated and documented, including the company\u2019s risk management objectives and strategy in undertaking the hedge. This documentation includes the identification of the hedging instrument, the item or transaction hedged, the nature of the risk being hedged, and how the entity will assess the hedging instrument\u2019s effectiveness in offsetting the exposures to changes in the fair value of the item hedged or in the cash flows attributable to the risk hedged; - the hedge is expected to be highly effective; - the planned transaction hedged, to hedge the cash flows, is highly probable and has an exposure to changes in cash flows that could have effects on the income statement; - the effectiveness of the hedge can be reliably measured; - the hedge is measured on an ongoing basis and is considered highly effective for all the financial years in which it was designated. Measurement criteria Hedging derivatives are measured at fair value. In particular: - in the case of fair value hedges, the change in the fair value of the hedged item is offset by the change in fair value of the hedging instrument. Offsetting is recognised via the registration in the income statement of the gains and losses referred to both the hedged item (with regard to the variations produced by the underlying risk factor), and the hedging instrument. Any difference, which represents the partial ineffectiveness of the hedge, is therefore the net economic effect. In case of fair value macro hedges, fair value changes related to the hedged risk of assets and liabilities in hedged portfolios are allocated to the balance sheet under caption 60. \u201cFair value change of financial assets in hedged portfolios\u201d or under caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d; - in the case of cash flow hedges, changes in fair value of the derivative are recorded in equity, for the effective portion of the hedge, and these are registered in the income statement only when, with reference to the hedged item, there is a variation in the flows to be offset or if the hedge is ineffective; - hedges of net investments in foreign currency are treated in the same way as cash flow hedges. The effectiveness of the hedge depends on the extent to which changes in the fair value of the hedged item or the relating expected cash flows are offset by those of the hedging instrument. Therefore, effectiveness is appraised by comparing the aforementioned changes, considering the intent pursued by the entity at the time in which it entered the hedging transaction. A hedge is effective when the variations in fair value (or cash flows) of the hedging financial instrument almost completely neutralise, that is within the 80-125% range, the changes in the fair value of the hedged item, for the type of risk being hedged. Effectiveness is assessed at every close of annual or interim financial statements using: - prospective tests, which justify the application of hedge accounting, since these prove the expected effectiveness of the hedge; - retrospective tests, which demonstrate the effectiveness of the hedge for the reference period, or measure how much the effective results diverge from perfect coverage. Fair value hedge accounting is discontinued prospectively in the following cases: \u2013 the hedging instrument expires or is sold, terminated, or exercised; \u2013 the hedge no longer meets the hedge accounting criteria described above; \u2013 the entity revokes the designation. If such assessments do not confirm hedge effectiveness, from that moment hedge accounting is discontinued, the derivative is reclassified in instruments held for trading and the hedged item is measured on the basis of its classification in the balance sheet. If the assets or liabilities hedged are measured at amortised cost, the higher or lower value resulting from the fair value measurement due to the hedge becoming ineffective is recognised through profit or loss, using the effective interest rate method. When a fair value macrohedging relationship is discontinued, the cumulative change in fair value losses carried under caption 60 \"Fair value change of financial assets in hedged portfolios\" or caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d are transferred to the income statement among interest income or expense over the residual life of the original hedging relationships, without prejudice to verification that the requirements have been met. An entity must discontinue cash flow hedge accounting prospectively in each of the following circumstances: a) the hedging instrument expires or is sold, terminated, or exercised (for this purpose the replacement or exchange of one hedging instrument with another hedging instrument is not a conclusion or termination if that replacement or exchange forms part of an entity\u2019s documented hedging strategy). In this case the total profit (or loss) on the hedging instrument continues to be recognised directly in shareholders\u2019 equity until the end of the reporting period in which the hedge became effective and it continues to be recognised separately until the programmed transaction, being hedged, occurs; b) the hedge no longer meets the criteria for hedge accounting. In this case the total profit or loss on the hedging instrument is recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective and continues to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs; c) it is no longer considered that the future transaction will occur, in which case any related total profit or loss on the hedging instrument recognised directly in equity starting from the reporting period in which the hedge became effective must be recognised through profit or loss; d) the entity revokes the designation. For hedges of a programmed transaction, total profits or losses on the hedging instrument recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective continue to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs or it is expected that it will no longer occur. As an exception to the provisions of IAS 39 discontinuation following an update of the documentation of the hedging relationship (due to modification of the hedged risk, the hedged underlying or the hedging derivative, or of the method for verifying hedge effectiveness) does not apply in the case of modifications required as a direct consequence of the Interest Rate Benchmark Reform (so-called IBOR Reform) and applied on equivalent economic bases. 13. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, in particular, the negative fair value of trading derivatives, as well as embedded derivatives with a negative fair value separated from liabilities measured at amortised cost. It also includes liabilities determined by short selling generated by trading of securities and certificates forming part of the trading business model. Measurement criteria All financial liabilities held for trading are measured at fair value through profit or loss. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. Insurance assets and liabilities The Intesa Sanpaolo Group has decided to exercise the option of adopting the Deferral Approach, according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39, while awaiting the entry into force of the new international financial reporting standard on insurance contracts (IFRS 17), from 1 January 2023 85 . For completeness, an outline is provided below of: - the classification and measurement criteria for the financial assets and liabilities used by the Group\u2019s insurance companies, with more details provided in Part A \u201cAccounting policies\u201d of the Notes to the consolidated financial statements of the 2017 Annual Report. However, a description has not been provided of the recognition and derecognition criteria, because they are essentially in line with the applicable provisions of IFRS 9 and IAS 39; - the approaches adopted for specific products of the insurance segment. For details of the treatment of financial statement captions of the insurance companies other than those of a financial nature, see the information provided above, as the companies of the banking group and the companies of the insurance segment use the same accounting policies. 1. Financial assets held for trading Classification criteria This category includes financial assets held for trading, essentially represented by debt securities and equities and the positive value of derivative contracts held for trading. Derivative contracts also include those embedded in combined financial instruments which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. Derivatives are stated as assets if their fair value is positive and as liabilities if their fair value is negative. The positive and negative current values arising from transactions with the same counterparty may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. The reclassifications to other categories of financial assets are not permitted unless there is an event that is unusual and highly unlikely to recur in the near term. In such cases debt securities and equities not held for trading may be reclassified into other categories established by IAS 39 if the conditions for their recognition apply (Investments held to maturity, Financial assets available for sale, Loans). The transfer value is the fair value at the time of the reclassification. On reclassification, the presence of any embedded derivative contracts, that have to be separated, is assessed. Measurement criteria After initial recognition, financial assets held for trading are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. Equities, quotas of UCI and derivatives which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value according to the guidelines listed above, are maintained at cost. 7. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities determined by short selling generated by securities trading activities. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1070": { "value": "3. Financial assets measured at amortised cost Classification criteria This category includes the financial assets (in particular loans and debt securities) that meet both the following conditions: - the financial asset is held under a business model whose objective is achieved through the collection of expected contractual cash flows (Hold to Collect business model), and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI Test\u201d passed). More specifically, the following are recognised in this caption: - loans to banks in their various forms that meet the requirements referred to above; - loans to customers in their various forms that meet the requirements referred to above; - debt securities that meet the requirements referred to above. This category also includes the operating loans and receivables connected to the provision of financial activities and services as defined by the Consolidated Law on Banking and the Consolidated Law on Finance (e.g. for the distribution of financial products and servicing activities). According to the general rules established by IFRS 9 on the reclassification of financial assets, reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. In such cases, which are expected to be highly infrequent, the financial assets may be reclassified from the amortised cost category to one of the other two categories established by IFRS 9 (Financial assets measured at fair value through other comprehensive income or Financial assets measured at fair value through profit or loss). The transfer value is the fair value at the time of the reclassification and the effects of the reclassification apply prospectively from the reclassification date. Gains and losses resulting from the difference between the amortised cost of a financial asset and its fair value are recognised through profit or loss in the event of reclassification to Financial assets measured at fair value through profit or loss and under Shareholders\u2019 equity, in the specific valuation reserve, in the event of reclassification to Financial assets measured at fair value through other comprehensive income. For more information regarding the classification criteria for the financial instruments see the paragraph below \u201cClassification drivers for the financial assets\u201d. Recognition criteria Initial recognition of the financial asset occurs at settlement date for debt securities and at disbursement date for loans. On initial recognition, assets are recorded at fair value, including transaction costs and revenues directly attributable to the instrument. In particular, for loans, the disbursement date is usually the same as the date of signing of the contract. Should this not be the case, a commitment to disburse funds is made along with the subscription of the contract, which will cease to exist upon disbursement of the loan. The loan is recognised based on its fair value, equal to the amount disbursed or subscription price, inclusive of the costs/revenues directly attributable to the single loan and determinable from inception, even when settled at a later date. Costs that, even with the aforementioned characteristics, are reimbursed by the borrower or are classifiable as normal internal administrative costs are excluded. Repurchase agreements and reverse repurchase agreements are recognised as funding or lending transactions. Specifically, repurchase agreements are recognised as payables for the spot amount received, whereas reverse repurchase agreements are recognised as receivables for the spot amount paid. Measurement criteria After the initial recognition, these financial assets are measured at amortised cost, using the effective interest method. The assets are recognised in the balance sheet at an amount equal to their initial carrying amount less principal repayments, plus or minus the cumulative amortisation (calculated using the effective interest method) of the difference between this initial amount and the amount at maturity (typically attributable to costs/income directly attributable to the individual asset) and adjusted by any provision for losses. The effective interest rate is the rate that exactly discounts estimated future cash payments of the asset, as principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to that financial asset. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/income directly attributable to a financial asset over its expected lifetime. The amortised cost method is not used for assets, measured at historical cost, whose short duration makes the effect of discounting negligible, or for assets without a definite maturity or revocable loans. The measurement criteria, as described in more detail in the paragraph \u201cImpairment of financial assets\u201d, are closely linked to the inclusion of these instruments in one of the three stages of credit risk established by IFRS 9, the last of which (Stage 3) consists of non-performing financial assets and the remaining (Stages 1 and 2) of performing financial assets. With regard to the accounting representation of the above measurement effects, the adjustments for this type of asset are recognised in profit or loss: - on initial recognition, for an amount equal to the 12-month expected credit loss; - on subsequent measurement of the asset, when the credit risk has not increased significantly since initial recognition, in relation to changes in the amount of adjustments for the 12-month expected credit losses; - on subsequent measurement of the asset, when the credit risk has increased significantly since initial recognition, in relation to the recognition of adjustments for expected credit losses over the contractually agreed remaining lifetime of the asset; - on subsequent measurement of the asset, where \u2013 after a significant increase in credit risk has occurred since initial recognition \u2013 the increase is no longer \u201csignificant\u201d due to the alignment of the cumulative value adjustments to take account of the change from a lifetime expected credit loss to a 12-month expected credit loss for the instrument. These financial assets, when they are performing, are subject to an assessment, aimed at establishing the value adjustments to be recognised in the financial statements, at the level of individual loan (or \u201ctranches\u201d of securities), according to the risk parameters consisting of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), derived from the AIRB models, and duly adjusted to take account of the provisions of IFRS 9. If, in addition to a significant increase in credit risk, there is also objective evidence of impairment, the amount of the loss is measured as the difference between the carrying amount of the asset \u2013 classified as \u201cnon-performing\u201d, like all the other relationships with the same counterparty \u2013 and the present value of the estimated future cash flows, discounted using the original effective interest rate. The amount of the loss, to be recognised through profit or loss, is established based on individual measurement or determined according to uniform categories and, then, individually allocated to each position, and, as detailed in the paragraph \u201cImpairment of financial assets\u201d, takes account of forward-looking information and possible alternative recovery scenarios. Non-performing assets include financial assets classified as bad, unlikely-to-pay or past due by over ninety days according to the rules issued by the Bank of Italy, in line with the IAS/IFRS and EU Supervisory Regulations. The expected cash flows take into account the expected recovery times and the estimated realisable value of any guarantees. The original effective rate of each asset remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment with time value effects are recognised in net interest income. In some cases, during the lifetime of these financial assets, and of loans in particular, the original contractual conditions may be subsequently modified by the parties to the contract. When the contractual clauses are subject to change during the lifetime of an instrument, it is necessary to verify whether the original asset should continue to be recognised in the balance sheet or whether, instead, the original instrument needs to be derecognised and a new financial instrument needs to be recognised. In general, changes to a financial asset lead to its derecognition and the recognition of a new asset when they are \u201csubstantial\u201d. The assessment of the \u201csubstantial nature\u201d of the change must be made using both qualitative and quantitative information. In some cases, in fact, it may be clear, without resorting to complex analysis, that the changes introduced substantially modify the characteristics and/or contractual flows of a particular asset while, in other cases, further analysis (including quantitative analysis) will need to be carried out to assess the effects of the changes and verify whether or not to derecognise the asset and recognise a new financial instrument. The qualitative and quantitative analyses aimed at defining the \u201csubstantial nature\u201d of contractual changes made to a financial asset must therefore consider: - the purposes for which the changes were made: e.g. renegotiations for commercial reasons and forbearance measures due to financial difficulties of the counterparty: o the former, aimed at \u201cretaining\u201d the customer, involve a borrower that is not in financial difficulty. This category includes all renegotiations aimed at aligning the cost of the debt to market conditions. These operations involve a change in the original conditions of the contract, usually requested by the borrower and relating to aspects concerning the cost of the debt, with a consequent economic benefit for the borrower. In general, whenever the bank carries out a renegotiation to avoid losing its customer, that renegotiation should be considered as substantial because, if it were not carried out, the customer could borrow from another intermediary and the bank would incur a decrease in expected future revenues; o the latter, carried out for \u201creasons of credit risk\u201d (forbearance measures), relate to the bank\u2019s attempt to maximise the recovery of the cash flows of the original loan. The underlying risks and rewards, following the changes, are not normally substantially transferred and, consequently, the accounting representation that provides the most relevant information for the readers of the financial statements (apart from the triggers discussed below) is \u201cmodification accounting\u201d \u2013 which involves the recognition through profit or loss of the difference between the carrying value and the present value of the modified cash flows discounted at the original interest rate \u2013 rather than derecognition; - the presence of specific triggers that affect the contractual characteristics and/or cash flows of the financial instrument (such as, for example, a change in currency or a modification of the type of risk the financial instrument is exposed to, when correlated to equity and commodity parameters), which are considered to result in derecognition due to their impact (expected to be significant) on the original contractual cash flows. Conversely, the amendments to financial assets following the Interest Rate Benchmark Reform (so-called IBOR Reform), relating to the change in the basis for determining contractual cash flows (the replacement of the existing interest rate benchmark with an alternative benchmark rate), do not constitute a derecognition event, but are to be considered a modification from an accounting standpoint. Such amendments, if made as a direct consequence of the IBOR Reform and applied on equivalent economic bases, are represented with a prospective adjustment of the effective interest rate - by applying paragraph B5.4.5 of IFRS 9 instead of modification accounting, with impacts on net interest income in future periods. Derecognition criteria Financial assets are derecognised solely if the sale leads to the substantial transfer of all the risks and rewards connected to the assets. Conversely, if a significant part of the risks and rewards relative to the disposed financial assets is maintained, they continue to be recorded in the financial statements, even though their title has been transferred. When it is not possible to ascertain the substantial transfer of risks and rewards, the financial assets are derecognised where no control over the assets has been maintained. If this is not the case, when control, even partial, is maintained, the assets continue to be recognised for the entity\u2019s continuing involvement, measured by the exposure to changes in value of assets sold and to variations in the relevant cash flows. Lastly, disposed financial assets are derecognised if the entity retains the contractual rights to receive the cash flows of the asset, but signs a simultaneous obligation to pay such cash flows, and only such cash flows, without significant delay to third parties. 12. Financial liabilities measured at amortised cost Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in lease transactions. Recognition criteria Initial recognition of these financial liabilities occurs at the date of subscription of the contract, which usually coincides with the time of collection of the sums deposited or the issue of debt securities. Initial recognition is based on the fair value of the liabilities, normally equal to the amount collected or the issue price, increased by any additional charges/revenues directly attributable to the single funding or issuing transaction. Internal administrative costs are excluded. Lease payables are recognised at the present value of the future lease payments, discounted using the implicit interest rate of the transaction or, where it cannot be determined, the marginal financing rate. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. Lease payables are remeasured when there is a lease modification (e.g. a change in the contract which is not accounted for/considered as a separate contract); the effect of the remeasurement will be a corresponding adjustment to the right-of-use asset. Derecognition criteria Financial liabilities are derecognised from the balance sheet when they have expired or extinguished. Derecognition also occurs for repurchase of previously-issued bonds. The difference between book value of the liability and amount paid for repurchase is recorded in the income statement. Placement of own securities, after their repurchase, is considered a new issue with recognition at the new placement price. 4. Loans Classification criteria Loans include loans to customers and due from banks, both disbursed directly and acquired from third parties, which entail fixed or in any case determinable payments, which are not quoted on an active market and which are not classified at inception in Financial assets available for sale. The caption Loans also includes commercial loans, repurchase agreements with the obligation to resell at a later date, and securities underwritten at issue or via private placements, with determined or determinable payments, not quoted in active markets. Reclassifications to the other categories of financial assets established in IAS 39 are not permitted. Measurement criteria After initial recognition, loans are measured at amortised cost, equal to initial value increased/decreased by principal repayments, adjustments/recoveries and amortisation \u2013 calculated applying the effective interest method \u2013 of the difference between amount disbursed and amount to be reimbursed at maturity, typically attributable to the costs/revenues directly connected to the single loan. The effective interest rate is the rate that exactly discounts estimated future cash payments of the loan, for principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to the loan. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/revenues through the expected residual maturity of the loan. The amortised cost method is not used for loans whose short maturity implies that the application of the discounting approach leads to immaterial effects. Such loans are recorded at historical cost. An analogous measurement criterion is applied to loans with unspecified maturity or with notice period. Loans are reassessed for the purpose of identifying those which, due to events occurred after initial recognition, show objective evidence of possible impairment. These include bad loans, unlikely-to-pay or past due loans according to the rules issued by the Bank of Italy, consistent with IAS/IFRS and EU supervisory regulations. Non-performing loans undergo an individual measurement process, or the calculation of the expected loss for homogeneous categories and analytical allocation to each position, and the amount of the adjustment of each loan is the difference between its carrying value at the time of measurement (amortised cost) and the present value of expected future cash flows, discounted using the original effective interest rate. Expected cash flows consider forecast recovery periods, presumed realisable value of guarantees as well as the costs sustained for the recovery of credit exposure. The original effective rate of each loan remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. The impairment loss is recorded in the income statement. The original value of loans is reinstated in subsequent periods to the extent that the reasons which had led to the impairment cease to exist, provided that such valuation is objectively attributed to an event which occurred subsequent to the impairment. The recovery is recorded in the income statement and must not lead the carrying amount of the loan to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment include time value effects. Loans for which no objective evidence of loss has emerged from individual measurement are subject to measurement of a collective adjustment. Such measurement occurs for homogeneous loan categories in terms of credit risk and the relative loss percentages are estimated considering past time series and other objective elements observable at measurement date, which enable the latent loss to be estimated for each loan category. Measurement also considers the risk connected to the borrower\u2019s country of residence. Collective adjustments are recorded in the income statement. 6. Payables and securities issued Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in finance lease transactions. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRepurchaseAndReverseRepurchaseAgreementsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-943": { "value": "4. Hedging transactions The Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each type of hedge (both for micro hedges and macro hedges). Classification criteria: type of hedge Hedging transactions are aimed at neutralising potential losses on a specific item or group of items, attributable to a certain risk, if such a risk should actually occur. The following types of hedging transactions are used: - fair value hedge, which has the objective of covering exposure to changes in the fair value (attributable to the different risk categories) of assets and liabilities in the balance sheet, or on a portion of these, of groups of assets/liabilities, of binding commitments and portfolios of financial assets and liabilities, including core deposits, as permitted by IAS 39 endorsed by the European Commission. Fair value macro hedges are aimed at reducing fluctuations in the fair value, as a result of interest rate risk, of a sum of money flowing from a portfolio of financial assets or liabilities. Net amounts resulting from mismatches between assets and liabilities cannot be subject to macro hedges; - cash flow hedge, which has the objective of covering exposure to variability in future cash flows attributable to particular risks associated with balance sheet captions. This type of hedge is essentially used to stabilise the interest flow on floating rate funding to the extent that the latter finances fixed rate investments. In certain circumstances, similar transactions are carried out with respect to some types of floating rate investments; - hedges of net investments in foreign currency, which refer to the coverage of the risks of net investments in foreign operations expressed in their original currency. Only hedging transactions which involve counterparties outside the Group may qualify for hedge accounting. The choice made by the Group to take advantage of the possibility of continuing to fully apply the IAS 39 rules for hedging relationships means that the equity instruments classified as Financial assets measured at fair value through other comprehensive income (FVOCI) cannot be measured as hedged items for price or exchange rate risk, since these instruments are not recognised through profit or loss, not even if they are sold (except for dividends that are recognised through profit or loss). Recognition criteria Hedging derivatives, like all derivatives, are initially recognised and subsequently measured at fair value. A relationship qualifies as a hedging relationship, and is appropriately reported in the financial statements only if, all of the following conditions are met: - at the inception of the hedge, the hedging relationship is formally designated and documented, including the company\u2019s risk management objectives and strategy in undertaking the hedge. This documentation includes the identification of the hedging instrument, the item or transaction hedged, the nature of the risk being hedged, and how the entity will assess the hedging instrument\u2019s effectiveness in offsetting the exposures to changes in the fair value of the item hedged or in the cash flows attributable to the risk hedged; - the hedge is expected to be highly effective; - the planned transaction hedged, to hedge the cash flows, is highly probable and has an exposure to changes in cash flows that could have effects on the income statement; - the effectiveness of the hedge can be reliably measured; - the hedge is measured on an ongoing basis and is considered highly effective for all the financial years in which it was designated. Measurement criteria Hedging derivatives are measured at fair value. In particular: - in the case of fair value hedges, the change in the fair value of the hedged item is offset by the change in fair value of the hedging instrument. Offsetting is recognised via the registration in the income statement of the gains and losses referred to both the hedged item (with regard to the variations produced by the underlying risk factor), and the hedging instrument. Any difference, which represents the partial ineffectiveness of the hedge, is therefore the net economic effect. In case of fair value macro hedges, fair value changes related to the hedged risk of assets and liabilities in hedged portfolios are allocated to the balance sheet under caption 60. \u201cFair value change of financial assets in hedged portfolios\u201d or under caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d; - in the case of cash flow hedges, changes in fair value of the derivative are recorded in equity, for the effective portion of the hedge, and these are registered in the income statement only when, with reference to the hedged item, there is a variation in the flows to be offset or if the hedge is ineffective; - hedges of net investments in foreign currency are treated in the same way as cash flow hedges. The effectiveness of the hedge depends on the extent to which changes in the fair value of the hedged item or the relating expected cash flows are offset by those of the hedging instrument. Therefore, effectiveness is appraised by comparing the aforementioned changes, considering the intent pursued by the entity at the time in which it entered the hedging transaction. A hedge is effective when the variations in fair value (or cash flows) of the hedging financial instrument almost completely neutralise, that is within the 80-125% range, the changes in the fair value of the hedged item, for the type of risk being hedged. Effectiveness is assessed at every close of annual or interim financial statements using: - prospective tests, which justify the application of hedge accounting, since these prove the expected effectiveness of the hedge; - retrospective tests, which demonstrate the effectiveness of the hedge for the reference period, or measure how much the effective results diverge from perfect coverage. Fair value hedge accounting is discontinued prospectively in the following cases: \u2013 the hedging instrument expires or is sold, terminated, or exercised; \u2013 the hedge no longer meets the hedge accounting criteria described above; \u2013 the entity revokes the designation. If such assessments do not confirm hedge effectiveness, from that moment hedge accounting is discontinued, the derivative is reclassified in instruments held for trading and the hedged item is measured on the basis of its classification in the balance sheet. If the assets or liabilities hedged are measured at amortised cost, the higher or lower value resulting from the fair value measurement due to the hedge becoming ineffective is recognised through profit or loss, using the effective interest rate method. When a fair value macrohedging relationship is discontinued, the cumulative change in fair value losses carried under caption 60 \"Fair value change of financial assets in hedged portfolios\" or caption 50. \u201cFair value change of financial liabilities in hedged portfolios\u201d are transferred to the income statement among interest income or expense over the residual life of the original hedging relationships, without prejudice to verification that the requirements have been met. An entity must discontinue cash flow hedge accounting prospectively in each of the following circumstances: a) the hedging instrument expires or is sold, terminated, or exercised (for this purpose the replacement or exchange of one hedging instrument with another hedging instrument is not a conclusion or termination if that replacement or exchange forms part of an entity\u2019s documented hedging strategy). In this case the total profit (or loss) on the hedging instrument continues to be recognised directly in shareholders\u2019 equity until the end of the reporting period in which the hedge became effective and it continues to be recognised separately until the programmed transaction, being hedged, occurs; b) the hedge no longer meets the criteria for hedge accounting. In this case the total profit or loss on the hedging instrument is recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective and continues to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs; c) it is no longer considered that the future transaction will occur, in which case any related total profit or loss on the hedging instrument recognised directly in equity starting from the reporting period in which the hedge became effective must be recognised through profit or loss; d) the entity revokes the designation. For hedges of a programmed transaction, total profits or losses on the hedging instrument recognised directly in shareholders\u2019 equity starting from the reporting period in which the hedge became effective continue to be recognised separately in shareholders\u2019 equity until the programmed transaction occurs or it is expected that it will no longer occur. As an exception to the provisions of IAS 39 discontinuation following an update of the documentation of the hedging relationship (due to modification of the hedged risk, the hedged underlying or the hedging derivative, or of the method for verifying hedge effectiveness) does not apply in the case of modifications required as a direct consequence of the Interest Rate Benchmark Reform (so-called IBOR Reform) and applied on equivalent economic bases. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-944": { "value": "6. Property and equipment Classification criteria Property and equipment include land, owner-occupied property, investment property, valuable art assets, technical plants, furniture and fittings and any type of equipment that are expected to be used during more than one period. Property and equipment held for use in the production or supply of goods and services are classified as \u201cProperty and equipment used in operations\u201d, in accordance with IAS 16. Real estate owned for investment purposes (to obtain rental income or gains on the capital invested) is classified as \u201cInvestment property\u201d based on IAS 40. This caption also includes property and equipment classified in accordance with IAS 2 - Inventories, which refer both to assets resulting from the enforcement of guarantees or from purchase at auction that the company intends to sell in the near future, without carrying out major renovation work, and which do not meet the requirements for classification in the previous categories, and to the real estate portfolio of the Group\u2019s real estate companies, including building sites, properties under construction, properties completed for sale and real estate development initiatives, held for sale. Finally, this caption also includes the rights of use acquired through leases and relating to the use of an item of property and equipment (for the lessee companies) and the assets leased under operating leases (for the lessor companies). Recognition criteria Property and equipment are initially measured at cost which comprises in addition to their purchase price any costs directly attributable to the purchase and required for them to be operational. Extraordinary maintenance expenses which lead to a rise in future economic benefits are attributed to increase the value of assets, while other ordinary maintenance costs are recorded in the income statement. Measurement criteria Property and equipment are measured at cost, net of depreciation and impairment losses, except for owner-occupied properties and valuable art assets, which are measured according to the revaluation model. The investment properties are measured with the fair value method. For the property and equipment subject to assessment according to the revaluation model: - if the carrying value of an asset is increased following a revaluation, the increase must be recognised in the Statement of comprehensive income and accumulated in the shareholders\u2019 equity under the caption revaluation reserve; conversely, in the case where an impairment loss on the same asset recognised previously in the income statement is recovered, it must be recognised as income; - if the carrying value of an asset is decreased following the revaluation, the decrease must be recognised in the Statement of comprehensive income to the extent in which there are possible credit balances in the revaluation reserve referring to this asset; otherwise, this reduction is recorded in the income statement. Property and equipment are systematically depreciated, adopting the straight-line method over their useful life. The depreciable amount is the cost of the goods (or the net value recalculated if the method adopted for the valuation is the revaluation model) net of the residual value at the end of the depreciation period, if significant. Buildings are depreciated for a portion deemed to be suitable to represent their deterioration over time following their use, considering extraordinary maintenance expenses, which are recognised in the carrying value of the assets. In order to determine the useful life of the various types of assets and the corresponding depreciation rates, the Group\u2019s real estate assets have been divided into four clusters: (i) historical properties (useful life of 65 years), (ii) Entire buildings (useful life of 33 years), (iii) Banking branches (useful life of 20 years) and (iv) Other properties (useful life of 20 years). These clusters do not include the New Intesa Sanpaolo Headquarters in Turin, for which the useful life was estimated through a specific analysis which considered the innovative characteristics of the work, featuring strategic importance and extensive architectonic value, built using complex technologies, and having few, or even zero peers not only within the Group\u2019s real estate assets but also in general. Other property and equipment is depreciated based on the following useful lives: furniture from 5 to 10 years, plants from 4 to 10 years, hardware and IT equipment for a period from 4 to 8 years and, lastly, other assets from 3 to 13 years. The following are not depreciated: - land, irrespective of whether acquired individually or embedded in the value of buildings, since it has an indefinite useful life; - the valuable art assets, the other historical, artistic and decorative assets, since their useful life cannot be estimated and their value is normally destined to increase over time; - the investment properties, as required by IAS 40, are measured at fair value through profit or loss and therefore they must not be depreciated. If there is some evidence that property and equipment measured at cost may have been impaired, the carrying amount of the asset and its recoverable amount are compared. Any impairment losses are recorded in the income statement. If the reasons for impairment cease to exist, a value recovery is recorded and may not exceed the value that the asset would have had, net of depreciation, determined in the absence of previous impairment losses. With regard to the property and equipment recognised in accordance with IAS 2, these are measured at the lesser of cost and net realisable value, without prejudice to the comparison between the asset\u2019s carrying amount and its recoverable amount where there is an indication that the asset may have been impaired. Any impairment losses are recorded in the income statement. Property and equipment consisting of the right-of-use of assets subject to leases According to IFRS 16, a lease is a contract or part of a contract that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. According to IFRS 16, leases are accounted for on the basis of the right of use model, where, at the initial date, the lessee has a financial obligation to make payments due to the lessor to compensate for its right of use of the underlying asset during the lease term. When the asset is made available to the lessee for use (initial date), the lessee recognises both the liability and the asset consisting of the right of use. In particular, the right of use acquired with a lease is measured as the sum of the present value of the future payments over the term of the contract, the lease payments made at or before the commencement date, the lease incentives received, if any, the initial direct costs and any estimated costs of dismantling or restoring the underlying asset. The financial liability recognised corresponds to the present value of the payments to be made for the lease. With regard to the discount rate, based on the requirements of IFRS 16, the Group uses the implicit interest rate for each lease contract, when it is available. For leases from the lessee\u2019s point of view, in some cases, for example for rental agreements, the implicit interest rate cannot always be readily determined without using estimates and assumptions (the lessee does not have enough information about the unguaranteed residual value of the leased asset). In these cases, the Group has developed a methodology for setting the incremental interest rate as an alternative to the implicit interest rate and has decided to adopt the Funds Transfer Pricing (FTP) method. This is based on an unsecured and amortising rate curve, which envisages lease payments for the lease contract that are typically constant over the lease term, rather than a single payment upon maturity. The FTP method takes into account the creditworthiness of the lessee, the term of the lease, as well as the economic environment in which the transaction takes place and is therefore in line with the requirements of the standard. The lease term is determined taking into account: - periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; - periods covered by an option to terminate the lease if the lessee is reasonably certain to exercise that option. During the course of the lease term a lessee shall: - measure the right-of-use at cost less accumulated depreciation and accumulated impairment losses determined and recognised based on the provisions of IAS 36 \u201cImpairment of assets\u201d, adjusted to take account of any remeasurement of the lease liability; - increase the liability arising from the lease following the accrual of interest expense calculated at the interest rate implicit in the lease or alternatively at the incremental borrowing rate, and decrease it for payments of principal and interest made. If changes are made to the lease payments, then the lease liability must be remeasured and the impact of the remeasurement of the liability is recognised against the right-of-use asset. Derecognition criteria Property and equipment are derecognised from the balance sheet on disposal or when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal. 7. Intangible assets Classification criteria Intangible assets consist of goodwill and other intangible assets governed by IAS 38. They may include the rights of use acquired under a lease and relating to the use of an intangible asset (for lessees) and assets leased under an operating lease (for lessors). Intangible assets are recognised as such if they may be identified and stem from legal or contractual rights. Intangible assets include goodwill, which represents the positive difference between purchase price and fair value of assets and liabilities pertaining to the acquired company. Recognition and measurement criteria Intangible assets are recognised at cost, adjusted for any accessory charges only if it is probable that the future economic benefits attributable to the assets will be realised and if the cost of the asset may be reliably determined. If this is not the case, the cost of the intangible asset is recorded in the income statement in the year in which it was incurred. For assets with finite useful life, the cost is amortised on a straight-line basis or in decreasing portions determined on the basis of the economic benefits expected from the asset. Assets with indefinite useful life are not subject to systematic amortisation, but are periodically subjected to impairment testing. If there is any indication that an asset may have suffered impairment losses, the asset\u2019s recoverable amount is estimated. The impairment loss, which is recorded in the income statement, is equal to the difference between the carrying value of the assets and the recoverable amount. In particular, intangible assets include: - Technology-related intangible assets, such as software applications, which are amortised on the basis of their expected technological obsolescence and over a maximum period of seven years. An exception is the core banking system platforms, whose useful life is estimated on a case-by-case basis, and, as a result, amortised over longer periods (from 10 to 15 years). Moreover, the costs incurred for the development of software are considered as intangible assets and are recognised under assets only when all the following conditions are met: i) the cost attributable to the intangible asset during its development can be measured reliably, ii) there is the intention, the availability of financial resources and the technical ability of making the intangible asset available for use or sale, iii) the future economic benefits to be generated by the asset can be demonstrated. Software development capitalised costs only comprise the costs directly attributable to the development process. Capitalised software development costs are amortised systematically over the estimated useful life of the relevant product/service so as to reflect the pattern in which the asset\u2019s future economic benefits are expected to be consumed by the entity from the beginning of production over the product's estimated life; - customer-related intangibles generally represented, in business combinations, by asset management relations, non- financial activities related to provision of services and insurance portfolios. Such assets, with a finite life, are originally measured by the discounting, using a rate representing the time value of money and the asset\u2019s specific risks, of the income margins on the ongoing relations at the time of the business combination over a period which expresses their residual, contractual or estimated life. For asset management relations and non-financial activities related to provision of services, they are amortised on a straight-line basis over the period of greater significance of the expected economic benefits in case of relations which do not have a predetermined duration and, for relations from insurance contracts, generally in decreasing portions corresponding to the duration of the contract in case of relations with predetermined expiry (residual lives of the policies); - marketing-related intangibles represented by the measurement of the brand name which is also recorded at the time of business combinations. This asset is considered as having indefinite life since it is deemed to contribute for an indefinite period of time to the formation of income flows. Lastly, intangible assets include goodwill. With respect to business combinations, goodwill may be recorded when the positive difference between the consideration transferred and the fair value recognition, if any, of minority interests, and the fair value of shareholders\u2019 equity acquired is representative of the future income-generation potential of the equity investment. If this difference is negative (badwill) or if goodwill may not be attributed considering future income-generation potential of the equity investments, the same difference is directly recorded in the income statement. Once a year (or every time that there is evidence of impairment losses), an impairment test is carried out for goodwill. This requires the identification of the Cash Generating Unit (or CGU) to which goodwill is allocated. The cash-generating units of the Intesa Sanpaolo Group correspond to the operating divisions presented in segment reporting. Any impairment losses are determined on the basis of the difference between the recognition value of goodwill and its recoverable amount, if lower. The recoverable amount is equal to the higher between the fair value of the cash-generating unit, less any cost to sell, and the relative value in use. The consequent adjustments are posted in the income statement. With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill allocated, then an independent and specific valuation is made of the intangible on the basis of the fair value certified by the appraisal of an independent expert. If the fair value of the brand name is not higher than its carrying amount, the recoverable amount of the CGU is estimated, calculated based on future cash flows. It is also noted that, where a CGU which is allocated both goodwill and a brand name has a value in use lower than the carrying amount, by an amount that exceeds the total value of the intangibles with indefinite life allocated, without prejudice to the full write-down of goodwill, an autonomous valuation of the brand name is carried out based on the fair value stated in the specific appraisal. Derecognition criteria Intangible assets are derecognised from the balance sheet on disposal and if no future economic benefits are expected. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-984": { "value": "6. Property and equipment Classification criteria Property and equipment include land, owner-occupied property, investment property, valuable art assets, technical plants, furniture and fittings and any type of equipment that are expected to be used during more than one period. Property and equipment held for use in the production or supply of goods and services are classified as \u201cProperty and equipment used in operations\u201d, in accordance with IAS 16. Real estate owned for investment purposes (to obtain rental income or gains on the capital invested) is classified as \u201cInvestment property\u201d based on IAS 40. This caption also includes property and equipment classified in accordance with IAS 2 - Inventories, which refer both to assets resulting from the enforcement of guarantees or from purchase at auction that the company intends to sell in the near future, without carrying out major renovation work, and which do not meet the requirements for classification in the previous categories, and to the real estate portfolio of the Group\u2019s real estate companies, including building sites, properties under construction, properties completed for sale and real estate development initiatives, held for sale. Finally, this caption also includes the rights of use acquired through leases and relating to the use of an item of property and equipment (for the lessee companies) and the assets leased under operating leases (for the lessor companies). Recognition criteria Property and equipment are initially measured at cost which comprises in addition to their purchase price any costs directly attributable to the purchase and required for them to be operational. Extraordinary maintenance expenses which lead to a rise in future economic benefits are attributed to increase the value of assets, while other ordinary maintenance costs are recorded in the income statement. Measurement criteria Property and equipment are measured at cost, net of depreciation and impairment losses, except for owner-occupied properties and valuable art assets, which are measured according to the revaluation model. The investment properties are measured with the fair value method. For the property and equipment subject to assessment according to the revaluation model: - if the carrying value of an asset is increased following a revaluation, the increase must be recognised in the Statement of comprehensive income and accumulated in the shareholders\u2019 equity under the caption revaluation reserve; conversely, in the case where an impairment loss on the same asset recognised previously in the income statement is recovered, it must be recognised as income; - if the carrying value of an asset is decreased following the revaluation, the decrease must be recognised in the Statement of comprehensive income to the extent in which there are possible credit balances in the revaluation reserve referring to this asset; otherwise, this reduction is recorded in the income statement. Property and equipment are systematically depreciated, adopting the straight-line method over their useful life. The depreciable amount is the cost of the goods (or the net value recalculated if the method adopted for the valuation is the revaluation model) net of the residual value at the end of the depreciation period, if significant. Buildings are depreciated for a portion deemed to be suitable to represent their deterioration over time following their use, considering extraordinary maintenance expenses, which are recognised in the carrying value of the assets. In order to determine the useful life of the various types of assets and the corresponding depreciation rates, the Group\u2019s real estate assets have been divided into four clusters: (i) historical properties (useful life of 65 years), (ii) Entire buildings (useful life of 33 years), (iii) Banking branches (useful life of 20 years) and (iv) Other properties (useful life of 20 years). These clusters do not include the New Intesa Sanpaolo Headquarters in Turin, for which the useful life was estimated through a specific analysis which considered the innovative characteristics of the work, featuring strategic importance and extensive architectonic value, built using complex technologies, and having few, or even zero peers not only within the Group\u2019s real estate assets but also in general. Other property and equipment is depreciated based on the following useful lives: furniture from 5 to 10 years, plants from 4 to 10 years, hardware and IT equipment for a period from 4 to 8 years and, lastly, other assets from 3 to 13 years. The following are not depreciated: - land, irrespective of whether acquired individually or embedded in the value of buildings, since it has an indefinite useful life; - the valuable art assets, the other historical, artistic and decorative assets, since their useful life cannot be estimated and their value is normally destined to increase over time; - the investment properties, as required by IAS 40, are measured at fair value through profit or loss and therefore they must not be depreciated. If there is some evidence that property and equipment measured at cost may have been impaired, the carrying amount of the asset and its recoverable amount are compared. Any impairment losses are recorded in the income statement. If the reasons for impairment cease to exist, a value recovery is recorded and may not exceed the value that the asset would have had, net of depreciation, determined in the absence of previous impairment losses. With regard to the property and equipment recognised in accordance with IAS 2, these are measured at the lesser of cost and net realisable value, without prejudice to the comparison between the asset\u2019s carrying amount and its recoverable amount where there is an indication that the asset may have been impaired. Any impairment losses are recorded in the income statement. Property and equipment consisting of the right-of-use of assets subject to leases According to IFRS 16, a lease is a contract or part of a contract that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. According to IFRS 16, leases are accounted for on the basis of the right of use model, where, at the initial date, the lessee has a financial obligation to make payments due to the lessor to compensate for its right of use of the underlying asset during the lease term. When the asset is made available to the lessee for use (initial date), the lessee recognises both the liability and the asset consisting of the right of use. In particular, the right of use acquired with a lease is measured as the sum of the present value of the future payments over the term of the contract, the lease payments made at or before the commencement date, the lease incentives received, if any, the initial direct costs and any estimated costs of dismantling or restoring the underlying asset. The financial liability recognised corresponds to the present value of the payments to be made for the lease. With regard to the discount rate, based on the requirements of IFRS 16, the Group uses the implicit interest rate for each lease contract, when it is available. For leases from the lessee\u2019s point of view, in some cases, for example for rental agreements, the implicit interest rate cannot always be readily determined without using estimates and assumptions (the lessee does not have enough information about the unguaranteed residual value of the leased asset). In these cases, the Group has developed a methodology for setting the incremental interest rate as an alternative to the implicit interest rate and has decided to adopt the Funds Transfer Pricing (FTP) method. This is based on an unsecured and amortising rate curve, which envisages lease payments for the lease contract that are typically constant over the lease term, rather than a single payment upon maturity. The FTP method takes into account the creditworthiness of the lessee, the term of the lease, as well as the economic environment in which the transaction takes place and is therefore in line with the requirements of the standard. The lease term is determined taking into account: - periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; - periods covered by an option to terminate the lease if the lessee is reasonably certain to exercise that option. During the course of the lease term a lessee shall: - measure the right-of-use at cost less accumulated depreciation and accumulated impairment losses determined and recognised based on the provisions of IAS 36 \u201cImpairment of assets\u201d, adjusted to take account of any remeasurement of the lease liability; - increase the liability arising from the lease following the accrual of interest expense calculated at the interest rate implicit in the lease or alternatively at the incremental borrowing rate, and decrease it for payments of principal and interest made. If changes are made to the lease payments, then the lease liability must be remeasured and the impact of the remeasurement of the liability is recognised against the right-of-use asset. Derecognition criteria Property and equipment are derecognised from the balance sheet on disposal or when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1010": { "value": "6. Property and equipment Classification criteria Property and equipment include land, owner-occupied property, investment property, valuable art assets, technical plants, furniture and fittings and any type of equipment that are expected to be used during more than one period. Property and equipment held for use in the production or supply of goods and services are classified as \u201cProperty and equipment used in operations\u201d, in accordance with IAS 16. Real estate owned for investment purposes (to obtain rental income or gains on the capital invested) is classified as \u201cInvestment property\u201d based on IAS 40. This caption also includes property and equipment classified in accordance with IAS 2 - Inventories, which refer both to assets resulting from the enforcement of guarantees or from purchase at auction that the company intends to sell in the near future, without carrying out major renovation work, and which do not meet the requirements for classification in the previous categories, and to the real estate portfolio of the Group\u2019s real estate companies, including building sites, properties under construction, properties completed for sale and real estate development initiatives, held for sale. Finally, this caption also includes the rights of use acquired through leases and relating to the use of an item of property and equipment (for the lessee companies) and the assets leased under operating leases (for the lessor companies). Recognition criteria Property and equipment are initially measured at cost which comprises in addition to their purchase price any costs directly attributable to the purchase and required for them to be operational. Extraordinary maintenance expenses which lead to a rise in future economic benefits are attributed to increase the value of assets, while other ordinary maintenance costs are recorded in the income statement. Measurement criteria Property and equipment are measured at cost, net of depreciation and impairment losses, except for owner-occupied properties and valuable art assets, which are measured according to the revaluation model. The investment properties are measured with the fair value method. For the property and equipment subject to assessment according to the revaluation model: - if the carrying value of an asset is increased following a revaluation, the increase must be recognised in the Statement of comprehensive income and accumulated in the shareholders\u2019 equity under the caption revaluation reserve; conversely, in the case where an impairment loss on the same asset recognised previously in the income statement is recovered, it must be recognised as income; - if the carrying value of an asset is decreased following the revaluation, the decrease must be recognised in the Statement of comprehensive income to the extent in which there are possible credit balances in the revaluation reserve referring to this asset; otherwise, this reduction is recorded in the income statement. Property and equipment are systematically depreciated, adopting the straight-line method over their useful life. The depreciable amount is the cost of the goods (or the net value recalculated if the method adopted for the valuation is the revaluation model) net of the residual value at the end of the depreciation period, if significant. Buildings are depreciated for a portion deemed to be suitable to represent their deterioration over time following their use, considering extraordinary maintenance expenses, which are recognised in the carrying value of the assets. In order to determine the useful life of the various types of assets and the corresponding depreciation rates, the Group\u2019s real estate assets have been divided into four clusters: (i) historical properties (useful life of 65 years), (ii) Entire buildings (useful life of 33 years), (iii) Banking branches (useful life of 20 years) and (iv) Other properties (useful life of 20 years). These clusters do not include the New Intesa Sanpaolo Headquarters in Turin, for which the useful life was estimated through a specific analysis which considered the innovative characteristics of the work, featuring strategic importance and extensive architectonic value, built using complex technologies, and having few, or even zero peers not only within the Group\u2019s real estate assets but also in general. Other property and equipment is depreciated based on the following useful lives: furniture from 5 to 10 years, plants from 4 to 10 years, hardware and IT equipment for a period from 4 to 8 years and, lastly, other assets from 3 to 13 years. The following are not depreciated: - land, irrespective of whether acquired individually or embedded in the value of buildings, since it has an indefinite useful life; - the valuable art assets, the other historical, artistic and decorative assets, since their useful life cannot be estimated and their value is normally destined to increase over time; - the investment properties, as required by IAS 40, are measured at fair value through profit or loss and therefore they must not be depreciated. If there is some evidence that property and equipment measured at cost may have been impaired, the carrying amount of the asset and its recoverable amount are compared. Any impairment losses are recorded in the income statement. If the reasons for impairment cease to exist, a value recovery is recorded and may not exceed the value that the asset would have had, net of depreciation, determined in the absence of previous impairment losses. With regard to the property and equipment recognised in accordance with IAS 2, these are measured at the lesser of cost and net realisable value, without prejudice to the comparison between the asset\u2019s carrying amount and its recoverable amount where there is an indication that the asset may have been impaired. Any impairment losses are recorded in the income statement. Property and equipment consisting of the right-of-use of assets subject to leases According to IFRS 16, a lease is a contract or part of a contract that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. According to IFRS 16, leases are accounted for on the basis of the right of use model, where, at the initial date, the lessee has a financial obligation to make payments due to the lessor to compensate for its right of use of the underlying asset during the lease term. When the asset is made available to the lessee for use (initial date), the lessee recognises both the liability and the asset consisting of the right of use. In particular, the right of use acquired with a lease is measured as the sum of the present value of the future payments over the term of the contract, the lease payments made at or before the commencement date, the lease incentives received, if any, the initial direct costs and any estimated costs of dismantling or restoring the underlying asset. The financial liability recognised corresponds to the present value of the payments to be made for the lease. With regard to the discount rate, based on the requirements of IFRS 16, the Group uses the implicit interest rate for each lease contract, when it is available. For leases from the lessee\u2019s point of view, in some cases, for example for rental agreements, the implicit interest rate cannot always be readily determined without using estimates and assumptions (the lessee does not have enough information about the unguaranteed residual value of the leased asset). In these cases, the Group has developed a methodology for setting the incremental interest rate as an alternative to the implicit interest rate and has decided to adopt the Funds Transfer Pricing (FTP) method. This is based on an unsecured and amortising rate curve, which envisages lease payments for the lease contract that are typically constant over the lease term, rather than a single payment upon maturity. The FTP method takes into account the creditworthiness of the lessee, the term of the lease, as well as the economic environment in which the transaction takes place and is therefore in line with the requirements of the standard. The lease term is determined taking into account: - periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; - periods covered by an option to terminate the lease if the lessee is reasonably certain to exercise that option. During the course of the lease term a lessee shall: - measure the right-of-use at cost less accumulated depreciation and accumulated impairment losses determined and recognised based on the provisions of IAS 36 \u201cImpairment of assets\u201d, adjusted to take account of any remeasurement of the lease liability; - increase the liability arising from the lease following the accrual of interest expense calculated at the interest rate implicit in the lease or alternatively at the incremental borrowing rate, and decrease it for payments of principal and interest made. If changes are made to the lease payments, then the lease liability must be remeasured and the impact of the remeasurement of the liability is recognised against the right-of-use asset. Derecognition criteria Property and equipment are derecognised from the balance sheet on disposal or when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1038": { "value": "6. Property and equipment Classification criteria Property and equipment include land, owner-occupied property, investment property, valuable art assets, technical plants, furniture and fittings and any type of equipment that are expected to be used during more than one period. Property and equipment held for use in the production or supply of goods and services are classified as \u201cProperty and equipment used in operations\u201d, in accordance with IAS 16. Real estate owned for investment purposes (to obtain rental income or gains on the capital invested) is classified as \u201cInvestment property\u201d based on IAS 40. This caption also includes property and equipment classified in accordance with IAS 2 - Inventories, which refer both to assets resulting from the enforcement of guarantees or from purchase at auction that the company intends to sell in the near future, without carrying out major renovation work, and which do not meet the requirements for classification in the previous categories, and to the real estate portfolio of the Group\u2019s real estate companies, including building sites, properties under construction, properties completed for sale and real estate development initiatives, held for sale. Finally, this caption also includes the rights of use acquired through leases and relating to the use of an item of property and equipment (for the lessee companies) and the assets leased under operating leases (for the lessor companies). Recognition criteria Property and equipment are initially measured at cost which comprises in addition to their purchase price any costs directly attributable to the purchase and required for them to be operational. Extraordinary maintenance expenses which lead to a rise in future economic benefits are attributed to increase the value of assets, while other ordinary maintenance costs are recorded in the income statement. Measurement criteria Property and equipment are measured at cost, net of depreciation and impairment losses, except for owner-occupied properties and valuable art assets, which are measured according to the revaluation model. The investment properties are measured with the fair value method. For the property and equipment subject to assessment according to the revaluation model: - if the carrying value of an asset is increased following a revaluation, the increase must be recognised in the Statement of comprehensive income and accumulated in the shareholders\u2019 equity under the caption revaluation reserve; conversely, in the case where an impairment loss on the same asset recognised previously in the income statement is recovered, it must be recognised as income; - if the carrying value of an asset is decreased following the revaluation, the decrease must be recognised in the Statement of comprehensive income to the extent in which there are possible credit balances in the revaluation reserve referring to this asset; otherwise, this reduction is recorded in the income statement. Property and equipment are systematically depreciated, adopting the straight-line method over their useful life. The depreciable amount is the cost of the goods (or the net value recalculated if the method adopted for the valuation is the revaluation model) net of the residual value at the end of the depreciation period, if significant. Buildings are depreciated for a portion deemed to be suitable to represent their deterioration over time following their use, considering extraordinary maintenance expenses, which are recognised in the carrying value of the assets. In order to determine the useful life of the various types of assets and the corresponding depreciation rates, the Group\u2019s real estate assets have been divided into four clusters: (i) historical properties (useful life of 65 years), (ii) Entire buildings (useful life of 33 years), (iii) Banking branches (useful life of 20 years) and (iv) Other properties (useful life of 20 years). These clusters do not include the New Intesa Sanpaolo Headquarters in Turin, for which the useful life was estimated through a specific analysis which considered the innovative characteristics of the work, featuring strategic importance and extensive architectonic value, built using complex technologies, and having few, or even zero peers not only within the Group\u2019s real estate assets but also in general. Other property and equipment is depreciated based on the following useful lives: furniture from 5 to 10 years, plants from 4 to 10 years, hardware and IT equipment for a period from 4 to 8 years and, lastly, other assets from 3 to 13 years. The following are not depreciated: - land, irrespective of whether acquired individually or embedded in the value of buildings, since it has an indefinite useful life; - the valuable art assets, the other historical, artistic and decorative assets, since their useful life cannot be estimated and their value is normally destined to increase over time; - the investment properties, as required by IAS 40, are measured at fair value through profit or loss and therefore they must not be depreciated. If there is some evidence that property and equipment measured at cost may have been impaired, the carrying amount of the asset and its recoverable amount are compared. Any impairment losses are recorded in the income statement. If the reasons for impairment cease to exist, a value recovery is recorded and may not exceed the value that the asset would have had, net of depreciation, determined in the absence of previous impairment losses. With regard to the property and equipment recognised in accordance with IAS 2, these are measured at the lesser of cost and net realisable value, without prejudice to the comparison between the asset\u2019s carrying amount and its recoverable amount where there is an indication that the asset may have been impaired. Any impairment losses are recorded in the income statement. Property and equipment consisting of the right-of-use of assets subject to leases According to IFRS 16, a lease is a contract or part of a contract that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. According to IFRS 16, leases are accounted for on the basis of the right of use model, where, at the initial date, the lessee has a financial obligation to make payments due to the lessor to compensate for its right of use of the underlying asset during the lease term. When the asset is made available to the lessee for use (initial date), the lessee recognises both the liability and the asset consisting of the right of use. In particular, the right of use acquired with a lease is measured as the sum of the present value of the future payments over the term of the contract, the lease payments made at or before the commencement date, the lease incentives received, if any, the initial direct costs and any estimated costs of dismantling or restoring the underlying asset. The financial liability recognised corresponds to the present value of the payments to be made for the lease. With regard to the discount rate, based on the requirements of IFRS 16, the Group uses the implicit interest rate for each lease contract, when it is available. For leases from the lessee\u2019s point of view, in some cases, for example for rental agreements, the implicit interest rate cannot always be readily determined without using estimates and assumptions (the lessee does not have enough information about the unguaranteed residual value of the leased asset). In these cases, the Group has developed a methodology for setting the incremental interest rate as an alternative to the implicit interest rate and has decided to adopt the Funds Transfer Pricing (FTP) method. This is based on an unsecured and amortising rate curve, which envisages lease payments for the lease contract that are typically constant over the lease term, rather than a single payment upon maturity. The FTP method takes into account the creditworthiness of the lessee, the term of the lease, as well as the economic environment in which the transaction takes place and is therefore in line with the requirements of the standard. The lease term is determined taking into account: - periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; - periods covered by an option to terminate the lease if the lessee is reasonably certain to exercise that option. During the course of the lease term a lessee shall: - measure the right-of-use at cost less accumulated depreciation and accumulated impairment losses determined and recognised based on the provisions of IAS 36 \u201cImpairment of assets\u201d, adjusted to take account of any remeasurement of the lease liability; - increase the liability arising from the lease following the accrual of interest expense calculated at the interest rate implicit in the lease or alternatively at the incremental borrowing rate, and decrease it for payments of principal and interest made. If changes are made to the lease payments, then the lease liability must be remeasured and the impact of the remeasurement of the liability is recognised against the right-of-use asset. Derecognition criteria Property and equipment are derecognised from the balance sheet on disposal or when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentPropertyExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1071": { "value": "6. Property and equipment Classification criteria Property and equipment include land, owner-occupied property, investment property, valuable art assets, technical plants, furniture and fittings and any type of equipment that are expected to be used during more than one period. Property and equipment held for use in the production or supply of goods and services are classified as \u201cProperty and equipment used in operations\u201d, in accordance with IAS 16. Real estate owned for investment purposes (to obtain rental income or gains on the capital invested) is classified as \u201cInvestment property\u201d based on IAS 40. This caption also includes property and equipment classified in accordance with IAS 2 - Inventories, which refer both to assets resulting from the enforcement of guarantees or from purchase at auction that the company intends to sell in the near future, without carrying out major renovation work, and which do not meet the requirements for classification in the previous categories, and to the real estate portfolio of the Group\u2019s real estate companies, including building sites, properties under construction, properties completed for sale and real estate development initiatives, held for sale. Finally, this caption also includes the rights of use acquired through leases and relating to the use of an item of property and equipment (for the lessee companies) and the assets leased under operating leases (for the lessor companies). Recognition criteria Property and equipment are initially measured at cost which comprises in addition to their purchase price any costs directly attributable to the purchase and required for them to be operational. Extraordinary maintenance expenses which lead to a rise in future economic benefits are attributed to increase the value of assets, while other ordinary maintenance costs are recorded in the income statement. Measurement criteria Property and equipment are measured at cost, net of depreciation and impairment losses, except for owner-occupied properties and valuable art assets, which are measured according to the revaluation model. The investment properties are measured with the fair value method. For the property and equipment subject to assessment according to the revaluation model: - if the carrying value of an asset is increased following a revaluation, the increase must be recognised in the Statement of comprehensive income and accumulated in the shareholders\u2019 equity under the caption revaluation reserve; conversely, in the case where an impairment loss on the same asset recognised previously in the income statement is recovered, it must be recognised as income; - if the carrying value of an asset is decreased following the revaluation, the decrease must be recognised in the Statement of comprehensive income to the extent in which there are possible credit balances in the revaluation reserve referring to this asset; otherwise, this reduction is recorded in the income statement. Property and equipment are systematically depreciated, adopting the straight-line method over their useful life. The depreciable amount is the cost of the goods (or the net value recalculated if the method adopted for the valuation is the revaluation model) net of the residual value at the end of the depreciation period, if significant. Buildings are depreciated for a portion deemed to be suitable to represent their deterioration over time following their use, considering extraordinary maintenance expenses, which are recognised in the carrying value of the assets. In order to determine the useful life of the various types of assets and the corresponding depreciation rates, the Group\u2019s real estate assets have been divided into four clusters: (i) historical properties (useful life of 65 years), (ii) Entire buildings (useful life of 33 years), (iii) Banking branches (useful life of 20 years) and (iv) Other properties (useful life of 20 years). These clusters do not include the New Intesa Sanpaolo Headquarters in Turin, for which the useful life was estimated through a specific analysis which considered the innovative characteristics of the work, featuring strategic importance and extensive architectonic value, built using complex technologies, and having few, or even zero peers not only within the Group\u2019s real estate assets but also in general. Other property and equipment is depreciated based on the following useful lives: furniture from 5 to 10 years, plants from 4 to 10 years, hardware and IT equipment for a period from 4 to 8 years and, lastly, other assets from 3 to 13 years. The following are not depreciated: - land, irrespective of whether acquired individually or embedded in the value of buildings, since it has an indefinite useful life; - the valuable art assets, the other historical, artistic and decorative assets, since their useful life cannot be estimated and their value is normally destined to increase over time; - the investment properties, as required by IAS 40, are measured at fair value through profit or loss and therefore they must not be depreciated. If there is some evidence that property and equipment measured at cost may have been impaired, the carrying amount of the asset and its recoverable amount are compared. Any impairment losses are recorded in the income statement. If the reasons for impairment cease to exist, a value recovery is recorded and may not exceed the value that the asset would have had, net of depreciation, determined in the absence of previous impairment losses. With regard to the property and equipment recognised in accordance with IAS 2, these are measured at the lesser of cost and net realisable value, without prejudice to the comparison between the asset\u2019s carrying amount and its recoverable amount where there is an indication that the asset may have been impaired. Any impairment losses are recorded in the income statement. Property and equipment consisting of the right-of-use of assets subject to leases According to IFRS 16, a lease is a contract or part of a contract that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. According to IFRS 16, leases are accounted for on the basis of the right of use model, where, at the initial date, the lessee has a financial obligation to make payments due to the lessor to compensate for its right of use of the underlying asset during the lease term. When the asset is made available to the lessee for use (initial date), the lessee recognises both the liability and the asset consisting of the right of use. In particular, the right of use acquired with a lease is measured as the sum of the present value of the future payments over the term of the contract, the lease payments made at or before the commencement date, the lease incentives received, if any, the initial direct costs and any estimated costs of dismantling or restoring the underlying asset. The financial liability recognised corresponds to the present value of the payments to be made for the lease. With regard to the discount rate, based on the requirements of IFRS 16, the Group uses the implicit interest rate for each lease contract, when it is available. For leases from the lessee\u2019s point of view, in some cases, for example for rental agreements, the implicit interest rate cannot always be readily determined without using estimates and assumptions (the lessee does not have enough information about the unguaranteed residual value of the leased asset). In these cases, the Group has developed a methodology for setting the incremental interest rate as an alternative to the implicit interest rate and has decided to adopt the Funds Transfer Pricing (FTP) method. This is based on an unsecured and amortising rate curve, which envisages lease payments for the lease contract that are typically constant over the lease term, rather than a single payment upon maturity. The FTP method takes into account the creditworthiness of the lessee, the term of the lease, as well as the economic environment in which the transaction takes place and is therefore in line with the requirements of the standard. The lease term is determined taking into account: - periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; - periods covered by an option to terminate the lease if the lessee is reasonably certain to exercise that option. During the course of the lease term a lessee shall: - measure the right-of-use at cost less accumulated depreciation and accumulated impairment losses determined and recognised based on the provisions of IAS 36 \u201cImpairment of assets\u201d, adjusted to take account of any remeasurement of the lease liability; - increase the liability arising from the lease following the accrual of interest expense calculated at the interest rate implicit in the lease or alternatively at the incremental borrowing rate, and decrease it for payments of principal and interest made. If changes are made to the lease payments, then the lease liability must be remeasured and the impact of the remeasurement of the liability is recognised against the right-of-use asset. Derecognition criteria Property and equipment are derecognised from the balance sheet on disposal or when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRepairsAndMaintenanceExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1027": { "value": "Property and equipment consisting of the right-of-use of assets subject to leases According to IFRS 16, a lease is a contract or part of a contract that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. According to IFRS 16, leases are accounted for on the basis of the right of use model, where, at the initial date, the lessee has a financial obligation to make payments due to the lessor to compensate for its right of use of the underlying asset during the lease term. When the asset is made available to the lessee for use (initial date), the lessee recognises both the liability and the asset consisting of the right of use. In particular, the right of use acquired with a lease is measured as the sum of the present value of the future payments over the term of the contract, the lease payments made at or before the commencement date, the lease incentives received, if any, the initial direct costs and any estimated costs of dismantling or restoring the underlying asset. The financial liability recognised corresponds to the present value of the payments to be made for the lease. With regard to the discount rate, based on the requirements of IFRS 16, the Group uses the implicit interest rate for each lease contract, when it is available. For leases from the lessee\u2019s point of view, in some cases, for example for rental agreements, the implicit interest rate cannot always be readily determined without using estimates and assumptions (the lessee does not have enough information about the unguaranteed residual value of the leased asset). In these cases, the Group has developed a methodology for setting the incremental interest rate as an alternative to the implicit interest rate and has decided to adopt the Funds Transfer Pricing (FTP) method. This is based on an unsecured and amortising rate curve, which envisages lease payments for the lease contract that are typically constant over the lease term, rather than a single payment upon maturity. The FTP method takes into account the creditworthiness of the lessee, the term of the lease, as well as the economic environment in which the transaction takes place and is therefore in line with the requirements of the standard. The lease term is determined taking into account: - periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; - periods covered by an option to terminate the lease if the lessee is reasonably certain to exercise that option. During the course of the lease term a lessee shall: - measure the right-of-use at cost less accumulated depreciation and accumulated impairment losses determined and recognised based on the provisions of IAS 36 \u201cImpairment of assets\u201d, adjusted to take account of any remeasurement of the lease liability; - increase the liability arising from the lease following the accrual of interest expense calculated at the interest rate implicit in the lease or alternatively at the incremental borrowing rate, and decrease it for payments of principal and interest made. If changes are made to the lease payments, then the lease liability must be remeasured and the impact of the remeasurement of the liability is recognised against the right-of-use asset. Derecognition criteria Property and equipment are derecognised from the balance sheet on disposal or when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-985": { "value": "7. Intangible assets Classification criteria Intangible assets consist of goodwill and other intangible assets governed by IAS 38. They may include the rights of use acquired under a lease and relating to the use of an intangible asset (for lessees) and assets leased under an operating lease (for lessors). Intangible assets are recognised as such if they may be identified and stem from legal or contractual rights. Intangible assets include goodwill, which represents the positive difference between purchase price and fair value of assets and liabilities pertaining to the acquired company. Recognition and measurement criteria Intangible assets are recognised at cost, adjusted for any accessory charges only if it is probable that the future economic benefits attributable to the assets will be realised and if the cost of the asset may be reliably determined. If this is not the case, the cost of the intangible asset is recorded in the income statement in the year in which it was incurred. For assets with finite useful life, the cost is amortised on a straight-line basis or in decreasing portions determined on the basis of the economic benefits expected from the asset. Assets with indefinite useful life are not subject to systematic amortisation, but are periodically subjected to impairment testing. If there is any indication that an asset may have suffered impairment losses, the asset\u2019s recoverable amount is estimated. The impairment loss, which is recorded in the income statement, is equal to the difference between the carrying value of the assets and the recoverable amount. In particular, intangible assets include: - Technology-related intangible assets, such as software applications, which are amortised on the basis of their expected technological obsolescence and over a maximum period of seven years. An exception is the core banking system platforms, whose useful life is estimated on a case-by-case basis, and, as a result, amortised over longer periods (from 10 to 15 years). Moreover, the costs incurred for the development of software are considered as intangible assets and are recognised under assets only when all the following conditions are met: i) the cost attributable to the intangible asset during its development can be measured reliably, ii) there is the intention, the availability of financial resources and the technical ability of making the intangible asset available for use or sale, iii) the future economic benefits to be generated by the asset can be demonstrated. Software development capitalised costs only comprise the costs directly attributable to the development process. Capitalised software development costs are amortised systematically over the estimated useful life of the relevant product/service so as to reflect the pattern in which the asset\u2019s future economic benefits are expected to be consumed by the entity from the beginning of production over the product's estimated life; - customer-related intangibles generally represented, in business combinations, by asset management relations, non- financial activities related to provision of services and insurance portfolios. Such assets, with a finite life, are originally measured by the discounting, using a rate representing the time value of money and the asset\u2019s specific risks, of the income margins on the ongoing relations at the time of the business combination over a period which expresses their residual, contractual or estimated life. For asset management relations and non-financial activities related to provision of services, they are amortised on a straight-line basis over the period of greater significance of the expected economic benefits in case of relations which do not have a predetermined duration and, for relations from insurance contracts, generally in decreasing portions corresponding to the duration of the contract in case of relations with predetermined expiry (residual lives of the policies); - marketing-related intangibles represented by the measurement of the brand name which is also recorded at the time of business combinations. This asset is considered as having indefinite life since it is deemed to contribute for an indefinite period of time to the formation of income flows. Lastly, intangible assets include goodwill. With respect to business combinations, goodwill may be recorded when the positive difference between the consideration transferred and the fair value recognition, if any, of minority interests, and the fair value of shareholders\u2019 equity acquired is representative of the future income-generation potential of the equity investment. If this difference is negative (badwill) or if goodwill may not be attributed considering future income-generation potential of the equity investments, the same difference is directly recorded in the income statement. Once a year (or every time that there is evidence of impairment losses), an impairment test is carried out for goodwill. This requires the identification of the Cash Generating Unit (or CGU) to which goodwill is allocated. The cash-generating units of the Intesa Sanpaolo Group correspond to the operating divisions presented in segment reporting. Any impairment losses are determined on the basis of the difference between the recognition value of goodwill and its recoverable amount, if lower. The recoverable amount is equal to the higher between the fair value of the cash-generating unit, less any cost to sell, and the relative value in use. The consequent adjustments are posted in the income statement. With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill allocated, then an independent and specific valuation is made of the intangible on the basis of the fair value certified by the appraisal of an independent expert. If the fair value of the brand name is not higher than its carrying amount, the recoverable amount of the CGU is estimated, calculated based on future cash flows. It is also noted that, where a CGU which is allocated both goodwill and a brand name has a value in use lower than the carrying amount, by an amount that exceeds the total value of the intangibles with indefinite life allocated, without prejudice to the full write-down of goodwill, an autonomous valuation of the brand name is carried out based on the fair value stated in the specific appraisal. Derecognition criteria Intangible assets are derecognised from the balance sheet on disposal and if no future economic benefits are expected. Business combinations Business combinations are governed by IFRS 3. The transfer of control over a company (or over a group of assets managed together as a single business) is considered a business combination. To this end, control is deemed to have transferred when the investor is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns by exercising its power over the investee. IFRS 3 requires that an acquirer be identified in any business combination. The acquirer is identified as the combining entity that obtains control of the other combining entities or businesses. If a controlling entity cannot be identified, following the definition of control described above, as for example in the case of exchange of equity investments, the identification of the acquirer must occur considering other factors such as: the entity which has a significantly higher fair value, the entity which pays a cash consideration, the entity which issues new shares. The acquisition, and therefore the initial consolidation of the acquired entity, must be recognised in the books on the date in which the acquirer effectively obtains control over the acquired company or businesses. When the combination occurs via an exchange of voting ordinary equity instruments, the date of the exchange usually coincides with the date of the acquisition. However, it is always necessary to verify that there are no agreements which may lead to transfer of control prior to the date of the exchange. The consideration transferred as part of a business combination is equal to the sum of the fair value, at the exchange date, of the transferred assets, the liabilities incurred or assumed and the equity instruments issued by the acquirer in return for control. In transactions which entail cash consideration (or when payment occurs via cash-equivalent financial instruments), the purchase price is the agreed consideration. When settlement does not occur in the short-term, the fair value of any deferred component is calculated by discounting the amounts payable to their present value; when payment occurs via an instrument other than cash, therefore via the issue of financial instruments, the price is equal to the fair value of such instruments net of the costs directly attributable to their issue. For the determination of fair value of financial instruments, see Section A.4 \u2013 Information on fair value and note that, in the case of shares quoted on active markets, fair value is represented by Stock Exchange price at acquisition date or, should that not be available, the last price available. Purchase price at acquisition date includes any adjustments to the cost contingent on future events, if provided for by the combination agreement and only if the adjustment is probable, can be measured reliably and realised within the twelve months subsequent to the date of acquisition of control. Instead, any restoration related to any loss in the value of the assets used as consideration is not included in purchase price since it is already considered either in the fair value of equity instruments or as a reduction in the premium or an increase in the discount on the initial issue of debt instruments. Acquisition costs refer to the charges incurred by the acquirer to carry out the business combination, including, for example, professional fees paid to independent auditors, experts, legal advisors, costs for legal opinions and audit of accounts, preparation of information documents required by the law, as well as advisory fees sustained to identify potential acquisition targets if the contract provides for the payment of success fees as well as debt securities' or equities' registration and issue costs. Acquisition costs must be recognised as charges when incurred and when the related services are provided, except for the costs relating to the issue of debt securities or equities which must be recognised in accordance with IAS 32. Business combinations must be accounted for using the \"acquisition method\" whereby identifiable assets acquired (including any intangible assets which had not been previously recognised by the acquired company) or liabilities assumed (including contingent liabilities) are recognised at their fair value at acquisition date. Moreover, as specifically required by IFRS 3, for each business combination, any minority interest in the acquired company can be recognised at fair value (therefore increasing the consideration transferred) or in proportion to the minority investment in the net identifiable assets of the acquired companies. If control is achieved in stages, the acquirer recalculates its previous interest in the acquired company at the acquisition date fair value. Any difference with respect to the previous carrying value is taken to income statement. Excess between the consideration transferred (being the fair value of transferred assets, liabilities incurred and equity instruments issued by the acquirer), increased, where present, by minority interests (determined as above) as well as the fair value of the stakes already held by the acquirer, and the fair value of acquired assets and liabilities should be recognised as goodwill. Conversely, such difference is taken to the income statement when the latter exceed the sum of the consideration, minority interests and the fair value of the stakes already held. The accounting for business combination can be determined provisionally by the end of the year in which the combination is realised and must be completed within twelve months of the acquisition date. In accordance with IFRS 10, acquisitions of further stakes in companies which are already controlled are accounted for as a capital transaction or as a transaction with shareholders acting in their capacity as shareholders. For this reason, the difference between the cost of the acquisition and the book value of the minority stakes acquired is posted to group shareholders' equity; in the same way, the sale of minority stakes without ceding control, does not generate gains or losses in the income statement but is posted to group shareholders' equity. The following transactions are outside the scope of business combinations: transactions aimed at acquiring control over one or more entities which are not part of the company\u2019s business; transactions aimed at acquiring transitory control; transactions conducted for organisational purposes, therefore between two or more companies or businesses which are already part of the Intesa Sanpaolo Group, and which do not entail changes in control, independently of the extent of minority interests in each of the combining entities before and after the business combinations (business combinations involving entities under common control). These transactions are considered immaterial. Therefore, since there are no specific provisions in IAS/IFRS and in compliance with IAS 8 which requires \u2013 in the absence of a specific Standard \u2013 that the reporting entity must use its judgement in applying an accounting policy that results in information that is relevant, reliable, prudent and that reflects the economic substance of the transaction, these are accounted for safeguarding the continuing values in the financial statements of the acquirer. Mergers are examples of combinations between companies and represent the most complete business combinations, since they imply the legal and economic unification of the merged entities. Mergers which entail the establishment of a new legal entity and mergers by incorporation (which entail that an entity is absorbed by another existing entity) are treated according to the criteria illustrated above, that is: - if the transaction leads to the transfer of control of a company, it is accounted for as a business combination as provided for by IFRS 3; - if the transaction does not lead to the transfer of control, it is accounted for by privileging the continuity of the values. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1011": { "value": "7. Intangible assets Classification criteria Intangible assets consist of goodwill and other intangible assets governed by IAS 38. They may include the rights of use acquired under a lease and relating to the use of an intangible asset (for lessees) and assets leased under an operating lease (for lessors). Intangible assets are recognised as such if they may be identified and stem from legal or contractual rights. Intangible assets include goodwill, which represents the positive difference between purchase price and fair value of assets and liabilities pertaining to the acquired company. Recognition and measurement criteria Intangible assets are recognised at cost, adjusted for any accessory charges only if it is probable that the future economic benefits attributable to the assets will be realised and if the cost of the asset may be reliably determined. If this is not the case, the cost of the intangible asset is recorded in the income statement in the year in which it was incurred. For assets with finite useful life, the cost is amortised on a straight-line basis or in decreasing portions determined on the basis of the economic benefits expected from the asset. Assets with indefinite useful life are not subject to systematic amortisation, but are periodically subjected to impairment testing. If there is any indication that an asset may have suffered impairment losses, the asset\u2019s recoverable amount is estimated. The impairment loss, which is recorded in the income statement, is equal to the difference between the carrying value of the assets and the recoverable amount. In particular, intangible assets include: - Technology-related intangible assets, such as software applications, which are amortised on the basis of their expected technological obsolescence and over a maximum period of seven years. An exception is the core banking system platforms, whose useful life is estimated on a case-by-case basis, and, as a result, amortised over longer periods (from 10 to 15 years). Moreover, the costs incurred for the development of software are considered as intangible assets and are recognised under assets only when all the following conditions are met: i) the cost attributable to the intangible asset during its development can be measured reliably, ii) there is the intention, the availability of financial resources and the technical ability of making the intangible asset available for use or sale, iii) the future economic benefits to be generated by the asset can be demonstrated. Software development capitalised costs only comprise the costs directly attributable to the development process. Capitalised software development costs are amortised systematically over the estimated useful life of the relevant product/service so as to reflect the pattern in which the asset\u2019s future economic benefits are expected to be consumed by the entity from the beginning of production over the product's estimated life; - customer-related intangibles generally represented, in business combinations, by asset management relations, non- financial activities related to provision of services and insurance portfolios. Such assets, with a finite life, are originally measured by the discounting, using a rate representing the time value of money and the asset\u2019s specific risks, of the income margins on the ongoing relations at the time of the business combination over a period which expresses their residual, contractual or estimated life. For asset management relations and non-financial activities related to provision of services, they are amortised on a straight-line basis over the period of greater significance of the expected economic benefits in case of relations which do not have a predetermined duration and, for relations from insurance contracts, generally in decreasing portions corresponding to the duration of the contract in case of relations with predetermined expiry (residual lives of the policies); - marketing-related intangibles represented by the measurement of the brand name which is also recorded at the time of business combinations. This asset is considered as having indefinite life since it is deemed to contribute for an indefinite period of time to the formation of income flows. Lastly, intangible assets include goodwill. With respect to business combinations, goodwill may be recorded when the positive difference between the consideration transferred and the fair value recognition, if any, of minority interests, and the fair value of shareholders\u2019 equity acquired is representative of the future income-generation potential of the equity investment. If this difference is negative (badwill) or if goodwill may not be attributed considering future income-generation potential of the equity investments, the same difference is directly recorded in the income statement. Once a year (or every time that there is evidence of impairment losses), an impairment test is carried out for goodwill. This requires the identification of the Cash Generating Unit (or CGU) to which goodwill is allocated. The cash-generating units of the Intesa Sanpaolo Group correspond to the operating divisions presented in segment reporting. Any impairment losses are determined on the basis of the difference between the recognition value of goodwill and its recoverable amount, if lower. The recoverable amount is equal to the higher between the fair value of the cash-generating unit, less any cost to sell, and the relative value in use. The consequent adjustments are posted in the income statement. With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill allocated, then an independent and specific valuation is made of the intangible on the basis of the fair value certified by the appraisal of an independent expert. If the fair value of the brand name is not higher than its carrying amount, the recoverable amount of the CGU is estimated, calculated based on future cash flows. It is also noted that, where a CGU which is allocated both goodwill and a brand name has a value in use lower than the carrying amount, by an amount that exceeds the total value of the intangibles with indefinite life allocated, without prejudice to the full write-down of goodwill, an autonomous valuation of the brand name is carried out based on the fair value stated in the specific appraisal. Derecognition criteria Intangible assets are derecognised from the balance sheet on disposal and if no future economic benefits are expected. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1028": { "value": "7. Intangible assets Classification criteria Intangible assets consist of goodwill and other intangible assets governed by IAS 38. They may include the rights of use acquired under a lease and relating to the use of an intangible asset (for lessees) and assets leased under an operating lease (for lessors). Intangible assets are recognised as such if they may be identified and stem from legal or contractual rights. Intangible assets include goodwill, which represents the positive difference between purchase price and fair value of assets and liabilities pertaining to the acquired company. Recognition and measurement criteria Intangible assets are recognised at cost, adjusted for any accessory charges only if it is probable that the future economic benefits attributable to the assets will be realised and if the cost of the asset may be reliably determined. If this is not the case, the cost of the intangible asset is recorded in the income statement in the year in which it was incurred. For assets with finite useful life, the cost is amortised on a straight-line basis or in decreasing portions determined on the basis of the economic benefits expected from the asset. Assets with indefinite useful life are not subject to systematic amortisation, but are periodically subjected to impairment testing. If there is any indication that an asset may have suffered impairment losses, the asset\u2019s recoverable amount is estimated. The impairment loss, which is recorded in the income statement, is equal to the difference between the carrying value of the assets and the recoverable amount. In particular, intangible assets include: - Technology-related intangible assets, such as software applications, which are amortised on the basis of their expected technological obsolescence and over a maximum period of seven years. An exception is the core banking system platforms, whose useful life is estimated on a case-by-case basis, and, as a result, amortised over longer periods (from 10 to 15 years). Moreover, the costs incurred for the development of software are considered as intangible assets and are recognised under assets only when all the following conditions are met: i) the cost attributable to the intangible asset during its development can be measured reliably, ii) there is the intention, the availability of financial resources and the technical ability of making the intangible asset available for use or sale, iii) the future economic benefits to be generated by the asset can be demonstrated. Software development capitalised costs only comprise the costs directly attributable to the development process. Capitalised software development costs are amortised systematically over the estimated useful life of the relevant product/service so as to reflect the pattern in which the asset\u2019s future economic benefits are expected to be consumed by the entity from the beginning of production over the product's estimated life; - customer-related intangibles generally represented, in business combinations, by asset management relations, non- financial activities related to provision of services and insurance portfolios. Such assets, with a finite life, are originally measured by the discounting, using a rate representing the time value of money and the asset\u2019s specific risks, of the income margins on the ongoing relations at the time of the business combination over a period which expresses their residual, contractual or estimated life. For asset management relations and non-financial activities related to provision of services, they are amortised on a straight-line basis over the period of greater significance of the expected economic benefits in case of relations which do not have a predetermined duration and, for relations from insurance contracts, generally in decreasing portions corresponding to the duration of the contract in case of relations with predetermined expiry (residual lives of the policies); - marketing-related intangibles represented by the measurement of the brand name which is also recorded at the time of business combinations. This asset is considered as having indefinite life since it is deemed to contribute for an indefinite period of time to the formation of income flows. Lastly, intangible assets include goodwill. With respect to business combinations, goodwill may be recorded when the positive difference between the consideration transferred and the fair value recognition, if any, of minority interests, and the fair value of shareholders\u2019 equity acquired is representative of the future income-generation potential of the equity investment. If this difference is negative (badwill) or if goodwill may not be attributed considering future income-generation potential of the equity investments, the same difference is directly recorded in the income statement. Once a year (or every time that there is evidence of impairment losses), an impairment test is carried out for goodwill. This requires the identification of the Cash Generating Unit (or CGU) to which goodwill is allocated. The cash-generating units of the Intesa Sanpaolo Group correspond to the operating divisions presented in segment reporting. Any impairment losses are determined on the basis of the difference between the recognition value of goodwill and its recoverable amount, if lower. The recoverable amount is equal to the higher between the fair value of the cash-generating unit, less any cost to sell, and the relative value in use. The consequent adjustments are posted in the income statement. With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill allocated, then an independent and specific valuation is made of the intangible on the basis of the fair value certified by the appraisal of an independent expert. If the fair value of the brand name is not higher than its carrying amount, the recoverable amount of the CGU is estimated, calculated based on future cash flows. It is also noted that, where a CGU which is allocated both goodwill and a brand name has a value in use lower than the carrying amount, by an amount that exceeds the total value of the intangibles with indefinite life allocated, without prejudice to the full write-down of goodwill, an autonomous valuation of the brand name is carried out based on the fair value stated in the specific appraisal. Derecognition criteria Intangible assets are derecognised from the balance sheet on disposal and if no future economic benefits are expected. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1039": { "value": "7. Intangible assets Classification criteria Intangible assets consist of goodwill and other intangible assets governed by IAS 38. They may include the rights of use acquired under a lease and relating to the use of an intangible asset (for lessees) and assets leased under an operating lease (for lessors). Intangible assets are recognised as such if they may be identified and stem from legal or contractual rights. Intangible assets include goodwill, which represents the positive difference between purchase price and fair value of assets and liabilities pertaining to the acquired company. Recognition and measurement criteria Intangible assets are recognised at cost, adjusted for any accessory charges only if it is probable that the future economic benefits attributable to the assets will be realised and if the cost of the asset may be reliably determined. If this is not the case, the cost of the intangible asset is recorded in the income statement in the year in which it was incurred. For assets with finite useful life, the cost is amortised on a straight-line basis or in decreasing portions determined on the basis of the economic benefits expected from the asset. Assets with indefinite useful life are not subject to systematic amortisation, but are periodically subjected to impairment testing. If there is any indication that an asset may have suffered impairment losses, the asset\u2019s recoverable amount is estimated. The impairment loss, which is recorded in the income statement, is equal to the difference between the carrying value of the assets and the recoverable amount. In particular, intangible assets include: - Technology-related intangible assets, such as software applications, which are amortised on the basis of their expected technological obsolescence and over a maximum period of seven years. An exception is the core banking system platforms, whose useful life is estimated on a case-by-case basis, and, as a result, amortised over longer periods (from 10 to 15 years). Moreover, the costs incurred for the development of software are considered as intangible assets and are recognised under assets only when all the following conditions are met: i) the cost attributable to the intangible asset during its development can be measured reliably, ii) there is the intention, the availability of financial resources and the technical ability of making the intangible asset available for use or sale, iii) the future economic benefits to be generated by the asset can be demonstrated. Software development capitalised costs only comprise the costs directly attributable to the development process. Capitalised software development costs are amortised systematically over the estimated useful life of the relevant product/service so as to reflect the pattern in which the asset\u2019s future economic benefits are expected to be consumed by the entity from the beginning of production over the product's estimated life; - customer-related intangibles generally represented, in business combinations, by asset management relations, non- financial activities related to provision of services and insurance portfolios. Such assets, with a finite life, are originally measured by the discounting, using a rate representing the time value of money and the asset\u2019s specific risks, of the income margins on the ongoing relations at the time of the business combination over a period which expresses their residual, contractual or estimated life. For asset management relations and non-financial activities related to provision of services, they are amortised on a straight-line basis over the period of greater significance of the expected economic benefits in case of relations which do not have a predetermined duration and, for relations from insurance contracts, generally in decreasing portions corresponding to the duration of the contract in case of relations with predetermined expiry (residual lives of the policies); - marketing-related intangibles represented by the measurement of the brand name which is also recorded at the time of business combinations. This asset is considered as having indefinite life since it is deemed to contribute for an indefinite period of time to the formation of income flows. Lastly, intangible assets include goodwill. With respect to business combinations, goodwill may be recorded when the positive difference between the consideration transferred and the fair value recognition, if any, of minority interests, and the fair value of shareholders\u2019 equity acquired is representative of the future income-generation potential of the equity investment. If this difference is negative (badwill) or if goodwill may not be attributed considering future income-generation potential of the equity investments, the same difference is directly recorded in the income statement. Once a year (or every time that there is evidence of impairment losses), an impairment test is carried out for goodwill. This requires the identification of the Cash Generating Unit (or CGU) to which goodwill is allocated. The cash-generating units of the Intesa Sanpaolo Group correspond to the operating divisions presented in segment reporting. Any impairment losses are determined on the basis of the difference between the recognition value of goodwill and its recoverable amount, if lower. The recoverable amount is equal to the higher between the fair value of the cash-generating unit, less any cost to sell, and the relative value in use. The consequent adjustments are posted in the income statement. With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill allocated, then an independent and specific valuation is made of the intangible on the basis of the fair value certified by the appraisal of an independent expert. If the fair value of the brand name is not higher than its carrying amount, the recoverable amount of the CGU is estimated, calculated based on future cash flows. It is also noted that, where a CGU which is allocated both goodwill and a brand name has a value in use lower than the carrying amount, by an amount that exceeds the total value of the intangibles with indefinite life allocated, without prejudice to the full write-down of goodwill, an autonomous valuation of the brand name is carried out based on the fair value stated in the specific appraisal. Derecognition criteria Intangible assets are derecognised from the balance sheet on disposal and if no future economic benefits are expected. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1049": { "value": "7. Intangible assets Classification criteria Intangible assets consist of goodwill and other intangible assets governed by IAS 38. They may include the rights of use acquired under a lease and relating to the use of an intangible asset (for lessees) and assets leased under an operating lease (for lessors). Intangible assets are recognised as such if they may be identified and stem from legal or contractual rights. Intangible assets include goodwill, which represents the positive difference between purchase price and fair value of assets and liabilities pertaining to the acquired company. Recognition and measurement criteria Intangible assets are recognised at cost, adjusted for any accessory charges only if it is probable that the future economic benefits attributable to the assets will be realised and if the cost of the asset may be reliably determined. If this is not the case, the cost of the intangible asset is recorded in the income statement in the year in which it was incurred. For assets with finite useful life, the cost is amortised on a straight-line basis or in decreasing portions determined on the basis of the economic benefits expected from the asset. Assets with indefinite useful life are not subject to systematic amortisation, but are periodically subjected to impairment testing. If there is any indication that an asset may have suffered impairment losses, the asset\u2019s recoverable amount is estimated. The impairment loss, which is recorded in the income statement, is equal to the difference between the carrying value of the assets and the recoverable amount. In particular, intangible assets include: - Technology-related intangible assets, such as software applications, which are amortised on the basis of their expected technological obsolescence and over a maximum period of seven years. An exception is the core banking system platforms, whose useful life is estimated on a case-by-case basis, and, as a result, amortised over longer periods (from 10 to 15 years). Moreover, the costs incurred for the development of software are considered as intangible assets and are recognised under assets only when all the following conditions are met: i) the cost attributable to the intangible asset during its development can be measured reliably, ii) there is the intention, the availability of financial resources and the technical ability of making the intangible asset available for use or sale, iii) the future economic benefits to be generated by the asset can be demonstrated. Software development capitalised costs only comprise the costs directly attributable to the development process. Capitalised software development costs are amortised systematically over the estimated useful life of the relevant product/service so as to reflect the pattern in which the asset\u2019s future economic benefits are expected to be consumed by the entity from the beginning of production over the product's estimated life; - customer-related intangibles generally represented, in business combinations, by asset management relations, non- financial activities related to provision of services and insurance portfolios. Such assets, with a finite life, are originally measured by the discounting, using a rate representing the time value of money and the asset\u2019s specific risks, of the income margins on the ongoing relations at the time of the business combination over a period which expresses their residual, contractual or estimated life. For asset management relations and non-financial activities related to provision of services, they are amortised on a straight-line basis over the period of greater significance of the expected economic benefits in case of relations which do not have a predetermined duration and, for relations from insurance contracts, generally in decreasing portions corresponding to the duration of the contract in case of relations with predetermined expiry (residual lives of the policies); - marketing-related intangibles represented by the measurement of the brand name which is also recorded at the time of business combinations. This asset is considered as having indefinite life since it is deemed to contribute for an indefinite period of time to the formation of income flows. Lastly, intangible assets include goodwill. With respect to business combinations, goodwill may be recorded when the positive difference between the consideration transferred and the fair value recognition, if any, of minority interests, and the fair value of shareholders\u2019 equity acquired is representative of the future income-generation potential of the equity investment. If this difference is negative (badwill) or if goodwill may not be attributed considering future income-generation potential of the equity investments, the same difference is directly recorded in the income statement. Once a year (or every time that there is evidence of impairment losses), an impairment test is carried out for goodwill. This requires the identification of the Cash Generating Unit (or CGU) to which goodwill is allocated. The cash-generating units of the Intesa Sanpaolo Group correspond to the operating divisions presented in segment reporting. Any impairment losses are determined on the basis of the difference between the recognition value of goodwill and its recoverable amount, if lower. The recoverable amount is equal to the higher between the fair value of the cash-generating unit, less any cost to sell, and the relative value in use. The consequent adjustments are posted in the income statement. With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill allocated, then an independent and specific valuation is made of the intangible on the basis of the fair value certified by the appraisal of an independent expert. If the fair value of the brand name is not higher than its carrying amount, the recoverable amount of the CGU is estimated, calculated based on future cash flows. It is also noted that, where a CGU which is allocated both goodwill and a brand name has a value in use lower than the carrying amount, by an amount that exceeds the total value of the intangibles with indefinite life allocated, without prejudice to the full write-down of goodwill, an autonomous valuation of the brand name is carried out based on the fair value stated in the specific appraisal. Derecognition criteria Intangible assets are derecognised from the balance sheet on disposal and if no future economic benefits are expected. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-913": { "value": "9. Non-current assets held for sale and discontinued operations Non-current assets/liabilities for which a disposal process has commenced and for which disposal is deemed to be extremely probable are recorded in assets under Non-current assets held for sale and discontinued operations and in liabilities under Liabilities associated with non-current assets held for sale and discontinued operations. These assets/liabilities are measured at the lower of the carrying amount and fair value less cost to sell, except for some type of assets (e.g., financial assets within the scope of IFRS 9) for which IFRS 5 specifically establishes that the measurement principles of the applicable accounting standard must be used. Non-current assets held for sale and discontinued operations may include portfolios of assets for which there are no prices in an active market. In such case, where an agreement has been reached with the purchaser, they are measured at fair value by referring to the sale prices resulting from that agreement. Where there is no agreement, they are measured using specific valuation techniques based on the asset and, where necessary, by employing external fairness opinions. The income and charges (net of tax effect) attributable to non-current assets held for sale and discontinued operations or recorded as such in the year are recognised in the income statement in a separate caption. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-986": { "value": "9. Non-current assets held for sale and discontinued operations Non-current assets/liabilities for which a disposal process has commenced and for which disposal is deemed to be extremely probable are recorded in assets under Non-current assets held for sale and discontinued operations and in liabilities under Liabilities associated with non-current assets held for sale and discontinued operations. These assets/liabilities are measured at the lower of the carrying amount and fair value less cost to sell, except for some type of assets (e.g., financial assets within the scope of IFRS 9) for which IFRS 5 specifically establishes that the measurement principles of the applicable accounting standard must be used. Non-current assets held for sale and discontinued operations may include portfolios of assets for which there are no prices in an active market. In such case, where an agreement has been reached with the purchaser, they are measured at fair value by referring to the sale prices resulting from that agreement. Where there is no agreement, they are measured using specific valuation techniques based on the asset and, where necessary, by employing external fairness opinions. The income and charges (net of tax effect) attributable to non-current assets held for sale and discontinued operations or recorded as such in the year are recognised in the income statement in a separate caption. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleAndDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-945": { "value": "9. Non-current assets held for sale and discontinued operations Non-current assets/liabilities for which a disposal process has commenced and for which disposal is deemed to be extremely probable are recorded in assets under Non-current assets held for sale and discontinued operations and in liabilities under Liabilities associated with non-current assets held for sale and discontinued operations. These assets/liabilities are measured at the lower of the carrying amount and fair value less cost to sell, except for some type of assets (e.g., financial assets within the scope of IFRS 9) for which IFRS 5 specifically establishes that the measurement principles of the applicable accounting standard must be used. Non-current assets held for sale and discontinued operations may include portfolios of assets for which there are no prices in an active market. In such case, where an agreement has been reached with the purchaser, they are measured at fair value by referring to the sale prices resulting from that agreement. Where there is no agreement, they are measured using specific valuation techniques based on the asset and, where necessary, by employing external fairness opinions. The income and charges (net of tax effect) attributable to non-current assets held for sale and discontinued operations or recorded as such in the year are recognised in the income statement in a separate caption. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-946": { "value": "10. Current and deferred tax Taxes on income, calculated according to domestic tax regulations, are accounted for as a cost on an accruals basis, in line with the method followed to include, in the financial statements, the costs and income that generated them. Therefore, they represent the balance of current and deferred income taxes for the year. Current tax assets and liabilities include the balances of the Group companies due to the relevant Italian and foreign tax authorities relating to direct taxation. More specifically, these captions include the net balance of tax liabilities from previous years and the current year, calculated on the basis of a prudent estimate of the tax charges due for the year, assessed according to the tax regulations currently in force, and the current tax assets represented by advances, by withholding taxes borne or other tax credits. The risk inherent in such proceedings and the risks inherent in proceedings where preliminary disbursements have not been requested are evaluated in applying the principles contained in IAS 37 regarding the best estimate of the economic resources required. Considering the Group\u2019s adoption of the national fiscal consolidation provisions, tax positions which may be referred to the Group companies are managed separately from an administrative standpoint. Deferred taxation is calculated according to the balance sheet liability method, taking into account the tax effect of the temporary differences between the book value of the assets and liabilities and their value for taxation purposes, which will determine taxable income or deductible amounts in the future. To this end, \u201ctaxable temporary differences\u201d are differences which will give rise to taxable income in future years while \u201cdeductible temporary differences\u201d are those which will give rise to deductible amounts in future years. Deferred tax liabilities are calculated by applying the tax rates currently in force to taxable temporary differences that are likely to generate a tax burden, and to the deductible temporary differences for which it is likely that there will be future taxable amounts at the time when the related tax deductibility occurs (so-called probability test). Deferred tax assets and liabilities related to the same tax and due in the same period are offset. If deferred tax assets and liabilities refer to items affecting the Income statement, the balancing entry is represented by taxes on income. Where deferred tax assets and liabilities relate to transactions that have been recorded in shareholders\u2019 equity without affecting earnings (such as adjustments on IAS/IFRS first-time adoption, measurements of financial assets recognised at fair value through other comprehensive income or of cash flow hedge derivative contracts), the balancing entry is made in shareholders\u2019 equity, under specific reserves where so provided (e.g. valuation reserves). Latent taxation on equity reserves that will become taxable \"however used\" is charged against shareholders\u2019 equity. Deferred taxation relating to revaluations arising on conversion to the euro, credited directly to a specific reserve named \u201cReserve pursuant to Article 21 of Legislative Decree 213/98\u201d, which qualify for deferred taxation, is charged directly against this reserve. No provision is made for reserves subject to latent taxation only in the event of distribution, since the size of the available reserves which have already been taxed leads to the belief that no transactions will be undertaken which may cause taxation of the untaxed reserves. Deferred tax liabilities referred to companies included in the fiscal consolidation are reported in their financial statements, in application of the accrual basis principle and in consideration of the fact that the effects of fiscal consolidation are limited to the settlement of current tax positions. Latent taxation on shareholders' equity items of consolidated companies is not recorded in the financial statements if it is unlikely that any tax liability will actually arise, also bearing in mind the permanent nature of the investment. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-914": { "value": "10. Current and deferred tax Taxes on income, calculated according to domestic tax regulations, are accounted for as a cost on an accruals basis, in line with the method followed to include, in the financial statements, the costs and income that generated them. Therefore, they represent the balance of current and deferred income taxes for the year. Current tax assets and liabilities include the balances of the Group companies due to the relevant Italian and foreign tax authorities relating to direct taxation. More specifically, these captions include the net balance of tax liabilities from previous years and the current year, calculated on the basis of a prudent estimate of the tax charges due for the year, assessed according to the tax regulations currently in force, and the current tax assets represented by advances, by withholding taxes borne or other tax credits. The risk inherent in such proceedings and the risks inherent in proceedings where preliminary disbursements have not been requested are evaluated in applying the principles contained in IAS 37 regarding the best estimate of the economic resources required. Considering the Group\u2019s adoption of the national fiscal consolidation provisions, tax positions which may be referred to the Group companies are managed separately from an administrative standpoint. Deferred taxation is calculated according to the balance sheet liability method, taking into account the tax effect of the temporary differences between the book value of the assets and liabilities and their value for taxation purposes, which will determine taxable income or deductible amounts in the future. To this end, \u201ctaxable temporary differences\u201d are differences which will give rise to taxable income in future years while \u201cdeductible temporary differences\u201d are those which will give rise to deductible amounts in future years. Deferred tax liabilities are calculated by applying the tax rates currently in force to taxable temporary differences that are likely to generate a tax burden, and to the deductible temporary differences for which it is likely that there will be future taxable amounts at the time when the related tax deductibility occurs (so-called probability test). Deferred tax assets and liabilities related to the same tax and due in the same period are offset. If deferred tax assets and liabilities refer to items affecting the Income statement, the balancing entry is represented by taxes on income. Where deferred tax assets and liabilities relate to transactions that have been recorded in shareholders\u2019 equity without affecting earnings (such as adjustments on IAS/IFRS first-time adoption, measurements of financial assets recognised at fair value through other comprehensive income or of cash flow hedge derivative contracts), the balancing entry is made in shareholders\u2019 equity, under specific reserves where so provided (e.g. valuation reserves). Latent taxation on equity reserves that will become taxable \"however used\" is charged against shareholders\u2019 equity. Deferred taxation relating to revaluations arising on conversion to the euro, credited directly to a specific reserve named \u201cReserve pursuant to Article 21 of Legislative Decree 213/98\u201d, which qualify for deferred taxation, is charged directly against this reserve. No provision is made for reserves subject to latent taxation only in the event of distribution, since the size of the available reserves which have already been taxed leads to the belief that no transactions will be undertaken which may cause taxation of the untaxed reserves. Deferred tax liabilities referred to companies included in the fiscal consolidation are reported in their financial statements, in application of the accrual basis principle and in consideration of the fact that the effects of fiscal consolidation are limited to the settlement of current tax positions. Latent taxation on shareholders' equity items of consolidated companies is not recorded in the financial statements if it is unlikely that any tax liability will actually arise, also bearing in mind the permanent nature of the investment. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-987": { "value": "11. Allowances for risks and charges Allowances for risks and charges for commitments and guarantees given This sub-caption of the allowances for risks and charges contains the allowances for credit risk recognised for loan commitments and guarantees given that come under the scope of the IFRS 9 impairment rules. For these cases, in general, the methods described for financial assets measured at amortised cost or at fair value through other comprehensive income are adopted for the assignment to the three credit risk stages and the calculation of the expected credit loss. This aggregate also includes allowances for risks and charges made to cover other types of commitments and guarantees given that, due to their specific characteristics, do not fall under the scope of impairment pursuant to IFRS 9. Post-employment benefits Company post-employment benefits are based on agreements and qualify as defined benefit plans. Liabilities related to such plans and the relative cost of current service are determined on the basis of actuarial assumptions based on the Projected Unit Credit Method. This method sets out that future obligations are forecast using past time-series analyses and the demographic curve and that such future cash flows are discounted based on a market interest rate. The provisions made in each year of service are considered separately and give rise to an additional unit of benefit entitlement for the purposes of the final obligation. The discounting rate is determined on the basis of market returns, surveyed as at the date of measurement, on high-quality corporate bonds, taking account of the residual average life of the liability. The present value of the liability at the reporting date is also adjusted by the fair value of any plan assets. Actuarial profits and losses (namely the changes in the current value of the obligation resulting from changes in the actuarial assumptions and adjustments based on past experience) are recognised in the statement of comprehensive income. Other allowances Other allowances for risks and charges record provisions related to legal obligations or connected to labour relationships or to litigations, also of a fiscal nature, originating from a past event for which a disbursement will probably arise to settle the obligations, provided that the amount of the disbursement may be estimated reliably. Consequently, a provision is recognised when, and only when: - there is a present obligation (legal or constructive) as a result of a past event; - it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and - a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the reporting date and takes into account the risks and uncertainties that inevitably surround many events and circumstances. Where time value is significant, provisions are discounted using current market rates. Provisions and increases due to time value are recorded in the income statement. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation or when the obligation is settled, the provision should be reversed. The caption also includes long-term benefits to employees, whose charges are determined with the same actuarial criteria described for post-employment benefits. Actuarial profits and losses are all immediately recognised in the income statement. Use of estimates and assumptions in preparing financial reports The preparation of financial reports requires the use of estimates and assumptions that may have a significant effect on the amounts stated in the balance sheet and income statement, and on the contingent assets and liabilities reported in the financial statements. Estimates are based on available information and subjective evaluations, also founded on past experience, which are used to formulate reasonable assumptions in measuring operating events. Given their nature, the estimates and assumptions used may vary from year to year, and hence it cannot be excluded that current amounts carried in the financial statements may differ significantly in future financial years as a result of changes in the subjective evaluations made. If there are greater uncertainties and/or the assets being measured are particularly material, the valuation is supported by specific fairness opinions from external appraisers/experts. The main cases for which subjective evaluations are required to be made by corporate management include: - the measurement of impairment losses on loans, investments, and, generally, other financial assets; - the use of measurement models for determining the fair value of financial instruments not listed on active markets; - the evaluation of the appropriateness of amounts stated for goodwill and other intangible assets; - the fair value measurement of real estate and valuable art assets; - the measurement of personnel funds and allowances for risks and charges; - the estimates and assumptions on the collectability of deferred tax assets; - the demographic (linked to the estimated mortality of insured people) and financial (deriving from the possible trend in financial markets) suppositions used to structure insurance products and define the basis for calculating integrative reserves provided for in insurance regulations, in addition to the shadow reserves, and liability adequacy test provided for in IFRS 4. For some of the types listed above, the main factors subject to estimates by the Group and which determine the carrying value of assets and liabilities in the financial statements can be identified. The following are noted, by way of example: - to determine the fair value of financial instruments not listed on active markets, if the use of parameters that cannot be obtained from the market is necessary, the main estimates regard, on one hand, development of future cash flows (or even income flows, in the case of equities), possibly conditional on future events and, on the other, the level of specific input parameters not listed on active markets; - the estimates for the assignment of loans and debt securities classified as Financial assets measured at amortised cost and Financial assets measured at fair value through other comprehensive income to the three credit risk stages required by IFRS 9 and to calculate the related expected credit losses involve: o the determination of the parameters for a significant increase in credit risk, essentially based on models for measuring the probability of default (PD) upon origination of the financial assets and at the reporting date; o the inclusion of forward-looking factors, including macroeconomic factors, for the determination of the PD and LGD; o the determination of the likelihood of sale of impaired financial assets, through the realisation of market positions; - to determine the future cash flow estimates from non-performing loans, a number of items are considered: the expected recovery times, the presumed realisable value of guarantees and the costs to be sustained for the recovery of credit exposure; - to determine the value in use of intangible assets with an indefinite life (brand name and goodwill) with regard to the Cash-Generating Units (CGU) comprising the Group, the future cash flows in the forecasting period of the analysis and the flows used to determine the terminal value, generated by the CGU, are subject to estimate, separately and appropriately discounted. Also the cost of capital is among the items subject to estimate; - to determine the value in use of intangible assets with a finite life (asset management and insurance portfolios) with regard to the CGUs comprising the Group, the useful life is subject to estimate, on the one hand, as well as the future cash flows arising from the asset, on the other. The cost of capital is subject to estimate in the case of intangible assets with a finite life as well; - the fair value measurement of real estate and valuable art assets is based on valuations prepared by qualified independent firms. Lease rentals, selling prices, discount rates and capitalisation rates are estimated in order to conduct the appraisals of the properties, while to conduct the appraisals on the valuable art assets, the estimate of the value is gathered from the performance of the exchanges of similar works (in terms of technique, size, subject) by the same author or regional movements and schools that are close with regard to style and technique; - to measure post-employment benefits, the present value of the obligations is subject to estimate, taking into account the flows, appropriately discounted, arising from past time-series analyses and the demographic curve; - to measure allowances for risks and charges, the amount of outflows necessary to fulfil the obligations is estimated, where possible, taking into account the effective probability of having to utilise resources; - to determine the value of deferred tax items, the likelihood of an effective future tax burden is estimated (taxable temporary differences) and the level of reasonable certainty \u2013 if it exists \u2013 of future taxable amounts at the time when the tax deductibility occurs (deductible temporary differences and tax losses carried forward). ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-947": { "value": "11. Allowances for risks and charges Allowances for risks and charges for commitments and guarantees given This sub-caption of the allowances for risks and charges contains the allowances for credit risk recognised for loan commitments and guarantees given that come under the scope of the IFRS 9 impairment rules. For these cases, in general, the methods described for financial assets measured at amortised cost or at fair value through other comprehensive income are adopted for the assignment to the three credit risk stages and the calculation of the expected credit loss. This aggregate also includes allowances for risks and charges made to cover other types of commitments and guarantees given that, due to their specific characteristics, do not fall under the scope of impairment pursuant to IFRS 9. Post-employment benefits Company post-employment benefits are based on agreements and qualify as defined benefit plans. Liabilities related to such plans and the relative cost of current service are determined on the basis of actuarial assumptions based on the Projected Unit Credit Method. This method sets out that future obligations are forecast using past time-series analyses and the demographic curve and that such future cash flows are discounted based on a market interest rate. The provisions made in each year of service are considered separately and give rise to an additional unit of benefit entitlement for the purposes of the final obligation. The discounting rate is determined on the basis of market returns, surveyed as at the date of measurement, on high-quality corporate bonds, taking account of the residual average life of the liability. The present value of the liability at the reporting date is also adjusted by the fair value of any plan assets. Actuarial profits and losses (namely the changes in the current value of the obligation resulting from changes in the actuarial assumptions and adjustments based on past experience) are recognised in the statement of comprehensive income. Other allowances Other allowances for risks and charges record provisions related to legal obligations or connected to labour relationships or to litigations, also of a fiscal nature, originating from a past event for which a disbursement will probably arise to settle the obligations, provided that the amount of the disbursement may be estimated reliably. Consequently, a provision is recognised when, and only when: - there is a present obligation (legal or constructive) as a result of a past event; - it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and - a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the reporting date and takes into account the risks and uncertainties that inevitably surround many events and circumstances. Where time value is significant, provisions are discounted using current market rates. Provisions and increases due to time value are recorded in the income statement. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation or when the obligation is settled, the provision should be reversed. The caption also includes long-term benefits to employees, whose charges are determined with the same actuarial criteria described for post-employment benefits. Actuarial profits and losses are all immediately recognised in the income statement. Use of estimates and assumptions in preparing financial reports The preparation of financial reports requires the use of estimates and assumptions that may have a significant effect on the amounts stated in the balance sheet and income statement, and on the contingent assets and liabilities reported in the financial statements. Estimates are based on available information and subjective evaluations, also founded on past experience, which are used to formulate reasonable assumptions in measuring operating events. Given their nature, the estimates and assumptions used may vary from year to year, and hence it cannot be excluded that current amounts carried in the financial statements may differ significantly in future financial years as a result of changes in the subjective evaluations made. If there are greater uncertainties and/or the assets being measured are particularly material, the valuation is supported by specific fairness opinions from external appraisers/experts. The main cases for which subjective evaluations are required to be made by corporate management include: - the measurement of impairment losses on loans, investments, and, generally, other financial assets; - the use of measurement models for determining the fair value of financial instruments not listed on active markets; - the evaluation of the appropriateness of amounts stated for goodwill and other intangible assets; - the fair value measurement of real estate and valuable art assets; - the measurement of personnel funds and allowances for risks and charges; - the estimates and assumptions on the collectability of deferred tax assets; - the demographic (linked to the estimated mortality of insured people) and financial (deriving from the possible trend in financial markets) suppositions used to structure insurance products and define the basis for calculating integrative reserves provided for in insurance regulations, in addition to the shadow reserves, and liability adequacy test provided for in IFRS 4. For some of the types listed above, the main factors subject to estimates by the Group and which determine the carrying value of assets and liabilities in the financial statements can be identified. The following are noted, by way of example: - to determine the fair value of financial instruments not listed on active markets, if the use of parameters that cannot be obtained from the market is necessary, the main estimates regard, on one hand, development of future cash flows (or even income flows, in the case of equities), possibly conditional on future events and, on the other, the level of specific input parameters not listed on active markets; - the estimates for the assignment of loans and debt securities classified as Financial assets measured at amortised cost and Financial assets measured at fair value through other comprehensive income to the three credit risk stages required by IFRS 9 and to calculate the related expected credit losses involve: o the determination of the parameters for a significant increase in credit risk, essentially based on models for measuring the probability of default (PD) upon origination of the financial assets and at the reporting date; o the inclusion of forward-looking factors, including macroeconomic factors, for the determination of the PD and LGD; o the determination of the likelihood of sale of impaired financial assets, through the realisation of market positions; - to determine the future cash flow estimates from non-performing loans, a number of items are considered: the expected recovery times, the presumed realisable value of guarantees and the costs to be sustained for the recovery of credit exposure; - to determine the value in use of intangible assets with an indefinite life (brand name and goodwill) with regard to the Cash-Generating Units (CGU) comprising the Group, the future cash flows in the forecasting period of the analysis and the flows used to determine the terminal value, generated by the CGU, are subject to estimate, separately and appropriately discounted. Also the cost of capital is among the items subject to estimate; - to determine the value in use of intangible assets with a finite life (asset management and insurance portfolios) with regard to the CGUs comprising the Group, the useful life is subject to estimate, on the one hand, as well as the future cash flows arising from the asset, on the other. The cost of capital is subject to estimate in the case of intangible assets with a finite life as well; - the fair value measurement of real estate and valuable art assets is based on valuations prepared by qualified independent firms. Lease rentals, selling prices, discount rates and capitalisation rates are estimated in order to conduct the appraisals of the properties, while to conduct the appraisals on the valuable art assets, the estimate of the value is gathered from the performance of the exchanges of similar works (in terms of technique, size, subject) by the same author or regional movements and schools that are close with regard to style and technique; - to measure post-employment benefits, the present value of the obligations is subject to estimate, taking into account the flows, appropriately discounted, arising from past time-series analyses and the demographic curve; - to measure allowances for risks and charges, the amount of outflows necessary to fulfil the obligations is estimated, where possible, taking into account the effective probability of having to utilise resources; - to determine the value of deferred tax items, the likelihood of an effective future tax burden is estimated (taxable temporary differences) and the level of reasonable certainty \u2013 if it exists \u2013 of future taxable amounts at the time when the tax deductibility occurs (deductible temporary differences and tax losses carried forward). ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1012": { "value": "11. Allowances for risks and charges Allowances for risks and charges for commitments and guarantees given This sub-caption of the allowances for risks and charges contains the allowances for credit risk recognised for loan commitments and guarantees given that come under the scope of the IFRS 9 impairment rules. For these cases, in general, the methods described for financial assets measured at amortised cost or at fair value through other comprehensive income are adopted for the assignment to the three credit risk stages and the calculation of the expected credit loss. This aggregate also includes allowances for risks and charges made to cover other types of commitments and guarantees given that, due to their specific characteristics, do not fall under the scope of impairment pursuant to IFRS 9. Post-employment benefits Company post-employment benefits are based on agreements and qualify as defined benefit plans. Liabilities related to such plans and the relative cost of current service are determined on the basis of actuarial assumptions based on the Projected Unit Credit Method. This method sets out that future obligations are forecast using past time-series analyses and the demographic curve and that such future cash flows are discounted based on a market interest rate. The provisions made in each year of service are considered separately and give rise to an additional unit of benefit entitlement for the purposes of the final obligation. The discounting rate is determined on the basis of market returns, surveyed as at the date of measurement, on high-quality corporate bonds, taking account of the residual average life of the liability. The present value of the liability at the reporting date is also adjusted by the fair value of any plan assets. Actuarial profits and losses (namely the changes in the current value of the obligation resulting from changes in the actuarial assumptions and adjustments based on past experience) are recognised in the statement of comprehensive income. Other allowances Other allowances for risks and charges record provisions related to legal obligations or connected to labour relationships or to litigations, also of a fiscal nature, originating from a past event for which a disbursement will probably arise to settle the obligations, provided that the amount of the disbursement may be estimated reliably. Consequently, a provision is recognised when, and only when: - there is a present obligation (legal or constructive) as a result of a past event; - it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and - a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the reporting date and takes into account the risks and uncertainties that inevitably surround many events and circumstances. Where time value is significant, provisions are discounted using current market rates. Provisions and increases due to time value are recorded in the income statement. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation or when the obligation is settled, the provision should be reversed. The caption also includes long-term benefits to employees, whose charges are determined with the same actuarial criteria described for post-employment benefits. Actuarial profits and losses are all immediately recognised in the income statement. 2.4. Credit risk mitigation techniques During the credit granting and managing process, the acquisition of mitigating factors is encouraged for counterparties with non-investment grade ratings or for certain types of medium/long-term transactions. The mitigating factors that have the greatest impact include pledges of financial assets and residential mortgages. Other forms of risk mitigation are pledges on non-financial assets and non-residential mortgages. The strength of the personal guarantees issued by rated parties, typically banks/insurance companies, Credit Guarantee Consortia and corporations, is instead assessed on the basis of the type of guarantee and guarantor\u2019s credit quality. Detailed processes govern the material acquisition of the individual collateral and guarantees, identifying the structure responsible as well as the methods for their correct completion, for archiving the documentation and for the complete and timely recording of the related information in the applications. The set of internal regulations and organisational and procedural controls is aimed at ensuring that: \u2013 all the requirements for the validity and effectiveness of credit protection are satisfied; \u2013 a standard contractual framework is defined for guarantees and collateral of general and current use, accompanied by full instructions for its use; \u2013 the methods for approving collateral and guarantee documents deviating from the standard by structures other than those in charge of commercial relations with the customer are identified. The guidelines for the management of collateral and guarantees are the same for the entire Group. The management of collateral and guarantees received for the Parent Company and the Italian subsidiaries is carried out on a single platform, which is integrated with the register of assets and the portal that manages the immovable property valuations. The granting of credit with the acquisition of collateral is subject to internal rules and processes \u2013 for the valuation of the asset, the acquisition of the collateral and the control of its value. The enforcement of the collateral is handled by specialist departments, which are responsible for credit recovery. In any case, the presence of collateral does not grant exemption from an overall assessment of the credit risk, focused mainly on the borrower's ability to meet the obligations assumed, irrespective of the associated collateral. The assessment of the pledged collateral is based on the actual value, namely the market value for financial instruments listed on a regulated market, or, otherwise, the estimated realisable value. The resulting value is multiplied by the haircut percentage rates, differentiated according to the financial instruments accepted as collateral. For real-estate collateral, the prudential market value is considered; for properties under construction, the construction cost is considered, net of prudential haircuts differentiated according to the intended use of the property. Assets are appraised by internal and external appraisers. The external appraisers are included in a special list of professionals accredited on the basis of an individual verification of their capabilities, professionalism and experience. The valuation of residential properties used as collateral for mortgage loans to private individuals is mainly assigned to specialised companies. The work of the appraisers is monitored on an ongoing basis, by means of statistical verifications and sample checks carried out centrally. The appraisers are required to produce estimates on the basis of standardised appraisal reports, differentiated according to the valuation method to be applied and the characteristics of the asset, in accordance with the \u201cRules on immovable property valuations for credit purposes\u201d drawn up by the Bank. The internal rules are consistent with the \u201cGuidelines for the valuation of real estate properties securing credit exposures\u201d promoted by the Italian Banking Association and with the European Valuation Standards. Immovable property valuations are managed through a specific integrated platform covering the entire appraisal phase, ensuring that assignments are properly awarded, on an independent basis and according to objective criteria, the workflow is thoroughly monitored, valuation standards are correctly applied and all information and documents regarding immovable properties are recorded. The market value of the immovable property collateral is periodically recalculated through various statistical valuation methods, that make use of prices/coefficients provided by an external supplier with proven skills and a solid reputation for surveying and measuring the market prices of Italian real-estate assets. Asset value is constantly monitored. The appraisers carry out inspections and verify the work progress for properties under construction. The valuation is duly updated in the event of restriction or splitting mortgage, of damage to the property, significant impairment losses reported by market indicators used to monitor fair value and, in any case, according to the due dates established for significant exposures, or when there are immovable properties securing non-performing loans. In order to limit the risks of absence or termination of the protection, specific safeguards are in place, including: restoration of a pledge when the assets decrease below their initial value or, for immovable property collateral, the obligation of insurance cover against fire damage and the presence of adequate monitoring of the property\u2019s value. There is also an \u201cumbrella\u201d insurance policy that, with limited exceptions, covers damages on the entire portfolio of properties mortgaged as collateral for the loans granted. Collateral and guarantees are subject to accurate, regular control using a specific application, the CRM engine, in which a series of tests have been implemented to confirm the effective compliance with the requirements set by prudential supervision regulations. The support application verifies whether the collateral and guarantees received are eligible with regard to the methods permitted by the regulations in relation to the various categories of collateral and guarantees for calculating capital requirements (Standardised and Internal Rating Based). Based on the specifics of each category, the eligibility results are defined at the level of individual guarantee for unfunded guarantees (usually personal guarantees) or, for collateral, for each asset or financial instrument. The Bank uses two integrated asset and guarantee management systems (PGA - Active Guarantees Portal and ABS - System Assets Archive) in order to improve the efficiency of collateral management. This has been accompanied by the development of a specific system for managing bad loans, to track the main legal actions and particularly those relating to the enforcement of immovable property collateral (EPC - Ex Parte Creditoris). In order to mitigate the counterparty risk associated with OTC (i.e., unregulated) derivatives and SFTs (Securities Financing Transactions, i.e. securities lending and repurchase agreements), the Group uses bilateral netting arrangements that allow the netting of claims and obligations if a counterparty defaults. This is achieved by entering into International Swap Derivatives Association (ISDA) and International Securities Market Association/Public Securities Association (ISMA/PSA) agreements, which also reduce the absorption of regulatory capital in accordance with supervisory provisions. In addition, the Group has collateral exchange arrangements in place, mainly with daily frequency, to hedge OTC derivatives transactions (Credit Support Annexes), also due to the margin requirements for non-centrally cleared derivatives, established by the EMIR; also for SFTs, the Bank implements daily margining arrangements (GMRAs - Global Master Repurchase Agreements and GMSLAs - Global Master Securities Lending Agreements). To mitigate the exposure to counterparties, mainly corporate customers, and the volatility arising from credit adjustments to derivative valuations (CVAs), the Bank also buys protection through credit default swaps, both on individual companies and credit indices. In 2022, the Parent Company continued its activities relating to the \u201cGARC\u201d (Active Credit Risk Management) Project, involving a platform for monitoring credit risk of performing portfolios. The initiative involves the systematic acquisition of both personal guarantees and collateral to support lending to companies. The guarantees obtained provide hedging of default risk (past due, unlikely to pay and bad loan) of granular portfolios and freeing up of economic and regulatory capital, as envisaged by the current Supervisory Regulations on the matter (including Regulation (EU) 575/2013 and Bank of Italy Circular 285/2013). During the year \u2013 again as part of the GARC Project \u2013 with regard to operations with the Guarantee Fund for SMEs, the ramp- up was completed of four tranched cover transactions on the junior risk of portfolios of newly disbursed loans in support of businesses adversely affected by the COVID-19 emergency. For details of the transactions carried out in 2022 under the GARC Project, see the description provided in paragraph C. Securitisations of this chapter. In order to optimise capital absorption, transactions to hedge the risk of expropriation of the compulsory and unrestricted reserves of the ISP Group banks operating in Serbia, Egypt and Moldova were also renewed and the hedging for the bank operating in Albania was increased. During the year, with the aim of improving the overall risk/return profile of the loan portfolios, also in terms of capital optimisation, Intesa Sanpaolo carried out a securitisation on a portfolio of performing loans originating from leases, with significant risk transfer, for a total gross amount of around 3.7 billion euro. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForCollateralExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1029": { "value": "11. Allowances for risks and charges Allowances for risks and charges for commitments and guarantees given This sub-caption of the allowances for risks and charges contains the allowances for credit risk recognised for loan commitments and guarantees given that come under the scope of the IFRS 9 impairment rules. For these cases, in general, the methods described for financial assets measured at amortised cost or at fair value through other comprehensive income are adopted for the assignment to the three credit risk stages and the calculation of the expected credit loss. This aggregate also includes allowances for risks and charges made to cover other types of commitments and guarantees given that, due to their specific characteristics, do not fall under the scope of impairment pursuant to IFRS 9. Post-employment benefits Company post-employment benefits are based on agreements and qualify as defined benefit plans. Liabilities related to such plans and the relative cost of current service are determined on the basis of actuarial assumptions based on the Projected Unit Credit Method. This method sets out that future obligations are forecast using past time-series analyses and the demographic curve and that such future cash flows are discounted based on a market interest rate. The provisions made in each year of service are considered separately and give rise to an additional unit of benefit entitlement for the purposes of the final obligation. The discounting rate is determined on the basis of market returns, surveyed as at the date of measurement, on high-quality corporate bonds, taking account of the residual average life of the liability. The present value of the liability at the reporting date is also adjusted by the fair value of any plan assets. Actuarial profits and losses (namely the changes in the current value of the obligation resulting from changes in the actuarial assumptions and adjustments based on past experience) are recognised in the statement of comprehensive income. Other allowances Other allowances for risks and charges record provisions related to legal obligations or connected to labour relationships or to litigations, also of a fiscal nature, originating from a past event for which a disbursement will probably arise to settle the obligations, provided that the amount of the disbursement may be estimated reliably. Consequently, a provision is recognised when, and only when: - there is a present obligation (legal or constructive) as a result of a past event; - it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and - a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the reporting date and takes into account the risks and uncertainties that inevitably surround many events and circumstances. Where time value is significant, provisions are discounted using current market rates. Provisions and increases due to time value are recorded in the income statement. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation or when the obligation is settled, the provision should be reversed. The caption also includes long-term benefits to employees, whose charges are determined with the same actuarial criteria described for post-employment benefits. Actuarial profits and losses are all immediately recognised in the income statement. 2.4. Credit risk mitigation techniques During the credit granting and managing process, the acquisition of mitigating factors is encouraged for counterparties with non-investment grade ratings or for certain types of medium/long-term transactions. The mitigating factors that have the greatest impact include pledges of financial assets and residential mortgages. Other forms of risk mitigation are pledges on non-financial assets and non-residential mortgages. The strength of the personal guarantees issued by rated parties, typically banks/insurance companies, Credit Guarantee Consortia and corporations, is instead assessed on the basis of the type of guarantee and guarantor\u2019s credit quality. Detailed processes govern the material acquisition of the individual collateral and guarantees, identifying the structure responsible as well as the methods for their correct completion, for archiving the documentation and for the complete and timely recording of the related information in the applications. The set of internal regulations and organisational and procedural controls is aimed at ensuring that: \u2013 all the requirements for the validity and effectiveness of credit protection are satisfied; \u2013 a standard contractual framework is defined for guarantees and collateral of general and current use, accompanied by full instructions for its use; \u2013 the methods for approving collateral and guarantee documents deviating from the standard by structures other than those in charge of commercial relations with the customer are identified. The guidelines for the management of collateral and guarantees are the same for the entire Group. The management of collateral and guarantees received for the Parent Company and the Italian subsidiaries is carried out on a single platform, which is integrated with the register of assets and the portal that manages the immovable property valuations. The granting of credit with the acquisition of collateral is subject to internal rules and processes \u2013 for the valuation of the asset, the acquisition of the collateral and the control of its value. The enforcement of the collateral is handled by specialist departments, which are responsible for credit recovery. In any case, the presence of collateral does not grant exemption from an overall assessment of the credit risk, focused mainly on the borrower's ability to meet the obligations assumed, irrespective of the associated collateral. The assessment of the pledged collateral is based on the actual value, namely the market value for financial instruments listed on a regulated market, or, otherwise, the estimated realisable value. The resulting value is multiplied by the haircut percentage rates, differentiated according to the financial instruments accepted as collateral. For real-estate collateral, the prudential market value is considered; for properties under construction, the construction cost is considered, net of prudential haircuts differentiated according to the intended use of the property. Assets are appraised by internal and external appraisers. The external appraisers are included in a special list of professionals accredited on the basis of an individual verification of their capabilities, professionalism and experience. The valuation of residential properties used as collateral for mortgage loans to private individuals is mainly assigned to specialised companies. The work of the appraisers is monitored on an ongoing basis, by means of statistical verifications and sample checks carried out centrally. The appraisers are required to produce estimates on the basis of standardised appraisal reports, differentiated according to the valuation method to be applied and the characteristics of the asset, in accordance with the \u201cRules on immovable property valuations for credit purposes\u201d drawn up by the Bank. The internal rules are consistent with the \u201cGuidelines for the valuation of real estate properties securing credit exposures\u201d promoted by the Italian Banking Association and with the European Valuation Standards. Immovable property valuations are managed through a specific integrated platform covering the entire appraisal phase, ensuring that assignments are properly awarded, on an independent basis and according to objective criteria, the workflow is thoroughly monitored, valuation standards are correctly applied and all information and documents regarding immovable properties are recorded. The market value of the immovable property collateral is periodically recalculated through various statistical valuation methods, that make use of prices/coefficients provided by an external supplier with proven skills and a solid reputation for surveying and measuring the market prices of Italian real-estate assets. Asset value is constantly monitored. The appraisers carry out inspections and verify the work progress for properties under construction. The valuation is duly updated in the event of restriction or splitting mortgage, of damage to the property, significant impairment losses reported by market indicators used to monitor fair value and, in any case, according to the due dates established for significant exposures, or when there are immovable properties securing non-performing loans. In order to limit the risks of absence or termination of the protection, specific safeguards are in place, including: restoration of a pledge when the assets decrease below their initial value or, for immovable property collateral, the obligation of insurance cover against fire damage and the presence of adequate monitoring of the property\u2019s value. There is also an \u201cumbrella\u201d insurance policy that, with limited exceptions, covers damages on the entire portfolio of properties mortgaged as collateral for the loans granted. Collateral and guarantees are subject to accurate, regular control using a specific application, the CRM engine, in which a series of tests have been implemented to confirm the effective compliance with the requirements set by prudential supervision regulations. The support application verifies whether the collateral and guarantees received are eligible with regard to the methods permitted by the regulations in relation to the various categories of collateral and guarantees for calculating capital requirements (Standardised and Internal Rating Based). Based on the specifics of each category, the eligibility results are defined at the level of individual guarantee for unfunded guarantees (usually personal guarantees) or, for collateral, for each asset or financial instrument. The Bank uses two integrated asset and guarantee management systems (PGA - Active Guarantees Portal and ABS - System Assets Archive) in order to improve the efficiency of collateral management. This has been accompanied by the development of a specific system for managing bad loans, to track the main legal actions and particularly those relating to the enforcement of immovable property collateral (EPC - Ex Parte Creditoris). In order to mitigate the counterparty risk associated with OTC (i.e., unregulated) derivatives and SFTs (Securities Financing Transactions, i.e. securities lending and repurchase agreements), the Group uses bilateral netting arrangements that allow the netting of claims and obligations if a counterparty defaults. This is achieved by entering into International Swap Derivatives Association (ISDA) and International Securities Market Association/Public Securities Association (ISMA/PSA) agreements, which also reduce the absorption of regulatory capital in accordance with supervisory provisions. In addition, the Group has collateral exchange arrangements in place, mainly with daily frequency, to hedge OTC derivatives transactions (Credit Support Annexes), also due to the margin requirements for non-centrally cleared derivatives, established by the EMIR; also for SFTs, the Bank implements daily margining arrangements (GMRAs - Global Master Repurchase Agreements and GMSLAs - Global Master Securities Lending Agreements). To mitigate the exposure to counterparties, mainly corporate customers, and the volatility arising from credit adjustments to derivative valuations (CVAs), the Bank also buys protection through credit default swaps, both on individual companies and credit indices. In 2022, the Parent Company continued its activities relating to the \u201cGARC\u201d (Active Credit Risk Management) Project, involving a platform for monitoring credit risk of performing portfolios. The initiative involves the systematic acquisition of both personal guarantees and collateral to support lending to companies. The guarantees obtained provide hedging of default risk (past due, unlikely to pay and bad loan) of granular portfolios and freeing up of economic and regulatory capital, as envisaged by the current Supervisory Regulations on the matter (including Regulation (EU) 575/2013 and Bank of Italy Circular 285/2013). During the year \u2013 again as part of the GARC Project \u2013 with regard to operations with the Guarantee Fund for SMEs, the ramp- up was completed of four tranched cover transactions on the junior risk of portfolios of newly disbursed loans in support of businesses adversely affected by the COVID-19 emergency. For details of the transactions carried out in 2022 under the GARC Project, see the description provided in paragraph C. Securitisations of this chapter. In order to optimise capital absorption, transactions to hedge the risk of expropriation of the compulsory and unrestricted reserves of the ISP Group banks operating in Serbia, Egypt and Moldova were also renewed and the hedging for the bank operating in Albania was increased. During the year, with the aim of improving the overall risk/return profile of the loan portfolios, also in terms of capital optimisation, Intesa Sanpaolo carried out a securitisation on a portfolio of performing loans originating from leases, with significant risk transfer, for a total gross amount of around 3.7 billion euro. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialGuaranteesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1057": { "value": "12. Financial liabilities measured at amortised cost Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in lease transactions. Recognition criteria Initial recognition of these financial liabilities occurs at the date of subscription of the contract, which usually coincides with the time of collection of the sums deposited or the issue of debt securities. Initial recognition is based on the fair value of the liabilities, normally equal to the amount collected or the issue price, increased by any additional charges/revenues directly attributable to the single funding or issuing transaction. Internal administrative costs are excluded. Lease payables are recognised at the present value of the future lease payments, discounted using the implicit interest rate of the transaction or, where it cannot be determined, the marginal financing rate. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. Lease payables are remeasured when there is a lease modification (e.g. a change in the contract which is not accounted for/considered as a separate contract); the effect of the remeasurement will be a corresponding adjustment to the right-of-use asset. Derecognition criteria Financial liabilities are derecognised from the balance sheet when they have expired or extinguished. Derecognition also occurs for repurchase of previously-issued bonds. The difference between book value of the liability and amount paid for repurchase is recorded in the income statement. Placement of own securities, after their repurchase, is considered a new issue with recognition at the new placement price. 13. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, in particular, the negative fair value of trading derivatives, as well as embedded derivatives with a negative fair value separated from liabilities measured at amortised cost. It also includes liabilities determined by short selling generated by trading of securities and certificates forming part of the trading business model. Measurement criteria All financial liabilities held for trading are measured at fair value through profit or loss. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 14. Financial liabilities designated at fair value Classification criteria Financial liabilities designated at fair value are recorded under this caption, on the basis of the fair value option given to companies by IFRS 9 and in compliance with the cases contemplated in the reference regulations. This category of liabilities includes certificates that form part of the banking book business model. Recognition criteria These liabilities are recorded at fair value as at the date of issue, including the value of any embedded derivatives, net of placement fees paid. Measurement criteria These liabilities are measured at fair value according to the following rules established by IFRS 9: - changes in fair value attributable to changes in own credit risk must be recognised in the statement of comprehensive income (shareholders\u2019 equity); - the remaining changes in fair value must be recognised in the income statement. The amounts recognised in the statement of comprehensive income are not subsequently recycled to the income statement. This method of accounting must not be applied when recognition of the effects of own credit risk on shareholders\u2019 equity results in or accentuates an accounting mismatch in the income statement. In this case, gains and losses associated with the liability, including those resulting from changes in own credit risk, must be recognised in the income statement. Derecognition criteria The financial liabilities designated at fair value are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed with the substantial transfer of all the risks and rewards connected to it. 6. Payables and securities issued Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in finance lease transactions. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. 7. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities determined by short selling generated by securities trading activities. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 8. Financial liabilities designated at fair value through profit or loss Classification criteria Financial liabilities designated at fair value through profit or loss are recorded under this caption, on the basis of the fair value option given to companies by IAS 39, in compliance with the cases contemplated in the reference regulations. The Group exercised the fair value option for liabilities, designating insurance products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features. Investments relating to such forms of deposits, as already reported, were also designated at fair value, thereby eliminating or considerably reducing \u201caccounting biases\u201d that would otherwise have arisen from measuring assets and liabilities on the basis of different accounting criteria. Measurement criteria These liabilities are designated at fair value through profit or loss. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1072": { "value": "12. Financial liabilities measured at amortised cost Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in lease transactions. Recognition criteria Initial recognition of these financial liabilities occurs at the date of subscription of the contract, which usually coincides with the time of collection of the sums deposited or the issue of debt securities. Initial recognition is based on the fair value of the liabilities, normally equal to the amount collected or the issue price, increased by any additional charges/revenues directly attributable to the single funding or issuing transaction. Internal administrative costs are excluded. Lease payables are recognised at the present value of the future lease payments, discounted using the implicit interest rate of the transaction or, where it cannot be determined, the marginal financing rate. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. Lease payables are remeasured when there is a lease modification (e.g. a change in the contract which is not accounted for/considered as a separate contract); the effect of the remeasurement will be a corresponding adjustment to the right-of-use asset. Derecognition criteria Financial liabilities are derecognised from the balance sheet when they have expired or extinguished. Derecognition also occurs for repurchase of previously-issued bonds. The difference between book value of the liability and amount paid for repurchase is recorded in the income statement. Placement of own securities, after their repurchase, is considered a new issue with recognition at the new placement price. 13. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, in particular, the negative fair value of trading derivatives, as well as embedded derivatives with a negative fair value separated from liabilities measured at amortised cost. It also includes liabilities determined by short selling generated by trading of securities and certificates forming part of the trading business model. Measurement criteria All financial liabilities held for trading are measured at fair value through profit or loss. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 14. Financial liabilities designated at fair value Classification criteria Financial liabilities designated at fair value are recorded under this caption, on the basis of the fair value option given to companies by IFRS 9 and in compliance with the cases contemplated in the reference regulations. This category of liabilities includes certificates that form part of the banking book business model. Recognition criteria These liabilities are recorded at fair value as at the date of issue, including the value of any embedded derivatives, net of placement fees paid. Measurement criteria These liabilities are measured at fair value according to the following rules established by IFRS 9: - changes in fair value attributable to changes in own credit risk must be recognised in the statement of comprehensive income (shareholders\u2019 equity); - the remaining changes in fair value must be recognised in the income statement. The amounts recognised in the statement of comprehensive income are not subsequently recycled to the income statement. This method of accounting must not be applied when recognition of the effects of own credit risk on shareholders\u2019 equity results in or accentuates an accounting mismatch in the income statement. In this case, gains and losses associated with the liability, including those resulting from changes in own credit risk, must be recognised in the income statement. Derecognition criteria The financial liabilities designated at fair value are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed with the substantial transfer of all the risks and rewards connected to it. 6. Payables and securities issued Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in finance lease transactions. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. 7. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities determined by short selling generated by securities trading activities. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 8. Financial liabilities designated at fair value through profit or loss Classification criteria Financial liabilities designated at fair value through profit or loss are recorded under this caption, on the basis of the fair value option given to companies by IAS 39, in compliance with the cases contemplated in the reference regulations. The Group exercised the fair value option for liabilities, designating insurance products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features. Investments relating to such forms of deposits, as already reported, were also designated at fair value, thereby eliminating or considerably reducing \u201caccounting biases\u201d that would otherwise have arisen from measuring assets and liabilities on the basis of different accounting criteria. Measurement criteria These liabilities are designated at fair value through profit or loss. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-915": { "value": "Own shares Any own shares held are directly deducted from equity. Similarly, their original cost and the profits or losses deriving from their subsequent sale are recorded in equity. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-948": { "value": "Employee termination indemnities Employee termination indemnities qualify as a \u201cpost-employment benefit\u201d classified as: - a \u201cdefined contribution plan\u201d to the extent of the portions accruing from 1 January 2007 (the date the reform of the supplementary pension schemes came into force pursuant to Legislative Decree 252 of 5 December 2005) when the employee opted for the complementary pension scheme or decided to allocate such portions to the INPS (the Italian Social Security Institute) Treasury fund. Therefore, the amounts, recorded under personnel expenses, are determined on the basis of amounts due without the application of actuarial calculation; - a \u201cdefined benefit plan\u201d to the extent of the portions of employee termination indemnities accrued until 31 December 2006. These amounts are recognised at their actuarial value determined using the \u201cProjected Unit Credit Method\u201d, without applying the pro-rata of the service rendered. Indeed, the current service cost of employee termination indemnities is almost entirely accrued and its revaluation in the years to come is not expected to generate significant benefits for employees. For the purposes of discounting, the rate used is the market yield of high-quality corporate bonds taking into account the average remaining life of the liability, weighted based on the percentage amount paid and advanced, for each maturity, with respect to the total to be paid and advanced until the expiry of the entire obligation. The plan\u2019s costs are recorded under personnel expenses, while actuarial profits and losses are recognised in the statement of comprehensive income. Employee benefits Employee benefits are defined as all forms of consideration given by an entity in exchange for service rendered by employees. Employee benefits are divided into: - short-term benefits (other than termination benefits or equity compensation benefits) that are expected to be paid in full within twelve months after the end of the period in which the employees render the related service and recognised in full through profit or loss when they become due (this category includes, for example, wages, salaries and \u201cextraordinary\u201d benefits); - post-employment benefits payable after the conclusion of employment that require the entity to provide future benefits to employees. These include employee termination indemnities and pension funds, which are in turn divided into defined contribution plans and defined benefit plans or company pension funds; - termination benefits, i.e. compensation that the company recognises to the staff members upon termination of the employment agreement, following the company's decision to terminate the employment relationship prior to the normal retirement date; - long-term benefits, other than those above, that are not expected to be paid in full within twelve months after the end of the period in which the employee rendered their service. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-917": { "value": "Share-based payments Share-based payments are recorded in the income statement, with a corresponding increase in shareholders\u2019 equity, on the basis of the fair value of financial instruments attributed at assignment date, dividing the charge over the period set forth by the plan. In the case of options, the fair value is calculated using a model which considers, in addition to information such as strike price and expiry date of the option, spot price of the shares and their expected volatility, expected dividends and the risk-free interest rate, as well as the specific characteristics of the plan. The pricing model values the option and the probability of realisation of the condition on the basis of which the options have been assigned. The combination of the two values supplies the fair value of the assigned instrument. Any decrease in the number of financial instruments granted is accounted for as a cancellation of such instruments. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-916": { "value": "Employee benefits Employee benefits are defined as all forms of consideration given by an entity in exchange for service rendered by employees. Employee benefits are divided into: - short-term benefits (other than termination benefits or equity compensation benefits) that are expected to be paid in full within twelve months after the end of the period in which the employees render the related service and recognised in full through profit or loss when they become due (this category includes, for example, wages, salaries and \u201cextraordinary\u201d benefits); - post-employment benefits payable after the conclusion of employment that require the entity to provide future benefits to employees. These include employee termination indemnities and pension funds, which are in turn divided into defined contribution plans and defined benefit plans or company pension funds; - termination benefits, i.e. compensation that the company recognises to the staff members upon termination of the employment agreement, following the company's decision to terminate the employment relationship prior to the normal retirement date; - long-term benefits, other than those above, that are not expected to be paid in full within twelve months after the end of the period in which the employee rendered their service. Employee termination indemnities Employee termination indemnities qualify as a \u201cpost-employment benefit\u201d classified as: - a \u201cdefined contribution plan\u201d to the extent of the portions accruing from 1 January 2007 (the date the reform of the supplementary pension schemes came into force pursuant to Legislative Decree 252 of 5 December 2005) when the employee opted for the complementary pension scheme or decided to allocate such portions to the INPS (the Italian Social Security Institute) Treasury fund. Therefore, the amounts, recorded under personnel expenses, are determined on the basis of amounts due without the application of actuarial calculation; - a \u201cdefined benefit plan\u201d to the extent of the portions of employee termination indemnities accrued until 31 December 2006. These amounts are recognised at their actuarial value determined using the \u201cProjected Unit Credit Method\u201d, without applying the pro-rata of the service rendered. Indeed, the current service cost of employee termination indemnities is almost entirely accrued and its revaluation in the years to come is not expected to generate significant benefits for employees. For the purposes of discounting, the rate used is the market yield of high-quality corporate bonds taking into account the average remaining life of the liability, weighted based on the percentage amount paid and advanced, for each maturity, with respect to the total to be paid and advanced until the expiry of the entire obligation. The plan\u2019s costs are recorded under personnel expenses, while actuarial profits and losses are recognised in the statement of comprehensive income. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTerminationBenefits", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-918": { "value": "Offsetting of financial instruments According to IAS 32, paragraph 42, financial assets and financial liabilities are offset and the net amount presented in the financial statements when an entity: - has a legal enforceable right of set off which is currently exercisable in all circumstances, both in the ordinary course of business or in the event of default, insolvency or bankruptcy of the parties; - intends to settle the transactions on a net basis or on a gross settlement basis whose substantive effects are equivalent to a net settlement. For derivative instruments covered by netting agreements that meet the above requirements, Bank of Italy Circular 262 also requires the offsetting to be performed between trading and hedging derivatives, with the mismatches to be presented on a net basis. The net balance is usually allocated to the trading book rather than to the hedging derivatives, based on the actual amount of the mismatch between trading and hedging derivatives. In compliance with the requirements of IFRS 7, more detailed information is provided in the tables contained in Part B \u2013 Other information of these Notes to the financial statements, which present the following: - the carrying amounts of assets and liabilities that meet the requirements of IAS 32, paragraph 42, before and after offsetting; - the exposures subject to master netting agreements that have not been offset but have the potential to be offset following specific circumstances; - the collateral associated with them. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1058": { "value": "Recognition of revenues and costs Revenues are gross flows of economic benefits deriving from the performance of the company's ordinary business and are recognised when control of the goods or services is transferred to the customer, at an amount that represents the amount of consideration that the company considers it is entitled to. In particular, revenues are recognised by applying a model that must meet the following criteria: - identification of the contract, defined as an agreement in which the parties are committed to perform their respective obligations; - identification of the individual performance obligations contained in the contract; - determination of the transaction price, i.e. the expected consideration for the transfer of the goods or services to the customer; - allocation of the transaction price to each performance obligation, based on the sale prices of the individual obligation; - recognition of revenues when (or as) the performance obligation is satisfied by transferring a promised good or service to a customer. The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and services promised. It may include fixed or variable amounts or both. Revenues from variable fees are recognised in the income statement if they can be reliably estimated and only if it is highly likely that all or a significant part of this fee will not need to be reversed from the income statement in future periods. Where there is a high level of uncertainty related to the nature of the consideration, it will be recognised only when this uncertainty is resolved. Revenues may be recognised: - at a specific point in time, when the entity satisfies a performance obligation by transferring a promised good or service to the customer, or - over time, as the entity satisfies a performance obligation by transferring a promised good or service to the customer. The good is transferred when, or in the period when, the customer acquires control of the good. In particular: - interest is recognised on accrual on the basis of the contractual interest rate or the effective interest rate in the case of application of amortised cost. Interest income (or interest expense) includes differentials and positive (or negative) margins accrued up to the reporting date, relating to financial derivatives: a) hedging interest-generating assets and liabilities; b) classified in the balance sheet in the trading book, though related to financial assets and/or liabilities designated at fair value through profit or loss (fair value option) in management terms; c) related in management terms to assets and/or liabilities classified in the trading book and providing for the settlement of differentials or margins with different maturities; - overdue interest, which may be provided for by the relevant contracts is recorded in the income statement solely at the time of collection; - dividends are posted in the income statement when their distribution is approved, unless this date is not known or the information is not immediately available, in which case they may be recognised when they are collected; - commission income from services is recorded, on the basis of the existence of contractual agreements, in the period in which the services have been rendered. Commission income included in the amortised cost for the purposes of determining the effective interest rate is recognised under interest; - profits and losses from securities trading are recognised in the income statement at the date of sale, on the basis of the difference between the consideration paid or collected and the carrying value of such instruments; - revenues deriving from the sale of non-financial assets are recorded at the date of sale, or when the performance obligation towards the customer is satisfied. Costs are recognised in the income statement on an accruals basis. Costs relating to the receipt and performance of contracts with customers are recognised in the income statement in the periods when the related revenues are recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForExpensesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1050": { "value": "Recognition of revenues and costs Revenues are gross flows of economic benefits deriving from the performance of the company's ordinary business and are recognised when control of the goods or services is transferred to the customer, at an amount that represents the amount of consideration that the company considers it is entitled to. In particular, revenues are recognised by applying a model that must meet the following criteria: - identification of the contract, defined as an agreement in which the parties are committed to perform their respective obligations; - identification of the individual performance obligations contained in the contract; - determination of the transaction price, i.e. the expected consideration for the transfer of the goods or services to the customer; - allocation of the transaction price to each performance obligation, based on the sale prices of the individual obligation; - recognition of revenues when (or as) the performance obligation is satisfied by transferring a promised good or service to a customer. The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and services promised. It may include fixed or variable amounts or both. Revenues from variable fees are recognised in the income statement if they can be reliably estimated and only if it is highly likely that all or a significant part of this fee will not need to be reversed from the income statement in future periods. Where there is a high level of uncertainty related to the nature of the consideration, it will be recognised only when this uncertainty is resolved. Revenues may be recognised: - at a specific point in time, when the entity satisfies a performance obligation by transferring a promised good or service to the customer, or - over time, as the entity satisfies a performance obligation by transferring a promised good or service to the customer. The good is transferred when, or in the period when, the customer acquires control of the good. In particular: - interest is recognised on accrual on the basis of the contractual interest rate or the effective interest rate in the case of application of amortised cost. Interest income (or interest expense) includes differentials and positive (or negative) margins accrued up to the reporting date, relating to financial derivatives: a) hedging interest-generating assets and liabilities; b) classified in the balance sheet in the trading book, though related to financial assets and/or liabilities designated at fair value through profit or loss (fair value option) in management terms; c) related in management terms to assets and/or liabilities classified in the trading book and providing for the settlement of differentials or margins with different maturities; - overdue interest, which may be provided for by the relevant contracts is recorded in the income statement solely at the time of collection; - dividends are posted in the income statement when their distribution is approved, unless this date is not known or the information is not immediately available, in which case they may be recognised when they are collected; - commission income from services is recorded, on the basis of the existence of contractual agreements, in the period in which the services have been rendered. Commission income included in the amortised cost for the purposes of determining the effective interest rate is recognised under interest; - profits and losses from securities trading are recognised in the income statement at the date of sale, on the basis of the difference between the consideration paid or collected and the carrying value of such instruments; - revenues deriving from the sale of non-financial assets are recorded at the date of sale, or when the performance obligation towards the customer is satisfied. Costs are recognised in the income statement on an accruals basis. Costs relating to the receipt and performance of contracts with customers are recognised in the income statement in the periods when the related revenues are recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFeeAndCommissionIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1040": { "value": "Recognition of revenues and costs Revenues are gross flows of economic benefits deriving from the performance of the company's ordinary business and are recognised when control of the goods or services is transferred to the customer, at an amount that represents the amount of consideration that the company considers it is entitled to. In particular, revenues are recognised by applying a model that must meet the following criteria: - identification of the contract, defined as an agreement in which the parties are committed to perform their respective obligations; - identification of the individual performance obligations contained in the contract; - determination of the transaction price, i.e. the expected consideration for the transfer of the goods or services to the customer; - allocation of the transaction price to each performance obligation, based on the sale prices of the individual obligation; - recognition of revenues when (or as) the performance obligation is satisfied by transferring a promised good or service to a customer. The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and services promised. It may include fixed or variable amounts or both. Revenues from variable fees are recognised in the income statement if they can be reliably estimated and only if it is highly likely that all or a significant part of this fee will not need to be reversed from the income statement in future periods. Where there is a high level of uncertainty related to the nature of the consideration, it will be recognised only when this uncertainty is resolved. Revenues may be recognised: - at a specific point in time, when the entity satisfies a performance obligation by transferring a promised good or service to the customer, or - over time, as the entity satisfies a performance obligation by transferring a promised good or service to the customer. The good is transferred when, or in the period when, the customer acquires control of the good. In particular: - interest is recognised on accrual on the basis of the contractual interest rate or the effective interest rate in the case of application of amortised cost. Interest income (or interest expense) includes differentials and positive (or negative) margins accrued up to the reporting date, relating to financial derivatives: a) hedging interest-generating assets and liabilities; b) classified in the balance sheet in the trading book, though related to financial assets and/or liabilities designated at fair value through profit or loss (fair value option) in management terms; c) related in management terms to assets and/or liabilities classified in the trading book and providing for the settlement of differentials or margins with different maturities; - overdue interest, which may be provided for by the relevant contracts is recorded in the income statement solely at the time of collection; - dividends are posted in the income statement when their distribution is approved, unless this date is not known or the information is not immediately available, in which case they may be recognised when they are collected; - commission income from services is recorded, on the basis of the existence of contractual agreements, in the period in which the services have been rendered. Commission income included in the amortised cost for the purposes of determining the effective interest rate is recognised under interest; - profits and losses from securities trading are recognised in the income statement at the date of sale, on the basis of the difference between the consideration paid or collected and the carrying value of such instruments; - revenues deriving from the sale of non-financial assets are recorded at the date of sale, or when the performance obligation towards the customer is satisfied. Costs are recognised in the income statement on an accruals basis. Costs relating to the receipt and performance of contracts with customers are recognised in the income statement in the periods when the related revenues are recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceCostsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1030": { "value": "Recognition of revenues and costs Revenues are gross flows of economic benefits deriving from the performance of the company's ordinary business and are recognised when control of the goods or services is transferred to the customer, at an amount that represents the amount of consideration that the company considers it is entitled to. In particular, revenues are recognised by applying a model that must meet the following criteria: - identification of the contract, defined as an agreement in which the parties are committed to perform their respective obligations; - identification of the individual performance obligations contained in the contract; - determination of the transaction price, i.e. the expected consideration for the transfer of the goods or services to the customer; - allocation of the transaction price to each performance obligation, based on the sale prices of the individual obligation; - recognition of revenues when (or as) the performance obligation is satisfied by transferring a promised good or service to a customer. The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and services promised. It may include fixed or variable amounts or both. Revenues from variable fees are recognised in the income statement if they can be reliably estimated and only if it is highly likely that all or a significant part of this fee will not need to be reversed from the income statement in future periods. Where there is a high level of uncertainty related to the nature of the consideration, it will be recognised only when this uncertainty is resolved. Revenues may be recognised: - at a specific point in time, when the entity satisfies a performance obligation by transferring a promised good or service to the customer, or - over time, as the entity satisfies a performance obligation by transferring a promised good or service to the customer. The good is transferred when, or in the period when, the customer acquires control of the good. In particular: - interest is recognised on accrual on the basis of the contractual interest rate or the effective interest rate in the case of application of amortised cost. Interest income (or interest expense) includes differentials and positive (or negative) margins accrued up to the reporting date, relating to financial derivatives: a) hedging interest-generating assets and liabilities; b) classified in the balance sheet in the trading book, though related to financial assets and/or liabilities designated at fair value through profit or loss (fair value option) in management terms; c) related in management terms to assets and/or liabilities classified in the trading book and providing for the settlement of differentials or margins with different maturities; - overdue interest, which may be provided for by the relevant contracts is recorded in the income statement solely at the time of collection; - dividends are posted in the income statement when their distribution is approved, unless this date is not known or the information is not immediately available, in which case they may be recognised when they are collected; - commission income from services is recorded, on the basis of the existence of contractual agreements, in the period in which the services have been rendered. Commission income included in the amortised cost for the purposes of determining the effective interest rate is recognised under interest; - profits and losses from securities trading are recognised in the income statement at the date of sale, on the basis of the difference between the consideration paid or collected and the carrying value of such instruments; - revenues deriving from the sale of non-financial assets are recorded at the date of sale, or when the performance obligation towards the customer is satisfied. Costs are recognised in the income statement on an accruals basis. Costs relating to the receipt and performance of contracts with customers are recognised in the income statement in the periods when the related revenues are recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceIncomeAndCostsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1013": { "value": "Recognition of revenues and costs Revenues are gross flows of economic benefits deriving from the performance of the company's ordinary business and are recognised when control of the goods or services is transferred to the customer, at an amount that represents the amount of consideration that the company considers it is entitled to. In particular, revenues are recognised by applying a model that must meet the following criteria: - identification of the contract, defined as an agreement in which the parties are committed to perform their respective obligations; - identification of the individual performance obligations contained in the contract; - determination of the transaction price, i.e. the expected consideration for the transfer of the goods or services to the customer; - allocation of the transaction price to each performance obligation, based on the sale prices of the individual obligation; - recognition of revenues when (or as) the performance obligation is satisfied by transferring a promised good or service to a customer. The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and services promised. It may include fixed or variable amounts or both. Revenues from variable fees are recognised in the income statement if they can be reliably estimated and only if it is highly likely that all or a significant part of this fee will not need to be reversed from the income statement in future periods. Where there is a high level of uncertainty related to the nature of the consideration, it will be recognised only when this uncertainty is resolved. Revenues may be recognised: - at a specific point in time, when the entity satisfies a performance obligation by transferring a promised good or service to the customer, or - over time, as the entity satisfies a performance obligation by transferring a promised good or service to the customer. The good is transferred when, or in the period when, the customer acquires control of the good. In particular: - interest is recognised on accrual on the basis of the contractual interest rate or the effective interest rate in the case of application of amortised cost. Interest income (or interest expense) includes differentials and positive (or negative) margins accrued up to the reporting date, relating to financial derivatives: a) hedging interest-generating assets and liabilities; b) classified in the balance sheet in the trading book, though related to financial assets and/or liabilities designated at fair value through profit or loss (fair value option) in management terms; c) related in management terms to assets and/or liabilities classified in the trading book and providing for the settlement of differentials or margins with different maturities; - overdue interest, which may be provided for by the relevant contracts is recorded in the income statement solely at the time of collection; - dividends are posted in the income statement when their distribution is approved, unless this date is not known or the information is not immediately available, in which case they may be recognised when they are collected; - commission income from services is recorded, on the basis of the existence of contractual agreements, in the period in which the services have been rendered. Commission income included in the amortised cost for the purposes of determining the effective interest rate is recognised under interest; - profits and losses from securities trading are recognised in the income statement at the date of sale, on the basis of the difference between the consideration paid or collected and the carrying value of such instruments; - revenues deriving from the sale of non-financial assets are recorded at the date of sale, or when the performance obligation towards the customer is satisfied. Costs are recognised in the income statement on an accruals basis. Costs relating to the receipt and performance of contracts with customers are recognised in the income statement in the periods when the related revenues are recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-988": { "value": "Recognition of revenues and costs Revenues are gross flows of economic benefits deriving from the performance of the company's ordinary business and are recognised when control of the goods or services is transferred to the customer, at an amount that represents the amount of consideration that the company considers it is entitled to. In particular, revenues are recognised by applying a model that must meet the following criteria: - identification of the contract, defined as an agreement in which the parties are committed to perform their respective obligations; - identification of the individual performance obligations contained in the contract; - determination of the transaction price, i.e. the expected consideration for the transfer of the goods or services to the customer; - allocation of the transaction price to each performance obligation, based on the sale prices of the individual obligation; - recognition of revenues when (or as) the performance obligation is satisfied by transferring a promised good or service to a customer. The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and services promised. It may include fixed or variable amounts or both. Revenues from variable fees are recognised in the income statement if they can be reliably estimated and only if it is highly likely that all or a significant part of this fee will not need to be reversed from the income statement in future periods. Where there is a high level of uncertainty related to the nature of the consideration, it will be recognised only when this uncertainty is resolved. Revenues may be recognised: - at a specific point in time, when the entity satisfies a performance obligation by transferring a promised good or service to the customer, or - over time, as the entity satisfies a performance obligation by transferring a promised good or service to the customer. The good is transferred when, or in the period when, the customer acquires control of the good. In particular: - interest is recognised on accrual on the basis of the contractual interest rate or the effective interest rate in the case of application of amortised cost. Interest income (or interest expense) includes differentials and positive (or negative) margins accrued up to the reporting date, relating to financial derivatives: a) hedging interest-generating assets and liabilities; b) classified in the balance sheet in the trading book, though related to financial assets and/or liabilities designated at fair value through profit or loss (fair value option) in management terms; c) related in management terms to assets and/or liabilities classified in the trading book and providing for the settlement of differentials or margins with different maturities; - overdue interest, which may be provided for by the relevant contracts is recorded in the income statement solely at the time of collection; - dividends are posted in the income statement when their distribution is approved, unless this date is not known or the information is not immediately available, in which case they may be recognised when they are collected; - commission income from services is recorded, on the basis of the existence of contractual agreements, in the period in which the services have been rendered. Commission income included in the amortised cost for the purposes of determining the effective interest rate is recognised under interest; - profits and losses from securities trading are recognised in the income statement at the date of sale, on the basis of the difference between the consideration paid or collected and the carrying value of such instruments; - revenues deriving from the sale of non-financial assets are recorded at the date of sale, or when the performance obligation towards the customer is satisfied. Costs are recognised in the income statement on an accruals basis. Costs relating to the receipt and performance of contracts with customers are recognised in the income statement in the periods when the related revenues are recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-919": { "value": "Recognition of revenues and costs Revenues are gross flows of economic benefits deriving from the performance of the company's ordinary business and are recognised when control of the goods or services is transferred to the customer, at an amount that represents the amount of consideration that the company considers it is entitled to. In particular, revenues are recognised by applying a model that must meet the following criteria: - identification of the contract, defined as an agreement in which the parties are committed to perform their respective obligations; - identification of the individual performance obligations contained in the contract; - determination of the transaction price, i.e. the expected consideration for the transfer of the goods or services to the customer; - allocation of the transaction price to each performance obligation, based on the sale prices of the individual obligation; - recognition of revenues when (or as) the performance obligation is satisfied by transferring a promised good or service to a customer. The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and services promised. It may include fixed or variable amounts or both. Revenues from variable fees are recognised in the income statement if they can be reliably estimated and only if it is highly likely that all or a significant part of this fee will not need to be reversed from the income statement in future periods. Where there is a high level of uncertainty related to the nature of the consideration, it will be recognised only when this uncertainty is resolved. Revenues may be recognised: - at a specific point in time, when the entity satisfies a performance obligation by transferring a promised good or service to the customer, or - over time, as the entity satisfies a performance obligation by transferring a promised good or service to the customer. The good is transferred when, or in the period when, the customer acquires control of the good. In particular: - interest is recognised on accrual on the basis of the contractual interest rate or the effective interest rate in the case of application of amortised cost. Interest income (or interest expense) includes differentials and positive (or negative) margins accrued up to the reporting date, relating to financial derivatives: a) hedging interest-generating assets and liabilities; b) classified in the balance sheet in the trading book, though related to financial assets and/or liabilities designated at fair value through profit or loss (fair value option) in management terms; c) related in management terms to assets and/or liabilities classified in the trading book and providing for the settlement of differentials or margins with different maturities; - overdue interest, which may be provided for by the relevant contracts is recorded in the income statement solely at the time of collection; - dividends are posted in the income statement when their distribution is approved, unless this date is not known or the information is not immediately available, in which case they may be recognised when they are collected; - commission income from services is recorded, on the basis of the existence of contractual agreements, in the period in which the services have been rendered. Commission income included in the amortised cost for the purposes of determining the effective interest rate is recognised under interest; - profits and losses from securities trading are recognised in the income statement at the date of sale, on the basis of the difference between the consideration paid or collected and the carrying value of such instruments; - revenues deriving from the sale of non-financial assets are recorded at the date of sale, or when the performance obligation towards the customer is satisfied. Costs are recognised in the income statement on an accruals basis. Costs relating to the receipt and performance of contracts with customers are recognised in the income statement in the periods when the related revenues are recognised. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1014": { "value": "Use of estimates and assumptions in preparing financial reports The preparation of financial reports requires the use of estimates and assumptions that may have a significant effect on the amounts stated in the balance sheet and income statement, and on the contingent assets and liabilities reported in the financial statements. Estimates are based on available information and subjective evaluations, also founded on past experience, which are used to formulate reasonable assumptions in measuring operating events. Given their nature, the estimates and assumptions used may vary from year to year, and hence it cannot be excluded that current amounts carried in the financial statements may differ significantly in future financial years as a result of changes in the subjective evaluations made. If there are greater uncertainties and/or the assets being measured are particularly material, the valuation is supported by specific fairness opinions from external appraisers/experts. The main cases for which subjective evaluations are required to be made by corporate management include: - the measurement of impairment losses on loans, investments, and, generally, other financial assets; - the use of measurement models for determining the fair value of financial instruments not listed on active markets; - the evaluation of the appropriateness of amounts stated for goodwill and other intangible assets; - the fair value measurement of real estate and valuable art assets; - the measurement of personnel funds and allowances for risks and charges; - the estimates and assumptions on the collectability of deferred tax assets; - the demographic (linked to the estimated mortality of insured people) and financial (deriving from the possible trend in financial markets) suppositions used to structure insurance products and define the basis for calculating integrative reserves provided for in insurance regulations, in addition to the shadow reserves, and liability adequacy test provided for in IFRS 4. For some of the types listed above, the main factors subject to estimates by the Group and which determine the carrying value of assets and liabilities in the financial statements can be identified. The following are noted, by way of example: - to determine the fair value of financial instruments not listed on active markets, if the use of parameters that cannot be obtained from the market is necessary, the main estimates regard, on one hand, development of future cash flows (or even income flows, in the case of equities), possibly conditional on future events and, on the other, the level of specific input parameters not listed on active markets; - the estimates for the assignment of loans and debt securities classified as Financial assets measured at amortised cost and Financial assets measured at fair value through other comprehensive income to the three credit risk stages required by IFRS 9 and to calculate the related expected credit losses involve: o the determination of the parameters for a significant increase in credit risk, essentially based on models for measuring the probability of default (PD) upon origination of the financial assets and at the reporting date; o the inclusion of forward-looking factors, including macroeconomic factors, for the determination of the PD and LGD; o the determination of the likelihood of sale of impaired financial assets, through the realisation of market positions; - to determine the future cash flow estimates from non-performing loans, a number of items are considered: the expected recovery times, the presumed realisable value of guarantees and the costs to be sustained for the recovery of credit exposure; - to determine the value in use of intangible assets with an indefinite life (brand name and goodwill) with regard to the Cash-Generating Units (CGU) comprising the Group, the future cash flows in the forecasting period of the analysis and the flows used to determine the terminal value, generated by the CGU, are subject to estimate, separately and appropriately discounted. Also the cost of capital is among the items subject to estimate; - to determine the value in use of intangible assets with a finite life (asset management and insurance portfolios) with regard to the CGUs comprising the Group, the useful life is subject to estimate, on the one hand, as well as the future cash flows arising from the asset, on the other. The cost of capital is subject to estimate in the case of intangible assets with a finite life as well; - the fair value measurement of real estate and valuable art assets is based on valuations prepared by qualified independent firms. Lease rentals, selling prices, discount rates and capitalisation rates are estimated in order to conduct the appraisals of the properties, while to conduct the appraisals on the valuable art assets, the estimate of the value is gathered from the performance of the exchanges of similar works (in terms of technique, size, subject) by the same author or regional movements and schools that are close with regard to style and technique; - to measure post-employment benefits, the present value of the obligations is subject to estimate, taking into account the flows, appropriately discounted, arising from past time-series analyses and the demographic curve; - to measure allowances for risks and charges, the amount of outflows necessary to fulfil the obligations is estimated, where possible, taking into account the effective probability of having to utilise resources; - to determine the value of deferred tax items, the likelihood of an effective future tax burden is estimated (taxable temporary differences) and the level of reasonable certainty \u2013 if it exists \u2013 of future taxable amounts at the time when the tax deductibility occurs (deductible temporary differences and tax losses carried forward). ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1041": { "value": "Impairment of assets Impairment of financial assets At each reporting date, pursuant to IFRS 9, financial assets other than those measured at fair value through profit or loss are subject to an assessment aimed at verifying whether there is any evidence that the carrying value of the assets may not be fully recoverable. A similar analysis is also performed for loan commitments and for guarantees given that must be tested for impairment under IFRS 9. In preparation for the determination of the impairment losses, at each reporting date the financial instruments must be assigned to the following categories (Stage Assignment or Staging): - Stage 1: comprising financial instruments for which, from their initial recognition up to the reporting date, there is no evidence of a significant increase in credit risk; - Stage 2: it comprises financial assets that have had a significant increase in credit risk since initial recognition; - Stage 3: if there is evidence of impairment, these financial assets \u2013 in line with any other assets pertaining to the same counterparty \u2013 are considered impaired and are therefore included in Stage 3. The impaired exposures consist of financial assets classified in the categories of bad loans, unlikely-to-pay (UTP) loans and exposures past due by more than ninety days, defined in Bank of Italy Circular 272/2008. Impairment of performing financial assets For financial assets for which there is no evidence of impairment (unimpaired financial instruments), it is necessary to check whether there are indicators that the credit risk of the individual transaction has increased significantly since initial recognition. This check, in terms of classification (or, more precisely, staging) and measurement, has the following consequences: - where these indicators exist, the financial asset is included in Stage 2. In this case, in compliance with international accounting standards and despite the absence of an actual impairment, the measurement consists of the recognition of value adjustments equal to the lifetime expected credit losses of the financial instrument. These adjustments are subject to revision at each subsequent reporting date, both to periodically check their consistency with the continuously updated loss estimates and to take account \u2013 if the indicators of \u201csignificantly increased\u201d credit risk are no longer present \u2013 of the change in the forecast period for the calculation of the expected credit loss; - where these indicators do not exist, the financial asset is included in Stage 1. In this case, in compliance with international accounting standards and despite the absence of an actual impairment, the measurement consists of the recognition of the 12-month expected credit losses for the specific financial instrument. These adjustments are subject to revision at each subsequent reporting date both to periodically check their consistency with the continuously updated loss estimates and to take into account \u2013 if there are indicators that the credit risk has \u201csignificantly increased\u201d \u2013 the change in the forecast period for the calculation of the expected loss. With regard to the measurement of financial assets and, in particular, the identification of the \u201csignificant increase\u201d in credit risk (a necessary and sufficient condition for the classification of the asset being measured as Stage 2), the following factors constitute the key elements to be taken into account, in accordance with the standard and its operational implementation by the Intesa Sanpaolo Group: - the variation (beyond set thresholds) of the lifetime probabilities of default compared to the time of initial recognition of the financial instrument. This is therefore an assessment made on a \u201crelative\u201d basis, which constitutes the main driver; - the presence of a past due position that \u2013 subject to the materiality thresholds identified by the regulations \u2013 has been in that status for at least 30 days. If these circumstances apply, the credit risk of the exposure is considered to have \u201csignificantly increased\u201d and the exposure is therefore transferred to Stage 2 (when the exposure was previously included in Stage 1); - the presence of forbearance measures, which \u2013 again on a presumption basis \u2013 result in the classification of the exposures under those whose credit risk has \u201csignificantly increased\u201d since initial recognition; - lastly, for banks belonging to the international scope, some of the indicators from the credit monitoring systems specifically used by each bank are also considered for the purposes of the transfer between \u201cstages\u201d where appropriate. This refers in particular to the watch lists, i.e. the credit monitoring systems that \u2013 based on the current credit quality of the borrower \u2013 place performing exposures above a certain level of risk within a particular range. Focusing on the main trigger out of those referred to above (i.e. the change in the lifetime probability of default), the significant increase in credit risk (\u201cSICR\u201d) is determined by comparing the relative change in the lifetime probability of default recorded between the initial recognition date of the relationship and the observation date (Lifetime PD Change) with predetermined significance thresholds. The assignment of a Lifetime PD to the individual relationships is carried out by allocating the ratings for each segment according to the masterscale at both the initial recognition date and the observation date. Ratings are determined based on internal models, where available, or on business models. If there are no ratings, the Benchmark PDs are assigned to the type of counterparty being assessed. The significant deterioration is therefore based on the increase in the lifetime PD caused by downgrades of the position from its origination to the reporting (observation) date, as well as the change in the forecast of the future macroeconomic factors. The above-mentioned \u201crelative\u201d change in lifetime PD is an indicator of the increase or decrease in credit risk during the reporting period. To establish whether, in accordance with IFRS 9, any increase in credit risk can be considered \u201csignificant\u201d (and therefore entail a transition between stages), it is necessary to set specific thresholds. Increases in lifetime PD below these thresholds are not considered significant and, consequently, do not result in the transfer of individual credit lines/tranches of debt securities from Stage 1 to Stage 2. However, this transfer is required if there are relative increases in PD above these thresholds. The thresholds used have been estimated based on a process of simulations and optimisations of forecast performance, carried out using granular historical portfolio data. Specific thresholds are set for the Corporate, Retail, Large Corporate and Retail SME models and extended to the other models based on methodological affinity. The thresholds differ in terms of residual maturity, annual granularity and rating class. The determination of the thresholds has been calibrated to find a suitable balance between the performance indicators relating to the ability of the thresholds to: - detect Stage 2 positions before their transition to default; - identify positions for which a return to Stage 1 is due to an actual improvement in credit rating. Some specific considerations apply for the \u201cstaging\u201d of the debt securities. Unlike loans, for this type of exposure, sales and purchases after initial recognition (made using the same ISIN) may form part of the ordinary management of the positions (with the consequent need to identify methods to be adopted for identifying the sales and repayments in order to determine the remaining quantities of the individual transactions that need to be allocated a credit quality/rating upon origination to be compared with that parameter at the reporting date). In this regard, the use of the \u201cfirst-in-first-out\u201d or \u201cFIFO\u201d method (for the recognition of the recorded ECL in the income statement, in the event of sales or repayments) was considered to help in providing a more transparent management of the portfolio, also for the front office operators, while also enabling the continued updating of the credit rating based on new purchases. Once the allocation of the exposures to the various credit risk stages has been established, the expected credit losses (ECL) are determined at individual transaction or securities tranche level, using the IRB/Business models, based on the parameters of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), to which appropriate corrections are made to ensure compliance with the specific requirements of IFRS 9. The following definitions apply for PD, LGD and EAD: - PD (Probability of Default): likelihood of migrating from performing to non-performing status over the period of one year. In models consistent with supervisory provisions, the PD factor is typically quantified through the rating. In the Intesa Sanpaolo Group, the PD values are derived from internal rating models where available, supplemented by external ratings or segment/portfolio average figures; - LGD (Loss Given Default): percentage loss in the event of default. In the models consistent with supervisory provisions, it is quantified through the historical experience of discounted recoveries on exposures that have become non-performing; - EAD (Exposure At Default) or credit equivalent: amount of the exposure at the time of default. As mentioned above, in order to comply with IFRS 9, specific adjustments had to be made to these factors, including in particular: - adoption of a Point in Time (PIT) PD compared to the Through the Cycle (TTC) PD used for Basel purposes; - removal of some additional components from the TTC LGD, such as indirect costs (non-recurring costs) and an additional margin of conservatism specifically introduced for the regulatory models, as well as the component linked to the economic downturn; - the introduction of specific treatment in relation to the regulatory provisions, in order to estimate the accounting LGD, to include in the modelling (in line with the indications of IFRS 9 on using entity-specific information) the estimates of internal recoveries exceeding the regulatory threshold of the Maximum Recovery Period, i.e., the maximum time limit beyond which the Supervisory Authority assumes that nothing will be recovered; - the use of PDs and, where necessary, multi-period LGDs, to determine the lifetime expected loss of the financial instrument (Stages 2 and 3); - the use of the effective interest rate of the individual transaction in the discounting of the expected future cash flows, unlike in the regulatory models, where the individual cash flows are discounted using the discounting rates determined in compliance with the prudential regulations. In relation to the multi-period EAD, in line with IFRS 9 the Intesa Sanpaolo Group refers to the plans at amortised cost for both loans and debt securities, regardless of the measurement method used (amortised cost or fair value through other comprehensive income). For loan commitments (margins), on the other hand, the EAD is assumed to be equal to the nominal amount weighted according to a specific Credit Conversion Factor (CCF). The measurement of the financial assets also reflects the best estimate of the effects of current and future conditions and in particular the economic conditions that affect the forward-looking PDs and LGDs. IFRS 9, also based on the guidance from the international regulators, gives particular importance to information on future macroeconomic scenarios in which the Bank may find itself and which clearly influence the situation of the debtors, with regard both to the \u201crisk\u201d of migration of exposures to lower quality classes (and therefore concerning the staging) and to the recoverable amounts (and therefore concerning the determination of the expected loss on the exposures). In terms of method, various possible alternative approaches designed to take account of these elements have been analysed. Of the various alternatives considered, the Intesa Sanpaolo Group has decided to adopt the \u201cMost likely scenario+Add-on\u201d approach. According to this approach, the macroeconomic conditioning of PD and LGD is carried out through a baseline scenario (\u201cMost Likely\u201d, in line with the approach used for other business purposes such as, for example, the budget and business plans) and then corrected with an Add-On to include any differences compared to downside and upside scenarios. If the overall impact of the Add-On on the risk parameters is positive, the decision has been made to neutralise the effect for both staging and ECL calculation purposes. The macroeconomic scenario is determined by the Bank\u2019s Research Department using forecasting models that are disclosed to the market to determine the consensus. Alternative upside and downside scenarios are determined through stress tests of the input variables of the forecasting models. In particular, the most likely scenario and alternative scenarios are determined using a set of analytical and stand-alone forecasting instruments that determine the forecast path for several blocks of variables, namely: - national accounts and inflation of the top 6 Eurozone countries, the United States and Japan; - official rates (ECB, Fed, BoJ), EUR and USD swap rate curves, and several points of the government curves; - exchange rates for EUR, USD, JPY and GBP; - stock market indices (DJ Eurostoxx 50 and S&P 500); - Brent price; - some specific data for the Italian economy (industrial production, real estate prices, employment, public finance balances). These forecasts are then processed using the Oxford Economics multi-country structural Global Economic Model, where they replace the forecast paths of the baseline scenario provided by the company with the periodic updating of the database. The model is then solved to derive a consistent global forecasting framework, including variables for which no specific models have been developed, and to obtain a simulation environment that can be used to generate alternative scenarios. This step may require some iterations, particularly if the forecasting framework generated internally is significantly different from the one provided by Oxford Economics. If this is the case, further fine-tuning may be needed for specific secondary variables that the analysts consider to be inconsistent with the forecast scenario or that have an unexplainable quarterly volatility. The alternative paths are selected using external information. In particular: - average annual GDP growth rates of several countries: this is the key driver for the simulation and the deviations are determined to replicate the dispersion of the growth estimates published by Consensus Economics in the most recent report available at the date of the simulation, considering the minimum and maximum forecasts (after applying a filter to identify and eliminate possible outliers). If there are outliers, these are discarded and the remaining maximum and minimum values are considered. Since consensus estimates are only available for the first two years of the simulation period, an extrapolation of the deviations identified for the first two years is used for the third year; - stock market indices (DJ Eurostoxx 50, S&P 500) and US residential real estate prices: the minimum and maximum forecasts of the Thomson Reuters panel are used as a reference; - Italian residential real estate prices: since no consensus estimates are currently available, the alternative paths are based on the distribution of the historical quarterly changes available from 1980 to the current quarter. The percentile value identified is used, for the most likely scenario, to determine the variations corresponding to a probability gap, calculated through statistical analysis of the historical distribution of the observations. The two (positive and negative) changes with respect to the most-likely scenario are then used to calculate the level of the individual identified indices, reconstructing the two alternative paths (one positive and one negative) for each of them that represent the input for the determination of the Add-On. The probability gap used is identified based on the variability characteristics of the series, to obtain a significant deviation from the most-likely scenario. In addition to defining the alternative paths, a map of possible additional factors is maintained, i.e., adverse idiosyncratic events or scenarios, not explicitly incorporated in the time series used for the construction of the most-likely scenario or in the alternative paths, which can generate further significant effects on expected losses. The following is assessed for these events/scenarios: - the possible time frame; - the degree of inclusion in the most-likely scenario or the alternative paths; - the potential impact, assessed in qualitative terms. The map of additional factors also draws on the list of risk factors contained in the forecast reports of the IMF (World Economic Outlook) and the European Commission and may change over time. Within the assessment of the time frame for the additional factors, note is made if the factor cannot be placed within a specific time period, which makes its incorporation into the most-likely scenario or alternative paths unfeasible. The assessments made take account of the fact that the consensus estimates may include forecasts that already incorporate the total or partial realisation of one or more risk factors in their estimates, which means that the alternative paths may already incorporate these additional factors to some extent. Where there is considerable uncertainty in the national and international macroeconomic forecasts, as well as significant deviations in terms of best-case forecasts with respect to the TTC scenario, prudential factors may be introduced in relation to the deviations in the minimum and maximum values of the variables based on the above-mentioned consensus or historical figures. The above macroeconomic scenarios (most likely and alternative scenarios) are used in internal models to determine the point-in-time (PIT) parameters. Specifically, the time series of default rates acquired from the Bank of Italy are differentiated over the main economic macro- sectors (e.g. consumer households, family businesses, construction) and, for each of these, specific satellite models establish the relationships with the macroeconomic variables in order to obtain the forecast default rates. In turn, these impact the TTC transition matrices between rating classes and thus provide the PIT transition matrices for each scenario (most likely and alternative scenarios). These give rise to the lifetime conditional PD. In particular, the TTC matrices are calculated using internal default rates for the Corporate, Retail SME and Retail segments, whereas the Bank of Italy system rates are used for the Low Default segments, because the internal time series data for those segments is less extensive. The forward-looking point-in-time matrices, on the other hand, are calculated using the system default rates for all the segments. A similar process is used to determine the PIT LGD grids. Taking account of the repayment plans of the individual loans, their conditional PD and LGD, residual maturity and staging, the impairment of performing financial assets is determined. Impairment of non-performing financial assets Non-performing loans are represented by bad loans, unlikely to pay and past due positions by more than 90 days. Non-performing loans classified as bad loans are subject to the following measurement methods: \u2212 analytical-statistical measurement, which is used for exposures of less than 2 million euro and is based on the use of specific LGD grids, plus an Add-On to take account of information linked to the evolution of the current conditions related to management variables highly correlated with the loss performance and forward-looking information relating to the impact of expected future macroeconomic scenarios (as described in the previous paragraphs); \u2212 analytical-specific measurement, which is used for customers with exposures exceeding 2 million euro and is based on the impairment percentages allocated by the manager, following specific analysis and measurements, also based on the evolution of the current conditions, plus an Add-On to take account of forward-looking information, and in particular information relating to the impact of future macroeconomic scenarios (except for bad loans backed by mortgage collateral or relating to property leases for which the impact of future scenarios is included through the method used to determine the haircuts to the value of the properties pledged as collateral). The measurement of unlikely-to-pay loans (UTPs) is also performed based on different approaches: \u2212 analytical-statistical measurement, for exposures of less than 2 million euro, based on the use of specific LGD grids, plus an Add-On to take account of the already mentioned information linked to the current conditions and the impacts of future macroeconomic scenarios, as well as continuation in the risk status, in order to penalise positions with greater vintage or which have no movements and/or recoveries for a particular period of time; \u2212 analytical-specific measurement, for on-balance sheet exposures of more than 2 million euro, based on the impairment percentages allocated by the manager, following specific analyses and assessments also based on the evolution of the current conditions, plus an Add-On to take account, also in this case, of the impacts of future macroeconomic scenarios and of continuation in the risk status. For Group companies, the threshold value for analytical-statistical measurement is set by the competent bodies of the individual companies, in coordination with the structures of Intesa Sanpaolo, at a level that is not, in any event, higher than that set by the Parent Company. Regardless of the division of these exposures between those subject to analytical-statistical measurement and those subject to analytical-specific measurement (as identified above), the add-ons envisaged include the sales scenarios for the disposable non-performing loans if the business plan and the NPL reduction plan envisage sales and those sales do not lead to a reclassification pursuant to IFRS 5. The valuation of the disposable non-performing loans therefore considers the possibility of also realising these loans through their sale. Non-performing loans classified in the past-due loans category, on the other hand, are subject to analytical measurement based on statistics, regardless of the amount of the exposure. However, also in this case, the adjustment determined based on the LGD statistical grids is supplemented to take account of the Add-On attributable to the effect of the evolution of the current conditions and the future macroeconomic scenarios. Credit exposures must continue to be carried as non-performing for at least three months after they cease to meet the requirements for being classified as such (the \u201cprobation period\u201d). Until the conditions are met for reclassification out of the non-performing category, such exposures are retained in their respective risk classes and measured according to an analytical-statistical or an analytical-specific approach taking account of their lower risk level. A brief description is provided below of the methods used for the analytical-specific and analytical-statistical measurement: - the analytical-specific measurement of bad loans and unlikely-to-pay loans above 2 million euro is a measurement performed by the managers of the individual positions based on a qualitative and quantitative analysis of the borrower's financial position, the riskiness of the credit relationship, the targets and strategies for reduction of the non-performing loans, and any mitigating factors (collateral), taking into account the financial impact of the estimated recovery time. For bad loans in particular, a series of elements are relevant, which differ according to the characteristics of the positions, and must be thoroughly and prudently assessed, including the following, listed merely as examples: o nature of the credit, whether preferential or unsecured; o net asset value of the borrowers/third party collateral providers; o complexity of existing or potential litigation and/or the underlying legal issues; o exposure of the borrowers to the banking system and other creditors; o last available financial statements; o legal status of the borrowers and any pending insolvency and/or individual proceedings. In order to determine the estimated realisable value of loans secured by real estate, and to take into account both the time series of recoveries and the forward-looking information in accordance with IFRS 9, an approach is applied focused on the valuation of real estate based on the expected average auction price and the related reduction in the observed price, with the calculation of average haircuts that differ according to the type of real estate collateral (residential, commercial, industrial and land). Accordingly, to avoid duplications, a macroeconomic Add-On is not used in the analytical-specific measurement for bad mortgage loans, because the forward-looking component is already taken into account through the haircut. For real-estate bad loans arising from lease contracts, in view of the particular nature of the product (lack of auctions), the haircut is estimated as the depreciation of the asset with respect to the appraised value observed at the time of classification as non-performing and the actual price of sale. In addition, for unlikely-to-pay loans, the measurement is based on a qualitative and quantitative analysis of the borrower\u2019s financial position and on precise assessment of the risk situation. The calculation of the impairment loss involves the valuation of the future cash flows that the borrower is considered to be able to generate and that will also be used to service the financial debt. This estimate must be made based on two alternative approaches: o the going concern approach: the operating cash flows of the borrower (or the beneficial owner) continue to be generated and are used to repay the financial debts contracted. The going concern assumption does not rule out the realisation of collateral, but only to the extent that this can take place without affecting the borrower's ability to generate future cash flows. The going concern approach is also used in cases where the recoverability of the exposure is based on the possible sale of assets by the borrower or on extraordinary transactions. Similarly to the case of bad loans, haircuts are also used in measuring real-estate collateral for unlikely-to-pay positions. For going- concern positions, these haircuts are determined on the basis of the haircuts applied in the liquidation process (gone-concern bad loan or UTP position), while applying a calibration factor equal to the probability of migration of the UTP positions to the bad loan category; o the gone concern approach: applicable in cases when it is believed that the borrower's cash flows will cease. This is a scenario that can apply to positions that are expected to be classified as bad loans. In this context, assuming that shareholders' interventions and/or extraordinary operations to restructure debt in turnaround situations are not reasonably feasible, recovery of the credit is essentially based on the value of the collateral that secures the Bank's credit claim, net of the application of a haircut (determined as for bad loans) and, alternatively, on the realisable value of the assets, taking into account the liabilities and possible pre-emptive claims; - the analytical-statistical measurement, performed for bad loans and unlikely-to-pay loans of less than 2 million euro and for past-due loans has specific features according to the type of exposure involved. With regard to bad loans, the analytical-statistical measurement is based on the Bad Loan LGD grids, where the LGD Defaulted Asset model is mainly characterised by the differentiation of the loss rates that, in addition to the regulatory segment, is based on the continuation in the risk status (\u201cvintage\u201d) and the possible activation of legal recovery proceedings. The grids are also differentiated for the other significant analysis axes used in the model estimation (e.g. product type, type of guarantee, geographical area, exposure band, etc.). The recovery time grids are mainly broken down by regulatory segment and by additional significant analysis axes used in the modelling (e.g. recovery procedures, exposure band, product type). For unlikely-to-pay loans, the measurement is performed using statistical LGD grids estimated specifically for positions classified as unlikely-to-pay loans, in line with the estimated LGD grids for bad loans. The estimation model for the LGD grid for unlikely-to-pay loans is similar to the one described above for bad loans and calculates the expected loss rate of the relationship being valued according to its characteristics. The LGD for unlikely-to-pay loans is obtained by recalibrating the bad loan LGD using the Danger Rate module. The Danger Rate is a multiplying correction factor to apply to the bad loan LGD, in order to take into account the loss rates that can be recorded in the various default statuses (Unlikely-to-Pay and/or past due). The Danger Rate is estimated using the probability of migration to bad loans for positions already in default, the loss rates observed in the pre-bad loans phase for positions migrating to bad loans, and the loss rates observed in the pre-bad loans phase for positions that return to performing status or are extinguished. In addition, for the two subclasses of the \u201cUnlikely-to-Pay Loans\u201d risk status (\u201cNon-Forborne Unlikely-to-Pay Loans\u201d and \u201cForborne Unlikely-to-Pay Loans\u201d), differentiated grids are estimated to take into account the characteristics of the Forborne loans, which, in addition to having lower average loss levels due to the effect of the Forbearance Measures, are also affected by the regulatory constraints that prevent their return to performing loan status before 12 months from the date of the renegotiation. For past-due loans, the methods used to determine the grids are the same as those described for the unlikely-to-pay loans (Framework Danger Rate). In this case, the vintage factor is captured by the introduction of a differentiation based on the duration of the past-due period (Past Due at 90 days/180 days) which produces a significant variation in the loss rates of the grids, which are also differentiated according to regulatory segment and additional analysis axes (e.g. product type, type of guarantee, geographical area, exposure band, etc.) common to the other non-performing loan categories. Also in the LGD estimation models used in the analytical-statistical measurement of non-performing exposures, several additional components specifically included for regulatory models are removed, similar to that illustrated for performing exposures. With regard to the inclusion of current and forward looking information, it should be noted that, for non-performing exposures, a statistically estimated component (Add-On from macroeconomic scenario) linked to the most-likely and downside scenarios expected over the period of the next three years is also considered, according to the criteria already described. In fact, as required by IFRS 9, the effects of the forward-looking scenario on LGD estimates must also be considered and the aforementioned component is aimed at capturing the non-linearity of the relationship between the macroeconomic variables and ECL measurement, by analysing the forecast uncertainty of the variables used for the preparation of the most-likely scenario. It is based on the methodological framework that is used for performing loans, but ignores the upside scenario from a prudential perspective and only considers the average downside and most-likely scenarios over the period of the next three years. Furthermore, an additional factor is applied to the analytical/statistical measurement firmly based on internal management variables, in particular the level of past and prospective NPL ratio, which, on the basis of long-term observation, is statistically correlated with the loss performance. This factor makes the LGD estimate more sensitive to changes in the current and future economic/management context. Also in terms of future scenarios, with regard to the unlikely to pay category, which includes positions that are still performing but show signs of difficulty, both for positions with analytical-specific measurement and those with analytical-statistical measurement, when there are no effective forbearance measures, an additional component shall be applied (in addition to the aforementioned add on from the macroeconomic scenario) to reduce the recoverable amount of the positions based on their vintage in the risk status and the absence of movements and/or recoveries in a specific period of time. With regard to the alternative recovery scenarios, the Intesa Sanpaolo Group, in relation to the objectives of reducing the stock of outstanding non-performing loans, included in its business plans, and any commitments made to the Supervisory Authorities, with specific regard to the NPL Strategy, considers the sale of particular portfolios as the strategy that, in certain conditions, can maximise the cash flow recovery, also considering the recovery times. Consequently, the \u201cordinary\u201d scenario, which assumes a recovery strategy based on the collection of credit, typically through legal actions, mandates to credit recovery companies and the realisation of bank collateral, is also been accompanied - where applicable and as an alternative recovery strategy - by the scenario of the sale of the loan. Where company plans and Group strategies identify disposal objectives and, as a result, a portfolio of non-performing loans that may be disposed of, until the disposal objectives are reached, the loans and receivables included in that portfolio shall be measured taking account of both the amount recoverable through operating activities and market valuations (based on external appraisals) and/or sales prices, if already defined. In particular, where a larger loan portfolio that may be sold represented by Group loans that are disposable (thus, for example, positions that are not involved in disputes, as per precise indication by the management structures and which are not subject to synthetic securitisation), in relation to the sales objectives is identified, the book value of said portfolio is determined by weighting the recoverable amount through operating activities with the amount recoverable through sale. More specifically, the recoverable amount of disposable non-performing loans is quantified as the average between (i) the value in the event of sale (fair value) and (ii) the collection amount, weighted on the basis of the percentage of the loans eligible for sale - determined as the ratio between the target volume of loans to be sold and the respective non bankruptcy- remote portfolios having the same profile, i.e. as a percentage that adequately reflects the probability of sale of the portfolios whose disposal is considered highly probable. The \u201ccollection amount\u201d was determined according to the already shown ordinary methods adopted by the Group for the impairment of non-performing loans, i.e. based on the individual measurement of the exposures exceeding a defined threshold and based on an analytical-statistical measurement for the others. The measurement of the value in the event of sale is carried out by an external expert, based on market valuations. However, where the positions to be sold are specifically identified, those positions shall be measured exclusively taking account of the market values established by external experts, based on a specific fairness opinion or, if already defined through a binding agreement with the buyer, the sales price. Those loans are also reclassified as assets held for sale. As already mentioned, the purchased or originated credit-impaired (POCI) financial assets have specific features in terms of impairment. As a result, value adjustments equal to the lifetime ECL must be recognised on these instruments from their initial recognition date and for their entire lifetime. At each subsequent reporting date, the amount of the lifetime ECL must therefore be adjusted, with the recognition through profit or loss of the amount of any change in lifetime expected credit losses as a gain or an impairment loss. In view of the above, POCI financial assets are initially recognised in Stage 3, subject to the possibility of being subsequently transferred to the performing loans stage, even if an expected loss equal to the lifetime ECL will continue to be recognised. Lastly, with regard to non-performing loans, it is highlighted that the Intesa Sanpaolo Group uses the \u2013 full or partial \u2013 write- off/derecognition of unrecoverable accounting positions and, in the following cases, the consequent allocation to loss of the remainder that has not yet been adjusted: \u2013 uncollectability of the debt, as a result of definite and precise elements (such as, for example, untraceability and indigence of the debtor, lack of recovery from realisation of securities and real estate, negative foreclosures, bankruptcy proceedings closed with no full compensation for the Bank, if there are no further guarantees that can be enforced etc.); \u2013 disposal of the loan; \u2013 waiver of the credit claim, due to the unilateral cancellation of the debt or residual amount as a result of settlement agreements; \u2013 no waiver of the credit claim. With regard to the full or partial write-offs without waiver of the credit claim, in order to avoid maintaining loans on the balance sheet that have a very low possibility of recovery, despite continuing to be managed by the recovery structures, they are fully or partially written off due to uncollectability even if the legal proceedings have not been closed. The write-off can only involve the portion of the loan covered by provisions and, therefore, each loan can only be written off up to the amount of its net book value. Therefore, on a periodic basis, the Group identifies the bad loan portfolios to be subject to total or partial write-offs with the following macro-characteristics: o percentage cover of 100% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >1 year; o percentage cover of >95% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >5 years or >8 years, respectively, for non-mortgage and mortgage loans. Portfolios to be written off can also be identified that have similar characteristics that are different from those indicated above, but that relate to exposures that have a marginal possibility of recovering the amount of the provision, where the minimum amount of the provision (calculated taking into account the accumulated write-offs on the position, according to the same rule established at prudential level by the calendar provisioning framework) is at least equal to the amount needed to bring the value of the exposures up to their fair value estimated based on the prices recorded in the latest sales of bad loans made by the Group. Impairment of investments in associates and companies subject to joint control At each reporting date the investments in associates and companies subject to joint control are subjected to an impairment test to assess whether there is objective evidence to consider that the carrying value of such assets is not fully recoverable. The process of detection of any impairment involves the verification of the presence of impairment indicators and the determination of any write-down. The impairment indicators are essentially divided into two categories: qualitative and quantitative indicators. Qualitative indicators include: - the generation of negative economic results or in any case a significant variance with respect to the targets budgeted or established in the multi-year plans disclosed to the market; - the announcement/initiation of insolvency proceedings or restructuring plans; - the downgrading by more than two rating classes; - failure to discharge payment obligations for debt securities issued fully and in a timely manner; - use of industrial policy tools aimed at responding to a serious crisis or allowing companies to face restructuring/reorganisation processes. Quantitative indicators include: - a reduction in fair value of over 30% below the carrying value or for a period of over 24 months; - a market capitalisation lower than the company's net book value, in the case of securities listed on active markets, a carrying value of the investment in the Parent Company's financial statements higher than the carrying value in the consolidated financial statements of the investee's net assets and goodwill, or distribution by the investee of a dividend that is higher than its total income. The presence of impairment indicators results in the recognition of a write-down to the extent that the recoverable amount is lower than the recognition value. The recoverable amount consists of the higher of the fair value and the value in use, less costs to sell. For an illustration of the valuation techniques used to determine fair value, see the specific Section A.4 \u2013 Information on fair value. Value in use is the present value of expected future cash flows from the asset; it reflects estimated expected future cash flows from the asset, the estimate of possible changes in the amount and/or timing of cash flows, time value of money, the price able to repay the risk of the asset and other factors, which may affect the appreciation by market participants of expected future cash flows from the asset. Value in use is determined by discounting future cash flows. Impairment of non-financial assets Property, equipment and intangible assets with definite useful life are subject to impairment testing if there is the indication that the book value of the asset may no longer be recovered. The recoverable amount is determined with reference to the fair value of the property and equipment or intangible assets less costs to sell or the value in use, if determinable and if it is higher than fair value. For property and equipment other than real estate and valuable art assets and intangible assets (other than those recognised following business combinations) it is assumed that the carrying amount normally corresponds to the value in use, since it is determined by a depreciation or amortisation process estimated on the basis of the effective contribution of the asset to the production process and since the determination of fair value is extremely subjective. The two values diverge and lead to impairment in case of damages, exit from the production process or other similar non-recurring circumstances. As clarified in the discussion of \u201cProperty and equipment and intangible assets\u201d, the Group measures owner-occupied properties and valuable art assets according to the revaluation model; in this case, any impairment loss on a revalued asset must be treated as a decrease in the revaluation up to the relevant amount, after which any difference is taken to the income statement. As described in the Information on fair value - Fair value of real estate and valuable art assets, for owner-occupied properties each year a scenario analysis is conducted on trends in the real-estate market to assess whether there are any significant deviations in the value of the assets. If significant changes are identified (+ or - 10%), an updated appraisal is prepared to adjust the fair value of the asset to the valuations of the real estate market. If there are no significant differences, the value is redetermined through a new expert appraisal every two years for \u201ctrophy assets\u201d (i.e. particularly prestigious properties used by management functions located in the main cities where the bank is based or properties of particular historical and artistic interest because they are listed by the Ministry for Cultural Heritage and Activities) and every three years for other owner- occupied properties. For the valuable art assets, the revaluation is carried out by means of a new expert appraisal every three years. However, a scenario analysis is carried out annually to identify any appreciable changes in value in order to bring forward the valuation. If the annual monitoring identifies a possible positive or negative value deviation of more than 15% for individual works of artists in the bank\u2019s collections and comparable on the basis of objective criteria (size, technique, period of production, etc.), new appraisals are commissioned. Intangible assets recognised following a business combination and in application of IFRS 3 are subjected to an impairment test at each reporting date to assess whether there is objective evidence that the asset may have been impaired. Intangible assets with a finite life, represented by the value of the asset management portfolio and the value of the insurance portfolio, in the presence of impairment indicators are subjected to a new valuation process to assess the recoverability of the book values. The recoverable amount is determined on the basis of the value in use, namely the present value estimated using a rate representing the time value of money and the asset\u2019s specific risks, of the income margins generated by the existing relations as at the valuation date over a period which expresses their expected residual life. Intangible assets with an indefinite life, represented by the valuation of the brand name and goodwill, do not have independent cash flows and therefore annually undergo an assessment of the adequacy of the value recorded under the assets with reference to the Cash-Generating Unit (CGU) to which the values are attributed at the time of the business combinations. The amount of any impairment is determined on the basis of the difference between the CGU\u2019s book value and its recoverable amount represented by the higher of the fair value, less costs to sell, and the value in use. The book value of the CGUs must be determined in a manner consistent with the criterion used to determine their recoverable amount. For a banking business, the cash flows generated by a CGU cannot be identified without considering the cash flows deriving from financial assets/liabilities, as these form part of the core business. In other words, the recoverable amount of the CGUs is influenced by the aforementioned cash flows and therefore the CGUs\u2019 book value must include financial assets/liabilities in accordance with the scope of the recoverable amount estimate process. Consequently, these assets and liabilities must be properly allocated to the associated CGUs. On this basis, the book value of Intesa Sanpaolo\u2019s CGUs may be determined in terms of contribution to consolidated shareholders\u2019 equity including the minority interest. Thus, the carrying amount of the CGUs consisting of companies that belong to a single operating division or consist of a single legal entity (Asset Management, Private Banking, Insurance and International Subsidiary Banks) is determined by summing the individual book values of each company in the consolidated financial statements, namely the contribution to consolidated shareholders\u2019 equity and corresponding to their net book value, taking into account any goodwill and intangibles recorded upon acquisition (net of subsequent amortisations and any write-downs) and the consolidation entries. With regard to the determination of the carrying value of the other two divisions (Banca dei Territori and IMI Corporate & Investment Banking), given that the Parent Company and other banks contribute to the management of these divisions, and this subdivision is not represented in the accounting information, the overall carrying value of the CGUs cannot be determined on the basis of book values. As a consequence, the use of operational factors is required to make the subdivision following a detailed allocation of the intangibles and goodwill to the two CGUs in accordance with the available accounting information. The operational driver is identified as the \"regulatory capital\" determined by the Financial and Market Risks Department structures for each operating division: it represents the capital absorption necessary to handle the types of risk envisaged by the regulatory supervision rules. The resulting book values already take into account the effects of any impairment of the individual assets, including those relating to intangible assets with a finite life. For an illustration of the valuation techniques used to determine fair value, see Section A.4 \u2013 Information on fair value. The value in use of a CGU is determined by estimating the present value of future cash flows that may be expected to be generated by the CGU. These cash flows are determined by using the latest publicly available business plan or, in its absence, through the drawing up by management of an internal forecast plan or other external information available. The forecasting period for the analysis usually consists of a maximum of five years. The cash flow of the final year of the forecast is projected in perpetuity, using an appropriate growth rate \u201cg\u201d for the purposes of the so-called Terminal value. The \u201cg\u201d rate is determined by assuming that the growth factor is the lower of the average growth rate for the forecasting period of the analysis and the average rate of increase in the Gross Domestic Product in the countries where the cash flows are generated. For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present valuations of the time value of money and the asset\u2019s specific risks. Specifically, the discount rates used incorporate the risk free component and the premiums for the risk associated with the equity component observed over a sufficiently long time period to reflect different market conditions and economic cycles. In addition, given the diverse risks of the respective operating areas, different Beta coefficients are used for each CGU. All the resulting rates have been adjusted to take into account the \u201cCountry Risk\u201d. The cash flows produced by the international subsidiaries are estimated in the currency in which they are generated and translated into euro using the spot exchange rate as at the date of the determination of the value in use. With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill allocated and, as a result, it is not possible to test the recoverable amount of the specific intangible as part of the impairment test of the goodwill based on total cash flows at the level of the CGU, then an independent and specific valuation is made on the basis of the fair value certified by the appraisal of an independent expert. Insurance assets and liabilities The Intesa Sanpaolo Group has decided to exercise the option of adopting the Deferral Approach, according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39, while awaiting the entry into force of the new international financial reporting standard on insurance contracts (IFRS 17), from 1 January 2023 85 . For completeness, an outline is provided below of: - the classification and measurement criteria for the financial assets and liabilities used by the Group\u2019s insurance companies, with more details provided in Part A \u201cAccounting policies\u201d of the Notes to the consolidated financial statements of the 2017 Annual Report. However, a description has not been provided of the recognition and derecognition criteria, because they are essentially in line with the applicable provisions of IFRS 9 and IAS 39; - the approaches adopted for specific products of the insurance segment. For details of the treatment of financial statement captions of the insurance companies other than those of a financial nature, see the information provided above, as the companies of the banking group and the companies of the insurance segment use the same accounting policies. 1. Financial assets held for trading Classification criteria This category includes financial assets held for trading, essentially represented by debt securities and equities and the positive value of derivative contracts held for trading. Derivative contracts also include those embedded in combined financial instruments which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. Derivatives are stated as assets if their fair value is positive and as liabilities if their fair value is negative. The positive and negative current values arising from transactions with the same counterparty may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. The reclassifications to other categories of financial assets are not permitted unless there is an event that is unusual and highly unlikely to recur in the near term. In such cases debt securities and equities not held for trading may be reclassified into other categories established by IAS 39 if the conditions for their recognition apply (Investments held to maturity, Financial assets available for sale, Loans). The transfer value is the fair value at the time of the reclassification. On reclassification, the presence of any embedded derivative contracts, that have to be separated, is assessed. Measurement criteria After initial recognition, financial assets held for trading are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. Equities, quotas of UCI and derivatives which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value according to the guidelines listed above, are maintained at cost. 2. Financial assets available for sale Classification criteria This category includes the financial assets that do not fall within any of the other categories such as Loans, Financial assets held for trading, Investments held to maturity or Financial assets measured at fair value through profit or loss. In particular, this caption is made up of i) bonds which are not held for trading and which are not included in Loans and Receivables, in Investments held to maturity or designated at fair value through profit or loss, ii) equity investments which are not held for trading and do not qualify as investments in subsidiaries, associates or entities subject to joint control, including private equity investments and private equity funds as well as iii) the portions of syndicated loans that, from inception, are destined for sale. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category Investments held to maturity. Moreover, debt securities may be reclassified into the category Investments held to maturity as well as under Loans, when there is the intention to hold them in the foreseeable future and when the recognition criteria are met. The transfer value is the fair value at the time of the reclassification. Measurement criteria After initial recognition, Financial assets available for sale are measured at fair value, through the recording in the income statement of the value corresponding to amortised cost, while gains or losses deriving from a change in fair value are recorded in a specific reserve in shareholders\u2019 equity, until the financial asset is derecognised or a permanent loss occurs. On the total or partial sale of the financial asset or on recognition of a loss, the cumulated profit or loss must be reversed, all or in part, to the income statement. Fair value is determined on the basis of the criteria already illustrated for financial assets held for trading. Equities included in this category and quotas of UCI which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value, are maintained at cost. Financial assets available for sale are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and its fair value. Should the reasons for impairment cease to exist, following an event occurred after the registration of the impairment, value recoveries are posted through the income statement in the case of loans or debt securities, and through shareholders\u2019 equity in the case of equities. The size of the recovery must not lead the carrying amount of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 3. Investments held to maturity Classification criteria Quoted debt securities with fixed or determinable payments and fixed maturity, which the entity has the positive intention and ability to hold to maturity, are classified in this category. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category of Financial assets available for sale. If during a year, prior to expiry, more than an insignificant amount classified under this category is sold or reclassified, the remaining investments held to maturity are reclassified as Financial assets available for sale and the portfolio in question may not be used for the next two years, unless the sales and reclassifications: - are so close to maturity or the financial asset\u2019s call date that changes in the market interest rate would not have a significant effect on the financial asset\u2019s fair value; - occur after the entity has collected substantially all of the financial asset\u2019s original principal through scheduled payments or prepayments; or - are attributable to an isolated event that is beyond the entity\u2019s control, is non-recurring and could not have been reasonably anticipated by the entity. Measurement criteria After the initial recognition, Investments held to maturity are measured at amortised cost, using the effective interest method. Profits or losses referred to investments held to maturity are recorded in the income statement when assets are derecognised or impaired, and through the amortisation process of the difference between book value and the value reimbursable at maturity. Investments held to maturity are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and the present value of the estimated future cash flows, discounted at the original effective interest rate. The loss is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 4. Loans Classification criteria Loans include loans to customers and due from banks, both disbursed directly and acquired from third parties, which entail fixed or in any case determinable payments, which are not quoted on an active market and which are not classified at inception in Financial assets available for sale. The caption Loans also includes commercial loans, repurchase agreements with the obligation to resell at a later date, and securities underwritten at issue or via private placements, with determined or determinable payments, not quoted in active markets. Reclassifications to the other categories of financial assets established in IAS 39 are not permitted. Measurement criteria After initial recognition, loans are measured at amortised cost, equal to initial value increased/decreased by principal repayments, adjustments/recoveries and amortisation \u2013 calculated applying the effective interest method \u2013 of the difference between amount disbursed and amount to be reimbursed at maturity, typically attributable to the costs/revenues directly connected to the single loan. The effective interest rate is the rate that exactly discounts estimated future cash payments of the loan, for principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to the loan. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/revenues through the expected residual maturity of the loan. The amortised cost method is not used for loans whose short maturity implies that the application of the discounting approach leads to immaterial effects. Such loans are recorded at historical cost. An analogous measurement criterion is applied to loans with unspecified maturity or with notice period. Loans are reassessed for the purpose of identifying those which, due to events occurred after initial recognition, show objective evidence of possible impairment. These include bad loans, unlikely-to-pay or past due loans according to the rules issued by the Bank of Italy, consistent with IAS/IFRS and EU supervisory regulations. Non-performing loans undergo an individual measurement process, or the calculation of the expected loss for homogeneous categories and analytical allocation to each position, and the amount of the adjustment of each loan is the difference between its carrying value at the time of measurement (amortised cost) and the present value of expected future cash flows, discounted using the original effective interest rate. Expected cash flows consider forecast recovery periods, presumed realisable value of guarantees as well as the costs sustained for the recovery of credit exposure. The original effective rate of each loan remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. The impairment loss is recorded in the income statement. The original value of loans is reinstated in subsequent periods to the extent that the reasons which had led to the impairment cease to exist, provided that such valuation is objectively attributed to an event which occurred subsequent to the impairment. The recovery is recorded in the income statement and must not lead the carrying amount of the loan to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment include time value effects. Loans for which no objective evidence of loss has emerged from individual measurement are subject to measurement of a collective adjustment. Such measurement occurs for homogeneous loan categories in terms of credit risk and the relative loss percentages are estimated considering past time series and other objective elements observable at measurement date, which enable the latent loss to be estimated for each loan category. Measurement also considers the risk connected to the borrower\u2019s country of residence. Collective adjustments are recorded in the income statement. 5. Financial assets measured at fair value through profit or loss Classification criteria IAS/IFRS endorsed by the European Commission enable the classification as financial instruments measured at fair value through profit and loss of any financial asset thus defined at the moment of acquisition, in compliance with the cases contemplated in the reference regulations. Reclassifications to the other categories of financial assets are not permitted. The Group classifies investments with respect to insurance policies in this category. Measurement criteria After initial recognition, the financial instruments in question are measured at fair value. The effects of the application of this measurement criterion are recorded in the income statement. 6. Payables and securities issued Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in finance lease transactions. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. 7. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities determined by short selling generated by securities trading activities. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 8. Financial liabilities designated at fair value through profit or loss Classification criteria Financial liabilities designated at fair value through profit or loss are recorded under this caption, on the basis of the fair value option given to companies by IAS 39, in compliance with the cases contemplated in the reference regulations. The Group exercised the fair value option for liabilities, designating insurance products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features. Investments relating to such forms of deposits, as already reported, were also designated at fair value, thereby eliminating or considerably reducing \u201caccounting biases\u201d that would otherwise have arisen from measuring assets and liabilities on the basis of different accounting criteria. Measurement criteria These liabilities are designated at fair value through profit or loss. 9. Insurance products Products for which insurance risk is deemed significant include: temporary first class death policies and income and mixed policies with guaranteed fixed conversion rates at the time of issue, and certain types of unit-linked policies and damage cover. As regards these products, the IAS/IFRS substantially confirm the national accounting standards concerning insurance. In brief, IFRS 4 sets forth that: - gross premiums are to be recorded in the income statement under income; they include all amounts matured during the year as a result of insurance contracts signed, net of cancellations; likewise, all premiums ceded to reinsurers are recorded under current year costs; - with respect to gross premiums, the corresponding commitment towards the insured is accrued in technical reserves, such amount being calculated on a contract-by-contract basis in accordance with applicable local accounting principles; - the insurance products entered under separate management are valued by applying \u201cshadow accounting\u201d, whereby the differences between the carrying value and the market value of securities classified as securities available for sale are allocated to technical reserves as regards the insured parties' portion and to shareholders\u2019 equity as regards the insurance companies' portion. If, on the other hand, the securities are measured at fair value through profit or loss, the difference between the carrying value and the market value is recorded in the income statement giving rise to a change in technical reserves equal to the amount of the insured parties\u2019 portion; - in determining shadow accounting, the Group uses the retrocession average rate and the minimum guaranteed rate established in accordance with the contractual conditions of the various products associated with each portfolio management; - liabilities related to products with discretionary participation features are given as a whole with no distinction between the guaranteed component and the discretionary participation feature. In accordance with IFRS 4, the Group assesses the prospective adequacy of the carrying amount of recorded liabilities using the Liability Adequacy Test (LAT). 10. Financial products included under separate management Financial products included under separate management, despite their not being subject to significant insurance risk, and which therefore contain discretionary participation features, include the majority of life policies and mixed first branch policies, as well as fifth branch capitalisation policies. These are accounted for according to the principles set forth in IFRS 4: - the products are shown in the financial statements according to principles that essentially reflect those locally in force on the subject, any premiums, payments and changes in technical reserves being recorded in the income statement; - as stated in the previous paragraph, shadow accounting is applied to the insurance products entered under separate management which, therefore, have discretionary participation features; - in determining shadow accounting, the Group uses the retrocession average rate and the minimum guaranteed rate established in accordance with the contractual conditions of the various products associated with each portfolio management; - liabilities related to products with discretionary participation features are given as a whole with no distinction between the guaranteed component and the discretionary participation feature. 11. Financial products not included under separate management Financial products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features, are stated in the financial statements as financial liabilities and are measured at fair value, on the basis of the envisaged option (Fair Value Option), or at amortised cost. These financial products are essentially index-linked policies and part of the unit-linked ones, as well as policies with specific assets not included under separate management. These products are accounted for according to the principles set forth in IAS 39, as summarised below: - the portion of index- and unit-linked policies that are considered investment contracts are measured at fair value, whereas the specific asset products not included under separate management are measured at amortised cost; - the income statement does not reflect the premiums relating to these products, but just the revenue components, represented by fees and commissions, and the cost components, comprising provisions and other charges; it also reflects the costs or revenues represented by the changes in the fair value of the liabilities incurred against these contracts. More specifically, the international accounting and financial reporting standards, contained in IAS 39 and IFRS 15, provide that, for the liabilities designated at fair value, income and costs relating to the products in question be identified and classified under two headings: (i) origination, to be recorded in the income statement at the time the product is issued and (ii) investment and management services, to be amortised over the life of the product which depends on how the service is provided. In addition, as regards specific asset products not included under separate management, incremental cost and income items are included in the calculation of the amount to be amortised; - the insurance component included in the index- and unit-linked products, where it can be unbundled, is independently valued and recorded. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1051": { "value": "Impairment of assets Impairment of financial assets At each reporting date, pursuant to IFRS 9, financial assets other than those measured at fair value through profit or loss are subject to an assessment aimed at verifying whether there is any evidence that the carrying value of the assets may not be fully recoverable. A similar analysis is also performed for loan commitments and for guarantees given that must be tested for impairment under IFRS 9. In preparation for the determination of the impairment losses, at each reporting date the financial instruments must be assigned to the following categories (Stage Assignment or Staging): - Stage 1: comprising financial instruments for which, from their initial recognition up to the reporting date, there is no evidence of a significant increase in credit risk; - Stage 2: it comprises financial assets that have had a significant increase in credit risk since initial recognition; - Stage 3: if there is evidence of impairment, these financial assets \u2013 in line with any other assets pertaining to the same counterparty \u2013 are considered impaired and are therefore included in Stage 3. The impaired exposures consist of financial assets classified in the categories of bad loans, unlikely-to-pay (UTP) loans and exposures past due by more than ninety days, defined in Bank of Italy Circular 272/2008. Impairment of performing financial assets For financial assets for which there is no evidence of impairment (unimpaired financial instruments), it is necessary to check whether there are indicators that the credit risk of the individual transaction has increased significantly since initial recognition. This check, in terms of classification (or, more precisely, staging) and measurement, has the following consequences: - where these indicators exist, the financial asset is included in Stage 2. In this case, in compliance with international accounting standards and despite the absence of an actual impairment, the measurement consists of the recognition of value adjustments equal to the lifetime expected credit losses of the financial instrument. These adjustments are subject to revision at each subsequent reporting date, both to periodically check their consistency with the continuously updated loss estimates and to take account \u2013 if the indicators of \u201csignificantly increased\u201d credit risk are no longer present \u2013 of the change in the forecast period for the calculation of the expected credit loss; - where these indicators do not exist, the financial asset is included in Stage 1. In this case, in compliance with international accounting standards and despite the absence of an actual impairment, the measurement consists of the recognition of the 12-month expected credit losses for the specific financial instrument. These adjustments are subject to revision at each subsequent reporting date both to periodically check their consistency with the continuously updated loss estimates and to take into account \u2013 if there are indicators that the credit risk has \u201csignificantly increased\u201d \u2013 the change in the forecast period for the calculation of the expected loss. With regard to the measurement of financial assets and, in particular, the identification of the \u201csignificant increase\u201d in credit risk (a necessary and sufficient condition for the classification of the asset being measured as Stage 2), the following factors constitute the key elements to be taken into account, in accordance with the standard and its operational implementation by the Intesa Sanpaolo Group: - the variation (beyond set thresholds) of the lifetime probabilities of default compared to the time of initial recognition of the financial instrument. This is therefore an assessment made on a \u201crelative\u201d basis, which constitutes the main driver; - the presence of a past due position that \u2013 subject to the materiality thresholds identified by the regulations \u2013 has been in that status for at least 30 days. If these circumstances apply, the credit risk of the exposure is considered to have \u201csignificantly increased\u201d and the exposure is therefore transferred to Stage 2 (when the exposure was previously included in Stage 1); - the presence of forbearance measures, which \u2013 again on a presumption basis \u2013 result in the classification of the exposures under those whose credit risk has \u201csignificantly increased\u201d since initial recognition; - lastly, for banks belonging to the international scope, some of the indicators from the credit monitoring systems specifically used by each bank are also considered for the purposes of the transfer between \u201cstages\u201d where appropriate. This refers in particular to the watch lists, i.e. the credit monitoring systems that \u2013 based on the current credit quality of the borrower \u2013 place performing exposures above a certain level of risk within a particular range. Focusing on the main trigger out of those referred to above (i.e. the change in the lifetime probability of default), the significant increase in credit risk (\u201cSICR\u201d) is determined by comparing the relative change in the lifetime probability of default recorded between the initial recognition date of the relationship and the observation date (Lifetime PD Change) with predetermined significance thresholds. The assignment of a Lifetime PD to the individual relationships is carried out by allocating the ratings for each segment according to the masterscale at both the initial recognition date and the observation date. Ratings are determined based on internal models, where available, or on business models. If there are no ratings, the Benchmark PDs are assigned to the type of counterparty being assessed. The significant deterioration is therefore based on the increase in the lifetime PD caused by downgrades of the position from its origination to the reporting (observation) date, as well as the change in the forecast of the future macroeconomic factors. The above-mentioned \u201crelative\u201d change in lifetime PD is an indicator of the increase or decrease in credit risk during the reporting period. To establish whether, in accordance with IFRS 9, any increase in credit risk can be considered \u201csignificant\u201d (and therefore entail a transition between stages), it is necessary to set specific thresholds. Increases in lifetime PD below these thresholds are not considered significant and, consequently, do not result in the transfer of individual credit lines/tranches of debt securities from Stage 1 to Stage 2. However, this transfer is required if there are relative increases in PD above these thresholds. The thresholds used have been estimated based on a process of simulations and optimisations of forecast performance, carried out using granular historical portfolio data. Specific thresholds are set for the Corporate, Retail, Large Corporate and Retail SME models and extended to the other models based on methodological affinity. The thresholds differ in terms of residual maturity, annual granularity and rating class. The determination of the thresholds has been calibrated to find a suitable balance between the performance indicators relating to the ability of the thresholds to: - detect Stage 2 positions before their transition to default; - identify positions for which a return to Stage 1 is due to an actual improvement in credit rating. Some specific considerations apply for the \u201cstaging\u201d of the debt securities. Unlike loans, for this type of exposure, sales and purchases after initial recognition (made using the same ISIN) may form part of the ordinary management of the positions (with the consequent need to identify methods to be adopted for identifying the sales and repayments in order to determine the remaining quantities of the individual transactions that need to be allocated a credit quality/rating upon origination to be compared with that parameter at the reporting date). In this regard, the use of the \u201cfirst-in-first-out\u201d or \u201cFIFO\u201d method (for the recognition of the recorded ECL in the income statement, in the event of sales or repayments) was considered to help in providing a more transparent management of the portfolio, also for the front office operators, while also enabling the continued updating of the credit rating based on new purchases. Once the allocation of the exposures to the various credit risk stages has been established, the expected credit losses (ECL) are determined at individual transaction or securities tranche level, using the IRB/Business models, based on the parameters of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), to which appropriate corrections are made to ensure compliance with the specific requirements of IFRS 9. The following definitions apply for PD, LGD and EAD: - PD (Probability of Default): likelihood of migrating from performing to non-performing status over the period of one year. In models consistent with supervisory provisions, the PD factor is typically quantified through the rating. In the Intesa Sanpaolo Group, the PD values are derived from internal rating models where available, supplemented by external ratings or segment/portfolio average figures; - LGD (Loss Given Default): percentage loss in the event of default. In the models consistent with supervisory provisions, it is quantified through the historical experience of discounted recoveries on exposures that have become non-performing; - EAD (Exposure At Default) or credit equivalent: amount of the exposure at the time of default. As mentioned above, in order to comply with IFRS 9, specific adjustments had to be made to these factors, including in particular: - adoption of a Point in Time (PIT) PD compared to the Through the Cycle (TTC) PD used for Basel purposes; - removal of some additional components from the TTC LGD, such as indirect costs (non-recurring costs) and an additional margin of conservatism specifically introduced for the regulatory models, as well as the component linked to the economic downturn; - the introduction of specific treatment in relation to the regulatory provisions, in order to estimate the accounting LGD, to include in the modelling (in line with the indications of IFRS 9 on using entity-specific information) the estimates of internal recoveries exceeding the regulatory threshold of the Maximum Recovery Period, i.e., the maximum time limit beyond which the Supervisory Authority assumes that nothing will be recovered; - the use of PDs and, where necessary, multi-period LGDs, to determine the lifetime expected loss of the financial instrument (Stages 2 and 3); - the use of the effective interest rate of the individual transaction in the discounting of the expected future cash flows, unlike in the regulatory models, where the individual cash flows are discounted using the discounting rates determined in compliance with the prudential regulations. In relation to the multi-period EAD, in line with IFRS 9 the Intesa Sanpaolo Group refers to the plans at amortised cost for both loans and debt securities, regardless of the measurement method used (amortised cost or fair value through other comprehensive income). For loan commitments (margins), on the other hand, the EAD is assumed to be equal to the nominal amount weighted according to a specific Credit Conversion Factor (CCF). The measurement of the financial assets also reflects the best estimate of the effects of current and future conditions and in particular the economic conditions that affect the forward-looking PDs and LGDs. IFRS 9, also based on the guidance from the international regulators, gives particular importance to information on future macroeconomic scenarios in which the Bank may find itself and which clearly influence the situation of the debtors, with regard both to the \u201crisk\u201d of migration of exposures to lower quality classes (and therefore concerning the staging) and to the recoverable amounts (and therefore concerning the determination of the expected loss on the exposures). In terms of method, various possible alternative approaches designed to take account of these elements have been analysed. Of the various alternatives considered, the Intesa Sanpaolo Group has decided to adopt the \u201cMost likely scenario+Add-on\u201d approach. According to this approach, the macroeconomic conditioning of PD and LGD is carried out through a baseline scenario (\u201cMost Likely\u201d, in line with the approach used for other business purposes such as, for example, the budget and business plans) and then corrected with an Add-On to include any differences compared to downside and upside scenarios. If the overall impact of the Add-On on the risk parameters is positive, the decision has been made to neutralise the effect for both staging and ECL calculation purposes. The macroeconomic scenario is determined by the Bank\u2019s Research Department using forecasting models that are disclosed to the market to determine the consensus. Alternative upside and downside scenarios are determined through stress tests of the input variables of the forecasting models. In particular, the most likely scenario and alternative scenarios are determined using a set of analytical and stand-alone forecasting instruments that determine the forecast path for several blocks of variables, namely: - national accounts and inflation of the top 6 Eurozone countries, the United States and Japan; - official rates (ECB, Fed, BoJ), EUR and USD swap rate curves, and several points of the government curves; - exchange rates for EUR, USD, JPY and GBP; - stock market indices (DJ Eurostoxx 50 and S&P 500); - Brent price; - some specific data for the Italian economy (industrial production, real estate prices, employment, public finance balances). These forecasts are then processed using the Oxford Economics multi-country structural Global Economic Model, where they replace the forecast paths of the baseline scenario provided by the company with the periodic updating of the database. The model is then solved to derive a consistent global forecasting framework, including variables for which no specific models have been developed, and to obtain a simulation environment that can be used to generate alternative scenarios. This step may require some iterations, particularly if the forecasting framework generated internally is significantly different from the one provided by Oxford Economics. If this is the case, further fine-tuning may be needed for specific secondary variables that the analysts consider to be inconsistent with the forecast scenario or that have an unexplainable quarterly volatility. The alternative paths are selected using external information. In particular: - average annual GDP growth rates of several countries: this is the key driver for the simulation and the deviations are determined to replicate the dispersion of the growth estimates published by Consensus Economics in the most recent report available at the date of the simulation, considering the minimum and maximum forecasts (after applying a filter to identify and eliminate possible outliers). If there are outliers, these are discarded and the remaining maximum and minimum values are considered. Since consensus estimates are only available for the first two years of the simulation period, an extrapolation of the deviations identified for the first two years is used for the third year; - stock market indices (DJ Eurostoxx 50, S&P 500) and US residential real estate prices: the minimum and maximum forecasts of the Thomson Reuters panel are used as a reference; - Italian residential real estate prices: since no consensus estimates are currently available, the alternative paths are based on the distribution of the historical quarterly changes available from 1980 to the current quarter. The percentile value identified is used, for the most likely scenario, to determine the variations corresponding to a probability gap, calculated through statistical analysis of the historical distribution of the observations. The two (positive and negative) changes with respect to the most-likely scenario are then used to calculate the level of the individual identified indices, reconstructing the two alternative paths (one positive and one negative) for each of them that represent the input for the determination of the Add-On. The probability gap used is identified based on the variability characteristics of the series, to obtain a significant deviation from the most-likely scenario. In addition to defining the alternative paths, a map of possible additional factors is maintained, i.e., adverse idiosyncratic events or scenarios, not explicitly incorporated in the time series used for the construction of the most-likely scenario or in the alternative paths, which can generate further significant effects on expected losses. The following is assessed for these events/scenarios: - the possible time frame; - the degree of inclusion in the most-likely scenario or the alternative paths; - the potential impact, assessed in qualitative terms. The map of additional factors also draws on the list of risk factors contained in the forecast reports of the IMF (World Economic Outlook) and the European Commission and may change over time. Within the assessment of the time frame for the additional factors, note is made if the factor cannot be placed within a specific time period, which makes its incorporation into the most-likely scenario or alternative paths unfeasible. The assessments made take account of the fact that the consensus estimates may include forecasts that already incorporate the total or partial realisation of one or more risk factors in their estimates, which means that the alternative paths may already incorporate these additional factors to some extent. Where there is considerable uncertainty in the national and international macroeconomic forecasts, as well as significant deviations in terms of best-case forecasts with respect to the TTC scenario, prudential factors may be introduced in relation to the deviations in the minimum and maximum values of the variables based on the above-mentioned consensus or historical figures. The above macroeconomic scenarios (most likely and alternative scenarios) are used in internal models to determine the point-in-time (PIT) parameters. Specifically, the time series of default rates acquired from the Bank of Italy are differentiated over the main economic macro- sectors (e.g. consumer households, family businesses, construction) and, for each of these, specific satellite models establish the relationships with the macroeconomic variables in order to obtain the forecast default rates. In turn, these impact the TTC transition matrices between rating classes and thus provide the PIT transition matrices for each scenario (most likely and alternative scenarios). These give rise to the lifetime conditional PD. In particular, the TTC matrices are calculated using internal default rates for the Corporate, Retail SME and Retail segments, whereas the Bank of Italy system rates are used for the Low Default segments, because the internal time series data for those segments is less extensive. The forward-looking point-in-time matrices, on the other hand, are calculated using the system default rates for all the segments. A similar process is used to determine the PIT LGD grids. Taking account of the repayment plans of the individual loans, their conditional PD and LGD, residual maturity and staging, the impairment of performing financial assets is determined. Impairment of non-performing financial assets Non-performing loans are represented by bad loans, unlikely to pay and past due positions by more than 90 days. Non-performing loans classified as bad loans are subject to the following measurement methods: \u2212 analytical-statistical measurement, which is used for exposures of less than 2 million euro and is based on the use of specific LGD grids, plus an Add-On to take account of information linked to the evolution of the current conditions related to management variables highly correlated with the loss performance and forward-looking information relating to the impact of expected future macroeconomic scenarios (as described in the previous paragraphs); \u2212 analytical-specific measurement, which is used for customers with exposures exceeding 2 million euro and is based on the impairment percentages allocated by the manager, following specific analysis and measurements, also based on the evolution of the current conditions, plus an Add-On to take account of forward-looking information, and in particular information relating to the impact of future macroeconomic scenarios (except for bad loans backed by mortgage collateral or relating to property leases for which the impact of future scenarios is included through the method used to determine the haircuts to the value of the properties pledged as collateral). The measurement of unlikely-to-pay loans (UTPs) is also performed based on different approaches: \u2212 analytical-statistical measurement, for exposures of less than 2 million euro, based on the use of specific LGD grids, plus an Add-On to take account of the already mentioned information linked to the current conditions and the impacts of future macroeconomic scenarios, as well as continuation in the risk status, in order to penalise positions with greater vintage or which have no movements and/or recoveries for a particular period of time; \u2212 analytical-specific measurement, for on-balance sheet exposures of more than 2 million euro, based on the impairment percentages allocated by the manager, following specific analyses and assessments also based on the evolution of the current conditions, plus an Add-On to take account, also in this case, of the impacts of future macroeconomic scenarios and of continuation in the risk status. For Group companies, the threshold value for analytical-statistical measurement is set by the competent bodies of the individual companies, in coordination with the structures of Intesa Sanpaolo, at a level that is not, in any event, higher than that set by the Parent Company. Regardless of the division of these exposures between those subject to analytical-statistical measurement and those subject to analytical-specific measurement (as identified above), the add-ons envisaged include the sales scenarios for the disposable non-performing loans if the business plan and the NPL reduction plan envisage sales and those sales do not lead to a reclassification pursuant to IFRS 5. The valuation of the disposable non-performing loans therefore considers the possibility of also realising these loans through their sale. Non-performing loans classified in the past-due loans category, on the other hand, are subject to analytical measurement based on statistics, regardless of the amount of the exposure. However, also in this case, the adjustment determined based on the LGD statistical grids is supplemented to take account of the Add-On attributable to the effect of the evolution of the current conditions and the future macroeconomic scenarios. Credit exposures must continue to be carried as non-performing for at least three months after they cease to meet the requirements for being classified as such (the \u201cprobation period\u201d). Until the conditions are met for reclassification out of the non-performing category, such exposures are retained in their respective risk classes and measured according to an analytical-statistical or an analytical-specific approach taking account of their lower risk level. A brief description is provided below of the methods used for the analytical-specific and analytical-statistical measurement: - the analytical-specific measurement of bad loans and unlikely-to-pay loans above 2 million euro is a measurement performed by the managers of the individual positions based on a qualitative and quantitative analysis of the borrower's financial position, the riskiness of the credit relationship, the targets and strategies for reduction of the non-performing loans, and any mitigating factors (collateral), taking into account the financial impact of the estimated recovery time. For bad loans in particular, a series of elements are relevant, which differ according to the characteristics of the positions, and must be thoroughly and prudently assessed, including the following, listed merely as examples: o nature of the credit, whether preferential or unsecured; o net asset value of the borrowers/third party collateral providers; o complexity of existing or potential litigation and/or the underlying legal issues; o exposure of the borrowers to the banking system and other creditors; o last available financial statements; o legal status of the borrowers and any pending insolvency and/or individual proceedings. In order to determine the estimated realisable value of loans secured by real estate, and to take into account both the time series of recoveries and the forward-looking information in accordance with IFRS 9, an approach is applied focused on the valuation of real estate based on the expected average auction price and the related reduction in the observed price, with the calculation of average haircuts that differ according to the type of real estate collateral (residential, commercial, industrial and land). Accordingly, to avoid duplications, a macroeconomic Add-On is not used in the analytical-specific measurement for bad mortgage loans, because the forward-looking component is already taken into account through the haircut. For real-estate bad loans arising from lease contracts, in view of the particular nature of the product (lack of auctions), the haircut is estimated as the depreciation of the asset with respect to the appraised value observed at the time of classification as non-performing and the actual price of sale. In addition, for unlikely-to-pay loans, the measurement is based on a qualitative and quantitative analysis of the borrower\u2019s financial position and on precise assessment of the risk situation. The calculation of the impairment loss involves the valuation of the future cash flows that the borrower is considered to be able to generate and that will also be used to service the financial debt. This estimate must be made based on two alternative approaches: o the going concern approach: the operating cash flows of the borrower (or the beneficial owner) continue to be generated and are used to repay the financial debts contracted. The going concern assumption does not rule out the realisation of collateral, but only to the extent that this can take place without affecting the borrower's ability to generate future cash flows. The going concern approach is also used in cases where the recoverability of the exposure is based on the possible sale of assets by the borrower or on extraordinary transactions. Similarly to the case of bad loans, haircuts are also used in measuring real-estate collateral for unlikely-to-pay positions. For going- concern positions, these haircuts are determined on the basis of the haircuts applied in the liquidation process (gone-concern bad loan or UTP position), while applying a calibration factor equal to the probability of migration of the UTP positions to the bad loan category; o the gone concern approach: applicable in cases when it is believed that the borrower's cash flows will cease. This is a scenario that can apply to positions that are expected to be classified as bad loans. In this context, assuming that shareholders' interventions and/or extraordinary operations to restructure debt in turnaround situations are not reasonably feasible, recovery of the credit is essentially based on the value of the collateral that secures the Bank's credit claim, net of the application of a haircut (determined as for bad loans) and, alternatively, on the realisable value of the assets, taking into account the liabilities and possible pre-emptive claims; - the analytical-statistical measurement, performed for bad loans and unlikely-to-pay loans of less than 2 million euro and for past-due loans has specific features according to the type of exposure involved. With regard to bad loans, the analytical-statistical measurement is based on the Bad Loan LGD grids, where the LGD Defaulted Asset model is mainly characterised by the differentiation of the loss rates that, in addition to the regulatory segment, is based on the continuation in the risk status (\u201cvintage\u201d) and the possible activation of legal recovery proceedings. The grids are also differentiated for the other significant analysis axes used in the model estimation (e.g. product type, type of guarantee, geographical area, exposure band, etc.). The recovery time grids are mainly broken down by regulatory segment and by additional significant analysis axes used in the modelling (e.g. recovery procedures, exposure band, product type). For unlikely-to-pay loans, the measurement is performed using statistical LGD grids estimated specifically for positions classified as unlikely-to-pay loans, in line with the estimated LGD grids for bad loans. The estimation model for the LGD grid for unlikely-to-pay loans is similar to the one described above for bad loans and calculates the expected loss rate of the relationship being valued according to its characteristics. The LGD for unlikely-to-pay loans is obtained by recalibrating the bad loan LGD using the Danger Rate module. The Danger Rate is a multiplying correction factor to apply to the bad loan LGD, in order to take into account the loss rates that can be recorded in the various default statuses (Unlikely-to-Pay and/or past due). The Danger Rate is estimated using the probability of migration to bad loans for positions already in default, the loss rates observed in the pre-bad loans phase for positions migrating to bad loans, and the loss rates observed in the pre-bad loans phase for positions that return to performing status or are extinguished. In addition, for the two subclasses of the \u201cUnlikely-to-Pay Loans\u201d risk status (\u201cNon-Forborne Unlikely-to-Pay Loans\u201d and \u201cForborne Unlikely-to-Pay Loans\u201d), differentiated grids are estimated to take into account the characteristics of the Forborne loans, which, in addition to having lower average loss levels due to the effect of the Forbearance Measures, are also affected by the regulatory constraints that prevent their return to performing loan status before 12 months from the date of the renegotiation. For past-due loans, the methods used to determine the grids are the same as those described for the unlikely-to-pay loans (Framework Danger Rate). In this case, the vintage factor is captured by the introduction of a differentiation based on the duration of the past-due period (Past Due at 90 days/180 days) which produces a significant variation in the loss rates of the grids, which are also differentiated according to regulatory segment and additional analysis axes (e.g. product type, type of guarantee, geographical area, exposure band, etc.) common to the other non-performing loan categories. Also in the LGD estimation models used in the analytical-statistical measurement of non-performing exposures, several additional components specifically included for regulatory models are removed, similar to that illustrated for performing exposures. With regard to the inclusion of current and forward looking information, it should be noted that, for non-performing exposures, a statistically estimated component (Add-On from macroeconomic scenario) linked to the most-likely and downside scenarios expected over the period of the next three years is also considered, according to the criteria already described. In fact, as required by IFRS 9, the effects of the forward-looking scenario on LGD estimates must also be considered and the aforementioned component is aimed at capturing the non-linearity of the relationship between the macroeconomic variables and ECL measurement, by analysing the forecast uncertainty of the variables used for the preparation of the most-likely scenario. It is based on the methodological framework that is used for performing loans, but ignores the upside scenario from a prudential perspective and only considers the average downside and most-likely scenarios over the period of the next three years. Furthermore, an additional factor is applied to the analytical/statistical measurement firmly based on internal management variables, in particular the level of past and prospective NPL ratio, which, on the basis of long-term observation, is statistically correlated with the loss performance. This factor makes the LGD estimate more sensitive to changes in the current and future economic/management context. Also in terms of future scenarios, with regard to the unlikely to pay category, which includes positions that are still performing but show signs of difficulty, both for positions with analytical-specific measurement and those with analytical-statistical measurement, when there are no effective forbearance measures, an additional component shall be applied (in addition to the aforementioned add on from the macroeconomic scenario) to reduce the recoverable amount of the positions based on their vintage in the risk status and the absence of movements and/or recoveries in a specific period of time. With regard to the alternative recovery scenarios, the Intesa Sanpaolo Group, in relation to the objectives of reducing the stock of outstanding non-performing loans, included in its business plans, and any commitments made to the Supervisory Authorities, with specific regard to the NPL Strategy, considers the sale of particular portfolios as the strategy that, in certain conditions, can maximise the cash flow recovery, also considering the recovery times. Consequently, the \u201cordinary\u201d scenario, which assumes a recovery strategy based on the collection of credit, typically through legal actions, mandates to credit recovery companies and the realisation of bank collateral, is also been accompanied - where applicable and as an alternative recovery strategy - by the scenario of the sale of the loan. Where company plans and Group strategies identify disposal objectives and, as a result, a portfolio of non-performing loans that may be disposed of, until the disposal objectives are reached, the loans and receivables included in that portfolio shall be measured taking account of both the amount recoverable through operating activities and market valuations (based on external appraisals) and/or sales prices, if already defined. In particular, where a larger loan portfolio that may be sold represented by Group loans that are disposable (thus, for example, positions that are not involved in disputes, as per precise indication by the management structures and which are not subject to synthetic securitisation), in relation to the sales objectives is identified, the book value of said portfolio is determined by weighting the recoverable amount through operating activities with the amount recoverable through sale. More specifically, the recoverable amount of disposable non-performing loans is quantified as the average between (i) the value in the event of sale (fair value) and (ii) the collection amount, weighted on the basis of the percentage of the loans eligible for sale - determined as the ratio between the target volume of loans to be sold and the respective non bankruptcy- remote portfolios having the same profile, i.e. as a percentage that adequately reflects the probability of sale of the portfolios whose disposal is considered highly probable. The \u201ccollection amount\u201d was determined according to the already shown ordinary methods adopted by the Group for the impairment of non-performing loans, i.e. based on the individual measurement of the exposures exceeding a defined threshold and based on an analytical-statistical measurement for the others. The measurement of the value in the event of sale is carried out by an external expert, based on market valuations. However, where the positions to be sold are specifically identified, those positions shall be measured exclusively taking account of the market values established by external experts, based on a specific fairness opinion or, if already defined through a binding agreement with the buyer, the sales price. Those loans are also reclassified as assets held for sale. As already mentioned, the purchased or originated credit-impaired (POCI) financial assets have specific features in terms of impairment. As a result, value adjustments equal to the lifetime ECL must be recognised on these instruments from their initial recognition date and for their entire lifetime. At each subsequent reporting date, the amount of the lifetime ECL must therefore be adjusted, with the recognition through profit or loss of the amount of any change in lifetime expected credit losses as a gain or an impairment loss. In view of the above, POCI financial assets are initially recognised in Stage 3, subject to the possibility of being subsequently transferred to the performing loans stage, even if an expected loss equal to the lifetime ECL will continue to be recognised. Lastly, with regard to non-performing loans, it is highlighted that the Intesa Sanpaolo Group uses the \u2013 full or partial \u2013 write- off/derecognition of unrecoverable accounting positions and, in the following cases, the consequent allocation to loss of the remainder that has not yet been adjusted: \u2013 uncollectability of the debt, as a result of definite and precise elements (such as, for example, untraceability and indigence of the debtor, lack of recovery from realisation of securities and real estate, negative foreclosures, bankruptcy proceedings closed with no full compensation for the Bank, if there are no further guarantees that can be enforced etc.); \u2013 disposal of the loan; \u2013 waiver of the credit claim, due to the unilateral cancellation of the debt or residual amount as a result of settlement agreements; \u2013 no waiver of the credit claim. With regard to the full or partial write-offs without waiver of the credit claim, in order to avoid maintaining loans on the balance sheet that have a very low possibility of recovery, despite continuing to be managed by the recovery structures, they are fully or partially written off due to uncollectability even if the legal proceedings have not been closed. The write-off can only involve the portion of the loan covered by provisions and, therefore, each loan can only be written off up to the amount of its net book value. Therefore, on a periodic basis, the Group identifies the bad loan portfolios to be subject to total or partial write-offs with the following macro-characteristics: o percentage cover of 100% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >1 year; o percentage cover of >95% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >5 years or >8 years, respectively, for non-mortgage and mortgage loans. Portfolios to be written off can also be identified that have similar characteristics that are different from those indicated above, but that relate to exposures that have a marginal possibility of recovering the amount of the provision, where the minimum amount of the provision (calculated taking into account the accumulated write-offs on the position, according to the same rule established at prudential level by the calendar provisioning framework) is at least equal to the amount needed to bring the value of the exposures up to their fair value estimated based on the prices recorded in the latest sales of bad loans made by the Group. Impairment of investments in associates and companies subject to joint control At each reporting date the investments in associates and companies subject to joint control are subjected to an impairment test to assess whether there is objective evidence to consider that the carrying value of such assets is not fully recoverable. The process of detection of any impairment involves the verification of the presence of impairment indicators and the determination of any write-down. The impairment indicators are essentially divided into two categories: qualitative and quantitative indicators. Qualitative indicators include: - the generation of negative economic results or in any case a significant variance with respect to the targets budgeted or established in the multi-year plans disclosed to the market; - the announcement/initiation of insolvency proceedings or restructuring plans; - the downgrading by more than two rating classes; - failure to discharge payment obligations for debt securities issued fully and in a timely manner; - use of industrial policy tools aimed at responding to a serious crisis or allowing companies to face restructuring/reorganisation processes. Quantitative indicators include: - a reduction in fair value of over 30% below the carrying value or for a period of over 24 months; - a market capitalisation lower than the company's net book value, in the case of securities listed on active markets, a carrying value of the investment in the Parent Company's financial statements higher than the carrying value in the consolidated financial statements of the investee's net assets and goodwill, or distribution by the investee of a dividend that is higher than its total income. The presence of impairment indicators results in the recognition of a write-down to the extent that the recoverable amount is lower than the recognition value. The recoverable amount consists of the higher of the fair value and the value in use, less costs to sell. For an illustration of the valuation techniques used to determine fair value, see the specific Section A.4 \u2013 Information on fair value. Value in use is the present value of expected future cash flows from the asset; it reflects estimated expected future cash flows from the asset, the estimate of possible changes in the amount and/or timing of cash flows, time value of money, the price able to repay the risk of the asset and other factors, which may affect the appreciation by market participants of expected future cash flows from the asset. Value in use is determined by discounting future cash flows. Insurance assets and liabilities The Intesa Sanpaolo Group has decided to exercise the option of adopting the Deferral Approach, according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39, while awaiting the entry into force of the new international financial reporting standard on insurance contracts (IFRS 17), from 1 January 2023 85 . For completeness, an outline is provided below of: - the classification and measurement criteria for the financial assets and liabilities used by the Group\u2019s insurance companies, with more details provided in Part A \u201cAccounting policies\u201d of the Notes to the consolidated financial statements of the 2017 Annual Report. However, a description has not been provided of the recognition and derecognition criteria, because they are essentially in line with the applicable provisions of IFRS 9 and IAS 39; - the approaches adopted for specific products of the insurance segment. For details of the treatment of financial statement captions of the insurance companies other than those of a financial nature, see the information provided above, as the companies of the banking group and the companies of the insurance segment use the same accounting policies. 1. Financial assets held for trading Classification criteria This category includes financial assets held for trading, essentially represented by debt securities and equities and the positive value of derivative contracts held for trading. Derivative contracts also include those embedded in combined financial instruments which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. Derivatives are stated as assets if their fair value is positive and as liabilities if their fair value is negative. The positive and negative current values arising from transactions with the same counterparty may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. The reclassifications to other categories of financial assets are not permitted unless there is an event that is unusual and highly unlikely to recur in the near term. In such cases debt securities and equities not held for trading may be reclassified into other categories established by IAS 39 if the conditions for their recognition apply (Investments held to maturity, Financial assets available for sale, Loans). The transfer value is the fair value at the time of the reclassification. On reclassification, the presence of any embedded derivative contracts, that have to be separated, is assessed. Measurement criteria After initial recognition, financial assets held for trading are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. Equities, quotas of UCI and derivatives which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value according to the guidelines listed above, are maintained at cost. 2. Financial assets available for sale Classification criteria This category includes the financial assets that do not fall within any of the other categories such as Loans, Financial assets held for trading, Investments held to maturity or Financial assets measured at fair value through profit or loss. In particular, this caption is made up of i) bonds which are not held for trading and which are not included in Loans and Receivables, in Investments held to maturity or designated at fair value through profit or loss, ii) equity investments which are not held for trading and do not qualify as investments in subsidiaries, associates or entities subject to joint control, including private equity investments and private equity funds as well as iii) the portions of syndicated loans that, from inception, are destined for sale. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category Investments held to maturity. Moreover, debt securities may be reclassified into the category Investments held to maturity as well as under Loans, when there is the intention to hold them in the foreseeable future and when the recognition criteria are met. The transfer value is the fair value at the time of the reclassification. Measurement criteria After initial recognition, Financial assets available for sale are measured at fair value, through the recording in the income statement of the value corresponding to amortised cost, while gains or losses deriving from a change in fair value are recorded in a specific reserve in shareholders\u2019 equity, until the financial asset is derecognised or a permanent loss occurs. On the total or partial sale of the financial asset or on recognition of a loss, the cumulated profit or loss must be reversed, all or in part, to the income statement. Fair value is determined on the basis of the criteria already illustrated for financial assets held for trading. Equities included in this category and quotas of UCI which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value, are maintained at cost. Financial assets available for sale are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and its fair value. Should the reasons for impairment cease to exist, following an event occurred after the registration of the impairment, value recoveries are posted through the income statement in the case of loans or debt securities, and through shareholders\u2019 equity in the case of equities. The size of the recovery must not lead the carrying amount of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 3. Investments held to maturity Classification criteria Quoted debt securities with fixed or determinable payments and fixed maturity, which the entity has the positive intention and ability to hold to maturity, are classified in this category. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category of Financial assets available for sale. If during a year, prior to expiry, more than an insignificant amount classified under this category is sold or reclassified, the remaining investments held to maturity are reclassified as Financial assets available for sale and the portfolio in question may not be used for the next two years, unless the sales and reclassifications: - are so close to maturity or the financial asset\u2019s call date that changes in the market interest rate would not have a significant effect on the financial asset\u2019s fair value; - occur after the entity has collected substantially all of the financial asset\u2019s original principal through scheduled payments or prepayments; or - are attributable to an isolated event that is beyond the entity\u2019s control, is non-recurring and could not have been reasonably anticipated by the entity. Measurement criteria After the initial recognition, Investments held to maturity are measured at amortised cost, using the effective interest method. Profits or losses referred to investments held to maturity are recorded in the income statement when assets are derecognised or impaired, and through the amortisation process of the difference between book value and the value reimbursable at maturity. Investments held to maturity are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and the present value of the estimated future cash flows, discounted at the original effective interest rate. The loss is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 4. Loans Classification criteria Loans include loans to customers and due from banks, both disbursed directly and acquired from third parties, which entail fixed or in any case determinable payments, which are not quoted on an active market and which are not classified at inception in Financial assets available for sale. The caption Loans also includes commercial loans, repurchase agreements with the obligation to resell at a later date, and securities underwritten at issue or via private placements, with determined or determinable payments, not quoted in active markets. Reclassifications to the other categories of financial assets established in IAS 39 are not permitted. Measurement criteria After initial recognition, loans are measured at amortised cost, equal to initial value increased/decreased by principal repayments, adjustments/recoveries and amortisation \u2013 calculated applying the effective interest method \u2013 of the difference between amount disbursed and amount to be reimbursed at maturity, typically attributable to the costs/revenues directly connected to the single loan. The effective interest rate is the rate that exactly discounts estimated future cash payments of the loan, for principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to the loan. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/revenues through the expected residual maturity of the loan. The amortised cost method is not used for loans whose short maturity implies that the application of the discounting approach leads to immaterial effects. Such loans are recorded at historical cost. An analogous measurement criterion is applied to loans with unspecified maturity or with notice period. Loans are reassessed for the purpose of identifying those which, due to events occurred after initial recognition, show objective evidence of possible impairment. These include bad loans, unlikely-to-pay or past due loans according to the rules issued by the Bank of Italy, consistent with IAS/IFRS and EU supervisory regulations. Non-performing loans undergo an individual measurement process, or the calculation of the expected loss for homogeneous categories and analytical allocation to each position, and the amount of the adjustment of each loan is the difference between its carrying value at the time of measurement (amortised cost) and the present value of expected future cash flows, discounted using the original effective interest rate. Expected cash flows consider forecast recovery periods, presumed realisable value of guarantees as well as the costs sustained for the recovery of credit exposure. The original effective rate of each loan remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. The impairment loss is recorded in the income statement. The original value of loans is reinstated in subsequent periods to the extent that the reasons which had led to the impairment cease to exist, provided that such valuation is objectively attributed to an event which occurred subsequent to the impairment. The recovery is recorded in the income statement and must not lead the carrying amount of the loan to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment include time value effects. Loans for which no objective evidence of loss has emerged from individual measurement are subject to measurement of a collective adjustment. Such measurement occurs for homogeneous loan categories in terms of credit risk and the relative loss percentages are estimated considering past time series and other objective elements observable at measurement date, which enable the latent loss to be estimated for each loan category. Measurement also considers the risk connected to the borrower\u2019s country of residence. Collective adjustments are recorded in the income statement. 5. Financial assets measured at fair value through profit or loss Classification criteria IAS/IFRS endorsed by the European Commission enable the classification as financial instruments measured at fair value through profit and loss of any financial asset thus defined at the moment of acquisition, in compliance with the cases contemplated in the reference regulations. Reclassifications to the other categories of financial assets are not permitted. The Group classifies investments with respect to insurance policies in this category. Measurement criteria After initial recognition, the financial instruments in question are measured at fair value. The effects of the application of this measurement criterion are recorded in the income statement. 6. Payables and securities issued Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in finance lease transactions. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. 7. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities determined by short selling generated by securities trading activities. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 8. Financial liabilities designated at fair value through profit or loss Classification criteria Financial liabilities designated at fair value through profit or loss are recorded under this caption, on the basis of the fair value option given to companies by IAS 39, in compliance with the cases contemplated in the reference regulations. The Group exercised the fair value option for liabilities, designating insurance products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features. Investments relating to such forms of deposits, as already reported, were also designated at fair value, thereby eliminating or considerably reducing \u201caccounting biases\u201d that would otherwise have arisen from measuring assets and liabilities on the basis of different accounting criteria. Measurement criteria These liabilities are designated at fair value through profit or loss. 9. Insurance products Products for which insurance risk is deemed significant include: temporary first class death policies and income and mixed policies with guaranteed fixed conversion rates at the time of issue, and certain types of unit-linked policies and damage cover. As regards these products, the IAS/IFRS substantially confirm the national accounting standards concerning insurance. In brief, IFRS 4 sets forth that: - gross premiums are to be recorded in the income statement under income; they include all amounts matured during the year as a result of insurance contracts signed, net of cancellations; likewise, all premiums ceded to reinsurers are recorded under current year costs; - with respect to gross premiums, the corresponding commitment towards the insured is accrued in technical reserves, such amount being calculated on a contract-by-contract basis in accordance with applicable local accounting principles; - the insurance products entered under separate management are valued by applying \u201cshadow accounting\u201d, whereby the differences between the carrying value and the market value of securities classified as securities available for sale are allocated to technical reserves as regards the insured parties' portion and to shareholders\u2019 equity as regards the insurance companies' portion. If, on the other hand, the securities are measured at fair value through profit or loss, the difference between the carrying value and the market value is recorded in the income statement giving rise to a change in technical reserves equal to the amount of the insured parties\u2019 portion; - in determining shadow accounting, the Group uses the retrocession average rate and the minimum guaranteed rate established in accordance with the contractual conditions of the various products associated with each portfolio management; - liabilities related to products with discretionary participation features are given as a whole with no distinction between the guaranteed component and the discretionary participation feature. In accordance with IFRS 4, the Group assesses the prospective adequacy of the carrying amount of recorded liabilities using the Liability Adequacy Test (LAT). 10. Financial products included under separate management Financial products included under separate management, despite their not being subject to significant insurance risk, and which therefore contain discretionary participation features, include the majority of life policies and mixed first branch policies, as well as fifth branch capitalisation policies. These are accounted for according to the principles set forth in IFRS 4: - the products are shown in the financial statements according to principles that essentially reflect those locally in force on the subject, any premiums, payments and changes in technical reserves being recorded in the income statement; - as stated in the previous paragraph, shadow accounting is applied to the insurance products entered under separate management which, therefore, have discretionary participation features; - in determining shadow accounting, the Group uses the retrocession average rate and the minimum guaranteed rate established in accordance with the contractual conditions of the various products associated with each portfolio management; - liabilities related to products with discretionary participation features are given as a whole with no distinction between the guaranteed component and the discretionary participation feature. 11. Financial products not included under separate management Financial products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features, are stated in the financial statements as financial liabilities and are measured at fair value, on the basis of the envisaged option (Fair Value Option), or at amortised cost. These financial products are essentially index-linked policies and part of the unit-linked ones, as well as policies with specific assets not included under separate management. These products are accounted for according to the principles set forth in IAS 39, as summarised below: - the portion of index- and unit-linked policies that are considered investment contracts are measured at fair value, whereas the specific asset products not included under separate management are measured at amortised cost; - the income statement does not reflect the premiums relating to these products, but just the revenue components, represented by fees and commissions, and the cost components, comprising provisions and other charges; it also reflects the costs or revenues represented by the changes in the fair value of the liabilities incurred against these contracts. More specifically, the international accounting and financial reporting standards, contained in IAS 39 and IFRS 15, provide that, for the liabilities designated at fair value, income and costs relating to the products in question be identified and classified under two headings: (i) origination, to be recorded in the income statement at the time the product is issued and (ii) investment and management services, to be amortised over the life of the product which depends on how the service is provided. In addition, as regards specific asset products not included under separate management, incremental cost and income items are included in the calculation of the amount to be amortised; - the insurance component included in the index- and unit-linked products, where it can be unbundled, is independently valued and recorded. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1031": { "value": "Impairment of non-financial assets Property, equipment and intangible assets with definite useful life are subject to impairment testing if there is the indication that the book value of the asset may no longer be recovered. The recoverable amount is determined with reference to the fair value of the property and equipment or intangible assets less costs to sell or the value in use, if determinable and if it is higher than fair value. For property and equipment other than real estate and valuable art assets and intangible assets (other than those recognised following business combinations) it is assumed that the carrying amount normally corresponds to the value in use, since it is determined by a depreciation or amortisation process estimated on the basis of the effective contribution of the asset to the production process and since the determination of fair value is extremely subjective. The two values diverge and lead to impairment in case of damages, exit from the production process or other similar non-recurring circumstances. As clarified in the discussion of \u201cProperty and equipment and intangible assets\u201d, the Group measures owner-occupied properties and valuable art assets according to the revaluation model; in this case, any impairment loss on a revalued asset must be treated as a decrease in the revaluation up to the relevant amount, after which any difference is taken to the income statement. As described in the Information on fair value - Fair value of real estate and valuable art assets, for owner-occupied properties each year a scenario analysis is conducted on trends in the real-estate market to assess whether there are any significant deviations in the value of the assets. If significant changes are identified (+ or - 10%), an updated appraisal is prepared to adjust the fair value of the asset to the valuations of the real estate market. If there are no significant differences, the value is redetermined through a new expert appraisal every two years for \u201ctrophy assets\u201d (i.e. particularly prestigious properties used by management functions located in the main cities where the bank is based or properties of particular historical and artistic interest because they are listed by the Ministry for Cultural Heritage and Activities) and every three years for other owner- occupied properties. For the valuable art assets, the revaluation is carried out by means of a new expert appraisal every three years. However, a scenario analysis is carried out annually to identify any appreciable changes in value in order to bring forward the valuation. If the annual monitoring identifies a possible positive or negative value deviation of more than 15% for individual works of artists in the bank\u2019s collections and comparable on the basis of objective criteria (size, technique, period of production, etc.), new appraisals are commissioned. Intangible assets recognised following a business combination and in application of IFRS 3 are subjected to an impairment test at each reporting date to assess whether there is objective evidence that the asset may have been impaired. Intangible assets with a finite life, represented by the value of the asset management portfolio and the value of the insurance portfolio, in the presence of impairment indicators are subjected to a new valuation process to assess the recoverability of the book values. The recoverable amount is determined on the basis of the value in use, namely the present value estimated using a rate representing the time value of money and the asset\u2019s specific risks, of the income margins generated by the existing relations as at the valuation date over a period which expresses their expected residual life. Intangible assets with an indefinite life, represented by the valuation of the brand name and goodwill, do not have independent cash flows and therefore annually undergo an assessment of the adequacy of the value recorded under the assets with reference to the Cash-Generating Unit (CGU) to which the values are attributed at the time of the business combinations. The amount of any impairment is determined on the basis of the difference between the CGU\u2019s book value and its recoverable amount represented by the higher of the fair value, less costs to sell, and the value in use. The book value of the CGUs must be determined in a manner consistent with the criterion used to determine their recoverable amount. For a banking business, the cash flows generated by a CGU cannot be identified without considering the cash flows deriving from financial assets/liabilities, as these form part of the core business. In other words, the recoverable amount of the CGUs is influenced by the aforementioned cash flows and therefore the CGUs\u2019 book value must include financial assets/liabilities in accordance with the scope of the recoverable amount estimate process. Consequently, these assets and liabilities must be properly allocated to the associated CGUs. On this basis, the book value of Intesa Sanpaolo\u2019s CGUs may be determined in terms of contribution to consolidated shareholders\u2019 equity including the minority interest. Thus, the carrying amount of the CGUs consisting of companies that belong to a single operating division or consist of a single legal entity (Asset Management, Private Banking, Insurance and International Subsidiary Banks) is determined by summing the individual book values of each company in the consolidated financial statements, namely the contribution to consolidated shareholders\u2019 equity and corresponding to their net book value, taking into account any goodwill and intangibles recorded upon acquisition (net of subsequent amortisations and any write-downs) and the consolidation entries. With regard to the determination of the carrying value of the other two divisions (Banca dei Territori and IMI Corporate & Investment Banking), given that the Parent Company and other banks contribute to the management of these divisions, and this subdivision is not represented in the accounting information, the overall carrying value of the CGUs cannot be determined on the basis of book values. As a consequence, the use of operational factors is required to make the subdivision following a detailed allocation of the intangibles and goodwill to the two CGUs in accordance with the available accounting information. The operational driver is identified as the \"regulatory capital\" determined by the Financial and Market Risks Department structures for each operating division: it represents the capital absorption necessary to handle the types of risk envisaged by the regulatory supervision rules. The resulting book values already take into account the effects of any impairment of the individual assets, including those relating to intangible assets with a finite life. For an illustration of the valuation techniques used to determine fair value, see Section A.4 \u2013 Information on fair value. The value in use of a CGU is determined by estimating the present value of future cash flows that may be expected to be generated by the CGU. These cash flows are determined by using the latest publicly available business plan or, in its absence, through the drawing up by management of an internal forecast plan or other external information available. The forecasting period for the analysis usually consists of a maximum of five years. The cash flow of the final year of the forecast is projected in perpetuity, using an appropriate growth rate \u201cg\u201d for the purposes of the so-called Terminal value. The \u201cg\u201d rate is determined by assuming that the growth factor is the lower of the average growth rate for the forecasting period of the analysis and the average rate of increase in the Gross Domestic Product in the countries where the cash flows are generated. For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present valuations of the time value of money and the asset\u2019s specific risks. Specifically, the discount rates used incorporate the risk free component and the premiums for the risk associated with the equity component observed over a sufficiently long time period to reflect different market conditions and economic cycles. In addition, given the diverse risks of the respective operating areas, different Beta coefficients are used for each CGU. All the resulting rates have been adjusted to take into account the \u201cCountry Risk\u201d. The cash flows produced by the international subsidiaries are estimated in the currency in which they are generated and translated into euro using the spot exchange rate as at the date of the determination of the value in use. With regard to the intangible asset represented by the brand name, if the reference CGU does not have any goodwill allocated and, as a result, it is not possible to test the recoverable amount of the specific intangible as part of the impairment test of the goodwill based on total cash flows at the level of the CGU, then an independent and specific valuation is made on the basis of the fair value certified by the appraisal of an independent expert. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-949": { "value": "Business combinations Business combinations are governed by IFRS 3. The transfer of control over a company (or over a group of assets managed together as a single business) is considered a business combination. To this end, control is deemed to have transferred when the investor is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns by exercising its power over the investee. IFRS 3 requires that an acquirer be identified in any business combination. The acquirer is identified as the combining entity that obtains control of the other combining entities or businesses. If a controlling entity cannot be identified, following the definition of control described above, as for example in the case of exchange of equity investments, the identification of the acquirer must occur considering other factors such as: the entity which has a significantly higher fair value, the entity which pays a cash consideration, the entity which issues new shares. The acquisition, and therefore the initial consolidation of the acquired entity, must be recognised in the books on the date in which the acquirer effectively obtains control over the acquired company or businesses. When the combination occurs via an exchange of voting ordinary equity instruments, the date of the exchange usually coincides with the date of the acquisition. However, it is always necessary to verify that there are no agreements which may lead to transfer of control prior to the date of the exchange. The consideration transferred as part of a business combination is equal to the sum of the fair value, at the exchange date, of the transferred assets, the liabilities incurred or assumed and the equity instruments issued by the acquirer in return for control. In transactions which entail cash consideration (or when payment occurs via cash-equivalent financial instruments), the purchase price is the agreed consideration. When settlement does not occur in the short-term, the fair value of any deferred component is calculated by discounting the amounts payable to their present value; when payment occurs via an instrument other than cash, therefore via the issue of financial instruments, the price is equal to the fair value of such instruments net of the costs directly attributable to their issue. For the determination of fair value of financial instruments, see Section A.4 \u2013 Information on fair value and note that, in the case of shares quoted on active markets, fair value is represented by Stock Exchange price at acquisition date or, should that not be available, the last price available. Purchase price at acquisition date includes any adjustments to the cost contingent on future events, if provided for by the combination agreement and only if the adjustment is probable, can be measured reliably and realised within the twelve months subsequent to the date of acquisition of control. Instead, any restoration related to any loss in the value of the assets used as consideration is not included in purchase price since it is already considered either in the fair value of equity instruments or as a reduction in the premium or an increase in the discount on the initial issue of debt instruments. Acquisition costs refer to the charges incurred by the acquirer to carry out the business combination, including, for example, professional fees paid to independent auditors, experts, legal advisors, costs for legal opinions and audit of accounts, preparation of information documents required by the law, as well as advisory fees sustained to identify potential acquisition targets if the contract provides for the payment of success fees as well as debt securities' or equities' registration and issue costs. Acquisition costs must be recognised as charges when incurred and when the related services are provided, except for the costs relating to the issue of debt securities or equities which must be recognised in accordance with IAS 32. Business combinations must be accounted for using the \"acquisition method\" whereby identifiable assets acquired (including any intangible assets which had not been previously recognised by the acquired company) or liabilities assumed (including contingent liabilities) are recognised at their fair value at acquisition date. Moreover, as specifically required by IFRS 3, for each business combination, any minority interest in the acquired company can be recognised at fair value (therefore increasing the consideration transferred) or in proportion to the minority investment in the net identifiable assets of the acquired companies. If control is achieved in stages, the acquirer recalculates its previous interest in the acquired company at the acquisition date fair value. Any difference with respect to the previous carrying value is taken to income statement. Excess between the consideration transferred (being the fair value of transferred assets, liabilities incurred and equity instruments issued by the acquirer), increased, where present, by minority interests (determined as above) as well as the fair value of the stakes already held by the acquirer, and the fair value of acquired assets and liabilities should be recognised as goodwill. Conversely, such difference is taken to the income statement when the latter exceed the sum of the consideration, minority interests and the fair value of the stakes already held. The accounting for business combination can be determined provisionally by the end of the year in which the combination is realised and must be completed within twelve months of the acquisition date. In accordance with IFRS 10, acquisitions of further stakes in companies which are already controlled are accounted for as a capital transaction or as a transaction with shareholders acting in their capacity as shareholders. For this reason, the difference between the cost of the acquisition and the book value of the minority stakes acquired is posted to group shareholders' equity; in the same way, the sale of minority stakes without ceding control, does not generate gains or losses in the income statement but is posted to group shareholders' equity. The following transactions are outside the scope of business combinations: transactions aimed at acquiring control over one or more entities which are not part of the company\u2019s business; transactions aimed at acquiring transitory control; transactions conducted for organisational purposes, therefore between two or more companies or businesses which are already part of the Intesa Sanpaolo Group, and which do not entail changes in control, independently of the extent of minority interests in each of the combining entities before and after the business combinations (business combinations involving entities under common control). These transactions are considered immaterial. Therefore, since there are no specific provisions in IAS/IFRS and in compliance with IAS 8 which requires \u2013 in the absence of a specific Standard \u2013 that the reporting entity must use its judgement in applying an accounting policy that results in information that is relevant, reliable, prudent and that reflects the economic substance of the transaction, these are accounted for safeguarding the continuing values in the financial statements of the acquirer. Mergers are examples of combinations between companies and represent the most complete business combinations, since they imply the legal and economic unification of the merged entities. Mergers which entail the establishment of a new legal entity and mergers by incorporation (which entail that an entity is absorbed by another existing entity) are treated according to the criteria illustrated above, that is: - if the transaction leads to the transfer of control of a company, it is accounted for as a business combination as provided for by IFRS 3; - if the transaction does not lead to the transfer of control, it is accounted for by privileging the continuity of the values. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-989": { "value": "Criteria for the preparation of segment reporting The Intesa Sanpaolo Group\u2019s segment reporting is based on the elements that the management uses to make its own operating decisions (the \u201cmanagement approach\u201d) and is therefore consistent with the disclosure requirements of IFRS 8. The Intesa Sanpaolo Group's organisational model is structured according to six business segments with specific operational responsibilities: Banca dei Territori, IMI Corporate & Investment Banking, International Subsidiary Banks, Asset Management, Private Banking and Insurance. In addition to these operating areas there is also the Corporate Centre which is responsible for guidance, coordination and control of the whole Group. The Corporate Centre also includes the following support structures: Treasury, NPE Department and the Strategic Asset & Liability Management (ALM) activities. For the purposes of preparation of the Segment Reporting, the income statement and balance sheet results attributed to the various business sectors were calculated according to the accounting principles used in the preparation and presentation of the consolidated financial statements. Use of the same accounting standards allows segment data and consolidated data to be effectively reconciled. To represent results more effectively and give a better understanding of the components that generated them, the reclassified income statement for each reporting segment is presented with values that express the contribution made by each segment to the Group\u2019s results. The contribution of the various Divisions and of the Corporate Centre to the Group's overall income statement results is determined according to the methods described below: \u2013 application of the contribution model with Internal Fund Transfer Pricing (FTP), differentiated on the basis of the maturity of the individual transaction, for the correct attribution of net interest income; \u2013 application, by virtue of specific contractual agreements between the Group Banks/Companies, of retrocession rules for economic components relative to transactions which set out the distribution of results between product factories/service units and relationship entities/customer units; \u2013 direct cost debiting to each Business Division and to the Corporate Centre; \u2013 application of the Group business accounting model, for the part within its remit, for the charging of the costs for the services provided by the head-office structures of the Parent Company belonging to the Corporate Centre to the Business Divisions and other Structures of the Corporate Centre, as well as the costs relating to the performance of steering and control activities; \u2013 application of customer portfolio/segmentation logics for the assignment to each Division and to the Corporate Centre of the economic results of operations with customers and of the net adjustments to loans. Business units' profits are shown net of the tax effect, calculated by applying the main components underlying the effective tax rate, in line with the Group tax policy. The economic results of the business operational segments are disclosed net of intragroup relations within each segment and gross of intragroup relations between different business operational segments. For each Division and for the Corporate Centre, the absorbed capital is also calculated on the basis of the Risk Weighted Assets (RWAs) determined in accordance with the applicable regulations and supplemented, where necessary, with management data on \u201ceconomic\u201d capital to take into account the risks not covered by the regulatory metric. To complete business operational segment reporting, the most relevant income statement data and balance sheet aggregates referred to the geographical areas in which the Group operates are also given. Geographical areas are defined on the basis of the territorial breakdown of Group activities. Three main geographical areas have been identified, based on the residence of the legal entities making up the Group: Italy, Europe and Rest of the World. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-920": { "value": "Insurance assets and liabilities The Intesa Sanpaolo Group has decided to exercise the option of adopting the Deferral Approach, according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39, while awaiting the entry into force of the new international financial reporting standard on insurance contracts (IFRS 17), from 1 January 2023 85 . For completeness, an outline is provided below of: - the classification and measurement criteria for the financial assets and liabilities used by the Group\u2019s insurance companies, with more details provided in Part A \u201cAccounting policies\u201d of the Notes to the consolidated financial statements of the 2017 Annual Report. However, a description has not been provided of the recognition and derecognition criteria, because they are essentially in line with the applicable provisions of IFRS 9 and IAS 39; - the approaches adopted for specific products of the insurance segment. For details of the treatment of financial statement captions of the insurance companies other than those of a financial nature, see the information provided above, as the companies of the banking group and the companies of the insurance segment use the same accounting policies. 1. Financial assets held for trading Classification criteria This category includes financial assets held for trading, essentially represented by debt securities and equities and the positive value of derivative contracts held for trading. Derivative contracts also include those embedded in combined financial instruments which are subject to separate accounting when: - their economic characteristics and risks are not closely related to the characteristics of the host contract; - the embedded instruments, even though separate, fully meet the definition of derivative; - the combined instruments are not measured at fair value with changes in fair value recognised through profit or loss. Derivatives are stated as assets if their fair value is positive and as liabilities if their fair value is negative. The positive and negative current values arising from transactions with the same counterparty may be offset only when the legal right to offset amounts recognised for accounting purposes currently exists and the net settlement of positions subject to offsetting is carried out. The reclassifications to other categories of financial assets are not permitted unless there is an event that is unusual and highly unlikely to recur in the near term. In such cases debt securities and equities not held for trading may be reclassified into other categories established by IAS 39 if the conditions for their recognition apply (Investments held to maturity, Financial assets available for sale, Loans). The transfer value is the fair value at the time of the reclassification. On reclassification, the presence of any embedded derivative contracts, that have to be separated, is assessed. Measurement criteria After initial recognition, financial assets held for trading are recorded at fair value. The effects of the application of this measurement criterion are recorded in the income statement. For the determination of the fair value of financial instruments quoted on active markets, market quotations are used. If the market for a financial instrument is not active, standard practice estimation methods and valuation techniques are used which consider all the risk factors correlated to the instruments and that are based on market elements such as: valuation of quoted instruments with the same characteristics, calculation of discounted cash flows, option pricing models, recent comparable transactions, etc. Equities, quotas of UCI and derivatives which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value according to the guidelines listed above, are maintained at cost. 2. Financial assets available for sale Classification criteria This category includes the financial assets that do not fall within any of the other categories such as Loans, Financial assets held for trading, Investments held to maturity or Financial assets measured at fair value through profit or loss. In particular, this caption is made up of i) bonds which are not held for trading and which are not included in Loans and Receivables, in Investments held to maturity or designated at fair value through profit or loss, ii) equity investments which are not held for trading and do not qualify as investments in subsidiaries, associates or entities subject to joint control, including private equity investments and private equity funds as well as iii) the portions of syndicated loans that, from inception, are destined for sale. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category Investments held to maturity. Moreover, debt securities may be reclassified into the category Investments held to maturity as well as under Loans, when there is the intention to hold them in the foreseeable future and when the recognition criteria are met. The transfer value is the fair value at the time of the reclassification. Measurement criteria After initial recognition, Financial assets available for sale are measured at fair value, through the recording in the income statement of the value corresponding to amortised cost, while gains or losses deriving from a change in fair value are recorded in a specific reserve in shareholders\u2019 equity, until the financial asset is derecognised or a permanent loss occurs. On the total or partial sale of the financial asset or on recognition of a loss, the cumulated profit or loss must be reversed, all or in part, to the income statement. Fair value is determined on the basis of the criteria already illustrated for financial assets held for trading. Equities included in this category and quotas of UCI which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value, are maintained at cost. Financial assets available for sale are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and its fair value. Should the reasons for impairment cease to exist, following an event occurred after the registration of the impairment, value recoveries are posted through the income statement in the case of loans or debt securities, and through shareholders\u2019 equity in the case of equities. The size of the recovery must not lead the carrying amount of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 3. Investments held to maturity Classification criteria Quoted debt securities with fixed or determinable payments and fixed maturity, which the entity has the positive intention and ability to hold to maturity, are classified in this category. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category of Financial assets available for sale. If during a year, prior to expiry, more than an insignificant amount classified under this category is sold or reclassified, the remaining investments held to maturity are reclassified as Financial assets available for sale and the portfolio in question may not be used for the next two years, unless the sales and reclassifications: - are so close to maturity or the financial asset\u2019s call date that changes in the market interest rate would not have a significant effect on the financial asset\u2019s fair value; - occur after the entity has collected substantially all of the financial asset\u2019s original principal through scheduled payments or prepayments; or - are attributable to an isolated event that is beyond the entity\u2019s control, is non-recurring and could not have been reasonably anticipated by the entity. Measurement criteria After the initial recognition, Investments held to maturity are measured at amortised cost, using the effective interest method. Profits or losses referred to investments held to maturity are recorded in the income statement when assets are derecognised or impaired, and through the amortisation process of the difference between book value and the value reimbursable at maturity. Investments held to maturity are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and the present value of the estimated future cash flows, discounted at the original effective interest rate. The loss is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. 4. Loans Classification criteria Loans include loans to customers and due from banks, both disbursed directly and acquired from third parties, which entail fixed or in any case determinable payments, which are not quoted on an active market and which are not classified at inception in Financial assets available for sale. The caption Loans also includes commercial loans, repurchase agreements with the obligation to resell at a later date, and securities underwritten at issue or via private placements, with determined or determinable payments, not quoted in active markets. Reclassifications to the other categories of financial assets established in IAS 39 are not permitted. Measurement criteria After initial recognition, loans are measured at amortised cost, equal to initial value increased/decreased by principal repayments, adjustments/recoveries and amortisation \u2013 calculated applying the effective interest method \u2013 of the difference between amount disbursed and amount to be reimbursed at maturity, typically attributable to the costs/revenues directly connected to the single loan. The effective interest rate is the rate that exactly discounts estimated future cash payments of the loan, for principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to the loan. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/revenues through the expected residual maturity of the loan. The amortised cost method is not used for loans whose short maturity implies that the application of the discounting approach leads to immaterial effects. Such loans are recorded at historical cost. An analogous measurement criterion is applied to loans with unspecified maturity or with notice period. Loans are reassessed for the purpose of identifying those which, due to events occurred after initial recognition, show objective evidence of possible impairment. These include bad loans, unlikely-to-pay or past due loans according to the rules issued by the Bank of Italy, consistent with IAS/IFRS and EU supervisory regulations. Non-performing loans undergo an individual measurement process, or the calculation of the expected loss for homogeneous categories and analytical allocation to each position, and the amount of the adjustment of each loan is the difference between its carrying value at the time of measurement (amortised cost) and the present value of expected future cash flows, discounted using the original effective interest rate. Expected cash flows consider forecast recovery periods, presumed realisable value of guarantees as well as the costs sustained for the recovery of credit exposure. The original effective rate of each loan remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. The impairment loss is recorded in the income statement. The original value of loans is reinstated in subsequent periods to the extent that the reasons which had led to the impairment cease to exist, provided that such valuation is objectively attributed to an event which occurred subsequent to the impairment. The recovery is recorded in the income statement and must not lead the carrying amount of the loan to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment include time value effects. Loans for which no objective evidence of loss has emerged from individual measurement are subject to measurement of a collective adjustment. Such measurement occurs for homogeneous loan categories in terms of credit risk and the relative loss percentages are estimated considering past time series and other objective elements observable at measurement date, which enable the latent loss to be estimated for each loan category. Measurement also considers the risk connected to the borrower\u2019s country of residence. Collective adjustments are recorded in the income statement. 5. Financial assets measured at fair value through profit or loss Classification criteria IAS/IFRS endorsed by the European Commission enable the classification as financial instruments measured at fair value through profit and loss of any financial asset thus defined at the moment of acquisition, in compliance with the cases contemplated in the reference regulations. Reclassifications to the other categories of financial assets are not permitted. The Group classifies investments with respect to insurance policies in this category. Measurement criteria After initial recognition, the financial instruments in question are measured at fair value. The effects of the application of this measurement criterion are recorded in the income statement. 6. Payables and securities issued Classification criteria Amounts Due to banks, Due to customers and Securities issued include various forms of funding on the interbank market and with customers, repurchase agreements with commitment to repurchase and funding via certificates of deposit, bonds issued and other funding instruments in circulation, net of any amounts repurchased. It also includes the payables recorded by the entity in the capacity of lessee in finance lease transactions. Measurement criteria After initial recognition, financial liabilities are measured at amortised cost with the effective interest method. An exception is made for short-term liabilities, where time value is immaterial, which are stated at collected amount. 7. Financial liabilities held for trading Recognition criteria These financial instruments are recognised at the subscription or issue date at cost, which reflects the fair value of the instrument, without taking into account directly attributable transaction costs or revenues. This liability category includes, specifically, the negative value of trading derivatives as well as the negative value of embedded derivatives in combined contracts but which are not closely correlated to the latter. It also includes liabilities determined by short selling generated by securities trading activities. Derecognition criteria Financial liabilities held for trading are derecognised when the contractual rights to the related cash flows expire or when the financial liability is disposed of with the substantial transfer of all the risks and rewards connected to it. 8. Financial liabilities designated at fair value through profit or loss Classification criteria Financial liabilities designated at fair value through profit or loss are recorded under this caption, on the basis of the fair value option given to companies by IAS 39, in compliance with the cases contemplated in the reference regulations. The Group exercised the fair value option for liabilities, designating insurance products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features. Investments relating to such forms of deposits, as already reported, were also designated at fair value, thereby eliminating or considerably reducing \u201caccounting biases\u201d that would otherwise have arisen from measuring assets and liabilities on the basis of different accounting criteria. Measurement criteria These liabilities are designated at fair value through profit or loss. 9. Insurance products Products for which insurance risk is deemed significant include: temporary first class death policies and income and mixed policies with guaranteed fixed conversion rates at the time of issue, and certain types of unit-linked policies and damage cover. As regards these products, the IAS/IFRS substantially confirm the national accounting standards concerning insurance. In brief, IFRS 4 sets forth that: - gross premiums are to be recorded in the income statement under income; they include all amounts matured during the year as a result of insurance contracts signed, net of cancellations; likewise, all premiums ceded to reinsurers are recorded under current year costs; - with respect to gross premiums, the corresponding commitment towards the insured is accrued in technical reserves, such amount being calculated on a contract-by-contract basis in accordance with applicable local accounting principles; - the insurance products entered under separate management are valued by applying \u201cshadow accounting\u201d, whereby the differences between the carrying value and the market value of securities classified as securities available for sale are allocated to technical reserves as regards the insured parties' portion and to shareholders\u2019 equity as regards the insurance companies' portion. If, on the other hand, the securities are measured at fair value through profit or loss, the difference between the carrying value and the market value is recorded in the income statement giving rise to a change in technical reserves equal to the amount of the insured parties\u2019 portion; - in determining shadow accounting, the Group uses the retrocession average rate and the minimum guaranteed rate established in accordance with the contractual conditions of the various products associated with each portfolio management; - liabilities related to products with discretionary participation features are given as a whole with no distinction between the guaranteed component and the discretionary participation feature. In accordance with IFRS 4, the Group assesses the prospective adequacy of the carrying amount of recorded liabilities using the Liability Adequacy Test (LAT). 10. Financial products included under separate management Financial products included under separate management, despite their not being subject to significant insurance risk, and which therefore contain discretionary participation features, include the majority of life policies and mixed first branch policies, as well as fifth branch capitalisation policies. These are accounted for according to the principles set forth in IFRS 4: - the products are shown in the financial statements according to principles that essentially reflect those locally in force on the subject, any premiums, payments and changes in technical reserves being recorded in the income statement; - as stated in the previous paragraph, shadow accounting is applied to the insurance products entered under separate management which, therefore, have discretionary participation features; - in determining shadow accounting, the Group uses the retrocession average rate and the minimum guaranteed rate established in accordance with the contractual conditions of the various products associated with each portfolio management; - liabilities related to products with discretionary participation features are given as a whole with no distinction between the guaranteed component and the discretionary participation feature. 11. Financial products not included under separate management Financial products without a significant insurance risk and which are not included under separate management, and therefore do not envisage discretionary participation features, are stated in the financial statements as financial liabilities and are measured at fair value, on the basis of the envisaged option (Fair Value Option), or at amortised cost. These financial products are essentially index-linked policies and part of the unit-linked ones, as well as policies with specific assets not included under separate management. These products are accounted for according to the principles set forth in IAS 39, as summarised below: - the portion of index- and unit-linked policies that are considered investment contracts are measured at fair value, whereas the specific asset products not included under separate management are measured at amortised cost; - the income statement does not reflect the premiums relating to these products, but just the revenue components, represented by fees and commissions, and the cost components, comprising provisions and other charges; it also reflects the costs or revenues represented by the changes in the fair value of the liabilities incurred against these contracts. More specifically, the international accounting and financial reporting standards, contained in IAS 39 and IFRS 15, provide that, for the liabilities designated at fair value, income and costs relating to the products in question be identified and classified under two headings: (i) origination, to be recorded in the income statement at the time the product is issued and (ii) investment and management services, to be amortised over the life of the product which depends on how the service is provided. In addition, as regards specific asset products not included under separate management, incremental cost and income items are included in the calculation of the amount to be amortised; - the insurance component included in the index- and unit-linked products, where it can be unbundled, is independently valued and recorded. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInsuranceContracts", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-950": { "value": "2. Financial assets available for sale Classification criteria This category includes the financial assets that do not fall within any of the other categories such as Loans, Financial assets held for trading, Investments held to maturity or Financial assets measured at fair value through profit or loss. In particular, this caption is made up of i) bonds which are not held for trading and which are not included in Loans and Receivables, in Investments held to maturity or designated at fair value through profit or loss, ii) equity investments which are not held for trading and do not qualify as investments in subsidiaries, associates or entities subject to joint control, including private equity investments and private equity funds as well as iii) the portions of syndicated loans that, from inception, are destined for sale. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category Investments held to maturity. Moreover, debt securities may be reclassified into the category Investments held to maturity as well as under Loans, when there is the intention to hold them in the foreseeable future and when the recognition criteria are met. The transfer value is the fair value at the time of the reclassification. Measurement criteria After initial recognition, Financial assets available for sale are measured at fair value, through the recording in the income statement of the value corresponding to amortised cost, while gains or losses deriving from a change in fair value are recorded in a specific reserve in shareholders\u2019 equity, until the financial asset is derecognised or a permanent loss occurs. On the total or partial sale of the financial asset or on recognition of a loss, the cumulated profit or loss must be reversed, all or in part, to the income statement. Fair value is determined on the basis of the criteria already illustrated for financial assets held for trading. Equities included in this category and quotas of UCI which have equities as underlying assets, which are not quoted on an active market, for which it is not possible to determine a reliable fair value, are maintained at cost. Financial assets available for sale are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and its fair value. Should the reasons for impairment cease to exist, following an event occurred after the registration of the impairment, value recoveries are posted through the income statement in the case of loans or debt securities, and through shareholders\u2019 equity in the case of equities. The size of the recovery must not lead the carrying amount of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForAvailableforsaleFinancialAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-951": { "value": "3. Investments held to maturity Classification criteria Quoted debt securities with fixed or determinable payments and fixed maturity, which the entity has the positive intention and ability to hold to maturity, are classified in this category. In the cases provided for by the accounting standards, reclassifications are only permitted towards the category of Financial assets available for sale. If during a year, prior to expiry, more than an insignificant amount classified under this category is sold or reclassified, the remaining investments held to maturity are reclassified as Financial assets available for sale and the portfolio in question may not be used for the next two years, unless the sales and reclassifications: - are so close to maturity or the financial asset\u2019s call date that changes in the market interest rate would not have a significant effect on the financial asset\u2019s fair value; - occur after the entity has collected substantially all of the financial asset\u2019s original principal through scheduled payments or prepayments; or - are attributable to an isolated event that is beyond the entity\u2019s control, is non-recurring and could not have been reasonably anticipated by the entity. Measurement criteria After the initial recognition, Investments held to maturity are measured at amortised cost, using the effective interest method. Profits or losses referred to investments held to maturity are recorded in the income statement when assets are derecognised or impaired, and through the amortisation process of the difference between book value and the value reimbursable at maturity. Investments held to maturity are assessed to identify if they show objective evidence of an impairment loss. If such evidence exists, the loss is measured as the difference between the carrying value of the asset and the present value of the estimated future cash flows, discounted at the original effective interest rate. The loss is recorded in the income statement. If the reasons for impairment are no longer applicable following an event subsequent to the registration of impairment, recoveries are recorded in the income statement. The size of the recovery must not lead the carrying value of the financial asset to exceed the amortised cost had no impairment losses been recognised in previous periods. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHeldtomaturityInvestmentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-952": { "value": "4. Loans Classification criteria Loans include loans to customers and due from banks, both disbursed directly and acquired from third parties, which entail fixed or in any case determinable payments, which are not quoted on an active market and which are not classified at inception in Financial assets available for sale. The caption Loans also includes commercial loans, repurchase agreements with the obligation to resell at a later date, and securities underwritten at issue or via private placements, with determined or determinable payments, not quoted in active markets. Reclassifications to the other categories of financial assets established in IAS 39 are not permitted. Measurement criteria After initial recognition, loans are measured at amortised cost, equal to initial value increased/decreased by principal repayments, adjustments/recoveries and amortisation \u2013 calculated applying the effective interest method \u2013 of the difference between amount disbursed and amount to be reimbursed at maturity, typically attributable to the costs/revenues directly connected to the single loan. The effective interest rate is the rate that exactly discounts estimated future cash payments of the loan, for principal and interest, to the amount disbursed inclusive of the costs/revenues attributable to the loan. This measurement method uses a financial approach and allows distribution of the economic effect of the costs/revenues through the expected residual maturity of the loan. The amortised cost method is not used for loans whose short maturity implies that the application of the discounting approach leads to immaterial effects. Such loans are recorded at historical cost. An analogous measurement criterion is applied to loans with unspecified maturity or with notice period. Loans are reassessed for the purpose of identifying those which, due to events occurred after initial recognition, show objective evidence of possible impairment. These include bad loans, unlikely-to-pay or past due loans according to the rules issued by the Bank of Italy, consistent with IAS/IFRS and EU supervisory regulations. Non-performing loans undergo an individual measurement process, or the calculation of the expected loss for homogeneous categories and analytical allocation to each position, and the amount of the adjustment of each loan is the difference between its carrying value at the time of measurement (amortised cost) and the present value of expected future cash flows, discounted using the original effective interest rate. Expected cash flows consider forecast recovery periods, presumed realisable value of guarantees as well as the costs sustained for the recovery of credit exposure. The original effective rate of each loan remains unchanged over time even if the relationship has been restructured with a variation of the contractual interest rate and even if the relationship, in practice, no longer bears contractual interest. The impairment loss is recorded in the income statement. The original value of loans is reinstated in subsequent periods to the extent that the reasons which had led to the impairment cease to exist, provided that such valuation is objectively attributed to an event which occurred subsequent to the impairment. The recovery is recorded in the income statement and must not lead the carrying amount of the loan to exceed the amortised cost had no impairment losses been recognised in previous periods. Recoveries on impairment include time value effects. Loans for which no objective evidence of loss has emerged from individual measurement are subject to measurement of a collective adjustment. Such measurement occurs for homogeneous loan categories in terms of credit risk and the relative loss percentages are estimated considering past time series and other objective elements observable at measurement date, which enable the latent loss to be estimated for each loan category. Measurement also considers the risk connected to the borrower\u2019s country of residence. Collective adjustments are recorded in the income statement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-953": { "value": "A.3 \u2013 INFORMATION ON TRANSFERS BETWEEN FINANCIAL ASSET PORTFOLIOS Following the adoption of IFRS 9, the Intesa Sanpaolo Group did not make changes to its business model for managing its financial assets and, therefore, no transfers occurred between portfolios of financial assets. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. Such changes are expected to be extremely rare and must be decided by the management following significant external or internal changes that can be demonstrated to external parties. A.3.1 Reclassified financial assets: change in business model, book value and interest income No disclosure is required since there are no reclassified financial assets recognised under balance sheet assets. A.3.2 Reclassified financial assets: change in business model, fair value and effects on comprehensive income No disclosure is required since no transfers were carried out between portfolios of financial assets in 2022. A.3.3 Reclassified financial assets: change in business model and effective interest rate No disclosure is required since there are no reclassified financial assets recognised under balance sheet assets. ", "dimensions": { "concept": "ifrs-full:DisclosureOfReclassificationOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-921": { "value": "A.3 \u2013 INFORMATION ON TRANSFERS BETWEEN FINANCIAL ASSET PORTFOLIOS Following the adoption of IFRS 9, the Intesa Sanpaolo Group did not make changes to its business model for managing its financial assets and, therefore, no transfers occurred between portfolios of financial assets. According to the general rules established by IFRS 9 on the reclassification of financial assets (except for equity instruments, for which no reclassification is permitted), reclassifications to other categories of financial assets are not permitted unless the entity changes its business model for those financial assets. Such changes are expected to be extremely rare and must be decided by the management following significant external or internal changes that can be demonstrated to external parties. A.3.1 Reclassified financial assets: change in business model, book value and interest income No disclosure is required since there are no reclassified financial assets recognised under balance sheet assets. A.3.2 Reclassified financial assets: change in business model, fair value and effects on comprehensive income No disclosure is required since no transfers were carried out between portfolios of financial assets in 2022. A.3.3 Reclassified financial assets: change in business model and effective interest rate No disclosure is required since there are no reclassified financial assets recognised under balance sheet assets.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForReclassificationOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-922": { "value": "
A.4 \u2013 INFORMATION ON FAIR VALUE
FAIR VALUE, INDEPENDENT PRICE VERIFICATION AND PRUDENT VALUE OF FINANCIAL
INSTRUMENTS
The framework of financial measurement at fair value is based on three pillars: fair value measurement according to the
IAS/IFRS, independent price verification (IPV) and prudent value measurement. The latter two are established by the Capital
Requirement Regulation (CRR). The paragraphs below describe the methods applied by the Intesa Sanpaolo Group to
implement and use those elements.
General fair value principles
The Intesa Sanpaolo Group governs and defines the fair value measurement of financial instruments through the Group
Guidelines and Rules for Valuation of Financial Instruments at Fair Value, prepared by the Market and Financial Risk
Management Head Office Department and applied by the Parent Company and all consolidated subsidiaries, including the
Insurance Companies.
The \u201cGuidelines for Valuation of Financial Instruments at Fair Value\u201d, once a favourable opinion has been given by the Group
Financial Risk Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of
the Risks and Sustainability Committee. The \u201cRules for Valuation of Financial Instruments at Fair Value\u201d are reviewed, revised
and approved at least on an annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by
the Management Bodies, and which also reviews material changes and updates proposed by the Market and Financial Risk
Management Head Office Department.
The \u201cRules for the Measurement of Unlisted Equity Investments\u201d, drawn up by the Group M&A and Equity Investments Head
Office Department and approved by the Group Financial Risk Committee, govern the fair value measurement of unlisted
equities and financial instruments with unlisted equities as their underlying.
IFRS 13, which harmonises the measurement rules and the related disclosure, defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e. not as part of
the compulsory liquidation or a below-cost sale) as at the measurement date. Fair value is a market measurement criterion,
not specifically referring to a single bank. Underlying the definition of fair value is the assumption that the Bank is carrying out
normal operations, without any intention of liquidating its assets, significantly reducing the level of operations or carrying out
transactions at unfavourable conditions.
The bank measures the fair value of an asset or liability by adopting the assumptions that would be used by market
participants when pricing an asset or liability, presuming that they act with a view to satisfying their own economic interest in
the best way possible. Measurement at fair value presumes that the asset is sold or the liability transferred:
a. in the principal active market for the asset or liability;
b. in the absence of a major market, in the most advantageous active market for the asset or liability.
The bank is not required to conduct an exhaustive study of all possible markets to identify the major market or, in the absence
of the major market, the most advantageous market, but must take into account all the reasonably available information. If
there is no evidence to the contrary, the market that the entity normally operates in to sell the asset or transfer the liability is
assumed to be the major market or the most advantageous market, if there is no major market. The Intesa Sanpaolo Group
considers the principal market of a financial asset or liability to be the market in which the Intesa Sanpaolo Group generally
operates.
In accordance with IFRS 13, the Group considers an active market to be a market where transactions in an asset or liability
occur with sufficient frequency and volume to provide useful information for determining price on an ongoing basis. More
specifically, a financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent
actual and regularly occurring market transactions on an arm's length basis.
In specific cases, governed by the Guidelines and Rules for Valuation of Financial Instruments at Fair Value, and despite
being quoted on regulated markets, relevant research is carried out to verify the significance of the official market values. In
the event of a significant reduction in the volume or level of operations compared to normal operations for the asset or liability
(or for similar assets or liabilities) highlighted by a number of indicators (number of transactions, limited significance of market
prices, significant increase in implicit premiums for liquidity risk, widening or increase of the bid-ask spread, reduction or total
lack of market for new issuances, limited publicly-available information), analyses of the transactions or of the quoted prices
must be carried out. A reduction in the volume or the level of activity alone may not indicate that the price of a transaction or
the quoted price does not represent fair value or that the transaction in that market is not ordinary. If an entity determines that
a transaction price or quoted price does not represent fair value (e.g., non-ordinary transactions) an adjustment to the
transaction prices or listed prices is required if the entity uses those prices as the basis for fair value measurement and that
adjustment may be significant with respect to the fair value as a whole.
The fair value of financial instruments
The presence of quoted prices in an active market represents the best evidence of fair value and these prices are therefore
the quoted prices to be used on a priority basis for the measurement of financial assets and liabilities. If there is no active
market, the fair value is determined using valuation techniques aimed, ultimately, at establishing the price the product would
have had, at the measurement date, in an arm\u2019s length exchange motivated by normal business considerations.
The choice of the above measurement methods is not optional, because they must be applied in hierarchical order: the
availability of a price stated in an active market prevents the use of one of the other measurement approaches.
Inputs of the valuation techniques
The inputs are defined as the assumptions that market participants would have used to determine the price of the asset or the
liability, including assumptions regarding risk, such as, for example, the risk relating to a particular valuation technique used to
measure fair value or the risk relating to the inputs of the valuation technique. The inputs may be observable or unobservable.
Observable inputs are those produced using market data, such as publicly available information on operations or actual
events, which reflect the assumptions that market participants would use in determining the price of the asset or the liability.
Unobservable inputs are those for which no market information is available and that are produced using the best available
information regarding the assumptions that market participants would use to determine the price of the asset or the liability.
Fair value hierarchy
IFRS 13 establishes a fair value hierarchy in which inputs to fair value measurement techniques are divided into three levels.
That hierarchy assigns top priority to (unadjusted) quoted prices on active markets for identical assets or liabilities
(level 1 data) and the lowest priority to unobservable inputs (level 3 data). Specifically:
\u2013 fair value level 1 applies when an instrument is measured directly on the basis of (unadjusted) quoted prices on active
markets for identical assets or liabilities to which the entity has access on the measurement date;
\u2013 fair value level 2 applies when a price has not been found on an active market and the instrument is measured according
to valuation techniques, on the basis of observable market parameters, or of the use of parameters that are not
observable but are supported and confirmed by market evidence, such as prices, spreads or other inputs;
\u2013 fair value level 3 applies when fair value is measured using various inputs, not all of which are directly drawn from
observable market parameters, and which thus entail estimates and assumptions by the valuator.
If various inputs are used to measure the fair value of an asset or liability, classification in the hierarchy is determined on the
basis of the lowest-level input used in measurement. When assigning a level in the fair value hierarchy, priority is given to the
inputs of the valuation techniques rather than the valuation techniques themselves.
The attachment \u201cFair Value Hierarchy Rules\u201d to the \u201cRules for Valuation of Financial Instruments at Fair Value\u201d defines, with
regard to the respective financial instrument valuation models/inputs, the basic rules that market inputs must comply with in
order to be classified as Level 2, and the significance thresholds which, when overrun, result in the assignment of Level 3.
For level 1 financial instruments, the current bid price is used for financial assets and the current ask price for financial
liabilities, struck on the principal active market at the end of the reference period.
For financial instruments with a scarcely significant bid-ask spread or for financial assets and liabilities with offsetting market
risks, mid-market prices are used (again referred to the last day of the reference period) instead of the bid or ask price.
The following are considered as level 1 financial instruments: contributed bonds (i.e. bonds for which the Composite
Bloomberg Bond Trader is available from the Information Provider Bloomberg, or, alternatively, a price on the EuroMTS
circuit, or at least three prices available from the Information Provider Bloomberg), contributed equities (i.e., quoted on the
official market of reference), contributed UCITS funds (covered by EU directives), spot exchange rates, and derivatives for
which prices are available on an active market (for example, exchange traded futures and options).
Conversely, all other financial instruments that do not belong to the above-described categories or that do not have the
contribution level defined by the Guidelines and Rules for Valuation of Financial Instruments at Fair Value are not considered
level 1 instruments.
When no listing on an active market exists or the market is not functioning regularly, that is when the market does not have a
sufficient and continuous number of trades, and bid-ask spreads and volatility that are not sufficiently contained, the fair value
of the financial instruments is mainly determined through the use of valuation techniques whose objective is the establishment
of the price at which, in an orderly transaction, the asset is sold or the liability transferred between market participants, as at
the measurement date, under current market conditions.
In the case of instruments classified as level 2, the valuation is based on prices or credit spreads presumed from the official
listing of instruments which are similar in terms of risk factors, using a given calculation methodology (valuation model). The
use of this approach requires the identification of transactions on active markets in relation to instruments that, in terms of risk
factors, are comparable with the instrument to be measured. Level 2 calculation methodologies reproduce prices of financial
instruments quoted on active markets (model calibration) and do not contain discretional parameters \u2013 parameters for which
values may not be inferred from quotations of financial instruments present on active markets or fixed at levels capable of
reproducing quotations on active markets \u2013 that significantly influence the final measurement.
The following are measured using level 2 input models:
\u2013 bonds without official quotations expressed by an active market and whose fair value is determined through the use of an
appropriate credit spread which is estimated starting from contributed and liquid financial instruments with
similar characteristics;
\u2013 loans whose fair value is determined through the use of an appropriate credit spread which is estimated starting from
market data of financial instruments with similar characteristics;
\u2013 derivatives (including securitised derivatives) measured through specific models, fed by input parameters (such as yield,
foreign exchange and volatility curves) observed on the market;
\u2013 structured credit products (ABSs, HY CLOs, CDOs) for which significant prices are not available and whose fair value is
measured using valuation techniques that consider parameters that can be gathered from the market;
\u2013 non-contributed equity instruments measured based on direct transactions, that is significant transactions on the stock
registered in a time frame considered to be sufficiently short with respect to measurement date and in constant market
conditions, or using the \"relative\" valuation models based on multipliers;
\u2013 non-UCITS hedge funds, provided the Level 3 instruments do not exceed a set threshold.
In case of instruments classified as level 3, the calculation of the fair value is based on valuation models which consider input
parameters not directly observable on the market, therefore implying estimates and assumptions on the part of the valuator.
In particular, the valuation of the financial instrument uses a calculation methodology which is based on specific assumptions
of:
\u2013 the development of future cash flows, which may be affected by future events that may be attributed probabilities
presumed from past experience or on the basis of the assumed behaviour;
\u2013 the level of specific input parameters not quoted on active markets, for which information acquired from prices and
spreads observed on the market is in any case preferred. Where this is not available, past data on the specific risk of the
underlying asset or specialised reports are used (e.g. reports prepared by Rating agencies or primary market players).
The following are measured using this method:
\u2013 some transactions in derivatives, bonds, or complex structured credit instruments measured using level 3 inputs;
\u2013 hedge funds in which the level 3 assets are above a set limit;
\u2013 private equity funds, private debt funds, real estate funds and closed-end funds resulting from sales of non-performing
loans valued at NAV, with possible discounts;
\u2013 shareholdings and other equities measured using models based on discounted cash flows or using equity methods;
\u2013 loans whose fair value is determined through the use of a credit spread that does not meet the criteria to be considered
level 2;
\u2013 loans with underlying equity risk, whose fair value is calculated based on the discounting of expected contractual flows.
The transfer of fair value levels of financial assets and financial liabilities measured at fair value on a recurring basis occurs,
as established by IFRS 13, as follows: the transfer between levels 2 and 3 occurs upon a change in the observability or
significance of an input to the measurements; and the transfer between levels 1 and 2 or 3 occurs upon a change in the
availability of prices in an active market.
For OTC derivatives, the initial choice of the level of fair value hierarchy depends on the degree of observability and
significance of the parameters used to determine the risk-free component. The calculation of the counterparty/issuer default
risk component may result in a transfer to level 3 when the current exposure is positive for the bank and the counterparty is in
non-performing loan status, or when the determination of default risk requires unobservable inputs and the bilateral credit
value adjustment (bCVA) component is significant when compared to the overall fair value of the netting set, or when the
counterparty's sensitivity to downgrading is significant when compared to the overall fair value of the netting set.
For non-contributed equity instruments, the change of the level occurs:
\u2212 when inputs observable on the market (e.g., prices defined based on comparable transactions on the same instrument
between independent and informed counterparties) have become available during the period. In this case, the Intesa
Sanpaolo Group reclassifies from level 3 to level 2;
\u2212 when the directly or indirectly observable elements used as the basis for the valuation cease to exist, or when they are
no longer up to date (e.g., comparable transactions that are no longer recent or multiples that are no longer applicable).
In this case, the Intesa Sanpaolo Group uses valuation techniques that use unobservable inputs.
Valuation of financial instruments
The valuation of financial instruments entails the following phases:
- identification of the sources for valuation: for each asset class, the Guidelines and Rules for Valuation of Financial
Instruments at Fair Value establish the processes that are necessary to identify market parameters and the manner
according to which such data must be extracted and used;
- validation and processing of input data for periodic valuation: this stage consists of the accurate verification, at each
accounting measurement date, of the market parameters used (verifying the integrity of data contained on the proprietary
platform with respect to the source of contribution), reliability tests (consistency of each single figure with similar or
comparable figures) and verification of concrete application means;
- certification of the measurement methods: this phase is aimed at verifying the consistency and the adherence of the
various measurement techniques used with current market practice, at highlighting any critical aspects in the
measurement models used and at determining any adjustments necessary for measurement;
- monitoring and revision of the measurement methods: the monitoring consists of the ongoing checking of the adherence
to the market of the valuation model and enables the timely discovery of any gaps, in order to initiate the necessary
checks and measures.
Identification, certification and processing of the input data for the measurements
The fair value calculation process and the need to distinguish between products which may be measured on the basis of
effective market quotes rather than through the application of measurement techniques, highlight the need to establish
univocal principles in the determination of market parameters. To this end, the Guidelines and Rules for Valuation of Financial
Instruments at Fair Value establish the processes needed to identify the market parameters, the contribution sources
considered appropriate and how the data must be received (cut-offs) and used for the measurement of financial instruments
held for any purpose in the proprietary portfolios of the Parent Company and its subsidiaries. The same sources are used in
measurements carried out for third parties under Service Level Agreements, entered into in advance. The adequacy of the
input data for the measurements is guaranteed by the respect of reference requirements, which are based on comparability,
availability and transparency of the data, or the possibility of extracting the figure from one or more info providing systems,
measuring the contribution bid-ask, and lastly, for OTC products, verifying the comparability of the contribution sources.
The use of all market parameters in Intesa Sanpaolo is subordinated to their certification by the Market and Financial Risk
Management Head Office Department, in terms of specific controls (verifying the integrity of data contained on the proprietary
platform with respect to the source of contribution), reliability tests (consistency of each single figure with similar or
comparable figures) and verification of concrete application means.
Certification of measurement methods
The measurement methods used by the Intesa Sanpaolo Group are certified by the IMI CIB Risk Management Head Office
Department, with the involvement of all relevant structures. The purpose of the certification is to verify the consistency of the
methods with current market practice, to highlight any problems or limitations, and to determine any fair value adjustments, in
accordance with the applicable regulations. The certification process considers all aspects of the measurement method (basic
assumptions, mathematical derivation, any approximations, numerical algorithms used, inputs and outputs) but also all
contextual elements that are relevant to the management, including the characteristics of the associated products (payoffs,
early termination clauses, etc.), any ancillary agreements (e.g. netting or collateral agreements), the market where the
products are traded, and how they are used by end users (e.g. precision vs. performance, calculation of risk measures, etc.).
These aspects are subject to qualitative and quantitative analysis and are duly reported in the internal documentation.
The possibility of independent validation issued by high standing financial service companies is also envisaged in highly-
complex cases and/or in presence of market turbulence (market dislocation).
At the end of the certification process, the measurement method is recorded in the Rules for Valuation of Financial
Instruments at Fair Value.
Monitoring and review of measurement methods
As required by the applicable regulations, the measurement methods used are subject to ongoing monitoring of their
performance with respect to the evolution of financial instruments, markets and methodological innovations developed by the
scientific community, in order to ensure their continuous alignment to the market, promptly highlight any inadequacies and
initiate the necessary checks and actions. The Rules for Valuation of Financial Instruments at Fair Value detail all elements
considered for the periodic monitoring and revision of the measurement methods. The functions involved in the monitoring
process are the same as those involved in the process of certification of the measurement methods mentioned above and in
the IPV process governed by the Guidelines and Rules on Independent Price Verification.
Valuation risk: fair value adjustments
The Intesa Sanpaolo Group defines valuation risk as the risk of losses arising from the valuation uncertainty for the fair value
exit price of financial instruments, due to any limitations of the measurement techniques used or particular market conditions.
The main measure of the valuation risk associated with a financial instrument are the fair value adjustments, which are
designed to take into account the valuation uncertainty or the difficulty in the disposal of specific financial positions, and may
relate to a single financial instrument or to the net position for a particular risk factor. The adjustments may be calculated as
add-ons to the valuation or included directly in the valuation. They are regularly reviewed, also considering market trends, or
the introduction of new liquid instruments, different calculation methodologies and, in general, methodological advances which
may also lead to significant changes in measurement methods chosen and their implementation.
In particular, the Intesa Sanpaolo Group envisages fair value adjustments for the following categories of measurement
uncertainty:
- uncertainty of input data: any valuation uncertainty related to the input data for the valuation (whether mid, bid or ask) is
measured with respect to temporary or structural conditions on the markets or in relation to the size of the values held (in
the case of concentration), and where necessary a fair value adjustment is made, quantifying the consequent impact on
the valuations;
- illiquidity of the underlying positions or risk factors: similarly to the case above, the market bid-ask spread is measured
and, where necessary, a fair value adjustment is made, quantifying the consequent impact on the valuations;
- model risk: this is based on the identification and use of variants of the same model or alternative models, with which to
carry out comparison analyses aimed at quantifying the variability of the valuations (in particular any directionality of the
price when the model changes) and the behaviour of the model in various market scenarios (stress tests). The
quantification of the fair value adjustment is based, where possible, on easily comprehensible and measurable financial
variables (e.g. vega, delta, correlation shift);
- counterparty and funding risk: counterparty and funding risks, collectively referred to as XVA, include Bilateral Credit
Value Adjustment (bCVA) and Funding Value Adjustment (FVA). The bCVA takes account of the counterparty risk
premium associated with the possibility that the counterparties may not honour their mutual commitments (for example in
the event of bankruptcy). This component derives, in turn, from two components: the Credit Value Adjustment (CVA,
negative) and the Debt Value Adjustment (DVA, positive), which consider, respectively, the scenarios where the
Counterparty goes bankrupt before the Bank (and the Bank has a positive exposure towards the Counterparty), and vice
versa the scenarios where the Bank goes bankrupt before the Counterparty (and the Bank has a negative exposure
towards the Counterparty). The Funding Value Adjustment (FVA, negative), on the other hand, takes into consideration
the funding risk premium, connected to the costs of funding the cash flows (coupons, dividends, collateral, etc.)
generated by the Bank's overall OTC derivatives portfolio. The calculation of the XVAs depends on the overall exposure
between the two counterparties, calculated using techniques for simulating the underlying risk factors of the transactions
considered, taking into account any counterparty risk mitigation arrangements (in particular netting and collateralisation
agreements), as well as any contractual clauses. The calculation of the XVAs also depends on the Loss Given Defaults
(LGDs) based on the estimated value of the expected recovery in the event of counterparty default, and the probability of
counterparty default (PD). LGDs and PDs are obtained from credit default swap market quotes or are based on internal
estimates by sector/rating used for credit risk. In addition, the FVA calculation is based on a funding curve representative
of the best market counterparties that the Bank could renegotiate transactions with, in accordance with the most IFRS 13
advantageous market principle, as there is currently no real main market for these transactions.
The management process for fair value adjustments is formalised in the Guidelines and Rules for Valuation of Financial
Instruments at Fair Value and the Rules for the Valuation of Unlisted Equity Investments with appropriate calculation
methodologies on the basis of the different configurations of the points set out above, and is carried out in the most objective,
consistent and systematic manner possible by the IMI CIB Risk Management Head Office Department and the Group M&A
and Equity Investments Head Office Department. The introduction and release of the fair value adjustments depend on the
factors described above. Such processes are a combination of quantitative elements that are rigidly specified and qualitative
elements, valued based on the different configuration over time of the risk factors which generated the adjustments. Thus, the
estimates subsequent to initial recognition are always guided by the mitigation or elimination of said risks.
For new products, the decision to apply the adjustments is taken during the new product approval process, upon the proposal
of the IMI CIB Risk Management Head Office Department.
The application of the adjustments is subject to an authorisation procedure that, above a certain warning threshold defined for
specific cases, involves both the area of the Chief Risk Officer and the Manager responsible for preparing the Company\u2019s
financial reports.
A.4.1 Fair value levels 2 and 3: valuation techniques and inputs used
The sections below provide a summary of the information, by type of financial instrument (securities, derivatives, structured
products, hedge funds, and loans), on the valuation models used.
I. Valuation of non-contributed debt securities
The fair value of non-contributed bonds is measured using the income approach, i.e. by calculating the present value of
expected future cash flows using an appropriate risk premium represented by the credit spread, identified on the basis of
contributed and liquid financial instruments with similar characteristics. The sources used for this measurement are the
following:
- contributed and liquid debt securities of the same issuer;
- credit default swaps on the same reference entity;
- contributed and liquid securities of an issuer with the same rating and belonging to the same sector.
In any case, the different seniority of the security to be priced is considered with regard to the issuer\u2019s debt structure.
In the case of Italian public issuers, a rating/maturity matrix is defined on the basis of the spread levels on government
issues, to which the spreads among the various rating/maturity classes with respect to public issues (regions, provinces,
municipalities, government entities) are applied.
When applying the spread for the pricing of the non-contributed instrument, if the estimated \u2018fair\u2019 credit curve does not
respect the same characteristics of the instrument, correction factors are considered.
Also, for bonds that are not quoted on active markets, an extra spread, estimated based on the bid/ask spread recorded
on the market, is added to the \u201cfair\u201d credit spread component, to take account of the higher premium demanded by the
market compared to similar contributed securities.
Finally, if the instrument includes an optional component, a further adjustment is made to the spread by adding a
component designed to capture the hedging costs of the structure and any illiquidity of the underlying assets.
This component is calculated based on the type of option, using the corresponding valuation models for derivatives
mentioned below.
Similarly, Intesa Sanpaolo\u2019s credit spread for the Banking Group\u2019s financial liabilities designated at fair value is
determined and measured based on the bonds issued by the Parent Company, with regular, periodic coupons, maturity
beyond one year and quoted on an active market in compliance with IAS/IFRS. The implicit credit rating is determined
on the basis of market prices and subsequently adjusted through interpolation models which generate credit spread
curves by type of coupon, maturity and subordination level. Similarly, the issued certificates are measured at fair value
by breaking them down into the following two components: an issued bond, measured as described above, and an
option component, measured using the corresponding derivative pricing models described below.
Finally, measurement of the financial liabilities designated at fair value of the Insurance Companies (mainly liabilities
associated with unit-linked investment contracts that do not present significant insurance risk) reflects the market value
of the underlying assets, which are determined in application of the various methods described herein.
II. Valuation of loans
Loans are measured at fair value through contributions from info providers when available or by calculating the present
value of expected future cash flows using an appropriate credit spread, identified starting from the following sources:
- contributed loans on the market;
- sector/rating-specific loan market curves;
- contributed securities of the same issuer;
- credit default swaps on the same reference entity.
In any case, the different seniority of the instrument to be priced is considered with regard to the issuer\u2019s debt structure.
When applying the spread for the pricing of the loan, if the estimated \u2018fair\u2019 credit curve does not respect the same
characteristics of the instrument, correction factors are considered.
Moreover, where, in determining the credit spread of the loans, reference is made to the curves created through bonds,
a Bond \u2013 Loan basis must be applied, to capture the different structure of the market, if any, and the different type of
loan.
In order to consider the premium required by the market for illiquid and/or structured instruments, several adjustments
are applied to the credit spread.
Loans with an underlying unlisted equity risk (which include financial instruments that, pursuant to IAS 32, cannot be
classed as equity, e.g. loans convertible into shares) are usually measured by discounting the cash flows provided for by
the contract. Since these are debt securities, the cash flows are normally discounted using a rate consisting of the sum
of: a risk free rate, a spread deriving from the CDS or measured on listed securities or similar disbursements, and any
additional risk premium.
In the case of non-performing loans, the fair value is determined based on the recoverable amount of the position. This
estimate is made taking into account the contractual elements that characterise the loan and may involve, for example,
the valuation of the cash flows from the sale of the real estate pledged as collateral or the valuation of any capital
instruments that may be acquired following the introduction of an equity conversion clause for the position.
III. Valuation of OTC derivatives
Derivatives, if not traded on regulated markets, are Over The Counter (OTC) instruments, which are bilaterally
exchanged with market counterparties and are measured through specific measurement methods and input parameters
(such as, for example, interest rate, foreign exchange and volatility curves) observed on the market and subject to the
certification and monitoring illustrated above.
The fair value of an OTC derivative is calculated considering the risk premium related to the various underlying risk
factors. Specifically, there are two relevant cases, according to whether or not the instrument is subject to
collateralisation agreements (CSAs) aimed at mitigating the counterparty and funding risk:
a. for CSA transactions with characteristics that reduce counterparty and funding risk to a negligible level, the fair
value is calculated according to the non-arbitrage principle, by including the market risk premium related to the risk
factors underlying the contract (e.g. interest rates, volatility, etc.), and, in the most significant cases, using the rate
of remuneration for the collateral as the discount rate for the future cash flows;
b. for transactions without CSAs, or with CSAs with characteristics that do not reduce the counterparty and funding
risk to a negligible level (e.g., One Way CSAs, or with non-negligible limits or minimum transfer amounts), the fair
value of the instrument may be stated, under appropriate circumstances, as the sum of the reference (or base)
value, equal to the price of the corresponding collateralised instrument, and several additional valuation
components related to the counterparty and funding risk premium, referred to jointly as XVA (see \"Valuation risk:
fair value adjustments\u201d).
In view of the number and complexity of the OTC derivatives, a systematic reference framework has been developed
which represents the common elements (calculation algorithms, processing models, market data used, basic
assumptions of the model) that are used for their measurement.
The table below illustrates the main methods used to measure OTC derivatives based on the category of
underlying asset.
Underlying class
Valuation models
Market data and input parameters
Interest rate
Net Present Value, Black-Scholes, SABR, Libor
Market Model, Hull-White, Bivariate log-normal,
Rendistato, Hagan exact formula for CMS
Interest rate curves (deposits, FRA, Futures, OIS,
swap, basis swap, CMS, Rendistato basket),
cap/floor/swaption option volatility, correlation
between interest rates
Foreign exchange rate
Net present Value FX, Garman-Kohlhagen,
Lognormal with Uncertain Volatility (LMUV),
Stochastic Local Volatility (SLV), Local Volatility
(LV)
Interest rate curves, spot and forward FX curves,
FX volatility, \"quanto\" volatility and correlations
Equity
Accrual, Net present Value Equity, Generalised
Black-Scholes, Heston, Local Volatility, Jump
Diffusion
Interest rate curves, underlying asset spot rate,
expected dividends, underlying asset volatility and
correlation between underlying assets, \"quanto\"
volatility and correlations
Inflation
Inflation NPV, Inflation SABR, Inflation Jarrow-
Yildirim
Nominal and inflation interest rate curves, interest
and inflation rate volatility, seasonality ratios of
consumer price index, correlation between
inflation rates
Commodity
Net present Value Commodity, Generalised Black-
Scholes, Independent Forward, Local Volatility, 2-
Factors Jump Diffusion
Interest rate curves, spot rate, forwards and
futures of underlying assets, underlying asset
volatility and correlation between underlying
assets, \"quanto\" volatility and correlations
Loans
Net present Value, CDS Option (or log-normal
model), Contingent CDS
Probability of default, Recovery rate, credit index
volatility.
As envisaged by IFRS 13, in determining fair value the Intesa Sanpaolo Group also takes into account the effect of non-
performance risk. This risk includes changes in the counterparty credit rating and changes in the issuer\u2019s own credit risk.
IV. Valuation model for structured credit products
With regard to asset-backed securities (ABSs), if significant prices are not available, valuation techniques are used that
take into account parameters that can be gathered from an active market (level 2 inputs) or, where parameters cannot be
observed, estimated parameters (level 2 or 3 inputs, where immaterial or material).
In this case, the cash flows are obtained from infoproviders or specialised platforms, where available, or are taken from
the business plan of the transaction, supplemented with periodic reporting, such as the case of Non-Performing Loans
(NPLs) and Unlikely to Pay (UTP); the spreads are gathered from prices available on the market/market info provider,
further strengthened by a qualitative analysis relative to the performance of the underlying assets presumed from
periodic investor reports and aimed at highlighting structural aspects that are not (or not fully) encompassed by the
analyses described above, relating to the actual future ability to pay the expected cash flows and analyses of relative
value with respect to other similar structures.
In the case of securitised high-yield loans to European corporate borrowers (CLO HY loans), valuation techniques call for
calculation of the net present value of the expected cash flows, determined through specialised platforms, discounted
using market spreads. When modelling expected future flows, account is taken of all contractual aspects of the HY CLO
loans that may influence the waterfall, i.e. the distribution of cash flows from the collateral on the notes.
After this valuation, credit analyses on underlying assets are fine-tuned to incorporate further valuation elements not
included in the quantitative models. In particular, a Qualitative Credit Review is provided for and entails an accurate
analysis of credit aspects referred to the specific structure of the HY CLO and to the collateral present. This is to identify
any present or future weaknesses which emerge from the characteristics of the underlying assets, which could have
been missed by rating agencies and as such not fully considered in the valuations described in the previous point.
V. Valuation of non-contributed equities
Level 2 equities include:
- equities measured based on direct transactions, that is significant transactions on the stock registered in a time
frame considered to be sufficiently short with respect to measurement date and in constant market conditions;
- equities measured using relative methods, based on multipliers: implied multiples in transactions in comparable
listed or unlisted companies, within a time frame deemed sufficiently short with respect to the time of measurement
and under constant market conditions (M&A multiples) or implicit multiples in the stock market prices of a sample of
comparable companies (stock market multiples).
Level 3 equities for which the \u201crelative\u201d models described above are not applicable in significant terms, and, therefore,
\u201cabsolute\u201d valuation models are used, include:
- equities for which analytical models based on flows are used, which determine the value through estimates of the
cash or income flows that the company is expected to generate over time, discounted using an appropriate rate
based on the level of risk of the instrument;
- equities measured based on net worth criteria such as NAV or Adjusted Net Asset Value (ANAV), which estimates
the fair value of the various components of the assets of the investee.
Any values deemed representative of the fair value of the equity instrument deriving from contractual clauses (for
example, options) are classified in level 2 or 3 of the fair value hierarchy, according to the observability of the inputs used
in the valuation. Specifically, if the negotiation of the clause resulted in strike prices or pre-defined algorithms and
multiples, the instrument is classified in level 2.
The cost criterion as estimate of fair value is used to a lesser extent, where none of the previous methods are applicable
due to lack of sufficient information, and in the cases where there is a wide range of possible fair value measurements
and it is not possible to identify the most appropriate value among these.
This case also includes Equity Instruments which, in accordance with IAS 32, have the characteristics to be considered
as equities.
VI. The valuation of hedge funds
The fair value of a hedge fund corresponds to the Net Asset Value (NAV) provided by the fund administrator, to which an
adjustment can be applied, deriving from a measurement process aimed at capturing the main risk factors that the
management of the funds is subject to, which consist of the following two types:
- counterparty (broker) risk, i.e. the risk that the assets of the fund are exposed to when a single service provider is
entrusted with prime brokerage or custodian activities, subject to the risk of default;
- illiquidity risk, i.e. the risk that the assets of the fund are illiquid due to the limited prices available or due to a lack of
information on the assessment policies used by the fund.
These risks are assessed on the basis of the information contained in the documentation received periodically from the
fund managers or administrators.
The fair value hierarchy level is Level 2, provided the Level 3 instruments do not exceed a set threshold.
VII. The valuation of private debt funds
For Private Debt AIFs (Alternative Investment Funds), the investment authorisation process involves an initial due
diligence to verify the consistency between each fund's asset valuation policy and the Guidelines and Rules for Valuation
of Financial Instruments at Fair Value. The fund is subsequently valued at NAV. The fair value hierarchy level is Level 3.
VIII. Valuation of closed-end private equity funds, real estate funds and closed-end funds resulting from sales of non-
performing loans
Closed-end private equity funds are usually valued using the latest Net Asset Value approved by the asset management
company (published half yearly or quarterly), adjusted solely to take into account events that have not yet occurred at the
reference date of the NAV, such as:
- a material transaction on a portfolio company;
- the bankruptcy or liquidation of a portfolio company;
- the alignment of any listed assets to current prices;
- draw downs and distributions by the fund.
Closed-end real estate funds are valued using the last available Net Asset Value, adjusted for any subsequent call ups or
distributions and, where considered necessary, applying a discount calculated using an internal model. Specifically, this
model enables the calculation of a discount on the Net Asset Value based on five different factors: (i) the size of the
asset management company that manages the fund; (ii) the number of subscribers; (iii) the fund\u2019s historical return; (iv)
the fund\u2019s return for the period; and (v) the level of debt. These factors are calibrated differently based on the business
model and the fund\u2019s resulting risk profile, distinguishing between core, value added and opportunistic funds.
With regard to closed-end funds resulting from sales of non-performing loans, where an information set is available that
makes it possible to conduct an analysis of the business plan of the positions held by the fund, individually or by uniform
cluster, to determine the fair value of the units of the fund, in general the Bank uses the support of an independent
expert, who, among other duties, carries out a comparison of performance of the business plans of the underlying
exposures, and states in its report, that the fair value determined by the expert complies with the indications from the
main regulators
86
.
Where it is not possible to apply the approach mentioned above, for each fund a comparison is made between the
expected return of the fund and a benchmark rate, defined using a model that factors in various elements, such as: i) the
fund\u2019s valuation policies, verifying whether they are compliant with criteria consistent with the definition of fair value
pursuant to IFRS 13, ii) verification that there is an updated business plan and of the performance of the fund compared
to the available business plan, iii) the characteristics of the fund\u2019s assets, iv) the level of the cost of funding on the market
for issuing liquid instruments, v) the completeness and extensiveness of the information provided by the fund, and vi) the
fund management methods. Where the expected return of the fund is higher than the defined benchmark rate, the NAV
communicated by the asset management company is used as the fair value measure. Where, instead, the benchmark
rate is higher than the expected return of the fund, the fair value is determined based on the NAV minus a discount,
which takes account of the spread between the benchmark rate and the expected return of the fund and the average
residual life of the fund (Weighted Average Life or WAL).
Valuation of financial assets and liabilities not measured at fair value on a recurring basis
Finally, for asset and liability financial instruments measured at amortised cost, whose fair value is determined solely for the
purposes of disclosure in the notes to the financial statements, the following is noted:
- the fair value of the bonds is calculated using the methods described above;
- the fair value measurement of the other medium- and long-term asset and liability financial instruments is performed by
discounting future cash flows using the discount rate adjustment approach, which requires credit risk factors to be taken
into account in the discount rate for future cash flows;
- for short-term assets and liabilities, the book value is assumed to be a reasonable approximation of fair value.
For more information see paragraph A.4.5.4.
As required by IFRS 13, the table below highlights, for financial assets and liabilities measured at level 3 fair value,
quantitative information on the significant, unobservable inputs used in the fair value measurement.
(thousands of euro)
Financial assets/ liabilities
Valuation technique
Main non-observable input
Minimum
value of
range of
changes
Maximum
value of
range of
changes
Unit
Favourable
changes in
FV
Unfavourable
changes in
FV
Securities and loans
Discounting Cash Flows
Credit Spread
-3
6
%
7,409
-11,764
Structured securities and loans
JD model
JD parameters
-37
13
%
134
-192
Structured securities and loans
Two-factor model
Correlation
-26
32
%
4,871
-3,413
ABSs
Discounting Cash Flows
Credit Spread
-1
3
%
611
-832
CLOs Cash
Discounting Cash Flows
Credit Spread
-6
6
%
503
-523
OTC derivatives subject to FV adjustment
for CVA/DVA
CVA
Loss Given Default Rate (LGD)
0
100
%
3,388
-2,315
OTC derivatives subject to FV adjustment
for CVA/DVA
CVA
Probability of default (PD)
based on counterparty's internal
rating
CCC
A
Internal
rating
44
-78
OTC Derivatives - Equity basket option
Black - Scholes model
Equity basket correlation
-11.16
87.39
%
517
-759
OTC Derivatives - Equity Option
Black - Scholes model
Historical volatility
8.21
76.17
%
967
-1,524
OTC Derivatives - Equity Option
Marshall Olkin Model
Historical correlation
2.44
47.95
%
66
-43
OTC Derivatives - Spread option on swap
rates
Bivariate log-normal model
Correlation between swap rates
-71.70
71.04
%
0
-1
A.4.2 Valuation processes and sensitivity
For a description of the valuation processes used by the Group for instruments measured at level 3 in a recurring and non-
recurring manner, see paragraphs A.4.1 and A.4.5 respectively.
As required by IFRS 13, for the financial assets and liabilities measured at level 3 fair value, the following table lists the effects
of a change in one or more significant non-observable parameters used in the valuation techniques adopted to determine the
fair value. Note that only the total material effects at the end of the year are shown in the table.
86
See Bank of Italy/Consob/Ivass Document no. 8 \u201cTreatment in the financial statements of sales without recourse of unlikely-to-pay loans in exchange
for units of investment funds\u201d, published in April 2020.
Financial assets/liabilities
Non-observable parameters
Sensitivity
(thousands of
euro)
Change in non-
observable
parameter
FVTPL and FVTOCI securities and loans
Credit spread
-576
1 bp
FVTPL and FVTOCI securities and loans
JD parameters
-10
1%
FVTPL and FVTOCI securities and loans
Correlation
157
1%
OTC Derivatives - Equity
Correlation between underlying equity baskets
218
10%
OTC Derivatives - Equity
Historical volatility
-1,076
10%
OTC Derivatives - Equity CPPI
Historical correlation
-24
10%
A.4.3. Fair value hierarchy (transfers between the different levels)
A description of the policy for determining when transfers occur between the different levels of fair value hierarchy (see IFRS
13, par. 95) is provided above (see \u201cFair value hierarchy\").
A.4.4. Other information
In calculating the bCVA, the Intesa Sanpaolo Group considers the net positions in derivatives of each counterparty (see
paragraph A.4.1 above for further details on the measurement of derivatives). For other cases, the Group does not make use
of the option provided in paragraph 48 of IFRS 13, which permits an entity \u201cto measure the fair value of a group of financial
assets and financial liabilities on the basis of the price that would be received to sell a net long position (i.e. an asset) for a
particular risk exposure or paid to transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly
transaction between market participants at the measurement date under current market conditions\u201d.
General Independent Price Verification principles
The Intesa Sanpaolo Group governs and defines the independent price verification process through the Group Guidelines and
Rules on Independent Price Verification, documents that are coordinated by the Market and Financial Risk Management
Head Office Department and applied by the Parent Company and all consolidated subsidiaries of the Banking Group.
The \u201cGuidelines on Independent Price Verification\u201d, once a favourable opinion has been given by the Group Financial Risk
Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of the Risks and
Sustainability Committee. The level I and II \u201cRules on Independent Price Verification\u201d are revised and approved at least on an
annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by the Management Bodies, and
which also reviews material changes and updates proposed by the Market and Financial Risk Management Head Office
Department.
According to the provisions of Regulation (EU) 575/2013 (Capital Requirement Regulation \u2013 CRR), Article 4, par. 1.70 and
Article 105, par. 8, the Intesa Sanpaolo Group governs the Independent Price Verification (IPV) process, which consists of the
regular verification of the accuracy and independence of market prices or the data input in pricing models, carried out by an
organisational unit independent from the business functions, at a frequency commensurate with the trading carried out and
the nature of the market.
The Intesa Sanpaolo Group has set up an IPV process with 3 levels of control in line with the provisions of Bank of Italy
Circular 285/2013 (Supervisory regulations for banks), incorporated into the Integrated Internal Control System, which
requires the risk management processes to be incorporated in the processes and methods for valuing the company activities,
also for accounting purposes.
Within the IPV, the level I, II and III control functions have the following main responsibilities:
- the level I control function participates in the definition of the related methodological framework and carries out the level I
implementations and controls, reporting the results to the business function and the level II control functions;
- the level II control function defines the methodological and control framework, ensures alignment with current regulations
and consistency between the IPV controls, accounting valuations and additional valuation adjustments (AVA) (carried
out, respectively, on the basis of the Guidelines and Rules for Valuation of Financial Instruments at Fair Value and the
Guidelines and Rules for Prudent Valuation of Financial Instruments at Fair Value) and supervises the level I controls
and performs the level II controls;
- the level III control function carries out internal audit controls to identify breaches of procedures and regulations, as well
as to periodically assess the completeness, adequacy, functionality (in terms of efficiency and effectiveness) and
reliability of the organisational structure of the other components of the internal control system and the IT system at
Group level, at scheduled deadlines in relation to the nature and intensity of the risks.
The level I and II IPV controls are qualitative and quantitative controls and are distinguished according to the type of
instruments subject to control. They are applied consistently to both the input data underlying the valuations and the
valuations themselves, and ensure consistency between the management valuations and the accounting valuations carried
out in the various systems. They are characterised by completeness and suitability of application, absence of overlaps,
sequentiality and complementarity in execution. The IPV control instruments use, as far as possible, specific applications or IT
procedures, which enable extensive data analysis on a daily basis. Specifically:
- the level I controls are aimed at ensuring the validation of the market data entered into the systems and are based on an
in-depth analysis of the data obtained from external providers. If the level I controls detect that certain thresholds have
been exceeded for the data contained in the systems, or the data is not considered correct by the level I control
functions, a comparison process (challenge) is activated with the involvement of the business function and the level II
control functions, in line with the degree of complexity of the report;
- the level II controls are characterized by sequentiality and complementarity in execution with the level I controls and are
designed to ensure alignment between management and accounting valuations, based on an in-depth analysis of
consensus or counterparty data and, where these are not available, through the application of pricing models associated
with the respective instruments.
The results of the IPV process are analysed, assessed and coordinated by the Financial Measurements Working Group, a
technical body set up specifically for this purpose, with the aim of facilitating integration and comparison between the business
functions and the control functions.
General prudent value principles
The framework of financial measurements is completed with the prudent valuation of financial instruments measured at fair
value, which involves the calculation of additional valuation adjustments for prudential purposes, without impacts on the fair
value calculated for accounting purposes in accordance with the IFRS.
The Intesa Sanpaolo Group governs and defines the prudent value measurement of financial instruments through the Group
Guidelines and Rules for Prudent Valuation of Financial Instruments at Fair Value, prepared by the Market and Financial Risk
Management Head Office Department and applied by the Parent Company and all the consolidated subsidiaries of the
Banking Group.
The \u201cGuidelines on Prudent Valuation of Financial Instruments\u201d, once a favourable opinion has been given by the Group
Financial Risk Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of
the Risks and Sustainability Committee. The \u201cRules for Prudent Valuation of Financial Instruments\u201d are revised and approved
at least on an annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by the
Management Bodies, and which also reviews material changes and updates proposed by the Market and Financial Risk
Management Head Office Department.
In accordance with the provisions of Regulation (EU) 575/2013 (Capital Requirements Regulation \u2013 CRR), prudent valuation
entails the calculation of specific additional valuation adjustments (AVAs) for the financial instruments measured at fair value,
aimed at capturing different sources of valuation uncertainty and ensuring the achievement of a suitable level of certainty in
the measurement of the positions. The total value of the AVAs is deducted from the Common Equity Tier 1 capital, without
impacts on accounting fair values.
The Intesa Sanpaolo Group, in line with the criteria indicated in Delegated Regulation (EU) 2016/101, is subject to the
application of the core approach for the determination of AVAs both at individual and at consolidated level for all the positions
measured at fair value. In particular the following AVAs are considered:
- market price uncertainty: this reflects the uncertainty of the market prices, calculated at valuation exposure level;
- close-out costs: it reflects the uncertainty of the exit price calculated at valuation exposure level;
- model risks: it considers the valuation model risk which arises due to the potential existence of a range of different
models or model calibrations, which are used by market participants, and the lack of a firm exit price for the specific
product being valued;
- unearned credit spreads: it reflects the valuation uncertainty in the adjustment necessary according to the applicable
accounting framework to include the current value of expected losses due to counterparty default on derivative positions;
- investment and funding costs: it represents the valuation uncertainty in the funding costs used when assessing the exit
price according to the applicable accounting framework;
- concentrated positions: it reflects the uncertainty relating to the exit price of the positions defined as concentrated;
- future administrative costs: it considers administrative costs and future hedging costs over the expected life of the
valuation exposures for which a direct exit price is not applied for the close-out costs AVAs for concentrated positions;
- early termination: it considers the potential losses arising from non-contractual early terminations of customer trades;
- operational risks: it considers the potential losses which may be incurred consequently to the operational risks connected
to the valuation processes.
The prudent value corresponds to the exit price from the position with a level of certainty equal to 90%. Where possible, this
value is determined on the basis of a distribution of exit prices observed on the market. In all the other cases, an expert-based
approach is used, referring to the qualitative and quantitative information available.
The AVA value associated to the single position and to the single source of uncertainty in valuation thus corresponds to the
difference between the prudent value and the fair value. The total AVA is obtained by aggregating the single AVAs, taking into
account the corresponding weighting ratios.
The \u201cRules for Prudent Valuation of Financial Instruments\u201d outline, for each AVA, the definition and interpretation, the scope
of application, the input data and the detailed calculation method for each class of financial instrument.
FAIR VALUE OF REAL ESTATE AND VALUABLE ART ASSETS
Fair value of real estate assets
As extensively illustrated in the first part regarding the accounting policies, the Group has adopted the revaluation model as
the basis of measurement for the owner-occupied properties accounted for according to IAS 16 and fair value for the
investment properties accounted for according to IAS 40.
Measurement of real estate assets
The revaluation model applied to owner-occupied properties envisages that property and equipment, whose fair value can be
reliably determined, is recorded at a revalued amount, equal to its fair value at the date of the revaluation, net of depreciation
and any accumulated impairment losses.
For the properties held for investment, the Intesa Sanpaolo Group has chosen the fair value method, according to which, after
initial recognition, all investment properties are measured at fair value.
Valuation approach
IFRS 13 defines fair value as \u201cthe price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date\u201d.
The valuation approach has been defined on the basis of the business relevance and plan for the use of the properties, which
consists of three main groups:
\u2013 \u201ctrophy assets\u201d, i.e. particularly prestigious properties used by management functions located in the main cities where the
Bank is based or properties of particular historical and artistic interest because they are listed by the Ministry for Cultural
Heritage and Activities;
\u2013 \u201cowner-occupied properties\u201d;
\u2013 \u201cinvestment properties\u201d.
The properties are valued individually asset-by-asset without considering any discount, or premium, that may be agreed
during commercial negotiations if all or part of the portfolio is sold in bulk or in lots.
The Intesa Sanpaolo Group has chosen to assign the valuation activity to professionally qualified external companies with an
international structure, able to provide property valuations based on the RICS Valuation standards
87
which guarantee:
\u2013 determination of the value consistent with the fair value configuration indicated in the IAS/IFRS;
\u2013 compliance with the professional, ethical and independence requirements for experts, in line with the provisions of
international and European standards.
To determine the value of the assets, the following valuation methods are used based on the characteristics of the asset and
the conditions of the market of reference; the valuer determines the most suitable method for each individual property.
\u2013 The Discounted Cash Flow Method: the discounted cash flow method is based on the discounting (for a variable period
based on the rental/occupational situation of the property and its subsequent optimisation) of the future net proceeds
from the rental or sale of the property. At the end of this period, the value of the property is assumed to be the sale price
obtained by capitalising the income of the last year at a market rate for investments similar to the object of the estimate
or through a split sale. This method is used for the valuation of all the owner-occupied properties or real estate leased to
third parties, located in Italy.
\u2013 Comparative or Market Method: the comparative or market method is based on the comparison between the assets
examined and similar assets recently sold/purchased or offered on the same market or in competitive environments. This
criterion is based on a comparison with properties that have recently been sold or offered on the open market and, if
possible, have the same characteristics. In the absence of observations directly related to the property examined, cases
are used that are as similar as possible to the property examined, making the necessary adjustments. This method,
which also represents the basis for other valuation methods, can be adopted in particular for non-owner-occupied assets
and/or, in any case, for unrestricted and available assets in Italy and abroad.
\u2013 Direct capitalisation income approach: the income approach is based on the current value of the potential market income
of a property, obtained by capitalising the income at a market rate. This approach is applied mainly to owner-occupied
properties abroad, where a prolonged stay within the building is envisaged.
\u2013 Investment Value (Worth): the Investment Value (Worth) is defined by the International Valuation Standard as: \u201cthe value
of an asset to a particular owner or prospective owner for individual investment or operational objectives\u201d. This definition
is consistent with the provisions of the latest edition of the \u201cRICS Valuation - Global Standards 2022\u201d of the Royal
Institution of Chartered Surveyors of the United Kingdom, where the Investment Value is defined as \u201cthe value of an
asset to the owner or a prospective owner for individual investment or operational objectives\u201d.
The Investment Value is applicable to properties built by the entity or properties with a strong business relevance subject
to significant investments for technological, construction and functional adaptation.
The Investment Value of these properties is determined on the basis of a 12+6 year plan for business use without break
options, whose annual rent is determined by applying an appropriate gross rate of return to the amount of direct and
indirect costs capitalised by the Owner, including the costs of purchasing the land.
For the purposes of valuation, if necessary and where relevant, the assumptions also include sustainability considerations,
connected with climate change and energy efficiency factors, as well as aspects linked to any specific legislation (for example,
configuration, accessibility, etc.). To date, the Group has not made substantial adjustments to fair value due to climate
change, aside from those already valued by the indicators observable on the reference market.
87
Standards set out in the Royal Institution of Chartered Surveyors of the United Kingdom document \u201cRICS Valuation \u2013 Global Standard\u201d (also known
as the \u201cRed Book\u201d): the updated version was issued in November 2021 and took effect on 31 January 2022.
Frequency of valuation
Revaluations must be made with sufficient regularity to ensure that the carrying amount does not differ materially from that
which would be determined using fair value at the reporting date.
The frequency of revaluations depends upon the changes in fair values of the property and equipment being revalued. When
the fair value of a revalued asset differs materially from its carrying amount, a further revaluation is required.
Specifically, based on the market trends, different valuation frequencies have been identified that, according to the
characteristics of the assets and their location, are considered capable of capturing the significant changes in the value of
the assets.
The following distinction is made for owner-occupied properties:
\u2013 for trophy assets, the revaluation is carried out by verifying the value through a scenario analysis (market trend analysis)
every year and with a new appraisal every two years;
\u2013 for the other owner-occupied properties, the revaluation is carried out through scenario analysis (market trend analysis)
every year and through a new appraisal every three years.
If the scenario analysis identifies significant changes (+/- 10%), specific and updated appraisals must be carried out to adjust
the fair value of the asset to the valuations of the real estate market.
For investment properties, the value is determined on the basis of new appraisals each year.
Based on the rules referred to, in 2022, investment properties as well as owner-occupied properties which, based on the
scenario analysis, recorded changes on the defined threshold, were subject to periodic valuation.
Scenario analysis
As part of the annual update of the fair value of the owner-occupied properties, in the years when a revaluation of the property
is not envisaged, a scenario analysis (market trend analysis) is carried out using the best information sources available for the
various countries in which the properties are located, in order to identify deviations, using databases, in the market values
between the analysis period and the previous period.
In particular, for real estate located in Italy, the changes are defined using at least 3 different sources. The main source is that
provided by the Italian Revenue Agency, based on the specific OMI (Real Estate Market Monitor) zones. The second
publication source is Nomisma for which, for the related zoning, the same queries are conducted as those for the OMI (main
database). Lastly, the third source is based on the analyses of the changes during the year surveyed in terms of the offers
present on the real estate market.
Accordingly, the experts identify the annual deviations in rents and/or prices by related asset class for each property.
Real estate located abroad is grouped, for each country, into different clusters based on location and asset class. Specific
market analyses are conducted based on local and national knowledge of the particular target real estate market.
The market study also takes account of the following macroeconomic drivers:
\u2013 analysis of economic data (unemployment rate, GDP per capita, inflation and consumer price index); these
macroeconomic factors constitute the first economic analysis, supporting the real estate market forecasts;
\u2013 movement in average yield;
\u2013 movement in market rents;
\u2013 range of movement in unit values.
The above-mentioned market survey, together with a qualitative weighting of the macroeconomic key drivers is used to
determine a range of percentage deviation from the last assessment carried out, which is compared with the target threshold
set, identifying a synthetic percentage factor for each individual property, included in a single worksheet.
This activity is carried out close to the end of the year in order to produce a range of deviations within a reference threshold
and to enable the timely planning of the updating of the specific appraisals for the properties whose deviation exceeds the
threshold.
The permitted variation threshold is +/-10%.
If the deviations identified exceed this threshold, a new valuation will be carried out before the end of the year.
Sensitivity of valuations
Just as for financial instruments, level 3 non-financial assets and liabilities measured at fair value for which, due to the
valuation model used to determine the fair value, execution is possible, and whose results are significant, are subject to
sensitivity analysis. The analysis essentially concerned the properties of the Parent Company Intesa Sanpaolo, which
represent the Core perimeter of the Group's real estate assets.
It is noted that the sensitivity analysis was conducted by identifying the most important variables in the valuation model used
to value the various classes of real estate, represented by the discounted cash flow method. Specifically, taking account of
the trend recorded in the various asset classes of the real estate market and the parameters featuring greater
volatility/variability, for owner-occupied properties, reference was made to the net capitalisation rate (yield) and the average
medium/long-term inflation rate, while for investment properties, to the exit value. In compliance with the estimate
assumptions applied to real estate assets, for the purpose of the analysis, variation ranges were used that were consistent
with the potential trends in the market at the reporting date. For owner-occupied properties, a change of +/- 25 bps for the net
capitalisation rate and a concurrent change of -/+15 bps for the inflation rate were assumed, in relation to which average
deviations of fair value of +4.4% and -4.3% were recorded. For investment properties, a change of +/- 5% in the exit value
was assumed, in relation to which there were average deviations of fair value of +4.8% and -5.2%.
Fair value of valuable art assets
The Bank\u2019s valuable art assets are also valued using the revaluation model, which envisages that property and equipment,
whose fair value can be reliably determined, is recorded at a revalued amount, equal to its fair value at the date of the
revaluation.
Works of art included in the asset class \u201cvaluable art assets\u201d are works of particular importance, recognised for their historic
and artistic value by experts and in line with the ministerial guidelines, and particularly those set out in Ministerial Decree 537
of 6 December 2017 on the exportation of works of art, such as: the state of preservation, the historical importance of the
artist, the importance of the work in terms of art criticism/history, illustrious origin, certain quality and attribution and the
declaration of interest by the Italian government.
Valuation approach
The valuation is carried out by determining the value through external appraisals, entrusted to qualified independent experts.
These values are obtained from online databases such as Artnet and Artprice, which list over 100 million works of art and
monitor the results of leading Italian and international auction houses. These are objective parameters that are compared with
the market as a whole, in an analysis that also involves monitoring galleries and art fairs.
In particular, the factors considered for the fair value measurement include objective factors relating to the historical-critical-
artistic value of the author, state of preservation, execution technique, size and quality of the artwork, importance of the
artwork in the production by the artist, publication of the artwork in specialist catalogues, period of execution of the artwork,
international exposure of the artworks by the artist, distinguished provenance, certainty of attribution, guarantee of authenticity
of an artwork, as well as other factors (which may change over time, depending on the evolution and tastes of the market),
such as the reputation of the museum hosting the artwork by the artist, the prestige of fairs/exhibitions/galleries/auction
houses that handle the artwork, the reputation of its critics and collectors, and the quality of the communications concerning
the artist\u2019s work.
Once these factors have been identified, the fair value is determined comparing them firstly with artworks similar to those
examined (in terms of period of production/year, technique, size, type of subject and state of preservation), by the same artist
and from the same period, if available (this is more feasible for modern and contemporary works) and, secondly, with works
by artists or schools and areas that are close in style, philosophy and importance in the same historical period. Where several
similar artworks are available, average values are used to take account of price volatility.
In addition to considering the trends in auction trading, starting from the most recent trading and also including unsold items in
the analysis (which are a possible indicator of the loss of market value for the artwork/artist), the valuation also considers the
current market interest in an artwork or an artist, measured by the number and quality of temporary exhibitions held in
internationally important museum spaces and accompanied by specific publications.
The valuations also take into account any declarations of historical-artistic interest formally expressed by the Italian Ministry of
Cultural Heritage and Activities (commonly referred to as \"notifications\"), which tie part of the artworks in the collection to
Italy's heritage and restrict their circulation to the country\u2019s territory, reducing the price obtainable on the international market.
The pricing is also influenced by the importance of the buyers/sellers (e.g. prices paid by famous collectors or known
investors may be more significant).
The valuation approach is based on the monitoring of the objective market values of the artworks included in the category
examined, which follows three methodological approaches:
\u2013 prudent basis, analysing the average values of a variety of different information sources, based on robust, updated and
statistically representative databases: in a market of \u201cunique\u201d artworks, often without transactions for decades, this
approach ensures the periodic identification of any outlier values and avoids following speculative trends;
\u2013 comparison, monitoring the transactions that have taken place at a global level in a variety of distribution channels, in
order to avoid considering only certain forms of transaction and the related financial values: in a global market with global
demand, this approach enables verification of the presence of any geographical arbitrage or specific
appreciation/depreciation phenomena with potential impacts;
\u2013 recurrence, since it updates and monitors price trends over the shortest period of time that the specific features of the
market allow, i.e. the half year: in a market in which there are no public trades monitored daily, the shortness of the
measurement period ensures maximum attention and timeliness of any changes.
This approach is applied to all the \"valuable art assets\".
Frequency of valuation
For valuable art assets, the revaluation is carried out by means of an expert appraisal every three years. However, a scenario
analysis is carried out annually to identify any appreciable changes in value in order to bring forward the valuation.
Based on the rules referred to, in 2022, artworks which, based on the scenario analysis, recorded changes on the defined
threshold, were subject to valuation.
Scenario analysis
In order to identify and determine the changes in the market of the artworks being valued, market trends are monitored to
detect signs of significant change that require appraisals to be made in advance with respect to the frequency established.
This monitoring is carried out on a two-fold basis:
\u2013 Monitoring of the market prices of the top artworks in terms of value held in Intesa Sanpaolo\u2019s collections, which
represent 75% of the total value of the artworks included in the \u201cvaluable art assets\u201d class, by verifying both the results of
the main international auctions (which are based on a calendar of precise seasonal deadlines) and the reports of the two
main world databases (Artprice and Artnet), whose analytics provide useful tools for monitoring prices;
\u2013 Monitoring the performance of the art market in general, to identify trends and changes with respect to Intesa Sanpaolo\u2019s
\u201cvaluable art assets\u201d, verifying both the results of the main international auctions (which are based on a calendar of
precise seasonal deadlines), and the reports of the two main world databases (Artprice and Artnet); since the works of
many artists in the Intesa Sanpaolo\u2019s collection very rarely go up for auction due to the limited number of items left in the
market, it is important to monitor the trend of similar artists or works; accordingly, the monitoring is not just limited to the
works held and their artists, but also extends to the authors and artworks related to the same area, to take into account
trend data.
If the annual monitoring identifies a potential, positive or negative, value deviation of more than 15% for individual
artworks/collections of artists in Intesa Sanpaolo\u2019s collections and comparable on the basis of objective criteria (such as
period of production/year, size, technique, period of production, etc.), the appraisals are commissioned according to the usual
internal procedures in order to align the carrying amount.
Quantitative information
A.4.5. Fair value hierarchy
A.4.5.1 Assets and liabilities measured at fair value on a recurring basis: fair value by level - Excluding insurance
companies
Assets / liabilities at fair value
31.12.2022
31.12.2021
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
1. Financial assets measured at fair value through
profit or loss
11,311
32,672
3,594
24,262
25,080
3,389
a) Financial assets held for trading
10,331
32,008
183
22,615
24,379
187
of which: Equities
860
-
22
674
-
17
of which: quotas of UCI
264
5
21
116
-
25
b) Financial assets designated at fair value
-
1
-
-
1
3
c) Other financial assets mandatorily measured at
fair value
980
663
3,411
1,647
700
3,199
of which: Equities
122
107
242
161
116
225
of which: quotas of UCI
858
191
2,401
1,486
149
2,166
2. Financial assets measured at fair value through
other comprehensive income
41,937
7,422
357
59,084
8,004
492
of which: Equities
513
510
325
1,537
1,314
421
3. Hedging derivatives
-
10,062
-
-
1,732
-
4. Property and equipment
-
-
7,144
-
-
7,364
5. Intangible assets
-
-
-
-
-
-
Total
53,248
50,156
11,095
83,346
34,816
11,245
1. Financial liabilities held for trading
7,285
39,085
142
22,241
33,946
119
2. Financial liabilities designated at fair value
-
8,765
30
6
3,642
26
3. Hedging derivatives
-
5,346
-
-
4,868
-
Total
7,285
53,196
172
22,247
42,456
145
With regard to assets, level 3 instruments, which allow for more discretion in fair value measurement, account for a limited
portion of the portfolio, with an impact of 9.7% on total assets (8.7% as at 31 December 2021). The majority of level 3
financial assets is represented by quotas of UCIs, of which, under Financial assets mandatorily measured at fair value, 290
million euro is represented by units of the Atlante Fund and the Italian Recovery Fund put in place as part of the regulations to
support the banking system.
Over 46% of assets measured at fair value are determined based on market prices, and therefore without any discretion by
the valuator.
Property and equipment measured at level 3 fair value includes real estate assets and valuable art assets, which represent
64% of the balance sheet assets at level 3 fair value.
As at 31 December 2022, the impact of non-performance risk (Credit Value Adjustment and Debt Value Adjustment) in the
determination of the fair value of derivative contracts amounted to a reduction of 141 million euro in positive fair value and a
reduction of 79 million euro in negative fair value.
The impact of the Funding Value Adjustment in reducing the fair value amounted to 63 million euro, equal to the cost of
funding the cash flows generated by the Bank\u2019s overall portfolio of OTC derivatives.
Determining the quantity of those adjustments is irrespective of the effects of the correlated operational hedging strategies,
where present.
As far as liabilities are concerned, level 3 instruments account for less than 1% of total liabilities.
In addition to the transfers relating to financial assets and liabilities measured at level 3 as detailed below, please note that the following transfers were made during 2022: \u2013 from level 1 to level 2: o financial assets held for trading for 99 million euro (book value as at 31 December 2022); o other financial assets mandatorily measured at fair value for 51 million euro (book value as at 31 December 2022); o financial assets measured at fair value through other comprehensive income for 131 million euro (book value as at 31 December 2022); o financial liabilities designated at fair value for 3 million euro (book value as at 31 December 2022); \u2013 from level 2 to level 1: o financial assets held for trading for 100 million euro (book value as at 31 December 2022); o financial assets measured at fair value through other comprehensive income for 47 million euro (book value as at 31 December 2022); o financial liabilities held for trading for 4 million euro (book value as at 31 December 2022). The transfers between fair value levels are determined by the trends in the observability of prices or market data used to measure the instruments and by the materiality of the unobservable inputs. The transition from level 1 to level 2 is a consequence of the disappearance of an active market for that instrument assessed by analysing the reliability and the reciprocal consistency of the available prices according to the provisions of the Group\u2019s Fair Value Policy. Conversely, securities for which a mark-to-model measurement is performed using inputs that can be observed on the market \u2013 classified, therefore, as level 2 \u2013 are transferred to level 1 when the existence of an active market is identified. A.4.5.1 Bis Assets and liabilities measured at fair value on a recurring basis: fair value by level - Insurance companies (millions of euro) Assets / liabilities at fair value 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Financial assets held for trading 297 249 356 344 293 390 of which: Equities - - - - - - of which: quotas of UCI 97 - 46 122 - 49 2. Financial assets designated at fair value through profit or loss 85,608 22 587 100,515 143 401 of which: Equities 3,016 - - 3,510 - - of which: quotas of UCI 78,025 - - 91,908 109 - 3. Financial assets available for sale 77,810 3,158 4,625 93,910 6,305 4,208 of which: Equities 1,921 7 67 2,201 7 54 of which: quotas of UCI 8,306 - 4,208 9,879 - 3,742 4. Hedging derivatives - 13 - - 291 - 5. Property and equipment - - 7 - - 8 6. Intangible assets - - - - - - Total 163,715 3,442 5,575 194,769 7,032 5,007 1. Financial liabilities held for trading 1 8 - - 42 61 2. Financial liabilities designated at fair value through profit or loss - 71,565 - - 84,667 - 3. Hedging derivatives - 170 - - - - Total 1 71,743 - - 84,709 61 With regard to insurance companies, level 3 instruments, which allow for more discretion in fair value measurement, account for a limited portion of the portfolio. They amount to 3.2% of Assets (2.4% as at 31 December 2021). 94.8% of financial assets measured at fair value in the insurance segment are determined based on market prices, and therefore without any discretion by the valuator. Liabilities at fair value were almost entirely measured using level 2 inputs. In addition to the transfers relating to financial assets and liabilities in the insurance segment designated at level 3 as detailed below, please note that the following transfers were made during 2022: \u2013 from level 1 to level 2: o financial assets measured at fair value through profit and loss for 3 million euro (book value as at 31 December 2022); o financial assets available for sale for 143 million euro (book value as at 31 December 2022); \u2013 from level 2 to level 1: o financial assets measured at fair value through profit and loss for 2 million euro (book value as at 31 December 2022); o financial assets available for sale for 2,114 million euro (book value as at 31 December 2022).
The transfers between fair value levels are determined by the trends in the observability of prices or market data used to
measure the instruments and by the materiality of the unobservable inputs.
The transition from level 1 to level 2 is a consequence of the disappearance of an active market for that instrument assessed
by analysing the reliability and the reciprocal consistency of the available prices according to the Group\u2019s Guidelines and
Rules for Valuation of Financial Instruments at Fair Value. Conversely, securities for which a mark-to-model measurement is
performed using inputs that can be observed on the market \u2013 classified, therefore, as level 2 \u2013 are transferred to level 1 when
the existence of an active market is identified.
A.4.5.2. Annual changes in assets measured at fair value on a recurring basis (level 3) - Excluding insurance companies
(millions of euro)
Assets measured at fair value through profit or
loss
Financial
assets
measured at
fair value
through other
comprehensive
income
Hedging
derivatives
Property
and
equipment
Intangible
assets
TOTAL
of which:
a)
Financial
assets held
for trading
of which:
b)
Financial
assets
designated
at fair
value
of which:
c)
Other
financial
assets
mandatorily
measured
at fair
value
1. Initial amount
3,389
187
3
3,199
492
-
7,364
-
2. Increases
1,070
94
-
976
93
-
278
-
2.1 Purchases
390
20
-
370
60
-
76
-
2.2 Gains recognised in:
177
7
-
170
18
-
32
-
2.2.1 Income statement
177
7
-
170
-
-
5
-
- of which capital gains
152
7
-
145
-
-
-
-
2.2.2 Shareholders' equity
-
X
X
X
18
-
27
-
2.3 Transfers from other levels
38
11
-
27
14
-
-
-
2.4 Other increases
465
56
-
409
1
-
170
-
3. Decreases
-865
-98
-3
-764
-228
-
-498
-
3.1 Sales
-208
-43
-3
-162
-100
-
-48
-
3.2 Reimbursements
-5
-
-
-5
-14
-
-
-
3.3 Losses recognized in:
-264
-42
-
-222
-25
-
-181
-
3.3.1 Income statement
-264
-42
-
-222
-4
-
-165
-
- of which capital losses
-243
-35
-
-208
-1
-
-
-
3.3.2 Shareholders' equity
-
X
X
X
-21
-
-16
-
3.4 Transfers to other levels
-38
-12
-
-26
-65
-
-
-
3.5 Other decreases
-350
-1
-
-349
-24
-
-269
-
4. Final amount
3,594
183
-
3,411
357
-
7,144
-
The captions Other increases and Other decreases in Financial assets mandatorily measured at fair value mainly refer to
quotas of UCIs, and include the payments made and the reimbursements received by the Bank, with no change in the quotas
held. With regard to Property and equipment, the captions mainly include transfers of these assets from investment to
operations and vice versa.
A.4.5.2. Bis Annual changes in assets measured at fair value on a recurring basis (level 3) - Insurance companies
(millions of euro)
Financial
assets
held for
trading
Financial
assets
designated
at fair value
through profit
or loss
Financial
assets
available
for sale
Hedging
derivatives
Property
and
equipment
Intangible
assets
1. Initial amount
390
401
4,208
-
8
-
2. Increases
92
186
1,091
-
-
-
2.1 Purchases
58
-
876
-
-
-
2.2 Gains recognised in:
-
-
199
-
-
-
2.2.1 Income statement
-
-
-
-
-
-
- of which capital gains
-
-
-
-
-
-
2.2.2 Shareholders' equity
X
X
199
-
-
-
2.3 Transfers from other levels
32
-
12
-
-
-
2.4 Other increases
2
186
4
-
-
-
3. Decreases
-126
-
-674
-
-1
-
3.1 Sales
-4
-
-354
-
-
-
3.2 Reimbursements
-
-
-12
-
-
-
3.3 Losses recognized in:
-68
-
-236
-
-
-
3.3.1 Income statement
-68
-
-53
-
-
-
- of which capital losses
-
-
12
-
-
-
3.3.2 Shareholders' equity
X
X
-183
-
-
-
3.4 Transfers to other levels
-54
-
-68
-
-
-
3.5 Other decreases
-
-
-4
-
-1
-
4. Final amount
356
587
4,625
-
7
-
A.4.5.3 Annual changes in liabilities measured at fair value on a recurring basis (level 3) - Excluding insurance
companies
(millions of euro)
Financial liabilities
held for trading
Financial liabilities
designated
at fair value
Hedging
derivatives
1. Initial amount
119
26
-
2. Increases
101
4
-
2.1 Issues
71
-
-
2.2 Losses recognised in:
-
3
-
2.2.1 Income statement
-
3
-
- of which capital losses
-
3
-
2.2.2 Shareholders' equity
X
-
-
2.3 Transfers from other levels
30
-
-
2.4 Other increases
-
1
-
3. Decreases
-78
-
-
3.1 Reimbursements
-
-
-
3.2 Repurchases
-
-
-
3.3 Gains recognised in:
-19
-
-
3.3.1 Income statement
-19
-
-
- of which capital gains
-16
-
-
3.3.2 Shareholders' equity
X
-
-
3.4 Transfers to other levels
-50
-
-
3.5 Other decreases
-9
-
-
4. Final amount
142
30
-
\u201cFinancial liabilities held for trading\u201d refer to derivative contracts with a negative fair value.
Transfers from and to other levels described in the above tables were carried out in accordance with the guidelines described
in paragraph A.4.3 - Fair value hierarchy.
For more exhaustive information on the sensitivity of financial instruments to changes in the main input parameters, reference
should be made to the analyses of the trading book in Part E of these Notes to the consolidated financial statements.
A.4.5.3 Bis Annual changes in liabilities measured at fair value on a recurring basis (level 3) - Insurance companies
(millions of euro)
Financial liabilities
held for trading
Financial liabilities
designated
at fair value
through profit
or loss
Hedging
derivatives
1. Initial amount
61
-
-
2. Increases
-
-
-
2.1 Issues
-
-
-
2.2 Losses recognised in:
-
-
-
2.2.1 Income statement
-
-
-
- of which capital losses
-
-
-
2.2.2 Shareholders' equity
X
X
-
2.3 Transfers from other levels
-
-
-
2.4 Other increases
-
-
-
3. Decreases
-61
-
-
3.1 Reimbursements
-
-
-
3.2 Repurchases
-
-
-
3.3 Gains recognised in:
-61
-
-
3.3.1 Income statement
-61
-
-
- of which capital gains
-
-
-
3.3.2 Shareholders' equity
X
X
-
3.4 Transfers to other levels
-
-
-
3.5 Other decreases
-
-
-
4. Final amount
-
-
-
A.4.5.4 Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: fair value
by level- Excluding insurance companies
(millions of euro)
Assets/liabilities not measured at fair value
or measured at fair value on a non-recurring basis
31.12.2022
31.12.2021
Book
value
Level 1
Level 2
Level 3
Book
value
Level 1
Level 2
Level 3
1. Financial assets measured at amortised cost
528,078
28,958
320,105
161,493
668,866
27,206
484,983
165,462
2. Investment property
-
-
-
-
-
-
-
-
3. Non-current assets held for sale and discontinued
operations
638
-
-
638
1,422
-
-
1,422
Total
528,716
28,958
320,105
162,131
670,288
27,206
484,983
166,884
1. Financial liabilities measured at amortised cost
667,586
41,748
592,888
32,270
710,055
47,030
625,414
39,759
2. Liabilities associated with non-current assets
15
-
-
15
30
-
-
30
Total
667,601
41,748
592,888
32,285
710,085
47,030
625,414
39,789
A.4.5.4 Bis Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: fair
value by level - Insurance companies
(millions of euro)
Assets/liabilities not measured at fair value
or measured at fair value on a non-recurring basis
31.12.2022
31.12.2021
Book
value
Level 1
Level 2
Level 3
Book
value
Level 1
Level 2
Level 3
1. Investments held to maturity
-
-
-
-
-
-
-
-
2. Due from banks
40
-
40
-
41
-
41
-
3. Loans to customers
40
-
34
6
44
-
39
5
4. Investment property
-
-
-
-
-
-
-
-
5. Non-current assets held for sale and discontinued
operations
-
-
-
-
-
-
-
-
Total
80
-
74
6
85
-
80
5
1. Due to banks
629
-
17
556
623
-
-
650
2. Due to customers
587
-
452
135
188
-
93
95
3. Securities issued
1,334
-
1,171
-
1,335
-
1,338
-
4. Liabilities associated with non-current assets
-
-
-
-
-
-
-
-
Total
2,550
-
1,640
691
2,146
-
1,431
745
Financial assets and liabilities
For financial assets and liabilities not measured at fair value (loans and loans represented by securities, amounts due to
customers and securities issued), the Group measures fair value by calculating the present value of future cash flows at a rate
that incorporates the estimate of the main risks and uncertainties associated with the financial instrument to be measured
(discount rate adjustment approach).
In particular, the interest rate used to discount the future cash flows is determined by taking into account the following
risk factors:
\u2013 interest rate risk, which represents the rate offered by the market for each unit of capital provided to risk-free
counterparties;
\u2013 credit risk, which is the premium for having provided capital to counterparties with insolvency risk;
\u2013 the cost of liquidity connected to credit.
For fixed-rate instruments, the cash flows are those envisaged by the contracts. For floating-rate instruments, the future cash
flows are determined based on forward rates, implicit in the zero-coupon interest rate curves observed at the various fixing
dates and differentiated by indexation type.
The value of the risk premium (credit spread) is determined per individual position, through acquisition of the risk class (LGD)
and rating (PD). These amounts, together with the average residual financial life, constitute the guideline for acquisition of the
credit spread. For securities issued by Intesa Sanpaolo, the construction of the spread curve follows the rules set out in the
Rules for Valuation of Financial Instruments at Fair Value.
The following assumptions were used in determining the fair values indicated in table A.4.5.4:
\u2013 for loans represented by securities, the same rules envisaged for the fair value measurement of other categories of
securities are used;
\u2013 for securities issued, the rules used are the same as those applied to securities under assets.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-990": { "value": "A.4 \u2013 INFORMATION ON FAIR VALUE FAIR VALUE, INDEPENDENT PRICE VERIFICATION AND PRUDENT VALUE OF FINANCIAL INSTRUMENTS The framework of financial measurement at fair value is based on three pillars: fair value measurement according to the IAS/IFRS, independent price verification (IPV) and prudent value measurement. The latter two are established by the Capital Requirement Regulation (CRR). The paragraphs below describe the methods applied by the Intesa Sanpaolo Group to implement and use those elements. General fair value principles The Intesa Sanpaolo Group governs and defines the fair value measurement of financial instruments through the Group Guidelines and Rules for Valuation of Financial Instruments at Fair Value, prepared by the Market and Financial Risk Management Head Office Department and applied by the Parent Company and all consolidated subsidiaries, including the Insurance Companies. The \u201cGuidelines for Valuation of Financial Instruments at Fair Value\u201d, once a favourable opinion has been given by the Group Financial Risk Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of the Risks and Sustainability Committee. The \u201cRules for Valuation of Financial Instruments at Fair Value\u201d are reviewed, revised and approved at least on an annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by the Management Bodies, and which also reviews material changes and updates proposed by the Market and Financial Risk Management Head Office Department. The \u201cRules for the Measurement of Unlisted Equity Investments\u201d, drawn up by the Group M&A and Equity Investments Head Office Department and approved by the Group Financial Risk Committee, govern the fair value measurement of unlisted equities and financial instruments with unlisted equities as their underlying. IFRS 13, which harmonises the measurement rules and the related disclosure, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e. not as part of the compulsory liquidation or a below-cost sale) as at the measurement date. Fair value is a market measurement criterion, not specifically referring to a single bank. Underlying the definition of fair value is the assumption that the Bank is carrying out normal operations, without any intention of liquidating its assets, significantly reducing the level of operations or carrying out transactions at unfavourable conditions. The bank measures the fair value of an asset or liability by adopting the assumptions that would be used by market participants when pricing an asset or liability, presuming that they act with a view to satisfying their own economic interest in the best way possible. Measurement at fair value presumes that the asset is sold or the liability transferred: a. in the principal active market for the asset or liability; b. in the absence of a major market, in the most advantageous active market for the asset or liability. The bank is not required to conduct an exhaustive study of all possible markets to identify the major market or, in the absence of the major market, the most advantageous market, but must take into account all the reasonably available information. If there is no evidence to the contrary, the market that the entity normally operates in to sell the asset or transfer the liability is assumed to be the major market or the most advantageous market, if there is no major market. The Intesa Sanpaolo Group considers the principal market of a financial asset or liability to be the market in which the Intesa Sanpaolo Group generally operates. In accordance with IFRS 13, the Group considers an active market to be a market where transactions in an asset or liability occur with sufficient frequency and volume to provide useful information for determining price on an ongoing basis. More specifically, a financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. In specific cases, governed by the Guidelines and Rules for Valuation of Financial Instruments at Fair Value, and despite being quoted on regulated markets, relevant research is carried out to verify the significance of the official market values. In the event of a significant reduction in the volume or level of operations compared to normal operations for the asset or liability (or for similar assets or liabilities) highlighted by a number of indicators (number of transactions, limited significance of market prices, significant increase in implicit premiums for liquidity risk, widening or increase of the bid-ask spread, reduction or total lack of market for new issuances, limited publicly-available information), analyses of the transactions or of the quoted prices must be carried out. A reduction in the volume or the level of activity alone may not indicate that the price of a transaction or the quoted price does not represent fair value or that the transaction in that market is not ordinary. If an entity determines that a transaction price or quoted price does not represent fair value (e.g., non-ordinary transactions) an adjustment to the transaction prices or listed prices is required if the entity uses those prices as the basis for fair value measurement and that adjustment may be significant with respect to the fair value as a whole. The fair value of financial instruments The presence of quoted prices in an active market represents the best evidence of fair value and these prices are therefore the quoted prices to be used on a priority basis for the measurement of financial assets and liabilities. If there is no active market, the fair value is determined using valuation techniques aimed, ultimately, at establishing the price the product would have had, at the measurement date, in an arm\u2019s length exchange motivated by normal business considerations. The choice of the above measurement methods is not optional, because they must be applied in hierarchical order: the availability of a price stated in an active market prevents the use of one of the other measurement approaches. Inputs of the valuation techniques The inputs are defined as the assumptions that market participants would have used to determine the price of the asset or the liability, including assumptions regarding risk, such as, for example, the risk relating to a particular valuation technique used to measure fair value or the risk relating to the inputs of the valuation technique. The inputs may be observable or unobservable. Observable inputs are those produced using market data, such as publicly available information on operations or actual events, which reflect the assumptions that market participants would use in determining the price of the asset or the liability. Unobservable inputs are those for which no market information is available and that are produced using the best available information regarding the assumptions that market participants would use to determine the price of the asset or the liability. Fair value hierarchy IFRS 13 establishes a fair value hierarchy in which inputs to fair value measurement techniques are divided into three levels. That hierarchy assigns top priority to (unadjusted) quoted prices on active markets for identical assets or liabilities (level 1 data) and the lowest priority to unobservable inputs (level 3 data). Specifically: \u2013 fair value level 1 applies when an instrument is measured directly on the basis of (unadjusted) quoted prices on active markets for identical assets or liabilities to which the entity has access on the measurement date; \u2013 fair value level 2 applies when a price has not been found on an active market and the instrument is measured according to valuation techniques, on the basis of observable market parameters, or of the use of parameters that are not observable but are supported and confirmed by market evidence, such as prices, spreads or other inputs; \u2013 fair value level 3 applies when fair value is measured using various inputs, not all of which are directly drawn from observable market parameters, and which thus entail estimates and assumptions by the valuator. If various inputs are used to measure the fair value of an asset or liability, classification in the hierarchy is determined on the basis of the lowest-level input used in measurement. When assigning a level in the fair value hierarchy, priority is given to the inputs of the valuation techniques rather than the valuation techniques themselves. The attachment \u201cFair Value Hierarchy Rules\u201d to the \u201cRules for Valuation of Financial Instruments at Fair Value\u201d defines, with regard to the respective financial instrument valuation models/inputs, the basic rules that market inputs must comply with in order to be classified as Level 2, and the significance thresholds which, when overrun, result in the assignment of Level 3. For level 1 financial instruments, the current bid price is used for financial assets and the current ask price for financial liabilities, struck on the principal active market at the end of the reference period. For financial instruments with a scarcely significant bid-ask spread or for financial assets and liabilities with offsetting market risks, mid-market prices are used (again referred to the last day of the reference period) instead of the bid or ask price. The following are considered as level 1 financial instruments: contributed bonds (i.e. bonds for which the Composite Bloomberg Bond Trader is available from the Information Provider Bloomberg, or, alternatively, a price on the EuroMTS circuit, or at least three prices available from the Information Provider Bloomberg), contributed equities (i.e., quoted on the official market of reference), contributed UCITS funds (covered by EU directives), spot exchange rates, and derivatives for which prices are available on an active market (for example, exchange traded futures and options). Conversely, all other financial instruments that do not belong to the above-described categories or that do not have the contribution level defined by the Guidelines and Rules for Valuation of Financial Instruments at Fair Value are not considered level 1 instruments. When no listing on an active market exists or the market is not functioning regularly, that is when the market does not have a sufficient and continuous number of trades, and bid-ask spreads and volatility that are not sufficiently contained, the fair value of the financial instruments is mainly determined through the use of valuation techniques whose objective is the establishment of the price at which, in an orderly transaction, the asset is sold or the liability transferred between market participants, as at the measurement date, under current market conditions. In the case of instruments classified as level 2, the valuation is based on prices or credit spreads presumed from the official listing of instruments which are similar in terms of risk factors, using a given calculation methodology (valuation model). The use of this approach requires the identification of transactions on active markets in relation to instruments that, in terms of risk factors, are comparable with the instrument to be measured. Level 2 calculation methodologies reproduce prices of financial instruments quoted on active markets (model calibration) and do not contain discretional parameters \u2013 parameters for which values may not be inferred from quotations of financial instruments present on active markets or fixed at levels capable of reproducing quotations on active markets \u2013 that significantly influence the final measurement. The following are measured using level 2 input models: \u2013 bonds without official quotations expressed by an active market and whose fair value is determined through the use of an appropriate credit spread which is estimated starting from contributed and liquid financial instruments with similar characteristics; \u2013 loans whose fair value is determined through the use of an appropriate credit spread which is estimated starting from market data of financial instruments with similar characteristics; \u2013 derivatives (including securitised derivatives) measured through specific models, fed by input parameters (such as yield, foreign exchange and volatility curves) observed on the market; \u2013 structured credit products (ABSs, HY CLOs, CDOs) for which significant prices are not available and whose fair value is measured using valuation techniques that consider parameters that can be gathered from the market; \u2013 non-contributed equity instruments measured based on direct transactions, that is significant transactions on the stock registered in a time frame considered to be sufficiently short with respect to measurement date and in constant market conditions, or using the \"relative\" valuation models based on multipliers; \u2013 non-UCITS hedge funds, provided the Level 3 instruments do not exceed a set threshold. In case of instruments classified as level 3, the calculation of the fair value is based on valuation models which consider input parameters not directly observable on the market, therefore implying estimates and assumptions on the part of the valuator. In particular, the valuation of the financial instrument uses a calculation methodology which is based on specific assumptions of: \u2013 the development of future cash flows, which may be affected by future events that may be attributed probabilities presumed from past experience or on the basis of the assumed behaviour; \u2013 the level of specific input parameters not quoted on active markets, for which information acquired from prices and spreads observed on the market is in any case preferred. Where this is not available, past data on the specific risk of the underlying asset or specialised reports are used (e.g. reports prepared by Rating agencies or primary market players). The following are measured using this method: \u2013 some transactions in derivatives, bonds, or complex structured credit instruments measured using level 3 inputs; \u2013 hedge funds in which the level 3 assets are above a set limit; \u2013 private equity funds, private debt funds, real estate funds and closed-end funds resulting from sales of non-performing loans valued at NAV, with possible discounts; \u2013 shareholdings and other equities measured using models based on discounted cash flows or using equity methods; \u2013 loans whose fair value is determined through the use of a credit spread that does not meet the criteria to be considered level 2; \u2013 loans with underlying equity risk, whose fair value is calculated based on the discounting of expected contractual flows. The transfer of fair value levels of financial assets and financial liabilities measured at fair value on a recurring basis occurs, as established by IFRS 13, as follows: the transfer between levels 2 and 3 occurs upon a change in the observability or significance of an input to the measurements; and the transfer between levels 1 and 2 or 3 occurs upon a change in the availability of prices in an active market. For OTC derivatives, the initial choice of the level of fair value hierarchy depends on the degree of observability and significance of the parameters used to determine the risk-free component. The calculation of the counterparty/issuer default risk component may result in a transfer to level 3 when the current exposure is positive for the bank and the counterparty is in non-performing loan status, or when the determination of default risk requires unobservable inputs and the bilateral credit value adjustment (bCVA) component is significant when compared to the overall fair value of the netting set, or when the counterparty's sensitivity to downgrading is significant when compared to the overall fair value of the netting set. For non-contributed equity instruments, the change of the level occurs: \u2212 when inputs observable on the market (e.g., prices defined based on comparable transactions on the same instrument between independent and informed counterparties) have become available during the period. In this case, the Intesa Sanpaolo Group reclassifies from level 3 to level 2; \u2212 when the directly or indirectly observable elements used as the basis for the valuation cease to exist, or when they are no longer up to date (e.g., comparable transactions that are no longer recent or multiples that are no longer applicable). In this case, the Intesa Sanpaolo Group uses valuation techniques that use unobservable inputs. Valuation of financial instruments The valuation of financial instruments entails the following phases: - identification of the sources for valuation: for each asset class, the Guidelines and Rules for Valuation of Financial Instruments at Fair Value establish the processes that are necessary to identify market parameters and the manner according to which such data must be extracted and used; - validation and processing of input data for periodic valuation: this stage consists of the accurate verification, at each accounting measurement date, of the market parameters used (verifying the integrity of data contained on the proprietary platform with respect to the source of contribution), reliability tests (consistency of each single figure with similar or comparable figures) and verification of concrete application means; - certification of the measurement methods: this phase is aimed at verifying the consistency and the adherence of the various measurement techniques used with current market practice, at highlighting any critical aspects in the measurement models used and at determining any adjustments necessary for measurement; - monitoring and revision of the measurement methods: the monitoring consists of the ongoing checking of the adherence to the market of the valuation model and enables the timely discovery of any gaps, in order to initiate the necessary checks and measures. Identification, certification and processing of the input data for the measurements The fair value calculation process and the need to distinguish between products which may be measured on the basis of effective market quotes rather than through the application of measurement techniques, highlight the need to establish univocal principles in the determination of market parameters. To this end, the Guidelines and Rules for Valuation of Financial Instruments at Fair Value establish the processes needed to identify the market parameters, the contribution sources considered appropriate and how the data must be received (cut-offs) and used for the measurement of financial instruments held for any purpose in the proprietary portfolios of the Parent Company and its subsidiaries. The same sources are used in measurements carried out for third parties under Service Level Agreements, entered into in advance. The adequacy of the input data for the measurements is guaranteed by the respect of reference requirements, which are based on comparability, availability and transparency of the data, or the possibility of extracting the figure from one or more info providing systems, measuring the contribution bid-ask, and lastly, for OTC products, verifying the comparability of the contribution sources. The use of all market parameters in Intesa Sanpaolo is subordinated to their certification by the Market and Financial Risk Management Head Office Department, in terms of specific controls (verifying the integrity of data contained on the proprietary platform with respect to the source of contribution), reliability tests (consistency of each single figure with similar or comparable figures) and verification of concrete application means. Certification of measurement methods The measurement methods used by the Intesa Sanpaolo Group are certified by the IMI CIB Risk Management Head Office Department, with the involvement of all relevant structures. The purpose of the certification is to verify the consistency of the methods with current market practice, to highlight any problems or limitations, and to determine any fair value adjustments, in accordance with the applicable regulations. The certification process considers all aspects of the measurement method (basic assumptions, mathematical derivation, any approximations, numerical algorithms used, inputs and outputs) but also all contextual elements that are relevant to the management, including the characteristics of the associated products (payoffs, early termination clauses, etc.), any ancillary agreements (e.g. netting or collateral agreements), the market where the products are traded, and how they are used by end users (e.g. precision vs. performance, calculation of risk measures, etc.). These aspects are subject to qualitative and quantitative analysis and are duly reported in the internal documentation. The possibility of independent validation issued by high standing financial service companies is also envisaged in highly- complex cases and/or in presence of market turbulence (market dislocation). At the end of the certification process, the measurement method is recorded in the Rules for Valuation of Financial Instruments at Fair Value. Monitoring and review of measurement methods As required by the applicable regulations, the measurement methods used are subject to ongoing monitoring of their performance with respect to the evolution of financial instruments, markets and methodological innovations developed by the scientific community, in order to ensure their continuous alignment to the market, promptly highlight any inadequacies and initiate the necessary checks and actions. The Rules for Valuation of Financial Instruments at Fair Value detail all elements considered for the periodic monitoring and revision of the measurement methods. The functions involved in the monitoring process are the same as those involved in the process of certification of the measurement methods mentioned above and in the IPV process governed by the Guidelines and Rules on Independent Price Verification. Valuation risk: fair value adjustments The Intesa Sanpaolo Group defines valuation risk as the risk of losses arising from the valuation uncertainty for the fair value exit price of financial instruments, due to any limitations of the measurement techniques used or particular market conditions. The main measure of the valuation risk associated with a financial instrument are the fair value adjustments, which are designed to take into account the valuation uncertainty or the difficulty in the disposal of specific financial positions, and may relate to a single financial instrument or to the net position for a particular risk factor. The adjustments may be calculated as add-ons to the valuation or included directly in the valuation. They are regularly reviewed, also considering market trends, or the introduction of new liquid instruments, different calculation methodologies and, in general, methodological advances which may also lead to significant changes in measurement methods chosen and their implementation. In particular, the Intesa Sanpaolo Group envisages fair value adjustments for the following categories of measurement uncertainty: - uncertainty of input data: any valuation uncertainty related to the input data for the valuation (whether mid, bid or ask) is measured with respect to temporary or structural conditions on the markets or in relation to the size of the values held (in the case of concentration), and where necessary a fair value adjustment is made, quantifying the consequent impact on the valuations; - illiquidity of the underlying positions or risk factors: similarly to the case above, the market bid-ask spread is measured and, where necessary, a fair value adjustment is made, quantifying the consequent impact on the valuations; - model risk: this is based on the identification and use of variants of the same model or alternative models, with which to carry out comparison analyses aimed at quantifying the variability of the valuations (in particular any directionality of the price when the model changes) and the behaviour of the model in various market scenarios (stress tests). The quantification of the fair value adjustment is based, where possible, on easily comprehensible and measurable financial variables (e.g. vega, delta, correlation shift); - counterparty and funding risk: counterparty and funding risks, collectively referred to as XVA, include Bilateral Credit Value Adjustment (bCVA) and Funding Value Adjustment (FVA). The bCVA takes account of the counterparty risk premium associated with the possibility that the counterparties may not honour their mutual commitments (for example in the event of bankruptcy). This component derives, in turn, from two components: the Credit Value Adjustment (CVA, negative) and the Debt Value Adjustment (DVA, positive), which consider, respectively, the scenarios where the Counterparty goes bankrupt before the Bank (and the Bank has a positive exposure towards the Counterparty), and vice versa the scenarios where the Bank goes bankrupt before the Counterparty (and the Bank has a negative exposure towards the Counterparty). The Funding Value Adjustment (FVA, negative), on the other hand, takes into consideration the funding risk premium, connected to the costs of funding the cash flows (coupons, dividends, collateral, etc.) generated by the Bank's overall OTC derivatives portfolio. The calculation of the XVAs depends on the overall exposure between the two counterparties, calculated using techniques for simulating the underlying risk factors of the transactions considered, taking into account any counterparty risk mitigation arrangements (in particular netting and collateralisation agreements), as well as any contractual clauses. The calculation of the XVAs also depends on the Loss Given Defaults (LGDs) based on the estimated value of the expected recovery in the event of counterparty default, and the probability of counterparty default (PD). LGDs and PDs are obtained from credit default swap market quotes or are based on internal estimates by sector/rating used for credit risk. In addition, the FVA calculation is based on a funding curve representative of the best market counterparties that the Bank could renegotiate transactions with, in accordance with the most IFRS 13 advantageous market principle, as there is currently no real main market for these transactions. The management process for fair value adjustments is formalised in the Guidelines and Rules for Valuation of Financial Instruments at Fair Value and the Rules for the Valuation of Unlisted Equity Investments with appropriate calculation methodologies on the basis of the different configurations of the points set out above, and is carried out in the most objective, consistent and systematic manner possible by the IMI CIB Risk Management Head Office Department and the Group M&A and Equity Investments Head Office Department. The introduction and release of the fair value adjustments depend on the factors described above. Such processes are a combination of quantitative elements that are rigidly specified and qualitative elements, valued based on the different configuration over time of the risk factors which generated the adjustments. Thus, the estimates subsequent to initial recognition are always guided by the mitigation or elimination of said risks. For new products, the decision to apply the adjustments is taken during the new product approval process, upon the proposal of the IMI CIB Risk Management Head Office Department. The application of the adjustments is subject to an authorisation procedure that, above a certain warning threshold defined for specific cases, involves both the area of the Chief Risk Officer and the Manager responsible for preparing the Company\u2019s financial reports. A.4.1 Fair value levels 2 and 3: valuation techniques and inputs used The sections below provide a summary of the information, by type of financial instrument (securities, derivatives, structured products, hedge funds, and loans), on the valuation models used. I. Valuation of non-contributed debt securities The fair value of non-contributed bonds is measured using the income approach, i.e. by calculating the present value of expected future cash flows using an appropriate risk premium represented by the credit spread, identified on the basis of contributed and liquid financial instruments with similar characteristics. The sources used for this measurement are the following: - contributed and liquid debt securities of the same issuer; - credit default swaps on the same reference entity; - contributed and liquid securities of an issuer with the same rating and belonging to the same sector. In any case, the different seniority of the security to be priced is considered with regard to the issuer\u2019s debt structure. In the case of Italian public issuers, a rating/maturity matrix is defined on the basis of the spread levels on government issues, to which the spreads among the various rating/maturity classes with respect to public issues (regions, provinces, municipalities, government entities) are applied. When applying the spread for the pricing of the non-contributed instrument, if the estimated \u2018fair\u2019 credit curve does not respect the same characteristics of the instrument, correction factors are considered. Also, for bonds that are not quoted on active markets, an extra spread, estimated based on the bid/ask spread recorded on the market, is added to the \u201cfair\u201d credit spread component, to take account of the higher premium demanded by the market compared to similar contributed securities. Finally, if the instrument includes an optional component, a further adjustment is made to the spread by adding a component designed to capture the hedging costs of the structure and any illiquidity of the underlying assets. This component is calculated based on the type of option, using the corresponding valuation models for derivatives mentioned below. Similarly, Intesa Sanpaolo\u2019s credit spread for the Banking Group\u2019s financial liabilities designated at fair value is determined and measured based on the bonds issued by the Parent Company, with regular, periodic coupons, maturity beyond one year and quoted on an active market in compliance with IAS/IFRS. The implicit credit rating is determined on the basis of market prices and subsequently adjusted through interpolation models which generate credit spread curves by type of coupon, maturity and subordination level. Similarly, the issued certificates are measured at fair value by breaking them down into the following two components: an issued bond, measured as described above, and an option component, measured using the corresponding derivative pricing models described below. Finally, measurement of the financial liabilities designated at fair value of the Insurance Companies (mainly liabilities associated with unit-linked investment contracts that do not present significant insurance risk) reflects the market value of the underlying assets, which are determined in application of the various methods described herein. II. Valuation of loans Loans are measured at fair value through contributions from info providers when available or by calculating the present value of expected future cash flows using an appropriate credit spread, identified starting from the following sources: - contributed loans on the market; - sector/rating-specific loan market curves; - contributed securities of the same issuer; - credit default swaps on the same reference entity. In any case, the different seniority of the instrument to be priced is considered with regard to the issuer\u2019s debt structure. When applying the spread for the pricing of the loan, if the estimated \u2018fair\u2019 credit curve does not respect the same characteristics of the instrument, correction factors are considered. Moreover, where, in determining the credit spread of the loans, reference is made to the curves created through bonds, a Bond \u2013 Loan basis must be applied, to capture the different structure of the market, if any, and the different type of loan. In order to consider the premium required by the market for illiquid and/or structured instruments, several adjustments are applied to the credit spread. Loans with an underlying unlisted equity risk (which include financial instruments that, pursuant to IAS 32, cannot be classed as equity, e.g. loans convertible into shares) are usually measured by discounting the cash flows provided for by the contract. Since these are debt securities, the cash flows are normally discounted using a rate consisting of the sum of: a risk free rate, a spread deriving from the CDS or measured on listed securities or similar disbursements, and any additional risk premium. In the case of non-performing loans, the fair value is determined based on the recoverable amount of the position. This estimate is made taking into account the contractual elements that characterise the loan and may involve, for example, the valuation of the cash flows from the sale of the real estate pledged as collateral or the valuation of any capital instruments that may be acquired following the introduction of an equity conversion clause for the position. III. Valuation of OTC derivatives Derivatives, if not traded on regulated markets, are Over The Counter (OTC) instruments, which are bilaterally exchanged with market counterparties and are measured through specific measurement methods and input parameters (such as, for example, interest rate, foreign exchange and volatility curves) observed on the market and subject to the certification and monitoring illustrated above. The fair value of an OTC derivative is calculated considering the risk premium related to the various underlying risk factors. Specifically, there are two relevant cases, according to whether or not the instrument is subject to collateralisation agreements (CSAs) aimed at mitigating the counterparty and funding risk: a. for CSA transactions with characteristics that reduce counterparty and funding risk to a negligible level, the fair value is calculated according to the non-arbitrage principle, by including the market risk premium related to the risk factors underlying the contract (e.g. interest rates, volatility, etc.), and, in the most significant cases, using the rate of remuneration for the collateral as the discount rate for the future cash flows; b. for transactions without CSAs, or with CSAs with characteristics that do not reduce the counterparty and funding risk to a negligible level (e.g., One Way CSAs, or with non-negligible limits or minimum transfer amounts), the fair value of the instrument may be stated, under appropriate circumstances, as the sum of the reference (or base) value, equal to the price of the corresponding collateralised instrument, and several additional valuation components related to the counterparty and funding risk premium, referred to jointly as XVA (see \"Valuation risk: fair value adjustments\u201d). In view of the number and complexity of the OTC derivatives, a systematic reference framework has been developed which represents the common elements (calculation algorithms, processing models, market data used, basic assumptions of the model) that are used for their measurement. The table below illustrates the main methods used to measure OTC derivatives based on the category of underlying asset. Underlying class Valuation models Market data and input parameters Interest rate Net Present Value, Black-Scholes, SABR, Libor Market Model, Hull-White, Bivariate log-normal, Rendistato, Hagan exact formula for CMS Interest rate curves (deposits, FRA, Futures, OIS, swap, basis swap, CMS, Rendistato basket), cap/floor/swaption option volatility, correlation between interest rates Foreign exchange rate Net present Value FX, Garman-Kohlhagen, Lognormal with Uncertain Volatility (LMUV), Stochastic Local Volatility (SLV), Local Volatility (LV) Interest rate curves, spot and forward FX curves, FX volatility, \"quanto\" volatility and correlations Equity Accrual, Net present Value Equity, Generalised Black-Scholes, Heston, Local Volatility, Jump Diffusion Interest rate curves, underlying asset spot rate, expected dividends, underlying asset volatility and correlation between underlying assets, \"quanto\" volatility and correlations Inflation Inflation NPV, Inflation SABR, Inflation Jarrow- Yildirim Nominal and inflation interest rate curves, interest and inflation rate volatility, seasonality ratios of consumer price index, correlation between inflation rates Commodity Net present Value Commodity, Generalised Black- Scholes, Independent Forward, Local Volatility, 2- Factors Jump Diffusion Interest rate curves, spot rate, forwards and futures of underlying assets, underlying asset volatility and correlation between underlying assets, \"quanto\" volatility and correlations Loans Net present Value, CDS Option (or log-normal model), Contingent CDS Probability of default, Recovery rate, credit index volatility. As envisaged by IFRS 13, in determining fair value the Intesa Sanpaolo Group also takes into account the effect of non- performance risk. This risk includes changes in the counterparty credit rating and changes in the issuer\u2019s own credit risk. IV. Valuation model for structured credit products With regard to asset-backed securities (ABSs), if significant prices are not available, valuation techniques are used that take into account parameters that can be gathered from an active market (level 2 inputs) or, where parameters cannot be observed, estimated parameters (level 2 or 3 inputs, where immaterial or material). In this case, the cash flows are obtained from infoproviders or specialised platforms, where available, or are taken from the business plan of the transaction, supplemented with periodic reporting, such as the case of Non-Performing Loans (NPLs) and Unlikely to Pay (UTP); the spreads are gathered from prices available on the market/market info provider, further strengthened by a qualitative analysis relative to the performance of the underlying assets presumed from periodic investor reports and aimed at highlighting structural aspects that are not (or not fully) encompassed by the analyses described above, relating to the actual future ability to pay the expected cash flows and analyses of relative value with respect to other similar structures. In the case of securitised high-yield loans to European corporate borrowers (CLO HY loans), valuation techniques call for calculation of the net present value of the expected cash flows, determined through specialised platforms, discounted using market spreads. When modelling expected future flows, account is taken of all contractual aspects of the HY CLO loans that may influence the waterfall, i.e. the distribution of cash flows from the collateral on the notes. After this valuation, credit analyses on underlying assets are fine-tuned to incorporate further valuation elements not included in the quantitative models. In particular, a Qualitative Credit Review is provided for and entails an accurate analysis of credit aspects referred to the specific structure of the HY CLO and to the collateral present. This is to identify any present or future weaknesses which emerge from the characteristics of the underlying assets, which could have been missed by rating agencies and as such not fully considered in the valuations described in the previous point. V. Valuation of non-contributed equities Level 2 equities include: - equities measured based on direct transactions, that is significant transactions on the stock registered in a time frame considered to be sufficiently short with respect to measurement date and in constant market conditions; - equities measured using relative methods, based on multipliers: implied multiples in transactions in comparable listed or unlisted companies, within a time frame deemed sufficiently short with respect to the time of measurement and under constant market conditions (M&A multiples) or implicit multiples in the stock market prices of a sample of comparable companies (stock market multiples). Level 3 equities for which the \u201crelative\u201d models described above are not applicable in significant terms, and, therefore, \u201cabsolute\u201d valuation models are used, include: - equities for which analytical models based on flows are used, which determine the value through estimates of the cash or income flows that the company is expected to generate over time, discounted using an appropriate rate based on the level of risk of the instrument; - equities measured based on net worth criteria such as NAV or Adjusted Net Asset Value (ANAV), which estimates the fair value of the various components of the assets of the investee. Any values deemed representative of the fair value of the equity instrument deriving from contractual clauses (for example, options) are classified in level 2 or 3 of the fair value hierarchy, according to the observability of the inputs used in the valuation. Specifically, if the negotiation of the clause resulted in strike prices or pre-defined algorithms and multiples, the instrument is classified in level 2. The cost criterion as estimate of fair value is used to a lesser extent, where none of the previous methods are applicable due to lack of sufficient information, and in the cases where there is a wide range of possible fair value measurements and it is not possible to identify the most appropriate value among these. This case also includes Equity Instruments which, in accordance with IAS 32, have the characteristics to be considered as equities. VI. The valuation of hedge funds The fair value of a hedge fund corresponds to the Net Asset Value (NAV) provided by the fund administrator, to which an adjustment can be applied, deriving from a measurement process aimed at capturing the main risk factors that the management of the funds is subject to, which consist of the following two types: - counterparty (broker) risk, i.e. the risk that the assets of the fund are exposed to when a single service provider is entrusted with prime brokerage or custodian activities, subject to the risk of default; - illiquidity risk, i.e. the risk that the assets of the fund are illiquid due to the limited prices available or due to a lack of information on the assessment policies used by the fund. These risks are assessed on the basis of the information contained in the documentation received periodically from the fund managers or administrators. The fair value hierarchy level is Level 2, provided the Level 3 instruments do not exceed a set threshold. VII. The valuation of private debt funds For Private Debt AIFs (Alternative Investment Funds), the investment authorisation process involves an initial due diligence to verify the consistency between each fund's asset valuation policy and the Guidelines and Rules for Valuation of Financial Instruments at Fair Value. The fund is subsequently valued at NAV. The fair value hierarchy level is Level 3. VIII. Valuation of closed-end private equity funds, real estate funds and closed-end funds resulting from sales of non- performing loans Closed-end private equity funds are usually valued using the latest Net Asset Value approved by the asset management company (published half yearly or quarterly), adjusted solely to take into account events that have not yet occurred at the reference date of the NAV, such as: - a material transaction on a portfolio company; - the bankruptcy or liquidation of a portfolio company; - the alignment of any listed assets to current prices; - draw downs and distributions by the fund. Closed-end real estate funds are valued using the last available Net Asset Value, adjusted for any subsequent call ups or distributions and, where considered necessary, applying a discount calculated using an internal model. Specifically, this model enables the calculation of a discount on the Net Asset Value based on five different factors: (i) the size of the asset management company that manages the fund; (ii) the number of subscribers; (iii) the fund\u2019s historical return; (iv) the fund\u2019s return for the period; and (v) the level of debt. These factors are calibrated differently based on the business model and the fund\u2019s resulting risk profile, distinguishing between core, value added and opportunistic funds. With regard to closed-end funds resulting from sales of non-performing loans, where an information set is available that makes it possible to conduct an analysis of the business plan of the positions held by the fund, individually or by uniform cluster, to determine the fair value of the units of the fund, in general the Bank uses the support of an independent expert, who, among other duties, carries out a comparison of performance of the business plans of the underlying exposures, and states in its report, that the fair value determined by the expert complies with the indications from the main regulators 86 . Where it is not possible to apply the approach mentioned above, for each fund a comparison is made between the expected return of the fund and a benchmark rate, defined using a model that factors in various elements, such as: i) the fund\u2019s valuation policies, verifying whether they are compliant with criteria consistent with the definition of fair value pursuant to IFRS 13, ii) verification that there is an updated business plan and of the performance of the fund compared to the available business plan, iii) the characteristics of the fund\u2019s assets, iv) the level of the cost of funding on the market for issuing liquid instruments, v) the completeness and extensiveness of the information provided by the fund, and vi) the fund management methods. Where the expected return of the fund is higher than the defined benchmark rate, the NAV communicated by the asset management company is used as the fair value measure. Where, instead, the benchmark rate is higher than the expected return of the fund, the fair value is determined based on the NAV minus a discount, which takes account of the spread between the benchmark rate and the expected return of the fund and the average residual life of the fund (Weighted Average Life or WAL). Valuation of financial assets and liabilities not measured at fair value on a recurring basis Finally, for asset and liability financial instruments measured at amortised cost, whose fair value is determined solely for the purposes of disclosure in the notes to the financial statements, the following is noted: - the fair value of the bonds is calculated using the methods described above; - the fair value measurement of the other medium- and long-term asset and liability financial instruments is performed by discounting future cash flows using the discount rate adjustment approach, which requires credit risk factors to be taken into account in the discount rate for future cash flows; - for short-term assets and liabilities, the book value is assumed to be a reasonable approximation of fair value. For more information see paragraph A.4.5.4. As required by IFRS 13, the table below highlights, for financial assets and liabilities measured at level 3 fair value, quantitative information on the significant, unobservable inputs used in the fair value measurement. (thousands of euro) Financial assets/ liabilities Valuation technique Main non-observable input Minimum value of range of changes Maximum value of range of changes Unit Favourable changes in FV Unfavourable changes in FV Securities and loans Discounting Cash Flows Credit Spread -3 6 % 7,409 -11,764 Structured securities and loans JD model JD parameters -37 13 % 134 -192 Structured securities and loans Two-factor model Correlation -26 32 % 4,871 -3,413 ABSs Discounting Cash Flows Credit Spread -1 3 % 611 -832 CLOs Cash Discounting Cash Flows Credit Spread -6 6 % 503 -523 OTC derivatives subject to FV adjustment for CVA/DVA CVA Loss Given Default Rate (LGD) 0 100 % 3,388 -2,315 OTC derivatives subject to FV adjustment for CVA/DVA CVA Probability of default (PD) based on counterparty's internal rating CCC A Internal rating 44 -78 OTC Derivatives - Equity basket option Black - Scholes model Equity basket correlation -11.16 87.39 % 517 -759 OTC Derivatives - Equity Option Black - Scholes model Historical volatility 8.21 76.17 % 967 -1,524 OTC Derivatives - Equity Option Marshall Olkin Model Historical correlation 2.44 47.95 % 66 -43 OTC Derivatives - Spread option on swap rates Bivariate log-normal model Correlation between swap rates -71.70 71.04 % 0 -1 A.4.2 Valuation processes and sensitivity For a description of the valuation processes used by the Group for instruments measured at level 3 in a recurring and non- recurring manner, see paragraphs A.4.1 and A.4.5 respectively. As required by IFRS 13, for the financial assets and liabilities measured at level 3 fair value, the following table lists the effects of a change in one or more significant non-observable parameters used in the valuation techniques adopted to determine the fair value. Note that only the total material effects at the end of the year are shown in the table. 86 See Bank of Italy/Consob/Ivass Document no. 8 \u201cTreatment in the financial statements of sales without recourse of unlikely-to-pay loans in exchange for units of investment funds\u201d, published in April 2020. Financial assets/liabilities Non-observable parameters Sensitivity (thousands of euro) Change in non- observable parameter FVTPL and FVTOCI securities and loans Credit spread -576 1 bp FVTPL and FVTOCI securities and loans JD parameters -10 1% FVTPL and FVTOCI securities and loans Correlation 157 1% OTC Derivatives - Equity Correlation between underlying equity baskets 218 10% OTC Derivatives - Equity Historical volatility -1,076 10% OTC Derivatives - Equity CPPI Historical correlation -24 10% A.4.3. Fair value hierarchy (transfers between the different levels) A description of the policy for determining when transfers occur between the different levels of fair value hierarchy (see IFRS 13, par. 95) is provided above (see \u201cFair value hierarchy\"). A.4.4. Other information In calculating the bCVA, the Intesa Sanpaolo Group considers the net positions in derivatives of each counterparty (see paragraph A.4.1 above for further details on the measurement of derivatives). For other cases, the Group does not make use of the option provided in paragraph 48 of IFRS 13, which permits an entity \u201cto measure the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position (i.e. an asset) for a particular risk exposure or paid to transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction between market participants at the measurement date under current market conditions\u201d. General Independent Price Verification principles The Intesa Sanpaolo Group governs and defines the independent price verification process through the Group Guidelines and Rules on Independent Price Verification, documents that are coordinated by the Market and Financial Risk Management Head Office Department and applied by the Parent Company and all consolidated subsidiaries of the Banking Group. The \u201cGuidelines on Independent Price Verification\u201d, once a favourable opinion has been given by the Group Financial Risk Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of the Risks and Sustainability Committee. The level I and II \u201cRules on Independent Price Verification\u201d are revised and approved at least on an annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by the Management Bodies, and which also reviews material changes and updates proposed by the Market and Financial Risk Management Head Office Department. According to the provisions of Regulation (EU) 575/2013 (Capital Requirement Regulation \u2013 CRR), Article 4, par. 1.70 and Article 105, par. 8, the Intesa Sanpaolo Group governs the Independent Price Verification (IPV) process, which consists of the regular verification of the accuracy and independence of market prices or the data input in pricing models, carried out by an organisational unit independent from the business functions, at a frequency commensurate with the trading carried out and the nature of the market. The Intesa Sanpaolo Group has set up an IPV process with 3 levels of control in line with the provisions of Bank of Italy Circular 285/2013 (Supervisory regulations for banks), incorporated into the Integrated Internal Control System, which requires the risk management processes to be incorporated in the processes and methods for valuing the company activities, also for accounting purposes. Within the IPV, the level I, II and III control functions have the following main responsibilities: - the level I control function participates in the definition of the related methodological framework and carries out the level I implementations and controls, reporting the results to the business function and the level II control functions; - the level II control function defines the methodological and control framework, ensures alignment with current regulations and consistency between the IPV controls, accounting valuations and additional valuation adjustments (AVA) (carried out, respectively, on the basis of the Guidelines and Rules for Valuation of Financial Instruments at Fair Value and the Guidelines and Rules for Prudent Valuation of Financial Instruments at Fair Value) and supervises the level I controls and performs the level II controls; - the level III control function carries out internal audit controls to identify breaches of procedures and regulations, as well as to periodically assess the completeness, adequacy, functionality (in terms of efficiency and effectiveness) and reliability of the organisational structure of the other components of the internal control system and the IT system at Group level, at scheduled deadlines in relation to the nature and intensity of the risks. The level I and II IPV controls are qualitative and quantitative controls and are distinguished according to the type of instruments subject to control. They are applied consistently to both the input data underlying the valuations and the valuations themselves, and ensure consistency between the management valuations and the accounting valuations carried out in the various systems. They are characterised by completeness and suitability of application, absence of overlaps, sequentiality and complementarity in execution. The IPV control instruments use, as far as possible, specific applications or IT procedures, which enable extensive data analysis on a daily basis. Specifically: - the level I controls are aimed at ensuring the validation of the market data entered into the systems and are based on an in-depth analysis of the data obtained from external providers. If the level I controls detect that certain thresholds have been exceeded for the data contained in the systems, or the data is not considered correct by the level I control functions, a comparison process (challenge) is activated with the involvement of the business function and the level II control functions, in line with the degree of complexity of the report; - the level II controls are characterized by sequentiality and complementarity in execution with the level I controls and are designed to ensure alignment between management and accounting valuations, based on an in-depth analysis of consensus or counterparty data and, where these are not available, through the application of pricing models associated with the respective instruments. The results of the IPV process are analysed, assessed and coordinated by the Financial Measurements Working Group, a technical body set up specifically for this purpose, with the aim of facilitating integration and comparison between the business functions and the control functions. General prudent value principles The framework of financial measurements is completed with the prudent valuation of financial instruments measured at fair value, which involves the calculation of additional valuation adjustments for prudential purposes, without impacts on the fair value calculated for accounting purposes in accordance with the IFRS. The Intesa Sanpaolo Group governs and defines the prudent value measurement of financial instruments through the Group Guidelines and Rules for Prudent Valuation of Financial Instruments at Fair Value, prepared by the Market and Financial Risk Management Head Office Department and applied by the Parent Company and all the consolidated subsidiaries of the Banking Group. The \u201cGuidelines on Prudent Valuation of Financial Instruments\u201d, once a favourable opinion has been given by the Group Financial Risk Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of the Risks and Sustainability Committee. The \u201cRules for Prudent Valuation of Financial Instruments\u201d are revised and approved at least on an annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by the Management Bodies, and which also reviews material changes and updates proposed by the Market and Financial Risk Management Head Office Department. In accordance with the provisions of Regulation (EU) 575/2013 (Capital Requirements Regulation \u2013 CRR), prudent valuation entails the calculation of specific additional valuation adjustments (AVAs) for the financial instruments measured at fair value, aimed at capturing different sources of valuation uncertainty and ensuring the achievement of a suitable level of certainty in the measurement of the positions. The total value of the AVAs is deducted from the Common Equity Tier 1 capital, without impacts on accounting fair values. The Intesa Sanpaolo Group, in line with the criteria indicated in Delegated Regulation (EU) 2016/101, is subject to the application of the core approach for the determination of AVAs both at individual and at consolidated level for all the positions measured at fair value. In particular the following AVAs are considered: - market price uncertainty: this reflects the uncertainty of the market prices, calculated at valuation exposure level; - close-out costs: it reflects the uncertainty of the exit price calculated at valuation exposure level; - model risks: it considers the valuation model risk which arises due to the potential existence of a range of different models or model calibrations, which are used by market participants, and the lack of a firm exit price for the specific product being valued; - unearned credit spreads: it reflects the valuation uncertainty in the adjustment necessary according to the applicable accounting framework to include the current value of expected losses due to counterparty default on derivative positions; - investment and funding costs: it represents the valuation uncertainty in the funding costs used when assessing the exit price according to the applicable accounting framework; - concentrated positions: it reflects the uncertainty relating to the exit price of the positions defined as concentrated; - future administrative costs: it considers administrative costs and future hedging costs over the expected life of the valuation exposures for which a direct exit price is not applied for the close-out costs AVAs for concentrated positions; - early termination: it considers the potential losses arising from non-contractual early terminations of customer trades; - operational risks: it considers the potential losses which may be incurred consequently to the operational risks connected to the valuation processes. The prudent value corresponds to the exit price from the position with a level of certainty equal to 90%. Where possible, this value is determined on the basis of a distribution of exit prices observed on the market. In all the other cases, an expert-based approach is used, referring to the qualitative and quantitative information available. The AVA value associated to the single position and to the single source of uncertainty in valuation thus corresponds to the difference between the prudent value and the fair value. The total AVA is obtained by aggregating the single AVAs, taking into account the corresponding weighting ratios. The \u201cRules for Prudent Valuation of Financial Instruments\u201d outline, for each AVA, the definition and interpretation, the scope of application, the input data and the detailed calculation method for each class of financial instrument. FAIR VALUE OF REAL ESTATE AND VALUABLE ART ASSETS Fair value of real estate assets As extensively illustrated in the first part regarding the accounting policies, the Group has adopted the revaluation model as the basis of measurement for the owner-occupied properties accounted for according to IAS 16 and fair value for the investment properties accounted for according to IAS 40. Measurement of real estate assets The revaluation model applied to owner-occupied properties envisages that property and equipment, whose fair value can be reliably determined, is recorded at a revalued amount, equal to its fair value at the date of the revaluation, net of depreciation and any accumulated impairment losses. For the properties held for investment, the Intesa Sanpaolo Group has chosen the fair value method, according to which, after initial recognition, all investment properties are measured at fair value. Valuation approach IFRS 13 defines fair value as \u201cthe price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date\u201d. The valuation approach has been defined on the basis of the business relevance and plan for the use of the properties, which consists of three main groups: \u2013 \u201ctrophy assets\u201d, i.e. particularly prestigious properties used by management functions located in the main cities where the Bank is based or properties of particular historical and artistic interest because they are listed by the Ministry for Cultural Heritage and Activities; \u2013 \u201cowner-occupied properties\u201d; \u2013 \u201cinvestment properties\u201d. The properties are valued individually asset-by-asset without considering any discount, or premium, that may be agreed during commercial negotiations if all or part of the portfolio is sold in bulk or in lots. The Intesa Sanpaolo Group has chosen to assign the valuation activity to professionally qualified external companies with an international structure, able to provide property valuations based on the RICS Valuation standards 87 which guarantee: \u2013 determination of the value consistent with the fair value configuration indicated in the IAS/IFRS; \u2013 compliance with the professional, ethical and independence requirements for experts, in line with the provisions of international and European standards. To determine the value of the assets, the following valuation methods are used based on the characteristics of the asset and the conditions of the market of reference; the valuer determines the most suitable method for each individual property. \u2013 The Discounted Cash Flow Method: the discounted cash flow method is based on the discounting (for a variable period based on the rental/occupational situation of the property and its subsequent optimisation) of the future net proceeds from the rental or sale of the property. At the end of this period, the value of the property is assumed to be the sale price obtained by capitalising the income of the last year at a market rate for investments similar to the object of the estimate or through a split sale. This method is used for the valuation of all the owner-occupied properties or real estate leased to third parties, located in Italy. \u2013 Comparative or Market Method: the comparative or market method is based on the comparison between the assets examined and similar assets recently sold/purchased or offered on the same market or in competitive environments. This criterion is based on a comparison with properties that have recently been sold or offered on the open market and, if possible, have the same characteristics. In the absence of observations directly related to the property examined, cases are used that are as similar as possible to the property examined, making the necessary adjustments. This method, which also represents the basis for other valuation methods, can be adopted in particular for non-owner-occupied assets and/or, in any case, for unrestricted and available assets in Italy and abroad. \u2013 Direct capitalisation income approach: the income approach is based on the current value of the potential market income of a property, obtained by capitalising the income at a market rate. This approach is applied mainly to owner-occupied properties abroad, where a prolonged stay within the building is envisaged. \u2013 Investment Value (Worth): the Investment Value (Worth) is defined by the International Valuation Standard as: \u201cthe value of an asset to a particular owner or prospective owner for individual investment or operational objectives\u201d. This definition is consistent with the provisions of the latest edition of the \u201cRICS Valuation - Global Standards 2022\u201d of the Royal Institution of Chartered Surveyors of the United Kingdom, where the Investment Value is defined as \u201cthe value of an asset to the owner or a prospective owner for individual investment or operational objectives\u201d. The Investment Value is applicable to properties built by the entity or properties with a strong business relevance subject to significant investments for technological, construction and functional adaptation. The Investment Value of these properties is determined on the basis of a 12+6 year plan for business use without break options, whose annual rent is determined by applying an appropriate gross rate of return to the amount of direct and indirect costs capitalised by the Owner, including the costs of purchasing the land. For the purposes of valuation, if necessary and where relevant, the assumptions also include sustainability considerations, connected with climate change and energy efficiency factors, as well as aspects linked to any specific legislation (for example, configuration, accessibility, etc.). To date, the Group has not made substantial adjustments to fair value due to climate change, aside from those already valued by the indicators observable on the reference market. 87 Standards set out in the Royal Institution of Chartered Surveyors of the United Kingdom document \u201cRICS Valuation \u2013 Global Standard\u201d (also known as the \u201cRed Book\u201d): the updated version was issued in November 2021 and took effect on 31 January 2022. Frequency of valuation Revaluations must be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the reporting date. The frequency of revaluations depends upon the changes in fair values of the property and equipment being revalued. When the fair value of a revalued asset differs materially from its carrying amount, a further revaluation is required. Specifically, based on the market trends, different valuation frequencies have been identified that, according to the characteristics of the assets and their location, are considered capable of capturing the significant changes in the value of the assets. The following distinction is made for owner-occupied properties: \u2013 for trophy assets, the revaluation is carried out by verifying the value through a scenario analysis (market trend analysis) every year and with a new appraisal every two years; \u2013 for the other owner-occupied properties, the revaluation is carried out through scenario analysis (market trend analysis) every year and through a new appraisal every three years. If the scenario analysis identifies significant changes (+/- 10%), specific and updated appraisals must be carried out to adjust the fair value of the asset to the valuations of the real estate market. For investment properties, the value is determined on the basis of new appraisals each year. Based on the rules referred to, in 2022, investment properties as well as owner-occupied properties which, based on the scenario analysis, recorded changes on the defined threshold, were subject to periodic valuation. Scenario analysis As part of the annual update of the fair value of the owner-occupied properties, in the years when a revaluation of the property is not envisaged, a scenario analysis (market trend analysis) is carried out using the best information sources available for the various countries in which the properties are located, in order to identify deviations, using databases, in the market values between the analysis period and the previous period. In particular, for real estate located in Italy, the changes are defined using at least 3 different sources. The main source is that provided by the Italian Revenue Agency, based on the specific OMI (Real Estate Market Monitor) zones. The second publication source is Nomisma for which, for the related zoning, the same queries are conducted as those for the OMI (main database). Lastly, the third source is based on the analyses of the changes during the year surveyed in terms of the offers present on the real estate market. Accordingly, the experts identify the annual deviations in rents and/or prices by related asset class for each property. Real estate located abroad is grouped, for each country, into different clusters based on location and asset class. Specific market analyses are conducted based on local and national knowledge of the particular target real estate market. The market study also takes account of the following macroeconomic drivers: \u2013 analysis of economic data (unemployment rate, GDP per capita, inflation and consumer price index); these macroeconomic factors constitute the first economic analysis, supporting the real estate market forecasts; \u2013 movement in average yield; \u2013 movement in market rents; \u2013 range of movement in unit values. The above-mentioned market survey, together with a qualitative weighting of the macroeconomic key drivers is used to determine a range of percentage deviation from the last assessment carried out, which is compared with the target threshold set, identifying a synthetic percentage factor for each individual property, included in a single worksheet. This activity is carried out close to the end of the year in order to produce a range of deviations within a reference threshold and to enable the timely planning of the updating of the specific appraisals for the properties whose deviation exceeds the threshold. The permitted variation threshold is +/-10%. If the deviations identified exceed this threshold, a new valuation will be carried out before the end of the year. Sensitivity of valuations Just as for financial instruments, level 3 non-financial assets and liabilities measured at fair value for which, due to the valuation model used to determine the fair value, execution is possible, and whose results are significant, are subject to sensitivity analysis. The analysis essentially concerned the properties of the Parent Company Intesa Sanpaolo, which represent the Core perimeter of the Group's real estate assets. It is noted that the sensitivity analysis was conducted by identifying the most important variables in the valuation model used to value the various classes of real estate, represented by the discounted cash flow method. Specifically, taking account of the trend recorded in the various asset classes of the real estate market and the parameters featuring greater volatility/variability, for owner-occupied properties, reference was made to the net capitalisation rate (yield) and the average medium/long-term inflation rate, while for investment properties, to the exit value. In compliance with the estimate assumptions applied to real estate assets, for the purpose of the analysis, variation ranges were used that were consistent with the potential trends in the market at the reporting date. For owner-occupied properties, a change of +/- 25 bps for the net capitalisation rate and a concurrent change of -/+15 bps for the inflation rate were assumed, in relation to which average deviations of fair value of +4.4% and -4.3% were recorded. For investment properties, a change of +/- 5% in the exit value was assumed, in relation to which there were average deviations of fair value of +4.8% and -5.2%. Fair value of valuable art assets The Bank\u2019s valuable art assets are also valued using the revaluation model, which envisages that property and equipment, whose fair value can be reliably determined, is recorded at a revalued amount, equal to its fair value at the date of the revaluation. Works of art included in the asset class \u201cvaluable art assets\u201d are works of particular importance, recognised for their historic and artistic value by experts and in line with the ministerial guidelines, and particularly those set out in Ministerial Decree 537 of 6 December 2017 on the exportation of works of art, such as: the state of preservation, the historical importance of the artist, the importance of the work in terms of art criticism/history, illustrious origin, certain quality and attribution and the declaration of interest by the Italian government. Valuation approach The valuation is carried out by determining the value through external appraisals, entrusted to qualified independent experts. These values are obtained from online databases such as Artnet and Artprice, which list over 100 million works of art and monitor the results of leading Italian and international auction houses. These are objective parameters that are compared with the market as a whole, in an analysis that also involves monitoring galleries and art fairs. In particular, the factors considered for the fair value measurement include objective factors relating to the historical-critical- artistic value of the author, state of preservation, execution technique, size and quality of the artwork, importance of the artwork in the production by the artist, publication of the artwork in specialist catalogues, period of execution of the artwork, international exposure of the artworks by the artist, distinguished provenance, certainty of attribution, guarantee of authenticity of an artwork, as well as other factors (which may change over time, depending on the evolution and tastes of the market), such as the reputation of the museum hosting the artwork by the artist, the prestige of fairs/exhibitions/galleries/auction houses that handle the artwork, the reputation of its critics and collectors, and the quality of the communications concerning the artist\u2019s work. Once these factors have been identified, the fair value is determined comparing them firstly with artworks similar to those examined (in terms of period of production/year, technique, size, type of subject and state of preservation), by the same artist and from the same period, if available (this is more feasible for modern and contemporary works) and, secondly, with works by artists or schools and areas that are close in style, philosophy and importance in the same historical period. Where several similar artworks are available, average values are used to take account of price volatility. In addition to considering the trends in auction trading, starting from the most recent trading and also including unsold items in the analysis (which are a possible indicator of the loss of market value for the artwork/artist), the valuation also considers the current market interest in an artwork or an artist, measured by the number and quality of temporary exhibitions held in internationally important museum spaces and accompanied by specific publications. The valuations also take into account any declarations of historical-artistic interest formally expressed by the Italian Ministry of Cultural Heritage and Activities (commonly referred to as \"notifications\"), which tie part of the artworks in the collection to Italy's heritage and restrict their circulation to the country\u2019s territory, reducing the price obtainable on the international market. The pricing is also influenced by the importance of the buyers/sellers (e.g. prices paid by famous collectors or known investors may be more significant). The valuation approach is based on the monitoring of the objective market values of the artworks included in the category examined, which follows three methodological approaches: \u2013 prudent basis, analysing the average values of a variety of different information sources, based on robust, updated and statistically representative databases: in a market of \u201cunique\u201d artworks, often without transactions for decades, this approach ensures the periodic identification of any outlier values and avoids following speculative trends; \u2013 comparison, monitoring the transactions that have taken place at a global level in a variety of distribution channels, in order to avoid considering only certain forms of transaction and the related financial values: in a global market with global demand, this approach enables verification of the presence of any geographical arbitrage or specific appreciation/depreciation phenomena with potential impacts; \u2013 recurrence, since it updates and monitors price trends over the shortest period of time that the specific features of the market allow, i.e. the half year: in a market in which there are no public trades monitored daily, the shortness of the measurement period ensures maximum attention and timeliness of any changes. This approach is applied to all the \"valuable art assets\". Frequency of valuation For valuable art assets, the revaluation is carried out by means of an expert appraisal every three years. However, a scenario analysis is carried out annually to identify any appreciable changes in value in order to bring forward the valuation. Based on the rules referred to, in 2022, artworks which, based on the scenario analysis, recorded changes on the defined threshold, were subject to valuation. Scenario analysis In order to identify and determine the changes in the market of the artworks being valued, market trends are monitored to detect signs of significant change that require appraisals to be made in advance with respect to the frequency established. This monitoring is carried out on a two-fold basis: \u2013 Monitoring of the market prices of the top artworks in terms of value held in Intesa Sanpaolo\u2019s collections, which represent 75% of the total value of the artworks included in the \u201cvaluable art assets\u201d class, by verifying both the results of the main international auctions (which are based on a calendar of precise seasonal deadlines) and the reports of the two main world databases (Artprice and Artnet), whose analytics provide useful tools for monitoring prices; \u2013 Monitoring the performance of the art market in general, to identify trends and changes with respect to Intesa Sanpaolo\u2019s \u201cvaluable art assets\u201d, verifying both the results of the main international auctions (which are based on a calendar of precise seasonal deadlines), and the reports of the two main world databases (Artprice and Artnet); since the works of many artists in the Intesa Sanpaolo\u2019s collection very rarely go up for auction due to the limited number of items left in the market, it is important to monitor the trend of similar artists or works; accordingly, the monitoring is not just limited to the works held and their artists, but also extends to the authors and artworks related to the same area, to take into account trend data. If the annual monitoring identifies a potential, positive or negative, value deviation of more than 15% for individual artworks/collections of artists in Intesa Sanpaolo\u2019s collections and comparable on the basis of objective criteria (such as period of production/year, size, technique, period of production, etc.), the appraisals are commissioned according to the usual internal procedures in order to align the carrying amount. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1015": { "value": "A.4 \u2013 INFORMATION ON FAIR VALUE FAIR VALUE, INDEPENDENT PRICE VERIFICATION AND PRUDENT VALUE OF FINANCIAL INSTRUMENTS The framework of financial measurement at fair value is based on three pillars: fair value measurement according to the IAS/IFRS, independent price verification (IPV) and prudent value measurement. The latter two are established by the Capital Requirement Regulation (CRR). The paragraphs below describe the methods applied by the Intesa Sanpaolo Group to implement and use those elements. General fair value principles The Intesa Sanpaolo Group governs and defines the fair value measurement of financial instruments through the Group Guidelines and Rules for Valuation of Financial Instruments at Fair Value, prepared by the Market and Financial Risk Management Head Office Department and applied by the Parent Company and all consolidated subsidiaries, including the Insurance Companies. The \u201cGuidelines for Valuation of Financial Instruments at Fair Value\u201d, once a favourable opinion has been given by the Group Financial Risk Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of the Risks and Sustainability Committee. The \u201cRules for Valuation of Financial Instruments at Fair Value\u201d are reviewed, revised and approved at least on an annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by the Management Bodies, and which also reviews material changes and updates proposed by the Market and Financial Risk Management Head Office Department. The \u201cRules for the Measurement of Unlisted Equity Investments\u201d, drawn up by the Group M&A and Equity Investments Head Office Department and approved by the Group Financial Risk Committee, govern the fair value measurement of unlisted equities and financial instruments with unlisted equities as their underlying. IFRS 13, which harmonises the measurement rules and the related disclosure, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e. not as part of the compulsory liquidation or a below-cost sale) as at the measurement date. Fair value is a market measurement criterion, not specifically referring to a single bank. Underlying the definition of fair value is the assumption that the Bank is carrying out normal operations, without any intention of liquidating its assets, significantly reducing the level of operations or carrying out transactions at unfavourable conditions. The bank measures the fair value of an asset or liability by adopting the assumptions that would be used by market participants when pricing an asset or liability, presuming that they act with a view to satisfying their own economic interest in the best way possible. Measurement at fair value presumes that the asset is sold or the liability transferred: a. in the principal active market for the asset or liability; b. in the absence of a major market, in the most advantageous active market for the asset or liability. The bank is not required to conduct an exhaustive study of all possible markets to identify the major market or, in the absence of the major market, the most advantageous market, but must take into account all the reasonably available information. If there is no evidence to the contrary, the market that the entity normally operates in to sell the asset or transfer the liability is assumed to be the major market or the most advantageous market, if there is no major market. The Intesa Sanpaolo Group considers the principal market of a financial asset or liability to be the market in which the Intesa Sanpaolo Group generally operates. In accordance with IFRS 13, the Group considers an active market to be a market where transactions in an asset or liability occur with sufficient frequency and volume to provide useful information for determining price on an ongoing basis. More specifically, a financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. In specific cases, governed by the Guidelines and Rules for Valuation of Financial Instruments at Fair Value, and despite being quoted on regulated markets, relevant research is carried out to verify the significance of the official market values. In the event of a significant reduction in the volume or level of operations compared to normal operations for the asset or liability (or for similar assets or liabilities) highlighted by a number of indicators (number of transactions, limited significance of market prices, significant increase in implicit premiums for liquidity risk, widening or increase of the bid-ask spread, reduction or total lack of market for new issuances, limited publicly-available information), analyses of the transactions or of the quoted prices must be carried out. A reduction in the volume or the level of activity alone may not indicate that the price of a transaction or the quoted price does not represent fair value or that the transaction in that market is not ordinary. If an entity determines that a transaction price or quoted price does not represent fair value (e.g., non-ordinary transactions) an adjustment to the transaction prices or listed prices is required if the entity uses those prices as the basis for fair value measurement and that adjustment may be significant with respect to the fair value as a whole. The fair value of financial instruments The presence of quoted prices in an active market represents the best evidence of fair value and these prices are therefore the quoted prices to be used on a priority basis for the measurement of financial assets and liabilities. If there is no active market, the fair value is determined using valuation techniques aimed, ultimately, at establishing the price the product would have had, at the measurement date, in an arm\u2019s length exchange motivated by normal business considerations. The choice of the above measurement methods is not optional, because they must be applied in hierarchical order: the availability of a price stated in an active market prevents the use of one of the other measurement approaches. Inputs of the valuation techniques The inputs are defined as the assumptions that market participants would have used to determine the price of the asset or the liability, including assumptions regarding risk, such as, for example, the risk relating to a particular valuation technique used to measure fair value or the risk relating to the inputs of the valuation technique. The inputs may be observable or unobservable. Observable inputs are those produced using market data, such as publicly available information on operations or actual events, which reflect the assumptions that market participants would use in determining the price of the asset or the liability. Unobservable inputs are those for which no market information is available and that are produced using the best available information regarding the assumptions that market participants would use to determine the price of the asset or the liability. Fair value hierarchy IFRS 13 establishes a fair value hierarchy in which inputs to fair value measurement techniques are divided into three levels. That hierarchy assigns top priority to (unadjusted) quoted prices on active markets for identical assets or liabilities (level 1 data) and the lowest priority to unobservable inputs (level 3 data). Specifically: \u2013 fair value level 1 applies when an instrument is measured directly on the basis of (unadjusted) quoted prices on active markets for identical assets or liabilities to which the entity has access on the measurement date; \u2013 fair value level 2 applies when a price has not been found on an active market and the instrument is measured according to valuation techniques, on the basis of observable market parameters, or of the use of parameters that are not observable but are supported and confirmed by market evidence, such as prices, spreads or other inputs; \u2013 fair value level 3 applies when fair value is measured using various inputs, not all of which are directly drawn from observable market parameters, and which thus entail estimates and assumptions by the valuator. If various inputs are used to measure the fair value of an asset or liability, classification in the hierarchy is determined on the basis of the lowest-level input used in measurement. When assigning a level in the fair value hierarchy, priority is given to the inputs of the valuation techniques rather than the valuation techniques themselves. The attachment \u201cFair Value Hierarchy Rules\u201d to the \u201cRules for Valuation of Financial Instruments at Fair Value\u201d defines, with regard to the respective financial instrument valuation models/inputs, the basic rules that market inputs must comply with in order to be classified as Level 2, and the significance thresholds which, when overrun, result in the assignment of Level 3. For level 1 financial instruments, the current bid price is used for financial assets and the current ask price for financial liabilities, struck on the principal active market at the end of the reference period. For financial instruments with a scarcely significant bid-ask spread or for financial assets and liabilities with offsetting market risks, mid-market prices are used (again referred to the last day of the reference period) instead of the bid or ask price. The following are considered as level 1 financial instruments: contributed bonds (i.e. bonds for which the Composite Bloomberg Bond Trader is available from the Information Provider Bloomberg, or, alternatively, a price on the EuroMTS circuit, or at least three prices available from the Information Provider Bloomberg), contributed equities (i.e., quoted on the official market of reference), contributed UCITS funds (covered by EU directives), spot exchange rates, and derivatives for which prices are available on an active market (for example, exchange traded futures and options). Conversely, all other financial instruments that do not belong to the above-described categories or that do not have the contribution level defined by the Guidelines and Rules for Valuation of Financial Instruments at Fair Value are not considered level 1 instruments. When no listing on an active market exists or the market is not functioning regularly, that is when the market does not have a sufficient and continuous number of trades, and bid-ask spreads and volatility that are not sufficiently contained, the fair value of the financial instruments is mainly determined through the use of valuation techniques whose objective is the establishment of the price at which, in an orderly transaction, the asset is sold or the liability transferred between market participants, as at the measurement date, under current market conditions. In the case of instruments classified as level 2, the valuation is based on prices or credit spreads presumed from the official listing of instruments which are similar in terms of risk factors, using a given calculation methodology (valuation model). The use of this approach requires the identification of transactions on active markets in relation to instruments that, in terms of risk factors, are comparable with the instrument to be measured. Level 2 calculation methodologies reproduce prices of financial instruments quoted on active markets (model calibration) and do not contain discretional parameters \u2013 parameters for which values may not be inferred from quotations of financial instruments present on active markets or fixed at levels capable of reproducing quotations on active markets \u2013 that significantly influence the final measurement. The following are measured using level 2 input models: \u2013 bonds without official quotations expressed by an active market and whose fair value is determined through the use of an appropriate credit spread which is estimated starting from contributed and liquid financial instruments with similar characteristics; \u2013 loans whose fair value is determined through the use of an appropriate credit spread which is estimated starting from market data of financial instruments with similar characteristics; \u2013 derivatives (including securitised derivatives) measured through specific models, fed by input parameters (such as yield, foreign exchange and volatility curves) observed on the market; \u2013 structured credit products (ABSs, HY CLOs, CDOs) for which significant prices are not available and whose fair value is measured using valuation techniques that consider parameters that can be gathered from the market; \u2013 non-contributed equity instruments measured based on direct transactions, that is significant transactions on the stock registered in a time frame considered to be sufficiently short with respect to measurement date and in constant market conditions, or using the \"relative\" valuation models based on multipliers; \u2013 non-UCITS hedge funds, provided the Level 3 instruments do not exceed a set threshold. In case of instruments classified as level 3, the calculation of the fair value is based on valuation models which consider input parameters not directly observable on the market, therefore implying estimates and assumptions on the part of the valuator. In particular, the valuation of the financial instrument uses a calculation methodology which is based on specific assumptions of: \u2013 the development of future cash flows, which may be affected by future events that may be attributed probabilities presumed from past experience or on the basis of the assumed behaviour; \u2013 the level of specific input parameters not quoted on active markets, for which information acquired from prices and spreads observed on the market is in any case preferred. Where this is not available, past data on the specific risk of the underlying asset or specialised reports are used (e.g. reports prepared by Rating agencies or primary market players). The following are measured using this method: \u2013 some transactions in derivatives, bonds, or complex structured credit instruments measured using level 3 inputs; \u2013 hedge funds in which the level 3 assets are above a set limit; \u2013 private equity funds, private debt funds, real estate funds and closed-end funds resulting from sales of non-performing loans valued at NAV, with possible discounts; \u2013 shareholdings and other equities measured using models based on discounted cash flows or using equity methods; \u2013 loans whose fair value is determined through the use of a credit spread that does not meet the criteria to be considered level 2; \u2013 loans with underlying equity risk, whose fair value is calculated based on the discounting of expected contractual flows. The transfer of fair value levels of financial assets and financial liabilities measured at fair value on a recurring basis occurs, as established by IFRS 13, as follows: the transfer between levels 2 and 3 occurs upon a change in the observability or significance of an input to the measurements; and the transfer between levels 1 and 2 or 3 occurs upon a change in the availability of prices in an active market. For OTC derivatives, the initial choice of the level of fair value hierarchy depends on the degree of observability and significance of the parameters used to determine the risk-free component. The calculation of the counterparty/issuer default risk component may result in a transfer to level 3 when the current exposure is positive for the bank and the counterparty is in non-performing loan status, or when the determination of default risk requires unobservable inputs and the bilateral credit value adjustment (bCVA) component is significant when compared to the overall fair value of the netting set, or when the counterparty's sensitivity to downgrading is significant when compared to the overall fair value of the netting set. For non-contributed equity instruments, the change of the level occurs: \u2212 when inputs observable on the market (e.g., prices defined based on comparable transactions on the same instrument between independent and informed counterparties) have become available during the period. In this case, the Intesa Sanpaolo Group reclassifies from level 3 to level 2; \u2212 when the directly or indirectly observable elements used as the basis for the valuation cease to exist, or when they are no longer up to date (e.g., comparable transactions that are no longer recent or multiples that are no longer applicable). In this case, the Intesa Sanpaolo Group uses valuation techniques that use unobservable inputs. Valuation of financial instruments The valuation of financial instruments entails the following phases: - identification of the sources for valuation: for each asset class, the Guidelines and Rules for Valuation of Financial Instruments at Fair Value establish the processes that are necessary to identify market parameters and the manner according to which such data must be extracted and used; - validation and processing of input data for periodic valuation: this stage consists of the accurate verification, at each accounting measurement date, of the market parameters used (verifying the integrity of data contained on the proprietary platform with respect to the source of contribution), reliability tests (consistency of each single figure with similar or comparable figures) and verification of concrete application means; - certification of the measurement methods: this phase is aimed at verifying the consistency and the adherence of the various measurement techniques used with current market practice, at highlighting any critical aspects in the measurement models used and at determining any adjustments necessary for measurement; - monitoring and revision of the measurement methods: the monitoring consists of the ongoing checking of the adherence to the market of the valuation model and enables the timely discovery of any gaps, in order to initiate the necessary checks and measures. Identification, certification and processing of the input data for the measurements The fair value calculation process and the need to distinguish between products which may be measured on the basis of effective market quotes rather than through the application of measurement techniques, highlight the need to establish univocal principles in the determination of market parameters. To this end, the Guidelines and Rules for Valuation of Financial Instruments at Fair Value establish the processes needed to identify the market parameters, the contribution sources considered appropriate and how the data must be received (cut-offs) and used for the measurement of financial instruments held for any purpose in the proprietary portfolios of the Parent Company and its subsidiaries. The same sources are used in measurements carried out for third parties under Service Level Agreements, entered into in advance. The adequacy of the input data for the measurements is guaranteed by the respect of reference requirements, which are based on comparability, availability and transparency of the data, or the possibility of extracting the figure from one or more info providing systems, measuring the contribution bid-ask, and lastly, for OTC products, verifying the comparability of the contribution sources. The use of all market parameters in Intesa Sanpaolo is subordinated to their certification by the Market and Financial Risk Management Head Office Department, in terms of specific controls (verifying the integrity of data contained on the proprietary platform with respect to the source of contribution), reliability tests (consistency of each single figure with similar or comparable figures) and verification of concrete application means. Certification of measurement methods The measurement methods used by the Intesa Sanpaolo Group are certified by the IMI CIB Risk Management Head Office Department, with the involvement of all relevant structures. The purpose of the certification is to verify the consistency of the methods with current market practice, to highlight any problems or limitations, and to determine any fair value adjustments, in accordance with the applicable regulations. The certification process considers all aspects of the measurement method (basic assumptions, mathematical derivation, any approximations, numerical algorithms used, inputs and outputs) but also all contextual elements that are relevant to the management, including the characteristics of the associated products (payoffs, early termination clauses, etc.), any ancillary agreements (e.g. netting or collateral agreements), the market where the products are traded, and how they are used by end users (e.g. precision vs. performance, calculation of risk measures, etc.). These aspects are subject to qualitative and quantitative analysis and are duly reported in the internal documentation. The possibility of independent validation issued by high standing financial service companies is also envisaged in highly- complex cases and/or in presence of market turbulence (market dislocation). At the end of the certification process, the measurement method is recorded in the Rules for Valuation of Financial Instruments at Fair Value. Monitoring and review of measurement methods As required by the applicable regulations, the measurement methods used are subject to ongoing monitoring of their performance with respect to the evolution of financial instruments, markets and methodological innovations developed by the scientific community, in order to ensure their continuous alignment to the market, promptly highlight any inadequacies and initiate the necessary checks and actions. The Rules for Valuation of Financial Instruments at Fair Value detail all elements considered for the periodic monitoring and revision of the measurement methods. The functions involved in the monitoring process are the same as those involved in the process of certification of the measurement methods mentioned above and in the IPV process governed by the Guidelines and Rules on Independent Price Verification. Valuation risk: fair value adjustments The Intesa Sanpaolo Group defines valuation risk as the risk of losses arising from the valuation uncertainty for the fair value exit price of financial instruments, due to any limitations of the measurement techniques used or particular market conditions. The main measure of the valuation risk associated with a financial instrument are the fair value adjustments, which are designed to take into account the valuation uncertainty or the difficulty in the disposal of specific financial positions, and may relate to a single financial instrument or to the net position for a particular risk factor. The adjustments may be calculated as add-ons to the valuation or included directly in the valuation. They are regularly reviewed, also considering market trends, or the introduction of new liquid instruments, different calculation methodologies and, in general, methodological advances which may also lead to significant changes in measurement methods chosen and their implementation. In particular, the Intesa Sanpaolo Group envisages fair value adjustments for the following categories of measurement uncertainty: - uncertainty of input data: any valuation uncertainty related to the input data for the valuation (whether mid, bid or ask) is measured with respect to temporary or structural conditions on the markets or in relation to the size of the values held (in the case of concentration), and where necessary a fair value adjustment is made, quantifying the consequent impact on the valuations; - illiquidity of the underlying positions or risk factors: similarly to the case above, the market bid-ask spread is measured and, where necessary, a fair value adjustment is made, quantifying the consequent impact on the valuations; - model risk: this is based on the identification and use of variants of the same model or alternative models, with which to carry out comparison analyses aimed at quantifying the variability of the valuations (in particular any directionality of the price when the model changes) and the behaviour of the model in various market scenarios (stress tests). The quantification of the fair value adjustment is based, where possible, on easily comprehensible and measurable financial variables (e.g. vega, delta, correlation shift); - counterparty and funding risk: counterparty and funding risks, collectively referred to as XVA, include Bilateral Credit Value Adjustment (bCVA) and Funding Value Adjustment (FVA). The bCVA takes account of the counterparty risk premium associated with the possibility that the counterparties may not honour their mutual commitments (for example in the event of bankruptcy). This component derives, in turn, from two components: the Credit Value Adjustment (CVA, negative) and the Debt Value Adjustment (DVA, positive), which consider, respectively, the scenarios where the Counterparty goes bankrupt before the Bank (and the Bank has a positive exposure towards the Counterparty), and vice versa the scenarios where the Bank goes bankrupt before the Counterparty (and the Bank has a negative exposure towards the Counterparty). The Funding Value Adjustment (FVA, negative), on the other hand, takes into consideration the funding risk premium, connected to the costs of funding the cash flows (coupons, dividends, collateral, etc.) generated by the Bank's overall OTC derivatives portfolio. The calculation of the XVAs depends on the overall exposure between the two counterparties, calculated using techniques for simulating the underlying risk factors of the transactions considered, taking into account any counterparty risk mitigation arrangements (in particular netting and collateralisation agreements), as well as any contractual clauses. The calculation of the XVAs also depends on the Loss Given Defaults (LGDs) based on the estimated value of the expected recovery in the event of counterparty default, and the probability of counterparty default (PD). LGDs and PDs are obtained from credit default swap market quotes or are based on internal estimates by sector/rating used for credit risk. In addition, the FVA calculation is based on a funding curve representative of the best market counterparties that the Bank could renegotiate transactions with, in accordance with the most IFRS 13 advantageous market principle, as there is currently no real main market for these transactions. The management process for fair value adjustments is formalised in the Guidelines and Rules for Valuation of Financial Instruments at Fair Value and the Rules for the Valuation of Unlisted Equity Investments with appropriate calculation methodologies on the basis of the different configurations of the points set out above, and is carried out in the most objective, consistent and systematic manner possible by the IMI CIB Risk Management Head Office Department and the Group M&A and Equity Investments Head Office Department. The introduction and release of the fair value adjustments depend on the factors described above. Such processes are a combination of quantitative elements that are rigidly specified and qualitative elements, valued based on the different configuration over time of the risk factors which generated the adjustments. Thus, the estimates subsequent to initial recognition are always guided by the mitigation or elimination of said risks. For new products, the decision to apply the adjustments is taken during the new product approval process, upon the proposal of the IMI CIB Risk Management Head Office Department. The application of the adjustments is subject to an authorisation procedure that, above a certain warning threshold defined for specific cases, involves both the area of the Chief Risk Officer and the Manager responsible for preparing the Company\u2019s financial reports. A.4.1 Fair value levels 2 and 3: valuation techniques and inputs used The sections below provide a summary of the information, by type of financial instrument (securities, derivatives, structured products, hedge funds, and loans), on the valuation models used. I. Valuation of non-contributed debt securities The fair value of non-contributed bonds is measured using the income approach, i.e. by calculating the present value of expected future cash flows using an appropriate risk premium represented by the credit spread, identified on the basis of contributed and liquid financial instruments with similar characteristics. The sources used for this measurement are the following: - contributed and liquid debt securities of the same issuer; - credit default swaps on the same reference entity; - contributed and liquid securities of an issuer with the same rating and belonging to the same sector. In any case, the different seniority of the security to be priced is considered with regard to the issuer\u2019s debt structure. In the case of Italian public issuers, a rating/maturity matrix is defined on the basis of the spread levels on government issues, to which the spreads among the various rating/maturity classes with respect to public issues (regions, provinces, municipalities, government entities) are applied. When applying the spread for the pricing of the non-contributed instrument, if the estimated \u2018fair\u2019 credit curve does not respect the same characteristics of the instrument, correction factors are considered. Also, for bonds that are not quoted on active markets, an extra spread, estimated based on the bid/ask spread recorded on the market, is added to the \u201cfair\u201d credit spread component, to take account of the higher premium demanded by the market compared to similar contributed securities. Finally, if the instrument includes an optional component, a further adjustment is made to the spread by adding a component designed to capture the hedging costs of the structure and any illiquidity of the underlying assets. This component is calculated based on the type of option, using the corresponding valuation models for derivatives mentioned below. Similarly, Intesa Sanpaolo\u2019s credit spread for the Banking Group\u2019s financial liabilities designated at fair value is determined and measured based on the bonds issued by the Parent Company, with regular, periodic coupons, maturity beyond one year and quoted on an active market in compliance with IAS/IFRS. The implicit credit rating is determined on the basis of market prices and subsequently adjusted through interpolation models which generate credit spread curves by type of coupon, maturity and subordination level. Similarly, the issued certificates are measured at fair value by breaking them down into the following two components: an issued bond, measured as described above, and an option component, measured using the corresponding derivative pricing models described below. Finally, measurement of the financial liabilities designated at fair value of the Insurance Companies (mainly liabilities associated with unit-linked investment contracts that do not present significant insurance risk) reflects the market value of the underlying assets, which are determined in application of the various methods described herein. II. Valuation of loans Loans are measured at fair value through contributions from info providers when available or by calculating the present value of expected future cash flows using an appropriate credit spread, identified starting from the following sources: - contributed loans on the market; - sector/rating-specific loan market curves; - contributed securities of the same issuer; - credit default swaps on the same reference entity. In any case, the different seniority of the instrument to be priced is considered with regard to the issuer\u2019s debt structure. When applying the spread for the pricing of the loan, if the estimated \u2018fair\u2019 credit curve does not respect the same characteristics of the instrument, correction factors are considered. Moreover, where, in determining the credit spread of the loans, reference is made to the curves created through bonds, a Bond \u2013 Loan basis must be applied, to capture the different structure of the market, if any, and the different type of loan. In order to consider the premium required by the market for illiquid and/or structured instruments, several adjustments are applied to the credit spread. Loans with an underlying unlisted equity risk (which include financial instruments that, pursuant to IAS 32, cannot be classed as equity, e.g. loans convertible into shares) are usually measured by discounting the cash flows provided for by the contract. Since these are debt securities, the cash flows are normally discounted using a rate consisting of the sum of: a risk free rate, a spread deriving from the CDS or measured on listed securities or similar disbursements, and any additional risk premium. In the case of non-performing loans, the fair value is determined based on the recoverable amount of the position. This estimate is made taking into account the contractual elements that characterise the loan and may involve, for example, the valuation of the cash flows from the sale of the real estate pledged as collateral or the valuation of any capital instruments that may be acquired following the introduction of an equity conversion clause for the position. III. Valuation of OTC derivatives Derivatives, if not traded on regulated markets, are Over The Counter (OTC) instruments, which are bilaterally exchanged with market counterparties and are measured through specific measurement methods and input parameters (such as, for example, interest rate, foreign exchange and volatility curves) observed on the market and subject to the certification and monitoring illustrated above. The fair value of an OTC derivative is calculated considering the risk premium related to the various underlying risk factors. Specifically, there are two relevant cases, according to whether or not the instrument is subject to collateralisation agreements (CSAs) aimed at mitigating the counterparty and funding risk: a. for CSA transactions with characteristics that reduce counterparty and funding risk to a negligible level, the fair value is calculated according to the non-arbitrage principle, by including the market risk premium related to the risk factors underlying the contract (e.g. interest rates, volatility, etc.), and, in the most significant cases, using the rate of remuneration for the collateral as the discount rate for the future cash flows; b. for transactions without CSAs, or with CSAs with characteristics that do not reduce the counterparty and funding risk to a negligible level (e.g., One Way CSAs, or with non-negligible limits or minimum transfer amounts), the fair value of the instrument may be stated, under appropriate circumstances, as the sum of the reference (or base) value, equal to the price of the corresponding collateralised instrument, and several additional valuation components related to the counterparty and funding risk premium, referred to jointly as XVA (see \"Valuation risk: fair value adjustments\u201d). In view of the number and complexity of the OTC derivatives, a systematic reference framework has been developed which represents the common elements (calculation algorithms, processing models, market data used, basic assumptions of the model) that are used for their measurement. The table below illustrates the main methods used to measure OTC derivatives based on the category of underlying asset. Underlying class Valuation models Market data and input parameters Interest rate Net Present Value, Black-Scholes, SABR, Libor Market Model, Hull-White, Bivariate log-normal, Rendistato, Hagan exact formula for CMS Interest rate curves (deposits, FRA, Futures, OIS, swap, basis swap, CMS, Rendistato basket), cap/floor/swaption option volatility, correlation between interest rates Foreign exchange rate Net present Value FX, Garman-Kohlhagen, Lognormal with Uncertain Volatility (LMUV), Stochastic Local Volatility (SLV), Local Volatility (LV) Interest rate curves, spot and forward FX curves, FX volatility, \"quanto\" volatility and correlations Equity Accrual, Net present Value Equity, Generalised Black-Scholes, Heston, Local Volatility, Jump Diffusion Interest rate curves, underlying asset spot rate, expected dividends, underlying asset volatility and correlation between underlying assets, \"quanto\" volatility and correlations Inflation Inflation NPV, Inflation SABR, Inflation Jarrow- Yildirim Nominal and inflation interest rate curves, interest and inflation rate volatility, seasonality ratios of consumer price index, correlation between inflation rates Commodity Net present Value Commodity, Generalised Black- Scholes, Independent Forward, Local Volatility, 2- Factors Jump Diffusion Interest rate curves, spot rate, forwards and futures of underlying assets, underlying asset volatility and correlation between underlying assets, \"quanto\" volatility and correlations Loans Net present Value, CDS Option (or log-normal model), Contingent CDS Probability of default, Recovery rate, credit index volatility. As envisaged by IFRS 13, in determining fair value the Intesa Sanpaolo Group also takes into account the effect of non- performance risk. This risk includes changes in the counterparty credit rating and changes in the issuer\u2019s own credit risk. IV. Valuation model for structured credit products With regard to asset-backed securities (ABSs), if significant prices are not available, valuation techniques are used that take into account parameters that can be gathered from an active market (level 2 inputs) or, where parameters cannot be observed, estimated parameters (level 2 or 3 inputs, where immaterial or material). In this case, the cash flows are obtained from infoproviders or specialised platforms, where available, or are taken from the business plan of the transaction, supplemented with periodic reporting, such as the case of Non-Performing Loans (NPLs) and Unlikely to Pay (UTP); the spreads are gathered from prices available on the market/market info provider, further strengthened by a qualitative analysis relative to the performance of the underlying assets presumed from periodic investor reports and aimed at highlighting structural aspects that are not (or not fully) encompassed by the analyses described above, relating to the actual future ability to pay the expected cash flows and analyses of relative value with respect to other similar structures. In the case of securitised high-yield loans to European corporate borrowers (CLO HY loans), valuation techniques call for calculation of the net present value of the expected cash flows, determined through specialised platforms, discounted using market spreads. When modelling expected future flows, account is taken of all contractual aspects of the HY CLO loans that may influence the waterfall, i.e. the distribution of cash flows from the collateral on the notes. After this valuation, credit analyses on underlying assets are fine-tuned to incorporate further valuation elements not included in the quantitative models. In particular, a Qualitative Credit Review is provided for and entails an accurate analysis of credit aspects referred to the specific structure of the HY CLO and to the collateral present. This is to identify any present or future weaknesses which emerge from the characteristics of the underlying assets, which could have been missed by rating agencies and as such not fully considered in the valuations described in the previous point. V. Valuation of non-contributed equities Level 2 equities include: - equities measured based on direct transactions, that is significant transactions on the stock registered in a time frame considered to be sufficiently short with respect to measurement date and in constant market conditions; - equities measured using relative methods, based on multipliers: implied multiples in transactions in comparable listed or unlisted companies, within a time frame deemed sufficiently short with respect to the time of measurement and under constant market conditions (M&A multiples) or implicit multiples in the stock market prices of a sample of comparable companies (stock market multiples). Level 3 equities for which the \u201crelative\u201d models described above are not applicable in significant terms, and, therefore, \u201cabsolute\u201d valuation models are used, include: - equities for which analytical models based on flows are used, which determine the value through estimates of the cash or income flows that the company is expected to generate over time, discounted using an appropriate rate based on the level of risk of the instrument; - equities measured based on net worth criteria such as NAV or Adjusted Net Asset Value (ANAV), which estimates the fair value of the various components of the assets of the investee. Any values deemed representative of the fair value of the equity instrument deriving from contractual clauses (for example, options) are classified in level 2 or 3 of the fair value hierarchy, according to the observability of the inputs used in the valuation. Specifically, if the negotiation of the clause resulted in strike prices or pre-defined algorithms and multiples, the instrument is classified in level 2. The cost criterion as estimate of fair value is used to a lesser extent, where none of the previous methods are applicable due to lack of sufficient information, and in the cases where there is a wide range of possible fair value measurements and it is not possible to identify the most appropriate value among these. This case also includes Equity Instruments which, in accordance with IAS 32, have the characteristics to be considered as equities. VI. The valuation of hedge funds The fair value of a hedge fund corresponds to the Net Asset Value (NAV) provided by the fund administrator, to which an adjustment can be applied, deriving from a measurement process aimed at capturing the main risk factors that the management of the funds is subject to, which consist of the following two types: - counterparty (broker) risk, i.e. the risk that the assets of the fund are exposed to when a single service provider is entrusted with prime brokerage or custodian activities, subject to the risk of default; - illiquidity risk, i.e. the risk that the assets of the fund are illiquid due to the limited prices available or due to a lack of information on the assessment policies used by the fund. These risks are assessed on the basis of the information contained in the documentation received periodically from the fund managers or administrators. The fair value hierarchy level is Level 2, provided the Level 3 instruments do not exceed a set threshold. VII. The valuation of private debt funds For Private Debt AIFs (Alternative Investment Funds), the investment authorisation process involves an initial due diligence to verify the consistency between each fund's asset valuation policy and the Guidelines and Rules for Valuation of Financial Instruments at Fair Value. The fund is subsequently valued at NAV. The fair value hierarchy level is Level 3. VIII. Valuation of closed-end private equity funds, real estate funds and closed-end funds resulting from sales of non- performing loans Closed-end private equity funds are usually valued using the latest Net Asset Value approved by the asset management company (published half yearly or quarterly), adjusted solely to take into account events that have not yet occurred at the reference date of the NAV, such as: - a material transaction on a portfolio company; - the bankruptcy or liquidation of a portfolio company; - the alignment of any listed assets to current prices; - draw downs and distributions by the fund. Closed-end real estate funds are valued using the last available Net Asset Value, adjusted for any subsequent call ups or distributions and, where considered necessary, applying a discount calculated using an internal model. Specifically, this model enables the calculation of a discount on the Net Asset Value based on five different factors: (i) the size of the asset management company that manages the fund; (ii) the number of subscribers; (iii) the fund\u2019s historical return; (iv) the fund\u2019s return for the period; and (v) the level of debt. These factors are calibrated differently based on the business model and the fund\u2019s resulting risk profile, distinguishing between core, value added and opportunistic funds. With regard to closed-end funds resulting from sales of non-performing loans, where an information set is available that makes it possible to conduct an analysis of the business plan of the positions held by the fund, individually or by uniform cluster, to determine the fair value of the units of the fund, in general the Bank uses the support of an independent expert, who, among other duties, carries out a comparison of performance of the business plans of the underlying exposures, and states in its report, that the fair value determined by the expert complies with the indications from the main regulators 86 . Where it is not possible to apply the approach mentioned above, for each fund a comparison is made between the expected return of the fund and a benchmark rate, defined using a model that factors in various elements, such as: i) the fund\u2019s valuation policies, verifying whether they are compliant with criteria consistent with the definition of fair value pursuant to IFRS 13, ii) verification that there is an updated business plan and of the performance of the fund compared to the available business plan, iii) the characteristics of the fund\u2019s assets, iv) the level of the cost of funding on the market for issuing liquid instruments, v) the completeness and extensiveness of the information provided by the fund, and vi) the fund management methods. Where the expected return of the fund is higher than the defined benchmark rate, the NAV communicated by the asset management company is used as the fair value measure. Where, instead, the benchmark rate is higher than the expected return of the fund, the fair value is determined based on the NAV minus a discount, which takes account of the spread between the benchmark rate and the expected return of the fund and the average residual life of the fund (Weighted Average Life or WAL). Valuation of financial assets and liabilities not measured at fair value on a recurring basis Finally, for asset and liability financial instruments measured at amortised cost, whose fair value is determined solely for the purposes of disclosure in the notes to the financial statements, the following is noted: - the fair value of the bonds is calculated using the methods described above; - the fair value measurement of the other medium- and long-term asset and liability financial instruments is performed by discounting future cash flows using the discount rate adjustment approach, which requires credit risk factors to be taken into account in the discount rate for future cash flows; - for short-term assets and liabilities, the book value is assumed to be a reasonable approximation of fair value. For more information see paragraph A.4.5.4. As required by IFRS 13, the table below highlights, for financial assets and liabilities measured at level 3 fair value, quantitative information on the significant, unobservable inputs used in the fair value measurement. (thousands of euro) Financial assets/ liabilities Valuation technique Main non-observable input Minimum value of range of changes Maximum value of range of changes Unit Favourable changes in FV Unfavourable changes in FV Securities and loans Discounting Cash Flows Credit Spread -3 6 % 7,409 -11,764 Structured securities and loans JD model JD parameters -37 13 % 134 -192 Structured securities and loans Two-factor model Correlation -26 32 % 4,871 -3,413 ABSs Discounting Cash Flows Credit Spread -1 3 % 611 -832 CLOs Cash Discounting Cash Flows Credit Spread -6 6 % 503 -523 OTC derivatives subject to FV adjustment for CVA/DVA CVA Loss Given Default Rate (LGD) 0 100 % 3,388 -2,315 OTC derivatives subject to FV adjustment for CVA/DVA CVA Probability of default (PD) based on counterparty's internal rating CCC A Internal rating 44 -78 OTC Derivatives - Equity basket option Black - Scholes model Equity basket correlation -11.16 87.39 % 517 -759 OTC Derivatives - Equity Option Black - Scholes model Historical volatility 8.21 76.17 % 967 -1,524 OTC Derivatives - Equity Option Marshall Olkin Model Historical correlation 2.44 47.95 % 66 -43 OTC Derivatives - Spread option on swap rates Bivariate log-normal model Correlation between swap rates -71.70 71.04 % 0 -1 A.4.2 Valuation processes and sensitivity For a description of the valuation processes used by the Group for instruments measured at level 3 in a recurring and non- recurring manner, see paragraphs A.4.1 and A.4.5 respectively. As required by IFRS 13, for the financial assets and liabilities measured at level 3 fair value, the following table lists the effects of a change in one or more significant non-observable parameters used in the valuation techniques adopted to determine the fair value. Note that only the total material effects at the end of the year are shown in the table. 86 See Bank of Italy/Consob/Ivass Document no. 8 \u201cTreatment in the financial statements of sales without recourse of unlikely-to-pay loans in exchange for units of investment funds\u201d, published in April 2020. Financial assets/liabilities Non-observable parameters Sensitivity (thousands of euro) Change in non- observable parameter FVTPL and FVTOCI securities and loans Credit spread -576 1 bp FVTPL and FVTOCI securities and loans JD parameters -10 1% FVTPL and FVTOCI securities and loans Correlation 157 1% OTC Derivatives - Equity Correlation between underlying equity baskets 218 10% OTC Derivatives - Equity Historical volatility -1,076 10% OTC Derivatives - Equity CPPI Historical correlation -24 10% A.4.3. Fair value hierarchy (transfers between the different levels) A description of the policy for determining when transfers occur between the different levels of fair value hierarchy (see IFRS 13, par. 95) is provided above (see \u201cFair value hierarchy\"). A.4.4. Other information In calculating the bCVA, the Intesa Sanpaolo Group considers the net positions in derivatives of each counterparty (see paragraph A.4.1 above for further details on the measurement of derivatives). For other cases, the Group does not make use of the option provided in paragraph 48 of IFRS 13, which permits an entity \u201cto measure the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position (i.e. an asset) for a particular risk exposure or paid to transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction between market participants at the measurement date under current market conditions\u201d. General Independent Price Verification principles The Intesa Sanpaolo Group governs and defines the independent price verification process through the Group Guidelines and Rules on Independent Price Verification, documents that are coordinated by the Market and Financial Risk Management Head Office Department and applied by the Parent Company and all consolidated subsidiaries of the Banking Group. The \u201cGuidelines on Independent Price Verification\u201d, once a favourable opinion has been given by the Group Financial Risk Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of the Risks and Sustainability Committee. The level I and II \u201cRules on Independent Price Verification\u201d are revised and approved at least on an annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by the Management Bodies, and which also reviews material changes and updates proposed by the Market and Financial Risk Management Head Office Department. According to the provisions of Regulation (EU) 575/2013 (Capital Requirement Regulation \u2013 CRR), Article 4, par. 1.70 and Article 105, par. 8, the Intesa Sanpaolo Group governs the Independent Price Verification (IPV) process, which consists of the regular verification of the accuracy and independence of market prices or the data input in pricing models, carried out by an organisational unit independent from the business functions, at a frequency commensurate with the trading carried out and the nature of the market. The Intesa Sanpaolo Group has set up an IPV process with 3 levels of control in line with the provisions of Bank of Italy Circular 285/2013 (Supervisory regulations for banks), incorporated into the Integrated Internal Control System, which requires the risk management processes to be incorporated in the processes and methods for valuing the company activities, also for accounting purposes. Within the IPV, the level I, II and III control functions have the following main responsibilities: - the level I control function participates in the definition of the related methodological framework and carries out the level I implementations and controls, reporting the results to the business function and the level II control functions; - the level II control function defines the methodological and control framework, ensures alignment with current regulations and consistency between the IPV controls, accounting valuations and additional valuation adjustments (AVA) (carried out, respectively, on the basis of the Guidelines and Rules for Valuation of Financial Instruments at Fair Value and the Guidelines and Rules for Prudent Valuation of Financial Instruments at Fair Value) and supervises the level I controls and performs the level II controls; - the level III control function carries out internal audit controls to identify breaches of procedures and regulations, as well as to periodically assess the completeness, adequacy, functionality (in terms of efficiency and effectiveness) and reliability of the organisational structure of the other components of the internal control system and the IT system at Group level, at scheduled deadlines in relation to the nature and intensity of the risks. The level I and II IPV controls are qualitative and quantitative controls and are distinguished according to the type of instruments subject to control. They are applied consistently to both the input data underlying the valuations and the valuations themselves, and ensure consistency between the management valuations and the accounting valuations carried out in the various systems. They are characterised by completeness and suitability of application, absence of overlaps, sequentiality and complementarity in execution. The IPV control instruments use, as far as possible, specific applications or IT procedures, which enable extensive data analysis on a daily basis. Specifically: - the level I controls are aimed at ensuring the validation of the market data entered into the systems and are based on an in-depth analysis of the data obtained from external providers. If the level I controls detect that certain thresholds have been exceeded for the data contained in the systems, or the data is not considered correct by the level I control functions, a comparison process (challenge) is activated with the involvement of the business function and the level II control functions, in line with the degree of complexity of the report; - the level II controls are characterized by sequentiality and complementarity in execution with the level I controls and are designed to ensure alignment between management and accounting valuations, based on an in-depth analysis of consensus or counterparty data and, where these are not available, through the application of pricing models associated with the respective instruments. The results of the IPV process are analysed, assessed and coordinated by the Financial Measurements Working Group, a technical body set up specifically for this purpose, with the aim of facilitating integration and comparison between the business functions and the control functions. General prudent value principles The framework of financial measurements is completed with the prudent valuation of financial instruments measured at fair value, which involves the calculation of additional valuation adjustments for prudential purposes, without impacts on the fair value calculated for accounting purposes in accordance with the IFRS. The Intesa Sanpaolo Group governs and defines the prudent value measurement of financial instruments through the Group Guidelines and Rules for Prudent Valuation of Financial Instruments at Fair Value, prepared by the Market and Financial Risk Management Head Office Department and applied by the Parent Company and all the consolidated subsidiaries of the Banking Group. The \u201cGuidelines on Prudent Valuation of Financial Instruments\u201d, once a favourable opinion has been given by the Group Financial Risk Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of the Risks and Sustainability Committee. The \u201cRules for Prudent Valuation of Financial Instruments\u201d are revised and approved at least on an annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by the Management Bodies, and which also reviews material changes and updates proposed by the Market and Financial Risk Management Head Office Department. In accordance with the provisions of Regulation (EU) 575/2013 (Capital Requirements Regulation \u2013 CRR), prudent valuation entails the calculation of specific additional valuation adjustments (AVAs) for the financial instruments measured at fair value, aimed at capturing different sources of valuation uncertainty and ensuring the achievement of a suitable level of certainty in the measurement of the positions. The total value of the AVAs is deducted from the Common Equity Tier 1 capital, without impacts on accounting fair values. The Intesa Sanpaolo Group, in line with the criteria indicated in Delegated Regulation (EU) 2016/101, is subject to the application of the core approach for the determination of AVAs both at individual and at consolidated level for all the positions measured at fair value. In particular the following AVAs are considered: - market price uncertainty: this reflects the uncertainty of the market prices, calculated at valuation exposure level; - close-out costs: it reflects the uncertainty of the exit price calculated at valuation exposure level; - model risks: it considers the valuation model risk which arises due to the potential existence of a range of different models or model calibrations, which are used by market participants, and the lack of a firm exit price for the specific product being valued; - unearned credit spreads: it reflects the valuation uncertainty in the adjustment necessary according to the applicable accounting framework to include the current value of expected losses due to counterparty default on derivative positions; - investment and funding costs: it represents the valuation uncertainty in the funding costs used when assessing the exit price according to the applicable accounting framework; - concentrated positions: it reflects the uncertainty relating to the exit price of the positions defined as concentrated; - future administrative costs: it considers administrative costs and future hedging costs over the expected life of the valuation exposures for which a direct exit price is not applied for the close-out costs AVAs for concentrated positions; - early termination: it considers the potential losses arising from non-contractual early terminations of customer trades; - operational risks: it considers the potential losses which may be incurred consequently to the operational risks connected to the valuation processes. The prudent value corresponds to the exit price from the position with a level of certainty equal to 90%. Where possible, this value is determined on the basis of a distribution of exit prices observed on the market. In all the other cases, an expert-based approach is used, referring to the qualitative and quantitative information available. The AVA value associated to the single position and to the single source of uncertainty in valuation thus corresponds to the difference between the prudent value and the fair value. The total AVA is obtained by aggregating the single AVAs, taking into account the corresponding weighting ratios. The \u201cRules for Prudent Valuation of Financial Instruments\u201d outline, for each AVA, the definition and interpretation, the scope of application, the input data and the detailed calculation method for each class of financial instrument. FAIR VALUE OF REAL ESTATE AND VALUABLE ART ASSETS Fair value of real estate assets As extensively illustrated in the first part regarding the accounting policies, the Group has adopted the revaluation model as the basis of measurement for the owner-occupied properties accounted for according to IAS 16 and fair value for the investment properties accounted for according to IAS 40. Measurement of real estate assets The revaluation model applied to owner-occupied properties envisages that property and equipment, whose fair value can be reliably determined, is recorded at a revalued amount, equal to its fair value at the date of the revaluation, net of depreciation and any accumulated impairment losses. For the properties held for investment, the Intesa Sanpaolo Group has chosen the fair value method, according to which, after initial recognition, all investment properties are measured at fair value. Valuation approach IFRS 13 defines fair value as \u201cthe price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date\u201d. The valuation approach has been defined on the basis of the business relevance and plan for the use of the properties, which consists of three main groups: \u2013 \u201ctrophy assets\u201d, i.e. particularly prestigious properties used by management functions located in the main cities where the Bank is based or properties of particular historical and artistic interest because they are listed by the Ministry for Cultural Heritage and Activities; \u2013 \u201cowner-occupied properties\u201d; \u2013 \u201cinvestment properties\u201d. The properties are valued individually asset-by-asset without considering any discount, or premium, that may be agreed during commercial negotiations if all or part of the portfolio is sold in bulk or in lots. The Intesa Sanpaolo Group has chosen to assign the valuation activity to professionally qualified external companies with an international structure, able to provide property valuations based on the RICS Valuation standards 87 which guarantee: \u2013 determination of the value consistent with the fair value configuration indicated in the IAS/IFRS; \u2013 compliance with the professional, ethical and independence requirements for experts, in line with the provisions of international and European standards. To determine the value of the assets, the following valuation methods are used based on the characteristics of the asset and the conditions of the market of reference; the valuer determines the most suitable method for each individual property. \u2013 The Discounted Cash Flow Method: the discounted cash flow method is based on the discounting (for a variable period based on the rental/occupational situation of the property and its subsequent optimisation) of the future net proceeds from the rental or sale of the property. At the end of this period, the value of the property is assumed to be the sale price obtained by capitalising the income of the last year at a market rate for investments similar to the object of the estimate or through a split sale. This method is used for the valuation of all the owner-occupied properties or real estate leased to third parties, located in Italy. \u2013 Comparative or Market Method: the comparative or market method is based on the comparison between the assets examined and similar assets recently sold/purchased or offered on the same market or in competitive environments. This criterion is based on a comparison with properties that have recently been sold or offered on the open market and, if possible, have the same characteristics. In the absence of observations directly related to the property examined, cases are used that are as similar as possible to the property examined, making the necessary adjustments. This method, which also represents the basis for other valuation methods, can be adopted in particular for non-owner-occupied assets and/or, in any case, for unrestricted and available assets in Italy and abroad. \u2013 Direct capitalisation income approach: the income approach is based on the current value of the potential market income of a property, obtained by capitalising the income at a market rate. This approach is applied mainly to owner-occupied properties abroad, where a prolonged stay within the building is envisaged. \u2013 Investment Value (Worth): the Investment Value (Worth) is defined by the International Valuation Standard as: \u201cthe value of an asset to a particular owner or prospective owner for individual investment or operational objectives\u201d. This definition is consistent with the provisions of the latest edition of the \u201cRICS Valuation - Global Standards 2022\u201d of the Royal Institution of Chartered Surveyors of the United Kingdom, where the Investment Value is defined as \u201cthe value of an asset to the owner or a prospective owner for individual investment or operational objectives\u201d. The Investment Value is applicable to properties built by the entity or properties with a strong business relevance subject to significant investments for technological, construction and functional adaptation. The Investment Value of these properties is determined on the basis of a 12+6 year plan for business use without break options, whose annual rent is determined by applying an appropriate gross rate of return to the amount of direct and indirect costs capitalised by the Owner, including the costs of purchasing the land. For the purposes of valuation, if necessary and where relevant, the assumptions also include sustainability considerations, connected with climate change and energy efficiency factors, as well as aspects linked to any specific legislation (for example, configuration, accessibility, etc.). To date, the Group has not made substantial adjustments to fair value due to climate change, aside from those already valued by the indicators observable on the reference market. 87 Standards set out in the Royal Institution of Chartered Surveyors of the United Kingdom document \u201cRICS Valuation \u2013 Global Standard\u201d (also known as the \u201cRed Book\u201d): the updated version was issued in November 2021 and took effect on 31 January 2022. Frequency of valuation Revaluations must be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the reporting date. The frequency of revaluations depends upon the changes in fair values of the property and equipment being revalued. When the fair value of a revalued asset differs materially from its carrying amount, a further revaluation is required. Specifically, based on the market trends, different valuation frequencies have been identified that, according to the characteristics of the assets and their location, are considered capable of capturing the significant changes in the value of the assets. The following distinction is made for owner-occupied properties: \u2013 for trophy assets, the revaluation is carried out by verifying the value through a scenario analysis (market trend analysis) every year and with a new appraisal every two years; \u2013 for the other owner-occupied properties, the revaluation is carried out through scenario analysis (market trend analysis) every year and through a new appraisal every three years. If the scenario analysis identifies significant changes (+/- 10%), specific and updated appraisals must be carried out to adjust the fair value of the asset to the valuations of the real estate market. For investment properties, the value is determined on the basis of new appraisals each year. Based on the rules referred to, in 2022, investment properties as well as owner-occupied properties which, based on the scenario analysis, recorded changes on the defined threshold, were subject to periodic valuation. Scenario analysis As part of the annual update of the fair value of the owner-occupied properties, in the years when a revaluation of the property is not envisaged, a scenario analysis (market trend analysis) is carried out using the best information sources available for the various countries in which the properties are located, in order to identify deviations, using databases, in the market values between the analysis period and the previous period. In particular, for real estate located in Italy, the changes are defined using at least 3 different sources. The main source is that provided by the Italian Revenue Agency, based on the specific OMI (Real Estate Market Monitor) zones. The second publication source is Nomisma for which, for the related zoning, the same queries are conducted as those for the OMI (main database). Lastly, the third source is based on the analyses of the changes during the year surveyed in terms of the offers present on the real estate market. Accordingly, the experts identify the annual deviations in rents and/or prices by related asset class for each property. Real estate located abroad is grouped, for each country, into different clusters based on location and asset class. Specific market analyses are conducted based on local and national knowledge of the particular target real estate market. The market study also takes account of the following macroeconomic drivers: \u2013 analysis of economic data (unemployment rate, GDP per capita, inflation and consumer price index); these macroeconomic factors constitute the first economic analysis, supporting the real estate market forecasts; \u2013 movement in average yield; \u2013 movement in market rents; \u2013 range of movement in unit values. The above-mentioned market survey, together with a qualitative weighting of the macroeconomic key drivers is used to determine a range of percentage deviation from the last assessment carried out, which is compared with the target threshold set, identifying a synthetic percentage factor for each individual property, included in a single worksheet. This activity is carried out close to the end of the year in order to produce a range of deviations within a reference threshold and to enable the timely planning of the updating of the specific appraisals for the properties whose deviation exceeds the threshold. The permitted variation threshold is +/-10%. If the deviations identified exceed this threshold, a new valuation will be carried out before the end of the year. Sensitivity of valuations Just as for financial instruments, level 3 non-financial assets and liabilities measured at fair value for which, due to the valuation model used to determine the fair value, execution is possible, and whose results are significant, are subject to sensitivity analysis. The analysis essentially concerned the properties of the Parent Company Intesa Sanpaolo, which represent the Core perimeter of the Group's real estate assets. It is noted that the sensitivity analysis was conducted by identifying the most important variables in the valuation model used to value the various classes of real estate, represented by the discounted cash flow method. Specifically, taking account of the trend recorded in the various asset classes of the real estate market and the parameters featuring greater volatility/variability, for owner-occupied properties, reference was made to the net capitalisation rate (yield) and the average medium/long-term inflation rate, while for investment properties, to the exit value. In compliance with the estimate assumptions applied to real estate assets, for the purpose of the analysis, variation ranges were used that were consistent with the potential trends in the market at the reporting date. For owner-occupied properties, a change of +/- 25 bps for the net capitalisation rate and a concurrent change of -/+15 bps for the inflation rate were assumed, in relation to which average deviations of fair value of +4.4% and -4.3% were recorded. For investment properties, a change of +/- 5% in the exit value was assumed, in relation to which there were average deviations of fair value of +4.8% and -5.2%. Fair value of valuable art assets The Bank\u2019s valuable art assets are also valued using the revaluation model, which envisages that property and equipment, whose fair value can be reliably determined, is recorded at a revalued amount, equal to its fair value at the date of the revaluation. Works of art included in the asset class \u201cvaluable art assets\u201d are works of particular importance, recognised for their historic and artistic value by experts and in line with the ministerial guidelines, and particularly those set out in Ministerial Decree 537 of 6 December 2017 on the exportation of works of art, such as: the state of preservation, the historical importance of the artist, the importance of the work in terms of art criticism/history, illustrious origin, certain quality and attribution and the declaration of interest by the Italian government. Valuation approach The valuation is carried out by determining the value through external appraisals, entrusted to qualified independent experts. These values are obtained from online databases such as Artnet and Artprice, which list over 100 million works of art and monitor the results of leading Italian and international auction houses. These are objective parameters that are compared with the market as a whole, in an analysis that also involves monitoring galleries and art fairs. In particular, the factors considered for the fair value measurement include objective factors relating to the historical-critical- artistic value of the author, state of preservation, execution technique, size and quality of the artwork, importance of the artwork in the production by the artist, publication of the artwork in specialist catalogues, period of execution of the artwork, international exposure of the artworks by the artist, distinguished provenance, certainty of attribution, guarantee of authenticity of an artwork, as well as other factors (which may change over time, depending on the evolution and tastes of the market), such as the reputation of the museum hosting the artwork by the artist, the prestige of fairs/exhibitions/galleries/auction houses that handle the artwork, the reputation of its critics and collectors, and the quality of the communications concerning the artist\u2019s work. Once these factors have been identified, the fair value is determined comparing them firstly with artworks similar to those examined (in terms of period of production/year, technique, size, type of subject and state of preservation), by the same artist and from the same period, if available (this is more feasible for modern and contemporary works) and, secondly, with works by artists or schools and areas that are close in style, philosophy and importance in the same historical period. Where several similar artworks are available, average values are used to take account of price volatility. In addition to considering the trends in auction trading, starting from the most recent trading and also including unsold items in the analysis (which are a possible indicator of the loss of market value for the artwork/artist), the valuation also considers the current market interest in an artwork or an artist, measured by the number and quality of temporary exhibitions held in internationally important museum spaces and accompanied by specific publications. The valuations also take into account any declarations of historical-artistic interest formally expressed by the Italian Ministry of Cultural Heritage and Activities (commonly referred to as \"notifications\"), which tie part of the artworks in the collection to Italy's heritage and restrict their circulation to the country\u2019s territory, reducing the price obtainable on the international market. The pricing is also influenced by the importance of the buyers/sellers (e.g. prices paid by famous collectors or known investors may be more significant). The valuation approach is based on the monitoring of the objective market values of the artworks included in the category examined, which follows three methodological approaches: \u2013 prudent basis, analysing the average values of a variety of different information sources, based on robust, updated and statistically representative databases: in a market of \u201cunique\u201d artworks, often without transactions for decades, this approach ensures the periodic identification of any outlier values and avoids following speculative trends; \u2013 comparison, monitoring the transactions that have taken place at a global level in a variety of distribution channels, in order to avoid considering only certain forms of transaction and the related financial values: in a global market with global demand, this approach enables verification of the presence of any geographical arbitrage or specific appreciation/depreciation phenomena with potential impacts; \u2013 recurrence, since it updates and monitors price trends over the shortest period of time that the specific features of the market allow, i.e. the half year: in a market in which there are no public trades monitored daily, the shortness of the measurement period ensures maximum attention and timeliness of any changes. This approach is applied to all the \"valuable art assets\". Frequency of valuation For valuable art assets, the revaluation is carried out by means of an expert appraisal every three years. However, a scenario analysis is carried out annually to identify any appreciable changes in value in order to bring forward the valuation. Based on the rules referred to, in 2022, artworks which, based on the scenario analysis, recorded changes on the defined threshold, were subject to valuation. Scenario analysis In order to identify and determine the changes in the market of the artworks being valued, market trends are monitored to detect signs of significant change that require appraisals to be made in advance with respect to the frequency established. This monitoring is carried out on a two-fold basis: \u2013 Monitoring of the market prices of the top artworks in terms of value held in Intesa Sanpaolo\u2019s collections, which represent 75% of the total value of the artworks included in the \u201cvaluable art assets\u201d class, by verifying both the results of the main international auctions (which are based on a calendar of precise seasonal deadlines) and the reports of the two main world databases (Artprice and Artnet), whose analytics provide useful tools for monitoring prices; \u2013 Monitoring the performance of the art market in general, to identify trends and changes with respect to Intesa Sanpaolo\u2019s \u201cvaluable art assets\u201d, verifying both the results of the main international auctions (which are based on a calendar of precise seasonal deadlines), and the reports of the two main world databases (Artprice and Artnet); since the works of many artists in the Intesa Sanpaolo\u2019s collection very rarely go up for auction due to the limited number of items left in the market, it is important to monitor the trend of similar artists or works; accordingly, the monitoring is not just limited to the works held and their artists, but also extends to the authors and artworks related to the same area, to take into account trend data. If the annual monitoring identifies a potential, positive or negative, value deviation of more than 15% for individual artworks/collections of artists in Intesa Sanpaolo\u2019s collections and comparable on the basis of objective criteria (such as period of production/year, size, technique, period of production, etc.), the appraisals are commissioned according to the usual internal procedures in order to align the carrying amount. Quantitative information A.4.5. Fair value hierarchy A.4.5.1 Assets and liabilities measured at fair value on a recurring basis: fair value by level - Excluding insurance companies Assets / liabilities at fair value 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Financial assets measured at fair value through profit or loss 11,311 32,672 3,594 24,262 25,080 3,389 a) Financial assets held for trading 10,331 32,008 183 22,615 24,379 187 of which: Equities 860 - 22 674 - 17 of which: quotas of UCI 264 5 21 116 - 25 b) Financial assets designated at fair value - 1 - - 1 3 c) Other financial assets mandatorily measured at fair value 980 663 3,411 1,647 700 3,199 of which: Equities 122 107 242 161 116 225 of which: quotas of UCI 858 191 2,401 1,486 149 2,166 2. Financial assets measured at fair value through other comprehensive income 41,937 7,422 357 59,084 8,004 492 of which: Equities 513 510 325 1,537 1,314 421 3. Hedging derivatives - 10,062 - - 1,732 - 4. Property and equipment - - 7,144 - - 7,364 5. Intangible assets - - - - - - Total 53,248 50,156 11,095 83,346 34,816 11,245 1. Financial liabilities held for trading 7,285 39,085 142 22,241 33,946 119 2. Financial liabilities designated at fair value - 8,765 30 6 3,642 26 3. Hedging derivatives - 5,346 - - 4,868 - Total 7,285 53,196 172 22,247 42,456 145 With regard to assets, level 3 instruments, which allow for more discretion in fair value measurement, account for a limited portion of the portfolio, with an impact of 9.7% on total assets (8.7% as at 31 December 2021). The majority of level 3 financial assets is represented by quotas of UCIs, of which, under Financial assets mandatorily measured at fair value, 290 million euro is represented by units of the Atlante Fund and the Italian Recovery Fund put in place as part of the regulations to support the banking system. Over 46% of assets measured at fair value are determined based on market prices, and therefore without any discretion by the valuator. Property and equipment measured at level 3 fair value includes real estate assets and valuable art assets, which represent 64% of the balance sheet assets at level 3 fair value. As at 31 December 2022, the impact of non-performance risk (Credit Value Adjustment and Debt Value Adjustment) in the determination of the fair value of derivative contracts amounted to a reduction of 141 million euro in positive fair value and a reduction of 79 million euro in negative fair value. The impact of the Funding Value Adjustment in reducing the fair value amounted to 63 million euro, equal to the cost of funding the cash flows generated by the Bank\u2019s overall portfolio of OTC derivatives. Determining the quantity of those adjustments is irrespective of the effects of the correlated operational hedging strategies, where present. As far as liabilities are concerned, level 3 instruments account for less than 1% of total liabilities. In addition to the transfers relating to financial assets and liabilities measured at level 3 as detailed below, please note that the following transfers were made during 2022: \u2013 from level 1 to level 2: o financial assets held for trading for 99 million euro (book value as at 31 December 2022); o other financial assets mandatorily measured at fair value for 51 million euro (book value as at 31 December 2022); o financial assets measured at fair value through other comprehensive income for 131 million euro (book value as at 31 December 2022); o financial liabilities designated at fair value for 3 million euro (book value as at 31 December 2022); \u2013 from level 2 to level 1: o financial assets held for trading for 100 million euro (book value as at 31 December 2022); o financial assets measured at fair value through other comprehensive income for 47 million euro (book value as at 31 December 2022); o financial liabilities held for trading for 4 million euro (book value as at 31 December 2022). The transfers between fair value levels are determined by the trends in the observability of prices or market data used to measure the instruments and by the materiality of the unobservable inputs. The transition from level 1 to level 2 is a consequence of the disappearance of an active market for that instrument assessed by analysing the reliability and the reciprocal consistency of the available prices according to the provisions of the Group\u2019s Fair Value Policy. Conversely, securities for which a mark-to-model measurement is performed using inputs that can be observed on the market \u2013 classified, therefore, as level 2 \u2013 are transferred to level 1 when the existence of an active market is identified. A.4.5.1 Bis Assets and liabilities measured at fair value on a recurring basis: fair value by level - Insurance companies (millions of euro) Assets / liabilities at fair value 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Financial assets held for trading 297 249 356 344 293 390 of which: Equities - - - - - - of which: quotas of UCI 97 - 46 122 - 49 2. Financial assets designated at fair value through profit or loss 85,608 22 587 100,515 143 401 of which: Equities 3,016 - - 3,510 - - of which: quotas of UCI 78,025 - - 91,908 109 - 3. Financial assets available for sale 77,810 3,158 4,625 93,910 6,305 4,208 of which: Equities 1,921 7 67 2,201 7 54 of which: quotas of UCI 8,306 - 4,208 9,879 - 3,742 4. Hedging derivatives - 13 - - 291 - 5. Property and equipment - - 7 - - 8 6. Intangible assets - - - - - - Total 163,715 3,442 5,575 194,769 7,032 5,007 1. Financial liabilities held for trading 1 8 - - 42 61 2. Financial liabilities designated at fair value through profit or loss - 71,565 - - 84,667 - 3. Hedging derivatives - 170 - - - - Total 1 71,743 - - 84,709 61 With regard to insurance companies, level 3 instruments, which allow for more discretion in fair value measurement, account for a limited portion of the portfolio. They amount to 3.2% of Assets (2.4% as at 31 December 2021). 94.8% of financial assets measured at fair value in the insurance segment are determined based on market prices, and therefore without any discretion by the valuator. Liabilities at fair value were almost entirely measured using level 2 inputs. In addition to the transfers relating to financial assets and liabilities in the insurance segment designated at level 3 as detailed below, please note that the following transfers were made during 2022: \u2013 from level 1 to level 2: o financial assets measured at fair value through profit and loss for 3 million euro (book value as at 31 December 2022); o financial assets available for sale for 143 million euro (book value as at 31 December 2022); \u2013 from level 2 to level 1: o financial assets measured at fair value through profit and loss for 2 million euro (book value as at 31 December 2022); o financial assets available for sale for 2,114 million euro (book value as at 31 December 2022). The transfers between fair value levels are determined by the trends in the observability of prices or market data used to measure the instruments and by the materiality of the unobservable inputs. The transition from level 1 to level 2 is a consequence of the disappearance of an active market for that instrument assessed by analysing the reliability and the reciprocal consistency of the available prices according to the Group\u2019s Guidelines and Rules for Valuation of Financial Instruments at Fair Value. Conversely, securities for which a mark-to-model measurement is performed using inputs that can be observed on the market \u2013 classified, therefore, as level 2 \u2013 are transferred to level 1 when the existence of an active market is identified. A.4.5.2. Annual changes in assets measured at fair value on a recurring basis (level 3) - Excluding insurance companies (millions of euro) Assets measured at fair value through profit or loss Financial assets measured at fair value through other comprehensive income Hedging derivatives Property and equipment Intangible assets TOTAL of which: a) Financial assets held for trading of which: b) Financial assets designated at fair value of which: c) Other financial assets mandatorily measured at fair value 1. Initial amount 3,389 187 3 3,199 492 - 7,364 - 2. Increases 1,070 94 - 976 93 - 278 - 2.1 Purchases 390 20 - 370 60 - 76 - 2.2 Gains recognised in: 177 7 - 170 18 - 32 - 2.2.1 Income statement 177 7 - 170 - - 5 - - of which capital gains 152 7 - 145 - - - - 2.2.2 Shareholders' equity - X X X 18 - 27 - 2.3 Transfers from other levels 38 11 - 27 14 - - - 2.4 Other increases 465 56 - 409 1 - 170 - 3. Decreases -865 -98 -3 -764 -228 - -498 - 3.1 Sales -208 -43 -3 -162 -100 - -48 - 3.2 Reimbursements -5 - - -5 -14 - - - 3.3 Losses recognized in: -264 -42 - -222 -25 - -181 - 3.3.1 Income statement -264 -42 - -222 -4 - -165 - - of which capital losses -243 -35 - -208 -1 - - - 3.3.2 Shareholders' equity - X X X -21 - -16 - 3.4 Transfers to other levels -38 -12 - -26 -65 - - - 3.5 Other decreases -350 -1 - -349 -24 - -269 - 4. Final amount 3,594 183 - 3,411 357 - 7,144 - The captions Other increases and Other decreases in Financial assets mandatorily measured at fair value mainly refer to quotas of UCIs, and include the payments made and the reimbursements received by the Bank, with no change in the quotas held. With regard to Property and equipment, the captions mainly include transfers of these assets from investment to operations and vice versa. A.4.5.2. Bis Annual changes in assets measured at fair value on a recurring basis (level 3) - Insurance companies (millions of euro) Financial assets held for trading Financial assets designated at fair value through profit or loss Financial assets available for sale Hedging derivatives Property and equipment Intangible assets 1. Initial amount 390 401 4,208 - 8 - 2. Increases 92 186 1,091 - - - 2.1 Purchases 58 - 876 - - - 2.2 Gains recognised in: - - 199 - - - 2.2.1 Income statement - - - - - - - of which capital gains - - - - - - 2.2.2 Shareholders' equity X X 199 - - - 2.3 Transfers from other levels 32 - 12 - - - 2.4 Other increases 2 186 4 - - - 3. Decreases -126 - -674 - -1 - 3.1 Sales -4 - -354 - - - 3.2 Reimbursements - - -12 - - - 3.3 Losses recognized in: -68 - -236 - - - 3.3.1 Income statement -68 - -53 - - - - of which capital losses - - 12 - - - 3.3.2 Shareholders' equity X X -183 - - - 3.4 Transfers to other levels -54 - -68 - - - 3.5 Other decreases - - -4 - -1 - 4. Final amount 356 587 4,625 - 7 - A.4.5.3 Annual changes in liabilities measured at fair value on a recurring basis (level 3) - Excluding insurance companies (millions of euro) Financial liabilities held for trading Financial liabilities designated at fair value Hedging derivatives 1. Initial amount 119 26 - 2. Increases 101 4 - 2.1 Issues 71 - - 2.2 Losses recognised in: - 3 - 2.2.1 Income statement - 3 - - of which capital losses - 3 - 2.2.2 Shareholders' equity X - - 2.3 Transfers from other levels 30 - - 2.4 Other increases - 1 - 3. Decreases -78 - - 3.1 Reimbursements - - - 3.2 Repurchases - - - 3.3 Gains recognised in: -19 - - 3.3.1 Income statement -19 - - - of which capital gains -16 - - 3.3.2 Shareholders' equity X - - 3.4 Transfers to other levels -50 - - 3.5 Other decreases -9 - - 4. Final amount 142 30 - \u201cFinancial liabilities held for trading\u201d refer to derivative contracts with a negative fair value. Transfers from and to other levels described in the above tables were carried out in accordance with the guidelines described in paragraph A.4.3 - Fair value hierarchy. For more exhaustive information on the sensitivity of financial instruments to changes in the main input parameters, reference should be made to the analyses of the trading book in Part E of these Notes to the consolidated financial statements. A.4.5.3 Bis Annual changes in liabilities measured at fair value on a recurring basis (level 3) - Insurance companies (millions of euro) Financial liabilities held for trading Financial liabilities designated at fair value through profit or loss Hedging derivatives 1. Initial amount 61 - - 2. Increases - - - 2.1 Issues - - - 2.2 Losses recognised in: - - - 2.2.1 Income statement - - - - of which capital losses - - - 2.2.2 Shareholders' equity X X - 2.3 Transfers from other levels - - - 2.4 Other increases - - - 3. Decreases -61 - - 3.1 Reimbursements - - - 3.2 Repurchases - - - 3.3 Gains recognised in: -61 - - 3.3.1 Income statement -61 - - - of which capital gains - - - 3.3.2 Shareholders' equity X X - 3.4 Transfers to other levels - - - 3.5 Other decreases - - - 4. Final amount - - - A.4.5.4 Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: fair value by level- Excluding insurance companies (millions of euro) Assets/liabilities not measured at fair value or measured at fair value on a non-recurring basis 31.12.2022 31.12.2021 Book value Level 1 Level 2 Level 3 Book value Level 1 Level 2 Level 3 1. Financial assets measured at amortised cost 528,078 28,958 320,105 161,493 668,866 27,206 484,983 165,462 2. Investment property - - - - - - - - 3. Non-current assets held for sale and discontinued operations 638 - - 638 1,422 - - 1,422 Total 528,716 28,958 320,105 162,131 670,288 27,206 484,983 166,884 1. Financial liabilities measured at amortised cost 667,586 41,748 592,888 32,270 710,055 47,030 625,414 39,759 2. Liabilities associated with non-current assets 15 - - 15 30 - - 30 Total 667,601 41,748 592,888 32,285 710,085 47,030 625,414 39,789 A.4.5.4 Bis Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: fair value by level - Insurance companies (millions of euro) Assets/liabilities not measured at fair value or measured at fair value on a non-recurring basis 31.12.2022 31.12.2021 Book value Level 1 Level 2 Level 3 Book value Level 1 Level 2 Level 3 1. Investments held to maturity - - - - - - - - 2. Due from banks 40 - 40 - 41 - 41 - 3. Loans to customers 40 - 34 6 44 - 39 5 4. Investment property - - - - - - - - 5. Non-current assets held for sale and discontinued operations - - - - - - - - Total 80 - 74 6 85 - 80 5 1. Due to banks 629 - 17 556 623 - - 650 2. Due to customers 587 - 452 135 188 - 93 95 3. Securities issued 1,334 - 1,171 - 1,335 - 1,338 - 4. Liabilities associated with non-current assets - - - - - - - - Total 2,550 - 1,640 691 2,146 - 1,431 745 Financial assets and liabilities For financial assets and liabilities not measured at fair value (loans and loans represented by securities, amounts due to customers and securities issued), the Group measures fair value by calculating the present value of future cash flows at a rate that incorporates the estimate of the main risks and uncertainties associated with the financial instrument to be measured (discount rate adjustment approach). In particular, the interest rate used to discount the future cash flows is determined by taking into account the following risk factors: \u2013 interest rate risk, which represents the rate offered by the market for each unit of capital provided to risk-free counterparties; \u2013 credit risk, which is the premium for having provided capital to counterparties with insolvency risk; \u2013 the cost of liquidity connected to credit. For fixed-rate instruments, the cash flows are those envisaged by the contracts. For floating-rate instruments, the future cash flows are determined based on forward rates, implicit in the zero-coupon interest rate curves observed at the various fixing dates and differentiated by indexation type. The value of the risk premium (credit spread) is determined per individual position, through acquisition of the risk class (LGD) and rating (PD). These amounts, together with the average residual financial life, constitute the guideline for acquisition of the credit spread. For securities issued by Intesa Sanpaolo, the construction of the spread curve follows the rules set out in the Rules for Valuation of Financial Instruments at Fair Value. The following assumptions were used in determining the fair values indicated in table A.4.5.4: \u2013 for loans represented by securities, the same rules envisaged for the fair value measurement of other categories of securities are used; \u2013 for securities issued, the rules used are the same as those applied to securities under assets. A.5 \u2013 INFORMATION ON \u201cDAY ONE PROFIT/LOSS\u201d Under IFRS 9, financial instruments shall be initially recognised at fair value. The fair value of a financial instrument at initial recognition is normally the \"transaction price\", i.e. the fair value of the consideration given or received in relation to, respectively, financial assets and liabilities. The fact that, upon initial recognition, the fair value of a financial instrument normally coincides with the transaction price is usually intuitively verifiable in the case of transactions falling under level 1 of the fair value hierarchy. Any differences between the price and the fair value are usually attributable to the so-called commercial margins, which are considered as not falling within the scope of Day One Profit. Therefore, commercial margins are taken to the income statement on the first subsequent measurement of the financial instrument. Also in the case of level 2, which is based on quotes that can be derived indirectly from the market (Comparable Approach), the fair value and the price often coincide upon initial recognition. Any residual differences, as in the previous case, are usually attributable to the commercial margins. With respect to level 3 instruments, which have more discretion in fair value measurement, no definite reference benchmark is available to compare the transaction price with. For the same reason, the calculation of any commercial margin to be taken to the income statement is also difficult. In this event, the instrument is always initially recognised at the transaction cost, irrespective of whether it is possible to identify commercial margins. Subsequent measurement shall not include the difference between cost and fair value identified upon initial recognition (also defined as Day One Profit - DOP). This difference shall be recognised in the income statement only when it arises from changes to the factors over which market participants base their valuations when fixing prices (including the time effect). Where unobservable inputs used to estimate the fair value become observable, the residual deferred Day One Profits are recognised in the income statement. Similarly, in the event of \u201con the book\u201d transactions falling under the investment division\u2019s activities, the Day One Profits earned on transactions - included in the above on the book management - are taken to the income statement when transactions are carried out which substantially eliminate the risks linked to unobservable parameters of the instrument which generated the DOP. At the end of 2022, as at the end of 2021, the amount of the DOP deferred in the balance sheet was immaterial (around 0.1 million euro). SECTION 2 - FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS CAPTION 20 2.1 Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 9,150 1,194 52 21,798 1,324 89 1.1 Structured securities 1,016 74 - 5 1,009 42 1.2 Other debt securities 8,134 1,120 52 21,793 315 47 2. Equities 860 - 22 674 - 17 3. Quotas of UCI 264 5 21 116 - 25 4. Loans - 32 53 - 14 4 4.1 Repurchase agreements - - - - - - 4.2 Other - 32 53 - 14 4 Total (A) 10,274 1,231 148 22,588 1,338 135 B. Derivatives 1. Financial derivatives 57 29,841 35 27 20,817 52 1.1 trading 55 29,841 35 27 20,817 52 1.2 fair value option - - - - - - 1.3 other 2 - - - - - 2. Credit derivatives - 936 - - 2,224 - 2.1 trading - 936 - - 2,224 - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total (B) 57 30,777 35 27 23,041 52 TOTAL (A+B) 10,331 32,008 183 22,615 24,379 187 Structured securities as at 31 December 2022 consist of 1,086 million euro of fixed-rate debt securities indexed to inflation, as an additional component, and 4 million euro of debt securities convertible into shares. The caption above includes the securities connected with securitisation transactions for a total amount of approximately 865 million euro (818 million euro Level 1 and 47 million euro Level 2), of which 627 million euro is senior, 230 million euro is mezzanine and 8 million euro is junior. As the gross positive fair value of the derivative instruments implemented with the legal clearing agent LCH Ltd. meets the requirements set out for offsetting between gross positive and negative balances pursuant to IAS 32, paragraph 42, it was subject to offsetting, with recognition of the net fair value under Financial liabilities held for trading and Financial assets held for trading, respectively. 2.2 Financial assets held for trading: breakdown by borrower/issuer/counterparty (millions of euro) Captions 31.12.2022 31.12.2021 A. Cash assets 1. Debt securities 10,396 23,211 a) Central Banks 78 44 b) Public administration 7,541 20,394 c) Banks 1,186 1,149 d) Other financial companies 1,175 1,239 of which: insurance companies 85 65 e) Non financial companies 416 385 2. Equities 882 691 a) Banks 35 71 b) Other financial companies 133 96 of which: insurance companies 51 31 c) Non financial companies 714 524 d) Other issuers - - 3. Quotas of UCI 290 141 4. Loans 85 18 a) Central Banks - - b) Public administration - - c) Banks - - d) Other financial companies 38 - of which: insurance companies - - e) Non financial companies 47 18 f) Households - - Total A 11,653 24,061 B. Derivatives a) Central counterparties 11,065 1,693 b) Other 19,804 21,427 Total B 30,869 23,120 TOTAL (A+B) 42,522 47,181 2.3 Financial assets designated at fair value: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities - 1 - - 1 3 1.1 Structured securities - - - - - - 1.2 Other debt securities - 1 - - 1 3 2. Loans - - - - - - 2.1 Structured - - - - - - 2.2 Other - - - - - - Total - 1 - - 1 3 The Bank has included in this category debt securities linked to financial instruments measured at fair value through profit and loss, such as financial derivatives. On the basis of the debt securities, no hedges were arranged through credit derivatives or similar instruments to mitigate the relevant credit risk. The fair value change attributable to the measurement of credit risk of financial assets designated at fair value was insignificant, both during the year and in cumulative terms. 2.4 Financial assets designated at fair value: breakdown by borrower/issuer (millions of euro) Captions 31.12.2022 31.12.2021 1. Debt securities 1 4 a) Central Banks - - b) Public administration 1 1 c) Banks - - d) Other financial companies - 3 of which: insurance companies - - e) Non financial companies - - 2. Loans - - a) Central Banks - - b) Public administration - - c) Banks - - d) Other financial companies - - of which: insurance companies - - e) Non financial companies - - f) Households - - Total 1 4 2.5 Other financial assets mandatorily measured at fair value: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities - 55 133 - 60 107 1.1 Structured securities - - 5 - - 5 1.2 Other debt securities - 55 128 - 60 102 2. Equities 122 107 242 161 116 225 3. Quotas of UCI 858 191 2,401 1,486 149 2,166 4. Loans - 310 635 - 375 701 4.1 Repurchase agreements - - - - - - 4.2 Other - 310 635 - 375 701 Total 980 663 3,411 1,647 700 3,199 The caption above includes the securities connected with securitisation transactions for a total amount of approximately 125 million euro (25 million euro Level 1 and 100 million euro Level 2), of which 44 million euro is senior, 65 million euro is mezzanine and 16 million euro is junior. 2.6 Other financial assets mandatorily measured at fair value: breakdown by borrower/issuer (millions of euro) Captions 31.12.2022 31.12.2021 1. Equities 471 502 of which: banks - - of which: other financial companies 117 160 of which: non financial companies 355 342 2. Debt securities 188 167 a) Central Banks - - b) Public administration - - c) Banks - - d) Other financial companies 157 158 of which: insurance companies 1 - e) Non financial companies 31 9 3. Quotas of UCI 3,450 3,801 4. Loans 945 1,076 a) Central Banks - - b) Public administration - - c) Banks 29 38 d) Other financial companies 119 141 of which: insurance companies 10 10 e) Non financial companies 554 674 f) Households 243 223 Total 5,054 5,546 The aggregate \u201cquotas of UCI\u201d includes 290 million euro in interests held by the bank in the Atlante Fund and in the Italian Recovery Fund (formerly Atlante Fund II), as alternative investment funds to support Italian banks in their recapitalisation transactions and in the management of the bad loans in the sector. Loans include credit exposures classified among financial assets mandatorily measured at fair value as they failed the test on the contractual characteristics of cash flows (SPPI Test) required by IFRS 9. SECTION 3 - FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - CAPTION 30 3.1 Financial assets measured at fair value through other comprehensive income: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 41,424 5,227 9 57,547 6,003 18 1.1 Structured securities 1,373 - - - 587 - 1.2 Other debt securities 40,051 5,227 9 57,547 5,416 18 2. Equities 513 510 325 1,537 1,314 421 3. Loans - 1,685 23 - 687 53 Total 41,937 7,422 357 59,084 8,004 492 Loans included in this caption, as illustrated in Part A \u2013 Accounting policies, refer to portions of syndicated loans underwritten and destined to be subsequently sold. The caption includes the securities connected with securitisations for a total amount of approximately 1,543 million euro (all Level 2), of which approximately 1,501 million euro is senior, 42 million euro is mezzanine and there is no junior. The sub-caption 2. Equities includes the stakes in the capital of the Bank of Italy for an amount of 375 million euro. For the related valuation, as in the previous years, the direct transaction method was used, considering the purchases made starting from 2015 and continuing in subsequent years. Considering that all the main transactions were finalised at nominal value, the use of this approach confirms the recognition value of the stakes held in the financial statements of the Group. In addition, the value of the investment was also supported by the use of an alternative method based on the discounting of future dividends deriving from the investment (DDM \u2013 \u201cDividend Discount Model\u201d). Following the approach taken in the previous years, the use of level 2 inputs (direct transaction prices) as the reference for determining fair value for the 2022 financial statements also resulted in the confirmation of level 2 in the fair value hierarchy. The book value of equity instruments deriving from the recovery of impaired financial assets amounted to 50 million euro. 3.2 Financial assets measured at fair value through other comprehensive income: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 1. Debt securities 46,660 63,568 a) Central Banks - - b) Public administration 35,062 50,549 c) Banks 5,487 5,699 d) Other financial companies 3,943 4,212 of which: Insurance companies 25 11 e) Non financial companies 2,168 3,108 2. Equities 1,348 3,272 a) Banks 768 1,456 b) Other issuers: 580 1,816 - other financial companies 163 1,268 of which: insurance companies 3 3 - non financial companies 407 538 - other 10 10 3. Loans 1,708 740 a) Central Banks - - b) Public administration - - c) Banks 100 - d) Other financial companies 146 62 of which: insurance companies - - e) Non financial companies 1,462 678 f) Households - - Total 49,716 67,580 3.3 Financial assets measured at fair value through other comprehensive income: gross amount and total adjustments (millions of euro) Gross amount Total adjustments Total partial write-offs Stage 1 of which: Instruments with low credit risk Stage 2 Stage 3 Purchased or originated credit- impaired Stage 1 Stage 2 Stage 3 Purchased or originated credit- impaired Debt securities 46,501 564 213 36 - -26 -28 -36 - - Loans 1,081 - 654 - - -8 -19 - - - Total 31.12.2022 47,582 564 867 36 - -34 -47 -36 - - Total 31.12.2021 64,126 965 231 35 - -38 -11 -35 - - For the approach used to represent the gross value and the total adjustments to impaired financial assets, see the illustration provided in Part A \u2013 Accounting policies. 3.3a Loans measured at fair value through other comprehensive income subject to COVID-19 support measures: gross amount and total adjustments As at 31 December 2022 this case was not present. SECTION 3 BIS - FINANCIAL ASSETS PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE PURSUANT TO IAS 39 - CAPTION 35 The breakdown of the IAS 39 captions included in caption 35 of the Balance Sheet Assets referring to insurance companies is shown below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 35 Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d was created, which comprises the components set out in the table below. (millions of euro) Breakdown of Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39 - Caption 35 31.12.2022 31.12.2021 20. Financial assets held for trading 902 1,027 30. Financial assets designated at fair value 86,217 101,059 40. Financial assets available for sale 85,593 104,423 80. Hedging derivatives 13 291 TOTAL Caption 35 172,725 206,800 3.1 Bis Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 150 198 310 166 288 337 1.1 Structured securities - - - - - - 1.2 Other debt securities 150 198 310 166 288 337 2. Equities - - - - - - 3. Quotas of UCI 97 - 46 122 - 49 4. Loans - - - - - - 4.1 Reverse repurchase agreements - - - - - - 4.2 Other - - - - - - Total A 247 198 356 288 288 386 B. Derivatives 1. Financial derivatives: 50 51 - 56 5 4 1.1 trading 50 35 - 55 4 4 1.2 fair value option - 16 - 1 1 - 1.3 other - - - - - - 2. Credit derivatives: - - - - - - 2.1 trading - - - - - - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total B 50 51 - 56 5 4 TOTAL (A+B) 297 249 356 344 293 390 3.2 Bis Financial assets held for trading: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 A. Cash assets 1. Debt securities 658 791 a) Governments and Central Banks 101 122 b) Other public entities - - c) Banks 267 329 d) Other issuers 290 340 2. Equities - - a) Banks - - b) Other issuers: - - - insurance companies - - - financial companies - - - non-financial companies - - - other - - 3. Quotas of UCI 143 171 4. Loans - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - Total A 801 962 B. Derivatives a) Banks - - - Fair value - - b) Customers 101 65 - Fair value 101 65 Total B 101 65 Total (A+B) 902 1,027 3.3 Bis Financial assets designated at fair value: breakdown (millions of euro) Captions/Amounts 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 4,344 22 5 4,754 34 5 1.1 Structured securities - - - 17 2 - 1.2 Other debt securities 4,344 22 5 4,737 32 5 2. Equities 3,016 - - 3,510 - - 3. Quotas of UCI 78,025 - - 91,908 109 - 4. Loans 223 - 582 343 - 396 4.1 Structured - - - - - - 4.2 Other 223 - 582 343 - 396 Total 85,608 22 587 100,515 143 401 Cost 86,661 14 586 93,092 121 395 3.4 Bis Financial assets designated at fair value: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 1. Debt securities 4,371 4,793 a) Governments and Central Banks 3,375 3,772 b) Other public entities 11 11 c) Banks 514 471 d) Other issuers 471 539 2. Equities 3,016 3,510 a) Banks 214 239 b) Other issuers: 2,802 3,271 - insurance companies 129 120 - financial companies 50 54 - non-financial companies 1,327 1,669 - other 1,296 1,428 3. Quotas of UCI 78,025 92,017 4. Loans 805 739 a) Governments and Central Banks - - b) Other public entities - - c) Banks 805 739 d) Other counterparties - - Total 86,217 101,059 3.5 Bis Financial assets available for sale: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 67,583 3,152 349 81,830 6,298 412 1.1 Structured securities 8 - - 14 - - 1.2 Other debt securities 67,575 3,152 349 81,816 6,298 412 2. Equities 1,921 7 67 2,201 7 54 2.1 Measured at fair value 1,921 7 67 2,201 7 54 2.2 Measured at cost - - - - - - 3. Quotas of UCI 8,306 - 4,208 9,879 - 3,742 4. Loans - - - - - - Total 77,810 3,159 4,624 93,910 6,305 4,208 3.6 Bis Financial assets available for sale: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 1. Debt securities 71,084 88,540 a) Governments and Central Banks 55,587 71,782 b) Other public entities 283 359 c) Banks 6,495 6,214 d) Other issuers 8,719 10,185 2. Equities 1,995 2,262 a) Banks 194 206 b) Other issuers: 1,801 2,056 - insurance companies 35 37 - financial companies - - - non-financial companies 1,766 2,019 - other - - 3. Quotas of UCI 12,514 13,621 4. Loans - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - Total 85,593 104,423 3.7 Bis Financial assets available for sale subject to microhedging There were no financial assets available for sale subject to microhedging referring to insurance companies. 3.8 Bis Hedging derivatives: breakdown by type of hedge and level (millions of euro) Fair value 31.12.2022 Notional value Fair value 31.12.2021 Notional value Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A) Financial derivatives - 13 - 200 - 291 - 1,046 1) fair value - - - - - - - - 2) cash flows - 13 - 200 - 291 - 1,046 3) foreign investments - - - - - - - - B) Credit derivatives - - - - - - - - 1) fair value - - - - - - - - 2) cash flows - - - - - - - - Total - 13 - 200 - 291 - 1,046 3.9 Bis Hedging derivatives: breakdown by hedged portfolio and type of hedge (book value) (millions of euro) Operations/Type of hedge FAIR VALUE CASH FLOWS FOREIGN. INVESTM. Specific Generic Specific Generic Interest rate risk foreign exchange risk Credit risk various risk Multiple risk 1. Financial assets available for sale - - - - - X 13 X X 2. Loans - - - X - X - X X 3. Investments held to maturity X - - X - X - X X 4. Portfolio X X X X X - X - X 5. Other transactions - - - - - X - X - Total assets - - - - - - 13 - - 1. Financial liabilities - - - X - X - X X 2. Portfolio X X X X X - X - X Total liabilities - - - - - - - - - 1. Forecast transactions X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X - X - - DISCLOSURE PURSUANT TO IFRS 4 As previously indicated, the Intesa Sanpaolo Group exercised the option of adopting the Deferral Approach or Temporary Exemption, according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39. In particular, the Group\u2019s insurance companies applying IAS 39 are as follows: - Intesa Sanpaolo Vita S.p.A.; - Intesa Sanpaolo Assicura S.p.A.; - Intesa Sanpaolo Life Ltd.; - Fideuram Vita S.p.A.; - Intesa Sanpaolo RBM Salute S.p.A. This section sets out the information required by IFRS 4 Insurance Contracts following exercise of the option, granted to insurance companies belonging to banking-led financial conglomerates, pursuant to Regulation 2017/1988 and the subsequent Regulation 2020/2097, of postponing the first-time adoption of IFRS 9 88 . The Group verified the fulfilment of the requirements to apply the Temporary Exemption. The insurance companies meet the requirement of insurance predominance, which requires that the percentage of the carrying amount of liabilities linked to insurance business on the carrying amount of total liabilities of the entity exceeds 90% (predominance ratio). Moreover, there were no transfers of financial assets other than those measured at FVTPL between Group companies using different accounting standards. As required by the reference regulations, the quantitative disclosure regarding the entities that will postpone the application of IFRS 9 is provided below. Details of the securities of the insurance companies that pass the SPPI Test (millions of euro) Caption Fair value at the reporting date Fair value changes during the year Other changes during the year (3) Fair value at the previous reporting date Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39 171,920 -24,284 -9,857 206,061 of which: Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1) 69,674 -14,890 -1,888 86,452 Debt securities 69,674 -14,890 -1,888 86,452 Structured securities - - -9 9 Other debt securities 69,674 -14,890 -1,879 86,443 Loans - - - - Other financial assets - - - - Financial asset other than those with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (2) 17,044 -1,668 -818 19,530 Debt securities 2,086 -408 -405 2,899 Structured securities 8 -1 4 5 Other debt securities 2,078 -407 -409 2,894 Equities 1,995 -207 -60 2,262 Quotas of UCI 12,865 -1,008 -152 14,025 Loans - - - - Derivatives 98 -45 -201 344 Other financial assets - - - - Other financial assets connected with contracts where the investment risk is borne by the policyholders 85,202 -7,726 -7,151 100,079 Debt securities 4,353 -437 17 4,773 Structured securities - - -19 19 Other debt securities 4,353 -437 36 4,754 Equities 3,016 -552 58 3,510 Quotas of UCI 77,817 -6,811 -7,156 91,784 Loans - - - - Derivatives 16 74 -70 12 Other financial assets - - - - Financial assets pertaining to insurance companies measured at amortised cost pursuant to IAS 39 (*) 69 -6 -7 82 of which: Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1) 33 -2 -6 41 Debt securities 33 -2 -6 41 Structured securities - - - - Other debt securities 33 -2 -6 41 Loans - - - - Other financial assets - - - - Financial asset other than those with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (2) 36 -4 -1 41 Debt securities 36 -4 -1 41 Structured securities - - - - Other debt securities 36 -4 -1 41 Equities - - - - Quotas of UCI - - - - Loans - - - - Derivatives - - - - Other financial assets - - - - (*) Debt securities shows the fair value as required by the amendment to IFRS 4. These securities have been recognised in the balance sheet at amortised cost (1) excluding financial assets that meet the definition of held for trading in IFRS 9, or are managed and whose return is measured at fair value (2) includes all other financial assets, i.e. any financial asset: i) with contractual terms that do not give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding; ii) that meet the definition of held for trading in IFRS 9; or iii) that are managed and whose return is measured at fair value (3) Column includes movements that are not attributable to changes in fair value (purchases, sales, repayments, etc.) The table referred to above includes the investments whose risk is fully borne by policyholders, classified under financial assets measured at fair value. Amounts due from banks of 805 million euro are added to the amounts indicated above. Credit risk exposure for financial instruments of the insurance companies that pass the SPPI test (millions of euro) Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1) Credit risk rating Current year book value (2) Previous year book value (2) Debt securities 67,265 83,261 Structured securities Investment Grade - 9 Other debt securities Investment Grade 67,265 83,252 Loans - - Other financial assets - - (millions of euro) Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1), and which do not have a low credit risk Credit risk rating Current year book value (2) Current year market value Previous year book value (2) Debt securities 2,444 2,445 3,227 Structured securities Non-Investment Grade - - - Other debt securities Non-Investment Grade 2,444 2,445 3,227 Loans - - - Other financial assets - - - (1) excluding financial assets that meet the definition of held for trading in IFRS 9, or are managed and whose return is measured at fair value. (2) in the case of financial assets measured at amortised cost, before any impairment loss. SECTION 4 - FINANCIAL ASSETS MEASURED AT AMORTISED COST \u2013 CAPTION 40 4.1 Financial assets measured at amortised cost: breakdown of amounts due from banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 A. Due from Central Banks 9,712 - - - 7,089 2,623 131,361 - - - 128,282 3,078 1. Time deposits 3,622 - - X X X 3,118 - - X X X 2. Compulsory reserve 5,427 - - X X X 126,882 - - X X X 3. Repurchase agreements 543 - - X X X 273 - - X X X 4. Other 120 - - X X X 1,088 - - X X X B. Due from banks 23,136 36 - 1,265 18,791 3,055 32,523 53 - 1,547 28,156 2,903 1. Loans 21,478 36 - - 18,465 3,055 30,752 53 - - 27,914 2,903 1.1 Current accounts - - - X X X - - - X X X 1.2 Time deposits 2,449 - - X X X 1,681 - - X X X 1.3 Other loans: 19,029 36 - X X X 29,071 53 - X X X - Reverse repurchase agreements 5,397 - - X X X 9,566 - - X X X - Finance leases 5 - - X X X 6 - - X X X - Other 13,627 36 - X X X 19,499 53 - X X X 2. Debt securities 1,658 - - 1,265 326 - 1,771 - - 1,547 242 - 2.1 Structured - - - - - - - - - - - - 2.2 Other 1,658 - - 1,265 326 - 1,771 - - 1,547 242 - TOTAL 32,848 36 - 1,265 25,880 5,678 163,884 53 - 1,547 156,438 5,981 As at 31 December 2022, the decline in the sub-caption Reserve Requirement was due to the placement of excess liquidity in overnight deposits reported in the caption Cash and cash equivalents. The sub-caption \u201cOther loans - Other\u201d includes operating loans, i.e. operations connected to the provision of financial activities and services with no credit facilities, for an amount of 122 million euro. Those exposures are essentially performing loans classified in Stage 1 and adjusted based on IFRS 9 4.2 Financial assets measured at amortised cost: breakdown of loans to customers (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 1. Loans 432,447 5,255 271 - 283,348 140,877 449,287 6,682 446 - 317,673 147,945 1.1.Current accounts 22,967 484 12 X X X 21,724 688 22 X X X 1.2. Reverse repurchase agreements 15,366 - - X X X 17,620 - - X X X 1.3. Mortgages 242,049 3,083 156 X X X 250,722 4,080 268 X X X 1.4. Credit card loans, personal loans and transfer of one fifth of salaries 19,435 339 2 X X X 18,626 364 9 X X X 1.5. Finance leases 7,780 328 85 X X X 12,830 347 108 X X X 1.6. Factoring 10,869 52 - X X X 9,453 65 - X X X 1.7. Other loans 113,981 969 16 X X X 118,312 1,138 39 X X X 2. Debt securities 57,188 33 - 27,693 10,877 14,938 48,473 41 - 25,659 10,872 11,536 2.1. Structured securities - - - - - - - - - - - - 2.2. Other debt securities 57,188 33 - 27,693 10,877 14,938 48,473 41 - 25,659 10,872 11,536 Total 489,635 5,288 271 27,693 294,225 155,815 497,760 6,723 446 25,659 328,545 159,481 The sub-caption \u201cOther loans\u201d includes operating loans, i.e. operations connected to the provision of financial activities and services with no credit facilities, for an amount of 740 million euro. Those exposures are essentially performing loans classified in Stage 1 and adjusted based on IFRS 9. Debt securities include the securities connected with securitisations for a total amount of approximately 8,495 million euro, of which 8,475 million euro is senior notes and 20 million euro mezzanine. 4.3 Financial assets measured at amortised cost: breakdown by borrower/issuer of loans to customers (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Stage 1 and 2 Stage 3 Purchased or originated credit- impaired 1. Debt securities 57,188 33 - 48,473 41 - a) Public administration 32,298 13 - 27,851 15 - b) Other financial companies 21,418 8 - 16,612 14 - of which: insurance companies 1 - - 6 - - c) Non financial companies 3,472 12 - 4,010 12 - 2. Loans: 432,447 5,255 271 449,287 6,682 446 a) Public administration 15,566 213 - 16,385 356 - b) Other financial companies 44,781 123 1 45,872 262 1 of which: insurance companies 39 - - 361 - - c) Non financial companies 193,579 3,126 150 212,387 3,555 246 d) Households 178,521 1,793 120 174,643 2,509 199 TOTAL 489,635 5,288 271 497,760 6,723 446 4.4 Financial assets measured at amortised cost: gross amount and total adjustments (millions of euro) Gross amount Total adjustments Total partial write-offs Stage 1 of which: Instruments with low credit risk Stage 2 Stage 3 Purchased or originated credit- impaired Stage 1 Stage 2 Stage 3 Purchased or originated credit- impaired Debt securities 54,961 - 4,062 105 - -29 -66 -72 - - Loans 419,968 24 46,175 10,332 384 -659 -1,929 -5,041 -113 3,081 Total 31.12.2022 474,929 24 50,237 10,437 384 -688 -1,995 -5,113 -113 3,081 Total 31.12.2021 603,169 17 61,028 14,892 587 -753 -1,800 -8,116 -141 6,476 For the approach used to represent the gross value and the total adjustments to impaired financial assets, see the illustration provided in Part A \u2013 Accounting policies. 4.4a Loans measured at amortised cost subject to COVID-19 support measures: gross amount and total adjustments (millions of euro) Gross value Writedown Write off partial total Stage 1 of which: low credit risk Stage 2 Stage 3 Purchased or originated credit- impaired Stage 1 Stage 2 Stage 3 Purchased or originated credit- impaired 1. EBA-compliant moratoria loans - - - - - - - - - - 2. Loans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne 51 - 26 27 - - -3 -11 - - 3. Other loans with COVID-19-related forbearance measures 4 - 693 156 1 - -36 -52 -1 - 4. Newly originated loans 29,434 - 3,199 573 1 -38 -37 -176 - - Total 31.12.2022 29,489 - 3,918 756 2 -38 -76 -239 -1 - Total 31.12.2021 35,182 - 9,340 545 5 -44 -248 -151 - - The row \u201cEBA-compliant moratoria loans\u201d shows the loans subject to moratoria that fall within the scope of application of the \u201cGuidelines on legislative and non legislative moratoria on loan repayments applied in the light of the COVID 19 crisis\u201d, published by the EBA (EBA/GL/2020/02), as amended. As at 31 December 2022 such loans were less than 1 million euro and amounted to 412 thousand euro. The row \u201cLoans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne\u201d shows the outstanding loans subject to moratoria, assessed as compliant with EBA/GL/2020/02 at the date the measure was granted, but no longer compliant at the reporting date, which were not classified by the bank as \u201cforborne exposures\u201d (as defined by the supervisory reports in force) following the assessment conducted on occurrence of the event that generated the non-compliance with EBA/GL/2020/02. The row \u201cOther forborne loans\u201d contains information regarding the loans subject to the COVID-19 support measures that meet the conditions of \u201cforborne exposures\u201d as defined by the current supervisory reports, and have not been included in the category \u201cEBA-compliant moratoria loans\u201d since the grant date or since the date on which they no longer comply with the EBA/GL/2020/02. The row \u201cNewly originated loans\u201d represents the exposures for which new liquidity was granted, with the support of government guarantees. The loans under sub-captions 1, 2 and 3 of the table above are subject to moratoria which were still in force as at 31 December 2022. SECTION 4 BIS - FINANCIAL ASSETS PERTAINING TO INSURANCE COMPANIES MEASURED AT AMORTISED COST PURSUANT TO IAS 39 - CAPTION 45 The breakdown of the IAS 39 captions included in caption 45 of the Balance Sheet Assets referring to insurance companies is shown below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 45 Financial assets pertaining to insurance companies measured at amortised cost pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial assets pertaining to insurance companies measured at amortised cost pursuant to IAS 39 - Caption 45 31.12.2022 31.12.2021 50. Investments held to maturity - - 60. Due from banks 40 41 70. Loans to customers 40 44 TOTAL Caption 45 80 85 4.1 Bis Investments held to maturity There were no investments held maturity relating to the insurance companies. 4.4 Bis Due from banks: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Due from Central Banks - - - - - - - - 1. Time deposits - - 2. Compulsory reserve - - 3. Reverse repurchase agreements - - 4. Other - - B. Due from banks 40 - 40 - 41 - 41 - 1. Loans - - - - - - - - 1.1 Current accounts and deposits - - 1.2 Time deposits - - 1.3 Other loans: - - - Reverse repurchase agreements - - - Finance leases - - - Other - - 2. Debt securities 40 - 40 - 41 - 41 - 2.1 Structured - - 2.2 Other 40 41 Total 40 - 40 - 41 - 41 - 4.5 Bis Due from banks subject to microhedging There were no amounts due from banks subject to microhedging referring to insurance companies. 4.6 Bis Loans to customers: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Book value Book Value Performing Non Performing Fair value Not impaired Impaired Fair value Purchased Other Level 1 Level 2 Level 3 Purchased Other Level 1 Level 2 Level 3 Loans 5 - - - 4 1 8 - - - 8 - 1. Current accounts - - - X X X - - - X X X 2. Reverse repurchase agreements - - - X X X - - - X X X 3. Mortgages - - - X X X - - - X X X 4. Credit card loans, personal loans, and transfer of one fifth of salaries - - - X X X - - - X X X 5. Finance leases - - - X X X - - - X X X 6. Factoring - - - X X X - - - X X X 7. Other loans 5 - - X X X 8 - - X X X Debt securities 35 - - - 30 5 36 - - - 31 5 8. Structured securities - - - X X X - - - X X X 9. Other debt securities 35 - - X X X 36 - - X X X Total 40 - - - 34 6 44 - - - 39 5 4.7 Bis Loans to customers: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Performing Non performing Performing Non performing Purchased Other Purchased Other 1. Debt securities 35 - - 36 - - a) Governments - - - - - - b) Other public entities - - - - - - c) Other issuers 35 - - 36 - - - non-financial companies 20 - - 21 - - - financial institutions 15 - - 15 - - - insurance companies - - - - - - - other - - - - - - 2. Loans: 5 - - 8 - - a) Governments - - - - - - b) Other public entities - - - - - - c) Other counterparties 5 - - 8 - - - non-financial companies - - - - - - - financial institutions 4 - - 7 - - - insurance companies - - - - - - - other 1 - - 1 - - Total 40 - - 44 - - 4.8 Bis Loans to customers subject to microhedging There were no Loans to customers subject to microhedging referring to insurance companies. SECTION 5 - HEDGING DERIVATIVES \u2013 CAPTION 50 Concerning the objectives and the strategies underlying hedging transactions see the information provided in Part E \u2013 Information on risks and relative hedging policies, Section 2 \u2013 Market risks. 5.1 Hedging derivatives: breakdown by type of hedge and level (millions of euro) Fair value 31.12.2022 Notional amount Fair value 31.12.2021 Notional amount Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A. Financial derivatives 1. Fair Value - 10,061 - 177,498 - 1,719 - 186,185 2. Cash flows - 1 - 893 - 13 - 3,961 3. Foreign investments - - - 28 - - - - B. Credit derivatives 1. Fair Value - - - - - - - - 2. Cash flows - - - - - - - - Total - 10,062 - 178,419 - 1,732 - 190,146 As the gross positive fair value of Hedging derivatives implemented with the legal clearing agent LCH Ltd. meets the requirements set out for offsetting between gross positive and negative balances pursuant to IAS 32, paragraph 42, it was subject to offsetting, with recognition of the net fair value under Financial liabilities held for trading. 5.2 Hedging derivatives: breakdown by hedged portfolio and type of hedge (millions of euro) Transactions / Type of hedge Fair Value Cash-flow Foreign investm Specific Generic Specific Generic debt securities and interest rates equities and stock indices foreign exchange rates and gold credit risk commodities other 1. Financial assets measured at fair value through other comprehensive income 2,566 - 263 - X X X - X X 2. Financial assets measured at amortised cost 2,876 X 3 - X X X 1 X X 3. Portfolio X X X X X X 3,803 X - X 4. Other transactions - - - - - - X - X - Total assets 5,442 - 266 - - - 3,803 1 - - 1. Financial liabilities 476 X 60 - - - X - X X 2. Portfolio X X X X X X 14 X - X Total liabilities 476 - 60 - - - 14 - - - 1. Forecast transactions X X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X X - X - - The table indicates positive fair values of hedging derivatives, broken down in relation to asset or liability hedged and type of hedge. Considering the values gross of netting in the financial statements, these continued to refer mainly to micro fair value hedges of debt securities under assets, as well as macro fair value hedges of loans disbursed. SECTION 1 \u2013 FINANCIAL LIABILITIES MEASURED AT AMORTISED COST - CAPTION 10 1.1 Financial liabilities measured at amortised cost: breakdown of amounts due to banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to central banks 98,444 X X X 134,790 X X X 2. Due to banks 39,038 X X X 30,468 X X X 2.1 Current accounts and on demand deposits 3,234 X X X 3,197 X X X 2.2 Time deposits 3,807 X X X 4,394 X X X 2.3 Loans 18,610 X X X 18,574 X X X 2.3.1 Repurchase agreements 12,753 X X X 12,160 X X X 2.3.2 Other 5,857 X X X 6,414 X X X 2.4 Debts for commitments to repurchase own equity instruments - X X X 138 X X X 2.5 Lease liabilities 6 X X X 8 X X X 2.6 Other debts 13,381 X X X 4,157 X X X Total 137,482 - 125,164 12,148 165,258 - 153,297 11,916 The illustration of the criteria used to determine the fair value is contained in Part A \u2013 Accounting policies. Repurchase agreements related to assets sold not derecognised are detailed in Part E - Sales of the Notes to the financial statements. The caption Due to Central Banks includes the balance of TLTRO refinancing operations for a total of 96,060 million euro, fully attributable to the TLTRO III. The Group\u2019s repurchase agreements shown in the table include long-term repurchase agreements with a total carrying amount of 238 million euro, attributable to Banca Fideuram for de-risking transactions completed in previous years with the twofold aim of both funding the bank\u2019s operations (through repurchase transactions) and reducing the credit risks associated with the portfolio of securities issued (also through the acquisition of financial guarantees). The transactions have a non- replaceable underlying portfolio of Italian government securities (with maturities from 2023 to 2033) hedged against interest rate risk through interest rate swap contracts and against credit risk through credit default swap contracts, already recorded in the financial statements at the time of execution of the repurchase transactions and recognised under financial assets measured at amortised cost. The nominal value and the maturity date of the repurchase agreements are the same as that of the securities. For recognition purposes, an assessment was conducted aimed at understanding the purpose underlying the contractual agreements, taking into account the instructions provided by the supervisory authorities in Bank of Italy/Consob/IVASS Document No. 6 of 8 March 2013, \u201cAccounting treatment of \u2018long-term structured repurchase agreements\u2019.\u201d The analysis focused on the structure, cash flows and risks associated with the transactions and was aimed at verifying whether the cases described above were similar to the long-term structured repurchase agreements described in the above Document, and, in order to be compliant with the principle of the prevalence of substance over form, whether the indicators referred in paragraph B.6 of the Guidance on Implementing IFRS 9, according to which the transaction may be considered substantially similar to a credit derivative contract, and, in particular, a credit default swap, were present. The case described above consists of repurchase agreements that are not concurrent with the purchases of the securities, because they were already present in the portfolio. In addition, buying securities and entering into the related hedging derivatives occurred with market counterparties other than those with which the repurchase agreements were entered into. The credit risk was also closed with financial guarantees. Consequently, the analysis shows elements of differentiation from the long-term structured repurchase agreements described in the aforementioned Document, supporting the inapplicability of the guidelines provided in paragraph B.6 of the Guidance on Implementing IFRS 9, with the result that the transactions must be recognised in the financial statements with the individual contractual components shown separately. 1.2 Financial liabilities measured at amortised cost: breakdown of amounts due to customers (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Current accounts and on demand deposits 412,667 X X X 423,335 X X X 2. Time deposits 20,309 X X X 19,184 X X X 3. Loans 5,200 X X X 5,716 X X X 3.1 Repurchase agreements 1,284 X X X 2,691 X X X 3.2 Other 3,916 X X X 3,025 X X X 4. Debts for commitments to repurchase own equity instruments 181 X X X 23 X X X 5. Lease liabilities 1,309 X X X 1,379 X X X 6. Other debts 14,359 X X X 8,602 X X X Total 454,025 - 435,464 18,132 458,239 - 433,309 25,130 1.3 Financial liabilities measured at amortised cost: breakdown of securities issued (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Securities 1. bonds 64,838 41,748 22,980 29 75,050 47,030 29,971 42 1.1 structured 1,806 397 1,361 29 2,262 246 2,038 42 1.2 other 63,032 41,351 21,619 - 72,788 46,784 27,933 - 2. other 11,241 - 9,280 1,961 11,508 - 8,837 2,671 2.1 structured - - - - - - - - 2.2 other 11,241 - 9,280 1,961 11,508 - 8,837 2,671 Total 76,079 41,748 32,260 1,990 86,558 47,030 38,808 2,713 1.4 Details of subordinated debts/securities There were no subordinated debts with banks and customers as at 31 December 2022. As at the reporting date, subordinated securities issued amounted to 12,474 million euro, entirely attributable to the Parent Company. 1.5 Details of structured debts As at 31 December 2022 there were no structured debts. 1.6 Lease payables As at 31 December 2022 lease payables amounted to 1,315 million euro, of which 238 million euro maturing within one year, 622 million euro maturing within 1 to 5 years and 455 million euro maturing in over 5 years. Lease payables comprise 1,309 million euro referring to customer counterparties and 6 million euro to bank counterparties. These derive from the application of the financial reporting standard IFRS 16 relating to Leases, with effect from 1 January 2019. SECTION 1 BIS - FINANCIAL LIABILITIES PERTAINING TO INSURANCE COMPANIES MEASURED AT AMORTISED COST PURSUANT TO IAS 39 - CAPTION 15 The breakdown of the IAS 39 captions included in caption 15 of the Balance sheet liabilities pertaining to insurance companies is provided below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 15 Financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39 - Caption 15 31.12.2022 31.12.2021 10. Due to banks 629 623 20. Due to customers 587 188 30. Securities issued 1,334 1,335 Total - Caption 15 2,550 2,146 1.1 Bis Due to banks: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1. Due to central banks - - 2. Due to banks 629 623 2.1 Current accounts and deposits 6 - 2.2 Time deposits - - 2.3 Loans 607 607 2.3.1 Repurchase agreements - - 2.3.2 Financial leasing loans - 2.3.3 Other 607 607 2.4 Debts for commitments to repurchase own equity instruments - - 2.5 Lease liabilities - 2.6 Other debts 16 16 TOTAL (Book value) 629 623 Fair value - level 1 - - Fair value - level 2 17 - Fair value - level 3 556 650 Total Fair value 573 650 1.2 Bis Breakdown of \u201cDue to banks\u201d: subordinated debts As at 31 December 2022 subordinated debts amounted to 607 million euro, entirely attributable to Intesa Sanpaolo Vita. 1.3 Bis Breakdown of \u201cDue to banks\u201d: structured debts There were no structured debts pertaining to Insurance Companies as at 31 December 2022. 1.4 Bis Due to banks subject to microhedging There were no structured debts due to banks subject to microhedging pertaining to Insurance Companies as at 31 December 2022. 1.5 Bis Lease payables As at 31 December 2022 there were no lease payables due to banks. 1.6 Bis Due to customers: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1.Current accounts and deposits - - 2 Time deposits - - 3. Loans - - 3.1 Repurchase agreements - - 3.2 Financial leasing loans - - 3.3 Other - - 4. Debts for commitments to repurchase own equity instruments 360 87 5. Lease liabilities 6 7 6. Other debts 221 94 Total (Book value) 587 188 Fair value - level 1 - - Fair value - level 2 452 93 Fair value - level 3 135 95 Total Fair Value 587 188 The amount under Debts for commitments to repurchase own equity instruments refers to put options sold with minority stakes of fully consolidated equity investments as underlying asset, attributable to the Put & Call Agreement for the purchase of 26% of Intesa Sanpaolo RBM Salute S.p.A. 1.7 Bis Breakdown of \u201cDue to customers\u201d: subordinated debts There were no subordinated debts due to customers pertaining to Insurance Companies as at 31 December 2022. 1.8 Bis Breakdown of \u201cDue to customers\u201d: structured debts There were no structured debts due to customers pertaining to Insurance Companies as at 31 December 2022. 1.9 Bis Due to customers subject to microhedging There were no amounts due to customers subject to microhedging pertaining to Insurance Companies as at 31 December 2022. 1.10 Bis Lease payables As at 31 December 2022 there were lease payables due to customers of 6 million euro, all of which are due between 1 and 5 years. These derive from the application of the financial reporting standard IFRS 16 relating to Leases, with effect from 1 January 2019. 1.11 Bis Securities issued: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair Value Book value Fair Value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A.Securities 1. Bonds 1,334 - 1,171 - 1,335 - 1,338 - 1.1 structured - - - - - - - - 1.2 other 1,334 - 1,171 - 1,335 - 1,338 - 2. Other - - - - - - - - 2.1 structured - - - - - - - - 2.2 Other - - - - - - - - Total 1,334 - 1,171 - 1,335 - 1,338 - 1.12 Bis Breakdown of \u201cSecurities issued\u201d: subordinated securities As at 31 December 2022, a total of 1,334 million euro pertaining to insurance companies, fully attributable to level-2 other bonds (fair value 1,171 million euro), which at the end of 2021 amounted to 1,335 million euro. 1.13 Bis Breakdown of \u201cSecurities issued\u201d: securities subject to microhedging There were no Securities issued subject to microhedging pertaining to Insurance Companies. SECTION 2 \u2013 FINANCIAL LIABILITIES HELD FOR TRADING \u2013 CAPTION 20 2.1 Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level1 Level 2 Livello 3 A. Cash liabilities 1. Due to banks 4,729 4,240 - - 4,239 19,827 22,222 40 - 22,262 2. Due to customers 3,121 3,001 - - 3,001 - - - - - 3. Debt securities 3,000 - 2,779 - X 3,324 - 3,459 - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - X 3.1.2 Other bonds - - - - X - - - - X 3.2 Other 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.1 Structured 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.2 Other - - - - X - - - - X Total A 10,850 7,241 2,779 - 7,240 23,151 22,222 3,499 - 22,262 B. Derivatives 1. Financial derivatives X 44 35,363 142 X X 19 28,107 118 X 1.1 Trading X 44 35,343 142 X X 19 28,072 118 X 1.2 Fair value option X - - - X X - - - X 1.3 Other X - 20 - X X - 35 - X 2. Credit derivatives X - 943 - X X - 2,340 1 X 2.1 Trading X - 943 - X X - 2,340 1 X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 44 36,306 142 X X 19 30,447 119 X Total (A+B) 10,850 7,285 39,085 142 X 23,151 22,241 33,946 119 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. Amounts due to banks and customers consist entirely of short selling of securities. The aggregate 3.2.1 Other structured securities includes securitised derivatives which provide for partial or full redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014, issued by the Group throughout 2019. Derivative instruments include 5,017 million euro in certificates with characteristics similar to financial derivative instruments due to the prevalence of market risk in relation to the return of the premiums paid. The changes in fair value recorded during the year due to the change in its own credit rating were positive by 229 million euro and related to derivatives and Debt securities - Other. The values of derivative instruments as at 31 December 2022 include the results of the offsetting of accounts between positive and negative gross balances of hedging derivatives undertaken with the legal clearing agent LCH Ltd. as they meet the requirements set out in IAS 32, paragraph 42. 2.2 Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities The aggregate Financial liabilities held for trading includes subordinated liabilities represented by Due to banks for 214 million euro and Due to customers for 36 million euro. 2.3 Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts As at 31 December 2022, structured debts classified under Financial liabilities held for trading amounted to 300 million euro due to customers and 57 million euro due to banks, attributable to short selling of fixed-rate bonds indexed to inflation, as an additional component. SECTION 3 \u2013 FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE \u2013 CAPTION 30 3.1 Financial liabilities designated at fair value: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal value Fair value Fair value (*) Nominal value Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to banks - - - - - - - - - - 1.1 Structured - - - - X - - - - X 1.2 Other - - - - X - - - - X of which: - commitments to disburse funds - X X X X - X X X X - financial guarantees given - X X X X - X X X X 2. Due to customers 5 - 4 - 4 5 - 4 - 4 2.1 Structured 5 - 4 - X 5 - 4 - X 2.2 Other - - - - X - - - - X of which: - commitments to disburse funds - X X X X - X X X X - financial guarantees given - X X X X - X X X X 3. Debt securities 9,875 - 8,761 30 8,719 3,634 6 3,638 26 3,566 3.1 Structured 9,875 - 8,761 30 X 3,634 6 3,638 26 X 3.2 Other - - - - X - - - - X Total 9,880 - 8,765 30 8,723 3,639 6 3,642 26 3,570 (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. The Group has classified the LECOIP 3.0 for the employment agreements, terminated early, of employees of Group companies and life policies connected to social initiatives, managed by the Bank based on fair value, under Amounts due to customers. Sub-caption 3.1 Debt securities - Structured comprised certificates which provide for partial or full redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014 (certificates with guaranteed or protected capital). As they were issued after 1 January 2020, these are classified under Financial liabilities designated at fair value (Fair Value Option), as a result of the Bank\u2019s implementation of a business model based on a banking book approach, with the goal of generating stable inflows. Certificates representing Financial liabilities designated at fair value record the related changes in fair value attributable to changes in own credit risk in the statement of comprehensive income (shareholders\u2019 equity). Changes in the Bank\u2019s own credit rating during the year were negative by 47 million euro. 3.2 Breakdown of \u201cFinancial liabilities designated at fair value\u201d: subordinated liabilities As at 31 December 2022, the Group did not have any subordinated liabilities classified under Financial liabilities designated at fair value. SECTION 3 BIS \u2013 FINANCIAL LIABILITIES PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE PURSUANT TO IAS 39 - CAPTION 35 The breakdown of the IAS 39 captions included in caption 35 of the Balance sheet liabilities pertaining to insurance companies is provided below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 35 Financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39 - Caption 35 31.12.2022 31.12.2021 40. Financial liabilities held for trading 9 103 50. Financial liabilities designated at fair value through profit or loss 71.565 84.667 60. Hedging derivatives 170 - Total Caption 35 71.744 84.770 3.1 Bis Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cashl liabilities 1. Due to banks - - - - - - - - - - 2. Due to customers - - - - - - - - - - 3. Debt securities - - - - X - - - - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - - 3.1.2 Other bonds - - - - X - - - - - 3.2 Other - - - - X - - - - X 3.2.1 Structured - - - - X - - - - - 3.2.2 Other - - - - X - - - - - Total A - - - - - - - - - - B. Derivatives 1. Financial derivatives X 1 8 - X X - 42 61 X 1.1 Trading X 1 - - X X - 38 61 X 1.2 Fair value option X - 8 - X X - 4 - X 1.3 Other X - - - X X - - - X 2. Credit derivatives X - - - X X - - - X 2.1 Trading X - - - X X - - - X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 1 8 - X X - 42 61 X Total (A+B) X 1 8 - X X - 42 61 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.2 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities With regard to Financial liabilities held for trading: subordinated liabilities, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.3 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts With regard to Financial liabilities held for trading: structured debts, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.4 Bis Financial liabilities measured at fair value: breakdown (millions of euro) Transaction type/Values 31.12.2022 31.12.2021 Nominal value Fair value Fair value (*) Nominal value Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to banks - - - - - - - - - - 1.1 Structured - - - - X - - - - X 1.2 Other - - - - X - - - - X 2. Due to customers 71,565 - 71,565 - 79,141 84,667 - 84,667 - 85,269 2.1 Structured - - - - X - - - - X 2.2 Other 71,565 - 71,565 - X 84,667 - 84,667 - X 3. Debt securities - - - - - - - - - - 3.1 Structured - - - - X - - - - X 3.2 Other - - - - X - - - - X Total 71,565 - 71,565 - 79,141 84,667 - 84,667 - 85,269 (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.5 Bis Breakdown of \u201cFinancial liabilities measured at fair value\u201d: subordinated liabilities There were no subordinated liabilities classified under Financial liabilities measured at fair value as at 31 December 2022. 3.6 Bis Hedging derivatives: breakdown by type of hedge and level (millions of euro) Fair value 31.12.2022 Notional value Fair value 31.12.2021 Notional value Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A) Financial derivatives - 170 - 1,241 - - - - 1) fair value - - - - - - - - 2) cash flows - 170 - 1,241 - - - - 3) foreign investments - - - - - - - - B) Credit derivatives - - - - - - - - 1) fair value - - - - - - - - 2) cash flows - - - - - - - - Total - 170 - 1,241 - - - - 3.7 Bis Hedging derivatives: breakdown by hedged portfolio and type of hedge (millions of euro) Transactions/Type of hedge FAIR VALUE CASH FLOW FOREIGN INVESTM. Specific Generic Specific Generic Interest rate risk Foreign exchange risk Credit risk Price risk Various risks 1. Financial assets available for sale - - - - - X - X X 2. Loans - - - X - X - X X 3. Investments held to maturity X - - X - X - X X 4. Portfolio X X X X X - X - X 5. Other transactions - - - - - X - X - Total assets - - - - - - - - - 1. Financial liabilities - - - X - X 170 X X 2. Portfolio X X X X X - X - X Total liabilities - - - - - - 170 - - 1. Forecast transactions X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X - X - - SECTION 4 \u2013 HEDGING DERIVATIVES \u2013 CAPTION 40 4.1 Hedging derivatives: breakdown by type of hedge and level (millions of euro) 31.12.2022 Notional value 31.12.2021 Notional value Fair value Fair value Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A) Financial derivatives - 5,346 - 191,704 - 4,868 - 111,607 1) Fair value - 5,093 - 178,117 - 2,814 - 102,604 2) Cash flows - 253 - 13,408 - 2,054 - 9,003 3) Foreign investments - - - 179 - - - - B. Credit derivatives - - - - - - - - 1) Fair value - - - - - - - - 2) Cash flows - - - - - - - - Total - 5,346 - 191,704 - 4,868 - 111,607 As at 31 December 2022 the Group had undertaken hedging transactions involving foreign investments, relating to the equity investment in Reyl & Cie SA, based in Switzerland. 4.2 Hedging derivatives: breakdown by hedged portfolio and type of hedge (millions of euro) Transactions/Type of hedge FAIR VALUE CASH FLOW FOREIGN INVESTM. Specific Generic Specific Generic debt securities and interest rates equities and stock indices foreign exchange rates and gold credit risk commodities other 1. Financial assets measured at fair value through other comprehensive income 68 - 16 - X X X - X X 2. Financial assets measured at amortised cost 972 X 161 - X X X - X X 3. Portfolio X X X X X X 3 X 210 X 4. Other transactions - - - - - - X - X - Total assets 1,040 - 177 - - - 3 - 210 - 1. Financial liabilities 545 X 625 - - - X - X X 2. Portfolio X X X X X X 2,703 X 43 X Total liabilities 545 - 625 - - - 2,703 - 43 - 1. Forecast transactions X X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X X - X - - The table indicates negative fair values of hedging derivatives, broken down in relation to asset or liability hedged and type of hedge. Considering the values gross of netting in the financial statements, these continue to refer mainly to macro hedges of portfolios of liabilities represented by core deposits and debt securities under assets. Cash flow hedges refer to funding through floating-rate securities issued used to fund fixed-rate investments. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-954": { "value": "A.4 \u2013 INFORMATION ON FAIR VALUE FAIR VALUE, INDEPENDENT PRICE VERIFICATION AND PRUDENT VALUE OF FINANCIAL INSTRUMENTS The framework of financial measurement at fair value is based on three pillars: fair value measurement according to the IAS/IFRS, independent price verification (IPV) and prudent value measurement. The latter two are established by the Capital Requirement Regulation (CRR). The paragraphs below describe the methods applied by the Intesa Sanpaolo Group to implement and use those elements. General fair value principles The Intesa Sanpaolo Group governs and defines the fair value measurement of financial instruments through the Group Guidelines and Rules for Valuation of Financial Instruments at Fair Value, prepared by the Market and Financial Risk Management Head Office Department and applied by the Parent Company and all consolidated subsidiaries, including the Insurance Companies. The \u201cGuidelines for Valuation of Financial Instruments at Fair Value\u201d, once a favourable opinion has been given by the Group Financial Risk Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of the Risks and Sustainability Committee. The \u201cRules for Valuation of Financial Instruments at Fair Value\u201d are reviewed, revised and approved at least on an annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by the Management Bodies, and which also reviews material changes and updates proposed by the Market and Financial Risk Management Head Office Department. The \u201cRules for the Measurement of Unlisted Equity Investments\u201d, drawn up by the Group M&A and Equity Investments Head Office Department and approved by the Group Financial Risk Committee, govern the fair value measurement of unlisted equities and financial instruments with unlisted equities as their underlying. IFRS 13, which harmonises the measurement rules and the related disclosure, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e. not as part of the compulsory liquidation or a below-cost sale) as at the measurement date. Fair value is a market measurement criterion, not specifically referring to a single bank. Underlying the definition of fair value is the assumption that the Bank is carrying out normal operations, without any intention of liquidating its assets, significantly reducing the level of operations or carrying out transactions at unfavourable conditions. The bank measures the fair value of an asset or liability by adopting the assumptions that would be used by market participants when pricing an asset or liability, presuming that they act with a view to satisfying their own economic interest in the best way possible. Measurement at fair value presumes that the asset is sold or the liability transferred: a. in the principal active market for the asset or liability; b. in the absence of a major market, in the most advantageous active market for the asset or liability. The bank is not required to conduct an exhaustive study of all possible markets to identify the major market or, in the absence of the major market, the most advantageous market, but must take into account all the reasonably available information. If there is no evidence to the contrary, the market that the entity normally operates in to sell the asset or transfer the liability is assumed to be the major market or the most advantageous market, if there is no major market. The Intesa Sanpaolo Group considers the principal market of a financial asset or liability to be the market in which the Intesa Sanpaolo Group generally operates. In accordance with IFRS 13, the Group considers an active market to be a market where transactions in an asset or liability occur with sufficient frequency and volume to provide useful information for determining price on an ongoing basis. More specifically, a financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. In specific cases, governed by the Guidelines and Rules for Valuation of Financial Instruments at Fair Value, and despite being quoted on regulated markets, relevant research is carried out to verify the significance of the official market values. In the event of a significant reduction in the volume or level of operations compared to normal operations for the asset or liability (or for similar assets or liabilities) highlighted by a number of indicators (number of transactions, limited significance of market prices, significant increase in implicit premiums for liquidity risk, widening or increase of the bid-ask spread, reduction or total lack of market for new issuances, limited publicly-available information), analyses of the transactions or of the quoted prices must be carried out. A reduction in the volume or the level of activity alone may not indicate that the price of a transaction or the quoted price does not represent fair value or that the transaction in that market is not ordinary. If an entity determines that a transaction price or quoted price does not represent fair value (e.g., non-ordinary transactions) an adjustment to the transaction prices or listed prices is required if the entity uses those prices as the basis for fair value measurement and that adjustment may be significant with respect to the fair value as a whole. The fair value of financial instruments The presence of quoted prices in an active market represents the best evidence of fair value and these prices are therefore the quoted prices to be used on a priority basis for the measurement of financial assets and liabilities. If there is no active market, the fair value is determined using valuation techniques aimed, ultimately, at establishing the price the product would have had, at the measurement date, in an arm\u2019s length exchange motivated by normal business considerations. The choice of the above measurement methods is not optional, because they must be applied in hierarchical order: the availability of a price stated in an active market prevents the use of one of the other measurement approaches. Inputs of the valuation techniques The inputs are defined as the assumptions that market participants would have used to determine the price of the asset or the liability, including assumptions regarding risk, such as, for example, the risk relating to a particular valuation technique used to measure fair value or the risk relating to the inputs of the valuation technique. The inputs may be observable or unobservable. Observable inputs are those produced using market data, such as publicly available information on operations or actual events, which reflect the assumptions that market participants would use in determining the price of the asset or the liability. Unobservable inputs are those for which no market information is available and that are produced using the best available information regarding the assumptions that market participants would use to determine the price of the asset or the liability. Fair value hierarchy IFRS 13 establishes a fair value hierarchy in which inputs to fair value measurement techniques are divided into three levels. That hierarchy assigns top priority to (unadjusted) quoted prices on active markets for identical assets or liabilities (level 1 data) and the lowest priority to unobservable inputs (level 3 data). Specifically: \u2013 fair value level 1 applies when an instrument is measured directly on the basis of (unadjusted) quoted prices on active markets for identical assets or liabilities to which the entity has access on the measurement date; \u2013 fair value level 2 applies when a price has not been found on an active market and the instrument is measured according to valuation techniques, on the basis of observable market parameters, or of the use of parameters that are not observable but are supported and confirmed by market evidence, such as prices, spreads or other inputs; \u2013 fair value level 3 applies when fair value is measured using various inputs, not all of which are directly drawn from observable market parameters, and which thus entail estimates and assumptions by the valuator. If various inputs are used to measure the fair value of an asset or liability, classification in the hierarchy is determined on the basis of the lowest-level input used in measurement. When assigning a level in the fair value hierarchy, priority is given to the inputs of the valuation techniques rather than the valuation techniques themselves. The attachment \u201cFair Value Hierarchy Rules\u201d to the \u201cRules for Valuation of Financial Instruments at Fair Value\u201d defines, with regard to the respective financial instrument valuation models/inputs, the basic rules that market inputs must comply with in order to be classified as Level 2, and the significance thresholds which, when overrun, result in the assignment of Level 3. For level 1 financial instruments, the current bid price is used for financial assets and the current ask price for financial liabilities, struck on the principal active market at the end of the reference period. For financial instruments with a scarcely significant bid-ask spread or for financial assets and liabilities with offsetting market risks, mid-market prices are used (again referred to the last day of the reference period) instead of the bid or ask price. The following are considered as level 1 financial instruments: contributed bonds (i.e. bonds for which the Composite Bloomberg Bond Trader is available from the Information Provider Bloomberg, or, alternatively, a price on the EuroMTS circuit, or at least three prices available from the Information Provider Bloomberg), contributed equities (i.e., quoted on the official market of reference), contributed UCITS funds (covered by EU directives), spot exchange rates, and derivatives for which prices are available on an active market (for example, exchange traded futures and options). Conversely, all other financial instruments that do not belong to the above-described categories or that do not have the contribution level defined by the Guidelines and Rules for Valuation of Financial Instruments at Fair Value are not considered level 1 instruments. When no listing on an active market exists or the market is not functioning regularly, that is when the market does not have a sufficient and continuous number of trades, and bid-ask spreads and volatility that are not sufficiently contained, the fair value of the financial instruments is mainly determined through the use of valuation techniques whose objective is the establishment of the price at which, in an orderly transaction, the asset is sold or the liability transferred between market participants, as at the measurement date, under current market conditions. In the case of instruments classified as level 2, the valuation is based on prices or credit spreads presumed from the official listing of instruments which are similar in terms of risk factors, using a given calculation methodology (valuation model). The use of this approach requires the identification of transactions on active markets in relation to instruments that, in terms of risk factors, are comparable with the instrument to be measured. Level 2 calculation methodologies reproduce prices of financial instruments quoted on active markets (model calibration) and do not contain discretional parameters \u2013 parameters for which values may not be inferred from quotations of financial instruments present on active markets or fixed at levels capable of reproducing quotations on active markets \u2013 that significantly influence the final measurement. The following are measured using level 2 input models: \u2013 bonds without official quotations expressed by an active market and whose fair value is determined through the use of an appropriate credit spread which is estimated starting from contributed and liquid financial instruments with similar characteristics; \u2013 loans whose fair value is determined through the use of an appropriate credit spread which is estimated starting from market data of financial instruments with similar characteristics; \u2013 derivatives (including securitised derivatives) measured through specific models, fed by input parameters (such as yield, foreign exchange and volatility curves) observed on the market; \u2013 structured credit products (ABSs, HY CLOs, CDOs) for which significant prices are not available and whose fair value is measured using valuation techniques that consider parameters that can be gathered from the market; \u2013 non-contributed equity instruments measured based on direct transactions, that is significant transactions on the stock registered in a time frame considered to be sufficiently short with respect to measurement date and in constant market conditions, or using the \"relative\" valuation models based on multipliers; \u2013 non-UCITS hedge funds, provided the Level 3 instruments do not exceed a set threshold. In case of instruments classified as level 3, the calculation of the fair value is based on valuation models which consider input parameters not directly observable on the market, therefore implying estimates and assumptions on the part of the valuator. In particular, the valuation of the financial instrument uses a calculation methodology which is based on specific assumptions of: \u2013 the development of future cash flows, which may be affected by future events that may be attributed probabilities presumed from past experience or on the basis of the assumed behaviour; \u2013 the level of specific input parameters not quoted on active markets, for which information acquired from prices and spreads observed on the market is in any case preferred. Where this is not available, past data on the specific risk of the underlying asset or specialised reports are used (e.g. reports prepared by Rating agencies or primary market players). The following are measured using this method: \u2013 some transactions in derivatives, bonds, or complex structured credit instruments measured using level 3 inputs; \u2013 hedge funds in which the level 3 assets are above a set limit; \u2013 private equity funds, private debt funds, real estate funds and closed-end funds resulting from sales of non-performing loans valued at NAV, with possible discounts; \u2013 shareholdings and other equities measured using models based on discounted cash flows or using equity methods; \u2013 loans whose fair value is determined through the use of a credit spread that does not meet the criteria to be considered level 2; \u2013 loans with underlying equity risk, whose fair value is calculated based on the discounting of expected contractual flows. The transfer of fair value levels of financial assets and financial liabilities measured at fair value on a recurring basis occurs, as established by IFRS 13, as follows: the transfer between levels 2 and 3 occurs upon a change in the observability or significance of an input to the measurements; and the transfer between levels 1 and 2 or 3 occurs upon a change in the availability of prices in an active market. For OTC derivatives, the initial choice of the level of fair value hierarchy depends on the degree of observability and significance of the parameters used to determine the risk-free component. The calculation of the counterparty/issuer default risk component may result in a transfer to level 3 when the current exposure is positive for the bank and the counterparty is in non-performing loan status, or when the determination of default risk requires unobservable inputs and the bilateral credit value adjustment (bCVA) component is significant when compared to the overall fair value of the netting set, or when the counterparty's sensitivity to downgrading is significant when compared to the overall fair value of the netting set. For non-contributed equity instruments, the change of the level occurs: \u2212 when inputs observable on the market (e.g., prices defined based on comparable transactions on the same instrument between independent and informed counterparties) have become available during the period. In this case, the Intesa Sanpaolo Group reclassifies from level 3 to level 2; \u2212 when the directly or indirectly observable elements used as the basis for the valuation cease to exist, or when they are no longer up to date (e.g., comparable transactions that are no longer recent or multiples that are no longer applicable). In this case, the Intesa Sanpaolo Group uses valuation techniques that use unobservable inputs. Valuation of financial instruments The valuation of financial instruments entails the following phases: - identification of the sources for valuation: for each asset class, the Guidelines and Rules for Valuation of Financial Instruments at Fair Value establish the processes that are necessary to identify market parameters and the manner according to which such data must be extracted and used; - validation and processing of input data for periodic valuation: this stage consists of the accurate verification, at each accounting measurement date, of the market parameters used (verifying the integrity of data contained on the proprietary platform with respect to the source of contribution), reliability tests (consistency of each single figure with similar or comparable figures) and verification of concrete application means; - certification of the measurement methods: this phase is aimed at verifying the consistency and the adherence of the various measurement techniques used with current market practice, at highlighting any critical aspects in the measurement models used and at determining any adjustments necessary for measurement; - monitoring and revision of the measurement methods: the monitoring consists of the ongoing checking of the adherence to the market of the valuation model and enables the timely discovery of any gaps, in order to initiate the necessary checks and measures. Identification, certification and processing of the input data for the measurements The fair value calculation process and the need to distinguish between products which may be measured on the basis of effective market quotes rather than through the application of measurement techniques, highlight the need to establish univocal principles in the determination of market parameters. To this end, the Guidelines and Rules for Valuation of Financial Instruments at Fair Value establish the processes needed to identify the market parameters, the contribution sources considered appropriate and how the data must be received (cut-offs) and used for the measurement of financial instruments held for any purpose in the proprietary portfolios of the Parent Company and its subsidiaries. The same sources are used in measurements carried out for third parties under Service Level Agreements, entered into in advance. The adequacy of the input data for the measurements is guaranteed by the respect of reference requirements, which are based on comparability, availability and transparency of the data, or the possibility of extracting the figure from one or more info providing systems, measuring the contribution bid-ask, and lastly, for OTC products, verifying the comparability of the contribution sources. The use of all market parameters in Intesa Sanpaolo is subordinated to their certification by the Market and Financial Risk Management Head Office Department, in terms of specific controls (verifying the integrity of data contained on the proprietary platform with respect to the source of contribution), reliability tests (consistency of each single figure with similar or comparable figures) and verification of concrete application means. Certification of measurement methods The measurement methods used by the Intesa Sanpaolo Group are certified by the IMI CIB Risk Management Head Office Department, with the involvement of all relevant structures. The purpose of the certification is to verify the consistency of the methods with current market practice, to highlight any problems or limitations, and to determine any fair value adjustments, in accordance with the applicable regulations. The certification process considers all aspects of the measurement method (basic assumptions, mathematical derivation, any approximations, numerical algorithms used, inputs and outputs) but also all contextual elements that are relevant to the management, including the characteristics of the associated products (payoffs, early termination clauses, etc.), any ancillary agreements (e.g. netting or collateral agreements), the market where the products are traded, and how they are used by end users (e.g. precision vs. performance, calculation of risk measures, etc.). These aspects are subject to qualitative and quantitative analysis and are duly reported in the internal documentation. The possibility of independent validation issued by high standing financial service companies is also envisaged in highly- complex cases and/or in presence of market turbulence (market dislocation). At the end of the certification process, the measurement method is recorded in the Rules for Valuation of Financial Instruments at Fair Value. Monitoring and review of measurement methods As required by the applicable regulations, the measurement methods used are subject to ongoing monitoring of their performance with respect to the evolution of financial instruments, markets and methodological innovations developed by the scientific community, in order to ensure their continuous alignment to the market, promptly highlight any inadequacies and initiate the necessary checks and actions. The Rules for Valuation of Financial Instruments at Fair Value detail all elements considered for the periodic monitoring and revision of the measurement methods. The functions involved in the monitoring process are the same as those involved in the process of certification of the measurement methods mentioned above and in the IPV process governed by the Guidelines and Rules on Independent Price Verification. Valuation risk: fair value adjustments The Intesa Sanpaolo Group defines valuation risk as the risk of losses arising from the valuation uncertainty for the fair value exit price of financial instruments, due to any limitations of the measurement techniques used or particular market conditions. The main measure of the valuation risk associated with a financial instrument are the fair value adjustments, which are designed to take into account the valuation uncertainty or the difficulty in the disposal of specific financial positions, and may relate to a single financial instrument or to the net position for a particular risk factor. The adjustments may be calculated as add-ons to the valuation or included directly in the valuation. They are regularly reviewed, also considering market trends, or the introduction of new liquid instruments, different calculation methodologies and, in general, methodological advances which may also lead to significant changes in measurement methods chosen and their implementation. In particular, the Intesa Sanpaolo Group envisages fair value adjustments for the following categories of measurement uncertainty: - uncertainty of input data: any valuation uncertainty related to the input data for the valuation (whether mid, bid or ask) is measured with respect to temporary or structural conditions on the markets or in relation to the size of the values held (in the case of concentration), and where necessary a fair value adjustment is made, quantifying the consequent impact on the valuations; - illiquidity of the underlying positions or risk factors: similarly to the case above, the market bid-ask spread is measured and, where necessary, a fair value adjustment is made, quantifying the consequent impact on the valuations; - model risk: this is based on the identification and use of variants of the same model or alternative models, with which to carry out comparison analyses aimed at quantifying the variability of the valuations (in particular any directionality of the price when the model changes) and the behaviour of the model in various market scenarios (stress tests). The quantification of the fair value adjustment is based, where possible, on easily comprehensible and measurable financial variables (e.g. vega, delta, correlation shift); - counterparty and funding risk: counterparty and funding risks, collectively referred to as XVA, include Bilateral Credit Value Adjustment (bCVA) and Funding Value Adjustment (FVA). The bCVA takes account of the counterparty risk premium associated with the possibility that the counterparties may not honour their mutual commitments (for example in the event of bankruptcy). This component derives, in turn, from two components: the Credit Value Adjustment (CVA, negative) and the Debt Value Adjustment (DVA, positive), which consider, respectively, the scenarios where the Counterparty goes bankrupt before the Bank (and the Bank has a positive exposure towards the Counterparty), and vice versa the scenarios where the Bank goes bankrupt before the Counterparty (and the Bank has a negative exposure towards the Counterparty). The Funding Value Adjustment (FVA, negative), on the other hand, takes into consideration the funding risk premium, connected to the costs of funding the cash flows (coupons, dividends, collateral, etc.) generated by the Bank's overall OTC derivatives portfolio. The calculation of the XVAs depends on the overall exposure between the two counterparties, calculated using techniques for simulating the underlying risk factors of the transactions considered, taking into account any counterparty risk mitigation arrangements (in particular netting and collateralisation agreements), as well as any contractual clauses. The calculation of the XVAs also depends on the Loss Given Defaults (LGDs) based on the estimated value of the expected recovery in the event of counterparty default, and the probability of counterparty default (PD). LGDs and PDs are obtained from credit default swap market quotes or are based on internal estimates by sector/rating used for credit risk. In addition, the FVA calculation is based on a funding curve representative of the best market counterparties that the Bank could renegotiate transactions with, in accordance with the most IFRS 13 advantageous market principle, as there is currently no real main market for these transactions. The management process for fair value adjustments is formalised in the Guidelines and Rules for Valuation of Financial Instruments at Fair Value and the Rules for the Valuation of Unlisted Equity Investments with appropriate calculation methodologies on the basis of the different configurations of the points set out above, and is carried out in the most objective, consistent and systematic manner possible by the IMI CIB Risk Management Head Office Department and the Group M&A and Equity Investments Head Office Department. The introduction and release of the fair value adjustments depend on the factors described above. Such processes are a combination of quantitative elements that are rigidly specified and qualitative elements, valued based on the different configuration over time of the risk factors which generated the adjustments. Thus, the estimates subsequent to initial recognition are always guided by the mitigation or elimination of said risks. For new products, the decision to apply the adjustments is taken during the new product approval process, upon the proposal of the IMI CIB Risk Management Head Office Department. The application of the adjustments is subject to an authorisation procedure that, above a certain warning threshold defined for specific cases, involves both the area of the Chief Risk Officer and the Manager responsible for preparing the Company\u2019s financial reports. A.4.1 Fair value levels 2 and 3: valuation techniques and inputs used The sections below provide a summary of the information, by type of financial instrument (securities, derivatives, structured products, hedge funds, and loans), on the valuation models used. I. Valuation of non-contributed debt securities The fair value of non-contributed bonds is measured using the income approach, i.e. by calculating the present value of expected future cash flows using an appropriate risk premium represented by the credit spread, identified on the basis of contributed and liquid financial instruments with similar characteristics. The sources used for this measurement are the following: - contributed and liquid debt securities of the same issuer; - credit default swaps on the same reference entity; - contributed and liquid securities of an issuer with the same rating and belonging to the same sector. In any case, the different seniority of the security to be priced is considered with regard to the issuer\u2019s debt structure. In the case of Italian public issuers, a rating/maturity matrix is defined on the basis of the spread levels on government issues, to which the spreads among the various rating/maturity classes with respect to public issues (regions, provinces, municipalities, government entities) are applied. When applying the spread for the pricing of the non-contributed instrument, if the estimated \u2018fair\u2019 credit curve does not respect the same characteristics of the instrument, correction factors are considered. Also, for bonds that are not quoted on active markets, an extra spread, estimated based on the bid/ask spread recorded on the market, is added to the \u201cfair\u201d credit spread component, to take account of the higher premium demanded by the market compared to similar contributed securities. Finally, if the instrument includes an optional component, a further adjustment is made to the spread by adding a component designed to capture the hedging costs of the structure and any illiquidity of the underlying assets. This component is calculated based on the type of option, using the corresponding valuation models for derivatives mentioned below. Similarly, Intesa Sanpaolo\u2019s credit spread for the Banking Group\u2019s financial liabilities designated at fair value is determined and measured based on the bonds issued by the Parent Company, with regular, periodic coupons, maturity beyond one year and quoted on an active market in compliance with IAS/IFRS. The implicit credit rating is determined on the basis of market prices and subsequently adjusted through interpolation models which generate credit spread curves by type of coupon, maturity and subordination level. Similarly, the issued certificates are measured at fair value by breaking them down into the following two components: an issued bond, measured as described above, and an option component, measured using the corresponding derivative pricing models described below. Finally, measurement of the financial liabilities designated at fair value of the Insurance Companies (mainly liabilities associated with unit-linked investment contracts that do not present significant insurance risk) reflects the market value of the underlying assets, which are determined in application of the various methods described herein. II. Valuation of loans Loans are measured at fair value through contributions from info providers when available or by calculating the present value of expected future cash flows using an appropriate credit spread, identified starting from the following sources: - contributed loans on the market; - sector/rating-specific loan market curves; - contributed securities of the same issuer; - credit default swaps on the same reference entity. In any case, the different seniority of the instrument to be priced is considered with regard to the issuer\u2019s debt structure. When applying the spread for the pricing of the loan, if the estimated \u2018fair\u2019 credit curve does not respect the same characteristics of the instrument, correction factors are considered. Moreover, where, in determining the credit spread of the loans, reference is made to the curves created through bonds, a Bond \u2013 Loan basis must be applied, to capture the different structure of the market, if any, and the different type of loan. In order to consider the premium required by the market for illiquid and/or structured instruments, several adjustments are applied to the credit spread. Loans with an underlying unlisted equity risk (which include financial instruments that, pursuant to IAS 32, cannot be classed as equity, e.g. loans convertible into shares) are usually measured by discounting the cash flows provided for by the contract. Since these are debt securities, the cash flows are normally discounted using a rate consisting of the sum of: a risk free rate, a spread deriving from the CDS or measured on listed securities or similar disbursements, and any additional risk premium. In the case of non-performing loans, the fair value is determined based on the recoverable amount of the position. This estimate is made taking into account the contractual elements that characterise the loan and may involve, for example, the valuation of the cash flows from the sale of the real estate pledged as collateral or the valuation of any capital instruments that may be acquired following the introduction of an equity conversion clause for the position. III. Valuation of OTC derivatives Derivatives, if not traded on regulated markets, are Over The Counter (OTC) instruments, which are bilaterally exchanged with market counterparties and are measured through specific measurement methods and input parameters (such as, for example, interest rate, foreign exchange and volatility curves) observed on the market and subject to the certification and monitoring illustrated above. The fair value of an OTC derivative is calculated considering the risk premium related to the various underlying risk factors. Specifically, there are two relevant cases, according to whether or not the instrument is subject to collateralisation agreements (CSAs) aimed at mitigating the counterparty and funding risk: a. for CSA transactions with characteristics that reduce counterparty and funding risk to a negligible level, the fair value is calculated according to the non-arbitrage principle, by including the market risk premium related to the risk factors underlying the contract (e.g. interest rates, volatility, etc.), and, in the most significant cases, using the rate of remuneration for the collateral as the discount rate for the future cash flows; b. for transactions without CSAs, or with CSAs with characteristics that do not reduce the counterparty and funding risk to a negligible level (e.g., One Way CSAs, or with non-negligible limits or minimum transfer amounts), the fair value of the instrument may be stated, under appropriate circumstances, as the sum of the reference (or base) value, equal to the price of the corresponding collateralised instrument, and several additional valuation components related to the counterparty and funding risk premium, referred to jointly as XVA (see \"Valuation risk: fair value adjustments\u201d). In view of the number and complexity of the OTC derivatives, a systematic reference framework has been developed which represents the common elements (calculation algorithms, processing models, market data used, basic assumptions of the model) that are used for their measurement. The table below illustrates the main methods used to measure OTC derivatives based on the category of underlying asset. Underlying class Valuation models Market data and input parameters Interest rate Net Present Value, Black-Scholes, SABR, Libor Market Model, Hull-White, Bivariate log-normal, Rendistato, Hagan exact formula for CMS Interest rate curves (deposits, FRA, Futures, OIS, swap, basis swap, CMS, Rendistato basket), cap/floor/swaption option volatility, correlation between interest rates Foreign exchange rate Net present Value FX, Garman-Kohlhagen, Lognormal with Uncertain Volatility (LMUV), Stochastic Local Volatility (SLV), Local Volatility (LV) Interest rate curves, spot and forward FX curves, FX volatility, \"quanto\" volatility and correlations Equity Accrual, Net present Value Equity, Generalised Black-Scholes, Heston, Local Volatility, Jump Diffusion Interest rate curves, underlying asset spot rate, expected dividends, underlying asset volatility and correlation between underlying assets, \"quanto\" volatility and correlations Inflation Inflation NPV, Inflation SABR, Inflation Jarrow- Yildirim Nominal and inflation interest rate curves, interest and inflation rate volatility, seasonality ratios of consumer price index, correlation between inflation rates Commodity Net present Value Commodity, Generalised Black- Scholes, Independent Forward, Local Volatility, 2- Factors Jump Diffusion Interest rate curves, spot rate, forwards and futures of underlying assets, underlying asset volatility and correlation between underlying assets, \"quanto\" volatility and correlations Loans Net present Value, CDS Option (or log-normal model), Contingent CDS Probability of default, Recovery rate, credit index volatility. As envisaged by IFRS 13, in determining fair value the Intesa Sanpaolo Group also takes into account the effect of non- performance risk. This risk includes changes in the counterparty credit rating and changes in the issuer\u2019s own credit risk. IV. Valuation model for structured credit products With regard to asset-backed securities (ABSs), if significant prices are not available, valuation techniques are used that take into account parameters that can be gathered from an active market (level 2 inputs) or, where parameters cannot be observed, estimated parameters (level 2 or 3 inputs, where immaterial or material). In this case, the cash flows are obtained from infoproviders or specialised platforms, where available, or are taken from the business plan of the transaction, supplemented with periodic reporting, such as the case of Non-Performing Loans (NPLs) and Unlikely to Pay (UTP); the spreads are gathered from prices available on the market/market info provider, further strengthened by a qualitative analysis relative to the performance of the underlying assets presumed from periodic investor reports and aimed at highlighting structural aspects that are not (or not fully) encompassed by the analyses described above, relating to the actual future ability to pay the expected cash flows and analyses of relative value with respect to other similar structures. In the case of securitised high-yield loans to European corporate borrowers (CLO HY loans), valuation techniques call for calculation of the net present value of the expected cash flows, determined through specialised platforms, discounted using market spreads. When modelling expected future flows, account is taken of all contractual aspects of the HY CLO loans that may influence the waterfall, i.e. the distribution of cash flows from the collateral on the notes. After this valuation, credit analyses on underlying assets are fine-tuned to incorporate further valuation elements not included in the quantitative models. In particular, a Qualitative Credit Review is provided for and entails an accurate analysis of credit aspects referred to the specific structure of the HY CLO and to the collateral present. This is to identify any present or future weaknesses which emerge from the characteristics of the underlying assets, which could have been missed by rating agencies and as such not fully considered in the valuations described in the previous point. V. Valuation of non-contributed equities Level 2 equities include: - equities measured based on direct transactions, that is significant transactions on the stock registered in a time frame considered to be sufficiently short with respect to measurement date and in constant market conditions; - equities measured using relative methods, based on multipliers: implied multiples in transactions in comparable listed or unlisted companies, within a time frame deemed sufficiently short with respect to the time of measurement and under constant market conditions (M&A multiples) or implicit multiples in the stock market prices of a sample of comparable companies (stock market multiples). Level 3 equities for which the \u201crelative\u201d models described above are not applicable in significant terms, and, therefore, \u201cabsolute\u201d valuation models are used, include: - equities for which analytical models based on flows are used, which determine the value through estimates of the cash or income flows that the company is expected to generate over time, discounted using an appropriate rate based on the level of risk of the instrument; - equities measured based on net worth criteria such as NAV or Adjusted Net Asset Value (ANAV), which estimates the fair value of the various components of the assets of the investee. Any values deemed representative of the fair value of the equity instrument deriving from contractual clauses (for example, options) are classified in level 2 or 3 of the fair value hierarchy, according to the observability of the inputs used in the valuation. Specifically, if the negotiation of the clause resulted in strike prices or pre-defined algorithms and multiples, the instrument is classified in level 2. The cost criterion as estimate of fair value is used to a lesser extent, where none of the previous methods are applicable due to lack of sufficient information, and in the cases where there is a wide range of possible fair value measurements and it is not possible to identify the most appropriate value among these. This case also includes Equity Instruments which, in accordance with IAS 32, have the characteristics to be considered as equities. VI. The valuation of hedge funds The fair value of a hedge fund corresponds to the Net Asset Value (NAV) provided by the fund administrator, to which an adjustment can be applied, deriving from a measurement process aimed at capturing the main risk factors that the management of the funds is subject to, which consist of the following two types: - counterparty (broker) risk, i.e. the risk that the assets of the fund are exposed to when a single service provider is entrusted with prime brokerage or custodian activities, subject to the risk of default; - illiquidity risk, i.e. the risk that the assets of the fund are illiquid due to the limited prices available or due to a lack of information on the assessment policies used by the fund. These risks are assessed on the basis of the information contained in the documentation received periodically from the fund managers or administrators. The fair value hierarchy level is Level 2, provided the Level 3 instruments do not exceed a set threshold. VII. The valuation of private debt funds For Private Debt AIFs (Alternative Investment Funds), the investment authorisation process involves an initial due diligence to verify the consistency between each fund's asset valuation policy and the Guidelines and Rules for Valuation of Financial Instruments at Fair Value. The fund is subsequently valued at NAV. The fair value hierarchy level is Level 3. VIII. Valuation of closed-end private equity funds, real estate funds and closed-end funds resulting from sales of non- performing loans Closed-end private equity funds are usually valued using the latest Net Asset Value approved by the asset management company (published half yearly or quarterly), adjusted solely to take into account events that have not yet occurred at the reference date of the NAV, such as: - a material transaction on a portfolio company; - the bankruptcy or liquidation of a portfolio company; - the alignment of any listed assets to current prices; - draw downs and distributions by the fund. Closed-end real estate funds are valued using the last available Net Asset Value, adjusted for any subsequent call ups or distributions and, where considered necessary, applying a discount calculated using an internal model. Specifically, this model enables the calculation of a discount on the Net Asset Value based on five different factors: (i) the size of the asset management company that manages the fund; (ii) the number of subscribers; (iii) the fund\u2019s historical return; (iv) the fund\u2019s return for the period; and (v) the level of debt. These factors are calibrated differently based on the business model and the fund\u2019s resulting risk profile, distinguishing between core, value added and opportunistic funds. With regard to closed-end funds resulting from sales of non-performing loans, where an information set is available that makes it possible to conduct an analysis of the business plan of the positions held by the fund, individually or by uniform cluster, to determine the fair value of the units of the fund, in general the Bank uses the support of an independent expert, who, among other duties, carries out a comparison of performance of the business plans of the underlying exposures, and states in its report, that the fair value determined by the expert complies with the indications from the main regulators 86 . Where it is not possible to apply the approach mentioned above, for each fund a comparison is made between the expected return of the fund and a benchmark rate, defined using a model that factors in various elements, such as: i) the fund\u2019s valuation policies, verifying whether they are compliant with criteria consistent with the definition of fair value pursuant to IFRS 13, ii) verification that there is an updated business plan and of the performance of the fund compared to the available business plan, iii) the characteristics of the fund\u2019s assets, iv) the level of the cost of funding on the market for issuing liquid instruments, v) the completeness and extensiveness of the information provided by the fund, and vi) the fund management methods. Where the expected return of the fund is higher than the defined benchmark rate, the NAV communicated by the asset management company is used as the fair value measure. Where, instead, the benchmark rate is higher than the expected return of the fund, the fair value is determined based on the NAV minus a discount, which takes account of the spread between the benchmark rate and the expected return of the fund and the average residual life of the fund (Weighted Average Life or WAL). Valuation of financial assets and liabilities not measured at fair value on a recurring basis Finally, for asset and liability financial instruments measured at amortised cost, whose fair value is determined solely for the purposes of disclosure in the notes to the financial statements, the following is noted: - the fair value of the bonds is calculated using the methods described above; - the fair value measurement of the other medium- and long-term asset and liability financial instruments is performed by discounting future cash flows using the discount rate adjustment approach, which requires credit risk factors to be taken into account in the discount rate for future cash flows; - for short-term assets and liabilities, the book value is assumed to be a reasonable approximation of fair value. For more information see paragraph A.4.5.4. As required by IFRS 13, the table below highlights, for financial assets and liabilities measured at level 3 fair value, quantitative information on the significant, unobservable inputs used in the fair value measurement. (thousands of euro) Financial assets/ liabilities Valuation technique Main non-observable input Minimum value of range of changes Maximum value of range of changes Unit Favourable changes in FV Unfavourable changes in FV Securities and loans Discounting Cash Flows Credit Spread -3 6 % 7,409 -11,764 Structured securities and loans JD model JD parameters -37 13 % 134 -192 Structured securities and loans Two-factor model Correlation -26 32 % 4,871 -3,413 ABSs Discounting Cash Flows Credit Spread -1 3 % 611 -832 CLOs Cash Discounting Cash Flows Credit Spread -6 6 % 503 -523 OTC derivatives subject to FV adjustment for CVA/DVA CVA Loss Given Default Rate (LGD) 0 100 % 3,388 -2,315 OTC derivatives subject to FV adjustment for CVA/DVA CVA Probability of default (PD) based on counterparty's internal rating CCC A Internal rating 44 -78 OTC Derivatives - Equity basket option Black - Scholes model Equity basket correlation -11.16 87.39 % 517 -759 OTC Derivatives - Equity Option Black - Scholes model Historical volatility 8.21 76.17 % 967 -1,524 OTC Derivatives - Equity Option Marshall Olkin Model Historical correlation 2.44 47.95 % 66 -43 OTC Derivatives - Spread option on swap rates Bivariate log-normal model Correlation between swap rates -71.70 71.04 % 0 -1 A.4.2 Valuation processes and sensitivity For a description of the valuation processes used by the Group for instruments measured at level 3 in a recurring and non- recurring manner, see paragraphs A.4.1 and A.4.5 respectively. As required by IFRS 13, for the financial assets and liabilities measured at level 3 fair value, the following table lists the effects of a change in one or more significant non-observable parameters used in the valuation techniques adopted to determine the fair value. Note that only the total material effects at the end of the year are shown in the table. 86 See Bank of Italy/Consob/Ivass Document no. 8 \u201cTreatment in the financial statements of sales without recourse of unlikely-to-pay loans in exchange for units of investment funds\u201d, published in April 2020. Financial assets/liabilities Non-observable parameters Sensitivity (thousands of euro) Change in non- observable parameter FVTPL and FVTOCI securities and loans Credit spread -576 1 bp FVTPL and FVTOCI securities and loans JD parameters -10 1% FVTPL and FVTOCI securities and loans Correlation 157 1% OTC Derivatives - Equity Correlation between underlying equity baskets 218 10% OTC Derivatives - Equity Historical volatility -1,076 10% OTC Derivatives - Equity CPPI Historical correlation -24 10% A.4.3. Fair value hierarchy (transfers between the different levels) A description of the policy for determining when transfers occur between the different levels of fair value hierarchy (see IFRS 13, par. 95) is provided above (see \u201cFair value hierarchy\"). A.4.4. Other information In calculating the bCVA, the Intesa Sanpaolo Group considers the net positions in derivatives of each counterparty (see paragraph A.4.1 above for further details on the measurement of derivatives). For other cases, the Group does not make use of the option provided in paragraph 48 of IFRS 13, which permits an entity \u201cto measure the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position (i.e. an asset) for a particular risk exposure or paid to transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction between market participants at the measurement date under current market conditions\u201d. General Independent Price Verification principles The Intesa Sanpaolo Group governs and defines the independent price verification process through the Group Guidelines and Rules on Independent Price Verification, documents that are coordinated by the Market and Financial Risk Management Head Office Department and applied by the Parent Company and all consolidated subsidiaries of the Banking Group. The \u201cGuidelines on Independent Price Verification\u201d, once a favourable opinion has been given by the Group Financial Risk Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of the Risks and Sustainability Committee. The level I and II \u201cRules on Independent Price Verification\u201d are revised and approved at least on an annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by the Management Bodies, and which also reviews material changes and updates proposed by the Market and Financial Risk Management Head Office Department. According to the provisions of Regulation (EU) 575/2013 (Capital Requirement Regulation \u2013 CRR), Article 4, par. 1.70 and Article 105, par. 8, the Intesa Sanpaolo Group governs the Independent Price Verification (IPV) process, which consists of the regular verification of the accuracy and independence of market prices or the data input in pricing models, carried out by an organisational unit independent from the business functions, at a frequency commensurate with the trading carried out and the nature of the market. The Intesa Sanpaolo Group has set up an IPV process with 3 levels of control in line with the provisions of Bank of Italy Circular 285/2013 (Supervisory regulations for banks), incorporated into the Integrated Internal Control System, which requires the risk management processes to be incorporated in the processes and methods for valuing the company activities, also for accounting purposes. Within the IPV, the level I, II and III control functions have the following main responsibilities: - the level I control function participates in the definition of the related methodological framework and carries out the level I implementations and controls, reporting the results to the business function and the level II control functions; - the level II control function defines the methodological and control framework, ensures alignment with current regulations and consistency between the IPV controls, accounting valuations and additional valuation adjustments (AVA) (carried out, respectively, on the basis of the Guidelines and Rules for Valuation of Financial Instruments at Fair Value and the Guidelines and Rules for Prudent Valuation of Financial Instruments at Fair Value) and supervises the level I controls and performs the level II controls; - the level III control function carries out internal audit controls to identify breaches of procedures and regulations, as well as to periodically assess the completeness, adequacy, functionality (in terms of efficiency and effectiveness) and reliability of the organisational structure of the other components of the internal control system and the IT system at Group level, at scheduled deadlines in relation to the nature and intensity of the risks. The level I and II IPV controls are qualitative and quantitative controls and are distinguished according to the type of instruments subject to control. They are applied consistently to both the input data underlying the valuations and the valuations themselves, and ensure consistency between the management valuations and the accounting valuations carried out in the various systems. They are characterised by completeness and suitability of application, absence of overlaps, sequentiality and complementarity in execution. The IPV control instruments use, as far as possible, specific applications or IT procedures, which enable extensive data analysis on a daily basis. Specifically: - the level I controls are aimed at ensuring the validation of the market data entered into the systems and are based on an in-depth analysis of the data obtained from external providers. If the level I controls detect that certain thresholds have been exceeded for the data contained in the systems, or the data is not considered correct by the level I control functions, a comparison process (challenge) is activated with the involvement of the business function and the level II control functions, in line with the degree of complexity of the report; - the level II controls are characterized by sequentiality and complementarity in execution with the level I controls and are designed to ensure alignment between management and accounting valuations, based on an in-depth analysis of consensus or counterparty data and, where these are not available, through the application of pricing models associated with the respective instruments. The results of the IPV process are analysed, assessed and coordinated by the Financial Measurements Working Group, a technical body set up specifically for this purpose, with the aim of facilitating integration and comparison between the business functions and the control functions. General prudent value principles The framework of financial measurements is completed with the prudent valuation of financial instruments measured at fair value, which involves the calculation of additional valuation adjustments for prudential purposes, without impacts on the fair value calculated for accounting purposes in accordance with the IFRS. The Intesa Sanpaolo Group governs and defines the prudent value measurement of financial instruments through the Group Guidelines and Rules for Prudent Valuation of Financial Instruments at Fair Value, prepared by the Market and Financial Risk Management Head Office Department and applied by the Parent Company and all the consolidated subsidiaries of the Banking Group. The \u201cGuidelines on Prudent Valuation of Financial Instruments\u201d, once a favourable opinion has been given by the Group Financial Risk Committee, are revised and approved at least on an annual basis by the Board of Directors, with the support of the Risks and Sustainability Committee. The \u201cRules for Prudent Valuation of Financial Instruments\u201d are revised and approved at least on an annual basis by the Group Financial Risk Committee, which is specifically delegated to do so by the Management Bodies, and which also reviews material changes and updates proposed by the Market and Financial Risk Management Head Office Department. In accordance with the provisions of Regulation (EU) 575/2013 (Capital Requirements Regulation \u2013 CRR), prudent valuation entails the calculation of specific additional valuation adjustments (AVAs) for the financial instruments measured at fair value, aimed at capturing different sources of valuation uncertainty and ensuring the achievement of a suitable level of certainty in the measurement of the positions. The total value of the AVAs is deducted from the Common Equity Tier 1 capital, without impacts on accounting fair values. The Intesa Sanpaolo Group, in line with the criteria indicated in Delegated Regulation (EU) 2016/101, is subject to the application of the core approach for the determination of AVAs both at individual and at consolidated level for all the positions measured at fair value. In particular the following AVAs are considered: - market price uncertainty: this reflects the uncertainty of the market prices, calculated at valuation exposure level; - close-out costs: it reflects the uncertainty of the exit price calculated at valuation exposure level; - model risks: it considers the valuation model risk which arises due to the potential existence of a range of different models or model calibrations, which are used by market participants, and the lack of a firm exit price for the specific product being valued; - unearned credit spreads: it reflects the valuation uncertainty in the adjustment necessary according to the applicable accounting framework to include the current value of expected losses due to counterparty default on derivative positions; - investment and funding costs: it represents the valuation uncertainty in the funding costs used when assessing the exit price according to the applicable accounting framework; - concentrated positions: it reflects the uncertainty relating to the exit price of the positions defined as concentrated; - future administrative costs: it considers administrative costs and future hedging costs over the expected life of the valuation exposures for which a direct exit price is not applied for the close-out costs AVAs for concentrated positions; - early termination: it considers the potential losses arising from non-contractual early terminations of customer trades; - operational risks: it considers the potential losses which may be incurred consequently to the operational risks connected to the valuation processes. The prudent value corresponds to the exit price from the position with a level of certainty equal to 90%. Where possible, this value is determined on the basis of a distribution of exit prices observed on the market. In all the other cases, an expert-based approach is used, referring to the qualitative and quantitative information available. The AVA value associated to the single position and to the single source of uncertainty in valuation thus corresponds to the difference between the prudent value and the fair value. The total AVA is obtained by aggregating the single AVAs, taking into account the corresponding weighting ratios. The \u201cRules for Prudent Valuation of Financial Instruments\u201d outline, for each AVA, the definition and interpretation, the scope of application, the input data and the detailed calculation method for each class of financial instrument. FAIR VALUE OF REAL ESTATE AND VALUABLE ART ASSETS Fair value of real estate assets As extensively illustrated in the first part regarding the accounting policies, the Group has adopted the revaluation model as the basis of measurement for the owner-occupied properties accounted for according to IAS 16 and fair value for the investment properties accounted for according to IAS 40. Measurement of real estate assets The revaluation model applied to owner-occupied properties envisages that property and equipment, whose fair value can be reliably determined, is recorded at a revalued amount, equal to its fair value at the date of the revaluation, net of depreciation and any accumulated impairment losses. For the properties held for investment, the Intesa Sanpaolo Group has chosen the fair value method, according to which, after initial recognition, all investment properties are measured at fair value. Valuation approach IFRS 13 defines fair value as \u201cthe price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date\u201d. The valuation approach has been defined on the basis of the business relevance and plan for the use of the properties, which consists of three main groups: \u2013 \u201ctrophy assets\u201d, i.e. particularly prestigious properties used by management functions located in the main cities where the Bank is based or properties of particular historical and artistic interest because they are listed by the Ministry for Cultural Heritage and Activities; \u2013 \u201cowner-occupied properties\u201d; \u2013 \u201cinvestment properties\u201d. The properties are valued individually asset-by-asset without considering any discount, or premium, that may be agreed during commercial negotiations if all or part of the portfolio is sold in bulk or in lots. The Intesa Sanpaolo Group has chosen to assign the valuation activity to professionally qualified external companies with an international structure, able to provide property valuations based on the RICS Valuation standards 87 which guarantee: \u2013 determination of the value consistent with the fair value configuration indicated in the IAS/IFRS; \u2013 compliance with the professional, ethical and independence requirements for experts, in line with the provisions of international and European standards. To determine the value of the assets, the following valuation methods are used based on the characteristics of the asset and the conditions of the market of reference; the valuer determines the most suitable method for each individual property. \u2013 The Discounted Cash Flow Method: the discounted cash flow method is based on the discounting (for a variable period based on the rental/occupational situation of the property and its subsequent optimisation) of the future net proceeds from the rental or sale of the property. At the end of this period, the value of the property is assumed to be the sale price obtained by capitalising the income of the last year at a market rate for investments similar to the object of the estimate or through a split sale. This method is used for the valuation of all the owner-occupied properties or real estate leased to third parties, located in Italy. \u2013 Comparative or Market Method: the comparative or market method is based on the comparison between the assets examined and similar assets recently sold/purchased or offered on the same market or in competitive environments. This criterion is based on a comparison with properties that have recently been sold or offered on the open market and, if possible, have the same characteristics. In the absence of observations directly related to the property examined, cases are used that are as similar as possible to the property examined, making the necessary adjustments. This method, which also represents the basis for other valuation methods, can be adopted in particular for non-owner-occupied assets and/or, in any case, for unrestricted and available assets in Italy and abroad. \u2013 Direct capitalisation income approach: the income approach is based on the current value of the potential market income of a property, obtained by capitalising the income at a market rate. This approach is applied mainly to owner-occupied properties abroad, where a prolonged stay within the building is envisaged. \u2013 Investment Value (Worth): the Investment Value (Worth) is defined by the International Valuation Standard as: \u201cthe value of an asset to a particular owner or prospective owner for individual investment or operational objectives\u201d. This definition is consistent with the provisions of the latest edition of the \u201cRICS Valuation - Global Standards 2022\u201d of the Royal Institution of Chartered Surveyors of the United Kingdom, where the Investment Value is defined as \u201cthe value of an asset to the owner or a prospective owner for individual investment or operational objectives\u201d. The Investment Value is applicable to properties built by the entity or properties with a strong business relevance subject to significant investments for technological, construction and functional adaptation. The Investment Value of these properties is determined on the basis of a 12+6 year plan for business use without break options, whose annual rent is determined by applying an appropriate gross rate of return to the amount of direct and indirect costs capitalised by the Owner, including the costs of purchasing the land. For the purposes of valuation, if necessary and where relevant, the assumptions also include sustainability considerations, connected with climate change and energy efficiency factors, as well as aspects linked to any specific legislation (for example, configuration, accessibility, etc.). To date, the Group has not made substantial adjustments to fair value due to climate change, aside from those already valued by the indicators observable on the reference market. 87 Standards set out in the Royal Institution of Chartered Surveyors of the United Kingdom document \u201cRICS Valuation \u2013 Global Standard\u201d (also known as the \u201cRed Book\u201d): the updated version was issued in November 2021 and took effect on 31 January 2022. Frequency of valuation Revaluations must be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the reporting date. The frequency of revaluations depends upon the changes in fair values of the property and equipment being revalued. When the fair value of a revalued asset differs materially from its carrying amount, a further revaluation is required. Specifically, based on the market trends, different valuation frequencies have been identified that, according to the characteristics of the assets and their location, are considered capable of capturing the significant changes in the value of the assets. The following distinction is made for owner-occupied properties: \u2013 for trophy assets, the revaluation is carried out by verifying the value through a scenario analysis (market trend analysis) every year and with a new appraisal every two years; \u2013 for the other owner-occupied properties, the revaluation is carried out through scenario analysis (market trend analysis) every year and through a new appraisal every three years. If the scenario analysis identifies significant changes (+/- 10%), specific and updated appraisals must be carried out to adjust the fair value of the asset to the valuations of the real estate market. For investment properties, the value is determined on the basis of new appraisals each year. Based on the rules referred to, in 2022, investment properties as well as owner-occupied properties which, based on the scenario analysis, recorded changes on the defined threshold, were subject to periodic valuation. Scenario analysis As part of the annual update of the fair value of the owner-occupied properties, in the years when a revaluation of the property is not envisaged, a scenario analysis (market trend analysis) is carried out using the best information sources available for the various countries in which the properties are located, in order to identify deviations, using databases, in the market values between the analysis period and the previous period. In particular, for real estate located in Italy, the changes are defined using at least 3 different sources. The main source is that provided by the Italian Revenue Agency, based on the specific OMI (Real Estate Market Monitor) zones. The second publication source is Nomisma for which, for the related zoning, the same queries are conducted as those for the OMI (main database). Lastly, the third source is based on the analyses of the changes during the year surveyed in terms of the offers present on the real estate market. Accordingly, the experts identify the annual deviations in rents and/or prices by related asset class for each property. Real estate located abroad is grouped, for each country, into different clusters based on location and asset class. Specific market analyses are conducted based on local and national knowledge of the particular target real estate market. The market study also takes account of the following macroeconomic drivers: \u2013 analysis of economic data (unemployment rate, GDP per capita, inflation and consumer price index); these macroeconomic factors constitute the first economic analysis, supporting the real estate market forecasts; \u2013 movement in average yield; \u2013 movement in market rents; \u2013 range of movement in unit values. The above-mentioned market survey, together with a qualitative weighting of the macroeconomic key drivers is used to determine a range of percentage deviation from the last assessment carried out, which is compared with the target threshold set, identifying a synthetic percentage factor for each individual property, included in a single worksheet. This activity is carried out close to the end of the year in order to produce a range of deviations within a reference threshold and to enable the timely planning of the updating of the specific appraisals for the properties whose deviation exceeds the threshold. The permitted variation threshold is +/-10%. If the deviations identified exceed this threshold, a new valuation will be carried out before the end of the year. Sensitivity of valuations Just as for financial instruments, level 3 non-financial assets and liabilities measured at fair value for which, due to the valuation model used to determine the fair value, execution is possible, and whose results are significant, are subject to sensitivity analysis. The analysis essentially concerned the properties of the Parent Company Intesa Sanpaolo, which represent the Core perimeter of the Group's real estate assets. It is noted that the sensitivity analysis was conducted by identifying the most important variables in the valuation model used to value the various classes of real estate, represented by the discounted cash flow method. Specifically, taking account of the trend recorded in the various asset classes of the real estate market and the parameters featuring greater volatility/variability, for owner-occupied properties, reference was made to the net capitalisation rate (yield) and the average medium/long-term inflation rate, while for investment properties, to the exit value. In compliance with the estimate assumptions applied to real estate assets, for the purpose of the analysis, variation ranges were used that were consistent with the potential trends in the market at the reporting date. For owner-occupied properties, a change of +/- 25 bps for the net capitalisation rate and a concurrent change of -/+15 bps for the inflation rate were assumed, in relation to which average deviations of fair value of +4.4% and -4.3% were recorded. For investment properties, a change of +/- 5% in the exit value was assumed, in relation to which there were average deviations of fair value of +4.8% and -5.2%. Fair value of valuable art assets The Bank\u2019s valuable art assets are also valued using the revaluation model, which envisages that property and equipment, whose fair value can be reliably determined, is recorded at a revalued amount, equal to its fair value at the date of the revaluation. Works of art included in the asset class \u201cvaluable art assets\u201d are works of particular importance, recognised for their historic and artistic value by experts and in line with the ministerial guidelines, and particularly those set out in Ministerial Decree 537 of 6 December 2017 on the exportation of works of art, such as: the state of preservation, the historical importance of the artist, the importance of the work in terms of art criticism/history, illustrious origin, certain quality and attribution and the declaration of interest by the Italian government. Valuation approach The valuation is carried out by determining the value through external appraisals, entrusted to qualified independent experts. These values are obtained from online databases such as Artnet and Artprice, which list over 100 million works of art and monitor the results of leading Italian and international auction houses. These are objective parameters that are compared with the market as a whole, in an analysis that also involves monitoring galleries and art fairs. In particular, the factors considered for the fair value measurement include objective factors relating to the historical-critical- artistic value of the author, state of preservation, execution technique, size and quality of the artwork, importance of the artwork in the production by the artist, publication of the artwork in specialist catalogues, period of execution of the artwork, international exposure of the artworks by the artist, distinguished provenance, certainty of attribution, guarantee of authenticity of an artwork, as well as other factors (which may change over time, depending on the evolution and tastes of the market), such as the reputation of the museum hosting the artwork by the artist, the prestige of fairs/exhibitions/galleries/auction houses that handle the artwork, the reputation of its critics and collectors, and the quality of the communications concerning the artist\u2019s work. Once these factors have been identified, the fair value is determined comparing them firstly with artworks similar to those examined (in terms of period of production/year, technique, size, type of subject and state of preservation), by the same artist and from the same period, if available (this is more feasible for modern and contemporary works) and, secondly, with works by artists or schools and areas that are close in style, philosophy and importance in the same historical period. Where several similar artworks are available, average values are used to take account of price volatility. In addition to considering the trends in auction trading, starting from the most recent trading and also including unsold items in the analysis (which are a possible indicator of the loss of market value for the artwork/artist), the valuation also considers the current market interest in an artwork or an artist, measured by the number and quality of temporary exhibitions held in internationally important museum spaces and accompanied by specific publications. The valuations also take into account any declarations of historical-artistic interest formally expressed by the Italian Ministry of Cultural Heritage and Activities (commonly referred to as \"notifications\"), which tie part of the artworks in the collection to Italy's heritage and restrict their circulation to the country\u2019s territory, reducing the price obtainable on the international market. The pricing is also influenced by the importance of the buyers/sellers (e.g. prices paid by famous collectors or known investors may be more significant). The valuation approach is based on the monitoring of the objective market values of the artworks included in the category examined, which follows three methodological approaches: \u2013 prudent basis, analysing the average values of a variety of different information sources, based on robust, updated and statistically representative databases: in a market of \u201cunique\u201d artworks, often without transactions for decades, this approach ensures the periodic identification of any outlier values and avoids following speculative trends; \u2013 comparison, monitoring the transactions that have taken place at a global level in a variety of distribution channels, in order to avoid considering only certain forms of transaction and the related financial values: in a global market with global demand, this approach enables verification of the presence of any geographical arbitrage or specific appreciation/depreciation phenomena with potential impacts; \u2013 recurrence, since it updates and monitors price trends over the shortest period of time that the specific features of the market allow, i.e. the half year: in a market in which there are no public trades monitored daily, the shortness of the measurement period ensures maximum attention and timeliness of any changes. This approach is applied to all the \"valuable art assets\". Frequency of valuation For valuable art assets, the revaluation is carried out by means of an expert appraisal every three years. However, a scenario analysis is carried out annually to identify any appreciable changes in value in order to bring forward the valuation. Based on the rules referred to, in 2022, artworks which, based on the scenario analysis, recorded changes on the defined threshold, were subject to valuation. Scenario analysis In order to identify and determine the changes in the market of the artworks being valued, market trends are monitored to detect signs of significant change that require appraisals to be made in advance with respect to the frequency established. This monitoring is carried out on a two-fold basis: \u2013 Monitoring of the market prices of the top artworks in terms of value held in Intesa Sanpaolo\u2019s collections, which represent 75% of the total value of the artworks included in the \u201cvaluable art assets\u201d class, by verifying both the results of the main international auctions (which are based on a calendar of precise seasonal deadlines) and the reports of the two main world databases (Artprice and Artnet), whose analytics provide useful tools for monitoring prices; \u2013 Monitoring the performance of the art market in general, to identify trends and changes with respect to Intesa Sanpaolo\u2019s \u201cvaluable art assets\u201d, verifying both the results of the main international auctions (which are based on a calendar of precise seasonal deadlines), and the reports of the two main world databases (Artprice and Artnet); since the works of many artists in the Intesa Sanpaolo\u2019s collection very rarely go up for auction due to the limited number of items left in the market, it is important to monitor the trend of similar artists or works; accordingly, the monitoring is not just limited to the works held and their artists, but also extends to the authors and artworks related to the same area, to take into account trend data. If the annual monitoring identifies a potential, positive or negative, value deviation of more than 15% for individual artworks/collections of artists in Intesa Sanpaolo\u2019s collections and comparable on the basis of objective criteria (such as period of production/year, size, technique, period of production, etc.), the appraisals are commissioned according to the usual internal procedures in order to align the carrying amount. Quantitative information A.4.5. Fair value hierarchy A.4.5.1 Assets and liabilities measured at fair value on a recurring basis: fair value by level - Excluding insurance companies Assets / liabilities at fair value 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Financial assets measured at fair value through profit or loss 11,311 32,672 3,594 24,262 25,080 3,389 a) Financial assets held for trading 10,331 32,008 183 22,615 24,379 187 of which: Equities 860 - 22 674 - 17 of which: quotas of UCI 264 5 21 116 - 25 b) Financial assets designated at fair value - 1 - - 1 3 c) Other financial assets mandatorily measured at fair value 980 663 3,411 1,647 700 3,199 of which: Equities 122 107 242 161 116 225 of which: quotas of UCI 858 191 2,401 1,486 149 2,166 2. Financial assets measured at fair value through other comprehensive income 41,937 7,422 357 59,084 8,004 492 of which: Equities 513 510 325 1,537 1,314 421 3. Hedging derivatives - 10,062 - - 1,732 - 4. Property and equipment - - 7,144 - - 7,364 5. Intangible assets - - - - - - Total 53,248 50,156 11,095 83,346 34,816 11,245 1. Financial liabilities held for trading 7,285 39,085 142 22,241 33,946 119 2. Financial liabilities designated at fair value - 8,765 30 6 3,642 26 3. Hedging derivatives - 5,346 - - 4,868 - Total 7,285 53,196 172 22,247 42,456 145 With regard to assets, level 3 instruments, which allow for more discretion in fair value measurement, account for a limited portion of the portfolio, with an impact of 9.7% on total assets (8.7% as at 31 December 2021). The majority of level 3 financial assets is represented by quotas of UCIs, of which, under Financial assets mandatorily measured at fair value, 290 million euro is represented by units of the Atlante Fund and the Italian Recovery Fund put in place as part of the regulations to support the banking system. Over 46% of assets measured at fair value are determined based on market prices, and therefore without any discretion by the valuator. Property and equipment measured at level 3 fair value includes real estate assets and valuable art assets, which represent 64% of the balance sheet assets at level 3 fair value. As at 31 December 2022, the impact of non-performance risk (Credit Value Adjustment and Debt Value Adjustment) in the determination of the fair value of derivative contracts amounted to a reduction of 141 million euro in positive fair value and a reduction of 79 million euro in negative fair value. The impact of the Funding Value Adjustment in reducing the fair value amounted to 63 million euro, equal to the cost of funding the cash flows generated by the Bank\u2019s overall portfolio of OTC derivatives. Determining the quantity of those adjustments is irrespective of the effects of the correlated operational hedging strategies, where present. As far as liabilities are concerned, level 3 instruments account for less than 1% of total liabilities. In addition to the transfers relating to financial assets and liabilities measured at level 3 as detailed below, please note that the following transfers were made during 2022: \u2013 from level 1 to level 2: o financial assets held for trading for 99 million euro (book value as at 31 December 2022); o other financial assets mandatorily measured at fair value for 51 million euro (book value as at 31 December 2022); o financial assets measured at fair value through other comprehensive income for 131 million euro (book value as at 31 December 2022); o financial liabilities designated at fair value for 3 million euro (book value as at 31 December 2022); \u2013 from level 2 to level 1: o financial assets held for trading for 100 million euro (book value as at 31 December 2022); o financial assets measured at fair value through other comprehensive income for 47 million euro (book value as at 31 December 2022); o financial liabilities held for trading for 4 million euro (book value as at 31 December 2022). The transfers between fair value levels are determined by the trends in the observability of prices or market data used to measure the instruments and by the materiality of the unobservable inputs. The transition from level 1 to level 2 is a consequence of the disappearance of an active market for that instrument assessed by analysing the reliability and the reciprocal consistency of the available prices according to the provisions of the Group\u2019s Fair Value Policy. Conversely, securities for which a mark-to-model measurement is performed using inputs that can be observed on the market \u2013 classified, therefore, as level 2 \u2013 are transferred to level 1 when the existence of an active market is identified. A.4.5.1 Bis Assets and liabilities measured at fair value on a recurring basis: fair value by level - Insurance companies (millions of euro) Assets / liabilities at fair value 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Financial assets held for trading 297 249 356 344 293 390 of which: Equities - - - - - - of which: quotas of UCI 97 - 46 122 - 49 2. Financial assets designated at fair value through profit or loss 85,608 22 587 100,515 143 401 of which: Equities 3,016 - - 3,510 - - of which: quotas of UCI 78,025 - - 91,908 109 - 3. Financial assets available for sale 77,810 3,158 4,625 93,910 6,305 4,208 of which: Equities 1,921 7 67 2,201 7 54 of which: quotas of UCI 8,306 - 4,208 9,879 - 3,742 4. Hedging derivatives - 13 - - 291 - 5. Property and equipment - - 7 - - 8 6. Intangible assets - - - - - - Total 163,715 3,442 5,575 194,769 7,032 5,007 1. Financial liabilities held for trading 1 8 - - 42 61 2. Financial liabilities designated at fair value through profit or loss - 71,565 - - 84,667 - 3. Hedging derivatives - 170 - - - - Total 1 71,743 - - 84,709 61 With regard to insurance companies, level 3 instruments, which allow for more discretion in fair value measurement, account for a limited portion of the portfolio. They amount to 3.2% of Assets (2.4% as at 31 December 2021). 94.8% of financial assets measured at fair value in the insurance segment are determined based on market prices, and therefore without any discretion by the valuator. Liabilities at fair value were almost entirely measured using level 2 inputs. In addition to the transfers relating to financial assets and liabilities in the insurance segment designated at level 3 as detailed below, please note that the following transfers were made during 2022: \u2013 from level 1 to level 2: o financial assets measured at fair value through profit and loss for 3 million euro (book value as at 31 December 2022); o financial assets available for sale for 143 million euro (book value as at 31 December 2022); \u2013 from level 2 to level 1: o financial assets measured at fair value through profit and loss for 2 million euro (book value as at 31 December 2022); o financial assets available for sale for 2,114 million euro (book value as at 31 December 2022). The transfers between fair value levels are determined by the trends in the observability of prices or market data used to measure the instruments and by the materiality of the unobservable inputs. The transition from level 1 to level 2 is a consequence of the disappearance of an active market for that instrument assessed by analysing the reliability and the reciprocal consistency of the available prices according to the Group\u2019s Guidelines and Rules for Valuation of Financial Instruments at Fair Value. Conversely, securities for which a mark-to-model measurement is performed using inputs that can be observed on the market \u2013 classified, therefore, as level 2 \u2013 are transferred to level 1 when the existence of an active market is identified. A.4.5.2. Annual changes in assets measured at fair value on a recurring basis (level 3) - Excluding insurance companies (millions of euro) Assets measured at fair value through profit or loss Financial assets measured at fair value through other comprehensive income Hedging derivatives Property and equipment Intangible assets TOTAL of which: a) Financial assets held for trading of which: b) Financial assets designated at fair value of which: c) Other financial assets mandatorily measured at fair value 1. Initial amount 3,389 187 3 3,199 492 - 7,364 - 2. Increases 1,070 94 - 976 93 - 278 - 2.1 Purchases 390 20 - 370 60 - 76 - 2.2 Gains recognised in: 177 7 - 170 18 - 32 - 2.2.1 Income statement 177 7 - 170 - - 5 - - of which capital gains 152 7 - 145 - - - - 2.2.2 Shareholders' equity - X X X 18 - 27 - 2.3 Transfers from other levels 38 11 - 27 14 - - - 2.4 Other increases 465 56 - 409 1 - 170 - 3. Decreases -865 -98 -3 -764 -228 - -498 - 3.1 Sales -208 -43 -3 -162 -100 - -48 - 3.2 Reimbursements -5 - - -5 -14 - - - 3.3 Losses recognized in: -264 -42 - -222 -25 - -181 - 3.3.1 Income statement -264 -42 - -222 -4 - -165 - - of which capital losses -243 -35 - -208 -1 - - - 3.3.2 Shareholders' equity - X X X -21 - -16 - 3.4 Transfers to other levels -38 -12 - -26 -65 - - - 3.5 Other decreases -350 -1 - -349 -24 - -269 - 4. Final amount 3,594 183 - 3,411 357 - 7,144 - The captions Other increases and Other decreases in Financial assets mandatorily measured at fair value mainly refer to quotas of UCIs, and include the payments made and the reimbursements received by the Bank, with no change in the quotas held. With regard to Property and equipment, the captions mainly include transfers of these assets from investment to operations and vice versa. A.4.5.2. Bis Annual changes in assets measured at fair value on a recurring basis (level 3) - Insurance companies (millions of euro) Financial assets held for trading Financial assets designated at fair value through profit or loss Financial assets available for sale Hedging derivatives Property and equipment Intangible assets 1. Initial amount 390 401 4,208 - 8 - 2. Increases 92 186 1,091 - - - 2.1 Purchases 58 - 876 - - - 2.2 Gains recognised in: - - 199 - - - 2.2.1 Income statement - - - - - - - of which capital gains - - - - - - 2.2.2 Shareholders' equity X X 199 - - - 2.3 Transfers from other levels 32 - 12 - - - 2.4 Other increases 2 186 4 - - - 3. Decreases -126 - -674 - -1 - 3.1 Sales -4 - -354 - - - 3.2 Reimbursements - - -12 - - - 3.3 Losses recognized in: -68 - -236 - - - 3.3.1 Income statement -68 - -53 - - - - of which capital losses - - 12 - - - 3.3.2 Shareholders' equity X X -183 - - - 3.4 Transfers to other levels -54 - -68 - - - 3.5 Other decreases - - -4 - -1 - 4. Final amount 356 587 4,625 - 7 - A.4.5.3 Annual changes in liabilities measured at fair value on a recurring basis (level 3) - Excluding insurance companies (millions of euro) Financial liabilities held for trading Financial liabilities designated at fair value Hedging derivatives 1. Initial amount 119 26 - 2. Increases 101 4 - 2.1 Issues 71 - - 2.2 Losses recognised in: - 3 - 2.2.1 Income statement - 3 - - of which capital losses - 3 - 2.2.2 Shareholders' equity X - - 2.3 Transfers from other levels 30 - - 2.4 Other increases - 1 - 3. Decreases -78 - - 3.1 Reimbursements - - - 3.2 Repurchases - - - 3.3 Gains recognised in: -19 - - 3.3.1 Income statement -19 - - - of which capital gains -16 - - 3.3.2 Shareholders' equity X - - 3.4 Transfers to other levels -50 - - 3.5 Other decreases -9 - - 4. Final amount 142 30 - \u201cFinancial liabilities held for trading\u201d refer to derivative contracts with a negative fair value. Transfers from and to other levels described in the above tables were carried out in accordance with the guidelines described in paragraph A.4.3 - Fair value hierarchy. For more exhaustive information on the sensitivity of financial instruments to changes in the main input parameters, reference should be made to the analyses of the trading book in Part E of these Notes to the consolidated financial statements. A.4.5.3 Bis Annual changes in liabilities measured at fair value on a recurring basis (level 3) - Insurance companies (millions of euro) Financial liabilities held for trading Financial liabilities designated at fair value through profit or loss Hedging derivatives 1. Initial amount 61 - - 2. Increases - - - 2.1 Issues - - - 2.2 Losses recognised in: - - - 2.2.1 Income statement - - - - of which capital losses - - - 2.2.2 Shareholders' equity X X - 2.3 Transfers from other levels - - - 2.4 Other increases - - - 3. Decreases -61 - - 3.1 Reimbursements - - - 3.2 Repurchases - - - 3.3 Gains recognised in: -61 - - 3.3.1 Income statement -61 - - - of which capital gains - - - 3.3.2 Shareholders' equity X X - 3.4 Transfers to other levels - - - 3.5 Other decreases - - - 4. Final amount - - - A.4.5.4 Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: fair value by level- Excluding insurance companies (millions of euro) Assets/liabilities not measured at fair value or measured at fair value on a non-recurring basis 31.12.2022 31.12.2021 Book value Level 1 Level 2 Level 3 Book value Level 1 Level 2 Level 3 1. Financial assets measured at amortised cost 528,078 28,958 320,105 161,493 668,866 27,206 484,983 165,462 2. Investment property - - - - - - - - 3. Non-current assets held for sale and discontinued operations 638 - - 638 1,422 - - 1,422 Total 528,716 28,958 320,105 162,131 670,288 27,206 484,983 166,884 1. Financial liabilities measured at amortised cost 667,586 41,748 592,888 32,270 710,055 47,030 625,414 39,759 2. Liabilities associated with non-current assets 15 - - 15 30 - - 30 Total 667,601 41,748 592,888 32,285 710,085 47,030 625,414 39,789 A.4.5.4 Bis Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: fair value by level - Insurance companies (millions of euro) Assets/liabilities not measured at fair value or measured at fair value on a non-recurring basis 31.12.2022 31.12.2021 Book value Level 1 Level 2 Level 3 Book value Level 1 Level 2 Level 3 1. Investments held to maturity - - - - - - - - 2. Due from banks 40 - 40 - 41 - 41 - 3. Loans to customers 40 - 34 6 44 - 39 5 4. Investment property - - - - - - - - 5. Non-current assets held for sale and discontinued operations - - - - - - - - Total 80 - 74 6 85 - 80 5 1. Due to banks 629 - 17 556 623 - - 650 2. Due to customers 587 - 452 135 188 - 93 95 3. Securities issued 1,334 - 1,171 - 1,335 - 1,338 - 4. Liabilities associated with non-current assets - - - - - - - - Total 2,550 - 1,640 691 2,146 - 1,431 745 Financial assets and liabilities For financial assets and liabilities not measured at fair value (loans and loans represented by securities, amounts due to customers and securities issued), the Group measures fair value by calculating the present value of future cash flows at a rate that incorporates the estimate of the main risks and uncertainties associated with the financial instrument to be measured (discount rate adjustment approach). In particular, the interest rate used to discount the future cash flows is determined by taking into account the following risk factors: \u2013 interest rate risk, which represents the rate offered by the market for each unit of capital provided to risk-free counterparties; \u2013 credit risk, which is the premium for having provided capital to counterparties with insolvency risk; \u2013 the cost of liquidity connected to credit. For fixed-rate instruments, the cash flows are those envisaged by the contracts. For floating-rate instruments, the future cash flows are determined based on forward rates, implicit in the zero-coupon interest rate curves observed at the various fixing dates and differentiated by indexation type. The value of the risk premium (credit spread) is determined per individual position, through acquisition of the risk class (LGD) and rating (PD). These amounts, together with the average residual financial life, constitute the guideline for acquisition of the credit spread. For securities issued by Intesa Sanpaolo, the construction of the spread curve follows the rules set out in the Rules for Valuation of Financial Instruments at Fair Value. The following assumptions were used in determining the fair values indicated in table A.4.5.4: \u2013 for loans represented by securities, the same rules envisaged for the fair value measurement of other categories of securities are used; \u2013 for securities issued, the rules used are the same as those applied to securities under assets. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-991": { "value": "A.5 \u2013 INFORMATION ON \u201cDAY ONE PROFIT/LOSS\u201d Under IFRS 9, financial instruments shall be initially recognised at fair value. The fair value of a financial instrument at initial recognition is normally the \"transaction price\", i.e. the fair value of the consideration given or received in relation to, respectively, financial assets and liabilities. The fact that, upon initial recognition, the fair value of a financial instrument normally coincides with the transaction price is usually intuitively verifiable in the case of transactions falling under level 1 of the fair value hierarchy. Any differences between the price and the fair value are usually attributable to the so-called commercial margins, which are considered as not falling within the scope of Day One Profit. Therefore, commercial margins are taken to the income statement on the first subsequent measurement of the financial instrument. Also in the case of level 2, which is based on quotes that can be derived indirectly from the market (Comparable Approach), the fair value and the price often coincide upon initial recognition. Any residual differences, as in the previous case, are usually attributable to the commercial margins. With respect to level 3 instruments, which have more discretion in fair value measurement, no definite reference benchmark is available to compare the transaction price with. For the same reason, the calculation of any commercial margin to be taken to the income statement is also difficult. In this event, the instrument is always initially recognised at the transaction cost, irrespective of whether it is possible to identify commercial margins. Subsequent measurement shall not include the difference between cost and fair value identified upon initial recognition (also defined as Day One Profit - DOP). This difference shall be recognised in the income statement only when it arises from changes to the factors over which market participants base their valuations when fixing prices (including the time effect). Where unobservable inputs used to estimate the fair value become observable, the residual deferred Day One Profits are recognised in the income statement. Similarly, in the event of \u201con the book\u201d transactions falling under the investment division\u2019s activities, the Day One Profits earned on transactions - included in the above on the book management - are taken to the income statement when transactions are carried out which substantially eliminate the risks linked to unobservable parameters of the instrument which generated the DOP. At the end of 2022, as at the end of 2021, the amount of the DOP deferred in the balance sheet was immaterial (around 0.1 million euro). ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognisingDifferenceBetweenFairValueAtInitialRecognitionAndAmountDeterminedUsingValuationTechniqueExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-956": { "value": "SECTION 1 - CASH AND CASH EQUIVALENTS - CAPTION 10 1.1 Cash and cash equivalents: breakdown (millions of euro) 31.12.2022 31.12.2021 a) Cash 3,709 3,463 b) Current accounts and on demand deposits with Central Banks 105,546 7,020 c) Current accounts and on demand deposits with banks 3,669 4,273 Total 112,924 14,756 As at 31 December 2022, the aggregate \u201cb) Current accounts and on-demand deposits with Central Banks\u201d includes overnight deposits, totalling approximately 89 billion euro, where the excess liquidity is placed, which due to the rise in interest rates is no longer deposited in the Reserve Requirement account reported in the caption \u201cFinancial assets measured at amortised cost \u2013 Due from banks\u201d. 4.1 Financial assets measured at amortised cost: breakdown of amounts due from banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 A. Due from Central Banks 9,712 - - - 7,089 2,623 131,361 - - - 128,282 3,078 1. Time deposits 3,622 - - X X X 3,118 - - X X X 2. Compulsory reserve 5,427 - - X X X 126,882 - - X X X 3. Repurchase agreements 543 - - X X X 273 - - X X X 4. Other 120 - - X X X 1,088 - - X X X B. Due from banks 23,136 36 - 1,265 18,791 3,055 32,523 53 - 1,547 28,156 2,903 1. Loans 21,478 36 - - 18,465 3,055 30,752 53 - - 27,914 2,903 1.1 Current accounts - - - X X X - - - X X X 1.2 Time deposits 2,449 - - X X X 1,681 - - X X X 1.3 Other loans: 19,029 36 - X X X 29,071 53 - X X X - Reverse repurchase agreements 5,397 - - X X X 9,566 - - X X X - Finance leases 5 - - X X X 6 - - X X X - Other 13,627 36 - X X X 19,499 53 - X X X 2. Debt securities 1,658 - - 1,265 326 - 1,771 - - 1,547 242 - 2.1 Structured - - - - - - - - - - - - 2.2 Other 1,658 - - 1,265 326 - 1,771 - - 1,547 242 - TOTAL 32,848 36 - 1,265 25,880 5,678 163,884 53 - 1,547 156,438 5,981 As at 31 December 2022, the decline in the sub-caption Reserve Requirement was due to the placement of excess liquidity in overnight deposits reported in the caption Cash and cash equivalents. The sub-caption \u201cOther loans - Other\u201d includes operating loans, i.e. operations connected to the provision of financial activities and services with no credit facilities, for an amount of 122 million euro. Those exposures are essentially performing loans classified in Stage 1 and adjusted based on IFRS 9 . 4.4 Bis Due from banks: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Due from Central Banks - - - - - - - - 1. Time deposits - - 2. Compulsory reserve - - 3. Reverse repurchase agreements - - 4. Other - - B. Due from banks 40 - 40 - 41 - 41 - 1. Loans - - - - - - - - 1.1 Current accounts and deposits - - 1.2 Time deposits - - 1.3 Other loans: - - - Reverse repurchase agreements - - - Finance leases - - - Other - - 2. Debt securities 40 - 40 - 41 - 41 - 2.1 Structured - - 2.2 Other 40 41 Total 40 - 40 - 41 - 41 - ", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndBankBalancesAtCentralBanksExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-923": { "value": "SECTION 1 - CASH AND CASH EQUIVALENTS - CAPTION 10 1.1 Cash and cash equivalents: breakdown (millions of euro) 31.12.2022 31.12.2021 a) Cash 3,709 3,463 b) Current accounts and on demand deposits with Central Banks 105,546 7,020 c) Current accounts and on demand deposits with banks 3,669 4,273 Total 112,924 14,756 As at 31 December 2022, the aggregate \u201cb) Current accounts and on-demand deposits with Central Banks\u201d includes overnight deposits, totalling approximately 89 billion euro, where the excess liquidity is placed, which due to the rise in interest rates is no longer deposited in the Reserve Requirement account reported in the caption \u201cFinancial assets measured at amortised cost \u2013 Due from banks\u201d. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-992": { "value": "SECTION 2 - FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS CAPTION 20 2.1 Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 9,150 1,194 52 21,798 1,324 89 1.1 Structured securities 1,016 74 - 5 1,009 42 1.2 Other debt securities 8,134 1,120 52 21,793 315 47 2. Equities 860 - 22 674 - 17 3. Quotas of UCI 264 5 21 116 - 25 4. Loans - 32 53 - 14 4 4.1 Repurchase agreements - - - - - - 4.2 Other - 32 53 - 14 4 Total (A) 10,274 1,231 148 22,588 1,338 135 B. Derivatives 1. Financial derivatives 57 29,841 35 27 20,817 52 1.1 trading 55 29,841 35 27 20,817 52 1.2 fair value option - - - - - - 1.3 other 2 - - - - - 2. Credit derivatives - 936 - - 2,224 - 2.1 trading - 936 - - 2,224 - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total (B) 57 30,777 35 27 23,041 52 TOTAL (A+B) 10,331 32,008 183 22,615 24,379 187 Structured securities as at 31 December 2022 consist of 1,086 million euro of fixed-rate debt securities indexed to inflation, as an additional component, and 4 million euro of debt securities convertible into shares. The caption above includes the securities connected with securitisation transactions for a total amount of approximately 865 million euro (818 million euro Level 1 and 47 million euro Level 2), of which 627 million euro is senior, 230 million euro is mezzanine and 8 million euro is junior. As the gross positive fair value of the derivative instruments implemented with the legal clearing agent LCH Ltd. meets the requirements set out for offsetting between gross positive and negative balances pursuant to IAS 32, paragraph 42, it was subject to offsetting, with recognition of the net fair value under Financial liabilities held for trading and Financial assets held for trading, respectively. 2.2 Financial assets held for trading: breakdown by borrower/issuer/counterparty (millions of euro) Captions 31.12.2022 31.12.2021 A. Cash assets 1. Debt securities 10,396 23,211 a) Central Banks 78 44 b) Public administration 7,541 20,394 c) Banks 1,186 1,149 d) Other financial companies 1,175 1,239 of which: insurance companies 85 65 e) Non financial companies 416 385 2. Equities 882 691 a) Banks 35 71 b) Other financial companies 133 96 of which: insurance companies 51 31 c) Non financial companies 714 524 d) Other issuers - - 3. Quotas of UCI 290 141 4. Loans 85 18 a) Central Banks - - b) Public administration - - c) Banks - - d) Other financial companies 38 - of which: insurance companies - - e) Non financial companies 47 18 f) Households - - Total A 11,653 24,061 B. Derivatives a) Central counterparties 11,065 1,693 b) Other 19,804 21,427 Total B 30,869 23,120 TOTAL (A+B) 42,522 47,181 SECTION 3 BIS - FINANCIAL ASSETS PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE PURSUANT TO IAS 39 - CAPTION 35 The breakdown of the IAS 39 captions included in caption 35 of the Balance Sheet Assets referring to insurance companies is shown below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 35 Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d was created, which comprises the components set out in the table below. (millions of euro) Breakdown of Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39 - Caption 35 31.12.2022 31.12.2021 20. Financial assets held for trading 902 1,027 30. Financial assets designated at fair value 86,217 101,059 40. Financial assets available for sale 85,593 104,423 80. Hedging derivatives 13 291 TOTAL Caption 35 172,725 206,800 3.1 Bis Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 150 198 310 166 288 337 1.1 Structured securities - - - - - - 1.2 Other debt securities 150 198 310 166 288 337 2. Equities - - - - - - 3. Quotas of UCI 97 - 46 122 - 49 4. Loans - - - - - - 4.1 Reverse repurchase agreements - - - - - - 4.2 Other - - - - - - Total A 247 198 356 288 288 386 B. Derivatives 1. Financial derivatives: 50 51 - 56 5 4 1.1 trading 50 35 - 55 4 4 1.2 fair value option - 16 - 1 1 - 1.3 other - - - - - - 2. Credit derivatives: - - - - - - 2.1 trading - - - - - - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total B 50 51 - 56 5 4 TOTAL (A+B) 297 249 356 344 293 390 3.2 Bis Financial assets held for trading: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 A. Cash assets 1. Debt securities 658 791 a) Governments and Central Banks 101 122 b) Other public entities - - c) Banks 267 329 d) Other issuers 290 340 2. Equities - - a) Banks - - b) Other issuers: - - - insurance companies - - - financial companies - - - non-financial companies - - - other - - 3. Quotas of UCI 143 171 4. Loans - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - Total A 801 962 B. Derivatives a) Banks - - - Fair value - - b) Customers 101 65 - Fair value 101 65 Total B 101 65 Total (A+B) 902 1,027 ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialAssetsHeldForTradingExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-955": { "value": "SECTION 2 - FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS CAPTION 20 2.1 Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 9,150 1,194 52 21,798 1,324 89 1.1 Structured securities 1,016 74 - 5 1,009 42 1.2 Other debt securities 8,134 1,120 52 21,793 315 47 2. Equities 860 - 22 674 - 17 3. Quotas of UCI 264 5 21 116 - 25 4. Loans - 32 53 - 14 4 4.1 Repurchase agreements - - - - - - 4.2 Other - 32 53 - 14 4 Total (A) 10,274 1,231 148 22,588 1,338 135 B. Derivatives 1. Financial derivatives 57 29,841 35 27 20,817 52 1.1 trading 55 29,841 35 27 20,817 52 1.2 fair value option - - - - - - 1.3 other 2 - - - - - 2. Credit derivatives - 936 - - 2,224 - 2.1 trading - 936 - - 2,224 - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total (B) 57 30,777 35 27 23,041 52 TOTAL (A+B) 10,331 32,008 183 22,615 24,379 187 Structured securities as at 31 December 2022 consist of 1,086 million euro of fixed-rate debt securities indexed to inflation, as an additional component, and 4 million euro of debt securities convertible into shares. The caption above includes the securities connected with securitisation transactions for a total amount of approximately 865 million euro (818 million euro Level 1 and 47 million euro Level 2), of which 627 million euro is senior, 230 million euro is mezzanine and 8 million euro is junior. As the gross positive fair value of the derivative instruments implemented with the legal clearing agent LCH Ltd. meets the requirements set out for offsetting between gross positive and negative balances pursuant to IAS 32, paragraph 42, it was subject to offsetting, with recognition of the net fair value under Financial liabilities held for trading and Financial assets held for trading, respectively. 2.2 Financial assets held for trading: breakdown by borrower/issuer/counterparty (millions of euro) Captions 31.12.2022 31.12.2021 A. Cash assets 1. Debt securities 10,396 23,211 a) Central Banks 78 44 b) Public administration 7,541 20,394 c) Banks 1,186 1,149 d) Other financial companies 1,175 1,239 of which: insurance companies 85 65 e) Non financial companies 416 385 2. Equities 882 691 a) Banks 35 71 b) Other financial companies 133 96 of which: insurance companies 51 31 c) Non financial companies 714 524 d) Other issuers - - 3. Quotas of UCI 290 141 4. Loans 85 18 a) Central Banks - - b) Public administration - - c) Banks - - d) Other financial companies 38 - of which: insurance companies - - e) Non financial companies 47 18 f) Households - - Total A 11,653 24,061 B. Derivatives a) Central counterparties 11,065 1,693 b) Other 19,804 21,427 Total B 30,869 23,120 TOTAL (A+B) 42,522 47,181 2.3 Financial assets designated at fair value: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities - 1 - - 1 3 1.1 Structured securities - - - - - - 1.2 Other debt securities - 1 - - 1 3 2. Loans - - - - - - 2.1 Structured - - - - - - 2.2 Other - - - - - - Total - 1 - - 1 3 The Bank has included in this category debt securities linked to financial instruments measured at fair value through profit and loss, such as financial derivatives. On the basis of the debt securities, no hedges were arranged through credit derivatives or similar instruments to mitigate the relevant credit risk. The fair value change attributable to the measurement of credit risk of financial assets designated at fair value was insignificant, both during the year and in cumulative terms. 2.4 Financial assets designated at fair value: breakdown by borrower/issuer (millions of euro) Captions 31.12.2022 31.12.2021 1. Debt securities 1 4 a) Central Banks - - b) Public administration 1 1 c) Banks - - d) Other financial companies - 3 of which: insurance companies - - e) Non financial companies - - 2. Loans - - a) Central Banks - - b) Public administration - - c) Banks - - d) Other financial companies - - of which: insurance companies - - e) Non financial companies - - f) Households - - Total 1 4 2.5 Other financial assets mandatorily measured at fair value: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities - 55 133 - 60 107 1.1 Structured securities - - 5 - - 5 1.2 Other debt securities - 55 128 - 60 102 2. Equities 122 107 242 161 116 225 3. Quotas of UCI 858 191 2,401 1,486 149 2,166 4. Loans - 310 635 - 375 701 4.1 Repurchase agreements - - - - - - 4.2 Other - 310 635 - 375 701 Total 980 663 3,411 1,647 700 3,199 The caption above includes the securities connected with securitisation transactions for a total amount of approximately 125 million euro (25 million euro Level 1 and 100 million euro Level 2), of which 44 million euro is senior, 65 million euro is mezzanine and 16 million euro is junior. 2.6 Other financial assets mandatorily measured at fair value: breakdown by borrower/issuer (millions of euro) Captions 31.12.2022 31.12.2021 1. Equities 471 502 of which: banks - - of which: other financial companies 117 160 of which: non financial companies 355 342 2. Debt securities 188 167 a) Central Banks - - b) Public administration - - c) Banks - - d) Other financial companies 157 158 of which: insurance companies 1 - e) Non financial companies 31 9 3. Quotas of UCI 3,450 3,801 4. Loans 945 1,076 a) Central Banks - - b) Public administration - - c) Banks 29 38 d) Other financial companies 119 141 of which: insurance companies 10 10 e) Non financial companies 554 674 f) Households 243 223 Total 5,054 5,546 The aggregate \u201cquotas of UCI\u201d includes 290 million euro in interests held by the bank in the Atlante Fund and in the Italian Recovery Fund (formerly Atlante Fund II), as alternative investment funds to support Italian banks in their recapitalisation transactions and in the management of the bad loans in the sector. Loans include credit exposures classified among financial assets mandatorily measured at fair value as they failed the test on the contractual characteristics of cash flows (SPPI Test) required by IFRS 9. SECTION 3 BIS - FINANCIAL ASSETS PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE PURSUANT TO IAS 39 - CAPTION 35 The breakdown of the IAS 39 captions included in caption 35 of the Balance Sheet Assets referring to insurance companies is shown below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 35 Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d was created, which comprises the components set out in the table below. (millions of euro) Breakdown of Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39 - Caption 35 31.12.2022 31.12.2021 20. Financial assets held for trading 902 1,027 30. Financial assets designated at fair value 86,217 101,059 40. Financial assets available for sale 85,593 104,423 80. Hedging derivatives 13 291 TOTAL Caption 35 172,725 206,800 3.1 Bis Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 150 198 310 166 288 337 1.1 Structured securities - - - - - - 1.2 Other debt securities 150 198 310 166 288 337 2. Equities - - - - - - 3. Quotas of UCI 97 - 46 122 - 49 4. Loans - - - - - - 4.1 Reverse repurchase agreements - - - - - - 4.2 Other - - - - - - Total A 247 198 356 288 288 386 B. Derivatives 1. Financial derivatives: 50 51 - 56 5 4 1.1 trading 50 35 - 55 4 4 1.2 fair value option - 16 - 1 1 - 1.3 other - - - - - - 2. Credit derivatives: - - - - - - 2.1 trading - - - - - - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total B 50 51 - 56 5 4 TOTAL (A+B) 297 249 356 344 293 390 3.2 Bis Financial assets held for trading: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 A. Cash assets 1. Debt securities 658 791 a) Governments and Central Banks 101 122 b) Other public entities - - c) Banks 267 329 d) Other issuers 290 340 2. Equities - - a) Banks - - b) Other issuers: - - - insurance companies - - - financial companies - - - non-financial companies - - - other - - 3. Quotas of UCI 143 171 4. Loans - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - Total A 801 962 B. Derivatives a) Banks - - - Fair value - - b) Customers 101 65 - Fair value 101 65 Total B 101 65 Total (A+B) 902 1,027 3.3 Bis Financial assets designated at fair value: breakdown (millions of euro) Captions/Amounts 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 4,344 22 5 4,754 34 5 1.1 Structured securities - - - 17 2 - 1.2 Other debt securities 4,344 22 5 4,737 32 5 2. Equities 3,016 - - 3,510 - - 3. Quotas of UCI 78,025 - - 91,908 109 - 4. Loans 223 - 582 343 - 396 4.1 Structured - - - - - - 4.2 Other 223 - 582 343 - 396 Total 85,608 22 587 100,515 143 401 Cost 86,661 14 586 93,092 121 395 3.4 Bis Financial assets designated at fair value: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 1. Debt securities 4,371 4,793 a) Governments and Central Banks 3,375 3,772 b) Other public entities 11 11 c) Banks 514 471 d) Other issuers 471 539 2. Equities 3,016 3,510 a) Banks 214 239 b) Other issuers: 2,802 3,271 - insurance companies 129 120 - financial companies 50 54 - non-financial companies 1,327 1,669 - other 1,296 1,428 3. Quotas of UCI 78,025 92,017 4. Loans 805 739 a) Governments and Central Banks - - b) Other public entities - - c) Banks 805 739 d) Other counterparties - - Total 86,217 101,059 3.5 Bis Financial assets available for sale: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 67,583 3,152 349 81,830 6,298 412 1.1 Structured securities 8 - - 14 - - 1.2 Other debt securities 67,575 3,152 349 81,816 6,298 412 2. Equities 1,921 7 67 2,201 7 54 2.1 Measured at fair value 1,921 7 67 2,201 7 54 2.2 Measured at cost - - - - - - 3. Quotas of UCI 8,306 - 4,208 9,879 - 3,742 4. Loans - - - - - - Total 77,810 3,159 4,624 93,910 6,305 4,208 3.6 Bis Financial assets available for sale: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 1. Debt securities 71,084 88,540 a) Governments and Central Banks 55,587 71,782 b) Other public entities 283 359 c) Banks 6,495 6,214 d) Other issuers 8,719 10,185 2. Equities 1,995 2,262 a) Banks 194 206 b) Other issuers: 1,801 2,056 - insurance companies 35 37 - financial companies - - - non-financial companies 1,766 2,019 - other - - 3. Quotas of UCI 12,514 13,621 4. Loans - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - Total 85,593 104,423 3.7 Bis Financial assets available for sale subject to microhedging There were no financial assets available for sale subject to microhedging referring to insurance companies. 3.8 Bis Hedging derivatives: breakdown by type of hedge and level (millions of euro) Fair value 31.12.2022 Notional value Fair value 31.12.2021 Notional value Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A) Financial derivatives - 13 - 200 - 291 - 1,046 1) fair value - - - - - - - - 2) cash flows - 13 - 200 - 291 - 1,046 3) foreign investments - - - - - - - - B) Credit derivatives - - - - - - - - 1) fair value - - - - - - - - 2) cash flows - - - - - - - - Total - 13 - 200 - 291 - 1,046 3.9 Bis Hedging derivatives: breakdown by hedged portfolio and type of hedge (book value) (millions of euro) Operations/Type of hedge FAIR VALUE CASH FLOWS FOREIGN. INVESTM. Specific Generic Specific Generic Interest rate risk foreign exchange risk Credit risk various risk Multiple risk 1. Financial assets available for sale - - - - - X 13 X X 2. Loans - - - X - X - X X 3. Investments held to maturity X - - X - X - X X 4. Portfolio X X X X X - X - X 5. Other transactions - - - - - X - X - Total assets - - - - - - 13 - - 1. Financial liabilities - - - X - X - X X 2. Portfolio X X X X X - X - X Total liabilities - - - - - - - - - 1. Forecast transactions X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X - X - - SECTION 5 - HEDGING DERIVATIVES \u2013 CAPTION 50 Concerning the objectives and the strategies underlying hedging transactions see the information provided in Part E \u2013 Information on risks and relative hedging policies, Section 2 \u2013 Market risks. 5.1 Hedging derivatives: breakdown by type of hedge and level (millions of euro) Fair value 31.12.2022 Notional amount Fair value 31.12.2021 Notional amount Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A. Financial derivatives 1. Fair Value - 10,061 - 177,498 - 1,719 - 186,185 2. Cash flows - 1 - 893 - 13 - 3,961 3. Foreign investments - - - 28 - - - - B. Credit derivatives 1. Fair Value - - - - - - - - 2. Cash flows - - - - - - - - Total - 10,062 - 178,419 - 1,732 - 190,146 As the gross positive fair value of Hedging derivatives implemented with the legal clearing agent LCH Ltd. meets the requirements set out for offsetting between gross positive and negative balances pursuant to IAS 32, paragraph 42, it was subject to offsetting, with recognition of the net fair value under Financial liabilities held for trading. 5.2 Hedging derivatives: breakdown by hedged portfolio and type of hedge (millions of euro) Transactions / Type of hedge Fair Value Cash-flow Foreign investm Specific Generic Specific Generic debt securities and interest rates equities and stock indices foreign exchange rates and gold credit risk commodities other 1. Financial assets measured at fair value through other comprehensive income 2,566 - 263 - X X X - X X 2. Financial assets measured at amortised cost 2,876 X 3 - X X X 1 X X 3. Portfolio X X X X X X 3,803 X - X 4. Other transactions - - - - - - X - X - Total assets 5,442 - 266 - - - 3,803 1 - - 1. Financial liabilities 476 X 60 - - - X - X X 2. Portfolio X X X X X X 14 X - X Total liabilities 476 - 60 - - - 14 - - - 1. Forecast transactions X X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X X - X - - The table indicates positive fair values of hedging derivatives, broken down in relation to asset or liability hedged and type of hedge. Considering the values gross of netting in the financial statements, these continued to refer mainly to micro fair value hedges of debt securities under assets, as well as macro fair value hedges of loans disbursed. SECTION 2 \u2013 FINANCIAL LIABILITIES HELD FOR TRADING \u2013 CAPTION 20 2.1 Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level1 Level 2 Livello 3 A. Cash liabilities 1. Due to banks 4,729 4,240 - - 4,239 19,827 22,222 40 - 22,262 2. Due to customers 3,121 3,001 - - 3,001 - - - - - 3. Debt securities 3,000 - 2,779 - X 3,324 - 3,459 - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - X 3.1.2 Other bonds - - - - X - - - - X 3.2 Other 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.1 Structured 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.2 Other - - - - X - - - - X Total A 10,850 7,241 2,779 - 7,240 23,151 22,222 3,499 - 22,262 B. Derivatives 1. Financial derivatives X 44 35,363 142 X X 19 28,107 118 X 1.1 Trading X 44 35,343 142 X X 19 28,072 118 X 1.2 Fair value option X - - - X X - - - X 1.3 Other X - 20 - X X - 35 - X 2. Credit derivatives X - 943 - X X - 2,340 1 X 2.1 Trading X - 943 - X X - 2,340 1 X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 44 36,306 142 X X 19 30,447 119 X Total (A+B) 10,850 7,285 39,085 142 X 23,151 22,241 33,946 119 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. Amounts due to banks and customers consist entirely of short selling of securities. The aggregate 3.2.1 Other structured securities includes securitised derivatives which provide for partial or full redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014, issued by the Group throughout 2019. Derivative instruments include 5,017 million euro in certificates with characteristics similar to financial derivative instruments due to the prevalence of market risk in relation to the return of the premiums paid. The changes in fair value recorded during the year due to the change in its own credit rating were positive by 229 million euro and related to derivatives and Debt securities - Other. The values of derivative instruments as at 31 December 2022 include the results of the offsetting of accounts between positive and negative gross balances of hedging derivatives undertaken with the legal clearing agent LCH Ltd. as they meet the requirements set out in IAS 32, paragraph 42. 2.2 Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities The aggregate Financial liabilities held for trading includes subordinated liabilities represented by Due to banks for 214 million euro and Due to customers for 36 million euro. 2.3 Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts As at 31 December 2022, structured debts classified under Financial liabilities held for trading amounted to 300 million euro due to customers and 57 million euro due to banks, attributable to short selling of fixed-rate bonds indexed to inflation, as an additional component. SECTION 3 \u2013 FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE \u2013 CAPTION 30 3.1 Financial liabilities designated at fair value: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal value Fair value Fair value (*) Nominal value Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to banks - - - - - - - - - - 1.1 Structured - - - - X - - - - X 1.2 Other - - - - X - - - - X of which: - commitments to disburse funds - X X X X - X X X X - financial guarantees given - X X X X - X X X X 2. Due to customers 5 - 4 - 4 5 - 4 - 4 2.1 Structured 5 - 4 - X 5 - 4 - X 2.2 Other - - - - X - - - - X of which: - commitments to disburse funds - X X X X - X X X X - financial guarantees given - X X X X - X X X X 3. Debt securities 9,875 - 8,761 30 8,719 3,634 6 3,638 26 3,566 3.1 Structured 9,875 - 8,761 30 X 3,634 6 3,638 26 X 3.2 Other - - - - X - - - - X Total 9,880 - 8,765 30 8,723 3,639 6 3,642 26 3,570 (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. The Group has classified the LECOIP 3.0 for the employment agreements, terminated early, of employees of Group companies and life policies connected to social initiatives, managed by the Bank based on fair value, under Amounts due to customers. Sub-caption 3.1 Debt securities - Structured comprised certificates which provide for partial or full redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014 (certificates with guaranteed or protected capital). As they were issued after 1 January 2020, these are classified under Financial liabilities designated at fair value (Fair Value Option), as a result of the Bank\u2019s implementation of a business model based on a banking book approach, with the goal of generating stable inflows. Certificates representing Financial liabilities designated at fair value record the related changes in fair value attributable to changes in own credit risk in the statement of comprehensive income (shareholders\u2019 equity). Changes in the Bank\u2019s own credit rating during the year were negative by 47 million euro. 3.2 Breakdown of \u201cFinancial liabilities designated at fair value\u201d: subordinated liabilities As at 31 December 2022, the Group did not have any subordinated liabilities classified under Financial liabilities designated at fair value. SECTION 3 BIS \u2013 FINANCIAL LIABILITIES PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE PURSUANT TO IAS 39 - CAPTION 35 The breakdown of the IAS 39 captions included in caption 35 of the Balance sheet liabilities pertaining to insurance companies is provided below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 35 Financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39 - Caption 35 31.12.2022 31.12.2021 40. Financial liabilities held for trading 9 103 50. Financial liabilities designated at fair value through profit or loss 71.565 84.667 60. Hedging derivatives 170 - Total Caption 35 71.744 84.770 3.1 Bis Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cashl liabilities 1. Due to banks - - - - - - - - - - 2. Due to customers - - - - - - - - - - 3. Debt securities - - - - X - - - - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - - 3.1.2 Other bonds - - - - X - - - - - 3.2 Other - - - - X - - - - X 3.2.1 Structured - - - - X - - - - - 3.2.2 Other - - - - X - - - - - Total A - - - - - - - - - - B. Derivatives 1. Financial derivatives X 1 8 - X X - 42 61 X 1.1 Trading X 1 - - X X - 38 61 X 1.2 Fair value option X - 8 - X X - 4 - X 1.3 Other X - - - X X - - - X 2. Credit derivatives X - - - X X - - - X 2.1 Trading X - - - X X - - - X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 1 8 - X X - 42 61 X Total (A+B) X 1 8 - X X - 42 61 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.2 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities With regard to Financial liabilities held for trading: subordinated liabilities, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.3 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts With regard to Financial liabilities held for trading: structured debts, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.4 Bis Financial liabilities measured at fair value: breakdown (millions of euro) Transaction type/Values 31.12.2022 31.12.2021 Nominal value Fair value Fair value (*) Nominal value Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to banks - - - - - - - - - - 1.1 Structured - - - - X - - - - X 1.2 Other - - - - X - - - - X 2. Due to customers 71,565 - 71,565 - 79,141 84,667 - 84,667 - 85,269 2.1 Structured - - - - X - - - - X 2.2 Other 71,565 - 71,565 - X 84,667 - 84,667 - X 3. Debt securities - - - - - - - - - - 3.1 Structured - - - - X - - - - X 3.2 Other - - - - X - - - - X Total 71,565 - 71,565 - 79,141 84,667 - 84,667 - 85,269 (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.5 Bis Breakdown of \u201cFinancial liabilities measured at fair value\u201d: subordinated liabilities There were no subordinated liabilities classified under Financial liabilities measured at fair value as at 31 December 2022. 3.6 Bis Hedging derivatives: breakdown by type of hedge and level (millions of euro) Fair value 31.12.2022 Notional value Fair value 31.12.2021 Notional value Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A) Financial derivatives - 170 - 1,241 - - - - 1) fair value - - - - - - - - 2) cash flows - 170 - 1,241 - - - - 3) foreign investments - - - - - - - - B) Credit derivatives - - - - - - - - 1) fair value - - - - - - - - 2) cash flows - - - - - - - - Total - 170 - 1,241 - - - - 3.7 Bis Hedging derivatives: breakdown by hedged portfolio and type of hedge (millions of euro) Transactions/Type of hedge FAIR VALUE CASH FLOW FOREIGN INVESTM. Specific Generic Specific Generic Interest rate risk Foreign exchange risk Credit risk Price risk Various risks 1. Financial assets available for sale - - - - - X - X X 2. Loans - - - X - X - X X 3. Investments held to maturity X - - X - X - X X 4. Portfolio X X X X X - X - X 5. Other transactions - - - - - X - X - Total assets - - - - - - - - - 1. Financial liabilities - - - X - X 170 X X 2. Portfolio X X X X X - X - X Total liabilities - - - - - - 170 - - 1. Forecast transactions X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X - X - - SECTION 4 \u2013 HEDGING DERIVATIVES \u2013 CAPTION 40 4.1 Hedging derivatives: breakdown by type of hedge and level (millions of euro) 31.12.2022 Notional value 31.12.2021 Notional value Fair value Fair value Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A) Financial derivatives - 5,346 - 191,704 - 4,868 - 111,607 1) Fair value - 5,093 - 178,117 - 2,814 - 102,604 2) Cash flows - 253 - 13,408 - 2,054 - 9,003 3) Foreign investments - - - 179 - - - - B. Credit derivatives - - - - - - - - 1) Fair value - - - - - - - - 2) Cash flows - - - - - - - - Total - 5,346 - 191,704 - 4,868 - 111,607 As at 31 December 2022 the Group had undertaken hedging transactions involving foreign investments, relating to the equity investment in Reyl & Cie SA, based in Switzerland. 4.2 Hedging derivatives: breakdown by hedged portfolio and type of hedge (millions of euro) Transactions/Type of hedge FAIR VALUE CASH FLOW FOREIGN INVESTM. Specific Generic Specific Generic debt securities and interest rates equities and stock indices foreign exchange rates and gold credit risk commodities other 1. Financial assets measured at fair value through other comprehensive income 68 - 16 - X X X - X X 2. Financial assets measured at amortised cost 972 X 161 - X X X - X X 3. Portfolio X X X X X X 3 X 210 X 4. Other transactions - - - - - - X - X - Total assets 1,040 - 177 - - - 3 - 210 - 1. Financial liabilities 545 X 625 - - - X - X X 2. Portfolio X X X X X X 2,703 X 43 X Total liabilities 545 - 625 - - - 2,703 - 43 - 1. Forecast transactions X X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X X - X - - The table indicates negative fair values of hedging derivatives, broken down in relation to asset or liability hedged and type of hedge. Considering the values gross of netting in the financial statements, these continue to refer mainly to macro hedges of portfolios of liabilities represented by core deposits and debt securities under assets. Cash flow hedges refer to funding through floating-rate securities issued used to fund fixed-rate investments. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1032": { "value": "SECTION 2 - FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS CAPTION 20 2.1 Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 9,150 1,194 52 21,798 1,324 89 1.1 Structured securities 1,016 74 - 5 1,009 42 1.2 Other debt securities 8,134 1,120 52 21,793 315 47 2. Equities 860 - 22 674 - 17 3. Quotas of UCI 264 5 21 116 - 25 4. Loans - 32 53 - 14 4 4.1 Repurchase agreements - - - - - - 4.2 Other - 32 53 - 14 4 Total (A) 10,274 1,231 148 22,588 1,338 135 B. Derivatives 1. Financial derivatives 57 29,841 35 27 20,817 52 1.1 trading 55 29,841 35 27 20,817 52 1.2 fair value option - - - - - - 1.3 other 2 - - - - - 2. Credit derivatives - 936 - - 2,224 - 2.1 trading - 936 - - 2,224 - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total (B) 57 30,777 35 27 23,041 52 TOTAL (A+B) 10,331 32,008 183 22,615 24,379 187 Structured securities as at 31 December 2022 consist of 1,086 million euro of fixed-rate debt securities indexed to inflation, as an additional component, and 4 million euro of debt securities convertible into shares. The caption above includes the securities connected with securitisation transactions for a total amount of approximately 865 million euro (818 million euro Level 1 and 47 million euro Level 2), of which 627 million euro is senior, 230 million euro is mezzanine and 8 million euro is junior. As the gross positive fair value of the derivative instruments implemented with the legal clearing agent LCH Ltd. meets the requirements set out for offsetting between gross positive and negative balances pursuant to IAS 32, paragraph 42, it was subject to offsetting, with recognition of the net fair value under Financial liabilities held for trading and Financial assets held for trading, respectively. 2.2 Financial assets held for trading: breakdown by borrower/issuer/counterparty (millions of euro) Captions 31.12.2022 31.12.2021 A. Cash assets 1. Debt securities 10,396 23,211 a) Central Banks 78 44 b) Public administration 7,541 20,394 c) Banks 1,186 1,149 d) Other financial companies 1,175 1,239 of which: insurance companies 85 65 e) Non financial companies 416 385 2. Equities 882 691 a) Banks 35 71 b) Other financial companies 133 96 of which: insurance companies 51 31 c) Non financial companies 714 524 d) Other issuers - - 3. Quotas of UCI 290 141 4. Loans 85 18 a) Central Banks - - b) Public administration - - c) Banks - - d) Other financial companies 38 - of which: insurance companies - - e) Non financial companies 47 18 f) Households - - Total A 11,653 24,061 B. Derivatives a) Central counterparties 11,065 1,693 b) Other 19,804 21,427 Total B 30,869 23,120 TOTAL (A+B) 42,522 47,181 2.3 Financial assets designated at fair value: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities - 1 - - 1 3 1.1 Structured securities - - - - - - 1.2 Other debt securities - 1 - - 1 3 2. Loans - - - - - - 2.1 Structured - - - - - - 2.2 Other - - - - - - Total - 1 - - 1 3
The Bank has included in this category debt securities linked to financial instruments measured at fair value through profit and
loss, such as financial derivatives. On the basis of the debt securities, no hedges were arranged through credit derivatives or
similar instruments to mitigate the relevant credit risk.
The fair value change attributable to the measurement of credit risk of financial assets designated at fair value was
insignificant, both during the year and in cumulative terms.
2.4 Financial assets designated at fair value: breakdown by borrower/issuer
(millions of euro)
Captions
31.12.2022
31.12.2021
1. Debt securities
1
4
a) Central Banks
-
-
b) Public administration
1
1
c) Banks
-
-
d) Other financial companies
-
3
of which: insurance companies
-
-
e) Non financial companies
-
-
2. Loans
-
-
a) Central Banks
-
-
b) Public administration
-
-
c) Banks
-
-
d) Other financial companies
-
-
of which: insurance companies
-
-
e) Non financial companies
-
-
f) Households
-
-
Total
1
4
2.5 Other financial assets mandatorily measured at fair value: breakdown
(millions of euro)
Captions
31.12.2022
31.12.2021
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
1. Debt securities
-
55
133
-
60
107
1.1 Structured securities
-
-
5
-
-
5
1.2 Other debt securities
-
55
128
-
60
102
2. Equities
122
107
242
161
116
225
3. Quotas of UCI
858
191
2,401
1,486
149
2,166
4. Loans
-
310
635
-
375
701
4.1 Repurchase agreements
-
-
-
-
-
-
4.2 Other
-
310
635
-
375
701
Total
980
663
3,411
1,647
700
3,199
The caption above includes the securities connected with securitisation transactions for a total amount of approximately
125 million euro (25 million euro Level 1 and 100 million euro Level 2), of which 44 million euro is senior, 65 million euro is
mezzanine and 16 million euro is junior.
2.6 Other financial assets mandatorily measured at fair value: breakdown by borrower/issuer
(millions of euro)
Captions
31.12.2022
31.12.2021
1. Equities
471
502
of which: banks
-
-
of which: other financial companies
117
160
of which: non financial companies
355
342
2. Debt securities
188
167
a) Central Banks
-
-
b) Public administration
-
-
c) Banks
-
-
d) Other financial companies
157
158
of which: insurance companies
1
-
e) Non financial companies
31
9
3. Quotas of UCI
3,450
3,801
4. Loans
945
1,076
a) Central Banks
-
-
b) Public administration
-
-
c) Banks
29
38
d) Other financial companies
119
141
of which: insurance companies
10
10
e) Non financial companies
554
674
f) Households
243
223
Total
5,054
5,546
The aggregate \u201cquotas of UCI\u201d includes 290 million euro in interests held by the bank in the Atlante Fund and in the Italian
Recovery Fund (formerly Atlante Fund II), as alternative investment funds to support Italian banks in their recapitalisation
transactions and in the management of the bad loans in the sector.
Loans include credit exposures classified among financial assets mandatorily measured at fair value as they failed the test on
the contractual characteristics of cash flows (SPPI Test) required by IFRS 9.
SECTION 3 - FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
- CAPTION 30
3.1 Financial assets measured at fair value through other comprehensive income: breakdown
(millions of euro)
Captions
31.12.2022
31.12.2021
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
1. Debt securities
41,424
5,227
9
57,547
6,003
18
1.1 Structured securities
1,373
-
-
-
587
-
1.2 Other debt securities
40,051
5,227
9
57,547
5,416
18
2. Equities
513
510
325
1,537
1,314
421
3. Loans
-
1,685
23
-
687
53
Total
41,937
7,422
357
59,084
8,004
492
Loans included in this caption, as illustrated in Part A \u2013 Accounting policies, refer to portions of syndicated loans underwritten
and destined to be subsequently sold.
The caption includes the securities connected with securitisations for a total amount of approximately 1,543 million euro (all
Level 2), of which approximately 1,501 million euro is senior, 42 million euro is mezzanine and there is no junior.
The sub-caption 2. Equities includes the stakes in the capital of the Bank of Italy for an amount of 375 million euro. For the
related valuation, as in the previous years, the direct transaction method was used, considering the purchases made starting
from 2015 and continuing in subsequent years. Considering that all the main transactions were finalised at nominal value, the
use of this approach confirms the recognition value of the stakes held in the financial statements of the Group.
In addition, the value of the investment was also supported by the use of an alternative method based on the discounting of
future dividends deriving from the investment (DDM \u2013 \u201cDividend Discount Model\u201d). Following the approach taken in the
previous years, the use of level 2 inputs (direct transaction prices) as the reference for determining fair value for the 2022
financial statements also resulted in the confirmation of level 2 in the fair value hierarchy.
The book value of equity instruments deriving from the recovery of impaired financial assets amounted to 50 million euro.
3.2 Financial assets measured at fair value through other comprehensive income: borrower/issuer breakdown
(millions of euro)
Captions
31.12.2022
31.12.2021
1. Debt securities
46,660
63,568
a) Central Banks
-
-
b) Public administration
35,062
50,549
c) Banks
5,487
5,699
d) Other financial companies
3,943
4,212
of which: Insurance companies
25
11
e) Non financial companies
2,168
3,108
2. Equities
1,348
3,272
a) Banks
768
1,456
b) Other issuers:
580
1,816
- other financial companies
163
1,268
of which: insurance companies
3
3
- non financial companies
407
538
- other
10
10
3. Loans
1,708
740
a) Central Banks
-
-
b) Public administration
-
-
c) Banks
100
-
d) Other financial companies
146
62
of which: insurance companies
-
-
e) Non financial companies
1,462
678
f) Households
-
-
Total
49,716
67,580
3.3 Financial assets measured at fair value through other comprehensive income: gross amount and total
adjustments
(millions of euro)
Gross amount
Total adjustments
Total
partial
write-offs
Stage 1
of which:
Instruments
with low
credit risk
Stage 2
Stage 3
Purchased
or
originated
credit-
impaired
Stage 1
Stage 2
Stage 3
Purchased
or
originated
credit-
impaired
Debt securities
46,501
564
213
36
-
-26
-28
-36
-
-
Loans
1,081
-
654
-
-
-8
-19
-
-
-
Total
31.12.2022
47,582
564
867
36
-
-34
-47
-36
-
-
Total
31.12.2021
64,126
965
231
35
-
-38
-11
-35
-
-
For the approach used to represent the gross value and the total adjustments to impaired financial assets, see the illustration
provided in Part A \u2013 Accounting policies.
3.3a Loans measured at fair value through other comprehensive income subject to COVID-19 support measures:
gross amount and total adjustments
As at 31 December 2022 this case was not present.
SECTION 3 BIS - FINANCIAL ASSETS PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE
PURSUANT TO IAS 39 - CAPTION 35
The breakdown of the IAS 39 captions included in caption 35 of the Balance Sheet Assets referring to insurance companies is
shown below.
In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of
Italy Circular 262, \u201cCaption 35 Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d
was created, which comprises the components set out in the table below.
(millions of euro)
Breakdown of Financial assets pertaining to insurance companies measured at fair value pursuant to
IAS 39 - Caption 35
31.12.2022
31.12.2021
20. Financial assets held for trading
902
1,027
30. Financial assets designated at fair value
86,217
101,059
40. Financial assets available for sale
85,593
104,423
80. Hedging derivatives
13
291
TOTAL Caption 35
172,725
206,800
3.1 Bis Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 150 198 310 166 288 337 1.1 Structured securities - - - - - - 1.2 Other debt securities 150 198 310 166 288 337 2. Equities - - - - - - 3. Quotas of UCI 97 - 46 122 - 49 4. Loans - - - - - - 4.1 Reverse repurchase agreements - - - - - - 4.2 Other - - - - - - Total A 247 198 356 288 288 386 B. Derivatives 1. Financial derivatives: 50 51 - 56 5 4 1.1 trading 50 35 - 55 4 4 1.2 fair value option - 16 - 1 1 - 1.3 other - - - - - - 2. Credit derivatives: - - - - - - 2.1 trading - - - - - - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total B 50 51 - 56 5 4 TOTAL (A+B) 297 249 356 344 293 390 3.2 Bis Financial assets held for trading: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 A. Cash assets 1. Debt securities 658 791 a) Governments and Central Banks 101 122 b) Other public entities - - c) Banks 267 329 d) Other issuers 290 340 2. Equities - - a) Banks - - b) Other issuers: - - - insurance companies - - - financial companies - - - non-financial companies - - - other - - 3. Quotas of UCI 143 171 4. Loans - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - Total A 801 962 B. Derivatives a) Banks - - - Fair value - - b) Customers 101 65 - Fair value 101 65 Total B 101 65 Total (A+B) 902 1,027
3.3 Bis Financial assets designated at fair value: breakdown
(millions of euro)
Captions/Amounts
31.12.2022
31.12.2021
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
1. Debt securities
4,344
22
5
4,754
34
5
1.1 Structured securities
-
-
-
17
2
-
1.2 Other debt securities
4,344
22
5
4,737
32
5
2. Equities
3,016
-
-
3,510
-
-
3. Quotas of UCI
78,025
-
-
91,908
109
-
4. Loans
223
-
582
343
-
396
4.1 Structured
-
-
-
-
-
-
4.2 Other
223
-
582
343
-
396
Total
85,608
22
587
100,515
143
401
Cost
86,661
14
586
93,092
121
395
3.4 Bis Financial assets designated at fair value: borrower/issuer breakdown
(millions of euro)
Captions
31.12.2022
31.12.2021
1. Debt securities
4,371
4,793
a) Governments and Central Banks
3,375
3,772
b) Other public entities
11
11
c) Banks
514
471
d) Other issuers
471
539
2. Equities
3,016
3,510
a) Banks
214
239
b) Other issuers:
2,802
3,271
- insurance companies
129
120
- financial companies
50
54
- non-financial companies
1,327
1,669
- other
1,296
1,428
3. Quotas of UCI
78,025
92,017
4. Loans
805
739
a) Governments and Central Banks
-
-
b) Other public entities
-
-
c) Banks
805
739
d) Other counterparties
-
-
Total
86,217
101,059
3.5 Bis Financial assets available for sale: breakdown
(millions of euro)
Captions
31.12.2022
31.12.2021
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
1. Debt securities
67,583
3,152
349
81,830
6,298
412
1.1 Structured securities
8
-
-
14
-
-
1.2 Other debt securities
67,575
3,152
349
81,816
6,298
412
2. Equities
1,921
7
67
2,201
7
54
2.1 Measured at fair value
1,921
7
67
2,201
7
54
2.2 Measured at cost
-
-
-
-
-
-
3. Quotas of UCI
8,306
-
4,208
9,879
-
3,742
4. Loans
-
-
-
-
-
-
Total
77,810
3,159
4,624
93,910
6,305
4,208
3.6 Bis Financial assets available for sale: borrower/issuer breakdown
(millions of euro)
Captions
31.12.2022
31.12.2021
1. Debt securities
71,084
88,540
a) Governments and Central Banks
55,587
71,782
b) Other public entities
283
359
c) Banks
6,495
6,214
d) Other issuers
8,719
10,185
2. Equities
1,995
2,262
a) Banks
194
206
b) Other issuers:
1,801
2,056
- insurance companies
35
37
- financial companies
-
-
- non-financial companies
1,766
2,019
- other
-
-
3. Quotas of UCI
12,514
13,621
4. Loans
-
-
a) Governments and Central Banks
-
-
b) Other public entities
-
-
c) Banks
-
-
d) Other counterparties
-
-
Total
85,593
104,423
3.7 Bis Financial assets available for sale subject to microhedging
There were no financial assets available for sale subject to microhedging referring to insurance companies.
3.8 Bis Hedging derivatives: breakdown by type of hedge and level (millions of euro) Fair value 31.12.2022 Notional value Fair value 31.12.2021 Notional value Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A) Financial derivatives - 13 - 200 - 291 - 1,046 1) fair value - - - - - - - - 2) cash flows - 13 - 200 - 291 - 1,046 3) foreign investments - - - - - - - - B) Credit derivatives - - - - - - - - 1) fair value - - - - - - - - 2) cash flows - - - - - - - - Total - 13 - 200 - 291 - 1,046 3.9 Bis Hedging derivatives: breakdown by hedged portfolio and type of hedge (book value) (millions of euro) Operations/Type of hedge FAIR VALUE CASH FLOWS FOREIGN. INVESTM. Specific Generic Specific Generic Interest rate risk foreign exchange risk Credit risk various risk Multiple risk 1. Financial assets available for sale - - - - - X 13 X X 2. Loans - - - X - X - X X 3. Investments held to maturity X - - X - X - X X 4. Portfolio X X X X X - X - X 5. Other transactions - - - - - X - X - Total assets - - - - - - 13 - - 1. Financial liabilities - - - X - X - X X 2. Portfolio X X X X X - X - X Total liabilities - - - - - - - - - 1. Forecast transactions X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X - X - - DISCLOSURE PURSUANT TO IFRS 4 As previously indicated, the Intesa Sanpaolo Group exercised the option of adopting the Deferral Approach or Temporary Exemption, according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39. In particular, the Group\u2019s insurance companies applying IAS 39 are as follows: - Intesa Sanpaolo Vita S.p.A.; - Intesa Sanpaolo Assicura S.p.A.; - Intesa Sanpaolo Life Ltd.; - Fideuram Vita S.p.A.; - Intesa Sanpaolo RBM Salute S.p.A. This section sets out the information required by IFRS 4 Insurance Contracts following exercise of the option, granted to insurance companies belonging to banking-led financial conglomerates, pursuant to Regulation 2017/1988 and the subsequent Regulation 2020/2097, of postponing the first-time adoption of IFRS 9 88 . The Group verified the fulfilment of the requirements to apply the Temporary Exemption. The insurance companies meet the requirement of insurance predominance, which requires that the percentage of the carrying amount of liabilities linked to insurance business on the carrying amount of total liabilities of the entity exceeds 90% (predominance ratio). Moreover, there were no transfers of financial assets other than those measured at FVTPL between Group companies using different accounting standards. As required by the reference regulations, the quantitative disclosure regarding the entities that will postpone the application of IFRS 9 is provided below. 88 It is noted that the publication of Regulation 2097/2020 of 15 December 2020 endorsed the extension of the temporary exemption from applying IFRS 9 Financial Instruments to 1 January 2023, considering the IASB\u2019s decision on 25 June 2020 to postpone the date of first-time adoption of IFRS 17 Insurance Contracts to 1 January 2023. Details of the securities of the insurance companies that pass the SPPI Test (millions of euro) Caption Fair value at the reporting date Fair value changes during the year Other changes during the year (3) Fair value at the previous reporting date Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39 171,920 -24,284 -9,857 206,061 of which: Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1) 69,674 -14,890 -1,888 86,452 Debt securities 69,674 -14,890 -1,888 86,452 Structured securities - - -9 9 Other debt securities 69,674 -14,890 -1,879 86,443 Loans - - - - Other financial assets - - - - Financial asset other than those with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (2) 17,044 -1,668 -818 19,530 Debt securities 2,086 -408 -405 2,899 Structured securities 8 -1 4 5 Other debt securities 2,078 -407 -409 2,894 Equities 1,995 -207 -60 2,262 Quotas of UCI 12,865 -1,008 -152 14,025 Loans - - - - Derivatives 98 -45 -201 344 Other financial assets - - - - Other financial assets connected with contracts where the investment risk is borne by the policyholders 85,202 -7,726 -7,151 100,079 Debt securities 4,353 -437 17 4,773 Structured securities - - -19 19 Other debt securities 4,353 -437 36 4,754 Equities 3,016 -552 58 3,510 Quotas of UCI 77,817 -6,811 -7,156 91,784 Loans - - - - Derivatives 16 74 -70 12 Other financial assets - - - - Financial assets pertaining to insurance companies measured at amortised cost pursuant to IAS 39 (*) 69 -6 -7 82 of which: Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1) 33 -2 -6 41 Debt securities 33 -2 -6 41 Structured securities - - - - Other debt securities 33 -2 -6 41 Loans - - - - Other financial assets - - - - Financial asset other than those with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (2) 36 -4 -1 41 Debt securities 36 -4 -1 41 Structured securities - - - - Other debt securities 36 -4 -1 41 Equities - - - - Quotas of UCI - - - - Loans - - - - Derivatives - - - - Other financial assets - - - - (*) Debt securities shows the fair value as required by the amendment to IFRS 4. These securities have been recognised in the balance sheet at amortised cost (1) excluding financial assets that meet the definition of held for trading in IFRS 9, or are managed and whose return is measured at fair value (2) includes all other financial assets, i.e. any financial asset: i) with contractual terms that do not give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding; ii) that meet the definition of held for trading in IFRS 9; or iii) that are managed and whose return is measured at fair value (3) Column includes movements that are not attributable to changes in fair value (purchases, sales, repayments, etc.) The table referred to above includes the investments whose risk is fully borne by policyholders, classified under financial assets measured at fair value. Amounts due from banks of 805 million euro are added to the amounts indicated above. Credit risk exposure for financial instruments of the insurance companies that pass the SPPI test (millions of euro) Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1) Credit risk rating Current year book value (2) Previous year book value (2) Debt securities 67,265 83,261 Structured securities Investment Grade - 9 Other debt securities Investment Grade 67,265 83,252 Loans - - Other financial assets - - (millions of euro) Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1), and which do not have a low credit risk Credit risk rating Current year book value (2) Current year market value Previous year book value (2) Debt securities 2,444 2,445 3,227 Structured securities Non-Investment Grade - - - Other debt securities Non-Investment Grade 2,444 2,445 3,227 Loans - - - Other financial assets - - - (1) excluding financial assets that meet the definition of held for trading in IFRS 9, or are managed and whose return is measured at fair value. (2) in the case of financial assets measured at amortised cost, before any impairment loss. SECTION 4 - FINANCIAL ASSETS MEASURED AT AMORTISED COST \u2013 CAPTION 40 4.1 Financial assets measured at amortised cost: breakdown of amounts due from banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 A. Due from Central Banks 9,712 - - - 7,089 2,623 131,361 - - - 128,282 3,078 1. Time deposits 3,622 - - X X X 3,118 - - X X X 2. Compulsory reserve 5,427 - - X X X 126,882 - - X X X 3. Repurchase agreements 543 - - X X X 273 - - X X X 4. Other 120 - - X X X 1,088 - - X X X B. Due from banks 23,136 36 - 1,265 18,791 3,055 32,523 53 - 1,547 28,156 2,903 1. Loans 21,478 36 - - 18,465 3,055 30,752 53 - - 27,914 2,903 1.1 Current accounts - - - X X X - - - X X X 1.2 Time deposits 2,449 - - X X X 1,681 - - X X X 1.3 Other loans: 19,029 36 - X X X 29,071 53 - X X X - Reverse repurchase agreements 5,397 - - X X X 9,566 - - X X X - Finance leases 5 - - X X X 6 - - X X X - Other 13,627 36 - X X X 19,499 53 - X X X 2. Debt securities 1,658 - - 1,265 326 - 1,771 - - 1,547 242 - 2.1 Structured - - - - - - - - - - - - 2.2 Other 1,658 - - 1,265 326 - 1,771 - - 1,547 242 - TOTAL 32,848 36 - 1,265 25,880 5,678 163,884 53 - 1,547 156,438 5,981 As at 31 December 2022, the decline in the sub-caption Reserve Requirement was due to the placement of excess liquidity in overnight deposits reported in the caption Cash and cash equivalents. The sub-caption \u201cOther loans - Other\u201d includes operating loans, i.e. operations connected to the provision of financial activities and services with no credit facilities, for an amount of 122 million euro. Those exposures are essentially performing loans classified in Stage 1 and adjusted based on IFRS 9 .
4.2 Financial assets measured at amortised cost: breakdown of loans to customers
(millions of euro)
Transaction type/Amount
31.12.2022
31.12.2021
Book value
Fair value
Book value
Fair value
Stage 1
and 2
Stage 3
Purchased
or
originated
credit-
impaired
Level 1
Level 2
Level 3
Stage 1
and 2
Stage 3
Purchased
or
originated
credit-
impaired
Level 1
Level 2
Level 3
1. Loans
432,447
5,255
271
-
283,348
140,877
449,287
6,682
446
-
317,673
147,945
1.1.Current accounts
22,967
484
12
X
X
X
21,724
688
22
X
X
X
1.2. Reverse repurchase agreements
15,366
-
-
X
X
X
17,620
-
-
X
X
X
1.3. Mortgages
242,049
3,083
156
X
X
X
250,722
4,080
268
X
X
X
1.4. Credit card loans, personal loans
and transfer of one fifth of salaries
19,435
339
2
X
X
X
18,626
364
9
X
X
X
1.5. Finance leases
7,780
328
85
X
X
X
12,830
347
108
X
X
X
1.6. Factoring
10,869
52
-
X
X
X
9,453
65
-
X
X
X
1.7. Other loans
113,981
969
16
X
X
X
118,312
1,138
39
X
X
X
2. Debt securities
57,188
33
-
27,693
10,877
14,938
48,473
41
-
25,659
10,872
11,536
2.1. Structured securities
-
-
-
-
-
-
-
-
-
-
-
-
2.2. Other debt securities
57,188
33
-
27,693
10,877
14,938
48,473
41
-
25,659
10,872
11,536
Total
489,635
5,288
271
27,693
294,225
155,815
497,760
6,723
446
25,659
328,545
159,481
The sub-caption \u201cOther loans\u201d includes operating loans, i.e. operations connected to the provision of financial activities and
services with no credit facilities, for an amount of 740 million euro. Those exposures are essentially performing loans
classified in Stage 1 and adjusted based on IFRS 9.
Debt securities include the securities connected with securitisations for a total amount of approximately 8,495 million euro, of
which 8,475 million euro is senior notes and 20 million euro mezzanine.
4.3 Financial assets measured at amortised cost: breakdown by borrower/issuer of loans to customers
(millions of euro)
Transaction type/Amount
31.12.2022
31.12.2021
Stage 1 and 2
Stage 3
Purchased or
originated
credit-
impaired
Stage 1 and 2
Stage 3
Purchased or
originated
credit-
impaired
1. Debt securities
57,188
33
-
48,473
41
-
a) Public administration
32,298
13
-
27,851
15
-
b) Other financial companies
21,418
8
-
16,612
14
-
of which: insurance companies
1
-
-
6
-
-
c) Non financial companies
3,472
12
-
4,010
12
-
2. Loans:
432,447
5,255
271
449,287
6,682
446
a) Public administration
15,566
213
-
16,385
356
-
b) Other financial companies
44,781
123
1
45,872
262
1
of which: insurance companies
39
-
-
361
-
-
c) Non financial companies
193,579
3,126
150
212,387
3,555
246
d) Households
178,521
1,793
120
174,643
2,509
199
TOTAL
489,635
5,288
271
497,760
6,723
446
4.4 Financial assets measured at amortised cost: gross amount and total adjustments
(millions of euro)
Gross amount
Total adjustments
Total
partial
write-offs
Stage 1
of which:
Instruments
with low
credit risk
Stage
2
Stage 3
Purchased
or
originated
credit-
impaired
Stage 1
Stage 2
Stage 3
Purchased
or
originated
credit-
impaired
Debt
securities
54,961
-
4,062
105
-
-29
-66
-72
-
-
Loans
419,968
24
46,175
10,332
384
-659
-1,929
-5,041
-113
3,081
Total
31.12.2022
474,929
24
50,237
10,437
384
-688
-1,995
-5,113
-113
3,081
Total
31.12.2021
603,169
17
61,028
14,892
587
-753
-1,800
-8,116
-141
6,476
For the approach used to represent the gross value and the total adjustments to impaired financial assets, see the illustration
provided in Part A \u2013 Accounting policies.
4.4a Loans measured at amortised cost subject to COVID-19 support measures: gross amount and total adjustments
(millions of euro)
Gross value
Writedown
Write off
partial
total
Stage 1
of which:
low
credit
risk
Stage 2
Stage 3
Purchased
or
originated
credit-
impaired
Stage 1
Stage 2
Stage 3
Purchased
or
originated
credit-
impaired
1. EBA-compliant moratoria loans
-
-
-
-
-
-
-
-
-
-
2. Loans subject to outstanding moratorium
measures no longer compliant with the GL
and not considered forborne
51
-
26
27
-
-
-3
-11
-
-
3. Other loans with COVID-19-related
forbearance measures
4
-
693
156
1
-
-36
-52
-1
-
4. Newly originated loans
29,434
-
3,199
573
1
-38
-37
-176
-
-
Total
31.12.2022
29,489
-
3,918
756
2
-38
-76
-239
-1
-
Total
31.12.2021
35,182
-
9,340
545
5
-44
-248
-151
-
-
The row \u201cEBA-compliant moratoria loans\u201d shows the loans subject to moratoria that fall within the scope of application of the
\u201cGuidelines on legislative and non legislative moratoria on loan repayments applied in the light of the COVID 19 crisis\u201d,
published by the EBA (EBA/GL/2020/02), as amended. As at 31 December 2022 such loans were less than 1 million euro and
amounted to 412 thousand euro.
The row \u201cLoans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne\u201d
shows the outstanding loans subject to moratoria, assessed as compliant with EBA/GL/2020/02 at the date the measure was
granted, but no longer compliant at the reporting date, which were not classified by the bank as \u201cforborne exposures\u201d (as
defined by the supervisory reports in force) following the assessment conducted on occurrence of the event that generated
the non-compliance with EBA/GL/2020/02.
The row \u201cOther forborne loans\u201d contains information regarding the loans subject to the COVID-19 support measures that meet
the conditions of \u201cforborne exposures\u201d as defined by the current supervisory reports, and have not been included in the
category \u201cEBA-compliant moratoria loans\u201d since the grant date or since the date on which they no longer comply with the
EBA/GL/2020/02.
The row \u201cNewly originated loans\u201d represents the exposures for which new liquidity was granted, with the support of
government guarantees.
The loans under sub-captions 1, 2 and 3 of the table above are subject to moratoria which were still in force as at
31 December 2022.
SECTION 4 BIS - FINANCIAL ASSETS PERTAINING TO INSURANCE COMPANIES MEASURED AT AMORTISED
COST PURSUANT TO IAS 39 - CAPTION 45
The breakdown of the IAS 39 captions included in caption 45 of the Balance Sheet Assets referring to insurance companies is
shown below.
In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of
Italy Circular 262, \u201cCaption 45 Financial assets pertaining to insurance companies measured at amortised cost pursuant to
IAS 39\u201d was created, which comprises the components set out in the table below:
(millions of euro)
Breakdown of financial assets pertaining to insurance companies measured at amortised cost
pursuant to IAS 39 - Caption 45
31.12.2022
31.12.2021
50. Investments held to maturity
-
-
60. Due from banks
40
41
70. Loans to customers
40
44
TOTAL Caption 45
80
85
4.1 Bis Investments held to maturity
There were no investments held maturity relating to the insurance companies.
4.4 Bis Due from banks: breakdown
(millions of euro)
Captions
31.12.2022
31.12.2021
Book value
Fair value
Book
value
Fair value
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
A. Due from Central Banks
-
-
-
-
-
-
-
-
1. Time deposits
-
-
2. Compulsory reserve
-
-
3. Reverse repurchase agreements
-
-
4. Other
-
-
B. Due from banks
40
-
40
-
41
-
41
-
1. Loans
-
-
-
-
-
-
-
-
1.1 Current accounts and deposits
-
-
1.2 Time deposits
-
-
1.3 Other loans:
-
-
- Reverse repurchase agreements
-
-
- Finance leases
-
-
- Other
-
-
2. Debt securities
40
-
40
-
41
-
41
-
2.1 Structured
-
-
2.2 Other
40
41
Total
40
-
40
-
41
-
41
-
4.5 Bis Due from banks subject to microhedging
There were no amounts due from banks subject to microhedging referring to insurance companies.
4.6 Bis Loans to customers: breakdown
(millions of euro)
Captions
31.12.2022
31.12.2021
Book value
Book Value
Performing
Non Performing
Fair value
Not
impaired
Impaired
Fair value
Purchased
Other
Level 1
Level 2
Level 3
Purchased
Other
Level 1
Level 2
Level 3
Loans
5
-
-
-
4
1
8
-
-
-
8
-
1. Current accounts
-
-
-
X
X
X
-
-
-
X
X
X
2. Reverse repurchase agreements
-
-
-
X
X
X
-
-
-
X
X
X
3. Mortgages
-
-
-
X
X
X
-
-
-
X
X
X
4. Credit card loans, personal loans,
and transfer of one fifth of salaries
-
-
-
X
X
X
-
-
-
X
X
X
5. Finance leases
-
-
-
X
X
X
-
-
-
X
X
X
6. Factoring
-
-
-
X
X
X
-
-
-
X
X
X
7. Other loans
5
-
-
X
X
X
8
-
-
X
X
X
Debt securities
35
-
-
-
30
5
36
-
-
-
31
5
8. Structured securities
-
-
-
X
X
X
-
-
-
X
X
X
9. Other debt securities
35
-
-
X
X
X
36
-
-
X
X
X
Total
40
-
-
-
34
6
44
-
-
-
39
5
4.7 Bis Loans to customers: borrower/issuer breakdown
(millions of euro)
Captions
31.12.2022
31.12.2021
Performing
Non performing
Performing
Non performing
Purchased
Other
Purchased
Other
1. Debt securities
35
-
-
36
-
-
a) Governments
-
-
-
-
-
-
b) Other public entities
-
-
-
-
-
-
c) Other issuers
35
-
-
36
-
-
- non-financial companies
20
-
-
21
-
-
- financial institutions
15
-
-
15
-
-
- insurance companies
-
-
-
-
-
-
- other
-
-
-
-
-
-
2. Loans:
5
-
-
8
-
-
a) Governments
-
-
-
-
-
-
b) Other public entities
-
-
-
-
-
-
c) Other counterparties
5
-
-
8
-
-
- non-financial companies
-
-
-
-
-
-
- financial institutions
4
-
-
7
-
-
- insurance companies
-
-
-
-
-
-
- other
1
-
-
1
-
-
Total
40
-
-
44
-
-
4.8 Bis Loans to customers subject to microhedging
There were no Loans to customers subject to microhedging referring to insurance companies.
SECTION 1 \u2013 FINANCIAL LIABILITIES MEASURED AT AMORTISED COST - CAPTION 10 1.1 Financial liabilities measured at amortised cost: breakdown of amounts due to banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to central banks 98,444 X X X 134,790 X X X 2. Due to banks 39,038 X X X 30,468 X X X 2.1 Current accounts and on demand deposits 3,234 X X X 3,197 X X X 2.2 Time deposits 3,807 X X X 4,394 X X X 2.3 Loans 18,610 X X X 18,574 X X X 2.3.1 Repurchase agreements 12,753 X X X 12,160 X X X 2.3.2 Other 5,857 X X X 6,414 X X X 2.4 Debts for commitments to repurchase own equity instruments - X X X 138 X X X 2.5 Lease liabilities 6 X X X 8 X X X 2.6 Other debts 13,381 X X X 4,157 X X X Total 137,482 - 125,164 12,148 165,258 - 153,297 11,916 The illustration of the criteria used to determine the fair value is contained in Part A \u2013 Accounting policies. Repurchase agreements related to assets sold not derecognised are detailed in Part E - Sales of the Notes to the financial statements. The caption Due to Central Banks includes the balance of TLTRO refinancing operations for a total of 96,060 million euro, fully attributable to the TLTRO III. The Group\u2019s repurchase agreements shown in the table include long-term repurchase agreements with a total carrying amount of 238 million euro, attributable to Banca Fideuram for de-risking transactions completed in previous years with the twofold aim of both funding the bank\u2019s operations (through repurchase transactions) and reducing the credit risks associated with the portfolio of securities issued (also through the acquisition of financial guarantees). The transactions have a non- replaceable underlying portfolio of Italian government securities (with maturities from 2023 to 2033) hedged against interest rate risk through interest rate swap contracts and against credit risk through credit default swap contracts, already recorded in the financial statements at the time of execution of the repurchase transactions and recognised under financial assets measured at amortised cost. The nominal value and the maturity date of the repurchase agreements are the same as that of the securities. For recognition purposes, an assessment was conducted aimed at understanding the purpose underlying the contractual agreements, taking into account the instructions provided by the supervisory authorities in Bank of Italy/Consob/IVASS Document No. 6 of 8 March 2013, \u201cAccounting treatment of \u2018long-term structured repurchase agreements\u2019.\u201d The analysis focused on the structure, cash flows and risks associated with the transactions and was aimed at verifying whether the cases described above were similar to the long-term structured repurchase agreements described in the above Document, and, in order to be compliant with the principle of the prevalence of substance over form, whether the indicators referred in paragraph B.6 of the Guidance on Implementing IFRS 9, according to which the transaction may be considered substantially similar to a credit derivative contract, and, in particular, a credit default swap, were present. The case described above consists of repurchase agreements that are not concurrent with the purchases of the securities, because they were already present in the portfolio. In addition, buying securities and entering into the related hedging derivatives occurred with market counterparties other than those with which the repurchase agreements were entered into. The credit risk was also closed with financial guarantees. Consequently, the analysis shows elements of differentiation from the long-term structured repurchase agreements described in the aforementioned Document, supporting the inapplicability of the guidelines provided in paragraph B.6 of the Guidance on Implementing IFRS 9, with the result that the transactions must be recognised in the financial statements with the individual contractual components shown separately. 1.2 Financial liabilities measured at amortised cost: breakdown of amounts due to customers (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Current accounts and on demand deposits 412,667 X X X 423,335 X X X 2. Time deposits 20,309 X X X 19,184 X X X 3. Loans 5,200 X X X 5,716 X X X 3.1 Repurchase agreements 1,284 X X X 2,691 X X X 3.2 Other 3,916 X X X 3,025 X X X 4. Debts for commitments to repurchase own equity instruments 181 X X X 23 X X X 5. Lease liabilities 1,309 X X X 1,379 X X X 6. Other debts 14,359 X X X 8,602 X X X Total 454,025 - 435,464 18,132 458,239 - 433,309 25,130 1.3 Financial liabilities measured at amortised cost: breakdown of securities issued (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Securities 1. bonds 64,838 41,748 22,980 29 75,050 47,030 29,971 42 1.1 structured 1,806 397 1,361 29 2,262 246 2,038 42 1.2 other 63,032 41,351 21,619 - 72,788 46,784 27,933 - 2. other 11,241 - 9,280 1,961 11,508 - 8,837 2,671 2.1 structured - - - - - - - - 2.2 other 11,241 - 9,280 1,961 11,508 - 8,837 2,671 Total 76,079 41,748 32,260 1,990 86,558 47,030 38,808 2,713 1.4 Details of subordinated debts/securities There were no subordinated debts with banks and customers as at 31 December 2022. As at the reporting date, subordinated securities issued amounted to 12,474 million euro, entirely attributable to the Parent Company. 1.5 Details of structured debts As at 31 December 2022 there were no structured debts. 1.6 Lease payables As at 31 December 2022 lease payables amounted to 1,315 million euro, of which 238 million euro maturing within one year, 622 million euro maturing within 1 to 5 years and 455 million euro maturing in over 5 years. Lease payables comprise 1,309 million euro referring to customer counterparties and 6 million euro to bank counterparties. These derive from the application of the financial reporting standard IFRS 16 relating to Leases, with effect from 1 January 2019. SECTION 1 BIS - FINANCIAL LIABILITIES PERTAINING TO INSURANCE COMPANIES MEASURED AT AMORTISED COST PURSUANT TO IAS 39 - CAPTION 15 The breakdown of the IAS 39 captions included in caption 15 of the Balance sheet liabilities pertaining to insurance companies is provided below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 15 Financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39 - Caption 15 31.12.2022 31.12.2021 10. Due to banks 629 623 20. Due to customers 587 188 30. Securities issued 1,334 1,335 Total - Caption 15 2,550 2,146 1.1 Bis Due to banks: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1. Due to central banks - - 2. Due to banks 629 623 2.1 Current accounts and deposits 6 - 2.2 Time deposits - - 2.3 Loans 607 607 2.3.1 Repurchase agreements - - 2.3.2 Financial leasing loans - 2.3.3 Other 607 607 2.4 Debts for commitments to repurchase own equity instruments - - 2.5 Lease liabilities - 2.6 Other debts 16 16 TOTAL (Book value) 629 623 Fair value - level 1 - - Fair value - level 2 17 - Fair value - level 3 556 650 Total Fair value 573 650 1.2 Bis Breakdown of \u201cDue to banks\u201d: subordinated debts As at 31 December 2022 subordinated debts amounted to 607 million euro, entirely attributable to Intesa Sanpaolo Vita. 1.3 Bis Breakdown of \u201cDue to banks\u201d: structured debts There were no structured debts pertaining to Insurance Companies as at 31 December 2022. 1.4 Bis Due to banks subject to microhedging There were no structured debts due to banks subject to microhedging pertaining to Insurance Companies as at 31 December 2022. 1.5 Bis Lease payables As at 31 December 2022 there were no lease payables due to banks. 1.6 Bis Due to customers: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1.Current accounts and deposits - - 2 Time deposits - - 3. Loans - - 3.1 Repurchase agreements - - 3.2 Financial leasing loans - - 3.3 Other - - 4. Debts for commitments to repurchase own equity instruments 360 87 5. Lease liabilities 6 7 6. Other debts 221 94 Total (Book value) 587 188 Fair value - level 1 - - Fair value - level 2 452 93 Fair value - level 3 135 95 Total Fair Value 587 188 The amount under Debts for commitments to repurchase own equity instruments refers to put options sold with minority stakes of fully consolidated equity investments as underlying asset, attributable to the Put & Call Agreement for the purchase of 26% of Intesa Sanpaolo RBM Salute S.p.A. 1.7 Bis Breakdown of \u201cDue to customers\u201d: subordinated debts There were no subordinated debts due to customers pertaining to Insurance Companies as at 31 December 2022. 1.8 Bis Breakdown of \u201cDue to customers\u201d: structured debts There were no structured debts due to customers pertaining to Insurance Companies as at 31 December 2022. 1.9 Bis Due to customers subject to microhedging There were no amounts due to customers subject to microhedging pertaining to Insurance Companies as at 31 December 2022. 1.10 Bis Lease payables As at 31 December 2022 there were lease payables due to customers of 6 million euro, all of which are due between 1 and 5 years. These derive from the application of the financial reporting standard IFRS 16 relating to Leases, with effect from 1 January 2019. 1.11 Bis Securities issued: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair Value Book value Fair Value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A.Securities 1. Bonds 1,334 - 1,171 - 1,335 - 1,338 - 1.1 structured - - - - - - - - 1.2 other 1,334 - 1,171 - 1,335 - 1,338 - 2. Other - - - - - - - - 2.1 structured - - - - - - - - 2.2 Other - - - - - - - - Total 1,334 - 1,171 - 1,335 - 1,338 - 1.12 Bis Breakdown of \u201cSecurities issued\u201d: subordinated securities As at 31 December 2022, a total of 1,334 million euro pertaining to insurance companies, fully attributable to level-2 other bonds (fair value 1,171 million euro), which at the end of 2021 amounted to 1,335 million euro. 1.13 Bis Breakdown of \u201cSecurities issued\u201d: securities subject to microhedging There were no Securities issued subject to microhedging pertaining to Insurance Companies. SECTION 2 \u2013 FINANCIAL LIABILITIES HELD FOR TRADING \u2013 CAPTION 20 2.1 Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level1 Level 2 Livello 3 A. Cash liabilities 1. Due to banks 4,729 4,240 - - 4,239 19,827 22,222 40 - 22,262 2. Due to customers 3,121 3,001 - - 3,001 - - - - - 3. Debt securities 3,000 - 2,779 - X 3,324 - 3,459 - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - X 3.1.2 Other bonds - - - - X - - - - X 3.2 Other 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.1 Structured 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.2 Other - - - - X - - - - X Total A 10,850 7,241 2,779 - 7,240 23,151 22,222 3,499 - 22,262 B. Derivatives 1. Financial derivatives X 44 35,363 142 X X 19 28,107 118 X 1.1 Trading X 44 35,343 142 X X 19 28,072 118 X 1.2 Fair value option X - - - X X - - - X 1.3 Other X - 20 - X X - 35 - X 2. Credit derivatives X - 943 - X X - 2,340 1 X 2.1 Trading X - 943 - X X - 2,340 1 X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 44 36,306 142 X X 19 30,447 119 X Total (A+B) 10,850 7,285 39,085 142 X 23,151 22,241 33,946 119 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. Amounts due to banks and customers consist entirely of short selling of securities. The aggregate 3.2.1 Other structured securities includes securitised derivatives which provide for partial or full redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014, issued by the Group throughout 2019. Derivative instruments include 5,017 million euro in certificates with characteristics similar to financial derivative instruments due to the prevalence of market risk in relation to the return of the premiums paid. The changes in fair value recorded during the year due to the change in its own credit rating were positive by 229 million euro and related to derivatives and Debt securities - Other. The values of derivative instruments as at 31 December 2022 include the results of the offsetting of accounts between positive and negative gross balances of hedging derivatives undertaken with the legal clearing agent LCH Ltd. as they meet the requirements set out in IAS 32, paragraph 42.
2.2 Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities
The aggregate Financial liabilities held for trading includes subordinated liabilities represented by Due to banks for 214 million
euro and Due to customers for 36 million euro.
2.3 Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts
As at 31 December 2022, structured debts classified under Financial liabilities held for trading amounted to 300 million euro
due to customers and 57 million euro due to banks, attributable to short selling of fixed-rate bonds indexed to inflation, as an
additional component.
SECTION 3 \u2013 FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE \u2013 CAPTION 30
3.1 Financial liabilities designated at fair value: breakdown
(millions of euro)
Transaction type/Amount
31.12.2022
31.12.2021
Nominal
value
Fair value
Fair
value
(*)
Nominal
value
Fair value
Fair
value
(*)
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
1. Due to banks
-
-
-
-
-
-
-
-
-
-
1.1 Structured
-
-
-
-
X
-
-
-
-
X
1.2 Other
-
-
-
-
X
-
-
-
-
X
of which:
- commitments to disburse
funds
-
X
X
X
X
-
X
X
X
X
- financial guarantees given
-
X
X
X
X
-
X
X
X
X
2. Due to customers
5
-
4
-
4
5
-
4
-
4
2.1 Structured
5
-
4
-
X
5
-
4
-
X
2.2 Other
-
-
-
-
X
-
-
-
-
X
of which:
- commitments to disburse
funds
-
X
X
X
X
-
X
X
X
X
- financial guarantees given
-
X
X
X
X
-
X
X
X
X
3. Debt securities
9,875
-
8,761
30
8,719
3,634
6
3,638
26
3,566
3.1 Structured
9,875
-
8,761
30
X
3,634
6
3,638
26
X
3.2 Other
-
-
-
-
X
-
-
-
-
X
Total
9,880
-
8,765
30
8,723
3,639
6
3,642
26
3,570
(*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date.
The Group has classified the LECOIP 3.0 for the employment agreements, terminated early, of employees of Group
companies and life policies connected to social initiatives, managed by the Bank based on fair value, under Amounts due to
customers.
Sub-caption 3.1 Debt securities - Structured comprised certificates which provide for partial or full redemption of the premiums
paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014 (certificates with guaranteed or protected
capital). As they were issued after 1 January 2020, these are classified under Financial liabilities designated at fair value (Fair
Value Option), as a result of the Bank\u2019s implementation of a business model based on a banking book approach, with the goal
of generating stable inflows.
Certificates representing Financial liabilities designated at fair value record the related changes in fair value attributable to
changes in own credit risk in the statement of comprehensive income (shareholders\u2019 equity). Changes in the Bank\u2019s own
credit rating during the year were negative by 47 million euro.
3.2 Breakdown of \u201cFinancial liabilities designated at fair value\u201d: subordinated liabilities
As at 31 December 2022, the Group did not have any subordinated liabilities classified under Financial liabilities designated at
fair value.
SECTION 3 BIS \u2013 FINANCIAL LIABILITIES PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE PURSUANT TO IAS 39 - CAPTION 35 The breakdown of the IAS 39 captions included in caption 35 of the Balance sheet liabilities pertaining to insurance companies is provided below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 35 Financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39 - Caption 35 31.12.2022 31.12.2021 40. Financial liabilities held for trading 9 103 50. Financial liabilities designated at fair value through profit or loss 71.565 84.667 60. Hedging derivatives 170 - Total Caption 35 71.744 84.770 3.1 Bis Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cashl liabilities 1. Due to banks - - - - - - - - - - 2. Due to customers - - - - - - - - - - 3. Debt securities - - - - X - - - - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - - 3.1.2 Other bonds - - - - X - - - - - 3.2 Other - - - - X - - - - X 3.2.1 Structured - - - - X - - - - - 3.2.2 Other - - - - X - - - - - Total A - - - - - - - - - - B. Derivatives 1. Financial derivatives X 1 8 - X X - 42 61 X 1.1 Trading X 1 - - X X - 38 61 X 1.2 Fair value option X - 8 - X X - 4 - X 1.3 Other X - - - X X - - - X 2. Credit derivatives X - - - X X - - - X 2.1 Trading X - - - X X - - - X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 1 8 - X X - 42 61 X Total (A+B) X 1 8 - X X - 42 61 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.2 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities With regard to Financial liabilities held for trading: subordinated liabilities, no amounts were recorded for Insurance Companies as at 31 December 2022.
3.3 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts
With regard to Financial liabilities held for trading: structured debts, no amounts were recorded for Insurance Companies as at
31 December 2022.
3.4 Bis Financial liabilities measured at fair value: breakdown
(millions of euro)
Transaction type/Values
31.12.2022
31.12.2021
Nominal
value
Fair value
Fair
value
(*)
Nominal
value
Fair value
Fair
value
(*)
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
1. Due to banks
-
-
-
-
-
-
-
-
-
-
1.1 Structured
-
-
-
-
X
-
-
-
-
X
1.2 Other
-
-
-
-
X
-
-
-
-
X
2. Due to customers
71,565
-
71,565
-
79,141
84,667
-
84,667
-
85,269
2.1 Structured
-
-
-
-
X
-
-
-
-
X
2.2 Other
71,565
-
71,565
-
X
84,667
-
84,667
-
X
3. Debt securities
-
-
-
-
-
-
-
-
-
-
3.1 Structured
-
-
-
-
X
-
-
-
-
X
3.2 Other
-
-
-
-
X
-
-
-
-
X
Total
71,565
-
71,565
-
79,141
84,667
-
84,667
-
85,269
(*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date.
3.5 Bis Breakdown of \u201cFinancial liabilities measured at fair value\u201d: subordinated liabilities
There were no subordinated liabilities classified under Financial liabilities measured at fair value as at 31 December 2022.
3.6 Bis Hedging derivatives: breakdown by type of hedge and level
(millions of euro)
Fair value
31.12.2022
Notional
value
Fair value
31.12.2021
Notional
value
Level 1
Level 2
Level 3
31.12.2022
Level 1
Level 2
Level 3
31.12.2021
A) Financial derivatives
-
170
-
1,241
-
-
-
-
1) fair value
-
-
-
-
-
-
-
-
2) cash flows
-
170
-
1,241
-
-
-
-
3) foreign investments
-
-
-
-
-
-
-
-
B) Credit derivatives
-
-
-
-
-
-
-
-
1) fair value
-
-
-
-
-
-
-
-
2) cash flows
-
-
-
-
-
-
-
-
Total
-
170
-
1,241
-
-
-
-
3.7 Bis Hedging derivatives: breakdown by hedged portfolio and type of hedge
(millions of euro)
Transactions/Type of hedge
FAIR VALUE
CASH FLOW
FOREIGN
INVESTM.
Specific
Generic
Specific
Generic
Interest
rate risk
Foreign
exchange
risk
Credit
risk
Price
risk
Various
risks
1. Financial assets available for sale
-
-
-
-
-
X
-
X
X
2. Loans
-
-
-
X
-
X
-
X
X
3. Investments held to maturity
X
-
-
X
-
X
-
X
X
4. Portfolio
X
X
X
X
X
-
X
-
X
5. Other transactions
-
-
-
-
-
X
-
X
-
Total assets
-
-
-
-
-
-
-
-
-
1. Financial liabilities
-
-
-
X
-
X
170
X
X
2. Portfolio
X
X
X
X
X
-
X
-
X
Total liabilities
-
-
-
-
-
-
170
-
-
1. Forecast transactions
X
X
X
X
X
X
-
X
X
2. Financial assets and liabilities portfolio
X
X
X
X
X
-
X
-
-
", "dimensions": { "concept": "ifrs-full:DisclosureOfDebtSecuritiesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1042": { "value": "2.1 Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 9,150 1,194 52 21,798 1,324 89 1.1 Structured securities 1,016 74 - 5 1,009 42 1.2 Other debt securities 8,134 1,120 52 21,793 315 47 2. Equities 860 - 22 674 - 17 3. Quotas of UCI 264 5 21 116 - 25 4. Loans - 32 53 - 14 4 4.1 Repurchase agreements - - - - - - 4.2 Other - 32 53 - 14 4 Total (A) 10,274 1,231 148 22,588 1,338 135 B. Derivatives 1. Financial derivatives 57 29,841 35 27 20,817 52 1.1 trading 55 29,841 35 27 20,817 52 1.2 fair value option - - - - - - 1.3 other 2 - - - - - 2. Credit derivatives - 936 - - 2,224 - 2.1 trading - 936 - - 2,224 - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total (B) 57 30,777 35 27 23,041 52 TOTAL (A+B) 10,331 32,008 183 22,615 24,379 187 Structured securities as at 31 December 2022 consist of 1,086 million euro of fixed-rate debt securities indexed to inflation, as an additional component, and 4 million euro of debt securities convertible into shares. The caption above includes the securities connected with securitisation transactions for a total amount of approximately 865 million euro (818 million euro Level 1 and 47 million euro Level 2), of which 627 million euro is senior, 230 million euro is mezzanine and 8 million euro is junior. As the gross positive fair value of the derivative instruments implemented with the legal clearing agent LCH Ltd. meets the requirements set out for offsetting between gross positive and negative balances pursuant to IAS 32, paragraph 42, it was subject to offsetting, with recognition of the net fair value under Financial liabilities held for trading and Financial assets held for trading, respectively. 2.2 Financial assets held for trading: breakdown by borrower/issuer/counterparty (millions of euro) Captions 31.12.2022 31.12.2021 A. Cash assets 1. Debt securities 10,396 23,211 a) Central Banks 78 44 b) Public administration 7,541 20,394 c) Banks 1,186 1,149 d) Other financial companies 1,175 1,239 of which: insurance companies 85 65 e) Non financial companies 416 385 2. Equities 882 691 a) Banks 35 71 b) Other financial companies 133 96 of which: insurance companies 51 31 c) Non financial companies 714 524 d) Other issuers - - 3. Quotas of UCI 290 141 4. Loans 85 18 a) Central Banks - - b) Public administration - - c) Banks - - d) Other financial companies 38 - of which: insurance companies - - e) Non financial companies 47 18 f) Households - - Total A 11,653 24,061 B. Derivatives a) Central counterparties 11,065 1,693 b) Other 19,804 21,427 Total B 30,869 23,120 TOTAL (A+B) 42,522 47,181 SECTION 3 BIS - FINANCIAL ASSETS PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE PURSUANT TO IAS 39 - CAPTION 35 The breakdown of the IAS 39 captions included in caption 35 of the Balance Sheet Assets referring to insurance companies is shown below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 35 Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d was created, which comprises the components set out in the table below. (millions of euro) Breakdown of Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39 - Caption 35 31.12.2022 31.12.2021 20. Financial assets held for trading 902 1,027 30. Financial assets designated at fair value 86,217 101,059 40. Financial assets available for sale 85,593 104,423 80. Hedging derivatives 13 291 TOTAL Caption 35 172,725 206,800 3.1 Bis Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 150 198 310 166 288 337 1.1 Structured securities - - - - - - 1.2 Other debt securities 150 198 310 166 288 337 2. Equities - - - - - - 3. Quotas of UCI 97 - 46 122 - 49 4. Loans - - - - - - 4.1 Reverse repurchase agreements - - - - - - 4.2 Other - - - - - - Total A 247 198 356 288 288 386 B. Derivatives 1. Financial derivatives: 50 51 - 56 5 4 1.1 trading 50 35 - 55 4 4 1.2 fair value option - 16 - 1 1 - 1.3 other - - - - - - 2. Credit derivatives: - - - - - - 2.1 trading - - - - - - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total B 50 51 - 56 5 4 TOTAL (A+B) 297 249 356 344 293 390 3.2 Bis Financial assets held for trading: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 A. Cash assets 1. Debt securities 658 791 a) Governments and Central Banks 101 122 b) Other public entities - - c) Banks 267 329 d) Other issuers 290 340 2. Equities - - a) Banks - - b) Other issuers: - - - insurance companies - - - financial companies - - - non-financial companies - - - other - - 3. Quotas of UCI 143 171 4. Loans - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - Total A 801 962 B. Derivatives a) Banks - - - Fair value - - b) Customers 101 65 - Fair value 101 65 Total B 101 65 Total (A+B) 902 1,027 3.3 Bis Financial assets designated at fair value: breakdown (millions of euro) Captions/Amounts 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 4,344 22 5 4,754 34 5 1.1 Structured securities - - - 17 2 - 1.2 Other debt securities 4,344 22 5 4,737 32 5 2. Equities 3,016 - - 3,510 - - 3. Quotas of UCI 78,025 - - 91,908 109 - 4. Loans 223 - 582 343 - 396 4.1 Structured - - - - - - 4.2 Other 223 - 582 343 - 396 Total 85,608 22 587 100,515 143 401 Cost 86,661 14 586 93,092 121 395 3.4 Bis Financial assets designated at fair value: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 1. Debt securities 4,371 4,793 a) Governments and Central Banks 3,375 3,772 b) Other public entities 11 11 c) Banks 514 471 d) Other issuers 471 539 2. Equities 3,016 3,510 a) Banks 214 239 b) Other issuers: 2,802 3,271 - insurance companies 129 120 - financial companies 50 54 - non-financial companies 1,327 1,669 - other 1,296 1,428 3. Quotas of UCI 78,025 92,017 4. Loans 805 739 a) Governments and Central Banks - - b) Other public entities - - c) Banks 805 739 d) Other counterparties - - Total 86,217 101,059 3.5 Bis Financial assets available for sale: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 67,583 3,152 349 81,830 6,298 412 1.1 Structured securities 8 - - 14 - - 1.2 Other debt securities 67,575 3,152 349 81,816 6,298 412 2. Equities 1,921 7 67 2,201 7 54 2.1 Measured at fair value 1,921 7 67 2,201 7 54 2.2 Measured at cost - - - - - - 3. Quotas of UCI 8,306 - 4,208 9,879 - 3,742 4. Loans - - - - - - Total 77,810 3,159 4,624 93,910 6,305 4,208 3.6 Bis Financial assets available for sale: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 1. Debt securities 71,084 88,540 a) Governments and Central Banks 55,587 71,782 b) Other public entities 283 359 c) Banks 6,495 6,214 d) Other issuers 8,719 10,185 2. Equities 1,995 2,262 a) Banks 194 206 b) Other issuers: 1,801 2,056 - insurance companies 35 37 - financial companies - - - non-financial companies 1,766 2,019 - other - - 3. Quotas of UCI 12,514 13,621 4. Loans - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - Total 85,593 104,423 3.7 Bis Financial assets available for sale subject to microhedging There were no financial assets available for sale subject to microhedging referring to insurance companies. 3.8 Bis Hedging derivatives: breakdown by type of hedge and level (millions of euro) Fair value 31.12.2022 Notional value Fair value 31.12.2021 Notional value Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A) Financial derivatives - 13 - 200 - 291 - 1,046 1) fair value - - - - - - - - 2) cash flows - 13 - 200 - 291 - 1,046 3) foreign investments - - - - - - - - B) Credit derivatives - - - - - - - - 1) fair value - - - - - - - - 2) cash flows - - - - - - - - Total - 13 - 200 - 291 - 1,046 3.9 Bis Hedging derivatives: breakdown by hedged portfolio and type of hedge (book value) (millions of euro) Operations/Type of hedge FAIR VALUE CASH FLOWS FOREIGN. INVESTM. Specific Generic Specific Generic Interest rate risk foreign exchange risk Credit risk various risk Multiple risk 1. Financial assets available for sale - - - - - X 13 X X 2. Loans - - - X - X - X X 3. Investments held to maturity X - - X - X - X X 4. Portfolio X X X X X - X - X 5. Other transactions - - - - - X - X - Total assets - - - - - - 13 - - 1. Financial liabilities - - - X - X - X X 2. Portfolio X X X X X - X - X Total liabilities - - - - - - - - - 1. Forecast transactions X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X - X - - SECTION 2 \u2013 FINANCIAL LIABILITIES HELD FOR TRADING \u2013 CAPTION 20 2.1 Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level1 Level 2 Livello 3 A. Cash liabilities 1. Due to banks 4,729 4,240 - - 4,239 19,827 22,222 40 - 22,262 2. Due to customers 3,121 3,001 - - 3,001 - - - - - 3. Debt securities 3,000 - 2,779 - X 3,324 - 3,459 - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - X 3.1.2 Other bonds - - - - X - - - - X 3.2 Other 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.1 Structured 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.2 Other - - - - X - - - - X Total A 10,850 7,241 2,779 - 7,240 23,151 22,222 3,499 - 22,262 B. Derivatives 1. Financial derivatives X 44 35,363 142 X X 19 28,107 118 X 1.1 Trading X 44 35,343 142 X X 19 28,072 118 X 1.2 Fair value option X - - - X X - - - X 1.3 Other X - 20 - X X - 35 - X 2. Credit derivatives X - 943 - X X - 2,340 1 X 2.1 Trading X - 943 - X X - 2,340 1 X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 44 36,306 142 X X 19 30,447 119 X Total (A+B) 10,850 7,285 39,085 142 X 23,151 22,241 33,946 119 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. Amounts due to banks and customers consist entirely of short selling of securities. The aggregate 3.2.1 Other structured securities includes securitised derivatives which provide for partial or full redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014, issued by the Group throughout 2019. Derivative instruments include 5,017 million euro in certificates with characteristics similar to financial derivative instruments due to the prevalence of market risk in relation to the return of the premiums paid. The changes in fair value recorded during the year due to the change in its own credit rating were positive by 229 million euro and related to derivatives and Debt securities - Other. The values of derivative instruments as at 31 December 2022 include the results of the offsetting of accounts between positive and negative gross balances of hedging derivatives undertaken with the legal clearing agent LCH Ltd. as they meet the requirements set out in IAS 32, paragraph 42. 2.2 Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities The aggregate Financial liabilities held for trading includes subordinated liabilities represented by Due to banks for 214 million euro and Due to customers for 36 million euro. 2.3 Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts As at 31 December 2022, structured debts classified under Financial liabilities held for trading amounted to 300 million euro due to customers and 57 million euro due to banks, attributable to short selling of fixed-rate bonds indexed to inflation, as an additional component. SECTION 3 BIS \u2013 FINANCIAL LIABILITIES PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE PURSUANT TO IAS 39 - CAPTION 35 The breakdown of the IAS 39 captions included in caption 35 of the Balance sheet liabilities pertaining to insurance companies is provided below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 35 Financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39 - Caption 35 31.12.2022 31.12.2021 40. Financial liabilities held for trading 9 103 50. Financial liabilities designated at fair value through profit or loss 71.565 84.667 60. Hedging derivatives 170 - Total Caption 35 71.744 84.770 3.1 Bis Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cashl liabilities 1. Due to banks - - - - - - - - - - 2. Due to customers - - - - - - - - - - 3. Debt securities - - - - X - - - - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - - 3.1.2 Other bonds - - - - X - - - - - 3.2 Other - - - - X - - - - X 3.2.1 Structured - - - - X - - - - - 3.2.2 Other - - - - X - - - - - Total A - - - - - - - - - - B. Derivatives 1. Financial derivatives X 1 8 - X X - 42 61 X 1.1 Trading X 1 - - X X - 38 61 X 1.2 Fair value option X - 8 - X X - 4 - X 1.3 Other X - - - X X - - - X 2. Credit derivatives X - - - X X - - - X 2.1 Trading X - - - X X - - - X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 1 8 - X X - 42 61 X Total (A+B) X 1 8 - X X - 42 61 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.2 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities With regard to Financial liabilities held for trading: subordinated liabilities, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.3 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts With regard to Financial liabilities held for trading: structured debts, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.4 Bis Financial liabilities measured at fair value: breakdown (millions of euro) Transaction type/Values 31.12.2022 31.12.2021 Nominal value Fair value Fair value (*) Nominal value Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to banks - - - - - - - - - - 1.1 Structured - - - - X - - - - X 1.2 Other - - - - X - - - - X 2. Due to customers 71,565 - 71,565 - 79,141 84,667 - 84,667 - 85,269 2.1 Structured - - - - X - - - - X 2.2 Other 71,565 - 71,565 - X 84,667 - 84,667 - X 3. Debt securities - - - - - - - - - - 3.1 Structured - - - - X - - - - X 3.2 Other - - - - X - - - - X Total 71,565 - 71,565 - 79,141 84,667 - 84,667 - 85,269 (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.5 Bis Breakdown of \u201cFinancial liabilities measured at fair value\u201d: subordinated liabilities There were no subordinated liabilities classified under Financial liabilities measured at fair value as at 31 December 2022. 3.6 Bis Hedging derivatives: breakdown by type of hedge and level (millions of euro) Fair value 31.12.2022 Notional value Fair value 31.12.2021 Notional value Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A) Financial derivatives - 170 - 1,241 - - - - 1) fair value - - - - - - - - 2) cash flows - 170 - 1,241 - - - - 3) foreign investments - - - - - - - - B) Credit derivatives - - - - - - - - 1) fair value - - - - - - - - 2) cash flows - - - - - - - - Total - 170 - 1,241 - - - - 3.7 Bis Hedging derivatives: breakdown by hedged portfolio and type of hedge (millions of euro) Transactions/Type of hedge FAIR VALUE CASH FLOW FOREIGN INVESTM. Specific Generic Specific Generic Interest rate risk Foreign exchange risk Credit risk Price risk Various risks 1. Financial assets available for sale - - - - - X - X X 2. Loans - - - X - X - X X 3. Investments held to maturity X - - X - X - X X 4. Portfolio X X X X X - X - X 5. Other transactions - - - - - X - X - Total assets - - - - - - - - - 1. Financial liabilities - - - X - X 170 X X 2. Portfolio X X X X X - X - X Total liabilities - - - - - - 170 - - 1. Forecast transactions X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X - X - - ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsHeldForTradingExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1059": { "value": "2.1 Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 9,150 1,194 52 21,798 1,324 89 1.1 Structured securities 1,016 74 - 5 1,009 42 1.2 Other debt securities 8,134 1,120 52 21,793 315 47 2. Equities 860 - 22 674 - 17 3. Quotas of UCI 264 5 21 116 - 25 4. Loans - 32 53 - 14 4 4.1 Repurchase agreements - - - - - - 4.2 Other - 32 53 - 14 4 Total (A) 10,274 1,231 148 22,588 1,338 135 B. Derivatives 1. Financial derivatives 57 29,841 35 27 20,817 52 1.1 trading 55 29,841 35 27 20,817 52 1.2 fair value option - - - - - - 1.3 other 2 - - - - - 2. Credit derivatives - 936 - - 2,224 - 2.1 trading - 936 - - 2,224 - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total (B) 57 30,777 35 27 23,041 52 TOTAL (A+B) 10,331 32,008 183 22,615 24,379 187 Structured securities as at 31 December 2022 consist of 1,086 million euro of fixed-rate debt securities indexed to inflation, as an additional component, and 4 million euro of debt securities convertible into shares. The caption above includes the securities connected with securitisation transactions for a total amount of approximately 865 million euro (818 million euro Level 1 and 47 million euro Level 2), of which 627 million euro is senior, 230 million euro is mezzanine and 8 million euro is junior. As the gross positive fair value of the derivative instruments implemented with the legal clearing agent LCH Ltd. meets the requirements set out for offsetting between gross positive and negative balances pursuant to IAS 32, paragraph 42, it was subject to offsetting, with recognition of the net fair value under Financial liabilities held for trading and Financial assets held for trading, respectively. 2.5 Other financial assets mandatorily measured at fair value: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities - 55 133 - 60 107 1.1 Structured securities - - 5 - - 5 1.2 Other debt securities - 55 128 - 60 102 2. Equities 122 107 242 161 116 225 3. Quotas of UCI 858 191 2,401 1,486 149 2,166 4. Loans - 310 635 - 375 701 4.1 Repurchase agreements - - - - - - 4.2 Other - 310 635 - 375 701 Total 980 663 3,411 1,647 700 3,199 The caption above includes the securities connected with securitisation transactions for a total amount of approximately 125 million euro (25 million euro Level 1 and 100 million euro Level 2), of which 44 million euro is senior, 65 million euro is mezzanine and 16 million euro is junior. 4.1 Financial assets measured at amortised cost: breakdown of amounts due from banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 A. Due from Central Banks 9,712 - - - 7,089 2,623 131,361 - - - 128,282 3,078 1. Time deposits 3,622 - - X X X 3,118 - - X X X 2. Compulsory reserve 5,427 - - X X X 126,882 - - X X X 3. Repurchase agreements 543 - - X X X 273 - - X X X 4. Other 120 - - X X X 1,088 - - X X X B. Due from banks 23,136 36 - 1,265 18,791 3,055 32,523 53 - 1,547 28,156 2,903 1. Loans 21,478 36 - - 18,465 3,055 30,752 53 - - 27,914 2,903 1.1 Current accounts - - - X X X - - - X X X 1.2 Time deposits 2,449 - - X X X 1,681 - - X X X 1.3 Other loans: 19,029 36 - X X X 29,071 53 - X X X - Reverse repurchase agreements 5,397 - - X X X 9,566 - - X X X - Finance leases 5 - - X X X 6 - - X X X - Other 13,627 36 - X X X 19,499 53 - X X X 2. Debt securities 1,658 - - 1,265 326 - 1,771 - - 1,547 242 - 2.1 Structured - - - - - - - - - - - - 2.2 Other 1,658 - - 1,265 326 - 1,771 - - 1,547 242 - TOTAL 32,848 36 - 1,265 25,880 5,678 163,884 53 - 1,547 156,438 5,981 As at 31 December 2022, the decline in the sub-caption Reserve Requirement was due to the placement of excess liquidity in overnight deposits reported in the caption Cash and cash equivalents. The sub-caption \u201cOther loans - Other\u201d includes operating loans, i.e. operations connected to the provision of financial activities and services with no credit facilities, for an amount of 122 million euro. Those exposures are essentially performing loans classified in Stage 1 and adjusted based on IFRS 9 . 4.2 Financial assets measured at amortised cost: breakdown of loans to customers (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 1. Loans 432,447 5,255 271 - 283,348 140,877 449,287 6,682 446 - 317,673 147,945 1.1.Current accounts 22,967 484 12 X X X 21,724 688 22 X X X 1.2. Reverse repurchase agreements 15,366 - - X X X 17,620 - - X X X 1.3. Mortgages 242,049 3,083 156 X X X 250,722 4,080 268 X X X 1.4. Credit card loans, personal loans and transfer of one fifth of salaries 19,435 339 2 X X X 18,626 364 9 X X X 1.5. Finance leases 7,780 328 85 X X X 12,830 347 108 X X X 1.6. Factoring 10,869 52 - X X X 9,453 65 - X X X 1.7. Other loans 113,981 969 16 X X X 118,312 1,138 39 X X X 2. Debt securities 57,188 33 - 27,693 10,877 14,938 48,473 41 - 25,659 10,872 11,536 2.1. Structured securities - - - - - - - - - - - - 2.2. Other debt securities 57,188 33 - 27,693 10,877 14,938 48,473 41 - 25,659 10,872 11,536 Total 489,635 5,288 271 27,693 294,225 155,815 497,760 6,723 446 25,659 328,545 159,481 The sub-caption \u201cOther loans\u201d includes operating loans, i.e. operations connected to the provision of financial activities and services with no credit facilities, for an amount of 740 million euro. Those exposures are essentially performing loans classified in Stage 1 and adjusted based on IFRS 9. Debt securities include the securities connected with securitisations for a total amount of approximately 8,495 million euro, of which 8,475 million euro is senior notes and 20 million euro mezzanine. 4.4 Bis Due from banks: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Due from Central Banks - - - - - - - - 1. Time deposits - - 2. Compulsory reserve - - 3. Reverse repurchase agreements - - 4. Other - - B. Due from banks 40 - 40 - 41 - 41 - 1. Loans - - - - - - - - 1.1 Current accounts and deposits - - 1.2 Time deposits - - 1.3 Other loans: - - - Reverse repurchase agreements - - - Finance leases - - - Other - - 2. Debt securities 40 - 40 - 41 - 41 - 2.1 Structured - - 2.2 Other 40 41 Total 40 - 40 - 41 - 41 - 4.6 Bis Loans to customers: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Book value Book Value Performing Non Performing Fair value Not impaired Impaired Fair value Purchased Other Level 1 Level 2 Level 3 Purchased Other Level 1 Level 2 Level 3 Loans 5 - - - 4 1 8 - - - 8 - 1. Current accounts - - - X X X - - - X X X 2. Reverse repurchase agreements - - - X X X - - - X X X 3. Mortgages - - - X X X - - - X X X 4. Credit card loans, personal loans, and transfer of one fifth of salaries - - - X X X - - - X X X 5. Finance leases - - - X X X - - - X X X 6. Factoring - - - X X X - - - X X X 7. Other loans 5 - - X X X 8 - - X X X Debt securities 35 - - - 30 5 36 - - - 31 5 8. Structured securities - - - X X X - - - X X X 9. Other debt securities 35 - - X X X 36 - - X X X Total 40 - - - 34 6 44 - - - 39 5 1.1 Financial liabilities measured at amortised cost: breakdown of amounts due to banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to central banks 98,444 X X X 134,790 X X X 2. Due to banks 39,038 X X X 30,468 X X X 2.1 Current accounts and on demand deposits 3,234 X X X 3,197 X X X 2.2 Time deposits 3,807 X X X 4,394 X X X 2.3 Loans 18,610 X X X 18,574 X X X 2.3.1 Repurchase agreements 12,753 X X X 12,160 X X X 2.3.2 Other 5,857 X X X 6,414 X X X 2.4 Debts for commitments to repurchase own equity instruments - X X X 138 X X X 2.5 Lease liabilities 6 X X X 8 X X X 2.6 Other debts 13,381 X X X 4,157 X X X Total 137,482 - 125,164 12,148 165,258 - 153,297 11,916 The illustration of the criteria used to determine the fair value is contained in Part A \u2013 Accounting policies. Repurchase agreements related to assets sold not derecognised are detailed in Part E - Sales of the Notes to the financial statements. The caption Due to Central Banks includes the balance of TLTRO refinancing operations for a total of 96,060 million euro, fully attributable to the TLTRO III. The Group\u2019s repurchase agreements shown in the table include long-term repurchase agreements with a total carrying amount of 238 million euro, attributable to Banca Fideuram for de-risking transactions completed in previous years with the twofold aim of both funding the bank\u2019s operations (through repurchase transactions) and reducing the credit risks associated with the portfolio of securities issued (also through the acquisition of financial guarantees). The transactions have a non- replaceable underlying portfolio of Italian government securities (with maturities from 2023 to 2033) hedged against interest rate risk through interest rate swap contracts and against credit risk through credit default swap contracts, already recorded in the financial statements at the time of execution of the repurchase transactions and recognised under financial assets measured at amortised cost. The nominal value and the maturity date of the repurchase agreements are the same as that of the securities. For recognition purposes, an assessment was conducted aimed at understanding the purpose underlying the contractual agreements, taking into account the instructions provided by the supervisory authorities in Bank of Italy/Consob/IVASS Document No. 6 of 8 March 2013, \u201cAccounting treatment of \u2018long-term structured repurchase agreements\u2019.\u201d The analysis focused on the structure, cash flows and risks associated with the transactions and was aimed at verifying whether the cases described above were similar to the long-term structured repurchase agreements described in the above Document, and, in order to be compliant with the principle of the prevalence of substance over form, whether the indicators referred in paragraph B.6 of the Guidance on Implementing IFRS 9, according to which the transaction may be considered substantially similar to a credit derivative contract, and, in particular, a credit default swap, were present. The case described above consists of repurchase agreements that are not concurrent with the purchases of the securities, because they were already present in the portfolio. In addition, buying securities and entering into the related hedging derivatives occurred with market counterparties other than those with which the repurchase agreements were entered into. The credit risk was also closed with financial guarantees. Consequently, the analysis shows elements of differentiation from the long-term structured repurchase agreements described in the aforementioned Document, supporting the inapplicability of the guidelines provided in paragraph B.6 of the Guidance on Implementing IFRS 9, with the result that the transactions must be recognised in the financial statements with the individual contractual components shown separately. 1.2 Financial liabilities measured at amortised cost: breakdown of amounts due to customers (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Current accounts and on demand deposits 412,667 X X X 423,335 X X X 2. Time deposits 20,309 X X X 19,184 X X X 3. Loans 5,200 X X X 5,716 X X X 3.1 Repurchase agreements 1,284 X X X 2,691 X X X 3.2 Other 3,916 X X X 3,025 X X X 4. Debts for commitments to repurchase own equity instruments 181 X X X 23 X X X 5. Lease liabilities 1,309 X X X 1,379 X X X 6. Other debts 14,359 X X X 8,602 X X X Total 454,025 - 435,464 18,132 458,239 - 433,309 25,130 1.1 Bis Due to banks: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1. Due to central banks - - 2. Due to banks 629 623 2.1 Current accounts and deposits 6 - 2.2 Time deposits - - 2.3 Loans 607 607 2.3.1 Repurchase agreements - - 2.3.2 Financial leasing loans - 2.3.3 Other 607 607 2.4 Debts for commitments to repurchase own equity instruments - - 2.5 Lease liabilities - 2.6 Other debts 16 16 TOTAL (Book value) 629 623 Fair value - level 1 - - Fair value - level 2 17 - Fair value - level 3 556 650 Total Fair value 573 650 1.6 Bis Due to customers: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1.Current accounts and deposits - - 2 Time deposits - - 3. Loans - - 3.1 Repurchase agreements - - 3.2 Financial leasing loans - - 3.3 Other - - 4. Debts for commitments to repurchase own equity instruments 360 87 5. Lease liabilities 6 7 6. Other debts 221 94 Total (Book value) 587 188 Fair value - level 1 - - Fair value - level 2 452 93 Fair value - level 3 135 95 Total Fair Value 587 188 The amount under Debts for commitments to repurchase own equity instruments refers to put options sold with minority stakes of fully consolidated equity investments as underlying asset, attributable to the Put & Call Agreement for the purchase of 26% of Intesa Sanpaolo RBM Salute S.p.A. 3. Assets pledged as collateral of liabilities and commitments (millions of euro) Portfolios 31.12.2022 31.12.2021 1. Financial assets measured at fair value through profit or loss 2,058 9,266 2. Financial assets measured at fair value through other comprehensive income 10,006 25,308 3. Financial assets measured at amortised cost 187,404 199,785 4. Property and equipment - - of which: property and equipment that constitute inventories - - Intragroup deposits of 689 million euro, established to serve securities lending with subjects outside the Group, were netted.
5. Management and dealing on behalf of third parties
(millions of euro)
Type of service
31.12.2022
1. Trading on behalf of customers
a) Purchases
395,714
1. settled
395,714
2. to be settled
-
b) Sales
371,516
1. settled
371,516
2. to be settled
-
2. Portfolio management
a) individual
73,591
b) collective
161,776
3. Custody and administration of securities
a) third party securities held in deposit: related to depositary bank activities (excluding portfolio management)
4,468
1. securities issued by companies included in the consolidation area
-
2. other securities
4,468
b) third-party securities held in deposit (excluding portfolio management): other
544,770
1. securities issued by companies included in the consolidation area
18,515
2. other securities
526,255
c) third party securities deposited with third parties
539,444
d) portfolio securities deposited with third parties
181,698
4. Other
694,276
Note regarding contractual clauses of financial payables
In relation to point 3: \u201cIFRS 7 \u2013 Contractual clauses of financial payables\u201d, of Bank of Italy/Consob/Isvap document no. 4
of March 2010, the following is specified:
\u2013 there were no cases of non-compliance by Intesa Sanpaolo Group companies with the relative contractual clauses set
forth in bond issues, medium-/long-term loans received from financial entities and other debt contracts, which involved or
which could involve the application of acceleration clauses;
\u2013 bond issues, medium-/long-term loans received from Supranational Organisations and other debt contracts of Intesa
Sanpaolo Group companies may contain standard negative pledges and covenants based on current practice.
Due to the nature of commitments undertaken, in line with market practices, and the remote probability of default, these
clauses may be considered as immaterial.
6. Financial assets subject to offsetting in the financial statements or subject to master netting arrangements or
similar agreements
(millions of euro)
Types
Gross
amount
of
financial
assets
(a)
Amount of
financial
liabilities
offset in the
balance sheet
(b)
Net amount of
financial
assets
presented in
the balance
sheet (c = a-b)
Related amounts not
subject to offsetting in
the balance sheet
Net
amount
Net amount
31.12.2022
31.12.2021
Financial
instruments
(d)
Cash
collateral (e)
(f=c-d-e)
1. Derivatives
-118,734
81,574
-37,160
-22,195
-13,851
-1,114
-1,091
2. Repurchase agreements
-20,694
-
-20,694
-19,539
-632
-523
-259
3. Securities lending
-
-
-
-
-
-
-
4. Other
-
-
-
-
-
-
-
TOTAL
31.12.2022
-139,428
81,574
-57,854
-41,734
-14,483
-1,637
X
TOTAL
31.12.2021
-86,176
-41,082
-45,094
-41,726
-2,018
X
-1,350
7. Financial liabilities subject to offsetting in the financial statements or subject to master netting arrangements or similar agreements (millions of euro) Types Gross amount of financial liabilities (a) Amount of financial assets offset in the balance sheet (b) Net amount of financial liabilities presented in the balance sheet (c=a-b) Related amounts not subject to offsetting in the balance sheet Net amount Ammontare netto 31.12.2022 31.12.2021 Financial instruments (d) Cash deposits pledged as collateral (e) (f=c-d-e) 1. Derivatives 111,771 81,574 30,197 22,196 6,418 1,583 522 2. Repurchase agreements 15,981 - 15,981 15,643 - 338 82 3. Securities lending - - - - - - - 4. Other - - - - - - - TOTAL 31.12.2022 127,752 81,574 46,178 37,839 6,418 1,921 X TOTAL 31.12.2021 84,693 41,082 43,611 31,209 11,798 X 604 IFRS 7, amended in 2013, requires specific disclosure for financial instruments that have been offset in the Balance Sheet pursuant to IAS 32 or that may be potentially offset, upon occurrence of specific conditions, but are recognised in the Balance Sheet without any netting since they are regulated by \u201cmaster netting arrangements or similar agreements\u201d that do not respect all of the criteria set forth by IAS 32, paragraph 42. In this respect, the Intesa Sanpaolo Group has netting arrangements in force that meet the requirements envisaged by IAS 32, paragraph 42, for netting in the financial statements. In terms of instruments that may be potentially offset upon occurrence of such events and to be presented in Tables 6 and 7, it is noted that the Intesa Sanpaolo Group uses bilateral netting arrangements that allow, in the event of counterparty default, the netting of claims and obligations in relation to financial and credit derivatives, as well as securities financing transactions (SFTs). In particular, there are ISDA agreements (for transactions in derivatives), GMRAs (for repurchase agreements) and GMSLAs (for securities lending). With regard to securities lending transactions, only those transactions that require the payment of a cash guarantee fully available to the lender must also be reported in tables 6 and 7, as this is the only type of transaction recognised in the Balance Sheet. The Intesa Sanpaolo Group did not have any such transactions as at 31 December 2021. For the purposes of preparing the tables and in compliance with the provisions of IFRS 7 and the new provisions that govern the financial statements of banks, the following are noted: \u2013 the effects of the potential offsetting of the balance sheet values of financial assets and liabilities are indicated under column (d) \u201cFinancial instruments\u201d, together with the fair value of financial collateral consisting of securities; \u2013 the effects of the potential offsetting of the exposure with the relative cash collateral are included under column (e) \u201cCash deposits received/pledged as collateral\u201d; \u2013 repurchase agreement transactions are recognised in the tables based on the amortised cost measurement criterion, while the relative collateral is measured at fair value. \u2013 derivatives transactions are recognised at fair value. These effects are calculated for each individual counterparty included in a master netting arrangement, to the extent of the exposure indicated in column (c). Based on the preparation methods indicated above, the netting arrangements between financial instruments and the relative collateral permit a significant reduction in credit/debt exposure to the counterparty, as indicated under column (f) \u201cNet amount\u201d. These effects are calculated for each individual counterparty included in a master netting arrangement, to the extent of the exposure indicated in column (c). Based on the preparation methods indicated above, the netting arrangements between financial instruments and the relative collateral permit a significant reduction in credit/debt exposure to the counterparty, as indicated under column (f) \u201cNet amount\u201d. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRepurchaseAndReverseRepurchaseAgreementsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1074": { "value": "2.1 Financial assets held for trading: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cash assets 1. Debt securities 9,150 1,194 52 21,798 1,324 89 1.1 Structured securities 1,016 74 - 5 1,009 42 1.2 Other debt securities 8,134 1,120 52 21,793 315 47 2. Equities 860 - 22 674 - 17 3. Quotas of UCI 264 5 21 116 - 25 4. Loans - 32 53 - 14 4 4.1 Repurchase agreements - - - - - - 4.2 Other - 32 53 - 14 4 Total (A) 10,274 1,231 148 22,588 1,338 135 B. Derivatives 1. Financial derivatives 57 29,841 35 27 20,817 52 1.1 trading 55 29,841 35 27 20,817 52 1.2 fair value option - - - - - - 1.3 other 2 - - - - - 2. Credit derivatives - 936 - - 2,224 - 2.1 trading - 936 - - 2,224 - 2.2 fair value option - - - - - - 2.3 other - - - - - - Total (B) 57 30,777 35 27 23,041 52 TOTAL (A+B) 10,331 32,008 183 22,615 24,379 187 Structured securities as at 31 December 2022 consist of 1,086 million euro of fixed-rate debt securities indexed to inflation, as an additional component, and 4 million euro of debt securities convertible into shares.
The caption above includes the securities connected with securitisation transactions for a total amount of approximately
865 million euro (818 million euro Level 1 and 47 million euro Level 2), of which 627 million euro is senior, 230 million euro is
mezzanine and 8 million euro is junior.
As the gross positive fair value of the derivative instruments implemented with the legal clearing agent LCH Ltd. meets the
requirements set out for offsetting between gross positive and negative balances pursuant to IAS 32, paragraph 42, it was
subject to offsetting, with recognition of the net fair value under Financial liabilities held for trading and Financial assets held
for trading, respectively.
2.2 Financial assets held for trading: breakdown by borrower/issuer/counterparty
(millions of euro)
Captions
31.12.2022
31.12.2021
A. Cash assets
1. Debt securities
10,396
23,211
a) Central Banks
78
44
b) Public administration
7,541
20,394
c) Banks
1,186
1,149
d) Other financial companies
1,175
1,239
of which: insurance companies
85
65
e) Non financial companies
416
385
2. Equities
882
691
a) Banks
35
71
b) Other financial companies
133
96
of which: insurance companies
51
31
c) Non financial companies
714
524
d) Other issuers
-
-
3. Quotas of UCI
290
141
4. Loans
85
18
a) Central Banks
-
-
b) Public administration
-
-
c) Banks
-
-
d) Other financial companies
38
-
of which: insurance companies
-
-
e) Non financial companies
47
18
f) Households
-
-
Total A
11,653
24,061
B. Derivatives
a) Central counterparties
11,065
1,693
b) Other
19,804
21,427
Total B
30,869
23,120
TOTAL (A+B)
42,522
47,181
3.1 Bis Financial assets held for trading: breakdown
(millions of euro)
Captions
31.12.2022
31.12.2021
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
A. Cash assets
1. Debt securities
150
198
310
166
288
337
1.1 Structured securities
-
-
-
-
-
-
1.2 Other debt securities
150
198
310
166
288
337
2. Equities
-
-
-
-
-
-
3. Quotas of UCI
97
-
46
122
-
49
4. Loans
-
-
-
-
-
-
4.1 Reverse repurchase agreements
-
-
-
-
-
-
4.2 Other
-
-
-
-
-
-
Total A
247
198
356
288
288
386
B. Derivatives
1. Financial derivatives:
50
51
-
56
5
4
1.1 trading
50
35
-
55
4
4
1.2 fair value option
-
16
-
1
1
-
1.3 other
-
-
-
-
-
-
2. Credit derivatives:
-
-
-
-
-
-
2.1 trading
-
-
-
-
-
-
2.2 fair value option
-
-
-
-
-
-
2.3 other
-
-
-
-
-
-
Total B
50
51
-
56
5
4
TOTAL (A+B)
297
249
356
344
293
390
3.2 Bis Financial assets held for trading: borrower/issuer breakdown
(millions of euro)
Captions
31.12.2022
31.12.2021
A. Cash assets
1. Debt securities
658
791
a) Governments and Central Banks
101
122
b) Other public entities
-
-
c) Banks
267
329
d) Other issuers
290
340
2. Equities
-
-
a) Banks
-
-
b) Other issuers:
-
-
- insurance companies
-
-
- financial companies
-
-
- non-financial companies
-
-
- other
-
-
3. Quotas of UCI
143
171
4. Loans
-
-
a) Governments and Central Banks
-
-
b) Other public entities
-
-
c) Banks
-
-
d) Other counterparties
-
-
Total A
801
962
B. Derivatives
a) Banks
-
-
- Fair value
-
-
b) Customers
101
65
- Fair value
101
65
Total B
101
65
Total (A+B)
902
1,027
3.8 Bis Hedging derivatives: breakdown by type of hedge and level
(millions of euro)
Fair value
31.12.2022
Notional
value
Fair value
31.12.2021
Notional
value
Level 1
Level 2
Level 3
31.12.2022
Level 1
Level 2
Level 3
31.12.2021
A) Financial derivatives
-
13
-
200
-
291
-
1,046
1) fair value
-
-
-
-
-
-
-
-
2) cash flows
-
13
-
200
-
291
-
1,046
3) foreign investments
-
-
-
-
-
-
-
-
B) Credit derivatives
-
-
-
-
-
-
-
-
1) fair value
-
-
-
-
-
-
-
-
2) cash flows
-
-
-
-
-
-
-
-
Total
-
13
-
200
-
291
-
1,046
3.9 Bis Hedging derivatives: breakdown by hedged portfolio and type of hedge (book value)
(millions of euro)
Operations/Type of hedge
FAIR VALUE
CASH FLOWS
FOREIGN.
INVESTM.
Specific
Generic
Specific
Generic
Interest
rate risk
foreign
exchange
risk
Credit
risk
various
risk
Multiple
risk
1. Financial assets available for
sale
-
-
-
-
-
X
13
X
X
2. Loans
-
-
-
X
-
X
-
X
X
3. Investments held to maturity
X
-
-
X
-
X
-
X
X
4. Portfolio
X
X
X
X
X
-
X
-
X
5. Other transactions
-
-
-
-
-
X
-
X
-
Total assets
-
-
-
-
-
-
13
-
-
1. Financial liabilities
-
-
-
X
-
X
-
X
X
2. Portfolio
X
X
X
X
X
-
X
-
X
Total liabilities
-
-
-
-
-
-
-
-
-
1. Forecast transactions
X
X
X
X
X
X
-
X
X
2. Financial assets and liabilities portfolio
X
X
X
X
X
-
X
-
-
SECTION 5 - HEDGING DERIVATIVES \u2013 CAPTION 50
Concerning the objectives and the strategies underlying hedging transactions see the information provided in Part E \u2013
Information on risks and relative hedging policies, Section 2 \u2013 Market risks.
5.1 Hedging derivatives: breakdown by type of hedge and level
(millions of euro)
Fair value
31.12.2022
Notional
amount
Fair value
31.12.2021
Notional
amount
Level 1
Level 2
Level 3
31.12.2022
Level 1
Level 2
Level 3
31.12.2021
A. Financial derivatives
1. Fair Value
-
10,061
-
177,498
-
1,719
-
186,185
2. Cash flows
-
1
-
893
-
13
-
3,961
3. Foreign investments
-
-
-
28
-
-
-
-
B. Credit derivatives
1. Fair Value
-
-
-
-
-
-
-
-
2. Cash flows
-
-
-
-
-
-
-
-
Total
-
10,062
-
178,419
-
1,732
-
190,146
As the gross positive fair value of Hedging derivatives implemented with the legal clearing agent LCH Ltd. meets the
requirements set out for offsetting between gross positive and negative balances pursuant to IAS 32, paragraph 42, it was
subject to offsetting, with recognition of the net fair value under Financial liabilities held for trading.
5.2 Hedging derivatives: breakdown by hedged portfolio and type of hedge
(millions of euro)
Transactions / Type of hedge
Fair Value
Cash-flow
Foreign
investm
Specific
Generic
Specific
Generic
debt
securities
and
interest
rates
equities
and
stock
indices
foreign
exchange
rates and
gold
credit
risk
commodities
other
1. Financial assets measured at fair value
through other comprehensive income
2,566
-
263
-
X
X
X
-
X
X
2. Financial assets measured at amortised
cost
2,876
X
3
-
X
X
X
1
X
X
3. Portfolio
X
X
X
X
X
X
3,803
X
-
X
4. Other transactions
-
-
-
-
-
-
X
-
X
-
Total assets
5,442
-
266
-
-
-
3,803
1
-
-
1. Financial liabilities
476
X
60
-
-
-
X
-
X
X
2. Portfolio
X
X
X
X
X
X
14
X
-
X
Total liabilities
476
-
60
-
-
-
14
-
-
-
1. Forecast transactions
X
X
X
X
X
X
X
-
X
X
2. Financial assets and liabilities portfolio
X
X
X
X
X
X
-
X
-
-
The table indicates positive fair values of hedging derivatives, broken down in relation to asset or liability hedged and type
of hedge.
Considering the values gross of netting in the financial statements, these continued to refer mainly to micro fair value hedges
of debt securities under assets, as well as macro fair value hedges of loans disbursed.
2.1 Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level1 Level 2 Livello 3 A. Cash liabilities 1. Due to banks 4,729 4,240 - - 4,239 19,827 22,222 40 - 22,262 2. Due to customers 3,121 3,001 - - 3,001 - - - - - 3. Debt securities 3,000 - 2,779 - X 3,324 - 3,459 - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - X 3.1.2 Other bonds - - - - X - - - - X 3.2 Other 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.1 Structured 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.2 Other - - - - X - - - - X Total A 10,850 7,241 2,779 - 7,240 23,151 22,222 3,499 - 22,262 B. Derivatives 1. Financial derivatives X 44 35,363 142 X X 19 28,107 118 X 1.1 Trading X 44 35,343 142 X X 19 28,072 118 X 1.2 Fair value option X - - - X X - - - X 1.3 Other X - 20 - X X - 35 - X 2. Credit derivatives X - 943 - X X - 2,340 1 X 2.1 Trading X - 943 - X X - 2,340 1 X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 44 36,306 142 X X 19 30,447 119 X Total (A+B) 10,850 7,285 39,085 142 X 23,151 22,241 33,946 119 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. Amounts due to banks and customers consist entirely of short selling of securities. The aggregate 3.2.1 Other structured securities includes securitised derivatives which provide for partial or full redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014, issued by the Group throughout 2019. Derivative instruments include 5,017 million euro in certificates with characteristics similar to financial derivative instruments due to the prevalence of market risk in relation to the return of the premiums paid. The changes in fair value recorded during the year due to the change in its own credit rating were positive by 229 million euro and related to derivatives and Debt securities - Other. The values of derivative instruments as at 31 December 2022 include the results of the offsetting of accounts between positive and negative gross balances of hedging derivatives undertaken with the legal clearing agent LCH Ltd. as they meet the requirements set out in IAS 32, paragraph 42.
3.1 Bis Financial liabilities held for trading: breakdown
(millions of euro)
Transaction type/Amount
31.12.2022
31.12.2021
Nominal
or
notional
amount
Fair value
Fair
value
(*)
Nominal
or
notional
amount
Fair value
Fair
value
(*)
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
A. Cashl liabilities
1. Due to banks
-
-
-
-
-
-
-
-
-
-
2. Due to customers
-
-
-
-
-
-
-
-
-
-
3. Debt securities
-
-
-
-
X
-
-
-
-
X
3.1 Bonds
-
-
-
-
X
-
-
-
-
X
3.1.1 Structured
-
-
-
-
X
-
-
-
-
-
3.1.2 Other bonds
-
-
-
-
X
-
-
-
-
-
3.2 Other
-
-
-
-
X
-
-
-
-
X
3.2.1 Structured
-
-
-
-
X
-
-
-
-
-
3.2.2 Other
-
-
-
-
X
-
-
-
-
-
Total A
-
-
-
-
-
-
-
-
-
-
B. Derivatives
1. Financial derivatives
X
1
8
-
X
X
-
42
61
X
1.1 Trading
X
1
-
-
X
X
-
38
61
X
1.2 Fair value option
X
-
8
-
X
X
-
4
-
X
1.3 Other
X
-
-
-
X
X
-
-
-
X
2. Credit derivatives
X
-
-
-
X
X
-
-
-
X
2.1 Trading
X
-
-
-
X
X
-
-
-
X
2.2 Fair value option
X
-
-
-
X
X
-
-
-
X
2.3 Other
X
-
-
-
X
X
-
-
-
X
Total B
X
1
8
-
X
X
-
42
61
X
Total (A+B)
X
1
8
-
X
X
-
42
61
X
(*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date.
SECTION 4 \u2013 HEDGING DERIVATIVES \u2013 CAPTION 40
4.1 Hedging derivatives: breakdown by type of hedge and level
(millions of euro)
31.12.2022
Notional
value
31.12.2021
Notional
value
Fair value
Fair value
Level 1
Level 2
Level 3
31.12.2022
Level 1
Level 2
Level 3
31.12.2021
A) Financial derivatives
-
5,346
-
191,704
-
4,868
-
111,607
1) Fair value
-
5,093
-
178,117
-
2,814
-
102,604
2) Cash flows
-
253
-
13,408
-
2,054
-
9,003
3) Foreign investments
-
-
-
179
-
-
-
-
B. Credit derivatives
-
-
-
-
-
-
-
-
1) Fair value
-
-
-
-
-
-
-
-
2) Cash flows
-
-
-
-
-
-
-
-
Total
-
5,346
-
191,704
-
4,868
-
111,607
As at 31 December 2022 the Group had undertaken hedging transactions involving foreign investments, relating to the equity
investment in Reyl & Cie SA, based in Switzerland.
4.2 Hedging derivatives: breakdown by hedged portfolio and type of hedge
(millions of euro)
Transactions/Type of hedge
FAIR VALUE
CASH FLOW
FOREIGN
INVESTM.
Specific
Generic
Specific
Generic
debt
securities
and
interest
rates
equities
and
stock
indices
foreign
exchange
rates and
gold
credit
risk
commodities
other
1. Financial assets measured at fair value
through other comprehensive income
68
-
16
-
X
X
X
-
X
X
2. Financial assets measured at amortised
cost
972
X
161
-
X
X
X
-
X
X
3. Portfolio
X
X
X
X
X
X
3
X
210
X
4. Other transactions
-
-
-
-
-
-
X
-
X
-
Total assets
1,040
-
177
-
-
-
3
-
210
-
1. Financial liabilities
545
X
625
-
-
-
X
-
X
X
2. Portfolio
X
X
X
X
X
X
2,703
X
43
X
Total liabilities
545
-
625
-
-
-
2,703
-
43
-
1. Forecast transactions
X
X
X
X
X
X
X
-
X
X
2. Financial assets and liabilities portfolio
X
X
X
X
X
X
-
X
-
-
The table indicates negative fair values of hedging derivatives, broken down in relation to asset or liability hedged and type of
hedge.
Considering the values gross of netting in the financial statements, these continue to refer mainly to macro hedges of
portfolios of liabilities represented by core deposits and debt securities under assets.
Cash flow hedges refer to funding through floating-rate securities issued used to fund fixed-rate investments.
1.3. DERIVATIVES AND HEDGING POLICIES Starting from 2014, the Parent Company has been authorised to use EPE (Expected Positive Exposure) internal models to determine the capital requirement for counterparty risk. This approach is applicable to almost the entire derivatives portfolio (as shown in the table below, as at 31 December 2022 approximately 95% of the total EAD of financial and credit derivatives is measured using EPE models). Derivatives whose counterparty risk is measured using approaches other than internal models represent a residual portion of the portfolio (as at 31 December 2022 accounting for approximately 5% of overall EAD) and refer to: \u2013 residual contracts of Intesa Sanpaolo to which EPE is not applied (in compliance with the immateriality thresholds set by the EBA); \u2013 EAD generated by all other banks and companies in the Group which do not report using an internal model. The table below shows the overall EAD of exposures in financial and credit derivatives, broken down by measurement approach. (millions of euro) Transaction categories Exposure at default (EAD) 31.12.2022 31.12.2021 Standardised models Internal Method (EPE) Standardised models Internal Method (EPE) Derivative contracts 666 12,340 599 16,270 The EPE internal model considers the collateral collected to mitigate credit exposure and any excess collateral paid. The value of the guarantees received and included in the calculation of the EAD amounts to approximately 17.7 billion euro for the Parent Company, while the collateral paid equals 18 billion euro (including the initial margins posted in connection with transactions with central counterparties). 1.3.1. Trading derivatives A. FINANCIAL DERIVATIVES A.1. Financial trading derivatives: period-end notional amounts (millions of euro) Underlying asset/Type of derivatives 31.12.2022 31.12.2021 Over the counter Organised markets Over the counter Organized markets Central Counterparties without central counterparties Central Counterparts without central counterparties With netting agreements Without netting agreements With netting agreements Without netting agreements 1. Debt securities and interest rate 2,301,865 244,096 76,402 109,527 1,933,468 255,211 70,804 167,501 a) Options - 68,869 7,909 1,004 - 68,964 6,224 6,868 b) Swaps 2,301,865 175,227 66,617 - 1,933,468 186,247 63,792 - c) Forwards - - 1,607 - - - 751 - d) Futures - - 269 108,523 - - 37 160,633 e) Other - - - - - - - - 2. Equities and stock indices - 6,570 25,435 5,889 - 4,955 28,500 2,480 a) Options - 6,101 25,426 3,961 - 4,948 28,491 609 b) Swaps - 469 9 - - 7 9 - c) Forwards - - - - - - - - d) Futures - - - 1,928 - - - 1,871 e) Other - - - - - - - - 3. Foreign exchange rates and gold - 163,959 17,532 209 96 170,930 17,670 2,005 a) Options - 27,688 1,282 5 - 22,674 1,186 89 b) Swaps - 37,274 2,952 201 95 44,619 4,450 - c) Forwards - 98,710 12,425 - - 103,454 11,258 1,901 d) Futures - - - 3 - - - 15 e) Other - 287 873 - 1 183 776 - 4. Commodities - 4,043 1,079 1,640 - 3,070 1,074 1,698 5. Other - - - - - - - - Total 2,301,865 418,668 120,448 117,265 1,933,564 434,166 118,048 173,684 The notional amounts shown as at 31 December 2022 in the column \u201cOver the counter\u201d with central counterparties relate to interest rate derivatives settled through legal clearing for a total of 2,302 billion euro. A.2. Financial trading derivatives: gross positive and negative fair value \u2013 breakdown by product (millions of euro) Type of derivative 31.12.2022 31.12.2021 Over the counter Organised markets Over the counter Organised markets Central Counterparties Without central counterparties Central Counterparties Without central counterparties With netting agreements Without netting agreements With netting agreements Without netting agreements 1. Positive fair value a) Options - 1,580 594 54 - 1,750 789 26 b) Interest rate swaps 83,520 9,334 1,649 - 39,039 9,181 5,331 - c) Cross currency swaps - 1,599 201 - - 1,250 272 - d) Equity swaps - 21 2 1 - - - - e) Forwards - 1,886 232 - - 890 108 8 f) Futures - - - - - - - - g) Other - 723 170 - - 757 190 - Total 83,520 15,143 2,848 55 39,039 13,828 6,690 34 2. Negative fair value a) Options - 1,803 6,320 44 - 1,815 6,365 19 b) Interest rate swaps 80,573 10,223 3,824 - 39,252 13,298 801 - c) Cross currency swaps - 1,443 878 - - 1,127 864 - d) Equity swaps - 21 - 1 - - - - e) Forwards - 1,323 365 - - 1,146 212 16 f) Futures - - - - - - - - g) Other - 558 186 - - 752 422 - Total 80,573 15,371 11,573 45 39,252 18,138 8,664 35 A.3. Over the counter financial trading derivatives: notional values, gross positive and negative fair value by counterparty (millions of euro) Underlying asset Central Counterparties Banks Other financial companies Other counterparties Contracts not included under netting agreements 1) Debt securities and interest rates - notional amount X 1,982 16,278 58,142 - positive fair value X 288 120 1,339 - negative fair value X -235 -502 -3,555 2) Equities and stock indices - notional amount X 14,300 5,362 5,773 - positive fair value X 518 41 3 - negative fair value X -841 -160 -5,009 3) Foreign exchange rates and gold - notional amount X 1,352 2,961 13,219 - positive fair value X 34 13 345 - negative fair value X -668 -31 -397 4) Commodities - notional amount X - 114 965 - positive fair value X - 8 139 - negative fair value X - -19 -156 5) Other - notional amount X - - - - positive fair value X - - - - negative fair value X - - - Contracts included under netting agreements 1) Debt securities and interest rates - notional amount 2,301,865 171,158 58,904 14,034 - positive fair value 83,520 6,514 3,523 315 - negative fair value -80,573 -8,639 -1,505 -1,072 2) Equities and stock indices - notional amount - 2,490 4,065 15 - positive fair value - 134 64 3 - negative fair value - -101 -330 - 3) Foreign exchange rates and gold - notional amount - 118,496 34,311 11,152 - positive fair value - 2,610 867 394 - negative fair value - -1,829 -659 -676 4) Commodities - notional amount - 350 1,725 1,968 - positive fair value - 48 219 452 - negative fair value - -38 -189 -333 5) Other - notional amount - - - - - positive fair value - - - - - negative fair value - - - - A.4. Residual maturity of over the counter financial derivatives: notional amounts (millions of euro) Underlying/Residual maturity Up to 1 year Between 1 and 5 years Over 5 years Total A.1 Financial derivatives on debt securities and interest rates 847,618 1,021,245 753,500 2,622,363 A.2 Financial derivatives on equities and stock indices 11,182 19,440 1,383 32,005 A.3 Financial derivatives on foreign exchange rates and gold 129,901 38,991 12,599 181,491 A.4 Financial derivatives on commodities 2,632 2,490 - 5,122 A.5 Other financial derivatives - - - - Total 31.12.2022 991,333 1,082,166 767,482 2,840,981 Total 31.12.2021 730,422 1,012,428 742,928 2,485,778 B. CREDIT DERIVATIVES B.1. Credit trading derivatives: period-end notional amounts (millions of euro) Categories of transactions Trading derivatives single counterparty more counterparties (basket) 1. Protection purchases a) Credit default products 7,582 68,356 b) Credit spread products - - c) Total rate of return swap - - d) Other - - Total 31.12.2022 7,582 68,356 Total 31.12.2021 7,531 67,468 2. Protection sales a) Credit default products 7,890 65,183 b) Credit spread products - - c) Total rate of return swap - - d) Other - - Total 31.12.2022 7,890 65,183 Total 31.12.2021 8,043 63,098 As at 31 December 2022, none of the contracts shown in the table above have been included within the structured credit products. B.2. Credit trading derivatives: gross positive and negative fair value \u2013 breakdown by product (millions of euro) Type of derivative Total 31.12.2022 Total 31.12.2021 1. Positive fair value a) Credit default products 936 2,225 b) Credit spread products - - c) Total rate of return swap - - d) Other - - Total 936 2,225 2. Negative fair value a) Credit default products 943 2,341 b) Credit spread products - - c) Total rate of return swap - - d) Other - - Total 943 2,341 As at 31 December 2022, none of the contracts shown in the table above have been included within the structured credit products. B.3. Over the counter credit trading derivatives: notional values, gross positive and negative fair value by counterparty (millions of euro) Central counterparties Banks Other financial companies Other counterparties Contracts not included under netting agreements 1) Protection purchases \u2212 notional amount X - - 275 \u2212 positive fair value X - - 22 \u2212 negative fair value X - - - 2) Protection sales \u2212 notional amount X - 36 8 \u2212 positive fair value X - - - \u2212 negative fair value X - - -8 Contracts included under netting agreements 1) Protection purchases \u2212 notional amount 53,496 11,408 10,759 - \u2212 positive fair value 15 168 147 - \u2212 negative fair value -421 -77 -83 - 2) Protection sales \u2212 notional amount 53,235 10,587 9,207 - \u2212 positive fair value 410 62 112 - \u2212 negative fair value -13 -185 -156 - As at 31 December 2022, none of the contracts shown in the table above have been included within the structured credit products. B.4. Residual maturity of over the counter credit trading derivatives: notional amounts (millions of euro) Underlying/Residual maturity Up to 1 year Between 1 and 5 years Over 5 years Total 1. Protection sales 7,767 64,382 924 73,073 2. Protection purchases 8,088 67,174 676 75,938 Total 31.12.2022 15,855 131,556 1,600 149,011 Total 31.12.2021 9,145 135,770 1,225 146,140 B.5. Credit derivatives associated with the fair value option: annual changes The Intesa Sanpaolo Group does not hold credit derivatives associated with the fair value option. 1.3.2. Accounting hedges Qualitative information On first-time adoption of IFRS 9, the Intesa Sanpaolo Group exercised its option under the said Standard to continue to fully apply the rules of IAS 39 for all types of hedges (micro and macro hedges). As a result, the provisions of IFRS 9 on hedging do not apply. A. Fair value hedging The hedging carried out by the Intesa Sanpaolo Group is aimed at protecting the banking book from variations in the fair value of loans and deposits due to movements in the interest rate curve (interest rate risk). The Group uses both micro fair value hedges and macro fair value hedges. The micro fair value hedges mainly hedge bonds issued, securities under assets and loans to customers. The macro fair value hedges are used for: \u2212 core deposits, based on the applicable standards in the carved-out version of IAS 39 in accordance with the option provided by IFRS 9 to make use of the possibility of fully applying the provisions of IAS 39 on hedges; \u2212 the already fixed portion of floating-rate loans, in which the macro fair value hedge is used to hedge the interest rate risk inherent in the floating-rate coupons of the loans granted, when the coupon rate is set; \u2212 a portion of fixed-rate loans; for this type, in line with the carved-out version of IAS 39, an open-portfolio macrohedging model has been adopted according to a bottom-layer approach that, in accordance with the interest rate risk measurement method involving modelling of the prepayment phenomenon, is more closely correlated with risk management activity and asset dynamics. The main types of derivative contracts used are plain and structured interest rate swaps (IRS), overnight index swaps (OIS), cross-currency swaps (CCS), forward sales and options on interest rates stipulated with third parties. The derivatives are not listed on regulated markets but are traded in OTC (over the counter) circuits. The OTC contracts also include contracts entered into through clearing houses. B. Cash flow hedging The hedging carried out by the Intesa Sanpaolo Group is aimed at protecting the Group from the exposure to changes in future cash flows attributable to movements in the interest rate curve, associated with a particular asset/liability, such as variable future interest payments on a debt/loan or a highly probable expected future transaction. The Group uses both micro cash flow hedges and macro cash flow hedges. The micro cash flow hedges mainly hedge bonds issued. The macro cash flow hedges are used for: \u2212 floating-rate funding when it is used to finance fixed-rate loans; \u2212 floating-rate loans to hedge the fixed-rate funding. The derivatives used are interest rate swaps (IRS) with third parties or with other Group companies, which, in turn, hedge the risk in the market to meet the requirements for the outsourcing of the hedges to third-party counterparties required to qualify the hedges as IAS-compliant in the consolidated financial statements. The derivatives are not listed on regulated markets but are traded in OTC (over the counter) circuits. The OTC contracts also include contracts brokered through clearing houses. C. Hedging of foreign investments In 2022 the Group entered into hedging relationships, subject to hedge accounting, to neutralise the effects of structural foreign exchange rate fluctuations on positions not exempt for the purposes of calculating capital requirements for foreign exchange risk. Such hedging relationships were entered into in respect of structural foreign exchange risk positions capable of generating an impact on the foreign exchange reserves that form part of the Group's consolidated shareholders\u2019 equity. In the Parent Company\u2019s financial statements these hedging relationships are accounted for as micro fair value hedges, whereas in the consolidated financial statements they are treated as hedges of a net investment in a foreign currency. D. Hedging instruments The main causes of ineffectiveness of the model adopted by the Group for verifying the effectiveness of the hedges are attributable to the following: \u2212 misalignment between the notional value of the derivative and the hedged underlying recognised at the time of initial designation or generated subsequently, such as in the case of partial repayments of loans or the repurchase of bonds; \u2212 application of different curves on the hedging derivative and hedged item for the purpose of carrying out the effectiveness test on fair value hedges. The derivatives, normally collateralised or entered into through clearing houses, are discounted on the overnight curves, while the hedged items are discounted on the indexing curve of the hedging instrument; \u2212 inclusion in the effectiveness test of the value of the variable leg of the hedging derivative, in the case of fair value hedges. The ineffectiveness of the hedge is promptly recognised for the purposes of: \u2212 the determination of the effect on the income statement; \u2212 the assessment of the possibility of continuing to apply the hedge accounting rules. The Group does not use dynamic hedges, as defined in IFRS 7, paragraph 23C. E. Hedged items The main types of hedged items are: \u2212 debt securities under assets; \u2212 debt securities issued and non-securities funding; \u2212 fixed-rate loans; \u2212 floating-rate loans; \u2212 optional embedded component of floating-rate mortgages; \u2212 already fixed coupon of floating rate-loans; \u2212 modelled on demand deposits. \u2212 net investments in foreign currency. E.1 Debt securities under assets These are hedged by micro fair value hedges, using IRS (interest rate swaps), OIS (overnight index swaps) and CCS (cross- currency swaps) as hedging instruments. The interest rate risk is generally hedged for the entire duration of the obligation. The Dollar Offset Method is used to verify the hedge effectiveness. This method is based on the ratio between the cumulative changes (from the inception of the hedge) in the fair value of the hedging instrument, attributable to the hedged risk, and past changes in the fair value of the hedged item (fair value change), net of accrued interest. Micro fair value hedges also include forward sales on securities in the HTCS portfolio, carried out to hedge fair value risks from movements in credit spreads and interest rate curves. With regard to the forward sale contract, which is a derivative because it is a non-regular way transaction, the spot component is separated from the interest component by designating only the spot component as the hedging instrument in a fair value hedging relationship. E.2 Debt securities issued and non-securities funding The Group currently has micro fair value hedges in place on fixed- or structured-rate funding and micro cash flow hedges or macro cash flow hedges on floating-rate funding, using IRS (interest rate swaps), OIS (overnight index swaps) and CCS (cross-currency swaps) as hedging instruments. The interest rate risk is generally hedged for the entire duration of the obligation. For the micro hedges, the hedge effectiveness is verified using the Dollar Offset Method. This method is based on the ratio between the cumulative changes (from the inception of the hedge) in the fair value or the cash flows of the hedging instrument, attributable to the hedged risk, and past changes in the fair value or the cash flows of the hedged item (fair value change), net of accrued interest. For the macro hedges, the hedge effectiveness is verified by means of a capacity test. This test involves a comparison of the consistency between the hedged items, referring to existing and expected floating-rate funding (so-called highly probable future transactions), and the hedging instruments, which must always be confirmed throughout the life of the hedging relationship and for each time band. In this case, the hedged item is represented by the expected cash flows from funding that will arise over the life of the issues. E.3 Fixed-rate loans The Group has designated micro fair value hedges for fixed-rate loans and macro fair value hedges for mortgage loans in the retail segment, mainly using IRS (interest rate swaps) as hedging instruments. In a micro fair value hedge, the interest rate risk is generally hedged throughout the life of the underlying. For the micro hedges, the hedge effectiveness is verified using the Dollar Offset Method. For the macro hedges, the loan portfolio hedged is open, i.e. it is dynamically composed of fixed-rate instruments managed at aggregate level through hedging derivatives entered into over time. The effectiveness of the macro hedges on fixed-rate loans is periodically verified through specific prospective and retrospective tests aimed at demonstrating that the hedged portfolio contains an amount of assets whose sensitivity profile and changes in fair value due to interest rate risk reflect those of the derivatives used for the hedge. E.4 Floating-rate loans The Group currently has macro cash flow hedges in place on floating-rate loans, mainly using IRS as hedging instruments. The hedge effectiveness is verified by means of a capacity test. This test involves a comparison of the consistency between the hedged items, referring to the floating-rate loans outstanding, and the hedging instruments, which must always be confirmed throughout the life of the hedging relationship and for each time band. In this case, the hedged item is represented by the expected cash flows originating from the loans that will arise over the life of the assets. E.5 Optional embedded component of floating-rate mortgages The optional embedded components (interest rate options) of floating-rate mortgages are hedged by micro fair value hedges, using options (cap, floor, collar) as hedging instruments. The underlying assets may be partially or totally hedged, over time and in terms of amount. The Dollar Offset Method is used to verify the hedge effectiveness. E.6 Already fixed coupon of floating-rate loans The Group has designated macro fair value hedges on coupons already set for floating-rate loans using OIS (overnight index swaps) as hedging instruments. The purpose of this type of hedge is to neutralise the interest rate risk generated by the coupons already set for floating-rate loans. The Dollar Offset Method is used to verify the hedge effectiveness, while the actual consistency of the hedged items is verified by a capacity test. E.7 Modelled on demand deposits. Modelled on demand deposits are hedged by macro fair value hedges, as required by the \u201ccarve out\u201d of IAS 39, using IRS (interest rate swaps) and OIS (overnight index swaps) as hedging instruments. The purpose of this type of hedge is to protect the net interest income from possible falls in interest rates that reduce the spread generated by core deposits. The model is subject to continuous monitoring and verification by the Market and Financial Risk Management Head Office Department, in order to promptly incorporate changes in the main characteristics (volumes, stability, reactivity) and make the necessary adjustments where appropriate. The Dollar Offset Method is used to verify the hedge effectiveness. E.8 Foreign investments The Group currently has active hedging relationships of net investments in a foreign currency that use outright currency forward contracts as the hedging instruments. The purpose of the hedging is to protect the Group from the effects of changes in the exchange rate that could have impacts on the foreign exchange reserves that are part of the Group\u2019s consolidated shareholders\u2019 equity. Of the currency forward derivative contract, only the change relating to the spot exchange rate (spot component) is designated a hedge subject to hedge accounting; this change is separated from the total fair value of the instrument. In the Parent Company\u2019s financial statements, these hedging relationships are accounted for as micro fair value hedges, whereas in the consolidated financial statements they are treated as hedges of a net investment in a foreign currency. The Dollar Offset Method is used to verify the hedge effectiveness at the Parent Company level, while at the Group level the actual consistency of the hedged items is verified by a capacity test. Quantitative information A. Financial hedging derivatives A.1 Financial hedging derivatives: period-end notional amounts (millions of euro) Underlying asset/Type of derivative 31.12.2022 31.12.2021 Over the counter Organised markets Over the counter Organized markets Central Counterparties Without central counterparties Central Counterparts Without central counterparties With netting agreements Without netting agreements With netting agreements Without netting agreements 1. Debt securities and interest rates 322,529 28,225 8,873 - 253,424 29,784 8,435 - a) Options - 1,587 - - - 1,851 - - b) Swaps 322,529 26,269 8,873 - 253,424 27,195 7,687 - c) Forwards - 349 - - - 718 748 - d) Futures - - - - - - - - e) Others - 20 - - - 20 - - 2. Equities and stock indices - - - - - - - - a) Options - - - - - - - - b) Swaps - - - - - - - - c) Forwards - - - - - - - - d) Futures - - - - - - - - e) Other - - - - - - - - 3. Foreign exchange rates and gold - 9,528 21 316 - 9,576 26 175 a) Options - - - - - - - - b) Swaps - 9,321 21 316 - 9,576 26 175 c) Forwards - 207 - - - - - - d) Futures - - - - - - - - e) Other - - - - - - - - 4. Commodities - - - - - - - - 5. Other - - - - - - - - TOTAL 322,529 37,753 8,894 316 253,424 39,360 8,461 175 The average notional amount in the year of the financial hedging derivatives was 335,456 million euro. A.2 Financial hedging derivatives: gross positive and negative fair value \u2013 breakdown by product (millions of euro) Type of derivative Positive and negative fair value Change in value used to calculate hedge effectiveness Total 31.12.2022 Total 31.12.2021 Total Total Over the counter Organised markets Over the counter Organised markets Central Counterparties Without central counterparties Central Counterparties Without central counterparties 31.12.2022 31.12.2021 With netting agreements Without netting agreements With netting agreements Without netting agreements Positive fair value a) Options - 75 - - - 26 - - -47 -114 b) Interest rate swap 17,193 1,637 830 - 2,816 712 61 - 18,312 2,505 c) Cross currency swap - 325 - - - 483 - - -92 68 d) Equity swap - - - - - - - - - - e) Forwards - - - - - - - - - - f) Futures - - - - - - - - - - g) Other - - - - - - - - - - Total 17,193 2,037 830 - 2,816 1,221 61 - 18,173 2,459 Negative fair value a) Options - 1 - - - 2 - - 1 2 b) Interest rate swap 12,471 1,631 18 - 5,238 2,492 63 - 13,360 5,743 c) Cross currency swap - 788 8 - - 380 7 - 1,015 378 d) Equity swap - - - - - - - - - - e) Forwards - 5 - - - 6 1 - - - f) Futures - - - - - - - - - - g) Other - - - 6 - - - - - - Total 12,471 2,425 26 6 5,238 2,880 71 - 14,376 6,123 A.3 Over the counter financial hedging derivatives: notional amounts, gross positive and negative fair values by counterparty (millions of euro) Underlying asset Central counterparties Banks Other financial companies Other counterparties Contracts not included under netting agreements 1) Debt securities and interest rates - notional amount X 4,834 4,039 - - positive fair value X 497 333 - - negative fair value X -16 -2 - 2) Equities and stock indices - notional amount X - - - - positive fair value X - - - - negative fair value X - - - 3) Foreign exchange rates and gold - notional amount X 21 - - - positive fair value X - - - - negative fair value X -8 - - 4) Commodities - notional amount X - - - - positive fair value X - - - - negative fair value X - - - 5) Other - notional amount X - - - - positive fair value X - - - - negative fair value X - - - Contracts included under netting agreements 1) Debt securities and interest rates - notional amount 322,529 26,545 1,680 - - positive fair value 17,193 1,668 44 - - negative fair value -12,471 -1,119 -517 - 2) Equities and stock indices - notional amount - - - - - positive fair value - - - - - negative fair value - - - - 3) Foreign exchange rates and gold - notional amount - 7,918 1,610 - - positive fair value - 293 32 - - negative fair value - -465 -324 - 4) Commodities - notional amount - - - - - positive fair value - - - - - negative fair value - - - - 5) Other - notional amount - - - - - positive fair value - - - - - negative fair value - - - - A.4 Residual maturity of over the counter financial hedging derivatives: notional amounts (millions of euro) Underlying/Residual maturity Up to 1 year Between 1 and 5 years Over 5 year Total A.1 Financial derivatives on debt securities and interest rates 83,539 151,813 124,275 359,627 A.2 Financial derivatives on equities and stock indices - - - - A.3 Financial derivatives on foreign exchange rates and gold 687 3,704 5,158 9,549 A.4 Financial derivatives on commodities - - - - A.5 Other financial derivatives - - - - Total 31.12.2022 84,226 155,517 129,433 369,176 Total 31.12.2021 60,347 126,333 114,565 301,245 Information on the uncertainty deriving from hedging derivative benchmark indices As illustrated in Part A \u2013 Accounting policies, the Intesa Sanpaolo Group, from the 2019 Financial Statements, has applied Regulation (EU) 34/2020 of 15 January 2020, which adopted the document issued by the IASB in September 2019 on \u201cInterest Rate Benchmark Reform (amendments to IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures)\u201d. This regulation introduced several amendments regarding hedge accounting designed to prevent uncertainties about the amount and timing of the cash flows arising from the rate reform resulting in the discontinuation of existing hedges and difficulties in designating new hedging relationships. Therefore, the analysis of hedge effectiveness was carried out considering the flows and timing of outstanding hedging derivatives, assuming that the interest rate benchmarks used to set existing interest rates will not be changed as a result of the Interest Rate Benchmark Reform (IBOR Reform). The disclosure required by IFRS 7, paragraph 24H, on the uncertainty arising from interest rate benchmark reform on hedging relationships and the nominal amount of hedging instruments potentially impacted by the benchmark rate reform is provided below. Reference should also be made to that set out in the Notes to the consolidated financial statements, in the Introduction of Part E \u2013 Information on risks and relative hedging policies, for an illustration of how the Group is managing the process to transition to alternative benchmark rates. B. Credit hedging derivatives B.1 Credit hedging derivatives: period-end notional amounts B.2 Credit hedging derivatives: gross positive and negative fair value - breakdown by product B.3 Over the counter credit hedging derivatives: notional amounts, gross positive and negative fair values by counterparty B.4 Residual maturity of over the counter credit hedging derivatives: notional amounts The Intesa Sanpaolo Group does not hold credit derivatives classified as hedges in its portfolio. C. Non-derivative hedging instruments C.1 Non-derivative hedging instruments: breakdown by accounting portfolio and type of hedge The Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each type of hedge (both for micro hedges and macro hedges). For this reason, the Intesa Sanpaolo Group does not hold financial instruments to be shown in table \u201cC.1 Non-derivative hedging instruments: breakdown by accounting portfolio and type of hedge\u201d. Fair value hedge derivatives Fair value hedge derivatives of the Group are mainly index-linked to the Euribor, whose calculation method was revised during 2019 to be able to continue using that parameter also after 1 January 2022, both for outstanding contracts and new contracts. To make the Euribor compliant with the EU Benchmarks Regulation (BMR - Regulation 2016/1011/EU) the EMMI - European Money Markets Institute - implemented the change to a new \u201chybrid\u201d calculation method. The current calculation system \u2013 which was completed at the end of November 2019 \u2013 does not change the economic variable that the benchmark measures: the Euribor expresses the actual cost of funding for contributing European banks, and is always available and consultable. Therefore, it is not deemed to be uncertainty on the timing or cash flows of the Euribor, and the fair value hedges linked to the Euribor are not deemed to be impacted by the reform, in line with the approach already adopted in previous years. With reference to the benchmarks being wound down as at 31 December 2021, the transition activities have been successfully completed for all these benchmarks. Specifically, with regard to the remaining hedging derivative contracts still outstanding as at 31 December 2021 with an underlying EONIA benchmark rate (EONIA OIS), as well as the contracts with the EONIA as the collateral benchmark remuneration rate, no positions were open as at 31 December 2022. It is also noted that the exposures relating to hedging derivative contracts linked to the Libor to be wound down as at 31 December 2021 (mainly in relation to those expressed in GBP, CHF, JPY and EUR) were no longer present from the initial months of 2022. With regard to hedging derivative contracts linked to the USD LIBOR, the transition must be carried out by 30 June 2023 (the last date of publication of only the one-week and two-month USD LIBOR rates was 31 December 2021). Therefore, for the purpose of managing the transition to the new RFR, only the financial instruments with maturities after that date are concerned. The date on which the USD LIBOR will no longer be used does not give rise to specific uncertainties except for those linked to trading timescales, which could be deferred by the counterparties. Specifically, as at 31 December 2022 fair value hedge derivatives indexed to the USD LIBOR amounted to a notional value of 13,332 million euro, accounting for 4% of the Group's total fair value hedge derivatives. As at 31 December 2021 fair value hedge derivatives indexed to the EONIA amounted to a notional value of 4 million euro, those indexed to the USD LIBOR to a notional value of 16,646 million euro and those indexed to the LIBOR in other currencies to a notional value of 62 million euro, accounting for 6% of the Group's total fair value hedge derivatives. These amounts are included in the disclosure provided on the IBOR Reform in Part A, Section 4 - Other aspects. Specifically, the table published includes, in the \u201cderivatives\u201d column, both trading and hedging derivatives not yet passed to the alternative benchmarks as at 31 December 2022. See that section for qualitative analyses of the methods of management of the transition by the Group. Cash flow hedge derivatives Cash flow hedge derivatives are index-linked to the Euribor. As illustrated for fair value hedges, the Group does not deem that there is uncertainty on the timing or cash flows of the Euribor, and, therefore does not consider the cash flow hedges linked to the Euribor to be impacted by the reform. D. Hedged items The Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each type of hedge (both for micro hedges and macro hedges). D.1 Fair value hedges (millions of euro) Micro- hedges: book value Micro-hedges \u2013 net positions: book value of assets and liabilities (prior to netting) Micro-hedges Macro- hedges: book value Cumulative fair value changes (hedged instrument) Termination of hedging: residual cumulative fair value changes Changes in value used to assess hedge ineffectiveness A. Assets 1. Financial assets designated at fair value through other comprehensive income \u2013 hedging of: 30,794 - -4,934 -2,221 -4,575 - 1.1 Debt securities and interest rates 28,597 - -4,905 -2,214 -4,566 X 1.2 Equities and stock indices - - - - - X 1.3 Foreign exchange rates and gold - - - - - X 1.4 Loans - - - - - X 1.5 Other 2,197 - -29 -7 -9 X 2. Financial assets measured at amortised cost - hedging of: 35,329 - -2,568 -1,028 -2,536 99,032 1.1 Debt securities and interest rates 34,751 - -2,766 -1,028 -2,738 X 1.2 Equities and stock indices - - - - - X 1.3 Foreign exchange rates and gold 157 - -1 - - X 1.4 Loans - - - - - X 1.5 Other 421 - 199 - 202 X Total 31.12.2022 66,123 - -7,502 -3,249 -7,111 99,032 Total 31.12.2021 84,679 - 3,383 190 2,773 76,009 B. Liabilities 1. Financial liabilities measured at amortised cost - hedging of: 55,128 - -3,589 -370 -3,764 111,035 1.1 Debt securities and interest rates 49,462 - -2,997 -66 -3,219 X 1.2 Foreign exchange rates and gold - - - - - X 1.3 Other 5,666 - -592 -304 -545 X Total 31.12.2022 55,128 - -3,589 -370 -3,764 111,035 Total 31.12.2021 61,269 - 740 3 697 61,554 D.2 Cash flow hedges and hedges of foreign investments (millions of euro) Change in value used to assess hedge ineffectiveness Hedging reserves Termination of hedging: residual cumulative value of the hedging reserves A. Cash flow hedge 1. Assets 640 -488 - 1.1 Debt securities and interest rates 640 -488 - 1.2 Equities and stock indices - - - 1.3 Foreign exchange rates and gold - - - 1.4 Loans - - - 1.5 Other - - - 2. Liabilities 192 22 - 1.1 Debt securities and interest rates 192 22 - 1.2 Foreign exchange rates and gold - - - 1.3 Other - - - Total (A) 31.12.2022 832 -466 - Total (A) 31.12.2021 -751 -607 - B. Hedges of foreign investments X 10 - Total (A+B) 31.12.2022 832 -456 - Total (A+B) 31.12.2021 -751 -607 - E. Effects of hedging on shareholders\u2019 equity E.1 Reconciliation of components of shareholders\u2019 equity (millions of euro) Cash flow hedging reserve Reserve for hedging of foreign investments Debt securities and interest rates Equities and stock indices Foreign exchange rates and gold Loans Other Debt securities and interest rates Equities and stock indices Foreign exchange rates and gold Loans Other Initial amount -607 - - - - - - - - - Fair value changes (effective portion) 141 - - - - - - - - - Reclassification to the income statement - - - - - - - - - - of which: future transaction not expected - - - - - X X X X X Other changes - - - - - - - 10 - - of wich: transfer to initial book value - - - - - X X X X X Final amount -466 - - - - - - 10 - - The category \u201cHedging instruments (non-designated items)\u201d is not present, because the Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each type of hedge (both for micro hedges and macro hedges). 1.3.3. Other information on derivative instruments (trading and hedging) A. Credit and financial derivatives A.1 Over the counter credit and financial derivatives: net fair values by counterparty (millions of euro) Central counterparties Banks Other financial companies Other counterparties A. Financial derivatives 1) Debt securities and interest rates - notional amount 1,650,362 - - - - positive net fair value 564 - - - - negative net fair value - - - - 2) Equities and stock indices - notional amount - - - - - positive net fair value - - - - - negative net fair value - - - - 3) Foreign exchange rates and gold - notional amount - - - - - positive net fair value - - - - - negative net fair value - - - - 4) Commodities - notional amount - - - - - positive net fair value - - - - - negative net fair value - - - - 5) Other - notional amount - - - - - positive net fair value - - - - - negative net fair value - - - - B. Credit derivatives 1) Protection purchases - notional amount - - - - - positive net fair value - - - - - negative net fair value - - - - 2) Protection sales - notional amount - - - - - positive net fair value - - - - - negative net fair value - - - - The table shows the values resulting from the offsetting in the balance sheet for the derivatives whose netting agreements meet the criteria set out in IAS 32 paragraph 42. In particular, the above refers mainly to OTC trading and hedging financial and credit derivatives in place with the legal clearing agent LCH Ltd., for which the fair values attributable to transactions on own account and transactions on behalf of customers have been offset separately in the financial statements. The clearing amount, which had a total net positive value of 564 million euro (positive fair value of 85,957 million euro and negative fair value of 85,393 million euro), attributable to a positive result of 147 million euro from trading derivatives and a positive result of 417 million euro from hedging derivatives, is presented in Part B of the Notes to the financial statements, for operations on behalf of customers and Group companies (trading derivatives) among Financial assets held for trading for 4,384 million euro and operations on own account (trading derivatives and hedging derivatives) among Financial liabilities held for trading for 3,820 million euro, respectively.", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1052": { "value": " 2.3 Financial assets designated at fair value: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities - 1 - - 1 3 1.1 Structured securities - - - - - - 1.2 Other debt securities - 1 - - 1 3 2. Loans - - - - - - 2.1 Structured - - - - - - 2.2 Other - - - - - - Total - 1 - - 1 3 The Bank has included in this category debt securities linked to financial instruments measured at fair value through profit and loss, such as financial derivatives. On the basis of the debt securities, no hedges were arranged through credit derivatives or similar instruments to mitigate the relevant credit risk. The fair value change attributable to the measurement of credit risk of financial assets designated at fair value was insignificant, both during the year and in cumulative terms. 2.4 Financial assets designated at fair value: breakdown by borrower/issuer (millions of euro) Captions 31.12.2022 31.12.2021 1. Debt securities 1 4 a) Central Banks - - b) Public administration 1 1 c) Banks - - d) Other financial companies - 3 of which: insurance companies - - e) Non financial companies - - 2. Loans - - a) Central Banks - - b) Public administration - - c) Banks - - d) Other financial companies - - of which: insurance companies - - e) Non financial companies - - f) Households - - Total 1 4 SECTION 3 \u2013 FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE \u2013 CAPTION 30 3.1 Financial liabilities designated at fair value: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal value Fair value Fair value (*) Nominal value Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to banks - - - - - - - - - - 1.1 Structured - - - - X - - - - X 1.2 Other - - - - X - - - - X of which: - commitments to disburse funds - X X X X - X X X X - financial guarantees given - X X X X - X X X X 2. Due to customers 5 - 4 - 4 5 - 4 - 4 2.1 Structured 5 - 4 - X 5 - 4 - X 2.2 Other - - - - X - - - - X of which: - commitments to disburse funds - X X X X - X X X X - financial guarantees given - X X X X - X X X X 3. Debt securities 9,875 - 8,761 30 8,719 3,634 6 3,638 26 3,566 3.1 Structured 9,875 - 8,761 30 X 3,634 6 3,638 26 X 3.2 Other - - - - X - - - - X Total 9,880 - 8,765 30 8,723 3,639 6 3,642 26 3,570 (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. The Group has classified the LECOIP 3.0 for the employment agreements, terminated early, of employees of Group companies and life policies connected to social initiatives, managed by the Bank based on fair value, under Amounts due to customers. Sub-caption 3.1 Debt securities - Structured comprised certificates which provide for partial or full redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014 (certificates with guaranteed or protected capital). As they were issued after 1 January 2020, these are classified under Financial liabilities designated at fair value (Fair Value Option), as a result of the Bank\u2019s implementation of a business model based on a banking book approach, with the goal of generating stable inflows. Certificates representing Financial liabilities designated at fair value record the related changes in fair value attributable to changes in own credit risk in the statement of comprehensive income (shareholders\u2019 equity). Changes in the Bank\u2019s own credit rating during the year were negative by 47 million euro. 3.2 Breakdown of \u201cFinancial liabilities designated at fair value\u201d: subordinated liabilities As at 31 December 2022, the Group did not have any subordinated liabilities classified under Financial liabilities designated at fair value. SECTION 3 BIS \u2013 FINANCIAL LIABILITIES PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE PURSUANT TO IAS 39 - CAPTION 35 The breakdown of the IAS 39 captions included in caption 35 of the Balance sheet liabilities pertaining to insurance companies is provided below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 35 Financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39 - Caption 35 31.12.2022 31.12.2021 40. Financial liabilities held for trading 9 103 50. Financial liabilities designated at fair value through profit or loss 71.565 84.667 60. Hedging derivatives 170 - Total Caption 35 71.744 84.770 3.1 Bis Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cashl liabilities 1. Due to banks - - - - - - - - - - 2. Due to customers - - - - - - - - - - 3. Debt securities - - - - X - - - - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - - 3.1.2 Other bonds - - - - X - - - - - 3.2 Other - - - - X - - - - X 3.2.1 Structured - - - - X - - - - - 3.2.2 Other - - - - X - - - - - Total A - - - - - - - - - - B. Derivatives 1. Financial derivatives X 1 8 - X X - 42 61 X 1.1 Trading X 1 - - X X - 38 61 X 1.2 Fair value option X - 8 - X X - 4 - X 1.3 Other X - - - X X - - - X 2. Credit derivatives X - - - X X - - - X 2.1 Trading X - - - X X - - - X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 1 8 - X X - 42 61 X Total (A+B) X 1 8 - X X - 42 61 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.2 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities With regard to Financial liabilities held for trading: subordinated liabilities, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.3 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts With regard to Financial liabilities held for trading: structured debts, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.4 Bis Financial liabilities measured at fair value: breakdown (millions of euro) Transaction type/Values 31.12.2022 31.12.2021 Nominal value Fair value Fair value (*) Nominal value Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to banks - - - - - - - - - - 1.1 Structured - - - - X - - - - X 1.2 Other - - - - X - - - - X 2. Due to customers 71,565 - 71,565 - 79,141 84,667 - 84,667 - 85,269 2.1 Structured - - - - X - - - - X 2.2 Other 71,565 - 71,565 - X 84,667 - 84,667 - X 3. Debt securities - - - - - - - - - - 3.1 Structured - - - - X - - - - X 3.2 Other - - - - X - - - - X Total 71,565 - 71,565 - 79,141 84,667 - 84,667 - 85,269 (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.5 Bis Breakdown of \u201cFinancial liabilities measured at fair value\u201d: subordinated liabilities There were no subordinated liabilities classified under Financial liabilities measured at fair value as at 31 December 2022. 3.6 Bis Hedging derivatives: breakdown by type of hedge and level (millions of euro) Fair value 31.12.2022 Notional value Fair value 31.12.2021 Notional value Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A) Financial derivatives - 170 - 1,241 - - - - 1) fair value - - - - - - - - 2) cash flows - 170 - 1,241 - - - - 3) foreign investments - - - - - - - - B) Credit derivatives - - - - - - - - 1) fair value - - - - - - - - 2) cash flows - - - - - - - - Total - 170 - 1,241 - - - - 3.7 Bis Hedging derivatives: breakdown by hedged portfolio and type of hedge (millions of euro) Transactions/Type of hedge FAIR VALUE CASH FLOW FOREIGN INVESTM. Specific Generic Specific Generic Interest rate risk Foreign exchange risk Credit risk Price risk Various risks 1. Financial assets available for sale - - - - - X - X X 2. Loans - - - X - X - X X 3. Investments held to maturity X - - X - X - X X 4. Portfolio X X X X X - X - X 5. Other transactions - - - - - X - X - Total assets - - - - - - - - - 1. Financial liabilities - - - X - X 170 X X 2. Portfolio X X X X X - X - X Total liabilities - - - - - - 170 - - 1. Forecast transactions X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X - X - - ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsDesignatedAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1060": { "value": "3.5 Bis Financial assets available for sale: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Debt securities 67,583 3,152 349 81,830 6,298 412 1.1 Structured securities 8 - - 14 - - 1.2 Other debt securities 67,575 3,152 349 81,816 6,298 412 2. Equities 1,921 7 67 2,201 7 54 2.1 Measured at fair value 1,921 7 67 2,201 7 54 2.2 Measured at cost - - - - - - 3. Quotas of UCI 8,306 - 4,208 9,879 - 3,742 4. Loans - - - - - - Total 77,810 3,159 4,624 93,910 6,305 4,208 3.6 Bis Financial assets available for sale: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 1. Debt securities 71,084 88,540 a) Governments and Central Banks 55,587 71,782 b) Other public entities 283 359 c) Banks 6,495 6,214 d) Other issuers 8,719 10,185 2. Equities 1,995 2,262 a) Banks 194 206 b) Other issuers: 1,801 2,056 - insurance companies 35 37 - financial companies - - - non-financial companies 1,766 2,019 - other - - 3. Quotas of UCI 12,514 13,621 4. Loans - - a) Governments and Central Banks - - b) Other public entities - - c) Banks - - d) Other counterparties - - Total 85,593 104,423 3.7 Bis Financial assets available for sale subject to microhedging There were no financial assets available for sale subject to microhedging referring to insurance companies. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAvailableforsaleAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1065": { "value": " DISCLOSURE PURSUANT TO IFRS 4 As previously indicated, the Intesa Sanpaolo Group exercised the option of adopting the Deferral Approach or Temporary Exemption, according to which the financial assets and liabilities of the subsidiary insurance companies continue to be recognised in accordance with the provisions of IAS 39. In particular, the Group\u2019s insurance companies applying IAS 39 are as follows: - Intesa Sanpaolo Vita S.p.A.; - Intesa Sanpaolo Assicura S.p.A.; - Intesa Sanpaolo Life Ltd.; - Fideuram Vita S.p.A.; - Intesa Sanpaolo RBM Salute S.p.A. This section sets out the information required by IFRS 4 Insurance Contracts following exercise of the option, granted to insurance companies belonging to banking-led financial conglomerates, pursuant to Regulation 2017/1988 and the subsequent Regulation 2020/2097, of postponing the first-time adoption of IFRS 9 88 . The Group verified the fulfilment of the requirements to apply the Temporary Exemption. The insurance companies meet the requirement of insurance predominance, which requires that the percentage of the carrying amount of liabilities linked to insurance business on the carrying amount of total liabilities of the entity exceeds 90% (predominance ratio). Moreover, there were no transfers of financial assets other than those measured at FVTPL between Group companies using different accounting standards. As required by the reference regulations, the quantitative disclosure regarding the entities that will postpone the application of IFRS 9 is provided below. Details of the securities of the insurance companies that pass the SPPI Test (millions of euro) Caption Fair value at the reporting date Fair value changes during the year Other changes during the year (3) Fair value at the previous reporting date Financial assets pertaining to insurance companies measured at fair value pursuant to IAS 39 171,920 -24,284 -9,857 206,061 of which: Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1) 69,674 -14,890 -1,888 86,452 Debt securities 69,674 -14,890 -1,888 86,452 Structured securities - - -9 9 Other debt securities 69,674 -14,890 -1,879 86,443 Loans - - - - Other financial assets - - - - Financial asset other than those with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (2) 17,044 -1,668 -818 19,530 Debt securities 2,086 -408 -405 2,899 Structured securities 8 -1 4 5 Other debt securities 2,078 -407 -409 2,894 Equities 1,995 -207 -60 2,262 Quotas of UCI 12,865 -1,008 -152 14,025 Loans - - - - Derivatives 98 -45 -201 344 Other financial assets - - - - Other financial assets connected with contracts where the investment risk is borne by the policyholders 85,202 -7,726 -7,151 100,079 Debt securities 4,353 -437 17 4,773 Structured securities - - -19 19 Other debt securities 4,353 -437 36 4,754 Equities 3,016 -552 58 3,510 Quotas of UCI 77,817 -6,811 -7,156 91,784 Loans - - - - Derivatives 16 74 -70 12 Other financial assets - - - - Financial assets pertaining to insurance companies measured at amortised cost pursuant to IAS 39 (*) 69 -6 -7 82 of which: Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1) 33 -2 -6 41 Debt securities 33 -2 -6 41 Structured securities - - - - Other debt securities 33 -2 -6 41 Loans - - - - Other financial assets - - - - Financial asset other than those with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (2) 36 -4 -1 41 Debt securities 36 -4 -1 41 Structured securities - - - - Other debt securities 36 -4 -1 41 Equities - - - - Quotas of UCI - - - - Loans - - - - Derivatives - - - - Other financial assets - - - - (*) Debt securities shows the fair value as required by the amendment to IFRS 4. These securities have been recognised in the balance sheet at amortised cost (1) excluding financial assets that meet the definition of held for trading in IFRS 9, or are managed and whose return is measured at fair value (2) includes all other financial assets, i.e. any financial asset: i) with contractual terms that do not give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding; ii) that meet the definition of held for trading in IFRS 9; or iii) that are managed and whose return is measured at fair value (3) Column includes movements that are not attributable to changes in fair value (purchases, sales, repayments, etc.) The table referred to above includes the investments whose risk is fully borne by policyholders, classified under financial assets measured at fair value. Amounts due from banks of 805 million euro are added to the amounts indicated above. Credit risk exposure for financial instruments of the insurance companies that pass the SPPI test (millions of euro) Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1) Credit risk rating Current year book value (2) Previous year book value (2) Debt securities 67,265 83,261 Structured securities Investment Grade - 9 Other debt securities Investment Grade 67,265 83,252 Loans - - Other financial assets - - (millions of euro) Financial asset with contractual terms that give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding (1), and which do not have a low credit risk Credit risk rating Current year book value (2) Current year market value Previous year book value (2) Debt securities 2,444 2,445 3,227 Structured securities Non-Investment Grade - - - Other debt securities Non-Investment Grade 2,444 2,445 3,227 Loans - - - Other financial assets - - - (1) excluding financial assets that meet the definition of held for trading in IFRS 9, or are managed and whose return is measured at fair value. (2) in the case of financial assets measured at amortised cost, before any impairment loss. SECTION 8 \u2013 TECHNICAL INSURANCE RESERVES REASSURED WITH THIRD PARTIES \u2013 CAPTION 80 8.1 Technical insurance reserves reassured with third parties: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 A. Non-life business 127 164 A1. Premiums reserves 44 37 A2. Claims reserves 83 127 A3. Other reserves - - B. Life business 36 44 B1. Mathematical reserves 32 40 B2. Reserves for amounts to be disbursed 4 4 B3. Other reserves - - C. Technical reserves for investment risks to be borne by the insured - - C1. Reserves for contracts with disbursements connected with investment funds and market indices - - C2. Reserves from pension fund management - - D. Total technical insurance reserves reassured with third parties 163 208 8.2 Change in caption 80 Technical insurance reserves reassured with third parties The balance of this caption came to 163 million euro (208 million euro as at 31 December 2021), down by 45 million euro compared to 31 December 2021. The change is essentially due to the decline in caption \u201cA2. Claims reserves\u201d as a result of a new underwriting policy, for both renewals and new customers, preferring profitability by enabling a reduction in the portfolio\u2019s claims rate. SECTION 11 \u2013 TECHNICAL RESERVES \u2013 CAPTION 110 11.1 Technical reserves: breakdown This caption corresponds to caption C of the insurance company balance sheet liabilities. (millions of euro) Captions Direct work Indirect work 31.12.2022 31.12.2021 A. Non-life business 1,654 - 1,654 1,756 A.1 premiums reserves 932 - 932 945 A2. claims reserves 708 - 708 797 A3. other reserves 14 - 14 14 B. Life business 89,874 - 89,874 107,324 B1. mathematical reserves 97,148 - 97,148 98,399 B2. reserves for amounts to be disbursed 673 - 673 712 B3. other reserves -7,947 - -7,947 8,213 C. Technical reserves for investment risks to be borne by the insured 8,589 - 8,589 9,216 C1. reserves for contracts with disbursements connected with investment funds and market indices 1,586 - 1,586 1,917 C2. reserves from pension fund management 7,003 - 7,003 7,299 D. Total technical reserves 100,117 - 100,117 118,296 11.2 Technical reserves: annual changes (millions of euro) Items 31.12.2022 31.12.2021 A. Non-life insurance 1,654 1,756 Initial amount 1,756 1,213 Business combinations - 396 Changes in the reserve (+/-) -102 147 B. Life business and other technical reserves 98,463 116,540 Initial amount 116,540 95,598 Business combinations - 20,530 Change in premiums 9,065 9,338 Change in payments -9,668 -9,534 Changes due to income and other bonuses recognised to insured parties (+/-) 289 1,743 Changes due to exchange differences (+/-) - - Changes in other technical reserves (+/-) -17,763 -1,135 C. Total technical reserves 100,117 118,296 SECTION 3 \u2013 RISKS OF INSURANCE COMPANIES 3.1 INSURANCE RISKS QUALITATIVE AND QUANTITATIVE INFORMATION Life business The typical risks of the life insurance portfolio (managed by Intesa Sanpaolo Vita, Intesa Sanpaolo Life and Fideuram Vita) may be divided into three main categories: premium risks, actuarial and demographic risks and reserve risks. Premium risks are managed initially during definition of the technical features and product pricing, and over the life of the instrument by means of periodic checks on sustainability and profitability (both at product level and at portfolio level, including liabilities). During the definition of a product, profit testing is used, aimed at measuring profitability and identifying any weaknesses beforehand, by means of specific sensitivity analyses. Actuarial and demographic risks arise when an unfavourable trend is recorded in the actual loss ratio compared with the trend estimated when the rate was calculated, and these risks are reflected in the level of \u201creserves\u201d. The loss ratio refers not only to actuarial loss, but also to financial loss (guaranteed interest rate risk). The Company guards against these risks by means of systematic statistical analysis of the evolution of liabilities in its own contract portfolio, divided by risk type, and through simulations of expected profitability of the assets hedging technical reserves. Reserve risk is guarded against through the exact calculation of mathematical reserves, with a series of detailed checks (for example, checking that all the variables required for the calculation such as yields, quotations, technical foundations, parameters for the supplementary reserves, and recalculation of the value of single contracts are correctly saved in the system) as well as overall verifications, by comparing results with the estimates produced on a monthly basis. Specific attention is paid to checking the correct assumption of contracts, by checking the relative portfolio against the reconstruction of movements during the period, divided by purpose, and checking the consistency of the amounts settled compared with the movements of reserves. The tables below show the structure of the mathematical reserves by expiry date, excluding reserves for amounts to be paid and before intercompany netting, and the structure of the guaranteed minimum yield as at 31 December 2022. (millions of euro) Breakdown of mathematical reserves of life branch: maturity Mathematical reserve % up to 1 year 1,778 1.68 1 to 5 years 4,826 4.57 6 to 10 years 1,934 1.83 11 to 20 years 3,294 3.12 over 20 years 93,787 88.80 TOTAL 105,619 100.00 (millions of euro) Breakdown of risk concentration by type of guarantee Total Reserves % Insurance and investment products with guaranteed annual yield 0% - 1% 52,437 53.86 from 1% to 3% 31,233 32.08 from 3% to 5% 6,125 6.29 Insurance products 15,824 16.25 Shadow reserve -8,270 -8.48 TOTAL 97,349 100.00 The mathematical reserves are calculated on almost the entire portfolio, on a contract-by-contract basis, and the methodology used to determine the reserves takes account of all the future commitments of the company. The following table shows a breakdown by maturity of financial liabilities, before intercompany netting, represented by assets covering commitments arising under unit- and index-linked policies and other insurance products (specifically, the Risparmio Insurance product) and subordinated liabilities. (millions of euro) Breakdown of financial liabilities by maturity Within 12 months Over 12 months Total as at 31.12.2022 Total as at 31.12.2021 Unit linked 66 70,517 70,583 84,883 Index linked - - - - Other payables to insured parties 1,562 - 1,562 - Subordinated liabilities - 2,222 2,222 2,220 Total 1,628 72,739 74,367 87,103 Non-life business The typical risks of the non-life insurance portfolio (managed through Intesa Sanpaolo Assicura, Intesa Sanpaolo RBM Salute and Intesa Sanpaolo Vita) mainly relate to premium and reserve risks. Premium risks are managed initially during definition of the technical features and product pricing, and over the life of the instrument by means of periodic checks on sustainability and profitability (both at product level and at portfolio level, including liabilities). Reserve risk is monitored through the exact calculation of technical reserves. More specifically, for companies with non-life business the technical reserves may be broken down into: premium reserves, claims reserves, profit sharing and reversal reserves, other technical reserves and the equalisation reserve. With regard to risk assumption, policies are checked when acquired through an automatic system aimed at detecting the underwriting parameters associated with the applicable tariff. The check is thus not only formal, but also substantive, and in particular allows the identification of exposures in terms of capital and limits of liability, in order to verify that the portfolio matches the technical and tariff scheme agreed upon with the sales network. Subsequently, statistical checks are carried out to verify potentially anomalous situations (such as concentration by area or by type of risk) and to keep under control accumulation at the level of individual persons (with particular reference to policies that provide cover in the accident and health branches). This is also carried out in order to provide the Actuarial and Reinsurance Unit with suitable indications of the portfolio characteristics in order to prepare the annual reinsurance plan. The following table presents the development of claims by year of generation, broken down into the major business lines of operation, as at 31 December 2022. (millions of euro) Development of Claims Reserves YEAR OF GENERATION/EVENT TOTAL 2018 2019 2020 2021 2022 Reserve amount: as at 31/12 generation year N 543 721 588 842 696 as at 31/12 year N+1 383 396 417 510 as at 31/12 year N+2 261 311 219 as at 31/12 year N+3 251 201 as at 31/12 year N+4 147 Total claims paid 521 623 524 862 429 2,959 Claims reserve booked as at 31.12.2022 25 37 48 123 403 636 Final claims reserve for previous years 72 Total claims reserve booked as at 31.12.2022 708 3.2 FINANCIAL RISKS QUALITATIVE AND QUANTITATIVE INFORMATION Financial Risks These risks derive from the level or volatility of market prices of financial instruments that impact the book value of both assets and liabilities. The risk factors identified by the company are as follows: \u2013 interest rate risk: impacts assets and liabilities whose value is sensitive to changes in the forward structure of interest rates or the volatility of interest rates; \u2013 equity price risk: derives from the level or volatility of market prices of equities and impacts assets and liabilities whose value is sensitive to changes in equity prices; \u2013 property risk: derives from the level or volatility of market prices of real estate property and impacts assets and liabilities sensitive to said changes; \u2013 foreign exchange risk: derives from changes in the level or volatility of foreign exchange rates; \u2013 spread risk: impacts assets and liabilities whose value is sensitive to adverse changes in credit spreads; \u2013 concentration risk: reflects the risk of holding high percentages of financial assets of the same counterparty. Impacts from the COVID-19 pandemic In line with 2021, the analysis of the Insurance Group\u2019s risk exposure was impacted by the economic, social and financial scenario deriving from the COVID-19 pandemic emergency. Weekly and monthly monitoring continued on the situations of solvency and liquidity of the Insurance Group, sent to the Supervisory Authority starting in March 2020. The reinforced monitoring of operational risks also continued, specifically referring to the occurrence of losses due to business continuity and/or depending on cyber risks. Impacts of the Russia-Ukraine conflict Following the escalation of the geopolitical tensions between Russia and Ukraine, the Risk Management Department has constantly monitored the evolution of the risks and their effects on the business of the Insurance Group, with a specific focus on exposures to countries directly involved in the conflict. In that area, exposure is residual (less than 0.1% of total assets). Investment portfolios The investments of the insurance companies of the Intesa Sanpaolo Group (Intesa Sanpaolo Vita, Intesa Sanpaolo Assicura, Intesa Sanpaolo Life, Fideuram Vita and Intesa Sanpaolo RBM Salute) are made with their shareholder fund and to cover contractual obligations with customers. These refer to traditional revaluable life insurance policies, Index- and Unit-linked policies, pension funds and non-life policies. As at 31 December 2022, the investment portfolios of Group companies, recorded at book value, amounted to 174,035 million euro. Of these, a part amounting to 107,620 million euro relates to traditional revaluable life policies (the financial risk of which is shared with the policyholders by virtue of the mechanism whereby the returns on assets subject to segregated management are determined), non-life policies and shareholder fund. The other component, whose risk is borne solely by the policyholders, consists of investments related to Index-linked policies, Unit-linked policies and pension funds and amounted to 100,834 million euro. Considering the various types of risks, the analysis of investment portfolios, described below, concentrates on the assets held to cover traditional revaluable life policies, non-life policies and shareholder fund. Financial assets under segregated funds and shareholder fund In terms of breakdown by asset class, net of derivative financial instruments, 83.06% of assets, i.e. 72,869 million euro, were bonds, whereas assets subject to equity risk represented 2.28% of the total and amounted to 2,001 million euro. The remainder (12,865 million euro) consisted of investments relating to UCI, Private Equity and Hedge Funds (14.66%). The carrying value of derivatives came to approximately -73 million euro, almost entirely relating to hedging derivatives, while the portion of effective management derivatives 114 is positive for approximately 84 million euro. At the end of 2022, investments made with the shareholder fund of Intesa Sanpaolo Vita and Fideuram Vita amounted to around 430 million euro at market value, and presented a risk in terms of VaR (99% confidence level, 10-day holding period) of around 9 million euro. 114 ISVAP Regulation 36 of 31 January 2011 on investments defines as \u201ceffective management derivatives\u201d all derivatives aimed at achieving pre- established investment objectives in a faster, easier, more economical or more flexible manner than would have been possible acting on the underlying assets. Interest rate risk exposure The breakdown by maturity of bonds showed 10.76% short-term (under 1 year), 27.63% medium-term and 44.67% long-term (over 5 years). (millions of euro) Financial assets Book value % Duration Fixed-rate bonds 62,464 71.20 6.11 up to 1 year 9,078 10.35 1 to 5 years 21,656 24.68 over 5 years 31,730 36.17 Floating rate/indexed bonds 10,405 11.86 6.24 up to 1 year 362 0.41 1 to 5 years 2,591 2.95 over 5 years 7,452 8.50 TOTAL 72,869 83.06 - Equities or similar capital securities 2,001 2.28 UCI, Private Equity, Hedge Fund 12,865 14.66 TOTAL AS AT 31.12.2022 87,735 100.00 The sensitivity of the fair value of the portfolio of financial assets to interest rate movements, summarised in the table below, highlights the exposure of the portfolio: for example, a parallel shift in the yield curve of +100 basis points leads to a negative fair value change in the bond portfolios of 4,139 million euro. (millions of euro) Book value % Fair value changes due to interest rate fluctuations +100 bps -100 bps Fixed-rate bonds 62,464 85.72 -3,553 4,034 Floating rate/indexed bonds 10,405 14.28 -586 702 Interest rate risk hedging effect - - - - TOTAL 72,869 100.00 -4,139 4,736 Credit risk exposure The table below sets forth the distribution of the bond portfolio by rating class: AAA/AA bonds represented 6.30% of total investments and A bonds approximately 7.68%. Low investment grade securities (BBB) were 65.89% of the total, while the portion of speculative grade or unrated was minimal (3.19%). With regard to exposure to BBB rated securities, the majority of the exposure related to bonds issued by the Republic of Italy. (millions of euro) Breakdown of financial assets by issuer rating Book value % Bonds 72,869 83.06 AAA 2,343 2.67 AA 3,182 3.63 A 6,735 7.68 BBB 57,812 65.89 Speculative grade 2,526 2.88 Unrated 271 0.31 Equities or similar capital securities 2,001 2.28 UCI, Private Equity, Hedge Fund 12,865 14.66 TOTAL 87,735 100.00 The analysis of the exposure in terms of the issuers/counterparties produced the following results: securities issued by governments, central banks and other public entities made up 76.78% of the total investments, whereas the securities of corporate issuers contributed around 23.22%. The sensitivity values of the fair value of the bonds with respect to a variation in the creditworthiness of the issuers, namely a market credit spread shock of \u00b1100 basis points, as at end of 2022, are shown in the table below. (millions of euro) Book value % Fair value changes due to credit spread fluctuations +100 bps -100 bps Government bonds 55,952 76.78 -3,651 4,216 Corporate bonds 16,917 23.22 -758 731 TOTAL 72,869 100.00 -4,409 4,947 Equity risk exposure The sensitivity of the equity portfolio to a hypothetical deterioration in equity prices of 10% amounts to -200 million euro, as shown in the table below. (millions of euro) Book value % Fair value changes due to stock price fluctuations -10% Equities - Financial institutions 289 14.44 -29 Equities - Non-financial companies and other counterparties 1,712 85.56 -171 TOTAL 2,001 100.00 -200 Foreign exchange risk exposure Approximately 97.6% of investments is made up of assets denominated in the EU currency. The residual exposure to foreign exchange risk was hedged by positions in derivative financial instruments, particularly domestic currency swaps, in the same currency. Derivative financial instruments Financial derivative instruments are used to hedge the financial risks of the investment portfolio or for effective management. The table below shows the book values of the financial derivative instruments as at 31 December 2022. (millions of euro) Type of underlying DEBT SECURITIES/ INTEREST RATES EQUITIES, EQUITY INDICES, COMMODITIES, EXCHANGE RATES TOTAL Quoted Unquoted Quoted Unquoted Quoted Unquoted Hedging derivatives - -157 - - - -157 Effective management derivatives - - 49 35 49 35 TOTAL - -157 49 35 49 -122 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInsuranceContractsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-924": { "value": "4.1 Financial assets measured at amortised cost: breakdown of amounts due from banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 A. Due from Central Banks 9,712 - - - 7,089 2,623 131,361 - - - 128,282 3,078 1. Time deposits 3,622 - - X X X 3,118 - - X X X 2. Compulsory reserve 5,427 - - X X X 126,882 - - X X X 3. Repurchase agreements 543 - - X X X 273 - - X X X 4. Other 120 - - X X X 1,088 - - X X X B. Due from banks 23,136 36 - 1,265 18,791 3,055 32,523 53 - 1,547 28,156 2,903 1. Loans 21,478 36 - - 18,465 3,055 30,752 53 - - 27,914 2,903 1.1 Current accounts - - - X X X - - - X X X 1.2 Time deposits 2,449 - - X X X 1,681 - - X X X 1.3 Other loans: 19,029 36 - X X X 29,071 53 - X X X - Reverse repurchase agreements 5,397 - - X X X 9,566 - - X X X - Finance leases 5 - - X X X 6 - - X X X - Other 13,627 36 - X X X 19,499 53 - X X X 2. Debt securities 1,658 - - 1,265 326 - 1,771 - - 1,547 242 - 2.1 Structured - - - - - - - - - - - - 2.2 Other 1,658 - - 1,265 326 - 1,771 - - 1,547 242 - TOTAL 32,848 36 - 1,265 25,880 5,678 163,884 53 - 1,547 156,438 5,981 As at 31 December 2022, the decline in the sub-caption Reserve Requirement was due to the placement of excess liquidity in overnight deposits reported in the caption Cash and cash equivalents. The sub-caption \u201cOther loans - Other\u201d includes operating loans, i.e. operations connected to the provision of financial activities and services with no credit facilities, for an amount of 122 million euro. Those exposures are essentially performing loans classified in Stage 1 and adjusted based on IFRS 9 . 4.4 Bis Due from banks: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Due from Central Banks - - - - - - - - 1. Time deposits - - 2. Compulsory reserve - - 3. Reverse repurchase agreements - - 4. Other - - B. Due from banks 40 - 40 - 41 - 41 - 1. Loans - - - - - - - - 1.1 Current accounts and deposits - - 1.2 Time deposits - - 1.3 Other loans: - - - Reverse repurchase agreements - - - Finance leases - - - Other - - 2. Debt securities 40 - 40 - 41 - 41 - 2.1 Structured - - 2.2 Other 40 41 Total 40 - 40 - 41 - 41 - ", "dimensions": { "concept": "ifrs-full:DisclosureOfLoansAndAdvancesToBanksExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-993": { "value": "4.2 Financial assets measured at amortised cost: breakdown of loans to customers (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Level 1 Level 2 Level 3 1. Loans 432,447 5,255 271 - 283,348 140,877 449,287 6,682 446 - 317,673 147,945 1.1.Current accounts 22,967 484 12 X X X 21,724 688 22 X X X 1.2. Reverse repurchase agreements 15,366 - - X X X 17,620 - - X X X 1.3. Mortgages 242,049 3,083 156 X X X 250,722 4,080 268 X X X 1.4. Credit card loans, personal loans and transfer of one fifth of salaries 19,435 339 2 X X X 18,626 364 9 X X X 1.5. Finance leases 7,780 328 85 X X X 12,830 347 108 X X X 1.6. Factoring 10,869 52 - X X X 9,453 65 - X X X 1.7. Other loans 113,981 969 16 X X X 118,312 1,138 39 X X X 2. Debt securities 57,188 33 - 27,693 10,877 14,938 48,473 41 - 25,659 10,872 11,536 2.1. Structured securities - - - - - - - - - - - - 2.2. Other debt securities 57,188 33 - 27,693 10,877 14,938 48,473 41 - 25,659 10,872 11,536 Total 489,635 5,288 271 27,693 294,225 155,815 497,760 6,723 446 25,659 328,545 159,481 The sub-caption \u201cOther loans\u201d includes operating loans, i.e. operations connected to the provision of financial activities and services with no credit facilities, for an amount of 740 million euro. Those exposures are essentially performing loans classified in Stage 1 and adjusted based on IFRS 9. Debt securities include the securities connected with securitisations for a total amount of approximately 8,495 million euro, of which 8,475 million euro is senior notes and 20 million euro mezzanine. 4.3 Financial assets measured at amortised cost: breakdown by borrower/issuer of loans to customers (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Stage 1 and 2 Stage 3 Purchased or originated credit- impaired Stage 1 and 2 Stage 3 Purchased or originated credit- impaired 1. Debt securities 57,188 33 - 48,473 41 - a) Public administration 32,298 13 - 27,851 15 - b) Other financial companies 21,418 8 - 16,612 14 - of which: insurance companies 1 - - 6 - - c) Non financial companies 3,472 12 - 4,010 12 - 2. Loans: 432,447 5,255 271 449,287 6,682 446 a) Public administration 15,566 213 - 16,385 356 - b) Other financial companies 44,781 123 1 45,872 262 1 of which: insurance companies 39 - - 361 - - c) Non financial companies 193,579 3,126 150 212,387 3,555 246 d) Households 178,521 1,793 120 174,643 2,509 199 TOTAL 489,635 5,288 271 497,760 6,723 446 4.6 Bis Loans to customers: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Book value Book Value Performing Non Performing Fair value Not impaired Impaired Fair value Purchased Other Level 1 Level 2 Level 3 Purchased Other Level 1 Level 2 Level 3 Loans 5 - - - 4 1 8 - - - 8 - 1. Current accounts - - - X X X - - - X X X 2. Reverse repurchase agreements - - - X X X - - - X X X 3. Mortgages - - - X X X - - - X X X 4. Credit card loans, personal loans, and transfer of one fifth of salaries - - - X X X - - - X X X 5. Finance leases - - - X X X - - - X X X 6. Factoring - - - X X X - - - X X X 7. Other loans 5 - - X X X 8 - - X X X Debt securities 35 - - - 30 5 36 - - - 31 5 8. Structured securities - - - X X X - - - X X X 9. Other debt securities 35 - - X X X 36 - - X X X Total 40 - - - 34 6 44 - - - 39 5 4.7 Bis Loans to customers: borrower/issuer breakdown (millions of euro) Captions 31.12.2022 31.12.2021 Performing Non performing Performing Non performing Purchased Other Purchased Other 1. Debt securities 35 - - 36 - - a) Governments - - - - - - b) Other public entities - - - - - - c) Other issuers 35 - - 36 - - - non-financial companies 20 - - 21 - - - financial institutions 15 - - 15 - - - insurance companies - - - - - - - other - - - - - - 2. Loans: 5 - - 8 - - a) Governments - - - - - - b) Other public entities - - - - - - c) Other counterparties 5 - - 8 - - - non-financial companies - - - - - - - financial institutions 4 - - 7 - - - insurance companies - - - - - - - other 1 - - 1 - - Total 40 - - 44 - - ", "dimensions": { "concept": "ifrs-full:DisclosureOfLoansAndAdvancesToCustomersExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1053": { "value": "SECTION 7 \u2013 INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL \u2013 CAPTION 70 7.1 Investments in associates and companies subject to joint control: information on equity interests Companies Registered office Place of business Type of relationship (a) INVESTMENT Votes available % (b) Direct ownership % held A. COMPANIES SUBJECT TO JOINT CONTROL 1 Apside S.p.A. Torino Torino 7 Intesa Sanpaolo S.p.A. 50.00 Capital Euro 10,000 in shares of Euro 1 2 Augusto S.r.l. Milano Milano 7 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10,000 in shares of Euro 1 3 Diocleziano S.r.l. Milano Milano 7 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10,000 in shares of Euro 1 4 Immobiliare Novoli S.p.A. Firenze Firenze 7 Intesa Sanpaolo S.p.A. 50.00 Capital Euro 15.635.514 un shares of Euro 0,60 5 Mir Capital Management S.A. Luxembourg Luxembourg 7 Private Equity International S.A. 50.00 Capital Euro 31.000 in shares of Euro 1 6 Mir Capital S.C.A. SICAR Luxembourg Luxembourg 7 Private Equity International S.A. 50.00 Capital Euro 65.365.000 in shares of Euro 1 7 Mooney Group S.p.A. Milano Milano 7 Banca 5 S.p.A. 50.00 Capital Euro 10.050.000 in shares of Euro 0,20 8 PBZ Croatia Osiguranje Public Limited Company for Compulsory Pension Fund Management Zagreb Zagreb 7 Privredna Banka Zagreb D.D. 50.00 Capital HRK 56.000.000 in shares of HRK 1.000 9 Responsability BOP S.A.R.L. Luxembourg Luxembourg 7 Asteria Investment Managers S.A. 50.00 Capital USD 20.000 in shares of USD 50 B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE 1 1875 Finance Holding AG Sarnen Sarnen 4 Reyl&Cie S.A. 40.00 Capital Chf 500.000 in shares of Chf 1 2 Adriano Lease Sec S.r.l. (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 100,00 (**) Capital Euro 10.000 in shares of Euro 1 3 Alpian S.A. Gen\u00e8ve Gen\u00e8ve 4 Fideuram - Intesa Sanpaolo Private Banking S.p.A. 14.91 Capital Chf 21.672.678 in shares of Chf 0,01 Reyl&Cie S.A. 12.93 27.84 4 Apulia Finance N. 4 S.r.l. in liquidazione (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 10.00 Capital Euro 10.000 in shares of Euro 1 5 Back2Bonis Milano Milano 4 Intesa Sanpaolo S.p.A. 55.40 35,00 (*) Capital Euro 776.381.183 in shares of Euro 476.671 6 Backtowork24 S.r.l. (d) Milano Milano 4 Intesa Sanpaolo S.p.A. 30.58 Capital Euro 2.892.691 in shares of Euro 0,01 7 Bancomat S.p.A. Roma Roma 4 Intesa Sanpaolo S.p.A. 31.55 Capital Euro 21.095.726 in shares of Euro 5 Banca 5 S.p.A. 0.01 31.56 8 Berica ABS 3 S.r.l. (c) Vicenza Vicenza 4 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10.000 in shares of Euro 1 9 Brera Sec S.r.l. (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 Capital EUR 10.000 in shares of Euro 1 10 Camfin S.p.A. (e) Milano Milano 4 Intesa Sanpaolo S.p.A. 4.60 8,53 (*) Capital EUR 110.800.000 in shares of Euro 0,2 11 Cassa di Risparmio di Fermo S.p.A. Fermo Fermo 4 Intesa Sanpaolo S.p.A. 33.33 Capital EUR 39.241.088 in shares of Euro 51,65 12 Centai Institute S.p.A. Torino Torino 4 Intesa Sanpaolo S.p.A. 49.00 Capital EUR 50.000 in shares of Euro 1 13 Clara Sec S.r.l. Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10.000 in shares of Euro 1 14 Compagnia Aerea Italiana S.p.A. Roma Fiumicino 4 Intesa Sanpaolo S.p.A. 27.49 Capital Euro 3.526.846 in shares of Euro 0,00004 Companies Registered office Place of business Type of relationship (a) INVESTMENT Votes available % (b) Direct ownership % held 15 Destination Gusto S.r.l. Milano Milano 4 Intesa Sanpaolo S.p.A. 49.00 Capital Euro 20.000 in shares of Euro 1 16 Digit'ed Holding S.p.A. Milano Milano 4 Intesa Sanpaolo S.p.A. 20.00 Capital Euro 1.173.822 in shares of Euro 1 17 Equiter S.p.A. Torino Torino 4 Intesa Sanpaolo S.p.A. 32.88 Capital Euro 150.004.017 in shares of Euro 1 18 Euromilano S.p.A. Milano Milano 4 Intesa Sanpaolo S.p.A. 43.43 Capital Euro 1.356.582 in shares of Euro 15,51 19 Europrogetti & Finanza S.r.l. in liquidazione Roma Roma 4 Intesa Sanpaolo S.p.A. 15.97 Capital Euro 5.636.400 in shares of Euro 1 20 Eusebi Holdings B.V. Amsterdam Amsterdam 4 Intesa Sanpaolo S.p.A. 47.00 Capital Euro 100 in shares of Euro 1 21 FI.NAV. Comparto A - Crediti Roma Roma 4 Intesa Sanpaolo S.p.A. 50.54 Capital USD 405.821.168 in shares of USD 1 22 Fondo di Rigenerazione Urbana Sicilia S.r.l. (f) Palermo Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 50.000 in shares of Euro 1 23 Fondo per la ricerca e l'innovazione S.r.l. (f) Torino Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 24 Fondo Sardegna Energia S.r.l. (f) Cagliari Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 25 Giada Sec S.r.l. (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10.000 in shares of Euro 1 26 Gilda S.r.l. Montesilvano Montesilvano 4 Intesa Sanpaolo S.p.A. 13.05 15,00 (**) Capital Euro 213.402 in shares of da Euro 1 27 Indaco Venture Partners SGR S.p.A. ( gi\u00e0 Venture Capital Partners SGR) Milano Milano 4 Intesa Sanpaolo S.p.A. 24.50 Capital Euro 750.000 in shares of Euro 0,50 28 Iniziative Immobiliari Industriali S.p.A. In liquidazione Arqu\u00e0 Polesine Arqu\u00e0 Polesine 4 Intesa Sanpaolo S.p.A. 20.00 Capital Euro 510.000 in shares of Euro 0,51 29 Intrum Italy S.p.A. Milano Milano 4 Intesa Sanpaolo S.p.A. 49.00 Capital Euro 600.000 in shares of Euro 0,02 30 Ism Investimenti S.p.A. Mantova Mantova 4 Intesa Sanpaolo S.p.A. 27.36 Capital Euro 6.654.902 in shares of Euro 1 31 Leonardo Technology S.r.l. in liquidazione Torino Torino 4 Intesa Sanpaolo S.p.A. 26.60 Capital Euro 242.081 in shares of Euro 1 32 Marketwall S.r.l. Milano Milano 4 Intesa Sanpaolo S.p.A. 33.00 Capital Euro 2.380.409 in shares of Euro 1 33 Materias S.r.l. Napoli Napoli 4 Intesa Sanpaolo S.p.A. 12.87 Capital Euro 29.191 in shares of Euro 1 34 Misr Alexandria for Financial Investments Mutual Fund Co. in liquidazione Cairo Cairo 4 Bank of Alexandria S.A.E. 25.00 Capital EGP 30.708.000 in shares of EGP 1000 35 Misr International Towers Co. Cairo Cairo 4 Bank of Alexandria S.A.E. 27.86 Capital EGP 50.000.000 in shares of EGP 10 36 Monilogi SRO Bratislava Bratislava 4 Vseobecna Uverova Banka A.S. 30.00 Capital Euro 250.000 in shares of Euro 1 37 Montefeltro Sviluppo Soc.cons. A.r. Urbania Urbania 4 Intesa Sanpaolo S.p.A. 26.37 Capital Euro 73.000 in shares of Euro 10 38 Network Impresa S.p.A. in concordato preventivo Limena Limena 4 Intesa Sanpaolo S.p.A. 28.95 Capital Euro 562.342 in shares of Euro 1 39 Neva First - FCC Torino Torino 4 Intesa Sanpaolo Innovation Center S.p.A. 42.53 Capital Euro 237.323.232 in shares of Euro 99,80 Companies Registered office Place of business Type of relationship (a) INVESTMENT Votes available % (b) Direct ownership % held 40 NEWCO - Fondo Tematico Piani Urbani Integrati S.r.l. (f) Torino Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 41 NEWCO - Fondo Tematico Turismo S.r.l. (f) Torino Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 42 Penghua Fund Management Co. Ltd. Shenzhen Shenzhen 4 Eurizon Capital SGR S.p.A. 49.00 Capital CNY 150.000.000 in shares of CNY 1 43 Pietra S.r.l. In liquidazione Milano Milano 4 Intesa Sanpaolo S.p.A. 22.22 Capital Euro 40.000 in shares of Euro 1 44 R.C.N. Finanziaria S.p.A. Mantova Mantova 4 Intesa Sanpaolo S.p.A. 23.96 Capital Euro 1.000.000 in shares of Euro 0,50 45 RSCT FUND - COMPARTO CREDITI Milano Milano 4 Intesa Sanpaolo S.p.A. 70.07 Capital Euro 383.363.831 in shares of Euro 1 46 S.F. Consulting S.r.l. Bergamo Bergamo 4 Intesa Sanpaolo S.p.A. 35.00 Capital Euro 93.600 in shares of Euro 0,52 47 Sicily Investments S.a.r.l. Luxembourg Luxembourg 4 Intesa Sanpaolo S.p.A. 25.20 Capital Euro 12.500 in shares of Euro 25 48 Slovak Banking Credit Bureau S.r.o. Bratislava Bratislava 4 Vseobecna Uverova Banka A.S. 33.33 Capital Euro 9.958 in shares of Euro 3.319,39 49 Sviluppo Industriale S.p.A. in Liquidazione (gi\u00e0 Sviluppo Industriale S.p.A. in Concordato Preventivo) Pistoia Pistoia 4 Intesa Sanpaolo S.p.A. 28.27 Capital Euro 628.444 in shares of Eur 22,26 50 Trinacria Capital S.a.r.l. Luxembourg Luxembourg 4 Intesa Sanpaolo S.p.A. 25.20 Capital Euro 12.500 in shares of Euro 25 51 UBI SPV LEASE 2016 S.r.l. Milano Milano 4 Intesa Sanpaolo S.p.A. 10.00 100,00 (**) Capital Euro 10.000 in shares of Euro 1 52 Vesta OML Limited ( ex Oval Money LTD) London London 4 Intesa Sanpaolo S.p.A. 37.51 Capital GBP 16.692 in shares of GBP 0,0004 53 Warrant Hub S.p.A. Correggio Correggio 4 Intesa Sanpaolo S.p.A. 12.00 Capital Euro 113.637 in shares of Euro 1 54 Yolo Group S.p.A. Milano Milano 4 Intesa Sanpaolo Vita S.p.A. 1.43 Capital Euro 87.493 in shares of Euro 0,01 (a) Type of relationship: 1 - majority of voting rights at Ordinary Shareholders' Meeting; 2 - dominant influence at Ordinary Shareholders' Meeting; 3 - agreements with other shareholders; 4 - company subject to significant influence; 5 - unitary management as defined in Art. 26.1 of \"Legislative Decree 87/92\"; 6 - unitary management as defined in Art. 26.2 of \"Legislative Decree 87/92\"; 7 - joint control; 8 - other relationship. (b) Where different from the % portion, the availability of the votes in the Ordinary Shareholders' Meeting is indicated, distinguishing between the effective (*) and potential (**) voting rights, where applicable. (c) These are vehicles used for securitisation transactions within the Group. (d) At any moment from the date of subscription of the second capital increase (24/11/2020) to the end of the 42nd month from that date, Intesa Sanpaolo has the right to increase, in one or more tranches, its investment in the company\u2019s share capital, obtaining a maximum total investment of 51%. Currently, the prerequisites of IFRS 10 to classify the interest among subsidiaries are not met. (e) The different value between the actual share and the number of votes in the Shareholders\u2019 Meeting is linked to the presence of various categories of shares (A and B). Only category A shares (also held by Intesa Sanpaolo) grant rights to vote in the Shareholders\u2019 Meeting. (f) The economic effects of the investments in equity and loans underlying the fund\u2019s operations will be borne in full by the EIB. The illustration of the criteria and the methods for the definition of the scope of consolidation and the reasons which determine that a company is subject to joint control or significant influence is contained in Part A \u2013 Accounting policies, to which reference should be made. 7.2 Individually material investments in associates and companies subject to joint control: book value, fair value and dividends received (millions of euro) Book value Fair value Dividends received (a) A. COMPANIES SUBJECT TO JOINT CONTROL 1 Mooney Group S.p.A. 111 - - B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE 1 BACK2BONIS 387 - - 2 Penghua Fund Management Co. Ltd. 332 - 45 3 Intrum Italy S.p.A. 307 - 13 4 RSCT FUND - Comparto Crediti 256 - - 5 FI.NAV. Comparto A - Crediti 155 - - 6 Equiter S.p.A. 104 - 2 7 NEVA FIRST - FCC 59 - - TOTAL 1,711 - 60 a) Dividends are paid by Group companies accounted for using the equity method, and, though they are not included in caption \u201c250 Profits (Losses) on equity investments\u201d, as they represent a decrease in caption \u201c70 Investments in associates and companies subject to joint control\u201d under Assets, they are still presented in that table, as envisaged by the reference regulations. 7.3 Individually material investments in associates and companies subject to joint control: financial information (millions of euro) Cash and cash equivalents Financial assets Non-financial assets Financial liabilities Non-financial liabilities Total revenues Interest margin Adjustments to/write -backs on property, equipment and intangible assets Income (Loss) before tax from continuing operations Income (Loss) after tax from continuing operations Income (Loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) A. COMPANIES SUBJECT TO JOINT CONTROL Mooney Group S.p.A. X 397 930 1,446 198 300 X X -48 -37 - -37 - -37 B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE BACK2BONIS X 748 22 24 3 11 X X - - - - - - Penghua Fund Management Co. Ltd. X 826 198 221 249 596 X X 181 136 - 136 - 136 Intrum Italy S.p.A. X 65 86 9 60 163 X X 46 35 - 35 - 35 RSCT FUND - Comparto Crediti X 346 25 - 4 - X X - - - - - - FI.NAV. Comparto A - Crediti X 268 - - - - X X - - - - - - Equiter S.p.A. X 296 8 - 3 13 X X 10 8 - 8 - 8 NEVA FIRST - FCC X 110 22 - 1 7 X X 7 7 - 7 - 7 7.5 Investments in associates and companies subject to joint control: annual changes (millions of euro) 31.12.2022 31.12.2021 A. Initial amount 1,652 1,996 B. Increases 942 422 B.1 purchases 528 122 of which business combinations - 10 B.2 recoveries 13 - B.3 revaluations 143 163 B.4 other changes 258 137 C. Decreases -581 -766 C.1 sales -305 -58 C.2 impairment losses -52 -39 C.3 write-downs -69 -61 C.4 other changes -155 -608 D. Final amount 2,013 1,652 E. Total revaluations 3,620 3,477 F. Total impairment losses 2,111 2,059 The sub-caption B.1 purchases includes the acquisition of the additional 20% stake in Mooney Group, Back2Bonis and other purchases, including Warrant Hub and Digit\u2019Ed Holding. The sub-caption B.3 revaluations mainly includes the profits of companies carried at equity (including Penghua Fund Management Co. Ltd.). The sub-caption B.4 Increases - other changes includes profits on disposal/reclassifications for a total of 197 million euro, attributable to the Isp Formazione transaction for 196 million euro and to Innolva for 1 million euro. The sub-caption C.1 sales includes the disposal of companies carried at equity (mainly ISP Formazione and Innolva). The sub-caption C.3 write-downs includes the losses of companies carried at equity (mainly FI.NAV and Mooney Group). The sub-caption C.4 Decreases - other changes includes the payment of dividends (mainly Penghua and Intrum), as well as reclassification from other portfolios of VUB Generali, which entered the line-by-line scope of consolidation following the purchase of an additional 5.26%. 7.6 Significant evaluations and assumptions to establish the existence of joint control or significant influence Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties sharing control. Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of financial and management policies of the company based on specific juridical relations, such as the participation in voting syndicates. Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since it solely has economic rights on a portion of the returns generated by the investment, but does not have access to management policies and may exercise governance rights limited to the safeguarding of its economic interests. 7.7 Commitments referred to investments in companies subject to joint control As at 31 December 2022, there were commitments on capital referring to MIR CAPITAL S.C.A. Sicar for a total of 35.6 million euro; to Mooney Group S.p.A. for a total of 8 million euro; and to Apside S.p.A. for a total of 17 million euro, relating to the subscription of equity instruments issued by the company. 7.8 Commitments referred to investments in companies subject to significant influence As at 31 December 2022, the following commitments are noted: the recapitalisation of Bancomat S.p.A. for around 2.7 million euro; the commitment undertaken by ISP Innovation Center S.p.A. and Neva SGR S.p.A. to pay the amounts for the call ups of the NEVA FIRST-FCC Fund for a residual 49.5 million euro; a capital increase commitment benefiting Centai Institute S.p.A. for 0.7 million euro; a commitment to subscribe equity instruments issued by the associate Destination Gusto S.r.l. for a maximum of 2.5 million euro. Lastly, there is a residual commitment on Leonardo Technology S.r.l. of a modest amount. 7.9 Significant restrictions There is nothing to report in terms of significant restrictions. 7.10 Other information For most of the companies subject to joint control or significant influence, the timing regarding the availability of the financial statements at the end of the year is not compatible with the terms set for the closure of Intesa Sanpaolo\u2019s consolidated financial statements; on this point, for the application of the equity method, reference is made to the last accounting reports available that, in most cases, include the interim statement of the first 9 months for the listed associates or the last financial statements or half-yearly report available for the other associates. In any case, when the accounts of the associate or joint venture used in the application of the equity method refer to a date that is different from that of Intesa Sanpaolo\u2019s financial statements, adjustments are made to take into account the effects of operations or significant events which took place between that date and the reporting date of Intesa Sanpaolo\u2019s financial statements. Impairment tests of investments in associates and companies subject to joint control As required under IAS/IFRS, investments in associates and companies subject to joint control are subjected to impairment testing to assess whether there is objective evidence to consider that the carrying value of the assets is not fully recoverable. With reference to investments in associates and companies subject to joint control, the process of detection of any impairment involves verification of the presence of impairment indicators and the determination of any write-down. The impairment indicators are essentially divided into two categories: qualitative indicators, such as the generation of negative economic results or in any case a significant variance with respect to the targets budgeted or established in the multi-year plans disclosed to the market, the announcement/start-up of insolvency proceedings or restructuring plans, and the downgrading by more than two classes of the rating; quantitative indicators, represented by a reduction in fair value of over 30% below the carrying value or for a period of over 24 months, by market capitalisation lower than the company\u2019s net book value, in the case of securities listed on active markets or by a carrying value of the investment in the Parent Company\u2019s financial statements higher than the carrying value in the consolidated financial statements of the investee\u2019s net assets and goodwill or by distribution by the latter of a dividend that is higher than its total income. If impairment indicators are detected, the recoverable amount, represented by the higher of the fair value less costs to sell and the value in use, is calculated and if it proves lower than the carrying value, impairment is recognised. If, subsequently, the recoverable amount is higher than the new carrying amount and the reasons for the impairment no longer apply following an event subsequent to the recognition of the impairment, write-backs are recognised, through profit or loss, up to the amount of the adjustment previously recognised. In particular, where impairment indicators were recorded with respect to investments in associates or companies subject to joint control, analyses were carried out based, as a priority, on market methodologies (direct or comparable transactions and market multiples) or alternatively on \u201cfundamental\u201d analyses mainly based on an estimate of the expected discounted cash flows or on the adjusted net asset value (ANAV). The results of these assessments led to the need to recognise adjustments, mainly referring to the investments in Intrum Italy (34 million euro), Mir Capital (8 million euro), RSCT Fund Comparto Crediti (4 million euro), Marketwall (3 million euro) and in other minor investments for 3 million euro. The valuation of investments in associates or companies subject to joint control also led to the recognition of a write-back of 13 million euro of the investment in FI.NAV. Comparto A Crediti. ( millions of euro) Total Shareholders' Equity Proportionate equity Goodwill Other changes Consolidated book value A. COMPANIES SUBJECT TO JOINT CONTROL Mooney Group S.p.A. - - 111 - 111 B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE BACK2BONIS 725 402 - -15 387 Penghua Fund Management Co. Ltd. 554 272 60 - 332 Intrum Italy S.p.A. 82 40 267 - 307 RSCT FUND - Comparto Crediti 375 263 - -7 256 FI.NAV. Comparto A - Crediti 306 155 - - 155 Equiter S.p.A. 293 97 7 - 104 NEVA FIRST - FCC 138 59 - - 59 2,473 1,288 445 -22 1,711 The figures for these companies are updated to December 2022, for Intrum and Penghua; to 30 June 2022 for RSCT FUND, BACK2BONIS, NEVA FIRST and FI.NAV; and to 31 December 2021 for Equiter. For Mooney Group S.p.A., the figures shown above refer to 30 September 2022, even though the figures as at 31 December 2022 were used for the purposes of the Group\u2019s consolidated financial statements. The latter will be made public following approval by the company\u2019s Shareholders\u2019 Meeting. 7.4 Individually immaterial investments in associates and companies subject to joint control: financial information (millions of euro) Book value of investments in associates and companies subject to joint control Total assets Total liabilities Total revenues Income (loss) after tax from continuing operations Income (Loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) COMPANIES SUBJECT TO JOINT CONTROL 23 210 147 94 -1 - -1 - -1 COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE (a) 279 4,523 3,449 222 5 - 5 -46 -41 (a) This caption includes some subsidiaries excluded from the scope of consolidation as of modest amount. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1061": { "value": "SECTION 7 \u2013 INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL \u2013 CAPTION 70 7.1 Investments in associates and companies subject to joint control: information on equity interests Companies Registered office Place of business Type of relationship (a) INVESTMENT Votes available % (b) Direct ownership % held A. COMPANIES SUBJECT TO JOINT CONTROL 1 Apside S.p.A. Torino Torino 7 Intesa Sanpaolo S.p.A. 50.00 Capital Euro 10,000 in shares of Euro 1 2 Augusto S.r.l. Milano Milano 7 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10,000 in shares of Euro 1 3 Diocleziano S.r.l. Milano Milano 7 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10,000 in shares of Euro 1 4 Immobiliare Novoli S.p.A. Firenze Firenze 7 Intesa Sanpaolo S.p.A. 50.00 Capital Euro 15.635.514 un shares of Euro 0,60 5 Mir Capital Management S.A. Luxembourg Luxembourg 7 Private Equity International S.A. 50.00 Capital Euro 31.000 in shares of Euro 1 6 Mir Capital S.C.A. SICAR Luxembourg Luxembourg 7 Private Equity International S.A. 50.00 Capital Euro 65.365.000 in shares of Euro 1 7 Mooney Group S.p.A. Milano Milano 7 Banca 5 S.p.A. 50.00 Capital Euro 10.050.000 in shares of Euro 0,20 8 PBZ Croatia Osiguranje Public Limited Company for Compulsory Pension Fund Management Zagreb Zagreb 7 Privredna Banka Zagreb D.D. 50.00 Capital HRK 56.000.000 in shares of HRK 1.000 9 Responsability BOP S.A.R.L. Luxembourg Luxembourg 7 Asteria Investment Managers S.A. 50.00 Capital USD 20.000 in shares of USD 50 B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE 1 1875 Finance Holding AG Sarnen Sarnen 4 Reyl&Cie S.A. 40.00 Capital Chf 500.000 in shares of Chf 1 2 Adriano Lease Sec S.r.l. (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 100,00 (**) Capital Euro 10.000 in shares of Euro 1 3 Alpian S.A. Gen\u00e8ve Gen\u00e8ve 4 Fideuram - Intesa Sanpaolo Private Banking S.p.A. 14.91 Capital Chf 21.672.678 in shares of Chf 0,01 Reyl&Cie S.A. 12.93 27.84 4 Apulia Finance N. 4 S.r.l. in liquidazione (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 10.00 Capital Euro 10.000 in shares of Euro 1 5 Back2Bonis Milano Milano 4 Intesa Sanpaolo S.p.A. 55.40 35,00 (*) Capital Euro 776.381.183 in shares of Euro 476.671 6 Backtowork24 S.r.l. (d) Milano Milano 4 Intesa Sanpaolo S.p.A. 30.58 Capital Euro 2.892.691 in shares of Euro 0,01 7 Bancomat S.p.A. Roma Roma 4 Intesa Sanpaolo S.p.A. 31.55 Capital Euro 21.095.726 in shares of Euro 5 Banca 5 S.p.A. 0.01 31.56 8 Berica ABS 3 S.r.l. (c) Vicenza Vicenza 4 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10.000 in shares of Euro 1 9 Brera Sec S.r.l. (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 Capital EUR 10.000 in shares of Euro 1 10 Camfin S.p.A. (e) Milano Milano 4 Intesa Sanpaolo S.p.A. 4.60 8,53 (*) Capital EUR 110.800.000 in shares of Euro 0,2 11 Cassa di Risparmio di Fermo S.p.A. Fermo Fermo 4 Intesa Sanpaolo S.p.A. 33.33 Capital EUR 39.241.088 in shares of Euro 51,65 12 Centai Institute S.p.A. Torino Torino 4 Intesa Sanpaolo S.p.A. 49.00 Capital EUR 50.000 in shares of Euro 1 13 Clara Sec S.r.l. Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10.000 in shares of Euro 1 14 Compagnia Aerea Italiana S.p.A. Roma Fiumicino 4 Intesa Sanpaolo S.p.A. 27.49 Capital Euro 3.526.846 in shares of Euro 0,00004 Companies Registered office Place of business Type of relationship (a) INVESTMENT Votes available % (b) Direct ownership % held 15 Destination Gusto S.r.l. Milano Milano 4 Intesa Sanpaolo S.p.A. 49.00 Capital Euro 20.000 in shares of Euro 1 16 Digit'ed Holding S.p.A. Milano Milano 4 Intesa Sanpaolo S.p.A. 20.00 Capital Euro 1.173.822 in shares of Euro 1 17 Equiter S.p.A. Torino Torino 4 Intesa Sanpaolo S.p.A. 32.88 Capital Euro 150.004.017 in shares of Euro 1 18 Euromilano S.p.A. Milano Milano 4 Intesa Sanpaolo S.p.A. 43.43 Capital Euro 1.356.582 in shares of Euro 15,51 19 Europrogetti & Finanza S.r.l. in liquidazione Roma Roma 4 Intesa Sanpaolo S.p.A. 15.97 Capital Euro 5.636.400 in shares of Euro 1 20 Eusebi Holdings B.V. Amsterdam Amsterdam 4 Intesa Sanpaolo S.p.A. 47.00 Capital Euro 100 in shares of Euro 1 21 FI.NAV. Comparto A - Crediti Roma Roma 4 Intesa Sanpaolo S.p.A. 50.54 Capital USD 405.821.168 in shares of USD 1 22 Fondo di Rigenerazione Urbana Sicilia S.r.l. (f) Palermo Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 50.000 in shares of Euro 1 23 Fondo per la ricerca e l'innovazione S.r.l. (f) Torino Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 24 Fondo Sardegna Energia S.r.l. (f) Cagliari Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 25 Giada Sec S.r.l. (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10.000 in shares of Euro 1 26 Gilda S.r.l. Montesilvano Montesilvano 4 Intesa Sanpaolo S.p.A. 13.05 15,00 (**) Capital Euro 213.402 in shares of da Euro 1 27 Indaco Venture Partners SGR S.p.A. ( gi\u00e0 Venture Capital Partners SGR) Milano Milano 4 Intesa Sanpaolo S.p.A. 24.50 Capital Euro 750.000 in shares of Euro 0,50 28 Iniziative Immobiliari Industriali S.p.A. In liquidazione Arqu\u00e0 Polesine Arqu\u00e0 Polesine 4 Intesa Sanpaolo S.p.A. 20.00 Capital Euro 510.000 in shares of Euro 0,51 29 Intrum Italy S.p.A. Milano Milano 4 Intesa Sanpaolo S.p.A. 49.00 Capital Euro 600.000 in shares of Euro 0,02 30 Ism Investimenti S.p.A. Mantova Mantova 4 Intesa Sanpaolo S.p.A. 27.36 Capital Euro 6.654.902 in shares of Euro 1 31 Leonardo Technology S.r.l. in liquidazione Torino Torino 4 Intesa Sanpaolo S.p.A. 26.60 Capital Euro 242.081 in shares of Euro 1 32 Marketwall S.r.l. Milano Milano 4 Intesa Sanpaolo S.p.A. 33.00 Capital Euro 2.380.409 in shares of Euro 1 33 Materias S.r.l. Napoli Napoli 4 Intesa Sanpaolo S.p.A. 12.87 Capital Euro 29.191 in shares of Euro 1 34 Misr Alexandria for Financial Investments Mutual Fund Co. in liquidazione Cairo Cairo 4 Bank of Alexandria S.A.E. 25.00 Capital EGP 30.708.000 in shares of EGP 1000 35 Misr International Towers Co. Cairo Cairo 4 Bank of Alexandria S.A.E. 27.86 Capital EGP 50.000.000 in shares of EGP 10 36 Monilogi SRO Bratislava Bratislava 4 Vseobecna Uverova Banka A.S. 30.00 Capital Euro 250.000 in shares of Euro 1 37 Montefeltro Sviluppo Soc.cons. A.r. Urbania Urbania 4 Intesa Sanpaolo S.p.A. 26.37 Capital Euro 73.000 in shares of Euro 10 38 Network Impresa S.p.A. in concordato preventivo Limena Limena 4 Intesa Sanpaolo S.p.A. 28.95 Capital Euro 562.342 in shares of Euro 1 39 Neva First - FCC Torino Torino 4 Intesa Sanpaolo Innovation Center S.p.A. 42.53 Capital Euro 237.323.232 in shares of Euro 99,80 Companies Registered office Place of business Type of relationship (a) INVESTMENT Votes available % (b) Direct ownership % held 40 NEWCO - Fondo Tematico Piani Urbani Integrati S.r.l. (f) Torino Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 41 NEWCO - Fondo Tematico Turismo S.r.l. (f) Torino Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 42 Penghua Fund Management Co. Ltd. Shenzhen Shenzhen 4 Eurizon Capital SGR S.p.A. 49.00 Capital CNY 150.000.000 in shares of CNY 1 43 Pietra S.r.l. In liquidazione Milano Milano 4 Intesa Sanpaolo S.p.A. 22.22 Capital Euro 40.000 in shares of Euro 1 44 R.C.N. Finanziaria S.p.A. Mantova Mantova 4 Intesa Sanpaolo S.p.A. 23.96 Capital Euro 1.000.000 in shares of Euro 0,50 45 RSCT FUND - COMPARTO CREDITI Milano Milano 4 Intesa Sanpaolo S.p.A. 70.07 Capital Euro 383.363.831 in shares of Euro 1 46 S.F. Consulting S.r.l. Bergamo Bergamo 4 Intesa Sanpaolo S.p.A. 35.00 Capital Euro 93.600 in shares of Euro 0,52 47 Sicily Investments S.a.r.l. Luxembourg Luxembourg 4 Intesa Sanpaolo S.p.A. 25.20 Capital Euro 12.500 in shares of Euro 25 48 Slovak Banking Credit Bureau S.r.o. Bratislava Bratislava 4 Vseobecna Uverova Banka A.S. 33.33 Capital Euro 9.958 in shares of Euro 3.319,39 49 Sviluppo Industriale S.p.A. in Liquidazione (gi\u00e0 Sviluppo Industriale S.p.A. in Concordato Preventivo) Pistoia Pistoia 4 Intesa Sanpaolo S.p.A. 28.27 Capital Euro 628.444 in shares of Eur 22,26 50 Trinacria Capital S.a.r.l. Luxembourg Luxembourg 4 Intesa Sanpaolo S.p.A. 25.20 Capital Euro 12.500 in shares of Euro 25 51 UBI SPV LEASE 2016 S.r.l. Milano Milano 4 Intesa Sanpaolo S.p.A. 10.00 100,00 (**) Capital Euro 10.000 in shares of Euro 1 52 Vesta OML Limited ( ex Oval Money LTD) London London 4 Intesa Sanpaolo S.p.A. 37.51 Capital GBP 16.692 in shares of GBP 0,0004 53 Warrant Hub S.p.A. Correggio Correggio 4 Intesa Sanpaolo S.p.A. 12.00 Capital Euro 113.637 in shares of Euro 1 54 Yolo Group S.p.A. Milano Milano 4 Intesa Sanpaolo Vita S.p.A. 1.43 Capital Euro 87.493 in shares of Euro 0,01 (a) Type of relationship: 1 - majority of voting rights at Ordinary Shareholders' Meeting; 2 - dominant influence at Ordinary Shareholders' Meeting; 3 - agreements with other shareholders; 4 - company subject to significant influence; 5 - unitary management as defined in Art. 26.1 of \"Legislative Decree 87/92\"; 6 - unitary management as defined in Art. 26.2 of \"Legislative Decree 87/92\"; 7 - joint control; 8 - other relationship. (b) Where different from the % portion, the availability of the votes in the Ordinary Shareholders' Meeting is indicated, distinguishing between the effective (*) and potential (**) voting rights, where applicable. (c) These are vehicles used for securitisation transactions within the Group. (d) At any moment from the date of subscription of the second capital increase (24/11/2020) to the end of the 42nd month from that date, Intesa Sanpaolo has the right to increase, in one or more tranches, its investment in the company\u2019s share capital, obtaining a maximum total investment of 51%. Currently, the prerequisites of IFRS 10 to classify the interest among subsidiaries are not met. (e) The different value between the actual share and the number of votes in the Shareholders\u2019 Meeting is linked to the presence of various categories of shares (A and B). Only category A shares (also held by Intesa Sanpaolo) grant rights to vote in the Shareholders\u2019 Meeting. (f) The economic effects of the investments in equity and loans underlying the fund\u2019s operations will be borne in full by the EIB. The illustration of the criteria and the methods for the definition of the scope of consolidation and the reasons which determine that a company is subject to joint control or significant influence is contained in Part A \u2013 Accounting policies, to which reference should be made. 7.2 Individually material investments in associates and companies subject to joint control: book value, fair value and dividends received (millions of euro) Book value Fair value Dividends received (a) A. COMPANIES SUBJECT TO JOINT CONTROL 1 Mooney Group S.p.A. 111 - - B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE 1 BACK2BONIS 387 - - 2 Penghua Fund Management Co. Ltd. 332 - 45 3 Intrum Italy S.p.A. 307 - 13 4 RSCT FUND - Comparto Crediti 256 - - 5 FI.NAV. Comparto A - Crediti 155 - - 6 Equiter S.p.A. 104 - 2 7 NEVA FIRST - FCC 59 - - TOTAL 1,711 - 60 a) Dividends are paid by Group companies accounted for using the equity method, and, though they are not included in caption \u201c250 Profits (Losses) on equity investments\u201d, as they represent a decrease in caption \u201c70 Investments in associates and companies subject to joint control\u201d under Assets, they are still presented in that table, as envisaged by the reference regulations. 7.3 Individually material investments in associates and companies subject to joint control: financial information (millions of euro) Cash and cash equivalents Financial assets Non-financial assets Financial liabilities Non-financial liabilities Total revenues Interest margin Adjustments to/write -backs on property, equipment and intangible assets Income (Loss) before tax from continuing operations Income (Loss) after tax from continuing operations Income (Loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) A. COMPANIES SUBJECT TO JOINT CONTROL Mooney Group S.p.A. X 397 930 1,446 198 300 X X -48 -37 - -37 - -37 B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE BACK2BONIS X 748 22 24 3 11 X X - - - - - - Penghua Fund Management Co. Ltd. X 826 198 221 249 596 X X 181 136 - 136 - 136 Intrum Italy S.p.A. X 65 86 9 60 163 X X 46 35 - 35 - 35 RSCT FUND - Comparto Crediti X 346 25 - 4 - X X - - - - - - FI.NAV. Comparto A - Crediti X 268 - - - - X X - - - - - - Equiter S.p.A. X 296 8 - 3 13 X X 10 8 - 8 - 8 NEVA FIRST - FCC X 110 22 - 1 7 X X 7 7 - 7 - 7 7.5 Investments in associates and companies subject to joint control: annual changes (millions of euro) 31.12.2022 31.12.2021 A. Initial amount 1,652 1,996 B. Increases 942 422 B.1 purchases 528 122 of which business combinations - 10 B.2 recoveries 13 - B.3 revaluations 143 163 B.4 other changes 258 137 C. Decreases -581 -766 C.1 sales -305 -58 C.2 impairment losses -52 -39 C.3 write-downs -69 -61 C.4 other changes -155 -608 D. Final amount 2,013 1,652 E. Total revaluations 3,620 3,477 F. Total impairment losses 2,111 2,059 The sub-caption B.1 purchases includes the acquisition of the additional 20% stake in Mooney Group, Back2Bonis and other purchases, including Warrant Hub and Digit\u2019Ed Holding. The sub-caption B.3 revaluations mainly includes the profits of companies carried at equity (including Penghua Fund Management Co. Ltd.). The sub-caption B.4 Increases - other changes includes profits on disposal/reclassifications for a total of 197 million euro, attributable to the Isp Formazione transaction for 196 million euro and to Innolva for 1 million euro. The sub-caption C.1 sales includes the disposal of companies carried at equity (mainly ISP Formazione and Innolva). The sub-caption C.3 write-downs includes the losses of companies carried at equity (mainly FI.NAV and Mooney Group). The sub-caption C.4 Decreases - other changes includes the payment of dividends (mainly Penghua and Intrum), as well as reclassification from other portfolios of VUB Generali, which entered the line-by-line scope of consolidation following the purchase of an additional 5.26%. 7.6 Significant evaluations and assumptions to establish the existence of joint control or significant influence Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties sharing control. Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of financial and management policies of the company based on specific juridical relations, such as the participation in voting syndicates. Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since it solely has economic rights on a portion of the returns generated by the investment, but does not have access to management policies and may exercise governance rights limited to the safeguarding of its economic interests. 7.7 Commitments referred to investments in companies subject to joint control As at 31 December 2022, there were commitments on capital referring to MIR CAPITAL S.C.A. Sicar for a total of 35.6 million euro; to Mooney Group S.p.A. for a total of 8 million euro; and to Apside S.p.A. for a total of 17 million euro, relating to the subscription of equity instruments issued by the company. 7.8 Commitments referred to investments in companies subject to significant influence As at 31 December 2022, the following commitments are noted: the recapitalisation of Bancomat S.p.A. for around 2.7 million euro; the commitment undertaken by ISP Innovation Center S.p.A. and Neva SGR S.p.A. to pay the amounts for the call ups of the NEVA FIRST-FCC Fund for a residual 49.5 million euro; a capital increase commitment benefiting Centai Institute S.p.A. for 0.7 million euro; a commitment to subscribe equity instruments issued by the associate Destination Gusto S.r.l. for a maximum of 2.5 million euro. Lastly, there is a residual commitment on Leonardo Technology S.r.l. of a modest amount. 7.9 Significant restrictions There is nothing to report in terms of significant restrictions. 7.10 Other information For most of the companies subject to joint control or significant influence, the timing regarding the availability of the financial statements at the end of the year is not compatible with the terms set for the closure of Intesa Sanpaolo\u2019s consolidated financial statements; on this point, for the application of the equity method, reference is made to the last accounting reports available that, in most cases, include the interim statement of the first 9 months for the listed associates or the last financial statements or half-yearly report available for the other associates. In any case, when the accounts of the associate or joint venture used in the application of the equity method refer to a date that is different from that of Intesa Sanpaolo\u2019s financial statements, adjustments are made to take into account the effects of operations or significant events which took place between that date and the reporting date of Intesa Sanpaolo\u2019s financial statements. Impairment tests of investments in associates and companies subject to joint control As required under IAS/IFRS, investments in associates and companies subject to joint control are subjected to impairment testing to assess whether there is objective evidence to consider that the carrying value of the assets is not fully recoverable. With reference to investments in associates and companies subject to joint control, the process of detection of any impairment involves verification of the presence of impairment indicators and the determination of any write-down. The impairment indicators are essentially divided into two categories: qualitative indicators, such as the generation of negative economic results or in any case a significant variance with respect to the targets budgeted or established in the multi-year plans disclosed to the market, the announcement/start-up of insolvency proceedings or restructuring plans, and the downgrading by more than two classes of the rating; quantitative indicators, represented by a reduction in fair value of over 30% below the carrying value or for a period of over 24 months, by market capitalisation lower than the company\u2019s net book value, in the case of securities listed on active markets or by a carrying value of the investment in the Parent Company\u2019s financial statements higher than the carrying value in the consolidated financial statements of the investee\u2019s net assets and goodwill or by distribution by the latter of a dividend that is higher than its total income. If impairment indicators are detected, the recoverable amount, represented by the higher of the fair value less costs to sell and the value in use, is calculated and if it proves lower than the carrying value, impairment is recognised. If, subsequently, the recoverable amount is higher than the new carrying amount and the reasons for the impairment no longer apply following an event subsequent to the recognition of the impairment, write-backs are recognised, through profit or loss, up to the amount of the adjustment previously recognised. In particular, where impairment indicators were recorded with respect to investments in associates or companies subject to joint control, analyses were carried out based, as a priority, on market methodologies (direct or comparable transactions and market multiples) or alternatively on \u201cfundamental\u201d analyses mainly based on an estimate of the expected discounted cash flows or on the adjusted net asset value (ANAV). The results of these assessments led to the need to recognise adjustments, mainly referring to the investments in Intrum Italy (34 million euro), Mir Capital (8 million euro), RSCT Fund Comparto Crediti (4 million euro), Marketwall (3 million euro) and in other minor investments for 3 million euro. The valuation of investments in associates or companies subject to joint control also led to the recognition of a write-back of 13 million euro of the investment in FI.NAV. Comparto A Crediti. millions of euro) Total Shareholders' Equity Proportionate equity Goodwill Other changes Consolidated book value A. COMPANIES SUBJECT TO JOINT CONTROL Mooney Group S.p.A. - - 111 - 111 B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE BACK2BONIS 725 402 - -15 387 Penghua Fund Management Co. Ltd. 554 272 60 - 332 Intrum Italy S.p.A. 82 40 267 - 307 RSCT FUND - Comparto Crediti 375 263 - -7 256 FI.NAV. Comparto A - Crediti 306 155 - - 155 Equiter S.p.A. 293 97 7 - 104 NEVA FIRST - FCC 138 59 - - 59 2,473 1,288 445 -22 1,711 The figures for these companies are updated to December 2022, for Intrum and Penghua; to 30 June 2022 for RSCT FUND, BACK2BONIS, NEVA FIRST and FI.NAV; and to 31 December 2021 for Equiter. For Mooney Group S.p.A., the figures shown above refer to 30 September 2022, even though the figures as at 31 December 2022 were used for the purposes of the Group\u2019s consolidated financial statements. The latter will be made public following approval by the company\u2019s Shareholders\u2019 Meeting. 7.4 Individually immaterial investments in associates and companies subject to joint control: financial information (millions of euro) Book value of investments in associates and companies subject to joint control Total assets Total liabilities Total revenues Income (loss) after tax from continuing operations Income (Loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) COMPANIES SUBJECT TO JOINT CONTROL 23 210 147 94 -1 - -1 - -1 COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE (a) 279 4,523 3,449 222 5 - 5 -46 -41 (a) This caption includes some subsidiaries excluded from the scope of consolidation as of modest amount. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1043": { "value": "SECTION 7 \u2013 INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL \u2013 CAPTION 70 7.1 Investments in associates and companies subject to joint control: information on equity interests Companies Registered office Place of business Type of relationship (a) INVESTMENT Votes available % (b) Direct ownership % held A. COMPANIES SUBJECT TO JOINT CONTROL 1 Apside S.p.A. Torino Torino 7 Intesa Sanpaolo S.p.A. 50.00 Capital Euro 10,000 in shares of Euro 1 2 Augusto S.r.l. Milano Milano 7 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10,000 in shares of Euro 1 3 Diocleziano S.r.l. Milano Milano 7 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10,000 in shares of Euro 1 4 Immobiliare Novoli S.p.A. Firenze Firenze 7 Intesa Sanpaolo S.p.A. 50.00 Capital Euro 15.635.514 un shares of Euro 0,60 5 Mir Capital Management S.A. Luxembourg Luxembourg 7 Private Equity International S.A. 50.00 Capital Euro 31.000 in shares of Euro 1 6 Mir Capital S.C.A. SICAR Luxembourg Luxembourg 7 Private Equity International S.A. 50.00 Capital Euro 65.365.000 in shares of Euro 1 7 Mooney Group S.p.A. Milano Milano 7 Banca 5 S.p.A. 50.00 Capital Euro 10.050.000 in shares of Euro 0,20 8 PBZ Croatia Osiguranje Public Limited Company for Compulsory Pension Fund Management Zagreb Zagreb 7 Privredna Banka Zagreb D.D. 50.00 Capital HRK 56.000.000 in shares of HRK 1.000 9 Responsability BOP S.A.R.L. Luxembourg Luxembourg 7 Asteria Investment Managers S.A. 50.00 Capital USD 20.000 in shares of USD 50 B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE 1 1875 Finance Holding AG Sarnen Sarnen 4 Reyl&Cie S.A. 40.00 Capital Chf 500.000 in shares of Chf 1 2 Adriano Lease Sec S.r.l. (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 100,00 (**) Capital Euro 10.000 in shares of Euro 1 3 Alpian S.A. Gen\u00e8ve Gen\u00e8ve 4 Fideuram - Intesa Sanpaolo Private Banking S.p.A. 14.91 Capital Chf 21.672.678 in shares of Chf 0,01 Reyl&Cie S.A. 12.93 27.84 4 Apulia Finance N. 4 S.r.l. in liquidazione (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 10.00 Capital Euro 10.000 in shares of Euro 1 5 Back2Bonis Milano Milano 4 Intesa Sanpaolo S.p.A. 55.40 35,00 (*) Capital Euro 776.381.183 in shares of Euro 476.671 6 Backtowork24 S.r.l. (d) Milano Milano 4 Intesa Sanpaolo S.p.A. 30.58 Capital Euro 2.892.691 in shares of Euro 0,01 7 Bancomat S.p.A. Roma Roma 4 Intesa Sanpaolo S.p.A. 31.55 Capital Euro 21.095.726 in shares of Euro 5 Banca 5 S.p.A. 0.01 31.56 8 Berica ABS 3 S.r.l. (c) Vicenza Vicenza 4 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10.000 in shares of Euro 1 9 Brera Sec S.r.l. (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 Capital EUR 10.000 in shares of Euro 1 10 Camfin S.p.A. (e) Milano Milano 4 Intesa Sanpaolo S.p.A. 4.60 8,53 (*) Capital EUR 110.800.000 in shares of Euro 0,2 11 Cassa di Risparmio di Fermo S.p.A. Fermo Fermo 4 Intesa Sanpaolo S.p.A. 33.33 Capital EUR 39.241.088 in shares of Euro 51,65 12 Centai Institute S.p.A. Torino Torino 4 Intesa Sanpaolo S.p.A. 49.00 Capital EUR 50.000 in shares of Euro 1 13 Clara Sec S.r.l. Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10.000 in shares of Euro 1 14 Compagnia Aerea Italiana S.p.A. Roma Fiumicino 4 Intesa Sanpaolo S.p.A. 27.49 Capital Euro 3.526.846 in shares of Euro 0,00004 Companies Registered office Place of business Type of relationship (a) INVESTMENT Votes available % (b) Direct ownership % held 15 Destination Gusto S.r.l. Milano Milano 4 Intesa Sanpaolo S.p.A. 49.00 Capital Euro 20.000 in shares of Euro 1 16 Digit'ed Holding S.p.A. Milano Milano 4 Intesa Sanpaolo S.p.A. 20.00 Capital Euro 1.173.822 in shares of Euro 1 17 Equiter S.p.A. Torino Torino 4 Intesa Sanpaolo S.p.A. 32.88 Capital Euro 150.004.017 in shares of Euro 1 18 Euromilano S.p.A. Milano Milano 4 Intesa Sanpaolo S.p.A. 43.43 Capital Euro 1.356.582 in shares of Euro 15,51 19 Europrogetti & Finanza S.r.l. in liquidazione Roma Roma 4 Intesa Sanpaolo S.p.A. 15.97 Capital Euro 5.636.400 in shares of Euro 1 20 Eusebi Holdings B.V. Amsterdam Amsterdam 4 Intesa Sanpaolo S.p.A. 47.00 Capital Euro 100 in shares of Euro 1 21 FI.NAV. Comparto A - Crediti Roma Roma 4 Intesa Sanpaolo S.p.A. 50.54 Capital USD 405.821.168 in shares of USD 1 22 Fondo di Rigenerazione Urbana Sicilia S.r.l. (f) Palermo Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 50.000 in shares of Euro 1 23 Fondo per la ricerca e l'innovazione S.r.l. (f) Torino Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 24 Fondo Sardegna Energia S.r.l. (f) Cagliari Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 25 Giada Sec S.r.l. (c) Conegliano Conegliano 4 Intesa Sanpaolo S.p.A. 5.00 Capital Euro 10.000 in shares of Euro 1 26 Gilda S.r.l. Montesilvano Montesilvano 4 Intesa Sanpaolo S.p.A. 13.05 15,00 (**) Capital Euro 213.402 in shares of da Euro 1 27 Indaco Venture Partners SGR S.p.A. ( gi\u00e0 Venture Capital Partners SGR) Milano Milano 4 Intesa Sanpaolo S.p.A. 24.50 Capital Euro 750.000 in shares of Euro 0,50 28 Iniziative Immobiliari Industriali S.p.A. In liquidazione Arqu\u00e0 Polesine Arqu\u00e0 Polesine 4 Intesa Sanpaolo S.p.A. 20.00 Capital Euro 510.000 in shares of Euro 0,51 29 Intrum Italy S.p.A. Milano Milano 4 Intesa Sanpaolo S.p.A. 49.00 Capital Euro 600.000 in shares of Euro 0,02 30 Ism Investimenti S.p.A. Mantova Mantova 4 Intesa Sanpaolo S.p.A. 27.36 Capital Euro 6.654.902 in shares of Euro 1 31 Leonardo Technology S.r.l. in liquidazione Torino Torino 4 Intesa Sanpaolo S.p.A. 26.60 Capital Euro 242.081 in shares of Euro 1 32 Marketwall S.r.l. Milano Milano 4 Intesa Sanpaolo S.p.A. 33.00 Capital Euro 2.380.409 in shares of Euro 1 33 Materias S.r.l. Napoli Napoli 4 Intesa Sanpaolo S.p.A. 12.87 Capital Euro 29.191 in shares of Euro 1 34 Misr Alexandria for Financial Investments Mutual Fund Co. in liquidazione Cairo Cairo 4 Bank of Alexandria S.A.E. 25.00 Capital EGP 30.708.000 in shares of EGP 1000 35 Misr International Towers Co. Cairo Cairo 4 Bank of Alexandria S.A.E. 27.86 Capital EGP 50.000.000 in shares of EGP 10 36 Monilogi SRO Bratislava Bratislava 4 Vseobecna Uverova Banka A.S. 30.00 Capital Euro 250.000 in shares of Euro 1 37 Montefeltro Sviluppo Soc.cons. A.r. Urbania Urbania 4 Intesa Sanpaolo S.p.A. 26.37 Capital Euro 73.000 in shares of Euro 10 38 Network Impresa S.p.A. in concordato preventivo Limena Limena 4 Intesa Sanpaolo S.p.A. 28.95 Capital Euro 562.342 in shares of Euro 1 39 Neva First - FCC Torino Torino 4 Intesa Sanpaolo Innovation Center S.p.A. 42.53 Capital Euro 237.323.232 in shares of Euro 99,80 Companies Registered office Place of business Type of relationship (a) INVESTMENT Votes available % (b) Direct ownership % held 40 NEWCO - Fondo Tematico Piani Urbani Integrati S.r.l. (f) Torino Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 41 NEWCO - Fondo Tematico Turismo S.r.l. (f) Torino Torino 4 Intesa Sanpaolo S.p.A. 100.00 Capital Euro 25.000 in shares of Euro 1 42 Penghua Fund Management Co. Ltd. Shenzhen Shenzhen 4 Eurizon Capital SGR S.p.A. 49.00 Capital CNY 150.000.000 in shares of CNY 1 43 Pietra S.r.l. In liquidazione Milano Milano 4 Intesa Sanpaolo S.p.A. 22.22 Capital Euro 40.000 in shares of Euro 1 44 R.C.N. Finanziaria S.p.A. Mantova Mantova 4 Intesa Sanpaolo S.p.A. 23.96 Capital Euro 1.000.000 in shares of Euro 0,50 45 RSCT FUND - COMPARTO CREDITI Milano Milano 4 Intesa Sanpaolo S.p.A. 70.07 Capital Euro 383.363.831 in shares of Euro 1 46 S.F. Consulting S.r.l. Bergamo Bergamo 4 Intesa Sanpaolo S.p.A. 35.00 Capital Euro 93.600 in shares of Euro 0,52 47 Sicily Investments S.a.r.l. Luxembourg Luxembourg 4 Intesa Sanpaolo S.p.A. 25.20 Capital Euro 12.500 in shares of Euro 25 48 Slovak Banking Credit Bureau S.r.o. Bratislava Bratislava 4 Vseobecna Uverova Banka A.S. 33.33 Capital Euro 9.958 in shares of Euro 3.319,39 49 Sviluppo Industriale S.p.A. in Liquidazione (gi\u00e0 Sviluppo Industriale S.p.A. in Concordato Preventivo) Pistoia Pistoia 4 Intesa Sanpaolo S.p.A. 28.27 Capital Euro 628.444 in shares of Eur 22,26 50 Trinacria Capital S.a.r.l. Luxembourg Luxembourg 4 Intesa Sanpaolo S.p.A. 25.20 Capital Euro 12.500 in shares of Euro 25 51 UBI SPV LEASE 2016 S.r.l. Milano Milano 4 Intesa Sanpaolo S.p.A. 10.00 100,00 (**) Capital Euro 10.000 in shares of Euro 1 52 Vesta OML Limited ( ex Oval Money LTD) London London 4 Intesa Sanpaolo S.p.A. 37.51 Capital GBP 16.692 in shares of GBP 0,0004 53 Warrant Hub S.p.A. Correggio Correggio 4 Intesa Sanpaolo S.p.A. 12.00 Capital Euro 113.637 in shares of Euro 1 54 Yolo Group S.p.A. Milano Milano 4 Intesa Sanpaolo Vita S.p.A. 1.43 Capital Euro 87.493 in shares of Euro 0,01 (a) Type of relationship: 1 - majority of voting rights at Ordinary Shareholders' Meeting; 2 - dominant influence at Ordinary Shareholders' Meeting; 3 - agreements with other shareholders; 4 - company subject to significant influence; 5 - unitary management as defined in Art. 26.1 of \"Legislative Decree 87/92\"; 6 - unitary management as defined in Art. 26.2 of \"Legislative Decree 87/92\"; 7 - joint control; 8 - other relationship. (b) Where different from the % portion, the availability of the votes in the Ordinary Shareholders' Meeting is indicated, distinguishing between the effective (*) and potential (**) voting rights, where applicable. (c) These are vehicles used for securitisation transactions within the Group. (d) At any moment from the date of subscription of the second capital increase (24/11/2020) to the end of the 42nd month from that date, Intesa Sanpaolo has the right to increase, in one or more tranches, its investment in the company\u2019s share capital, obtaining a maximum total investment of 51%. Currently, the prerequisites of IFRS 10 to classify the interest among subsidiaries are not met. (e) The different value between the actual share and the number of votes in the Shareholders\u2019 Meeting is linked to the presence of various categories of shares (A and B). Only category A shares (also held by Intesa Sanpaolo) grant rights to vote in the Shareholders\u2019 Meeting. (f) The economic effects of the investments in equity and loans underlying the fund\u2019s operations will be borne in full by the EIB. The illustration of the criteria and the methods for the definition of the scope of consolidation and the reasons which determine that a company is subject to joint control or significant influence is contained in Part A \u2013 Accounting policies, to which reference should be made. 7.2 Individually material investments in associates and companies subject to joint control: book value, fair value and dividends received (millions of euro) Book value Fair value Dividends received (a) A. COMPANIES SUBJECT TO JOINT CONTROL 1 Mooney Group S.p.A. 111 - - B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE 1 BACK2BONIS 387 - - 2 Penghua Fund Management Co. Ltd. 332 - 45 3 Intrum Italy S.p.A. 307 - 13 4 RSCT FUND - Comparto Crediti 256 - - 5 FI.NAV. Comparto A - Crediti 155 - - 6 Equiter S.p.A. 104 - 2 7 NEVA FIRST - FCC 59 - - TOTAL 1,711 - 60 a) Dividends are paid by Group companies accounted for using the equity method, and, though they are not included in caption \u201c250 Profits (Losses) on equity investments\u201d, as they represent a decrease in caption \u201c70 Investments in associates and companies subject to joint control\u201d under Assets, they are still presented in that table, as envisaged by the reference regulations. 7.3 Individually material investments in associates and companies subject to joint control: financial information (millions of euro) Cash and cash equivalents Financial assets Non-financial assets Financial liabilities Non-financial liabilities Total revenues Interest margin Adjustments to/write -backs on property, equipment and intangible assets Income (Loss) before tax from continuing operations Income (Loss) after tax from continuing operations Income (Loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) A. COMPANIES SUBJECT TO JOINT CONTROL Mooney Group S.p.A. X 397 930 1,446 198 300 X X -48 -37 - -37 - -37 B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE BACK2BONIS X 748 22 24 3 11 X X - - - - - - Penghua Fund Management Co. Ltd. X 826 198 221 249 596 X X 181 136 - 136 - 136 Intrum Italy S.p.A. X 65 86 9 60 163 X X 46 35 - 35 - 35 RSCT FUND - Comparto Crediti X 346 25 - 4 - X X - - - - - - FI.NAV. Comparto A - Crediti X 268 - - - - X X - - - - - - Equiter S.p.A. X 296 8 - 3 13 X X 10 8 - 8 - 8 NEVA FIRST - FCC X 110 22 - 1 7 X X 7 7 - 7 - 7 7.5 Investments in associates and companies subject to joint control: annual changes (millions of euro) 31.12.2022 31.12.2021 A. Initial amount 1,652 1,996 B. Increases 942 422 B.1 purchases 528 122 of which business combinations - 10 B.2 recoveries 13 - B.3 revaluations 143 163 B.4 other changes 258 137 C. Decreases -581 -766 C.1 sales -305 -58 C.2 impairment losses -52 -39 C.3 write-downs -69 -61 C.4 other changes -155 -608 D. Final amount 2,013 1,652 E. Total revaluations 3,620 3,477 F. Total impairment losses 2,111 2,059 The sub-caption B.1 purchases includes the acquisition of the additional 20% stake in Mooney Group, Back2Bonis and other purchases, including Warrant Hub and Digit\u2019Ed Holding. The sub-caption B.3 revaluations mainly includes the profits of companies carried at equity (including Penghua Fund Management Co. Ltd.). The sub-caption B.4 Increases - other changes includes profits on disposal/reclassifications for a total of 197 million euro, attributable to the Isp Formazione transaction for 196 million euro and to Innolva for 1 million euro. The sub-caption C.1 sales includes the disposal of companies carried at equity (mainly ISP Formazione and Innolva). The sub-caption C.3 write-downs includes the losses of companies carried at equity (mainly FI.NAV and Mooney Group). The sub-caption C.4 Decreases - other changes includes the payment of dividends (mainly Penghua and Intrum), as well as reclassification from other portfolios of VUB Generali, which entered the line-by-line scope of consolidation following the purchase of an additional 5.26%. 7.6 Significant evaluations and assumptions to establish the existence of joint control or significant influence Entities are considered to be companies subject to joint control if control is contractually shared between the Group and one or more other parties, or where the decisions about the relevant activities require the unanimous consent from all parties sharing control. Companies are considered subject to significant influence (associates) when the Group holds 20% or more of the voting rights (including \u201cpotential\u201d voting rights) or if it \u2013 with a lower equity stake \u2013 has the power of participating in the determination of financial and management policies of the company based on specific juridical relations, such as the participation in voting syndicates. Certain companies in which the Group holds a stake exceeding 20% are not considered subject to significant influence since it solely has economic rights on a portion of the returns generated by the investment, but does not have access to management policies and may exercise governance rights limited to the safeguarding of its economic interests. 7.7 Commitments referred to investments in companies subject to joint control As at 31 December 2022, there were commitments on capital referring to MIR CAPITAL S.C.A. Sicar for a total of 35.6 million euro; to Mooney Group S.p.A. for a total of 8 million euro; and to Apside S.p.A. for a total of 17 million euro, relating to the subscription of equity instruments issued by the company. 7.8 Commitments referred to investments in companies subject to significant influence As at 31 December 2022, the following commitments are noted: the recapitalisation of Bancomat S.p.A. for around 2.7 million euro; the commitment undertaken by ISP Innovation Center S.p.A. and Neva SGR S.p.A. to pay the amounts for the call ups of the NEVA FIRST-FCC Fund for a residual 49.5 million euro; a capital increase commitment benefiting Centai Institute S.p.A. for 0.7 million euro; a commitment to subscribe equity instruments issued by the associate Destination Gusto S.r.l. for a maximum of 2.5 million euro. Lastly, there is a residual commitment on Leonardo Technology S.r.l. of a modest amount. 7.9 Significant restrictions There is nothing to report in terms of significant restrictions. 7.10 Other information For most of the companies subject to joint control or significant influence, the timing regarding the availability of the financial statements at the end of the year is not compatible with the terms set for the closure of Intesa Sanpaolo\u2019s consolidated financial statements; on this point, for the application of the equity method, reference is made to the last accounting reports available that, in most cases, include the interim statement of the first 9 months for the listed associates or the last financial statements or half-yearly report available for the other associates. In any case, when the accounts of the associate or joint venture used in the application of the equity method refer to a date that is different from that of Intesa Sanpaolo\u2019s financial statements, adjustments are made to take into account the effects of operations or significant events which took place between that date and the reporting date of Intesa Sanpaolo\u2019s financial statements. Impairment tests of investments in associates and companies subject to joint control As required under IAS/IFRS, investments in associates and companies subject to joint control are subjected to impairment testing to assess whether there is objective evidence to consider that the carrying value of the assets is not fully recoverable. With reference to investments in associates and companies subject to joint control, the process of detection of any impairment involves verification of the presence of impairment indicators and the determination of any write-down. The impairment indicators are essentially divided into two categories: qualitative indicators, such as the generation of negative economic results or in any case a significant variance with respect to the targets budgeted or established in the multi-year plans disclosed to the market, the announcement/start-up of insolvency proceedings or restructuring plans, and the downgrading by more than two classes of the rating; quantitative indicators, represented by a reduction in fair value of over 30% below the carrying value or for a period of over 24 months, by market capitalisation lower than the company\u2019s net book value, in the case of securities listed on active markets or by a carrying value of the investment in the Parent Company\u2019s financial statements higher than the carrying value in the consolidated financial statements of the investee\u2019s net assets and goodwill or by distribution by the latter of a dividend that is higher than its total income. If impairment indicators are detected, the recoverable amount, represented by the higher of the fair value less costs to sell and the value in use, is calculated and if it proves lower than the carrying value, impairment is recognised. If, subsequently, the recoverable amount is higher than the new carrying amount and the reasons for the impairment no longer apply following an event subsequent to the recognition of the impairment, write-backs are recognised, through profit or loss, up to the amount of the adjustment previously recognised. In particular, where impairment indicators were recorded with respect to investments in associates or companies subject to joint control, analyses were carried out based, as a priority, on market methodologies (direct or comparable transactions and market multiples) or alternatively on \u201cfundamental\u201d analyses mainly based on an estimate of the expected discounted cash flows or on the adjusted net asset value (ANAV). The results of these assessments led to the need to recognise adjustments, mainly referring to the investments in Intrum Italy (34 million euro), Mir Capital (8 million euro), RSCT Fund Comparto Crediti (4 million euro), Marketwall (3 million euro) and in other minor investments for 3 million euro. The valuation of investments in associates or companies subject to joint control also led to the recognition of a write-back of 13 million euro of the investment in FI.NAV. Comparto A Crediti. millions of euro) Total Shareholders' Equity Proportionate equity Goodwill Other changes Consolidated book value A. COMPANIES SUBJECT TO JOINT CONTROL Mooney Group S.p.A. - - 111 - 111 B. COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE BACK2BONIS 725 402 - -15 387 Penghua Fund Management Co. Ltd. 554 272 60 - 332 Intrum Italy S.p.A. 82 40 267 - 307 RSCT FUND - Comparto Crediti 375 263 - -7 256 FI.NAV. Comparto A - Crediti 306 155 - - 155 Equiter S.p.A. 293 97 7 - 104 NEVA FIRST - FCC 138 59 - - 59 2,473 1,288 445 -22 1,711 The figures for these companies are updated to December 2022, for Intrum and Penghua; to 30 June 2022 for RSCT FUND, BACK2BONIS, NEVA FIRST and FI.NAV; and to 31 December 2021 for Equiter. For Mooney Group S.p.A., the figures shown above refer to 30 September 2022, even though the figures as at 31 December 2022 were used for the purposes of the Group\u2019s consolidated financial statements. The latter will be made public following approval by the company\u2019s Shareholders\u2019 Meeting. 7.4 Individually immaterial investments in associates and companies subject to joint control: financial information (millions of euro) Book value of investments in associates and companies subject to joint control Total assets Total liabilities Total revenues Income (loss) after tax from continuing operations Income (Loss) after tax from discontinued operations Net income (loss) (1) Other comprehensive income (net of tax) (2) Consolidated comprehensive income (3) = (1) + (2) COMPANIES SUBJECT TO JOINT CONTROL 23 210 147 94 -1 - -1 - -1 COMPANIES SUBJECT TO SIGNIFICANT INFLUENCE (a) 279 4,523 3,449 222 5 - 5 -46 -41 (a) This caption includes some subsidiaries excluded from the scope of consolidation as of modest amount.", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-957": { "value": "SECTION 8 \u2013 TECHNICAL INSURANCE RESERVES REASSURED WITH THIRD PARTIES \u2013 CAPTION 80 8.1 Technical insurance reserves reassured with third parties: breakdown (millions of euro) Captions 31.12.2022 31.12.2021 A. Non-life business 127 164 A1. Premiums reserves 44 37 A2. Claims reserves 83 127 A3. Other reserves - - B. Life business 36 44 B1. Mathematical reserves 32 40 B2. Reserves for amounts to be disbursed 4 4 B3. Other reserves - - C. Technical reserves for investment risks to be borne by the insured - - C1. Reserves for contracts with disbursements connected with investment funds and market indices - - C2. Reserves from pension fund management - - D. Total technical insurance reserves reassured with third parties 163 208 8.2 Change in caption 80 Technical insurance reserves reassured with third parties The balance of this caption came to 163 million euro (208 million euro as at 31 December 2021), down by 45 million euro compared to 31 December 2021. The change is essentially due to the decline in caption \u201cA2. Claims reserves\u201d as a result of a new underwriting policy, for both renewals and new customers, preferring profitability by enabling a reduction in the portfolio\u2019s claims rate. SECTION 11 \u2013 TECHNICAL RESERVES \u2013 CAPTION 110 11.1 Technical reserves: breakdown This caption corresponds to caption C of the insurance company balance sheet liabilities. (millions of euro) Captions Direct work Indirect work 31.12.2022 31.12.2021 A. Non-life business 1,654 - 1,654 1,756 A.1 premiums reserves 932 - 932 945 A2. claims reserves 708 - 708 797 A3. other reserves 14 - 14 14 B. Life business 89,874 - 89,874 107,324 B1. mathematical reserves 97,148 - 97,148 98,399 B2. reserves for amounts to be disbursed 673 - 673 712 B3. other reserves -7,947 - -7,947 8,213 C. Technical reserves for investment risks to be borne by the insured 8,589 - 8,589 9,216 C1. reserves for contracts with disbursements connected with investment funds and market indices 1,586 - 1,586 1,917 C2. reserves from pension fund management 7,003 - 7,003 7,299 D. Total technical reserves 100,117 - 100,117 118,296 11.2 Technical reserves: annual changes (millions of euro) Items 31.12.2022 31.12.2021 A. Non-life insurance 1,654 1,756 Initial amount 1,756 1,213 Business combinations - 396 Changes in the reserve (+/-) -102 147 B. Life business and other technical reserves 98,463 116,540 Initial amount 116,540 95,598 Business combinations - 20,530 Change in premiums 9,065 9,338 Change in payments -9,668 -9,534 Changes due to income and other bonuses recognised to insured parties (+/-) 289 1,743 Changes due to exchange differences (+/-) - - Changes in other technical reserves (+/-) -17,763 -1,135 C. Total technical reserves 100,117 118,296 SECTION 3 \u2013 RISKS OF INSURANCE COMPANIES 3.1 INSURANCE RISKS QUALITATIVE AND QUANTITATIVE INFORMATION Life business The typical risks of the life insurance portfolio (managed by Intesa Sanpaolo Vita, Intesa Sanpaolo Life and Fideuram Vita) may be divided into three main categories: premium risks, actuarial and demographic risks and reserve risks. Premium risks are managed initially during definition of the technical features and product pricing, and over the life of the instrument by means of periodic checks on sustainability and profitability (both at product level and at portfolio level, including liabilities). During the definition of a product, profit testing is used, aimed at measuring profitability and identifying any weaknesses beforehand, by means of specific sensitivity analyses. Actuarial and demographic risks arise when an unfavourable trend is recorded in the actual loss ratio compared with the trend estimated when the rate was calculated, and these risks are reflected in the level of \u201creserves\u201d. The loss ratio refers not only to actuarial loss, but also to financial loss (guaranteed interest rate risk). The Company guards against these risks by means of systematic statistical analysis of the evolution of liabilities in its own contract portfolio, divided by risk type, and through simulations of expected profitability of the assets hedging technical reserves. Reserve risk is guarded against through the exact calculation of mathematical reserves, with a series of detailed checks (for example, checking that all the variables required for the calculation such as yields, quotations, technical foundations, parameters for the supplementary reserves, and recalculation of the value of single contracts are correctly saved in the system) as well as overall verifications, by comparing results with the estimates produced on a monthly basis. Specific attention is paid to checking the correct assumption of contracts, by checking the relative portfolio against the reconstruction of movements during the period, divided by purpose, and checking the consistency of the amounts settled compared with the movements of reserves. The tables below show the structure of the mathematical reserves by expiry date, excluding reserves for amounts to be paid and before intercompany netting, and the structure of the guaranteed minimum yield as at 31 December 2022. (millions of euro) Breakdown of mathematical reserves of life branch: maturity Mathematical reserve % up to 1 year 1,778 1.68 1 to 5 years 4,826 4.57 6 to 10 years 1,934 1.83 11 to 20 years 3,294 3.12 over 20 years 93,787 88.80 TOTAL 105,619 100.00 (millions of euro) Breakdown of risk concentration by type of guarantee Total Reserves % Insurance and investment products with guaranteed annual yield 0% - 1% 52,437 53.86 from 1% to 3% 31,233 32.08 from 3% to 5% 6,125 6.29 Insurance products 15,824 16.25 Shadow reserve -8,270 -8.48 TOTAL 97,349 100.00 The mathematical reserves are calculated on almost the entire portfolio, on a contract-by-contract basis, and the methodology used to determine the reserves takes account of all the future commitments of the company. The following table shows a breakdown by maturity of financial liabilities, before intercompany netting, represented by assets covering commitments arising under unit- and index-linked policies and other insurance products (specifically, the Risparmio Insurance product) and subordinated liabilities. millions of euro) Breakdown of financial liabilities by maturity Within 12 months Over 12 months Total as at 31.12.2022 Total as at 31.12.2021 Unit linked 66 70,517 70,583 84,883 Index linked - - - - Other payables to insured parties 1,562 - 1,562 - Subordinated liabilities - 2,222 2,222 2,220 Total 1,628 72,739 74,367 87,103 Non-life business The typical risks of the non-life insurance portfolio (managed through Intesa Sanpaolo Assicura, Intesa Sanpaolo RBM Salute and Intesa Sanpaolo Vita) mainly relate to premium and reserve risks. Premium risks are managed initially during definition of the technical features and product pricing, and over the life of the instrument by means of periodic checks on sustainability and profitability (both at product level and at portfolio level, including liabilities). Reserve risk is monitored through the exact calculation of technical reserves. More specifically, for companies with non-life business the technical reserves may be broken down into: premium reserves, claims reserves, profit sharing and reversal reserves, other technical reserves and the equalisation reserve. With regard to risk assumption, policies are checked when acquired through an automatic system aimed at detecting the underwriting parameters associated with the applicable tariff. The check is thus not only formal, but also substantive, and in particular allows the identification of exposures in terms of capital and limits of liability, in order to verify that the portfolio matches the technical and tariff scheme agreed upon with the sales network. Subsequently, statistical checks are carried out to verify potentially anomalous situations (such as concentration by area or by type of risk) and to keep under control accumulation at the level of individual persons (with particular reference to policies that provide cover in the accident and health branches). This is also carried out in order to provide the Actuarial and Reinsurance Unit with suitable indications of the portfolio characteristics in order to prepare the annual reinsurance plan. The following table presents the development of claims by year of generation, broken down into the major business lines of operation, as at 31 December 2022. (millions of euro) Development of Claims Reserves YEAR OF GENERATION/EVENT TOTAL 2018 2019 2020 2021 2022 Reserve amount: as at 31/12 generation year N 543 721 588 842 696 as at 31/12 year N+1 383 396 417 510 as at 31/12 year N+2 261 311 219 as at 31/12 year N+3 251 201 as at 31/12 year N+4 147 Total claims paid 521 623 524 862 429 2,959 Claims reserve booked as at 31.12.2022 25 37 48 123 403 636 Final claims reserve for previous years 72 Total claims reserve booked as at 31.12.2022 708 3.2 FINANCIAL RISKS QUALITATIVE AND QUANTITATIVE INFORMATION Financial Risks These risks derive from the level or volatility of market prices of financial instruments that impact the book value of both assets and liabilities. The risk factors identified by the company are as follows: \u2013 interest rate risk: impacts assets and liabilities whose value is sensitive to changes in the forward structure of interest rates or the volatility of interest rates; \u2013 equity price risk: derives from the level or volatility of market prices of equities and impacts assets and liabilities whose value is sensitive to changes in equity prices; \u2013 property risk: derives from the level or volatility of market prices of real estate property and impacts assets and liabilities sensitive to said changes; \u2013 foreign exchange risk: derives from changes in the level or volatility of foreign exchange rates; \u2013 spread risk: impacts assets and liabilities whose value is sensitive to adverse changes in credit spreads; \u2013 concentration risk: reflects the risk of holding high percentages of financial assets of the same counterparty. Impacts from the COVID-19 pandemic In line with 2021, the analysis of the Insurance Group\u2019s risk exposure was impacted by the economic, social and financial scenario deriving from the COVID-19 pandemic emergency. Weekly and monthly monitoring continued on the situations of solvency and liquidity of the Insurance Group, sent to the Supervisory Authority starting in March 2020. The reinforced monitoring of operational risks also continued, specifically referring to the occurrence of losses due to business continuity and/or depending on cyber risks. Impacts of the Russia-Ukraine conflict Following the escalation of the geopolitical tensions between Russia and Ukraine, the Risk Management Department has constantly monitored the evolution of the risks and their effects on the business of the Insurance Group, with a specific focus on exposures to countries directly involved in the conflict. In that area, exposure is residual (less than 0.1% of total assets). Investment portfolios The investments of the insurance companies of the Intesa Sanpaolo Group (Intesa Sanpaolo Vita, Intesa Sanpaolo Assicura, Intesa Sanpaolo Life, Fideuram Vita and Intesa Sanpaolo RBM Salute) are made with their shareholder fund and to cover contractual obligations with customers. These refer to traditional revaluable life insurance policies, Index- and Unit-linked policies, pension funds and non-life policies. As at 31 December 2022, the investment portfolios of Group companies, recorded at book value, amounted to 174,035 million euro. Of these, a part amounting to 107,620 million euro relates to traditional revaluable life policies (the financial risk of which is shared with the policyholders by virtue of the mechanism whereby the returns on assets subject to segregated management are determined), non-life policies and shareholder fund. The other component, whose risk is borne solely by the policyholders, consists of investments related to Index-linked policies, Unit-linked policies and pension funds and amounted to 100,834 million euro. Considering the various types of risks, the analysis of investment portfolios, described below, concentrates on the assets held to cover traditional revaluable life policies, non-life policies and shareholder fund. Financial assets under segregated funds and shareholder fund In terms of breakdown by asset class, net of derivative financial instruments, 83.06% of assets, i.e. 72,869 million euro, were bonds, whereas assets subject to equity risk represented 2.28% of the total and amounted to 2,001 million euro. The remainder (12,865 million euro) consisted of investments relating to UCI, Private Equity and Hedge Funds (14.66%). The carrying value of derivatives came to approximately -73 million euro, almost entirely relating to hedging derivatives, while the portion of effective management derivatives 114 is positive for approximately 84 million euro. At the end of 2022, investments made with the shareholder fund of Intesa Sanpaolo Vita and Fideuram Vita amounted to around 430 million euro at market value, and presented a risk in terms of VaR (99% confidence level, 10-day holding period) of around 9 million euro. Interest rate risk exposure The breakdown by maturity of bonds showed 10.76% short-term (under 1 year), 27.63% medium-term and 44.67% long-term (over 5 years). (millions of euro) Financial assets Book value % Duration Fixed-rate bonds 62,464 71.20 6.11 up to 1 year 9,078 10.35 1 to 5 years 21,656 24.68 over 5 years 31,730 36.17 Floating rate/indexed bonds 10,405 11.86 6.24 up to 1 year 362 0.41 1 to 5 years 2,591 2.95 over 5 years 7,452 8.50 TOTAL 72,869 83.06 - Equities or similar capital securities 2,001 2.28 UCI, Private Equity, Hedge Fund 12,865 14.66 TOTAL AS AT 31.12.2022 87,735 100.00 The sensitivity of the fair value of the portfolio of financial assets to interest rate movements, summarised in the table below, highlights the exposure of the portfolio: for example, a parallel shift in the yield curve of +100 basis points leads to a negative fair value change in the bond portfolios of 4,139 million euro. (millions of euro) Book value % Fair value changes due to interest rate fluctuations +100 bps -100 bps Fixed-rate bonds 62,464 85.72 -3,553 4,034 Floating rate/indexed bonds 10,405 14.28 -586 702 Interest rate risk hedging effect - - - - TOTAL 72,869 100.00 -4,139 4,736 Credit risk exposure The table below sets forth the distribution of the bond portfolio by rating class: AAA/AA bonds represented 6.30% of total investments and A bonds approximately 7.68%. Low investment grade securities (BBB) were 65.89% of the total, while the portion of speculative grade or unrated was minimal (3.19%). With regard to exposure to BBB rated securities, the majority of the exposure related to bonds issued by the Republic of Italy. (millions of euro) Breakdown of financial assets by issuer rating Book value % Bonds 72,869 83.06 AAA 2,343 2.67 AA 3,182 3.63 A 6,735 7.68 BBB 57,812 65.89 Speculative grade 2,526 2.88 Unrated 271 0.31 Equities or similar capital securities 2,001 2.28 UCI, Private Equity, Hedge Fund 12,865 14.66 TOTAL 87,735 100.00 The analysis of the exposure in terms of the issuers/counterparties produced the following results: securities issued by governments, central banks and other public entities made up 76.78% of the total investments, whereas the securities of corporate issuers contributed around 23.22%. The sensitivity values of the fair value of the bonds with respect to a variation in the creditworthiness of the issuers, namely a market credit spread shock of \u00b1100 basis points, as at end of 2022, are shown in the table below. (millions of euro) Book value % Fair value changes due to credit spread fluctuations +100 bps -100 bps Government bonds 55,952 76.78 -3,651 4,216 Corporate bonds 16,917 23.22 -758 731 TOTAL 72,869 100.00 -4,409 4,947 Equity risk exposure The sensitivity of the equity portfolio to a hypothetical deterioration in equity prices of 10% amounts to -200 million euro, as shown in the table below. (millions of euro) Book value % Fair value changes due to stock price fluctuations -10% Equities - Financial institutions 289 14.44 -29 Equities - Non-financial companies and other counterparties 1,712 85.56 -171 TOTAL 2,001 100.00 -200 Foreign exchange risk exposure Approximately 97.6% of investments is made up of assets denominated in the EU currency. The residual exposure to foreign exchange risk was hedged by positions in derivative financial instruments, particularly domestic currency swaps, in the same currency. Derivative financial instruments Financial derivative instruments are used to hedge the financial risks of the investment portfolio or for effective management. The table below shows the book values of the financial derivative instruments as at 31 December 2022. (millions of euro) Type of underlying DEBT SECURITIES/ INTEREST RATES EQUITIES, EQUITY INDICES, COMMODITIES, EXCHANGE RATES TOTAL Quoted Unquoted Quoted Unquoted Quoted Unquoted Hedging derivatives - -157 - - - -157 Effective management derivatives - - 49 35 49 35 TOTAL - -157 49 35 49 -122 ", "dimensions": { "concept": "ifrs-full:DisclosureOfReinsuranceExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-925": { "value": "SECTION 9 \u2013 PROPERTY AND EQUIPMENT \u2013 CAPTION 90 (millions of euro) Assets/Amounts 31.12.2022 31.12.2021 1. Property and equipment used in operations measured at cost 2,483 2,530 Of which - Property and equipment used in operations - Rights of use acquired under leases 1,495 1,521 2. Investment property measured at cost - - 3. Property and equipment used in operations, revalued 6,381 6,574 Of which - Property and equipment used in operations, revalued - Rights of use acquired under leases - - 4. Investment property measured at fair value 770 798 Of which - Investment property - Rights of use acquired under leases - - 5. Inventories of property and equipment governed by IAS 2 871 890 Total Property and equipment caption 90 10,505 10,792 9.1 Property and equipment used in operations: breakdown of assets measured at cost (millions of euro) 31.12.2022 31.12.2021 1. Property and equipment owned 988 1,009 a) land - - b) buildings - - c) furniture 194 207 d) electronic equipment 748 758 e) other 46 44 2. Rights of use acquired through the lease 1,495 1,521 a) land 1 9 b) buildings 1,218 1,331 c) furniture - - d) electronic equipment 36 16 e) other 240 165 Total 2,483 2,530 of which: resulting from the enforcement of guarantees 1 2 9.2 Investment property: breakdown of assets measured at cost There was no investment property measured at cost in the Intesa Sanpaolo Group. 9.3 Property and equipment used in operations: breakdown of revalued assets (millions of euro) 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Property and equipment owned - - 6,381 - - 6,574 a) land - - 2,641 - - 2,656 b) buildings - - 3,429 - - 3,606 c) valuable art assets - - 311 - - 312 d) electronic equipment - - - - - - e) other - - - - - - 2. Rights of use acquired through the lease - - - - - - a) land - - - - - - b) buildings - - - - - - c) furniture - - - - - - d) electronic equipment - - - - - - e) other - - - - - - TOTAL - - 6,381 - - 6,574 of which: resulting from the enforcement of guarantees - - - - - - 9.4 Investment property: breakdown of assets measured at fair value (millions of euro) 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Property and equipment owned - - 770 - - 798 a) land - - 271 - - 281 b) buildings - - 499 - - 517 2. Rights of use acquired through the lease - - - - - - a) land - - - - - - b) buildings - - - - - - TOTAL - - 770 - - 798 of which: resulting from the enforcement of guarantees - - 114 - - 138 With regard to the provisions of IAS 40, paragraph 75, letters c), g) and h), there was no information worth mentioning. 9.5 Inventories of property and equipment governed by IAS 2: breakdown (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Inventories of property and equipment resulting from the enforcement of guarantees 192 181 - 11 211 a) land 13 3 - 10 18 b) buildings 179 178 - 1 192 c) furniture - - - - - d) electronic equipment - - - - - e) other - - - - 1 2. Other inventories of property and equipment 679 24 - 655 679 Total 871 205 - 666 890 of which: measured at fair value less cost to sell 6 6 - - 1 9.6 Property and equipment used in operations: annual changes (millions of euro) Land Buildings Furniture Electronic equipment Valuable art assets Other Total A. Gross initial carrying amount 2,665 5,736 2,088 6,657 312 395 17,853 A.1 Total net adjustments - -799 -1,881 -5,883 - -186 -8,749 A.2 Net initial carrying amount 2,665 4,937 207 774 312 209 9,104 B. Increases 52 450 36 260 1 188 987 B.1 Purchases - 97 33 244 - 155 529 of which business combinations - - - - - - - B.2 Capitalised improvement costs 12 37 - - - - 49 B.3 Recoveries - - - - - - - B.4 Positive fair value differences recognised in: 16 11 - - - - 27 a) shareholders' equity 16 11 - - - - 27 b) income statement - - - - - - - B.5 Positive foreign exchange differences - - - - - - - B.6 Transfer from investment property 14 19 X X X X 33 B.7 Other changes 10 286 3 16 1 33 349 C. Decreases -75 -740 -49 -250 -2 -111 -1,227 C.1 Sales - -6 - -1 - -2 -9 of which business combinations - - - - - - - C.2 Depreciation - -342 -33 -221 - -79 -675 C.3 Impairment losses recognised in: - -3 -5 - - -2 -10 a) shareholders' equity - -3 - - - - -3 b) income statement - - -5 - - -2 -7 C.4 Negative fair value differences recognised in: -9 -13 - - -2 -1 -25 a) shareholders' equity -6 -9 - - - - -15 b) income statement -3 -4 - - -2 -1 -10 C.5 Negative foreign exchange differences -20 -46 -3 -5 - -2 -76 C.6 Transfer to: -38 -77 - - - - -115 a) investment -36 -72 X X X X -108 b) non-current assets held for sale and discontinued operations -2 -5 - - - - -7 C.7 Other changes -8 -253 -8 -23 - -25 -317 D. Net final carrying amount 2,642 4,647 194 784 311 286 8,864 D.1 Total net adjustments - -967 -1,902 -6,012 - -173 -9,054 D.2 Gross final carrying amount 2,642 5,614 2,096 6,796 311 459 17,918 E. Measurement at cost 1,852 2,450 - - 112 - 4,414 The table above shows the values of owned assets, as well as the rights of use acquired under leases. As explained in Part A \u2013 Fair value of real estate and valuable art assets, please note that, in accordance with the rules on valuation frequencies: \u2013 the properties classified as owner-occupied assets and trophy assets in the real estate portfolio were respectively subject to full valuation at the end of 2020 and the end of 2021, and were therefore subject to scenario analysis for 2022; \u2013 the valuable art assets were subject to scenario analyses for the year 2022, as they had been fully appraised at the end of 2020, through external appraisals, entrusted to qualified independent experts. Sub-captions B.4 and C.4 respectively report the positive and negative changes in fair value relating to owner-occupied real estate (land and buildings) and valuable art assets, for which the Bank applies the revaluation model. The Other changes, both increases and decreases, refer mainly to renegotiations and early terminations during the year of leases (IFRS 16) and, only regarding decreases, to amortisation and depreciation recorded during the year on assets deriving from the acquisition of business lines of the former Venetian banks, covered using the allowance for risks and charges specifically allocated at the time. Sub-caption E. Measurement at cost only contains property and equipment measured according to the revaluation model, in compliance with the instructions set out in Circular 262 of the Bank of Italy. 9.6 Of which - Property and equipment used in operations - Rights of use acquired under leases: annual changes (millions of euro) Land Buildings Furniture Electronic equipment Valuable art assets Other Total A. Gross initial carrying amount 9 1,968 - 36 - 193 2,206 A.1 Total net adjustments - -637 - -20 - -28 -685 A.2 Net initial carrying amount 9 1,331 - 16 - 165 1,521 B. Increases - 356 - 52 - 150 558 B.1 Purchases - 78 - 42 - 137 257 of which business combinations - - - - - - - B.2 Capitalised improvement costs - - - - - - - B.3 Recoveries - - - - - - - B.4 Positive fair value differences recognised in: - - - - - - - a) shareholders' equity - - - - - - - b) income statement - - - - - - - B.5 Positive foreign exchange differences - - - - - - - B.6 Transfer from investment property - - X X X X - B.7 Other changes - 278 - 10 - 13 301 C. Decreases -8 -469 - -32 - -75 -584 C.1 Sales - -1 - -1 - - -2 of which business combinations - - - - - - - C.2 Depreciation - -214 - -24 - -69 -307 C.3 Impairment losses recognised in: - -1 - - - - -1 a) shareholders' equity - - - - - - - b) income statement - -1 - - - - -1 C.4 Negative fair value differences recognised in: - - - - - -1 -1 a) shareholders' equity - - - - - - - b) income statement - - - - - -1 -1 C.5 Negative foreign exchange differences - -5 - - - -2 -7 C.6 Transfer to: - - - - - - - a) investment - - X X X X - b) non-current assets held for sale and discontinued operations - - - - - - - C.7 Other changes -8 -248 - -7 - -3 -266 D. Net final carrying amount 1 1,218 - 36 - 240 1,495 D.1 Total net adjustments - -718 - -39 - -34 -791 D.2 Gross final carrying amount 1 1,936 - 75 - 274 2,286 E. Measurement at cost - - - - - - - The Other changes, both increases and decreases, refer mainly to renegotiations and early terminations during the year of leases (IFRS 16). 9.7 Investment property: annual changes (millions of euro) TOTAL Land Buildings A. Initial carrying amount 281 517 B. Increases 41 87 B.1 Purchases - - of which business combinations - - B.2 Capitalised improvement costs - 7 B.3 Positive fair value differences 3 3 B.4 Recoveries - - B.5 Positive foreign exchange differences - - B.6 Transfer from investment property 36 72 B.7 Other changes 2 5 C. Decreases -51 -105 C.1 Sales -13 -30 of which business combinations - - C.2 Depreciation - - C.3 Negative fair value differences -10 -32 C.4 Impairment losses - -1 C.5 Negative foreign exchange differences - - C.6 Transfer to -24 -35 a) property used in operations -14 -19 b) non-current assets held for sale and discontinued operations -10 -16 C.7 Other changes -4 -7 D. Final carrying amount 271 499 E. Fair value measurement - - The table above shows the values of owned assets, as well as the rights of use acquired under leases. Investment property, comprised of land and buildings, is measured at fair value, in compliance with IAS 40. As illustrated in Part A \u2013 Fair value of real estate and valuable art assets, based on the rules on valuation frequencies, at the end of 2022 the appraisals were updated for all the investment properties, whose effects are recognised in the sub-captions B.3 Positive fair value differences and C.3 Negative fair value differences. 9.7 Of which - Investment property - Rights of use acquired under leases: annual changes As at 31 December 2022, the amount for Investment property - Rights of use acquired under leases was immaterial. 9.8 Inventories of property and equipment governed by IAS 2: annual changes (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 18 191 - - 1 680 890 B. Increases 1 24 - - 5 4 34 B.1 Purchases - - - - 5 - 5 B.2 Recoveries - 1 - - - - 1 B.3 Positive foreign exchange differences 1 1 - - - - 2 B.4 Other changes - 22 - - - 4 26 C. Decreases -6 -36 - - -6 -5 -53 C.1 Sales -5 -14 - - -5 -2 -26 C.2 Impairment losses - -17 - - - -1 -18 C.3 Negative foreign exchange differences -1 - - - - - -1 C.4 Other changes - -5 - - -1 -2 -8 D. Final carrying amount 13 179 - - - 679 871 9.8 Of which: Banking group (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 7 190 - - 1 26 224 B. Increases 1 24 - - 5 3 33 B.1 Purchases - - - - 5 - 5 B.2 Recoveries - 1 - - - - 1 B.3 Positive foreign exchange differences 1 1 - - - - 2 B.4 Other changes - 22 - - - 3 25 C. Decreases -5 -36 - - -6 -5 -52 C.1 Sales -5 -14 - - -5 -2 -26 C.2 Impairment losses - -17 - - - -1 -18 C.3 Negative foreign exchange differences - - - - - - - C.4 Other changes - -5 - - -1 -2 -8 D. Final carrying amount 3 178 - - - 24 205 9.8 Of which: Insurance companies There were no inventories of property and equipment governed by IAS 2 pertaining to insurance companies of the Intesa Sanpaolo Group. 9.8 Of which: Other companies (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 11 1 - - - 654 666 B. Increases - - - - - 1 1 B.1 Purchases - - - - - - - B.2 Recoveries - - - - - - - B.3 Positive foreign exchange differences - - - - - - - B.4 Other changes - - - - - 1 1 C. Decreases -1 - - - - - -1 C.1 Sales - - - - - - - C.2 Impairment losses - - - - - - - C.3 Negative foreign exchange differences -1 - - - - - -1 C.4 Other changes - - - - - - - D. Final carrying amount 10 1 - - - 655 666 9.9 Commitments to purchase property and equipment Commitments to purchase property and equipment in existence as at 31 December 2022 amounted to approximately 9 million euro, mainly relating to efficiency improvement measures implemented on the systems installations in the Group\u2019s head office buildings. Any commitments relating to lease agreements are illustrated in Part M. ", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1044": { "value": "SECTION 9 \u2013 PROPERTY AND EQUIPMENT \u2013 CAPTION 90 (millions of euro) Assets/Amounts 31.12.2022 31.12.2021 1. Property and equipment used in operations measured at cost 2,483 2,530 Of which - Property and equipment used in operations - Rights of use acquired under leases 1,495 1,521 2. Investment property measured at cost - - 3. Property and equipment used in operations, revalued 6,381 6,574 Of which - Property and equipment used in operations, revalued - Rights of use acquired under leases - - 4. Investment property measured at fair value 770 798 Of which - Investment property - Rights of use acquired under leases - - 5. Inventories of property and equipment governed by IAS 2 871 890 Total Property and equipment caption 90 10,505 10,792 9.1 Property and equipment used in operations: breakdown of assets measured at cost (millions of euro) 31.12.2022 31.12.2021 1. Property and equipment owned 988 1,009 a) land - - b) buildings - - c) furniture 194 207 d) electronic equipment 748 758 e) other 46 44 2. Rights of use acquired through the lease 1,495 1,521 a) land 1 9 b) buildings 1,218 1,331 c) furniture - - d) electronic equipment 36 16 e) other 240 165 Total 2,483 2,530 of which: resulting from the enforcement of guarantees 1 2 9.2 Investment property: breakdown of assets measured at cost There was no investment property measured at cost in the Intesa Sanpaolo Group. 9.3 Property and equipment used in operations: breakdown of revalued assets (millions of euro) 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Property and equipment owned - - 6,381 - - 6,574 a) land - - 2,641 - - 2,656 b) buildings - - 3,429 - - 3,606 c) valuable art assets - - 311 - - 312 d) electronic equipment - - - - - - e) other - - - - - - 2. Rights of use acquired through the lease - - - - - - a) land - - - - - - b) buildings - - - - - - c) furniture - - - - - - d) electronic equipment - - - - - - e) other - - - - - - TOTAL - - 6,381 - - 6,574 of which: resulting from the enforcement of guarantees - - - - - - 9.4 Investment property: breakdown of assets measured at fair value (millions of euro) 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Property and equipment owned - - 770 - - 798 a) land - - 271 - - 281 b) buildings - - 499 - - 517 2. Rights of use acquired through the lease - - - - - - a) land - - - - - - b) buildings - - - - - - TOTAL - - 770 - - 798 of which: resulting from the enforcement of guarantees - - 114 - - 138 With regard to the provisions of IAS 40, paragraph 75, letters c), g) and h), there was no information worth mentioning. 9.5 Inventories of property and equipment governed by IAS 2: breakdown (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Inventories of property and equipment resulting from the enforcement of guarantees 192 181 - 11 211 a) land 13 3 - 10 18 b) buildings 179 178 - 1 192 c) furniture - - - - - d) electronic equipment - - - - - e) other - - - - 1 2. Other inventories of property and equipment 679 24 - 655 679 Total 871 205 - 666 890 of which: measured at fair value less cost to sell 6 6 - - 1 9.6 Property and equipment used in operations: annual changes (millions of euro) Land Buildings Furniture Electronic equipment Valuable art assets Other Total A. Gross initial carrying amount 2,665 5,736 2,088 6,657 312 395 17,853 A.1 Total net adjustments - -799 -1,881 -5,883 - -186 -8,749 A.2 Net initial carrying amount 2,665 4,937 207 774 312 209 9,104 B. Increases 52 450 36 260 1 188 987 B.1 Purchases - 97 33 244 - 155 529 of which business combinations - - - - - - - B.2 Capitalised improvement costs 12 37 - - - - 49 B.3 Recoveries - - - - - - - B.4 Positive fair value differences recognised in: 16 11 - - - - 27 a) shareholders' equity 16 11 - - - - 27 b) income statement - - - - - - - B.5 Positive foreign exchange differences - - - - - - - B.6 Transfer from investment property 14 19 X X X X 33 B.7 Other changes 10 286 3 16 1 33 349 C. Decreases -75 -740 -49 -250 -2 -111 -1,227 C.1 Sales - -6 - -1 - -2 -9 of which business combinations - - - - - - - C.2 Depreciation - -342 -33 -221 - -79 -675 C.3 Impairment losses recognised in: - -3 -5 - - -2 -10 a) shareholders' equity - -3 - - - - -3 b) income statement - - -5 - - -2 -7 C.4 Negative fair value differences recognised in: -9 -13 - - -2 -1 -25 a) shareholders' equity -6 -9 - - - - -15 b) income statement -3 -4 - - -2 -1 -10 C.5 Negative foreign exchange differences -20 -46 -3 -5 - -2 -76 C.6 Transfer to: -38 -77 - - - - -115 a) investment -36 -72 X X X X -108 b) non-current assets held for sale and discontinued operations -2 -5 - - - - -7 C.7 Other changes -8 -253 -8 -23 - -25 -317 D. Net final carrying amount 2,642 4,647 194 784 311 286 8,864 D.1 Total net adjustments - -967 -1,902 -6,012 - -173 -9,054 D.2 Gross final carrying amount 2,642 5,614 2,096 6,796 311 459 17,918 E. Measurement at cost 1,852 2,450 - - 112 - 4,414 The table above shows the values of owned assets, as well as the rights of use acquired under leases. As explained in Part A \u2013 Fair value of real estate and valuable art assets, please note that, in accordance with the rules on valuation frequencies: \u2013 the properties classified as owner-occupied assets and trophy assets in the real estate portfolio were respectively subject to full valuation at the end of 2020 and the end of 2021, and were therefore subject to scenario analysis for 2022; \u2013 the valuable art assets were subject to scenario analyses for the year 2022, as they had been fully appraised at the end of 2020, through external appraisals, entrusted to qualified independent experts. Sub-captions B.4 and C.4 respectively report the positive and negative changes in fair value relating to owner-occupied real estate (land and buildings) and valuable art assets, for which the Bank applies the revaluation model. The Other changes, both increases and decreases, refer mainly to renegotiations and early terminations during the year of leases (IFRS 16) and, only regarding decreases, to amortisation and depreciation recorded during the year on assets deriving from the acquisition of business lines of the former Venetian banks, covered using the allowance for risks and charges specifically allocated at the time. Sub-caption E. Measurement at cost only contains property and equipment measured according to the revaluation model, in compliance with the instructions set out in Circular 262 of the Bank of Italy. 9.6 Of which - Property and equipment used in operations - Rights of use acquired under leases: annual changes (millions of euro) Land Buildings Furniture Electronic equipment Valuable art assets Other Total A. Gross initial carrying amount 9 1,968 - 36 - 193 2,206 A.1 Total net adjustments - -637 - -20 - -28 -685 A.2 Net initial carrying amount 9 1,331 - 16 - 165 1,521 B. Increases - 356 - 52 - 150 558 B.1 Purchases - 78 - 42 - 137 257 of which business combinations - - - - - - - B.2 Capitalised improvement costs - - - - - - - B.3 Recoveries - - - - - - - B.4 Positive fair value differences recognised in: - - - - - - - a) shareholders' equity - - - - - - - b) income statement - - - - - - - B.5 Positive foreign exchange differences - - - - - - - B.6 Transfer from investment property - - X X X X - B.7 Other changes - 278 - 10 - 13 301 C. Decreases -8 -469 - -32 - -75 -584 C.1 Sales - -1 - -1 - - -2 of which business combinations - - - - - - - C.2 Depreciation - -214 - -24 - -69 -307 C.3 Impairment losses recognised in: - -1 - - - - -1 a) shareholders' equity - - - - - - - b) income statement - -1 - - - - -1 C.4 Negative fair value differences recognised in: - - - - - -1 -1 a) shareholders' equity - - - - - - - b) income statement - - - - - -1 -1 C.5 Negative foreign exchange differences - -5 - - - -2 -7 C.6 Transfer to: - - - - - - - a) investment - - X X X X - b) non-current assets held for sale and discontinued operations - - - - - - - C.7 Other changes -8 -248 - -7 - -3 -266 D. Net final carrying amount 1 1,218 - 36 - 240 1,495 D.1 Total net adjustments - -718 - -39 - -34 -791 D.2 Gross final carrying amount 1 1,936 - 75 - 274 2,286 E. Measurement at cost - - - - - - - The Other changes, both increases and decreases, refer mainly to renegotiations and early terminations during the year of leases (IFRS 16). 9.7 Investment property: annual changes (millions of euro) TOTAL Land Buildings A. Initial carrying amount 281 517 B. Increases 41 87 B.1 Purchases - - of which business combinations - - B.2 Capitalised improvement costs - 7 B.3 Positive fair value differences 3 3 B.4 Recoveries - - B.5 Positive foreign exchange differences - - B.6 Transfer from investment property 36 72 B.7 Other changes 2 5 C. Decreases -51 -105 C.1 Sales -13 -30 of which business combinations - - C.2 Depreciation - - C.3 Negative fair value differences -10 -32 C.4 Impairment losses - -1 C.5 Negative foreign exchange differences - - C.6 Transfer to -24 -35 a) property used in operations -14 -19 b) non-current assets held for sale and discontinued operations -10 -16 C.7 Other changes -4 -7 D. Final carrying amount 271 499 E. Fair value measurement - - The table above shows the values of owned assets, as well as the rights of use acquired under leases. Investment property, comprised of land and buildings, is measured at fair value, in compliance with IAS 40. As illustrated in Part A \u2013 Fair value of real estate and valuable art assets, based on the rules on valuation frequencies, at the end of 2022 the appraisals were updated for all the investment properties, whose effects are recognised in the sub-captions B.3 Positive fair value differences and C.3 Negative fair value differences. 9.7 Of which - Investment property - Rights of use acquired under leases: annual changes As at 31 December 2022, the amount for Investment property - Rights of use acquired under leases was immaterial. 9.8 Inventories of property and equipment governed by IAS 2: annual changes (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 18 191 - - 1 680 890 B. Increases 1 24 - - 5 4 34 B.1 Purchases - - - - 5 - 5 B.2 Recoveries - 1 - - - - 1 B.3 Positive foreign exchange differences 1 1 - - - - 2 B.4 Other changes - 22 - - - 4 26 C. Decreases -6 -36 - - -6 -5 -53 C.1 Sales -5 -14 - - -5 -2 -26 C.2 Impairment losses - -17 - - - -1 -18 C.3 Negative foreign exchange differences -1 - - - - - -1 C.4 Other changes - -5 - - -1 -2 -8 D. Final carrying amount 13 179 - - - 679 871 9.8 Of which: Banking group (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 7 190 - - 1 26 224 B. Increases 1 24 - - 5 3 33 B.1 Purchases - - - - 5 - 5 B.2 Recoveries - 1 - - - - 1 B.3 Positive foreign exchange differences 1 1 - - - - 2 B.4 Other changes - 22 - - - 3 25 C. Decreases -5 -36 - - -6 -5 -52 C.1 Sales -5 -14 - - -5 -2 -26 C.2 Impairment losses - -17 - - - -1 -18 C.3 Negative foreign exchange differences - - - - - - - C.4 Other changes - -5 - - -1 -2 -8 D. Final carrying amount 3 178 - - - 24 205 9.8 Of which: Insurance companies There were no inventories of property and equipment governed by IAS 2 pertaining to insurance companies of the Intesa Sanpaolo Group. 9.8 Of which: Other companies (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 11 1 - - - 654 666 B. Increases - - - - - 1 1 B.1 Purchases - - - - - - - B.2 Recoveries - - - - - - - B.3 Positive foreign exchange differences - - - - - - - B.4 Other changes - - - - - 1 1 C. Decreases -1 - - - - - -1 C.1 Sales - - - - - - - C.2 Impairment losses - - - - - - - C.3 Negative foreign exchange differences -1 - - - - - -1 C.4 Other changes - - - - - - - D. Final carrying amount 10 1 - - - 655 666 9.9 Commitments to purchase property and equipment Commitments to purchase property and equipment in existence as at 31 December 2022 amounted to approximately 9 million euro, mainly relating to efficiency improvement measures implemented on the systems installations in the Group\u2019s head office buildings. Any commitments relating to lease agreements are illustrated in Part M. 1.1 Financial liabilities measured at amortised cost: breakdown of amounts due to banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to central banks 98,444 X X X 134,790 X X X 2. Due to banks 39,038 X X X 30,468 X X X 2.1 Current accounts and on demand deposits 3,234 X X X 3,197 X X X 2.2 Time deposits 3,807 X X X 4,394 X X X 2.3 Loans 18,610 X X X 18,574 X X X 2.3.1 Repurchase agreements 12,753 X X X 12,160 X X X 2.3.2 Other 5,857 X X X 6,414 X X X 2.4 Debts for commitments to repurchase own equity instruments - X X X 138 X X X 2.5 Lease liabilities 6 X X X 8 X X X 2.6 Other debts 13,381 X X X 4,157 X X X Total 137,482 - 125,164 12,148 165,258 - 153,297 11,916 The illustration of the criteria used to determine the fair value is contained in Part A \u2013 Accounting policies. Repurchase agreements related to assets sold not derecognised are detailed in Part E - Sales of the Notes to the financial statements. The caption Due to Central Banks includes the balance of TLTRO refinancing operations for a total of 96,060 million euro, fully attributable to the TLTRO III. The Group\u2019s repurchase agreements shown in the table include long-term repurchase agreements with a total carrying amount of 238 million euro, attributable to Banca Fideuram for de-risking transactions completed in previous years with the twofold aim of both funding the bank\u2019s operations (through repurchase transactions) and reducing the credit risks associated with the portfolio of securities issued (also through the acquisition of financial guarantees). The transactions have a non- replaceable underlying portfolio of Italian government securities (with maturities from 2023 to 2033) hedged against interest rate risk through interest rate swap contracts and against credit risk through credit default swap contracts, already recorded in the financial statements at the time of execution of the repurchase transactions and recognised under financial assets measured at amortised cost. The nominal value and the maturity date of the repurchase agreements are the same as that of the securities. For recognition purposes, an assessment was conducted aimed at understanding the purpose underlying the contractual agreements, taking into account the instructions provided by the supervisory authorities in Bank of Italy/Consob/IVASS Document No. 6 of 8 March 2013, \u201cAccounting treatment of \u2018long-term structured repurchase agreements\u2019.\u201d The analysis focused on the structure, cash flows and risks associated with the transactions and was aimed at verifying whether the cases described above were similar to the long-term structured repurchase agreements described in the above Document, and, in order to be compliant with the principle of the prevalence of substance over form, whether the indicators referred in paragraph B.6 of the Guidance on Implementing IFRS 9, according to which the transaction may be considered substantially similar to a credit derivative contract, and, in particular, a credit default swap, were present. The case described above consists of repurchase agreements that are not concurrent with the purchases of the securities, because they were already present in the portfolio. In addition, buying securities and entering into the related hedging derivatives occurred with market counterparties other than those with which the repurchase agreements were entered into. The credit risk was also closed with financial guarantees. Consequently, the analysis shows elements of differentiation from the long-term structured repurchase agreements described in the aforementioned Document, supporting the inapplicability of the guidelines provided in paragraph B.6 of the Guidance on Implementing IFRS 9, with the result that the transactions must be recognised in the financial statements with the individual contractual components shown separately.
1.2 Financial liabilities measured at amortised cost: breakdown of amounts due to customers
(millions of euro)
Transaction type/Amount
31.12.2022
31.12.2021
Book
value
Fair value
Book
value
Fair value
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
1. Current accounts and on demand deposits
412,667
X
X
X
423,335
X
X
X
2. Time deposits
20,309
X
X
X
19,184
X
X
X
3. Loans
5,200
X
X
X
5,716
X
X
X
3.1 Repurchase agreements
1,284
X
X
X
2,691
X
X
X
3.2 Other
3,916
X
X
X
3,025
X
X
X
4. Debts for commitments to repurchase own equity
instruments
181
X
X
X
23
X
X
X
5. Lease liabilities
1,309
X
X
X
1,379
X
X
X
6. Other debts
14,359
X
X
X
8,602
X
X
X
Total
454,025
-
435,464
18,132
458,239
-
433,309
25,130
1.6 Lease payables As at 31 December 2022 lease payables amounted to 1,315 million euro, of which 238 million euro maturing within one year, 622 million euro maturing within 1 to 5 years and 455 million euro maturing in over 5 years. Lease payables comprise 1,309 million euro referring to customer counterparties and 6 million euro to bank counterparties. These derive from the application of the financial reporting standard IFRS 16 relating to Leases, with effect from 1 January 2019. 1.1 Bis Due to banks: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1. Due to central banks - - 2. Due to banks 629 623 2.1 Current accounts and deposits 6 - 2.2 Time deposits - - 2.3 Loans 607 607 2.3.1 Repurchase agreements - - 2.3.2 Financial leasing loans - 2.3.3 Other 607 607 2.4 Debts for commitments to repurchase own equity instruments - - 2.5 Lease liabilities - 2.6 Other debts 16 16 TOTAL (Book value) 629 623 Fair value - level 1 - - Fair value - level 2 17 - Fair value - level 3 556 650 Total Fair value 573 650 1.5 Bis Lease payables As at 31 December 2022 there were no lease payables due to banks. 1.6 Bis Due to customers: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1.Current accounts and deposits - - 2 Time deposits - - 3. Loans - - 3.1 Repurchase agreements - - 3.2 Financial leasing loans - - 3.3 Other - - 4. Debts for commitments to repurchase own equity instruments 360 87 5. Lease liabilities 6 7 6. Other debts 221 94 Total (Book value) 587 188 Fair value - level 1 - - Fair value - level 2 452 93 Fair value - level 3 135 95 Total Fair Value 587 188 The amount under Debts for commitments to repurchase own equity instruments refers to put options sold with minority stakes of fully consolidated equity investments as underlying asset, attributable to the Put & Call Agreement for the purchase of 26% of Intesa Sanpaolo RBM Salute S.p.A. 1.10 Bis Lease payables As at 31 December 2022 there were lease payables due to customers of 6 million euro, all of which are due between 1 and 5 years. These derive from the application of the financial reporting standard IFRS 16 relating to Leases, with effect from 1 January 2019.
Part M \u2013 Disclosure of leases
This section provides the information required by IFRS 16 that is not included in other parts of the financial statements,
divided between lessee and lessor.
SECTION 1 - LESSEE
QUALITATIVE INFORMATION
The Intesa Sanpaolo Group essentially has real estate and car or other vehicle lease contracts in place. There are also other
types of lease contracts, for residual amounts, mainly relating to hardware.
As at 31 December 2022, there were 8,622 lease contracts (9,297 as at 31 December 2021), 5,255 of which (5,963 as at 31
December 2021) relating to real estate leases, for a total value of rights of use of 1,495 million euro (1,521 million euro as at
31 December 2021). Real estate lease contracts include properties designated for use as offices or bank branches. The
contracts, within Italy, normally have a term of more than 12 months and typically have renewal and termination options that
can be exercised by the lessor and the lessee in accordance with the law or specific contractual provisions. These contracts
usually do not include the option to purchase at the end of the lease or significant restoration costs for the companies. On the
basis of the characteristics of the Italian lease contracts and the provisions of Law 392/1978, in the event of the signing of a
new lease contract with a contractual term of six years and the option to automatically renew the contract after six years for
another six years, the total term of the lease will be set at twelve years. This general rule is superseded if there are new
elements or specific situations within the contract. Within the international scope, contractual terms may vary according to
local practice, while generally not exceeding a period of 5 years, subject to renewal. In the case of the international
subsidiaries as well, these contracts do not provide for either an option to purchase at the end of the lease or significant
restoration costs for the companies.
Contracts for vehicles are long-term rental contracts relating to the company fleet made available to employees (mixed use) or
to the organisational structures of the individual companies. These contracts generally have a four-year term, with monthly
payments, no renewal option and do not include the option to purchase the asset. The contract may be extended depending
on the management of the car fleet and there may be a penalty in the event of early termination.
Lease contracts other than those relating to real estate and cars relate to hardware (54 contracts as at 31 December 2022, 55
as at 31 December 2021) and other residual contracts (229 as at 31 December 2022, 123 as at 31 December 2021) and are
of immaterial amounts in relation to total property and equipment leased.
The amounts of the sale or leaseback transactions carried out in 2022 were insignificant.
Sub-leasing transactions are immaterial and are connected to intra-group transactions.
Lastly, the Group makes use of the exemptions allowed by IFRS 16 for short-term leases (i.e. with a term of less than or equal
to 12 months) or leases of low value assets (i.e. with a value of 5,000 euro or less).
QUANTITATIVE DISCLOSURES
Part B - Assets in the Notes to the consolidated financial statements contains information on the rights of use acquired
through leases (Table 9.1 - Property and equipment used in operations: breakdown of assets measured at cost and Table 9.4
- Investment property: breakdown of assets measured at fair value) and Part B - Liabilities contains information on the lease
payables (Table 1.1 - Financial liabilities measured at amortised cost: breakdown of amounts due to banks and Table 1.2 -
Financial liabilities measured at amortised cost: breakdown of amounts due to customers and Table 1.6 bis \u2013 Amounts due to
customers: breakdown).
In particular, the rights of use acquired through leases amounted to 1,495 million euro (1,521 million euro as at 31 December
2021), of which 1,219 million euro relating to real estate leases (1,340 million euro as at 31 December 2021).
Lease payables amounted to 1,321 million euro (1,394 million euro as at 31 December 2021). See the abovementioned
sections for more details.
Part C of the Notes to the consolidated financial statements contains information on the interest expense on lease payables
and other charges connected to rights of use acquired through leases, and on the income from sub-leasing transactions. See
the specific sections for more details.
The table below provides a breakdown of the amortisation and depreciation charges for assets consisting of the right of use
among the various categories, in line with the disclosure of property and equipment/intangible assets.
( millions of euro) Captions 31.12.2022 31.12.2021 Depreciation charges by asset class - - Property and equipment used in operations 307 288 a) buildings 210 236 b) forniture - - c) electronic equipment 22 7 d) other 75 45 Property and equipment for investment - - a) buildings - - TOTAL 307 288 As at 31 December 2022, there was no property and equipment relating to commitments for leases not yet commenced. There is no other information that needs to be reported in addition to that already contained in this section.
SECTION 2 - LESSOR
QUALITATIVE INFORMATION
The Intesa Sanpaolo Group undertakes lease transactions, as lessor, primarily through the Parent Company, Intesa
Sanpaolo, and various international subsidiaries, specifically PBZ Leasing, VUB Leasing, CIB Leasing and Intesa Leasing
Beograd.
The transactions primarily consist of finance leases of real estate and industrial and commercial assets. The companies are
also present on the market with lease products relating to capital goods, industrial vehicles, boats and pleasure craft. The
risks associated with the ownership rights to the leased assets within Italy are managed through the compulsory subscription
of an all-risk insurance policy, either offered through concessionary agreements or taken out directly by the customer with
their insurer.
Operating leases refer to both real estate and vehicles and equipment.
The Notes to the consolidated financial statements report the following:
\u2212 finance leases (Part B, Assets: Table 4.1 - Financial assets measured at amortised cost: breakdown of amounts due
from banks and Table 4.2 - Financial assets measured at amortised cost: breakdown of loans to customers);
\u2212 assets leased under operating leases contained in caption 90 Property and equipment and described in Part B, Assets
(Table 9.4 - Investment property: breakdown of assets measured at fair value); this consists of real estate no longer used
in operations by the Group, which is leased to third parties or held for possible appreciation in value. This item showed
no amounts as at 31 December 2022.
See the abovementioned sections for more details.
Part C of the Notes to the consolidated financial statements contains information on interest income on finance leases and
other income from finance and operating leases. See the specific sections for more details.
2. Finance leases
2.1. Breakdown by time bands of payments to be received and reconciliation with finance leases recorded as assets
This table provides the breakdown by time bands of lease payments to be received and the reconciliation between lease
payments to be received and finance leases in accordance with IFRS 16, paragraph 94. In particular, the lease payments to
be received, representing the sum of the minimum payments due as principal and interest, are shown net of the adjustment
allowances and the unguaranteed residual value due to the lessor. The reconciliation with finance leases, shown in the
financial statements under financial assets measured at amortised cost, is performed by subtracting the unearned finance
income and adding the unguaranteed residual value.
(millions of euro)
Time bands
31.12.2022
31.12.2021
Payments to be received
Payments to be received
Up to 1 year
1,738
2,471
Between 1 and 2 years
1,423
2,064
Between 2 and 3 years
1,222
1,802
Between 3 and 4 years
978
1,537
Between 4 and 5 years
794
1,259
Over 5 years
1,984
3,750
Total lease payments to be received
8,139
12,883
Reconciliation with loans
-59
-408
Not accrued gains (+)
1,276
2,024
Unguaranteed residual value (-)
-1,335
-2,432
Loans for leases
8,198
13,291
2.2. Other information
2.2.1 Classification of finance leases by type of leased asset
The table shows the classification of finance leases by credit quality (performing and non-performing) and by type of leased
asset. The amounts are shown net of adjustments.
(millions of euro)
Finance leases
Performing
exposures
Non-performing
exposures
A. Real estate assets
5,352
364
B. Operating assets
1,310
19
C. Movable assets
1,113
30
- Motor vehicles
747
25
- Aircraft and rolling stock
235
3
- Other
131
2
D. Intangible assets
10
-
- Trademarks
10
-
- Software
-
-
- Other
-
-
2.2.2 Classification of assets under finance leases
The table below provides a breakdown by category of leased asset (not yet transferred to property and equipment) relating to
lease receivables, net of adjustments.
(millions of euro)
Unexercised
assets
Assets withdrawn
following
termination
Other assets
A. Real estate assets
14
4
5,698
B. Operating assets
-
-
1,329
C. Movable assets
76
-
1,067
- Motor vehicles
55
-
717
- Aircraft and rolling stock
1
-
237
- Other
20
-
113
D. Intangible assets
-
-
10
- Trademarks
-
-
10
- Software
-
-
-
- Other
-
-
-
TOTAL
90
4
8,104
Unexercised assets are assets still held by customers, for which the repurchase option has not been exercised, related to
positions that do not show any deterioration in credit quality. Assets withdrawn following termination relate to terminated
contracts, where the customer has not yet been released from the contractual obligations, despite having returned the asset
covered by the lease contract. The category \"other assets\" includes the assets underlying the other lease receivables not
included in the previous columns.
3. Operating lease
3.1. Breakdown of payments to be received by time bands
This refers to lease instalments to be received for owned real estate assets.
(millions of euro)
Time bands
31.12.2022
31.12.2021
Payments to be
received for leases
Payments to be
received for leases
Up to one year
29
15
Over one year up to 2 years
13
11
Over 2 years up to 3 years
9
10
Over 3 years up to 4 years
9
9
Over 4 years up to 5 years
9
10
For over 5 years
20
19
Total
89
74
3.2. Other information
There is no other information that needs to be reported in addition to that already contained in this section.
", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1054": { "value": "SECTION 9 \u2013 PROPERTY AND EQUIPMENT \u2013 CAPTION 90 (millions of euro) Assets/Amounts 31.12.2022 31.12.2021 1. Property and equipment used in operations measured at cost 2,483 2,530 Of which - Property and equipment used in operations - Rights of use acquired under leases 1,495 1,521 2. Investment property measured at cost - - 3. Property and equipment used in operations, revalued 6,381 6,574 Of which - Property and equipment used in operations, revalued - Rights of use acquired under leases - - 4. Investment property measured at fair value 770 798 Of which - Investment property - Rights of use acquired under leases - - 5. Inventories of property and equipment governed by IAS 2 871 890 Total Property and equipment caption 90 10,505 10,792 9.1 Property and equipment used in operations: breakdown of assets measured at cost (millions of euro) 31.12.2022 31.12.2021 1. Property and equipment owned 988 1,009 a) land - - b) buildings - - c) furniture 194 207 d) electronic equipment 748 758 e) other 46 44 2. Rights of use acquired through the lease 1,495 1,521 a) land 1 9 b) buildings 1,218 1,331 c) furniture - - d) electronic equipment 36 16 e) other 240 165 Total 2,483 2,530 of which: resulting from the enforcement of guarantees 1 2 9.2 Investment property: breakdown of assets measured at cost There was no investment property measured at cost in the Intesa Sanpaolo Group. 9.3 Property and equipment used in operations: breakdown of revalued assets (millions of euro) 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Property and equipment owned - - 6,381 - - 6,574 a) land - - 2,641 - - 2,656 b) buildings - - 3,429 - - 3,606 c) valuable art assets - - 311 - - 312 d) electronic equipment - - - - - - e) other - - - - - - 2. Rights of use acquired through the lease - - - - - - a) land - - - - - - b) buildings - - - - - - c) furniture - - - - - - d) electronic equipment - - - - - - e) other - - - - - - TOTAL - - 6,381 - - 6,574 of which: resulting from the enforcement of guarantees - - - - - - 9.4 Investment property: breakdown of assets measured at fair value (millions of euro) 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Property and equipment owned - - 770 - - 798 a) land - - 271 - - 281 b) buildings - - 499 - - 517 2. Rights of use acquired through the lease - - - - - - a) land - - - - - - b) buildings - - - - - - TOTAL - - 770 - - 798 of which: resulting from the enforcement of guarantees - - 114 - - 138 With regard to the provisions of IAS 40, paragraph 75, letters c), g) and h), there was no information worth mentioning. 9.5 Inventories of property and equipment governed by IAS 2: breakdown (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Inventories of property and equipment resulting from the enforcement of guarantees 192 181 - 11 211 a) land 13 3 - 10 18 b) buildings 179 178 - 1 192 c) furniture - - - - - d) electronic equipment - - - - - e) other - - - - 1 2. Other inventories of property and equipment 679 24 - 655 679 Total 871 205 - 666 890 of which: measured at fair value less cost to sell 6 6 - - 1 9.6 Property and equipment used in operations: annual changes (millions of euro) Land Buildings Furniture Electronic equipment Valuable art assets Other Total A. Gross initial carrying amount 2,665 5,736 2,088 6,657 312 395 17,853 A.1 Total net adjustments - -799 -1,881 -5,883 - -186 -8,749 A.2 Net initial carrying amount 2,665 4,937 207 774 312 209 9,104 B. Increases 52 450 36 260 1 188 987 B.1 Purchases - 97 33 244 - 155 529 of which business combinations - - - - - - - B.2 Capitalised improvement costs 12 37 - - - - 49 B.3 Recoveries - - - - - - - B.4 Positive fair value differences recognised in: 16 11 - - - - 27 a) shareholders' equity 16 11 - - - - 27 b) income statement - - - - - - - B.5 Positive foreign exchange differences - - - - - - - B.6 Transfer from investment property 14 19 X X X X 33 B.7 Other changes 10 286 3 16 1 33 349 C. Decreases -75 -740 -49 -250 -2 -111 -1,227 C.1 Sales - -6 - -1 - -2 -9 of which business combinations - - - - - - - C.2 Depreciation - -342 -33 -221 - -79 -675 C.3 Impairment losses recognised in: - -3 -5 - - -2 -10 a) shareholders' equity - -3 - - - - -3 b) income statement - - -5 - - -2 -7 C.4 Negative fair value differences recognised in: -9 -13 - - -2 -1 -25 a) shareholders' equity -6 -9 - - - - -15 b) income statement -3 -4 - - -2 -1 -10 C.5 Negative foreign exchange differences -20 -46 -3 -5 - -2 -76 C.6 Transfer to: -38 -77 - - - - -115 a) investment -36 -72 X X X X -108 b) non-current assets held for sale and discontinued operations -2 -5 - - - - -7 C.7 Other changes -8 -253 -8 -23 - -25 -317 D. Net final carrying amount 2,642 4,647 194 784 311 286 8,864 D.1 Total net adjustments - -967 -1,902 -6,012 - -173 -9,054 D.2 Gross final carrying amount 2,642 5,614 2,096 6,796 311 459 17,918 E. Measurement at cost 1,852 2,450 - - 112 - 4,414 The table above shows the values of owned assets, as well as the rights of use acquired under leases. As explained in Part A \u2013 Fair value of real estate and valuable art assets, please note that, in accordance with the rules on valuation frequencies: \u2013 the properties classified as owner-occupied assets and trophy assets in the real estate portfolio were respectively subject to full valuation at the end of 2020 and the end of 2021, and were therefore subject to scenario analysis for 2022; \u2013 the valuable art assets were subject to scenario analyses for the year 2022, as they had been fully appraised at the end of 2020, through external appraisals, entrusted to qualified independent experts. Sub-captions B.4 and C.4 respectively report the positive and negative changes in fair value relating to owner-occupied real estate (land and buildings) and valuable art assets, for which the Bank applies the revaluation model. The Other changes, both increases and decreases, refer mainly to renegotiations and early terminations during the year of leases (IFRS 16) and, only regarding decreases, to amortisation and depreciation recorded during the year on assets deriving from the acquisition of business lines of the former Venetian banks, covered using the allowance for risks and charges specifically allocated at the time. Sub-caption E. Measurement at cost only contains property and equipment measured according to the revaluation model, in compliance with the instructions set out in Circular 262 of the Bank of Italy. 9.6 Of which - Property and equipment used in operations - Rights of use acquired under leases: annual changes (millions of euro) Land Buildings Furniture Electronic equipment Valuable art assets Other Total A. Gross initial carrying amount 9 1,968 - 36 - 193 2,206 A.1 Total net adjustments - -637 - -20 - -28 -685 A.2 Net initial carrying amount 9 1,331 - 16 - 165 1,521 B. Increases - 356 - 52 - 150 558 B.1 Purchases - 78 - 42 - 137 257 of which business combinations - - - - - - - B.2 Capitalised improvement costs - - - - - - - B.3 Recoveries - - - - - - - B.4 Positive fair value differences recognised in: - - - - - - - a) shareholders' equity - - - - - - - b) income statement - - - - - - - B.5 Positive foreign exchange differences - - - - - - - B.6 Transfer from investment property - - X X X X - B.7 Other changes - 278 - 10 - 13 301 C. Decreases -8 -469 - -32 - -75 -584 C.1 Sales - -1 - -1 - - -2 of which business combinations - - - - - - - C.2 Depreciation - -214 - -24 - -69 -307 C.3 Impairment losses recognised in: - -1 - - - - -1 a) shareholders' equity - - - - - - - b) income statement - -1 - - - - -1 C.4 Negative fair value differences recognised in: - - - - - -1 -1 a) shareholders' equity - - - - - - - b) income statement - - - - - -1 -1 C.5 Negative foreign exchange differences - -5 - - - -2 -7 C.6 Transfer to: - - - - - - - a) investment - - X X X X - b) non-current assets held for sale and discontinued operations - - - - - - - C.7 Other changes -8 -248 - -7 - -3 -266 D. Net final carrying amount 1 1,218 - 36 - 240 1,495 D.1 Total net adjustments - -718 - -39 - -34 -791 D.2 Gross final carrying amount 1 1,936 - 75 - 274 2,286 E. Measurement at cost - - - - - - - The Other changes, both increases and decreases, refer mainly to renegotiations and early terminations during the year of leases (IFRS 16). 9.7 Investment property: annual changes (millions of euro) TOTAL Land Buildings A. Initial carrying amount 281 517 B. Increases 41 87 B.1 Purchases - - of which business combinations - - B.2 Capitalised improvement costs - 7 B.3 Positive fair value differences 3 3 B.4 Recoveries - - B.5 Positive foreign exchange differences - - B.6 Transfer from investment property 36 72 B.7 Other changes 2 5 C. Decreases -51 -105 C.1 Sales -13 -30 of which business combinations - - C.2 Depreciation - - C.3 Negative fair value differences -10 -32 C.4 Impairment losses - -1 C.5 Negative foreign exchange differences - - C.6 Transfer to -24 -35 a) property used in operations -14 -19 b) non-current assets held for sale and discontinued operations -10 -16 C.7 Other changes -4 -7 D. Final carrying amount 271 499 E. Fair value measurement - - The table above shows the values of owned assets, as well as the rights of use acquired under leases. Investment property, comprised of land and buildings, is measured at fair value, in compliance with IAS 40. As illustrated in Part A \u2013 Fair value of real estate and valuable art assets, based on the rules on valuation frequencies, at the end of 2022 the appraisals were updated for all the investment properties, whose effects are recognised in the sub-captions B.3 Positive fair value differences and C.3 Negative fair value differences. 9.7 Of which - Investment property - Rights of use acquired under leases: annual changes As at 31 December 2022, the amount for Investment property - Rights of use acquired under leases was immaterial. 9.8 Inventories of property and equipment governed by IAS 2: annual changes (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 18 191 - - 1 680 890 B. Increases 1 24 - - 5 4 34 B.1 Purchases - - - - 5 - 5 B.2 Recoveries - 1 - - - - 1 B.3 Positive foreign exchange differences 1 1 - - - - 2 B.4 Other changes - 22 - - - 4 26 C. Decreases -6 -36 - - -6 -5 -53 C.1 Sales -5 -14 - - -5 -2 -26 C.2 Impairment losses - -17 - - - -1 -18 C.3 Negative foreign exchange differences -1 - - - - - -1 C.4 Other changes - -5 - - -1 -2 -8 D. Final carrying amount 13 179 - - - 679 871 9.8 Of which: Banking group (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 7 190 - - 1 26 224 B. Increases 1 24 - - 5 3 33 B.1 Purchases - - - - 5 - 5 B.2 Recoveries - 1 - - - - 1 B.3 Positive foreign exchange differences 1 1 - - - - 2 B.4 Other changes - 22 - - - 3 25 C. Decreases -5 -36 - - -6 -5 -52 C.1 Sales -5 -14 - - -5 -2 -26 C.2 Impairment losses - -17 - - - -1 -18 C.3 Negative foreign exchange differences - - - - - - - C.4 Other changes - -5 - - -1 -2 -8 D. Final carrying amount 3 178 - - - 24 205 9.8 Of which: Insurance companies There were no inventories of property and equipment governed by IAS 2 pertaining to insurance companies of the Intesa Sanpaolo Group. 9.8 Of which: Other companies (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 11 1 - - - 654 666 B. Increases - - - - - 1 1 B.1 Purchases - - - - - - - B.2 Recoveries - - - - - - - B.3 Positive foreign exchange differences - - - - - - - B.4 Other changes - - - - - 1 1 C. Decreases -1 - - - - - -1 C.1 Sales - - - - - - - C.2 Impairment losses - - - - - - - C.3 Negative foreign exchange differences -1 - - - - - -1 C.4 Other changes - - - - - - - D. Final carrying amount 10 1 - - - 655 666 9.9 Commitments to purchase property and equipment Commitments to purchase property and equipment in existence as at 31 December 2022 amounted to approximately 9 million euro, mainly relating to efficiency improvement measures implemented on the systems installations in the Group\u2019s head office buildings. Any commitments relating to lease agreements are illustrated in Part M. SECTION 1 \u2013 FINANCIAL LIABILITIES MEASURED AT AMORTISED COST - CAPTION 10 1.1 Financial liabilities measured at amortised cost: breakdown of amounts due to banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to central banks 98,444 X X X 134,790 X X X 2. Due to banks 39,038 X X X 30,468 X X X 2.1 Current accounts and on demand deposits 3,234 X X X 3,197 X X X 2.2 Time deposits 3,807 X X X 4,394 X X X 2.3 Loans 18,610 X X X 18,574 X X X 2.3.1 Repurchase agreements 12,753 X X X 12,160 X X X 2.3.2 Other 5,857 X X X 6,414 X X X 2.4 Debts for commitments to repurchase own equity instruments - X X X 138 X X X 2.5 Lease liabilities 6 X X X 8 X X X 2.6 Other debts 13,381 X X X 4,157 X X X Total 137,482 - 125,164 12,148 165,258 - 153,297 11,916 The illustration of the criteria used to determine the fair value is contained in Part A \u2013 Accounting policies. Repurchase agreements related to assets sold not derecognised are detailed in Part E - Sales of the Notes to the financial statements. The caption Due to Central Banks includes the balance of TLTRO refinancing operations for a total of 96,060 million euro, fully attributable to the TLTRO III. The Group\u2019s repurchase agreements shown in the table include long-term repurchase agreements with a total carrying amount of 238 million euro, attributable to Banca Fideuram for de-risking transactions completed in previous years with the twofold aim of both funding the bank\u2019s operations (through repurchase transactions) and reducing the credit risks associated with the portfolio of securities issued (also through the acquisition of financial guarantees). The transactions have a non- replaceable underlying portfolio of Italian government securities (with maturities from 2023 to 2033) hedged against interest rate risk through interest rate swap contracts and against credit risk through credit default swap contracts, already recorded in the financial statements at the time of execution of the repurchase transactions and recognised under financial assets measured at amortised cost. The nominal value and the maturity date of the repurchase agreements are the same as that of the securities. For recognition purposes, an assessment was conducted aimed at understanding the purpose underlying the contractual agreements, taking into account the instructions provided by the supervisory authorities in Bank of Italy/Consob/IVASS Document No. 6 of 8 March 2013, \u201cAccounting treatment of \u2018long-term structured repurchase agreements\u2019.\u201d The analysis focused on the structure, cash flows and risks associated with the transactions and was aimed at verifying whether the cases described above were similar to the long-term structured repurchase agreements described in the above Document, and, in order to be compliant with the principle of the prevalence of substance over form, whether the indicators referred in paragraph B.6 of the Guidance on Implementing IFRS 9, according to which the transaction may be considered substantially similar to a credit derivative contract, and, in particular, a credit default swap, were present. The case described above consists of repurchase agreements that are not concurrent with the purchases of the securities, because they were already present in the portfolio. In addition, buying securities and entering into the related hedging derivatives occurred with market counterparties other than those with which the repurchase agreements were entered into. The credit risk was also closed with financial guarantees. Consequently, the analysis shows elements of differentiation from the long-term structured repurchase agreements described in the aforementioned Document, supporting the inapplicability of the guidelines provided in paragraph B.6 of the Guidance on Implementing IFRS 9, with the result that the transactions must be recognised in the financial statements with the individual contractual components shown separately. 1.2 Financial liabilities measured at amortised cost: breakdown of amounts due to customers (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Current accounts and on demand deposits 412,667 X X X 423,335 X X X 2. Time deposits 20,309 X X X 19,184 X X X 3. Loans 5,200 X X X 5,716 X X X 3.1 Repurchase agreements 1,284 X X X 2,691 X X X 3.2 Other 3,916 X X X 3,025 X X X 4. Debts for commitments to repurchase own equity instruments 181 X X X 23 X X X 5. Lease liabilities 1,309 X X X 1,379 X X X 6. Other debts 14,359 X X X 8,602 X X X Total 454,025 - 435,464 18,132 458,239 - 433,309 25,130 1.6 Lease payables As at 31 December 2022 lease payables amounted to 1,315 million euro, of which 238 million euro maturing within one year, 622 million euro maturing within 1 to 5 years and 455 million euro maturing in over 5 years. Lease payables comprise 1,309 million euro referring to customer counterparties and 6 million euro to bank counterparties. These derive from the application of the financial reporting standard IFRS 16 relating to Leases, with effect from 1 January 2019. SECTION 1 BIS - FINANCIAL LIABILITIES PERTAINING TO INSURANCE COMPANIES MEASURED AT AMORTISED COST PURSUANT TO IAS 39 - CAPTION 15 The breakdown of the IAS 39 captions included in caption 15 of the Balance sheet liabilities pertaining to insurance companies is provided below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 15 Financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39 - Caption 15 31.12.2022 31.12.2021 10. Due to banks 629 623 20. Due to customers 587 188 30. Securities issued 1,334 1,335 Total - Caption 15 2,550 2,146 1.1 Bis Due to banks: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1. Due to central banks - - 2. Due to banks 629 623 2.1 Current accounts and deposits 6 - 2.2 Time deposits - - 2.3 Loans 607 607 2.3.1 Repurchase agreements - - 2.3.2 Financial leasing loans - 2.3.3 Other 607 607 2.4 Debts for commitments to repurchase own equity instruments - - 2.5 Lease liabilities - 2.6 Other debts 16 16 TOTAL (Book value) 629 623 Fair value - level 1 - - Fair value - level 2 17 - Fair value - level 3 556 650 Total Fair value 573 650 1.2 Bis Breakdown of \u201cDue to banks\u201d: subordinated debts As at 31 December 2022 subordinated debts amounted to 607 million euro, entirely attributable to Intesa Sanpaolo Vita. 1.3 Bis Breakdown of \u201cDue to banks\u201d: structured debts There were no structured debts pertaining to Insurance Companies as at 31 December 2022. 1.4 Bis Due to banks subject to microhedging There were no structured debts due to banks subject to microhedging pertaining to Insurance Companies as at 31 December 2022. 1.5 Bis Lease payables As at 31 December 2022 there were no lease payables due to banks.
1.6 Bis Due to customers: breakdown
(millions of euro)
Transaction type/Amount
31.12.2022
31.12.2021
1.Current accounts and deposits
-
-
2 Time deposits
-
-
3. Loans
-
-
3.1 Repurchase agreements
-
-
3.2 Financial leasing loans
-
-
3.3 Other
-
-
4. Debts for commitments to repurchase own equity instruments
360
87
5. Lease liabilities
6
7
6. Other debts
221
94
Total (Book value)
587
188
Fair value - level 1
-
-
Fair value - level 2
452
93
Fair value - level 3
135
95
Total Fair Value
587
188
The amount under Debts for commitments to repurchase own equity instruments refers to put options sold with minority
stakes of fully consolidated equity investments as underlying asset, attributable to the Put & Call Agreement for the purchase
of 26% of Intesa Sanpaolo RBM Salute S.p.A.
1.7 Bis Breakdown of \u201cDue to customers\u201d: subordinated debts
There were no subordinated debts due to customers pertaining to Insurance Companies as at 31 December 2022.
1.8 Bis Breakdown of \u201cDue to customers\u201d: structured debts
There were no structured debts due to customers pertaining to Insurance Companies as at 31 December 2022.
1.9 Bis Due to customers subject to microhedging
There were no amounts due to customers subject to microhedging pertaining to Insurance Companies as at 31 December
2022.
1.10 Bis Lease payables
As at 31 December 2022 there were lease payables due to customers of 6 million euro, all of which are due between 1 and
5 years.
These derive from the application of the financial reporting standard IFRS 16 relating to Leases, with effect from 1 January
2019.
1.11 Bis Securities issued: breakdown
(millions of euro)
Transaction type/Amount
31.12.2022
31.12.2021
Book
value
Fair Value
Book
value
Fair Value
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
A.Securities
1. Bonds
1,334
-
1,171
-
1,335
-
1,338
-
1.1 structured
-
-
-
-
-
-
-
-
1.2 other
1,334
-
1,171
-
1,335
-
1,338
-
2. Other
-
-
-
-
-
-
-
-
2.1 structured
-
-
-
-
-
-
-
-
2.2 Other
-
-
-
-
-
-
-
-
Total
1,334
-
1,171
-
1,335
-
1,338
-
1.12 Bis Breakdown of \u201cSecurities issued\u201d: subordinated securities As at 31 December 2022, a total of 1,334 million euro pertaining to insurance companies, fully attributable to level-2 other bonds (fair value 1,171 million euro), which at the end of 2021 amounted to 1,335 million euro. 1.13 Bis Breakdown of \u201cSecurities issued\u201d: securities subject to microhedging There were no Securities issued subject to microhedging pertaining to Insurance Companies. Part M \u2013 Disclosure of leases This section provides the information required by IFRS 16 that is not included in other parts of the financial statements, divided between lessee and lessor. SECTION 1 - LESSEE QUALITATIVE INFORMATION The Intesa Sanpaolo Group essentially has real estate and car or other vehicle lease contracts in place. There are also other types of lease contracts, for residual amounts, mainly relating to hardware. As at 31 December 2022, there were 8,622 lease contracts (9,297 as at 31 December 2021), 5,255 of which (5,963 as at 31 December 2021) relating to real estate leases, for a total value of rights of use of 1,495 million euro (1,521 million euro as at 31 December 2021). Real estate lease contracts include properties designated for use as offices or bank branches. The contracts, within Italy, normally have a term of more than 12 months and typically have renewal and termination options that can be exercised by the lessor and the lessee in accordance with the law or specific contractual provisions. These contracts usually do not include the option to purchase at the end of the lease or significant restoration costs for the companies. On the basis of the characteristics of the Italian lease contracts and the provisions of Law 392/1978, in the event of the signing of a new lease contract with a contractual term of six years and the option to automatically renew the contract after six years for another six years, the total term of the lease will be set at twelve years. This general rule is superseded if there are new elements or specific situations within the contract. Within the international scope, contractual terms may vary according to local practice, while generally not exceeding a period of 5 years, subject to renewal. In the case of the international subsidiaries as well, these contracts do not provide for either an option to purchase at the end of the lease or significant restoration costs for the companies. Contracts for vehicles are long-term rental contracts relating to the company fleet made available to employees (mixed use) or to the organisational structures of the individual companies. These contracts generally have a four-year term, with monthly payments, no renewal option and do not include the option to purchase the asset. The contract may be extended depending on the management of the car fleet and there may be a penalty in the event of early termination. Lease contracts other than those relating to real estate and cars relate to hardware (54 contracts as at 31 December 2022, 55 as at 31 December 2021) and other residual contracts (229 as at 31 December 2022, 123 as at 31 December 2021) and are of immaterial amounts in relation to total property and equipment leased. The amounts of the sale or leaseback transactions carried out in 2022 were insignificant. Sub-leasing transactions are immaterial and are connected to intra-group transactions. Lastly, the Group makes use of the exemptions allowed by IFRS 16 for short-term leases (i.e. with a term of less than or equal to 12 months) or leases of low value assets (i.e. with a value of 5,000 euro or less). QUANTITATIVE DISCLOSURES Part B - Assets in the Notes to the consolidated financial statements contains information on the rights of use acquired through leases (Table 9.1 - Property and equipment used in operations: breakdown of assets measured at cost and Table 9.4 - Investment property: breakdown of assets measured at fair value) and Part B - Liabilities contains information on the lease payables (Table 1.1 - Financial liabilities measured at amortised cost: breakdown of amounts due to banks and Table 1.2 - Financial liabilities measured at amortised cost: breakdown of amounts due to customers and Table 1.6 bis \u2013 Amounts due to customers: breakdown). In particular, the rights of use acquired through leases amounted to 1,495 million euro (1,521 million euro as at 31 December 2021), of which 1,219 million euro relating to real estate leases (1,340 million euro as at 31 December 2021). Lease payables amounted to 1,321 million euro (1,394 million euro as at 31 December 2021). See the abovementioned sections for more details. Part C of the Notes to the consolidated financial statements contains information on the interest expense on lease payables and other charges connected to rights of use acquired through leases, and on the income from sub-leasing transactions. See the specific sections for more details. The table below provides a breakdown of the amortisation and depreciation charges for assets consisting of the right of use among the various categories, in line with the disclosure of property and equipment/intangible assets. millions of euro) Captions 31.12.2022 31.12.2021 Depreciation charges by asset class - - Property and equipment used in operations 307 288 a) buildings 210 236 b) forniture - - c) electronic equipment 22 7 d) other 75 45 Property and equipment for investment - - a) buildings - - TOTAL 307 288 As at 31 December 2022, there was no property and equipment relating to commitments for leases not yet commenced. There is no other information that needs to be reported in addition to that already contained in this section. SECTION 2 - LESSOR QUALITATIVE INFORMATION The Intesa Sanpaolo Group undertakes lease transactions, as lessor, primarily through the Parent Company, Intesa Sanpaolo, and various international subsidiaries, specifically PBZ Leasing, VUB Leasing, CIB Leasing and Intesa Leasing Beograd. The transactions primarily consist of finance leases of real estate and industrial and commercial assets. The companies are also present on the market with lease products relating to capital goods, industrial vehicles, boats and pleasure craft. The risks associated with the ownership rights to the leased assets within Italy are managed through the compulsory subscription of an all-risk insurance policy, either offered through concessionary agreements or taken out directly by the customer with their insurer. Operating leases refer to both real estate and vehicles and equipment. The Notes to the consolidated financial statements report the following: \u2212 finance leases (Part B, Assets: Table 4.1 - Financial assets measured at amortised cost: breakdown of amounts due from banks and Table 4.2 - Financial assets measured at amortised cost: breakdown of loans to customers); \u2212 assets leased under operating leases contained in caption 90 Property and equipment and described in Part B, Assets (Table 9.4 - Investment property: breakdown of assets measured at fair value); this consists of real estate no longer used in operations by the Group, which is leased to third parties or held for possible appreciation in value. This item showed no amounts as at 31 December 2022. See the abovementioned sections for more details. Part C of the Notes to the consolidated financial statements contains information on interest income on finance leases and other income from finance and operating leases. See the specific sections for more details. 2. Finance leases 2.1. Breakdown by time bands of payments to be received and reconciliation with finance leases recorded as assets This table provides the breakdown by time bands of lease payments to be received and the reconciliation between lease payments to be received and finance leases in accordance with IFRS 16, paragraph 94. In particular, the lease payments to be received, representing the sum of the minimum payments due as principal and interest, are shown net of the adjustment allowances and the unguaranteed residual value due to the lessor. The reconciliation with finance leases, shown in the financial statements under financial assets measured at amortised cost, is performed by subtracting the unearned finance income and adding the unguaranteed residual value. (millions of euro) Time bands 31.12.2022 31.12.2021 Payments to be received Payments to be received Up to 1 year 1,738 2,471 Between 1 and 2 years 1,423 2,064 Between 2 and 3 years 1,222 1,802 Between 3 and 4 years 978 1,537 Between 4 and 5 years 794 1,259 Over 5 years 1,984 3,750 Total lease payments to be received 8,139 12,883 Reconciliation with loans -59 -408 Not accrued gains (+) 1,276 2,024 Unguaranteed residual value (-) -1,335 -2,432 Loans for leases 8,198 13,291 2.2. Other information 2.2.1 Classification of finance leases by type of leased asset The table shows the classification of finance leases by credit quality (performing and non-performing) and by type of leased asset. The amounts are shown net of adjustments. (millions of euro) Finance leases Performing exposures Non-performing exposures A. Real estate assets 5,352 364 B. Operating assets 1,310 19 C. Movable assets 1,113 30 - Motor vehicles 747 25 - Aircraft and rolling stock 235 3 - Other 131 2 D. Intangible assets 10 - - Trademarks 10 - - Software - - - Other - - 2.2.2 Classification of assets under finance leases The table below provides a breakdown by category of leased asset (not yet transferred to property and equipment) relating to lease receivables, net of adjustments. (millions of euro) Unexercised assets Assets withdrawn following termination Other assets A. Real estate assets 14 4 5,698 B. Operating assets - - 1,329 C. Movable assets 76 - 1,067 - Motor vehicles 55 - 717 - Aircraft and rolling stock 1 - 237 - Other 20 - 113 D. Intangible assets - - 10 - Trademarks - - 10 - Software - - - - Other - - - TOTAL 90 4 8,104 Unexercised assets are assets still held by customers, for which the repurchase option has not been exercised, related to positions that do not show any deterioration in credit quality. Assets withdrawn following termination relate to terminated contracts, where the customer has not yet been released from the contractual obligations, despite having returned the asset covered by the lease contract. The category \"other assets\" includes the assets underlying the other lease receivables not included in the previous columns. 3. Operating lease 3.1. Breakdown of payments to be received by time bands This refers to lease instalments to be received for owned real estate assets. (millions of euro) Time bands 31.12.2022 31.12.2021 Payments to be received for leases Payments to be received for leases Up to one year 29 15 Over one year up to 2 years 13 11 Over 2 years up to 3 years 9 10 Over 3 years up to 4 years 9 9 Over 4 years up to 5 years 9 10 For over 5 years 20 19 Total 89 74 3.2. Other information There is no other information that needs to be reported in addition to that already contained in this section.", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasePrepaymentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-994": { "value": "SECTION 9 \u2013 PROPERTY AND EQUIPMENT \u2013 CAPTION 90 (millions of euro) Assets/Amounts 31.12.2022 31.12.2021 1. Property and equipment used in operations measured at cost 2,483 2,530 Of which - Property and equipment used in operations - Rights of use acquired under leases 1,495 1,521 2. Investment property measured at cost - - 3. Property and equipment used in operations, revalued 6,381 6,574 Of which - Property and equipment used in operations, revalued - Rights of use acquired under leases - - 4. Investment property measured at fair value 770 798 Of which - Investment property - Rights of use acquired under leases - - 5. Inventories of property and equipment governed by IAS 2 871 890 Total Property and equipment caption 90 10,505 10,792 9.1 Property and equipment used in operations: breakdown of assets measured at cost (millions of euro) 31.12.2022 31.12.2021 1. Property and equipment owned 988 1,009 a) land - - b) buildings - - c) furniture 194 207 d) electronic equipment 748 758 e) other 46 44 2. Rights of use acquired through the lease 1,495 1,521 a) land 1 9 b) buildings 1,218 1,331 c) furniture - - d) electronic equipment 36 16 e) other 240 165 Total 2,483 2,530 of which: resulting from the enforcement of guarantees 1 2 9.2 Investment property: breakdown of assets measured at cost There was no investment property measured at cost in the Intesa Sanpaolo Group. 9.3 Property and equipment used in operations: breakdown of revalued assets (millions of euro) 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Property and equipment owned - - 6,381 - - 6,574 a) land - - 2,641 - - 2,656 b) buildings - - 3,429 - - 3,606 c) valuable art assets - - 311 - - 312 d) electronic equipment - - - - - - e) other - - - - - - 2. Rights of use acquired through the lease - - - - - - a) land - - - - - - b) buildings - - - - - - c) furniture - - - - - - d) electronic equipment - - - - - - e) other - - - - - - TOTAL - - 6,381 - - 6,574 of which: resulting from the enforcement of guarantees - - - - - - 9.4 Investment property: breakdown of assets measured at fair value (millions of euro) 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Property and equipment owned - - 770 - - 798 a) land - - 271 - - 281 b) buildings - - 499 - - 517 2. Rights of use acquired through the lease - - - - - - a) land - - - - - - b) buildings - - - - - - TOTAL - - 770 - - 798 of which: resulting from the enforcement of guarantees - - 114 - - 138 With regard to the provisions of IAS 40, paragraph 75, letters c), g) and h), there was no information worth mentioning. 9.5 Inventories of property and equipment governed by IAS 2: breakdown (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Inventories of property and equipment resulting from the enforcement of guarantees 192 181 - 11 211 a) land 13 3 - 10 18 b) buildings 179 178 - 1 192 c) furniture - - - - - d) electronic equipment - - - - - e) other - - - - 1 2. Other inventories of property and equipment 679 24 - 655 679 Total 871 205 - 666 890 of which: measured at fair value less cost to sell 6 6 - - 1 9.6 Property and equipment used in operations: annual changes (millions of euro) Land Buildings Furniture Electronic equipment Valuable art assets Other Total A. Gross initial carrying amount 2,665 5,736 2,088 6,657 312 395 17,853 A.1 Total net adjustments - -799 -1,881 -5,883 - -186 -8,749 A.2 Net initial carrying amount 2,665 4,937 207 774 312 209 9,104 B. Increases 52 450 36 260 1 188 987 B.1 Purchases - 97 33 244 - 155 529 of which business combinations - - - - - - - B.2 Capitalised improvement costs 12 37 - - - - 49 B.3 Recoveries - - - - - - - B.4 Positive fair value differences recognised in: 16 11 - - - - 27 a) shareholders' equity 16 11 - - - - 27 b) income statement - - - - - - - B.5 Positive foreign exchange differences - - - - - - - B.6 Transfer from investment property 14 19 X X X X 33 B.7 Other changes 10 286 3 16 1 33 349 C. Decreases -75 -740 -49 -250 -2 -111 -1,227 C.1 Sales - -6 - -1 - -2 -9 of which business combinations - - - - - - - C.2 Depreciation - -342 -33 -221 - -79 -675 C.3 Impairment losses recognised in: - -3 -5 - - -2 -10 a) shareholders' equity - -3 - - - - -3 b) income statement - - -5 - - -2 -7 C.4 Negative fair value differences recognised in: -9 -13 - - -2 -1 -25 a) shareholders' equity -6 -9 - - - - -15 b) income statement -3 -4 - - -2 -1 -10 C.5 Negative foreign exchange differences -20 -46 -3 -5 - -2 -76 C.6 Transfer to: -38 -77 - - - - -115 a) investment -36 -72 X X X X -108 b) non-current assets held for sale and discontinued operations -2 -5 - - - - -7 C.7 Other changes -8 -253 -8 -23 - -25 -317 D. Net final carrying amount 2,642 4,647 194 784 311 286 8,864 D.1 Total net adjustments - -967 -1,902 -6,012 - -173 -9,054 D.2 Gross final carrying amount 2,642 5,614 2,096 6,796 311 459 17,918 E. Measurement at cost 1,852 2,450 - - 112 - 4,414 The table above shows the values of owned assets, as well as the rights of use acquired under leases. As explained in Part A \u2013 Fair value of real estate and valuable art assets, please note that, in accordance with the rules on valuation frequencies: \u2013 the properties classified as owner-occupied assets and trophy assets in the real estate portfolio were respectively subject to full valuation at the end of 2020 and the end of 2021, and were therefore subject to scenario analysis for 2022; \u2013 the valuable art assets were subject to scenario analyses for the year 2022, as they had been fully appraised at the end of 2020, through external appraisals, entrusted to qualified independent experts. Sub-captions B.4 and C.4 respectively report the positive and negative changes in fair value relating to owner-occupied real estate (land and buildings) and valuable art assets, for which the Bank applies the revaluation model. The Other changes, both increases and decreases, refer mainly to renegotiations and early terminations during the year of leases (IFRS 16) and, only regarding decreases, to amortisation and depreciation recorded during the year on assets deriving from the acquisition of business lines of the former Venetian banks, covered using the allowance for risks and charges specifically allocated at the time. Sub-caption E. Measurement at cost only contains property and equipment measured according to the revaluation model, in compliance with the instructions set out in Circular 262 of the Bank of Italy. 9.6 Of which - Property and equipment used in operations - Rights of use acquired under leases: annual changes (millions of euro) Land Buildings Furniture Electronic equipment Valuable art assets Other Total A. Gross initial carrying amount 9 1,968 - 36 - 193 2,206 A.1 Total net adjustments - -637 - -20 - -28 -685 A.2 Net initial carrying amount 9 1,331 - 16 - 165 1,521 B. Increases - 356 - 52 - 150 558 B.1 Purchases - 78 - 42 - 137 257 of which business combinations - - - - - - - B.2 Capitalised improvement costs - - - - - - - B.3 Recoveries - - - - - - - B.4 Positive fair value differences recognised in: - - - - - - - a) shareholders' equity - - - - - - - b) income statement - - - - - - - B.5 Positive foreign exchange differences - - - - - - - B.6 Transfer from investment property - - X X X X - B.7 Other changes - 278 - 10 - 13 301 C. Decreases -8 -469 - -32 - -75 -584 C.1 Sales - -1 - -1 - - -2 of which business combinations - - - - - - - C.2 Depreciation - -214 - -24 - -69 -307 C.3 Impairment losses recognised in: - -1 - - - - -1 a) shareholders' equity - - - - - - - b) income statement - -1 - - - - -1 C.4 Negative fair value differences recognised in: - - - - - -1 -1 a) shareholders' equity - - - - - - - b) income statement - - - - - -1 -1 C.5 Negative foreign exchange differences - -5 - - - -2 -7 C.6 Transfer to: - - - - - - - a) investment - - X X X X - b) non-current assets held for sale and discontinued operations - - - - - - - C.7 Other changes -8 -248 - -7 - -3 -266 D. Net final carrying amount 1 1,218 - 36 - 240 1,495 D.1 Total net adjustments - -718 - -39 - -34 -791 D.2 Gross final carrying amount 1 1,936 - 75 - 274 2,286 E. Measurement at cost - - - - - - - The Other changes, both increases and decreases, refer mainly to renegotiations and early terminations during the year of leases (IFRS 16). 9.7 Investment property: annual changes (millions of euro) TOTAL Land Buildings A. Initial carrying amount 281 517 B. Increases 41 87 B.1 Purchases - - of which business combinations - - B.2 Capitalised improvement costs - 7 B.3 Positive fair value differences 3 3 B.4 Recoveries - - B.5 Positive foreign exchange differences - - B.6 Transfer from investment property 36 72 B.7 Other changes 2 5 C. Decreases -51 -105 C.1 Sales -13 -30 of which business combinations - - C.2 Depreciation - - C.3 Negative fair value differences -10 -32 C.4 Impairment losses - -1 C.5 Negative foreign exchange differences - - C.6 Transfer to -24 -35 a) property used in operations -14 -19 b) non-current assets held for sale and discontinued operations -10 -16 C.7 Other changes -4 -7 D. Final carrying amount 271 499 E. Fair value measurement - - The table above shows the values of owned assets, as well as the rights of use acquired under leases. Investment property, comprised of land and buildings, is measured at fair value, in compliance with IAS 40. As illustrated in Part A \u2013 Fair value of real estate and valuable art assets, based on the rules on valuation frequencies, at the end of 2022 the appraisals were updated for all the investment properties, whose effects are recognised in the sub-captions B.3 Positive fair value differences and C.3 Negative fair value differences. 9.7 Of which - Investment property - Rights of use acquired under leases: annual changes As at 31 December 2022, the amount for Investment property - Rights of use acquired under leases was immaterial. 9.8 Inventories of property and equipment governed by IAS 2: annual changes (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 18 191 - - 1 680 890 B. Increases 1 24 - - 5 4 34 B.1 Purchases - - - - 5 - 5 B.2 Recoveries - 1 - - - - 1 B.3 Positive foreign exchange differences 1 1 - - - - 2 B.4 Other changes - 22 - - - 4 26 C. Decreases -6 -36 - - -6 -5 -53 C.1 Sales -5 -14 - - -5 -2 -26 C.2 Impairment losses - -17 - - - -1 -18 C.3 Negative foreign exchange differences -1 - - - - - -1 C.4 Other changes - -5 - - -1 -2 -8 D. Final carrying amount 13 179 - - - 679 871 9.8 Of which: Banking group (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 7 190 - - 1 26 224 B. Increases 1 24 - - 5 3 33 B.1 Purchases - - - - 5 - 5 B.2 Recoveries - 1 - - - - 1 B.3 Positive foreign exchange differences 1 1 - - - - 2 B.4 Other changes - 22 - - - 3 25 C. Decreases -5 -36 - - -6 -5 -52 C.1 Sales -5 -14 - - -5 -2 -26 C.2 Impairment losses - -17 - - - -1 -18 C.3 Negative foreign exchange differences - - - - - - - C.4 Other changes - -5 - - -1 -2 -8 D. Final carrying amount 3 178 - - - 24 205 9.8 Of which: Insurance companies There were no inventories of property and equipment governed by IAS 2 pertaining to insurance companies of the Intesa Sanpaolo Group. 9.8 Of which: Other companies (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 11 1 - - - 654 666 B. Increases - - - - - 1 1 B.1 Purchases - - - - - - - B.2 Recoveries - - - - - - - B.3 Positive foreign exchange differences - - - - - - - B.4 Other changes - - - - - 1 1 C. Decreases -1 - - - - - -1 C.1 Sales - - - - - - - C.2 Impairment losses - - - - - - - C.3 Negative foreign exchange differences -1 - - - - - -1 C.4 Other changes - - - - - - - D. Final carrying amount 10 1 - - - 655 666 9.9 Commitments to purchase property and equipment Commitments to purchase property and equipment in existence as at 31 December 2022 amounted to approximately 9 million euro, mainly relating to efficiency improvement measures implemented on the systems installations in the Group\u2019s head office buildings. Any commitments relating to lease agreements are illustrated in Part M. SECTION 13 \u2013 OTHER ASSETS \u2013 CAPTION 130 13.1 Other assets: breakdown (millions of euro) Captions Amounts to tax authorities 16,503 Amounts to be credited and items under processing 1,297 Cheques and other instruments held 455 Leasehold improvements 93 Transit items 9 Other 4,494 TOTAL 31.12.2022 22,851 TOTAL 31.12.2021 13,837 The sub-caption \u201cAmounts due from tax authorities\u201d includes tax credits related to the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees acquired as a result of transfer by direct beneficiaries or previous purchasers for a total of approximately 11 billion euro. The sub-caption \u201cOther\u201d includes the following main components: (i) prepayments and accrued income not reallocated of 367 million euro; (ii) costs incurred to obtain and execute contracts with customers for an amount of 524 million euro, mainly referring to costs for bonuses capitalised by Fideuram \u2013 Intesa Sanpaolo Private Banking (and, therefore, subject to amortisation for 68.7 million euro) as they are strictly related to the acquisition and maintenance of the funding; and (iii) pursuant to paragraphs 116 and following of IFRS 15, operating loans, i.e. loans for operations connected with the provision of non-financial activities and services, amounting to 150 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInventoriesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-958": { "value": "SECTION 9 \u2013 PROPERTY AND EQUIPMENT \u2013 CAPTION 90 (millions of euro) Assets/Amounts 31.12.2022 31.12.2021 1. Property and equipment used in operations measured at cost 2,483 2,530 Of which - Property and equipment used in operations - Rights of use acquired under leases 1,495 1,521 2. Investment property measured at cost - - 3. Property and equipment used in operations, revalued 6,381 6,574 Of which - Property and equipment used in operations, revalued - Rights of use acquired under leases - - 4. Investment property measured at fair value 770 798 Of which - Investment property - Rights of use acquired under leases - - 5. Inventories of property and equipment governed by IAS 2 871 890 Total Property and equipment caption 90 10,505 10,792 9.1 Property and equipment used in operations: breakdown of assets measured at cost (millions of euro) 31.12.2022 31.12.2021 1. Property and equipment owned 988 1,009 a) land - - b) buildings - - c) furniture 194 207 d) electronic equipment 748 758 e) other 46 44 2. Rights of use acquired through the lease 1,495 1,521 a) land 1 9 b) buildings 1,218 1,331 c) furniture - - d) electronic equipment 36 16 e) other 240 165 Total 2,483 2,530 of which: resulting from the enforcement of guarantees 1 2 9.2 Investment property: breakdown of assets measured at cost There was no investment property measured at cost in the Intesa Sanpaolo Group. 9.3 Property and equipment used in operations: breakdown of revalued assets (millions of euro) 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Property and equipment owned - - 6,381 - - 6,574 a) land - - 2,641 - - 2,656 b) buildings - - 3,429 - - 3,606 c) valuable art assets - - 311 - - 312 d) electronic equipment - - - - - - e) other - - - - - - 2. Rights of use acquired through the lease - - - - - - a) land - - - - - - b) buildings - - - - - - c) furniture - - - - - - d) electronic equipment - - - - - - e) other - - - - - - TOTAL - - 6,381 - - 6,574 of which: resulting from the enforcement of guarantees - - - - - - 9.4 Investment property: breakdown of assets measured at fair value (millions of euro) 31.12.2022 31.12.2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Property and equipment owned - - 770 - - 798 a) land - - 271 - - 281 b) buildings - - 499 - - 517 2. Rights of use acquired through the lease - - - - - - a) land - - - - - - b) buildings - - - - - - TOTAL - - 770 - - 798 of which: resulting from the enforcement of guarantees - - 114 - - 138 With regard to the provisions of IAS 40, paragraph 75, letters c), g) and h), there was no information worth mentioning. 9.5 Inventories of property and equipment governed by IAS 2: breakdown (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Inventories of property and equipment resulting from the enforcement of guarantees 192 181 - 11 211 a) land 13 3 - 10 18 b) buildings 179 178 - 1 192 c) furniture - - - - - d) electronic equipment - - - - - e) other - - - - 1 2. Other inventories of property and equipment 679 24 - 655 679 Total 871 205 - 666 890 of which: measured at fair value less cost to sell 6 6 - - 1 9.6 Property and equipment used in operations: annual changes (millions of euro) Land Buildings Furniture Electronic equipment Valuable art assets Other Total A. Gross initial carrying amount 2,665 5,736 2,088 6,657 312 395 17,853 A.1 Total net adjustments - -799 -1,881 -5,883 - -186 -8,749 A.2 Net initial carrying amount 2,665 4,937 207 774 312 209 9,104 B. Increases 52 450 36 260 1 188 987 B.1 Purchases - 97 33 244 - 155 529 of which business combinations - - - - - - - B.2 Capitalised improvement costs 12 37 - - - - 49 B.3 Recoveries - - - - - - - B.4 Positive fair value differences recognised in: 16 11 - - - - 27 a) shareholders' equity 16 11 - - - - 27 b) income statement - - - - - - - B.5 Positive foreign exchange differences - - - - - - - B.6 Transfer from investment property 14 19 X X X X 33 B.7 Other changes 10 286 3 16 1 33 349 C. Decreases -75 -740 -49 -250 -2 -111 -1,227 C.1 Sales - -6 - -1 - -2 -9 of which business combinations - - - - - - - C.2 Depreciation - -342 -33 -221 - -79 -675 C.3 Impairment losses recognised in: - -3 -5 - - -2 -10 a) shareholders' equity - -3 - - - - -3 b) income statement - - -5 - - -2 -7 C.4 Negative fair value differences recognised in: -9 -13 - - -2 -1 -25 a) shareholders' equity -6 -9 - - - - -15 b) income statement -3 -4 - - -2 -1 -10 C.5 Negative foreign exchange differences -20 -46 -3 -5 - -2 -76 C.6 Transfer to: -38 -77 - - - - -115 a) investment -36 -72 X X X X -108 b) non-current assets held for sale and discontinued operations -2 -5 - - - - -7 C.7 Other changes -8 -253 -8 -23 - -25 -317 D. Net final carrying amount 2,642 4,647 194 784 311 286 8,864 D.1 Total net adjustments - -967 -1,902 -6,012 - -173 -9,054 D.2 Gross final carrying amount 2,642 5,614 2,096 6,796 311 459 17,918 E. Measurement at cost 1,852 2,450 - - 112 - 4,414 The table above shows the values of owned assets, as well as the rights of use acquired under leases. As explained in Part A \u2013 Fair value of real estate and valuable art assets, please note that, in accordance with the rules on valuation frequencies: \u2013 the properties classified as owner-occupied assets and trophy assets in the real estate portfolio were respectively subject to full valuation at the end of 2020 and the end of 2021, and were therefore subject to scenario analysis for 2022; \u2013 the valuable art assets were subject to scenario analyses for the year 2022, as they had been fully appraised at the end of 2020, through external appraisals, entrusted to qualified independent experts. Sub-captions B.4 and C.4 respectively report the positive and negative changes in fair value relating to owner-occupied real estate (land and buildings) and valuable art assets, for which the Bank applies the revaluation model. The Other changes, both increases and decreases, refer mainly to renegotiations and early terminations during the year of leases (IFRS 16) and, only regarding decreases, to amortisation and depreciation recorded during the year on assets deriving from the acquisition of business lines of the former Venetian banks, covered using the allowance for risks and charges specifically allocated at the time. Sub-caption E. Measurement at cost only contains property and equipment measured according to the revaluation model, in compliance with the instructions set out in Circular 262 of the Bank of Italy. 9.6 Of which - Property and equipment used in operations - Rights of use acquired under leases: annual changes (millions of euro) Land Buildings Furniture Electronic equipment Valuable art assets Other Total A. Gross initial carrying amount 9 1,968 - 36 - 193 2,206 A.1 Total net adjustments - -637 - -20 - -28 -685 A.2 Net initial carrying amount 9 1,331 - 16 - 165 1,521 B. Increases - 356 - 52 - 150 558 B.1 Purchases - 78 - 42 - 137 257 of which business combinations - - - - - - - B.2 Capitalised improvement costs - - - - - - - B.3 Recoveries - - - - - - - B.4 Positive fair value differences recognised in: - - - - - - - a) shareholders' equity - - - - - - - b) income statement - - - - - - - B.5 Positive foreign exchange differences - - - - - - - B.6 Transfer from investment property - - X X X X - B.7 Other changes - 278 - 10 - 13 301 C. Decreases -8 -469 - -32 - -75 -584 C.1 Sales - -1 - -1 - - -2 of which business combinations - - - - - - - C.2 Depreciation - -214 - -24 - -69 -307 C.3 Impairment losses recognised in: - -1 - - - - -1 a) shareholders' equity - - - - - - - b) income statement - -1 - - - - -1 C.4 Negative fair value differences recognised in: - - - - - -1 -1 a) shareholders' equity - - - - - - - b) income statement - - - - - -1 -1 C.5 Negative foreign exchange differences - -5 - - - -2 -7 C.6 Transfer to: - - - - - - - a) investment - - X X X X - b) non-current assets held for sale and discontinued operations - - - - - - - C.7 Other changes -8 -248 - -7 - -3 -266 D. Net final carrying amount 1 1,218 - 36 - 240 1,495 D.1 Total net adjustments - -718 - -39 - -34 -791 D.2 Gross final carrying amount 1 1,936 - 75 - 274 2,286 E. Measurement at cost - - - - - - - The Other changes, both increases and decreases, refer mainly to renegotiations and early terminations during the year of leases (IFRS 16). 9.7 Investment property: annual changes (millions of euro) TOTAL Land Buildings A. Initial carrying amount 281 517 B. Increases 41 87 B.1 Purchases - - of which business combinations - - B.2 Capitalised improvement costs - 7 B.3 Positive fair value differences 3 3 B.4 Recoveries - - B.5 Positive foreign exchange differences - - B.6 Transfer from investment property 36 72 B.7 Other changes 2 5 C. Decreases -51 -105 C.1 Sales -13 -30 of which business combinations - - C.2 Depreciation - - C.3 Negative fair value differences -10 -32 C.4 Impairment losses - -1 C.5 Negative foreign exchange differences - - C.6 Transfer to -24 -35 a) property used in operations -14 -19 b) non-current assets held for sale and discontinued operations -10 -16 C.7 Other changes -4 -7 D. Final carrying amount 271 499 E. Fair value measurement - - The table above shows the values of owned assets, as well as the rights of use acquired under leases. Investment property, comprised of land and buildings, is measured at fair value, in compliance with IAS 40. As illustrated in Part A \u2013 Fair value of real estate and valuable art assets, based on the rules on valuation frequencies, at the end of 2022 the appraisals were updated for all the investment properties, whose effects are recognised in the sub-captions B.3 Positive fair value differences and C.3 Negative fair value differences. 9.7 Of which - Investment property - Rights of use acquired under leases: annual changes As at 31 December 2022, the amount for Investment property - Rights of use acquired under leases was immaterial. 9.8 Inventories of property and equipment governed by IAS 2: annual changes (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 18 191 - - 1 680 890 B. Increases 1 24 - - 5 4 34 B.1 Purchases - - - - 5 - 5 B.2 Recoveries - 1 - - - - 1 B.3 Positive foreign exchange differences 1 1 - - - - 2 B.4 Other changes - 22 - - - 4 26 C. Decreases -6 -36 - - -6 -5 -53 C.1 Sales -5 -14 - - -5 -2 -26 C.2 Impairment losses - -17 - - - -1 -18 C.3 Negative foreign exchange differences -1 - - - - - -1 C.4 Other changes - -5 - - -1 -2 -8 D. Final carrying amount 13 179 - - - 679 871 9.8 Of which: Banking group (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 7 190 - - 1 26 224 B. Increases 1 24 - - 5 3 33 B.1 Purchases - - - - 5 - 5 B.2 Recoveries - 1 - - - - 1 B.3 Positive foreign exchange differences 1 1 - - - - 2 B.4 Other changes - 22 - - - 3 25 C. Decreases -5 -36 - - -6 -5 -52 C.1 Sales -5 -14 - - -5 -2 -26 C.2 Impairment losses - -17 - - - -1 -18 C.3 Negative foreign exchange differences - - - - - - - C.4 Other changes - -5 - - -1 -2 -8 D. Final carrying amount 3 178 - - - 24 205 9.8 Of which: Insurance companies There were no inventories of property and equipment governed by IAS 2 pertaining to insurance companies of the Intesa Sanpaolo Group. 9.8 Of which: Other companies (millions of euro) Assets/Amounts Inventories of property and equipment resulting from the enforcement of guarantees Other inventories of property and equipment TOTAL Land Buildings Furniture Electronic equipment Other A. Initial carrying amount 11 1 - - - 654 666 B. Increases - - - - - 1 1 B.1 Purchases - - - - - - - B.2 Recoveries - - - - - - - B.3 Positive foreign exchange differences - - - - - - - B.4 Other changes - - - - - 1 1 C. Decreases -1 - - - - - -1 C.1 Sales - - - - - - - C.2 Impairment losses - - - - - - - C.3 Negative foreign exchange differences -1 - - - - - -1 C.4 Other changes - - - - - - - D. Final carrying amount 10 1 - - - 655 666 9.9 Commitments to purchase property and equipment Commitments to purchase property and equipment in existence as at 31 December 2022 amounted to approximately 9 million euro, mainly relating to efficiency improvement measures implemented on the systems installations in the Group\u2019s head office buildings. Any commitments relating to lease agreements are illustrated in Part M. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentPropertyExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-995": { "value": "SECTION 10 - INTANGIBLE ASSETS - CAPTION 100 10.1 Intangible assets: breakdown by type of asset (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life A.1 Goodwill X 3,626 X 2,650 X 976 X - X 3,574 A.1.1 Group x 3,626 x 2,650 x 976 x - x 3,574 A.1.2 Minority interests x - x - x - x - x - A.2 Other intangible assets 4,322 1,882 3,755 1,882 549 - 18 - 3,886 1,882 of which: software 3,013 - 2,961 - 52 - - - 2,533 - A.2.1 Assets measured at cost 4,322 1,882 3,755 1,882 549 - 18 - 3,886 1,882 a) Internally generated intangible assets 2,386 - 2,366 - 20 - - - 2,072 - b) Other assets 1,936 1,882 1,389 1,882 529 - 18 - 1,814 1,882 A.2.2 Assets measured at fair value - - - - - - - - - - a) Internally generated intangible assets - - - - - - - - - - b) Other assets - - - - - - - - - - Total 4,322 5,508 3,755 4,532 549 976 18 - 3,886 5,456 As at 31 December 2022, the amount for software was 3,013 million euro, of which 2,386 million euro produced internally and 627 million euro purchased externally. The allocation of goodwill between \u201cCash Generating Units\u201d is reported in the following table. (millions of euro) CGUs/Goodwill 31.12.2022 31.12.2021 Banca dei Territori - - IMI Corporate & Investment Banking 56 56 Insurance 976 976 Asset Management 1,059 1,060 Private Banking 1,535 1,482 International Subsidiary Banks - - Bank of Alexandria (Egypt) - - Pravex Bank (Ukraine) - - GROUP TOTAL 3,626 3,574 For a breakdown of the CGUs, see the next chapter \u201cInformation on intangible assets and goodwill\u201d. 10.2 Intangible assets: annual changes (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 20,772 7,382 - 10,583 2,386 41,123 A.1 Total net adjustments -17,198 -5,310 - -8,769 -504 -31,781 A.2 Net initial carrying amount 3,574 2,072 - 1,814 1,882 9,342 B. Increases 52 1,041 - 422 - 1,515 B.1 Purchases 42 51 - 304 - 397 of which business combinations 42 - - 73 - 115 B.2 Increases of internally generated intangible assets X 990 - - - 990 B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences 10 - - - - 10 B.6 Other changes - - - 118 - 118 C. Decreases - -727 - -300 - -1,027 C.1 Sales - - - -3 - -3 of which business combinations - - - - - - C.2 Impairment losses - -692 - -292 - -984 - Amortisation X -684 - -280 - -964 - Write-downs recognised in - -8 - -12 - -20 shareholders' equity X - - - - - income statement - -8 - -12 - -20 C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - -12 - - - -12 C.5 Negative foreign exchange differences - - - -4 - -4 C.6 Other changes - -23 - -1 - -24 D. Net final carrying amount 3,626 2,386 - 1,936 1,882 9,830 D.1 Total net adjustments -17,198 -6,002 - -9,061 -504 -32,765 E. Gross final carrying amount 20,824 8,388 - 10,997 2,386 42,595 F. Measurement at cost - - - - - - The sub-caption B.1 includes the increase for Goodwill deriving from the purchase of Compagnie de Banque Priv\u00e9e Quilvest S.A. (CBPQ). 10.2 Of which: Banking group (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 19,042 7,322 - 8,952 2,386 37,702 A.1 Total net adjustments -16,444 -5,276 - -7,743 -504 -29,967 A.2 Net initial carrying amount 2,598 2,046 - 1,209 1,882 7,735 B. Increases 52 1,025 - 378 - 1,455 B.1 Purchases 42 38 - 276 - 356 of which business combinations 42 - - 73 - 115 B.2 Increases of internally generated intangible assets X 987 - - - 987 B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences 10 - - - - 10 B.6 Other changes - - - 102 - 102 C. Decreases - -705 - -198 - -903 C.1 Sales - - - -3 - -3 of which business combinations - - - - - - C.2 Impairment losses - -678 - -190 - -868 - Amortisation X -670 - -178 - -848 - Write-downs recognised in - -8 - -12 - -20 shareholders' equity X - - - - - income statement - -8 - -12 - -20 C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - -12 - - - -12 C.5 Negative foreign exchange differences - - - -4 - -4 C.6 Other changes - -15 - -1 - -16 D. Net final carrying amount 2,650 2,366 - 1,389 1,882 8,287 D.1 Total net adjustments -16,444 -5,954 - -7,933 -504 -30,835 E. Gross final carrying amount 19,094 8,320 - 9,322 2,386 39,122 F. Measurement at cost - - - - - - 10.2 Of which: Insurance companies (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 1,712 60 - 1,544 - 3,316 A.1 Total net adjustments -736 -34 - -939 - -1,709 A.2 Net initial carrying amount 976 26 - 605 - 1,607 B. Increases - 16 - 21 - 37 B.1 Purchases - 13 - 6 - 19 of which business combinations - - - - - - B.2 Increases of internally generated intangible assets X 3 - - - 3 B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences - - - - - - B.6 Other changes - - - 15 - 15 C. Decreases - -22 - -97 - -119 C.1 Sales - - - - - - of which business combinations - - - - - - C.2 Impairment losses - -14 - -97 - -111 - Amortisation X -14 - -97 - -111 - Write-downs recognised in - - - - - - shareholders' equity X - - - - - income statement - - - - - - C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - - - - - - C.5 Negative foreign exchange differences - - - - - - C.6 Other changes - -8 - - - -8 D. Net final carrying amount 976 20 - 529 - 1,525 D.1 Total net adjustments -736 -48 - -1,036 - -1,820 E. Gross final carrying amount 1,712 68 - 1,565 - 3,345 F. Measurement at cost - - - - - - 10.2 Of which: Other companies (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 18 - - 87 - 105 A.1 Total net adjustments -18 - - -87 - -105 A.2 Net initial carrying amount - - - - - - B. Increases - - - 23 - 23 B.1 Purchases - - - 22 - 22 of which business combinations - - - - - - B.2 Increases of internally generated intangible assets X - - - - - B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences - - - - - - B.6 Other changes - - - 1 - 1 C. Decreases - - - -5 - -5 C.1 Sales - - - - - - of which business combinations - - - - - - C.2 Impairment losses - - - -5 - -5 - Amortisation X - - -5 - -5 - Write-downs recognised in - - - - - - shareholders' equity X - - - - - income statement - - - - - - C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - - - - - - C.5 Negative foreign exchange differences - - - - - - C.6 Other changes - - - - - - D. Net final carrying amount - - - 18 - 18 D.1 Total net adjustments -18 - - -92 - -110 E. Gross final carrying amount 18 - - 110 - 128 F. Measurement at cost - - - - - - 10.3 Other information As at 31 December 2022, there were commitments relating to investments in intangible assets, primarily software, of approximately 25 million euro. Information on intangible assets and goodwill The application of IFRS 3 to the accounting of acquisitions may lead to the recognition of new intangible assets and goodwill. In the case of the Intesa Sanpaolo Group, the merger between Banca Intesa and Sanpaolo IMI and the subsequent acquisitions led to the recognition of significant amounts for intangible assets and goodwill. In 2022 two transactions were finalised, entailing the recognition of new intangible assets with finite useful lives and goodwill. These transactions are briefly illustrated below, describing their effects on the amount and composition of the Group\u2019s intangible assets. The acquisition by Fideuram Bank Luxembourg, a subsidiary of Fideuram - Intesa Sanpaolo Private Banking, of 100% of the capital of Compagnie de Banque Priv\u00e9e Quilvest, a Luxembourg private bank wholly owned by the holding company Quilvest Wealth Management, was finalised on 30 June 2022. Within the framework of the Purchase Price Allocation (PPA), two specific customer relationship related intangible assets were identified and recognised, amounting to 43 million euro in relation to indirect customer deposits (assets under management) and 30 million euro in relation to core deposits, respectively. In addition, goodwill of approximately 42 million euro was recognised as the residual difference between the acquisition cost and the company\u2019s shareholders\u2019 equity measured at its acquisition date fair value. According to IAS 36, both goodwill and the intangible assets linked to these assets were allocated to the Private Banking CGU. Within the International Subsidiary Banks Division, the acquisition by VUB Banka, a wholly owned subsidiary of Intesa Sanpaolo Holding International, of 5.26% of the capital of VUB Generali, the number-four operator in the Slovak pension fund market, in which the Intesa Sanpaolo Group previously held a 50% stake as part of a joint venture established in 2004 with the Generali Group, was finalised on 24 October 2022. This transaction, which entailed the acquisition of control over the company by the Intesa Sanpaolo Group pursuant to IFRS 10, was considered a business combination to be accounted for under IFRS 3. At the end of the Purchase Price Allocation (PPA), an intangible asset not previously recognised in the financial statements of VUB Generali attributable to customer relationship related activities, and in particular asset management, of 80 million euro was identified and allocated to the International Subsidiary Banks CGU. The intangible asset identified, net of the related tax effect, offset the entire difference between the acquisition cost and the company\u2019s assets, without the transaction giving rise to amounts of goodwill. For more details on the transactions mentioned above, see Part G of these Notes. The table below summarises the values of the intangible assets and goodwill recorded in the consolidated financial statements at 31 December 2022 with the related changes during the period, subdivided by Cash Generating Unit (CGU), which represent the groups of assets subject to impairment testing on goodwill in order to determine the recoverable amount. (millions of euro) CGU Financial Statements 2021 Acquisition of CBPQ Acquisition of VUB Generali Amortisation Other changes (1) Financial Statements 2022 BANCA DEI TERRITORI DIVISION 1,833 - - -22 - 1,811 - Asset management intangibles - distribution 201 - - -14 - 187 - Insurance intangibles - distribution 110 - - -7 - 103 - Brand name intangibles 1,507 - - - - 1,507 - Intangible asset under administration 15 - - -1 - 14 - Intangibile Acquiring - - - - - - - Goodwill - - - - - - DIVISIONE IMI CORPORATE & INVESTMENT BANKING 56 - - - - 56 - Goodwill 56 - - - - 56 ASSET MANAGEMENT DIVISION 1,166 - - -6 -1 1,159 - Asset management intangibles - prod. and distribut. 106 - - -6 - 100 - Goodwill 1,060 - - - -1 1,059 PRIVATE BANKING DIVISION 2,106 115 - -19 15 2,217 - Asset management intangibles - prod. and distribut. 180 43 - -14 4 213 - Insurance intangibles - distribution 47 - - -2 - 45 - Intangibile Core Deposits - 30 - -1 - 29 - Brand name intangibles 375 - - - - 375 - Intangible asset under administration 22 - - -2 - 20 - Goodwill 1,482 42 - - 11 1,535 INSURANCE DIVISION 1,567 - - -94 - 1,473 - Insurance intangibles - production 591 - - -94 - 497 - Goodwill 976 - - - - 976 DIVISIONE INTERNATIONAL SUBSIDIARY BANKS - - 80 -1 - 79 - Intangible asset management - production - - 80 -1 - 79 BANK OF ALEXANDRIA (Egypt) - - - - - - PRAVEX BANK (Ukraine) - - - - - - CGU TOTAL 6,728 115 80 -142 14 6,795 - Asset management intangibles 487 43 80 -35 4 579 - Insurance intangibles 748 - - -103 - 645 - Intangibile Core Deposits - 30 - -1 - 29 - Intangible asset under administration 37 - - -3 - 34 - Intangibile Acquiring - - - - - - - Brand name intangibles 1,882 - - - - 1,882 - Goodwill 3,574 42 - - 10 3,626 (1) Foreign exchange differences on the goodwill attributable to Eurizon Capital SLJ and on the portion of amortisation of intangibles attributable to Reyl & Cie SA. The intangible assets with finite useful lives recognised refer to customer relationships and relate to the valuation of the insurance portfolio (Value of Business Acquired), Assets Under Administration (AUA), Assets Under Management (AUM) and Core Deposits. Such intangible assets were originally measured by discounting the income margin cash flows over a period representing the residual life, contractual or estimated, of relationships existing at the time of the business combination. For the intangible assets with a finite useful life, the amortisation for the year was recognised to the income statement (under \u201c220. Net adjustments to/recoveries on intangible assets\u201d) for a total of 142 million euro gross of the tax effect. The brand name, an intangible asset related to marketing, was also measured. This asset is considered to have an indefinite life since it is expected to contribute for an indefinite period of time to the formation of income flows. Based on IAS 36, both intangible assets with an indefinite useful life and goodwill are submitted to impairment testing on an annual basis to verify recoverability of their value. In addition, intangible assets with a finite useful life must be tested for impairment whenever there is evidence of impairment indicators. The recoverable amount consists of the higher of the fair value and the value in use, less costs to sell. Lastly, it should be mentioned that IAS 36, for the purpose of calculating the value in use of intangibles subject to impairment testing, states that reference must be made to cash flows arising from intangible asset in its current condition (as at the impairment test date), with no distinction between cash flows arising from the asset initially recognised according to IFRS 3 and those relating to the asset outstanding at the impairment test date. This because it would be difficult, especially with regard to extraordinary transactions between businesses or changes in the asset following significant turnover in volumes, customers, contracts, etc., to separate cash flows relating to the original asset from others. This concept can also be applied in impairment testing of goodwill to calculate the Value in use of the CGUs, for which the cash flows have to be considered with regard to all assets and liabilities of that CGU and not only the assets and liabilities for which goodwill was recognised on application of IFRS 3. As in previous financial statements, given the volatility of the financial markets and the available market values for calculation of the recoverable amount, the Value in use that represents the present value of net future cash flows from the asset (or business) being valued was used in the impairment tests for the 2022 financial statements. In particular, for the financial statements as at 31 December 2022, in line with the previous financial statements, the impairment test on goodwill was conducted by applying the DCF \u2013 Discounted Cash Flow model \u2013 to which, as a check of the consistency of the results of using the DCF model, the DDM \u2013 Dividend Discounted Model \u2013 is added. Both of these methods were based on the individual estimates made internally for the 2023-2027 period, which for the years up to 2025 represent the forecasts in the 2022-2025 Business Plan, updated to take account of the changed macroeconomic scenario, whereas the final two years of forecasts were estimated through inertial tracking of the flows for 2025, on the basis of internal forecasts relating to the aforementioned macroeconomic scenario. It is noted that the tests mentioned above did not concern the Banca dei Territori, International Subsidiary Banks, Bank of Alexandria or Pravex Bank CGUs in consideration of the absence, as of the date of the test, of goodwill allocated to those CGUs to be subject to impairment test. These tests were also joined by an autonomous test, using an independent expert, of the fair value of the component of the brand name attributable to Banca dei Territori, a CGU which no longer has goodwill allocated. The results of the impairment test as at 31 December 2022 showed no need to recognise any goodwill impairment or adjustments to intangible assets with an indefinite life (brand name) with regard to any of the CGUs in the Intesa Sanpaolo Group. Lastly, the methods, assumptions and results of the impairment test procedures for intangible assets and goodwill defined by management were approved by the Board of Directors prior to approval of the draft financial statements for 2022. Impairment testing of intangibles Insurance portfolio Valuation of the insurance portfolio uses models normally applied in valuation practice. The resulting value, considered to have a finite life, is amortised at variable rates over a period representing the residual life of the insurance contracts. The book value of insurance intangible assets includes, among other things, the insurance portfolio of Intesa Sanpaolo Vita and the subsidiary Intesa Sanpaolo Life DAC distributed by the networks of the Intesa Sanpaolo Group and Fideuram Vita. The total book value also includes the intangible asset belonging to Intesa Sanpaolo RBM Salute and the value of the component of distribution of insurance products by the former UBI Banca network and by IW Bank. During 2021, the Value of Business Acquired (VoBA) deriving from the acquisitions of Assicurazioni Vita, Lombarda Vita and Cargeas Assicurazioni was added to this. Assicurazioni Vita and Lombarda Vita were merged into Intesa Sanpaolo Vita as of 31 December 2021, whereas Cargeas Assicurazioni was merged into Intesa Sanpaolo Assicura on 1 October 2022. The intangible assets referring to the insurance portfolio were partly allocated to the Insurance CGU, partly to the Private Banking CGU and partly to the Banca dei Territori CGU, depending on whether they refer to the value of the component of policy production or policy distribution. As previously stated, these are intangible assets with finite useful lives and, during the year, the amortisation for the year was charged to the income statement, for a total amount of 103 million euro. During the year, the analyses on the main impairment indicators were updated. Specifically, in 2022 the Insurance Division reported strong income from insurance business of approximately 1.6 billion euro, up slightly on the previous year (+1.9%). This trend is attributable to the increase in the technical margin, in both the life business and the non-life business, which more than offset the reduction in the net investment result. In addition, in 2022 the Division\u2019s collected premiums for life policies and pension products amounted to 16.2 billion euro, down by around 14% compared to the previous year, due to unit-linked products (-41%), as a result of the uncertainty on the financial markets. In contrast, the collected premiums for traditional products increased (+39%), including the Class I component of multi-line policies, due to the placement in the fourth quarter of the Class I credit line dedicated to senior customers. Pension products recorded an increase of 1%. Direct deposits from insurance business exceeded 173 billion euro as at 31 December 2022, down by approximately 15% on the previous year. Note that, as previously stated, IAS 36 requires that intangible assets be subject to impairment tests with reference to relationships with customers of all the CGUs at the valuation date, not only the residual relationships which were used to determine the initial value of the intangible assets. Therefore, any possible calculation of the recoverable amount shall also include the new business generated at the level of the CGU following the date of recognition of the intangible assets. In addition, the volumes of the policies underlying the measurement of the intangible assets recognised in the financial statements are negligible if compared with the total policies of the relevant CGUs. An analysis of the comprehensive income of the products in the portfolios did not identify any potential impairment of the intangible asset relating to the insurance business, also considering that, as required by IAS 36, the intangible asset is tested for impairment at the CGU level as a whole and not by individual product or business line. The following table presents a summary of the values of insurance intangibles according to the relevant CGU. (millions of euro) CGU Financial statements 2021 Amortisation Financial statements 2022 BANCA DEI TERRITORI DIVISION Insurance intangibles - distribution 110 -7 103 INSURANCE DIVISION Insurance intangibles - production 591 -94 497 PRIVATE BANKING DIVISION Intangibile asset management - produc. and distribut. 47 -2 45 GROUP TOTAL 748 -103 645 Following the analyses conducted on the main impairment indicators, it was not necessary to carry out a thorough recalculation of the value of the intangible asset, since the overall trend of the insurance business did not present any particular critical issues in 2022. Asset management and administration portfolio The intangible asset recognised in Intesa Sanpaolo\u2019s consolidated financial statements is regarded as having a finite useful life. Accordingly, for the purposes of the 2022 Financial Statements, analyses were conducted on the main value indicators, which were also monitored throughout the year (these include trends in assets, redemption rates, and net interest and other banking income net of operating costs and tax effects). Those analyses regarded the component of the intangible assets linked to assets under administration (AUA) and under management (AUM), represented by the capacity of the relationships existing at the acquisition date to generate cash flows over the residual useful life of those relationships, recognised in the financial statements following the acquisitions that were carried out over time. More specifically, this aspect concerns the asset management portfolios of the former Venetian banks, acquired in 2017, and of the Morval Group, acquired by Fideuram - Intesa Sanpaolo Private Banking in 2018. Subsequently, as part of the acquisition of the UBI Group, during 2020 intangible assets were measured linked to indirect customer deposits and, in particular, the intangible assets pertaining to assets under administration (AUA) and assets under management (AUM), whereas during 2021 the intangible assets relating to the assets under administration and assets under management of Reyl & Cie SA, a Swiss private bank with an international presence, were recognised. In 2022, as stated above, new customer relationship related intangible assets were recognised in connection with the indirect customer deposits of Compagnie de Banque Priv\u00e9e Quilvest (CBPQ) and VUB Generali, amounting to 43 and 80 million euro as at the acquisition date, respectively. As at 31 December 2022, taking account of the portion amortised in the meantime, the intangible asset linked to AUM was allocated to the Banca dei Territori CGU (187 million euro), to the Private Banking CGU (213 million euro), to the Asset Management CGU (100 million euro) and to the International Subsidiary Banks CGU (79 million euro). Likewise, the intangible asset linked to AUA, taking account of the component of amortisation recorded during the year, was allocated to the Banca dei Territori CGU, for the component distributed by the branches deriving from UBI Banca (14 million euro), and to the Private Banking CGU, for the component distributed to customers of IW Private Investments SIM (20 million euro) as at 31 December 2022. As stated above, IAS 36 provides that impairment testing must not be limited only to the cash flows deriving from the assets acquired, but should take account of all the cash flows linked to the assets of the specific CGU, also including the cash flows generated after initial measurement of the intangible assets. On this regard, it is noted that the volumes of assets underlying the measurement of the intangible assets recognised in the financial statements are negligible if compared with the total assets of the CGUs. Accordingly, in the light of the above, and regardless of the performance of the assets during the reporting period, it may be confirmed that there were no signs of impairment of the intangible assets recognised in the financial statements and pertaining to asset under management and asset under administration relationships. The following table presents a summary of the values of the AUM and AUA intangibles attributable to the Banca dei Territori, Private Banking, Asset Management and International Subsidiary Banks CGUs. CGU Financial statements 2021 Acquisitions Amortisation Other changes (1) Financial statements 2022 BANCA DEI TERRITORI DIVISION Intangibile asset management - distribution 201 - -14 - 187 Intangible asset under administration 15 - -1 - 14 PRIVATE BANKING DIVISION Intangibile asset management - produc. and distribut. 180 43 -14 4 213 Intangible asset under administration 22 - -2 - 20 ASSET MANAGEMENT DIVISION Intangibile asset management - produc. and distribut. 106 - -6 - 100 INTERNATIONAL SUBSIDIARY BANKS DIVISION Intangibile asset management - distribution - 80 -1 - 79 GROUP TOTAL 524 123 -38 4 613 (1) Foreign exchange differences on intangible assets attributable to Reyl & Cie SA. Core Deposits \u201cCore deposits\u201d are \u201ccustomer-related intangibles\u201d, generally recorded in business combinations between banks. The intangible value of core deposits stems from the future benefits for the acquirer deriving from the stable and lower funding cost compared to market parameters. Basically, the acquirer may use funding for its lending and investment activities which pays less than the interbank market interest rate. The intangible asset consists of the valuation of this future margin, known as the \u201cdeposit premium\u201d, which represents an asset the value of which is correlated with the performance of market rates and the assets raised. As stated above, total core deposits of 30 million euro were recognised as part of the acquisition of Compagnie de Banque Priv\u00e9e Quilvest by Fideuram Bank Luxembourg. No impairment indicators were considered when assessing whether the intangible asset had maintained its value, given the limited period of time between the initial recognition of the asset and the expected interest rate scenario. Brand name IFRS 3 considers the \u201cbrand name\u201d a potential, marketing related intangible asset, which may be recorded in the Purchase Price Allocation (PPA) process. For this purpose, please note that the term \"brand\u201d is used in accounting standards with an extensive meaning and not as a synonym of \u201clogo\u201d or \u201cname\u201d. It is considered a general marketing term which defines a set of complementary intangible assets (in addition to the name and the logo, also the competencies, consumer trust, service quality, etc.) which concur to form brand equity. With reference to acquisition of the Sanpaolo IMI Group, it was decided to limit the analysis to just two brands: the corporate brand Sanpaolo IMI, intended as an \u201cumbrella\u201d brand to which the brands of the other network banks were also related, and the brand of the subsidiary Fideuram - Intesa Sanpaolo Private Banking (former Banca Fideuram), as an autonomous brand widely recognised on the market for the placement of financial products through a network of financial advisors. Both are considered intangibles with indefinite useful life, since they are deemed to contribute indefinitely to the formation of income flows. Market methods and flow-based methods (and, thus, based on fundamental analyses) were used in the valuation of the two brands. Value was determined as the average of the values obtained using the various methods. The amount recorded in the 2022 Financial Statements came to 1,882 million euro, of which 1,507 million euro was allocated to the Banca dei Territori CGU and 375 million euro to the Private Banking CGU. In general, the brand name is considered an intangible asset that has no independent cash flows and, thus, to be subject to impairment testing as part of the verification of the retention of goodwill for the various CGUs. For the purposes of this impairment test, with regard to the brand name allocated to the Banca dei Territori CGU, it was considered that the reference CGU did not have any goodwill allocated and, as a result, it was not possible to test the recoverable amount of the specific intangible as part of the impairment test of the goodwill based on total cash flows at the level of the CGU. As it was not possible to refer, for the recoverable amount of the brand name of Banca dei Territori, to the notion of Value in Use, i.e. the present value of net future cash flows from the assets valued, it was decided, in line with that carried out for the 2020 and 2021 Financial Statements, to conduct a specific, autonomous valuation of the specific intangible based on the fair value resulting from the dedicated appraisal commissioned from Prof. Mauro Bini, Full Professor of Corporate Finance at Bocconi University. Lacking specific transactions on comparable banking brand names, the fair value of the brand name allocated to the Banca dei Territori CGU was estimated using the following methods: - Royalty Relief; - the implicit value in estimating brands with comparable PPAs; - the implicit value in the public estimates of brands provided by independent third parties (Brand Finance); - Hirose. Royalty Relief Criterion The Royalty Relief criterion determines the value of the brand from the present value of income deriving from the brand, estimated as the product of a royalty rate reconstructed on the basis of implicit rates in comparable PPAs and the value of net turnover (operating income, for banks). The criterion of the implicit value in estimating brands with comparable PPAs The criterion of the implicit value in estimating brands with comparable PPAs determines the value of the brand based on the \u201cFair value of the brand/Operating income\u201d multiples recorded on PPA and their fundamental drivers. The multiple, calculated in relation to net operating income, is taken from the fair value of the brands recognised on PPA of commercial banks from the Markables database. Criterion of the implicit value in the public estimates of brands provided by independent third parties (Brand Finance) Brand Finance is a UK company specialising in valuing brands. Each year, Brand Finance publishes the updated estimated value of the brands of the top 500 global banks. The valuation of brands carried out by Brand Finance is consistent with the Relief from Royalties criterion, widely used in valuation to estimate the value of brands. According to this criterion, the value of the brand corresponds to the current value of royalty flows saved. The royalty rates are determined based on the trademark license agreements of comparable companies and applied to the specific bank brand based on the strength of the brand estimated and discounted at an opportunity cost of capital in line with the assigned brand rating. Hirose Criterion This criterion is based on the comparison of the profitability of the branded company (in this case, the Banca dei Territori CGU) and unbranded competitor companies. The income-based method adopted is attributable to the profit-split criterion. Based on the analyses conducted, all four methods used returned a value of the Intesa Sanpaolo brand for the Banca dei Territori CGU higher than the book value of that intangible asset, demonstrating the value of the Group\u2019s brand and the resulting competitive advantage it continues to provide the Group in relation to its competitors. Instead, the brand name allocated to the Private Banking CGU was subject to impairment testing as part of the activities regarding the verification of the recoverable amount of the goodwill allocated to that CGU. Impairment testing of CGUs and goodwill Definition of Cash Generating Units (CGUs) For impairment testing purposes, the estimation of the value in use relating to intangible assets with an indefinite life (including goodwill) that do not generate cash flows unless jointly with other business, as per IAS 36, requires the preliminary assignment of such intangible assets to relatively independent business units, able to generate cash flows strongly independent of those produced in other business areas, but interdependent within the business unit generating them. In IAS/IFRS terminology, such business units are known as Cash Generating Units (CGUs). The meaning of the impairment test is significant for identification of the CGUs. IAS 36 indicates the necessity to correlate the level at which the goodwill is tested with the level of internal reporting at which management controls the increases and decreases of such value. Definition of the level closely depends on the organisational models adopted and on the managerial responsibilities governing the operating guidelines and monitoring activity. Organisational models may ignore (and in the case of the Intesa Sanpaolo Group they do ignore) the network of legal entities through which operations are carried out, and are instead very often closely designed around the definition of business operating segments as envisaged by IFRS 8. Furthermore, the identification of CGUs for goodwill impairment test purposes is consistent with the definition of the recoverable amount of an asset - which is in itself the base for impairment tests - according to which the relevant item is the amount that the company expects to recover from that asset, considering any synergies with other assets. Therefore, in accordance with the criteria applied for the determination of the prices of the business combinations that gave rise to goodwill recognition, the recoverable amount for impairment testing purposes of the CGU to which goodwill is allocated must include not only the value of external (or universal) synergies but also the internal ones, the reason being that the specific acquirer may obtain additional value from the integration of activities obtained through business combinations, according to its business model. The Intesa Sanpaolo Group\u2019s organisational model envisages that: - management decisions are highly centralised at the level of the heads of the operational segments; - strategies, identification of new products or services and commercial penetration initiatives are outlined and directed centrally for each operating division; - planning processes and reporting systems are managed at the operational segment level; - as a result of this centralisation, income flows are highly dependent on the policies set up at segment level, based on balanced development of the entire division and not of the individual operating areas or legal entities considered individually; - specialised transversal areas are defined to provide support and develop products benefiting many subsidiaries; - the management of financial risks is also highly centralised in order to maintain, also as a result of regulatory provisions, a balance between the capital allocation policies and the financial risks in development of the various business lines; - the divisions operate in homogeneous markets or sectors in terms of economic characteristics and development level. As a result of this centralisation, income flows are highly dependent on the policies set up at the operational segment level, based on balanced development of the entire division and not of the individual operating areas or legal entities considered individually. The operating divisions identified in the Intesa Sanpaolo Group are as follows: - Banca dei Territori; - IMI Corporate & Investment Banking; - Insurance; - Asset Management; - Private Banking; - International Subsidiary Banks. For the foregoing reasons, the operating divisions cited above correspond, in general terms, to the Group\u2019s CGUs, while also representing the core business areas considered for segment reporting. These divisions are considered representative of cash generating units since each constitutes the smallest group of assets generating independent incoming cash flows and, as mentioned above, also the minimum level set by the Parent Company Intesa Sanpaolo for planning and reporting processes. Therefore, this is the minimum level to which goodwill may be allocated and monitored according to non-arbitrary criteria. The International Subsidiary Banks Division needs specific comments, given the particular structure and conditions under which it operates. It should firstly be mentioned that the cash flows of the various Group companies forming this business unit are strictly dependent upon policies formulated by the Division Governance Centres and Head Office Departments of the Parent Company. These policies are defined and implemented in compliance with a management plan designed to develop the entire Division in an organised manner, and not focusing only on the individual companies\u2019 strategies. Specifically, the expansion strategies for the various operating units, the identification and development of new credit, savings and service products, limits to the assumption of financial risk, commercial penetration and operations specialisation initiatives are outlined and steered at central level, following a portfolio strategy, and not devolved to the individual subsidiaries. Therefore, there is strong interaction of the flows that, at the same time, requires both single and integrated governance of all companies in the Division, and the central monitoring and control of operations of the overall business activities of the Division. However, it is important to consider that not all factors affecting the correlation and interdependence of cash flows within the Division can be controlled by the Division\u2019s Head Office Departments. In fact, there are circumstances outside the Group that could have varying levels of impact on the capacity to systematically manage CGU flows and control over their generation. These are circumstances largely determined in the wider sense by the conditions of the environment in which the various entities are located. Indeed, for Banks operating abroad, the effects of country risk must be considered: i.e. the risk linked to economic, political and institutional events in the country in which the subsidiary and its business activities are based. In view of the above, if the cash flows that the Parent Company expects from activities generated by a foreign subsidiary are deeply influenced - in terms of extent, quality and trends - by institutional, economic and political circumstances in the country in which the subsidiary is based, this subsidiary cannot be considered an integral part of the single management model for the CGU which it belongs to. The company in such a situation must, therefore, even if only temporarily, be excluded from the CGU, regardless of the Group Management\u2019s willingness to keep it within the CGU, due to the above-mentioned factors over which the Bank and Group's management clearly have no influence. The flows of the company, in fact, would be influenced to a greater extent by the country\u2019s conditions than by the unitary and centralised management policy adopted by the Division and, therefore, for impairment testing purposes, the company must be subjected to independent valuation until the conditions for the systemic central control of cash flows of the subsidiary are restored. With regard to the Ukrainian Pravex Bank, for the purposes of the 2008 impairment testing, careful consideration of the economic and institutional events unfolding in Ukraine, which was undergoing a deep economic and currency crisis, and prudent assessment of their impact on the operational variables of the subsidiary in question, especially from the point of view of their interdependence on variables of the entire CGU, resulted in classification of this company as a completely separate CGU, treating it separately from the Group\u2019s International Subsidiary Banks Division. Subsequently, Pravex Bank was functionally allocated to Capital Light Bank (now the NPE Head Office Department), to then be moved back to the International Subsidiary Banks Division in 2018. With regard to the subsidiary Bank of Alexandria, for the purposes of the 2011 impairment testing the bank was separated from the International Subsidiary Banks CGU due to a profound political crisis in Egypt. For the purposes of the 2022 impairment testing, as no significant elements arose that cast doubt on the decision made for the previous financial statements, and taking account of the outbreak of the military conflict between Russia and Ukraine, it was deemed appropriate to maintain the decisions made with respect to the previous financial statements, and thus to consider Pravex Bank and Bank of Alexandria as autonomous, distinct CGUs in conducting the impairment test for the consolidated financial statements. However, it bears recalling that the goodwill associated with Pravex Bank and Bank of Alexandria were fully written down in conjunction with the impairment tests for the 2008 and 2011 financial statements, respectively, and there is no goodwill even relating to the other International Subsidiary Banks of the Division. In Pravex Bank's and Bank of Alexandria\u2019s cases, the separate assessment of the banks for impairment testing purposes does not affect the Group\u2019s intention to support the development of the subsidiaries, with specific regard to the Ukrainian bank, within the limits permitted by the ongoing conflict. As previously mentioned, the Banca dei Territori, International Subsidiary Banks and Bank of Alexandria and Pravex Bank CGUs, as of the date of the test, did not possess intangible assets with an indefinite life (with the exception of the brand name allocated to the Banca dei Territori CGU, whose recoverable amount, understood as its fair value, was confirmed by a specific valuation drawn up by an independent expert) and, as a result, were not subject to an impairment test. Book value of the CGUs The book value of the CGUs must be determined in a manner consistent with the criterion used to estimate their recoverable amount. For a banking business, the cash flows generated by a CGU cannot be identified without considering the cash flows deriving from financial assets/liabilities, as these represent the core business. In other words, the recoverable amount of the CGUs is influenced by the aforementioned cash flows and therefore the CGUs\u2019 book value must include financial assets/liabilities in accordance with the scope of the recoverable amount estimate process. Consequently, these assets and liabilities must be properly allocated to the associated CGUs. On this basis (so-called \u201cequity side\u201d), the book value of the Intesa Sanpaolo Group\u2019s CGUs may be determined in terms of contribution to consolidated shareholders\u2019 equity including the minority interest. Accordingly, the carrying amount of the CGUs composed of companies belonging to a single operating division was determined by summing up the individual contributions to the balance sheet. However, where the Parent Company or other Group companies contribute to multiple CGUs from a management standpoint, and this division is not represented in accounting information, management values must be used. In this specific case, the management driver was identified as each division's \"regulatory capital\", which represents the capital absorption necessary to handle the types of risk envisaged by the regulatory supervision rules. The table below provides the book values of the CGUs and the goodwill and brand name allocations to each. The values, determined for impairment testing purposes, include the portion of goodwill attributable to minority interests (included in the last column with minority interests). (millions of euro) Values Value as at 31.12.2022 CGU Book value of which goodwill Group share of which brand name of which minority interests Banca dei Territori 18,858 - 1,507 14 IMI Corporate & Investment Banking 21,334 56 - 18 Insurance 6,702 976 - 1 Asset Management 2,656 1,059 - 6 Private Banking 5,192 1,535 375 1 International Subsidiary Banks 6,461 - - - Bank of Alexandria (Egypt) 628 - - 126 Pravex Bank (Ukraine) - - - - TOTAL 61,831 3,626 1,882 166 Criteria for estimates of CGUs\u2019 value in use The value in use of CGUs is determined by estimating the present value of future cash flows that may be expected to be generated by the CGUs. These cash flows are normally estimated by using the latest publicly available business plan or, in its absence, through the drawing up by management of an internal forecast plan. The forecasting period for the analysis usually consists of a maximum of five years. The cash flow of the final year of the forecast is projected in perpetuity (through the use of perpetual return formulae, or, alternatively, temporary return formulae, if it is not realistic to expect the assets subject to measurement to generate positive cash flows over the long term), using an appropriate growth rate \u201cg\u201d for the purposes of the so-called \u201cTerminal Value.\u201d The \u201cg\u201d rate is determined by assuming as growth factor the rate of increase in the gross domestic product of the countries in which the cash flows are generated. Alternatively, the Terminal Value could be determined on the basis of a final sale or liquidation value. For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present valuations of the time value of money and the asset\u2019s specific risks. Specifically, the discount rates to be used must incorporate the present market values with reference to the risk-free component and the risk premium associated with the equity component observed over a sufficiently long time period to reflect different market conditions and economic cycles. In addition, given the diverse risks of the respective operating areas, different Beta coefficients must be used for each CGU. All the resulting rates have been adjusted to take into account the \u201cCountry Risk\u201d. Cash flow estimates Also with regard to the calculation of the value in use of CGUs for impairment testing purposes for the 2022 financial statements, the volatility of financial markets and the uncertainties that still characterise the future macroeconomic environment make the definition of near-term future cash flows from operating activities and the identification of growth rates in order to calculate the Terminal value of CGUs particularly complex. The medium-term forecasting scenario of reference has been drawn up by the Intesa Sanpaolo Research Department taking account of the forecasts of the main Italian and international organisations and institutions, and underlies the income forecasts throughout the 2023-2027 period. These forecasts are based on a reference scenario for the global economy characterised by a gradual return of inflation to levels consistent with the definition of price stability by central banks, associated with lower real growth rates than in the years prior to the pandemic crisis and rising nominal and real interest rate levels. The reference scenario assumes that in 2022 global GDP growth was 2.7%, following the rebound of 6% witnessed in 2020. In 2023 growth is expected to slow further to 2.2%, but then to accelerate again to a range of 3% to 3.5%. International trade of goods is expected to remain essentially stagnant in 2023 (+0.6%), but then to gain momentum in 2024 at growth rates similar to those of global GDP. In 2022, the Euro area was hit by the effects of a spike in natural gas prices, a repercussion of the Russian invasion of Ukraine and of the resulting deterioration in relations between the European Union and Russia. The almost total disruption of gas imports from Russia was tackled with a combination of reduced consumption, increased production from renewable and other fossil sources, and increased imports from other suppliers. Achieving this forced transition in such a short time means that prices will remain structurally higher than in the pre-crisis years. Although 2023 began relatively well, due to milder temperatures than the seasonal average and low Chinese demand, the expectation that Chinese gas demand will resume in the second quarter could entail further price tensions by the end of the year. In the light of recent developments, the scenario includes very conservative forecasts of gas prices in 2023, with mainly downside risks in the short term. The drastic deterioration in terms of trade as a result of the gas crisis was reflected in a fall of around 4 percentage points in the trade balance. The recessionary impact of the shock was almost entirely offset by public support measures for households and businesses and the fall in the average household saving rate back towards pre-pandemic levels. As a result, GDP grew by 3.3% in 2022, well above the potential growth estimates. In 2023 GDP growth is expected to be essentially nil (0.1%), associated with two quarters of mild decline. Estimated annual average growth is then expected to rebound to a range of between 1.5% and 1.8%. The long-term scenario is weighed down by the risk that structurally higher energy prices may reduce the European economy\u2019s growth potential. In 2022, inflation rose to levels well above those predicted a year ago before the war, with an estimated annual average of 8.5%. Much of the greater increase was attributable to the direct and indirect effects of higher natural gas prices, but statistical analyses now also point to demand factors making a significant contribution to the underlying inflation dynamics. The decline in gas prices from the summer 2022 peak suggests that inflation rates will fall in 2023. The annual average is estimated at 7.7%, a level that reflects very conservative forecasts of gas prices at the beginning of the year. The decrease in energy prices would further reduce inflation in the following years, bringing it into line with the ECB\u2019s price stability target in 2025. However, the decline in underlying inflation will be much slower, as a salary increase is expected, compatible with inflation rates of above 2% in services, considering that in 2023-24 productivity growth is unlikely to accelerate enough to offset its effects. In Italy, GDP growth in 2022 was 3.8%, around half a point lower than predicted before the war. The reduction in growth was due to the sharp deterioration in the trade balance (at around 4% of GDP in 2022), which was reflected internally in a decline in real household income and a fall in company earnings. However, the final impact was mitigated by fiscal measures (cut in excise duty, corporate tax credits, household subsidies, suspension of several system-wide cost components, etc.) and the reduction in the average household saving rate. GDP growth gradually slowed down over the course of 2022, and is expected to be negative on a quarterly basis at the end of 2022 and early 2023. It is expected to amount to an annual average of 0.6% in 2023. A sharp acceleration is then expected in the wake of declining energy prices, assuming that aggregate demand is supported by spending flows associated with the Next Generation EU programme (which could increase growth by 0.5% a year), investments in the energy transition, a recovery of foreign demand and a positive trend in employment and real income. Interest-rate-sensitive components of demand will record weaker real growth, a trend that will be accentuated in construction due to the scaling-back of tax incentives for renovations, but without fully offsetting the foregoing factors. Accordingly, on the whole growth continues to be expected to be above potential in the years 2024-27, although there are greater downside risks due to higher energy costs. In the reference scenario, Italian inflation slows to 6.8% in 2023 and then to 2.4% in 2024. This reduction is due primarily to the decrease in energy prices. The risks for 2023 are primarily to the downside, considering the recent performance of gas prices. The European Central Bank raised official rates rapidly from July 2022, initiating a tightening phase that will carry on into the early part of 2023. The year 2022 ended with a deposit facility rate (DFR) of 2.00% and a rate on main refinancing operations (Refi) of 2.5%. At its meeting at the end of 2022, the ECB announced that the increases would continue at a robust pace in early 2023, and this is believed to entail at least a further increase in the DFR to 3.0%. In addition, given the underlying inflation forecasts for the coming years and the very modest slowdown in final domestic demand, it is likely that the rate will be raised further in the following months to 3.50%. However, to take account of the current context of uncertainty, the reference scenario includes a progression of official rates reaching a maximum of 3.0% (DFR) and 3.5% (Refi) in 2023. Official rates are then expected to converge gradually towards neutral levels. The European Central Bank has also begun the progressive discontinuation of unconventional measures. Through an amendment of conditions, it facilitated early repayment of TLTRO III loans. Net purchases of securities under the APP and PEPP programmes were discontinued in June 2022 and March 2022, respectively. In addition, at the end of March 2023 the APP portfolio will begin to decline through monthly reductions in reinvestments from maturing securities of 15 billion euro. In the long term, such measures could exert upwards pressure on risk premiums and on the slope of the government yield curve, enhancing monetary policy direction. Excess liquidity is expected to be reduced drastically in 2023. Due to the relatively conservative assumption made regarding official rate performance, short-term interest rate forecasts are expected to fall short of implicit market rates until the end of 2027, with the sole exception of 2024. The exceptionally high level of surplus reserves, while falling rapidly in 2023 and 2024, will remain considerable and tend to keep very short-term rates close to the ECB overnight deposit rate throughout the horizon of the forecast. Estimates for the medium and long-term interest rate curve reflect the closing of the securities purchase programmes, the speed of the monetary tightening phase already implemented, modest expectations of increases in official rates for the rest of 2023 and the expectation of a decline in such rates in the following years. The slope of the rate curve becomes negative in 2023, but resumes growth in 2024 due to the decline in short-term rates and a marginal increase in longer-term rates. The decline in ECB securities portfolios could provide an additional contribution to the increase in long-term interest rates, even if the boost should be lower than that exercised in the opposite direction by the increase in the securities portfolio of the Central Bank in previous years. The decrease in support provided by the Eurosystem and the increase in risk-free rates could also reflect in an expansion of sovereign risk premiums. Nonetheless, this negative factor could be at least partly offset by the reduction in net issues by the Ministry of the Economy and Finance, in a context of improvement in public finances, and by the faster reduction in public debt than expected in the 2022-24 period. The reference scenario incorporates a modest increase in the spread linked to only fundamental factors (performance of the debt) and monetary policy (rates and negative net purchases). However, the sovereign rating and risk premium level will also be very sensitive to the level of implementation of the NRRP, with regard to both investments and structural reforms. In this regard, the reference scenario assumes that implementation will be relatively prompt. With reference to the banking scenario, in 2022 the credit market saw moderate tightening of supply conditions in line with the move towards more restrictive monetary policy and the increase in perceived risks, while on the bank balance sheets side, the good liquidity and funding position was maintained and the capital base remained solid. In addition, credit quality did not show any particular signs of deterioration. Demand for credit from businesses revived due to financial needs related to day-to-day management, in the face of rising operating costs as a result of higher prices for energy and other inputs. The particular nature of demand drove a rebound in short-term loans, but near the end of the year they began to slow partly due to the worsening of credit conditions. In contrast, medium- and long-term loans remained stationary, with rates of change hovering around zero, reflecting the strong increase during the pandemic due to the support of government-backed loans. In 2023 short-term loan performance is expected to normalise; such loans could continue to present moderately positive changes in line with inflation performance. With regard to medium- and long-term loans, after the persistent weakness of early 2023, the recovery of GDP is expected to support a return to positive territory. As already seen in 2022, financing needs may be partly met using the considerable cash buffer accumulated by businesses in the two-year period 2020-21 and deposited with banks, as well as bond issues and self-financing. In particular, market conditions are expected to be more favourable for the issues of securities, in the light of the return of interest from investors in bonds, above all after the end of the ECB rate hike phase. Loans to households continued to grow at a robust pace in 2022. Once again, this performance was driven by loans for home purchases, which grew at a rate of 5%, the highest in the last decade, with a gradually more moderate trend in the fourth quarter. The slowdown of loans to households is expected to continue in 2023 due to the impact of the increase in mortgage rates and the expected decline in real estate transactions, against the backdrop of house price trends that, while remaining slightly positive, will lose the momentum gained during the pandemic, culminating in 5.2% growth in the second quarter of 2022. In subsequent years, loans to households are expected to grow at a moderate rate, slightly higher from 2025, driven by a possible recovery in house sales and prices. Mortgage loans will continue to play a major role in the residential property market, which is expected to continue to be driven by the new housing and working needs that emerged following the pandemic, renovations and energy reclassification, and the use of part of the excess savings accumulated by some segments of households starting in 2020. With the shift in monetary policy and the rapid rise in interest rates, the long and strong growth of bank deposits, which had lasted more than a decade, came to a halt in the autumn of 2022. After the peaks reached in 2021 and the subsequent gradual slowdown, the growth rate for total deposits fell to zero, following the deceleration in the overnight deposits component, which recorded a slightly negative annual change towards the end of 2022. In a context of much higher inflation and interest rates, a modest decrease of overnight deposits is expected to continue throughout 2023, as a result of a combination of several factors, including the use of the considerable cash deposited with banks in previous years by businesses and households and the reallocation of savings to more remunerative forms. In particular, funds will continue to be shifted from overnight deposits to forms of time deposit, supported by more attractive interest-rate offerings, a trend that had already begun to be seen in late 2022. Buoyed by the return of positive yields, 2023 and subsequent years will see renewed diversification of household financial investments into government and corporate bonds, resulting in less dynamic bank deposits than during the exceptional phase of years of very low rates and the pandemic crisis. For bank bonds, after more than a decade of decline, 2023 will see a resumption of growth, which will continue in subsequent years. With the progressive repayment of the TLTRO IIIs, alongside the use of the ECB\u2019s more traditional refinancing instruments, banks are again turning to the wholesale institutional market, through diversified short- and medium- to long-term funding channels and instruments. Increases in key monetary policy rates have begun to filter through to bank interest rates. In the second half of 2022, interest rates on new loans to non-financial companies rose rapidly, to around double for loans up to 1 million euro compared to the beginning of the year, while the rate on larger loans more than trebled. Interest rates on loans to households for home purchases also increased significantly, particularly the fixed rate, which returned to being higher than the variable rate by 0.9 points in the second half of 2022, after two years of substantial alignment between the two rates. As a result of the increases in new transactions, the average bank lending interest rates also rose faster in the latter part of 2022, to 3.2% (+1.1 percentage points compared to the end of 2021). Interest rates on deposits were more stable in 2022, particularly the average rate on overnight deposits, which only increased slightly towards the end of the year. The stickiness of the interest rate for the on demand component influenced the performance of the average interest rate on deposits, which only rose slightly. In contrast, the interest rates on new time deposits were more responsive, with significant increases from July. The overall cost of funding from customers also began to rise very gradually, reflecting moderate upward movements in the average rate on bonds. As a result, the spread between lending and funding rates increased significantly, returning to levels not seen since 2009. The increase in rates on loans will continue in 2023, following the additional expected increases of key monetary policy rates. In subsequent years, the expected performance of monetary rates will enable a moderate reduction of rates on loans from the levels to be reached in 2023, which will represent the maximum for the entire scenario period. Turning to borrowing rates, in 2023 and subsequent years the stickiness of overnight deposit rates will continue, whereas pricing policies are expected to favour time deposits. The total cost of funding will increase, also driven by the effects of the recomposition towards costlier components such as time deposits and bonds. The banking spread will continue to widen in 2023, driven by the various rates of adjustment of lending and borrowing rates. A moderate reduction is expected from 2024, but unit profitability of dealing will remain high compared to the last decade. After eleven years in negative territory, in September 2022 the mark-down on on-demand deposits returned to positive levels, and it is expected to increase further in 2023 to approximately 2%, to then decline gradually in later years, given the expectation of falling Euribor rates. In contrast, with the sharp rise in Euribor rates, the mark-up on short-term rates fell significantly towards the end of 2022. A further moderate reduction is also expected in the first half of 2023, followed by a general recovery in the margin as increases in key rates are transmitted to rates on loans. Substantial stabilisation of the mark-up is expected in the final two years of the scenario period. Assets under management performed weakly in 2022. For mutual funds, the inflows during the year were mainly directed towards the equity, balanced and money-market segments. The moderate inflows to funds were driven by the negative performance of stock market indices, against the backdrop of reduced investor confidence. Portfolio management schemes were characterised by net outflows. Overall, life insurance declined as new business fell for both traditional and unit-linked policies. With the completion of the rise of rates in 2023, volumes in the asset management and life insurance industries are expected to recover. Inflows of investments to these segments may be fuelled by the stock of cash that flowed into bank deposits in previous years, albeit in a scenario of more attractive direct investment in fixed-income securities. In particular, in 2023 moderately positive inflows are expected for mutual funds and portfolio management schemes, with a possible recovery for bond fund subscriptions. In the following years, assets under management are expected to continue to achieve positive results. For life insurance companies, in 2023 and onwards, total collected premiums are expected to increase. In particular, the level reached by market rates is making it possible to meet the previous demand for traditional policies, which is again on the rise. However, on the offering side, the strategy will continue to focus on hybrid products and class III policies, set to recover starting in 2023. This is also reflected on the demand side, where there is interest in products capable of taking advantage of the best investment opportunities, including those more closely linked to equity instruments. From this perspective, multi-line policies will continue to be drivers. The table below illustrates the macroeconomic variables expected in the period 2023-2027, only for Italy, as no goodwill was recognised for the CGUs operating in foreign countries. (values as a percentage) Italy 2022 2023 2024 2025 2026 2027 REAL ECONOMY Real GDP Italy 3.8 0.6 1.8 1.2 1.0 0.6 Consumer prices Italy 8.2 6.8 2.4 1.3 1.5 1.3 Period-end ECB rate 2.50 3.50 3.00 2.75 2.50 2.50 3-month Euribor rate 0.34 3.00 2.99 2.38 2.10 2.06 10-year IRS 1.92 2.82 3.11 3.28 3.27 3.23 10-year BTP 3.03 4.05 4.60 4.90 4.85 4.76 Spread vs. Bund (basis points) 187 201 190 179 174 170 BANKING SECTOR Loans 2.3 1.5 1.9 2.2 2.6 2.7 Direct customer deposits 2.2 0.6 1.3 2.1 2.3 2.3 Average customer spread 1.93 2.87 2.80 2.60 2.52 2.49 Mutual funds -12.9 4.7 4.1 4.1 3.9 3.6 Portfolio management -15.1 2.8 2.9 2.9 2.8 2.5 Life technical reserves -1.9 4.6 4.4 4.4 4.4 4.3 Scenario produced in December 2022 by the Research Department. Forecast data (estimates for 2022). The various CGUs\u2019 expected cash flows were subject to impairment testing, taking account of the macroeconomic scenario described above, and were estimated by following a two-stage assessment process. Specifically, with regard to the first forecast period, in line with the choices made for the previous Financial Statements, a timeframe of 5 years was considered, i.e. the five-year period 2023-2027. For that period, with regard to the years up to 2025, the forecasts set out in the 2022-2025 Business Plan, updated to take account of the changed macroeconomic scenario, were considered. The flows for the last two years of forecasting (2026 and 2027) were estimated through inertial tracking of the flows for 2025, based on the forecasts relating to the updated macroeconomic scenario, thus, without considering the effect of additional managerial leverage, compared to that incorporated into the Plan forecasts. The net income projected for the forecast years has been adjusted, in accordance with IAS 36, to consider non-monetary components and the minority-interest share of net income. It also excludes the effects of any reorganisation and restructuring transactions and the capital gains on future sales of company assets. In addition, cash flows include those allocated to the various CGUs deriving from central corporate assets. In accordance with the equity-side approach mentioned above in relation to the determination of the carrying values of CGUs, the cash flows used for impairment testing include the flows correlated with financial assets and liabilities, given that these represent the company's core business. In addition, among various financial valuation techniques, such as that used for determining the value in use, the value of a company at the end of the flow forecast period, the so-called terminal value, is normally determined by infinite compounding, at an appropriate \u201cg\u201d rate, of the cash flow achievable \"at full capacity\u201d. This rate, even if subject to time variations, may be assumed to be constant or decreasing (or increasing in rarer circumstances). As an alternative to the terminal value estimation methodology, doctrine also envisages (i) the exit multiple approach and (ii) the approach based on an estimation of the liquidation value of the company. Specifically, with regard to approach (i) it should be mentioned that an exit multiple estimate has complex (and potentially subjective) elements that become even more marked at times of market uncertainty and volatility such as now. Approach (ii) is valid only for companies due to be wound up on termination of the forecasting period, and therefore not applicable with a view to a business as a going concern. For the purposes of the Terminal Value, i.e. the second stage of valuation, the cash flow forecast for 2027, the last year of the analytical projections, was used as the cash flow achievable at full capacity. In line with the impairment tests of the previous years, the \u201cg\u201d rate was determined as the average growth rate of Italy\u2019s nominal GDP, observed and forecast in the 2008-2027 period (it should be noted that, in consideration of the impairment made in the previous financial statements, no goodwill is allocated to the Banca dei Territori, International Subsidiary Banks, Bank of Alexandria and Pravex Bank CGUs; consequently, it is not necessary to calculate the \u201cg\u201d rate for the purpose of the goodwill test for the foreign countries where the Group operates). Nominal GDP is the sum of the real GDP growth rate and the inflation rate. Expected real GDP and inflation figures used to calculate the \"g\" rate were drawn from the forecasts prepared by the Intesa Sanpaolo Research Department described above. Each component has been calculated as the average for the period 2008-2027. The decision made in terms of observation period for the growth rates, considering the current particular macroeconomic situation, calls for specific consideration. Real GDP dynamics in recent years have often been negative, due mainly to the various economic and financial crises that affected global economies, beginning in particular with the 2008 global financial crisis, followed by the sovereign debt crisis in 2011. The trend began to be reversed as early as 2015, with the resumption of a growth process that, however, was abruptly interrupted in 2020 by the COVID-19 pandemic, and which continues to be threatened by the energy crisis that emerged in 2022 as a consequence of the outbreak of the military conflict between Russia and Ukraine. In order to consider the various phases of the economic cycle, the growth rate for estimating terminal value was calculated as the average GDP rates for the 2008-2027 period, inasmuch as this period was deemed sufficiently extensive to include, and thus average, a period of severe crisis and a prospective period of a return to a scenario of moderate economic growth. Furthermore, with a prudential approach, it was checked that the \u201cg\u201d rate was not higher than Italy\u2019s GDP growth rate in 2027 or, for each CGU, the growth rate of the last year of analytical forecasting. Cash flow discounting rates For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present market valuations, the time value of money and the asset\u2019s specific risks. In practice, the first characteristic (current market conditions) translates into the calculation of all parameters based on the latest available information as at the reference date of the estimate, so as to best take into account the current market assessments. The second characteristic (consistency between risks/flows and rates) must follow the specificity of flows used for impairment testing of the CGUs. This rate (in its various components) must therefore be decided by observing the specific nature of flows used to assess each CGU, in order to maintain coherence and consistency with the flows. Specifically, consistency becomes important with regard to inflation, country risk and other risk factors that, according to IAS 36, may be expressed in the flows or rate. It is important to point out that a characteristic common to all CGUs recording goodwill (and, in general, intangibles with an indefinite life) is the long-term perspective of flows used to estimate the CGU\u2019s value in use. In fact, by its very nature, goodwill has an indefinite useful life, and therefore future cash flows are normally infinitely projectable. This long-term perspective should be reflected in all discounting rate benchmarks by means of the appropriate selection of each, in such a way that they express normalised conditions in the long term. The discounting rate should normally include the cost of the various sources of funding of the asset to be assessed, in other words the equity cost and debt cost (i.e. WACC, weighted average capital cost). However, in the case of a banking entity, it is estimated according to an equity-side approach, that is to say by considering only the cost of equity capital (Ke), in a manner consistent with the methods for determining cash flows, which, as stated above, include those deriving from financial assets and liabilities. The cost of capital is determined using the Capital Asset Pricing Model (CAPM). Based on this model, the cost of capital is calculated as the sum of risk-free rate and a risk premium, in turn dependent on the specific risks implicit in the business activities (i.e. both business segment risk and country risk). The cost of capital is determined net of taxes, in order to ensure consistency with the discounted cash flows. As the various CGUs of the Intesa Sanpaolo Group operate in different business segments and with different risk factors, the specific costs of capital of each CGU were identified. It should be noted that, since cash flows were determined in nominal terms, discounting rates were also determined in nominal terms, meaning that they incorporate inflation expectations. Entering into the details of the various components that contribute to the determination of discounting rates, it may be remarked that: - with regard to the choice of cash flow discounting rates, and in particular of the risk-free rate and CRP, in view of the structure of interest rates in the current macroeconomic scenario, which will see a further increase in the long term, continuing the progression of increases that began in the second half of 2022, it was prudentially decided to maintain the approach that involves the use of differentiated discount rates for the discounting of cash flows expected over the explicit forecast horizon and for the terminal value cash flow: o concerning the risk-free component included in the cash flow discounting rate of the explicit forecast horizon, a decision was made to use the average monthly return (December 2022) of the 10-year German Government bonds (Bund); o concerning the risk-free component included in the cash flow discounting rate of the terminal value (cash flow projectable beyond the explicit forecast period), a decision was made to use the average annual return of 10-year German government bonds (Bund) forecast for 2027, which is the last year of flow forecast period, estimated by the Intesa Sanpaolo Research Department. In line with the above, also for the Country Risk Premium (CRP) a methodology was considered that envisages the use of differentiated values. In addition, it should be noted that there is no goodwill allocated to CGUs other than those (mainly) operating in Italy - the \u201ccountry risk\u201d essentially coincides with the \u201cItaly risk\u201d. Therefore, in the methodological choices for the impairment test of goodwill for the purpose of the 2022 Financial Statements, the CRP was calculated as follows: o concerning the CRP included in the cash flow discounting rate of the explicit forecast horizon, the average BTP- Bund spread of December 2022 was considered; o concerning the CRP included in the cash flow discounting rate of the terminal value, the average annual BTP-Bund spread estimated for 2027 was considered, based on the medium-term forecast scenario mentioned previously; - the equity risk premium \u2013 represented by the difference between stock market yield and the Return on Investment on risk- free securities determined in reference to a sufficiently wide time horizon \u2013 was calculated on the basis of historical data, given its higher degree of reliability and visibility and also in the light of the current macroeconomic context, which reflects particularly volatile stock market prices not always representative of economic \u201cfundamentals,\u201d while also creating a framework of uncertainty within which it is difficult to formulate reliable forecasts of results in order to estimate the equity risk premium implicit in stock market quotations. Specifically, the geometric mean for the equity risk premium was used, recorded on the US market for the period 1928-2022, adjusted for the differential between the US inflation rate and the German inflation rate (the market used as the basis for risk-free calculation); - the Beta coefficient, which measures the specific degree of risk of an individual company or business sector, was calculated by identifying a sample of companies, comparable in business terms, for each CGU, and with reference to this sample the average or median Beta figure used was that recorded on a monthly basis over a five-year period; Summary of growth rates and discounting rates used The following table presents a summary, for each CGU subject to impairment test, of the parameters relevant to determining value in use: weighted average 2023-2027 growth rates for the cash flows of the various CGUs, including the allocation of cash flows related to the central corporate assets, the \u201cg\u201d growth rates for terminal value purposes, and the various discounting rates and inflation rates. RATES/PARAMETERS Nominal growth rates for impairment test (2023-2027) NOMINAL DISCOUNTING RATES LONG-TERM \"G\" GROWTH RATES INFLATION RATES CGU 2022 flows 2022 Terminal Value 2021 flows 2021 Terminal Value 2022 2021 2022 CGU subject to impairment test IMI Corporate & Investment Banking 17.81% 10.57% 11.18% 7.61% 9.37% 2.06% 1.52% 1.96% Insurance 1.69% 10.27% 10.88% 7.12% 8.89% 2.06% 1.52% 1.96% Asset Management 1.96% 10.12% 10.73% 6.85% 8.61% 2.06% 1.52% 1.96% Private Banking 2.59% 10.14% 10.75% 7.28% 9.05% 2.06% 1.52% 1.96% Impairment testing results The outcomes of the impairment test showed how the values in use of each of the CGUs to which amounts of goodwill were allocated as at 31 December 2022 were higher than the respective book values. Thus, it was not necessary to proceed to any impairment of the goodwill or brand name allocated to the CGUs. In addition, it is specified that, for the sake of completeness of the analysis, the Group's total value in use was confirmed to be greater than the sum of the carrying amounts of the individual CGUs. Finally, with regard to the direct consequences of the Russia-Ukraine conflict on the Group\u2019s goodwill, it should be noted that the goodwill relating to the Ukrainian subsidiary Pravex Bank, considered an autonomous CGU, was already fully written down in the 2008 Financial Statements, as previously mentioned. In the case of the Russian subsidiary Joint-Stock Company Banca Intesa (Banca Intesa Russia), in addition to not presenting allocated goodwill, its weight in the IMI Corporate & Investment Banking CGU is absolutely immaterial on that CGU. Furthermore, as stated above, during impairment testing as at 31 December 2022 the IMI Corporate & Investment Banking CGU was found to have a recoverable amount in excess of its book value. Verification of the results of impairment testing using an alternative calculation method As the value of a company or a business line may also be determined by discounting the distributable cash flows, understood as the future cash flows estimated to be generated by the business area (the single CGUs) net of the share of income that must be retained in equity to meet the supervisory requirements, the recoverability of the book value of the goodwill allocated to the CGUs was verified also by discounting the aforementioned cash flows according to the excess capital version of the Dividend Discounted Model (DDM). With reference to the supervisory requirements, a Common Equity Tier 1 ratio of 10.25% was used, as resulting from the Group Risk Appetite Framework (RAF), and significantly higher than the capital requirement (8.91%) communicated by the ECB following the results of the Supervisory Review and Evaluation Process (SREP). For the Insurance CGU, a Solvency Ratio of 170% was taken into account, as per the aforementioned RAF. Thus, the distributable cash flows were obtained by integrating the expected cash flows determined as illustrated above, factoring in an increase in capital surplus in relation to the above-mentioned minimum limits of capital, or a decrease in the shares of income needed to cover the requirements deriving from the estimated growth trend in risk-weighted assets. These flows, estimated for each CGU, were discounted by applying the same discounting rates and growth rates \u201cg\u201d used in applying the Discounted Cash Flow (DCF) method. The results of this method confirmed the results based on the calculation made using the DCF method. Reconciliation of the results of the impairment test with the market valuation During 2022, the Intesa Sanpaolo stock price declined (-8.6%) on the closing values at the end of 2021, underperforming the Italian sector index (FTSE Italia All-Share Banks, approximately -4%), but outperforming the main Borsa Italiana reference index (FTSE MIB Index, approximately -13.4%). Specifically, after a particularly difficult start to the year following the outbreak of the military conflict between Russia and Ukraine and the consequent deterioration of the macroeconomic scenario, in which stock prices slowed considerably, in the second half of the year the stock recovered in part, rallying to a particularly evident degree in the fourth quarter of the year, to close at around 2.08 euro at the end of December 2022. In early 2023 the Intesa Sanpaolo stock appreciated further, with prices at the end of February of approximately 2.5 euro per share and a market capitalisation of approximately 47 billion euro (with a P/BV multiple of approximately 0.7x). The valuations and reports by financial analysts produced during 2022 showed on average a downward revision of the target prices compared to the 2021 values, with a performance essentially in line with the decline in Intesa Sanpaolo stock prices. In early 2023, above all following the reporting to the market of 2022 results, target prices were generally revised upwards, with an average value of 2.85 euro per share. Among the strengths of Intesa Sanpaolo, analysts underscore its strong brand and its highly qualified management, which is valued by the market. In addition, they believe that the Bank will benefit from further increases in net interest income, considering that on average Italian banks have a positive sensitivity to increases in the Euribor rate. Intesa Sanpaolo is also capable of generating a level of profitability that is among the highest in Italy, while also benefiting from considerable exposure to portfolio and asset management activities, and maintains a strong capital position. In addition, it conducted a highly successful de-risking strategy that allows it to face a possible further deterioration of the macroeconomic scenario with greater peace of mind. On the other hand, among the main elements that could prove especially critical, analysts reiterate the customary risk of internal political instability for Italy, with possible consequences for the BTP-Bund spread, in addition to possible outflows of assets managed if financial market tension should resume. In any event, it bears observing that valuations expressed by financial analysts have different characteristics from the \u201cfundamental\u201d assessment represented by value in use. The following may be observed regarding those valuations: - the future cash flows forecast by analysts mainly extend to 2025, and are essentially aligned with, or marginally in excess of, internal management estimates, whereas the forecasts used for impairment testing purposes cover a period of five years that extends until 2027; - the cost of the capital used (in not particularly frequent cases where this parameter is explicitly stated by analysts) is often determined in overall terms at Group level; the cost of capital of Intesa Sanpaolo, used to discount the terminal value cash flows, is marginally lower than the average value shown in the reports by the analysts. Analysts tend to use discount rates implicit in stock market values, which are therefore higher on average as they are influenced by current prices; - similarly to the observations made for the impairment test of the 2021 Financial Statements, from the methodological standpoint, use was often made of multiples (in terms of P/E or ROE) applied to current market prices or expected profitability for the coming years 2023 or 2024; these are thus methods that provide a fair value, rather than a long-term value in use. It bears observing that the valuations in question were intended for financial investors and thus aimed to determine prices and values in the short term. These valuations represent the value potentially obtainable from sale on the market of limited amounts of securities, i.e. the disposal of a minority interest, and are therefore closely pegged to prices and to current market conditions. In brief, the difference in the values from the analysts\u2019 estimates, which reflect on a methodological difference between the fair value and the value in use, may be explained by the following factors: - different unit of valuation: as stated, the fair value calculated by the analysts represents the price of a single share, different from the value in use, which measures the Bank\u2019s entire capital. However, there is a control premium between the two values, which is lacking in the former case, and which is generally valued within a range of 15% to 25%; - different time horizon of reference considered by the market: the period covered by the estimates of the cash flows, as mentioned, has a considerable impact on the valuation of the Group; given the time horizon considered by analysts, which in general covers a period of 3 years, and deducting the control premium, the Group\u2019s total recoverable amount would be, in terms of value per share, in line with that given by analysts as the target price; - different value of the cost of capital: the analysts\u2019 estimates, deriving from stock market prices, factor in elements external to the Group\u2019s ability to generate profits for the purpose of remunerating its shareholders. Finally, it is believed that impairment tests must be performed with the awareness of the fact that the current economic situation, penalised by the geopolitical context, impacts expected short- and medium-term cash flows from operating activities, without however in any way affecting the Intesa Sanpaolo Group\u2019s primary sources of income, which are also positively impacted by rising interest rates, and competitive edges, as has also been demonstrated by the results of the past few years in which forecast targets have consistently been achieved, and the income dynamics for 2022. In this regard, it should be noted that in recent years the Group has sold businesses or equity investments that have generated significant gains from disposal (e.g. Setefi, Allfunds Bank, Intrum, the merchant acquiring business, Fund Administration in Luxembourg and the training business), confirming the existence of hidden value within the Group that is not reflected in the book values but is recognised in transactions with third parties. Moreover, the resilient and well diversified business model, which focuses on the product factories where a large part of the difference in book values is concentrated, guarantees a primary source of income for the Group even in adverse conditions solely in relation to the scenario of the banking sector. Accordingly, in developing the valuation model used for the purposes of impairment testing, the following precautions were adopted: \u2212 projected cash flows include the financial effects of the services provided by the Corporate Centres. Moreover, the final figures for the last few years have been essentially in line with the forecast figures; \u2212 the cost of capital was determined analytically, based on parameters taken from the markets for each CGU, depending on the different risk of the respective businesses, also considering analytically the various risk factors. Lastly, the parameters and information used to test the recoverability of intangible assets with indefinite useful life are significantly influenced by the macroeconomic environment and financial market trends, which might undergo changes that cannot be predicted at the present time. If, in the future, the macroeconomic scenario should deteriorate with respect to the assumptions, this would have effects on the estimate of the various CGUs\u2019 cash flows and on the main assumptions adopted, which could obviously yield results in the financial statements of the coming years different from those outlined in the Financial Statements as at 31 December 2022. Nonetheless, it must be noted that the business units that have significant amounts of goodwill (Insurance, Asset Management and Private Banking) have always had, and are expected also in the future to have profitability that largely justifies the values of goodwill recognised. Sensitivity analyses Since the value in use is determined by using estimates and assumptions that may contain some level of uncertainty, sensitivity analyses to verify the sensitivity of the results obtained to changes in the parameters and in the underlying hypotheses, referring to the DCF method, were carried out, as required by the IAS/IFRS. These analyses are important in this forecasting scenario characterised by a significant degree of uncertainty. In this regard, considering alternative scenarios and stress factors in the main valuation and macro-economic variables makes it possible to evaluate the impacts on the impairment test results related to the specific forecasting scenario. For CGUs that present residual values of goodwill, the impact on the value in use of an increase of up to 50 bps in discount rates and a decrease of up to 50 bps in the growth rate for terminal value purposes was verified. In addition, analyses were conducted of changes in the Value in Use resulting from a decrease in the cash flows used for terminal value purposes. No events of impairment would emerge in any of the CGUs tested, even in the event of an increase in discounting rates of 50 bps, and a decrease in the \u201cg\u201d rate of 50 bps or a decrease in the terminal value cash flow of 10%. The table below illustrates the sensitivity (in percentage terms) of the Value in Use of the CGUs that present goodwill to changes in the \u201cg\u201d rate or discounting rate of -/+10 basis points, as well as a reduction in the cash flows used for terminal value purposes of 10%. CHANGE IN VALUE IN USE Sensitivity Sensitivity to growth rate \"g\" - 10 bps Sensitivity to discount rate + 10 bps Sensitivity to Terminal value cash flows - 10% CGU IMI Corporate & Investment Banking -0.82% -1.09% -8.49% Insurance -0.78% -1.05% -6.44% Asset Management -0.80% -1.07% -6.50% Private Banking -0.80% -1.07% -6.52% Based on the table above, changes in the Ke (increasing) or the \u201cg\u201d (decreasing) values within 10 bps would lead to a general decrease in the values in use ranging between 0.78% and 1.09%. Regarding the cash flow considered for the purpose of the terminal value, a 10% decrease of the same would lead to reductions in the values in use ranging between 6.50% and 8.49%. In any event, no issues of impairment would arise for any CGU at that amount of sensitivity. Still considering stress testing, analyses were performed with the aim of determining the limits for the main inputs, beyond which impairment testing of the CGUs would require the recognition of impairment. The following table presents the \u201cg\u201d growth rates and discounting rates for each CGU that would result in a Value in Use in line with its carrying amounts, assuming equal cash flows to be discounted. Sensitivity \"g\" growth rate Difference compared to the \"g\" rate used TV discounting rate Difference compared to the Ke discounting rate used CGU IMI Corporate & Investment Banking 0.10% -198 bps 12.70% 152 bps Insurance -3.80% -583 bps 15.16% 428 bps Asset Management -17.80% -1.984 bps 23.62% 1.289 bps Private Banking -54.50% -5.658 bps 45.27% 3.452 bps As shown by the data contained in the table, the Values in Use of the CGUs would reduce until the book values, with consequent impairment problems, only in correspondence with the significant worsening of the discounting rates (Ke) and the \u201cg\u201d growth rates. Finally, within the framework of analysis regarding possible changes in the cash flows of the CGUs on the basis of alternative scenarios to those used for the purposes of this impairment test, account was taken of the impact on prospective cash flows of the application of an alternative prospective macroeconomic scenario, consistent with the \u201cadverse\u201d scenario incorporated into the Expected Credit Loss models used to measure loans pursuant to IFRS 9. This scenario envisages a general shock to the Euro area economy, relating primarily to a very significant increase in the price of gas, with the introduction of a recession for the years 2023 and 2024, with the resulting increase in inflation. The scenario presented above translates into a reduction in cash flows at the Group level, which will also benefit from the provisions set aside in the 2022 Financial Statements in response to the uncertainty in the prospective scenario and the significant reduction in risks associated with exposures to Russian and Ukrainian counterparties following the de-risking measures taken and the provisions made, averaging 11% over the forecasting horizon, with impacts spread across all CGUs. Following this analysis, it was found that the reduction in cash flows over the 2023-2027 forecasting horizon, estimated as a result of the application of an \u201cadverse\u201d scenario, would not entail issues of impairment for any of the Group\u2019s CGUs.", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1016": { "value": "SECTION 10 - INTANGIBLE ASSETS - CAPTION 100 10.1 Intangible assets: breakdown by type of asset (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life A.1 Goodwill X 3,626 X 2,650 X 976 X - X 3,574 A.1.1 Group x 3,626 x 2,650 x 976 x - x 3,574 A.1.2 Minority interests x - x - x - x - x - A.2 Other intangible assets 4,322 1,882 3,755 1,882 549 - 18 - 3,886 1,882 of which: software 3,013 - 2,961 - 52 - - - 2,533 - A.2.1 Assets measured at cost 4,322 1,882 3,755 1,882 549 - 18 - 3,886 1,882 a) Internally generated intangible assets 2,386 - 2,366 - 20 - - - 2,072 - b) Other assets 1,936 1,882 1,389 1,882 529 - 18 - 1,814 1,882 A.2.2 Assets measured at fair value - - - - - - - - - - a) Internally generated intangible assets - - - - - - - - - - b) Other assets - - - - - - - - - - Total 4,322 5,508 3,755 4,532 549 976 18 - 3,886 5,456 As at 31 December 2022, the amount for software was 3,013 million euro, of which 2,386 million euro produced internally and 627 million euro purchased externally. The allocation of goodwill between \u201cCash Generating Units\u201d is reported in the following table. (millions of euro) CGUs/Goodwill 31.12.2022 31.12.2021 Banca dei Territori - - IMI Corporate & Investment Banking 56 56 Insurance 976 976 Asset Management 1,059 1,060 Private Banking 1,535 1,482 International Subsidiary Banks - - Bank of Alexandria (Egypt) - - Pravex Bank (Ukraine) - - GROUP TOTAL 3,626 3,574 For a breakdown of the CGUs, see the next chapter \u201cInformation on intangible assets and goodwill\u201d. 10.2 Intangible assets: annual changes (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 20,772 7,382 - 10,583 2,386 41,123 A.1 Total net adjustments -17,198 -5,310 - -8,769 -504 -31,781 A.2 Net initial carrying amount 3,574 2,072 - 1,814 1,882 9,342 B. Increases 52 1,041 - 422 - 1,515 B.1 Purchases 42 51 - 304 - 397 of which business combinations 42 - - 73 - 115 B.2 Increases of internally generated intangible assets X 990 - - - 990 B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences 10 - - - - 10 B.6 Other changes - - - 118 - 118 C. Decreases - -727 - -300 - -1,027 C.1 Sales - - - -3 - -3 of which business combinations - - - - - - C.2 Impairment losses - -692 - -292 - -984 - Amortisation X -684 - -280 - -964 - Write-downs recognised in - -8 - -12 - -20 shareholders' equity X - - - - - income statement - -8 - -12 - -20 C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - -12 - - - -12 C.5 Negative foreign exchange differences - - - -4 - -4 C.6 Other changes - -23 - -1 - -24 D. Net final carrying amount 3,626 2,386 - 1,936 1,882 9,830 D.1 Total net adjustments -17,198 -6,002 - -9,061 -504 -32,765 E. Gross final carrying amount 20,824 8,388 - 10,997 2,386 42,595 F. Measurement at cost - - - - - - The sub-caption B.1 includes the increase for Goodwill deriving from the purchase of Compagnie de Banque Priv\u00e9e Quilvest S.A. (CBPQ). 10.2 Of which: Banking group (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 19,042 7,322 - 8,952 2,386 37,702 A.1 Total net adjustments -16,444 -5,276 - -7,743 -504 -29,967 A.2 Net initial carrying amount 2,598 2,046 - 1,209 1,882 7,735 B. Increases 52 1,025 - 378 - 1,455 B.1 Purchases 42 38 - 276 - 356 of which business combinations 42 - - 73 - 115 B.2 Increases of internally generated intangible assets X 987 - - - 987 B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences 10 - - - - 10 B.6 Other changes - - - 102 - 102 C. Decreases - -705 - -198 - -903 C.1 Sales - - - -3 - -3 of which business combinations - - - - - - C.2 Impairment losses - -678 - -190 - -868 - Amortisation X -670 - -178 - -848 - Write-downs recognised in - -8 - -12 - -20 shareholders' equity X - - - - - income statement - -8 - -12 - -20 C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - -12 - - - -12 C.5 Negative foreign exchange differences - - - -4 - -4 C.6 Other changes - -15 - -1 - -16 D. Net final carrying amount 2,650 2,366 - 1,389 1,882 8,287 D.1 Total net adjustments -16,444 -5,954 - -7,933 -504 -30,835 E. Gross final carrying amount 19,094 8,320 - 9,322 2,386 39,122 F. Measurement at cost - - - - - - 10.2 Of which: Insurance companies (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 1,712 60 - 1,544 - 3,316 A.1 Total net adjustments -736 -34 - -939 - -1,709 A.2 Net initial carrying amount 976 26 - 605 - 1,607 B. Increases - 16 - 21 - 37 B.1 Purchases - 13 - 6 - 19 of which business combinations - - - - - - B.2 Increases of internally generated intangible assets X 3 - - - 3 B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences - - - - - - B.6 Other changes - - - 15 - 15 C. Decreases - -22 - -97 - -119 C.1 Sales - - - - - - of which business combinations - - - - - - C.2 Impairment losses - -14 - -97 - -111 - Amortisation X -14 - -97 - -111 - Write-downs recognised in - - - - - - shareholders' equity X - - - - - income statement - - - - - - C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - - - - - - C.5 Negative foreign exchange differences - - - - - - C.6 Other changes - -8 - - - -8 D. Net final carrying amount 976 20 - 529 - 1,525 D.1 Total net adjustments -736 -48 - -1,036 - -1,820 E. Gross final carrying amount 1,712 68 - 1,565 - 3,345 F. Measurement at cost - - - - - - 10.2 Of which: Other companies (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 18 - - 87 - 105 A.1 Total net adjustments -18 - - -87 - -105 A.2 Net initial carrying amount - - - - - - B. Increases - - - 23 - 23 B.1 Purchases - - - 22 - 22 of which business combinations - - - - - - B.2 Increases of internally generated intangible assets X - - - - - B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences - - - - - - B.6 Other changes - - - 1 - 1 C. Decreases - - - -5 - -5 C.1 Sales - - - - - - of which business combinations - - - - - - C.2 Impairment losses - - - -5 - -5 - Amortisation X - - -5 - -5 - Write-downs recognised in - - - - - - shareholders' equity X - - - - - income statement - - - - - - C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - - - - - - C.5 Negative foreign exchange differences - - - - - - C.6 Other changes - - - - - - D. Net final carrying amount - - - 18 - 18 D.1 Total net adjustments -18 - - -92 - -110 E. Gross final carrying amount 18 - - 110 - 128 F. Measurement at cost - - - - - - 10.3 Other information As at 31 December 2022, there were commitments relating to investments in intangible assets, primarily software, of approximately 25 million euro. Information on intangible assets and goodwill The application of IFRS 3 to the accounting of acquisitions may lead to the recognition of new intangible assets and goodwill. In the case of the Intesa Sanpaolo Group, the merger between Banca Intesa and Sanpaolo IMI and the subsequent acquisitions led to the recognition of significant amounts for intangible assets and goodwill. In 2022 two transactions were finalised, entailing the recognition of new intangible assets with finite useful lives and goodwill. These transactions are briefly illustrated below, describing their effects on the amount and composition of the Group\u2019s intangible assets. The acquisition by Fideuram Bank Luxembourg, a subsidiary of Fideuram - Intesa Sanpaolo Private Banking, of 100% of the capital of Compagnie de Banque Priv\u00e9e Quilvest, a Luxembourg private bank wholly owned by the holding company Quilvest Wealth Management, was finalised on 30 June 2022. Within the framework of the Purchase Price Allocation (PPA), two specific customer relationship related intangible assets were identified and recognised, amounting to 43 million euro in relation to indirect customer deposits (assets under management) and 30 million euro in relation to core deposits, respectively. In addition, goodwill of approximately 42 million euro was recognised as the residual difference between the acquisition cost and the company\u2019s shareholders\u2019 equity measured at its acquisition date fair value. According to IAS 36, both goodwill and the intangible assets linked to these assets were allocated to the Private Banking CGU. Within the International Subsidiary Banks Division, the acquisition by VUB Banka, a wholly owned subsidiary of Intesa Sanpaolo Holding International, of 5.26% of the capital of VUB Generali, the number-four operator in the Slovak pension fund market, in which the Intesa Sanpaolo Group previously held a 50% stake as part of a joint venture established in 2004 with the Generali Group, was finalised on 24 October 2022. This transaction, which entailed the acquisition of control over the company by the Intesa Sanpaolo Group pursuant to IFRS 10, was considered a business combination to be accounted for under IFRS 3. At the end of the Purchase Price Allocation (PPA), an intangible asset not previously recognised in the financial statements of VUB Generali attributable to customer relationship related activities, and in particular asset management, of 80 million euro was identified and allocated to the International Subsidiary Banks CGU. The intangible asset identified, net of the related tax effect, offset the entire difference between the acquisition cost and the company\u2019s assets, without the transaction giving rise to amounts of goodwill. For more details on the transactions mentioned above, see Part G of these Notes. The table below summarises the values of the intangible assets and goodwill recorded in the consolidated financial statements at 31 December 2022 with the related changes during the period, subdivided by Cash Generating Unit (CGU), which represent the groups of assets subject to impairment testing on goodwill in order to determine the recoverable amount. (millions of euro) CGU Financial Statements 2021 Acquisition of CBPQ Acquisition of VUB Generali Amortisation Other changes (1) Financial Statements 2022 BANCA DEI TERRITORI DIVISION 1,833 - - -22 - 1,811 - Asset management intangibles - distribution 201 - - -14 - 187 - Insurance intangibles - distribution 110 - - -7 - 103 - Brand name intangibles 1,507 - - - - 1,507 - Intangible asset under administration 15 - - -1 - 14 - Intangibile Acquiring - - - - - - - Goodwill - - - - - - DIVISIONE IMI CORPORATE & INVESTMENT BANKING 56 - - - - 56 - Goodwill 56 - - - - 56 ASSET MANAGEMENT DIVISION 1,166 - - -6 -1 1,159 - Asset management intangibles - prod. and distribut. 106 - - -6 - 100 - Goodwill 1,060 - - - -1 1,059 PRIVATE BANKING DIVISION 2,106 115 - -19 15 2,217 - Asset management intangibles - prod. and distribut. 180 43 - -14 4 213 - Insurance intangibles - distribution 47 - - -2 - 45 - Intangibile Core Deposits - 30 - -1 - 29 - Brand name intangibles 375 - - - - 375 - Intangible asset under administration 22 - - -2 - 20 - Goodwill 1,482 42 - - 11 1,535 INSURANCE DIVISION 1,567 - - -94 - 1,473 - Insurance intangibles - production 591 - - -94 - 497 - Goodwill 976 - - - - 976 DIVISIONE INTERNATIONAL SUBSIDIARY BANKS - - 80 -1 - 79 - Intangible asset management - production - - 80 -1 - 79 BANK OF ALEXANDRIA (Egypt) - - - - - - PRAVEX BANK (Ukraine) - - - - - - CGU TOTAL 6,728 115 80 -142 14 6,795 - Asset management intangibles 487 43 80 -35 4 579 - Insurance intangibles 748 - - -103 - 645 - Intangibile Core Deposits - 30 - -1 - 29 - Intangible asset under administration 37 - - -3 - 34 - Intangibile Acquiring - - - - - - - Brand name intangibles 1,882 - - - - 1,882 - Goodwill 3,574 42 - - 10 3,626 (1) Foreign exchange differences on the goodwill attributable to Eurizon Capital SLJ and on the portion of amortisation of intangibles attributable to Reyl & Cie SA. The intangible assets with finite useful lives recognised refer to customer relationships and relate to the valuation of the insurance portfolio (Value of Business Acquired), Assets Under Administration (AUA), Assets Under Management (AUM) and Core Deposits. Such intangible assets were originally measured by discounting the income margin cash flows over a period representing the residual life, contractual or estimated, of relationships existing at the time of the business combination. For the intangible assets with a finite useful life, the amortisation for the year was recognised to the income statement (under \u201c220. Net adjustments to/recoveries on intangible assets\u201d) for a total of 142 million euro gross of the tax effect. The brand name, an intangible asset related to marketing, was also measured. This asset is considered to have an indefinite life since it is expected to contribute for an indefinite period of time to the formation of income flows. Based on IAS 36, both intangible assets with an indefinite useful life and goodwill are submitted to impairment testing on an annual basis to verify recoverability of their value. In addition, intangible assets with a finite useful life must be tested for impairment whenever there is evidence of impairment indicators. The recoverable amount consists of the higher of the fair value and the value in use, less costs to sell. Lastly, it should be mentioned that IAS 36, for the purpose of calculating the value in use of intangibles subject to impairment testing, states that reference must be made to cash flows arising from intangible asset in its current condition (as at the impairment test date), with no distinction between cash flows arising from the asset initially recognised according to IFRS 3 and those relating to the asset outstanding at the impairment test date. This because it would be difficult, especially with regard to extraordinary transactions between businesses or changes in the asset following significant turnover in volumes, customers, contracts, etc., to separate cash flows relating to the original asset from others. This concept can also be applied in impairment testing of goodwill to calculate the Value in use of the CGUs, for which the cash flows have to be considered with regard to all assets and liabilities of that CGU and not only the assets and liabilities for which goodwill was recognised on application of IFRS 3. As in previous financial statements, given the volatility of the financial markets and the available market values for calculation of the recoverable amount, the Value in use that represents the present value of net future cash flows from the asset (or business) being valued was used in the impairment tests for the 2022 financial statements. In particular, for the financial statements as at 31 December 2022, in line with the previous financial statements, the impairment test on goodwill was conducted by applying the DCF \u2013 Discounted Cash Flow model \u2013 to which, as a check of the consistency of the results of using the DCF model, the DDM \u2013 Dividend Discounted Model \u2013 is added. Both of these methods were based on the individual estimates made internally for the 2023-2027 period, which for the years up to 2025 represent the forecasts in the 2022-2025 Business Plan, updated to take account of the changed macroeconomic scenario, whereas the final two years of forecasts were estimated through inertial tracking of the flows for 2025, on the basis of internal forecasts relating to the aforementioned macroeconomic scenario. It is noted that the tests mentioned above did not concern the Banca dei Territori, International Subsidiary Banks, Bank of Alexandria or Pravex Bank CGUs in consideration of the absence, as of the date of the test, of goodwill allocated to those CGUs to be subject to impairment test. These tests were also joined by an autonomous test, using an independent expert, of the fair value of the component of the brand name attributable to Banca dei Territori, a CGU which no longer has goodwill allocated. The results of the impairment test as at 31 December 2022 showed no need to recognise any goodwill impairment or adjustments to intangible assets with an indefinite life (brand name) with regard to any of the CGUs in the Intesa Sanpaolo Group. Lastly, the methods, assumptions and results of the impairment test procedures for intangible assets and goodwill defined by management were approved by the Board of Directors prior to approval of the draft financial statements for 2022. Impairment testing of intangibles Insurance portfolio Valuation of the insurance portfolio uses models normally applied in valuation practice. The resulting value, considered to have a finite life, is amortised at variable rates over a period representing the residual life of the insurance contracts. The book value of insurance intangible assets includes, among other things, the insurance portfolio of Intesa Sanpaolo Vita and the subsidiary Intesa Sanpaolo Life DAC distributed by the networks of the Intesa Sanpaolo Group and Fideuram Vita. The total book value also includes the intangible asset belonging to Intesa Sanpaolo RBM Salute and the value of the component of distribution of insurance products by the former UBI Banca network and by IW Bank. During 2021, the Value of Business Acquired (VoBA) deriving from the acquisitions of Assicurazioni Vita, Lombarda Vita and Cargeas Assicurazioni was added to this. Assicurazioni Vita and Lombarda Vita were merged into Intesa Sanpaolo Vita as of 31 December 2021, whereas Cargeas Assicurazioni was merged into Intesa Sanpaolo Assicura on 1 October 2022. The intangible assets referring to the insurance portfolio were partly allocated to the Insurance CGU, partly to the Private Banking CGU and partly to the Banca dei Territori CGU, depending on whether they refer to the value of the component of policy production or policy distribution. As previously stated, these are intangible assets with finite useful lives and, during the year, the amortisation for the year was charged to the income statement, for a total amount of 103 million euro. During the year, the analyses on the main impairment indicators were updated. Specifically, in 2022 the Insurance Division reported strong income from insurance business of approximately 1.6 billion euro, up slightly on the previous year (+1.9%). This trend is attributable to the increase in the technical margin, in both the life business and the non-life business, which more than offset the reduction in the net investment result. In addition, in 2022 the Division\u2019s collected premiums for life policies and pension products amounted to 16.2 billion euro, down by around 14% compared to the previous year, due to unit-linked products (-41%), as a result of the uncertainty on the financial markets. In contrast, the collected premiums for traditional products increased (+39%), including the Class I component of multi-line policies, due to the placement in the fourth quarter of the Class I credit line dedicated to senior customers. Pension products recorded an increase of 1%. Direct deposits from insurance business exceeded 173 billion euro as at 31 December 2022, down by approximately 15% on the previous year. Note that, as previously stated, IAS 36 requires that intangible assets be subject to impairment tests with reference to relationships with customers of all the CGUs at the valuation date, not only the residual relationships which were used to determine the initial value of the intangible assets. Therefore, any possible calculation of the recoverable amount shall also include the new business generated at the level of the CGU following the date of recognition of the intangible assets. In addition, the volumes of the policies underlying the measurement of the intangible assets recognised in the financial statements are negligible if compared with the total policies of the relevant CGUs. An analysis of the comprehensive income of the products in the portfolios did not identify any potential impairment of the intangible asset relating to the insurance business, also considering that, as required by IAS 36, the intangible asset is tested for impairment at the CGU level as a whole and not by individual product or business line. The following table presents a summary of the values of insurance intangibles according to the relevant CGU. (millions of euro) CGU Financial statements 2021 Amortisation Financial statements 2022 BANCA DEI TERRITORI DIVISION Insurance intangibles - distribution 110 -7 103 INSURANCE DIVISION Insurance intangibles - production 591 -94 497 PRIVATE BANKING DIVISION Intangibile asset management - produc. and distribut. 47 -2 45 GROUP TOTAL 748 -103 645 Following the analyses conducted on the main impairment indicators, it was not necessary to carry out a thorough recalculation of the value of the intangible asset, since the overall trend of the insurance business did not present any particular critical issues in 2022. Asset management and administration portfolio The intangible asset recognised in Intesa Sanpaolo\u2019s consolidated financial statements is regarded as having a finite useful life. Accordingly, for the purposes of the 2022 Financial Statements, analyses were conducted on the main value indicators, which were also monitored throughout the year (these include trends in assets, redemption rates, and net interest and other banking income net of operating costs and tax effects). Those analyses regarded the component of the intangible assets linked to assets under administration (AUA) and under management (AUM), represented by the capacity of the relationships existing at the acquisition date to generate cash flows over the residual useful life of those relationships, recognised in the financial statements following the acquisitions that were carried out over time. More specifically, this aspect concerns the asset management portfolios of the former Venetian banks, acquired in 2017, and of the Morval Group, acquired by Fideuram - Intesa Sanpaolo Private Banking in 2018. Subsequently, as part of the acquisition of the UBI Group, during 2020 intangible assets were measured linked to indirect customer deposits and, in particular, the intangible assets pertaining to assets under administration (AUA) and assets under management (AUM), whereas during 2021 the intangible assets relating to the assets under administration and assets under management of Reyl & Cie SA, a Swiss private bank with an international presence, were recognised. In 2022, as stated above, new customer relationship related intangible assets were recognised in connection with the indirect customer deposits of Compagnie de Banque Priv\u00e9e Quilvest (CBPQ) and VUB Generali, amounting to 43 and 80 million euro as at the acquisition date, respectively. As at 31 December 2022, taking account of the portion amortised in the meantime, the intangible asset linked to AUM was allocated to the Banca dei Territori CGU (187 million euro), to the Private Banking CGU (213 million euro), to the Asset Management CGU (100 million euro) and to the International Subsidiary Banks CGU (79 million euro). Likewise, the intangible asset linked to AUA, taking account of the component of amortisation recorded during the year, was allocated to the Banca dei Territori CGU, for the component distributed by the branches deriving from UBI Banca (14 million euro), and to the Private Banking CGU, for the component distributed to customers of IW Private Investments SIM (20 million euro) as at 31 December 2022. As stated above, IAS 36 provides that impairment testing must not be limited only to the cash flows deriving from the assets acquired, but should take account of all the cash flows linked to the assets of the specific CGU, also including the cash flows generated after initial measurement of the intangible assets. On this regard, it is noted that the volumes of assets underlying the measurement of the intangible assets recognised in the financial statements are negligible if compared with the total assets of the CGUs. Accordingly, in the light of the above, and regardless of the performance of the assets during the reporting period, it may be confirmed that there were no signs of impairment of the intangible assets recognised in the financial statements and pertaining to asset under management and asset under administration relationships. The following table presents a summary of the values of the AUM and AUA intangibles attributable to the Banca dei Territori, Private Banking, Asset Management and International Subsidiary Banks CGUs. CGU Financial statements 2021 Acquisitions Amortisation Other changes (1) Financial statements 2022 BANCA DEI TERRITORI DIVISION Intangibile asset management - distribution 201 - -14 - 187 Intangible asset under administration 15 - -1 - 14 PRIVATE BANKING DIVISION Intangibile asset management - produc. and distribut. 180 43 -14 4 213 Intangible asset under administration 22 - -2 - 20 ASSET MANAGEMENT DIVISION Intangibile asset management - produc. and distribut. 106 - -6 - 100 INTERNATIONAL SUBSIDIARY BANKS DIVISION Intangibile asset management - distribution - 80 -1 - 79 GROUP TOTAL 524 123 -38 4 613 (1) Foreign exchange differences on intangible assets attributable to Reyl & Cie SA. Core Deposits \u201cCore deposits\u201d are \u201ccustomer-related intangibles\u201d, generally recorded in business combinations between banks. The intangible value of core deposits stems from the future benefits for the acquirer deriving from the stable and lower funding cost compared to market parameters. Basically, the acquirer may use funding for its lending and investment activities which pays less than the interbank market interest rate. The intangible asset consists of the valuation of this future margin, known as the \u201cdeposit premium\u201d, which represents an asset the value of which is correlated with the performance of market rates and the assets raised. As stated above, total core deposits of 30 million euro were recognised as part of the acquisition of Compagnie de Banque Priv\u00e9e Quilvest by Fideuram Bank Luxembourg. No impairment indicators were considered when assessing whether the intangible asset had maintained its value, given the limited period of time between the initial recognition of the asset and the expected interest rate scenario. Brand name IFRS 3 considers the \u201cbrand name\u201d a potential, marketing related intangible asset, which may be recorded in the Purchase Price Allocation (PPA) process. For this purpose, please note that the term \"brand\u201d is used in accounting standards with an extensive meaning and not as a synonym of \u201clogo\u201d or \u201cname\u201d. It is considered a general marketing term which defines a set of complementary intangible assets (in addition to the name and the logo, also the competencies, consumer trust, service quality, etc.) which concur to form brand equity. With reference to acquisition of the Sanpaolo IMI Group, it was decided to limit the analysis to just two brands: the corporate brand Sanpaolo IMI, intended as an \u201cumbrella\u201d brand to which the brands of the other network banks were also related, and the brand of the subsidiary Fideuram - Intesa Sanpaolo Private Banking (former Banca Fideuram), as an autonomous brand widely recognised on the market for the placement of financial products through a network of financial advisors. Both are considered intangibles with indefinite useful life, since they are deemed to contribute indefinitely to the formation of income flows. Market methods and flow-based methods (and, thus, based on fundamental analyses) were used in the valuation of the two brands. Value was determined as the average of the values obtained using the various methods. The amount recorded in the 2022 Financial Statements came to 1,882 million euro, of which 1,507 million euro was allocated to the Banca dei Territori CGU and 375 million euro to the Private Banking CGU. In general, the brand name is considered an intangible asset that has no independent cash flows and, thus, to be subject to impairment testing as part of the verification of the retention of goodwill for the various CGUs. For the purposes of this impairment test, with regard to the brand name allocated to the Banca dei Territori CGU, it was considered that the reference CGU did not have any goodwill allocated and, as a result, it was not possible to test the recoverable amount of the specific intangible as part of the impairment test of the goodwill based on total cash flows at the level of the CGU. As it was not possible to refer, for the recoverable amount of the brand name of Banca dei Territori, to the notion of Value in Use, i.e. the present value of net future cash flows from the assets valued, it was decided, in line with that carried out for the 2020 and 2021 Financial Statements, to conduct a specific, autonomous valuation of the specific intangible based on the fair value resulting from the dedicated appraisal commissioned from Prof. Mauro Bini, Full Professor of Corporate Finance at Bocconi University. Lacking specific transactions on comparable banking brand names, the fair value of the brand name allocated to the Banca dei Territori CGU was estimated using the following methods: - Royalty Relief; - the implicit value in estimating brands with comparable PPAs; - the implicit value in the public estimates of brands provided by independent third parties (Brand Finance); - Hirose. Royalty Relief Criterion The Royalty Relief criterion determines the value of the brand from the present value of income deriving from the brand, estimated as the product of a royalty rate reconstructed on the basis of implicit rates in comparable PPAs and the value of net turnover (operating income, for banks). The criterion of the implicit value in estimating brands with comparable PPAs The criterion of the implicit value in estimating brands with comparable PPAs determines the value of the brand based on the \u201cFair value of the brand/Operating income\u201d multiples recorded on PPA and their fundamental drivers. The multiple, calculated in relation to net operating income, is taken from the fair value of the brands recognised on PPA of commercial banks from the Markables database. Criterion of the implicit value in the public estimates of brands provided by independent third parties (Brand Finance) Brand Finance is a UK company specialising in valuing brands. Each year, Brand Finance publishes the updated estimated value of the brands of the top 500 global banks. The valuation of brands carried out by Brand Finance is consistent with the Relief from Royalties criterion, widely used in valuation to estimate the value of brands. According to this criterion, the value of the brand corresponds to the current value of royalty flows saved. The royalty rates are determined based on the trademark license agreements of comparable companies and applied to the specific bank brand based on the strength of the brand estimated and discounted at an opportunity cost of capital in line with the assigned brand rating. Hirose Criterion This criterion is based on the comparison of the profitability of the branded company (in this case, the Banca dei Territori CGU) and unbranded competitor companies. The income-based method adopted is attributable to the profit-split criterion. Based on the analyses conducted, all four methods used returned a value of the Intesa Sanpaolo brand for the Banca dei Territori CGU higher than the book value of that intangible asset, demonstrating the value of the Group\u2019s brand and the resulting competitive advantage it continues to provide the Group in relation to its competitors. Instead, the brand name allocated to the Private Banking CGU was subject to impairment testing as part of the activities regarding the verification of the recoverable amount of the goodwill allocated to that CGU. Impairment testing of CGUs and goodwill Definition of Cash Generating Units (CGUs) For impairment testing purposes, the estimation of the value in use relating to intangible assets with an indefinite life (including goodwill) that do not generate cash flows unless jointly with other business, as per IAS 36, requires the preliminary assignment of such intangible assets to relatively independent business units, able to generate cash flows strongly independent of those produced in other business areas, but interdependent within the business unit generating them. In IAS/IFRS terminology, such business units are known as Cash Generating Units (CGUs). The meaning of the impairment test is significant for identification of the CGUs. IAS 36 indicates the necessity to correlate the level at which the goodwill is tested with the level of internal reporting at which management controls the increases and decreases of such value. Definition of the level closely depends on the organisational models adopted and on the managerial responsibilities governing the operating guidelines and monitoring activity. Organisational models may ignore (and in the case of the Intesa Sanpaolo Group they do ignore) the network of legal entities through which operations are carried out, and are instead very often closely designed around the definition of business operating segments as envisaged by IFRS 8. Furthermore, the identification of CGUs for goodwill impairment test purposes is consistent with the definition of the recoverable amount of an asset - which is in itself the base for impairment tests - according to which the relevant item is the amount that the company expects to recover from that asset, considering any synergies with other assets. Therefore, in accordance with the criteria applied for the determination of the prices of the business combinations that gave rise to goodwill recognition, the recoverable amount for impairment testing purposes of the CGU to which goodwill is allocated must include not only the value of external (or universal) synergies but also the internal ones, the reason being that the specific acquirer may obtain additional value from the integration of activities obtained through business combinations, according to its business model. The Intesa Sanpaolo Group\u2019s organisational model envisages that: - management decisions are highly centralised at the level of the heads of the operational segments; - strategies, identification of new products or services and commercial penetration initiatives are outlined and directed centrally for each operating division; - planning processes and reporting systems are managed at the operational segment level; - as a result of this centralisation, income flows are highly dependent on the policies set up at segment level, based on balanced development of the entire division and not of the individual operating areas or legal entities considered individually; - specialised transversal areas are defined to provide support and develop products benefiting many subsidiaries; - the management of financial risks is also highly centralised in order to maintain, also as a result of regulatory provisions, a balance between the capital allocation policies and the financial risks in development of the various business lines; - the divisions operate in homogeneous markets or sectors in terms of economic characteristics and development level. As a result of this centralisation, income flows are highly dependent on the policies set up at the operational segment level, based on balanced development of the entire division and not of the individual operating areas or legal entities considered individually. The operating divisions identified in the Intesa Sanpaolo Group are as follows: - Banca dei Territori; - IMI Corporate & Investment Banking; - Insurance; - Asset Management; - Private Banking; - International Subsidiary Banks. For the foregoing reasons, the operating divisions cited above correspond, in general terms, to the Group\u2019s CGUs, while also representing the core business areas considered for segment reporting. These divisions are considered representative of cash generating units since each constitutes the smallest group of assets generating independent incoming cash flows and, as mentioned above, also the minimum level set by the Parent Company Intesa Sanpaolo for planning and reporting processes. Therefore, this is the minimum level to which goodwill may be allocated and monitored according to non-arbitrary criteria. The International Subsidiary Banks Division needs specific comments, given the particular structure and conditions under which it operates. It should firstly be mentioned that the cash flows of the various Group companies forming this business unit are strictly dependent upon policies formulated by the Division Governance Centres and Head Office Departments of the Parent Company. These policies are defined and implemented in compliance with a management plan designed to develop the entire Division in an organised manner, and not focusing only on the individual companies\u2019 strategies. Specifically, the expansion strategies for the various operating units, the identification and development of new credit, savings and service products, limits to the assumption of financial risk, commercial penetration and operations specialisation initiatives are outlined and steered at central level, following a portfolio strategy, and not devolved to the individual subsidiaries. Therefore, there is strong interaction of the flows that, at the same time, requires both single and integrated governance of all companies in the Division, and the central monitoring and control of operations of the overall business activities of the Division. However, it is important to consider that not all factors affecting the correlation and interdependence of cash flows within the Division can be controlled by the Division\u2019s Head Office Departments. In fact, there are circumstances outside the Group that could have varying levels of impact on the capacity to systematically manage CGU flows and control over their generation. These are circumstances largely determined in the wider sense by the conditions of the environment in which the various entities are located. Indeed, for Banks operating abroad, the effects of country risk must be considered: i.e. the risk linked to economic, political and institutional events in the country in which the subsidiary and its business activities are based. In view of the above, if the cash flows that the Parent Company expects from activities generated by a foreign subsidiary are deeply influenced - in terms of extent, quality and trends - by institutional, economic and political circumstances in the country in which the subsidiary is based, this subsidiary cannot be considered an integral part of the single management model for the CGU which it belongs to. The company in such a situation must, therefore, even if only temporarily, be excluded from the CGU, regardless of the Group Management\u2019s willingness to keep it within the CGU, due to the above-mentioned factors over which the Bank and Group's management clearly have no influence. The flows of the company, in fact, would be influenced to a greater extent by the country\u2019s conditions than by the unitary and centralised management policy adopted by the Division and, therefore, for impairment testing purposes, the company must be subjected to independent valuation until the conditions for the systemic central control of cash flows of the subsidiary are restored. With regard to the Ukrainian Pravex Bank, for the purposes of the 2008 impairment testing, careful consideration of the economic and institutional events unfolding in Ukraine, which was undergoing a deep economic and currency crisis, and prudent assessment of their impact on the operational variables of the subsidiary in question, especially from the point of view of their interdependence on variables of the entire CGU, resulted in classification of this company as a completely separate CGU, treating it separately from the Group\u2019s International Subsidiary Banks Division. Subsequently, Pravex Bank was functionally allocated to Capital Light Bank (now the NPE Head Office Department), to then be moved back to the International Subsidiary Banks Division in 2018. With regard to the subsidiary Bank of Alexandria, for the purposes of the 2011 impairment testing the bank was separated from the International Subsidiary Banks CGU due to a profound political crisis in Egypt. For the purposes of the 2022 impairment testing, as no significant elements arose that cast doubt on the decision made for the previous financial statements, and taking account of the outbreak of the military conflict between Russia and Ukraine, it was deemed appropriate to maintain the decisions made with respect to the previous financial statements, and thus to consider Pravex Bank and Bank of Alexandria as autonomous, distinct CGUs in conducting the impairment test for the consolidated financial statements. However, it bears recalling that the goodwill associated with Pravex Bank and Bank of Alexandria were fully written down in conjunction with the impairment tests for the 2008 and 2011 financial statements, respectively, and there is no goodwill even relating to the other International Subsidiary Banks of the Division. In Pravex Bank's and Bank of Alexandria\u2019s cases, the separate assessment of the banks for impairment testing purposes does not affect the Group\u2019s intention to support the development of the subsidiaries, with specific regard to the Ukrainian bank, within the limits permitted by the ongoing conflict. As previously mentioned, the Banca dei Territori, International Subsidiary Banks and Bank of Alexandria and Pravex Bank CGUs, as of the date of the test, did not possess intangible assets with an indefinite life (with the exception of the brand name allocated to the Banca dei Territori CGU, whose recoverable amount, understood as its fair value, was confirmed by a specific valuation drawn up by an independent expert) and, as a result, were not subject to an impairment test. Book value of the CGUs The book value of the CGUs must be determined in a manner consistent with the criterion used to estimate their recoverable amount. For a banking business, the cash flows generated by a CGU cannot be identified without considering the cash flows deriving from financial assets/liabilities, as these represent the core business. In other words, the recoverable amount of the CGUs is influenced by the aforementioned cash flows and therefore the CGUs\u2019 book value must include financial assets/liabilities in accordance with the scope of the recoverable amount estimate process. Consequently, these assets and liabilities must be properly allocated to the associated CGUs. On this basis (so-called \u201cequity side\u201d), the book value of the Intesa Sanpaolo Group\u2019s CGUs may be determined in terms of contribution to consolidated shareholders\u2019 equity including the minority interest. Accordingly, the carrying amount of the CGUs composed of companies belonging to a single operating division was determined by summing up the individual contributions to the balance sheet. However, where the Parent Company or other Group companies contribute to multiple CGUs from a management standpoint, and this division is not represented in accounting information, management values must be used. In this specific case, the management driver was identified as each division's \"regulatory capital\", which represents the capital absorption necessary to handle the types of risk envisaged by the regulatory supervision rules. The table below provides the book values of the CGUs and the goodwill and brand name allocations to each. The values, determined for impairment testing purposes, include the portion of goodwill attributable to minority interests (included in the last column with minority interests). (millions of euro) Values Value as at 31.12.2022 CGU Book value of which goodwill Group share of which brand name of which minority interests Banca dei Territori 18,858 - 1,507 14 IMI Corporate & Investment Banking 21,334 56 - 18 Insurance 6,702 976 - 1 Asset Management 2,656 1,059 - 6 Private Banking 5,192 1,535 375 1 International Subsidiary Banks 6,461 - - - Bank of Alexandria (Egypt) 628 - - 126 Pravex Bank (Ukraine) - - - - TOTAL 61,831 3,626 1,882 166 Criteria for estimates of CGUs\u2019 value in use The value in use of CGUs is determined by estimating the present value of future cash flows that may be expected to be generated by the CGUs. These cash flows are normally estimated by using the latest publicly available business plan or, in its absence, through the drawing up by management of an internal forecast plan. The forecasting period for the analysis usually consists of a maximum of five years. The cash flow of the final year of the forecast is projected in perpetuity (through the use of perpetual return formulae, or, alternatively, temporary return formulae, if it is not realistic to expect the assets subject to measurement to generate positive cash flows over the long term), using an appropriate growth rate \u201cg\u201d for the purposes of the so-called \u201cTerminal Value.\u201d The \u201cg\u201d rate is determined by assuming as growth factor the rate of increase in the gross domestic product of the countries in which the cash flows are generated. Alternatively, the Terminal Value could be determined on the basis of a final sale or liquidation value. For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present valuations of the time value of money and the asset\u2019s specific risks. Specifically, the discount rates to be used must incorporate the present market values with reference to the risk-free component and the risk premium associated with the equity component observed over a sufficiently long time period to reflect different market conditions and economic cycles. In addition, given the diverse risks of the respective operating areas, different Beta coefficients must be used for each CGU. All the resulting rates have been adjusted to take into account the \u201cCountry Risk\u201d. Cash flow estimates Also with regard to the calculation of the value in use of CGUs for impairment testing purposes for the 2022 financial statements, the volatility of financial markets and the uncertainties that still characterise the future macroeconomic environment make the definition of near-term future cash flows from operating activities and the identification of growth rates in order to calculate the Terminal value of CGUs particularly complex. The medium-term forecasting scenario of reference has been drawn up by the Intesa Sanpaolo Research Department taking account of the forecasts of the main Italian and international organisations and institutions, and underlies the income forecasts throughout the 2023-2027 period. These forecasts are based on a reference scenario for the global economy characterised by a gradual return of inflation to levels consistent with the definition of price stability by central banks, associated with lower real growth rates than in the years prior to the pandemic crisis and rising nominal and real interest rate levels. The reference scenario assumes that in 2022 global GDP growth was 2.7%, following the rebound of 6% witnessed in 2020. In 2023 growth is expected to slow further to 2.2%, but then to accelerate again to a range of 3% to 3.5%. International trade of goods is expected to remain essentially stagnant in 2023 (+0.6%), but then to gain momentum in 2024 at growth rates similar to those of global GDP. In 2022, the Euro area was hit by the effects of a spike in natural gas prices, a repercussion of the Russian invasion of Ukraine and of the resulting deterioration in relations between the European Union and Russia. The almost total disruption of gas imports from Russia was tackled with a combination of reduced consumption, increased production from renewable and other fossil sources, and increased imports from other suppliers. Achieving this forced transition in such a short time means that prices will remain structurally higher than in the pre-crisis years. Although 2023 began relatively well, due to milder temperatures than the seasonal average and low Chinese demand, the expectation that Chinese gas demand will resume in the second quarter could entail further price tensions by the end of the year. In the light of recent developments, the scenario includes very conservative forecasts of gas prices in 2023, with mainly downside risks in the short term. The drastic deterioration in terms of trade as a result of the gas crisis was reflected in a fall of around 4 percentage points in the trade balance. The recessionary impact of the shock was almost entirely offset by public support measures for households and businesses and the fall in the average household saving rate back towards pre-pandemic levels. As a result, GDP grew by 3.3% in 2022, well above the potential growth estimates. In 2023 GDP growth is expected to be essentially nil (0.1%), associated with two quarters of mild decline. Estimated annual average growth is then expected to rebound to a range of between 1.5% and 1.8%. The long-term scenario is weighed down by the risk that structurally higher energy prices may reduce the European economy\u2019s growth potential. In 2022, inflation rose to levels well above those predicted a year ago before the war, with an estimated annual average of 8.5%. Much of the greater increase was attributable to the direct and indirect effects of higher natural gas prices, but statistical analyses now also point to demand factors making a significant contribution to the underlying inflation dynamics. The decline in gas prices from the summer 2022 peak suggests that inflation rates will fall in 2023. The annual average is estimated at 7.7%, a level that reflects very conservative forecasts of gas prices at the beginning of the year. The decrease in energy prices would further reduce inflation in the following years, bringing it into line with the ECB\u2019s price stability target in 2025. However, the decline in underlying inflation will be much slower, as a salary increase is expected, compatible with inflation rates of above 2% in services, considering that in 2023-24 productivity growth is unlikely to accelerate enough to offset its effects. In Italy, GDP growth in 2022 was 3.8%, around half a point lower than predicted before the war. The reduction in growth was due to the sharp deterioration in the trade balance (at around 4% of GDP in 2022), which was reflected internally in a decline in real household income and a fall in company earnings. However, the final impact was mitigated by fiscal measures (cut in excise duty, corporate tax credits, household subsidies, suspension of several system-wide cost components, etc.) and the reduction in the average household saving rate. GDP growth gradually slowed down over the course of 2022, and is expected to be negative on a quarterly basis at the end of 2022 and early 2023. It is expected to amount to an annual average of 0.6% in 2023. A sharp acceleration is then expected in the wake of declining energy prices, assuming that aggregate demand is supported by spending flows associated with the Next Generation EU programme (which could increase growth by 0.5% a year), investments in the energy transition, a recovery of foreign demand and a positive trend in employment and real income. Interest-rate-sensitive components of demand will record weaker real growth, a trend that will be accentuated in construction due to the scaling-back of tax incentives for renovations, but without fully offsetting the foregoing factors. Accordingly, on the whole growth continues to be expected to be above potential in the years 2024-27, although there are greater downside risks due to higher energy costs. In the reference scenario, Italian inflation slows to 6.8% in 2023 and then to 2.4% in 2024. This reduction is due primarily to the decrease in energy prices. The risks for 2023 are primarily to the downside, considering the recent performance of gas prices. The European Central Bank raised official rates rapidly from July 2022, initiating a tightening phase that will carry on into the early part of 2023. The year 2022 ended with a deposit facility rate (DFR) of 2.00% and a rate on main refinancing operations (Refi) of 2.5%. At its meeting at the end of 2022, the ECB announced that the increases would continue at a robust pace in early 2023, and this is believed to entail at least a further increase in the DFR to 3.0%. In addition, given the underlying inflation forecasts for the coming years and the very modest slowdown in final domestic demand, it is likely that the rate will be raised further in the following months to 3.50%. However, to take account of the current context of uncertainty, the reference scenario includes a progression of official rates reaching a maximum of 3.0% (DFR) and 3.5% (Refi) in 2023. Official rates are then expected to converge gradually towards neutral levels. The European Central Bank has also begun the progressive discontinuation of unconventional measures. Through an amendment of conditions, it facilitated early repayment of TLTRO III loans. Net purchases of securities under the APP and PEPP programmes were discontinued in June 2022 and March 2022, respectively. In addition, at the end of March 2023 the APP portfolio will begin to decline through monthly reductions in reinvestments from maturing securities of 15 billion euro. In the long term, such measures could exert upwards pressure on risk premiums and on the slope of the government yield curve, enhancing monetary policy direction. Excess liquidity is expected to be reduced drastically in 2023. Due to the relatively conservative assumption made regarding official rate performance, short-term interest rate forecasts are expected to fall short of implicit market rates until the end of 2027, with the sole exception of 2024. The exceptionally high level of surplus reserves, while falling rapidly in 2023 and 2024, will remain considerable and tend to keep very short-term rates close to the ECB overnight deposit rate throughout the horizon of the forecast. Estimates for the medium and long-term interest rate curve reflect the closing of the securities purchase programmes, the speed of the monetary tightening phase already implemented, modest expectations of increases in official rates for the rest of 2023 and the expectation of a decline in such rates in the following years. The slope of the rate curve becomes negative in 2023, but resumes growth in 2024 due to the decline in short-term rates and a marginal increase in longer-term rates. The decline in ECB securities portfolios could provide an additional contribution to the increase in long-term interest rates, even if the boost should be lower than that exercised in the opposite direction by the increase in the securities portfolio of the Central Bank in previous years. The decrease in support provided by the Eurosystem and the increase in risk-free rates could also reflect in an expansion of sovereign risk premiums. Nonetheless, this negative factor could be at least partly offset by the reduction in net issues by the Ministry of the Economy and Finance, in a context of improvement in public finances, and by the faster reduction in public debt than expected in the 2022-24 period. The reference scenario incorporates a modest increase in the spread linked to only fundamental factors (performance of the debt) and monetary policy (rates and negative net purchases). However, the sovereign rating and risk premium level will also be very sensitive to the level of implementation of the NRRP, with regard to both investments and structural reforms. In this regard, the reference scenario assumes that implementation will be relatively prompt. With reference to the banking scenario, in 2022 the credit market saw moderate tightening of supply conditions in line with the move towards more restrictive monetary policy and the increase in perceived risks, while on the bank balance sheets side, the good liquidity and funding position was maintained and the capital base remained solid. In addition, credit quality did not show any particular signs of deterioration. Demand for credit from businesses revived due to financial needs related to day-to-day management, in the face of rising operating costs as a result of higher prices for energy and other inputs. The particular nature of demand drove a rebound in short-term loans, but near the end of the year they began to slow partly due to the worsening of credit conditions. In contrast, medium- and long-term loans remained stationary, with rates of change hovering around zero, reflecting the strong increase during the pandemic due to the support of government-backed loans. In 2023 short-term loan performance is expected to normalise; such loans could continue to present moderately positive changes in line with inflation performance. With regard to medium- and long-term loans, after the persistent weakness of early 2023, the recovery of GDP is expected to support a return to positive territory. As already seen in 2022, financing needs may be partly met using the considerable cash buffer accumulated by businesses in the two-year period 2020-21 and deposited with banks, as well as bond issues and self-financing. In particular, market conditions are expected to be more favourable for the issues of securities, in the light of the return of interest from investors in bonds, above all after the end of the ECB rate hike phase. Loans to households continued to grow at a robust pace in 2022. Once again, this performance was driven by loans for home purchases, which grew at a rate of 5%, the highest in the last decade, with a gradually more moderate trend in the fourth quarter. The slowdown of loans to households is expected to continue in 2023 due to the impact of the increase in mortgage rates and the expected decline in real estate transactions, against the backdrop of house price trends that, while remaining slightly positive, will lose the momentum gained during the pandemic, culminating in 5.2% growth in the second quarter of 2022. In subsequent years, loans to households are expected to grow at a moderate rate, slightly higher from 2025, driven by a possible recovery in house sales and prices. Mortgage loans will continue to play a major role in the residential property market, which is expected to continue to be driven by the new housing and working needs that emerged following the pandemic, renovations and energy reclassification, and the use of part of the excess savings accumulated by some segments of households starting in 2020. With the shift in monetary policy and the rapid rise in interest rates, the long and strong growth of bank deposits, which had lasted more than a decade, came to a halt in the autumn of 2022. After the peaks reached in 2021 and the subsequent gradual slowdown, the growth rate for total deposits fell to zero, following the deceleration in the overnight deposits component, which recorded a slightly negative annual change towards the end of 2022. In a context of much higher inflation and interest rates, a modest decrease of overnight deposits is expected to continue throughout 2023, as a result of a combination of several factors, including the use of the considerable cash deposited with banks in previous years by businesses and households and the reallocation of savings to more remunerative forms. In particular, funds will continue to be shifted from overnight deposits to forms of time deposit, supported by more attractive interest-rate offerings, a trend that had already begun to be seen in late 2022. Buoyed by the return of positive yields, 2023 and subsequent years will see renewed diversification of household financial investments into government and corporate bonds, resulting in less dynamic bank deposits than during the exceptional phase of years of very low rates and the pandemic crisis. For bank bonds, after more than a decade of decline, 2023 will see a resumption of growth, which will continue in subsequent years. With the progressive repayment of the TLTRO IIIs, alongside the use of the ECB\u2019s more traditional refinancing instruments, banks are again turning to the wholesale institutional market, through diversified short- and medium- to long-term funding channels and instruments. Increases in key monetary policy rates have begun to filter through to bank interest rates. In the second half of 2022, interest rates on new loans to non-financial companies rose rapidly, to around double for loans up to 1 million euro compared to the beginning of the year, while the rate on larger loans more than trebled. Interest rates on loans to households for home purchases also increased significantly, particularly the fixed rate, which returned to being higher than the variable rate by 0.9 points in the second half of 2022, after two years of substantial alignment between the two rates. As a result of the increases in new transactions, the average bank lending interest rates also rose faster in the latter part of 2022, to 3.2% (+1.1 percentage points compared to the end of 2021). Interest rates on deposits were more stable in 2022, particularly the average rate on overnight deposits, which only increased slightly towards the end of the year. The stickiness of the interest rate for the on demand component influenced the performance of the average interest rate on deposits, which only rose slightly. In contrast, the interest rates on new time deposits were more responsive, with significant increases from July. The overall cost of funding from customers also began to rise very gradually, reflecting moderate upward movements in the average rate on bonds. As a result, the spread between lending and funding rates increased significantly, returning to levels not seen since 2009. The increase in rates on loans will continue in 2023, following the additional expected increases of key monetary policy rates. In subsequent years, the expected performance of monetary rates will enable a moderate reduction of rates on loans from the levels to be reached in 2023, which will represent the maximum for the entire scenario period. Turning to borrowing rates, in 2023 and subsequent years the stickiness of overnight deposit rates will continue, whereas pricing policies are expected to favour time deposits. The total cost of funding will increase, also driven by the effects of the recomposition towards costlier components such as time deposits and bonds. The banking spread will continue to widen in 2023, driven by the various rates of adjustment of lending and borrowing rates. A moderate reduction is expected from 2024, but unit profitability of dealing will remain high compared to the last decade. After eleven years in negative territory, in September 2022 the mark-down on on-demand deposits returned to positive levels, and it is expected to increase further in 2023 to approximately 2%, to then decline gradually in later years, given the expectation of falling Euribor rates. In contrast, with the sharp rise in Euribor rates, the mark-up on short-term rates fell significantly towards the end of 2022. A further moderate reduction is also expected in the first half of 2023, followed by a general recovery in the margin as increases in key rates are transmitted to rates on loans. Substantial stabilisation of the mark-up is expected in the final two years of the scenario period. Assets under management performed weakly in 2022. For mutual funds, the inflows during the year were mainly directed towards the equity, balanced and money-market segments. The moderate inflows to funds were driven by the negative performance of stock market indices, against the backdrop of reduced investor confidence. Portfolio management schemes were characterised by net outflows. Overall, life insurance declined as new business fell for both traditional and unit-linked policies. With the completion of the rise of rates in 2023, volumes in the asset management and life insurance industries are expected to recover. Inflows of investments to these segments may be fuelled by the stock of cash that flowed into bank deposits in previous years, albeit in a scenario of more attractive direct investment in fixed-income securities. In particular, in 2023 moderately positive inflows are expected for mutual funds and portfolio management schemes, with a possible recovery for bond fund subscriptions. In the following years, assets under management are expected to continue to achieve positive results. For life insurance companies, in 2023 and onwards, total collected premiums are expected to increase. In particular, the level reached by market rates is making it possible to meet the previous demand for traditional policies, which is again on the rise. However, on the offering side, the strategy will continue to focus on hybrid products and class III policies, set to recover starting in 2023. This is also reflected on the demand side, where there is interest in products capable of taking advantage of the best investment opportunities, including those more closely linked to equity instruments. From this perspective, multi-line policies will continue to be drivers. The table below illustrates the macroeconomic variables expected in the period 2023-2027, only for Italy, as no goodwill was recognised for the CGUs operating in foreign countries. (values as a percentage) Italy 2022 2023 2024 2025 2026 2027 REAL ECONOMY Real GDP Italy 3.8 0.6 1.8 1.2 1.0 0.6 Consumer prices Italy 8.2 6.8 2.4 1.3 1.5 1.3 Period-end ECB rate 2.50 3.50 3.00 2.75 2.50 2.50 3-month Euribor rate 0.34 3.00 2.99 2.38 2.10 2.06 10-year IRS 1.92 2.82 3.11 3.28 3.27 3.23 10-year BTP 3.03 4.05 4.60 4.90 4.85 4.76 Spread vs. Bund (basis points) 187 201 190 179 174 170 BANKING SECTOR Loans 2.3 1.5 1.9 2.2 2.6 2.7 Direct customer deposits 2.2 0.6 1.3 2.1 2.3 2.3 Average customer spread 1.93 2.87 2.80 2.60 2.52 2.49 Mutual funds -12.9 4.7 4.1 4.1 3.9 3.6 Portfolio management -15.1 2.8 2.9 2.9 2.8 2.5 Life technical reserves -1.9 4.6 4.4 4.4 4.4 4.3 Scenario produced in December 2022 by the Research Department. Forecast data (estimates for 2022). The various CGUs\u2019 expected cash flows were subject to impairment testing, taking account of the macroeconomic scenario described above, and were estimated by following a two-stage assessment process. Specifically, with regard to the first forecast period, in line with the choices made for the previous Financial Statements, a timeframe of 5 years was considered, i.e. the five-year period 2023-2027. For that period, with regard to the years up to 2025, the forecasts set out in the 2022-2025 Business Plan, updated to take account of the changed macroeconomic scenario, were considered. The flows for the last two years of forecasting (2026 and 2027) were estimated through inertial tracking of the flows for 2025, based on the forecasts relating to the updated macroeconomic scenario, thus, without considering the effect of additional managerial leverage, compared to that incorporated into the Plan forecasts. The net income projected for the forecast years has been adjusted, in accordance with IAS 36, to consider non-monetary components and the minority-interest share of net income. It also excludes the effects of any reorganisation and restructuring transactions and the capital gains on future sales of company assets. In addition, cash flows include those allocated to the various CGUs deriving from central corporate assets. In accordance with the equity-side approach mentioned above in relation to the determination of the carrying values of CGUs, the cash flows used for impairment testing include the flows correlated with financial assets and liabilities, given that these represent the company's core business. In addition, among various financial valuation techniques, such as that used for determining the value in use, the value of a company at the end of the flow forecast period, the so-called terminal value, is normally determined by infinite compounding, at an appropriate \u201cg\u201d rate, of the cash flow achievable \"at full capacity\u201d. This rate, even if subject to time variations, may be assumed to be constant or decreasing (or increasing in rarer circumstances). As an alternative to the terminal value estimation methodology, doctrine also envisages (i) the exit multiple approach and (ii) the approach based on an estimation of the liquidation value of the company. Specifically, with regard to approach (i) it should be mentioned that an exit multiple estimate has complex (and potentially subjective) elements that become even more marked at times of market uncertainty and volatility such as now. Approach (ii) is valid only for companies due to be wound up on termination of the forecasting period, and therefore not applicable with a view to a business as a going concern. For the purposes of the Terminal Value, i.e. the second stage of valuation, the cash flow forecast for 2027, the last year of the analytical projections, was used as the cash flow achievable at full capacity. In line with the impairment tests of the previous years, the \u201cg\u201d rate was determined as the average growth rate of Italy\u2019s nominal GDP, observed and forecast in the 2008-2027 period (it should be noted that, in consideration of the impairment made in the previous financial statements, no goodwill is allocated to the Banca dei Territori, International Subsidiary Banks, Bank of Alexandria and Pravex Bank CGUs; consequently, it is not necessary to calculate the \u201cg\u201d rate for the purpose of the goodwill test for the foreign countries where the Group operates). Nominal GDP is the sum of the real GDP growth rate and the inflation rate. Expected real GDP and inflation figures used to calculate the \"g\" rate were drawn from the forecasts prepared by the Intesa Sanpaolo Research Department described above. Each component has been calculated as the average for the period 2008-2027. The decision made in terms of observation period for the growth rates, considering the current particular macroeconomic situation, calls for specific consideration. Real GDP dynamics in recent years have often been negative, due mainly to the various economic and financial crises that affected global economies, beginning in particular with the 2008 global financial crisis, followed by the sovereign debt crisis in 2011. The trend began to be reversed as early as 2015, with the resumption of a growth process that, however, was abruptly interrupted in 2020 by the COVID-19 pandemic, and which continues to be threatened by the energy crisis that emerged in 2022 as a consequence of the outbreak of the military conflict between Russia and Ukraine. In order to consider the various phases of the economic cycle, the growth rate for estimating terminal value was calculated as the average GDP rates for the 2008-2027 period, inasmuch as this period was deemed sufficiently extensive to include, and thus average, a period of severe crisis and a prospective period of a return to a scenario of moderate economic growth. Furthermore, with a prudential approach, it was checked that the \u201cg\u201d rate was not higher than Italy\u2019s GDP growth rate in 2027 or, for each CGU, the growth rate of the last year of analytical forecasting. Cash flow discounting rates For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present market valuations, the time value of money and the asset\u2019s specific risks. In practice, the first characteristic (current market conditions) translates into the calculation of all parameters based on the latest available information as at the reference date of the estimate, so as to best take into account the current market assessments. The second characteristic (consistency between risks/flows and rates) must follow the specificity of flows used for impairment testing of the CGUs. This rate (in its various components) must therefore be decided by observing the specific nature of flows used to assess each CGU, in order to maintain coherence and consistency with the flows. Specifically, consistency becomes important with regard to inflation, country risk and other risk factors that, according to IAS 36, may be expressed in the flows or rate. It is important to point out that a characteristic common to all CGUs recording goodwill (and, in general, intangibles with an indefinite life) is the long-term perspective of flows used to estimate the CGU\u2019s value in use. In fact, by its very nature, goodwill has an indefinite useful life, and therefore future cash flows are normally infinitely projectable. This long-term perspective should be reflected in all discounting rate benchmarks by means of the appropriate selection of each, in such a way that they express normalised conditions in the long term. The discounting rate should normally include the cost of the various sources of funding of the asset to be assessed, in other words the equity cost and debt cost (i.e. WACC, weighted average capital cost). However, in the case of a banking entity, it is estimated according to an equity-side approach, that is to say by considering only the cost of equity capital (Ke), in a manner consistent with the methods for determining cash flows, which, as stated above, include those deriving from financial assets and liabilities. The cost of capital is determined using the Capital Asset Pricing Model (CAPM). Based on this model, the cost of capital is calculated as the sum of risk-free rate and a risk premium, in turn dependent on the specific risks implicit in the business activities (i.e. both business segment risk and country risk). The cost of capital is determined net of taxes, in order to ensure consistency with the discounted cash flows. As the various CGUs of the Intesa Sanpaolo Group operate in different business segments and with different risk factors, the specific costs of capital of each CGU were identified. It should be noted that, since cash flows were determined in nominal terms, discounting rates were also determined in nominal terms, meaning that they incorporate inflation expectations. Entering into the details of the various components that contribute to the determination of discounting rates, it may be remarked that: - with regard to the choice of cash flow discounting rates, and in particular of the risk-free rate and CRP, in view of the structure of interest rates in the current macroeconomic scenario, which will see a further increase in the long term, continuing the progression of increases that began in the second half of 2022, it was prudentially decided to maintain the approach that involves the use of differentiated discount rates for the discounting of cash flows expected over the explicit forecast horizon and for the terminal value cash flow: o concerning the risk-free component included in the cash flow discounting rate of the explicit forecast horizon, a decision was made to use the average monthly return (December 2022) of the 10-year German Government bonds (Bund); o concerning the risk-free component included in the cash flow discounting rate of the terminal value (cash flow projectable beyond the explicit forecast period), a decision was made to use the average annual return of 10-year German government bonds (Bund) forecast for 2027, which is the last year of flow forecast period, estimated by the Intesa Sanpaolo Research Department. In line with the above, also for the Country Risk Premium (CRP) a methodology was considered that envisages the use of differentiated values. In addition, it should be noted that there is no goodwill allocated to CGUs other than those (mainly) operating in Italy - the \u201ccountry risk\u201d essentially coincides with the \u201cItaly risk\u201d. Therefore, in the methodological choices for the impairment test of goodwill for the purpose of the 2022 Financial Statements, the CRP was calculated as follows: o concerning the CRP included in the cash flow discounting rate of the explicit forecast horizon, the average BTP- Bund spread of December 2022 was considered; o concerning the CRP included in the cash flow discounting rate of the terminal value, the average annual BTP-Bund spread estimated for 2027 was considered, based on the medium-term forecast scenario mentioned previously; - the equity risk premium \u2013 represented by the difference between stock market yield and the Return on Investment on risk- free securities determined in reference to a sufficiently wide time horizon \u2013 was calculated on the basis of historical data, given its higher degree of reliability and visibility and also in the light of the current macroeconomic context, which reflects particularly volatile stock market prices not always representative of economic \u201cfundamentals,\u201d while also creating a framework of uncertainty within which it is difficult to formulate reliable forecasts of results in order to estimate the equity risk premium implicit in stock market quotations. Specifically, the geometric mean for the equity risk premium was used, recorded on the US market for the period 1928-2022, adjusted for the differential between the US inflation rate and the German inflation rate (the market used as the basis for risk-free calculation); - the Beta coefficient, which measures the specific degree of risk of an individual company or business sector, was calculated by identifying a sample of companies, comparable in business terms, for each CGU, and with reference to this sample the average or median Beta figure used was that recorded on a monthly basis over a five-year period; Summary of growth rates and discounting rates used The following table presents a summary, for each CGU subject to impairment test, of the parameters relevant to determining value in use: weighted average 2023-2027 growth rates for the cash flows of the various CGUs, including the allocation of cash flows related to the central corporate assets, the \u201cg\u201d growth rates for terminal value purposes, and the various discounting rates and inflation rates. RATES/PARAMETERS Nominal growth rates for impairment test (2023-2027) NOMINAL DISCOUNTING RATES LONG-TERM \"G\" GROWTH RATES INFLATION RATES CGU 2022 flows 2022 Terminal Value 2021 flows 2021 Terminal Value 2022 2021 2022 CGU subject to impairment test IMI Corporate & Investment Banking 17.81% 10.57% 11.18% 7.61% 9.37% 2.06% 1.52% 1.96% Insurance 1.69% 10.27% 10.88% 7.12% 8.89% 2.06% 1.52% 1.96% Asset Management 1.96% 10.12% 10.73% 6.85% 8.61% 2.06% 1.52% 1.96% Private Banking 2.59% 10.14% 10.75% 7.28% 9.05% 2.06% 1.52% 1.96% Impairment testing results The outcomes of the impairment test showed how the values in use of each of the CGUs to which amounts of goodwill were allocated as at 31 December 2022 were higher than the respective book values. Thus, it was not necessary to proceed to any impairment of the goodwill or brand name allocated to the CGUs. In addition, it is specified that, for the sake of completeness of the analysis, the Group's total value in use was confirmed to be greater than the sum of the carrying amounts of the individual CGUs. Finally, with regard to the direct consequences of the Russia-Ukraine conflict on the Group\u2019s goodwill, it should be noted that the goodwill relating to the Ukrainian subsidiary Pravex Bank, considered an autonomous CGU, was already fully written down in the 2008 Financial Statements, as previously mentioned. In the case of the Russian subsidiary Joint-Stock Company Banca Intesa (Banca Intesa Russia), in addition to not presenting allocated goodwill, its weight in the IMI Corporate & Investment Banking CGU is absolutely immaterial on that CGU. Furthermore, as stated above, during impairment testing as at 31 December 2022 the IMI Corporate & Investment Banking CGU was found to have a recoverable amount in excess of its book value. Verification of the results of impairment testing using an alternative calculation method As the value of a company or a business line may also be determined by discounting the distributable cash flows, understood as the future cash flows estimated to be generated by the business area (the single CGUs) net of the share of income that must be retained in equity to meet the supervisory requirements, the recoverability of the book value of the goodwill allocated to the CGUs was verified also by discounting the aforementioned cash flows according to the excess capital version of the Dividend Discounted Model (DDM). With reference to the supervisory requirements, a Common Equity Tier 1 ratio of 10.25% was used, as resulting from the Group Risk Appetite Framework (RAF), and significantly higher than the capital requirement (8.91%) communicated by the ECB following the results of the Supervisory Review and Evaluation Process (SREP). For the Insurance CGU, a Solvency Ratio of 170% was taken into account, as per the aforementioned RAF. Thus, the distributable cash flows were obtained by integrating the expected cash flows determined as illustrated above, factoring in an increase in capital surplus in relation to the above-mentioned minimum limits of capital, or a decrease in the shares of income needed to cover the requirements deriving from the estimated growth trend in risk-weighted assets. These flows, estimated for each CGU, were discounted by applying the same discounting rates and growth rates \u201cg\u201d used in applying the Discounted Cash Flow (DCF) method. The results of this method confirmed the results based on the calculation made using the DCF method. Reconciliation of the results of the impairment test with the market valuation During 2022, the Intesa Sanpaolo stock price declined (-8.6%) on the closing values at the end of 2021, underperforming the Italian sector index (FTSE Italia All-Share Banks, approximately -4%), but outperforming the main Borsa Italiana reference index (FTSE MIB Index, approximately -13.4%). Specifically, after a particularly difficult start to the year following the outbreak of the military conflict between Russia and Ukraine and the consequent deterioration of the macroeconomic scenario, in which stock prices slowed considerably, in the second half of the year the stock recovered in part, rallying to a particularly evident degree in the fourth quarter of the year, to close at around 2.08 euro at the end of December 2022. In early 2023 the Intesa Sanpaolo stock appreciated further, with prices at the end of February of approximately 2.5 euro per share and a market capitalisation of approximately 47 billion euro (with a P/BV multiple of approximately 0.7x). The valuations and reports by financial analysts produced during 2022 showed on average a downward revision of the target prices compared to the 2021 values, with a performance essentially in line with the decline in Intesa Sanpaolo stock prices. In early 2023, above all following the reporting to the market of 2022 results, target prices were generally revised upwards, with an average value of 2.85 euro per share. Among the strengths of Intesa Sanpaolo, analysts underscore its strong brand and its highly qualified management, which is valued by the market. In addition, they believe that the Bank will benefit from further increases in net interest income, considering that on average Italian banks have a positive sensitivity to increases in the Euribor rate. Intesa Sanpaolo is also capable of generating a level of profitability that is among the highest in Italy, while also benefiting from considerable exposure to portfolio and asset management activities, and maintains a strong capital position. In addition, it conducted a highly successful de-risking strategy that allows it to face a possible further deterioration of the macroeconomic scenario with greater peace of mind. On the other hand, among the main elements that could prove especially critical, analysts reiterate the customary risk of internal political instability for Italy, with possible consequences for the BTP-Bund spread, in addition to possible outflows of assets managed if financial market tension should resume. In any event, it bears observing that valuations expressed by financial analysts have different characteristics from the \u201cfundamental\u201d assessment represented by value in use. The following may be observed regarding those valuations: - the future cash flows forecast by analysts mainly extend to 2025, and are essentially aligned with, or marginally in excess of, internal management estimates, whereas the forecasts used for impairment testing purposes cover a period of five years that extends until 2027; - the cost of the capital used (in not particularly frequent cases where this parameter is explicitly stated by analysts) is often determined in overall terms at Group level; the cost of capital of Intesa Sanpaolo, used to discount the terminal value cash flows, is marginally lower than the average value shown in the reports by the analysts. Analysts tend to use discount rates implicit in stock market values, which are therefore higher on average as they are influenced by current prices; - similarly to the observations made for the impairment test of the 2021 Financial Statements, from the methodological standpoint, use was often made of multiples (in terms of P/E or ROE) applied to current market prices or expected profitability for the coming years 2023 or 2024; these are thus methods that provide a fair value, rather than a long-term value in use. It bears observing that the valuations in question were intended for financial investors and thus aimed to determine prices and values in the short term. These valuations represent the value potentially obtainable from sale on the market of limited amounts of securities, i.e. the disposal of a minority interest, and are therefore closely pegged to prices and to current market conditions. In brief, the difference in the values from the analysts\u2019 estimates, which reflect on a methodological difference between the fair value and the value in use, may be explained by the following factors: - different unit of valuation: as stated, the fair value calculated by the analysts represents the price of a single share, different from the value in use, which measures the Bank\u2019s entire capital. However, there is a control premium between the two values, which is lacking in the former case, and which is generally valued within a range of 15% to 25%; - different time horizon of reference considered by the market: the period covered by the estimates of the cash flows, as mentioned, has a considerable impact on the valuation of the Group; given the time horizon considered by analysts, which in general covers a period of 3 years, and deducting the control premium, the Group\u2019s total recoverable amount would be, in terms of value per share, in line with that given by analysts as the target price; - different value of the cost of capital: the analysts\u2019 estimates, deriving from stock market prices, factor in elements external to the Group\u2019s ability to generate profits for the purpose of remunerating its shareholders. Finally, it is believed that impairment tests must be performed with the awareness of the fact that the current economic situation, penalised by the geopolitical context, impacts expected short- and medium-term cash flows from operating activities, without however in any way affecting the Intesa Sanpaolo Group\u2019s primary sources of income, which are also positively impacted by rising interest rates, and competitive edges, as has also been demonstrated by the results of the past few years in which forecast targets have consistently been achieved, and the income dynamics for 2022. In this regard, it should be noted that in recent years the Group has sold businesses or equity investments that have generated significant gains from disposal (e.g. Setefi, Allfunds Bank, Intrum, the merchant acquiring business, Fund Administration in Luxembourg and the training business), confirming the existence of hidden value within the Group that is not reflected in the book values but is recognised in transactions with third parties. Moreover, the resilient and well diversified business model, which focuses on the product factories where a large part of the difference in book values is concentrated, guarantees a primary source of income for the Group even in adverse conditions solely in relation to the scenario of the banking sector. Accordingly, in developing the valuation model used for the purposes of impairment testing, the following precautions were adopted: \u2212 projected cash flows include the financial effects of the services provided by the Corporate Centres. Moreover, the final figures for the last few years have been essentially in line with the forecast figures; \u2212 the cost of capital was determined analytically, based on parameters taken from the markets for each CGU, depending on the different risk of the respective businesses, also considering analytically the various risk factors. Lastly, the parameters and information used to test the recoverability of intangible assets with indefinite useful life are significantly influenced by the macroeconomic environment and financial market trends, which might undergo changes that cannot be predicted at the present time. If, in the future, the macroeconomic scenario should deteriorate with respect to the assumptions, this would have effects on the estimate of the various CGUs\u2019 cash flows and on the main assumptions adopted, which could obviously yield results in the financial statements of the coming years different from those outlined in the Financial Statements as at 31 December 2022. Nonetheless, it must be noted that the business units that have significant amounts of goodwill (Insurance, Asset Management and Private Banking) have always had, and are expected also in the future to have profitability that largely justifies the values of goodwill recognised. Sensitivity analyses Since the value in use is determined by using estimates and assumptions that may contain some level of uncertainty, sensitivity analyses to verify the sensitivity of the results obtained to changes in the parameters and in the underlying hypotheses, referring to the DCF method, were carried out, as required by the IAS/IFRS. These analyses are important in this forecasting scenario characterised by a significant degree of uncertainty. In this regard, considering alternative scenarios and stress factors in the main valuation and macro-economic variables makes it possible to evaluate the impacts on the impairment test results related to the specific forecasting scenario. For CGUs that present residual values of goodwill, the impact on the value in use of an increase of up to 50 bps in discount rates and a decrease of up to 50 bps in the growth rate for terminal value purposes was verified. In addition, analyses were conducted of changes in the Value in Use resulting from a decrease in the cash flows used for terminal value purposes. No events of impairment would emerge in any of the CGUs tested, even in the event of an increase in discounting rates of 50 bps, and a decrease in the \u201cg\u201d rate of 50 bps or a decrease in the terminal value cash flow of 10%. The table below illustrates the sensitivity (in percentage terms) of the Value in Use of the CGUs that present goodwill to changes in the \u201cg\u201d rate or discounting rate of -/+10 basis points, as well as a reduction in the cash flows used for terminal value purposes of 10%. CHANGE IN VALUE IN USE Sensitivity Sensitivity to growth rate \"g\" - 10 bps Sensitivity to discount rate + 10 bps Sensitivity to Terminal value cash flows - 10% CGU IMI Corporate & Investment Banking -0.82% -1.09% -8.49% Insurance -0.78% -1.05% -6.44% Asset Management -0.80% -1.07% -6.50% Private Banking -0.80% -1.07% -6.52% Based on the table above, changes in the Ke (increasing) or the \u201cg\u201d (decreasing) values within 10 bps would lead to a general decrease in the values in use ranging between 0.78% and 1.09%. Regarding the cash flow considered for the purpose of the terminal value, a 10% decrease of the same would lead to reductions in the values in use ranging between 6.50% and 8.49%. In any event, no issues of impairment would arise for any CGU at that amount of sensitivity. Still considering stress testing, analyses were performed with the aim of determining the limits for the main inputs, beyond which impairment testing of the CGUs would require the recognition of impairment. The following table presents the \u201cg\u201d growth rates and discounting rates for each CGU that would result in a Value in Use in line with its carrying amounts, assuming equal cash flows to be discounted. Sensitivity \"g\" growth rate Difference compared to the \"g\" rate used TV discounting rate Difference compared to the Ke discounting rate used CGU IMI Corporate & Investment Banking 0.10% -198 bps 12.70% 152 bps Insurance -3.80% -583 bps 15.16% 428 bps Asset Management -17.80% -1.984 bps 23.62% 1.289 bps Private Banking -54.50% -5.658 bps 45.27% 3.452 bps As shown by the data contained in the table, the Values in Use of the CGUs would reduce until the book values, with consequent impairment problems, only in correspondence with the significant worsening of the discounting rates (Ke) and the \u201cg\u201d growth rates. Finally, within the framework of analysis regarding possible changes in the cash flows of the CGUs on the basis of alternative scenarios to those used for the purposes of this impairment test, account was taken of the impact on prospective cash flows of the application of an alternative prospective macroeconomic scenario, consistent with the \u201cadverse\u201d scenario incorporated into the Expected Credit Loss models used to measure loans pursuant to IFRS 9. This scenario envisages a general shock to the Euro area economy, relating primarily to a very significant increase in the price of gas, with the introduction of a recession for the years 2023 and 2024, with the resulting increase in inflation. The scenario presented above translates into a reduction in cash flows at the Group level, which will also benefit from the provisions set aside in the 2022 Financial Statements in response to the uncertainty in the prospective scenario and the significant reduction in risks associated with exposures to Russian and Ukrainian counterparties following the de-risking measures taken and the provisions made, averaging 11% over the forecasting horizon, with impacts spread across all CGUs. Following this analysis, it was found that the reduction in cash flows over the 2023-2027 forecasting horizon, estimated as a result of the application of an \u201cadverse\u201d scenario, would not entail issues of impairment for any of the Group\u2019s CGUs.", "dimensions": { "concept": "ifrs-full:DisclosureOfResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-959": { "value": "SECTION 10 - INTANGIBLE ASSETS - CAPTION 100 10.1 Intangible assets: breakdown by type of asset (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life A.1 Goodwill X 3,626 X 2,650 X 976 X - X 3,574 A.1.1 Group x 3,626 x 2,650 x 976 x - x 3,574 A.1.2 Minority interests x - x - x - x - x - A.2 Other intangible assets 4,322 1,882 3,755 1,882 549 - 18 - 3,886 1,882 of which: software 3,013 - 2,961 - 52 - - - 2,533 - A.2.1 Assets measured at cost 4,322 1,882 3,755 1,882 549 - 18 - 3,886 1,882 a) Internally generated intangible assets 2,386 - 2,366 - 20 - - - 2,072 - b) Other assets 1,936 1,882 1,389 1,882 529 - 18 - 1,814 1,882 A.2.2 Assets measured at fair value - - - - - - - - - - a) Internally generated intangible assets - - - - - - - - - - b) Other assets - - - - - - - - - - Total 4,322 5,508 3,755 4,532 549 976 18 - 3,886 5,456 As at 31 December 2022, the amount for software was 3,013 million euro, of which 2,386 million euro produced internally and 627 million euro purchased externally. The allocation of goodwill between \u201cCash Generating Units\u201d is reported in the following table. (millions of euro) CGUs/Goodwill 31.12.2022 31.12.2021 Banca dei Territori - - IMI Corporate & Investment Banking 56 56 Insurance 976 976 Asset Management 1,059 1,060 Private Banking 1,535 1,482 International Subsidiary Banks - - Bank of Alexandria (Egypt) - - Pravex Bank (Ukraine) - - GROUP TOTAL 3,626 3,574 For a breakdown of the CGUs, see the next chapter \u201cInformation on intangible assets and goodwill\u201d. 10.2 Intangible assets: annual changes (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 20,772 7,382 - 10,583 2,386 41,123 A.1 Total net adjustments -17,198 -5,310 - -8,769 -504 -31,781 A.2 Net initial carrying amount 3,574 2,072 - 1,814 1,882 9,342 B. Increases 52 1,041 - 422 - 1,515 B.1 Purchases 42 51 - 304 - 397 of which business combinations 42 - - 73 - 115 B.2 Increases of internally generated intangible assets X 990 - - - 990 B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences 10 - - - - 10 B.6 Other changes - - - 118 - 118 C. Decreases - -727 - -300 - -1,027 C.1 Sales - - - -3 - -3 of which business combinations - - - - - - C.2 Impairment losses - -692 - -292 - -984 - Amortisation X -684 - -280 - -964 - Write-downs recognised in - -8 - -12 - -20 shareholders' equity X - - - - - income statement - -8 - -12 - -20 C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - -12 - - - -12 C.5 Negative foreign exchange differences - - - -4 - -4 C.6 Other changes - -23 - -1 - -24 D. Net final carrying amount 3,626 2,386 - 1,936 1,882 9,830 D.1 Total net adjustments -17,198 -6,002 - -9,061 -504 -32,765 E. Gross final carrying amount 20,824 8,388 - 10,997 2,386 42,595 F. Measurement at cost - - - - - - The sub-caption B.1 includes the increase for Goodwill deriving from the purchase of Compagnie de Banque Priv\u00e9e Quilvest S.A. (CBPQ). 10.2 Of which: Banking group (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 19,042 7,322 - 8,952 2,386 37,702 A.1 Total net adjustments -16,444 -5,276 - -7,743 -504 -29,967 A.2 Net initial carrying amount 2,598 2,046 - 1,209 1,882 7,735 B. Increases 52 1,025 - 378 - 1,455 B.1 Purchases 42 38 - 276 - 356 of which business combinations 42 - - 73 - 115 B.2 Increases of internally generated intangible assets X 987 - - - 987 B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences 10 - - - - 10 B.6 Other changes - - - 102 - 102 C. Decreases - -705 - -198 - -903 C.1 Sales - - - -3 - -3 of which business combinations - - - - - - C.2 Impairment losses - -678 - -190 - -868 - Amortisation X -670 - -178 - -848 - Write-downs recognised in - -8 - -12 - -20 shareholders' equity X - - - - - income statement - -8 - -12 - -20 C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - -12 - - - -12 C.5 Negative foreign exchange differences - - - -4 - -4 C.6 Other changes - -15 - -1 - -16 D. Net final carrying amount 2,650 2,366 - 1,389 1,882 8,287 D.1 Total net adjustments -16,444 -5,954 - -7,933 -504 -30,835 E. Gross final carrying amount 19,094 8,320 - 9,322 2,386 39,122 F. Measurement at cost - - - - - - 10.2 Of which: Insurance companies (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 1,712 60 - 1,544 - 3,316 A.1 Total net adjustments -736 -34 - -939 - -1,709 A.2 Net initial carrying amount 976 26 - 605 - 1,607 B. Increases - 16 - 21 - 37 B.1 Purchases - 13 - 6 - 19 of which business combinations - - - - - - B.2 Increases of internally generated intangible assets X 3 - - - 3 B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences - - - - - - B.6 Other changes - - - 15 - 15 C. Decreases - -22 - -97 - -119 C.1 Sales - - - - - - of which business combinations - - - - - - C.2 Impairment losses - -14 - -97 - -111 - Amortisation X -14 - -97 - -111 - Write-downs recognised in - - - - - - shareholders' equity X - - - - - income statement - - - - - - C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - - - - - - C.5 Negative foreign exchange differences - - - - - - C.6 Other changes - -8 - - - -8 D. Net final carrying amount 976 20 - 529 - 1,525 D.1 Total net adjustments -736 -48 - -1,036 - -1,820 E. Gross final carrying amount 1,712 68 - 1,565 - 3,345 F. Measurement at cost - - - - - - 10.2 Of which: Other companies (millions of euro) Goodwill Other intangible assets: internally generated Other intangible assets: other Total Finite useful life Indefinite useful life Finite useful life Indefinite useful life A. Gross initial carrying amount 18 - - 87 - 105 A.1 Total net adjustments -18 - - -87 - -105 A.2 Net initial carrying amount - - - - - - B. Increases - - - 23 - 23 B.1 Purchases - - - 22 - 22 of which business combinations - - - - - - B.2 Increases of internally generated intangible assets X - - - - - B.3 Recoveries X - - - - - B.4 Positive fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - B.5 Positive foreign exchange differences - - - - - - B.6 Other changes - - - 1 - 1 C. Decreases - - - -5 - -5 C.1 Sales - - - - - - of which business combinations - - - - - - C.2 Impairment losses - - - -5 - -5 - Amortisation X - - -5 - -5 - Write-downs recognised in - - - - - - shareholders' equity X - - - - - income statement - - - - - - C.3 Negative fair value differences recognised in - - - - - - - shareholders' equity X - - - - - - income statement X - - - - - C.4 Transfer to non-current assets held for sale and discontinued operations - - - - - - C.5 Negative foreign exchange differences - - - - - - C.6 Other changes - - - - - - D. Net final carrying amount - - - 18 - 18 D.1 Total net adjustments -18 - - -92 - -110 E. Gross final carrying amount 18 - - 110 - 128 F. Measurement at cost - - - - - - 10.3 Other information As at 31 December 2022, there were commitments relating to investments in intangible assets, primarily software, of approximately 25 million euro. Information on intangible assets and goodwill The application of IFRS 3 to the accounting of acquisitions may lead to the recognition of new intangible assets and goodwill. In the case of the Intesa Sanpaolo Group, the merger between Banca Intesa and Sanpaolo IMI and the subsequent acquisitions led to the recognition of significant amounts for intangible assets and goodwill. In 2022 two transactions were finalised, entailing the recognition of new intangible assets with finite useful lives and goodwill. These transactions are briefly illustrated below, describing their effects on the amount and composition of the Group\u2019s intangible assets. The acquisition by Fideuram Bank Luxembourg, a subsidiary of Fideuram - Intesa Sanpaolo Private Banking, of 100% of the capital of Compagnie de Banque Priv\u00e9e Quilvest, a Luxembourg private bank wholly owned by the holding company Quilvest Wealth Management, was finalised on 30 June 2022. Within the framework of the Purchase Price Allocation (PPA), two specific customer relationship related intangible assets were identified and recognised, amounting to 43 million euro in relation to indirect customer deposits (assets under management) and 30 million euro in relation to core deposits, respectively. In addition, goodwill of approximately 42 million euro was recognised as the residual difference between the acquisition cost and the company\u2019s shareholders\u2019 equity measured at its acquisition date fair value. According to IAS 36, both goodwill and the intangible assets linked to these assets were allocated to the Private Banking CGU. Within the International Subsidiary Banks Division, the acquisition by VUB Banka, a wholly owned subsidiary of Intesa Sanpaolo Holding International, of 5.26% of the capital of VUB Generali, the number-four operator in the Slovak pension fund market, in which the Intesa Sanpaolo Group previously held a 50% stake as part of a joint venture established in 2004 with the Generali Group, was finalised on 24 October 2022. This transaction, which entailed the acquisition of control over the company by the Intesa Sanpaolo Group pursuant to IFRS 10, was considered a business combination to be accounted for under IFRS 3. At the end of the Purchase Price Allocation (PPA), an intangible asset not previously recognised in the financial statements of VUB Generali attributable to customer relationship related activities, and in particular asset management, of 80 million euro was identified and allocated to the International Subsidiary Banks CGU. The intangible asset identified, net of the related tax effect, offset the entire difference between the acquisition cost and the company\u2019s assets, without the transaction giving rise to amounts of goodwill. For more details on the transactions mentioned above, see Part G of these Notes. The table below summarises the values of the intangible assets and goodwill recorded in the consolidated financial statements at 31 December 2022 with the related changes during the period, subdivided by Cash Generating Unit (CGU), which represent the groups of assets subject to impairment testing on goodwill in order to determine the recoverable amount. (millions of euro) CGU Financial Statements 2021 Acquisition of CBPQ Acquisition of VUB Generali Amortisation Other changes (1) Financial Statements 2022 BANCA DEI TERRITORI DIVISION 1,833 - - -22 - 1,811 - Asset management intangibles - distribution 201 - - -14 - 187 - Insurance intangibles - distribution 110 - - -7 - 103 - Brand name intangibles 1,507 - - - - 1,507 - Intangible asset under administration 15 - - -1 - 14 - Intangibile Acquiring - - - - - - - Goodwill - - - - - - DIVISIONE IMI CORPORATE & INVESTMENT BANKING 56 - - - - 56 - Goodwill 56 - - - - 56 ASSET MANAGEMENT DIVISION 1,166 - - -6 -1 1,159 - Asset management intangibles - prod. and distribut. 106 - - -6 - 100 - Goodwill 1,060 - - - -1 1,059 PRIVATE BANKING DIVISION 2,106 115 - -19 15 2,217 - Asset management intangibles - prod. and distribut. 180 43 - -14 4 213 - Insurance intangibles - distribution 47 - - -2 - 45 - Intangibile Core Deposits - 30 - -1 - 29 - Brand name intangibles 375 - - - - 375 - Intangible asset under administration 22 - - -2 - 20 - Goodwill 1,482 42 - - 11 1,535 INSURANCE DIVISION 1,567 - - -94 - 1,473 - Insurance intangibles - production 591 - - -94 - 497 - Goodwill 976 - - - - 976 DIVISIONE INTERNATIONAL SUBSIDIARY BANKS - - 80 -1 - 79 - Intangible asset management - production - - 80 -1 - 79 BANK OF ALEXANDRIA (Egypt) - - - - - - PRAVEX BANK (Ukraine) - - - - - - CGU TOTAL 6,728 115 80 -142 14 6,795 - Asset management intangibles 487 43 80 -35 4 579 - Insurance intangibles 748 - - -103 - 645 - Intangibile Core Deposits - 30 - -1 - 29 - Intangible asset under administration 37 - - -3 - 34 - Intangibile Acquiring - - - - - - - Brand name intangibles 1,882 - - - - 1,882 - Goodwill 3,574 42 - - 10 3,626 (1) Foreign exchange differences on the goodwill attributable to Eurizon Capital SLJ and on the portion of amortisation of intangibles attributable to Reyl & Cie SA. The intangible assets with finite useful lives recognised refer to customer relationships and relate to the valuation of the insurance portfolio (Value of Business Acquired), Assets Under Administration (AUA), Assets Under Management (AUM) and Core Deposits. Such intangible assets were originally measured by discounting the income margin cash flows over a period representing the residual life, contractual or estimated, of relationships existing at the time of the business combination. For the intangible assets with a finite useful life, the amortisation for the year was recognised to the income statement (under \u201c220. Net adjustments to/recoveries on intangible assets\u201d) for a total of 142 million euro gross of the tax effect. The brand name, an intangible asset related to marketing, was also measured. This asset is considered to have an indefinite life since it is expected to contribute for an indefinite period of time to the formation of income flows. Based on IAS 36, both intangible assets with an indefinite useful life and goodwill are submitted to impairment testing on an annual basis to verify recoverability of their value. In addition, intangible assets with a finite useful life must be tested for impairment whenever there is evidence of impairment indicators. The recoverable amount consists of the higher of the fair value and the value in use, less costs to sell. Lastly, it should be mentioned that IAS 36, for the purpose of calculating the value in use of intangibles subject to impairment testing, states that reference must be made to cash flows arising from intangible asset in its current condition (as at the impairment test date), with no distinction between cash flows arising from the asset initially recognised according to IFRS 3 and those relating to the asset outstanding at the impairment test date. This because it would be difficult, especially with regard to extraordinary transactions between businesses or changes in the asset following significant turnover in volumes, customers, contracts, etc., to separate cash flows relating to the original asset from others. This concept can also be applied in impairment testing of goodwill to calculate the Value in use of the CGUs, for which the cash flows have to be considered with regard to all assets and liabilities of that CGU and not only the assets and liabilities for which goodwill was recognised on application of IFRS 3. As in previous financial statements, given the volatility of the financial markets and the available market values for calculation of the recoverable amount, the Value in use that represents the present value of net future cash flows from the asset (or business) being valued was used in the impairment tests for the 2022 financial statements. In particular, for the financial statements as at 31 December 2022, in line with the previous financial statements, the impairment test on goodwill was conducted by applying the DCF \u2013 Discounted Cash Flow model \u2013 to which, as a check of the consistency of the results of using the DCF model, the DDM \u2013 Dividend Discounted Model \u2013 is added. Both of these methods were based on the individual estimates made internally for the 2023-2027 period, which for the years up to 2025 represent the forecasts in the 2022-2025 Business Plan, updated to take account of the changed macroeconomic scenario, whereas the final two years of forecasts were estimated through inertial tracking of the flows for 2025, on the basis of internal forecasts relating to the aforementioned macroeconomic scenario. It is noted that the tests mentioned above did not concern the Banca dei Territori, International Subsidiary Banks, Bank of Alexandria or Pravex Bank CGUs in consideration of the absence, as of the date of the test, of goodwill allocated to those CGUs to be subject to impairment test. These tests were also joined by an autonomous test, using an independent expert, of the fair value of the component of the brand name attributable to Banca dei Territori, a CGU which no longer has goodwill allocated. The results of the impairment test as at 31 December 2022 showed no need to recognise any goodwill impairment or adjustments to intangible assets with an indefinite life (brand name) with regard to any of the CGUs in the Intesa Sanpaolo Group. Lastly, the methods, assumptions and results of the impairment test procedures for intangible assets and goodwill defined by management were approved by the Board of Directors prior to approval of the draft financial statements for 2022. Impairment testing of intangibles Insurance portfolio Valuation of the insurance portfolio uses models normally applied in valuation practice. The resulting value, considered to have a finite life, is amortised at variable rates over a period representing the residual life of the insurance contracts. The book value of insurance intangible assets includes, among other things, the insurance portfolio of Intesa Sanpaolo Vita and the subsidiary Intesa Sanpaolo Life DAC distributed by the networks of the Intesa Sanpaolo Group and Fideuram Vita. The total book value also includes the intangible asset belonging to Intesa Sanpaolo RBM Salute and the value of the component of distribution of insurance products by the former UBI Banca network and by IW Bank. During 2021, the Value of Business Acquired (VoBA) deriving from the acquisitions of Assicurazioni Vita, Lombarda Vita and Cargeas Assicurazioni was added to this. Assicurazioni Vita and Lombarda Vita were merged into Intesa Sanpaolo Vita as of 31 December 2021, whereas Cargeas Assicurazioni was merged into Intesa Sanpaolo Assicura on 1 October 2022. The intangible assets referring to the insurance portfolio were partly allocated to the Insurance CGU, partly to the Private Banking CGU and partly to the Banca dei Territori CGU, depending on whether they refer to the value of the component of policy production or policy distribution. As previously stated, these are intangible assets with finite useful lives and, during the year, the amortisation for the year was charged to the income statement, for a total amount of 103 million euro. During the year, the analyses on the main impairment indicators were updated. Specifically, in 2022 the Insurance Division reported strong income from insurance business of approximately 1.6 billion euro, up slightly on the previous year (+1.9%). This trend is attributable to the increase in the technical margin, in both the life business and the non-life business, which more than offset the reduction in the net investment result. In addition, in 2022 the Division\u2019s collected premiums for life policies and pension products amounted to 16.2 billion euro, down by around 14% compared to the previous year, due to unit-linked products (-41%), as a result of the uncertainty on the financial markets. In contrast, the collected premiums for traditional products increased (+39%), including the Class I component of multi-line policies, due to the placement in the fourth quarter of the Class I credit line dedicated to senior customers. Pension products recorded an increase of 1%. Direct deposits from insurance business exceeded 173 billion euro as at 31 December 2022, down by approximately 15% on the previous year. Note that, as previously stated, IAS 36 requires that intangible assets be subject to impairment tests with reference to relationships with customers of all the CGUs at the valuation date, not only the residual relationships which were used to determine the initial value of the intangible assets. Therefore, any possible calculation of the recoverable amount shall also include the new business generated at the level of the CGU following the date of recognition of the intangible assets. In addition, the volumes of the policies underlying the measurement of the intangible assets recognised in the financial statements are negligible if compared with the total policies of the relevant CGUs. An analysis of the comprehensive income of the products in the portfolios did not identify any potential impairment of the intangible asset relating to the insurance business, also considering that, as required by IAS 36, the intangible asset is tested for impairment at the CGU level as a whole and not by individual product or business line. The following table presents a summary of the values of insurance intangibles according to the relevant CGU. (millions of euro) CGU Financial statements 2021 Amortisation Financial statements 2022 BANCA DEI TERRITORI DIVISION Insurance intangibles - distribution 110 -7 103 INSURANCE DIVISION Insurance intangibles - production 591 -94 497 PRIVATE BANKING DIVISION Intangibile asset management - produc. and distribut. 47 -2 45 GROUP TOTAL 748 -103 645 Following the analyses conducted on the main impairment indicators, it was not necessary to carry out a thorough recalculation of the value of the intangible asset, since the overall trend of the insurance business did not present any particular critical issues in 2022. Asset management and administration portfolio The intangible asset recognised in Intesa Sanpaolo\u2019s consolidated financial statements is regarded as having a finite useful life. Accordingly, for the purposes of the 2022 Financial Statements, analyses were conducted on the main value indicators, which were also monitored throughout the year (these include trends in assets, redemption rates, and net interest and other banking income net of operating costs and tax effects). Those analyses regarded the component of the intangible assets linked to assets under administration (AUA) and under management (AUM), represented by the capacity of the relationships existing at the acquisition date to generate cash flows over the residual useful life of those relationships, recognised in the financial statements following the acquisitions that were carried out over time. More specifically, this aspect concerns the asset management portfolios of the former Venetian banks, acquired in 2017, and of the Morval Group, acquired by Fideuram - Intesa Sanpaolo Private Banking in 2018. Subsequently, as part of the acquisition of the UBI Group, during 2020 intangible assets were measured linked to indirect customer deposits and, in particular, the intangible assets pertaining to assets under administration (AUA) and assets under management (AUM), whereas during 2021 the intangible assets relating to the assets under administration and assets under management of Reyl & Cie SA, a Swiss private bank with an international presence, were recognised. In 2022, as stated above, new customer relationship related intangible assets were recognised in connection with the indirect customer deposits of Compagnie de Banque Priv\u00e9e Quilvest (CBPQ) and VUB Generali, amounting to 43 and 80 million euro as at the acquisition date, respectively. As at 31 December 2022, taking account of the portion amortised in the meantime, the intangible asset linked to AUM was allocated to the Banca dei Territori CGU (187 million euro), to the Private Banking CGU (213 million euro), to the Asset Management CGU (100 million euro) and to the International Subsidiary Banks CGU (79 million euro). Likewise, the intangible asset linked to AUA, taking account of the component of amortisation recorded during the year, was allocated to the Banca dei Territori CGU, for the component distributed by the branches deriving from UBI Banca (14 million euro), and to the Private Banking CGU, for the component distributed to customers of IW Private Investments SIM (20 million euro) as at 31 December 2022. As stated above, IAS 36 provides that impairment testing must not be limited only to the cash flows deriving from the assets acquired, but should take account of all the cash flows linked to the assets of the specific CGU, also including the cash flows generated after initial measurement of the intangible assets. On this regard, it is noted that the volumes of assets underlying the measurement of the intangible assets recognised in the financial statements are negligible if compared with the total assets of the CGUs. Accordingly, in the light of the above, and regardless of the performance of the assets during the reporting period, it may be confirmed that there were no signs of impairment of the intangible assets recognised in the financial statements and pertaining to asset under management and asset under administration relationships. The following table presents a summary of the values of the AUM and AUA intangibles attributable to the Banca dei Territori, Private Banking, Asset Management and International Subsidiary Banks CGUs. CGU Financial statements 2021 Acquisitions Amortisation Other changes (1) Financial statements 2022 BANCA DEI TERRITORI DIVISION Intangibile asset management - distribution 201 - -14 - 187 Intangible asset under administration 15 - -1 - 14 PRIVATE BANKING DIVISION Intangibile asset management - produc. and distribut. 180 43 -14 4 213 Intangible asset under administration 22 - -2 - 20 ASSET MANAGEMENT DIVISION Intangibile asset management - produc. and distribut. 106 - -6 - 100 INTERNATIONAL SUBSIDIARY BANKS DIVISION Intangibile asset management - distribution - 80 -1 - 79 GROUP TOTAL 524 123 -38 4 613 (1) Foreign exchange differences on intangible assets attributable to Reyl & Cie SA. Core Deposits \u201cCore deposits\u201d are \u201ccustomer-related intangibles\u201d, generally recorded in business combinations between banks. The intangible value of core deposits stems from the future benefits for the acquirer deriving from the stable and lower funding cost compared to market parameters. Basically, the acquirer may use funding for its lending and investment activities which pays less than the interbank market interest rate. The intangible asset consists of the valuation of this future margin, known as the \u201cdeposit premium\u201d, which represents an asset the value of which is correlated with the performance of market rates and the assets raised. As stated above, total core deposits of 30 million euro were recognised as part of the acquisition of Compagnie de Banque Priv\u00e9e Quilvest by Fideuram Bank Luxembourg. No impairment indicators were considered when assessing whether the intangible asset had maintained its value, given the limited period of time between the initial recognition of the asset and the expected interest rate scenario. Brand name IFRS 3 considers the \u201cbrand name\u201d a potential, marketing related intangible asset, which may be recorded in the Purchase Price Allocation (PPA) process. For this purpose, please note that the term \"brand\u201d is used in accounting standards with an extensive meaning and not as a synonym of \u201clogo\u201d or \u201cname\u201d. It is considered a general marketing term which defines a set of complementary intangible assets (in addition to the name and the logo, also the competencies, consumer trust, service quality, etc.) which concur to form brand equity. With reference to acquisition of the Sanpaolo IMI Group, it was decided to limit the analysis to just two brands: the corporate brand Sanpaolo IMI, intended as an \u201cumbrella\u201d brand to which the brands of the other network banks were also related, and the brand of the subsidiary Fideuram - Intesa Sanpaolo Private Banking (former Banca Fideuram), as an autonomous brand widely recognised on the market for the placement of financial products through a network of financial advisors. Both are considered intangibles with indefinite useful life, since they are deemed to contribute indefinitely to the formation of income flows. Market methods and flow-based methods (and, thus, based on fundamental analyses) were used in the valuation of the two brands. Value was determined as the average of the values obtained using the various methods. The amount recorded in the 2022 Financial Statements came to 1,882 million euro, of which 1,507 million euro was allocated to the Banca dei Territori CGU and 375 million euro to the Private Banking CGU. In general, the brand name is considered an intangible asset that has no independent cash flows and, thus, to be subject to impairment testing as part of the verification of the retention of goodwill for the various CGUs. For the purposes of this impairment test, with regard to the brand name allocated to the Banca dei Territori CGU, it was considered that the reference CGU did not have any goodwill allocated and, as a result, it was not possible to test the recoverable amount of the specific intangible as part of the impairment test of the goodwill based on total cash flows at the level of the CGU. As it was not possible to refer, for the recoverable amount of the brand name of Banca dei Territori, to the notion of Value in Use, i.e. the present value of net future cash flows from the assets valued, it was decided, in line with that carried out for the 2020 and 2021 Financial Statements, to conduct a specific, autonomous valuation of the specific intangible based on the fair value resulting from the dedicated appraisal commissioned from Prof. Mauro Bini, Full Professor of Corporate Finance at Bocconi University. Lacking specific transactions on comparable banking brand names, the fair value of the brand name allocated to the Banca dei Territori CGU was estimated using the following methods: - Royalty Relief; - the implicit value in estimating brands with comparable PPAs; - the implicit value in the public estimates of brands provided by independent third parties (Brand Finance); - Hirose. Royalty Relief Criterion The Royalty Relief criterion determines the value of the brand from the present value of income deriving from the brand, estimated as the product of a royalty rate reconstructed on the basis of implicit rates in comparable PPAs and the value of net turnover (operating income, for banks). The criterion of the implicit value in estimating brands with comparable PPAs The criterion of the implicit value in estimating brands with comparable PPAs determines the value of the brand based on the \u201cFair value of the brand/Operating income\u201d multiples recorded on PPA and their fundamental drivers. The multiple, calculated in relation to net operating income, is taken from the fair value of the brands recognised on PPA of commercial banks from the Markables database. Criterion of the implicit value in the public estimates of brands provided by independent third parties (Brand Finance) Brand Finance is a UK company specialising in valuing brands. Each year, Brand Finance publishes the updated estimated value of the brands of the top 500 global banks. The valuation of brands carried out by Brand Finance is consistent with the Relief from Royalties criterion, widely used in valuation to estimate the value of brands. According to this criterion, the value of the brand corresponds to the current value of royalty flows saved. The royalty rates are determined based on the trademark license agreements of comparable companies and applied to the specific bank brand based on the strength of the brand estimated and discounted at an opportunity cost of capital in line with the assigned brand rating. Hirose Criterion This criterion is based on the comparison of the profitability of the branded company (in this case, the Banca dei Territori CGU) and unbranded competitor companies. The income-based method adopted is attributable to the profit-split criterion. Based on the analyses conducted, all four methods used returned a value of the Intesa Sanpaolo brand for the Banca dei Territori CGU higher than the book value of that intangible asset, demonstrating the value of the Group\u2019s brand and the resulting competitive advantage it continues to provide the Group in relation to its competitors. Instead, the brand name allocated to the Private Banking CGU was subject to impairment testing as part of the activities regarding the verification of the recoverable amount of the goodwill allocated to that CGU. Impairment testing of CGUs and goodwill Definition of Cash Generating Units (CGUs) For impairment testing purposes, the estimation of the value in use relating to intangible assets with an indefinite life (including goodwill) that do not generate cash flows unless jointly with other business, as per IAS 36, requires the preliminary assignment of such intangible assets to relatively independent business units, able to generate cash flows strongly independent of those produced in other business areas, but interdependent within the business unit generating them. In IAS/IFRS terminology, such business units are known as Cash Generating Units (CGUs). The meaning of the impairment test is significant for identification of the CGUs. IAS 36 indicates the necessity to correlate the level at which the goodwill is tested with the level of internal reporting at which management controls the increases and decreases of such value. Definition of the level closely depends on the organisational models adopted and on the managerial responsibilities governing the operating guidelines and monitoring activity. Organisational models may ignore (and in the case of the Intesa Sanpaolo Group they do ignore) the network of legal entities through which operations are carried out, and are instead very often closely designed around the definition of business operating segments as envisaged by IFRS 8. Furthermore, the identification of CGUs for goodwill impairment test purposes is consistent with the definition of the recoverable amount of an asset - which is in itself the base for impairment tests - according to which the relevant item is the amount that the company expects to recover from that asset, considering any synergies with other assets. Therefore, in accordance with the criteria applied for the determination of the prices of the business combinations that gave rise to goodwill recognition, the recoverable amount for impairment testing purposes of the CGU to which goodwill is allocated must include not only the value of external (or universal) synergies but also the internal ones, the reason being that the specific acquirer may obtain additional value from the integration of activities obtained through business combinations, according to its business model. The Intesa Sanpaolo Group\u2019s organisational model envisages that: - management decisions are highly centralised at the level of the heads of the operational segments; - strategies, identification of new products or services and commercial penetration initiatives are outlined and directed centrally for each operating division; - planning processes and reporting systems are managed at the operational segment level; - as a result of this centralisation, income flows are highly dependent on the policies set up at segment level, based on balanced development of the entire division and not of the individual operating areas or legal entities considered individually; - specialised transversal areas are defined to provide support and develop products benefiting many subsidiaries; - the management of financial risks is also highly centralised in order to maintain, also as a result of regulatory provisions, a balance between the capital allocation policies and the financial risks in development of the various business lines; - the divisions operate in homogeneous markets or sectors in terms of economic characteristics and development level. As a result of this centralisation, income flows are highly dependent on the policies set up at the operational segment level, based on balanced development of the entire division and not of the individual operating areas or legal entities considered individually. The operating divisions identified in the Intesa Sanpaolo Group are as follows: - Banca dei Territori; - IMI Corporate & Investment Banking; - Insurance; - Asset Management; - Private Banking; - International Subsidiary Banks. For the foregoing reasons, the operating divisions cited above correspond, in general terms, to the Group\u2019s CGUs, while also representing the core business areas considered for segment reporting. These divisions are considered representative of cash generating units since each constitutes the smallest group of assets generating independent incoming cash flows and, as mentioned above, also the minimum level set by the Parent Company Intesa Sanpaolo for planning and reporting processes. Therefore, this is the minimum level to which goodwill may be allocated and monitored according to non-arbitrary criteria. The International Subsidiary Banks Division needs specific comments, given the particular structure and conditions under which it operates. It should firstly be mentioned that the cash flows of the various Group companies forming this business unit are strictly dependent upon policies formulated by the Division Governance Centres and Head Office Departments of the Parent Company. These policies are defined and implemented in compliance with a management plan designed to develop the entire Division in an organised manner, and not focusing only on the individual companies\u2019 strategies. Specifically, the expansion strategies for the various operating units, the identification and development of new credit, savings and service products, limits to the assumption of financial risk, commercial penetration and operations specialisation initiatives are outlined and steered at central level, following a portfolio strategy, and not devolved to the individual subsidiaries. Therefore, there is strong interaction of the flows that, at the same time, requires both single and integrated governance of all companies in the Division, and the central monitoring and control of operations of the overall business activities of the Division. However, it is important to consider that not all factors affecting the correlation and interdependence of cash flows within the Division can be controlled by the Division\u2019s Head Office Departments. In fact, there are circumstances outside the Group that could have varying levels of impact on the capacity to systematically manage CGU flows and control over their generation. These are circumstances largely determined in the wider sense by the conditions of the environment in which the various entities are located. Indeed, for Banks operating abroad, the effects of country risk must be considered: i.e. the risk linked to economic, political and institutional events in the country in which the subsidiary and its business activities are based. In view of the above, if the cash flows that the Parent Company expects from activities generated by a foreign subsidiary are deeply influenced - in terms of extent, quality and trends - by institutional, economic and political circumstances in the country in which the subsidiary is based, this subsidiary cannot be considered an integral part of the single management model for the CGU which it belongs to. The company in such a situation must, therefore, even if only temporarily, be excluded from the CGU, regardless of the Group Management\u2019s willingness to keep it within the CGU, due to the above-mentioned factors over which the Bank and Group's management clearly have no influence. The flows of the company, in fact, would be influenced to a greater extent by the country\u2019s conditions than by the unitary and centralised management policy adopted by the Division and, therefore, for impairment testing purposes, the company must be subjected to independent valuation until the conditions for the systemic central control of cash flows of the subsidiary are restored. With regard to the Ukrainian Pravex Bank, for the purposes of the 2008 impairment testing, careful consideration of the economic and institutional events unfolding in Ukraine, which was undergoing a deep economic and currency crisis, and prudent assessment of their impact on the operational variables of the subsidiary in question, especially from the point of view of their interdependence on variables of the entire CGU, resulted in classification of this company as a completely separate CGU, treating it separately from the Group\u2019s International Subsidiary Banks Division. Subsequently, Pravex Bank was functionally allocated to Capital Light Bank (now the NPE Head Office Department), to then be moved back to the International Subsidiary Banks Division in 2018. With regard to the subsidiary Bank of Alexandria, for the purposes of the 2011 impairment testing the bank was separated from the International Subsidiary Banks CGU due to a profound political crisis in Egypt. For the purposes of the 2022 impairment testing, as no significant elements arose that cast doubt on the decision made for the previous financial statements, and taking account of the outbreak of the military conflict between Russia and Ukraine, it was deemed appropriate to maintain the decisions made with respect to the previous financial statements, and thus to consider Pravex Bank and Bank of Alexandria as autonomous, distinct CGUs in conducting the impairment test for the consolidated financial statements. However, it bears recalling that the goodwill associated with Pravex Bank and Bank of Alexandria were fully written down in conjunction with the impairment tests for the 2008 and 2011 financial statements, respectively, and there is no goodwill even relating to the other International Subsidiary Banks of the Division. In Pravex Bank's and Bank of Alexandria\u2019s cases, the separate assessment of the banks for impairment testing purposes does not affect the Group\u2019s intention to support the development of the subsidiaries, with specific regard to the Ukrainian bank, within the limits permitted by the ongoing conflict. As previously mentioned, the Banca dei Territori, International Subsidiary Banks and Bank of Alexandria and Pravex Bank CGUs, as of the date of the test, did not possess intangible assets with an indefinite life (with the exception of the brand name allocated to the Banca dei Territori CGU, whose recoverable amount, understood as its fair value, was confirmed by a specific valuation drawn up by an independent expert) and, as a result, were not subject to an impairment test. Book value of the CGUs The book value of the CGUs must be determined in a manner consistent with the criterion used to estimate their recoverable amount. For a banking business, the cash flows generated by a CGU cannot be identified without considering the cash flows deriving from financial assets/liabilities, as these represent the core business. In other words, the recoverable amount of the CGUs is influenced by the aforementioned cash flows and therefore the CGUs\u2019 book value must include financial assets/liabilities in accordance with the scope of the recoverable amount estimate process. Consequently, these assets and liabilities must be properly allocated to the associated CGUs. On this basis (so-called \u201cequity side\u201d), the book value of the Intesa Sanpaolo Group\u2019s CGUs may be determined in terms of contribution to consolidated shareholders\u2019 equity including the minority interest. Accordingly, the carrying amount of the CGUs composed of companies belonging to a single operating division was determined by summing up the individual contributions to the balance sheet. However, where the Parent Company or other Group companies contribute to multiple CGUs from a management standpoint, and this division is not represented in accounting information, management values must be used. In this specific case, the management driver was identified as each division's \"regulatory capital\", which represents the capital absorption necessary to handle the types of risk envisaged by the regulatory supervision rules. The table below provides the book values of the CGUs and the goodwill and brand name allocations to each. The values, determined for impairment testing purposes, include the portion of goodwill attributable to minority interests (included in the last column with minority interests). (millions of euro) Values Value as at 31.12.2022 CGU Book value of which goodwill Group share of which brand name of which minority interests Banca dei Territori 18,858 - 1,507 14 IMI Corporate & Investment Banking 21,334 56 - 18 Insurance 6,702 976 - 1 Asset Management 2,656 1,059 - 6 Private Banking 5,192 1,535 375 1 International Subsidiary Banks 6,461 - - - Bank of Alexandria (Egypt) 628 - - 126 Pravex Bank (Ukraine) - - - - TOTAL 61,831 3,626 1,882 166 Criteria for estimates of CGUs\u2019 value in use The value in use of CGUs is determined by estimating the present value of future cash flows that may be expected to be generated by the CGUs. These cash flows are normally estimated by using the latest publicly available business plan or, in its absence, through the drawing up by management of an internal forecast plan. The forecasting period for the analysis usually consists of a maximum of five years. The cash flow of the final year of the forecast is projected in perpetuity (through the use of perpetual return formulae, or, alternatively, temporary return formulae, if it is not realistic to expect the assets subject to measurement to generate positive cash flows over the long term), using an appropriate growth rate \u201cg\u201d for the purposes of the so-called \u201cTerminal Value.\u201d The \u201cg\u201d rate is determined by assuming as growth factor the rate of increase in the gross domestic product of the countries in which the cash flows are generated. Alternatively, the Terminal Value could be determined on the basis of a final sale or liquidation value. For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present valuations of the time value of money and the asset\u2019s specific risks. Specifically, the discount rates to be used must incorporate the present market values with reference to the risk-free component and the risk premium associated with the equity component observed over a sufficiently long time period to reflect different market conditions and economic cycles. In addition, given the diverse risks of the respective operating areas, different Beta coefficients must be used for each CGU. All the resulting rates have been adjusted to take into account the \u201cCountry Risk\u201d. Cash flow estimates Also with regard to the calculation of the value in use of CGUs for impairment testing purposes for the 2022 financial statements, the volatility of financial markets and the uncertainties that still characterise the future macroeconomic environment make the definition of near-term future cash flows from operating activities and the identification of growth rates in order to calculate the Terminal value of CGUs particularly complex. The medium-term forecasting scenario of reference has been drawn up by the Intesa Sanpaolo Research Department taking account of the forecasts of the main Italian and international organisations and institutions, and underlies the income forecasts throughout the 2023-2027 period. These forecasts are based on a reference scenario for the global economy characterised by a gradual return of inflation to levels consistent with the definition of price stability by central banks, associated with lower real growth rates than in the years prior to the pandemic crisis and rising nominal and real interest rate levels. The reference scenario assumes that in 2022 global GDP growth was 2.7%, following the rebound of 6% witnessed in 2020. In 2023 growth is expected to slow further to 2.2%, but then to accelerate again to a range of 3% to 3.5%. International trade of goods is expected to remain essentially stagnant in 2023 (+0.6%), but then to gain momentum in 2024 at growth rates similar to those of global GDP. In 2022, the Euro area was hit by the effects of a spike in natural gas prices, a repercussion of the Russian invasion of Ukraine and of the resulting deterioration in relations between the European Union and Russia. The almost total disruption of gas imports from Russia was tackled with a combination of reduced consumption, increased production from renewable and other fossil sources, and increased imports from other suppliers. Achieving this forced transition in such a short time means that prices will remain structurally higher than in the pre-crisis years. Although 2023 began relatively well, due to milder temperatures than the seasonal average and low Chinese demand, the expectation that Chinese gas demand will resume in the second quarter could entail further price tensions by the end of the year. In the light of recent developments, the scenario includes very conservative forecasts of gas prices in 2023, with mainly downside risks in the short term. The drastic deterioration in terms of trade as a result of the gas crisis was reflected in a fall of around 4 percentage points in the trade balance. The recessionary impact of the shock was almost entirely offset by public support measures for households and businesses and the fall in the average household saving rate back towards pre-pandemic levels. As a result, GDP grew by 3.3% in 2022, well above the potential growth estimates. In 2023 GDP growth is expected to be essentially nil (0.1%), associated with two quarters of mild decline. Estimated annual average growth is then expected to rebound to a range of between 1.5% and 1.8%. The long-term scenario is weighed down by the risk that structurally higher energy prices may reduce the European economy\u2019s growth potential. In 2022, inflation rose to levels well above those predicted a year ago before the war, with an estimated annual average of 8.5%. Much of the greater increase was attributable to the direct and indirect effects of higher natural gas prices, but statistical analyses now also point to demand factors making a significant contribution to the underlying inflation dynamics. The decline in gas prices from the summer 2022 peak suggests that inflation rates will fall in 2023. The annual average is estimated at 7.7%, a level that reflects very conservative forecasts of gas prices at the beginning of the year. The decrease in energy prices would further reduce inflation in the following years, bringing it into line with the ECB\u2019s price stability target in 2025. However, the decline in underlying inflation will be much slower, as a salary increase is expected, compatible with inflation rates of above 2% in services, considering that in 2023-24 productivity growth is unlikely to accelerate enough to offset its effects. In Italy, GDP growth in 2022 was 3.8%, around half a point lower than predicted before the war. The reduction in growth was due to the sharp deterioration in the trade balance (at around 4% of GDP in 2022), which was reflected internally in a decline in real household income and a fall in company earnings. However, the final impact was mitigated by fiscal measures (cut in excise duty, corporate tax credits, household subsidies, suspension of several system-wide cost components, etc.) and the reduction in the average household saving rate. GDP growth gradually slowed down over the course of 2022, and is expected to be negative on a quarterly basis at the end of 2022 and early 2023. It is expected to amount to an annual average of 0.6% in 2023. A sharp acceleration is then expected in the wake of declining energy prices, assuming that aggregate demand is supported by spending flows associated with the Next Generation EU programme (which could increase growth by 0.5% a year), investments in the energy transition, a recovery of foreign demand and a positive trend in employment and real income. Interest-rate-sensitive components of demand will record weaker real growth, a trend that will be accentuated in construction due to the scaling-back of tax incentives for renovations, but without fully offsetting the foregoing factors. Accordingly, on the whole growth continues to be expected to be above potential in the years 2024-27, although there are greater downside risks due to higher energy costs. In the reference scenario, Italian inflation slows to 6.8% in 2023 and then to 2.4% in 2024. This reduction is due primarily to the decrease in energy prices. The risks for 2023 are primarily to the downside, considering the recent performance of gas prices. The European Central Bank raised official rates rapidly from July 2022, initiating a tightening phase that will carry on into the early part of 2023. The year 2022 ended with a deposit facility rate (DFR) of 2.00% and a rate on main refinancing operations (Refi) of 2.5%. At its meeting at the end of 2022, the ECB announced that the increases would continue at a robust pace in early 2023, and this is believed to entail at least a further increase in the DFR to 3.0%. In addition, given the underlying inflation forecasts for the coming years and the very modest slowdown in final domestic demand, it is likely that the rate will be raised further in the following months to 3.50%. However, to take account of the current context of uncertainty, the reference scenario includes a progression of official rates reaching a maximum of 3.0% (DFR) and 3.5% (Refi) in 2023. Official rates are then expected to converge gradually towards neutral levels. The European Central Bank has also begun the progressive discontinuation of unconventional measures. Through an amendment of conditions, it facilitated early repayment of TLTRO III loans. Net purchases of securities under the APP and PEPP programmes were discontinued in June 2022 and March 2022, respectively. In addition, at the end of March 2023 the APP portfolio will begin to decline through monthly reductions in reinvestments from maturing securities of 15 billion euro. In the long term, such measures could exert upwards pressure on risk premiums and on the slope of the government yield curve, enhancing monetary policy direction. Excess liquidity is expected to be reduced drastically in 2023. Due to the relatively conservative assumption made regarding official rate performance, short-term interest rate forecasts are expected to fall short of implicit market rates until the end of 2027, with the sole exception of 2024. The exceptionally high level of surplus reserves, while falling rapidly in 2023 and 2024, will remain considerable and tend to keep very short-term rates close to the ECB overnight deposit rate throughout the horizon of the forecast. Estimates for the medium and long-term interest rate curve reflect the closing of the securities purchase programmes, the speed of the monetary tightening phase already implemented, modest expectations of increases in official rates for the rest of 2023 and the expectation of a decline in such rates in the following years. The slope of the rate curve becomes negative in 2023, but resumes growth in 2024 due to the decline in short-term rates and a marginal increase in longer-term rates. The decline in ECB securities portfolios could provide an additional contribution to the increase in long-term interest rates, even if the boost should be lower than that exercised in the opposite direction by the increase in the securities portfolio of the Central Bank in previous years. The decrease in support provided by the Eurosystem and the increase in risk-free rates could also reflect in an expansion of sovereign risk premiums. Nonetheless, this negative factor could be at least partly offset by the reduction in net issues by the Ministry of the Economy and Finance, in a context of improvement in public finances, and by the faster reduction in public debt than expected in the 2022-24 period. The reference scenario incorporates a modest increase in the spread linked to only fundamental factors (performance of the debt) and monetary policy (rates and negative net purchases). However, the sovereign rating and risk premium level will also be very sensitive to the level of implementation of the NRRP, with regard to both investments and structural reforms. In this regard, the reference scenario assumes that implementation will be relatively prompt. With reference to the banking scenario, in 2022 the credit market saw moderate tightening of supply conditions in line with the move towards more restrictive monetary policy and the increase in perceived risks, while on the bank balance sheets side, the good liquidity and funding position was maintained and the capital base remained solid. In addition, credit quality did not show any particular signs of deterioration. Demand for credit from businesses revived due to financial needs related to day-to-day management, in the face of rising operating costs as a result of higher prices for energy and other inputs. The particular nature of demand drove a rebound in short-term loans, but near the end of the year they began to slow partly due to the worsening of credit conditions. In contrast, medium- and long-term loans remained stationary, with rates of change hovering around zero, reflecting the strong increase during the pandemic due to the support of government-backed loans. In 2023 short-term loan performance is expected to normalise; such loans could continue to present moderately positive changes in line with inflation performance. With regard to medium- and long-term loans, after the persistent weakness of early 2023, the recovery of GDP is expected to support a return to positive territory. As already seen in 2022, financing needs may be partly met using the considerable cash buffer accumulated by businesses in the two-year period 2020-21 and deposited with banks, as well as bond issues and self-financing. In particular, market conditions are expected to be more favourable for the issues of securities, in the light of the return of interest from investors in bonds, above all after the end of the ECB rate hike phase. Loans to households continued to grow at a robust pace in 2022. Once again, this performance was driven by loans for home purchases, which grew at a rate of 5%, the highest in the last decade, with a gradually more moderate trend in the fourth quarter. The slowdown of loans to households is expected to continue in 2023 due to the impact of the increase in mortgage rates and the expected decline in real estate transactions, against the backdrop of house price trends that, while remaining slightly positive, will lose the momentum gained during the pandemic, culminating in 5.2% growth in the second quarter of 2022. In subsequent years, loans to households are expected to grow at a moderate rate, slightly higher from 2025, driven by a possible recovery in house sales and prices. Mortgage loans will continue to play a major role in the residential property market, which is expected to continue to be driven by the new housing and working needs that emerged following the pandemic, renovations and energy reclassification, and the use of part of the excess savings accumulated by some segments of households starting in 2020. With the shift in monetary policy and the rapid rise in interest rates, the long and strong growth of bank deposits, which had lasted more than a decade, came to a halt in the autumn of 2022. After the peaks reached in 2021 and the subsequent gradual slowdown, the growth rate for total deposits fell to zero, following the deceleration in the overnight deposits component, which recorded a slightly negative annual change towards the end of 2022. In a context of much higher inflation and interest rates, a modest decrease of overnight deposits is expected to continue throughout 2023, as a result of a combination of several factors, including the use of the considerable cash deposited with banks in previous years by businesses and households and the reallocation of savings to more remunerative forms. In particular, funds will continue to be shifted from overnight deposits to forms of time deposit, supported by more attractive interest-rate offerings, a trend that had already begun to be seen in late 2022. Buoyed by the return of positive yields, 2023 and subsequent years will see renewed diversification of household financial investments into government and corporate bonds, resulting in less dynamic bank deposits than during the exceptional phase of years of very low rates and the pandemic crisis. For bank bonds, after more than a decade of decline, 2023 will see a resumption of growth, which will continue in subsequent years. With the progressive repayment of the TLTRO IIIs, alongside the use of the ECB\u2019s more traditional refinancing instruments, banks are again turning to the wholesale institutional market, through diversified short- and medium- to long-term funding channels and instruments. Increases in key monetary policy rates have begun to filter through to bank interest rates. In the second half of 2022, interest rates on new loans to non-financial companies rose rapidly, to around double for loans up to 1 million euro compared to the beginning of the year, while the rate on larger loans more than trebled. Interest rates on loans to households for home purchases also increased significantly, particularly the fixed rate, which returned to being higher than the variable rate by 0.9 points in the second half of 2022, after two years of substantial alignment between the two rates. As a result of the increases in new transactions, the average bank lending interest rates also rose faster in the latter part of 2022, to 3.2% (+1.1 percentage points compared to the end of 2021). Interest rates on deposits were more stable in 2022, particularly the average rate on overnight deposits, which only increased slightly towards the end of the year. The stickiness of the interest rate for the on demand component influenced the performance of the average interest rate on deposits, which only rose slightly. In contrast, the interest rates on new time deposits were more responsive, with significant increases from July. The overall cost of funding from customers also began to rise very gradually, reflecting moderate upward movements in the average rate on bonds. As a result, the spread between lending and funding rates increased significantly, returning to levels not seen since 2009. The increase in rates on loans will continue in 2023, following the additional expected increases of key monetary policy rates. In subsequent years, the expected performance of monetary rates will enable a moderate reduction of rates on loans from the levels to be reached in 2023, which will represent the maximum for the entire scenario period. Turning to borrowing rates, in 2023 and subsequent years the stickiness of overnight deposit rates will continue, whereas pricing policies are expected to favour time deposits. The total cost of funding will increase, also driven by the effects of the recomposition towards costlier components such as time deposits and bonds. The banking spread will continue to widen in 2023, driven by the various rates of adjustment of lending and borrowing rates. A moderate reduction is expected from 2024, but unit profitability of dealing will remain high compared to the last decade. After eleven years in negative territory, in September 2022 the mark-down on on-demand deposits returned to positive levels, and it is expected to increase further in 2023 to approximately 2%, to then decline gradually in later years, given the expectation of falling Euribor rates. In contrast, with the sharp rise in Euribor rates, the mark-up on short-term rates fell significantly towards the end of 2022. A further moderate reduction is also expected in the first half of 2023, followed by a general recovery in the margin as increases in key rates are transmitted to rates on loans. Substantial stabilisation of the mark-up is expected in the final two years of the scenario period. Assets under management performed weakly in 2022. For mutual funds, the inflows during the year were mainly directed towards the equity, balanced and money-market segments. The moderate inflows to funds were driven by the negative performance of stock market indices, against the backdrop of reduced investor confidence. Portfolio management schemes were characterised by net outflows. Overall, life insurance declined as new business fell for both traditional and unit-linked policies. With the completion of the rise of rates in 2023, volumes in the asset management and life insurance industries are expected to recover. Inflows of investments to these segments may be fuelled by the stock of cash that flowed into bank deposits in previous years, albeit in a scenario of more attractive direct investment in fixed-income securities. In particular, in 2023 moderately positive inflows are expected for mutual funds and portfolio management schemes, with a possible recovery for bond fund subscriptions. In the following years, assets under management are expected to continue to achieve positive results. For life insurance companies, in 2023 and onwards, total collected premiums are expected to increase. In particular, the level reached by market rates is making it possible to meet the previous demand for traditional policies, which is again on the rise. However, on the offering side, the strategy will continue to focus on hybrid products and class III policies, set to recover starting in 2023. This is also reflected on the demand side, where there is interest in products capable of taking advantage of the best investment opportunities, including those more closely linked to equity instruments. From this perspective, multi-line policies will continue to be drivers. The table below illustrates the macroeconomic variables expected in the period 2023-2027, only for Italy, as no goodwill was recognised for the CGUs operating in foreign countries. (values as a percentage) Italy 2022 2023 2024 2025 2026 2027 REAL ECONOMY Real GDP Italy 3.8 0.6 1.8 1.2 1.0 0.6 Consumer prices Italy 8.2 6.8 2.4 1.3 1.5 1.3 Period-end ECB rate 2.50 3.50 3.00 2.75 2.50 2.50 3-month Euribor rate 0.34 3.00 2.99 2.38 2.10 2.06 10-year IRS 1.92 2.82 3.11 3.28 3.27 3.23 10-year BTP 3.03 4.05 4.60 4.90 4.85 4.76 Spread vs. Bund (basis points) 187 201 190 179 174 170 BANKING SECTOR Loans 2.3 1.5 1.9 2.2 2.6 2.7 Direct customer deposits 2.2 0.6 1.3 2.1 2.3 2.3 Average customer spread 1.93 2.87 2.80 2.60 2.52 2.49 Mutual funds -12.9 4.7 4.1 4.1 3.9 3.6 Portfolio management -15.1 2.8 2.9 2.9 2.8 2.5 Life technical reserves -1.9 4.6 4.4 4.4 4.4 4.3 Scenario produced in December 2022 by the Research Department. Forecast data (estimates for 2022). The various CGUs\u2019 expected cash flows were subject to impairment testing, taking account of the macroeconomic scenario described above, and were estimated by following a two-stage assessment process. Specifically, with regard to the first forecast period, in line with the choices made for the previous Financial Statements, a timeframe of 5 years was considered, i.e. the five-year period 2023-2027. For that period, with regard to the years up to 2025, the forecasts set out in the 2022-2025 Business Plan, updated to take account of the changed macroeconomic scenario, were considered. The flows for the last two years of forecasting (2026 and 2027) were estimated through inertial tracking of the flows for 2025, based on the forecasts relating to the updated macroeconomic scenario, thus, without considering the effect of additional managerial leverage, compared to that incorporated into the Plan forecasts. The net income projected for the forecast years has been adjusted, in accordance with IAS 36, to consider non-monetary components and the minority-interest share of net income. It also excludes the effects of any reorganisation and restructuring transactions and the capital gains on future sales of company assets. In addition, cash flows include those allocated to the various CGUs deriving from central corporate assets. In accordance with the equity-side approach mentioned above in relation to the determination of the carrying values of CGUs, the cash flows used for impairment testing include the flows correlated with financial assets and liabilities, given that these represent the company's core business. In addition, among various financial valuation techniques, such as that used for determining the value in use, the value of a company at the end of the flow forecast period, the so-called terminal value, is normally determined by infinite compounding, at an appropriate \u201cg\u201d rate, of the cash flow achievable \"at full capacity\u201d. This rate, even if subject to time variations, may be assumed to be constant or decreasing (or increasing in rarer circumstances). As an alternative to the terminal value estimation methodology, doctrine also envisages (i) the exit multiple approach and (ii) the approach based on an estimation of the liquidation value of the company. Specifically, with regard to approach (i) it should be mentioned that an exit multiple estimate has complex (and potentially subjective) elements that become even more marked at times of market uncertainty and volatility such as now. Approach (ii) is valid only for companies due to be wound up on termination of the forecasting period, and therefore not applicable with a view to a business as a going concern. For the purposes of the Terminal Value, i.e. the second stage of valuation, the cash flow forecast for 2027, the last year of the analytical projections, was used as the cash flow achievable at full capacity. In line with the impairment tests of the previous years, the \u201cg\u201d rate was determined as the average growth rate of Italy\u2019s nominal GDP, observed and forecast in the 2008-2027 period (it should be noted that, in consideration of the impairment made in the previous financial statements, no goodwill is allocated to the Banca dei Territori, International Subsidiary Banks, Bank of Alexandria and Pravex Bank CGUs; consequently, it is not necessary to calculate the \u201cg\u201d rate for the purpose of the goodwill test for the foreign countries where the Group operates). Nominal GDP is the sum of the real GDP growth rate and the inflation rate. Expected real GDP and inflation figures used to calculate the \"g\" rate were drawn from the forecasts prepared by the Intesa Sanpaolo Research Department described above. Each component has been calculated as the average for the period 2008-2027. The decision made in terms of observation period for the growth rates, considering the current particular macroeconomic situation, calls for specific consideration. Real GDP dynamics in recent years have often been negative, due mainly to the various economic and financial crises that affected global economies, beginning in particular with the 2008 global financial crisis, followed by the sovereign debt crisis in 2011. The trend began to be reversed as early as 2015, with the resumption of a growth process that, however, was abruptly interrupted in 2020 by the COVID-19 pandemic, and which continues to be threatened by the energy crisis that emerged in 2022 as a consequence of the outbreak of the military conflict between Russia and Ukraine. In order to consider the various phases of the economic cycle, the growth rate for estimating terminal value was calculated as the average GDP rates for the 2008-2027 period, inasmuch as this period was deemed sufficiently extensive to include, and thus average, a period of severe crisis and a prospective period of a return to a scenario of moderate economic growth. Furthermore, with a prudential approach, it was checked that the \u201cg\u201d rate was not higher than Italy\u2019s GDP growth rate in 2027 or, for each CGU, the growth rate of the last year of analytical forecasting. Cash flow discounting rates For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present market valuations, the time value of money and the asset\u2019s specific risks. In practice, the first characteristic (current market conditions) translates into the calculation of all parameters based on the latest available information as at the reference date of the estimate, so as to best take into account the current market assessments. The second characteristic (consistency between risks/flows and rates) must follow the specificity of flows used for impairment testing of the CGUs. This rate (in its various components) must therefore be decided by observing the specific nature of flows used to assess each CGU, in order to maintain coherence and consistency with the flows. Specifically, consistency becomes important with regard to inflation, country risk and other risk factors that, according to IAS 36, may be expressed in the flows or rate. It is important to point out that a characteristic common to all CGUs recording goodwill (and, in general, intangibles with an indefinite life) is the long-term perspective of flows used to estimate the CGU\u2019s value in use. In fact, by its very nature, goodwill has an indefinite useful life, and therefore future cash flows are normally infinitely projectable. This long-term perspective should be reflected in all discounting rate benchmarks by means of the appropriate selection of each, in such a way that they express normalised conditions in the long term. The discounting rate should normally include the cost of the various sources of funding of the asset to be assessed, in other words the equity cost and debt cost (i.e. WACC, weighted average capital cost). However, in the case of a banking entity, it is estimated according to an equity-side approach, that is to say by considering only the cost of equity capital (Ke), in a manner consistent with the methods for determining cash flows, which, as stated above, include those deriving from financial assets and liabilities. The cost of capital is determined using the Capital Asset Pricing Model (CAPM). Based on this model, the cost of capital is calculated as the sum of risk-free rate and a risk premium, in turn dependent on the specific risks implicit in the business activities (i.e. both business segment risk and country risk). The cost of capital is determined net of taxes, in order to ensure consistency with the discounted cash flows. As the various CGUs of the Intesa Sanpaolo Group operate in different business segments and with different risk factors, the specific costs of capital of each CGU were identified. It should be noted that, since cash flows were determined in nominal terms, discounting rates were also determined in nominal terms, meaning that they incorporate inflation expectations. Entering into the details of the various components that contribute to the determination of discounting rates, it may be remarked that: - with regard to the choice of cash flow discounting rates, and in particular of the risk-free rate and CRP, in view of the structure of interest rates in the current macroeconomic scenario, which will see a further increase in the long term, continuing the progression of increases that began in the second half of 2022, it was prudentially decided to maintain the approach that involves the use of differentiated discount rates for the discounting of cash flows expected over the explicit forecast horizon and for the terminal value cash flow: o concerning the risk-free component included in the cash flow discounting rate of the explicit forecast horizon, a decision was made to use the average monthly return (December 2022) of the 10-year German Government bonds (Bund); o concerning the risk-free component included in the cash flow discounting rate of the terminal value (cash flow projectable beyond the explicit forecast period), a decision was made to use the average annual return of 10-year German government bonds (Bund) forecast for 2027, which is the last year of flow forecast period, estimated by the Intesa Sanpaolo Research Department. In line with the above, also for the Country Risk Premium (CRP) a methodology was considered that envisages the use of differentiated values. In addition, it should be noted that there is no goodwill allocated to CGUs other than those (mainly) operating in Italy - the \u201ccountry risk\u201d essentially coincides with the \u201cItaly risk\u201d. Therefore, in the methodological choices for the impairment test of goodwill for the purpose of the 2022 Financial Statements, the CRP was calculated as follows: o concerning the CRP included in the cash flow discounting rate of the explicit forecast horizon, the average BTP- Bund spread of December 2022 was considered; o concerning the CRP included in the cash flow discounting rate of the terminal value, the average annual BTP-Bund spread estimated for 2027 was considered, based on the medium-term forecast scenario mentioned previously; - the equity risk premium \u2013 represented by the difference between stock market yield and the Return on Investment on risk- free securities determined in reference to a sufficiently wide time horizon \u2013 was calculated on the basis of historical data, given its higher degree of reliability and visibility and also in the light of the current macroeconomic context, which reflects particularly volatile stock market prices not always representative of economic \u201cfundamentals,\u201d while also creating a framework of uncertainty within which it is difficult to formulate reliable forecasts of results in order to estimate the equity risk premium implicit in stock market quotations. Specifically, the geometric mean for the equity risk premium was used, recorded on the US market for the period 1928-2022, adjusted for the differential between the US inflation rate and the German inflation rate (the market used as the basis for risk-free calculation); - the Beta coefficient, which measures the specific degree of risk of an individual company or business sector, was calculated by identifying a sample of companies, comparable in business terms, for each CGU, and with reference to this sample the average or median Beta figure used was that recorded on a monthly basis over a five-year period; Summary of growth rates and discounting rates used The following table presents a summary, for each CGU subject to impairment test, of the parameters relevant to determining value in use: weighted average 2023-2027 growth rates for the cash flows of the various CGUs, including the allocation of cash flows related to the central corporate assets, the \u201cg\u201d growth rates for terminal value purposes, and the various discounting rates and inflation rates. RATES/PARAMETERS Nominal growth rates for impairment test (2023-2027) NOMINAL DISCOUNTING RATES LONG-TERM \"G\" GROWTH RATES INFLATION RATES CGU 2022 flows 2022 Terminal Value 2021 flows 2021 Terminal Value 2022 2021 2022 CGU subject to impairment test IMI Corporate & Investment Banking 17.81% 10.57% 11.18% 7.61% 9.37% 2.06% 1.52% 1.96% Insurance 1.69% 10.27% 10.88% 7.12% 8.89% 2.06% 1.52% 1.96% Asset Management 1.96% 10.12% 10.73% 6.85% 8.61% 2.06% 1.52% 1.96% Private Banking 2.59% 10.14% 10.75% 7.28% 9.05% 2.06% 1.52% 1.96% Impairment testing results The outcomes of the impairment test showed how the values in use of each of the CGUs to which amounts of goodwill were allocated as at 31 December 2022 were higher than the respective book values. Thus, it was not necessary to proceed to any impairment of the goodwill or brand name allocated to the CGUs. In addition, it is specified that, for the sake of completeness of the analysis, the Group's total value in use was confirmed to be greater than the sum of the carrying amounts of the individual CGUs. Finally, with regard to the direct consequences of the Russia-Ukraine conflict on the Group\u2019s goodwill, it should be noted that the goodwill relating to the Ukrainian subsidiary Pravex Bank, considered an autonomous CGU, was already fully written down in the 2008 Financial Statements, as previously mentioned. In the case of the Russian subsidiary Joint-Stock Company Banca Intesa (Banca Intesa Russia), in addition to not presenting allocated goodwill, its weight in the IMI Corporate & Investment Banking CGU is absolutely immaterial on that CGU. Furthermore, as stated above, during impairment testing as at 31 December 2022 the IMI Corporate & Investment Banking CGU was found to have a recoverable amount in excess of its book value. Verification of the results of impairment testing using an alternative calculation method As the value of a company or a business line may also be determined by discounting the distributable cash flows, understood as the future cash flows estimated to be generated by the business area (the single CGUs) net of the share of income that must be retained in equity to meet the supervisory requirements, the recoverability of the book value of the goodwill allocated to the CGUs was verified also by discounting the aforementioned cash flows according to the excess capital version of the Dividend Discounted Model (DDM). With reference to the supervisory requirements, a Common Equity Tier 1 ratio of 10.25% was used, as resulting from the Group Risk Appetite Framework (RAF), and significantly higher than the capital requirement (8.91%) communicated by the ECB following the results of the Supervisory Review and Evaluation Process (SREP). For the Insurance CGU, a Solvency Ratio of 170% was taken into account, as per the aforementioned RAF. Thus, the distributable cash flows were obtained by integrating the expected cash flows determined as illustrated above, factoring in an increase in capital surplus in relation to the above-mentioned minimum limits of capital, or a decrease in the shares of income needed to cover the requirements deriving from the estimated growth trend in risk-weighted assets. These flows, estimated for each CGU, were discounted by applying the same discounting rates and growth rates \u201cg\u201d used in applying the Discounted Cash Flow (DCF) method. The results of this method confirmed the results based on the calculation made using the DCF method. Reconciliation of the results of the impairment test with the market valuation During 2022, the Intesa Sanpaolo stock price declined (-8.6%) on the closing values at the end of 2021, underperforming the Italian sector index (FTSE Italia All-Share Banks, approximately -4%), but outperforming the main Borsa Italiana reference index (FTSE MIB Index, approximately -13.4%). Specifically, after a particularly difficult start to the year following the outbreak of the military conflict between Russia and Ukraine and the consequent deterioration of the macroeconomic scenario, in which stock prices slowed considerably, in the second half of the year the stock recovered in part, rallying to a particularly evident degree in the fourth quarter of the year, to close at around 2.08 euro at the end of December 2022. In early 2023 the Intesa Sanpaolo stock appreciated further, with prices at the end of February of approximately 2.5 euro per share and a market capitalisation of approximately 47 billion euro (with a P/BV multiple of approximately 0.7x). The valuations and reports by financial analysts produced during 2022 showed on average a downward revision of the target prices compared to the 2021 values, with a performance essentially in line with the decline in Intesa Sanpaolo stock prices. In early 2023, above all following the reporting to the market of 2022 results, target prices were generally revised upwards, with an average value of 2.85 euro per share. Among the strengths of Intesa Sanpaolo, analysts underscore its strong brand and its highly qualified management, which is valued by the market. In addition, they believe that the Bank will benefit from further increases in net interest income, considering that on average Italian banks have a positive sensitivity to increases in the Euribor rate. Intesa Sanpaolo is also capable of generating a level of profitability that is among the highest in Italy, while also benefiting from considerable exposure to portfolio and asset management activities, and maintains a strong capital position. In addition, it conducted a highly successful de-risking strategy that allows it to face a possible further deterioration of the macroeconomic scenario with greater peace of mind. On the other hand, among the main elements that could prove especially critical, analysts reiterate the customary risk of internal political instability for Italy, with possible consequences for the BTP-Bund spread, in addition to possible outflows of assets managed if financial market tension should resume. In any event, it bears observing that valuations expressed by financial analysts have different characteristics from the \u201cfundamental\u201d assessment represented by value in use. The following may be observed regarding those valuations: - the future cash flows forecast by analysts mainly extend to 2025, and are essentially aligned with, or marginally in excess of, internal management estimates, whereas the forecasts used for impairment testing purposes cover a period of five years that extends until 2027; - the cost of the capital used (in not particularly frequent cases where this parameter is explicitly stated by analysts) is often determined in overall terms at Group level; the cost of capital of Intesa Sanpaolo, used to discount the terminal value cash flows, is marginally lower than the average value shown in the reports by the analysts. Analysts tend to use discount rates implicit in stock market values, which are therefore higher on average as they are influenced by current prices; - similarly to the observations made for the impairment test of the 2021 Financial Statements, from the methodological standpoint, use was often made of multiples (in terms of P/E or ROE) applied to current market prices or expected profitability for the coming years 2023 or 2024; these are thus methods that provide a fair value, rather than a long-term value in use. It bears observing that the valuations in question were intended for financial investors and thus aimed to determine prices and values in the short term. These valuations represent the value potentially obtainable from sale on the market of limited amounts of securities, i.e. the disposal of a minority interest, and are therefore closely pegged to prices and to current market conditions. In brief, the difference in the values from the analysts\u2019 estimates, which reflect on a methodological difference between the fair value and the value in use, may be explained by the following factors: - different unit of valuation: as stated, the fair value calculated by the analysts represents the price of a single share, different from the value in use, which measures the Bank\u2019s entire capital. However, there is a control premium between the two values, which is lacking in the former case, and which is generally valued within a range of 15% to 25%; - different time horizon of reference considered by the market: the period covered by the estimates of the cash flows, as mentioned, has a considerable impact on the valuation of the Group; given the time horizon considered by analysts, which in general covers a period of 3 years, and deducting the control premium, the Group\u2019s total recoverable amount would be, in terms of value per share, in line with that given by analysts as the target price; - different value of the cost of capital: the analysts\u2019 estimates, deriving from stock market prices, factor in elements external to the Group\u2019s ability to generate profits for the purpose of remunerating its shareholders. Finally, it is believed that impairment tests must be performed with the awareness of the fact that the current economic situation, penalised by the geopolitical context, impacts expected short- and medium-term cash flows from operating activities, without however in any way affecting the Intesa Sanpaolo Group\u2019s primary sources of income, which are also positively impacted by rising interest rates, and competitive edges, as has also been demonstrated by the results of the past few years in which forecast targets have consistently been achieved, and the income dynamics for 2022. In this regard, it should be noted that in recent years the Group has sold businesses or equity investments that have generated significant gains from disposal (e.g. Setefi, Allfunds Bank, Intrum, the merchant acquiring business, Fund Administration in Luxembourg and the training business), confirming the existence of hidden value within the Group that is not reflected in the book values but is recognised in transactions with third parties. Moreover, the resilient and well diversified business model, which focuses on the product factories where a large part of the difference in book values is concentrated, guarantees a primary source of income for the Group even in adverse conditions solely in relation to the scenario of the banking sector. Accordingly, in developing the valuation model used for the purposes of impairment testing, the following precautions were adopted: \u2212 projected cash flows include the financial effects of the services provided by the Corporate Centres. Moreover, the final figures for the last few years have been essentially in line with the forecast figures; \u2212 the cost of capital was determined analytically, based on parameters taken from the markets for each CGU, depending on the different risk of the respective businesses, also considering analytically the various risk factors. Lastly, the parameters and information used to test the recoverability of intangible assets with indefinite useful life are significantly influenced by the macroeconomic environment and financial market trends, which might undergo changes that cannot be predicted at the present time. If, in the future, the macroeconomic scenario should deteriorate with respect to the assumptions, this would have effects on the estimate of the various CGUs\u2019 cash flows and on the main assumptions adopted, which could obviously yield results in the financial statements of the coming years different from those outlined in the Financial Statements as at 31 December 2022. Nonetheless, it must be noted that the business units that have significant amounts of goodwill (Insurance, Asset Management and Private Banking) have always had, and are expected also in the future to have profitability that largely justifies the values of goodwill recognised. Sensitivity analyses Since the value in use is determined by using estimates and assumptions that may contain some level of uncertainty, sensitivity analyses to verify the sensitivity of the results obtained to changes in the parameters and in the underlying hypotheses, referring to the DCF method, were carried out, as required by the IAS/IFRS. These analyses are important in this forecasting scenario characterised by a significant degree of uncertainty. In this regard, considering alternative scenarios and stress factors in the main valuation and macro-economic variables makes it possible to evaluate the impacts on the impairment test results related to the specific forecasting scenario. For CGUs that present residual values of goodwill, the impact on the value in use of an increase of up to 50 bps in discount rates and a decrease of up to 50 bps in the growth rate for terminal value purposes was verified. In addition, analyses were conducted of changes in the Value in Use resulting from a decrease in the cash flows used for terminal value purposes. No events of impairment would emerge in any of the CGUs tested, even in the event of an increase in discounting rates of 50 bps, and a decrease in the \u201cg\u201d rate of 50 bps or a decrease in the terminal value cash flow of 10%. The table below illustrates the sensitivity (in percentage terms) of the Value in Use of the CGUs that present goodwill to changes in the \u201cg\u201d rate or discounting rate of -/+10 basis points, as well as a reduction in the cash flows used for terminal value purposes of 10%. CHANGE IN VALUE IN USE Sensitivity Sensitivity to growth rate \"g\" - 10 bps Sensitivity to discount rate + 10 bps Sensitivity to Terminal value cash flows - 10% CGU IMI Corporate & Investment Banking -0.82% -1.09% -8.49% Insurance -0.78% -1.05% -6.44% Asset Management -0.80% -1.07% -6.50% Private Banking -0.80% -1.07% -6.52% Based on the table above, changes in the Ke (increasing) or the \u201cg\u201d (decreasing) values within 10 bps would lead to a general decrease in the values in use ranging between 0.78% and 1.09%. Regarding the cash flow considered for the purpose of the terminal value, a 10% decrease of the same would lead to reductions in the values in use ranging between 6.50% and 8.49%. In any event, no issues of impairment would arise for any CGU at that amount of sensitivity. Still considering stress testing, analyses were performed with the aim of determining the limits for the main inputs, beyond which impairment testing of the CGUs would require the recognition of impairment. The following table presents the \u201cg\u201d growth rates and discounting rates for each CGU that would result in a Value in Use in line with its carrying amounts, assuming equal cash flows to be discounted. Sensitivity \"g\" growth rate Difference compared to the \"g\" rate used TV discounting rate Difference compared to the Ke discounting rate used CGU IMI Corporate & Investment Banking 0.10% -198 bps 12.70% 152 bps Insurance -3.80% -583 bps 15.16% 428 bps Asset Management -17.80% -1.984 bps 23.62% 1.289 bps Private Banking -54.50% -5.658 bps 45.27% 3.452 bps As shown by the data contained in the table, the Values in Use of the CGUs would reduce until the book values, with consequent impairment problems, only in correspondence with the significant worsening of the discounting rates (Ke) and the \u201cg\u201d growth rates. Finally, within the framework of analysis regarding possible changes in the cash flows of the CGUs on the basis of alternative scenarios to those used for the purposes of this impairment test, account was taken of the impact on prospective cash flows of the application of an alternative prospective macroeconomic scenario, consistent with the \u201cadverse\u201d scenario incorporated into the Expected Credit Loss models used to measure loans pursuant to IFRS 9. This scenario envisages a general shock to the Euro area economy, relating primarily to a very significant increase in the price of gas, with the introduction of a recession for the years 2023 and 2024, with the resulting increase in inflation. The scenario presented above translates into a reduction in cash flows at the Group level, which will also benefit from the provisions set aside in the 2022 Financial Statements in response to the uncertainty in the prospective scenario and the significant reduction in risks associated with exposures to Russian and Ukrainian counterparties following the de-risking measures taken and the provisions made, averaging 11% over the forecasting horizon, with impacts spread across all CGUs. Following this analysis, it was found that the reduction in cash flows over the 2023-2027 forecasting horizon, estimated as a result of the application of an \u201cadverse\u201d scenario, would not entail issues of impairment for any of the Group\u2019s CGUs.", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-926": { "value": "SECTION 10 - INTANGIBLE ASSETS - CAPTION 100 10.1 Intangible assets: breakdown by type of asset (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life Finite useful life Indefinite useful life A.1 Goodwill X 3,626 X 2,650 X 976 X - X 3,574 A.1.1 Group x 3,626 x 2,650 x 976 x - x 3,574 A.1.2 Minority interests x - x - x - x - x - A.2 Other intangible assets 4,322 1,882 3,755 1,882 549 - 18 - 3,886 1,882 of which: software 3,013 - 2,961 - 52 - - - 2,533 - A.2.1 Assets measured at cost 4,322 1,882 3,755 1,882 549 - 18 - 3,886 1,882 a) Internally generated intangible assets 2,386 - 2,366 - 20 - - - 2,072 - b) Other assets 1,936 1,882 1,389 1,882 529 - 18 - 1,814 1,882 A.2.2 Assets measured at fair value - - - - - - - - - - a) Internally generated intangible assets - - - - - - - - - - b) Other assets - - - - - - - - - - Total 4,322 5,508 3,755 4,532 549 976 18 - 3,886 5,456 As at 31 December 2022, the amount for software was 3,013 million euro, of which 2,386 million euro produced internally and 627 million euro purchased externally. The allocation of goodwill between \u201cCash Generating Units\u201d is reported in the following table
(millions of euro)
CGUs/Goodwill
31.12.2022
31.12.2021
Banca dei Territori
-
-
IMI Corporate & Investment Banking
56
56
Insurance
976
976
Asset Management
1,059
1,060
Private Banking
1,535
1,482
International Subsidiary Banks
-
-
Bank of Alexandria (Egypt)
-
-
Pravex Bank (Ukraine)
-
-
GROUP TOTAL
3,626
3,574
For a breakdown of the CGUs, see the next chapter \u201cInformation on intangible assets and goodwill\u201d.
10.2 Intangible assets: annual changes
(millions of euro)
Goodwill
Other intangible assets:
internally generated
Other intangible assets:
other
Total
Finite
useful life
Indefinite
useful life
Finite
useful life
Indefinite
useful life
A. Gross initial carrying amount
20,772
7,382
-
10,583
2,386
41,123
A.1 Total net adjustments
-17,198
-5,310
-
-8,769
-504
-31,781
A.2 Net initial carrying amount
3,574
2,072
-
1,814
1,882
9,342
B. Increases
52
1,041
-
422
-
1,515
B.1 Purchases
42
51
-
304
-
397
of which business combinations
42
-
-
73
-
115
B.2 Increases of internally generated
intangible assets
X
990
-
-
-
990
B.3 Recoveries
X
-
-
-
-
-
B.4 Positive fair value differences recognised in
-
-
-
-
-
-
- shareholders' equity
X
-
-
-
-
-
- income statement
X
-
-
-
-
-
B.5 Positive foreign exchange differences
10
-
-
-
-
10
B.6 Other changes
-
-
-
118
-
118
C. Decreases
-
-727
-
-300
-
-1,027
C.1 Sales
-
-
-
-3
-
-3
of which business combinations
-
-
-
-
-
-
C.2 Impairment losses
-
-692
-
-292
-
-984
- Amortisation
X
-684
-
-280
-
-964
- Write-downs recognised in
-
-8
-
-12
-
-20
shareholders' equity
X
-
-
-
-
-
income statement
-
-8
-
-12
-
-20
C.3 Negative fair value differences recognised in
-
-
-
-
-
-
- shareholders' equity
X
-
-
-
-
-
- income statement
X
-
-
-
-
-
C.4 Transfer to non-current assets held for sale
and discontinued operations
-
-12
-
-
-
-12
C.5 Negative foreign exchange differences
-
-
-
-4
-
-4
C.6 Other changes
-
-23
-
-1
-
-24
D. Net final carrying amount
3,626
2,386
-
1,936
1,882
9,830
D.1 Total net adjustments
-17,198
-6,002
-
-9,061
-504
-32,765
E. Gross final carrying amount
20,824
8,388
-
10,997
2,386
42,595
F. Measurement at cost
-
-
-
-
-
-
The sub-caption B.1 includes the increase for Goodwill deriving from the purchase of Compagnie de Banque Priv\u00e9e Quilvest
S.A. (CBPQ).
10.2 Of which: Banking group
(millions of euro)
Goodwill
Other intangible assets:
internally generated
Other intangible assets:
other
Total
Finite
useful life
Indefinite
useful life
Finite
useful life
Indefinite
useful life
A. Gross initial carrying amount
19,042
7,322
-
8,952
2,386
37,702
A.1 Total net adjustments
-16,444
-5,276
-
-7,743
-504
-29,967
A.2 Net initial carrying amount
2,598
2,046
-
1,209
1,882
7,735
B. Increases
52
1,025
-
378
-
1,455
B.1 Purchases
42
38
-
276
-
356
of which business combinations
42
-
-
73
-
115
B.2 Increases of internally generated
intangible assets
X
987
-
-
-
987
B.3 Recoveries
X
-
-
-
-
-
B.4 Positive fair value differences recognised in
-
-
-
-
-
-
- shareholders' equity
X
-
-
-
-
-
- income statement
X
-
-
-
-
-
B.5 Positive foreign exchange differences
10
-
-
-
-
10
B.6 Other changes
-
-
-
102
-
102
C. Decreases
-
-705
-
-198
-
-903
C.1 Sales
-
-
-
-3
-
-3
of which business combinations
-
-
-
-
-
-
C.2 Impairment losses
-
-678
-
-190
-
-868
- Amortisation
X
-670
-
-178
-
-848
- Write-downs recognised in
-
-8
-
-12
-
-20
shareholders' equity
X
-
-
-
-
-
income statement
-
-8
-
-12
-
-20
C.3 Negative fair value differences recognised in
-
-
-
-
-
-
- shareholders' equity
X
-
-
-
-
-
- income statement
X
-
-
-
-
-
C.4 Transfer to non-current assets held for sale
and discontinued operations
-
-12
-
-
-
-12
C.5 Negative foreign exchange differences
-
-
-
-4
-
-4
C.6 Other changes
-
-15
-
-1
-
-16
D. Net final carrying amount
2,650
2,366
-
1,389
1,882
8,287
D.1 Total net adjustments
-16,444
-5,954
-
-7,933
-504
-30,835
E. Gross final carrying amount
19,094
8,320
-
9,322
2,386
39,122
F. Measurement at cost
-
-
-
-
-
-
10.2 Of which: Insurance companies
(millions of euro)
Goodwill
Other intangible assets:
internally generated
Other intangible assets:
other
Total
Finite
useful life
Indefinite
useful life
Finite
useful life
Indefinite
useful life
A. Gross initial carrying amount
1,712
60
-
1,544
-
3,316
A.1 Total net adjustments
-736
-34
-
-939
-
-1,709
A.2 Net initial carrying amount
976
26
-
605
-
1,607
B. Increases
-
16
-
21
-
37
B.1 Purchases
-
13
-
6
-
19
of which business combinations
-
-
-
-
-
-
B.2 Increases of internally generated
intangible assets
X
3
-
-
-
3
B.3 Recoveries
X
-
-
-
-
-
B.4 Positive fair value differences recognised in
-
-
-
-
-
-
- shareholders' equity
X
-
-
-
-
-
- income statement
X
-
-
-
-
-
B.5 Positive foreign exchange differences
-
-
-
-
-
-
B.6 Other changes
-
-
-
15
-
15
C. Decreases
-
-22
-
-97
-
-119
C.1 Sales
-
-
-
-
-
-
of which business combinations
-
-
-
-
-
-
C.2 Impairment losses
-
-14
-
-97
-
-111
- Amortisation
X
-14
-
-97
-
-111
- Write-downs recognised in
-
-
-
-
-
-
shareholders' equity
X
-
-
-
-
-
income statement
-
-
-
-
-
-
C.3 Negative fair value differences recognised in
-
-
-
-
-
-
- shareholders' equity
X
-
-
-
-
-
- income statement
X
-
-
-
-
-
C.4 Transfer to non-current assets held for sale
and discontinued operations
-
-
-
-
-
-
C.5 Negative foreign exchange differences
-
-
-
-
-
-
C.6 Other changes
-
-8
-
-
-
-8
D. Net final carrying amount
976
20
-
529
-
1,525
D.1 Total net adjustments
-736
-48
-
-1,036
-
-1,820
E. Gross final carrying amount
1,712
68
-
1,565
-
3,345
F. Measurement at cost
-
-
-
-
-
-
10.2 Of which: Other companies
(millions of euro)
Goodwill
Other intangible assets:
internally generated
Other intangible assets:
other
Total
Finite
useful life
Indefinite
useful life
Finite
useful life
Indefinite
useful life
A. Gross initial carrying amount
18
-
-
87
-
105
A.1 Total net adjustments
-18
-
-
-87
-
-105
A.2 Net initial carrying amount
-
-
-
-
-
-
B. Increases
-
-
-
23
-
23
B.1 Purchases
-
-
-
22
-
22
of which business combinations
-
-
-
-
-
-
B.2 Increases of internally generated
intangible assets
X
-
-
-
-
-
B.3 Recoveries
X
-
-
-
-
-
B.4 Positive fair value differences recognised in
-
-
-
-
-
-
- shareholders' equity
X
-
-
-
-
-
- income statement
X
-
-
-
-
-
B.5 Positive foreign exchange differences
-
-
-
-
-
-
B.6 Other changes
-
-
-
1
-
1
C. Decreases
-
-
-
-5
-
-5
C.1 Sales
-
-
-
-
-
-
of which business combinations
-
-
-
-
-
-
C.2 Impairment losses
-
-
-
-5
-
-5
- Amortisation
X
-
-
-5
-
-5
- Write-downs recognised in
-
-
-
-
-
-
shareholders' equity
X
-
-
-
-
-
income statement
-
-
-
-
-
-
C.3 Negative fair value differences recognised in
-
-
-
-
-
-
- shareholders' equity
X
-
-
-
-
-
- income statement
X
-
-
-
-
-
C.4 Transfer to non-current assets held for sale
and discontinued operations
-
-
-
-
-
-
C.5 Negative foreign exchange differences
-
-
-
-
-
-
C.6 Other changes
-
-
-
-
-
-
D. Net final carrying amount
-
-
-
18
-
18
D.1 Total net adjustments
-18
-
-
-92
-
-110
E. Gross final carrying amount
18
-
-
110
-
128
F. Measurement at cost
-
-
-
-
-
-
10.3 Other information
As at 31 December 2022, there were commitments relating to investments in intangible assets, primarily software, of
approximately 25 million euro.
Information on intangible assets and goodwill
The application of IFRS 3 to the accounting of acquisitions may lead to the recognition of new intangible assets and goodwill.
In the case of the Intesa Sanpaolo Group, the merger between Banca Intesa and Sanpaolo IMI and the subsequent
acquisitions led to the recognition of significant amounts for intangible assets and goodwill.
In 2022 two transactions were finalised, entailing the recognition of new intangible assets with finite useful lives and goodwill.
These transactions are briefly illustrated below, describing their effects on the amount and composition of the Group\u2019s
intangible assets.
The acquisition by Fideuram Bank Luxembourg, a subsidiary of Fideuram - Intesa Sanpaolo Private Banking, of 100% of the
capital of Compagnie de Banque Priv\u00e9e Quilvest, a Luxembourg private bank wholly owned by the holding company Quilvest
Wealth Management, was finalised on 30 June 2022. Within the framework of the Purchase Price Allocation (PPA), two
specific customer relationship related intangible assets were identified and recognised, amounting to 43 million euro in
relation to indirect customer deposits (assets under management) and 30 million euro in relation to core deposits,
respectively. In addition, goodwill of approximately 42 million euro was recognised as the residual difference between the
acquisition cost and the company\u2019s shareholders\u2019 equity measured at its acquisition date fair value. According to IAS 36, both
goodwill and the intangible assets linked to these assets were allocated to the Private Banking CGU.
Within the International Subsidiary Banks Division, the acquisition by VUB Banka, a wholly owned subsidiary of Intesa
Sanpaolo Holding International, of 5.26% of the capital of VUB Generali, the number-four operator in the Slovak pension fund
market, in which the Intesa Sanpaolo Group previously held a 50% stake as part of a joint venture established in 2004 with
the Generali Group, was finalised on 24 October 2022. This transaction, which entailed the acquisition of control over the
company by the Intesa Sanpaolo Group pursuant to IFRS 10, was considered a business combination to be accounted for
under IFRS 3. At the end of the Purchase Price Allocation (PPA), an intangible asset not previously recognised in the financial
statements of VUB Generali attributable to customer relationship related activities, and in particular asset management, of 80
million euro was identified and allocated to the International Subsidiary Banks CGU. The intangible asset identified, net of the
related tax effect, offset the entire difference between the acquisition cost and the company\u2019s assets, without the transaction
giving rise to amounts of goodwill.
For more details on the transactions mentioned above, see Part G of these Notes.
The table below summarises the values of the intangible assets and goodwill recorded in the consolidated financial
statements at 31 December 2022 with the related changes during the period, subdivided by Cash Generating Unit (CGU),
which represent the groups of assets subject to impairment testing on goodwill in order to determine the recoverable amount.
(millions of euro)
CGU
Financial
Statements
2021
Acquisition of
CBPQ
Acquisition of
VUB Generali
Amortisation
Other
changes
(1)
Financial
Statements
2022
BANCA DEI TERRITORI DIVISION
1,833
-
-
-22
-
1,811
- Asset management intangibles - distribution
201
-
-
-14
-
187
- Insurance intangibles - distribution
110
-
-
-7
-
103
- Brand name intangibles
1,507
-
-
-
-
1,507
- Intangible asset under administration
15
-
-
-1
-
14
- Intangibile Acquiring
-
-
-
-
-
-
- Goodwill
-
-
-
-
-
-
DIVISIONE IMI CORPORATE & INVESTMENT BANKING
56
-
-
-
-
56
- Goodwill
56
-
-
-
-
56
ASSET MANAGEMENT DIVISION
1,166
-
-
-6
-1
1,159
- Asset management intangibles - prod. and distribut.
106
-
-
-6
-
100
- Goodwill
1,060
-
-
-
-1
1,059
PRIVATE BANKING DIVISION
2,106
115
-
-19
15
2,217
- Asset management intangibles - prod. and distribut.
180
43
-
-14
4
213
- Insurance intangibles - distribution
47
-
-
-2
-
45
- Intangibile Core Deposits
-
30
-
-1
-
29
- Brand name intangibles
375
-
-
-
-
375
- Intangible asset under administration
22
-
-
-2
-
20
- Goodwill
1,482
42
-
-
11
1,535
INSURANCE DIVISION
1,567
-
-
-94
-
1,473
- Insurance intangibles - production
591
-
-
-94
-
497
- Goodwill
976
-
-
-
-
976
DIVISIONE INTERNATIONAL SUBSIDIARY BANKS
-
-
80
-1
-
79
- Intangible asset management - production
-
-
80
-1
-
79
BANK OF ALEXANDRIA (Egypt)
-
-
-
-
-
-
PRAVEX BANK (Ukraine)
-
-
-
-
-
-
CGU TOTAL
6,728
115
80
-142
14
6,795
- Asset management intangibles
487
43
80
-35
4
579
- Insurance intangibles
748
-
-
-103
-
645
- Intangibile Core Deposits
-
30
-
-1
-
29
- Intangible asset under administration
37
-
-
-3
-
34
- Intangibile Acquiring
-
-
-
-
-
-
- Brand name intangibles
1,882
-
-
-
-
1,882
- Goodwill
3,574
42
-
-
10
3,626
(1) Foreign exchange differences on the goodwill attributable to Eurizon Capital SLJ and on the portion of amortisation of intangibles attributable to Reyl & Cie SA.
The intangible assets with finite useful lives recognised refer to customer relationships and relate to the valuation of the
insurance portfolio (Value of Business Acquired), Assets Under Administration (AUA), Assets Under Management (AUM) and
Core Deposits. Such intangible assets were originally measured by discounting the income margin cash flows over a period
representing the residual life, contractual or estimated, of relationships existing at the time of the business combination.
For the intangible assets with a finite useful life, the amortisation for the year was recognised to the income statement (under
\u201c220. Net adjustments to/recoveries on intangible assets\u201d) for a total of 142 million euro gross of the tax effect.
The brand name, an intangible asset related to marketing, was also measured. This asset is considered to have an indefinite
life since it is expected to contribute for an indefinite period of time to the formation of income flows.
Based on IAS 36, both intangible assets with an indefinite useful life and goodwill are submitted to impairment testing on an
annual basis to verify recoverability of their value. In addition, intangible assets with a finite useful life must be tested for
impairment whenever there is evidence of impairment indicators. The recoverable amount consists of the higher of the fair
value and the value in use, less costs to sell.
Lastly, it should be mentioned that IAS 36, for the purpose of calculating the value in use of intangibles subject to impairment
testing, states that reference must be made to cash flows arising from intangible asset in its current condition (as at the
impairment test date), with no distinction between cash flows arising from the asset initially recognised according to IFRS 3
and those relating to the asset outstanding at the impairment test date. This because it would be difficult, especially with
regard to extraordinary transactions between businesses or changes in the asset following significant turnover in volumes,
customers, contracts, etc., to separate cash flows relating to the original asset from others.
This concept can also be applied in impairment testing of goodwill to calculate the Value in use of the CGUs, for which the
cash flows have to be considered with regard to all assets and liabilities of that CGU and not only the assets and liabilities for
which goodwill was recognised on application of IFRS 3.
As in previous financial statements, given the volatility of the financial markets and the available market values for calculation
of the recoverable amount, the Value in use that represents the present value of net future cash flows from the asset (or
business) being valued was used in the impairment tests for the 2022 financial statements. In particular, for the financial
statements as at 31 December 2022, in line with the previous financial statements, the impairment test on goodwill was
conducted by applying the DCF \u2013 Discounted Cash Flow model \u2013 to which, as a check of the consistency of the results of
using the DCF model, the DDM \u2013 Dividend Discounted Model \u2013 is added. Both of these methods were based on the individual
estimates made internally for the 2023-2027 period, which for the years up to 2025 represent the forecasts in the 2022-2025
Business Plan, updated to take account of the changed macroeconomic scenario, whereas the final two years of forecasts
were estimated through inertial tracking of the flows for 2025, on the basis of internal forecasts relating to the aforementioned
macroeconomic scenario. It is noted that the tests mentioned above did not concern the Banca dei Territori, International
Subsidiary Banks, Bank of Alexandria or Pravex Bank CGUs in consideration of the absence, as of the date of the test, of
goodwill allocated to those CGUs to be subject to impairment test. These tests were also joined by an autonomous test, using
an independent expert, of the fair value of the component of the brand name attributable to Banca dei Territori, a CGU which
no longer has goodwill allocated.
The results of the impairment test as at 31 December 2022 showed no need to recognise any goodwill impairment or
adjustments to intangible assets with an indefinite life (brand name) with regard to any of the CGUs in the Intesa Sanpaolo
Group.
Lastly, the methods, assumptions and results of the impairment test procedures for intangible assets and goodwill defined by
management were approved by the Board of Directors prior to approval of the draft financial statements for 2022.
Impairment testing of intangibles
Insurance portfolio
Valuation of the insurance portfolio uses models normally applied in valuation practice. The resulting value, considered to
have a finite life, is amortised at variable rates over a period representing the residual life of the insurance contracts.
The book value of insurance intangible assets includes, among other things, the insurance portfolio of Intesa Sanpaolo Vita
and the subsidiary Intesa Sanpaolo Life DAC distributed by the networks of the Intesa Sanpaolo Group and Fideuram Vita.
The total book value also includes the intangible asset belonging to Intesa Sanpaolo RBM Salute and the value of the
component of distribution of insurance products by the former UBI Banca network and by IW Bank. During 2021, the Value of
Business Acquired (VoBA) deriving from the acquisitions of Assicurazioni Vita, Lombarda Vita and Cargeas Assicurazioni was
added to this. Assicurazioni Vita and Lombarda Vita were merged into Intesa Sanpaolo Vita as of 31 December 2021,
whereas Cargeas Assicurazioni was merged into Intesa Sanpaolo Assicura on 1 October 2022.
The intangible assets referring to the insurance portfolio were partly allocated to the Insurance CGU, partly to the Private
Banking CGU and partly to the Banca dei Territori CGU, depending on whether they refer to the value of the component of
policy production or policy distribution.
As previously stated, these are intangible assets with finite useful lives and, during the year, the amortisation for the year was
charged to the income statement, for a total amount of 103 million euro.
During the year, the analyses on the main impairment indicators were updated.
Specifically, in 2022 the Insurance Division reported strong income from insurance business of approximately 1.6 billion euro,
up slightly on the previous year (+1.9%). This trend is attributable to the increase in the technical margin, in both the life
business and the non-life business, which more than offset the reduction in the net investment result. In addition, in 2022 the
Division\u2019s collected premiums for life policies and pension products amounted to 16.2 billion euro, down by around 14%
compared to the previous year, due to unit-linked products (-41%), as a result of the uncertainty on the financial markets. In
contrast, the collected premiums for traditional products increased (+39%), including the Class I component of multi-line
policies, due to the placement in the fourth quarter of the Class I credit line dedicated to senior customers. Pension products
recorded an increase of 1%. Direct deposits from insurance business exceeded 173 billion euro as at 31 December 2022,
down by approximately 15% on the previous year.
Note that, as previously stated, IAS 36 requires that intangible assets be subject to impairment tests with reference to
relationships with customers of all the CGUs at the valuation date, not only the residual relationships which were used to
determine the initial value of the intangible assets. Therefore, any possible calculation of the recoverable amount shall also
include the new business generated at the level of the CGU following the date of recognition of the intangible assets.
In addition, the volumes of the policies underlying the measurement of the intangible assets recognised in the financial
statements are negligible if compared with the total policies of the relevant CGUs.
An analysis of the comprehensive income of the products in the portfolios did not identify any potential impairment of the
intangible asset relating to the insurance business, also considering that, as required by IAS 36, the intangible asset is tested
for impairment at the CGU level as a whole and not by individual product or business line.
The following table presents a summary of the values of insurance intangibles according to the relevant CGU.
(millions of euro)
CGU
Financial
statements
2021
Amortisation
Financial
statements
2022
BANCA DEI TERRITORI DIVISION
Insurance intangibles - distribution
110
-7
103
INSURANCE DIVISION
Insurance intangibles - production
591
-94
497
PRIVATE BANKING DIVISION
Intangibile asset management - produc. and distribut.
47
-2
45
GROUP TOTAL
748
-103
645
Following the analyses conducted on the main impairment indicators, it was not necessary to carry out a thorough
recalculation of the value of the intangible asset, since the overall trend of the insurance business did not present any
particular critical issues in 2022.
Asset management and administration portfolio
The intangible asset recognised in Intesa Sanpaolo\u2019s consolidated financial statements is regarded as having a finite useful
life. Accordingly, for the purposes of the 2022 Financial Statements, analyses were conducted on the main value indicators,
which were also monitored throughout the year (these include trends in assets, redemption rates, and net interest and other
banking income net of operating costs and tax effects). Those analyses regarded the component of the intangible assets
linked to assets under administration (AUA) and under management (AUM), represented by the capacity of the relationships
existing at the acquisition date to generate cash flows over the residual useful life of those relationships, recognised in the
financial statements following the acquisitions that were carried out over time.
More specifically, this aspect concerns the asset management portfolios of the former Venetian banks, acquired in 2017, and
of the Morval Group, acquired by Fideuram - Intesa Sanpaolo Private Banking in 2018. Subsequently, as part of the
acquisition of the UBI Group, during 2020 intangible assets were measured linked to indirect customer deposits and, in
particular, the intangible assets pertaining to assets under administration (AUA) and assets under management (AUM),
whereas during 2021 the intangible assets relating to the assets under administration and assets under management of Reyl
& Cie SA, a Swiss private bank with an international presence, were recognised.
In 2022, as stated above, new customer relationship related intangible assets were recognised in connection with the indirect
customer deposits of Compagnie de Banque Priv\u00e9e Quilvest (CBPQ) and VUB Generali, amounting to 43 and 80 million euro
as at the acquisition date, respectively.
As at 31 December 2022, taking account of the portion amortised in the meantime, the intangible asset linked to AUM was
allocated to the Banca dei Territori CGU (187 million euro), to the Private Banking CGU (213 million euro), to the Asset
Management CGU (100 million euro) and to the International Subsidiary Banks CGU (79 million euro). Likewise, the
intangible asset linked to AUA, taking account of the component of amortisation recorded during the year, was allocated to the
Banca dei Territori CGU, for the component distributed by the branches deriving from UBI Banca (14 million euro), and to the
Private Banking CGU, for the component distributed to customers of IW Private Investments SIM (20 million euro) as at 31
December 2022.
As stated above, IAS 36 provides that impairment testing must not be limited only to the cash flows deriving from the assets
acquired, but should take account of all the cash flows linked to the assets of the specific CGU, also including the cash flows
generated after initial measurement of the intangible assets. On this regard, it is noted that the volumes of assets underlying
the measurement of the intangible assets recognised in the financial statements are negligible if compared with the total
assets of the CGUs.
Accordingly, in the light of the above, and regardless of the performance of the assets during the reporting period, it may be
confirmed that there were no signs of impairment of the intangible assets recognised in the financial statements and
pertaining to asset under management and asset under administration relationships.
The following table presents a summary of the values of the AUM and AUA intangibles attributable to the Banca dei Territori,
Private Banking, Asset Management and International Subsidiary Banks CGUs.
CGU
Financial
statements
2021
Acquisitions
Amortisation
Other
changes
(1)
Financial
statements
2022
BANCA DEI TERRITORI DIVISION
Intangibile asset management - distribution
201
-
-14
-
187
Intangible asset under administration
15
-
-1
-
14
PRIVATE BANKING DIVISION
Intangibile asset management - produc. and distribut.
180
43
-14
4
213
Intangible asset under administration
22
-
-2
-
20
ASSET MANAGEMENT DIVISION
Intangibile asset management - produc. and distribut.
106
-
-6
-
100
INTERNATIONAL SUBSIDIARY BANKS DIVISION
Intangibile asset management - distribution
-
80
-1
-
79
GROUP TOTAL
524
123
-38
4
613
(1) Foreign exchange differences on intangible assets attributable to Reyl & Cie SA.
Core Deposits
\u201cCore deposits\u201d are \u201ccustomer-related intangibles\u201d, generally recorded in business combinations between banks. The
intangible value of core deposits stems from the future benefits for the acquirer deriving from the stable and lower funding
cost compared to market parameters. Basically, the acquirer may use funding for its lending and investment activities which
pays less than the interbank market interest rate. The intangible asset consists of the valuation of this future margin, known as
the \u201cdeposit premium\u201d, which represents an asset the value of which is correlated with the performance of market rates and
the assets raised.
As stated above, total core deposits of 30 million euro were recognised as part of the acquisition of Compagnie de Banque
Priv\u00e9e Quilvest by Fideuram Bank Luxembourg.
No impairment indicators were considered when assessing whether the intangible asset had maintained its value, given the
limited period of time between the initial recognition of the asset and the expected interest rate scenario.
Brand name
IFRS 3 considers the \u201cbrand name\u201d a potential, marketing related intangible asset, which may be recorded in the Purchase
Price Allocation (PPA) process.
For this purpose, please note that the term \"brand\u201d is used in accounting standards with an extensive meaning and not as a
synonym of \u201clogo\u201d or \u201cname\u201d. It is considered a general marketing term which defines a set of complementary intangible
assets (in addition to the name and the logo, also the competencies, consumer trust, service quality, etc.) which concur to
form brand equity.
With reference to acquisition of the Sanpaolo IMI Group, it was decided to limit the analysis to just two brands: the corporate
brand Sanpaolo IMI, intended as an \u201cumbrella\u201d brand to which the brands of the other network banks were also related, and
the brand of the subsidiary Fideuram - Intesa Sanpaolo Private Banking (former Banca Fideuram), as an autonomous brand
widely recognised on the market for the placement of financial products through a network of financial advisors. Both are
considered intangibles with indefinite useful life, since they are deemed to contribute indefinitely to the formation of income
flows. Market methods and flow-based methods (and, thus, based on fundamental analyses) were used in the valuation of the
two brands. Value was determined as the average of the values obtained using the various methods.
The amount recorded in the 2022 Financial Statements came to 1,882 million euro, of which 1,507 million euro was allocated
to the Banca dei Territori CGU and 375 million euro to the Private Banking CGU.
In general, the brand name is considered an intangible asset that has no independent cash flows and, thus, to be subject to
impairment testing as part of the verification of the retention of goodwill for the various CGUs. For the purposes of this
impairment test, with regard to the brand name allocated to the Banca dei Territori CGU, it was considered that the reference
CGU did not have any goodwill allocated and, as a result, it was not possible to test the recoverable amount of the specific
intangible as part of the impairment test of the goodwill based on total cash flows at the level of the CGU. As it was not
possible to refer, for the recoverable amount of the brand name of Banca dei Territori, to the notion of Value in Use, i.e. the
present value of net future cash flows from the assets valued, it was decided, in line with that carried out for the 2020 and
2021 Financial Statements, to conduct a specific, autonomous valuation of the specific intangible based on the fair value
resulting from the dedicated appraisal commissioned from Prof. Mauro Bini, Full Professor of Corporate Finance at Bocconi
University.
Lacking specific transactions on comparable banking brand names, the fair value of the brand name allocated to the Banca
dei Territori CGU was estimated using the following methods:
- Royalty Relief;
- the implicit value in estimating brands with comparable PPAs;
- the implicit value in the public estimates of brands provided by independent third parties (Brand Finance);
- Hirose.
Royalty Relief Criterion
The Royalty Relief criterion determines the value of the brand from the present value of income deriving from the brand,
estimated as the product of a royalty rate reconstructed on the basis of implicit rates in comparable PPAs and the value of net
turnover (operating income, for banks).
The criterion of the implicit value in estimating brands with comparable PPAs
The criterion of the implicit value in estimating brands with comparable PPAs determines the value of the brand based on the
\u201cFair value of the brand/Operating income\u201d multiples recorded on PPA and their fundamental drivers.
The multiple, calculated in relation to net operating income, is taken from the fair value of the brands recognised on PPA of
commercial banks from the Markables database.
Criterion of the implicit value in the public estimates of brands provided by independent third parties (Brand Finance)
Brand Finance is a UK company specialising in valuing brands. Each year, Brand Finance publishes the updated estimated
value of the brands of the top 500 global banks.
The valuation of brands carried out by Brand Finance is consistent with the Relief from Royalties criterion, widely used in
valuation to estimate the value of brands. According to this criterion, the value of the brand corresponds to the current value of
royalty flows saved. The royalty rates are determined based on the trademark license agreements of comparable companies
and applied to the specific bank brand based on the strength of the brand estimated and discounted at an opportunity cost of
capital in line with the assigned brand rating.
Hirose Criterion
This criterion is based on the comparison of the profitability of the branded company (in this case, the Banca dei Territori
CGU) and unbranded competitor companies. The income-based method adopted is attributable to the profit-split criterion.
Based on the analyses conducted, all four methods used returned a value of the Intesa Sanpaolo brand for the Banca dei
Territori CGU higher than the book value of that intangible asset, demonstrating the value of the Group\u2019s brand and the
resulting competitive advantage it continues to provide the Group in relation to its competitors.
Instead, the brand name allocated to the Private Banking CGU was subject to impairment testing as part of the activities
regarding the verification of the recoverable amount of the goodwill allocated to that CGU.
Impairment testing of CGUs and goodwill
Definition of Cash Generating Units (CGUs)
For impairment testing purposes, the estimation of the value in use relating to intangible assets with an indefinite life
(including goodwill) that do not generate cash flows unless jointly with other business, as per IAS 36, requires the preliminary
assignment of such intangible assets to relatively independent business units, able to generate cash flows strongly
independent of those produced in other business areas, but interdependent within the business unit generating them.
In IAS/IFRS terminology, such business units are known as Cash Generating Units (CGUs). The meaning of the impairment
test is significant for identification of the CGUs.
IAS 36 indicates the necessity to correlate the level at which the goodwill is tested with the level of internal reporting at which
management controls the increases and decreases of such value. Definition of the level closely depends on the
organisational models adopted and on the managerial responsibilities governing the operating guidelines and monitoring
activity. Organisational models may ignore (and in the case of the Intesa Sanpaolo Group they do ignore) the network of legal
entities through which operations are carried out, and are instead very often closely designed around the definition of
business operating segments as envisaged by IFRS 8. Furthermore, the identification of CGUs for goodwill impairment test
purposes is consistent with the definition of the recoverable amount of an asset - which is in itself the base for impairment
tests - according to which the relevant item is the amount that the company expects to recover from that asset, considering
any synergies with other assets.
Therefore, in accordance with the criteria applied for the determination of the prices of the business combinations that gave
rise to goodwill recognition, the recoverable amount for impairment testing purposes of the CGU to which goodwill is allocated
must include not only the value of external (or universal) synergies but also the internal ones, the reason being that the
specific acquirer may obtain additional value from the integration of activities obtained through business combinations,
according to its business model.
The Intesa Sanpaolo Group\u2019s organisational model envisages that:
- management decisions are highly centralised at the level of the heads of the operational segments;
- strategies, identification of new products or services and commercial penetration initiatives are outlined and directed
centrally for each operating division;
- planning processes and reporting systems are managed at the operational segment level;
- as a result of this centralisation, income flows are highly dependent on the policies set up at segment level, based on
balanced development of the entire division and not of the individual operating areas or legal entities considered
individually;
- specialised transversal areas are defined to provide support and develop products benefiting many subsidiaries;
- the management of financial risks is also highly centralised in order to maintain, also as a result of regulatory provisions,
a balance between the capital allocation policies and the financial risks in development of the various business lines;
- the divisions operate in homogeneous markets or sectors in terms of economic characteristics and development level.
As a result of this centralisation, income flows are highly dependent on the policies set up at the operational segment level,
based on balanced development of the entire division and not of the individual operating areas or legal entities considered
individually.
The operating divisions identified in the Intesa Sanpaolo Group are as follows:
- Banca dei Territori;
- IMI Corporate & Investment Banking;
- Insurance;
- Asset Management;
- Private Banking;
- International Subsidiary Banks.
For the foregoing reasons, the operating divisions cited above correspond, in general terms, to the Group\u2019s CGUs, while also
representing the core business areas considered for segment reporting.
These divisions are considered representative of cash generating units since each constitutes the smallest group of assets
generating independent incoming cash flows and, as mentioned above, also the minimum level set by the Parent Company
Intesa Sanpaolo for planning and reporting processes. Therefore, this is the minimum level to which goodwill may be
allocated and monitored according to non-arbitrary criteria.
The International Subsidiary Banks Division needs specific comments, given the particular structure and conditions under
which it operates.
It should firstly be mentioned that the cash flows of the various Group companies forming this business unit are strictly
dependent upon policies formulated by the Division Governance Centres and Head Office Departments of the Parent
Company.
These policies are defined and implemented in compliance with a management plan designed to develop the entire Division
in an organised manner, and not focusing only on the individual companies\u2019 strategies. Specifically, the expansion strategies
for the various operating units, the identification and development of new credit, savings and service products, limits to the
assumption of financial risk, commercial penetration and operations specialisation initiatives are outlined and steered at
central level, following a portfolio strategy, and not devolved to the individual subsidiaries. Therefore, there is strong
interaction of the flows that, at the same time, requires both single and integrated governance of all companies in the Division,
and the central monitoring and control of operations of the overall business activities of the Division.
However, it is important to consider that not all factors affecting the correlation and interdependence of cash flows within the
Division can be controlled by the Division\u2019s Head Office Departments.
In fact, there are circumstances outside the Group that could have varying levels of impact on the capacity to systematically
manage CGU flows and control over their generation. These are circumstances largely determined in the wider sense by the
conditions of the environment in which the various entities are located.
Indeed, for Banks operating abroad, the effects of country risk must be considered: i.e. the risk linked to economic, political
and institutional events in the country in which the subsidiary and its business activities are based.
In view of the above, if the cash flows that the Parent Company expects from activities generated by a foreign subsidiary are
deeply influenced - in terms of extent, quality and trends - by institutional, economic and political circumstances in the country
in which the subsidiary is based, this subsidiary cannot be considered an integral part of the single management model for the
CGU which it belongs to. The company in such a situation must, therefore, even if only temporarily, be excluded from the
CGU, regardless of the Group Management\u2019s willingness to keep it within the CGU, due to the above-mentioned factors over
which the Bank and Group's management clearly have no influence. The flows of the company, in fact, would be influenced to
a greater extent by the country\u2019s conditions than by the unitary and centralised management policy adopted by the Division
and, therefore, for impairment testing purposes, the company must be subjected to independent valuation until the conditions
for the systemic central control of cash flows of the subsidiary are restored.
With regard to the Ukrainian Pravex Bank, for the purposes of the 2008 impairment testing, careful consideration of the
economic and institutional events unfolding in Ukraine, which was undergoing a deep economic and currency crisis, and
prudent assessment of their impact on the operational variables of the subsidiary in question, especially from the point of view
of their interdependence on variables of the entire CGU, resulted in classification of this company as a completely separate
CGU, treating it separately from the Group\u2019s International Subsidiary Banks Division. Subsequently, Pravex Bank was
functionally allocated to Capital Light Bank (now the NPE Head Office Department), to then be moved back to the
International Subsidiary Banks Division in 2018.
With regard to the subsidiary Bank of Alexandria, for the purposes of the 2011 impairment testing the bank was separated
from the International Subsidiary Banks CGU due to a profound political crisis in Egypt.
For the purposes of the 2022 impairment testing, as no significant elements arose that cast doubt on the decision made for
the previous financial statements, and taking account of the outbreak of the military conflict between Russia and Ukraine, it
was deemed appropriate to maintain the decisions made with respect to the previous financial statements, and thus to
consider Pravex Bank and Bank of Alexandria as autonomous, distinct CGUs in conducting the impairment test for the
consolidated financial statements. However, it bears recalling that the goodwill associated with Pravex Bank and Bank of
Alexandria were fully written down in conjunction with the impairment tests for the 2008 and 2011 financial statements,
respectively, and there is no goodwill even relating to the other International Subsidiary Banks of the Division.
In Pravex Bank's and Bank of Alexandria\u2019s cases, the separate assessment of the banks for impairment testing purposes
does not affect the Group\u2019s intention to support the development of the subsidiaries, with specific regard to the Ukrainian
bank, within the limits permitted by the ongoing conflict.
As previously mentioned, the Banca dei Territori, International Subsidiary Banks and Bank of Alexandria and Pravex Bank
CGUs, as of the date of the test, did not possess intangible assets with an indefinite life (with the exception of the brand name
allocated to the Banca dei Territori CGU, whose recoverable amount, understood as its fair value, was confirmed by a specific
valuation drawn up by an independent expert) and, as a result, were not subject to an impairment test.
Book value of the CGUs
The book value of the CGUs must be determined in a manner consistent with the criterion used to estimate their recoverable
amount. For a banking business, the cash flows generated by a CGU cannot be identified without considering the cash flows
deriving from financial assets/liabilities, as these represent the core business. In other words, the recoverable amount of the
CGUs is influenced by the aforementioned cash flows and therefore the CGUs\u2019 book value must include financial
assets/liabilities in accordance with the scope of the recoverable amount estimate process.
Consequently, these assets and liabilities must be properly allocated to the associated CGUs. On this basis (so-called \u201cequity
side\u201d), the book value of the Intesa Sanpaolo Group\u2019s CGUs may be determined in terms of contribution to consolidated
shareholders\u2019 equity including the minority interest.
Accordingly, the carrying amount of the CGUs composed of companies belonging to a single operating division was
determined by summing up the individual contributions to the balance sheet.
However, where the Parent Company or other Group companies contribute to multiple CGUs from a management standpoint,
and this division is not represented in accounting information, management values must be used. In this specific case, the
management driver was identified as each division's \"regulatory capital\", which represents the capital absorption necessary to
handle the types of risk envisaged by the regulatory supervision rules.
The table below provides the book values of the CGUs and the goodwill and brand name allocations to each. The values,
determined for impairment testing purposes, include the portion of goodwill attributable to minority interests (included in the
last column with minority interests).
(millions of euro)
Values
Value as at 31.12.2022
CGU
Book
value
of which
goodwill
Group share
of which
brand name
of which
minority
interests
Banca dei Territori
18,858
-
1,507
14
IMI Corporate & Investment Banking
21,334
56
-
18
Insurance
6,702
976
-
1
Asset Management
2,656
1,059
-
6
Private Banking
5,192
1,535
375
1
International Subsidiary Banks
6,461
-
-
-
Bank of Alexandria (Egypt)
628
-
-
126
Pravex Bank (Ukraine)
-
-
-
-
TOTAL
61,831
3,626
1,882
166
Criteria for estimates of CGUs\u2019 value in use
The value in use of CGUs is determined by estimating the present value of future cash flows that may be expected to be
generated by the CGUs. These cash flows are normally estimated by using the latest publicly available business plan or, in its
absence, through the drawing up by management of an internal forecast plan.
The forecasting period for the analysis usually consists of a maximum of five years. The cash flow of the final year of the
forecast is projected in perpetuity (through the use of perpetual return formulae, or, alternatively, temporary return formulae, if
it is not realistic to expect the assets subject to measurement to generate positive cash flows over the long term), using an
appropriate growth rate \u201cg\u201d for the purposes of the so-called \u201cTerminal Value.\u201d The \u201cg\u201d rate is determined by assuming as
growth factor the rate of increase in the gross domestic product of the countries in which the cash flows are generated.
Alternatively, the Terminal Value could be determined on the basis of a final sale or liquidation value.
For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present valuations of
the time value of money and the asset\u2019s specific risks. Specifically, the discount rates to be used must incorporate the present
market values with reference to the risk-free component and the risk premium associated with the equity component observed
over a sufficiently long time period to reflect different market conditions and economic cycles.
In addition, given the diverse risks of the respective operating areas, different Beta coefficients must be used for each CGU.
All the resulting rates have been adjusted to take into account the \u201cCountry Risk\u201d.
Cash flow estimates
Also with regard to the calculation of the value in use of CGUs for impairment testing purposes for the 2022 financial
statements, the volatility of financial markets and the uncertainties that still characterise the future macroeconomic
environment make the definition of near-term future cash flows from operating activities and the identification of growth rates
in order to calculate the Terminal value of CGUs particularly complex.
The medium-term forecasting scenario of reference has been drawn up by the Intesa Sanpaolo Research Department taking
account of the forecasts of the main Italian and international organisations and institutions, and underlies the income
forecasts throughout the 2023-2027 period.
These forecasts are based on a reference scenario for the global economy characterised by a gradual return of inflation to
levels consistent with the definition of price stability by central banks, associated with lower real growth rates than in the years
prior to the pandemic crisis and rising nominal and real interest rate levels.
The reference scenario assumes that in 2022 global GDP growth was 2.7%, following the rebound of 6% witnessed in 2020.
In 2023 growth is expected to slow further to 2.2%, but then to accelerate again to a range of 3% to 3.5%. International trade
of goods is expected to remain essentially stagnant in 2023 (+0.6%), but then to gain momentum in 2024 at growth rates
similar to those of global GDP.
In 2022, the Euro area was hit by the effects of a spike in natural gas prices, a repercussion of the Russian invasion of
Ukraine and of the resulting deterioration in relations between the European Union and Russia. The almost total disruption of
gas imports from Russia was tackled with a combination of reduced consumption, increased production from renewable and
other fossil sources, and increased imports from other suppliers. Achieving this forced transition in such a short time means
that prices will remain structurally higher than in the pre-crisis years. Although 2023 began relatively well, due to milder
temperatures than the seasonal average and low Chinese demand, the expectation that Chinese gas demand will resume in
the second quarter could entail further price tensions by the end of the year. In the light of recent developments, the scenario
includes very conservative forecasts of gas prices in 2023, with mainly downside risks in the short term.
The drastic deterioration in terms of trade as a result of the gas crisis was reflected in a fall of around 4 percentage points in
the trade balance. The recessionary impact of the shock was almost entirely offset by public support measures for households
and businesses and the fall in the average household saving rate back towards pre-pandemic levels. As a result, GDP grew
by 3.3% in 2022, well above the potential growth estimates. In 2023 GDP growth is expected to be essentially nil (0.1%),
associated with two quarters of mild decline. Estimated annual average growth is then expected to rebound to a range of
between 1.5% and 1.8%. The long-term scenario is weighed down by the risk that structurally higher energy prices may
reduce the European economy\u2019s growth potential.
In 2022, inflation rose to levels well above those predicted a year ago before the war, with an estimated annual average of
8.5%. Much of the greater increase was attributable to the direct and indirect effects of higher natural gas prices, but statistical
analyses now also point to demand factors making a significant contribution to the underlying inflation dynamics. The decline
in gas prices from the summer 2022 peak suggests that inflation rates will fall in 2023. The annual average is estimated at
7.7%, a level that reflects very conservative forecasts of gas prices at the beginning of the year. The decrease in energy
prices would further reduce inflation in the following years, bringing it into line with the ECB\u2019s price stability target in 2025.
However, the decline in underlying inflation will be much slower, as a salary increase is expected, compatible with inflation
rates of above 2% in services, considering that in 2023-24 productivity growth is unlikely to accelerate enough to offset its
effects.
In Italy, GDP growth in 2022 was 3.8%, around half a point lower than predicted before the war. The reduction in growth was
due to the sharp deterioration in the trade balance (at around 4% of GDP in 2022), which was reflected internally in a decline
in real household income and a fall in company earnings. However, the final impact was mitigated by fiscal measures (cut in
excise duty, corporate tax credits, household subsidies, suspension of several system-wide cost components, etc.) and the
reduction in the average household saving rate. GDP growth gradually slowed down over the course of 2022, and is expected
to be negative on a quarterly basis at the end of 2022 and early 2023. It is expected to amount to an annual average of 0.6%
in 2023. A sharp acceleration is then expected in the wake of declining energy prices, assuming that aggregate demand is
supported by spending flows associated with the Next Generation EU programme (which could increase growth by 0.5% a
year), investments in the energy transition, a recovery of foreign demand and a positive trend in employment and real income.
Interest-rate-sensitive components of demand will record weaker real growth, a trend that will be accentuated in construction
due to the scaling-back of tax incentives for renovations, but without fully offsetting the foregoing factors. Accordingly, on the
whole growth continues to be expected to be above potential in the years 2024-27, although there are greater downside risks
due to higher energy costs.
In the reference scenario, Italian inflation slows to 6.8% in 2023 and then to 2.4% in 2024. This reduction is due primarily to
the decrease in energy prices. The risks for 2023 are primarily to the downside, considering the recent performance of gas
prices.
The European Central Bank raised official rates rapidly from July 2022, initiating a tightening phase that will carry on into the
early part of 2023. The year 2022 ended with a deposit facility rate (DFR) of 2.00% and a rate on main refinancing operations
(Refi) of 2.5%. At its meeting at the end of 2022, the ECB announced that the increases would continue at a robust pace in
early 2023, and this is believed to entail at least a further increase in the DFR to 3.0%. In addition, given the underlying
inflation forecasts for the coming years and the very modest slowdown in final domestic demand, it is likely that the rate will be
raised further in the following months to 3.50%. However, to take account of the current context of uncertainty, the reference
scenario includes a progression of official rates reaching a maximum of 3.0% (DFR) and 3.5% (Refi) in 2023. Official rates are
then expected to converge gradually towards neutral levels.
The European Central Bank has also begun the progressive discontinuation of unconventional measures. Through an
amendment of conditions, it facilitated early repayment of TLTRO III loans. Net purchases of securities under the APP and
PEPP programmes were discontinued in June 2022 and March 2022, respectively. In addition, at the end of March 2023 the
APP portfolio will begin to decline through monthly reductions in reinvestments from maturing securities of 15 billion euro. In
the long term, such measures could exert upwards pressure on risk premiums and on the slope of the government yield
curve, enhancing monetary policy direction. Excess liquidity is expected to be reduced drastically in 2023.
Due to the relatively conservative assumption made regarding official rate performance, short-term interest rate forecasts are
expected to fall short of implicit market rates until the end of 2027, with the sole exception of 2024. The exceptionally high
level of surplus reserves, while falling rapidly in 2023 and 2024, will remain considerable and tend to keep very short-term
rates close to the ECB overnight deposit rate throughout the horizon of the forecast.
Estimates for the medium and long-term interest rate curve reflect the closing of the securities purchase programmes, the
speed of the monetary tightening phase already implemented, modest expectations of increases in official rates for the rest of
2023 and the expectation of a decline in such rates in the following years. The slope of the rate curve becomes negative in
2023, but resumes growth in 2024 due to the decline in short-term rates and a marginal increase in longer-term rates. The
decline in ECB securities portfolios could provide an additional contribution to the increase in long-term interest rates, even if
the boost should be lower than that exercised in the opposite direction by the increase in the securities portfolio of the Central
Bank in previous years.
The decrease in support provided by the Eurosystem and the increase in risk-free rates could also reflect in an expansion of
sovereign risk premiums. Nonetheless, this negative factor could be at least partly offset by the reduction in net issues by the
Ministry of the Economy and Finance, in a context of improvement in public finances, and by the faster reduction in public
debt than expected in the 2022-24 period. The reference scenario incorporates a modest increase in the spread linked to only
fundamental factors (performance of the debt) and monetary policy (rates and negative net purchases). However, the
sovereign rating and risk premium level will also be very sensitive to the level of implementation of the NRRP, with regard to
both investments and structural reforms. In this regard, the reference scenario assumes that implementation will be relatively
prompt.
With reference to the banking scenario, in 2022 the credit market saw moderate tightening of supply conditions in line with the
move towards more restrictive monetary policy and the increase in perceived risks, while on the bank balance sheets side, the
good liquidity and funding position was maintained and the capital base remained solid. In addition, credit quality did not show
any particular signs of deterioration.
Demand for credit from businesses revived due to financial needs related to day-to-day management, in the face of rising
operating costs as a result of higher prices for energy and other inputs. The particular nature of demand drove a rebound in
short-term loans, but near the end of the year they began to slow partly due to the worsening of credit conditions. In contrast,
medium- and long-term loans remained stationary, with rates of change hovering around zero, reflecting the strong increase
during the pandemic due to the support of government-backed loans.
In 2023 short-term loan performance is expected to normalise; such loans could continue to present moderately positive
changes in line with inflation performance. With regard to medium- and long-term loans, after the persistent weakness of early
2023, the recovery of GDP is expected to support a return to positive territory. As already seen in 2022, financing needs may
be partly met using the considerable cash buffer accumulated by businesses in the two-year period 2020-21 and deposited
with banks, as well as bond issues and self-financing. In particular, market conditions are expected to be more favourable for
the issues of securities, in the light of the return of interest from investors in bonds, above all after the end of the ECB rate
hike phase.
Loans to households continued to grow at a robust pace in 2022. Once again, this performance was driven by loans for home
purchases, which grew at a rate of 5%, the highest in the last decade, with a gradually more moderate trend in the fourth
quarter.
The slowdown of loans to households is expected to continue in 2023 due to the impact of the increase in mortgage rates and
the expected decline in real estate transactions, against the backdrop of house price trends that, while remaining slightly
positive, will lose the momentum gained during the pandemic, culminating in 5.2% growth in the second quarter of 2022.
In subsequent years, loans to households are expected to grow at a moderate rate, slightly higher from 2025, driven by a
possible recovery in house sales and prices. Mortgage loans will continue to play a major role in the residential property
market, which is expected to continue to be driven by the new housing and working needs that emerged following the
pandemic, renovations and energy reclassification, and the use of part of the excess savings accumulated by some segments
of households starting in 2020.
With the shift in monetary policy and the rapid rise in interest rates, the long and strong growth of bank deposits, which had
lasted more than a decade, came to a halt in the autumn of 2022. After the peaks reached in 2021 and the subsequent
gradual slowdown, the growth rate for total deposits fell to zero, following the deceleration in the overnight deposits
component, which recorded a slightly negative annual change towards the end of 2022.
In a context of much higher inflation and interest rates, a modest decrease of overnight deposits is expected to continue
throughout 2023, as a result of a combination of several factors, including the use of the considerable cash deposited with
banks in previous years by businesses and households and the reallocation of savings to more remunerative forms. In
particular, funds will continue to be shifted from overnight deposits to forms of time deposit, supported by more attractive
interest-rate offerings, a trend that had already begun to be seen in late 2022. Buoyed by the return of positive yields, 2023
and subsequent years will see renewed diversification of household financial investments into government and corporate
bonds, resulting in less dynamic bank deposits than during the exceptional phase of years of very low rates and the pandemic
crisis.
For bank bonds, after more than a decade of decline, 2023 will see a resumption of growth, which will continue in subsequent
years. With the progressive repayment of the TLTRO IIIs, alongside the use of the ECB\u2019s more traditional refinancing
instruments, banks are again turning to the wholesale institutional market, through diversified short- and medium- to long-term
funding channels and instruments.
Increases in key monetary policy rates have begun to filter through to bank interest rates. In the second half of 2022, interest
rates on new loans to non-financial companies rose rapidly, to around double for loans up to 1 million euro compared to the
beginning of the year, while the rate on larger loans more than trebled. Interest rates on loans to households for home
purchases also increased significantly, particularly the fixed rate, which returned to being higher than the variable rate by 0.9
points in the second half of 2022, after two years of substantial alignment between the two rates. As a result of the increases
in new transactions, the average bank lending interest rates also rose faster in the latter part of 2022, to 3.2% (+1.1
percentage points compared to the end of 2021).
Interest rates on deposits were more stable in 2022, particularly the average rate on overnight deposits, which only increased
slightly towards the end of the year. The stickiness of the interest rate for the on demand component influenced the
performance of the average interest rate on deposits, which only rose slightly. In contrast, the interest rates on new time
deposits were more responsive, with significant increases from July. The overall cost of funding from customers also began to
rise very gradually, reflecting moderate upward movements in the average rate on bonds. As a result, the spread between
lending and funding rates increased significantly, returning to levels not seen since 2009.
The increase in rates on loans will continue in 2023, following the additional expected increases of key monetary policy rates.
In subsequent years, the expected performance of monetary rates will enable a moderate reduction of rates on loans from the
levels to be reached in 2023, which will represent the maximum for the entire scenario period. Turning to borrowing rates, in
2023 and subsequent years the stickiness of overnight deposit rates will continue, whereas pricing policies are expected to
favour time deposits. The total cost of funding will increase, also driven by the effects of the recomposition towards costlier
components such as time deposits and bonds.
The banking spread will continue to widen in 2023, driven by the various rates of adjustment of lending and borrowing rates. A
moderate reduction is expected from 2024, but unit profitability of dealing will remain high compared to the last decade.
After eleven years in negative territory, in September 2022 the mark-down on on-demand deposits returned to positive levels,
and it is expected to increase further in 2023 to approximately 2%, to then decline gradually in later years, given the
expectation of falling Euribor rates.
In contrast, with the sharp rise in Euribor rates, the mark-up on short-term rates fell significantly towards the end of 2022. A
further moderate reduction is also expected in the first half of 2023, followed by a general recovery in the margin as increases
in key rates are transmitted to rates on loans. Substantial stabilisation of the mark-up is expected in the final two years of the
scenario period.
Assets under management performed weakly in 2022. For mutual funds, the inflows during the year were mainly directed
towards the equity, balanced and money-market segments. The moderate inflows to funds were driven by the negative
performance of stock market indices, against the backdrop of reduced investor confidence. Portfolio management schemes
were characterised by net outflows. Overall, life insurance declined as new business fell for both traditional and unit-linked
policies.
With the completion of the rise of rates in 2023, volumes in the asset management and life insurance industries are expected
to recover. Inflows of investments to these segments may be fuelled by the stock of cash that flowed into bank deposits in
previous years, albeit in a scenario of more attractive direct investment in fixed-income securities.
In particular, in 2023 moderately positive inflows are expected for mutual funds and portfolio management schemes, with a
possible recovery for bond fund subscriptions. In the following years, assets under management are expected to continue to
achieve positive results.
For life insurance companies, in 2023 and onwards, total collected premiums are expected to increase. In particular, the level
reached by market rates is making it possible to meet the previous demand for traditional policies, which is again on the rise.
However, on the offering side, the strategy will continue to focus on hybrid products and class III policies, set to recover
starting in 2023. This is also reflected on the demand side, where there is interest in products capable of taking advantage of
the best investment opportunities, including those more closely linked to equity instruments. From this perspective, multi-line
policies will continue to be drivers.
The table below illustrates the macroeconomic variables expected in the period 2023-2027, only for Italy, as no goodwill was
recognised for the CGUs operating in foreign countries.
(values as a percentage)
Italy
2022
2023
2024
2025
2026
2027
REAL ECONOMY
Real GDP Italy
3.8
0.6
1.8
1.2
1.0
0.6
Consumer prices Italy
8.2
6.8
2.4
1.3
1.5
1.3
Period-end ECB rate
2.50
3.50
3.00
2.75
2.50
2.50
3-month Euribor rate
0.34
3.00
2.99
2.38
2.10
2.06
10-year IRS
1.92
2.82
3.11
3.28
3.27
3.23
10-year BTP
3.03
4.05
4.60
4.90
4.85
4.76
Spread vs. Bund (basis points)
187
201
190
179
174
170
BANKING SECTOR
Loans
2.3
1.5
1.9
2.2
2.6
2.7
Direct customer deposits
2.2
0.6
1.3
2.1
2.3
2.3
Average customer spread
1.93
2.87
2.80
2.60
2.52
2.49
Mutual funds
-12.9
4.7
4.1
4.1
3.9
3.6
Portfolio management
-15.1
2.8
2.9
2.9
2.8
2.5
Life technical reserves
-1.9
4.6
4.4
4.4
4.4
4.3
Scenario produced in December 2022 by the Research Department. Forecast data (estimates for 2022).
The various CGUs\u2019 expected cash flows were subject to impairment testing, taking account of the macroeconomic scenario
described above, and were estimated by following a two-stage assessment process.
Specifically, with regard to the first forecast period, in line with the choices made for the previous Financial Statements, a
timeframe of 5 years was considered, i.e. the five-year period 2023-2027. For that period, with regard to the years up to 2025,
the forecasts set out in the 2022-2025 Business Plan, updated to take account of the changed macroeconomic scenario, were
considered. The flows for the last two years of forecasting (2026 and 2027) were estimated through inertial tracking of the
flows for 2025, based on the forecasts relating to the updated macroeconomic scenario, thus, without considering the effect of
additional managerial leverage, compared to that incorporated into the Plan forecasts.
The net income projected for the forecast years has been adjusted, in accordance with IAS 36, to consider non-monetary
components and the minority-interest share of net income. It also excludes the effects of any reorganisation and restructuring
transactions and the capital gains on future sales of company assets. In addition, cash flows include those allocated to the
various CGUs deriving from central corporate assets. In accordance with the equity-side approach mentioned above in
relation to the determination of the carrying values of CGUs, the cash flows used for impairment testing include the flows
correlated with financial assets and liabilities, given that these represent the company's core business.
In addition, among various financial valuation techniques, such as that used for determining the value in use, the value of a
company at the end of the flow forecast period, the so-called terminal value, is normally determined by infinite compounding,
at an appropriate \u201cg\u201d rate, of the cash flow achievable \"at full capacity\u201d. This rate, even if subject to time variations, may be
assumed to be constant or decreasing (or increasing in rarer circumstances).
As an alternative to the terminal value estimation methodology, doctrine also envisages (i) the exit multiple approach and (ii)
the approach based on an estimation of the liquidation value of the company. Specifically, with regard to approach (i) it should
be mentioned that an exit multiple estimate has complex (and potentially subjective) elements that become even more
marked at times of market uncertainty and volatility such as now. Approach (ii) is valid only for companies due to be wound up
on termination of the forecasting period, and therefore not applicable with a view to a business as a going concern.
For the purposes of the Terminal Value, i.e. the second stage of valuation, the cash flow forecast for 2027, the last year of the
analytical projections, was used as the cash flow achievable at full capacity.
In line with the impairment tests of the previous years, the \u201cg\u201d rate was determined as the average growth rate of Italy\u2019s
nominal GDP, observed and forecast in the 2008-2027 period (it should be noted that, in consideration of the impairment
made in the previous financial statements, no goodwill is allocated to the Banca dei Territori, International Subsidiary Banks,
Bank of Alexandria and Pravex Bank CGUs; consequently, it is not necessary to calculate the \u201cg\u201d rate for the purpose of the
goodwill test for the foreign countries where the Group operates). Nominal GDP is the sum of the real GDP growth rate and
the inflation rate. Expected real GDP and inflation figures used to calculate the \"g\" rate were drawn from the forecasts
prepared by the Intesa Sanpaolo Research Department described above. Each component has been calculated as the
average for the period 2008-2027. The decision made in terms of observation period for the growth rates, considering the
current particular macroeconomic situation, calls for specific consideration.
Real GDP dynamics in recent years have often been negative, due mainly to the various economic and financial crises that
affected global economies, beginning in particular with the 2008 global financial crisis, followed by the sovereign debt crisis in
2011. The trend began to be reversed as early as 2015, with the resumption of a growth process that, however, was abruptly
interrupted in 2020 by the COVID-19 pandemic, and which continues to be threatened by the energy crisis that emerged in
2022 as a consequence of the outbreak of the military conflict between Russia and Ukraine. In order to consider the various
phases of the economic cycle, the growth rate for estimating terminal value was calculated as the average GDP rates for the
2008-2027 period, inasmuch as this period was deemed sufficiently extensive to include, and thus average, a period of
severe crisis and a prospective period of a return to a scenario of moderate economic growth.
Furthermore, with a prudential approach, it was checked that the \u201cg\u201d rate was not higher than Italy\u2019s GDP growth rate in 2027
or, for each CGU, the growth rate of the last year of analytical forecasting.
Cash flow discounting rates
For the determination of the value in use, the cash flows must be discounted at a rate that reflects the present market
valuations, the time value of money and the asset\u2019s specific risks.
In practice, the first characteristic (current market conditions) translates into the calculation of all parameters based on the
latest available information as at the reference date of the estimate, so as to best take into account the current market
assessments. The second characteristic (consistency between risks/flows and rates) must follow the specificity of flows used
for impairment testing of the CGUs. This rate (in its various components) must therefore be decided by observing the specific
nature of flows used to assess each CGU, in order to maintain coherence and consistency with the flows. Specifically,
consistency becomes important with regard to inflation, country risk and other risk factors that, according to IAS 36, may be
expressed in the flows or rate. It is important to point out that a characteristic common to all CGUs recording goodwill (and, in
general, intangibles with an indefinite life) is the long-term perspective of flows used to estimate the CGU\u2019s value in use. In
fact, by its very nature, goodwill has an indefinite useful life, and therefore future cash flows are normally infinitely projectable.
This long-term perspective should be reflected in all discounting rate benchmarks by means of the appropriate selection of
each, in such a way that they express normalised conditions in the long term.
The discounting rate should normally include the cost of the various sources of funding of the asset to be assessed, in other
words the equity cost and debt cost (i.e. WACC, weighted average capital cost).
However, in the case of a banking entity, it is estimated according to an equity-side approach, that is to say by considering
only the cost of equity capital (Ke), in a manner consistent with the methods for determining cash flows, which, as stated
above, include those deriving from financial assets and liabilities.
The cost of capital is determined using the Capital Asset Pricing Model (CAPM). Based on this model, the cost of capital is
calculated as the sum of risk-free rate and a risk premium, in turn dependent on the specific risks implicit in the business
activities (i.e. both business segment risk and country risk).
The cost of capital is determined net of taxes, in order to ensure consistency with the discounted cash flows.
As the various CGUs of the Intesa Sanpaolo Group operate in different business segments and with different risk factors, the
specific costs of capital of each CGU were identified.
It should be noted that, since cash flows were determined in nominal terms, discounting rates were also determined in
nominal terms, meaning that they incorporate inflation expectations.
Entering into the details of the various components that contribute to the determination of discounting rates, it may be
remarked that:
- with regard to the choice of cash flow discounting rates, and in particular of the risk-free rate and CRP, in view of the
structure of interest rates in the current macroeconomic scenario, which will see a further increase in the long term,
continuing the progression of increases that began in the second half of 2022, it was prudentially decided to maintain the
approach that involves the use of differentiated discount rates for the discounting of cash flows expected over the explicit
forecast horizon and for the terminal value cash flow:
o concerning the risk-free component included in the cash flow discounting rate of the explicit forecast horizon, a
decision was made to use the average monthly return (December 2022) of the 10-year German Government bonds
(Bund);
o concerning the risk-free component included in the cash flow discounting rate of the terminal value (cash flow
projectable beyond the explicit forecast period), a decision was made to use the average annual return of 10-year
German government bonds (Bund) forecast for 2027, which is the last year of flow forecast period, estimated by the
Intesa Sanpaolo Research Department.
In line with the above, also for the Country Risk Premium (CRP) a methodology was considered that envisages the use
of differentiated values. In addition, it should be noted that there is no goodwill allocated to CGUs other than those
(mainly) operating in Italy - the \u201ccountry risk\u201d essentially coincides with the \u201cItaly risk\u201d. Therefore, in the methodological
choices for the impairment test of goodwill for the purpose of the 2022 Financial Statements, the CRP was calculated as
follows:
o concerning the CRP included in the cash flow discounting rate of the explicit forecast horizon, the average BTP-
Bund spread of December 2022 was considered;
o concerning the CRP included in the cash flow discounting rate of the terminal value, the average annual BTP-Bund
spread estimated for 2027 was considered, based on the medium-term forecast scenario mentioned previously;
- the equity risk premium \u2013 represented by the difference between stock market yield and the Return on Investment on risk-
free securities determined in reference to a sufficiently wide time horizon \u2013 was calculated on the basis of historical data,
given its higher degree of reliability and visibility and also in the light of the current macroeconomic context, which reflects
particularly volatile stock market prices not always representative of economic \u201cfundamentals,\u201d while also creating a
framework of uncertainty within which it is difficult to formulate reliable forecasts of results in order to estimate the equity
risk premium implicit in stock market quotations. Specifically, the geometric mean for the equity risk premium was used,
recorded on the US market for the period 1928-2022, adjusted for the differential between the US inflation rate and the
German inflation rate (the market used as the basis for risk-free calculation);
- the Beta coefficient, which measures the specific degree of risk of an individual company or business sector, was
calculated by identifying a sample of companies, comparable in business terms, for each CGU, and with reference to this
sample the average or median Beta figure used was that recorded on a monthly basis over a five-year period;
Summary of growth rates and discounting rates used
The following table presents a summary, for each CGU subject to impairment test, of the parameters relevant to determining
value in use: weighted average 2023-2027 growth rates for the cash flows of the various CGUs, including the allocation of
cash flows related to the central corporate assets, the \u201cg\u201d growth rates for terminal value purposes, and the various
discounting rates and inflation rates.
RATES/PARAMETERS
Nominal growth
rates for
impairment test
(2023-2027)
NOMINAL DISCOUNTING RATES
LONG-TERM \"G\"
GROWTH RATES
INFLATION
RATES
CGU
2022
flows
2022
Terminal
Value
2021
flows
2021
Terminal
Value
2022
2021
2022
CGU subject to impairment test
IMI Corporate & Investment
Banking
17.81%
10.57%
11.18%
7.61%
9.37%
2.06%
1.52%
1.96%
Insurance
1.69%
10.27%
10.88%
7.12%
8.89%
2.06%
1.52%
1.96%
Asset Management
1.96%
10.12%
10.73%
6.85%
8.61%
2.06%
1.52%
1.96%
Private Banking
2.59%
10.14%
10.75%
7.28%
9.05%
2.06%
1.52%
1.96%
Impairment testing results
The outcomes of the impairment test showed how the values in use of each of the CGUs to which amounts of goodwill were
allocated as at 31 December 2022 were higher than the respective book values. Thus, it was not necessary to proceed to any
impairment of the goodwill or brand name allocated to the CGUs.
In addition, it is specified that, for the sake of completeness of the analysis, the Group's total value in use was confirmed to be
greater than the sum of the carrying amounts of the individual CGUs.
Finally, with regard to the direct consequences of the Russia-Ukraine conflict on the Group\u2019s goodwill, it should be noted that
the goodwill relating to the Ukrainian subsidiary Pravex Bank, considered an autonomous CGU, was already fully written
down in the 2008 Financial Statements, as previously mentioned. In the case of the Russian subsidiary Joint-Stock Company
Banca Intesa (Banca Intesa Russia), in addition to not presenting allocated goodwill, its weight in the IMI Corporate &
Investment Banking CGU is absolutely immaterial on that CGU. Furthermore, as stated above, during impairment testing as at
31 December 2022 the IMI Corporate & Investment Banking CGU was found to have a recoverable amount in excess of its
book value.
Verification of the results of impairment testing using an alternative calculation method
As the value of a company or a business line may also be determined by discounting the distributable cash flows, understood
as the future cash flows estimated to be generated by the business area (the single CGUs) net of the share of income that
must be retained in equity to meet the supervisory requirements, the recoverability of the book value of the goodwill allocated
to the CGUs was verified also by discounting the aforementioned cash flows according to the excess capital version of the
Dividend Discounted Model (DDM).
With reference to the supervisory requirements, a Common Equity Tier 1 ratio of 10.25% was used, as resulting from the
Group Risk Appetite Framework (RAF), and significantly higher than the capital requirement (8.91%) communicated by the
ECB following the results of the Supervisory Review and Evaluation Process (SREP). For the Insurance CGU, a Solvency
Ratio of 170% was taken into account, as per the aforementioned RAF.
Thus, the distributable cash flows were obtained by integrating the expected cash flows determined as illustrated above,
factoring in an increase in capital surplus in relation to the above-mentioned minimum limits of capital, or a decrease in the
shares of income needed to cover the requirements deriving from the estimated growth trend in risk-weighted assets. These
flows, estimated for each CGU, were discounted by applying the same discounting rates and growth rates \u201cg\u201d used in applying
the Discounted Cash Flow (DCF) method.
The results of this method confirmed the results based on the calculation made using the DCF method.
Reconciliation of the results of the impairment test with the market valuation
During 2022, the Intesa Sanpaolo stock price declined (-8.6%) on the closing values at the end of 2021, underperforming the
Italian sector index (FTSE Italia All-Share Banks, approximately -4%), but outperforming the main Borsa Italiana reference
index (FTSE MIB Index, approximately -13.4%).
Specifically, after a particularly difficult start to the year following the outbreak of the military conflict between Russia and
Ukraine and the consequent deterioration of the macroeconomic scenario, in which stock prices slowed considerably, in the
second half of the year the stock recovered in part, rallying to a particularly evident degree in the fourth quarter of the year, to
close at around 2.08 euro at the end of December 2022. In early 2023 the Intesa Sanpaolo stock appreciated further, with
prices at the end of February of approximately 2.5 euro per share and a market capitalisation of approximately 47 billion euro
(with a P/BV multiple of approximately 0.7x).
The valuations and reports by financial analysts produced during 2022 showed on average a downward revision of the target
prices compared to the 2021 values, with a performance essentially in line with the decline in Intesa Sanpaolo stock prices. In
early 2023, above all following the reporting to the market of 2022 results, target prices were generally revised upwards, with
an average value of 2.85 euro per share.
Among the strengths of Intesa Sanpaolo, analysts underscore its strong brand and its highly qualified management, which is
valued by the market. In addition, they believe that the Bank will benefit from further increases in net interest income,
considering that on average Italian banks have a positive sensitivity to increases in the Euribor rate. Intesa Sanpaolo is also
capable of generating a level of profitability that is among the highest in Italy, while also benefiting from considerable
exposure to portfolio and asset management activities, and maintains a strong capital position. In addition, it conducted a
highly successful de-risking strategy that allows it to face a possible further deterioration of the macroeconomic scenario with
greater peace of mind. On the other hand, among the main elements that could prove especially critical, analysts reiterate the
customary risk of internal political instability for Italy, with possible consequences for the BTP-Bund spread, in addition to
possible outflows of assets managed if financial market tension should resume.
In any event, it bears observing that valuations expressed by financial analysts have different characteristics from the
\u201cfundamental\u201d assessment represented by value in use. The following may be observed regarding those valuations:
- the future cash flows forecast by analysts mainly extend to 2025, and are essentially aligned with, or marginally in excess
of, internal management estimates, whereas the forecasts used for impairment testing purposes cover a period of five
years that extends until 2027;
- the cost of the capital used (in not particularly frequent cases where this parameter is explicitly stated by analysts) is
often determined in overall terms at Group level; the cost of capital of Intesa Sanpaolo, used to discount the terminal
value cash flows, is marginally lower than the average value shown in the reports by the analysts. Analysts tend to use
discount rates implicit in stock market values, which are therefore higher on average as they are influenced by current
prices;
- similarly to the observations made for the impairment test of the 2021 Financial Statements, from the methodological
standpoint, use was often made of multiples (in terms of P/E or ROE) applied to current market prices or expected
profitability for the coming years 2023 or 2024; these are thus methods that provide a fair value, rather than a long-term
value in use.
It bears observing that the valuations in question were intended for financial investors and thus aimed to determine prices and
values in the short term. These valuations represent the value potentially obtainable from sale on the market of limited
amounts of securities, i.e. the disposal of a minority interest, and are therefore closely pegged to prices and to current market
conditions.
In brief, the difference in the values from the analysts\u2019 estimates, which reflect on a methodological difference between the fair
value and the value in use, may be explained by the following factors:
- different unit of valuation: as stated, the fair value calculated by the analysts represents the price of a single share,
different from the value in use, which measures the Bank\u2019s entire capital. However, there is a control premium between
the two values, which is lacking in the former case, and which is generally valued within a range of 15% to 25%;
- different time horizon of reference considered by the market: the period covered by the estimates of the cash flows, as
mentioned, has a considerable impact on the valuation of the Group; given the time horizon considered by analysts,
which in general covers a period of 3 years, and deducting the control premium, the Group\u2019s total recoverable amount
would be, in terms of value per share, in line with that given by analysts as the target price;
- different value of the cost of capital: the analysts\u2019 estimates, deriving from stock market prices, factor in elements external
to the Group\u2019s ability to generate profits for the purpose of remunerating its shareholders.
Finally, it is believed that impairment tests must be performed with the awareness of the fact that the current economic
situation, penalised by the geopolitical context, impacts expected short- and medium-term cash flows from operating activities,
without however in any way affecting the Intesa Sanpaolo Group\u2019s primary sources of income, which are also positively
impacted by rising interest rates, and competitive edges, as has also been demonstrated by the results of the past few years
in which forecast targets have consistently been achieved, and the income dynamics for 2022.
In this regard, it should be noted that in recent years the Group has sold businesses or equity investments that have
generated significant gains from disposal (e.g. Setefi, Allfunds Bank, Intrum, the merchant acquiring business, Fund
Administration in Luxembourg and the training business), confirming the existence of hidden value within the Group that is not
reflected in the book values but is recognised in transactions with third parties. Moreover, the resilient and well diversified
business model, which focuses on the product factories where a large part of the difference in book values is concentrated,
guarantees a primary source of income for the Group even in adverse conditions solely in relation to the scenario of the
banking sector.
Accordingly, in developing the valuation model used for the purposes of impairment testing, the following precautions were
adopted:
\u2212 projected cash flows include the financial effects of the services provided by the Corporate Centres. Moreover, the final
figures for the last few years have been essentially in line with the forecast figures;
\u2212 the cost of capital was determined analytically, based on parameters taken from the markets for each CGU, depending
on the different risk of the respective businesses, also considering analytically the various risk factors.
Lastly, the parameters and information used to test the recoverability of intangible assets with indefinite useful life are
significantly influenced by the macroeconomic environment and financial market trends, which might undergo changes that
cannot be predicted at the present time. If, in the future, the macroeconomic scenario should deteriorate with respect to the
assumptions, this would have effects on the estimate of the various CGUs\u2019 cash flows and on the main assumptions adopted,
which could obviously yield results in the financial statements of the coming years different from those outlined in the
Financial Statements as at 31 December 2022. Nonetheless, it must be noted that the business units that have significant
amounts of goodwill (Insurance, Asset Management and Private Banking) have always had, and are expected also in the
future to have profitability that largely justifies the values of goodwill recognised.
Sensitivity analyses
Since the value in use is determined by using estimates and assumptions that may contain some level of uncertainty,
sensitivity analyses to verify the sensitivity of the results obtained to changes in the parameters and in the underlying
hypotheses, referring to the DCF method, were carried out, as required by the IAS/IFRS. These analyses are important in this
forecasting scenario characterised by a significant degree of uncertainty. In this regard, considering alternative scenarios and
stress factors in the main valuation and macro-economic variables makes it possible to evaluate the impacts on the
impairment test results related to the specific forecasting scenario.
For CGUs that present residual values of goodwill, the impact on the value in use of an increase of up to 50 bps in discount
rates and a decrease of up to 50 bps in the growth rate for terminal value purposes was verified. In addition, analyses were
conducted of changes in the Value in Use resulting from a decrease in the cash flows used for terminal value purposes. No
events of impairment would emerge in any of the CGUs tested, even in the event of an increase in discounting rates of 50
bps, and a decrease in the \u201cg\u201d rate of 50 bps or a decrease in the terminal value cash flow of 10%. The table below illustrates
the sensitivity (in percentage terms) of the Value in Use of the CGUs that present goodwill to changes in the \u201cg\u201d rate or
discounting rate of -/+10 basis points, as well as a reduction in the cash flows used for terminal value purposes of 10%.
CHANGE IN VALUE IN USE
Sensitivity
Sensitivity
to growth rate \"g\"
- 10 bps
Sensitivity
to discount rate
+ 10 bps
Sensitivity
to Terminal value
cash flows
- 10%
CGU
IMI Corporate & Investment Banking
-0.82%
-1.09%
-8.49%
Insurance
-0.78%
-1.05%
-6.44%
Asset Management
-0.80%
-1.07%
-6.50%
Private Banking
-0.80%
-1.07%
-6.52%
Based on the table above, changes in the Ke (increasing) or the \u201cg\u201d (decreasing) values within 10 bps would lead to a general
decrease in the values in use ranging between 0.78% and 1.09%. Regarding the cash flow considered for the purpose of the
terminal value, a 10% decrease of the same would lead to reductions in the values in use ranging between 6.50% and 8.49%.
In any event, no issues of impairment would arise for any CGU at that amount of sensitivity.
Still considering stress testing, analyses were performed with the aim of determining the limits for the main inputs, beyond
which impairment testing of the CGUs would require the recognition of impairment. The following table presents the \u201cg\u201d growth
rates and discounting rates for each CGU that would result in a Value in Use in line with its carrying amounts, assuming equal
cash flows to be discounted.
Sensitivity
\"g\" growth rate
Difference
compared
to the \"g\"
rate used
TV discounting
rate
Difference compared to
the Ke discounting rate
used
CGU
IMI Corporate & Investment Banking
0.10%
-198 bps
12.70%
152 bps
Insurance
-3.80%
-583 bps
15.16%
428 bps
Asset Management
-17.80%
-1.984 bps
23.62%
1.289 bps
Private Banking
-54.50%
-5.658 bps
45.27%
3.452 bps
As shown by the data contained in the table, the Values in Use of the CGUs would reduce until the book values, with
consequent impairment problems, only in correspondence with the significant worsening of the discounting rates (Ke) and the
\u201cg\u201d growth rates.
Finally, within the framework of analysis regarding possible changes in the cash flows of the CGUs on the basis of alternative
scenarios to those used for the purposes of this impairment test, account was taken of the impact on prospective cash flows
of the application of an alternative prospective macroeconomic scenario, consistent with the \u201cadverse\u201d scenario incorporated
into the Expected Credit Loss models used to measure loans pursuant to IFRS 9. This scenario envisages a general shock to
the Euro area economy, relating primarily to a very significant increase in the price of gas, with the introduction of a recession
for the years 2023 and 2024, with the resulting increase in inflation. The scenario presented above translates into a reduction
in cash flows at the Group level, which will also benefit from the provisions set aside in the 2022 Financial Statements in
response to the uncertainty in the prospective scenario and the significant reduction in risks associated with exposures to
Russian and Ukrainian counterparties following the de-risking measures taken and the provisions made, averaging 11% over
the forecasting horizon, with impacts spread across all CGUs.
Following this analysis, it was found that the reduction in cash flows over the 2023-2027 forecasting horizon, estimated as a
result of the application of an \u201cadverse\u201d scenario, would not entail issues of impairment for any of the Group\u2019s CGUs.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1055": { "value": "SECTION 11 \u2013 TAX ASSETS AND LIABILITIES \u2013 CAPTION 110 OF ASSETS AND CAPTION 60 OF LIABILITIES 11.1 Deferred tax assets: breakdown Deferred tax assets, recognised with regard to deductible temporary differences, totalled 14,753 million euro, of which 12,941 million euro refers to taxes recorded through profit or loss and 1,812 million euro to taxes with a balancing entry under shareholders\u2019 equity. The first of these amounts refers to losses brought forward, to the portion of tax benefits not offset in relation to adjustments to loans and provisions for risks and charges deductible in future years, and to the benefit from realignment of the taxable value of goodwill, trademarks and other intangible assets pursuant to Article 15, par. 10, 10-bis and 10-ter of Law Decree 185/2008. Deferred tax assets recorded as a balancing entry under shareholders\u2019 equity almost exclusively refer to tax on negative valuation reserves for financial assets measured at fair value through other comprehensive income, to the cash flow hedges and to recognition of actuarial losses on personnel funds. 11.2 Deferred tax liabilities: breakdown Deferred tax liabilities amounted to 2,009 million euro and the balancing entry is in the income statement (1,634 million euro) as well as in shareholders' equity (375 million euro). 11.3 Changes in deferred tax assets (through profit or loss) (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Initial amount 14,287 13,739 537 11 15,771 2. Increases 1,426 1,266 160 - 2,254 2.1 Deferred tax assets recognised in the period 1,233 1,107 126 - 1,442 a) related to previous years 326 326 - - 25 b) due to changes in accounting criteria - - - - - c) value recoveries - - - - - d) other 907 781 126 - 1,417 2.2 New taxes or tax rate increases 2 2 - - - 2.3 Other increases 190 156 34 - 741 2.4 Business combinations 1 1 - - 71 3. Decreases -2,772 -2,655 -116 -1 -3,738 3.1 Deferred tax assets eliminated in the period -1,519 -1,405 -113 -1 -2,331 a) reversals -1,401 -1,396 -4 -1 -2,087 b) write-offs - - - - -1 c) due to changes in accounting criteria - - - - - d) other -118 -9 -109 - -243 3.2 Tax rate reductions -1 -1 - - - 3.3 Other decreases -1,252 -1,249 -3 - -1,407 a) changes into tax credits pursuant to Law no. 214/2011 -851 -851 - - -1,254 b) other -401 -398 -3 - -153 3.4 Business combinations - - - - - 4. Final amount 12,941 12,350 581 10 14,287 Among Increases, sub-caption a) related to previous years is made up of 320 million euro for the recognition of the deferred tax assets on part of tax losses carried forward of the former UBI Banca. Again, among Increases, sub-caption d) other refers mainly to the recognition of convertible deferred tax assets on the portion of the tax loss that is attributable to the reversal of accumulated adjustments to loans and goodwill and the deductible temporary differences arising during the year, connected to provisions for risks and charges. With regard to the insurance companies, within the framework of the Increases, sub-caption d) others primarily referred to the recognition of deferred tax assets on the goodwill arising from the merger of Cargeas Assicurazioni S.p.A. in 2022. Other increases mainly consist of the write-off of netting against deferred tax liabilities, applied as at 31 December 2021. \u201cBusiness combinations\u201d include the balance contributed by Compagnie de Banque Priv\u00e9e Quilvest S.A. (CBPQ), which entered the scope of consolidation in 2022. Among Decreases, sub-caption 3.1 a) reversals mainly refer to the elimination of deferred tax assets pursuant to Law no. 214/2011 and deferred tax assets previously recorded in relation to provisions for risks and charges, as a result of their use during the year. Among Other decreases, sub-caption a) changes into tax credits pursuant to Law no. 214/2011 refers to the information set out in Part C, table 21.1. Again, among Other decreases, sub-caption b) other refers to the netting against deferred tax liabilities for the year. 11.4 Changes in deferred tax assets pursuant to Law 214/2011 (millions of euro) 31.12.2022 31.12.2021 1. Initial amount 8,758 10,010 2. Increases 470 954 3. Decreases -1,740 -2,206 3.1 Reversals -865 -925 3.2 Changes into tax credits -851 -1,254 a) from losses for the year - -537 b) from fiscal losses -851 -717 3.3 Other decreases -24 -27 4. Final amount 7,488 8,758 11.5 Changes in deferred tax liabilities (through profit or loss) (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Initial amount 1,337 652 660 25 1,253 2. Increases 660 129 531 - 806 2.1 Deferred tax liabilities recognised in the period 521 15 506 - 124 a) related to previous years - - - - - b) due to changes in accounting criteria - - - - - c) other 521 15 506 - 124 2.2 New taxes or tax rate increases - - - - - 2.3 Other increases 121 96 25 - 402 2.4 Business combinations 18 18 - - 280 3. Decreases -363 -275 -88 - -722 3.1 Deferred tax liabilities eliminated in the period -270 -182 -88 - -629 a) reversals -75 -74 -1 - -35 b) due to changes in accounting criteria - - - - - c) other -195 -108 -87 - -594 3.2 Tax rate reductions - - - - - 3.3 Other decreases -93 -93 - - -93 3.4 Business combinations - - - - - 4. Final amount 1,634 506 1,103 25 1,337 Among Increases, sub-caption c) other mainly refers to taxable temporary differences arising during the year, in relation to the tax amortisation of the brand name and other intangible assets \u201crealigned\u201d in the previous year in accordance with Article 110, paragraphs 8 and 8-bis of Law Decree no. 104/2020. With regard to the insurance companies, among Increases, sub-caption c) refers primarily to deferred taxation relating to the measurement of securities through profit or loss. Other increases mainly consist of the write-off of netting against deferred tax assets through profit or loss applied as at 31 December 2021. \u201cBusiness combinations\u201d include the balance contributed by Compagnie de Banque Priv\u00e9e Quilvest S.A. (CBPQ), which entered the scope of consolidation in 2022. Among Decreases, sub-caption c) other relates to the release of the deferred tax assets recognised as at 31 December 2021 on intangible assets subject to tax realignment pursuant to Article 15, paragraph 10, of Law Decree no. 185/2008. With regard to the insurance companies, among Decreases, sub-caption c) refers primarily to deferred taxation relating to the measurement of securities and the reduction in technical reserves. Other decreases mainly relate to the netting against deferred tax assets through profit or loss for the year. 11.6 Changes in deferred tax assets (recorded in equity) (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Initial amount 966 826 136 4 1,406 2. Increases 1,419 1,098 317 4 386 2.1 Deferred tax assets recognised in the period 1,370 1,053 317 - 240 a) related to previous years - - - - - b) due to changes in accounting criteria - - - - - c) other 1,370 1,053 317 - 240 2.2 New taxes or tax rate increases 4 - - 4 5 2.3 Other increases 45 45 - - 137 2.4 Business combinations - - - - 4 3. Decreases -573 -573 - - -826 3.1 Deferred tax assets eliminated in the period -467 -467 - - -258 a) reversals -453 -453 - - -178 b) write-offs - - - - - c) due to changes in accounting criteria - - - - - d) other -14 -14 - - -80 3.2 Tax rate reductions - - - - -6 3.3 Other decreases -106 -106 - - -562 3.4 Business combinations - - - - - 4. Final amount 1,812 1,351 453 8 966 Among Increases, sub-caption c) other mainly refers to deductible temporary differences arising during the year, connected with the results of financial assets measured at fair value through other comprehensive income and cash flow hedging derivatives. For the insurance companies, among Increases, sub-caption c) others refers primarily to the effects on taxation of the measurement of securities available for sale, the measurement of which has effects on valuation reserves. Other increases mainly refer to the write-off of netting against deferred tax liabilities recorded in equity, applied as at 31 December 2021. Among Decreases, sub-caption a) reversals mainly refers to the elimination of deferred tax assets previously recorded in relation to the fair value measurement of cash flow hedging derivatives and financial assets measured at fair value through other comprehensive income following the adjustment of the valuation effects or the related realisation during the year. Caption 3.3 Other decreases refers mainly to the netting against deferred tax liabilities recorded in equity. 11.7 Changes in deferred tax liabilities (recorded in equity) (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Initial amount 585 221 363 1 1,492 2. Increases 239 239 - - 370 2.1 Deferred tax liabilities recognised in the period 154 154 - - 182 a) related to previous years - - - - - b) due to changes in accounting criteria - - - - - c) other 154 154 - - 182 2.2 New taxes or tax rate increases - - - - - 2.3 Other increases 85 85 - - 161 2.4 Business combinations - - - - 27 3. Decreases -449 -255 -194 - -1,277 3.1 Deferred tax liabilities eliminated in the period -288 -119 -169 - -498 a) reversals -103 -103 - - -12 b) due to changes in accounting criteria - - - - - c) other -185 -16 -169 - -486 3.2 Tax rate reductions - - - - - 3.3 Other decreases -161 -136 -25 - -779 3.4 Business combinations - - - - - 4. Final amount 375 205 169 1 585 Among Increases, sub-caption c) other refers to taxable temporary differences arising during the year connected with the measurement of financial assets measured at fair value through other comprehensive income and cash flow hedging derivatives. Other increases mainly consist of the write-off of netting against deferred tax assets applied as at 31 December 2021. Among Decreases, sub-caption a) reversals mainly refers to the discharge of deferred tax liabilities previously recorded in relation to the valuation of financial assets measured at fair value through other comprehensive income. With regard to the insurance companies, among Decreases, sub-caption c) others refers primarily to the measurement of securities with an impact on technical reserves. Caption 3.3 Other decreases mainly relates to the netting against deferred tax assets recorded in equity and the netting against deferred tax assets through profit or loss. As indicated in the accounting policies, with regard to current and deferred taxation, no provision is made in the financial statements for reserves subject to latent taxation only in the event of distribution, since the size of the available reserves which have already been taxed leads to the belief that the Bank will not undertake any transactions which may cause taxation of those untaxed reserves. Probability test on deferred taxation IAS 12 requires for deferred tax assets and liabilities to be recognised according to the following criteria: \u2212 a deferred tax liability (or DTL) must be recognised, as a general rule, for all taxable temporary differences; \u2212 a deferred tax asset (or DTA) must be recognised for all deductible temporary differences to the extent that it is probable that taxable income will be earned that can offset the deductible temporary differences. Deferred tax assets not recognised in the past - inasmuch as the conditions for their recognition were not met - are recognised during the year in which those conditions arise. Deferred tax assets are then divided into \u201celigible\u201d deferred tax assets and \u201cineligible\u201d deferred tax assets. For the former, as illustrated in greater detail hereinafter, the regulations set out a specific mechanism for conversion into tax credits which legitimises, in and of itself, their recognition in the financial statements. Instead, the book value of \u201cineligible\u201d deferred tax assets must be tested to determine whether it is likely that taxable income will be earned in the future that will ensure their recovery (probability test). \u201cEligible\u201d deferred tax assets amounted to 7,488 million euro, while \u201cineligible\u201d deferred tax assets subjected to the probability test amounted to 7,265 million euro (joined by 2,009 million euro in deferred tax liabilities). The probability test on the \u201cineligible\u201d deferred tax assets carried in the 2022 Financial Statements separately regarded, due to the different conditions of use of the underlying temporary differences, the following cases: \u2212 IRES deferred tax assets recognised in relation to previous tax losses. In particular, these were deferred tax assets relating to the tax losses of Intesa Sanpaolo and the merged companies (mainly generated by the former Venetian banks and by the companies in the former UBI Group); \u2212 deferred tax assets recognised for tax losses of the Luxembourg subsidiary Intesa Sanpaolo Holding International (ISPHI); \u2212 other deferred tax assets triggered by deductible temporary differences for IRES tax purposes, arising at the Group companies included in the consolidated financial statements (\u201cOther deferred tax assets - IRES\u201d); \u2212 deferred tax assets triggered by deductible temporary differences for IRAP tax purposes (\u201cDeferred tax assets - IRAP\u201d). In the 2022 Financial Statements, deferred tax assets relating to previous tax losses of the parent company Intesa Sanpaolo were recognised for a total of 2,277 89 million euro, of which 1,755 million euro equal to the base IRES tax rate of 24% and 522 million euro to the additional IRES tax rate of 3.5%. Of this amount of deferred tax assets, 320 million euro consists of deferred tax assets at 24% recognised for the first time in the financial statements as at 31 December 2022 as regards the tax losses carried forward of the former UBI Banca (\u201cnew DTAs\u201d; see below). The probability test on the deferred tax assets relating to the tax losses was conducted considering the individual position of Intesa Sanpaolo. For the losses of the former Venetian banks, the possibility of use on an exclusively individual basis by Intesa Sanpaolo derives from the regulations that set out the transfer (Art. 7, paragraph 3 of Law Decree no. 99/2017, converted with amendments by Law no. 121/2017, and Art. 15 of Law Decree no. 18/2016) at the time of the purchase of the business lines of Banca Popolare di Vicenza and Veneto Banca (in 2017) and the subsequent merger of their former subsidiaries Banca Nuova and Banca Apulia (effective on 1 January 2018 and 1 January 2019, respectively). For the losses of UBI Banca and the other companies in the former UBI Group merged into Intesa Sanpaolo, the same possibility is triggered by the incorporation of those companies into Intesa Sanpaolo during 2021 and 2022. For the purposes of the probability test, the income prospects of Intesa Sanpaolo have been estimated, for the years 2023- 2027, using the economic-financial forecasts drawn up by the Planning and Control Department (\u201dForecasts\u201d or \u201cEstimates\u201d). More specifically: for the years 2023-2025, the Estimates were prepared starting from the 2023 Budget, which takes into account the update of the macroeconomic and banking scenario illustrated in the previous chapter on the impairment test of intangible values, and reflect the dynamics underlying the 2022-2025 Business Plan (\u201cPlan\u201d), drawn up by the management of Intesa Sanpaolo and submitted for approval by the Board of Directors on 4 February 2022; for 2026 and 2027, they represent an \u201cinertial\u201d extrapolation of the new scenario, without considering the effects of managerial leverage (taken from the same database used for the impairment test on intangibles in the 2022 Financial Statements); for the years following 2027, it was prudently assumed that the gross result would remain constant, therefore, equal to that estimated for 2027 (without, therefore, considering a growth rate \u201cg\u201d). The Forecasts, which benefit from the allowances for risks recognised in the 2022 Financial Statements to reflect the uncertainties regarding the prospective scenario and the significant reduction in risks associated with exposures to Russian and Ukrainian counterparties following the de-risking measures taken, were prudentially prepared, in order to achieve a sufficient degree of confidence regarding the recognition of \u201cnew DTAs\u201d relating to the prior losses of the former UBI Banca, assuming \u2013 in addition to the \u201cbase\u201d scenario \u2013 a scenario less favourable \u2013 than the \u201cbase\u201d one \u2013 consistent with the \u201cadverse\u201d scenario incorporated into the Expected Credit Loss models used for the valuation of loans pursuant to IFRS 9, which essentially provides for a general shock to the Eurozone economy, relating primarily to a very significant increase in the price of gas, with the introduction of a recession hypothesis for the years 2023 and 2024, with the resulting increase in inflation and a negative impact on Italian GDP (\u201c Adverse scenario\u201d). Even considering the Adverse scenario, based on the analyses conducted, total absorption of the deferred tax assets in question \u2013 and also of the \u201cnew DTAs\u201d recognised in the 2022 Financial Statements \u2013 could be achieved over a time horizon deemed compatible with the \u201cprobability\u201d of recovery required by IAS 12. With particular regard to the \u201cnew DTAs\u201d recognised in the 2022 Financial Statements, as at the date of the merger of UBI Banca into Intesa Sanpaolo, UBI Banca had tax losses carried forward, largely relating to the former Good Banks (in turn merged into UBI in 2017 and 2018) against of which UBI Banca had not recognised deferred tax assets. During the PPA, and in the 2020 and 2021 Financial Statements, Intesa Sanpaolo had decided to adopt an approach in line with that of UBI Banca, prudently choosing not to recognise the above deferred tax assets. However, it had been decided to reconsider the issue in later years, based on the trend in the Bank\u2019s income performance within the evolution of the external situation. In 2022: i) the right to full use by Intesa Sanpaolo of the tax losses of UBI Banca (both those for which deferred tax assets had already been recognised and the others) was confirmed by the Italian Revenue Agency in response to a specific ruling request filed by the Parent Company (the reply was received on 11 July 2022); and ii) the Parent Company and the National Resolution Fund (which had sold UBI Banca the equity investments in the former Good Banks) held talks aimed at regulating in the post-merger structure the right granted to the National Resolution Fund, on the basis of the initial agreements, to receive a part of the tax benefit that will be achieved in the future when the tax losses of the former Good Banks are concretely used. The favourable outcome to the above ruling request , along with several objective elements, mainly relating to changes in interest rates and the ensuing expected performance of the net interest income of Intesa Sanpaolo, which have a positive impact on the earnings prospects of Intesa Sanpaolo, made it possible to reconsider, when preparing the 2022 Financial Statements, the extremely conservative attitude taken until now with regard to the recognition of new deferred tax assets on the tax losses of the former UBI Banca. However, even in such an improving scenario there continue to be circumstances \u2013 such as the macroeconomic framework, which is still uncertain, due in part to the Russia-Ukraine conflict, and the wholly preliminary stage of the talks with the National Resolution Fund \u2013 that suggest caution in recognising all the deferred tax assets in question. On the basis of the foregoing, for the time being it was decided to quantify the amount of deferred tax assets to be recognised in the 2022 income statement of Intesa Sanpaolo at 320 million euro. The possibility of recognising the residual deferred tax assets, which in view of the outcome of the aforementioned ruling request and net of a prudential estimate of the potential retrocession to the National Resolution Fund amount to 320 million euro, will be assessed in the upcoming financial reports, as a function of the Bank\u2019s earnings performance and the aforementioned talks with the National Resolution Fund. In the 2022 Financial Statements, deferred tax assets of 44 million euro are also entered, which derive from previous years\u2019 tax losses of the Luxembourg subsidiary Intesa Sanpaolo Holding International (ISPHI). The analyses carried out in relation to the income forecasts of the Luxembourg subsidiary confirm the ability of that company to use the losses against which deferred tax assets are recognised. 89 That amount is already net of the benefit deriving from the transformation into tax credits of a total of 220 million euro (of which 110 million euro referring to 2020 and 110 million euro referring to 2021) in deferred tax assets relating to tax losses, due to the sales, carried out by 31 December 2020 and 31 December 2021, respectively, of non-performing loans pursuant to Art. 55 of Law Decree no. 18/2020 (\u201cCura Italia\u201d Decree), and Art 19 of Law Decree no. 73/2021 (\u201cSostegni bis\u201d Decree). In conducting the probability test for the other deferred tax assets for IRES and the deferred tax assets for IRAP carried in the Group\u2019s Financial Statements as at 31 December 2022, deferred tax assets arising from temporary deductible differences associated with impairment losses on loans (other than those deriving from the first-time adoption of the IFRS 9; see below), as well as - if recognised within 2014 \u2013 from goodwill and other intangible assets with indefinite useful lives 90 (\u201celigible deferred tax assets\u201d and \u201celigible temporary differences\u201d), were considered separately from others. In this regard, it bears noting that, effective from the tax period ended 31 December 2011, deferred tax assets (for corporate income tax or IRES) recognised to account for tax losses due to the deferred deduction of \u201celigible\u201d temporary differences are eligible for conversion into tax credits (article 2, paragraph 56-bis, of Law Decree 225 of 29 December 2010, introduced by article 9 of Law Decree 201 of 6 December 2011). Effective from the 2013 tax period, a similar conversion is allowed where the regional business tax (IRAP) return shows a negative net production value also in relation to IRAP deferred tax assets that pertain to \u201celigible\u201d temporary differences that have contributed to determining the negative net production value (article 2, paragraph 56-bis.1, of Law Decree 225 of 29 December 2010, introduced by Law 147/2013). The above convertibility forms \u2013 which are in addition to that already envisaged for cases in which the separate financial statements show a loss for the year (article 2, paragraphs 55 and 56, of Law Decree 225/2010, as most recently amended by Law 147/2013) \u2013 provide an additional, supplementary recovery method suited to ensuring the recovery of \u201celigible\u201d deferred tax assets in all situations, regardless of the company\u2019s future profitability. If in a given year there are surplus \u201celigible\u201d temporary differences with respect to taxable income or net production value, the recovery of deferred tax assets takes the form not of a decrease in current taxes, but of the recognition of deferred tax assets on the tax loss or the negative net production value, convertible into tax credits pursuant to Art. 2, paragraphs 56-bis and 56-bis.1, of Law Decree 225/2010. The convertibility of deferred tax assets on tax losses and negative net production values that result from eligible temporary differences is therefore a suitable and sufficient condition for the recognition of \u201celigible\u201d deferred tax assets, making it possible to exclude them from the area of application of the probability test. A limit to the straight convertibility of \u201celigible\u201d deferred tax assets was introduced by art. 11 of Law Decree 59 of 3 May 2016, amended by Law Decree 237 of 23 December 2016, which subordinated the transformation into tax credits of the eligible deferred tax assets which were not matched by an actual prepayment of taxes (so-called \u201ctype 2 DTA\u201d) to the payment of an annual fee, equal to 1.5% of their overall value, for the years 2016-2030. Instead, no fee is due for the transformation into tax credits of the \u201celigible\u201d deferred tax assets which were matched by an actual prepayment of greater taxes (\u201ctype 1 DTA\u201d). Considering that the \u201celigible\u201d deferred tax assets recognised by the Companies that are part of the fiscal consolidation of Intesa Sanpaolo, as well as those included in the Parent Company\u2019s financial statements following the acquisition of the business lines of the former Venetian Banks and, most recently, those of the former UBI Group are all \u201ctype 1 DTA\u201d, the Group is not currently concretely required to pay this fee. Article 1, paragraphs 1067 and 1068 of the 2019 Budget Act (Law 145 of 30 December 2018) envisage the deductibility (both for IRES and IRAP purposes) over ten tax periods, starting from the one under way as at 31 December 2018, of the adjustments to loans to customers recognised in the financial statements of banks and financial institutions on first-time adoption of IFRS 9 91 . According to that clarified in the Explanatory Report on the Measure, deferred tax assets recognised in financial statements in relation to the deferral of said deduction cannot be converted into tax credits based on the aforementioned provisions of Law Decree no. 225/2010. Therefore, those taxes must be subject to probability testing. Based on the above, the probability test on other deferred tax assets - IRES was carried out as follows: \u2212 identifying the \u201cother deferred tax assets - IRES\u201d, i.e. those not relating to the tax losses of Intesa Sanpaolo or ISPHI, which were subject to a specific test to determine whether they could be recognised in the financial statements (see above); \u2212 identifying \u201cineligible\u201d deferred tax assets among other deferred tax assets, as they cannot be converted into tax credits (see above); \u2212 analysing such \u201cineligible\u201d deferred tax assets and deferred tax liabilities carried in the consolidated financial statements, distinguishing them by causal relationship and by foreseeable recovery timing; \u2212 provisionally determining the amount of the Group's future taxable income in order to verify its ability to recover the \u201cineligible\u201d \u201cother deferred tax assets - IRES\u201d. The estimate of future taxable income was made, for the years 2023-2027, using the same database used for the impairment test on intangibles in the 2022 Financial Statements (see above). For the subsequent years, an overhang of the forecasts was cautiously assumed, without considering a growth rate \u201cg\u201d. The analysis conducted indicated an IRES taxable base that was sufficient and adequate to allow recovery of the deferred tax assets relating to IRES carried in the financial statements as at 31 December 2022. Also for \u201cdeferred tax assets - IRAP\u201d, the probability test was conducted analytically, referring only to the \u201cineligible\u201d deferred tax assets (for those that can be converted into tax credits, as stated, the prospective certain use based on the cases of conversion into tax credits set out in paragraphs 56-bis and 56-bis.1 of Art. 2 of Law Decree 225/2010, effectively constitutes a sufficient prerequisite for recognition in the financial statements, implicitly passing the related probability test). The test was conducted by comparing the estimated forecast taxable income for IRAP purposes of Intesa Sanpaolo, estimated on the basis of the same forecast data assumed in carrying out the probability test on tax losses, with the cancelled ineligible temporary differences found as at 31 December 2022 and resulting in the residual IRAP taxable base for each year. Considering that, for IRAP purposes, different from that set out for IRES tax losses, there is no carrying forward of tax losses or the possibility of offsetting them as part of tax consolidation, if in one or more years the residual taxable base is negative, for example, the deferred tax assets - IRAP that can be recognised in the financial statements should be limited to only the amounts of the temporary differences that can be recovered in each year considered. The calculations performed resulted in a positive residual IRAP taxable base in each of the years included in the reference time horizon of the test. In support of the positive results of the probability test please note that: 90 With art. 17 of Law Decree 83 of 27 June 2015, the convertibility into tax credits was excluded (for any reason provided for by Law Decree 225 of 29 December 2010) of the deferred tax assets relating \u201cto the value of the goodwill and the other intangible assets entered for the first time starting from the financial statements relating to the year underway at the date the provision comes into force\u201d, i.e. starting from 2015. 91 The ten-year instalment period, which should have originally concluded in 2027, was extended by one year by the 2020 Budget Act (Law no. 160 of 27 December 2019). \u2212 the health situation is improving, resulting in a gradual easing of the containment measures adopted during the most critical phase of the pandemic, with the consequent favourable impacts on the relevant financial performance indicators; \u2212 the 2022 results of Intesa Sanpaolo are better than in the previous year, with a more significant increase in the more \u201cstable\u201d revenue components, confirming a solid profitability track record; \u2212 the forecast figures that form the basis of the estimate of the future taxable income prudentially incorporate a macroeconomic scenario less favourable than the \u201cbase\u201d scenario, which, however, shows an improvement in all variables relevant for tax purposes in the 2023-2027 period; \u2212 for the purposes of additional prudence, when performing the probability test, the taxable profit for the years where no specific estimate of future profits is available, even when there is a trend of growth in profits, is assumed to be equal (i.e. not increasing with respect) to the taxable profit of the last year covered by the Forecasts; \u2212 in any event, the future earnings estimates used for the probability test are updated at least annually to take account of intervening changes in the market scenarios; \u2212 under the current Italian regulations, tax losses can be carried forward without time limits (Article 84, Combined Tax Regulations); \u2212 the negative taxable income does not derive from a natural \u201cinability\u201d to generate taxable income, but rather from some rules specific to the Italian tax system, which resulted in deferred tax assets whose reversals penalised and will continue to penalise (but only up to 2029) the taxable income (accrual of adjustments to loans not deducted until 2014; accrual of expected losses on loans to customers recognised as a result the IFRS 9 FTA; and repeated deferral of the start and end of the recovery period for goodwill realigned for payment); \u2212 almost all the deferred tax assets on tax losses relate to the entities acquired by Intesa Sanpaolo and arose prior to the acquisition by Intesa Sanpaolo. Therefore, the prospects for recovery resulting from the estimates are considered to meet the \u201cprobability of recovery\u201d requirement of IAS 12 and, consequently, the above-mentioned deferred tax assets can be recognised in the balance sheet as at 31 December 2022 for their full amount. 11.8 Other information There is no other information to be noted in addition to the above. SECTION 13 \u2013 OTHER ASSETS \u2013 CAPTION 130 13.1 Other assets: breakdown (millions of euro) Captions Amounts to tax authorities 16,503 Amounts to be credited and items under processing 1,297 Cheques and other instruments held 455 Leasehold improvements 93 Transit items 9 Other 4,494 TOTAL 31.12.2022 22,851 TOTAL 31.12.2021 13,837 The sub-caption \u201cAmounts due from tax authorities\u201d includes tax credits related to the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees acquired as a result of transfer by direct beneficiaries or previous purchasers for a total of approximately 11 billion euro. The sub-caption \u201cOther\u201d includes the following main components: (i) prepayments and accrued income not reallocated of 367 million euro; (ii) costs incurred to obtain and execute contracts with customers for an amount of 524 million euro, mainly referring to costs for bonuses capitalised by Fideuram \u2013 Intesa Sanpaolo Private Banking (and, therefore, subject to amortisation for 68.7 million euro) as they are strictly related to the acquisition and maintenance of the funding; and (iii) pursuant to paragraphs 116 and following of IFRS 15, operating loans, i.e. loans for operations connected with the provision of non-financial activities and services, amounting to 150 million euro. SECTION 8 \u2013 OTHER LIABILITIES \u2013 CAPTION 80 8.1 Other liabilities: breakdown (millions of euro) Captions Amounts to be credited and items under processing 3,256 Due to suppliers 1,884 Due to tax authorities 1,340 Amounts due to third parties 333 Personnel charges 294 Due to social security entities 223 Other 3,730 TOTAL 31.12.2022 11,060 TOTAL 31.12.2021 15,639 The sub-caption \u201cOther\u201d includes the following main components: (i) unallocated accrued expenses and deferred income of 755 million euro; and (ii) payables to private bankers of 660 million euro. That sub-caption also includes, as required by paragraph 116 a) of IFRS 15, liabilities arising from contracts with customers of 112 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTaxReceivablesAndPayablesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1045": { "value": "SECTION 11 \u2013 TAX ASSETS AND LIABILITIES \u2013 CAPTION 110 OF ASSETS AND CAPTION 60 OF LIABILITIES 11.1 Deferred tax assets: breakdown Deferred tax assets, recognised with regard to deductible temporary differences, totalled 14,753 million euro, of which 12,941 million euro refers to taxes recorded through profit or loss and 1,812 million euro to taxes with a balancing entry under shareholders\u2019 equity. The first of these amounts refers to losses brought forward, to the portion of tax benefits not offset in relation to adjustments to loans and provisions for risks and charges deductible in future years, and to the benefit from realignment of the taxable value of goodwill, trademarks and other intangible assets pursuant to Article 15, par. 10, 10-bis and 10-ter of Law Decree 185/2008. Deferred tax assets recorded as a balancing entry under shareholders\u2019 equity almost exclusively refer to tax on negative valuation reserves for financial assets measured at fair value through other comprehensive income, to the cash flow hedges and to recognition of actuarial losses on personnel funds. 11.2 Deferred tax liabilities: breakdown Deferred tax liabilities amounted to 2,009 million euro and the balancing entry is in the income statement (1,634 million euro) as well as in shareholders' equity (375 million euro). 11.3 Changes in deferred tax assets (through profit or loss) (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Initial amount 14,287 13,739 537 11 15,771 2. Increases 1,426 1,266 160 - 2,254 2.1 Deferred tax assets recognised in the period 1,233 1,107 126 - 1,442 a) related to previous years 326 326 - - 25 b) due to changes in accounting criteria - - - - - c) value recoveries - - - - - d) other 907 781 126 - 1,417 2.2 New taxes or tax rate increases 2 2 - - - 2.3 Other increases 190 156 34 - 741 2.4 Business combinations 1 1 - - 71 3. Decreases -2,772 -2,655 -116 -1 -3,738 3.1 Deferred tax assets eliminated in the period -1,519 -1,405 -113 -1 -2,331 a) reversals -1,401 -1,396 -4 -1 -2,087 b) write-offs - - - - -1 c) due to changes in accounting criteria - - - - - d) other -118 -9 -109 - -243 3.2 Tax rate reductions -1 -1 - - - 3.3 Other decreases -1,252 -1,249 -3 - -1,407 a) changes into tax credits pursuant to Law no. 214/2011 -851 -851 - - -1,254 b) other -401 -398 -3 - -153 3.4 Business combinations - - - - - 4. Final amount 12,941 12,350 581 10 14,287 Among Increases, sub-caption a) related to previous years is made up of 320 million euro for the recognition of the deferred tax assets on part of tax losses carried forward of the former UBI Banca. Again, among Increases, sub-caption d) other refers mainly to the recognition of convertible deferred tax assets on the portion of the tax loss that is attributable to the reversal of accumulated adjustments to loans and goodwill and the deductible temporary differences arising during the year, connected to provisions for risks and charges. With regard to the insurance companies, within the framework of the Increases, sub-caption d) others primarily referred to the recognition of deferred tax assets on the goodwill arising from the merger of Cargeas Assicurazioni S.p.A. in 2022. Other increases mainly consist of the write-off of netting against deferred tax liabilities, applied as at 31 December 2021. \u201cBusiness combinations\u201d include the balance contributed by Compagnie de Banque Priv\u00e9e Quilvest S.A. (CBPQ), which entered the scope of consolidation in 2022. Among Decreases, sub-caption 3.1 a) reversals mainly refer to the elimination of deferred tax assets pursuant to Law no. 214/2011 and deferred tax assets previously recorded in relation to provisions for risks and charges, as a result of their use during the year. Among Other decreases, sub-caption a) changes into tax credits pursuant to Law no. 214/2011 refers to the information set out in Part C, table 21.1. Again, among Other decreases, sub-caption b) other refers to the netting against deferred tax liabilities for the year. 11.4 Changes in deferred tax assets pursuant to Law 214/2011 (millions of euro) 31.12.2022 31.12.2021 1. Initial amount 8,758 10,010 2. Increases 470 954 3. Decreases -1,740 -2,206 3.1 Reversals -865 -925 3.2 Changes into tax credits -851 -1,254 a) from losses for the year - -537 b) from fiscal losses -851 -717 3.3 Other decreases -24 -27 4. Final amount 7,488 8,758 11.5 Changes in deferred tax liabilities (through profit or loss) (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Initial amount 1,337 652 660 25 1,253 2. Increases 660 129 531 - 806 2.1 Deferred tax liabilities recognised in the period 521 15 506 - 124 a) related to previous years - - - - - b) due to changes in accounting criteria - - - - - c) other 521 15 506 - 124 2.2 New taxes or tax rate increases - - - - - 2.3 Other increases 121 96 25 - 402 2.4 Business combinations 18 18 - - 280 3. Decreases -363 -275 -88 - -722 3.1 Deferred tax liabilities eliminated in the period -270 -182 -88 - -629 a) reversals -75 -74 -1 - -35 b) due to changes in accounting criteria - - - - - c) other -195 -108 -87 - -594 3.2 Tax rate reductions - - - - - 3.3 Other decreases -93 -93 - - -93 3.4 Business combinations - - - - - 4. Final amount 1,634 506 1,103 25 1,337 Among Increases, sub-caption c) other mainly refers to taxable temporary differences arising during the year, in relation to the tax amortisation of the brand name and other intangible assets \u201crealigned\u201d in the previous year in accordance with Article 110, paragraphs 8 and 8-bis of Law Decree no. 104/2020. With regard to the insurance companies, among Increases, sub-caption c) refers primarily to deferred taxation relating to the measurement of securities through profit or loss. Other increases mainly consist of the write-off of netting against deferred tax assets through profit or loss applied as at 31 December 2021. \u201cBusiness combinations\u201d include the balance contributed by Compagnie de Banque Priv\u00e9e Quilvest S.A. (CBPQ), which entered the scope of consolidation in 2022. Among Decreases, sub-caption c) other relates to the release of the deferred tax assets recognised as at 31 December 2021 on intangible assets subject to tax realignment pursuant to Article 15, paragraph 10, of Law Decree no. 185/2008. With regard to the insurance companies, among Decreases, sub-caption c) refers primarily to deferred taxation relating to the measurement of securities and the reduction in technical reserves. Other decreases mainly relate to the netting against deferred tax assets through profit or loss for the year. 11.6 Changes in deferred tax assets (recorded in equity) (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Initial amount 966 826 136 4 1,406 2. Increases 1,419 1,098 317 4 386 2.1 Deferred tax assets recognised in the period 1,370 1,053 317 - 240 a) related to previous years - - - - - b) due to changes in accounting criteria - - - - - c) other 1,370 1,053 317 - 240 2.2 New taxes or tax rate increases 4 - - 4 5 2.3 Other increases 45 45 - - 137 2.4 Business combinations - - - - 4 3. Decreases -573 -573 - - -826 3.1 Deferred tax assets eliminated in the period -467 -467 - - -258 a) reversals -453 -453 - - -178 b) write-offs - - - - - c) due to changes in accounting criteria - - - - - d) other -14 -14 - - -80 3.2 Tax rate reductions - - - - -6 3.3 Other decreases -106 -106 - - -562 3.4 Business combinations - - - - - 4. Final amount 1,812 1,351 453 8 966 Among Increases, sub-caption c) other mainly refers to deductible temporary differences arising during the year, connected with the results of financial assets measured at fair value through other comprehensive income and cash flow hedging derivatives. For the insurance companies, among Increases, sub-caption c) others refers primarily to the effects on taxation of the measurement of securities available for sale, the measurement of which has effects on valuation reserves. Other increases mainly refer to the write-off of netting against deferred tax liabilities recorded in equity, applied as at 31 December 2021. Among Decreases, sub-caption a) reversals mainly refers to the elimination of deferred tax assets previously recorded in relation to the fair value measurement of cash flow hedging derivatives and financial assets measured at fair value through other comprehensive income following the adjustment of the valuation effects or the related realisation during the year. Caption 3.3 Other decreases refers mainly to the netting against deferred tax liabilities recorded in equity. 11.7 Changes in deferred tax liabilities (recorded in equity) (millions of euro) 31.12.2022 Of which: 31.12.2021 Banking group Insurance companies Other companies 1. Initial amount 585 221 363 1 1,492 2. Increases 239 239 - - 370 2.1 Deferred tax liabilities recognised in the period 154 154 - - 182 a) related to previous years - - - - - b) due to changes in accounting criteria - - - - - c) other 154 154 - - 182 2.2 New taxes or tax rate increases - - - - - 2.3 Other increases 85 85 - - 161 2.4 Business combinations - - - - 27 3. Decreases -449 -255 -194 - -1,277 3.1 Deferred tax liabilities eliminated in the period -288 -119 -169 - -498 a) reversals -103 -103 - - -12 b) due to changes in accounting criteria - - - - - c) other -185 -16 -169 - -486 3.2 Tax rate reductions - - - - - 3.3 Other decreases -161 -136 -25 - -779 3.4 Business combinations - - - - - 4. Final amount 375 205 169 1 585 Among Increases, sub-caption c) other refers to taxable temporary differences arising during the year connected with the measurement of financial assets measured at fair value through other comprehensive income and cash flow hedging derivatives. Other increases mainly consist of the write-off of netting against deferred tax assets applied as at 31 December 2021. Among Decreases, sub-caption a) reversals mainly refers to the discharge of deferred tax liabilities previously recorded in relation to the valuation of financial assets measured at fair value through other comprehensive income. With regard to the insurance companies, among Decreases, sub-caption c) others refers primarily to the measurement of securities with an impact on technical reserves. Caption 3.3 Other decreases mainly relates to the netting against deferred tax assets recorded in equity and the netting against deferred tax assets through profit or loss. As indicated in the accounting policies, with regard to current and deferred taxation, no provision is made in the financial statements for reserves subject to latent taxation only in the event of distribution, since the size of the available reserves which have already been taxed leads to the belief that the Bank will not undertake any transactions which may cause taxation of those untaxed reserves. Probability test on deferred taxation IAS 12 requires for deferred tax assets and liabilities to be recognised according to the following criteria: \u2212 a deferred tax liability (or DTL) must be recognised, as a general rule, for all taxable temporary differences; \u2212 a deferred tax asset (or DTA) must be recognised for all deductible temporary differences to the extent that it is probable that taxable income will be earned that can offset the deductible temporary differences. Deferred tax assets not recognised in the past - inasmuch as the conditions for their recognition were not met - are recognised during the year in which those conditions arise. Deferred tax assets are then divided into \u201celigible\u201d deferred tax assets and \u201cineligible\u201d deferred tax assets. For the former, as illustrated in greater detail hereinafter, the regulations set out a specific mechanism for conversion into tax credits which legitimises, in and of itself, their recognition in the financial statements. Instead, the book value of \u201cineligible\u201d deferred tax assets must be tested to determine whether it is likely that taxable income will be earned in the future that will ensure their recovery (probability test). \u201cEligible\u201d deferred tax assets amounted to 7,488 million euro, while \u201cineligible\u201d deferred tax assets subjected to the probability test amounted to 7,265 million euro (joined by 2,009 million euro in deferred tax liabilities). The probability test on the \u201cineligible\u201d deferred tax assets carried in the 2022 Financial Statements separately regarded, due to the different conditions of use of the underlying temporary differences, the following cases: \u2212 IRES deferred tax assets recognised in relation to previous tax losses. In particular, these were deferred tax assets relating to the tax losses of Intesa Sanpaolo and the merged companies (mainly generated by the former Venetian banks and by the companies in the former UBI Group); \u2212 deferred tax assets recognised for tax losses of the Luxembourg subsidiary Intesa Sanpaolo Holding International (ISPHI); \u2212 other deferred tax assets triggered by deductible temporary differences for IRES tax purposes, arising at the Group companies included in the consolidated financial statements (\u201cOther deferred tax assets - IRES\u201d); \u2212 deferred tax assets triggered by deductible temporary differences for IRAP tax purposes (\u201cDeferred tax assets - IRAP\u201d). In the 2022 Financial Statements, deferred tax assets relating to previous tax losses of the parent company Intesa Sanpaolo were recognised for a total of 2,277 89 million euro, of which 1,755 million euro equal to the base IRES tax rate of 24% and 522 million euro to the additional IRES tax rate of 3.5%. Of this amount of deferred tax assets, 320 million euro consists of deferred tax assets at 24% recognised for the first time in the financial statements as at 31 December 2022 as regards the tax losses carried forward of the former UBI Banca (\u201cnew DTAs\u201d; see below). The probability test on the deferred tax assets relating to the tax losses was conducted considering the individual position of Intesa Sanpaolo. For the losses of the former Venetian banks, the possibility of use on an exclusively individual basis by Intesa Sanpaolo derives from the regulations that set out the transfer (Art. 7, paragraph 3 of Law Decree no. 99/2017, converted with amendments by Law no. 121/2017, and Art. 15 of Law Decree no. 18/2016) at the time of the purchase of the business lines of Banca Popolare di Vicenza and Veneto Banca (in 2017) and the subsequent merger of their former subsidiaries Banca Nuova and Banca Apulia (effective on 1 January 2018 and 1 January 2019, respectively). For the losses of UBI Banca and the other companies in the former UBI Group merged into Intesa Sanpaolo, the same possibility is triggered by the incorporation of those companies into Intesa Sanpaolo during 2021 and 2022. For the purposes of the probability test, the income prospects of Intesa Sanpaolo have been estimated, for the years 2023- 2027, using the economic-financial forecasts drawn up by the Planning and Control Department (\u201dForecasts\u201d or \u201cEstimates\u201d). More specifically: for the years 2023-2025, the Estimates were prepared starting from the 2023 Budget, which takes into account the update of the macroeconomic and banking scenario illustrated in the previous chapter on the impairment test of intangible values, and reflect the dynamics underlying the 2022-2025 Business Plan (\u201cPlan\u201d), drawn up by the management of Intesa Sanpaolo and submitted for approval by the Board of Directors on 4 February 2022; for 2026 and 2027, they represent an \u201cinertial\u201d extrapolation of the new scenario, without considering the effects of managerial leverage (taken from the same database used for the impairment test on intangibles in the 2022 Financial Statements); for the years following 2027, it was prudently assumed that the gross result would remain constant, therefore, equal to that estimated for 2027 (without, therefore, considering a growth rate \u201cg\u201d). The Forecasts, which benefit from the allowances for risks recognised in the 2022 Financial Statements to reflect the uncertainties regarding the prospective scenario and the significant reduction in risks associated with exposures to Russian and Ukrainian counterparties following the de-risking measures taken, were prudentially prepared, in order to achieve a sufficient degree of confidence regarding the recognition of \u201cnew DTAs\u201d relating to the prior losses of the former UBI Banca, assuming \u2013 in addition to the \u201cbase\u201d scenario \u2013 a scenario less favourable \u2013 than the \u201cbase\u201d one \u2013 consistent with the \u201cadverse\u201d scenario incorporated into the Expected Credit Loss models used for the valuation of loans pursuant to IFRS 9, which essentially provides for a general shock to the Eurozone economy, relating primarily to a very significant increase in the price of gas, with the introduction of a recession hypothesis for the years 2023 and 2024, with the resulting increase in inflation and a negative impact on Italian GDP (\u201c Adverse scenario\u201d). Even considering the Adverse scenario, based on the analyses conducted, total absorption of the deferred tax assets in question \u2013 and also of the \u201cnew DTAs\u201d recognised in the 2022 Financial Statements \u2013 could be achieved over a time horizon deemed compatible with the \u201cprobability\u201d of recovery required by IAS 12. With particular regard to the \u201cnew DTAs\u201d recognised in the 2022 Financial Statements, as at the date of the merger of UBI Banca into Intesa Sanpaolo, UBI Banca had tax losses carried forward, largely relating to the former Good Banks (in turn merged into UBI in 2017 and 2018) against of which UBI Banca had not recognised deferred tax assets. During the PPA, and in the 2020 and 2021 Financial Statements, Intesa Sanpaolo had decided to adopt an approach in line with that of UBI Banca, prudently choosing not to recognise the above deferred tax assets. However, it had been decided to reconsider the issue in later years, based on the trend in the Bank\u2019s income performance within the evolution of the external situation. In 2022: i) the right to full use by Intesa Sanpaolo of the tax losses of UBI Banca (both those for which deferred tax assets had already been recognised and the others) was confirmed by the Italian Revenue Agency in response to a specific ruling request filed by the Parent Company (the reply was received on 11 July 2022); and ii) the Parent Company and the National Resolution Fund (which had sold UBI Banca the equity investments in the former Good Banks) held talks aimed at regulating in the post-merger structure the right granted to the National Resolution Fund, on the basis of the initial agreements, to receive a part of the tax benefit that will be achieved in the future when the tax losses of the former Good Banks are concretely used. The favourable outcome to the above ruling request , along with several objective elements, mainly relating to changes in interest rates and the ensuing expected performance of the net interest income of Intesa Sanpaolo, which have a positive impact on the earnings prospects of Intesa Sanpaolo, made it possible to reconsider, when preparing the 2022 Financial Statements, the extremely conservative attitude taken until now with regard to the recognition of new deferred tax assets on the tax losses of the former UBI Banca. However, even in such an improving scenario there continue to be circumstances \u2013 such as the macroeconomic framework, which is still uncertain, due in part to the Russia-Ukraine conflict, and the wholly preliminary stage of the talks with the National Resolution Fund \u2013 that suggest caution in recognising all the deferred tax assets in question. On the basis of the foregoing, for the time being it was decided to quantify the amount of deferred tax assets to be recognised in the 2022 income statement of Intesa Sanpaolo at 320 million euro. The possibility of recognising the residual deferred tax assets, which in view of the outcome of the aforementioned ruling request and net of a prudential estimate of the potential retrocession to the National Resolution Fund amount to 320 million euro, will be assessed in the upcoming financial reports, as a function of the Bank\u2019s earnings performance and the aforementioned talks with the National Resolution Fund. In the 2022 Financial Statements, deferred tax assets of 44 million euro are also entered, which derive from previous years\u2019 tax losses of the Luxembourg subsidiary Intesa Sanpaolo Holding International (ISPHI). The analyses carried out in relation to the income forecasts of the Luxembourg subsidiary confirm the ability of that company to use the losses against which deferred tax assets are recognised. 89 That amount is already net of the benefit deriving from the transformation into tax credits of a total of 220 million euro (of which 110 million euro referring to 2020 and 110 million euro referring to 2021) in deferred tax assets relating to tax losses, due to the sales, carried out by 31 December 2020 and 31 December 2021, respectively, of non-performing loans pursuant to Art. 55 of Law Decree no. 18/2020 (\u201cCura Italia\u201d Decree), and Art 19 of Law Decree no. 73/2021 (\u201cSostegni bis\u201d Decree). In conducting the probability test for the other deferred tax assets for IRES and the deferred tax assets for IRAP carried in the Group\u2019s Financial Statements as at 31 December 2022, deferred tax assets arising from temporary deductible differences associated with impairment losses on loans (other than those deriving from the first-time adoption of the IFRS 9; see below), as well as - if recognised within 2014 \u2013 from goodwill and other intangible assets with indefinite useful lives 90 (\u201celigible deferred tax assets\u201d and \u201celigible temporary differences\u201d), were considered separately from others. In this regard, it bears noting that, effective from the tax period ended 31 December 2011, deferred tax assets (for corporate income tax or IRES) recognised to account for tax losses due to the deferred deduction of \u201celigible\u201d temporary differences are eligible for conversion into tax credits (article 2, paragraph 56-bis, of Law Decree 225 of 29 December 2010, introduced by article 9 of Law Decree 201 of 6 December 2011). Effective from the 2013 tax period, a similar conversion is allowed where the regional business tax (IRAP) return shows a negative net production value also in relation to IRAP deferred tax assets that pertain to \u201celigible\u201d temporary differences that have contributed to determining the negative net production value (article 2, paragraph 56-bis.1, of Law Decree 225 of 29 December 2010, introduced by Law 147/2013). The above convertibility forms \u2013 which are in addition to that already envisaged for cases in which the separate financial statements show a loss for the year (article 2, paragraphs 55 and 56, of Law Decree 225/2010, as most recently amended by Law 147/2013) \u2013 provide an additional, supplementary recovery method suited to ensuring the recovery of \u201celigible\u201d deferred tax assets in all situations, regardless of the company\u2019s future profitability. If in a given year there are surplus \u201celigible\u201d temporary differences with respect to taxable income or net production value, the recovery of deferred tax assets takes the form not of a decrease in current taxes, but of the recognition of deferred tax assets on the tax loss or the negative net production value, convertible into tax credits pursuant to Art. 2, paragraphs 56-bis and 56-bis.1, of Law Decree 225/2010. The convertibility of deferred tax assets on tax losses and negative net production values that result from eligible temporary differences is therefore a suitable and sufficient condition for the recognition of \u201celigible\u201d deferred tax assets, making it possible to exclude them from the area of application of the probability test. A limit to the straight convertibility of \u201celigible\u201d deferred tax assets was introduced by art. 11 of Law Decree 59 of 3 May 2016, amended by Law Decree 237 of 23 December 2016, which subordinated the transformation into tax credits of the eligible deferred tax assets which were not matched by an actual prepayment of taxes (so-called \u201ctype 2 DTA\u201d) to the payment of an annual fee, equal to 1.5% of their overall value, for the years 2016-2030. Instead, no fee is due for the transformation into tax credits of the \u201celigible\u201d deferred tax assets which were matched by an actual prepayment of greater taxes (\u201ctype 1 DTA\u201d). Considering that the \u201celigible\u201d deferred tax assets recognised by the Companies that are part of the fiscal consolidation of Intesa Sanpaolo, as well as those included in the Parent Company\u2019s financial statements following the acquisition of the business lines of the former Venetian Banks and, most recently, those of the former UBI Group are all \u201ctype 1 DTA\u201d, the Group is not currently concretely required to pay this fee. Article 1, paragraphs 1067 and 1068 of the 2019 Budget Act (Law 145 of 30 December 2018) envisage the deductibility (both for IRES and IRAP purposes) over ten tax periods, starting from the one under way as at 31 December 2018, of the adjustments to loans to customers recognised in the financial statements of banks and financial institutions on first-time adoption of IFRS 9 91 . According to that clarified in the Explanatory Report on the Measure, deferred tax assets recognised in financial statements in relation to the deferral of said deduction cannot be converted into tax credits based on the aforementioned provisions of Law Decree no. 225/2010. Therefore, those taxes must be subject to probability testing. Based on the above, the probability test on other deferred tax assets - IRES was carried out as follows: \u2212 identifying the \u201cother deferred tax assets - IRES\u201d, i.e. those not relating to the tax losses of Intesa Sanpaolo or ISPHI, which were subject to a specific test to determine whether they could be recognised in the financial statements (see above); \u2212 identifying \u201cineligible\u201d deferred tax assets among other deferred tax assets, as they cannot be converted into tax credits (see above); \u2212 analysing such \u201cineligible\u201d deferred tax assets and deferred tax liabilities carried in the consolidated financial statements, distinguishing them by causal relationship and by foreseeable recovery timing; \u2212 provisionally determining the amount of the Group's future taxable income in order to verify its ability to recover the \u201cineligible\u201d \u201cother deferred tax assets - IRES\u201d. The estimate of future taxable income was made, for the years 2023-2027, using the same database used for the impairment test on intangibles in the 2022 Financial Statements (see above). For the subsequent years, an overhang of the forecasts was cautiously assumed, without considering a growth rate \u201cg\u201d. The analysis conducted indicated an IRES taxable base that was sufficient and adequate to allow recovery of the deferred tax assets relating to IRES carried in the financial statements as at 31 December 2022. Also for \u201cdeferred tax assets - IRAP\u201d, the probability test was conducted analytically, referring only to the \u201cineligible\u201d deferred tax assets (for those that can be converted into tax credits, as stated, the prospective certain use based on the cases of conversion into tax credits set out in paragraphs 56-bis and 56-bis.1 of Art. 2 of Law Decree 225/2010, effectively constitutes a sufficient prerequisite for recognition in the financial statements, implicitly passing the related probability test). The test was conducted by comparing the estimated forecast taxable income for IRAP purposes of Intesa Sanpaolo, estimated on the basis of the same forecast data assumed in carrying out the probability test on tax losses, with the cancelled ineligible temporary differences found as at 31 December 2022 and resulting in the residual IRAP taxable base for each year. Considering that, for IRAP purposes, different from that set out for IRES tax losses, there is no carrying forward of tax losses or the possibility of offsetting them as part of tax consolidation, if in one or more years the residual taxable base is negative, for example, the deferred tax assets - IRAP that can be recognised in the financial statements should be limited to only the amounts of the temporary differences that can be recovered in each year considered. The calculations performed resulted in a positive residual IRAP taxable base in each of the years included in the reference time horizon of the test. In support of the positive results of the probability test please note that: 90 With art. 17 of Law Decree 83 of 27 June 2015, the convertibility into tax credits was excluded (for any reason provided for by Law Decree 225 of 29 December 2010) of the deferred tax assets relating \u201cto the value of the goodwill and the other intangible assets entered for the first time starting from the financial statements relating to the year underway at the date the provision comes into force\u201d, i.e. starting from 2015. 91 The ten-year instalment period, which should have originally concluded in 2027, was extended by one year by the 2020 Budget Act (Law no. 160 of 27 December 2019). \u2212 the health situation is improving, resulting in a gradual easing of the containment measures adopted during the most critical phase of the pandemic, with the consequent favourable impacts on the relevant financial performance indicators; \u2212 the 2022 results of Intesa Sanpaolo are better than in the previous year, with a more significant increase in the more \u201cstable\u201d revenue components, confirming a solid profitability track record; \u2212 the forecast figures that form the basis of the estimate of the future taxable income prudentially incorporate a macroeconomic scenario less favourable than the \u201cbase\u201d scenario, which, however, shows an improvement in all variables relevant for tax purposes in the 2023-2027 period; \u2212 for the purposes of additional prudence, when performing the probability test, the taxable profit for the years where no specific estimate of future profits is available, even when there is a trend of growth in profits, is assumed to be equal (i.e. not increasing with respect) to the taxable profit of the last year covered by the Forecasts; \u2212 in any event, the future earnings estimates used for the probability test are updated at least annually to take account of intervening changes in the market scenarios; \u2212 under the current Italian regulations, tax losses can be carried forward without time limits (Article 84, Combined Tax Regulations); \u2212 the negative taxable income does not derive from a natural \u201cinability\u201d to generate taxable income, but rather from some rules specific to the Italian tax system, which resulted in deferred tax assets whose reversals penalised and will continue to penalise (but only up to 2029) the taxable income (accrual of adjustments to loans not deducted until 2014; accrual of expected losses on loans to customers recognised as a result the IFRS 9 FTA; and repeated deferral of the start and end of the recovery period for goodwill realigned for payment); \u2212 almost all the deferred tax assets on tax losses relate to the entities acquired by Intesa Sanpaolo and arose prior to the acquisition by Intesa Sanpaolo. Therefore, the prospects for recovery resulting from the estimates are considered to meet the \u201cprobability of recovery\u201d requirement of IAS 12 and, consequently, the above-mentioned deferred tax assets can be recognised in the balance sheet as at 31 December 2022 for their full amount. 11.8 Other information There is no other information to be noted in addition to the above.", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-927": { "value": "SECTION 12 - NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS AND RELATED LIABILITIES - CAPTION 120 OF ASSETS AND CAPTION 70 OF LIABILITIES 12.1 Non-current assets held for sale and discontinued operations: breakdown by type of asset (millions of euro) Captions 31.12.2022 31.12.2021 A. Non-current assets held for sale A.1 Financial assets 368 1,206 A.2 Investments in associates and companies subject to joint control 145 145 A.3 Property and equipment 87 60 of which: resulting from the enforcement of guarantees 5 4 A.4 Intangible assets - 8 A.5 Other 38 3 Total A 638 1,422 of which measured at cost 557 1,364 of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 81 58 B. Discontinued operations B.1 Financial assets measured at fair value through profit or loss - - - Financial assets held for trading - - - Financial assets designated at fair value - - - Other financial assets mandatorily measured at fair value - - B.2 Financial assets measured at fair value through other comprehensive income - - B.3 Financial assets measured at amortised cost - - B.4 Investments in associates and companies subject to joint control - - B.5 Property and equipment - - of which: resulting from the enforcement of guarantees - - B.6 Intangible assets - - B.7 Other assets - - Total B - - of which measured at cost - - of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 - - C. Liabilities associated with non current assets held for sale C.1 Debts - - C.2 Securities - - C.3 Other -15 -30 Total C -15 -30 of which measured at cost -15 -30 of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 - - D. Liabilities associated with discontinued operations D.1 Financial liabilities measured at amortised cost - - D.2 Financial liabilities held for trading - - D.3 Financial liabilities designated at fair value - - D.4 Allowances - - D.5 Other - - Total D - - of which measured at cost - - of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 - - As at 31 December 2022 assets held for sale amounted to 638 million euro and consist mainly of: portfolios classified as UTP and, to a residual extent, performing loans that will be sold in 2023, the equity investment in Zhong Ou Asset Management Co. Ltd. (ZOAM), closing for which is expected after the completion of the authorisation process, and the assets and liabilities relating to the PBZ Card business line dedicated to merchant acquiring activity, which will be transferred to the Nexi Group in the coming months. This amount is compared to the amount of 1,422 million euro recorded as at 31 December 2021, which primarily included portfolios, or individual positions, classified as bad loans or UTP, and which were sold in 2022. 12.2 Other information There is no other significant information to note as at 31 December 2022. We highlight the equity investment in Zhong Ou Asset Management Co. Ltd. (ZOAM), dedicated to mutual fund management, subject to significant influence not carried at equity and classified as held for sale. ", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-960": { "value": "SECTION 12 - NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS AND RELATED LIABILITIES - CAPTION 120 OF ASSETS AND CAPTION 70 OF LIABILITIES 12.1 Non-current assets held for sale and discontinued operations: breakdown by type of asset (millions of euro) Captions 31.12.2022 31.12.2021 A. Non-current assets held for sale A.1 Financial assets 368 1,206 A.2 Investments in associates and companies subject to joint control 145 145 A.3 Property and equipment 87 60 of which: resulting from the enforcement of guarantees 5 4 A.4 Intangible assets - 8 A.5 Other 38 3 Total A 638 1,422 of which measured at cost 557 1,364 of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 81 58 B. Discontinued operations B.1 Financial assets measured at fair value through profit or loss - - - Financial assets held for trading - - - Financial assets designated at fair value - - - Other financial assets mandatorily measured at fair value - - B.2 Financial assets measured at fair value through other comprehensive income - - B.3 Financial assets measured at amortised cost - - B.4 Investments in associates and companies subject to joint control - - B.5 Property and equipment - - of which: resulting from the enforcement of guarantees - - B.6 Intangible assets - - B.7 Other assets - - Total B - - of which measured at cost - - of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 - - C. Liabilities associated with non current assets held for sale C.1 Debts - - C.2 Securities - - C.3 Other -15 -30 Total C -15 -30 of which measured at cost -15 -30 of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 - - D. Liabilities associated with discontinued operations D.1 Financial liabilities measured at amortised cost - - D.2 Financial liabilities held for trading - - D.3 Financial liabilities designated at fair value - - D.4 Allowances - - D.5 Other - - Total D - - of which measured at cost - - of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 - - As at 31 December 2022 assets held for sale amounted to 638 million euro and consist mainly of: portfolios classified as UTP and, to a residual extent, performing loans that will be sold in 2023, the equity investment in Zhong Ou Asset Management Co. Ltd. (ZOAM), closing for which is expected after the completion of the authorisation process, and the assets and liabilities relating to the PBZ Card business line dedicated to merchant acquiring activity, which will be transferred to the Nexi Group in the coming months. This amount is compared to the amount of 1,422 million euro recorded as at 31 December 2021, which primarily included portfolios, or individual positions, classified as bad loans or UTP, and which were sold in 2022. 12.2 Other information There is no other significant information to note as at 31 December 2022. We highlight the equity investment in Zhong Ou Asset Management Co. Ltd. (ZOAM), dedicated to mutual fund management, subject to significant influence not carried at equity and classified as held for sale. ", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsHeldForSaleAndDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-996": { "value": "SECTION 12 - NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS AND RELATED LIABILITIES - CAPTION 120 OF ASSETS AND CAPTION 70 OF LIABILITIES 12.1 Non-current assets held for sale and discontinued operations: breakdown by type of asset (millions of euro) Captions 31.12.2022 31.12.2021 A. Non-current assets held for sale A.1 Financial assets 368 1,206 A.2 Investments in associates and companies subject to joint control 145 145 A.3 Property and equipment 87 60 of which: resulting from the enforcement of guarantees 5 4 A.4 Intangible assets - 8 A.5 Other 38 3 Total A 638 1,422 of which measured at cost 557 1,364 of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 81 58 B. Discontinued operations B.1 Financial assets measured at fair value through profit or loss - - - Financial assets held for trading - - - Financial assets designated at fair value - - - Other financial assets mandatorily measured at fair value - - B.2 Financial assets measured at fair value through other comprehensive income - - B.3 Financial assets measured at amortised cost - - B.4 Investments in associates and companies subject to joint control - - B.5 Property and equipment - - of which: resulting from the enforcement of guarantees - - B.6 Intangible assets - - B.7 Other assets - - Total B - - of which measured at cost - - of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 - - C. Liabilities associated with non current assets held for sale C.1 Debts - - C.2 Securities - - C.3 Other -15 -30 Total C -15 -30 of which measured at cost -15 -30 of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 - - D. Liabilities associated with discontinued operations D.1 Financial liabilities measured at amortised cost - - D.2 Financial liabilities held for trading - - D.3 Financial liabilities designated at fair value - - D.4 Allowances - - D.5 Other - - Total D - - of which measured at cost - - of which Fair value level 1 - - of which Fair value level 2 - - of which Fair value level 3 - - As at 31 December 2022 assets held for sale amounted to 638 million euro and consist mainly of: portfolios classified as UTP and, to a residual extent, performing loans that will be sold in 2023, the equity investment in Zhong Ou Asset Management Co. Ltd. (ZOAM), closing for which is expected after the completion of the authorisation process, and the assets and liabilities relating to the PBZ Card business line dedicated to merchant acquiring activity, which will be transferred to the Nexi Group in the coming months. This amount is compared to the amount of 1,422 million euro recorded as at 31 December 2021, which primarily included portfolios, or individual positions, classified as bad loans or UTP, and which were sold in 2022. 12.2 Other information There is no other significant information to note as at 31 December 2022. We highlight the equity investment in Zhong Ou Asset Management Co. Ltd. (ZOAM), dedicated to mutual fund management, subject to significant influence not carried at equity and classified as held for sale. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1046": { "value": "SECTION 13 \u2013 OTHER ASSETS \u2013 CAPTION 130 13.1 Other assets: breakdown (millions of euro) Captions Amounts to tax authorities 16,503 Amounts to be credited and items under processing 1,297 Cheques and other instruments held 455 Leasehold improvements 93 Transit items 9 Other 4,494 TOTAL 31.12.2022 22,851 TOTAL 31.12.2021 13,837 The sub-caption \u201cAmounts due from tax authorities\u201d includes tax credits related to the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees acquired as a result of transfer by direct beneficiaries or previous purchasers for a total of approximately 11 billion euro. The sub-caption \u201cOther\u201d includes the following main components: (i) prepayments and accrued income not reallocated of 367 million euro; (ii) costs incurred to obtain and execute contracts with customers for an amount of 524 million euro, mainly referring to costs for bonuses capitalised by Fideuram \u2013 Intesa Sanpaolo Private Banking (and, therefore, subject to amortisation for 68.7 million euro) as they are strictly related to the acquisition and maintenance of the funding; and (iii) pursuant to paragraphs 116 and following of IFRS 15, operating loans, i.e. loans for operations connected with the provision of non-financial activities and services, amounting to 150 million euro. SECTION 8 \u2013 OTHER LIABILITIES \u2013 CAPTION 80 8.1 Other liabilities: breakdown (millions of euro) Captions Amounts to be credited and items under processing 3,256 Due to suppliers 1,884 Due to tax authorities 1,340 Amounts due to third parties 333 Personnel charges 294 Due to social security entities 223 Other 3,730 TOTAL 31.12.2022 11,060 TOTAL 31.12.2021 15,639 The sub-caption \u201cOther\u201d includes the following main components: (i) unallocated accrued expenses and deferred income of 755 million euro; and (ii) payables to private bankers of 660 million euro. That sub-caption also includes, as required by paragraph 116 a) of IFRS 15, liabilities arising from contracts with customers of 112 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredIncomeExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1033": { "value": "SECTION 13 \u2013 OTHER ASSETS \u2013 CAPTION 130 13.1 Other assets: breakdown (millions of euro) Captions Amounts to tax authorities 16,503 Amounts to be credited and items under processing 1,297 Cheques and other instruments held 455 Leasehold improvements 93 Transit items 9 Other 4,494 TOTAL 31.12.2022 22,851 TOTAL 31.12.2021 13,837 The sub-caption \u201cAmounts due from tax authorities\u201d includes tax credits related to the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees acquired as a result of transfer by direct beneficiaries or previous purchasers for a total of approximately 11 billion euro. The sub-caption \u201cOther\u201d includes the following main components: (i) prepayments and accrued income not reallocated of 367 million euro; (ii) costs incurred to obtain and execute contracts with customers for an amount of 524 million euro, mainly referring to costs for bonuses capitalised by Fideuram \u2013 Intesa Sanpaolo Private Banking (and, therefore, subject to amortisation for 68.7 million euro) as they are strictly related to the acquisition and maintenance of the funding; and (iii) pursuant to paragraphs 116 and following of IFRS 15, operating loans, i.e. loans for operations connected with the provision of non-financial activities and services, amounting to 150 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfPrepaymentsAndOtherAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-961": { "value": "SECTION 13 \u2013 OTHER ASSETS \u2013 CAPTION 130 13.1 Other assets: breakdown (millions of euro) Captions Amounts to tax authorities 16,503 Amounts to be credited and items under processing 1,297 Cheques and other instruments held 455 Leasehold improvements 93 Transit items 9 Other 4,494 TOTAL 31.12.2022 22,851 TOTAL 31.12.2021 13,837 The sub-caption \u201cAmounts due from tax authorities\u201d includes tax credits related to the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees acquired as a result of transfer by direct beneficiaries or previous purchasers for a total of approximately 11 billion euro. The sub-caption \u201cOther\u201d includes the following main components: (i) prepayments and accrued income not reallocated of 367 million euro; (ii) costs incurred to obtain and execute contracts with customers for an amount of 524 million euro, mainly referring to costs for bonuses capitalised by Fideuram \u2013 Intesa Sanpaolo Private Banking (and, therefore, subject to amortisation for 68.7 million euro) as they are strictly related to the acquisition and maintenance of the funding; and (iii) pursuant to paragraphs 116 and following of IFRS 15, operating loans, i.e. loans for operations connected with the provision of non-financial activities and services, amounting to 150 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1017": { "value": "SECTION 13 \u2013 OTHER ASSETS \u2013 CAPTION 130 13.1 Other assets: breakdown (millions of euro) Captions Amounts to tax authorities 16,503 Amounts to be credited and items under processing 1,297 Cheques and other instruments held 455 Leasehold improvements 93 Transit items 9 Other 4,494 TOTAL 31.12.2022 22,851 TOTAL 31.12.2021 13,837 The sub-caption \u201cAmounts due from tax authorities\u201d includes tax credits related to the \u201cCura Italia\u201d and \u201cRilancio\u201d Law Decrees acquired as a result of transfer by direct beneficiaries or previous purchasers for a total of approximately 11 billion euro. The sub-caption \u201cOther\u201d includes the following main components: (i) prepayments and accrued income not reallocated of 367 million euro; (ii) costs incurred to obtain and execute contracts with customers for an amount of 524 million euro, mainly referring to costs for bonuses capitalised by Fideuram \u2013 Intesa Sanpaolo Private Banking (and, therefore, subject to amortisation for 68.7 million euro) as they are strictly related to the acquisition and maintenance of the funding; and (iii) pursuant to paragraphs 116 and following of IFRS 15, operating loans, i.e. loans for operations connected with the provision of non-financial activities and services, amounting to 150 million euro. 2.1 Fee and commission income: breakdown (millions of euro) Type of service/Amounts 2022 2021 a) Financial instruments 1,584 1,968 1. Placement of securities 511 886 1.1 Through underwriting and/or on a firm commitment basis 29 19 1.2 Without firm commitment 482 867 2. Reception and transmission of orders and execution of orders on behalf of customers 214 227 2.1 Reception and transmission of orders for one or more financial instruments 107 119 2.2 Execution of orders on behalf of customers 107 108 3. Other fee and commission income related to activities connected to financial instruments 859 855 of which: dealing on own account 2 3 of which: individual portfolio management 857 852 b) Corporate Finance 9 22 1. M&A advisory 9 22 2. Treasury services - - 3. Other fee and commission income related to corporate finance services - - c) Investment advice 238 221 d) Clearing and settlement - - e) Collective portfolio management 2,180 2,608 f) Custody and administration 80 116 1. Depositary bank 4 15 2. Other fee and commission income related to custody and administration services 76 101 g) Central administrative services for collective portfolio management - - h) Fiduciary services 13 10 i) Payment services 3,071 2,999 1. Current accounts 1,410 1,471 2. Credit cards 611 559 3. Debit cards and other payment cards 284 249 4. Credit transfers and other payment orders 389 314 5. Other fee and commission income related to payment services 377 406 j) Distribution of third-party services 711 662 1. Collective portfolio management 510 508 2. Insurance products 109 78 3. Other products 92 76 of which: individual portfolio management 27 27 k) Structured finance 24 24 l) Servicing related to securitisations 1 - m) Commitments to disburse funds 15 18 n) Financial guarantees given 473 403 of which: credit derivatives 2 2 o) Financing transactions 922 878 of which: for factoring transactions 84 85 p) Currency dealing 16 21 q) Commodities - - r) Other fee and commission income 1,948 2,137 of which: for management of multilateral trading facilities - - of which: for management of organised trading facilities - - Total 11,285 12,087 The sub-caption \u201cOther fee and commission income\u201d includes fee and commission income collected from insurance companies of 1,590 million euro. As required by IFRS 15, paragraph 116 b), it is noted that fee and commission income includes the revenues recognised during the year included in the opening balance of liabilities deriving from contracts with customers. In line with paragraph 116 c) of IFRS 15, revenues deriving from performance obligations satisfied in the previous years are included, amounting to 22 million euro. 2.2 Fee and commission expense: breakdown (millions of euro) 2022 2021 a) Financial instruments 306 278 of which: trading in financial instruments 50 34 of which: placement of financial instruments 244 219 of which: individual portfolio management 12 25 - Own portfolio 12 24 - Third-party portfolio - 1 b) Clearing and settlement 31 19 c) Collective portfolio management 46 54 - Own portfolio 11 14 - Third-party portfolio 35 40 d) Custody and administration 75 86 e) Collection and payment services 601 576 of which: credit cards, debit cards and other payment cards 457 417 f) Servicing related to securitisations - - g) Commitments to receive funds 1 1 h) Financial guarantees received 255 220 of which: credit derivatives 27 21 i) \u201cOut-of-branch\u201d offer of financial instruments, products and services 925 919 j) Currency dealing 7 4 k) Other fee and commission expense 461 566 Total 2,708 2,723 The sub-caption \u201cOther fee and commission expense\u201d includes 228 million euro on the placement of investment insurance products, 140 million euro on banking services to Italian branches, 60 million euro on banking services to international branches and 33 million euro on other minor services. As required by IFRS 15, paragraph 116 b), it is noted that fee and commission income includes the revenues recognised during the year included in the opening balance of liabilities deriving from contracts with customers. In line with paragraph 116 c) of IFRS 15, revenues deriving from performance obligations satisfied in the previous years are included, amounting to 6 million euro. Part L \u2013 Segment reporting Breakdown by business area: income statement figures (a) (millions of euro) Banca dei Territori IMI Corporate & Investment Banking International Subsidiary Banks Private Banking Asset Management Insurance Corporate Centre (b) Total Net interest income 3,957 2,132 1,592 419 - - 1,400 9,500 Net fee and commission income 4,744 1,156 574 1,980 913 3 -451 8,919 Income from insurance business - - - - - 1,616 89 1,705 Profits (Losses) on financial assets and liabilities designated at fair value 120 1,047 129 60 -21 - 43 1,378 Other operating income (expenses) -8 -2 -68 16 70 -12 -28 -32 Operating income 8,813 4,333 2,227 2,475 962 1,607 1,053 21,470 Personnel expenses -3,430 -528 -573 -486 -110 -148 -1,467 -6,742 Other administrative expenses -2,964 -870 -431 -354 -106 -217 2,030 -2,912 Adjustments to property, equipment and intangible assets -3 -20 -114 -81 -6 -20 -1,036 -1,280 Operating costs -6,397 -1,418 -1,118 -921 -222 -385 -473 -10,934 Operating margin 2,416 2,915 1,109 1,554 740 1,222 580 10,536 Net adjustments to loans -1,238 -1,564 -345 -12 - - 46 -3,113 Other net provisions and net impairment losses on other assets -68 -131 -20 13 - 90 -165 -281 Other income (expenses) 11 - 35 - - 8 148 202 Income (Loss) from discontinued operations - - - - - - - - Gross income (loss) 1,121 1,220 779 1,555 740 1,320 609 7,344 Taxes on income -375 -519 -191 -444 -184 -347 1 -2,059 Charges (net of tax) for integration and exit incentives -42 -21 -44 -37 -1 -14 19 -140 Effect of purchase price allocation (net of tax) -32 - - -21 -4 -65 -89 -211 Levies and other charges concerning the banking industry (net of tax) -214 - -40 -21 - - -301 -576 Impairment (net of tax) of goodwill and other intangible assets - - - - - - - - Minority interests 13 1 - 2 -1 -24 5 -4 Net income (loss) 2022 471 681 504 1,034 550 870 244 4,354 Net income (loss) 2021 316 2,247 463 1,076 787 712 -1,416 4,185 (a) Figures from the reclassified financial statements as described in the Report on operations. (b) The Corporate Centre has been attributed the intersector netting. In application of IFRS 15, in particular paragraphs 114 and 115, which require a breakdown of revenues from contracts with customers, the breakdown of fee and commission income and expense by business area is provided below. (millions of euro) Captions (a) Banca dei Territori IMI Corporate & Investment Banking International Subsidiary Banks Private Banking Asset Management Insurance Corporate Centre (b) Total Guarantees given 97 326 45 2 - - 2 472 Collection and payment services 438 125 197 6 - - 1 767 Current accounts 1,198 33 145 10 - - - 1,386 Credit and debit cards 587 4 263 17 - - - 871 Commercial banking activities 2,320 488 650 35 - - 3 3,496 Dealing and placement of securities 1,233 220 18 275 337 - -1,083 1,000 Currency dealing 5 2 4 3 - - 2 16 Portfolio management 100 2 27 1,883 1,914 - -271 3,655 Distribution of insurance products 877 - 32 678 - 3 -3 1,587 Other 218 31 11 188 - - -13 435 Management, dealing and consultancy activities 2,433 255 92 3,027 2,251 3 -1,368 6,693 Other net fee and commission income 328 597 92 25 181 - 42 1,265 Fee and commission income 5,081 1,340 834 3,087 2,432 3 -1,323 11,454 Fee and commission expense -337 -184 -260 -1,107 -1,519 - 872 -2,535 Net fee and commission income 2022 4,744 1,156 574 1,980 913 3 -451 8,919 Net fee and commission income 2021 (redetermined figures) 4,809 1,135 546 2,096 1,282 2 -343 9,527 (a) Figures from the reclassified financial statements as described in the Report on operations. (b) The Corporate Centre has been attributed the intersector netting. Breakdown by business area: balance sheet figures (a) (millions of euro) Banca dei Territori IMI Corporate & Investment Banking International Subsidiary Banks Private Banking Asset Management Insurance Corporate Centre (b) Total Loans to customers 31.12.2022 247,522 132,927 40,212 15,104 282 - 10,807 446,854 31.12.2021 250,592 152,543 38,970 14,450 783 - 8,533 465,871 Direct deposits from banking business 31.12.2022 291,089 94,785 54,364 50,447 26 - 54,675 545,386 31.12.2021 291,697 94,844 51,504 55,895 21 - 63,287 557,248 (a) Figures from the reclassified financial statements as described in the Report on operations. (b) The Corporate Centre has been attributed the intersector netting. Breakdown by geographical area: income statement figures (a) (millions of euro) Italy Europe Rest of the world Total Net interest income 7,013 1,806 681 9,500 Net fee and commission income 7,154 1,576 189 8,919 Income from insurance business 1,408 297 - 1,705 Profits (Losses) on financial assets and liabilities designated at fair value 1,233 139 6 1,378 Other operating income (expenses) -92 1 59 -32 Operating income 16,716 3,819 935 21,470 Personnel expenses -5,848 -720 -174 -6,742 Other administrative expenses -2,347 -466 -99 -2,912 Adjustments to property, equipment and intangible assets -1,111 -138 -31 -1,280 Operating costs -9,306 -1,324 -304 -10,934 Operating margin 7,410 2,495 631 10,536 Net adjustments to loans -1,936 -1,097 -80 -3,113 Other net provisions and net impairment losses on other assets -170 -118 7 -281 Other income (expenses) 173 30 -1 202 Income (Loss) from discontinued operations - - - - Gross income (loss) 5,477 1,310 557 7,344 Taxes on income -1,599 -338 -122 -2,059 Charges (net of tax) for integration and exit incentives -88 -52 - -140 Effect of purchase price allocation (net of tax) -213 2 - -211 Levies and other charges concerning the banking industry (net of tax) -508 -68 - -576 Impairment (net of tax) of goodwill and other intangible assets - - - - Minority interests 23 -1 -26 -4 Net income (loss) 2022 3,092 853 409 4,354 Net income (loss) 2021 2,023 1,714 448 4,185 (a) Figures from the reclassified financial statements, as described in the Report on operations. Breakdown by geographical area is carried out with reference to the location of Group entities. The International Branches are reported with reference to the country where the branches are located. As far as taxes on income are concerned, since Intesa Sanpaolo did not apply the option for the scheme of income exemption for international branches (known as Branch exemption), these branches\u2019 income is also taxed in Italy. In application of IFRS 15, in particular paragraphs 114 and 115, which require a breakdown of revenues from contracts with customers, the breakdown of fee and commission income and expense by geographical area is provided below. (millions of euro) Italy Europe Rest of the world Total Fee and commission income 2022 11,329 3,088 237 14,654 2021 (Redetermined figures) 12,154 3,422 222 15,798 Fee and commission expense 2022 -4,175 -1,512 -48 -5,735 2021 (Redetermined figures) -4,410 -1,817 -44 -6,271 (a) Figures from the reclassified financial statements, as described in the Report on operations. Breakdown by geographical area: balance sheet figures (a) (millions of euro) Italy Europe Rest of the world Total Loans to customers 31.12.2022 365,428 63,173 18,253 446,854 31.12.2021 383,765 62,328 19,778 465,871 Direct deposits from banking business 31.12.2022 466,841 71,010 7,535 545,386 31.12.2021 480,993 68,136 8,119 557,248 Breakdown by geographical area is carried out with reference to the location of Group entities. (a) Figures from the reclassified financial statements, as described in the Report on operations. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueFromContractsWithCustomersExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1066": { "value": "SECTION 1 \u2013 FINANCIAL LIABILITIES MEASURED AT AMORTISED COST - CAPTION 10 1.1 Financial liabilities measured at amortised cost: breakdown of amounts due to banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to central banks 98,444 X X X 134,790 X X X 2. Due to banks 39,038 X X X 30,468 X X X 2.1 Current accounts and on demand deposits 3,234 X X X 3,197 X X X 2.2 Time deposits 3,807 X X X 4,394 X X X 2.3 Loans 18,610 X X X 18,574 X X X 2.3.1 Repurchase agreements 12,753 X X X 12,160 X X X 2.3.2 Other 5,857 X X X 6,414 X X X 2.4 Debts for commitments to repurchase own equity instruments - X X X 138 X X X 2.5 Lease liabilities 6 X X X 8 X X X 2.6 Other debts 13,381 X X X 4,157 X X X Total 137,482 - 125,164 12,148 165,258 - 153,297 11,916 The illustration of the criteria used to determine the fair value is contained in Part A \u2013 Accounting policies. Repurchase agreements related to assets sold not derecognised are detailed in Part E - Sales of the Notes to the financial statements. The caption Due to Central Banks includes the balance of TLTRO refinancing operations for a total of 96,060 million euro, fully attributable to the TLTRO III. The Group\u2019s repurchase agreements shown in the table include long-term repurchase agreements with a total carrying amount of 238 million euro, attributable to Banca Fideuram for de-risking transactions completed in previous years with the twofold aim of both funding the bank\u2019s operations (through repurchase transactions) and reducing the credit risks associated with the portfolio of securities issued (also through the acquisition of financial guarantees). The transactions have a non- replaceable underlying portfolio of Italian government securities (with maturities from 2023 to 2033) hedged against interest rate risk through interest rate swap contracts and against credit risk through credit default swap contracts, already recorded in the financial statements at the time of execution of the repurchase transactions and recognised under financial assets measured at amortised cost. The nominal value and the maturity date of the repurchase agreements are the same as that of the securities. For recognition purposes, an assessment was conducted aimed at understanding the purpose underlying the contractual agreements, taking into account the instructions provided by the supervisory authorities in Bank of Italy/Consob/IVASS Document No. 6 of 8 March 2013, \u201cAccounting treatment of \u2018long-term structured repurchase agreements\u2019.\u201d The analysis focused on the structure, cash flows and risks associated with the transactions and was aimed at verifying whether the cases described above were similar to the long-term structured repurchase agreements described in the above Document, and, in order to be compliant with the principle of the prevalence of substance over form, whether the indicators referred in paragraph B.6 of the Guidance on Implementing IFRS 9, according to which the transaction may be considered substantially similar to a credit derivative contract, and, in particular, a credit default swap, were present. The case described above consists of repurchase agreements that are not concurrent with the purchases of the securities, because they were already present in the portfolio. In addition, buying securities and entering into the related hedging derivatives occurred with market counterparties other than those with which the repurchase agreements were entered into. The credit risk was also closed with financial guarantees. Consequently, the analysis shows elements of differentiation from the long-term structured repurchase agreements described in the aforementioned Document, supporting the inapplicability of the guidelines provided in paragraph B.6 of the Guidance on Implementing IFRS 9, with the result that the transactions must be recognised in the financial statements with the individual contractual components shown separately. 1.2 Financial liabilities measured at amortised cost: breakdown of amounts due to customers (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Current accounts and on demand deposits 412,667 X X X 423,335 X X X 2. Time deposits 20,309 X X X 19,184 X X X 3. Loans 5,200 X X X 5,716 X X X 3.1 Repurchase agreements 1,284 X X X 2,691 X X X 3.2 Other 3,916 X X X 3,025 X X X 4. Debts for commitments to repurchase own equity instruments 181 X X X 23 X X X 5. Lease liabilities 1,309 X X X 1,379 X X X 6. Other debts 14,359 X X X 8,602 X X X Total 454,025 - 435,464 18,132 458,239 - 433,309 25,130 1.3 Financial liabilities measured at amortised cost: breakdown of securities issued (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Securities 1. bonds 64,838 41,748 22,980 29 75,050 47,030 29,971 42 1.1 structured 1,806 397 1,361 29 2,262 246 2,038 42 1.2 other 63,032 41,351 21,619 - 72,788 46,784 27,933 - 2. other 11,241 - 9,280 1,961 11,508 - 8,837 2,671 2.1 structured - - - - - - - - 2.2 other 11,241 - 9,280 1,961 11,508 - 8,837 2,671 Total 76,079 41,748 32,260 1,990 86,558 47,030 38,808 2,713 1.4 Details of subordinated debts/securities There were no subordinated debts with banks and customers as at 31 December 2022. As at the reporting date, subordinated securities issued amounted to 12,474 million euro, entirely attributable to the Parent Company. 1.5 Details of structured debts As at 31 December 2022 there were no structured debts. 1.6 Lease payables As at 31 December 2022 lease payables amounted to 1,315 million euro, of which 238 million euro maturing within one year, 622 million euro maturing within 1 to 5 years and 455 million euro maturing in over 5 years. Lease payables comprise 1,309 million euro referring to customer counterparties and 6 million euro to bank counterparties. These derive from the application of the financial reporting standard IFRS 16 relating to Leases, with effect from 1 January 2019. SECTION 1 BIS - FINANCIAL LIABILITIES PERTAINING TO INSURANCE COMPANIES MEASURED AT AMORTISED COST PURSUANT TO IAS 39 - CAPTION 15 The breakdown of the IAS 39 captions included in caption 15 of the Balance sheet liabilities pertaining to insurance companies is provided below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 15 Financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39 - Caption 15 31.12.2022 31.12.2021 10. Due to banks 629 623 20. Due to customers 587 188 30. Securities issued 1,334 1,335 Total - Caption 15 2,550 2,146 1.1 Bis Due to banks: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1. Due to central banks - - 2. Due to banks 629 623 2.1 Current accounts and deposits 6 - 2.2 Time deposits - - 2.3 Loans 607 607 2.3.1 Repurchase agreements - - 2.3.2 Financial leasing loans - 2.3.3 Other 607 607 2.4 Debts for commitments to repurchase own equity instruments - - 2.5 Lease liabilities - 2.6 Other debts 16 16 TOTAL (Book value) 629 623 Fair value - level 1 - - Fair value - level 2 17 - Fair value - level 3 556 650 Total Fair value 573 650 1.2 Bis Breakdown of \u201cDue to banks\u201d: subordinated debts As at 31 December 2022 subordinated debts amounted to 607 million euro, entirely attributable to Intesa Sanpaolo Vita. 1.3 Bis Breakdown of \u201cDue to banks\u201d: structured debts There were no structured debts pertaining to Insurance Companies as at 31 December 2022. 1.4 Bis Due to banks subject to microhedging There were no structured debts due to banks subject to microhedging pertaining to Insurance Companies as at 31 December 2022. 1.5 Bis Lease payables As at 31 December 2022 there were no lease payables due to banks. 1.6 Bis Due to customers: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1.Current accounts and deposits - - 2 Time deposits - - 3. Loans - - 3.1 Repurchase agreements - - 3.2 Financial leasing loans - - 3.3 Other - - 4. Debts for commitments to repurchase own equity instruments 360 87 5. Lease liabilities 6 7 6. Other debts 221 94 Total (Book value) 587 188 Fair value - level 1 - - Fair value - level 2 452 93 Fair value - level 3 135 95 Total Fair Value 587 188 The amount under Debts for commitments to repurchase own equity instruments refers to put options sold with minority stakes of fully consolidated equity investments as underlying asset, attributable to the Put & Call Agreement for the purchase of 26% of Intesa Sanpaolo RBM Salute S.p.A. 1.7 Bis Breakdown of \u201cDue to customers\u201d: subordinated debts There were no subordinated debts due to customers pertaining to Insurance Companies as at 31 December 2022. 1.8 Bis Breakdown of \u201cDue to customers\u201d: structured debts There were no structured debts due to customers pertaining to Insurance Companies as at 31 December 2022. 1.9 Bis Due to customers subject to microhedging There were no amounts due to customers subject to microhedging pertaining to Insurance Companies as at 31 December 2022. 1.10 Bis Lease payables As at 31 December 2022 there were lease payables due to customers of 6 million euro, all of which are due between 1 and 5 years. These derive from the application of the financial reporting standard IFRS 16 relating to Leases, with effect from 1 January 2019. 1.11 Bis Securities issued: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair Value Book value Fair Value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A.Securities 1. Bonds 1,334 - 1,171 - 1,335 - 1,338 - 1.1 structured - - - - - - - - 1.2 other 1,334 - 1,171 - 1,335 - 1,338 - 2. Other - - - - - - - - 2.1 structured - - - - - - - - 2.2 Other - - - - - - - - Total 1,334 - 1,171 - 1,335 - 1,338 1.12 Bis Breakdown of \u201cSecurities issued\u201d: subordinated securities As at 31 December 2022, a total of 1,334 million euro pertaining to insurance companies, fully attributable to level-2 other bonds (fair value 1,171 million euro), which at the end of 2021 amounted to 1,335 million euro. 1.13 Bis Breakdown of \u201cSecurities issued\u201d: securities subject to microhedging There were no Securities issued subject to microhedging pertaining to Insurance Companies. SECTION 3 \u2013 FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE \u2013 CAPTION 30 3.1 Financial liabilities designated at fair value: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal value Fair value Fair value (*) Nominal value Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to banks - - - - - - - - - - 1.1 Structured - - - - X - - - - X 1.2 Other - - - - X - - - - X of which: - commitments to disburse funds - X X X X - X X X X - financial guarantees given - X X X X - X X X X 2. Due to customers 5 - 4 - 4 5 - 4 - 4 2.1 Structured 5 - 4 - X 5 - 4 - X 2.2 Other - - - - X - - - - X of which: - commitments to disburse funds - X X X X - X X X X - financial guarantees given - X X X X - X X X X 3. Debt securities 9,875 - 8,761 30 8,719 3,634 6 3,638 26 3,566 3.1 Structured 9,875 - 8,761 30 X 3,634 6 3,638 26 X 3.2 Other - - - - X - - - - X Total 9,880 - 8,765 30 8,723 3,639 6 3,642 26 3,570 (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. The Group has classified the LECOIP 3.0 for the employment agreements, terminated early, of employees of Group companies and life policies connected to social initiatives, managed by the Bank based on fair value, under Amounts due to customers. Sub-caption 3.1 Debt securities - Structured comprised certificates which provide for partial or full redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014 (certificates with guaranteed or protected capital). As they were issued after 1 January 2020, these are classified under Financial liabilities designated at fair value (Fair Value Option), as a result of the Bank\u2019s implementation of a business model based on a banking book approach, with the goal of generating stable inflows. Certificates representing Financial liabilities designated at fair value record the related changes in fair value attributable to changes in own credit risk in the statement of comprehensive income (shareholders\u2019 equity). Changes in the Bank\u2019s own credit rating during the year were negative by 47 million euro. 3.2 Breakdown of \u201cFinancial liabilities designated at fair value\u201d: subordinated liabilities As at 31 December 2022, the Group did not have any subordinated liabilities classified under Financial liabilities designated at fair value. SECTION 3 BIS \u2013 FINANCIAL LIABILITIES PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE PURSUANT TO IAS 39 - CAPTION 35 The breakdown of the IAS 39 captions included in caption 35 of the Balance sheet liabilities pertaining to insurance companies is provided below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 35 Financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39 - Caption 35 31.12.2022 31.12.2021 40. Financial liabilities held for trading 9 103 50. Financial liabilities designated at fair value through profit or loss 71.565 84.667 60. Hedging derivatives 170 - Total Caption 35 71.744 84.770 3.1 Bis Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cashl liabilities 1. Due to banks - - - - - - - - - - 2. Due to customers - - - - - - - - - - 3. Debt securities - - - - X - - - - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - - 3.1.2 Other bonds - - - - X - - - - - 3.2 Other - - - - X - - - - X 3.2.1 Structured - - - - X - - - - - 3.2.2 Other - - - - X - - - - - Total A - - - - - - - - - - B. Derivatives 1. Financial derivatives X 1 8 - X X - 42 61 X 1.1 Trading X 1 - - X X - 38 61 X 1.2 Fair value option X - 8 - X X - 4 - X 1.3 Other X - - - X X - - - X 2. Credit derivatives X - - - X X - - - X 2.1 Trading X - - - X X - - - X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 1 8 - X X - 42 61 X Total (A+B) X 1 8 - X X - 42 61 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.2 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities With regard to Financial liabilities held for trading: subordinated liabilities, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.3 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts With regard to Financial liabilities held for trading: structured debts, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.4 Bis Financial liabilities measured at fair value: breakdown (millions of euro) Transaction type/Values 31.12.2022 31.12.2021 Nominal value Fair value Fair value (*) Nominal value Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to banks - - - - - - - - - - 1.1 Structured - - - - X - - - - X 1.2 Other - - - - X - - - - X 2. Due to customers 71,565 - 71,565 - 79,141 84,667 - 84,667 - 85,269 2.1 Structured - - - - X - - - - X 2.2 Other 71,565 - 71,565 - X 84,667 - 84,667 - X 3. Debt securities - - - - - - - - - - 3.1 Structured - - - - X - - - - X 3.2 Other - - - - X - - - - X Total 71,565 - 71,565 - 79,141 84,667 - 84,667 - 85,269 (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.5 Bis Breakdown of \u201cFinancial liabilities measured at fair value\u201d: subordinated liabilities There were no subordinated liabilities classified under Financial liabilities measured at fair value as at 31 December 2022. 3.6 Bis Hedging derivatives: breakdown by type of hedge and level (millions of euro) Fair value 31.12.2022 Notional value Fair value 31.12.2021 Notional value Level 1 Level 2 Level 3 31.12.2022 Level 1 Level 2 Level 3 31.12.2021 A) Financial derivatives - 170 - 1,241 - - - - 1) fair value - - - - - - - - 2) cash flows - 170 - 1,241 - - - - 3) foreign investments - - - - - - - - B) Credit derivatives - - - - - - - - 1) fair value - - - - - - - - 2) cash flows - - - - - - - - Total - 170 - 1,241 - - - - 3.7 Bis Hedging derivatives: breakdown by hedged portfolio and type of hedge (millions of euro) Transactions/Type of hedge FAIR VALUE CASH FLOW FOREIGN INVESTM. Specific Generic Specific Generic Interest rate risk Foreign exchange risk Credit risk Price risk Various risks 1. Financial assets available for sale - - - - - X - X X 2. Loans - - - X - X - X X 3. Investments held to maturity X - - X - X - X X 4. Portfolio X X X X X - X - X 5. Other transactions - - - - - X - X - Total assets - - - - - - - - - 1. Financial liabilities - - - X - X 170 X X 2. Portfolio X X X X X - X - X Total liabilities - - - - - - 170 - - 1. Forecast transactions X X X X X X - X X 2. Financial assets and liabilities portfolio X X X X X - X - - ", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-928": { "value": "1.1 Financial liabilities measured at amortised cost: breakdown of amounts due to banks (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Due to central banks 98,444 X X X 134,790 X X X 2. Due to banks 39,038 X X X 30,468 X X X 2.1 Current accounts and on demand deposits 3,234 X X X 3,197 X X X 2.2 Time deposits 3,807 X X X 4,394 X X X 2.3 Loans 18,610 X X X 18,574 X X X 2.3.1 Repurchase agreements 12,753 X X X 12,160 X X X 2.3.2 Other 5,857 X X X 6,414 X X X 2.4 Debts for commitments to repurchase own equity instruments - X X X 138 X X X 2.5 Lease liabilities 6 X X X 8 X X X 2.6 Other debts 13,381 X X X 4,157 X X X Total 137,482 - 125,164 12,148 165,258 - 153,297 11,916 The illustration of the criteria used to determine the fair value is contained in Part A \u2013 Accounting policies. Repurchase agreements related to assets sold not derecognised are detailed in Part E - Sales of the Notes to the financial statements. The caption Due to Central Banks includes the balance of TLTRO refinancing operations for a total of 96,060 million euro, fully attributable to the TLTRO III. The Group\u2019s repurchase agreements shown in the table include long-term repurchase agreements with a total carrying amount of 238 million euro, attributable to Banca Fideuram for de-risking transactions completed in previous years with the twofold aim of both funding the bank\u2019s operations (through repurchase transactions) and reducing the credit risks associated with the portfolio of securities issued (also through the acquisition of financial guarantees). The transactions have a non- replaceable underlying portfolio of Italian government securities (with maturities from 2023 to 2033) hedged against interest rate risk through interest rate swap contracts and against credit risk through credit default swap contracts, already recorded in the financial statements at the time of execution of the repurchase transactions and recognised under financial assets measured at amortised cost. The nominal value and the maturity date of the repurchase agreements are the same as that of the securities. For recognition purposes, an assessment was conducted aimed at understanding the purpose underlying the contractual agreements, taking into account the instructions provided by the supervisory authorities in Bank of Italy/Consob/IVASS Document No. 6 of 8 March 2013, \u201cAccounting treatment of \u2018long-term structured repurchase agreements\u2019.\u201d The analysis focused on the structure, cash flows and risks associated with the transactions and was aimed at verifying whether the cases described above were similar to the long-term structured repurchase agreements described in the above Document, and, in order to be compliant with the principle of the prevalence of substance over form, whether the indicators referred in paragraph B.6 of the Guidance on Implementing IFRS 9, according to which the transaction may be considered substantially similar to a credit derivative contract, and, in particular, a credit default swap, were present. The case described above consists of repurchase agreements that are not concurrent with the purchases of the securities, because they were already present in the portfolio. In addition, buying securities and entering into the related hedging derivatives occurred with market counterparties other than those with which the repurchase agreements were entered into. The credit risk was also closed with financial guarantees. Consequently, the analysis shows elements of differentiation from the long-term structured repurchase agreements described in the aforementioned Document, supporting the inapplicability of the guidelines provided in paragraph B.6 of the Guidance on Implementing IFRS 9, with the result that the transactions must be recognised in the financial statements with the individual contractual components shown separately. 1.1 Bis Due to banks: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1. Due to central banks - - 2. Due to banks 629 623 2.1 Current accounts and deposits 6 - 2.2 Time deposits - - 2.3 Loans 607 607 2.3.1 Repurchase agreements - - 2.3.2 Financial leasing loans - 2.3.3 Other 607 607 2.4 Debts for commitments to repurchase own equity instruments - - 2.5 Lease liabilities - 2.6 Other debts 16 16 TOTAL (Book value) 629 623 Fair value - level 1 - - Fair value - level 2 17 - Fair value - level 3 556 650 Total Fair value 573 650 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDepositsFromBanksExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-962": { "value": "1.2 Financial liabilities measured at amortised cost: breakdown of amounts due to customers (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Book value Fair value Book value Fair value Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 1. Current accounts and on demand deposits 412,667 X X X 423,335 X X X 2. Time deposits 20,309 X X X 19,184 X X X 3. Loans 5,200 X X X 5,716 X X X 3.1 Repurchase agreements 1,284 X X X 2,691 X X X 3.2 Other 3,916 X X X 3,025 X X X 4. Debts for commitments to repurchase own equity instruments 181 X X X 23 X X X 5. Lease liabilities 1,309 X X X 1,379 X X X 6. Other debts 14,359 X X X 8,602 X X X Total 454,025 - 435,464 18,132 458,239 - 433,309 25,130 1.6 Bis Due to customers: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 1.Current accounts and deposits - - 2 Time deposits - - 3. Loans - - 3.1 Repurchase agreements - - 3.2 Financial leasing loans - - 3.3 Other - - 4. Debts for commitments to repurchase own equity instruments 360 87 5. Lease liabilities 6 7 6. Other debts 221 94 Total (Book value) 587 188 Fair value - level 1 - - Fair value - level 2 452 93 Fair value - level 3 135 95 Total Fair Value 587 188 The amount under Debts for commitments to repurchase own equity instruments refers to put options sold with minority stakes of fully consolidated equity investments as underlying asset, attributable to the Put & Call Agreement for the purchase of 26% of Intesa Sanpaolo RBM Salute S.p.A. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDepositsFromCustomersExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-997": { "value": "1.4 Details of subordinated debts/securities There were no subordinated debts with banks and customers as at 31 December 2022. As at the reporting date, subordinated securities issued amounted to 12,474 million euro, entirely attributable to the Parent Company. 1.2 Bis Breakdown of \u201cDue to banks\u201d: subordinated debts As at 31 December 2022 subordinated debts amounted to 607 million euro, entirely attributable to Intesa Sanpaolo Vita. 1.7 Bis Breakdown of \u201cDue to customers\u201d: subordinated debts There were no subordinated debts due to customers pertaining to Insurance Companies as at 31 December 2022. 1.12 Bis Breakdown of \u201cSecurities issued\u201d: subordinated securities As at 31 December 2022, a total of 1,334 million euro pertaining to insurance companies, fully attributable to level-2 other bonds (fair value 1,171 million euro), which at the end of 2021 amounted to 1,335 million euro. 2.2 Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities The aggregate Financial liabilities held for trading includes subordinated liabilities represented by Due to banks for 214 million euro and Due to customers for 36 million euro. 3.2 Breakdown of \u201cFinancial liabilities designated at fair value\u201d: subordinated liabilities As at 31 December 2022, the Group did not have any subordinated liabilities classified under Financial liabilities designated at fair value. 3.2 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities With regard to Financial liabilities held for trading: subordinated liabilities, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.5 Bis Breakdown of \u201cFinancial liabilities measured at fair value\u201d: subordinated liabilities There were no subordinated liabilities classified under Financial liabilities measured at fair value as at 31 December 2022. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSubordinatedLiabilitiesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1062": { "value": "SECTION 2 \u2013 FINANCIAL LIABILITIES HELD FOR TRADING \u2013 CAPTION 20 2.1 Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level1 Level 2 Livello 3 A. Cash liabilities 1. Due to banks 4,729 4,240 - - 4,239 19,827 22,222 40 - 22,262 2. Due to customers 3,121 3,001 - - 3,001 - - - - - 3. Debt securities 3,000 - 2,779 - X 3,324 - 3,459 - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - X 3.1.2 Other bonds - - - - X - - - - X 3.2 Other 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.1 Structured 3,000 - 2,779 - X 3,324 - 3,459 - X 3.2.2 Other - - - - X - - - - X Total A 10,850 7,241 2,779 - 7,240 23,151 22,222 3,499 - 22,262 B. Derivatives 1. Financial derivatives X 44 35,363 142 X X 19 28,107 118 X 1.1 Trading X 44 35,343 142 X X 19 28,072 118 X 1.2 Fair value option X - - - X X - - - X 1.3 Other X - 20 - X X - 35 - X 2. Credit derivatives X - 943 - X X - 2,340 1 X 2.1 Trading X - 943 - X X - 2,340 1 X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 44 36,306 142 X X 19 30,447 119 X Total (A+B) 10,850 7,285 39,085 142 X 23,151 22,241 33,946 119 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. Amounts due to banks and customers consist entirely of short selling of securities. The aggregate 3.2.1 Other structured securities includes securitised derivatives which provide for partial or full redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014, issued by the Group throughout 2019. Derivative instruments include 5,017 million euro in certificates with characteristics similar to financial derivative instruments due to the prevalence of market risk in relation to the return of the premiums paid. The changes in fair value recorded during the year due to the change in its own credit rating were positive by 229 million euro and related to derivatives and Debt securities - Other. The values of derivative instruments as at 31 December 2022 include the results of the offsetting of accounts between positive and negative gross balances of hedging derivatives undertaken with the legal clearing agent LCH Ltd. as they meet the requirements set out in IAS 32, paragraph 42. 2.2 Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities The aggregate Financial liabilities held for trading includes subordinated liabilities represented by Due to banks for 214 million euro and Due to customers for 36 million euro. 2.3 Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts As at 31 December 2022, structured debts classified under Financial liabilities held for trading amounted to 300 million euro due to customers and 57 million euro due to banks, attributable to short selling of fixed-rate bonds indexed to inflation, as an additional component. SECTION 3 BIS \u2013 FINANCIAL LIABILITIES PERTAINING TO INSURANCE COMPANIES MEASURED AT FAIR VALUE PURSUANT TO IAS 39 - CAPTION 35 The breakdown of the IAS 39 captions included in caption 35 of the Balance sheet liabilities pertaining to insurance companies is provided below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by Bank of Italy Circular 262, \u201cCaption 35 Financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39 - Caption 35 31.12.2022 31.12.2021 40. Financial liabilities held for trading 9 103 50. Financial liabilities designated at fair value through profit or loss 71.565 84.667 60. Hedging derivatives 170 - Total Caption 35 71.744 84.770 3.1 Bis Financial liabilities held for trading: breakdown (millions of euro) Transaction type/Amount 31.12.2022 31.12.2021 Nominal or notional amount Fair value Fair value (*) Nominal or notional amount Fair value Fair value (*) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 A. Cashl liabilities 1. Due to banks - - - - - - - - - - 2. Due to customers - - - - - - - - - - 3. Debt securities - - - - X - - - - X 3.1 Bonds - - - - X - - - - X 3.1.1 Structured - - - - X - - - - - 3.1.2 Other bonds - - - - X - - - - - 3.2 Other - - - - X - - - - X 3.2.1 Structured - - - - X - - - - - 3.2.2 Other - - - - X - - - - - Total A - - - - - - - - - - B. Derivatives 1. Financial derivatives X 1 8 - X X - 42 61 X 1.1 Trading X 1 - - X X - 38 61 X 1.2 Fair value option X - 8 - X X - 4 - X 1.3 Other X - - - X X - - - X 2. Credit derivatives X - - - X X - - - X 2.1 Trading X - - - X X - - - X 2.2 Fair value option X - - - X X - - - X 2.3 Other X - - - X X - - - X Total B X 1 8 - X X - 42 61 X Total (A+B) X 1 8 - X X - 42 61 X (*) Fair value calculated excluding changes in creditworthiness of the issuer after issue date. 3.2 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: subordinated liabilities With regard to Financial liabilities held for trading: subordinated liabilities, no amounts were recorded for Insurance Companies as at 31 December 2022. 3.3 Bis Breakdown of \u201cFinancial liabilities held for trading\u201d: structured debts With regard to Financial liabilities held for trading: structured debts, no amounts were recorded for Insurance Companies as at 31 December 2022. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialLiabilitiesHeldForTradingExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1018": { "value": "SECTION 8 \u2013 OTHER LIABILITIES \u2013 CAPTION 80 8.1 Other liabilities: breakdown (millions of euro) Captions Amounts to be credited and items under processing 3,256 Due to suppliers 1,884 Due to tax authorities 1,340 Amounts due to third parties 333 Personnel charges 294 Due to social security entities 223 Other 3,730 TOTAL 31.12.2022 11,060 TOTAL 31.12.2021 15,639 The sub-caption \u201cOther\u201d includes the following main components: (i) unallocated accrued expenses and deferred income of 755 million euro; and (ii) payables to private bankers of 660 million euro. That sub-caption also includes, as required by paragraph 116 a) of IFRS 15, liabilities arising from contracts with customers of 112 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-998": { "value": "SECTION 8 \u2013 OTHER LIABILITIES \u2013 CAPTION 80 8.1 Other liabilities: breakdown (millions of euro) Captions Amounts to be credited and items under processing 3,256 Due to suppliers 1,884 Due to tax authorities 1,340 Amounts due to third parties 333 Personnel charges 294 Due to social security entities 223 Other 3,730 TOTAL 31.12.2022 11,060 TOTAL 31.12.2021 15,639 The sub-caption \u201cOther\u201d includes the following main components: (i) unallocated accrued expenses and deferred income of 755 million euro; and (ii) payables to private bankers of 660 million euro. That sub-caption also includes, as required by paragraph 116 a) of IFRS 15, liabilities arising from contracts with customers of 112 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-999": { "value": "SECTION 9 \u2013 EMPLOYEE TERMINATION INDEMNITIES \u2013 CAPTION 90 9.1 Employee termination indemnities: annual changes (millions of euro) 31.12.2022 31.12.2021 A. Initial amount 1,099 1,200 B. Increases 117 291 B.1 Provisions in the year 18 7 B.2 Other 99 284 - of which business combinations - 6 C. Decreases -364 -392 C.1 Benefits paid -101 -150 C.2 Other -263 -242 - of which business combinations -2 -5 D. Final amount 852 1,099 Total 852 1,099 C.1. refers to benefits paid as at 31 December 2022. For greater detail on actuarial calculations, see Section 10.5 \u2013 Post employment defined benefit plans. 9.2 Other information The present value of employee termination indemnities qualifying as unfunded defined benefit plans totalled 852 million euro as at 31 December 2022, while at the end of 2021 it amounted to 1,099 million euro. 10.5 Post-employment defined benefit plans 1. Illustration of the characteristics of the funds and related risks As already illustrated in Part A \u2013 Accounting policies, for defined benefit plans, the liability of the Bank, according to IAS 19 \u201cEmployee Benefits\u201d, is determined via the \u201cprojected unit credit method\u201d by an independent actuary. The liability is recognised net of any plan assets and the actuarial gains and losses calculated in the valuation process for the plans are recognised in the statement of comprehensive income and, therefore, in shareholders\u2019 equity. The defined benefit plans, in which the Intesa Sanpaolo Group companies are co-obliged, can be distinguished in: - internal supplementary pension funds; - external supplementary pension funds. Internal funds include: - Three defined benefit plans in force for the London branch, relating to the former Cariplo, Banca Commerciale Italiana and Banco Ambrosiano Veneto branches. The private pension funds have been set up by the UK employers to integrate the levels of the local state pension, which has always been very low. The London branches of Cariplo, Banca Commerciale Italiana and Banco Ambrosiano Veneto set up defined benefit plans for their employees at the time of their opening, under the form of Trusts incorporated under English law and managed by Boards of Trustees, appointed partly by the employers and partly by beneficiaries. Such funds are operational for employees hired until the end of 1999 for Banco Ambrosiano Veneto and Cariplo and until the end of 2000 for Banca Commerciale Italiana. In general, all funds guarantee a pension payable when the beneficiary turns 65 and the benefit is determined, with different rules for the various funds, on the basis of the annual gross wage received in the last year of service; - post-retirement medical plan and other benefits for employees of Bank of Alexandria (Egypt): defined benefit plans providing health coverage and other benefits to employees, even after retirement. The bank is responsible for the costs and risks related to the disbursement of said benefits; - defined benefit plans in effect within Banca Intesa Beograd: these are long-term benefits established by the Collective Contract (which refers to provisions of law in the Republic of Serbia) for employees in service to be paid upon termination of employment. External funds include: - the Intesa Sanpaolo Group Defined-Benefit Pension Fund \u201cFondo Pensione a Prestazione definita del Gruppo Intesa Sanpaolo\u201d, the new name given to the former Supplementary Pension Fund for the Employees of Banco di Napoli \u201cFondo Pensione Complementare per il Personale del Banco di Napoli \u2013 Sezione A\u201d, identified as a collector of other \u201cdefined benefit\u201d forms under the reorganisation and rationalisation of the existing pension schemes within the Intesa Sanpaolo Group, with protection of the rights of the (active and retired) subscribers. To this end, the \u201cFund\u201d \u2013 in the virtually separated sections \u2013 has been assigned the asset captions contained in the financial statements of the pre- existing pension schemes, in order to ensure full coverage of the supplementary benefits. The Fund, which is a legal entity with independently managed assets, includes the following: employees enrolled in the plan and other beneficiaries from former Banco di Napoli; retired employees receiving Supplementary Pension Cheques, formerly the Sanpaolo IMI internal fund; retired employees from the former Banca Nazionale delle Comunicazioni; current and retired employees of Cassa di Risparmio in Bologna, formerly enrolled in the Complementary pension fund for the employees of said bank, transferred to the Complementary Pension Fund for the employees of Banco di Napoli in 2004; retired employees of the Complementary pension fund of the former Fin.Opi, transferred to the Fund in question on 1 June 2005; current and retired employees of the former Banca Popolare dell\u2019Adriatico, formerly enrolled in the Pension fund for the employees of Banca Popolare dell\u2019Adriatico, transferred to the Fund in question on 30 June 2006; retired employees of Cassa di Risparmio di Udine e Pordenone, formerly enrolled in the Complementary pension fund for the employees of said bank, transferred to the Fund in 2006; retired employees of Cassa di Risparmio di Forl\u00ec, formerly enrolled in the Complementary pension fund for the employees of said bank, transferred to the Fund in question on 1 January 2007; retired employees of the former Carive internal Fund, transferred to the Fund in question on 1 January 2008; retired employees of the former CR Firenze FIP internal fund, transferred to the Fund in question on 1 January 2010; retired employees of Cassa di Risparmio di Terni e Narni internal fund, transferred to the Fund in question on 1 January 2010, for which there were no longer any beneficiaries as at 31 December 2021; retired employees of Cassa di Risparmio di Pistoia e Pescia internal fund, transferred to the Fund in question on 1 September 2012; retired tax-collection personnel of the Supplementary pension fund for tax-collection personnel formerly employed by Cariplo, transferred to the Fund in question on 1 January 2015; retired employees formerly enrolled in the supplementary pension fund for employees of Mediocredito Lombardo S.p.A., transferred to the Fund in question on 1 January 2015; retired employees formerly enrolled in the Pension Fund for key Managers, former Key Managers and entitled parties of former Comit, transferred to the Fund in question on 1 January 2015; retired employees formerly enrolled in the \u201cCasse del Centro\u201d Pension Funds, in particular those enrolled in the Supplementary INPS benefits fund for the compulsory insurance for invalidity, old-age and survivors for personnel of Cassa di Risparmio di Citt\u00e0 di Castello, Supplementary INPS benefits fund for the compulsory insurance for invalidity, old-age and survivors for personnel of Cassa di Risparmio di Foligno, Company supplementary pension AGO fund for employees of Cassa di Risparmio di Spoleto, Supplementary/complementary pension fund for the mandatory pension for employees of Cassa di Risparmio di Rieti, Pension fund for the Employees of Cassa di Risparmio della Provincia di Viterbo and Company supplementary pension fund for employees of Cassa di Risparmio di Ascoli Piceno, transferred to the Fund in question on 1 January 2015; retired employees formerly enrolled in the Company supplementary pension fund of INPS benefits for employees of Cassa di Risparmio di Civitavecchia, transferred to the Fund in question on 1 January 2015; retired employees formerly enrolled in the supplementary fund of SIL - Societ\u00e0 Italiana Leasing S.p.A., transferred to the Fund in question on 1 January 2015; retired employees formerly enrolled in the Supplementary Pension Fund for the personnel of Banca Monte Parma, transferred to the Fund in question on 1 January 2016; employees and retired employees formerly enrolled in the Pension Fund for the personnel of the former Crediop hired before 30 September 1989, transferred to the Fund in question on 1 January 2016; retired employees formerly enrolled in the Supplementary Pension Fund for the personnel of Cassa di Risparmio di Mirandola, transferred to the Fund in question on 1 April 2016; retired employees formerly enrolled in the Pension Fund for the Personnel of the former Cassa di Risparmio di Prato transferred to the Fund in question on 1 May 2018; retired employees formerly enrolled in the Defined Benefit Plan of the former Cassa di Risparmio di Fabriano e Cupramontana transferred to the Fund in question on 1 May 2018; current and retired employees of the Supplementary pension fund for the personnel of Istituto Bancario Sanpaolo di Torino, transferred to the Fund in question on 1 January 2019; retired employees of the Supplementary pension fund for the personnel of Cassa di Risparmio di Padova e Rovigo, transferred to the Fund in question on 1 July 2019; employees and retired employees formerly enrolled in the former UBI Banca internal Funds - which include the Funds relating to the former Centrobanca (former Supplementary Pension Fund for employees of Centrobanca - former Banca Centrale di Credito Popolare S.p.A.), former Banca Regionale Europea (former Fund for the personnel of Banca Regionale Europea from the former Banca del Monte di Lombardia and the former Cassa di Risparmio di Cuneo), former Carime (former Fund of the former Cassa di Risparmio di Calabria e Lucania, Fund of the former Cassa di Risparmio di Puglia, Fund of the former Cassa di Risparmio Salernitana) and former Banca Adriatica (former Retirement Fund for the personnel of the loans business line of the former Cassa di Risparmio di Macerata S.p.A, Retirement Fund for the personnel of the former Banca Ca.Ri.Ma. transferred to Se.Ri.Ma - now Equitalia Servizi di Riscossione S.p.A., Retirement Fund for the personnel of the former Mediocredito Fondiario Centro Italia S.p.A., Retirement Fund for personnel in the tax-collection segment of the former Cassa di Risparmio di Pesaro, Retirement Fund for the personnel of the former Cassa di Risparmio di Jesi, Retirement Fund for personnel in the tax-collection segment of the former Cassa di Risparmio di Pesaro S.p.A. transferred to the former SE.RI.T. It is necessary to specify that if the sections of the Fund, after approval of the financial statements, show a technical imbalance according to the statutory method, the Articles of Association envisage immediate settlement by the Banks jointly responsible. - Pension fund for the employees of Cariplo, a fund with legal status and full economic independence, whose aim is to guarantee supplementary pension treatment in addition to AGO cheques to former Cariplo employees already retired on 30 June 1998; - a defined benefit plan at the New York branch: the fund was established in 1977 by the branch of Banca Commerciale Italiana and guarantees a pension treatment to all the employees resident in the United States who have been in service at the Bank for at least 5 years. The benefit is considered to be accrued even if the employment relationship ceases in advance. The benefit is calculated based on the highest average wage considering three consecutive years out of the last 10 years of service, or, if the employment relationship ceases before, based on the average wage in the last three years of service. The fund is no longer managed by the New York branch, but has been fully transferred to the Prudential Fund (a defined benefit plan that manages the positions of members); - the pension fund of Cassa di Risparmio di Firenze: fund with legal status and full economic independence, whose aim is to guarantee supplementary pension treatment to the bank\u2019s employees in service as at 31 December 1990 and already enrolled in the former \u201ccontracted-out\u201d fund; - an employee pension plan of Reyl & Cie S.A. / Asteria Investment Managers S.A. / Obviam AG: the plan provides supplementary benefits when the pension is due or in the event of an unfavourable event (disability and death) under the local social security provisions (LPP); the obligations are covered by dedicated assets, managed through a contractual relationship between the company and La Collective de Pr\u00e9voyance - Copr\u00e9, Geneva; On 5 December 2017, Intesa Sanpaolo S.p.A., also in its capacity as Parent Company, signed an agreement with the Trade Unions, as Fund Founders, for the integration of the Supplementary Pension Fund for the Personnel of Istituto Bancario Sanpaolo di Torino into the Supplementary Pension Fund for the Personnel of Banco di Napoli \u2013 Section A (which from 1 January 2019 changed its name to the \u201cFondo pensione a prestazione definita del Gruppo Intesa Sanpaolo\u201d). This agreement also provided for the formulation of an individual capitalisation offer for the supplementary benefits to be made to the participants, which was carried out in the second half of 2018. The subscriptions received over time led to a decrease in the obligation, which, in the current year, amounted to around 6 million euro, partly covered by the Fund\u2019s assets (around 3 million euro) and partly through the use of Funds set up specifically for this purpose by the Bank, under the guarantee given (around 3 million euro). On 7 October 2021, Intesa Sanpaolo S.p.A., also in its capacity as Parent Company, signed an agreement with the Trade Unions, as Fund Founders, for the integration, from 1 July 2022, of the pension rights of the Internal Funds of the former UBI Banca into the Intesa Sanpaolo Group Defined-Benefit Fund, which, from that date, has provided the participants with the defined benefit pension rights envisaged by their Rules. This agreement also provided for the formulation of an individual capitalisation offer for the supplementary benefits to be made to the participants, which was carried out in the first half of 2022, and the subscriptions received led to a decrease in the obligation of around 34 million euro. On 1 July 2022, Intesa Sanpaolo S.p.A. transferred the liability of 38 million euro, remaining after the payments resulting from the above-mentioned subscriptions to the offers, to the Intesa Sanpaolo Group Defined-Benefit Fund. The streamlining process also involved the external funds of former UBI and, therefore, again on 7 October 2021, Intesa Sanpaolo S.p.A., also in its capacity as Parent Company, signed an agreement with the Trade Unions, as Fund Founders, for the integration, from 1 September 2022, of the pension rights of the Pension Fund of the UBI Banca Group of the former Banca Popolare di Bergamo and its subsidiaries and the Pension Fund for the personnel of the former Banca Popolare di Ancona and its subsidiaries into the Intesa Sanpaolo Group Defined-Benefit Fund, which, from that date, has provided the participants with the defined benefit pension rights envisaged by their Rules. This agreement also provided for the formulation of an individual capitalisation offer for the supplementary benefits to be made to the participants, which was carried out in July and August 2022 and led to a decrease in the obligation of around 5 million euro. On 9 June 2022, Intesa Sanpaolo S.p.A., also in its capacity as Parent Company, signed an agreement with the Trade Unions, as Fund Founders, for the integration, from 1 January 2023, of the pension rights of the Pension Fund of Cassa di Risparmio di Firenze into the Intesa Sanpaolo Group Defined-Benefit Fund, which, from that date, has provided the participants with the defined benefit pension rights envisaged by their Rules. This agreement also provided for the formulation of an individual capitalisation offer for the supplementary benefits to be made to the participants, which was carried out in the last four months of 2022, and the subscriptions received led to a decrease in the obligation of around 370 million euro. With effect from 1 January 2022, following the merger of Intesa Sanpaolo Private Banking (Suisse) Morval S.A. into Reyl & Cie S.A., the integration of the related pension plan was also finalised. With regard to the investment and integrated risk management policies, the Funds verify the level of coverage and the possible outcomes under various scenarios. For this purpose, various investment configurations and portfolio mixes and allocations are defined, in order to satisfy the pension and profitability objectives as adequately as possible. 2. Changes in the year of net liabilities (assets) with defined benefits and redemption rights (millions of euro) Pension plan liabilities defined benefit obligations 31.12.2022 31.12.2021 Employee termination indemnities Internal plans External plans Employee termination indemnities Internal plans External plans Initial amount 1,099 359 1,763 1,200 345 1,692 Current service costs 14 3 10 7 4 12 Recognised past service costs - - 1 - - -4 Interest expense 4 13 17 - 16 3 Actuarial losses due to changes in financial assumptions - 5 - 33 3 73 Actuarial losses due to changes in demographic assumptions 1 - 16 5 - 9 Actuarial losses based on past experience 70 5 50 2 15 28 Positive exchange differences - - 10 - 19 10 Increases - business combinations - - 5 6 - 87 Participants\u2019 contributions X - 13 X - 7 Actuarial profits due to changes in financial assumptions -207 -72 -251 - -24 -5 Actuarial profits due to changes in demographic assumptions - -1 - - - -12 Actuarial profits based on past experience -1 -6 - - - -1 Negative exchange differences - -42 - - - - Benefits paid -101 -15 -136 -150 -19 -131 Decreases - business combinations -2 - - -5 - - Curtailments of the fund X - - X - -6 Settlements of the fund X -34 -375 X - - Other increases 28 - 41 238 1 1 Other decreases -52 -39 -12 -237 -1 - Final amount 853 176 1,152 1,099 359 1,763 Pension plan liabilities defined benefit obligations 31.12.2022 31.12.2021 Employee termination indemnities Internal plans External plans Employee termination indemnities Internal plans External plans Unfunded plans 853 73 - 1,099 177 - Partly funded plans - - - - - - Wholly funded plans - 103 1,152 - 182 1,763 The actuarial gains recorded for variations in financial assumptions are mainly due to the increase in the discount rate which was higher than the increase in the inflation rate. 3. Information on the fair value of plan assets The following tables show the changes in plan assets for certain defined benefit plans and their composition. (millions of euro) Plan assets 31.12.2022 31.12.2021 Internal plans External plans Internal plans External plans Initial amount 168 1,602 131 1,536 Return on assets net of interest -28 -109 19 114 Interest income 3 14 2 3 Positive exchange differences - 7 10 7 Increases - business combinations - 5 - 61 Employer contributions 9 15 10 8 Participants\u2019 contributions - 13 - 7 Negative exchange differences -9 - - - Decreases - business combinations - - - - Benefits paid -6 -136 -4 -131 Curtailments of the fund - - - -6 Settlements of the fund - -375 - - Other changes - 30 - 3 Final amount 137 1,066 168 1,602 (millions of euro) Plan assets: additional information 31.12.2022 31.12.2021 Internal plans % External plans % Internal plans % External plans % Equities - - 314 29.5 89 53.0 456 28.5 - of which level-1 fair value - 300 89 437 Mutual funds - - 80 7.5 - - 137 8.6 - of which level-1 fair value - 21 - - 82 Debt securities 126 92.0 300 28.1 59 35.0 460 28.7 - of which level-1 fair value 126 300 59 460 Real estate assets and investments in real estate companies 8 5.8 319 29.9 10 6.0 377 23.5 - of which level-1 fair value - - - - Insurance business - - - - - - - - - of which level-1 fair value - - - - Other assets 3 2.2 53 5.0 10 6.0 172 10.7 - of which level-1 fair value - - - - TOTAL ASSETS 137 100.0 1,066 100.0 168 100.0 1,602 100.0 millions of euro) Plan assets: additional information 31.12.2022 31.12.2021 Internal plans % External plans % Internal plans % External plans % Equities - - 314 29.5 89 53.0 456 28.5 - of which financial companies - 56 89 70 - of which non financial companies - 258 - 386 Mutual funds - - 80 7.5 - - 137 8.6 Debt securities 126 92.0 300 28.1 59 35.1 460 28.7 Government bonds 89 208 59 282 - of which investment grade 89 208 59 282 - of which speculative grade - - - - Financial companies 37 34 - 76 - of which investment grade 37 30 - 70 - of which speculative grade - 4 - 6 Non Financial companies - 58 - 102 - of which investment grade - 52 - 84 - of which speculative grade - 6 - 18 Real estate assets and investments in real estate companies 8 5.8 319 29.9 10 6.0 377 23.5 Insurance business - - - - - - - - Other assets 3 2.2 53 5.0 10 5.9 172 10.7 TOTAL ASSETS 137 100.0 1,066 100.0 168 100.0 1,602 100.0 The difference between net defined benefit liabilities (see the previous disclosure, Table 10.5, point 2) and the plan assets (see the previous disclosure, Table 10.5, point 3) is recognised under the post-employment plans and, in some cases, under other allowances for risks and charges. 4. Description of the main actuarial assumptions The table below indicates the actuarial assumptions and interest rates used by the various funds. Actuarial assumptions 31.12.2022 31.12.2021 Discount rate Expected rate of return Expected rate of wage rises (a) Annual inflation rate Discount rate Expected rate of return Expected rate of wage rises (a) Annual inflation rate EMPLOYEE TERMINATION INDEMNITIES from 3,2% to 3,6% X from 3,3% to 3,4% 2.7% from 0,2 % to 1,4% X from 2,8% to 3% 2.2% INTERNAL PLANS - of which Italy - - - - 0.4% - 2.9% 2.2% - of which Egypt 14.7% - 6.4% 6.4% 14.6% - 5.3% 5.3% - of which England 4.4% - 2.9% 2.9% 1.9% - 3.0% 3.0% - of which Serbia 6.8% - 8.0% - 3.3% - 5.0% - EXTERNAL PLANS - of which Italy from 3,3% to 3,4% 5.0% 3.5% from 2,7% to 3,3% from 0,1% to 0,7% 3.0% from 2,7% to 2,8% from 1,7% to 2,2% - of which USA 4.8% 4.8% - - 2.8% 2.8% - - - of which Switzerland 1.9% 1.0% - 1.3% 0.4% 1.0% - 0.5% (a) Net of career developments. The Intesa Sanpaolo Group primarily uses the Eur Composite AA rate as its discounting rate, weighted by the ratio of payments and advances referring to each maturity, on the one hand, and the total amount of payments and advances to be made for the final fulfilment of the entire obligation, on the other. In the case of defined-benefit plans in particular, the rate used is the average rate that reflects the market parameters covered by the plan. The Eur Composite AA curve is obtained daily from the Bloomberg\u2019s information provider and refers to a basket of securities issued by investment-grade corporate issuers included in the AA rating class, residing in the Eurozone and belonging to various sectors. Likewise, the Intesa Sanpaolo Group mainly uses the European Zero-Coupon Inflation-Indexed Swap rate curve, weighted on the basis of the ratio of the amount paid for each maturity and the total amount to be paid until the obligation is finally discharged in full, as the inflation rate. 5. Information on amount, timing and uncertainty of cash flows (millions of euro) Sensitivity analysis 31.12.2022 EMPLOYEE TERMINATION INDEMNITIES INTERNAL PLANS EXTERNAL PLANS +100 bps -100 bps +100 bps -100 bps +100 bps -100 bps Discount rate 792 921 153 204 1,057 1,266 Rate of wage rises 853 853 189 166 1,164 1,141 Inflation rate 895 813 190 163 1,223 1,089 The sensitivity analysis is not conducted on the expected rate of return as it has no effect on the calculation of the liabilities. The sensitivity analysis was carried out on the net defined benefit liabilities (pursuant to the previous disclosure, 10.5, point 2). The absolute values of the data presented indicate the possible amount of net defined benefit liabilities in the event of a change in rate of +/-100bps. The average duration of the defined benefit obligation is 10.98 years for pension funds and 7.91 years for employee termination indemnities. Any outflows to be made over the next year (settlement of the technical imbalance envisaged by the Articles of Association of the Intesa Sanpaolo Group Defined-Benefit Fund \u201cFondo Pensione a Prestazione Definita del Gruppo Intesa Sanpaolo\u201d) shall be determined upon preparation of the financial statements of said Fund, which will take place in the upcoming months of May/June. 6. Multi-employer plans The Group has the following defined benefit plans regarding more than one employer: - Pension Fund for the employees of the former Crediop hired before 30 September 1989, which on 1 January 2016 was transferred to the Supplementary Pension Fund for the Employees of Banco di Napoli (now the Intesa Sanpaolo Group Defined-Benefit Fund \u201cFondo Pensione a Prestazione Definita del Gruppo Intesa Sanpaolo\u201d). The commitments of Crediop S.p.A. (now Dexia-Crediop) and the former Sanpaolo IMI (now Intesa Sanpaolo S.p.A.) with regard to the Fund are governed by the agreement entered into between the parties on 28 May 1999. Its transfer into the Intesa Sanpaolo Group Defined-Benefit Fund \u201cFondo Pensione a Prestazione Definita del Gruppo Intesa Sanpaolo\u201d did not modify the guarantees and commitments undertaken by the parties in the past; - Retirement Fund for former employees of Banca Ca.Ri.Ma., transferred to Se.Ri.Ma. (now Equitalia Servizi di Riscossione S.p.A.), whose tax collection services were transferred on 1 January 1990 to the former Equitalia Marche S.p.A. (currently Agenzia delle Entrate - Riscossione) which was transferred to the Intesa Sanpaolo Group Defined- Benefit Fund on 1 July 2022. The trade union agreement and agreements between subscribers of the operation sanctioned that the then-parent company Ca.Ri.Ma. (then former Banca Marche S.p.A., then former Nuova Banca Marche S.p.A. and subsequently former Banca Adriatica S.p.A., then merged into former UBI Banca, in turn merged into Intesa Sanpaolo S.p.A.) would continue to allocate in its financial statements the mathematical reserves pertaining to personnel hired before the operation was finalised; - Pension Fund for the Personnel of the former Banca Popolare di Ancona and its subsidiaries, transferred on 1 September 2022 to the Intesa Sanpaolo Group Defined-Benefit Fund, which provides a guarantee of settlement of the respective shares of the subscribers by Intesa Sanpaolo S.p.A. (former UBI Banca) and Credito Valtellinese. 7. Defined benefit plans that share risks among entities under joint control The Intesa Sanpaolo Group Defined-Benefit Fund \u201cFondo Pensione a Prestazione Definita del Gruppo Intesa Sanpaolo\u201d and the Pension fund of Cassa di Risparmio di Firenze are defined benefit plans that share the risks among the various Group Companies. These Companies issue a joint guarantee for their registered employees and pensioners with respect to the subject pension entities. The liabilities of each jointly responsible Company are determined by an Independent Actuary through the \u201cprojected unit credit method\u201d and are recorded in the financial statements net of the plan assets. Similarly, the current service cost, which represents the average present value at the measurement date of the benefits accrued by workers in service during the year, is calculated for each Company by said Actuary. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1034": { "value": "SECTION 10 \u2013 ALLOWANCES FOR RISKS AND CHARGES \u2013 CAPTION 100 10.1 Allowances for risks and charges: breakdown (millions of euro) Captions/Components 31.12.2022 31.12.2021 1. Allowances for credit risk associated with commitments and financial guarantees given 711 508 2. Allowances on other commitments and other guarantees given - - 3. Post-employment benefits 139 290 4. Other allowances for risks and charges 4,160 4,918 4.1 legal disputes 969 1,066 4.2 personnel charges 2,230 2,611 4.3 other 961 1,241 Total 5,010 5,716 There are no amounts attributable to the caption \u201c2 \u2013 Allowances on other commitments and other guarantees given\u201d. The contents of 4 \u2013 Other allowances for risks and charges are illustrated in point 10.6 below.
10.2 Allowances for risks and charges: annual changes
(millions of euro)
Captions
Allowances
on other
commitments
and other
guarantees
given
Post-
employment
benefits
Other
allowances
for risks and
charges
Total
A. Initial amount
-
290
4,918
5,208
B. Increases
-
18
1,098
1,116
B.1 Provisions in the year
-
13
1,063
1,076
B.2 Time value changes
-
3
1
4
B.3 Changes due to discount rate variations
-
-
-
-
B.4 Other
-
2
34
36
- of which business combinations
-
-
-
-
C. Decreases
-
-169
-1,856
-2,025
C.1 Uses in the year
-
-100
-1,549
-1,649
C.2 Changes due to discount rate variations
-
-
-129
-129
C.3 Other
-
-69
-178
-247
- of which business combinations
-
-
-
-
D. Final amount
-
139
4,160
4,299
As specified in the comment to the previous table, there are no amounts attributable to the caption \u201cAllowances on other
commitments and other guarantees given\u201d.
Other allowances for risks and charges include net provisions of 140 million euro to caption 200, letter b) of the income
statement and net provisions to other income statement captions, for the residual amount. Provisions include those for legal
and tax disputes (180 million euro) and those for other risks and charges (325 million euro), as well as costs included in the
income statement among personnel expenses. Uses refer almost entirely to payments.
10.3 Allowances for credit risk associated with commitments and financial guarantees given
(millions of euro)
Allowances for credit risk associated with commitments and
financial guarantees given
Stage 1
Stage 2
Stage 3
Purchased
or
originated
credit-
impaired
Total
1. Commitments to disburse funds
70
73
53
-
196
2. Financial guarantees given
82
82
351
-
515
Total
152
155
404
-
711
10.4 Allowances on other commitments and other guarantees given
As at 31 December 2022, there were no allowances on other commitments and guarantees given.
10.5 Post-employment defined benefit plans
1. Illustration of the characteristics of the funds and related risks
As already illustrated in Part A \u2013 Accounting policies, for defined benefit plans, the liability of the Bank, according to IAS 19
\u201cEmployee Benefits\u201d, is determined via the \u201cprojected unit credit method\u201d by an independent actuary. The liability is
recognised net of any plan assets and the actuarial gains and losses calculated in the valuation process for the plans are
recognised in the statement of comprehensive income and, therefore, in shareholders\u2019 equity.
The defined benefit plans, in which the Intesa Sanpaolo Group companies are co-obliged, can be distinguished in:
- internal supplementary pension funds;
- external supplementary pension funds.
Internal funds include:
- Three defined benefit plans in force for the London branch, relating to the former Cariplo, Banca Commerciale Italiana
and Banco Ambrosiano Veneto branches. The private pension funds have been set up by the UK employers to integrate
the levels of the local state pension, which has always been very low. The London branches of Cariplo, Banca
Commerciale Italiana and Banco Ambrosiano Veneto set up defined benefit plans for their employees at the time of their
opening, under the form of Trusts incorporated under English law and managed by Boards of Trustees, appointed partly
by the employers and partly by beneficiaries. Such funds are operational for employees hired until the end of 1999 for
Banco Ambrosiano Veneto and Cariplo and until the end of 2000 for Banca Commerciale Italiana. In general, all funds
guarantee a pension payable when the beneficiary turns 65 and the benefit is determined, with different rules for the
various funds, on the basis of the annual gross wage received in the last year of service;
- post-retirement medical plan and other benefits for employees of Bank of Alexandria (Egypt): defined benefit plans
providing health coverage and other benefits to employees, even after retirement. The bank is responsible for the costs
and risks related to the disbursement of said benefits;
- defined benefit plans in effect within Banca Intesa Beograd: these are long-term benefits established by the
Collective Contract (which refers to provisions of law in the Republic of Serbia) for employees in service to be paid upon
termination of employment.
External funds include:
- the Intesa Sanpaolo Group Defined-Benefit Pension Fund \u201cFondo Pensione a Prestazione definita del Gruppo Intesa
Sanpaolo\u201d, the new name given to the former Supplementary Pension Fund for the Employees of Banco di Napoli
\u201cFondo Pensione Complementare per il Personale del Banco di Napoli \u2013 Sezione A\u201d, identified as a collector of other
\u201cdefined benefit\u201d forms under the reorganisation and rationalisation of the existing pension schemes within the Intesa
Sanpaolo Group, with protection of the rights of the (active and retired) subscribers. To this end, the \u201cFund\u201d \u2013 in the
virtually separated sections \u2013 has been assigned the asset captions contained in the financial statements of the pre-
existing pension schemes, in order to ensure full coverage of the supplementary benefits. The Fund, which is a legal
entity with independently managed assets, includes the following: employees enrolled in the plan and other beneficiaries
from former Banco di Napoli; retired employees receiving Supplementary Pension Cheques, formerly the Sanpaolo IMI
internal fund; retired employees from the former Banca Nazionale delle Comunicazioni; current and retired employees of
Cassa di Risparmio in Bologna, formerly enrolled in the Complementary pension fund for the employees of said bank,
transferred to the Complementary Pension Fund for the employees of Banco di Napoli in 2004; retired employees of the
Complementary pension fund of the former Fin.Opi, transferred to the Fund in question on 1 June 2005; current and
retired employees of the former Banca Popolare dell\u2019Adriatico, formerly enrolled in the Pension fund for the employees of
Banca Popolare dell\u2019Adriatico, transferred to the Fund in question on 30 June 2006; retired employees of Cassa di
Risparmio di Udine e Pordenone, formerly enrolled in the Complementary pension fund for the employees of said bank,
transferred to the Fund in 2006; retired employees of Cassa di Risparmio di Forl\u00ec, formerly enrolled in the
Complementary pension fund for the employees of said bank, transferred to the Fund in question on 1 January 2007;
retired employees of the former Carive internal Fund, transferred to the Fund in question on 1 January 2008; retired
employees of the former CR Firenze FIP internal fund, transferred to the Fund in question on 1 January 2010; retired
employees of Cassa di Risparmio di Terni e Narni internal fund, transferred to the Fund in question on 1 January 2010,
for which there were no longer any beneficiaries as at 31 December 2021; retired employees of Cassa di Risparmio di
Pistoia e Pescia internal fund, transferred to the Fund in question on 1 September 2012; retired tax-collection personnel
of the Supplementary pension fund for tax-collection personnel formerly employed by Cariplo, transferred to the Fund in
question on 1 January 2015; retired employees formerly enrolled in the supplementary pension fund for employees of
Mediocredito Lombardo S.p.A., transferred to the Fund in question on 1 January 2015; retired employees formerly
enrolled in the Pension Fund for key Managers, former Key Managers and entitled parties of former Comit, transferred to
the Fund in question on 1 January 2015; retired employees formerly enrolled in the \u201cCasse del Centro\u201d Pension Funds, in
particular those enrolled in the Supplementary INPS benefits fund for the compulsory insurance for invalidity, old-age and
survivors for personnel of Cassa di Risparmio di Citt\u00e0 di Castello, Supplementary INPS benefits fund for the compulsory
insurance for invalidity, old-age and survivors for personnel of Cassa di Risparmio di Foligno, Company supplementary
pension AGO fund for employees of Cassa di Risparmio di Spoleto, Supplementary/complementary pension fund for the
mandatory pension for employees of Cassa di Risparmio di Rieti, Pension fund for the Employees of Cassa di Risparmio
della Provincia di Viterbo and Company supplementary pension fund for employees of Cassa di Risparmio di Ascoli
Piceno, transferred to the Fund in question on 1 January 2015; retired employees formerly enrolled in the Company
supplementary pension fund of INPS benefits for employees of Cassa di Risparmio di Civitavecchia, transferred to the
Fund in question on 1 January 2015; retired employees formerly enrolled in the supplementary fund of SIL - Societ\u00e0
Italiana Leasing S.p.A., transferred to the Fund in question on 1 January 2015; retired employees formerly enrolled in the
Supplementary Pension Fund for the personnel of Banca Monte Parma, transferred to the Fund in question on 1 January
2016; employees and retired employees formerly enrolled in the Pension Fund for the personnel of the former Crediop
hired before 30 September 1989, transferred to the Fund in question on 1 January 2016; retired employees formerly
enrolled in the Supplementary Pension Fund for the personnel of Cassa di Risparmio di Mirandola, transferred to the Fund in question on 1 April 2016; retired employees formerly enrolled in the Pension Fund for the Personnel of the former Cassa di Risparmio di Prato transferred to the Fund in question on 1 May 2018; retired employees formerly enrolled in the Defined Benefit Plan of the former Cassa di Risparmio di Fabriano e Cupramontana transferred to the Fund in question on 1 May 2018; current and retired employees of the Supplementary pension fund for the personnel of Istituto Bancario Sanpaolo di Torino, transferred to the Fund in question on 1 January 2019; retired employees of the Supplementary pension fund for the personnel of Cassa di Risparmio di Padova e Rovigo, transferred to the Fund in question on 1 July 2019; employees and retired employees formerly enrolled in the former UBI Banca internal Funds - which include the Funds relating to the former Centrobanca (former Supplementary Pension Fund for employees of Centrobanca - former Banca Centrale di Credito Popolare S.p.A.), former Banca Regionale Europea (former Fund for the personnel of Banca Regionale Europea from the former Banca del Monte di Lombardia and the former Cassa di Risparmio di Cuneo), former Carime (former Fund of the former Cassa di Risparmio di Calabria e Lucania, Fund of the former Cassa di Risparmio di Puglia, Fund of the former Cassa di Risparmio Salernitana) and former Banca Adriatica (former Retirement Fund for the personnel of the loans business line of the former Cassa di Risparmio di Macerata S.p.A, Retirement Fund for the personnel of the former Banca Ca.Ri.Ma. transferred to Se.Ri.Ma - now Equitalia Servizi di Riscossione S.p.A., Retirement Fund for the personnel of the former Mediocredito Fondiario Centro Italia S.p.A., Retirement Fund for personnel in the tax-collection segment of the former Cassa di Risparmio di Pesaro, Retirement Fund for the personnel of the former Cassa di Risparmio di Jesi, Retirement Fund for personnel in the tax-collection segment of the former Cassa di Risparmio di Pesaro S.p.A. transferred to the former SE.RI.T. It is necessary to specify that if the sections of the Fund, after approval of the financial statements, show a technical imbalance according to the statutory method, the Articles of Association envisage immediate settlement by the Banks jointly responsible. - Pension fund for the employees of Cariplo, a fund with legal status and full economic independence, whose aim is to guarantee supplementary pension treatment in addition to AGO cheques to former Cariplo employees already retired on 30 June 1998; - a defined benefit plan at the New York branch: the fund was established in 1977 by the branch of Banca Commerciale Italiana and guarantees a pension treatment to all the employees resident in the United States who have been in service at the Bank for at least 5 years. The benefit is considered to be accrued even if the employment relationship ceases in advance. The benefit is calculated based on the highest average wage considering three consecutive years out of the last 10 years of service, or, if the employment relationship ceases before, based on the average wage in the last three years of service. The fund is no longer managed by the New York branch, but has been fully transferred to the Prudential Fund (a defined benefit plan that manages the positions of members); - the pension fund of Cassa di Risparmio di Firenze: fund with legal status and full economic independence, whose aim is to guarantee supplementary pension treatment to the bank\u2019s employees in service as at 31 December 1990 and already enrolled in the former \u201ccontracted-out\u201d fund; - an employee pension plan of Reyl & Cie S.A. / Asteria Investment Managers S.A. / Obviam AG: the plan provides supplementary benefits when the pension is due or in the event of an unfavourable event (disability and death) under the local social security provisions (LPP); the obligations are covered by dedicated assets, managed through a contractual relationship between the company and La Collective de Pr\u00e9voyance - Copr\u00e9, Geneva; On 5 December 2017, Intesa Sanpaolo S.p.A., also in its capacity as Parent Company, signed an agreement with the Trade Unions, as Fund Founders, for the integration of the Supplementary Pension Fund for the Personnel of Istituto Bancario Sanpaolo di Torino into the Supplementary Pension Fund for the Personnel of Banco di Napoli \u2013 Section A (which from 1 January 2019 changed its name to the \u201cFondo pensione a prestazione definita del Gruppo Intesa Sanpaolo\u201d). This agreement also provided for the formulation of an individual capitalisation offer for the supplementary benefits to be made to the participants, which was carried out in the second half of 2018. The subscriptions received over time led to a decrease in the obligation, which, in the current year, amounted to around 6 million euro, partly covered by the Fund\u2019s assets (around 3 million euro) and partly through the use of Funds set up specifically for this purpose by the Bank, under the guarantee given (around 3 million euro). On 7 October 2021, Intesa Sanpaolo S.p.A., also in its capacity as Parent Company, signed an agreement with the Trade Unions, as Fund Founders, for the integration, from 1 July 2022, of the pension rights of the Internal Funds of the former UBI Banca into the Intesa Sanpaolo Group Defined-Benefit Fund, which, from that date, has provided the participants with the defined benefit pension rights envisaged by their Rules. This agreement also provided for the formulation of an individual capitalisation offer for the supplementary benefits to be made to the participants, which was carried out in the first half of 2022, and the subscriptions received led to a decrease in the obligation of around 34 million euro. On 1 July 2022, Intesa Sanpaolo S.p.A. transferred the liability of 38 million euro, remaining after the payments resulting from the above-mentioned subscriptions to the offers, to the Intesa Sanpaolo Group Defined-Benefit Fund. The streamlining process also involved the external funds of former UBI and, therefore, again on 7 October 2021, Intesa Sanpaolo S.p.A., also in its capacity as Parent Company, signed an agreement with the Trade Unions, as Fund Founders, for the integration, from 1 September 2022, of the pension rights of the Pension Fund of the UBI Banca Group of the former Banca Popolare di Bergamo and its subsidiaries and the Pension Fund for the personnel of the former Banca Popolare di Ancona and its subsidiaries into the Intesa Sanpaolo Group Defined-Benefit Fund, which, from that date, has provided the participants with the defined benefit pension rights envisaged by their Rules. This agreement also provided for the formulation of an individual capitalisation offer for the supplementary benefits to be made to the participants, which was carried out in July and August 2022 and led to a decrease in the obligation of around 5 million euro. On 9 June 2022, Intesa Sanpaolo S.p.A., also in its capacity as Parent Company, signed an agreement with the Trade Unions, as Fund Founders, for the integration, from 1 January 2023, of the pension rights of the Pension Fund of Cassa di Risparmio di Firenze into the Intesa Sanpaolo Group Defined-Benefit Fund, which, from that date, has provided the participants with the defined benefit pension rights envisaged by their Rules. This agreement also provided for the formulation of an individual capitalisation offer for the supplementary benefits to be made to the participants, which was carried out in the last four months of 2022, and the subscriptions received led to a decrease in the obligation of around 370 million euro
With effect from 1 January 2022, following the merger of Intesa Sanpaolo Private Banking (Suisse) Morval S.A. into Reyl &
Cie S.A., the integration of the related pension plan was also finalised.
With regard to the investment and integrated risk management policies, the Funds verify the level of coverage and the
possible outcomes under various scenarios. For this purpose, various investment configurations and portfolio mixes and
allocations are defined, in order to satisfy the pension and profitability objectives as adequately as possible.
2. Changes in the year of net liabilities (assets) with defined benefits and redemption rights
(millions of euro)
Pension plan liabilities
defined benefit obligations
31.12.2022
31.12.2021
Employee
termination
indemnities
Internal
plans
External
plans
Employee
termination
indemnities
Internal
plans
External
plans
Initial amount
1,099
359
1,763
1,200
345
1,692
Current service costs
14
3
10
7
4
12
Recognised past service costs
-
-
1
-
-
-4
Interest expense
4
13
17
-
16
3
Actuarial losses due to changes in financial assumptions
-
5
-
33
3
73
Actuarial losses due to changes in demographic assumptions
1
-
16
5
-
9
Actuarial losses based on past experience
70
5
50
2
15
28
Positive exchange differences
-
-
10
-
19
10
Increases - business combinations
-
-
5
6
-
87
Participants\u2019 contributions
X
-
13
X
-
7
Actuarial profits due to changes in financial assumptions
-207
-72
-251
-
-24
-5
Actuarial profits due to changes in demographic assumptions
-
-1
-
-
-
-12
Actuarial profits based on past experience
-1
-6
-
-
-
-1
Negative exchange differences
-
-42
-
-
-
-
Benefits paid
-101
-15
-136
-150
-19
-131
Decreases - business combinations
-2
-
-
-5
-
-
Curtailments of the fund
X
-
-
X
-
-6
Settlements of the fund
X
-34
-375
X
-
-
Other increases
28
-
41
238
1
1
Other decreases
-52
-39
-12
-237
-1
-
Final amount
853
176
1,152
1,099
359
1,763
Pension plan liabilities
defined benefit obligations
31.12.2022
31.12.2021
Employee
termination
indemnities
Internal
plans
External
plans
Employee
termination
indemnities
Internal
plans
External
plans
Unfunded plans
853
73
-
1,099
177
-
Partly funded plans
-
-
-
-
-
-
Wholly funded plans
-
103
1,152
-
182
1,763
The actuarial gains recorded for variations in financial assumptions are mainly due to the increase in the discount rate which
was higher than the increase in the inflation rate.
3. Information on the fair value of plan assets The following tables show the changes in plan assets for certain defined benefit plans and their composition. (millions of euro) Plan assets 31.12.2022 31.12.2021 Internal plans External plans Internal plans External plans Initial amount 168 1,602 131 1,536 Return on assets net of interest -28 -109 19 114 Interest income 3 14 2 3 Positive exchange differences - 7 10 7 Increases - business combinations - 5 - 61 Employer contributions 9 15 10 8 Participants\u2019 contributions - 13 - 7 Negative exchange differences -9 - - - Decreases - business combinations - - - - Benefits paid -6 -136 -4 -131 Curtailments of the fund - - - -6 Settlements of the fund - -375 - - Other changes - 30 - 3 Final amount 137 1,066 168 1,602 (millions of euro) Plan assets: additional information 31.12.2022 31.12.2021 Internal plans % External plans % Internal plans % External plans % Equities - - 314 29.5 89 53.0 456 28.5 - of which level-1 fair value - 300 89 437 Mutual funds - - 80 7.5 - - 137 8.6 - of which level-1 fair value - 21 - - 82 Debt securities 126 92.0 300 28.1 59 35.0 460 28.7 - of which level-1 fair value 126 300 59 460 Real estate assets and investments in real estate companies 8 5.8 319 29.9 10 6.0 377 23.5 - of which level-1 fair value - - - - Insurance business - - - - - - - - - of which level-1 fair value - - - - Other assets 3 2.2 53 5.0 10 6.0 172 10.7 - of which level-1 fair value - - - - TOTAL ASSETS 137 100.0 1,066 100.0 168 100.0 1,602 100.0 ( millions of euro) Plan assets: additional information 31.12.2022 31.12.2021 Internal plans % External plans % Internal plans % External plans % Equities - - 314 29.5 89 53.0 456 28.5 - of which financial companies - 56 89 70 - of which non financial companies - 258 - 386 Mutual funds - - 80 7.5 - - 137 8.6 Debt securities 126 92.0 300 28.1 59 35.1 460 28.7 Government bonds 89 208 59 282 - of which investment grade 89 208 59 282 - of which speculative grade - - - - Financial companies 37 34 - 76 - of which investment grade 37 30 - 70 - of which speculative grade - 4 - 6 Non Financial companies - 58 - 102 - of which investment grade - 52 - 84 - of which speculative grade - 6 - 18 Real estate assets and investments in real estate companies 8 5.8 319 29.9 10 6.0 377 23.5 Insurance business - - - - - - - - Other assets 3 2.2 53 5.0 10 5.9 172 10.7 TOTAL ASSETS 137 100.0 1,066 100.0 168 100.0 1,602 100.0 The difference between net defined benefit liabilities (see the previous disclosure, Table 10.5, point 2) and the plan assets (see the previous disclosure, Table 10.5, point 3) is recognised under the post-employment plans and, in some cases, under other allowances for risks and charges. 4. Description of the main actuarial assumptions The table below indicates the actuarial assumptions and interest rates used by the various funds. Actuarial assumptions 31.12.2022 31.12.2021 Discount rate Expected rate of return Expected rate of wage rises (a) Annual inflation rate Discount rate Expected rate of return Expected rate of wage rises (a) Annual inflation rate EMPLOYEE TERMINATION INDEMNITIES from 3,2% to 3,6% X from 3,3% to 3,4% 2.7% from 0,2 % to 1,4% X from 2,8% to 3% 2.2% INTERNAL PLANS - of which Italy - - - - 0.4% - 2.9% 2.2% - of which Egypt 14.7% - 6.4% 6.4% 14.6% - 5.3% 5.3% - of which England 4.4% - 2.9% 2.9% 1.9% - 3.0% 3.0% - of which Serbia 6.8% - 8.0% - 3.3% - 5.0% - EXTERNAL PLANS - of which Italy from 3,3% to 3,4% 5.0% 3.5% from 2,7% to 3,3% from 0,1% to 0,7% 3.0% from 2,7% to 2,8% from 1,7% to 2,2% - of which USA 4.8% 4.8% - - 2.8% 2.8% - - - of which Switzerland 1.9% 1.0% - 1.3% 0.4% 1.0% - 0.5% (a) Net of career developments. The Intesa Sanpaolo Group primarily uses the Eur Composite AA rate as its discounting rate, weighted by the ratio of payments and advances referring to each maturity, on the one hand, and the total amount of payments and advances to be made for the final fulfilment of the entire obligation, on the other. In the case of defined-benefit plans in particular, the rate used is the average rate that reflects the market parameters covered by the plan. The Eur Composite AA curve is obtained daily from the Bloomberg\u2019s information provider and refers to a basket of securities issued by investment-grade corporate issuers included in the AA rating class, residing in the Eurozone and belonging to various sectors. Likewise, the Intesa Sanpaolo Group mainly uses the European Zero-Coupon Inflation-Indexed Swap rate curve, weighted on the basis of the ratio of the amount paid for each maturity and the total amount to be paid until the obligation is finally discharged in full, as the inflation rate.
5. Information on amount, timing and uncertainty of cash flows
(millions of euro)
Sensitivity analysis
31.12.2022
EMPLOYEE
TERMINATION
INDEMNITIES
INTERNAL PLANS
EXTERNAL PLANS
+100 bps
-100 bps
+100 bps
-100 bps
+100 bps
-100 bps
Discount rate
792
921
153
204
1,057
1,266
Rate of wage rises
853
853
189
166
1,164
1,141
Inflation rate
895
813
190
163
1,223
1,089
The sensitivity analysis is not conducted on the expected rate of return as it has no effect on the calculation of the liabilities.
The sensitivity analysis was carried out on the net defined benefit liabilities (pursuant to the previous disclosure, 10.5, point 2).
The absolute values of the data presented indicate the possible amount of net defined benefit liabilities in the event of a
change in rate of +/-100bps.
The average duration of the defined benefit obligation is 10.98 years for pension funds and 7.91 years for employee
termination indemnities.
Any outflows to be made over the next year (settlement of the technical imbalance envisaged by the Articles of Association of
the Intesa Sanpaolo Group Defined-Benefit Fund \u201cFondo Pensione a Prestazione Definita del Gruppo Intesa Sanpaolo\u201d) shall
be determined upon preparation of the financial statements of said Fund, which will take place in the upcoming months of
May/June.
6. Multi-employer plans
The Group has the following defined benefit plans regarding more than one employer:
- Pension Fund for the employees of the former Crediop hired before 30 September 1989, which on 1 January 2016 was
transferred to the Supplementary Pension Fund for the Employees of Banco di Napoli (now the Intesa Sanpaolo Group
Defined-Benefit Fund \u201cFondo Pensione a Prestazione Definita del Gruppo Intesa Sanpaolo\u201d). The commitments of
Crediop S.p.A. (now Dexia-Crediop) and the former Sanpaolo IMI (now Intesa Sanpaolo S.p.A.) with regard to the Fund
are governed by the agreement entered into between the parties on 28 May 1999. Its transfer into the Intesa Sanpaolo
Group Defined-Benefit Fund \u201cFondo Pensione a Prestazione Definita del Gruppo Intesa Sanpaolo\u201d did not modify the
guarantees and commitments undertaken by the parties in the past;
- Retirement Fund for former employees of Banca Ca.Ri.Ma., transferred to Se.Ri.Ma. (now Equitalia Servizi di
Riscossione S.p.A.), whose tax collection services were transferred on 1 January 1990 to the former Equitalia Marche
S.p.A. (currently Agenzia delle Entrate - Riscossione) which was transferred to the Intesa Sanpaolo Group Defined-
Benefit Fund on 1 July 2022. The trade union agreement and agreements between subscribers of the operation
sanctioned that the then-parent company Ca.Ri.Ma. (then former Banca Marche S.p.A., then former Nuova Banca
Marche S.p.A. and subsequently former Banca Adriatica S.p.A., then merged into former UBI Banca, in turn merged into
Intesa Sanpaolo S.p.A.) would continue to allocate in its financial statements the mathematical reserves pertaining to
personnel hired before the operation was finalised;
- Pension Fund for the Personnel of the former Banca Popolare di Ancona and its subsidiaries, transferred on 1
September 2022 to the Intesa Sanpaolo Group Defined-Benefit Fund, which provides a guarantee of settlement of the
respective shares of the subscribers by Intesa Sanpaolo S.p.A. (former UBI Banca) and Credito Valtellinese.
7. Defined benefit plans that share risks among entities under joint control
The Intesa Sanpaolo Group Defined-Benefit Fund \u201cFondo Pensione a Prestazione Definita del Gruppo Intesa Sanpaolo\u201d and
the Pension fund of Cassa di Risparmio di Firenze are defined benefit plans that share the risks among the various Group
Companies. These Companies issue a joint guarantee for their registered employees and pensioners with respect to the
subject pension entities.
The liabilities of each jointly responsible Company are determined by an Independent Actuary through the \u201cprojected unit
credit method\u201d and are recorded in the financial statements net of the plan assets. Similarly, the current service cost, which
represents the average present value at the measurement date of the benefits accrued by workers in service during the year,
is calculated for each Company by said Actuary.
10.6 Allowances for risks and charges \u2013 Other allowances (millions of euro) Captions/Components 31.12.2022 31.12.2021 Other allowances 1. legal disputes 969 1,066 2. personnel charges 2,230 2,611 incentive-driven exit plans 1,306 1,771 employee seniority bonuses 177 229 other personnel expenses 747 611 3. other risks and charges 961 1,241 other indemnities due to agents of the distribution network 300 367 other 661 874 Total 4,160 4,918 Where the time value is significant, provisions are discounted using current market rates. Other allowances refers to: \u2013 Legal and tax disputes: the allowance was set up mainly to cover expected outlay for litigation, revocatory action and tax disputes; \u2013 Personnel charges: the allowance includes charges for incentive-driven exit plans, employee seniority bonuses (calculated on the basis of actuarial assumptions) and provisions for bonuses and other outlays relating to employees; \u2013 Other risks and charges: these mainly refer to provisions to cover private bankers\u2019 indemnities, Insurance Company risks, charges for integration of UBI Banca and the former Venetian banks, charges connected with the sale of a portfolio of NPLs and other disputes. 1. Commitments and financial guarantees given \u2013 Excluding insurance companies (millions of euro) Commitments and financial guarantees given - nominal amount 31.12.2022 31.12.2021 Stage 1 Stage 2 Stage 3 Purchased or originated credit- impaired 1. Commitments to disburse funds 216,615 22,288 908 4 239,815 234,827 a) Central Banks 1,146 48 - - 1,194 1,617 b) Public Administration 9,371 2,374 100 - 11,845 11,485 c) Banks 31,750 497 11 - 32,258 35,157 d) Other financial companies 14,447 5,798 12 - 20,257 22,012 e) Non-financial companies 144,200 12,882 728 4 157,814 148,920 f) Households 15,701 689 57 - 16,447 15,636 2. Financial guarantees given 42,580 4,727 854 - 48,161 46,458 a) Central Banks - - - - - 1 b) Public Administration 438 6 - - 444 493 c) Banks 3,434 124 - - 3,558 3,124 d) Other financial companies 948 399 12 - 1,359 783 e) Non-financial companies 37,264 4,171 835 - 42,270 41,509 f) Households 496 27 7 - 530 548 In this table - in accordance with the instructions of Circular 262 - the Commitments to disburse funds include the commitments that can give rise to credit risk subject to the rules for determining the expected loss in accordance with IFRS 9, including revocable margins available on credit lines granted to customers and banks (for a total amount of 152,332 million euro in 2022). 1.Bis Commitments and financial guarantees given \u2013 Insurance companies As at 31 December 2022 there were no exposures of this type. 2. Other commitments and other financial guarantees given \u2013 Excluding insurance companies As at 31 December 2022 there were no exposures of this type. 1.5. OPERATIONAL RISK QUALITATIVE INFORMATION A. General aspects, operational risk management processes and measurement methods Operational risk is the risk of incurring losses resulting from inadequate or failed internal processes, people and systems or from external events 106 . The Intesa Sanpaolo Group adopts an undertaking and management strategy of operational risk based on prudent management principles and aimed at guaranteeing long-term solidity and continuity for the company. In addition, the Group pays particular attention to achieving an optimal balance between growth and profitability and the resulting risks. In line with these objectives, the Intesa Sanpaolo Group has long since established an overall operational risk governance framework, by setting up a Group policy and organisational processes for measuring, managing and controlling operational risk. For regulatory purposes, the Group adopts the Advanced Measurement Approach (AMA), in partial use with the standardised (TSA) and basic approaches (BIA), to determine the capital requirement. As at 31 December 2022, the scope of the Advanced Measurement Approach (AMA) is comprised of Intesa Sanpaolo (including the former Banks and Companies merged into it) and the main banks and companies in the Private Banking and Asset Management Divisions, as well as of VUB Banka and PBZ Banka. Governance Model An effective and efficient framework for managing operational risks must be fully integrated into decision-making processes and management of business operations. Accordingly, the Intesa Sanpaolo Group has chosen to involve the organisational units (business units, central/support structures) of the Parent Company, the Banks and Group companies with direct responsibility in the operational risk management process. The operational risk governance model has been developed in view of: \u2212 optimising and maximising organisational safeguards, interrelations and information flows between the existing organisational units and integration of the operational risk management approach with other company models developed for specific risks (business continuity, IT security, etc.); \u2212 guaranteeing transparency and spread of the models, methods and criteria of analysis, assessment and measurement criteria used to facilitate the process of cultural diffusion and comprehension of the logic underlying the choices made. The Group has a centralised function within the Enterprise Risk Management Department for management of the Group\u2019s operational risk. This function is responsible for the definition, implementation, and monitoring of the methodological and organisational framework, as well as for the measurement of the risk profile, the verification of mitigation effectiveness and reporting to Top Management. In compliance with current requirements, the individual organisational units are responsible for identifying, assessing, managing and mitigating risks. Specific officers and departments have been identified within these organisational units to be responsible for Operational Risk Management (structured collection of information relative to operational events, detection of issues and related mitigation actions, scenario analyses and evaluation of the business environment and internal control factors). In order to support the operational risk management process on a continuous basis, a structured training programme has been implemented for employees actively involved in this process. ICT risk The Intesa Sanpaolo Group considers its information system a tool of primary importance to the achievement of its strategic, business and social responsibility objectives, including in the light of the critical nature of the company processes that depend on it. Accordingly, it undertakes to create a resilient environment and to invest in assets and infrastructure designed to minimise the potential impact of ICT events and to protect its business, image, customers and employees. The Group has therefore adopted a system of principles and rules intended to identify and measure the ICT risk to which company assets are exposed, assess the existing safeguards and identify adequate methods of managing such risks, in accordance with the operational risk management process. In line with the methodological framework established for the governance of operational risks, the ICT Risk management framework has been developed with a view to integrating and coordinating the specific expertise of the structures involved. ICT (Information and Communication Technology) risk means the risk of economic, reputational or market share losses related to the use of information and communication technology. In the integrated view of corporate risk for supervisory purposes, this risk is considered, according to specific aspects, as operational, reputational and strategic risk. ICT risk includes: \u2212 cyber risk (including IT security risk): the risk of sustaining economic loss, reputational damage or loss of market shares due to: o any unauthorised access or attempt to access the IT system of the Group or the data or digital information it contains; o any event (intentional or unintentional), favoured or caused by the use of technology or related to it that has or could have a negative impact on the integrity, availability, confidentiality and/or authenticity of company data and information, or on the continuity of business processes; o the improper use and/or dissemination of data and digital information also not directly produced and managed by the ISP Group; \u2212 IT or technology risk: the risk of sustaining economic loss, reputational damage or loss of market shares in relation to the use of the corporate IT systems and related to malfunctioning hardware, software and networks. Group Operational Risk Management Process The Intesa Sanpaolo Group\u2019s operational risk management process is divided into the following phases: Identification The identification phase includes the collection and classification of qualitative and quantitative information that allows to identify and describe the Group\u2019s potential areas of operational risk. In particular, it involves: \u2013 the collection and updating of data on operational events (Loss Data Collection), decentralised to the Organisational Units; \u2013 identification of the company processes and components of the IT system at highest potential risk; \u2013 determination of the applicability and relevance of the operational risk factors defined; \u2013 identification of projects that will involve relevant changes to the IT system or changes to critical components of the IT system; \u2013 identification of significant risk scenarios, also based on the external context (e.g., external loss data, regulatory Identification Assessment and Measurement Monitoring and Control Mitigation Reporting development, emerging trends, strategic and threat intelligence); \u2013 identification and analysis of issues affecting the Group\u2019s areas of operation. Assessment and measurement The assessment and measurement phase includes the process of qualitative and quantitative determination of the Group\u2019s exposure to operational risks. It includes: \u2013 at least annual performance of the process of self-assessment of exposure to operational and ICT risk (Self-diagnosis); \u2013 performance of preventive analyses of operational and ICT risks deriving from agreements with third parties (e.g., outsourcing of activities), business operations or project initiatives, introduction or revision of new products and services, launch of new activities and entry into new markets; \u2013 the definition of the relevance of identified issues; \u2013 transformation of the evaluations collected (e.g., internal and external operational loss data, management levels of risk factors, probability and impact in the event of occurrence of risk scenarios) into synthetic risk measures; \u2013 determination of economic and regulatory capital for operational risk, through the internal model and the simplified methods defined by the regulations. Monitoring and control The purpose of the monitoring phase is to analyse and monitor on an ongoing basis: \u2013 the development of the exposure to operational risks on the basis of the structured organisation of the results of the identification, assessment and measurement processes and the observation of indicators that represent a valid proxy of the exposure to operational risks (e.g., limits, early warnings and indicators established within the RAF); \u2013 the development of the risk profile inherent in the use of new technologies or in the implementation of significant changes to existing systems. Mitigation The mitigation phase includes activities aimed at containing the exposure to operational risks, defined on the basis of the results of the identification, measurement, assessment and monitoring phases. It includes: \u2212 identification, definition and implementation of the corrective measures (mitigation actions) necessary to solve the identified gaps or to bring back the relevance of the identified issues within the defined risk tolerance; \u2212 promotion of initiatives designed to spread a culture of operational risk within the Group; \u2212 definition of strategies for transferring operational risks, in terms of optimisation of insurance coverage and any other forms of risk transfer adopted by the Group from time to time. In this regard, in addition to a traditional insurance programme (to protect against offences such as employee infidelity, theft and damage, transport of valuables, computer fraud, forgery, cyber-crimes, fire and earthquake, and third-party liability), the Group has taken out an insurance coverage policy named Operational Risk Insurance Programme, in compliance with the requirements established by the regulations and to have access to the capital benefits provided for by the policy, which provides specific cover for Companies included in the AMA scope, significantly increasing the limits and transferring the risk of significant operational losses to the insurance market. In addition, with respect to risks relating to real estate and infrastructure, with the aim of containing the impacts of phenomena such as catastrophic environmental events, situations of international crisis, and social protest events, the Group may activate its business continuity solutions. Reporting The reporting phase includes the preparation of appropriate information flows associated with operational risk management, designed to provide disclosures useful, for example, for: \u2212 analysis and understanding of any dynamics underlying the trend in the level of exposure to operational risks; \u2212 analysis and understanding of the main issues identified; \u2212 defining the mitigation actions and intervention priorities. Self-diagnosis Self-diagnosis is the annual process through which the Organisational Units identify their level of exposure to operational and ICT risk. It includes the Operational Risk Assessment and ICT Risk Assessment, in turn consisting of: \u2013 Business Environment Evaluation (VCO): activities used to identify significant risk factors and assess the related management level 107 . \u2013 Scenario analysis (SA): a method of prospective analysis that takes the form of a systematic process, which is typically repeated at predefined intervals, but which may also be conducted on an ad hoc basis, and which consists in imagining the occurrence of particular situations (or scenarios) and imagining their consequences. Once scenarios have been identified and appropriately characterised, they must be assessed: i.e., one must determine the probability of occurrence (frequency) and potential impact (average impact and worse case) in the event of occurrence of the situation described in the scenario. Internal model for the measurement of operational risk The Intesa Sanpaolo Group\u2019s internal model for calculating capital absorption is designed to combine all the main sources of quantitative information (operational losses: internal and external events, estimates deriving from the Scenario Analysis) and 107 The applicability and significance of risk factors are assessed, in the case of ICT risk, by the technical functions, cybersecurity functions and business continuity functions, and, with regard to operational risk, by the Decentralised Operational Risk Management functions. qualitative information (Business Environment Evaluation). Capital-at-risk is therefore identified as the minimum amount at Group level required to bear the maximum potential loss (worst case). It is estimated using a Loss Distribution Approach model (actuarial statistical model to calculate the Value-at-risk of operational losses), applied to historical data and the results of the scenario analysis assuming a one-year estimation period, with a confidence level of 99.90%. The methodology also applies a corrective factor, which derives from the qualitative analyses of the risk level of the operational environment (VCO), to take into account the effectiveness of internal controls in the various Organisational Units. The internal model\u2019s insurance mitigation component was approved by the Bank of Italy in June 2013 with immediate effect of its benefits on operations and on the capital requirements. Impacts from the COVID-19 pandemic During 2022, the company measures and rules adopted since the beginning of the emergency, in order to ensure business continuity and the safeguarding of the health of customers, employees and suppliers, were constantly reassessed and updated based on the evolution of the health situation and the regulatory requirements. In terms of operational risks, no additional impacts were reported specifically due to the pandemic. Impacts of the Russia-Ukraine conflict As regards operational risks, the impacts of the Russia-Ukraine conflict regard several actions implemented to ensure the Group's business continuity operations, particularly the extra costs incurred for Business continuity and the losses resulting from physical damage directly caused to offices/branches located in the conflict zone. That information is used to monitor exposure to operational risk, including that regarding the Risk Appetite Framework. QUANTITATIVE INFORMATION To determine its capital requirements, the Group uses a combination of the methods (AMA, TSA and BIA) allowed under applicable regulations. The capital requirement amounted to 2,039 million euro as at 31 December 2022, substantially stable on the 2,024 million euro as at 31 December 2021. The following shows the breakdown of capital requirement relating to the Advanced Measurement Approach by type of operational event (Event Type). Breakdown of capital requirement (Advanced Measurement Approach - AMA) by type of operational event With regard to the sources of operational risk, the chart below shows the impact of the operational losses recorded during the year, based on event type. In 2022, the most significant event type was Clients, Products and Business Practices, which included losses related to defaults connected with professional obligations towards customers, suppliers or outsourcers and to the provision of services and products to customers performed improperly or negligently. Breakdown of operational losses recorded in 2022, by event type LEGAL RISKS As at 31 December 2022, there were a total of about 37,400 disputes, other than tax disputes, pending at Group level (excluding those involving Risanamento S.p.A., which is not subject to management and coordination by Intesa Sanpaolo) with a total remedy 108 sought of around 3,850 million euro. This amount includes all disputes for which the risk of a disbursement of financial resources resulting from a potential negative outcome has been deemed possible or probable and therefore does not include disputes for which risk has been deemed remote. Those disputes include a large number of mass disputes at the international subsidiary banks (amounting to around 25,600 disputes) which, as a whole, account for a very low remedy sought. The risks associated with these disputes are thoroughly and individually analysed by the Parent Company and Group companies. Specific and appropriate provisions have been made to the Allowances for Risks and Charges in the event of disputes for which there is an estimated probability of a disbursement of more than 50% and where the amount of the disbursement may be reliably estimated (disputes with likely risk). Without prejudice to the uncertainty inherent in all litigation, the estimate of the obligations that could arise from the disputes and hence the amount of any provisions recognised are based on the forward-looking assessments of the outcome of the trial. These forward-looking assessments are, in any event, prepared on the basis of all information available at the time of the estimate. The only disputes with likely risk amount to around 28,300 with a remedy sought of 1,788 million euro and provisions of 744 million euro. The component referring to the Parent Company Intesa Sanpaolo totals around 5,280 disputes, with a remedy sought of 1,433 million euro and provisions of 550 million euro. These include 2,860 positions relating to disputes concerning anatocism, illustrated in greater detail below. Compared to the previous year\u2019s figures, there was a decrease in number and in the amount of remedy sought. That decrease mainly regarded disputes concerning anatocism, illegal interest and other conditions, and claims on banking products. There were around 700 disputes relating to other Italian subsidiaries, with a remedy sought of 246 million euro and provisions of 91 million euro. There were around 22,300 disputes relating to international subsidiaries, with a remedy sought of 109 million euro and provisions of 103 million euro, impacted by the previously mentioned mass disputes 109 : specifically, there were around 19,000 disputes referring to the subsidiary Banca Intesa Beograd, regarding two areas of litigation which are illustrated in the specific section. The breakdown according to the main categories of disputes with likely risk shows the prevalence of cases related to the Group\u2019s ordinary banking and credit activities: disputes involving claims relating to banking and investment products and services or on credit positions and revocatory actions account for about 74% of the remedy sought and 75% of the provisions. The remaining disputes mainly consist of other civil and administrative proceedings and labour disputes or criminal proceedings or proceedings related to operational violations. The paragraphs below provide summary information on the significant disputes (mainly those with a remedy sought of more than 20 million euro and where the risk of a disbursement is currently considered likely or possible), together with the cases considered significant. Disputes relating to anatocism and other current account and credit facility conditions, as well as usury During 2022, the disputes of this type \u2013 which for years have been a significant part of the civil litigation brought against the Italian banking industry \u2013 decreased both in number and in total value of claims made compared to the previous year. Overall, the number of disputes, including mediations, with likely risk amounted to around 2,860. The remedy sought amounted to 491 million euro, with provisions of 180 million euro. As is the case for the other civil disputes, the assessment of the risk related to this type of litigation is carried out individually, taking into account the claims made, the defences submitted, the progress of the proceedings and case-law decisions, for each dispute. You are reminded that in 2014 and 2016, Article 120 of the Consolidated Law on Banking, which governs the compounding of interest in banking transactions, was amended with the establishment of the ban on anatocism and the delegation of the CICR (Interdepartmental Committee for Credit and Savings) to regulate this matter. In February 2017, the Italian Antitrust Authority initiated proceedings against Intesa Sanpaolo for alleged unfair business practices involving, among other things, the methods used to request the above-mentioned authorisation from customers for the charging of the interest to the account imposed by the new regulations introduced in 2016. The Authority completed the proceedings in October 2017, ruling that Intesa Sanpaolo had implemented an \u201caggressive\u201d policy aimed at acquiring the authorisation, by soliciting customers to provide it through various means of communications and without putting them in a position to consider the consequences of that choice in terms of the interest calculation on the compounded debt interest. As a result, the Authority issued a fine of 2 million euro against Intesa Sanpaolo. Intesa Sanpaolo has submitted an appeal with the Lazio Regional Administrative Court, on the grounds that the ruling was unfounded. With ruling of 2 January 2023, the Regional Administrative Court confirmed the fine and the Bank will appeal to the Council of State. Disputes relating to investment services Also in this area, the disputes showed a downtrend in terms of number compared to the previous year. The most significant sub-group was disputes concerning derivatives. There were a total of around 350 disputes relating to investment services with likely risk. The total remedy sought amounted to around 242 million euro, with provisions of 144 million euro. As is the case for the other civil disputes, the assessment of the risk related to this type of litigation is carried out individually, taking into account the claims made, the defences submitted, the progress of the proceedings and the case-law guidance, for each dispute. We also note approximately 154 disputes with a remedy sought of 142 million euro initiated by \u201cwiped out\u201d shareholders and subordinated bondholders of the former \u201cOld Banks\u201d of Banca delle Marche, Banca Popolare dell\u2019Etruria e del Lazio and Cassa di Risparmio della Provincia di Chieti, deemed to be of possible risk. Those disputes are backed by the warranties and obligations to indemnify by the Seller (National Resolution Fund) for the benefit of the former UBI Banca, and 108 The figures for the remedy sought do not include claims of indeterminate value, i.e. those that do not contain a specific financial claim when the dispute is initiated; the value of these disputes is determined during the course of the proceedings when sufficient information emerges for the valuation. 109 For those cases, the provisions are relatively higher than the remedy sought (which is determined based on the customer\u2019s original claim) to take account of the interest and legal fees to be paid to the adverse party and the potential expansion of the original claim submitted in the legal proceedings. now Intesa Sanpaolo, and therefore also cover any liabilities arising from the activities carried out by the Banks (the \u201cOld Banks\u201d) before they were subject to the resolution procedure, in relation to, inter alia, risks of a legal nature or generally related to ongoing or threatened disputes, or violations of the law and any potential liabilities. Dispute regarding financial derivative instruments With regard to derivative transactions, the legal risks linked to legal proceedings with local authorities, their subsidiaries and individuals continue to be subject to careful monitoring. Specifically, disputes are pending with 20 local authorities, with possible or probable risk, for total claims of 142 million euro, and disputes with 5 Companies controlled by public entities, with total claims of 66 million euro. Disputes with individuals, assessed as having possible or probable risk, total around 197, and of these, around 43 positions also regard requests for refunds of amounts on other accounts held with the Bank. Net of those latter positions, the total value of the claims lodged in the proceedings regarding only derivatives amounts to around 84 million euro. With regard to contracts entered into with local authorities, during 2022, 6 new disputes were initiated against the Bank (Province of Catanzaro, Province of Varese, Province of Rovigo, Municipality of Marsciano, Municipality of Soriano del Cimino and Municipality of Servigliano) with total claims of 27 million euro. In the same year, 4 rulings were issued relating to the following proceedings: \u2212 Municipality of Faenza: with decision dated 1 February 2022, the Court of Appeal of Bologna confirmed that the contract was null and void. In execution of the first instance ruling, the Bank paid 2.8 million euro. An appeal was lodged with the Court of Cassation. \u2212 Municipality of Santa Maria Capua Vetere: the Court of Rome, in its ruling of 2 March 2022, rejected the claim of invalidity of the two derivative contracts, made by the Municipality, and, instead upheld the claim for implicit costs not disclosed at the time of signing and ordered the Bank to pay 1.1 million euro plus interest and revaluation. \u2212 Municipality of Vittorio Veneto: the Court of Venice, with non-final ruling of 29 March 2022, voided two contracts, referring to the final decision for the quantification of the restitutionary effects, whose potential risk amounts to 5.8 million euro. \u2212 Province of Pavia: with decision dated 4 May 2022, the Court of Appeal of Milan confirmed that the contract was null and void. In execution of the first instance ruling, the Bank had already paid 10.1 million euro. An appeal was lodged with the Court of Cassation. A summary of the most significant disputes with local authorities is provided below: \u2212 Municipality of Venice: the dispute regards a contract governed by the ISDA, with remedy sought of 71 million euro. With ruling of 14 October 2022, the High Court of Justice in London held that the Municipality did not have the capacity to enter into speculative derivative contracts involving debt. As a result, the High Court established that the Municipality was entitled to the restitution of the differentials paid to the Bank solely in the amount exceeding the outlays of the Bank incurred for the back-to-back hedging derivatives (at least until December 2020, the date on which the Municipality formally challenged the validity of the transaction). In this case, the application of that principle would significantly reduce the restitutionary obligation to the Municipality. The parties formalised the grounds for appeal by the set deadline of 3 February 2023. In a subsequent hearing of 6 February 2023, the request was upheld to defer to the outcome of the appeal the settlement of the credit/debit amounts between the parties (\u201cconsequential hearing\u201d) due to the High Court\u2019s ruling. The Bank was also ordered to pay 70% of the legal fees requested by the Municipality, of which 35%, equal to around 2 million GBP, to be paid by 20 February. With regard to the second proceedings with the Municipality of Venice before the Italian court, regarding alleged breaches deriving from the mandate and investment services agreements, the Court has set a new hearing for 22 March 2023, \u201cas it would be appropriate to hear testimony from the parties and obtain clarifications, given the likely settlement of the proceedings held in the UK.\u201d \u2212 Municipality of Perugia: at the end of 2020, the Municipality of Perugia served a summons relating to four derivative contracts entered into in 2006, asking for repayment of the amounts paid, to be quantified during the lawsuit. The Court permitted an expert\u2019s report, adjourning to the hearing of 9 March 2023 for the examination of the expert witness report. With regard to the contracts entered into with subsidiaries of local authorities, no new disputes were initiated, while 2 rulings were issued regarding the following proceedings: \u2212 Azienda Socio Sanitaria territoriale Valle Olona: with ruling dated 6 April 2022, the Court of Busto Arsizio declared the contract null and void. In execution of the ruling, the Bank paid 1.8 million euro and lodged an appeal. \u2212 Aler S.p.A.: with ruling dated 1 August 2022, the Court of Appeal of Milan confirmed that the contract entered into with the then Banca OPI was null and void. As a result of the first instance ruling, the Bank had paid 4.6 million euro. The possibility of filing an appeal with the Court of Cassation is being evaluated. A summary of the most significant disputes with subsidiaries of local authorities is provided below: \u2212 Terni Reti Sud S.r.l.: the dispute concerns a derivative contract entered into in August 2007 by the former Banca delle Marche 110 with Terni Reti Sud S.r.l., whose capital is 100% held by the Municipality di Terni. The opponent claims that the derivative is null and void due to failure to communicate the MTM and the probabilistic scenarios, and the breach of disclosure obligations, formulating a demand of 22 million euro. The Court ordered a court-appointed expert\u2019s report and adjourned the case to 13 June 2023. \u2212 EUR S.p.A.: in May 2021, a writ of summons was served by EUR S.p.A., a company held by the Ministry of the Economy and Finance and Roma Capitale. In addition to ISP, the company is also suing other intermediaries due to derivative contracts governed by the ISDA, entered into in relation to a syndicated loan granted. At the hearing of 8 November 110 Note that those disputes are backed by the warranties and obligations to indemnify by the Seller (National Resolution Fund) for the benefit of UBI Banca in relation to the acquisition of the New Banks deriving from the resolution of Banca delle Marche, Banca Popolare dell\u2019Etruria e del Lazio and Cassa di Risparmio della Provincia di Chieti and therefore also cover any liabilities arising from the activities carried out by the Banks (the \u201cOld Banks\u201d) before they were subject to the resolution procedure, in relation to, inter alia, risks of a legal nature or generally related to ongoing or threatened disputes, or violations of the law and any potential liabilities. 2022, the Court deemed that the lawsuit was ready for a ruling on the objection raised by the defendants regarding the lack of jurisdiction of the Italian court, and granted the terms for filing the closing briefs. Intesa Sanpaolo\u2019s risk amounts to 22 million euro. Disputes with individuals are decreasing, in terms of both stock and flows. Dispute relating to loans in CHF to the Croatian subsidiary Privredna Banka Zagreb Dd As already noted in the previous financial statements, Potro\u0161a\u010d \u2013 Croatian Union of the Consumer Protection Association initiated legal action against the subsidiary Privredna Banka Zagreb (\u201cPBZ\u201d) and seven other Croatian banks. According to the plaintiff, the defendant banks engaged in an unfair practice by allegedly using unfair contractual provisions on variable interest rate , which could be changed unilaterally by the bank, and by denominating the loans granted in Swiss francs (or indexing them to Swiss francs) without allegedly appropriately informing the consumers of the risks prior to entering into the respective loan agreements. In September 2019, the Croatian Supreme Court rendered a ruling in the collective action proceedings, rejecting the appeals filed by the sued banks against the High Commercial Court ruling from 2018 and confirming the position of courts of lower instance that banks had breached collective interests and rights of consumers by incorporating unfair and null and void provisions on CHF currency clause. The decision of the Supreme Court was challenged by PBZ before the Constitutional Court, which rejected the claim at the beginning of 2021. The subsidiary thus lodged an appeal before the European Court of Human Rights, which was rejected near the end of 2022. In connection with the mentioned proceedings for the protection of the collective interests of consumers, numerous individual proceedings have been brought by customers against PBZ, despite the fact that most of them voluntarily accepted the offer to convert their CHF loans into EUR denominated loans retroactively, in accordance with the Act on the Amendments to the Consumer Credit Act (Croatian Official Gazette 102/2015 \u2013 the \u201cConversion Law\u201d). In March 2020, the Croatian Supreme Court, within model case proceedings (a Supreme Court proceedings with obligatory effect on lower instance courts with the aim of unifying/harmonising case law), ruled that the conversion agreements concluded between banks and borrowers under the Croatian Conversion Law of 2015 produce legal effects and are valid even in the case when the provisions of the underlying loan agreements on variable interest rate and currency clause are null and void. In May 2022, the EU Court of Justice, in proceedings regarding reference for a preliminary ruling involving another intermediary, established that the Court of Justice has jurisdiction over the conversion agreements concluded under the Conversion Law, as they occurred after Croatia joined the European Union, and that the EU Directive on unfair terms in consumer contracts does not apply to those conversion agreements, whose content reproduces provisions of national law. On 20 December 2022, the Civil Law Department of the Croatian Supreme Court provided an interpretation of the legal effects of the agreements for the conversion of loan agreements from CHF to EUR and on consumers\u2019 rights. By virtue of that interpretation, consumers that entered into a conversion agreement pursuant to the aforementioned Conversion Law of 2015 have the right to receive legal interest on excess amounts paid that the bank calculated on converting the loans, from the date of each single payment up to the date of conversion. Once this judicial interpretation is recorded with the Court Practice Records Department, it will be final and binding for lower instance courts. The number of new individual lawsuits filed against PBZ in 2022 was lower than those in 2021. At the end of 2022, the total pending cases amounted to a few thousand. It cannot be excluded the possibility that additional lawsuits might be filed against PBZ in the future in connection with CHF loans. Dispute with the foreign subsidiary Banca Intesa Beograd (Serbia) The following areas of the mass disputes that have impacted the entire Serbian banking system are shown below. 1) Processing fees Legal dispute regarding processing fees applied by banks at the time of disbursing loans. The claimants, individuals and legal persons, are requesting the repayment of those charges, as they are deemed as not owed. The first claims arose in 2017 and recorded a significant increase in lawsuits was recorded in the following years, though for modest amounts on average. At the end of 2022 Banca Intesa Beograd had been summoned in around 18,600 lawsuits deemed as having possible or probable risk (at the end of 2021, these amounted to around 24,500); the related total amounts of principal requested to be repaid by the Bank came to around 1.3 million euro. Most of the courts accepted the customers\u2019 requests, based on an interpretation of regulations that the banks oppose. In September 2021, the Supreme Court of Serbia recognised the legitimacy of the costs and fees applied to loans at the time of their disbursement, provided they are indicated in the contract proposal. During 2022, the flows of new disputes significantly decreased on 2021, and several customers dropped pending disputes. 2) NKOSK Legal dispute relating to real estate loans insured through the National Housing Loan Insurance Corporation (NKOSK), whose premium is paid by the borrowers. The borrowers deem that, as the Bank is the Beneficiary of the insurance, the premium should be paid by the Bank. At the end of 2022 Banca Intesa Beograd had been summoned in around 1,100 lawsuits deemed as having possible or probable risk (at the end of 2021, these amounted to around 1,000); the related total amounts of principal requested to be repaid by the Bank came to around 1.1 million euro. Most of the courts accepted the customers\u2019 requests, based on an interpretation of regulations that the banks oppose. In September 2021, the Supreme Court of Serbia recognised the legitimacy of requiring the insurance premium to be paid by the borrowers, provided that the obligation is clearly described to the borrowers during precontractual procedures. In 2022, the flows of new disputes grew slightly on 2021, and several customers dropped pending disputes. Ruling of the EU Court of Justice of 11 September 2019 on credit agreements for consumers \u2013 so-called Lexitor ruling Article 16, paragraph 1, of Directive 2008/48 on credit agreements for consumers states that in the event of early repayment of the loan the consumer is \u201centitled to a reduction in the total cost of the credit, such reduction consisting of the interest and the costs for the remaining duration of the contract\u201d. According to the Lexitor ruling, this provision must be interpreted as meaning that the right to a reduction in the total cost of the credit includes all the costs incurred by the consumer and therefore also includes the costs relating to services prior to or connected with the signing of the contract (upfront costs such as processing costs or agency fees). Article 16, paragraph 1 of Directive 2008/48 has been transposed in Italy through Article 125 sexies of the Consolidated Law on Banking, according to which in the event of early repayment \u201cthe consumer is entitled to a reduction in the total cost of the credit, equal to the amount of interest and costs due for the remaining life of the contract\u201d. On the basis of this rule, the Bank of Italy, the Financial Banking Arbitrator and case law have held that the obligation to repay only relates to the charges that have accrued during the course of the relationship (recurring costs) and have been paid in advance by the customer to the lender. In the event of early repayment, these costs must be repaid in the amount not yet accrued and the obligation to repay does not include the upfront costs. Following the Lexitor judgment, the question has arisen as to whether Article 125 sexies of the Consolidated Law on Banking should be interpreted in accordance with the principle laid down therein or whether the new principle requires a legislative amendment. According to the EU principle of \u201cconsistent interpretation\u201d, national courts are required to interpret the rules in their own jurisdiction in a manner consistent with the European provisions. However, if the national rule has an unambiguous interpretation, it cannot be (re)interpreted by the court in order to bring it into line with the various provisions of a European directive: the principles recognised by European Union law prevent the national court from being required to make an interpretation that goes against the provisions of the domestic law. In this regard, we note that Article 125 sexies of the Consolidated Law on Banking has always been interpreted as meaning that, in the event of early repayment, the obligation to repay relates only to recurring costs and therefore does not include upfront costs. In December 2019, following the Lexitor ruling, the Bank of Italy issued \u201cguidance\u201d for the implementation of the principle established by the EU Court of Justice, to the effect that all costs (including upfront costs) should be included among the costs to be refunded in the event of early repayment, both for new relationships and for existing relationships. Intesa Sanpaolo has decided to follow the Bank of Italy \u201cguidance\u201d, even though it believes that the legal arguments set out above regarding the fact that Article 125 sexies of the Consolidated Law on Banking cannot be interpreted in a manner that complies with the Lexitor ruling are well founded. A provision has therefore been made in the Allowance for Risks and Charges corresponding to the estimated higher charges resulting from the decision to follow the Bank of Italy \u201cguidance\u201d. On 25 July 2021, Article 11-octies of Law 106/2021 took effect, which modified paragraph 1 of Article 125 sexies of the Consolidated Law on Banking, with the intention of resolving the situation of uncertainty caused by the Lexitor ruling, with the following provisions: \u2212 with regard to the rules on mortgage lending to consumers, removal of the reference to Article 125-sexies of the Consolidated Law on Banking and insertion of a specific provision on the early redemption of this type of loan, limiting repayment to only the interest and costs due for the remaining life of the loan agreement; \u2212 with regard to the rules on consumer credit, the text of Article 125-sexies of the Consolidated Law on Banking is modified so as to implement the principles of the Lexitor ruling, indicating, however, the amortised cost criterion as the preferred criterion for calculating repayment; \u2212 these provisions only apply to loan agreements signed after the entry into force of the law converting the decree. Loan agreements signed before that date are expressly to be governed by the provisions of law and Supervisory Provisions previously in force. The new rule did not have significant impacts on new contracts: for personal loans, the contractual clauses already comply with the rule, and for salary-backed loan products, the companies in the Intesa Sanpaolo Group have adopted the \u201ctutto TAN\u201d (All APR) model, which does not apply incidental costs to the customer, aside from interest. As regards consumer credit agreements concluded before the date of entry into force of the new rule, even if the agreements expired after that date, the repayment of the upfront costs could be limited to the amount established in the agreement. The Coordination Board of the Banking and Financial Ombudsman (ABF), which was assigned the issue of repayment of the upfront costs following the entry into force of the \u201cLexitor amendment\u201d, issued Decision no. 21676 on 15 October 2021, stating the following principle: in application of the legislative change pursuant to Article 11 octies, paragraph 2, last sentence of Law Decree No. 73 of 25 May 2021, converted into Law no. 106 of 23 July 2021, in the event of early repayment of a loan entered into before the entry into force of the specific regulatory provisions, there must be a distinction between costs relating to activities over the course of the contractual relationship (recurring costs) and costs relating to the fulfilment of preliminary obligations for granting the loan (upfront costs). This means that the former, but not the latter, can be repaid, limited to the portion not accrued due to the early repayment. The guidance from the Coordination Board of the Banking and Financial Ombudsman was followed by the single panels, which rejected the requests for pro rata repayment of upfront costs. The decisions were not suspended even after the issue of the legitimacy of the legislative change was referred to the Constitutional Court. This will be explained further below. On 1 December 2021, the Bank of Italy also notified intermediaries that, as a result of the changes made by Law 106/2021 to Article 125 sexies of the Consolidated Law on Banking, its \u201cguidelines\u201d of 4 December 2019 are to be considered invalid. Those guidelines requested that, in the event of the early repayment of consumer credit loans, the reduction in the total cost of the loan be calculated, including all costs borne by the consumer (recurring and upfront costs), excluding taxes. Conversely, ordinary case law was divided over the application of the new rule. Several judges have applied the new provision by rejecting the claimant\u2019s request for pro rata repayment of upfront fees following early repayment. However, in a significant number of cases, particularly in disputes before Justices of Peace, the customer\u2019s right to pro rata repayment of the upfront costs was recognised, deeming that - with varying, questionable grounds - the Lexitor principles should be applied also following the entry into force of the legislative change. Those rulings have generally been challenged by the Bank. With ruling no. 263 of 22 December 2022, the Constitutional Court accepted the question of constitutionality raised by the Court of Turin in November 2021, in a lawsuit brought against an intermediary specialising in salary-backed loans, for repayment of the upfront costs, declaring only the section of Article 11 octies, paragraph 2 of Law Decree no. 73 of 25 May 2021, converted with amendments into Law no. 106 of 23 July 2021 with the wording \u201cand the secondary regulations contained in the transparency and supervisory provisions of the Bank of Italy\u201d to be unconstitutional. In light of the ruling of the Constitutional Court, the Bank made an initial estimate of the potential charge connected with the effects of the partial declaration of unconstitutionality of Article 11 octies, paragraph 2 of Law Decree no. 73 of 25 May 2021, making a specific provision to the allowance for risks and charges. On 9 February 2023, the European Court of Justice, within proceedings originating from a reference for a preliminary ruling from the Austrian Supreme Court, ruled on the applicability of the Lexitor principle to mortgage lending to consumers. The Austrian Court asked the European Court of Justice whether Directive 2014/17 on mortgage lending to consumers precluded national legislation providing that the right of the consumer to a reduction in the total cost of the credit in the event of early repayment of the credit covers only interest and costs that are dependent on the duration of the agreement. The Court declared that Directive 2014/17 does not preclude such legislation. According to the Court, that right to reduction does not, therefore, include costs which, irrespective of the duration of the agreement, are payable by the consumer to either the creditor or third parties for services previously rendered in their entirety at the time of early repayment (such as processing and appraisal fees). Moreover, in 2021 the European Commission launched the process for the revision of EU Directive no. 2008/48 on consumer credit, on which the Lexitor ruling had been handed down. Following the legislative proposal initially formulated by the Commission, the phase of involving the European Parliament and Council began and, in the last few months, these bodies defined their positions by publishing their respective proposals. Dispute between Intesa Sanpaolo Vita S.p.A. and RB Holding S.p.A. and the Favaretto family In May 2020, Intesa Sanpaolo Vita S.p.A. finalised an investment in RBM Assicurazioni Salute S.p.A., the leading Italian insurance company in the healthcare class held by RB Holding S.p.A. referring to the family of Roberto Favaretto, an operation that resulted in Intesa Vita S.p.A. currently controlling the insurance company, now named Intesa Sanpaolo RBM Salute S.p.A. In May, Intesa Sanpaolo Vita sent the minority shareholders RB Holding S.p.A. an indemnity request pursuant to and in accordance with the investment contract, in relation to the emerging situations that gave rise (or could give rise) to liabilities currently quantifiable at over 129 million euro, which substantially involve: \u2212 the increase in the charges for claims concerning the M\u00e8taSalute Policy due to the elimination of unfair business practices subject to proceedings launched by the AGCM (Italian Competition Authority); \u2212 credit positions (per \u2018premium settlements\u2019) posted to balance sheet assets at the time of closing and fully written down following the closing, due to their verified uncollectibility; \u2212 penalties for delays in payments of claims relating to the ASDEP \u2013 Healthcare for Employees of Public Entities Policy. RB Holding S.p.A. rejected all charges and, in the second decade of July, along with the Favaretto family, submitted a petition to the Arbitration Chamber of Milan, claiming the invalidity of several clauses in the investment contract and shareholders\u2019 agreement of 2020 (including those relating to the put and call options on the minority interest and the non-competition agreement), breaches by Intesa Sanpaolo Vita of contractual commitments (such as the consultation clause relating to the renewal of the M\u00e8taSalute contract and the termination of the relationship with the previous Managing Director), the breach by the latter of the rules of good faith and fairness, with a request for compensation for damages totalling 423.5 million euro. Intesa Sanpaolo Vita S.p.A. filed its defence to the Arbitration Chamber by the assigned deadline of 5 September 2022, fully contesting the adverse party\u2019s arguments and also making a counterclaim for the payment of a total amount of 129.4 million euro, for the breach, by RB Hold, of the representations and warranties issued and commitments undertaken through the investment contract, as well as the obligation to act in accordance with fairness and good faith, making full reference to the claims set out in the indemnity request of last May. As the appearing parties did not reach an agreement on the appointment of the President of the Arbitration Tribunal, they submitted a joint request to the Arbitration Board to postpone the appointment. Where consultation between the parties identifies the interest in an amicable settlement, the fact that the dispute is pending shall not impede the verification of the feasibility of such cases. Disputes arising from the acquisition of certain assets, liabilities and legal relationships of Banca Popolare di Vicenza S.p.A. in compulsory administrative liquidation and Veneto Banca S.p.A. in compulsory administrative liquidation Preliminarily, the following is noted: a. based on the agreements between the two Banks in compulsory administrative liquidation and Intesa Sanpaolo (Sale Contract of 26 June 2017 and Second Acknowledgement Agreement of 17 January 2018), two distinct categories of disputes have been identified (also relating to the subsidiaries of the former Venetian banks included in the sale): a1 - the Previous Disputes, included among the liabilities of the Aggregate Set transferred to Intesa Sanpaolo, which include, with some important exceptions (see point a2 herein), civil disputes relating to proceedings already pending at 26 June 2017, and in any case different from those included under the Excluded Disputes (see the point below); a2 - the Excluded Disputes, which remain under the responsibility of the Banks in compulsory administrative liquidation and which concern, among other things, disputes (even if already pending at 26 June 2017) brought by shareholders and convertible and/or subordinated bondholders of one of the two former Venetian banks (including those deriving from so- called \u201coperazioni baciate\u201d), disputes relating to non-performing loans, disputes relating to relationships terminated at the date of the transfer, and all disputes (whatever their subject) arising after the sale and relating to acts or events occurring prior to the sale. The Excluded Disputes also include the disputes attributable to all the categories listed herein (point a2) brought against Banca Nuova and Banca Apulia (or Intesa Sanpaolo as their absorbing company). The relevant provisions were transferred to Intesa Sanpaolo along with the Previous Disputes; in any case, if the allowances transferred prove insufficient, Intesa Sanpaolo is entitled to be indemnified by the Banks in compulsory administrative liquidation, at the terms provided for in the Sale Contract of 26 June 2017; b. after 26 June 2017, a number of lawsuits included within the Excluded Disputes were initiated or resumed against Intesa Sanpaolo. With regard to these lawsuits: \u2212 Intesa Sanpaolo is pleading (and will plead) its non-involvement and lack of capacity to be sued, both on the basis of the provisions of Law Decree 99/2017 (Article 3) and the agreements signed with the Banks in compulsory administrative liquidation and in compliance with the European Commission provisions on State Aid (Decision C(2017) 4501 final and Attachment B to the Sale Contract of 26 June 2017), which prohibit Intesa Sanpaolo from taking responsibility for any claims made by the shareholders and subordinated bondholders of the former Venetian Banks; \u2212 if there were to be a ruling against Intesa Sanpaolo (and in any event for the charges incurred by Intesa Sanpaolo for any reason in relation to its involvement in any Excluded Disputes), it would have the right to be reimbursed by the Banks in compulsory administrative liquidation, based on that set out in the Sale Contract and subsequent agreements. The Banks in compulsory administrative liquidation have contractually acknowledged their capacity to be sued with respect to the Excluded Disputes, such that they have entered appearances in various proceedings initiated (or re-initiated) by various shareholders and convertible and/or subordinated bondholders against Intesa Sanpaolo (or in any case included in the category of Excluded Disputes), asking for the declaration of their exclusive capacity to be sued and the consequent exclusion of Intesa Sanpaolo from those proceedings. All the obligations and liabilities for indemnity assumed by the Banks in compulsory administrative liquidation in relation to Intesa Sanpaolo are covered by a public guarantee (\u201cIndemnification Guarantee\u201d), whose issue was an essential prerequisite of the Sale Contract. This guarantee was formalised on 15 November 2022. Over time, by virtue of the contractual obligations assumed by the two Venetian Banks in compulsory administrative liquidation, Intesa Sanpaolo has sent them several claims containing requests (or reserving the right to make requests) for reimbursement/indemnity relating to previously incurred or potential damage concerning Previous Disputes or Excluded Disputes, as well as the breach of representations and warranties regarding certain assets and liabilities transferred to Intesa Sanpaolo. Pending the formalisation of the \u201cIndemnification Guarantee\u201d, on 14 October 2022, Intesa Sanpaolo and the two Venetian Banks in compulsory administrative liquidation negotiated and signed a \u201cThird Agreement\u201d to govern several aspects for the performance of the Sale Contract of 26 June 2017 (as occurred for two previous acknowledgement agreements signed in 2017 and in 2018). At that time, Intesa Sanpaolo and the two Venetian Banks in compulsory administrative liquidation: \u2212 extended the duration of the loan agreements on the net debt of the sale and the sale of high risk loans and their conditions, aligning the guarantees; \u2212 specified, both regarding the claims already sent by Intesa Sanpaolo and for the future, several aspects concerning the timing and methods of managing the related requests for compensation, covered by the Indemnification Guarantee in favour of Intesa Sanpaolo; \u2212 agreed on several methods to effectively manage disputes in which Intesa Sanpaolo will be involved. By order of 20 July 2021, in the proceedings relating to the Excluded Disputes brought for the alleged misselling of BPVi shares in which Intesa Sanpaolo (which claimed it lacks the capacity to be sued based on Law Decree 99/2017 and the sale contract) is also a party, the Court of Florence referred the question of the constitutionality of Law Decree 99/2017 to the Constitutional Court. This is the first case of referral to the Constitutional Court of issues relating to Law Decree 99/2017. To date, the numerous applications for referral to the Constitutional Court formulated by the adverse parties in proceedings relating to the Excluded Disputes have always been rejected by judges, as they were deemed immaterial or clearly unfounded. In filing an appearance in court, the Bank challenged the order of referral, claiming that it was inadmissible and unfounded; this, considering EU and Italian regulations on State aid as part of the operations on the Venetian Banks, correctly applied by the national legal system, and the absence of discriminatory effects against the shareholders and subordinated bondholders of the Venetian Banks. The Presidency of the Council of Ministers and BPVi in compulsory administrative liquidation (as well as the Bank of Italy, as amicus curiae) filed appearances in the proceedings, concluding in favour of the inadmissibility and lack of grounds of the issues of unconstitutionality raised. With ruling no. 225 filed on 7 November 2022, accepting the defences of Intesa Sanpaolo, the Attorney General and Banca Popolare di Vicenza in compulsory administrative liquidation, the Court declared all the issues of unconstitutionality raised to be inadmissible, also taking a position on their lack of grounds, in line with the defences submitted by Intesa Sanpaolo. In January 2018, as part of a criminal proceeding before the Court of Rome for the alleged market rigging and obstructing the Supervisory Authorities in the performance of their functions with respect to officers and executives of Veneto Banca, the preliminary hearing judge decided that Intesa Sanpaolo could be charged with civil liability, assuming that the exclusion from the sale to Intesa Sanpaolo of the debts, responsibilities and liabilities deriving from the sale of shares and subordinated bonds \u2013 envisaged by Law Decree 99/2017 \u2013 would not be objectionable by third parties, while Article 2560 of the Italian Civil Code would be applicable in the case in question and Intesa Sanpaolo should therefore take on those liabilities. As a result of this decision, more than 3,800 civil plaintiffs holding Veneto Banca shares or subordinated bonds joined the proceedings. Intesa Sanpaolo thus filed an appearance, requesting that it be excluded from the proceedings. In turn, Veneto Banca in compulsory administrative liquidation intervened voluntarily affirming its exclusive, substantial and procedural capacity to be sued. In March 2018, the preliminary hearing judge declared his lack of territorial jurisdiction, transferring the files to the Public Prosecutor\u2019s Office of Treviso. The charge of civil liability and the joinders of the civil parties were therefore removed. After the case documents were forwarded to the Public Prosecutor\u2019s Office of Treviso, the former Managing Director of Veneto Banca, Vincenzo Consoli, was committed to trial for the offences of market-rigging, obstructing banking supervisory authorities and financial reporting irregularities. The Judge for the Preliminary Hearing rejected the motion to authorise the summons of Intesa Sanpaolo as civilly liable party. A similar motion was rejected in the criminal proceedings before the Court of Vicenza against management board members and key function holders and executives of Banca Popolare di Vicenza. Disputes relating to bank guarantees This type of dispute derives from a decision of the Court of Cassation in 2017, based on a Bank of Italy measure of 2005 relating to a bank guarantee scheme submitted to it by the ABI (agreed with the main consumers\u2019 associations). The Bank of Italy deemed that three clauses in this scheme could have anti-competition effects if applied in a standard manner by banks. Referring to that measure, the Court of Cassation formulated the following new principle of law: once the existence of an unlawful, and therefore, null and void anticompetitive agreement has been ascertained, bank guarantees that constitute the application of the unlawful agreement shall also be deemed unlawful, even if issued prior to the verification of the agreement. As part of recovery proceedings managed by Italfondiario on behalf of the Bank, the issue relating to the consequences of the principle stated by the Court in 2017 on individual bank guarantees issued based on the Italian Banking Association (ABI) scheme was referred to the Joint Sections. Specifically, they were asked to assess: a. whether the inclusion of the unlawful clauses in the contract justifies the declaration that the contracts are null and void or exclusively legitimises the claim for damages; b. in the event of nullity, what type of defect determines such nullity and which party is entitled to enforce it; c. whether the partial nullity of the bank guarantee is admissible; d. whether, in addition to verifying that the clauses match those deemed unlawful, the intention of the parties regarding the operation must be investigated and, that is, whether they would have gone ahead even knowing the clauses were unlawful. On 30 December 2021, the Joint Sections declared the partial nullity of the bank guarantees drawn up based on the Italian Banking Association (ABI) template, in relation to clauses 2, 6 and 8. The Joint Sections opted for an intermediate solution, excluding the other two possible solutions: on one side, they ruled out the full validity of the bank guarantee, a solution which would have exclusively permitted compensation for damages as the only remedy to be used by the guarantor (as suggested in the conclusions of the General Prosecutor prior to the hearing of 23 November 2021); on the other side, they ruled out the possibility of deeming the entire bank guarantee contract null and void. Around one year since the ruling of the Joint Sections, there have been no increases in disputes, which, on the whole, are still a modest amount. Andrea Abb\u00e0 + 207 This is a dispute pending before the Court of Milan, Business Section, initiated in 2019 by Mr. Abb\u00e0 and 207 subordinated bondholders of Banca delle Marche 111 . The claimants seek a declaration voiding the bonds and compensation for the damages suffered. The claim has been quantified at approximately 31 million euro. The Bank filed its appearance, objecting that it lacked the capacity to be sued, arguing in particular that the bonds in question were outside the scope of the sale by the Bridge Entity to the former UBI Banca. The former UBI Banca also argued that the claimant\u2019s claims had become time barred and that the adverse parties lacked capacity, since they were not the \u201cfirst borrowers\u201d and thus by law were not entitled to claim that the original bonds were inherently flawed. Finally, the lack of grounds to void the bonds and of evidence of the causal relationship between the Bank\u2019s conduct at issue and the damages was underscored. As the manager of the National Resolution Fund, the Bank of Italy intervened in the proceedings, upholding the arguments and conclusions formulated by the former UBI Banca. Following its interruption due to the death of one of the claimants, the lawsuit was resumed. The Court of Milan granted the terms for filing preliminary briefs and scheduled the hearing for 28 March 2023. AC Costruzioni S.r.l. Proceedings brought by AC Costruzioni S.r.l. (subsequently declared bankrupt) and Aurelio Cava (deceased during the trial) seeking a declaratory judgment establishing contractual and/or extracontractual liability of the Bank for the revocation of the credit facilities in 1998 and a judgment ordering the bank to provide compensation for the damages resulting from revocation, quantified at a total of around 33 million euro. The adverse party\u2019s claims were rejected in full by both the Court of Cosenza and the Catanzaro Court of Appeal, which upheld the arguments made by the Bank. The judgment of the second instance was appealed by Cava\u2019s heirs and by the receiver to AC Costruzioni by counter-appeal and cross-appeal. By order filed at the end of July 2022, the Court of Cassation rejected the appeals filed by the adverse parties in their entirety and ordered them to pay the costs to the Bank. Therefore, the dispute has been definitively closed without any outlays. Citt\u00e0 Metropolitana di Roma Capitale (formerly Provincia di Roma) Criminal proceedings are pending before the Rome Public Prosecutor\u2019s Office against a former Banca IMI manager for co- commission of aggravated fraud against the Metropolitan City of Rome Capital (formerly the Province of Rome). The proceedings relate to the overall transaction for the purchase by the local authority, through the real estate fund Fondo Immobiliare Provincia di Roma (fully owned by the Province of Rome), of the new EUR premises. The real-estate transaction received financing of 232 million euro from UniCredit, BNL and Banca IMI (each with 1/3). The former Banca IMI employee is accused of having misled \u2013 with three other managers of the two other lending banks, seven managers of the asset management company that manages the provincial fund and two public officials \u2013 the fund\u2019s internal control bodies and representatives of the Province, allowing the lending banks to obtain an unjust profit and thus causing significant damages to the public authority. In addition, the Public Prosecutor claims that the lending banks and the Fund entered into a loan under different, more burdensome conditions than those provided for in the call for tenders held by the public entity for the transaction. Intesa Sanpaolo (as the company that absorbed Banca IMI) is investigated in the criminal proceeding pursuant to Legislative Decree 231/01 together with the other two lending banks and the real-estate fund management company. By measures dated 23 May 2022 and 14 June 2022, the Public Prosecutor\u2019s Office of Rome ordered the closure of the positions of both the former manager of Banca IMI and of ISP to request their dismissal. By order dated 27 June 2022, which became final in December, the Public Prosecutor\u2019s Office ordered the dismissal of the proceedings against the Bank. It is also expected that the request for dismissal be formalised also against the former manager of Banca IMI. 111 See the previous note. Disputes regarding tax-collection companies In the context of the government\u2019s decision to re-assume responsibility for tax collection, Intesa Sanpaolo sold to Equitalia S.p.A., now the Italian Revenue Agency - Collections Division, full ownership of Gest Line and ETR/ESATRI, companies that managed tax-collection activities, undertaking to indemnify the buyer against any expenses associated with the collection activity carried out up to the time of purchase of the equity investments. In particular, such expenses refer to liabilities for disputes with tax authorities, taxpayers and employees and out-of-period expenses and capital losses with respect to the financial situation at the time of the sale. Overall, the claims made amount to approximately 74.9 million euro. The activities of the technical roundtable with the Italian Revenue Agency - Collections Division on the parties\u2019 claims have been concluded, and now the negotiations are underway. Energy S.r.l. Energy S.r.l., to which the bankruptcy receiver of C.I.S.I. S.r.l. transferred all its rights towards third parties, brought a claim before the Court of Rome against Intesa Sanpaolo seeking to quash the revocation of the subsidised loan of approximately 22 million euro granted to C.I.S.I. S.r.l. in 1997 pursuant to Law 488/92 and a judgment ordering the Ministry of Economic Development, Intesa Sanpaolo (as the concessionaire for the procedural application process) and Vittoria Assicurazioni (guarantor of the payment of the second tranche of the loan), jointly and severally between them, to provide compensation for damages allegedly incurred, quantified at a total of approximately 53 million euro. The company justified its claim by citing a favourable judgment rendered in criminal proceedings originating from a complaint filed against C.I.S.I. and its director alleging grave irregularities and breach in the execution of the business plan to which the loan referred \u2013 proceedings that had led to the revocation of the subsidised loan. Intesa Sanpaolo entered its appearance, denying that there was any basis for the adverse parties\u2019 claims, arguing that all claims for compensation against the Bank had become time barred, the claims were groundless on the merits and the damages had been represented inappropriately. The trial process was begun and the usual briefings were exchanged without the preliminary investigation being carried out. On 10 December 2022, the Court filed its ruling rejecting Energy\u2019s claims. On 10 January 2023 Energy served its appeal. Engineering Service S.r.l. In 2015, Engineering Service S.r.l. brought a civil suit against the Ministry of Economic Development, BPER and the former UBI Banca regarding the granting of public subsidies to businesses. The claimant accuses our Bank (and BPER) of delays in managing the approval procedure and disbursements \u2013 delays that allegedly resulted in a liquidity crisis for the company and the consequent loss of the public contribution. A claim for damages for approximately 28 million euro was brought against our Bank. The Bank\u2019s defence counsel argued that the approval times depended on BPER, to which it thus submitted a claim for indemnity. Following the revocation of the order to carry out a court-appointed expert\u2019s report, the Court of Rome, with ruling dated 9 November 2021, fully rejected the claimant\u2019s application, ordering it to pay the legal fees of all the parties summoned. The ruling became final due to lack of appeal within the terms set out by law. G.I.& E. Bankruptcy In November 2021, the G.I.& E. S.p.A. Bankruptcy Receiver initiated action for compensation of damages against Intesa Sanpaolo (as the absorbing company of Banca dell\u2019Adriatico) and UBI (as the absorbing company of Banca Marche and Popolare di Ancona), claiming that they were liable for having contributed, along with other banks and with the conduct of the directors and control bodies, to artificially keeping the company afloat and worsening its default. The alleged damages claimed were quantified by the adverse party at around 22.5 million euro. Lifting the reservation assumed at the hearing of 16 December 2022, the Court ordered the court-appointed expert\u2019s report requested by the Bankruptcy Receiver to be carried out. Isoldi Holding Bankruptcy The Isoldi Bankruptcy Receiver sued the former UBI Banca (which absorbed Nuova Banca Etruria and Centrobanca), Intesa Sanpaolo and five other banks in June 2020, before the Court of Bologna, claiming that they were liable, jointly and severally with the management body of Isoldi Holding, for a series of acts of diversion of assets that are claimed to have contributed to the company\u2019s artificial survival in the period June 2011 \u2013 June 2013, due to conduct claimed to have been implemented by preparing a turnaround plan pursuant to Article 67, para. 3, letter d), of the Bankruptcy Law based on unlawful acts and a connected agreement governing the disbursement of new finance, acts that are argued to have artificially deferred the company\u2019s crisis and concealed the irreversibility of its default. The Isoldi Bankruptcy Receiver also formulated a joint claim against Intesa Sanpaolo (prior to the incorporation of UBI Banca) and MPS, claiming their liability, jointly with the Sole Director of Isoldi Holding, for allegedly unlawful conduct connected with the bail-in of Aedes, in which Isoldi Holding was interested in taking over the majority shareholding. Intesa Sanpaolo and the former UBI Banca filed regular appearances and the assigned Court, with order dated 1 July 2021, declared that it lacked jurisdiction. The adverse party resumed the proceedings, submitting the same claims before the Court of Turin. The Bank filed an appearance for the hearing scheduled for 3 March 2022. At the hearing of 16 February 2023, the judge reserved the decision on the preliminary objections. The total damages claimed by the adverse party do not seem to be accurately quantifiable as things stand, also taking account of the various conduct of the various banks challenged. Societ\u00e0 Italiana per le Condotte d\u2019Acqua S.p.A. under Extraordinary Administration By writ of summons of 23 December 2022, Societ\u00e0 Italiana per le Condotte d\u2019Acqua S.p.A. (admitted to the \u201cMarzano\u201d proceedings by way of Italian Ministerial Decree of 6 August 2018) asked the Court of Rome to order compensation for damages in the amount of 389.3 million euro (or a different amount that will arise during the proceedings), in addition to monetary revaluation, legal interest and expenses. The claim has been filed, jointly, against Intesa Sanpaolo (also as the absorbing company of Medio Credito Italiano, Banca IMI and UBI Banca, as well as \u201cthe purchaser of\u201d Veneto Banca and Banca Popolare di Vicenza), the members of the Management Board and the Supervisory Board of Condotte and numerous other banks and factoring companies. The claim is based on the alleged conduct engaged in for various reasons by the defendants, considered a source of harm to the company\u2019s assets and its creditors. Specifically, the banks and factoring companies are allegedly liable for having unlawfully granted to and/or maintained credit for Condotte, thereby contributing to the continuation of its business at a loss and the worsening of its default. The first hearing has been scheduled for September 2023. As things stand, it is not possible to estimate the risk attributable to Intesa Sanpaolo, also taking account of the different conduct claimed against the numerous defendants. The Extraordinary Administration has also promoted against Intesa Sanpaolo three bankruptcy revocatory actions before the Court of Rome, with a request to reimburse amounts of around 16 million euro. Fondazione Cassa di Risparmio di Pesaro In 2018, Fondazione Cassa di Risparmio di Pesaro brought a compensation claim against the former UBI Banca (as the successor-in-interest to the issuer Banca Marche S.p.A. 112 ) and PwC (the auditing firm that certified all the financial statements and the figures presented in the Prospectus) alleging that the defendants published data and information regarding the financial performance and the income outlooks of Banca delle Marche S.p.A. that later proved to be totally incorrect and misleading. This information, contained in the financial statements as at 31 December 2010 and 30 June 2011 and included in the Prospectus, is claimed to have led the Foundation to subscribe for the bank\u2019s shares issued as part of the capital increase in March 2012. In later years, these shares went on to decline in value considerably, resulting in a loss quantified at approximately 52 million euro. During the trial the Bank of Italy joined the suit, upholding the lack of capacity to be sued invoked by UBI, by virtue of the provisions of Legislative Decree 180/2015 governing the resolution procedure for Banca delle Marche. The Court rejected all preliminary applications filed and adjourned the case to 13 July 2021 for the entry of conclusions. After the entry of conclusions, the parties have filed their closing briefs and the ruling is pending. Fondazione Cassa di Risparmio di Jesi In January 2016, Fondazione Cassa di Risparmio di Jesi brought a compensation claim against UBI Banca (as the alleged successor-in-interest to the issuer Banca Marche S.p.A. 113 ) and PwC (the independent auditors that certified all the financial statements and the figures presented in the Prospectus) alleging that the defendants published data and information regarding the financial performance and the income outlooks of Banca delle Marche S.p.A. that later proved to be totally incorrect and misleading. This information, contained in the financial statements as at 31 December 2010 and 30 June 2011 and included in the Prospectus, is claimed to have led the Foundation to subscribe for the bank\u2019s shares issued as part of the capital increase in March 2012. The value of these shares then fell to zero, resulting in a loss quantified at approximately 25 million euro. During the trial the Bank of Italy joined the suit, upholding the lack of capacity to be sued invoked by the former UBI Banca, by virtue of the provisions of Legislative Decree 180/2015 governing the resolution procedure for Banca delle Marche. By judgment rendered on 18 March 2020, the Court of Ancona granted the objection of lack of capacity to be sued raised by the Bank, rejecting the claims lodged. In the appeal proceedings initiated by the Foundation before the Ancona Court of Appeal, the hearing for the filing of the final briefs was postponed to 9 May 2023. Alitalia Group: claw-back actions In August 2011, companies of the Alitalia Group under Extraordinary Administration \u2013 namely Alitalia Linee Aeree, Alitalia Servizi, Alitalia Airport and Alitalia Express \u2013 brought five bankruptcy claw-back proceedings against the Bank before the Court of Rome (of which one against the former Cassa di Risparmio di Firenze), requesting the repayment of a total of 44.6 million euro. When the proceedings were initiated, a line of defence was adopted based mainly on the grounds that the actions were invalid due to the vagueness of the claims, that the condition of knowledge of the Alitalia Group\u2019s state of insolvency (subject first of the Air France plan and then of the subsequent rescue conducted by the Italian Government) did not apply, and that the credited items were not eligible for claw back, due to the specific nature of the account movements. As the initial attempts to reach a settlement agreement had failed, in March 2016, the Court of Rome upheld Alitalia Servizi\u2019s petition and ordered the Bank to repay around 17 million euro, plus accessory costs. In addition to being contestable on the merits, the ruling was issued before the deadline for filing of the final arguments. Accordingly, in the appeal subsequently lodged, a preliminary objection was made regarding the invalidity of the judgment, together with an application for suspension of its provisional enforceability, which was upheld by order of 15 July 2016 of the Court of Appeal. Conversely, the Alitalia Linee Aeree and Alitalia Express lawsuits were won at first instance. The bankruptcy receivers filed an appeal, which, for Alitalia Express, was concluded in our favour, with the receivers subsequently submitting an appeal to the Court of Cassation. For Alitalia Airport, which was also won at first instance, the favourable judgment has become final. The lawsuit brought against the former Cassa di Risparmio di Firenze was also won in the first two instances, with the adverse party filing an appeal to the Court of Cassation. The entire dispute, following long negotiations which were restarted in the meantime, was settled in November 2022, awarding the amount of 12.8 million euro to the adverse party. 112 See the previous note. 113 See the previous note. Elifani Group Lawsuit brought in 2009 by Edilizia Immobiliare San Giorgio 89 S.r.l. (now incorporated into Enselfin, which filed an appearance as its replacement), San Paolo Edilizia S.r.l., Hotel Cristallo S.r.l. and the guarantor-shareholder Mario Elifani seeking compensation for damages suffered due to alleged unlawful conduct by the Bank for having requested guarantees disproportionate to the credit granted, enforced pledge guarantees, applied usurious interest to mortgage loans and submitted erroneous reports to the Central Credit Register. The initially claimed amount was approximately 116 million euro and the dispute refers to the same circumstances mostly already cited in the disputes regarding anatocism and interest in excess of the legal amount brought by the aforementioned companies in 2004 and settled in early 2014. The lawsuit had a favourable outcome for the Bank in both the first and second instances. By order of 27 December 2019, the Court of Cassation partially granted the adverse parties\u2019 petition, with referral of the matter. The adverse parties resumed the lawsuit before the Court of Appeal of Milan, quantifying the claim at a total of approximately 100 million euro. With a ruling of June 2022, the Court of Appeal of Milan, reviewing the case, rejected the claims made by the claimants, ordering them to pay the legal fees. This ruling was also appealed before the Court of Cassation by the adverse parties, with appeal served on 30 November 2022. Mariella Burani Fashion Group S.p.A. in liquidation and bankruptcy (\u201cMBFG\u201d) In January 2018, the receiver to Mariella Burani Fashion Group S.p.A. sued its former directors and statutory auditors, its independent auditors and the former UBI Banca (as the company that absorbed Centrobanca), seeking a judgment ordering compensation for alleged damages suffered due to the many acts of mismanagement of the company while in good standing. According to the claimant\u2019s arguments, Centrobanca, which was merged into the former UBI Banca, provided financial support to the parent company of the bankrupt company (Mariella Burani Holding S.p.A.) in 2008, in an operation on its subsidiary, despite the signs of insolvency that the latter began to show in September 2007, causing damages quantified at approximately 92 million euro. On a preliminary level, the Bank argued that the receiver lacked capacity to sue since the disputed loan had been disbursed to the parent company of Mariella Burani Fashion Group S.p.A.; moreover, the alleged damages for which the receiver claims compensation were argued to have been in fact sustained by the company\u2019s creditors (and not by the procedure). With regard to the merit of the claims, the Bank stressed that it had acted properly and the borrower in good standing was solely liable since it bore exclusive responsibility for preparing the untrue financial statements, circulating the misinformation and continuing to operate the company in an alleged situation of insolvency. The proceedings are currently in the preliminary phase. SIM Bankruptcy By writ of summons served in October 2022, the receiver to SIM S.p.A. summoned Intesa Sanpaolo (along with another 7 banks) before the Court of Catania, with the first hearing scheduled for 31 March 2023. This is a compensation claim brought for damages allegedly suffered by the company and its creditors due to conduct by the banks defined by the adverse party as \u201cunlawful\u201d, which allegedly resulted in the unlawful granting of credit. The claim for damages has been quantified at around 47 million euro, requesting that the defendant banks be jointly ruled against. Offering of diamonds In October 2015, the Bank signed a partnership agreement with Diamond Private Investment (DPI) governing how diamond offerings were made by DPI to the customers of Intesa Sanpaolo. The aim of this initiative was to provide customers with a diversification solution with the characteristics of a \u201csafe haven asset\u201d in which to allocate a marginal part of their assets over the long-term. Diamonds had already been sold for several years by other leading national banking networks. This recommendation activity was carried out primarily in 2016, with a significant decline starting from the end of that year. A total of around 8,000 customers purchased diamonds, for a total of around 130 million euro. The marketing process was based on criteria of transparency, with safeguards progressively enhanced over time, including quality controls on the diamonds and the fairness of the prices applied by DPI. In February 2017, the AGCM (the Italian Competition Authority) brought proceedings against companies that marketed diamonds, (DPI and other companies), for alleged conduct in breach of the provisions on unfair business practices. In April, those proceedings were extended to the banks that carried out the recommendation of the services of those companies. At the end of those proceedings, on 30 October 2017, the AGCM notified the penalties imposed for the alleged breach of the Consumer Code through the conduct of DPI and of the banks which the proceedings had been extended to, consisting - in short - of having provided partial, deceptive and misleading information on the characteristics of the diamond purchases, the methods used to calculate the price - presented as being the market price - and the performance of the market. The Authority issued a fine of 3 million euro against Intesa Sanpaolo, reduced from the initial fine of 3.5 million euro, after the Authority had recognised the value of the measures taken by the Bank from 2016 to strengthen the safeguards on the offering process aimed, in particular, at ensuring proper information to customers. Following the order by the AGCM, the Bank paid the amount of the fine and filed an appeal with the Lazio Regional Administrative Court against the order. With reference to that appeal, on 16 November 2022, the Regional Administrative Court confirmed the fine and the Bank will appeal to the Council of State. From November 2017, the Bank: \u2212 terminated the partnership agreement with Diamond Private Investment (DPI) and ceased the activity, which had already been suspended in October 2017; \u2212 started a process that provides for the payment to customers of the original cost incurred for the purchase of the diamonds and the withdrawal of the stones, in order to satisfy the customers\u2019 resale needs which, due to the illiquidity that had arisen in the market, are not met by DPI; \u2212 sent a communication in January 2018 to the diamond-holding customers reiterating the nature of the stones as durable goods, and also confirming the Bank\u2019s willingness to intervene directly in relation to any realisation needs expressed by the customers and not met by DPI. In 2022, 34 requests were received for around 0.5 million euro. At the end of the year, a total of 6,854 repurchase requests had been received from customers and met by the Bank, for a total value of 116.3 million euro. The valuation of the repurchased diamonds is carried out using the values provided by the IDEX Diamond Retail Benchmark, one of the main online trading platforms used in the main markets by over 7,000 traders. In February 2019, an order for preventive criminal seizure of 11.1 million euro was served, corresponding to the fee and commission income paid by DPI to the Bank. The preliminary investigations initiated by the Public Prosecutor\u2019s Office of Milan also concern four other banks (more involved) and two companies that sell diamonds. In October 2019, the notice of conclusion of the investigation was served, which stated that two of the Bank\u2019s operators were currently under investigation for alleged aggravated fraud (in collusion with other parties to be identified) and other persons are being identified for allegations of self-laundering, while ISP is being charged with the administrative offence pursuant to Italian Legislative Decree 231/2001 in relation to this latter predicate offence. In reaction to the latter claims, in July 2021, the hearing was held, in which the Preliminary Investigation Judge accepted the plea bargain request \u2013 which Intesa Sanpaolo had submitted solely to bring to an end the lengthy legal proceedings and which had been supported by the Public Prosecutor\u2019s Office \u2013 issuing a ruling which ordered only a financial penalty of 100,000 euro, and the confiscation of only the sums constituting the profit from the offence of self-laundering, calculated at 61,000 euro. Following the partial transfer of the proceedings to the Court of Rome, for reasons of territorial jurisdiction, in August 2022 the revocation of the preventive seizure ordered in February 2019 regarding the profit from the alleged crime of fraud was served, with full restitution to the Bank of the amount of 11.1 million euro. Now that the Bank\u2019s position has been settled, the Public Prosecutor\u2019s Office of Milan is expected to request the dismissal against the two operators investigated. Private banker (Sanpaolo Invest SIM, incorporated into its parent company Fideuram - Intesa Sanpaolo Private Banking) An inspection conducted by the Audit function identified serious irregularities by a private banker of the former Sanpaolo Invest SIM. The checks carried out revealed serious irregularities affecting several customers, including misappropriation of funds and reports with false incremental amounts. On 28 June 2019, the Company terminated the agency contract with the private banker due to just cause and communicated the findings to the Judicial Authority and the Supervisory Body for financial advisors, which first suspended and then removed the private banker from the Register of Financial Advisors in December 2019. Following the unlawful actions, the company received a total of 278 compensation claims (including complaints, mediation proceedings and lawsuits), for a total amount of approximately 62.9 million euro, mostly based on alleged embezzlement, losses due to disavowed transactions in financial instruments, false account statements and the debiting of fees relating to advisory service. There are currently 55 pending claims, with a present value of approximately 25.5 million euro, following the resolution of 223 positions. The total amount of 6.4 million euro was recovered from the improperly credited customers (and already returned to the customers harmed) and there are pending attachments of 42 million euro. A precautionary attachment was ordered against the private banker for an amount equal to the balance found in the accounts and deposits held with credit institutions and the social-security position with Enasarco. In the ensuing case on the merits, the former private banker filed a counterclaim in the total amount of 0.6 million euro by way of non-payment of indemnity for termination of the relationship. Another lawsuit was also brought against former private banker to recover the claims arising from withdrawal from the agency contract, in the total amount of 1.6 million euro, in addition to interest by way of indemnity in lieu of notice, penalty relating to a loan agreement and reimbursement of advances of bonuses. Adequate provisions have been set aside for the risks associated with the unlawful conduct discussed above, mainly for the damages verified relating to compensation claims and pending lawsuits. The above provisions do not consider the coverage envisaged by the specific insurance policy in force, under which the insurance company has already paid an initial advance of 744 thousand euro. Reyl & Cie (Switzerland) \u2013 Proceedings pursuant to Legislative Decree 231/2001 of the Public Prosecutor\u2019s Office of the Court of Milan The Public Prosecutor\u2019s Office of Milan initiated criminal proceedings pursuant to Legislative Decree 231/2001 against Reyl & Cie (a Swiss subsidiary of Fideuram \u2013 Intesa Sanpaolo Private Banking) for the predicate offence of money laundering, allegedly committed by one of its former employees (dismissed in 2020), and ordered the seizure of securities owned by Reyl for around 1.1 million euro. The proceedings also involve the Swiss bank Cramer & Cie. Neither Fideuram ISPPB nor ISP are currently involved in the proceedings. The circumstances alleged relate to events that took place in 2018, before Reyl & Cie joined the Intesa Sanpaolo Group in May 2021. According to the prosecution, the former employee, together with his brother, an employee of the bank Cramer & Cie, and an external advisor, allegedly engaged in practices aimed at facilitating tax evasion by Italian customers through the transfer of accounts from Switzerland to branches located in the Bahamas, in order to allow those customers to withdraw money from those accounts without the possibility of being traced by the Italian authorities. With regard to the measure notified by the Swiss judicial authorities, the appeal is currently being prepared, whose filing, in any event, will be subject to a separate assessment before it is formalised. Instead, with regard to the criminal proceedings pursuant to Legislative Decree 231/2001 pending in Italy, the possibility is being evaluated of filing a petition for the reduction of the amount thereof. Indeed, an examination of the documents of the proceedings has revealed elements indicating that it may be considered reasonable that such a petition would be upheld. A request for disqualification from operating in Italy has not been made against Reyl & Cie, although investigations are still pending and it is not yet possible to access the related documents. Tirrenia di Navigazione in A.S.: Claw-back actions In July 2013, Tirrenia di Navigazione in A.S. filed two bankruptcy claw-back actions before the Court of Rome against the former Cassa di Risparmio di Venezia for 2.7 million euro and against the former Banco di Napoli for 33.8 million euro. The lawsuit against the former CR Venezia is now pending on appeal, filed by the Bank, following the order for payment of 2.8 million euro in 2016. The lawsuit against the former Banco di Napoli is also pending on appeal against the order for payment of approximately 14.5 million euro, plus accessory costs, issued by the Court in 2021. That order was not suspended, and, in October 2022, the Bank paid 15.2 million euro, reserving the right to be refunded in case of favourable outcome of the appeal. Against the appeal filed by the Bank, the adverse party filed an appearance, initiating a cross-appeal relating to the claim for return of the amount of 28 million euro deriving from a currency adjustment, a claim already rejected in the first instance and which is expected to also be rejected on appeal. Selarl Bruno Raulet (former Dargent Tirmant Raulet) Dispute The claim was filed before a French Court in 2001 by the trustee in bankruptcy for the bankruptcy of the real estate entrepreneur Philippe Vincent, which made a request to the Bank for compensation of 56.6 million euro for the alleged \u201cimproper financial support\u201d provided to the entrepreneur. The claim of the trustee in bankruptcy has consistently been rejected by the courts of different instance which dealt with the case over 17 years, until the Court of Colmar, in May 2018, ordered the Bank to pay compensation of around 23 million euro. The Colmar judgment was appealed before French Supreme Court of Cassation, which in January 2020 overturned and quashed the decision of the Court of Appeal of Colmar and referred the matter to the Court of Appeal of Metz. Consequently, in the first quarter of 2020, the Bank obtained the refund of the around 23 million euro paid according to the ruling of the Court of Appeal of Colmar in 2018. At the end of July 2020, the bankruptcy receiver referred the dispute to the Court of Appeal of Metz, requesting payment of 55.6 million euro (equal to the entire amount of insolvency liabilities, minus the amount obtained from the sale of the property whose purchase was financed by the Bank). In turn, the Bank filed an appearance and challenged the opposing party\u2019s claims. In a ruling delivered on 27 July 2021, the Metz Court of Appeal partially upheld the receivership\u2019s claim and ordered the Bank to pay around 20 million euro, plus legal costs of the various instances of the proceedings (for a total of 20.6 million euro). The Court quantified the damage suffered by the insolvency estate as being equal to the loan granted by the Bank, less the proceeds from the sale of the asset given as security. In December 2021, the Bank filed an appeal before the French Court of Cassation. In parallel, the receivership autonomously challenged the decision of the Court of Appeal, insisting that the Bank be ordered to pay all the insolvency liabilities. In November 2021, payment was made to the receivership of the amount ordered. The amounts were temporarily deposited with CARPA (the French Bar Association\u2019s Cash Fund) and would have been unavailable until the Court of Cassation issues its ruling. A hearing was held on 4 October 2022. At the end of November 2022, the Court of Cassation rejected the appeals filed by the Bank and by the receivership. The ruling by the Court of Appeal of Metz thus became final. The amounts already paid by the Bank following that decision were therefore made available to the receivership. Lawsuit against two Hungarian subsidiaries of Intesa Sanpaolo The lawsuit is connected with a lease agreement terminated by one of the subsidiaries in 2010. During 2011, the tenant initiated proceedings in civil court, and during 2021, it supplemented its initial claim, formulating new claims and, as a result, increasing the total of the claims to around 31 million euro. In July 2022, the Court rejected all the plaintiff company\u2019s claims, finding that it lacked standing. The plaintiff filed an appeal against that decision.. In December 2022, the Court of Appeal partially upheld the adverse party\u2019s appeal, ordering one of the two defendant companies to pay around 9.5 million euro. The relevant subsidiary filed an appeal before the Supreme Court, which suspended the enforcement of the challenged ruling. Intesa Sanpaolo\u2019s subsidiaries took action in 2012 for the recognition of their receivables claimed against the tenant resulting from unpaid lease rentals. These proceedings are currently pending. Labour litigation In line with the situation as at 31 December 2021, as at 31 December 2022 there were no significant cases of labour litigation from either a qualitative or quantitative standpoint. In general, all labour litigation is covered by specific provisions adequate to meet any outlays. Contingent assets As for contingent assets, and the IMI/SIR dispute in particular, it should be recalled that following the final judgement establishing the criminal liability of the corrupt judge Metta (and his accomplices Rovelli, Acampora, Pacifico, and Previti), the defendants were ordered to pay compensation for damages, with the determination of those damages referred to the civil courts. Intesa Sanpaolo then brought a case before the Court of Rome to obtain an order of compensation for damages from those responsible. In its ruling of May 2015, the Court of Rome quantified the financial and non-financial damages for Intesa Sanpaolo and ordered Acampora and Metta \u2013 the latter also jointly liable with the Prime Minister\u2019s Office (pursuant to Law no. 117/1988 on the accountability of the judiciary) \u2013 to pay Intesa Sanpaolo 173 million euro net of tax, plus legal interest accruing from 1 February 2015 to the date of final payment, plus legal expenses. The amount ordered took account of the amounts received in the meantime by the Bank as part of the settlements with the Rovelli family and with the adverse parties Previti and Pacifico. In July 2016, the Rome Court of Appeal stayed the enforcement of the judgment of first instance with respect to the amount in excess of 130 million euro, in addition to ancillary charges and expenses, and adjourned the hearing of the final pleadings to June 2018. As a result of this decision, in December 2016 the Office of the President of the Council of Ministers credited Intesa Sanpaolo with the sum of 131,173,551.58 euro (corresponding to the 130 million euro of the order, in addition to legal interest and reimbursement of expenses). To avoid dispute, only the exact amount of the order, without applying the gross-up, was demanded and collected. On 16 April 2020, the ruling of the Court of Appeal of Rome was filed, which essentially upheld the Court's ruling, while reducing the amount of non-financial damages to 8 million euro (compared to 77 million euro that had been quantified by the court of first instance), and set the amount to be paid at 108 million euro, to be considered net of tax, plus legal interest and expenses. In the second quarter of 2020 the Bank filed a petition for the correction of a material error contained in the finding regarding the calculation of the damages liquidated; the Court of Appeal rejected the Bank\u2019s petition by ruling filed on 7 December 2020. In May 2021, the Bank filed an appeal with the Court of Cassation against the Rome Court of Appeal\u2019s ruling of 16 April 2020. The appeal sets out two main grounds: a) the reduction to 8 million euro of the non-financial damages made by the Court of Appeal, compared to the 77 million euro recognised in the first instance ruling is arbitrary and devoid of any sound legal or logical reasoning; b) even accepting the reduction under point a), the Court made a miscalculation when redetermining the amount of total damages. That aspect was already the subject of an application for material correction filed in 2020, rejected by the Court as the Court deemed it an issue that could be remedied through appeal. On 10 January 2023, a hearing was held before the Court of Cassation. After hearing the conclusions from the parties and the report of the General Prosecutor, the Court deferred judgment. TAX LITIGATION At Group level, the total value of the claims for tax disputes (taxes, penalties and interest) was equal to 219 million euro as at 31 December 2022, which represents a slight increase compared to 215 million euro as at 31 December 2021. The Group's tax litigation risks are covered by adequate provisions to the allowances for risks and charges (70 million euro in 2022 compared to 76 million in 2021). The Parent Company had 473 pending litigation proceedings (628 as at 31 December 2021) for a total amount claimed (taxes, penalties and interest) of 126 million euro (135 million euro as at 31 December 2021), considering both administrative and judicial proceedings at various instances. In relation to these proceedings, the actual risks were quantified at 57 million euro as at 31 December 2022 (57 million euro also as at 31 December 2021). Compared to 31 December 2021, for the Parent Company, the main events that gave rise to significant movements of amount of claims consisted of: \u2013 an increase (around 13.5 million euro), due to: i) new claims of 1.4 million euro relating to municipal property tax (IMU) on properties not repossessed through terminated lease agreements (1 million euro) and income-generating lease agreements (0.4 million euro), net of the positions arising and settled during the year (for a detailed analysis of the disputes in question, refer to the Consolidated financial statements as at 31 December 2021); ii) the assessment on registration tax on transfer of business unit (1.8 million euro); iii) notice of registration tax on the ruling establishing a bankruptcy credit (0.6 million euro); iv) notice of assessment regarding VAT on boat lease transactions for the tax year 2016 (for 1.5 million euro); v) adjustment of the value of the former Sudameris dispute of 6.3 million euro, due to the appreciation of the Brazilian currency against the euro; vi) notices of registration tax for various reasons (0.6 million euro); and vii) interest accrued on the outstanding disputes of around 1 million euro; \u2013 a decrease (around 22.8 million euro), due to: i) the closure of disputes concerning registration tax for 11.8 million euro, mainly relating to the demerger of business unit (including: the Manzoni/Melville case for 8.3 million euro, the case for reclassification of the transfer of the Banca di Trento e Bolzano/Intesa Sanpaolo business line for 1.2 million euro and the case for the value adjustment of the transfer of the Credito Piemontese/Intesa Sanpaolo business line for 1.6 million euro); ii) the closure of disputes concerning municipal property tax (IMU) on properties from leases, both following settlement and cancellation by the municipalities for 4.4 million euro; and iii) 6.6 million euro for various disputes, including the partial cancellation due to internal review of the VAT claim on boat lease transactions of 1.6 million euro relating to the tax year 2014, as well as the settlement of claims regarding IRES and IRAP taxes for 2 million euro. The main changes in the provisions booked by the Parent Company (which remained substantially unchanged) as at 31 December 2021 are related to: \u2013 an increase (around 7 million euro), due to: i) the adjustment of 1.2 million euro for the former Sudameris dispute relating to the principal and penalty components (assessed as higher risk), due to the appreciation of the Brazilian currency against the euro; ii) claims regarding municipal property tax (IMU) (1 million euro), still pending at the end of the year; iii) the greater provisions on the 2016 VAT claim for boat lease transactions of 1.5 million euro; iv) the penalty and related surcharges (2 million euro) included in a payment notice totalling 10 million euro due to an unfavourable ruling by the Court of Cassation in connection with the dispute on the registration tax for the demerger of a business unit from ISP to State Street Bank (the proceedings on the payment notice for registration tax related to this transaction are still pending); and v) greater provisions of 1.3 million euro on sundry cases, both new and existing (of which 0.8 million euro for disputes regarding registration tax); \u2013 a decrease (around 6.8 million euro), due to: i) the favourable closure of the dispute regarding registration tax referring to the business contribution and subsequent sale of the investment by Banca di Trento e Bolzano to ISP (1.1 million euro); ii) the release relating to the closure of the tax audit report for 2016 of 1.3 million euro, due to the notification of the related notice of assessment on VAT on boat lease transactions. The increases and decreases on this position derive from the exact recognition of the liability initially estimated based on the results of the audit on 2014 and 2015; iii) the municipal property tax (IMU) claims for 3.3 million euro, due to the settlement of the IMU disputes on properties not repossessed through terminated lease agreements, arising in previous years; and iv) 1 million euro for sundry disputes, mainly regarding IRES and IRAP taxes. During the year, the litigation settled (known as findings closed) totalled 340 proceedings, for a total amount claimed of 24.7 million euro, including the findings arising and settled during the year, with an outlay of 3.6 million euro, mainly referring to claims for municipal property tax (IMU) (2.5 million euro). With regard to the Italian subsidiaries, tax disputes totalled 85 million euro as at 31 December 2022 (71 million euro as at 31 December 2021), covered by specific provisions amounting to 9 million euro (11 million euro in the 2021 financial statements). Compared to 31 December 2021, the main events that gave rise to significant movements of the total amount of claims (+14 million euro) were as follows: \u2013 +16 million euro in new disputes, mainly referring to: Intesa Sanpaolo Private Banking (10.4 million euro); Cargeas Assicurazioni (4.6 million euro); Provis and other minor disputes (1 million euro); \u2013 -2 million euro in closed disputes referring to Fideuram Vita, Intesa Sanpaolo Vita, Fideuram ISPPB, Siref and UBI Leasing. The decrease in provisions compared to 31 December 2021, equal to 2 million euro, mainly refers to: \u2013 +1.2 million euro in provisions on new disputes arising; \u2013 -1.5 million euro due to the merger of UBI Leasing; \u2013 -1 million euro with regard to cases closed that were previously covered by provisions. Tax disputes involving foreign subsidiaries amounted to 8 million euro (9 million euro at the end of 2021), covered by provisions of 4 million euro (8 million euro in 2021). The changes in the amount claimed and the allowance for risks are mainly due to the settlement of several disputes of Intesa Sanpaolo Bank Albania and Bank of Alexandria and, referring only to the amount claimed, the penalties imposed to UBI Trustee. In the following paragraphs, information is provided regarding the most important ongoing disputes, and on several orders to file appearances relating to Italian subsidiaries, served in December 2022. Parent Company Disputes regarding registration tax, with a total remedy sought of 38 million euro, on the reclassification of business contribution and sale of the investments as sales of businesses and the consequent assessment of a higher business value These are disputes concerning the recovery of registration tax paid on business contributions and the subsequent sales of the investments, which were reclassified by the tax authorities as sales of business unit, with the consequent assessment of a higher value for the business unit. These disputes were not settled under the tax amnesty pursuant to Article 6 of the tax decree connected to the 2019 Budget Law (Decree-Law 119/2018), either because the Bank had already paid the full amount assessed and as a result of settlement would not have been entitled to the repayment of the sums in excess of the amount due for settlement, or because there were sound prospects of a favourable outcome to the trials pending before the Court of Cassation. Dispute regarding the municipal property tax (\u201cIMU\u201d) on real estate not repossessed following the termination of the related lease contracts The dispute regarded the identification of the taxpayer liable for the municipal property tax (IMU) in relation to real estate assets owned by the lease companies or banks and leased out to third parties, where the lease was terminated early due to default by the lessee, or as a result of insolvency proceedings involving the lessee, but without the lessee having returned the asset to the lessor. Over the years a tax dispute arose on this matter (also affecting the former Mediocredito Italiano and Provis) relating to whether the lessee is (still) liable for the municipal property tax rather than (already) the lease company/bank in the period between the date of termination (or dissolution) of the lease and the date of physical return of the asset to the lessor. In 2020, the Court of Cassation settled on the view that the lease company/bank was liable for municipal property tax (IMU) from the date of legal termination of the contract, regardless of repossession of the asset. In addition, the 2020 Budget Law provided for the abolition of the single municipal tax (IUC), with regard to its components relating to IMU and TASI, and the unification of the two taxes into the new municipal property tax (IMU). On 18 March 2020, the Ministry of the Economy and Finance \u2013 Finance Department \u2013 Tax Legislation and Tax Federalism Unit, with circular no. 1/DF, commenting on the latter changes, provided precise indications regarding the liability for the new municipal property tax with regard to the date of termination of the lease agreement in accordance with the prevailing case law. Accordingly, starting from 2020, the Bank decided to proceed with the payment of municipal property tax for all leased real estate assets with terminated contracts, regardless of repossession of the asset, seeking recovery from the former users, where possible. It was also decided to gradually withdraw from all pending disputes on assessments relating to years up to 2019, following an attempt at settlement with the interested municipalities to quash the penalties and offset trial fees. The total remedy sought is 7 million euro. Dispute regarding VAT on boat lease transactions On 17 April 2019, the Milan Tax Police (Guardia di Finanza) initiated a general audit of the former Mediocredito Italiano, merged into Intesa Sanpaolo, concerning tax years 2014 and 2015 for VAT purposes and tax years 2015 and 2017 for direct tax purposes. The audit was concluded on 13 October 2020, contesting: i) the VAT exemption applied, in accordance with Article 8-bis of Presidential Decree 633/72, by the company to boat leases, and ii) the VAT exemption established in Article 7- bis of Presidential Decree 633/72 for the buyback of a vessel referring to 2014. The Lombardy Regional Tax Office thus served a notice of assessment (with interest and penalties) for 2014, against which an appeal was lodged. On 28 February 2022 the ruling of the Milan Provincial Tax Commission was filed, partially favourable to the Bank, where, in acknowledging the reduction of the VAT claimed due to internal review by the Italian Revenue Agency, the judges recognised that the penalties imposed of 2 million euro (remedy sought of 4 million euro) were not due. On this dispute, the Bank made provisions with regard to the former claim, solely for the risk of tax and interest, and not also for the risk of penalties, whereas for the latter claim, the potential tax liability is believed to be borne contractually by the customer. However, prudently, the dispute has been covered by provisions for the penalty and interest components. The dispute is pending before the Court of Justice in the second instance. For the tax year 2015, the notice of assessment regarding one single finding of tax exemption pursuant to Article 8-bis of Presidential Decree no. 633/72, applied by the nautical lease company, was settled through a payment of around 2 million euro, using the allowance for tax litigation, previously established in 2019, for 2.9 million euro. Also for 2016, the Italian Revenue Agency notified the related notice of assessment on 1 June 2022 (remedy sought of 1.5 million euro). The proceedings are pending before the Tax Court of Justice in the first instance. With regard to tax years 2015 and 2017, the audit was concluded without detecting any irregularities in the field of direct taxes. * * * Instead, with regard to the disputes settled during the period, the following is noted: i) the dispute regarding the transfer by Manzoni S.r.l. to Melville S.r.l. through a partial, non-proportional demerger, of a private equity business line, reclassified by the Italian Revenue Agency as a direct sale of a business pursuant to Article 20 of Presidential Decree no. 131/1986, with a request for registration tax of 6.7 million euro, plus interest. The Bank won both in the first and second instance, and, lastly, also in the Court of Cassation, with a ruling filed during the year. As a result, that claim, quantified in a total of 8.3 million euro (of which interest of 1.6 million euro) was closed. In the previous financial reports, with regard to the dispute concerning the application of the proportional registration tax following the reclassification of a reorganisation consisting of a transfer of a business and a sale of an equity interest into a sale of a business pursuant to Article 20 of Presidential Decree 131/1986, details were provided of the publication of the Constitutional Court\u2019s ruling no. 39/2021 of 16 March 2021 whose conclusions confirmed the previous ruling no. 158 of 21 July 2020 by that Court. In light of this second ruling of the Constitutional Court, the long-standing dispute was considered to have been concluded with favourable outcomes for the Bank in the numerous claims pending before the Court of Cassation. However, it is important to note that, on the grounds that, according to the principle of alternativity between VAT/registration tax, it is essential to arrive at a single definition of the concept of a business for the purposes of both taxes, the Court of Cassation, by Order no. 10283/2022 of 31 March 2022, referred the proceedings to the EU Court of Justice concerning the compatibility of Article 20 of the Consolidated Law on Registration Taxes (according to which the application of registration tax is to be made on the basis of the content of the document submitted for registration, without taking into account any non-directly discernible external elements), with respect to the VAT rules governing the treatment of transfers of businesses (transactions not subject to the tax) and of individual assets (taxable transactions). The Court of Justice of the European Union, with order of 21 December 2022 - Case C-250/22, declared that, \u201cIt is clearly impossible to admit the request for a preliminary ruling lodged by the Supreme Court of Cassation (Italy), with order dated 31 March 2022\u201d...\u201cas the referring court has not sufficiently explained under which profile the interpretation of Article 5, paragraph 8 of the Sixth Directive and Article 19 of the VAT Directive is relevant for the purposes of applying Article 20 of the TUR (Consolidated Law on Registration Tax, Ed.)\u201d. The Court also specified that \u201cthe referring court retains the right to lodge a new request for a preliminary ruling, providing the Court with all the elements that make it possible to issue a ruling\u201d. The issue is now being carefully monitored; ii) the dispute relating to the business contribution and subsequent sale of the investment by Banca di Trento e Bolzano to Intesa Sanpaolo is noted, reclassified by the Italian Revenue Agency as a direct sale of a business (also pursuant to the aforementioned Art. 20 of Italian Presidential Decree no. 131/1986), with a demand for proportionate registration tax (0.8 million euro) plus interest (0.3 million euro), amounts provisioned at the time. Lastly, in a ruling filed during the year, the Court of Cassation found that the reclassification of the deed of contribution of a business line, followed by the sale of the investments in the contributed company is no longer permitted by law (pursuant to Art. 20 of Italian Presidential Decree no. 131/1986) and that the tax nature of the deed requires registration tax, as also observed by the Constitutional Court in the aforementioned ruling no. 158/2020. As a result, the amounts provisioned at the time were released. With regard to the Intesa Sanpaolo branches located abroad, it should be noted that: a) a VAT audit on the London branch is in progress for the years 2016, 2017 and 2018; to date, no findings have been reported; ii) two tax audits concerning direct taxes of the New York branch are in progress: the first audit, which began in January 2021, is being conducted by the Internal Revenue Service (IRS) with regard to the income tax return filed for the tax period 2018; to date, no claims have been made; the second audit, notified in July 2021, is being conducted by the City of New York, with regard to the tax periods 2018 and 2019; to date, no claims have been made. The previous audits conducted by the State of New York, regarding the tax periods 2015 and 2016, and by the IRS regarding the tax period 2016 were closed with no claims; c) the tax audit begun in April 2021 by the Madrid Revenue Agency for the year 2016 concerning taxes on income on the Madrid branch of the merged company UBI Banca, which was closed down on 31 December 2018, was closed with no liabilities. More specifically, the tax loss reported by the branch for 2016 of 724 thousand euro was adjusted, decreasing it by a total of 722 thousand euro, of which 150 thousand euro due to interest that was not deductible, as it related to debt exceeding the regulatory capital required by Spanish regulations (application of the thin capitalisation rule), and 572 thousand euro due to non-deductible expenses, referring to services provided to the branch by the then Luxembourg parent company (UBI Banca International S.A.), by virtue of Spanish international transfer pricing regulations. The reduction of the tax loss did not generate any taxes or penalties due; e) the VAT audit on the Warsaw branch for the tax periods 2016-2020 on financial services (SWIFT) was closed. The branch paid the amount claimed, equal to 13 thousand euro (including interest and penalties) in full; f) the audit on the Munich branch of the merged company UBI Banca for the years 2015 to 2018, begun in 2021, is under way. The auditors are acquiring the accounting and tax documentation; g) the tax audit on the Madrid branch of ISP regarding the deductibility of intercompany costs amounting to 2.2 million euro for the tax period 2015 was concluded with the charging of 93 thousand euro of tax, plus interest (17 thousand euro) and penalties (20 thousand euro). The branch paid the amount claimed in full. Group Companies For Banca Fideuram, as a result of the Bank\u2019s appeal, three lawsuits are pending before the Court of Cassation concerning the failure to withhold 27% of the interest accrued in 2009, 2010 and 2011 on foreign bank accounts held at Fideuram Bank (Luxembourg) by two \u201chistoric\u201d Luxembourg mutual funds (Fonditalia and Interfund SICAV), for which Banca Fideuram was only the placement bank and correspondent bank (total value of the disputes of 9.3 million euro). As the Bank lost in the second instance of all the proceedings, it was decided, after consultation with the consultant engaged to assist the bank in the cases pending before the Court of Cassation, to set up a provision for risks, including penalties and interest. Intesa Sanpaolo Private Banking has long had pending IRES and IRAP disputes relating to the deduction (in 2011 and the following years) of the amortisation charge for the goodwill arising from the transfers of the private banking business lines of Intesa Sanpaolo and Cassa dei Risparmi di Forl\u00ec e della Romagna in 2009, Banca di Trento e Bolzano and Cassa di Risparmio di Firenze in 2010 and Cassa di Risparmio Pistoia e Lucchesia and Cassa di Risparmio dell\u2019Umbria in 2013, realigned by the transferee in accordance with Article 15, paragraph 10, of Law Decree no. 185 of 29 November 2008. The status of the disputes is as follows: \u2013 year 2011: the favourable ruling no. 2763/2019, filed on 26 June 2019, by the Lombardy Regional Tax Commission, which rejected the main appeal by the Italian Revenue Agency against the ruling no. 7028/2017 by the Milan Provincial Tax Commission, on the merits (total claim amount of 7.9 million euro, of which 3.8 million euro for taxes and 3.5 million euro for penalties). The court of second instance also upheld the company\u2019s cross-appeal on the preliminary matter of the lapse of the tax administration\u2019s power of assessment: the realignment of goodwill had been reported in the tax return for the 2010 tax year, and the notices were served in 2017, i.e. beyond the time limits laid down in Article 43 of Presidential Decree 600/73. The case is pending before the Court of Cassation on appeal by the Attorney General and a counter-appeal has been prepared by the Bank; \u2013 year 2012: unfavourable rulings no. 5172/2019 and 5173/2019 by the Lombardy Regional Tax Commission, which granted the appeals by the Italian Revenue Agency (total claim amount of 8.4 million euro, of which 3.9 million euro for taxes and 3.9 million euro for penalties). An appeal was lodged with the Court of Cassation; \u2013 year 2013: the favourable rulings of both the Provincial Tax Commission and the Regional Tax Commission (total claim amount of 10.6 million euro, of which 4.9 million euro for taxes and 4.9 million euro for penalties). The Revenue Agency lodged an appeal with the Court of Cassation and the Bank then filed its defence; \u2013 years 2014 and 2015: the Second Division of the Milan Provincial Tax Commission, by judgment no. 504/2/2020 of 7 February 2020, filed on 13 February 2020, granted the IRES and IRAP appeals for both years (joined proceedings). The tax claim amounts to 16.7 million euro (of which tax of 7.9 million euro and penalties of 7.9 million euro), plus interest. The favourable second instance ruling no. 1044 concerning the years 2014 and 2015 was filed on 18 March 2022. The Lombardy Regional Tax Commission rejected the appeal by the Italian Revenue Agency against the first instance ruling that had upheld the (combined) IRES and IRAP tax appeals relating to those tax periods. The Italian Revenue Agency lodged an appeal with the Court of Cassation; \u2013 year 2016: on 29 April 2021, notices were served for the assessment of IRES and IRAP taxes for tax year 2016. The amount deducted by the company and now disputed by the Lombardy Regional Revenue Directorate for that year is the same amount already adjusted for 2015, of 12.1 million euro, corresponding to higher IRES of 3.3 million euro and IRAP of 0.7 million euro, plus interest, and penalties (total amount 8.2 million euro); By ruling no. 1962, filed on 6 July 2022, the Milan Provincial Tax Commission rejected the joined appeals of the Parent Company and Intesa Sanpaolo Private Banking, ordering each party to pay its own costs. In addition to rejecting the preliminary matter of the lapse of the Office\u2019s power of assessment, based on the well-known ruling no. 8500/2021 of the Joint Sections of the Court of Cassation, the ruling also rejected the appeals on the merits. The term for lodging an appeal expires on 5 February 2023. \u2013 year 2017: the dispute was initiated against the notice of assessment. The amount deducted and disputed for 2017 is the same amount already adjusted for 2016 (12.1 million euro), corresponding to higher IRES of 3.3 million euro and IRAP of 0.7 million euro, plus interest and penalties (total amount 8.6 million euro). The notice of assessment was challenged through an appeal served on the Lombardy Regional Revenue Directorate on 3 June 2022 and filed with the Milan Provincial Tax Commission on 20 June 2022 (Appeals General Register no. 2683/2022). We are awaiting for the hearing for discussion to be scheduled. The total amount claimed, including taxes, penalties and interest, amounts to 61 million euro. According to the opinion issued by the firm assisting the bank, the risk of an adverse ruling is classified as \u201cpossible\u201d, since the lawfulness of realigning the tax value of the goodwill newly generated for the transferee \u2013 something which in the past was done by other Group companies without incurring in tax disputes \u2013 has been expressly acknowledged by the Italian Revenue Agency in Circular no. 8/E of 2010 and is consistent with the provisions of Article 15, paragraph 10 of Law Decree 185/2008. Cargeas Assicurazioni, an insurance company acquired by Intesa Sanpaolo Vita on 27 May 2021, underwent a tax audit by the Italian Revenue Agency, Lombardy Regional Directorate, Large Taxpayers Office, aimed at verifying the correct application, for the years from 2010 to 2018, of the tax rules on private insurance and life annuity contracts pursuant to Law no. 1216 of 29 October 1961. As a result of the audit, the authorities claimed that redundancy insurance policies (which are mandatorily associated with salary-backed loans and optional with other mortgages, loans and consumer credit), should not be subject to tax on insurance premiums at a rate of 2.5%, but should be classified as credit risk insurance policies, subject to a tax rate of 12.5%. The Revenue Agency maintains that although the risk insured (on the basis of which the premium is determined with statistical/actuarial criteria) is the loss of employment, redundancy policies should be charged the 12.5% rate applicable to credit risk insurance, given that the policy would protect the lending institution\u2019s interest in collecting its credit. The dispute is nothing new for the insurance industry; in fact, insurance companies have been maintaining that the Agency's reasoning is unsubstantiated and biased for years now. ANIA has also recently given its opinion on the matter through circular no. 0082 of 5 March 2021 (which refers to circular no. 127 of 21 April 2005), pointing out that the Agency\u2019s position produces a series of unsystematic and abnormal consequences which certainly do not reflect the intention of the legislator in Law no. 1216, and diverge from the guidance of the financial administration itself which, on this point, had supported application of the 2.5% rate in circular no. 29/E of 2001. On the merits, ANIA specified that in the policies, the insured party is identified as the natural person who subscribed, in full autonomy, the collective policy proposed by the lending institution, and that contractual structure recognises the natural person debtor as the party in the interest of whom the policy is underwritten, as the risk covered (loss of employment, which results in the impossibility to pay the debt) is specifically borne by the latter. Moreover, the contractual framework shows that the lender is the contracting party of the policy exclusively in terms of the form, while, by virtue of demonstrating his/her intention to subscribe the contract and due to the cost charged to him/her, which refers exclusively to the insurance premium paid, the financed worker can be effectively classified as the contracting party, as well as the insured party. Lastly, as additional support, it should also be considered that the communication of data and information regarding the contracting parties, sent annually to the Tax Register contemplates the indication of the individual subscribers of collective policies, as they are the parties that bear the cost of the premium. After the audit, on 25 May 2021 Cargeas Assicurazioni received notice of assessment no. TMB032S00039/2021 for 2010, claiming an additional tax of 1.7 million euro, 0.7 million euro in interest and 3.4 million euro in penalties, equal to 200% of the assessed tax (minimum penalty prescribed by law), for a total of 5.7 million euro. On 21 July 2021, the notice was appealed before the Milan Provincial Tax Commission which, by ruling no. 2396 of 1 September 2022, upheld the appeal and cancelled the notice of assessment. The term for the Office\u2019s appeal is pending. During 2022, two rulings of the Milan Provincial Tax Commission were published (no. 343 of 17 January 2022 and no. 1214 of 28 March 2022), which regarded the issue of the \u201creclassification\u201d of redundancy insurance policies (subject to tax at a rate of 2.5%) in place of those against debtor insolvency risk, i.e. those that cover credit risk (subject to tax at a rate of 12.5%). The outcome was unfavourable to the appealing companies outside the Intesa Sanpaolo Group (even though ruling no. 343 recognised the inapplicability of the penalties due to clear objective uncertainty on the applicability of the rule). However, considering the arguments clearly expressed by ANIA, and due to the assessments formalised by the defence counsel, the risk of a negative outcome was deemed possible. Also as a result of the above audits, on 6 June 2022, Cargeas Assicurazioni received notice of assessment no. TMB032S00216/2022 for 2011, which claimed a higher tax of 1.3 million euro, 0.5 million euro in interest and 2.8 million euro in penalties, equal to 200% of the assessed tax (minimum penalty prescribed by law), for a total of 4.6 million euro. The grounds set out in the above notice of assessment for 2011 are the same as those indicated for 2010. The Company deems that a negative outcome for the year 2011 is possible, just as that for the year 2010. Therefore, within the terms set out by law, it will appeal that notice before the competent Court of Justice. Provis has municipal property tax (IMU) and municipal tax (TASI) claim procedures that are pending or about to commence with a total value of 3.8 million euro. The corresponding provision for risks amounts to 4.2 million euro, inclusive of legal expenses. On 28 October 2022, Fideuram SGR (as well as ISP as the consolidating entity) received from the Italian Revenue Agency \u2013 Lombardy Regional Directorate an order to file an appearance regarding the year 2016 for IRES and IRAP, following the delivery of documentation in response to a questionnaire served on 21 April 2021, in order to establish a cross-examination on the alleged transfer pricing issues arising in relation to the consideration for fees received by Fideuram SGR in delegated manager activities for investment funds performed in favour of the Irish associate Fideuram Asset Management Ireland (principal). With specific regard to those management fees, the Revenue Agency has repeated the same adjustments made for the years 2011 to 2013 (which gave rise to tax settlement proposals for those years) and, as a result, adjusted the taxable income of Fideuram SGR upwards by 560 thousand euro. Fideuram accepted that proposal, signing the settlement proposal on 15 December 2022 and paying the amount due (220 thousand euro) on 20 December 2022. In relation to possible equivalent claims for subsequent years up to 2019, the company determined the possible charge in terms of taxes and interest at 500 thousand euro, allocating provisions to the 2022 income statement. In agreement with the advisor handling the claim, no provisions were made for 2020 and after, as the settlement of the bilateral agreements submitted in 2020 (thus, applicable from that period for 5 years) to the Irish and Italian authorities on the disputed activities seems to be near. On 22 December 2022, Eurizon Capital SGR (hereinafter, \u201cEC ITA\u201d) received from the Italian Revenue Agency \u2013 Lombardy Regional Directorate (hereinafter, the \u201cOffice\u201d) an order to file an appearance for the purposes of IRAP and, jointly with the tax consolidating entity Intesa Sanpaolo (hereinafter, the \u201cParent Company\u201d), an order to file an appearance for the purposes of IRES for the year 2016. EC ITA and the Parent Company attended the meeting with the Office on 28 December 2022, thereby launching a cross- examination that will last around four months. After examining the intragroup transactions implemented by EC ITA with regard to the Luxembourg subsidiary Eurizon Capital S.A. (hereinafter, \u201cEC LUX\u201d), the Office challenged the transfer pricing analysis conducted in the transfer pricing documentation of EC ITA, deeming that it allegedly does not reflect the actual allocation of functions, risks and assets existing between EC ITA and EC LUX. More specifically, the Office deems that the provision of services by EC ITA to EC LUX, though formally divided into numerous separate operations, in terms of substance is \u201cattributable to wider business operations\u201d carried out by EC ITA for EC LUX. Therefore, applying a method for determining the arm\u2019s length price different from that adopted by EC ITA, the Office determined higher taxable income for IRES and IRAP purposes of 151.1 million euro, to which IRES and IRAP taxes are applied for 50 million euro (41.6 million euro for IRES and 8.4 million euro for IRAP), plus interest totalling 9.6 million euro and penalties totalling 15 million euro. In the case in point, with regard to the method for determining transfer prices, while EC ITA deemed it correct to use the Comparable Uncontrolled Price (CUP) method to price the value of services, first of all of the management mandate service, provided to EC LUX, aligning the price charged to EC LUX with the prices that EC ITA charges to/pays for mandates received from/granted to third parties, the Office deemed that the most appropriate method was the Transactional Net Margin Method (TNMM), which substantially requires allocating a percentage of the net margin out of production value to the party in question, i.e. EC LUX. In detail, the Office deems that the ratio of net income (loss) before tax/net fee and commission income recognised for EC LUX (38.5%) is too high. As a result of that approach, only around one-fourth of the net income before tax of EC LUX (208.6 million euro) is attributed to Luxembourg and around three-fourths (151.1 million euro) to EC ITA. It is important to note that, according to the Office, the choice of the method and the consequent results of allocating revenues between Luxembourg and Italy is based on the conviction that EC LUX receives an intangible contribution from EC ITA. As confirmed also by the opinion issued by the advisor assisting EC ITA, the claim made by the Office is unfounded in various aspects: a) the intangible does not influence the intragroup transfer prices; b) in addition, the Office completely ignored the results of its own analysis, conducted in the previous years regarding the tax periods 2011-2015, which led it to issue tax settlement proposals regarding the adjustment of transfer prices applied in transactions between EC ITA and EC LUX on completely different bases than those now arising in relation to 2016. Moreover, in that context, EC LUX provided the Office with information regarding the intangible and its non-accounting tax amortisation. As part of the tax settlement proposals for the tax periods 2011-2015, the Office acquired and assessed the information regarding that non-accounting amortisation, without, however, deeming that it should have an impact for the purposes of determining the transfer prices between EC ITA and EC LUX. The Office had also deemed the transfer pricing documentation prepared at the time by EC ITA based on the CUP method to be suitable, granting penalty protection to EC ITA; c) the Office also failed to conduct a specific analysis to identify the actual functions performed, risks assumed and assets used by EC LUX during the tax period 2016, but merely classified EC LUX as the \u201cless complex\u201d entity mainly based on the incorrect conviction that the non-accounting tax amortisation attributable to EC LUX was attributable to an \u201cintangible asset\u201d contributed by EC ITA. As a result, also based on the presence of that \u201csingle\u201d contribution subject to tax amortisation, it deemed the \u201ctraditional\u201d methods for determining the arm\u2019s length price, such as the CUP, inapplicable to the case in question; d) the Office ignored the approach it had adopted in the tax settlement proposals issued in 2022 with Fideuram SGR, discussed above, regarding intragroup transactions with the Irish associate FAMI. In this last context, in the presence of intragroup transactions similar to those carried out by EC ITA with EC LUX, the Office deemed that the most appropriate method based on the specific circumstances was the CUP; e) lastly, though the Office acknowledged that on the same intragroup transactions subject to the order, there is currently an ongoing procedure of preventive bilateral agreement to reach an agreement on transfer prices between the competent Italian and Luxembourg authorities, it has not promoted that situation in any way. This, despite the fact that the preventive agreement procedure was launched by EC ITA following the issue of the afore-mentioned tax settlement proposals relating to the tax periods 2011-2015 and, therefore, also including 2016. Those arguments will all be stated and documented in the cross-examination with the Office, which should be concluded by 30 April 2023. The following is an account of the developments relating to the foreign subsidiaries during the year. Intesa Sanpaolo Bank Albania is mainly involved in: i) a dispute pending before the Court of Cassation on appeal by the Bank, concerning the write-off of loans that were no longer recoverable that, according to the tax authorities, led to an unjustified reduction in the taxable amount for direct tax for the years 2003 to 2007 (remedy sought of 1.3 million euro); ii) a former Veneto Banka dispute pending in the second instance regarding mistakes made in the tax return for the tax period 2013 (remedy sought of 33 thousand euro). Instead, the dispute relating to mistakes made in the tax return for the tax period 2011 was settled with the payment of 1 million euro. Bank of Alexandria has two tax audits under way regarding corporate income tax for the tax period 2018 and stamp duty for 2019. At present no claims have been put forward. In addition, there is a pending dispute concerning the non-payment of stamp duty by the bank\u2019s branches for a total value of 2.1 million euro for tax periods 1984 \u2013 2008 (it amounted to 5.8 million euro as at 31 December 2021). The reduction in the amount claimed and the allowance for risks (-3.7 million euro) derives from the settlement of a portion of the disputes, using the related allowance for risks. The tax audit on stamp duty relating to the tax period 2019 was closed with no findings. The dispute for the years 2014 and 2015 regarding the foreign subsidiary UBI Trustee S.A. (a trust company resident in Luxembourg) was closed without liabilities, as a result of an agreement by the trusts and their beneficial owners with the tax authorities. Lastly, it is noted that an audit is under way for IMI SEC, conducted by the State of New York, regarding income tax for the years 2015, 2016 and 2017. No findings are noted for the time being. Another tax audit begun in 2022 regards EXELIA, for the tax periods 2016 and 2017. No findings are noted for the time being. Lastly, we note a dispute pending in Brazil in relation to the former subsidiary Banco Sudameris Brasil (now Banco Santander Brasil), sold in 2003 to ABN AMRO Brasil (now the Santander Group), whose economic charge falls on Intesa Sanpaolo due to the commitments entered into with the seller at the time, which was not established through the Settlement Agreement of 2019 with Banco Santander Brasil. The dispute is known as \u201cCausa PDD1\u201d and is based on the issue of taxes on income and social security contributions for 1995. During 2021, the first instance judgement was filed by the ordinary civil judge. Despite having partially accepted several objections of the bank, the judgement was favourable, on the whole, to the Brazilian tax authorities. The judgement was appealed and the case is now pending in the court of second instance. The remedy sought is 41.6 million euro, at the exchange rate of December 2022 (35 million euro as at 31 December 2021), set as equal to the security deposit paid by the bank to take action in the civil court (216 million Brazilian real) and posted under balance sheet assets. There were two changes during the year. The first change concerns the issue on 13 June 2022 of an opinion by Prof. Tercio Sampaio Ferraz in which, inter alia, he confirms the argument put forth by Intesa Sanpaolo that the settlement for the year 1995 with the Brazilian tax authorities based on specific local law (Art. 17 of Brazilian Law no. 9799/1999), the subject of an administrative dispute closed in favour of the taxpayer with two decisions of the Administrative Court (CARF), cannot be put under discussion once again as, instead, the Brazilian tax authorities did through the jurisdictional dispute currently pending in the second instance. According to local advisors, those arguments confirm that a negative ruling in relation to the interest component (approximately 25.6 million euro of the deposit posted under balance sheet assets) is remote. On taxes and penalties (equal to a total of 16 million euro of the deposit) we prudentially confirm the provisions of 50% of that amount, totalling 8 million euro (+1.2 million euro compared to 31 December 2021). The increase is due to the appreciation of the Brazilian currency against the euro, compared to the exchange rate recorded at the end of 2021 for the valuation of the dispute and the related risk. The second change regards the notification in October from the Brazilian tax authorities of a payment order for the alleged failure of the taxpayer to provide a deposit by order of the court to cover the tax debt, which is still being challenged. In that regard, a brief was submitted opposing that order, highlighting that the Brazilian tax authorities incorrectly calculated the value of interest accrued on the deposit by order of the court, which, instead, would more than cover the claim of the tax authorities. The local advisors confirmed that the document does not change the estimates of risk expressed to date with regard to that pending dispute. * * * In connection with all the tax disputes outstanding as at 31 December 2022, for a total value, as stated above, of 219 million euro, of which 126 million euro relating to Intesa Sanpaolo, the Group has recognised receivables of 44 million euro in its balance sheet assets to account for amounts paid on a provisional basis due to tax assessments, of which 21 million euro related to the Parent Company. The portion of the allowance for risks which relates to provisional tax assessments amounts to 32 million euro, of which 26 million euro for Intesa Sanpaolo. The provisional payments in question were made in compliance with specific legal provisions, which provide for the mandatory payment based on an automatic mechanism totally independent of whether the related tax claims are actually founded and, thus, irrespective of the higher or lower level of risk of a negative outcome in the related proceedings. Thus, these payments were made solely because of the enforceable nature of the administrative acts that set forth the related tax claim, which does not lose its effectiveness even in the event of an appeal (no suspensive effect) and has no impact on the assessment of the actual risk of a negative outcome, which is measured using the criterion set forth in IAS 37 for liabilities. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-963": { "value": "10.1 Allowances for risks and charges: breakdown (millions of euro) Captions/Components 31.12.2022 31.12.2021 1. Allowances for credit risk associated with commitments and financial guarantees given 711 508 2. Allowances on other commitments and other guarantees given - - 3. Post-employment benefits 139 290 4. Other allowances for risks and charges 4,160 4,918 4.1 legal disputes 969 1,066 4.2 personnel charges 2,230 2,611 4.3 other 961 1,241 Total 5,010 5,716 There are no amounts attributable to the caption \u201c2 \u2013 Allowances on other commitments and other guarantees given\u201d. The contents of 4 \u2013 Other allowances for risks and charges are illustrated in point 10.6 below. 10.2 Allowances for risks and charges: annual changes (millions of euro) Captions Allowances on other commitments and other guarantees given Post- employment benefits Other allowances for risks and charges Total A. Initial amount - 290 4,918 5,208 B. Increases - 18 1,098 1,116 B.1 Provisions in the year - 13 1,063 1,076 B.2 Time value changes - 3 1 4 B.3 Changes due to discount rate variations - - - - B.4 Other - 2 34 36 - of which business combinations - - - - C. Decreases - -169 -1,856 -2,025 C.1 Uses in the year - -100 -1,549 -1,649 C.2 Changes due to discount rate variations - - -129 -129 C.3 Other - -69 -178 -247 - of which business combinations - - - - D. Final amount - 139 4,160 4,299 As specified in the comment to the previous table, there are no amounts attributable to the caption \u201cAllowances on other commitments and other guarantees given\u201d. Other allowances for risks and charges include net provisions of 140 million euro to caption 200, letter b) of the income statement and net provisions to other income statement captions, for the residual amount. Provisions include those for legal and tax disputes (180 million euro) and those for other risks and charges (325 million euro), as well as costs included in the income statement among personnel expenses. Uses refer almost entirely to payments. 1.5. OPERATIONAL RISK QUALITATIVE INFORMATION A. General aspects, operational risk management processes and measurement methods Operational risk is the risk of incurring losses resulting from inadequate or failed internal processes, people and systems or from external events 106 . The Intesa Sanpaolo Group adopts an undertaking and management strategy of operational risk based on prudent management principles and aimed at guaranteeing long-term solidity and continuity for the company. In addition, the Group pays particular attention to achieving an optimal balance between growth and profitability and the resulting risks. In line with these objectives, the Intesa Sanpaolo Group has long since established an overall operational risk governance framework, by setting up a Group policy and organisational processes for measuring, managing and controlling operational risk. For regulatory purposes, the Group adopts the Advanced Measurement Approach (AMA), in partial use with the standardised (TSA) and basic approaches (BIA), to determine the capital requirement. As at 31 December 2022, the scope of the Advanced Measurement Approach (AMA) is comprised of Intesa Sanpaolo (including the former Banks and Companies merged into it) and the main banks and companies in the Private Banking and Asset Management Divisions, as well as of VUB Banka and PBZ Banka. Governance Model An effective and efficient framework for managing operational risks must be fully integrated into decision-making processes and management of business operations. Accordingly, the Intesa Sanpaolo Group has chosen to involve the organisational units (business units, central/support structures) of the Parent Company, the Banks and Group companies with direct responsibility in the operational risk management process. The operational risk governance model has been developed in view of: \u2212 optimising and maximising organisational safeguards, interrelations and information flows between the existing organisational units and integration of the operational risk management approach with other company models developed for specific risks (business continuity, IT security, etc.); \u2212 guaranteeing transparency and spread of the models, methods and criteria of analysis, assessment and measurement criteria used to facilitate the process of cultural diffusion and comprehension of the logic underlying the choices made. The Group has a centralised function within the Enterprise Risk Management Department for management of the Group\u2019s operational risk. This function is responsible for the definition, implementation, and monitoring of the methodological and organisational framework, as well as for the measurement of the risk profile, the verification of mitigation effectiveness and reporting to Top Management. In compliance with current requirements, the individual organisational units are responsible for identifying, assessing, managing and mitigating risks. Specific officers and departments have been identified within these organisational units to be responsible for Operational Risk Management (structured collection of information relative to operational events, detection of issues and related mitigation actions, scenario analyses and evaluation of the business environment and internal control factors). In order to support the operational risk management process on a continuous basis, a structured training programme has been implemented for employees actively involved in this process. ICT risk The Intesa Sanpaolo Group considers its information system a tool of primary importance to the achievement of its strategic, business and social responsibility objectives, including in the light of the critical nature of the company processes that depend on it. Accordingly, it undertakes to create a resilient environment and to invest in assets and infrastructure designed to minimise the potential impact of ICT events and to protect its business, image, customers and employees. The Group has therefore adopted a system of principles and rules intended to identify and measure the ICT risk to which company assets are exposed, assess the existing safeguards and identify adequate methods of managing such risks, in accordance with the operational risk management process. In line with the methodological framework established for the governance of operational risks, the ICT Risk management framework has been developed with a view to integrating and coordinating the specific expertise of the structures involved. ICT (Information and Communication Technology) risk means the risk of economic, reputational or market share losses related to the use of information and communication technology. In the integrated view of corporate risk for supervisory purposes, this risk is considered, according to specific aspects, as operational, reputational and strategic risk. ICT risk includes: \u2212 cyber risk (including IT security risk): the risk of sustaining economic loss, reputational damage or loss of market shares due to: o any unauthorised access or attempt to access the IT system of the Group or the data or digital information it contains; o any event (intentional or unintentional), favoured or caused by the use of technology or related to it that has or could have a negative impact on the integrity, availability, confidentiality and/or authenticity of company data and information, or on the continuity of business processes; o the improper use and/or dissemination of data and digital information also not directly produced and managed by the ISP Group; \u2212 IT or technology risk: the risk of sustaining economic loss, reputational damage or loss of market shares in relation to the use of the corporate IT systems and related to malfunctioning hardware, software and networks. Group Operational Risk Management Process The Intesa Sanpaolo Group\u2019s operational risk management process is divided into the following phases: Identification The identification phase includes the collection and classification of qualitative and quantitative information that allows to identify and describe the Group\u2019s potential areas of operational risk. In particular, it involves: \u2013 the collection and updating of data on operational events (Loss Data Collection), decentralised to the Organisational Units; \u2013 identification of the company processes and components of the IT system at highest potential risk; \u2013 determination of the applicability and relevance of the operational risk factors defined; \u2013 identification of projects that will involve relevant changes to the IT system or changes to critical components of the IT system; \u2013 identification of significant risk scenarios, also based on the external context (e.g., external loss data, regulatory Identification Assessment and Measurement Monitoring and Control Mitigation Reporting development, emerging trends, strategic and threat intelligence); \u2013 identification and analysis of issues affecting the Group\u2019s areas of operation. Assessment and measurement The assessment and measurement phase includes the process of qualitative and quantitative determination of the Group\u2019s exposure to operational risks. It includes: \u2013 at least annual performance of the process of self-assessment of exposure to operational and ICT risk (Self-diagnosis); \u2013 performance of preventive analyses of operational and ICT risks deriving from agreements with third parties (e.g., outsourcing of activities), business operations or project initiatives, introduction or revision of new products and services, launch of new activities and entry into new markets; \u2013 the definition of the relevance of identified issues; \u2013 transformation of the evaluations collected (e.g., internal and external operational loss data, management levels of risk factors, probability and impact in the event of occurrence of risk scenarios) into synthetic risk measures; \u2013 determination of economic and regulatory capital for operational risk, through the internal model and the simplified methods defined by the regulations. Monitoring and control The purpose of the monitoring phase is to analyse and monitor on an ongoing basis: \u2013 the development of the exposure to operational risks on the basis of the structured organisation of the results of the identification, assessment and measurement processes and the observation of indicators that represent a valid proxy of the exposure to operational risks (e.g., limits, early warnings and indicators established within the RAF); \u2013 the development of the risk profile inherent in the use of new technologies or in the implementation of significant changes to existing systems. Mitigation The mitigation phase includes activities aimed at containing the exposure to operational risks, defined on the basis of the results of the identification, measurement, assessment and monitoring phases. It includes: \u2212 identification, definition and implementation of the corrective measures (mitigation actions) necessary to solve the identified gaps or to bring back the relevance of the identified issues within the defined risk tolerance; \u2212 promotion of initiatives designed to spread a culture of operational risk within the Group; \u2212 definition of strategies for transferring operational risks, in terms of optimisation of insurance coverage and any other forms of risk transfer adopted by the Group from time to time. In this regard, in addition to a traditional insurance programme (to protect against offences such as employee infidelity, theft and damage, transport of valuables, computer fraud, forgery, cyber-crimes, fire and earthquake, and third-party liability), the Group has taken out an insurance coverage policy named Operational Risk Insurance Programme, in compliance with the requirements established by the regulations and to have access to the capital benefits provided for by the policy, which provides specific cover for Companies included in the AMA scope, significantly increasing the limits and transferring the risk of significant operational losses to the insurance market. In addition, with respect to risks relating to real estate and infrastructure, with the aim of containing the impacts of phenomena such as catastrophic environmental events, situations of international crisis, and social protest events, the Group may activate its business continuity solutions. Reporting The reporting phase includes the preparation of appropriate information flows associated with operational risk management, designed to provide disclosures useful, for example, for: \u2212 analysis and understanding of any dynamics underlying the trend in the level of exposure to operational risks; \u2212 analysis and understanding of the main issues identified; \u2212 defining the mitigation actions and intervention priorities. Self-diagnosis Self-diagnosis is the annual process through which the Organisational Units identify their level of exposure to operational and ICT risk. It includes the Operational Risk Assessment and ICT Risk Assessment, in turn consisting of: \u2013 Business Environment Evaluation (VCO): activities used to identify significant risk factors and assess the related management level 107 . \u2013 Scenario analysis (SA): a method of prospective analysis that takes the form of a systematic process, which is typically repeated at predefined intervals, but which may also be conducted on an ad hoc basis, and which consists in imagining the occurrence of particular situations (or scenarios) and imagining their consequences. Once scenarios have been identified and appropriately characterised, they must be assessed: i.e., one must determine the probability of occurrence (frequency) and potential impact (average impact and worse case) in the event of occurrence of the situation described in the scenario. Internal model for the measurement of operational risk The Intesa Sanpaolo Group\u2019s internal model for calculating capital absorption is designed to combine all the main sources of quantitative information (operational losses: internal and external events, estimates deriving from the Scenario Analysis) and 107 The applicability and significance of risk factors are assessed, in the case of ICT risk, by the technical functions, cybersecurity functions and business continuity functions, and, with regard to operational risk, by the Decentralised Operational Risk Management functions. qualitative information (Business Environment Evaluation). Capital-at-risk is therefore identified as the minimum amount at Group level required to bear the maximum potential loss (worst case). It is estimated using a Loss Distribution Approach model (actuarial statistical model to calculate the Value-at-risk of operational losses), applied to historical data and the results of the scenario analysis assuming a one-year estimation period, with a confidence level of 99.90%. The methodology also applies a corrective factor, which derives from the qualitative analyses of the risk level of the operational environment (VCO), to take into account the effectiveness of internal controls in the various Organisational Units. The internal model\u2019s insurance mitigation component was approved by the Bank of Italy in June 2013 with immediate effect of its benefits on operations and on the capital requirements. Impacts from the COVID-19 pandemic During 2022, the company measures and rules adopted since the beginning of the emergency, in order to ensure business continuity and the safeguarding of the health of customers, employees and suppliers, were constantly reassessed and updated based on the evolution of the health situation and the regulatory requirements. In terms of operational risks, no additional impacts were reported specifically due to the pandemic. Impacts of the Russia-Ukraine conflict As regards operational risks, the impacts of the Russia-Ukraine conflict regard several actions implemented to ensure the Group's business continuity operations, particularly the extra costs incurred for Business continuity and the losses resulting from physical damage directly caused to offices/branches located in the conflict zone. That information is used to monitor exposure to operational risk, including that regarding the Risk Appetite Framework. QUANTITATIVE INFORMATION To determine its capital requirements, the Group uses a combination of the methods (AMA, TSA and BIA) allowed under applicable regulations. The capital requirement amounted to 2,039 million euro as at 31 December 2022, substantially stable on the 2,024 million euro as at 31 December 2021. The following shows the breakdown of capital requirement relating to the Advanced Measurement Approach by type of operational event (Event Type). Breakdown of capital requirement (Advanced Measurement Approach - AMA) by type of operational event With regard to the sources of operational risk, the chart below shows the impact of the operational losses recorded during the year, based on event type. In 2022, the most significant event type was Clients, Products and Business Practices, which included losses related to defaults connected with professional obligations towards customers, suppliers or outsourcers and to the provision of services and products to customers performed improperly or negligently. Breakdown of operational losses recorded in 2022, by event type LEGAL RISKS As at 31 December 2022, there were a total of about 37,400 disputes, other than tax disputes, pending at Group level (excluding those involving Risanamento S.p.A., which is not subject to management and coordination by Intesa Sanpaolo) with a total remedy 108 sought of around 3,850 million euro. This amount includes all disputes for which the risk of a disbursement of financial resources resulting from a potential negative outcome has been deemed possible or probable and therefore does not include disputes for which risk has been deemed remote. Those disputes include a large number of mass disputes at the international subsidiary banks (amounting to around 25,600 disputes) which, as a whole, account for a very low remedy sought. The risks associated with these disputes are thoroughly and individually analysed by the Parent Company and Group companies. Specific and appropriate provisions have been made to the Allowances for Risks and Charges in the event of disputes for which there is an estimated probability of a disbursement of more than 50% and where the amount of the disbursement may be reliably estimated (disputes with likely risk). Without prejudice to the uncertainty inherent in all litigation, the estimate of the obligations that could arise from the disputes and hence the amount of any provisions recognised are based on the forward-looking assessments of the outcome of the trial. These forward-looking assessments are, in any event, prepared on the basis of all information available at the time of the estimate. The only disputes with likely risk amount to around 28,300 with a remedy sought of 1,788 million euro and provisions of 744 million euro. The component referring to the Parent Company Intesa Sanpaolo totals around 5,280 disputes, with a remedy sought of 1,433 million euro and provisions of 550 million euro. These include 2,860 positions relating to disputes concerning anatocism, illustrated in greater detail below. Compared to the previous year\u2019s figures, there was a decrease in number and in the amount of remedy sought. That decrease mainly regarded disputes concerning anatocism, illegal interest and other conditions, and claims on banking products. There were around 700 disputes relating to other Italian subsidiaries, with a remedy sought of 246 million euro and provisions of 91 million euro. There were around 22,300 disputes relating to international subsidiaries, with a remedy sought of 109 million euro and provisions of 103 million euro, impacted by the previously mentioned mass disputes 109 : specifically, there were around 19,000 disputes referring to the subsidiary Banca Intesa Beograd, regarding two areas of litigation which are illustrated in the specific section. The breakdown according to the main categories of disputes with likely risk shows the prevalence of cases related to the Group\u2019s ordinary banking and credit activities: disputes involving claims relating to banking and investment products and services or on credit positions and revocatory actions account for about 74% of the remedy sought and 75% of the provisions. The remaining disputes mainly consist of other civil and administrative proceedings and labour disputes or criminal proceedings or proceedings related to operational violations. The paragraphs below provide summary information on the significant disputes (mainly those with a remedy sought of more than 20 million euro and where the risk of a disbursement is currently considered likely or possible), together with the cases considered significant. Disputes relating to anatocism and other current account and credit facility conditions, as well as usury During 2022, the disputes of this type \u2013 which for years have been a significant part of the civil litigation brought against the Italian banking industry \u2013 decreased both in number and in total value of claims made compared to the previous year. Overall, the number of disputes, including mediations, with likely risk amounted to around 2,860. The remedy sought amounted to 491 million euro, with provisions of 180 million euro. As is the case for the other civil disputes, the assessment of the risk related to this type of litigation is carried out individually, taking into account the claims made, the defences submitted, the progress of the proceedings and case-law decisions, for each dispute. You are reminded that in 2014 and 2016, Article 120 of the Consolidated Law on Banking, which governs the compounding of interest in banking transactions, was amended with the establishment of the ban on anatocism and the delegation of the CICR (Interdepartmental Committee for Credit and Savings) to regulate this matter. In February 2017, the Italian Antitrust Authority initiated proceedings against Intesa Sanpaolo for alleged unfair business practices involving, among other things, the methods used to request the above-mentioned authorisation from customers for the charging of the interest to the account imposed by the new regulations introduced in 2016. The Authority completed the proceedings in October 2017, ruling that Intesa Sanpaolo had implemented an \u201caggressive\u201d policy aimed at acquiring the authorisation, by soliciting customers to provide it through various means of communications and without putting them in a position to consider the consequences of that choice in terms of the interest calculation on the compounded debt interest. As a result, the Authority issued a fine of 2 million euro against Intesa Sanpaolo. Intesa Sanpaolo has submitted an appeal with the Lazio Regional Administrative Court, on the grounds that the ruling was unfounded. With ruling of 2 January 2023, the Regional Administrative Court confirmed the fine and the Bank will appeal to the Council of State. Disputes relating to investment services Also in this area, the disputes showed a downtrend in terms of number compared to the previous year. The most significant sub-group was disputes concerning derivatives. There were a total of around 350 disputes relating to investment services with likely risk. The total remedy sought amounted to around 242 million euro, with provisions of 144 million euro. As is the case for the other civil disputes, the assessment of the risk related to this type of litigation is carried out individually, taking into account the claims made, the defences submitted, the progress of the proceedings and the case-law guidance, for each dispute. We also note approximately 154 disputes with a remedy sought of 142 million euro initiated by \u201cwiped out\u201d shareholders and subordinated bondholders of the former \u201cOld Banks\u201d of Banca delle Marche, Banca Popolare dell\u2019Etruria e del Lazio and Cassa di Risparmio della Provincia di Chieti, deemed to be of possible risk. Those disputes are backed by the warranties and obligations to indemnify by the Seller (National Resolution Fund) for the benefit of the former UBI Banca, and 108 The figures for the remedy sought do not include claims of indeterminate value, i.e. those that do not contain a specific financial claim when the dispute is initiated; the value of these disputes is determined during the course of the proceedings when sufficient information emerges for the valuation. 109 For those cases, the provisions are relatively higher than the remedy sought (which is determined based on the customer\u2019s original claim) to take account of the interest and legal fees to be paid to the adverse party and the potential expansion of the original claim submitted in the legal proceedings. now Intesa Sanpaolo, and therefore also cover any liabilities arising from the activities carried out by the Banks (the \u201cOld Banks\u201d) before they were subject to the resolution procedure, in relation to, inter alia, risks of a legal nature or generally related to ongoing or threatened disputes, or violations of the law and any potential liabilities. Dispute regarding financial derivative instruments With regard to derivative transactions, the legal risks linked to legal proceedings with local authorities, their subsidiaries and individuals continue to be subject to careful monitoring. Specifically, disputes are pending with 20 local authorities, with possible or probable risk, for total claims of 142 million euro, and disputes with 5 Companies controlled by public entities, with total claims of 66 million euro. Disputes with individuals, assessed as having possible or probable risk, total around 197, and of these, around 43 positions also regard requests for refunds of amounts on other accounts held with the Bank. Net of those latter positions, the total value of the claims lodged in the proceedings regarding only derivatives amounts to around 84 million euro. With regard to contracts entered into with local authorities, during 2022, 6 new disputes were initiated against the Bank (Province of Catanzaro, Province of Varese, Province of Rovigo, Municipality of Marsciano, Municipality of Soriano del Cimino and Municipality of Servigliano) with total claims of 27 million euro. In the same year, 4 rulings were issued relating to the following proceedings: \u2212 Municipality of Faenza: with decision dated 1 February 2022, the Court of Appeal of Bologna confirmed that the contract was null and void. In execution of the first instance ruling, the Bank paid 2.8 million euro. An appeal was lodged with the Court of Cassation. \u2212 Municipality of Santa Maria Capua Vetere: the Court of Rome, in its ruling of 2 March 2022, rejected the claim of invalidity of the two derivative contracts, made by the Municipality, and, instead upheld the claim for implicit costs not disclosed at the time of signing and ordered the Bank to pay 1.1 million euro plus interest and revaluation. \u2212 Municipality of Vittorio Veneto: the Court of Venice, with non-final ruling of 29 March 2022, voided two contracts, referring to the final decision for the quantification of the restitutionary effects, whose potential risk amounts to 5.8 million euro. \u2212 Province of Pavia: with decision dated 4 May 2022, the Court of Appeal of Milan confirmed that the contract was null and void. In execution of the first instance ruling, the Bank had already paid 10.1 million euro. An appeal was lodged with the Court of Cassation. A summary of the most significant disputes with local authorities is provided below: \u2212 Municipality of Venice: the dispute regards a contract governed by the ISDA, with remedy sought of 71 million euro. With ruling of 14 October 2022, the High Court of Justice in London held that the Municipality did not have the capacity to enter into speculative derivative contracts involving debt. As a result, the High Court established that the Municipality was entitled to the restitution of the differentials paid to the Bank solely in the amount exceeding the outlays of the Bank incurred for the back-to-back hedging derivatives (at least until December 2020, the date on which the Municipality formally challenged the validity of the transaction). In this case, the application of that principle would significantly reduce the restitutionary obligation to the Municipality. The parties formalised the grounds for appeal by the set deadline of 3 February 2023. In a subsequent hearing of 6 February 2023, the request was upheld to defer to the outcome of the appeal the settlement of the credit/debit amounts between the parties (\u201cconsequential hearing\u201d) due to the High Court\u2019s ruling. The Bank was also ordered to pay 70% of the legal fees requested by the Municipality, of which 35%, equal to around 2 million GBP, to be paid by 20 February. With regard to the second proceedings with the Municipality of Venice before the Italian court, regarding alleged breaches deriving from the mandate and investment services agreements, the Court has set a new hearing for 22 March 2023, \u201cas it would be appropriate to hear testimony from the parties and obtain clarifications, given the likely settlement of the proceedings held in the UK.\u201d \u2212 Municipality of Perugia: at the end of 2020, the Municipality of Perugia served a summons relating to four derivative contracts entered into in 2006, asking for repayment of the amounts paid, to be quantified during the lawsuit. The Court permitted an expert\u2019s report, adjourning to the hearing of 9 March 2023 for the examination of the expert witness report. With regard to the contracts entered into with subsidiaries of local authorities, no new disputes were initiated, while 2 rulings were issued regarding the following proceedings: \u2212 Azienda Socio Sanitaria territoriale Valle Olona: with ruling dated 6 April 2022, the Court of Busto Arsizio declared the contract null and void. In execution of the ruling, the Bank paid 1.8 million euro and lodged an appeal. \u2212 Aler S.p.A.: with ruling dated 1 August 2022, the Court of Appeal of Milan confirmed that the contract entered into with the then Banca OPI was null and void. As a result of the first instance ruling, the Bank had paid 4.6 million euro. The possibility of filing an appeal with the Court of Cassation is being evaluated. A summary of the most significant disputes with subsidiaries of local authorities is provided below: \u2212 Terni Reti Sud S.r.l.: the dispute concerns a derivative contract entered into in August 2007 by the former Banca delle Marche 110 with Terni Reti Sud S.r.l., whose capital is 100% held by the Municipality di Terni. The opponent claims that the derivative is null and void due to failure to communicate the MTM and the probabilistic scenarios, and the breach of disclosure obligations, formulating a demand of 22 million euro. The Court ordered a court-appointed expert\u2019s report and adjourned the case to 13 June 2023. \u2212 EUR S.p.A.: in May 2021, a writ of summons was served by EUR S.p.A., a company held by the Ministry of the Economy and Finance and Roma Capitale. In addition to ISP, the company is also suing other intermediaries due to derivative contracts governed by the ISDA, entered into in relation to a syndicated loan granted. At the hearing of 8 November 110 Note that those disputes are backed by the warranties and obligations to indemnify by the Seller (National Resolution Fund) for the benefit of UBI Banca in relation to the acquisition of the New Banks deriving from the resolution of Banca delle Marche, Banca Popolare dell\u2019Etruria e del Lazio and Cassa di Risparmio della Provincia di Chieti and therefore also cover any liabilities arising from the activities carried out by the Banks (the \u201cOld Banks\u201d) before they were subject to the resolution procedure, in relation to, inter alia, risks of a legal nature or generally related to ongoing or threatened disputes, or violations of the law and any potential liabilities. 2022, the Court deemed that the lawsuit was ready for a ruling on the objection raised by the defendants regarding the lack of jurisdiction of the Italian court, and granted the terms for filing the closing briefs. Intesa Sanpaolo\u2019s risk amounts to 22 million euro. Disputes with individuals are decreasing, in terms of both stock and flows. Dispute relating to loans in CHF to the Croatian subsidiary Privredna Banka Zagreb Dd As already noted in the previous financial statements, Potro\u0161a\u010d \u2013 Croatian Union of the Consumer Protection Association initiated legal action against the subsidiary Privredna Banka Zagreb (\u201cPBZ\u201d) and seven other Croatian banks. According to the plaintiff, the defendant banks engaged in an unfair practice by allegedly using unfair contractual provisions on variable interest rate , which could be changed unilaterally by the bank, and by denominating the loans granted in Swiss francs (or indexing them to Swiss francs) without allegedly appropriately informing the consumers of the risks prior to entering into the respective loan agreements. In September 2019, the Croatian Supreme Court rendered a ruling in the collective action proceedings, rejecting the appeals filed by the sued banks against the High Commercial Court ruling from 2018 and confirming the position of courts of lower instance that banks had breached collective interests and rights of consumers by incorporating unfair and null and void provisions on CHF currency clause. The decision of the Supreme Court was challenged by PBZ before the Constitutional Court, which rejected the claim at the beginning of 2021. The subsidiary thus lodged an appeal before the European Court of Human Rights, which was rejected near the end of 2022. In connection with the mentioned proceedings for the protection of the collective interests of consumers, numerous individual proceedings have been brought by customers against PBZ, despite the fact that most of them voluntarily accepted the offer to convert their CHF loans into EUR denominated loans retroactively, in accordance with the Act on the Amendments to the Consumer Credit Act (Croatian Official Gazette 102/2015 \u2013 the \u201cConversion Law\u201d). In March 2020, the Croatian Supreme Court, within model case proceedings (a Supreme Court proceedings with obligatory effect on lower instance courts with the aim of unifying/harmonising case law), ruled that the conversion agreements concluded between banks and borrowers under the Croatian Conversion Law of 2015 produce legal effects and are valid even in the case when the provisions of the underlying loan agreements on variable interest rate and currency clause are null and void. In May 2022, the EU Court of Justice, in proceedings regarding reference for a preliminary ruling involving another intermediary, established that the Court of Justice has jurisdiction over the conversion agreements concluded under the Conversion Law, as they occurred after Croatia joined the European Union, and that the EU Directive on unfair terms in consumer contracts does not apply to those conversion agreements, whose content reproduces provisions of national law. On 20 December 2022, the Civil Law Department of the Croatian Supreme Court provided an interpretation of the legal effects of the agreements for the conversion of loan agreements from CHF to EUR and on consumers\u2019 rights. By virtue of that interpretation, consumers that entered into a conversion agreement pursuant to the aforementioned Conversion Law of 2015 have the right to receive legal interest on excess amounts paid that the bank calculated on converting the loans, from the date of each single payment up to the date of conversion. Once this judicial interpretation is recorded with the Court Practice Records Department, it will be final and binding for lower instance courts. The number of new individual lawsuits filed against PBZ in 2022 was lower than those in 2021. At the end of 2022, the total pending cases amounted to a few thousand. It cannot be excluded the possibility that additional lawsuits might be filed against PBZ in the future in connection with CHF loans. Dispute with the foreign subsidiary Banca Intesa Beograd (Serbia) The following areas of the mass disputes that have impacted the entire Serbian banking system are shown below. 1) Processing fees Legal dispute regarding processing fees applied by banks at the time of disbursing loans. The claimants, individuals and legal persons, are requesting the repayment of those charges, as they are deemed as not owed. The first claims arose in 2017 and recorded a significant increase in lawsuits was recorded in the following years, though for modest amounts on average. At the end of 2022 Banca Intesa Beograd had been summoned in around 18,600 lawsuits deemed as having possible or probable risk (at the end of 2021, these amounted to around 24,500); the related total amounts of principal requested to be repaid by the Bank came to around 1.3 million euro. Most of the courts accepted the customers\u2019 requests, based on an interpretation of regulations that the banks oppose. In September 2021, the Supreme Court of Serbia recognised the legitimacy of the costs and fees applied to loans at the time of their disbursement, provided they are indicated in the contract proposal. During 2022, the flows of new disputes significantly decreased on 2021, and several customers dropped pending disputes. 2) NKOSK Legal dispute relating to real estate loans insured through the National Housing Loan Insurance Corporation (NKOSK), whose premium is paid by the borrowers. The borrowers deem that, as the Bank is the Beneficiary of the insurance, the premium should be paid by the Bank. At the end of 2022 Banca Intesa Beograd had been summoned in around 1,100 lawsuits deemed as having possible or probable risk (at the end of 2021, these amounted to around 1,000); the related total amounts of principal requested to be repaid by the Bank came to around 1.1 million euro. Most of the courts accepted the customers\u2019 requests, based on an interpretation of regulations that the banks oppose. In September 2021, the Supreme Court of Serbia recognised the legitimacy of requiring the insurance premium to be paid by the borrowers, provided that the obligation is clearly described to the borrowers during precontractual procedures. In 2022, the flows of new disputes grew slightly on 2021, and several customers dropped pending disputes. Ruling of the EU Court of Justice of 11 September 2019 on credit agreements for consumers \u2013 so-called Lexitor ruling Article 16, paragraph 1, of Directive 2008/48 on credit agreements for consumers states that in the event of early repayment of the loan the consumer is \u201centitled to a reduction in the total cost of the credit, such reduction consisting of the interest and the costs for the remaining duration of the contract\u201d. According to the Lexitor ruling, this provision must be interpreted as meaning that the right to a reduction in the total cost of the credit includes all the costs incurred by the consumer and therefore also includes the costs relating to services prior to or connected with the signing of the contract (upfront costs such as processing costs or agency fees). Article 16, paragraph 1 of Directive 2008/48 has been transposed in Italy through Article 125 sexies of the Consolidated Law on Banking, according to which in the event of early repayment \u201cthe consumer is entitled to a reduction in the total cost of the credit, equal to the amount of interest and costs due for the remaining life of the contract\u201d. On the basis of this rule, the Bank of Italy, the Financial Banking Arbitrator and case law have held that the obligation to repay only relates to the charges that have accrued during the course of the relationship (recurring costs) and have been paid in advance by the customer to the lender. In the event of early repayment, these costs must be repaid in the amount not yet accrued and the obligation to repay does not include the upfront costs. Following the Lexitor judgment, the question has arisen as to whether Article 125 sexies of the Consolidated Law on Banking should be interpreted in accordance with the principle laid down therein or whether the new principle requires a legislative amendment. According to the EU principle of \u201cconsistent interpretation\u201d, national courts are required to interpret the rules in their own jurisdiction in a manner consistent with the European provisions. However, if the national rule has an unambiguous interpretation, it cannot be (re)interpreted by the court in order to bring it into line with the various provisions of a European directive: the principles recognised by European Union law prevent the national court from being required to make an interpretation that goes against the provisions of the domestic law. In this regard, we note that Article 125 sexies of the Consolidated Law on Banking has always been interpreted as meaning that, in the event of early repayment, the obligation to repay relates only to recurring costs and therefore does not include upfront costs. In December 2019, following the Lexitor ruling, the Bank of Italy issued \u201cguidance\u201d for the implementation of the principle established by the EU Court of Justice, to the effect that all costs (including upfront costs) should be included among the costs to be refunded in the event of early repayment, both for new relationships and for existing relationships. Intesa Sanpaolo has decided to follow the Bank of Italy \u201cguidance\u201d, even though it believes that the legal arguments set out above regarding the fact that Article 125 sexies of the Consolidated Law on Banking cannot be interpreted in a manner that complies with the Lexitor ruling are well founded. A provision has therefore been made in the Allowance for Risks and Charges corresponding to the estimated higher charges resulting from the decision to follow the Bank of Italy \u201cguidance\u201d. On 25 July 2021, Article 11-octies of Law 106/2021 took effect, which modified paragraph 1 of Article 125 sexies of the Consolidated Law on Banking, with the intention of resolving the situation of uncertainty caused by the Lexitor ruling, with the following provisions: \u2212 with regard to the rules on mortgage lending to consumers, removal of the reference to Article 125-sexies of the Consolidated Law on Banking and insertion of a specific provision on the early redemption of this type of loan, limiting repayment to only the interest and costs due for the remaining life of the loan agreement; \u2212 with regard to the rules on consumer credit, the text of Article 125-sexies of the Consolidated Law on Banking is modified so as to implement the principles of the Lexitor ruling, indicating, however, the amortised cost criterion as the preferred criterion for calculating repayment; \u2212 these provisions only apply to loan agreements signed after the entry into force of the law converting the decree. Loan agreements signed before that date are expressly to be governed by the provisions of law and Supervisory Provisions previously in force. The new rule did not have significant impacts on new contracts: for personal loans, the contractual clauses already comply with the rule, and for salary-backed loan products, the companies in the Intesa Sanpaolo Group have adopted the \u201ctutto TAN\u201d (All APR) model, which does not apply incidental costs to the customer, aside from interest. As regards consumer credit agreements concluded before the date of entry into force of the new rule, even if the agreements expired after that date, the repayment of the upfront costs could be limited to the amount established in the agreement. The Coordination Board of the Banking and Financial Ombudsman (ABF), which was assigned the issue of repayment of the upfront costs following the entry into force of the \u201cLexitor amendment\u201d, issued Decision no. 21676 on 15 October 2021, stating the following principle: in application of the legislative change pursuant to Article 11 octies, paragraph 2, last sentence of Law Decree No. 73 of 25 May 2021, converted into Law no. 106 of 23 July 2021, in the event of early repayment of a loan entered into before the entry into force of the specific regulatory provisions, there must be a distinction between costs relating to activities over the course of the contractual relationship (recurring costs) and costs relating to the fulfilment of preliminary obligations for granting the loan (upfront costs). This means that the former, but not the latter, can be repaid, limited to the portion not accrued due to the early repayment. The guidance from the Coordination Board of the Banking and Financial Ombudsman was followed by the single panels, which rejected the requests for pro rata repayment of upfront costs. The decisions were not suspended even after the issue of the legitimacy of the legislative change was referred to the Constitutional Court. This will be explained further below. On 1 December 2021, the Bank of Italy also notified intermediaries that, as a result of the changes made by Law 106/2021 to Article 125 sexies of the Consolidated Law on Banking, its \u201cguidelines\u201d of 4 December 2019 are to be considered invalid. Those guidelines requested that, in the event of the early repayment of consumer credit loans, the reduction in the total cost of the loan be calculated, including all costs borne by the consumer (recurring and upfront costs), excluding taxes. Conversely, ordinary case law was divided over the application of the new rule. Several judges have applied the new provision by rejecting the claimant\u2019s request for pro rata repayment of upfront fees following early repayment. However, in a significant number of cases, particularly in disputes before Justices of Peace, the customer\u2019s right to pro rata repayment of the upfront costs was recognised, deeming that - with varying, questionable grounds - the Lexitor principles should be applied also following the entry into force of the legislative change. Those rulings have generally been challenged by the Bank. With ruling no. 263 of 22 December 2022, the Constitutional Court accepted the question of constitutionality raised by the Court of Turin in November 2021, in a lawsuit brought against an intermediary specialising in salary-backed loans, for repayment of the upfront costs, declaring only the section of Article 11 octies, paragraph 2 of Law Decree no. 73 of 25 May 2021, converted with amendments into Law no. 106 of 23 July 2021 with the wording \u201cand the secondary regulations contained in the transparency and supervisory provisions of the Bank of Italy\u201d to be unconstitutional. In light of the ruling of the Constitutional Court, the Bank made an initial estimate of the potential charge connected with the effects of the partial declaration of unconstitutionality of Article 11 octies, paragraph 2 of Law Decree no. 73 of 25 May 2021, making a specific provision to the allowance for risks and charges. On 9 February 2023, the European Court of Justice, within proceedings originating from a reference for a preliminary ruling from the Austrian Supreme Court, ruled on the applicability of the Lexitor principle to mortgage lending to consumers. The Austrian Court asked the European Court of Justice whether Directive 2014/17 on mortgage lending to consumers precluded national legislation providing that the right of the consumer to a reduction in the total cost of the credit in the event of early repayment of the credit covers only interest and costs that are dependent on the duration of the agreement. The Court declared that Directive 2014/17 does not preclude such legislation. According to the Court, that right to reduction does not, therefore, include costs which, irrespective of the duration of the agreement, are payable by the consumer to either the creditor or third parties for services previously rendered in their entirety at the time of early repayment (such as processing and appraisal fees). Moreover, in 2021 the European Commission launched the process for the revision of EU Directive no. 2008/48 on consumer credit, on which the Lexitor ruling had been handed down. Following the legislative proposal initially formulated by the Commission, the phase of involving the European Parliament and Council began and, in the last few months, these bodies defined their positions by publishing their respective proposals. Dispute between Intesa Sanpaolo Vita S.p.A. and RB Holding S.p.A. and the Favaretto family In May 2020, Intesa Sanpaolo Vita S.p.A. finalised an investment in RBM Assicurazioni Salute S.p.A., the leading Italian insurance company in the healthcare class held by RB Holding S.p.A. referring to the family of Roberto Favaretto, an operation that resulted in Intesa Vita S.p.A. currently controlling the insurance company, now named Intesa Sanpaolo RBM Salute S.p.A. In May, Intesa Sanpaolo Vita sent the minority shareholders RB Holding S.p.A. an indemnity request pursuant to and in accordance with the investment contract, in relation to the emerging situations that gave rise (or could give rise) to liabilities currently quantifiable at over 129 million euro, which substantially involve: \u2212 the increase in the charges for claims concerning the M\u00e8taSalute Policy due to the elimination of unfair business practices subject to proceedings launched by the AGCM (Italian Competition Authority); \u2212 credit positions (per \u2018premium settlements\u2019) posted to balance sheet assets at the time of closing and fully written down following the closing, due to their verified uncollectibility; \u2212 penalties for delays in payments of claims relating to the ASDEP \u2013 Healthcare for Employees of Public Entities Policy. RB Holding S.p.A. rejected all charges and, in the second decade of July, along with the Favaretto family, submitted a petition to the Arbitration Chamber of Milan, claiming the invalidity of several clauses in the investment contract and shareholders\u2019 agreement of 2020 (including those relating to the put and call options on the minority interest and the non-competition agreement), breaches by Intesa Sanpaolo Vita of contractual commitments (such as the consultation clause relating to the renewal of the M\u00e8taSalute contract and the termination of the relationship with the previous Managing Director), the breach by the latter of the rules of good faith and fairness, with a request for compensation for damages totalling 423.5 million euro. Intesa Sanpaolo Vita S.p.A. filed its defence to the Arbitration Chamber by the assigned deadline of 5 September 2022, fully contesting the adverse party\u2019s arguments and also making a counterclaim for the payment of a total amount of 129.4 million euro, for the breach, by RB Hold, of the representations and warranties issued and commitments undertaken through the investment contract, as well as the obligation to act in accordance with fairness and good faith, making full reference to the claims set out in the indemnity request of last May. As the appearing parties did not reach an agreement on the appointment of the President of the Arbitration Tribunal, they submitted a joint request to the Arbitration Board to postpone the appointment. Where consultation between the parties identifies the interest in an amicable settlement, the fact that the dispute is pending shall not impede the verification of the feasibility of such cases. Disputes arising from the acquisition of certain assets, liabilities and legal relationships of Banca Popolare di Vicenza S.p.A. in compulsory administrative liquidation and Veneto Banca S.p.A. in compulsory administrative liquidation Preliminarily, the following is noted: a. based on the agreements between the two Banks in compulsory administrative liquidation and Intesa Sanpaolo (Sale Contract of 26 June 2017 and Second Acknowledgement Agreement of 17 January 2018), two distinct categories of disputes have been identified (also relating to the subsidiaries of the former Venetian banks included in the sale): a1 - the Previous Disputes, included among the liabilities of the Aggregate Set transferred to Intesa Sanpaolo, which include, with some important exceptions (see point a2 herein), civil disputes relating to proceedings already pending at 26 June 2017, and in any case different from those included under the Excluded Disputes (see the point below); a2 - the Excluded Disputes, which remain under the responsibility of the Banks in compulsory administrative liquidation and which concern, among other things, disputes (even if already pending at 26 June 2017) brought by shareholders and convertible and/or subordinated bondholders of one of the two former Venetian banks (including those deriving from so- called \u201coperazioni baciate\u201d), disputes relating to non-performing loans, disputes relating to relationships terminated at the date of the transfer, and all disputes (whatever their subject) arising after the sale and relating to acts or events occurring prior to the sale. The Excluded Disputes also include the disputes attributable to all the categories listed herein (point a2) brought against Banca Nuova and Banca Apulia (or Intesa Sanpaolo as their absorbing company). The relevant provisions were transferred to Intesa Sanpaolo along with the Previous Disputes; in any case, if the allowances transferred prove insufficient, Intesa Sanpaolo is entitled to be indemnified by the Banks in compulsory administrative liquidation, at the terms provided for in the Sale Contract of 26 June 2017; b. after 26 June 2017, a number of lawsuits included within the Excluded Disputes were initiated or resumed against Intesa Sanpaolo. With regard to these lawsuits: \u2212 Intesa Sanpaolo is pleading (and will plead) its non-involvement and lack of capacity to be sued, both on the basis of the provisions of Law Decree 99/2017 (Article 3) and the agreements signed with the Banks in compulsory administrative liquidation and in compliance with the European Commission provisions on State Aid (Decision C(2017) 4501 final and Attachment B to the Sale Contract of 26 June 2017), which prohibit Intesa Sanpaolo from taking responsibility for any claims made by the shareholders and subordinated bondholders of the former Venetian Banks; \u2212 if there were to be a ruling against Intesa Sanpaolo (and in any event for the charges incurred by Intesa Sanpaolo for any reason in relation to its involvement in any Excluded Disputes), it would have the right to be reimbursed by the Banks in compulsory administrative liquidation, based on that set out in the Sale Contract and subsequent agreements. The Banks in compulsory administrative liquidation have contractually acknowledged their capacity to be sued with respect to the Excluded Disputes, such that they have entered appearances in various proceedings initiated (or re-initiated) by various shareholders and convertible and/or subordinated bondholders against Intesa Sanpaolo (or in any case included in the category of Excluded Disputes), asking for the declaration of their exclusive capacity to be sued and the consequent exclusion of Intesa Sanpaolo from those proceedings. All the obligations and liabilities for indemnity assumed by the Banks in compulsory administrative liquidation in relation to Intesa Sanpaolo are covered by a public guarantee (\u201cIndemnification Guarantee\u201d), whose issue was an essential prerequisite of the Sale Contract. This guarantee was formalised on 15 November 2022. Over time, by virtue of the contractual obligations assumed by the two Venetian Banks in compulsory administrative liquidation, Intesa Sanpaolo has sent them several claims containing requests (or reserving the right to make requests) for reimbursement/indemnity relating to previously incurred or potential damage concerning Previous Disputes or Excluded Disputes, as well as the breach of representations and warranties regarding certain assets and liabilities transferred to Intesa Sanpaolo. Pending the formalisation of the \u201cIndemnification Guarantee\u201d, on 14 October 2022, Intesa Sanpaolo and the two Venetian Banks in compulsory administrative liquidation negotiated and signed a \u201cThird Agreement\u201d to govern several aspects for the performance of the Sale Contract of 26 June 2017 (as occurred for two previous acknowledgement agreements signed in 2017 and in 2018). At that time, Intesa Sanpaolo and the two Venetian Banks in compulsory administrative liquidation: \u2212 extended the duration of the loan agreements on the net debt of the sale and the sale of high risk loans and their conditions, aligning the guarantees; \u2212 specified, both regarding the claims already sent by Intesa Sanpaolo and for the future, several aspects concerning the timing and methods of managing the related requests for compensation, covered by the Indemnification Guarantee in favour of Intesa Sanpaolo; \u2212 agreed on several methods to effectively manage disputes in which Intesa Sanpaolo will be involved. By order of 20 July 2021, in the proceedings relating to the Excluded Disputes brought for the alleged misselling of BPVi shares in which Intesa Sanpaolo (which claimed it lacks the capacity to be sued based on Law Decree 99/2017 and the sale contract) is also a party, the Court of Florence referred the question of the constitutionality of Law Decree 99/2017 to the Constitutional Court. This is the first case of referral to the Constitutional Court of issues relating to Law Decree 99/2017. To date, the numerous applications for referral to the Constitutional Court formulated by the adverse parties in proceedings relating to the Excluded Disputes have always been rejected by judges, as they were deemed immaterial or clearly unfounded. In filing an appearance in court, the Bank challenged the order of referral, claiming that it was inadmissible and unfounded; this, considering EU and Italian regulations on State aid as part of the operations on the Venetian Banks, correctly applied by the national legal system, and the absence of discriminatory effects against the shareholders and subordinated bondholders of the Venetian Banks. The Presidency of the Council of Ministers and BPVi in compulsory administrative liquidation (as well as the Bank of Italy, as amicus curiae) filed appearances in the proceedings, concluding in favour of the inadmissibility and lack of grounds of the issues of unconstitutionality raised. With ruling no. 225 filed on 7 November 2022, accepting the defences of Intesa Sanpaolo, the Attorney General and Banca Popolare di Vicenza in compulsory administrative liquidation, the Court declared all the issues of unconstitutionality raised to be inadmissible, also taking a position on their lack of grounds, in line with the defences submitted by Intesa Sanpaolo. In January 2018, as part of a criminal proceeding before the Court of Rome for the alleged market rigging and obstructing the Supervisory Authorities in the performance of their functions with respect to officers and executives of Veneto Banca, the preliminary hearing judge decided that Intesa Sanpaolo could be charged with civil liability, assuming that the exclusion from the sale to Intesa Sanpaolo of the debts, responsibilities and liabilities deriving from the sale of shares and subordinated bonds \u2013 envisaged by Law Decree 99/2017 \u2013 would not be objectionable by third parties, while Article 2560 of the Italian Civil Code would be applicable in the case in question and Intesa Sanpaolo should therefore take on those liabilities. As a result of this decision, more than 3,800 civil plaintiffs holding Veneto Banca shares or subordinated bonds joined the proceedings. Intesa Sanpaolo thus filed an appearance, requesting that it be excluded from the proceedings. In turn, Veneto Banca in compulsory administrative liquidation intervened voluntarily affirming its exclusive, substantial and procedural capacity to be sued. In March 2018, the preliminary hearing judge declared his lack of territorial jurisdiction, transferring the files to the Public Prosecutor\u2019s Office of Treviso. The charge of civil liability and the joinders of the civil parties were therefore removed. After the case documents were forwarded to the Public Prosecutor\u2019s Office of Treviso, the former Managing Director of Veneto Banca, Vincenzo Consoli, was committed to trial for the offences of market-rigging, obstructing banking supervisory authorities and financial reporting irregularities. The Judge for the Preliminary Hearing rejected the motion to authorise the summons of Intesa Sanpaolo as civilly liable party. A similar motion was rejected in the criminal proceedings before the Court of Vicenza against management board members and key function holders and executives of Banca Popolare di Vicenza. Disputes relating to bank guarantees This type of dispute derives from a decision of the Court of Cassation in 2017, based on a Bank of Italy measure of 2005 relating to a bank guarantee scheme submitted to it by the ABI (agreed with the main consumers\u2019 associations). The Bank of Italy deemed that three clauses in this scheme could have anti-competition effects if applied in a standard manner by banks. Referring to that measure, the Court of Cassation formulated the following new principle of law: once the existence of an unlawful, and therefore, null and void anticompetitive agreement has been ascertained, bank guarantees that constitute the application of the unlawful agreement shall also be deemed unlawful, even if issued prior to the verification of the agreement. As part of recovery proceedings managed by Italfondiario on behalf of the Bank, the issue relating to the consequences of the principle stated by the Court in 2017 on individual bank guarantees issued based on the Italian Banking Association (ABI) scheme was referred to the Joint Sections. Specifically, they were asked to assess: a. whether the inclusion of the unlawful clauses in the contract justifies the declaration that the contracts are null and void or exclusively legitimises the claim for damages; b. in the event of nullity, what type of defect determines such nullity and which party is entitled to enforce it; c. whether the partial nullity of the bank guarantee is admissible; d. whether, in addition to verifying that the clauses match those deemed unlawful, the intention of the parties regarding the operation must be investigated and, that is, whether they would have gone ahead even knowing the clauses were unlawful. On 30 December 2021, the Joint Sections declared the partial nullity of the bank guarantees drawn up based on the Italian Banking Association (ABI) template, in relation to clauses 2, 6 and 8. The Joint Sections opted for an intermediate solution, excluding the other two possible solutions: on one side, they ruled out the full validity of the bank guarantee, a solution which would have exclusively permitted compensation for damages as the only remedy to be used by the guarantor (as suggested in the conclusions of the General Prosecutor prior to the hearing of 23 November 2021); on the other side, they ruled out the possibility of deeming the entire bank guarantee contract null and void. Around one year since the ruling of the Joint Sections, there have been no increases in disputes, which, on the whole, are still a modest amount. Andrea Abb\u00e0 + 207 This is a dispute pending before the Court of Milan, Business Section, initiated in 2019 by Mr. Abb\u00e0 and 207 subordinated bondholders of Banca delle Marche 111 . The claimants seek a declaration voiding the bonds and compensation for the damages suffered. The claim has been quantified at approximately 31 million euro. The Bank filed its appearance, objecting that it lacked the capacity to be sued, arguing in particular that the bonds in question were outside the scope of the sale by the Bridge Entity to the former UBI Banca. The former UBI Banca also argued that the claimant\u2019s claims had become time barred and that the adverse parties lacked capacity, since they were not the \u201cfirst borrowers\u201d and thus by law were not entitled to claim that the original bonds were inherently flawed. Finally, the lack of grounds to void the bonds and of evidence of the causal relationship between the Bank\u2019s conduct at issue and the damages was underscored. As the manager of the National Resolution Fund, the Bank of Italy intervened in the proceedings, upholding the arguments and conclusions formulated by the former UBI Banca. Following its interruption due to the death of one of the claimants, the lawsuit was resumed. The Court of Milan granted the terms for filing preliminary briefs and scheduled the hearing for 28 March 2023. AC Costruzioni S.r.l. Proceedings brought by AC Costruzioni S.r.l. (subsequently declared bankrupt) and Aurelio Cava (deceased during the trial) seeking a declaratory judgment establishing contractual and/or extracontractual liability of the Bank for the revocation of the credit facilities in 1998 and a judgment ordering the bank to provide compensation for the damages resulting from revocation, quantified at a total of around 33 million euro. The adverse party\u2019s claims were rejected in full by both the Court of Cosenza and the Catanzaro Court of Appeal, which upheld the arguments made by the Bank. The judgment of the second instance was appealed by Cava\u2019s heirs and by the receiver to AC Costruzioni by counter-appeal and cross-appeal. By order filed at the end of July 2022, the Court of Cassation rejected the appeals filed by the adverse parties in their entirety and ordered them to pay the costs to the Bank. Therefore, the dispute has been definitively closed without any outlays. Citt\u00e0 Metropolitana di Roma Capitale (formerly Provincia di Roma) Criminal proceedings are pending before the Rome Public Prosecutor\u2019s Office against a former Banca IMI manager for co- commission of aggravated fraud against the Metropolitan City of Rome Capital (formerly the Province of Rome). The proceedings relate to the overall transaction for the purchase by the local authority, through the real estate fund Fondo Immobiliare Provincia di Roma (fully owned by the Province of Rome), of the new EUR premises. The real-estate transaction received financing of 232 million euro from UniCredit, BNL and Banca IMI (each with 1/3). The former Banca IMI employee is accused of having misled \u2013 with three other managers of the two other lending banks, seven managers of the asset management company that manages the provincial fund and two public officials \u2013 the fund\u2019s internal control bodies and representatives of the Province, allowing the lending banks to obtain an unjust profit and thus causing significant damages to the public authority. In addition, the Public Prosecutor claims that the lending banks and the Fund entered into a loan under different, more burdensome conditions than those provided for in the call for tenders held by the public entity for the transaction. Intesa Sanpaolo (as the company that absorbed Banca IMI) is investigated in the criminal proceeding pursuant to Legislative Decree 231/01 together with the other two lending banks and the real-estate fund management company. By measures dated 23 May 2022 and 14 June 2022, the Public Prosecutor\u2019s Office of Rome ordered the closure of the positions of both the former manager of Banca IMI and of ISP to request their dismissal. By order dated 27 June 2022, which became final in December, the Public Prosecutor\u2019s Office ordered the dismissal of the proceedings against the Bank. It is also expected that the request for dismissal be formalised also against the former manager of Banca IMI. 111 See the previous note. Disputes regarding tax-collection companies In the context of the government\u2019s decision to re-assume responsibility for tax collection, Intesa Sanpaolo sold to Equitalia S.p.A., now the Italian Revenue Agency - Collections Division, full ownership of Gest Line and ETR/ESATRI, companies that managed tax-collection activities, undertaking to indemnify the buyer against any expenses associated with the collection activity carried out up to the time of purchase of the equity investments. In particular, such expenses refer to liabilities for disputes with tax authorities, taxpayers and employees and out-of-period expenses and capital losses with respect to the financial situation at the time of the sale. Overall, the claims made amount to approximately 74.9 million euro. The activities of the technical roundtable with the Italian Revenue Agency - Collections Division on the parties\u2019 claims have been concluded, and now the negotiations are underway. Energy S.r.l. Energy S.r.l., to which the bankruptcy receiver of C.I.S.I. S.r.l. transferred all its rights towards third parties, brought a claim before the Court of Rome against Intesa Sanpaolo seeking to quash the revocation of the subsidised loan of approximately 22 million euro granted to C.I.S.I. S.r.l. in 1997 pursuant to Law 488/92 and a judgment ordering the Ministry of Economic Development, Intesa Sanpaolo (as the concessionaire for the procedural application process) and Vittoria Assicurazioni (guarantor of the payment of the second tranche of the loan), jointly and severally between them, to provide compensation for damages allegedly incurred, quantified at a total of approximately 53 million euro. The company justified its claim by citing a favourable judgment rendered in criminal proceedings originating from a complaint filed against C.I.S.I. and its director alleging grave irregularities and breach in the execution of the business plan to which the loan referred \u2013 proceedings that had led to the revocation of the subsidised loan. Intesa Sanpaolo entered its appearance, denying that there was any basis for the adverse parties\u2019 claims, arguing that all claims for compensation against the Bank had become time barred, the claims were groundless on the merits and the damages had been represented inappropriately. The trial process was begun and the usual briefings were exchanged without the preliminary investigation being carried out. On 10 December 2022, the Court filed its ruling rejecting Energy\u2019s claims. On 10 January 2023 Energy served its appeal. Engineering Service S.r.l. In 2015, Engineering Service S.r.l. brought a civil suit against the Ministry of Economic Development, BPER and the former UBI Banca regarding the granting of public subsidies to businesses. The claimant accuses our Bank (and BPER) of delays in managing the approval procedure and disbursements \u2013 delays that allegedly resulted in a liquidity crisis for the company and the consequent loss of the public contribution. A claim for damages for approximately 28 million euro was brought against our Bank. The Bank\u2019s defence counsel argued that the approval times depended on BPER, to which it thus submitted a claim for indemnity. Following the revocation of the order to carry out a court-appointed expert\u2019s report, the Court of Rome, with ruling dated 9 November 2021, fully rejected the claimant\u2019s application, ordering it to pay the legal fees of all the parties summoned. The ruling became final due to lack of appeal within the terms set out by law. G.I.& E. Bankruptcy In November 2021, the G.I.& E. S.p.A. Bankruptcy Receiver initiated action for compensation of damages against Intesa Sanpaolo (as the absorbing company of Banca dell\u2019Adriatico) and UBI (as the absorbing company of Banca Marche and Popolare di Ancona), claiming that they were liable for having contributed, along with other banks and with the conduct of the directors and control bodies, to artificially keeping the company afloat and worsening its default. The alleged damages claimed were quantified by the adverse party at around 22.5 million euro. Lifting the reservation assumed at the hearing of 16 December 2022, the Court ordered the court-appointed expert\u2019s report requested by the Bankruptcy Receiver to be carried out. Isoldi Holding Bankruptcy The Isoldi Bankruptcy Receiver sued the former UBI Banca (which absorbed Nuova Banca Etruria and Centrobanca), Intesa Sanpaolo and five other banks in June 2020, before the Court of Bologna, claiming that they were liable, jointly and severally with the management body of Isoldi Holding, for a series of acts of diversion of assets that are claimed to have contributed to the company\u2019s artificial survival in the period June 2011 \u2013 June 2013, due to conduct claimed to have been implemented by preparing a turnaround plan pursuant to Article 67, para. 3, letter d), of the Bankruptcy Law based on unlawful acts and a connected agreement governing the disbursement of new finance, acts that are argued to have artificially deferred the company\u2019s crisis and concealed the irreversibility of its default. The Isoldi Bankruptcy Receiver also formulated a joint claim against Intesa Sanpaolo (prior to the incorporation of UBI Banca) and MPS, claiming their liability, jointly with the Sole Director of Isoldi Holding, for allegedly unlawful conduct connected with the bail-in of Aedes, in which Isoldi Holding was interested in taking over the majority shareholding. Intesa Sanpaolo and the former UBI Banca filed regular appearances and the assigned Court, with order dated 1 July 2021, declared that it lacked jurisdiction. The adverse party resumed the proceedings, submitting the same claims before the Court of Turin. The Bank filed an appearance for the hearing scheduled for 3 March 2022. At the hearing of 16 February 2023, the judge reserved the decision on the preliminary objections. The total damages claimed by the adverse party do not seem to be accurately quantifiable as things stand, also taking account of the various conduct of the various banks challenged. Societ\u00e0 Italiana per le Condotte d\u2019Acqua S.p.A. under Extraordinary Administration By writ of summons of 23 December 2022, Societ\u00e0 Italiana per le Condotte d\u2019Acqua S.p.A. (admitted to the \u201cMarzano\u201d proceedings by way of Italian Ministerial Decree of 6 August 2018) asked the Court of Rome to order compensation for damages in the amount of 389.3 million euro (or a different amount that will arise during the proceedings), in addition to monetary revaluation, legal interest and expenses. The claim has been filed, jointly, against Intesa Sanpaolo (also as the absorbing company of Medio Credito Italiano, Banca IMI and UBI Banca, as well as \u201cthe purchaser of\u201d Veneto Banca and Banca Popolare di Vicenza), the members of the Management Board and the Supervisory Board of Condotte and numerous other banks and factoring companies. The claim is based on the alleged conduct engaged in for various reasons by the defendants, considered a source of harm to the company\u2019s assets and its creditors. Specifically, the banks and factoring companies are allegedly liable for having unlawfully granted to and/or maintained credit for Condotte, thereby contributing to the continuation of its business at a loss and the worsening of its default. The first hearing has been scheduled for September 2023. As things stand, it is not possible to estimate the risk attributable to Intesa Sanpaolo, also taking account of the different conduct claimed against the numerous defendants. The Extraordinary Administration has also promoted against Intesa Sanpaolo three bankruptcy revocatory actions before the Court of Rome, with a request to reimburse amounts of around 16 million euro. Fondazione Cassa di Risparmio di Pesaro In 2018, Fondazione Cassa di Risparmio di Pesaro brought a compensation claim against the former UBI Banca (as the successor-in-interest to the issuer Banca Marche S.p.A. 112 ) and PwC (the auditing firm that certified all the financial statements and the figures presented in the Prospectus) alleging that the defendants published data and information regarding the financial performance and the income outlooks of Banca delle Marche S.p.A. that later proved to be totally incorrect and misleading. This information, contained in the financial statements as at 31 December 2010 and 30 June 2011 and included in the Prospectus, is claimed to have led the Foundation to subscribe for the bank\u2019s shares issued as part of the capital increase in March 2012. In later years, these shares went on to decline in value considerably, resulting in a loss quantified at approximately 52 million euro. During the trial the Bank of Italy joined the suit, upholding the lack of capacity to be sued invoked by UBI, by virtue of the provisions of Legislative Decree 180/2015 governing the resolution procedure for Banca delle Marche. The Court rejected all preliminary applications filed and adjourned the case to 13 July 2021 for the entry of conclusions. After the entry of conclusions, the parties have filed their closing briefs and the ruling is pending. Fondazione Cassa di Risparmio di Jesi In January 2016, Fondazione Cassa di Risparmio di Jesi brought a compensation claim against UBI Banca (as the alleged successor-in-interest to the issuer Banca Marche S.p.A. 113 ) and PwC (the independent auditors that certified all the financial statements and the figures presented in the Prospectus) alleging that the defendants published data and information regarding the financial performance and the income outlooks of Banca delle Marche S.p.A. that later proved to be totally incorrect and misleading. This information, contained in the financial statements as at 31 December 2010 and 30 June 2011 and included in the Prospectus, is claimed to have led the Foundation to subscribe for the bank\u2019s shares issued as part of the capital increase in March 2012. The value of these shares then fell to zero, resulting in a loss quantified at approximately 25 million euro. During the trial the Bank of Italy joined the suit, upholding the lack of capacity to be sued invoked by the former UBI Banca, by virtue of the provisions of Legislative Decree 180/2015 governing the resolution procedure for Banca delle Marche. By judgment rendered on 18 March 2020, the Court of Ancona granted the objection of lack of capacity to be sued raised by the Bank, rejecting the claims lodged. In the appeal proceedings initiated by the Foundation before the Ancona Court of Appeal, the hearing for the filing of the final briefs was postponed to 9 May 2023. Alitalia Group: claw-back actions In August 2011, companies of the Alitalia Group under Extraordinary Administration \u2013 namely Alitalia Linee Aeree, Alitalia Servizi, Alitalia Airport and Alitalia Express \u2013 brought five bankruptcy claw-back proceedings against the Bank before the Court of Rome (of which one against the former Cassa di Risparmio di Firenze), requesting the repayment of a total of 44.6 million euro. When the proceedings were initiated, a line of defence was adopted based mainly on the grounds that the actions were invalid due to the vagueness of the claims, that the condition of knowledge of the Alitalia Group\u2019s state of insolvency (subject first of the Air France plan and then of the subsequent rescue conducted by the Italian Government) did not apply, and that the credited items were not eligible for claw back, due to the specific nature of the account movements. As the initial attempts to reach a settlement agreement had failed, in March 2016, the Court of Rome upheld Alitalia Servizi\u2019s petition and ordered the Bank to repay around 17 million euro, plus accessory costs. In addition to being contestable on the merits, the ruling was issued before the deadline for filing of the final arguments. Accordingly, in the appeal subsequently lodged, a preliminary objection was made regarding the invalidity of the judgment, together with an application for suspension of its provisional enforceability, which was upheld by order of 15 July 2016 of the Court of Appeal. Conversely, the Alitalia Linee Aeree and Alitalia Express lawsuits were won at first instance. The bankruptcy receivers filed an appeal, which, for Alitalia Express, was concluded in our favour, with the receivers subsequently submitting an appeal to the Court of Cassation. For Alitalia Airport, which was also won at first instance, the favourable judgment has become final. The lawsuit brought against the former Cassa di Risparmio di Firenze was also won in the first two instances, with the adverse party filing an appeal to the Court of Cassation. The entire dispute, following long negotiations which were restarted in the meantime, was settled in November 2022, awarding the amount of 12.8 million euro to the adverse party. 112 See the previous note. 113 See the previous note. Elifani Group Lawsuit brought in 2009 by Edilizia Immobiliare San Giorgio 89 S.r.l. (now incorporated into Enselfin, which filed an appearance as its replacement), San Paolo Edilizia S.r.l., Hotel Cristallo S.r.l. and the guarantor-shareholder Mario Elifani seeking compensation for damages suffered due to alleged unlawful conduct by the Bank for having requested guarantees disproportionate to the credit granted, enforced pledge guarantees, applied usurious interest to mortgage loans and submitted erroneous reports to the Central Credit Register. The initially claimed amount was approximately 116 million euro and the dispute refers to the same circumstances mostly already cited in the disputes regarding anatocism and interest in excess of the legal amount brought by the aforementioned companies in 2004 and settled in early 2014. The lawsuit had a favourable outcome for the Bank in both the first and second instances. By order of 27 December 2019, the Court of Cassation partially granted the adverse parties\u2019 petition, with referral of the matter. The adverse parties resumed the lawsuit before the Court of Appeal of Milan, quantifying the claim at a total of approximately 100 million euro. With a ruling of June 2022, the Court of Appeal of Milan, reviewing the case, rejected the claims made by the claimants, ordering them to pay the legal fees. This ruling was also appealed before the Court of Cassation by the adverse parties, with appeal served on 30 November 2022. Mariella Burani Fashion Group S.p.A. in liquidation and bankruptcy (\u201cMBFG\u201d) In January 2018, the receiver to Mariella Burani Fashion Group S.p.A. sued its former directors and statutory auditors, its independent auditors and the former UBI Banca (as the company that absorbed Centrobanca), seeking a judgment ordering compensation for alleged damages suffered due to the many acts of mismanagement of the company while in good standing. According to the claimant\u2019s arguments, Centrobanca, which was merged into the former UBI Banca, provided financial support to the parent company of the bankrupt company (Mariella Burani Holding S.p.A.) in 2008, in an operation on its subsidiary, despite the signs of insolvency that the latter began to show in September 2007, causing damages quantified at approximately 92 million euro. On a preliminary level, the Bank argued that the receiver lacked capacity to sue since the disputed loan had been disbursed to the parent company of Mariella Burani Fashion Group S.p.A.; moreover, the alleged damages for which the receiver claims compensation were argued to have been in fact sustained by the company\u2019s creditors (and not by the procedure). With regard to the merit of the claims, the Bank stressed that it had acted properly and the borrower in good standing was solely liable since it bore exclusive responsibility for preparing the untrue financial statements, circulating the misinformation and continuing to operate the company in an alleged situation of insolvency. The proceedings are currently in the preliminary phase. SIM Bankruptcy By writ of summons served in October 2022, the receiver to SIM S.p.A. summoned Intesa Sanpaolo (along with another 7 banks) before the Court of Catania, with the first hearing scheduled for 31 March 2023. This is a compensation claim brought for damages allegedly suffered by the company and its creditors due to conduct by the banks defined by the adverse party as \u201cunlawful\u201d, which allegedly resulted in the unlawful granting of credit. The claim for damages has been quantified at around 47 million euro, requesting that the defendant banks be jointly ruled against. Offering of diamonds In October 2015, the Bank signed a partnership agreement with Diamond Private Investment (DPI) governing how diamond offerings were made by DPI to the customers of Intesa Sanpaolo. The aim of this initiative was to provide customers with a diversification solution with the characteristics of a \u201csafe haven asset\u201d in which to allocate a marginal part of their assets over the long-term. Diamonds had already been sold for several years by other leading national banking networks. This recommendation activity was carried out primarily in 2016, with a significant decline starting from the end of that year. A total of around 8,000 customers purchased diamonds, for a total of around 130 million euro. The marketing process was based on criteria of transparency, with safeguards progressively enhanced over time, including quality controls on the diamonds and the fairness of the prices applied by DPI. In February 2017, the AGCM (the Italian Competition Authority) brought proceedings against companies that marketed diamonds, (DPI and other companies), for alleged conduct in breach of the provisions on unfair business practices. In April, those proceedings were extended to the banks that carried out the recommendation of the services of those companies. At the end of those proceedings, on 30 October 2017, the AGCM notified the penalties imposed for the alleged breach of the Consumer Code through the conduct of DPI and of the banks which the proceedings had been extended to, consisting - in short - of having provided partial, deceptive and misleading information on the characteristics of the diamond purchases, the methods used to calculate the price - presented as being the market price - and the performance of the market. The Authority issued a fine of 3 million euro against Intesa Sanpaolo, reduced from the initial fine of 3.5 million euro, after the Authority had recognised the value of the measures taken by the Bank from 2016 to strengthen the safeguards on the offering process aimed, in particular, at ensuring proper information to customers. Following the order by the AGCM, the Bank paid the amount of the fine and filed an appeal with the Lazio Regional Administrative Court against the order. With reference to that appeal, on 16 November 2022, the Regional Administrative Court confirmed the fine and the Bank will appeal to the Council of State. From November 2017, the Bank: \u2212 terminated the partnership agreement with Diamond Private Investment (DPI) and ceased the activity, which had already been suspended in October 2017; \u2212 started a process that provides for the payment to customers of the original cost incurred for the purchase of the diamonds and the withdrawal of the stones, in order to satisfy the customers\u2019 resale needs which, due to the illiquidity that had arisen in the market, are not met by DPI; \u2212 sent a communication in January 2018 to the diamond-holding customers reiterating the nature of the stones as durable goods, and also confirming the Bank\u2019s willingness to intervene directly in relation to any realisation needs expressed by the customers and not met by DPI. In 2022, 34 requests were received for around 0.5 million euro. At the end of the year, a total of 6,854 repurchase requests had been received from customers and met by the Bank, for a total value of 116.3 million euro. The valuation of the repurchased diamonds is carried out using the values provided by the IDEX Diamond Retail Benchmark, one of the main online trading platforms used in the main markets by over 7,000 traders. In February 2019, an order for preventive criminal seizure of 11.1 million euro was served, corresponding to the fee and commission income paid by DPI to the Bank. The preliminary investigations initiated by the Public Prosecutor\u2019s Office of Milan also concern four other banks (more involved) and two companies that sell diamonds. In October 2019, the notice of conclusion of the investigation was served, which stated that two of the Bank\u2019s operators were currently under investigation for alleged aggravated fraud (in collusion with other parties to be identified) and other persons are being identified for allegations of self-laundering, while ISP is being charged with the administrative offence pursuant to Italian Legislative Decree 231/2001 in relation to this latter predicate offence. In reaction to the latter claims, in July 2021, the hearing was held, in which the Preliminary Investigation Judge accepted the plea bargain request \u2013 which Intesa Sanpaolo had submitted solely to bring to an end the lengthy legal proceedings and which had been supported by the Public Prosecutor\u2019s Office \u2013 issuing a ruling which ordered only a financial penalty of 100,000 euro, and the confiscation of only the sums constituting the profit from the offence of self-laundering, calculated at 61,000 euro. Following the partial transfer of the proceedings to the Court of Rome, for reasons of territorial jurisdiction, in August 2022 the revocation of the preventive seizure ordered in February 2019 regarding the profit from the alleged crime of fraud was served, with full restitution to the Bank of the amount of 11.1 million euro. Now that the Bank\u2019s position has been settled, the Public Prosecutor\u2019s Office of Milan is expected to request the dismissal against the two operators investigated. Private banker (Sanpaolo Invest SIM, incorporated into its parent company Fideuram - Intesa Sanpaolo Private Banking) An inspection conducted by the Audit function identified serious irregularities by a private banker of the former Sanpaolo Invest SIM. The checks carried out revealed serious irregularities affecting several customers, including misappropriation of funds and reports with false incremental amounts. On 28 June 2019, the Company terminated the agency contract with the private banker due to just cause and communicated the findings to the Judicial Authority and the Supervisory Body for financial advisors, which first suspended and then removed the private banker from the Register of Financial Advisors in December 2019. Following the unlawful actions, the company received a total of 278 compensation claims (including complaints, mediation proceedings and lawsuits), for a total amount of approximately 62.9 million euro, mostly based on alleged embezzlement, losses due to disavowed transactions in financial instruments, false account statements and the debiting of fees relating to advisory service. There are currently 55 pending claims, with a present value of approximately 25.5 million euro, following the resolution of 223 positions. The total amount of 6.4 million euro was recovered from the improperly credited customers (and already returned to the customers harmed) and there are pending attachments of 42 million euro. A precautionary attachment was ordered against the private banker for an amount equal to the balance found in the accounts and deposits held with credit institutions and the social-security position with Enasarco. In the ensuing case on the merits, the former private banker filed a counterclaim in the total amount of 0.6 million euro by way of non-payment of indemnity for termination of the relationship. Another lawsuit was also brought against former private banker to recover the claims arising from withdrawal from the agency contract, in the total amount of 1.6 million euro, in addition to interest by way of indemnity in lieu of notice, penalty relating to a loan agreement and reimbursement of advances of bonuses. Adequate provisions have been set aside for the risks associated with the unlawful conduct discussed above, mainly for the damages verified relating to compensation claims and pending lawsuits. The above provisions do not consider the coverage envisaged by the specific insurance policy in force, under which the insurance company has already paid an initial advance of 744 thousand euro. Reyl & Cie (Switzerland) \u2013 Proceedings pursuant to Legislative Decree 231/2001 of the Public Prosecutor\u2019s Office of the Court of Milan The Public Prosecutor\u2019s Office of Milan initiated criminal proceedings pursuant to Legislative Decree 231/2001 against Reyl & Cie (a Swiss subsidiary of Fideuram \u2013 Intesa Sanpaolo Private Banking) for the predicate offence of money laundering, allegedly committed by one of its former employees (dismissed in 2020), and ordered the seizure of securities owned by Reyl for around 1.1 million euro. The proceedings also involve the Swiss bank Cramer & Cie. Neither Fideuram ISPPB nor ISP are currently involved in the proceedings. The circumstances alleged relate to events that took place in 2018, before Reyl & Cie joined the Intesa Sanpaolo Group in May 2021. According to the prosecution, the former employee, together with his brother, an employee of the bank Cramer & Cie, and an external advisor, allegedly engaged in practices aimed at facilitating tax evasion by Italian customers through the transfer of accounts from Switzerland to branches located in the Bahamas, in order to allow those customers to withdraw money from those accounts without the possibility of being traced by the Italian authorities. With regard to the measure notified by the Swiss judicial authorities, the appeal is currently being prepared, whose filing, in any event, will be subject to a separate assessment before it is formalised. Instead, with regard to the criminal proceedings pursuant to Legislative Decree 231/2001 pending in Italy, the possibility is being evaluated of filing a petition for the reduction of the amount thereof. Indeed, an examination of the documents of the proceedings has revealed elements indicating that it may be considered reasonable that such a petition would be upheld. A request for disqualification from operating in Italy has not been made against Reyl & Cie, although investigations are still pending and it is not yet possible to access the related documents. Tirrenia di Navigazione in A.S.: Claw-back actions In July 2013, Tirrenia di Navigazione in A.S. filed two bankruptcy claw-back actions before the Court of Rome against the former Cassa di Risparmio di Venezia for 2.7 million euro and against the former Banco di Napoli for 33.8 million euro. The lawsuit against the former CR Venezia is now pending on appeal, filed by the Bank, following the order for payment of 2.8 million euro in 2016. The lawsuit against the former Banco di Napoli is also pending on appeal against the order for payment of approximately 14.5 million euro, plus accessory costs, issued by the Court in 2021. That order was not suspended, and, in October 2022, the Bank paid 15.2 million euro, reserving the right to be refunded in case of favourable outcome of the appeal. Against the appeal filed by the Bank, the adverse party filed an appearance, initiating a cross-appeal relating to the claim for return of the amount of 28 million euro deriving from a currency adjustment, a claim already rejected in the first instance and which is expected to also be rejected on appeal. Selarl Bruno Raulet (former Dargent Tirmant Raulet) Dispute The claim was filed before a French Court in 2001 by the trustee in bankruptcy for the bankruptcy of the real estate entrepreneur Philippe Vincent, which made a request to the Bank for compensation of 56.6 million euro for the alleged \u201cimproper financial support\u201d provided to the entrepreneur. The claim of the trustee in bankruptcy has consistently been rejected by the courts of different instance which dealt with the case over 17 years, until the Court of Colmar, in May 2018, ordered the Bank to pay compensation of around 23 million euro. The Colmar judgment was appealed before French Supreme Court of Cassation, which in January 2020 overturned and quashed the decision of the Court of Appeal of Colmar and referred the matter to the Court of Appeal of Metz. Consequently, in the first quarter of 2020, the Bank obtained the refund of the around 23 million euro paid according to the ruling of the Court of Appeal of Colmar in 2018. At the end of July 2020, the bankruptcy receiver referred the dispute to the Court of Appeal of Metz, requesting payment of 55.6 million euro (equal to the entire amount of insolvency liabilities, minus the amount obtained from the sale of the property whose purchase was financed by the Bank). In turn, the Bank filed an appearance and challenged the opposing party\u2019s claims. In a ruling delivered on 27 July 2021, the Metz Court of Appeal partially upheld the receivership\u2019s claim and ordered the Bank to pay around 20 million euro, plus legal costs of the various instances of the proceedings (for a total of 20.6 million euro). The Court quantified the damage suffered by the insolvency estate as being equal to the loan granted by the Bank, less the proceeds from the sale of the asset given as security. In December 2021, the Bank filed an appeal before the French Court of Cassation. In parallel, the receivership autonomously challenged the decision of the Court of Appeal, insisting that the Bank be ordered to pay all the insolvency liabilities. In November 2021, payment was made to the receivership of the amount ordered. The amounts were temporarily deposited with CARPA (the French Bar Association\u2019s Cash Fund) and would have been unavailable until the Court of Cassation issues its ruling. A hearing was held on 4 October 2022. At the end of November 2022, the Court of Cassation rejected the appeals filed by the Bank and by the receivership. The ruling by the Court of Appeal of Metz thus became final. The amounts already paid by the Bank following that decision were therefore made available to the receivership. Lawsuit against two Hungarian subsidiaries of Intesa Sanpaolo The lawsuit is connected with a lease agreement terminated by one of the subsidiaries in 2010. During 2011, the tenant initiated proceedings in civil court, and during 2021, it supplemented its initial claim, formulating new claims and, as a result, increasing the total of the claims to around 31 million euro. In July 2022, the Court rejected all the plaintiff company\u2019s claims, finding that it lacked standing. The plaintiff filed an appeal against that decision.. In December 2022, the Court of Appeal partially upheld the adverse party\u2019s appeal, ordering one of the two defendant companies to pay around 9.5 million euro. The relevant subsidiary filed an appeal before the Supreme Court, which suspended the enforcement of the challenged ruling. Intesa Sanpaolo\u2019s subsidiaries took action in 2012 for the recognition of their receivables claimed against the tenant resulting from unpaid lease rentals. These proceedings are currently pending. Labour litigation In line with the situation as at 31 December 2021, as at 31 December 2022 there were no significant cases of labour litigation from either a qualitative or quantitative standpoint. In general, all labour litigation is covered by specific provisions adequate to meet any outlays. Contingent assets As for contingent assets, and the IMI/SIR dispute in particular, it should be recalled that following the final judgement establishing the criminal liability of the corrupt judge Metta (and his accomplices Rovelli, Acampora, Pacifico, and Previti), the defendants were ordered to pay compensation for damages, with the determination of those damages referred to the civil courts. Intesa Sanpaolo then brought a case before the Court of Rome to obtain an order of compensation for damages from those responsible. In its ruling of May 2015, the Court of Rome quantified the financial and non-financial damages for Intesa Sanpaolo and ordered Acampora and Metta \u2013 the latter also jointly liable with the Prime Minister\u2019s Office (pursuant to Law no. 117/1988 on the accountability of the judiciary) \u2013 to pay Intesa Sanpaolo 173 million euro net of tax, plus legal interest accruing from 1 February 2015 to the date of final payment, plus legal expenses. The amount ordered took account of the amounts received in the meantime by the Bank as part of the settlements with the Rovelli family and with the adverse parties Previti and Pacifico. In July 2016, the Rome Court of Appeal stayed the enforcement of the judgment of first instance with respect to the amount in excess of 130 million euro, in addition to ancillary charges and expenses, and adjourned the hearing of the final pleadings to June 2018. As a result of this decision, in December 2016 the Office of the President of the Council of Ministers credited Intesa Sanpaolo with the sum of 131,173,551.58 euro (corresponding to the 130 million euro of the order, in addition to legal interest and reimbursement of expenses). To avoid dispute, only the exact amount of the order, without applying the gross-up, was demanded and collected. On 16 April 2020, the ruling of the Court of Appeal of Rome was filed, which essentially upheld the Court's ruling, while reducing the amount of non-financial damages to 8 million euro (compared to 77 million euro that had been quantified by the court of first instance), and set the amount to be paid at 108 million euro, to be considered net of tax, plus legal interest and expenses. In the second quarter of 2020 the Bank filed a petition for the correction of a material error contained in the finding regarding the calculation of the damages liquidated; the Court of Appeal rejected the Bank\u2019s petition by ruling filed on 7 December 2020. In May 2021, the Bank filed an appeal with the Court of Cassation against the Rome Court of Appeal\u2019s ruling of 16 April 2020. The appeal sets out two main grounds: a) the reduction to 8 million euro of the non-financial damages made by the Court of Appeal, compared to the 77 million euro recognised in the first instance ruling is arbitrary and devoid of any sound legal or logical reasoning; b) even accepting the reduction under point a), the Court made a miscalculation when redetermining the amount of total damages. That aspect was already the subject of an application for material correction filed in 2020, rejected by the Court as the Court deemed it an issue that could be remedied through appeal. On 10 January 2023, a hearing was held before the Court of Cassation. After hearing the conclusions from the parties and the report of the General Prosecutor, the Court deferred judgment. TAX LITIGATION At Group level, the total value of the claims for tax disputes (taxes, penalties and interest) was equal to 219 million euro as at 31 December 2022, which represents a slight increase compared to 215 million euro as at 31 December 2021. The Group's tax litigation risks are covered by adequate provisions to the allowances for risks and charges (70 million euro in 2022 compared to 76 million in 2021). The Parent Company had 473 pending litigation proceedings (628 as at 31 December 2021) for a total amount claimed (taxes, penalties and interest) of 126 million euro (135 million euro as at 31 December 2021), considering both administrative and judicial proceedings at various instances. In relation to these proceedings, the actual risks were quantified at 57 million euro as at 31 December 2022 (57 million euro also as at 31 December 2021). Compared to 31 December 2021, for the Parent Company, the main events that gave rise to significant movements of amount of claims consisted of: \u2013 an increase (around 13.5 million euro), due to: i) new claims of 1.4 million euro relating to municipal property tax (IMU) on properties not repossessed through terminated lease agreements (1 million euro) and income-generating lease agreements (0.4 million euro), net of the positions arising and settled during the year (for a detailed analysis of the disputes in question, refer to the Consolidated financial statements as at 31 December 2021); ii) the assessment on registration tax on transfer of business unit (1.8 million euro); iii) notice of registration tax on the ruling establishing a bankruptcy credit (0.6 million euro); iv) notice of assessment regarding VAT on boat lease transactions for the tax year 2016 (for 1.5 million euro); v) adjustment of the value of the former Sudameris dispute of 6.3 million euro, due to the appreciation of the Brazilian currency against the euro; vi) notices of registration tax for various reasons (0.6 million euro); and vii) interest accrued on the outstanding disputes of around 1 million euro; \u2013 a decrease (around 22.8 million euro), due to: i) the closure of disputes concerning registration tax for 11.8 million euro, mainly relating to the demerger of business unit (including: the Manzoni/Melville case for 8.3 million euro, the case for reclassification of the transfer of the Banca di Trento e Bolzano/Intesa Sanpaolo business line for 1.2 million euro and the case for the value adjustment of the transfer of the Credito Piemontese/Intesa Sanpaolo business line for 1.6 million euro); ii) the closure of disputes concerning municipal property tax (IMU) on properties from leases, both following settlement and cancellation by the municipalities for 4.4 million euro; and iii) 6.6 million euro for various disputes, including the partial cancellation due to internal review of the VAT claim on boat lease transactions of 1.6 million euro relating to the tax year 2014, as well as the settlement of claims regarding IRES and IRAP taxes for 2 million euro. The main changes in the provisions booked by the Parent Company (which remained substantially unchanged) as at 31 December 2021 are related to: \u2013 an increase (around 7 million euro), due to: i) the adjustment of 1.2 million euro for the former Sudameris dispute relating to the principal and penalty components (assessed as higher risk), due to the appreciation of the Brazilian currency against the euro; ii) claims regarding municipal property tax (IMU) (1 million euro), still pending at the end of the year; iii) the greater provisions on the 2016 VAT claim for boat lease transactions of 1.5 million euro; iv) the penalty and related surcharges (2 million euro) included in a payment notice totalling 10 million euro due to an unfavourable ruling by the Court of Cassation in connection with the dispute on the registration tax for the demerger of a business unit from ISP to State Street Bank (the proceedings on the payment notice for registration tax related to this transaction are still pending); and v) greater provisions of 1.3 million euro on sundry cases, both new and existing (of which 0.8 million euro for disputes regarding registration tax); \u2013 a decrease (around 6.8 million euro), due to: i) the favourable closure of the dispute regarding registration tax referring to the business contribution and subsequent sale of the investment by Banca di Trento e Bolzano to ISP (1.1 million euro); ii) the release relating to the closure of the tax audit report for 2016 of 1.3 million euro, due to the notification of the related notice of assessment on VAT on boat lease transactions. The increases and decreases on this position derive from the exact recognition of the liability initially estimated based on the results of the audit on 2014 and 2015; iii) the municipal property tax (IMU) claims for 3.3 million euro, due to the settlement of the IMU disputes on properties not repossessed through terminated lease agreements, arising in previous years; and iv) 1 million euro for sundry disputes, mainly regarding IRES and IRAP taxes. During the year, the litigation settled (known as findings closed) totalled 340 proceedings, for a total amount claimed of 24.7 million euro, including the findings arising and settled during the year, with an outlay of 3.6 million euro, mainly referring to claims for municipal property tax (IMU) (2.5 million euro). With regard to the Italian subsidiaries, tax disputes totalled 85 million euro as at 31 December 2022 (71 million euro as at 31 December 2021), covered by specific provisions amounting to 9 million euro (11 million euro in the 2021 financial statements). Compared to 31 December 2021, the main events that gave rise to significant movements of the total amount of claims (+14 million euro) were as follows: \u2013 +16 million euro in new disputes, mainly referring to: Intesa Sanpaolo Private Banking (10.4 million euro); Cargeas Assicurazioni (4.6 million euro); Provis and other minor disputes (1 million euro); \u2013 -2 million euro in closed disputes referring to Fideuram Vita, Intesa Sanpaolo Vita, Fideuram ISPPB, Siref and UBI Leasing. The decrease in provisions compared to 31 December 2021, equal to 2 million euro, mainly refers to: \u2013 +1.2 million euro in provisions on new disputes arising; \u2013 -1.5 million euro due to the merger of UBI Leasing; \u2013 -1 million euro with regard to cases closed that were previously covered by provisions. Tax disputes involving foreign subsidiaries amounted to 8 million euro (9 million euro at the end of 2021), covered by provisions of 4 million euro (8 million euro in 2021). The changes in the amount claimed and the allowance for risks are mainly due to the settlement of several disputes of Intesa Sanpaolo Bank Albania and Bank of Alexandria and, referring only to the amount claimed, the penalties imposed to UBI Trustee. In the following paragraphs, information is provided regarding the most important ongoing disputes, and on several orders to file appearances relating to Italian subsidiaries, served in December 2022. Parent Company Disputes regarding registration tax, with a total remedy sought of 38 million euro, on the reclassification of business contribution and sale of the investments as sales of businesses and the consequent assessment of a higher business value These are disputes concerning the recovery of registration tax paid on business contributions and the subsequent sales of the investments, which were reclassified by the tax authorities as sales of business unit, with the consequent assessment of a higher value for the business unit. These disputes were not settled under the tax amnesty pursuant to Article 6 of the tax decree connected to the 2019 Budget Law (Decree-Law 119/2018), either because the Bank had already paid the full amount assessed and as a result of settlement would not have been entitled to the repayment of the sums in excess of the amount due for settlement, or because there were sound prospects of a favourable outcome to the trials pending before the Court of Cassation. Dispute regarding the municipal property tax (\u201cIMU\u201d) on real estate not repossessed following the termination of the related lease contracts The dispute regarded the identification of the taxpayer liable for the municipal property tax (IMU) in relation to real estate assets owned by the lease companies or banks and leased out to third parties, where the lease was terminated early due to default by the lessee, or as a result of insolvency proceedings involving the lessee, but without the lessee having returned the asset to the lessor. Over the years a tax dispute arose on this matter (also affecting the former Mediocredito Italiano and Provis) relating to whether the lessee is (still) liable for the municipal property tax rather than (already) the lease company/bank in the period between the date of termination (or dissolution) of the lease and the date of physical return of the asset to the lessor. In 2020, the Court of Cassation settled on the view that the lease company/bank was liable for municipal property tax (IMU) from the date of legal termination of the contract, regardless of repossession of the asset. In addition, the 2020 Budget Law provided for the abolition of the single municipal tax (IUC), with regard to its components relating to IMU and TASI, and the unification of the two taxes into the new municipal property tax (IMU). On 18 March 2020, the Ministry of the Economy and Finance \u2013 Finance Department \u2013 Tax Legislation and Tax Federalism Unit, with circular no. 1/DF, commenting on the latter changes, provided precise indications regarding the liability for the new municipal property tax with regard to the date of termination of the lease agreement in accordance with the prevailing case law. Accordingly, starting from 2020, the Bank decided to proceed with the payment of municipal property tax for all leased real estate assets with terminated contracts, regardless of repossession of the asset, seeking recovery from the former users, where possible. It was also decided to gradually withdraw from all pending disputes on assessments relating to years up to 2019, following an attempt at settlement with the interested municipalities to quash the penalties and offset trial fees. The total remedy sought is 7 million euro. Dispute regarding VAT on boat lease transactions On 17 April 2019, the Milan Tax Police (Guardia di Finanza) initiated a general audit of the former Mediocredito Italiano, merged into Intesa Sanpaolo, concerning tax years 2014 and 2015 for VAT purposes and tax years 2015 and 2017 for direct tax purposes. The audit was concluded on 13 October 2020, contesting: i) the VAT exemption applied, in accordance with Article 8-bis of Presidential Decree 633/72, by the company to boat leases, and ii) the VAT exemption established in Article 7- bis of Presidential Decree 633/72 for the buyback of a vessel referring to 2014. The Lombardy Regional Tax Office thus served a notice of assessment (with interest and penalties) for 2014, against which an appeal was lodged. On 28 February 2022 the ruling of the Milan Provincial Tax Commission was filed, partially favourable to the Bank, where, in acknowledging the reduction of the VAT claimed due to internal review by the Italian Revenue Agency, the judges recognised that the penalties imposed of 2 million euro (remedy sought of 4 million euro) were not due. On this dispute, the Bank made provisions with regard to the former claim, solely for the risk of tax and interest, and not also for the risk of penalties, whereas for the latter claim, the potential tax liability is believed to be borne contractually by the customer. However, prudently, the dispute has been covered by provisions for the penalty and interest components. The dispute is pending before the Court of Justice in the second instance. For the tax year 2015, the notice of assessment regarding one single finding of tax exemption pursuant to Article 8-bis of Presidential Decree no. 633/72, applied by the nautical lease company, was settled through a payment of around 2 million euro, using the allowance for tax litigation, previously established in 2019, for 2.9 million euro. Also for 2016, the Italian Revenue Agency notified the related notice of assessment on 1 June 2022 (remedy sought of 1.5 million euro). The proceedings are pending before the Tax Court of Justice in the first instance. With regard to tax years 2015 and 2017, the audit was concluded without detecting any irregularities in the field of direct taxes. * * * Instead, with regard to the disputes settled during the period, the following is noted: i) the dispute regarding the transfer by Manzoni S.r.l. to Melville S.r.l. through a partial, non-proportional demerger, of a private equity business line, reclassified by the Italian Revenue Agency as a direct sale of a business pursuant to Article 20 of Presidential Decree no. 131/1986, with a request for registration tax of 6.7 million euro, plus interest. The Bank won both in the first and second instance, and, lastly, also in the Court of Cassation, with a ruling filed during the year. As a result, that claim, quantified in a total of 8.3 million euro (of which interest of 1.6 million euro) was closed. In the previous financial reports, with regard to the dispute concerning the application of the proportional registration tax following the reclassification of a reorganisation consisting of a transfer of a business and a sale of an equity interest into a sale of a business pursuant to Article 20 of Presidential Decree 131/1986, details were provided of the publication of the Constitutional Court\u2019s ruling no. 39/2021 of 16 March 2021 whose conclusions confirmed the previous ruling no. 158 of 21 July 2020 by that Court. In light of this second ruling of the Constitutional Court, the long-standing dispute was considered to have been concluded with favourable outcomes for the Bank in the numerous claims pending before the Court of Cassation. However, it is important to note that, on the grounds that, according to the principle of alternativity between VAT/registration tax, it is essential to arrive at a single definition of the concept of a business for the purposes of both taxes, the Court of Cassation, by Order no. 10283/2022 of 31 March 2022, referred the proceedings to the EU Court of Justice concerning the compatibility of Article 20 of the Consolidated Law on Registration Taxes (according to which the application of registration tax is to be made on the basis of the content of the document submitted for registration, without taking into account any non-directly discernible external elements), with respect to the VAT rules governing the treatment of transfers of businesses (transactions not subject to the tax) and of individual assets (taxable transactions). The Court of Justice of the European Union, with order of 21 December 2022 - Case C-250/22, declared that, \u201cIt is clearly impossible to admit the request for a preliminary ruling lodged by the Supreme Court of Cassation (Italy), with order dated 31 March 2022\u201d...\u201cas the referring court has not sufficiently explained under which profile the interpretation of Article 5, paragraph 8 of the Sixth Directive and Article 19 of the VAT Directive is relevant for the purposes of applying Article 20 of the TUR (Consolidated Law on Registration Tax, Ed.)\u201d. The Court also specified that \u201cthe referring court retains the right to lodge a new request for a preliminary ruling, providing the Court with all the elements that make it possible to issue a ruling\u201d. The issue is now being carefully monitored; ii) the dispute relating to the business contribution and subsequent sale of the investment by Banca di Trento e Bolzano to Intesa Sanpaolo is noted, reclassified by the Italian Revenue Agency as a direct sale of a business (also pursuant to the aforementioned Art. 20 of Italian Presidential Decree no. 131/1986), with a demand for proportionate registration tax (0.8 million euro) plus interest (0.3 million euro), amounts provisioned at the time. Lastly, in a ruling filed during the year, the Court of Cassation found that the reclassification of the deed of contribution of a business line, followed by the sale of the investments in the contributed company is no longer permitted by law (pursuant to Art. 20 of Italian Presidential Decree no. 131/1986) and that the tax nature of the deed requires registration tax, as also observed by the Constitutional Court in the aforementioned ruling no. 158/2020. As a result, the amounts provisioned at the time were released. With regard to the Intesa Sanpaolo branches located abroad, it should be noted that: a) a VAT audit on the London branch is in progress for the years 2016, 2017 and 2018; to date, no findings have been reported; ii) two tax audits concerning direct taxes of the New York branch are in progress: the first audit, which began in January 2021, is being conducted by the Internal Revenue Service (IRS) with regard to the income tax return filed for the tax period 2018; to date, no claims have been made; the second audit, notified in July 2021, is being conducted by the City of New York, with regard to the tax periods 2018 and 2019; to date, no claims have been made. The previous audits conducted by the State of New York, regarding the tax periods 2015 and 2016, and by the IRS regarding the tax period 2016 were closed with no claims; c) the tax audit begun in April 2021 by the Madrid Revenue Agency for the year 2016 concerning taxes on income on the Madrid branch of the merged company UBI Banca, which was closed down on 31 December 2018, was closed with no liabilities. More specifically, the tax loss reported by the branch for 2016 of 724 thousand euro was adjusted, decreasing it by a total of 722 thousand euro, of which 150 thousand euro due to interest that was not deductible, as it related to debt exceeding the regulatory capital required by Spanish regulations (application of the thin capitalisation rule), and 572 thousand euro due to non-deductible expenses, referring to services provided to the branch by the then Luxembourg parent company (UBI Banca International S.A.), by virtue of Spanish international transfer pricing regulations. The reduction of the tax loss did not generate any taxes or penalties due; e) the VAT audit on the Warsaw branch for the tax periods 2016-2020 on financial services (SWIFT) was closed. The branch paid the amount claimed, equal to 13 thousand euro (including interest and penalties) in full; f) the audit on the Munich branch of the merged company UBI Banca for the years 2015 to 2018, begun in 2021, is under way. The auditors are acquiring the accounting and tax documentation; g) the tax audit on the Madrid branch of ISP regarding the deductibility of intercompany costs amounting to 2.2 million euro for the tax period 2015 was concluded with the charging of 93 thousand euro of tax, plus interest (17 thousand euro) and penalties (20 thousand euro). The branch paid the amount claimed in full. Group Companies For Banca Fideuram, as a result of the Bank\u2019s appeal, three lawsuits are pending before the Court of Cassation concerning the failure to withhold 27% of the interest accrued in 2009, 2010 and 2011 on foreign bank accounts held at Fideuram Bank (Luxembourg) by two \u201chistoric\u201d Luxembourg mutual funds (Fonditalia and Interfund SICAV), for which Banca Fideuram was only the placement bank and correspondent bank (total value of the disputes of 9.3 million euro). As the Bank lost in the second instance of all the proceedings, it was decided, after consultation with the consultant engaged to assist the bank in the cases pending before the Court of Cassation, to set up a provision for risks, including penalties and interest. Intesa Sanpaolo Private Banking has long had pending IRES and IRAP disputes relating to the deduction (in 2011 and the following years) of the amortisation charge for the goodwill arising from the transfers of the private banking business lines of Intesa Sanpaolo and Cassa dei Risparmi di Forl\u00ec e della Romagna in 2009, Banca di Trento e Bolzano and Cassa di Risparmio di Firenze in 2010 and Cassa di Risparmio Pistoia e Lucchesia and Cassa di Risparmio dell\u2019Umbria in 2013, realigned by the transferee in accordance with Article 15, paragraph 10, of Law Decree no. 185 of 29 November 2008. The status of the disputes is as follows: \u2013 year 2011: the favourable ruling no. 2763/2019, filed on 26 June 2019, by the Lombardy Regional Tax Commission, which rejected the main appeal by the Italian Revenue Agency against the ruling no. 7028/2017 by the Milan Provincial Tax Commission, on the merits (total claim amount of 7.9 million euro, of which 3.8 million euro for taxes and 3.5 million euro for penalties). The court of second instance also upheld the company\u2019s cross-appeal on the preliminary matter of the lapse of the tax administration\u2019s power of assessment: the realignment of goodwill had been reported in the tax return for the 2010 tax year, and the notices were served in 2017, i.e. beyond the time limits laid down in Article 43 of Presidential Decree 600/73. The case is pending before the Court of Cassation on appeal by the Attorney General and a counter-appeal has been prepared by the Bank; \u2013 year 2012: unfavourable rulings no. 5172/2019 and 5173/2019 by the Lombardy Regional Tax Commission, which granted the appeals by the Italian Revenue Agency (total claim amount of 8.4 million euro, of which 3.9 million euro for taxes and 3.9 million euro for penalties). An appeal was lodged with the Court of Cassation; \u2013 year 2013: the favourable rulings of both the Provincial Tax Commission and the Regional Tax Commission (total claim amount of 10.6 million euro, of which 4.9 million euro for taxes and 4.9 million euro for penalties). The Revenue Agency lodged an appeal with the Court of Cassation and the Bank then filed its defence; \u2013 years 2014 and 2015: the Second Division of the Milan Provincial Tax Commission, by judgment no. 504/2/2020 of 7 February 2020, filed on 13 February 2020, granted the IRES and IRAP appeals for both years (joined proceedings). The tax claim amounts to 16.7 million euro (of which tax of 7.9 million euro and penalties of 7.9 million euro), plus interest. The favourable second instance ruling no. 1044 concerning the years 2014 and 2015 was filed on 18 March 2022. The Lombardy Regional Tax Commission rejected the appeal by the Italian Revenue Agency against the first instance ruling that had upheld the (combined) IRES and IRAP tax appeals relating to those tax periods. The Italian Revenue Agency lodged an appeal with the Court of Cassation; \u2013 year 2016: on 29 April 2021, notices were served for the assessment of IRES and IRAP taxes for tax year 2016. The amount deducted by the company and now disputed by the Lombardy Regional Revenue Directorate for that year is the same amount already adjusted for 2015, of 12.1 million euro, corresponding to higher IRES of 3.3 million euro and IRAP of 0.7 million euro, plus interest, and penalties (total amount 8.2 million euro); By ruling no. 1962, filed on 6 July 2022, the Milan Provincial Tax Commission rejected the joined appeals of the Parent Company and Intesa Sanpaolo Private Banking, ordering each party to pay its own costs. In addition to rejecting the preliminary matter of the lapse of the Office\u2019s power of assessment, based on the well-known ruling no. 8500/2021 of the Joint Sections of the Court of Cassation, the ruling also rejected the appeals on the merits. The term for lodging an appeal expires on 5 February 2023. \u2013 year 2017: the dispute was initiated against the notice of assessment. The amount deducted and disputed for 2017 is the same amount already adjusted for 2016 (12.1 million euro), corresponding to higher IRES of 3.3 million euro and IRAP of 0.7 million euro, plus interest and penalties (total amount 8.6 million euro). The notice of assessment was challenged through an appeal served on the Lombardy Regional Revenue Directorate on 3 June 2022 and filed with the Milan Provincial Tax Commission on 20 June 2022 (Appeals General Register no. 2683/2022). We are awaiting for the hearing for discussion to be scheduled. The total amount claimed, including taxes, penalties and interest, amounts to 61 million euro. According to the opinion issued by the firm assisting the bank, the risk of an adverse ruling is classified as \u201cpossible\u201d, since the lawfulness of realigning the tax value of the goodwill newly generated for the transferee \u2013 something which in the past was done by other Group companies without incurring in tax disputes \u2013 has been expressly acknowledged by the Italian Revenue Agency in Circular no. 8/E of 2010 and is consistent with the provisions of Article 15, paragraph 10 of Law Decree 185/2008. Cargeas Assicurazioni, an insurance company acquired by Intesa Sanpaolo Vita on 27 May 2021, underwent a tax audit by the Italian Revenue Agency, Lombardy Regional Directorate, Large Taxpayers Office, aimed at verifying the correct application, for the years from 2010 to 2018, of the tax rules on private insurance and life annuity contracts pursuant to Law no. 1216 of 29 October 1961. As a result of the audit, the authorities claimed that redundancy insurance policies (which are mandatorily associated with salary-backed loans and optional with other mortgages, loans and consumer credit), should not be subject to tax on insurance premiums at a rate of 2.5%, but should be classified as credit risk insurance policies, subject to a tax rate of 12.5%. The Revenue Agency maintains that although the risk insured (on the basis of which the premium is determined with statistical/actuarial criteria) is the loss of employment, redundancy policies should be charged the 12.5% rate applicable to credit risk insurance, given that the policy would protect the lending institution\u2019s interest in collecting its credit. The dispute is nothing new for the insurance industry; in fact, insurance companies have been maintaining that the Agency's reasoning is unsubstantiated and biased for years now. ANIA has also recently given its opinion on the matter through circular no. 0082 of 5 March 2021 (which refers to circular no. 127 of 21 April 2005), pointing out that the Agency\u2019s position produces a series of unsystematic and abnormal consequences which certainly do not reflect the intention of the legislator in Law no. 1216, and diverge from the guidance of the financial administration itself which, on this point, had supported application of the 2.5% rate in circular no. 29/E of 2001. On the merits, ANIA specified that in the policies, the insured party is identified as the natural person who subscribed, in full autonomy, the collective policy proposed by the lending institution, and that contractual structure recognises the natural person debtor as the party in the interest of whom the policy is underwritten, as the risk covered (loss of employment, which results in the impossibility to pay the debt) is specifically borne by the latter. Moreover, the contractual framework shows that the lender is the contracting party of the policy exclusively in terms of the form, while, by virtue of demonstrating his/her intention to subscribe the contract and due to the cost charged to him/her, which refers exclusively to the insurance premium paid, the financed worker can be effectively classified as the contracting party, as well as the insured party. Lastly, as additional support, it should also be considered that the communication of data and information regarding the contracting parties, sent annually to the Tax Register contemplates the indication of the individual subscribers of collective policies, as they are the parties that bear the cost of the premium. After the audit, on 25 May 2021 Cargeas Assicurazioni received notice of assessment no. TMB032S00039/2021 for 2010, claiming an additional tax of 1.7 million euro, 0.7 million euro in interest and 3.4 million euro in penalties, equal to 200% of the assessed tax (minimum penalty prescribed by law), for a total of 5.7 million euro. On 21 July 2021, the notice was appealed before the Milan Provincial Tax Commission which, by ruling no. 2396 of 1 September 2022, upheld the appeal and cancelled the notice of assessment. The term for the Office\u2019s appeal is pending. During 2022, two rulings of the Milan Provincial Tax Commission were published (no. 343 of 17 January 2022 and no. 1214 of 28 March 2022), which regarded the issue of the \u201creclassification\u201d of redundancy insurance policies (subject to tax at a rate of 2.5%) in place of those against debtor insolvency risk, i.e. those that cover credit risk (subject to tax at a rate of 12.5%). The outcome was unfavourable to the appealing companies outside the Intesa Sanpaolo Group (even though ruling no. 343 recognised the inapplicability of the penalties due to clear objective uncertainty on the applicability of the rule). However, considering the arguments clearly expressed by ANIA, and due to the assessments formalised by the defence counsel, the risk of a negative outcome was deemed possible. Also as a result of the above audits, on 6 June 2022, Cargeas Assicurazioni received notice of assessment no. TMB032S00216/2022 for 2011, which claimed a higher tax of 1.3 million euro, 0.5 million euro in interest and 2.8 million euro in penalties, equal to 200% of the assessed tax (minimum penalty prescribed by law), for a total of 4.6 million euro. The grounds set out in the above notice of assessment for 2011 are the same as those indicated for 2010. The Company deems that a negative outcome for the year 2011 is possible, just as that for the year 2010. Therefore, within the terms set out by law, it will appeal that notice before the competent Court of Justice. Provis has municipal property tax (IMU) and municipal tax (TASI) claim procedures that are pending or about to commence with a total value of 3.8 million euro. The corresponding provision for risks amounts to 4.2 million euro, inclusive of legal expenses. On 28 October 2022, Fideuram SGR (as well as ISP as the consolidating entity) received from the Italian Revenue Agency \u2013 Lombardy Regional Directorate an order to file an appearance regarding the year 2016 for IRES and IRAP, following the delivery of documentation in response to a questionnaire served on 21 April 2021, in order to establish a cross-examination on the alleged transfer pricing issues arising in relation to the consideration for fees received by Fideuram SGR in delegated manager activities for investment funds performed in favour of the Irish associate Fideuram Asset Management Ireland (principal). With specific regard to those management fees, the Revenue Agency has repeated the same adjustments made for the years 2011 to 2013 (which gave rise to tax settlement proposals for those years) and, as a result, adjusted the taxable income of Fideuram SGR upwards by 560 thousand euro. Fideuram accepted that proposal, signing the settlement proposal on 15 December 2022 and paying the amount due (220 thousand euro) on 20 December 2022. In relation to possible equivalent claims for subsequent years up to 2019, the company determined the possible charge in terms of taxes and interest at 500 thousand euro, allocating provisions to the 2022 income statement. In agreement with the advisor handling the claim, no provisions were made for 2020 and after, as the settlement of the bilateral agreements submitted in 2020 (thus, applicable from that period for 5 years) to the Irish and Italian authorities on the disputed activities seems to be near. On 22 December 2022, Eurizon Capital SGR (hereinafter, \u201cEC ITA\u201d) received from the Italian Revenue Agency \u2013 Lombardy Regional Directorate (hereinafter, the \u201cOffice\u201d) an order to file an appearance for the purposes of IRAP and, jointly with the tax consolidating entity Intesa Sanpaolo (hereinafter, the \u201cParent Company\u201d), an order to file an appearance for the purposes of IRES for the year 2016. EC ITA and the Parent Company attended the meeting with the Office on 28 December 2022, thereby launching a cross- examination that will last around four months. After examining the intragroup transactions implemented by EC ITA with regard to the Luxembourg subsidiary Eurizon Capital S.A. (hereinafter, \u201cEC LUX\u201d), the Office challenged the transfer pricing analysis conducted in the transfer pricing documentation of EC ITA, deeming that it allegedly does not reflect the actual allocation of functions, risks and assets existing between EC ITA and EC LUX. More specifically, the Office deems that the provision of services by EC ITA to EC LUX, though formally divided into numerous separate operations, in terms of substance is \u201cattributable to wider business operations\u201d carried out by EC ITA for EC LUX. Therefore, applying a method for determining the arm\u2019s length price different from that adopted by EC ITA, the Office determined higher taxable income for IRES and IRAP purposes of 151.1 million euro, to which IRES and IRAP taxes are applied for 50 million euro (41.6 million euro for IRES and 8.4 million euro for IRAP), plus interest totalling 9.6 million euro and penalties totalling 15 million euro. In the case in point, with regard to the method for determining transfer prices, while EC ITA deemed it correct to use the Comparable Uncontrolled Price (CUP) method to price the value of services, first of all of the management mandate service, provided to EC LUX, aligning the price charged to EC LUX with the prices that EC ITA charges to/pays for mandates received from/granted to third parties, the Office deemed that the most appropriate method was the Transactional Net Margin Method (TNMM), which substantially requires allocating a percentage of the net margin out of production value to the party in question, i.e. EC LUX. In detail, the Office deems that the ratio of net income (loss) before tax/net fee and commission income recognised for EC LUX (38.5%) is too high. As a result of that approach, only around one-fourth of the net income before tax of EC LUX (208.6 million euro) is attributed to Luxembourg and around three-fourths (151.1 million euro) to EC ITA. It is important to note that, according to the Office, the choice of the method and the consequent results of allocating revenues between Luxembourg and Italy is based on the conviction that EC LUX receives an intangible contribution from EC ITA. As confirmed also by the opinion issued by the advisor assisting EC ITA, the claim made by the Office is unfounded in various aspects: a) the intangible does not influence the intragroup transfer prices; b) in addition, the Office completely ignored the results of its own analysis, conducted in the previous years regarding the tax periods 2011-2015, which led it to issue tax settlement proposals regarding the adjustment of transfer prices applied in transactions between EC ITA and EC LUX on completely different bases than those now arising in relation to 2016. Moreover, in that context, EC LUX provided the Office with information regarding the intangible and its non-accounting tax amortisation. As part of the tax settlement proposals for the tax periods 2011-2015, the Office acquired and assessed the information regarding that non-accounting amortisation, without, however, deeming that it should have an impact for the purposes of determining the transfer prices between EC ITA and EC LUX. The Office had also deemed the transfer pricing documentation prepared at the time by EC ITA based on the CUP method to be suitable, granting penalty protection to EC ITA; c) the Office also failed to conduct a specific analysis to identify the actual functions performed, risks assumed and assets used by EC LUX during the tax period 2016, but merely classified EC LUX as the \u201cless complex\u201d entity mainly based on the incorrect conviction that the non-accounting tax amortisation attributable to EC LUX was attributable to an \u201cintangible asset\u201d contributed by EC ITA. As a result, also based on the presence of that \u201csingle\u201d contribution subject to tax amortisation, it deemed the \u201ctraditional\u201d methods for determining the arm\u2019s length price, such as the CUP, inapplicable to the case in question; d) the Office ignored the approach it had adopted in the tax settlement proposals issued in 2022 with Fideuram SGR, discussed above, regarding intragroup transactions with the Irish associate FAMI. In this last context, in the presence of intragroup transactions similar to those carried out by EC ITA with EC LUX, the Office deemed that the most appropriate method based on the specific circumstances was the CUP; e) lastly, though the Office acknowledged that on the same intragroup transactions subject to the order, there is currently an ongoing procedure of preventive bilateral agreement to reach an agreement on transfer prices between the competent Italian and Luxembourg authorities, it has not promoted that situation in any way. This, despite the fact that the preventive agreement procedure was launched by EC ITA following the issue of the afore-mentioned tax settlement proposals relating to the tax periods 2011-2015 and, therefore, also including 2016. Those arguments will all be stated and documented in the cross-examination with the Office, which should be concluded by 30 April 2023. The following is an account of the developments relating to the foreign subsidiaries during the year. Intesa Sanpaolo Bank Albania is mainly involved in: i) a dispute pending before the Court of Cassation on appeal by the Bank, concerning the write-off of loans that were no longer recoverable that, according to the tax authorities, led to an unjustified reduction in the taxable amount for direct tax for the years 2003 to 2007 (remedy sought of 1.3 million euro); ii) a former Veneto Banka dispute pending in the second instance regarding mistakes made in the tax return for the tax period 2013 (remedy sought of 33 thousand euro). Instead, the dispute relating to mistakes made in the tax return for the tax period 2011 was settled with the payment of 1 million euro. Bank of Alexandria has two tax audits under way regarding corporate income tax for the tax period 2018 and stamp duty for 2019. At present no claims have been put forward. In addition, there is a pending dispute concerning the non-payment of stamp duty by the bank\u2019s branches for a total value of 2.1 million euro for tax periods 1984 \u2013 2008 (it amounted to 5.8 million euro as at 31 December 2021). The reduction in the amount claimed and the allowance for risks (-3.7 million euro) derives from the settlement of a portion of the disputes, using the related allowance for risks. The tax audit on stamp duty relating to the tax period 2019 was closed with no findings. The dispute for the years 2014 and 2015 regarding the foreign subsidiary UBI Trustee S.A. (a trust company resident in Luxembourg) was closed without liabilities, as a result of an agreement by the trusts and their beneficial owners with the tax authorities. Lastly, it is noted that an audit is under way for IMI SEC, conducted by the State of New York, regarding income tax for the years 2015, 2016 and 2017. No findings are noted for the time being. Another tax audit begun in 2022 regards EXELIA, for the tax periods 2016 and 2017. No findings are noted for the time being. Lastly, we note a dispute pending in Brazil in relation to the former subsidiary Banco Sudameris Brasil (now Banco Santander Brasil), sold in 2003 to ABN AMRO Brasil (now the Santander Group), whose economic charge falls on Intesa Sanpaolo due to the commitments entered into with the seller at the time, which was not established through the Settlement Agreement of 2019 with Banco Santander Brasil. The dispute is known as \u201cCausa PDD1\u201d and is based on the issue of taxes on income and social security contributions for 1995. During 2021, the first instance judgement was filed by the ordinary civil judge. Despite having partially accepted several objections of the bank, the judgement was favourable, on the whole, to the Brazilian tax authorities. The judgement was appealed and the case is now pending in the court of second instance. The remedy sought is 41.6 million euro, at the exchange rate of December 2022 (35 million euro as at 31 December 2021), set as equal to the security deposit paid by the bank to take action in the civil court (216 million Brazilian real) and posted under balance sheet assets. There were two changes during the year. The first change concerns the issue on 13 June 2022 of an opinion by Prof. Tercio Sampaio Ferraz in which, inter alia, he confirms the argument put forth by Intesa Sanpaolo that the settlement for the year 1995 with the Brazilian tax authorities based on specific local law (Art. 17 of Brazilian Law no. 9799/1999), the subject of an administrative dispute closed in favour of the taxpayer with two decisions of the Administrative Court (CARF), cannot be put under discussion once again as, instead, the Brazilian tax authorities did through the jurisdictional dispute currently pending in the second instance. According to local advisors, those arguments confirm that a negative ruling in relation to the interest component (approximately 25.6 million euro of the deposit posted under balance sheet assets) is remote. On taxes and penalties (equal to a total of 16 million euro of the deposit) we prudentially confirm the provisions of 50% of that amount, totalling 8 million euro (+1.2 million euro compared to 31 December 2021). The increase is due to the appreciation of the Brazilian currency against the euro, compared to the exchange rate recorded at the end of 2021 for the valuation of the dispute and the related risk. The second change regards the notification in October from the Brazilian tax authorities of a payment order for the alleged failure of the taxpayer to provide a deposit by order of the court to cover the tax debt, which is still being challenged. In that regard, a brief was submitted opposing that order, highlighting that the Brazilian tax authorities incorrectly calculated the value of interest accrued on the deposit by order of the court, which, instead, would more than cover the claim of the tax authorities. The local advisors confirmed that the document does not change the estimates of risk expressed to date with regard to that pending dispute. * * * In connection with all the tax disputes outstanding as at 31 December 2022, for a total value, as stated above, of 219 million euro, of which 126 million euro relating to Intesa Sanpaolo, the Group has recognised receivables of 44 million euro in its balance sheet assets to account for amounts paid on a provisional basis due to tax assessments, of which 21 million euro related to the Parent Company. The portion of the allowance for risks which relates to provisional tax assessments amounts to 32 million euro, of which 26 million euro for Intesa Sanpaolo. The provisional payments in question were made in compliance with specific legal provisions, which provide for the mandatory payment based on an automatic mechanism totally independent of whether the related tax claims are actually founded and, thus, irrespective of the higher or lower level of risk of a negative outcome in the related proceedings. Thus, these payments were made solely because of the enforceable nature of the administrative acts that set forth the related tax claim, which does not lose its effectiveness even in the event of an appeal (no suspensive effect) and has no impact on the assessment of the actual risk of a negative outcome, which is measured using the criterion set forth in IAS 37 for liabilities.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1019": { "value": "
10.6 Allowances for risks and charges \u2013 Other allowances
(millions of euro)
Captions/Components
31.12.2022
31.12.2021
Other allowances
1. legal disputes
969
1,066
2. personnel charges
2,230
2,611
incentive-driven exit plans
1,306
1,771
employee seniority bonuses
177
229
other personnel expenses
747
611
3. other risks and charges
961
1,241
other indemnities due to agents of the distribution network
300
367
other
661
874
Total
4,160
4,918
Where the time value is significant, provisions are discounted using current market rates.
Other allowances refers to:
\u2013 Legal and tax disputes: the allowance was set up mainly to cover expected outlay for litigation, revocatory action and tax
disputes;
\u2013 Personnel charges: the allowance includes charges for incentive-driven exit plans, employee seniority bonuses
(calculated on the basis of actuarial assumptions) and provisions for bonuses and other outlays relating to employees;
\u2013 Other risks and charges: these mainly refer to provisions to cover private bankers\u2019 indemnities, Insurance Company
risks, charges for integration of UBI Banca and the former Venetian banks, charges connected with the sale of a portfolio
of NPLs and other disputes.
1.5. OPERATIONAL RISK QUALITATIVE INFORMATION A. General aspects, operational risk management processes and measurement methods Operational risk is the risk of incurring losses resulting from inadequate or failed internal processes, people and systems or from external events 106 . The Intesa Sanpaolo Group adopts an undertaking and management strategy of operational risk based on prudent management principles and aimed at guaranteeing long-term solidity and continuity for the company. In addition, the Group pays particular attention to achieving an optimal balance between growth and profitability and the resulting risks. In line with these objectives, the Intesa Sanpaolo Group has long since established an overall operational risk governance framework, by setting up a Group policy and organisational processes for measuring, managing and controlling operational risk. For regulatory purposes, the Group adopts the Advanced Measurement Approach (AMA), in partial use with the standardised (TSA) and basic approaches (BIA), to determine the capital requirement. As at 31 December 2022, the scope of the Advanced Measurement Approach (AMA) is comprised of Intesa Sanpaolo (including the former Banks and Companies merged into it) and the main banks and companies in the Private Banking and Asset Management Divisions, as well as of VUB Banka and PBZ Banka. Governance Model An effective and efficient framework for managing operational risks must be fully integrated into decision-making processes and management of business operations. Accordingly, the Intesa Sanpaolo Group has chosen to involve the organisational units (business units, central/support structures) of the Parent Company, the Banks and Group companies with direct responsibility in the operational risk management process. The operational risk governance model has been developed in view of: \u2212 optimising and maximising organisational safeguards, interrelations and information flows between the existing organisational units and integration of the operational risk management approach with other company models developed for specific risks (business continuity, IT security, etc.); \u2212 guaranteeing transparency and spread of the models, methods and criteria of analysis, assessment and measurement criteria used to facilitate the process of cultural diffusion and comprehension of the logic underlying the choices made. The Group has a centralised function within the Enterprise Risk Management Department for management of the Group\u2019s operational risk. This function is responsible for the definition, implementation, and monitoring of the methodological and organisational framework, as well as for the measurement of the risk profile, the verification of mitigation effectiveness and reporting to Top Management. In compliance with current requirements, the individual organisational units are responsible for identifying, assessing, managing and mitigating risks. Specific officers and departments have been identified within these organisational units to be responsible for Operational Risk Management (structured collection of information relative to operational events, detection of issues and related mitigation actions, scenario analyses and evaluation of the business environment and internal control factors). In order to support the operational risk management process on a continuous basis, a structured training programme has been implemented for employees actively involved in this process. ICT risk The Intesa Sanpaolo Group considers its information system a tool of primary importance to the achievement of its strategic, business and social responsibility objectives, including in the light of the critical nature of the company processes that depend on it. Accordingly, it undertakes to create a resilient environment and to invest in assets and infrastructure designed to minimise the potential impact of ICT events and to protect its business, image, customers and employees. The Group has therefore adopted a system of principles and rules intended to identify and measure the ICT risk to which company assets are exposed, assess the existing safeguards and identify adequate methods of managing such risks, in accordance with the operational risk management process. In line with the methodological framework established for the governance of operational risks, the ICT Risk management framework has been developed with a view to integrating and coordinating the specific expertise of the structures involved. ICT (Information and Communication Technology) risk means the risk of economic, reputational or market share losses related to the use of information and communication technology. In the integrated view of corporate risk for supervisory purposes, this risk is considered, according to specific aspects, as operational, reputational and strategic risk. ICT risk includes: \u2212 cyber risk (including IT security risk): the risk of sustaining economic loss, reputational damage or loss of market shares due to: o any unauthorised access or attempt to access the IT system of the Group or the data or digital information it contains; o any event (intentional or unintentional), favoured or caused by the use of technology or related to it that has or could have a negative impact on the integrity, availability, confidentiality and/or authenticity of company data and information, or on the continuity of business processes; o the improper use and/or dissemination of data and digital information also not directly produced and managed by the ISP Group; \u2212 IT or technology risk: the risk of sustaining economic loss, reputational damage or loss of market shares in relation to the use of the corporate IT systems and related to malfunctioning hardware, software and networks. Group Operational Risk Management Process The Intesa Sanpaolo Group\u2019s operational risk management process is divided into the following phases: Identification The identification phase includes the collection and classification of qualitative and quantitative information that allows to identify and describe the Group\u2019s potential areas of operational risk. In particular, it involves: \u2013 the collection and updating of data on operational events (Loss Data Collection), decentralised to the Organisational Units; \u2013 identification of the company processes and components of the IT system at highest potential risk; \u2013 determination of the applicability and relevance of the operational risk factors defined; \u2013 identification of projects that will involve relevant changes to the IT system or changes to critical components of the IT system; \u2013 identification of significant risk scenarios, also based on the external context (e.g., external loss data, regulatory Identification Assessment and Measurement Monitoring and Control Mitigation Reporting development, emerging trends, strategic and threat intelligence); \u2013 identification and analysis of issues affecting the Group\u2019s areas of operation. Assessment and measurement The assessment and measurement phase includes the process of qualitative and quantitative determination of the Group\u2019s exposure to operational risks. It includes: \u2013 at least annual performance of the process of self-assessment of exposure to operational and ICT risk (Self-diagnosis); \u2013 performance of preventive analyses of operational and ICT risks deriving from agreements with third parties (e.g., outsourcing of activities), business operations or project initiatives, introduction or revision of new products and services, launch of new activities and entry into new markets; \u2013 the definition of the relevance of identified issues; \u2013 transformation of the evaluations collected (e.g., internal and external operational loss data, management levels of risk factors, probability and impact in the event of occurrence of risk scenarios) into synthetic risk measures; \u2013 determination of economic and regulatory capital for operational risk, through the internal model and the simplified methods defined by the regulations. Monitoring and control The purpose of the monitoring phase is to analyse and monitor on an ongoing basis: \u2013 the development of the exposure to operational risks on the basis of the structured organisation of the results of the identification, assessment and measurement processes and the observation of indicators that represent a valid proxy of the exposure to operational risks (e.g., limits, early warnings and indicators established within the RAF); \u2013 the development of the risk profile inherent in the use of new technologies or in the implementation of significant changes to existing systems. Mitigation The mitigation phase includes activities aimed at containing the exposure to operational risks, defined on the basis of the results of the identification, measurement, assessment and monitoring phases. It includes: \u2212 identification, definition and implementation of the corrective measures (mitigation actions) necessary to solve the identified gaps or to bring back the relevance of the identified issues within the defined risk tolerance; \u2212 promotion of initiatives designed to spread a culture of operational risk within the Group; \u2212 definition of strategies for transferring operational risks, in terms of optimisation of insurance coverage and any other forms of risk transfer adopted by the Group from time to time. In this regard, in addition to a traditional insurance programme (to protect against offences such as employee infidelity, theft and damage, transport of valuables, computer fraud, forgery, cyber-crimes, fire and earthquake, and third-party liability), the Group has taken out an insurance coverage policy named Operational Risk Insurance Programme, in compliance with the requirements established by the regulations and to have access to the capital benefits provided for by the policy, which provides specific cover for Companies included in the AMA scope, significantly increasing the limits and transferring the risk of significant operational losses to the insurance market. In addition, with respect to risks relating to real estate and infrastructure, with the aim of containing the impacts of phenomena such as catastrophic environmental events, situations of international crisis, and social protest events, the Group may activate its business continuity solutions. Reporting The reporting phase includes the preparation of appropriate information flows associated with operational risk management, designed to provide disclosures useful, for example, for: \u2212 analysis and understanding of any dynamics underlying the trend in the level of exposure to operational risks; \u2212 analysis and understanding of the main issues identified; \u2212 defining the mitigation actions and intervention priorities. Self-diagnosis Self-diagnosis is the annual process through which the Organisational Units identify their level of exposure to operational and ICT risk. It includes the Operational Risk Assessment and ICT Risk Assessment, in turn consisting of: \u2013 Business Environment Evaluation (VCO): activities used to identify significant risk factors and assess the related management level 107 . \u2013 Scenario analysis (SA): a method of prospective analysis that takes the form of a systematic process, which is typically repeated at predefined intervals, but which may also be conducted on an ad hoc basis, and which consists in imagining the occurrence of particular situations (or scenarios) and imagining their consequences. Once scenarios have been identified and appropriately characterised, they must be assessed: i.e., one must determine the probability of occurrence (frequency) and potential impact (average impact and worse case) in the event of occurrence of the situation described in the scenario. Internal model for the measurement of operational risk The Intesa Sanpaolo Group\u2019s internal model for calculating capital absorption is designed to combine all the main sources of quantitative information (operational losses: internal and external events, estimates deriving from the Scenario Analysis) and 107 The applicability and significance of risk factors are assessed, in the case of ICT risk, by the technical functions, cybersecurity functions and business continuity functions, and, with regard to operational risk, by the Decentralised Operational Risk Management functions. qualitative information (Business Environment Evaluation). Capital-at-risk is therefore identified as the minimum amount at Group level required to bear the maximum potential loss (worst case). It is estimated using a Loss Distribution Approach model (actuarial statistical model to calculate the Value-at-risk of operational losses), applied to historical data and the results of the scenario analysis assuming a one-year estimation period, with a confidence level of 99.90%. The methodology also applies a corrective factor, which derives from the qualitative analyses of the risk level of the operational environment (VCO), to take into account the effectiveness of internal controls in the various Organisational Units. The internal model\u2019s insurance mitigation component was approved by the Bank of Italy in June 2013 with immediate effect of its benefits on operations and on the capital requirements. Impacts from the COVID-19 pandemic During 2022, the company measures and rules adopted since the beginning of the emergency, in order to ensure business continuity and the safeguarding of the health of customers, employees and suppliers, were constantly reassessed and updated based on the evolution of the health situation and the regulatory requirements. In terms of operational risks, no additional impacts were reported specifically due to the pandemic. Impacts of the Russia-Ukraine conflict As regards operational risks, the impacts of the Russia-Ukraine conflict regard several actions implemented to ensure the Group's business continuity operations, particularly the extra costs incurred for Business continuity and the losses resulting from physical damage directly caused to offices/branches located in the conflict zone. That information is used to monitor exposure to operational risk, including that regarding the Risk Appetite Framework. QUANTITATIVE INFORMATION To determine its capital requirements, the Group uses a combination of the methods (AMA, TSA and BIA) allowed under applicable regulations. The capital requirement amounted to 2,039 million euro as at 31 December 2022, substantially stable on the 2,024 million euro as at 31 December 2021. The following shows the breakdown of capital requirement relating to the Advanced Measurement Approach by type of operational event (Event Type). Breakdown of capital requirement (Advanced Measurement Approach - AMA) by type of operational event With regard to the sources of operational risk, the chart below shows the impact of the operational losses recorded during the year, based on event type. In 2022, the most significant event type was Clients, Products and Business Practices, which included losses related to defaults connected with professional obligations towards customers, suppliers or outsourcers and to the provision of services and products to customers performed improperly or negligently. Breakdown of operational losses recorded in 2022, by event type LEGAL RISKS As at 31 December 2022, there were a total of about 37,400 disputes, other than tax disputes, pending at Group level (excluding those involving Risanamento S.p.A., which is not subject to management and coordination by Intesa Sanpaolo) with a total remedy 108 sought of around 3,850 million euro. This amount includes all disputes for which the risk of a disbursement of financial resources resulting from a potential negative outcome has been deemed possible or probable and therefore does not include disputes for which risk has been deemed remote. Those disputes include a large number of mass disputes at the international subsidiary banks (amounting to around 25,600 disputes) which, as a whole, account for a very low remedy sought. The risks associated with these disputes are thoroughly and individually analysed by the Parent Company and Group companies. Specific and appropriate provisions have been made to the Allowances for Risks and Charges in the event of disputes for which there is an estimated probability of a disbursement of more than 50% and where the amount of the disbursement may be reliably estimated (disputes with likely risk). Without prejudice to the uncertainty inherent in all litigation, the estimate of the obligations that could arise from the disputes and hence the amount of any provisions recognised are based on the forward-looking assessments of the outcome of the trial. These forward-looking assessments are, in any event, prepared on the basis of all information available at the time of the estimate. The only disputes with likely risk amount to around 28,300 with a remedy sought of 1,788 million euro and provisions of 744 million euro. The component referring to the Parent Company Intesa Sanpaolo totals around 5,280 disputes, with a remedy sought of 1,433 million euro and provisions of 550 million euro. These include 2,860 positions relating to disputes concerning anatocism, illustrated in greater detail below. Compared to the previous year\u2019s figures, there was a decrease in number and in the amount of remedy sought. That decrease mainly regarded disputes concerning anatocism, illegal interest and other conditions, and claims on banking products. There were around 700 disputes relating to other Italian subsidiaries, with a remedy sought of 246 million euro and provisions of 91 million euro. There were around 22,300 disputes relating to international subsidiaries, with a remedy sought of 109 million euro and provisions of 103 million euro, impacted by the previously mentioned mass disputes 109 : specifically, there were around 19,000 disputes referring to the subsidiary Banca Intesa Beograd, regarding two areas of litigation which are illustrated in the specific section. The breakdown according to the main categories of disputes with likely risk shows the prevalence of cases related to the Group\u2019s ordinary banking and credit activities: disputes involving claims relating to banking and investment products and services or on credit positions and revocatory actions account for about 74% of the remedy sought and 75% of the provisions. The remaining disputes mainly consist of other civil and administrative proceedings and labour disputes or criminal proceedings or proceedings related to operational violations. The paragraphs below provide summary information on the significant disputes (mainly those with a remedy sought of more than 20 million euro and where the risk of a disbursement is currently considered likely or possible), together with the cases considered significant. Disputes relating to anatocism and other current account and credit facility conditions, as well as usury During 2022, the disputes of this type \u2013 which for years have been a significant part of the civil litigation brought against the Italian banking industry \u2013 decreased both in number and in total value of claims made compared to the previous year. Overall, the number of disputes, including mediations, with likely risk amounted to around 2,860. The remedy sought amounted to 491 million euro, with provisions of 180 million euro. As is the case for the other civil disputes, the assessment of the risk related to this type of litigation is carried out individually, taking into account the claims made, the defences submitted, the progress of the proceedings and case-law decisions, for each dispute. You are reminded that in 2014 and 2016, Article 120 of the Consolidated Law on Banking, which governs the compounding of interest in banking transactions, was amended with the establishment of the ban on anatocism and the delegation of the CICR (Interdepartmental Committee for Credit and Savings) to regulate this matter. In February 2017, the Italian Antitrust Authority initiated proceedings against Intesa Sanpaolo for alleged unfair business practices involving, among other things, the methods used to request the above-mentioned authorisation from customers for the charging of the interest to the account imposed by the new regulations introduced in 2016. The Authority completed the proceedings in October 2017, ruling that Intesa Sanpaolo had implemented an \u201caggressive\u201d policy aimed at acquiring the authorisation, by soliciting customers to provide it through various means of communications and without putting them in a position to consider the consequences of that choice in terms of the interest calculation on the compounded debt interest. As a result, the Authority issued a fine of 2 million euro against Intesa Sanpaolo. Intesa Sanpaolo has submitted an appeal with the Lazio Regional Administrative Court, on the grounds that the ruling was unfounded. With ruling of 2 January 2023, the Regional Administrative Court confirmed the fine and the Bank will appeal to the Council of State. Disputes relating to investment services Also in this area, the disputes showed a downtrend in terms of number compared to the previous year. The most significant sub-group was disputes concerning derivatives. There were a total of around 350 disputes relating to investment services with likely risk. The total remedy sought amounted to around 242 million euro, with provisions of 144 million euro. As is the case for the other civil disputes, the assessment of the risk related to this type of litigation is carried out individually, taking into account the claims made, the defences submitted, the progress of the proceedings and the case-law guidance, for each dispute. We also note approximately 154 disputes with a remedy sought of 142 million euro initiated by \u201cwiped out\u201d shareholders and subordinated bondholders of the former \u201cOld Banks\u201d of Banca delle Marche, Banca Popolare dell\u2019Etruria e del Lazio and Cassa di Risparmio della Provincia di Chieti, deemed to be of possible risk. Those disputes are backed by the warranties and obligations to indemnify by the Seller (National Resolution Fund) for the benefit of the former UBI Banca, and 108 The figures for the remedy sought do not include claims of indeterminate value, i.e. those that do not contain a specific financial claim when the dispute is initiated; the value of these disputes is determined during the course of the proceedings when sufficient information emerges for the valuation. 109 For those cases, the provisions are relatively higher than the remedy sought (which is determined based on the customer\u2019s original claim) to take account of the interest and legal fees to be paid to the adverse party and the potential expansion of the original claim submitted in the legal proceedings. now Intesa Sanpaolo, and therefore also cover any liabilities arising from the activities carried out by the Banks (the \u201cOld Banks\u201d) before they were subject to the resolution procedure, in relation to, inter alia, risks of a legal nature or generally related to ongoing or threatened disputes, or violations of the law and any potential liabilities. Dispute regarding financial derivative instruments With regard to derivative transactions, the legal risks linked to legal proceedings with local authorities, their subsidiaries and individuals continue to be subject to careful monitoring. Specifically, disputes are pending with 20 local authorities, with possible or probable risk, for total claims of 142 million euro, and disputes with 5 Companies controlled by public entities, with total claims of 66 million euro. Disputes with individuals, assessed as having possible or probable risk, total around 197, and of these, around 43 positions also regard requests for refunds of amounts on other accounts held with the Bank. Net of those latter positions, the total value of the claims lodged in the proceedings regarding only derivatives amounts to around 84 million euro. With regard to contracts entered into with local authorities, during 2022, 6 new disputes were initiated against the Bank (Province of Catanzaro, Province of Varese, Province of Rovigo, Municipality of Marsciano, Municipality of Soriano del Cimino and Municipality of Servigliano) with total claims of 27 million euro. In the same year, 4 rulings were issued relating to the following proceedings: \u2212 Municipality of Faenza: with decision dated 1 February 2022, the Court of Appeal of Bologna confirmed that the contract was null and void. In execution of the first instance ruling, the Bank paid 2.8 million euro. An appeal was lodged with the Court of Cassation. \u2212 Municipality of Santa Maria Capua Vetere: the Court of Rome, in its ruling of 2 March 2022, rejected the claim of invalidity of the two derivative contracts, made by the Municipality, and, instead upheld the claim for implicit costs not disclosed at the time of signing and ordered the Bank to pay 1.1 million euro plus interest and revaluation. \u2212 Municipality of Vittorio Veneto: the Court of Venice, with non-final ruling of 29 March 2022, voided two contracts, referring to the final decision for the quantification of the restitutionary effects, whose potential risk amounts to 5.8 million euro. \u2212 Province of Pavia: with decision dated 4 May 2022, the Court of Appeal of Milan confirmed that the contract was null and void. In execution of the first instance ruling, the Bank had already paid 10.1 million euro. An appeal was lodged with the Court of Cassation. A summary of the most significant disputes with local authorities is provided below: \u2212 Municipality of Venice: the dispute regards a contract governed by the ISDA, with remedy sought of 71 million euro. With ruling of 14 October 2022, the High Court of Justice in London held that the Municipality did not have the capacity to enter into speculative derivative contracts involving debt. As a result, the High Court established that the Municipality was entitled to the restitution of the differentials paid to the Bank solely in the amount exceeding the outlays of the Bank incurred for the back-to-back hedging derivatives (at least until December 2020, the date on which the Municipality formally challenged the validity of the transaction). In this case, the application of that principle would significantly reduce the restitutionary obligation to the Municipality. The parties formalised the grounds for appeal by the set deadline of 3 February 2023. In a subsequent hearing of 6 February 2023, the request was upheld to defer to the outcome of the appeal the settlement of the credit/debit amounts between the parties (\u201cconsequential hearing\u201d) due to the High Court\u2019s ruling. The Bank was also ordered to pay 70% of the legal fees requested by the Municipality, of which 35%, equal to around 2 million GBP, to be paid by 20 February. With regard to the second proceedings with the Municipality of Venice before the Italian court, regarding alleged breaches deriving from the mandate and investment services agreements, the Court has set a new hearing for 22 March 2023, \u201cas it would be appropriate to hear testimony from the parties and obtain clarifications, given the likely settlement of the proceedings held in the UK.\u201d \u2212 Municipality of Perugia: at the end of 2020, the Municipality of Perugia served a summons relating to four derivative contracts entered into in 2006, asking for repayment of the amounts paid, to be quantified during the lawsuit. The Court permitted an expert\u2019s report, adjourning to the hearing of 9 March 2023 for the examination of the expert witness report. With regard to the contracts entered into with subsidiaries of local authorities, no new disputes were initiated, while 2 rulings were issued regarding the following proceedings: \u2212 Azienda Socio Sanitaria territoriale Valle Olona: with ruling dated 6 April 2022, the Court of Busto Arsizio declared the contract null and void. In execution of the ruling, the Bank paid 1.8 million euro and lodged an appeal. \u2212 Aler S.p.A.: with ruling dated 1 August 2022, the Court of Appeal of Milan confirmed that the contract entered into with the then Banca OPI was null and void. As a result of the first instance ruling, the Bank had paid 4.6 million euro. The possibility of filing an appeal with the Court of Cassation is being evaluated. A summary of the most significant disputes with subsidiaries of local authorities is provided below: \u2212 Terni Reti Sud S.r.l.: the dispute concerns a derivative contract entered into in August 2007 by the former Banca delle Marche 110 with Terni Reti Sud S.r.l., whose capital is 100% held by the Municipality di Terni. The opponent claims that the derivative is null and void due to failure to communicate the MTM and the probabilistic scenarios, and the breach of disclosure obligations, formulating a demand of 22 million euro. The Court ordered a court-appointed expert\u2019s report and adjourned the case to 13 June 2023. \u2212 EUR S.p.A.: in May 2021, a writ of summons was served by EUR S.p.A., a company held by the Ministry of the Economy and Finance and Roma Capitale. In addition to ISP, the company is also suing other intermediaries due to derivative contracts governed by the ISDA, entered into in relation to a syndicated loan granted. At the hearing of 8 November 110 Note that those disputes are backed by the warranties and obligations to indemnify by the Seller (National Resolution Fund) for the benefit of UBI Banca in relation to the acquisition of the New Banks deriving from the resolution of Banca delle Marche, Banca Popolare dell\u2019Etruria e del Lazio and Cassa di Risparmio della Provincia di Chieti and therefore also cover any liabilities arising from the activities carried out by the Banks (the \u201cOld Banks\u201d) before they were subject to the resolution procedure, in relation to, inter alia, risks of a legal nature or generally related to ongoing or threatened disputes, or violations of the law and any potential liabilities. 2022, the Court deemed that the lawsuit was ready for a ruling on the objection raised by the defendants regarding the lack of jurisdiction of the Italian court, and granted the terms for filing the closing briefs. Intesa Sanpaolo\u2019s risk amounts to 22 million euro. Disputes with individuals are decreasing, in terms of both stock and flows. Dispute relating to loans in CHF to the Croatian subsidiary Privredna Banka Zagreb Dd As already noted in the previous financial statements, Potro\u0161a\u010d \u2013 Croatian Union of the Consumer Protection Association initiated legal action against the subsidiary Privredna Banka Zagreb (\u201cPBZ\u201d) and seven other Croatian banks. According to the plaintiff, the defendant banks engaged in an unfair practice by allegedly using unfair contractual provisions on variable interest rate , which could be changed unilaterally by the bank, and by denominating the loans granted in Swiss francs (or indexing them to Swiss francs) without allegedly appropriately informing the consumers of the risks prior to entering into the respective loan agreements. In September 2019, the Croatian Supreme Court rendered a ruling in the collective action proceedings, rejecting the appeals filed by the sued banks against the High Commercial Court ruling from 2018 and confirming the position of courts of lower instance that banks had breached collective interests and rights of consumers by incorporating unfair and null and void provisions on CHF currency clause. The decision of the Supreme Court was challenged by PBZ before the Constitutional Court, which rejected the claim at the beginning of 2021. The subsidiary thus lodged an appeal before the European Court of Human Rights, which was rejected near the end of 2022. In connection with the mentioned proceedings for the protection of the collective interests of consumers, numerous individual proceedings have been brought by customers against PBZ, despite the fact that most of them voluntarily accepted the offer to convert their CHF loans into EUR denominated loans retroactively, in accordance with the Act on the Amendments to the Consumer Credit Act (Croatian Official Gazette 102/2015 \u2013 the \u201cConversion Law\u201d). In March 2020, the Croatian Supreme Court, within model case proceedings (a Supreme Court proceedings with obligatory effect on lower instance courts with the aim of unifying/harmonising case law), ruled that the conversion agreements concluded between banks and borrowers under the Croatian Conversion Law of 2015 produce legal effects and are valid even in the case when the provisions of the underlying loan agreements on variable interest rate and currency clause are null and void. In May 2022, the EU Court of Justice, in proceedings regarding reference for a preliminary ruling involving another intermediary, established that the Court of Justice has jurisdiction over the conversion agreements concluded under the Conversion Law, as they occurred after Croatia joined the European Union, and that the EU Directive on unfair terms in consumer contracts does not apply to those conversion agreements, whose content reproduces provisions of national law. On 20 December 2022, the Civil Law Department of the Croatian Supreme Court provided an interpretation of the legal effects of the agreements for the conversion of loan agreements from CHF to EUR and on consumers\u2019 rights. By virtue of that interpretation, consumers that entered into a conversion agreement pursuant to the aforementioned Conversion Law of 2015 have the right to receive legal interest on excess amounts paid that the bank calculated on converting the loans, from the date of each single payment up to the date of conversion. Once this judicial interpretation is recorded with the Court Practice Records Department, it will be final and binding for lower instance courts. The number of new individual lawsuits filed against PBZ in 2022 was lower than those in 2021. At the end of 2022, the total pending cases amounted to a few thousand. It cannot be excluded the possibility that additional lawsuits might be filed against PBZ in the future in connection with CHF loans. Dispute with the foreign subsidiary Banca Intesa Beograd (Serbia) The following areas of the mass disputes that have impacted the entire Serbian banking system are shown below. 1) Processing fees Legal dispute regarding processing fees applied by banks at the time of disbursing loans. The claimants, individuals and legal persons, are requesting the repayment of those charges, as they are deemed as not owed. The first claims arose in 2017 and recorded a significant increase in lawsuits was recorded in the following years, though for modest amounts on average. At the end of 2022 Banca Intesa Beograd had been summoned in around 18,600 lawsuits deemed as having possible or probable risk (at the end of 2021, these amounted to around 24,500); the related total amounts of principal requested to be repaid by the Bank came to around 1.3 million euro. Most of the courts accepted the customers\u2019 requests, based on an interpretation of regulations that the banks oppose. In September 2021, the Supreme Court of Serbia recognised the legitimacy of the costs and fees applied to loans at the time of their disbursement, provided they are indicated in the contract proposal. During 2022, the flows of new disputes significantly decreased on 2021, and several customers dropped pending disputes. 2) NKOSK Legal dispute relating to real estate loans insured through the National Housing Loan Insurance Corporation (NKOSK), whose premium is paid by the borrowers. The borrowers deem that, as the Bank is the Beneficiary of the insurance, the premium should be paid by the Bank. At the end of 2022 Banca Intesa Beograd had been summoned in around 1,100 lawsuits deemed as having possible or probable risk (at the end of 2021, these amounted to around 1,000); the related total amounts of principal requested to be repaid by the Bank came to around 1.1 million euro. Most of the courts accepted the customers\u2019 requests, based on an interpretation of regulations that the banks oppose. In September 2021, the Supreme Court of Serbia recognised the legitimacy of requiring the insurance premium to be paid by the borrowers, provided that the obligation is clearly described to the borrowers during precontractual procedures. In 2022, the flows of new disputes grew slightly on 2021, and several customers dropped pending disputes. Ruling of the EU Court of Justice of 11 September 2019 on credit agreements for consumers \u2013 so-called Lexitor ruling Article 16, paragraph 1, of Directive 2008/48 on credit agreements for consumers states that in the event of early repayment of the loan the consumer is \u201centitled to a reduction in the total cost of the credit, such reduction consisting of the interest and the costs for the remaining duration of the contract\u201d. According to the Lexitor ruling, this provision must be interpreted as meaning that the right to a reduction in the total cost of the credit includes all the costs incurred by the consumer and therefore also includes the costs relating to services prior to or connected with the signing of the contract (upfront costs such as processing costs or agency fees). Article 16, paragraph 1 of Directive 2008/48 has been transposed in Italy through Article 125 sexies of the Consolidated Law on Banking, according to which in the event of early repayment \u201cthe consumer is entitled to a reduction in the total cost of the credit, equal to the amount of interest and costs due for the remaining life of the contract\u201d. On the basis of this rule, the Bank of Italy, the Financial Banking Arbitrator and case law have held that the obligation to repay only relates to the charges that have accrued during the course of the relationship (recurring costs) and have been paid in advance by the customer to the lender. In the event of early repayment, these costs must be repaid in the amount not yet accrued and the obligation to repay does not include the upfront costs. Following the Lexitor judgment, the question has arisen as to whether Article 125 sexies of the Consolidated Law on Banking should be interpreted in accordance with the principle laid down therein or whether the new principle requires a legislative amendment. According to the EU principle of \u201cconsistent interpretation\u201d, national courts are required to interpret the rules in their own jurisdiction in a manner consistent with the European provisions. However, if the national rule has an unambiguous interpretation, it cannot be (re)interpreted by the court in order to bring it into line with the various provisions of a European directive: the principles recognised by European Union law prevent the national court from being required to make an interpretation that goes against the provisions of the domestic law. In this regard, we note that Article 125 sexies of the Consolidated Law on Banking has always been interpreted as meaning that, in the event of early repayment, the obligation to repay relates only to recurring costs and therefore does not include upfront costs. In December 2019, following the Lexitor ruling, the Bank of Italy issued \u201cguidance\u201d for the implementation of the principle established by the EU Court of Justice, to the effect that all costs (including upfront costs) should be included among the costs to be refunded in the event of early repayment, both for new relationships and for existing relationships. Intesa Sanpaolo has decided to follow the Bank of Italy \u201cguidance\u201d, even though it believes that the legal arguments set out above regarding the fact that Article 125 sexies of the Consolidated Law on Banking cannot be interpreted in a manner that complies with the Lexitor ruling are well founded. A provision has therefore been made in the Allowance for Risks and Charges corresponding to the estimated higher charges resulting from the decision to follow the Bank of Italy \u201cguidance\u201d. On 25 July 2021, Article 11-octies of Law 106/2021 took effect, which modified paragraph 1 of Article 125 sexies of the Consolidated Law on Banking, with the intention of resolving the situation of uncertainty caused by the Lexitor ruling, with the following provisions: \u2212 with regard to the rules on mortgage lending to consumers, removal of the reference to Article 125-sexies of the Consolidated Law on Banking and insertion of a specific provision on the early redemption of this type of loan, limiting repayment to only the interest and costs due for the remaining life of the loan agreement; \u2212 with regard to the rules on consumer credit, the text of Article 125-sexies of the Consolidated Law on Banking is modified so as to implement the principles of the Lexitor ruling, indicating, however, the amortised cost criterion as the preferred criterion for calculating repayment; \u2212 these provisions only apply to loan agreements signed after the entry into force of the law converting the decree. Loan agreements signed before that date are expressly to be governed by the provisions of law and Supervisory Provisions previously in force. The new rule did not have significant impacts on new contracts: for personal loans, the contractual clauses already comply with the rule, and for salary-backed loan products, the companies in the Intesa Sanpaolo Group have adopted the \u201ctutto TAN\u201d (All APR) model, which does not apply incidental costs to the customer, aside from interest. As regards consumer credit agreements concluded before the date of entry into force of the new rule, even if the agreements expired after that date, the repayment of the upfront costs could be limited to the amount established in the agreement. The Coordination Board of the Banking and Financial Ombudsman (ABF), which was assigned the issue of repayment of the upfront costs following the entry into force of the \u201cLexitor amendment\u201d, issued Decision no. 21676 on 15 October 2021, stating the following principle: in application of the legislative change pursuant to Article 11 octies, paragraph 2, last sentence of Law Decree No. 73 of 25 May 2021, converted into Law no. 106 of 23 July 2021, in the event of early repayment of a loan entered into before the entry into force of the specific regulatory provisions, there must be a distinction between costs relating to activities over the course of the contractual relationship (recurring costs) and costs relating to the fulfilment of preliminary obligations for granting the loan (upfront costs). This means that the former, but not the latter, can be repaid, limited to the portion not accrued due to the early repayment. The guidance from the Coordination Board of the Banking and Financial Ombudsman was followed by the single panels, which rejected the requests for pro rata repayment of upfront costs. The decisions were not suspended even after the issue of the legitimacy of the legislative change was referred to the Constitutional Court. This will be explained further below. On 1 December 2021, the Bank of Italy also notified intermediaries that, as a result of the changes made by Law 106/2021 to Article 125 sexies of the Consolidated Law on Banking, its \u201cguidelines\u201d of 4 December 2019 are to be considered invalid. Those guidelines requested that, in the event of the early repayment of consumer credit loans, the reduction in the total cost of the loan be calculated, including all costs borne by the consumer (recurring and upfront costs), excluding taxes. Conversely, ordinary case law was divided over the application of the new rule. Several judges have applied the new provision by rejecting the claimant\u2019s request for pro rata repayment of upfront fees following early repayment. However, in a significant number of cases, particularly in disputes before Justices of Peace, the customer\u2019s right to pro rata repayment of the upfront costs was recognised, deeming that - with varying, questionable grounds - the Lexitor principles should be applied also following the entry into force of the legislative change. Those rulings have generally been challenged by the Bank. With ruling no. 263 of 22 December 2022, the Constitutional Court accepted the question of constitutionality raised by the Court of Turin in November 2021, in a lawsuit brought against an intermediary specialising in salary-backed loans, for repayment of the upfront costs, declaring only the section of Article 11 octies, paragraph 2 of Law Decree no. 73 of 25 May 2021, converted with amendments into Law no. 106 of 23 July 2021 with the wording \u201cand the secondary regulations contained in the transparency and supervisory provisions of the Bank of Italy\u201d to be unconstitutional. In light of the ruling of the Constitutional Court, the Bank made an initial estimate of the potential charge connected with the effects of the partial declaration of unconstitutionality of Article 11 octies, paragraph 2 of Law Decree no. 73 of 25 May 2021, making a specific provision to the allowance for risks and charges. On 9 February 2023, the European Court of Justice, within proceedings originating from a reference for a preliminary ruling from the Austrian Supreme Court, ruled on the applicability of the Lexitor principle to mortgage lending to consumers. The Austrian Court asked the European Court of Justice whether Directive 2014/17 on mortgage lending to consumers precluded national legislation providing that the right of the consumer to a reduction in the total cost of the credit in the event of early repayment of the credit covers only interest and costs that are dependent on the duration of the agreement. The Court declared that Directive 2014/17 does not preclude such legislation. According to the Court, that right to reduction does not, therefore, include costs which, irrespective of the duration of the agreement, are payable by the consumer to either the creditor or third parties for services previously rendered in their entirety at the time of early repayment (such as processing and appraisal fees). Moreover, in 2021 the European Commission launched the process for the revision of EU Directive no. 2008/48 on consumer credit, on which the Lexitor ruling had been handed down. Following the legislative proposal initially formulated by the Commission, the phase of involving the European Parliament and Council began and, in the last few months, these bodies defined their positions by publishing their respective proposals. Dispute between Intesa Sanpaolo Vita S.p.A. and RB Holding S.p.A. and the Favaretto family In May 2020, Intesa Sanpaolo Vita S.p.A. finalised an investment in RBM Assicurazioni Salute S.p.A., the leading Italian insurance company in the healthcare class held by RB Holding S.p.A. referring to the family of Roberto Favaretto, an operation that resulted in Intesa Vita S.p.A. currently controlling the insurance company, now named Intesa Sanpaolo RBM Salute S.p.A. In May, Intesa Sanpaolo Vita sent the minority shareholders RB Holding S.p.A. an indemnity request pursuant to and in accordance with the investment contract, in relation to the emerging situations that gave rise (or could give rise) to liabilities currently quantifiable at over 129 million euro, which substantially involve: \u2212 the increase in the charges for claims concerning the M\u00e8taSalute Policy due to the elimination of unfair business practices subject to proceedings launched by the AGCM (Italian Competition Authority); \u2212 credit positions (per \u2018premium settlements\u2019) posted to balance sheet assets at the time of closing and fully written down following the closing, due to their verified uncollectibility; \u2212 penalties for delays in payments of claims relating to the ASDEP \u2013 Healthcare for Employees of Public Entities Policy. RB Holding S.p.A. rejected all charges and, in the second decade of July, along with the Favaretto family, submitted a petition to the Arbitration Chamber of Milan, claiming the invalidity of several clauses in the investment contract and shareholders\u2019 agreement of 2020 (including those relating to the put and call options on the minority interest and the non-competition agreement), breaches by Intesa Sanpaolo Vita of contractual commitments (such as the consultation clause relating to the renewal of the M\u00e8taSalute contract and the termination of the relationship with the previous Managing Director), the breach by the latter of the rules of good faith and fairness, with a request for compensation for damages totalling 423.5 million euro. Intesa Sanpaolo Vita S.p.A. filed its defence to the Arbitration Chamber by the assigned deadline of 5 September 2022, fully contesting the adverse party\u2019s arguments and also making a counterclaim for the payment of a total amount of 129.4 million euro, for the breach, by RB Hold, of the representations and warranties issued and commitments undertaken through the investment contract, as well as the obligation to act in accordance with fairness and good faith, making full reference to the claims set out in the indemnity request of last May. As the appearing parties did not reach an agreement on the appointment of the President of the Arbitration Tribunal, they submitted a joint request to the Arbitration Board to postpone the appointment. Where consultation between the parties identifies the interest in an amicable settlement, the fact that the dispute is pending shall not impede the verification of the feasibility of such cases. Disputes arising from the acquisition of certain assets, liabilities and legal relationships of Banca Popolare di Vicenza S.p.A. in compulsory administrative liquidation and Veneto Banca S.p.A. in compulsory administrative liquidation Preliminarily, the following is noted: a. based on the agreements between the two Banks in compulsory administrative liquidation and Intesa Sanpaolo (Sale Contract of 26 June 2017 and Second Acknowledgement Agreement of 17 January 2018), two distinct categories of disputes have been identified (also relating to the subsidiaries of the former Venetian banks included in the sale): a1 - the Previous Disputes, included among the liabilities of the Aggregate Set transferred to Intesa Sanpaolo, which include, with some important exceptions (see point a2 herein), civil disputes relating to proceedings already pending at 26 June 2017, and in any case different from those included under the Excluded Disputes (see the point below); a2 - the Excluded Disputes, which remain under the responsibility of the Banks in compulsory administrative liquidation and which concern, among other things, disputes (even if already pending at 26 June 2017) brought by shareholders and convertible and/or subordinated bondholders of one of the two former Venetian banks (including those deriving from so- called \u201coperazioni baciate\u201d), disputes relating to non-performing loans, disputes relating to relationships terminated at the date of the transfer, and all disputes (whatever their subject) arising after the sale and relating to acts or events occurring prior to the sale. The Excluded Disputes also include the disputes attributable to all the categories listed herein (point a2) brought against Banca Nuova and Banca Apulia (or Intesa Sanpaolo as their absorbing company). The relevant provisions were transferred to Intesa Sanpaolo along with the Previous Disputes; in any case, if the allowances transferred prove insufficient, Intesa Sanpaolo is entitled to be indemnified by the Banks in compulsory administrative liquidation, at the terms provided for in the Sale Contract of 26 June 2017; b. after 26 June 2017, a number of lawsuits included within the Excluded Disputes were initiated or resumed against Intesa Sanpaolo. With regard to these lawsuits: \u2212 Intesa Sanpaolo is pleading (and will plead) its non-involvement and lack of capacity to be sued, both on the basis of the provisions of Law Decree 99/2017 (Article 3) and the agreements signed with the Banks in compulsory administrative liquidation and in compliance with the European Commission provisions on State Aid (Decision C(2017) 4501 final and Attachment B to the Sale Contract of 26 June 2017), which prohibit Intesa Sanpaolo from taking responsibility for any claims made by the shareholders and subordinated bondholders of the former Venetian Banks; \u2212 if there were to be a ruling against Intesa Sanpaolo (and in any event for the charges incurred by Intesa Sanpaolo for any reason in relation to its involvement in any Excluded Disputes), it would have the right to be reimbursed by the Banks in compulsory administrative liquidation, based on that set out in the Sale Contract and subsequent agreements. The Banks in compulsory administrative liquidation have contractually acknowledged their capacity to be sued with respect to the Excluded Disputes, such that they have entered appearances in various proceedings initiated (or re-initiated) by various shareholders and convertible and/or subordinated bondholders against Intesa Sanpaolo (or in any case included in the category of Excluded Disputes), asking for the declaration of their exclusive capacity to be sued and the consequent exclusion of Intesa Sanpaolo from those proceedings. All the obligations and liabilities for indemnity assumed by the Banks in compulsory administrative liquidation in relation to Intesa Sanpaolo are covered by a public guarantee (\u201cIndemnification Guarantee\u201d), whose issue was an essential prerequisite of the Sale Contract. This guarantee was formalised on 15 November 2022. Over time, by virtue of the contractual obligations assumed by the two Venetian Banks in compulsory administrative liquidation, Intesa Sanpaolo has sent them several claims containing requests (or reserving the right to make requests) for reimbursement/indemnity relating to previously incurred or potential damage concerning Previous Disputes or Excluded Disputes, as well as the breach of representations and warranties regarding certain assets and liabilities transferred to Intesa Sanpaolo. Pending the formalisation of the \u201cIndemnification Guarantee\u201d, on 14 October 2022, Intesa Sanpaolo and the two Venetian Banks in compulsory administrative liquidation negotiated and signed a \u201cThird Agreement\u201d to govern several aspects for the performance of the Sale Contract of 26 June 2017 (as occurred for two previous acknowledgement agreements signed in 2017 and in 2018). At that time, Intesa Sanpaolo and the two Venetian Banks in compulsory administrative liquidation: \u2212 extended the duration of the loan agreements on the net debt of the sale and the sale of high risk loans and their conditions, aligning the guarantees; \u2212 specified, both regarding the claims already sent by Intesa Sanpaolo and for the future, several aspects concerning the timing and methods of managing the related requests for compensation, covered by the Indemnification Guarantee in favour of Intesa Sanpaolo; \u2212 agreed on several methods to effectively manage disputes in which Intesa Sanpaolo will be involved. By order of 20 July 2021, in the proceedings relating to the Excluded Disputes brought for the alleged misselling of BPVi shares in which Intesa Sanpaolo (which claimed it lacks the capacity to be sued based on Law Decree 99/2017 and the sale contract) is also a party, the Court of Florence referred the question of the constitutionality of Law Decree 99/2017 to the Constitutional Court. This is the first case of referral to the Constitutional Court of issues relating to Law Decree 99/2017. To date, the numerous applications for referral to the Constitutional Court formulated by the adverse parties in proceedings relating to the Excluded Disputes have always been rejected by judges, as they were deemed immaterial or clearly unfounded. In filing an appearance in court, the Bank challenged the order of referral, claiming that it was inadmissible and unfounded; this, considering EU and Italian regulations on State aid as part of the operations on the Venetian Banks, correctly applied by the national legal system, and the absence of discriminatory effects against the shareholders and subordinated bondholders of the Venetian Banks. The Presidency of the Council of Ministers and BPVi in compulsory administrative liquidation (as well as the Bank of Italy, as amicus curiae) filed appearances in the proceedings, concluding in favour of the inadmissibility and lack of grounds of the issues of unconstitutionality raised. With ruling no. 225 filed on 7 November 2022, accepting the defences of Intesa Sanpaolo, the Attorney General and Banca Popolare di Vicenza in compulsory administrative liquidation, the Court declared all the issues of unconstitutionality raised to be inadmissible, also taking a position on their lack of grounds, in line with the defences submitted by Intesa Sanpaolo. In January 2018, as part of a criminal proceeding before the Court of Rome for the alleged market rigging and obstructing the Supervisory Authorities in the performance of their functions with respect to officers and executives of Veneto Banca, the preliminary hearing judge decided that Intesa Sanpaolo could be charged with civil liability, assuming that the exclusion from the sale to Intesa Sanpaolo of the debts, responsibilities and liabilities deriving from the sale of shares and subordinated bonds \u2013 envisaged by Law Decree 99/2017 \u2013 would not be objectionable by third parties, while Article 2560 of the Italian Civil Code would be applicable in the case in question and Intesa Sanpaolo should therefore take on those liabilities. As a result of this decision, more than 3,800 civil plaintiffs holding Veneto Banca shares or subordinated bonds joined the proceedings. Intesa Sanpaolo thus filed an appearance, requesting that it be excluded from the proceedings. In turn, Veneto Banca in compulsory administrative liquidation intervened voluntarily affirming its exclusive, substantial and procedural capacity to be sued. In March 2018, the preliminary hearing judge declared his lack of territorial jurisdiction, transferring the files to the Public Prosecutor\u2019s Office of Treviso. The charge of civil liability and the joinders of the civil parties were therefore removed. After the case documents were forwarded to the Public Prosecutor\u2019s Office of Treviso, the former Managing Director of Veneto Banca, Vincenzo Consoli, was committed to trial for the offences of market-rigging, obstructing banking supervisory authorities and financial reporting irregularities. The Judge for the Preliminary Hearing rejected the motion to authorise the summons of Intesa Sanpaolo as civilly liable party. A similar motion was rejected in the criminal proceedings before the Court of Vicenza against management board members and key function holders and executives of Banca Popolare di Vicenza. Disputes relating to bank guarantees This type of dispute derives from a decision of the Court of Cassation in 2017, based on a Bank of Italy measure of 2005 relating to a bank guarantee scheme submitted to it by the ABI (agreed with the main consumers\u2019 associations). The Bank of Italy deemed that three clauses in this scheme could have anti-competition effects if applied in a standard manner by banks. Referring to that measure, the Court of Cassation formulated the following new principle of law: once the existence of an unlawful, and therefore, null and void anticompetitive agreement has been ascertained, bank guarantees that constitute the application of the unlawful agreement shall also be deemed unlawful, even if issued prior to the verification of the agreement. As part of recovery proceedings managed by Italfondiario on behalf of the Bank, the issue relating to the consequences of the principle stated by the Court in 2017 on individual bank guarantees issued based on the Italian Banking Association (ABI) scheme was referred to the Joint Sections. Specifically, they were asked to assess: a. whether the inclusion of the unlawful clauses in the contract justifies the declaration that the contracts are null and void or exclusively legitimises the claim for damages; b. in the event of nullity, what type of defect determines such nullity and which party is entitled to enforce it; c. whether the partial nullity of the bank guarantee is admissible; d. whether, in addition to verifying that the clauses match those deemed unlawful, the intention of the parties regarding the operation must be investigated and, that is, whether they would have gone ahead even knowing the clauses were unlawful. On 30 December 2021, the Joint Sections declared the partial nullity of the bank guarantees drawn up based on the Italian Banking Association (ABI) template, in relation to clauses 2, 6 and 8. The Joint Sections opted for an intermediate solution, excluding the other two possible solutions: on one side, they ruled out the full validity of the bank guarantee, a solution which would have exclusively permitted compensation for damages as the only remedy to be used by the guarantor (as suggested in the conclusions of the General Prosecutor prior to the hearing of 23 November 2021); on the other side, they ruled out the possibility of deeming the entire bank guarantee contract null and void. Around one year since the ruling of the Joint Sections, there have been no increases in disputes, which, on the whole, are still a modest amount. Andrea Abb\u00e0 + 207 This is a dispute pending before the Court of Milan, Business Section, initiated in 2019 by Mr. Abb\u00e0 and 207 subordinated bondholders of Banca delle Marche 111 . The claimants seek a declaration voiding the bonds and compensation for the damages suffered. The claim has been quantified at approximately 31 million euro. The Bank filed its appearance, objecting that it lacked the capacity to be sued, arguing in particular that the bonds in question were outside the scope of the sale by the Bridge Entity to the former UBI Banca. The former UBI Banca also argued that the claimant\u2019s claims had become time barred and that the adverse parties lacked capacity, since they were not the \u201cfirst borrowers\u201d and thus by law were not entitled to claim that the original bonds were inherently flawed. Finally, the lack of grounds to void the bonds and of evidence of the causal relationship between the Bank\u2019s conduct at issue and the damages was underscored. As the manager of the National Resolution Fund, the Bank of Italy intervened in the proceedings, upholding the arguments and conclusions formulated by the former UBI Banca. Following its interruption due to the death of one of the claimants, the lawsuit was resumed. The Court of Milan granted the terms for filing preliminary briefs and scheduled the hearing for 28 March 2023. AC Costruzioni S.r.l. Proceedings brought by AC Costruzioni S.r.l. (subsequently declared bankrupt) and Aurelio Cava (deceased during the trial) seeking a declaratory judgment establishing contractual and/or extracontractual liability of the Bank for the revocation of the credit facilities in 1998 and a judgment ordering the bank to provide compensation for the damages resulting from revocation, quantified at a total of around 33 million euro. The adverse party\u2019s claims were rejected in full by both the Court of Cosenza and the Catanzaro Court of Appeal, which upheld the arguments made by the Bank. The judgment of the second instance was appealed by Cava\u2019s heirs and by the receiver to AC Costruzioni by counter-appeal and cross-appeal. By order filed at the end of July 2022, the Court of Cassation rejected the appeals filed by the adverse parties in their entirety and ordered them to pay the costs to the Bank. Therefore, the dispute has been definitively closed without any outlays. Citt\u00e0 Metropolitana di Roma Capitale (formerly Provincia di Roma) Criminal proceedings are pending before the Rome Public Prosecutor\u2019s Office against a former Banca IMI manager for co- commission of aggravated fraud against the Metropolitan City of Rome Capital (formerly the Province of Rome). The proceedings relate to the overall transaction for the purchase by the local authority, through the real estate fund Fondo Immobiliare Provincia di Roma (fully owned by the Province of Rome), of the new EUR premises. The real-estate transaction received financing of 232 million euro from UniCredit, BNL and Banca IMI (each with 1/3). The former Banca IMI employee is accused of having misled \u2013 with three other managers of the two other lending banks, seven managers of the asset management company that manages the provincial fund and two public officials \u2013 the fund\u2019s internal control bodies and representatives of the Province, allowing the lending banks to obtain an unjust profit and thus causing significant damages to the public authority. In addition, the Public Prosecutor claims that the lending banks and the Fund entered into a loan under different, more burdensome conditions than those provided for in the call for tenders held by the public entity for the transaction. Intesa Sanpaolo (as the company that absorbed Banca IMI) is investigated in the criminal proceeding pursuant to Legislative Decree 231/01 together with the other two lending banks and the real-estate fund management company. By measures dated 23 May 2022 and 14 June 2022, the Public Prosecutor\u2019s Office of Rome ordered the closure of the positions of both the former manager of Banca IMI and of ISP to request their dismissal. By order dated 27 June 2022, which became final in December, the Public Prosecutor\u2019s Office ordered the dismissal of the proceedings against the Bank. It is also expected that the request for dismissal be formalised also against the former manager of Banca IMI. 111 See the previous note. Disputes regarding tax-collection companies In the context of the government\u2019s decision to re-assume responsibility for tax collection, Intesa Sanpaolo sold to Equitalia S.p.A., now the Italian Revenue Agency - Collections Division, full ownership of Gest Line and ETR/ESATRI, companies that managed tax-collection activities, undertaking to indemnify the buyer against any expenses associated with the collection activity carried out up to the time of purchase of the equity investments. In particular, such expenses refer to liabilities for disputes with tax authorities, taxpayers and employees and out-of-period expenses and capital losses with respect to the financial situation at the time of the sale. Overall, the claims made amount to approximately 74.9 million euro. The activities of the technical roundtable with the Italian Revenue Agency - Collections Division on the parties\u2019 claims have been concluded, and now the negotiations are underway. Energy S.r.l. Energy S.r.l., to which the bankruptcy receiver of C.I.S.I. S.r.l. transferred all its rights towards third parties, brought a claim before the Court of Rome against Intesa Sanpaolo seeking to quash the revocation of the subsidised loan of approximately 22 million euro granted to C.I.S.I. S.r.l. in 1997 pursuant to Law 488/92 and a judgment ordering the Ministry of Economic Development, Intesa Sanpaolo (as the concessionaire for the procedural application process) and Vittoria Assicurazioni (guarantor of the payment of the second tranche of the loan), jointly and severally between them, to provide compensation for damages allegedly incurred, quantified at a total of approximately 53 million euro. The company justified its claim by citing a favourable judgment rendered in criminal proceedings originating from a complaint filed against C.I.S.I. and its director alleging grave irregularities and breach in the execution of the business plan to which the loan referred \u2013 proceedings that had led to the revocation of the subsidised loan. Intesa Sanpaolo entered its appearance, denying that there was any basis for the adverse parties\u2019 claims, arguing that all claims for compensation against the Bank had become time barred, the claims were groundless on the merits and the damages had been represented inappropriately. The trial process was begun and the usual briefings were exchanged without the preliminary investigation being carried out. On 10 December 2022, the Court filed its ruling rejecting Energy\u2019s claims. On 10 January 2023 Energy served its appeal. Engineering Service S.r.l. In 2015, Engineering Service S.r.l. brought a civil suit against the Ministry of Economic Development, BPER and the former UBI Banca regarding the granting of public subsidies to businesses. The claimant accuses our Bank (and BPER) of delays in managing the approval procedure and disbursements \u2013 delays that allegedly resulted in a liquidity crisis for the company and the consequent loss of the public contribution. A claim for damages for approximately 28 million euro was brought against our Bank. The Bank\u2019s defence counsel argued that the approval times depended on BPER, to which it thus submitted a claim for indemnity. Following the revocation of the order to carry out a court-appointed expert\u2019s report, the Court of Rome, with ruling dated 9 November 2021, fully rejected the claimant\u2019s application, ordering it to pay the legal fees of all the parties summoned. The ruling became final due to lack of appeal within the terms set out by law. G.I.& E. Bankruptcy In November 2021, the G.I.& E. S.p.A. Bankruptcy Receiver initiated action for compensation of damages against Intesa Sanpaolo (as the absorbing company of Banca dell\u2019Adriatico) and UBI (as the absorbing company of Banca Marche and Popolare di Ancona), claiming that they were liable for having contributed, along with other banks and with the conduct of the directors and control bodies, to artificially keeping the company afloat and worsening its default. The alleged damages claimed were quantified by the adverse party at around 22.5 million euro. Lifting the reservation assumed at the hearing of 16 December 2022, the Court ordered the court-appointed expert\u2019s report requested by the Bankruptcy Receiver to be carried out. Isoldi Holding Bankruptcy The Isoldi Bankruptcy Receiver sued the former UBI Banca (which absorbed Nuova Banca Etruria and Centrobanca), Intesa Sanpaolo and five other banks in June 2020, before the Court of Bologna, claiming that they were liable, jointly and severally with the management body of Isoldi Holding, for a series of acts of diversion of assets that are claimed to have contributed to the company\u2019s artificial survival in the period June 2011 \u2013 June 2013, due to conduct claimed to have been implemented by preparing a turnaround plan pursuant to Article 67, para. 3, letter d), of the Bankruptcy Law based on unlawful acts and a connected agreement governing the disbursement of new finance, acts that are argued to have artificially deferred the company\u2019s crisis and concealed the irreversibility of its default. The Isoldi Bankruptcy Receiver also formulated a joint claim against Intesa Sanpaolo (prior to the incorporation of UBI Banca) and MPS, claiming their liability, jointly with the Sole Director of Isoldi Holding, for allegedly unlawful conduct connected with the bail-in of Aedes, in which Isoldi Holding was interested in taking over the majority shareholding. Intesa Sanpaolo and the former UBI Banca filed regular appearances and the assigned Court, with order dated 1 July 2021, declared that it lacked jurisdiction. The adverse party resumed the proceedings, submitting the same claims before the Court of Turin. The Bank filed an appearance for the hearing scheduled for 3 March 2022. At the hearing of 16 February 2023, the judge reserved the decision on the preliminary objections. The total damages claimed by the adverse party do not seem to be accurately quantifiable as things stand, also taking account of the various conduct of the various banks challenged. Societ\u00e0 Italiana per le Condotte d\u2019Acqua S.p.A. under Extraordinary Administration By writ of summons of 23 December 2022, Societ\u00e0 Italiana per le Condotte d\u2019Acqua S.p.A. (admitted to the \u201cMarzano\u201d proceedings by way of Italian Ministerial Decree of 6 August 2018) asked the Court of Rome to order compensation for damages in the amount of 389.3 million euro (or a different amount that will arise during the proceedings), in addition to monetary revaluation, legal interest and expenses. The claim has been filed, jointly, against Intesa Sanpaolo (also as the absorbing company of Medio Credito Italiano, Banca IMI and UBI Banca, as well as \u201cthe purchaser of\u201d Veneto Banca and Banca Popolare di Vicenza), the members of the Management Board and the Supervisory Board of Condotte and numerous other banks and factoring companies. The claim is based on the alleged conduct engaged in for various reasons by the defendants, considered a source of harm to the company\u2019s assets and its creditors. Specifically, the banks and factoring companies are allegedly liable for having unlawfully granted to and/or maintained credit for Condotte, thereby contributing to the continuation of its business at a loss and the worsening of its default. The first hearing has been scheduled for September 2023. As things stand, it is not possible to estimate the risk attributable to Intesa Sanpaolo, also taking account of the different conduct claimed against the numerous defendants. The Extraordinary Administration has also promoted against Intesa Sanpaolo three bankruptcy revocatory actions before the Court of Rome, with a request to reimburse amounts of around 16 million euro. Fondazione Cassa di Risparmio di Pesaro In 2018, Fondazione Cassa di Risparmio di Pesaro brought a compensation claim against the former UBI Banca (as the successor-in-interest to the issuer Banca Marche S.p.A. 112 ) and PwC (the auditing firm that certified all the financial statements and the figures presented in the Prospectus) alleging that the defendants published data and information regarding the financial performance and the income outlooks of Banca delle Marche S.p.A. that later proved to be totally incorrect and misleading. This information, contained in the financial statements as at 31 December 2010 and 30 June 2011 and included in the Prospectus, is claimed to have led the Foundation to subscribe for the bank\u2019s shares issued as part of the capital increase in March 2012. In later years, these shares went on to decline in value considerably, resulting in a loss quantified at approximately 52 million euro. During the trial the Bank of Italy joined the suit, upholding the lack of capacity to be sued invoked by UBI, by virtue of the provisions of Legislative Decree 180/2015 governing the resolution procedure for Banca delle Marche. The Court rejected all preliminary applications filed and adjourned the case to 13 July 2021 for the entry of conclusions. After the entry of conclusions, the parties have filed their closing briefs and the ruling is pending. Fondazione Cassa di Risparmio di Jesi In January 2016, Fondazione Cassa di Risparmio di Jesi brought a compensation claim against UBI Banca (as the alleged successor-in-interest to the issuer Banca Marche S.p.A. 113 ) and PwC (the independent auditors that certified all the financial statements and the figures presented in the Prospectus) alleging that the defendants published data and information regarding the financial performance and the income outlooks of Banca delle Marche S.p.A. that later proved to be totally incorrect and misleading. This information, contained in the financial statements as at 31 December 2010 and 30 June 2011 and included in the Prospectus, is claimed to have led the Foundation to subscribe for the bank\u2019s shares issued as part of the capital increase in March 2012. The value of these shares then fell to zero, resulting in a loss quantified at approximately 25 million euro. During the trial the Bank of Italy joined the suit, upholding the lack of capacity to be sued invoked by the former UBI Banca, by virtue of the provisions of Legislative Decree 180/2015 governing the resolution procedure for Banca delle Marche. By judgment rendered on 18 March 2020, the Court of Ancona granted the objection of lack of capacity to be sued raised by the Bank, rejecting the claims lodged. In the appeal proceedings initiated by the Foundation before the Ancona Court of Appeal, the hearing for the filing of the final briefs was postponed to 9 May 2023. Alitalia Group: claw-back actions In August 2011, companies of the Alitalia Group under Extraordinary Administration \u2013 namely Alitalia Linee Aeree, Alitalia Servizi, Alitalia Airport and Alitalia Express \u2013 brought five bankruptcy claw-back proceedings against the Bank before the Court of Rome (of which one against the former Cassa di Risparmio di Firenze), requesting the repayment of a total of 44.6 million euro. When the proceedings were initiated, a line of defence was adopted based mainly on the grounds that the actions were invalid due to the vagueness of the claims, that the condition of knowledge of the Alitalia Group\u2019s state of insolvency (subject first of the Air France plan and then of the subsequent rescue conducted by the Italian Government) did not apply, and that the credited items were not eligible for claw back, due to the specific nature of the account movements. As the initial attempts to reach a settlement agreement had failed, in March 2016, the Court of Rome upheld Alitalia Servizi\u2019s petition and ordered the Bank to repay around 17 million euro, plus accessory costs. In addition to being contestable on the merits, the ruling was issued before the deadline for filing of the final arguments. Accordingly, in the appeal subsequently lodged, a preliminary objection was made regarding the invalidity of the judgment, together with an application for suspension of its provisional enforceability, which was upheld by order of 15 July 2016 of the Court of Appeal. Conversely, the Alitalia Linee Aeree and Alitalia Express lawsuits were won at first instance. The bankruptcy receivers filed an appeal, which, for Alitalia Express, was concluded in our favour, with the receivers subsequently submitting an appeal to the Court of Cassation. For Alitalia Airport, which was also won at first instance, the favourable judgment has become final. The lawsuit brought against the former Cassa di Risparmio di Firenze was also won in the first two instances, with the adverse party filing an appeal to the Court of Cassation. The entire dispute, following long negotiations which were restarted in the meantime, was settled in November 2022, awarding the amount of 12.8 million euro to the adverse party. 112 See the previous note. 113 See the previous note. Elifani Group Lawsuit brought in 2009 by Edilizia Immobiliare San Giorgio 89 S.r.l. (now incorporated into Enselfin, which filed an appearance as its replacement), San Paolo Edilizia S.r.l., Hotel Cristallo S.r.l. and the guarantor-shareholder Mario Elifani seeking compensation for damages suffered due to alleged unlawful conduct by the Bank for having requested guarantees disproportionate to the credit granted, enforced pledge guarantees, applied usurious interest to mortgage loans and submitted erroneous reports to the Central Credit Register. The initially claimed amount was approximately 116 million euro and the dispute refers to the same circumstances mostly already cited in the disputes regarding anatocism and interest in excess of the legal amount brought by the aforementioned companies in 2004 and settled in early 2014. The lawsuit had a favourable outcome for the Bank in both the first and second instances. By order of 27 December 2019, the Court of Cassation partially granted the adverse parties\u2019 petition, with referral of the matter. The adverse parties resumed the lawsuit before the Court of Appeal of Milan, quantifying the claim at a total of approximately 100 million euro. With a ruling of June 2022, the Court of Appeal of Milan, reviewing the case, rejected the claims made by the claimants, ordering them to pay the legal fees. This ruling was also appealed before the Court of Cassation by the adverse parties, with appeal served on 30 November 2022. Mariella Burani Fashion Group S.p.A. in liquidation and bankruptcy (\u201cMBFG\u201d) In January 2018, the receiver to Mariella Burani Fashion Group S.p.A. sued its former directors and statutory auditors, its independent auditors and the former UBI Banca (as the company that absorbed Centrobanca), seeking a judgment ordering compensation for alleged damages suffered due to the many acts of mismanagement of the company while in good standing. According to the claimant\u2019s arguments, Centrobanca, which was merged into the former UBI Banca, provided financial support to the parent company of the bankrupt company (Mariella Burani Holding S.p.A.) in 2008, in an operation on its subsidiary, despite the signs of insolvency that the latter began to show in September 2007, causing damages quantified at approximately 92 million euro. On a preliminary level, the Bank argued that the receiver lacked capacity to sue since the disputed loan had been disbursed to the parent company of Mariella Burani Fashion Group S.p.A.; moreover, the alleged damages for which the receiver claims compensation were argued to have been in fact sustained by the company\u2019s creditors (and not by the procedure). With regard to the merit of the claims, the Bank stressed that it had acted properly and the borrower in good standing was solely liable since it bore exclusive responsibility for preparing the untrue financial statements, circulating the misinformation and continuing to operate the company in an alleged situation of insolvency. The proceedings are currently in the preliminary phase. SIM Bankruptcy By writ of summons served in October 2022, the receiver to SIM S.p.A. summoned Intesa Sanpaolo (along with another 7 banks) before the Court of Catania, with the first hearing scheduled for 31 March 2023. This is a compensation claim brought for damages allegedly suffered by the company and its creditors due to conduct by the banks defined by the adverse party as \u201cunlawful\u201d, which allegedly resulted in the unlawful granting of credit. The claim for damages has been quantified at around 47 million euro, requesting that the defendant banks be jointly ruled against. Offering of diamonds In October 2015, the Bank signed a partnership agreement with Diamond Private Investment (DPI) governing how diamond offerings were made by DPI to the customers of Intesa Sanpaolo. The aim of this initiative was to provide customers with a diversification solution with the characteristics of a \u201csafe haven asset\u201d in which to allocate a marginal part of their assets over the long-term. Diamonds had already been sold for several years by other leading national banking networks. This recommendation activity was carried out primarily in 2016, with a significant decline starting from the end of that year. A total of around 8,000 customers purchased diamonds, for a total of around 130 million euro. The marketing process was based on criteria of transparency, with safeguards progressively enhanced over time, including quality controls on the diamonds and the fairness of the prices applied by DPI. In February 2017, the AGCM (the Italian Competition Authority) brought proceedings against companies that marketed diamonds, (DPI and other companies), for alleged conduct in breach of the provisions on unfair business practices. In April, those proceedings were extended to the banks that carried out the recommendation of the services of those companies. At the end of those proceedings, on 30 October 2017, the AGCM notified the penalties imposed for the alleged breach of the Consumer Code through the conduct of DPI and of the banks which the proceedings had been extended to, consisting - in short - of having provided partial, deceptive and misleading information on the characteristics of the diamond purchases, the methods used to calculate the price - presented as being the market price - and the performance of the market. The Authority issued a fine of 3 million euro against Intesa Sanpaolo, reduced from the initial fine of 3.5 million euro, after the Authority had recognised the value of the measures taken by the Bank from 2016 to strengthen the safeguards on the offering process aimed, in particular, at ensuring proper information to customers. Following the order by the AGCM, the Bank paid the amount of the fine and filed an appeal with the Lazio Regional Administrative Court against the order. With reference to that appeal, on 16 November 2022, the Regional Administrative Court confirmed the fine and the Bank will appeal to the Council of State. From November 2017, the Bank: \u2212 terminated the partnership agreement with Diamond Private Investment (DPI) and ceased the activity, which had already been suspended in October 2017; \u2212 started a process that provides for the payment to customers of the original cost incurred for the purchase of the diamonds and the withdrawal of the stones, in order to satisfy the customers\u2019 resale needs which, due to the illiquidity that had arisen in the market, are not met by DPI; \u2212 sent a communication in January 2018 to the diamond-holding customers reiterating the nature of the stones as durable goods, and also confirming the Bank\u2019s willingness to intervene directly in relation to any realisation needs expressed by the customers and not met by DPI. In 2022, 34 requests were received for around 0.5 million euro. At the end of the year, a total of 6,854 repurchase requests had been received from customers and met by the Bank, for a total value of 116.3 million euro. The valuation of the repurchased diamonds is carried out using the values provided by the IDEX Diamond Retail Benchmark, one of the main online trading platforms used in the main markets by over 7,000 traders. In February 2019, an order for preventive criminal seizure of 11.1 million euro was served, corresponding to the fee and commission income paid by DPI to the Bank. The preliminary investigations initiated by the Public Prosecutor\u2019s Office of Milan also concern four other banks (more involved) and two companies that sell diamonds. In October 2019, the notice of conclusion of the investigation was served, which stated that two of the Bank\u2019s operators were currently under investigation for alleged aggravated fraud (in collusion with other parties to be identified) and other persons are being identified for allegations of self-laundering, while ISP is being charged with the administrative offence pursuant to Italian Legislative Decree 231/2001 in relation to this latter predicate offence. In reaction to the latter claims, in July 2021, the hearing was held, in which the Preliminary Investigation Judge accepted the plea bargain request \u2013 which Intesa Sanpaolo had submitted solely to bring to an end the lengthy legal proceedings and which had been supported by the Public Prosecutor\u2019s Office \u2013 issuing a ruling which ordered only a financial penalty of 100,000 euro, and the confiscation of only the sums constituting the profit from the offence of self-laundering, calculated at 61,000 euro. Following the partial transfer of the proceedings to the Court of Rome, for reasons of territorial jurisdiction, in August 2022 the revocation of the preventive seizure ordered in February 2019 regarding the profit from the alleged crime of fraud was served, with full restitution to the Bank of the amount of 11.1 million euro. Now that the Bank\u2019s position has been settled, the Public Prosecutor\u2019s Office of Milan is expected to request the dismissal against the two operators investigated. Private banker (Sanpaolo Invest SIM, incorporated into its parent company Fideuram - Intesa Sanpaolo Private Banking) An inspection conducted by the Audit function identified serious irregularities by a private banker of the former Sanpaolo Invest SIM. The checks carried out revealed serious irregularities affecting several customers, including misappropriation of funds and reports with false incremental amounts. On 28 June 2019, the Company terminated the agency contract with the private banker due to just cause and communicated the findings to the Judicial Authority and the Supervisory Body for financial advisors, which first suspended and then removed the private banker from the Register of Financial Advisors in December 2019. Following the unlawful actions, the company received a total of 278 compensation claims (including complaints, mediation proceedings and lawsuits), for a total amount of approximately 62.9 million euro, mostly based on alleged embezzlement, losses due to disavowed transactions in financial instruments, false account statements and the debiting of fees relating to advisory service. There are currently 55 pending claims, with a present value of approximately 25.5 million euro, following the resolution of 223 positions. The total amount of 6.4 million euro was recovered from the improperly credited customers (and already returned to the customers harmed) and there are pending attachments of 42 million euro. A precautionary attachment was ordered against the private banker for an amount equal to the balance found in the accounts and deposits held with credit institutions and the social-security position with Enasarco. In the ensuing case on the merits, the former private banker filed a counterclaim in the total amount of 0.6 million euro by way of non-payment of indemnity for termination of the relationship. Another lawsuit was also brought against former private banker to recover the claims arising from withdrawal from the agency contract, in the total amount of 1.6 million euro, in addition to interest by way of indemnity in lieu of notice, penalty relating to a loan agreement and reimbursement of advances of bonuses. Adequate provisions have been set aside for the risks associated with the unlawful conduct discussed above, mainly for the damages verified relating to compensation claims and pending lawsuits. The above provisions do not consider the coverage envisaged by the specific insurance policy in force, under which the insurance company has already paid an initial advance of 744 thousand euro. Reyl & Cie (Switzerland) \u2013 Proceedings pursuant to Legislative Decree 231/2001 of the Public Prosecutor\u2019s Office of the Court of Milan The Public Prosecutor\u2019s Office of Milan initiated criminal proceedings pursuant to Legislative Decree 231/2001 against Reyl & Cie (a Swiss subsidiary of Fideuram \u2013 Intesa Sanpaolo Private Banking) for the predicate offence of money laundering, allegedly committed by one of its former employees (dismissed in 2020), and ordered the seizure of securities owned by Reyl for around 1.1 million euro. The proceedings also involve the Swiss bank Cramer & Cie. Neither Fideuram ISPPB nor ISP are currently involved in the proceedings. The circumstances alleged relate to events that took place in 2018, before Reyl & Cie joined the Intesa Sanpaolo Group in May 2021. According to the prosecution, the former employee, together with his brother, an employee of the bank Cramer & Cie, and an external advisor, allegedly engaged in practices aimed at facilitating tax evasion by Italian customers through the transfer of accounts from Switzerland to branches located in the Bahamas, in order to allow those customers to withdraw money from those accounts without the possibility of being traced by the Italian authorities. With regard to the measure notified by the Swiss judicial authorities, the appeal is currently being prepared, whose filing, in any event, will be subject to a separate assessment before it is formalised. Instead, with regard to the criminal proceedings pursuant to Legislative Decree 231/2001 pending in Italy, the possibility is being evaluated of filing a petition for the reduction of the amount thereof. Indeed, an examination of the documents of the proceedings has revealed elements indicating that it may be considered reasonable that such a petition would be upheld. A request for disqualification from operating in Italy has not been made against Reyl & Cie, although investigations are still pending and it is not yet possible to access the related documents. Tirrenia di Navigazione in A.S.: Claw-back actions In July 2013, Tirrenia di Navigazione in A.S. filed two bankruptcy claw-back actions before the Court of Rome against the former Cassa di Risparmio di Venezia for 2.7 million euro and against the former Banco di Napoli for 33.8 million euro. The lawsuit against the former CR Venezia is now pending on appeal, filed by the Bank, following the order for payment of 2.8 million euro in 2016. The lawsuit against the former Banco di Napoli is also pending on appeal against the order for payment of approximately 14.5 million euro, plus accessory costs, issued by the Court in 2021. That order was not suspended, and, in October 2022, the Bank paid 15.2 million euro, reserving the right to be refunded in case of favourable outcome of the appeal. Against the appeal filed by the Bank, the adverse party filed an appearance, initiating a cross-appeal relating to the claim for return of the amount of 28 million euro deriving from a currency adjustment, a claim already rejected in the first instance and which is expected to also be rejected on appeal. Selarl Bruno Raulet (former Dargent Tirmant Raulet) Dispute The claim was filed before a French Court in 2001 by the trustee in bankruptcy for the bankruptcy of the real estate entrepreneur Philippe Vincent, which made a request to the Bank for compensation of 56.6 million euro for the alleged \u201cimproper financial support\u201d provided to the entrepreneur. The claim of the trustee in bankruptcy has consistently been rejected by the courts of different instance which dealt with the case over 17 years, until the Court of Colmar, in May 2018, ordered the Bank to pay compensation of around 23 million euro. The Colmar judgment was appealed before French Supreme Court of Cassation, which in January 2020 overturned and quashed the decision of the Court of Appeal of Colmar and referred the matter to the Court of Appeal of Metz. Consequently, in the first quarter of 2020, the Bank obtained the refund of the around 23 million euro paid according to the ruling of the Court of Appeal of Colmar in 2018. At the end of July 2020, the bankruptcy receiver referred the dispute to the Court of Appeal of Metz, requesting payment of 55.6 million euro (equal to the entire amount of insolvency liabilities, minus the amount obtained from the sale of the property whose purchase was financed by the Bank). In turn, the Bank filed an appearance and challenged the opposing party\u2019s claims. In a ruling delivered on 27 July 2021, the Metz Court of Appeal partially upheld the receivership\u2019s claim and ordered the Bank to pay around 20 million euro, plus legal costs of the various instances of the proceedings (for a total of 20.6 million euro). The Court quantified the damage suffered by the insolvency estate as being equal to the loan granted by the Bank, less the proceeds from the sale of the asset given as security. In December 2021, the Bank filed an appeal before the French Court of Cassation. In parallel, the receivership autonomously challenged the decision of the Court of Appeal, insisting that the Bank be ordered to pay all the insolvency liabilities. In November 2021, payment was made to the receivership of the amount ordered. The amounts were temporarily deposited with CARPA (the French Bar Association\u2019s Cash Fund) and would have been unavailable until the Court of Cassation issues its ruling. A hearing was held on 4 October 2022. At the end of November 2022, the Court of Cassation rejected the appeals filed by the Bank and by the receivership. The ruling by the Court of Appeal of Metz thus became final. The amounts already paid by the Bank following that decision were therefore made available to the receivership. Lawsuit against two Hungarian subsidiaries of Intesa Sanpaolo The lawsuit is connected with a lease agreement terminated by one of the subsidiaries in 2010. During 2011, the tenant initiated proceedings in civil court, and during 2021, it supplemented its initial claim, formulating new claims and, as a result, increasing the total of the claims to around 31 million euro. In July 2022, the Court rejected all the plaintiff company\u2019s claims, finding that it lacked standing. The plaintiff filed an appeal against that decision.. In December 2022, the Court of Appeal partially upheld the adverse party\u2019s appeal, ordering one of the two defendant companies to pay around 9.5 million euro. The relevant subsidiary filed an appeal before the Supreme Court, which suspended the enforcement of the challenged ruling. Intesa Sanpaolo\u2019s subsidiaries took action in 2012 for the recognition of their receivables claimed against the tenant resulting from unpaid lease rentals. These proceedings are currently pending. Labour litigation In line with the situation as at 31 December 2021, as at 31 December 2022 there were no significant cases of labour litigation from either a qualitative or quantitative standpoint. In general, all labour litigation is covered by specific provisions adequate to meet any outlays. Contingent assets As for contingent assets, and the IMI/SIR dispute in particular, it should be recalled that following the final judgement establishing the criminal liability of the corrupt judge Metta (and his accomplices Rovelli, Acampora, Pacifico, and Previti), the defendants were ordered to pay compensation for damages, with the determination of those damages referred to the civil courts. Intesa Sanpaolo then brought a case before the Court of Rome to obtain an order of compensation for damages from those responsible. In its ruling of May 2015, the Court of Rome quantified the financial and non-financial damages for Intesa Sanpaolo and ordered Acampora and Metta \u2013 the latter also jointly liable with the Prime Minister\u2019s Office (pursuant to Law no. 117/1988 on the accountability of the judiciary) \u2013 to pay Intesa Sanpaolo 173 million euro net of tax, plus legal interest accruing from 1 February 2015 to the date of final payment, plus legal expenses. The amount ordered took account of the amounts received in the meantime by the Bank as part of the settlements with the Rovelli family and with the adverse parties Previti and Pacifico. In July 2016, the Rome Court of Appeal stayed the enforcement of the judgment of first instance with respect to the amount in excess of 130 million euro, in addition to ancillary charges and expenses, and adjourned the hearing of the final pleadings to June 2018. As a result of this decision, in December 2016 the Office of the President of the Council of Ministers credited Intesa Sanpaolo with the sum of 131,173,551.58 euro (corresponding to the 130 million euro of the order, in addition to legal interest and reimbursement of expenses). To avoid dispute, only the exact amount of the order, without applying the gross-up, was demanded and collected. On 16 April 2020, the ruling of the Court of Appeal of Rome was filed, which essentially upheld the Court's ruling, while reducing the amount of non-financial damages to 8 million euro (compared to 77 million euro that had been quantified by the court of first instance), and set the amount to be paid at 108 million euro, to be considered net of tax, plus legal interest and expenses. In the second quarter of 2020 the Bank filed a petition for the correction of a material error contained in the finding regarding the calculation of the damages liquidated; the Court of Appeal rejected the Bank\u2019s petition by ruling filed on 7 December 2020. In May 2021, the Bank filed an appeal with the Court of Cassation against the Rome Court of Appeal\u2019s ruling of 16 April 2020. The appeal sets out two main grounds: a) the reduction to 8 million euro of the non-financial damages made by the Court of Appeal, compared to the 77 million euro recognised in the first instance ruling is arbitrary and devoid of any sound legal or logical reasoning; b) even accepting the reduction under point a), the Court made a miscalculation when redetermining the amount of total damages. That aspect was already the subject of an application for material correction filed in 2020, rejected by the Court as the Court deemed it an issue that could be remedied through appeal. On 10 January 2023, a hearing was held before the Court of Cassation. After hearing the conclusions from the parties and the report of the General Prosecutor, the Court deferred judgment. TAX LITIGATION At Group level, the total value of the claims for tax disputes (taxes, penalties and interest) was equal to 219 million euro as at 31 December 2022, which represents a slight increase compared to 215 million euro as at 31 December 2021. The Group's tax litigation risks are covered by adequate provisions to the allowances for risks and charges (70 million euro in 2022 compared to 76 million in 2021). The Parent Company had 473 pending litigation proceedings (628 as at 31 December 2021) for a total amount claimed (taxes, penalties and interest) of 126 million euro (135 million euro as at 31 December 2021), considering both administrative and judicial proceedings at various instances. In relation to these proceedings, the actual risks were quantified at 57 million euro as at 31 December 2022 (57 million euro also as at 31 December 2021). Compared to 31 December 2021, for the Parent Company, the main events that gave rise to significant movements of amount of claims consisted of: \u2013 an increase (around 13.5 million euro), due to: i) new claims of 1.4 million euro relating to municipal property tax (IMU) on properties not repossessed through terminated lease agreements (1 million euro) and income-generating lease agreements (0.4 million euro), net of the positions arising and settled during the year (for a detailed analysis of the disputes in question, refer to the Consolidated financial statements as at 31 December 2021); ii) the assessment on registration tax on transfer of business unit (1.8 million euro); iii) notice of registration tax on the ruling establishing a bankruptcy credit (0.6 million euro); iv) notice of assessment regarding VAT on boat lease transactions for the tax year 2016 (for 1.5 million euro); v) adjustment of the value of the former Sudameris dispute of 6.3 million euro, due to the appreciation of the Brazilian currency against the euro; vi) notices of registration tax for various reasons (0.6 million euro); and vii) interest accrued on the outstanding disputes of around 1 million euro; \u2013 a decrease (around 22.8 million euro), due to: i) the closure of disputes concerning registration tax for 11.8 million euro, mainly relating to the demerger of business unit (including: the Manzoni/Melville case for 8.3 million euro, the case for reclassification of the transfer of the Banca di Trento e Bolzano/Intesa Sanpaolo business line for 1.2 million euro and the case for the value adjustment of the transfer of the Credito Piemontese/Intesa Sanpaolo business line for 1.6 million euro); ii) the closure of disputes concerning municipal property tax (IMU) on properties from leases, both following settlement and cancellation by the municipalities for 4.4 million euro; and iii) 6.6 million euro for various disputes, including the partial cancellation due to internal review of the VAT claim on boat lease transactions of 1.6 million euro relating to the tax year 2014, as well as the settlement of claims regarding IRES and IRAP taxes for 2 million euro. The main changes in the provisions booked by the Parent Company (which remained substantially unchanged) as at 31 December 2021 are related to: \u2013 an increase (around 7 million euro), due to: i) the adjustment of 1.2 million euro for the former Sudameris dispute relating to the principal and penalty components (assessed as higher risk), due to the appreciation of the Brazilian currency against the euro; ii) claims regarding municipal property tax (IMU) (1 million euro), still pending at the end of the year; iii) the greater provisions on the 2016 VAT claim for boat lease transactions of 1.5 million euro; iv) the penalty and related surcharges (2 million euro) included in a payment notice totalling 10 million euro due to an unfavourable ruling by the Court of Cassation in connection with the dispute on the registration tax for the demerger of a business unit from ISP to State Street Bank (the proceedings on the payment notice for registration tax related to this transaction are still pending); and v) greater provisions of 1.3 million euro on sundry cases, both new and existing (of which 0.8 million euro for disputes regarding registration tax); \u2013 a decrease (around 6.8 million euro), due to: i) the favourable closure of the dispute regarding registration tax referring to the business contribution and subsequent sale of the investment by Banca di Trento e Bolzano to ISP (1.1 million euro); ii) the release relating to the closure of the tax audit report for 2016 of 1.3 million euro, due to the notification of the related notice of assessment on VAT on boat lease transactions. The increases and decreases on this position derive from the exact recognition of the liability initially estimated based on the results of the audit on 2014 and 2015; iii) the municipal property tax (IMU) claims for 3.3 million euro, due to the settlement of the IMU disputes on properties not repossessed through terminated lease agreements, arising in previous years; and iv) 1 million euro for sundry disputes, mainly regarding IRES and IRAP taxes. During the year, the litigation settled (known as findings closed) totalled 340 proceedings, for a total amount claimed of 24.7 million euro, including the findings arising and settled during the year, with an outlay of 3.6 million euro, mainly referring to claims for municipal property tax (IMU) (2.5 million euro). With regard to the Italian subsidiaries, tax disputes totalled 85 million euro as at 31 December 2022 (71 million euro as at 31 December 2021), covered by specific provisions amounting to 9 million euro (11 million euro in the 2021 financial statements). Compared to 31 December 2021, the main events that gave rise to significant movements of the total amount of claims (+14 million euro) were as follows: \u2013 +16 million euro in new disputes, mainly referring to: Intesa Sanpaolo Private Banking (10.4 million euro); Cargeas Assicurazioni (4.6 million euro); Provis and other minor disputes (1 million euro); \u2013 -2 million euro in closed disputes referring to Fideuram Vita, Intesa Sanpaolo Vita, Fideuram ISPPB, Siref and UBI Leasing. The decrease in provisions compared to 31 December 2021, equal to 2 million euro, mainly refers to: \u2013 +1.2 million euro in provisions on new disputes arising; \u2013 -1.5 million euro due to the merger of UBI Leasing; \u2013 -1 million euro with regard to cases closed that were previously covered by provisions. Tax disputes involving foreign subsidiaries amounted to 8 million euro (9 million euro at the end of 2021), covered by provisions of 4 million euro (8 million euro in 2021). The changes in the amount claimed and the allowance for risks are mainly due to the settlement of several disputes of Intesa Sanpaolo Bank Albania and Bank of Alexandria and, referring only to the amount claimed, the penalties imposed to UBI Trustee. In the following paragraphs, information is provided regarding the most important ongoing disputes, and on several orders to file appearances relating to Italian subsidiaries, served in December 2022. Parent Company Disputes regarding registration tax, with a total remedy sought of 38 million euro, on the reclassification of business contribution and sale of the investments as sales of businesses and the consequent assessment of a higher business value These are disputes concerning the recovery of registration tax paid on business contributions and the subsequent sales of the investments, which were reclassified by the tax authorities as sales of business unit, with the consequent assessment of a higher value for the business unit. These disputes were not settled under the tax amnesty pursuant to Article 6 of the tax decree connected to the 2019 Budget Law (Decree-Law 119/2018), either because the Bank had already paid the full amount assessed and as a result of settlement would not have been entitled to the repayment of the sums in excess of the amount due for settlement, or because there were sound prospects of a favourable outcome to the trials pending before the Court of Cassation. Dispute regarding the municipal property tax (\u201cIMU\u201d) on real estate not repossessed following the termination of the related lease contracts The dispute regarded the identification of the taxpayer liable for the municipal property tax (IMU) in relation to real estate assets owned by the lease companies or banks and leased out to third parties, where the lease was terminated early due to default by the lessee, or as a result of insolvency proceedings involving the lessee, but without the lessee having returned the asset to the lessor. Over the years a tax dispute arose on this matter (also affecting the former Mediocredito Italiano and Provis) relating to whether the lessee is (still) liable for the municipal property tax rather than (already) the lease company/bank in the period between the date of termination (or dissolution) of the lease and the date of physical return of the asset to the lessor. In 2020, the Court of Cassation settled on the view that the lease company/bank was liable for municipal property tax (IMU) from the date of legal termination of the contract, regardless of repossession of the asset. In addition, the 2020 Budget Law provided for the abolition of the single municipal tax (IUC), with regard to its components relating to IMU and TASI, and the unification of the two taxes into the new municipal property tax (IMU). On 18 March 2020, the Ministry of the Economy and Finance \u2013 Finance Department \u2013 Tax Legislation and Tax Federalism Unit, with circular no. 1/DF, commenting on the latter changes, provided precise indications regarding the liability for the new municipal property tax with regard to the date of termination of the lease agreement in accordance with the prevailing case law. Accordingly, starting from 2020, the Bank decided to proceed with the payment of municipal property tax for all leased real estate assets with terminated contracts, regardless of repossession of the asset, seeking recovery from the former users, where possible. It was also decided to gradually withdraw from all pending disputes on assessments relating to years up to 2019, following an attempt at settlement with the interested municipalities to quash the penalties and offset trial fees. The total remedy sought is 7 million euro. Dispute regarding VAT on boat lease transactions On 17 April 2019, the Milan Tax Police (Guardia di Finanza) initiated a general audit of the former Mediocredito Italiano, merged into Intesa Sanpaolo, concerning tax years 2014 and 2015 for VAT purposes and tax years 2015 and 2017 for direct tax purposes. The audit was concluded on 13 October 2020, contesting: i) the VAT exemption applied, in accordance with Article 8-bis of Presidential Decree 633/72, by the company to boat leases, and ii) the VAT exemption established in Article 7- bis of Presidential Decree 633/72 for the buyback of a vessel referring to 2014. The Lombardy Regional Tax Office thus served a notice of assessment (with interest and penalties) for 2014, against which an appeal was lodged. On 28 February 2022 the ruling of the Milan Provincial Tax Commission was filed, partially favourable to the Bank, where, in acknowledging the reduction of the VAT claimed due to internal review by the Italian Revenue Agency, the judges recognised that the penalties imposed of 2 million euro (remedy sought of 4 million euro) were not due. On this dispute, the Bank made provisions with regard to the former claim, solely for the risk of tax and interest, and not also for the risk of penalties, whereas for the latter claim, the potential tax liability is believed to be borne contractually by the customer. However, prudently, the dispute has been covered by provisions for the penalty and interest components. The dispute is pending before the Court of Justice in the second instance. For the tax year 2015, the notice of assessment regarding one single finding of tax exemption pursuant to Article 8-bis of Presidential Decree no. 633/72, applied by the nautical lease company, was settled through a payment of around 2 million euro, using the allowance for tax litigation, previously established in 2019, for 2.9 million euro. Also for 2016, the Italian Revenue Agency notified the related notice of assessment on 1 June 2022 (remedy sought of 1.5 million euro). The proceedings are pending before the Tax Court of Justice in the first instance. With regard to tax years 2015 and 2017, the audit was concluded without detecting any irregularities in the field of direct taxes. * * * Instead, with regard to the disputes settled during the period, the following is noted: i) the dispute regarding the transfer by Manzoni S.r.l. to Melville S.r.l. through a partial, non-proportional demerger, of a private equity business line, reclassified by the Italian Revenue Agency as a direct sale of a business pursuant to Article 20 of Presidential Decree no. 131/1986, with a request for registration tax of 6.7 million euro, plus interest. The Bank won both in the first and second instance, and, lastly, also in the Court of Cassation, with a ruling filed during the year. As a result, that claim, quantified in a total of 8.3 million euro (of which interest of 1.6 million euro) was closed. In the previous financial reports, with regard to the dispute concerning the application of the proportional registration tax following the reclassification of a reorganisation consisting of a transfer of a business and a sale of an equity interest into a sale of a business pursuant to Article 20 of Presidential Decree 131/1986, details were provided of the publication of the Constitutional Court\u2019s ruling no. 39/2021 of 16 March 2021 whose conclusions confirmed the previous ruling no. 158 of 21 July 2020 by that Court. In light of this second ruling of the Constitutional Court, the long-standing dispute was considered to have been concluded with favourable outcomes for the Bank in the numerous claims pending before the Court of Cassation. However, it is important to note that, on the grounds that, according to the principle of alternativity between VAT/registration tax, it is essential to arrive at a single definition of the concept of a business for the purposes of both taxes, the Court of Cassation, by Order no. 10283/2022 of 31 March 2022, referred the proceedings to the EU Court of Justice concerning the compatibility of Article 20 of the Consolidated Law on Registration Taxes (according to which the application of registration tax is to be made on the basis of the content of the document submitted for registration, without taking into account any non-directly discernible external elements), with respect to the VAT rules governing the treatment of transfers of businesses (transactions not subject to the tax) and of individual assets (taxable transactions). The Court of Justice of the European Union, with order of 21 December 2022 - Case C-250/22, declared that, \u201cIt is clearly impossible to admit the request for a preliminary ruling lodged by the Supreme Court of Cassation (Italy), with order dated 31 March 2022\u201d...\u201cas the referring court has not sufficiently explained under which profile the interpretation of Article 5, paragraph 8 of the Sixth Directive and Article 19 of the VAT Directive is relevant for the purposes of applying Article 20 of the TUR (Consolidated Law on Registration Tax, Ed.)\u201d. The Court also specified that \u201cthe referring court retains the right to lodge a new request for a preliminary ruling, providing the Court with all the elements that make it possible to issue a ruling\u201d. The issue is now being carefully monitored; ii) the dispute relating to the business contribution and subsequent sale of the investment by Banca di Trento e Bolzano to Intesa Sanpaolo is noted, reclassified by the Italian Revenue Agency as a direct sale of a business (also pursuant to the aforementioned Art. 20 of Italian Presidential Decree no. 131/1986), with a demand for proportionate registration tax (0.8 million euro) plus interest (0.3 million euro), amounts provisioned at the time. Lastly, in a ruling filed during the year, the Court of Cassation found that the reclassification of the deed of contribution of a business line, followed by the sale of the investments in the contributed company is no longer permitted by law (pursuant to Art. 20 of Italian Presidential Decree no. 131/1986) and that the tax nature of the deed requires registration tax, as also observed by the Constitutional Court in the aforementioned ruling no. 158/2020. As a result, the amounts provisioned at the time were released. With regard to the Intesa Sanpaolo branches located abroad, it should be noted that: a) a VAT audit on the London branch is in progress for the years 2016, 2017 and 2018; to date, no findings have been reported; ii) two tax audits concerning direct taxes of the New York branch are in progress: the first audit, which began in January 2021, is being conducted by the Internal Revenue Service (IRS) with regard to the income tax return filed for the tax period 2018; to date, no claims have been made; the second audit, notified in July 2021, is being conducted by the City of New York, with regard to the tax periods 2018 and 2019; to date, no claims have been made. The previous audits conducted by the State of New York, regarding the tax periods 2015 and 2016, and by the IRS regarding the tax period 2016 were closed with no claims; c) the tax audit begun in April 2021 by the Madrid Revenue Agency for the year 2016 concerning taxes on income on the Madrid branch of the merged company UBI Banca, which was closed down on 31 December 2018, was closed with no liabilities. More specifically, the tax loss reported by the branch for 2016 of 724 thousand euro was adjusted, decreasing it by a total of 722 thousand euro, of which 150 thousand euro due to interest that was not deductible, as it related to debt exceeding the regulatory capital required by Spanish regulations (application of the thin capitalisation rule), and 572 thousand euro due to non-deductible expenses, referring to services provided to the branch by the then Luxembourg parent company (UBI Banca International S.A.), by virtue of Spanish international transfer pricing regulations. The reduction of the tax loss did not generate any taxes or penalties due; e) the VAT audit on the Warsaw branch for the tax periods 2016-2020 on financial services (SWIFT) was closed. The branch paid the amount claimed, equal to 13 thousand euro (including interest and penalties) in full; f) the audit on the Munich branch of the merged company UBI Banca for the years 2015 to 2018, begun in 2021, is under way. The auditors are acquiring the accounting and tax documentation; g) the tax audit on the Madrid branch of ISP regarding the deductibility of intercompany costs amounting to 2.2 million euro for the tax period 2015 was concluded with the charging of 93 thousand euro of tax, plus interest (17 thousand euro) and penalties (20 thousand euro). The branch paid the amount claimed in full. Group Companies For Banca Fideuram, as a result of the Bank\u2019s appeal, three lawsuits are pending before the Court of Cassation concerning the failure to withhold 27% of the interest accrued in 2009, 2010 and 2011 on foreign bank accounts held at Fideuram Bank (Luxembourg) by two \u201chistoric\u201d Luxembourg mutual funds (Fonditalia and Interfund SICAV), for which Banca Fideuram was only the placement bank and correspondent bank (total value of the disputes of 9.3 million euro). As the Bank lost in the second instance of all the proceedings, it was decided, after consultation with the consultant engaged to assist the bank in the cases pending before the Court of Cassation, to set up a provision for risks, including penalties and interest. Intesa Sanpaolo Private Banking has long had pending IRES and IRAP disputes relating to the deduction (in 2011 and the following years) of the amortisation charge for the goodwill arising from the transfers of the private banking business lines of Intesa Sanpaolo and Cassa dei Risparmi di Forl\u00ec e della Romagna in 2009, Banca di Trento e Bolzano and Cassa di Risparmio di Firenze in 2010 and Cassa di Risparmio Pistoia e Lucchesia and Cassa di Risparmio dell\u2019Umbria in 2013, realigned by the transferee in accordance with Article 15, paragraph 10, of Law Decree no. 185 of 29 November 2008. The status of the disputes is as follows: \u2013 year 2011: the favourable ruling no. 2763/2019, filed on 26 June 2019, by the Lombardy Regional Tax Commission, which rejected the main appeal by the Italian Revenue Agency against the ruling no. 7028/2017 by the Milan Provincial Tax Commission, on the merits (total claim amount of 7.9 million euro, of which 3.8 million euro for taxes and 3.5 million euro for penalties). The court of second instance also upheld the company\u2019s cross-appeal on the preliminary matter of the lapse of the tax administration\u2019s power of assessment: the realignment of goodwill had been reported in the tax return for the 2010 tax year, and the notices were served in 2017, i.e. beyond the time limits laid down in Article 43 of Presidential Decree 600/73. The case is pending before the Court of Cassation on appeal by the Attorney General and a counter-appeal has been prepared by the Bank; \u2013 year 2012: unfavourable rulings no. 5172/2019 and 5173/2019 by the Lombardy Regional Tax Commission, which granted the appeals by the Italian Revenue Agency (total claim amount of 8.4 million euro, of which 3.9 million euro for taxes and 3.9 million euro for penalties). An appeal was lodged with the Court of Cassation; \u2013 year 2013: the favourable rulings of both the Provincial Tax Commission and the Regional Tax Commission (total claim amount of 10.6 million euro, of which 4.9 million euro for taxes and 4.9 million euro for penalties). The Revenue Agency lodged an appeal with the Court of Cassation and the Bank then filed its defence; \u2013 years 2014 and 2015: the Second Division of the Milan Provincial Tax Commission, by judgment no. 504/2/2020 of 7 February 2020, filed on 13 February 2020, granted the IRES and IRAP appeals for both years (joined proceedings). The tax claim amounts to 16.7 million euro (of which tax of 7.9 million euro and penalties of 7.9 million euro), plus interest. The favourable second instance ruling no. 1044 concerning the years 2014 and 2015 was filed on 18 March 2022. The Lombardy Regional Tax Commission rejected the appeal by the Italian Revenue Agency against the first instance ruling that had upheld the (combined) IRES and IRAP tax appeals relating to those tax periods. The Italian Revenue Agency lodged an appeal with the Court of Cassation; \u2013 year 2016: on 29 April 2021, notices were served for the assessment of IRES and IRAP taxes for tax year 2016. The amount deducted by the company and now disputed by the Lombardy Regional Revenue Directorate for that year is the same amount already adjusted for 2015, of 12.1 million euro, corresponding to higher IRES of 3.3 million euro and IRAP of 0.7 million euro, plus interest, and penalties (total amount 8.2 million euro); By ruling no. 1962, filed on 6 July 2022, the Milan Provincial Tax Commission rejected the joined appeals of the Parent Company and Intesa Sanpaolo Private Banking, ordering each party to pay its own costs. In addition to rejecting the preliminary matter of the lapse of the Office\u2019s power of assessment, based on the well-known ruling no. 8500/2021 of the Joint Sections of the Court of Cassation, the ruling also rejected the appeals on the merits. The term for lodging an appeal expires on 5 February 2023. \u2013 year 2017: the dispute was initiated against the notice of assessment. The amount deducted and disputed for 2017 is the same amount already adjusted for 2016 (12.1 million euro), corresponding to higher IRES of 3.3 million euro and IRAP of 0.7 million euro, plus interest and penalties (total amount 8.6 million euro). The notice of assessment was challenged through an appeal served on the Lombardy Regional Revenue Directorate on 3 June 2022 and filed with the Milan Provincial Tax Commission on 20 June 2022 (Appeals General Register no. 2683/2022). We are awaiting for the hearing for discussion to be scheduled. The total amount claimed, including taxes, penalties and interest, amounts to 61 million euro. According to the opinion issued by the firm assisting the bank, the risk of an adverse ruling is classified as \u201cpossible\u201d, since the lawfulness of realigning the tax value of the goodwill newly generated for the transferee \u2013 something which in the past was done by other Group companies without incurring in tax disputes \u2013 has been expressly acknowledged by the Italian Revenue Agency in Circular no. 8/E of 2010 and is consistent with the provisions of Article 15, paragraph 10 of Law Decree 185/2008. Cargeas Assicurazioni, an insurance company acquired by Intesa Sanpaolo Vita on 27 May 2021, underwent a tax audit by the Italian Revenue Agency, Lombardy Regional Directorate, Large Taxpayers Office, aimed at verifying the correct application, for the years from 2010 to 2018, of the tax rules on private insurance and life annuity contracts pursuant to Law no. 1216 of 29 October 1961. As a result of the audit, the authorities claimed that redundancy insurance policies (which are mandatorily associated with salary-backed loans and optional with other mortgages, loans and consumer credit), should not be subject to tax on insurance premiums at a rate of 2.5%, but should be classified as credit risk insurance policies, subject to a tax rate of 12.5%. The Revenue Agency maintains that although the risk insured (on the basis of which the premium is determined with statistical/actuarial criteria) is the loss of employment, redundancy policies should be charged the 12.5% rate applicable to credit risk insurance, given that the policy would protect the lending institution\u2019s interest in collecting its credit. The dispute is nothing new for the insurance industry; in fact, insurance companies have been maintaining that the Agency's reasoning is unsubstantiated and biased for years now. ANIA has also recently given its opinion on the matter through circular no. 0082 of 5 March 2021 (which refers to circular no. 127 of 21 April 2005), pointing out that the Agency\u2019s position produces a series of unsystematic and abnormal consequences which certainly do not reflect the intention of the legislator in Law no. 1216, and diverge from the guidance of the financial administration itself which, on this point, had supported application of the 2.5% rate in circular no. 29/E of 2001. On the merits, ANIA specified that in the policies, the insured party is identified as the natural person who subscribed, in full autonomy, the collective policy proposed by the lending institution, and that contractual structure recognises the natural person debtor as the party in the interest of whom the policy is underwritten, as the risk covered (loss of employment, which results in the impossibility to pay the debt) is specifically borne by the latter. Moreover, the contractual framework shows that the lender is the contracting party of the policy exclusively in terms of the form, while, by virtue of demonstrating his/her intention to subscribe the contract and due to the cost charged to him/her, which refers exclusively to the insurance premium paid, the financed worker can be effectively classified as the contracting party, as well as the insured party. Lastly, as additional support, it should also be considered that the communication of data and information regarding the contracting parties, sent annually to the Tax Register contemplates the indication of the individual subscribers of collective policies, as they are the parties that bear the cost of the premium. After the audit, on 25 May 2021 Cargeas Assicurazioni received notice of assessment no. TMB032S00039/2021 for 2010, claiming an additional tax of 1.7 million euro, 0.7 million euro in interest and 3.4 million euro in penalties, equal to 200% of the assessed tax (minimum penalty prescribed by law), for a total of 5.7 million euro. On 21 July 2021, the notice was appealed before the Milan Provincial Tax Commission which, by ruling no. 2396 of 1 September 2022, upheld the appeal and cancelled the notice of assessment. The term for the Office\u2019s appeal is pending. During 2022, two rulings of the Milan Provincial Tax Commission were published (no. 343 of 17 January 2022 and no. 1214 of 28 March 2022), which regarded the issue of the \u201creclassification\u201d of redundancy insurance policies (subject to tax at a rate of 2.5%) in place of those against debtor insolvency risk, i.e. those that cover credit risk (subject to tax at a rate of 12.5%). The outcome was unfavourable to the appealing companies outside the Intesa Sanpaolo Group (even though ruling no. 343 recognised the inapplicability of the penalties due to clear objective uncertainty on the applicability of the rule). However, considering the arguments clearly expressed by ANIA, and due to the assessments formalised by the defence counsel, the risk of a negative outcome was deemed possible. Also as a result of the above audits, on 6 June 2022, Cargeas Assicurazioni received notice of assessment no. TMB032S00216/2022 for 2011, which claimed a higher tax of 1.3 million euro, 0.5 million euro in interest and 2.8 million euro in penalties, equal to 200% of the assessed tax (minimum penalty prescribed by law), for a total of 4.6 million euro. The grounds set out in the above notice of assessment for 2011 are the same as those indicated for 2010. The Company deems that a negative outcome for the year 2011 is possible, just as that for the year 2010. Therefore, within the terms set out by law, it will appeal that notice before the competent Court of Justice. Provis has municipal property tax (IMU) and municipal tax (TASI) claim procedures that are pending or about to commence with a total value of 3.8 million euro. The corresponding provision for risks amounts to 4.2 million euro, inclusive of legal expenses. On 28 October 2022, Fideuram SGR (as well as ISP as the consolidating entity) received from the Italian Revenue Agency \u2013 Lombardy Regional Directorate an order to file an appearance regarding the year 2016 for IRES and IRAP, following the delivery of documentation in response to a questionnaire served on 21 April 2021, in order to establish a cross-examination on the alleged transfer pricing issues arising in relation to the consideration for fees received by Fideuram SGR in delegated manager activities for investment funds performed in favour of the Irish associate Fideuram Asset Management Ireland (principal). With specific regard to those management fees, the Revenue Agency has repeated the same adjustments made for the years 2011 to 2013 (which gave rise to tax settlement proposals for those years) and, as a result, adjusted the taxable income of Fideuram SGR upwards by 560 thousand euro. Fideuram accepted that proposal, signing the settlement proposal on 15 December 2022 and paying the amount due (220 thousand euro) on 20 December 2022. In relation to possible equivalent claims for subsequent years up to 2019, the company determined the possible charge in terms of taxes and interest at 500 thousand euro, allocating provisions to the 2022 income statement. In agreement with the advisor handling the claim, no provisions were made for 2020 and after, as the settlement of the bilateral agreements submitted in 2020 (thus, applicable from that period for 5 years) to the Irish and Italian authorities on the disputed activities seems to be near. On 22 December 2022, Eurizon Capital SGR (hereinafter, \u201cEC ITA\u201d) received from the Italian Revenue Agency \u2013 Lombardy Regional Directorate (hereinafter, the \u201cOffice\u201d) an order to file an appearance for the purposes of IRAP and, jointly with the tax consolidating entity Intesa Sanpaolo (hereinafter, the \u201cParent Company\u201d), an order to file an appearance for the purposes of IRES for the year 2016. EC ITA and the Parent Company attended the meeting with the Office on 28 December 2022, thereby launching a cross- examination that will last around four months. After examining the intragroup transactions implemented by EC ITA with regard to the Luxembourg subsidiary Eurizon Capital S.A. (hereinafter, \u201cEC LUX\u201d), the Office challenged the transfer pricing analysis conducted in the transfer pricing documentation of EC ITA, deeming that it allegedly does not reflect the actual allocation of functions, risks and assets existing between EC ITA and EC LUX. More specifically, the Office deems that the provision of services by EC ITA to EC LUX, though formally divided into numerous separate operations, in terms of substance is \u201cattributable to wider business operations\u201d carried out by EC ITA for EC LUX. Therefore, applying a method for determining the arm\u2019s length price different from that adopted by EC ITA, the Office determined higher taxable income for IRES and IRAP purposes of 151.1 million euro, to which IRES and IRAP taxes are applied for 50 million euro (41.6 million euro for IRES and 8.4 million euro for IRAP), plus interest totalling 9.6 million euro and penalties totalling 15 million euro. In the case in point, with regard to the method for determining transfer prices, while EC ITA deemed it correct to use the Comparable Uncontrolled Price (CUP) method to price the value of services, first of all of the management mandate service, provided to EC LUX, aligning the price charged to EC LUX with the prices that EC ITA charges to/pays for mandates received from/granted to third parties, the Office deemed that the most appropriate method was the Transactional Net Margin Method (TNMM), which substantially requires allocating a percentage of the net margin out of production value to the party in question, i.e. EC LUX. In detail, the Office deems that the ratio of net income (loss) before tax/net fee and commission income recognised for EC LUX (38.5%) is too high. As a result of that approach, only around one-fourth of the net income before tax of EC LUX (208.6 million euro) is attributed to Luxembourg and around three-fourths (151.1 million euro) to EC ITA. It is important to note that, according to the Office, the choice of the method and the consequent results of allocating revenues between Luxembourg and Italy is based on the conviction that EC LUX receives an intangible contribution from EC ITA. As confirmed also by the opinion issued by the advisor assisting EC ITA, the claim made by the Office is unfounded in various aspects: a) the intangible does not influence the intragroup transfer prices; b) in addition, the Office completely ignored the results of its own analysis, conducted in the previous years regarding the tax periods 2011-2015, which led it to issue tax settlement proposals regarding the adjustment of transfer prices applied in transactions between EC ITA and EC LUX on completely different bases than those now arising in relation to 2016. Moreover, in that context, EC LUX provided the Office with information regarding the intangible and its non-accounting tax amortisation. As part of the tax settlement proposals for the tax periods 2011-2015, the Office acquired and assessed the information regarding that non-accounting amortisation, without, however, deeming that it should have an impact for the purposes of determining the transfer prices between EC ITA and EC LUX. The Office had also deemed the transfer pricing documentation prepared at the time by EC ITA based on the CUP method to be suitable, granting penalty protection to EC ITA; c) the Office also failed to conduct a specific analysis to identify the actual functions performed, risks assumed and assets used by EC LUX during the tax period 2016, but merely classified EC LUX as the \u201cless complex\u201d entity mainly based on the incorrect conviction that the non-accounting tax amortisation attributable to EC LUX was attributable to an \u201cintangible asset\u201d contributed by EC ITA. As a result, also based on the presence of that \u201csingle\u201d contribution subject to tax amortisation, it deemed the \u201ctraditional\u201d methods for determining the arm\u2019s length price, such as the CUP, inapplicable to the case in question; d) the Office ignored the approach it had adopted in the tax settlement proposals issued in 2022 with Fideuram SGR, discussed above, regarding intragroup transactions with the Irish associate FAMI. In this last context, in the presence of intragroup transactions similar to those carried out by EC ITA with EC LUX, the Office deemed that the most appropriate method based on the specific circumstances was the CUP; e) lastly, though the Office acknowledged that on the same intragroup transactions subject to the order, there is currently an ongoing procedure of preventive bilateral agreement to reach an agreement on transfer prices between the competent Italian and Luxembourg authorities, it has not promoted that situation in any way. This, despite the fact that the preventive agreement procedure was launched by EC ITA following the issue of the afore-mentioned tax settlement proposals relating to the tax periods 2011-2015 and, therefore, also including 2016. Those arguments will all be stated and documented in the cross-examination with the Office, which should be concluded by 30 April 2023. The following is an account of the developments relating to the foreign subsidiaries during the year. Intesa Sanpaolo Bank Albania is mainly involved in: i) a dispute pending before the Court of Cassation on appeal by the Bank, concerning the write-off of loans that were no longer recoverable that, according to the tax authorities, led to an unjustified reduction in the taxable amount for direct tax for the years 2003 to 2007 (remedy sought of 1.3 million euro); ii) a former Veneto Banka dispute pending in the second instance regarding mistakes made in the tax return for the tax period 2013 (remedy sought of 33 thousand euro). Instead, the dispute relating to mistakes made in the tax return for the tax period 2011 was settled with the payment of 1 million euro. Bank of Alexandria has two tax audits under way regarding corporate income tax for the tax period 2018 and stamp duty for 2019. At present no claims have been put forward. In addition, there is a pending dispute concerning the non-payment of stamp duty by the bank\u2019s branches for a total value of 2.1 million euro for tax periods 1984 \u2013 2008 (it amounted to 5.8 million euro as at 31 December 2021). The reduction in the amount claimed and the allowance for risks (-3.7 million euro) derives from the settlement of a portion of the disputes, using the related allowance for risks. The tax audit on stamp duty relating to the tax period 2019 was closed with no findings. The dispute for the years 2014 and 2015 regarding the foreign subsidiary UBI Trustee S.A. (a trust company resident in Luxembourg) was closed without liabilities, as a result of an agreement by the trusts and their beneficial owners with the tax authorities. Lastly, it is noted that an audit is under way for IMI SEC, conducted by the State of New York, regarding income tax for the years 2015, 2016 and 2017. No findings are noted for the time being. Another tax audit begun in 2022 regards EXELIA, for the tax periods 2016 and 2017. No findings are noted for the time being. Lastly, we note a dispute pending in Brazil in relation to the former subsidiary Banco Sudameris Brasil (now Banco Santander Brasil), sold in 2003 to ABN AMRO Brasil (now the Santander Group), whose economic charge falls on Intesa Sanpaolo due to the commitments entered into with the seller at the time, which was not established through the Settlement Agreement of 2019 with Banco Santander Brasil. The dispute is known as \u201cCausa PDD1\u201d and is based on the issue of taxes on income and social security contributions for 1995. During 2021, the first instance judgement was filed by the ordinary civil judge. Despite having partially accepted several objections of the bank, the judgement was favourable, on the whole, to the Brazilian tax authorities. The judgement was appealed and the case is now pending in the court of second instance. The remedy sought is 41.6 million euro, at the exchange rate of December 2022 (35 million euro as at 31 December 2021), set as equal to the security deposit paid by the bank to take action in the civil court (216 million Brazilian real) and posted under balance sheet assets. There were two changes during the year. The first change concerns the issue on 13 June 2022 of an opinion by Prof. Tercio Sampaio Ferraz in which, inter alia, he confirms the argument put forth by Intesa Sanpaolo that the settlement for the year 1995 with the Brazilian tax authorities based on specific local law (Art. 17 of Brazilian Law no. 9799/1999), the subject of an administrative dispute closed in favour of the taxpayer with two decisions of the Administrative Court (CARF), cannot be put under discussion once again as, instead, the Brazilian tax authorities did through the jurisdictional dispute currently pending in the second instance. According to local advisors, those arguments confirm that a negative ruling in relation to the interest component (approximately 25.6 million euro of the deposit posted under balance sheet assets) is remote. On taxes and penalties (equal to a total of 16 million euro of the deposit) we prudentially confirm the provisions of 50% of that amount, totalling 8 million euro (+1.2 million euro compared to 31 December 2021). The increase is due to the appreciation of the Brazilian currency against the euro, compared to the exchange rate recorded at the end of 2021 for the valuation of the dispute and the related risk. The second change regards the notification in October from the Brazilian tax authorities of a payment order for the alleged failure of the taxpayer to provide a deposit by order of the court to cover the tax debt, which is still being challenged. In that regard, a brief was submitted opposing that order, highlighting that the Brazilian tax authorities incorrectly calculated the value of interest accrued on the deposit by order of the court, which, instead, would more than cover the claim of the tax authorities. The local advisors confirmed that the document does not change the estimates of risk expressed to date with regard to that pending dispute. * * * In connection with all the tax disputes outstanding as at 31 December 2022, for a total value, as stated above, of 219 million euro, of which 126 million euro relating to Intesa Sanpaolo, the Group has recognised receivables of 44 million euro in its balance sheet assets to account for amounts paid on a provisional basis due to tax assessments, of which 21 million euro related to the Parent Company. The portion of the allowance for risks which relates to provisional tax assessments amounts to 32 million euro, of which 26 million euro for Intesa Sanpaolo. The provisional payments in question were made in compliance with specific legal provisions, which provide for the mandatory payment based on an automatic mechanism totally independent of whether the related tax claims are actually founded and, thus, irrespective of the higher or lower level of risk of a negative outcome in the related proceedings. Thus, these payments were made solely because of the enforceable nature of the administrative acts that set forth the related tax claim, which does not lose its effectiveness even in the event of an appeal (no suspensive effect) and has no impact on the assessment of the actual risk of a negative outcome, which is measured using the criterion set forth in IAS 37 for liabilities.", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1000": { "value": "
SECTION 13 \u2013 GROUP SHAREHOLDERS\u2019 EQUITY \u2013 CAPTIONS 120, 130, 140, 150, 160, 170 AND 180
13.1 Share capital and Treasury shares: breakdown
For information on this section, see point 13.3 below.
13.2 Share capital \u2013 Parent Company\u2019s number of shares: annual changes
Captions/Type
Ordinary
A. Initial number of shares
19,430,463,305
-fully paid-in
19,430,463,305
- not fully paid-in
-
A.1 Own shares (-)
-30,629,777
A.2 Shares outstanding: initial number
19,399,833,528
B. Increases
566,771,008
B.1 New issues
546,972,658
- for consideration:
386,972,658
- business combinations
-
- conversion of bonds
-
- exercise of warrants
-
- other
386,972,658
- for free:
160,000,000
- in favour of employees
160,000,000
- in favour of directors
-
- other
-
B.2 Sale of own shares
19,798,350
B.3 Other
-
C. Decreases
-1,001,693,612
C.1 Annulment
-988,632,803
C.2 Purchase of own shares
-13,060,809
C.3 Disposal of companies
-
C.4 Other
-
D. Shares outstanding: final number
18,964,910,924
D.1 Own shares (+)
23,892,236
D.2 Final number of shares
18,988,803,160
-fully paid-in
18,988,803,160
- not fully paid-in
-
13.3 Share capital: other information
The share capital of Intesa Sanpaolo as at 31 December 2022 amounted to 10,369 million euro, divided into 18,988,803,160
ordinary shares, with no par value. Each ordinary share gives the right to one vote in the Shareholders\u2019 Meeting. At the date
of this document, the share capital was fully paid-in.
As at 31 December 2022, the Group holds treasury shares of Intesa Sanpaolo of 124 million euro, of which approximately
50 million euro attributable to the Parent Company and the remaining 74 million euro to the other Group companies.
13.4 Reserves from retained earnings: other information
Group reserves amounted to 14,427 million euro and included the legal reserve, extraordinary reserve, concentration
reserves (Law 218 of 30 July 1990, art. 7, par. 3 and Law 218 of 30 July 1990, art. 7) and other reserves, as well as the
consolidation reserve.
The legal reserve, set up as provided for by law, must be at least one fifth of share capital; in the past it was set up by
allocating each year at least one twentieth of net income for the year. Should the reserve decrease, it must be reintegrated by
allocating at least one twentieth of net income for the year.
Concentration reserves under Law 218 of 30 July 1990 were set up at the time of reorganisations or concentrations carried
out pursuant to the aforementioned law.
Other reserves included reserves pertaining to international branches and other reserves set up in the past following specific
legal provisions.
Consolidation reserves were generated following the elimination of the book value of equity investments against the
corresponding portion of the shareholders' equity of each investment.
The valuation reserves amounted to a negative figure of 2,635 million euro and included valuation reserves for assets
measured at fair value through other comprehensive income of -2,032 million euro, valuation reserves pertaining to insurance
companies of -696 million euro, reserves for cash flow hedges of -466 million euro, exchange rate valuation reserves (relating
to fully consolidated equity investments) of -1,247 million euro, reserves relating to the hedging of foreign investments of
-10 million euro, reserves for revaluations of property and equipment and legally-required revaluation reserves of 2,060 million
euro, valuation reserves relating to financial liabilities designated at fair value through profit or loss (changes in the Group\u2019s
own credit rating) of -45 million euro, as well as the negative reserve on actuarial profits (losses) from defined benefit pension
plans of -238 million euro, in addition to approximately 39 million euro of valuation reserves connected to minority equity
investments.
13.5 Equity instruments: breakdowns and annual changes
Issuer
Interest rate
Step-
up
Issue
date
Expiry
date
Early
redemption
as of
Currency
Original
amount in
currency
Book value
(millions
of euro)
Intesa Sanpaolo
7.70% fixed rate
no
17-Sep-2015
perpetual
17-Sep-2025
USD
1,000,000,000
873
Intesa Sanpaolo
7.75% fixed rate
no
11-Jan-2017
perpetual
11-Jan-2027
Eur
1,250,000,000
1,251
Intesa Sanpaolo
6.25% fixed rate
no
16-May-2017
perpetual
16-May-2024
Eur
750,000,000
750
Intesa Sanpaolo
5.875% fixed rate payable
semi-annually
no
20-Jan-2020
perpetual
20-Jan-2025
Eur
400,000,000
382
Intesa Sanpaolo
3.75% fixed rate
no
27-Feb-2020
perpetual
27-Feb-2025
Eur
750,000,000
731
Intesa Sanpaolo
4.125% fixed rate
no
27-Feb-2020
perpetual
27-Feb-2030
Eur
750,000,000
732
Intesa Sanpaolo
5.875% fixed rate payable
semi-annually
no
01-Sep-2020
perpetual
01-Sep-2031
Eur
750,000,000
743
Intesa Sanpaolo
5.5% fixed rate payable semi-
annually
no
01-Sep-2020
perpetual
01-Mar-2028
Eur
750,000,000
746
Intesa Sanpaolo
6.375% fixed rate payable
semi-annually
no
30-Mar-2022
perpetual
30-Sep-2028
Eur
1,000,000,000
980
REYL & Cie SA
4.75%
NO
30-Nov-2018
perpetual
30-Nov-2023
CHF
12,000,000
10
REYL & Cie SA
4.75%
NO
30-Nov-2019
perpetual
30-Nov-2024
CHF
15,000,000
13
Total
7,211
13.6 Other information
Pursuant to Article 2433-bis, paragraph 4, of the Italian Civil Code, Intesa Sanpaolo distributed a 2022 interim dividend
totalling 1,399,608,167.99 euro
92
, corresponding to a unit dividend of 7.38 euro cents per ordinary share. The dividend was
paid out on 23 November 2022 (with coupon presentation on 21 November and record date on 22 November).
92
It does not include the interim dividend on the 23,922,835 own shares held at the record date, equal to 1,765,505.22 euro.
SECTION 14 - MINORITY INTERESTS \u2013 CAPTION 190 For details regarding the breakdown of minority interests, see section F, \u201cPart B.1. Consolidated shareholders\u2019 equity: breakdown by type of company\u201d. 14.1 Breakdown of caption 190 Minority interests (millions of euro) Companies 31.12.2022 31.12.2021 Investments in consolidated companies with significant minority interests 158 276 1 Bank of Alexandria 126 174 2 Risanamento S.p.A. 26 53 3 Eurizon SLJ Capital Limited 3 - 4 Eurizon Capital Real Asset S.p.A. 3 - 5 Private Equity International S.A. - 32 6 Privredna Banka Zagreb DD - 17 Other investments 8 15 TOTAL 166 291 14.2 Equity instruments: breakdown and annual changes There were no equity instruments pertaining to minority interests. SECTION 1 \u2013 CONSOLIDATED CAPITAL A. Qualitative information The control of capital adequacy both at consolidated level and at single entities level is ensured by capital management which defines the size and optimum combination of the different capital instruments in accordance with regulatory constraints and consistently with the risk exposure taken on by the Group. The Intesa Sanpaolo Group assigns a primary role to the management and allocation of capital resources, considering this to be an instrument for strategic leverage, as well as a way to ensure consistency of the operating plans of the business units. Once the Group\u2019s strategic profitability, capital position and liquidity objectives have been defined, capital and financial resources are allocated to the business units through a process that evaluates their growth potential, capacity to generate value and financial autonomy. The capital at risk considered is twofold: \u2013 regulatory capital covering Pillar 1 risks; \u2013 overall internal capital covering Pillar 2 risks, for ICAAP purposes. Regulatory capital and overall internal capital differ from each other by definition and by their coverage of risk categories. The first arises from formats defined in supervisory provisions, the second from operational measurements. Hence, the capital management activity comprises the management of current and prospective capital adequacy through careful control of both regulatory Pillar 1 constraints (in compliance with Basel 3 rules, effective from 1 January 2014) and operational Pillar 2 constraints. Projections are also produced under stress conditions in order to ensure that the available resources are adequate to cover all risks, even in adverse conditions. Furthermore, since 2013, the Group has been drawing up a Recovery Plan, in line with regulatory indications (directives \u201cBank Recovery and Resolution Directive \u2013 BRRD\u201d - 2014/59/EU transposed in Italy through Legislative Decrees 180 and 181 on 16 November 2015 and \u201cBank Recovery and Resolution Directive \u2013 BRRD II\u201d - Directive (UE) 2019/879, transposed into Italian law on 8 November 2021 by Legislative Decree 193, which entered into force on 1 December 2021), with international practice and in compliance with both the Group Risk Appetite Framework and the crisis management model adopted by the Bank. As part of the process of defining budget targets, a projection compatibility analysis is conducted annually at Group level and at the level of individual entities in the Group. Depending on the expected performance of balance sheet and income statement aggregates, the appropriate capital management measures to ensure the required financial resources for the individual business units are already identified in this phase, if necessary. Compliance with the target levels of capitalisation is monitored on a quarterly basis, taking appropriate action when necessary. Compliance with capital adequacy is sought via various levers, such as the dividend distribution policy, the definition of strategic finance operations (capital increases, issue of convertible loans and subordinated bonds, disposal of non-core assets, etc.) and the management of investments, particularly loans, on the basis of counterparty risk. Further analyses for preliminary assessment of capital adequacy are performed during extraordinary operations (mergers, acquisitions, disposals, etc.) whether internal to the Group or changing the scope of consolidation of the Group. Following the Supervisory Review and Evaluation Process (SREP), the ECB annually makes a final decision on the capital requirement that Intesa Sanpaolo must comply with at consolidated level. On 3 February 2022, Intesa Sanpaolo announced that it had received the ECB\u2019s final decision concerning the capital requirement that the Bank has to meet, as of 1 March 2022. The overall capital requirement the Bank has to meet in terms of Common Equity Tier 1 ratio is 8.95%. This is the result of: \u2013 the SREP requirement in terms of Total Capital ratio of 9.79% comprising a minimum Pillar 1 capital requirement of 8%, of which 4.5% is CET1, and an additional Pillar 2 capital requirement of 1.79%, of which 1.01% is CET1 applying the regulatory amendment introduced by the ECB and effective from 12 March 2020 115 ; \u2013 additional requirements, entirely in terms of Common Equity Tier 1 ratio, relating to: o A Capital Conservation Buffer of 2.5%; o an O-SII Buffer (Other Systemically Important Institutions Buffer) of 0.75%; o a Countercyclical Capital Buffer of 0.19% 116 . With effect from 30 September 2019, following permission from the ECB, the Intesa Sanpaolo Group calculates capital ratios applying the so-called Danish Compromise, under which insurance investments, held indirectly through Intesa Sanpaolo Vita, are risk weighted instead of being deducted from capital. As stated in Part E, compared to 31 December 2021, with regard to the scope of application of internal credit risk models, the ECB's authorisation to use the new Retail models for regulatory purposes were implemented starting from September 2022, and the Institutions and Retail SME models starting from June 2021. With regard to counterparty risk, the Banking Group improved the measurement and monitoring of the risk, by refining the instruments required under Basel 3. For reporting purposes, the Parent Company is authorised to use the internal models approach for the reporting of the requirement with respect to counterparty risk both for derivatives and for SFTs (Securities Financing Transactions, i.e. repos and securities lending). This authorisation was obtained for derivatives from the first quarter of 2014, and for SFTs from the report as at 31 December 2016. For management purposes, the advanced risk measurement approaches have been implemented for the OTC derivatives of the Parent Company since 2010 and were subsequently extended in 2015 to Securities Financing Transactions. Compared to 31 December 2021, it is noted that, starting in the second quarter of 2022, the eligibility rules for securities used as collateral in SFTs were revised, in light of the provisions of art. 271.2 CRR. In order to maintain a suitable level of control over the materiality of transactions previously considered at full risk, a concentration limit was introduced on guarantees that have low levels of liquidity or creditworthiness. A new assessment process was also defined for guarantees comprised of senior securitisation tranches, to make them eligible to mitigate exposures deriving from SFTs. Starting in the fourth quarter of 2022, in response to the request from the ECB, a process was activated to exclude from the internal counterparty risk model those transactions whose valuation does not comply with the consistency thresholds between the risk and front office systems. With regard to operational risk, the Group obtained authorisation to use the Advanced Measurement Approach (AMA \u2013 internal model) to determine the associated capital requirement for regulatory purposes, with effect from the report as at 31 December 2009. As at 31 December 2022, the scope of the Advanced Measurement Approach (AMA) is comprised of Intesa Sanpaolo (including the former Banks and Companies merged into it) and the main banks and companies in the Private Banking and Asset Management Divisions, as well as of VUB Banka and Privredna Banka Zagreb. On 15 December 2022, Intesa Sanpaolo announced that it had received the ECB\u2019s final decision concerning the capital requirement that the Bank has to meet, as of 1 January 2023. The overall capital requirement to be met in terms of Common Equity Tier 1 ratio is currently 8.91%. This is the result of: \u2013 the SREP requirement in terms of Total Capital ratio of 9.72% comprising a minimum Pillar 1 capital requirement of 8%, of which 4.5% is CET1, and an additional Pillar 2 capital requirement of 1.72%, of which 0.97% is CET1 applying the regulatory amendment introduced by the ECB and effective from 12 March 2020; \u2013 additional requirements, entirely in terms of Common Equity Tier 1 ratio, relating to: o A Capital Conservation Buffer of 2.5%; o an O-SII Buffer (Other Systemically Important Institutions Buffer) of 0.75%; o a Countercyclical Capital Buffer of 0.19% 117 . The transitional period, which will end with the last reporting date as at 31 December 2022 and is aimed at mitigating the capital impacts linked to the introduction of the new financial reporting standard IFRS 9, started from 1 January 2018. Intesa Sanpaolo has exercised the option provided in EU Regulation 2395/2017 to adopt the \u201cstatic\u201d approach that allows the neutralisation of a progressively decreasing amount of the impact of IFRS 9 in its CET 1 relating solely to the FTA component of the impairment. In particular, the result from the comparison between the IAS 39 adjustments at 31 December 2017 and the IFRS 9 adjustments at 1 January 2018 \u2013 relating to performing loans and securities (stage 1 and 2) and adjustments to NPLs (stage 3), net of tax and having eliminated any existing shortfall \u2013 is re-included in the capital according to phase-in percentages of 70% in 2020, 50% in 2021 and 25% in 2022. Within the framework of the COVID-19 pandemic scenario, Regulation (EU) 2020/873 of 24 June 2020, amending Regulations (EU) 575/2013 (CRR) and Regulation (EU) 2019/876 (CRR 2) containing temporary support provisions in terms of capital and liquidity, was published with an accelerated approval procedure (the \u201cquick fix\u201d). Among the provisions set out in Regulation (EU) 2020/873 relating to the calculation of own funds, the Intesa Sanpaolo Group opted not to use, since 30 June 2020, either the changes to the transitional regime for the application of IFRS 9 (art. 473 bis of the CRR) or the temporary reintroduction of the prudential filter aimed at excluding unrealised gains and losses measured at fair value through other comprehensive income (FVOCI) on exposures to central governments and public sector entities (art. 468 CRR). Lastly, since 31 December 2020, the Intesa Sanpaolo Group has applied Commission Delegated Regulation (EU) 2020/2176, which entered into force on 23 December 2020 and amends Commission Delegated Regulation (EU) 241/2014 with regard to the deduction of software assets from Common Equity Tier 1 items. The Regulation, which is, inter alia, intended to support the transition to a more digitalised banking sector, introduces the criterion of prudential amortisation applied to all software assets over a three-year period, regardless of their estimated useful lives for accounting purposes. Specifically, the difference, where positive, between prudential cumulative amortisation and accounting cumulative amortisation (including impairment losses) is fully deducted from CET1.
B. Quantitative information
B.1. Consolidated book shareholders\u2019 equity: breakdown by type of company
(millions of euro)
Balance sheet captions
Prudential
consolidation
Insurance
companies
Other
companies
Netting and
adjustments on
consolidation
TOTAL
of which
minority
interests
1. Share capital
10,435
-
102
-
10,537
168
2. Share premium reserves
28,067
-
1
-
28,068
15
3. Reserves
15,982
-2
-784
715
15,911
84
3.5 (Interim dividend)
-1,400
-
-
-
-1,400
-
4. Equity instruments
7,211
-
-
-
7,211
-
5. (Own shares)
-124
-4
-
4
-124
-
6. Valuation reserves:
-2,761
-696
140
558
-2,759
-124
- Equities designated at fair value through other
comprehensive income
-258
-
-
-
-258
-
- Hedges of equities designated at fair value through other
comprehensive income
-
-
-
-
-
-
- Financial assets (other than equities) measured at fair value
through other comprehensive income
-1,774
-
-
-
-1,774
-
- Property and equipment
1,738
-
31
-
1,769
20
- Intangible assets
-
-
-
-
-
-
- Hedges of foreign investments
-10
-
-
-
-10
-
- Cash flow hedges
-466
-
-
-
-466
-
- Hedging instruments (non-designated items)
-
-
-
-
-
-
- Foreign exchange differences
-1,463
-
68
8
-1,387
-140
- Non-current assets held for sale and discontinued operations
-
-
-
-
-
-
- Financial liabilities designated at fair value through profit or
loss (changes in own credit rating)
-45
-
-
-
-45
-
- Actuarial gains (losses) on defined benefit plans
-242
-
-
-
-242
-4
- Share of valuation reserves connected with investments
carried at equity
-552
-
41
550
39
-
- Legally-required revaluations
311
-
-
-
311
-
- Share of valuation reserves pertaining to insurance
companies
-
-696
-
-
-696
-
7. Parent company's net income (loss) and minority interest
(+/-)
4,380
987
-53
-937
4,377
23
Shareholders' equity
61,790
285
-594
340
61,821
166
The table above indicates the components of net book value, adding those of the Group to those of third parties, broken down
by the type of consolidated company. In further detail, the column for the Banking group indicates the amount resulting from
the consolidation of the companies belonging to such group, gross of the effects on the income statement of transactions with
other companies within the scope of consolidation. Subsidiaries other than those belonging to the Banking group and
consolidated on a line-by-line basis are stated at equity. The columns Insurance companies and Other companies contain the
amounts resulting from consolidation, gross of the effects on the income statement of transactions with companies belonging
to the Banking group. The columns Netting and Adjustments on consolidation show the adjustments required to obtain the
figure presented in the financial statements.
B.2. Valuation reserves of financial assets measured at fair value through other comprehensive income: breakdown
(millions of euro)
Banking
group
Insurance
companies
Other
companies
Netting and
adjustments on
consolidation
TOTAL
Positive
reserve
Negative
reserve
Positive
reserve
Negative
reserve
Positive
reserve
Negative
reserve
Positive
reserve
Negative
reserve
Positive
reserve
Negative
reserve
1. Debt securities
72
-2,612
4
-803
-
-
-4
803
72
-2,612
- of which measured pursuant to IAS 39
4
-803
4
-803
-
-
-4
803
4
-803
2. Equities
159
-375
44
-2
-
-
-44
2
159
-375
- of which measured pursuant to IAS 39
44
-2
44
-2
-
-
-44
2
44
-2
2bis. Quotas of UCI (pursuant to IAS 39)
55
-96
55
-96
-
-
-55
96
55
-96
4. Loans
10
-52
-
-
-
-
-
-
10
-52
Total as at 31.12.2022
296
-3,135
103
-901
-
-
-103
901
296
-3,135
Total as at 31.12.2021
1,012
-1,008
508
-39
-
-
-508
39
1,012
-1,008
The reserve on equities classified as level 1 is negative for about 338 million euro.
B.3. Valuation reserves of financial assets measured at fair value through other comprehensive income:
annual changes
(millions of euro)
Debt
securities
Debt
securities: of
which
measured
pursuant to
IAS39
Equities
Equities: of
which
measured
pursuant to
IAS39
Quotas of UCI
(pursuant to
IAS39)
Loans
1. Opening balance
51
377
-100
44
48
5
2. Increases
7,299
6,746
875
372
666
27
2.1. Fair value increases
6,956
6,739
375
351
663
5
2.2. Adjustments for credit risk
17
-
X
-
-
13
2.3. Reversal to the income statement of negative reserves from
disposal
312
4
4
4
-
9
2.3bis Reversal to the income statement of negative reserves from
impairment (pursuant to IAS39)
-
-
-
-
2
-
2.4. Transfer to other shareholders' equity items (equities)
-
-
439
-
-
-
2.5. Other increases
14
3
57
17
1
-
3. Decreases
-9,890
-7,922
-991
-374
-755
-74
3.1. Fair value decreases
-9,699
-7,895
-906
-372
-751
-74
3.2. Recoveries for credit risk
-2
-
-
-
-
-
3.2bis Impairment losses (pursuant to IAS39)
-1
-1
-
-
-
-
3.3. Reversal to the income statement of positive reserves from
disposal
-171
-23
-
-
-2
-
3.4. Transfer to other shareholders' equity items (equities)
-
-
-39
-
-
-
3.5. Other decreases
-17
-3
-46
-2
-2
-
4. Final balance
-2,540
-799
-216
42
-41
-42
Trading on treasury shares
During the year, Intesa Sanpaolo and the Group companies \u2013 on the basis of specific Shareholders\u2019 Meeting authorisations \u2013
carried out the following transactions on treasury shares of the Parent Company Intesa Sanpaolo:
Ordinary shares:
Initial number no. 40,481,556
Purchases no. 1,035,246,253
of which to be annulled (buyback) no. 988,632,803
Sales no. -1,019,021,022
of which annulment of shares subject to buyback no. -988,632,803
End-of-year number no. 56,706,787
B.4. Valuation reserves relating to the defined benefit plans: annual changes During the year, the reserves at issue recorded an increase of 182 million euro. Therefore, as at 31 December 2022 there was an overall negative reserve equal to approximately 242 million euro for defined benefit plans.", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1035": { "value": "SECTION 13 \u2013 GROUP SHAREHOLDERS\u2019 EQUITY \u2013 CAPTIONS 120, 130, 140, 150, 160, 170 AND 180 13.1 Share capital and Treasury shares: breakdown For information on this section, see point 13.3 below. 13.2 Share capital \u2013 Parent Company\u2019s number of shares: annual changes Captions/Type Ordinary A. Initial number of shares 19,430,463,305 -fully paid-in 19,430,463,305 - not fully paid-in - A.1 Own shares (-) -30,629,777 A.2 Shares outstanding: initial number 19,399,833,528 B. Increases 566,771,008 B.1 New issues 546,972,658 - for consideration: 386,972,658 - business combinations - - conversion of bonds - - exercise of warrants - - other 386,972,658 - for free: 160,000,000 - in favour of employees 160,000,000 - in favour of directors - - other - B.2 Sale of own shares 19,798,350 B.3 Other - C. Decreases -1,001,693,612 C.1 Annulment -988,632,803 C.2 Purchase of own shares -13,060,809 C.3 Disposal of companies - C.4 Other - D. Shares outstanding: final number 18,964,910,924 D.1 Own shares (+) 23,892,236 D.2 Final number of shares 18,988,803,160 -fully paid-in 18,988,803,160 - not fully paid-in - 13.3 Share capital: other information The share capital of Intesa Sanpaolo as at 31 December 2022 amounted to 10,369 million euro, divided into 18,988,803,160 ordinary shares, with no par value. Each ordinary share gives the right to one vote in the Shareholders\u2019 Meeting. At the date of this document, the share capital was fully paid-in. As at 31 December 2022, the Group holds treasury shares of Intesa Sanpaolo of 124 million euro, of which approximately 50 million euro attributable to the Parent Company and the remaining 74 million euro to the other Group companies. 13.4 Reserves from retained earnings: other information Group reserves amounted to 14,427 million euro and included the legal reserve, extraordinary reserve, concentration reserves (Law 218 of 30 July 1990, art. 7, par. 3 and Law 218 of 30 July 1990, art. 7) and other reserves, as well as the consolidation reserve. The legal reserve, set up as provided for by law, must be at least one fifth of share capital; in the past it was set up by allocating each year at least one twentieth of net income for the year. Should the reserve decrease, it must be reintegrated by allocating at least one twentieth of net income for the year. Concentration reserves under Law 218 of 30 July 1990 were set up at the time of reorganisations or concentrations carried out pursuant to the aforementioned law. Other reserves included reserves pertaining to international branches and other reserves set up in the past following specific legal provisions. Consolidation reserves were generated following the elimination of the book value of equity investments against the corresponding portion of the shareholders' equity of each investment. The valuation reserves amounted to a negative figure of 2,635 million euro and included valuation reserves for assets measured at fair value through other comprehensive income of -2,032 million euro, valuation reserves pertaining to insurance companies of -696 million euro, reserves for cash flow hedges of -466 million euro, exchange rate valuation reserves (relating to fully consolidated equity investments) of -1,247 million euro, reserves relating to the hedging of foreign investments of -10 million euro, reserves for revaluations of property and equipment and legally-required revaluation reserves of 2,060 million euro, valuation reserves relating to financial liabilities designated at fair value through profit or loss (changes in the Group\u2019s own credit rating) of -45 million euro, as well as the negative reserve on actuarial profits (losses) from defined benefit pension plans of -238 million euro, in addition to approximately 39 million euro of valuation reserves connected to minority equity investments. 13.5 Equity instruments: breakdowns and annual changes Issuer Interest rate Step- up Issue date Expiry date Early redemption as of Currency Original amount in currency Book value (millions of euro) Intesa Sanpaolo 7.70% fixed rate no 17-Sep-2015 perpetual 17-Sep-2025 USD 1,000,000,000 873 Intesa Sanpaolo 7.75% fixed rate no 11-Jan-2017 perpetual 11-Jan-2027 Eur 1,250,000,000 1,251 Intesa Sanpaolo 6.25% fixed rate no 16-May-2017 perpetual 16-May-2024 Eur 750,000,000 750 Intesa Sanpaolo 5.875% fixed rate payable semi-annually no 20-Jan-2020 perpetual 20-Jan-2025 Eur 400,000,000 382 Intesa Sanpaolo 3.75% fixed rate no 27-Feb-2020 perpetual 27-Feb-2025 Eur 750,000,000 731 Intesa Sanpaolo 4.125% fixed rate no 27-Feb-2020 perpetual 27-Feb-2030 Eur 750,000,000 732 Intesa Sanpaolo 5.875% fixed rate payable semi-annually no 01-Sep-2020 perpetual 01-Sep-2031 Eur 750,000,000 743 Intesa Sanpaolo 5.5% fixed rate payable semi- annually no 01-Sep-2020 perpetual 01-Mar-2028 Eur 750,000,000 746 Intesa Sanpaolo 6.375% fixed rate payable semi-annually no 30-Mar-2022 perpetual 30-Sep-2028 Eur 1,000,000,000 980 REYL & Cie SA 4.75% NO 30-Nov-2018 perpetual 30-Nov-2023 CHF 12,000,000 10 REYL & Cie SA 4.75% NO 30-Nov-2019 perpetual 30-Nov-2024 CHF 15,000,000 13 Total 7,211 13.6 Other information Pursuant to Article 2433-bis, paragraph 4, of the Italian Civil Code, Intesa Sanpaolo distributed a 2022 interim dividend totalling 1,399,608,167.99 euro 92 , corresponding to a unit dividend of 7.38 euro cents per ordinary share. The dividend was paid out on 23 November 2022 (with coupon presentation on 21 November and record date on 22 November). ", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1020": { "value": "SECTION 13 \u2013 GROUP SHAREHOLDERS\u2019 EQUITY \u2013 CAPTIONS 120, 130, 140, 150, 160, 170 AND 180 13.1 Share capital and Treasury shares: breakdown For information on this section, see point 13.3 below. 13.2 Share capital \u2013 Parent Company\u2019s number of shares: annual changes Captions/Type Ordinary A. Initial number of shares 19,430,463,305 -fully paid-in 19,430,463,305 - not fully paid-in - A.1 Own shares (-) -30,629,777 A.2 Shares outstanding: initial number 19,399,833,528 B. Increases 566,771,008 B.1 New issues 546,972,658 - for consideration: 386,972,658 - business combinations - - conversion of bonds - - exercise of warrants - - other 386,972,658 - for free: 160,000,000 - in favour of employees 160,000,000 - in favour of directors - - other - B.2 Sale of own shares 19,798,350 B.3 Other - C. Decreases -1,001,693,612 C.1 Annulment -988,632,803 C.2 Purchase of own shares -13,060,809 C.3 Disposal of companies - C.4 Other - D. Shares outstanding: final number 18,964,910,924 D.1 Own shares (+) 23,892,236 D.2 Final number of shares 18,988,803,160 -fully paid-in 18,988,803,160 - not fully paid-in - 13.3 Share capital: other information The share capital of Intesa Sanpaolo as at 31 December 2022 amounted to 10,369 million euro, divided into 18,988,803,160 ordinary shares, with no par value. Each ordinary share gives the right to one vote in the Shareholders\u2019 Meeting. At the date of this document, the share capital was fully paid-in. As at 31 December 2022, the Group holds treasury shares of Intesa Sanpaolo of 124 million euro, of which approximately 50 million euro attributable to the Parent Company and the remaining 74 million euro to the other Group companies. 13.4 Reserves from retained earnings: other information Group reserves amounted to 14,427 million euro and included the legal reserve, extraordinary reserve, concentration reserves (Law 218 of 30 July 1990, art. 7, par. 3 and Law 218 of 30 July 1990, art. 7) and other reserves, as well as the consolidation reserve. The legal reserve, set up as provided for by law, must be at least one fifth of share capital; in the past it was set up by allocating each year at least one twentieth of net income for the year. Should the reserve decrease, it must be reintegrated by allocating at least one twentieth of net income for the year. Concentration reserves under Law 218 of 30 July 1990 were set up at the time of reorganisations or concentrations carried out pursuant to the aforementioned law. Other reserves included reserves pertaining to international branches and other reserves set up in the past following specific legal provisions. Consolidation reserves were generated following the elimination of the book value of equity investments against the corresponding portion of the shareholders' equity of each investment. The valuation reserves amounted to a negative figure of 2,635 million euro and included valuation reserves for assets measured at fair value through other comprehensive income of -2,032 million euro, valuation reserves pertaining to insurance companies of -696 million euro, reserves for cash flow hedges of -466 million euro, exchange rate valuation reserves (relating to fully consolidated equity investments) of -1,247 million euro, reserves relating to the hedging of foreign investments of -10 million euro, reserves for revaluations of property and equipment and legally-required revaluation reserves of 2,060 million euro, valuation reserves relating to financial liabilities designated at fair value through profit or loss (changes in the Group\u2019s own credit rating) of -45 million euro, as well as the negative reserve on actuarial profits (losses) from defined benefit pension plans of -238 million euro, in addition to approximately 39 million euro of valuation reserves connected to minority equity investments. 13.5 Equity instruments: breakdowns and annual changes Issuer Interest rate Step- up Issue date Expiry date Early redemption as of Currency Original amount in currency Book value (millions of euro) Intesa Sanpaolo 7.70% fixed rate no 17-Sep-2015 perpetual 17-Sep-2025 USD 1,000,000,000 873 Intesa Sanpaolo 7.75% fixed rate no 11-Jan-2017 perpetual 11-Jan-2027 Eur 1,250,000,000 1,251 Intesa Sanpaolo 6.25% fixed rate no 16-May-2017 perpetual 16-May-2024 Eur 750,000,000 750 Intesa Sanpaolo 5.875% fixed rate payable semi-annually no 20-Jan-2020 perpetual 20-Jan-2025 Eur 400,000,000 382 Intesa Sanpaolo 3.75% fixed rate no 27-Feb-2020 perpetual 27-Feb-2025 Eur 750,000,000 731 Intesa Sanpaolo 4.125% fixed rate no 27-Feb-2020 perpetual 27-Feb-2030 Eur 750,000,000 732 Intesa Sanpaolo 5.875% fixed rate payable semi-annually no 01-Sep-2020 perpetual 01-Sep-2031 Eur 750,000,000 743 Intesa Sanpaolo 5.5% fixed rate payable semi- annually no 01-Sep-2020 perpetual 01-Mar-2028 Eur 750,000,000 746 Intesa Sanpaolo 6.375% fixed rate payable semi-annually no 30-Mar-2022 perpetual 30-Sep-2028 Eur 1,000,000,000 980 REYL & Cie SA 4.75% NO 30-Nov-2018 perpetual 30-Nov-2023 CHF 12,000,000 10 REYL & Cie SA 4.75% NO 30-Nov-2019 perpetual 30-Nov-2024 CHF 15,000,000 13 Total 7,211 13.6 Other information Pursuant to Article 2433-bis, paragraph 4, of the Italian Civil Code, Intesa Sanpaolo distributed a 2022 interim dividend totalling 1,399,608,167.99 euro 92 , corresponding to a unit dividend of 7.38 euro cents per ordinary share. The dividend was paid out on 23 November 2022 (with coupon presentation on 21 November and record date on 22 November). SECTION 1 \u2013 CONSOLIDATED CAPITAL A. Qualitative information The control of capital adequacy both at consolidated level and at single entities level is ensured by capital management which defines the size and optimum combination of the different capital instruments in accordance with regulatory constraints and consistently with the risk exposure taken on by the Group. The Intesa Sanpaolo Group assigns a primary role to the management and allocation of capital resources, considering this to be an instrument for strategic leverage, as well as a way to ensure consistency of the operating plans of the business units. Once the Group\u2019s strategic profitability, capital position and liquidity objectives have been defined, capital and financial resources are allocated to the business units through a process that evaluates their growth potential, capacity to generate value and financial autonomy. The capital at risk considered is twofold: \u2013 regulatory capital covering Pillar 1 risks; \u2013 overall internal capital covering Pillar 2 risks, for ICAAP purposes. Regulatory capital and overall internal capital differ from each other by definition and by their coverage of risk categories. The first arises from formats defined in supervisory provisions, the second from operational measurements. Hence, the capital management activity comprises the management of current and prospective capital adequacy through careful control of both regulatory Pillar 1 constraints (in compliance with Basel 3 rules, effective from 1 January 2014) and operational Pillar 2 constraints. Projections are also produced under stress conditions in order to ensure that the available resources are adequate to cover all risks, even in adverse conditions. Furthermore, since 2013, the Group has been drawing up a Recovery Plan, in line with regulatory indications (directives \u201cBank Recovery and Resolution Directive \u2013 BRRD\u201d - 2014/59/EU transposed in Italy through Legislative Decrees 180 and 181 on 16 November 2015 and \u201cBank Recovery and Resolution Directive \u2013 BRRD II\u201d - Directive (UE) 2019/879, transposed into Italian law on 8 November 2021 by Legislative Decree 193, which entered into force on 1 December 2021), with international practice and in compliance with both the Group Risk Appetite Framework and the crisis management model adopted by the Bank. As part of the process of defining budget targets, a projection compatibility analysis is conducted annually at Group level and at the level of individual entities in the Group. Depending on the expected performance of balance sheet and income statement aggregates, the appropriate capital management measures to ensure the required financial resources for the individual business units are already identified in this phase, if necessary. Compliance with the target levels of capitalisation is monitored on a quarterly basis, taking appropriate action when necessary. Compliance with capital adequacy is sought via various levers, such as the dividend distribution policy, the definition of strategic finance operations (capital increases, issue of convertible loans and subordinated bonds, disposal of non-core assets, etc.) and the management of investments, particularly loans, on the basis of counterparty risk. Further analyses for preliminary assessment of capital adequacy are performed during extraordinary operations (mergers, acquisitions, disposals, etc.) whether internal to the Group or changing the scope of consolidation of the Group. Following the Supervisory Review and Evaluation Process (SREP), the ECB annually makes a final decision on the capital requirement that Intesa Sanpaolo must comply with at consolidated level. On 3 February 2022, Intesa Sanpaolo announced that it had received the ECB\u2019s final decision concerning the capital requirement that the Bank has to meet, as of 1 March 2022. The overall capital requirement the Bank has to meet in terms of Common Equity Tier 1 ratio is 8.95%. This is the result of: \u2013 the SREP requirement in terms of Total Capital ratio of 9.79% comprising a minimum Pillar 1 capital requirement of 8%, of which 4.5% is CET1, and an additional Pillar 2 capital requirement of 1.79%, of which 1.01% is CET1 applying the regulatory amendment introduced by the ECB and effective from 12 March 2020 115 ; \u2013 additional requirements, entirely in terms of Common Equity Tier 1 ratio, relating to: o A Capital Conservation Buffer of 2.5%; o an O-SII Buffer (Other Systemically Important Institutions Buffer) of 0.75%; o a Countercyclical Capital Buffer of 0.19% 116 . With effect from 30 September 2019, following permission from the ECB, the Intesa Sanpaolo Group calculates capital ratios applying the so-called Danish Compromise, under which insurance investments, held indirectly through Intesa Sanpaolo Vita, are risk weighted instead of being deducted from capital. As stated in Part E, compared to 31 December 2021, with regard to the scope of application of internal credit risk models, the ECB's authorisation to use the new Retail models for regulatory purposes were implemented starting from September 2022, and the Institutions and Retail SME models starting from June 2021. With regard to counterparty risk, the Banking Group improved the measurement and monitoring of the risk, by refining the instruments required under Basel 3. For reporting purposes, the Parent Company is authorised to use the internal models approach for the reporting of the requirement with respect to counterparty risk both for derivatives and for SFTs (Securities Financing Transactions, i.e. repos and securities lending). This authorisation was obtained for derivatives from the first quarter of 2014, and for SFTs from the report as at 31 December 2016. For management purposes, the advanced risk measurement approaches have been implemented for the OTC derivatives of the Parent Company since 2010 and were subsequently extended in 2015 to Securities Financing Transactions. Compared to 31 December 2021, it is noted that, starting in the second quarter of 2022, the eligibility rules for securities used as collateral in SFTs were revised, in light of the provisions of art. 271.2 CRR. In order to maintain a suitable level of control over the materiality of transactions previously considered at full risk, a concentration limit was introduced on guarantees that have low levels of liquidity or creditworthiness. A new assessment process was also defined for guarantees comprised of senior securitisation tranches, to make them eligible to mitigate exposures deriving from SFTs. Starting in the fourth quarter of 2022, in response to the request from the ECB, a process was activated to exclude from the internal counterparty risk model those transactions whose valuation does not comply with the consistency thresholds between the risk and front office systems. With regard to operational risk, the Group obtained authorisation to use the Advanced Measurement Approach (AMA \u2013 internal model) to determine the associated capital requirement for regulatory purposes, with effect from the report as at 31 December 2009. As at 31 December 2022, the scope of the Advanced Measurement Approach (AMA) is comprised of Intesa Sanpaolo (including the former Banks and Companies merged into it) and the main banks and companies in the Private Banking and Asset Management Divisions, as well as of VUB Banka and Privredna Banka Zagreb. On 15 December 2022, Intesa Sanpaolo announced that it had received the ECB\u2019s final decision concerning the capital requirement that the Bank has to meet, as of 1 January 2023. The overall capital requirement to be met in terms of Common Equity Tier 1 ratio is currently 8.91%. This is the result of: \u2013 the SREP requirement in terms of Total Capital ratio of 9.72% comprising a minimum Pillar 1 capital requirement of 8%, of which 4.5% is CET1, and an additional Pillar 2 capital requirement of 1.72%, of which 0.97% is CET1 applying the regulatory amendment introduced by the ECB and effective from 12 March 2020; \u2013 additional requirements, entirely in terms of Common Equity Tier 1 ratio, relating to: o A Capital Conservation Buffer of 2.5%; o an O-SII Buffer (Other Systemically Important Institutions Buffer) of 0.75%; o a Countercyclical Capital Buffer of 0.19% 117 . The transitional period, which will end with the last reporting date as at 31 December 2022 and is aimed at mitigating the capital impacts linked to the introduction of the new financial reporting standard IFRS 9, started from 1 January 2018. Intesa Sanpaolo has exercised the option provided in EU Regulation 2395/2017 to adopt the \u201cstatic\u201d approach that allows the neutralisation of a progressively decreasing amount of the impact of IFRS 9 in its CET 1 relating solely to the FTA component of the impairment. In particular, the result from the comparison between the IAS 39 adjustments at 31 December 2017 and the IFRS 9 adjustments at 1 January 2018 \u2013 relating to performing loans and securities (stage 1 and 2) and adjustments to NPLs (stage 3), net of tax and having eliminated any existing shortfall \u2013 is re-included in the capital according to phase-in percentages of 70% in 2020, 50% in 2021 and 25% in 2022. Within the framework of the COVID-19 pandemic scenario, Regulation (EU) 2020/873 of 24 June 2020, amending Regulations (EU) 575/2013 (CRR) and Regulation (EU) 2019/876 (CRR 2) containing temporary support provisions in terms of capital and liquidity, was published with an accelerated approval procedure (the \u201cquick fix\u201d). Among the provisions set out in Regulation (EU) 2020/873 relating to the calculation of own funds, the Intesa Sanpaolo Group opted not to use, since 30 June 2020, either the changes to the transitional regime for the application of IFRS 9 (art. 473 bis of the CRR) or the temporary reintroduction of the prudential filter aimed at excluding unrealised gains and losses measured at fair value through other comprehensive income (FVOCI) on exposures to central governments and public sector entities (art. 468 CRR). Lastly, since 31 December 2020, the Intesa Sanpaolo Group has applied Commission Delegated Regulation (EU) 2020/2176, which entered into force on 23 December 2020 and amends Commission Delegated Regulation (EU) 241/2014 with regard to the deduction of software assets from Common Equity Tier 1 items. The Regulation, which is, inter alia, intended to support the transition to a more digitalised banking sector, introduces the criterion of prudential amortisation applied to all software assets over a three-year period, regardless of their estimated useful lives for accounting purposes. Specifically, the difference, where positive, between prudential cumulative amortisation and accounting cumulative amortisation (including impairment losses) is fully deducted from CET1. B. Quantitative information B.1. Consolidated book shareholders\u2019 equity: breakdown by type of company (millions of euro) Balance sheet captions Prudential consolidation Insurance companies Other companies Netting and adjustments on consolidation TOTAL of which minority interests 1. Share capital 10,435 - 102 - 10,537 168 2. Share premium reserves 28,067 - 1 - 28,068 15 3. Reserves 15,982 -2 -784 715 15,911 84 3.5 (Interim dividend) -1,400 - - - -1,400 - 4. Equity instruments 7,211 - - - 7,211 - 5. (Own shares) -124 -4 - 4 -124 - 6. Valuation reserves: -2,761 -696 140 558 -2,759 -124 - Equities designated at fair value through other comprehensive income -258 - - - -258 - - Hedges of equities designated at fair value through other comprehensive income - - - - - - - Financial assets (other than equities) measured at fair value through other comprehensive income -1,774 - - - -1,774 - - Property and equipment 1,738 - 31 - 1,769 20 - Intangible assets - - - - - - - Hedges of foreign investments -10 - - - -10 - - Cash flow hedges -466 - - - -466 - - Hedging instruments (non-designated items) - - - - - - - Foreign exchange differences -1,463 - 68 8 -1,387 -140 - Non-current assets held for sale and discontinued operations - - - - - - - Financial liabilities designated at fair value through profit or loss (changes in own credit rating) -45 - - - -45 - - Actuarial gains (losses) on defined benefit plans -242 - - - -242 -4 - Share of valuation reserves connected with investments carried at equity -552 - 41 550 39 - - Legally-required revaluations 311 - - - 311 - - Share of valuation reserves pertaining to insurance companies - -696 - - -696 - 7. Parent company's net income (loss) and minority interest (+/-) 4,380 987 -53 -937 4,377 23 Shareholders' equity 61,790 285 -594 340 61,821 166 The table above indicates the components of net book value, adding those of the Group to those of third parties, broken down by the type of consolidated company. In further detail, the column for the Banking group indicates the amount resulting from the consolidation of the companies belonging to such group, gross of the effects on the income statement of transactions with other companies within the scope of consolidation. Subsidiaries other than those belonging to the Banking group and consolidated on a line-by-line basis are stated at equity. The columns Insurance companies and Other companies contain the amounts resulting from consolidation, gross of the effects on the income statement of transactions with companies belonging to the Banking group. The columns Netting and Adjustments on consolidation show the adjustments required to obtain the figure presented in the financial statements. B.2. Valuation reserves of financial assets measured at fair value through other comprehensive income: breakdown (millions of euro) Banking group Insurance companies Other companies Netting and adjustments on consolidation TOTAL Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve 1. Debt securities 72 -2,612 4 -803 - - -4 803 72 -2,612 - of which measured pursuant to IAS 39 4 -803 4 -803 - - -4 803 4 -803 2. Equities 159 -375 44 -2 - - -44 2 159 -375 - of which measured pursuant to IAS 39 44 -2 44 -2 - - -44 2 44 -2 2bis. Quotas of UCI (pursuant to IAS 39) 55 -96 55 -96 - - -55 96 55 -96 4. Loans 10 -52 - - - - - - 10 -52 Total as at 31.12.2022 296 -3,135 103 -901 - - -103 901 296 -3,135 Total as at 31.12.2021 1,012 -1,008 508 -39 - - -508 39 1,012 -1,008 The reserve on equities classified as level 1 is negative for about 338 million euro. B.3. Valuation reserves of financial assets measured at fair value through other comprehensive income: annual changes (millions of euro) Debt securities Debt securities: of which measured pursuant to IAS39 Equities Equities: of which measured pursuant to IAS39 Quotas of UCI (pursuant to IAS39) Loans 1. Opening balance 51 377 -100 44 48 5 2. Increases 7,299 6,746 875 372 666 27 2.1. Fair value increases 6,956 6,739 375 351 663 5 2.2. Adjustments for credit risk 17 - X - - 13 2.3. Reversal to the income statement of negative reserves from disposal 312 4 4 4 - 9 2.3bis Reversal to the income statement of negative reserves from impairment (pursuant to IAS39) - - - - 2 - 2.4. Transfer to other shareholders' equity items (equities) - - 439 - - - 2.5. Other increases 14 3 57 17 1 - 3. Decreases -9,890 -7,922 -991 -374 -755 -74 3.1. Fair value decreases -9,699 -7,895 -906 -372 -751 -74 3.2. Recoveries for credit risk -2 - - - - - 3.2bis Impairment losses (pursuant to IAS39) -1 -1 - - - - 3.3. Reversal to the income statement of positive reserves from disposal -171 -23 - - -2 - 3.4. Transfer to other shareholders' equity items (equities) - - -39 - - - 3.5. Other decreases -17 -3 -46 -2 -2 - 4. Final balance -2,540 -799 -216 42 -41 -42 Trading on treasury shares During the year, Intesa Sanpaolo and the Group companies \u2013 on the basis of specific Shareholders\u2019 Meeting authorisations \u2013 carried out the following transactions on treasury shares of the Parent Company Intesa Sanpaolo: Ordinary shares: Initial number no. 40,481,556 Purchases no. 1,035,246,253 of which to be annulled (buyback) no. 988,632,803 Sales no. -1,019,021,022 of which annulment of shares subject to buyback no. -988,632,803 End-of-year number no. 56,706,787 B.4. Valuation reserves relating to the defined benefit plans: annual changes During the year, the reserves at issue recorded an increase of 182 million euro. Therefore, as at 31 December 2022 there was an overall negative reserve equal to approximately 242 million euro for defined benefit plans. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-964": { "value": "SECTION 13 \u2013 GROUP SHAREHOLDERS\u2019 EQUITY \u2013 CAPTIONS 120, 130, 140, 150, 160, 170 AND 180 13.1 Share capital and Treasury shares: breakdown For information on this section, see point 13.3 below. 13.2 Share capital \u2013 Parent Company\u2019s number of shares: annual changes Captions/Type Ordinary A. Initial number of shares 19,430,463,305 -fully paid-in 19,430,463,305 - not fully paid-in - A.1 Own shares (-) -30,629,777 A.2 Shares outstanding: initial number 19,399,833,528 B. Increases 566,771,008 B.1 New issues 546,972,658 - for consideration: 386,972,658 - business combinations - - conversion of bonds - - exercise of warrants - - other 386,972,658 - for free: 160,000,000 - in favour of employees 160,000,000 - in favour of directors - - other - B.2 Sale of own shares 19,798,350 B.3 Other - C. Decreases -1,001,693,612 C.1 Annulment -988,632,803 C.2 Purchase of own shares -13,060,809 C.3 Disposal of companies - C.4 Other - D. Shares outstanding: final number 18,964,910,924 D.1 Own shares (+) 23,892,236 D.2 Final number of shares 18,988,803,160 -fully paid-in 18,988,803,160 - not fully paid-in - 13.3 Share capital: other information The share capital of Intesa Sanpaolo as at 31 December 2022 amounted to 10,369 million euro, divided into 18,988,803,160 ordinary shares, with no par value. Each ordinary share gives the right to one vote in the Shareholders\u2019 Meeting. At the date of this document, the share capital was fully paid-in. As at 31 December 2022, the Group holds treasury shares of Intesa Sanpaolo of 124 million euro, of which approximately 50 million euro attributable to the Parent Company and the remaining 74 million euro to the other Group companies. 13.4 Reserves from retained earnings: other information Group reserves amounted to 14,427 million euro and included the legal reserve, extraordinary reserve, concentration reserves (Law 218 of 30 July 1990, art. 7, par. 3 and Law 218 of 30 July 1990, art. 7) and other reserves, as well as the consolidation reserve. The legal reserve, set up as provided for by law, must be at least one fifth of share capital; in the past it was set up by allocating each year at least one twentieth of net income for the year. Should the reserve decrease, it must be reintegrated by allocating at least one twentieth of net income for the year. Concentration reserves under Law 218 of 30 July 1990 were set up at the time of reorganisations or concentrations carried out pursuant to the aforementioned law. Other reserves included reserves pertaining to international branches and other reserves set up in the past following specific legal provisions. Consolidation reserves were generated following the elimination of the book value of equity investments against the corresponding portion of the shareholders' equity of each investment. The valuation reserves amounted to a negative figure of 2,635 million euro and included valuation reserves for assets measured at fair value through other comprehensive income of -2,032 million euro, valuation reserves pertaining to insurance companies of -696 million euro, reserves for cash flow hedges of -466 million euro, exchange rate valuation reserves (relating to fully consolidated equity investments) of -1,247 million euro, reserves relating to the hedging of foreign investments of -10 million euro, reserves for revaluations of property and equipment and legally-required revaluation reserves of 2,060 million euro, valuation reserves relating to financial liabilities designated at fair value through profit or loss (changes in the Group\u2019s own credit rating) of -45 million euro, as well as the negative reserve on actuarial profits (losses) from defined benefit pension plans of -238 million euro, in addition to approximately 39 million euro of valuation reserves connected to minority equity investments. 13.5 Equity instruments: breakdowns and annual changes Issuer Interest rate Step- up Issue date Expiry date Early redemption as of Currency Original amount in currency Book value (millions of euro) Intesa Sanpaolo 7.70% fixed rate no 17-Sep-2015 perpetual 17-Sep-2025 USD 1,000,000,000 873 Intesa Sanpaolo 7.75% fixed rate no 11-Jan-2017 perpetual 11-Jan-2027 Eur 1,250,000,000 1,251 Intesa Sanpaolo 6.25% fixed rate no 16-May-2017 perpetual 16-May-2024 Eur 750,000,000 750 Intesa Sanpaolo 5.875% fixed rate payable semi-annually no 20-Jan-2020 perpetual 20-Jan-2025 Eur 400,000,000 382 Intesa Sanpaolo 3.75% fixed rate no 27-Feb-2020 perpetual 27-Feb-2025 Eur 750,000,000 731 Intesa Sanpaolo 4.125% fixed rate no 27-Feb-2020 perpetual 27-Feb-2030 Eur 750,000,000 732 Intesa Sanpaolo 5.875% fixed rate payable semi-annually no 01-Sep-2020 perpetual 01-Sep-2031 Eur 750,000,000 743 Intesa Sanpaolo 5.5% fixed rate payable semi- annually no 01-Sep-2020 perpetual 01-Mar-2028 Eur 750,000,000 746 Intesa Sanpaolo 6.375% fixed rate payable semi-annually no 30-Mar-2022 perpetual 30-Sep-2028 Eur 1,000,000,000 980 REYL & Cie SA 4.75% NO 30-Nov-2018 perpetual 30-Nov-2023 CHF 12,000,000 10 REYL & Cie SA 4.75% NO 30-Nov-2019 perpetual 30-Nov-2024 CHF 15,000,000 13 Total 7,211 13.6 Other information Pursuant to Article 2433-bis, paragraph 4, of the Italian Civil Code, Intesa Sanpaolo distributed a 2022 interim dividend totalling 1,399,608,167.99 euro 92 , corresponding to a unit dividend of 7.38 euro cents per ordinary share. The dividend was paid out on 23 November 2022 (with coupon presentation on 21 November and record date on 22 November). 92 It does not include the interim dividend on the 23,922,835 own shares held at the record date, equal to 1,765,505.22 euro. SECTION 14 - MINORITY INTERESTS \u2013 CAPTION 190 For details regarding the breakdown of minority interests, see section F, \u201cPart B.1. Consolidated shareholders\u2019 equity: breakdown by type of company\u201d. 14.1 Breakdown of caption 190 Minority interests (millions of euro) Companies 31.12.2022 31.12.2021 Investments in consolidated companies with significant minority interests 158 276 1 Bank of Alexandria 126 174 2 Risanamento S.p.A. 26 53 3 Eurizon SLJ Capital Limited 3 - 4 Eurizon Capital Real Asset S.p.A. 3 - 5 Private Equity International S.A. - 32 6 Privredna Banka Zagreb DD - 17 Other investments 8 15 TOTAL 166 291 14.2 Equity instruments: breakdown and annual changes There were no equity instruments pertaining to minority interests. SECTION 1 \u2013 CONSOLIDATED CAPITAL A. Qualitative information The control of capital adequacy both at consolidated level and at single entities level is ensured by capital management which defines the size and optimum combination of the different capital instruments in accordance with regulatory constraints and consistently with the risk exposure taken on by the Group. The Intesa Sanpaolo Group assigns a primary role to the management and allocation of capital resources, considering this to be an instrument for strategic leverage, as well as a way to ensure consistency of the operating plans of the business units. Once the Group\u2019s strategic profitability, capital position and liquidity objectives have been defined, capital and financial resources are allocated to the business units through a process that evaluates their growth potential, capacity to generate value and financial autonomy. The capital at risk considered is twofold: \u2013 regulatory capital covering Pillar 1 risks; \u2013 overall internal capital covering Pillar 2 risks, for ICAAP purposes. Regulatory capital and overall internal capital differ from each other by definition and by their coverage of risk categories. The first arises from formats defined in supervisory provisions, the second from operational measurements. Hence, the capital management activity comprises the management of current and prospective capital adequacy through careful control of both regulatory Pillar 1 constraints (in compliance with Basel 3 rules, effective from 1 January 2014) and operational Pillar 2 constraints. Projections are also produced under stress conditions in order to ensure that the available resources are adequate to cover all risks, even in adverse conditions. Furthermore, since 2013, the Group has been drawing up a Recovery Plan, in line with regulatory indications (directives \u201cBank Recovery and Resolution Directive \u2013 BRRD\u201d - 2014/59/EU transposed in Italy through Legislative Decrees 180 and 181 on 16 November 2015 and \u201cBank Recovery and Resolution Directive \u2013 BRRD II\u201d - Directive (UE) 2019/879, transposed into Italian law on 8 November 2021 by Legislative Decree 193, which entered into force on 1 December 2021), with international practice and in compliance with both the Group Risk Appetite Framework and the crisis management model adopted by the Bank. As part of the process of defining budget targets, a projection compatibility analysis is conducted annually at Group level and at the level of individual entities in the Group. Depending on the expected performance of balance sheet and income statement aggregates, the appropriate capital management measures to ensure the required financial resources for the individual business units are already identified in this phase, if necessary. Compliance with the target levels of capitalisation is monitored on a quarterly basis, taking appropriate action when necessary. Compliance with capital adequacy is sought via various levers, such as the dividend distribution policy, the definition of strategic finance operations (capital increases, issue of convertible loans and subordinated bonds, disposal of non-core assets, etc.) and the management of investments, particularly loans, on the basis of counterparty risk. Further analyses for preliminary assessment of capital adequacy are performed during extraordinary operations (mergers, acquisitions, disposals, etc.) whether internal to the Group or changing the scope of consolidation of the Group. Following the Supervisory Review and Evaluation Process (SREP), the ECB annually makes a final decision on the capital requirement that Intesa Sanpaolo must comply with at consolidated level. On 3 February 2022, Intesa Sanpaolo announced that it had received the ECB\u2019s final decision concerning the capital requirement that the Bank has to meet, as of 1 March 2022. The overall capital requirement the Bank has to meet in terms of Common Equity Tier 1 ratio is 8.95%. This is the result of: \u2013 the SREP requirement in terms of Total Capital ratio of 9.79% comprising a minimum Pillar 1 capital requirement of 8%, of which 4.5% is CET1, and an additional Pillar 2 capital requirement of 1.79%, of which 1.01% is CET1 applying the regulatory amendment introduced by the ECB and effective from 12 March 2020 115 ; \u2013 additional requirements, entirely in terms of Common Equity Tier 1 ratio, relating to: o A Capital Conservation Buffer of 2.5%; o an O-SII Buffer (Other Systemically Important Institutions Buffer) of 0.75%; o a Countercyclical Capital Buffer of 0.19% 116 . With effect from 30 September 2019, following permission from the ECB, the Intesa Sanpaolo Group calculates capital ratios applying the so-called Danish Compromise, under which insurance investments, held indirectly through Intesa Sanpaolo Vita, are risk weighted instead of being deducted from capital. As stated in Part E, compared to 31 December 2021, with regard to the scope of application of internal credit risk models, the ECB's authorisation to use the new Retail models for regulatory purposes were implemented starting from September 2022, and the Institutions and Retail SME models starting from June 2021. With regard to counterparty risk, the Banking Group improved the measurement and monitoring of the risk, by refining the instruments required under Basel 3. For reporting purposes, the Parent Company is authorised to use the internal models approach for the reporting of the requirement with respect to counterparty risk both for derivatives and for SFTs (Securities Financing Transactions, i.e. repos and securities lending). This authorisation was obtained for derivatives from the first quarter of 2014, and for SFTs from the report as at 31 December 2016. For management purposes, the advanced risk measurement approaches have been implemented for the OTC derivatives of the Parent Company since 2010 and were subsequently extended in 2015 to Securities Financing Transactions. Compared to 31 December 2021, it is noted that, starting in the second quarter of 2022, the eligibility rules for securities used as collateral in SFTs were revised, in light of the provisions of art. 271.2 CRR. In order to maintain a suitable level of control over the materiality of transactions previously considered at full risk, a concentration limit was introduced on guarantees that have low levels of liquidity or creditworthiness. A new assessment process was also defined for guarantees comprised of senior securitisation tranches, to make them eligible to mitigate exposures deriving from SFTs. Starting in the fourth quarter of 2022, in response to the request from the ECB, a process was activated to exclude from the internal counterparty risk model those transactions whose valuation does not comply with the consistency thresholds between the risk and front office systems. With regard to operational risk, the Group obtained authorisation to use the Advanced Measurement Approach (AMA \u2013 internal model) to determine the associated capital requirement for regulatory purposes, with effect from the report as at 31 December 2009. As at 31 December 2022, the scope of the Advanced Measurement Approach (AMA) is comprised of Intesa Sanpaolo (including the former Banks and Companies merged into it) and the main banks and companies in the Private Banking and Asset Management Divisions, as well as of VUB Banka and Privredna Banka Zagreb. On 15 December 2022, Intesa Sanpaolo announced that it had received the ECB\u2019s final decision concerning the capital requirement that the Bank has to meet, as of 1 January 2023. The overall capital requirement to be met in terms of Common Equity Tier 1 ratio is currently 8.91%. This is the result of: \u2013 the SREP requirement in terms of Total Capital ratio of 9.72% comprising a minimum Pillar 1 capital requirement of 8%, of which 4.5% is CET1, and an additional Pillar 2 capital requirement of 1.72%, of which 0.97% is CET1 applying the regulatory amendment introduced by the ECB and effective from 12 March 2020; \u2013 additional requirements, entirely in terms of Common Equity Tier 1 ratio, relating to: o A Capital Conservation Buffer of 2.5%; o an O-SII Buffer (Other Systemically Important Institutions Buffer) of 0.75%; o a Countercyclical Capital Buffer of 0.19% 117 . The transitional period, which will end with the last reporting date as at 31 December 2022 and is aimed at mitigating the capital impacts linked to the introduction of the new financial reporting standard IFRS 9, started from 1 January 2018. Intesa Sanpaolo has exercised the option provided in EU Regulation 2395/2017 to adopt the \u201cstatic\u201d approach that allows the neutralisation of a progressively decreasing amount of the impact of IFRS 9 in its CET 1 relating solely to the FTA component of the impairment. In particular, the result from the comparison between the IAS 39 adjustments at 31 December 2017 and the IFRS 9 adjustments at 1 January 2018 \u2013 relating to performing loans and securities (stage 1 and 2) and adjustments to NPLs (stage 3), net of tax and having eliminated any existing shortfall \u2013 is re-included in the capital according to phase-in percentages of 70% in 2020, 50% in 2021 and 25% in 2022. Within the framework of the COVID-19 pandemic scenario, Regulation (EU) 2020/873 of 24 June 2020, amending Regulations (EU) 575/2013 (CRR) and Regulation (EU) 2019/876 (CRR 2) containing temporary support provisions in terms of capital and liquidity, was published with an accelerated approval procedure (the \u201cquick fix\u201d). Among the provisions set out in Regulation (EU) 2020/873 relating to the calculation of own funds, the Intesa Sanpaolo Group opted not to use, since 30 June 2020, either the changes to the transitional regime for the application of IFRS 9 (art. 473 bis of the CRR) or the temporary reintroduction of the prudential filter aimed at excluding unrealised gains and losses measured at fair value through other comprehensive income (FVOCI) on exposures to central governments and public sector entities (art. 468 CRR). Lastly, since 31 December 2020, the Intesa Sanpaolo Group has applied Commission Delegated Regulation (EU) 2020/2176, which entered into force on 23 December 2020 and amends Commission Delegated Regulation (EU) 241/2014 with regard to the deduction of software assets from Common Equity Tier 1 items. The Regulation, which is, inter alia, intended to support the transition to a more digitalised banking sector, introduces the criterion of prudential amortisation applied to all software assets over a three-year period, regardless of their estimated useful lives for accounting purposes. Specifically, the difference, where positive, between prudential cumulative amortisation and accounting cumulative amortisation (including impairment losses) is fully deducted from CET1. B. Quantitative information B.1. Consolidated book shareholders\u2019 equity: breakdown by type of company (millions of euro) Balance sheet captions Prudential consolidation Insurance companies Other companies Netting and adjustments on consolidation TOTAL of which minority interests 1. Share capital 10,435 - 102 - 10,537 168 2. Share premium reserves 28,067 - 1 - 28,068 15 3. Reserves 15,982 -2 -784 715 15,911 84 3.5 (Interim dividend) -1,400 - - - -1,400 - 4. Equity instruments 7,211 - - - 7,211 - 5. (Own shares) -124 -4 - 4 -124 - 6. Valuation reserves: -2,761 -696 140 558 -2,759 -124 - Equities designated at fair value through other comprehensive income -258 - - - -258 - - Hedges of equities designated at fair value through other comprehensive income - - - - - - - Financial assets (other than equities) measured at fair value through other comprehensive income -1,774 - - - -1,774 - - Property and equipment 1,738 - 31 - 1,769 20 - Intangible assets - - - - - - - Hedges of foreign investments -10 - - - -10 - - Cash flow hedges -466 - - - -466 - - Hedging instruments (non-designated items) - - - - - - - Foreign exchange differences -1,463 - 68 8 -1,387 -140 - Non-current assets held for sale and discontinued operations - - - - - - - Financial liabilities designated at fair value through profit or loss (changes in own credit rating) -45 - - - -45 - - Actuarial gains (losses) on defined benefit plans -242 - - - -242 -4 - Share of valuation reserves connected with investments carried at equity -552 - 41 550 39 - - Legally-required revaluations 311 - - - 311 - - Share of valuation reserves pertaining to insurance companies - -696 - - -696 - 7. Parent company's net income (loss) and minority interest (+/-) 4,380 987 -53 -937 4,377 23 Shareholders' equity 61,790 285 -594 340 61,821 166 The table above indicates the components of net book value, adding those of the Group to those of third parties, broken down by the type of consolidated company. In further detail, the column for the Banking group indicates the amount resulting from the consolidation of the companies belonging to such group, gross of the effects on the income statement of transactions with other companies within the scope of consolidation. Subsidiaries other than those belonging to the Banking group and consolidated on a line-by-line basis are stated at equity. The columns Insurance companies and Other companies contain the amounts resulting from consolidation, gross of the effects on the income statement of transactions with companies belonging to the Banking group. The columns Netting and Adjustments on consolidation show the adjustments required to obtain the figure presented in the financial statements. B.2. Valuation reserves of financial assets measured at fair value through other comprehensive income: breakdown (millions of euro) Banking group Insurance companies Other companies Netting and adjustments on consolidation TOTAL Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve Positive reserve Negative reserve 1. Debt securities 72 -2,612 4 -803 - - -4 803 72 -2,612 - of which measured pursuant to IAS 39 4 -803 4 -803 - - -4 803 4 -803 2. Equities 159 -375 44 -2 - - -44 2 159 -375 - of which measured pursuant to IAS 39 44 -2 44 -2 - - -44 2 44 -2 2bis. Quotas of UCI (pursuant to IAS 39) 55 -96 55 -96 - - -55 96 55 -96 4. Loans 10 -52 - - - - - - 10 -52 Total as at 31.12.2022 296 -3,135 103 -901 - - -103 901 296 -3,135 Total as at 31.12.2021 1,012 -1,008 508 -39 - - -508 39 1,012 -1,008 The reserve on equities classified as level 1 is negative for about 338 million euro. B.3. Valuation reserves of financial assets measured at fair value through other comprehensive income: annual changes (millions of euro) Debt securities Debt securities: of which measured pursuant to IAS39 Equities Equities: of which measured pursuant to IAS39 Quotas of UCI (pursuant to IAS39) Loans 1. Opening balance 51 377 -100 44 48 5 2. Increases 7,299 6,746 875 372 666 27 2.1. Fair value increases 6,956 6,739 375 351 663 5 2.2. Adjustments for credit risk 17 - X - - 13 2.3. Reversal to the income statement of negative reserves from disposal 312 4 4 4 - 9 2.3bis Reversal to the income statement of negative reserves from impairment (pursuant to IAS39) - - - - 2 - 2.4. Transfer to other shareholders' equity items (equities) - - 439 - - - 2.5. Other increases 14 3 57 17 1 - 3. Decreases -9,890 -7,922 -991 -374 -755 -74 3.1. Fair value decreases -9,699 -7,895 -906 -372 -751 -74 3.2. Recoveries for credit risk -2 - - - - - 3.2bis Impairment losses (pursuant to IAS39) -1 -1 - - - - 3.3. Reversal to the income statement of positive reserves from disposal -171 -23 - - -2 - 3.4. Transfer to other shareholders' equity items (equities) - - -39 - - - 3.5. Other decreases -17 -3 -46 -2 -2 - 4. Final balance -2,540 -799 -216 42 -41 -42 Trading on treasury shares During the year, Intesa Sanpaolo and the Group companies \u2013 on the basis of specific Shareholders\u2019 Meeting authorisations \u2013 carried out the following transactions on treasury shares of the Parent Company Intesa Sanpaolo: Ordinary shares: Initial number no. 40,481,556 Purchases no. 1,035,246,253 of which to be annulled (buyback) no. 988,632,803 Sales no. -1,019,021,022 of which annulment of shares subject to buyback no. -988,632,803 End-of-year number no. 56,706,787 B.4. Valuation reserves relating to the defined benefit plans: annual changes During the year, the reserves at issue recorded an increase of 182 million euro. Therefore, as at 31 December 2022 there was an overall negative reserve equal to approximately 242 million euro for defined benefit plans.", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1021": { "value": "SECTION 14 - MINORITY INTERESTS \u2013 CAPTION 190 For details regarding the breakdown of minority interests, see section F, \u201cPart B.1. Consolidated shareholders\u2019 equity: breakdown by type of company\u201d. 14.1 Breakdown of caption 190 Minority interests (millions of euro) Companies 31.12.2022 31.12.2021 Investments in consolidated companies with significant minority interests 158 276 1 Bank of Alexandria 126 174 2 Risanamento S.p.A. 26 53 3 Eurizon SLJ Capital Limited 3 - 4 Eurizon Capital Real Asset S.p.A. 3 - 5 Private Equity International S.A. - 32 6 Privredna Banka Zagreb DD - 17 Other investments 8 15 TOTAL 166 291 14.2 Equity instruments: breakdown and annual changes There were no equity instruments pertaining to minority interests. ", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncontrollingInterestsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-929": { "value": "1. Commitments and financial guarantees given \u2013 Excluding insurance companies (millions of euro) Commitments and financial guarantees given - nominal amount 31.12.2022 31.12.2021 Stage 1 Stage 2 Stage 3 Purchased or originated credit- impaired 1. Commitments to disburse funds 216,615 22,288 908 4 239,815 234,827 a) Central Banks 1,146 48 - - 1,194 1,617 b) Public Administration 9,371 2,374 100 - 11,845 11,485 c) Banks 31,750 497 11 - 32,258 35,157 d) Other financial companies 14,447 5,798 12 - 20,257 22,012 e) Non-financial companies 144,200 12,882 728 4 157,814 148,920 f) Households 15,701 689 57 - 16,447 15,636 2. Financial guarantees given 42,580 4,727 854 - 48,161 46,458 a) Central Banks - - - - - 1 b) Public Administration 438 6 - - 444 493 c) Banks 3,434 124 - - 3,558 3,124 d) Other financial companies 948 399 12 - 1,359 783 e) Non-financial companies 37,264 4,171 835 - 42,270 41,509 f) Households 496 27 7 - 530 548 In this table - in accordance with the instructions of Circular 262 - the Commitments to disburse funds include the commitments that can give rise to credit risk subject to the rules for determining the expected loss in accordance with IFRS 9, including revocable margins available on credit lines granted to customers and banks (for a total amount of 152,332 million euro in 2022). 1.Bis Commitments and financial guarantees given \u2013 Insurance companies As at 31 December 2022 there were no exposures of this type. 2. Other commitments and other financial guarantees given \u2013 Excluding insurance companies As at 31 December 2022 there were no exposures of this type. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1001": { "value": "SECTION 1 \u2013 INTEREST \u2013 CAPTIONS 10 AND 20 1.1. Interest and similar income: breakdown (millions of euro) Captions/Types Debt securities Loans Other transactions 2022 2021 1. Financial assets measured at fair value through profit or loss 17 38 - 55 55 1.1 Financial assets held for trading 9 2 - 11 8 1.2 Financial assets designated at fair value - - - - - 1.3 Other financial assets mandatorily measured at fair value 8 36 - 44 47 2. Financial assets measured at fair value through other comprehensive income 860 52 X 912 652 3. Financial assets measured at amortised cost 829 10,967 X 11,796 9,386 3.1 Due from banks 47 1,201 X 1,248 273 3.2 Loans to customers 782 9,766 X 10,548 9,113 4. Hedging derivatives X X -584 -584 -1,134 5. Other assets X X 251 251 34 6. Financial liabilities X X X 802 1,480 Total 1,706 11,057 -333 13,232 10,473 of which: interest income on impaired financial assets 1 444 - 445 608 of which: interest income on financial lease X 338 X 338 350 Interest and similar income also includes interest income on securities relating to repurchase agreements. Interest on impaired financial assets also includes interest due to the passing of time, equal to 161 million euro (time value) which came to 275 million euro in 2021. The caption \u201cHedging derivatives\u201d includes the differentials on hedging transactions, adjusting interest income recognised on hedged financial instruments. \u201cFinancial liabilities\u201d include interest on funding transactions with negative rates. In that context, interest income was recognised, on an overall basis, on other TLTROs in the total amount of 615 million euro in 2022 and 1,187 million euro in 2021. The amount recognised in 2022 refers to interest accrued on TLTRO III operations. As described in further detail in Part A \u2013 Accounting policies of these Notes, in the paragraph \u201cTLTRO III\u201d, the interest was recognised taking into account the achievement of the benchmarks set (referring in particular to the outstanding amounts as at 31 March 2021 and 31 December 2021), the changes in interest rates and lastly the recalibrations of the conditions applicable to TLTRO III loans communicated by the Governing Council of the ECB on 27 October 2022. Finally, the caption \u201cFinancial assets measured at amortised cost\u201d, sub-caption \u201cDue from banks\u201d, includes interest on \u201con demand\u201d loans due from banks and central banks classified in the balance sheet to the caption \u201cCash and cash equivalents\u201d. 1.2. Interest and similar income: other information 1.2.1 Interest income on foreign currency financial assets The balance as at 31 December 2022 includes 3,659 million euro relating to financial assets in foreign currency. 1.3 Interest and similar expense: breakdown (millions of euro) Captions/Types Debts Securities Other transactions 2022 2021 1. Financial liabilities measured at amortised cost 1,323 1,658 X 2,981 2,021 1.1 Due to Central Banks 76 X X 76 16 1.2 Due to banks 495 X X 495 164 1.3 Due to customers 752 X X 752 350 1.4 Securities issued X 1,658 X 1,658 1,491 2. Financial liabilities held for trading 39 - - 39 80 3. Financial liabilities designated at fair value 10 1 - 11 11 4. Other liabilities and allowances X X 49 49 34 5. Hedging derivatives X X -61 -61 -435 6. Financial assets X X X 528 769 Total 1,372 1,659 -12 3,547 2,480 of which: interest expense on lease liabilities 22 X X 22 25 \u201cDue to banks\u201d and \u201cDue to customers\u201d also include interest expense on repurchase agreements, even if the transaction referred to securities recorded under assets. Hedging derivatives refer to the interest on liabilities and include the differentials on hedging transactions, adjusting interest expense recognised on hedged financial instruments. \u201cFinancial assets\u201d include interest on lending transactions with negative rates. 1.4. Interest and similar expense: other information 1.4.1 Interest expense on foreign currency financial liabilities Interest and similar expense in 2022 includes 1,612 million euro relative to financial liabilities in foreign currency. 1.5. Differentials on hedging transactions (millions of euro) Captions 2022 2021 A. Positive differentials on hedging transactions 3,626 2,570 B. Negative differentials on hedging transactions -4,149 -3,269 C. Balance (A-B) -523 -699
SECTION 2 \u2013 NET FEE AND COMMISSION INCOME - CAPTIONS 40 AND 50
2.1 Fee and commission income: breakdown
(millions of euro)
Type of service/Amounts
2022
2021
a) Financial instruments
1,584
1,968
1. Placement of securities
511
886
1.1 Through underwriting and/or on a firm commitment basis
29
19
1.2 Without firm commitment
482
867
2. Reception and transmission of orders and execution of orders on behalf of customers
214
227
2.1 Reception and transmission of orders for one or more financial instruments
107
119
2.2 Execution of orders on behalf of customers
107
108
3. Other fee and commission income related to activities connected to financial instruments
859
855
of which: dealing on own account
2
3
of which: individual portfolio management
857
852
b) Corporate Finance
9
22
1. M&A advisory
9
22
2. Treasury services
-
-
3. Other fee and commission income related to corporate finance services
-
-
c) Investment advice
238
221
d) Clearing and settlement
-
-
e) Collective portfolio management
2,180
2,608
f) Custody and administration
80
116
1. Depositary bank
4
15
2. Other fee and commission income related to custody and administration services
76
101
g) Central administrative services for collective portfolio management
-
-
h) Fiduciary services
13
10
i) Payment services
3,071
2,999
1. Current accounts
1,410
1,471
2. Credit cards
611
559
3. Debit cards and other payment cards
284
249
4. Credit transfers and other payment orders
389
314
5. Other fee and commission income related to payment services
377
406
j) Distribution of third-party services
711
662
1. Collective portfolio management
510
508
2. Insurance products
109
78
3. Other products
92
76
of which: individual portfolio management
27
27
k) Structured finance
24
24
l) Servicing related to securitisations
1
-
m) Commitments to disburse funds
15
18
n) Financial guarantees given
473
403
of which: credit derivatives
2
2
o) Financing transactions
922
878
of which: for factoring transactions
84
85
p) Currency dealing
16
21
q) Commodities
-
-
r) Other fee and commission income
1,948
2,137
of which: for management of multilateral trading facilities
-
-
of which: for management of organised trading facilities
-
-
Total
11,285
12,087
The sub-caption \u201cOther fee and commission income\u201d includes fee and commission income collected from insurance
companies of 1,590 million euro.
As required by IFRS 15, paragraph 116 b), it is noted that fee and commission income includes the revenues recognised
during the year included in the opening balance of liabilities deriving from contracts with customers. In line with paragraph 116
c) of IFRS 15, revenues deriving from performance obligations satisfied in the previous years are included, amounting to 22
million euro.
2.2 Fee and commission expense: breakdown
(millions of euro)
2022
2021
a) Financial instruments
306
278
of which: trading in financial instruments
50
34
of which: placement of financial instruments
244
219
of which: individual portfolio management
12
25
- Own portfolio
12
24
- Third-party portfolio
-
1
b) Clearing and settlement
31
19
c) Collective portfolio management
46
54
- Own portfolio
11
14
- Third-party portfolio
35
40
d) Custody and administration
75
86
e) Collection and payment services
601
576
of which: credit cards, debit cards and other payment cards
457
417
f) Servicing related to securitisations
-
-
g) Commitments to receive funds
1
1
h) Financial guarantees received
255
220
of which: credit derivatives
27
21
i) \u201cOut-of-branch\u201d offer of financial instruments, products and services
925
919
j) Currency dealing
7
4
k) Other fee and commission expense
461
566
Total
2,708
2,723
The sub-caption \u201cOther fee and commission expense\u201d includes 228 million euro on the placement of investment insurance
products, 140 million euro on banking services to Italian branches, 60 million euro on banking services to international
branches and 33 million euro on other minor services.
As required by IFRS 15, paragraph 116 b), it is noted that fee and commission income includes the revenues recognised
during the year included in the opening balance of liabilities deriving from contracts with customers.
In line with paragraph 116 c) of IFRS 15, revenues deriving from performance obligations satisfied in the previous years are
included, amounting to 6 million euro.
SECTION 3 \u2013 DIVIDEND AND SIMILAR INCOME - CAPTION 70
3.1 Dividend and similar income: breakdown
(millions of euro)
Captions/Income
2022
2021
Dividends
Similar
income
Dividends
Similar
income
A. Financial assets held for trading
39
-
27
-
B. Other financial assets mandatorily measured at fair value
5
119
7
72
C. Financial assets measured at fair value through other comprehensive income
62
-
55
-
D. Investments in associates and companies subject to joint control
-
-
-
-
Total
106
119
89
72
SECTION 4 \u2013 PROFITS (LOSSES) ON TRADING - CAPTION 80
4.1 Profits (Losses) on trading: breakdown
(millions of euro)
Transactions/Income components
Revaluations
Profits on
trading
Write-downs
Losses on
trading
Net result
1. Financial assets held for trading
218
3,058
-711
-2,304
261
1.1 Debt securities
184
2,985
-662
-2,169
338
1.2 Equities
31
66
-40
-121
-64
1.3 Quotas of UCI
3
4
-7
-13
-13
1.4 Loans
-
-
-2
-
-2
1.5 Other
-
3
-
-1
2
2. Financial liabilities held for trading
901
6
-7
-30
870
2.1 Debt securities
-
-
-
-
-
2.2 Payables
559
-
-5
-
554
2.3 Other
342
6
-2
-30
316
3. Financial assets and liabilities: foreign exchange
differences
X
X
X
X
-1,574
4. Derivatives
123,315
43,492
-126,013
-41,929
294
4.1 Financial derivatives:
122,227
40,888
-124,987
-39,269
288
- on debt securities and interest rates
120,294
29,263
-121,852
-29,172
-1,467
- on equities and stock indexes
1,037
6,230
-2,485
-4,488
294
- on currencies and gold
X
X
X
X
1,429
- other
896
5,395
-650
-5,609
32
4.2 Credit derivatives
1,088
2,604
-1,026
-2,660
6
of which: natural hedging associated with the fair value option
X
X
X
X
-
Total
124,434
46,556
-126,731
-44,263
-149
Profits and losses on Financial assets held for trading are shown for each single purchase or sale, in line with the method of
accounting recognition used by the Bank, and include the results of both long and short positions.
\u201cNet result\u201d includes profits, losses, revaluations and write-downs on currency transactions and currency and gold derivatives.
The net result of the exchange differences on Financial assets and liabilities, reported in sub-caption 3, is connected to the
result of sub-caption 4.1 relating to Derivatives - Financial derivatives on currencies and gold, which includes the results of the
related operational hedges taken out by the Bank on foreign exchange risk using financial trading derivatives. Similarly, the
result in Financial derivatives on debt securities and interest rates should be viewed in conjunction with the results of the
Financial assets held for trading in Debt securities and Financial liabilities held for trading in Payables (short selling of
securities) respectively, as these transactions are operationally linked to each other.
Regarding structured financial products and their impact on the income statement, for detailed information please refer to Part
E of these Notes to the consolidated financial statements - Information on risks and relative hedging policies.
SECTION 6 \u2013 PROFITS (LOSSES) ON DISPOSAL OR REPURCHASE - CAPTION 100 6.1 Profits (Losses) on disposal or repurchase: breakdown (millions of euro) Captions/Income components 2022 2021 Profits Losses Net result Profits Losses Net result A. Financial assets 1. Financial assets measured at amortised cost 439 -272 167 494 -293 201 1.1 Due from banks 1 -9 -8 - - - 1.2 Loans to customers 438 -263 175 494 -293 201 2. Financial assets measured at fair value through other comprehensive income 357 -600 -243 693 -82 611 2.1 Debt securities 356 -588 -232 693 -82 611 2.2 Loans 1 -12 -11 - - - Total assets (A) 796 -872 -76 1,187 -375 812 Financial liabilities valued at amortized cost 1. Due to banks 1 -6 -5 1 -3 -2 2. Due to customers - - - 6 -3 3 3. Securities issued 47 -14 33 19 -74 -55 Total liabilities (B) 48 -20 28 26 -80 -54 The Net result on Financial assets measured at amortised cost in sub-caption 1.2 Loans to customers, primarily attributable to the Parent Company, mainly relates to the sale on the market of government debt securities and a portfolio of non-performing loans to an SPV formed pursuant to Law No. 130/99 with the obtainment of a \u201cGACS\u201d (government guarantee on securitisation of NPLs).
The Net result on Financial assets measured at fair value through other comprehensive income in sub-caption 2.1 Debt
securities, also primarily attributable to the Parent Company, relates to profits and losses mainly deriving from the sale of
government debt securities.
Profits and losses on Financial assets measured at fair value through other comprehensive income, represented by debt
securities, are shown for each single purchase or sale.
SECTION 7 \u2013 PROFITS (LOSSES) ON OTHER FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR
VALUE THROUGH PROFIT OR LOSS - CAPTION 110
7.1 Net change in the value of other financial assets and liabilities measured at fair value through profit or loss:
breakdown of financial assets and liabilities designated at fair value
(millions of euro)
Transactions/Income components
Revaluations
Gains on
disposal
Write-downs
Losses on
trading
Net result
1. Financial assets
-
-
-
-
-
1.1 Debt securities
-
-
-
-
-
1.2 Loans
-
-
-
-
-
2. Financial liabilities
1,020
8
-1
-42
985
2.1 Securities issued
1,007
8
-1
-42
972
2.2 Due to banks
-
-
-
-
-
2.3 Due to customers
13
-
-
-
13
3. Foreign currency financial assets and liabilities: foreign
exchange differences
X
X
X
X
-28
Total
1,020
8
-1
-42
957
Sub-caption 2.1 Financial liabilities - Securities issued, reports the net result of the certificates which provide for partial or full
redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014 (certificates with
guaranteed or protected capital), issued after 1 January 2020. The Revaluations shown in the table refer to the fair value
measurement of these financial instruments, calculated excluding the changes in value due to the change in own credit rating
recognised in the Statement of comprehensive income (Shareholders\u2019 equity).
For information on the methods used to determine counterparty risk (credit spread), reference should be made to Part A.4 -
Information on fair value of the Notes to the consolidated financial statements.
7.2 Net change in the value of other financial assets and liabilities measured at fair value through profit or loss:
breakdown of other financial assets mandatorily measured at fair value
(millions of euro)
Transactions/Income components
Revaluations
Gains on
disposal
Write-downs
Losses on
trading
Net result
1. Financial assets
204
38
-448
-30
-236
1.1 Debt securities
12
3
-104
-2
-91
1.2 Equities
8
4
-40
-2
-30
1.3 Quotas of UCI
137
6
-95
-18
30
1.4 Loans
47
25
-209
-8
-145
2. Financial assets: foreign exchange differences
X
X
X
X
34
Total
204
38
-448
-30
-202
SECTION 7 BIS \u2013 PROFITS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES PERTAINING TO INSURANCE COMPANIES PURSUANT TO IAS 39 - CAPTION 115 The breakdown of the IAS 39 captions included in caption 115 of the Income Statement referring to insurance companies is shown below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by the Bank of Italy Circular no. 262, \u201cCaption 115 Net profit (loss) on financial assets and liabilities pertaining to insurance companies in accordance with IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of Profits (Losses) on financial assets and liabilities pertaining to insurance companies pursuant to IAS 39 - Caption 115 2022 2021 10. Interest and similar income 2,335 1,862 20. Interest and similar expense -77 -75 70. Dividend and similar income 503 383 80. Profits (Losses) on trading -53 -69 90. Fair value adjustments in hedge accounting (*) - - 100. Profits (Losses) on disposal or repurchase of: -384 198 a) loans - - b) financial assets available for sale -384 198 c) investments held to maturity - - d) financial liabilities - - 110. Profits (Losses) on financial assets and liabilities designated at fair value -1,090 2,455 TOTAL Caption 115 1,234 4,754 (*) There are no hedges in hedge accounting 7.1 Bis. Interest and similar income: breakdown (millions of euro) Captions/Types Debt securities Loans Other transactions 2022 2021 1. Financial assets held for trading 22 - - 22 16 2. Financial assets designated at fair value 1 - - 1 1 3. Financial assets available for sale 2,298 - - 2,298 1,834 4. Investments held to maturity - - - - - 5. Due from banks 1 1 - 2 3 6. Loans to customers - - - - - 7. Hedging derivatives X X 12 12 8 8. Other assets X X - - - Total 2,322 1 12 2,335 1,862 7.2 Bis. Interest and similar income: differentials on hedging transactions Differentials on hedging transactions amounted to 12 million euro. 7.3 Bis. Interest and similar income: other information 7.3.1 Bis Interest income on foreign currency financial assets There were no amounts pertaining to insurance companies.
7.4 Bis. Interest and similar expense: breakdown
(millions of euro)
Captions/Types
Debts
Securities
Other
transactions
2022
2021
1. Due to Central Banks
-
X
-
-
-
2. Due to banks
5
X
21
26
27
3. Due to customers
-
X
-
-
-
4. Securities issued
X
51
-
51
48
5. Financial liabilities held for trading
-
-
-
-
-
6. Financial liabilities designated at fair value
-
-
-
-
-
7. Other liabilities and allowances
X
X
-
-
-
8. Hedging derivatives
X
X
-
-
-
Total
5
51
21
77
75
7.5. Bis. Interest and similar expense: differentials on hedging transactions
There were no amounts pertaining to insurance companies.
7.6. Bis. Interest and similar expense: other information
7.6.1 Bis Interest expense on foreign currency financial liabilities
There were no amounts pertaining to insurance companies.
7.7 Bis. Dividend and similar income: breakdown
(millions of euro)
Captions/Income
2022
2021
Dividends
Income from quotas of
UCI
Dividends
Income from
quotas of UCI
A. Financial assets held for trading
-
-
-
-
B. Financial assets available for sale
78
362
93
237
C. Financial assets designated at fair value
63
-
53
-
D. Investments in associates and companies subject to joint control
-
X
-
X
Total
141
362
146
237
7.8 Bis. Profits (Losses) on trading: breakdown
(millions of euro)
Transactions/Income components
Revaluations
Profits on
trading
Write-downs
Losses on
trading
Net result
1. Financial assets held for trading
-
-
-153
-3
-156
1.1 Debt securities
-
-
-136
-1
-137
1.2 Equities
-
-
-
-
-
1.3 Quotas of UCI
-
-
-17
-2
-19
1.4 Loans
-
-
-
-
-
1.5 Other
-
-
-
-
-
2. Financial liabilities held for trading
-
-
-
-
-
2.1 Debt securities
-
-
-
-
-
2.2 Payables
-
-
-
-
-
2.3 Other
-
-
-
-
-
3. Financial assets and liabilities: foreign exchange
differences
X
X
X
X
3
4. Derivatives
33
218
-17
-52
100
4.1 Financial derivatives:
33
217
-17
-52
99
- on debt securities and interest rates
-
156
-
-9
147
- on equities and stock indexes
33
61
-17
-43
34
- on currencies and gold
X
X
X
X
-82
- other
-
-
-
-
-
4.2 Credit derivatives
-
1
-
-
1
Total
33
218
-170
-55
-53
7.9 Bis. Fair value adjustments in hedge accounting: breakdown
There were no fair value adjustments in hedge accounting pertaining to insurance companies through the income statement.
7.10 Bis. Profits (Losses) on disposal or repurchase: breakdown
(millions of euro)
Captions/Income components
2022
2021
Profits
Losses
Net result
Profits
Losses
Net result
Financial assets
1. Due from banks
-
-
-
-
-
-
2. Loans to customers
-
-
-
-
-
-
3. Financial assets available for sale
297
-681
-384
300
-102
198
3.1 Debt securities
135
-598
-463
152
-17
135
3.2 Equities
51
-32
19
45
-36
9
3.3 Quotas of UCI
108
-51
57
103
-49
54
3.4 Loans
3
-
3
-
-
-
4.Investments held to maturity
-
-
-
-
-
-
Total assets
297
-681
-384
300
-102
198
Financial liabilities
1. Due to banks
-
-
-
-
-
-
2. Due to customers
-
-
-
-
-
-
3. Securities issued
-
-
-
-
-
-
Total liabilities
-
-
-
-
-
-
7.11 Bis. Profits (losses) on financial assets/liabilities designated at fair value: breakdown
(millions of euro)
Transactions/Income components
Revaluations
Gains on
disposal
Write-
downs
Losses on
trading
Net
result
1. Financial assets
413
611
-10,686
-2,724
-12,386
1.1 Debt securities
6
106
-403
-157
-448
1.2 Equities
147
184
-480
-309
-458
1.3 Quotas of UCI
231
314
-9,740
-2,250
-11,445
1.4 Loans
29
7
-63
-8
-35
2. Financial liabilities
11,339
-
-15
-
11,324
2.1 Debt securities
-
-
-
-
-
2.2 Due to banks
69
-
-
-
69
2.3 Due to customers
11,270
-
-15
-
11,255
3. Foreign currency financial assets and liabilities:
foreign exchange differences
X
X
X
X
-
4. Credit and financial derivatives
49
83
-20
-140
-28
Total
11,801
694
-10,721
-2,864
-1,090
16.2 Other operating income: breakdown (millions of euro) Type of expense/Amount Recovery of other expenses 930 Income related to consumer credit and leasing 42 Rentals and recovery of expenses on real estate 34 Recovery of services rendered to third parties 23 Negative Goodwill - Other 341 Total 2022 1,370 Total 2021 1,483 The sub-caption \u201cOther income\u201d comprises 58 million euro for the positive result on gold and precious metals. As required by paragraph 116 c) of IFRS 15, it is specified that revenues deriving from performance obligations satisfied in the previous years are included, amounting to 17 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-965": { "value": "SECTION 1 \u2013 INTEREST \u2013 CAPTIONS 10 AND 20 1.1. Interest and similar income: breakdown (millions of euro) Captions/Types Debt securities Loans Other transactions 2022 2021 1. Financial assets measured at fair value through profit or loss 17 38 - 55 55 1.1 Financial assets held for trading 9 2 - 11 8 1.2 Financial assets designated at fair value - - - - - 1.3 Other financial assets mandatorily measured at fair value 8 36 - 44 47 2. Financial assets measured at fair value through other comprehensive income 860 52 X 912 652 3. Financial assets measured at amortised cost 829 10,967 X 11,796 9,386 3.1 Due from banks 47 1,201 X 1,248 273 3.2 Loans to customers 782 9,766 X 10,548 9,113 4. Hedging derivatives X X -584 -584 -1,134 5. Other assets X X 251 251 34 6. Financial liabilities X X X 802 1,480 Total 1,706 11,057 -333 13,232 10,473 of which: interest income on impaired financial assets 1 444 - 445 608 of which: interest income on financial lease X 338 X 338 350 Interest and similar income also includes interest income on securities relating to repurchase agreements. Interest on impaired financial assets also includes interest due to the passing of time, equal to 161 million euro (time value) which came to 275 million euro in 2021. The caption \u201cHedging derivatives\u201d includes the differentials on hedging transactions, adjusting interest income recognised on hedged financial instruments. \u201cFinancial liabilities\u201d include interest on funding transactions with negative rates. In that context, interest income was recognised, on an overall basis, on other TLTROs in the total amount of 615 million euro in 2022 and 1,187 million euro in 2021. The amount recognised in 2022 refers to interest accrued on TLTRO III operations. As described in further detail in Part A \u2013 Accounting policies of these Notes, in the paragraph \u201cTLTRO III\u201d, the interest was recognised taking into account the achievement of the benchmarks set (referring in particular to the outstanding amounts as at 31 March 2021 and 31 December 2021), the changes in interest rates and lastly the recalibrations of the conditions applicable to TLTRO III loans communicated by the Governing Council of the ECB on 27 October 2022. Finally, the caption \u201cFinancial assets measured at amortised cost\u201d, sub-caption \u201cDue from banks\u201d, includes interest on \u201con demand\u201d loans due from banks and central banks classified in the balance sheet to the caption \u201cCash and cash equivalents\u201d. 1.2. Interest and similar income: other information 1.2.1 Interest income on foreign currency financial assets The balance as at 31 December 2022 includes 3,659 million euro relating to financial assets in foreign currency. 1.5. Differentials on hedging transactions (millions of euro) Captions 2022 2021 A. Positive differentials on hedging transactions 3,626 2,570 B. Negative differentials on hedging transactions -4,149 -3,269 C. Balance (A-B) -523 -699 SECTION 7 BIS \u2013 PROFITS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES PERTAINING TO INSURANCE COMPANIES PURSUANT TO IAS 39 - CAPTION 115 The breakdown of the IAS 39 captions included in caption 115 of the Income Statement referring to insurance companies is shown below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by the Bank of Italy Circular no. 262, \u201cCaption 115 Net profit (loss) on financial assets and liabilities pertaining to insurance companies in accordance with IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of Profits (Losses) on financial assets and liabilities pertaining to insurance companies pursuant to IAS 39 - Caption 115 2022 2021 10. Interest and similar income 2,335 1,862 20. Interest and similar expense -77 -75 70. Dividend and similar income 503 383 80. Profits (Losses) on trading -53 -69 90. Fair value adjustments in hedge accounting (*) - - 100. Profits (Losses) on disposal or repurchase of: -384 198 a) loans - - b) financial assets available for sale -384 198 c) investments held to maturity - - d) financial liabilities - - 110. Profits (Losses) on financial assets and liabilities designated at fair value -1,090 2,455 TOTAL Caption 115 1,234 4,754 (*) There are no hedges in hedge accounting 7.1 Bis. Interest and similar income: breakdown (millions of euro) Captions/Types Debt securities Loans Other transactions 2022 2021 1. Financial assets held for trading 22 - - 22 16 2. Financial assets designated at fair value 1 - - 1 1 3. Financial assets available for sale 2,298 - - 2,298 1,834 4. Investments held to maturity - - - - - 5. Due from banks 1 1 - 2 3 6. Loans to customers - - - - - 7. Hedging derivatives X X 12 12 8 8. Other assets X X - - - Total 2,322 1 12 2,335 1,862 7.2 Bis. Interest and similar income: differentials on hedging transactions Differentials on hedging transactions amounted to 12 million euro. 7.3 Bis. Interest and similar income: other information 7.3.1 Bis Interest income on foreign currency financial assets There were no amounts pertaining to insurance companies. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-930": { "value": "SECTION 1 \u2013 INTEREST \u2013 CAPTIONS 10 AND 20 1.1. Interest and similar income: breakdown (millions of euro) Captions/Types Debt securities Loans Other transactions 2022 2021 1. Financial assets measured at fair value through profit or loss 17 38 - 55 55 1.1 Financial assets held for trading 9 2 - 11 8 1.2 Financial assets designated at fair value - - - - - 1.3 Other financial assets mandatorily measured at fair value 8 36 - 44 47 2. Financial assets measured at fair value through other comprehensive income 860 52 X 912 652 3. Financial assets measured at amortised cost 829 10,967 X 11,796 9,386 3.1 Due from banks 47 1,201 X 1,248 273 3.2 Loans to customers 782 9,766 X 10,548 9,113 4. Hedging derivatives X X -584 -584 -1,134 5. Other assets X X 251 251 34 6. Financial liabilities X X X 802 1,480 Total 1,706 11,057 -333 13,232 10,473 of which: interest income on impaired financial assets 1 444 - 445 608 of which: interest income on financial lease X 338 X 338 350 Interest and similar income also includes interest income on securities relating to repurchase agreements. Interest on impaired financial assets also includes interest due to the passing of time, equal to 161 million euro (time value) which came to 275 million euro in 2021. The caption \u201cHedging derivatives\u201d includes the differentials on hedging transactions, adjusting interest income recognised on hedged financial instruments. \u201cFinancial liabilities\u201d include interest on funding transactions with negative rates. In that context, interest income was recognised, on an overall basis, on other TLTROs in the total amount of 615 million euro in 2022 and 1,187 million euro in 2021. The amount recognised in 2022 refers to interest accrued on TLTRO III operations. As described in further detail in Part A \u2013 Accounting policies of these Notes, in the paragraph \u201cTLTRO III\u201d, the interest was recognised taking into account the achievement of the benchmarks set (referring in particular to the outstanding amounts as at 31 March 2021 and 31 December 2021), the changes in interest rates and lastly the recalibrations of the conditions applicable to TLTRO III loans communicated by the Governing Council of the ECB on 27 October 2022. Finally, the caption \u201cFinancial assets measured at amortised cost\u201d, sub-caption \u201cDue from banks\u201d, includes interest on \u201con demand\u201d loans due from banks and central banks classified in the balance sheet to the caption \u201cCash and cash equivalents\u201d. 1.2. Interest and similar income: other information 1.2.1 Interest income on foreign currency financial assets The balance as at 31 December 2022 includes 3,659 million euro relating to financial assets in foreign currency. 1.3 Interest and similar expense: breakdown (millions of euro) Captions/Types Debts Securities Other transactions 2022 2021 1. Financial liabilities measured at amortised cost 1,323 1,658 X 2,981 2,021 1.1 Due to Central Banks 76 X X 76 16 1.2 Due to banks 495 X X 495 164 1.3 Due to customers 752 X X 752 350 1.4 Securities issued X 1,658 X 1,658 1,491 2. Financial liabilities held for trading 39 - - 39 80 3. Financial liabilities designated at fair value 10 1 - 11 11 4. Other liabilities and allowances X X 49 49 34 5. Hedging derivatives X X -61 -61 -435 6. Financial assets X X X 528 769 Total 1,372 1,659 -12 3,547 2,480 of which: interest expense on lease liabilities 22 X X 22 25 \u201cDue to banks\u201d and \u201cDue to customers\u201d also include interest expense on repurchase agreements, even if the transaction referred to securities recorded under assets. Hedging derivatives refer to the interest on liabilities and include the differentials on hedging transactions, adjusting interest expense recognised on hedged financial instruments. \u201cFinancial assets\u201d include interest on lending transactions with negative rates. 1.4. Interest and similar expense: other information 1.4.1 Interest expense on foreign currency financial liabilities Interest and similar expense in 2022 includes 1,612 million euro relative to financial liabilities in foreign currency. 1.5. Differentials on hedging transactions (millions of euro) Captions 2022 2021 A. Positive differentials on hedging transactions 3,626 2,570 B. Negative differentials on hedging transactions -4,149 -3,269 C. Balance (A-B) -523 -699 SECTION 7 BIS \u2013 PROFITS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES PERTAINING TO INSURANCE COMPANIES PURSUANT TO IAS 39 - CAPTION 115 The breakdown of the IAS 39 captions included in caption 115 of the Income Statement referring to insurance companies is shown below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by the Bank of Italy Circular no. 262, \u201cCaption 115 Net profit (loss) on financial assets and liabilities pertaining to insurance companies in accordance with IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of Profits (Losses) on financial assets and liabilities pertaining to insurance companies pursuant to IAS 39 - Caption 115 2022 2021 10. Interest and similar income 2,335 1,862 20. Interest and similar expense -77 -75 70. Dividend and similar income 503 383 80. Profits (Losses) on trading -53 -69 90. Fair value adjustments in hedge accounting (*) - - 100. Profits (Losses) on disposal or repurchase of: -384 198 a) loans - - b) financial assets available for sale -384 198 c) investments held to maturity - - d) financial liabilities - - 110. Profits (Losses) on financial assets and liabilities designated at fair value -1,090 2,455 TOTAL Caption 115 1,234 4,754 (*) There are no hedges in hedge accounting 7.1 Bis. Interest and similar income: breakdown (millions of euro) Captions/Types Debt securities Loans Other transactions 2022 2021 1. Financial assets held for trading 22 - - 22 16 2. Financial assets designated at fair value 1 - - 1 1 3. Financial assets available for sale 2,298 - - 2,298 1,834 4. Investments held to maturity - - - - - 5. Due from banks 1 1 - 2 3 6. Loans to customers - - - - - 7. Hedging derivatives X X 12 12 8 8. Other assets X X - - - Total 2,322 1 12 2,335 1,862 7.2 Bis. Interest and similar income: differentials on hedging transactions Differentials on hedging transactions amounted to 12 million euro. 7.3 Bis. Interest and similar income: other information 7.3.1 Bis Interest income on foreign currency financial assets There were no amounts pertaining to insurance companies. 7.4 Bis. Interest and similar expense: breakdown (millions of euro) Captions/Types Debts Securities Other transactions 2022 2021 1. Due to Central Banks - X - - - 2. Due to banks 5 X 21 26 27 3. Due to customers - X - - - 4. Securities issued X 51 - 51 48 5. Financial liabilities held for trading - - - - - 6. Financial liabilities designated at fair value - - - - - 7. Other liabilities and allowances X X - - - 8. Hedging derivatives X X - - - Total 5 51 21 77 75 7.5. Bis. Interest and similar expense: differentials on hedging transactions There were no amounts pertaining to insurance companies. 7.6. Bis. Interest and similar expense: other information 7.6.1 Bis Interest expense on foreign currency financial liabilities There were no amounts pertaining to insurance companies.", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1022": { "value": "1.3 Interest and similar expense: breakdown (millions of euro) Captions/Types Debts Securities Other transactions 2022 2021 1. Financial liabilities measured at amortised cost 1,323 1,658 X 2,981 2,021 1.1 Due to Central Banks 76 X X 76 16 1.2 Due to banks 495 X X 495 164 1.3 Due to customers 752 X X 752 350 1.4 Securities issued X 1,658 X 1,658 1,491 2. Financial liabilities held for trading 39 - - 39 80 3. Financial liabilities designated at fair value 10 1 - 11 11 4. Other liabilities and allowances X X 49 49 34 5. Hedging derivatives X X -61 -61 -435 6. Financial assets X X X 528 769 Total 1,372 1,659 -12 3,547 2,480 of which: interest expense on lease liabilities 22 X X 22 25 \u201cDue to banks\u201d and \u201cDue to customers\u201d also include interest expense on repurchase agreements, even if the transaction referred to securities recorded under assets. Hedging derivatives refer to the interest on liabilities and include the differentials on hedging transactions, adjusting interest expense recognised on hedged financial instruments. \u201cFinancial assets\u201d include interest on lending transactions with negative rates. 1.4. Interest and similar expense: other information 1.4.1 Interest expense on foreign currency financial liabilities Interest and similar expense in 2022 includes 1,612 million euro relative to financial liabilities in foreign currency. 1.5. Differentials on hedging transactions (millions of euro) Captions 2022 2021 A. Positive differentials on hedging transactions 3,626 2,570 B. Negative differentials on hedging transactions -4,149 -3,269 C. Balance (A-B) -523 -699 7.4 Bis. Interest and similar expense: breakdown (millions of euro) Captions/Types Debts Securities Other transactions 2022 2021 1. Due to Central Banks - X - - - 2. Due to banks 5 X 21 26 27 3. Due to customers - X - - - 4. Securities issued X 51 - 51 48 5. Financial liabilities held for trading - - - - - 6. Financial liabilities designated at fair value - - - - - 7. Other liabilities and allowances X X - - - 8. Hedging derivatives X X - - - Total 5 51 21 77 75 7.5. Bis. Interest and similar expense: differentials on hedging transactions There were no amounts pertaining to insurance companies. 7.6. Bis. Interest and similar expense: other information 7.6.1 Bis Interest expense on foreign currency financial liabilities There were no amounts pertaining to insurance companies. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-966": { "value": "SECTION 2 \u2013 NET FEE AND COMMISSION INCOME - CAPTIONS 40 AND 50 2.1 Fee and commission income: breakdown (millions of euro) Type of service/Amounts 2022 2021 a) Financial instruments 1,584 1,968 1. Placement of securities 511 886 1.1 Through underwriting and/or on a firm commitment basis 29 19 1.2 Without firm commitment 482 867 2. Reception and transmission of orders and execution of orders on behalf of customers 214 227 2.1 Reception and transmission of orders for one or more financial instruments 107 119 2.2 Execution of orders on behalf of customers 107 108 3. Other fee and commission income related to activities connected to financial instruments 859 855 of which: dealing on own account 2 3 of which: individual portfolio management 857 852 b) Corporate Finance 9 22 1. M&A advisory 9 22 2. Treasury services - - 3. Other fee and commission income related to corporate finance services - - c) Investment advice 238 221 d) Clearing and settlement - - e) Collective portfolio management 2,180 2,608 f) Custody and administration 80 116 1. Depositary bank 4 15 2. Other fee and commission income related to custody and administration services 76 101 g) Central administrative services for collective portfolio management - - h) Fiduciary services 13 10 i) Payment services 3,071 2,999 1. Current accounts 1,410 1,471 2. Credit cards 611 559 3. Debit cards and other payment cards 284 249 4. Credit transfers and other payment orders 389 314 5. Other fee and commission income related to payment services 377 406 j) Distribution of third-party services 711 662 1. Collective portfolio management 510 508 2. Insurance products 109 78 3. Other products 92 76 of which: individual portfolio management 27 27 k) Structured finance 24 24 l) Servicing related to securitisations 1 - m) Commitments to disburse funds 15 18 n) Financial guarantees given 473 403 of which: credit derivatives 2 2 o) Financing transactions 922 878 of which: for factoring transactions 84 85 p) Currency dealing 16 21 q) Commodities - - r) Other fee and commission income 1,948 2,137 of which: for management of multilateral trading facilities - - of which: for management of organised trading facilities - - Total 11,285 12,087 The sub-caption \u201cOther fee and commission income\u201d includes fee and commission income collected from insurance companies of 1,590 million euro. As required by IFRS 15, paragraph 116 b), it is noted that fee and commission income includes the revenues recognised during the year included in the opening balance of liabilities deriving from contracts with customers. In line with paragraph 116 c) of IFRS 15, revenues deriving from performance obligations satisfied in the previous years are included, amounting to 22 million euro. 2.2 Fee and commission expense: breakdown (millions of euro) 2022 2021 a) Financial instruments 306 278 of which: trading in financial instruments 50 34 of which: placement of financial instruments 244 219 of which: individual portfolio management 12 25 - Own portfolio 12 24 - Third-party portfolio - 1 b) Clearing and settlement 31 19 c) Collective portfolio management 46 54 - Own portfolio 11 14 - Third-party portfolio 35 40 d) Custody and administration 75 86 e) Collection and payment services 601 576 of which: credit cards, debit cards and other payment cards 457 417 f) Servicing related to securitisations - - g) Commitments to receive funds 1 1 h) Financial guarantees received 255 220 of which: credit derivatives 27 21 i) \u201cOut-of-branch\u201d offer of financial instruments, products and services 925 919 j) Currency dealing 7 4 k) Other fee and commission expense 461 566 Total 2,708 2,723 The sub-caption \u201cOther fee and commission expense\u201d includes 228 million euro on the placement of investment insurance products, 140 million euro on banking services to Italian branches, 60 million euro on banking services to international branches and 33 million euro on other minor services. As required by IFRS 15, paragraph 116 b), it is noted that fee and commission income includes the revenues recognised during the year included in the opening balance of liabilities deriving from contracts with customers. In line with paragraph 116 c) of IFRS 15, revenues deriving from performance obligations satisfied in the previous years are included, amounting to 6 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFeeAndCommissionIncomeExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-967": { "value": "SECTION 3 \u2013 DIVIDEND AND SIMILAR INCOME - CAPTION 70 3.1 Dividend and similar income: breakdown (millions of euro) Captions/Income 2022 2021 Dividends Similar income Dividends Similar income A. Financial assets held for trading 39 - 27 - B. Other financial assets mandatorily measured at fair value 5 119 7 72 C. Financial assets measured at fair value through other comprehensive income 62 - 55 - D. Investments in associates and companies subject to joint control - - - - Total 106 119 89 72", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1036": { "value": "SECTION 4 \u2013 PROFITS (LOSSES) ON TRADING - CAPTION 80 4.1 Profits (Losses) on trading: breakdown (millions of euro) Transactions/Income components Revaluations Profits on trading Write-downs Losses on trading Net result 1. Financial assets held for trading 218 3,058 -711 -2,304 261 1.1 Debt securities 184 2,985 -662 -2,169 338 1.2 Equities 31 66 -40 -121 -64 1.3 Quotas of UCI 3 4 -7 -13 -13 1.4 Loans - - -2 - -2 1.5 Other - 3 - -1 2 2. Financial liabilities held for trading 901 6 -7 -30 870 2.1 Debt securities - - - - - 2.2 Payables 559 - -5 - 554 2.3 Other 342 6 -2 -30 316 3. Financial assets and liabilities: foreign exchange differences X X X X -1,574 4. Derivatives 123,315 43,492 -126,013 -41,929 294 4.1 Financial derivatives: 122,227 40,888 -124,987 -39,269 288 - on debt securities and interest rates 120,294 29,263 -121,852 -29,172 -1,467 - on equities and stock indexes 1,037 6,230 -2,485 -4,488 294 - on currencies and gold X X X X 1,429 - other 896 5,395 -650 -5,609 32 4.2 Credit derivatives 1,088 2,604 -1,026 -2,660 6 of which: natural hedging associated with the fair value option X X X X - Total 124,434 46,556 -126,731 -44,263 -149 Profits and losses on Financial assets held for trading are shown for each single purchase or sale, in line with the method of accounting recognition used by the Bank, and include the results of both long and short positions. \u201cNet result\u201d includes profits, losses, revaluations and write-downs on currency transactions and currency and gold derivatives. The net result of the exchange differences on Financial assets and liabilities, reported in sub-caption 3, is connected to the result of sub-caption 4.1 relating to Derivatives - Financial derivatives on currencies and gold, which includes the results of the related operational hedges taken out by the Bank on foreign exchange risk using financial trading derivatives. Similarly, the result in Financial derivatives on debt securities and interest rates should be viewed in conjunction with the results of the Financial assets held for trading in Debt securities and Financial liabilities held for trading in Payables (short selling of securities) respectively, as these transactions are operationally linked to each other. Regarding structured financial products and their impact on the income statement, for detailed information please refer to Part E of these Notes to the consolidated financial statements - Information on risks and relative hedging policies. SECTION 7 BIS \u2013 PROFITS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES PERTAINING TO INSURANCE COMPANIES PURSUANT TO IAS 39 - CAPTION 115 The breakdown of the IAS 39 captions included in caption 115 of the Income Statement referring to insurance companies is shown below. In relation to the adoption of the Deferral Approach, in the consolidated financial statement layouts established by the Bank of Italy Circular no. 262, \u201cCaption 115 Net profit (loss) on financial assets and liabilities pertaining to insurance companies in accordance with IAS 39\u201d was created, which comprises the components set out in the table below: (millions of euro) Breakdown of Profits (Losses) on financial assets and liabilities pertaining to insurance companies pursuant to IAS 39 - Caption 115 2022 2021 10. Interest and similar income 2,335 1,862 20. Interest and similar expense -77 -75 70. Dividend and similar income 503 383 80. Profits (Losses) on trading -53 -69 90. Fair value adjustments in hedge accounting (*) - - 100. Profits (Losses) on disposal or repurchase of: -384 198 a) loans - - b) financial assets available for sale -384 198 c) investments held to maturity - - d) financial liabilities - - 110. Profits (Losses) on financial assets and liabilities designated at fair value -1,090 2,455 TOTAL Caption 115 1,234 4,754 (*) There are no hedges in hedge accounting 7.8 Bis. Profits (Losses) on trading: breakdown (millions of euro) Transactions/Income components Revaluations Profits on trading Write-downs Losses on trading Net result 1. Financial assets held for trading - - -153 -3 -156 1.1 Debt securities - - -136 -1 -137 1.2 Equities - - - - - 1.3 Quotas of UCI - - -17 -2 -19 1.4 Loans - - - - - 1.5 Other - - - - - 2. Financial liabilities held for trading - - - - - 2.1 Debt securities - - - - - 2.2 Payables - - - - - 2.3 Other - - - - - 3. Financial assets and liabilities: foreign exchange differences X X X X 3 4. Derivatives 33 218 -17 -52 100 4.1 Financial derivatives: 33 217 -17 -52 99 - on debt securities and interest rates - 156 - -9 147 - on equities and stock indexes 33 61 -17 -43 34 - on currencies and gold X X X X -82 - other - - - - - 4.2 Credit derivatives - 1 - - 1 Total 33 218 -170 -55 -53", "dimensions": { "concept": "ifrs-full:DisclosureOfTradingIncomeExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1047": { "value": "SECTION 4 \u2013 PROFITS (LOSSES) ON TRADING - CAPTION 80 4.1 Profits (Losses) on trading: breakdown (millions of euro) Transactions/Income components Revaluations Profits on trading Write-downs Losses on trading Net result 1. Financial assets held for trading 218 3,058 -711 -2,304 261 1.1 Debt securities 184 2,985 -662 -2,169 338 1.2 Equities 31 66 -40 -121 -64 1.3 Quotas of UCI 3 4 -7 -13 -13 1.4 Loans - - -2 - -2 1.5 Other - 3 - -1 2 2. Financial liabilities held for trading 901 6 -7 -30 870 2.1 Debt securities - - - - - 2.2 Payables 559 - -5 - 554 2.3 Other 342 6 -2 -30 316 3. Financial assets and liabilities: foreign exchange differences X X X X -1,574 4. Derivatives 123,315 43,492 -126,013 -41,929 294 4.1 Financial derivatives: 122,227 40,888 -124,987 -39,269 288 - on debt securities and interest rates 120,294 29,263 -121,852 -29,172 -1,467 - on equities and stock indexes 1,037 6,230 -2,485 -4,488 294 - on currencies and gold X X X X 1,429 - other 896 5,395 -650 -5,609 32 4.2 Credit derivatives 1,088 2,604 -1,026 -2,660 6 of which: natural hedging associated with the fair value option X X X X - Total 124,434 46,556 -126,731 -44,263 -149 Profits and losses on Financial assets held for trading are shown for each single purchase or sale, in line with the method of accounting recognition used by the Bank, and include the results of both long and short positions. \u201cNet result\u201d includes profits, losses, revaluations and write-downs on currency transactions and currency and gold derivatives. The net result of the exchange differences on Financial assets and liabilities, reported in sub-caption 3, is connected to the result of sub-caption 4.1 relating to Derivatives - Financial derivatives on currencies and gold, which includes the results of the related operational hedges taken out by the Bank on foreign exchange risk using financial trading derivatives. Similarly, the result in Financial derivatives on debt securities and interest rates should be viewed in conjunction with the results of the Financial assets held for trading in Debt securities and Financial liabilities held for trading in Payables (short selling of securities) respectively, as these transactions are operationally linked to each other. Regarding structured financial products and their impact on the income statement, for detailed information please refer to Part E of these Notes to the consolidated financial statements - Information on risks and relative hedging policies. SECTION 5 \u2013 FAIR VALUE ADJUSTMENTS IN HEDGE ACCOUNTING - CAPTION 90 5.1 Fair value adjustments in hedge accounting: breakdown (millions of euro) Income component/Amount 2022 2021 A. Income from: A.1 fair value hedge derivatives 25,847 6,866 A.2 financial assets hedged (fair value) 52 186 A.3 financial liabilities hedged (fair value) 13,205 1,947 A.4 cash flow hedge: derivatives - - A.5 currency assets and liabilities 10 - Total income from hedging (A) 39,114 8,999 B. Expenses for B.1 fair value hedge derivatives -13,798 -3,775 B.2 financial assets hedged (fair value) -25,282 -5,091 B.3 financial liabilities hedged (fair value) -1 -97 B.4 cash flow hedge: derivatives - - B.5 currency assets and liabilities - - Total expense from hedging (B) -39,081 -8,963 C. Fair value adjustments in hedge accounting (A - B) 33 36 of which: fair value adjustments in hedge accounting on net positions - - The Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each type of hedge (both for micro hedges and macro hedges). For this reason, table \u201c5.1 Fair value adjustments in hedge accounting: breakdown\u201d, contains no amounts in the row \u201cof which: profits (losses) on hedges of net positions\u201d envisaged for parties that apply IFRS 9 also to hedges. SECTION 7 \u2013 PROFITS (LOSSES) ON OTHER FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS - CAPTION 110 7.1 Net change in the value of other financial assets and liabilities measured at fair value through profit or loss: breakdown of financial assets and liabilities designated at fair value (millions of euro) Transactions/Income components Revaluations Gains on disposal Write-downs Losses on trading Net result 1. Financial assets - - - - - 1.1 Debt securities - - - - - 1.2 Loans - - - - - 2. Financial liabilities 1,020 8 -1 -42 985 2.1 Securities issued 1,007 8 -1 -42 972 2.2 Due to banks - - - - - 2.3 Due to customers 13 - - - 13 3. Foreign currency financial assets and liabilities: foreign exchange differences X X X X -28 Total 1,020 8 -1 -42 957 Sub-caption 2.1 Financial liabilities - Securities issued, reports the net result of the certificates which provide for partial or full redemption of the premiums paid on maturity, pursuant to Bank of Italy Communication of 21 October 2014 (certificates with guaranteed or protected capital), issued after 1 January 2020. The Revaluations shown in the table refer to the fair value measurement of these financial instruments, calculated excluding the changes in value due to the change in own credit rating recognised in the Statement of comprehensive income (Shareholders\u2019 equity). For information on the methods used to determine counterparty risk (credit spread), reference should be made to Part A.4 - Information on fair value of the Notes to the consolidated financial statements. 7.2 Net change in the value of other financial assets and liabilities measured at fair value through profit or loss: breakdown of other financial assets mandatorily measured at fair value (millions of euro) Transactions/Income components Revaluations Gains on disposal Write-downs Losses on trading Net result 1. Financial assets 204 38 -448 -30 -236 1.1 Debt securities 12 3 -104 -2 -91 1.2 Equities 8 4 -40 -2 -30 1.3 Quotas of UCI 137 6 -95 -18 30 1.4 Loans 47 25 -209 -8 -145 2. Financial assets: foreign exchange differences X X X X 34 Total 204 38 -448 -30 -202 SECTION 16 \u2013 OTHER OPERATING EXPENSES (INCOME) - CAPTION 230 16.1 Other operating expenses: breakdown (millions of euro) Type of expense/Amount Other expenses for consumer credit and leasing transactions 29 Amortisation of leasehold improvements 34 Other 373 Total 2022 436 Total 2021 503 The sub-caption \u201cOther expenses\u201d comprises 53 million euro for the negative result on gold and precious metals. 16.2 Other operating income: breakdown (millions of euro) Type of expense/Amount Recovery of other expenses 930 Income related to consumer credit and leasing 42 Rentals and recovery of expenses on real estate 34 Recovery of services rendered to third parties 23 Negative Goodwill - Other 341 Total 2022 1,370 Total 2021 1,483 The sub-caption \u201cOther income\u201d comprises 58 million euro for the positive result on gold and precious metals. As required by paragraph 116 c) of IFRS 15, it is specified that revenues deriving from performance obligations satisfied in the previous years are included, amounting to 17 million euro. 1.2.3. FOREIGN EXCHANGE RISK Qualitative information A. General aspects, foreign exchange risk management processes and measurement methods \u201cForeign exchange risk\u201d is defined as the potential adverse effect resulting from changes in the exchange rate between currencies that could have a negative impact on the valuation of the assets and liabilities in the financial statements and on earnings and capital ratios. Two types of Foreign Exchange Risk are identified: Structural and Transaction risk. Structural Foreign Exchange Risk is defined as the potential loss resulting from changes in the exchange rate that could have a negative impact on the foreign exchange reserves that are part of the Group\u2019s consolidated shareholders\u2019 equity. Transaction Foreign Exchange Risk is defined as the potential loss resulting from changes in the currencies exchange rate that may have negative impacts both on the valuation of the assets and liabilities in the financial statements when converted into the reporting currency and on the earnings from funding, lending and investment/disinvestment transactions in currencies other than the euro. The main sources of this foreign exchange risk consist of: non-euro loans and deposits held by corporate and/or retail customers; conversion into domestic currency of assets, liabilities and income of the international branches; trading of foreign currencies; collection and/or payment of interest, commissions, dividends and administrative expenses in foreign currencies; purchase and sale of securities and financial instruments for the purpose of resale in the short term; etc. Transaction foreign exchange risk also includes the risk of transactions related to operations that generate the type of structural foreign exchange risk represented, for example, by dividends approved by international subsidiaries and that relating to the management of foreign exchange risk tied to the management of equity investments, also including the gains/losses of international branches (Transaction Foreign Exchange Risk associated with Structural Foreign Exchange Risk). The Market and Financial Risk Management Head Office Department measures and controls the Parent Company and Group\u2019s exposure to Structural Foreign Exchange Risk; it performs the management calculation of the optimal position. It represents the open position in foreign currency designed to neutralise the sensitivity of the capital ratio to foreign exchange movements. The Market and Financial Risk Management Head Office Department also produces sensitivity analyses on capital ratios for management control and monitoring of Structural Foreign Exchange Risk in view of progressive alignment with the EBA LGs and sets its own Transaction Foreign Exchange Risk associated with Structural Foreign Exchange Risk within the framework of market risk VaR. B. Foreign exchange risk hedging activities The Intesa Sanpaolo Group\u2019s management of the Structural Foreign Exchange Risk assigns the Parent Company the related management and coordination powers in order to achieve a consistent Group strategy. This choice, which is consistent with the Parent Company\u2019s role as the liaison with the Supervisory Authority, allows the activities to be performed based on the specific responsibilities set out in the prudential supervision regulations, in addition to suitably mitigating and/or managing this type of risk. The monitoring and management of the Structural Foreign Exchange Risk are carried out at central level by the Group Treasury and Finance Head Office Department of the Parent Company, which manages it with a view to risk/return and to optimising capital requirements. The monitoring and hedging of the Transaction Foreign Exchange Risk are carried out at central level by the Group Treasury and Finance Head Office Department of the Parent Company and the IMI Corporate & Investment Banking Division for the area of competence, and at local level by the individual treasury functions of the Group companies and banks. As at the date of preparation of the financial statements, there were no transactions hedging shareholders\u2019 equity, whereas there were operational hedges of the foreign exchange risk of the assets and liabilities in the financial statements related to the banking book. Impacts from the COVID-19 pandemic The strategies and controls in place for the purpose of managing exchange rate risk did not require changes or specific actions in the situation resulting from the COVID-19 pandemic. Impacts of the Russia-Ukraine conflict The Russia-Ukraine conflict did not generate critical issues in the management of liquidity in foreign currency. Limited to the days immediately following the outbreak of the war, the cost of funding in USD increased on the market, an indicator of strong risk aversion. On the forex segment, though with low liquidity, the possibility of trading roubles on the interbank market did not disappear, save for the limits imposed by the sanctions regime. Quantitative information 1. Breakdown by currency of assets and liabilities and of derivatives (millions of euro) CURRENCIES US dollar GB pound Croatian kuna Swiss franc Hungarian forint Yen Australian dollar Other currencies A. FINANCIAL ASSETS 38,356 3,770 8,660 1,052 5,456 2,700 3,605 17,115 A.1 Debt securities 8,194 661 848 - 1,112 2,457 854 3,316 A.2 Equities 624 95 5 63 2 - - 824 A.3 Loans to banks 10,728 623 434 174 1,847 48 1,441 5,764 A.4 Loans to customers 18,810 2,391 7,373 815 2,495 195 1,310 7,211 A.5 Other financial assets - - - - - - - - B. OTHER ASSETS 3,432 556 771 987 204 103 117 2,277 C. FINANCIAL LIABILITIES 40,959 3,147 6,988 995 4,769 703 2,164 12,218 C.1 Due to banks 20,464 588 160 185 865 47 1,898 1,741 C.2 Due to customers 7,025 833 6,828 718 3,889 28 200 8,494 C.3 Debt securities 13,470 1,726 - 92 15 628 66 1,983 C.4 Other financial liabilities - - - - - - - - D. OTHER LIABILITIES 1,561 692 351 118 73 27 50 1,468 E. FINANCIAL DERIVATIVES - Options long positions 5,552 133 - 53 55 408 65 336 short positions 5,711 195 - 37 33 340 69 761 - Other derivatives long positions 62,767 10,972 12 5,946 1,849 3,246 1,501 11,711 short positions 62,708 11,271 9 6,706 1,960 5,366 3,070 13,524 TOTAL ASSETS 110,107 15,431 9,443 8,038 7,564 6,457 5,288 31,439 TOTAL LIABILITIES 110,939 15,305 7,348 7,856 6,835 6,436 5,353 27,971 DIFFERENCE (+/-) -832 126 2,095 182 729 21 -65 3,468 As of 31 December 2022, the presentation of the \u201cBreakdown by currency of assets and liabilities and of derivatives\u201d has been aligned with the prudential approach in compliance with the new methodological framework introduced by the EBA Guidelines on the treatment of structural FX under Article 352(2) of Regulation (EU) No 575/2013 (CRR). On 1 January 2023, the Croatian kuna joined the euro Area, and will no longer be the subject of future reporting. 2. Internal models and other sensitivity analysis methodologies As already noted, the management of Transaction Foreign Exchange Risk relating to trading activities is included in the operating procedures and in the estimation methodologies of the managerial VaR. Foreign exchange risk expressed by equity investments in foreign currency (banking book), including Group companies, originated a VaR (99% confidence level, 10-day holding period) amounting to 126 million euro as at 31 December 2022. This potential impact would only be reflected in the Shareholders\u2019 Equity. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-968": { "value": "SECTION 10 - NET INSURANCE PREMIUMS - CAPTION 160 10.1 Net insurance premiums: breakdown (millions of euro) Premiums deriving from insurance business Direct work Indirect work 2022 2021 A. Life business A.1 Gross accounted premiums (+) 9,075 - 9,075 9,446 A.2 Premiums ceded for reinsurance (-) -4 X -4 -4 A.3 Total 9,071 - 9,071 9,442 B. Non-life business B.1 Gross accounted premiums (+) 1,436 - 1,436 1,342 B.2 Premiums ceded for reinsurance (-) -172 X -172 -216 B.3 Changes in the gross amount of premium reserve (+/-) 13 - 13 -18 B.4 Changes in premium reserves reassured with third parties (-/+) 10 - 10 7 B.5 Total 1,287 - 1,287 1,115 C. Total net premiums 10,358 - 10,358 10,557 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInsurancePremiumRevenueExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1023": { "value": "SECTION 12 - ADMINISTRATIVE EXPENSES - CAPTION 190 12.1 Personnel expenses: breakdown (millions of euro) Type of expense 2022 2021 1) Employees 6,760 7,152 a) wages and salaries 4,836 4,741 b) social security charges 1,201 1,218 c) termination indemnities 35 41 d) supplementary benefits 6 4 e) provisions for termination indemnities 18 7 f) provisions for post employment benefits 16 12 - defined contribution plans - - - defined benefit plans 16 12 g) payments to external pension funds 362 368 - defined contribution plans 360 366 - defined benefit plans 2 2 h) costs from share based payments 146 220 i) other benefits in favour of employees 140 541 2) Other non-retired personnel 16 16 3) Directors and statutory auditors 17 19 4) Early retirement costs - - Total 6,793 7,187 It should be specified that sub-caption 3) \u201cDirectors and statutory auditors\u201d includes remuneration to members of the Board of Directors of the Parent Company and members of the Board of Directors and the Board of Statutory Auditors of the various Group companies. 12.2 Average number of employees by categories 2022 2021 Personnel employed 90,003 92,657 a) managers 1,775 1,831 b) total officers 34,836 35,971 c) other employees 53,392 54,855 Other personnel 85 108 TOTAL 90,088 92,765 In 2022, the average number of employees (with part-time employees calculated, per standard practice, at 0.5) decreased on 2021 due to the terminations occurred under agreements over the two years and partially due to the sales of going concerns in early 2021. 12.3 Post-employment defined benefit plans: costs and revenues (millions of euro) 2022 2021 Employee Termination Indemnities Internal plans External plans Employee Termination Indemnities Internal plans External plans Current service cost -14 -3 -10 -7 -4 -12 Interest expense -4 -13 -17 - -16 -3 Interest income - 3 14 - 2 3 Reimbursement from third parties - - - - - - Past service cost - - -1 - - 4 Curtailment of the fund X - - X - - Settlement of the fund X - - X - - This table illustrates the economic components referred to \u201cEmployee termination indemnities\u201d \u2013 caption 90 of Balance sheet liabilities and \u201cAllowances for risks and charges - post employment benefits\u201d \u2013 caption 100b of Balance sheet liabilities. 12.4 Other benefits in favour of employees The balance of the caption in 2022 amounts to 140 million euro. This amount essentially relates to contributions for health assistance, lunch and restaurant vouchers, as well as adjustments to liabilities due to the agreements on voluntary exit incentives signed with the trade unions and seniority bonuses, mainly due to the increase, during the year, in the discount rate curve used for the discounting. 12.5 Other administrative expenses: breakdown (millions of euro) Type of expense/Amount 2022 2021 Expenses for maintenance of information technology and electronic equipment 799 821 Telephonic, teletransmission and transmission expenses 66 75 Information technology expenses 865 896 Rentals and service charges - real estate 42 42 Security services 46 48 Cleaning of premises 50 56 Expenses for maintenance of real estate assets furniture and equipment 77 84 Energy costs 90 110 Property costs 11 15 Management of real estate assets expenses 316 355 Printing, stationery and consumables expenses 27 36 Transport and related services expenses (including counting of valuables) 76 75 Information expenses 242 227 Postal and telegraphic expenses 54 58 General structure costs 399 396 Expenses for consultancy fees 157 165 Legal and judiciary expenses 136 157 Insurance premiums - banks and customers 57 62 Professional and legal expenses 350 384 Advertising and promotional expenses 173 154 Services rendered by third parties 437 496 Indirect personnel costs 121 51 Other costs 218 225 Contributions to resolution funds and deposit guarantee schemes 793 739 Taxes and duties 1,147 1,170 Recovery of taxes and duties -4 -5 Recovery of other expenses -29 -36 Total 4,786 4,825 The amount of the sub-caption Rentals and service charges - real estate relates to contracts with a total lease term of 12 months or less and to contracts with a value of the underlying asset, when new, of 5,000 euro or less (\u201clow value\u201d). In such cases, as allowed by IFRS 16, the lease payments for these lease contracts are recognised as an expense on a straight-line basis for the contract term. In 2022 the costs incurred by the Intesa Sanpaolo Group for measures related to the pandemic amounted to around 19.7 million euro (37 million euro in 2021). SECTION 13 - NET PROVISIONS FOR RISKS AND CHARGES - CAPTION 200 13.1 Net provisions for credit risk associated with loan commitments and financial guarantees given: breakdown (millions of euro) Provision Reallocations Net provision Stage1 -133 103 -30 Stage2 -182 119 -63 Stage3 -205 89 -116 Total -520 311 -209 13.2 Net provisions associated with other commitments and other guarantees given: breakdown With regard to net provisions associated with other commitments and other guarantees given, there were no amounts as at 31 December 2022. 13.3 Net provisions for other risks and charges: breakdown (millions of euro) Provisions Reallocations Net provision Net provisions for legal disputes -180 87 -93 Net provisions for other personnel charges - - - Net provisions for risks and charges -325 278 -47 Total -505 365 -140 \u201cNet provisions for risks and charges\u201d, which amounted to a negative 140 million euro, recorded the provisions attributable to the year relating to legal and tax disputes and other risks and charges, net of reallocations. In particular, the sub-caption \u201cNet provisions for legal disputes\u201d includes provisions for legal disputes, including bankruptcy claw-back actions and other disputes, net of releases for the year. SECTION 14 \u2013 NET ADJUSTMENTS TO/RECOVERIES ON PROPERTY AND EQUIPMENT - CAPTION 210 14.1 Net adjustments to property and equipment: breakdown (millions of euro) Assets/Income components Depreciation Impairment losses Recoveries Net result A. Property and equipment A.1 Used in operations -675 -7 - -682 - Owned -368 -6 - -374 - Licenses acquired through lease -307 -1 - -308 A.2 Investment property - -1 - -1 - Owned - -1 - -1 - Licenses acquired through lease - - - - A.3 Inventories X -18 1 -17 B. Non-current assets held for sale X - - - Total -675 -26 1 -700 SECTION 15 \u2013 NET ADJUSTMENTS TO/RECOVERIES ON INTANGIBLE ASSETS - CAPTION 220 15.1 Net adjustments to intangible assets: breakdown (millions of euro) Assets/Income components Amortisation Impairment losses Recoveries Net result A. Intangible assets of which: software -776 -20 - -796 A.1 Owned -964 -20 - -984 - Internally generated -684 -8 - -692 - Others -280 -12 - -292 A.2 Rights of use acquired through the lease - - - - B. Non-current assets held for sale X - - - Total -964 -20 - -984 With regard to the method of the impairment testing for intangible assets and related impairment recognised to the income statement, see Part B \u2013 Section 10 \u2013 Intangible Assets in these Notes to the consolidated financial statements. SECTION 16 \u2013 OTHER OPERATING EXPENSES (INCOME) - CAPTION 230 16.1 Other operating expenses: breakdown (millions of euro) Type of expense/Amount Other expenses for consumer credit and leasing transactions 29 Amortisation of leasehold improvements 34 Other 373 Total 2022 436 Total 2021 503 The sub-caption \u201cOther expenses\u201d comprises 53 million euro for the negative result on gold and precious metals. 16.2 Other operating income: breakdown (millions of euro) Type of expense/Amount Recovery of other expenses 930 Income related to consumer credit and leasing 42 Rentals and recovery of expenses on real estate 34 Recovery of services rendered to third parties 23 Negative Goodwill - Other 341 Total 2022 1,370 Total 2021 1,483 The sub-caption \u201cOther income\u201d comprises 58 million euro for the positive result on gold and precious metals. As required by paragraph 116 c) of IFRS 15, it is specified that revenues deriving from performance obligations satisfied in the previous years are included, amounting to 17 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1002": { "value": "SECTION 12 - ADMINISTRATIVE EXPENSES - CAPTION 190 12.1 Personnel expenses: breakdown (millions of euro) Type of expense 2022 2021 1) Employees 6,760 7,152 a) wages and salaries 4,836 4,741 b) social security charges 1,201 1,218 c) termination indemnities 35 41 d) supplementary benefits 6 4 e) provisions for termination indemnities 18 7 f) provisions for post employment benefits 16 12 - defined contribution plans - - - defined benefit plans 16 12 g) payments to external pension funds 362 368 - defined contribution plans 360 366 - defined benefit plans 2 2 h) costs from share based payments 146 220 i) other benefits in favour of employees 140 541 2) Other non-retired personnel 16 16 3) Directors and statutory auditors 17 19 4) Early retirement costs - - Total 6,793 7,187 It should be specified that sub-caption 3) \u201cDirectors and statutory auditors\u201d includes remuneration to members of the Board of Directors of the Parent Company and members of the Board of Directors and the Board of Statutory Auditors of the various Group companies. 12.2 Average number of employees by categories 2022 2021 Personnel employed 90,003 92,657 a) managers 1,775 1,831 b) total officers 34,836 35,971 c) other employees 53,392 54,855 Other personnel 85 108 TOTAL 90,088 92,765 In 2022, the average number of employees (with part-time employees calculated, per standard practice, at 0.5) decreased on 2021 due to the terminations occurred under agreements over the two years and partially due to the sales of going concerns in early 2021. 12.3 Post-employment defined benefit plans: costs and revenues (millions of euro) 2022 2021 Employee Termination Indemnities Internal plans External plans Employee Termination Indemnities Internal plans External plans Current service cost -14 -3 -10 -7 -4 -12 Interest expense -4 -13 -17 - -16 -3 Interest income - 3 14 - 2 3 Reimbursement from third parties - - - - - - Past service cost - - -1 - - 4 Curtailment of the fund X - - X - - Settlement of the fund X - - X - - This table illustrates the economic components referred to \u201cEmployee termination indemnities\u201d \u2013 caption 90 of Balance sheet liabilities and \u201cAllowances for risks and charges - post employment benefits\u201d \u2013 caption 100b of Balance sheet liabilities. 12.4 Other benefits in favour of employees The balance of the caption in 2022 amounts to 140 million euro. This amount essentially relates to contributions for health assistance, lunch and restaurant vouchers, as well as adjustments to liabilities due to the agreements on voluntary exit incentives signed with the trade unions and seniority bonuses, mainly due to the increase, during the year, in the discount rate curve used for the discounting. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-969": { "value": "SECTION 12 - ADMINISTRATIVE EXPENSES - CAPTION 190 12.1 Personnel expenses: breakdown (millions of euro) Type of expense 2022 2021 1) Employees 6,760 7,152 a) wages and salaries 4,836 4,741 b) social security charges 1,201 1,218 c) termination indemnities 35 41 d) supplementary benefits 6 4 e) provisions for termination indemnities 18 7 f) provisions for post employment benefits 16 12 - defined contribution plans - - - defined benefit plans 16 12 g) payments to external pension funds 362 368 - defined contribution plans 360 366 - defined benefit plans 2 2 h) costs from share based payments 146 220 i) other benefits in favour of employees 140 541 2) Other non-retired personnel 16 16 3) Directors and statutory auditors 17 19 4) Early retirement costs - - Total 6,793 7,187 It should be specified that sub-caption 3) \u201cDirectors and statutory auditors\u201d includes remuneration to members of the Board of Directors of the Parent Company and members of the Board of Directors and the Board of Statutory Auditors of the various Group companies. 12.2 Average number of employees by categories 2022 2021 Personnel employed 90,003 92,657 a) managers 1,775 1,831 b) total officers 34,836 35,971 c) other employees 53,392 54,855 Other personnel 85 108 TOTAL 90,088 92,765 In 2022, the average number of employees (with part-time employees calculated, per standard practice, at 0.5) decreased on 2021 due to the terminations occurred under agreements over the two years and partially due to the sales of going concerns in early 2021. 12.3 Post-employment defined benefit plans: costs and revenues (millions of euro) 2022 2021 Employee Termination Indemnities Internal plans External plans Employee Termination Indemnities Internal plans External plans Current service cost -14 -3 -10 -7 -4 -12 Interest expense -4 -13 -17 - -16 -3 Interest income - 3 14 - 2 3 Reimbursement from third parties - - - - - - Past service cost - - -1 - - 4 Curtailment of the fund X - - X - - Settlement of the fund X - - X - - This table illustrates the economic components referred to \u201cEmployee termination indemnities\u201d \u2013 caption 90 of Balance sheet liabilities and \u201cAllowances for risks and charges - post employment benefits\u201d \u2013 caption 100b of Balance sheet liabilities. 12.4 Other benefits in favour of employees The balance of the caption in 2022 amounts to 140 million euro. This amount essentially relates to contributions for health assistance, lunch and restaurant vouchers, as well as adjustments to liabilities due to the agreements on voluntary exit incentives signed with the trade unions and seniority bonuses, mainly due to the increase, during the year, in the discount rate curve used for the discounting. 12.5 Other administrative expenses: breakdown (millions of euro) Type of expense/Amount 2022 2021 Expenses for maintenance of information technology and electronic equipment 799 821 Telephonic, teletransmission and transmission expenses 66 75 Information technology expenses 865 896 Rentals and service charges - real estate 42 42 Security services 46 48 Cleaning of premises 50 56 Expenses for maintenance of real estate assets furniture and equipment 77 84 Energy costs 90 110 Property costs 11 15 Management of real estate assets expenses 316 355 Printing, stationery and consumables expenses 27 36 Transport and related services expenses (including counting of valuables) 76 75 Information expenses 242 227 Postal and telegraphic expenses 54 58 General structure costs 399 396 Expenses for consultancy fees 157 165 Legal and judiciary expenses 136 157 Insurance premiums - banks and customers 57 62 Professional and legal expenses 350 384 Advertising and promotional expenses 173 154 Services rendered by third parties 437 496 Indirect personnel costs 121 51 Other costs 218 225 Contributions to resolution funds and deposit guarantee schemes 793 739 Taxes and duties 1,147 1,170 Recovery of taxes and duties -4 -5 Recovery of other expenses -29 -36 Total 4,786 4,825 The amount of the sub-caption Rentals and service charges - real estate relates to contracts with a total lease term of 12 months or less and to contracts with a value of the underlying asset, when new, of 5,000 euro or less (\u201clow value\u201d). In such cases, as allowed by IFRS 16, the lease payments for these lease contracts are recognised as an expense on a straight-line basis for the contract term. In 2022 the costs incurred by the Intesa Sanpaolo Group for measures related to the pandemic amounted to around 19.7 million euro (37 million euro in 2021). ", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1004": { "value": "SECTION 13 - NET PROVISIONS FOR RISKS AND CHARGES - CAPTION 200 13.1 Net provisions for credit risk associated with loan commitments and financial guarantees given: breakdown (millions of euro) Provision Reallocations Net provision Stage1 -133 103 -30 Stage2 -182 119 -63 Stage3 -205 89 -116 Total -520 311 -209 13.2 Net provisions associated with other commitments and other guarantees given: breakdown With regard to net provisions associated with other commitments and other guarantees given, there were no amounts as at 31 December 2022. 13.3 Net provisions for other risks and charges: breakdown (millions of euro) Provisions Reallocations Net provision Net provisions for legal disputes -180 87 -93 Net provisions for other personnel charges - - - Net provisions for risks and charges -325 278 -47 Total -505 365 -140 \u201cNet provisions for risks and charges\u201d, which amounted to a negative 140 million euro, recorded the provisions attributable to the year relating to legal and tax disputes and other risks and charges, net of reallocations. In particular, the sub-caption \u201cNet provisions for legal disputes\u201d includes provisions for legal disputes, including bankruptcy claw-back actions and other disputes, net of releases for the year. ", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-970": { "value": "SECTION 14 \u2013 NET ADJUSTMENTS TO/RECOVERIES ON PROPERTY AND EQUIPMENT - CAPTION 210 14.1 Net adjustments to property and equipment: breakdown (millions of euro) Assets/Income components Depreciation Impairment losses Recoveries Net result A. Property and equipment A.1 Used in operations -675 -7 - -682 - Owned -368 -6 - -374 - Licenses acquired through lease -307 -1 - -308 A.2 Investment property - -1 - -1 - Owned - -1 - -1 - Licenses acquired through lease - - - - A.3 Inventories X -18 1 -17 B. Non-current assets held for sale X - - - Total -675 -26 1 -700 SECTION 15 \u2013 NET ADJUSTMENTS TO/RECOVERIES ON INTANGIBLE ASSETS - CAPTION 220 15.1 Net adjustments to intangible assets: breakdown (millions of euro) Assets/Income components Amortisation Impairment losses Recoveries Net result A. Intangible assets of which: software -776 -20 - -796 A.1 Owned -964 -20 - -984 - Internally generated -684 -8 - -692 - Others -280 -12 - -292 A.2 Rights of use acquired through the lease - - - - B. Non-current assets held for sale X - - - Total -964 -20 - -984 With regard to the method of the impairment testing for intangible assets and related impairment recognised to the income statement, see Part B \u2013 Section 10 \u2013 Intangible Assets in these Notes to the consolidated financial statements. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1003": { "value": "SECTION 14 \u2013 NET ADJUSTMENTS TO/RECOVERIES ON PROPERTY AND EQUIPMENT - CAPTION 210 14.1 Net adjustments to property and equipment: breakdown (millions of euro) Assets/Income components Depreciation Impairment losses Recoveries Net result A. Property and equipment A.1 Used in operations -675 -7 - -682 - Owned -368 -6 - -374 - Licenses acquired through lease -307 -1 - -308 A.2 Investment property - -1 - -1 - Owned - -1 - -1 - Licenses acquired through lease - - - - A.3 Inventories X -18 1 -17 B. Non-current assets held for sale X - - - Total -675 -26 1 -700 SECTION 15 \u2013 NET ADJUSTMENTS TO/RECOVERIES ON INTANGIBLE ASSETS - CAPTION 220 15.1 Net adjustments to intangible assets: breakdown (millions of euro) Assets/Income components Amortisation Impairment losses Recoveries Net result A. Intangible assets of which: software -776 -20 - -796 A.1 Owned -964 -20 - -984 - Internally generated -684 -8 - -692 - Others -280 -12 - -292 A.2 Rights of use acquired through the lease - - - - B. Non-current assets held for sale X - - - Total -964 -20 - -984 With regard to the method of the impairment testing for intangible assets and related impairment recognised to the income statement, see Part B \u2013 Section 10 \u2013 Intangible Assets in these Notes to the consolidated financial statements. SECTION 17 \u2013 PROFITS (LOSSES) ON INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL - CAPTION 250 17.1 Profits (Losses) on investments in associates and companies subject to joint control: breakdown (millions of euro) Income components/Sectors 2022 2021 1) Companies subject to joint control A. Revenues 3 12 1. Revaluations 3 12 2. Profits on disposal - - 3. Recoveries - - 4. Other - - B. Charges -37 -3 1. Write-downs -29 -3 2. Impairment losses -8 - 3. Losses on disposal - - 4. Other - - Net result -34 9 2) Investments in associates A. Revenues 350 229 1. Revaluations 140 164 2. Profits on disposal 197 65 3. Recoveries 13 - 4. Other - - B. Charges -84 -100 1. Write-downs -40 -58 2. Impairment losses -44 -39 3. Losses on disposal - -3 4. Other - - Net result 266 129 Total 232 138 For companies subject to joint control and significant influence, revenues from recognition at equity of the equity stakes is included under Revaluations, while the charges from the recognition at equity of the equity stakes is recorded under Write- downs. SECTION 19 \u2013 GOODWILL IMPAIRMENT - CAPTION 270 19.1 Goodwill impairment: breakdown The results of impairment testing on goodwill recorded in the financial statements did not lead to adjustments in 2022. See Part A \u2013 Accounting policies for details on the means of determination of goodwill impairment. For a description of the impairment testing methods for goodwill, reference should be made to Part B \u2013 Section 10 \u2013 Intangible Assets in these Notes to the consolidated financial statements. ", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-931": { "value": "SECTION 16 \u2013 OTHER OPERATING EXPENSES (INCOME) - CAPTION 230 16.1 Other operating expenses: breakdown (millions of euro) Type of expense/Amount Other expenses for consumer credit and leasing transactions 29 Amortisation of leasehold improvements 34 Other 373 Total 2022 436 Total 2021 503 The sub-caption \u201cOther expenses\u201d comprises 53 million euro for the negative result on gold and precious metals. 16.2 Other operating income: breakdown (millions of euro) Type of expense/Amount Recovery of other expenses 930 Income related to consumer credit and leasing 42 Rentals and recovery of expenses on real estate 34 Recovery of services rendered to third parties 23 Negative Goodwill - Other 341 Total 2022 1,370 Total 2021 1,483 The sub-caption \u201cOther income\u201d comprises 58 million euro for the positive result on gold and precious metals. As required by paragraph 116 c) of IFRS 15, it is specified that revenues deriving from performance obligations satisfied in the previous years are included, amounting to 17 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1037": { "value": "16.1 Other operating expenses: breakdown (millions of euro) Type of expense/Amount Other expenses for consumer credit and leasing transactions 29 Amortisation of leasehold improvements 34 Other 373 Total 2022 436 Total 2021 503 The sub-caption \u201cOther expenses\u201d comprises 53 million euro for the negative result on gold and precious metals. ", "dimensions": { "concept": "ifrs-full:DisclosureOfClaimsAndBenefitsPaidExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-971": { "value": "16.1 Other operating expenses: breakdown (millions of euro) Type of expense/Amount Other expenses for consumer credit and leasing transactions 29 Amortisation of leasehold improvements 34 Other 373 Total 2022 436 Total 2021 503 The sub-caption \u201cOther expenses\u201d comprises 53 million euro for the negative result on gold and precious metals. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-972": { "value": "16.2 Other operating income: breakdown (millions of euro) Type of expense/Amount Recovery of other expenses 930 Income related to consumer credit and leasing 42 Rentals and recovery of expenses on real estate 34 Recovery of services rendered to third parties 23 Negative Goodwill - Other 341 Total 2022 1,370 Total 2021 1,483 The sub-caption \u201cOther income\u201d comprises 58 million euro for the positive result on gold and precious metals. As required by paragraph 116 c) of IFRS 15, it is specified that revenues deriving from performance obligations satisfied in the previous years are included, amounting to 17 million euro. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-973": { "value": "SECTION 21 - TAXES ON INCOME FROM CONTINUING OPERATIONS - CAPTION 300 21.1 Taxes on income from continuing operations: breakdown (millions of euro) Income component/Amount 2022 2021 1. Current taxes (-) -1,190 -888 2. Changes in current taxes of previous years (+/-) 15 24 3. Reduction in current taxes of the year (+) 81 110 3. bis Reduction in current taxes of the year for tax credits pursuant to Law no. 214/2011 (+) 851 1,254 4. Changes in deferred tax assets (+/-) -1,136 -2,143 5. Changes in deferred tax liabilities (+/-) -251 505 6. Taxes on income for the year (-) (-1+/-2+3+3bis+/-4+/-5) -1,630 -1,138 The reduction in current taxes for the year, measured at 851 million euro, as required by the \u201cRoneata\u201d Letter from the Bank of Italy of 7 August 2012, shows the transformation into tax credits of the deferred tax assets pursuant to Law 214/2011 due to the tax loss of Intesa Sanpaolo in relation to 2021. This effect is entirely offset by the corresponding decrease in the caption Changes in deferred tax assets with the ensuing nil impact on the income statement. 21.2 Reconciliation of theoretical tax charge to total income tax expense for the period (millions of euro) 2022 2021 Income before tax from continuing operations 6,007 5,181 Income before tax from discontinued operations - - Theoretical taxable income 6,007 5,181 Taxes (a) Impact % on theoretical taxable income Income taxes - theoretical tax charge (b) 1,986 33.1 Increase of taxes 358 6.0 Non-deductible interest expense 299 5.0 Other 59 1.0 Decrease of taxes -714 -11.9 Effects of the participation exemption -68 -1.1 Effects of international companies lower rates -291 -4.9 Other -355 -5.9 Total changes in taxes -356 -5.9 Total income tax expense for the period 1,630 27.2 of which: - total income tax expense from continuing operations 1,630 27.2 - total income tax expense from discontinued operations - - (a) Tax expenses are indicated with a positive sign and tax income with a negative sign. (b) Includes IRES ordinary tax 24%, IRES additional rate 3.5% and IRAP weighted average rate 5.56%.", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-974": { "value": "SECTION 25 \u2013 EARNINGS PER SHARE Earnings per share Ordinary shares 31.12.2022 31.12.2021 Weighted average number of shares 19,315,541,610 19,377,549,407 Income attributable to the various categories of shares (millions of euro) 4,354 4,185 Basic EPS (euro) 0.23 0.22 Diluted EPS (euro) 0.23 0.22 25.1 Average number of ordinary shares (fully diluted) For further information on this section, see the chapters \u201cShareholder base\u201d and \u201cStock price performance\u201d in the Report on operations. 25.2 Other information There is no other information to be provided. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-932": { "value": "
SECTION 1 \u2013 RISKS OF THE CONSOLIDATED BOOK
In this Section, information is provided regarding the companies included in the consolidated book.
QUANTITATIVE INFORMATION
A. CREDIT QUALITY
For the purposes of quantitative information about credit quality, the term \u201ccredit exposures\u201d is understood to exclude equities
and quotas of UCI.
A.1. Performing and non-performing credit exposures: amounts, adjustments, changes, and economic
breakdown
A.1.1. Breakdown of financial assets by portfolio classification and credit quality
(book values) - Excluding insurance companies
(millions of euro)
Portfolios/quality
Bad
loans
Unlikely
to pay
Non-
performing
past due
exposures
Performing
past due
exposures
Other
performing
exposures
TOTAL
1. Financial assets measured at amortised cost
1,131
3,963
413
3,550
519,021
528,078
2. Financial assets measured at fair value through other comprehensive
income
-
-
-
94
48,274
48,368
3. Financial assets designated at fair value
-
-
-
-
1
1
4. Other financial assets mandatorily measured at fair value
-
33
-
129
971
1,133
5. Non-current financial assets held for sale
46
312
-
-
10
368
Total
31.12.2022
1,177
4,308
413
3,773
568,277
577,948
Total
31.12.2021
2,564
5,164
622
6,053
721,224
735,627
A.1.1. Bis. Breakdown of financial assets by portfolio classification and credit quality
(book values) - Insurance companies
(millions of euro)
Portfolios/quality
Bad loans
Unlikely to
pay
Non-
performing
past due
exposures
Performing
past due
exposures
Performing
exposures
TOTAL
1. Financial assets available for sale
-
-
-
-
71,084
71,084
2. Investments held to maturity
-
-
-
-
-
-
3. Due from banks
-
-
-
-
40
40
4. Loans to customers
-
-
-
-
40
40
5. Financial assets designated at fair value
-
-
-
-
5,176
5,176
6. Non-current financial assets held for sale
-
-
-
-
-
-
TOTAL
31.12.2022
-
-
-
-
76,340
76,340
TOTAL
31.12.2021
-
-
-
-
94,157
94,157
A.1.2. Breakdown of financial assets by portfolio classification and credit quality (gross and net values) - Excluding insurance companies (millions of euro) Portfolios/quality NON-PERFORMING ASSETS PERFORMING ASSETS TOTAL (net exposure) Gross exposure Collective adjustments Net exposure Total partial write-offs Gross exposure Collective adjustments Net exposure 1. Financial assets measured at amortised cost 10,729 -5,222 5,507 3,081 525,258 -2,687 522,571 528,078 2. Financial assets measured at fair value through other comprehensive income 36 -36 - - 48,449 -81 48,368 48,368 3. Financial assets designated at fair value - - - - X X 1 1 4. Other financial assets mandatorily measured at fair value 45 -12 33 - X X 1,100 1,133 5. Non-current financial assets held for sale 744 -386 358 1 10 - 10 368 Total 31.12.2022 11,554 -5,656 5,898 3,082 573,717 -2,768 572,050 577,948 Total 31.12.2021 19,944 -11,594 8,350 7,158 728,675 -2,606 727,277 735,627 (millions of euro) Portfolios/quality ASSETS OF EVIDENTLY LOW CREDIT QUALITY OTHER ASSETS Cumulative capital losses Net exposure Net exposure 1. Financial assets held for trading -27 22 41,328 2. Hedging derivatives - - 10,062 Total 31.12.2022 -27 22 51,390 Total 31.12.2021 -26 34 48,047 A.1.2. Bis Breakdown of financial assets by portfolio classification and credit quality (gross and net values) - Insurance companies (millions of euro) Portfolios / Quality (Figures must be filled in absolute values) Non-performing assets Performing assets Total (net exposure) Gross exposure Individual adjustments Net exposure Gross exposure Collective adjustments Net exposure 1. Financial assets available for sale - - - 71,084 - 71,084 71,084 2. Investments held to maturity - - - - - - - 3. Due from banks - - - 40 - 40 40 4. Loans to customers - - - 40 - 40 40 5. Financial assets designated at fair value - - - X X 5,176 5,176 6. Non-current financial assets held for sale - - - - - - - Total 31.12.2022 - - - 71,164 - 76,340 76,340 Total 31.12.2021 - - - 88,625 - 94,157 94,157 (millions of euro) Portfolios / Quality Assets of evidently low credit quality Other assets Cumulative capital losses Net exposure Net exposure 1. Financial assets held for trading - - 759 2. Hedging derivatives - - 13 Total 31.12.2022 - - 772 Total 31.12.2021 - - 1,147
B. INFORMATION ON STRUCTURED ENTITIES (OTHER THAN SECURITISATION VEHICLES)
In line with IFRS 12, the Group considers structured entities to be entities set up to achieve a narrow, well-defined objective,
defined through contractual arrangements which often impose strict restrictions on decision-making powers of the entity's
management bodies. In that sense, structured entities are designed so that voting or similar rights are not the dominant factor
in deciding who controls the entity, as they refer to administrative tasks, while the relevant operating activities are directed by
means of contractual arrangements agreed on at the time of structuring the structured entity, which are difficult to modify.
The characteristics of a structured entity include:
\u2013 limited activities;
\u2013 a narrow and well-defined objective;
\u2013 insufficient equity to permit the structured entity to finance its activities without subordinated financial support.
The structured entities through which the Group operates are mainly Special Purpose Entities (SPEs) and UCIs.
B.1. Consolidated structured entities
There are no structured entities consolidated in the accounts other than securitisation companies that fall within the scope of
the Intesa Sanpaolo Banking Group.
B.2. Structured entities not consolidated in the accounts
B.2.1. Prudential consolidation of structured entities
There are no structured entities consolidated for prudential purposes other than securitisation companies that fall within the
scope of the Intesa Sanpaolo Banking Group.
B.2.2. Other structured entities
Qualitative information
As indicated above, the Group's operations through structured entities are also carried out through SPEs. To that end, SPEs
are understood as legal entities established to pursue a specific, well-defined and limited objective:
\u2013 to raise funds on the market by issuing specific financial instruments;
\u2013 to develop and/or finance a specific business initiative, capable of generating, through an economic activity, cash flows
which permit the complete reimbursement of the debt;
\u2013 to finance the acquisition of a target company which, through its economic activity, will be capable of generating cash
flows for the SPEs which permit the complete reimbursement of the debt.
For the purposes of this section, operations carried out through securitisation vehicles, that is vehicles established to acquire,
sell and manage specific assets, separating them from the financial statements of the Originator, for the purpose of carrying
out securitisations of assets or for acquiring funding through self-securitisations and issues of Covered Bonds (CB), shall not
be relevant. For those types of vehicle companies, reference should be made to section \u201cC. Securitisations\u201d and section \u201cD.
Sales\u201d of Part E of the Notes to the consolidated financial statements.
In some cases, the Group sponsors the SPE by structuring the transaction to pursue specific objectives, such as raising
funds, securitising its own assets also for the purposes of funding or offering financial services to customers.
In detail, the Group's operations are carried out through the following types of structured entities represented by special
purpose entities (SPEs).
Project Financing SPEs
These are financing instruments for capital intensive projects, which are based on the economic or financial validity of the
industrial or infrastructural project, and are independent from the standing/creditworthiness of the sponsors who developed
the \u201centrepreneurial\u201d idea. The financing of the initiative is based on the project\u2019s capacity to generate positive cash flows,
sufficient to reimburse loans received and guarantee an adequate risk-adjusted return on invested capital.
The Intesa Sanpaolo Group finances entities of this type, as normal borrowers, without acting as sponsor.
Asset Backed SPEs
These are transactions aimed at acquisition/construction/management of physical assets by SPEs financed by one or more
entities. Their recovery prospects mostly depend upon the cash flows generated by the assets. The assets generate cash
flows in their recurring operations (e.g. rentals, goods transportation contracts, etc.) or in their non-recurring operations (e.g. a
real estate development or disposal plan). Generally, the assets are also the collateral for the financing disbursed to the
vehicle.
The Intesa Sanpaolo Group finances entities of this type, as normal borrowers, without any direct equity investments or any
other interests which might lead to presume the role of sponsor. The risk undertaken is always a normal credit risk and the
benefits are represented by the return on the financing granted.
Leveraged & Acquisition Finance SPEs
This category includes exposures (loans granted and disbursed in relation to structured financing operations, normally
medium/long-term) to legal entities in which the majority of share capital is held by private equity funds.
These are mainly positions in support of Leveraged Buy-Out projects (therefore with high leverage), i.e. linked to the full or
partial acquisition of companies through recourse to SPEs. After acquisition of the target company\u2019s shares/quotas package,
these SPEs are normally merged into the target. The target companies generally have good economic prospects, stable cash
flows in the medium term and low original leverage levels. The Intesa Sanpaolo Group finances entities of this type, as normal
borrowers, without acting as sponsor.
The Intesa Sanpaolo Group also has investments in/exposures to structured entities represented by UCIs.
The main cases include the Group's investments in several closed-end and reserved private equity as well as venture and
seed capital funds.
The exposures to UCIs also include the investments in units of real estate funds deriving from transactions to contribute
portions of the Group\u2019s real estate portfolio.
They also consist of investments in UCIs deriving from credit recovery operations or contributions of non-performing loans,
together with other banking entities, to funds managed by specialist entities.
The investments in UCIs also include the units held in the Atlante Fund and the Italian Recovery Fund, alternative investment
funds managed by the asset management company Quaestio Capital Management, involved in value enhancement of Non-
Performing Loans of Italian banks.
Lastly, the Intesa Sanpaolo Group invests in hedge funds. For more information, reference is made to the specific section in
Part E of the Notes to the consolidated financial statements.
The Group made further investments in UCIs through the subsidiary Eurizon Capital SGR and the companies controlled by it,
in line with the financial portfolio management policies issued by the asset management company and its subsidiaries, in
agreement with the Intesa Sanpaolo Group Guidelines. In detail, the asset management company and its subsidiaries have
both temporary and structural available funds deriving from company equity that is not permanently invested in equity
investments or other fixed assets, and from the ordinary cash flows. Based on that set out in the guidelines for managing the
financial portfolio, as part of liquidity management activities, structural and temporarily available funds linked to the trend in
short-term and on demand cash flows make up the liquidity portfolio net of the amount held in current accounts or invested in
term deposits. In relation to the activities carried out by the asset management company and its subsidiaries and the
characteristics of the available funds in question, excess liquidity must be invested in assets with moderate risk that can be
easily liquidated. That portfolio includes investments in short-term money market and bond funds, both specialising in the
Eurozone, established and/or managed by Eurizon Capital SGR or by its subsidiaries. The Group\u2019s investments in UCIs
managed by subsidiaries do not prejudice the operational autonomy and capacity of the asset management companies to act
in the exclusive interest of investors, considering the specific provisions set out in sector regulations and by the Supervisory
Authorities.
The table below summarises the accounting portfolios that the debit and credit transactions with unconsolidated structured
entities are allocated to.
Quantitative information
(millions of euro)
Captions /
Type of
structured
entity
Accounting portfolios under assets
Total
assets
(A)
Accounting portfolios
under liabilites
Total
liabilities
(B)
NET
BOOK
VALUE
(C = A-B)
Maximum
exposure
to risk of
loss
(D)
Difference
between
exposure
to risk of
loss and
book value
(E = D - C)
1.
Special purpose vehicle
2,780
912
1,868
3,375
1,507
Financial assets held for trading
82
Due to customers
778
Other financial assets mandatorily measured
at fair value
3
Financial liabilities held for
trading
134
Financial assets measured at fair value
through other comprehensive income
16
-
Financial assets measured at amortised cost
- Loans to customers
2,679
2.
UCI
4,033
10
4,023
4,262
239
Financial assets held for trading
292
Due to customers
-
Financial assets designated at fair value
3,450
Financial liabilities held for
trading
10
Assets measured at amortised cost Loans to
customers
291
-
The maximum exposure to risk, representing the maximum exposure of the Group to losses deriving from its interests in
structured entities, is generally equal to the net book value, to which, where applicable, several types of off-balance sheet
exposures are added (e.g. committed credit lines or guarantees given). The net book value equals the exposure in the
financial statements net of value adjustments recorded during the current and previous years.
For UCIs, the maximum risk exposure also includes the Group's commitments, not yet called up by the fund, to subscribe
additional units.
The table below shows the amount and type of revenues earned over the year by structured entities. The main component of
the revenues recognised consists of fees deriving from the management and placement of the UCIs sponsored and managed
by the Group's asset management companies and placed with customers. The fees in question are charged by the asset
management company to the funds managed and partly reversed to the distribution network for the placement service.
(millions of euro)
Type of structured entity sponsored
Interest
Fees and
commissions
Dividends
Other
revenue
TOTAL
UCI
51
2,171
119
-160
2,181
Special-purpose vehicles
107
10
-
-286
-169
SECTION 2 \u2013 RISKS OF THE PRUDENTIAL CONSOLIDATION
In this section the figures are shown gross of the transactions with the other companies included in the scope of the
accounting consolidation. These figures usually also include the assets and liabilities, in proportion to the interest held, of the
jointly-controlled banking, financial and operational companies consolidated proportionally for reporting purposes. Where the
contribution of transactions between the companies included in the prudential consolidation and the other companies in the
scope of the accounting consolidation is material, the details of those transactions are provided at the foot of the disclosure
concerned.
The following table contains the reconciliation of the consolidated balance sheet with the banking regulatory-scope balance
sheet.
(millions of euro)
Assets
31.12.2022
Financial
Statements
Effects of the
deconsolidation
and consolidation of
counterparties
other than those in
the banking group (*)
31.12.2022
Regulatory-
scope
balance
sheet
10.
Cash and cash equivalents
112,924
-915
112,009
20.
Financial assets measured at fair value through profit or loss
47,577
744
48,321
a) financial assets held for trading
42,522
92
42,614
b) financial assets designated at fair value
1
-
1
c) other financial assets mandatorily measured at fair value
5,054
652
5,706
30.
Financial assets measured at fair value through other comprehensive income
49,716
-
49,716
35.
Financial assets pertaining to insurance companies, measured at fair value pursuant to IAS 39
172,725
-172,725
-
40.
Financial assets measured at amortised cost
528,078
761
528,839
a) due from banks
32,884
3
32,887
b) loans to customers
495,194
758
495,952
45.
Financial assets pertaining to insurance companies measured at amortised cost pursuant to IAS 39
80
-80
-
50.
Hedging derivatives
10,062
-
10,062
60.
Fair value change of financial assets in hedged portfolios (+/-)
-9,752
-
-9,752
70.
Investments in associates and companies subject to joint control
2,013
6,527
8,540
80.
Technical insurance reserves reassured with third parties
163
-163
-
90.
Property and equipment
10,505
-1,277
9,228
100.
Intangible assets
9,830
-885
8,945
of which:
-
-
-
- goodwill
3,626
-382
3,244
110.
Tax assets
18,273
-1,127
17,146
a) current
3,520
-97
3,423
b) deferred
14,753
-1,030
13,723
120.
Non-current assets held for sale and discontinued operations
638
-3
635
130.
Other assets
22,851
-4,080
18,771
Total Assets
975,683
-173,223
802,460
Liabilities and Shareholders' Equity
31.12.2022
Financial
Statements
Effects of the
deconsolidation
and consolidation of
counterparties
other than those in
the banking group (*)
31.12.2022
Regulatory-
scope
balance
sheet
10.
Financial liabilities measured at amortised cost
667,586
3,660
671,246
a) due to banks
137,482
-265
137,217
b) due to customers
454,025
2,615
456,640
c) securities issued
76,079
1,310
77,389
15.
Financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39
2,550
-2,550
-
20.
Financial liabilities held for trading
46,512
21
46,533
30.
Financial liabilities designated at fair value
8,795
-
8,795
35.
Financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39
71,744
-71,744
-
40.
Hedging derivatives
5,346
-
5,346
50.
Fair value change of financial liabilities in hedged portfolios (+/-)
-8,031
-
-8,031
60.
Tax liabilities
2,306
-1,311
995
a) current
297
-24
273
b) deferred
2,009
-1,287
722
70.
Liabilities associated with non-current assets held for sale and discontinued operations
15
-
15
80.
Other liabilities
11,060
-794
10,266
90.
Employee termination indemnities
852
-5
847
100.
Allowances for risks and charges
5,010
-352
4,658
a) commitments and guarantees given
711
-136
575
b) post-employment benefits
139
-
139
c) other allowances for risks and charges
4,160
-216
3,944
110.
Technical reserves
100,117
-100,117
-
120.
Valuation reserves
-1,939
-
-1,939
125.
Valuation reserves pertaining to insurance companies
-696
-
-696
130.
Redeemable shares
-
-
-
140.
Equity instruments
7,211
-
7,211
150.
Reserves
15,827
-
15,827
155.
Interim dividends (-)
-1,400
-
-1,400
160.
Share premium reserve
28,053
-
28,053
170.
Share capital
10,369
-
10,369
180.
Own shares (-)
-124
-
-124
190.
Minority interests (+/-)
166
-31
135
200.
Net income (loss) (+/-)
4,354
-
4,354
Total Liabilities and Shareholders' Equity
975,683
-173,223
802,460
(*) The effects are attributable to :
- deconsolidation of companies that are not part of the Banking Group;
- proportional consolidation of the jointly controlled companies that are consolidated at equity in the financial statements.
1.1. CREDIT RISK
QUALITATIVE INFORMATION
1. GENERAL ASPECTS
The Group\u2019s strategies, Risk Appetite Framework, and Powers and Rules for credit granting and management are aimed at:
\u2013 achieving a sustainable goal consistent with the Group\u2019s risk appetite and value creation objectives, whilst guaranteeing
the quality of its lending operations;
\u2013 diversifying the portfolio, limiting the concentration of exposures to counterparties/groups, economic sectors or
geographical areas;
\u2013 efficiently selecting economic groups and individual borrowers through a thorough analysis of their creditworthiness
aimed at limiting the risk of insolvency and mitigating potentially associated losses;
\u2013 given the current economic climate, favouring lending business aimed at supporting the real economy and production
system and at developing relationships with customers;
\u2013 constantly monitoring relationships and the related exposures, through the use of both IT procedures and systematic
surveillance of positions that show irregularities with the aim of detecting any symptoms of deterioration in a timely
manner.
Constant monitoring of the quality of the loan portfolio is also pursued through specific operating checks for all the phases of
loan management.
It should also be noted that the 2022-2025 Business Plan includes specific initiatives aimed at massive NPL stock reduction
and continuous pre-emption through a modular strategy.
The transactions carried out during the year included several extraordinary de-risking initiatives for a total of 9.5 billion euro in
terms of GBV, in addition to around 0.8 billion euro in GBV classified as assets held for sale for which the disposal is
envisaged in 2023.
For more details, see the paragraph \u201cThe 2022-2025 Business Plan\u201d of the Report on operations.
1.1. The valuation impacts for the ISP Group of the military conflict between Russia and Ukraine
In referring to Part A of these Notes to the consolidated financial statements (Section 5: Other aspects) for the Group\u2019s
general approach to the risks, uncertainties and impacts associated with the conflict between Russia and Ukraine, details are
provided below of the qualitative and quantitative aspects relating to credit exposures to counterparties resident in the
countries in conflict, held in the portfolio of the two subsidiaries resident in Russia and Ukraine, Banca Intesa Russia and
Pravex Bank (Ukrainian bank), or credit disbursed by other entities of the Group (cross-border exposures), with particular
regard to their valuation.
As at 31 December 2022, the Group presented the following on-balance sheet exposures to counterparties resident in Russia
and Ukraine, net of ECA guarantees and gross/net of value adjustments carried out:
(millions of euro)
31.12.2022 (*)
31.12.2021 (**)
Gross exposure
Net exposure
Gross exposure
Net exposure
Russia
Ukraine
Russia
Ukraine
Russia
Ukraine
Russia
Ukraine
Loans to customers
1,629
216
1,168
103
4,518
226
4,486
224
Banca Intesa Russia
372
-
205
-
644
-
614
-
Pravex
-
112
-
-
-
156
-
154
Cross-border exposures
1,257
104
963
103
3,874
70
3,872
70
Due from banks
797
63
782
62
305
57
305
56
Banca Intesa Russia
751
-
740
-
269
-
269
-
Pravex
-
63
-
62
-
57
-
56
Cross-border exposures
46
-
42
-
36
-
36
-
Securities
73
11
41
2
118
58
118
56
Banca Intesa Russia
13
-
13
-
24
-
24
-
Pravex
-
-
-
-
-
48
-
46
IMI C&IB Division
31
-
14
-
29
-
29
-
Insurance Division
29
11
14
2
65
10
65
10
(*) In addition to the on-balance sheet exposures shown in the table, there are off-balance risks to customers for 126 million euro (113 million euro net) at
Banca Intesa Russia, and 67 million euro (66 million euro net) at Pravex, in addition to 232 million euro (186 million euro net) in cross-border off-balance
risks to resident customers in Russia, net of ECA, and 27 million euro (gross and net value) to customers resident in Ukraine.
There are also 155 million euro (152 million euro net) in cross-border off-balance exposures to banks resident in Russia and 18 million euro (gross and
net value) in cross-border off-balance exposures to banks resident in Ukraine.
On the other hand, the cross-border exposures to customers resident in Ukraine are, for the corporate part, backed by guarantees provided by US
persons, while, for the household part, the amounts as at 31 December 2022 and the increase of around 34 million euro compared to 31 December 2021
mainly relate to exposures disbursed by the subsidiary VUB to households with permanent residence in Slovakia.
(**) In addition to the on-balance sheet exposures shown in the table, there are off-balance risks to customers for 254 million euro (253 million euro net)
at Banca Intesa Russia, and 88 million euro (gross and net value) at Pravex, in addition to 995 million euro (gross and net value) in cross-border off-
balance risks to resident customers, net of ECA. There are also 1,109 million euro (gross and net value) in cross-border off-balance exposures to banks
resident in Russia.
On the other hand, the cross-border exposures to customers resident in Ukraine are, for the corporate part, backed by guarantees provided by US
persons, while, for the household part, they mainly relate to exposures disbursed by the subsidiary VUB to households with permanent residence in
Slovakia.
As shown in the table, at the end of the year the remaining on-balance sheet exposures to the total counterparties resident in
Russia and Ukraine amounted, in terms of gross values, to 372 million euro (205 million euro net) for Banca Intesa Russia
and 1,257 million euro (963 million euro net) for cross-border exposures to customers resident in Russia (net of ECA
guarantees). These were accompanied by exposures to banks totalling 797 million euro (782 million euro net) and in
securities totalling 73 million euro (41 million euro net). Exposures to customers resident in Ukraine amounted to 216 million
euro (103 million euro net), of which 112 million euro (book value nil in net terms) related to the subsidiary Pravex Bank.
These were accompanied by exposures to banks and in securities totalling 74 million euro (64 million euro net). The majority
of the exposures to Russian
100
and Ukrainian counterparties essentially consist of loans to customers subject to measurement
in accordance with IFRS 9 \u201cFinancial Instruments\u201d.
In view of the above, it should be noted that during the year the Group has taken active steps to significantly reduce the credit
risks associated with the Russian-Ukrainian conflict. Specifically, during the year, the gross on-balance sheet exposure to the
total counterparties resident in Russia and Ukraine (customers, banks and securities) decreased by 2,493 million euro (-47%
compared to the end of the previous year), mainly due to the final disposal of two major exposures (for 2.2 billion euro in the
third quarter and 0.3 billion euro in the fourth quarter of 2022). In detail, there was a reduction of 2,899 million euro (-61%
compared to the end of 2021) in gross credit exposures to customers, only partly offset by the increase in Banca Intesa
Russia\u2019s amounts due from banks in relation to the liquidity that has become available from the progressive repayment of
loans to customers.
The significant de-risking exercise and the major adjustments to the residual positions \u2013 described below \u2013 contributed to
more than halving the overall net exposure (customers, banks and securities) as at 31 December 2022 to counterparties
resident in Russia and Ukraine, which amounted to 2,158 million euro, down by 3,087 million euro compared to 31 December
2021 (-59%).
Starting in March 2022, among the areas receiving the greatest attention in terms of credit assessments in the emergency
triggered by the conflict in Ukraine, a specific focus was dedicated to the Group\u2019s exposure to counterparties resident in
Russia and Ukraine. Specifically, customised measures were implemented to strengthen the oversight of credit risk, also by
updating the assessment of creditworthiness, of counterparties with residency or parent companies in the Russian Federation,
Belarus or Ukraine. In that context, the deterioration of specific positions was also acknowledged, which were classified
among unlikely-to-pay exposures and, as a result, subject to analytical measurement. As at 31 December, in the Group
companies other than those resident in the countries in conflict, a total of 322 million euro of on-balance sheet non-performing
100
For these purposes, the small exposures to Belarusian counterparties have for simplicity been treated and disclosed together with the exposures to
the Russian Federation.
loans to counterparties resident in Russia were recorded, relating to positions already classified as at 30 June, mainly
attributable to two counterparties.
The non-performing loans of the Russian subsidiary amounted to 61 million euro, while the classification of the entire portfolio
of the Ukrainian subsidiary to bad loan status led to the recognition of 112 million euro in bad loans.
In line with the disclosure already provided in the Half-yearly Report as at 30 June, with regard to the portfolio that did not
show specific signs of deterioration, the analyses of IFRS 9 and the related Annexes show no indications or examples aimed
at setting out specific guidelines for the measurement of Expected Credit Losses in contexts of war or defining specific
methods of increasing credit risk due to sudden, serious geopolitical crises such as the current one. The most pertinent
references to the current scenario seem to be those set out in the Application Guidance of the standard. These allow/suggest
the use of collective assessment to verify the existence of a Significant Increase in Credit Risk (SICR) with a view to staging
the credit exposures
101
, as well as, in line with the treatment set out for capturing the critical issues of another recent
emergency situation (COVID-19
102
), using the management overlay in calculating the ECL, to define the most suitable
methods to incorporate the aspects linked to the ongoing conflict into provisions.
With specific reference to cross-border positions, the Group thus decided to adopt a valuation approach strongly guided by
the emerging geopolitical risk \u201cvia transfer\u201d, i.e. the risk that counterparties do not honour their commitments to pay debt
following restrictions or decisions by their countries of residence, not due to aspects directly pertaining to their business, thus
applied based on the country of residence of the counterparties. That approach was implemented both to determine the SICR
and the related classification in Stage 2, and to calculate the ECL by applying a management overlay. This approach, which
was adopted on a continuous basis throughout the year, was considered the most appropriate way to incorporate the
provisions for country and geopolitical risk related to the current conflict that would otherwise not be properly captured by the
risk measurement systems normally used. At the same time, the rating review continued for the most significant
counterparties exposed to the country risk related to the conflict, for which more restrictive validity periods were exceptionally
established for the ratings assigned.
In detail, the choices made for the purposes of calculating ECL on cross-border exposures were as follows:
\u2013 application of PD through the cycle associated with the assigned rating, without forward-looking conditioning. This
approach was deemed more prudent, as the conditioning methodology, relating to the approaches currently adopted in
the satellite models, would not represent the specific risk linked to the countries in conflict;
\u2013 calculation of an additional prudential buffer that ensures equivalence with the use of an estimated loss rate according to
an approach based on the transfer of the risk of the country of residence under Pillar 2 modelling (unconditional LGD set
by the transfer risk model of 55%);
\u2013 introduction of prudent margins in addition to the ECL estimates deriving from the above elements, in relation to potential
further worsening of the credit ratings of Russian counterparties.
With reference to loans to customers disbursed by Pravex Bank, the absolutely serious situation in all of Ukraine also resulted
in the definition, for the purpose of measuring the loan portfolio of the subsidiary Ukraine bank, of a highly specific approach,
significantly based on rationales, which consider the uncertainties and the risk elements associated with the military conflict.
Already in the Half-yearly Report, for the portfolio of performing loans of Pravex (the bank substantially had no NPLs as at
31 December 2021) a specific management overlay had been applied at ECL level, which resulted in impairment that brought
the coverage ratio to 73%. In light of the worsening and prolongation of the conflict, with the consequent repercussions on the
Ukrainian economy, in the financial statements as at 31 December 2022, in line with the Interim Statement as at 30
September, the loans to customers of the Ukrainian subsidiary have been classified for the purposes of the Consolidated
Financial Statements as non-performing loans (bad loans), with full impairment of the on-balance sheet component.
With regard to Banca Intesa Russia, specific prudent choices were defined, while also considering the different situation of
risk/operations than that of the Ukraine subsidiary. Thus, an approach to classifying and assessing performing loans was
adopted that strongly considers the geopolitical risk deriving from the ongoing crisis. Therefore, the assessments carried out
on the loans of the subsidiary included a centrally determined prudent factor that takes account of the worsening of the
domestic economic situation in light of the continuation of the conflict and the increased isolation of the Russian economy. As
a result of the provisions made, the total coverage of performing loans of the Russian subsidiary amounted to around 40.5%
of their gross value.
Moreover, the Parent Company and two subsidiaries disbursed loans to Banca Intesa Russia for a residual book value of 211
million euro, to support the bank\u2019s operations, and also made available 200 million euro originally intended for a capital
increase. The concrete implementation of that capital increase was suspended due to the war. The loan of 211 million euro is
still supporting the operations of the bank, which, despite the difficulties caused by the context, achieved a positive operating
result in 2022. For the amount originally intended for a capital increase, the decisions will depend on the development of the
war and the Russian regulations which currently impose temporary restrictions to repayments and payments to parties
resident in \u201cunfriendly\u201d countries.
For completeness, you are reminded that the real estate assets of the two subsidiaries were also subject to valuation: given
the extreme uncertainty surrounding the current war scenario and the current absence of a real estate market in Ukraine, it
was considered prudent to confirm the write-off of the value of Pravex Bank\u2019s investment and branch assets and other
properties used in operations. The sole exception was the Kyiv headquarters, for which it was decided, in view of its strategic
function for the banking business, the current control that can be exercised over the condition of the building, and its location,
to keep its value unchanged. On the other hand, with regard to Banca Intesa Russia\u2019s small real estate asset portfolio,
essentially consisting of the Moscow headquarters, no items were identified that required a write-down.
101
In particular, see IFRS 9 B5.5.1, IFRS 9 B5.5.4, IFRS 9 B5.5.5, IFRS 9 B5.5.18 and IFRS 9 B5.5.52.
102
IFRS 9 and COVID-19 - Accounting for expected credit losses applying IFRS 9 Financial Instruments in the light of current uncertainty resulting from
the COVID-19 pandemic.
With regard to Banca Intesa Russia\u2019s securities portfolio (Pravex\u2019s residual portfolio was duly repaid at the end of 2022), the
valuations were made using the prices recorded on the Russian secondary market, with consequent classification in fair value
level 2 due to the low liquidity of the reference market. A similar approach was adopted for the small securities exposures of
the Parent Company and entities of the Group\u2019s insurance segment.
Overall, these valuation processes and the losses associated with the de-risking of the Russian exposures led to the
recognition in the year, before tax, of net charges totalling 1,415 million euro, with 1,298 million euro relating to adjustments to
loans, 36 million euro to securities and 81 million euro to other balance sheet items, including the provision of 80 million euro
made upon consolidation of the subsidiary Banca Intesa Russia mainly to zero out its equity contribution to the Group\u2019s
consolidated financial statements.
1.2. Impacts from the COVID-19 pandemic
Since the beginning of the pandemic all the Bank\u2019s functions have been involved in an extensive and complex set of actions
aimed at supporting the various types of Group customers. This was provided through both the offer of government support
related initiatives and through initiatives implemented autonomously by the Group.
The pandemic caused a significant threat to the resilience of the companies in the Group\u2019s loan portfolio. On the other hand, a
series of unprecedented government measures were implemented to support the economy, which must be considered in
assessing risk. The speed of change in the economic and social context has increased the level of uncertainty of economic
forecasts used as the basis for the estimates of risk appetite. This phase thus requires a greater capacity to adapt and
attention to the various challenges laid down by the current credit risk assessment models. As a result, in line with the
approach adopted in 2020 after the beginning of the pandemic, it was decided to calibrate the risk appetite, to avoid pro-
cyclical conduct while supporting the economy, maintaining a solid financial and equity position.
At the beginning of February 2022, the Board of Directors approved the update of the Credit Risk Appetite Framework, within
the overall Risk Appetite Framework, which, in line with the approach adopted in 2020 and 2021, included the forward-looking
information needed to reflect the specific impacts of the COVID-19 crisis within the risk and resilience factors on the
Corporate Domestic, Large Corporate (Italy component), Corporate Real Estate and International Corporate scope and a
vulnerability indicator for the Corporate Domestic and Corporate Real Estate scope. The vulnerability indicator, introduced in
2020, is based on the company\u2019s liquidity profile and its resulting ability to service existing debt and contracted debt in the
face of the COVID-19 emergency. The assessment of debt sustainability is measured against the post-pandemic return to
normality by using the pre-COVID-19 EBITDA of the companies as a benchmark. The methodological decision to consider a
post-crisis time horizon was due to the need to sterilise the transitional effects of the crisis, such as the exceptional
institutional measures (e.g. moratoria, grace period for new secured transactions) and the volatility of net working capital, as
well as to assess the medium/long-term sustainability in order to reduce the pro-cyclical effects. This indicator can therefore
contribute to providing an initial \u2013 though partial \u2013 response to the expectation of reducing to the minimum any cliff-edge
effects upon expiry of the moratoria.
For the Retail SME segment, the choice was made to continue applying the resilience factor on the economic outlooks,
implemented at micro-sector level.
With regard to the actions in support of customers, the process of gradual restoration of fully ordinary credit processes, with
one-to-one assessments, already initiated in 2021 with the gradual phase out of the EBA Guidelines on general payment
moratoria, was completed in full on 1 April 2022, following the termination of the state of emergency, with full return also of the
solutions offered by the Bank\u2019s ordinary product catalogue.
As at 31 December 2022, the option ended, which had been set up in April 2022 and provided for by the \u201cMille Proroghe
Decree\u201d for loans of \u201c30 thousand euro\u201d pursuant to letters m) and m-bis) of Article 13, paragraph 1 of Law Decree no. 23 of 8
April 2020, converted, with amendments, by Law no. 40 of 5 June 2020, to be requested by the borrower, through agreement
between the parties, to defer for a maximum of 6 months the grace period of the loan, whose initial deadline for payment of
principal was scheduled in 2022.
However, the possibility of extending the duration within the maximum limit of 15 years remains for loans of up to 30 thousand
euro guaranteed in accordance with Article 13, paragraph 1, letter m) of the Liquidity Law Decree.
With specific reference to credit portfolio management, in addition to the standard early warning indicators and proactive
credit management processes, a further quantitative assessment layer was added, which combines sector-based forecasts
with additional risk indicators. Specifically, government and bank financial support measures in 2020 and 2021 safeguarded
many companies that faced a liquidity shortfall due to the COVID-19 situation. Otherwise, there would have been a worsening
of the risk, which would have been reflected in a deterioration of the customers\u2019 ratings and an increase in the default rate. In
this context, at the beginning of 2021, with a view to anticipating potential financial issues related to the expiry of the
government support measures, the Chief Risk Officer Area conducted specific assessments to identify companies/sectors that
continue to experience operational difficulties in terms of cash flow generation, despite being financially supported by those
measures. The methodology was subsequently further developed, strengthened, supplemented and reported to the corporate
bodies in line with the accompanying development of the Early Warning models, which was completed in December 2021 and
for which the process of parallel running and embedding into the credit management processes continues.
With regard to actions linked to proactive credit management, in 2021 specific diagnostics were launched on the moratoria
portfolio, which continued for the entire year in the area of the Credit Action Plan, with the goal of reducing impairment, by
activating actions on critical positions. In the second quarter of 2022, new diagnostics were launched on the moratoria expired
or expiring in the first half of 2022, which presented certain elements of risk, with outcomes that did not identify any significant
critical issues or need for monitoring with any planned actions in the third quarter for almost all the positions (96%).
Similar diagnostics were then repeated in the third and fourth quarters, with outcomes in line with those reported in the first
half.
At domestic level, the amount of outstanding moratoria as at 31 December 2022 was small, both in absolute terms (around 80
million euro) and in comparison to the situation at the end of 2021 (4.8 billion euro). The amount of terminated moratoria that
will reach the term for the resumption of payments in subsequent months was also very small, at around 40 million euro,
compared to 6.7 billion euro at the end of 2021. The expired moratoria that had already met the conditions for the resumption
of payments as at 31 December 2022 amounted to 35.9 billion euro. The rate of total defaults on the portfolio as at that date
was around 4.5% (2.7% at the end of 2021). The rate of total defaults, when compared to the total exposures with moratoria
originally granted, was less than 3%.
At consolidated level, the exposure value of the outstanding moratoria as at 31 December 2022 was 80 million euro
(4.9 billion euro as at December 2021), substantially attributable to the domestic perimeter, against expired moratoria of
39.6 billion euro (around 47 billion euro at the end of 2021). Like at domestic level, also at consolidated level the outstanding
moratoria qualifying as such under the EBA Guidelines amounted to 412 thousand euro (1.1 billion euro at the end of 2021).
With regard to the assessment of the forborne designation of the moratoria, in 2020/2021 Intesa Sanpaolo operated in
compliance with the \u201cEBA Guidelines on legislative and non-legislative moratoria on loan repayments applied in the light of
the COVID-19 crisis\u201d and the applicable government regulations, reinstating the ordinary valuation processes already from the
second half of 2021 and then fully confirming them in 2022.
During 2022, the systematic monitoring continued of the risk profiles of the exposures that had already reached or had not yet
reached the terms for resumption of payments (all occurring within the year). Specifically, as a result of the steady decrease in
exposures due to resumptions and payments, as mentioned above, there were no particularly negative trends in 2022 in
relation to the emergence of signs of distress or deterioration. For the Financial Statements as at 31 December 2021,
management overlays on performing loans had been maintained (adjustments to the results of the IFRS 9 models in use
incorporated into the satellite models and extraordinary triggers for sliding into Stage 2) to prudently take account of the
potential emergence of vulnerabilities on the exposures subject to moratorium measures. During the year, these were
gradually reassessed, while still maintaining reasonable prudence up to the third quarter and completing their release in the
fourth quarter, in light of the results of the abovementioned monitoring.
Moreover, it should be recalled that the general rules adopted by the Bank for the identification of the Significant Increase in
Credit Risk and the classification to Stage 2 also apply to this portfolio on an ordinary basis, including the presence of a
payment past due more than 30 days and the granting of forbearance measures. It should also be noted that the specificity of
the portfolio that was subject to moratoria and related extensions in the 2020/2021 two-year period is becoming less and less
distinctive or directly correlated to the cessation of the benefit granted at the time. In addition, in response to the evolution of
the geopolitical crisis triggered by the Russia/Ukraine conflict, starting from the first quarter of 2022, prudent choices have
been made on the portfolios of households, small economic operators and companies operating in certain sectors (including,
when covered by the rules adopted, counterparties that were granted moratoria during the pandemic) due to the emergence \u2013
within the Group\u2019s geographical scope \u2013 of indirect repercussions and new vulnerabilities arising from the effects of persistent
inflationary pressures and increases in energy costs. Further details are provided in paragraph 2.3 \u201cMethods for measuring
expected losses\u201d.
With regard to counterparty risk, the pandemic crisis entailed an initial increase in exposures, mainly due to the decline in
Euro area interest rates and the general, significant increase in the volatility of the main risk factors. However, no critical
issues were encountered in the margining process with market counterparties, despite the sharp increase in collateral calls,
by both number and volume, during the weeks of greatest stress on the markets. Margin processes with central
counterparties also did not generate any operating issues. The situation on the financial markets has gradually stabilised.
Lastly, with reference to credit risk issues, note that the Group publishes the disclosure set out in the \u201cGuidelines on reporting
and disclosure of exposures subject to measures applied in response to the COVID-19 crisis\u201d, published by the EBA
(EBA/GL/2020/07) in the \u201cPillar 3\u201d public disclosure.
2. CREDIT RISK MANAGEMENT POLICIES
2.1. Organisation
Within the Intesa Sanpaolo Group, a fundamental role in managing and controlling credit risk is played by the corporate
bodies, which, to the extent of their respective competences, ensure adequate coverage of credit risk by setting strategic
guidelines and risk management policies, verifying that they remain constantly efficient and effective and assigning tasks and
responsibilities to the company functions and units involved in the processes.
The coverage and governance of credit ensured by the corporate bodies is reflected in the current organisational structure,
which identifies areas of central responsibility attributable to:
\u2013 Chief Lending Officer Governance Area;
\u2013 Chief Risk Officer Governance Area;
\u2013 Chief Financial Officer Governance Area.
They ensure that risk control activities are managed and implemented, with an appropriate level of segregation, in addition to
the establishment of the supporting processes and applications.
The Chief Lending Officer Governance Area, with the aid of its structures (BdT Underwriting Head Office Department, CIB
Underwriting Head Office Department, ISB Credit Head Office Department, Credit Governance Head Office Department,
Credit Value Preservation Head Office Department and NPE Head Office Department):
\u2013 makes material credit decisions, directly or submitting them to the relevant bodies, in relation to the assumption and
management of the Group\u2019s credit risks, authorising them directly if falling within its prerogatives, including by way of
advisory opinions;
\u2013 ensures the correct classification and valuation for financial reporting purposes of positions under its responsibility that
are classified as non-performing loans;
\u2013 ensures, for its area of responsibility, the proactive management of credit and guarantees the management and the
monitoring of the Group\u2019s non-performing and bad loans kept within the Group\u2019s internal management;
\u2013 designs and manages transactions for the sale of individual NPE positions or portfolios, credit exposures and other
assets within scope, with the collaboration of other competent functions;
\u2013 performs monitoring and control on outsourced activities, including the monitoring of the performance KPIs of
outsourcers, directly making decisions, or submitting them to the Competent Bodies, regarding proposals exceeding the
powers delegated to the Outsourcers;
\u2013 contributes to the process of formulating the proposal of the Credit Strategies in the analysis of the impacts on the
granting of loans and to their definition in relation to the relevant credit management variables, without prejudice to the
Chief Financial Officer Governance Area\u2019s ultimate responsibility for their finalisation;
\u2013 coordinates the implementation of Credit Management Guidance by the relevant Group business units, also in the
various corporate contexts;
\u2013 analyses the evolution of the cost of credit within the Group, also taking into account the application of the aforesaid
Credit Strategies;
\u2013 assigns and validates the ratings to the relevant positions, also providing support in the definition of the rating
assignment processes and tools;
\u2013 defines the relevant regulations on credit matters, the requirements for the development of credit tools and contributes to
the formulation of the proposals for the assignment of credit granting and management powers, without prejudice to the
Chief Risk Officer Governance Area\u2019s ultimate responsibility for their finalisation;
\u2013 promotes initiatives aimed at disseminating and developing a credit culture;
\u2013 ensures, consistently with the guidelines of the Chief Risk Officer Governance Area and in compliance with the Credit
Management Guidance, the first level systematic supervision of the relevant loan portfolio, identifying phenomena
referring to specific credit aggregates characterised by high levels of anomalies for which to activate the appropriate risk
mitigation measures.
The Chief Risk Officer Governance Area is responsible for adapting the Risk Appetite Framework for the management of
credit risk, in accordance with company strategies and objectives, as well as for measuring and controlling the Group's risk
exposures. Specifically, the Chief Risk Officer Governance Area:
\u2013 establishes the metrics for the measurement of credit risk - also with regard to the collective measurement of performing
loans and the measurement of non-performing loans on a statistical basis;
\u2013 provides risk-adjusted pricing models and ensures the measurement of portfolio risk in relation to Expected Loss,
Economic Capital (ECAP) and RWAs;
\u2013 monitors the absorption of capital relating to credit risk, supporting the Chief Financial Officer Governance Area in the
active management of capital;
\u2013 makes proposals for the assignment of Credit Powers;
\u2013 validates internal risk measurement systems;
\u2013 oversees model risk;
\u2013 performs level II controls for credit risk.
The activities are performed directly by the Chief Risk Officer Governance Area for both the Parent Company and the main
subsidiaries, according to a service contract.
With regard to the credit risk management policies, the Chief Financial Officer Governance Area:
\u2013 assists the Corporate Bodies in defining, in accordance with the Group corporate strategies and objectives, the
guidelines and policies on administration and tax, planning and management control, treasury and finance, studies and
research, active management of the loan portfolio, relations with investors and rating agencies, and social and
environmental responsibility;
\u2013 oversees Credit Portfolio Management at Group level, supporting the Divisions in the active management of credit risk,
with the aim of improving the risk-return profile of the loan portfolio in order to create value for shareholders;
\u2013 establishes the Credit Strategies for the Divisions with the aim of incentivising new disbursements, through pricing
adjustments, to the most attractive economic sectors and customer clusters in terms of risk/return profile, monitors the
loan portfolio with a view to creating value within the risk-adjusted pricing macro-process and carries out credit risk
transfer transactions on the capital market in line with the target portfolio;
\u2013 oversees and coordinates the \u201cGroup NPL Plan Control Room\u201d, a managerial body with consulting, monitoring and
guidance functions, established to ensure that the strategic objectives of the Group\u2019s NPL Plan are achieved while in
compliance with the performance targets, solidity of the capital ratios and creation of value for the Group.
The Chief IT, Digital and Innovation Officer establishes the model and oversees the Group\u2019s Data Governance and Data
Quality system, ensuring its dissemination and implementation and coordinating the activities of the parties involved.
Lastly, as is the case for all the risk areas and above all for credit risk, the Chief Audit Officer performs internal audits aimed at
identifying breaches of the procedures and regulations and periodically assessing the completeness, adequacy, functioning
(in terms of efficiency and effectiveness) and reliability of the internal control system and the ICT system (ICT audit), at preset
intervals according to the nature and extent of the risks.
2.2. Management, measurement and control systems
Intesa Sanpaolo, as the Parent Company, has set out codes of conduct in relation to credit risk acceptance, in order to
prevent excessive concentration of exposures, limit potential losses in adverse scenarios, and maintain credit quality in line
with the objectives of capital and financial stability.
Expected Loss and Risk Weighted Assets are fundamental elements for the management, measurement and control of credit
risk. These measures incorporate the effects of the exposure size (Exposure at Default - EAD), the relative riskiness of the
customer (Probability of Default - PD), the loss estimate where insolvency conditions exist - taking into account the
guarantees that mitigate the assumption of risk related to the loan (Loss Given Default - LGD) - and the duration of the
exposure (maturity), as detailed in Paragraph 2.3.
The components that contribute to the determination of the Risk Weighted Assets are the key elements for the determination
of the levels of the Credit Granting Powers, the limits of the Credit Risk Appetite (CRA), the credit pricing, the calculation of
the adjustments on performing exposures and the analytical-statistical adjustments on non-performing exposures, as well as
the calculation of the economic and regulatory capital.
The Credit Risk Appetite is aimed at optimising the risk/return profile of the assets. The \u201cRules on Credit Risk Appetite\u201d define
the methods for applying the CRA and the methods for calculating the CRA colour class, with associated exposure limits, in
order to pursue a growth in lending consistent with the risk appetite defined for the Group.
The objective of the calculation of the pricing of transactions is to define the suitability of the economic conditions based on
the value generation with respect to the expressed riskiness and all the components that contribute to the calculation of the
value, also including the costs allocated to the structures.
The capital at risk is defined as the maximum \u201cunexpected\u201d loss that the Group may incur over a period of one year with
particular confidence levels. The calculation is made with reference to the current status of the portfolio and on a dynamic
basis, by determining the projected level, based on both the forecast macroeconomic scenario and on stress scenarios. Risk
capital is a fundamental element in the assessment of the Group\u2019s capital adequacy and is calculated within the ICAAP
process from both a regulatory and a management perspective.
The levels of Powers set in terms of RWA delimit the decision-making power in the granting phase, specifying the authorised
professional profiles and the decision-making procedures for the loans for the individual counterparties. In particular, where
the granting of loans by the Group\u2019s subsidiaries exceeds certain thresholds, a request for a \u201cCompliance Opinion\u201d is made to
the competent bodies of the Parent Company.
The credit granting phase is also regulated by metrics that are complementary to the RWAs, which define coordination
mechanisms and support tools for the ongoing exercise of guidance, coordination and control responsibilities, in
implementation of the corporate governance provisions. In particular, the company rules include the Granting Rules, which
specify the methods for taking on credit risk with customers, and the Rules on Credit Strategies, which are designed to direct
the development and composition of the loan portfolio towards a risk/return profile that is recognised as optimal over the
medium/long-term, also taking into account the sustainability of the portfolio from an ESG perspective over the same time
horizon.
The credit risk management processes also envisage the periodic review of the credit positions by the relevant centralised or
decentralised structures and the assessment of customers not only at origination, but also on a continuous basis, by means of
a periodic monitoring process that interacts with credit management and control processes and procedures to ensure timely
assessment of any signs of impairment, with an impact on the level of risk of the exposures. An Early Warning System is in
place for the Corporate, Retail SME, Retail and Institutions portfolios, with adaptations introduced alongside the updates to
the internal rating models. The system used was developed on the basis of the indicators identified in the Asset Quality
Review and consists of a statistical component and a qualitative component, plus manual triggers by event. The indicators are
updated on a daily basis and, when they confirm a potential anomaly in the management of the relationship, the related
positions are detected and reported in specific management processes. As mentioned above, further developments were
made to the EWS engine from the second half of 2021 for a forthcoming addition of new models to the credit process. More
Credit Granting and
Management Powers
Calculation of adjustments to
performing exposures
Calculation of
Economic/Regulatory
Capital
Credit pricing
Calculation of adjustments
to non-performing
exposures (analytical
statistical valuation)
PD, LGD and EAD
CRA limits
generally, the Group continued to develop its own management models to support the credit granting, monitoring and
management processes (e.g. affordability, automatic granting engines, and forecasting). In more detail, the development was
completed of the Retail and Retail SME affordability models. In the Retail SME sector, the model went into operation on 18
November 2022 to serve the APC/ATP product feeding a new automatic decision-making engine developed using machine
learning techniques. In the Retail sector, the model is expected to be in operation in March 2023 to serve the personal loan
process and in May 2023 to serve the mortgage loan product. Sector-specific forecasting models were also developed in
2022 in support of numerous company processes including the RAF, credit strategies, and credit granting and monitoring
activities/instruments.
The valuation of the adjustments to the performing and non-performing exposures is based on methods consistent with IFRS
9, described in detail in Part A - Section \u201cA. 2 - Main financial statement captions\u201d and in particular in the paragraph
\u201cImpairment of assets\u201d. The paragraph below \u201c2.3. Methods for measuring expected losses\u201d details the main applications
used for the 2022 Financial Statements.
Country risk is an additional component of an individual borrower\u2019s insolvency risk, measured by credit risk control systems.
This component is linked to losses potentially resulting from international lending operations caused by events in a country
that are partly or entirely within the control of the government concerned, but not that of the individual residents of the country
in question. Country risk therefore takes the form of both transfer risk for non-sovereign counterparties, due to the freezing of
international payments, and sovereign risk, which is measured through an assessment of the sovereign states\u2019
creditworthiness. This definition includes all forms of cross-border lending to entities residing in a given country, whether they
are the government, a bank, a private enterprise or an individual.
The country risk component is used in the granting of credit to non-resident entities in order to obtain a preliminary evaluation
of the absorption of country risk limits set on an ex-ante basis. These limits, expressed in terms of economic capital, identify
the maximum acceptable risk for the Group, set on an annual basis in the Group Risk Appetite Framework. It should also be
noted that, as a result of the exceptional situation caused by the outbreak of the Russia/Ukraine conflict, the estimated
transfer risk of the Russian Federation was taken as a reference for the establishment of the management overlay of the LGD
of the cross-border counterparties as described in paragraph \u201c1.1 The valuation impacts for the ISP Group of the military
conflict between Russia and Ukraine\u201d.
Counterparty risk is a particular kind of credit risk associated with derivatives and SFTs (Securities Financing Transactions,
namely repurchase agreements and securities lending transactions), that refers to the possibility that a counterparty may
default before the contract expires. This risk, which is often referred to as replacement risk, is related to the case in which the
market value of a position has become positive and thus, in the case of default of the counterparty, the solvent party would be
forced to replace the position on the market, thereby suffering a loss.
With regard to counterparty risk, the Banking Group has an internal model for measuring this risk both for regulatory (only for
the Parent Company) and managerial purposes.
Potential Future Exposure (mean effective PFE 95%) has been adopted by the entire Banking Group for the measurement of
the utilisation rate of credit limits for derivatives and SFTs exposures. The Market, Financial and C&IB Risks Coordination
Area produces daily risk measurement estimates for counterparty risk, for the measurement of the utilisation rate of credit
lines for derivatives and SFTs for the Parent Company and Fideuram - Intesa Sanpaolo Private Banking. The other Banks of
the Group also use an internal model measurement approach, in simplified form, through internally estimated add-ons.
In addition, the following company processes were implemented to complete the risk analysis process for the exposure
measures implemented over time following the developments discussed above:
\u2013 definition and periodic calculation of stress tests on market scenarios and joint market/credit scenarios on counterparty
risk measures;
\u2013 definition and periodic analysis of Wrong-Way Risk, i.e. the risk of a positive correlation between the future exposure to a
counterparty and that counterparty\u2019s probability of default;
\u2013 definition and monitoring of management limits;
\u2013 contribution of collateral inflow/outflow risk measures, calculated on the basis of the internal counterparty risk model, for
OTC derivatives and SFTs with margining agreements (CSA, GMRA and similar);
\u2013 periodic reporting to the management of measures calculated using the internal exposure model, capital requirement,
level of use of management limits, results of stress tests and analyses of wrong-way risk;
\u2013 definition and periodic calculation of back-testing analyses to monitor the predictive performance over time of the model
with respect to the movements of the risk factors underlying the transactions in the portfolio.
The concentration risk arises from the exposure to counterparties, groups of related counterparties and counterparties in the
same business segment or that engage in the same business or operate in the same geographical region. In the annual
update of the Risk Appetite Framework, such counterparties are subject to stress tests aimed at identifying and assessing
threats for the Group and the most appropriate mitigating actions:
\u2013 aimed at defining exposure limits for specific geographical areas and sets of counterparties (e.g.: the top 20);
\u2013 aimed at ex ante limitation of exposures with significant concentration effects, in particular with reference to \u201clarge
exposures\u201d and to credit lines subject to country risk;
\u2013 aimed at ex-post correction of the risk profile, through the secondary loan market, through specific judgement metrics
based on the maximisation of overall portfolio value.
The Internal Validation and Controls Head Office Department within the Chief Risk Officer Governance Area, carries out
specific Level II controls on credit and data quality.
The purpose of the credit controls is to verify the proper classification and the adequacy of the management process for
individual exposures (so-called single names).
In general, the development of control activities, as well as of guidance and coordination, includes the credit processes
assessment also to verify that suitable Level I controls are in place, including proper execution and traceability. The potential
areas of investigation to be examined through Single Name controls also consider the results of the monitoring carried out by the Level I Control Functions within the different credit clusters. It also assesses the compliance of the internal risk measurement and management systems over time as regards determination of the capital requirements with the regulatory provisions, company needs and changes in the relative market. The Group\u2019s lending activity is focused on Italian customers (over 80% of the total) and is primarily aimed at households and small and medium enterprises. The exchange of basic information flows between different Group entities is assured by the Group\u2019s Central Credit Register (exposure monitoring and control system) and by the \u201cPosizione Complessiva di Rischio\u201d (global risk position), which highlight and analyse credit risks for each counterparty/economic group both towards the Group as a whole and towards individual Group companies. From the September 2018 monthly report \u2013 following the preparation of the input and generation architecture for the Anacredit reporting, aimed at supporting the \u201ccollection of granular credit and credit risk data\u201d as defined by Regulation (EU) 2016/867 of 18 May 2016 \u2013 a new reporting system has been in place in compliance with the regulatory provisions established by the ECB and implemented by the related Central National Banks. 2.3. Methods for measuring expected losses The expected loss is the product of exposure at default, probability of default and Loss Given Default. In Intesa Sanpaolo, probability of default is measured by means of different rating models according to borrower segment (Corporate, Retail SME, Retail, Sovereigns, Public Sector Entities and Banks). These models make it possible to summarise the counterparty\u2019s credit quality in a value, the rating, which reflects the probability of default over a period of one year, adjusted on the basis of the average level of the economic cycle. A number of rating models are used for the Corporate segment, which use all available information sources and incorporate the opinions of credit analysts and relationship managers. In particular: \u2013 models differentiated according to the market (domestic or international) and size bracket of the company are applied to most businesses; \u2013 specific models are in use for specialised lending, one for real-estate initiatives, one for project-finance transactions and one for leveraged buy-out/acquisition-finance and asset-finance transactions. The Corporate model is also used to calculate the resulting RWAs for the Equity portfolio of the Banking Book. The models applied to the Retail portfolio are as follows: \u2013 for the Retail SME segment, since May 2021, a new automated rating model has been in use that enables the calculation of the rating in real time; \u2013 for the Retail segment, a counterparty rating model consisting of the Retail Mortgages segment and the Other Retail segment has been in use since September 2018. The model was updated in August 2022, following the receipt of the Authorisation Letter, with effects for reporting purposes from September 2022. With regard to the Institutions portfolio: \u2013 the models for banks (banks in mature economies and banks in emerging countries) are composed of a quantitative part and a qualitative part, differentiated according to mature and emerging countries, and a country rating component that, based on the bank/country connection, assesses any negative effect of the country on the counterparty credit risk or, vice versa, the support capacity in the event of difficulties of the bank being assessed; \u2013 the models used for Municipalities and Provinces are default models, whereas shadow rating models based on agency ratings are used for the Regions. An approach to extend the rating (with the application of a downgrading) for the regulatory Entity (e.g.: Region) has been adopted for local healthcare authorities and other sector entities. For the Sovereign portfolio, the structure of the rating model includes a quantitative module that takes into account the structural rating assigned by the main international agencies, the implicit risk in the market prices of sovereign debt, the macroeconomic assessment estimated with an econometric model, and a qualitative opinion component, which supplements the quantitative opinion with elements drawn from the broader scope of publicly available information concerning the political and economic structure of the individual sovereign countries. The Sovereign rating model is used solely for management purposes. For the international subsidiary banks of the Group, PD models are used, which may be: \u2013 developed by the international subsidiary banks in order to capture the specific features of the risk of the local counterparties; \u2013 extended by the Parent Company; \u2013 borrowed from the Parent Company and adapted to local situations. Some of these models are used for reporting purposes and others only for management purposes, as set out in the table below. The Loss Given Default (LGD) models are based on the concept of \u201cEconomic LGD\u201d, namely the present value of the cash flows obtained in the various phases of the recovery process net of any administrative costs directly attributable to the exposure as well as the indirect management costs incurred by the Group, and consists, in brief, of the following elements: \u2013 estimate of a Bad Loan LGD Model: starting from the LGD observed on the portfolio, namely \u201cWorkout LGD\u201d, determined on the basis of the recoveries and costs, a regression econometric model of the LGD is estimated on variables considered to be significant for the determination of the loss associated to the Default event; \u2013 application of the Danger Rate, a multiplying correction factor, used to recalibrate the Bad Loan LGD with the information available on the other default statuses, in order to calculate an LGD representative of all the possible default statuses and their evolution; \u2013 application of an additional correction factor, known as \u201cFinal Settlement Component\u201d: this component is used as an add- on to the estimate recalibrated for the Danger Rate in order to consider the loss rates associated with positions not evolved to the Bad Loan status (Unlikely to pay or Past Due positions).
LGD is determined according to differentiated models, specialised by operating segment (Corporate, Retail SME, Retail,
Factoring, Leasing, Public Entities and Banks). As in the case of the PD, the models that have been adopted for the LGD of
the International Subsidiary Banks of the Group were developed by the banks themselves, extended by the Parent Company,
using local parameters where necessary or changed by the Parent Company, with adaptations to each international
subsidiary bank.
For the banks, the LGD calculation model partly diverges from the models developed for the other segments as the estimation
model used is based on the market price of debt instruments observed 30 days after the official date of default and relating to
a sample of defaulted banks from all over the world, acquired from an external provider. The model is completed by an
econometric estimate aimed at determining the most significant drivers, in accordance with the practice in use for the other
models, and a recalibration of the observed LGD levels on the bank\u2019s internal defaults.
Sovereign LGD is estimated by analysing historical recovery rates on sovereign defaults, split into five categories according to
income levels and other specific characteristics the individual countries.
The LGD Sovereign model is used solely for management purposes.
The calculation of the Exposure at Default (EAD) uses differentiated models, specialised by operating segment (Corporate,
Retail SME and Retail). Specifically, the methodology is based on data from the 12 months prior to the default event and
differs according to whether or not there is a margin available at the observation date. In any case, corrective factors are
applied in compliance with the regulatory requirements and in order to introduce a margin of conservatism on the estimates.
Regulatory parameters are currently used for the low default segments of the Banks and Public Entities and for the Leasing
and Factoring products of the Corporate Portfolio.
For the Group companies included in the roll out plan, the internal rating models (PD) and the EAD and LGD models are
subject to a level two control by the Validation function and a level three control by the Internal Audit Department. The control
functions produce annual reports for the Supervisory Authority on the compliance of the models with the supervisory
regulations, which also includes a verification on the deviations of the ex-ante estimates and the effective ex-post values.
These reports, approved by the Board of Directors of Intesa Sanpaolo, confirm the compliance to the regulatory
requirements.
The methodology for the estimation of the Expected Credit Loss (ECL), adopted for the determination of the impairment on
the credit exposures in accordance with IFRS 9, is implemented at individual transaction or securities tranche level, based on
the IRB modelling of the parameters of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD),
to which appropriate adjustments are made to ensure compliance with the requirements of the standard. With a view to
achieving convergence between the accounting and regulatory rules, while respecting their specific purposes, adjustments
have been made to the estimation model for accounting LGD, incorporating the provisions progressively introduced and
applied in the prudential models.
Portfolio
PD - Model Type
Status
Corporate
Default model
(Corporate)
FIRB authorised since December 2008,
AIRB LGD authorised since December
2010, EAD authorised since September
2017
(1)
Retail
Default model
(Retail)
IRB Retail authorised since September 2018
and IRB Mortgage since December 2010
(2)
Simulation models
(Specialised Lending)
AIRB authorised since June 2012
Institutions
Default model (Banks)
(4)
AIRB authorised since June 2017
Default model (Municipalities
and Provinces)
Shadow model (Regions)
(4)
AIRB authorised since June 2017
Default model
(Retail SME)
LGD - Model
Type
Workout model
(Retail)
Simulation models
(Specialised Lending)
Market model (Banks)
Workout model
(Municipalities,
Provinces, Regions)
Workout model
(Retail SME)
EAD - Model
Type
CCF/K factor model
(Bank products)
Regulatory parameters
(Leasing and Factoring)
CCF/K factor model
(Retail)
Regulatory parameters
(Specialised Lending)
Regulatory parameters
(Banks)
Regulatory parameters
(Municipalities,
Provinces, Regions)
IRB authorised since December 2012
(3)
Sovereign
Shadow model based on
agency rating
Used for management purposes only;
Standardised approach for reporting
purposes
Model based on
recovery rates
estimated by rating
agencies
Regulatory parameters
Expert-Based Model
(Non-Banking Fin. Inst.)
Used for management purposes only;
Standardised approach for reporting
purposes
Regulatory parameters
(Non-Banking Fin.
Inst.)
Regulatory parameters
(Non-Banking Fin. Inst.)
Workout model
(Bank products;
Leasing and
Factoring)
CCF/ K factor model
(Retail SME)
1) ISP authorised for FIRB from December 2008, for LGD AIRB from December 2010 and for EAD from 2017, Banca IMI (2012, merged by
incorporation into the Parent company since 2020), ISP Ireland (2010), VUB (2010), Intesa Sanpaolo Bank (2017), and ISP Luxembourg (2017).
From 2017, the Corporate model has also been used to calculate the risk on the Banking book equity portfolio with LGD 65%/90%.
2) VUB authorised from June 2012 for PD and LGD of Retail Mortgage models and from December 2022 in reference to PD-LGD-EAD models of Other
Retail.
3) VUB authorised from June 2014.
4) ISP and Banca IMI (merged by incorporation into the Parent company in 2020) authorised from 2017.
A detailed description of the methods adopted by the Group is provided in Part A \u2013 Section \u201cA.2 \u2013 Main financial statement
captions\u201d, in particular in the paragraph \u201cImpairment of assets\u201d, to which reference is made, and in relation to the specifics of
the current pandemic situation, in the Section \u201cRisks, uncertainties and impacts of the Russian/Ukrainian crisis\u201d in Part A -
Section 5 - Other Aspects.
More specifically, the measurement of the financial assets reflects the best estimate of the effects of future conditions and in
particular the economic conditions that affect the forward-looking PDs and LGDs. IFRS 9, also based on the guidance from
the international regulators, gives particular importance to information on future macroeconomic scenarios in which the Bank
may find itself and which clearly influence the situation of the debtors, with regard both to the \u201crisk\u201d of migration of exposures
to lower quality classes (and therefore concerning the staging) and to the recoverable amounts (and therefore concerning the
determination of the expected loss on the exposures). In terms of method, various possible alternative approaches designed
to take account of these elements have been analysed. Of the various alternatives considered, the Intesa Sanpaolo Group
has decided to adopt the \u201cMost likely scenario+Add-on\u201d approach. According to this approach, the macroeconomic
conditioning of PD and LGD is carried out through a baseline scenario (\u201cMost Likely\u201d, in line with the approach used for other
business purposes such as, for example, the budget and business plans) and then corrected with an Add-On to include any
differences compared to downside and upside scenarios. If the overall impact of the Add-On on the risk parameters is
positive, the decision has been made to neutralise the effect for both staging and ECL calculation purposes.
Upon the periodic update of the time series incorporated into the models for the forward-looking conditioning of the
parameters underlying the determination of the ECL, a refinement of the models was introduced to handle the discontinuity
generated in the relationship between the trends in default rates and the macro-economic variables, as a consequence of
extraordinary circumstances like those generated by the COVID-19 pandemic. Moreover, it is noted that, in re-estimating the
econometric relationships underlying the satellite models, in order to adequately consider the effects deriving from the energy
crisis, additional explanatory variables relating to energy prices were introduced and tested.
The effectiveness of the IFRS 9 models is monitored by the Validation function once a year through specific backtesting of the
risk parameters (staging criteria, PD, LGD and EAD models, and haircuts). In addition, in the event of significant updates, the
Validation function performs prior checks also in terms of model design. The results of the checks by the Validation function
are submitted to the competent managerial committees and model owner functions and are presented in the annual report on
the internal models used for management purposes, which is also sent to the Supervisor.
Macroeconomic scenario for forward-looking conditioning
For the purposes of forward-looking conditioning of the parameters for estimating the ECL \u2013 in accordance with the approach
described in Part A - Accounting Policies and in particular in the paragraph \u201cImpairment of assets\u201d \u2013 Intesa Sanpaolo\u2019s policy
involves the use of the macroeconomic scenario defined and updated by the Research Department.
The table shows the main macroeconomic scenario variables used to determine expected credit losses from a forward-
looking perspective, broken down by baseline, best-case and worst-case scenarios. These scenarios were applied in the
measurement of loans according to the \u201cMost-Likely scenario + Add-on\u201d model described above.
Baseline
Mild
Severe
2022
2023
2024
2025
2022
2023
2024
2025
2022
2023
2024
2025
Euro Area
Real GDP EUR (annual
change)
3.3%
0.1%
1.6%
1.8%
3.3%
0.7%
2.0%
2.3%
3.3%
-0.9%
-0.4%
1.9%
CPI EUR (annual change)
8.5%
7.7%
2.7%
1.9%
8.5%
8.0%
3.6%
2.2%
8.0%
8.7%
5.1%
1.5%
EurIRS 10Y
1.92
2.82
3.11
3.28
1.93
2.86
3.51
3.98
1.93
2.61
3.19
3.73
EUR/USD
1.05
1.07
1.11
1.13
1.05
0.99
1.05
1.09
1.05
0.99
1.04
1.09
Italy
Real GDP Italy (annual
change)
3.8%
0.6%
1.8%
1.2%
3.6%
0.9%
2.2%
1.8%
3.6%
-1.0%
-1.1%
0.4%
CPI Italy (annual change)
8.2%
6.8%
2.4%
1.3%
8.1%
7.2%
3.4%
2.2%
8.1%
13.3%
4.9%
2.3%
Residential Property Italy
(annual change)
5.1%
1.5%
1.5%
1.5%
5.1%
1.9%
1.6%
1.9%
5.1%
-1.2%
-3.1%
-1.7%
6-month BOT yield
0.5
2.7
2.9
2.6
0.5
2.7
3.4
3.5
0.5
2.4
2.9
3.0
10Y BTP yield
3.0
4.1
4.6
4.9
3.0
4.1
5.0
5.6
3.0
4.2
5.1
5.9
BTP-Bund Spread 10Y (basis
points)
187
201
190
179
187
200
184
173
187
242
232
230
Italian Unemployment (%)
8.2
8.5
8.2
8.1
8.2
8.5
8.1
7.9
8.2
8.8
9.4
10.0
Commodities
Natural gas price (\u20ac/MWh)
134
145
107
79
135
157
116
83
135
246
201
127
Oil price (BRENT)
100.8
93.0
87.0
82.0
100.8
93.0
90.5
84.2
100.8
92.3
83.4
79.4
USA
Real GDP US (annual change)
2.0%
0.3%
1.1%
2.4%
2.0%
1.1%
2.1%
2.4%
2.0%
-0.6%
0.9%
2.2%
US Unemployment (%)
3.7
4.5
4.5
3.9
3.7
4.3
4.0
3.5
3.7
4.7
4.7
4.2
Scenarios produced in December 2022 by the Research Department. Forecast data (estimates for 2022).
The main assumptions underlying the baseline forecast are founded on the assumption of a widespread slowdown in real
growth, due to factors such as rising energy costs in Europe, economic developments in China, and the impacts of monetary
tightening. Inflation is expected to fall in the advanced economies in 2023. However, core inflation may continue to rise until
the first quarter of 2023 and then slowly decline. High inflation and uncertainty in relation to energy supplies are expected to
cause a reduction in the GDP growth envisaged for the euro area in 2023, which will go into recession over the winter,
returning to positive growth from spring 2023 onwards. However, the recovery will be held back by monetary tightening and a
slowdown in the global economy throughout 2023, settling at an annual rate of 0.1%. With regard to interest rates, the peak of
the cycle may be reached by mid-2023. However, there is a significant risk that more monetary tightening, with negative
effects on the 2024-25 growth, will be necessary. Oil and energy (natural gas) prices are expected to remain high in 2023,
due to limited storage capacity and high uncertainty fuelled by persistent political and geopolitical risks, despite the likely
recession in North America and Europe and the slowdown in China.
For Italy, inflation may have peaked at the end of 2022, but the fall could be slow and the annual average will remain very
high even in 2023. Inflation may return to just above 2% only from the end of 2024, with a true \u201cnormalisation\u201d of the inflation
scenario only expected from 2025.
GDP growth is expected to slow significantly in 2023, to 0.6%, after an estimated 3.8% in 2022. The slowdown in the
economic scenario forecast for 2023 is mainly attributable to the inflationary surge following the energy crisis and the
monetary tightening decided by the major central banks at global level in response to the shock. The effects of these factors
do not yet appear to have fully worked their way through the economy, which is why it will be difficult to avoid a contraction of
GDP in early 2023. However, the recent fall from the spikes in the wholesale prices of energy commodities will make the
effects on household income and business margins less dramatic, enabling the assumption of a recovery in economic activity
from next spring, albeit at a moderate pace. A stronger re-acceleration of 1.8% is expected in 2024.
The component of domestic demand that is expected to be most affected by the effects of the inflation shock will be
consumption of goods (durable and non-durable), which is predicted to be essentially stagnant on average for 2023, while
expenditure on services may maintain positive growth due to the residual effect of the normalisation of lifestyles following the
restrictions imposed during the pandemic. Investment is also expected to slow down in 2023, in the wake of the effects of
rising commodity prices on company profit margins, the tightening of financial conditions, the gradual fading of the impetus
from incentives for building renovations, and the continued high uncertainty surrounding the scenario. The hardest hit
component will be investment in construction, due to the gradual phasing out of tax incentives, as well as the effects of higher
production costs on supply and the expected rise in mortgage rates on demand.
The effects of the NRRP should be felt from 2023 onwards: the impact on the GDP growth rate is expected to be 0.5% for
each year until the end of the period (2023-26).
As a result of the continuing excess of demand for labour over supply, unemployment is expected to remain within moderate
levels, despite an economic slowdown.
For real estate, the rise in prices is being driven by the forecast of higher inflation, which is compensating for the unfavourable
trend in financial conditions and real income. The levels of the BTP-Bund spread are also reflected in the estimation horizon
starting from the fall seen at the close of 2022.
As described in Part A - Accounting Policies, and in particular in the section \u201cImpairment of assets\u201d, the methodology adopted
by the Group includes taking into account alternative scenarios (best-case/worst-case), which mainly use external information
(among others, the minimum and maximum forecasts of a fundamental variable such as GDP based on data from Consensus
Economics).
The highest GDP growth forecasts in the Consensus Economics survey published in December 2022 for several advanced
economies were identified for the favourable scenario, and all the private consumption and fixed investment trends of the
baseline scenario were adjusted to provide an annual average GDP growth profile identical to those forecasts, and the other
variables were recalculated accordingly. These assumptions yield a scenario characterised by higher real growth rates, higher
inflation, a lower unemployment rate and more robust growth in stock indices and real estate prices compared to the baseline
scenario, under the assumption that central banks will adopt a more aggressive monetary policy in response to economic
signals indicating a lower than expected slowdown in order to contain inflationary pressures. In any event, the forecast
outcomes yielded by the favourable scenario on the performance of the most representative variables are not significantly
different from those of the baseline forecasts.
The \u201cadverse\u201d scenario adopted by the Group was, initially, constructed according to the methodology envisaged by the
internal policy, and therefore based on the lowest GDP growth forecasts in the Consensus Economics survey published in
December 2022 for the main advanced economies. The private consumption and fixed investment trends of the baseline
scenario were adjusted to yield GDP growth in line with those forecasts, and a negative shock was also applied to the
performance of stock market indices and real estate prices. Based on these results, in the construction of the worst-case
scenario, the Group also took the decision to take into account the more conservative assumptions considered in the
downside scenario included in the \u201cMacroeconomic projections for the euro area\u201d published by the ECB on 15 December
2022. The uncertainty characterising the experts\u2019 projections is still high and a significant risk for the outlook for the euro area
\u2013 according to the ECB \u2013 relates to the possibility of more severe disruptions in European energy supplies, leading to further
spikes in energy prices and production cuts. In the assumptions adopted by the ECB, the downside scenario reflects this risk
and points to higher inflation rates than in the baseline scenario in 2023 and 2024, as energy prices spike, with these only
later dropping below the baseline scenario, when supply shocks unwind and the lagged impact of adverse demand shocks
predominates.
To take this more drastic assumption into account, a shock to the European natural gas market, calibrated to that predicted in
the Eurosystem\u2019s adverse scenario for this variable, was added to the adverse forecast prepared by the Group, through a
very significant increase in gas prices compared to the baseline scenario forecasts in both 2023 and 2024. The effects on
growth were aggravated to capture possible rationing. These assumptions result in a much more aggressive inflation trend
than in the baseline scenario and severe impacts on Italian and euro area GDP, with two years of fall in GDP. Indeed, Italy\u2019s
GDP growth shows a negative deviation between the baseline and worst-case scenarios, increasing until 2024 and becoming
smaller in 2025. The cumulative difference for the period 2022-2025 is -5.5%. The decline in real growth is reflected in the
unemployment rate, which is 1.9 percentage points above the baseline scenario in the final year. It is assumed that, in the
event of critical inflationary pressures, the ECB would prioritise price stability, accepting the prospect of a period of even
intense GDP decline. The deviation of ECB rates from the baseline scenario reflects excessive inflation, which dominates
over the separate reduction in growth. The BTP-Bund spread is higher than the baseline scenario over the entire forecast
period.
With regard to the impact of adopting the above scenario in the estimate of the ECL for the measurement of performing loans,
you are reminded that, starting from the Interim Statement as at 31 March, following the outbreak of the Russia/Ukraine
conflict, the Group \u2013 in order to take proper account of the gradually observed and expected effects of the macroeconomic
situation \u2013 has incorporated systematic updates (on a quarterly basis) of the baseline forecasts and alternative scenarios on
the \u201cCore\u201d scope, namely the Parent Company and the other Italian entities, as well as Intesa Sanpaolo Luxembourg and
Intesa Sanpaolo Ireland. As at 31 December 2022, impacts were mainly generated by the updated forecasts for the adverse
scenario.
At the end of the year, the banks of the International Subsidiary Banks Division also updated their estimates on the basis of
the forecast scenarios for their geographical scope.
The overall impact of the macro-economic scenario on the ECL of performing loans during the year was around 300 million
euro (of which around 140 million euro in the fourth quarter, and, for the latter, it was estimated that around half of this impact
resulted from the prudent decision to adjust the adverse scenario assumptions to those adopted by the ECB).
ECL sensitivity analysis
The ECL, calculated in accordance with IFRS 9, was subject to sensitivity analysis aimed at analysing its variability with
respect to the individual alternative scenarios in accordance with the ESMA Recommendations (\u201cReport on the application of
the IFRS 7 and IFRS 9 requirements regarding banks\u2019 expected credit losses \u2013 ECL\u201d of 15 December 2021).
That analysis was conducted on a performing loan portfolio (Stage 1 and Stage 2) relating to the scope representing the
Group (which includes the Parent Company and the Banks in the IMI C&IB Division that represent around 90% of the Group\u2019s
total exposure).
You are reminded that, according to the approach adopted by the Group to estimate the ECL, the parameters for calculating it
are determined on the basis of the Most-Likely scenario and an Add-on calculated based on the distance between the
baseline scenario and alternative scenarios. The sensitivity analysis is determined using the assumptions adopted for the
alternative scenarios (best-case and worst-case), produced internally by the Research Department, each weighted at 100%.
This result is then compared with the ECL calculated with the Most-Likely plus Add-On scenario.
As highlighted in the paragraphs above, there is a big distance between the worst-case and best-case scenarios, while the
latter is very close to the baseline forecast. As a result, the sensitivity of the portfolio to the worst-case scenario is already
essentially factored into the ECL as at 31 December 2022 in the model used, as described above, in addition to the overlays
illustrated in the paragraph below. Therefore, the application of the worst-case scenario would result in the sliding into Stage 2
of 1.5 billion euro of exposures, a slight increase in the ECL and a substantially unchanged coverage ratio. On the other hand,
the sensitivity of the portfolio to the best-case scenario would see a decrease of 240 million euro in the ECL, with a return to
Stage 1 of 4.9 billion euro of exposures. The coverage ratio for performing exposures would decrease by 5 bps.
Management overlays
During 2022, the Group, in applying the estimation methods for the calculation of the ECL, in compliance with IFRS 9, added
several more prudent factors in consideration of the situation of high uncertainty generated by the continuation of the
Russia/Ukraine conflict. Examples include the systematic updating of macroeconomic forecasts, the actions described in the
paragraph on the \u201cadverse\u201d scenario, and the updating of the explanatory macroeconomic variables used by the satellite
models for the estimates of the future default rates \u2013 in which the choice of energy cost variables was favoured on the basis of
a judgement sensitivity influenced by the current situation. That said, the ECL estimates are based on forward-looking models
that use historical observations of the relationships between macroeconomic variables and default rates. The \u201crare\u201d scenarios,
particularly those not previously seen, are very difficult to capture in the modelling process and it is essentially impossible to
produce forecasts for specific portfolio risks in such circumstances.
In this context, the Bank \u2013 as also reiterated by the standard setters in the context of the pandemic crisis \u2013 must take into
account the fact that, as a result of the uncertainties presented by the forecast scenarios and the estimation characteristics
adopted, which are strongly anchored to the long-term observed relationships, the methodologies used may not be fully
adequate in the current situation. The main area of uncertainty underlying the most recent forecast scenarios is the
occurrence of major supply shocks in the gas market, triggered by a worsening of the geopolitical crisis, and the ability to
accurately forecast their effects on the economic and financial systems in the presence of unprecedented conditions (strong
dependence of the European economy on this energy source).
These considerations supported the Bank\u2019s decision to adopt post-model adjustments, increasing the ECL on a managerial
basis, in order to incorporate a suitable estimate of the uncertainties relating to the measurement of performing loans. This
choice was introduced during the year and was reinforced in the fourth quarter in order to adequately account for potential
vulnerabilities not captured by the models used, from a forward-looking perspective, given the current situation of increased
uncertainty and the limited availability of reasonable and supportable forward-looking information. At the same time, as
already stated in paragraph \u201c1.2. Impacts from the COVID-19 pandemic\u201d, the conditions were also fulfilled for considering that
the management overlays on the portfolios subject to moratoria during the pandemic were no longer necessary. For the
purposes of the decisions regarding updates and changes and additions to the results of the models, as in the period of the
pandemic, the Group has adopted enhanced governance through the decisions of the Credit Risk and Pillar 2 Internal Models
Committee and also taken into account the references to the relevant guidance issued by the standard setters and
regulators
103
.
Details are provided below of the main choices adopted by the Group in 2022 in relation to the above, while details of the
credit risk aspects more closely related to the Russia/Ukraine crisis are provided in the specific paragraph.
As already stated, in 2022, as the country emerged from the health emergency and health restrictions were relaxed, the
uncertainties specifically related to the pandemic eased and there was no noticeable increase in credit risk on exposures that
had been subject to moratoria. The latter have now all returned to resumption of payments, for a considerable portion already
some time ago, and continue to record reductions in the exposures and full repayments.
The elements of vulnerability of the exposures subject to moratorium measures considered for the purposes of the Financial
Statements as at 31 December 2021 (represented by both overlays incorporated into the satellite models and extraordinary
triggers for sliding into Stage 2) had already been re-estimated starting from March, still maintaining suitable prudence, but
considering both the substantial normalisation of forbearance measures and the positive evidence from the set of exposures
with resumption of payments that has already begun. During the next two quarters, although the observations regarding the
evolution of the credit risk parameters remained satisfactory, it was decided to continue the observation until the end of 2022
and to keep the overlay incorporated into the satellite model unchanged, while returns to Stage 1 were recorded in relation to
the increasingly residual portfolios that had gradually resumed payments (subject to the extraordinary trigger for sliding into
Stage 2). In light of the additional observations, which are described in paragraph \u201c1.2. Impacts from the COVID-19
pandemic\u201d, the remaining management overlays were released in the fourth quarter.
At the same time, since the Russia/Ukraine geopolitical crisis, uncertainties about the economic outlook have gradually
increased, as also discussed with regard to the macroeconomic scenario. In particular, a specific risk factor has emerged (the
energy crisis brought about in the context of the ongoing geopolitical crisis) accompanied by the prospects of the effects of
rising inflation, rising costs for businesses and rising interest rates. In the fourth quarter, economic activity weakened, both
due to the slackening of the recovery of added value for services, which had already returned to pre-pandemic values in the
summer, and due to the decline in industrial production and the slowdown in household spending, despite measures
implemented to support disposable income in a situation of high inflation.
From the first quarter of 2022, management overlays were added in order to introduce increased adjustments of performing
loans related to the effects of the higher sector-specific vulnerability companies were exposed to. In the third quarter, with the
greater availability of more specific forecast scenarios, also at the micro-sector level, the Bank considered that the increases
already recognised were still appropriate. At the same time, the allocation was redefined for the previously applied
management overlays by sector-specific vulnerability. Specifically, the analyses by the CRO Area led to the adoption of a
post-model adjustment, i.e. an increase in the ECL, which was applied in a more targeted manner to all counterparties
belonging to micro-sectors with negative sector performance or particularly exposed to energy cost risk, as defined by the
sector risk management framework developed by the CRO and CLO Areas and by the Research Department with the support
of the business divisions and recently adopted by the Bank for the granting, management and monitoring of credit. This
framework duly takes into account the micro-sector forecasts and their outlooks, which are also systematically monitored and
calibrated based on the experience of the Bank\u2019s business and credit risk governance structures.
The post-model adjustment adopted replaced the previous method of application, which, although timely in terms of adoption,
was mainly based on an increase in the estimate of future default rates derived from the IFRS 9 models for macro-aggregates
potentially more exposed to the effects of persistent inflationary pressures on energy products and commodities, but without
being able to introduce particular differentiations within them (in particular, the Manufacturing and Transport macro-
aggregates had been considered for companies). In order to introduce a more targeted and granular level of intervention, in
103
See for example: ECB letter of 4 December 2020 \u201cIdentification and measurement of credit risk in the context of the coronavirus (COVID-19)
pandemic\u201d, IASB document \u201cIFRS 9 and COVID-19 \u2013 Accounting for expected credit losses applying IFRS 9 Financial Instruments in the light of current
uncertainty resulting from the COVID-19 pandemic\u201d of 27 March 2020 and ECB Speech \u201cAn evolving supervisory response to the pandemic\u201d of
1 October 2020.
the subsequent quarters extraordinary triggers for sliding into Stage 2 were introduced for counterparties not already
classified as such by the staging allocation methods, when they belong to certain micro-sectors identified with negative sector
performance and with medium/high risk profiles.
In the fourth quarter, in light of the macroeconomic situation described above and the uncertainties associated with it, it was
decided to reinforce the adjustments of the ECL estimates compared to those already made in the previous quarters. In
particular, an additional ECL value that expresses this uncertainty was initially quantified at the overall portfolio level. To this
end, a simulation was conducted assuming the \u201cadverse\u201d scenario \u2013 instead of the baseline scenario \u2013 and on that basis
quantifying the difference in adjustments generated by the performing portfolio identifiable up to the end of 2023. This
exercise resulted in a theoretical impact that was taken as reference for the determination of the total amount of the post-
model adjustments to be applied to the ECL of the Core scope as at 31 December.
The post-model adjustment is applied to the modelling result to estimate the ECL through a percentage increase in its size
without any effect on the staging allocation. Therefore, when applied to Stage 2 or higher risk positions, it has a larger effect
on the ECL in absolute terms. This approach adds prudential elements to those already factored in with the application of the
macroeconomic scenario for the purposes of forward-looking conditioning, as described above.
With regard to the application of the post-model adjustments in the 2022 Financial Statements, the following is noted:
- for business sectors particularly exposed to risks arising from the macroeconomic outlook (sectors with negative
performance or energy-intensive sectors), the adjustments have been revised with respect to the third quarter in order to
take into account the outcomes of the most recent Sector Working Group, as well as refinements to make the
identification of the scope more consistent with the taxonomies used in credit management and reporting. It was also
decided to limit the scope of application to Corporate/SME counterparties of the BdT Division, as these are portfolios for
which it is considered that the expected economic slowdown may lead to lower resilience and greater difficulties than for
Large Corporate counterparties. The scope of application of this overlay has also been defined, taking into account not
only the sector-specific vulnerability but also the risk level of the counterparties, measured through their rating;
- a post-model adjustment has been introduced in the Commercial Real Estate scope in order to add a prudent margin to
the assessment of the counterparties operating in the sector and with high risk;
- a post-model adjustment has also been introduced in the Retail and Retail SME segments, which are predominantly
composed of consumer households and SMEs. This was aimed at capturing the potential negative effects on their future
risk levels due to rising interest rates and lower disposable income as a result of high inflation. Consequently, the scope
of application \u2013 which is within the BdT Division \u2013 has been defined for counterparties at medium or higher risk.
The overall portfolio subject to management overlay amounts to around 70 billion euro.
The banks of the International Subsidiary Banks Division, in a large number of cases, have also adopted prudent margins,
through management overlays, based on specific assessments of the current and future situation and the characteristics of
their portfolios.
Overall, the adjustment allowances for performing exposures as at 31 December included prudential elements amounting to
785 million euro, in addition to the impact of around 70 million euro described in the paragraph above on the macroeconomic
scenario, due to the consideration of assumptions in line with the ECB for the \u201cadverse\u201d scenario.
2.4. Credit risk mitigation techniques
During the credit granting and managing process, the acquisition of mitigating factors is encouraged for counterparties with
non-investment grade ratings or for certain types of medium/long-term transactions.
The mitigating factors that have the greatest impact include pledges of financial assets and residential mortgages. Other
forms of risk mitigation are pledges on non-financial assets and non-residential mortgages.
The strength of the personal guarantees issued by rated parties, typically banks/insurance companies, Credit Guarantee
Consortia and corporations, is instead assessed on the basis of the type of guarantee and guarantor\u2019s credit quality.
Detailed processes govern the material acquisition of the individual collateral and guarantees, identifying the structure
responsible as well as the methods for their correct completion, for archiving the documentation and for the complete and
timely recording of the related information in the applications.
The set of internal regulations and organisational and procedural controls is aimed at ensuring that:
\u2013 all the requirements for the validity and effectiveness of credit protection are satisfied;
\u2013 a standard contractual framework is defined for guarantees and collateral of general and current use, accompanied by
full instructions for its use;
\u2013 the methods for approving collateral and guarantee documents deviating from the standard by structures other than
those in charge of commercial relations with the customer are identified.
The guidelines for the management of collateral and guarantees are the same for the entire Group. The management of
collateral and guarantees received for the Parent Company and the Italian subsidiaries is carried out on a single platform,
which is integrated with the register of assets and the portal that manages the immovable property valuations.
The granting of credit with the acquisition of collateral is subject to internal rules and processes \u2013 for the valuation of the
asset, the acquisition of the collateral and the control of its value. The enforcement of the collateral is handled by specialist
departments, which are responsible for credit recovery.
In any case, the presence of collateral does not grant exemption from an overall assessment of the credit risk, focused mainly
on the borrower's ability to meet the obligations assumed, irrespective of the associated collateral.
The assessment of the pledged collateral is based on the actual value, namely the market value for financial instruments
listed on a regulated market, or, otherwise, the estimated realisable value. The resulting value is multiplied by the haircut
percentage rates, differentiated according to the financial instruments accepted as collateral.
For real-estate collateral, the prudential market value is considered; for properties under construction, the construction cost is
considered, net of prudential haircuts differentiated according to the intended use of the property.
Assets are appraised by internal and external appraisers. The external appraisers are included in a special list of
professionals accredited on the basis of an individual verification of their capabilities, professionalism and experience. The
valuation of residential properties used as collateral for mortgage loans to private individuals is mainly assigned to specialised
companies. The work of the appraisers is monitored on an ongoing basis, by means of statistical verifications and sample
checks carried out centrally.
The appraisers are required to produce estimates on the basis of standardised appraisal reports, differentiated according to
the valuation method to be applied and the characteristics of the asset, in accordance with the \u201cRules on immovable property
valuations for credit purposes\u201d drawn up by the Bank. The internal rules are consistent with the \u201cGuidelines for the valuation of
real estate properties securing credit exposures\u201d promoted by the Italian Banking Association and with the European
Valuation Standards.
Immovable property valuations are managed through a specific integrated platform covering the entire appraisal phase,
ensuring that assignments are properly awarded, on an independent basis and according to objective criteria, the workflow is
thoroughly monitored, valuation standards are correctly applied and all information and documents regarding immovable
properties are recorded.
The market value of the immovable property collateral is periodically recalculated through various statistical valuation
methods, that make use of prices/coefficients provided by an external supplier with proven skills and a solid reputation for
surveying and measuring the market prices of Italian real-estate assets.
Asset value is constantly monitored. The appraisers carry out inspections and verify the work progress for properties under
construction. The valuation is duly updated in the event of restriction or splitting mortgage, of damage to the property,
significant impairment losses reported by market indicators used to monitor fair value and, in any case, according to the due
dates established for significant exposures, or when there are immovable properties securing non-performing loans.
In order to limit the risks of absence or termination of the protection, specific safeguards are in place, including: restoration of
a pledge when the assets decrease below their initial value or, for immovable property collateral, the obligation of insurance
cover against fire damage and the presence of adequate monitoring of the property\u2019s value. There is also an \u201cumbrella\u201d
insurance policy that, with limited exceptions, covers damages on the entire portfolio of properties mortgaged as collateral for
the loans granted. Collateral and guarantees are subject to accurate, regular control using a specific application, the CRM
engine, in which a series of tests have been implemented to confirm the effective compliance with the requirements set by
prudential supervision regulations.
The support application verifies whether the collateral and guarantees received are eligible with regard to the methods
permitted by the regulations in relation to the various categories of collateral and guarantees for calculating capital
requirements (Standardised and Internal Rating Based). Based on the specifics of each category, the eligibility results are
defined at the level of individual guarantee for unfunded guarantees (usually personal guarantees) or, for collateral, for each
asset or financial instrument.
The Bank uses two integrated asset and guarantee management systems (PGA - Active Guarantees Portal and ABS -
System Assets Archive) in order to improve the efficiency of collateral management. This has been accompanied by the
development of a specific system for managing bad loans, to track the main legal actions and particularly those relating to the
enforcement of immovable property collateral (EPC - Ex Parte Creditoris).
In order to mitigate the counterparty risk associated with OTC (i.e., unregulated) derivatives and SFTs (Securities Financing
Transactions, i.e. securities lending and repurchase agreements), the Group uses bilateral netting arrangements that allow
the netting of claims and obligations if a counterparty defaults.
This is achieved by entering into International Swap Derivatives Association (ISDA) and International Securities Market
Association/Public Securities Association (ISMA/PSA) agreements, which also reduce the absorption of regulatory capital in
accordance with supervisory provisions.
In addition, the Group has collateral exchange arrangements in place, mainly with daily frequency, to hedge OTC derivatives
transactions (Credit Support Annexes), also due to the margin requirements for non-centrally cleared derivatives, established
by the EMIR; also for SFTs, the Bank implements daily margining arrangements (GMRAs - Global Master Repurchase
Agreements and GMSLAs - Global Master Securities Lending Agreements).
To mitigate the exposure to counterparties, mainly corporate customers, and the volatility arising from credit adjustments to
derivative valuations (CVAs), the Bank also buys protection through credit default swaps, both on individual companies and
credit indices.
In 2022, the Parent Company continued its activities relating to the \u201cGARC\u201d (Active Credit Risk Management) Project,
involving a platform for monitoring credit risk of performing portfolios. The initiative involves the systematic acquisition of both
personal guarantees and collateral to support lending to companies.
The guarantees obtained provide hedging of default risk (past due, unlikely to pay and bad loan) of granular portfolios and
freeing up of economic and regulatory capital, as envisaged by the current Supervisory Regulations on the matter (including
Regulation (EU) 575/2013 and Bank of Italy Circular 285/2013).
During the year \u2013 again as part of the GARC Project \u2013 with regard to operations with the Guarantee Fund for SMEs, the ramp-
up was completed of four tranched cover transactions on the junior risk of portfolios of newly disbursed loans in support of
businesses adversely affected by the COVID-19 emergency.
For details of the transactions carried out in 2022 under the GARC Project, see the description provided in paragraph C.
Securitisations of this chapter.
In order to optimise capital absorption, transactions to hedge the risk of expropriation of the compulsory and unrestricted
reserves of the ISP Group banks operating in Serbia, Egypt and Moldova were also renewed and the hedging for the bank
operating in Albania was increased.
During the year, with the aim of improving the overall risk/return profile of the loan portfolios, also in terms of capital
optimisation, Intesa Sanpaolo carried out a securitisation on a portfolio of performing loans originating from leases, with
significant risk transfer, for a total gross amount of around 3.7 billion euro.
3. NON-PERFORMING CREDIT EXPOSURES
3.1 Management strategies and policies
On 31 March 2022, the Board of Directors approved the revision of the Group NPL Plan, carried out on the basis of the ECB
Guidance to banks on non-performing loans, which was sent to the Supervisor on 4 April 2022. The 2022-2025 NPL Plan is
consistent with both the 2022-2025 Business Plan, approved by the Board of Directors in February 2022, and the Risk
Appetite Framework, and takes into account the observations and recommendations of the Supervisory Authority.
The Group NPL Plan is made up of a main document (2022-2025 Group NPL Plan) which includes a summary of the
initiatives detailed in the \u201cOperational Plans\u201d (drawn up at Business Owner level, which include the targets for reducing the
stock of non-performing loans, the detailed measures and the enablers, as well as the related costs and investments required
to achieve the targets set) and the projections underlying the NPL Plan, with the granular level and in accordance with the
requirements established by the ECB.
In the 2022-2025 Business Plan, the Group intends to pursue a structural de-risking strategy, which was mostly launched
during the last Business Plan, placing it among the best in Europe in terms of non-performing loan ratio and stock (Zero-NPL
Bank) and generating a net drop in the cost of risk. Indeed, the latter will always be maintained at a conservative level, due to
the extensive reserves of provisions on loans and ongoing prudent credit management. The deleveraging will be supported by
the establishment of additional select partnerships and targeted disposals of portfolios.
At the end of 2022, non-performing loans before adjustments amounted to 10.6 billion euro bringing the ratio of non-
performing loans to total loans to 2.3% gross and 1.2% net, with a cost of risk of 70 basis points (30 basis points when
excluding the adjustments for the exposure to Russia and Ukraine and the additional adjustments for overlays and to favour
de-risking, net of the release of generic provisions set aside in 2020 for the expected impacts of COVID-19). Based on the
EBA methodology, the NPL to total loan ratio stood at 1.9% gross and 1% net.
Since November 2019, the Intesa Sanpaolo Group has adopted the New Definition of Default set out in the EBA Guidelines
2016/07 of 18/01/2017 on the application of the definition of default under Article 178 of Regulation 575/2013 (CRR), and in
line with the additional clarifications introduced by Bank of Italy Circular 272. That definition of non-performing loans also
coincides with the definition of \u201cimpaired\u201d financial assets contained in IFRS 9, with the consequent recognition of all non-
performing loans within Stage 3.
Intesa Sanpaolo Group adopts a \u201cper borrower\u201d approach in identifying non-performing exposures. Accordingly, the entire
counterparty with credit relationship is assessed and subsequently classified, rather than the individual credit lines granted to
that counterparty.
Based on the regulatory framework, according to the rules of the Bank of Italy, in line with IAS/IFRS and European
Supervisory Regulations, supplemented by internal implementing rules, non-performing financial assets are classified into one
of the three below mentioned categories, based on their level of severity:
\u2013 non-performing past due exposures: this category includes on-balance sheet exposures, other than those classified as
bad loans or unlikely to pay that, as at the reporting date, are past due or overdrawn by over 90 days on a continuous
basis. The total exposure to a debtor must be recognised as Past Due if, at the reference reporting date, the amount of
the principal, interest and/or fees not paid when due exceeds both of the following thresholds (hereinafter, collectively,
the \"Relevance Thresholds\"):
o the absolute limit of 100 euro for retail exposures and of 500 euro for non-retail exposures (the \"Absolute
Threshold\"), to be compared with the total amount past due from the borrower;
o the relative limit of 1%, to be compared with the ratio of the total amount past due to the total amount of all on-
balance sheet exposures to the same borrower (the \"Relative Threshold\u201d);
\u2013 unlikely to pay: exposures for which \u2013 according to the judgement of the creditor bank \u2013 full repayment is deemed
unlikely (in terms of capital or interest), without considering recourse to actions such as enforcement of
collateral/guarantees. This assessment is conducted regardless of the presence of any amounts (or instalments) due and
unpaid. As the assessment of unlikelihood of repayment is at the discretion of the Bank, it is not necessary to await an
explicit symptom of anomaly (non-repayment), when there are elements that imply a risk of non-compliance by the
borrower (for example, a crisis in the industrial sector in which the borrower operates). The overall on- and off-balance
sheet exposures toward the same borrower in said situation is therefore classified under the category \"Unlikely To Pay\"
(unless the conditions for classification of the borrower among bad loans exist). Loans classified as \"Unlikely To Pay\"
should include exposures to issuers who have not regularly honoured their repayment obligations (in terms of capital or
interest) relating to listed debt securities, unless they meet the conditions for classification as bad loans. To this end the
\u201cgrace period\u201d established by the contract is recognised or, in its absence, the period recognised by the market listing the
security.
The Intesa Sanpaolo Group Rules have also provided for a further classification within \u201cunlikely to pay\u201d exposures,
identified as \u201cforborne unlikely to pay\u201d, which may include counterparties that have at least one exposure subject to
forbearance measures that are regularly respected or remain in the state of risk pending the start of the normally
imposed cure period (minimum of 12 months);
\u2013 bad loans: on- and off-balance sheet exposures to borrowers in a state of insolvency (even when not recognised in a
court of law) or in an essentially similar situation, regardless of any loss forecasts made by the Bank. This is irrespective,
therefore, of whether any collateral or guarantees have been established to cover the exposures. Exposures whose
anomalous situation may be attributed to Country risk are excluded from this category.
The type \u201cexposures subject to concessions \u2013 forbearance\u201d has also been established. These are exposures subject to
renegotiation and/or refinancing due to financial difficulties (evident or in the process of becoming evident) of the debtor,
which effectively constitute a subgroup of both non-performing exposures (non-performing exposures with forbearance
measures) and performing exposures (other forborne exposures).
Non-performing exposures with forbearance measures do not represent a separate category of non-performing assets, rather,
they are a sub-set of the above categories of non-performing assets.
Non-performing assets are subject to an assessment process resulting in the calculation of the expected loss for uniform
categories (identified based on the risk status, duration of risk status and significance of the underlying exposure) and the
allocation of the impairment adjustment for each position.
Non-performing loans are measured using two methods:
\u2013 analytical-statistical measurement: for exposures equal to or lower than certain thresholds, and for all non-performing
past-due exposures, based on the use of specific LGD grids;
\u2013 specific analytical measurement: for exposures above certain thresholds based on write-down estimates defined by the
relationship manager, following analyses and valuations based on pre-established criteria.
In addition to the assessment component determined through statistical valuation models or through individual expert
evaluation, a component is calculated to take into account the evolution of the current operational variables, the future
macroeconomic scenarios, the incremental risk of the counterparty as long as it remains in the specific risk status for unlikely-
to-pay exposures (vintage), as well as the sales prospects if present.
The assessment of non-performing positions classified as assets held for sale was carried out based on the expected sales
prices, less their costs to sell, supported by fairness opinions.
The assessment methods for non-performing loans are described in detail in Part A \u2013 Section \u201cA.2 \u2013 Main financial statement
captions\u201d and in particular in the paragraph \u201cImpairment of non-performing financial assets\u201d, to which reference is made.
The assessments are carried out upon classification of the exposures as non-performing and are reviewed periodically.
The assessment of the loans is also reviewed whenever a new event occurs that could affect the prospects for recovery (e.g.
change in the value of collateral, developments in ongoing litigation, etc.).
In order to timely identify such events, the information set relative to borrowers and guarantors is periodically monitored and
the development of out-of-court agreements and the various phases of the judicial procedures under way are constantly
monitored.
The management of the Group\u2019s non-performing loans may be directly carried out by the internal organisational structures or
by/with external partners granted appropriate mandates (outsourcers), for which the CLO Area performs a supervisory role in
the management of stocks and flows outsourced and acts as an interface for the approvals beyond the limits of the powers
delegated to them and for administrative, technical and operational activities envisaged in the processes of interaction with
the outsourcers. The internal organisational structures are identified, on the basis of pre-determined relevance thresholds, as
the local organisational units (at regional level) that perform specialist activities, or within the Head Office Departments, which
are also responsible for the overall management and coordination of these matters.
The classification of positions to non-performing is performed on proposal of both territorial structures, owners of the
commercial relationship, or of specialised central and local territorial structures in charge of the monitoring and recovery of
non-performing loans. Classification may also be performed through automatic mechanisms when predefined objective
default conditions arise. This refers, for example, to past-due loans continuously above certain thresholds for certain periods
and forborne performing positions (performing forborne positions originating from non-performing forborne positions) that
have not yet completed their 24-month probation period, if they meet the conditions envisaged by the applicable regulations
for their reallocation to non-performing loans, based on the verification of objective parameters and, specifically, for
transactions already designated as forborne, so-called reiteration (i.e. the granting of a further forbearance measure) and/or
continuously over 30 days past due above certain thresholds, and transactions subject to distressed restructuring with a loss
exceeding 1%.
Furthermore, automatic mechanisms detect any mismatches, thereby ensuring that material non-performing loans to
counterparties shared between the Group\u2019s various entities are subject to the required uniform convergence of management
decisions. Materiality is represented by exceeding a pre-established warning threshold for loans classified as at the greatest
risk, with respect to the overall exposure.
Automatic mechanisms within the system also ensure that positions are allocated to the risk status most representative of
their creditworthiness (bad loans excluded) as material default continues.
The return to performing status of non-performing exposures is governed by the Supervisory Authority and specific internal
regulations, and takes place on the proposal of the Structures responsible for their management, upon verification that the
critical conditions or state of default no longer exist.
Non-performing Past Due exposures and Unlikely To Pay exposures, not subject to forbearance measures must continue to
be classified as such for at least 3 months after they cease to meet the requirements for being classified as such. During the
probation period the counterparty\u2019s conduct must be assessed in light of its financial situation (in particular, by verifying the
absence of amounts past due exceeding the Relevance Thresholds).
For counterparties classified as Forborne Unlikely-to-Pay, the application of the cure period of at least 12 months shall prevail.
At the end of this period, the position may be reclassified as performing, provided that there are no past due exposures of the
borrower and the borrower has repaid a significant amount of the principal and interest and, more generally, the criteria for the
counterparties returning to performing status are met.
Exposures classified as Past Due return automatically to performing when the 90-day probation period has passed. The same
mechanism is applied to exposures of moderate amounts previously automatically classified as Unlikely To Pay when
automatic mechanisms detect that the conditions that triggered the classification no longer apply.
The Internal Validation and Controls Head Office Department of the Chief Risk Officer Governance Area carries out II level
controls on single counterparties in the various statuses of non-performing loan, randomly selected mainly with risk-based
criteria in order to verify their proper classification and provisioning, as well as the adequacy of the management and recovery
processes.
3.2 Write-offs
Lastly, with regard to non-performing loans, it is highlighted that the Intesa Sanpaolo Group uses the \u2013 full or partial \u2013 write-
off/derecognition of unrecoverable accounting positions and, in the following cases, the consequent allocation to loss of the
remainder that has not yet been adjusted:
\u2013 uncollectability of the debt, as a result of definite and precise elements (such as, for example, untraceability and
indigence of the debtor, lack of recovery from realisation of securities and real estate, negative foreclosures, bankruptcy
proceedings closed with no full compensation for the Bank, if there are no further guarantees that can be enforced etc.);
\u2013 disposal of the loan;
\u2013 waiver of the credit claim, due to the unilateral cancellation of the debt or residual amount as a result of
settlement agreements;
\u2013 no waiver of the credit claim. With regard to the full or partial write-offs without waiver of the credit claim, in order to avoid
maintaining loans on the balance sheet that have a very low possibility of recovery, despite continuing to be managed by
the recovery structures, they are fully or partially written off due to uncollectability even if the legal proceedings have not
been closed. The write-off can only involve the portion of the loan covered by provisions and, therefore, each loan can
only be written off up to the amount of its net book value. Therefore, on a periodic basis, the Group identifies the bad loan
portfolios to be subject to total or partial write-offs with the following macro-characteristics:
o percentage cover of 100% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >1 year;
o percentage cover of >95% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >5 years or >8
years, respectively, for non-mortgage and mortgage loans.
Portfolios to be written off can also be identified that have similar characteristics that are different from those indicated
above, but that relate to exposures that have a marginal possibility of recovering the amount of the provision, where the
minimum amount of the provision (calculated taking into account the accumulated write-offs on the position, according to
the same rule established at prudential level by the calendar provisioning framework) is at least equal to the amount
needed to bring the value of the exposures up to their fair value estimated based on the prices recorded in the latest
sales of bad loans made by the Group.
In 2022, the Group carried out write-offs on gross non-performing loans for around 658 million euro. Of these, around
475 million euro regarded bad loans, for the most part using the allowance already set aside. More than 87% of these
write-offs related to derecognised positions that are still subject to enforcement procedures, for which any recoveries
from collections after the write-off will be recognised in the income statement as recoveries.
3.3 Purchased or originated credit-impaired financial assets
According to IFRS 9, loans considered as impaired already upon initial recognition in the financial statements, due to the high
credit risk associated with them, are defined as Purchased or Originated Credit Impaired Assets (POCI). If these loans fall
within the scope of impairment in accordance with IFRS 9, they are valued by allocating allowances - from the date of initial
recognition - to cover losses for the entire residual life of the loan (lifetime Expected Credit Loss). Since these are non-
performing loans, they are initially recognised within Stage 3, subject to the possibility of being transferred, over the course of
their lives, to Stage 2 if, based on the credit risk analysis, they are identified as no longer being impaired.
POCI loans recorded in the Group\u2019s financial statements may derive from single renegotiations of non-performing exposures
carried out as part of routine lending activity or be recognised following business combinations. With regard to the latter case,
the acquisition of the former UBI Group during 2020 resulted in the recognition of a significant portfolio of non-performing
loans, which, therefore, were initially recognised as POCI pursuant to IFRS 9 and posted in the financial statements at the fair
value determined on Purchase Price Allocation, as the initial recognition value. More in detail, at the acquisition date (4
August 2020), the accounting records of the UBI Group had gross non-performing loans amounting to around 6.5 billion euro
(8 billion euro in terms of credit claim).
In light of the sales already carried out, the POCI loans referring to the former UBI Group posted in the consolidated financial
statements as at 31 December 2022 remain under assets measured at amortised cost for substantially residual amounts and
further reduced compared to the end of 2021, totalling 188 million euro, consisting of 131 million euro of non-performing loans
and 57 million euro of performing positions (total of 284 million euro, with 211 million euro of non-performing loans and 73
million euro of performing loans, as at 31 December 2021).
4. COMMERCIAL RENEGOTIATED FINANCIAL ASSETS AND FORBORNE EXPOSURES
Forbearance measures are concessions made to a borrower that is facing, or could face, situations of difficulty in meeting
their contractual commitments that would prevent them from meeting their original payment obligations (troubled debt).
The term \u201cforbearance measures\u201d indicates contractual modifications granted to the borrower undergoing financial difficulties
(modification), as well as the disbursement of a new loan in order to satisfy the pre-existing obligation (refinancing).
\u201cForbearance measures\u201d include the exercise of clauses, which may be freely requested by a borrower with regard to a
contract already signed, but only if the lender deems that there are circumstances indicating that the borrower is in financial
difficulty (the so-called \u201cembedded forbearance clauses\u201d). The concept of \u201cforborne\u201d therefore does not include renegotiations
carried out due to commercial reasons/practices, which do not take into account the financial difficulties of the borrower.
In many cases, a situation of financial difficulty is accompanied by a situation of economic instability of the borrower,
consisting of the inability of the core business to remunerate all the production factors that the company needs, through the
usual sources of cash flow and at normal market conditions.
The identification of \u201cforborne assets\u201d or \u201cforborne exposures\u201d, in line with the provisions of the EBA regulations and unlike the
\u201cper borrower\u201d approach used by the Intesa Sanpaolo Group for the classification of non-performing exposures, necessarily
takes place on a \u201cper transaction\u201d basis. The term \u201cexposure\u201d in this context refers to the renegotiated individual contract,
rather than to all the exposures to the same borrower.
More generally, Intesa Sanpaolo Group\u2019s policy, based on the instructions provided by the Supervisory Authorities, envisages
criteria for the identification of the financial difficulty (of the performing borrower) which, in the event of
renegotiation/refinancing, entails the classification of one (or more) credit line(s) as forborne, if at least one of the following
conditions applies:
\u2013 a significant deterioration in the debtor\u2019s rating identified in the previous three months;
\u2013 the presence of exposures past due by thirty days or more at the measurement date associated with a rating level in the
highest-risk band;
\u2013 Early Warning System (EWS) colour \u201cred\u201d, associated with a rating in the highest risk band.
A state of financial difficulty is always assumed in the case where the borrower is classified as non-performing.
The definition of forborne exposure applies transversally to the classification macro-categories (performing and non-
performing). Forborne assets may be included in Stage 2 (Performing) or Stage 3 (Non-Performing \u2013 forborne non-
performing).
The forbearance measures granted are monitored for minimum predefined periods, differentiated based on the administrative
status of the risk assigned to the counterparty. In detail:
\u2013 24 months for performing positions (probation period);
\u2013 36 months for positions classified as non-performing, represented by a cure period of 12 months and a probation period
of an additional 24 months.
When a forbearance measure is granted to a performing counterparty, quantitative assessments (diminished financial
obligation indicator set at 1%) and/or qualitative assessments are performed, as envisaged in the EBA Guidelines on the
application of the definition of default pursuant to Article 178 of Regulation (EU) 575/2013, which could result in the possible
classification to Non-Performing.
According to Intesa Sanpaolo Group\u2019s interpretations, the identification of an exposure as forborne necessarily implies the
existence of a \u201csignificant increase\u201d in risk since the origination of the loan (and, therefore, implies also a classification in
Stages 2 or 3 at the time of assignment of the forborne status).
Unlike the forbearance measures, which relate to loans to borrowers in financial difficulty, renegotiations for commercial
reasons involve borrowers that are not in financial difficulty and include all transactions aimed at adjusting the cost of the debt
to market conditions.
Transactions involving commercial renegotiations result in a change in the original conditions of the contract, usually
requested by the borrower, which normally relate to aspects concerning the cost of the debt (or its duration), with a
consequent economic benefit for the borrower. In general, whenever the bank carries out a renegotiation to avoid losing its
customer, that renegotiation should be considered as substantial because, if it were not carried out, the customer would
borrow from another intermediary and the bank would incur a decrease in expected future revenues.
These operations, under certain conditions, are treated for accounting purposes as an early repayment of the original debt
and the opening of a new loan.
QUANTITATIVE INFORMATION
A. CREDIT QUALITY
For the purposes of quantitative information about credit quality, the term \u201ccredit exposures\u201d is understood to exclude equities
and quotas of UCI.
The term \u201con-balance sheet credit exposures\u201d refers to all the on-balance sheet financial assets due from banks or customers,
irrespective of the accounting portfolio they are allocated to (measured at fair value through profit or loss, measured at fair
value through other comprehensive income, measured at amortised cost, or discontinued financial assets). On demand
receivables due from banks and central banks come under the definition of on-balance sheet exposures but by convention
are not included in the tables in Section 1, except in specifically identified cases where they must be considered.
The term \u201coff-balance sheet exposures\u201d refers to all the financial transactions that are not on the balance sheet (guarantees
given, revocable and irrevocable commitments, derivatives, etc.) but entail the assumption of credit risk, regardless of the
purpose of those transactions (trading, hedging, etc.). The off-balance sheet credit exposures also include the counterparty
risk associated with any securities lending transactions. Where necessary, the counterparty risk associated with exposures
relating to repurchase agreements, transactions involving the granting or assumption of goods on loan, and loans with
margins falling within the notion of securities financing transactions defined by the prudential regulations, is also reported.
Non-performing credit exposures (on-balance sheet and off-balance sheet) do not include financial assets held for trading and
hedging derivatives, which are therefore normally recognised as performing credit exposures.
A.1. Performing and non-performing credit exposures: amounts, adjustments, changes, and economic
breakdown
A.1.1. Prudential consolidation - Breakdown of financial assets by past-due brackets (book value)
(millions of euro)
Portfolios/risk stages
STAGE 1
STAGE 2
STAGE 3
PURCHASED OR
ORIGINATED CREDIT-
IMPAIRED
Between
1 and 30
days
Between
30 and
90 days
Over 90
days
Between
1 and 30
days
Between
30 and
90 days
Over 90
days
Between
1 and 30
days
Between
30 and
90 days
Over 90
days
Between
1 and 30
days
Between
30 and
90 days
Over 90
days
1. Financial assets measured at
amortised cost
1,823
168
272
686
466
129
360
187
2,913
10
4
138
2. Financial assets measured at fair
value through other comprehensive
income
45
-
49
-
-
-
-
-
-
-
-
-
3. Non-current financial assets held for
sale
-
-
-
-
-
-
4
5
277
-
-
10
Total
31.12.2022
1,868
168
321
686
466
129
364
192
3,190
10
4
148
Total
31.12.2021
2,192
236
155
2,623
598
194
466
237
5,455
7
9
261
A.1.2. Prudential consolidation \u2013 Financial assets, commitments to disburse funds and financial guarantees given: changes in total adjustments and total provisions (millions of euro) Reasons/risk stages TOTAL ADJUSTMENTS Stage 1 assets Stage 2 assets On demand due from banks and Central Banks Financial assets measured at amortised cost Financial assets measured at fair value through other comprehensive income Non- current financial assets held for sale of which: individual impairment losses of which: collective impairment losses On demand due from banks and Central Banks Financial assets measured at amortised cost Financial assets measured at fair value through other comprehensive income Non- current financial assets held for sale of which: individual impairment losses of which: collective impairment losses Total opening adjustments - 766 38 - 577 227 1 1,792 11 - 1,577 227 Changes in increase from financial assets acquired or originated - 302 11 - 230 83 - 23 - - 1 22 Cancellations other than write- offs - -78 -15 - -69 -24 - -113 -1 - -102 -12 Net value adjustments / write- backs for credit risk -2 -264 - - -220 -46 -1 283 37 - 83 236 Contractual changes without cancellations - 18 - - 7 11 - 22 - - 15 7 Changes in the estimation methodology - -3 - - - -3 - 3 - - - 3 Write-offs non recorded directly in the income statement - - - - - - - - - - - - Other variations 2 -34 - - -4 -28 - -22 - - 14 -36 Total closing adjustments - 707 34 - 521 220 - 1,988 47 - 1,588 447 Recoveries from financial assets subject to write-off - - - - - - - - - - - - Write-offs recorded directly in the income statement - - - - - - - - - - - - (millions of euro) Reasons/risk stages TOTAL ADJUSTMENTS Stage 3 assets Purchased or originated credit-impaired financial assets On demand due from banks and Central Banks Financial assets measured at amortised cost Financial assets measured at fair value through other comprehensive income Non-current financial assets held for sale of which: individual impairment losses of which: collective impairment losses Financial assets measured at amortised cost Financial assets measured at fair value through other comprehensive income Non-current financial assets held for sale of which: individual impairment losses of which: collective impairment losses Total opening adjustments - 8,161 35 3,231 10,940 487 141 - 67 198 10 Changes in increase from financial assets acquired or originated - 2 - - 2 - X X X X X Cancellations other than write-offs - -4,119 - -3,038 -7,128 -29 -53 - -67 -120 - Net value adjustments / write-backs for credit risk - 1,587 1 - 1,344 244 4 - - 9 -5 Contractual changes without cancellations - 65 - - 61 4 2 - - - 2 Changes in the estimation methodology - - - - - - - - - - - Write-offs non recorded directly in the income statement - -517 - -103 -574 -46 -35 - - -35 - Other variations - 57 - 288 365 -20 54 - 7 61 - Total closing adjustments - 5,236 36 378 5,010 640 113 - 7 113 7 Recoveries from financial assets subject to write-off - 41 - 1 40 2 - - - - - Write-offs recorded directly in the income statement - -79 - - -76 -3 -10 - - -10 -
A.1.2. Prudential consolidation \u2013 Financial assets, commitments to disburse funds and financial guarantees given:
changes in total adjustments and total provisions \u2013 continued \u2013
(millions of euro)
Reasons/risk stages
TOTAL PROVISIONS ON COMMITMENTS TO DISBURSE FUNDS AND
FINANCIAL GUARANTEES GIVEN
TOTAL
Stage 1
Stage 2
Stage 3
Commitments to
disburse funds
and financial
guarantees
given impaired
purchased or
originated
Total opening adjustments
110
104
233
-
14,690
Changes in increase from financial assets acquired or originated
23
2
-
-
363
Cancellations other than write-offs
-6
-6
-4
-
-7,500
Net value adjustments / write-backs for credit risk
-42
42
44
-
1,689
Contractual changes without cancellations
1
-
-
-
108
Changes in the estimation methodology
1
-
-
-
1
Write-offs non recorded directly in the income statement
-
-
-
-
-655
Other variations
66
13
-6
-
425
Total closing adjustments
153
155
267
-
9,121
Recoveries from financial assets subject to write-off
-
-
-
-
42
Write-offs recorded directly in the income statement
-
-
-
-
-89
The Intesa Sanpaolo Group does not use the simplified method for the valuation of the loss allowance in relation to trade
receivables, contract assets and lease receivables (method envisaged by IFRS 9, paragraph 5.5.15).
A.1.3. Prudential consolidation \u2013 Financial assets, commitments to disburse funds and financial guarantees given:
transfers between stages of credit risk (gross and nominal amounts)
(millions of euro)
Portfolios/risk stages
GROSS AMOUNTS/NOMINAL VALUE
Transfers between
Stage 1 and Stage 2
Transfers between
Stage 2 and Stage 3
Transfers between
Stage 1 and Stage 3
To Stage
2 from
Stage 1
To Stage
1 from
Stage 2
To Stage
3 from
Stage 2
To Stage
2 from
Stage 3
To Stage
3 from
Stage 1
To Stage
1 from
Stage 3
1. Financial assets measured at amortised cost
27,417
21,356
1,442
534
1,708
156
2. Financial assets measured at fair value through other
comprehensive income
767
43
-
-
-
-
3. Non-current financial assets held for sale
-
-
-
-
-
-
4. Commitments to disburse funds and financial guarantees given
19,170
6,537
311
22
511
24
Total
31.12.2022
47,354
27,936
1,753
556
2,219
180
Total
31.12.2021
49,645
39,553
1,607
451
1,709
224
A.1.3a Loans subject to COVID-19 support measures: transfers between stages of credit risk (gross amounts)
(millions of euro)
Portfolios/Risk stages
GROSS EXPOSURE / PAR VALUE
Transfers between Stage 1
and Stage 2
Transfers between Stage 2
and Stage 3
Transfer between Stage 1
and Stage 3
To Stage 2
from Stage 1
To Stage 1
from Stage 2
To Stage 3
from Stage 2
To Stage 2
from Stage 3
To Stage 3
from Stage 1
To Stage 1
from Stage 3
A. Loans measured at amortized cost
2,345
2,923
211
99
323
27
A.1 subject to EBA-compliant moratoria
-
-
-
-
-
-
A.2 Loans subject to outstanding moratorium
measures no longer compliant with the GL and not
considered forborne
3
18
1
-
-
-
A.3 subject to COVID-19-related forbearance
measures
289
3
74
89
32
-
A.4 newly originated loans
2,053
2,902
136
10
291
27
B. Loans and advances valued at fair value with an
impact on overall profitability
-
-
-
-
-
-
B.1 subject to EBA-compliant
moratoria
-
-
-
-
-
-
B.2 Loans subject to outstanding moratorium
measures no longer compliant with the GL and not
considered forborne
-
-
-
-
-
-
B.3 subject to COVID-19-related
forbearance measures
-
-
-
-
-
-
B.4 newly originated loans
-
-
-
-
-
-
Total
31.12.2022
2,345
2,923
211
99
323
27
Total
31.12.2021
7,818
920
214
13
539
12
The row Loans \u201csubject to EBA-compliant moratoria\u201d shows the information relating to financial assets subject to moratoria
that fall within the scope of application of the \u201cGuidelines on legislative and non legislative moratoria on loan repayments
applied in the light of the COVID 19 crisis\u201d, published by the EBA (EBA/GL/2020/02), as amended.
The row \u201cLoans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne\u201d
shows the outstanding loans subject to moratoria, assessed as compliant with EBA/GL/2020/02 at the date the measure was
granted, but no longer compliant at the reporting date, which were not classified by the bank as \u201cforborne exposures\u201d (as
defined by the supervisory reports in force) following the assessment conducted on occurrence of the event that generated
the non-compliance with EBA/GL/2020/02.
The row \u201cOther forborne loans\u201d contains information regarding the loans subject to the COVID-19 support measures that meet
the conditions of \u201cforborne exposures\u201d as defined by the current supervisory reports, and have not been included in the
category \u201cEBA-compliant moratoria loans\u201d since the grant date or since the date on which they no longer comply with the
EBA/GL/2020/02.
The row \u201cnewly originated loans\u201d presents the information on the exposures for which new liquidity was granted, with the
support of government guarantees.
A.1.4. Prudential Consolidation \u2013 On- and off-balance sheet credit exposures to banks: gross and net values
(millions of euro)
Type of exposure/amounts
Gross exposure
Total adjustments and total provisions for credit
risk
Net
exposure
Total partial
write-offs
Stage 1
Stage 2
Stage 3
Purchased
or
originated
credit-
impaired
Stage 1
Stage 2
Stage 3
Purchased
or
originated
credit-
impaired
A. ON-BALANCE SHEET
EXPOSURES
A.1 ON DEMAND
108,301
108,135
166
-
-
-
-
-
-
-
108,301
-
a) Non-performing
-
X
-
-
-
-
X
-
-
-
-
-
b) Performing
108,301
108,135
166
X
-
-
-
-
X
-
108,301
-
A.2 OTHERS
39,824
37,294
1,184
53
-
-55
-15
-24
-16
-
39,769
-
a) Bad loans
4
X
-
4
-
-4
X
-
-4
-
-
-
- of which: forborne
exposures
-
X
-
-
-
-
X
-
-
-
-
-
b) Unlikely to pay
48
X
-
48
-
-12
X
-
-12
-
36
-
- of which: forborne
exposures
48
X
-
48
-
-12
X
-
-12
-
36
-
c) Non-performing past due
exposures
1
X
-
1
-
-
X
-
-
-
1
-
- of which: forborne
exposures
-
X
-
-
-
-
X
-
-
-
-
-
d) Performing past due
exposures
2
-
2
X
-
-
-
-
X
-
2
-
- of which: forborne
exposures
-
-
-
X
-
-
-
-
X
-
-
-
e) Other performing
exposures
39,769
37,294
1,182
X
-
-39
-15
-24
X
-
39,730
-
- of which: forborne
exposures
83
-
83
X
-
-
-
-
X
-
83
-
TOTAL (A)
148,125
145,429
1,350
53
-
-55
-15
-24
-16
-
148,070
-
B. OFF-BALANCE SHEET
EXPOSURES
a) Non-performing
12
X
-
12
-
-
X
-
-
-
12
-
b) Performing
82,282
36,190
677
X
-
-66
-62
-4
X
-
82,216
-
TOTAL (B)
82,294
36,190
677
12
-
-66
-62
-4
-
-
82,228
-
TOTAL (A+B)
230,419
181,619
2,027
65
-
-121
-77
-28
-16
-
230,298
-
A.1.5. Prudential Consolidation \u2013 On- and off-balance sheet credit exposures to customers: gross and net values
(millions of euro)
Type of exposure/Amounts
Gross exposure
Total adjustments and total provisions for credit
risk
Net
Exposure
Total partial
write-offs
Stage 1
Stage 2
Stage 3
Purchased
or
originated
credit-
impaired
Stage 1
Stage 2
Stage 3
Purchased
or
originated
credit-
impaired
A. ON-BALANCE SHEET
EXPOSURES
a) Bad loans
3,850
X
-
3,685
165
-2,672
X
-
-2,599
-73
1,178
2,574
- of which: forborne
exposures
815
X
-
772
43
-518
X
-
-496
-22
297
220
b) Unlikely to pay
7,431
X
-
7,144
144
-2,956
X
-
-2,896
-43
4,475
508
- of which: forborne
exposures
3,060
X
-
2,951
81
-1,129
X
-
-1,102
-20
1,931
180
c) Non-performing past due
exposures
552
X
-
550
2
-139
X
-
-139
-
413
-
- of which: forborne
exposures
47
X
-
47
-
-11
X
-
-11
-
36
-
d) Performing past due
exposures
3,923
2,373
1,412
X
9
-147
-15
-132
X
-
3,776
-
- of which: forborne
exposures
505
-
385
X
1
-53
-
-53
X
-
452
-
e) Other performing
exposures
542,843
483,524
48,502
X
83
-2,594
-711
-1,879
X
-4
540,249
-
- of which: forborne
exposures
6,977
1
6,819
X
20
-500
-
-498
X
-1
6,477
-
TOTAL (A)
558,599
485,897
49,914
11,379
403
-8,508
-726
-2,011
-5,634
-120
550,091
3,082
B. OFF-BALANCE SHEET
EXPOSURES
a) Non-performing
1,771
X
-
1,765
4
-267
X
-
-267
-
1,504
-
b) Performing
330,175
229,968
26,343
X
1
-242
-91
-151
X
-
329,933
-
TOTAL (B)
331,946
229,968
26,343
1,765
5
-509
-91
-151
-267
-
331,437
-
TOTAL (A+B)
890,545
715,865
76,257
13,144
408
-9,017
-817
-2,162
-5,901
-120
881,528
3,082
The dealings between the Banking Group and other non-banking companies included within the scope of consolidation
amounted to:
- 352 million euro, adjusted by 142 million euro, included among gross non-performing on-balance sheet exposures to
customers;
- 11,797 million euro, adjusted by 22 million euro, included among gross performing on-balance sheet exposures to
customers;
- 19 million euro, adjusted by 3 million euro, included among gross non-performing off-balance sheet exposures to
customers;
- 8,897 million euro, adjusted by 16 million euro, included among gross performing off-balance sheet exposures to
customers.
The exposures also include financial assets allocated to the accounting portfolio of discontinued operations.
A.1.5a Loans subject to COVID-19 support measures: gross and net amounts
(millions of euro)
Loans types / amounts
Gross exposure
Total value adjustments and total provisions
Net
exposure
Write-off
partial total
Stage
1
Stage 2
Stage
3
Purchased
or
originated
credit-
impaired
Stage
1
Stage 2
Stage
3
Purchased
or
originated
credit-
impaired
A. BAD LOANS
90
-
-
90
-
-63
-
-
-63
-
27
-
a) Subject to EBA-compliant
moratoria
-
-
-
-
-
-
-
-
-
-
-
-
b) Loans subject to
outstanding moratorium
measures no longer
compliant with the GL and not
considered forborne
-
-
-
-
-
-
-
-
-
-
-
-
c) Subject to other COVID-
19-related forbearance
measures
9
-
-
9
-
-7
-
-
-7
-
2
-
d) Newly originated loans
81
-
-
81
-
-56
-
-
-56
-
25
-
B. UNLIKELY TO PAY
LOANS
595
-
-
594
1
-167
-
-
-166
-1
428
-
a) Subject to EBA-compliant
moratoria
-
-
-
-
-
-
-
-
-
-
-
-
b) Loans subject to
outstanding moratorium
measures no longer
compliant with the GL and not
considered forborne
27
-
-
27
-
-11
-
-
-11
-
16
-
c) Subject to other COVID-
19-related forbearance
measures
159
-
-
158
1
-50
-
-
-49
-1
109
-
d) Newly originated loans
409
-
-
409
-
-106
-
-
-106
-
303
-
C. NON-PERFORMING
PAST DUE LOANS
93
-
-
93
-
-19
-
-
-19
-
74
-
a) Subject to EBA-compliant
moratoria
-
-
-
-
-
-
-
-
-
-
-
-
b) Loans subject to
outstanding moratorium
measures no longer
compliant with the GL and not
considered forborne
-
-
-
-
-
-
-
-
-
-
-
-
c) Subject to other COVID-
19-related forbearance
measures
3
-
-
3
-
-1
-
-
-1
-
2
-
d) Newly originated loans
90
-
-
90
-
-18
-
-
-18
-
72
-
D. OTHER PAST DUE
PERFORMING LOANS
227
97
130
-
-
-3
-
-3
-
-
224
-
a) Subject to EBA-compliant
moratoria
-
-
-
-
-
-
-
-
-
-
-
-
b) Loans subject to
outstanding moratorium
measures no longer
compliant with the GL and not
considered forborne
-
-
-
-
-
-
-
-
-
-
-
-
c) Subject to other COVID-
19-related forbearance
measures
10
-
10
-
-
-1
-
-1
-
-
9
-
d) Newly originated loans
217
97
120
-
-
-2
-
-2
-
-
215
-
E. OTHER PERFORMING
LOANS
33,181
29,392
3,788
-
1
-111
-38
-73
-
-
33,070
-
a) Subject to EBA-compliant
moratoria
-
-
-
-
-
-
-
-
-
-
-
-
b) Loans subject to
outstanding moratorium
measures no longer
compliant with the GL and not
considered forborne
77
51
26
-
-
-3
-
-3
-
-
74
-
c) Subject to other COVID-
19-related forbearance
measures
687
4
683
-
-
-35
-
-35
-
-
652
-
d) Newly originated loans
32,417
29,337
3,079
-
1
-73
-38
-35
-
-
32,344
-
TOTAL (A+B+C+D+E)
34,186
29,489
3,918
777
2
-363
-38
-76
-248
-1
33,823
-
The row Loans \u201csubject to EBA-compliant moratoria\u201d shows the information relating to financial assets subject to moratoria
that fall within the scope of application of the \u201cGuidelines on legislative and non legislative moratoria on loan repayments
applied in the light of the COVID 19 crisis\u201d, published by the EBA (EBA/GL/2020/02), as amended.
As at 31 December 2022 such loans were less than 1 million euro and amounted to 412 thousand euro.
The row \u201cLoans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne\u201d
shows the outstanding loans subject to moratoria, assessed as compliant with EBA/GL/2020/02 at the date the measure was
granted, but no longer compliant at the reporting date, which were not classified by the bank as \u201cforborne exposures\u201d (as
defined by the supervisory reports in force) following the assessment conducted on occurrence of the event that generated
the non-compliance with EBA/GL/2020/02.
The row \u201cOther forborne loans\u201d contains information regarding the loans subject to the COVID-19 support measures that meet
the conditions of \u201cforborne exposures\u201d as defined by the current supervisory reports, and have not been included in the
category \u201cEBA-compliant moratoria loans\u201d since the grant date or since the date on which they no longer comply with the
EBA/GL/2020/02.
The row \u201cnewly originated loans\u201d presents the information on the exposures for which new liquidity was granted, with the
support of government guarantees.
The loans subject to COVID-19 support measures presented in the table also include loans allocated to the accounting
portfolio of discontinued operations.
A.1.6. Prudential Consolidation \u2013 On-balance sheet credit exposures to banks: changes in gross non-performing
exposures
(millions of euro)
Reasons/Categories
Bad loans
Unlikely to pay
Non-performing
past due
exposures
A. Initial gross exposure
4
66
-
- of which: exposures sold not derecognised
-
-
-
B. Increases
-
-
1
B.1 inflows from performing exposures
-
-
-
B.2 inflows from purchased or originated credit-impaired financial assets
-
-
-
B.3 transfers from other non-performing exposures categories
-
-
-
B.4 changes in contracts without derecognition
-
-
-
B.5 other increases
-
-
1
- of which: business combinations
C. Decreases
-
-18
-
C.1 outflows to performing exposures
-
-
-
C.2 write-offs
-
-
-
C.3 collections
-
-15
-
C.4 profits on disposal
-
-
-
C.5 losses on disposal
-
-
-
C.6 transfers to other non-performing exposure categories
-
-
-
C.7 changes in contracts without derecognition
-
-
-
C.8 other decreases
-
-3
-
D. Final gross exposure
4
48
1
- of which: exposures sold not derecognised
-
-
-
A.1.6. Bis Prudential Consolidation \u2013 On-balance sheet credit exposures to banks: changes in gross forborne
exposures broken down by credit quality
(millions of euro)
Description/Quality
Forborne
exposures: non-
performing
Forborne
exposures:
performing
A. Initial gross exposure
66
9
- of which: exposures sold not derecognised
-
-
B. Increases
-
81
B.1 inflows from non-forborne performing exposures
-
81
B.2 inflows from forborne performing exposures
-
X
B.3 inflows from non-performing forborne exposures
X
-
B.4 inflows from forborne non-performing exposures
-
-
B.5 other increases
-
-
C. Decreases
-18
-7
C.1 outflows to non-forborne performing exposures
X
-
C.2 outflows to forborne performing exposures
-
X
C.3 outflows to non-performing forborne exposures
X
-
C.4 write-offs
-
-
C.5 collections
-15
-7
C.6 profits on disposal
-
-
C.7 losses on disposal
-
-
C.8 other decreases
-3
-
D. Final gross exposure
48
83
- of which: exposures sold not derecognised
-
-
A.1.7. Prudential Consolidation \u2013 On-balance sheet credit exposures to customers: changes in gross non-performing
exposures
(millions of euro)
Reasons/Categories
Bad loans
Unlikely to
pay
Non-
performing
past due
exposures
A. Initial gross exposure
9,461
9,915
774
- of which: exposures sold not derecognised
196
862
242
B. Increases
1,852
3,905
817
B.1 inflows from performing exposures
377
2,432
761
B.2 inflows from purchased or originated credit-impaired financial assets
-
-
-
B.3 transfers from other non-performing exposures categories
985
701
14
B.4 changes in contracts without derecognition
-
9
-
B.5 other increases
490
763
42
C. Decreases
-7,463
-6,389
-1,039
C.1 outflows to performing exposures
-22
-639
-171
C.2 write-offs
-549
-194
-1
C.3 collections
-505
-1,106
-118
C.4 profits on disposal
-1,382
-1,085
-1
C.5 losses on disposal
-130
-5
-1
C.6 transfers to other non-performing exposure categories
-75
-926
-699
C.7 changes in contracts without derecognition
-
-19
-
C.8 other decreases
-4,800
-2,415
-48
D. Final gross exposure
3,850
7,431
552
- of which: exposures sold not derecognised
93
507
172
The \u201cother increases\u201d mainly include the increases in the amounts for charges and the increase in the amounts in foreign
currency due to changes in the exchange rate.
The \u201cother decreases\u201d mainly include the portfolio of loans classified as \u201cbad loans\u201d and \u201cunlikely to pay\u201d sold during the year.
A.1.7. Bis Prudential Consolidation \u2013 On-balance sheet credit exposures to customers: changes in gross forborne
exposures broken down by credit quality
(millions of euro)
Reasons/Quality
Forborne
exposures: non-
performing
Forborne
exposures:
performing
A. Initial gross exposure
6,170
8,616
- of which: exposures sold not derecognised
580
1,780
B. Increases
1,624
2,467
B.1 inflows from non-forborne performing exposures
227
1,910
B.2 inflows from forborne performing exposures
638
X
B.3 inflows from non-performing forborne exposures
X
439
B.4 inflows from forborne non-performing exposures
173
6
B.5 other increases
586
112
C. Decreases
-3,872
-3,601
C.1 outflows towards non-forborne performing exposures
X
-1,397
C.2 outflows towards forborne performing exposures
-439
X
C.3 outflows towards non-performing forborne exposures
X
-638
C.4 write-offs
-127
-
C.5 collections
-690
-913
C.6 profits on disposal
-820
-395
C.7 losses on disposal
-56
-
C.8 other decreases
-1,740
-258
D. Final gross exposure
3,922
7,482
- of which: exposures sold not derecognised
260
1,335
The \u201cother increases\u201d mainly include the increases in the amounts for charges.
The \u201cother decreases\u201d mainly include the portfolio of loans classified as \u201cbad loans\u201d and \u201cunlikely to pay\u201d sold during the year.
A.1.8 Prudential Consolidation \u2013 On-balance sheet non-performing credit exposures to banks: changes in total
adjustments
(millions of euro)
Reasons/Categories
BAD LOANS
UNLIKELY TO PAY
NON-PERFORMING PAST
DUE EXPOSURES
Total
of which:
forborne
exposures
Total
of which:
forborne
exposures
Total
of which:
forborne
exposures
A. Initial total adjustments
4
-
13
13
-
-
- of which: exposures sold not derecognised
-
-
-
-
-
-
B. Increases
-
-
-
-
-
-
B.1 adjustments to purchased or originated credit-
impaired assets
-
X
-
X
-
X
C.2 other adjustments
-
-
-
-
-
-
B.3 losses on disposal
-
-
-
-
-
-
B.4 transfers from other non-performing exposures
categories
-
-
-
-
-
-
B.5 changes in contracts without derecognition
-
-
-
-
-
-
B.6 other increases
-
-
-
-
-
-
C. Decreases
-
-
-1
-1
-
-
C.1 recoveries on impairment losses
-
-
-1
-1
-
-
C.2 recoveries on repayments
-
-
-
-
-
-
C.3 profits on disposal
-
-
-
-
-
-
C.4 write-offs
-
-
-
-
-
-
C.5 transfers to other non-performing exposure
categories
-
-
-
-
-
-
C.6 changes in contracts without derecognition
-
-
-
-
-
-
C.7 other decreases
-
-
-
-
-
-
D. Final total adjustments
4
-
12
12
-
-
- of which: exposures sold not derecognised
-
-
-
-
-
-
A.1.9 Prudential Consolidation \u2013 On-balance sheet non-performing credit exposures to customers: changes in total
adjustments
(millions of euro)
Reasons/Categories
BAD LOANS
UNLIKELY TO PAY
NON-PERFORMING PAST
DUE EXPOSURES
Total
of which:
forborne
exposures
Total
of which:
forborne
exposures
Total
of which:
forborne
exposures
A. Initial total adjustments
6,897
1,294
4,582
1,562
152
32
- of which: exposures sold not derecognised
105
28
221
116
35
4
B. Increases
1,794
381
1,975
764
215
21
B.1 adjustments to purchased or originated credit-
impaired assets
-
X
-
X
-
X
C.2 other adjustments
851
180
1,566
599
162
21
B.3 losses on disposal
253
56
6
1
1
-
B.4 transfers from other non-performing exposures
categories
463
121
185
50
9
-
B.5 changes in contracts without derecognition
-
-
77
77
-
-
B.6 other increases
227
24
141
37
43
-
C. Decreases
-6,019
-1,157
-3,601
-1,197
-228
-42
C.1 recoveries on impairment losses
-367
-84
-425
-261
-43
-
C.2 recoveries on repayments
-99
-21
-141
-85
-6
-
C.3 profits on disposal
-23
-1
-15
-8
-
-
C.4 write-offs
-549
-73
-194
-54
-1
-
C.5 transfers to other non-performing exposure
categories
-47
-10
-449
-119
-161
-42
C.6 changes in contracts without derecognition
-
-
-14
-14
-
-
C.7 other decreases
-4,934
-968
-2,363
-656
-17
-
D. Final total adjustments
2,672
518
2,956
1,129
139
11
- of which: exposures sold not derecognised
46
7
106
45
31
4
The \u201cother increases\u201d mainly include the collections of loans derecognised in full (through \u201crecoveries on repayments\u201d) and
increases in the balances of allowances in foreign currency due to changes in the exchange rate.
The \u201cother decreases\u201d mainly include the portfolio of loans classified as \u201cbad loans\u201d and \u201cunlikely to pay\u201d sold during the year.
This caption also includes the collections of overdue interest applied in previous years, losses on disposal not covered by the
allowance, the decrease in allowances in foreign currency due to changes in the exchange rate and the reduction in the
allowances for adjustment due to the passing of time.
A.2. Classification of exposures based on external and internal ratings
A.2.1. Prudential Consolidation - Breakdown of financial assets, commitments to disburse funds and financial
guarantees given by external rating classes (gross amounts)
The Intesa Sanpaolo Group uses the ratings supplied by the following external rating agencies for portfolios subject to
reporting: Standard & Poor\u2019s Ratings Services, Moody\u2019s Investors Service, Fitch Ratings and DBRS Morningstar. The ratings
provided by those agencies are used in compliance with the authorisations received and the regulations in force for the
different Group banks.
In compliance with the regulations, if there are two ratings for the same customer, the most prudential of the two is used,
when three ratings are available, the middle rating is adopted, and when all ratings are available, the second-best is taken.
(millions of euro)
Exposures
EXTERNAL RATING CLASSES
UNRATED
TOTAL
Class 1
Class 2
Class 3
Class 4
Class 5
Class 6
A. Financial assets measured at amortised cost
17,930
23,364
64,235
10,923
6,063
374
413,994
536,883
- Stage 1
17,887
21,082
62,418
10,578
4,631
113
358,898
475,607
- Stage 2
43
2,282
1,817
343
1,300
100
44,335
50,220
- Stage 3
-
-
-
-
132
161
10,379
10,672
- Purchased or originated credit-impaired
-
-
-
2
-
-
382
384
B.Financial assets measured at fair value through
other comprehensive income
16,399
10,502
14,790
963
2,481
69
3,284
48,488
- Stage 1
16,399
10,502
14,722
866
2,290
47
2,758
47,584
- Stage 2
-
-
68
97
191
8
504
868
- Stage 3
-
-
-
-
-
14
22
36
- Purchased or originated credit-impaired
-
-
-
-
-
-
-
-
C. Non-current financial assets held for sale
-
-
-
-
-
-
754
754
- Stage 1
-
-
-
-
-
-
-
-
- Stage 2
-
-
-
-
-
-
10
10
- Stage 3
-
-
-
-
-
-
725
725
- Purchased or originated credit-impaired
-
-
-
-
-
-
19
19
Total (A+B+C)
34,329
33,866
79,025
11,886
8,544
443
418,032
586,125
D. Commitments to disburse funds and financial
guarantees given
- Stage 1
11,594
25,962
51,799
13,899
3,271
142
161,048
267,715
- Stage 2
27
211
3,177
2,099
1,586
35
19,891
27,026
- Stage 3
-
-
-
-
25
3
1,754
1,782
- Purchased or originated credit-impaired
-
-
-
-
-
-
4
4
Total (D)
11,621
26,173
54,976
15,998
4,882
180
182,697
296,527
Total (A+B+C+D)
45,950
60,039
134,001
27,884
13,426
623
600,729
882,652
The following table shows the mapping of risk classes and the external ratings.
Mapping of ratings issued by external rating agencies
ECAI
Moody's
Standard & Poor's
Fitch
DBRS Morningstar
Long
term
Short
term
Long
term
Short
term
Long
term
Short
term
Long
term
Short
term
Credit quality step
1
Aaa, Aa3
P-1
AAA, AA-
A1+, A1
AAA, AA-
F1+, F1
AAA, AA-
R-1
2
A1, A3
P-2
A+, A-
A2
A+, A-
F2
A+, A-
R-2
3
Baa1, Baa3
P-3
BBB+, BBB-
A3
BBB+, BBB-
F3
BBB+, BBB-
R-3
4
Ba1, Ba3
NP
BB+, BB-
less than A3
BB+, BB-
less than F3
BB+, BB-
less than R-3
5
B1, B3
NP
B+, B-
less than A3
B+, B-
less than F3
B+, B-
less than R-3
6
Caa1 or less
NP
CCC+ or
less
less than A3
CCC+ or
less
less than F3
CCC+ or
less
less than R-3
A.2.2. Prudential Consolidation - Breakdown of financial assets, commitments to disburse funds and financial
guarantees given by internal rating classes (gross amounts)
As indicated above in the paragraph entitled \u201cBasel 3 Regulations\u201d, the Intesa Sanpaolo Group has a set of ratings for the
various operating segments of the counterparties (Corporate, Retail SME, Retail, Public Sector Entities and Banks).
The breakdown of exposures by internal rating classes shown in the following table is based on all ratings available in the
credit risk management and control system, in addition to ratings for validated models. These ratings include credit ratings
assigned by external agencies for counterparties in customer segments for which an internal model is not available.
Unrated exposures account for 7.8% of all exposures to performing counterparties and refer to customer portfolios for which a
rating model is not available, to counterparties for which the roll-out of internal models is still underway (mainly international
subsidiaries), as well as to Group companies whose mission is not related to credit and loans, which have been integrated
into the credit risk management system, or to marginal exposures.
When unrated counterparties and non-performing loans are excluded, there is a high concentration of investment grade
classes (classes 1, 2 and 3, representing ratings between AAA and BBB-) at 69.3% of the total, whilst 22.6% fall within the
BB+/BB range (class 4) and 8% fall under higher risk classes (of which 2.3% are below B-).
(millions of euro)
Exposures
Internal rating classes
Unrated
Total
Class 1
Class 2
Class 3
Class 4
Class 5
Class 6
A. Financial assets measured at amortized cost
91,831
46,154
168,462
125,556
33,988
17,037
53,855
536,883
- Stage 1
91,064
45,045
162,091
108,589
22,183
9,367
37,268
475,607
- Stage 2
765
1,108
6,360
16,931
10,350
5,117
9,589
50,220
- Stage 3
1
-
-
2
1,373
2,500
6,796
10,672
- Purchased or originated credit-impaired
1
1
11
34
82
53
202
384
B. Financial assets measured at fair value through other
comprehensive income
15,298
8,508
14,013
1,637
1,996
691
6,345
48,488
- Stage 1
15,282
8,484
13,965
1,016
1,921
685
6,231
47,584
- Stage 2
16
24
48
621
75
6
78
868
- Stage 3
-
-
-
-
-
-
36
36
- Purchased or originated credit-impaired
-
-
-
-
-
-
-
-
C. Non-current financial assets held for sale
-
-
-
8
195
452
99
754
- Stage 1
-
-
-
-
-
-
-
-
- Stage 2
-
-
-
8
2
-
-
10
- Stage 3
-
-
-
-
188
441
96
725
- Purchased or originated credit-impaired
-
-
-
-
5
11
3
19
Total (A+B+C)
107,129
54,662
182,475
127,201
36,179
18,180
60,299
586,125
D. Commitments and financial guarantees given
- Stage 1
24,502
62,299
116,759
45,823
7,857
2,127
8,348
267,715
- Stage 2
109
1,482
6,271
8,504
3,258
1,478
5,924
27,026
- Stage 3
-
-
1
2
383
174
1,222
1,782
- Purchased or originated credit-impaired
-
-
-
-
-
-
4
4
Total (D)
24,611
63,781
123,031
54,329
11,498
3,779
15,498
296,527
Total (A+B+C+D)
131,740
118,443
305,506
181,530
47,677
21,959
75,797
882,652
In addition to the tables required by the regulations, the rating allocation for performing loans to customers attributable to the
main Group banks is shown below.
As at 31 December 2022, performing loans to customers assigned an individual rating internally or by an external agency
accounted for 96% of the loans of the main Group banks.
The allocation shows a level of investment grade exposures (from AAA to BBB inclusive), at 63.0%, down on the previous
year (67.1%), mainly due to a revision in the master scale for certain types of counterparties rated using internal models. The
same percentage calculated on the entire portfolio, net of Russian counterparties, came to 74.2%.
Movements between rating classes are mainly caused by changes in risk parameters as a result of the update of the models.
0.0%
17.7%
9.2%
36.1%
30.5%
5.3%
1.2%
1.9%
10.3%
18.1%
36.8%
26.0%
6.0%
0.9%
AAA AA A BBB BB B CCC
2022
2021
The breakdown of the following portfolios by rating is presented below: Corporate, Retail Mortgage (residential mortgages for
individuals), Small Business and other retail, Sovereign & Public Entities.
Investment grade positions account for 59.9%, 67.4%, 47.3% and 91.9% of the above portfolios, respectively.
0.1%
2.3%
13.0%
44.5%
32.5%
6.0%
1.6%
AAA AA A BBB BB B CCC
Corporate
0.0%
47.3%
0.0%
20.1%
30.1%
2.1%
0.4%
AAA AA A BBB BB B CCC
Retail Mortgage
0.0%
22.6%
11.0%
13.7%
39.3%
11.3%
2.1%
AAA AA A BBB BB B CCC
Small Business and other retail
0.0%
5.7%
13.3%
72.9%
4.4%
3.3%
0.4%
AAA AA A BBB BB B CCC
Sovereign & Public Entities
A.3. Breakdown of guaranteed credit exposures by type of guarantee A.3.1. Prudential Consolidation \u2013 Guaranteed on- and off-balance sheet credit exposures to banks (millions of euro) Gross exposure Net exposures Collaterals (*) Personal guarantees (1) (2) Credit derivatives Real estate assets - mortgages Real estate assets - finance leases Securities Other CLN Other derivatives Central counterparties 1.Guaranteed on-balance sheet credit exposures: 6,437 6,433 - 5 5,559 172 - - 1.1 totally guaranteed 5,596 5,593 - 5 5,193 172 - - - of which non-performing 1 - - - - - - - 1.2 partly guaranteed 841 840 - - 366 - - - - of which non-performing - - - - - - - - 2. Guaranteed off-balance sheet credit exposures: 26,510 26,510 - - 1,929 11,333 - - 2.1 totally guaranteed 4,925 4,925 - - 1,929 980 - - - of which non-performing - - - - - - - - 2.2 partly guaranteed 21,585 21,585 - - - 10,353 - - - of which non-performing - - - - - - - - (*) Fair value of the guarantee or, if difficult to determine, its contractual value; as required by the regulations, the latter is stated up to the net exposure value. (millions of euro) Personal guarantees (*) Total (2) Credit derivatives Commitments Other derivatives Public Administration Banks Other financial companies Other counterparties (1)+(2) Banks Other financial companies Other counterparties 1.Guaranteed on-balance sheet credit exposures: - - - 228 23 - 66 6,053 1.1 totally guaranteed - - - 8 3 - 66 5,447 - of which non-performing - - - - - - - - 1.2 partly guaranteed - - - 220 20 - - 606 - of which non-performing - - - - - - - - 2. Guaranteed off-balance sheet credit exposures: - - - 7 76 - 70 13,415 2.1 totally guaranteed - - - 3 35 - 14 2,961 - of which non-performing - - - - - - - - 2.2 partly guaranteed - - - 4 41 - 56 10,454 - of which non-performing - - - - - - - - (*) Fair value of the guarantee or, if difficult to determine, contractual value, the latter stated - as required by the regulations - up to the net exposure value. A.3.2. Prudential Consolidation - Guaranteed on- and off-balance sheet credit exposures to customers (millions of euro) Gross exposure Net exposure Collateral (*) Personal guarantees (*) (1) (2) Credit derivatives Real estate assets - mortgages Real estate assets - finance leases Securities Other CLN Other derivatives Central counterparties 1. Guaranteed on-balance sheet credit exposures: 318,384 313,549 164,512 4,816 26,969 10,564 - - 1.1 totally guaranteed 252,621 248,860 161,898 4,626 26,238 8,118 - - - of which non-performing 6,201 3,838 2,517 268 45 104 - - 1.2 partly guaranteed 65,763 64,689 2,614 190 731 2,446 - - - of which non-performing 1,476 737 170 65 9 22 - - 2. Guaranteed off-balance sheet credit exposures: 53,130 53,017 2,016 52 8,758 4,341 - - 2.1 totally guaranteed 39,452 39,376 1,390 10 8,288 2,115 - - - of which non-performing 327 295 36 - 6 12 - - 2.2. partly guaranteed 13,678 13,641 626 42 470 2,226 - - - of which non-performing 159 136 23 - 1 27 - - (*) Fair value of the guarantee or, if difficult to determine, its contractual value; as required by the regulations, the latter is stated up to the net exposure value. (millions of euro) Personal guarantees (*) Total (2) Credit derivatives Commitments Other derivatives Public administration Banks Other financial companies Other counterparties (1)+(2) Banks Other financial companies Other counterparties 1. Guaranteed on-balance sheet credit exposures - - - 49,862 766 3,199 26,698 287,386 1.1 totally guaranteed - - - 23,208 437 2,253 17,987 244,765 - of which non-performing - - - 360 5 29 439 3,767 1.2 partly guaranteed - - - 26,654 329 946 8,711 42,621 - of which non-performing - - - 277 1 4 59 607 2. Guaranteed off-balance sheet credit exposures: - - - 2,477 92 1,787 25,015 44,538 2.1 totally guaranteed - - - 1,558 42 899 20,443 34,745 - of which non-performing - - - 30 - 1 161 246 2.2. partly guaranteed - - - 919 50 888 4,572 9,793 - of which non-performing - - - 7 - - 31 89 (*) Fair value of the guarantee or, if difficult to determine, its contractual value; as required by the regulations, the latter is stated up to the net exposure value.
A.4. Prudential consolidation \u2013 Financial assets and non-financial assets resulting from the enforcement
of guarantees
(millions of euro)
Derecognised
credit
exposure
Gross
amount
Total
adjustments
Book value
of which
obtained
during the
year
A. Property and equipment
338
375
-70
305
15
A.1 Used in operations
1
1
-
1
-
A.2. Investment
134
123
-9
114
3
A.3 Inventories
203
251
-61
190
12
B. Equities and debt securities
367
368
-176
192
-
C. Other assets
-
-
-
-
-
D. Non-current assets held for sale and discontinued operations
5
6
-1
5
-
D.1 Property and equipment
5
6
-1
5
-
D.2. Other assets
-
-
-
-
-
Total
31.12.2022
710
749
-247
502
15
Total
31.12.2021
735
775
-196
579
36
For the Group, the assets seized (book value) are mainly represented by:
\u2013 Property and equipment used in operations: buildings (1 million euro);
\u2013 Investment property: buildings (82 million euro); land (32 million euro);
\u2013 Property and equipment \u2013 Inventories: buildings (178 million euro), land (12 million euro);
\u2013 Equities and debt securities:
o equity investments of 24 million euro (primarily relating to the equity investment in Risanamento);
o financial assets mandatorily measured at fair value of 118 million euro;
o financial assets measured at fair value through other comprehensive income of 50 million euro.
These are financial assets not previously provided by the borrower as security for pre-existing loans, but acquired
under bilateral agreements with the borrower, following which the Group has derecognised the credit exposure;
\u2013 Non-current assets held for sale and discontinued operations: buildings (4 million euro), other (1 million euro).
B. BREAKDOWN AND CONCENTRATION OF CREDIT EXPOSURES B.1. Prudential Consolidation - Breakdown by sector of on- and off-balance sheet credit exposures to customers (millions of euro) Exposures/Counterparties Public administration Financial companies Financial companies (of which: insurance companies) Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans 73 -158 6 -23 - - - of which: forborne exposures - - 1 -1 - - A.2 Unlikely to pay 153 -30 105 -167 - - - of wich: forborne exposures 22 -10 18 -58 - - A.3 Non-performing past due exposures 2 - 1 - - - - of which: forborne exposures - - - - - - A.4 Performing exposures 90,484 -147 72,943 -120 1,315 - - of which: forborne exposures 13 - 140 -4 - - Total (A) 90,712 -335 73,055 -310 1,315 - B. Off-balance sheet exposures B.1 Non-performing exposures 91 -8 22 -2 - - B.2 Performing exposures 27,791 -8 66,502 -29 10,312 - Total (B) 27,882 -16 66,524 -31 10,312 - Total (A+B) 31.12.2022 118,594 -351 139,579 -341 11,627 - Total (A+B) 31.12.2021 155,202 -301 124,749 -576 10,072 - (millions of euro) Exposures/Counterparties Non-financial companies Households Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans 681 -1,546 418 -945 - of which: forborne exposures 219 -394 77 -123 A.2 Unlikely to pay 2,727 -1,906 1,490 -853 - of which: forborne exposures 1,212 -810 679 -251 A.3 Non-performing past due exposures 133 -44 277 -95 - of which: forborne exposures 17 -5 19 -6 A.4 Performing exposures 201,804 -1,594 178,794 -880 - of which: forborne exposures 5,048 -437 1,728 -112 Total (A) 205,345 -5,090 180,979 -2,773 B. Off-balance sheet exposures B.1 Non-performing exposures 1,336 -249 55 -8 B.2 Performing exposures 216,744 -179 18,221 -26 Total (B) 218,080 -428 18,276 -34 Total (A+B) 31.12.2022 423,425 -5,518 199,255 -2,807 Total (A+B) 31.12.2021 444,382 -10,582 193,298 -3,205 B.2. Prudential Consolidation - Breakdown by geographical area of on- and off-balance sheet credit exposures to customers (millions of euro) Exposures/Geographical areas Italy Other european countries Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans 956 -1,906 156 -610 A.2 Unlikely to pay 3,727 -2,417 557 -399 A.3 Non-performing past due exposures 344 -88 61 -44 A.4 Performing exposures 376,976 -1,648 116,563 -978 Total (A) 382,003 -6,059 117,337 -2,031 B. Off-balance sheet exposures B.1 Non-performing exposures 1,275 -219 99 -45 B.2 Performing exposures 169,505 -137 114,307 -84 Total (B) 170,780 -356 114,406 -129 - - Total (A+B) 31.12.2022 552,783 -6,415 231,743 -2,160 Total (A+B) 31.12.2021 585,575 -12,838 231,907 -1,408 (millions of euro) Exposures/Geographical areas America Asia Rest of the world Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans 37 -76 1 -32 28 -48 A.2 Unlikely to pay 16 -63 43 -29 132 -48 A.3 Non-performing past due exposures - - - - 8 -7 A.4 Performing exposures 26,909 -45 14,481 -21 9,096 -49 Total (A) 26,962 -184 14,525 -82 9,264 -152 B. Off-balance sheet exposures B.1 Non-performing exposures 23 - 12 - 95 -3 B.2 Performing exposures 30,733 -7 11,622 -2 3,091 -12 Total (B) 30,756 -7 11,634 -2 3,186 -15 57718 Total (A+B) 31.12.2022 57,718 -191 26,159 -84 12,450 -167 Total (A+B) 31.12.2021 56,550 -148 29,087 -64 14,512 -206 B.2.Bis Prudential consolidation \u2013 Breakdown of relations with customers resident in Italy by geographical area (millions of euro) Exposures/Geographical areas North West North East Centre South and islands Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans 254 -591 171 -316 236 -389 295 -610 A.2 Unlikely to pay 1,424 -864 522 -412 916 -582 865 -559 A.3 Non-performing past due exposures 104 -27 44 -12 77 -20 119 -29 A.4 Performing exposures 133,051 -688 72,057 -248 113,783 -384 58,085 -328 Total A 134,833 -2,170 72,794 -988 115,012 -1,375 59,364 -1,526 B. Off-balance sheet exposures B.1 Non-performing exposures 421 -49 467 -84 269 -73 118 -13 B.2 Performing exposures 72,661 -96 32,751 -15 49,630 -16 14,463 -10 Total B 73,082 -145 33,218 -99 49,899 -89 14,581 -23 Total (A+B) 31.12.2022 207,915 -2,315 106,012 -1,087 164,911 -1,464 73,945 -1,549 Total (A+B) 31.12.2021 215,021 -4,799 104,749 -2,290 193,455 -3,006 72,350 -2,743 B.3. Prudential Consolidation - Breakdown by geographical area of on- and off-balance sheet credit exposures to banks (millions of euro) Exposures / Geographical Areas Italy Other european countries Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans - - - -2 A.2 Unlikely to pay - - - - A.3 Non-performing past due exposures - - 1 - A.4 Performing exposures 103,544 -2 32,515 -25 Total (A) 103,544 -2 32,516 -27 B. Off-balance sheet exposures B.1 Non-performing exposures - - - - B.2 Performing exposures 8,879 - 51,458 -65 Total (B) 8,879 - 51,458 -65 Total (A+B) 31.12.2022 112,423 -2 83,974 -92 Total (A+B) 31.12.2021 136,133 -4 80,122 -11 (millions of euro) Exposures / Geographical Areas America Asia Rest of the world Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans - - - -2 - - A.2 Unlikely to pay 36 -12 - - - - A.3 Non-performing past due exposures - - - - - - A.4 Performing exposures 6,314 -1 3,026 -1 2,634 -10 Total (A) 6,350 -13 3,026 -3 2,634 -10 B. Off-balance sheet exposures B.1 Non-performing exposures 2 - - - 10 - B.2 Performing exposures 6,969 - 11,037 - 2,508 -1 Total (B) 6,971 - 11,037 - 2,518 -1 Total (A+B) 31.12.2022 13,321 -13 14,063 -3 5,152 -11 Total (A+B) 31.12.2021 11,588 -14 13,093 -4 5,492 -10
B.3.Bis Prudential consolidation \u2013 Breakdown of relations with banks resident in Italy by geographical
area
(millions of euro)
Exposures/Geographical areas
NORTH WEST
NORTH EAST
CENTRE
SOUTH AND
ISLANDS
Net
exposure
Total
adjustments
Net
exposure
Total
adjustments
Net
exposure
Total
adjustments
Net
exposure
Total
adjustments
A. On-balance sheet exposures
A.1 Bad loans
-
-
-
-
-
-
-
-
A.2 Unlikely to pay
-
-
-
-
-
-
-
-
A.3 Non-performing past due exposures
-
-
-
-
-
-
-
-
A.4 Performing exposures
3,845
-1
3,015
-
96,677
-1
7
-
Total A
3,845
-1
3,015
-
96,677
-1
7
-
B. Off-balance sheet exposures
B.1 Non-performing exposures
-
-
-
-
-
-
-
-
B.2 Performing exposures
6,465
-
749
-
1,661
-
4
-
Total B
6,465
-
749
-
1,661
-
4
-
-
-
-
-
Total (A+B)
31.12.2022
10,310
-1
3,764
-
98,338
-1
11
-
Total (A+B)
31.12.2021
8,969
-3
1,474
-
125,485
-1
205
-
B.4 Large exposures
Large exposures
a) Book value (millions of euro)
258,353
b) Weighted value (millions of euro)
22,314
b) Number
9
Based on regulatory provisions, the number of large exposures presented in the table was determined by the reference to
unweighted \u201cexposures\u201d in excess of 10% of Tier 1 Capital as defined by Regulation (EU) 876/2019 (CRR2) and Regulation
(EU) 575/2013 (CRR). The \u201cexposures\u201d are defined as the sum of on-balance sheet assets at risk and off-balance sheet
transactions (excluding those deducted from Tier 1 Capital) with a customer or a group of related customers, without applying
weighting factors. These presentation criteria result in the inclusion in the financial statement table for large exposures of
entities that \u2013 even with a weighting of 0% \u2013 present an unweighted exposure in excess of 10% of Tier 1 Capital for the
purposes of large risks.
In accordance with the provisions of the EBA document \"Guidelines on connected clients under Article 4(1)(39) of Regulation
(EU) 575/2013\", the supervisory reports have standard methods of presentation of groups of connected clients that (in the
case of silos) require exposures to the central governments to be repeated within each corresponding economic group directly
controlled by a central government or connected to it by economic dependence.
However, the amounts shown in points a) and b) and the number shown in point c) in the table above include the exposure to
the various central governments, to which the Intesa Sanpaolo Group is exposed, only once.
C. SECURITISATIONS
This section does not include securitisations where the originators are Intesa Sanpaolo Group banks and all the liabilities (e.g.
ABS securities, loans at the warehousing stage) issued by the vehicle companies are subscribed at the time of issue by one
or more Group companies. For a description of these types of transaction, see the section on liquidity risk in Part E of the
Notes to the consolidated financial statements.
Qualitative information
The securitisations carried out in 2022 are summarised below:
GARC Securitisations
Within the \u201cGARC\u201d transactions, Intesa Sanpaolo completed six new synthetic securitisations during the year: GARC High
Potential-2, GARC Residential Mortgages-3, GARC Leasing-2, GARC Corp-5, GARC CRE-1 and GARC Infrastructure-1.
Specifically:
i) For the GARC High Potential-2 transaction, the junior and mezzanine risk relating to a portfolio of around 0.5 billion euro
in residential mortgages to around 7,000 retail customers, valued using internal models (Advanced IRB), was sold;
ii) For the GARC Residential Mortgages-3 transaction, the upper junior and mezzanine risk relating to a portfolio of around
1.4 billion euro of high LTV residential mortgages to around 12,800 retail customers, valued using internal models
(Advanced IRB), was sold to specialist investors;
iii) For the GARC Leasing-2 transaction, the junior risk relating to a total portfolio of around 2.1 billion euro in finance leases
to around 2,900 businesses in the Corporate and Corporate SME regulatory segment, valued using internal models
(Advanced IRB), was sold to specialist investors;
iv) For the GARC CORP-5 transaction, the junior risk relating to a total portfolio of around 7.5 billion euro in loans to around
4,500 businesses in the Corporate and Corporate SME regulatory segment, valued using internal models (Advanced
IRB), was sold to specialist investors;
v) For the GARC Commercial Real Estate-1 transaction, the junior risk relating to a total portfolio of around 1.9 billion euro
in corporate and commercial real estate mortgage loans to around 150 counterparties in the Corporate and Corporate
SME regulatory segment, valued using internal models (Advanced IRB), was sold to specialist investors;
vi) For the GARC Infrastructure-1 transaction, the junior risk relating to a total portfolio of around 2.3 billion euro in corporate
and project finance loans in the infrastructure segment to around 200 businesses in the Corporate and Corporate SME
regulatory segment, valued using internal models (Advanced IRB), was sold to specialist investors.
In compliance with the retention rule laid down by the supervisory regulations, for the first four transactions, Intesa Sanpaolo
holds 5% of the securitised portfolio, while for the last two, it holds 10% of the securitised portfolio.
The portfolios of the transactions mainly consist of customers operating in Northern Italy.
Tranched Cover Fondo di Garanzia per le PMI Securitisation
During 2022, as part of the operations with the Guarantee Fund for SMEs, the ramp-up was completed of four tranched cover
transactions on the junior risk of portfolios of newly disbursed loans in support of businesses adversely affected by the
COVID-19 emergency, for a total of around 0.6 billion euro to around 1,700 businesses.
For these transactions, Intesa Sanpaolo holds at least 10% of the securitised portfolios in compliance with the retention rule
laid down by the supervisory regulations.
Organa Securitisation
As part of the derisking strategy envisaged in the 2022-2025 Business Plan, and, specifically, in line with the 2022 derisking
plan approved by the Board of Directors on 21 December 2021, in April 2022, Intesa Sanpaolo completed a process to
deconsolidate a loan portfolio classified as \u201cbad loans\u201d, through a securitisation and subsequent application for issue of a
\u201cGACS\u201d government guarantee for the holders of senior notes issued as part of the transaction, once those senior notes had
obtained an investment grade rating of no less than BBB or equivalent, as envisaged by Italian Law no. 49/2016.
The portfolio to be sold, identified as at 31 December 2021 (cut-off date), has a Gross Book Value (GBV) of around 4 billion
euro (accounting GBV at pre-closing values, before PPA).
Within the transaction, Intrum Italy S.p.A. acts as special servicer of the securitisation.
The securitised assets were broken down as follows by geographical area:
\u2012 31.2% North-West;
\u2012 25.0% Centre;
\u2012 22.5% South and Islands;
\u2012 21.1% North-East;
\u2012 0.2% Outside Italy.
The breakdown of the assigned debtors by economic sector was as follows:
\u2012 18.6% Production companies;
\u2012 16.1% Consumer households;
\u2012 14.9% Construction companies;
\u2012 13.8% Wholesale and retail;
\u2012 13.3% Real estate business;
\u2012 8.0% Services;
\u2012 15.3% other business sectors (Agriculture, Transport, Manufacturing).
The sale transaction was structured in two main phases:
(i) Self-securitisation: in that phase, the sale of the portfolio to a securitisation vehicle, Organa SPV S.r.l. (SPV), established
pursuant to Italian Law 130/99, was completed, with Intesa Sanpaolo fully subscribing the senior, mezzanine and junior
notes issued by the SPV to finance the purchase price of the portfolio. At the time of issue of the notes, Intesa Sanpaolo
disbursed a loan with limited recourse as a liquidity facility for said SPV. In this phase of the transaction, as the risks and
rewards of the assets sold had not yet been transferred, the portfolio continued to be consolidated in the Intesa Sanpaolo
financial statements. Concurrent with the issue of the securitisation notes, Moody\u2019s, DBRS and Scope issued ratings for
the senior class of notes - investment grade \u201cBBB\u201d or equivalent;
(ii) \u201cPlacement of the subordinated securities and deconsolidation of the portfolio sold\u201d: in that phase, the sale of 95% of the
Mezzanine and Junior notes was finalised to a third party investor selected through syndication on the market and,
following the sale, the accounting and regulatory derecognition of the portfolio was also finalised, with the subsequent
application for a GACS guarantee to the Ministry of the Economy and Finance and Concessionaria Servizi Assicurativi
Pubblici. The guarantee was granted on 10 June 2022.
The SPV financed the acquisition of the portfolio by issuing 3 classes of securities, of which the senior tranche was
subscribed entirely by Intesa Sanpaolo, while the mezzanine and junior tranches were subscribed 95% by third party
investors and 5% by Intesa Sanpaolo in compliance with the retention rule laid down in the supervisory regulations:
\u2012 senior notes of 970 million euro, fully subscribed by Intesa Sanpaolo;
\u2012 mezzanine notes of 130 million euro, of which 6.5 million euro subscribed by Intesa Sanpaolo and the remainder by a
third-party investor;
\u2012 junior notes of 15 million euro, of which 0.8 million euro subscribed by Intesa Sanpaolo and the remainder by a third-
party investor.
Upon completion of the transaction, Intesa Sanpaolo achieved full accounting and regulatory deconsolidation of that portfolio.
Taking into account the subscription of 100% of the senior notes and 5% of the junior and mezzanine notes in compliance
with the retention rule, the variability connected to the cash flows of the underlying portfolio retained by the Group enabled it
to establish that the Group has substantially transferred all the risks and rewards of the financial assets transferred, meeting
the conditions under point a) of IFRS 9.3.2.6, as a result of which it has \u201cderecognised the financial asset and recognised
separately as assets or liabilities any rights and obligations originated from or maintained with the transfer\u201d.
In this regard, the notes subscribed by Intesa Sanpaolo, due to the business model used and the look-through test carried
out, have been classified as follows:
\u2012 senior tranches under securities at amortised cost;
\u2012 mezzanine and junior tranches under securities measured at FVTPL.
The transaction was carried out in accordance with the Group\u2019s income statement and balance sheet targets and forecasts
which have already been disclosed to the market for the 2022-2025 Business Plan.
Teseo Securitisation
As part of the derisking strategy envisaged in the 2022-2025 Business Plan and, specifically, in line with the Board of
Directors\u2019 resolution of 4 November 2022, on 21 November 2022 the sale of a performing loan portfolio deriving from leases
originated by Intesa Sanpaolo was finalised through a securitisation pursuant to Law 130/99. The portfolio sold is composed
of performing loans mainly in the Corporate SME segment (60% of the portfolio sold) and the Small Business Retail segment
(26% of the portfolio sold) with a Gross Book Value (GBV) of around 3,761 million euro as at 31 October 2022 (date of
identification of the portfolio).
As part of the transaction, in addition to being the originator, Intesa Sanpaolo is also the servicer of the portfolio.
The sale involved the transfer of the loans to the SPV, along with the transfer of the legal asset and liability relationships
arising from the leases pertaining to the loans sold, where the ownership of the moveable and immovable property covered by
those leases remained with Intesa Sanpaolo.
The securitised assets were broken down as follows by geographical area:
\u2012 63.26% North;
\u2012 23.76% Centre;
\u2012 12.98% South and Islands.
The breakdown of the assigned debtors by economic sector was as follows:
\u2012 27% Production companies;
\u2012 22% Real Estate;
\u2012 17% Wholesale and Retail;
\u2012 34% other business sectors.
The breakdown by type of lease was as follows:
\u2012 82.2% real estate leases;
\u2012 10.5% equipment leases;
\u2012 4.4% energy leases;
\u2012 2.9% other (motor vehicles, aeronautical, etc.).
On 30 November 2022 the SPV financed the acquisition of the portfolio by issuing 4 classes of securities, two senior tranches,
one fixed-rate and one floating-rate, both 100% subscribed by Intesa Sanpaolo. One mezzanine tranche and one junior
tranche were 5% subscribed by Intesa Sanpaolo, in compliance with the retention rule laid down in the supervisory
regulations. In detail:
\u2012 Class A1 \u2013 floating-rate senior \u2013 fully subscribed by Intesa Sanpaolo for a total of 2,632 million euro;
\u2012 Class A2 \u2013 fixed-rate senior \u2013 fully subscribed by Intesa Sanpaolo for a total of 564 million euro;
\u2012 Class B \u2013 mezzanine \u2013 subscribed by Intesa Sanpaolo for 9.4 million euro and the remainder by third parties;
\u2012 Class J \u2013 junior \u2013 subscribed by Intesa Sanpaolo for 20.5 million euro, at an issue price of 9.3 million euro, and the
remainder by third parties.
With the completion of the transaction, Intesa Sanpaolo achieved full accounting and prudential deconsolidation of the
portfolio.
More specifically, taking into account the retention of 5% of the classes issued (vertical slice), the variability connected to the
cash flows of the underlying portfolio retained by the Group enabled it to establish that the Group has substantially transferred
all the risks and rewards of the financial assets transferred, meeting the conditions under point a) of IFRS 9.3.2.6, as a result
of which it has \u201cderecognised the financial asset and recognised separately as assets or liabilities any rights and obligations
originated from or maintained with the transfer\u201d. In addition, a significant credit risk transfer was carried out, in line with Article
244(2) of the CRR.
In this regard, the notes subscribed by Intesa Sanpaolo, due to the business model used, have been classified as follows:
\u2012 the senior and mezzanine classes under securities at amortised cost;
\u2012 the junior class under securities at fair value through profit or loss (FVTPL).
The transaction was carried out in accordance with the Group\u2019s income statement and balance sheet targets and forecasts
which have already been disclosed to the market for the 2022-2025 Business Plan.
Quantitative information
C.1. Prudential consolidation - Breakdown of exposures deriving from the main \u201coriginated\u201d
securitisations by type of securitised asset and by type of exposure
On-balance sheet
(millions of euro)
Type of securitised asset/ Exposure
ON-BALANCE SHEET EXPOSURES
Senior
Mezzanine
Junior
Book
value
Adjust./
recoveries
Book
value
Adjust./
recoveries
Book
value
Adjust./
recoveries
A. Fully derecognised
7,401
6
49
-10
16
-11
\u2013 Loans to businesses (including SMEs) (*)
3,661
7
35
-9
5
-11
\u2013 Leases (**)
3,203
-1
13
-
10
-
\u2013 Residential mortgage loans (*)
537
-
1
-1
-
-
\u2013 Consumer credit
-
-
-
-
1
-
B. Partly derecognised
-
-
-
-
-
-
C. Not derecognised
24,824
4
97
7
413
-3
- Loans to businesses (including SMEs) (***) (****)
17,457
7
85
7
225
-
\u2013 Residential mortgage loans (****)
3,281
-1
12
-
160
-3
\u2013 Leases (****)
2,421
-1
-
-
12
-
\u2013 Commercial mortgage loans (****)
1,665
-1
-
-
16
-
TOTAL
32,225
10
146
-3
429
-14
(*) The entire amount refers to non-performing financial assets. \u201cLoans to businesses (including SMEs)\u201d refer to the Savoy, Kerma, Yoda, Sirio, Grogu and Kerdos
securitisations (see the 2018, 2019, 2020 and 2021 Consolidated Financial Statements, respectively, for details about the transactions) and the Organa transaction
(described in the paragraph on \u201cQualitative information\u201d of this Section). \u201cResidential mortgage loans\" refer to the Maior and Iseo securitisations (deriving from the
business combination with the former UBI Group).
(**) The amounts refer to the Portland securitisation relating to credit-impaired financial assets for amounts of 6 million euro - senior and 4 million euro - mezzanine,
respectively (see the 2021 Consolidated Financial Statements for a description of the transaction) and the Teseo transaction relating to performing financial assets
(described in the paragraph on \u201cQualitative information\u201d of this Section).
(***) The amounts include non-performing financial assets amounting to 29 million euro in senior exposures, 53 million euro in mezzanine exposures and 17 million
euro in junior exposures.
(****) The captions also include performing amounts associated with the synthetic securitisations originated by the Intesa Sanpaolo Group.
Off-balance sheet
This type of exposure did not exist as at 31 December 2022.
C.2. Prudential consolidation - Breakdown of exposures deriving from main \u201cthird-party\u201d securitisations
by type of securitised asset and by type of exposure
On-balance sheet
(millions of euro)
Type of securitised asset/ Exposure
ON-BALANCE SHEET EXPOSURES
Senior
Mezzanine
Junior
Book
value
Adjust./
recoveries
Book
value
Adjust./
recoveries
Book
value
Adjust./
recoveries
Leases
4
-
4
-
2
-
Covered bonds
36
-
16
-1
-
-
Commercial mortgage loans
126
-3
32
-1
-
-
Securitisations
167
-1
-
-
-
-
Trade receivables
213
-2
16
-1
-
-
Consumer credit
457
-
4
-
3
-
Residential mortgage loans
876
-12
91
-1
-
-
Loans to businesses (including SMEs)
1,526
-34
120
-7
2
-1
Other assets (*)
10,707
-6
-
-
-
-
TOTAL
14,112
-58
283
-11
7
-1
(*) The amount also includes the Romulus securities for 6,778 million, held by the Banking Group, generally represented among third-party securitisations, as well as
loans to the vehicle Duomo Funding Plc for 3,541 million as a result of the use of credit lines. For more information regarding the type of underlying assets, reference
is made to Section 4 \u2013 Risks of other companies, of this Part E.
Off-balance sheet
(millions of euro)
Type of securitised asset/
Exposure
GUARANTEES GIVEN
CREDIT LINES
Senior
Mezzanine
Junior
Senior
Mezzanine
Junior
Net
exposure
Adjust./
recoveries
Net
exposure
Adjust./
recoveries
Net
exposure
Adjust./
recoveries
Net
exposure
Adjust./
recoveries
Net
exposure
Adjust./
recoveries
Net
exposure
Adjust./
recoveries
Duomo ABCP Conduit
transactions (*)
-
-
-
-
-
-
(*)
(*)
-
-
-
-
Total
-
-
-
-
-
-
-
-
-
-
-
-
(*) With regard to the transactions carried out through Duomo Funding Plc and funded by ABCP, Intesa Sanpaolo has granted credit lines (amounting to 6,576 million euro in
terms of net exposures and around 3 million euro of recoveries) to secure the assets included under \u201cOther assets\u201d in Table C.2 on-balance sheet exposures.
C.3. Prudential consolidation - Stakes in securitisation vehicles
(millions of euro)
SECURITISATION/
SPECIAL PURPOSE VEHICLE
REGISTERED OFFICE
CONSOLIDATION
(a)
ASSETS (b)
LIABILITIES (b)
Loans
Debt
securities
Other
Senior
Mezzanine
Junior
Augusto S.r.l. (d)
Milano
(e)
-
-
2
13
-
-
Berica ABS 3 S.r.l. (h)
Vicenza
(e)
(f)
(f)
(f)
(f)
(f)
(f)
Brera Sec S.r.l. (c)
Conegliano Veneto
(TV)
(e)
16,319
-
594
13,869
-
2,652
Clara Sec S.r.l. (c)
Conegliano Veneto
(TV)
(e)
6,442
-
2,378
6,350
-
824
Diocleziano S.r.l. (d)
Milano
(e)
1
-
1
48
-
-
Giada Sec S.r.l. (c)
Conegliano Veneto
(TV)
(e)
21,803
-
3,825
16,860
-
8,425
ISP CB Ipotecario S.r.l. (g)
Milano
(e)
16,631
-
4,877
18,612
ISP CB Pubblico S.r.l. (g)
Milano
(e)
1,943
1,212
823
3,897
ISP OBG S.r.l. (g)
Milano
(e)
54,200
-
6,533
60,537
UBI Finance S.r.l. (g)
Milano
(e)
8,574
-
777
9,241
(a) Consolidation method referring to the so-called \"prudential\" scope.
(b) Figures gross of any intragroup relations. The amounts shown under assets and liabilities refer to the total values reported in the financial statements of the special purpose
vehicles
(c) Self-securitisation vehicle described in Section 1.4 Banking Group - Liquidity Risk, Quantitative Information, paragraph 2 of these Notes to the consolidated financial
statements.
(d) The amounts shown under assets and liabilities refer to the latest financial statement data available (31.12.2021).
(e) Vehicle consolidated at equity.
(f) For the financial statement disclosure concerning this vehicle, see the prospectus published in Section C.4 of these Notes to the consolidated financial statements.
(g) Vehicle used for the covered bond issue by the Intesa Sanpaolo Group. For more information, see Section D in Part E of these Notes to the consolidated financial statements.
(h) Vehicle deriving from the acquisition of certain assets and liabilities of the former Venetian Banks.
The securitisations structured by the Intesa Sanpaolo Group on its own assets include those named Towers, K-Equity, Savoy,
Kerma, Yoda, Maior, Iseo, Sirio, Kerdos, Grogu, Portland, Organa and Teseo, for which special purpose vehicles were used
that are third-party and independent entities with respect to the Group, and in which the Group does not hold any
investments. For that reason, these vehicles are not shown in the table above.
C.4 Prudential consolidation \u2013 Unconsolidated securitisation vehicles
The unconsolidated securitisation vehicles include the vehicles in which the Intesa Sanpaolo Group does not hold any stake
in the capital and those in which it holds a residual stake. The table below shows the assets, liabilities, costs and revenues of
each vehicle used for transactions in which the Group acts as originator.
(millions of euro)
BERICA ABS 3 S.r.l. (*)
A. Assets
197
A.1 Loans
197
A.2 Securities
-
A.3 Other assets
-
B. Use of cash and cash equivalents
13
B.1 Deposits with banks
-
B.2 Prepayments and accrued income
-
B.3 Other
13
B Liabilities
162
B.1 Class A Securities issued
-
B.2 Class B Securities issued
18
B.3 Class C Securities issued
-
B.4 Class J Securities issued
115
B.5 Other liabilities
29
C. Interest expense and other expenses
17
D. Interest income and other revenues
23
(*) Vehicle used for securitisations involving residential mortgage loans. The securitised assets included in the vehicle were not derecognised pursuant to the international
accounting standards.
With regard to the unconsolidated structured entities used for securitisations, the Group holds residual stakes in the vehicles
Augusto and Diocleziano, consolidated at equity. These vehicles are entities used in securitisations of assets, primarily land
and public works financing, of a company subject to joint control sold in previous years. The Group holds a residual stake in
these vehicles. There are no agreements in place which could result in the obligation of the Group to provide financial support
to said vehicles.
The Intesa Sanpaolo Group controls the companies Romulus Funding Corporation and Duomo Funding Plc (included solely in
the scope of consolidation pursuant to IFRS 10), which are used for transactions in which the Intesa Sanpaolo Group acts as
sponsor and whose operations are described in Section 4 - Risks of other companies, of this Part E.
C.5. Prudential consolidation - Servicer activities \u2013 originated securitisations: collection of securitised
loans and repayment of securities issued by the securitisation vehicle
SERVICER
SPECIAL PURPOSE
VEHICLE
SECURITISED
ASSETS
(end-of-period figure)
(millions of euro)
COLLECTIONS OF
LOANS
IN THE YEAR
(millions of euro)
PERCENTAGE OF REIMBURSED SECURITIES
(period-end figure)
Senior
Mezzanine
Junior
Non-
performing
Performing
Non-
performing
Performing
Non-
performing
Performing
Non-
performing
Performing
Non-
performing
Performing
Intesa
Sanpaolo
Berica ABS 3 S.r.l.
23
174
4
31
0%
100%
0%
81%
0%
0%
Intesa
Sanpaolo
Brera Sec S.r.l. (*) (**)
61
16,258
7
1,673
0%
29%
0%
0%
0%
0%
Intesa
Sanpaolo
Clara Sec S.r.l. (*)
30
6,412
10
2,159
0%
0%
0%
0%
0%
0%
Intesa
Sanpaolo
Giada Sec S.r.l. (*) (***)
130
21,673
10
3,806
0%
0%
0%
0%
0%
0%
Intesa
Sanpaolo
Teseo SPV S.r.l. (****)
-
3,644
-
-
0%
0%
0%
0%
0%
0%
Total
244
48,161
31
7,669
During 2022 the Berica ABS 4 S.r.l. securitisation was extinguished.
(*) Vehicle used for self-securitisations.
(**) As regards Brera Sec S.r.l., in 2022 the Brera SME securitisation was extinguished.
(***) As regards Giada Sec S.r.l., in 2022 a new self-securitisation was structured, named Giada Bis, for which no notes had been redeemed as at 31 December 2022.
(****) Vehicle used for the new traditional securitisation of performing lease receivables called Teseo. Note that collections of 129 million euro remained with the vehicle, as the
first payment date will be in March 2023.
C.6. Prudential consolidation \u2013 Consolidated securitisation vehicles
There were no transactions that used consolidated securitisation vehicles during 2022.
D. SALES
A. Financial assets sold not fully derecognised
Qualitative information
For a description of the operations shown in the tables below, reference is made to the information shown below the relevant
tables.
Conversely, for operations in debt securities against medium/long-term repurchase agreements, reference is made to the
information in Part B of the Notes to the consolidated financial statements.
Quantitative information
Prudential consolidation - Financial assets sold fully recognised and related financial liabilities: book
value
(millions of euro)
Financial assets sold fully recognised
Related financial liabilities
Book
value
of which:
securitisations
of which: subject
to sales contracts
with repurchase
clauses
of which:
non-
performing
Book
value
of which:
securitisations
of which:
subject to sales
contracts with
repurchase
clauses
A. Financial assets held for trading
599
-
599
X
615
-
615
1. Debt securities
391
-
391
X
395
-
395
2. Equities
208
-
208
X
220
-
220
3. Loans
-
-
-
X
-
-
-
4. Derivatives
-
-
-
X
-
-
-
B. Other financial assets mandatorily measured at
fair value
-
-
-
-
-
-
-
1. Debt securities
-
-
-
-
-
-
-
2. Equities
-
-
-
X
-
-
-
3. Loans
-
-
-
-
-
-
-
C. Financial assets designated at fair value
-
-
-
-
-
-
-
1. Debt securities
-
-
-
-
-
-
-
2. Loans
-
-
-
-
-
-
-
D. Financial assets measured at fair value through
other comprehensive income
7,645
-
7,645
-
7,739
-
7,739
1. Debt securities
7,645
-
7,645
-
7,739
-
7,739
2. Equities
-
-
-
X
-
-
-
3. Loans
-
-
-
-
-
-
-
E. Financial assets measured at amortised cost
5,458
27
5,431
3
5,150
18
5,132
1. Debt securities
5,431
-
5,431
-
5,132
-
5,132
2. Loans
27
27
-
3
18
18
-
TOTAL
31.12.2022
13,702
27
13,675
3
13,504
18
13,486
TOTAL
31.12.2021
14,213
98
14,115
10
12,546
67
12,479
The table above does not include covered bond transactions in which the Intesa Sanpaolo Group is both the seller and lender
for the vehicle issuing the debt securities.
The operations shown in the table mainly relate to the use of securities held for repurchase agreements and, to a lesser
extent, loans to customers assigned as part of the K-Equity and Berica securitisations.
Prudential consolidation \u2013 Financial assets sold partly recognised and related financial liabilities: book
value
These are not present in the Intesa Sanpaolo Group.
Prudential consolidation - Sales with liabilities having recourse exclusively on the assets sold and not
fully derecognised: fair value
(millions of euro)
Fully recognised
Partly
recognised
31.12.2022
31.12.2021
A. Financial assets held for trading
599
-
599
647
1. Debt securities
391
-
391
446
2. Equities
208
-
208
201
3. Loans
-
-
-
-
4. Derivatives
-
-
-
-
B. Other financial assets mandatorily measured at fair value
-
-
-
-
1. Debt securities
-
-
-
-
2. Equities
-
-
-
-
3. Loans
-
-
-
-
C. Financial assets designated at fair value
-
-
-
-
1. Debt securities
-
-
-
-
2. Loans
-
-
-
-
D. Financial assets measured at fair value through other
comprehensive income
7,645
-
7,645
8,548
1. Debt securities
7,645
-
7,645
8,548
2. Equities
-
-
-
-
3. Loans
-
-
-
-
E. Financial assets measured at amortised cost (fair value)
4,812
-
4,812
5,018
1. Debt securities
4,785
-
4,785
4,920
2. Loans
27
-
27
98
Total financial assets
13,056
-
13,056
14,213
Total related financial liabilities
13,504
-
13,504
12,546
Net value
31.12.2022
-448
-
-448
X
Net value
31.12.2021
1,667
-
X
1,667
The table above does not include covered bond transactions in which the Intesa Sanpaolo Group is both the seller and lender
for the vehicle issuing the debt securities.
B. Financial assets sold fully derecognised with recognition of continuing involvement
This type of exposure did not exist as at 31 December 2022.
C. Financial assets sold and fully derecognised
Qualitative information
Multioriginator sale transactions involving loan portfolios \u2013 classified as unlikely to pay in particular \u2013 attributable to the sale of
loans to a mutual investment fund with the assignment of the units in the fund to the selling intermediaries
At 31 December 2022, the Intesa Sanpaolo Group held units of mutual funds acquired in multioriginator sales of loan
portfolios.
In accordance with the provisions of the Communication of the Bank of Italy of 23 December 2019, incorporated into the
seventh update to Circular 262, disclosures regarding \u201cMultioriginator sale transactions involving loan portfolios \u2013 classified as
unlikely to pay in particular \u2013 attributable to the sale of loans to a mutual fund with the assignment of the units in the fund to
the selling intermediaries\u201d are provided below.
Back2Bonis Fund
In implementation of the derisking envisaged in the previous 2018-2021 Business Plan and the current 2022-2025 Business
Plan, in the third quarter of 2020 the Intesa Sanpaolo Group begun the deconsolidation of a portfolio of credit exposures
(including real estate assets and contracts) classified as unlikely to pay with real estate underlying held by the Parent
Company, accompanied by their conversion into units of the securities fund called Back2Bonis.
The transaction, the closing of which took place at the end of 2020, took the form for the Bank (including the transactions
undertaken in 2019 and 2020 by UBI Banca, merged in 2021) of the sale of a portfolio of loans, short-term legal relationships
and legal relationships and assets from lease receivables for a total gross amount of 351 million euro and net exposure of 164
million euro, accompanied by the subscription of the units of the Back2Bonis Fund for an amount of 164 million euro,
substantially in line with the net value of the loans and receivables sold.
The transaction was completed through: (i) the sale to the securitisation vehicle Ampre S.r.l. of the bank receivables and the
lease receivables; (ii) the sale to Ampre LeaseCo S.r.l. of the legal relationships and assets arising from the leases; (iii) the
sale of the short-term revolving contracts and the related legal relationships and receivables of ISP, together with the
medium/long-term contracts with residual disbursements and the related legal relationships, other than the lease relationships
and assets through the fronting bank provided by Banca Finanziaria Internazionale S.p.A.; (iv) the subscription by the
Back2Bonis Fund of all the securities issued by the securitisation vehicle; and (v) the acquisition by Intesa Sanpaolo of the
units of the Fund in exchange for the loans and receivables sold.
In 2022, additional loans were sold, for a gross amount of 1 billion euro and net exposure of 216 million euro, accompanied by
the subscription of units of the Back2Bonis Fund, for an amount of 216 million euro, with the sale price offset against the
subscription price of the Fund\u2019s units, without significant effects on the income statement for 2022.
The Back2Bonis fund, established in the form of a closed-end mutual fund whose units can only be subscribed by
professional investors, is a multi-originator platform for the management of Real Estate Small & Medium Size loans classified
as UTP, deriving from loans and credit lines granted to companies operating in the real estate sector or to real estate funds
(including those not fully disbursed/drawn down at the time of sale).
Following the completion of the transfer of the loans and receivables to the platform, ISP had deconsolidated the loans and
receivables and recognised the Fund\u2019s units in place of those loans and receivables.
The breakdown of the assigned debtors by economic sector was mainly concentrated in the following sectors:
\u2013 \"Production companies\" at 79.9%;
\u2013 \"Construction companies\" at 12.9%;
\u2013 \"Real estate business\" at 3.5%;
\u2013 \u201cFinancial and insurance business\" at 2.6%;
\u2013 and a residual amount in other business sectors (Services, Transport and Manufacturing Activities).
The assets of the assigned debtors were broken down as follows by geographical area:
\u2013 92.2% North-West;
\u2013 3.5% North-East;
\u2013 3.2% South and Islands;
\u2013 1.1% Centre.
At 31 December 2022, the Parent Company held a 55.4% stake (with voting rights limited to 35%) in the Back2Bonis Fund,
classified among investments subject to significant influence, for a consolidated book value of 387 million euro.
FI.NAV. Fund
In pursuit of the de-risking activities provided for in the previous 2018-2021 Business Plan and the current 2022-2025
Business Plan, in the fourth quarter of 2018 the Intesa Sanpaolo Group had launched the contribution to the FI.NAV. Fund (a
closed-end Italian securities umbrella fund) of a portfolio of non-performing secured and unsecured loans attributable to the
shipping sector.
The Fund, reserved for institutional investors, is managed by the asset management company Davy Global Fund
Management Limited, not a member of the Intesa Sanpaolo Group, based in Ireland, and is divided into two autonomous sub-
funds: FI.NAV. Sub-fund A \u2013 Loans, dedicated to receiving the loans transferred by the Intesa Sanpaolo Group and Unicredit,
and FI.NAV. Sub-fund B \u2013 New Finance, dedicated to receiving the capital of third-party investors to relaunch the
\u201crepossessed\u201d ships.
The transaction, formulated in 2018, was closed in 2019 through a sale of receivables without recourse for total gross
consideration of 155 million euro and a net exposure of 102 million euro, equal to the sale price, set off against the price of
subscription of the Fund units and, therefore, without
any effects on the income statement for 2019.
In the first quarter of 2020, a further tranche was sold without recourse for a gross amount of 37 million euro and a net value
of 34 million euro, in line with the sale price and, therefore, with no impact on the income statement for 2020.
Pursuant to IFRS 9, for the Intesa Sanpaolo Group the transaction entailed the derecognition of the loans sold since the Fund
has become solely responsible for managing them following the sale; the Intesa Sanpaolo Group had therefore derecognised
the loans concerned, while recognising the corresponding fair value of the units of the Fund assigned.
The Group companies involved in the transaction were the Parent Company Intesa Sanpaolo and some of its subsidiaries
merged in 2019 and 2020 (Cassa di Risparmio in Bologna and Mediocredito, both merged in 2019, and Banca IMI, merged in
2020).
In December 2022 the sale of a loan portfolio was finalised for a gross amount of 74 million euro and net exposure of 36
million euro, accompanied by the subscription of the units of the fund for an amount of 36 million euro, essentially in line with
the value of the exposure sold, without significant effects on the income statement for 2022.
The economic sector of the assigned debtors was mainly concentrated in Transport. The transferred financial assets are
primarily in the South and Islands area.
At 31 December 2022, the Parent Company ISP held a 50.54% stake in the FI.NAV. Fund, classified among investments
subject to significant influence, for a book value of 155 million euro. The measurement of the FI.NAV. Fund yielded a positive
effect of 7 million euro. Of this, +13 million euro was recognised through profit and loss, and refers to the change in the NAV
and the discount applied, while -6 million euro refers to foreign exchange differences, and is recognised, as per the IAS 28
investment policy, in a specific shareholders\u2019 equity reserve.
RSCT Fund \u2013 Loans Sub-Fund
As part of the derisking envisaged in the previous 2018-2021 Business Plan and the current 2022-2025 Business Plan, the
Intesa Sanpaolo Group had identified the opportunity to transfer assets (loans and securities) relating to non-performing
positions to the closed-end RSCT FUND, in exchange for units of the fund. The project was managed by Pillarstone, which
had selected a portfolio of industrial and commercial companies with the objective of helping each of them to identify a
strategy for maximising the potential for debt recovery, also through injections of new finance. The transaction took place in
May 2020 with the transfer of a portfolio of loans with 18 companies originated by the ISP Group (ISP and Banca IMI,
subsequently merged into ISP on 20 July 2020), Unicredit, BPER Banca and Cr\u00e9dit Agricole to the newly established closed-
end alternative investment RSCT Fund, managed by Davy Investment Fund Services, an alternative fund manager authorised
by the Central Bank of Ireland. The RSCT Fund is made up of two separate sub-funds: sub-fund A for the management of
loans acquired from the selling banks and sub-fund B for the management of the new finance. The May 2020 sale involved a
portfolio of loans, Sirti notes and PS Reti equity instruments for a gross amount of 339 million euro (ISP and Banca IMI) at a
net value of 255 million euro, substantially in line with the sale price. In July 2020, a further sale was completed of a loan
position for a gross amount of 6.3 million euro at a value of 4.5 million euro, with the sale price offset against the subscription
price of the Fund\u2019s units. In February 2021, a sale was completed of a loan position for a gross amount of 21.3 million euro at
a value of 13.9 million euro, with the sale price offset against the subscription price of the Fund\u2019s units. In March 2021, a sale
was completed of a loan position deriving from the absorption of UBI Banca for a gross amount of 3.1 million euro and a net
exposure of 1.2 million euro, with the concurrent subscription of units of the RSCT Fund for 1.3 million euro, essentially
aligned with the net value of the transferred loans. In June 2021, a further sale was completed of a loan position for a gross
amount of 0.4 million euro at a value of 0.1 million euro, with the sale price offset against the subscription price of the Fund\u2019s
units. By economic sector, the assigned debtors are 72% concentrated in \u201cCompanies that install electrical equipment\u201d, 18%
in \u201cAmusement and theme parks\u201d and 10% in \u201cRetail sale of footwear and accessories\u201d.
The transferred financial assets are primarily in the North-west area.
At 31 December 2022, the Parent Company ISP held a 70.07% stake in the RSCT Fund, classified among investments
subject to significant influence, for a book value of 256 million euro. The measurement of the RSCT Fund yielded a negative
effect for the year of 4 million euro.
IDEA CCR Corporate Credit Recovery II Fund - Loans Sub-fund
In 2018, the Intesa Sanpaolo Group (specifically Intesa Sanpaolo and the banks subsequently merged into Intesa Sanpaolo:
Cassa di Risparmio del Veneto, Cassa di Risparmio di Firenze, Cassa di Risparmio del Friuli Venezia Giulia, Cassa di
Risparmio in Bologna, and Mediocredito) participated in the closed-end Italian fund IDEA CCR Corporate Credit Recovery II -
Loans Sub-fund, managed by Dea Capital Alternative Funds S.G.R. S.p.A. and dedicated to the recovery of mid-size Italian
companies in situations of financial tension but with solid industrial fundamentals. The transaction, which was completed in
2018, was undertaken by contributing non-performing loans with a nominal value of 59 million euro and a net exposure to the
sale price of 39.2 million euro, with the price of sale offset against the subscription price, of equal amount, of the units of the
IDEA CCR Corporate Credit Recovery II Fund - Loans Sub-Fund. In 2021, the Bank\u2019s investment in the IDEA CCR Fund
increased further, due to the merger of UBI Banca, which had sold loan positions to the IDEA CCR Corporate Credit Recovery
II Fund, Loans Sub-fund, managed by Dea Capital Alternative Funds SGR, in 2020, 2019, 2018 and 2017 for a total gross
amount of 231 million euro and a net exposure of 144 million euro, with concurrent subscription of the units of the IDEA CCR
Fund for an amount of 148 million euro, with the price of sale offset against the price of subscription of the Fund units. The
breakdown of the assigned debtors by economic sector was mainly concentrated in the following sectors:
\u2013 \"Real estate activities\" at 31.6%;
\u2013 \"Transport and storage\" at 28%;
\u2013 \"Professional, scientific and technical activities\" at 10%;
\u2013 \u201cMetallurgy and metal product manufacturing\" at 9.4%;
\u2013 \u201cCar and other vehicle production\" at 5.6%;
\u2013 and a residual amount in other business sectors (Services, Transport and Manufacturing Activities).
The assets of the assigned debtors were broken down as follows by geographical area:
\u2013 28.8% North-West;
\u2013 11.8% North-East;
\u2013 31.2% South and Islands;
\u2013 23.8% Centre;
\u2013 4.4% Outside Italy.
In 2022, the investment of the Parent Company Intesa Sanpaolo in the IDEA CCR Fund changed due to: i) the inclusion of
the stake held by UBI Leasing S.p.A., merged into ISP in May 2022, which had sold loan positions to the IDEA CCR
Corporate Credit Recovery II Fund - Loans Sub-Fund in 2019 for a total gross amount of 5 million euro and a net exposure of
3 million euro, with the sale price offset against the subscription price, in the same amount, of the Fund units, and ii) the sale
of A1 units held by ISP in the Fund to Banca Nazionale del Lavoro S.p.A.. The receivable held by ISP in relation to the sale
was settled by offsetting with the purchase of units of Back2Bonis. As at 31 December 2022, Intesa Sanpaolo held a 19.98%
stake in the IDEA CCR Corporate Credit Recovery II Fund, Loans Sub-Fund, classified among Financial assets mandatorily
measured at fair value, for a book value of 46 million euro. The measurement of the IDEA CCR II Fund yielded a positive
effect on the income statement for the year of 4 million euro.
IDEA CCR Corporate Credit Recovery II Fund - Shipping Sub-fund
The Shipping Loans Sub-Fund refers to single-name, unlikely-to-pay non-performing loans with a sector focus on shipping
companies. The Fund consists of three sub-funds: loans, new finance and shipping. Following the merger of UBI Banca, ISP
also has an interest in the Shipping Sub-Fund, with a stake in the IDEA CCR II Fund \u2013 Shipping Sub-Fund. In 2018, UBI
Banca, which during 2021 was merged into Intesa Sanpaolo, had sold loans with a total gross amount of 45 million euro and
a net exposure of 31 million euro. As at 31 December 2022, Intesa Sanpaolo held a 20.37% stake in the IDEA CCR II Fund,
Shipping Sub-Fund, classified among Financial assets mandatorily measured at fair value, for a book value of 11 million euro.
The measurement of the IDEA CCR Corporate Credit Recovery II Fund - Shipping Sub-fund yielded no effects during the year
for the consolidated financial statements.
Clessidra Restructuring Fund
Clessidra Restructuring Fund (CRF Fund) is a closed-ended alternative investment fund reserved for institutional investors,
dedicated to investing in loans classified as unlikely to pay to previously identified industrial companies. In September 2019,
UBI Banca, which during 2021 was merged into Intesa Sanpaolo, had sold loans to five borrowers with a total gross amount
of 17 million euro and a net exposure of 11 million euro, with concurrent subscription of the units of the CRF Fund for an
amount essentially in line with the net value of the transferred loans.
The economic sector of the assigned debtors was mainly concentrated in \u201cManufacture of wooden doors and manufacture of
furniture\u201d.
The transferred financial assets are primarily in the North-west area.
As at 31 December 2022, Intesa Sanpaolo held a 4.34% stake in the CRF Fund, classified among Financial assets
mandatorily measured at fair value, for a book value of 9 million euro. The measurement of the Clessidra Restructuring Fund
yielded a positive effect of 1 million euro during the year.
UTP Italia Fund \u2013 Loans Sub-Fund
The UTP Italia Fund is an alternative closed-end Italian securities umbrella fund (AIF) in charge of managing loans classified
as unlikely-to-pay (UTP) and whose target is credit exposures to small and medium-sized enterprises and individuals. In
November 2022, the Parent Company Intesa Sanpaolo finalised the sale of a loan portfolio (mainly UTP) to the UTP Italia
Fund managed by Sagitta SGR, with Intrum Italy S.p.A. as special servicer. Specifically, the transaction entailed: i) the sale of
loans for a gross amount of 42 million euro and net exposure of 25 million euro, to Finn SPV S.r.l. (SPV 130) without
significant effects on the income statement for 2022; ii) the recognition of the receivable of 25 million euro from the SPV 130;
iii) the contribution to the UTP Italia Fund of the receivable from the SPV 130 in exchange for units of the fund by way of price;
and iv) issue of asset-backed securities (ABS) by the vehicle, subscribed by the Fund, derecognising the receivable from the
SPV 130.
The breakdown of the assigned debtors by economic sector was mainly concentrated in the following sectors:
\u2013 \"Production Companies\" at 80%;
\u2013 \"Companies with fewer than 20 workers\" at 9.1%;
\u2013 and a residual amount in other business sectors (Consumer households, Other financial intermediaries).
The assets of the assigned debtors were broken down as follows by geographical area:
\u2013 35.0% North-West;
\u2013 18.3% North-East;
\u2013 32.6% South and Islands;
\u2013 14.1% Centre.
As at 31 December 2022, Intesa Sanpaolo held a 27.58% stake in the UTP Italia Fund, classified among Financial assets
mandatorily measured at fair value, for a book value of 25 million euro.
Efesto
Efesto is an alternative closed-end Italian securities fund (AIF). In July 2022 the sale of loans was finalised for a gross amount
of 17 million euro and net exposure of 9 million euro, accompanied by the subscription of the units of the fund for an amount
of 7 million euro, without significant effects on the income statement for 2022. The economic sector of the assigned debtor is
\u201cProduction Companies\u201d. The financial asset sold is located in the North-west area. As at 31 December 2022, Intesa
Sanpaolo held a 2.44% stake in the Efesto Fund, classified among Financial assets mandatorily measured at fair value, for a
book value of 8 million euro. The measurement of the Efesto Fund yielded a positive effect of 1 million euro during the year.
Prudential consolidation - Covered bond transactions
Covered bond transactions where the selling bank and the lending bank are the same must be reported under this section.
Intesa Sanpaolo uses covered bonds mainly as a type of funding through securities guaranteed by assets originated by Intesa
Sanpaolo or by other companies of the Group.
Intesa Sanpaolo has arranged three programmes for the issue of Covered Bonds (CB).
The first programme, launched in 2009, has a maximum amount of 20 billion euro (the original maximum amount was 10
billion euro). The guarantor of the Covered Bonds is the vehicle ISP CB Pubblico, to which a portfolio of performing loans and
securities to the public sector, originated by the former subsidiary Banca Infrastrutture Innovazione e Sviluppo, now Intesa
Sanpaolo, was transferred. The Bank gradually sold the vehicle assets with a total original nominal value of 14.3 billion euro
(net of retrocessions of assets of 0.5 billion euro). The last sale (amounting to around 1 billion euro) took place in April 2013.
As at 31 December 2022, loans and securities sold to the vehicle had a book value of 3.2 billion euro.
Against these sales, Covered Bonds were issued over time for a total nominal value of 25.2 billion euro (of which 18.15 billion
euro relating to issues acquired in full by the Parent Company and subject to early redemption or matured and 3.5 billion euro
relating to an exchange offer to investors during 2012, of which 2 billion euro that matured in the second quarter of 2017 and
the remaining 1.5 billion euro in January 2021).
As at 31 December 2021, a total nominal amount of 3.6 billion euro of issues made as part of the Covered Bond programme
of the vehicle ISP CB Pubblico was outstanding, fully subscribed by the Bank.
During 2022 the tenth series was fully subject to early redemption, for a total nominal amount of 250 million euro, and the
twelfth series was partially redeemed for 225 million euro.
Therefore, as at 31 December 2022, a total nominal amount of 3.1 billion euro of issues made as part of the Covered Bond
programme of the vehicle ISP CB Pubblico was outstanding, fully subscribed by Intesa Sanpaolo.
All the securities issued under the programme are listed on the Luxembourg Stock Exchange and have a Moody\u2019s A2 rating.
In the second programme, launched in 2010, amounting to a maximum of 25 billion euro (the original maximum amount was
20 billion euro), the guarantor of the covered bonds is the vehicle ISP CB Ipotecario S.r.l., to which Italian residential
mortgage loans and, initially bonds issued by Adriano Finance S.r.l., originated by Intesa Sanpaolo, were transferred.
The Bank gradually sold the vehicle mortgage loans with an original total nominal value of 38.4 billion euro (net of
retrocessions).
During 2022, the following additional transactions were also finalised:
\u2013 in January repurchases were carried out for an amount of 116 million euro;
\u2013 in May sales were carried out for an amount of 2.7 billion euro.
As at 31 December 2022, the loans sold to the vehicle had a book value of 16.6 billion euro.
Over time, against the sale of these assets, Intesa Sanpaolo has carried out issues of Covered Bonds for a total nominal
value of approximately 34.9 billion euro (of which a total of 20.6 billion euro subject to early redemption or matured at
December 2022).
As at 31 December 2021, a total nominal amount of 15.5 billion euro of issues made as part of the covered bond programme
of the vehicle ISP CB Ipotecario was outstanding, of which 10.6 billion placed with third party investors and 4.9 billion
subscribed by Intesa Sanpaolo. Part of the latter was subsequently used in repurchase agreements for an amount of
343 million euro.
During 2022, two series matured for an amount of 2.2 billion euro and one series was issued for an amount of 1 billion euro.
Accordingly, as at 31 December 2022, a total nominal amount of 14.3 billion euro of issues made as part of the covered bond
programme of the vehicle ISP CB Ipotecario was outstanding, of which 8.4 billion placed with third party investors and
5.9 billion subscribed by Intesa Sanpaolo. Part of the latter was subsequently used in repurchase agreements for an amount
of 343 million euro.
All the securities issued under the programme are listed on the Luxembourg Stock Exchange and have a Moody\u2019s Aa3 rating.
The third multi-originator Covered Bond issue programme, launched in 2012, has the vehicle ISP OBG S.r.l. as the guarantor
of its securities. This programme is secured by mortgages for a maximum amount of 55 billion euro (the original maximum
amount was 30 billion euro) and is aimed at realising the retained issues.
The portfolio used to collateralise the issues of Covered Bonds is composed of mortgages originated by Intesa Sanpaolo,
Banco di Napoli, Cassa di Risparmio del Veneto, Cassa di Risparmio in Bologna and Banca CR Firenze (merged by
incorporation into Intesa Sanpaolo between July 2018 and February 2019).
Over time, the Intesa Sanpaolo Group sold mortgages to the vehicle for an original total nominal value of 94.4 billion euro
(net of exclusions).
In 2022, Intesa Sanpaolo sold mortgages to the vehicle for an original total nominal value of 12 billion euro (net of exclusions).
The following sales were carried out:
\u2013 in June, sales for an amount of 6.2 billion euro;
\u2013 in November, sales for a total of 6 billion euro.
In addition, the following loans were repurchased in 2022:
\u2013 in January, for an amount of 281 million euro.
As at 31 December 2022, the loans sold to the vehicle by Intesa Sanpaolo had a book value of 54.2 billion euro.
Over time, against the sales of these assets, the Bank has carried out issues of Covered Bonds for a total nominal value of
around 86.3 billion euro (of which 40.2 billion euro subject to early redemption and reimbursed). All the securities issued as
part of the programme are listed on the Luxembourg Stock Exchange and have a DBRS Morningstar A rating.
As at 31 December 2021, a total nominal amount of 45.9 billion euro of issues made as part of the Covered Bond programme
of the vehicle ISP OBG was outstanding, fully subscribed by Intesa Sanpaolo.
During 2022, the forty-seventh series was issued for 10 million euro.
Accordingly, as at 31 December 2022, a total nominal amount of 45.9 billion euro of issues made as part of the Covered Bond
programme of the vehicle ISP OBG was outstanding, fully subscribed by Intesa Sanpaolo.
The fourth programme was launched by the former UBI Banca Group in 2008.
Former UBI Banca, merged into Intesa Sanpaolo S.p.A. during 2021, included two covered bond programmes, run by two
special purpose vehicles named UBI Finance S.r.l. and UBI Finance CB2 S.r.l., respectively. The latter was closed in January
2021.
The former programme still provides Intesa Sanpaolo with the right to issue securities, targeted to institutional investors, for a
maximum amount of 15 billion euro. The Programme includes residential mortgage loans assigned by the UBI Group\u2019s
network banks. These banks participated in the programme as Originator Banks and Lending Banks.
As at 31 December 2021 a total nominal amount of 9.1 billion euro of issues made as part of the covered bond programme of
the vehicle UBI Finance was outstanding, of which 7.5 billion placed with third party investors and 1.6 billion retained.
During 2022, four series matured for a total amount of 1.4 billion euro.
As at 31 December 2022 a total nominal amount of 7.7 billion euro of issues made as part of the covered bond programme of
the vehicle UBI Finance was outstanding, of which 7.5 billion placed with third party investors and 0.2 billion retained.
As at 31 December, the bonds under the programme were assigned an Aa3 rating from Moody\u2019s and AA from DBRS
Morningstar.
In 2022, Intesa Sanpaolo sold mortgages to the vehicle for an original total nominal value of 751 million euro.
The following transactions were carried out:
\u2013 in June, a sale for an amount of 823 million euro;
\u2013 in February, repurchases were carried out for an amount of 72 million euro.
As at 31 December 2022, the loans sold to the vehicle had a book value of 8.6 billion euro.
The key figures for ISP CB Pubblico, ISP CB Ipotecario, ISP OBG, and UBI Finance as at 31 December 2022 are shown in
the table below.
(millions of euro)
COVERED BOND
VEHICLE DATA
SUBORDINATED
LOAN
(1)
COVERED BONDS
ISSUED
Total
assets
Cumulated
write-downs on
securitised
portfolio
amount
Nominal
amount
(2)
Book
value
(2)
ISP CB PUBBLICO
Performing public sector
loans and securities
3,978
21
3,897
-
-
ISP CB IPOTECARIO
Residential mortgages
21,508
33
18,612
8,702
8,328
ISP OBG
Mortgages
60,733
192
60,537
-
-
UBI FINANCE
Residential mortgages
9,351
65
9,241
7,497
7,108
(1) This caption includes the subordinated loan granted to the vehicles for the purchase of the portfolio lodged as collateral for the CB. This loan is derecognised in
the IAS-compliant separate financial statements. The amount of the loan refers to the issue already executed as part of an issue programme with a higher maximum
amount.
(2) The nominal amount and the book value shown in the table are to be considered net of securities repurchased.
In addition to this type of Covered Bonds, provided for by Italian law (Law 80/2005), there are some mortgage bonds issued
by the Slovak investee VUB. These are securities whose nominal value and returns are guaranteed by mortgage loans, i.e.
loans to individuals with residual maturities up to 30 years, backed by a pledge on property located in the Slovak Republic,
with a maximum loan-to-value of 80%.
Each issue has specific coverage, and the entire nominal value of the issue, including interest, must be backed by mortgage
loans on local properties on at least 90% of their nominal value, and the remaining 10% possibly by liquidity or deposits with
the National Bank of Slovakia, the European Central Bank, other European central banks or banks that meet the criteria set
out in Art. 129(1)(c) of Regulation (EU) 575/2013.
To cover the negative net cash flows expected from the covered bonds at 180 days, the issuer must maintain high-quality
liquid assets pursuant to Articles 10 and 11 of Regulation (EU) 61/2015.
As at 31 December 2022, the subsidiary VUB had issued 4 billion euro in this type of securities, booked in the financial
statements at a value of approximately 3.8 billion euro.
E. PRUDENTIAL CONSOLIDATION - MODELS FOR THE MEASUREMENT OF CREDIT RISK
As at 31 December 2022, the expected loss on performing loans to customers (which takes account of cash and unsecured
loan types) was 0.40%, substantially in line with the figure for 2021 (0.39%). The stable incidence is due to the offsetting of
the increased risk from counterparties involved in the Russia-Ukraine conflict, and the activities of derisking and improvement
in the credit quality recorded in the second half of the year.
As at 31 December 2022, economic capital was 2.00% of disbursed loans, down, considering performing loans to customers
only, on the figure for 2021 (-0.44%). That change is attributable to the above-mentioned improvement in the quality of the
portfolio, as well as the inclusion of the most significant international subsidiary banks in the analytical calculations of
economic capital.
For the companies included in the roll out plan, the LGD and EAD internal regulatory rating models are subject to a second
level of control by the Validation function, as described in paragraph 2.3 of this Section, and a third level of control by the
Internal Auditing function. The control functions produce annual reports for the Supervisory Authority on the compliance of the
models with the supervisory regulations, which also includes a verification on the deviations of the ex-ante estimates and the
effective ex post values. These reports, approved by the Board of Directors of Intesa Sanpaolo, confirm the compliance to the
regulatory requirements.
1.2. MARKET RISKS
As already mentioned in the Introduction, the Intesa Sanpaolo Group policies on financial risk are defined by the Parent
Company\u2019s Management Bodies, with the support of specific Committees, including the Steering Committee, chaired by the
Managing Director and CEO and composed of the heads of the main corporate departments, and the Group Financial Risk
Committee.
The Steering Committee, a Group body with a decision-making, reporting and consulting role, is also assigned the functions
of assisting the Managing Director and CEO in the performance of his duties, strengthening the coordination and cooperation
mechanisms between the various business, governance and control areas of the Group, with a view to sharing the main
business choices, and helping ensure coordinated and integrated risk management and the safeguarding of business value at
Group level, including the correct functioning of the internal control system.
The Group Financial Risk Committee, chaired by the Chief Risk Officer and the Chief Financial Officer, is responsible for
setting out the methodological and measurement guidelines for financial risks, establishing the operational limits and
assessing the risk profile of the Group and its main operational units. The Committee also sets out the strategies for the
management of the banking book to be submitted to the competent Bodies and establishes the guidelines on liquidity, interest
rate and foreign exchange risk.
The Committee operates on the basis of the operating and functional powers delegated by the Corporate Bodies and
coordination of the Steering Committee.
The Group\u2019s overall financial risk profile and the eventual necessary changes are examined periodically by the Group
Financial Risk Committee.
The Parent Company\u2019s Market and Financial Risk Management Head Office Department is responsible for the development
of corporate risk measurement and monitoring methodologies as well as for the proposals on the Group\u2019s system of
operational limits. It is also responsible in outsourcing for the risk measurement for certain operating units on the basis of
specific service contracts.
The table below shows the items of the consolidated Balance Sheet that are subject to market risks, showing the positions for
which managerial VaR is the main risk measurement metric (the managerial VaR is calculated on a wider scope that than
subject to the Internal Model for market risks. For a more in-depth discussion, refer to the subsequent paragraph), along with
those for which risks are monitored with other metrics. The latter mostly include the sensitivity analysis to the different risk
factors (interest rate, credit spread, etc.).
(millions of euro)
BOOK VALUE
(supervisory
scope)
MAIN RISK MEASUREMENT METRICS
VaR
Other
Risk factors measured
using metrics included
under Other
Assets subject to market risk
645,478
93,608
551,870
Financial assets held for trading
42,614
42,260
354
Interest rate risk, credit spread, equity
Financial assets designated at fair value
1
1
-
-
Other financial assets mandatorily measured at
fair value
5,706
176
5,530
Interest rate risk, credit spread, equity
Financial assets measured at fair value through
other comprehensive income (ifrs 7 par. 8 lett. h))
49,716
48,342
1,374
Interest rate risk, credit spread, equity
Due from banks
32,887
-
32,887
Interest rate risk
Loans to customers
495,952
-
495,952
Interest rate risk
Hedging derivatives
10,062
2,829
7,233
Interest rate risk
Investments in associates and companies
subject to joint control
8,540
-
8,540
Equity risk
Liabilities subject to market risk
731,920
55,340
676,580
Due to banks
137,217
-
137,217
Interest rate risk
Due to customers
456,640
-
456,640
Interest rate risk
Securities issued
77,389
-
77,389
Interest rate risk
Financial liabilities held for trading
46,533
46,462
71
Interest rate risk
Financial liabilities designated at fair value (ifrs 7
par. 8 lett. e))
8,795
8,795
-
-
Hedging derivatives
5,346
83
5,263
Interest rate risk
REGULATORY TRADING BOOK
1.2.1. INTEREST RATE RISK AND PRICE RISK
Qualitative information
General aspects
The regulatory requirements for the trading book are established in Regulation EU 575/2013 (CRR - Part Three, Title I,
Chapter 3, in Articles 102, 103, and 104 respectively). The combined provisions of those articles lay down the set of minimum
requirements for the identification of the trading strategies and the measurement and control of the associated risks.
In accordance with the requirements of the applicable regulations, the Intesa Sanpaolo Group has established an internal
policy that identifies the trading book based on:
\u2212 measurement at fair value through profit or loss of the instruments held for trading;
\u2212 the strategies defined;
\u2212 the risk-taking centres identified;
\u2212 the monitoring, limitation and management of the risks defined in accordance with the internal regulations on market risk.
In particular, the assets classified in the regulatory trading book coincide \u2013 apart from some specific exceptions \u2013 with the
financial assets held for trading (Bank of Italy Circular 262). This association derives from the set of strategies, powers, limits
and controls that feed and guarantee the adjacency and consistency between the accounting and prudential portfolios.
Among risks associated with trading activity, i.e. market risks deriving from the effect that changes in market variables may
generate on the Group's various assets and liabilities, the latter are generally quantified through daily and periodic analysis
designed to determine the vulnerability of the Intesa Sanpaolo Group\u2019s trading book. A list of the main risk factors to which the
Group\u2019s trading book is exposed is set out below:
\u2212 interest rates;
\u2212 equities and market indexes;
\u2212 investment funds;
\u2212 foreign exchange rates;
\u2212 implied volatilities;
\u2212 spreads in credit default swaps (CDSs);
\u2212 spreads in bond issues;
\u2212 correlation instruments;
\u2212 dividend derivatives;
\u2212 asset-backed securities (ABSs);
\u2212 commodities.
For some of the risk factors cited above and included in the managerial VaR (Value at Risk) measurements, the Supervisory
Authority has validated the internal models for the reporting of the capital requirement of Intesa Sanpaolo. More specifically,
concerning market risk, the risk profiles validated are: (i) generic/specific on debt securities and on equities; (ii) position risk
on quotas of UCI with daily liquidity and (iii) commodity risk.
Risk management processes and measurement methods
The allocation of capital for trading activities is set by the Parent Company\u2019s Board of Directors, through the attribution of
operating limits in terms of VaR to the various Group units.
The structure of limits reflects the risk level deemed to be acceptable with reference to single business areas, consistent with
operating and strategic guidelines defined by top management. The attribution and control of limits at the various hierarchical
levels implies the assignment of delegated powers to the heads of business areas, aimed at achieving the best trade-off
between a controlled risk environment and the need for operating flexibility. The functioning of the system of limits and
delegated powers is underpinned by the basic concepts of hierarchy and interaction.
The application of such principles led to the definition of a structure of limits in which the distinction between first level and
second level limits is particularly important:
\u2212 first-level limits (VaR): the overall limits of the Group as well as those of the IMI C&IB Division and Group Treasury and
Finance Department are included in the Group\u2019s Risk Appetite Framework (RAF). At the same time, the Board of
Directors of the Parent Company defines the operating limits in terms of VaR for other Group companies which hold
smaller trading books whose risk is marginal. Following approval, these limits are then allocated to the desks of the
individual legal entities, considering the proposals by the business units. Limit absorption trends and the relative
congruity analysis are periodically assessed by the Group Financial Risk Committee and Board of Directors within the
framework of the Tableau de Bord for the Group\u2019s risks;
\u2212 second level limits (sensitivity and greeks): they have the objective of controlling operations of the various desks on
the basis of differentiated measures based on the specific characteristics of traded instruments and operating strategies,
such as sensitivity, greeks and equivalent exposures;
\u2212 other significant limits: they have the objective of monitoring particular transactions (e.g. limits of negative maximum
exposure of the valuation reserve, ceilings for transactions with issuer risk).
Some of these limits may be covered by the RAF rules. See also the paragraph \u201cThe internal control system\u201d for a more
detailed representation of the risk framework.
The Parent Company represents the main portion of the Group\u2019s market risks, while some other Group subsidiaries hold
smaller trading books with a marginal risk (approximately less than 1% of the Group\u2019s overall management risk): in particular,
the risk factors of the international subsidiaries\u2019 trading books are local government bonds, positions in interest rates, and
foreign exchange rates relating to linear pay-offs.
A more detailed representation of the market risk metrics monitored in the limit structure is set out below:
Managerial VaR
Definition: Value at Risk is a monetary estimate of risk based on statistical techniques capable of summarising the maximum
probable loss, with a certain confidence level, that a financial position or portfolio may suffer in a given period (holding period)
in response to changes in the risk factors underlying the measurement models caused by market dynamics.
Method: the mathematical and statistical models that make it possible to calculate VaR can be divided into two general
categories: parametric approaches (variance/covariance) and approaches based on simulation techniques, such as that in
use at Intesa Sanpaolo.
Specifically, the approach used in Intesa Sanpaolo has the following characteristics:
\u2212 historical simulation model based on the mark-to-future platform;
\u2212 a 99th percentile confidence interval;
\u2212 disposal period of 1 day;
\u2212 full revaluation of existing positions.
Historical simulation scenarios are calculated internally on time series of one-year risk factors (250 observations).
For management purposes, a non-equal probability of occurrence is associated with each scenario, decreasing exponentially
as a function of time, to privilege the informational content of the most recent data. For regulatory purposes, scenarios are
equally weighted when calculating the capital requirement.
Please note that, in the first quarter of 2022, on approving the ordinary annual update of the market risk managerial
framework (as part of the 2022 Group Risk Appetite Framework), the Board of Directors confirmed a specific limit for trading
within an overall limit for trading and the hold to collect and sell (HTCS) business model.
Sensitivity and greeks
Definition: sensitivity measures the risk attributable to a change in the theoretical value of a financial position to changes of a
defined quantity of risk factors connected thereto. It therefore summarises:
\u2212 the extent and direction of the change in the form of multipliers or monetary changes in theoretical value;
\u2212 without explicit assumptions on the time horizon;
\u2212 without explicit assumptions of correlation between risk factors.
Method: the sensitivity indicator can be constructed using the following techniques:
\u2212 calculation of prime and second derivatives of the valuation formulae;
\u2212 calculation of the difference between the initial value and that resulting from the application of unidirectional shocks
independent of risk factors (delta, gamma, vega, CR01 and PV01).
Sensitivity measures make risk profiling more accurate, especially in the presence of option components. These measure the
risk attributable to a change in the value of a financial position to predefined changes in valuation parameters including a one
basis point increase in interest rates.
Level measures
Definition: Level measures, used also as ratios, are indicators supporting synthetic risk metrics which are based on the
assumption of a direct relationship between the size of a financial position and the risk profile. In particular, level measures
make it possible to monitor the nature of exposures to certain issuers and economic groups.
The main level measure indicators are nominal (or equivalent) position and average duration metrics; level indicators also
include the Negative Maximum Exposure of the Valuation Reserve measures characteristic of the HTCS business model.
Method: nominal (or equivalent) position is determined by identifying:
\u2212 the notional amount;
\u2212 the mark to market;
\u2212 the conversion of the position of one or more instruments to that of a given benchmark (equivalent position);
\u2212 the FX exposure.
When determining the equivalent position, risk is defined as the value of the various assets, converted into an aggregate
position that is \u201cequivalent\u201d in terms of sensitivity to the change in the risk factors investigated.
At Intesa Sanpaolo the approach is characterised by extended use of ceilings in terms of MtM, as representative of the value
of the assets as recognised.
Stress tests
Definition: stress tests are conducted periodically to identify and monitor potential vulnerabilities in trading books upon the
occurrence of extreme, rare events not fully captured by VaR models.
Method: Stress tests for management purposes are applied periodically to market risk exposures, typically adopting:
\u2212 sensitivity analysis, which measures the potential impact on the main risk metrics of a change in a single risk factor or
simple multi-risk factors;
\u2212 scenario analysis, which measures the potential impact on the main risk metrics of a certain scenario that considers
multiple risk factors.
The following stress exercises are included in the Group\u2019s Stress Testing Programme:
\u2212 multi-risk exercise, based on scenario analysis, which enables the forward-looking assessment of the simultaneous
impact on the Group of multiple risk factors, also taking into account the interrelationships between them and, where
applicable, the top management\u2019s reaction capacity;
\u2212 regulatory multi-risk exercise, ordered and coordinated by the supervisor/regulator which defines its general assumptions
and scenarios, requires the full revaluation of the impacts with the resulting need of contributions from the specialist
departments of the Chief Risk Officer and Chief Financial Officer Governance Areas;
\u2212 situational exercise, ordered by the top management or by the supervisor/regulator in order to assess the impact of
particular events (relating to the geopolitical, financial, economic, competitive environment, etc.) from a forward-looking
perspective;
\u2212 a single or specific risk exercise to assess the impact of scenarios (or single or more specific risk factors) on specific risk
areas.
Stressed VaR
Definition: the stressed VaR metric is based on the same measurement techniques as VaR. In contrast to the latter, it is
calculated by applying market stress conditions recorded over an uninterrupted 12-month historical period.
Method: that period was identified considering the following guidelines:
\u2212 the period must represent a stress scenario for the portfolio;
\u2212 the period must have a significant impact on the main risk factors for the portfolio of Intesa Sanpaolo;
\u2212 the period must allow real time series to be used for all portfolio risk factors.
While using the historical simulation approach for VaR calculation, the latter point is a discriminating condition in the selection
of the holding period. Actually, in order to ensure that the scenario adopted is effectively consistent and to avoid the use of
driver or comparable factors, the historical period must ensure the effective availability of market data.
As at the date of preparation of the 2022 Financial Statements, the period for the measurement of Stressed VaR for Intesa
Sanpaolo was from 3 October 2011 to 20 September 2012.
For managerial purposes, the stressed VaR metric is calculated on the entire set of the Group\u2019s portfolios measured at fair
value (trading and FVOCI in the banking scope) and the stressed period is revised at least annually, together with the annual
update to the market risk management framework (Risk Appetite Framework).
Incremental Risk Charge (IRC)
Definition: The Incremental Risk Charge (IRC) is the maximum potential loss in the credit trading book resulting from an
upgrade/downgrade or bankruptcy of the issuers, over a 1-year period, with a 99.9% confidence level. This measure, which is
additional to the VaR, is applied to the entire trading book of Intesa Sanpaolo (just as for the other regulatory metrics, it is not
applied to the sub-portfolios).
The IRC enables the correct representation of the specific risk on debt securities and credit derivatives because, in addition to
idiosyncratic risk, it also captures event and default risk.
This measure applies to all financial products that are sensitive to credit spreads included in the trading book except for the
securitisations.
Method: The simulation is based on a Modified Merton Model. The probabilities of transition and default are those observed
through the historical matrices of the main rating agencies, applying a probability of default minimum value higher than zero.
The asset correlation is inferred from the equity correlation of the issuers. The model is based on the assumption of a
constant position with a holding period of one year.
A regular stress program is applied to the model\u2019s main parameters (correlation, and transition, default and credit spread
matrices).
Quantitative information
Daily managerial VaR evolution
Below is a summary of the daily managerial VaR for the trading book only, which also shows the overall exposure of the main
risk-taking centres.
Daily managerial VaR of the trading book
(millions of euro)
average 4th
quarter
minimum 4th
quarter
maximum 4th
quarter
average 3rd
quarter
average 2nd
quarter
average 1st
quarter
Total GroupTrading Book
(a)
26.6
21.5
31.0
26.0
22.8
21.4
of which: Group Treasury and Finance
Department
6.6
4.9
9.4
7.2
6.1
3.8
of which: IMI C&IB Division
24.7
18.7
31.0
26.0
21.2
17.5
Each line in the table sets out past estimates of daily VaR calculated on the histrorical quarterly time-series of the Intesa Sanpaolo Group (including other subsidiaries), the Group
Treasury and Finance Department and the IMI C&IB Division respectively; minimum and maximum values for the overall perimeter are estimated using aggregate historical time-
series and therefore do not correspond to the sum of the individual values in the column.
(a) The Group Trading Book figure includes the managerial VaR of the Group Treasury and Finance Department, the IMI C&IB Division (Trading Book perimeter) and the other
subsidiaries.
During the fourth quarter of 2022, as shown in the table above, compared to the averages for the third quarter of 2022, trading
managerial risks were substantially stable (26.6 million euro in the fourth quarter of 2022 and 26 million euro in the third
quarter of 2022).
Instead, with regard to the overall performance in 2022, compared to the same period of 2021, the trading managerial VaR
decreased slightly, also due to lower market volatility compared to the exceptional market shocks connected with the spread
of the COVID-19 pandemic. In particular, there was a reduction from 26.7 million euro in 2021 to 24.1 million euro in 2022.
Daily managerial VaR of the trading book - Comparison 2022 \u2013 2021
(millions of euro)
2022
2021
average
minimum
maximum
last day
average
minimum
maximum
Total GroupTrading Book
(a)
24.1
15.4
32.5
22.4
26.7
16.9
57.8
of which: Group Treasury and Finance
Department
5.9
2.4
9.4
6.4
2.8
2.3
5.6
of which: IMI C&IB Division
22.3
13.9
34.1
18.7
25.7
16.0
51.9
Each line in the table sets out past estimates of daily VaR calculated on the historical time-series of the first nine months of the Intesa Sanpaolo Group (including other
subsidiaries), the year respectively of the Group Treasury and Finance Department and the IMI C&IB Division; minimum and maximum values for the overall perimeter are
estimated using aggregate historical time-series and therefore do not correspond to the sum of the individual values in the column.
(a) The Group Trading Book figure includes the managerial VaR of the Group Treasury and Finance Department, the IMI C&IB Division (Trading Book perimeter) and the other
subsidiaries.
The trend in the trading VaR in the fourth quarter of 2022 was mainly marked by transactions conducted by the IMI C&IB
Division. Specifically, as shown in the chart below, there was a gradual decrease attributable to transactions in developed
market government securities and credit indices. The movements are shown in the chart below:
The breakdown of the Group\u2019s risk profile in the trading book in the fourth quarter of 2022 shows a prevalence of credit spread
risk and interest rate risk, accounting for 34% and 29%, respectively, of the Group\u2019s total managerial VaR. Instead, the single
risk-taking centres show a prevalence of exchange rate risk and interest rate risk for the Group Treasury and Finance
Department (46% and 44%, respectively) and of credit spread and interest rate risk for the IMI C&IB Division (40% and 29%,
respectively).
Contribution of risk factors to total managerial VaR
4th quarter 2022
Shares
Interest rates
Credit
spreads
Foreign
exchange
rates
Other
parameters
Commodities
Group Treasury and Finance
Department
4%
44%
6%
46%
0%
0%
IMI C&IB Division
13%
29%
40%
5%
8%
5%
Total
11%
29%
34%
15%
7%
4%
(a) Each line in the table sets out the contribution of risk factors considering 100% the overall capital at risk, calculated as the average of daily estimates in the fourth
quarter of 2022, broken down between the Group Treasury and Finance Department and IMI C&IB Division and indicating the distribution of the Group's overall
capital at risk.
Risk control with regard to the activity of the Intesa Sanpaolo Group also uses scenario analyses and stress tests. The impact
of selected scenarios relating to the evolution of stock prices, interest rates, credit spreads, foreign exchange rates and
commodity prices at the end of December is summarised in the following table:
(millions of euro)
EQUITY
INTEREST
RATES
CREDIT
SPREADS
FOREIGN
EXCHANGE
RATES
COMMODITIES
Crash
Bullish
+40bps
lower
rate
-25bps
+25bps
-5%
+5%
Crash
Bullish
Total Trading Book
55
15
17
10
-16
19
22
-13
-17
6
0
5
10
15
20
25
30
35
40
45
50
Jan-22 Mar-22 Jun-22 Sep-22 Dec-22
Millions of euro
Daily evolution of market risks - VaR
IMI C&IB Division Group Trading Book Group Treasury and Finance Department
Specifically:
\u2013 for stock market positions, there would not be potential losses either in the case of sudden increases in stock prices or in
the case of sharp decreases therein;
\u2013 for positions in interest rates, there would not be potential losses either in the case of sudden increases or decreases
therein;
\u2013 for positions in credit spreads, a tightening of credit spreads of 25 bps would result in an overall loss of 16 million euro;
\u2013 for positions in exchange rates, there would be potential losses of 13 million euro in the event of appreciation in the Euro
against the other currencies;
\u2013 finally, for positions in commodities, there would be a loss of 17 million euro in the event of a fall in prices of commodities
other than precious metals.
With regard to the use of the overall limit relating to trading and the hold to collect and sell (HTCS) business model, there was
an overall reduction in the market managerial VaR in the fourth quarter of 2022 from 207 million euro (average managerial
VaR third quarter 2022) to 155 million euro (average managerial VaR fourth quarter 2022).
Backtesting
The soundness of the VaR calculation methods must be monitored daily via backtesting which, for the regulatory backtesting,
compares:
\u2013 the daily estimates of value at risk;
\u2013 the daily profits/losses based on backtesting which are determined using actual daily profits and losses achieved by
individual desks, net of components which are not considered in backtesting: these include, for example, fees and
financial costs of managing the positions that are regularly reported within the managerial area.
Backtesting allows verification of the model\u2019s capability of correctly seizing, from a statistical viewpoint, the variability in the
daily valuation of trading positions, covering an observation period of one year (approximately 250 estimates). Any critical
situations relative to the adequacy of the internal model are represented by situations in which daily profits/losses based on
backtesting highlight more than four occasions, in the year of observation, in which the daily loss is higher than the value at
risk estimate. Current regulations require that backtesting is performed by taking into consideration both the actual and
hypothetical P&L series.
During the last year there were three backtesting exceptions
104
for the regulatory VaR measure of Intesa Sanpaolo. The
breaches were not due to portfolio turnover but to peaks of volatility in the interest rate and credit risk factors.
104
In the last 250 observations, the Bank recorded three Actual P&L exceptions and three Hypothetical P&L exceptions. For the total calculation, as per
the reference regulations, the maximum between Actual P&L and Hypothetical P&L exceptions is counted. Accordingly, there were three backtesting
exceptions in the last year.
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
Jan-22 Mar-22 Jun-22 Sep-22 Dec-22
Millions of euro
Actual P&L Hypothetical P&L Current VAR
Issuer risk
Issuer risk in the trading portfolio is analysed through level measures, i.e. in terms of mark to market, with exposures
aggregated by rating class and sector, and is monitored through a system of operating limits based on both sector/rating
classes and concentration indexes.
Breakdown of exposures by type of issuer
Total
Of which
Corporate
Financial
Emerging
Covered
Government
Securitis.
Group Treasury and
Finance Department
0%
0%
0%
0%
0%
0%
0%
IMI C&IB Division
100%
8%
40%
12%
3%
5%
32%
Total
100%
8%
40%
12%
3%
5%
32%
The table sets out in the Total column the contribution of the Group Treasury and Finance Department and the IMI C&IB Division to overall issuer risk exposures,
breaking down the exposure by type of issuer. The scope corresponds to the trading portfolio with an issuer ceiling (excluding Italian Government bonds, AAA and
own bonds) and including CDS (absolute value).
The breakdown of the portfolio subject to issuer risk shows, in the fourth quarter, the prevalence of an exposure attributable
solely to the IMI C&IB Division and mainly in securities in the financial and securitisation segments.
Impacts from the COVID-19 pandemic
With regard to operating and regulatory market risks, during 2022 there were no changes in the risk metrics attributable to the
context resulting from the COVID-19 pandemic.
Impacts of the Russia-Ukraine conflict
There were no significant impacts of the Russia-Ukraine conflict on the metrics for measuring market risk in the Group\u2019s
trading book.
BANKING BOOK
1.2.2 INTEREST RATE RISK AND PRICE RISK
Qualitative information
General aspects, interest rate risk and price risk management processes and measurement methods
The \u201cbanking book\u201d is defined as the trade portfolio consisting of all on-balance sheet and off-balance sheet items that are
part of the Intesa Sanpaolo Group's lending and deposit collecting activities; therefore, the interest rate risk of the banking
book (hereinafter \u201cinterest rate risk\u201d or IRRBB) refers to the current and prospective risk of changes in the Group's banking
book due to adverse changes in interest rates, which are reflected in both economic value and net interest income.
The banking book also includes exposure to market risks deriving from the equity investments in listed companies not fully
consolidated, mainly held by the Parent Company.
The internal system for measuring interest rate risk assesses and describes the effect of changes in interest rates on the
economic value and the net interest income and identifies all significant sources of risk that affect the banking book:
\u2212 repricing risk, i.e. the risk associated with lags in maturity dates (for fixed-rate positions) or in the interest rate revision
date (for floating-rate positions) of the assets, liabilities and off-balance sheet items;
\u2212 yield curve risk, i.e. the risk associated with changes in the inclination and shape of the yield curve;
\u2212 basis risk, i.e. the risk arising from imperfect correlation in the adjustment of lending and deposit rates on different
instruments, but with otherwise similar repricing characteristics. As interest rates change, these differences can lead to
unexpected changes in cash flows and yield spreads between assets, liabilities and off-balance sheet positions having
similar maturities or rate revision frequencies;
\u2212 optionality risk, i.e. the risk associated with the presence of automatic or behavioural options in the Group's assets,
liabilities and off-balance sheet instruments.
Intesa Sanpaolo's current measurement system also allows the risk profile to be examined on the basis of two distinct but
complementary perspectives:
\u2013 economic value perspective (EVE \u2013 Economic Value of Equity), which considers the impact of interest rate fluctuations
and the associated volatility on the present value of all future cash flows;
\u2013 net interest income perspective (NII - Net Interest Income), which aims to analyse the impact of interest rate
fluctuations and their associated volatility on net interest income.
The economic value perspective assesses the medium-to-long term impacts of interest rate fluctuations, while the net interest
income perspective provides a short-term assessment.
Interest rate risk is managed by setting limits to both perspectives. Said limits comprise:
\u2013 consolidated limits, which are defined in the RAF and approved by the Board of Directors, both in terms of change in
EVE (sensitivity or \u0394EVE) and net interest income sensitivity (\u0394NII). The consolidated \u0394EVE limits reflect, consistent with
the context and regulatory instructions, the average expected exposure of the Group's EVE. The expected average level
is quantified within the RAF and defined as the average exposure that the Group expects to take during the year. The
Group's consolidated sensitivity limits are accompanied by a risk indicator, which constitutes an \u201cearly warning\u201d threshold
approved within the RAF, which makes it possible to control exposure to the risk of yield curve twists;
\u2013 individual sensitivity and net interest income sensitivity limits, which are part of the \u201ccascading\u201d process of the Group's
RAF limit, and are proposed, after being shared with the operating structures, by the Financial and Market Risks Head
Office Department and approved by the Group Financial Risk Committee (GFRC). These limits take account of the
characteristics of the banks\u2019/divisions\u2019 portfolios, with particular reference to intermediated volumes, average durations,
the type of instruments traded and the Company's strategic mission within the Group.
The Financial and Market Risks Head Office Department performs monthly checks that the limits and early warning level
approved in the Risk Appetite Framework (RAF) are observed at the consolidated and individual level. In addition, the Group
has adopted a specific internal policy document regarding interest rate risk (the IRRBB Guidelines) subject to approval by the
Board of Directors, which governs the Group's entire interest rate risk management framework and in particular the aspects of
governance, methods of use and formulation of scenarios.
The IRRBB Guidelines define the methods for measuring the financial risks generated by the Group\u2019s banking book:
1. Sensitivity of economic value (\u0394EVE);
2. Net interest income sensitivity (\u2206NII);
3. Credit Spread Risk of the Banking Book (CSRBB);
4. Value at Risk (VaR).
These measures are available for each relevant currency in the banking book.
The sensitivity of the economic value (or fair value sensitivity) measures the change in the economic value of the banking
book and is calculated at individual cash flow level for each financial instrument, based on different instantaneous rate shocks
and based on historical stress simulations aimed at identifying the worst and best cases. It reflects the changes in the present
value of the cash flows of the positions already in the balance sheet for the entire remaining duration until maturity (run-off
balance sheet). The cash flows used to determine the present value are developed at the contractual rate, FTP (internal fund
transfer price) or risk-free rate (Euribor/Libor) and discounted according to risk-free discount curves. When calculating the
present value of loans, the expected loss component is considered; it represents the amount of cash flow that the Bank does
not expect to recover on a given exposure and that thus reduces its value. The present value of the loan adjusted for credit
risk is calculated for this purpose by deducting the corresponding level of expected loss from expected cash flows according
to the \"cash flow adjustment\" (\"CFA\") method.
To control the exposure and monitor the limits, the calculation involves determining the algebraic sum of the equivalent in
euro of the sensitivities of the positions in the various currencies by applying a parallel shock of +100 bps to the interest rate
curves in the various currencies. The calculation for non-parallel shocks for the purposes of controlling the exposure and
monitoring the early warning level is performed similarly. The sensitivity of the relevant currencies is then corrected, according
to a \"currency aggregation\" management technique, to take account of the imperfect correlation with the rates of the main
currency (the euro).
The sensitivity of net interest income focuses the analysis on the impact that changes in interest rates can have on the
Group's ability to generate stable profit levels. The component of profits measured is represented by the difference between
the net interest income generated by interest-bearing assets and liabilities, including the results of hedging activities through
the use of derivatives. The time horizon of reference is commonly limited to the short and medium term (from one to three
years) and the impact is assessed on a going concern basis. The change in net interest income is estimated under expected
scenarios as well as under potential interest rate shocks and stress scenarios. Further assumptions are made regarding
customer behaviour (differentiated according to interest rate scenarios) and market behaviour and the response of
Group/Bank management to changes in the economy. Thus, the projection of the net interest income and its sensitivity to
changes in market factors require a series of modelling assumptions for the development of volumes and rates
(fixed/floating), the reference time horizon, the relevant currencies, as well as the behavioural models introduced
(prepayment, core deposits, etc.) and the assumptions regarding the evolution of the portfolio (run-off, constant or dynamic
balance sheet).
The net interest income sensitivity limits are defined on the basis of an instantaneous and parallel interest rate shock of +/-50
bp, with a reference time horizon of 1 year and assuming a constant balance sheet. The net interest income sensitivity limit is
defined as the limit on the loss in the income statement and, therefore, is exclusively negative (limit on the potential reduction
in the net interest income): the use of the limit is represented by the sensitivity that generates a greater reduction in net
interest income in the two scenarios of a parallel rise and fall in interest rates. The total sensitivity exposure of net interest
income is given by the algebraic sum of the exposure of individual currencies.
The GFRC is also tasked with allocating sub-limits on net interest income sensitivity to the individual Banks/Companies, and
may also define sub-limits on net interest income sensitivity by currency. The limit assigned to each Company is defined on
the basis of the historical volatility observed in individual net interest income, consistent with the strategies and limits defined
for sensitivity.
The Credit Spread Risk of the Banking Book (CSRBB) is defined as the risk caused by changes in the price of credit risk,
liquidity premium and potentially other components of instruments with credit risk that cause fluctuations in the price of credit
risk, liquidity premium and other potential components, which is not explained by the interest rate risk of the banking book.
The reference area is represented by the HTCS securities portfolio, whose changes in value have an immediate impact on the
Group\u2019s capital.
Value at Risk (VaR) is a probability-based metric that expresses the maximum potential loss of portfolio value that could be
incurred within a specific time horizon, at a pre-defined confidence level. VaR is also used to consolidate exposure to financial
risks of the various Group companies which perform banking book activities, also taking into account the benefits of
diversification and the correlation between various risk factors and different currencies. This measure is calculated and
monitored, for the entire scope, by the Financial and Market Risks Head Office Department.
In calculating the above risk measures, Intesa Sanpaolo adopts behavioural models for representing capital items.
For mortgages, statistical techniques are used to determine the probability of prepayment, in order to reduce the Group's
exposure to interest rate risk (overhedging) and to liquidity risk (overfunding). The method developed estimates prepayment
coefficients diversified according to the type of customer, financial characteristics of the transaction, such as the loan rate type
(fixed or floating), the original term of the loan and the seasoning, understood as the age of the loan on the date of the
prepayment event. The analysis refers to partial repayments, full repayments and refinancing. The prepayment model also
examines the reasons that lead customers to make prepayments. With regard to this aspect, the phenomenon may be divided
into a structural component (\"Core Prepayment\") and a scenario component (\"Coupon Incentive\"), primarily linked to market
variations. Prepayment phenomena are monitored monthly and the prepayment coefficients to be applied to the model are re-
estimated at least annually and are subject to periodic backtesting, appropriately documented in the specific model change
document to ensure that the operating situation adheres to the assumptions made and incorporate any legislative and/or
behavioural changes.
For core deposits (customer current accounts), a financial representation model is adopted aimed at reflecting the behavioural
features of stability of deposits and partial and delayed reaction to market interest rate fluctuations. The model is continuously
monitored and periodically revised to promptly reflect changes in volumes and customer characteristics over time, as well as
in the relevant regulatory framework.
In order to measure the Group's vulnerability to market turbulence, the interest rate risk measurement system measures the
impacts on the bank's economic value and net interest income produced by strains on the market (\u201cscenario analysis\u201d), i.e.
sudden changes in the general level of interest rates, changes in the relationships between fundamental market rates (basis
risk), in the slope and shape of the yield curve (yield curve risk), in the liquidity of the main financial markets or in the volatility
of market rates.
These analyses are conducted by subjecting the portfolio to various interest rate change scenarios:
\u2013 regulatory scenarios produced by the Supervisory Outlier Test (SOT) on the EVE, which introduces an \u201cearly warning\u201d of
15% of Tier 1, calculated with reference to the BCBS scenarios (Parallel shock up, Parallel shock down, Steepener
shock, Flattener shock, Short rates shock up and Short rates shock down);
\u2013 shocks diversified by reference curve of the main risk factors and calculated as the difference between the yields of the
curves of the individual factors and those of a curve relating to the selected pivot parameter (basis risk);
\u2013 stress scenarios in historical simulation.
Stress tests on behavioural models are also carried out to verify the financial impact of alternative assumptions underlying the
behavioural parameters estimated in the models. The methodological assumptions underlying the assumptions contained in
the stress scenarios are duly described in the detailed methodologies.
Impacts from the COVID-19 pandemic
In 2022, the strategies and safeguards implemented in the framework of interest rate risk management were put into place to
protect net interest income against potential additional negative impacts of COVID-19. Net interest income was stabilised
through measures to cover the viscousness of customer demand deposits by entering into hedging derivatives and natural
hedges with mortgage loans to customers.
Impacts of the Russia-Ukraine conflict
The Russia-Ukraine conflict resulted in a generalised increase in the spread against the German Bund and, as a result, an
increase in the related returns. With regard to the interest rate risk generated by the Intesa Sanpaolo Group\u2019s banking book,
this increase resulted in a reduction in exposure of the government bond portfolio.
Quantitative information
Banking book: internal models and other sensitivity analysis methodologies
In 2022, interest rate risk generated by the Intesa Sanpaolo Group\u2019s banking book, measured through shift sensitivity of
value, averaged -1,669 million euro, with a maximum of -2,134 million euro and a minimum value of -1,016 million euro, with
the latter coinciding with the value at the end of December 2022. The latter figure decreased by 740 million euro on the end of
2021, when it came to -1,756 million euro. The reduction in the last few months of 2022 originates from the effect of the
increase in interest rates, as well as derivatives to hedge loans and the decrease in the HTCS securities portfolio.
The sensitivity of net interest income \u2013 assuming a +50, -50 and +100 basis point change in interest rates \u2013 amounted to 633
million euro, -668 million euro and 251 million euro, respectively, at the end of December 2022. The latter figure decreased (-
1,596 million euro) on the end of 2021, when it came to 1,847 million euro. The reduction was impacted by both the change in
the rules of indexation of operations with the ECB, made at the end of October, and the rise in short-term market rates, which
resulted in increased responsiveness of on demand deposits from customers envisaged by the behavioural model.
The following table and charts provide a representation of the performance of the shift sensitivity of economic value (or the
shift sensitivity of fair value) and the shift sensitivity of net interest income.
(millions of euro)
2022
31.12.2022
31.12.2021
average
minimum
maximum
Shift Sensitivity of the Economic Value +100 bp
-1,669
-1,016
-2,134
-1,016
-1,756
Shift Sensitivity of Net Interest Income -50bp
-790
-641
-903
-668
-880
Shift Sensitivity of Net Interest Income +50bp
844
617
1,105
633
962
Shift Sensitivity of Net Interest Income +100bp
1,179
251
2,094
251
1,847
Interest rate risk, measured in terms of VaR, averaged 643 million euro in 2022, with a maximum value of 885 million euro
and a minimum value of 442 million euro, with the latter coinciding with the value at the end of December 2022. The latter
figure decreased by 67 million euro compared to 509 million euro at the end of 2021. That change is largely due to the
decrease in exposure recorded especially in the last few months of 2022.
Foreign exchange risk expressed by equity investments in foreign currency (banking book) and measured in terms of VaR
averaged 155 million euro in 2022, with a minimum value of 74 million euro and a maximum value of 252 million euro,
standing at 126 million euro at the end of December 2022, up by 33 million euro on the value of 93 million euro at the end of
December 2021. That change is due to the increase in the volatility of the Russian rouble and the Egyptian pound.
Price risk generated by the equity portfolio, measured in terms of VaR, recorded an average level during 2022 of 475 million
euro, with maximum and minimum values of 560 million euro and 334 million euro, respectively, the latter being the figure of
the end of December 2022, down by 33 million euro on the value at the end of December 2021 of 367 million euro. That
change is mainly due to the sales of stakes in various listed subsidiaries during the last few months of 2022.
Total VaR, consisting of the three components described above (Interest Rate VaR, Exchange VaR and Equity VaR)
averaged 799 million euro in 2022, with a maximum value of 1,130 million euro and a minimum value of 575 million euro,
reaching a figure of 639 million euro at the end of December 2022, up by 92 million euro on the value at the end of December
2021 of 548 million euro. This was due to a reduction in the benefit of overall diversification, linked to both the recomposition
of the portfolio illustrated with regard to single risks (Interest Rate, Foreign Exchange, and Equity Investment risk), and the
increase in market volatility.
The table and chart below provide a representation of the performance of total VaR and its three components (Interest Rate
VaR, Exchange VaR and Equity Investments VaR).
500 -2000 -1500 -1000 -500 0 millions of euro Shift Sensitivity of the Economic Value +100 bp 0 500 1000 1500 2000 2500 millions of euro Shift Sensitivity of Net Interest Income +100bp (millions of euro) 2022 31.12.2022 31.12.2021 average minimum maximum Value at Risk - Interest Rate 643 442 885 442 509 Value at Risk - Exchange 155 74 252 126 93 Value at Risk - Equity investments 475 334 560 334 367 Total Value at Risk 799 575 1,130 639 548 Lastly, the table below shows a sensitivity analysis of the banking book to price risk, measuring the impact on Shareholders\u2019 Equity of a price shock of \u00b110% for the portfolio of quoted minority stakes, largely classified to the HTCS category. Price risk: impact on Shareholders' Equity (millions of euro) Impact on shareholders' equity at 31.12.2022 Impact on shareholders' equity at 30.09.2022 Impact on shareholders' equity at 30.06.2022 Impact on shareholders' equity at 31.03.2022 Impact on shareholders' equity at 31.12.2021 Price shock 10% 73 147 146 166 177 Price shock -10% -73 -147 -146 -166 -177 0 200 400 600 800 1000 1200 millions of euro Monthly evolution of total managerial VaR and its three components VAR_Interest Rate VAR_Exchange VAR_Equity investments VaR TOTAL
1.2.3. FOREIGN EXCHANGE RISK
Qualitative information
A. General aspects, foreign exchange risk management processes and measurement methods
\u201cForeign exchange risk\u201d is defined as the potential adverse effect resulting from changes in the exchange rate between
currencies that could have a negative impact on the valuation of the assets and liabilities in the financial statements and on
earnings and capital ratios.
Two types of Foreign Exchange Risk are identified: Structural and Transaction risk.
Structural Foreign Exchange Risk is defined as the potential loss resulting from changes in the exchange rate that could have
a negative impact on the foreign exchange reserves that are part of the Group\u2019s consolidated shareholders\u2019 equity.
Transaction Foreign Exchange Risk is defined as the potential loss resulting from changes in the currencies exchange rate
that may have negative impacts both on the valuation of the assets and liabilities in the financial statements when converted
into the reporting currency and on the earnings from funding, lending and investment/disinvestment transactions in currencies
other than the euro. The main sources of this foreign exchange risk consist of: non-euro loans and deposits held by corporate
and/or retail customers; conversion into domestic currency of assets, liabilities and income of the international branches;
trading of foreign currencies; collection and/or payment of interest, commissions, dividends and administrative expenses in
foreign currencies; purchase and sale of securities and financial instruments for the purpose of resale in the short term; etc.
Transaction foreign exchange risk also includes the risk of transactions related to operations that generate the type of
structural foreign exchange risk represented, for example, by dividends approved by international subsidiaries and that
relating to the management of foreign exchange risk tied to the management of equity investments, also including the
gains/losses of international branches (Transaction Foreign Exchange Risk associated with Structural Foreign Exchange
Risk).
The Market and Financial Risk Management Head Office Department measures and controls the Parent Company and
Group\u2019s exposure to Structural Foreign Exchange Risk; it performs the management calculation of the optimal position. It
represents the open position in foreign currency designed to neutralise the sensitivity of the capital ratio to foreign exchange
movements. The Market and Financial Risk Management Head Office Department also produces sensitivity analyses on
capital ratios for management control and monitoring of Structural Foreign Exchange Risk in view of progressive alignment
with the EBA LGs and sets its own Transaction Foreign Exchange Risk associated with Structural Foreign Exchange Risk
within the framework of market risk VaR.
B. Foreign exchange risk hedging activities
The Intesa Sanpaolo Group\u2019s management of the Structural Foreign Exchange Risk assigns the Parent Company the related
management and coordination powers in order to achieve a consistent Group strategy.
This choice, which is consistent with the Parent Company\u2019s role as the liaison with the Supervisory Authority, allows the
activities to be performed based on the specific responsibilities set out in the prudential supervision regulations, in addition to
suitably mitigating and/or managing this type of risk.
The monitoring and management of the Structural Foreign Exchange Risk are carried out at central level by the Group
Treasury and Finance Head Office Department of the Parent Company, which manages it with a view to risk/return and to
optimising capital requirements.
The monitoring and hedging of the Transaction Foreign Exchange Risk are carried out at central level by the Group Treasury
and Finance Head Office Department of the Parent Company and the IMI Corporate & Investment Banking Division for the
area of competence, and at local level by the individual treasury functions of the Group companies and banks.
As at the date of preparation of the financial statements, there were no transactions hedging shareholders\u2019 equity, whereas
there were operational hedges of the foreign exchange risk of the assets and liabilities in the financial statements related to
the banking book.
Impacts from the COVID-19 pandemic
The strategies and controls in place for the purpose of managing exchange rate risk did not require changes or specific
actions in the situation resulting from the COVID-19 pandemic.
Impacts of the Russia-Ukraine conflict
The Russia-Ukraine conflict did not generate critical issues in the management of liquidity in foreign currency. Limited to the
days immediately following the outbreak of the war, the cost of funding in USD increased on the market, an indicator of strong
risk aversion. On the forex segment, though with low liquidity, the possibility of trading roubles on the interbank market did not
disappear, save for the limits imposed by the sanctions regime.
Quantitative information
1. Breakdown by currency of assets and liabilities and of derivatives
(millions of euro)
CURRENCIES
US
dollar
GB
pound
Croatian
kuna
Swiss
franc
Hungarian
forint
Yen
Australian
dollar
Other
currencies
A. FINANCIAL ASSETS
38,356
3,770
8,660
1,052
5,456
2,700
3,605
17,115
A.1 Debt securities
8,194
661
848
-
1,112
2,457
854
3,316
A.2 Equities
624
95
5
63
2
-
-
824
A.3 Loans to banks
10,728
623
434
174
1,847
48
1,441
5,764
A.4 Loans to customers
18,810
2,391
7,373
815
2,495
195
1,310
7,211
A.5 Other financial assets
-
-
-
-
-
-
-
-
B. OTHER ASSETS
3,432
556
771
987
204
103
117
2,277
C. FINANCIAL LIABILITIES
40,959
3,147
6,988
995
4,769
703
2,164
12,218
C.1 Due to banks
20,464
588
160
185
865
47
1,898
1,741
C.2 Due to customers
7,025
833
6,828
718
3,889
28
200
8,494
C.3 Debt securities
13,470
1,726
-
92
15
628
66
1,983
C.4 Other financial liabilities
-
-
-
-
-
-
-
-
D. OTHER LIABILITIES
1,561
692
351
118
73
27
50
1,468
E. FINANCIAL DERIVATIVES
- Options
long positions
5,552
133
-
53
55
408
65
336
short positions
5,711
195
-
37
33
340
69
761
- Other derivatives
long positions
62,767
10,972
12
5,946
1,849
3,246
1,501
11,711
short positions
62,708
11,271
9
6,706
1,960
5,366
3,070
13,524
TOTAL ASSETS
110,107
15,431
9,443
8,038
7,564
6,457
5,288
31,439
TOTAL LIABILITIES
110,939
15,305
7,348
7,856
6,835
6,436
5,353
27,971
DIFFERENCE (+/-)
-832
126
2,095
182
729
21
-65
3,468
As of 31 December 2022, the presentation of the \u201cBreakdown by currency of assets and liabilities and of derivatives\u201d has
been aligned with the prudential approach in compliance with the new methodological framework introduced by the EBA
Guidelines on the treatment of structural FX under Article 352(2) of Regulation (EU) No 575/2013 (CRR).
On 1 January 2023, the Croatian kuna joined the euro Area, and will no longer be the subject of future reporting.
2. Internal models and other sensitivity analysis methodologies
As already noted, the management of Transaction Foreign Exchange Risk relating to trading activities is included in the
operating procedures and in the estimation methodologies of the managerial VaR.
Foreign exchange risk expressed by equity investments in foreign currency (banking book), including Group companies,
originated a VaR (99% confidence level, 10-day holding period) amounting to 126 million euro as at 31 December 2022. This
potential impact would only be reflected in the Shareholders\u2019 Equity.
1.3. DERIVATIVES AND HEDGING POLICIES
Starting from 2014, the Parent Company has been authorised to use EPE (Expected Positive Exposure) internal models to
determine the capital requirement for counterparty risk. This approach is applicable to almost the entire derivatives portfolio
(as shown in the table below, as at 31 December 2022 approximately 95% of the total EAD of financial and credit derivatives
is measured using EPE models). Derivatives whose counterparty risk is measured using approaches other than internal
models represent a residual portion of the portfolio (as at 31 December 2022 accounting for approximately 5% of overall EAD)
and refer to:
\u2013 residual contracts of Intesa Sanpaolo to which EPE is not applied (in compliance with the immateriality thresholds set by
the EBA);
\u2013 EAD generated by all other banks and companies in the Group which do not report using an internal model.
The table below shows the overall EAD of exposures in financial and credit derivatives, broken down by measurement
approach.
(millions of euro)
Transaction categories
Exposure at default (EAD)
31.12.2022
31.12.2021
Standardised
models
Internal
Method (EPE)
Standardised
models
Internal
Method (EPE)
Derivative contracts
666
12,340
599
16,270
The EPE internal model considers the collateral collected to mitigate credit exposure and any excess collateral paid. The
value of the guarantees received and included in the calculation of the EAD amounts to approximately 17.7 billion euro for the
Parent Company, while the collateral paid equals 18 billion euro (including the initial margins posted in connection with
transactions with central counterparties).
1.3.1. Trading derivatives
A. FINANCIAL DERIVATIVES
A.1. Financial trading derivatives: period-end notional amounts
(millions of euro)
Underlying asset/Type of derivatives
31.12.2022
31.12.2021
Over the counter
Organised
markets
Over the counter
Organized
markets
Central
Counterparties
without central
counterparties
Central
Counterparts
without central
counterparties
With netting
agreements
Without
netting
agreements
With netting
agreements
Without
netting
agreements
1. Debt securities and interest rate
2,301,865
244,096
76,402
109,527
1,933,468
255,211
70,804
167,501
a) Options
-
68,869
7,909
1,004
-
68,964
6,224
6,868
b) Swaps
2,301,865
175,227
66,617
-
1,933,468
186,247
63,792
-
c) Forwards
-
-
1,607
-
-
-
751
-
d) Futures
-
-
269
108,523
-
-
37
160,633
e) Other
-
-
-
-
-
-
-
-
2. Equities and stock indices
-
6,570
25,435
5,889
-
4,955
28,500
2,480
a) Options
-
6,101
25,426
3,961
-
4,948
28,491
609
b) Swaps
-
469
9
-
-
7
9
-
c) Forwards
-
-
-
-
-
-
-
-
d) Futures
-
-
-
1,928
-
-
-
1,871
e) Other
-
-
-
-
-
-
-
-
3. Foreign exchange rates and gold
-
163,959
17,532
209
96
170,930
17,670
2,005
a) Options
-
27,688
1,282
5
-
22,674
1,186
89
b) Swaps
-
37,274
2,952
201
95
44,619
4,450
-
c) Forwards
-
98,710
12,425
-
-
103,454
11,258
1,901
d) Futures
-
-
-
3
-
-
-
15
e) Other
-
287
873
-
1
183
776
-
4. Commodities
-
4,043
1,079
1,640
-
3,070
1,074
1,698
5. Other
-
-
-
-
-
-
-
-
Total
2,301,865
418,668
120,448
117,265
1,933,564
434,166
118,048
173,684
The notional amounts shown as at 31 December 2022 in the column \u201cOver the counter\u201d with central counterparties relate to
interest rate derivatives settled through legal clearing for a total of 2,302 billion euro.
A.2. Financial trading derivatives: gross positive and negative fair value \u2013 breakdown by product
(millions of euro)
Type of derivative
31.12.2022
31.12.2021
Over the counter
Organised
markets
Over the counter
Organised
markets
Central
Counterparties
Without central counterparties
Central
Counterparties
Without central counterparties
With netting
agreements
Without netting
agreements
With netting
agreements
Without netting
agreements
1. Positive fair value
a) Options
-
1,580
594
54
-
1,750
789
26
b) Interest rate
swaps
83,520
9,334
1,649
-
39,039
9,181
5,331
-
c) Cross currency
swaps
-
1,599
201
-
-
1,250
272
-
d) Equity swaps
-
21
2
1
-
-
-
-
e) Forwards
-
1,886
232
-
-
890
108
8
f) Futures
-
-
-
-
-
-
-
-
g) Other
-
723
170
-
-
757
190
-
Total
83,520
15,143
2,848
55
39,039
13,828
6,690
34
2. Negative fair value
a) Options
-
1,803
6,320
44
-
1,815
6,365
19
b) Interest rate
swaps
80,573
10,223
3,824
-
39,252
13,298
801
-
c) Cross currency
swaps
-
1,443
878
-
-
1,127
864
-
d) Equity swaps
-
21
-
1
-
-
-
-
e) Forwards
-
1,323
365
-
-
1,146
212
16
f) Futures
-
-
-
-
-
-
-
-
g) Other
-
558
186
-
-
752
422
-
Total
80,573
15,371
11,573
45
39,252
18,138
8,664
35
A.3. Over the counter financial trading derivatives: notional values, gross positive and negative fair
value by counterparty
(millions of euro)
Underlying asset
Central
Counterparties
Banks
Other financial
companies
Other
counterparties
Contracts not included under netting agreements
1) Debt securities and interest rates
- notional amount
X
1,982
16,278
58,142
- positive fair value
X
288
120
1,339
- negative fair value
X
-235
-502
-3,555
2) Equities and stock indices
- notional amount
X
14,300
5,362
5,773
- positive fair value
X
518
41
3
- negative fair value
X
-841
-160
-5,009
3) Foreign exchange rates and gold
- notional amount
X
1,352
2,961
13,219
- positive fair value
X
34
13
345
- negative fair value
X
-668
-31
-397
4) Commodities
- notional amount
X
-
114
965
- positive fair value
X
-
8
139
- negative fair value
X
-
-19
-156
5) Other
- notional amount
X
-
-
-
- positive fair value
X
-
-
-
- negative fair value
X
-
-
-
Contracts included under netting agreements
1) Debt securities and interest rates
- notional amount
2,301,865
171,158
58,904
14,034
- positive fair value
83,520
6,514
3,523
315
- negative fair value
-80,573
-8,639
-1,505
-1,072
2) Equities and stock indices
- notional amount
-
2,490
4,065
15
- positive fair value
-
134
64
3
- negative fair value
-
-101
-330
-
3) Foreign exchange rates and gold
- notional amount
-
118,496
34,311
11,152
- positive fair value
-
2,610
867
394
- negative fair value
-
-1,829
-659
-676
4) Commodities
- notional amount
-
350
1,725
1,968
- positive fair value
-
48
219
452
- negative fair value
-
-38
-189
-333
5) Other
- notional amount
-
-
-
-
- positive fair value
-
-
-
-
- negative fair value
-
-
-
-
A.4. Residual maturity of over the counter financial derivatives: notional amounts
(millions of euro)
Underlying/Residual maturity
Up to 1 year
Between 1 and
5 years
Over 5 years
Total
A.1 Financial derivatives on debt securities and interest rates
847,618
1,021,245
753,500
2,622,363
A.2 Financial derivatives on equities and stock indices
11,182
19,440
1,383
32,005
A.3 Financial derivatives on foreign exchange rates and gold
129,901
38,991
12,599
181,491
A.4 Financial derivatives on commodities
2,632
2,490
-
5,122
A.5 Other financial derivatives
-
-
-
-
Total
31.12.2022
991,333
1,082,166
767,482
2,840,981
Total
31.12.2021
730,422
1,012,428
742,928
2,485,778
B. CREDIT DERIVATIVES
B.1. Credit trading derivatives: period-end notional amounts
(millions of euro)
Categories of transactions
Trading derivatives
single
counterparty
more
counterparties
(basket)
1. Protection purchases
a) Credit default products
7,582
68,356
b) Credit spread products
-
-
c) Total rate of return swap
-
-
d) Other
-
-
Total 31.12.2022
7,582
68,356
Total 31.12.2021
7,531
67,468
2. Protection sales
a) Credit default products
7,890
65,183
b) Credit spread products
-
-
c) Total rate of return swap
-
-
d) Other
-
-
Total 31.12.2022
7,890
65,183
Total 31.12.2021
8,043
63,098
As at 31 December 2022, none of the contracts shown in the table above have been included within the structured credit
products.
B.2. Credit trading derivatives: gross positive and negative fair value \u2013 breakdown by product
(millions of euro)
Type of derivative
Total 31.12.2022
Total 31.12.2021
1. Positive fair value
a) Credit default products
936
2,225
b) Credit spread products
-
-
c) Total rate of return swap
-
-
d) Other
-
-
Total
936
2,225
2. Negative fair value
a) Credit default products
943
2,341
b) Credit spread products
-
-
c) Total rate of return swap
-
-
d) Other
-
-
Total
943
2,341
As at 31 December 2022, none of the contracts shown in the table above have been included within the structured credit
products.
B.3. Over the counter credit trading derivatives: notional values, gross positive and negative fair value
by counterparty
(millions of euro)
Central
counterparties
Banks
Other
financial
companies
Other
counterparties
Contracts not included under netting agreements
1) Protection purchases
\u2212 notional amount
X
-
-
275
\u2212 positive fair value
X
-
-
22
\u2212 negative fair value
X
-
-
-
2) Protection sales
\u2212 notional amount
X
-
36
8
\u2212 positive fair value
X
-
-
-
\u2212 negative fair value
X
-
-
-8
Contracts included under netting agreements
1) Protection purchases
\u2212 notional amount
53,496
11,408
10,759
-
\u2212 positive fair value
15
168
147
-
\u2212 negative fair value
-421
-77
-83
-
2) Protection sales
\u2212 notional amount
53,235
10,587
9,207
-
\u2212 positive fair value
410
62
112
-
\u2212 negative fair value
-13
-185
-156
-
As at 31 December 2022, none of the contracts shown in the table above have been included within the structured credit
products.
B.4. Residual maturity of over the counter credit trading derivatives: notional amounts
(millions of euro)
Underlying/Residual maturity
Up to 1 year
Between 1 and 5
years
Over 5 years
Total
1. Protection sales
7,767
64,382
924
73,073
2. Protection purchases
8,088
67,174
676
75,938
Total 31.12.2022
15,855
131,556
1,600
149,011
Total 31.12.2021
9,145
135,770
1,225
146,140
B.5. Credit derivatives associated with the fair value option: annual changes
The Intesa Sanpaolo Group does not hold credit derivatives associated with the fair value option.
1.3.2. Accounting hedges
Qualitative information
On first-time adoption of IFRS 9, the Intesa Sanpaolo Group exercised its option under the said Standard to continue to fully
apply the rules of IAS 39 for all types of hedges (micro and macro hedges). As a result, the provisions of IFRS 9 on hedging
do not apply.
A. Fair value hedging
The hedging carried out by the Intesa Sanpaolo Group is aimed at protecting the banking book from variations in the fair
value of loans and deposits due to movements in the interest rate curve (interest rate risk).
The Group uses both micro fair value hedges and macro fair value hedges.
The micro fair value hedges mainly hedge bonds issued, securities under assets and loans to customers.
The macro fair value hedges are used for:
\u2212 core deposits, based on the applicable standards in the carved-out version of IAS 39 in accordance with the option
provided by IFRS 9 to make use of the possibility of fully applying the provisions of IAS 39 on hedges;
\u2212 the already fixed portion of floating-rate loans, in which the macro fair value hedge is used to hedge the interest rate risk
inherent in the floating-rate coupons of the loans granted, when the coupon rate is set;
\u2212 a portion of fixed-rate loans; for this type, in line with the carved-out version of IAS 39, an open-portfolio macrohedging
model has been adopted according to a bottom-layer approach that, in accordance with the interest rate risk
measurement method involving modelling of the prepayment phenomenon, is more closely correlated with risk
management activity and asset dynamics.
The main types of derivative contracts used are plain and structured interest rate swaps (IRS), overnight index swaps (OIS),
cross-currency swaps (CCS), forward sales and options on interest rates stipulated with third parties.
The derivatives are not listed on regulated markets but are traded in OTC (over the counter) circuits. The OTC contracts also
include contracts entered into through clearing houses.
B. Cash flow hedging
The hedging carried out by the Intesa Sanpaolo Group is aimed at protecting the Group from the exposure to changes in
future cash flows attributable to movements in the interest rate curve, associated with a particular asset/liability, such as
variable future interest payments on a debt/loan or a highly probable expected future transaction.
The Group uses both micro cash flow hedges and macro cash flow hedges.
The micro cash flow hedges mainly hedge bonds issued.
The macro cash flow hedges are used for:
\u2212 floating-rate funding when it is used to finance fixed-rate loans;
\u2212 floating-rate loans to hedge the fixed-rate funding.
The derivatives used are interest rate swaps (IRS) with third parties or with other Group companies, which, in turn, hedge the
risk in the market to meet the requirements for the outsourcing of the hedges to third-party counterparties required to qualify
the hedges as IAS-compliant in the consolidated financial statements.
The derivatives are not listed on regulated markets but are traded in OTC (over the counter) circuits. The OTC contracts also
include contracts brokered through clearing houses.
C. Hedging of foreign investments
In 2022 the Group entered into hedging relationships, subject to hedge accounting, to neutralise the effects of structural
foreign exchange rate fluctuations on positions not exempt for the purposes of calculating capital requirements for foreign
exchange risk. Such hedging relationships were entered into in respect of structural foreign exchange risk positions capable
of generating an impact on the foreign exchange reserves that form part of the Group's consolidated shareholders\u2019 equity. In
the Parent Company\u2019s financial statements these hedging relationships are accounted for as micro fair value hedges,
whereas in the consolidated financial statements they are treated as hedges of a net investment in a foreign currency.
D. Hedging instruments
The main causes of ineffectiveness of the model adopted by the Group for verifying the effectiveness of the hedges are
attributable to the following:
\u2212 misalignment between the notional value of the derivative and the hedged underlying recognised at the time of initial
designation or generated subsequently, such as in the case of partial repayments of loans or the repurchase of bonds;
\u2212 application of different curves on the hedging derivative and hedged item for the purpose of carrying out the effectiveness
test on fair value hedges. The derivatives, normally collateralised or entered into through clearing houses, are discounted
on the overnight curves, while the hedged items are discounted on the indexing curve of the hedging instrument;
\u2212 inclusion in the effectiveness test of the value of the variable leg of the hedging derivative, in the case of fair value
hedges.
The ineffectiveness of the hedge is promptly recognised for the purposes of:
\u2212 the determination of the effect on the income statement;
\u2212 the assessment of the possibility of continuing to apply the hedge accounting rules.
The Group does not use dynamic hedges, as defined in IFRS 7, paragraph 23C.
E. Hedged items
The main types of hedged items are:
\u2212 debt securities under assets;
\u2212 debt securities issued and non-securities funding;
\u2212 fixed-rate loans;
\u2212 floating-rate loans;
\u2212 optional embedded component of floating-rate mortgages;
\u2212 already fixed coupon of floating rate-loans;
\u2212 modelled on demand deposits.
\u2212 net investments in foreign currency.
E.1 Debt securities under assets
These are hedged by micro fair value hedges, using IRS (interest rate swaps), OIS (overnight index swaps) and CCS (cross-
currency swaps) as hedging instruments.
The interest rate risk is generally hedged for the entire duration of the obligation.
The Dollar Offset Method is used to verify the hedge effectiveness. This method is based on the ratio between the cumulative
changes (from the inception of the hedge) in the fair value of the hedging instrument, attributable to the hedged risk, and past
changes in the fair value of the hedged item (fair value change), net of accrued interest.
Micro fair value hedges also include forward sales on securities in the HTCS portfolio, carried out to hedge fair value risks
from movements in credit spreads and interest rate curves. With regard to the forward sale contract, which is a derivative
because it is a non-regular way transaction, the spot component is separated from the interest component by designating only
the spot component as the hedging instrument in a fair value hedging relationship.
E.2 Debt securities issued and non-securities funding
The Group currently has micro fair value hedges in place on fixed- or structured-rate funding and micro cash flow hedges or
macro cash flow hedges on floating-rate funding, using IRS (interest rate swaps), OIS (overnight index swaps) and CCS
(cross-currency swaps) as hedging instruments.
The interest rate risk is generally hedged for the entire duration of the obligation.
For the micro hedges, the hedge effectiveness is verified using the Dollar Offset Method. This method is based on the ratio
between the cumulative changes (from the inception of the hedge) in the fair value or the cash flows of the hedging
instrument, attributable to the hedged risk, and past changes in the fair value or the cash flows of the hedged item (fair value
change), net of accrued interest.
For the macro hedges, the hedge effectiveness is verified by means of a capacity test. This test involves a comparison of the
consistency between the hedged items, referring to existing and expected floating-rate funding (so-called highly probable
future transactions), and the hedging instruments, which must always be confirmed throughout the life of the hedging
relationship and for each time band. In this case, the hedged item is represented by the expected cash flows from funding that
will arise over the life of the issues.
E.3 Fixed-rate loans
The Group has designated micro fair value hedges for fixed-rate loans and macro fair value hedges for mortgage loans in the
retail segment, mainly using IRS (interest rate swaps) as hedging instruments.
In a micro fair value hedge, the interest rate risk is generally hedged throughout the life of the underlying.
For the micro hedges, the hedge effectiveness is verified using the Dollar Offset Method.
For the macro hedges, the loan portfolio hedged is open, i.e. it is dynamically composed of fixed-rate instruments managed at
aggregate level through hedging derivatives entered into over time.
The effectiveness of the macro hedges on fixed-rate loans is periodically verified through specific prospective and
retrospective tests aimed at demonstrating that the hedged portfolio contains an amount of assets whose sensitivity profile
and changes in fair value due to interest rate risk reflect those of the derivatives used for the hedge.
E.4 Floating-rate loans
The Group currently has macro cash flow hedges in place on floating-rate loans, mainly using IRS as hedging instruments.
The hedge effectiveness is verified by means of a capacity test. This test involves a comparison of the consistency between
the hedged items, referring to the floating-rate loans outstanding, and the hedging instruments, which must always be
confirmed throughout the life of the hedging relationship and for each time band. In this case, the hedged item is represented
by the expected cash flows originating from the loans that will arise over the life of the assets.
E.5 Optional embedded component of floating-rate mortgages
The optional embedded components (interest rate options) of floating-rate mortgages are hedged by micro fair value hedges,
using options (cap, floor, collar) as hedging instruments.
The underlying assets may be partially or totally hedged, over time and in terms of amount.
The Dollar Offset Method is used to verify the hedge effectiveness.
E.6 Already fixed coupon of floating-rate loans
The Group has designated macro fair value hedges on coupons already set for floating-rate loans using OIS (overnight index
swaps) as hedging instruments.
The purpose of this type of hedge is to neutralise the interest rate risk generated by the coupons already set for floating-rate
loans.
The Dollar Offset Method is used to verify the hedge effectiveness, while the actual consistency of the hedged items is
verified by a capacity test.
E.7 Modelled on demand deposits.
Modelled on demand deposits are hedged by macro fair value hedges, as required by the \u201ccarve out\u201d of IAS 39, using IRS
(interest rate swaps) and OIS (overnight index swaps) as hedging instruments.
The purpose of this type of hedge is to protect the net interest income from possible falls in interest rates that reduce the
spread generated by core deposits.
The model is subject to continuous monitoring and verification by the Market and Financial Risk Management Head Office
Department, in order to promptly incorporate changes in the main characteristics (volumes, stability, reactivity) and make the
necessary adjustments where appropriate.
The Dollar Offset Method is used to verify the hedge effectiveness.
E.8 Foreign investments
The Group currently has active hedging relationships of net investments in a foreign currency that use outright currency
forward contracts as the hedging instruments.
The purpose of the hedging is to protect the Group from the effects of changes in the exchange rate that could have impacts
on the foreign exchange reserves that are part of the Group\u2019s consolidated shareholders\u2019 equity.
Of the currency forward derivative contract, only the change relating to the spot exchange rate (spot component) is
designated a hedge subject to hedge accounting; this change is separated from the total fair value of the instrument.
In the Parent Company\u2019s financial statements, these hedging relationships are accounted for as micro fair value hedges,
whereas in the consolidated financial statements they are treated as hedges of a net investment in a foreign currency.
The Dollar Offset Method is used to verify the hedge effectiveness at the Parent Company level, while at the Group level the
actual consistency of the hedged items is verified by a capacity test.
Quantitative information
A. Financial hedging derivatives
A.1 Financial hedging derivatives: period-end notional amounts
(millions of euro)
Underlying asset/Type of derivative
31.12.2022
31.12.2021
Over the counter
Organised
markets
Over the counter
Organized
markets
Central
Counterparties
Without central
counterparties
Central
Counterparts
Without central
counterparties
With netting
agreements
Without
netting
agreements
With netting
agreements
Without
netting
agreements
1. Debt securities and interest rates
322,529
28,225
8,873
-
253,424
29,784
8,435
-
a) Options
-
1,587
-
-
-
1,851
-
-
b) Swaps
322,529
26,269
8,873
-
253,424
27,195
7,687
-
c) Forwards
-
349
-
-
-
718
748
-
d) Futures
-
-
-
-
-
-
-
-
e) Others
-
20
-
-
-
20
-
-
2. Equities and stock indices
-
-
-
-
-
-
-
-
a) Options
-
-
-
-
-
-
-
-
b) Swaps
-
-
-
-
-
-
-
-
c) Forwards
-
-
-
-
-
-
-
-
d) Futures
-
-
-
-
-
-
-
-
e) Other
-
-
-
-
-
-
-
-
3. Foreign exchange rates and gold
-
9,528
21
316
-
9,576
26
175
a) Options
-
-
-
-
-
-
-
-
b) Swaps
-
9,321
21
316
-
9,576
26
175
c) Forwards
-
207
-
-
-
-
-
-
d) Futures
-
-
-
-
-
-
-
-
e) Other
-
-
-
-
-
-
-
-
4. Commodities
-
-
-
-
-
-
-
-
5. Other
-
-
-
-
-
-
-
-
TOTAL
322,529
37,753
8,894
316
253,424
39,360
8,461
175
The average notional amount in the year of the financial hedging derivatives was 335,456 million euro.
A.2 Financial hedging derivatives: gross positive and negative fair value \u2013 breakdown by product
(millions of euro)
Type of derivative
Positive and negative fair value
Change in value used
to calculate hedge
effectiveness
Total
31.12.2022
Total
31.12.2021
Total
Total
Over the counter
Organised markets
Over the counter
Organised markets
Central
Counterparties
Without central
counterparties
Central
Counterparties
Without central
counterparties
31.12.2022
31.12.2021
With netting
agreements
Without
netting
agreements
With netting
agreements
Without
netting
agreements
Positive fair value
a) Options
-
75
-
-
-
26
-
-
-47
-114
b) Interest rate swap
17,193
1,637
830
-
2,816
712
61
-
18,312
2,505
c) Cross currency swap
-
325
-
-
-
483
-
-
-92
68
d) Equity swap
-
-
-
-
-
-
-
-
-
-
e) Forwards
-
-
-
-
-
-
-
-
-
-
f) Futures
-
-
-
-
-
-
-
-
-
-
g) Other
-
-
-
-
-
-
-
-
-
-
Total
17,193
2,037
830
-
2,816
1,221
61
-
18,173
2,459
Negative fair value
a) Options
-
1
-
-
-
2
-
-
1
2
b) Interest rate swap
12,471
1,631
18
-
5,238
2,492
63
-
13,360
5,743
c) Cross currency swap
-
788
8
-
-
380
7
-
1,015
378
d) Equity swap
-
-
-
-
-
-
-
-
-
-
e) Forwards
-
5
-
-
-
6
1
-
-
-
f) Futures
-
-
-
-
-
-
-
-
-
-
g) Other
-
-
-
6
-
-
-
-
-
-
Total
12,471
2,425
26
6
5,238
2,880
71
-
14,376
6,123
A.3 Over the counter financial hedging derivatives: notional amounts, gross positive and negative fair values by counterparty
(millions of euro)
Underlying asset
Central
counterparties
Banks
Other financial
companies
Other
counterparties
Contracts not included under netting agreements
1) Debt securities and interest rates
- notional amount
X
4,834
4,039
-
- positive fair value
X
497
333
-
- negative fair value
X
-16
-2
-
2) Equities and stock indices
- notional amount
X
-
-
-
- positive fair value
X
-
-
-
- negative fair value
X
-
-
-
3) Foreign exchange rates and gold
- notional amount
X
21
-
-
- positive fair value
X
-
-
-
- negative fair value
X
-8
-
-
4) Commodities
- notional amount
X
-
-
-
- positive fair value
X
-
-
-
- negative fair value
X
-
-
-
5) Other
- notional amount
X
-
-
-
- positive fair value
X
-
-
-
- negative fair value
X
-
-
-
Contracts included under netting agreements
1) Debt securities and interest rates
- notional amount
322,529
26,545
1,680
-
- positive fair value
17,193
1,668
44
-
- negative fair value
-12,471
-1,119
-517
-
2) Equities and stock indices
- notional amount
-
-
-
-
- positive fair value
-
-
-
-
- negative fair value
-
-
-
-
3) Foreign exchange rates and gold
- notional amount
-
7,918
1,610
-
- positive fair value
-
293
32
-
- negative fair value
-
-465
-324
-
4) Commodities
- notional amount
-
-
-
-
- positive fair value
-
-
-
-
- negative fair value
-
-
-
-
5) Other
- notional amount
-
-
-
-
- positive fair value
-
-
-
-
- negative fair value
-
-
-
-
A.4 Residual maturity of over the counter financial hedging derivatives: notional amounts
(millions of euro)
Underlying/Residual maturity
Up to 1 year
Between 1 and 5
years
Over 5 year
Total
A.1 Financial derivatives on debt securities and interest rates
83,539
151,813
124,275
359,627
A.2 Financial derivatives on equities and stock indices
-
-
-
-
A.3 Financial derivatives on foreign exchange rates and gold
687
3,704
5,158
9,549
A.4 Financial derivatives on commodities
-
-
-
-
A.5 Other financial derivatives
-
-
-
-
Total
31.12.2022
84,226
155,517
129,433
369,176
Total
31.12.2021
60,347
126,333
114,565
301,245
Information on the uncertainty deriving from hedging derivative benchmark indices
As illustrated in Part A \u2013 Accounting policies, the Intesa Sanpaolo Group, from the 2019 Financial Statements, has applied
Regulation (EU) 34/2020 of 15 January 2020, which adopted the document issued by the IASB in September 2019 on
\u201cInterest Rate Benchmark Reform (amendments to IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition
and Measurement and IFRS 7 Financial Instruments: Disclosures)\u201d. This regulation introduced several amendments regarding
hedge accounting designed to prevent uncertainties about the amount and timing of the cash flows arising from the rate
reform resulting in the discontinuation of existing hedges and difficulties in designating new hedging relationships. Therefore,
the analysis of hedge effectiveness was carried out considering the flows and timing of outstanding hedging derivatives,
assuming that the interest rate benchmarks used to set existing interest rates will not be changed as a result of the Interest
Rate Benchmark Reform (IBOR Reform).
The disclosure required by IFRS 7, paragraph 24H, on the uncertainty arising from interest rate benchmark reform on hedging
relationships and the nominal amount of hedging instruments potentially impacted by the benchmark rate reform is provided
below. Reference should also be made to that set out in the Notes to the consolidated financial statements, in the Introduction
of Part E \u2013 Information on risks and relative hedging policies, for an illustration of how the Group is managing the process to
transition to alternative benchmark rates.
B. Credit hedging derivatives
B.1 Credit hedging derivatives: period-end notional amounts
B.2 Credit hedging derivatives: gross positive and negative fair value - breakdown by product
B.3 Over the counter credit hedging derivatives: notional amounts, gross positive and negative fair values by counterparty
B.4 Residual maturity of over the counter credit hedging derivatives: notional amounts
The Intesa Sanpaolo Group does not hold credit derivatives classified as hedges in its portfolio.
C. Non-derivative hedging instruments
C.1 Non-derivative hedging instruments: breakdown by accounting portfolio and type of hedge
The Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply
the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each
type of hedge (both for micro hedges and macro hedges).
For this reason, the Intesa Sanpaolo Group does not hold financial instruments to be shown in table \u201cC.1 Non-derivative
hedging instruments: breakdown by accounting portfolio and type of hedge\u201d.
Fair value hedge derivatives
Fair value hedge derivatives of the Group are mainly index-linked to the Euribor, whose calculation method was revised
during 2019 to be able to continue using that parameter also after 1 January 2022, both for outstanding contracts and new
contracts. To make the Euribor compliant with the EU Benchmarks Regulation (BMR - Regulation 2016/1011/EU) the EMMI -
European Money Markets Institute - implemented the change to a new \u201chybrid\u201d calculation method. The current calculation
system \u2013 which was completed at the end of November 2019 \u2013 does not change the economic variable that the benchmark
measures: the Euribor expresses the actual cost of funding for contributing European banks, and is always available and
consultable.
Therefore, it is not deemed to be uncertainty on the timing or cash flows of the Euribor, and the fair value hedges linked to the
Euribor are not deemed to be impacted by the reform, in line with the approach already adopted in previous years.
With reference to the benchmarks being wound down as at 31 December 2021, the transition activities have been
successfully completed for all these benchmarks. Specifically, with regard to the remaining hedging derivative contracts still
outstanding as at 31 December 2021 with an underlying EONIA benchmark rate (EONIA OIS), as well as the contracts with
the EONIA as the collateral benchmark remuneration rate, no positions were open as at 31 December 2022.
It is also noted that the exposures relating to hedging derivative contracts linked to the Libor to be wound down as at
31 December 2021 (mainly in relation to those expressed in GBP, CHF, JPY and EUR) were no longer present from the initial
months of 2022.
With regard to hedging derivative contracts linked to the USD LIBOR, the transition must be carried out by 30 June 2023 (the
last date of publication of only the one-week and two-month USD LIBOR rates was 31 December 2021). Therefore, for the
purpose of managing the transition to the new RFR, only the financial instruments with maturities after that date are
concerned. The date on which the USD LIBOR will no longer be used does not give rise to specific uncertainties except for
those linked to trading timescales, which could be deferred by the counterparties.
Specifically, as at 31 December 2022 fair value hedge derivatives indexed to the USD LIBOR amounted to a notional value of
13,332 million euro, accounting for 4% of the Group's total fair value hedge derivatives. As at 31 December 2021 fair value
hedge derivatives indexed to the EONIA amounted to a notional value of 4 million euro, those indexed to the USD LIBOR to a
notional value of 16,646 million euro and those indexed to the LIBOR in other currencies to a notional value of 62 million euro,
accounting for 6% of the Group's total fair value hedge derivatives.
These amounts are included in the disclosure provided on the IBOR Reform in Part A, Section 4 - Other aspects. Specifically,
the table published includes, in the \u201cderivatives\u201d column, both trading and hedging derivatives not yet passed to the
alternative benchmarks as at 31 December 2022. See that section for qualitative analyses of the methods of management of
the transition by the Group.
Cash flow hedge derivatives
Cash flow hedge derivatives are index-linked to the Euribor. As illustrated for fair value hedges, the Group does not deem that
there is uncertainty on the timing or cash flows of the Euribor, and, therefore does not consider the cash flow hedges linked to
the Euribor to be impacted by the reform.
D. Hedged items
The Intesa Sanpaolo Group has exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply
the provisions of IAS 39 on hedge accounting (in the carved-out version endorsed by the European Commission) for each
type of hedge (both for micro hedges and macro hedges).
D.1 Fair value hedges
(millions of euro)
Micro-
hedges: book
value
Micro-hedges \u2013
net positions:
book value of
assets and
liabilities (prior
to netting)
Micro-hedges
Macro-
hedges:
book value
Cumulative
fair value
changes
(hedged
instrument)
Termination
of hedging:
residual
cumulative
fair value
changes
Changes in
value used to
assess hedge
ineffectiveness
A. Assets
1. Financial assets designated at fair value
through other comprehensive income \u2013
hedging of:
30,794
-
-4,934
-2,221
-4,575
-
1.1 Debt securities and interest rates
28,597
-
-4,905
-2,214
-4,566
X
1.2 Equities and stock indices
-
-
-
-
-
X
1.3 Foreign exchange rates and gold
-
-
-
-
-
X
1.4 Loans
-
-
-
-
-
X
1.5 Other
2,197
-
-29
-7
-9
X
2. Financial assets measured at amortised
cost - hedging of:
35,329
-
-2,568
-1,028
-2,536
99,032
1.1 Debt securities and interest rates
34,751
-
-2,766
-1,028
-2,738
X
1.2 Equities and stock indices
-
-
-
-
-
X
1.3 Foreign exchange rates and gold
157
-
-1
-
-
X
1.4 Loans
-
-
-
-
-
X
1.5 Other
421
-
199
-
202
X
Total
31.12.2022
66,123
-
-7,502
-3,249
-7,111
99,032
Total
31.12.2021
84,679
-
3,383
190
2,773
76,009
B. Liabilities
1. Financial liabilities measured at amortised
cost - hedging of:
55,128
-
-3,589
-370
-3,764
111,035
1.1 Debt securities and interest rates
49,462
-
-2,997
-66
-3,219
X
1.2 Foreign exchange rates and gold
-
-
-
-
-
X
1.3 Other
5,666
-
-592
-304
-545
X
Total
31.12.2022
55,128
-
-3,589
-370
-3,764
111,035
Total
31.12.2021
61,269
-
740
3
697
61,554
D.2 Cash flow hedges and hedges of foreign investments
(millions of euro)
Change in value
used to assess
hedge
ineffectiveness
Hedging
reserves
Termination of
hedging: residual
cumulative value
of the hedging
reserves
A. Cash flow hedge
1. Assets
640
-488
-
1.1 Debt securities and interest rates
640
-488
-
1.2 Equities and stock indices
-
-
-
1.3 Foreign exchange rates and gold
-
-
-
1.4 Loans
-
-
-
1.5 Other
-
-
-
2. Liabilities
192
22
-
1.1 Debt securities and interest rates
192
22
-
1.2 Foreign exchange rates and gold
-
-
-
1.3 Other
-
-
-
Total (A)
31.12.2022
832
-466
-
Total (A)
31.12.2021
-751
-607
-
B. Hedges of foreign investments
X
10
-
Total (A+B)
31.12.2022
832
-456
-
Total (A+B)
31.12.2021
-751
-607
-
E. Effects of hedging on shareholders\u2019 equity
E.1 Reconciliation of components of shareholders\u2019 equity
(millions of euro)
Cash flow hedging reserve
Reserve for hedging of foreign investments
Debt
securities
and
interest
rates
Equities
and
stock
indices
Foreign
exchange
rates and
gold
Loans
Other
Debt
securities
and
interest
rates
Equities
and
stock
indices
Foreign
exchange
rates and
gold
Loans
Other
Initial amount
-607
-
-
-
-
-
-
-
-
-
Fair value changes (effective
portion)
141
-
-
-
-
-
-
-
-
-
Reclassification to the income
statement
-
-
-
-
-
-
-
-
-
-
of which: future transaction not
expected
-
-
-
-
-
X
X
X
X
X
Other changes
-
-
-
-
-
-
-
10
-
-
of wich: transfer to initial book
value
-
-
-
-
-
X
X
X
X
X
Final amount
-466
-
-
-
-
-
-
10
-
-
The category \u201cHedging instruments (non-designated items)\u201d is not present, because the Intesa Sanpaolo Group has
exercised the option, provided for on the introduction of IFRS 9, of continuing to fully apply the provisions of IAS 39 on hedge
accounting (in the carved-out version endorsed by the European Commission) for each type of hedge (both for micro hedges
and macro hedges).
1.3.3. Other information on derivative instruments (trading and hedging)
A. Credit and financial derivatives
A.1 Over the counter credit and financial derivatives: net fair values by counterparty
(millions of euro)
Central
counterparties
Banks
Other
financial
companies
Other
counterparties
A. Financial derivatives
1) Debt securities and interest rates
- notional amount
1,650,362
-
-
-
- positive net fair value
564
-
-
-
- negative net fair value
-
-
-
-
2) Equities and stock indices
- notional amount
-
-
-
-
- positive net fair value
-
-
-
-
- negative net fair value
-
-
-
-
3) Foreign exchange rates and gold
- notional amount
-
-
-
-
- positive net fair value
-
-
-
-
- negative net fair value
-
-
-
-
4) Commodities
- notional amount
-
-
-
-
- positive net fair value
-
-
-
-
- negative net fair value
-
-
-
-
5) Other
- notional amount
-
-
-
-
- positive net fair value
-
-
-
-
- negative net fair value
-
-
-
-
B. Credit derivatives
1) Protection purchases
- notional amount
-
-
-
-
- positive net fair value
-
-
-
-
- negative net fair value
-
-
-
-
2) Protection sales
- notional amount
-
-
-
-
- positive net fair value
-
-
-
-
- negative net fair value
-
-
-
-
The table shows the values resulting from the offsetting in the balance sheet for the derivatives whose netting agreements
meet the criteria set out in IAS 32 paragraph 42.
In particular, the above refers mainly to OTC trading and hedging financial and credit derivatives in place with the legal
clearing agent LCH Ltd., for which the fair values attributable to transactions on own account and transactions on behalf of
customers have been offset separately in the financial statements.
The clearing amount, which had a total net positive value of 564 million euro (positive fair value of 85,957 million euro and
negative fair value of 85,393 million euro), attributable to a positive result of 147 million euro from trading derivatives and a
positive result of 417 million euro from hedging derivatives, is presented in Part B of the Notes to the financial statements, for
operations on behalf of customers and Group companies (trading derivatives) among Financial assets held for trading for
4,384 million euro and operations on own account (trading derivatives and hedging derivatives) among Financial liabilities
held for trading for 3,820 million euro, respectively.
1.4 LIQUIDITY RISK
QUALITATIVE INFORMATION
A. General aspects, liquidity risk management processes and measurement methods
Liquidity risk is defined as the risk that the Bank may not be able to meet its payment obligations due to the inability to obtain
funds on the market (funding liquidity risk) or liquidate its assets (market liquidity risk).
The arrangement of a suitable control and management system for that specific risk has a fundamental role in maintaining
stability, not only at the level of each individual bank, but also of the market as a whole, given that imbalances within a single
financial institution may have systemic repercussions. Such a system must be integrated into the overall risk management
system and provide for incisive controls consistent with developments in the context of reference.
Intesa Sanpaolo\u2019s internal control and management system for liquidity risk is implemented within the Group Risk Appetite
Framework and in compliance with the tolerance thresholds for liquidity risk approved in the system, which establish that the
Group must maintain an adequate liquidity position in order to cope with periods of strain, including prolonged periods, on the
various funding supply markets, also by establishing adequate liquidity reserves consisting of marketable securities and
refinancing at Central Banks. To this end, a balance needs to be maintained between incoming and outgoing funds, both in
the short and medium-long term. This goal is implemented by the Group Liquidity Risk Management Guidelines approved by
the Corporate Bodies of Intesa Sanpaolo, in implementation of the applicable regulatory provisions.
The provisions on liquidity introduced by the European Union in June 2013 and subsequently updated establish that banks
must comply with: (i) the short-term liquidity coverage ratio (LCR > 100%) and (ii) the net stable funding ratio (NSFR >100%),
as set out in Directive 2019/878/EU, Regulation (EU) No 575/2013, Regulation (EU) No 2019/876 and Delegated Regulation
(EU) No 2015/61, as supplemented and amended. The regulatory framework is completed by the \u201cImplementing Technical
Standards\u201d developed by the European Banking Authority (EBA) and ECB Guidelines designed to increase regulatory
harmonisation of the Union within the framework of the Single Supervisory Mechanism (SSM), which in the area of liquidity
also establishes an Internal Liquidity Adequacy Assessment Process (ILAAP), to be conducted with annual frequency for the
purposes of the Supervisory Review and Evaluation Process (SREP).
The \u201cGroup Liquidity Risk Management Guidelines\u201d of the Intesa Sanpaolo Group \u2013 in addition to referring to the Bank of
Italy\u2019s indications regarding liquidity risk contained in the \u201cSupervisory regulations for banks\u201d \u2013 have gradually incorporated all
the above regulatory provisions, in implementation of the applicable regulatory provisions.
In this framework, the Group Liquidity Risk Management Guidelines approved by Intesa Sanpaolo\u2019s Corporate Bodies
illustrate the tasks of the various corporate functions, the rules and the set of control and management processes aimed at
ensuring prudent monitoring of liquidity risk, thereby preventing the emergence of crisis situations. To this end, they include
procedures for identifying risk factors, measuring risk exposure and verifying observance of limits, conducting stress tests,
identifying appropriate risk mitigation initiatives, drawing up emergency plans and submitting informational reports to company
bodies.
The key principles guiding the internal control and management system for liquidity risk defined by those Guidelines are as
follows:
\u2013 the existence of a liquidity management policy approved by senior management and clearly disseminated throughout the
Bank;
\u2013 the existence of an operating structure that works within set limits and attention thresholds and of a control structure that
is independent from the operating structure;
\u2013 the constant availability of adequate liquidity reserves in relation to the pre-determined liquidity risk tolerance threshold;
\u2013 the assessment of the impact of various scenarios, including stress testing scenarios, on the cash inflows and outflows
over time and the quantitative and qualitative adequacy of liquidity reserves;
\u2013 the adoption of an internal fund transfer pricing system that accurately incorporates the cost/benefit of liquidity, on the
basis of the Intesa Sanpaolo Group\u2019s funding conditions;
\u2013 liquidity management in crisis situations that takes into account the guidelines on the governance of crisis management
processes within the Recovery Plan and the Resolution Plan.
The Group Liquidity Risk Management Guidelines set out the task assigned to the Corporate Bodies and allocate several
important responsibilities to senior management, including approving measurement indicators, defining the main assumptions
underlying the stress scenarios and composing the early warning thresholds used to activate emergency plans.
In order to pursue an integrated, consistent risk management policy, strategic decisions regarding liquidity risk monitoring and
management at the Group level fall to the Parent Company\u2019s Corporate Bodies. From this standpoint, the Parent Company
performs its functions of monitoring and managing liquidity not only in reference to its own organisation, but also by assessing
the Group\u2019s overall transactions and the liquidity risk to which it is exposed. In order to maximise the coordination and
integrated control of liquidity risk, the Group Liquidity Risk Management Guidelines identify the following scopes of
companies: (i) the \u201cEurozone sub-consolidation scope\u201d, which comprises the Parent Company with its international branches
and all the other Italian and international banks of the Group in the Eurozone for which the transfer of liquidity is not blocked
or limited by regulatory constraints and which therefore contribute to the stability of the integrated management in the
Eurozone, for which the Central Treasury function is directly responsible, subject to compliance with the limits set for each
individual legal entity; and (ii) the \u201cOther Banks/Group Companies\u201d scope, which includes the Group\u2019s international
subsidiaries, whose liquidity management is carried out by the Treasury/ALM functions of each subsidiary, under the
guidance and monitoring of the competent structures of the Parent Company.
The corporate functions of the Parent Company responsible for ensuring the correct application of the Guidelines and the
adequacy of the Group\u2019s liquidity position are the Group Treasury and Finance Head Office Department and the Planning and
Control Department, responsible, within the Chief Financial Officer (CFO) Area, for liquidity management, and the Market and
Financial Risk Management Head Office Department, which is directly responsible, within the Chief Risk Officer (CRO) Area,
for measuring liquidity risk on a consolidated basis.
The Group\u2019s liquidity is managed by the aforesaid structures of the CFO area through thorough monitoring of cash flows and
continuous liaison with the Business Units, within the framework of the relevant business plans drawn up in accordance with
the following guidelines:
\u2013 constant attention to the level of customer loyalty, aimed at maintaining a high stock of stable deposits;
\u2013 monitoring of the deposit-lending gap of the Business Units, with respect to plan and budget targets;
\u2013 balanced use of the institutional market, with particular attention to diversification of segments and instruments;
\u2013 selective use of refinancing operations by Central Banks.
The Market and Financial Risk Management Head Office Department is directly responsible for level two controls and, as an
active member of the Managerial Committees, it performs a primary role in the management and dissemination of information
on liquidity risk, helping improve the Group\u2019s overall awareness of the existing position. In particular, it ensures the
measurement of the Group\u2019s current and future exposure to liquidity risks under normal and stressed conditions, verifying
compliance with the limits and, if those limits are exceeded, implementing the reporting to the competent Corporate Bodies
and monitoring the agreed correction actions in the event of any excesses.
The Chief Audit Officer assesses the functioning of the overall structure of the control system monitoring the process for
measuring, managing and controlling the Group\u2019s exposure to liquidity risk and verifies the adequacy and compliance of the
process with the requirements established by the regulations. The results of the controls carried out are submitted to the
Corporate Bodies, at least once a year.
The liquidity risk measurement metrics and mitigation tools are formalised by the aforementioned Group Liquidity Risk
Management Guidelines which establish the methodology used for both the short-term and structural liquidity indicators.
The short-term liquidity is aimed at providing an adequate, balanced level of cash inflows and outflows the timing of which is
certain or estimated to fall within a period of 12 months, while ensuring a sufficient liquidity buffer, available for use as the
main mitigation tool for liquidity risk. To that end, and in keeping with the liquidity risk appetite, the system of limits consists of
specific short-term indicators, both of a regulatory nature with a holding a period of one month (Liquidity Coverage Ratio -
LCR) and internally defined (Survival Period indicators).
The LCR indicator is aimed at strengthening the short-term liquidity risk profile, ensuring that sufficient unencumbered high-
quality liquid assets (HQLA) are retained that can be converted easily and immediately into cash on the private markets to
satisfy the short-term liquidity requirements (30 days) in an acute liquidity stress scenario. To this end, the Liquidity Coverage
Ratio measures the ratio between: (i) the stock of HQLA and (ii) the total net cash outflows calculated according to the
scenario parameters defined by Delegated Regulation (EU) 2015/61 and its supplements/amendments.
The Survival Period is an internal indicator designed to measure the first day on which the net liquidity position (calculated as
the difference between available liquidity reserves and net outflows) becomes negative, i.e. when additional liquidity is no
longer available to cover simulated net outflows. To this end, two different scenario hypotheses are considered, baseline and
stressed, designed to measure, respectively: (i) the Group's independence from interbank funding on the financial markets
and (ii) the survival period in the event of further tensions of a market and idiosyncratic nature, of medium-high severity,
managed without envisaging restrictions on credit activity involving customers. For the Survival Period indicator, in stress
conditions it is established that a minimum survival period must be maintained with the purpose of establishing an overall level
of reserves covering greater cash outflows during a period of time that is adequate to implement the required operating
measures to restore the Group to balanced conditions.
The Intesa Sanpaolo Group\u2019s structural Liquidity Policy has adopted the structural requirement provided for by the regulatory
provisions - the Net Stable Funding Ratio (NSFR). This indicator is aimed at promoting the increased use of stable funding, to
prevent medium/long-term operations from giving rise to excessive imbalances to be financed in the short term. To this end, it
sets a minimum \"acceptable\u201d amount of funding exceeding one year in relation to the needs originating from the
characteristics of liquidity and residual duration of assets and off-balance sheet exposures. In addition, the internal policy on
structural liquidity also includes early warning indicators for maturities of more than 1 year, with particular attention to long-
term gaps (> 5 years).
The Group Liquidity Risk Management Guidelines also establish methods for management of a potential liquidity crisis,
defined as a situation of difficulty or inability of the Bank to meet its cash obligations falling due, without implementing
procedures and/or employing instruments that, due to their intensity or manner of use, do not qualify as ordinary
administration.
By setting itself the objectives of safeguarding the Group\u2019s asset value and also guaranteeing business continuity under
conditions of extreme liquidity emergency, the Contingency Liquidity Plan (CLP) ensures the identification of the early warning
signals and their ongoing monitoring, the definition of procedures to be implemented in situations of liquidity stress, also
indicating the immediate lines of action, and the intervention measures for the resolution of emergencies. The early warning
indexes, aimed at spotting the signs of a potential liquidity strain, both systematic and specific, are monitored with daily
frequency by the Market and Financial Risk Management Head Office Department. Within this framework, the Group Treasury
and Finance Head Office Department was officially entrusted with drawing up the Contingency Funding Plan (CFP), which
contains the various lines of actions that can be activated in order to face potential stress situations, specifying the extent of
the mitigating effects attainable in the short-term.
The CLP is part of the more general plan of Crisis Management (i.e. it is the first step of the escalation process envisaged in
the management of liquidity emergencies) and the instruments envisaged in it represent a selection of recovery actions that
are considered to be implementable in the short term and before other more radical measures, which are more extraordinary
in nature or extent. To this end, intervention strategies and tools are defined according to the type, duration and intensity of
the liquidity emergency, as well as the context in which the emergency is expected to occur.
Group liquidity position
The Group's liquidity position - supported by suitable high-quality liquid assets (HQLA) and the significant contribution from
retail stable funding - remained within the risk limits set out in the current Group Liquidity Policy for all of 2022.
Both regulatory indicators, LCR and NSFR, were above the regulatory requirements. In 2022, the Liquidity Coverage Ratio
(LCR) of the Intesa Sanpaolo Group, measured according to Delegated Regulation (EU) 2015/61, amounted to an average
105
of 181.9% (184.5% in 2021). The NSFR was also significantly higher than 100%, supported by a solid base of stable deposits
from customers, further increased during the year, as well as by adequate wholesale medium/long-term securities funding and
the TLTRO funding from the ECB. At 31 December 2022, the Intesa Sanpaolo Group\u2019s NSFR, measured in accordance with
regulatory instructions, was 126% (127.3% at the end of 2021); this indicator remains well above 100%, even excluding the
positive contribution of TLTRO funding.
The surpluses of both regulatory indicators, LCR and NSFR, are mainly originated within the Eurozone sub-consolidation
scope. For the purposes of the LCR indicator, individual surpluses recorded at some international subsidiaries are also
sterilised on consolidation due to constraints on the circulation of liquidity at those subsidiaries.
At the end of December 2022, the exact value of total unencumbered HQLA reserves at the various Treasury Departments of
the Group totalled 172.5 billion euro (187.1 billion euro at the end of 2021), approximately 64% of which consisted of cash as
a result of temporary excess liquidity payments in the form of unrestricted deposits held at central banks. Adding the other
marketable reserves and/or eligible Central Bank reserves, including retained self-securitisations, the Group\u2019s unencumbered
liquidity reserves amounted to a total of 177.7 billion euro (192.4 billion euro at the end of 2021).
(millions of euro)
Unencumbered
(net of haircut)
31.12.2022
31.12.2021
HQLA Liquidity Reserves
172,527
187,066
Cash and Deposits held with Central Banks (HQLA)
109,792
135,061
Highly liquid securities (HQLA)
62,735
52,005
Other eligible and/or marketable reserves
5,222
5,306
Total Group's Liquidity Buffer
177,749
192,372
Regular stress tests are carried out to assess the impact of negative events on the company liquidity position and on the
adequacy of liquidity reserves, in relation to the current and prospective situation of the Group, the Bank and the market, to
enable the Corporate Bodies to promptly recognise any unexpected vulnerability and to direct the activation of consequent
corrective measures.
Considering the high amounts of unencumbered liquidity reserves (liquid or eligible), the stress tests, in a combined scenario
of market and specific crises (with significant loss in customer deposits), yielded results in excess of the target threshold for
the Intesa Sanpaolo Group, with a liquidity surplus capable of meeting extraordinary cash outflows for a period of more than 3
months.
Intesa Sanpaolo\u2019s funding strategy is based on maintaining diversity in terms of customers, products, maturities and
currencies. Intesa Sanpaolo\u2019s main sources of funding consist of: (i) deposits from the domestic Retail and Corporate market,
which represent the stable portion of funding, (ii) short-term funding on wholesale markets, largely consisting of repurchase
agreements and CD/CP funding, and (iii) medium/long-term funding, mainly composed of own issues (covered bonds/ABS
and other senior debt securities in the euro and US markets, in addition to subordinated securities) and refinancing operations
with the Eurosystem (TLTRO).
The Group Liquidity Risk Management Guidelines require the regular monitoring of the concentration analyses for the funding
(by counterparty/product) and for the liquidity reserves (by issuer/counterparty).
Adequate and timely information regarding the development of market conditions and the position of the Bank and/or Group
was regularly provided to the corporate bodies and internal committees in order to ensure full awareness and manageability of
the risk factors. This report includes an assessment of the liquidity risk exposure, also determined based on the adverse
scenarios. The Board of Directors of Intesa Sanpaolo is regularly involved in defining the strategy for maintaining an adequate
liquidity position at the level of the entire Group.
105
The figure shown refers to the simple average of the last 12 months of monthly observations, as per Regulation (EU) 2021/637.
The corporate assessment on the adequacy of Intesa Sanpaolo\u2019s position is reported in the ILAAP (Internal Liquidity
Adequacy Assessment Process), which also includes the Group\u2019s Funding Plan. Within the annual approval process for this
report by the Corporate Bodies of Intesa Sanpaolo, the Liquidity Adequacy Statement (LAS) approved by the Board of
Directors, which also presents the main findings from the self-assessment of the adequacy of the liquidity position, taking into
account the results and values shown by the main indicators, confirms that the management of the liquidity position is
considered to be adequate and deeply rooted in the Group\u2019s culture and business processes. It also notes, including from a
prospective standpoint, that the current system of rules and procedures appears adequate to ensure a prompt and effective
reaction should the risks and challenges actually materialise in severe and adverse stress scenarios.
Impacts from the COVID-19 pandemic
All the necessary preventive management and control measures implemented from the outset of the COVID-19 emergency
remain in place to detect any signs of potential exacerbation of liquidity conditions.
Impacts of the Russia-Ukraine conflict
In light of the low exposure to Russian and Ukrainian counterparties, there were no significant impacts on the Group\u2019s
consolidated liquidity position deriving from the Russia-Ukraine conflict.
QUANTITATIVE INFORMATION
1. Breakdown by contractual residual maturity of financial assets and liabilities
The breakdown by maturity of financial assets and liabilities is shown in the tables below according to the rules set forth in the
financial statement regulations (Bank of Italy Circular 262 and related clarifications issued by the Supervisory Authority), using
accounting information organised by contractual residual maturity. Therefore, no operational data was used that would
require, for example, the modelling of core deposits and the representation of on-balance sheet items according to their level
of liquidability.
Currency of denomination: Euro
(millions of euro)
Type/Residual maturity
On
demand
Between
1 and 7
days
Between
7 and 15
days
Between
15 days
and 1
month
Between
1 and 3
months
Between
3 and 6
months
Between
6 months
and 1
year
Between
1 and 5
years
Over 5
years
Unspecified
maturity
A. Cash assets
150,164
13,534
4,019
17,166
21,843
22,015
35,595
167,586
197,955
4,250
A.1 Government bonds
17
8
155
97
649
1,282
1,250
9,778
43,346
-
A.2 Other debt securities
1,130
1,050
900
4,861
300
450
749
8,695
21,832
-
A.3 Quotas of UCI
3,198
-
-
-
-
-
-
-
-
-
A.4 Loans
145,819
12,476
2,964
12,208
20,894
20,283
33,596
149,113
132,777
4,250
- Banks
103,537
3,769
411
912
988
511
1,622
1,080
380
4,120
- Customers
42,282
8,707
2,553
11,296
19,906
19,772
31,974
148,033
132,397
130
B. Cash liabilities
428,655
2,922
1,670
4,159
13,240
51,096
9,465
92,428
21,562
-
B.1 Deposits and current accounts
395,258
712
1,126
1,681
2,277
1,881
2,756
2,259
816
-
- Banks
2,310
241
111
156
133
143
169
480
308
-
- Customers
392,948
471
1,015
1,525
2,144
1,738
2,587
1,779
508
-
B.2 Debt securities
41
190
543
2,444
6,468
2,224
5,716
40,828
16,951
-
B.3 Other liabilities
33,356
2,020
1
34
4,495
46,991
993
49,341
3,795
-
C. Off-balance sheet transactions
C.1 Financial derivatives with exchange of
capital
- Long positions
425
6,820
2,244
8,791
26,476
5,951
7,116
14,707
8,408
-
- Short positions
456
8,536
2,187
8,212
13,420
4,250
6,172
13,096
12,759
-
C.2 Financial derivatives without exchange
of capital
- Long positions
24,138
68
4
118
167
425
869
260
16
-
- Short positions
25,672
30
12
156
322
584
905
261
16
-
C.3 Deposits and loans to be settled
- Long positions
59,541
-
-
-
-
-
-
-
-
-
- Short positions
5
55,786
99
1,213
2,295
70
-
53
19
-
C.4 Irrevocable commitments to lend funds
- Long positions
4,135
10,943
7
339
556
723
2,093
17,146
2,266
-
- Short positions
36,478
50
7
42
40
91
162
104
3
-
C.5 Financial guarantees given
1,110
14
13
26
146
103
264
313
136
-
C.6 Financial guarantees received
172
-
-
-
-
-
-
-
-
-
C.7 Credit derivatives with exchange of
capital
- Long positions
-
-
-
-
-
20
30
536
686
-
- Short positions
-
-
-
-
-
20
30
536
686
-
C.8 Credit derivatives without exchange of
capital
- Long positions
502
-
-
-
-
-
-
-
-
-
- Short positions
469
-
-
-
-
-
-
-
-
-
Currency of denomination: Other currencies
(millions of euro)
Type/Residual maturity
On
demand
Between
1 and 7
days
Between
7 and 15
days
Between
15 days
and 1
month
Between
1 and 3
months
Between
3 and 6
months
Between
6 months
and 1
year
Between
1 and 5
years
Over 5
years
Unspecified
maturity
A. Cash assets
10,524
6,846
2,923
4,420
6,658
4,133
5,676
26,663
18,337
1,322
A.1 Government bonds
5
111
133
354
892
810
1,260
5,323
11,488
-
A.2 Other debt securities
199
28
59
195
359
164
441
4,285
1,667
-
A.3 Quotas of UCI
541
-
-
-
-
-
-
-
-
-
A.4 Loans
9,779
6,707
2,731
3,871
5,407
3,159
3,975
17,055
5,182
1,322
- Banks
7,012
5,788
1,812
1,409
2,025
914
324
408
263
1,309
- Customers
2,767
919
919
2,462
3,382
2,245
3,651
16,647
4,919
13
B. Cash liabilities
26,832
3,598
4,891
6,108
6,196
1,312
2,370
11,864
8,142
-
B.1 Deposits and current accounts
25,077
1,383
1,458
1,974
2,230
808
1,648
1,716
359
-
- Banks
1,588
729
531
666
543
99
260
798
75
-
- Customers
23,489
654
927
1,308
1,687
709
1,388
918
284
-
B.2 Debt securities
132
110
1,227
577
458
201
673
9,049
6,935
-
B.3 Other liabilities
1,623
2,105
2,206
3,557
3,508
303
49
1,099
848
-
C. Off-balance sheet transactions
C.1 Financial derivatives with exchange of
capital
- Long positions
142
14,959
5,653
12,622
17,107
8,030
11,320
17,395
10,723
-
- Short positions
254
14,143
5,716
13,676
30,101
9,688
11,985
18,887
6,052
-
C.2 Financial derivatives without exchange
of capital
- Long positions
2,808
5
61
81
43
227
274
2
19
-
- Short positions
5,667
1
53
69
40
201
273
3
20
-
C.3 Deposits and loans to be settled
- Long positions
2,950
-
-
-
-
-
-
-
-
-
- Short positions
-
199
1,001
659
736
2
-
155
198
-
C.4 Irrevocable commitments to lend funds
- Long positions
1,563
113
25
157
1,286
724
1,181
11,677
1,142
-
- Short positions
15,810
26
-
-
1
2
10
6
-
-
C.5 Financial guarantees given
839
13
8
48
124
127
245
371
92
-
C.6 Financial guarantees received
96
-
-
-
-
-
-
-
-
-
C.7 Credit derivatives with exchange of
capital
- Long positions
-
-
-
-
-
-
28
47
-
-
- Short positions
-
-
-
-
-
-
28
47
-
-
C.8 Credit derivatives without exchange of
capital
- Long positions
432
-
-
-
-
-
-
-
-
-
- Short positions
435
-
-
-
-
-
-
-
-
-
2. Self-securitisations
A brief illustration of the securitisations originated by Intesa Sanpaolo outstanding as at 31 December 2022 is shown below, in
which the Bank subscribed all the securities issued by the related vehicle (self-securitisations), and which need not be shown
in the tables of Part E, section C \u201cSecuritisations\u201d of the Notes to the financial statements.
Brera Sec S.r.l.
In October 2017, a self-securitisation was structured, carried out through the sale of five loan portfolios to the vehicle
company Brera Sec S.r.l. and originated by the Parent Company and by four banks of the Group subsequently incorporated
into Intesa Sanpaolo (Banco di Napoli, Cassa di Risparmio di Forl\u00ec e della Romagna and Cassa di Risparmio del Friuli
Venezia Giulia, incorporated in the second half of 2018, and Cassa di Risparmio in Bologna). The underlying consisted of
residential mortgage loans held by households and/or family businesses. This transaction was the Group\u2019s first Multi-
Originator Residential Mortgage Backed Security (\u201cRMBS\u201d) securitisation.
Intesa Sanpaolo has acquired a minority interest (5%) in the newly established vehicle, which was purchased on the market,
and control (95%) will remain with a corporate entity outside the Group (Dutch-registered foundation known as a Stichting).
Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be
carried out by Securitisation Services S.p.A.
The transaction involved the issuance by the vehicle company of two tranches of securities: a senior tranche listed on the
Luxembourg Stock Exchange, with a rating assigned by two rating agencies (Moody\u2019s and DBRS Morningstar) and an
unlisted junior tranche without rating.
Both the senior and junior securities were subscribed pro rata by each individual selling bank based on the sale price of each
portfolio, and therefore today they have been fully subscribed by Intesa Sanpaolo.
The senior security issued through the transaction was used as collateral for refinancing operations in the Eurosystem.
The total sale consideration was 7.1 billion euro. The sale price of each portfolio sold was settled through the issuance of
securities on 11 December 2017 for a total of 7.1 billion euro.
The senior securities are listed with an Aa3 Moody\u2019s and an A (High) DBRS Morningstar rating.
As at 31 December 2022, the value of the outstanding subscribed securities was 2,831 million euro for the senior securities
and 1,067 million euro for the junior securities.
Brera Sec S.r.l. (SEC 2)
In September 2019, a self-securitisation was structured, implemented through the sale of a loan portfolio originated by Intesa
Sanpaolo to the vehicle company Brera Sec S.r.l. This transaction is the Group\u2019s second Residential Mortgage Backed
Security (\u201cRMBS\u201d) securitisation.
The transaction involved the issuance on 27 November 2019 by the vehicle company of two tranches of securities: a senior
tranche listed on the Luxembourg Stock Exchange, with a rating assigned by two rating agencies (Moody\u2019s and DBRS
Morningstar) and an unlisted junior tranche without rating.
Both the senior and junior securities were subscribed by Intesa Sanpaolo.
The senior security issued through the transaction was used as collateral for refinancing operations in the Eurosystem.
Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be
carried out by Securitisation Services S.p.A.
The total sale consideration was 7.5 billion euro. The sale price of the portfolio was settled through the issuance of securities
on 27 November 2019 for a total of 7.5 billion euro.
The senior securities are listed with an Aa3 Moody\u2019s and an A (High) DBRS Morningstar rating.
As at 31 December 2022, the value of the outstanding securities was 4,523 million euro for the senior securities and 860
million euro for the junior securities.
Brera Sec S.r.l. (SEC 3)
In October 2021, a new self-securitisation was structured, implemented through the sale of a loan portfolio originated by
Intesa Sanpaolo to the vehicle company Brera Sec S.r.l. This transaction is the Group\u2019s third Residential Mortgage Backed
Security (\u201cRMBS\u201d) securitisation.
The transaction involved the issuance on 1 December 2021 by the vehicle company of two tranches of securities: a senior
tranche listed on the Luxembourg Stock Exchange, with a rating assigned by two rating agencies (Moody\u2019s and DBRS
Morningstar) and an unlisted junior tranche without rating.
Both the senior and junior securities were subscribed by Intesa Sanpaolo.
The senior security issued through the transaction was used as collateral for refinancing operations in the Eurosystem.
Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be
carried out by Securitisation Services S.p.A.
The total sale consideration was 7.7 billion euro. The sale price of the portfolio was settled through the issuance of securities
on 1 December 2021 for a total of 7.7 billion euro.
The senior securities are listed with an A1 Moody\u2019s and an A (High) DBRS Morningstar rating.
As at 31 December 2022, the value of the outstanding securities was 6,515 million euro for the senior securities and
725 million euro for the junior securities.
Clara Sec S.r.l.
In 2020, a self-securitisation was structured involving receivables arising from performing personal loans within the consumer
credit area and disbursed to consumer households.
The securitisation is a revolving transaction and Intesa Sanpaolo will have the option to sell the vehicle further portfolios of
loans with similar characteristics and quality, which the Vehicle will purchase by drawing on the receipts generated by the
portfolio segregated over time.
The transaction took place with the sale of the portfolio of loans originated by Intesa Sanpaolo to the vehicle company Clara
Sec S.r.l.
Intesa Sanpaolo has acquired a minority interest (5%) in the newly established vehicle, which was purchased on the market,
and control (95%) will remain with an entity from outside the Group (Dutch-registered foundation known as a Stichting).
Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be
carried out by Securitisation Services S.p.A.
The transaction involved the issuance by the vehicle company of two tranches of securities on 23 June 2020: a listed senior
tranche with a rating assigned by two rating agencies (Moody\u2019s and DBRS Morningstar) and an unlisted junior tranche without
a rating.
Both the senior and junior securities were subscribed by Intesa Sanpaolo.
The senior security issued through the transaction was used as collateral for refinancing operations in the Eurosystem.
The total sale consideration was 7.6 billion euro. The sale price of the portfolio was settled through the issuance of securities
on 23 June 2020 for a total of 7.2 billion euro.
The senior securities are listed with an A1 Moody\u2019s and an A DBRS Morningstar rating.
A sale of 1.4 billion euro was finalised in February 2022, followed by a repurchase of 88 million euro in April and a sale of
1.5 billion euro in October.
As at 31 December 2022, the value of the outstanding securities was 6,350 million euro for the senior securities and
824 million euro for the junior securities.
Giada Sec S.r.l.
In November 2020, a self-securitisation was structured, implemented through the sale of a portfolio of loans, disbursed to
companies belonging to the small business, SME and Corporate segment and originated by Intesa Sanpaolo, to the vehicle
company Giada Sec S.r.l.
The securitisation is a revolving transaction and Intesa Sanpaolo will have the option to sell the vehicle further portfolios of
loans with similar characteristics and quality, which the Vehicle will purchase by drawing on the receipts generated by the
portfolio segregated over time.
Intesa Sanpaolo has acquired a minority interest (5%) in the newly established vehicle, which was purchased on the market,
and control (95%) will remain with a corporate entity outside the Group (Dutch-registered foundation known as a Stichting).
Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be
carried out by Securitisation Services S.p.A.
The transaction involved the issuance by the vehicle company of two tranches of securities: a senior tranche listed on the
Luxembourg Stock Exchange, with a rating assigned by two rating agencies (Moody\u2019s and DBRS Morningstar) and an
unlisted junior tranche without rating.
Both the senior and junior securities were subscribed by Intesa Sanpaolo.
The senior security issued through the transaction, with a Moody\u2019s A1 and a DBRS Morningstar A rating, was used as
collateral for refinancing operations in the Eurosystem.
The total sale consideration was 10.1 billion euro.
The sale price of the portfolio was settled through the issuance of securities on 21 December 2020 for the same amount.
A sale of 1.7 billion euro was finalised in May 2022.
As at 31 December 2022, the value of the outstanding securities was 6,610 million euro for the senior securities and
3,485 million euro for the junior securities.
Giada Sec S.r.l. (Giada BIS)
In October 2022, a new self-securitisation was structured, implemented through the sale of a loan portfolio originated by
Intesa Sanpaolo, disbursed to small and medium enterprises (\u201dSMEs\u201d), including sole proprietorships and loans granted to
corporate customers not belonging to the \u201clarge corporate\u201d segment, to the special-purpose vehicle Giada Sec S.r.l.
The securitisation is a revolving transaction and Intesa Sanpaolo will have the option to sell the vehicle further portfolios of
loans with similar characteristics and quality, which the Vehicle will purchase by drawing on the receipts generated by the
portfolio segregated over time.
The transaction involved the issuance by the vehicle company of two tranches of securities: a senior tranche listed on the
Luxembourg Stock Exchange, with a rating assigned by two rating agencies (Moody\u2019s and DBRS Morningstar) and an
unlisted junior tranche without rating.
Both the senior and junior securities were subscribed by Intesa Sanpaolo.
The senior security issued through the transaction, with a Moody\u2019s A1 and a DBRS Morningstar A rating, was used as
collateral for refinancing operations in the Eurosystem.
Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be
carried out by Securitisation Services S.p.A.
The total sale consideration was 15.2 billion euro.
The sale price of the portfolio was settled through the issuance of securities on 5 December 2022 for a total of 15.2 billion
euro.
As at 31 December 2022, the value of the outstanding securities was 10,250 million euro for the senior securities and
4,940 million euro for the junior securities.
(millions of euro)
Vehicle
Type of
security issued
Type of asset securitised
External
rating
Principal
as at
31.12.2022
BRERA SEC S.r.l.
of which issued in euro
3,898
Class A RMBS F/R Notes
Senior
Residential mortgage loans
Moody's Aa3 / DBRS
Morningstar AH
2,831
Class B RMBS Fixed Rate and Additional Return Notes
Junior
Residential mortgage loans
no rating
1,067
BRERA SEC S.r.l. (SEC 2)
of which issued in euro
5,383
Class A RMBS F/R Notes
Senior
Residential mortgage loans
Moody's Aa3 / DBRS
Morningstar AH
4,523
Class B RMBS Fixed Rate and Additional Return Notes
Junior
Residential mortgage loans
no rating
860
BRERA SEC S.r.l (SEC 3)
of which issued in euro
7,240
Class A RMBS F/R Notes
Senior
Residential mortgage loans
Moody's A1 / DBRS
Morningstar AH
6,515
Class B RMBS Fixed Rate and Additional Return Notes
Junior
Residential mortgage loans
no rating
725
CLARA SEC S.r.l.
of which issued in euro
7,174
Class A Asset Backed F/R Notes
Senior
Personal loans
Moody's A1 / DBRS
Morningstar A
6,350
Class B Asset Backed F/R Notes
Junior
Personal loans
no rating
824
GIADA SEC S.r.l.
of which issued in euro
10,095
Class A Asset Backed F/R Notes
Senior
Receivables from Small
business, SME and corporate
customers
Moody's A1 / DBRS
Morningstar A
6,610
Class B Asset Backed F/R Notes
Junior
Receivables from Small
business, SME and corporate
customers
no rating
3,485
GIADA SEC S.r.l. (GIADA BIS)
of which issued in euro
15,190
Class A Asset Backed F/R Notes
Senior
Receivables from Small
business, SME and corporate
customers
Moody's A1 / DBRS
Morningstar A
10,250
Class B Asset Backed F/R Notes
Junior
Receivables from Small
business, SME and corporate
customers
no rating
4,940
TOTAL
48,980
The Adriano Lease SEC S.r.l. and Brera Sec S.r.l. (SME) self-securitisations were extinguished during 2022.
The former UBI Leasing, merged into Intesa Sanpaolo S.p.A. in 2022, had entered into the UBI SPV Lease 2016
securitisation, which was also extinguished in 2022.
OTHER INFORMATION ON FINANCIAL RISKS
SOVEREIGN RISK EXPOSURE BY COUNTRY OF RESIDENCE OF THE COUNTERPARTY
The following table illustrates the details of the exposures of the Intesa Sanpaolo Group to sovereign risk in banking business,
based on management data.
(millions of euro)
DEBT SECURITIES
LOANS
BANKING GROUP
TOTAL
(1)
Financial assets
measured at
amortised cost
Financial assets at fair
value through other
comprehensive income
Financial assets at fair
value through profit or
loss
EU Countries
30,875
24,708
616
56,199
10,128
Austria
615
160
1
776
-
Belgium
2,405
1,962
101
4,468
-
Bulgaria
-
-
3
3
-
Croatia
151
1,100
72
1,323
1,378
Cyprus
-
-
-
-
-
Czech Republic
-
-
-
-
-
Denmark
-
-
-
-
-
Estonia
-
-
-
-
-
Finland
255
13
-
268
-
France
6,457
2,370
-309
8,518
3
Germany
262
538
-151
649
-
Greece
-
-
-8
-8
-
Hungary
141
787
39
967
313
Ireland
336
45
26
407
-
Italy
14,994
11,255
622
26,871
8,019
Latvia
-
-
-
-
20
Lithuania
-
-
-
-
-
Luxembourg
265
392
88
745
-
Malta
-
-
-
-
-
The Netherlands
828
19
25
872
-
Poland
28
65
-
93
-
Portugal
388
621
-41
968
-
Romania
66
370
-1
435
4
Slovakia
-
892
2
894
149
Slovenia
1
148
2
151
178
Spain
3,683
3,971
145
7,799
64
Sweden
-
-
-
-
-
Non-EU Countries
Albania
93
489
1
583
1
Egypt
96
1,145
-
1,241
515
Japan
-
2,404
-
2,404
-
Russia
-
31
-
31
-
Serbia
7
536
-
543
165
United Kingdom
-
173
19
192
-
U.S.A.
1,398
6,944
126
8,468
-
Management accounts
(1) Debt securities from insurance business (excluding securities in which gathered amounts are invested from insurance policies where the total risk is
borne by the policyholders) relating to Italy amounted to 45.491 million euro.
As illustrated in the table, the Banking Group's exposure to securities issued by Italian central and local public administration
bodies at the end of 2022 totalled approximately 27 billion euro (31 billion euro at 31 December 2021), in addition to around
8 billion euro represented by loans (9 billion euro at the end of 2021).
INFORMATION ON STRUCTURED CREDIT PRODUCTS
The risk exposure in structured credit products came to 3,303 million euro as at 31 December 2022, a net decrease of
318 million euro compared to the stock of 3,621 million euro as at 31 December 2021. The exposure includes investments in
CLOs (Collateralised Loan Obligations) of 1,643 million euro, in ABSs (Asset-Backed Securities) of 1,588 million euro and in
CDOs (Collateralised Debt Obligations) of 72 million euro, which continued to be a marginal activity also in 2022.
(millions of euro)
Accounting categories
31.12.2022
31.12.2021
Changes
Collateralized
Loan
Obligations
Asset
Backed
Securities
Collateralized
Debt
Obligations
Total
absolute
%
Financial assets held for sale
339
478
-
817
1,049
-232
-22.1
Financial assets mandatorily measured at
fair value
-
3
-
3
3
-
-
Financial assets measured at fair value
through other comprehensive income
769
776
-
1,545
1,701
-156
-9.2
Financial assets measured at amortised cost
535
331
72
938
868
70
8.1
Total
1,643
1,588
72
3,303
3,621
-318
-8.8
In this disclosure, structured credit products include debt securities held by the Group divided into tranches upon issue
consisting of various degrees of subordination and not issued within the framework of transactions originated by entities of the
Intesa Sanpaolo Group or by public entities, in addition to transactions whereby the Group finances its corporate and financial
institution customers (operations implemented by the Group through the subsidiary Duomo Funding Plc).
Portfolio performance in 2022, while still focused on taking advantage of market opportunities, reflects more divestments and
redemptions than new positions, which involved assets measured at fair value, held for trading, through other comprehensive
income or at amortised cost, with a total value that declined by 318 million euro.
Exposures measured at fair value (ABS and CLO debt securities) went from 2,753 million euro in December 2021 to
2,365 million euro in December 2022, a net decrease of 388 million euro, mainly attributable to operations of the IMI
Corporate & Investment Banking Division, and to a greater extent in financial assets held for trading and to a lesser extent in
financial assets measured at fair value through other comprehensive income.
Exposures classified among assets measured at amortised cost (ABS, CLO and CDO debt securities) amounted to
938 million euro in December 2022, compared with a balance of 868 million euro in December 2021, a net increase of 70
million euro.
From the perspective of the income statement, the overall loss for the year ended 31 December 2022 of -49 million euro is
compared with a profit of 10 million euro for the year ended 31 December 2021.
The profits (losses) from assets held for trading, caption 80 of the income statement, amounted to -49 million euro and is
attributable to exposures in CLOs and ABS (-27 million euro of unrealised losses and -22 million euro of losses on disposals),
as was the impact on the income statement for the year ended 31 December 2021, equal to +9 million euro (+4 million euro of
unrealised gains and +5 million euro of gains on disposals).
The profits (losses) from financial assets mandatorily measured at fair value were nil in the year ended 31 December 2022,
compared to +1 million euro in the year ended 31 December 2021.
The exposures to debt securities classified as assets measured at fair value through other comprehensive income recorded a
decrease in fair value of -43 million euro as at 31 December 2022 through a shareholders\u2019 equity reserve (from a reserve of -
1 million euro in December 2021 to -44 million euro in December 2022). In the current year, there were also impacts from
sales on the portfolio of -3 million euro, which were nil in the previous year.
As regards debt securities classified among assets measured at amortised cost, the profit for the year ended 31 December
2022 of 3 million euro (+1 million euro from unrealised gains and +2 million euro from realised gains) is compared with the
overall nil impact in the year ended 31 December 2021 (-1 million euro of unrealised losses and +1 million euro of realised
gains).
(millions of euro)
Income statement results
broken down by accounting category
31.12.2022
31.12.2021
Changes
Collateralized
Loan
Obligations
Asset
Backed
Securities
Collateralized
Debt
Obligations
Total
absolute
%
Financial assets held for sale
-36
-13
-
-49
9
-58
Financial assets mandatorily measured at fair
value
-
-
-
-
1
-1
Financial assets measured at fair value
through other comprehensive income
-
-3
-
-3
-
3
-
Financial assets measured at amortised cost
-
1
2
3
-
3
-
Total
-36
-15
2
-49
10
-59
INFORMATION ON LEVERAGED TRANSACTIONS
In 2017, the ECB published specific Guidance on Leveraged Transactions, which applies to all the significant entities subject
to direct supervision by the ECB. The stated purpose of the guidance is to strengthen company controls over \u201cleveraged\u201d
transactions, in view of the global increase in leveraged finance activities and the highly competitive market, characterised by
a prolonged period of very low interest rates and the ensuing search for yields.
The scope of the ECB Guidance includes exposures in which the borrower\u2019s level of leverage, measured as the ratio of total
financial debt to EBITDA, is greater than 4, as well as exposures where the borrower is owned by one or more financial
sponsors. Moreover, counterparties with Investment Grade ratings, private individuals, credit institutions, financial institutions
and companies in the financial sector in general, public entities, non-profit entities, as well as counterparties with credit
facilities below a certain materiality threshold (5 million euro), Retail SME counterparties and Corporate SME counterparties
(the latter if not owned by financial sponsors) are explicitly excluded from the scope of Leveraged Transactions. Specialised
lending transactions (project finance, real estate and object financing) and certain other types of credit facilities, such as trade
finance transactions, are also excluded.
As at 31 December 2022, for the Intesa Sanpaolo Group, the transactions that meet the definition of Leveraged Transactions
as per the ECB Guidance amounted to approximately 26.2 billion euro, relating to 1,864 credit lines (35.3 billion euro as at
31 December 2021). The decline over twelve months was mainly concentrated:
\u2013 within the Parent Company for 75%, due to the exclusion from the reporting scope of counterparties with significant
amounts, as a result of an improved rating (lifting them into the investment grade area);
\u2013 within Intesa Sanpaolo Bank Luxembourg for 23%, due to the reduction of the exposure of a significant counterparty, not
offset by new entries.
In accordance with the requirements of the ECB Guidance, as part of the Credit Risk Appetite a specific limit for the
outstanding stock of leveraged transactions and limits on new transaction flows were submitted for approval to the Board of
Directors, in line with the Bank\u2019s risk appetite on these types of operations.
INFORMATION ON INVESTMENTS IN HEDGE FUNDS
The Parent Company\u2019s hedge fund portfolio as at 31 December 2022 amounted to 173 million euro for the trading book and
184 million euro for the banking book for a total of 357 million euro, compared to 27 million euro and 200 million euro,
respectively, as at 31 December 2021, for a total of 227 million euro.
The investments in the banking book are recognised under financial assets mandatorily measured at fair value and pertain to
funds that adopt medium/long-term investment strategies and redemption times that are longer than those of UCITS
(Undertakings for Collective Investment Schemes in Transferable Securities) funds.
In 2022 the increase in balances compared to the previous year was 130 million euro. In the previous year, 2021, first-time
adoption of the CRR2 regulations, which had entered into force on 30 June 2021, had resulted in significant disinvestments,
as a result of the changes to the method of calculating capital absorption associated with investments in funds; in order to
restore the previous volume levels, during 2022 greater investments were made, relating as a priority to UCITS hedge funds
that best meet capital absorption requirements.
In terms of the income statement effects, in 2022 an overall loss was recorded for -9 million euro, referring solely to the
valuation effects of funds held in portfolio among financial assets mandatorily measured at fair value (-7 million euro) and
among financial assets held for trading (-2 million euro), compared to an overall impact of +14 million euro in 2021 (-7 million
euro from financial assets held for sale and +21 million euro from financial assets mandatorily measured at fair value), of
which +9 million euro attributable to valuation effects and +5 million euro to realisation impacts.
In the Intesa Sanpaolo Group, as at 31 December 2022 the portfolio of Eurizon Capital SGR also included hedge funds for
50 million euro, with an impact on the income statement of -3 million euro in the year. Hedge funds are held according to a
seeding approach that involves setting up a service portfolio consisting of shares of mutual funds for which marketing has
begun in support of the funds.
INFORMATION ON TRADING TRANSACTIONS IN DERIVATIVES WITH CUSTOMERS
Considering relations with customers only, as at 31 December 2022, the Intesa Sanpaolo Group, in relation to derivatives
trading with retail customers, non-financial companies and public entities (therefore excluding banks, financial and insurance
companies), presented a positive fair value, not having applied netting agreements, of 3,049 million euro (6,917 million euro
as at 31 December 2021). The notional value of these derivatives totalled 29,872 million euro (64,254 million euro as at
31 December 2021).
In particular, the notional value of plain vanilla contracts was 26,826 million euro (59,649 million euro as at 31 December
2021), while that of structured contracts was 3,046 million euro (4,605 million euro as at 31 December 2021).
The positive fair value of contracts outstanding with the 10 customers with the highest exposures was 1,726 million euro
(4,416 million euro as at 31 December 2021).
Conversely, the negative fair value referring to total contracts outstanding, determined with the same criteria, for the same
types of contracts and with the same counterparties, totalled 6,149 million euro as at 31 December 2022 (2,192 million euro
as at 31 December 2021). The notional value of these derivatives totalled 74,174 million euro (34,378 million euro as at
31 December 2021).
In particular, the notional value of plain vanilla contracts was 69,140 million euro (31,493 million euro as at 31 December
2021), while that of structured contracts was 5,034 million euro (2,885 million euro as at 31 December 2021).
The fair value of derivative financial instruments entered into with customers was determined considering, as for all other OTC
derivatives, the creditworthiness of the single counterparty (\"Bilateral Credit Value Adjustment\"). With regard to contracts
outstanding as at 31 December 2022, this led to a positive effect of 102 million euro under \u201cProfits (Losses) on trading\u201d in the
income statement (positive impact of 97 million euro in 2021).
As regards the methodologies used in determining the fair value of financial instruments, see the specific paragraphs of the
section on accounting policies in the Notes to the consolidated financial statements.
Please note that contracts made up of combinations of more elementary derivative instruments have been considered
\"structured\" and that the aforesaid figures do not include fair value of derivatives embedded in structured bond issues as well
as the relative hedges agreed by the Group.
1.5. OPERATIONAL RISK
QUALITATIVE INFORMATION
A. General aspects, operational risk management processes and measurement methods
Operational risk is the risk of incurring losses resulting from inadequate or failed internal processes, people and systems or
from external events
106
.
The Intesa Sanpaolo Group adopts an undertaking and management strategy of operational risk based on prudent
management principles and aimed at guaranteeing long-term solidity and continuity for the company. In addition, the Group
pays particular attention to achieving an optimal balance between growth and profitability and the resulting risks.
In line with these objectives, the Intesa Sanpaolo Group has long since established an overall operational risk governance
framework, by setting up a Group policy and organisational processes for measuring, managing and controlling
operational risk.
For regulatory purposes, the Group adopts the Advanced Measurement Approach (AMA), in partial use with the standardised
(TSA) and basic approaches (BIA), to determine the capital requirement. As at 31 December 2022, the scope of the
Advanced Measurement Approach (AMA) is comprised of Intesa Sanpaolo (including the former Banks and Companies
merged into it) and the main banks and companies in the Private Banking and Asset Management Divisions, as well as of
VUB Banka and PBZ Banka.
Governance Model
An effective and efficient framework for managing operational risks must be fully integrated into decision-making processes
and management of business operations. Accordingly, the Intesa Sanpaolo Group has chosen to involve the organisational
units (business units, central/support structures) of the Parent Company, the Banks and Group companies with direct
responsibility in the operational risk management process.
The operational risk governance model has been developed in view of:
\u2212 optimising and maximising organisational safeguards, interrelations and information flows between the existing
organisational units and integration of the operational risk management approach with other company models developed
for specific risks (business continuity, IT security, etc.);
\u2212 guaranteeing transparency and spread of the models, methods and criteria of analysis, assessment and measurement
criteria used to facilitate the process of cultural diffusion and comprehension of the logic underlying the choices made.
The Group has a centralised function within the Enterprise Risk Management Department for management of the Group\u2019s
operational risk. This function is responsible for the definition, implementation, and monitoring of the methodological and
organisational framework, as well as for the measurement of the risk profile, the verification of mitigation effectiveness and
reporting to Top Management. In compliance with current requirements, the individual organisational units are responsible for
106
As far as the financial losses component is concerned, the Operational Risk includes the following risks: legal, conduct,compliance, financial crime,
fiscal, IT and Cyber, physical security, business continuity, third-party, data quality, fraud, process and employer. Strategic and reputational risk are not
included.
Board of Directors, CEO, Board
Committees (Risk and
Sustainability Committee),
Managerial Committees
(Control Coordination and Non-
Financial Risks Committee)
Definition of objectives and
policies for governing
operational risks
Supervision and Strategic
thrust
Chief Risk Officer Governance
Area, Centralised Function for
the management of the
operational risk (Operational,
Technology & Information Risk
Management)
Coordination of the
implementation of
guidelines and operational
risk governance policies
Definition, development,
maintenance of the
operational risk
management framework
Organisational Units of the
Parent Company/Group
Companies (ORMD and ORMR
functions, local risk
management functions)
Responsible for
Operational Risk
Management in the
individual Organisational
Units/Group Companies
Responsible for structured
collection of information
(operational events, issues,
mitigation actions, Self-
diagnosis)
identifying, assessing, managing and mitigating risks. Specific officers and departments have been identified within these
organisational units to be responsible for Operational Risk Management (structured collection of information relative to
operational events, detection of issues and related mitigation actions, scenario analyses and evaluation of the business
environment and internal control factors). In order to support the operational risk management process on a continuous basis,
a structured training programme has been implemented for employees actively involved in this process.
ICT risk
The Intesa Sanpaolo Group considers its information system a tool of primary importance to the achievement of its strategic,
business and social responsibility objectives, including in the light of the critical nature of the company processes that depend
on it. Accordingly, it undertakes to create a resilient environment and to invest in assets and infrastructure designed to
minimise the potential impact of ICT events and to protect its business, image, customers and employees.
The Group has therefore adopted a system of principles and rules intended to identify and measure the ICT risk to which
company assets are exposed, assess the existing safeguards and identify adequate methods of managing such risks, in
accordance with the operational risk management process.
In line with the methodological framework established for the governance of operational risks, the ICT Risk management
framework has been developed with a view to integrating and coordinating the specific expertise of the structures involved.
ICT (Information and Communication Technology) risk means the risk of economic, reputational or market share losses
related to the use of information and communication technology. In the integrated view of corporate risk for supervisory
purposes, this risk is considered, according to specific aspects, as operational, reputational and strategic risk.
ICT risk includes:
\u2212 cyber risk (including IT security risk): the risk of sustaining economic loss, reputational damage or loss of market shares
due to:
o any unauthorised access or attempt to access the IT system of the Group or the data or digital information it
contains;
o any event (intentional or unintentional), favoured or caused by the use of technology or related to it that has or could
have a negative impact on the integrity, availability, confidentiality and/or authenticity of company data and
information, or on the continuity of business processes;
o the improper use and/or dissemination of data and digital information also not directly produced and managed by the
ISP Group;
\u2212 IT or technology risk: the risk of sustaining economic loss, reputational damage or loss of market shares in relation to the
use of the corporate IT systems and related to malfunctioning hardware, software and networks.
Group Operational Risk Management Process
The Intesa Sanpaolo Group\u2019s operational risk management process is divided into the following phases:
Identification
The identification phase includes the collection and classification of qualitative and quantitative information that allows to
identify and describe the Group\u2019s potential areas of operational risk. In particular, it involves:
\u2013 the collection and updating of data on operational events (Loss Data Collection), decentralised to the Organisational
Units;
\u2013 identification of the company processes and components of the IT system at highest potential risk;
\u2013 determination of the applicability and relevance of the operational risk factors defined;
\u2013 identification of projects that will involve relevant changes to the IT system or changes to critical components of the IT
system;
\u2013 identification of significant risk scenarios, also based on the external context (e.g., external loss data, regulatory
Identification
Assessment and
Measurement
Monitoring and
Control
Mitigation
Reporting
development, emerging trends, strategic and threat intelligence);
\u2013 identification and analysis of issues affecting the Group\u2019s areas of operation.
Assessment and measurement
The assessment and measurement phase includes the process of qualitative and quantitative determination of the Group\u2019s
exposure to operational risks.
It includes:
\u2013 at least annual performance of the process of self-assessment of exposure to operational and ICT risk (Self-diagnosis);
\u2013 performance of preventive analyses of operational and ICT risks deriving from agreements with third parties (e.g.,
outsourcing of activities), business operations or project initiatives, introduction or revision of new products and services,
launch of new activities and entry into new markets;
\u2013 the definition of the relevance of identified issues;
\u2013 transformation of the evaluations collected (e.g., internal and external operational loss data, management levels of risk
factors, probability and impact in the event of occurrence of risk scenarios) into synthetic risk measures;
\u2013 determination of economic and regulatory capital for operational risk, through the internal model and the simplified
methods defined by the regulations.
Monitoring and control
The purpose of the monitoring phase is to analyse and monitor on an ongoing basis:
\u2013 the development of the exposure to operational risks on the basis of the structured organisation of the results of the
identification, assessment and measurement processes and the observation of indicators that represent a valid proxy of
the exposure to operational risks (e.g., limits, early warnings and indicators established within the RAF);
\u2013 the development of the risk profile inherent in the use of new technologies or in the implementation of significant changes
to existing systems.
Mitigation
The mitigation phase includes activities aimed at containing the exposure to operational risks, defined on the basis of the
results of the identification, measurement, assessment and monitoring phases. It includes:
\u2212 identification, definition and implementation of the corrective measures (mitigation actions) necessary to solve the
identified gaps or to bring back the relevance of the identified issues within the defined risk tolerance;
\u2212 promotion of initiatives designed to spread a culture of operational risk within the Group;
\u2212 definition of strategies for transferring operational risks, in terms of optimisation of insurance coverage and any other
forms of risk transfer adopted by the Group from time to time.
In this regard, in addition to a traditional insurance programme (to protect against offences such as employee infidelity, theft
and damage, transport of valuables, computer fraud, forgery, cyber-crimes, fire and earthquake, and third-party liability), the
Group has taken out an insurance coverage policy named Operational Risk Insurance Programme, in compliance with the
requirements established by the regulations and to have access to the capital benefits provided for by the policy, which
provides specific cover for Companies included in the AMA scope, significantly increasing the limits and transferring the risk of
significant operational losses to the insurance market.
In addition, with respect to risks relating to real estate and infrastructure, with the aim of containing the impacts of phenomena
such as catastrophic environmental events, situations of international crisis, and social protest events, the Group may activate
its business continuity solutions.
Reporting
The reporting phase includes the preparation of appropriate information flows associated with operational risk management,
designed to provide disclosures useful, for example, for:
\u2212 analysis and understanding of any dynamics underlying the trend in the level of exposure to operational risks;
\u2212 analysis and understanding of the main issues identified;
\u2212 defining the mitigation actions and intervention priorities.
Self-diagnosis
Self-diagnosis is the annual process through which the Organisational Units identify their level of exposure to operational and
ICT risk. It includes the Operational Risk Assessment and ICT Risk Assessment, in turn consisting of:
\u2013 Business Environment Evaluation (VCO): activities used to identify significant risk factors and assess the related
management level
107
.
\u2013 Scenario analysis (SA): a method of prospective analysis that takes the form of a systematic process, which is typically
repeated at predefined intervals, but which may also be conducted on an ad hoc basis, and which consists in imagining
the occurrence of particular situations (or scenarios) and imagining their consequences. Once scenarios have been
identified and appropriately characterised, they must be assessed: i.e., one must determine the probability of occurrence
(frequency) and potential impact (average impact and worse case) in the event of occurrence of the situation described in
the scenario.
Internal model for the measurement of operational risk
The Intesa Sanpaolo Group\u2019s internal model for calculating capital absorption is designed to combine all the main sources of
quantitative information (operational losses: internal and external events, estimates deriving from the Scenario Analysis) and
107
The applicability and significance of risk factors are assessed, in the case of ICT risk, by the technical functions, cybersecurity functions and business
continuity functions, and, with regard to operational risk, by the Decentralised Operational Risk Management functions.
qualitative information (Business Environment Evaluation).
Capital-at-risk is therefore identified as the minimum amount at Group level required to bear the maximum potential loss
(worst case). It is estimated using a Loss Distribution Approach model (actuarial statistical model to calculate the Value-at-risk
of operational losses), applied to historical data and the results of the scenario analysis assuming a one-year estimation
period, with a confidence level of 99.90%. The methodology also applies a corrective factor, which derives from the qualitative
analyses of the risk level of the operational environment (VCO), to take into account the effectiveness of internal controls in
the various Organisational Units.
The internal model\u2019s insurance mitigation component was approved by the Bank of Italy in June 2013 with immediate effect of
its benefits on operations and on the capital requirements.
Impacts from the COVID-19 pandemic
During 2022, the company measures and rules adopted since the beginning of the emergency, in order to ensure business
continuity and the safeguarding of the health of customers, employees and suppliers, were constantly reassessed and
updated based on the evolution of the health situation and the regulatory requirements.
In terms of operational risks, no additional impacts were reported specifically due to the pandemic.
Impacts of the Russia-Ukraine conflict
As regards operational risks, the impacts of the Russia-Ukraine conflict regard several actions implemented to ensure the
Group's business continuity operations, particularly the extra costs incurred for Business continuity and the losses resulting
from physical damage directly caused to offices/branches located in the conflict zone. That information is used to monitor
exposure to operational risk, including that regarding the Risk Appetite Framework.
QUANTITATIVE INFORMATION
To determine its capital requirements, the Group uses a combination of the methods (AMA, TSA and BIA) allowed under
applicable regulations.
The capital requirement amounted to 2,039 million euro as at 31 December 2022, substantially stable on the 2,024 million
euro as at 31 December 2021.
The following shows the breakdown of capital requirement relating to the Advanced Measurement Approach by type of
operational event (Event Type).
Breakdown of capital requirement (Advanced Measurement Approach - AMA) by type of operational event
With regard to the sources of operational risk, the chart below shows the impact of the operational losses recorded during the
year, based on event type.
In 2022, the most significant event type was Clients, Products and Business Practices, which included losses related to
defaults connected with professional obligations towards customers, suppliers or outsourcers and to the provision of services
and products to customers performed improperly or negligently.
Breakdown of operational losses recorded in 2022, by event type
LEGAL RISKS
As at 31 December 2022, there were a total of about 37,400 disputes, other than tax disputes, pending at Group level
(excluding those involving Risanamento S.p.A., which is not subject to management and coordination by Intesa Sanpaolo)
with a total remedy
108
sought of around 3,850 million euro. This amount includes all disputes for which the risk of a
disbursement of financial resources resulting from a potential negative outcome has been deemed possible or probable and
therefore does not include disputes for which risk has been deemed remote. Those disputes include a large number of mass
disputes at the international subsidiary banks (amounting to around 25,600 disputes) which, as a whole, account for a very
low remedy sought.
The risks associated with these disputes are thoroughly and individually analysed by the Parent Company and Group
companies. Specific and appropriate provisions have been made to the Allowances for Risks and Charges in the event of
disputes for which there is an estimated probability of a disbursement of more than 50% and where the amount of the
disbursement may be reliably estimated (disputes with likely risk). Without prejudice to the uncertainty inherent in all litigation,
the estimate of the obligations that could arise from the disputes and hence the amount of any provisions recognised are
based on the forward-looking assessments of the outcome of the trial. These forward-looking assessments are, in any event,
prepared on the basis of all information available at the time of the estimate.
The only disputes with likely risk amount to around 28,300 with a remedy sought of 1,788 million euro and provisions of
744 million euro. The component referring to the Parent Company Intesa Sanpaolo totals around 5,280 disputes, with a
remedy sought of 1,433 million euro and provisions of 550 million euro. These include 2,860 positions relating to disputes
concerning anatocism, illustrated in greater detail below. Compared to the previous year\u2019s figures, there was a decrease in
number and in the amount of remedy sought. That decrease mainly regarded disputes concerning anatocism, illegal interest
and other conditions, and claims on banking products.
There were around 700 disputes relating to other Italian subsidiaries, with a remedy sought of 246 million euro and provisions
of 91 million euro. There were around 22,300 disputes relating to international subsidiaries, with a remedy sought of 109
million euro and provisions of 103 million euro, impacted by the previously mentioned mass disputes
109
: specifically, there
were around 19,000 disputes referring to the subsidiary Banca Intesa Beograd, regarding two areas of litigation which are
illustrated in the specific section.
The breakdown according to the main categories of disputes with likely risk shows the prevalence of cases related to the
Group\u2019s ordinary banking and credit activities: disputes involving claims relating to banking and investment products and
services or on credit positions and revocatory actions account for about 74% of the remedy sought and 75% of the provisions.
The remaining disputes mainly consist of other civil and administrative proceedings and labour disputes or criminal
proceedings or proceedings related to operational violations.
The paragraphs below provide summary information on the significant disputes (mainly those with a remedy sought of more
than 20 million euro and where the risk of a disbursement is currently considered likely or possible), together with the cases
considered significant.
Disputes relating to anatocism and other current account and credit facility conditions, as well as usury
During 2022, the disputes of this type \u2013 which for years have been a significant part of the civil litigation brought against the
Italian banking industry \u2013 decreased both in number and in total value of claims made compared to the previous year. Overall,
the number of disputes, including mediations, with likely risk amounted to around 2,860. The remedy sought amounted to 491
million euro, with provisions of 180 million euro. As is the case for the other civil disputes, the assessment of the risk related to
this type of litigation is carried out individually, taking into account the claims made, the defences submitted, the progress of
the proceedings and case-law decisions, for each dispute.
You are reminded that in 2014 and 2016, Article 120 of the Consolidated Law on Banking, which governs the compounding of
interest in banking transactions, was amended with the establishment of the ban on anatocism and the delegation of the
CICR (Interdepartmental Committee for Credit and Savings) to regulate this matter. In February 2017, the Italian Antitrust
Authority initiated proceedings against Intesa Sanpaolo for alleged unfair business practices involving, among other things,
the methods used to request the above-mentioned authorisation from customers for the charging of the interest to the account
imposed by the new regulations introduced in 2016. The Authority completed the proceedings in October 2017, ruling that
Intesa Sanpaolo had implemented an \u201caggressive\u201d policy aimed at acquiring the authorisation, by soliciting customers to
provide it through various means of communications and without putting them in a position to consider the consequences of
that choice in terms of the interest calculation on the compounded debt interest. As a result, the Authority issued a fine of 2
million euro against Intesa Sanpaolo. Intesa Sanpaolo has submitted an appeal with the Lazio Regional Administrative Court,
on the grounds that the ruling was unfounded. With ruling of 2 January 2023, the Regional Administrative Court confirmed the
fine and the Bank will appeal to the Council of State.
Disputes relating to investment services
Also in this area, the disputes showed a downtrend in terms of number compared to the previous year. The most significant
sub-group was disputes concerning derivatives. There were a total of around 350 disputes relating to investment services with
likely risk. The total remedy sought amounted to around 242 million euro, with provisions of 144 million euro. As is the case
for the other civil disputes, the assessment of the risk related to this type of litigation is carried out individually, taking into
account the claims made, the defences submitted, the progress of the proceedings and the case-law guidance, for each
dispute. We also note approximately 154 disputes with a remedy sought of 142 million euro initiated by \u201cwiped out\u201d
shareholders and subordinated bondholders of the former \u201cOld Banks\u201d of Banca delle Marche, Banca Popolare dell\u2019Etruria e
del Lazio and Cassa di Risparmio della Provincia di Chieti, deemed to be of possible risk. Those disputes are backed by the
warranties and obligations to indemnify by the Seller (National Resolution Fund) for the benefit of the former UBI Banca, and
108
The figures for the remedy sought do not include claims of indeterminate value, i.e. those that do not contain a specific financial claim when the
dispute is initiated; the value of these disputes is determined during the course of the proceedings when sufficient information emerges for the valuation.
109
For those cases, the provisions are relatively higher than the remedy sought (which is determined based on the customer\u2019s original claim) to take
account of the interest and legal fees to be paid to the adverse party and the potential expansion of the original claim submitted in the legal proceedings.
now Intesa Sanpaolo, and therefore also cover any liabilities arising from the activities carried out by the Banks (the \u201cOld
Banks\u201d) before they were subject to the resolution procedure, in relation to, inter alia, risks of a legal nature or generally
related to ongoing or threatened disputes, or violations of the law and any potential liabilities.
Dispute regarding financial derivative instruments
With regard to derivative transactions, the legal risks linked to legal proceedings with local authorities, their subsidiaries and
individuals continue to be subject to careful monitoring.
Specifically, disputes are pending with 20 local authorities, with possible or probable risk, for total claims of 142 million euro,
and disputes with 5 Companies controlled by public entities, with total claims of 66 million euro. Disputes with individuals,
assessed as having possible or probable risk, total around 197, and of these, around 43 positions also regard requests for
refunds of amounts on other accounts held with the Bank. Net of those latter positions, the total value of the claims lodged in
the proceedings regarding only derivatives amounts to around 84 million euro.
With regard to contracts entered into with local authorities, during 2022, 6 new disputes were initiated against the Bank
(Province of Catanzaro, Province of Varese, Province of Rovigo, Municipality of Marsciano, Municipality of Soriano del Cimino
and Municipality of Servigliano) with total claims of 27 million euro.
In the same year, 4 rulings were issued relating to the following proceedings:
\u2212 Municipality of Faenza: with decision dated 1 February 2022, the Court of Appeal of Bologna confirmed that the contract
was null and void. In execution of the first instance ruling, the Bank paid 2.8 million euro. An appeal was lodged with the
Court of Cassation.
\u2212 Municipality of Santa Maria Capua Vetere: the Court of Rome, in its ruling of 2 March 2022, rejected the claim of
invalidity of the two derivative contracts, made by the Municipality, and, instead upheld the claim for implicit costs not
disclosed at the time of signing and ordered the Bank to pay 1.1 million euro plus interest and revaluation.
\u2212 Municipality of Vittorio Veneto: the Court of Venice, with non-final ruling of 29 March 2022, voided two contracts, referring
to the final decision for the quantification of the restitutionary effects, whose potential risk amounts to 5.8 million euro.
\u2212 Province of Pavia: with decision dated 4 May 2022, the Court of Appeal of Milan confirmed that the contract was null and
void. In execution of the first instance ruling, the Bank had already paid 10.1 million euro. An appeal was lodged with the
Court of Cassation.
A summary of the most significant disputes with local authorities is provided below:
\u2212 Municipality of Venice: the dispute regards a contract governed by the ISDA, with remedy sought of 71 million euro. With
ruling of 14 October 2022, the High Court of Justice in London held that the Municipality did not have the capacity to
enter into speculative derivative contracts involving debt. As a result, the High Court established that the Municipality was
entitled to the restitution of the differentials paid to the Bank solely in the amount exceeding the outlays of the Bank
incurred for the back-to-back hedging derivatives (at least until December 2020, the date on which the Municipality
formally challenged the validity of the transaction). In this case, the application of that principle would significantly reduce
the restitutionary obligation to the Municipality.
The parties formalised the grounds for appeal by the set deadline of 3 February 2023.
In a subsequent hearing of 6 February 2023, the request was upheld to defer to the outcome of the appeal the settlement
of the credit/debit amounts between the parties (\u201cconsequential hearing\u201d) due to the High Court\u2019s ruling.
The Bank was also ordered to pay 70% of the legal fees requested by the Municipality, of which 35%, equal to around 2
million GBP, to be paid by 20 February.
With regard to the second proceedings with the Municipality of Venice before the Italian court, regarding alleged
breaches deriving from the mandate and investment services agreements, the Court has set a new hearing for 22 March
2023, \u201cas it would be appropriate to hear testimony from the parties and obtain clarifications, given the likely settlement of
the proceedings held in the UK.\u201d
\u2212 Municipality of Perugia: at the end of 2020, the Municipality of Perugia served a summons relating to four derivative
contracts entered into in 2006, asking for repayment of the amounts paid, to be quantified during the lawsuit. The Court
permitted an expert\u2019s report, adjourning to the hearing of 9 March 2023 for the examination of the expert witness report.
With regard to the contracts entered into with subsidiaries of local authorities, no new disputes were initiated, while 2 rulings
were issued regarding the following proceedings:
\u2212 Azienda Socio Sanitaria territoriale Valle Olona: with ruling dated 6 April 2022, the Court of Busto Arsizio declared the
contract null and void. In execution of the ruling, the Bank paid 1.8 million euro and lodged an appeal.
\u2212 Aler S.p.A.: with ruling dated 1 August 2022, the Court of Appeal of Milan confirmed that the contract entered into with
the then Banca OPI was null and void. As a result of the first instance ruling, the Bank had paid 4.6 million euro. The
possibility of filing an appeal with the Court of Cassation is being evaluated.
A summary of the most significant disputes with subsidiaries of local authorities is provided below:
\u2212 Terni Reti Sud S.r.l.: the dispute concerns a derivative contract entered into in August 2007 by the former Banca delle
Marche
110
with Terni Reti Sud S.r.l., whose capital is 100% held by the Municipality di Terni. The opponent claims that
the derivative is null and void due to failure to communicate the MTM and the probabilistic scenarios, and the breach of
disclosure obligations, formulating a demand of 22 million euro. The Court ordered a court-appointed expert\u2019s report and
adjourned the case to 13 June 2023.
\u2212 EUR S.p.A.: in May 2021, a writ of summons was served by EUR S.p.A., a company held by the Ministry of the Economy
and Finance and Roma Capitale. In addition to ISP, the company is also suing other intermediaries due to derivative
contracts governed by the ISDA, entered into in relation to a syndicated loan granted. At the hearing of 8 November
110
Note that those disputes are backed by the warranties and obligations to indemnify by the Seller (National Resolution Fund) for the benefit of UBI
Banca in relation to the acquisition of the New Banks deriving from the resolution of Banca delle Marche, Banca Popolare dell\u2019Etruria e del Lazio and
Cassa di Risparmio della Provincia di Chieti and therefore also cover any liabilities arising from the activities carried out by the Banks (the \u201cOld Banks\u201d)
before they were subject to the resolution procedure, in relation to, inter alia, risks of a legal nature or generally related to ongoing or threatened
disputes, or violations of the law and any potential liabilities.
2022, the Court deemed that the lawsuit was ready for a ruling on the objection raised by the defendants regarding the
lack of jurisdiction of the Italian court, and granted the terms for filing the closing briefs. Intesa Sanpaolo\u2019s risk amounts to
22 million euro.
Disputes with individuals are decreasing, in terms of both stock and flows.
Dispute relating to loans in CHF to the Croatian subsidiary Privredna Banka Zagreb Dd
As already noted in the previous financial statements, Potro\u0161a\u010d \u2013 Croatian Union of the Consumer Protection Association
initiated legal action against the subsidiary Privredna Banka Zagreb (\u201cPBZ\u201d) and seven other Croatian banks. According to the
plaintiff, the defendant banks engaged in an unfair practice by allegedly using unfair contractual provisions on variable
interest rate , which could be changed unilaterally by the bank, and by denominating the loans granted in Swiss francs (or
indexing them to Swiss francs) without allegedly appropriately informing the consumers of the risks prior to entering into the
respective loan agreements. In September 2019, the Croatian Supreme Court rendered a ruling in the collective action
proceedings, rejecting the appeals filed by the sued banks against the High Commercial Court ruling from 2018 and
confirming the position of courts of lower instance that banks had breached collective interests and rights of consumers by
incorporating unfair and null and void provisions on CHF currency clause. The decision of the Supreme Court was challenged
by PBZ before the Constitutional Court, which rejected the claim at the beginning of 2021. The subsidiary thus lodged an
appeal before the European Court of Human Rights, which was rejected near the end of 2022. In connection with the
mentioned proceedings for the protection of the collective interests of consumers, numerous individual proceedings have
been brought by customers against PBZ, despite the fact that most of them voluntarily accepted the offer to convert their CHF
loans into EUR denominated loans retroactively, in accordance with the Act on the Amendments to the Consumer Credit Act
(Croatian Official Gazette 102/2015 \u2013 the \u201cConversion Law\u201d). In March 2020, the Croatian Supreme Court, within model case
proceedings (a Supreme Court proceedings with obligatory effect on lower instance courts with the aim of
unifying/harmonising case law), ruled that the conversion agreements concluded between banks and borrowers under the
Croatian Conversion Law of 2015 produce legal effects and are valid even in the case when the provisions of the underlying
loan agreements on variable interest rate and currency clause are null and void. In May 2022, the EU Court of Justice, in
proceedings regarding reference for a preliminary ruling involving another intermediary, established that the Court of Justice
has jurisdiction over the conversion agreements concluded under the Conversion Law, as they occurred after Croatia joined
the European Union, and that the EU Directive on unfair terms in consumer contracts does not apply to those conversion
agreements, whose content reproduces provisions of national law.
On 20 December 2022, the Civil Law Department of the Croatian Supreme Court provided an interpretation of the legal
effects of the agreements for the conversion of loan agreements from CHF to EUR and on consumers\u2019 rights. By virtue of that
interpretation, consumers that entered into a conversion agreement pursuant to the aforementioned Conversion Law of 2015
have the right to receive legal interest on excess amounts paid that the bank calculated on converting the loans, from the date
of each single payment up to the date of conversion. Once this judicial interpretation is recorded with the Court Practice
Records Department, it will be final and binding for lower instance courts.
The number of new individual lawsuits filed against PBZ in 2022 was lower than those in 2021. At the end of 2022, the total
pending cases amounted to a few thousand. It cannot be excluded the possibility that additional lawsuits might be filed
against PBZ in the future in connection with CHF loans.
Dispute with the foreign subsidiary Banca Intesa Beograd (Serbia)
The following areas of the mass disputes that have impacted the entire Serbian banking system are shown below.
1) Processing fees
Legal dispute regarding processing fees applied by banks at the time of disbursing loans. The claimants, individuals and legal
persons, are requesting the repayment of those charges, as they are deemed as not owed. The first claims arose in 2017 and
recorded a significant increase in lawsuits was recorded in the following years, though for modest amounts on average. At the
end of 2022 Banca Intesa Beograd had been summoned in around 18,600 lawsuits deemed as having possible or probable
risk (at the end of 2021, these amounted to around 24,500); the related total amounts of principal requested to be repaid by
the Bank came to around 1.3 million euro. Most of the courts accepted the customers\u2019 requests, based on an interpretation of
regulations that the banks oppose. In September 2021, the Supreme Court of Serbia recognised the legitimacy of the costs
and fees applied to loans at the time of their disbursement, provided they are indicated in the contract proposal. During 2022,
the flows of new disputes significantly decreased on 2021, and several customers dropped pending disputes.
2) NKOSK
Legal dispute relating to real estate loans insured through the National Housing Loan Insurance Corporation (NKOSK), whose
premium is paid by the borrowers. The borrowers deem that, as the Bank is the Beneficiary of the insurance, the premium
should be paid by the Bank. At the end of 2022 Banca Intesa Beograd had been summoned in around 1,100 lawsuits deemed
as having possible or probable risk (at the end of 2021, these amounted to around 1,000); the related total amounts of
principal requested to be repaid by the Bank came to around 1.1 million euro. Most of the courts accepted the customers\u2019
requests, based on an interpretation of regulations that the banks oppose. In September 2021, the Supreme Court of Serbia
recognised the legitimacy of requiring the insurance premium to be paid by the borrowers, provided that the obligation is
clearly described to the borrowers during precontractual procedures. In 2022, the flows of new disputes grew slightly on 2021,
and several customers dropped pending disputes.
Ruling of the EU Court of Justice of 11 September 2019 on credit agreements for consumers \u2013 so-called Lexitor ruling
Article 16, paragraph 1, of Directive 2008/48 on credit agreements for consumers states that in the event of early repayment
of the loan the consumer is \u201centitled to a reduction in the total cost of the credit, such reduction consisting of the interest and
the costs for the remaining duration of the contract\u201d. According to the Lexitor ruling, this provision must be interpreted as
meaning that the right to a reduction in the total cost of the credit includes all the costs incurred by the consumer and
therefore also includes the costs relating to services prior to or connected with the signing of the contract (upfront costs such
as processing costs or agency fees).
Article 16, paragraph 1 of Directive 2008/48 has been transposed in Italy through Article 125 sexies of the Consolidated Law
on Banking, according to which in the event of early repayment \u201cthe consumer is entitled to a reduction in the total cost of the
credit, equal to the amount of interest and costs due for the remaining life of the contract\u201d. On the basis of this rule, the Bank
of Italy, the Financial Banking Arbitrator and case law have held that the obligation to repay only relates to the charges that
have accrued during the course of the relationship (recurring costs) and have been paid in advance by the customer to the
lender. In the event of early repayment, these costs must be repaid in the amount not yet accrued and the obligation to repay
does not include the upfront costs.
Following the Lexitor judgment, the question has arisen as to whether Article 125 sexies of the Consolidated Law on Banking
should be interpreted in accordance with the principle laid down therein or whether the new principle requires a
legislative amendment.
According to the EU principle of \u201cconsistent interpretation\u201d, national courts are required to interpret the rules in their own
jurisdiction in a manner consistent with the European provisions. However, if the national rule has an unambiguous
interpretation, it cannot be (re)interpreted by the court in order to bring it into line with the various provisions of a European
directive: the principles recognised by European Union law prevent the national court from being required to make an
interpretation that goes against the provisions of the domestic law. In this regard, we note that Article 125 sexies of the
Consolidated Law on Banking has always been interpreted as meaning that, in the event of early repayment, the obligation to
repay relates only to recurring costs and therefore does not include upfront costs.
In December 2019, following the Lexitor ruling, the Bank of Italy issued \u201cguidance\u201d for the implementation of the principle
established by the EU Court of Justice, to the effect that all costs (including upfront costs) should be included among the costs
to be refunded in the event of early repayment, both for new relationships and for existing relationships.
Intesa Sanpaolo has decided to follow the Bank of Italy \u201cguidance\u201d, even though it believes that the legal arguments set out
above regarding the fact that Article 125 sexies of the Consolidated Law on Banking cannot be interpreted in a manner that
complies with the Lexitor ruling are well founded. A provision has therefore been made in the Allowance for Risks and
Charges corresponding to the estimated higher charges resulting from the decision to follow the Bank of Italy \u201cguidance\u201d.
On 25 July 2021, Article 11-octies of Law 106/2021 took effect, which modified paragraph 1 of Article 125 sexies of the
Consolidated Law on Banking, with the intention of resolving the situation of uncertainty caused by the Lexitor ruling, with the
following provisions:
\u2212 with regard to the rules on mortgage lending to consumers, removal of the reference to Article 125-sexies of the
Consolidated Law on Banking and insertion of a specific provision on the early redemption of this type of loan, limiting
repayment to only the interest and costs due for the remaining life of the loan agreement;
\u2212 with regard to the rules on consumer credit, the text of Article 125-sexies of the Consolidated Law on Banking is modified
so as to implement the principles of the Lexitor ruling, indicating, however, the amortised cost criterion as the preferred
criterion for calculating repayment;
\u2212 these provisions only apply to loan agreements signed after the entry into force of the law converting the decree. Loan
agreements signed before that date are expressly to be governed by the provisions of law and Supervisory Provisions
previously in force.
The new rule did not have significant impacts on new contracts: for personal loans, the contractual clauses already comply
with the rule, and for salary-backed loan products, the companies in the Intesa Sanpaolo Group have adopted the \u201ctutto TAN\u201d
(All APR) model, which does not apply incidental costs to the customer, aside from interest. As regards consumer credit
agreements concluded before the date of entry into force of the new rule, even if the agreements expired after that date, the
repayment of the upfront costs could be limited to the amount established in the agreement.
The Coordination Board of the Banking and Financial Ombudsman (ABF), which was assigned the issue of repayment of the
upfront costs following the entry into force of the \u201cLexitor amendment\u201d, issued Decision no. 21676 on 15 October 2021, stating
the following principle: in application of the legislative change pursuant to Article 11 octies, paragraph 2, last sentence of Law
Decree No. 73 of 25 May 2021, converted into Law no. 106 of 23 July 2021, in the event of early repayment of a loan entered
into before the entry into force of the specific regulatory provisions, there must be a distinction between costs relating to
activities over the course of the contractual relationship (recurring costs) and costs relating to the fulfilment of preliminary
obligations for granting the loan (upfront costs). This means that the former, but not the latter, can be repaid, limited to the
portion not accrued due to the early repayment.
The guidance from the Coordination Board of the Banking and Financial Ombudsman was followed by the single panels,
which rejected the requests for pro rata repayment of upfront costs. The decisions were not suspended even after the issue of
the legitimacy of the legislative change was referred to the Constitutional Court. This will be explained further below. On 1
December 2021, the Bank of Italy also notified intermediaries that, as a result of the changes made by Law 106/2021 to
Article 125 sexies of the Consolidated Law on Banking, its \u201cguidelines\u201d of 4 December 2019 are to be considered invalid.
Those guidelines requested that, in the event of the early repayment of consumer credit loans, the reduction in the total cost
of the loan be calculated, including all costs borne by the consumer (recurring and upfront costs), excluding taxes.
Conversely, ordinary case law was divided over the application of the new rule. Several judges have applied the new
provision by rejecting the claimant\u2019s request for pro rata repayment of upfront fees following early repayment. However, in a
significant number of cases, particularly in disputes before Justices of Peace, the customer\u2019s right to pro rata repayment of the
upfront costs was recognised, deeming that - with varying, questionable grounds - the Lexitor principles should be applied
also following the entry into force of the legislative change. Those rulings have generally been challenged by the Bank.
With ruling no. 263 of 22 December 2022, the Constitutional Court accepted the question of constitutionality raised by the
Court of Turin in November 2021, in a lawsuit brought against an intermediary specialising in salary-backed loans, for
repayment of the upfront costs, declaring only the section of Article 11 octies, paragraph 2 of Law Decree no. 73 of 25 May
2021, converted with amendments into Law no. 106 of 23 July 2021 with the wording \u201cand the secondary regulations
contained in the transparency and supervisory provisions of the Bank of Italy\u201d to be unconstitutional.
In light of the ruling of the Constitutional Court, the Bank made an initial estimate of the potential charge connected with the
effects of the partial declaration of unconstitutionality of Article 11 octies, paragraph 2 of Law Decree no. 73 of 25 May 2021,
making a specific provision to the allowance for risks and charges.
On 9 February 2023, the European Court of Justice, within proceedings originating from a reference for a preliminary ruling
from the Austrian Supreme Court, ruled on the applicability of the Lexitor principle to mortgage lending to consumers. The
Austrian Court asked the European Court of Justice whether Directive 2014/17 on mortgage lending to consumers precluded
national legislation providing that the right of the consumer to a reduction in the total cost of the credit in the event of early
repayment of the credit covers only interest and costs that are dependent on the duration of the agreement. The Court
declared that Directive 2014/17 does not preclude such legislation.
According to the Court, that right to reduction does not, therefore, include costs which, irrespective of the duration of the
agreement, are payable by the consumer to either the creditor or third parties for services previously rendered in their entirety
at the time of early repayment (such as processing and appraisal fees).
Moreover, in 2021 the European Commission launched the process for the revision of EU Directive no. 2008/48 on consumer
credit, on which the Lexitor ruling had been handed down. Following the legislative proposal initially formulated by the
Commission, the phase of involving the European Parliament and Council began and, in the last few months, these bodies
defined their positions by publishing their respective proposals.
Dispute between Intesa Sanpaolo Vita S.p.A. and RB Holding S.p.A. and the Favaretto family
In May 2020, Intesa Sanpaolo Vita S.p.A. finalised an investment in RBM Assicurazioni Salute S.p.A., the leading Italian
insurance company in the healthcare class held by RB Holding S.p.A. referring to the family of Roberto Favaretto, an
operation that resulted in Intesa Vita S.p.A. currently controlling the insurance company, now named Intesa Sanpaolo RBM
Salute S.p.A.
In May, Intesa Sanpaolo Vita sent the minority shareholders RB Holding S.p.A. an indemnity request pursuant to and in
accordance with the investment contract, in relation to the emerging situations that gave rise (or could give rise) to liabilities
currently quantifiable at over 129 million euro, which substantially involve:
\u2212 the increase in the charges for claims concerning the M\u00e8taSalute Policy due to the elimination of unfair business
practices subject to proceedings launched by the AGCM (Italian Competition Authority);
\u2212 credit positions (per \u2018premium settlements\u2019) posted to balance sheet assets at the time of closing and fully written down
following the closing, due to their verified uncollectibility;
\u2212 penalties for delays in payments of claims relating to the ASDEP \u2013 Healthcare for Employees of Public Entities Policy.
RB Holding S.p.A. rejected all charges and, in the second decade of July, along with the Favaretto family, submitted a petition
to the Arbitration Chamber of Milan, claiming the invalidity of several clauses in the investment contract and shareholders\u2019
agreement of 2020 (including those relating to the put and call options on the minority interest and the non-competition
agreement), breaches by Intesa Sanpaolo Vita of contractual commitments (such as the consultation clause relating to the
renewal of the M\u00e8taSalute contract and the termination of the relationship with the previous Managing Director), the breach by
the latter of the rules of good faith and fairness, with a request for compensation for damages totalling 423.5 million euro.
Intesa Sanpaolo Vita S.p.A. filed its defence to the Arbitration Chamber by the assigned deadline of 5 September 2022, fully
contesting the adverse party\u2019s arguments and also making a counterclaim for the payment of a total amount of
129.4 million euro, for the breach, by RB Hold, of the representations and warranties issued and commitments undertaken
through the investment contract, as well as the obligation to act in accordance with fairness and good faith, making full
reference to the claims set out in the indemnity request of last May.
As the appearing parties did not reach an agreement on the appointment of the President of the Arbitration Tribunal, they
submitted a joint request to the Arbitration Board to postpone the appointment.
Where consultation between the parties identifies the interest in an amicable settlement, the fact that the dispute is pending
shall not impede the verification of the feasibility of such cases.
Disputes arising from the acquisition of certain assets, liabilities and legal relationships of Banca Popolare di Vicenza S.p.A. in
compulsory administrative liquidation and Veneto Banca S.p.A. in compulsory administrative liquidation
Preliminarily, the following is noted:
a. based on the agreements between the two Banks in compulsory administrative liquidation and Intesa Sanpaolo (Sale
Contract of 26 June 2017 and Second Acknowledgement Agreement of 17 January 2018), two distinct categories of
disputes have been identified (also relating to the subsidiaries of the former Venetian banks included in the sale):
a1 - the Previous Disputes, included among the liabilities of the Aggregate Set transferred to Intesa Sanpaolo, which
include, with some important exceptions (see point a2 herein), civil disputes relating to proceedings already pending at
26 June 2017, and in any case different from those included under the Excluded Disputes (see the point below);
a2 - the Excluded Disputes, which remain under the responsibility of the Banks in compulsory administrative liquidation
and which concern, among other things, disputes (even if already pending at 26 June 2017) brought by shareholders and
convertible and/or subordinated bondholders of one of the two former Venetian banks (including those deriving from so-
called \u201coperazioni baciate\u201d), disputes relating to non-performing loans, disputes relating to relationships terminated at the
date of the transfer, and all disputes (whatever their subject) arising after the sale and relating to acts or events occurring
prior to the sale. The Excluded Disputes also include the disputes attributable to all the categories listed herein (point a2)
brought against Banca Nuova and Banca Apulia (or Intesa Sanpaolo as their absorbing company). The relevant
provisions were transferred to Intesa Sanpaolo along with the Previous Disputes; in any case, if the allowances
transferred prove insufficient, Intesa Sanpaolo is entitled to be indemnified by the Banks in compulsory administrative
liquidation, at the terms provided for in the Sale Contract of 26 June 2017;
b. after 26 June 2017, a number of lawsuits included within the Excluded Disputes were initiated or resumed against Intesa
Sanpaolo. With regard to these lawsuits:
\u2212 Intesa Sanpaolo is pleading (and will plead) its non-involvement and lack of capacity to be sued, both on the basis
of the provisions of Law Decree 99/2017 (Article 3) and the agreements signed with the Banks in compulsory
administrative liquidation and in compliance with the European Commission provisions on State Aid (Decision
C(2017) 4501 final and Attachment B to the Sale Contract of 26 June 2017), which prohibit Intesa Sanpaolo from
taking responsibility for any claims made by the shareholders and subordinated bondholders of the former Venetian
Banks;
\u2212 if there were to be a ruling against Intesa Sanpaolo (and in any event for the charges incurred by Intesa Sanpaolo
for any reason in relation to its involvement in any Excluded Disputes), it would have the right to be reimbursed by
the Banks in compulsory administrative liquidation, based on that set out in the Sale Contract and subsequent
agreements. The Banks in compulsory administrative liquidation have contractually acknowledged their capacity to
be sued with respect to the Excluded Disputes, such that they have entered appearances in various proceedings
initiated (or re-initiated) by various shareholders and convertible and/or subordinated bondholders against Intesa
Sanpaolo (or in any case included in the category of Excluded Disputes), asking for the declaration of their exclusive
capacity to be sued and the consequent exclusion of Intesa Sanpaolo from those proceedings.
All the obligations and liabilities for indemnity assumed by the Banks in compulsory administrative liquidation in relation to
Intesa Sanpaolo are covered by a public guarantee (\u201cIndemnification Guarantee\u201d), whose issue was an essential prerequisite
of the Sale Contract. This guarantee was formalised on 15 November 2022.
Over time, by virtue of the contractual obligations assumed by the two Venetian Banks in compulsory administrative
liquidation, Intesa Sanpaolo has sent them several claims containing requests (or reserving the right to make requests) for
reimbursement/indemnity relating to previously incurred or potential damage concerning Previous Disputes or Excluded
Disputes, as well as the breach of representations and warranties regarding certain assets and liabilities transferred to Intesa
Sanpaolo.
Pending the formalisation of the \u201cIndemnification Guarantee\u201d, on 14 October 2022, Intesa Sanpaolo and the two Venetian
Banks in compulsory administrative liquidation negotiated and signed a \u201cThird Agreement\u201d to govern several aspects for the
performance of the Sale Contract of 26 June 2017 (as occurred for two previous acknowledgement agreements signed in
2017 and in 2018). At that time, Intesa Sanpaolo and the two Venetian Banks in compulsory administrative liquidation:
\u2212 extended the duration of the loan agreements on the net debt of the sale and the sale of high risk loans and their
conditions, aligning the guarantees;
\u2212 specified, both regarding the claims already sent by Intesa Sanpaolo and for the future, several aspects concerning the
timing and methods of managing the related requests for compensation, covered by the Indemnification Guarantee in
favour of Intesa Sanpaolo;
\u2212 agreed on several methods to effectively manage disputes in which Intesa Sanpaolo will be involved.
By order of 20 July 2021, in the proceedings relating to the Excluded Disputes brought for the alleged misselling of BPVi
shares in which Intesa Sanpaolo (which claimed it lacks the capacity to be sued based on Law Decree 99/2017 and the sale
contract) is also a party, the Court of Florence referred the question of the constitutionality of Law Decree 99/2017 to the
Constitutional Court.
This is the first case of referral to the Constitutional Court of issues relating to Law Decree 99/2017. To date, the numerous
applications for referral to the Constitutional Court formulated by the adverse parties in proceedings relating to the Excluded
Disputes have always been rejected by judges, as they were deemed immaterial or clearly unfounded.
In filing an appearance in court, the Bank challenged the order of referral, claiming that it was inadmissible and unfounded;
this, considering EU and Italian regulations on State aid as part of the operations on the Venetian Banks, correctly applied by
the national legal system, and the absence of discriminatory effects against the shareholders and subordinated bondholders
of the Venetian Banks. The Presidency of the Council of Ministers and BPVi in compulsory administrative liquidation (as well
as the Bank of Italy, as amicus curiae) filed appearances in the proceedings, concluding in favour of the inadmissibility and
lack of grounds of the issues of unconstitutionality raised.
With ruling no. 225 filed on 7 November 2022, accepting the defences of Intesa Sanpaolo, the Attorney General and Banca
Popolare di Vicenza in compulsory administrative liquidation, the Court declared all the issues of unconstitutionality raised to
be inadmissible, also taking a position on their lack of grounds, in line with the defences submitted by Intesa Sanpaolo.
In January 2018, as part of a criminal proceeding before the Court of Rome for the alleged market rigging and obstructing the
Supervisory Authorities in the performance of their functions with respect to officers and executives of Veneto Banca, the
preliminary hearing judge decided that Intesa Sanpaolo could be charged with civil liability, assuming that the exclusion from
the sale to Intesa Sanpaolo of the debts, responsibilities and liabilities deriving from the sale of shares and subordinated
bonds \u2013 envisaged by Law Decree 99/2017 \u2013 would not be objectionable by third parties, while Article 2560 of the Italian Civil
Code would be applicable in the case in question and Intesa Sanpaolo should therefore take on those liabilities.
As a result of this decision, more than 3,800 civil plaintiffs holding Veneto Banca shares or subordinated bonds joined the
proceedings. Intesa Sanpaolo thus filed an appearance, requesting that it be excluded from the proceedings. In turn, Veneto
Banca in compulsory administrative liquidation intervened voluntarily affirming its exclusive, substantial and procedural
capacity to be sued.
In March 2018, the preliminary hearing judge declared his lack of territorial jurisdiction, transferring the files to the Public
Prosecutor\u2019s Office of Treviso. The charge of civil liability and the joinders of the civil parties were therefore removed.
After the case documents were forwarded to the Public Prosecutor\u2019s Office of Treviso, the former Managing Director of
Veneto Banca, Vincenzo Consoli, was committed to trial for the offences of market-rigging, obstructing banking supervisory
authorities and financial reporting irregularities.
The Judge for the Preliminary Hearing rejected the motion to authorise the summons of Intesa Sanpaolo as civilly liable party.
A similar motion was rejected in the criminal proceedings before the Court of Vicenza against management board members
and key function holders and executives of Banca Popolare di Vicenza.
Disputes relating to bank guarantees
This type of dispute derives from a decision of the Court of Cassation in 2017, based on a Bank of Italy measure of 2005
relating to a bank guarantee scheme submitted to it by the ABI (agreed with the main consumers\u2019 associations). The Bank of
Italy deemed that three clauses in this scheme could have anti-competition effects if applied in a standard manner by banks.
Referring to that measure, the Court of Cassation formulated the following new principle of law: once the existence of an
unlawful, and therefore, null and void anticompetitive agreement has been ascertained, bank guarantees that constitute the
application of the unlawful agreement shall also be deemed unlawful, even if issued prior to the verification of the agreement.
As part of recovery proceedings managed by Italfondiario on behalf of the Bank, the issue relating to the consequences of the
principle stated by the Court in 2017 on individual bank guarantees issued based on the Italian Banking Association (ABI)
scheme was referred to the Joint Sections.
Specifically, they were asked to assess:
a. whether the inclusion of the unlawful clauses in the contract justifies the declaration that the contracts are null and void or
exclusively legitimises the claim for damages;
b. in the event of nullity, what type of defect determines such nullity and which party is entitled to enforce it;
c. whether the partial nullity of the bank guarantee is admissible;
d. whether, in addition to verifying that the clauses match those deemed unlawful, the intention of the parties regarding the
operation must be investigated and, that is, whether they would have gone ahead even knowing the clauses were
unlawful.
On 30 December 2021, the Joint Sections declared the partial nullity of the bank guarantees drawn up based on the Italian
Banking Association (ABI) template, in relation to clauses 2, 6 and 8.
The Joint Sections opted for an intermediate solution, excluding the other two possible solutions: on one side, they ruled out
the full validity of the bank guarantee, a solution which would have exclusively permitted compensation for damages as the
only remedy to be used by the guarantor (as suggested in the conclusions of the General Prosecutor prior to the hearing of 23
November 2021); on the other side, they ruled out the possibility of deeming the entire bank guarantee contract null and void.
Around one year since the ruling of the Joint Sections, there have been no increases in disputes, which, on the whole, are still
a modest amount.
Andrea Abb\u00e0 + 207
This is a dispute pending before the Court of Milan, Business Section, initiated in 2019 by Mr. Abb\u00e0 and 207 subordinated
bondholders of Banca delle Marche
111
. The claimants seek a declaration voiding the bonds and compensation for the
damages suffered. The claim has been quantified at approximately 31 million euro.
The Bank filed its appearance, objecting that it lacked the capacity to be sued, arguing in particular that the bonds in question
were outside the scope of the sale by the Bridge Entity to the former UBI Banca. The former UBI Banca also argued that the
claimant\u2019s claims had become time barred and that the adverse parties lacked capacity, since they were not the \u201cfirst
borrowers\u201d and thus by law were not entitled to claim that the original bonds were inherently flawed. Finally, the lack of
grounds to void the bonds and of evidence of the causal relationship between the Bank\u2019s conduct at issue and the damages
was underscored.
As the manager of the National Resolution Fund, the Bank of Italy intervened in the proceedings, upholding the arguments
and conclusions formulated by the former UBI Banca. Following its interruption due to the death of one of the claimants, the
lawsuit was resumed. The Court of Milan granted the terms for filing preliminary briefs and scheduled the hearing for 28
March 2023.
AC Costruzioni S.r.l.
Proceedings brought by AC Costruzioni S.r.l. (subsequently declared bankrupt) and Aurelio Cava (deceased during the trial)
seeking a declaratory judgment establishing contractual and/or extracontractual liability of the Bank for the revocation of the
credit facilities in 1998 and a judgment ordering the bank to provide compensation for the damages resulting from revocation,
quantified at a total of around 33 million euro.
The adverse party\u2019s claims were rejected in full by both the Court of Cosenza and the Catanzaro Court of Appeal, which
upheld the arguments made by the Bank. The judgment of the second instance was appealed by Cava\u2019s heirs and by the
receiver to AC Costruzioni by counter-appeal and cross-appeal.
By order filed at the end of July 2022, the Court of Cassation rejected the appeals filed by the adverse parties in their entirety
and ordered them to pay the costs to the Bank.
Therefore, the dispute has been definitively closed without any outlays.
Citt\u00e0 Metropolitana di Roma Capitale (formerly Provincia di Roma)
Criminal proceedings are pending before the Rome Public Prosecutor\u2019s Office against a former Banca IMI manager for co-
commission of aggravated fraud against the Metropolitan City of Rome Capital (formerly the Province of Rome).
The proceedings relate to the overall transaction for the purchase by the local authority, through the real estate fund Fondo
Immobiliare Provincia di Roma (fully owned by the Province of Rome), of the new EUR premises.
The real-estate transaction received financing of 232 million euro from UniCredit, BNL and Banca IMI (each with 1/3).
The former Banca IMI employee is accused of having misled \u2013 with three other managers of the two other lending banks,
seven managers of the asset management company that manages the provincial fund and two public officials \u2013 the fund\u2019s
internal control bodies and representatives of the Province, allowing the lending banks to obtain an unjust profit and thus
causing significant damages to the public authority. In addition, the Public Prosecutor claims that the lending banks and the
Fund entered into a loan under different, more burdensome conditions than those provided for in the call for tenders held by
the public entity for the transaction.
Intesa Sanpaolo (as the company that absorbed Banca IMI) is investigated in the criminal proceeding pursuant to Legislative
Decree 231/01 together with the other two lending banks and the real-estate fund management company.
By measures dated 23 May 2022 and 14 June 2022, the Public Prosecutor\u2019s Office of Rome ordered the closure of the
positions of both the former manager of Banca IMI and of ISP to request their dismissal. By order dated 27 June 2022, which
became final in December, the Public Prosecutor\u2019s Office ordered the dismissal of the proceedings against the Bank. It is also
expected that the request for dismissal be formalised also against the former manager of Banca IMI.
111
See the previous note.
Disputes regarding tax-collection companies
In the context of the government\u2019s decision to re-assume responsibility for tax collection, Intesa Sanpaolo sold to Equitalia
S.p.A., now the Italian Revenue Agency - Collections Division, full ownership of Gest Line and ETR/ESATRI, companies that
managed tax-collection activities, undertaking to indemnify the buyer against any expenses associated with the collection
activity carried out up to the time of purchase of the equity investments.
In particular, such expenses refer to liabilities for disputes with tax authorities, taxpayers and employees and out-of-period
expenses and capital losses with respect to the financial situation at the time of the sale.
Overall, the claims made amount to approximately 74.9 million euro. The activities of the technical roundtable with the Italian
Revenue Agency - Collections Division on the parties\u2019 claims have been concluded, and now the negotiations are underway.
Energy S.r.l.
Energy S.r.l., to which the bankruptcy receiver of C.I.S.I. S.r.l. transferred all its rights towards third parties, brought a claim
before the Court of Rome against Intesa Sanpaolo seeking to quash the revocation of the subsidised loan of approximately 22
million euro granted to C.I.S.I. S.r.l. in 1997 pursuant to Law 488/92 and a judgment ordering the Ministry of Economic
Development, Intesa Sanpaolo (as the concessionaire for the procedural application process) and Vittoria Assicurazioni
(guarantor of the payment of the second tranche of the loan), jointly and severally between them, to provide compensation for
damages allegedly incurred, quantified at a total of approximately 53 million euro. The company justified its claim by citing a
favourable judgment rendered in criminal proceedings originating from a complaint filed against C.I.S.I. and its director
alleging grave irregularities and breach in the execution of the business plan to which the loan referred \u2013 proceedings that
had led to the revocation of the subsidised loan.
Intesa Sanpaolo entered its appearance, denying that there was any basis for the adverse parties\u2019 claims, arguing that all
claims for compensation against the Bank had become time barred, the claims were groundless on the merits and the
damages had been represented inappropriately.
The trial process was begun and the usual briefings were exchanged without the preliminary investigation being carried out.
On 10 December 2022, the Court filed its ruling rejecting Energy\u2019s claims. On 10 January 2023 Energy served its appeal.
Engineering Service S.r.l.
In 2015, Engineering Service S.r.l. brought a civil suit against the Ministry of Economic Development, BPER and the former
UBI Banca regarding the granting of public subsidies to businesses. The claimant accuses our Bank (and BPER) of delays in
managing the approval procedure and disbursements \u2013 delays that allegedly resulted in a liquidity crisis for the company and
the consequent loss of the public contribution.
A claim for damages for approximately 28 million euro was brought against our Bank.
The Bank\u2019s defence counsel argued that the approval times depended on BPER, to which it thus submitted a claim for
indemnity.
Following the revocation of the order to carry out a court-appointed expert\u2019s report, the Court of Rome, with ruling dated 9
November 2021, fully rejected the claimant\u2019s application, ordering it to pay the legal fees of all the parties summoned.
The ruling became final due to lack of appeal within the terms set out by law.
G.I.& E. Bankruptcy
In November 2021, the G.I.& E. S.p.A. Bankruptcy Receiver initiated action for compensation of damages against Intesa
Sanpaolo (as the absorbing company of Banca dell\u2019Adriatico) and UBI (as the absorbing company of Banca Marche and
Popolare di Ancona), claiming that they were liable for having contributed, along with other banks and with the conduct of the
directors and control bodies, to artificially keeping the company afloat and worsening its default.
The alleged damages claimed were quantified by the adverse party at around 22.5 million euro.
Lifting the reservation assumed at the hearing of 16 December 2022, the Court ordered the court-appointed expert\u2019s report
requested by the Bankruptcy Receiver to be carried out.
Isoldi Holding Bankruptcy
The Isoldi Bankruptcy Receiver sued the former UBI Banca (which absorbed Nuova Banca Etruria and Centrobanca), Intesa
Sanpaolo and five other banks in June 2020, before the Court of Bologna, claiming that they were liable, jointly and severally
with the management body of Isoldi Holding, for a series of acts of diversion of assets that are claimed to have contributed to
the company\u2019s artificial survival in the period June 2011 \u2013 June 2013, due to conduct claimed to have been implemented by
preparing a turnaround plan pursuant to Article 67, para. 3, letter d), of the Bankruptcy Law based on unlawful acts and a
connected agreement governing the disbursement of new finance, acts that are argued to have artificially deferred the
company\u2019s crisis and concealed the irreversibility of its default.
The Isoldi Bankruptcy Receiver also formulated a joint claim against Intesa Sanpaolo (prior to the incorporation of UBI Banca)
and MPS, claiming their liability, jointly with the Sole Director of Isoldi Holding, for allegedly unlawful conduct connected with
the bail-in of Aedes, in which Isoldi Holding was interested in taking over the majority shareholding.
Intesa Sanpaolo and the former UBI Banca filed regular appearances and the assigned Court, with order dated 1 July 2021,
declared that it lacked jurisdiction. The adverse party resumed the proceedings, submitting the same claims before the Court
of Turin. The Bank filed an appearance for the hearing scheduled for 3 March 2022. At the hearing of 16 February 2023, the
judge reserved the decision on the preliminary objections. The total damages claimed by the adverse party do not seem to be
accurately quantifiable as things stand, also taking account of the various conduct of the various banks challenged.
Societ\u00e0 Italiana per le Condotte d\u2019Acqua S.p.A. under Extraordinary Administration
By writ of summons of 23 December 2022, Societ\u00e0 Italiana per le Condotte d\u2019Acqua S.p.A. (admitted to the \u201cMarzano\u201d
proceedings by way of Italian Ministerial Decree of 6 August 2018) asked the Court of Rome to order compensation for
damages in the amount of 389.3 million euro (or a different amount that will arise during the proceedings), in addition to
monetary revaluation, legal interest and expenses.
The claim has been filed, jointly, against Intesa Sanpaolo (also as the absorbing company of Medio Credito Italiano, Banca
IMI and UBI Banca, as well as \u201cthe purchaser of\u201d Veneto Banca and Banca Popolare di Vicenza), the members of the
Management Board and the Supervisory Board of Condotte and numerous other banks and factoring companies.
The claim is based on the alleged conduct engaged in for various reasons by the defendants, considered a source of harm to
the company\u2019s assets and its creditors. Specifically, the banks and factoring companies are allegedly liable for having
unlawfully granted to and/or maintained credit for Condotte, thereby contributing to the continuation of its business at a loss
and the worsening of its default.
The first hearing has been scheduled for September 2023.
As things stand, it is not possible to estimate the risk attributable to Intesa Sanpaolo, also taking account of the different
conduct claimed against the numerous defendants.
The Extraordinary Administration has also promoted against Intesa Sanpaolo three bankruptcy revocatory actions before the
Court of Rome, with a request to reimburse amounts of around 16 million euro.
Fondazione Cassa di Risparmio di Pesaro
In 2018, Fondazione Cassa di Risparmio di Pesaro brought a compensation claim against the former UBI Banca (as the
successor-in-interest to the issuer Banca Marche S.p.A.
112
) and PwC (the auditing firm that certified all the financial
statements and the figures presented in the Prospectus) alleging that the defendants published data and information
regarding the financial performance and the income outlooks of Banca delle Marche S.p.A. that later proved to be totally
incorrect and misleading. This information, contained in the financial statements as at 31 December 2010 and 30 June 2011
and included in the Prospectus, is claimed to have led the Foundation to subscribe for the bank\u2019s shares issued as part of the
capital increase in March 2012. In later years, these shares went on to decline in value considerably, resulting in a loss
quantified at approximately 52 million euro.
During the trial the Bank of Italy joined the suit, upholding the lack of capacity to be sued invoked by UBI, by virtue of the
provisions of Legislative Decree 180/2015 governing the resolution procedure for Banca delle Marche. The Court rejected all
preliminary applications filed and adjourned the case to 13 July 2021 for the entry of conclusions. After the entry of
conclusions, the parties have filed their closing briefs and the ruling is pending.
Fondazione Cassa di Risparmio di Jesi
In January 2016, Fondazione Cassa di Risparmio di Jesi brought a compensation claim against UBI Banca (as the alleged
successor-in-interest to the issuer Banca Marche S.p.A.
113
) and PwC (the independent auditors that certified all the financial
statements and the figures presented in the Prospectus) alleging that the defendants published data and information
regarding the financial performance and the income outlooks of Banca delle Marche S.p.A. that later proved to be totally
incorrect and misleading. This information, contained in the financial statements as at 31 December 2010 and 30 June 2011
and included in the Prospectus, is claimed to have led the Foundation to subscribe for the bank\u2019s shares issued as part of the
capital increase in March 2012. The value of these shares then fell to zero, resulting in a loss quantified at approximately 25
million euro.
During the trial the Bank of Italy joined the suit, upholding the lack of capacity to be sued invoked by the former UBI Banca, by
virtue of the provisions of Legislative Decree 180/2015 governing the resolution procedure for Banca delle Marche.
By judgment rendered on 18 March 2020, the Court of Ancona granted the objection of lack of capacity to be sued raised by
the Bank, rejecting the claims lodged. In the appeal proceedings initiated by the Foundation before the Ancona Court of
Appeal, the hearing for the filing of the final briefs was postponed to 9 May 2023.
Alitalia Group: claw-back actions
In August 2011, companies of the Alitalia Group under Extraordinary Administration \u2013 namely Alitalia Linee Aeree, Alitalia
Servizi, Alitalia Airport and Alitalia Express \u2013 brought five bankruptcy claw-back proceedings against the Bank before the
Court of Rome (of which one against the former Cassa di Risparmio di Firenze), requesting the repayment of a total of 44.6
million euro.
When the proceedings were initiated, a line of defence was adopted based mainly on the grounds that the actions were
invalid due to the vagueness of the claims, that the condition of knowledge of the Alitalia Group\u2019s state of insolvency (subject
first of the Air France plan and then of the subsequent rescue conducted by the Italian Government) did not apply, and that
the credited items were not eligible for claw back, due to the specific nature of the account movements.
As the initial attempts to reach a settlement agreement had failed, in March 2016, the Court of Rome upheld Alitalia Servizi\u2019s
petition and ordered the Bank to repay around 17 million euro, plus accessory costs.
In addition to being contestable on the merits, the ruling was issued before the deadline for filing of the final arguments.
Accordingly, in the appeal subsequently lodged, a preliminary objection was made regarding the invalidity of the judgment,
together with an application for suspension of its provisional enforceability, which was upheld by order of 15 July 2016 of the
Court of Appeal. Conversely, the Alitalia Linee Aeree and Alitalia Express lawsuits were won at first instance. The bankruptcy
receivers filed an appeal, which, for Alitalia Express, was concluded in our favour, with the receivers subsequently submitting
an appeal to the Court of Cassation.
For Alitalia Airport, which was also won at first instance, the favourable judgment has become final.
The lawsuit brought against the former Cassa di Risparmio di Firenze was also won in the first two instances, with the
adverse party filing an appeal to the Court of Cassation.
The entire dispute, following long negotiations which were restarted in the meantime, was settled in November 2022,
awarding the amount of 12.8 million euro to the adverse party.
112
See the previous note.
113
See the previous note.
Elifani Group
Lawsuit brought in 2009 by Edilizia Immobiliare San Giorgio 89 S.r.l. (now incorporated into Enselfin, which filed an
appearance as its replacement), San Paolo Edilizia S.r.l., Hotel Cristallo S.r.l. and the guarantor-shareholder Mario Elifani
seeking compensation for damages suffered due to alleged unlawful conduct by the Bank for having requested guarantees
disproportionate to the credit granted, enforced pledge guarantees, applied usurious interest to mortgage loans and submitted
erroneous reports to the Central Credit Register.
The initially claimed amount was approximately 116 million euro and the dispute refers to the same circumstances mostly
already cited in the disputes regarding anatocism and interest in excess of the legal amount brought by the aforementioned
companies in 2004 and settled in early 2014. The lawsuit had a favourable outcome for the Bank in both the first and second
instances.
By order of 27 December 2019, the Court of Cassation partially granted the adverse parties\u2019 petition, with referral of the
matter. The adverse parties resumed the lawsuit before the Court of Appeal of Milan, quantifying the claim at a total of
approximately 100 million euro.
With a ruling of June 2022, the Court of Appeal of Milan, reviewing the case, rejected the claims made by the claimants,
ordering them to pay the legal fees. This ruling was also appealed before the Court of Cassation by the adverse parties, with
appeal served on 30 November 2022.
Mariella Burani Fashion Group S.p.A. in liquidation and bankruptcy (\u201cMBFG\u201d)
In January 2018, the receiver to Mariella Burani Fashion Group S.p.A. sued its former directors and statutory auditors, its
independent auditors and the former UBI Banca (as the company that absorbed Centrobanca), seeking a judgment ordering
compensation for alleged damages suffered due to the many acts of mismanagement of the company while in good standing.
According to the claimant\u2019s arguments, Centrobanca, which was merged into the former UBI Banca, provided financial
support to the parent company of the bankrupt company (Mariella Burani Holding S.p.A.) in 2008, in an operation on its
subsidiary, despite the signs of insolvency that the latter began to show in September 2007, causing damages quantified at
approximately 92 million euro.
On a preliminary level, the Bank argued that the receiver lacked capacity to sue since the disputed loan had been disbursed
to the parent company of Mariella Burani Fashion Group S.p.A.; moreover, the alleged damages for which the receiver claims
compensation were argued to have been in fact sustained by the company\u2019s creditors (and not by the procedure).
With regard to the merit of the claims, the Bank stressed that it had acted properly and the borrower in good standing was
solely liable since it bore exclusive responsibility for preparing the untrue financial statements, circulating the misinformation
and continuing to operate the company in an alleged situation of insolvency.
The proceedings are currently in the preliminary phase.
SIM Bankruptcy
By writ of summons served in October 2022, the receiver to SIM S.p.A. summoned Intesa Sanpaolo (along with another 7
banks) before the Court of Catania, with the first hearing scheduled for 31 March 2023.
This is a compensation claim brought for damages allegedly suffered by the company and its creditors due to conduct by the
banks defined by the adverse party as \u201cunlawful\u201d, which allegedly resulted in the unlawful granting of credit.
The claim for damages has been quantified at around 47 million euro, requesting that the defendant banks be jointly ruled
against.
Offering of diamonds
In October 2015, the Bank signed a partnership agreement with Diamond Private Investment (DPI) governing how diamond
offerings were made by DPI to the customers of Intesa Sanpaolo. The aim of this initiative was to provide customers with a
diversification solution with the characteristics of a \u201csafe haven asset\u201d in which to allocate a marginal part of their assets over
the long-term. Diamonds had already been sold for several years by other leading national banking networks.
This recommendation activity was carried out primarily in 2016, with a significant decline starting from the end of that year.
A total of around 8,000 customers purchased diamonds, for a total of around 130 million euro. The marketing process was
based on criteria of transparency, with safeguards progressively enhanced over time, including quality controls on the
diamonds and the fairness of the prices applied by DPI.
In February 2017, the AGCM (the Italian Competition Authority) brought proceedings against companies that marketed
diamonds, (DPI and other companies), for alleged conduct in breach of the provisions on unfair business practices.
In April, those proceedings were extended to the banks that carried out the recommendation of the services of
those companies.
At the end of those proceedings, on 30 October 2017, the AGCM notified the penalties imposed for the alleged breach of the
Consumer Code through the conduct of DPI and of the banks which the proceedings had been extended to, consisting - in
short - of having provided partial, deceptive and misleading information on the characteristics of the diamond purchases, the
methods used to calculate the price - presented as being the market price - and the performance of the market. The Authority
issued a fine of 3 million euro against Intesa Sanpaolo, reduced from the initial fine of 3.5 million euro, after the Authority had
recognised the value of the measures taken by the Bank from 2016 to strengthen the safeguards on the offering process
aimed, in particular, at ensuring proper information to customers.
Following the order by the AGCM, the Bank paid the amount of the fine and filed an appeal with the Lazio Regional
Administrative Court against the order. With reference to that appeal, on 16 November 2022, the Regional Administrative
Court confirmed the fine and the Bank will appeal to the Council of State.
From November 2017, the Bank:
\u2212 terminated the partnership agreement with Diamond Private Investment (DPI) and ceased the activity, which had already
been suspended in October 2017;
\u2212 started a process that provides for the payment to customers of the original cost incurred for the purchase of the
diamonds and the withdrawal of the stones, in order to satisfy the customers\u2019 resale needs which, due to the illiquidity
that had arisen in the market, are not met by DPI;
\u2212 sent a communication in January 2018 to the diamond-holding customers reiterating the nature of the stones as durable
goods, and also confirming the Bank\u2019s willingness to intervene directly in relation to any realisation needs expressed by
the customers and not met by DPI.
In 2022, 34 requests were received for around 0.5 million euro. At the end of the year, a total of 6,854 repurchase requests
had been received from customers and met by the Bank, for a total value of 116.3 million euro. The valuation of the
repurchased diamonds is carried out using the values provided by the IDEX Diamond Retail Benchmark, one of the main
online trading platforms used in the main markets by over 7,000 traders.
In February 2019, an order for preventive criminal seizure of 11.1 million euro was served, corresponding to the fee and
commission income paid by DPI to the Bank.
The preliminary investigations initiated by the Public Prosecutor\u2019s Office of Milan also concern four other banks (more
involved) and two companies that sell diamonds.
In October 2019, the notice of conclusion of the investigation was served, which stated that two of the Bank\u2019s operators were
currently under investigation for alleged aggravated fraud (in collusion with other parties to be identified) and other persons
are being identified for allegations of self-laundering, while ISP is being charged with the administrative offence pursuant to
Italian Legislative Decree 231/2001 in relation to this latter predicate offence.
In reaction to the latter claims, in July 2021, the hearing was held, in which the Preliminary Investigation Judge accepted the
plea bargain request \u2013 which Intesa Sanpaolo had submitted solely to bring to an end the lengthy legal proceedings and
which had been supported by the Public Prosecutor\u2019s Office \u2013 issuing a ruling which ordered only a financial penalty of
100,000 euro, and the confiscation of only the sums constituting the profit from the offence of self-laundering, calculated at
61,000 euro.
Following the partial transfer of the proceedings to the Court of Rome, for reasons of territorial jurisdiction, in August 2022 the
revocation of the preventive seizure ordered in February 2019 regarding the profit from the alleged crime of fraud was served,
with full restitution to the Bank of the amount of 11.1 million euro. Now that the Bank\u2019s position has been settled, the Public
Prosecutor\u2019s Office of Milan is expected to request the dismissal against the two operators investigated.
Private banker (Sanpaolo Invest SIM, incorporated into its parent company Fideuram - Intesa Sanpaolo Private Banking)
An inspection conducted by the Audit function identified serious irregularities by a private banker of the former Sanpaolo
Invest SIM. The checks carried out revealed serious irregularities affecting several customers, including misappropriation of
funds and reports with false incremental amounts.
On 28 June 2019, the Company terminated the agency contract with the private banker due to just cause and communicated
the findings to the Judicial Authority and the Supervisory Body for financial advisors, which first suspended and then removed
the private banker from the Register of Financial Advisors in December 2019.
Following the unlawful actions, the company received a total of 278 compensation claims (including complaints, mediation
proceedings and lawsuits), for a total amount of approximately 62.9 million euro, mostly based on alleged embezzlement,
losses due to disavowed transactions in financial instruments, false account statements and the debiting of fees relating to
advisory service.
There are currently 55 pending claims, with a present value of approximately 25.5 million euro, following the resolution of 223
positions.
The total amount of 6.4 million euro was recovered from the improperly credited customers (and already returned to the
customers harmed) and there are pending attachments of 42 million euro.
A precautionary attachment was ordered against the private banker for an amount equal to the balance found in the accounts
and deposits held with credit institutions and the social-security position with Enasarco. In the ensuing case on the merits, the
former private banker filed a counterclaim in the total amount of 0.6 million euro by way of non-payment of indemnity for
termination of the relationship.
Another lawsuit was also brought against former private banker to recover the claims arising from withdrawal from the agency
contract, in the total amount of 1.6 million euro, in addition to interest by way of indemnity in lieu of notice, penalty relating to a
loan agreement and reimbursement of advances of bonuses.
Adequate provisions have been set aside for the risks associated with the unlawful conduct discussed above, mainly for the
damages verified relating to compensation claims and pending lawsuits.
The above provisions do not consider the coverage envisaged by the specific insurance policy in force, under which the
insurance company has already paid an initial advance of 744 thousand euro.
Reyl & Cie (Switzerland) \u2013 Proceedings pursuant to Legislative Decree 231/2001 of the Public Prosecutor\u2019s Office of the
Court of Milan
The Public Prosecutor\u2019s Office of Milan initiated criminal proceedings pursuant to Legislative Decree 231/2001 against Reyl &
Cie (a Swiss subsidiary of Fideuram \u2013 Intesa Sanpaolo Private Banking) for the predicate offence of money laundering,
allegedly committed by one of its former employees (dismissed in 2020), and ordered the seizure of securities owned by Reyl
for around 1.1 million euro. The proceedings also involve the Swiss bank Cramer & Cie. Neither Fideuram ISPPB nor ISP are
currently involved in the proceedings. The circumstances alleged relate to events that took place in 2018, before Reyl & Cie
joined the Intesa Sanpaolo Group in May 2021. According to the prosecution, the former employee, together with his brother,
an employee of the bank Cramer & Cie, and an external advisor, allegedly engaged in practices aimed at facilitating tax
evasion by Italian customers through the transfer of accounts from Switzerland to branches located in the Bahamas, in order
to allow those customers to withdraw money from those accounts without the possibility of being traced by the Italian
authorities. With regard to the measure notified by the Swiss judicial authorities, the appeal is currently being prepared, whose
filing, in any event, will be subject to a separate assessment before it is formalised. Instead, with regard to the criminal
proceedings pursuant to Legislative Decree 231/2001 pending in Italy, the possibility is being evaluated of filing a petition for
the reduction of the amount thereof. Indeed, an examination of the documents of the proceedings has revealed elements
indicating that it may be considered reasonable that such a petition would be upheld. A request for disqualification from
operating in Italy has not been made against Reyl & Cie, although investigations are still pending and it is not yet possible to
access the related documents.
Tirrenia di Navigazione in A.S.: Claw-back actions
In July 2013, Tirrenia di Navigazione in A.S. filed two bankruptcy claw-back actions before the Court of Rome against the
former Cassa di Risparmio di Venezia for 2.7 million euro and against the former Banco di Napoli for 33.8 million euro.
The lawsuit against the former CR Venezia is now pending on appeal, filed by the Bank, following the order for payment of 2.8
million euro in 2016.
The lawsuit against the former Banco di Napoli is also pending on appeal against the order for payment of approximately 14.5
million euro, plus accessory costs, issued by the Court in 2021. That order was not suspended, and, in October 2022, the
Bank paid 15.2 million euro, reserving the right to be refunded in case of favourable outcome of the appeal.
Against the appeal filed by the Bank, the adverse party filed an appearance, initiating a cross-appeal relating to the claim for
return of the amount of 28 million euro deriving from a currency adjustment, a claim already rejected in the first instance and
which is expected to also be rejected on appeal.
Selarl Bruno Raulet (former Dargent Tirmant Raulet) Dispute
The claim was filed before a French Court in 2001 by the trustee in bankruptcy for the bankruptcy of the real estate
entrepreneur Philippe Vincent, which made a request to the Bank for compensation of 56.6 million euro for the alleged
\u201cimproper financial support\u201d provided to the entrepreneur. The claim of the trustee in bankruptcy has consistently been
rejected by the courts of different instance which dealt with the case over 17 years, until the Court of Colmar, in May 2018,
ordered the Bank to pay compensation of around 23 million euro. The Colmar judgment was appealed before French
Supreme Court of Cassation, which in January 2020 overturned and quashed the decision of the Court of Appeal of Colmar
and referred the matter to the Court of Appeal of Metz. Consequently, in the first quarter of 2020, the Bank obtained the
refund of the around 23 million euro paid according to the ruling of the Court of Appeal of Colmar in 2018. At the end of July
2020, the bankruptcy receiver referred the dispute to the Court of Appeal of Metz, requesting payment of 55.6 million euro
(equal to the entire amount of insolvency liabilities, minus the amount obtained from the sale of the property whose purchase
was financed by the Bank). In turn, the Bank filed an appearance and challenged the opposing party\u2019s claims. In a ruling
delivered on 27 July 2021, the Metz Court of Appeal partially upheld the receivership\u2019s claim and ordered the Bank to pay
around 20 million euro, plus legal costs of the various instances of the proceedings (for a total of 20.6 million euro). The Court
quantified the damage suffered by the insolvency estate as being equal to the loan granted by the Bank, less the proceeds
from the sale of the asset given as security. In December 2021, the Bank filed an appeal before the French Court of
Cassation. In parallel, the receivership autonomously challenged the decision of the Court of Appeal, insisting that the Bank
be ordered to pay all the insolvency liabilities. In November 2021, payment was made to the receivership of the amount
ordered. The amounts were temporarily deposited with CARPA (the French Bar Association\u2019s Cash Fund) and would have
been unavailable until the Court of Cassation issues its ruling. A hearing was held on 4 October 2022. At the end of
November 2022, the Court of Cassation rejected the appeals filed by the Bank and by the receivership. The ruling by the
Court of Appeal of Metz thus became final. The amounts already paid by the Bank following that decision were therefore
made available to the receivership.
Lawsuit against two Hungarian subsidiaries of Intesa Sanpaolo
The lawsuit is connected with a lease agreement terminated by one of the subsidiaries in 2010. During 2011, the tenant
initiated proceedings in civil court, and during 2021, it supplemented its initial claim, formulating new claims and, as a result,
increasing the total of the claims to around 31 million euro.
In July 2022, the Court rejected all the plaintiff company\u2019s claims, finding that it lacked standing. The plaintiff filed an appeal
against that decision..
In December 2022, the Court of Appeal partially upheld the adverse party\u2019s appeal, ordering one of the two defendant
companies to pay around 9.5 million euro. The relevant subsidiary filed an appeal before the Supreme Court, which
suspended the enforcement of the challenged ruling.
Intesa Sanpaolo\u2019s subsidiaries took action in 2012 for the recognition of their receivables claimed against the tenant resulting
from unpaid lease rentals. These proceedings are currently pending.
Labour litigation
In line with the situation as at 31 December 2021, as at 31 December 2022 there were no significant cases of labour litigation
from either a qualitative or quantitative standpoint. In general, all labour litigation is covered by specific provisions adequate to
meet any outlays.
Contingent assets
As for contingent assets, and the IMI/SIR dispute in particular, it should be recalled that following the final judgement
establishing the criminal liability of the corrupt judge Metta (and his accomplices Rovelli, Acampora, Pacifico, and Previti), the
defendants were ordered to pay compensation for damages, with the determination of those damages referred to the civil
courts. Intesa Sanpaolo then brought a case before the Court of Rome to obtain an order of compensation for damages from
those responsible.
In its ruling of May 2015, the Court of Rome quantified the financial and non-financial damages for Intesa Sanpaolo and
ordered Acampora and Metta \u2013 the latter also jointly liable with the Prime Minister\u2019s Office (pursuant to Law no. 117/1988 on
the accountability of the judiciary) \u2013 to pay Intesa Sanpaolo 173 million euro net of tax, plus legal interest accruing from 1
February 2015 to the date of final payment, plus legal expenses. The amount ordered took account of the amounts received
in the meantime by the Bank as part of the settlements with the Rovelli family and with the adverse parties Previti and
Pacifico.
In July 2016, the Rome Court of Appeal stayed the enforcement of the judgment of first instance with respect to the amount in
excess of 130 million euro, in addition to ancillary charges and expenses, and adjourned the hearing of the final pleadings to
June 2018. As a result of this decision, in December 2016 the Office of the President of the Council of Ministers credited
Intesa Sanpaolo with the sum of 131,173,551.58 euro (corresponding to the 130 million euro of the order, in addition to legal
interest and reimbursement of expenses). To avoid dispute, only the exact amount of the order, without applying the gross-up,
was demanded and collected. On 16 April 2020, the ruling of the Court of Appeal of Rome was filed, which essentially upheld
the Court's ruling, while reducing the amount of non-financial damages to 8 million euro (compared to 77 million euro that had
been quantified by the court of first instance), and set the amount to be paid at 108 million euro, to be considered net of tax,
plus legal interest and expenses.
In the second quarter of 2020 the Bank filed a petition for the correction of a material error contained in the finding regarding
the calculation of the damages liquidated; the Court of Appeal rejected the Bank\u2019s petition by ruling filed on 7 December 2020.
In May 2021, the Bank filed an appeal with the Court of Cassation against the Rome Court of Appeal\u2019s ruling of 16 April 2020.
The appeal sets out two main grounds:
a) the reduction to 8 million euro of the non-financial damages made by the Court of Appeal, compared to the 77 million
euro recognised in the first instance ruling is arbitrary and devoid of any sound legal or logical reasoning;
b) even accepting the reduction under point a), the Court made a miscalculation when redetermining the amount of total
damages. That aspect was already the subject of an application for material correction filed in 2020, rejected by the
Court as the Court deemed it an issue that could be remedied through appeal.
On 10 January 2023, a hearing was held before the Court of Cassation. After hearing the conclusions from the parties and the
report of the General Prosecutor, the Court deferred judgment.
TAX LITIGATION
At Group level, the total value of the claims for tax disputes (taxes, penalties and interest) was equal to 219 million euro as at
31 December 2022, which represents a slight increase compared to 215 million euro as at 31 December 2021.
The Group's tax litigation risks are covered by adequate provisions to the allowances for risks and charges (70 million euro in
2022 compared to 76 million in 2021).
The Parent Company had 473 pending litigation proceedings (628 as at 31 December 2021) for a total amount claimed
(taxes, penalties and interest) of 126 million euro (135 million euro as at 31 December 2021), considering both administrative
and judicial proceedings at various instances. In relation to these proceedings, the actual risks were quantified at 57 million
euro as at 31 December 2022 (57 million euro also as at 31 December 2021).
Compared to 31 December 2021, for the Parent Company, the main events that gave rise to significant movements of amount
of claims consisted of:
\u2013 an increase (around 13.5 million euro), due to: i) new claims of 1.4 million euro relating to municipal property tax (IMU) on
properties not repossessed through terminated lease agreements (1 million euro) and income-generating lease
agreements (0.4 million euro), net of the positions arising and settled during the year (for a detailed analysis of the
disputes in question, refer to the Consolidated financial statements as at 31 December 2021); ii) the assessment on
registration tax on transfer of business unit (1.8 million euro); iii) notice of registration tax on the ruling establishing a
bankruptcy credit (0.6 million euro); iv) notice of assessment regarding VAT on boat lease transactions for the tax year
2016 (for 1.5 million euro); v) adjustment of the value of the former Sudameris dispute of 6.3 million euro, due to the
appreciation of the Brazilian currency against the euro; vi) notices of registration tax for various reasons (0.6 million
euro); and vii) interest accrued on the outstanding disputes of around 1 million euro;
\u2013 a decrease (around 22.8 million euro), due to: i) the closure of disputes concerning registration tax for 11.8 million euro,
mainly relating to the demerger of business unit (including: the Manzoni/Melville case for 8.3 million euro, the case for
reclassification of the transfer of the Banca di Trento e Bolzano/Intesa Sanpaolo business line for 1.2 million euro and the
case for the value adjustment of the transfer of the Credito Piemontese/Intesa Sanpaolo business line for 1.6 million
euro); ii) the closure of disputes concerning municipal property tax (IMU) on properties from leases, both following
settlement and cancellation by the municipalities for 4.4 million euro; and iii) 6.6 million euro for various disputes,
including the partial cancellation due to internal review of the VAT claim on boat lease transactions of 1.6 million euro
relating to the tax year 2014, as well as the settlement of claims regarding IRES and IRAP taxes for 2 million euro.
The main changes in the provisions booked by the Parent Company (which remained substantially unchanged) as at 31
December 2021 are related to:
\u2013 an increase (around 7 million euro), due to: i) the adjustment of 1.2 million euro for the former Sudameris dispute relating
to the principal and penalty components (assessed as higher risk), due to the appreciation of the Brazilian currency
against the euro; ii) claims regarding municipal property tax (IMU) (1 million euro), still pending at the end of the year; iii)
the greater provisions on the 2016 VAT claim for boat lease transactions of 1.5 million euro; iv) the penalty and related
surcharges (2 million euro) included in a payment notice totalling 10 million euro due to an unfavourable ruling by the
Court of Cassation in connection with the dispute on the registration tax for the demerger of a business unit from ISP to
State Street Bank (the proceedings on the payment notice for registration tax related to this transaction are still pending);
and v) greater provisions of 1.3 million euro on sundry cases, both new and existing (of which 0.8 million euro for
disputes regarding registration tax);
\u2013 a decrease (around 6.8 million euro), due to: i) the favourable closure of the dispute regarding registration tax referring to
the business contribution and subsequent sale of the investment by Banca di Trento e Bolzano to ISP (1.1 million euro);
ii) the release relating to the closure of the tax audit report for 2016 of 1.3 million euro, due to the notification of the
related notice of assessment on VAT on boat lease transactions. The increases and decreases on this position derive
from the exact recognition of the liability initially estimated based on the results of the audit on 2014 and 2015; iii) the
municipal property tax (IMU) claims for 3.3 million euro, due to the settlement of the IMU disputes on properties not
repossessed through terminated lease agreements, arising in previous years; and iv) 1 million euro for sundry disputes,
mainly regarding IRES and IRAP taxes.
During the year, the litigation settled (known as findings closed) totalled 340 proceedings, for a total amount claimed of 24.7
million euro, including the findings arising and settled during the year, with an outlay of 3.6 million euro, mainly referring to
claims for municipal property tax (IMU) (2.5 million euro).
With regard to the Italian subsidiaries, tax disputes totalled 85 million euro as at 31 December 2022 (71 million euro as at 31
December 2021), covered by specific provisions amounting to 9 million euro (11 million euro in the 2021 financial statements).
Compared to 31 December 2021, the main events that gave rise to significant movements of the total amount of claims (+14
million euro) were as follows:
\u2013 +16 million euro in new disputes, mainly referring to: Intesa Sanpaolo Private Banking (10.4 million euro); Cargeas
Assicurazioni (4.6 million euro); Provis and other minor disputes (1 million euro);
\u2013 -2 million euro in closed disputes referring to Fideuram Vita, Intesa Sanpaolo Vita, Fideuram ISPPB, Siref and UBI
Leasing.
The decrease in provisions compared to 31 December 2021, equal to 2 million euro, mainly refers to:
\u2013 +1.2 million euro in provisions on new disputes arising;
\u2013 -1.5 million euro due to the merger of UBI Leasing;
\u2013 -1 million euro with regard to cases closed that were previously covered by provisions.
Tax disputes involving foreign subsidiaries amounted to 8 million euro (9 million euro at the end of 2021), covered by
provisions of 4 million euro (8 million euro in 2021).
The changes in the amount claimed and the allowance for risks are mainly due to the settlement of several disputes of Intesa
Sanpaolo Bank Albania and Bank of Alexandria and, referring only to the amount claimed, the penalties imposed to UBI
Trustee.
In the following paragraphs, information is provided regarding the most important ongoing disputes, and on several orders to
file appearances relating to Italian subsidiaries, served in December 2022.
Parent Company
Disputes regarding registration tax, with a total remedy sought of 38 million euro, on the reclassification of business
contribution and sale of the investments as sales of businesses and the consequent assessment of a higher business value
These are disputes concerning the recovery of registration tax paid on business contributions and the subsequent sales of the
investments, which were reclassified by the tax authorities as sales of business unit, with the consequent assessment of a
higher value for the business unit. These disputes were not settled under the tax amnesty pursuant to Article 6 of the tax
decree connected to the 2019 Budget Law (Decree-Law 119/2018), either because the Bank had already paid the full amount
assessed and as a result of settlement would not have been entitled to the repayment of the sums in excess of the amount
due for settlement, or because there were sound prospects of a favourable outcome to the trials pending before the Court of
Cassation.
Dispute regarding the municipal property tax (\u201cIMU\u201d) on real estate not repossessed following the termination of the related
lease contracts
The dispute regarded the identification of the taxpayer liable for the municipal property tax (IMU) in relation to real estate
assets owned by the lease companies or banks and leased out to third parties, where the lease was terminated early due to
default by the lessee, or as a result of insolvency proceedings involving the lessee, but without the lessee having returned the
asset to the lessor. Over the years a tax dispute arose on this matter (also affecting the former Mediocredito Italiano and
Provis) relating to whether the lessee is (still) liable for the municipal property tax rather than (already) the lease
company/bank in the period between the date of termination (or dissolution) of the lease and the date of physical return of the
asset to the lessor. In 2020, the Court of Cassation settled on the view that the lease company/bank was liable for municipal
property tax (IMU) from the date of legal termination of the contract, regardless of repossession of the asset. In addition, the
2020 Budget Law provided for the abolition of the single municipal tax (IUC), with regard to its components relating to IMU
and TASI, and the unification of the two taxes into the new municipal property tax (IMU). On 18 March 2020, the Ministry of
the Economy and Finance \u2013 Finance Department \u2013 Tax Legislation and Tax Federalism Unit, with circular no. 1/DF,
commenting on the latter changes, provided precise indications regarding the liability for the new municipal property tax with
regard to the date of termination of the lease agreement in accordance with the prevailing case law. Accordingly, starting from
2020, the Bank decided to proceed with the payment of municipal property tax for all leased real estate assets with terminated
contracts, regardless of repossession of the asset, seeking recovery from the former users, where possible. It was also
decided to gradually withdraw from all pending disputes on assessments relating to years up to 2019, following an attempt at
settlement with the interested municipalities to quash the penalties and offset trial fees.
The total remedy sought is 7 million euro.
Dispute regarding VAT on boat lease transactions
On 17 April 2019, the Milan Tax Police (Guardia di Finanza) initiated a general audit of the former Mediocredito Italiano,
merged into Intesa Sanpaolo, concerning tax years 2014 and 2015 for VAT purposes and tax years 2015 and 2017 for direct
tax purposes. The audit was concluded on 13 October 2020, contesting: i) the VAT exemption applied, in accordance with
Article 8-bis of Presidential Decree 633/72, by the company to boat leases, and ii) the VAT exemption established in Article 7-
bis of Presidential Decree 633/72 for the buyback of a vessel referring to 2014.
The Lombardy Regional Tax Office thus served a notice of assessment (with interest and penalties) for 2014, against which
an appeal was lodged. On 28 February 2022 the ruling of the Milan Provincial Tax Commission was filed, partially favourable
to the Bank, where, in acknowledging the reduction of the VAT claimed due to internal review by the Italian Revenue Agency,
the judges recognised that the penalties imposed of 2 million euro (remedy sought of 4 million euro) were not due. On this
dispute, the Bank made provisions with regard to the former claim, solely for the risk of tax and interest, and not also for the
risk of penalties, whereas for the latter claim, the potential tax liability is believed to be borne contractually by the customer.
However, prudently, the dispute has been covered by provisions for the penalty and interest components. The dispute is
pending before the Court of Justice in the second instance.
For the tax year 2015, the notice of assessment regarding one single finding of tax exemption pursuant to Article 8-bis of
Presidential Decree no. 633/72, applied by the nautical lease company, was settled through a payment of around 2 million
euro, using the allowance for tax litigation, previously established in 2019, for 2.9 million euro.
Also for 2016, the Italian Revenue Agency notified the related notice of assessment on 1 June 2022 (remedy sought of 1.5
million euro). The proceedings are pending before the Tax Court of Justice in the first instance.
With regard to tax years 2015 and 2017, the audit was concluded without detecting any irregularities in the field of direct
taxes.
* * *
Instead, with regard to the disputes settled during the period, the following is noted:
i) the dispute regarding the transfer by Manzoni S.r.l. to Melville S.r.l. through a partial, non-proportional demerger, of a
private equity business line, reclassified by the Italian Revenue Agency as a direct sale of a business pursuant to Article
20 of Presidential Decree no. 131/1986, with a request for registration tax of 6.7 million euro, plus interest. The Bank won
both in the first and second instance, and, lastly, also in the Court of Cassation, with a ruling filed during the year. As a
result, that claim, quantified in a total of 8.3 million euro (of which interest of 1.6 million euro) was closed. In the previous
financial reports, with regard to the dispute concerning the application of the proportional registration tax following the
reclassification of a reorganisation consisting of a transfer of a business and a sale of an equity interest into a sale of a
business pursuant to Article 20 of Presidential Decree 131/1986, details were provided of the publication of the
Constitutional Court\u2019s ruling no. 39/2021 of 16 March 2021 whose conclusions confirmed the previous ruling no. 158 of
21 July 2020 by that Court.
In light of this second ruling of the Constitutional Court, the long-standing dispute was considered to have been
concluded with favourable outcomes for the Bank in the numerous claims pending before the Court of Cassation.
However, it is important to note that, on the grounds that, according to the principle of alternativity between
VAT/registration tax, it is essential to arrive at a single definition of the concept of a business for the purposes of both
taxes, the Court of Cassation, by Order no. 10283/2022 of 31 March 2022, referred the proceedings to the EU Court of
Justice concerning the compatibility of Article 20 of the Consolidated Law on Registration Taxes (according to which the
application of registration tax is to be made on the basis of the content of the document submitted for registration, without
taking into account any non-directly discernible external elements), with respect to the VAT rules governing the treatment
of transfers of businesses (transactions not subject to the tax) and of individual assets (taxable transactions). The Court
of Justice of the European Union, with order of 21 December 2022 - Case C-250/22, declared that, \u201cIt is clearly
impossible to admit the request for a preliminary ruling lodged by the Supreme Court of Cassation (Italy), with order
dated 31 March 2022\u201d...\u201cas the referring court has not sufficiently explained under which profile the interpretation of
Article 5, paragraph 8 of the Sixth Directive and Article 19 of the VAT Directive is relevant for the purposes of applying
Article 20 of the TUR (Consolidated Law on Registration Tax, Ed.)\u201d. The Court also specified that \u201cthe referring court
retains the right to lodge a new request for a preliminary ruling, providing the Court with all the elements that make it
possible to issue a ruling\u201d. The issue is now being carefully monitored;
ii) the dispute relating to the business contribution and subsequent sale of the investment by Banca di Trento e Bolzano to
Intesa Sanpaolo is noted, reclassified by the Italian Revenue Agency as a direct sale of a business (also pursuant to the
aforementioned Art. 20 of Italian Presidential Decree no. 131/1986), with a demand for proportionate registration tax (0.8
million euro) plus interest (0.3 million euro), amounts provisioned at the time. Lastly, in a ruling filed during the year, the
Court of Cassation found that the reclassification of the deed of contribution of a business line, followed by the sale of the
investments in the contributed company is no longer permitted by law (pursuant to Art. 20 of Italian Presidential Decree
no. 131/1986) and that the tax nature of the deed requires registration tax, as also observed by the Constitutional Court
in the aforementioned ruling no. 158/2020. As a result, the amounts provisioned at the time were released.
With regard to the Intesa Sanpaolo branches located abroad, it should be noted that: a) a VAT audit on the London
branch is in progress for the years 2016, 2017 and 2018; to date, no findings have been reported; ii) two tax audits
concerning direct taxes of the New York branch are in progress: the first audit, which began in January 2021, is being
conducted by the Internal Revenue Service (IRS) with regard to the income tax return filed for the tax period 2018; to
date, no claims have been made; the second audit, notified in July 2021, is being conducted by the City of New York,
with regard to the tax periods 2018 and 2019; to date, no claims have been made. The previous audits conducted by the
State of New York, regarding the tax periods 2015 and 2016, and by the IRS regarding the tax period 2016 were closed
with no claims; c) the tax audit begun in April 2021 by the Madrid Revenue Agency for the year 2016 concerning taxes on
income on the Madrid branch of the merged company UBI Banca, which was closed down on 31 December 2018, was
closed with no liabilities. More specifically, the tax loss reported by the branch for 2016 of 724 thousand euro was
adjusted, decreasing it by a total of 722 thousand euro, of which 150 thousand euro due to interest that was not
deductible, as it related to debt exceeding the regulatory capital required by Spanish regulations (application of the thin
capitalisation rule), and 572 thousand euro due to non-deductible expenses, referring to services provided to the branch
by the then Luxembourg parent company (UBI Banca International S.A.), by virtue of Spanish international transfer
pricing regulations. The reduction of the tax loss did not generate any taxes or penalties due; e) the VAT audit on the
Warsaw branch for the tax periods 2016-2020 on financial services (SWIFT) was closed. The branch paid the amount
claimed, equal to 13 thousand euro (including interest and penalties) in full; f) the audit on the Munich branch of the
merged company UBI Banca for the years 2015 to 2018, begun in 2021, is under way. The auditors are acquiring the
accounting and tax documentation; g) the tax audit on the Madrid branch of ISP regarding the deductibility of
intercompany costs amounting to 2.2 million euro for the tax period 2015 was concluded with the charging of 93
thousand euro of tax, plus interest (17 thousand euro) and penalties (20 thousand euro). The branch paid the amount
claimed in full.
Group Companies
For Banca Fideuram, as a result of the Bank\u2019s appeal, three lawsuits are pending before the Court of Cassation concerning
the failure to withhold 27% of the interest accrued in 2009, 2010 and 2011 on foreign bank accounts held at Fideuram Bank
(Luxembourg) by two \u201chistoric\u201d Luxembourg mutual funds (Fonditalia and Interfund SICAV), for which Banca Fideuram was
only the placement bank and correspondent bank (total value of the disputes of 9.3 million euro). As the Bank lost in the
second instance of all the proceedings, it was decided, after consultation with the consultant engaged to assist the bank in the
cases pending before the Court of Cassation, to set up a provision for risks, including penalties and interest.
Intesa Sanpaolo Private Banking has long had pending IRES and IRAP disputes relating to the deduction (in 2011 and the
following years) of the amortisation charge for the goodwill arising from the transfers of the private banking business lines of
Intesa Sanpaolo and Cassa dei Risparmi di Forl\u00ec e della Romagna in 2009, Banca di Trento e Bolzano and Cassa di
Risparmio di Firenze in 2010 and Cassa di Risparmio Pistoia e Lucchesia and Cassa di Risparmio dell\u2019Umbria in 2013,
realigned by the transferee in accordance with Article 15, paragraph 10, of Law Decree no. 185 of 29 November 2008.
The status of the disputes is as follows:
\u2013 year 2011: the favourable ruling no. 2763/2019, filed on 26 June 2019, by the Lombardy Regional Tax Commission,
which rejected the main appeal by the Italian Revenue Agency against the ruling no. 7028/2017 by the Milan Provincial
Tax Commission, on the merits (total claim amount of 7.9 million euro, of which 3.8 million euro for taxes and 3.5 million
euro for penalties). The court of second instance also upheld the company\u2019s cross-appeal on the preliminary matter of
the lapse of the tax administration\u2019s power of assessment: the realignment of goodwill had been reported in the tax return
for the 2010 tax year, and the notices were served in 2017, i.e. beyond the time limits laid down in Article 43 of
Presidential Decree 600/73. The case is pending before the Court of Cassation on appeal by the Attorney General and a
counter-appeal has been prepared by the Bank;
\u2013 year 2012: unfavourable rulings no. 5172/2019 and 5173/2019 by the Lombardy Regional Tax Commission, which
granted the appeals by the Italian Revenue Agency (total claim amount of 8.4 million euro, of which 3.9 million euro for
taxes and 3.9 million euro for penalties). An appeal was lodged with the Court of Cassation;
\u2013 year 2013: the favourable rulings of both the Provincial Tax Commission and the Regional Tax Commission (total claim
amount of 10.6 million euro, of which 4.9 million euro for taxes and 4.9 million euro for penalties). The Revenue Agency
lodged an appeal with the Court of Cassation and the Bank then filed its defence;
\u2013 years 2014 and 2015: the Second Division of the Milan Provincial Tax Commission, by judgment no. 504/2/2020 of 7
February 2020, filed on 13 February 2020, granted the IRES and IRAP appeals for both years (joined proceedings). The
tax claim amounts to 16.7 million euro (of which tax of 7.9 million euro and penalties of 7.9 million euro), plus interest.
The favourable second instance ruling no. 1044 concerning the years 2014 and 2015 was filed on 18 March 2022. The
Lombardy Regional Tax Commission rejected the appeal by the Italian Revenue Agency against the first instance ruling
that had upheld the (combined) IRES and IRAP tax appeals relating to those tax periods. The Italian Revenue Agency
lodged an appeal with the Court of Cassation;
\u2013 year 2016: on 29 April 2021, notices were served for the assessment of IRES and IRAP taxes for tax year 2016. The
amount deducted by the company and now disputed by the Lombardy Regional Revenue Directorate for that year is the
same amount already adjusted for 2015, of 12.1 million euro, corresponding to higher IRES of 3.3 million euro and IRAP
of 0.7 million euro, plus interest, and penalties (total amount 8.2 million euro); By ruling no. 1962, filed on 6 July 2022, the
Milan Provincial Tax Commission rejected the joined appeals of the Parent Company and Intesa Sanpaolo Private
Banking, ordering each party to pay its own costs. In addition to rejecting the preliminary matter of the lapse of the
Office\u2019s power of assessment, based on the well-known ruling no. 8500/2021 of the Joint Sections of the Court of
Cassation, the ruling also rejected the appeals on the merits. The term for lodging an appeal expires on 5 February 2023.
\u2013 year 2017: the dispute was initiated against the notice of assessment. The amount deducted and disputed for 2017 is the
same amount already adjusted for 2016 (12.1 million euro), corresponding to higher IRES of 3.3 million euro and IRAP of
0.7 million euro, plus interest and penalties (total amount 8.6 million euro). The notice of assessment was challenged
through an appeal served on the Lombardy Regional Revenue Directorate on 3 June 2022 and filed with the Milan
Provincial Tax Commission on 20 June 2022 (Appeals General Register no. 2683/2022). We are awaiting for the hearing
for discussion to be scheduled.
The total amount claimed, including taxes, penalties and interest, amounts to 61 million euro. According to the opinion issued
by the firm assisting the bank, the risk of an adverse ruling is classified as \u201cpossible\u201d, since the lawfulness of realigning the tax
value of the goodwill newly generated for the transferee \u2013 something which in the past was done by other Group companies
without incurring in tax disputes \u2013 has been expressly acknowledged by the Italian Revenue Agency in Circular no. 8/E of
2010 and is consistent with the provisions of Article 15, paragraph 10 of Law Decree 185/2008.
Cargeas Assicurazioni, an insurance company acquired by Intesa Sanpaolo Vita on 27 May 2021, underwent a tax audit by
the Italian Revenue Agency, Lombardy Regional Directorate, Large Taxpayers Office, aimed at verifying the correct
application, for the years from 2010 to 2018, of the tax rules on private insurance and life annuity contracts pursuant to Law
no. 1216 of 29 October 1961.
As a result of the audit, the authorities claimed that redundancy insurance policies (which are mandatorily associated with
salary-backed loans and optional with other mortgages, loans and consumer credit), should not be subject to tax on insurance
premiums at a rate of 2.5%, but should be classified as credit risk insurance policies, subject to a tax rate of 12.5%. The
Revenue Agency maintains that although the risk insured (on the basis of which the premium is determined with
statistical/actuarial criteria) is the loss of employment, redundancy policies should be charged the 12.5% rate applicable to
credit risk insurance, given that the policy would protect the lending institution\u2019s interest in collecting its credit.
The dispute is nothing new for the insurance industry; in fact, insurance companies have been maintaining that the Agency's
reasoning is unsubstantiated and biased for years now. ANIA has also recently given its opinion on the matter through circular
no. 0082 of 5 March 2021 (which refers to circular no. 127 of 21 April 2005), pointing out that the Agency\u2019s position produces
a series of unsystematic and abnormal consequences which certainly do not reflect the intention of the legislator in Law no.
1216, and diverge from the guidance of the financial administration itself which, on this point, had supported application of the
2.5% rate in circular no. 29/E of 2001.
On the merits, ANIA specified that in the policies, the insured party is identified as the natural person who subscribed, in full
autonomy, the collective policy proposed by the lending institution, and that contractual structure recognises the natural
person debtor as the party in the interest of whom the policy is underwritten, as the risk covered (loss of employment, which
results in the impossibility to pay the debt) is specifically borne by the latter.
Moreover, the contractual framework shows that the lender is the contracting party of the policy exclusively in terms of the
form, while, by virtue of demonstrating his/her intention to subscribe the contract and due to the cost charged to him/her,
which refers exclusively to the insurance premium paid, the financed worker can be effectively classified as the contracting
party, as well as the insured party.
Lastly, as additional support, it should also be considered that the communication of data and information regarding the
contracting parties, sent annually to the Tax Register contemplates the indication of the individual subscribers of collective
policies, as they are the parties that bear the cost of the premium.
After the audit, on 25 May 2021 Cargeas Assicurazioni received notice of assessment no. TMB032S00039/2021 for 2010,
claiming an additional tax of 1.7 million euro, 0.7 million euro in interest and 3.4 million euro in penalties, equal to 200% of the
assessed tax (minimum penalty prescribed by law), for a total of 5.7 million euro.
On 21 July 2021, the notice was appealed before the Milan Provincial Tax Commission which, by ruling no. 2396 of 1
September 2022, upheld the appeal and cancelled the notice of assessment. The term for the Office\u2019s appeal is pending.
During 2022, two rulings of the Milan Provincial Tax Commission were published (no. 343 of 17 January 2022 and no. 1214 of
28 March 2022), which regarded the issue of the \u201creclassification\u201d of redundancy insurance policies (subject to tax at a rate of
2.5%) in place of those against debtor insolvency risk, i.e. those that cover credit risk (subject to tax at a rate of 12.5%). The
outcome was unfavourable to the appealing companies outside the Intesa Sanpaolo Group (even though ruling no. 343
recognised the inapplicability of the penalties due to clear objective uncertainty on the applicability of the rule).
However, considering the arguments clearly expressed by ANIA, and due to the assessments formalised by the defence
counsel, the risk of a negative outcome was deemed possible.
Also as a result of the above audits, on 6 June 2022, Cargeas Assicurazioni received notice of assessment no.
TMB032S00216/2022 for 2011, which claimed a higher tax of 1.3 million euro, 0.5 million euro in interest and 2.8 million euro
in penalties, equal to 200% of the assessed tax (minimum penalty prescribed by law), for a total of 4.6 million euro.
The grounds set out in the above notice of assessment for 2011 are the same as those indicated for 2010.
The Company deems that a negative outcome for the year 2011 is possible, just as that for the year 2010. Therefore, within
the terms set out by law, it will appeal that notice before the competent Court of Justice.
Provis has municipal property tax (IMU) and municipal tax (TASI) claim procedures that are pending or about to commence
with a total value of 3.8 million euro. The corresponding provision for risks amounts to 4.2 million euro, inclusive of legal
expenses.
On 28 October 2022, Fideuram SGR (as well as ISP as the consolidating entity) received from the Italian Revenue Agency \u2013
Lombardy Regional Directorate an order to file an appearance regarding the year 2016 for IRES and IRAP, following the
delivery of documentation in response to a questionnaire served on 21 April 2021, in order to establish a cross-examination
on the alleged transfer pricing issues arising in relation to the consideration for fees received by Fideuram SGR in delegated
manager activities for investment funds performed in favour of the Irish associate Fideuram Asset Management Ireland
(principal). With specific regard to those management fees, the Revenue Agency has repeated the same adjustments made
for the years 2011 to 2013 (which gave rise to tax settlement proposals for those years) and, as a result, adjusted the taxable
income of Fideuram SGR upwards by 560 thousand euro. Fideuram accepted that proposal, signing the settlement proposal
on 15 December 2022 and paying the amount due (220 thousand euro) on 20 December 2022. In relation to possible
equivalent claims for subsequent years up to 2019, the company determined the possible charge in terms of taxes and
interest at 500 thousand euro, allocating provisions to the 2022 income statement. In agreement with the advisor handling the
claim, no provisions were made for 2020 and after, as the settlement of the bilateral agreements submitted in 2020 (thus,
applicable from that period for 5 years) to the Irish and Italian authorities on the disputed activities seems to be near.
On 22 December 2022, Eurizon Capital SGR (hereinafter, \u201cEC ITA\u201d) received from the Italian Revenue Agency \u2013 Lombardy
Regional Directorate (hereinafter, the \u201cOffice\u201d) an order to file an appearance for the purposes of IRAP and, jointly with the tax
consolidating entity Intesa Sanpaolo (hereinafter, the \u201cParent Company\u201d), an order to file an appearance for the purposes of
IRES for the year 2016.
EC ITA and the Parent Company attended the meeting with the Office on 28 December 2022, thereby launching a cross-
examination that will last around four months.
After examining the intragroup transactions implemented by EC ITA with regard to the Luxembourg subsidiary Eurizon Capital
S.A. (hereinafter, \u201cEC LUX\u201d), the Office challenged the transfer pricing analysis conducted in the transfer pricing
documentation of EC ITA, deeming that it allegedly does not reflect the actual allocation of functions, risks and assets existing
between EC ITA and EC LUX. More specifically, the Office deems that the provision of services by EC ITA to EC LUX, though
formally divided into numerous separate operations, in terms of substance is \u201cattributable to wider business operations\u201d
carried out by EC ITA for EC LUX. Therefore, applying a method for determining the arm\u2019s length price different from that
adopted by EC ITA, the Office determined higher taxable income for IRES and IRAP purposes of 151.1 million euro, to which
IRES and IRAP taxes are applied for 50 million euro (41.6 million euro for IRES and 8.4 million euro for IRAP), plus interest
totalling 9.6 million euro and penalties totalling 15 million euro.
In the case in point, with regard to the method for determining transfer prices, while EC ITA deemed it correct to use the
Comparable Uncontrolled Price (CUP) method to price the value of services, first of all of the management mandate service,
provided to EC LUX, aligning the price charged to EC LUX with the prices that EC ITA charges to/pays for mandates received
from/granted to third parties, the Office deemed that the most appropriate method was the Transactional Net Margin Method
(TNMM), which substantially requires allocating a percentage of the net margin out of production value to the party in
question, i.e. EC LUX. In detail, the Office deems that the ratio of net income (loss) before tax/net fee and commission income
recognised for EC LUX (38.5%) is too high. As a result of that approach, only around one-fourth of the net income before tax
of EC LUX (208.6 million euro) is attributed to Luxembourg and around three-fourths (151.1 million euro) to EC ITA. It is
important to note that, according to the Office, the choice of the method and the consequent results of allocating revenues
between Luxembourg and Italy is based on the conviction that EC LUX receives an intangible contribution from EC ITA.
As confirmed also by the opinion issued by the advisor assisting EC ITA, the claim made by the Office is unfounded in various
aspects: a) the intangible does not influence the intragroup transfer prices; b) in addition, the Office completely ignored the
results of its own analysis, conducted in the previous years regarding the tax periods 2011-2015, which led it to issue tax
settlement proposals regarding the adjustment of transfer prices applied in transactions between EC ITA and EC LUX on
completely different bases than those now arising in relation to 2016. Moreover, in that context, EC LUX provided the Office
with information regarding the intangible and its non-accounting tax amortisation. As part of the tax settlement proposals for
the tax periods 2011-2015, the Office acquired and assessed the information regarding that non-accounting amortisation,
without, however, deeming that it should have an impact for the purposes of determining the transfer prices between EC ITA
and EC LUX. The Office had also deemed the transfer pricing documentation prepared at the time by EC ITA based on the
CUP method to be suitable, granting penalty protection to EC ITA; c) the Office also failed to conduct a specific analysis to
identify the actual functions performed, risks assumed and assets used by EC LUX during the tax period 2016, but merely
classified EC LUX as the \u201cless complex\u201d entity mainly based on the incorrect conviction that the non-accounting tax
amortisation attributable to EC LUX was attributable to an \u201cintangible asset\u201d contributed by EC ITA. As a result, also based on
the presence of that \u201csingle\u201d contribution subject to tax amortisation, it deemed the \u201ctraditional\u201d methods for determining the
arm\u2019s length price, such as the CUP, inapplicable to the case in question; d) the Office ignored the approach it had adopted in
the tax settlement proposals issued in 2022 with Fideuram SGR, discussed above, regarding intragroup transactions with the
Irish associate FAMI. In this last context, in the presence of intragroup transactions similar to those carried out by EC ITA with
EC LUX, the Office deemed that the most appropriate method based on the specific circumstances was the CUP; e) lastly,
though the Office acknowledged that on the same intragroup transactions subject to the order, there is currently an ongoing
procedure of preventive bilateral agreement to reach an agreement on transfer prices between the competent Italian and
Luxembourg authorities, it has not promoted that situation in any way. This, despite the fact that the preventive agreement
procedure was launched by EC ITA following the issue of the afore-mentioned tax settlement proposals relating to the tax
periods 2011-2015 and, therefore, also including 2016.
Those arguments will all be stated and documented in the cross-examination with the Office, which should be concluded by
30 April 2023.
The following is an account of the developments relating to the foreign subsidiaries during the year.
Intesa Sanpaolo Bank Albania is mainly involved in: i) a dispute pending before the Court of Cassation on appeal by the
Bank, concerning the write-off of loans that were no longer recoverable that, according to the tax authorities, led to an
unjustified reduction in the taxable amount for direct tax for the years 2003 to 2007 (remedy sought of 1.3 million euro); ii) a
former Veneto Banka dispute pending in the second instance regarding mistakes made in the tax return for the tax period
2013 (remedy sought of 33 thousand euro). Instead, the dispute relating to mistakes made in the tax return for the tax period
2011 was settled with the payment of 1 million euro.
Bank of Alexandria has two tax audits under way regarding corporate income tax for the tax period 2018 and stamp duty for
2019. At present no claims have been put forward. In addition, there is a pending dispute concerning the non-payment of
stamp duty by the bank\u2019s branches for a total value of 2.1 million euro for tax periods 1984 \u2013 2008 (it amounted to 5.8 million
euro as at 31 December 2021). The reduction in the amount claimed and the allowance for risks (-3.7 million euro) derives
from the settlement of a portion of the disputes, using the related allowance for risks. The tax audit on stamp duty relating to
the tax period 2019 was closed with no findings.
The dispute for the years 2014 and 2015 regarding the foreign subsidiary UBI Trustee S.A. (a trust company resident in
Luxembourg) was closed without liabilities, as a result of an agreement by the trusts and their beneficial owners with the tax
authorities.
Lastly, it is noted that an audit is under way for IMI SEC, conducted by the State of New York, regarding income tax for the
years 2015, 2016 and 2017. No findings are noted for the time being.
Another tax audit begun in 2022 regards EXELIA, for the tax periods 2016 and 2017. No findings are noted for the time being.
Lastly, we note a dispute pending in Brazil in relation to the former subsidiary Banco Sudameris Brasil (now Banco Santander
Brasil), sold in 2003 to ABN AMRO Brasil (now the Santander Group), whose economic charge falls on Intesa Sanpaolo due
to the commitments entered into with the seller at the time, which was not established through the Settlement Agreement of
2019 with Banco Santander Brasil. The dispute is known as \u201cCausa PDD1\u201d and is based on the issue of taxes on income and
social security contributions for 1995.
During 2021, the first instance judgement was filed by the ordinary civil judge. Despite having partially accepted several
objections of the bank, the judgement was favourable, on the whole, to the Brazilian tax authorities. The judgement was
appealed and the case is now pending in the court of second instance. The remedy sought is 41.6 million euro, at the
exchange rate of December 2022 (35 million euro as at 31 December 2021), set as equal to the security deposit paid by the
bank to take action in the civil court (216 million Brazilian real) and posted under balance sheet assets.
There were two changes during the year. The first change concerns the issue on 13 June 2022 of an opinion by Prof. Tercio
Sampaio Ferraz in which, inter alia, he confirms the argument put forth by Intesa Sanpaolo that the settlement for the year
1995 with the Brazilian tax authorities based on specific local law (Art. 17 of Brazilian Law no. 9799/1999), the subject of an
administrative dispute closed in favour of the taxpayer with two decisions of the Administrative Court (CARF), cannot be put
under discussion once again as, instead, the Brazilian tax authorities did through the jurisdictional dispute currently pending in
the second instance.
According to local advisors, those arguments confirm that a negative ruling in relation to the interest component
(approximately 25.6 million euro of the deposit posted under balance sheet assets) is remote. On taxes and penalties (equal
to a total of 16 million euro of the deposit) we prudentially confirm the provisions of 50% of that amount, totalling 8 million euro
(+1.2 million euro compared to 31 December 2021). The increase is due to the appreciation of the Brazilian currency against
the euro, compared to the exchange rate recorded at the end of 2021 for the valuation of the dispute and the related risk. The
second change regards the notification in October from the Brazilian tax authorities of a payment order for the alleged failure
of the taxpayer to provide a deposit by order of the court to cover the tax debt, which is still being challenged. In that regard, a
brief was submitted opposing that order, highlighting that the Brazilian tax authorities incorrectly calculated the value of
interest accrued on the deposit by order of the court, which, instead, would more than cover the claim of the tax authorities.
The local advisors confirmed that the document does not change the estimates of risk expressed to date with regard to that
pending dispute.
* * *
In connection with all the tax disputes outstanding as at 31 December 2022, for a total value, as stated above, of 219 million
euro, of which 126 million euro relating to Intesa Sanpaolo, the Group has recognised receivables of 44 million euro in its
balance sheet assets to account for amounts paid on a provisional basis due to tax assessments, of which 21 million euro
related to the Parent Company.
The portion of the allowance for risks which relates to provisional tax assessments amounts to 32 million euro, of which 26
million euro for Intesa Sanpaolo.
The provisional payments in question were made in compliance with specific legal provisions, which provide for the
mandatory payment based on an automatic mechanism totally independent of whether the related tax claims are actually
founded and, thus, irrespective of the higher or lower level of risk of a negative outcome in the related proceedings.
Thus, these payments were made solely because of the enforceable nature of the administrative acts that set forth the related
tax claim, which does not lose its effectiveness even in the event of an appeal (no suspensive effect) and has no impact on
the assessment of the actual risk of a negative outcome, which is measured using the criterion set forth in IAS 37 for liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-975": { "value": "SECTION 1 \u2013 RISKS OF THE CONSOLIDATED BOOK In this Section, information is provided regarding the companies included in the consolidated book. QUANTITATIVE INFORMATION A. CREDIT QUALITY For the purposes of quantitative information about credit quality, the term \u201ccredit exposures\u201d is understood to exclude equities and quotas of UCI. A.1. Performing and non-performing credit exposures: amounts, adjustments, changes, and economic breakdown A.1.1. Breakdown of financial assets by portfolio classification and credit quality (book values) - Excluding insurance companies (millions of euro) Portfolios/quality Bad loans Unlikely to pay Non- performing past due exposures Performing past due exposures Other performing exposures TOTAL 1. Financial assets measured at amortised cost 1,131 3,963 413 3,550 519,021 528,078 2. Financial assets measured at fair value through other comprehensive income - - - 94 48,274 48,368 3. Financial assets designated at fair value - - - - 1 1 4. Other financial assets mandatorily measured at fair value - 33 - 129 971 1,133 5. Non-current financial assets held for sale 46 312 - - 10 368 Total 31.12.2022 1,177 4,308 413 3,773 568,277 577,948 Total 31.12.2021 2,564 5,164 622 6,053 721,224 735,627 A.1.1. Bis. Breakdown of financial assets by portfolio classification and credit quality (book values) - Insurance companies (millions of euro) Portfolios/quality Bad loans Unlikely to pay Non- performing past due exposures Performing past due exposures Performing exposures TOTAL 1. Financial assets available for sale - - - - 71,084 71,084 2. Investments held to maturity - - - - - - 3. Due from banks - - - - 40 40 4. Loans to customers - - - - 40 40 5. Financial assets designated at fair value - - - - 5,176 5,176 6. Non-current financial assets held for sale - - - - - - TOTAL 31.12.2022 - - - - 76,340 76,340 TOTAL 31.12.2021 - - - - 94,157 94,157 A.1.2. Breakdown of financial assets by portfolio classification and credit quality (gross and net values) - Excluding insurance companies (millions of euro) Portfolios/quality NON-PERFORMING ASSETS PERFORMING ASSETS TOTAL (net exposure) Gross exposure Collective adjustments Net exposure Total partial write-offs Gross exposure Collective adjustments Net exposure 1. Financial assets measured at amortised cost 10,729 -5,222 5,507 3,081 525,258 -2,687 522,571 528,078 2. Financial assets measured at fair value through other comprehensive income 36 -36 - - 48,449 -81 48,368 48,368 3. Financial assets designated at fair value - - - - X X 1 1 4. Other financial assets mandatorily measured at fair value 45 -12 33 - X X 1,100 1,133 5. Non-current financial assets held for sale 744 -386 358 1 10 - 10 368 Total 31.12.2022 11,554 -5,656 5,898 3,082 573,717 -2,768 572,050 577,948 Total 31.12.2021 19,944 -11,594 8,350 7,158 728,675 -2,606 727,277 735,627 (millions of euro) Portfolios/quality ASSETS OF EVIDENTLY LOW CREDIT QUALITY OTHER ASSETS Cumulative capital losses Net exposure Net exposure 1. Financial assets held for trading -27 22 41,328 2. Hedging derivatives - - 10,062 Total 31.12.2022 -27 22 51,390 Total 31.12.2021 -26 34 48,047 A.1.2. Bis Breakdown of financial assets by portfolio classification and credit quality (gross and net values) - Insurance companies (millions of euro) Portfolios / Quality (Figures must be filled in absolute values) Non-performing assets Performing assets Total (net exposure) Gross exposure Individual adjustments Net exposure Gross exposure Collective adjustments Net exposure 1. Financial assets available for sale - - - 71,084 - 71,084 71,084 2. Investments held to maturity - - - - - - - 3. Due from banks - - - 40 - 40 40 4. Loans to customers - - - 40 - 40 40 5. Financial assets designated at fair value - - - X X 5,176 5,176 6. Non-current financial assets held for sale - - - - - - - Total 31.12.2022 - - - 71,164 - 76,340 76,340 Total 31.12.2021 - - - 88,625 - 94,157 94,157 (millions of euro) Portfolios / Quality Assets of evidently low credit quality Other assets Cumulative capital losses Net exposure Net exposure 1. Financial assets held for trading - - 759 2. Hedging derivatives - - 13 Total 31.12.2022 - - 772 Total 31.12.2021 - - 1,147 B. INFORMATION ON STRUCTURED ENTITIES (OTHER THAN SECURITISATION VEHICLES) In line with IFRS 12, the Group considers structured entities to be entities set up to achieve a narrow, well-defined objective, defined through contractual arrangements which often impose strict restrictions on decision-making powers of the entity's management bodies. In that sense, structured entities are designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, as they refer to administrative tasks, while the relevant operating activities are directed by means of contractual arrangements agreed on at the time of structuring the structured entity, which are difficult to modify. The characteristics of a structured entity include: \u2013 limited activities; \u2013 a narrow and well-defined objective; \u2013 insufficient equity to permit the structured entity to finance its activities without subordinated financial support. The structured entities through which the Group operates are mainly Special Purpose Entities (SPEs) and UCIs. B.1. Consolidated structured entities There are no structured entities consolidated in the accounts other than securitisation companies that fall within the scope of the Intesa Sanpaolo Banking Group. B.2. Structured entities not consolidated in the accounts B.2.1. Prudential consolidation of structured entities There are no structured entities consolidated for prudential purposes other than securitisation companies that fall within the scope of the Intesa Sanpaolo Banking Group. B.2.2. Other structured entities Qualitative information As indicated above, the Group's operations through structured entities are also carried out through SPEs. To that end, SPEs are understood as legal entities established to pursue a specific, well-defined and limited objective: \u2013 to raise funds on the market by issuing specific financial instruments; \u2013 to develop and/or finance a specific business initiative, capable of generating, through an economic activity, cash flows which permit the complete reimbursement of the debt; \u2013 to finance the acquisition of a target company which, through its economic activity, will be capable of generating cash flows for the SPEs which permit the complete reimbursement of the debt. For the purposes of this section, operations carried out through securitisation vehicles, that is vehicles established to acquire, sell and manage specific assets, separating them from the financial statements of the Originator, for the purpose of carrying out securitisations of assets or for acquiring funding through self-securitisations and issues of Covered Bonds (CB), shall not be relevant. For those types of vehicle companies, reference should be made to section \u201cC. Securitisations\u201d and section \u201cD. Sales\u201d of Part E of the Notes to the consolidated financial statements. In some cases, the Group sponsors the SPE by structuring the transaction to pursue specific objectives, such as raising funds, securitising its own assets also for the purposes of funding or offering financial services to customers. In detail, the Group's operations are carried out through the following types of structured entities represented by special purpose entities (SPEs). Project Financing SPEs These are financing instruments for capital intensive projects, which are based on the economic or financial validity of the industrial or infrastructural project, and are independent from the standing/creditworthiness of the sponsors who developed the \u201centrepreneurial\u201d idea. The financing of the initiative is based on the project\u2019s capacity to generate positive cash flows, sufficient to reimburse loans received and guarantee an adequate risk-adjusted return on invested capital. The Intesa Sanpaolo Group finances entities of this type, as normal borrowers, without acting as sponsor. Asset Backed SPEs These are transactions aimed at acquisition/construction/management of physical assets by SPEs financed by one or more entities. Their recovery prospects mostly depend upon the cash flows generated by the assets. The assets generate cash flows in their recurring operations (e.g. rentals, goods transportation contracts, etc.) or in their non-recurring operations (e.g. a real estate development or disposal plan). Generally, the assets are also the collateral for the financing disbursed to the vehicle. The Intesa Sanpaolo Group finances entities of this type, as normal borrowers, without any direct equity investments or any other interests which might lead to presume the role of sponsor. The risk undertaken is always a normal credit risk and the benefits are represented by the return on the financing granted. Leveraged & Acquisition Finance SPEs This category includes exposures (loans granted and disbursed in relation to structured financing operations, normally medium/long-term) to legal entities in which the majority of share capital is held by private equity funds. These are mainly positions in support of Leveraged Buy-Out projects (therefore with high leverage), i.e. linked to the full or partial acquisition of companies through recourse to SPEs. After acquisition of the target company\u2019s shares/quotas package, these SPEs are normally merged into the target. The target companies generally have good economic prospects, stable cash flows in the medium term and low original leverage levels. The Intesa Sanpaolo Group finances entities of this type, as normal borrowers, without acting as sponsor. The Intesa Sanpaolo Group also has investments in/exposures to structured entities represented by UCIs. The main cases include the Group's investments in several closed-end and reserved private equity as well as venture and seed capital funds. The exposures to UCIs also include the investments in units of real estate funds deriving from transactions to contribute portions of the Group\u2019s real estate portfolio. They also consist of investments in UCIs deriving from credit recovery operations or contributions of non-performing loans, together with other banking entities, to funds managed by specialist entities. The investments in UCIs also include the units held in the Atlante Fund and the Italian Recovery Fund, alternative investment funds managed by the asset management company Quaestio Capital Management, involved in value enhancement of Non- Performing Loans of Italian banks. Lastly, the Intesa Sanpaolo Group invests in hedge funds. For more information, reference is made to the specific section in Part E of the Notes to the consolidated financial statements. The Group made further investments in UCIs through the subsidiary Eurizon Capital SGR and the companies controlled by it, in line with the financial portfolio management policies issued by the asset management company and its subsidiaries, in agreement with the Intesa Sanpaolo Group Guidelines. In detail, the asset management company and its subsidiaries have both temporary and structural available funds deriving from company equity that is not permanently invested in equity investments or other fixed assets, and from the ordinary cash flows. Based on that set out in the guidelines for managing the financial portfolio, as part of liquidity management activities, structural and temporarily available funds linked to the trend in short-term and on demand cash flows make up the liquidity portfolio net of the amount held in current accounts or invested in term deposits. In relation to the activities carried out by the asset management company and its subsidiaries and the characteristics of the available funds in question, excess liquidity must be invested in assets with moderate risk that can be easily liquidated. That portfolio includes investments in short-term money market and bond funds, both specialising in the Eurozone, established and/or managed by Eurizon Capital SGR or by its subsidiaries. The Group\u2019s investments in UCIs managed by subsidiaries do not prejudice the operational autonomy and capacity of the asset management companies to act in the exclusive interest of investors, considering the specific provisions set out in sector regulations and by the Supervisory Authorities. The table below summarises the accounting portfolios that the debit and credit transactions with unconsolidated structured entities are allocated to. Quantitative information (millions of euro) Captions / Type of structured entity Accounting portfolios under assets Total assets (A) Accounting portfolios under liabilites Total liabilities (B) NET BOOK VALUE (C = A-B) Maximum exposure to risk of loss (D) Difference between exposure to risk of loss and book value (E = D - C) 1. Special purpose vehicle 2,780 912 1,868 3,375 1,507 Financial assets held for trading 82 Due to customers 778 Other financial assets mandatorily measured at fair value 3 Financial liabilities held for trading 134 Financial assets measured at fair value through other comprehensive income 16 - Financial assets measured at amortised cost - Loans to customers 2,679 2. UCI 4,033 10 4,023 4,262 239 Financial assets held for trading 292 Due to customers - Financial assets designated at fair value 3,450 Financial liabilities held for trading 10 Assets measured at amortised cost Loans to customers 291 - The maximum exposure to risk, representing the maximum exposure of the Group to losses deriving from its interests in structured entities, is generally equal to the net book value, to which, where applicable, several types of off-balance sheet exposures are added (e.g. committed credit lines or guarantees given). The net book value equals the exposure in the financial statements net of value adjustments recorded during the current and previous years. For UCIs, the maximum risk exposure also includes the Group's commitments, not yet called up by the fund, to subscribe additional units. The table below shows the amount and type of revenues earned over the year by structured entities. The main component of the revenues recognised consists of fees deriving from the management and placement of the UCIs sponsored and managed by the Group's asset management companies and placed with customers. The fees in question are charged by the asset management company to the funds managed and partly reversed to the distribution network for the placement service. (millions of euro) Type of structured entity sponsored Interest Fees and commissions Dividends Other revenue TOTAL UCI 51 2,171 119 -160 2,181 Special-purpose vehicles 107 10 - -286 -169 SECTION 2 \u2013 RISKS OF THE PRUDENTIAL CONSOLIDATION In this section the figures are shown gross of the transactions with the other companies included in the scope of the accounting consolidation. These figures usually also include the assets and liabilities, in proportion to the interest held, of the jointly-controlled banking, financial and operational companies consolidated proportionally for reporting purposes. Where the contribution of transactions between the companies included in the prudential consolidation and the other companies in the scope of the accounting consolidation is material, the details of those transactions are provided at the foot of the disclosure concerned. The following table contains the reconciliation of the consolidated balance sheet with the banking regulatory-scope balance sheet. (millions of euro) Assets 31.12.2022 Financial Statements Effects of the deconsolidation and consolidation of counterparties other than those in the banking group (*) 31.12.2022 Regulatory- scope balance sheet 10. Cash and cash equivalents 112,924 -915 112,009 20. Financial assets measured at fair value through profit or loss 47,577 744 48,321 a) financial assets held for trading 42,522 92 42,614 b) financial assets designated at fair value 1 - 1 c) other financial assets mandatorily measured at fair value 5,054 652 5,706 30. Financial assets measured at fair value through other comprehensive income 49,716 - 49,716 35. Financial assets pertaining to insurance companies, measured at fair value pursuant to IAS 39 172,725 -172,725 - 40. Financial assets measured at amortised cost 528,078 761 528,839 a) due from banks 32,884 3 32,887 b) loans to customers 495,194 758 495,952 45. Financial assets pertaining to insurance companies measured at amortised cost pursuant to IAS 39 80 -80 - 50. Hedging derivatives 10,062 - 10,062 60. Fair value change of financial assets in hedged portfolios (+/-) -9,752 - -9,752 70. Investments in associates and companies subject to joint control 2,013 6,527 8,540 80. Technical insurance reserves reassured with third parties 163 -163 - 90. Property and equipment 10,505 -1,277 9,228 100. Intangible assets 9,830 -885 8,945 of which: - - - - goodwill 3,626 -382 3,244 110. Tax assets 18,273 -1,127 17,146 a) current 3,520 -97 3,423 b) deferred 14,753 -1,030 13,723 120. Non-current assets held for sale and discontinued operations 638 -3 635 130. Other assets 22,851 -4,080 18,771 Total Assets 975,683 -173,223 802,460 Liabilities and Shareholders' Equity 31.12.2022 Financial Statements Effects of the deconsolidation and consolidation of counterparties other than those in the banking group (*) 31.12.2022 Regulatory- scope balance sheet 10. Financial liabilities measured at amortised cost 667,586 3,660 671,246 a) due to banks 137,482 -265 137,217 b) due to customers 454,025 2,615 456,640 c) securities issued 76,079 1,310 77,389 15. Financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39 2,550 -2,550 - 20. Financial liabilities held for trading 46,512 21 46,533 30. Financial liabilities designated at fair value 8,795 - 8,795 35. Financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39 71,744 -71,744 - 40. Hedging derivatives 5,346 - 5,346 50. Fair value change of financial liabilities in hedged portfolios (+/-) -8,031 - -8,031 60. Tax liabilities 2,306 -1,311 995 a) current 297 -24 273 b) deferred 2,009 -1,287 722 70. Liabilities associated with non-current assets held for sale and discontinued operations 15 - 15 80. Other liabilities 11,060 -794 10,266 90. Employee termination indemnities 852 -5 847 100. Allowances for risks and charges 5,010 -352 4,658 a) commitments and guarantees given 711 -136 575 b) post-employment benefits 139 - 139 c) other allowances for risks and charges 4,160 -216 3,944 110. Technical reserves 100,117 -100,117 - 120. Valuation reserves -1,939 - -1,939 125. Valuation reserves pertaining to insurance companies -696 - -696 130. Redeemable shares - - - 140. Equity instruments 7,211 - 7,211 150. Reserves 15,827 - 15,827 155. Interim dividends (-) -1,400 - -1,400 160. Share premium reserve 28,053 - 28,053 170. Share capital 10,369 - 10,369 180. Own shares (-) -124 - -124 190. Minority interests (+/-) 166 -31 135 200. Net income (loss) (+/-) 4,354 - 4,354 Total Liabilities and Shareholders' Equity 975,683 -173,223 802,460 (*) The effects are attributable to : - deconsolidation of companies that are not part of the Banking Group; - proportional consolidation of the jointly controlled companies that are consolidated at equity in the financial statements. 1.1. CREDIT RISK QUALITATIVE INFORMATION 1. GENERAL ASPECTS The Group\u2019s strategies, Risk Appetite Framework, and Powers and Rules for credit granting and management are aimed at: \u2013 achieving a sustainable goal consistent with the Group\u2019s risk appetite and value creation objectives, whilst guaranteeing the quality of its lending operations; \u2013 diversifying the portfolio, limiting the concentration of exposures to counterparties/groups, economic sectors or geographical areas; \u2013 efficiently selecting economic groups and individual borrowers through a thorough analysis of their creditworthiness aimed at limiting the risk of insolvency and mitigating potentially associated losses; \u2013 given the current economic climate, favouring lending business aimed at supporting the real economy and production system and at developing relationships with customers; \u2013 constantly monitoring relationships and the related exposures, through the use of both IT procedures and systematic surveillance of positions that show irregularities with the aim of detecting any symptoms of deterioration in a timely manner. Constant monitoring of the quality of the loan portfolio is also pursued through specific operating checks for all the phases of loan management. It should also be noted that the 2022-2025 Business Plan includes specific initiatives aimed at massive NPL stock reduction and continuous pre-emption through a modular strategy. The transactions carried out during the year included several extraordinary de-risking initiatives for a total of 9.5 billion euro in terms of GBV, in addition to around 0.8 billion euro in GBV classified as assets held for sale for which the disposal is envisaged in 2023. For more details, see the paragraph \u201cThe 2022-2025 Business Plan\u201d of the Report on operations. 1.1. The valuation impacts for the ISP Group of the military conflict between Russia and Ukraine In referring to Part A of these Notes to the consolidated financial statements (Section 5: Other aspects) for the Group\u2019s general approach to the risks, uncertainties and impacts associated with the conflict between Russia and Ukraine, details are provided below of the qualitative and quantitative aspects relating to credit exposures to counterparties resident in the countries in conflict, held in the portfolio of the two subsidiaries resident in Russia and Ukraine, Banca Intesa Russia and Pravex Bank (Ukrainian bank), or credit disbursed by other entities of the Group (cross-border exposures), with particular regard to their valuation. As at 31 December 2022, the Group presented the following on-balance sheet exposures to counterparties resident in Russia and Ukraine, net of ECA guarantees and gross/net of value adjustments carried out: (millions of euro) 31.12.2022 (*) 31.12.2021 (**) Gross exposure Net exposure Gross exposure Net exposure Russia Ukraine Russia Ukraine Russia Ukraine Russia Ukraine Loans to customers 1,629 216 1,168 103 4,518 226 4,486 224 Banca Intesa Russia 372 - 205 - 644 - 614 - Pravex - 112 - - - 156 - 154 Cross-border exposures 1,257 104 963 103 3,874 70 3,872 70 Due from banks 797 63 782 62 305 57 305 56 Banca Intesa Russia 751 - 740 - 269 - 269 - Pravex - 63 - 62 - 57 - 56 Cross-border exposures 46 - 42 - 36 - 36 - Securities 73 11 41 2 118 58 118 56 Banca Intesa Russia 13 - 13 - 24 - 24 - Pravex - - - - - 48 - 46 IMI C&IB Division 31 - 14 - 29 - 29 - Insurance Division 29 11 14 2 65 10 65 10 (*) In addition to the on-balance sheet exposures shown in the table, there are off-balance risks to customers for 126 million euro (113 million euro net) at Banca Intesa Russia, and 67 million euro (66 million euro net) at Pravex, in addition to 232 million euro (186 million euro net) in cross-border off-balance risks to resident customers in Russia, net of ECA, and 27 million euro (gross and net value) to customers resident in Ukraine. There are also 155 million euro (152 million euro net) in cross-border off-balance exposures to banks resident in Russia and 18 million euro (gross and net value) in cross-border off-balance exposures to banks resident in Ukraine. On the other hand, the cross-border exposures to customers resident in Ukraine are, for the corporate part, backed by guarantees provided by US persons, while, for the household part, the amounts as at 31 December 2022 and the increase of around 34 million euro compared to 31 December 2021 mainly relate to exposures disbursed by the subsidiary VUB to households with permanent residence in Slovakia. (**) In addition to the on-balance sheet exposures shown in the table, there are off-balance risks to customers for 254 million euro (253 million euro net) at Banca Intesa Russia, and 88 million euro (gross and net value) at Pravex, in addition to 995 million euro (gross and net value) in cross-border off- balance risks to resident customers, net of ECA. There are also 1,109 million euro (gross and net value) in cross-border off-balance exposures to banks resident in Russia. On the other hand, the cross-border exposures to customers resident in Ukraine are, for the corporate part, backed by guarantees provided by US persons, while, for the household part, they mainly relate to exposures disbursed by the subsidiary VUB to households with permanent residence in Slovakia. As shown in the table, at the end of the year the remaining on-balance sheet exposures to the total counterparties resident in Russia and Ukraine amounted, in terms of gross values, to 372 million euro (205 million euro net) for Banca Intesa Russia and 1,257 million euro (963 million euro net) for cross-border exposures to customers resident in Russia (net of ECA guarantees). These were accompanied by exposures to banks totalling 797 million euro (782 million euro net) and in securities totalling 73 million euro (41 million euro net). Exposures to customers resident in Ukraine amounted to 216 million euro (103 million euro net), of which 112 million euro (book value nil in net terms) related to the subsidiary Pravex Bank. These were accompanied by exposures to banks and in securities totalling 74 million euro (64 million euro net). The majority of the exposures to Russian 100 and Ukrainian counterparties essentially consist of loans to customers subject to measurement in accordance with IFRS 9 \u201cFinancial Instruments\u201d. In view of the above, it should be noted that during the year the Group has taken active steps to significantly reduce the credit risks associated with the Russian-Ukrainian conflict. Specifically, during the year, the gross on-balance sheet exposure to the total counterparties resident in Russia and Ukraine (customers, banks and securities) decreased by 2,493 million euro (-47% compared to the end of the previous year), mainly due to the final disposal of two major exposures (for 2.2 billion euro in the third quarter and 0.3 billion euro in the fourth quarter of 2022). In detail, there was a reduction of 2,899 million euro (-61% compared to the end of 2021) in gross credit exposures to customers, only partly offset by the increase in Banca Intesa Russia\u2019s amounts due from banks in relation to the liquidity that has become available from the progressive repayment of loans to customers. The significant de-risking exercise and the major adjustments to the residual positions \u2013 described below \u2013 contributed to more than halving the overall net exposure (customers, banks and securities) as at 31 December 2022 to counterparties resident in Russia and Ukraine, which amounted to 2,158 million euro, down by 3,087 million euro compared to 31 December 2021 (-59%). Starting in March 2022, among the areas receiving the greatest attention in terms of credit assessments in the emergency triggered by the conflict in Ukraine, a specific focus was dedicated to the Group\u2019s exposure to counterparties resident in Russia and Ukraine. Specifically, customised measures were implemented to strengthen the oversight of credit risk, also by updating the assessment of creditworthiness, of counterparties with residency or parent companies in the Russian Federation, Belarus or Ukraine. In that context, the deterioration of specific positions was also acknowledged, which were classified among unlikely-to-pay exposures and, as a result, subject to analytical measurement. As at 31 December, in the Group companies other than those resident in the countries in conflict, a total of 322 million euro of on-balance sheet non-performing 100 For these purposes, the small exposures to Belarusian counterparties have for simplicity been treated and disclosed together with the exposures to the Russian Federation. loans to counterparties resident in Russia were recorded, relating to positions already classified as at 30 June, mainly attributable to two counterparties. The non-performing loans of the Russian subsidiary amounted to 61 million euro, while the classification of the entire portfolio of the Ukrainian subsidiary to bad loan status led to the recognition of 112 million euro in bad loans. In line with the disclosure already provided in the Half-yearly Report as at 30 June, with regard to the portfolio that did not show specific signs of deterioration, the analyses of IFRS 9 and the related Annexes show no indications or examples aimed at setting out specific guidelines for the measurement of Expected Credit Losses in contexts of war or defining specific methods of increasing credit risk due to sudden, serious geopolitical crises such as the current one. The most pertinent references to the current scenario seem to be those set out in the Application Guidance of the standard. These allow/suggest the use of collective assessment to verify the existence of a Significant Increase in Credit Risk (SICR) with a view to staging the credit exposures 101 , as well as, in line with the treatment set out for capturing the critical issues of another recent emergency situation (COVID-19 102 ), using the management overlay in calculating the ECL, to define the most suitable methods to incorporate the aspects linked to the ongoing conflict into provisions. With specific reference to cross-border positions, the Group thus decided to adopt a valuation approach strongly guided by the emerging geopolitical risk \u201cvia transfer\u201d, i.e. the risk that counterparties do not honour their commitments to pay debt following restrictions or decisions by their countries of residence, not due to aspects directly pertaining to their business, thus applied based on the country of residence of the counterparties. That approach was implemented both to determine the SICR and the related classification in Stage 2, and to calculate the ECL by applying a management overlay. This approach, which was adopted on a continuous basis throughout the year, was considered the most appropriate way to incorporate the provisions for country and geopolitical risk related to the current conflict that would otherwise not be properly captured by the risk measurement systems normally used. At the same time, the rating review continued for the most significant counterparties exposed to the country risk related to the conflict, for which more restrictive validity periods were exceptionally established for the ratings assigned. In detail, the choices made for the purposes of calculating ECL on cross-border exposures were as follows: \u2013 application of PD through the cycle associated with the assigned rating, without forward-looking conditioning. This approach was deemed more prudent, as the conditioning methodology, relating to the approaches currently adopted in the satellite models, would not represent the specific risk linked to the countries in conflict; \u2013 calculation of an additional prudential buffer that ensures equivalence with the use of an estimated loss rate according to an approach based on the transfer of the risk of the country of residence under Pillar 2 modelling (unconditional LGD set by the transfer risk model of 55%); \u2013 introduction of prudent margins in addition to the ECL estimates deriving from the above elements, in relation to potential further worsening of the credit ratings of Russian counterparties. With reference to loans to customers disbursed by Pravex Bank, the absolutely serious situation in all of Ukraine also resulted in the definition, for the purpose of measuring the loan portfolio of the subsidiary Ukraine bank, of a highly specific approach, significantly based on rationales, which consider the uncertainties and the risk elements associated with the military conflict. Already in the Half-yearly Report, for the portfolio of performing loans of Pravex (the bank substantially had no NPLs as at 31 December 2021) a specific management overlay had been applied at ECL level, which resulted in impairment that brought the coverage ratio to 73%. In light of the worsening and prolongation of the conflict, with the consequent repercussions on the Ukrainian economy, in the financial statements as at 31 December 2022, in line with the Interim Statement as at 30 September, the loans to customers of the Ukrainian subsidiary have been classified for the purposes of the Consolidated Financial Statements as non-performing loans (bad loans), with full impairment of the on-balance sheet component. With regard to Banca Intesa Russia, specific prudent choices were defined, while also considering the different situation of risk/operations than that of the Ukraine subsidiary. Thus, an approach to classifying and assessing performing loans was adopted that strongly considers the geopolitical risk deriving from the ongoing crisis. Therefore, the assessments carried out on the loans of the subsidiary included a centrally determined prudent factor that takes account of the worsening of the domestic economic situation in light of the continuation of the conflict and the increased isolation of the Russian economy. As a result of the provisions made, the total coverage of performing loans of the Russian subsidiary amounted to around 40.5% of their gross value. Moreover, the Parent Company and two subsidiaries disbursed loans to Banca Intesa Russia for a residual book value of 211 million euro, to support the bank\u2019s operations, and also made available 200 million euro originally intended for a capital increase. The concrete implementation of that capital increase was suspended due to the war. The loan of 211 million euro is still supporting the operations of the bank, which, despite the difficulties caused by the context, achieved a positive operating result in 2022. For the amount originally intended for a capital increase, the decisions will depend on the development of the war and the Russian regulations which currently impose temporary restrictions to repayments and payments to parties resident in \u201cunfriendly\u201d countries. For completeness, you are reminded that the real estate assets of the two subsidiaries were also subject to valuation: given the extreme uncertainty surrounding the current war scenario and the current absence of a real estate market in Ukraine, it was considered prudent to confirm the write-off of the value of Pravex Bank\u2019s investment and branch assets and other properties used in operations. The sole exception was the Kyiv headquarters, for which it was decided, in view of its strategic function for the banking business, the current control that can be exercised over the condition of the building, and its location, to keep its value unchanged. On the other hand, with regard to Banca Intesa Russia\u2019s small real estate asset portfolio, essentially consisting of the Moscow headquarters, no items were identified that required a write-down. 101 In particular, see IFRS 9 B5.5.1, IFRS 9 B5.5.4, IFRS 9 B5.5.5, IFRS 9 B5.5.18 and IFRS 9 B5.5.52. 102 IFRS 9 and COVID-19 - Accounting for expected credit losses applying IFRS 9 Financial Instruments in the light of current uncertainty resulting from the COVID-19 pandemic. With regard to Banca Intesa Russia\u2019s securities portfolio (Pravex\u2019s residual portfolio was duly repaid at the end of 2022), the valuations were made using the prices recorded on the Russian secondary market, with consequent classification in fair value level 2 due to the low liquidity of the reference market. A similar approach was adopted for the small securities exposures of the Parent Company and entities of the Group\u2019s insurance segment. Overall, these valuation processes and the losses associated with the de-risking of the Russian exposures led to the recognition in the year, before tax, of net charges totalling 1,415 million euro, with 1,298 million euro relating to adjustments to loans, 36 million euro to securities and 81 million euro to other balance sheet items, including the provision of 80 million euro made upon consolidation of the subsidiary Banca Intesa Russia mainly to zero out its equity contribution to the Group\u2019s consolidated financial statements. 1.2. Impacts from the COVID-19 pandemic Since the beginning of the pandemic all the Bank\u2019s functions have been involved in an extensive and complex set of actions aimed at supporting the various types of Group customers. This was provided through both the offer of government support related initiatives and through initiatives implemented autonomously by the Group. The pandemic caused a significant threat to the resilience of the companies in the Group\u2019s loan portfolio. On the other hand, a series of unprecedented government measures were implemented to support the economy, which must be considered in assessing risk. The speed of change in the economic and social context has increased the level of uncertainty of economic forecasts used as the basis for the estimates of risk appetite. This phase thus requires a greater capacity to adapt and attention to the various challenges laid down by the current credit risk assessment models. As a result, in line with the approach adopted in 2020 after the beginning of the pandemic, it was decided to calibrate the risk appetite, to avoid pro- cyclical conduct while supporting the economy, maintaining a solid financial and equity position. At the beginning of February 2022, the Board of Directors approved the update of the Credit Risk Appetite Framework, within the overall Risk Appetite Framework, which, in line with the approach adopted in 2020 and 2021, included the forward-looking information needed to reflect the specific impacts of the COVID-19 crisis within the risk and resilience factors on the Corporate Domestic, Large Corporate (Italy component), Corporate Real Estate and International Corporate scope and a vulnerability indicator for the Corporate Domestic and Corporate Real Estate scope. The vulnerability indicator, introduced in 2020, is based on the company\u2019s liquidity profile and its resulting ability to service existing debt and contracted debt in the face of the COVID-19 emergency. The assessment of debt sustainability is measured against the post-pandemic return to normality by using the pre-COVID-19 EBITDA of the companies as a benchmark. The methodological decision to consider a post-crisis time horizon was due to the need to sterilise the transitional effects of the crisis, such as the exceptional institutional measures (e.g. moratoria, grace period for new secured transactions) and the volatility of net working capital, as well as to assess the medium/long-term sustainability in order to reduce the pro-cyclical effects. This indicator can therefore contribute to providing an initial \u2013 though partial \u2013 response to the expectation of reducing to the minimum any cliff-edge effects upon expiry of the moratoria. For the Retail SME segment, the choice was made to continue applying the resilience factor on the economic outlooks, implemented at micro-sector level. With regard to the actions in support of customers, the process of gradual restoration of fully ordinary credit processes, with one-to-one assessments, already initiated in 2021 with the gradual phase out of the EBA Guidelines on general payment moratoria, was completed in full on 1 April 2022, following the termination of the state of emergency, with full return also of the solutions offered by the Bank\u2019s ordinary product catalogue. As at 31 December 2022, the option ended, which had been set up in April 2022 and provided for by the \u201cMille Proroghe Decree\u201d for loans of \u201c30 thousand euro\u201d pursuant to letters m) and m-bis) of Article 13, paragraph 1 of Law Decree no. 23 of 8 April 2020, converted, with amendments, by Law no. 40 of 5 June 2020, to be requested by the borrower, through agreement between the parties, to defer for a maximum of 6 months the grace period of the loan, whose initial deadline for payment of principal was scheduled in 2022. However, the possibility of extending the duration within the maximum limit of 15 years remains for loans of up to 30 thousand euro guaranteed in accordance with Article 13, paragraph 1, letter m) of the Liquidity Law Decree. With specific reference to credit portfolio management, in addition to the standard early warning indicators and proactive credit management processes, a further quantitative assessment layer was added, which combines sector-based forecasts with additional risk indicators. Specifically, government and bank financial support measures in 2020 and 2021 safeguarded many companies that faced a liquidity shortfall due to the COVID-19 situation. Otherwise, there would have been a worsening of the risk, which would have been reflected in a deterioration of the customers\u2019 ratings and an increase in the default rate. In this context, at the beginning of 2021, with a view to anticipating potential financial issues related to the expiry of the government support measures, the Chief Risk Officer Area conducted specific assessments to identify companies/sectors that continue to experience operational difficulties in terms of cash flow generation, despite being financially supported by those measures. The methodology was subsequently further developed, strengthened, supplemented and reported to the corporate bodies in line with the accompanying development of the Early Warning models, which was completed in December 2021 and for which the process of parallel running and embedding into the credit management processes continues. With regard to actions linked to proactive credit management, in 2021 specific diagnostics were launched on the moratoria portfolio, which continued for the entire year in the area of the Credit Action Plan, with the goal of reducing impairment, by activating actions on critical positions. In the second quarter of 2022, new diagnostics were launched on the moratoria expired or expiring in the first half of 2022, which presented certain elements of risk, with outcomes that did not identify any significant critical issues or need for monitoring with any planned actions in the third quarter for almost all the positions (96%). Similar diagnostics were then repeated in the third and fourth quarters, with outcomes in line with those reported in the first half. At domestic level, the amount of outstanding moratoria as at 31 December 2022 was small, both in absolute terms (around 80 million euro) and in comparison to the situation at the end of 2021 (4.8 billion euro). The amount of terminated moratoria that will reach the term for the resumption of payments in subsequent months was also very small, at around 40 million euro, compared to 6.7 billion euro at the end of 2021. The expired moratoria that had already met the conditions for the resumption of payments as at 31 December 2022 amounted to 35.9 billion euro. The rate of total defaults on the portfolio as at that date was around 4.5% (2.7% at the end of 2021). The rate of total defaults, when compared to the total exposures with moratoria originally granted, was less than 3%. At consolidated level, the exposure value of the outstanding moratoria as at 31 December 2022 was 80 million euro (4.9 billion euro as at December 2021), substantially attributable to the domestic perimeter, against expired moratoria of 39.6 billion euro (around 47 billion euro at the end of 2021). Like at domestic level, also at consolidated level the outstanding moratoria qualifying as such under the EBA Guidelines amounted to 412 thousand euro (1.1 billion euro at the end of 2021). With regard to the assessment of the forborne designation of the moratoria, in 2020/2021 Intesa Sanpaolo operated in compliance with the \u201cEBA Guidelines on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis\u201d and the applicable government regulations, reinstating the ordinary valuation processes already from the second half of 2021 and then fully confirming them in 2022. During 2022, the systematic monitoring continued of the risk profiles of the exposures that had already reached or had not yet reached the terms for resumption of payments (all occurring within the year). Specifically, as a result of the steady decrease in exposures due to resumptions and payments, as mentioned above, there were no particularly negative trends in 2022 in relation to the emergence of signs of distress or deterioration. For the Financial Statements as at 31 December 2021, management overlays on performing loans had been maintained (adjustments to the results of the IFRS 9 models in use incorporated into the satellite models and extraordinary triggers for sliding into Stage 2) to prudently take account of the potential emergence of vulnerabilities on the exposures subject to moratorium measures. During the year, these were gradually reassessed, while still maintaining reasonable prudence up to the third quarter and completing their release in the fourth quarter, in light of the results of the abovementioned monitoring. Moreover, it should be recalled that the general rules adopted by the Bank for the identification of the Significant Increase in Credit Risk and the classification to Stage 2 also apply to this portfolio on an ordinary basis, including the presence of a payment past due more than 30 days and the granting of forbearance measures. It should also be noted that the specificity of the portfolio that was subject to moratoria and related extensions in the 2020/2021 two-year period is becoming less and less distinctive or directly correlated to the cessation of the benefit granted at the time. In addition, in response to the evolution of the geopolitical crisis triggered by the Russia/Ukraine conflict, starting from the first quarter of 2022, prudent choices have been made on the portfolios of households, small economic operators and companies operating in certain sectors (including, when covered by the rules adopted, counterparties that were granted moratoria during the pandemic) due to the emergence \u2013 within the Group\u2019s geographical scope \u2013 of indirect repercussions and new vulnerabilities arising from the effects of persistent inflationary pressures and increases in energy costs. Further details are provided in paragraph 2.3 \u201cMethods for measuring expected losses\u201d. With regard to counterparty risk, the pandemic crisis entailed an initial increase in exposures, mainly due to the decline in Euro area interest rates and the general, significant increase in the volatility of the main risk factors. However, no critical issues were encountered in the margining process with market counterparties, despite the sharp increase in collateral calls, by both number and volume, during the weeks of greatest stress on the markets. Margin processes with central counterparties also did not generate any operating issues. The situation on the financial markets has gradually stabilised. Lastly, with reference to credit risk issues, note that the Group publishes the disclosure set out in the \u201cGuidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis\u201d, published by the EBA (EBA/GL/2020/07) in the \u201cPillar 3\u201d public disclosure. 2. CREDIT RISK MANAGEMENT POLICIES 2.1. Organisation Within the Intesa Sanpaolo Group, a fundamental role in managing and controlling credit risk is played by the corporate bodies, which, to the extent of their respective competences, ensure adequate coverage of credit risk by setting strategic guidelines and risk management policies, verifying that they remain constantly efficient and effective and assigning tasks and responsibilities to the company functions and units involved in the processes. The coverage and governance of credit ensured by the corporate bodies is reflected in the current organisational structure, which identifies areas of central responsibility attributable to: \u2013 Chief Lending Officer Governance Area; \u2013 Chief Risk Officer Governance Area; \u2013 Chief Financial Officer Governance Area. They ensure that risk control activities are managed and implemented, with an appropriate level of segregation, in addition to the establishment of the supporting processes and applications. The Chief Lending Officer Governance Area, with the aid of its structures (BdT Underwriting Head Office Department, CIB Underwriting Head Office Department, ISB Credit Head Office Department, Credit Governance Head Office Department, Credit Value Preservation Head Office Department and NPE Head Office Department): \u2013 makes material credit decisions, directly or submitting them to the relevant bodies, in relation to the assumption and management of the Group\u2019s credit risks, authorising them directly if falling within its prerogatives, including by way of advisory opinions; \u2013 ensures the correct classification and valuation for financial reporting purposes of positions under its responsibility that are classified as non-performing loans; \u2013 ensures, for its area of responsibility, the proactive management of credit and guarantees the management and the monitoring of the Group\u2019s non-performing and bad loans kept within the Group\u2019s internal management; \u2013 designs and manages transactions for the sale of individual NPE positions or portfolios, credit exposures and other assets within scope, with the collaboration of other competent functions; \u2013 performs monitoring and control on outsourced activities, including the monitoring of the performance KPIs of outsourcers, directly making decisions, or submitting them to the Competent Bodies, regarding proposals exceeding the powers delegated to the Outsourcers; \u2013 contributes to the process of formulating the proposal of the Credit Strategies in the analysis of the impacts on the granting of loans and to their definition in relation to the relevant credit management variables, without prejudice to the Chief Financial Officer Governance Area\u2019s ultimate responsibility for their finalisation; \u2013 coordinates the implementation of Credit Management Guidance by the relevant Group business units, also in the various corporate contexts; \u2013 analyses the evolution of the cost of credit within the Group, also taking into account the application of the aforesaid Credit Strategies; \u2013 assigns and validates the ratings to the relevant positions, also providing support in the definition of the rating assignment processes and tools; \u2013 defines the relevant regulations on credit matters, the requirements for the development of credit tools and contributes to the formulation of the proposals for the assignment of credit granting and management powers, without prejudice to the Chief Risk Officer Governance Area\u2019s ultimate responsibility for their finalisation; \u2013 promotes initiatives aimed at disseminating and developing a credit culture; \u2013 ensures, consistently with the guidelines of the Chief Risk Officer Governance Area and in compliance with the Credit Management Guidance, the first level systematic supervision of the relevant loan portfolio, identifying phenomena referring to specific credit aggregates characterised by high levels of anomalies for which to activate the appropriate risk mitigation measures. The Chief Risk Officer Governance Area is responsible for adapting the Risk Appetite Framework for the management of credit risk, in accordance with company strategies and objectives, as well as for measuring and controlling the Group's risk exposures. Specifically, the Chief Risk Officer Governance Area: \u2013 establishes the metrics for the measurement of credit risk - also with regard to the collective measurement of performing loans and the measurement of non-performing loans on a statistical basis; \u2013 provides risk-adjusted pricing models and ensures the measurement of portfolio risk in relation to Expected Loss, Economic Capital (ECAP) and RWAs; \u2013 monitors the absorption of capital relating to credit risk, supporting the Chief Financial Officer Governance Area in the active management of capital; \u2013 makes proposals for the assignment of Credit Powers; \u2013 validates internal risk measurement systems; \u2013 oversees model risk; \u2013 performs level II controls for credit risk. The activities are performed directly by the Chief Risk Officer Governance Area for both the Parent Company and the main subsidiaries, according to a service contract. With regard to the credit risk management policies, the Chief Financial Officer Governance Area: \u2013 assists the Corporate Bodies in defining, in accordance with the Group corporate strategies and objectives, the guidelines and policies on administration and tax, planning and management control, treasury and finance, studies and research, active management of the loan portfolio, relations with investors and rating agencies, and social and environmental responsibility; \u2013 oversees Credit Portfolio Management at Group level, supporting the Divisions in the active management of credit risk, with the aim of improving the risk-return profile of the loan portfolio in order to create value for shareholders; \u2013 establishes the Credit Strategies for the Divisions with the aim of incentivising new disbursements, through pricing adjustments, to the most attractive economic sectors and customer clusters in terms of risk/return profile, monitors the loan portfolio with a view to creating value within the risk-adjusted pricing macro-process and carries out credit risk transfer transactions on the capital market in line with the target portfolio; \u2013 oversees and coordinates the \u201cGroup NPL Plan Control Room\u201d, a managerial body with consulting, monitoring and guidance functions, established to ensure that the strategic objectives of the Group\u2019s NPL Plan are achieved while in compliance with the performance targets, solidity of the capital ratios and creation of value for the Group. The Chief IT, Digital and Innovation Officer establishes the model and oversees the Group\u2019s Data Governance and Data Quality system, ensuring its dissemination and implementation and coordinating the activities of the parties involved. Lastly, as is the case for all the risk areas and above all for credit risk, the Chief Audit Officer performs internal audits aimed at identifying breaches of the procedures and regulations and periodically assessing the completeness, adequacy, functioning (in terms of efficiency and effectiveness) and reliability of the internal control system and the ICT system (ICT audit), at preset intervals according to the nature and extent of the risks. 2.2. Management, measurement and control systems Intesa Sanpaolo, as the Parent Company, has set out codes of conduct in relation to credit risk acceptance, in order to prevent excessive concentration of exposures, limit potential losses in adverse scenarios, and maintain credit quality in line with the objectives of capital and financial stability. Expected Loss and Risk Weighted Assets are fundamental elements for the management, measurement and control of credit risk. These measures incorporate the effects of the exposure size (Exposure at Default - EAD), the relative riskiness of the customer (Probability of Default - PD), the loss estimate where insolvency conditions exist - taking into account the guarantees that mitigate the assumption of risk related to the loan (Loss Given Default - LGD) - and the duration of the exposure (maturity), as detailed in Paragraph 2.3. The components that contribute to the determination of the Risk Weighted Assets are the key elements for the determination of the levels of the Credit Granting Powers, the limits of the Credit Risk Appetite (CRA), the credit pricing, the calculation of the adjustments on performing exposures and the analytical-statistical adjustments on non-performing exposures, as well as the calculation of the economic and regulatory capital. The Credit Risk Appetite is aimed at optimising the risk/return profile of the assets. The \u201cRules on Credit Risk Appetite\u201d define the methods for applying the CRA and the methods for calculating the CRA colour class, with associated exposure limits, in order to pursue a growth in lending consistent with the risk appetite defined for the Group. The objective of the calculation of the pricing of transactions is to define the suitability of the economic conditions based on the value generation with respect to the expressed riskiness and all the components that contribute to the calculation of the value, also including the costs allocated to the structures. The capital at risk is defined as the maximum \u201cunexpected\u201d loss that the Group may incur over a period of one year with particular confidence levels. The calculation is made with reference to the current status of the portfolio and on a dynamic basis, by determining the projected level, based on both the forecast macroeconomic scenario and on stress scenarios. Risk capital is a fundamental element in the assessment of the Group\u2019s capital adequacy and is calculated within the ICAAP process from both a regulatory and a management perspective. The levels of Powers set in terms of RWA delimit the decision-making power in the granting phase, specifying the authorised professional profiles and the decision-making procedures for the loans for the individual counterparties. In particular, where the granting of loans by the Group\u2019s subsidiaries exceeds certain thresholds, a request for a \u201cCompliance Opinion\u201d is made to the competent bodies of the Parent Company. The credit granting phase is also regulated by metrics that are complementary to the RWAs, which define coordination mechanisms and support tools for the ongoing exercise of guidance, coordination and control responsibilities, in implementation of the corporate governance provisions. In particular, the company rules include the Granting Rules, which specify the methods for taking on credit risk with customers, and the Rules on Credit Strategies, which are designed to direct the development and composition of the loan portfolio towards a risk/return profile that is recognised as optimal over the medium/long-term, also taking into account the sustainability of the portfolio from an ESG perspective over the same time horizon. The credit risk management processes also envisage the periodic review of the credit positions by the relevant centralised or decentralised structures and the assessment of customers not only at origination, but also on a continuous basis, by means of a periodic monitoring process that interacts with credit management and control processes and procedures to ensure timely assessment of any signs of impairment, with an impact on the level of risk of the exposures. An Early Warning System is in place for the Corporate, Retail SME, Retail and Institutions portfolios, with adaptations introduced alongside the updates to the internal rating models. The system used was developed on the basis of the indicators identified in the Asset Quality Review and consists of a statistical component and a qualitative component, plus manual triggers by event. The indicators are updated on a daily basis and, when they confirm a potential anomaly in the management of the relationship, the related positions are detected and reported in specific management processes. As mentioned above, further developments were made to the EWS engine from the second half of 2021 for a forthcoming addition of new models to the credit process. More Credit Granting and Management Powers Calculation of adjustments to performing exposures Calculation of Economic/Regulatory Capital Credit pricing Calculation of adjustments to non-performing exposures (analytical statistical valuation) PD, LGD and EAD CRA limits generally, the Group continued to develop its own management models to support the credit granting, monitoring and management processes (e.g. affordability, automatic granting engines, and forecasting). In more detail, the development was completed of the Retail and Retail SME affordability models. In the Retail SME sector, the model went into operation on 18 November 2022 to serve the APC/ATP product feeding a new automatic decision-making engine developed using machine learning techniques. In the Retail sector, the model is expected to be in operation in March 2023 to serve the personal loan process and in May 2023 to serve the mortgage loan product. Sector-specific forecasting models were also developed in 2022 in support of numerous company processes including the RAF, credit strategies, and credit granting and monitoring activities/instruments. The valuation of the adjustments to the performing and non-performing exposures is based on methods consistent with IFRS 9, described in detail in Part A - Section \u201cA. 2 - Main financial statement captions\u201d and in particular in the paragraph \u201cImpairment of assets\u201d. The paragraph below \u201c2.3. Methods for measuring expected losses\u201d details the main applications used for the 2022 Financial Statements. Country risk is an additional component of an individual borrower\u2019s insolvency risk, measured by credit risk control systems. This component is linked to losses potentially resulting from international lending operations caused by events in a country that are partly or entirely within the control of the government concerned, but not that of the individual residents of the country in question. Country risk therefore takes the form of both transfer risk for non-sovereign counterparties, due to the freezing of international payments, and sovereign risk, which is measured through an assessment of the sovereign states\u2019 creditworthiness. This definition includes all forms of cross-border lending to entities residing in a given country, whether they are the government, a bank, a private enterprise or an individual. The country risk component is used in the granting of credit to non-resident entities in order to obtain a preliminary evaluation of the absorption of country risk limits set on an ex-ante basis. These limits, expressed in terms of economic capital, identify the maximum acceptable risk for the Group, set on an annual basis in the Group Risk Appetite Framework. It should also be noted that, as a result of the exceptional situation caused by the outbreak of the Russia/Ukraine conflict, the estimated transfer risk of the Russian Federation was taken as a reference for the establishment of the management overlay of the LGD of the cross-border counterparties as described in paragraph \u201c1.1 The valuation impacts for the ISP Group of the military conflict between Russia and Ukraine\u201d. Counterparty risk is a particular kind of credit risk associated with derivatives and SFTs (Securities Financing Transactions, namely repurchase agreements and securities lending transactions), that refers to the possibility that a counterparty may default before the contract expires. This risk, which is often referred to as replacement risk, is related to the case in which the market value of a position has become positive and thus, in the case of default of the counterparty, the solvent party would be forced to replace the position on the market, thereby suffering a loss. With regard to counterparty risk, the Banking Group has an internal model for measuring this risk both for regulatory (only for the Parent Company) and managerial purposes. Potential Future Exposure (mean effective PFE 95%) has been adopted by the entire Banking Group for the measurement of the utilisation rate of credit limits for derivatives and SFTs exposures. The Market, Financial and C&IB Risks Coordination Area produces daily risk measurement estimates for counterparty risk, for the measurement of the utilisation rate of credit lines for derivatives and SFTs for the Parent Company and Fideuram - Intesa Sanpaolo Private Banking. The other Banks of the Group also use an internal model measurement approach, in simplified form, through internally estimated add-ons. In addition, the following company processes were implemented to complete the risk analysis process for the exposure measures implemented over time following the developments discussed above: \u2013 definition and periodic calculation of stress tests on market scenarios and joint market/credit scenarios on counterparty risk measures; \u2013 definition and periodic analysis of Wrong-Way Risk, i.e. the risk of a positive correlation between the future exposure to a counterparty and that counterparty\u2019s probability of default; \u2013 definition and monitoring of management limits; \u2013 contribution of collateral inflow/outflow risk measures, calculated on the basis of the internal counterparty risk model, for OTC derivatives and SFTs with margining agreements (CSA, GMRA and similar); \u2013 periodic reporting to the management of measures calculated using the internal exposure model, capital requirement, level of use of management limits, results of stress tests and analyses of wrong-way risk; \u2013 definition and periodic calculation of back-testing analyses to monitor the predictive performance over time of the model with respect to the movements of the risk factors underlying the transactions in the portfolio. The concentration risk arises from the exposure to counterparties, groups of related counterparties and counterparties in the same business segment or that engage in the same business or operate in the same geographical region. In the annual update of the Risk Appetite Framework, such counterparties are subject to stress tests aimed at identifying and assessing threats for the Group and the most appropriate mitigating actions: \u2013 aimed at defining exposure limits for specific geographical areas and sets of counterparties (e.g.: the top 20); \u2013 aimed at ex ante limitation of exposures with significant concentration effects, in particular with reference to \u201clarge exposures\u201d and to credit lines subject to country risk; \u2013 aimed at ex-post correction of the risk profile, through the secondary loan market, through specific judgement metrics based on the maximisation of overall portfolio value. The Internal Validation and Controls Head Office Department within the Chief Risk Officer Governance Area, carries out specific Level II controls on credit and data quality. The purpose of the credit controls is to verify the proper classification and the adequacy of the management process for individual exposures (so-called single names). In general, the development of control activities, as well as of guidance and coordination, includes the credit processes assessment also to verify that suitable Level I controls are in place, including proper execution and traceability. The potential areas of investigation to be examined through Single Name controls also consider the results of the monitoring carried out by the Level I Control Functions within the different credit clusters. It also assesses the compliance of the internal risk measurement and management systems over time as regards determination of the capital requirements with the regulatory provisions, company needs and changes in the relative market. The Group\u2019s lending activity is focused on Italian customers (over 80% of the total) and is primarily aimed at households and small and medium enterprises. The exchange of basic information flows between different Group entities is assured by the Group\u2019s Central Credit Register (exposure monitoring and control system) and by the \u201cPosizione Complessiva di Rischio\u201d (global risk position), which highlight and analyse credit risks for each counterparty/economic group both towards the Group as a whole and towards individual Group companies. From the September 2018 monthly report \u2013 following the preparation of the input and generation architecture for the Anacredit reporting, aimed at supporting the \u201ccollection of granular credit and credit risk data\u201d as defined by Regulation (EU) 2016/867 of 18 May 2016 \u2013 a new reporting system has been in place in compliance with the regulatory provisions established by the ECB and implemented by the related Central National Banks. 2.3. Methods for measuring expected losses The expected loss is the product of exposure at default, probability of default and Loss Given Default. In Intesa Sanpaolo, probability of default is measured by means of different rating models according to borrower segment (Corporate, Retail SME, Retail, Sovereigns, Public Sector Entities and Banks). These models make it possible to summarise the counterparty\u2019s credit quality in a value, the rating, which reflects the probability of default over a period of one year, adjusted on the basis of the average level of the economic cycle. A number of rating models are used for the Corporate segment, which use all available information sources and incorporate the opinions of credit analysts and relationship managers. In particular: \u2013 models differentiated according to the market (domestic or international) and size bracket of the company are applied to most businesses; \u2013 specific models are in use for specialised lending, one for real-estate initiatives, one for project-finance transactions and one for leveraged buy-out/acquisition-finance and asset-finance transactions. The Corporate model is also used to calculate the resulting RWAs for the Equity portfolio of the Banking Book. The models applied to the Retail portfolio are as follows: \u2013 for the Retail SME segment, since May 2021, a new automated rating model has been in use that enables the calculation of the rating in real time; \u2013 for the Retail segment, a counterparty rating model consisting of the Retail Mortgages segment and the Other Retail segment has been in use since September 2018. The model was updated in August 2022, following the receipt of the Authorisation Letter, with effects for reporting purposes from September 2022. With regard to the Institutions portfolio: \u2013 the models for banks (banks in mature economies and banks in emerging countries) are composed of a quantitative part and a qualitative part, differentiated according to mature and emerging countries, and a country rating component that, based on the bank/country connection, assesses any negative effect of the country on the counterparty credit risk or, vice versa, the support capacity in the event of difficulties of the bank being assessed; \u2013 the models used for Municipalities and Provinces are default models, whereas shadow rating models based on agency ratings are used for the Regions. An approach to extend the rating (with the application of a downgrading) for the regulatory Entity (e.g.: Region) has been adopted for local healthcare authorities and other sector entities. For the Sovereign portfolio, the structure of the rating model includes a quantitative module that takes into account the structural rating assigned by the main international agencies, the implicit risk in the market prices of sovereign debt, the macroeconomic assessment estimated with an econometric model, and a qualitative opinion component, which supplements the quantitative opinion with elements drawn from the broader scope of publicly available information concerning the political and economic structure of the individual sovereign countries. The Sovereign rating model is used solely for management purposes. For the international subsidiary banks of the Group, PD models are used, which may be: \u2013 developed by the international subsidiary banks in order to capture the specific features of the risk of the local counterparties; \u2013 extended by the Parent Company; \u2013 borrowed from the Parent Company and adapted to local situations. Some of these models are used for reporting purposes and others only for management purposes, as set out in the table below. The Loss Given Default (LGD) models are based on the concept of \u201cEconomic LGD\u201d, namely the present value of the cash flows obtained in the various phases of the recovery process net of any administrative costs directly attributable to the exposure as well as the indirect management costs incurred by the Group, and consists, in brief, of the following elements: \u2013 estimate of a Bad Loan LGD Model: starting from the LGD observed on the portfolio, namely \u201cWorkout LGD\u201d, determined on the basis of the recoveries and costs, a regression econometric model of the LGD is estimated on variables considered to be significant for the determination of the loss associated to the Default event; \u2013 application of the Danger Rate, a multiplying correction factor, used to recalibrate the Bad Loan LGD with the information available on the other default statuses, in order to calculate an LGD representative of all the possible default statuses and their evolution; \u2013 application of an additional correction factor, known as \u201cFinal Settlement Component\u201d: this component is used as an add- on to the estimate recalibrated for the Danger Rate in order to consider the loss rates associated with positions not evolved to the Bad Loan status (Unlikely to pay or Past Due positions). LGD is determined according to differentiated models, specialised by operating segment (Corporate, Retail SME, Retail, Factoring, Leasing, Public Entities and Banks). As in the case of the PD, the models that have been adopted for the LGD of the International Subsidiary Banks of the Group were developed by the banks themselves, extended by the Parent Company, using local parameters where necessary or changed by the Parent Company, with adaptations to each international subsidiary bank. For the banks, the LGD calculation model partly diverges from the models developed for the other segments as the estimation model used is based on the market price of debt instruments observed 30 days after the official date of default and relating to a sample of defaulted banks from all over the world, acquired from an external provider. The model is completed by an econometric estimate aimed at determining the most significant drivers, in accordance with the practice in use for the other models, and a recalibration of the observed LGD levels on the bank\u2019s internal defaults. Sovereign LGD is estimated by analysing historical recovery rates on sovereign defaults, split into five categories according to income levels and other specific characteristics the individual countries. The LGD Sovereign model is used solely for management purposes. The calculation of the Exposure at Default (EAD) uses differentiated models, specialised by operating segment (Corporate, Retail SME and Retail). Specifically, the methodology is based on data from the 12 months prior to the default event and differs according to whether or not there is a margin available at the observation date. In any case, corrective factors are applied in compliance with the regulatory requirements and in order to introduce a margin of conservatism on the estimates. Regulatory parameters are currently used for the low default segments of the Banks and Public Entities and for the Leasing and Factoring products of the Corporate Portfolio. For the Group companies included in the roll out plan, the internal rating models (PD) and the EAD and LGD models are subject to a level two control by the Validation function and a level three control by the Internal Audit Department. The control functions produce annual reports for the Supervisory Authority on the compliance of the models with the supervisory regulations, which also includes a verification on the deviations of the ex-ante estimates and the effective ex-post values. These reports, approved by the Board of Directors of Intesa Sanpaolo, confirm the compliance to the regulatory requirements. The methodology for the estimation of the Expected Credit Loss (ECL), adopted for the determination of the impairment on the credit exposures in accordance with IFRS 9, is implemented at individual transaction or securities tranche level, based on the IRB modelling of the parameters of Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), to which appropriate adjustments are made to ensure compliance with the requirements of the standard. With a view to achieving convergence between the accounting and regulatory rules, while respecting their specific purposes, adjustments have been made to the estimation model for accounting LGD, incorporating the provisions progressively introduced and applied in the prudential models. Portfolio PD - Model Type Status Corporate Default model (Corporate) FIRB authorised since December 2008, AIRB LGD authorised since December 2010, EAD authorised since September 2017 (1) Retail Default model (Retail) IRB Retail authorised since September 2018 and IRB Mortgage since December 2010 (2) Simulation models (Specialised Lending) AIRB authorised since June 2012 Institutions Default model (Banks) (4) AIRB authorised since June 2017 Default model (Municipalities and Provinces) Shadow model (Regions) (4) AIRB authorised since June 2017 Default model (Retail SME) LGD - Model Type Workout model (Retail) Simulation models (Specialised Lending) Market model (Banks) Workout model (Municipalities, Provinces, Regions) Workout model (Retail SME) EAD - Model Type CCF/K factor model (Bank products) Regulatory parameters (Leasing and Factoring) CCF/K factor model (Retail) Regulatory parameters (Specialised Lending) Regulatory parameters (Banks) Regulatory parameters (Municipalities, Provinces, Regions) IRB authorised since December 2012 (3) Sovereign Shadow model based on agency rating Used for management purposes only; Standardised approach for reporting purposes Model based on recovery rates estimated by rating agencies Regulatory parameters Expert-Based Model (Non-Banking Fin. Inst.) Used for management purposes only; Standardised approach for reporting purposes Regulatory parameters (Non-Banking Fin. Inst.) Regulatory parameters (Non-Banking Fin. Inst.) Workout model (Bank products; Leasing and Factoring) CCF/ K factor model (Retail SME) 1) ISP authorised for FIRB from December 2008, for LGD AIRB from December 2010 and for EAD from 2017, Banca IMI (2012, merged by incorporation into the Parent company since 2020), ISP Ireland (2010), VUB (2010), Intesa Sanpaolo Bank (2017), and ISP Luxembourg (2017). From 2017, the Corporate model has also been used to calculate the risk on the Banking book equity portfolio with LGD 65%/90%. 2) VUB authorised from June 2012 for PD and LGD of Retail Mortgage models and from December 2022 in reference to PD-LGD-EAD models of Other Retail. 3) VUB authorised from June 2014. 4) ISP and Banca IMI (merged by incorporation into the Parent company in 2020) authorised from 2017. A detailed description of the methods adopted by the Group is provided in Part A \u2013 Section \u201cA.2 \u2013 Main financial statement captions\u201d, in particular in the paragraph \u201cImpairment of assets\u201d, to which reference is made, and in relation to the specifics of the current pandemic situation, in the Section \u201cRisks, uncertainties and impacts of the Russian/Ukrainian crisis\u201d in Part A - Section 5 - Other Aspects. More specifically, the measurement of the financial assets reflects the best estimate of the effects of future conditions and in particular the economic conditions that affect the forward-looking PDs and LGDs. IFRS 9, also based on the guidance from the international regulators, gives particular importance to information on future macroeconomic scenarios in which the Bank may find itself and which clearly influence the situation of the debtors, with regard both to the \u201crisk\u201d of migration of exposures to lower quality classes (and therefore concerning the staging) and to the recoverable amounts (and therefore concerning the determination of the expected loss on the exposures). In terms of method, various possible alternative approaches designed to take account of these elements have been analysed. Of the various alternatives considered, the Intesa Sanpaolo Group has decided to adopt the \u201cMost likely scenario+Add-on\u201d approach. According to this approach, the macroeconomic conditioning of PD and LGD is carried out through a baseline scenario (\u201cMost Likely\u201d, in line with the approach used for other business purposes such as, for example, the budget and business plans) and then corrected with an Add-On to include any differences compared to downside and upside scenarios. If the overall impact of the Add-On on the risk parameters is positive, the decision has been made to neutralise the effect for both staging and ECL calculation purposes. Upon the periodic update of the time series incorporated into the models for the forward-looking conditioning of the parameters underlying the determination of the ECL, a refinement of the models was introduced to handle the discontinuity generated in the relationship between the trends in default rates and the macro-economic variables, as a consequence of extraordinary circumstances like those generated by the COVID-19 pandemic. Moreover, it is noted that, in re-estimating the econometric relationships underlying the satellite models, in order to adequately consider the effects deriving from the energy crisis, additional explanatory variables relating to energy prices were introduced and tested. The effectiveness of the IFRS 9 models is monitored by the Validation function once a year through specific backtesting of the risk parameters (staging criteria, PD, LGD and EAD models, and haircuts). In addition, in the event of significant updates, the Validation function performs prior checks also in terms of model design. The results of the checks by the Validation function are submitted to the competent managerial committees and model owner functions and are presented in the annual report on the internal models used for management purposes, which is also sent to the Supervisor. Macroeconomic scenario for forward-looking conditioning For the purposes of forward-looking conditioning of the parameters for estimating the ECL \u2013 in accordance with the approach described in Part A - Accounting Policies and in particular in the paragraph \u201cImpairment of assets\u201d \u2013 Intesa Sanpaolo\u2019s policy involves the use of the macroeconomic scenario defined and updated by the Research Department. The table shows the main macroeconomic scenario variables used to determine expected credit losses from a forward- looking perspective, broken down by baseline, best-case and worst-case scenarios. These scenarios were applied in the measurement of loans according to the \u201cMost-Likely scenario + Add-on\u201d model described above. Baseline Mild Severe 2022 2023 2024 2025 2022 2023 2024 2025 2022 2023 2024 2025 Euro Area Real GDP EUR (annual change) 3.3% 0.1% 1.6% 1.8% 3.3% 0.7% 2.0% 2.3% 3.3% -0.9% -0.4% 1.9% CPI EUR (annual change) 8.5% 7.7% 2.7% 1.9% 8.5% 8.0% 3.6% 2.2% 8.0% 8.7% 5.1% 1.5% EurIRS 10Y 1.92 2.82 3.11 3.28 1.93 2.86 3.51 3.98 1.93 2.61 3.19 3.73 EUR/USD 1.05 1.07 1.11 1.13 1.05 0.99 1.05 1.09 1.05 0.99 1.04 1.09 Italy Real GDP Italy (annual change) 3.8% 0.6% 1.8% 1.2% 3.6% 0.9% 2.2% 1.8% 3.6% -1.0% -1.1% 0.4% CPI Italy (annual change) 8.2% 6.8% 2.4% 1.3% 8.1% 7.2% 3.4% 2.2% 8.1% 13.3% 4.9% 2.3% Residential Property Italy (annual change) 5.1% 1.5% 1.5% 1.5% 5.1% 1.9% 1.6% 1.9% 5.1% -1.2% -3.1% -1.7% 6-month BOT yield 0.5 2.7 2.9 2.6 0.5 2.7 3.4 3.5 0.5 2.4 2.9 3.0 10Y BTP yield 3.0 4.1 4.6 4.9 3.0 4.1 5.0 5.6 3.0 4.2 5.1 5.9 BTP-Bund Spread 10Y (basis points) 187 201 190 179 187 200 184 173 187 242 232 230 Italian Unemployment (%) 8.2 8.5 8.2 8.1 8.2 8.5 8.1 7.9 8.2 8.8 9.4 10.0 Commodities Natural gas price (\u20ac/MWh) 134 145 107 79 135 157 116 83 135 246 201 127 Oil price (BRENT) 100.8 93.0 87.0 82.0 100.8 93.0 90.5 84.2 100.8 92.3 83.4 79.4 USA Real GDP US (annual change) 2.0% 0.3% 1.1% 2.4% 2.0% 1.1% 2.1% 2.4% 2.0% -0.6% 0.9% 2.2% US Unemployment (%) 3.7 4.5 4.5 3.9 3.7 4.3 4.0 3.5 3.7 4.7 4.7 4.2 Scenarios produced in December 2022 by the Research Department. Forecast data (estimates for 2022). The main assumptions underlying the baseline forecast are founded on the assumption of a widespread slowdown in real growth, due to factors such as rising energy costs in Europe, economic developments in China, and the impacts of monetary tightening. Inflation is expected to fall in the advanced economies in 2023. However, core inflation may continue to rise until the first quarter of 2023 and then slowly decline. High inflation and uncertainty in relation to energy supplies are expected to cause a reduction in the GDP growth envisaged for the euro area in 2023, which will go into recession over the winter, returning to positive growth from spring 2023 onwards. However, the recovery will be held back by monetary tightening and a slowdown in the global economy throughout 2023, settling at an annual rate of 0.1%. With regard to interest rates, the peak of the cycle may be reached by mid-2023. However, there is a significant risk that more monetary tightening, with negative effects on the 2024-25 growth, will be necessary. Oil and energy (natural gas) prices are expected to remain high in 2023, due to limited storage capacity and high uncertainty fuelled by persistent political and geopolitical risks, despite the likely recession in North America and Europe and the slowdown in China. For Italy, inflation may have peaked at the end of 2022, but the fall could be slow and the annual average will remain very high even in 2023. Inflation may return to just above 2% only from the end of 2024, with a true \u201cnormalisation\u201d of the inflation scenario only expected from 2025. GDP growth is expected to slow significantly in 2023, to 0.6%, after an estimated 3.8% in 2022. The slowdown in the economic scenario forecast for 2023 is mainly attributable to the inflationary surge following the energy crisis and the monetary tightening decided by the major central banks at global level in response to the shock. The effects of these factors do not yet appear to have fully worked their way through the economy, which is why it will be difficult to avoid a contraction of GDP in early 2023. However, the recent fall from the spikes in the wholesale prices of energy commodities will make the effects on household income and business margins less dramatic, enabling the assumption of a recovery in economic activity from next spring, albeit at a moderate pace. A stronger re-acceleration of 1.8% is expected in 2024. The component of domestic demand that is expected to be most affected by the effects of the inflation shock will be consumption of goods (durable and non-durable), which is predicted to be essentially stagnant on average for 2023, while expenditure on services may maintain positive growth due to the residual effect of the normalisation of lifestyles following the restrictions imposed during the pandemic. Investment is also expected to slow down in 2023, in the wake of the effects of rising commodity prices on company profit margins, the tightening of financial conditions, the gradual fading of the impetus from incentives for building renovations, and the continued high uncertainty surrounding the scenario. The hardest hit component will be investment in construction, due to the gradual phasing out of tax incentives, as well as the effects of higher production costs on supply and the expected rise in mortgage rates on demand. The effects of the NRRP should be felt from 2023 onwards: the impact on the GDP growth rate is expected to be 0.5% for each year until the end of the period (2023-26). As a result of the continuing excess of demand for labour over supply, unemployment is expected to remain within moderate levels, despite an economic slowdown. For real estate, the rise in prices is being driven by the forecast of higher inflation, which is compensating for the unfavourable trend in financial conditions and real income. The levels of the BTP-Bund spread are also reflected in the estimation horizon starting from the fall seen at the close of 2022. As described in Part A - Accounting Policies, and in particular in the section \u201cImpairment of assets\u201d, the methodology adopted by the Group includes taking into account alternative scenarios (best-case/worst-case), which mainly use external information (among others, the minimum and maximum forecasts of a fundamental variable such as GDP based on data from Consensus Economics). The highest GDP growth forecasts in the Consensus Economics survey published in December 2022 for several advanced economies were identified for the favourable scenario, and all the private consumption and fixed investment trends of the baseline scenario were adjusted to provide an annual average GDP growth profile identical to those forecasts, and the other variables were recalculated accordingly. These assumptions yield a scenario characterised by higher real growth rates, higher inflation, a lower unemployment rate and more robust growth in stock indices and real estate prices compared to the baseline scenario, under the assumption that central banks will adopt a more aggressive monetary policy in response to economic signals indicating a lower than expected slowdown in order to contain inflationary pressures. In any event, the forecast outcomes yielded by the favourable scenario on the performance of the most representative variables are not significantly different from those of the baseline forecasts. The \u201cadverse\u201d scenario adopted by the Group was, initially, constructed according to the methodology envisaged by the internal policy, and therefore based on the lowest GDP growth forecasts in the Consensus Economics survey published in December 2022 for the main advanced economies. The private consumption and fixed investment trends of the baseline scenario were adjusted to yield GDP growth in line with those forecasts, and a negative shock was also applied to the performance of stock market indices and real estate prices. Based on these results, in the construction of the worst-case scenario, the Group also took the decision to take into account the more conservative assumptions considered in the downside scenario included in the \u201cMacroeconomic projections for the euro area\u201d published by the ECB on 15 December 2022. The uncertainty characterising the experts\u2019 projections is still high and a significant risk for the outlook for the euro area \u2013 according to the ECB \u2013 relates to the possibility of more severe disruptions in European energy supplies, leading to further spikes in energy prices and production cuts. In the assumptions adopted by the ECB, the downside scenario reflects this risk and points to higher inflation rates than in the baseline scenario in 2023 and 2024, as energy prices spike, with these only later dropping below the baseline scenario, when supply shocks unwind and the lagged impact of adverse demand shocks predominates. To take this more drastic assumption into account, a shock to the European natural gas market, calibrated to that predicted in the Eurosystem\u2019s adverse scenario for this variable, was added to the adverse forecast prepared by the Group, through a very significant increase in gas prices compared to the baseline scenario forecasts in both 2023 and 2024. The effects on growth were aggravated to capture possible rationing. These assumptions result in a much more aggressive inflation trend than in the baseline scenario and severe impacts on Italian and euro area GDP, with two years of fall in GDP. Indeed, Italy\u2019s GDP growth shows a negative deviation between the baseline and worst-case scenarios, increasing until 2024 and becoming smaller in 2025. The cumulative difference for the period 2022-2025 is -5.5%. The decline in real growth is reflected in the unemployment rate, which is 1.9 percentage points above the baseline scenario in the final year. It is assumed that, in the event of critical inflationary pressures, the ECB would prioritise price stability, accepting the prospect of a period of even intense GDP decline. The deviation of ECB rates from the baseline scenario reflects excessive inflation, which dominates over the separate reduction in growth. The BTP-Bund spread is higher than the baseline scenario over the entire forecast period. With regard to the impact of adopting the above scenario in the estimate of the ECL for the measurement of performing loans, you are reminded that, starting from the Interim Statement as at 31 March, following the outbreak of the Russia/Ukraine conflict, the Group \u2013 in order to take proper account of the gradually observed and expected effects of the macroeconomic situation \u2013 has incorporated systematic updates (on a quarterly basis) of the baseline forecasts and alternative scenarios on the \u201cCore\u201d scope, namely the Parent Company and the other Italian entities, as well as Intesa Sanpaolo Luxembourg and Intesa Sanpaolo Ireland. As at 31 December 2022, impacts were mainly generated by the updated forecasts for the adverse scenario. At the end of the year, the banks of the International Subsidiary Banks Division also updated their estimates on the basis of the forecast scenarios for their geographical scope. The overall impact of the macro-economic scenario on the ECL of performing loans during the year was around 300 million euro (of which around 140 million euro in the fourth quarter, and, for the latter, it was estimated that around half of this impact resulted from the prudent decision to adjust the adverse scenario assumptions to those adopted by the ECB). ECL sensitivity analysis The ECL, calculated in accordance with IFRS 9, was subject to sensitivity analysis aimed at analysing its variability with respect to the individual alternative scenarios in accordance with the ESMA Recommendations (\u201cReport on the application of the IFRS 7 and IFRS 9 requirements regarding banks\u2019 expected credit losses \u2013 ECL\u201d of 15 December 2021). That analysis was conducted on a performing loan portfolio (Stage 1 and Stage 2) relating to the scope representing the Group (which includes the Parent Company and the Banks in the IMI C&IB Division that represent around 90% of the Group\u2019s total exposure). You are reminded that, according to the approach adopted by the Group to estimate the ECL, the parameters for calculating it are determined on the basis of the Most-Likely scenario and an Add-on calculated based on the distance between the baseline scenario and alternative scenarios. The sensitivity analysis is determined using the assumptions adopted for the alternative scenarios (best-case and worst-case), produced internally by the Research Department, each weighted at 100%. This result is then compared with the ECL calculated with the Most-Likely plus Add-On scenario. As highlighted in the paragraphs above, there is a big distance between the worst-case and best-case scenarios, while the latter is very close to the baseline forecast. As a result, the sensitivity of the portfolio to the worst-case scenario is already essentially factored into the ECL as at 31 December 2022 in the model used, as described above, in addition to the overlays illustrated in the paragraph below. Therefore, the application of the worst-case scenario would result in the sliding into Stage 2 of 1.5 billion euro of exposures, a slight increase in the ECL and a substantially unchanged coverage ratio. On the other hand, the sensitivity of the portfolio to the best-case scenario would see a decrease of 240 million euro in the ECL, with a return to Stage 1 of 4.9 billion euro of exposures. The coverage ratio for performing exposures would decrease by 5 bps. Management overlays During 2022, the Group, in applying the estimation methods for the calculation of the ECL, in compliance with IFRS 9, added several more prudent factors in consideration of the situation of high uncertainty generated by the continuation of the Russia/Ukraine conflict. Examples include the systematic updating of macroeconomic forecasts, the actions described in the paragraph on the \u201cadverse\u201d scenario, and the updating of the explanatory macroeconomic variables used by the satellite models for the estimates of the future default rates \u2013 in which the choice of energy cost variables was favoured on the basis of a judgement sensitivity influenced by the current situation. That said, the ECL estimates are based on forward-looking models that use historical observations of the relationships between macroeconomic variables and default rates. The \u201crare\u201d scenarios, particularly those not previously seen, are very difficult to capture in the modelling process and it is essentially impossible to produce forecasts for specific portfolio risks in such circumstances. In this context, the Bank \u2013 as also reiterated by the standard setters in the context of the pandemic crisis \u2013 must take into account the fact that, as a result of the uncertainties presented by the forecast scenarios and the estimation characteristics adopted, which are strongly anchored to the long-term observed relationships, the methodologies used may not be fully adequate in the current situation. The main area of uncertainty underlying the most recent forecast scenarios is the occurrence of major supply shocks in the gas market, triggered by a worsening of the geopolitical crisis, and the ability to accurately forecast their effects on the economic and financial systems in the presence of unprecedented conditions (strong dependence of the European economy on this energy source). These considerations supported the Bank\u2019s decision to adopt post-model adjustments, increasing the ECL on a managerial basis, in order to incorporate a suitable estimate of the uncertainties relating to the measurement of performing loans. This choice was introduced during the year and was reinforced in the fourth quarter in order to adequately account for potential vulnerabilities not captured by the models used, from a forward-looking perspective, given the current situation of increased uncertainty and the limited availability of reasonable and supportable forward-looking information. At the same time, as already stated in paragraph \u201c1.2. Impacts from the COVID-19 pandemic\u201d, the conditions were also fulfilled for considering that the management overlays on the portfolios subject to moratoria during the pandemic were no longer necessary. For the purposes of the decisions regarding updates and changes and additions to the results of the models, as in the period of the pandemic, the Group has adopted enhanced governance through the decisions of the Credit Risk and Pillar 2 Internal Models Committee and also taken into account the references to the relevant guidance issued by the standard setters and regulators 103 . Details are provided below of the main choices adopted by the Group in 2022 in relation to the above, while details of the credit risk aspects more closely related to the Russia/Ukraine crisis are provided in the specific paragraph. As already stated, in 2022, as the country emerged from the health emergency and health restrictions were relaxed, the uncertainties specifically related to the pandemic eased and there was no noticeable increase in credit risk on exposures that had been subject to moratoria. The latter have now all returned to resumption of payments, for a considerable portion already some time ago, and continue to record reductions in the exposures and full repayments. The elements of vulnerability of the exposures subject to moratorium measures considered for the purposes of the Financial Statements as at 31 December 2021 (represented by both overlays incorporated into the satellite models and extraordinary triggers for sliding into Stage 2) had already been re-estimated starting from March, still maintaining suitable prudence, but considering both the substantial normalisation of forbearance measures and the positive evidence from the set of exposures with resumption of payments that has already begun. During the next two quarters, although the observations regarding the evolution of the credit risk parameters remained satisfactory, it was decided to continue the observation until the end of 2022 and to keep the overlay incorporated into the satellite model unchanged, while returns to Stage 1 were recorded in relation to the increasingly residual portfolios that had gradually resumed payments (subject to the extraordinary trigger for sliding into Stage 2). In light of the additional observations, which are described in paragraph \u201c1.2. Impacts from the COVID-19 pandemic\u201d, the remaining management overlays were released in the fourth quarter. At the same time, since the Russia/Ukraine geopolitical crisis, uncertainties about the economic outlook have gradually increased, as also discussed with regard to the macroeconomic scenario. In particular, a specific risk factor has emerged (the energy crisis brought about in the context of the ongoing geopolitical crisis) accompanied by the prospects of the effects of rising inflation, rising costs for businesses and rising interest rates. In the fourth quarter, economic activity weakened, both due to the slackening of the recovery of added value for services, which had already returned to pre-pandemic values in the summer, and due to the decline in industrial production and the slowdown in household spending, despite measures implemented to support disposable income in a situation of high inflation. From the first quarter of 2022, management overlays were added in order to introduce increased adjustments of performing loans related to the effects of the higher sector-specific vulnerability companies were exposed to. In the third quarter, with the greater availability of more specific forecast scenarios, also at the micro-sector level, the Bank considered that the increases already recognised were still appropriate. At the same time, the allocation was redefined for the previously applied management overlays by sector-specific vulnerability. Specifically, the analyses by the CRO Area led to the adoption of a post-model adjustment, i.e. an increase in the ECL, which was applied in a more targeted manner to all counterparties belonging to micro-sectors with negative sector performance or particularly exposed to energy cost risk, as defined by the sector risk management framework developed by the CRO and CLO Areas and by the Research Department with the support of the business divisions and recently adopted by the Bank for the granting, management and monitoring of credit. This framework duly takes into account the micro-sector forecasts and their outlooks, which are also systematically monitored and calibrated based on the experience of the Bank\u2019s business and credit risk governance structures. The post-model adjustment adopted replaced the previous method of application, which, although timely in terms of adoption, was mainly based on an increase in the estimate of future default rates derived from the IFRS 9 models for macro-aggregates potentially more exposed to the effects of persistent inflationary pressures on energy products and commodities, but without being able to introduce particular differentiations within them (in particular, the Manufacturing and Transport macro- aggregates had been considered for companies). In order to introduce a more targeted and granular level of intervention, in 103 See for example: ECB letter of 4 December 2020 \u201cIdentification and measurement of credit risk in the context of the coronavirus (COVID-19) pandemic\u201d, IASB document \u201cIFRS 9 and COVID-19 \u2013 Accounting for expected credit losses applying IFRS 9 Financial Instruments in the light of current uncertainty resulting from the COVID-19 pandemic\u201d of 27 March 2020 and ECB Speech \u201cAn evolving supervisory response to the pandemic\u201d of 1 October 2020. the subsequent quarters extraordinary triggers for sliding into Stage 2 were introduced for counterparties not already classified as such by the staging allocation methods, when they belong to certain micro-sectors identified with negative sector performance and with medium/high risk profiles. In the fourth quarter, in light of the macroeconomic situation described above and the uncertainties associated with it, it was decided to reinforce the adjustments of the ECL estimates compared to those already made in the previous quarters. In particular, an additional ECL value that expresses this uncertainty was initially quantified at the overall portfolio level. To this end, a simulation was conducted assuming the \u201cadverse\u201d scenario \u2013 instead of the baseline scenario \u2013 and on that basis quantifying the difference in adjustments generated by the performing portfolio identifiable up to the end of 2023. This exercise resulted in a theoretical impact that was taken as reference for the determination of the total amount of the post- model adjustments to be applied to the ECL of the Core scope as at 31 December. The post-model adjustment is applied to the modelling result to estimate the ECL through a percentage increase in its size without any effect on the staging allocation. Therefore, when applied to Stage 2 or higher risk positions, it has a larger effect on the ECL in absolute terms. This approach adds prudential elements to those already factored in with the application of the macroeconomic scenario for the purposes of forward-looking conditioning, as described above. With regard to the application of the post-model adjustments in the 2022 Financial Statements, the following is noted: - for business sectors particularly exposed to risks arising from the macroeconomic outlook (sectors with negative performance or energy-intensive sectors), the adjustments have been revised with respect to the third quarter in order to take into account the outcomes of the most recent Sector Working Group, as well as refinements to make the identification of the scope more consistent with the taxonomies used in credit management and reporting. It was also decided to limit the scope of application to Corporate/SME counterparties of the BdT Division, as these are portfolios for which it is considered that the expected economic slowdown may lead to lower resilience and greater difficulties than for Large Corporate counterparties. The scope of application of this overlay has also been defined, taking into account not only the sector-specific vulnerability but also the risk level of the counterparties, measured through their rating; - a post-model adjustment has been introduced in the Commercial Real Estate scope in order to add a prudent margin to the assessment of the counterparties operating in the sector and with high risk; - a post-model adjustment has also been introduced in the Retail and Retail SME segments, which are predominantly composed of consumer households and SMEs. This was aimed at capturing the potential negative effects on their future risk levels due to rising interest rates and lower disposable income as a result of high inflation. Consequently, the scope of application \u2013 which is within the BdT Division \u2013 has been defined for counterparties at medium or higher risk. The overall portfolio subject to management overlay amounts to around 70 billion euro. The banks of the International Subsidiary Banks Division, in a large number of cases, have also adopted prudent margins, through management overlays, based on specific assessments of the current and future situation and the characteristics of their portfolios. Overall, the adjustment allowances for performing exposures as at 31 December included prudential elements amounting to 785 million euro, in addition to the impact of around 70 million euro described in the paragraph above on the macroeconomic scenario, due to the consideration of assumptions in line with the ECB for the \u201cadverse\u201d scenario. 2.4. Credit risk mitigation techniques During the credit granting and managing process, the acquisition of mitigating factors is encouraged for counterparties with non-investment grade ratings or for certain types of medium/long-term transactions. The mitigating factors that have the greatest impact include pledges of financial assets and residential mortgages. Other forms of risk mitigation are pledges on non-financial assets and non-residential mortgages. The strength of the personal guarantees issued by rated parties, typically banks/insurance companies, Credit Guarantee Consortia and corporations, is instead assessed on the basis of the type of guarantee and guarantor\u2019s credit quality. Detailed processes govern the material acquisition of the individual collateral and guarantees, identifying the structure responsible as well as the methods for their correct completion, for archiving the documentation and for the complete and timely recording of the related information in the applications. The set of internal regulations and organisational and procedural controls is aimed at ensuring that: \u2013 all the requirements for the validity and effectiveness of credit protection are satisfied; \u2013 a standard contractual framework is defined for guarantees and collateral of general and current use, accompanied by full instructions for its use; \u2013 the methods for approving collateral and guarantee documents deviating from the standard by structures other than those in charge of commercial relations with the customer are identified. The guidelines for the management of collateral and guarantees are the same for the entire Group. The management of collateral and guarantees received for the Parent Company and the Italian subsidiaries is carried out on a single platform, which is integrated with the register of assets and the portal that manages the immovable property valuations. The granting of credit with the acquisition of collateral is subject to internal rules and processes \u2013 for the valuation of the asset, the acquisition of the collateral and the control of its value. The enforcement of the collateral is handled by specialist departments, which are responsible for credit recovery. In any case, the presence of collateral does not grant exemption from an overall assessment of the credit risk, focused mainly on the borrower's ability to meet the obligations assumed, irrespective of the associated collateral. The assessment of the pledged collateral is based on the actual value, namely the market value for financial instruments listed on a regulated market, or, otherwise, the estimated realisable value. The resulting value is multiplied by the haircut percentage rates, differentiated according to the financial instruments accepted as collateral. For real-estate collateral, the prudential market value is considered; for properties under construction, the construction cost is considered, net of prudential haircuts differentiated according to the intended use of the property. Assets are appraised by internal and external appraisers. The external appraisers are included in a special list of professionals accredited on the basis of an individual verification of their capabilities, professionalism and experience. The valuation of residential properties used as collateral for mortgage loans to private individuals is mainly assigned to specialised companies. The work of the appraisers is monitored on an ongoing basis, by means of statistical verifications and sample checks carried out centrally. The appraisers are required to produce estimates on the basis of standardised appraisal reports, differentiated according to the valuation method to be applied and the characteristics of the asset, in accordance with the \u201cRules on immovable property valuations for credit purposes\u201d drawn up by the Bank. The internal rules are consistent with the \u201cGuidelines for the valuation of real estate properties securing credit exposures\u201d promoted by the Italian Banking Association and with the European Valuation Standards. Immovable property valuations are managed through a specific integrated platform covering the entire appraisal phase, ensuring that assignments are properly awarded, on an independent basis and according to objective criteria, the workflow is thoroughly monitored, valuation standards are correctly applied and all information and documents regarding immovable properties are recorded. The market value of the immovable property collateral is periodically recalculated through various statistical valuation methods, that make use of prices/coefficients provided by an external supplier with proven skills and a solid reputation for surveying and measuring the market prices of Italian real-estate assets. Asset value is constantly monitored. The appraisers carry out inspections and verify the work progress for properties under construction. The valuation is duly updated in the event of restriction or splitting mortgage, of damage to the property, significant impairment losses reported by market indicators used to monitor fair value and, in any case, according to the due dates established for significant exposures, or when there are immovable properties securing non-performing loans. In order to limit the risks of absence or termination of the protection, specific safeguards are in place, including: restoration of a pledge when the assets decrease below their initial value or, for immovable property collateral, the obligation of insurance cover against fire damage and the presence of adequate monitoring of the property\u2019s value. There is also an \u201cumbrella\u201d insurance policy that, with limited exceptions, covers damages on the entire portfolio of properties mortgaged as collateral for the loans granted. Collateral and guarantees are subject to accurate, regular control using a specific application, the CRM engine, in which a series of tests have been implemented to confirm the effective compliance with the requirements set by prudential supervision regulations. The support application verifies whether the collateral and guarantees received are eligible with regard to the methods permitted by the regulations in relation to the various categories of collateral and guarantees for calculating capital requirements (Standardised and Internal Rating Based). Based on the specifics of each category, the eligibility results are defined at the level of individual guarantee for unfunded guarantees (usually personal guarantees) or, for collateral, for each asset or financial instrument. The Bank uses two integrated asset and guarantee management systems (PGA - Active Guarantees Portal and ABS - System Assets Archive) in order to improve the efficiency of collateral management. This has been accompanied by the development of a specific system for managing bad loans, to track the main legal actions and particularly those relating to the enforcement of immovable property collateral (EPC - Ex Parte Creditoris). In order to mitigate the counterparty risk associated with OTC (i.e., unregulated) derivatives and SFTs (Securities Financing Transactions, i.e. securities lending and repurchase agreements), the Group uses bilateral netting arrangements that allow the netting of claims and obligations if a counterparty defaults. This is achieved by entering into International Swap Derivatives Association (ISDA) and International Securities Market Association/Public Securities Association (ISMA/PSA) agreements, which also reduce the absorption of regulatory capital in accordance with supervisory provisions. In addition, the Group has collateral exchange arrangements in place, mainly with daily frequency, to hedge OTC derivatives transactions (Credit Support Annexes), also due to the margin requirements for non-centrally cleared derivatives, established by the EMIR; also for SFTs, the Bank implements daily margining arrangements (GMRAs - Global Master Repurchase Agreements and GMSLAs - Global Master Securities Lending Agreements). To mitigate the exposure to counterparties, mainly corporate customers, and the volatility arising from credit adjustments to derivative valuations (CVAs), the Bank also buys protection through credit default swaps, both on individual companies and credit indices. In 2022, the Parent Company continued its activities relating to the \u201cGARC\u201d (Active Credit Risk Management) Project, involving a platform for monitoring credit risk of performing portfolios. The initiative involves the systematic acquisition of both personal guarantees and collateral to support lending to companies. The guarantees obtained provide hedging of default risk (past due, unlikely to pay and bad loan) of granular portfolios and freeing up of economic and regulatory capital, as envisaged by the current Supervisory Regulations on the matter (including Regulation (EU) 575/2013 and Bank of Italy Circular 285/2013). During the year \u2013 again as part of the GARC Project \u2013 with regard to operations with the Guarantee Fund for SMEs, the ramp- up was completed of four tranched cover transactions on the junior risk of portfolios of newly disbursed loans in support of businesses adversely affected by the COVID-19 emergency. For details of the transactions carried out in 2022 under the GARC Project, see the description provided in paragraph C. Securitisations of this chapter. In order to optimise capital absorption, transactions to hedge the risk of expropriation of the compulsory and unrestricted reserves of the ISP Group banks operating in Serbia, Egypt and Moldova were also renewed and the hedging for the bank operating in Albania was increased. During the year, with the aim of improving the overall risk/return profile of the loan portfolios, also in terms of capital optimisation, Intesa Sanpaolo carried out a securitisation on a portfolio of performing loans originating from leases, with significant risk transfer, for a total gross amount of around 3.7 billion euro. 3. NON-PERFORMING CREDIT EXPOSURES 3.1 Management strategies and policies On 31 March 2022, the Board of Directors approved the revision of the Group NPL Plan, carried out on the basis of the ECB Guidance to banks on non-performing loans, which was sent to the Supervisor on 4 April 2022. The 2022-2025 NPL Plan is consistent with both the 2022-2025 Business Plan, approved by the Board of Directors in February 2022, and the Risk Appetite Framework, and takes into account the observations and recommendations of the Supervisory Authority. The Group NPL Plan is made up of a main document (2022-2025 Group NPL Plan) which includes a summary of the initiatives detailed in the \u201cOperational Plans\u201d (drawn up at Business Owner level, which include the targets for reducing the stock of non-performing loans, the detailed measures and the enablers, as well as the related costs and investments required to achieve the targets set) and the projections underlying the NPL Plan, with the granular level and in accordance with the requirements established by the ECB. In the 2022-2025 Business Plan, the Group intends to pursue a structural de-risking strategy, which was mostly launched during the last Business Plan, placing it among the best in Europe in terms of non-performing loan ratio and stock (Zero-NPL Bank) and generating a net drop in the cost of risk. Indeed, the latter will always be maintained at a conservative level, due to the extensive reserves of provisions on loans and ongoing prudent credit management. The deleveraging will be supported by the establishment of additional select partnerships and targeted disposals of portfolios. At the end of 2022, non-performing loans before adjustments amounted to 10.6 billion euro bringing the ratio of non- performing loans to total loans to 2.3% gross and 1.2% net, with a cost of risk of 70 basis points (30 basis points when excluding the adjustments for the exposure to Russia and Ukraine and the additional adjustments for overlays and to favour de-risking, net of the release of generic provisions set aside in 2020 for the expected impacts of COVID-19). Based on the EBA methodology, the NPL to total loan ratio stood at 1.9% gross and 1% net. Since November 2019, the Intesa Sanpaolo Group has adopted the New Definition of Default set out in the EBA Guidelines 2016/07 of 18/01/2017 on the application of the definition of default under Article 178 of Regulation 575/2013 (CRR), and in line with the additional clarifications introduced by Bank of Italy Circular 272. That definition of non-performing loans also coincides with the definition of \u201cimpaired\u201d financial assets contained in IFRS 9, with the consequent recognition of all non- performing loans within Stage 3. Intesa Sanpaolo Group adopts a \u201cper borrower\u201d approach in identifying non-performing exposures. Accordingly, the entire counterparty with credit relationship is assessed and subsequently classified, rather than the individual credit lines granted to that counterparty. Based on the regulatory framework, according to the rules of the Bank of Italy, in line with IAS/IFRS and European Supervisory Regulations, supplemented by internal implementing rules, non-performing financial assets are classified into one of the three below mentioned categories, based on their level of severity: \u2013 non-performing past due exposures: this category includes on-balance sheet exposures, other than those classified as bad loans or unlikely to pay that, as at the reporting date, are past due or overdrawn by over 90 days on a continuous basis. The total exposure to a debtor must be recognised as Past Due if, at the reference reporting date, the amount of the principal, interest and/or fees not paid when due exceeds both of the following thresholds (hereinafter, collectively, the \"Relevance Thresholds\"): o the absolute limit of 100 euro for retail exposures and of 500 euro for non-retail exposures (the \"Absolute Threshold\"), to be compared with the total amount past due from the borrower; o the relative limit of 1%, to be compared with the ratio of the total amount past due to the total amount of all on- balance sheet exposures to the same borrower (the \"Relative Threshold\u201d); \u2013 unlikely to pay: exposures for which \u2013 according to the judgement of the creditor bank \u2013 full repayment is deemed unlikely (in terms of capital or interest), without considering recourse to actions such as enforcement of collateral/guarantees. This assessment is conducted regardless of the presence of any amounts (or instalments) due and unpaid. As the assessment of unlikelihood of repayment is at the discretion of the Bank, it is not necessary to await an explicit symptom of anomaly (non-repayment), when there are elements that imply a risk of non-compliance by the borrower (for example, a crisis in the industrial sector in which the borrower operates). The overall on- and off-balance sheet exposures toward the same borrower in said situation is therefore classified under the category \"Unlikely To Pay\" (unless the conditions for classification of the borrower among bad loans exist). Loans classified as \"Unlikely To Pay\" should include exposures to issuers who have not regularly honoured their repayment obligations (in terms of capital or interest) relating to listed debt securities, unless they meet the conditions for classification as bad loans. To this end the \u201cgrace period\u201d established by the contract is recognised or, in its absence, the period recognised by the market listing the security. The Intesa Sanpaolo Group Rules have also provided for a further classification within \u201cunlikely to pay\u201d exposures, identified as \u201cforborne unlikely to pay\u201d, which may include counterparties that have at least one exposure subject to forbearance measures that are regularly respected or remain in the state of risk pending the start of the normally imposed cure period (minimum of 12 months); \u2013 bad loans: on- and off-balance sheet exposures to borrowers in a state of insolvency (even when not recognised in a court of law) or in an essentially similar situation, regardless of any loss forecasts made by the Bank. This is irrespective, therefore, of whether any collateral or guarantees have been established to cover the exposures. Exposures whose anomalous situation may be attributed to Country risk are excluded from this category. The type \u201cexposures subject to concessions \u2013 forbearance\u201d has also been established. These are exposures subject to renegotiation and/or refinancing due to financial difficulties (evident or in the process of becoming evident) of the debtor, which effectively constitute a subgroup of both non-performing exposures (non-performing exposures with forbearance measures) and performing exposures (other forborne exposures). Non-performing exposures with forbearance measures do not represent a separate category of non-performing assets, rather, they are a sub-set of the above categories of non-performing assets. Non-performing assets are subject to an assessment process resulting in the calculation of the expected loss for uniform categories (identified based on the risk status, duration of risk status and significance of the underlying exposure) and the allocation of the impairment adjustment for each position. Non-performing loans are measured using two methods: \u2013 analytical-statistical measurement: for exposures equal to or lower than certain thresholds, and for all non-performing past-due exposures, based on the use of specific LGD grids; \u2013 specific analytical measurement: for exposures above certain thresholds based on write-down estimates defined by the relationship manager, following analyses and valuations based on pre-established criteria. In addition to the assessment component determined through statistical valuation models or through individual expert evaluation, a component is calculated to take into account the evolution of the current operational variables, the future macroeconomic scenarios, the incremental risk of the counterparty as long as it remains in the specific risk status for unlikely- to-pay exposures (vintage), as well as the sales prospects if present. The assessment of non-performing positions classified as assets held for sale was carried out based on the expected sales prices, less their costs to sell, supported by fairness opinions. The assessment methods for non-performing loans are described in detail in Part A \u2013 Section \u201cA.2 \u2013 Main financial statement captions\u201d and in particular in the paragraph \u201cImpairment of non-performing financial assets\u201d, to which reference is made. The assessments are carried out upon classification of the exposures as non-performing and are reviewed periodically. The assessment of the loans is also reviewed whenever a new event occurs that could affect the prospects for recovery (e.g. change in the value of collateral, developments in ongoing litigation, etc.). In order to timely identify such events, the information set relative to borrowers and guarantors is periodically monitored and the development of out-of-court agreements and the various phases of the judicial procedures under way are constantly monitored. The management of the Group\u2019s non-performing loans may be directly carried out by the internal organisational structures or by/with external partners granted appropriate mandates (outsourcers), for which the CLO Area performs a supervisory role in the management of stocks and flows outsourced and acts as an interface for the approvals beyond the limits of the powers delegated to them and for administrative, technical and operational activities envisaged in the processes of interaction with the outsourcers. The internal organisational structures are identified, on the basis of pre-determined relevance thresholds, as the local organisational units (at regional level) that perform specialist activities, or within the Head Office Departments, which are also responsible for the overall management and coordination of these matters. The classification of positions to non-performing is performed on proposal of both territorial structures, owners of the commercial relationship, or of specialised central and local territorial structures in charge of the monitoring and recovery of non-performing loans. Classification may also be performed through automatic mechanisms when predefined objective default conditions arise. This refers, for example, to past-due loans continuously above certain thresholds for certain periods and forborne performing positions (performing forborne positions originating from non-performing forborne positions) that have not yet completed their 24-month probation period, if they meet the conditions envisaged by the applicable regulations for their reallocation to non-performing loans, based on the verification of objective parameters and, specifically, for transactions already designated as forborne, so-called reiteration (i.e. the granting of a further forbearance measure) and/or continuously over 30 days past due above certain thresholds, and transactions subject to distressed restructuring with a loss exceeding 1%. Furthermore, automatic mechanisms detect any mismatches, thereby ensuring that material non-performing loans to counterparties shared between the Group\u2019s various entities are subject to the required uniform convergence of management decisions. Materiality is represented by exceeding a pre-established warning threshold for loans classified as at the greatest risk, with respect to the overall exposure. Automatic mechanisms within the system also ensure that positions are allocated to the risk status most representative of their creditworthiness (bad loans excluded) as material default continues. The return to performing status of non-performing exposures is governed by the Supervisory Authority and specific internal regulations, and takes place on the proposal of the Structures responsible for their management, upon verification that the critical conditions or state of default no longer exist. Non-performing Past Due exposures and Unlikely To Pay exposures, not subject to forbearance measures must continue to be classified as such for at least 3 months after they cease to meet the requirements for being classified as such. During the probation period the counterparty\u2019s conduct must be assessed in light of its financial situation (in particular, by verifying the absence of amounts past due exceeding the Relevance Thresholds). For counterparties classified as Forborne Unlikely-to-Pay, the application of the cure period of at least 12 months shall prevail. At the end of this period, the position may be reclassified as performing, provided that there are no past due exposures of the borrower and the borrower has repaid a significant amount of the principal and interest and, more generally, the criteria for the counterparties returning to performing status are met. Exposures classified as Past Due return automatically to performing when the 90-day probation period has passed. The same mechanism is applied to exposures of moderate amounts previously automatically classified as Unlikely To Pay when automatic mechanisms detect that the conditions that triggered the classification no longer apply. The Internal Validation and Controls Head Office Department of the Chief Risk Officer Governance Area carries out II level controls on single counterparties in the various statuses of non-performing loan, randomly selected mainly with risk-based criteria in order to verify their proper classification and provisioning, as well as the adequacy of the management and recovery processes. 3.2 Write-offs Lastly, with regard to non-performing loans, it is highlighted that the Intesa Sanpaolo Group uses the \u2013 full or partial \u2013 write- off/derecognition of unrecoverable accounting positions and, in the following cases, the consequent allocation to loss of the remainder that has not yet been adjusted: \u2013 uncollectability of the debt, as a result of definite and precise elements (such as, for example, untraceability and indigence of the debtor, lack of recovery from realisation of securities and real estate, negative foreclosures, bankruptcy proceedings closed with no full compensation for the Bank, if there are no further guarantees that can be enforced etc.); \u2013 disposal of the loan; \u2013 waiver of the credit claim, due to the unilateral cancellation of the debt or residual amount as a result of settlement agreements; \u2013 no waiver of the credit claim. With regard to the full or partial write-offs without waiver of the credit claim, in order to avoid maintaining loans on the balance sheet that have a very low possibility of recovery, despite continuing to be managed by the recovery structures, they are fully or partially written off due to uncollectability even if the legal proceedings have not been closed. The write-off can only involve the portion of the loan covered by provisions and, therefore, each loan can only be written off up to the amount of its net book value. Therefore, on a periodic basis, the Group identifies the bad loan portfolios to be subject to total or partial write-offs with the following macro-characteristics: o percentage cover of 100% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >1 year; o percentage cover of >95% and a vintage (understood as the period of time in \u201cbad loan\u201d status) of >5 years or >8 years, respectively, for non-mortgage and mortgage loans. Portfolios to be written off can also be identified that have similar characteristics that are different from those indicated above, but that relate to exposures that have a marginal possibility of recovering the amount of the provision, where the minimum amount of the provision (calculated taking into account the accumulated write-offs on the position, according to the same rule established at prudential level by the calendar provisioning framework) is at least equal to the amount needed to bring the value of the exposures up to their fair value estimated based on the prices recorded in the latest sales of bad loans made by the Group. In 2022, the Group carried out write-offs on gross non-performing loans for around 658 million euro. Of these, around 475 million euro regarded bad loans, for the most part using the allowance already set aside. More than 87% of these write-offs related to derecognised positions that are still subject to enforcement procedures, for which any recoveries from collections after the write-off will be recognised in the income statement as recoveries. 3.3 Purchased or originated credit-impaired financial assets According to IFRS 9, loans considered as impaired already upon initial recognition in the financial statements, due to the high credit risk associated with them, are defined as Purchased or Originated Credit Impaired Assets (POCI). If these loans fall within the scope of impairment in accordance with IFRS 9, they are valued by allocating allowances - from the date of initial recognition - to cover losses for the entire residual life of the loan (lifetime Expected Credit Loss). Since these are non- performing loans, they are initially recognised within Stage 3, subject to the possibility of being transferred, over the course of their lives, to Stage 2 if, based on the credit risk analysis, they are identified as no longer being impaired. POCI loans recorded in the Group\u2019s financial statements may derive from single renegotiations of non-performing exposures carried out as part of routine lending activity or be recognised following business combinations. With regard to the latter case, the acquisition of the former UBI Group during 2020 resulted in the recognition of a significant portfolio of non-performing loans, which, therefore, were initially recognised as POCI pursuant to IFRS 9 and posted in the financial statements at the fair value determined on Purchase Price Allocation, as the initial recognition value. More in detail, at the acquisition date (4 August 2020), the accounting records of the UBI Group had gross non-performing loans amounting to around 6.5 billion euro (8 billion euro in terms of credit claim). In light of the sales already carried out, the POCI loans referring to the former UBI Group posted in the consolidated financial statements as at 31 December 2022 remain under assets measured at amortised cost for substantially residual amounts and further reduced compared to the end of 2021, totalling 188 million euro, consisting of 131 million euro of non-performing loans and 57 million euro of performing positions (total of 284 million euro, with 211 million euro of non-performing loans and 73 million euro of performing loans, as at 31 December 2021). 4. COMMERCIAL RENEGOTIATED FINANCIAL ASSETS AND FORBORNE EXPOSURES Forbearance measures are concessions made to a borrower that is facing, or could face, situations of difficulty in meeting their contractual commitments that would prevent them from meeting their original payment obligations (troubled debt). The term \u201cforbearance measures\u201d indicates contractual modifications granted to the borrower undergoing financial difficulties (modification), as well as the disbursement of a new loan in order to satisfy the pre-existing obligation (refinancing). \u201cForbearance measures\u201d include the exercise of clauses, which may be freely requested by a borrower with regard to a contract already signed, but only if the lender deems that there are circumstances indicating that the borrower is in financial difficulty (the so-called \u201cembedded forbearance clauses\u201d). The concept of \u201cforborne\u201d therefore does not include renegotiations carried out due to commercial reasons/practices, which do not take into account the financial difficulties of the borrower. In many cases, a situation of financial difficulty is accompanied by a situation of economic instability of the borrower, consisting of the inability of the core business to remunerate all the production factors that the company needs, through the usual sources of cash flow and at normal market conditions. The identification of \u201cforborne assets\u201d or \u201cforborne exposures\u201d, in line with the provisions of the EBA regulations and unlike the \u201cper borrower\u201d approach used by the Intesa Sanpaolo Group for the classification of non-performing exposures, necessarily takes place on a \u201cper transaction\u201d basis. The term \u201cexposure\u201d in this context refers to the renegotiated individual contract, rather than to all the exposures to the same borrower. More generally, Intesa Sanpaolo Group\u2019s policy, based on the instructions provided by the Supervisory Authorities, envisages criteria for the identification of the financial difficulty (of the performing borrower) which, in the event of renegotiation/refinancing, entails the classification of one (or more) credit line(s) as forborne, if at least one of the following conditions applies: \u2013 a significant deterioration in the debtor\u2019s rating identified in the previous three months; \u2013 the presence of exposures past due by thirty days or more at the measurement date associated with a rating level in the highest-risk band; \u2013 Early Warning System (EWS) colour \u201cred\u201d, associated with a rating in the highest risk band. A state of financial difficulty is always assumed in the case where the borrower is classified as non-performing. The definition of forborne exposure applies transversally to the classification macro-categories (performing and non- performing). Forborne assets may be included in Stage 2 (Performing) or Stage 3 (Non-Performing \u2013 forborne non- performing). The forbearance measures granted are monitored for minimum predefined periods, differentiated based on the administrative status of the risk assigned to the counterparty. In detail: \u2013 24 months for performing positions (probation period); \u2013 36 months for positions classified as non-performing, represented by a cure period of 12 months and a probation period of an additional 24 months. When a forbearance measure is granted to a performing counterparty, quantitative assessments (diminished financial obligation indicator set at 1%) and/or qualitative assessments are performed, as envisaged in the EBA Guidelines on the application of the definition of default pursuant to Article 178 of Regulation (EU) 575/2013, which could result in the possible classification to Non-Performing. According to Intesa Sanpaolo Group\u2019s interpretations, the identification of an exposure as forborne necessarily implies the existence of a \u201csignificant increase\u201d in risk since the origination of the loan (and, therefore, implies also a classification in Stages 2 or 3 at the time of assignment of the forborne status). Unlike the forbearance measures, which relate to loans to borrowers in financial difficulty, renegotiations for commercial reasons involve borrowers that are not in financial difficulty and include all transactions aimed at adjusting the cost of the debt to market conditions. Transactions involving commercial renegotiations result in a change in the original conditions of the contract, usually requested by the borrower, which normally relate to aspects concerning the cost of the debt (or its duration), with a consequent economic benefit for the borrower. In general, whenever the bank carries out a renegotiation to avoid losing its customer, that renegotiation should be considered as substantial because, if it were not carried out, the customer would borrow from another intermediary and the bank would incur a decrease in expected future revenues. These operations, under certain conditions, are treated for accounting purposes as an early repayment of the original debt and the opening of a new loan. QUANTITATIVE INFORMATION A. CREDIT QUALITY For the purposes of quantitative information about credit quality, the term \u201ccredit exposures\u201d is understood to exclude equities and quotas of UCI. The term \u201con-balance sheet credit exposures\u201d refers to all the on-balance sheet financial assets due from banks or customers, irrespective of the accounting portfolio they are allocated to (measured at fair value through profit or loss, measured at fair value through other comprehensive income, measured at amortised cost, or discontinued financial assets). On demand receivables due from banks and central banks come under the definition of on-balance sheet exposures but by convention are not included in the tables in Section 1, except in specifically identified cases where they must be considered. The term \u201coff-balance sheet exposures\u201d refers to all the financial transactions that are not on the balance sheet (guarantees given, revocable and irrevocable commitments, derivatives, etc.) but entail the assumption of credit risk, regardless of the purpose of those transactions (trading, hedging, etc.). The off-balance sheet credit exposures also include the counterparty risk associated with any securities lending transactions. Where necessary, the counterparty risk associated with exposures relating to repurchase agreements, transactions involving the granting or assumption of goods on loan, and loans with margins falling within the notion of securities financing transactions defined by the prudential regulations, is also reported. Non-performing credit exposures (on-balance sheet and off-balance sheet) do not include financial assets held for trading and hedging derivatives, which are therefore normally recognised as performing credit exposures. A.1. Performing and non-performing credit exposures: amounts, adjustments, changes, and economic breakdown A.1.1. Prudential consolidation - Breakdown of financial assets by past-due brackets (book value) (millions of euro) Portfolios/risk stages STAGE 1 STAGE 2 STAGE 3 PURCHASED OR ORIGINATED CREDIT- IMPAIRED Between 1 and 30 days Between 30 and 90 days Over 90 days Between 1 and 30 days Between 30 and 90 days Over 90 days Between 1 and 30 days Between 30 and 90 days Over 90 days Between 1 and 30 days Between 30 and 90 days Over 90 days 1. Financial assets measured at amortised cost 1,823 168 272 686 466 129 360 187 2,913 10 4 138 2. Financial assets measured at fair value through other comprehensive income 45 - 49 - - - - - - - - - 3. Non-current financial assets held for sale - - - - - - 4 5 277 - - 10 Total 31.12.2022 1,868 168 321 686 466 129 364 192 3,190 10 4 148 Total 31.12.2021 2,192 236 155 2,623 598 194 466 237 5,455 7 9 261 A.1.2. Prudential consolidation \u2013 Financial assets, commitments to disburse funds and financial guarantees given: changes in total adjustments and total provisions (millions of euro) Reasons/risk stages TOTAL ADJUSTMENTS Stage 1 assets Stage 2 assets On demand due from banks and Central Banks Financial assets measured at amortised cost Financial assets measured at fair value through other comprehensive income Non- current financial assets held for sale of which: individual impairment losses of which: collective impairment losses On demand due from banks and Central Banks Financial assets measured at amortised cost Financial assets measured at fair value through other comprehensive income Non- current financial assets held for sale of which: individual impairment losses of which: collective impairment losses Total opening adjustments - 766 38 - 577 227 1 1,792 11 - 1,577 227 Changes in increase from financial assets acquired or originated - 302 11 - 230 83 - 23 - - 1 22 Cancellations other than write- offs - -78 -15 - -69 -24 - -113 -1 - -102 -12 Net value adjustments / write- backs for credit risk -2 -264 - - -220 -46 -1 283 37 - 83 236 Contractual changes without cancellations - 18 - - 7 11 - 22 - - 15 7 Changes in the estimation methodology - -3 - - - -3 - 3 - - - 3 Write-offs non recorded directly in the income statement - - - - - - - - - - - - Other variations 2 -34 - - -4 -28 - -22 - - 14 -36 Total closing adjustments - 707 34 - 521 220 - 1,988 47 - 1,588 447 Recoveries from financial assets subject to write-off - - - - - - - - - - - - Write-offs recorded directly in the income statement - - - - - - - - - - - - (millions of euro) Reasons/risk stages TOTAL ADJUSTMENTS Stage 3 assets Purchased or originated credit-impaired financial assets On demand due from banks and Central Banks Financial assets measured at amortised cost Financial assets measured at fair value through other comprehensive income Non-current financial assets held for sale of which: individual impairment losses of which: collective impairment losses Financial assets measured at amortised cost Financial assets measured at fair value through other comprehensive income Non-current financial assets held for sale of which: individual impairment losses of which: collective impairment losses Total opening adjustments - 8,161 35 3,231 10,940 487 141 - 67 198 10 Changes in increase from financial assets acquired or originated - 2 - - 2 - X X X X X Cancellations other than write-offs - -4,119 - -3,038 -7,128 -29 -53 - -67 -120 - Net value adjustments / write-backs for credit risk - 1,587 1 - 1,344 244 4 - - 9 -5 Contractual changes without cancellations - 65 - - 61 4 2 - - - 2 Changes in the estimation methodology - - - - - - - - - - - Write-offs non recorded directly in the income statement - -517 - -103 -574 -46 -35 - - -35 - Other variations - 57 - 288 365 -20 54 - 7 61 - Total closing adjustments - 5,236 36 378 5,010 640 113 - 7 113 7 Recoveries from financial assets subject to write-off - 41 - 1 40 2 - - - - - Write-offs recorded directly in the income statement - -79 - - -76 -3 -10 - - -10 - A.1.2. Prudential consolidation \u2013 Financial assets, commitments to disburse funds and financial guarantees given: changes in total adjustments and total provisions \u2013 continued \u2013 (millions of euro) Reasons/risk stages TOTAL PROVISIONS ON COMMITMENTS TO DISBURSE FUNDS AND FINANCIAL GUARANTEES GIVEN TOTAL Stage 1 Stage 2 Stage 3 Commitments to disburse funds and financial guarantees given impaired purchased or originated Total opening adjustments 110 104 233 - 14,690 Changes in increase from financial assets acquired or originated 23 2 - - 363 Cancellations other than write-offs -6 -6 -4 - -7,500 Net value adjustments / write-backs for credit risk -42 42 44 - 1,689 Contractual changes without cancellations 1 - - - 108 Changes in the estimation methodology 1 - - - 1 Write-offs non recorded directly in the income statement - - - - -655 Other variations 66 13 -6 - 425 Total closing adjustments 153 155 267 - 9,121 Recoveries from financial assets subject to write-off - - - - 42 Write-offs recorded directly in the income statement - - - - -89 The Intesa Sanpaolo Group does not use the simplified method for the valuation of the loss allowance in relation to trade receivables, contract assets and lease receivables (method envisaged by IFRS 9, paragraph 5.5.15). A.1.3. Prudential consolidation \u2013 Financial assets, commitments to disburse funds and financial guarantees given: transfers between stages of credit risk (gross and nominal amounts) (millions of euro) Portfolios/risk stages GROSS AMOUNTS/NOMINAL VALUE Transfers between Stage 1 and Stage 2 Transfers between Stage 2 and Stage 3 Transfers between Stage 1 and Stage 3 To Stage 2 from Stage 1 To Stage 1 from Stage 2 To Stage 3 from Stage 2 To Stage 2 from Stage 3 To Stage 3 from Stage 1 To Stage 1 from Stage 3 1. Financial assets measured at amortised cost 27,417 21,356 1,442 534 1,708 156 2. Financial assets measured at fair value through other comprehensive income 767 43 - - - - 3. Non-current financial assets held for sale - - - - - - 4. Commitments to disburse funds and financial guarantees given 19,170 6,537 311 22 511 24 Total 31.12.2022 47,354 27,936 1,753 556 2,219 180 Total 31.12.2021 49,645 39,553 1,607 451 1,709 224 A.1.3a Loans subject to COVID-19 support measures: transfers between stages of credit risk (gross amounts) (millions of euro) Portfolios/Risk stages GROSS EXPOSURE / PAR VALUE Transfers between Stage 1 and Stage 2 Transfers between Stage 2 and Stage 3 Transfer between Stage 1 and Stage 3 To Stage 2 from Stage 1 To Stage 1 from Stage 2 To Stage 3 from Stage 2 To Stage 2 from Stage 3 To Stage 3 from Stage 1 To Stage 1 from Stage 3 A. Loans measured at amortized cost 2,345 2,923 211 99 323 27 A.1 subject to EBA-compliant moratoria - - - - - - A.2 Loans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne 3 18 1 - - - A.3 subject to COVID-19-related forbearance measures 289 3 74 89 32 - A.4 newly originated loans 2,053 2,902 136 10 291 27 B. Loans and advances valued at fair value with an impact on overall profitability - - - - - - B.1 subject to EBA-compliant moratoria - - - - - - B.2 Loans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne - - - - - - B.3 subject to COVID-19-related forbearance measures - - - - - - B.4 newly originated loans - - - - - - Total 31.12.2022 2,345 2,923 211 99 323 27 Total 31.12.2021 7,818 920 214 13 539 12 The row Loans \u201csubject to EBA-compliant moratoria\u201d shows the information relating to financial assets subject to moratoria that fall within the scope of application of the \u201cGuidelines on legislative and non legislative moratoria on loan repayments applied in the light of the COVID 19 crisis\u201d, published by the EBA (EBA/GL/2020/02), as amended. The row \u201cLoans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne\u201d shows the outstanding loans subject to moratoria, assessed as compliant with EBA/GL/2020/02 at the date the measure was granted, but no longer compliant at the reporting date, which were not classified by the bank as \u201cforborne exposures\u201d (as defined by the supervisory reports in force) following the assessment conducted on occurrence of the event that generated the non-compliance with EBA/GL/2020/02. The row \u201cOther forborne loans\u201d contains information regarding the loans subject to the COVID-19 support measures that meet the conditions of \u201cforborne exposures\u201d as defined by the current supervisory reports, and have not been included in the category \u201cEBA-compliant moratoria loans\u201d since the grant date or since the date on which they no longer comply with the EBA/GL/2020/02. The row \u201cnewly originated loans\u201d presents the information on the exposures for which new liquidity was granted, with the support of government guarantees. A.1.4. Prudential Consolidation \u2013 On- and off-balance sheet credit exposures to banks: gross and net values (millions of euro) Type of exposure/amounts Gross exposure Total adjustments and total provisions for credit risk Net exposure Total partial write-offs Stage 1 Stage 2 Stage 3 Purchased or originated credit- impaired Stage 1 Stage 2 Stage 3 Purchased or originated credit- impaired A. ON-BALANCE SHEET EXPOSURES A.1 ON DEMAND 108,301 108,135 166 - - - - - - - 108,301 - a) Non-performing - X - - - - X - - - - - b) Performing 108,301 108,135 166 X - - - - X - 108,301 - A.2 OTHERS 39,824 37,294 1,184 53 - -55 -15 -24 -16 - 39,769 - a) Bad loans 4 X - 4 - -4 X - -4 - - - - of which: forborne exposures - X - - - - X - - - - - b) Unlikely to pay 48 X - 48 - -12 X - -12 - 36 - - of which: forborne exposures 48 X - 48 - -12 X - -12 - 36 - c) Non-performing past due exposures 1 X - 1 - - X - - - 1 - - of which: forborne exposures - X - - - - X - - - - - d) Performing past due exposures 2 - 2 X - - - - X - 2 - - of which: forborne exposures - - - X - - - - X - - - e) Other performing exposures 39,769 37,294 1,182 X - -39 -15 -24 X - 39,730 - - of which: forborne exposures 83 - 83 X - - - - X - 83 - TOTAL (A) 148,125 145,429 1,350 53 - -55 -15 -24 -16 - 148,070 - B. OFF-BALANCE SHEET EXPOSURES a) Non-performing 12 X - 12 - - X - - - 12 - b) Performing 82,282 36,190 677 X - -66 -62 -4 X - 82,216 - TOTAL (B) 82,294 36,190 677 12 - -66 -62 -4 - - 82,228 - TOTAL (A+B) 230,419 181,619 2,027 65 - -121 -77 -28 -16 - 230,298 - A.1.5. Prudential Consolidation \u2013 On- and off-balance sheet credit exposures to customers: gross and net values (millions of euro) Type of exposure/Amounts Gross exposure Total adjustments and total provisions for credit risk Net Exposure Total partial write-offs Stage 1 Stage 2 Stage 3 Purchased or originated credit- impaired Stage 1 Stage 2 Stage 3 Purchased or originated credit- impaired A. ON-BALANCE SHEET EXPOSURES a) Bad loans 3,850 X - 3,685 165 -2,672 X - -2,599 -73 1,178 2,574 - of which: forborne exposures 815 X - 772 43 -518 X - -496 -22 297 220 b) Unlikely to pay 7,431 X - 7,144 144 -2,956 X - -2,896 -43 4,475 508 - of which: forborne exposures 3,060 X - 2,951 81 -1,129 X - -1,102 -20 1,931 180 c) Non-performing past due exposures 552 X - 550 2 -139 X - -139 - 413 - - of which: forborne exposures 47 X - 47 - -11 X - -11 - 36 - d) Performing past due exposures 3,923 2,373 1,412 X 9 -147 -15 -132 X - 3,776 - - of which: forborne exposures 505 - 385 X 1 -53 - -53 X - 452 - e) Other performing exposures 542,843 483,524 48,502 X 83 -2,594 -711 -1,879 X -4 540,249 - - of which: forborne exposures 6,977 1 6,819 X 20 -500 - -498 X -1 6,477 - TOTAL (A) 558,599 485,897 49,914 11,379 403 -8,508 -726 -2,011 -5,634 -120 550,091 3,082 B. OFF-BALANCE SHEET EXPOSURES a) Non-performing 1,771 X - 1,765 4 -267 X - -267 - 1,504 - b) Performing 330,175 229,968 26,343 X 1 -242 -91 -151 X - 329,933 - TOTAL (B) 331,946 229,968 26,343 1,765 5 -509 -91 -151 -267 - 331,437 - TOTAL (A+B) 890,545 715,865 76,257 13,144 408 -9,017 -817 -2,162 -5,901 -120 881,528 3,082 The dealings between the Banking Group and other non-banking companies included within the scope of consolidation amounted to: - 352 million euro, adjusted by 142 million euro, included among gross non-performing on-balance sheet exposures to customers; - 11,797 million euro, adjusted by 22 million euro, included among gross performing on-balance sheet exposures to customers; - 19 million euro, adjusted by 3 million euro, included among gross non-performing off-balance sheet exposures to customers; - 8,897 million euro, adjusted by 16 million euro, included among gross performing off-balance sheet exposures to customers. The exposures also include financial assets allocated to the accounting portfolio of discontinued operations. A.1.5a Loans subject to COVID-19 support measures: gross and net amounts (millions of euro) Loans types / amounts Gross exposure Total value adjustments and total provisions Net exposure Write-off partial total Stage 1 Stage 2 Stage 3 Purchased or originated credit- impaired Stage 1 Stage 2 Stage 3 Purchased or originated credit- impaired A. BAD LOANS 90 - - 90 - -63 - - -63 - 27 - a) Subject to EBA-compliant moratoria - - - - - - - - - - - - b) Loans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne - - - - - - - - - - - - c) Subject to other COVID- 19-related forbearance measures 9 - - 9 - -7 - - -7 - 2 - d) Newly originated loans 81 - - 81 - -56 - - -56 - 25 - B. UNLIKELY TO PAY LOANS 595 - - 594 1 -167 - - -166 -1 428 - a) Subject to EBA-compliant moratoria - - - - - - - - - - - - b) Loans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne 27 - - 27 - -11 - - -11 - 16 - c) Subject to other COVID- 19-related forbearance measures 159 - - 158 1 -50 - - -49 -1 109 - d) Newly originated loans 409 - - 409 - -106 - - -106 - 303 - C. NON-PERFORMING PAST DUE LOANS 93 - - 93 - -19 - - -19 - 74 - a) Subject to EBA-compliant moratoria - - - - - - - - - - - - b) Loans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne - - - - - - - - - - - - c) Subject to other COVID- 19-related forbearance measures 3 - - 3 - -1 - - -1 - 2 - d) Newly originated loans 90 - - 90 - -18 - - -18 - 72 - D. OTHER PAST DUE PERFORMING LOANS 227 97 130 - - -3 - -3 - - 224 - a) Subject to EBA-compliant moratoria - - - - - - - - - - - - b) Loans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne - - - - - - - - - - - - c) Subject to other COVID- 19-related forbearance measures 10 - 10 - - -1 - -1 - - 9 - d) Newly originated loans 217 97 120 - - -2 - -2 - - 215 - E. OTHER PERFORMING LOANS 33,181 29,392 3,788 - 1 -111 -38 -73 - - 33,070 - a) Subject to EBA-compliant moratoria - - - - - - - - - - - - b) Loans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne 77 51 26 - - -3 - -3 - - 74 - c) Subject to other COVID- 19-related forbearance measures 687 4 683 - - -35 - -35 - - 652 - d) Newly originated loans 32,417 29,337 3,079 - 1 -73 -38 -35 - - 32,344 - TOTAL (A+B+C+D+E) 34,186 29,489 3,918 777 2 -363 -38 -76 -248 -1 33,823 - The row Loans \u201csubject to EBA-compliant moratoria\u201d shows the information relating to financial assets subject to moratoria that fall within the scope of application of the \u201cGuidelines on legislative and non legislative moratoria on loan repayments applied in the light of the COVID 19 crisis\u201d, published by the EBA (EBA/GL/2020/02), as amended. As at 31 December 2022 such loans were less than 1 million euro and amounted to 412 thousand euro. The row \u201cLoans subject to outstanding moratorium measures no longer compliant with the GL and not considered forborne\u201d shows the outstanding loans subject to moratoria, assessed as compliant with EBA/GL/2020/02 at the date the measure was granted, but no longer compliant at the reporting date, which were not classified by the bank as \u201cforborne exposures\u201d (as defined by the supervisory reports in force) following the assessment conducted on occurrence of the event that generated the non-compliance with EBA/GL/2020/02. The row \u201cOther forborne loans\u201d contains information regarding the loans subject to the COVID-19 support measures that meet the conditions of \u201cforborne exposures\u201d as defined by the current supervisory reports, and have not been included in the category \u201cEBA-compliant moratoria loans\u201d since the grant date or since the date on which they no longer comply with the EBA/GL/2020/02. The row \u201cnewly originated loans\u201d presents the information on the exposures for which new liquidity was granted, with the support of government guarantees. The loans subject to COVID-19 support measures presented in the table also include loans allocated to the accounting portfolio of discontinued operations. A.1.6. Prudential Consolidation \u2013 On-balance sheet credit exposures to banks: changes in gross non-performing exposures (millions of euro) Reasons/Categories Bad loans Unlikely to pay Non-performing past due exposures A. Initial gross exposure 4 66 - - of which: exposures sold not derecognised - - - B. Increases - - 1 B.1 inflows from performing exposures - - - B.2 inflows from purchased or originated credit-impaired financial assets - - - B.3 transfers from other non-performing exposures categories - - - B.4 changes in contracts without derecognition - - - B.5 other increases - - 1 - of which: business combinations C. Decreases - -18 - C.1 outflows to performing exposures - - - C.2 write-offs - - - C.3 collections - -15 - C.4 profits on disposal - - - C.5 losses on disposal - - - C.6 transfers to other non-performing exposure categories - - - C.7 changes in contracts without derecognition - - - C.8 other decreases - -3 - D. Final gross exposure 4 48 1 - of which: exposures sold not derecognised - - - A.1.6. Bis Prudential Consolidation \u2013 On-balance sheet credit exposures to banks: changes in gross forborne exposures broken down by credit quality (millions of euro) Description/Quality Forborne exposures: non- performing Forborne exposures: performing A. Initial gross exposure 66 9 - of which: exposures sold not derecognised - - B. Increases - 81 B.1 inflows from non-forborne performing exposures - 81 B.2 inflows from forborne performing exposures - X B.3 inflows from non-performing forborne exposures X - B.4 inflows from forborne non-performing exposures - - B.5 other increases - - C. Decreases -18 -7 C.1 outflows to non-forborne performing exposures X - C.2 outflows to forborne performing exposures - X C.3 outflows to non-performing forborne exposures X - C.4 write-offs - - C.5 collections -15 -7 C.6 profits on disposal - - C.7 losses on disposal - - C.8 other decreases -3 - D. Final gross exposure 48 83 - of which: exposures sold not derecognised - - A.1.7. Prudential Consolidation \u2013 On-balance sheet credit exposures to customers: changes in gross non-performing exposures (millions of euro) Reasons/Categories Bad loans Unlikely to pay Non- performing past due exposures A. Initial gross exposure 9,461 9,915 774 - of which: exposures sold not derecognised 196 862 242 B. Increases 1,852 3,905 817 B.1 inflows from performing exposures 377 2,432 761 B.2 inflows from purchased or originated credit-impaired financial assets - - - B.3 transfers from other non-performing exposures categories 985 701 14 B.4 changes in contracts without derecognition - 9 - B.5 other increases 490 763 42 C. Decreases -7,463 -6,389 -1,039 C.1 outflows to performing exposures -22 -639 -171 C.2 write-offs -549 -194 -1 C.3 collections -505 -1,106 -118 C.4 profits on disposal -1,382 -1,085 -1 C.5 losses on disposal -130 -5 -1 C.6 transfers to other non-performing exposure categories -75 -926 -699 C.7 changes in contracts without derecognition - -19 - C.8 other decreases -4,800 -2,415 -48 D. Final gross exposure 3,850 7,431 552 - of which: exposures sold not derecognised 93 507 172 The \u201cother increases\u201d mainly include the increases in the amounts for charges and the increase in the amounts in foreign currency due to changes in the exchange rate. The \u201cother decreases\u201d mainly include the portfolio of loans classified as \u201cbad loans\u201d and \u201cunlikely to pay\u201d sold during the year. A.1.7. Bis Prudential Consolidation \u2013 On-balance sheet credit exposures to customers: changes in gross forborne exposures broken down by credit quality (millions of euro) Reasons/Quality Forborne exposures: non- performing Forborne exposures: performing A. Initial gross exposure 6,170 8,616 - of which: exposures sold not derecognised 580 1,780 B. Increases 1,624 2,467 B.1 inflows from non-forborne performing exposures 227 1,910 B.2 inflows from forborne performing exposures 638 X B.3 inflows from non-performing forborne exposures X 439 B.4 inflows from forborne non-performing exposures 173 6 B.5 other increases 586 112 C. Decreases -3,872 -3,601 C.1 outflows towards non-forborne performing exposures X -1,397 C.2 outflows towards forborne performing exposures -439 X C.3 outflows towards non-performing forborne exposures X -638 C.4 write-offs -127 - C.5 collections -690 -913 C.6 profits on disposal -820 -395 C.7 losses on disposal -56 - C.8 other decreases -1,740 -258 D. Final gross exposure 3,922 7,482 - of which: exposures sold not derecognised 260 1,335 The \u201cother increases\u201d mainly include the increases in the amounts for charges. The \u201cother decreases\u201d mainly include the portfolio of loans classified as \u201cbad loans\u201d and \u201cunlikely to pay\u201d sold during the year. A.1.8 Prudential Consolidation \u2013 On-balance sheet non-performing credit exposures to banks: changes in total adjustments (millions of euro) Reasons/Categories BAD LOANS UNLIKELY TO PAY NON-PERFORMING PAST DUE EXPOSURES Total of which: forborne exposures Total of which: forborne exposures Total of which: forborne exposures A. Initial total adjustments 4 - 13 13 - - - of which: exposures sold not derecognised - - - - - - B. Increases - - - - - - B.1 adjustments to purchased or originated credit- impaired assets - X - X - X C.2 other adjustments - - - - - - B.3 losses on disposal - - - - - - B.4 transfers from other non-performing exposures categories - - - - - - B.5 changes in contracts without derecognition - - - - - - B.6 other increases - - - - - - C. Decreases - - -1 -1 - - C.1 recoveries on impairment losses - - -1 -1 - - C.2 recoveries on repayments - - - - - - C.3 profits on disposal - - - - - - C.4 write-offs - - - - - - C.5 transfers to other non-performing exposure categories - - - - - - C.6 changes in contracts without derecognition - - - - - - C.7 other decreases - - - - - - D. Final total adjustments 4 - 12 12 - - - of which: exposures sold not derecognised - - - - - - A.1.9 Prudential Consolidation \u2013 On-balance sheet non-performing credit exposures to customers: changes in total adjustments (millions of euro) Reasons/Categories BAD LOANS UNLIKELY TO PAY NON-PERFORMING PAST DUE EXPOSURES Total of which: forborne exposures Total of which: forborne exposures Total of which: forborne exposures A. Initial total adjustments 6,897 1,294 4,582 1,562 152 32 - of which: exposures sold not derecognised 105 28 221 116 35 4 B. Increases 1,794 381 1,975 764 215 21 B.1 adjustments to purchased or originated credit- impaired assets - X - X - X C.2 other adjustments 851 180 1,566 599 162 21 B.3 losses on disposal 253 56 6 1 1 - B.4 transfers from other non-performing exposures categories 463 121 185 50 9 - B.5 changes in contracts without derecognition - - 77 77 - - B.6 other increases 227 24 141 37 43 - C. Decreases -6,019 -1,157 -3,601 -1,197 -228 -42 C.1 recoveries on impairment losses -367 -84 -425 -261 -43 - C.2 recoveries on repayments -99 -21 -141 -85 -6 - C.3 profits on disposal -23 -1 -15 -8 - - C.4 write-offs -549 -73 -194 -54 -1 - C.5 transfers to other non-performing exposure categories -47 -10 -449 -119 -161 -42 C.6 changes in contracts without derecognition - - -14 -14 - - C.7 other decreases -4,934 -968 -2,363 -656 -17 - D. Final total adjustments 2,672 518 2,956 1,129 139 11 - of which: exposures sold not derecognised 46 7 106 45 31 4 The \u201cother increases\u201d mainly include the collections of loans derecognised in full (through \u201crecoveries on repayments\u201d) and increases in the balances of allowances in foreign currency due to changes in the exchange rate. The \u201cother decreases\u201d mainly include the portfolio of loans classified as \u201cbad loans\u201d and \u201cunlikely to pay\u201d sold during the year. This caption also includes the collections of overdue interest applied in previous years, losses on disposal not covered by the allowance, the decrease in allowances in foreign currency due to changes in the exchange rate and the reduction in the allowances for adjustment due to the passing of time. A.2. Classification of exposures based on external and internal ratings A.2.1. Prudential Consolidation - Breakdown of financial assets, commitments to disburse funds and financial guarantees given by external rating classes (gross amounts) The Intesa Sanpaolo Group uses the ratings supplied by the following external rating agencies for portfolios subject to reporting: Standard & Poor\u2019s Ratings Services, Moody\u2019s Investors Service, Fitch Ratings and DBRS Morningstar. The ratings provided by those agencies are used in compliance with the authorisations received and the regulations in force for the different Group banks. In compliance with the regulations, if there are two ratings for the same customer, the most prudential of the two is used, when three ratings are available, the middle rating is adopted, and when all ratings are available, the second-best is taken. (millions of euro) Exposures EXTERNAL RATING CLASSES UNRATED TOTAL Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 A. Financial assets measured at amortised cost 17,930 23,364 64,235 10,923 6,063 374 413,994 536,883 - Stage 1 17,887 21,082 62,418 10,578 4,631 113 358,898 475,607 - Stage 2 43 2,282 1,817 343 1,300 100 44,335 50,220 - Stage 3 - - - - 132 161 10,379 10,672 - Purchased or originated credit-impaired - - - 2 - - 382 384 B.Financial assets measured at fair value through other comprehensive income 16,399 10,502 14,790 963 2,481 69 3,284 48,488 - Stage 1 16,399 10,502 14,722 866 2,290 47 2,758 47,584 - Stage 2 - - 68 97 191 8 504 868 - Stage 3 - - - - - 14 22 36 - Purchased or originated credit-impaired - - - - - - - - C. Non-current financial assets held for sale - - - - - - 754 754 - Stage 1 - - - - - - - - - Stage 2 - - - - - - 10 10 - Stage 3 - - - - - - 725 725 - Purchased or originated credit-impaired - - - - - - 19 19 Total (A+B+C) 34,329 33,866 79,025 11,886 8,544 443 418,032 586,125 D. Commitments to disburse funds and financial guarantees given - Stage 1 11,594 25,962 51,799 13,899 3,271 142 161,048 267,715 - Stage 2 27 211 3,177 2,099 1,586 35 19,891 27,026 - Stage 3 - - - - 25 3 1,754 1,782 - Purchased or originated credit-impaired - - - - - - 4 4 Total (D) 11,621 26,173 54,976 15,998 4,882 180 182,697 296,527 Total (A+B+C+D) 45,950 60,039 134,001 27,884 13,426 623 600,729 882,652 The following table shows the mapping of risk classes and the external ratings. Mapping of ratings issued by external rating agencies ECAI Moody's Standard & Poor's Fitch DBRS Morningstar Long term Short term Long term Short term Long term Short term Long term Short term Credit quality step 1 Aaa, Aa3 P-1 AAA, AA- A1+, A1 AAA, AA- F1+, F1 AAA, AA- R-1 2 A1, A3 P-2 A+, A- A2 A+, A- F2 A+, A- R-2 3 Baa1, Baa3 P-3 BBB+, BBB- A3 BBB+, BBB- F3 BBB+, BBB- R-3 4 Ba1, Ba3 NP BB+, BB- less than A3 BB+, BB- less than F3 BB+, BB- less than R-3 5 B1, B3 NP B+, B- less than A3 B+, B- less than F3 B+, B- less than R-3 6 Caa1 or less NP CCC+ or less less than A3 CCC+ or less less than F3 CCC+ or less less than R-3 A.2.2. Prudential Consolidation - Breakdown of financial assets, commitments to disburse funds and financial guarantees given by internal rating classes (gross amounts) As indicated above in the paragraph entitled \u201cBasel 3 Regulations\u201d, the Intesa Sanpaolo Group has a set of ratings for the various operating segments of the counterparties (Corporate, Retail SME, Retail, Public Sector Entities and Banks). The breakdown of exposures by internal rating classes shown in the following table is based on all ratings available in the credit risk management and control system, in addition to ratings for validated models. These ratings include credit ratings assigned by external agencies for counterparties in customer segments for which an internal model is not available. Unrated exposures account for 7.8% of all exposures to performing counterparties and refer to customer portfolios for which a rating model is not available, to counterparties for which the roll-out of internal models is still underway (mainly international subsidiaries), as well as to Group companies whose mission is not related to credit and loans, which have been integrated into the credit risk management system, or to marginal exposures. When unrated counterparties and non-performing loans are excluded, there is a high concentration of investment grade classes (classes 1, 2 and 3, representing ratings between AAA and BBB-) at 69.3% of the total, whilst 22.6% fall within the BB+/BB range (class 4) and 8% fall under higher risk classes (of which 2.3% are below B-). Exposures Internal rating classes Unrated Total Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 A. Financial assets measured at amortized cost 91,831 46,154 168,462 125,556 33,988 17,037 53,855 536,883 - Stage 1 91,064 45,045 162,091 108,589 22,183 9,367 37,268 475,607 - Stage 2 765 1,108 6,360 16,931 10,350 5,117 9,589 50,220 - Stage 3 1 - - 2 1,373 2,500 6,796 10,672 - Purchased or originated credit-impaired 1 1 11 34 82 53 202 384 B. Financial assets measured at fair value through other comprehensive income 15,298 8,508 14,013 1,637 1,996 691 6,345 48,488 - Stage 1 15,282 8,484 13,965 1,016 1,921 685 6,231 47,584 - Stage 2 16 24 48 621 75 6 78 868 - Stage 3 - - - - - - 36 36 - Purchased or originated credit-impaired - - - - - - - - C. Non-current financial assets held for sale - - - 8 195 452 99 754 - Stage 1 - - - - - - - - - Stage 2 - - - 8 2 - - 10 - Stage 3 - - - - 188 441 96 725 - Purchased or originated credit-impaired - - - - 5 11 3 19 Total (A+B+C) 107,129 54,662 182,475 127,201 36,179 18,180 60,299 586,125 D. Commitments and financial guarantees given - Stage 1 24,502 62,299 116,759 45,823 7,857 2,127 8,348 267,715 - Stage 2 109 1,482 6,271 8,504 3,258 1,478 5,924 27,026 - Stage 3 - - 1 2 383 174 1,222 1,782 - Purchased or originated credit-impaired - - - - - - 4 4 Total (D) 24,611 63,781 123,031 54,329 11,498 3,779 15,498 296,527 Total (A+B+C+D) 131,740 118,443 305,506 181,530 47,677 21,959 75,797 882,652 In addition to the tables required by the regulations, the rating allocation for performing loans to customers attributable to the main Group banks is shown below. As at 31 December 2022, performing loans to customers assigned an individual rating internally or by an external agency accounted for 96% of the loans of the main Group banks. The allocation shows a level of investment grade exposures (from AAA to BBB inclusive), at 63.0%, down on the previous year (67.1%), mainly due to a revision in the master scale for certain types of counterparties rated using internal models. The same percentage calculated on the entire portfolio, net of Russian counterparties, came to 74.2%. Movements between rating classes are mainly caused by changes in risk parameters as a result of the update of the models. 0.0% 17.7% 9.2% 36.1% 30.5% 5.3% 1.2% 1.9% 10.3% 18.1% 36.8% 26.0% 6.0% 0.9% AAA AA A BBB BB B CCC 2022 2021 The breakdown of the following portfolios by rating is presented below: Corporate, Retail Mortgage (residential mortgages for individuals), Small Business and other retail, Sovereign & Public Entities. Investment grade positions account for 59.9%, 67.4%, 47.3% and 91.9% of the above portfolios, respectively. 0.1% 2.3% 13.0% 44.5% 32.5% 6.0% 1.6% AAA AA A BBB BB B CCC Corporate 0.0% 47.3% 0.0% 20.1% 30.1% 2.1% 0.4% AAA AA A BBB BB B CCC Retail Mortgage 0.0% 22.6% 11.0% 13.7% 39.3% 11.3% 2.1% AAA AA A BBB BB B CCC Small Business and other retail 0.0% 5.7% 13.3% 72.9% 4.4% 3.3% 0.4% AAA AA A BBB BB B CCC Sovereign & Public Entities A.3. Breakdown of guaranteed credit exposures by type of guarantee A.3.1. Prudential Consolidation \u2013 Guaranteed on- and off-balance sheet credit exposures to banks (millions of euro) Gross exposure Net exposures Collaterals (*) Personal guarantees (1) (2) Credit derivatives Real estate assets - mortgages Real estate assets - finance leases Securities Other CLN Other derivatives Central counterparties 1.Guaranteed on-balance sheet credit exposures: 6,437 6,433 - 5 5,559 172 - - 1.1 totally guaranteed 5,596 5,593 - 5 5,193 172 - - - of which non-performing 1 - - - - - - - 1.2 partly guaranteed 841 840 - - 366 - - - - of which non-performing - - - - - - - - 2. Guaranteed off-balance sheet credit exposures: 26,510 26,510 - - 1,929 11,333 - - 2.1 totally guaranteed 4,925 4,925 - - 1,929 980 - - - of which non-performing - - - - - - - - 2.2 partly guaranteed 21,585 21,585 - - - 10,353 - - - of which non-performing - - - - - - - - (*) Fair value of the guarantee or, if difficult to determine, its contractual value; as required by the regulations, the latter is stated up to the net exposure value. (millions of euro) Personal guarantees (*) Total (2) Credit derivatives Commitments Other derivatives Public Administration Banks Other financial companies Other counterparties (1)+(2) Banks Other financial companies Other counterparties 1.Guaranteed on-balance sheet credit exposures: - - - 228 23 - 66 6,053 1.1 totally guaranteed - - - 8 3 - 66 5,447 - of which non-performing - - - - - - - - 1.2 partly guaranteed - - - 220 20 - - 606 - of which non-performing - - - - - - - - 2. Guaranteed off-balance sheet credit exposures: - - - 7 76 - 70 13,415 2.1 totally guaranteed - - - 3 35 - 14 2,961 - of which non-performing - - - - - - - - 2.2 partly guaranteed - - - 4 41 - 56 10,454 - of which non-performing - - - - - - - - (*) Fair value of the guarantee or, if difficult to determine, contractual value, the latter stated - as required by the regulations - up to the net exposure value. A.3.2. Prudential Consolidation - Guaranteed on- and off-balance sheet credit exposures to customers (millions of euro) Gross exposure Net exposure Collateral (*) Personal guarantees (*) (1) (2) Credit derivatives Real estate assets - mortgages Real estate assets - finance leases Securities Other CLN Other derivatives Central counterparties 1. Guaranteed on-balance sheet credit exposures: 318,384 313,549 164,512 4,816 26,969 10,564 - - 1.1 totally guaranteed 252,621 248,860 161,898 4,626 26,238 8,118 - - - of which non-performing 6,201 3,838 2,517 268 45 104 - - 1.2 partly guaranteed 65,763 64,689 2,614 190 731 2,446 - - - of which non-performing 1,476 737 170 65 9 22 - - 2. Guaranteed off-balance sheet credit exposures: 53,130 53,017 2,016 52 8,758 4,341 - - 2.1 totally guaranteed 39,452 39,376 1,390 10 8,288 2,115 - - - of which non-performing 327 295 36 - 6 12 - - 2.2. partly guaranteed 13,678 13,641 626 42 470 2,226 - - - of which non-performing 159 136 23 - 1 27 - - (*) Fair value of the guarantee or, if difficult to determine, its contractual value; as required by the regulations, the latter is stated up to the net exposure value. (millions of euro) Personal guarantees (*) Total (2) Credit derivatives Commitments Other derivatives Public administration Banks Other financial companies Other counterparties (1)+(2) Banks Other financial companies Other counterparties 1. Guaranteed on-balance sheet credit exposures - - - 49,862 766 3,199 26,698 287,386 1.1 totally guaranteed - - - 23,208 437 2,253 17,987 244,765 - of which non-performing - - - 360 5 29 439 3,767 1.2 partly guaranteed - - - 26,654 329 946 8,711 42,621 - of which non-performing - - - 277 1 4 59 607 2. Guaranteed off-balance sheet credit exposures: - - - 2,477 92 1,787 25,015 44,538 2.1 totally guaranteed - - - 1,558 42 899 20,443 34,745 - of which non-performing - - - 30 - 1 161 246 2.2. partly guaranteed - - - 919 50 888 4,572 9,793 - of which non-performing - - - 7 - - 31 89 (*) Fair value of the guarantee or, if difficult to determine, its contractual value; as required by the regulations, the latter is stated up to the net exposure value. A.4. Prudential consolidation \u2013 Financial assets and non-financial assets resulting from the enforcement of guarantees (millions of euro) Derecognised credit exposure Gross amount Total adjustments Book value of which obtained during the year A. Property and equipment 338 375 -70 305 15 A.1 Used in operations 1 1 - 1 - A.2. Investment 134 123 -9 114 3 A.3 Inventories 203 251 -61 190 12 B. Equities and debt securities 367 368 -176 192 - C. Other assets - - - - - D. Non-current assets held for sale and discontinued operations 5 6 -1 5 - D.1 Property and equipment 5 6 -1 5 - D.2. Other assets - - - - - Total 31.12.2022 710 749 -247 502 15 Total 31.12.2021 735 775 -196 579 36 For the Group, the assets seized (book value) are mainly represented by: \u2013 Property and equipment used in operations: buildings (1 million euro); \u2013 Investment property: buildings (82 million euro); land (32 million euro); \u2013 Property and equipment \u2013 Inventories: buildings (178 million euro), land (12 million euro); \u2013 Equities and debt securities: o equity investments of 24 million euro (primarily relating to the equity investment in Risanamento); o financial assets mandatorily measured at fair value of 118 million euro; o financial assets measured at fair value through other comprehensive income of 50 million euro. These are financial assets not previously provided by the borrower as security for pre-existing loans, but acquired under bilateral agreements with the borrower, following which the Group has derecognised the credit exposure; \u2013 Non-current assets held for sale and discontinued operations: buildings (4 million euro), other (1 million euro). B. BREAKDOWN AND CONCENTRATION OF CREDIT EXPOSURES B.1. Prudential Consolidation - Breakdown by sector of on- and off-balance sheet credit exposures to customers (millions of euro) Exposures/Counterparties Public administration Financial companies Financial companies (of which: insurance companies) Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans 73 -158 6 -23 - - - of which: forborne exposures - - 1 -1 - - A.2 Unlikely to pay 153 -30 105 -167 - - - of wich: forborne exposures 22 -10 18 -58 - - A.3 Non-performing past due exposures 2 - 1 - - - - of which: forborne exposures - - - - - - A.4 Performing exposures 90,484 -147 72,943 -120 1,315 - - of which: forborne exposures 13 - 140 -4 - - Total (A) 90,712 -335 73,055 -310 1,315 - B. Off-balance sheet exposures B.1 Non-performing exposures 91 -8 22 -2 - - B.2 Performing exposures 27,791 -8 66,502 -29 10,312 - Total (B) 27,882 -16 66,524 -31 10,312 - Total (A+B) 31.12.2022 118,594 -351 139,579 -341 11,627 - Total (A+B) 31.12.2021 155,202 -301 124,749 -576 10,072 - (millions of euro) Exposures/Counterparties Non-financial companies Households Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans 681 -1,546 418 -945 - of which: forborne exposures 219 -394 77 -123 A.2 Unlikely to pay 2,727 -1,906 1,490 -853 - of which: forborne exposures 1,212 -810 679 -251 A.3 Non-performing past due exposures 133 -44 277 -95 - of which: forborne exposures 17 -5 19 -6 A.4 Performing exposures 201,804 -1,594 178,794 -880 - of which: forborne exposures 5,048 -437 1,728 -112 Total (A) 205,345 -5,090 180,979 -2,773 B. Off-balance sheet exposures B.1 Non-performing exposures 1,336 -249 55 -8 B.2 Performing exposures 216,744 -179 18,221 -26 Total (B) 218,080 -428 18,276 -34 Total (A+B) 31.12.2022 423,425 -5,518 199,255 -2,807 Total (A+B) 31.12.2021 444,382 -10,582 193,298 -3,205 B.2. Prudential Consolidation - Breakdown by geographical area of on- and off-balance sheet credit exposures to customers (millions of euro) Exposures/Geographical areas Italy Other european countries Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans 956 -1,906 156 -610 A.2 Unlikely to pay 3,727 -2,417 557 -399 A.3 Non-performing past due exposures 344 -88 61 -44 A.4 Performing exposures 376,976 -1,648 116,563 -978 Total (A) 382,003 -6,059 117,337 -2,031 B. Off-balance sheet exposures B.1 Non-performing exposures 1,275 -219 99 -45 B.2 Performing exposures 169,505 -137 114,307 -84 Total (B) 170,780 -356 114,406 -129 - - Total (A+B) 31.12.2022 552,783 -6,415 231,743 -2,160 Total (A+B) 31.12.2021 585,575 -12,838 231,907 -1,408 (millions of euro) Exposures/Geographical areas America Asia Rest of the world Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans 37 -76 1 -32 28 -48 A.2 Unlikely to pay 16 -63 43 -29 132 -48 A.3 Non-performing past due exposures - - - - 8 -7 A.4 Performing exposures 26,909 -45 14,481 -21 9,096 -49 Total (A) 26,962 -184 14,525 -82 9,264 -152 B. Off-balance sheet exposures B.1 Non-performing exposures 23 - 12 - 95 -3 B.2 Performing exposures 30,733 -7 11,622 -2 3,091 -12 Total (B) 30,756 -7 11,634 -2 3,186 -15 57718 Total (A+B) 31.12.2022 57,718 -191 26,159 -84 12,450 -167 Total (A+B) 31.12.2021 56,550 -148 29,087 -64 14,512 -206 B.2.Bis Prudential consolidation \u2013 Breakdown of relations with customers resident in Italy by geographical area (millions of euro) Exposures/Geographical areas North West North East Centre South and islands Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans 254 -591 171 -316 236 -389 295 -610 A.2 Unlikely to pay 1,424 -864 522 -412 916 -582 865 -559 A.3 Non-performing past due exposures 104 -27 44 -12 77 -20 119 -29 A.4 Performing exposures 133,051 -688 72,057 -248 113,783 -384 58,085 -328 Total A 134,833 -2,170 72,794 -988 115,012 -1,375 59,364 -1,526 B. Off-balance sheet exposures B.1 Non-performing exposures 421 -49 467 -84 269 -73 118 -13 B.2 Performing exposures 72,661 -96 32,751 -15 49,630 -16 14,463 -10 Total B 73,082 -145 33,218 -99 49,899 -89 14,581 -23 Total (A+B) 31.12.2022 207,915 -2,315 106,012 -1,087 164,911 -1,464 73,945 -1,549 Total (A+B) 31.12.2021 215,021 -4,799 104,749 -2,290 193,455 -3,006 72,350 -2,743 B.3. Prudential Consolidation - Breakdown by geographical area of on- and off-balance sheet credit exposures to banks (millions of euro) Exposures / Geographical Areas Italy Other european countries Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans - - - -2 A.2 Unlikely to pay - - - - A.3 Non-performing past due exposures - - 1 - A.4 Performing exposures 103,544 -2 32,515 -25 Total (A) 103,544 -2 32,516 -27 B. Off-balance sheet exposures B.1 Non-performing exposures - - - - B.2 Performing exposures 8,879 - 51,458 -65 Total (B) 8,879 - 51,458 -65 Total (A+B) 31.12.2022 112,423 -2 83,974 -92 Total (A+B) 31.12.2021 136,133 -4 80,122 -11 (millions of euro) Exposures / Geographical Areas America Asia Rest of the world Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans - - - -2 - - A.2 Unlikely to pay 36 -12 - - - - A.3 Non-performing past due exposures - - - - - - A.4 Performing exposures 6,314 -1 3,026 -1 2,634 -10 Total (A) 6,350 -13 3,026 -3 2,634 -10 B. Off-balance sheet exposures B.1 Non-performing exposures 2 - - - 10 - B.2 Performing exposures 6,969 - 11,037 - 2,508 -1 Total (B) 6,971 - 11,037 - 2,518 -1 Total (A+B) 31.12.2022 13,321 -13 14,063 -3 5,152 -11 Total (A+B) 31.12.2021 11,588 -14 13,093 -4 5,492 -10 B.3.Bis Prudential consolidation \u2013 Breakdown of relations with banks resident in Italy by geographical area (millions of euro) Exposures/Geographical areas NORTH WEST NORTH EAST CENTRE SOUTH AND ISLANDS Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments Net exposure Total adjustments A. On-balance sheet exposures A.1 Bad loans - - - - - - - - A.2 Unlikely to pay - - - - - - - - A.3 Non-performing past due exposures - - - - - - - - A.4 Performing exposures 3,845 -1 3,015 - 96,677 -1 7 - Total A 3,845 -1 3,015 - 96,677 -1 7 - B. Off-balance sheet exposures B.1 Non-performing exposures - - - - - - - - B.2 Performing exposures 6,465 - 749 - 1,661 - 4 - Total B 6,465 - 749 - 1,661 - 4 - - - - - Total (A+B) 31.12.2022 10,310 -1 3,764 - 98,338 -1 11 - Total (A+B) 31.12.2021 8,969 -3 1,474 - 125,485 -1 205 - B.4 Large exposures Large exposures a) Book value (millions of euro) 258,353 b) Weighted value (millions of euro) 22,314 b) Number 9 Based on regulatory provisions, the number of large exposures presented in the table was determined by the reference to unweighted \u201cexposures\u201d in excess of 10% of Tier 1 Capital as defined by Regulation (EU) 876/2019 (CRR2) and Regulation (EU) 575/2013 (CRR). The \u201cexposures\u201d are defined as the sum of on-balance sheet assets at risk and off-balance sheet transactions (excluding those deducted from Tier 1 Capital) with a customer or a group of related customers, without applying weighting factors. These presentation criteria result in the inclusion in the financial statement table for large exposures of entities that \u2013 even with a weighting of 0% \u2013 present an unweighted exposure in excess of 10% of Tier 1 Capital for the purposes of large risks. In accordance with the provisions of the EBA document \"Guidelines on connected clients under Article 4(1)(39) of Regulation (EU) 575/2013\", the supervisory reports have standard methods of presentation of groups of connected clients that (in the case of silos) require exposures to the central governments to be repeated within each corresponding economic group directly controlled by a central government or connected to it by economic dependence. However, the amounts shown in points a) and b) and the number shown in point c) in the table above include the exposure to the various central governments, to which the Intesa Sanpaolo Group is exposed, only once. C. SECURITISATIONS This section does not include securitisations where the originators are Intesa Sanpaolo Group banks and all the liabilities (e.g. ABS securities, loans at the warehousing stage) issued by the vehicle companies are subscribed at the time of issue by one or more Group companies. For a description of these types of transaction, see the section on liquidity risk in Part E of the Notes to the consolidated financial statements. Qualitative information The securitisations carried out in 2022 are summarised below: GARC Securitisations Within the \u201cGARC\u201d transactions, Intesa Sanpaolo completed six new synthetic securitisations during the year: GARC High Potential-2, GARC Residential Mortgages-3, GARC Leasing-2, GARC Corp-5, GARC CRE-1 and GARC Infrastructure-1. Specifically: i) For the GARC High Potential-2 transaction, the junior and mezzanine risk relating to a portfolio of around 0.5 billion euro in residential mortgages to around 7,000 retail customers, valued using internal models (Advanced IRB), was sold; ii) For the GARC Residential Mortgages-3 transaction, the upper junior and mezzanine risk relating to a portfolio of around 1.4 billion euro of high LTV residential mortgages to around 12,800 retail customers, valued using internal models (Advanced IRB), was sold to specialist investors; iii) For the GARC Leasing-2 transaction, the junior risk relating to a total portfolio of around 2.1 billion euro in finance leases to around 2,900 businesses in the Corporate and Corporate SME regulatory segment, valued using internal models (Advanced IRB), was sold to specialist investors; iv) For the GARC CORP-5 transaction, the junior risk relating to a total portfolio of around 7.5 billion euro in loans to around 4,500 businesses in the Corporate and Corporate SME regulatory segment, valued using internal models (Advanced IRB), was sold to specialist investors; v) For the GARC Commercial Real Estate-1 transaction, the junior risk relating to a total portfolio of around 1.9 billion euro in corporate and commercial real estate mortgage loans to around 150 counterparties in the Corporate and Corporate SME regulatory segment, valued using internal models (Advanced IRB), was sold to specialist investors; vi) For the GARC Infrastructure-1 transaction, the junior risk relating to a total portfolio of around 2.3 billion euro in corporate and project finance loans in the infrastructure segment to around 200 businesses in the Corporate and Corporate SME regulatory segment, valued using internal models (Advanced IRB), was sold to specialist investors. In compliance with the retention rule laid down by the supervisory regulations, for the first four transactions, Intesa Sanpaolo holds 5% of the securitised portfolio, while for the last two, it holds 10% of the securitised portfolio. The portfolios of the transactions mainly consist of customers operating in Northern Italy. Tranched Cover Fondo di Garanzia per le PMI Securitisation During 2022, as part of the operations with the Guarantee Fund for SMEs, the ramp-up was completed of four tranched cover transactions on the junior risk of portfolios of newly disbursed loans in support of businesses adversely affected by the COVID-19 emergency, for a total of around 0.6 billion euro to around 1,700 businesses. For these transactions, Intesa Sanpaolo holds at least 10% of the securitised portfolios in compliance with the retention rule laid down by the supervisory regulations. Organa Securitisation As part of the derisking strategy envisaged in the 2022-2025 Business Plan, and, specifically, in line with the 2022 derisking plan approved by the Board of Directors on 21 December 2021, in April 2022, Intesa Sanpaolo completed a process to deconsolidate a loan portfolio classified as \u201cbad loans\u201d, through a securitisation and subsequent application for issue of a \u201cGACS\u201d government guarantee for the holders of senior notes issued as part of the transaction, once those senior notes had obtained an investment grade rating of no less than BBB or equivalent, as envisaged by Italian Law no. 49/2016. The portfolio to be sold, identified as at 31 December 2021 (cut-off date), has a Gross Book Value (GBV) of around 4 billion euro (accounting GBV at pre-closing values, before PPA). Within the transaction, Intrum Italy S.p.A. acts as special servicer of the securitisation. The securitised assets were broken down as follows by geographical area: \u2012 31.2% North-West; \u2012 25.0% Centre; \u2012 22.5% South and Islands; \u2012 21.1% North-East; \u2012 0.2% Outside Italy. The breakdown of the assigned debtors by economic sector was as follows: \u2012 18.6% Production companies; \u2012 16.1% Consumer households; \u2012 14.9% Construction companies; \u2012 13.8% Wholesale and retail; \u2012 13.3% Real estate business; \u2012 8.0% Services; \u2012 15.3% other business sectors (Agriculture, Transport, Manufacturing). The sale transaction was structured in two main phases: (i) Self-securitisation: in that phase, the sale of the portfolio to a securitisation vehicle, Organa SPV S.r.l. (SPV), established pursuant to Italian Law 130/99, was completed, with Intesa Sanpaolo fully subscribing the senior, mezzanine and junior notes issued by the SPV to finance the purchase price of the portfolio. At the time of issue of the notes, Intesa Sanpaolo disbursed a loan with limited recourse as a liquidity facility for said SPV. In this phase of the transaction, as the risks and rewards of the assets sold had not yet been transferred, the portfolio continued to be consolidated in the Intesa Sanpaolo financial statements. Concurrent with the issue of the securitisation notes, Moody\u2019s, DBRS and Scope issued ratings for the senior class of notes - investment grade \u201cBBB\u201d or equivalent; (ii) \u201cPlacement of the subordinated securities and deconsolidation of the portfolio sold\u201d: in that phase, the sale of 95% of the Mezzanine and Junior notes was finalised to a third party investor selected through syndication on the market and, following the sale, the accounting and regulatory derecognition of the portfolio was also finalised, with the subsequent application for a GACS guarantee to the Ministry of the Economy and Finance and Concessionaria Servizi Assicurativi Pubblici. The guarantee was granted on 10 June 2022. The SPV financed the acquisition of the portfolio by issuing 3 classes of securities, of which the senior tranche was subscribed entirely by Intesa Sanpaolo, while the mezzanine and junior tranches were subscribed 95% by third party investors and 5% by Intesa Sanpaolo in compliance with the retention rule laid down in the supervisory regulations: \u2012 senior notes of 970 million euro, fully subscribed by Intesa Sanpaolo; \u2012 mezzanine notes of 130 million euro, of which 6.5 million euro subscribed by Intesa Sanpaolo and the remainder by a third-party investor; \u2012 junior notes of 15 million euro, of which 0.8 million euro subscribed by Intesa Sanpaolo and the remainder by a third- party investor. Upon completion of the transaction, Intesa Sanpaolo achieved full accounting and regulatory deconsolidation of that portfolio. Taking into account the subscription of 100% of the senior notes and 5% of the junior and mezzanine notes in compliance with the retention rule, the variability connected to the cash flows of the underlying portfolio retained by the Group enabled it to establish that the Group has substantially transferred all the risks and rewards of the financial assets transferred, meeting the conditions under point a) of IFRS 9.3.2.6, as a result of which it has \u201cderecognised the financial asset and recognised separately as assets or liabilities any rights and obligations originated from or maintained with the transfer\u201d. In this regard, the notes subscribed by Intesa Sanpaolo, due to the business model used and the look-through test carried out, have been classified as follows: \u2012 senior tranches under securities at amortised cost; \u2012 mezzanine and junior tranches under securities measured at FVTPL. The transaction was carried out in accordance with the Group\u2019s income statement and balance sheet targets and forecasts which have already been disclosed to the market for the 2022-2025 Business Plan. Teseo Securitisation As part of the derisking strategy envisaged in the 2022-2025 Business Plan and, specifically, in line with the Board of Directors\u2019 resolution of 4 November 2022, on 21 November 2022 the sale of a performing loan portfolio deriving from leases originated by Intesa Sanpaolo was finalised through a securitisation pursuant to Law 130/99. The portfolio sold is composed of performing loans mainly in the Corporate SME segment (60% of the portfolio sold) and the Small Business Retail segment (26% of the portfolio sold) with a Gross Book Value (GBV) of around 3,761 million euro as at 31 October 2022 (date of identification of the portfolio). As part of the transaction, in addition to being the originator, Intesa Sanpaolo is also the servicer of the portfolio. The sale involved the transfer of the loans to the SPV, along with the transfer of the legal asset and liability relationships arising from the leases pertaining to the loans sold, where the ownership of the moveable and immovable property covered by those leases remained with Intesa Sanpaolo. The securitised assets were broken down as follows by geographical area: \u2012 63.26% North; \u2012 23.76% Centre; \u2012 12.98% South and Islands. The breakdown of the assigned debtors by economic sector was as follows: \u2012 27% Production companies; \u2012 22% Real Estate; \u2012 17% Wholesale and Retail; \u2012 34% other business sectors. The breakdown by type of lease was as follows: \u2012 82.2% real estate leases; \u2012 10.5% equipment leases; \u2012 4.4% energy leases; \u2012 2.9% other (motor vehicles, aeronautical, etc.). On 30 November 2022 the SPV financed the acquisition of the portfolio by issuing 4 classes of securities, two senior tranches, one fixed-rate and one floating-rate, both 100% subscribed by Intesa Sanpaolo. One mezzanine tranche and one junior tranche were 5% subscribed by Intesa Sanpaolo, in compliance with the retention rule laid down in the supervisory regulations. In detail: \u2012 Class A1 \u2013 floating-rate senior \u2013 fully subscribed by Intesa Sanpaolo for a total of 2,632 million euro; \u2012 Class A2 \u2013 fixed-rate senior \u2013 fully subscribed by Intesa Sanpaolo for a total of 564 million euro; \u2012 Class B \u2013 mezzanine \u2013 subscribed by Intesa Sanpaolo for 9.4 million euro and the remainder by third parties; \u2012 Class J \u2013 junior \u2013 subscribed by Intesa Sanpaolo for 20.5 million euro, at an issue price of 9.3 million euro, and the remainder by third parties. With the completion of the transaction, Intesa Sanpaolo achieved full accounting and prudential deconsolidation of the portfolio. More specifically, taking into account the retention of 5% of the classes issued (vertical slice), the variability connected to the cash flows of the underlying portfolio retained by the Group enabled it to establish that the Group has substantially transferred all the risks and rewards of the financial assets transferred, meeting the conditions under point a) of IFRS 9.3.2.6, as a result of which it has \u201cderecognised the financial asset and recognised separately as assets or liabilities any rights and obligations originated from or maintained with the transfer\u201d. In addition, a significant credit risk transfer was carried out, in line with Article 244(2) of the CRR. In this regard, the notes subscribed by Intesa Sanpaolo, due to the business model used, have been classified as follows: \u2012 the senior and mezzanine classes under securities at amortised cost; \u2012 the junior class under securities at fair value through profit or loss (FVTPL). The transaction was carried out in accordance with the Group\u2019s income statement and balance sheet targets and forecasts which have already been disclosed to the market for the 2022-2025 Business Plan. Quantitative information C.1. Prudential consolidation - Breakdown of exposures deriving from the main \u201coriginated\u201d securitisations by type of securitised asset and by type of exposure On-balance sheet (millions of euro) Type of securitised asset/ Exposure ON-BALANCE SHEET EXPOSURES Senior Mezzanine Junior Book value Adjust./ recoveries Book value Adjust./ recoveries Book value Adjust./ recoveries A. Fully derecognised 7,401 6 49 -10 16 -11 \u2013 Loans to businesses (including SMEs) (*) 3,661 7 35 -9 5 -11 \u2013 Leases (**) 3,203 -1 13 - 10 - \u2013 Residential mortgage loans (*) 537 - 1 -1 - - \u2013 Consumer credit - - - - 1 - B. Partly derecognised - - - - - - C. Not derecognised 24,824 4 97 7 413 -3 - Loans to businesses (including SMEs) (***) (****) 17,457 7 85 7 225 - \u2013 Residential mortgage loans (****) 3,281 -1 12 - 160 -3 \u2013 Leases (****) 2,421 -1 - - 12 - \u2013 Commercial mortgage loans (****) 1,665 -1 - - 16 - TOTAL 32,225 10 146 -3 429 -14 (*) The entire amount refers to non-performing financial assets. \u201cLoans to businesses (including SMEs)\u201d refer to the Savoy, Kerma, Yoda, Sirio, Grogu and Kerdos securitisations (see the 2018, 2019, 2020 and 2021 Consolidated Financial Statements, respectively, for details about the transactions) and the Organa transaction (described in the paragraph on \u201cQualitative information\u201d of this Section). \u201cResidential mortgage loans\" refer to the Maior and Iseo securitisations (deriving from the business combination with the former UBI Group). (**) The amounts refer to the Portland securitisation relating to credit-impaired financial assets for amounts of 6 million euro - senior and 4 million euro - mezzanine, respectively (see the 2021 Consolidated Financial Statements for a description of the transaction) and the Teseo transaction relating to performing financial assets (described in the paragraph on \u201cQualitative information\u201d of this Section). (***) The amounts include non-performing financial assets amounting to 29 million euro in senior exposures, 53 million euro in mezzanine exposures and 17 million euro in junior exposures. (****) The captions also include performing amounts associated with the synthetic securitisations originated by the Intesa Sanpaolo Group. Off-balance sheet This type of exposure did not exist as at 31 December 2022. C.2. Prudential consolidation - Breakdown of exposures deriving from main \u201cthird-party\u201d securitisations by type of securitised asset and by type of exposure On-balance sheet (millions of euro) Type of securitised asset/ Exposure ON-BALANCE SHEET EXPOSURES Senior Mezzanine Junior Book value Adjust./ recoveries Book value Adjust./ recoveries Book value Adjust./ recoveries Leases 4 - 4 - 2 - Covered bonds 36 - 16 -1 - - Commercial mortgage loans 126 -3 32 -1 - - Securitisations 167 -1 - - - - Trade receivables 213 -2 16 -1 - - Consumer credit 457 - 4 - 3 - Residential mortgage loans 876 -12 91 -1 - - Loans to businesses (including SMEs) 1,526 -34 120 -7 2 -1 Other assets (*) 10,707 -6 - - - - TOTAL 14,112 -58 283 -11 7 -1 (*) The amount also includes the Romulus securities for 6,778 million, held by the Banking Group, generally represented among third-party securitisations, as well as loans to the vehicle Duomo Funding Plc for 3,541 million as a result of the use of credit lines. For more information regarding the type of underlying assets, reference is made to Section 4 \u2013 Risks of other companies, of this Part E. Off-balance sheet (millions of euro) Type of securitised asset/ Exposure GUARANTEES GIVEN CREDIT LINES Senior Mezzanine Junior Senior Mezzanine Junior Net exposure Adjust./ recoveries Net exposure Adjust./ recoveries Net exposure Adjust./ recoveries Net exposure Adjust./ recoveries Net exposure Adjust./ recoveries Net exposure Adjust./ recoveries Duomo ABCP Conduit transactions (*) - - - - - - (*) (*) - - - - Total - - - - - - - - - - - - (*) With regard to the transactions carried out through Duomo Funding Plc and funded by ABCP, Intesa Sanpaolo has granted credit lines (amounting to 6,576 million euro in terms of net exposures and around 3 million euro of recoveries) to secure the assets included under \u201cOther assets\u201d in Table C.2 on-balance sheet exposures. C.3. Prudential consolidation - Stakes in securitisation vehicles (millions of euro) SECURITISATION/ SPECIAL PURPOSE VEHICLE REGISTERED OFFICE CONSOLIDATION (a) ASSETS (b) LIABILITIES (b) Loans Debt securities Other Senior Mezzanine Junior Augusto S.r.l. (d) Milano (e) - - 2 13 - - Berica ABS 3 S.r.l. (h) Vicenza (e) (f) (f) (f) (f) (f) (f) Brera Sec S.r.l. (c) Conegliano Veneto (TV) (e) 16,319 - 594 13,869 - 2,652 Clara Sec S.r.l. (c) Conegliano Veneto (TV) (e) 6,442 - 2,378 6,350 - 824 Diocleziano S.r.l. (d) Milano (e) 1 - 1 48 - - Giada Sec S.r.l. (c) Conegliano Veneto (TV) (e) 21,803 - 3,825 16,860 - 8,425 ISP CB Ipotecario S.r.l. (g) Milano (e) 16,631 - 4,877 18,612 ISP CB Pubblico S.r.l. (g) Milano (e) 1,943 1,212 823 3,897 ISP OBG S.r.l. (g) Milano (e) 54,200 - 6,533 60,537 UBI Finance S.r.l. (g) Milano (e) 8,574 - 777 9,241 (a) Consolidation method referring to the so-called \"prudential\" scope. (b) Figures gross of any intragroup relations. The amounts shown under assets and liabilities refer to the total values reported in the financial statements of the special purpose vehicles (c) Self-securitisation vehicle described in Section 1.4 Banking Group - Liquidity Risk, Quantitative Information, paragraph 2 of these Notes to the consolidated financial statements. (d) The amounts shown under assets and liabilities refer to the latest financial statement data available (31.12.2021). (e) Vehicle consolidated at equity. (f) For the financial statement disclosure concerning this vehicle, see the prospectus published in Section C.4 of these Notes to the consolidated financial statements. (g) Vehicle used for the covered bond issue by the Intesa Sanpaolo Group. For more information, see Section D in Part E of these Notes to the consolidated financial statements. (h) Vehicle deriving from the acquisition of certain assets and liabilities of the former Venetian Banks. The securitisations structured by the Intesa Sanpaolo Group on its own assets include those named Towers, K-Equity, Savoy, Kerma, Yoda, Maior, Iseo, Sirio, Kerdos, Grogu, Portland, Organa and Teseo, for which special purpose vehicles were used that are third-party and independent entities with respect to the Group, and in which the Group does not hold any investments. For that reason, these vehicles are not shown in the table above. C.4 Prudential consolidation \u2013 Unconsolidated securitisation vehicles The unconsolidated securitisation vehicles include the vehicles in which the Intesa Sanpaolo Group does not hold any stake in the capital and those in which it holds a residual stake. The table below shows the assets, liabilities, costs and revenues of each vehicle used for transactions in which the Group acts as originator. (millions of euro) BERICA ABS 3 S.r.l. (*) A. Assets 197 A.1 Loans 197 A.2 Securities - A.3 Other assets - B. Use of cash and cash equivalents 13 B.1 Deposits with banks - B.2 Prepayments and accrued income - B.3 Other 13 B Liabilities 162 B.1 Class A Securities issued - B.2 Class B Securities issued 18 B.3 Class C Securities issued - B.4 Class J Securities issued 115 B.5 Other liabilities 29 C. Interest expense and other expenses 17 D. Interest income and other revenues 23 (*) Vehicle used for securitisations involving residential mortgage loans. The securitised assets included in the vehicle were not derecognised pursuant to the international accounting standards. With regard to the unconsolidated structured entities used for securitisations, the Group holds residual stakes in the vehicles Augusto and Diocleziano, consolidated at equity. These vehicles are entities used in securitisations of assets, primarily land and public works financing, of a company subject to joint control sold in previous years. The Group holds a residual stake in these vehicles. There are no agreements in place which could result in the obligation of the Group to provide financial support to said vehicles. The Intesa Sanpaolo Group controls the companies Romulus Funding Corporation and Duomo Funding Plc (included solely in the scope of consolidation pursuant to IFRS 10), which are used for transactions in which the Intesa Sanpaolo Group acts as sponsor and whose operations are described in Section 4 - Risks of other companies, of this Part E. C.5. Prudential consolidation - Servicer activities \u2013 originated securitisations: collection of securitised loans and repayment of securities issued by the securitisation vehicle SERVICER SPECIAL PURPOSE VEHICLE SECURITISED ASSETS (end-of-period figure) (millions of euro) COLLECTIONS OF LOANS IN THE YEAR (millions of euro) PERCENTAGE OF REIMBURSED SECURITIES (period-end figure) Senior Mezzanine Junior Non- performing Performing Non- performing Performing Non- performing Performing Non- performing Performing Non- performing Performing Intesa Sanpaolo Berica ABS 3 S.r.l. 23 174 4 31 0% 100% 0% 81% 0% 0% Intesa Sanpaolo Brera Sec S.r.l. (*) (**) 61 16,258 7 1,673 0% 29% 0% 0% 0% 0% Intesa Sanpaolo Clara Sec S.r.l. (*) 30 6,412 10 2,159 0% 0% 0% 0% 0% 0% Intesa Sanpaolo Giada Sec S.r.l. (*) (***) 130 21,673 10 3,806 0% 0% 0% 0% 0% 0% Intesa Sanpaolo Teseo SPV S.r.l. (****) - 3,644 - - 0% 0% 0% 0% 0% 0% Total 244 48,161 31 7,669 During 2022 the Berica ABS 4 S.r.l. securitisation was extinguished. (*) Vehicle used for self-securitisations. (**) As regards Brera Sec S.r.l., in 2022 the Brera SME securitisation was extinguished. (***) As regards Giada Sec S.r.l., in 2022 a new self-securitisation was structured, named Giada Bis, for which no notes had been redeemed as at 31 December 2022. (****) Vehicle used for the new traditional securitisation of performing lease receivables called Teseo. Note that collections of 129 million euro remained with the vehicle, as the first payment date will be in March 2023. C.6. Prudential consolidation \u2013 Consolidated securitisation vehicles There were no transactions that used consolidated securitisation vehicles during 2022. D. SALES A. Financial assets sold not fully derecognised Qualitative information For a description of the operations shown in the tables below, reference is made to the information shown below the relevant tables. Conversely, for operations in debt securities against medium/long-term repurchase agreements, reference is made to the information in Part B of the Notes to the consolidated financial statements. Quantitative information Prudential consolidation - Financial assets sold fully recognised and related financial liabilities: book value (millions of euro) Financial assets sold fully recognised Related financial liabilities Book value of which: securitisations of which: subject to sales contracts with repurchase clauses of which: non- performing Book value of which: securitisations of which: subject to sales contracts with repurchase clauses A. Financial assets held for trading 599 - 599 X 615 - 615 1. Debt securities 391 - 391 X 395 - 395 2. Equities 208 - 208 X 220 - 220 3. Loans - - - X - - - 4. Derivatives - - - X - - - B. Other financial assets mandatorily measured at fair value - - - - - - - 1. Debt securities - - - - - - - 2. Equities - - - X - - - 3. Loans - - - - - - - C. Financial assets designated at fair value - - - - - - - 1. Debt securities - - - - - - - 2. Loans - - - - - - - D. Financial assets measured at fair value through other comprehensive income 7,645 - 7,645 - 7,739 - 7,739 1. Debt securities 7,645 - 7,645 - 7,739 - 7,739 2. Equities - - - X - - - 3. Loans - - - - - - - E. Financial assets measured at amortised cost 5,458 27 5,431 3 5,150 18 5,132 1. Debt securities 5,431 - 5,431 - 5,132 - 5,132 2. Loans 27 27 - 3 18 18 - TOTAL 31.12.2022 13,702 27 13,675 3 13,504 18 13,486 TOTAL 31.12.2021 14,213 98 14,115 10 12,546 67 12,479 The table above does not include covered bond transactions in which the Intesa Sanpaolo Group is both the seller and lender for the vehicle issuing the debt securities. The operations shown in the table mainly relate to the use of securities held for repurchase agreements and, to a lesser extent, loans to customers assigned as part of the K-Equity and Berica securitisations. Prudential consolidation \u2013 Financial assets sold partly recognised and related financial liabilities: book value These are not present in the Intesa Sanpaolo Group. Prudential consolidation - Sales with liabilities having recourse exclusively on the assets sold and not fully derecognised: fair value (millions of euro) Fully recognised Partly recognised 31.12.2022 31.12.2021 A. Financial assets held for trading 599 - 599 647 1. Debt securities 391 - 391 446 2. Equities 208 - 208 201 3. Loans - - - - 4. Derivatives - - - - B. Other financial assets mandatorily measured at fair value - - - - 1. Debt securities - - - - 2. Equities - - - - 3. Loans - - - - C. Financial assets designated at fair value - - - - 1. Debt securities - - - - 2. Loans - - - - D. Financial assets measured at fair value through other comprehensive income 7,645 - 7,645 8,548 1. Debt securities 7,645 - 7,645 8,548 2. Equities - - - - 3. Loans - - - - E. Financial assets measured at amortised cost (fair value) 4,812 - 4,812 5,018 1. Debt securities 4,785 - 4,785 4,920 2. Loans 27 - 27 98 Total financial assets 13,056 - 13,056 14,213 Total related financial liabilities 13,504 - 13,504 12,546 Net value 31.12.2022 -448 - -448 X Net value 31.12.2021 1,667 - X 1,667 The table above does not include covered bond transactions in which the Intesa Sanpaolo Group is both the seller and lender for the vehicle issuing the debt securities. B. Financial assets sold fully derecognised with recognition of continuing involvement This type of exposure did not exist as at 31 December 2022. C. Financial assets sold and fully derecognised Qualitative information Multioriginator sale transactions involving loan portfolios \u2013 classified as unlikely to pay in particular \u2013 attributable to the sale of loans to a mutual investment fund with the assignment of the units in the fund to the selling intermediaries At 31 December 2022, the Intesa Sanpaolo Group held units of mutual funds acquired in multioriginator sales of loan portfolios. In accordance with the provisions of the Communication of the Bank of Italy of 23 December 2019, incorporated into the seventh update to Circular 262, disclosures regarding \u201cMultioriginator sale transactions involving loan portfolios \u2013 classified as unlikely to pay in particular \u2013 attributable to the sale of loans to a mutual fund with the assignment of the units in the fund to the selling intermediaries\u201d are provided below. Back2Bonis Fund In implementation of the derisking envisaged in the previous 2018-2021 Business Plan and the current 2022-2025 Business Plan, in the third quarter of 2020 the Intesa Sanpaolo Group begun the deconsolidation of a portfolio of credit exposures (including real estate assets and contracts) classified as unlikely to pay with real estate underlying held by the Parent Company, accompanied by their conversion into units of the securities fund called Back2Bonis. The transaction, the closing of which took place at the end of 2020, took the form for the Bank (including the transactions undertaken in 2019 and 2020 by UBI Banca, merged in 2021) of the sale of a portfolio of loans, short-term legal relationships and legal relationships and assets from lease receivables for a total gross amount of 351 million euro and net exposure of 164 million euro, accompanied by the subscription of the units of the Back2Bonis Fund for an amount of 164 million euro, substantially in line with the net value of the loans and receivables sold. The transaction was completed through: (i) the sale to the securitisation vehicle Ampre S.r.l. of the bank receivables and the lease receivables; (ii) the sale to Ampre LeaseCo S.r.l. of the legal relationships and assets arising from the leases; (iii) the sale of the short-term revolving contracts and the related legal relationships and receivables of ISP, together with the medium/long-term contracts with residual disbursements and the related legal relationships, other than the lease relationships and assets through the fronting bank provided by Banca Finanziaria Internazionale S.p.A.; (iv) the subscription by the Back2Bonis Fund of all the securities issued by the securitisation vehicle; and (v) the acquisition by Intesa Sanpaolo of the units of the Fund in exchange for the loans and receivables sold. In 2022, additional loans were sold, for a gross amount of 1 billion euro and net exposure of 216 million euro, accompanied by the subscription of units of the Back2Bonis Fund, for an amount of 216 million euro, with the sale price offset against the subscription price of the Fund\u2019s units, without significant effects on the income statement for 2022. The Back2Bonis fund, established in the form of a closed-end mutual fund whose units can only be subscribed by professional investors, is a multi-originator platform for the management of Real Estate Small & Medium Size loans classified as UTP, deriving from loans and credit lines granted to companies operating in the real estate sector or to real estate funds (including those not fully disbursed/drawn down at the time of sale). Following the completion of the transfer of the loans and receivables to the platform, ISP had deconsolidated the loans and receivables and recognised the Fund\u2019s units in place of those loans and receivables. The breakdown of the assigned debtors by economic sector was mainly concentrated in the following sectors: \u2013 \"Production companies\" at 79.9%; \u2013 \"Construction companies\" at 12.9%; \u2013 \"Real estate business\" at 3.5%; \u2013 \u201cFinancial and insurance business\" at 2.6%; \u2013 and a residual amount in other business sectors (Services, Transport and Manufacturing Activities). The assets of the assigned debtors were broken down as follows by geographical area: \u2013 92.2% North-West; \u2013 3.5% North-East; \u2013 3.2% South and Islands; \u2013 1.1% Centre. At 31 December 2022, the Parent Company held a 55.4% stake (with voting rights limited to 35%) in the Back2Bonis Fund, classified among investments subject to significant influence, for a consolidated book value of 387 million euro. FI.NAV. Fund In pursuit of the de-risking activities provided for in the previous 2018-2021 Business Plan and the current 2022-2025 Business Plan, in the fourth quarter of 2018 the Intesa Sanpaolo Group had launched the contribution to the FI.NAV. Fund (a closed-end Italian securities umbrella fund) of a portfolio of non-performing secured and unsecured loans attributable to the shipping sector. The Fund, reserved for institutional investors, is managed by the asset management company Davy Global Fund Management Limited, not a member of the Intesa Sanpaolo Group, based in Ireland, and is divided into two autonomous sub- funds: FI.NAV. Sub-fund A \u2013 Loans, dedicated to receiving the loans transferred by the Intesa Sanpaolo Group and Unicredit, and FI.NAV. Sub-fund B \u2013 New Finance, dedicated to receiving the capital of third-party investors to relaunch the \u201crepossessed\u201d ships. The transaction, formulated in 2018, was closed in 2019 through a sale of receivables without recourse for total gross consideration of 155 million euro and a net exposure of 102 million euro, equal to the sale price, set off against the price of subscription of the Fund units and, therefore, without any effects on the income statement for 2019. In the first quarter of 2020, a further tranche was sold without recourse for a gross amount of 37 million euro and a net value of 34 million euro, in line with the sale price and, therefore, with no impact on the income statement for 2020. Pursuant to IFRS 9, for the Intesa Sanpaolo Group the transaction entailed the derecognition of the loans sold since the Fund has become solely responsible for managing them following the sale; the Intesa Sanpaolo Group had therefore derecognised the loans concerned, while recognising the corresponding fair value of the units of the Fund assigned. The Group companies involved in the transaction were the Parent Company Intesa Sanpaolo and some of its subsidiaries merged in 2019 and 2020 (Cassa di Risparmio in Bologna and Mediocredito, both merged in 2019, and Banca IMI, merged in 2020). In December 2022 the sale of a loan portfolio was finalised for a gross amount of 74 million euro and net exposure of 36 million euro, accompanied by the subscription of the units of the fund for an amount of 36 million euro, essentially in line with the value of the exposure sold, without significant effects on the income statement for 2022. The economic sector of the assigned debtors was mainly concentrated in Transport. The transferred financial assets are primarily in the South and Islands area. At 31 December 2022, the Parent Company ISP held a 50.54% stake in the FI.NAV. Fund, classified among investments subject to significant influence, for a book value of 155 million euro. The measurement of the FI.NAV. Fund yielded a positive effect of 7 million euro. Of this, +13 million euro was recognised through profit and loss, and refers to the change in the NAV and the discount applied, while -6 million euro refers to foreign exchange differences, and is recognised, as per the IAS 28 investment policy, in a specific shareholders\u2019 equity reserve. RSCT Fund \u2013 Loans Sub-Fund As part of the derisking envisaged in the previous 2018-2021 Business Plan and the current 2022-2025 Business Plan, the Intesa Sanpaolo Group had identified the opportunity to transfer assets (loans and securities) relating to non-performing positions to the closed-end RSCT FUND, in exchange for units of the fund. The project was managed by Pillarstone, which had selected a portfolio of industrial and commercial companies with the objective of helping each of them to identify a strategy for maximising the potential for debt recovery, also through injections of new finance. The transaction took place in May 2020 with the transfer of a portfolio of loans with 18 companies originated by the ISP Group (ISP and Banca IMI, subsequently merged into ISP on 20 July 2020), Unicredit, BPER Banca and Cr\u00e9dit Agricole to the newly established closed- end alternative investment RSCT Fund, managed by Davy Investment Fund Services, an alternative fund manager authorised by the Central Bank of Ireland. The RSCT Fund is made up of two separate sub-funds: sub-fund A for the management of loans acquired from the selling banks and sub-fund B for the management of the new finance. The May 2020 sale involved a portfolio of loans, Sirti notes and PS Reti equity instruments for a gross amount of 339 million euro (ISP and Banca IMI) at a net value of 255 million euro, substantially in line with the sale price. In July 2020, a further sale was completed of a loan position for a gross amount of 6.3 million euro at a value of 4.5 million euro, with the sale price offset against the subscription price of the Fund\u2019s units. In February 2021, a sale was completed of a loan position for a gross amount of 21.3 million euro at a value of 13.9 million euro, with the sale price offset against the subscription price of the Fund\u2019s units. In March 2021, a sale was completed of a loan position deriving from the absorption of UBI Banca for a gross amount of 3.1 million euro and a net exposure of 1.2 million euro, with the concurrent subscription of units of the RSCT Fund for 1.3 million euro, essentially aligned with the net value of the transferred loans. In June 2021, a further sale was completed of a loan position for a gross amount of 0.4 million euro at a value of 0.1 million euro, with the sale price offset against the subscription price of the Fund\u2019s units. By economic sector, the assigned debtors are 72% concentrated in \u201cCompanies that install electrical equipment\u201d, 18% in \u201cAmusement and theme parks\u201d and 10% in \u201cRetail sale of footwear and accessories\u201d. The transferred financial assets are primarily in the North-west area. At 31 December 2022, the Parent Company ISP held a 70.07% stake in the RSCT Fund, classified among investments subject to significant influence, for a book value of 256 million euro. The measurement of the RSCT Fund yielded a negative effect for the year of 4 million euro. IDEA CCR Corporate Credit Recovery II Fund - Loans Sub-fund In 2018, the Intesa Sanpaolo Group (specifically Intesa Sanpaolo and the banks subsequently merged into Intesa Sanpaolo: Cassa di Risparmio del Veneto, Cassa di Risparmio di Firenze, Cassa di Risparmio del Friuli Venezia Giulia, Cassa di Risparmio in Bologna, and Mediocredito) participated in the closed-end Italian fund IDEA CCR Corporate Credit Recovery II - Loans Sub-fund, managed by Dea Capital Alternative Funds S.G.R. S.p.A. and dedicated to the recovery of mid-size Italian companies in situations of financial tension but with solid industrial fundamentals. The transaction, which was completed in 2018, was undertaken by contributing non-performing loans with a nominal value of 59 million euro and a net exposure to the sale price of 39.2 million euro, with the price of sale offset against the subscription price, of equal amount, of the units of the IDEA CCR Corporate Credit Recovery II Fund - Loans Sub-Fund. In 2021, the Bank\u2019s investment in the IDEA CCR Fund increased further, due to the merger of UBI Banca, which had sold loan positions to the IDEA CCR Corporate Credit Recovery II Fund, Loans Sub-fund, managed by Dea Capital Alternative Funds SGR, in 2020, 2019, 2018 and 2017 for a total gross amount of 231 million euro and a net exposure of 144 million euro, with concurrent subscription of the units of the IDEA CCR Fund for an amount of 148 million euro, with the price of sale offset against the price of subscription of the Fund units. The breakdown of the assigned debtors by economic sector was mainly concentrated in the following sectors: \u2013 \"Real estate activities\" at 31.6%; \u2013 \"Transport and storage\" at 28%; \u2013 \"Professional, scientific and technical activities\" at 10%; \u2013 \u201cMetallurgy and metal product manufacturing\" at 9.4%; \u2013 \u201cCar and other vehicle production\" at 5.6%; \u2013 and a residual amount in other business sectors (Services, Transport and Manufacturing Activities). The assets of the assigned debtors were broken down as follows by geographical area: \u2013 28.8% North-West; \u2013 11.8% North-East; \u2013 31.2% South and Islands; \u2013 23.8% Centre; \u2013 4.4% Outside Italy. In 2022, the investment of the Parent Company Intesa Sanpaolo in the IDEA CCR Fund changed due to: i) the inclusion of the stake held by UBI Leasing S.p.A., merged into ISP in May 2022, which had sold loan positions to the IDEA CCR Corporate Credit Recovery II Fund - Loans Sub-Fund in 2019 for a total gross amount of 5 million euro and a net exposure of 3 million euro, with the sale price offset against the subscription price, in the same amount, of the Fund units, and ii) the sale of A1 units held by ISP in the Fund to Banca Nazionale del Lavoro S.p.A.. The receivable held by ISP in relation to the sale was settled by offsetting with the purchase of units of Back2Bonis. As at 31 December 2022, Intesa Sanpaolo held a 19.98% stake in the IDEA CCR Corporate Credit Recovery II Fund, Loans Sub-Fund, classified among Financial assets mandatorily measured at fair value, for a book value of 46 million euro. The measurement of the IDEA CCR II Fund yielded a positive effect on the income statement for the year of 4 million euro. IDEA CCR Corporate Credit Recovery II Fund - Shipping Sub-fund The Shipping Loans Sub-Fund refers to single-name, unlikely-to-pay non-performing loans with a sector focus on shipping companies. The Fund consists of three sub-funds: loans, new finance and shipping. Following the merger of UBI Banca, ISP also has an interest in the Shipping Sub-Fund, with a stake in the IDEA CCR II Fund \u2013 Shipping Sub-Fund. In 2018, UBI Banca, which during 2021 was merged into Intesa Sanpaolo, had sold loans with a total gross amount of 45 million euro and a net exposure of 31 million euro. As at 31 December 2022, Intesa Sanpaolo held a 20.37% stake in the IDEA CCR II Fund, Shipping Sub-Fund, classified among Financial assets mandatorily measured at fair value, for a book value of 11 million euro. The measurement of the IDEA CCR Corporate Credit Recovery II Fund - Shipping Sub-fund yielded no effects during the year for the consolidated financial statements. Clessidra Restructuring Fund Clessidra Restructuring Fund (CRF Fund) is a closed-ended alternative investment fund reserved for institutional investors, dedicated to investing in loans classified as unlikely to pay to previously identified industrial companies. In September 2019, UBI Banca, which during 2021 was merged into Intesa Sanpaolo, had sold loans to five borrowers with a total gross amount of 17 million euro and a net exposure of 11 million euro, with concurrent subscription of the units of the CRF Fund for an amount essentially in line with the net value of the transferred loans. The economic sector of the assigned debtors was mainly concentrated in \u201cManufacture of wooden doors and manufacture of furniture\u201d. The transferred financial assets are primarily in the North-west area. As at 31 December 2022, Intesa Sanpaolo held a 4.34% stake in the CRF Fund, classified among Financial assets mandatorily measured at fair value, for a book value of 9 million euro. The measurement of the Clessidra Restructuring Fund yielded a positive effect of 1 million euro during the year. UTP Italia Fund \u2013 Loans Sub-Fund The UTP Italia Fund is an alternative closed-end Italian securities umbrella fund (AIF) in charge of managing loans classified as unlikely-to-pay (UTP) and whose target is credit exposures to small and medium-sized enterprises and individuals. In November 2022, the Parent Company Intesa Sanpaolo finalised the sale of a loan portfolio (mainly UTP) to the UTP Italia Fund managed by Sagitta SGR, with Intrum Italy S.p.A. as special servicer. Specifically, the transaction entailed: i) the sale of loans for a gross amount of 42 million euro and net exposure of 25 million euro, to Finn SPV S.r.l. (SPV 130) without significant effects on the income statement for 2022; ii) the recognition of the receivable of 25 million euro from the SPV 130; iii) the contribution to the UTP Italia Fund of the receivable from the SPV 130 in exchange for units of the fund by way of price; and iv) issue of asset-backed securities (ABS) by the vehicle, subscribed by the Fund, derecognising the receivable from the SPV 130. The breakdown of the assigned debtors by economic sector was mainly concentrated in the following sectors: \u2013 \"Production Companies\" at 80%; \u2013 \"Companies with fewer than 20 workers\" at 9.1%; \u2013 and a residual amount in other business sectors (Consumer households, Other financial intermediaries). The assets of the assigned debtors were broken down as follows by geographical area: \u2013 35.0% North-West; \u2013 18.3% North-East; \u2013 32.6% South and Islands; \u2013 14.1% Centre. As at 31 December 2022, Intesa Sanpaolo held a 27.58% stake in the UTP Italia Fund, classified among Financial assets mandatorily measured at fair value, for a book value of 25 million euro. Efesto Efesto is an alternative closed-end Italian securities fund (AIF). In July 2022 the sale of loans was finalised for a gross amount of 17 million euro and net exposure of 9 million euro, accompanied by the subscription of the units of the fund for an amount of 7 million euro, without significant effects on the income statement for 2022. The economic sector of the assigned debtor is \u201cProduction Companies\u201d. The financial asset sold is located in the North-west area. As at 31 December 2022, Intesa Sanpaolo held a 2.44% stake in the Efesto Fund, classified among Financial assets mandatorily measured at fair value, for a book value of 8 million euro. The measurement of the Efesto Fund yielded a positive effect of 1 million euro during the year. Prudential consolidation - Covered bond transactions Covered bond transactions where the selling bank and the lending bank are the same must be reported under this section. Intesa Sanpaolo uses covered bonds mainly as a type of funding through securities guaranteed by assets originated by Intesa Sanpaolo or by other companies of the Group. Intesa Sanpaolo has arranged three programmes for the issue of Covered Bonds (CB). The first programme, launched in 2009, has a maximum amount of 20 billion euro (the original maximum amount was 10 billion euro). The guarantor of the Covered Bonds is the vehicle ISP CB Pubblico, to which a portfolio of performing loans and securities to the public sector, originated by the former subsidiary Banca Infrastrutture Innovazione e Sviluppo, now Intesa Sanpaolo, was transferred. The Bank gradually sold the vehicle assets with a total original nominal value of 14.3 billion euro (net of retrocessions of assets of 0.5 billion euro). The last sale (amounting to around 1 billion euro) took place in April 2013. As at 31 December 2022, loans and securities sold to the vehicle had a book value of 3.2 billion euro. Against these sales, Covered Bonds were issued over time for a total nominal value of 25.2 billion euro (of which 18.15 billion euro relating to issues acquired in full by the Parent Company and subject to early redemption or matured and 3.5 billion euro relating to an exchange offer to investors during 2012, of which 2 billion euro that matured in the second quarter of 2017 and the remaining 1.5 billion euro in January 2021). As at 31 December 2021, a total nominal amount of 3.6 billion euro of issues made as part of the Covered Bond programme of the vehicle ISP CB Pubblico was outstanding, fully subscribed by the Bank. During 2022 the tenth series was fully subject to early redemption, for a total nominal amount of 250 million euro, and the twelfth series was partially redeemed for 225 million euro. Therefore, as at 31 December 2022, a total nominal amount of 3.1 billion euro of issues made as part of the Covered Bond programme of the vehicle ISP CB Pubblico was outstanding, fully subscribed by Intesa Sanpaolo. All the securities issued under the programme are listed on the Luxembourg Stock Exchange and have a Moody\u2019s A2 rating. In the second programme, launched in 2010, amounting to a maximum of 25 billion euro (the original maximum amount was 20 billion euro), the guarantor of the covered bonds is the vehicle ISP CB Ipotecario S.r.l., to which Italian residential mortgage loans and, initially bonds issued by Adriano Finance S.r.l., originated by Intesa Sanpaolo, were transferred. The Bank gradually sold the vehicle mortgage loans with an original total nominal value of 38.4 billion euro (net of retrocessions). During 2022, the following additional transactions were also finalised: \u2013 in January repurchases were carried out for an amount of 116 million euro; \u2013 in May sales were carried out for an amount of 2.7 billion euro. As at 31 December 2022, the loans sold to the vehicle had a book value of 16.6 billion euro. Over time, against the sale of these assets, Intesa Sanpaolo has carried out issues of Covered Bonds for a total nominal value of approximately 34.9 billion euro (of which a total of 20.6 billion euro subject to early redemption or matured at December 2022). As at 31 December 2021, a total nominal amount of 15.5 billion euro of issues made as part of the covered bond programme of the vehicle ISP CB Ipotecario was outstanding, of which 10.6 billion placed with third party investors and 4.9 billion subscribed by Intesa Sanpaolo. Part of the latter was subsequently used in repurchase agreements for an amount of 343 million euro. During 2022, two series matured for an amount of 2.2 billion euro and one series was issued for an amount of 1 billion euro. Accordingly, as at 31 December 2022, a total nominal amount of 14.3 billion euro of issues made as part of the covered bond programme of the vehicle ISP CB Ipotecario was outstanding, of which 8.4 billion placed with third party investors and 5.9 billion subscribed by Intesa Sanpaolo. Part of the latter was subsequently used in repurchase agreements for an amount of 343 million euro. All the securities issued under the programme are listed on the Luxembourg Stock Exchange and have a Moody\u2019s Aa3 rating. The third multi-originator Covered Bond issue programme, launched in 2012, has the vehicle ISP OBG S.r.l. as the guarantor of its securities. This programme is secured by mortgages for a maximum amount of 55 billion euro (the original maximum amount was 30 billion euro) and is aimed at realising the retained issues. The portfolio used to collateralise the issues of Covered Bonds is composed of mortgages originated by Intesa Sanpaolo, Banco di Napoli, Cassa di Risparmio del Veneto, Cassa di Risparmio in Bologna and Banca CR Firenze (merged by incorporation into Intesa Sanpaolo between July 2018 and February 2019). Over time, the Intesa Sanpaolo Group sold mortgages to the vehicle for an original total nominal value of 94.4 billion euro (net of exclusions). In 2022, Intesa Sanpaolo sold mortgages to the vehicle for an original total nominal value of 12 billion euro (net of exclusions). The following sales were carried out: \u2013 in June, sales for an amount of 6.2 billion euro; \u2013 in November, sales for a total of 6 billion euro. In addition, the following loans were repurchased in 2022: \u2013 in January, for an amount of 281 million euro. As at 31 December 2022, the loans sold to the vehicle by Intesa Sanpaolo had a book value of 54.2 billion euro. Over time, against the sales of these assets, the Bank has carried out issues of Covered Bonds for a total nominal value of around 86.3 billion euro (of which 40.2 billion euro subject to early redemption and reimbursed). All the securities issued as part of the programme are listed on the Luxembourg Stock Exchange and have a DBRS Morningstar A rating. As at 31 December 2021, a total nominal amount of 45.9 billion euro of issues made as part of the Covered Bond programme of the vehicle ISP OBG was outstanding, fully subscribed by Intesa Sanpaolo. During 2022, the forty-seventh series was issued for 10 million euro. Accordingly, as at 31 December 2022, a total nominal amount of 45.9 billion euro of issues made as part of the Covered Bond programme of the vehicle ISP OBG was outstanding, fully subscribed by Intesa Sanpaolo. The fourth programme was launched by the former UBI Banca Group in 2008. Former UBI Banca, merged into Intesa Sanpaolo S.p.A. during 2021, included two covered bond programmes, run by two special purpose vehicles named UBI Finance S.r.l. and UBI Finance CB2 S.r.l., respectively. The latter was closed in January 2021. The former programme still provides Intesa Sanpaolo with the right to issue securities, targeted to institutional investors, for a maximum amount of 15 billion euro. The Programme includes residential mortgage loans assigned by the UBI Group\u2019s network banks. These banks participated in the programme as Originator Banks and Lending Banks. As at 31 December 2021 a total nominal amount of 9.1 billion euro of issues made as part of the covered bond programme of the vehicle UBI Finance was outstanding, of which 7.5 billion placed with third party investors and 1.6 billion retained. During 2022, four series matured for a total amount of 1.4 billion euro. As at 31 December 2022 a total nominal amount of 7.7 billion euro of issues made as part of the covered bond programme of the vehicle UBI Finance was outstanding, of which 7.5 billion placed with third party investors and 0.2 billion retained. As at 31 December, the bonds under the programme were assigned an Aa3 rating from Moody\u2019s and AA from DBRS Morningstar. In 2022, Intesa Sanpaolo sold mortgages to the vehicle for an original total nominal value of 751 million euro. The following transactions were carried out: \u2013 in June, a sale for an amount of 823 million euro; \u2013 in February, repurchases were carried out for an amount of 72 million euro. As at 31 December 2022, the loans sold to the vehicle had a book value of 8.6 billion euro. The key figures for ISP CB Pubblico, ISP CB Ipotecario, ISP OBG, and UBI Finance as at 31 December 2022 are shown in the table below. (millions of euro) COVERED BOND VEHICLE DATA SUBORDINATED LOAN (1) COVERED BONDS ISSUED Total assets Cumulated write-downs on securitised portfolio amount Nominal amount (2) Book value (2) ISP CB PUBBLICO Performing public sector loans and securities 3,978 21 3,897 - - ISP CB IPOTECARIO Residential mortgages 21,508 33 18,612 8,702 8,328 ISP OBG Mortgages 60,733 192 60,537 - - UBI FINANCE Residential mortgages 9,351 65 9,241 7,497 7,108 (1) This caption includes the subordinated loan granted to the vehicles for the purchase of the portfolio lodged as collateral for the CB. This loan is derecognised in the IAS-compliant separate financial statements. The amount of the loan refers to the issue already executed as part of an issue programme with a higher maximum amount. (2) The nominal amount and the book value shown in the table are to be considered net of securities repurchased. In addition to this type of Covered Bonds, provided for by Italian law (Law 80/2005), there are some mortgage bonds issued by the Slovak investee VUB. These are securities whose nominal value and returns are guaranteed by mortgage loans, i.e. loans to individuals with residual maturities up to 30 years, backed by a pledge on property located in the Slovak Republic, with a maximum loan-to-value of 80%. Each issue has specific coverage, and the entire nominal value of the issue, including interest, must be backed by mortgage loans on local properties on at least 90% of their nominal value, and the remaining 10% possibly by liquidity or deposits with the National Bank of Slovakia, the European Central Bank, other European central banks or banks that meet the criteria set out in Art. 129(1)(c) of Regulation (EU) 575/2013. To cover the negative net cash flows expected from the covered bonds at 180 days, the issuer must maintain high-quality liquid assets pursuant to Articles 10 and 11 of Regulation (EU) 61/2015. As at 31 December 2022, the subsidiary VUB had issued 4 billion euro in this type of securities, booked in the financial statements at a value of approximately 3.8 billion euro. E. PRUDENTIAL CONSOLIDATION - MODELS FOR THE MEASUREMENT OF CREDIT RISK As at 31 December 2022, the expected loss on performing loans to customers (which takes account of cash and unsecured loan types) was 0.40%, substantially in line with the figure for 2021 (0.39%). The stable incidence is due to the offsetting of the increased risk from counterparties involved in the Russia-Ukraine conflict, and the activities of derisking and improvement in the credit quality recorded in the second half of the year. As at 31 December 2022, economic capital was 2.00% of disbursed loans, down, considering performing loans to customers only, on the figure for 2021 (-0.44%). That change is attributable to the above-mentioned improvement in the quality of the portfolio, as well as the inclusion of the most significant international subsidiary banks in the analytical calculations of economic capital. For the companies included in the roll out plan, the LGD and EAD internal regulatory rating models are subject to a second level of control by the Validation function, as described in paragraph 2.3 of this Section, and a third level of control by the Internal Auditing function. The control functions produce annual reports for the Supervisory Authority on the compliance of the models with the supervisory regulations, which also includes a verification on the deviations of the ex-ante estimates and the effective ex post values. These reports, approved by the Board of Directors of Intesa Sanpaolo, confirm the compliance to the regulatory requirements. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1005": { "value": "A.1.2. Breakdown of financial assets by portfolio classification and credit quality (gross and net values) - Excluding insurance companies (millions of euro) Portfolios/quality NON-PERFORMING ASSETS PERFORMING ASSETS TOTAL (net exposure) Gross exposure Collective adjustments Net exposure Total partial write-offs Gross exposure Collective adjustments Net exposure 1. Financial assets measured at amortised cost 10,729 -5,222 5,507 3,081 525,258 -2,687 522,571 528,078 2. Financial assets measured at fair value through other comprehensive income 36 -36 - - 48,449 -81 48,368 48,368 3. Financial assets designated at fair value - - - - X X 1 1 4. Other financial assets mandatorily measured at fair value 45 -12 33 - X X 1,100 1,133 5. Non-current financial assets held for sale 744 -386 358 1 10 - 10 368 Total 31.12.2022 11,554 -5,656 5,898 3,082 573,717 -2,768 572,050 577,948 Total 31.12.2021 19,944 -11,594 8,350 7,158 728,675 -2,606 727,277 735,627 (millions of euro) Portfolios/quality ASSETS OF EVIDENTLY LOW CREDIT QUALITY OTHER ASSETS Cumulative capital losses Net exposure Net exposure 1. Financial assets held for trading -27 22 41,328 2. Hedging derivatives - - 10,062 Total 31.12.2022 -27 22 51,390 Total 31.12.2021 -26 34 48,047 A.1.2. Bis Breakdown of financial assets by portfolio classification and credit quality (gross and net values) - Insurance companies (millions of euro) Portfolios / Quality (Figures must be filled in absolute values) Non-performing assets Performing assets Total (net exposure) Gross exposure Individual adjustments Net exposure Gross exposure Collective adjustments Net exposure 1. Financial assets available for sale - - - 71,084 - 71,084 71,084 2. Investments held to maturity - - - - - - - 3. Due from banks - - - 40 - 40 40 4. Loans to customers - - - 40 - 40 40 5. Financial assets designated at fair value - - - X X 5,176 5,176 6. Non-current financial assets held for sale - - - - - - - Total 31.12.2022 - - - 71,164 - 76,340 76,340 Total 31.12.2021 - - - 88,625 - 94,157 94,157 (millions of euro) Portfolios / Quality Assets of evidently low credit quality Other assets Cumulative capital losses Net exposure Net exposure 1. Financial assets held for trading - - 759 2. Hedging derivatives - - 13 Total 31.12.2022 - - 772 Total 31.12.2021 - - 1,147 ", "dimensions": { "concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1006": { "value": "A.3. Breakdown of guaranteed credit exposures by type of guarantee A.3.1. Prudential Consolidation \u2013 Guaranteed on- and off-balance sheet credit exposures to banks (millions of euro) Gross exposure Net exposures Collaterals (*) Personal guarantees (1) (2) Credit derivatives Real estate assets - mortgages Real estate assets - finance leases Securities Other CLN Other derivatives Central counterparties 1.Guaranteed on-balance sheet credit exposures: 6,437 6,433 - 5 5,559 172 - - 1.1 totally guaranteed 5,596 5,593 - 5 5,193 172 - - - of which non-performing 1 - - - - - - - 1.2 partly guaranteed 841 840 - - 366 - - - - of which non-performing - - - - - - - - 2. Guaranteed off-balance sheet credit exposures: 26,510 26,510 - - 1,929 11,333 - - 2.1 totally guaranteed 4,925 4,925 - - 1,929 980 - - - of which non-performing - - - - - - - - 2.2 partly guaranteed 21,585 21,585 - - - 10,353 - - - of which non-performing - - - - - - - - (*) Fair value of the guarantee or, if difficult to determine, its contractual value; as required by the regulations, the latter is stated up to the net exposure value. (millions of euro) Personal guarantees (*) Total (2) Credit derivatives Commitments Other derivatives Public Administration Banks Other financial companies Other counterparties (1)+(2) Banks Other financial companies Other counterparties 1.Guaranteed on-balance sheet credit exposures: - - - 228 23 - 66 6,053 1.1 totally guaranteed - - - 8 3 - 66 5,447 - of which non-performing - - - - - - - - 1.2 partly guaranteed - - - 220 20 - - 606 - of which non-performing - - - - - - - - 2. Guaranteed off-balance sheet credit exposures: - - - 7 76 - 70 13,415 2.1 totally guaranteed - - - 3 35 - 14 2,961 - of which non-performing - - - - - - - - 2.2 partly guaranteed - - - 4 41 - 56 10,454 - of which non-performing - - - - - - - - (*) Fair value of the guarantee or, if difficult to determine, contractual value, the latter stated - as required by the regulations - up to the net exposure value. A.3.2. Prudential Consolidation - Guaranteed on- and off-balance sheet credit exposures to customers (millions of euro) Gross exposure Net exposure Collateral (*) Personal guarantees (*) (1) (2) Credit derivatives Real estate assets - mortgages Real estate assets - finance leases Securities Other CLN Other derivatives Central counterparties 1. Guaranteed on-balance sheet credit exposures: 318,384 313,549 164,512 4,816 26,969 10,564 - - 1.1 totally guaranteed 252,621 248,860 161,898 4,626 26,238 8,118 - - - of which non-performing 6,201 3,838 2,517 268 45 104 - - 1.2 partly guaranteed 65,763 64,689 2,614 190 731 2,446 - - - of which non-performing 1,476 737 170 65 9 22 - - 2. Guaranteed off-balance sheet credit exposures: 53,130 53,017 2,016 52 8,758 4,341 - - 2.1 totally guaranteed 39,452 39,376 1,390 10 8,288 2,115 - - - of which non-performing 327 295 36 - 6 12 - - 2.2. partly guaranteed 13,678 13,641 626 42 470 2,226 - - - of which non-performing 159 136 23 - 1 27 - - (*) Fair value of the guarantee or, if difficult to determine, its contractual value; as required by the regulations, the latter is stated up to the net exposure value. (millions of euro) Personal guarantees (*) Total (2) Credit derivatives Commitments Other derivatives Public administration Banks Other financial companies Other counterparties (1)+(2) Banks Other financial companies Other counterparties 1. Guaranteed on-balance sheet credit exposures - - - 49,862 766 3,199 26,698 287,386 1.1 totally guaranteed - - - 23,208 437 2,253 17,987 244,765 - of which non-performing - - - 360 5 29 439 3,767 1.2 partly guaranteed - - - 26,654 329 946 8,711 42,621 - of which non-performing - - - 277 1 4 59 607 2. Guaranteed off-balance sheet credit exposures: - - - 2,477 92 1,787 25,015 44,538 2.1 totally guaranteed - - - 1,558 42 899 20,443 34,745 - of which non-performing - - - 30 - 1 161 246 2.2. partly guaranteed - - - 919 50 888 4,572 9,793 - of which non-performing - - - 7 - - 31 89 (*) Fair value of the guarantee or, if difficult to determine, its contractual value; as required by the regulations, the latter is stated up to the net exposure value. A.4. Prudential consolidation \u2013 Financial assets and non-financial assets resulting from the enforcement of guarantees (millions of euro) Derecognised credit exposure Gross amount Total adjustments Book value of which obtained during the year A. Property and equipment 338 375 -70 305 15 A.1 Used in operations 1 1 - 1 - A.2. Investment 134 123 -9 114 3 A.3 Inventories 203 251 -61 190 12 B. Equities and debt securities 367 368 -176 192 - C. Other assets - - - - - D. Non-current assets held for sale and discontinued operations 5 6 -1 5 - D.1 Property and equipment 5 6 -1 5 - D.2. Other assets - - - - - Total 31.12.2022 710 749 -247 502 15 Total 31.12.2021 735 775 -196 579 36 For the Group, the assets seized (book value) are mainly represented by: \u2013 Property and equipment used in operations: buildings (1 million euro); \u2013 Investment property: buildings (82 million euro); land (32 million euro); \u2013 Property and equipment \u2013 Inventories: buildings (178 million euro), land (12 million euro); \u2013 Equities and debt securities: o equity investments of 24 million euro (primarily relating to the equity investment in Risanamento); o financial assets mandatorily measured at fair value of 118 million euro; o financial assets measured at fair value through other comprehensive income of 50 million euro. These are financial assets not previously provided by the borrower as security for pre-existing loans, but acquired under bilateral agreements with the borrower, following which the Group has derecognised the credit exposure; \u2013 Non-current assets held for sale and discontinued operations: buildings (4 million euro), other (1 million euro). ", "dimensions": { "concept": "ifrs-full:DisclosureOfCollateralExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-976": { "value": "1.2. MARKET RISKS As already mentioned in the Introduction, the Intesa Sanpaolo Group policies on financial risk are defined by the Parent Company\u2019s Management Bodies, with the support of specific Committees, including the Steering Committee, chaired by the Managing Director and CEO and composed of the heads of the main corporate departments, and the Group Financial Risk Committee. The Steering Committee, a Group body with a decision-making, reporting and consulting role, is also assigned the functions of assisting the Managing Director and CEO in the performance of his duties, strengthening the coordination and cooperation mechanisms between the various business, governance and control areas of the Group, with a view to sharing the main business choices, and helping ensure coordinated and integrated risk management and the safeguarding of business value at Group level, including the correct functioning of the internal control system. The Group Financial Risk Committee, chaired by the Chief Risk Officer and the Chief Financial Officer, is responsible for setting out the methodological and measurement guidelines for financial risks, establishing the operational limits and assessing the risk profile of the Group and its main operational units. The Committee also sets out the strategies for the management of the banking book to be submitted to the competent Bodies and establishes the guidelines on liquidity, interest rate and foreign exchange risk. The Committee operates on the basis of the operating and functional powers delegated by the Corporate Bodies and coordination of the Steering Committee. The Group\u2019s overall financial risk profile and the eventual necessary changes are examined periodically by the Group Financial Risk Committee. The Parent Company\u2019s Market and Financial Risk Management Head Office Department is responsible for the development of corporate risk measurement and monitoring methodologies as well as for the proposals on the Group\u2019s system of operational limits. It is also responsible in outsourcing for the risk measurement for certain operating units on the basis of specific service contracts. The table below shows the items of the consolidated Balance Sheet that are subject to market risks, showing the positions for which managerial VaR is the main risk measurement metric (the managerial VaR is calculated on a wider scope that than subject to the Internal Model for market risks. For a more in-depth discussion, refer to the subsequent paragraph), along with those for which risks are monitored with other metrics. The latter mostly include the sensitivity analysis to the different risk factors (interest rate, credit spread, etc.). (millions of euro) BOOK VALUE (supervisory scope) MAIN RISK MEASUREMENT METRICS VaR Other Risk factors measured using metrics included under Other Assets subject to market risk 645,478 93,608 551,870 Financial assets held for trading 42,614 42,260 354 Interest rate risk, credit spread, equity Financial assets designated at fair value 1 1 - - Other financial assets mandatorily measured at fair value 5,706 176 5,530 Interest rate risk, credit spread, equity Financial assets measured at fair value through other comprehensive income (ifrs 7 par. 8 lett. h)) 49,716 48,342 1,374 Interest rate risk, credit spread, equity Due from banks 32,887 - 32,887 Interest rate risk Loans to customers 495,952 - 495,952 Interest rate risk Hedging derivatives 10,062 2,829 7,233 Interest rate risk Investments in associates and companies subject to joint control 8,540 - 8,540 Equity risk Liabilities subject to market risk 731,920 55,340 676,580 Due to banks 137,217 - 137,217 Interest rate risk Due to customers 456,640 - 456,640 Interest rate risk Securities issued 77,389 - 77,389 Interest rate risk Financial liabilities held for trading 46,533 46,462 71 Interest rate risk Financial liabilities designated at fair value (ifrs 7 par. 8 lett. e)) 8,795 8,795 - - Hedging derivatives 5,346 83 5,263 Interest rate risk REGULATORY TRADING BOOK 1.2.1. INTEREST RATE RISK AND PRICE RISK Qualitative information General aspects The regulatory requirements for the trading book are established in Regulation EU 575/2013 (CRR - Part Three, Title I, Chapter 3, in Articles 102, 103, and 104 respectively). The combined provisions of those articles lay down the set of minimum requirements for the identification of the trading strategies and the measurement and control of the associated risks. In accordance with the requirements of the applicable regulations, the Intesa Sanpaolo Group has established an internal policy that identifies the trading book based on: \u2212 measurement at fair value through profit or loss of the instruments held for trading; \u2212 the strategies defined; \u2212 the risk-taking centres identified; \u2212 the monitoring, limitation and management of the risks defined in accordance with the internal regulations on market risk. In particular, the assets classified in the regulatory trading book coincide \u2013 apart from some specific exceptions \u2013 with the financial assets held for trading (Bank of Italy Circular 262). This association derives from the set of strategies, powers, limits and controls that feed and guarantee the adjacency and consistency between the accounting and prudential portfolios. Among risks associated with trading activity, i.e. market risks deriving from the effect that changes in market variables may generate on the Group's various assets and liabilities, the latter are generally quantified through daily and periodic analysis designed to determine the vulnerability of the Intesa Sanpaolo Group\u2019s trading book. A list of the main risk factors to which the Group\u2019s trading book is exposed is set out below: \u2212 interest rates; \u2212 equities and market indexes; \u2212 investment funds; \u2212 foreign exchange rates; \u2212 implied volatilities; \u2212 spreads in credit default swaps (CDSs); \u2212 spreads in bond issues; \u2212 correlation instruments; \u2212 dividend derivatives; \u2212 asset-backed securities (ABSs); \u2212 commodities. For some of the risk factors cited above and included in the managerial VaR (Value at Risk) measurements, the Supervisory Authority has validated the internal models for the reporting of the capital requirement of Intesa Sanpaolo. More specifically, concerning market risk, the risk profiles validated are: (i) generic/specific on debt securities and on equities; (ii) position risk on quotas of UCI with daily liquidity and (iii) commodity risk. Risk management processes and measurement methods The allocation of capital for trading activities is set by the Parent Company\u2019s Board of Directors, through the attribution of operating limits in terms of VaR to the various Group units. The structure of limits reflects the risk level deemed to be acceptable with reference to single business areas, consistent with operating and strategic guidelines defined by top management. The attribution and control of limits at the various hierarchical levels implies the assignment of delegated powers to the heads of business areas, aimed at achieving the best trade-off between a controlled risk environment and the need for operating flexibility. The functioning of the system of limits and delegated powers is underpinned by the basic concepts of hierarchy and interaction. The application of such principles led to the definition of a structure of limits in which the distinction between first level and second level limits is particularly important: \u2212 first-level limits (VaR): the overall limits of the Group as well as those of the IMI C&IB Division and Group Treasury and Finance Department are included in the Group\u2019s Risk Appetite Framework (RAF). At the same time, the Board of Directors of the Parent Company defines the operating limits in terms of VaR for other Group companies which hold smaller trading books whose risk is marginal. Following approval, these limits are then allocated to the desks of the individual legal entities, considering the proposals by the business units. Limit absorption trends and the relative congruity analysis are periodically assessed by the Group Financial Risk Committee and Board of Directors within the framework of the Tableau de Bord for the Group\u2019s risks; \u2212 second level limits (sensitivity and greeks): they have the objective of controlling operations of the various desks on the basis of differentiated measures based on the specific characteristics of traded instruments and operating strategies, such as sensitivity, greeks and equivalent exposures; \u2212 other significant limits: they have the objective of monitoring particular transactions (e.g. limits of negative maximum exposure of the valuation reserve, ceilings for transactions with issuer risk). Some of these limits may be covered by the RAF rules. See also the paragraph \u201cThe internal control system\u201d for a more detailed representation of the risk framework. The Parent Company represents the main portion of the Group\u2019s market risks, while some other Group subsidiaries hold smaller trading books with a marginal risk (approximately less than 1% of the Group\u2019s overall management risk): in particular, the risk factors of the international subsidiaries\u2019 trading books are local government bonds, positions in interest rates, and foreign exchange rates relating to linear pay-offs. A more detailed representation of the market risk metrics monitored in the limit structure is set out below: Managerial VaR Definition: Value at Risk is a monetary estimate of risk based on statistical techniques capable of summarising the maximum probable loss, with a certain confidence level, that a financial position or portfolio may suffer in a given period (holding period) in response to changes in the risk factors underlying the measurement models caused by market dynamics. Method: the mathematical and statistical models that make it possible to calculate VaR can be divided into two general categories: parametric approaches (variance/covariance) and approaches based on simulation techniques, such as that in use at Intesa Sanpaolo. Specifically, the approach used in Intesa Sanpaolo has the following characteristics: \u2212 historical simulation model based on the mark-to-future platform; \u2212 a 99th percentile confidence interval; \u2212 disposal period of 1 day; \u2212 full revaluation of existing positions. Historical simulation scenarios are calculated internally on time series of one-year risk factors (250 observations). For management purposes, a non-equal probability of occurrence is associated with each scenario, decreasing exponentially as a function of time, to privilege the informational content of the most recent data. For regulatory purposes, scenarios are equally weighted when calculating the capital requirement. Please note that, in the first quarter of 2022, on approving the ordinary annual update of the market risk managerial framework (as part of the 2022 Group Risk Appetite Framework), the Board of Directors confirmed a specific limit for trading within an overall limit for trading and the hold to collect and sell (HTCS) business model. Sensitivity and greeks Definition: sensitivity measures the risk attributable to a change in the theoretical value of a financial position to changes of a defined quantity of risk factors connected thereto. It therefore summarises: \u2212 the extent and direction of the change in the form of multipliers or monetary changes in theoretical value; \u2212 without explicit assumptions on the time horizon; \u2212 without explicit assumptions of correlation between risk factors. Method: the sensitivity indicator can be constructed using the following techniques: \u2212 calculation of prime and second derivatives of the valuation formulae; \u2212 calculation of the difference between the initial value and that resulting from the application of unidirectional shocks independent of risk factors (delta, gamma, vega, CR01 and PV01). Sensitivity measures make risk profiling more accurate, especially in the presence of option components. These measure the risk attributable to a change in the value of a financial position to predefined changes in valuation parameters including a one basis point increase in interest rates. Level measures Definition: Level measures, used also as ratios, are indicators supporting synthetic risk metrics which are based on the assumption of a direct relationship between the size of a financial position and the risk profile. In particular, level measures make it possible to monitor the nature of exposures to certain issuers and economic groups. The main level measure indicators are nominal (or equivalent) position and average duration metrics; level indicators also include the Negative Maximum Exposure of the Valuation Reserve measures characteristic of the HTCS business model. Method: nominal (or equivalent) position is determined by identifying: \u2212 the notional amount; \u2212 the mark to market; \u2212 the conversion of the position of one or more instruments to that of a given benchmark (equivalent position); \u2212 the FX exposure. When determining the equivalent position, risk is defined as the value of the various assets, converted into an aggregate position that is \u201cequivalent\u201d in terms of sensitivity to the change in the risk factors investigated. At Intesa Sanpaolo the approach is characterised by extended use of ceilings in terms of MtM, as representative of the value of the assets as recognised. Stress tests Definition: stress tests are conducted periodically to identify and monitor potential vulnerabilities in trading books upon the occurrence of extreme, rare events not fully captured by VaR models. Method: Stress tests for management purposes are applied periodically to market risk exposures, typically adopting: \u2212 sensitivity analysis, which measures the potential impact on the main risk metrics of a change in a single risk factor or simple multi-risk factors; \u2212 scenario analysis, which measures the potential impact on the main risk metrics of a certain scenario that considers multiple risk factors. The following stress exercises are included in the Group\u2019s Stress Testing Programme: \u2212 multi-risk exercise, based on scenario analysis, which enables the forward-looking assessment of the simultaneous impact on the Group of multiple risk factors, also taking into account the interrelationships between them and, where applicable, the top management\u2019s reaction capacity; \u2212 regulatory multi-risk exercise, ordered and coordinated by the supervisor/regulator which defines its general assumptions and scenarios, requires the full revaluation of the impacts with the resulting need of contributions from the specialist departments of the Chief Risk Officer and Chief Financial Officer Governance Areas; \u2212 situational exercise, ordered by the top management or by the supervisor/regulator in order to assess the impact of particular events (relating to the geopolitical, financial, economic, competitive environment, etc.) from a forward-looking perspective; \u2212 a single or specific risk exercise to assess the impact of scenarios (or single or more specific risk factors) on specific risk areas. Stressed VaR Definition: the stressed VaR metric is based on the same measurement techniques as VaR. In contrast to the latter, it is calculated by applying market stress conditions recorded over an uninterrupted 12-month historical period. Method: that period was identified considering the following guidelines: \u2212 the period must represent a stress scenario for the portfolio; \u2212 the period must have a significant impact on the main risk factors for the portfolio of Intesa Sanpaolo; \u2212 the period must allow real time series to be used for all portfolio risk factors. While using the historical simulation approach for VaR calculation, the latter point is a discriminating condition in the selection of the holding period. Actually, in order to ensure that the scenario adopted is effectively consistent and to avoid the use of driver or comparable factors, the historical period must ensure the effective availability of market data. As at the date of preparation of the 2022 Financial Statements, the period for the measurement of Stressed VaR for Intesa Sanpaolo was from 3 October 2011 to 20 September 2012. For managerial purposes, the stressed VaR metric is calculated on the entire set of the Group\u2019s portfolios measured at fair value (trading and FVOCI in the banking scope) and the stressed period is revised at least annually, together with the annual update to the market risk management framework (Risk Appetite Framework). Incremental Risk Charge (IRC) Definition: The Incremental Risk Charge (IRC) is the maximum potential loss in the credit trading book resulting from an upgrade/downgrade or bankruptcy of the issuers, over a 1-year period, with a 99.9% confidence level. This measure, which is additional to the VaR, is applied to the entire trading book of Intesa Sanpaolo (just as for the other regulatory metrics, it is not applied to the sub-portfolios). The IRC enables the correct representation of the specific risk on debt securities and credit derivatives because, in addition to idiosyncratic risk, it also captures event and default risk. This measure applies to all financial products that are sensitive to credit spreads included in the trading book except for the securitisations. Method: The simulation is based on a Modified Merton Model. The probabilities of transition and default are those observed through the historical matrices of the main rating agencies, applying a probability of default minimum value higher than zero. The asset correlation is inferred from the equity correlation of the issuers. The model is based on the assumption of a constant position with a holding period of one year. A regular stress program is applied to the model\u2019s main parameters (correlation, and transition, default and credit spread matrices). Quantitative information Daily managerial VaR evolution Below is a summary of the daily managerial VaR for the trading book only, which also shows the overall exposure of the main risk-taking centres. Daily managerial VaR of the trading book (millions of euro) average 4th quarter minimum 4th quarter maximum 4th quarter average 3rd quarter average 2nd quarter average 1st quarter Total GroupTrading Book (a) 26.6 21.5 31.0 26.0 22.8 21.4 of which: Group Treasury and Finance Department 6.6 4.9 9.4 7.2 6.1 3.8 of which: IMI C&IB Division 24.7 18.7 31.0 26.0 21.2 17.5 Each line in the table sets out past estimates of daily VaR calculated on the histrorical quarterly time-series of the Intesa Sanpaolo Group (including other subsidiaries), the Group Treasury and Finance Department and the IMI C&IB Division respectively; minimum and maximum values for the overall perimeter are estimated using aggregate historical time- series and therefore do not correspond to the sum of the individual values in the column. (a) The Group Trading Book figure includes the managerial VaR of the Group Treasury and Finance Department, the IMI C&IB Division (Trading Book perimeter) and the other subsidiaries. During the fourth quarter of 2022, as shown in the table above, compared to the averages for the third quarter of 2022, trading managerial risks were substantially stable (26.6 million euro in the fourth quarter of 2022 and 26 million euro in the third quarter of 2022). Instead, with regard to the overall performance in 2022, compared to the same period of 2021, the trading managerial VaR decreased slightly, also due to lower market volatility compared to the exceptional market shocks connected with the spread of the COVID-19 pandemic. In particular, there was a reduction from 26.7 million euro in 2021 to 24.1 million euro in 2022. Daily managerial VaR of the trading book - Comparison 2022 \u2013 2021 (millions of euro) 2022 2021 average minimum maximum last day average minimum maximum Total GroupTrading Book (a) 24.1 15.4 32.5 22.4 26.7 16.9 57.8 of which: Group Treasury and Finance Department 5.9 2.4 9.4 6.4 2.8 2.3 5.6 of which: IMI C&IB Division 22.3 13.9 34.1 18.7 25.7 16.0 51.9 Each line in the table sets out past estimates of daily VaR calculated on the historical time-series of the first nine months of the Intesa Sanpaolo Group (including other subsidiaries), the year respectively of the Group Treasury and Finance Department and the IMI C&IB Division; minimum and maximum values for the overall perimeter are estimated using aggregate historical time-series and therefore do not correspond to the sum of the individual values in the column. (a) The Group Trading Book figure includes the managerial VaR of the Group Treasury and Finance Department, the IMI C&IB Division (Trading Book perimeter) and the other subsidiaries. The trend in the trading VaR in the fourth quarter of 2022 was mainly marked by transactions conducted by the IMI C&IB Division. Specifically, as shown in the chart below, there was a gradual decrease attributable to transactions in developed market government securities and credit indices. The movements are shown in the chart below: The breakdown of the Group\u2019s risk profile in the trading book in the fourth quarter of 2022 shows a prevalence of credit spread risk and interest rate risk, accounting for 34% and 29%, respectively, of the Group\u2019s total managerial VaR. Instead, the single risk-taking centres show a prevalence of exchange rate risk and interest rate risk for the Group Treasury and Finance Department (46% and 44%, respectively) and of credit spread and interest rate risk for the IMI C&IB Division (40% and 29%, respectively). Contribution of risk factors to total managerial VaR 4th quarter 2022 Shares Interest rates Credit spreads Foreign exchange rates Other parameters Commodities Group Treasury and Finance Department 4% 44% 6% 46% 0% 0% IMI C&IB Division 13% 29% 40% 5% 8% 5% Total 11% 29% 34% 15% 7% 4% (a) Each line in the table sets out the contribution of risk factors considering 100% the overall capital at risk, calculated as the average of daily estimates in the fourth quarter of 2022, broken down between the Group Treasury and Finance Department and IMI C&IB Division and indicating the distribution of the Group's overall capital at risk. Risk control with regard to the activity of the Intesa Sanpaolo Group also uses scenario analyses and stress tests. The impact of selected scenarios relating to the evolution of stock prices, interest rates, credit spreads, foreign exchange rates and commodity prices at the end of December is summarised in the following table: (millions of euro) EQUITY INTEREST RATES CREDIT SPREADS FOREIGN EXCHANGE RATES COMMODITIES Crash Bullish +40bps lower rate -25bps +25bps -5% +5% Crash Bullish Total Trading Book 55 15 17 10 -16 19 22 -13 -17 6 0 5 10 15 20 25 30 35 40 45 50 Jan-22 Mar-22 Jun-22 Sep-22 Dec-22 Millions of euro Daily evolution of market risks - VaR IMI C&IB Division Group Trading Book Group Treasury and Finance Department Specifically: \u2013 for stock market positions, there would not be potential losses either in the case of sudden increases in stock prices or in the case of sharp decreases therein; \u2013 for positions in interest rates, there would not be potential losses either in the case of sudden increases or decreases therein; \u2013 for positions in credit spreads, a tightening of credit spreads of 25 bps would result in an overall loss of 16 million euro; \u2013 for positions in exchange rates, there would be potential losses of 13 million euro in the event of appreciation in the Euro against the other currencies; \u2013 finally, for positions in commodities, there would be a loss of 17 million euro in the event of a fall in prices of commodities other than precious metals. With regard to the use of the overall limit relating to trading and the hold to collect and sell (HTCS) business model, there was an overall reduction in the market managerial VaR in the fourth quarter of 2022 from 207 million euro (average managerial VaR third quarter 2022) to 155 million euro (average managerial VaR fourth quarter 2022). Backtesting The soundness of the VaR calculation methods must be monitored daily via backtesting which, for the regulatory backtesting, compares: \u2013 the daily estimates of value at risk; \u2013 the daily profits/losses based on backtesting which are determined using actual daily profits and losses achieved by individual desks, net of components which are not considered in backtesting: these include, for example, fees and financial costs of managing the positions that are regularly reported within the managerial area. Backtesting allows verification of the model\u2019s capability of correctly seizing, from a statistical viewpoint, the variability in the daily valuation of trading positions, covering an observation period of one year (approximately 250 estimates). Any critical situations relative to the adequacy of the internal model are represented by situations in which daily profits/losses based on backtesting highlight more than four occasions, in the year of observation, in which the daily loss is higher than the value at risk estimate. Current regulations require that backtesting is performed by taking into consideration both the actual and hypothetical P&L series. During the last year there were three backtesting exceptions 104 for the regulatory VaR measure of Intesa Sanpaolo. The breaches were not due to portfolio turnover but to peaks of volatility in the interest rate and credit risk factors. 104 In the last 250 observations, the Bank recorded three Actual P&L exceptions and three Hypothetical P&L exceptions. For the total calculation, as per the reference regulations, the maximum between Actual P&L and Hypothetical P&L exceptions is counted. Accordingly, there were three backtesting exceptions in the last year. -50.0 -40.0 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 Jan-22 Mar-22 Jun-22 Sep-22 Dec-22 Millions of euro Actual P&L Hypothetical P&L Current VAR Issuer risk Issuer risk in the trading portfolio is analysed through level measures, i.e. in terms of mark to market, with exposures aggregated by rating class and sector, and is monitored through a system of operating limits based on both sector/rating classes and concentration indexes. Breakdown of exposures by type of issuer Total Of which Corporate Financial Emerging Covered Government Securitis. Group Treasury and Finance Department 0% 0% 0% 0% 0% 0% 0% IMI C&IB Division 100% 8% 40% 12% 3% 5% 32% Total 100% 8% 40% 12% 3% 5% 32% The table sets out in the Total column the contribution of the Group Treasury and Finance Department and the IMI C&IB Division to overall issuer risk exposures, breaking down the exposure by type of issuer. The scope corresponds to the trading portfolio with an issuer ceiling (excluding Italian Government bonds, AAA and own bonds) and including CDS (absolute value). The breakdown of the portfolio subject to issuer risk shows, in the fourth quarter, the prevalence of an exposure attributable solely to the IMI C&IB Division and mainly in securities in the financial and securitisation segments. Impacts from the COVID-19 pandemic With regard to operating and regulatory market risks, during 2022 there were no changes in the risk metrics attributable to the context resulting from the COVID-19 pandemic. Impacts of the Russia-Ukraine conflict There were no significant impacts of the Russia-Ukraine conflict on the metrics for measuring market risk in the Group\u2019s trading book. BANKING BOOK 1.2.2 INTEREST RATE RISK AND PRICE RISK Qualitative information General aspects, interest rate risk and price risk management processes and measurement methods The \u201cbanking book\u201d is defined as the trade portfolio consisting of all on-balance sheet and off-balance sheet items that are part of the Intesa Sanpaolo Group's lending and deposit collecting activities; therefore, the interest rate risk of the banking book (hereinafter \u201cinterest rate risk\u201d or IRRBB) refers to the current and prospective risk of changes in the Group's banking book due to adverse changes in interest rates, which are reflected in both economic value and net interest income. The banking book also includes exposure to market risks deriving from the equity investments in listed companies not fully consolidated, mainly held by the Parent Company. The internal system for measuring interest rate risk assesses and describes the effect of changes in interest rates on the economic value and the net interest income and identifies all significant sources of risk that affect the banking book: \u2212 repricing risk, i.e. the risk associated with lags in maturity dates (for fixed-rate positions) or in the interest rate revision date (for floating-rate positions) of the assets, liabilities and off-balance sheet items; \u2212 yield curve risk, i.e. the risk associated with changes in the inclination and shape of the yield curve; \u2212 basis risk, i.e. the risk arising from imperfect correlation in the adjustment of lending and deposit rates on different instruments, but with otherwise similar repricing characteristics. As interest rates change, these differences can lead to unexpected changes in cash flows and yield spreads between assets, liabilities and off-balance sheet positions having similar maturities or rate revision frequencies; \u2212 optionality risk, i.e. the risk associated with the presence of automatic or behavioural options in the Group's assets, liabilities and off-balance sheet instruments. Intesa Sanpaolo's current measurement system also allows the risk profile to be examined on the basis of two distinct but complementary perspectives: \u2013 economic value perspective (EVE \u2013 Economic Value of Equity), which considers the impact of interest rate fluctuations and the associated volatility on the present value of all future cash flows; \u2013 net interest income perspective (NII - Net Interest Income), which aims to analyse the impact of interest rate fluctuations and their associated volatility on net interest income. The economic value perspective assesses the medium-to-long term impacts of interest rate fluctuations, while the net interest income perspective provides a short-term assessment. Interest rate risk is managed by setting limits to both perspectives. Said limits comprise: \u2013 consolidated limits, which are defined in the RAF and approved by the Board of Directors, both in terms of change in EVE (sensitivity or \u0394EVE) and net interest income sensitivity (\u0394NII). The consolidated \u0394EVE limits reflect, consistent with the context and regulatory instructions, the average expected exposure of the Group's EVE. The expected average level is quantified within the RAF and defined as the average exposure that the Group expects to take during the year. The Group's consolidated sensitivity limits are accompanied by a risk indicator, which constitutes an \u201cearly warning\u201d threshold approved within the RAF, which makes it possible to control exposure to the risk of yield curve twists; \u2013 individual sensitivity and net interest income sensitivity limits, which are part of the \u201ccascading\u201d process of the Group's RAF limit, and are proposed, after being shared with the operating structures, by the Financial and Market Risks Head Office Department and approved by the Group Financial Risk Committee (GFRC). These limits take account of the characteristics of the banks\u2019/divisions\u2019 portfolios, with particular reference to intermediated volumes, average durations, the type of instruments traded and the Company's strategic mission within the Group. The Financial and Market Risks Head Office Department performs monthly checks that the limits and early warning level approved in the Risk Appetite Framework (RAF) are observed at the consolidated and individual level. In addition, the Group has adopted a specific internal policy document regarding interest rate risk (the IRRBB Guidelines) subject to approval by the Board of Directors, which governs the Group's entire interest rate risk management framework and in particular the aspects of governance, methods of use and formulation of scenarios. The IRRBB Guidelines define the methods for measuring the financial risks generated by the Group\u2019s banking book: 1. Sensitivity of economic value (\u0394EVE); 2. Net interest income sensitivity (\u2206NII); 3. Credit Spread Risk of the Banking Book (CSRBB); 4. Value at Risk (VaR). These measures are available for each relevant currency in the banking book. The sensitivity of the economic value (or fair value sensitivity) measures the change in the economic value of the banking book and is calculated at individual cash flow level for each financial instrument, based on different instantaneous rate shocks and based on historical stress simulations aimed at identifying the worst and best cases. It reflects the changes in the present value of the cash flows of the positions already in the balance sheet for the entire remaining duration until maturity (run-off balance sheet). The cash flows used to determine the present value are developed at the contractual rate, FTP (internal fund transfer price) or risk-free rate (Euribor/Libor) and discounted according to risk-free discount curves. When calculating the present value of loans, the expected loss component is considered; it represents the amount of cash flow that the Bank does not expect to recover on a given exposure and that thus reduces its value. The present value of the loan adjusted for credit risk is calculated for this purpose by deducting the corresponding level of expected loss from expected cash flows according to the \"cash flow adjustment\" (\"CFA\") method. To control the exposure and monitor the limits, the calculation involves determining the algebraic sum of the equivalent in euro of the sensitivities of the positions in the various currencies by applying a parallel shock of +100 bps to the interest rate curves in the various currencies. The calculation for non-parallel shocks for the purposes of controlling the exposure and monitoring the early warning level is performed similarly. The sensitivity of the relevant currencies is then corrected, according to a \"currency aggregation\" management technique, to take account of the imperfect correlation with the rates of the main currency (the euro). The sensitivity of net interest income focuses the analysis on the impact that changes in interest rates can have on the Group's ability to generate stable profit levels. The component of profits measured is represented by the difference between the net interest income generated by interest-bearing assets and liabilities, including the results of hedging activities through the use of derivatives. The time horizon of reference is commonly limited to the short and medium term (from one to three years) and the impact is assessed on a going concern basis. The change in net interest income is estimated under expected scenarios as well as under potential interest rate shocks and stress scenarios. Further assumptions are made regarding customer behaviour (differentiated according to interest rate scenarios) and market behaviour and the response of Group/Bank management to changes in the economy. Thus, the projection of the net interest income and its sensitivity to changes in market factors require a series of modelling assumptions for the development of volumes and rates (fixed/floating), the reference time horizon, the relevant currencies, as well as the behavioural models introduced (prepayment, core deposits, etc.) and the assumptions regarding the evolution of the portfolio (run-off, constant or dynamic balance sheet). The net interest income sensitivity limits are defined on the basis of an instantaneous and parallel interest rate shock of +/-50 bp, with a reference time horizon of 1 year and assuming a constant balance sheet. The net interest income sensitivity limit is defined as the limit on the loss in the income statement and, therefore, is exclusively negative (limit on the potential reduction in the net interest income): the use of the limit is represented by the sensitivity that generates a greater reduction in net interest income in the two scenarios of a parallel rise and fall in interest rates. The total sensitivity exposure of net interest income is given by the algebraic sum of the exposure of individual currencies. The GFRC is also tasked with allocating sub-limits on net interest income sensitivity to the individual Banks/Companies, and may also define sub-limits on net interest income sensitivity by currency. The limit assigned to each Company is defined on the basis of the historical volatility observed in individual net interest income, consistent with the strategies and limits defined for sensitivity. The Credit Spread Risk of the Banking Book (CSRBB) is defined as the risk caused by changes in the price of credit risk, liquidity premium and potentially other components of instruments with credit risk that cause fluctuations in the price of credit risk, liquidity premium and other potential components, which is not explained by the interest rate risk of the banking book. The reference area is represented by the HTCS securities portfolio, whose changes in value have an immediate impact on the Group\u2019s capital. Value at Risk (VaR) is a probability-based metric that expresses the maximum potential loss of portfolio value that could be incurred within a specific time horizon, at a pre-defined confidence level. VaR is also used to consolidate exposure to financial risks of the various Group companies which perform banking book activities, also taking into account the benefits of diversification and the correlation between various risk factors and different currencies. This measure is calculated and monitored, for the entire scope, by the Financial and Market Risks Head Office Department. In calculating the above risk measures, Intesa Sanpaolo adopts behavioural models for representing capital items. For mortgages, statistical techniques are used to determine the probability of prepayment, in order to reduce the Group's exposure to interest rate risk (overhedging) and to liquidity risk (overfunding). The method developed estimates prepayment coefficients diversified according to the type of customer, financial characteristics of the transaction, such as the loan rate type (fixed or floating), the original term of the loan and the seasoning, understood as the age of the loan on the date of the prepayment event. The analysis refers to partial repayments, full repayments and refinancing. The prepayment model also examines the reasons that lead customers to make prepayments. With regard to this aspect, the phenomenon may be divided into a structural component (\"Core Prepayment\") and a scenario component (\"Coupon Incentive\"), primarily linked to market variations. Prepayment phenomena are monitored monthly and the prepayment coefficients to be applied to the model are re- estimated at least annually and are subject to periodic backtesting, appropriately documented in the specific model change document to ensure that the operating situation adheres to the assumptions made and incorporate any legislative and/or behavioural changes. For core deposits (customer current accounts), a financial representation model is adopted aimed at reflecting the behavioural features of stability of deposits and partial and delayed reaction to market interest rate fluctuations. The model is continuously monitored and periodically revised to promptly reflect changes in volumes and customer characteristics over time, as well as in the relevant regulatory framework. In order to measure the Group's vulnerability to market turbulence, the interest rate risk measurement system measures the impacts on the bank's economic value and net interest income produced by strains on the market (\u201cscenario analysis\u201d), i.e. sudden changes in the general level of interest rates, changes in the relationships between fundamental market rates (basis risk), in the slope and shape of the yield curve (yield curve risk), in the liquidity of the main financial markets or in the volatility of market rates. These analyses are conducted by subjecting the portfolio to various interest rate change scenarios: \u2013 regulatory scenarios produced by the Supervisory Outlier Test (SOT) on the EVE, which introduces an \u201cearly warning\u201d of 15% of Tier 1, calculated with reference to the BCBS scenarios (Parallel shock up, Parallel shock down, Steepener shock, Flattener shock, Short rates shock up and Short rates shock down); \u2013 shocks diversified by reference curve of the main risk factors and calculated as the difference between the yields of the curves of the individual factors and those of a curve relating to the selected pivot parameter (basis risk); \u2013 stress scenarios in historical simulation. Stress tests on behavioural models are also carried out to verify the financial impact of alternative assumptions underlying the behavioural parameters estimated in the models. The methodological assumptions underlying the assumptions contained in the stress scenarios are duly described in the detailed methodologies. Impacts from the COVID-19 pandemic In 2022, the strategies and safeguards implemented in the framework of interest rate risk management were put into place to protect net interest income against potential additional negative impacts of COVID-19. Net interest income was stabilised through measures to cover the viscousness of customer demand deposits by entering into hedging derivatives and natural hedges with mortgage loans to customers. Impacts of the Russia-Ukraine conflict The Russia-Ukraine conflict resulted in a generalised increase in the spread against the German Bund and, as a result, an increase in the related returns. With regard to the interest rate risk generated by the Intesa Sanpaolo Group\u2019s banking book, this increase resulted in a reduction in exposure of the government bond portfolio. Quantitative information Banking book: internal models and other sensitivity analysis methodologies In 2022, interest rate risk generated by the Intesa Sanpaolo Group\u2019s banking book, measured through shift sensitivity of value, averaged -1,669 million euro, with a maximum of -2,134 million euro and a minimum value of -1,016 million euro, with the latter coinciding with the value at the end of December 2022. The latter figure decreased by 740 million euro on the end of 2021, when it came to -1,756 million euro. The reduction in the last few months of 2022 originates from the effect of the increase in interest rates, as well as derivatives to hedge loans and the decrease in the HTCS securities portfolio. The sensitivity of net interest income \u2013 assuming a +50, -50 and +100 basis point change in interest rates \u2013 amounted to 633 million euro, -668 million euro and 251 million euro, respectively, at the end of December 2022. The latter figure decreased (- 1,596 million euro) on the end of 2021, when it came to 1,847 million euro. The reduction was impacted by both the change in the rules of indexation of operations with the ECB, made at the end of October, and the rise in short-term market rates, which resulted in increased responsiveness of on demand deposits from customers envisaged by the behavioural model. The following table and charts provide a representation of the performance of the shift sensitivity of economic value (or the shift sensitivity of fair value) and the shift sensitivity of net interest income. (millions of euro) 2022 31.12.2022 31.12.2021 average minimum maximum Shift Sensitivity of the Economic Value +100 bp -1,669 -1,016 -2,134 -1,016 -1,756 Shift Sensitivity of Net Interest Income -50bp -790 -641 -903 -668 -880 Shift Sensitivity of Net Interest Income +50bp 844 617 1,105 633 962 Shift Sensitivity of Net Interest Income +100bp 1,179 251 2,094 251 1,847 Interest rate risk, measured in terms of VaR, averaged 643 million euro in 2022, with a maximum value of 885 million euro and a minimum value of 442 million euro, with the latter coinciding with the value at the end of December 2022. The latter figure decreased by 67 million euro compared to 509 million euro at the end of 2021. That change is largely due to the decrease in exposure recorded especially in the last few months of 2022. Foreign exchange risk expressed by equity investments in foreign currency (banking book) and measured in terms of VaR averaged 155 million euro in 2022, with a minimum value of 74 million euro and a maximum value of 252 million euro, standing at 126 million euro at the end of December 2022, up by 33 million euro on the value of 93 million euro at the end of December 2021. That change is due to the increase in the volatility of the Russian rouble and the Egyptian pound. Price risk generated by the equity portfolio, measured in terms of VaR, recorded an average level during 2022 of 475 million euro, with maximum and minimum values of 560 million euro and 334 million euro, respectively, the latter being the figure of the end of December 2022, down by 33 million euro on the value at the end of December 2021 of 367 million euro. That change is mainly due to the sales of stakes in various listed subsidiaries during the last few months of 2022. Total VaR, consisting of the three components described above (Interest Rate VaR, Exchange VaR and Equity VaR) averaged 799 million euro in 2022, with a maximum value of 1,130 million euro and a minimum value of 575 million euro, reaching a figure of 639 million euro at the end of December 2022, up by 92 million euro on the value at the end of December 2021 of 548 million euro. This was due to a reduction in the benefit of overall diversification, linked to both the recomposition of the portfolio illustrated with regard to single risks (Interest Rate, Foreign Exchange, and Equity Investment risk), and the increase in market volatility. The table and chart below provide a representation of the performance of total VaR and its three components (Interest Rate VaR, Exchange VaR and Equity Investments VaR).
-2500
-2000
-1500
-1000
-500
0
millions of euro
Shift Sensitivity of the Economic Value +100 bp
0
500
1000
1500
2000
2500
millions of euro
Shift Sensitivity of Net Interest Income +100bp
(millions of euro) 2022 31.12.2022 31.12.2021 average minimum maximum Value at Risk - Interest Rate 643 442 885 442 509 Value at Risk - Exchange 155 74 252 126 93 Value at Risk - Equity investments 475 334 560 334 367 Total Value at Risk 799 575 1,130 639 548 Lastly, the table below shows a sensitivity analysis of the banking book to price risk, measuring the impact on Shareholders\u2019 Equity of a price shock of \u00b110% for the portfolio of quoted minority stakes, largely classified to the HTCS category. Price risk: impact on Shareholders' Equity (millions of euro) Impact on shareholders' equity at 31.12.2022 Impact on shareholders' equity at 30.09.2022 Impact on shareholders' equity at 30.06.2022 Impact on shareholders' equity at 31.03.2022 Impact on shareholders' equity at 31.12.2021 Price shock 10% 73 147 146 166 177 Price shock -10% -73 -147 -146 -166 -177 0 200 400 600 800 1000 1200 millions of euro Monthly evolution of total managerial VaR and its three components VAR_Interest Rate VAR_Exchange VAR_Equity investments VaR TOTAL 1.2.3. FOREIGN EXCHANGE RISK Qualitative information A. General aspects, foreign exchange risk management processes and measurement methods \u201cForeign exchange risk\u201d is defined as the potential adverse effect resulting from changes in the exchange rate between currencies that could have a negative impact on the valuation of the assets and liabilities in the financial statements and on earnings and capital ratios. Two types of Foreign Exchange Risk are identified: Structural and Transaction risk. Structural Foreign Exchange Risk is defined as the potential loss resulting from changes in the exchange rate that could have a negative impact on the foreign exchange reserves that are part of the Group\u2019s consolidated shareholders\u2019 equity. Transaction Foreign Exchange Risk is defined as the potential loss resulting from changes in the currencies exchange rate that may have negative impacts both on the valuation of the assets and liabilities in the financial statements when converted into the reporting currency and on the earnings from funding, lending and investment/disinvestment transactions in currencies other than the euro. The main sources of this foreign exchange risk consist of: non-euro loans and deposits held by corporate and/or retail customers; conversion into domestic currency of assets, liabilities and income of the international branches; trading of foreign currencies; collection and/or payment of interest, commissions, dividends and administrative expenses in foreign currencies; purchase and sale of securities and financial instruments for the purpose of resale in the short term; etc. Transaction foreign exchange risk also includes the risk of transactions related to operations that generate the type of structural foreign exchange risk represented, for example, by dividends approved by international subsidiaries and that relating to the management of foreign exchange risk tied to the management of equity investments, also including the gains/losses of international branches (Transaction Foreign Exchange Risk associated with Structural Foreign Exchange Risk). The Market and Financial Risk Management Head Office Department measures and controls the Parent Company and Group\u2019s exposure to Structural Foreign Exchange Risk; it performs the management calculation of the optimal position. It represents the open position in foreign currency designed to neutralise the sensitivity of the capital ratio to foreign exchange movements. The Market and Financial Risk Management Head Office Department also produces sensitivity analyses on capital ratios for management control and monitoring of Structural Foreign Exchange Risk in view of progressive alignment with the EBA LGs and sets its own Transaction Foreign Exchange Risk associated with Structural Foreign Exchange Risk within the framework of market risk VaR. B. Foreign exchange risk hedging activities The Intesa Sanpaolo Group\u2019s management of the Structural Foreign Exchange Risk assigns the Parent Company the related management and coordination powers in order to achieve a consistent Group strategy. This choice, which is consistent with the Parent Company\u2019s role as the liaison with the Supervisory Authority, allows the activities to be performed based on the specific responsibilities set out in the prudential supervision regulations, in addition to suitably mitigating and/or managing this type of risk. The monitoring and management of the Structural Foreign Exchange Risk are carried out at central level by the Group Treasury and Finance Head Office Department of the Parent Company, which manages it with a view to risk/return and to optimising capital requirements. The monitoring and hedging of the Transaction Foreign Exchange Risk are carried out at central level by the Group Treasury and Finance Head Office Department of the Parent Company and the IMI Corporate & Investment Banking Division for the area of competence, and at local level by the individual treasury functions of the Group companies and banks. As at the date of preparation of the financial statements, there were no transactions hedging shareholders\u2019 equity, whereas there were operational hedges of the foreign exchange risk of the assets and liabilities in the financial statements related to the banking book. Impacts from the COVID-19 pandemic The strategies and controls in place for the purpose of managing exchange rate risk did not require changes or specific actions in the situation resulting from the COVID-19 pandemic. Impacts of the Russia-Ukraine conflict The Russia-Ukraine conflict did not generate critical issues in the management of liquidity in foreign currency. Limited to the days immediately following the outbreak of the war, the cost of funding in USD increased on the market, an indicator of strong risk aversion. On the forex segment, though with low liquidity, the possibility of trading roubles on the interbank market did not disappear, save for the limits imposed by the sanctions regime. Quantitative information 1. Breakdown by currency of assets and liabilities and of derivatives (millions of euro) CURRENCIES US dollar GB pound Croatian kuna Swiss franc Hungarian forint Yen Australian dollar Other currencies A. FINANCIAL ASSETS 38,356 3,770 8,660 1,052 5,456 2,700 3,605 17,115 A.1 Debt securities 8,194 661 848 - 1,112 2,457 854 3,316 A.2 Equities 624 95 5 63 2 - - 824 A.3 Loans to banks 10,728 623 434 174 1,847 48 1,441 5,764 A.4 Loans to customers 18,810 2,391 7,373 815 2,495 195 1,310 7,211 A.5 Other financial assets - - - - - - - - B. OTHER ASSETS 3,432 556 771 987 204 103 117 2,277 C. FINANCIAL LIABILITIES 40,959 3,147 6,988 995 4,769 703 2,164 12,218 C.1 Due to banks 20,464 588 160 185 865 47 1,898 1,741 C.2 Due to customers 7,025 833 6,828 718 3,889 28 200 8,494 C.3 Debt securities 13,470 1,726 - 92 15 628 66 1,983 C.4 Other financial liabilities - - - - - - - - D. OTHER LIABILITIES 1,561 692 351 118 73 27 50 1,468 E. FINANCIAL DERIVATIVES - Options long positions 5,552 133 - 53 55 408 65 336 short positions 5,711 195 - 37 33 340 69 761 - Other derivatives long positions 62,767 10,972 12 5,946 1,849 3,246 1,501 11,711 short positions 62,708 11,271 9 6,706 1,960 5,366 3,070 13,524 TOTAL ASSETS 110,107 15,431 9,443 8,038 7,564 6,457 5,288 31,439 TOTAL LIABILITIES 110,939 15,305 7,348 7,856 6,835 6,436 5,353 27,971 DIFFERENCE (+/-) -832 126 2,095 182 729 21 -65 3,468 As of 31 December 2022, the presentation of the \u201cBreakdown by currency of assets and liabilities and of derivatives\u201d has been aligned with the prudential approach in compliance with the new methodological framework introduced by the EBA Guidelines on the treatment of structural FX under Article 352(2) of Regulation (EU) No 575/2013 (CRR). On 1 January 2023, the Croatian kuna joined the euro Area, and will no longer be the subject of future reporting. 2. Internal models and other sensitivity analysis methodologies As already noted, the management of Transaction Foreign Exchange Risk relating to trading activities is included in the operating procedures and in the estimation methodologies of the managerial VaR. Foreign exchange risk expressed by equity investments in foreign currency (banking book), including Group companies, originated a VaR (99% confidence level, 10-day holding period) amounting to 126 million euro as at 31 December 2022. This potential impact would only be reflected in the Shareholders\u2019 Equity. ", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-977": { "value": "1.4 LIQUIDITY RISK QUALITATIVE INFORMATION A. General aspects, liquidity risk management processes and measurement methods Liquidity risk is defined as the risk that the Bank may not be able to meet its payment obligations due to the inability to obtain funds on the market (funding liquidity risk) or liquidate its assets (market liquidity risk). The arrangement of a suitable control and management system for that specific risk has a fundamental role in maintaining stability, not only at the level of each individual bank, but also of the market as a whole, given that imbalances within a single financial institution may have systemic repercussions. Such a system must be integrated into the overall risk management system and provide for incisive controls consistent with developments in the context of reference. Intesa Sanpaolo\u2019s internal control and management system for liquidity risk is implemented within the Group Risk Appetite Framework and in compliance with the tolerance thresholds for liquidity risk approved in the system, which establish that the Group must maintain an adequate liquidity position in order to cope with periods of strain, including prolonged periods, on the various funding supply markets, also by establishing adequate liquidity reserves consisting of marketable securities and refinancing at Central Banks. To this end, a balance needs to be maintained between incoming and outgoing funds, both in the short and medium-long term. This goal is implemented by the Group Liquidity Risk Management Guidelines approved by the Corporate Bodies of Intesa Sanpaolo, in implementation of the applicable regulatory provisions. The provisions on liquidity introduced by the European Union in June 2013 and subsequently updated establish that banks must comply with: (i) the short-term liquidity coverage ratio (LCR > 100%) and (ii) the net stable funding ratio (NSFR >100%), as set out in Directive 2019/878/EU, Regulation (EU) No 575/2013, Regulation (EU) No 2019/876 and Delegated Regulation (EU) No 2015/61, as supplemented and amended. The regulatory framework is completed by the \u201cImplementing Technical Standards\u201d developed by the European Banking Authority (EBA) and ECB Guidelines designed to increase regulatory harmonisation of the Union within the framework of the Single Supervisory Mechanism (SSM), which in the area of liquidity also establishes an Internal Liquidity Adequacy Assessment Process (ILAAP), to be conducted with annual frequency for the purposes of the Supervisory Review and Evaluation Process (SREP). The \u201cGroup Liquidity Risk Management Guidelines\u201d of the Intesa Sanpaolo Group \u2013 in addition to referring to the Bank of Italy\u2019s indications regarding liquidity risk contained in the \u201cSupervisory regulations for banks\u201d \u2013 have gradually incorporated all the above regulatory provisions, in implementation of the applicable regulatory provisions. In this framework, the Group Liquidity Risk Management Guidelines approved by Intesa Sanpaolo\u2019s Corporate Bodies illustrate the tasks of the various corporate functions, the rules and the set of control and management processes aimed at ensuring prudent monitoring of liquidity risk, thereby preventing the emergence of crisis situations. To this end, they include procedures for identifying risk factors, measuring risk exposure and verifying observance of limits, conducting stress tests, identifying appropriate risk mitigation initiatives, drawing up emergency plans and submitting informational reports to company bodies. The key principles guiding the internal control and management system for liquidity risk defined by those Guidelines are as follows: \u2013 the existence of a liquidity management policy approved by senior management and clearly disseminated throughout the Bank; \u2013 the existence of an operating structure that works within set limits and attention thresholds and of a control structure that is independent from the operating structure; \u2013 the constant availability of adequate liquidity reserves in relation to the pre-determined liquidity risk tolerance threshold; \u2013 the assessment of the impact of various scenarios, including stress testing scenarios, on the cash inflows and outflows over time and the quantitative and qualitative adequacy of liquidity reserves; \u2013 the adoption of an internal fund transfer pricing system that accurately incorporates the cost/benefit of liquidity, on the basis of the Intesa Sanpaolo Group\u2019s funding conditions; \u2013 liquidity management in crisis situations that takes into account the guidelines on the governance of crisis management processes within the Recovery Plan and the Resolution Plan. The Group Liquidity Risk Management Guidelines set out the task assigned to the Corporate Bodies and allocate several important responsibilities to senior management, including approving measurement indicators, defining the main assumptions underlying the stress scenarios and composing the early warning thresholds used to activate emergency plans. In order to pursue an integrated, consistent risk management policy, strategic decisions regarding liquidity risk monitoring and management at the Group level fall to the Parent Company\u2019s Corporate Bodies. From this standpoint, the Parent Company performs its functions of monitoring and managing liquidity not only in reference to its own organisation, but also by assessing the Group\u2019s overall transactions and the liquidity risk to which it is exposed. In order to maximise the coordination and integrated control of liquidity risk, the Group Liquidity Risk Management Guidelines identify the following scopes of companies: (i) the \u201cEurozone sub-consolidation scope\u201d, which comprises the Parent Company with its international branches and all the other Italian and international banks of the Group in the Eurozone for which the transfer of liquidity is not blocked or limited by regulatory constraints and which therefore contribute to the stability of the integrated management in the Eurozone, for which the Central Treasury function is directly responsible, subject to compliance with the limits set for each individual legal entity; and (ii) the \u201cOther Banks/Group Companies\u201d scope, which includes the Group\u2019s international subsidiaries, whose liquidity management is carried out by the Treasury/ALM functions of each subsidiary, under the guidance and monitoring of the competent structures of the Parent Company. The corporate functions of the Parent Company responsible for ensuring the correct application of the Guidelines and the adequacy of the Group\u2019s liquidity position are the Group Treasury and Finance Head Office Department and the Planning and Control Department, responsible, within the Chief Financial Officer (CFO) Area, for liquidity management, and the Market and Financial Risk Management Head Office Department, which is directly responsible, within the Chief Risk Officer (CRO) Area, for measuring liquidity risk on a consolidated basis. The Group\u2019s liquidity is managed by the aforesaid structures of the CFO area through thorough monitoring of cash flows and continuous liaison with the Business Units, within the framework of the relevant business plans drawn up in accordance with the following guidelines: \u2013 constant attention to the level of customer loyalty, aimed at maintaining a high stock of stable deposits; \u2013 monitoring of the deposit-lending gap of the Business Units, with respect to plan and budget targets; \u2013 balanced use of the institutional market, with particular attention to diversification of segments and instruments; \u2013 selective use of refinancing operations by Central Banks. The Market and Financial Risk Management Head Office Department is directly responsible for level two controls and, as an active member of the Managerial Committees, it performs a primary role in the management and dissemination of information on liquidity risk, helping improve the Group\u2019s overall awareness of the existing position. In particular, it ensures the measurement of the Group\u2019s current and future exposure to liquidity risks under normal and stressed conditions, verifying compliance with the limits and, if those limits are exceeded, implementing the reporting to the competent Corporate Bodies and monitoring the agreed correction actions in the event of any excesses. The Chief Audit Officer assesses the functioning of the overall structure of the control system monitoring the process for measuring, managing and controlling the Group\u2019s exposure to liquidity risk and verifies the adequacy and compliance of the process with the requirements established by the regulations. The results of the controls carried out are submitted to the Corporate Bodies, at least once a year. The liquidity risk measurement metrics and mitigation tools are formalised by the aforementioned Group Liquidity Risk Management Guidelines which establish the methodology used for both the short-term and structural liquidity indicators. The short-term liquidity is aimed at providing an adequate, balanced level of cash inflows and outflows the timing of which is certain or estimated to fall within a period of 12 months, while ensuring a sufficient liquidity buffer, available for use as the main mitigation tool for liquidity risk. To that end, and in keeping with the liquidity risk appetite, the system of limits consists of specific short-term indicators, both of a regulatory nature with a holding a period of one month (Liquidity Coverage Ratio - LCR) and internally defined (Survival Period indicators). The LCR indicator is aimed at strengthening the short-term liquidity risk profile, ensuring that sufficient unencumbered high- quality liquid assets (HQLA) are retained that can be converted easily and immediately into cash on the private markets to satisfy the short-term liquidity requirements (30 days) in an acute liquidity stress scenario. To this end, the Liquidity Coverage Ratio measures the ratio between: (i) the stock of HQLA and (ii) the total net cash outflows calculated according to the scenario parameters defined by Delegated Regulation (EU) 2015/61 and its supplements/amendments. The Survival Period is an internal indicator designed to measure the first day on which the net liquidity position (calculated as the difference between available liquidity reserves and net outflows) becomes negative, i.e. when additional liquidity is no longer available to cover simulated net outflows. To this end, two different scenario hypotheses are considered, baseline and stressed, designed to measure, respectively: (i) the Group's independence from interbank funding on the financial markets and (ii) the survival period in the event of further tensions of a market and idiosyncratic nature, of medium-high severity, managed without envisaging restrictions on credit activity involving customers. For the Survival Period indicator, in stress conditions it is established that a minimum survival period must be maintained with the purpose of establishing an overall level of reserves covering greater cash outflows during a period of time that is adequate to implement the required operating measures to restore the Group to balanced conditions. The Intesa Sanpaolo Group\u2019s structural Liquidity Policy has adopted the structural requirement provided for by the regulatory provisions - the Net Stable Funding Ratio (NSFR). This indicator is aimed at promoting the increased use of stable funding, to prevent medium/long-term operations from giving rise to excessive imbalances to be financed in the short term. To this end, it sets a minimum \"acceptable\u201d amount of funding exceeding one year in relation to the needs originating from the characteristics of liquidity and residual duration of assets and off-balance sheet exposures. In addition, the internal policy on structural liquidity also includes early warning indicators for maturities of more than 1 year, with particular attention to long- term gaps (> 5 years). The Group Liquidity Risk Management Guidelines also establish methods for management of a potential liquidity crisis, defined as a situation of difficulty or inability of the Bank to meet its cash obligations falling due, without implementing procedures and/or employing instruments that, due to their intensity or manner of use, do not qualify as ordinary administration. By setting itself the objectives of safeguarding the Group\u2019s asset value and also guaranteeing business continuity under conditions of extreme liquidity emergency, the Contingency Liquidity Plan (CLP) ensures the identification of the early warning signals and their ongoing monitoring, the definition of procedures to be implemented in situations of liquidity stress, also indicating the immediate lines of action, and the intervention measures for the resolution of emergencies. The early warning indexes, aimed at spotting the signs of a potential liquidity strain, both systematic and specific, are monitored with daily frequency by the Market and Financial Risk Management Head Office Department. Within this framework, the Group Treasury and Finance Head Office Department was officially entrusted with drawing up the Contingency Funding Plan (CFP), which contains the various lines of actions that can be activated in order to face potential stress situations, specifying the extent of the mitigating effects attainable in the short-term. The CLP is part of the more general plan of Crisis Management (i.e. it is the first step of the escalation process envisaged in the management of liquidity emergencies) and the instruments envisaged in it represent a selection of recovery actions that are considered to be implementable in the short term and before other more radical measures, which are more extraordinary in nature or extent. To this end, intervention strategies and tools are defined according to the type, duration and intensity of the liquidity emergency, as well as the context in which the emergency is expected to occur. Group liquidity position The Group's liquidity position - supported by suitable high-quality liquid assets (HQLA) and the significant contribution from retail stable funding - remained within the risk limits set out in the current Group Liquidity Policy for all of 2022. Both regulatory indicators, LCR and NSFR, were above the regulatory requirements. In 2022, the Liquidity Coverage Ratio (LCR) of the Intesa Sanpaolo Group, measured according to Delegated Regulation (EU) 2015/61, amounted to an average 105 of 181.9% (184.5% in 2021). The NSFR was also significantly higher than 100%, supported by a solid base of stable deposits from customers, further increased during the year, as well as by adequate wholesale medium/long-term securities funding and the TLTRO funding from the ECB. At 31 December 2022, the Intesa Sanpaolo Group\u2019s NSFR, measured in accordance with regulatory instructions, was 126% (127.3% at the end of 2021); this indicator remains well above 100%, even excluding the positive contribution of TLTRO funding. The surpluses of both regulatory indicators, LCR and NSFR, are mainly originated within the Eurozone sub-consolidation scope. For the purposes of the LCR indicator, individual surpluses recorded at some international subsidiaries are also sterilised on consolidation due to constraints on the circulation of liquidity at those subsidiaries. At the end of December 2022, the exact value of total unencumbered HQLA reserves at the various Treasury Departments of the Group totalled 172.5 billion euro (187.1 billion euro at the end of 2021), approximately 64% of which consisted of cash as a result of temporary excess liquidity payments in the form of unrestricted deposits held at central banks. Adding the other marketable reserves and/or eligible Central Bank reserves, including retained self-securitisations, the Group\u2019s unencumbered liquidity reserves amounted to a total of 177.7 billion euro (192.4 billion euro at the end of 2021). (millions of euro) Unencumbered (net of haircut) 31.12.2022 31.12.2021 HQLA Liquidity Reserves 172,527 187,066 Cash and Deposits held with Central Banks (HQLA) 109,792 135,061 Highly liquid securities (HQLA) 62,735 52,005 Other eligible and/or marketable reserves 5,222 5,306 Total Group's Liquidity Buffer 177,749 192,372 Regular stress tests are carried out to assess the impact of negative events on the company liquidity position and on the adequacy of liquidity reserves, in relation to the current and prospective situation of the Group, the Bank and the market, to enable the Corporate Bodies to promptly recognise any unexpected vulnerability and to direct the activation of consequent corrective measures. Considering the high amounts of unencumbered liquidity reserves (liquid or eligible), the stress tests, in a combined scenario of market and specific crises (with significant loss in customer deposits), yielded results in excess of the target threshold for the Intesa Sanpaolo Group, with a liquidity surplus capable of meeting extraordinary cash outflows for a period of more than 3 months. Intesa Sanpaolo\u2019s funding strategy is based on maintaining diversity in terms of customers, products, maturities and currencies. Intesa Sanpaolo\u2019s main sources of funding consist of: (i) deposits from the domestic Retail and Corporate market, which represent the stable portion of funding, (ii) short-term funding on wholesale markets, largely consisting of repurchase agreements and CD/CP funding, and (iii) medium/long-term funding, mainly composed of own issues (covered bonds/ABS and other senior debt securities in the euro and US markets, in addition to subordinated securities) and refinancing operations with the Eurosystem (TLTRO). The Group Liquidity Risk Management Guidelines require the regular monitoring of the concentration analyses for the funding (by counterparty/product) and for the liquidity reserves (by issuer/counterparty). Adequate and timely information regarding the development of market conditions and the position of the Bank and/or Group was regularly provided to the corporate bodies and internal committees in order to ensure full awareness and manageability of the risk factors. This report includes an assessment of the liquidity risk exposure, also determined based on the adverse scenarios. The Board of Directors of Intesa Sanpaolo is regularly involved in defining the strategy for maintaining an adequate liquidity position at the level of the entire Group. 105 The figure shown refers to the simple average of the last 12 months of monthly observations, as per Regulation (EU) 2021/637. The corporate assessment on the adequacy of Intesa Sanpaolo\u2019s position is reported in the ILAAP (Internal Liquidity Adequacy Assessment Process), which also includes the Group\u2019s Funding Plan. Within the annual approval process for this report by the Corporate Bodies of Intesa Sanpaolo, the Liquidity Adequacy Statement (LAS) approved by the Board of Directors, which also presents the main findings from the self-assessment of the adequacy of the liquidity position, taking into account the results and values shown by the main indicators, confirms that the management of the liquidity position is considered to be adequate and deeply rooted in the Group\u2019s culture and business processes. It also notes, including from a prospective standpoint, that the current system of rules and procedures appears adequate to ensure a prompt and effective reaction should the risks and challenges actually materialise in severe and adverse stress scenarios. Impacts from the COVID-19 pandemic All the necessary preventive management and control measures implemented from the outset of the COVID-19 emergency remain in place to detect any signs of potential exacerbation of liquidity conditions. Impacts of the Russia-Ukraine conflict In light of the low exposure to Russian and Ukrainian counterparties, there were no significant impacts on the Group\u2019s consolidated liquidity position deriving from the Russia-Ukraine conflict. QUANTITATIVE INFORMATION 1. Breakdown by contractual residual maturity of financial assets and liabilities The breakdown by maturity of financial assets and liabilities is shown in the tables below according to the rules set forth in the financial statement regulations (Bank of Italy Circular 262 and related clarifications issued by the Supervisory Authority), using accounting information organised by contractual residual maturity. Therefore, no operational data was used that would require, for example, the modelling of core deposits and the representation of on-balance sheet items according to their level of liquidability. Currency of denomination: Euro (millions of euro) Type/Residual maturity On demand Between 1 and 7 days Between 7 and 15 days Between 15 days and 1 month Between 1 and 3 months Between 3 and 6 months Between 6 months and 1 year Between 1 and 5 years Over 5 years Unspecified maturity A. Cash assets 150,164 13,534 4,019 17,166 21,843 22,015 35,595 167,586 197,955 4,250 A.1 Government bonds 17 8 155 97 649 1,282 1,250 9,778 43,346 - A.2 Other debt securities 1,130 1,050 900 4,861 300 450 749 8,695 21,832 - A.3 Quotas of UCI 3,198 - - - - - - - - - A.4 Loans 145,819 12,476 2,964 12,208 20,894 20,283 33,596 149,113 132,777 4,250 - Banks 103,537 3,769 411 912 988 511 1,622 1,080 380 4,120 - Customers 42,282 8,707 2,553 11,296 19,906 19,772 31,974 148,033 132,397 130 B. Cash liabilities 428,655 2,922 1,670 4,159 13,240 51,096 9,465 92,428 21,562 - B.1 Deposits and current accounts 395,258 712 1,126 1,681 2,277 1,881 2,756 2,259 816 - - Banks 2,310 241 111 156 133 143 169 480 308 - - Customers 392,948 471 1,015 1,525 2,144 1,738 2,587 1,779 508 - B.2 Debt securities 41 190 543 2,444 6,468 2,224 5,716 40,828 16,951 - B.3 Other liabilities 33,356 2,020 1 34 4,495 46,991 993 49,341 3,795 - C. Off-balance sheet transactions C.1 Financial derivatives with exchange of capital - Long positions 425 6,820 2,244 8,791 26,476 5,951 7,116 14,707 8,408 - - Short positions 456 8,536 2,187 8,212 13,420 4,250 6,172 13,096 12,759 - C.2 Financial derivatives without exchange of capital - Long positions 24,138 68 4 118 167 425 869 260 16 - - Short positions 25,672 30 12 156 322 584 905 261 16 - C.3 Deposits and loans to be settled - Long positions 59,541 - - - - - - - - - - Short positions 5 55,786 99 1,213 2,295 70 - 53 19 - C.4 Irrevocable commitments to lend funds - Long positions 4,135 10,943 7 339 556 723 2,093 17,146 2,266 - - Short positions 36,478 50 7 42 40 91 162 104 3 - C.5 Financial guarantees given 1,110 14 13 26 146 103 264 313 136 - C.6 Financial guarantees received 172 - - - - - - - - - C.7 Credit derivatives with exchange of capital - Long positions - - - - - 20 30 536 686 - - Short positions - - - - - 20 30 536 686 - C.8 Credit derivatives without exchange of capital - Long positions 502 - - - - - - - - - - Short positions 469 - - - - - - - - - Currency of denomination: Other currencies (millions of euro) Type/Residual maturity On demand Between 1 and 7 days Between 7 and 15 days Between 15 days and 1 month Between 1 and 3 months Between 3 and 6 months Between 6 months and 1 year Between 1 and 5 years Over 5 years Unspecified maturity A. Cash assets 10,524 6,846 2,923 4,420 6,658 4,133 5,676 26,663 18,337 1,322 A.1 Government bonds 5 111 133 354 892 810 1,260 5,323 11,488 - A.2 Other debt securities 199 28 59 195 359 164 441 4,285 1,667 - A.3 Quotas of UCI 541 - - - - - - - - - A.4 Loans 9,779 6,707 2,731 3,871 5,407 3,159 3,975 17,055 5,182 1,322 - Banks 7,012 5,788 1,812 1,409 2,025 914 324 408 263 1,309 - Customers 2,767 919 919 2,462 3,382 2,245 3,651 16,647 4,919 13 B. Cash liabilities 26,832 3,598 4,891 6,108 6,196 1,312 2,370 11,864 8,142 - B.1 Deposits and current accounts 25,077 1,383 1,458 1,974 2,230 808 1,648 1,716 359 - - Banks 1,588 729 531 666 543 99 260 798 75 - - Customers 23,489 654 927 1,308 1,687 709 1,388 918 284 - B.2 Debt securities 132 110 1,227 577 458 201 673 9,049 6,935 - B.3 Other liabilities 1,623 2,105 2,206 3,557 3,508 303 49 1,099 848 - C. Off-balance sheet transactions C.1 Financial derivatives with exchange of capital - Long positions 142 14,959 5,653 12,622 17,107 8,030 11,320 17,395 10,723 - - Short positions 254 14,143 5,716 13,676 30,101 9,688 11,985 18,887 6,052 - C.2 Financial derivatives without exchange of capital - Long positions 2,808 5 61 81 43 227 274 2 19 - - Short positions 5,667 1 53 69 40 201 273 3 20 - C.3 Deposits and loans to be settled - Long positions 2,950 - - - - - - - - - - Short positions - 199 1,001 659 736 2 - 155 198 - C.4 Irrevocable commitments to lend funds - Long positions 1,563 113 25 157 1,286 724 1,181 11,677 1,142 - - Short positions 15,810 26 - - 1 2 10 6 - - C.5 Financial guarantees given 839 13 8 48 124 127 245 371 92 - C.6 Financial guarantees received 96 - - - - - - - - - C.7 Credit derivatives with exchange of capital - Long positions - - - - - - 28 47 - - - Short positions - - - - - - 28 47 - - C.8 Credit derivatives without exchange of capital - Long positions 432 - - - - - - - - - - Short positions 435 - - - - - - - - - 2. Self-securitisations A brief illustration of the securitisations originated by Intesa Sanpaolo outstanding as at 31 December 2022 is shown below, in which the Bank subscribed all the securities issued by the related vehicle (self-securitisations), and which need not be shown in the tables of Part E, section C \u201cSecuritisations\u201d of the Notes to the financial statements. Brera Sec S.r.l. In October 2017, a self-securitisation was structured, carried out through the sale of five loan portfolios to the vehicle company Brera Sec S.r.l. and originated by the Parent Company and by four banks of the Group subsequently incorporated into Intesa Sanpaolo (Banco di Napoli, Cassa di Risparmio di Forl\u00ec e della Romagna and Cassa di Risparmio del Friuli Venezia Giulia, incorporated in the second half of 2018, and Cassa di Risparmio in Bologna). The underlying consisted of residential mortgage loans held by households and/or family businesses. This transaction was the Group\u2019s first Multi- Originator Residential Mortgage Backed Security (\u201cRMBS\u201d) securitisation. Intesa Sanpaolo has acquired a minority interest (5%) in the newly established vehicle, which was purchased on the market, and control (95%) will remain with a corporate entity outside the Group (Dutch-registered foundation known as a Stichting). Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be carried out by Securitisation Services S.p.A. The transaction involved the issuance by the vehicle company of two tranches of securities: a senior tranche listed on the Luxembourg Stock Exchange, with a rating assigned by two rating agencies (Moody\u2019s and DBRS Morningstar) and an unlisted junior tranche without rating. Both the senior and junior securities were subscribed pro rata by each individual selling bank based on the sale price of each portfolio, and therefore today they have been fully subscribed by Intesa Sanpaolo. The senior security issued through the transaction was used as collateral for refinancing operations in the Eurosystem. The total sale consideration was 7.1 billion euro. The sale price of each portfolio sold was settled through the issuance of securities on 11 December 2017 for a total of 7.1 billion euro. The senior securities are listed with an Aa3 Moody\u2019s and an A (High) DBRS Morningstar rating. As at 31 December 2022, the value of the outstanding subscribed securities was 2,831 million euro for the senior securities and 1,067 million euro for the junior securities. Brera Sec S.r.l. (SEC 2) In September 2019, a self-securitisation was structured, implemented through the sale of a loan portfolio originated by Intesa Sanpaolo to the vehicle company Brera Sec S.r.l. This transaction is the Group\u2019s second Residential Mortgage Backed Security (\u201cRMBS\u201d) securitisation. The transaction involved the issuance on 27 November 2019 by the vehicle company of two tranches of securities: a senior tranche listed on the Luxembourg Stock Exchange, with a rating assigned by two rating agencies (Moody\u2019s and DBRS Morningstar) and an unlisted junior tranche without rating. Both the senior and junior securities were subscribed by Intesa Sanpaolo. The senior security issued through the transaction was used as collateral for refinancing operations in the Eurosystem. Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be carried out by Securitisation Services S.p.A. The total sale consideration was 7.5 billion euro. The sale price of the portfolio was settled through the issuance of securities on 27 November 2019 for a total of 7.5 billion euro. The senior securities are listed with an Aa3 Moody\u2019s and an A (High) DBRS Morningstar rating. As at 31 December 2022, the value of the outstanding securities was 4,523 million euro for the senior securities and 860 million euro for the junior securities. Brera Sec S.r.l. (SEC 3) In October 2021, a new self-securitisation was structured, implemented through the sale of a loan portfolio originated by Intesa Sanpaolo to the vehicle company Brera Sec S.r.l. This transaction is the Group\u2019s third Residential Mortgage Backed Security (\u201cRMBS\u201d) securitisation. The transaction involved the issuance on 1 December 2021 by the vehicle company of two tranches of securities: a senior tranche listed on the Luxembourg Stock Exchange, with a rating assigned by two rating agencies (Moody\u2019s and DBRS Morningstar) and an unlisted junior tranche without rating. Both the senior and junior securities were subscribed by Intesa Sanpaolo. The senior security issued through the transaction was used as collateral for refinancing operations in the Eurosystem. Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be carried out by Securitisation Services S.p.A. The total sale consideration was 7.7 billion euro. The sale price of the portfolio was settled through the issuance of securities on 1 December 2021 for a total of 7.7 billion euro. The senior securities are listed with an A1 Moody\u2019s and an A (High) DBRS Morningstar rating. As at 31 December 2022, the value of the outstanding securities was 6,515 million euro for the senior securities and 725 million euro for the junior securities. Clara Sec S.r.l. In 2020, a self-securitisation was structured involving receivables arising from performing personal loans within the consumer credit area and disbursed to consumer households. The securitisation is a revolving transaction and Intesa Sanpaolo will have the option to sell the vehicle further portfolios of loans with similar characteristics and quality, which the Vehicle will purchase by drawing on the receipts generated by the portfolio segregated over time. The transaction took place with the sale of the portfolio of loans originated by Intesa Sanpaolo to the vehicle company Clara Sec S.r.l. Intesa Sanpaolo has acquired a minority interest (5%) in the newly established vehicle, which was purchased on the market, and control (95%) will remain with an entity from outside the Group (Dutch-registered foundation known as a Stichting). Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be carried out by Securitisation Services S.p.A. The transaction involved the issuance by the vehicle company of two tranches of securities on 23 June 2020: a listed senior tranche with a rating assigned by two rating agencies (Moody\u2019s and DBRS Morningstar) and an unlisted junior tranche without a rating. Both the senior and junior securities were subscribed by Intesa Sanpaolo. The senior security issued through the transaction was used as collateral for refinancing operations in the Eurosystem. The total sale consideration was 7.6 billion euro. The sale price of the portfolio was settled through the issuance of securities on 23 June 2020 for a total of 7.2 billion euro. The senior securities are listed with an A1 Moody\u2019s and an A DBRS Morningstar rating. A sale of 1.4 billion euro was finalised in February 2022, followed by a repurchase of 88 million euro in April and a sale of 1.5 billion euro in October. As at 31 December 2022, the value of the outstanding securities was 6,350 million euro for the senior securities and 824 million euro for the junior securities. Giada Sec S.r.l. In November 2020, a self-securitisation was structured, implemented through the sale of a portfolio of loans, disbursed to companies belonging to the small business, SME and Corporate segment and originated by Intesa Sanpaolo, to the vehicle company Giada Sec S.r.l. The securitisation is a revolving transaction and Intesa Sanpaolo will have the option to sell the vehicle further portfolios of loans with similar characteristics and quality, which the Vehicle will purchase by drawing on the receipts generated by the portfolio segregated over time. Intesa Sanpaolo has acquired a minority interest (5%) in the newly established vehicle, which was purchased on the market, and control (95%) will remain with a corporate entity outside the Group (Dutch-registered foundation known as a Stichting). Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be carried out by Securitisation Services S.p.A. The transaction involved the issuance by the vehicle company of two tranches of securities: a senior tranche listed on the Luxembourg Stock Exchange, with a rating assigned by two rating agencies (Moody\u2019s and DBRS Morningstar) and an unlisted junior tranche without rating. Both the senior and junior securities were subscribed by Intesa Sanpaolo. The senior security issued through the transaction, with a Moody\u2019s A1 and a DBRS Morningstar A rating, was used as collateral for refinancing operations in the Eurosystem. The total sale consideration was 10.1 billion euro. The sale price of the portfolio was settled through the issuance of securities on 21 December 2020 for the same amount. A sale of 1.7 billion euro was finalised in May 2022. As at 31 December 2022, the value of the outstanding securities was 6,610 million euro for the senior securities and 3,485 million euro for the junior securities. Giada Sec S.r.l. (Giada BIS) In October 2022, a new self-securitisation was structured, implemented through the sale of a loan portfolio originated by Intesa Sanpaolo, disbursed to small and medium enterprises (\u201dSMEs\u201d), including sole proprietorships and loans granted to corporate customers not belonging to the \u201clarge corporate\u201d segment, to the special-purpose vehicle Giada Sec S.r.l. The securitisation is a revolving transaction and Intesa Sanpaolo will have the option to sell the vehicle further portfolios of loans with similar characteristics and quality, which the Vehicle will purchase by drawing on the receipts generated by the portfolio segregated over time. The transaction involved the issuance by the vehicle company of two tranches of securities: a senior tranche listed on the Luxembourg Stock Exchange, with a rating assigned by two rating agencies (Moody\u2019s and DBRS Morningstar) and an unlisted junior tranche without rating. Both the senior and junior securities were subscribed by Intesa Sanpaolo. The senior security issued through the transaction, with a Moody\u2019s A1 and a DBRS Morningstar A rating, was used as collateral for refinancing operations in the Eurosystem. Intesa Sanpaolo takes care of the accounting management for the vehicle, whereas the corporate administration will be carried out by Securitisation Services S.p.A. The total sale consideration was 15.2 billion euro. The sale price of the portfolio was settled through the issuance of securities on 5 December 2022 for a total of 15.2 billion euro. As at 31 December 2022, the value of the outstanding securities was 10,250 million euro for the senior securities and 4,940 million euro for the junior securities. (millions of euro) Vehicle Type of security issued Type of asset securitised External rating Principal as at 31.12.2022 BRERA SEC S.r.l. of which issued in euro 3,898 Class A RMBS F/R Notes Senior Residential mortgage loans Moody's Aa3 / DBRS Morningstar AH 2,831 Class B RMBS Fixed Rate and Additional Return Notes Junior Residential mortgage loans no rating 1,067 BRERA SEC S.r.l. (SEC 2) of which issued in euro 5,383 Class A RMBS F/R Notes Senior Residential mortgage loans Moody's Aa3 / DBRS Morningstar AH 4,523 Class B RMBS Fixed Rate and Additional Return Notes Junior Residential mortgage loans no rating 860 BRERA SEC S.r.l (SEC 3) of which issued in euro 7,240 Class A RMBS F/R Notes Senior Residential mortgage loans Moody's A1 / DBRS Morningstar AH 6,515 Class B RMBS Fixed Rate and Additional Return Notes Junior Residential mortgage loans no rating 725 CLARA SEC S.r.l. of which issued in euro 7,174 Class A Asset Backed F/R Notes Senior Personal loans Moody's A1 / DBRS Morningstar A 6,350 Class B Asset Backed F/R Notes Junior Personal loans no rating 824 GIADA SEC S.r.l. of which issued in euro 10,095 Class A Asset Backed F/R Notes Senior Receivables from Small business, SME and corporate customers Moody's A1 / DBRS Morningstar A 6,610 Class B Asset Backed F/R Notes Junior Receivables from Small business, SME and corporate customers no rating 3,485 GIADA SEC S.r.l. (GIADA BIS) of which issued in euro 15,190 Class A Asset Backed F/R Notes Senior Receivables from Small business, SME and corporate customers Moody's A1 / DBRS Morningstar A 10,250 Class B Asset Backed F/R Notes Junior Receivables from Small business, SME and corporate customers no rating 4,940 TOTAL 48,980 The Adriano Lease SEC S.r.l. and Brera Sec S.r.l. (SME) self-securitisations were extinguished during 2022. The former UBI Leasing, merged into Intesa Sanpaolo S.p.A. in 2022, had entered into the UBI SPV Lease 2016 securitisation, which was also extinguished in 2022. OTHER INFORMATION ON FINANCIAL RISKS SOVEREIGN RISK EXPOSURE BY COUNTRY OF RESIDENCE OF THE COUNTERPARTY The following table illustrates the details of the exposures of the Intesa Sanpaolo Group to sovereign risk in banking business, based on management data. (millions of euro) DEBT SECURITIES LOANS BANKING GROUP TOTAL (1) Financial assets measured at amortised cost Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss EU Countries 30,875 24,708 616 56,199 10,128 Austria 615 160 1 776 - Belgium 2,405 1,962 101 4,468 - Bulgaria - - 3 3 - Croatia 151 1,100 72 1,323 1,378 Cyprus - - - - - Czech Republic - - - - - Denmark - - - - - Estonia - - - - - Finland 255 13 - 268 - France 6,457 2,370 -309 8,518 3 Germany 262 538 -151 649 - Greece - - -8 -8 - Hungary 141 787 39 967 313 Ireland 336 45 26 407 - Italy 14,994 11,255 622 26,871 8,019 Latvia - - - - 20 Lithuania - - - - - Luxembourg 265 392 88 745 - Malta - - - - - The Netherlands 828 19 25 872 - Poland 28 65 - 93 - Portugal 388 621 -41 968 - Romania 66 370 -1 435 4 Slovakia - 892 2 894 149 Slovenia 1 148 2 151 178 Spain 3,683 3,971 145 7,799 64 Sweden - - - - - Non-EU Countries Albania 93 489 1 583 1 Egypt 96 1,145 - 1,241 515 Japan - 2,404 - 2,404 - Russia - 31 - 31 - Serbia 7 536 - 543 165 United Kingdom - 173 19 192 - U.S.A. 1,398 6,944 126 8,468 - Management accounts (1) Debt securities from insurance business (excluding securities in which gathered amounts are invested from insurance policies where the total risk is borne by the policyholders) relating to Italy amounted to 45.491 million euro. As illustrated in the table, the Banking Group's exposure to securities issued by Italian central and local public administration bodies at the end of 2022 totalled approximately 27 billion euro (31 billion euro at 31 December 2021), in addition to around 8 billion euro represented by loans (9 billion euro at the end of 2021). INFORMATION ON STRUCTURED CREDIT PRODUCTS The risk exposure in structured credit products came to 3,303 million euro as at 31 December 2022, a net decrease of 318 million euro compared to the stock of 3,621 million euro as at 31 December 2021. The exposure includes investments in CLOs (Collateralised Loan Obligations) of 1,643 million euro, in ABSs (Asset-Backed Securities) of 1,588 million euro and in CDOs (Collateralised Debt Obligations) of 72 million euro, which continued to be a marginal activity also in 2022. (millions of euro) Accounting categories 31.12.2022 31.12.2021 Changes Collateralized Loan Obligations Asset Backed Securities Collateralized Debt Obligations Total absolute % Financial assets held for sale 339 478 - 817 1,049 -232 -22.1 Financial assets mandatorily measured at fair value - 3 - 3 3 - - Financial assets measured at fair value through other comprehensive income 769 776 - 1,545 1,701 -156 -9.2 Financial assets measured at amortised cost 535 331 72 938 868 70 8.1 Total 1,643 1,588 72 3,303 3,621 -318 -8.8 In this disclosure, structured credit products include debt securities held by the Group divided into tranches upon issue consisting of various degrees of subordination and not issued within the framework of transactions originated by entities of the Intesa Sanpaolo Group or by public entities, in addition to transactions whereby the Group finances its corporate and financial institution customers (operations implemented by the Group through the subsidiary Duomo Funding Plc). Portfolio performance in 2022, while still focused on taking advantage of market opportunities, reflects more divestments and redemptions than new positions, which involved assets measured at fair value, held for trading, through other comprehensive income or at amortised cost, with a total value that declined by 318 million euro. Exposures measured at fair value (ABS and CLO debt securities) went from 2,753 million euro in December 2021 to 2,365 million euro in December 2022, a net decrease of 388 million euro, mainly attributable to operations of the IMI Corporate & Investment Banking Division, and to a greater extent in financial assets held for trading and to a lesser extent in financial assets measured at fair value through other comprehensive income. Exposures classified among assets measured at amortised cost (ABS, CLO and CDO debt securities) amounted to 938 million euro in December 2022, compared with a balance of 868 million euro in December 2021, a net increase of 70 million euro. From the perspective of the income statement, the overall loss for the year ended 31 December 2022 of -49 million euro is compared with a profit of 10 million euro for the year ended 31 December 2021. The profits (losses) from assets held for trading, caption 80 of the income statement, amounted to -49 million euro and is attributable to exposures in CLOs and ABS (-27 million euro of unrealised losses and -22 million euro of losses on disposals), as was the impact on the income statement for the year ended 31 December 2021, equal to +9 million euro (+4 million euro of unrealised gains and +5 million euro of gains on disposals). The profits (losses) from financial assets mandatorily measured at fair value were nil in the year ended 31 December 2022, compared to +1 million euro in the year ended 31 December 2021. The exposures to debt securities classified as assets measured at fair value through other comprehensive income recorded a decrease in fair value of -43 million euro as at 31 December 2022 through a shareholders\u2019 equity reserve (from a reserve of - 1 million euro in December 2021 to -44 million euro in December 2022). In the current year, there were also impacts from sales on the portfolio of -3 million euro, which were nil in the previous year. As regards debt securities classified among assets measured at amortised cost, the profit for the year ended 31 December 2022 of 3 million euro (+1 million euro from unrealised gains and +2 million euro from realised gains) is compared with the overall nil impact in the year ended 31 December 2021 (-1 million euro of unrealised losses and +1 million euro of realised gains). (millions of euro) Income statement results broken down by accounting category 31.12.2022 31.12.2021 Changes Collateralized Loan Obligations Asset Backed Securities Collateralized Debt Obligations Total absolute % Financial assets held for sale -36 -13 - -49 9 -58 Financial assets mandatorily measured at fair value - - - - 1 -1 Financial assets measured at fair value through other comprehensive income - -3 - -3 - 3 - Financial assets measured at amortised cost - 1 2 3 - 3 - Total -36 -15 2 -49 10 -59 INFORMATION ON LEVERAGED TRANSACTIONS In 2017, the ECB published specific Guidance on Leveraged Transactions, which applies to all the significant entities subject to direct supervision by the ECB. The stated purpose of the guidance is to strengthen company controls over \u201cleveraged\u201d transactions, in view of the global increase in leveraged finance activities and the highly competitive market, characterised by a prolonged period of very low interest rates and the ensuing search for yields. The scope of the ECB Guidance includes exposures in which the borrower\u2019s level of leverage, measured as the ratio of total financial debt to EBITDA, is greater than 4, as well as exposures where the borrower is owned by one or more financial sponsors. Moreover, counterparties with Investment Grade ratings, private individuals, credit institutions, financial institutions and companies in the financial sector in general, public entities, non-profit entities, as well as counterparties with credit facilities below a certain materiality threshold (5 million euro), Retail SME counterparties and Corporate SME counterparties (the latter if not owned by financial sponsors) are explicitly excluded from the scope of Leveraged Transactions. Specialised lending transactions (project finance, real estate and object financing) and certain other types of credit facilities, such as trade finance transactions, are also excluded. As at 31 December 2022, for the Intesa Sanpaolo Group, the transactions that meet the definition of Leveraged Transactions as per the ECB Guidance amounted to approximately 26.2 billion euro, relating to 1,864 credit lines (35.3 billion euro as at 31 December 2021). The decline over twelve months was mainly concentrated: \u2013 within the Parent Company for 75%, due to the exclusion from the reporting scope of counterparties with significant amounts, as a result of an improved rating (lifting them into the investment grade area); \u2013 within Intesa Sanpaolo Bank Luxembourg for 23%, due to the reduction of the exposure of a significant counterparty, not offset by new entries. In accordance with the requirements of the ECB Guidance, as part of the Credit Risk Appetite a specific limit for the outstanding stock of leveraged transactions and limits on new transaction flows were submitted for approval to the Board of Directors, in line with the Bank\u2019s risk appetite on these types of operations. INFORMATION ON INVESTMENTS IN HEDGE FUNDS The Parent Company\u2019s hedge fund portfolio as at 31 December 2022 amounted to 173 million euro for the trading book and 184 million euro for the banking book for a total of 357 million euro, compared to 27 million euro and 200 million euro, respectively, as at 31 December 2021, for a total of 227 million euro. The investments in the banking book are recognised under financial assets mandatorily measured at fair value and pertain to funds that adopt medium/long-term investment strategies and redemption times that are longer than those of UCITS (Undertakings for Collective Investment Schemes in Transferable Securities) funds. In 2022 the increase in balances compared to the previous year was 130 million euro. In the previous year, 2021, first-time adoption of the CRR2 regulations, which had entered into force on 30 June 2021, had resulted in significant disinvestments, as a result of the changes to the method of calculating capital absorption associated with investments in funds; in order to restore the previous volume levels, during 2022 greater investments were made, relating as a priority to UCITS hedge funds that best meet capital absorption requirements. In terms of the income statement effects, in 2022 an overall loss was recorded for -9 million euro, referring solely to the valuation effects of funds held in portfolio among financial assets mandatorily measured at fair value (-7 million euro) and among financial assets held for trading (-2 million euro), compared to an overall impact of +14 million euro in 2021 (-7 million euro from financial assets held for sale and +21 million euro from financial assets mandatorily measured at fair value), of which +9 million euro attributable to valuation effects and +5 million euro to realisation impacts. In the Intesa Sanpaolo Group, as at 31 December 2022 the portfolio of Eurizon Capital SGR also included hedge funds for 50 million euro, with an impact on the income statement of -3 million euro in the year. Hedge funds are held according to a seeding approach that involves setting up a service portfolio consisting of shares of mutual funds for which marketing has begun in support of the funds. INFORMATION ON TRADING TRANSACTIONS IN DERIVATIVES WITH CUSTOMERS Considering relations with customers only, as at 31 December 2022, the Intesa Sanpaolo Group, in relation to derivatives trading with retail customers, non-financial companies and public entities (therefore excluding banks, financial and insurance companies), presented a positive fair value, not having applied netting agreements, of 3,049 million euro (6,917 million euro as at 31 December 2021). The notional value of these derivatives totalled 29,872 million euro (64,254 million euro as at 31 December 2021). In particular, the notional value of plain vanilla contracts was 26,826 million euro (59,649 million euro as at 31 December 2021), while that of structured contracts was 3,046 million euro (4,605 million euro as at 31 December 2021). The positive fair value of contracts outstanding with the 10 customers with the highest exposures was 1,726 million euro (4,416 million euro as at 31 December 2021). Conversely, the negative fair value referring to total contracts outstanding, determined with the same criteria, for the same types of contracts and with the same counterparties, totalled 6,149 million euro as at 31 December 2022 (2,192 million euro as at 31 December 2021). The notional value of these derivatives totalled 74,174 million euro (34,378 million euro as at 31 December 2021). In particular, the notional value of plain vanilla contracts was 69,140 million euro (31,493 million euro as at 31 December 2021), while that of structured contracts was 5,034 million euro (2,885 million euro as at 31 December 2021). The fair value of derivative financial instruments entered into with customers was determined considering, as for all other OTC derivatives, the creditworthiness of the single counterparty (\"Bilateral Credit Value Adjustment\"). With regard to contracts outstanding as at 31 December 2022, this led to a positive effect of 102 million euro under \u201cProfits (Losses) on trading\u201d in the income statement (positive impact of 97 million euro in 2021). As regards the methodologies used in determining the fair value of financial instruments, see the specific paragraphs of the section on accounting policies in the Notes to the consolidated financial statements. Please note that contracts made up of combinations of more elementary derivative instruments have been considered \"structured\" and that the aforesaid figures do not include fair value of derivatives embedded in structured bond issues as well as the relative hedges agreed by the Group.", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-933": { "value": " Part F \u2013 Information on consolidated capital SECTION 1 \u2013 CONSOLIDATED CAPITAL A. Qualitative information The control of capital adequacy both at consolidated level and at single entities level is ensured by capital management which defines the size and optimum combination of the different capital instruments in accordance with regulatory constraints and consistently with the risk exposure taken on by the Group. The Intesa Sanpaolo Group assigns a primary role to the management and allocation of capital resources, considering this to be an instrument for strategic leverage, as well as a way to ensure consistency of the operating plans of the business units. Once the Group\u2019s strategic profitability, capital position and liquidity objectives have been defined, capital and financial resources are allocated to the business units through a process that evaluates their growth potential, capacity to generate value and financial autonomy. The capital at risk considered is twofold: \u2013 regulatory capital covering Pillar 1 risks; \u2013 overall internal capital covering Pillar 2 risks, for ICAAP purposes. Regulatory capital and overall internal capital differ from each other by definition and by their coverage of risk categories. The first arises from formats defined in supervisory provisions, the second from operational measurements. Hence, the capital management activity comprises the management of current and prospective capital adequacy through careful control of both regulatory Pillar 1 constraints (in compliance with Basel 3 rules, effective from 1 January 2014) and operational Pillar 2 constraints. Projections are also produced under stress conditions in order to ensure that the available resources are adequate to cover all risks, even in adverse conditions. Furthermore, since 2013, the Group has been drawing up a Recovery Plan, in line with regulatory indications (directives \u201cBank Recovery and Resolution Directive \u2013 BRRD\u201d - 2014/59/EU transposed in Italy through Legislative Decrees 180 and 181 on 16 November 2015 and \u201cBank Recovery and Resolution Directive \u2013 BRRD II\u201d - Directive (UE) 2019/879, transposed into Italian law on 8 November 2021 by Legislative Decree 193, which entered into force on 1 December 2021), with international practice and in compliance with both the Group Risk Appetite Framework and the crisis management model adopted by the Bank. As part of the process of defining budget targets, a projection compatibility analysis is conducted annually at Group level and at the level of individual entities in the Group. Depending on the expected performance of balance sheet and income statement aggregates, the appropriate capital management measures to ensure the required financial resources for the individual business units are already identified in this phase, if necessary. Compliance with the target levels of capitalisation is monitored on a quarterly basis, taking appropriate action when necessary. Compliance with capital adequacy is sought via various levers, such as the dividend distribution policy, the definition of strategic finance operations (capital increases, issue of convertible loans and subordinated bonds, disposal of non-core assets, etc.) and the management of investments, particularly loans, on the basis of counterparty risk. Further analyses for preliminary assessment of capital adequacy are performed during extraordinary operations (mergers, acquisitions, disposals, etc.) whether internal to the Group or changing the scope of consolidation of the Group. Following the Supervisory Review and Evaluation Process (SREP), the ECB annually makes a final decision on the capital requirement that Intesa Sanpaolo must comply with at consolidated level. On 3 February 2022, Intesa Sanpaolo announced that it had received the ECB\u2019s final decision concerning the capital requirement that the Bank has to meet, as of 1 March 2022. The overall capital requirement the Bank has to meet in terms of Common Equity Tier 1 ratio is 8.95%. This is the result of: \u2013 the SREP requirement in terms of Total Capital ratio of 9.79% comprising a minimum Pillar 1 capital requirement of 8%, of which 4.5% is CET1, and an additional Pillar 2 capital requirement of 1.79%, of which 1.01% is CET1 applying the regulatory amendment introduced by the ECB and effective from 12 March 2020 115 ; \u2013 additional requirements, entirely in terms of Common Equity Tier 1 ratio, relating to: o A Capital Conservation Buffer of 2.5%; o an O-SII Buffer (Other Systemically Important Institutions Buffer) of 0.75%; o a Countercyclical Capital Buffer of 0.19% 116 . With effect from 30 September 2019, following permission from the ECB, the Intesa Sanpaolo Group calculates capital ratios applying the so-called Danish Compromise, under which insurance investments, held indirectly through Intesa Sanpaolo Vita, are risk weighted instead of being deducted from capital. As stated in Part E, compared to 31 December 2021, with regard to the scope of application of internal credit risk models, the ECB's authorisation to use the new Retail models for regulatory purposes were implemented starting from September 2022, and the Institutions and Retail SME models starting from June 2021. With regard to counterparty risk, the Banking Group improved the measurement and monitoring of the risk, by refining the instruments required under Basel 3. For reporting purposes, the Parent Company is authorised to use the internal models approach for the reporting of the requirement with respect to counterparty risk both for derivatives and for SFTs (Securities Financing Transactions, i.e. repos and securities lending). This authorisation was obtained for derivatives from the first quarter of 2014, and for SFTs from the report as at 31 December 2016. For management purposes, the advanced risk measurement approaches have been implemented for the OTC derivatives of the Parent Company since 2010 and were subsequently extended in 2015 to Securities Financing Transactions. Compared to 31 December 2021, it is noted that, starting in the second quarter of 2022, the eligibility rules for securities used as collateral in SFTs were revised, in light of the provisions of art. 271.2 CRR. In order to maintain a suitable level of control over the materiality of transactions previously considered at full risk, a concentration limit was introduced on guarantees that have low levels of liquidity or creditworthiness. A new assessment process was also defined for guarantees comprised of senior securitisation tranches, to make them eligible to mitigate exposures deriving from SFTs. Starting in the fourth quarter of 2022, in response to the request from the ECB, a process was activated to exclude from the internal counterparty risk model those transactions whose valuation does not comply with the consistency thresholds between the risk and front office systems. With regard to operational risk, the Group obtained authorisation to use the Advanced Measurement Approach (AMA \u2013 internal model) to determine the associated capital requirement for regulatory purposes, with effect from the report as at 31 December 2009. As at 31 December 2022, the scope of the Advanced Measurement Approach (AMA) is comprised of Intesa Sanpaolo (including the former Banks and Companies merged into it) and the main banks and companies in the Private Banking and Asset Management Divisions, as well as of VUB Banka and Privredna Banka Zagreb. On 15 December 2022, Intesa Sanpaolo announced that it had received the ECB\u2019s final decision concerning the capital requirement that the Bank has to meet, as of 1 January 2023. The overall capital requirement to be met in terms of Common Equity Tier 1 ratio is currently 8.91%. This is the result of: \u2013 the SREP requirement in terms of Total Capital ratio of 9.72% comprising a minimum Pillar 1 capital requirement of 8%, of which 4.5% is CET1, and an additional Pillar 2 capital requirement of 1.72%, of which 0.97% is CET1 applying the regulatory amendment introduced by the ECB and effective from 12 March 2020; \u2013 additional requirements, entirely in terms of Common Equity Tier 1 ratio, relating to: o A Capital Conservation Buffer of 2.5%; o an O-SII Buffer (Other Systemically Important Institutions Buffer) of 0.75%; o a Countercyclical Capital Buffer of 0.19% 117 . The transitional period, which will end with the last reporting date as at 31 December 2022 and is aimed at mitigating the capital impacts linked to the introduction of the new financial reporting standard IFRS 9, started from 1 January 2018. Intesa Sanpaolo has exercised the option provided in EU Regulation 2395/2017 to adopt the \u201cstatic\u201d approach that allows the neutralisation of a progressively decreasing amount of the impact of IFRS 9 in its CET 1 relating solely to the FTA component of the impairment. In particular, the result from the comparison between the IAS 39 adjustments at 31 December 2017 and the IFRS 9 adjustments at 1 January 2018 \u2013 relating to performing loans and securities (stage 1 and 2) and adjustments to NPLs (stage 3), net of tax and having eliminated any existing shortfall \u2013 is re-included in the capital according to phase-in percentages of 70% in 2020, 50% in 2021 and 25% in 2022. Within the framework of the COVID-19 pandemic scenario, Regulation (EU) 2020/873 of 24 June 2020, amending Regulations (EU) 575/2013 (CRR) and Regulation (EU) 2019/876 (CRR 2) containing temporary support provisions in terms of capital and liquidity, was published with an accelerated approval procedure (the \u201cquick fix\u201d). Among the provisions set out in Regulation (EU) 2020/873 relating to the calculation of own funds, the Intesa Sanpaolo Group opted not to use, since 30 June 2020, either the changes to the transitional regime for the application of IFRS 9 (art. 473 bis of the CRR) or the temporary reintroduction of the prudential filter aimed at excluding unrealised gains and losses measured at fair value through other comprehensive income (FVOCI) on exposures to central governments and public sector entities (art. 468 CRR). Lastly, since 31 December 2020, the Intesa Sanpaolo Group has applied Commission Delegated Regulation (EU) 2020/2176, which entered into force on 23 December 2020 and amends Commission Delegated Regulation (EU) 241/2014 with regard to the deduction of software assets from Common Equity Tier 1 items. The Regulation, which is, inter alia, intended to support the transition to a more digitalised banking sector, introduces the criterion of prudential amortisation applied to all software assets over a three-year period, regardless of their estimated useful lives for accounting purposes. Specifically, the difference, where positive, between prudential cumulative amortisation and accounting cumulative amortisation (including impairment losses) is fully deducted from CET1. ", "dimensions": { "concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-934": { "value": "
Part G \u2013 Business combinations
SECTION 1 \u2013 TRANSACTIONS CARRIED OUT IN THE YEAR
1.1 Business combinations
(millions of euro)
Companies
Date of the
transaction
(a)
Cost of the
transaction
Equity
stake
%
(b)
Net
interest
and other
banking
income
(c)
Net
income /
loss for
the
year
(d)
Net income /
loss
recorded
as of
acquisition
date
(e)
1. Compagnie de Banque Priv\u00e9e
Quilvest S.A
30-Jun-22
184
100
66
9
5
2. VUB Generali Dochodkova
Spravcovska Spolocnost A.S.
24-Oct-22
85
50
9
5
2
(a) Date of acquisition of control.
(b) Percentage of voting rights at the Ordinary Shareholders' Meeting plus possible options on minorities\u2019 stakes. For VUB Generali, considering the 50% stake
previously held by VUB Banka, the total equity investment is 100%.
(c) Net interest and other banking income (Caption 120 of the income statement) referred to full year 2022.
(d) Net income/loss recorded by the subsidiary/business for full year 2022.
(e) Net income/loss recorded by the subsidiary/business after acquisition date and included in the consolidated result of the Intesa Sanpaolo Group.
In addition to business combinations accounted for by IFRS 3, summarised in the previous table, several extraordinary
intragroup transactions were carried out during the year, which had no effects on the consolidated financial statements. Such
transactions, which are scoped out of IFRS 3, involved the transfer of business lines or legal entities between Intesa Sanpaolo
Group companies or business combinations (under common control).
Since the transfers were carried out for reorganisation purposes only, in accordance with the Group\u2019s accounting policy, these
transactions were simply recorded applying book value accounting in the individual statements of the companies involved,
without recognition of any economic effect.
The main intragroup transactions completed during the year concerned:
\u2013 sale by Intesa Sanpaolo Vita S.p.A. to Intesa Sanpaolo S.p.A. of 48.99% of the equity investment in Intesa Sanpaolo
Smart Care S.r.l.;
\u2013 contribution from Intesa Sanpaolo S.p.A. to Acantus S.p.A. of a pledged loans business line against a specific capital
increase;
\u2013 merger by incorporation of Intesa Sanpaolo Private Bank (Suisse) Morval S.A. into Reyl & CIE S.A.;
\u2013 sale of the equity investment in UBI Trustee S.A. by Intesa Sanpaolo S.p.A. to Fideuram Bank Luxembourg S.A.;
\u2013 merger by incorporation of V\u00daB Leasing A.S. into Vseobecna Uverova Banka A.S.;
\u2013 partial demerger of a business line of IW Bank S.p.A. to Fideuram - Intesa Sanpaolo Private Banking S.p.A. consisting of
banking relationships and banking activities, performing loans and bad loans, advanced trading activities, finance
activities, and management of the proprietary securities portfolio;
\u2013 partial demerger of assets of Fideuram \u2013 Intesa Sanpaolo Private Banking S.p.A. to Intesa Sanpaolo, composed of
performing loans that are part of the business line of IW Bank S.p.A. set out in the previous point, and the related funding
and personnel;
\u2013 sale by Eurizon Capital SGR S.p.A. to Intesa Sanpaolo Vita S.p.A. of 17.7% of the equity investment in Eurizon Capital
Real Asset SGR S.p.A.;
\u2013 merger by incorporation of UBI Leasing S.p.A. into Intesa Sanpaolo S.p.A.;
\u2013 merger by incorporation of PBZ Stambena Stedionica d.d. into Privredna Banka Zagreb d.d;
\u2013 merger by incorporation of Cargeas Assicurazioni S.p.A. into Intesa Sanpaolo Assicura S.p.A.;
\u2013 merger by incorporation of Intesa Sanpaolo Smart Care S.r.l. into Intesa Sanpaolo S.p.A.;
\u2013 merger by incorporation of Intesa Sanpaolo Agents4You S.p.A. into Intesa Sanpaolo S.p.A.;
\u2013 merger by incorporation of Obviam AG S.A. into Asteria Investment Managers S.A.;
\u2013 merger by incorporation of Sanpaolo Invest Societ\u00e0 d\u2019Intermediazione Mobiliare S.p.A. into Fideuram - Intesa Sanpaolo
Private Banking S.p.A.
Annual changes in goodwill
(millions of euro)
31.12.2022
Initial goodwill
3,574
Increases
52
- Goodwill recorded in the year
42
- Positive foreign exchange differences and other changes
10
Decreases
-
- Impairment recorded in the year
-
- Disinvestments
-
- Negative foreign exchange differences and other changes (reclassified to discontinued operations)
-
Final Goodwill
3,626
Goodwill
(millions of euro)
CGUs/Goodwill
31.12.2022
31.12.2021
Banca dei Territori
-
-
IMI Corporate & Investment Banking
56
56
Insurance
976
976
Asset Management
1,059
1,060
Private Banking
1,535
1,482
International Subsidiary Banks
-
-
Bank of Alexandria (Egypt)
-
-
Pravex Bank (Ukraine)
-
-
Total
3,626
3,574
1.2 Other information
Acquisition of Compagnie de Banque Priv\u00e9e Quilvest S.A.
As part of the process of the strengthening and strategic repositioning of the international operations of the Private Banking
Division, set out in the 2018-2021 Business Plan, on 6 and 8 July 2021, respectively, the Boards of Directors of Intesa
Sanpaolo and Fideuram \u2013 Intesa Sanpaolo Private Banking (hereinafter, \u201cFideuram\u201d) authorised the acquisition by Fideuram
Bank Luxembourg (hereinafter, \u201cFideuram Bank Lux\u201d), 100%-owned by Fideuram, of the entire share capital of Compagnie de
Banque Priv\u00e9e Quilvest (hereinafter, \u201cCBPQ\u201d), a Luxembourg private bank wholly owned by the holding company Quilvest
Wealth Management.
The acquisition of CBPQ made it possible to create an additional European hub of the Private Banking Division, alongside the
one in Switzerland, for European and international customers, enabling the development of private banking activities in areas
with promising growth prospects, such as Luxembourg and Belgium.
The sale agreement was finalised by the parties on 17 September 2021 with closing conditional on obtaining the necessary
authorisations from the Supervisory Authorities. After the conclusion of the authorisation procedure, the transaction was
finalised on 30 June 2022 with the acquisition by Fideuram Bank Lux of 100% of the share capital of CBPQ.
The parties agreed a price on the basis of a valuation of 100% of CBPQ equal to 180 million euro. To determine fairness from
an economic and financial standpoint, an independent third party was asked to provide a specific fairness opinion, which
attested that the price agreed for the acquisition of 100% of the share capital of CBPQ may be considered fair.
The valuation of 180 million euro was subject to a price adjustment to take account of changes in the company\u2019s balance
sheet between 31 December 2021 and the closing date. That adjustment resulted in an increase in the value of CBPQ of
around 4 million euro. Therefore, the final price for the acquisition of 100% of the company came to 184 million euro.
Accounting treatment of the business combination and Purchase Price Allocation (PPA) process
The acquisition of control of CBPQ is a business combination that must be accounted for in accordance with IFRS 3, which
requires the application of the acquisition method. Based on that method, it is necessary to:
\u2013 identify the acquirer and the acquisition date;
\u2013 determine the purchase cost;
\u2013 allocate the purchase cost (the \u201cPurchase Price Allocation\u201d or \u201cPPA\u201d) by recognising the identifiable assets, liabilities and
contingent liabilities of the acquiree at their fair value at the acquisition date, excluding non-current assets (or disposal
groups) that are classified as held for sale in accordance with IFRS 5. The latter assets are instead measured at fair
value less costs to sell. In addition, any intangible assets not yet recognised by the acquiree must be recorded.
Without prejudice to the identification of Fideuram Bank Lux as acquirer, the acquisition date was identified as 30 June 2022,
i.e. the date on which the transaction was finalised. It was thus with effect from this date that Fideuram Bank Lux (and thus,
indirectly, the Intesa Sanpaolo Group) acquired control of CBPQ pursuant to IFRS 10, with the consequent obligation to
include it within its consolidation scope.
For the purpose of the PPA and the initial consolidation of CBPQ in the consolidated financial statements of the Intesa
Sanpaolo Group, reference was made to the balance sheet prepared at 30 June 2022, while the income statement results of
the company were included in the consolidated financial statements of Intesa Sanpaolo starting on 1 July 2022.
The purchase price, equal to 184 million euro, was determined on the basis of the consideration transferred on the closing
date for 100% of the share capital of CBPQ, equal to 180 million euro, plus, as previously indicated, the price adjustment of
around 4 million euro defined based on the increase in the company\u2019s shareholders\u2019 equity from the closing date to
31 December 2021.
After the purchase price was determined, it was allocated to the equity acquired, after adjusting it to reflect the fair value of the
assets acquired and liabilities assumed.
The purchase price allocation was completed for the 2022 financial statements, even though the acquisition date was 30 June
2022, exercising the option afforded by para. 45 of IFRS 3, which grants the acquirer 12 months from the acquisition date to
complete the definitive PPA process.
Therefore, for the purposes of the 2022 financial statements, with the support of an independent expert, the PPA was
definitively completed, concluding the analysis aimed at redetermining the fair value of the assets acquired and liabilities
assumed and identifying any specific intangibles not previously recognised by CBPQ. In particular, the following accounting
entries emerged as worthy of attention in terms of potential differences between carrying amounts and fair values:
\u2013 the securities portfolio;
\u2013 the portfolio of medium-long term loans;
\u2013 two specific customer relationship related intangibles with a finite useful life, typical of the Wealth Management sector,
previously not recognised in the financial statements of CBPQ. The first is linked to the valuation of the assets acquired
(Assets under Management - AuM), and the second to the customer relationship for Core Deposits (CD).
Specifically, with reference to the securities portfolio already stated at fair value in the company\u2019s financial statements, as part
of the PPA process, in order to verify the portfolio\u2019s fair value, the expert referred to the price of each security at the
acquisition date, based on data taken from infoproviders, in line with the Fair Value Policy of the Intesa Sanpaolo Group. The
valuation process resulted in a total fair value of the securities portfolio in line with that stated in the financial statements of
CBPQ.
With regard to the loan portfolio, in order to determine the scope subject to measurement, for exposures with maturity of less
than 12 months, as they are short-term transactions, the carrying amount recognised in CBPQ\u2019s balance sheet at the
acquisition date was considered to be a reasonable approximation of their fair value in accordance with IFRS 13, taking into
account that the discounting of future cash flows is of little significance in presence also of changes in the reference market
rates. For the medium/long-term portfolio, the method used by the expert to estimate the fair value of the loan portfolio
involved discounting cash flows at a specific discount rate (the Discounted Cash Flow or DCF Model). Specifically, the fair
value of each single loan was estimated using a \u201cdirect\u201d approach, developed based on the gross expected cash flows
(principal and interest), minus the operating costs attributable to managing the portfolio, the cost of risk (Expected Credit Loss
\u2013 ECL) and the cost deriving from the absorption of regulatory capital. The net cash flows thus determined were discounted at
a discount rate composed of a market rate expressing a risk-free investment and a liquidity discount.
The valuation process resulted in a total fair value of the loan portfolio in line with its book value in the financial statements of
CBPQ, which was therefore confirmed for the purposes of the PPA process.
Finally, additional analyses were conducted, resulting in the recognition of two specific customer relationship related
intangibles, specifically associated with indirect customer deposits (Assets under Management - AuM) and Core Deposits
(CD). The value, if any, of those assets lies in the economic benefits that the Bank may receive over time as a result of the
relationships established with customers. For the purpose of estimating the value of the two intangible assets pursuant to IAS
38 and IFRS 3, only the value of the existing contractual relationships at the acquisition date was considered, as the ability to
generate new relationships cannot be separated and transferred to third parties. As a result, the intangible assets recognised
were considered as having a finite useful life.
With specific reference to indirect customer deposits, the identified value of one intangible asset is linked to the existing
customer relationships for Assets under Management (AuM) and the value that the Bank may obtain over time as a result of
those relationships. Instead, with regard to the core deposits, the value of the intangible asset lies in the Bank\u2019s ability to
benefit from a component of direct deposits of its customers at costs lower than market costs.
The independent expert used the Multi-period Excess Earnings Method (MEEM) to measure the two intangible assets at the
acquisition date. This method defines the value of the intangible asset on the basis of the estimated gross cash flows
generated by the intangibles subject to valuation, through the use of forward-looking data, appropriately adjusted to take
account of: i) the administrative costs required to produce income flows; ii) the tax effect; iii) the cost associated with the
capital absorbed by the intangible assets; iv) the cost of risk, where applicable; and v) the cost associated with the use of
other assets that contribute to the generation of cash flows associated with the specific intangibles. Subsequently, the present
value of net cash flows attributable to the intangibles subject to valuation was calculated, based on a discount rate
representing the cost of capital.
The valuation process resulted in a total fair value of the AuM intangible of 43 million euro, equal to 0.7% of the assets
acquired (in line with the previous PPA conducted by the Intesa Sanpaolo Group), while the fair value of Core Deposits came
to 30 million euro, equal to 1.8% of the on-demand deposits at the acquisition date. The related tax liabilities were also
recognised, as required by IAS 12, based on the nominal tax rate in Luxembourg.
For the purpose of determining the amortisation criteria of the two intangibles, based on the assumption adopted to determine
the value of the AuM intangible in reference to the useful lives of the underlying assets, the amortisation period was set at
16 years from the acquisition date. For the CD component, considering that for the specific type of customers, direct deposits
are correlated with assets, a residual duration was assumed in line with that of the AuM intangible.
Summary of the purchase price allocation and goodwill calculation process
As required by IFRS 3, at the acquisition date the acquirer must recognise the goodwill acquired in a business combination as
an asset and initially measure such goodwill as the residual amount of the acquisition cost, as it constitutes the amount by
which the cost of the business combination exceeds the acquirer\u2019s interest in the net fair value of the assets, liabilities and
contingent liabilities identified.
As described above, goodwill was recognised as the difference between the acquisition cost and the company\u2019s shareholders\u2019
equity measured at its acquisition date fair value.
The total acquisition cost came to 184 million euro, while the IAS/IFRS shareholders\u2019 equity of CBPQ, acquired as at 30 June
2022, appropriately revalued at fair value, came to 142 million euro.
The following table contains a summary of the purchase price allocation and final goodwill calculation process.
(millions of euro)
CBPQ
Final acquisition cost of CBPQ at acquisition date
a
180
Price adjustment
b
4
Final acquisition cost
c = a + b
184
IAS/IFRS shareholders\u2019 equity at acquisition date
d
87
PPA effects
e = f + g + h
55
- of which intangible AuM
f
43
- of which intangible CDs
g
30
- of which deferred tax liabilities on intangible AuM and CDs
h
-18
Shareholders\u2019 equity at acquisition date fair value
i = d +e
142
Goodwill recognised
c - i
42
The comparison between the total acquisition cost and the shareholders\u2019 equity of CBPQ at fair value identified a residual
difference to allocate of 42 million euro, which was recognised as goodwill following the completion of the PPA. According to
IAS 36, the goodwill and intangible assets recognised in a business combination must, from the acquisition date, be allocated
to the CGU that is expected to benefit from the synergies of the business combination; in the Intesa Sanpaolo Group, the
goodwill and the two intangible assets linked to AuM and core deposits were allocated to the Private Banking CGU.
For the purpose of completeness, the balance sheet of CBPQ at the acquisition date is shown below, with a comparison of
the carrying amounts from the company\u2019s IAS/IFRS financial statements and the fair values from the PPA process.
(millions of euro)
Assets
Compagnie de Banque Priv\u00e9e Quilvest S.A
Carrying amount
at acquisition
date
Fair value
differences
Acquisition date fair
value
Cash and cash equivalents
1,255
-
1,255
Financial assets measured at fair value through profit or loss
3
-
3
Financial assets measured at fair value through other comprehensive
income
209
-
209
Financial assets measured at amortised cost
601
-
601
a) due from banks
21
-
21
b) loans to customers
580
-
580
Property and equipment
4
-
4
Intangible assets
2
115
117
- of which intangible AuM
-
43
43
- of which intangible Core Deposits - CDs
-
30
30
- of which: goodwill
-
42
42
Tax assets
1
-
1
Other assets
32
-
32
Total assets
2,107
115
2,222
Liabilities and shareholders' equity
Compagnie de Banque Priv\u00e9e Quilvest S.A
Carrying amount
at acquisition
date
Fair value
differences
Acquisition date fair
value
Financial liabilities measured at amortised cost
1,963
-
1,963
a) due to banks
20
-
20
b) due to customers
1,943
-
1,943
Financial liabilities held for trading
4
-
4
Tax liabilities
8
18
26
a) current
8
-
8
b) deferred
-
18
18
Other liabilities
45
-
45
Shareholders\u2019 equity captions
87
97
184
Total liabilities and shareholders\u2019 equity
2,107
115
2,222
Acquisition of VUB Generali Dochodkova Spravcovska Spolocnost A.S.
Through its subsidiary Vseobecna Uverova Banka A.S. (hereinafter, \u201cVUB\u201d), Intesa Sanpaolo held 50% of the share capital of
VUB Generali Dochodkova Spravcovska Spolocnost A.S. (hereinafter, \u201cVUB Generali\u201d), as part of a joint venture established
in 2004 with the Generali Group to develop the offer of voluntary contribution pension funds in Slovakia. The company was
classified among investments in companies subject to joint control pursuant to IFRS 11 and consolidated using the equity
method.
Considering that, over the years, VUB Generali pursued its development mainly through the distribution network of VUB and
the associated business generated by the network of agents already partnered with VUB for the dealing in other banking
products, it was decided to discontinue the joint venture by acquiring a further interest in VUB Generali from Generali, equal to
5.26% of the share capital, in order to acquire control pursuant to IFRS 10.
In addition to the purchase of a 5.26% interest in the share capital, the transaction was structured with a cross put and call
option mechanism between the Intesa Sanpaolo Group and the Generali Group that, if exercised, will allow VUB to increase
its interest in the share capital of VUB Generali up to 100%, by acquiring the additional minority interest, equal to 44.74% of
the share capital.
The sale agreement and the update to the existing shareholders\u2019 agreement were finalised by the parties on 5 April 2022 with
closing conditional on obtaining the necessary authorisations from the Supervisory Authorities. After the conclusion of the
authorisation procedure, the transaction was finalised on 24 October 2022 with the acquisition by VUB of 5.26% of the share
capital of VUB Generali.
For the acquisition of 5.26% of the capital of VUB Generali, the parties agreed on a price of around 5 million euro, settled in
cash, which considers a valuation of 100% of the company at around 85 million euro, whose fairness from an economic and
financial standpoint was confirmed by a specific fairness opinion of an independent expert.
At closing, on the basis of the interest held of 55.26%, and the governance rights to which VUB is entitled, VUB, and thus the
Intesa Sanpaolo Group, acquired control of the company pursuant to IFRS 10, with the resulting obligation for line-by-line
consolidation of the company.
Accounting treatment of the business combination and Purchase Price Allocation (PPA) process
The acquisition of control of VUB Generali, in which, as stated above, the Intesa Sanpaolo Group already held a 50% interest
through VUB, was considered, as envisaged by IFRS 3, a business combination achieved in stages, i.e. a combination in
which the acquirer gains control of an entity in which it already held an interest immediately prior to the acquisition date.
According to IFRS 3, all business combinations must be accounted for using the acquisition method. Based on that method, it
is necessary to:
\u2013 identify the acquirer and the acquisition date;
\u2013 determine the purchase cost, including, for business combinations achieved in stages, restating at fair value the interest
previously held in the acquiree;
\u2013 allocate the purchase cost (the \u201cPurchase Price Allocation\u201d or \u201cPPA\u201d) by recognising the identifiable assets, liabilities and
contingent liabilities of the acquiree at their acquisition date fair value, excluding non-current assets (or disposal groups)
that are classified as held for sale in accordance with IFRS 5. The latter assets are instead measured at fair value less
costs to sell. In addition, any intangible assets not yet recognised by the acquiree must be recorded.
Without prejudice to the identification of VUB as the acquirer, although VUB acquired control of VUB Generali on 24 October
2022, taking due regard of the fact that the company, for the purposes of the contractual agreements, prepared a balance
sheet and income statement as at and for the period ended 31 October 2022 and between this date and the closing date
there were no extraordinary or material events, the book acquisition date has been taken by convention to be 1 November
2022. Accordingly, reference was made to the IAS/IFRS balance sheet prepared by the company as at 31 October 2022 for
the purposes of the balance sheet subject to initial consolidation, and for the purposes of determining the fair value of the
assets acquired and liabilities assumed. With regard to the recognition of the economic effects in the consolidated financial
statements of VUB and of Intesa Sanpaolo, the income statement results of VUB Generali were included from 1 November
2022.
Based on the provisions of IFRS 3, the purchase cost was determined by considering the acquisition-date fair values of the
interest previously held, the assets transferred by the acquirer and the liabilities incurred by the acquirer to former owners of
the acquiree and the equity interests issued by the acquirer. As previously noted, the standard requires that, in a business
combination achieved in stages, as in the case of the acquisition of VUB Generali, the purchase cost must also consider the
acquisition-date fair value of the equity interest in the acquiree previously held by the acquirer. Specifically, the acquirer must
remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the difference on
the previous carrying amount as a profit or loss in its income statement.
To determine the fair value of the interest already held in VUB Generali, reference was made to the valuation - negotiated
between the parties and confirmed in the fairness opinion from the accounting expert - of 100% of the company, equal to 85
million euro, considering that, for the acquisition of the 5.26% interest, which granted VUB control over VUB Generali, no
control premium was paid, as the price negotiated was merely the pro-rata amount of the valuation of 100% of the company.
Based on that value, the fair value of 50% of the share capital previously held by Intesa Sanpaolo, through VUB, came to
around 43 million euro. When compared with the carrying amount of the interest at the acquisition date (around 11 million
euro), this had a positive effect of around 32 million euro on the consolidated income statement.
In addition to the interest acquired in cash and that previously held, suitably remeasured at fair value, for the purposes of
determining the purchase cost, the put and call option mechanism was considered, through which VUB may acquire, within
the terms set out in the contractual agreements, the remaining shares of VUB Generali, to reach ownership of 100% of the
share capital, in the period from 2025 to 2029.
Given the presence of the put options for the minority shareholder, the result for VUB is an unconditional undertaking to
purchase the shares underlying the options, which was recognised as a financial liability in the parent entity\u2019s consolidated
financial statements. Accordingly, the minority interest in equity has been derecognised and a financial liability recognised,
also at fair value, representing VUB\u2019s undertaking to purchase the VUB Generali shares held by third parties. With regard to
the determination of the acquisition-date fair value of the liability connected with the put option, reference was made, also in
this case, to the valuation of 100% of the acquiree negotiated between the parties.
In summary, the total purchase cost pursuant to IFRS 3 amounted to 85 million euro, i.e. the sum of the price paid by VUB to
purchase the additional 5.26% interest in the company\u2019s share capital (equal to around 5 million euro), the fair value of the
interest previously held (43 million euro) and the amount of the financial liability to minority shareholders recognised at the
acquisition date, for the commitment underlying the put option agreements (37 million euro).
For the purposes of the 2022 financial statements, with the support of an independent expert, the PPA was definitively
completed, concluding the analysis aimed at redetermining the fair value of the assets acquired and liabilities assumed and
identifying any specific intangibles not previously recognised by VUB Generali.
From an analysis of the financial statements and on the basis of the information provided by the company, no significant
differences were found at the acquisition date between the carrying amounts in the IAS/IFRS financial statements of VUB
Generali and the related fair values.
Finally, specific analyses were conducted, resulting in the recognition of a customer relationship related intangible asset,
specifically associated with Assets under Management (AuM) performed by the acquiree.
AuM assets typically include relationships with banking customers relating to dealing in asset management products, i.e.
portfolio management schemes, mutual funds and SICAVs, in addition to pension and insurance products. In the case in
question, VUB Generali operates in the retirement savings market and is one of the leading pension fund management
companies in the Slovak market.
For the valuation of the intangible asset at the acquisition date, a Discounted Cash Flow (DCF) model was used, which entails
discounting, at the valuation date, the profitability generated by the assets acquired (gradually deteriorating over time),
considering the associated costs and the absorption of regulatory capital. The net cash flows were then discounted at a
discount rate expressing the cost of capital.
The valuation process resulted in a total fair value of the AuM intangible of 80 million euro, against which the related deferred
tax liabilities were recognised, as required by IAS 12, based on the nominal tax rate in Slovakia.
With reference to the determination of the amortisation criteria of the intangible, based on the assumption adopted for the
purposes of determining the value of the intangible in reference to the useful lives of the underlying assets, the amortisation
period was set at 28 years from the acquisition date. That value was determined based on the run-off of the assets,
considering the current retirement age of customers.
Summary of the purchase price allocation and final goodwill calculation process
As required by IFRS 3, at the acquisition date the acquirer must recognise the goodwill acquired in a business combination as
an asset and initially measure such goodwill as the residual amount of the acquisition cost, as it constitutes the amount by
which the cost of the business combination exceeds the acquirer\u2019s interest in the net fair value of the assets, liabilities and
contingent liabilities identified. However, if the fair value of the acquiree\u2019s identifiable net assets exceeds the acquisition cost,
badwill or negative goodwill must be recognised in the acquirer\u2019s income statement.
As described above, taking suitable account of the put and call option mechanisms underlying the minority interest, both the
total acquisition cost and the IAS/FRS shareholders\u2019 equity of the company suitably remeasured at fair value came to
85 million euro. As a result, on conclusion of the PPA, no goodwill caption was recognised.
For more details, see the table below:
(millions of euro)
VUB Generali
Acquisition cost
a
85
IAS/IFRS shareholders\u2019 equity at acquisition date
b
22
PPA effects
c = d + e
63
- of which intangible AuM
d
80
- of which deferred tax liabilities on intangible AuM
e
-17
IAS/IFRS shareholders\u2019 equity at fair value
f = b +c
85
Goodwill recognised
a - f
-
Moreover, according to IAS 36, the intangible assets recognised in a business combination must, from the acquisition date, be
allocated to the CGU that is expected to benefit from the synergies of the business combination; within the Intesa Sanpaolo
Group, the AuM intangible, recognised upon PPA, was allocated to the International Subsidiary Banks CGU.
For the purpose of completeness, the balance sheet of VUB Generali at the acquisition date is shown below, with a
comparison of the carrying amounts from the company\u2019s IAS/IFRS financial statements and the fair values from the PPA
process.
(millions of euro)
Assets
VUB Generali
Carrying amount
at acquisition
date
Fair value
differences
Acquisition date fair
value
Cash and cash equivalents
1
-
1
Financial assets measured at fair value through other comprehensive
income
15
-
15
Intangible assets
6
80
86
- of which intangible AuM
-
80
80
Tax assets
2
-
2
Total assets
24
80
104
Liabilities and shareholders' equity
VUB Generali
Carrying amount
at acquisition
date
Fair value
differences
Acquisition date fair
value
Tax liabilities
1
17
18
a) current
1
-
1
b) deferred
-
17
17
Other liabilities
1
-
1
Shareholders\u2019 equity captions
22
63
85
Total liabilities and shareholders\u2019 equity
24
80
104
SECTION 2 \u2013 TRANSACTIONS CARRIED OUT AFTER THE END OF THE YEAR
2.1 Business combinations
No business combinations within the scope of IFRS 3 have been undertaken since the end of 2022.
SECTION 3 \u2013 RETROSPECTIVE ADJUSTMENTS
No adjustments are recognised in the current year that relate to business combinations that occurred in previous reporting
periods.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-935": { "value": "
Part H \u2013 Transactions with related parties
A) TRANSACTIONS WITH RELATED PARTIES
1. Procedural features
The Board of Directors of Intesa Sanpaolo S.p.A. adopted, in compliance with the procedures set out by regulations, the
Group Procedures regulating the conduct of Transactions with Related Parties of Intesa Sanpaolo S.p.A., Associated Entities
of the Group and Relevant Parties pursuant to Art. 136 of the Consolidated Law on Banking.
These Procedures, most recently updated in June 2021, take into account both the rules issued by Consob, pursuant to
Article 2391-bis of the Italian Civil Code, and the supervisory provisions introduced by the Bank of Italy on 12 December 2011
in terms of risk-related activities and conflicts of interest by banks and banking groups with respect to \"Associated Entities\",
issued in accordance with Article 53, paragraphs 4 et seq. of the Consolidated Law on Banking and CICR (Interdepartmental
Committee for Credit and Savings) Resolution 277 of 29 July 2008, as well as the rules established by Article 136 of the
Consolidated Law on Banking.
The Procedures apply to the entire Intesa Sanpaolo Group with respect to the following aspects:
\u2212 the criteria for identifying Related Parties and Associated Entities;
\u2212 the process of analysis, decision-making and information for corporate bodies in connection with transactions with
Related Parties and Associated Entities;
\u2212 market disclosure for transactions with Related Parties;
\u2212 the prudential limits and obligations for periodic reporting to the Bank of Italy for risk-related activities in relation to
associated entities;
\u2212 the rules governing organisational controls and safeguards;
\u2212 the general rules for disclosure and abstention about the management of the personal interests by management body
members, employees and company staff, including other than Associated Entities.
Pursuant to the Procedures, the following are considered Related Parties of Intesa Sanpaolo: parties that exercise significant
control or influence, subsidiaries and associates, joint ventures, pension funds of the Group, Management Body Members and
Key Managers of Intesa Sanpaolo and their close family members and significant shareholdings.
The set of Associated Entities of the Group consists of the Associated Entities of each bank of the Group (including the
Parent Company) and each monitored significant intermediary with own funds greater than 2% of the total of consolidated
own funds. The following are considered to be Associated Entities for each monitored significant bank or intermediary of the
Group: i) shareholders that exercise control, significant influence or that are required to request authorisation pursuant to
Article 19 of the Consolidated Law on Banking or that may appoint a member of the management or strategic supervisory
body and the relative corporate groups; ii) subsidiaries, associated companies under joint control and associated companies,
as well as the companies controlled by the latter, also jointly with others; iii) management body members and their relative
close family members up to the second degree and significant subsidiary entities.
As a form of self-regulation, the Bank has extended the regulations on transactions with Related Parties, as well as those on
risk-related activities and conflicts of interest with Associated Entities to:
a) Intesa Sanpaolo shareholders and their groups that hold a stake in the share capital with voting rights of the Bank that
exceeds the minimum threshold set out in regulations on the communication of significant shareholdings in listed
companies, calculated considering only shares owned or under management, as well as entities jointly controlled by
them with others;
b) companies in which management body members of Intesa Sanpaolo or their close family members i) hold executive
offices or the office of chair of the management body; ii) hold a qualifying holding equal to or exceeding 10% of the
capital or voting rights of that entity, or a position of significant influence;
c) companies which the Group has notable investments in and financial links with, attributable to at least two of the
following indicators:
o the counterparty holds a stake in Intesa Sanpaolo\u2019s capital with an amount between 1% and the minimum threshold
set out in regulations on the communication of significant shareholdings in listed companies;
o an entity of the Intesa Sanpaolo Group holds a stake in the counterparty exceeding 10% of the voting rights;
o significant credit exposure of the Group to the counterparty.
This approach allows closer monitoring of transactions with the main entities in potential conflict of interest risk.
The Procedures set forth the assessment process that must be followed by the Parent Company and subsidiary companies
when carrying out transactions with Related Parties of Intesa Sanpaolo, Associated Entities of the Group and Relevant
Persons pursuant to Art. 136 of the Consolidated Law on Banking, to ensure appropriateness of the transactions. The
Procedures also require detailed examination of the reasons and interests behind the transactions, their effects on the Bank\u2019s
financials and the terms of the transaction.
In line with the regulations implemented by Consob and by the Bank of Italy, a regime of full or partial exemptions from the
application of the regulations is also envisaged.
With regard to the decision-making for transactions with Related Parties of Intesa Sanpaolo and Associated Entities of the
Group, the procedure distinguishes between:
\u2212 transactions involving smaller amounts: with a value of less than or equal to 250 thousand euro for individuals and
1 million euro for persons other than natural persons (excluded from application of the regulations);
\u2212 less significant transactions: with a value higher than the small-amount thresholds (250 thousand euro for individuals and
1 million euro for persons other than natural persons) but lower than or equal to the most significant thresholds indicated
below;
\u2212 most significant transactions: with a value higher than the threshold of 5% of the indicators defined by Consob and by the
Bank of Italy (approximately 2.8 billion euro for the Intesa Sanpaolo Group);
\u2212 transactions attributed to the shareholders' meeting, in accordance with the law or with the Articles of Association.
In the process of approval of transactions with Related Parties of Intesa Sanpaolo and Associated Entities of the Group, an
important role is reserved for the Committee for Transactions with Related Parties, which meets the independence
requirements laid down in the Corporate Governance Code for Listed Companies and Art. 148 of the Consolidated Law on
Finance. The Committee for Transactions with Related Parties can make use of independent experts, where considered
appropriate, according to the degree of importance of the transaction, its specific economic or structural characteristics and
the nature of the related party or associated entity.
For most significant transactions, the Committee must be promptly involved in the analysis and negotiation phases, receiving
a complete and timely flow of information, with the right of the Committee to request additional information and
make observations.
All transactions \u2013 that are not exempt based on the Procedures \u2013 undertaken by the Parent Company with one of its related
parties or associated entities are subject to approval by the Board, upon recommendation by the Committee for Transactions
with Related Parties.
The Procedures set out specific controls in the event that a less significant or most significant transaction is approved in spite
of a negative opinion of the Committee for Transactions with Related Parties.
Transactions undertaken by subsidiaries with Related Parties of Intesa Sanpaolo and Associated Entities of the Group must
be approved by the Board of Directors of the subsidiaries concerned, subject to prior authorisation from the Parent Company
released in accordance with the procedure described above.
The Procedures also define the general criteria for the information to be provided, at least quarterly \u2013 also pursuant to Article
150 of the Consolidated Law on Finance \u2013 to the directors and the control body regarding transactions with Related Parties
and Associated Entities completed in the reference period by the Parent Company or by its subsidiaries. All of the above is
aimed at providing a complete overview of the transactions of greater importance, as well as the volumes and the main
features of all those delegated. Reports must include all transactions, even if exempt from the decision-making procedure, for
amounts greater than the small-amount thresholds. Transactions of less significant importance and intragroup loans and bank
funding are excluded from this requirement (provided they do not regard a subsidiary with significant interests of another
Related Party or Associated Entity and are not carried out at market or standard conditions). For ordinary intragroup less
significant transactions carried out at market conditions, reporting is on an aggregate annual basis.
Transactions undertaken by Italian subsidiary banks with Related Parties and Associated Entities of the Group that have not
been considered exempt must, subject to authorisation by the Parent Company, be approved by the relative Board of
Directors, upon obtaining the opinion of a Committee of independent directors set up within the Board of Directors of the Bank
itself. Furthermore, specific reporting rules apply to transactions by the Bank's Bodies.
The Procedures also apply to transactions with Relevant Persons pursuant to Art. 136 of the Consolidated Law on Banking,
which must be applied by all the Italian Banks of the Intesa Sanpaolo Group, including the Parent Company. This provision
requires the adoption of a more thorough decision-making procedure (unanimous decision by the management body,
excluding the vote of the interested member, and favourable vote of members of the control body) in order to allow the bank
management body members to contract obligations, directly or indirectly, with the bank of which they act as management
body members.
Furthermore, the requirements envisaged by the Italian Civil Code (Article 2391) and Article 53 of the Consolidated Law on
Banking governing directors' personal interests are confirmed.
In particular, Article 2391 of the Italian Civil Code requires each Board Member to report every interest held, in his/her own
name or on behalf of third parties, that may be significant in carrying out his/her management function, with reference to a
specific transaction. In accordance with the abovementioned provision, the Board has jurisdiction over decisions regarding
transactions \u2013 including those with Related Parties \u2013 in which the Managing Director possesses an interest on his/her own
account or through a third party and must therefore abstain from the decision, entrusting the Board as per Article 2391 of the
Italian Civil Code.
In addition, Article 53 of the Consolidated Law on Banking requires banks' directors to abstain from voting on resolutions
where they have a conflict of interest on their own behalf or on behalf of third parties.
2. Information on balances with related parties Receivable and payable balances with related parties as at 31 December 2022 within the consolidated accounts \u2013 other than those fully consolidated intragroup \u2013 amount to a total that is insignificant compared to the size of the Group\u2019s capital base. Likewise, the weight of income and charges with related parties on consolidated operating margin is insignificant. 31.12.2022 Amount (millions of euro) Impact (%) Total financial assets (1) 6,997 0.8 Total other assets (2) 188 0.8 Total financial liabilities (3) 5,348 0.7 Total other liabilities (4) 882 0.8 (1) Includes captions 10, 20, 30, 35, 40 ,45 and 70 of balance sheet assets. (2) Includes captions 50, 60, 120 and 130 of balance sheet assets. (3) Includes captions 10, 15, 20, 30 and 35 of balance sheet liabilities. (4) Includes captions 40, 50, 70, 80, 90, 100 and 110 of balance sheet liabilities. 31.12.2022 Amount (millions of euro) Impact (%) Total interest income 59 0.4 Total interest expense -31 1 Total fee and commission income 35 0.3 Total fee and commission expense -52 1.9 Total operating costs (1) -194 1.7 (1) Includes caption 190 of the income statement. In relation to associates, during the year a total of around 4 million euro of writebacks to loans were recorded. The table below reports the main terms of reference of transactions with each category of related party, as classified by IAS 24, net of operations with fully consolidated entities, with the category of Significant Shareholders of Intesa Sanpaolo and their corporate groups (subsidiaries also controlled jointly with others, parent companies and companies subject to joint control) with an equity investment with voting rights in the Bank greater than the minimum threshold set out in regulations on communications of significant shareholdings in listed companies calculated only based on shares owned or under management, as well as with the additional subjects included in the scope set as a form of self-regulation. The following table does not show the impact of related party transactions on the Group\u2019s cash flows, as this was not significant. For greater clarity and in line with the reports sent to the Supervisory Authorities, note that the off-balance sheet items were detailed on two separate rows by grouping on one side the guarantees/commitments given and on the other the guarantees/commitments received. The first category also includes the revocable commitments issued totalling 1 billion euro.
(millions of euro)
Subsidiaries
not
consolidated
on a line-by-
line basis
Companies
subject to
joint control
and their
subsidiaries
Associates
and their
subsidiaries
Board
Members
and
General
Managers,
Key
Managers
and their
related
parties
Pension
funds
TOTAL
Shareholders
(*)
Companies
which the
Group has
notable
investments
in and
financial
links with
(**)
Other
companies
linked to
Board
Members
and
General
Managers
(***)
Cash and cash equivalents
-
-
-
-
-
-
-
483
-
Financial assets measured at fair value
through profit or loss
-
-
229
-
-
229
-
2,571
-
a) financial assets held for trading
-
-
-
-
-
-
-
2,526
-
b) financial assets designated at fair value
-
-
-
-
-
-
-
-
-
c) other financial assets mandatorily
measured at fair value
-
-
229
-
-
229
-
45
-
Financial assets measured at fair value
through other comprehensive income
-
-
-
-
-
-
19
-
-
Financial assets pertaining to insurance
companies, measured at fair value pursuant to
IAS 39
-
-
-
-
-
-
2
15
-
Financial assets measured at amortised cost
-
342
328
19
-
689
47
927
2
a) due from banks
-
-
5
-
-
5
-
741
-
b) loans to customers
-
342
323
19
-
684
47
186
2
Financial assets pertaining to insurance
companies measured at amortised cost
pursuant to IAS 39
-
-
-
-
-
-
-
-
-
Other assets
20
-
42
-
-
62
-
126
-
Investments in associates and companies
subject to joint control
49
133
1,831
-
-
2,013
-
-
-
Financial liabilities measured at amortised
cost
17
257
663
28
198
1,163
171
2,908
5
a) due to banks
-
-
2
-
-
2
-
2,719
-
b) due to customers
17
257
661
28
198
1,161
171
189
5
Financial liabilities pertaining to insurance
companies measured at amortised cost
pursuant to IAS 39
-
-
-
-
-
-
-
-
-
Financial liabilities held for trading
-
-
9
-
-
9
-
1,092
-
Financial liabilities designated at fair value
-
-
-
-
-
-
-
-
-
Financial liabilities pertaining to insurance
companies measured at fair value pursuant to
IAS 39
-
-
-
-
-
-
-
-
-
Other financial liabilities
3
-
24
22
517
566
13
303
-
Guarantees and committments given
37
379
206
7
1
630
15
1,091
-
Guarantees and committments received
-
10
9
7
-
26
1
10
-
(*) As a result of self-regulation, shareholders and their groups that hold a stake in the share capital that exceeds the minimum threshold set out in regulations on the
communication of significant shareholdings in listed companies, calculated considering only shares owned or under management, as well as entities jointly controlled by them.
(**) As a result of self-regulation, companies that meet the conditions of at least two of these indicators: i) the counterparty holds a stake in Intesa Sanpaolo\u2019s capital with an
amount between 1% and the minimum threshold set out in regulations on the communication of significant shareholdings in listed companies; ii) an entity of the ISP Group holds a
stake in the counterparty exceeding 10% of the voting rights; iii) significant credit exposure of the Group to the counterparty. The amounts shown largely refer to the companies of
the JP Morgan Group.
(***) As a result of self-regulation, companies in which management body members of Intesa Sanpaolo or their close family members i) hold executive offices or the office of chair
of the management body; ii) hold a qualifying holding equal to or exceeding 10% of the capital or voting rights of that entity, or on which those persons may exercise a significant
influence.
The caption Investments in associates and companies subject to joint control does not include the subsidiary Obviam AG as it was absorbed by Asteria with accounting effect
from 31 December 2022 (it was previously consolidated at equity)
For the sake of completeness, the Group\u2019s most significant associates included in the category of related parties in
accordance with the version of IAS 24 in effect are: Intrum Italy S.p.A., Penghua Fund Management Co. Ltd, RSCT Fund -
Comparto Crediti, Back2Bonis, FI.NAV Comparto A - Crediti, Equiter S.p.A., Cassa di Risparmio di Fermo S.p.A., Camfin
S.p.A., Neva First - FCC, Bancomat S.p.A., Alpian S.A., 1875 Finance Holding AG, Digit\u2019ed Holding S.p.A. and Warrant Hub
S.p.A. The main joint ventures include: Mir Capital Sca Sicar, PBZ Croatia Osiguranje Public Limited Company for
Compulsory Pension Fund Management and Mooney Group S.p.A.
3. Information on transactions with related parties
It is noted that transactions with fully consolidated intragroup related parties are not included in this document because they
are netted at consolidated level.
For details of the transactions carried out by Intesa Sanpaolo S.p.A., see the information provided in Part H of Parent
Company\u2019s Financial Statements.
Most significant transactions
During the year, the Intesa Sanpaolo Group did not carry out any transactions that qualified as non-ordinary \u201cmost significant
transactions\u201d and at non-market or non-standard conditions subject \u2013 in accordance with the Group Procedures regulating the
conduct of Transactions with Related Parties of Intesa Sanpaolo S.p.A., Associated Entities of the Group and Relevant
Parties pursuant to Art. 136 of the Consolidated Law on Banking \u2013 to the obligation to publish a market disclosure document.
Please note that the most significant transactions during the year are those that exceed the threshold of 5% of Own Funds at
consolidated level (approximately 2.8 billion) or of the other indicators defined by the Consob regulation.
Other significant transactions
The transactions undertaken by the Intesa Sanpaolo Group with related parties generally fall within the scope of the Group\u2019s
ordinary activities and are generally entered into at market conditions, based on considerations of mutual economic interest,
in line with the internal procedures mentioned above.
The main less significant transactions concluded during the year by Intesa Sanpaolo Group companies with related parties
are reported below.
Relations between the Intesa Sanpaolo Group and the board members and general managers, key managers, their close
family members and entities they have significant investments in refer to the Group\u2019s normal business activities and are
defined applying, where conditions recur, the terms reserved to all employees, in full respect and transparency of terms
applied.
With regard to the transactions with jointly-controlled subsidiaries or associates, as well as with significant investees due to
the presence of important equity and financial ties, mention should be made of:
\u2212 the sale, for 23 million euro, by Banca 5 S.p.A. to Mooney Group S.p.A. of the ordinary shares of the electronic money
institution Mooney S.p.A. as a result of the contribution of its business line to Mooney S.p.A. and the subsequent signing,
with Mooney Group S.p.A., of a commercial agreement;
\u2212 the recapitalisation of 10 million euro by Banca 5 S.p.A. in favour of Mooney Group S.p.A., and the revision of the
conditions applied to financial instruments in issue for a value of around 262 million euro;
\u2212 the signing of a service agreement between Fideuram - Intesa Sanpaolo Private Banking S.p.A. and Alpian S.A. aimed at
regulating the conditions for the development and use of the software on an exclusive basis in Italy and Luxembourg.
The agreement was signed on 12 May 2022, effective until 2028 and for a maximum value of 5 million euro. This
agreement was formalised following the subscription of a direct equity investment of 14.9% by Fideuram - Intesa
Sanpaolo Private Banking S.p.A. in the company, which resulted in the Intesa Sanpaolo Group having significant
influence over Alpian S.A., taking account of the 12.8% of capital owned by Reyl & CIE S.A.
Lastly, we note the credit facilities and extensions of credit lines in favour of VUB Generali Dochodkova Spravcovska
Spolocnost A.S.
Other significant information
With reference to the companies carried at equity, adjustments were recognised in the value of the investments held in Intrum
Italy S.p.A., Mir Capital S.C.A. Sicar, Misr Alexandria For Financial Investments Mutual Fund Co. in liquidation, Backtowork24
S.r.l., Gilda S.r.l. and Marketwall S.r.l.
B) INFORMATION REGARDING COMPENSATION OF THE MEMBERS OF MANAGEMENT AND CONTROL
BODIES AND KEY MANAGERS
The following table shows the amounts of the compensation paid in 2022 to the members of the Management and Control
Bodies and the General Managers of the subsidiary companies, as well as the compensation paid to other Key Managers of
the Parent Company who fall within the notion of \u201crelated party\u201d. This also includes the maximum amounts of the variable
portion of remuneration which shall be paid in cash and/or shares of the Parent Company, based on the Group's
remuneration and incentive policy, subject to the verification of achievement of the assigned targets and the decisions of the
competent bodies of the Parent Company.
(millions of euro)
MANAGEMENT BODIES/
CONTROL BODIES
(1)
OTHER MANAGERS
(2)
TOTAL as at 31.12.2022
Amount
due
Amount
paid
Amount
due
Amount
paid
Amount
due
Amount
paid
Short-term benefits
(3)
18
13
63
51
81
64
Post-employment benefits
(4)
-
-
5
5
5
5
Other long-term benefits
(5)
1
1
12
1
13
2
Termination benefits
(6)
-
-
-
-
-
-
Share-based payments
(7)
-
-
25
-
25
-
Total
19
14
105
57
124
71
(1) Figures referring to 448 positions. The table does not include approximately 2,1 million euro relating to 82 positions in the Boards of Directors (or similar bodies),
as this was fully transferred to other Group Companies.
(2) Figures referring to 99 positions. The table does not include approximately 5,1 million euro relating to 13 General Manager positions (or similar positions), as this
was fully transferred to other Group Companies
(3) Includes fixed and variable remuneration of Directors that may be treated as equivalent to labour cost and social security charges paid by the company for its
employees.
(4) Includes company contribution to pension funds and provisions for employee termination indemnities pursuant to law and company regulations.
(5) Includes an estimate of provisions for employee seniority bonuses.
(6) Includes benefits due under the employment contract for termination of employment.
(7) Includes the cost referring to the variable portion of short-/long-term remuneration to be paid in Intesa Sanpaolo shares/through POP and PSP Plan.
Detailed information on remuneration policies, pursuant to Art. 123-ter of the Consolidated Law on Finance, is published
annually in the \u201cReport on remuneration policy and compensation paid\u201d, which includes:
\u2212 the details of the remuneration paid to members of management and control bodies, to General Managers, and, in
aggregate form, to other Key Managers;
\u2212 the details and the progress of the stock option plans for the members of the Management Body, General Managers and
other Key Managers;
\u2212 the details and the progress of the incentive plans based on financial instruments other than stock options, in favour of
the Managing Director and CEO and other Key Managers;
\u2212 the details of the monetary incentive plans in favour of the Managing Director and CEO and other Key Managers;
\u2212 the shares of the Parent Company and subsidiaries held by the members of the Management and Control bodies, Key
Managers and other associated entities.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTransactionsWithRelatedPartiesExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-1007": { "value": "Part H \u2013 Transactions with related parties A) TRANSACTIONS WITH RELATED PARTIES 1. Procedural features The Board of Directors of Intesa Sanpaolo S.p.A. adopted, in compliance with the procedures set out by regulations, the Group Procedures regulating the conduct of Transactions with Related Parties of Intesa Sanpaolo S.p.A., Associated Entities of the Group and Relevant Parties pursuant to Art. 136 of the Consolidated Law on Banking. These Procedures, most recently updated in June 2021, take into account both the rules issued by Consob, pursuant to Article 2391-bis of the Italian Civil Code, and the supervisory provisions introduced by the Bank of Italy on 12 December 2011 in terms of risk-related activities and conflicts of interest by banks and banking groups with respect to \"Associated Entities\", issued in accordance with Article 53, paragraphs 4 et seq. of the Consolidated Law on Banking and CICR (Interdepartmental Committee for Credit and Savings) Resolution 277 of 29 July 2008, as well as the rules established by Article 136 of the Consolidated Law on Banking. The Procedures apply to the entire Intesa Sanpaolo Group with respect to the following aspects: \u2212 the criteria for identifying Related Parties and Associated Entities; \u2212 the process of analysis, decision-making and information for corporate bodies in connection with transactions with Related Parties and Associated Entities; \u2212 market disclosure for transactions with Related Parties; \u2212 the prudential limits and obligations for periodic reporting to the Bank of Italy for risk-related activities in relation to associated entities; \u2212 the rules governing organisational controls and safeguards; \u2212 the general rules for disclosure and abstention about the management of the personal interests by management body members, employees and company staff, including other than Associated Entities. Pursuant to the Procedures, the following are considered Related Parties of Intesa Sanpaolo: parties that exercise significant control or influence, subsidiaries and associates, joint ventures, pension funds of the Group, Management Body Members and Key Managers of Intesa Sanpaolo and their close family members and significant shareholdings. The set of Associated Entities of the Group consists of the Associated Entities of each bank of the Group (including the Parent Company) and each monitored significant intermediary with own funds greater than 2% of the total of consolidated own funds. The following are considered to be Associated Entities for each monitored significant bank or intermediary of the Group: i) shareholders that exercise control, significant influence or that are required to request authorisation pursuant to Article 19 of the Consolidated Law on Banking or that may appoint a member of the management or strategic supervisory body and the relative corporate groups; ii) subsidiaries, associated companies under joint control and associated companies, as well as the companies controlled by the latter, also jointly with others; iii) management body members and their relative close family members up to the second degree and significant subsidiary entities. As a form of self-regulation, the Bank has extended the regulations on transactions with Related Parties, as well as those on risk-related activities and conflicts of interest with Associated Entities to: a) Intesa Sanpaolo shareholders and their groups that hold a stake in the share capital with voting rights of the Bank that exceeds the minimum threshold set out in regulations on the communication of significant shareholdings in listed companies, calculated considering only shares owned or under management, as well as entities jointly controlled by them with others; b) companies in which management body members of Intesa Sanpaolo or their close family members i) hold executive offices or the office of chair of the management body; ii) hold a qualifying holding equal to or exceeding 10% of the capital or voting rights of that entity, or a position of significant influence; c) companies which the Group has notable investments in and financial links with, attributable to at least two of the following indicators: o the counterparty holds a stake in Intesa Sanpaolo\u2019s capital with an amount between 1% and the minimum threshold set out in regulations on the communication of significant shareholdings in listed companies; o an entity of the Intesa Sanpaolo Group holds a stake in the counterparty exceeding 10% of the voting rights; o significant credit exposure of the Group to the counterparty. This approach allows closer monitoring of transactions with the main entities in potential conflict of interest risk. The Procedures set forth the assessment process that must be followed by the Parent Company and subsidiary companies when carrying out transactions with Related Parties of Intesa Sanpaolo, Associated Entities of the Group and Relevant Persons pursuant to Art. 136 of the Consolidated Law on Banking, to ensure appropriateness of the transactions. The Procedures also require detailed examination of the reasons and interests behind the transactions, their effects on the Bank\u2019s financials and the terms of the transaction. In line with the regulations implemented by Consob and by the Bank of Italy, a regime of full or partial exemptions from the application of the regulations is also envisaged. With regard to the decision-making for transactions with Related Parties of Intesa Sanpaolo and Associated Entities of the Group, the procedure distinguishes between: \u2212 transactions involving smaller amounts: with a value of less than or equal to 250 thousand euro for individuals and 1 million euro for persons other than natural persons (excluded from application of the regulations); \u2212 less significant transactions: with a value higher than the small-amount thresholds (250 thousand euro for individuals and 1 million euro for persons other than natural persons) but lower than or equal to the most significant thresholds indicated below; \u2212 most significant transactions: with a value higher than the threshold of 5% of the indicators defined by Consob and by the Bank of Italy (approximately 2.8 billion euro for the Intesa Sanpaolo Group); \u2212 transactions attributed to the shareholders' meeting, in accordance with the law or with the Articles of Association. In the process of approval of transactions with Related Parties of Intesa Sanpaolo and Associated Entities of the Group, an important role is reserved for the Committee for Transactions with Related Parties, which meets the independence requirements laid down in the Corporate Governance Code for Listed Companies and Art. 148 of the Consolidated Law on Finance. The Committee for Transactions with Related Parties can make use of independent experts, where considered appropriate, according to the degree of importance of the transaction, its specific economic or structural characteristics and the nature of the related party or associated entity. For most significant transactions, the Committee must be promptly involved in the analysis and negotiation phases, receiving a complete and timely flow of information, with the right of the Committee to request additional information and make observations. All transactions \u2013 that are not exempt based on the Procedures \u2013 undertaken by the Parent Company with one of its related parties or associated entities are subject to approval by the Board, upon recommendation by the Committee for Transactions with Related Parties. The Procedures set out specific controls in the event that a less significant or most significant transaction is approved in spite of a negative opinion of the Committee for Transactions with Related Parties. Transactions undertaken by subsidiaries with Related Parties of Intesa Sanpaolo and Associated Entities of the Group must be approved by the Board of Directors of the subsidiaries concerned, subject to prior authorisation from the Parent Company released in accordance with the procedure described above. The Procedures also define the general criteria for the information to be provided, at least quarterly \u2013 also pursuant to Article 150 of the Consolidated Law on Finance \u2013 to the directors and the control body regarding transactions with Related Parties and Associated Entities completed in the reference period by the Parent Company or by its subsidiaries. All of the above is aimed at providing a complete overview of the transactions of greater importance, as well as the volumes and the main features of all those delegated. Reports must include all transactions, even if exempt from the decision-making procedure, for amounts greater than the small-amount thresholds. Transactions of less significant importance and intragroup loans and bank funding are excluded from this requirement (provided they do not regard a subsidiary with significant interests of another Related Party or Associated Entity and are not carried out at market or standard conditions). For ordinary intragroup less significant transactions carried out at market conditions, reporting is on an aggregate annual basis. Transactions undertaken by Italian subsidiary banks with Related Parties and Associated Entities of the Group that have not been considered exempt must, subject to authorisation by the Parent Company, be approved by the relative Board of Directors, upon obtaining the opinion of a Committee of independent directors set up within the Board of Directors of the Bank itself. Furthermore, specific reporting rules apply to transactions by the Bank's Bodies. The Procedures also apply to transactions with Relevant Persons pursuant to Art. 136 of the Consolidated Law on Banking, which must be applied by all the Italian Banks of the Intesa Sanpaolo Group, including the Parent Company. This provision requires the adoption of a more thorough decision-making procedure (unanimous decision by the management body, excluding the vote of the interested member, and favourable vote of members of the control body) in order to allow the bank management body members to contract obligations, directly or indirectly, with the bank of which they act as management body members. Furthermore, the requirements envisaged by the Italian Civil Code (Article 2391) and Article 53 of the Consolidated Law on Banking governing directors' personal interests are confirmed. In particular, Article 2391 of the Italian Civil Code requires each Board Member to report every interest held, in his/her own name or on behalf of third parties, that may be significant in carrying out his/her management function, with reference to a specific transaction. In accordance with the abovementioned provision, the Board has jurisdiction over decisions regarding transactions \u2013 including those with Related Parties \u2013 in which the Managing Director possesses an interest on his/her own account or through a third party and must therefore abstain from the decision, entrusting the Board as per Article 2391 of the Italian Civil Code. In addition, Article 53 of the Consolidated Law on Banking requires banks' directors to abstain from voting on resolutions where they have a conflict of interest on their own behalf or on behalf of third parties. 2. Information on balances with related parties Receivable and payable balances with related parties as at 31 December 2022 within the consolidated accounts \u2013 other than those fully consolidated intragroup \u2013 amount to a total that is insignificant compared to the size of the Group\u2019s capital base. Likewise, the weight of income and charges with related parties on consolidated operating margin is insignificant. 31.12.2022 Amount (millions of euro) Impact (%) Total financial assets (1) 6,997 0.8 Total other assets (2) 188 0.8 Total financial liabilities (3) 5,348 0.7 Total other liabilities (4) 882 0.8 (1) Includes captions 10, 20, 30, 35, 40 ,45 and 70 of balance sheet assets. (2) Includes captions 50, 60, 120 and 130 of balance sheet assets. (3) Includes captions 10, 15, 20, 30 and 35 of balance sheet liabilities. (4) Includes captions 40, 50, 70, 80, 90, 100 and 110 of balance sheet liabilities. 31.12.2022 Amount (millions of euro) Impact (%) Total interest income 59 0.4 Total interest expense -31 1 Total fee and commission income 35 0.3 Total fee and commission expense -52 1.9 Total operating costs (1) -194 1.7 (1) Includes caption 190 of the income statement. In relation to associates, during the year a total of around 4 million euro of writebacks to loans were recorded. The table below reports the main terms of reference of transactions with each category of related party, as classified by IAS 24, net of operations with fully consolidated entities, with the category of Significant Shareholders of Intesa Sanpaolo and their corporate groups (subsidiaries also controlled jointly with others, parent companies and companies subject to joint control) with an equity investment with voting rights in the Bank greater than the minimum threshold set out in regulations on communications of significant shareholdings in listed companies calculated only based on shares owned or under management, as well as with the additional subjects included in the scope set as a form of self-regulation. The following table does not show the impact of related party transactions on the Group\u2019s cash flows, as this was not significant. For greater clarity and in line with the reports sent to the Supervisory Authorities, note that the off-balance sheet items were detailed on two separate rows by grouping on one side the guarantees/commitments given and on the other the guarantees/commitments received. The first category also includes the revocable commitments issued totalling 1 billion euro. (millions of euro) Subsidiaries not consolidated on a line-by- line basis Companies subject to joint control and their subsidiaries Associates and their subsidiaries Board Members and General Managers, Key Managers and their related parties Pension funds TOTAL Shareholders (*) Companies which the Group has notable investments in and financial links with (**) Other companies linked to Board Members and General Managers (***) Cash and cash equivalents - - - - - - - 483 - Financial assets measured at fair value through profit or loss - - 229 - - 229 - 2,571 - a) financial assets held for trading - - - - - - - 2,526 - b) financial assets designated at fair value - - - - - - - - - c) other financial assets mandatorily measured at fair value - - 229 - - 229 - 45 - Financial assets measured at fair value through other comprehensive income - - - - - - 19 - - Financial assets pertaining to insurance companies, measured at fair value pursuant to IAS 39 - - - - - - 2 15 - Financial assets measured at amortised cost - 342 328 19 - 689 47 927 2 a) due from banks - - 5 - - 5 - 741 - b) loans to customers - 342 323 19 - 684 47 186 2 Financial assets pertaining to insurance companies measured at amortised cost pursuant to IAS 39 - - - - - - - - - Other assets 20 - 42 - - 62 - 126 - Investments in associates and companies subject to joint control 49 133 1,831 - - 2,013 - - - Financial liabilities measured at amortised cost 17 257 663 28 198 1,163 171 2,908 5 a) due to banks - - 2 - - 2 - 2,719 - b) due to customers 17 257 661 28 198 1,161 171 189 5 Financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39 - - - - - - - - - Financial liabilities held for trading - - 9 - - 9 - 1,092 - Financial liabilities designated at fair value - - - - - - - - - Financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39 - - - - - - - - - Other financial liabilities 3 - 24 22 517 566 13 303 - Guarantees and committments given 37 379 206 7 1 630 15 1,091 - Guarantees and committments received - 10 9 7 - 26 1 10 - (*) As a result of self-regulation, shareholders and their groups that hold a stake in the share capital that exceeds the minimum threshold set out in regulations on the communication of significant shareholdings in listed companies, calculated considering only shares owned or under management, as well as entities jointly controlled by them. (**) As a result of self-regulation, companies that meet the conditions of at least two of these indicators: i) the counterparty holds a stake in Intesa Sanpaolo\u2019s capital with an amount between 1% and the minimum threshold set out in regulations on the communication of significant shareholdings in listed companies; ii) an entity of the ISP Group holds a stake in the counterparty exceeding 10% of the voting rights; iii) significant credit exposure of the Group to the counterparty. The amounts shown largely refer to the companies of the JP Morgan Group. (***) As a result of self-regulation, companies in which management body members of Intesa Sanpaolo or their close family members i) hold executive offices or the office of chair of the management body; ii) hold a qualifying holding equal to or exceeding 10% of the capital or voting rights of that entity, or on which those persons may exercise a significant influence. The caption Investments in associates and companies subject to joint control does not include the subsidiary Obviam AG as it was absorbed by Asteria with accounting effect from 31 December 2022 (it was previously consolidated at equity) For the sake of completeness, the Group\u2019s most significant associates included in the category of related parties in accordance with the version of IAS 24 in effect are: Intrum Italy S.p.A., Penghua Fund Management Co. Ltd, RSCT Fund - Comparto Crediti, Back2Bonis, FI.NAV Comparto A - Crediti, Equiter S.p.A., Cassa di Risparmio di Fermo S.p.A., Camfin S.p.A., Neva First - FCC, Bancomat S.p.A., Alpian S.A., 1875 Finance Holding AG, Digit\u2019ed Holding S.p.A. and Warrant Hub S.p.A. The main joint ventures include: Mir Capital Sca Sicar, PBZ Croatia Osiguranje Public Limited Company for Compulsory Pension Fund Management and Mooney Group S.p.A. 3. Information on transactions with related parties It is noted that transactions with fully consolidated intragroup related parties are not included in this document because they are netted at consolidated level. For details of the transactions carried out by Intesa Sanpaolo S.p.A., see the information provided in Part H of Parent Company\u2019s Financial Statements. Most significant transactions During the year, the Intesa Sanpaolo Group did not carry out any transactions that qualified as non-ordinary \u201cmost significant transactions\u201d and at non-market or non-standard conditions subject \u2013 in accordance with the Group Procedures regulating the conduct of Transactions with Related Parties of Intesa Sanpaolo S.p.A., Associated Entities of the Group and Relevant Parties pursuant to Art. 136 of the Consolidated Law on Banking \u2013 to the obligation to publish a market disclosure document. Please note that the most significant transactions during the year are those that exceed the threshold of 5% of Own Funds at consolidated level (approximately 2.8 billion) or of the other indicators defined by the Consob regulation. Other significant transactions The transactions undertaken by the Intesa Sanpaolo Group with related parties generally fall within the scope of the Group\u2019s ordinary activities and are generally entered into at market conditions, based on considerations of mutual economic interest, in line with the internal procedures mentioned above. The main less significant transactions concluded during the year by Intesa Sanpaolo Group companies with related parties are reported below. Relations between the Intesa Sanpaolo Group and the board members and general managers, key managers, their close family members and entities they have significant investments in refer to the Group\u2019s normal business activities and are defined applying, where conditions recur, the terms reserved to all employees, in full respect and transparency of terms applied. With regard to the transactions with jointly-controlled subsidiaries or associates, as well as with significant investees due to the presence of important equity and financial ties, mention should be made of: \u2212 the sale, for 23 million euro, by Banca 5 S.p.A. to Mooney Group S.p.A. of the ordinary shares of the electronic money institution Mooney S.p.A. as a result of the contribution of its business line to Mooney S.p.A. and the subsequent signing, with Mooney Group S.p.A., of a commercial agreement; \u2212 the recapitalisation of 10 million euro by Banca 5 S.p.A. in favour of Mooney Group S.p.A., and the revision of the conditions applied to financial instruments in issue for a value of around 262 million euro; \u2212 the signing of a service agreement between Fideuram - Intesa Sanpaolo Private Banking S.p.A. and Alpian S.A. aimed at regulating the conditions for the development and use of the software on an exclusive basis in Italy and Luxembourg. The agreement was signed on 12 May 2022, effective until 2028 and for a maximum value of 5 million euro. This agreement was formalised following the subscription of a direct equity investment of 14.9% by Fideuram - Intesa Sanpaolo Private Banking S.p.A. in the company, which resulted in the Intesa Sanpaolo Group having significant influence over Alpian S.A., taking account of the 12.8% of capital owned by Reyl & CIE S.A. Lastly, we note the credit facilities and extensions of credit lines in favour of VUB Generali Dochodkova Spravcovska Spolocnost A.S. Other significant information With reference to the companies carried at equity, adjustments were recognised in the value of the investments held in Intrum Italy S.p.A., Mir Capital S.C.A. Sicar, Misr Alexandria For Financial Investments Mutual Fund Co. in liquidation, Backtowork24 S.r.l., Gilda S.r.l. and Marketwall S.r.l. B) INFORMATION REGARDING COMPENSATION OF THE MEMBERS OF MANAGEMENT AND CONTROL BODIES AND KEY MANAGERS The following table shows the amounts of the compensation paid in 2022 to the members of the Management and Control Bodies and the General Managers of the subsidiary companies, as well as the compensation paid to other Key Managers of the Parent Company who fall within the notion of \u201crelated party\u201d. This also includes the maximum amounts of the variable portion of remuneration which shall be paid in cash and/or shares of the Parent Company, based on the Group's remuneration and incentive policy, subject to the verification of achievement of the assigned targets and the decisions of the competent bodies of the Parent Company. (millions of euro) MANAGEMENT BODIES/ CONTROL BODIES (1) OTHER MANAGERS (2) TOTAL as at 31.12.2022 Amount due Amount paid Amount due Amount paid Amount due Amount paid Short-term benefits (3) 18 13 63 51 81 64 Post-employment benefits (4) - - 5 5 5 5 Other long-term benefits (5) 1 1 12 1 13 2 Termination benefits (6) - - - - - - Share-based payments (7) - - 25 - 25 - Total 19 14 105 57 124 71 (1) Figures referring to 448 positions. The table does not include approximately 2,1 million euro relating to 82 positions in the Boards of Directors (or similar bodies), as this was fully transferred to other Group Companies. (2) Figures referring to 99 positions. The table does not include approximately 5,1 million euro relating to 13 General Manager positions (or similar positions), as this was fully transferred to other Group Companies (3) Includes fixed and variable remuneration of Directors that may be treated as equivalent to labour cost and social security charges paid by the company for its employees. (4) Includes company contribution to pension funds and provisions for employee termination indemnities pursuant to law and company regulations. (5) Includes an estimate of provisions for employee seniority bonuses. (6) Includes benefits due under the employment contract for termination of employment. (7) Includes the cost referring to the variable portion of short-/long-term remuneration to be paid in Intesa Sanpaolo shares/through POP and PSP Plan. Detailed information on remuneration policies, pursuant to Art. 123-ter of the Consolidated Law on Finance, is published annually in the \u201cReport on remuneration policy and compensation paid\u201d, which includes: \u2212 the details of the remuneration paid to members of management and control bodies, to General Managers, and, in aggregate form, to other Key Managers; \u2212 the details and the progress of the stock option plans for the members of the Management Body, General Managers and other Key Managers; \u2212 the details and the progress of the incentive plans based on financial instruments other than stock options, in favour of the Managing Director and CEO and other Key Managers; \u2212 the details of the monetary incentive plans in favour of the Managing Director and CEO and other Key Managers; \u2212 the shares of the Parent Company and subsidiaries held by the members of the Management and Control bodies, Key Managers and other associated entities. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-978": { "value": "Part H \u2013 Transactions with related parties A) TRANSACTIONS WITH RELATED PARTIES 1. Procedural features The Board of Directors of Intesa Sanpaolo S.p.A. adopted, in compliance with the procedures set out by regulations, the Group Procedures regulating the conduct of Transactions with Related Parties of Intesa Sanpaolo S.p.A., Associated Entities of the Group and Relevant Parties pursuant to Art. 136 of the Consolidated Law on Banking. These Procedures, most recently updated in June 2021, take into account both the rules issued by Consob, pursuant to Article 2391-bis of the Italian Civil Code, and the supervisory provisions introduced by the Bank of Italy on 12 December 2011 in terms of risk-related activities and conflicts of interest by banks and banking groups with respect to \"Associated Entities\", issued in accordance with Article 53, paragraphs 4 et seq. of the Consolidated Law on Banking and CICR (Interdepartmental Committee for Credit and Savings) Resolution 277 of 29 July 2008, as well as the rules established by Article 136 of the Consolidated Law on Banking. The Procedures apply to the entire Intesa Sanpaolo Group with respect to the following aspects: \u2212 the criteria for identifying Related Parties and Associated Entities; \u2212 the process of analysis, decision-making and information for corporate bodies in connection with transactions with Related Parties and Associated Entities; \u2212 market disclosure for transactions with Related Parties; \u2212 the prudential limits and obligations for periodic reporting to the Bank of Italy for risk-related activities in relation to associated entities; \u2212 the rules governing organisational controls and safeguards; \u2212 the general rules for disclosure and abstention about the management of the personal interests by management body members, employees and company staff, including other than Associated Entities. Pursuant to the Procedures, the following are considered Related Parties of Intesa Sanpaolo: parties that exercise significant control or influence, subsidiaries and associates, joint ventures, pension funds of the Group, Management Body Members and Key Managers of Intesa Sanpaolo and their close family members and significant shareholdings. The set of Associated Entities of the Group consists of the Associated Entities of each bank of the Group (including the Parent Company) and each monitored significant intermediary with own funds greater than 2% of the total of consolidated own funds. The following are considered to be Associated Entities for each monitored significant bank or intermediary of the Group: i) shareholders that exercise control, significant influence or that are required to request authorisation pursuant to Article 19 of the Consolidated Law on Banking or that may appoint a member of the management or strategic supervisory body and the relative corporate groups; ii) subsidiaries, associated companies under joint control and associated companies, as well as the companies controlled by the latter, also jointly with others; iii) management body members and their relative close family members up to the second degree and significant subsidiary entities. As a form of self-regulation, the Bank has extended the regulations on transactions with Related Parties, as well as those on risk-related activities and conflicts of interest with Associated Entities to: a) Intesa Sanpaolo shareholders and their groups that hold a stake in the share capital with voting rights of the Bank that exceeds the minimum threshold set out in regulations on the communication of significant shareholdings in listed companies, calculated considering only shares owned or under management, as well as entities jointly controlled by them with others; b) companies in which management body members of Intesa Sanpaolo or their close family members i) hold executive offices or the office of chair of the management body; ii) hold a qualifying holding equal to or exceeding 10% of the capital or voting rights of that entity, or a position of significant influence; c) companies which the Group has notable investments in and financial links with, attributable to at least two of the following indicators: o the counterparty holds a stake in Intesa Sanpaolo\u2019s capital with an amount between 1% and the minimum threshold set out in regulations on the communication of significant shareholdings in listed companies; o an entity of the Intesa Sanpaolo Group holds a stake in the counterparty exceeding 10% of the voting rights; o significant credit exposure of the Group to the counterparty. This approach allows closer monitoring of transactions with the main entities in potential conflict of interest risk. The Procedures set forth the assessment process that must be followed by the Parent Company and subsidiary companies when carrying out transactions with Related Parties of Intesa Sanpaolo, Associated Entities of the Group and Relevant Persons pursuant to Art. 136 of the Consolidated Law on Banking, to ensure appropriateness of the transactions. The Procedures also require detailed examination of the reasons and interests behind the transactions, their effects on the Bank\u2019s financials and the terms of the transaction. In line with the regulations implemented by Consob and by the Bank of Italy, a regime of full or partial exemptions from the application of the regulations is also envisaged. With regard to the decision-making for transactions with Related Parties of Intesa Sanpaolo and Associated Entities of the Group, the procedure distinguishes between: \u2212 transactions involving smaller amounts: with a value of less than or equal to 250 thousand euro for individuals and 1 million euro for persons other than natural persons (excluded from application of the regulations); \u2212 less significant transactions: with a value higher than the small-amount thresholds (250 thousand euro for individuals and 1 million euro for persons other than natural persons) but lower than or equal to the most significant thresholds indicated below; \u2212 most significant transactions: with a value higher than the threshold of 5% of the indicators defined by Consob and by the Bank of Italy (approximately 2.8 billion euro for the Intesa Sanpaolo Group); \u2212 transactions attributed to the shareholders' meeting, in accordance with the law or with the Articles of Association. In the process of approval of transactions with Related Parties of Intesa Sanpaolo and Associated Entities of the Group, an important role is reserved for the Committee for Transactions with Related Parties, which meets the independence requirements laid down in the Corporate Governance Code for Listed Companies and Art. 148 of the Consolidated Law on Finance. The Committee for Transactions with Related Parties can make use of independent experts, where considered appropriate, according to the degree of importance of the transaction, its specific economic or structural characteristics and the nature of the related party or associated entity. For most significant transactions, the Committee must be promptly involved in the analysis and negotiation phases, receiving a complete and timely flow of information, with the right of the Committee to request additional information and make observations. All transactions \u2013 that are not exempt based on the Procedures \u2013 undertaken by the Parent Company with one of its related parties or associated entities are subject to approval by the Board, upon recommendation by the Committee for Transactions with Related Parties. The Procedures set out specific controls in the event that a less significant or most significant transaction is approved in spite of a negative opinion of the Committee for Transactions with Related Parties. Transactions undertaken by subsidiaries with Related Parties of Intesa Sanpaolo and Associated Entities of the Group must be approved by the Board of Directors of the subsidiaries concerned, subject to prior authorisation from the Parent Company released in accordance with the procedure described above. The Procedures also define the general criteria for the information to be provided, at least quarterly \u2013 also pursuant to Article 150 of the Consolidated Law on Finance \u2013 to the directors and the control body regarding transactions with Related Parties and Associated Entities completed in the reference period by the Parent Company or by its subsidiaries. All of the above is aimed at providing a complete overview of the transactions of greater importance, as well as the volumes and the main features of all those delegated. Reports must include all transactions, even if exempt from the decision-making procedure, for amounts greater than the small-amount thresholds. Transactions of less significant importance and intragroup loans and bank funding are excluded from this requirement (provided they do not regard a subsidiary with significant interests of another Related Party or Associated Entity and are not carried out at market or standard conditions). For ordinary intragroup less significant transactions carried out at market conditions, reporting is on an aggregate annual basis. Transactions undertaken by Italian subsidiary banks with Related Parties and Associated Entities of the Group that have not been considered exempt must, subject to authorisation by the Parent Company, be approved by the relative Board of Directors, upon obtaining the opinion of a Committee of independent directors set up within the Board of Directors of the Bank itself. Furthermore, specific reporting rules apply to transactions by the Bank's Bodies. The Procedures also apply to transactions with Relevant Persons pursuant to Art. 136 of the Consolidated Law on Banking, which must be applied by all the Italian Banks of the Intesa Sanpaolo Group, including the Parent Company. This provision requires the adoption of a more thorough decision-making procedure (unanimous decision by the management body, excluding the vote of the interested member, and favourable vote of members of the control body) in order to allow the bank management body members to contract obligations, directly or indirectly, with the bank of which they act as management body members. Furthermore, the requirements envisaged by the Italian Civil Code (Article 2391) and Article 53 of the Consolidated Law on Banking governing directors' personal interests are confirmed. In particular, Article 2391 of the Italian Civil Code requires each Board Member to report every interest held, in his/her own name or on behalf of third parties, that may be significant in carrying out his/her management function, with reference to a specific transaction. In accordance with the abovementioned provision, the Board has jurisdiction over decisions regarding transactions \u2013 including those with Related Parties \u2013 in which the Managing Director possesses an interest on his/her own account or through a third party and must therefore abstain from the decision, entrusting the Board as per Article 2391 of the Italian Civil Code. In addition, Article 53 of the Consolidated Law on Banking requires banks' directors to abstain from voting on resolutions where they have a conflict of interest on their own behalf or on behalf of third parties. 2. Information on balances with related parties Receivable and payable balances with related parties as at 31 December 2022 within the consolidated accounts \u2013 other than those fully consolidated intragroup \u2013 amount to a total that is insignificant compared to the size of the Group\u2019s capital base. Likewise, the weight of income and charges with related parties on consolidated operating margin is insignificant. 31.12.2022 Amount (millions of euro) Impact (%) Total financial assets (1) 6,997 0.8 Total other assets (2) 188 0.8 Total financial liabilities (3) 5,348 0.7 Total other liabilities (4) 882 0.8 (1) Includes captions 10, 20, 30, 35, 40 ,45 and 70 of balance sheet assets. (2) Includes captions 50, 60, 120 and 130 of balance sheet assets. (3) Includes captions 10, 15, 20, 30 and 35 of balance sheet liabilities. (4) Includes captions 40, 50, 70, 80, 90, 100 and 110 of balance sheet liabilities. 31.12.2022 Amount (millions of euro) Impact (%) Total interest income 59 0.4 Total interest expense -31 1 Total fee and commission income 35 0.3 Total fee and commission expense -52 1.9 Total operating costs (1) -194 1.7 (1) Includes caption 190 of the income statement. In relation to associates, during the year a total of around 4 million euro of writebacks to loans were recorded. The table below reports the main terms of reference of transactions with each category of related party, as classified by IAS 24, net of operations with fully consolidated entities, with the category of Significant Shareholders of Intesa Sanpaolo and their corporate groups (subsidiaries also controlled jointly with others, parent companies and companies subject to joint control) with an equity investment with voting rights in the Bank greater than the minimum threshold set out in regulations on communications of significant shareholdings in listed companies calculated only based on shares owned or under management, as well as with the additional subjects included in the scope set as a form of self-regulation. The following table does not show the impact of related party transactions on the Group\u2019s cash flows, as this was not significant. For greater clarity and in line with the reports sent to the Supervisory Authorities, note that the off-balance sheet items were detailed on two separate rows by grouping on one side the guarantees/commitments given and on the other the guarantees/commitments received. The first category also includes the revocable commitments issued totalling 1 billion euro. (millions of euro) Subsidiaries not consolidated on a line-by- line basis Companies subject to joint control and their subsidiaries Associates and their subsidiaries Board Members and General Managers, Key Managers and their related parties Pension funds TOTAL Shareholders (*) Companies which the Group has notable investments in and financial links with (**) Other companies linked to Board Members and General Managers (***) Cash and cash equivalents - - - - - - - 483 - Financial assets measured at fair value through profit or loss - - 229 - - 229 - 2,571 - a) financial assets held for trading - - - - - - - 2,526 - b) financial assets designated at fair value - - - - - - - - - c) other financial assets mandatorily measured at fair value - - 229 - - 229 - 45 - Financial assets measured at fair value through other comprehensive income - - - - - - 19 - - Financial assets pertaining to insurance companies, measured at fair value pursuant to IAS 39 - - - - - - 2 15 - Financial assets measured at amortised cost - 342 328 19 - 689 47 927 2 a) due from banks - - 5 - - 5 - 741 - b) loans to customers - 342 323 19 - 684 47 186 2 Financial assets pertaining to insurance companies measured at amortised cost pursuant to IAS 39 - - - - - - - - - Other assets 20 - 42 - - 62 - 126 - Investments in associates and companies subject to joint control 49 133 1,831 - - 2,013 - - - Financial liabilities measured at amortised cost 17 257 663 28 198 1,163 171 2,908 5 a) due to banks - - 2 - - 2 - 2,719 - b) due to customers 17 257 661 28 198 1,161 171 189 5 Financial liabilities pertaining to insurance companies measured at amortised cost pursuant to IAS 39 - - - - - - - - - Financial liabilities held for trading - - 9 - - 9 - 1,092 - Financial liabilities designated at fair value - - - - - - - - - Financial liabilities pertaining to insurance companies measured at fair value pursuant to IAS 39 - - - - - - - - - Other financial liabilities 3 - 24 22 517 566 13 303 - Guarantees and committments given 37 379 206 7 1 630 15 1,091 - Guarantees and committments received - 10 9 7 - 26 1 10 - (*) As a result of self-regulation, shareholders and their groups that hold a stake in the share capital that exceeds the minimum threshold set out in regulations on the communication of significant shareholdings in listed companies, calculated considering only shares owned or under management, as well as entities jointly controlled by them. (**) As a result of self-regulation, companies that meet the conditions of at least two of these indicators: i) the counterparty holds a stake in Intesa Sanpaolo\u2019s capital with an amount between 1% and the minimum threshold set out in regulations on the communication of significant shareholdings in listed companies; ii) an entity of the ISP Group holds a stake in the counterparty exceeding 10% of the voting rights; iii) significant credit exposure of the Group to the counterparty. The amounts shown largely refer to the companies of the JP Morgan Group. (***) As a result of self-regulation, companies in which management body members of Intesa Sanpaolo or their close family members i) hold executive offices or the office of chair of the management body; ii) hold a qualifying holding equal to or exceeding 10% of the capital or voting rights of that entity, or on which those persons may exercise a significant influence. The caption Investments in associates and companies subject to joint control does not include the subsidiary Obviam AG as it was absorbed by Asteria with accounting effect from 31 December 2022 (it was previously consolidated at equity) For the sake of completeness, the Group\u2019s most significant associates included in the category of related parties in accordance with the version of IAS 24 in effect are: Intrum Italy S.p.A., Penghua Fund Management Co. Ltd, RSCT Fund - Comparto Crediti, Back2Bonis, FI.NAV Comparto A - Crediti, Equiter S.p.A., Cassa di Risparmio di Fermo S.p.A., Camfin S.p.A., Neva First - FCC, Bancomat S.p.A., Alpian S.A., 1875 Finance Holding AG, Digit\u2019ed Holding S.p.A. and Warrant Hub S.p.A. The main joint ventures include: Mir Capital Sca Sicar, PBZ Croatia Osiguranje Public Limited Company for Compulsory Pension Fund Management and Mooney Group S.p.A. B) INFORMATION REGARDING COMPENSATION OF THE MEMBERS OF MANAGEMENT AND CONTROL BODIES AND KEY MANAGERS The following table shows the amounts of the compensation paid in 2022 to the members of the Management and Control Bodies and the General Managers of the subsidiary companies, as well as the compensation paid to other Key Managers of the Parent Company who fall within the notion of \u201crelated party\u201d. This also includes the maximum amounts of the variable portion of remuneration which shall be paid in cash and/or shares of the Parent Company, based on the Group's remuneration and incentive policy, subject to the verification of achievement of the assigned targets and the decisions of the competent bodies of the Parent Company. (millions of euro) MANAGEMENT BODIES/ CONTROL BODIES (1) OTHER MANAGERS (2) TOTAL as at 31.12.2022 Amount due Amount paid Amount due Amount paid Amount due Amount paid Short-term benefits (3) 18 13 63 51 81 64 Post-employment benefits (4) - - 5 5 5 5 Other long-term benefits (5) 1 1 12 1 13 2 Termination benefits (6) - - - - - - Share-based payments (7) - - 25 - 25 - Total 19 14 105 57 124 71 (1) Figures referring to 448 positions. The table does not include approximately 2,1 million euro relating to 82 positions in the Boards of Directors (or similar bodies), as this was fully transferred to other Group Companies. (2) Figures referring to 99 positions. The table does not include approximately 5,1 million euro relating to 13 General Manager positions (or similar positions), as this was fully transferred to other Group Companies (3) Includes fixed and variable remuneration of Directors that may be treated as equivalent to labour cost and social security charges paid by the company for its employees. (4) Includes company contribution to pension funds and provisions for employee termination indemnities pursuant to law and company regulations. (5) Includes an estimate of provisions for employee seniority bonuses. (6) Includes benefits due under the employment contract for termination of employment. (7) Includes the cost referring to the variable portion of short-/long-term remuneration to be paid in Intesa Sanpaolo shares/through POP and PSP Plan. Detailed information on remuneration policies, pursuant to Art. 123-ter of the Consolidated Law on Finance, is published annually in the \u201cReport on remuneration policy and compensation paid\u201d, which includes: \u2212 the details of the remuneration paid to members of management and control bodies, to General Managers, and, in aggregate form, to other Key Managers; \u2212 the details and the progress of the stock option plans for the members of the Management Body, General Managers and other Key Managers; \u2212 the details and the progress of the incentive plans based on financial instruments other than stock options, in favour of the Managing Director and CEO and other Key Managers; \u2212 the details of the monetary incentive plans in favour of the Managing Director and CEO and other Key Managers; \u2212 the shares of the Parent Company and subsidiaries held by the members of the Management and Control bodies, Key Managers and other associated entities. 3. Information on transactions with related parties It is noted that transactions with fully consolidated intragroup related parties are not included in this document because they are netted at consolidated level. For details of the transactions carried out by Intesa Sanpaolo S.p.A., see the information provided in Part H of Parent Company\u2019s Financial Statements. Most significant transactions During the year, the Intesa Sanpaolo Group did not carry out any transactions that qualified as non-ordinary \u201cmost significant transactions\u201d and at non-market or non-standard conditions subject \u2013 in accordance with the Group Procedures regulating the conduct of Transactions with Related Parties of Intesa Sanpaolo S.p.A., Associated Entities of the Group and Relevant Parties pursuant to Art. 136 of the Consolidated Law on Banking \u2013 to the obligation to publish a market disclosure document. Please note that the most significant transactions during the year are those that exceed the threshold of 5% of Own Funds at consolidated level (approximately 2.8 billion) or of the other indicators defined by the Consob regulation. Other significant transactions The transactions undertaken by the Intesa Sanpaolo Group with related parties generally fall within the scope of the Group\u2019s ordinary activities and are generally entered into at market conditions, based on considerations of mutual economic interest, in line with the internal procedures mentioned above. The main less significant transactions concluded during the year by Intesa Sanpaolo Group companies with related parties are reported below. Relations between the Intesa Sanpaolo Group and the board members and general managers, key managers, their close family members and entities they have significant investments in refer to the Group\u2019s normal business activities and are defined applying, where conditions recur, the terms reserved to all employees, in full respect and transparency of terms applied. With regard to the transactions with jointly-controlled subsidiaries or associates, as well as with significant investees due to the presence of important equity and financial ties, mention should be made of: \u2212 the sale, for 23 million euro, by Banca 5 S.p.A. to Mooney Group S.p.A. of the ordinary shares of the electronic money institution Mooney S.p.A. as a result of the contribution of its business line to Mooney S.p.A. and the subsequent signing, with Mooney Group S.p.A., of a commercial agreement; \u2212 the recapitalisation of 10 million euro by Banca 5 S.p.A. in favour of Mooney Group S.p.A., and the revision of the conditions applied to financial instruments in issue for a value of around 262 million euro; \u2212 the signing of a service agreement between Fideuram - Intesa Sanpaolo Private Banking S.p.A. and Alpian S.A. aimed at regulating the conditions for the development and use of the software on an exclusive basis in Italy and Luxembourg. The agreement was signed on 12 May 2022, effective until 2028 and for a maximum value of 5 million euro. This agreement was formalised following the subscription of a direct equity investment of 14.9% by Fideuram - Intesa Sanpaolo Private Banking S.p.A. in the company, which resulted in the Intesa Sanpaolo Group having significant influence over Alpian S.A., taking account of the 12.8% of capital owned by Reyl & CIE S.A. Lastly, we note the credit facilities and extensions of credit lines in favour of VUB Generali Dochodkova Spravcovska Spolocnost A.S. Other significant information With reference to the companies carried at equity, adjustments were recognised in the value of the investments held in Intrum Italy S.p.A., Mir Capital S.C.A. Sicar, Misr Alexandria For Financial Investments Mutual Fund Co. in liquidation, Backtowork24 S.r.l., Gilda S.r.l. and Marketwall S.r.l. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-936": { "value": "
Part I \u2013 Share-based payments
A. QUALITATIVE INFORMATION
Description of share-based payments
Annual incentive plan based on financial instruments
The Supervisory Provisions regarding remuneration and incentive policies and practices in banks and in banking groups,
issued on 30 March 2011 (now integrated in Circular 285 of the Bank of Italy) required, inter alia, that a portion of annual
incentives paid to \u201cRisk Takers\u201d be granted through the assignment of financial instruments, over a multi-year time horizon. As
a result, the Intesa Sanpaolo Group sets up annual incentive plans linked to performance. In fulfilment of these plans:
\u2212 with regard to the results for 2017, and in implementation of the Shareholders' Meeting resolution of 27 April 2018, on 12
September 2018 the Group totally purchased - through Banca IMI
118
, in charge of the programme execution - 12,686,321
Intesa Sanpaolo ordinary shares (representing approximately 0.07% of the ordinary share capital) at an average
purchase price of 2.291 euro per share, for a total value of 29,061,008 euro.
\u2212 with regard to the results for 2018, and in implementation of the Shareholders' Meeting resolution of 30 April 2019, on 17
and 18 September 2019 the Group totally purchased - through Banca IMI
119
, in charge of the programme execution -
17,137,954 Intesa Sanpaolo ordinary shares (representing approximately 0.10% of the ordinary share capital) at an
average purchase price of 2.129 euro per share, for a total value of 36,481,543 euro. In addition, the purchase
programme has been implemented in order to grant severance payments to Risk Takers upon early termination of
employment, as envisaged by the Supervisory Provisions;
\u2212 with regard to the results for 2019, and in implementation of the Shareholders' Meeting resolution of 27 April 2020, on 16,
17 and 18 November 2020 the Group totally purchased - through its IMI Corporate & Investment Banking Division, in
charge of the programme execution - 25,400,000 Intesa Sanpaolo ordinary shares (representing approximately 0.13% of
the share capital of the Parent Company) at an average purchase price of 1.852 euro per share, for a total value of
47,046,279 euro. In addition, the purchase programme has been implemented in service of the 2018-2021 Incentive Plan
for financial advisors of the Fideuram \u2013 Intesa Sanpaolo Private Banking and Sanpaolo Invest networks and to grant
severance payments to Risk Takers upon early termination of employment, as envisaged by the Supervisory Provisions;
\u2212 with regard to the results for 2020, and in implementation of the Shareholders' Meeting resolution of 28 April 2021, on 13
and 14 September 2021 the Group totally purchased - through its IMI Corporate & Investment Banking Division, in
charge of the programme execution - 20,000,000 Intesa Sanpaolo ordinary shares (representing approximately 0.10% of
the share capital of the Parent Company) at an average purchase price of 2.391 euro per share, for a total value of
47,822,401 euro. In addition, the purchase programme has been implemented in service of the former UBI Banca
Group's shared-based payment incentive system for Risk Takers in regard to 2020 and residual shares from the former
UBI Banca Group\u2019s incentive systems for previous years, as well as to grant severance payments to Risk Takers upon
early termination of employment, as envisaged by the Supervisory Provisions;
\u2212 with regard to the results for 2021, and in implementation of the Shareholders\u2019 Meeting resolution of 29 April 2022, from
12 to 14 September 2022 the Group totally purchased \u2013 through its IMI Corporate & Investment Banking Division, in
charge of the programme execution \u2013 46,216,652 Intesa Sanpaolo ordinary shares (representing approximately 0.24% of
the share capital of the Parent Company
120
) at an average purchase price of 1.8932 euro per share, for a total value of
87,496,321.48 euro. In addition, the purchase programme has been implemented in service of the Privredna Banka
Zagreb (PBZ) Group\u2019s shared-based payment incentive system in regard to 2021 and the residual portions in financial
instruments from previous plans, the Long-Term Incentive Plans reserved for the Financial Advisors of the Networks of
the Fideuram - Intesa Sanpaolo Private Banking Group, as well as to grant severance payments upon early termination
of employment.
The above Shareholders' Meetings also authorised the sale on the regulated market of any shares exceeding requirements,
or their retention for any future incentive plans.
The above shares shall be assigned to the beneficiaries in compliance with the implementing regulations set forth in the
above incentive systems. Generally, according to these regulations, the beneficiaries must remain in service up to the time
the shares are actually delivered to them, and the deferred portion (either in cash or in financial instruments) of the incentive
is subject to an ex post correction mechanism \u2013 the \u201cmalus condition\u201d \u2013 according to which the relative amount paid and the
number of shares assigned, if any, may be reduced by the level of achievement, in the year to which the deferred portion
refers, of specific income statement-balance sheet targets which measure the sustainability of the results achieved over time.
Long-Term Incentive Plans 2018-2021: POP and LECOIP 2.0 Plans
At the time of launching the 2018-2021 Business Plan, two long-term incentive plans were launched targeting different
clusters of employees:
\u2212 The Performance-based Option Plan (POP) targeted at the Top Management, Risk Takers and Key Managers, which
ends in March 2023;
\u2212 The LECOIP 2.0 Plan targeted at Managers and the remaining personnel, which ended in March 2022.
With reference to the Top Management, Risk Takers and Key Managers, which have a direct impact on the Group\u2019s results,
an instrument has been adopted that is specifically linked to the achievement of the Business Plan targets and with an
adequate risk/return profile in respect of the role held and the levels of ambition and challenge of the Business Plan.
The POP is based on financial instruments linked to shares (Call Options) and subject to the achievement of the key
performance conditions of the Business Plan as well as subordinated to gateway conditions and individual access
(compliance breach).
The entire amount accrued will be paid in shares over a 3/5-year time horizon (depending on the sub-cluster of the beneficiary
and subject to verification of the malus conditions, defined in a mirrored manner to the gateway conditions, in those years
when they are envisaged).
Furthermore, in June 2018 the Group signed a novation agreement (accollo liberatorio) with JP Morgan. Under the terms of
this agreement, Intesa Sanpaolo transferred to JP Morgan the obligation to deliver to the Intesa Sanpaolo Group employees
any ordinary shares that may be due when the POP Options expire, and JP Morgan thereby took on all the volatility risks
associated with the Plan.
Instead, with reference to the Managers and the remaining personnel, basically in line with the LECOIP 2014-2017, a LECOIP
2.0 retention plan 2018 \u2013 2021 was introduced.
The LECOIP 2.0, aimed at enabling the sharing of the value created over time, at every level of the organization, as a result of
the achievement of the objectives of the Business Plan and fostering the identification (ownership) and the spirit of belonging
to Intesa Sanpaolo Group, is assigned as certificates issued by JP Morgan, i.e. share-based financial instruments. In
particular, the LECOIP 2.0 includes:
\u2212 the assignment, free of charge, to employees, of new Intesa Sanpaolo ordinary shares deriving from a capital increase
without payment (\u201cFree Shares\u201d);
\u2212 the assignment, also free of charge, to employees, of additional new Intesa Sanpaolo ordinary shares deriving from the
same capital increase without payment (\u201cMatching Shares\u201d) and the subscription by employees to new Intesa Sanpaolo
ordinary shares deriving from a capital increase with payment, reserved for employees, through the issue of shares at a
discounted price (\u201cDiscounted Shares\u201d).
The Certificates are divided into two categories, and have different characteristics according to whether they are reserved for
Professionals or for Managers employed by the Group in Italy. The Certificates reflect the terms of certain options that have
Intesa Sanpaolo ordinary shares as their underlying instruments, and will allow employees to receive, at maturity, in the
absence of trigger events, an amount in cash (or in Intesa Sanpaolo ordinary shares) that is equal to the original market value
of the Free Shares and the Matching Shares with regard to Professionals and 75% of this value with regard to Managers, plus
a portion of any appreciation, compared to the original market value, related to the amount of the Free Shares, Matching
Shares and Discounted Shares.
The POP and the LECOIP 2.0 plans were subject to the approval of the ordinary Shareholders\u2019 Meeting of 27 April 2018.
With specific reference to the LECOIP 2.0, the extraordinary session of the Shareholders\u2019 Meeting resolved on granting a
power of attorney to the Board of Directors to increase the share capital pursuant to Article 2443 of the Italian Civil Code,
conducive to the implementation of the LECOIP 2.0. These capital increases were carried out on 11 July 2018, at the same
time as launching the long-term incentive plans 2018-2021.
With regard to the POP Plan, in light of the exogenous and extraordinary events (i.e. the limited dividend distributions in the
European banking sector in the context of the COVID-19 pandemic) and with the aim of neutralising their technical effects on
the functioning mechanism of the POP Plan that undermined its incentivising value, i.e. the realistic possibility for the POP
Plan to be in the money in case the value of the Intesa Sanpaolo share recovers and dividend distributions restart taking
place regularly, the Ordinary Shareholders\u2019 Meeting of 28 April 2021 approved certain amendments.
In particular, the amendments regarded the mechanism for correcting the strike price as a function of the amount of dividends
actually distributed in each year of the plan compared to consensus expectations and the postponement of the averaging
period (i.e., the observation period during which the average price of the ISP shares to be compared with the strike price is
determined), originally set in the time interval 11 March 2021 - 11 March 2022, by one year, with the consequent
postponement of the date of exercise of the POP Options by one year as well.
Both the long-term incentive plans in question (the POP and the LECOIP 2.0) fall within the scope of IFRS 2 and qualify as
equity-settled share-based payment plans.
With reference to the POP, at the assignment date, the fair value of the equity instruments that are subject to the plan was
calculated (represented by the fair value of the options adjusted to consider the availability constraint the shares will be
subject to following the exercise of the options) and then updated following the changes to the Plan. The Plan envisages the
presence of non-market service and performance conditions (the gateway conditions and performance conditions), which
were considered in order to determine the number of shares for the measurement of the cost of the plan. These estimates are
subject to review during the vesting period and until the expiry. The cost of the plan, so defined, is attributed to the income
statement (as labour costs) pro rata temporis along the period of accrual of the benefit, as a balancing entry for a specific
shareholders\u2019 equity reserve. A similar accounting representation for the purposes of IFRS 2 is applied to the Plan
amendments. In particular, the cost of the original plan continues to be recognised over the initial vesting period (i.e., until 11
March 2022), whereas the additional cost of the plan modification is recognised over the new vesting period, i.e. until 10
March 2023. The postponement of the observation period by one year, with the consequent extension of the period of service,
constitutes an increase of the vesting period.
Upon the occurrence of the events that imply the loss of the right to the benefits of the POP (performance conditions, gateway
conditions and the discontinuation of employment) for the employees, Intesa Sanpaolo recognises a financial asset through
shareholders' equity. Upon measurement, subsequent changes in fair value are taken to profit or loss. Concerning the right of
novation \u2013 as this can essentially be considered as the operational method adopted by the Group to fulfil the obligation of
physical delivery of the shares deriving from the Plan \u2013 the accounting representation is that of an equity instrument, with a
balancing entry under shareholders\u2019 equity. In addition, the amendment to the POP Plan also entailed the consequent
amendment to the novation agreement (accollo liberatorio) already signed by the Bank, the beneficiaries and the financial
partner, by virtue of which the latter became responsible for the obligation to deliver the ISP shares underlying the POP
Options to the beneficiaries.
With regard to the LECOIP 2.0 Plan, at the assignment date, the fair value of the equity instruments that are subject to the
plan was calculated (equivalent to the sum of the fair value of the shares assigned free of charge and the fair value of the
discount for the paid shares) and no longer modified. The Plan envisages the presence of non-market service and
performance conditions (trigger events), which were considered in order to determine the number of shares for the
measurement of the cost of the plan. The estimates were subject to review during the vesting period and until the expiry. The
cost of the plan, so defined, was attributed to the income statement (as labour costs) pro rata temporis along the period of
accrual of the benefit, as a balancing entry for a specific shareholders\u2019 equity reserve.
Upon the occurrence of the events that imply the loss of the rights to the benefits of the LECOIP 2.0 Certificates (trigger
events and the discontinuation of employment) for the employees, Intesa Sanpaolo recognised a financial asset (the
\u201ctransferred receivable\u201d representing the Certificates) as a balancing entry in Shareholders' Equity. In particular, the
Certificates entered in the Group\u2019s financial statements have been classified, in accordance with the provisions of IFRS 9,
under caption 20.c) \u201cFinancial assets measured at fair value through profit or loss: Other financial assets mandatorily
measured at fair value\u201d. At the same time, when the estimate made previously had to be adjusted, the cost of the plan was
changed with a corresponding adjustment to Shareholders\u2019 Equity.
Long-Term Incentive Plans 2022-2025: Performance Share Plan and LECOIP 3.0 Plan
At the time of launching the 2022-2025 Business Plan, two new long-term incentive plans were launched targeting different
clusters of employees:
\u2212 Performance Share Plan (PSP) reserved for the Group Management, including the Managing Director and CEO, the
remaining Group Top Risk Takers and other Group Risk Takers (in Italy and abroad);
\u2212 LECOIP 3.0 Plan reserved for all the Professionals employed by the Group in Italy.
With regard to Management, Intesa Sanpaolo has adopted a plan specifically linked to the achievement of the Business Plan
targets and with an adequate risk/return profile in respect of the role held and the levels of ambition and challenge of the
Business Plan, and which envisages the adoption of Performance Shares as a financial instrument.
In detail, the Performance Share Plan provides for the assignment of new Intesa Sanpaolo ordinary shares deriving from a
capital increase without payment, upon achievement of key performance conditions of the Business Plan, subject to the
application of de-multipliers based on sustainability targets, as well as subordinated to gateway conditions and individual
access (compliance breach).
Any shares accrued will be paid out over a 4/5-year time horizon according to payout schedules established depending on the
sub-cluster of the beneficiary, the amount of the total variable remuneration, and its weight compared to the fixed
remuneration. The deferred portions are also subject to the verification of malus conditions, defined in a mirrored manner to
the gateway conditions.
For Professionals, basically in line with the LECOIP 2.0 Plan, a retention plan called \u201cLECOIP 3.0\u201d has been structured with
the aim of continuing the work of strengthening the personnel\u2019s identity and sense of belonging, consistently with the Group's
inclusive organisational culture.
The LECOIP 3.0 Plan is assigned as certificates issued by JP Morgan, i.e. share-based financial instruments, and envisages:
\u2212 the assignment of newly issued ordinary shares of Intesa Sanpaolo deriving from a share capital increase without
payment (Free Shares) for an amount equivalent to the Variable Result Bonus advance for 2022 (employees may opt to
receive the advance in cash and, therefore, not to participate in LECOIP 3.0);
\u2212 the assignment, free of charge, of additional shares in exchange for the same share capital increase without payment
(Matching Shares) based on the role held and seniority, and the subscription, in set proportions with respect to the free
shares received, of newly issued ordinary Intesa Sanpaolo shares deriving from a share capital increase with payment
reserved for employees, at a discounted issue price (Discounted Shares) against market value.
The Certificates reflect the terms of certain options that have Intesa Sanpaolo ordinary shares as their underlying instruments,
and will allow employees to receive, at maturity, in the absence of trigger events, an amount in cash (or in Intesa Sanpaolo
ordinary shares) that is equal to the original market value of the Free Shares and the Matching Shares, plus a portion of any
appreciation, compared to the original market value, related to the amount of the Free Shares, Matching Shares and
Discounted Shares.
In residual cases, the amount will be paid according to specific payout schedules that provide for deferral and payment of part
of the bonus in financial instruments. These schedules are differentiated according to the cluster the beneficiaries belong to
when the bonus is accrued, as well as the amount of the total variable remuneration, and its weight compared to the fixed
remuneration.
The Performance Share Plan and the LECOIP 3.0 Plan were subject to the approval of the ordinary Shareholders\u2019 Meeting of
29 April 2022.
The extraordinary session of the Shareholders\u2019 Meeting resolved on granting a power of attorney to the Board of Directors to
increase the share capital pursuant to Article 2443 of the Italian Civil Code, conducive to the implementation of the plans.
On 21 June 2022, ISP\u2019s Board of Directors exercised the authority granted to it by the Shareholders\u2019 Meeting for capital
increases in favour of the Group\u2019s employees to service the implementation of the 2022-2025 LECOIP 3.0 Plan.
Both the long-term incentive plans in question (the Performance Share Plan and the LECOIP 3.0) fall within the scope of IFRS
2 and qualify as equity-settled share-based payment plans.
For the Performance Share Plan, the fair value of the equity instruments that are subject to the plan is calculated at the
assignment date. The Plan envisages the presence of service and performance conditions, which must be considered in order
to determine the number of shares for the measurement of the cost of the plan. These estimates will be subject to review
during the accrual period and until the expiry. Additionally, the determination of the fair value of the plan needs to take into
account the presence of \u201cmarket\u201d performance conditions.
The cost of the plan, so defined, is attributed to the income statement (as labour costs) pro rata temporis along the accrual
period of the benefit, as a balancing entry for a specific shareholders\u2019 equity reserve. Upon the occurrence of the events that
imply the loss of the rights to the benefits of the plan (performance targets, gateway conditions and the discontinuation of
employment) for the employees, if the estimate made previously needs to be adjusted, ISP changes the cost of the plan with
a corresponding adjustment to Shareholders\u2019 Equity.
With regard to the LECOIP 3.0 Plan, at the assignment date, the fair value of the equity instruments that are subject to the
plan is calculated (equivalent to the sum of the fair value of the shares assigned free of charge and the fair value of the
discount for the paid shares) and no longer modified.
The Plan envisages the presence of non-market service and performance conditions (trigger events), which must be
considered in order to determine the number of shares for the measurement of the cost of the plan. These estimates will be
subject to review during the vesting period and until the expiry. The cost of the Plan, so defined, is attributed to the income
statement (as labour costs) pro rata temporis along the period of accrual of the benefit, as a balancing entry for a specific
shareholders\u2019 equity reserve.
Upon the occurrence of the events that imply the loss of the rights to the benefits of the LECOIP 3.0 Certificate (trigger events
and the discontinuation of employment) for the employees, Intesa Sanpaolo recognises a financial asset (the \u201ctransferred
receivable\u201d representing the Certificates) as a balancing entry in Shareholders' Equity. In particular, the Certificates entered in
the Group\u2019s financial statements are classified, in accordance with the provisions of IFRS 9, under caption 20.c) \u201cFinancial
assets measured at fair value through profit or loss: Other financial assets mandatorily measured at fair value\u201d. At the same
time, if the estimate made previously needs to be adjusted, the cost of the plan is changed with a corresponding adjustment to
Shareholders\u2019 Equity.
B. QUANTITATIVE INFORMATION
Evolution of the annual incentive plans based on financial instruments in 2022
Number
of shares
Average
strike price
(euro)
Residual life
Financial instruments outstanding as at 31 December 2021
22,529,826
-
2022/2026
Financial instruments granted during the year (a)
29,523,155
-
2022/2027
Financial instruments no longer assignable (b)
154,176
-
Financial instruments vested during the year and assigned
24,615,984
-
Financial instruments outstanding as at 31 December 2022
27,282,821
-
2023/2027
of which: vested and assigned as at 31 December 2022
-
-
(a) Including the shares deriving from corporate transactions.
(b) Shares no longer deliverable to the beneficiaries following the related employment agreement ceasing and/or due to the application of the so-called malus
conditions.
In addition to the shares specified above, in accordance with the Provisions of the Bank of Italy regarding remuneration and
the Remuneration and Incentive Policies of the Group, during 2022, 512,540 shares were assigned with reference to
remuneration granted in the event of early termination (severance). The residual life of those shares, assigned over a multi-
year time horizon, ends between November 2022 and October 2026.
Breakdown by residual life Residual life (a) Number of shares 2023 6,046,025 2024 9,834,313 2025 5,920,481 2026 3,845,713 2027 1,636,289 (a) End of retention period Evolution of long-term share-based instruments: POP, LECOIP 2.0, Performance Share Plan (PSP) and LECOIP 3.0 Performance-based Option Plan (POP) POP options at July 2018 (a) POP options at 31.12.2021 POP options at 31 December 2022 Number of POP options Average unit fair value Number of POP options Average unit fair value of which: POP Options restructured as at 07.06.2021 Number of POP options - changes in the year (b) Number of POP options Average unit fair value of which: POP Options restructured as at 07.06.2021 Number of POP options Average unit fair value Number of POP options Average unit fair value Total beneficiaries (Top Management, Risk Takers and Key Managers) 517,066,285 0.3098 477,580,743 - 370,862,202 0.0819 -39,407 370,822,795 - 370,822,795 - (a) Number of POP Options and the average fair value assigned to the beneficiaries (Top Management, Risk Takers and Key Managers) on 11 July 2018. (b) Number of restructured POP Options, which provide for Intesa Sanpaolo to takeover the rights that would have been awarded to the employees, in the event they fail to meet the condition of continuation of employment and other vesting conditions. LECOIP PLAN 2.0 Free Shares at July 2018 Matching Shares at July 2018 Discounted Shares at July 2018 Sell to cover shares at July 2018 (a) Total number of shares assigned at July 2018 Number of LECOIP Certificates at 31.12.2021 Changes in the year (c) Number of LECOIP Certificates at 31.12.2022 Average fair value 31.12.2022 Number of shares Average unit fair value Number of shares Average unit fair value Number of shares Average unit fair value (b) Number of shares Average unit fair value (b) Total employees 25,147,152 2.4750 47,411,243 2.4750 507,908,765 0.3771 96,595,275 2.5416 677,062,435 67,626,889 -2,931,290 - - (a) Assigned shares allocated to cover the payment relating to the employee's tax burden. (b) Fair value of the subscription discount. (c) Number of Certificates for which Intesa Sanpaolo shall take over the rights that would have been recognised to the employees by virtue of the Certificates due to failure to comply with the condition of continuation of employment for the duration of the Plan and other vesting conditions. PERFORMANCE SHARE PLAN (PSP) Number of Performance Share at June 2022 (a) Changes in the year (b) Number of Performance Share at 31.12.2022 Fair value 31.12.2022 Total beneficiaries (all the Management, including the Managing Director and CEO, the other Group Top Risk Takers and the remaining Group Risk Takers \u2013 both Italian and foreign perimeter) 150,774,451 -1,552,971 149,221,480 0.9979 (a) Number of Performance Share assigned to the beneficiaries (all the Management, including the Managing Director and CEO, the other Group Top Risk Takers and the remaining Group Risk Takers \u2013 both Italian and foreign perimeter) on 30 June 2022. (b) Number of Performance Shares that will not be recognized to employees in the event they fail to meet the condition of continuation of employment or other vesting conditions. LECOIP PLAN 3.0 Free Shares at June 2022 Matching Shares at June 2022 Discounted Shares at June 2022 Sell to cover shares at June 2022 (a) Total number of shares assigned at June 2022 Number of LECOIP Certificates at June 2022 Changes in the year (c) Number of LECOIP Certificates at 31.12.2022 Average fair value 31.12.2022 Number of shares Average unit fair value Number of shares Average unit fair value Number of shares Average unit fair value (b) Number of shares Average unit fair value (b) Total employees 33,745,462 1.7800 39,591,828 1.7800 386,972,658 0.3409 86,662,710 1.7800 546,972,658 73,337,290 -536,380 72,800,910 3.6670 (a) Assigned shares allocated to cover the payment relating to the employee's tax burden. (b) Fair value of the subscription discount. (c) Number of Certificates for which Intesa Sanpaolo shall take over the rights that would have been recognised to the employees by virtue of the Certificates due to failure to comply with the condition of continuation of employment for the duration of the Plan and other vesting conditions. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:2W8N8UU78PMDQKZENC08", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-937": { "value": "
Part L \u2013 Segment reporting
Breakdown by business area: income statement figures
(a)
(millions of euro)
Banca
dei
Territori
IMI Corporate
& Investment
Banking
International
Subsidiary
Banks
Private
Banking
Asset
Management
Insurance
Corporate
Centre
(b)
Total
Net interest income
3,957
2,132
1,592
419
-
-
1,400
9,500
Net fee and commission income
4,744
1,156
574
1,980
913
3
-451
8,919
Income from insurance business
-
-
-
-
-
1,616
89
1,705
Profits (Losses) on financial assets and
liabilities designated at fair value
120
1,047
129
60
-21
-
43
1,378
Other operating income (expenses)
-8
-2
-68
16
70
-12
-28
-32
Operating income
8,813
4,333
2,227
2,475
962
1,607
1,053
21,470
Personnel expenses
-3,430
-528
-573
-486
-110
-148
-1,467
-6,742
Other administrative expenses
-2,964
-870
-431
-354
-106
-217
2,030
-2,912
Adjustments to property, equipment and
intangible assets
-3
-20
-114
-81
-6
-20
-1,036
-1,280
Operating costs
-6,397
-1,418
-1,118
-921
-222
-385
-473
-10,934
Operating margin
2,416
2,915
1,109
1,554
740
1,222
580
10,536
Net adjustments to loans
-1,238
-1,564
-345
-12
-
-
46
-3,113
Other net provisions and net impairment
losses on other assets
-68
-131
-20
13
-
90
-165
-281
Other income (expenses)
11
-
35
-
-
8
148
202
Income (Loss) from discontinued operations
-
-
-
-
-
-
-
-
Gross income (loss)
1,121
1,220
779
1,555
740
1,320
609
7,344
Taxes on income
-375
-519
-191
-444
-184
-347
1
-2,059
Charges (net of tax) for integration and exit
incentives
-42
-21
-44
-37
-1
-14
19
-140
Effect of purchase price allocation (net of tax)
-32
-
-
-21
-4
-65
-89
-211
Levies and other charges concerning the
banking industry (net of tax)
-214
-
-40
-21
-
-
-301
-576
Impairment (net of tax) of goodwill and other
intangible assets
-
-
-
-
-
-
-
-
Minority interests
13
1
-
2
-1
-24
5
-4
Net income (loss) 2022
471
681
504
1,034
550
870
244
4,354
Net income (loss) 2021
316
2,247
463
1,076
787
712
-1,416
4,185
(a) Figures from the reclassified financial statements as described in the Report on operations.
(b) The Corporate Centre has been attributed the intersector netting.
In application of IFRS 15, in particular paragraphs 114 and 115, which require a breakdown of revenues from contracts with
customers, the breakdown of fee and commission income and expense by business area is provided below.
(millions of euro)
Captions (a)
Banca
dei
Territori
IMI
Corporate &
Investment
Banking
International
Subsidiary
Banks
Private
Banking
Asset
Management
Insurance
Corporate
Centre
(b)
Total
Guarantees given
97
326
45
2
-
-
2
472
Collection and payment services
438
125
197
6
-
-
1
767
Current accounts
1,198
33
145
10
-
-
-
1,386
Credit and debit cards
587
4
263
17
-
-
-
871
Commercial banking activities
2,320
488
650
35
-
-
3
3,496
Dealing and placement of securities
1,233
220
18
275
337
-
-1,083
1,000
Currency dealing
5
2
4
3
-
-
2
16
Portfolio management
100
2
27
1,883
1,914
-
-271
3,655
Distribution of insurance products
877
-
32
678
-
3
-3
1,587
Other
218
31
11
188
-
-
-13
435
Management, dealing and
consultancy activities
2,433
255
92
3,027
2,251
3
-1,368
6,693
Other net fee and commission income
328
597
92
25
181
-
42
1,265
Fee and commission income
5,081
1,340
834
3,087
2,432
3
-1,323
11,454
Fee and commission expense
-337
-184
-260
-1,107
-1,519
-
872
-2,535
Net fee and commission
income 2022
4,744
1,156
574
1,980
913
3
-451
8,919
Net fee and commission
income 2021
(redetermined figures)
4,809
1,135
546
2,096
1,282
2
-343
9,527
(a) Figures from the reclassified financial statements as described in the Report on operations.
(b) The Corporate Centre has been attributed the intersector netting.
Breakdown by business area: balance sheet figures
(a)
(millions of euro)
Banca
dei
Territori
IMI Corporate
& Investment
Banking
International
Subsidiary
Banks
Private
Banking
Asset
Management
Insurance
Corporate
Centre
(b)
Total
Loans to customers
31.12.2022
247,522
132,927
40,212
15,104
282
-
10,807
446,854
31.12.2021
250,592
152,543
38,970
14,450
783
-
8,533
465,871
Direct deposits from banking business
31.12.2022
291,089
94,785
54,364
50,447
26
-
54,675
545,386
31.12.2021
291,697
94,844
51,504
55,895
21
-
63,287
557,248
(a) Figures from the reclassified financial statements as described in the Report on operations.
(b) The Corporate Centre has been attributed the intersector netting.
Breakdown by geographical area: income statement figures
(a)
(millions of euro)
Italy
Europe
Rest of
the world
Total
Net interest income
7,013
1,806
681
9,500
Net fee and commission income
7,154
1,576
189
8,919
Income from insurance business
1,408
297
-
1,705
Profits (Losses) on financial assets and liabilities designated
at fair value
1,233
139
6
1,378
Other operating income (expenses)
-92
1
59
-32
Operating income
16,716
3,819
935
21,470
Personnel expenses
-5,848
-720
-174
-6,742
Other administrative expenses
-2,347
-466
-99
-2,912
Adjustments to property, equipment and intangible assets
-1,111
-138
-31
-1,280
Operating costs
-9,306
-1,324
-304
-10,934
Operating margin
7,410
2,495
631
10,536
Net adjustments to loans
-1,936
-1,097
-80
-3,113
Other net provisions and net impairment losses on other assets
-170
-118
7
-281
Other income (expenses)
173
30
-1
202
Income (Loss) from discontinued operations
-
-
-
-
Gross income (loss)
5,477
1,310
557
7,344
Taxes on income
-1,599
-338
-122
-2,059
Charges (net of tax) for integration and exit incentives
-88
-52
-
-140
Effect of purchase price allocation (net of tax)
-213
2
-
-211
Levies and other charges concerning the banking industry
(net of tax)
-508
-68
-
-576
Impairment (net of tax) of goodwill and other intangible assets
-
-
-
-
Minority interests
23
-1
-26
-4
Net income (loss) 2022
3,092
853
409
4,354
Net income (loss) 2021
2,023
1,714
448
4,185
(a) Figures from the reclassified financial statements, as described in the Report on operations.
Breakdown by geographical area is carried out with reference to the location of Group entities.
The International Branches are reported with reference to the country where the branches are located. As far as taxes on
income are concerned, since Intesa Sanpaolo did not apply the option for the scheme of income exemption for international
branches (known as Branch exemption), these branches\u2019 income is also taxed in Italy.
In application of IFRS 15, in particular paragraphs 114 and 115, which require a breakdown of revenues from contracts with
customers, the breakdown of fee and commission income and expense by geographical area is provided below.
(millions of euro)
Italy
Europe
Rest of
the world
Total
Fee and commission income
2022
11,329
3,088
237
14,654
2021 (Redetermined figures)
12,154
3,422
222
15,798
Fee and commission expense
2022
-4,175
-1,512
-48
-5,735
2021 (Redetermined figures)
-4,410
-1,817
-44
-6,271
(a) Figures from the reclassified financial statements, as described in the Report on operations.
Breakdown by geographical area: balance sheet figures
(a)
(millions of euro)
Italy
Europe
Rest of
the world
Total
Loans to customers
31.12.2022
365,428
63,173
18,253
446,854
31.12.2021
383,765
62,328
19,778
465,871
Direct deposits from banking business
31.12.2022
466,841
71,010
7,535
545,386
31.12.2021
480,993
68,136
8,119
557,248
Breakdown by geographical area is carried out with reference to the location of Group entities.
(a) Figures from the reclassified financial statements, as described in the Report on operations.
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