Annual Report 2010 - ProCredit Bank

Annual Report 2010

2
Annual Report 2010
Key Figures
EUR ’000 Change
2010 2009
Balance Sheet Data
Total Assets 229,713 259,274 -11.4%
Gross Loan Portfolio 178,667 180,914 -1.2%
Business Loan Portfolio 127,844 133,163 -4.0%
EUR < 10,000 41,341 55,102 -25.0%
EUR > 10,000 < 30,000 26,513 28,936 -8.4%
EUR > 30,000 < 150,000 33,427 29,903 11.8%
EUR > 150,000 26,563 19,222 38.2%
Agricultural Loan Portfolio 43,810 36,997 18.4%
Housing Improvement Loan Portfolio 4,035 6,633 -39.2%
Other 2,978 4,121 -27.7%
Allowance for Impairment on Loans 8,141 6,490 25.4%
Net Loan Portfolio 170,526 174,424 -2.2%
Liabilities to Customers
Liabilities to Banks and Financial Institutions
144,049 133,564 7.9%
(excluding PCH) 52,927 94,337 -43.9%
Total Equity 22,852 21,159 8.0%
Income Statement
Operating Income 21,162 18,610 13.7%
Operating Expenses 24,693 25,246 -2.2%
Operating Profit Before Tax -3,531 -6,636 -46.8%
Net Profit -3,162 -5,193 -39.1%
Key Ratios
Cost/Income Ratio 95.10% 111.50%
ROE -14.37% -22.60%
Capital Ratio 14.12% 13.40%
Operational Statistics
Number of Loans Outstanding 28,900 35,533 -18.7%
Number of Loans Disbursed within the Year
Number of Business and Agricultural
10,545 12,608 -16.4%
Loans Outstanding 25,257 30,132 -16.2%
Number of Deposit Accounts 118,147 136,576 -13.5%
Number of Staff 830 1,006 -17.5%
Number of Branches and Outlets 37 43 -14.0%

Contents 3
Mission Statement 4
Letter from the Board of Administrators 5
The Bank and its Shareholders 6
Special Feature 10
Management Business Review 12
Risk Management 22
Branch Network 28
Organisation, Staff and Staff Development 30
Business Ethics and Environmental Standards 32
The ProCredit Group: Responsible Neighbourhood Banks for Small Businesses and Ordinary People 34
ProCredit in Eastern Europe 38
Our Clients 42
Financial Statements 46
Contact Addresses 76

4
Annual Report 2010
Mission Statement
ProCredit Bank Romania is a development-oriented full-service bank. We offer
excellent customer service and a wide range of banking products. In our credit
operations, we focus on lending to very small, small and medium-sized enterprises, as
we are convinced that these businesses create the largest number of jobs and make
a vital contribution to the economies in which they operate.
Unlike other banks, our bank does not promote consumer loans. Instead we focus on
responsible banking, by building a savings culture and long-term partnerships with our
customers.
Our shareholders expect a sustainable return on investment, but are not primarily
interested in short-term profit maximisation. We invest extensively in the training of our
staff in order to create an enjoyable and efficient working atmosphere, and to provide
the friendliest and most competent service possible for our customers.

Letter from the Board of Administrators
In 2010 Romania faced the difficult task of reconciling short-term fiscal consolidation with the need to mitigate
the social costs of the economic crisis and restore the sources of sustainable and equitable growth. To
this end, the government moved to contain the impact of the crisis and revive the structural reform agenda
that had faltered since the country’s accession to the EU in 2007. The crisis also forced the state to implement
fiscal adjustment measures and re-evaluate its policies, including its public sector wage expenditures.
To achieve the 2010 target of keeping the fiscal deficit at or below 6.8% of GDP, the government passed a
far-reaching austerity package that decreased public sector wages by 25%, increased VAT to 24%, and reduced
social assistance programmes (including goods and services). It remains to be seen whether and to
what extent the reforms – which have been supported by the IMF and EU – will indeed help to stabilise the
internal economic situation and thus create a healthy basis for Romania’s future development.
In the banking sector, the quality of the loan portfolio further deteriorated in 2010 for a multitude of reasons:
the increasing unemployment rate, the stagnation of real wages and the lay-off of many public and
private sector employees. In addition, lending activities remained weak this year and currency substitution
continued (loans in Romania are denominated increasingly in EUR). However, some sectors reported
growth – albeit moderate – in economic activity. Despite this progress, we expect the overall trend in
lending to remain reserved throughout 2011.
In line with its business strategy of being the house bank for small businesses, ProCredit Bank supported
its clients throughout this difficult year. In 2010, it put significant effort into adjusting its institutional
structures to better serve its core client groups of urban and rural small enterprises and private individuals.
Among other measures, the acquisition process was reviewed and modified to enhance the efficiency
of our client approach, and, in keeping with the ProCredit Group’s overall strategy of building stronger
relationships with enterprise clients, in November 2010 the bank opened its first business centre in Bucharest.
More of these specialised branches, which cater to the needs of small businesses, are scheduled
to follow in 2011. In addition, the bank not only increased its loan portfolio, but during the last quarter of
2010 also maintained the portfolio’s relatively high quality despite the difficult economic environment.
However, working with clients who were not able to service their loans in time continued to be a central
issue for the institution throughout 2010, and management consequently made recovery and restructuring
top priorities.
In order to strengthen ProCredit Bank Romania’s capital base and to underscore their strong commitment
to the institution, the bank’s shareholders increased its equity by EUR 5 million to EUR 32.6 million, bringing
the capital adequacy ratio at year-end to a comfortable 16.6% (14.1% according to statutory reporting
standards).
2010 was another year of great challenges and intensive learning for ProCredit Bank Romania. The ability
of our staff and management team to cope with the quickly changing environment, to take sound decisions
under difficult conditions, and to communicate openly and honestly with clients, business partners
and the general public at all times made us an even stronger institution than we were before. Thus, on
behalf of the entire Board, I would like to extend my sincere thanks to our very dedicated staff and management
team.
Anja Lepp
Chairperson of the Board of Administrators
Letter from the Board of Administrators 5
Members of the
Board of Administrators
as of December 31, 2010:
Anja Lepp
Hanns Martin Hagen
Roger Bardo Rihmland
Dietrich Ohse
Ivaylo Iliev Blagoev
Bank’s Managers
as of December 31, 2010:
Ilinca Rosetti
(General Manager)
Heribert Kailbach
(Deputy General Manager)

6
Annual Report 2010
The Bank and its Shareholders
ProCredit Bank Romania is a member of the
ProCredit group, which is led by its Frankfurtbased
parent company, ProCredit Holding.
ProCredit Holding is the majority owner of
ProCredit Bank Romania and holds 32.2% of
the shares.
ProCredit Bank Romania was founded in May
2002 as Banca de Microfinantare MIRO SA by an
alliance of international development-oriented
investors, many of which are shareholders in
ProCredit Holding today. Their goal was to establish
a new kind of financial institution that
would meet the demand of small and very small
businesses in a socially responsible way. The
primary aim was not short-term profit maximi-
Shareholder
(as of Dec. 31, 2010)
ProCredit Holding
Commerzbank
EBRD
KfW
IFC
IPC
Total Capital
Sector
Investment
Banking
Banking
Banking
Banking
Consulting
ProCredit Holding is the parent
company of a global
group of 21 ProCredit banks. ProCredit Holding
was founded as Internationale Micro Investitionen
AG (IMI) in 1998 by the pioneering development
finance consultancy company IPC.
ProCredit Holding is committed to expanding access
to financial services in developing countries
and transition economies by building a group of
banks that are the leading providers of fair, transparent
financial services for very small, small and
medium-sized businesses as well as the general
population in their countries of operation. In addition
to meeting the equity needs of its subsidiaries,
ProCredit Holding guides the development
of the ProCredit banks and supports the banks in
all key areas of activity, including banking operations,
human resources and risk management. It
ensures that ProCredit corporate values, international
best practice procedures and Basel II risk
management principles are implemented groupwide
in line with standards also set by the German
supervisory authorities.
sation but rather to deepen the financial sector
and contribute to long-term economic development
while also achieving a sustainable return
on investment.
Over the years, ProCredit Holding has consolidated
the ownership and management structure
of all the ProCredit banks to create a truly global
group with a clear shareholder structure and to
bring to each ProCredit institution all the best
practice standards, synergies and benefits that
this implies.
Today’s shareholder structure of ProCredit Bank
Romania is outlined below. Its current share capital
is EUR 32.3 million.
Headquarters
Germany
Germany
UK
Germany
USA
Germany
Share
32.22%
21.03%
16.53%
13.21%
12.06%
4.96%
100%
Paid-in Capital
(in EUR)
10,393,258
6,783,102
5,331,442
4,260,983
3,889,388
1,600,028
32,258,201
IPC is the leading shareholder and strategic investor
in ProCredit Holding. IPC has been the driving
entrepreneurial force behind the ProCredit group
since the foundation of the banks.
ProCredit Holding is a public-private partnership.
In addition to IPC and IPC Invest (the investment
vehicle of the staff of IPC and ProCredit), the other
private shareholders of ProCredit Holding include
the Dutch DOEN Foundation, the US pension fund
TIAA-CREF, the US Omidyar-Tufts Microfinance
Fund and the Swiss investment fund responsAbility.
The public shareholders of ProCredit Holding
include KfW (the German promotional bank), IFC
(the private sector arm of the World Bank), FMO
(the Dutch development bank), BIO (the Belgian
Investment Company for Developing Countries)
and Proparco (the French Investment and Promotions
company for Economic Cooperation).
ProCredit Holding has an investment grade rating
(BBB-) from Fitch Ratings Agency. As of the end
of 2010, the equity base of the ProCredit group is
EUR 428 million. The total assets of the ProCredit
group are EUR 5.2 billion.

Commerzbank is
Germany’s leading bank for private and corporate
customers. Following the merger of Dresdner
Bank and Commerzbank in May 2009, its customers
will in future have access to around 1,200
branches, the largest branch network of any German
private bank. Commerzbank has approximately
15 million private and corporate customers
worldwide, who can now enjoy a broad and
attractive range of Commerzbank products and
advisory services.
Commerzbank is a strong and reliable partner
for corporate customers, particularly export-dependent
small and medium-sized firms (SMEs).
It also manages major corporate customers and
institutions in Europe as well as multinational
enterprises. In addition, Commerzbank is a
leading export financier, supporting its customers
in Germany and around the world.
Commerzbank AG is the parent company of a
global financial services group. The group’s op-
The Bank and its Shareholders 7
erating business is organised into six segments
providing each other with mutually beneficial
synergies: Private Customers, Mittelstandsbank
(SME bank), Central & Eastern Europe, Corporates
& Markets, Asset Based Finance and Portfolio
Restructuring Unit.
Today some 30% of German foreign trade is
channelled through the new Commerzbank, the
leading export financier for the German industry.
The bank is directly represented in more than 50
countries as well as through a network of more
than 6,000 banking relationships worldwide.
Commerzbank is well positioned in Central and
Eastern Europe, serving more than 4 million
customers in the region. In Poland the bank
holds a 70% stake in BRE Bank, Poland’s thirdlargest
financial institution. In Ukraine it is the
majority shareholder of Bank Forum – a universal
bank with a nationwide network. Currently
Commerzbank operates in more than ten countries
in the region.

8
Annual Report 2010
The European Bank for Reconstruction
and Development
(EBRD) was established in 1991.
It aims to foster the transition towards open,
market-oriented economies and to promote private
and entrepreneurial initiative in countries
from Central Europe to Central Asia that are committed
to democracy, pluralism and market economics.
The EBRD seeks to help its countries of
operations to implement structural and sectoral
economic reforms, promoting competition, privatization
and entrepreneurship.
In fulfilling its role as a catalyst of change, the
Bank encourages co-financing and foreign direct
investment from the private and public sectors,
helps to mobilise domestic capital, and provides
technical cooperation in relevant areas.
KfW Entwicklungsbank (KfW Development
Bank): On behalf of the
German Federal Government, KfW Entwicklungsbank
finances investments and accompanying
advisory services in developing and transition
countries. Its aim is to build up and expand the
social and economic infrastructure of the respective
countries, and to advance sound financial
systems while protecting resources and ensuring
a healthy environment.
KfW Entwicklungsbank is a leader in supporting
responsible and sustainable microfinance and is
involved in target group-oriented financial institutions
around the world. It is part of KfW, which has a
balance sheet total of EUR 442 billion (as of December
31, 2010). KfW is one of the five biggest banks in
Germany and is AAA-rated by Moody’s, Standard &
Poor’s and Fitch Ratings.
IFC, a member of the
World Bank Group, is
the largest global development institution focused
on the private sector in developing countries. We
create opportunity for people to escape poverty and
improve their lives. We do so by providing financing
to help businesses employ more people and supply
essential services, by mobilizing capital from others,
and by delivering advisory services to ensure
sustainable development. In a time of global economic
uncertainty, our new investments climbed to
a record $18 billion in fiscal 2010. For more information,
visit www.ifc.org.
IPC – Internationale Projekt
Consult GmbH, a Frankfurtbased
company, was founded in 1981. Since then,
IPC has provided sound consulting and management
services for meaningful development projects.
The company has been particularly successful in its
activities in the financial sector, a field in which IPC
has been involved since 1984. IPC advises banks
in developing countries and transition economies
on how to build their capacity to provide financial
services to very small, small and medium-sized enterprises.
For more than two decades, IPC has set
new standards in the establishment of target grouporiented
financial institutions. It founded ProCredit
Holding, and remains that company’s leading shareholder
and strategic investor. From the very beginning,
IPC has been the driving entrepreneurial force
behind the ProCredit group. Moreover, by providing
advisory assistance to the ProCredit banks in the
first few years of their operations, it has helped the
group to build sound and stable financial institutions
in countries around the world. IPC’s advisory
services for the ProCredit banks cover management
consulting, institution building, branch network
expansion, and staff training. Recently it also began
supporting them in a new area: the development
and introduction of credit products for private
households and SMEs to finance energy-efficiency
measures and the use of renewable energy technologies.
In addition, IPC helps the banks to improve
their own environmental performance.

The Bank and its Shareholders 9

10
Annual Report 2010
Special Feature
Tailored services for SMEs in the Romanian economic environment
In the second year of the financial crisis, Romanian
companies have been finding it increasingly
difficult to operate. Facing dramatic drops in liquidity
and profits as well as a stringent need
to cut costs, many entrepreneurs have reduced
spending and some have even stopped investing
in their businesses altogether. To help them
overcome these difficulties, ProCredit Bank introduced
a new programme to support small and medium-sized
enterprises in 2010. This move served
to reinforce our commitment to this key sector and
provided opportunities for companies in Romania
at a time when they most needed them.
Despite the country’s dire economic situation,
ProCredit Bank believed it was possible to help
stimulate development and growth in the SME
sector. Therefore, we sought ways to better respond
to the needs of entrepreneurs, launching
several campaigns throughout the year to facilitate
access to our financing and banking services.
From March to September 2010, we reduced the
costs of the banking services currently used by
entrepreneurs, helping companies to boost their
efficiency and focus more on their core business.
With other financial institutions reluctant to lend
in the wake of the crisis, ProCredit Bank felt that it
should continue to support companies. We therefore
reduced our analysis fees for investments
and working capital loans and helped entrepreneurs
to put together solid business plans to restart
their operations.
The agricultural sector, which we have supported
for years, was severely hit by the crisis. In response,
starting in June 2010 we waived fees for
agricultural investment loans for five months.
With the support of experienced client advisers,
who provided assistance in developing a solid
business strategy, agricultural clients submitted
a total of 7,534 loan applications and ProCredit
disbursed EUR 33.9 million in 2010.
To address the toughening market conditions for
small and medium-sized companies, in October
we launched a campaign offering new solutions,
including loan refinancing measures that helped

entrepreneurs to better manage their liquidity by
consolidating their repayments into one monthly
instalment. Longer maturity periods also granted
SMEs greater access to additional funds for investments
and working capital, and inspired them
to start thinking about growth once again.
Throughout 2010, we remained true to our mission
of being the “house bank” for SMEs, offering
complete services adapted to the characteristics
of each business and to the rather unstable market
conditions. In our lending activities we will
continue to focus on small and medium-sized
companies, as the good results we have achieved
so far validate our strategy. Bearing in mind the
lessons of recent years, we are confident that
we will continue to have a positive impact on the
small and medium-sized enterprise sector.
Special Feature 11

12
Annual Report 2010
Management Business Review
Management
from left to right:
Cristina Sindile
Credit Risk Division Director
Andreea Elena Enache
Business Clients Division Director
Marius Sindile
Finance Division Director
Dana Enache
Operations Support Division Director
Heribert Kailbach
Deputy General Manager
Anca Grigorescu
Internal Services Division Director
Ilinca Rosetti
General Manager
Andreea Florescu
Private Individuals and Banking Services Operations Division
Cosmin Ciobanu
Risk Division Director

Political and Economic Environment
In 2010, the Romanian economy remained hampered
by the downturn that started in October
2008, albeit less severely. GDP still fell by 1.2%,
but this was a considerable improvement over
2009’s 7.1% decrease. Some economic sectors
continued to decline sharply, such as construction
(-7%) and agriculture (-1%). The country’s
slightly better economic performance in 2010
was mainly due to industrial sector output, which
managed to achieve an increase of 5.8%. However,
the deep recession, paired with austerity
measures, stalled recovery. There was not much
that the government could do to stimulate economic
recovery, as the country has a ballooning
budget deficit and a sub-investment grade rating.
The projections for 2011 are more optimistic,
as the economy is expected to recover and grow
by 1-2% by the end of the year.
During the first weeks of 2011, Romania received
the eighth tranche of the nine-tranche IMF Stand-
By Agreement, bringing the total amount borrowed
from the IMF to EUR 12.2 billion. The disbursement
of the tranches sent positive signals
in the markets, as the government was able to
meet the IMF’s requirements regarding budget
deficit levels and central administration arrears.
The country’s budget deficit in 2010 was 6.5% of
GDP, while the IMF target was set at 6.8%.
In order to meet these requirements, the government
had to take some unpopular measures
during 2010, such as increasing VAT from 19% to
24% and cutting central administration salaries
by 25%. These measures led to a further contraction
of GDP as well as to political instability,
as the opposition did not support the austerity
measures implemented by the governing party,
which has only a narrow majority in parliament.
Furthermore, Romania’s admittance into the
Schengen Area was postponed, which tarnished
the image of the government both internally
and externally.
On a brighter note, the previous two years of
economic downturn had positive effects on the
current account deficit. During 2010 net imports
continued to decrease, amounting to EUR 6.6 billion
(down from EUR 7.0 billion in 2009). However,
the level of the current account deficit increased
slightly from EUR 5.1 billion to EUR 5.2 billion,
due to the fall in incomes and money transfers
from abroad.
The limited current account deficit, coupled with
IMF and EU funding, nevertheless allowed the
National Bank of Romania (NBR) to renew investor
confidence by stabilising the RON against the
major currencies. The inflation rate rose to 7.96%
by year-end, overshooting the National Bank’s
target of 3.5%. Due to the macroeconomic developments
of 2010, Romania will most likely not be
able to adopt the euro in 2015, as was initially
planned. Joining the ERM II is still under debate
and seems to be a distant target.
Financial Sector Developments 1
Management Business Review 13
The number of banks and non-bank financial institutions
in Romania, which stood at 42 and 228,
respectively, was nearly identical to the previous
year; one new, 100% Romanian-owned bank
went into operation. The top five banks held 53%
of total sector assets, while foreign ownership
held 85.1%.
The Romanian banking system did not require
support from the government in 2010. However,
the shareholders of the banks brought in additional
capital in order to accommodate regulatory
pressures and to compensate for the losses
incurred during 2010.
Total banking assets contracted for most of 2010,
but started to pick up again in the second half of
the year due to increased government borrowing,
which grew by 31% to RON 61.6 billion. As a
consequence, total assets as of end-2010 stood
at RON 341 billion, 3.53% greater than the corresponding
figure for 2009. Lending to the private
sector demonstrated far lower growth of 4.70% 2
to RON 209.3 billion 3 (EUR 48.8 billion) due to
1 Unless otherwise stated, all of the figures cited in the
Financial Sector Developments section were taken from
National Bank of Romania, “Statistical Report”, December
2010.
2 National Bank of Romania, “Structure of Deposits and
Loans”, December 2010.
3 Ibid.

14
Annual Report 2010
tighter lending criteria, rising unemployment and
austerity measures. However, the low demand for
credit from the real economy was offset by the
government’s appetite for funds to finance the
growing budget deficit. On the deposit side, there
was a 6.2% 4 increase, resulting in total deposits
of RON 192.1 billion (EUR 44.8 billion). 5
The quality of the Romanian banking sector’s
loan portfolio fell sharply in 2010, primarily as
the result of the economic downturn. The indicator
of portfolio quality published by the National
Bank, which is similar to portfolio at risk over 90
days (PAR>90), rose swiftly to 11.85% 6 in 2010
(2009: 8% 7 ). The high arrears were especially
detrimental to very small and small companies
and private individuals with un-hedged debts in
foreign currency; almost 60% 8 of private sector
loans are denominated in hard currency.
The banking system did not exert a pull effect
due to the dynamics of its total assets and to the
relatively low level of financial intermediation of
41% 9 loans to GDP and 30% 10 deposits to GDP,
figures that carried over from 2009. In this environment,
the country’s banks focused on managing
their arrears, primarily by restructuring them;
they also tightened their lending criteria and
restricted access to credit, particularly for very
small and small clients.
ProCredit Performance
2010 was a hard year for everyone, including
our clients. Businesses suffered from depressed
consumption and tight liquidity, while private
individuals grappled with unemployment, falling
wages and a sizable jump in sales tax. As a development-oriented
bank committed to supporting
our clients through times of economic hardship,
we offered our customers expert financial
advice and restructured their loans to help them
get back on their feet. And, as always, we offered
convenient, transparent and affordable products
and services.
Thanks to our staff’s hard work, our overall results
were promising despite the many challenges we
faced in 2010. The bank strove to maintain its
outstanding loan portfolio, which at year-end
amounted to RON 766 million (EUR 179 million),
a slight decrease of 1.24% (2009: decrease of
11.0%). Customer accounts followed suit, closing
the year with a total volume of RON 617 million
(EUR 144 million), a 7.9% increase over the previous
year. The quality of the loan portfolio deteriorated
throughout 2010; however, thanks to our
strong institutional focus and efforts to maintain
portfolio quality, it was still clearly better than the
market average at year-end. 11
In keeping with our positioning as the house bank
for small businesses, we reached out to small urban
and rural small enterprises, which are vital
contributors to economic growth. The bank will
continue to devote attention and resources to its
Very Small and Medium clients, but will approach
these segments defensively. As the competition
on the retail market in Romania is mainly dominated
by big players, which even on a post-crisis
landscape continue to heavily engage in consumer
lending, ProCredit Bank’s key strategic goal
regarding private individuals is to strengthen its
reputation as a professional and inclusive savings
institution that provides basic financial services.
Our aim has always been to provide high-quality
service for our clients and to ensure the most appropriate
environment for building up and maintaining
long-term relationships. To this end, in
2010 we optimised our branch structure, establishing
even more efficient and client-friendly processes.
We also created a strong, dedicated client
acquisition force consisting of Business Client Advisers
(BCA), whose role is to establish contact and
4 Ibid.
5 Ibid.
6 Loss 2 category: loans for which payment of principal or
interest is overdue by more than 90 days and/or legal
proceedings against the debtor have been initiated.
7 National Bank of Romania, Financial Stability Report
2010, p. 44.
8 National Bank of Romania, “Statistical Report”, December
2010, p. 37 / Financial Stability Report 2010, p. 39.
9 National Bank of Romania, Financial Stability Report
2010, p. 38.
10 Op. cit., p. 22.
11 According to the statutory reporting principles defined
by the National Bank of Romania (www.bnr.ro), 15.34%
of loans issued by ProCredit Bank were classified as
“doubtful or loss”, compared with 20.81% for the banking
sector as a whole.

maintain relationships with potential clients from
our various target groups, identify their needs, and
make appropriate recommendations. The acquisition
process had previously been conducted by
various staff; the new, consolidated approach has
proven to be more efficient and effective.
Lending
Despite the unpredictable macroeconomic environment,
we focused on loan portfolio development
and quality throughout the year. We were
acutely aware of the need to provide affordable
Management Business Review 15
funding to our clients at a time when other banks
were charging high risk premiums. While it is
true that our Very Small and Small clients were
the hardest hit by the decline in consumption, the
bankruptcy of their partners and higher taxes,
they were and are the key to economic recovery.
We ended the year with a gross loan portfolio of
RON 766 million (EUR 179 million) and 28,900
loans, which represented a slight decrease of
1.24% in volume and a decrease of 18.7% in
number. We disbursed 10,411 loans totalling
RON 396 million (EUR 94 million) with an average
amount of RON 38,066 (EUR 9,042). Allowances

16
Annual Report 2010
for loan losses were increased to RON 34.9 million
(EUR 8.14 million), reflecting the bank’s conservative
provisioning policy.
Understandably, the demand for new loans was
low due to the prolonged recession, but we still
managed to attract small and medium business
clients from other banks that had either ceased
lending or had tightened their lending criteria.
Remaining faithful to our policy of focusing on
lending to businesses that have a development
impact, we increased our minimum loan amount
to EUR 3,000 for business loans and to EUR
2,000 for agricultural loans. As a result of the
new limits, very small loans declined by 21%,
which led our overall business loan portfolio to
decrease by 3.99% to EUR 128 million. However,
small loans increased by 6.6% to EUR 41.5 million,
while medium loans grew by 34.9% to EUR
28.5 million.
At the same time, the ProCredit Bank is making
a valuable contribution to rural development,
meeting a financial need that is not fulfilled by
other banks. We have achieved success in this
segment responsibly and profitably due to our
well-developed lending technology. ProCredit
Bank issued 5,538 loans to the agricultural sector
for a total of RON 188 million (EUR 43.8 million),
an increase of 18.4% over the previous
year. Although the number of loans remained
fairly stable (10,131; 2009: 10,790), the average
Loan Portfolio Development
Volume (in EUR million)
250
200
150
100
50
0
Jun
06
Dec
Jun
07
Dec
Jun
08
Dec
Jun
09
Dec
Number (in ’000)
Jun
10
Dec
< EUR 10,000 > EUR 150,000
EUR 10,001 – EUR 30,000 Total number outstanding
EUR 30,001 – EUR 150,000
50
40
30
20
10
0
amount increased. The agricultural loan portfolio
now makes up 25% of our total loan portfolio,
up from 21% at end-2009.
In the last quarter of 2010 we decided to segregate
the responsibilities of our loan officers for
the Very Small segment in order to better serve
our clients and fortify the business portfolio. The
bank now has Maintenance Loan Officers, who
deal exclusively with portfolio quality management,
and Loan Officers, who are responsible for
the acquisition of new clients and for disbursements.
As a result of this change, there has been a
marked improvement in the portfolio quality and
an increase in the Very Small segment.
Deposits and Other Banking Services
In 2010, we continued to be the neighbourhood
bank for ordinary people by offering transparent
services and products at fair prices.
Thanks to sufficient liquidity levels throughout
2010, the bank was able to concentrate on stabilising
the level of deposits relative to the lending
portfolio. As loan disbursements started to pick
up at the end of the year, however, we returned
to a more active approach to mobilising deposits,
which rose by RON 50 million (EUR 10.5 million)
to RON 617 million (EUR 144 million). This once
again demonstrates that the bank maintained the
Number of Loans Outstanding – Breakdown by Loan Size*
7.4%
65.5%
24.3%
< EUR 1,000 EUR 30,001 – EUR 150,000
EUR 1,001 – EUR 10,000 > EUR 150,000
EUR 10,001 – EUR 30,000 * 31 Dec 2010
2.5%
0.3%

Business Loan Portfolio – Breakdown by Maturity
in %
100
90
80
70
60
50
40
30
20
10
0
Jun
06
Dec
Jun
07
Dec
Jun
08
Dec
Jun
09
Dec
< 12 months 12 – 24 months > 24 months
Jun
10
Dec
Loan Portfolio Quality (arrears >30 days)
in % of loan portfolio
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0
Jun
06
Dec
Jun
07
Net write-offs:
in 2006: EUR 554,618
Dec
Jun
08
Management Business Review 17
Dec
Jun
09
in 2007: EUR -182,489
in 2008: EUR 1,365,596
Dec
Jun
10
Dec
in 2009: EUR 3,680,186
in 2010: EUR 3,077,671

18
Annual Report 2010
loyalty of its clients and, at the same time, gained
new ones. Business clients tend to account for a
small share of our deposits, but our efforts to cater
to this segment’s demand for account-based
services resulted in a 7% rise in business client
deposits this year. This increase brought their deposits
to RON 105 million (EUR 24.6 million) and
the bank’s total current account funds to RON 69.4
million (EUR 16.2 million), an increase of 30%.
The bank offers several popular financial packages,
which bundle a range of products and services
with the advantage of a single monthly fee and
lower transaction costs. Our salary earner and
pensioner packages increased by 37% over the
previous year to 7,723. For our business clients,
we introduced a package consisting of a current
account, business bank card and e-banking access.
Following the success of last year’s InfoPayment
service, the bank also launched InfoEncashment,
which automatically notifies clients via text
message whenever a cheque is cashed and the
amount is debited to the holder’s account. The
new product was well received, with nearly 650
clients signing on by year-end.
In 2010, 1,300 new clients signed up for e-banking,
bringing the total number of customers using
this service to 3,553 by the end of the year, approximately
2,500 of whom are business clients.
The number of online transactions climbed to
15,270 in December, representing a 55% increase
year-on-year.
Customer Deposits
Volume (in EUR million)
180
160
140
120
100
80
60
40
20
0
Jun
06
Dec
Jun
07
Dec
Jun
08
Dec
Jun
09
Dec
Term Savings Sight Total number
Number (in ’000)
Jun
10
Dec
180
160
140
120
100
80
60
40
20
0
We continued to expand our ATM network in 2010,
bringing the total to 65 machines. In addition,
22,000 bank cards were in circulation by the end
of December, with the share of active cards rising
from 54% to 64%. Card transactions increased by
47% in volume, to RON 12.9 million (EUR 3.0 million)
and by 40% in number, to more than 183,000
during the year.
Domestic transactions continued to fall in 2010,
but at a slower pace than in 2009. Transactions
dropped by 4.7% in number, to 576,226, and by
13% in volume to RON 2,058 million (EUR 693 million).
International money transfers remained stable
in number (51,475), but recorded an increase
in volume of 13.4% to RON 540 million (EUR
126 million).
Financial Results
Despite the recessionary economy, low demand for
new loans and declining appetite for investments,
the bank’s loan portfolio shrunk only marginally.
However, there were significant structural changes:
the percentage of the Very Small portfolio relative
to total volume decreased, while the weight of
Small and Medium loans increased, leading to an
overall decline in interest revenues. The bank was
profitable before loan loss provisions, which rose
to historic levels. Further cost-saving measures
helped contain the net losses, however, and the
bank expects to break even in 2011.
Number of Customer Deposits – Breakdown by Size*
1.0%
20.2%
21.2%
0.1%
o.03%
57.5%
< EUR 100 EUR 10,001 – EUR 50,000
EUR 101 – EUR 1,000 EUR 50,001 – EUR 100,000
EUR 1,001 – EUR 10,000 > EUR 100,000
* 31 Dec 2010

Domestic Money Transfers
Volume (in EUR million)
600
500
400
300
200
100
0
Jan–
Jun
06
Jul–
Dec
Jan–
Jun
07
Jul–
Dec
Jan–
Jun
08
Jul–
Dec
Jan–
Jun
09
Incoming Outgoing Number
Jul–
Dec
Number (in ’000)
Jan–
Jun
10
Jul–
Dec
600
500
400
300
200
100
0
International Money Transfers*
Volume (in EUR million)
80
70
60
50
40
30
20
10
0
Jan–
Jun
06
Jul–
Dec
Jan–
Jun
07
Jul–
Dec
Incoming Outgoing Number
* incl. Western Union transfers
Management Business Review 19
Jan–
Jun
08
Jul–
Dec
Jan–
Jun
09
Jul–
Dec
Number (in ’000)
Jan–
Jun
10
Jul–
Dec
40
35
30
25
20
15
10
5
0

20
Annual Report 2010
Total assets decreased by 11.4% (2009: 6.2%),
mainly due to a better and stricter liquidity management.
The bank optimised its liquidity by repaying a
syndicated loan in local currency before maturity.
We also arranged funding agreements with
EFSE and Dexia Micro-credit Fund to replace loans
which had reached maturity and funded the development
of our EUR loan portfolio. Our most
important source of funding is customer deposits,
which cover 81% of the gross loan portfolio.
ProCredit Holding provided support for shortterm
liquidity whenever necessary.
Our shareholders reaffirmed their support to
the bank by participating in a pro-rata capital increase
of EUR 5 million, which resulted in a capital
adequacy ratio of 14.1% in 2010 (compared
to 13.4% in 2009). The shareholder structure did
not change this year.
Interest income decreased by 17.1%, driven by the
change in structure of the loan portfolio, which
reflects the bank’s increased focus on small and
medium clients and the decline of the loan portfolio.
It accounted for 135% of our total operating
income. Interest expenses decreased by 44.9%,
due to the falling interest rates for local currency
deposits and to the bank’s efforts to tighten its
liquidity management.
Net fee and commission increased by 0.91% as
a result of increased efficiency, despite a drop in
the total number of transactions. Overall, operating
income grew by 13.7%, reaching a level of
RON 109 million (EUR 26.0 million). Administrative
expenses, including personnel expenses,
were reduced by 2.19% thanks to the bank’s efforts
to raise efficiency levels.
The net financial result of 2010 was a loss of RON
13.3 million (EUR 3.16 million) Consequently, return
on equity fell to -14.4% (2009: -22.6%). The
cost-income ratio decreased in 2010 to 95.1%
(2009: 112%).
Outlook
Romania was one of the countries to be hardest
hit by the financial crisis, and the negative effects
are likely to persist in 2011 and possibly beyond.
While there are indeed signs of recovery, they
are mainly due to increases in exports (the value
added on the goods and services sold is relatively
low, however), and the macroeconomic situation
is not expected to change dramatically. Consumption
will be subdued, as cost-cutting measures in
the public sector will dampen spending. In addition,
investments are forecast to be only half
of what they were in 2008. The increase of GDP
for 2011 is expected to be between 1-2%. At the
same time, the exchange rate is projected to be
stable since the current account deficit has been
adjusted to a sustainable level; the target of the
National Bank for 2011 is 4.1-4.3 RON/EUR.
Considering both the lessons learned from the
past and current external market trends, in 2011
the bank will work hardest to cultivate its small
business and agricultural segments. To this end,
we will strive to be the house bank for Small business
clients by building up a strong Small business
client portfolio, as well as the bank of choice
for rural enterprises by continuing to develop
agricultural lending for all client segments. Agricultural
loans are expected to grow to 26% of our
loan portfolio in 2015.
Although we plan to approach the Very Small
segment defensively in 2011, these customers
will continue to play a key role in the fulfilment
of our development mission. With respect to
medium-sized enterprises, we intend to achieve
moderate loan portfolio growth, but will take a
defensive approach; however, we will continue
to devote the necessary attention and resources
to this segment, especially in order to continue
supporting our Small business clients as they
develop into Medium enterprises. Concerning
our Private Individuals business, deposit mobilisation
and the provision of basic banking services
will be our primary objectives. Private individuals
will remain at the heart of our success,
since their deposits provide the lion’s share of
gross loan portfolio coverage.

Management Business Review 21

22
Annual Report 2010
Risk Management
In 2010, banking operations were still very
strongly influenced by the financial crisis. At the
same time, however, this situation has created
opportunities for a bank that has consistently
taken a rigorous approach to risk management.
We believe that this has been one of the key factors
behind ProCredit Bank’s success in retaining
the trust of our customers.
While ultimate responsibility for risk management
lies with the General Manager and the
Board of Administration, it is the Risk Division
which develops and implements mechanisms to
identify, assess, and mitigate the bank’s exposure
to risk. The two departments which make up
the Risk Division are the Risk Management Department,
which includes the Information Security
Unit, and the Risk Control Department. Credit
risk at the individual exposures level is managed
separately by the Credit Risk Division, while the
risk of money laundering and related illegal activities
is addressed by the Compliance Department.
These departments report to the various
committees which are responsible for decisionmaking
in connection with risk. The Risk Management
Committee works with its subcommittees
to manage and control risk: the Credit Risk
Management Subcommittee closely monitors
loan portfolio quality; the Assets and Liabilities
Subcommittee manages liquidity, market and
counterparty risks; and the Operational Risk
Management Subcommittee manages operational
and reputational risk. AML is the responsibility
of the AML&CFT Subcommittee.
The risk management policies in effect at
ProCredit Bank Romania are based on the principles
and standards applicable to all ProCredit institutions,
which in turn are based on the German
Federal Financial Supervisory Authority’s policy
document “Minimum Requirements for Risk Management”
as well as on the requirements of the
National Bank of Romania. ProCredit Bank Romania
reports its risk position to the relevant units
responsible for risk management at the ProCredit
Holding level at monthly intervals.
Risk management policies throughout the
ProCredit group are based on the concept of
“risk-bearing capacity”, i.e. the principle that
each bank’s aggregated risk exposures must
not exceed its capacity to bear risk, and that the
resources available to cover risk are sufficient
to absorb any losses that may arise and protect
creditors’ investments. Statistical models and
other procedures are used to quantify the risks
incurred, and thresholds and limits are set for
each risk category and for the aggregate exposure.
Throughout 2010 the level of risk remained
within the limit in nearly every category. One
exception was interest rate risk, which remains
at a significant level. The bank is continuing its
efforts to reduce this risk.
ProCredit Bank’s culture of internal and external
transparency is equally crucial to our risk management
efforts. Thanks to our clearly defined
procedures and our encouragement of open communication,
our well-trained staff are in a strong

position to detect risks and take the steps necessary
to mitigate them.
Credit Risk Management
Given that lending to small businesses is
ProCredit Bank’s main asset-side operation, it
is not surprising that classical credit risk, i.e.
the risk that borrowers will be unable to repay,
accounts for the largest share of risk in
this category.
ProCredit Bank Romania has implemented in its
local policies the principles established through
the ProCredit Group Credit Risk Management
Policy and the Group Collateral Valuation Policy,
which together reflect the experience gained in
more than two decades of successful lending operations
in developing and transition economies.
Credit decision-making authority at the bank is
clearly defined; all decisions to issue a loan, or
change its terms, are taken by a credit committee,
and all credit risk assessments are carefully
documented. Above all, the bank seeks to build
and maintain long-term relationships with its
customers, thus ensuring that it is fully aware of
their financial situation, and great care is taken
to avoid over-indebting them.
Credit risk is also mitigated by the fact that our
portfolio is highly diversified. The businesses
Risk Management 23

24
Annual Report 2010
we serve operate in a wide range of sectors, and
their exposure to global market fluctuations is
very limited. Moreover, the vast majority of our
credit exposures are relatively small. During
2010, loans under EUR 30,000 accounted for
53.3% of the total outstanding portfolio, and
the average amount outstanding was EUR 6189,
while the ten largest exposures accounted for
only 8.8% of the portfolio.
As the vast majority of the bank’s loans are repayable
in monthly instalments, a borrower’s
failure to meet a payment deadline is treated as
an initial sign of potential default and draws an
immediate response from the bank. When a payment
of interest or principal is overdue by more
than 30 days, the loan in question is assigned
to the portfolio at risk (PAR>30), which serves as
the key indicator of classical credit risk.
In 2010 the bank’s overall PAR>30 climbed from
3.29% at the beginning of the year to 4.87%
of the gross loan portfolio as of year-end. This
deterioration was largely attributable to the
economic recession, but also due to the government’s
decision to increase the VAT, which
dampened consumption and thus negatively
affected the business sector. The arrears were
concentrated primarily in the very small business
and private individual loan segments, with
the former category representing a significant
part of our portfolio. It should be noted that the
quality of ProCredit Bank’s loan portfolio is better
than the average for the Romania banking
sector as a whole, measured in terms of loans
classified as doubtful and loss relative to total
loan portfolio. 11
One of the ways in which ProCredit Bank has met
the challenge to portfolio quality posed by the financial
crisis is to offer loan restructuring to those
clients that are judged to have the potential to regain
stability. Restructurings follow a thorough
analysis of each client’s changed payment capacity.
The decision to restructure a credit exposure
is always taken by a credit committee and aims at
full recovery. As of end-2010, the total volume of
restructured loans in the “watch” category came
to EUR 11.2 million, with EUR 3.6 million migrating
to the “impaired” category.
ProCredit Bank Romania takes a conservative
approach to loan loss provisioning. Impairment
allowances for impaired individually significant
exposures are calculated on the basis of individual
assessment. For all unimpaired credit
exposures, portfolio-based allowances for impairment
are made. At the end of the year the
coverage ratio (loan loss provisions as a percentage
of PAR>30) stood at 93.6%, with provisions
accounting for 4.56% of the total loan portfolio
by year-end.
Loans considered to be irrecoverable are consistently
written off. Nonetheless, recovery efforts
continue even after a loan has been written off,
and collateral collection is rigorously enforced.
In 2010 net write-offs totalled EUR 3.1 million, or
1.73% of the gross loan portfolio.
Counterparty and Issuer
Risk Management
Counterparty and issuer risks evolve especially
from the bank’s need to invest excess liquidity or
to conclude foreign exchange transactions.
The risk of incurring losses caused by the unwillingness
or inability of a financial counterparty
or issuer to fulfil its obligations is managed according
to the ProCredit Group Counterparty Risk
Management Policy, which defines the counterparty
selection process and limits the size of
exposures, and according to the Group Treasury
Policy, which specifies the set of permissible
transactions and the rules for their processing.
As a matter of principle, only large international
banks and local banks with a good reputation and
financial standing are eligible counterparties. No
exposure to a financial counterparty may be assumed
unless a limit on the size and tenor has
been approved for the respective counterparty.
Country Risk Management
Given ProCredit Bank’s focus on lending to businesses
in the local market, it does not normally enter
into cross-border transactions, and therefore,
its exposure to country risk is limited. However,
the bank has several Nostro accounts abroad and

sometimes engages in transactions with other
members of the ProCredit group in order to invest
its additional liquidity. The group as a whole
is exposed to country risk insofar as all ProCredit
banks operate in transition economies or developing
countries. However, over the years the
ProCredit business model has proven to be relatively
resistant to macroeconomic and political shocks.
Liquidity Risk Management
To determine the robustness of the bank’s liquidity
in the face of potential shocks, the bank performs
regular stress tests based on scenarios
defined as a group standard by the Group Liquidity
Risk Management Policy. Whenever necessary
to bridge liquidity shortages, ProCredit
Bank Romania, may draw on a standby line from
ProCredit Holding.
Several factors inherent to the bank’s business
model offset liquidity risk. Firstly, the bank’s diversified,
high quality portfolio of loans means
that incoming cash flows are highly predictable.
Secondly, our customer deposits are spread
across a large number of depositors each holding
relatively small amounts. As of end-2010 the
average balance in our term deposit accounts
was EUR 2,987, and the ten largest customer deposits
taken together represented only 6.6% of
total deposits.
11 According to the statutory reporting principles defined
by the National Bank of Romania (www.bnr.ro), 15.34%
of loans issued by ProCredit Bank were classified as
“doubtful or loss”, compared with 20.81% for the banking
sector as a whole.
Risk Management 25

26
Annual Report 2010
Currency Risk Management
ProCredit Bank Romania has a low level of exposure
to market risk because it does not trade in
securities or in commodities, nor does it engage
in derivative transactions except for hedging
purposes. Currency risk is managed in accordance
with the Foreign Currency Risk Management
Policy and Strategy.
The bank continuously monitors exchange rate
movements and foreign currency markets, and
determines its currency positions on a daily basis.
Stress tests are regularly carried out to assess
the impact of exchange rate movements on
open currency positions (OCP) in each operating
currency based on two scenarios: most probable
and worst case.
Group policy forbids the bank to maintain OCPs
for speculative purposes. The bank’s strategy is
to keep its statutory foreign currency position
closed, which results in a long EUR position under
IFRS. As of end-2010, the bank had OCPs of
around 4.41% of Basel II capital. The local currency
depreciated by over 20% against the US
dollar towards the middle of the year; however,
this trend reversed itself in the second half of
the year following EUR/USD evolution on international
markets. The Romanian leu remained
fairly stable against the euro in 2010, occasionally
weakening due to political instability.
Interest Rate Risk Management
The six-month euro interest rate increased in
2010 (from 0.99% to 1.24%) following the recovery
of the euro economies. Maturity gap analysis
and stress testing are used to measure and analyse
the impact of interest rate shifts on interest
income.
Throughout 2010, the bank continued its policy of
decreasing its exposure to interest rate risk from
its banking book. A key policy measure undertaken
in 2010 to mitigate interest rate risk was to develop
the variable interest rate loan portfolio, as
most loans disbursed were priced at market interest
rate plus margin. The bank does not use derivatives
to hedge its interest rate risk positions, and
aims to close its gaps through natural hedging.
Operational Risk Management
The bank’s Operational Risk Management Policy
is in full compliance with Basel II and with Romanian
and German banking legislation. To minimise
operational risk, all processes are precisely
documented and subject to effective control
mechanisms. Job descriptions are comprehensive,
duties are strictly segregated, and dependency
on key individuals is avoided.
When recruiting, the bank pays close attention
to personal integrity, a quality which is reinforced
through the bank’s strictly imposed code
of conduct and through comprehensive training
programmes designed to promote a culture of
transparency and risk-awareness.
The group-wide Risk Event Database (RED) ensures
that operational risks are addressed in a
systematic and transparent manner, with all remedial
and preventive action clearly documented
and accessible to management control. Staff
are required to report all operational risk events
regardless of the actual or potential loss level.
Furthermore, as part of their initial training, all
new staff members are taught how to recognise
and avoid operational risk and how to maintain
information security. The bank also installed an
e-learning platform in December 2010 with training
material on operational and reputational risk
and information security. In 2010, ProCredit
Bank Romania reported 1,221 risk events representing
a total net risk amount of EUR 15,791.
Every year the bank conducts a risk assessment
procedure by completing a group-wide questionnaire
on fraud risk and operational risk. Each of
the risks described here must be mitigated by
appropriate controls, the adequacy of which is
the subject of the assessment. If the controls are
judged to be insufficient, an action plan for remedying
the situation is drawn up. The completed
assessment is sent to the Group Operational
Risk Management Department.
In 2010 the bank introduced the group-wide New
Risk Approval (NRA) process, which is applied to
all materially new or changed products, services
or business processes. Only after the elimination
of any obstacles or deficiencies revealed by the

NRA process does management give its approval
for the innovation to go ahead.
The bank’s Business Continuity Policy ensures
that the bank can maintain or restore its operations
in a timely manner in the event of a serious
disruption. As well as defining the steps to be
taken to restore normal operations, the bank’s
Business Continuity Plan specifies the procedure
for moving critical operations to temporary locations,
the resources that need to be mobilised in
each type of case and the expected cost of disruptions
in specific areas. It also offers guidance
on avoiding disruption in the first place.
Anti-Money Laundering
ProCredit Bank Romania fully endorses the fight
against money laundering and terrorist financing,
and has implemented the Group Anti-Money
Laundering Policy, which is consistent with the
requirements of German and EU legislation. No
customer is accepted and no transaction is executed
unless the bank understands and agrees to
the underlying purpose of the business relationship.
The Group Anti-Money Laundering Department
(Group AML) conducts an annual survey of
all ProCredit banks and updates the group policy
accordingly. In addition, all ProCredit banks submit
quarterly reports on their AML activities to
Group AML.
At ProCredit Bank Romania, responsibility for
AML activities is exercised by the Compliance
Department. According to local regulations, any
transaction (or any series of transactions within
10 days) exceeding the RON or foreign currency
equivalent of EUR 15,000 must be reported to
the local authorities. In addition, any account
activity or attempt to execute a transaction that
arouses suspicion of money laundering, terrorist
financing or some other criminal activity must be
reported. Front-office staff receive intensive training
in how to recognise suspicious transactions.
An additional automated safeguard is provided
by the use of three modules of the AML software
manufactured by Tonbeller AG: Siron Embargo,
Siron PEP and Siron AML. In cases of doubt, the
AML&CFT Subcommittee takes the final decision
on how to handle the suspicious transactions and
suspicious customers reported by the bank.
Capital Adequacy
The bank’s capital adequacy is calculated on a
monthly basis and reported both to the management
and to the Risk Management Committee,
together with rolling forecasts to ensure future
compliance with capital adequacy requirements.
Strong support from our shareholders once
again enabled the bank to maintain a comfortable
capital cushion. During 2010 it received a
total paid-in capital increase of EUR 5.0 million.
At year-end 2010 the IFRS/Basel II capital adequacy
ratio for the bank stood at 16.6%; this
is above the group-wide target of 12%, which
is also the IFRS minimum level required locally.
The bank was issued a rating of BB+ by Fitch
in 2010.
Risk Management 27

28
Annual Report 2010
Hungary
Branch Network
At the end of 2010, ProCredit Bank Romania had
a total of 37 offices located in 20 different towns
and cities across the country. In order to ensure efficient
communication between the branches and
the bank’s headquarters, and among branches in
the same part of the country, the network is organised
into four regions – South, East, Transylvania
and Bucharest – each headed by a regional
manager. Every region combines service points
and branches that serve both key development
lines of the institution: urban business development
and agricultural portfolio development, as
agricultural production is spread relatively evenly
across the country. In addition, each region
contains large cities, where we find the highest
potential for new business related to our target
group of small and medium-sized companies.
Since 2009, as part of our ongoing effort to respond
in a more differentiated manner to our
customers’ needs, our lending business has been
concentrated in specialised branches, where the
majority of our business client advisers and credit
Serbia
Arad
Timisoara
Cluj-Napoca (2)
Ramnicu Valcea
Craiova (2)
Slatina
Dabuleni
Ukraine
Baia Mare Suceava
Sibiu
Alexandria
analysts are now based. These branches provide
not only credit products but also all of the bank’s
other services for business clients and private
individuals, including various types of account
services, foreign exchange, money transfers and
utilities payments.
In addition to the full-scale branches, the bank
now also operates small service points in strategic,
often densely populated neighbourhoods.
The service points are designed to be convenient
places for both private individuals and enterprises
to do their day-to-day retail banking
business, but do not process loan applications.
At the other end of the scale, one of the oldest
branches in Bucharest and the most successful
in attracting small and medium clients was relocated
and rebranded as a Business Centre, i.e.
as a branch offering additional specialist services
to meet the more complex needs of these larger-scale
customers. During 2010, three branches
and three service points were closed in order to
concentrate the available resources in locations
Targu Mures
Pitesti
Brasov (2)
Bucharest (13)
Iasi (2)
Romania
Ploiesti
Bulgaria
Bacau
Braila
Moldova
Constanta (2)
Ukraine
Black
Sea

where they could make the greatest impact on
service quality.
Also in line with the shift towards a more pronounced
customer focus, improvements were
made to the interior design of the branches. Signposting
in the front office now directs business
clients to physically separate areas staffed by experts
in serving enterprises, and rooms for confidential
negotiations have been created wherever
space has allowed.
Our retail services include debit cards, which
both business clients and private individuals can
use to withdraw cash at any of our 65 ATMs, 11 of
which were installed in 2010. The bank does not
yet offer POS services to merchants, but plans
to start installing POS terminals at customers’
premises in 2011 in co-operation with another
Romanian bank.
The focus for 2011 will be on consolidating our results
in the regions where we already have a presence,
while constantly assessing the efficiency of
the existing branches and service points in meeting
the needs of legal entities and agricultural clients
in the respective region. There are also plans
to remodel a number of branches in order to create
a more conducive space for our clients to do
their banking business.
Branch Network 29

30
Annual Report 2010
Organisation, Staff and Staff Development
ProCredit Bank Romania understands that the key
to providing high quality service lies in building
a team of motivated, professionally competent
staff who are jointly committed to the bank’s mission
and objectives, and who work well together
on the basis of mutual trust and respect.
In line with the group-wide focus on enhancing
the quality of the relationship with our customers
and improving service quality in 2010, the bank
intensified its efforts to advance the professional
and personal development of its staff. During
the year, our employees participated in a total of
5,096 internal training days, not including attendance
at the international ProCredit Academies.
The bank’s Training Unit is part of the Human
Resources Department. In addition to co-ordinating
and delivering training programmes to
experienced staff, the department is also responsible
for monitoring and evaluating new
staff in the probation period. Following changes
in the bank’s recruitment procedure, experienced
members of the Training Unit now play
an important role in the hiring process, offering
support in testing and evaluation.
In the context of the ProCredit group’s international
initiative to raise the level of mathematical
knowledge among its staff, ProCredit Bank Romania
hired a dedicated maths trainer to prepare all
colleagues for the group-wide “Maths 1” examination.
Employees requiring extra maths training
received additional support through exercises
and practice tests posted on the intranet.
A large proportion of the training provided to current
and potential middle managers takes place

outside Romania at the international ProCredit
Academies. In 2010, seven colleagues from
ProCredit Bank Romania graduated from the
ProCredit Regional Academy for Eastern Europe
in Veles, Macedonia, while another seven completed
the first year of their two-year course. Two
of the bank’s staff earned their “ProCredit Banker”
diploma, marking the successful completion
of the highly intensive three-year programme
offered at the central ProCredit Academy in
Fürth, Germany.
The adoption of a new group-wide business
strategy in 2010, with its increased emphasis
on building long-term customer relationships,
necessitated various changes to the bank’s
organisational structure. A number of new positions
were created to reflect the shift from a
product-based to a client-based approach. To
this end, the two key target groups, private individuals
and legal entities, are now served by
two separate divisions that monitor their specific
business development. A clear separation
was made between sales activities and business
analysis to ensure better control, more efficient
processes and better customer care. In
addition, the Credit Risk Department and Credit
Control Department were separated from the
Credit Department in order to establish a clear
separation of duties. The credit risk function is
managed separately by a division manager. At
the same time, in order to efficiently support the
organisational structure, other divisions were
created (Internal Services, Operations Support,
Finance and Risk).
Organisation, Staff and Staff Development 31
The internal organisation of the branches was
also revised, with separate front office areas for
business clients and private individuals, respectively.
In this context, various assessments were
undertaken to ensure that staff had the requisite
skills for their assignments within this modified
structure. For example, the Business Client Advisers,
who are responsible for advising clients
on all of the bank’s products and services and
for acquiring new customers, were chosen for
this new position on the strength of their communication
skills. At the same time, experienced
loan officers with the strongest analytical
expertise were appointed to the newly created
Credit Analyst position, whose function is to
evaluate applications for credit services submitted
by comparatively large, complex business
clients. In all cases, intensive training was given
to reassigned staff to prepare them for their
new duties.
Given the bank’s focus on consolidation and
quality in 2010, recruitment of new personnel
increased only slightly over the previous year,
with 131 people joining the bank in 2010, bringing
the total at year-end to 830 (including support
staff). In line with the ProCredit group’s new
recruitment policy, all shortlisted applicants are
now invited to take a “maths and logic” test,
which is set by ProCredit Holding. Successful
candidates then take part in group discussions
and role plays, where among other things their
interpersonal skills are assessed, followed
by individual in-depth interviews with senior
staff of the bank.

32
Annual Report 2010
Business Ethics and Environmental Standards
Part of the overall mission of the ProCredit group
is to set standards in the financial sectors in which
we operate. We want to make a difference not only
in terms of the target groups we serve and the
quality of the financial services we provide, but
also with regard to business ethics. Our strong
corporate values play a key role in this respect.
Six essential principles guide the operations of
the ProCredit institutions:
• Transparency: We adhere to the principle of
providing transparent information both to our
customers and the general public and to our
employees, and our conduct is straightforward
and open;
• A culture of open communication: We are
open, fair and constructive in our communication
with each other, and deal with conflicts
at work in a professional manner, working together
to find solutions;
• Social responsibility and tolerance: We offer
our clients sound advice and assess their eco-
nomic and financial situation, business potential
and repayment capacity so that they can
benefit from the most appropriate loan products.
Promoting a savings culture is an important
part of our mission, and we are committed
to treating all customers and employees with
fairness and respect, regardless of their origin,
colour, language, gender or religious or
political beliefs;
• Service orientation: Every client is served in
a friendly, competent and courteous manner.
Our employees are committed to providing excellent
service to all customers, regardless of
their background or the size of their business;
• High professional standards: Our employees
take personal responsibility for the quality of
their work and always strive to grow as professionals;
• A high degree of personal commitment: This
goes hand-in-hand with integrity and honesty –
traits which are required of all employees in the
ProCredit group.

These six values represent the backbone of our
corporate culture and are discussed and actively
applied in our day-to-day operations. Moreover,
they are reflected in the ProCredit Code of Conduct,
which transforms the group’s ethical principles
into practical guidelines for all staff. To make
sure that new employees fully understand all of
the principles that have been defined, induction
training includes sessions dedicated to the Code
of Conduct and its significance for all members of
our team. Regular refresher training sessions help
to ensure that employees remain committed to
our high ethical standards and are kept abreast of
new issues and developments which have an ethical
dimension for our institution. These events allow
existing staff to analyse recent case studies
and discuss any grey areas.
Another aspect of ensuring that our institution adheres
to the highest ethical standards is our consistent
application of best practice systems and
procedures to protect ourselves from being used
as a vehicle for money laundering or other illegal
activities such as the financing of terrorist activities.
An important focus here is to “know your customer”,
and, in line with this principle, to carry out
sound reporting and comply with the applicable
regulations. Updated anti-money laundering and
fraud prevention policies are being introduced
Business Ethics and Environmental Standards 33
across the group to ensure compliance with German
regulatory standards.
We also set standards regarding the impact
of our lending operations on the environment.
ProCredit Bank Romania has implemented an
environmental management system
based on continuous assessment of
the loan portfolio according to environmental
criteria, an in-depth
analysis of all economic activities
which potentially involve environmental
risks, and the rejection of
loan applications from enterprises
engaged in activities which are
deemed environmentally hazardous
and appear on our institution’s
exclusion list. By incorporating
environmental issues
into the loan approval process,
ProCredit Bank Romania is also
able to raise its clients’ overall
level of environmental awareness. We
also ensure that requests for loans are evaluated
in terms of the applicant’s compliance with ethical
business practices. No loans are issued to enterprises
or individuals if it is suspected that they
are making use of unsafe or morally objectionable
forms of labour, in particular child labour.

34
-
Annual Report 2010
The ProCredit Group: Responsible Neighbourhood Banks for
Small Businesses and Ordinary People
The ProCredit group comprises 21 financial institutions
providing banking services in transition
economies and developing countries. ProCredit
banks are responsible neighbourhood banks.
This means, in the neighbourhoods in which we
work, we aim to:
• be the house bank of choice for the very small,
small and medium-sized enterprises which create
jobs and drive economic development, and
• provide secure and transparent savings and
banking services to ordinary people who are
looking for an affordable bank they can trust.
At the end of 2010 our 15,600 employees, working
in some 740 branches, were serving 3 million
customers in Eastern Europe, Latin America
and Africa.
The history of the ProCredit group is a rich one
and forms the basis of what we are today. The
first ProCredit banks were founded more than
a decade ago with the aim of making a development
impact by promoting the growth of small
businesses. We sought to achieve this by providing
loans tailored to their requirements and
offering deposit facilities that would encourage
low-income individuals and families to save. The
group has grown strongly over the years, and today
we are one of the leading providers of banking
services to small business clients in most of
the countries in which we operate.
Our origins lie in our pioneering microfinance
positioning. This positioning has developed as
our markets and our clients have developed so
our socially responsible approach remains as relevant
today as ever. Its importance has been underscored
by the financial crisis and subsequent
significant macroeconomic decline which most
of our countries of operation experienced over
the last two years. As enterprises adjust to and
expand again in their new economic reality and
ordinary people rebuild their trust in banks, it is
clear that our customers need a reliable banking
partner now more than ever. This has also given
us the impetus to further strengthen our comprehensive
customer-oriented approach with more
highly specialised and well trained staff.
Unlike most other banks operating in our markets,
we have always avoided aggressive con-
sumer lending and speculative lines of business.
Instead, the ProCredit banks work in close contact
with their clients to gain a full understanding
of the problems small businesses face and
the opportunities that are available to them. Our
credit technology, developed over many years
with the support of the German consulting company
IPC, relies on the careful individual analysis
of credit risks. By making the effort to know our
clients well and maintain long-term relationships
based on trust and understanding, we are well
positioned to support them not only when the
economy is buoyant, but also during a downturn
and recovery. Over the last two years, the ability
of our loan officers to proactively make appropriate
adaptations to payment plans where necessary
to reflect clients’ new and more challenging
sales environments has played an important role
in maintaining good loan portfolio quality.
We not only extend loans, but also offer our enterprise
clients a broad range of other banking
services such as cash management, domestic
and international money transfers, payroll services,
POS terminals and payment and credit cards.
These services are geared towards assisting our
business clients to operate more efficiently and
more formally and thus help to strengthen the
real economy and the banking sector as a whole.
In these terms ProCredit has a “whole customer”
focus rather than a simple product focus. Our
staff and our branches are becoming more specialised
and better equipped to cater to the needs
of different client segments.
Today we have less of a focus on traditional “microfinance”
than we did in the past. At the end of
2009, we increased the minimum loan size for enterprise
clients to EUR/USD 2,000 in most countries
since we found that below this limit there
is such broad access to loans from consumer finance
providers that “excess” had become more
of a challenge for many clients than “access”. For
these groups we prefer to offer deposit accounts
and other banking services rather than credit.
Our targeted efforts to foster a savings culture
in our countries of operation have enabled us
to build a stable deposit base. ProCredit deposit
facilities are appropriate for a broad range
of lower- and middle-income customers. We
place particular emphasis on working with the

The ProCredit Group: Responsible Neighbourhood Banks for Small Businesses and Ordinary People 35
owners, employees and families associated with
our core target group of very small, small and
medium-sized businesses. ProCredit banks offer
simple savings products and place great emphasis
on promoting children’s savings accounts and
on running financial literacy campaigns in the
broader community. In addition to deposit facilities,
we offer our clients a full range of standard
retail banking services. Over 2010 ProCredit institutions
managed to maintain a high level of
liquidity given the stability of their loyal retail
deposit base.
The ProCredit group has a simple business model:
providing banking services to a diverse range
of enterprises and the ordinary people who live
and work around our branches. As a result, our
ProCredit
Mexico
Banco ProCredit
Honduras
Banco ProCredit
El Salvador
Banco ProCredit
Nicaragua
Banco ProCredit
Colombia
Banco ProCredit
Ecuador
Banco Los Andes
ProCredit Bolivia
banks have a transparent, low-risk profile. We
do not rely heavily on capital market funding and
have no exposure to complex financial products.
Furthermore, our staff are well trained, flexible
and able to provide competent advice to clients,
guiding them through difficult times as well as
good times. Despite the turmoil of the global financial
markets, the performance of the ProCredit
group has been remarkably stable: we ended
2010 with a good liquidity position, comfortable
capital adequacy, PAR over 30 days of 3.7%, and
a modest profit. Given the very difficult macroeconomic
situation in many of our countries of
operation, this was a strong performance.
Our shareholders have always taken a conservative,
long-term view of business development,
ProCredit Holding Germany
ProCredit Bank Serbia
ProCredit Bank
Bosnia and Herzegovina
ProCredit Bank Kosovo
ProCredit Bank Albania
ProCredit Bank Macedonia
ProCredit
Savings and Loans Ghana
ProCredit Bank
Democratic Republic of Congo
Banco ProCredit Mozambique
The international group
of ProCredit institutions;
see also
www.procredit-holding.com
ProCredit Bank Ukraine
ProCredit Bank Moldova
ProCredit Bank Romania
ProCredit Bank Georgia
ProCredit Bank Armenia
ProCredit Bank Bulgaria

36
Annual Report 2010
aiming to strike the right balance between a
shared developmental goal – reaching as many
small enterprises and small savers as possible –
and achieving commercial success.
Strong shareholders provide a solid foundation
for the ProCredit group. It is led by ProCredit
Holding AG, a German-based company that was
founded by IPC in 1998. ProCredit Holding is a
public-private partnership. The private shareholders
include: IPC and IPC Invest, an investment
vehicle set up by IPC and ProCredit staff
members; the Dutch DOEN Foundation; the US
pension fund TIAA-CREF; the US Omidyar-Tufts
Microfinance Fund; and the Swiss investment
fund responsAbility. The public shareholders
include the German KfW Bankengruppe (KfW
banking group); IFC, the private sector arm of the
World Bank; the Dutch development bank FMO;
the Belgian Investment Company for Developing
Countries (BIO) and Proparco, the French Investment
and Promotions Company for Economic
Co-operation. The group also receives strong
support from the EBRD and Commerzbank, our
minority shareholders in Eastern Europe, and
from the Inter-American Development Bank (IDB)
in Latin America. With the strong support of its
shareholders and other partners, the ProCredit
group ended the year with a total capital adequa-
cy ratio of 16.5% – a figure that reflects their confidence
in the group.
ProCredit Holding is not only a source of equity
for its subsidiaries, but also a guide for the development
of the ProCredit banks, providing the
personnel for their senior management and offering
support in all key areas of activity. The
holding company ensures the implementation of
ProCredit corporate values, best practice banking
operations and Basel II risk management
principles across the group. The group’s business
is run in accordance with the rigorous regulatory
standards imposed by the German banking
supervisory authority (BaFin).
ProCredit Holding and the ProCredit group place
a strong emphasis on human resource management.
Our “neighbourhood bank” concept is not
limited to our target customers and how we reach
them; it also concerns the way in which we work
with our staff and how we encourage them to work
with their customers. The strength of our relationships
with our customers will continue to be
central to working with them effectively in 2010
and achieving steady business results. In 2010
there was a strong focus on staff quality and efficiency,
which resulted in a 20% reduction in the
number of staff over the year. This focus has been

The ProCredit Group: Responsible Neighbourhood Banks for Small Businesses and Ordinary People 37
supported by the introduction of a new groupwide
recruitment policy and a demanding training
programme for all staff. This is complemented by
a six month stipend or intern programme provided
by ProCredit banks for new entrants into the banking
sector which symbolises our commitment to
skill development in all our countries of operation.
A responsible approach to neighbourhood banking
requires a decentralised decision-making
process and a high level of judgment and adaptability
from all staff members, especially our
branch managers. Our corporate values embed
principles such as open communication, transparency
and professionalism into our day-today
business. Key to our success is therefore
the recruitment and training of dedicated staff.
We maintain a corporate culture that promotes
the professional development of our employees
while fostering a deep sense of personal and social
responsibility. This entails not only intensive
training in technical and management skills, but
also frequent staff exchanges between our member
institutions. In this way, we take full advantage
of the opportunities for staff development
that are created by the existence of a truly international
group.
A central plank in our approach to training is the
ProCredit Academy in Germany, which provides a
part-time “ProCredit Banker” training programme
over a period of three years for high-potential
staff from each of the ProCredit institutions. The
curriculum includes intensive technical training
and also exposes participants to subjects such
as anthropology, history, philosophy and ethics
in an open and multicultural learning environment.
Our goal in covering such varied topics is
to give our future managers the opportunity to
develop their knowledge and views of the world.
At the same time, we aim to improve their communication
and staff management skills. The group
also operates three Regional Academies in Latin
America, Africa and Eastern Europe to support
the professional development of middle managers
at the local level.
The group’s strategy for 2011 focuses on two key
interrelated themes “high quality customer relations”
and “efficiency”. We will further expand
our business as the “house bank” of choice for
small and very small enterprises, offering tailored
loans and other banking services. At the
same time we will continue to improve the speed
and convenience of our services for all clients.
Strong investment in our staff will also remain a
key priority since it is their skills which enable
us to build strong, broad-based relationships
with our clients, which are a particularly important
factor of success in volatile macroeconomic
conditions. As a group of responsible banks for
ordinary people with prudent policies and welltrained
staff to ensure our steady performance,
we look forward to consolidating our position as a
“house bank” for small businesses, their employees,
and the ordinary people who live and work in
the neighbourhoods around our branches.

38
Annual Report 2010
ProCredit in Eastern Europe
ProCredit operates in 11 countries across Eastern
Europe. It is a leading provider of banking services
to very small, small and medium-sized businesses
in the region. ProCredit banks provide a
high standard of transparent, professional services
to all their clients – the ordinary people who
live and work in the vicinity of the 457 ProCredit
branches across the region.
2010 proved to be another challenging year for
the South Eastern and Eastern European countries
in which ProCredit works. Most countries
in South Eastern Europe experienced no GDP
growth or GDP decline over the year as they continued
to adjust to the fallout of the financial
sector crisis. Only Albania and the more eastern
countries (Armenia, Georgia, Moldova and
Ukraine) experienced more steady GDP growth
of 4-5%. The development of banking sectors
in the region also continued to be depressed as
non-performing loans (NPLs, i.e. loans more than
90 days overdue) that were originally disbursed
in the pre-crisis boom years now work their way
through the system. In most markets, sector
NPLs were over 10% at the end of 2010.
Macroeconomic stability and signs of recovery
are currently being driven above all by strong
commodity prices. However, government spending
remained very tight, consumer confidence
low and activity in the small and medium enterprise
sector depressed in 2010. Prospects
for 2011 are somewhat more encouraging and
ProCredit banks are working closely with their
enterprise clients to support their ability to respond
to gradually emerging opportunities. Indeed,
more widely, the role of ProCredit banks
against this still vulnerable economic backdrop
is a valuable one as our clients and the financial
markets in which we operate adjust to the new
economic reality in the region.
For the financial sectors in which we work,
ProCredit banks have represented consistency,
good risk management and a high degree of financial
transparency throughout the past two unsettled
years. ProCredit banks have been notable
in continuing to lend steadily and responsibly to
support small businesses whilst banking sectors
as a whole have tended to be restrictive or erratic.
For our enterprise clients, ProCredit banks remain
a reliable and responsible partner. We
specialise in working with very small, small and
medium enterprises, because these segments
are central to developing the economy and employment
opportunities. Our approach is based
on building strong relationships with our clients
and a thorough understanding of their business.
This means we disburse loans which help a business
to develop and are in line with a company’s
ability to repay. It also allows us, for example,
where necessary to appropriately adapt loan repayment
schedules if the sales pattern of a business
has changed significantly. This has helped
some of our clients endure through the crisis and
has meant that arrears and write-off figures for
the ProCredit banks in Eastern Europe are relatively
low. The combined PAR (Portfolio at Risk
> 30 days) for the Eastern European institutions
as a percentage of their loan portfolio was 4.1%
at the end of 2010 (PAR>90 days stood at 3.0%).
Write-offs for the group in the region amounted
to 1.2% of the loan portfolio.
Asset quality decline amongst the Eastern European
institutions was concentrated in Bosnia,
Bulgaria, Romania and Ukraine, countries in
which the pre-crisis boom in consumer lending
was most extreme and the level of overindebtedness
in the banking sector as a whole therefore
most marked. The performance of ProCredit
banks across the region and in these countries remains
very strong when compared to the market
as a whole. In these terms ProCredit continues to
demonstrate that with a responsible approach to
lending, based on a thorough understanding of
the real situation of an enterprise, a high degree
of financial stability can be achieved for clients
and in bank performance.
At the same time our enterprise loan portfolio
grew over 2010. The outstanding loan portfolio
of the 11 ProCredit banks in Eastern Europe stood
at EUR 2.7 billion at the end of 2010 (an increase
of 6.9% from the end of 2009). In 2010, ProCredit
staff have been proactive in acquiring new clients
and serving existing clients, especially supporting
responsible investment opportunities
as well as good management of working capital,

Switzerland
Germany
Italy
Czech Republic
Austria
Slovenia
Croatia
Poland
Slovakia
Hungary
Bosnia
and
Herzegovina
Serbia
Montenegro Kosovo
Macedonia
Albania
Greece
Romania
Bulgaria
liquidity and receivables. Our lending activities
aim in particular to foster local production and
service industries, and include the provision of
agricultural loans. We are keen to support a sector
that has been particularly neglected by other
banks and that is vital for employment and social
cohesion outside the main urban areas.
In 2010, in addition to developing their core segments
(very small and small enterprises taking
loans with a volume of less than EUR 150,000),
ProCredit banks also grew with clients in the
“medium enterprise” segment (defined as clients
taking loans above EUR 150,000) by some 20%,
illustrating a need from such businesses for capital
which was not being provided by other banks.
For very small and small businesses in the region,
ProCredit banks remain the leading bank group
specialised in meeting their needs. These businesses
are still relatively informal, but are operating
in steadily formalising markets which are
becoming more competitive. It takes a focused
bank with well trained staff to work sustainably
with this segment. In summary, ProCredit banks
have firmly established themselves as broadbased
enterprise banks able to cover the full
spectrum of demand.
Belarus
Ukraine
Moldova
Turkey
ProCredit in Eastern Europe 39
Russia
Georgia
For our private person clients, ProCredit banks
have also been a symbol of stability and transparency
in turbulent years. ProCredit has focused
for many years on promoting a savings culture because
setting money aside can help clients build
a buffer against the vagaries of life, and the ratio
of deposits to GDP in Eastern European countries
is still well below Western European levels.
We offer simple and reliable retail banking services.
Our belief in transparent, direct communication
is particularly important in fostering clients’
trust in these difficult times. We understand that
our clients want to know in simple language how
to save safely; they also want to access their
money when they need it and they want access to
convenient and efficient transaction services. In
2010, as in 2009, our experience confirmed that
our clients appreciate the transparent, responsible
approach we take.
ProCredit banks fund most of their lending activities
from local savings. The ratio of deposits to
loans in the ProCredit banks in the region is close
to 90%. Not only did we not have to rely on unpredictable
capital markets for funds in 2010, but
ProCredit banks in the region remained highly
Armenia Azerbaijan

40
Annual Report 2010
liquid throughout the year and our cost of funds
declined.
Looking forward, in addition to the savings services
they provide, ProCredit banks will continue
to be very conservative with consumer loans for
their private person clients, but will expand their
provision of convenient banking services, such
as e-banking and direct debit, and will continue
to provide responsible housing improvement, energy
efficiency and other loans which help build
a family’s assets.
For our staff, ProCredit banks offer unique opportunities
for professional development and job
satisfaction given our strong client orientation,
open communication culture and unusual commitment
to staff training. In terms of institution
building activities, ProCredit banks in Eastern
Europe were, like the rest of the ProCredit group,
focused above all on quality and efficiency rather
than quantity in 2010. The pre-crisis boom
years in Eastern Europe encouraged all banks,
including ProCredit banks, to invest heavily in
staff numbers and branch infrastructure, which
needed to be brought back in line with prevailing
economic conditions. This has provided the
context for ProCredit banks to also review staff
standards and our training efforts as well as bank
processes and procedures – to ensure our institutions
are ideally aligned with demand and the
efficient services required by our clients. As a
result, branch infrastructure has been reviewed,
staff numbers reduced and greater job specialisation
implemented.
Our staff is the key element in our approach to being
a stable, down-to-earth and personal banking
partner. The ProCredit group invests a lot to
achieve high standards in staff recruitment and
development. Staff exchanges, cross-border
training programmes and regional workshops
are an important part of our approach. To complement
the international academy in Germany, we
have an Eastern European Academy, located near
Skopje in Macedonia, which is dedicated to the
training of ProCredit middle managers. The regional
academy is an important channel for rapid
and consistent communication region-wide and
one that helps us adapt quickly to face new challenges.
A language centre at the academy also
provides residential English courses, maximising
the potential for international exchange within
the group. Investment in our staff is an ongoing
commitment and will remain a central plank in the
ProCredit Bank approach. A qualified, motivated
and professional team lies at the root of our lasting
success across Eastern Europe.

Name
ProCredit Bank
Albania
ProCredit Bank
Armenia
ProCredit Bank
Bosnia and Herzegovina
ProCredit Bank
Bulgaria
ProCredit Bank
Georgia
ProCredit Bank
Kosovo
ProCredit Bank
Macedonia
ProCredit Bank
Moldova**
ProCredit Bank
Romania
ProCredit Bank
Serbia
ProCredit Bank
Ukraine
Highlights*
Founded in October 1998
40 branches
29,791 loans / EUR 172.1 million in loans
195,053 deposit accounts / EUR 242.0 million
672 employees
Founded in December 2007
9 branches
4,512 loans / EUR 39.0 million in loans
18,116 deposit accounts / EUR 19.4 million
240 employees
Founded in October 1997
26 branches
20,746 loans / EUR 119.2 million in loans
97,249 deposit accounts / EUR 111.7 million
460 employees
Founded in October 2001
75 branches
42,286 loans / EUR 562.5 million in loans
220,971 deposit accounts / EUR 373.5 million
1,268 employees
Founded in May 1999
58 branches
49,060 loans / EUR 250.7 million in loans
436,898 deposit accounts / EUR 202.4 million
1,640 employees
Founded in January 2000
62 branches
93,510 loans / EUR 494.8 million in loans
409,502 deposit accounts / EUR 676.1 million
1,107 employees
Founded in July 2003
30 branches
26,790 loans / EUR 148.5 million in loans
118,067 deposit accounts / EUR 139.2 million
541 employees
Founded in December 2007
23 branches
11,249 loans / EUR 61.4 million in loans
38,802 deposit accounts / EUR 24.7 million
454 employees
Founded in May 2002
37 branches
28,900 loans / EUR 180.8 million in loans
118,147 deposit accounts / EUR 133.5 million
830 employees
Founded in April 2001
57 branches
95,198 loans / EUR 507.2 million in loans
329,216 deposit accounts / EUR 316.2 million
1,299 employees
Founded in January 2001
40 branches
17,089 loans / EUR 190.3 million in loans
125,129 deposit accounts / EUR 130.0 million
1,017 employees
ProCredit in Eastern Europe 41
Contact
Legal address: Sami Frashëri St., Tirana
Mailing address: Dritan Hoxha St., Tirana
P.O. Box 2395
Tel./Fax: +355 4 2 389 300 / 22 33 918
info@procreditbank.com.al
www.procreditbank.com.al
105/1 Teryan St., area 11
0009 Yerevan
Tel./Fax: + 374 10 514 860 / 853
info@procreditbank.am
www.procreditbank.am
8 Emerika Bluma
71000 Sarajevo
Tel./Fax: +387 33 250 950 / 971
info@procreditbank.ba
www.procreditbank.ba
26 Todor Aleksandrov Blvd.
1303 Sofia
Tel./Fax: +359 2 813 5100 / 5110
contact@procreditbank.bg
www.procreditbank.bg
154 D. Agmashenebeli Ave.
0112 Tbilisi
Tel./Fax: +995 32 202222 / 202223
info@procreditbank.ge
www.procreditbank.ge
16 “Mother Tereze” Boulevard
10000 Prishtina
Tel./Fax: +381 38 555 777 / 248 777
info@procreditbank-kos.com
www.procreditbank-kos.com
109a Jane Sandanski Blvd.
1000 Skopje
Tel./Fax: +389 2 321 99 00 / 01
info@procreditbank.com.mk
www.procreditbank.com.mk
65 Stefan cel Mare Ave.
office 901, Chisinau
Tel./Fax: +373 22 836555 / 273488
office@procreditbank.md
www.procreditbank.md
62-64 Buzesti St., Sector 1
011017 Bucharest
Tel./Fax: +40 21 201 6000 / 305 5663
headoffice@procreditbank.ro
www.procreditbank.ro
17 Milutina Milankovica
11070 Belgrade
Tel./Fax: +381 11 20 77 906 / 905
info@procreditbank.rs
www.procreditbank.rs
107a Peremohy Ave.
03115 Kyiv
Tel./Fax: +380 44 590 10 17 / 01
info@procreditbank.com.ua
www.procreditbank.com.ua
* The figures in this section have been compiled on the basis of the financial and operational reporting performed in accordance with
group-wide standards; they may differ from the figures reported in the bank’s local statements.
** Not including finance company ProCredit Moldova.

42
Annual Report 2010
Our Clients
Ms. Elena Duţă, 41, started her mushroom business
in the village of Surani in 2007. She first
visited several mushroom farms in Romania and
abroad to learn about the growing process and
then built a cultivation facility with her own savings.
However, because she could not afford to
equip the building with air conditioning, her company,
Devicostore, was only able to produce mushrooms
in the milder spring and autumn months.
Without special equipment, mushroom cultivation
is a slow process, so Ms. Duţă decided to
invest in upgrading her equipment in order to increase
output.
“I learned that I might be able to obtain an
investment loan from the European Agricultural
Fund for Rural Development (E.A.F.R.D.), but that
I would need to come up with the total project
amount of EUR 120,000 up front and later be
reimbursed 65% of the whole amount minus
VAT. However, I did not have the full amount and
needed to apply for a bank loan,”
she explains.
In June 2009, Ms. Duţă’s project was declared
to be eligible for funding from this programme.
Shortly thereafter, Ms. Duţă received a call from
staff at ProCredit Bank’s Ploiesti branch.
“We set up a meeting and it went very well. The
bank understood my business and was very sup-
Elena Duţă,
Mushroom Producer
portive. I looked into several offers, but ProCredit
Bank was the best choice for me.”
After her project was approved in April 2010,
Ms. Duţă received the EUR 60,000 loan that she
needed from ProCredit Bank. In the same month,
the bank granted her an additional loan of EUR
27,000. Both loans were used for infrastructural
improvements, air conditioning equipment and
working capital.
Once the cultivation facility was upgraded, production
levels skyrocketed, with the company
distributing every 6 weeks. Devicostore supplies
mushrooms to major supermarkets in Ploiesti.
Initially, Ms. Duţă employed her brother and her
sister-in-law; now, during peak production times,
Devicostore also hires several part-time workers.
She is now thinking of investing in a new cultivation
facility.
“If you want to grow your business, it is very
important to have reliable partners,”
she says.
In her case, ProCredit Bank is such a partner, providing
support, advice and funding.
“I am very happy dealing with ProCredit Bank
and recommend it to other entrepreneurs whenever
I can.”

Rodica and Ciprian Lazar,
Producers of Non-asbestos
Insulation Materials
Run by Rodica and Ciprian Lazar, Etansari Grafex
is a family company that produces and sells
non-asbestos insulation materials. Established
in Ploiesti in 1996 by Mrs. Lazar’s parents, the
business started in a rented space no bigger than
20 m 2 and had no other employees besides the
family members.
The company grew steadily, opening new production
departments and increasing the number of
employees over the years. By 2006, the Lazars
had around 30 employees and conducted their
business activities at two sites, both rented, with
a total workspace of 500 m 2 . This was when the
couple decided to purchase land on which to build
their own production facility. Seeking funding for
this project, they went online and discovered that
ProCredit Bank offered financing for small and
medium-sized companies. They went to the bank’s
Ploiesti branch and discussed loan options.
“ProCredit Bank listened to what we had to say
and understood our needs – that was what mattered
the most!”
says Mrs. Lazar.
Favourably impressed with what ProCredit had to
offer, in May 2006 the Lazars became clients at
the bank and received a loan of EUR 120,000. The
first tranche was used to purchase a 6000 m 2 plot
of land. The second tranche, disbursed in November
2006, went into building the production facil-
ity. In April 2007, the couple received a new loan
of EUR 49,500, which it invested in equipment for
the facility and payments for finalising the construction.
A third loan of EUR 160,000 was given
to the company in March 2009 for construction of
a second facility on the same premises.
Thanks to the growth made possible by ProCredit
Bank’s support, the Lazars had built their own office
space and production facility by 2010, with
over 40 employees working on their 1200 m 2
property. Etansari Grafex has increased its turnover
five-fold and now serves more than 75 clients
all over Romania.
The Lazars are sure that they will remain loyal to
ProCredit in the future, as they are happy with the
relationship they have with the bank and like the
way they are treated there.
“If the bank’s conditions remain as favourable
as they are now, we will certainly apply for other
loans to further expand our business.”
Our Clients 43

44
Annual Report 2010
After more than 11 years of experience in the baking
industry, Mr. Ion Stoian, 38, opened a small
bakery called Panion in 1999. He started with 15
employees and initially produced only bread. By
2003 the bakery was doing so well that Mr. Stoian
decided to expand his business.
Mr. Stoian first learned about ProCredit Bank
through a friend who is a satisfied client of the
bank. In May 2003, the baker received a loan
of EUR 2,500, which he used to purchase new
equipment for Panion’s production line. Business
continued to thrive, so in 2004, Mr. Stoian
decided to invest in a new production facility
and another production line. In May of the same
year he applied for and received a third loan from
ProCredit in the amount of EUR 250,000, which
he used to purchase construction materials and
baking equipment, as well as a plot of land near
Bucharest on which to build the production facility.
After two years of hard work and another loan
of EUR 150,000 from ProCredit, construction
was complete and the bakery was operating at
full capacity.
Ion Stoian,
Bakery Owner
“When I started the business, Panion was
producing around 2,000 loaves of bread per
day. Now we are producing between 45,000 and
50,000 loaves daily and every baked good you
can think of!”
The company now has 67 employees who bake
and distribute the products, and the facility is
well equipped, with one 10 m 2 and two 50 m 2 ovens.
Twenty minivans travel around 2000 km daily
to deliver Panion breads and pastries to bakery
shops and supermarkets all over Bucharest, as
well as to outlets in the regions around the city.
Although many people are watching their wallets
these days, the demand for baked goods has not
fallen. In fact, Mr. Stoian is looking forward to
continuing to grow his business and confidently
states that he will continue to work with ProCredit.
“ProCredit Bank has never let me down and
always finds solutions for me and my business. I
have found the right partner and I see no reason
to make a change. ProCredit is my bank.”

Mr. Valeriu Dacius Masalar, 35, started his first
business in 1996 producing shutters. The company,
Supra Construct, developed quickly, and in
2003 Mr. Masalar decided to expand his range of
business activities to include importing and distributing
carpet and parquet. However, he knew
would need external funding for this expansion.
In the same year, a friend recommended ProCredit
Bank, and after meeting with a loan officer, Mr.
Masalar applied for a small working capital loan
of EUR 3,000. Since then, he has taken out several
loans ranging from EUR 20,000 to EUR 30,000 to
improve and develop Supra Construct. He has
also opened a credit line and uses the bank’s
overdraft services, which are some of the special
services that ProCredit Bank offers to its SME clients.
By providing him with convenient access to
funds for his business, these services allow him
to keep everything running smoothly.
As Mr. Masalar is very happy with ProCredit
Bank’s business client services, he also uses its
private individual products. He is eager to try out
new services and finds ProCredit’s e-banking
Valeriu Dacius Masalar,
Owner of a Carpet and
Parquet Trading Company
services particularly useful. In addition, he enthusiastically
recommends the bank to others.
“I like how dynamic ProCredit is and the fact that
there is always somebody there for me. The bank
makes an effort to build straightforward and
friendly relationships with its clients and has
therefore gained my trust. I do not see any reason
to work with another bank.”
Since Mr. Masalar started working with ProCredit
Bank, his company has grown from having 3 to 27
employees and he now owns the production facility.
Supra Construct works with important design
and construction shop chains and is also one of
Bucharest’s biggest carpet and parquet installers
for office buildings.
“With ProCredit Bank’s help, Supra Construct has
come a long way since 2003. I look forward to
working with the bank in the future.”
Our Clients 45

46
Annual Report 2010
Financial Statements
For the year ended 31 December 2010.
Prepared in accordance with International Financial Reporting Standards.

Financial Statements 47

48
Annual Report 2010
Statement of Comprehensive Income (single statement approach)
For the year ended 31 December 2010
Note 2010 2009
in EUR
Interest income 35,043,173 42,288,683
Interest expense (12,936,265) (23,455,301)
Net interest income 7 22,106,908 18,833,382
Fee and commission income 3,050,115 2,937,534
Fee and commission expense (508,182) (418,438)
Net fee and commission income 8 2,541,933 2,519,096
Net trading income 9 1,013,695 918,290
Other operating income 300,918 372,321
Operating income 25,963,454 22,643,089
Net impairment loss on financial assets 11 (4,801,864) (4,032,600)
Personnel expenses 12 (11,652,770) (12,317,761)
Operating lease expenses (4,009,394) (4,347,170)
Depreciation and amortisation 18, 19 (2,316,718) (2,591,752)
Other operating expenses 9 (6,714,464) (5,989,751)
Operating expenses (29,495,210) (29,279,034)
Loss before income tax (3,531,756) (6,635,945)
Income tax revenue 13 369,679 1,443,009
Loss for the year (3,162,077) (5,192,936)
Other comprehensive income, net of income tax
Effect of translation (*) (243,496) (1,462,128)
Other comprehensive income for the year, net of income tax (243,496) (1,462,128)
Total comprehensive income for the year (3,405,573) (6,655,064)
(*) see note 3.a
The statement of comprehensive income is to be read in conjunction with the notes to and forming part of the financial statements set out on
pages 52 to 74.
The financial statements were approved by the Board of Administration on 12 April 2011 and were signed on its behalf by:
Dr. Ilinca Rosetti
General Manager
Heribert Kailbach
Deputy General Manager

Statement of Financial Position
As at 31 December 2010
Note 31 December 31 December
in EUR 2010 2009
Assets
Cash and balances with National Bank of Romania 14 46,881,293 64,880,319
Loans and advances to banks 15 991,920 1,535,027
Loans and advances to customers 17 170,526,084 174,423,600
Treasury bills, available-for-sale 28 3,480,127 9,411,905
Investment securities, available-for-sale 16 86,305 87,460
Property and equipment 19 4,229,326 5,565,270
Intangible assets 18 461,972 563,159
Deferred tax assets 13 1,584,165 1,237,293
Other assets 20 1,471,968 1,569,930
Total assets 229,713,160 259,273,963
Liabilities
Deposits from banks 25 200,012 –
Deposits from customers 21 144,049,401 133,563,751
Loans from banks and other financial institutions 22 52,725,697 94,337,308
Subordinated liabilities 24 8,929,648 8,928,206
Other liabilities 23 956,621 1,285,365
Total liabilities 206,861,379 238,114,630
Equity
Share capital and share premium 26 32,555,479 27,844,530
Reserves 27 1,585,838 1,607,067
Accumulated deficit (11,344,291) (8,281,092)
Translation reserve 3.a 54,755 (11,172)
Total equity 22,851,781 21,159,333
Total liabilities and equity 229,713,160 259,273,963
The statement of financial position is to be read in conjunction with the notes to and forming part of the financial statements set out on pages
52 to 74.
The financial statements were approved by the Board of Administration on 12 April 2011 and were signed on its behalf by
Dr. Ilinca Rosetti Heribert Kailbach
General Manager Deputy General Manager
Financial Statements 49

50
Annual Report 2010
Statement of Changes in Equity
For the year ended 31 December 2010
Share Share Reserves Accumulated Translation Total
in EUR Capital premium deficit reserve equity
Balance at 1 January 2010 27,543,274 301,256 1,607,067 (8,281,092) (11,172) 21,159,333
Total comprehensive
income for the year
Loss for the year – – – (3,162,077) – (3,162,077)
Other comprehensive income,
net of income tax
Effect of translation (*)
Total other comprehensive
(383,094) (3,978) (21,229) 98,878 65,927 (243,496)
income, net of income tax (383,094) (3,978) (21,229) 98,878 65,927 (243,496)
Total comprehensive
income for the year (383,094) (3,978) (21,229) (3,063,199) 65,927 (3,405,573)
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Contributions from shareholders 5,098,021 – – – – 5,098,021
Total contributions by owners 5,098,021 – – – – 5,098,021
Balance at 31 December 2010 32,258,201 297,278 1,585,838 (11,344,291) 54,755 22,851,781
Balance at 1 January 2009 25,979,823 319,626 1,705,058 (3,408,067) 144,857 24,741,297
Total Comprehensive
income for the year
Loss for the year – – – (5,192,936) – (5,192,936)
Other comprehensive
income, net of income tax
Effect of translation (*)
Total other comprehensive
(1,509,649) (18,370) (97,991) 319,911 (156,029) (1,462,128)
income, net of income tax (1,509,649) (18,370) (97,991) 319,911 (156,029) (1,462,128)
Total comprehensive
income for the year (1,509,649) (18,370) (97,991) (4,873,025) (156,029) (6,655,064)
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Contributions from shareholders 3,073,100 – – – – 3,073,100
Total contributions by owners 3,073,100 – – – – 3,073,100
Balance at 31 December 2009 27,543,274 301,256 1,607,067 (8,281,092) (11,172) 21,159,333
(*) see note 3.a
The statement of changes in equity is to be read in conjunction with the notes to and forming part of the financial statements set out on pages
52 to 74.

Statement of Cash Flows
For the year ended 31 December
in EUR
Note 2010 2009
Cash flows from operating activities
Loss for the year
Adjustments for:
(3,162,077) (5,192,936)
Depreciation and amortisation 18, 19 2,316,718 2,591,752
Net impairment on loans and advances to customers 11 1,513,246 2,061,684
Loans written-off 11 5,204,656 3,252,915
Loss on disposal of property and equipment 552,548 88,540
Accrued interest, deferred commission on debt securities (747,146) (2,039,759)
Income tax revenue 13 (369,679) (1,443,009)
Dividend income (1,794) (2,864)
Exchange rate differences 831,735 (1,060,767)
Operating profit/(loss) before changes in operating assets and liabilities 6,138,207 (1,744,443)
Change in minimum compulsory reserve 14 2,852 21,194,904
Change in loans and advances to customers (2,818,335) 30,370,679
Change in other assets 20 (97,963) 481,247
Change in deposits from banks 200,000 –
Change in deposits from customers 10,726,204 (17,141,505)
Change in other liabilities 23 (328,745) (871,557)
Net cash from operating activities 13,822,220 32,289,325
Cash flows from investing activities
Purchase of property and equipment and intangible assets 18,19 (1,466,851) (2,355,313)
Dividends received 1,794 2,864
Proceeds from sale of property and equipment 191,364 –
Net cash used in investing activities (1,273,693) (2,352,449)
Cash flows from financing activities
Financial Statements 51
Proceeds from issue of share capital 5,098,021 3,054,730
Proceeds from borrowings 14,770,000 19,955,537
Repayment of borrowing (56,887,607) (19,719,613)
Repayment of debt securities issued – 10,420,000
Net cash used in financing activities (37,019,586) (7,129,346)
Net increase in cash and cash equivalents
Cash and cash equivalents at 31 December 36,508,956 13,701,426
Net increase/(decrease) in cash and cash equivalents (24,471,059) 22,807,530
Cash and cash equivalents at 31 December 28 12,037,897 36,508,956
Cash flows from operating activities include:
Interest received 35,043,173 42,288,683
Interest paid (12,936,265) (23,455,301)
Fees and commissions received 3,050,115 2,937,534
Fees and commissions paid (508,182) (418,438)
24,648,841 21,352,478
The statement of cash flows is to be read in conjunction with the notes to and forming part of the financial statements set out on pages
52 to 74.

52
Annual Report 2010
Notes to the Financial Statements
For the year ended 31 December 2010
1. Reporting entity
ProCredit Bank S.A. (the “Bank” or “ProCredit”) is domiciled in Romania.
The Bank was established in Romania in July 2002 (up to
November 2004 the Bank was known as Microfinance Bank MIRO
S.A.), and is licenced by the National Bank of Romania to conduct
banking activities.
The Bank provides day-to-day banking services to corporate and
individual clients. These include: accounts opening, domestic and
international payments, foreign exchange transactions, working
capital finance and overdrafts, medium term facilities and mortgage
loans. The principal activity of the Bank is to finance very
small and small enterprises operating in Romania.
The Bank operates through the Head Office located in Bucharest
and through its network consisting of 26 branches (31 December
2009: 29) and 11 agencies (31 December 2009: 14) located in
Romania.
The current registered office of the Bank is located at:
62 – 64 Buzesti Street,
Bucharest, Sector 1
Romania
The Bank’s number of employees as at 31 December 2010 was of
830 (31 December 2009: 1006).
The Bank is managed by a Board of Directors made up of 5 members
(31 December 2009:7 members), lead by a Chairman, and by Dr.
Ilinca Rosetti as General Manager of the Bank. The composition of
the Board of Directors was as follows:
Position 31 December 2010 31 December 2009
Chairperson Dr. Anja Lepp Dr. Anja Lepp
Vice-Chairpeson – Ana Maria Mihaescu
Member Ivaylo Blagoev Ivaylo Blagoev
Member Hanns M. Hagen Hanns M. Hagen
Member Roger Bardo Rihmland Roger Bardo Rihmland
Member Dr. Dietrich Ohse Dr. Dietrich Ohse
Member – Guadalupe de la Mata
2. Basis of preparation
a) Statement of compliance
The financial statements of the Bank have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) as
endorsed by the European Union.
These financial statements have been prepared on the basis of the
IFRS in issue that are effective for the Bank’s IFRS annual reporting
date, 31 December 2010.
Differences between IFRS and statutory accounts
The accounts of the Bank are maintained in historical RON in accordance
with Romanian accounting law and National Bank of Romania
banking regulations (“statutory accounts”).
These accounts have been restated to reflect the differences between
the statutory accounts and the IFRS. Accordingly, such adjustments
have been made to the statutory accounts as have been
considered necessary to bring the financial statements into line, in
all material respects, with IFRS.
The major changes from the statutory financial statements prepared
under domestic law are:
• grouping of numerous detailed items into broader captions;
• different methodology for the calculation of loan loss impairment
provisions;
• deferred taxation, where appropriate;
• the necessary IFRS disclosure requirements.
b) Basis of measurement
The financial statements of the Bank are prepared on a fair value
basis for derivative financial instruments, financial assets and liabilities
held at fair value through profit and loss and available-forsale
instruments, except those for which a reliable measure of fair
value is not available.
Other financial assets and liabilities and non-financial assets and
liabilities are stated at amortised cost, revalued amount or historical
cost. Non-current assets held for sale are stated at the lower of
carrying amount and fair value less cost to sell.
c) Functional and presentation currency
These financial statements are prepared in Romanian Lei (“RON”),
which is the Bank’s functional currency and presented in Euro
(“EUR”).
The reason for using a presentation currency different from the
functional currency is to meet the expectations of existing and potential
providers of external financing and other stakeholders.
d) Use of estimates and judgements
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods
affected.
In particular, information about significant areas of estimation uncertainty
and critical judgements in applying accounting policies
that have the most significant effect on the amount recognised in
the financial statements are described in notes 4 and 5.
3. Significant accounting policies
The accounting policies set out below have been applied consistently
to all periods presented in these financial statements.
a) Foreign currency
i. Foreign currency transactions
Transactions in foreign currencies are translated to the functional
currency of the Bank at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign
currencies at the reporting date are retranslated to the functional
currency at the exchange rate at that date.
The foreign currency gain or loss on monetary items is the difference
between amortised cost in the functional currency at the beginning
of the period, adjusted for effective interest and payments
during the period, and the amortised cost in foreign currency translated
at the exchange rate at the end of the period. Non-monetary

assets and liabilities denominated in foreign currencies that are
measured at fair value are retranslated to the functional currency
at the exchange rate at the date that the fair value was determined.
Foreign currency differences arising on retranslation are recognised
in profit or loss, except for differences arising on the retranslation
of available-for-sale equity instruments.
The exchange rates of major foreign currencies were:
Currency 31 December 31 December Increase
2010 2009 %
Euro (EUR) 1: RON 4.2848 1: RON 4.2282 1.34 %
US Dollar (USD) 1: RON 3.2045 1: RON 2.9361 9.14%
ii. Translation from functional to presentation currency
All assets and liabilities for all balance sheets presented (including
comparatives) have been translated from the functional currency
to the presentation currency at the closing rate existing at the date
of each balance sheet presented. Income and expense for all periods
presented (including comparatives) have been translated using
an average rate for the period (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing
on the transaction dates, in which case income and expenses are
translated at the dates of the transactions). Share capital, retaining
earnings and all other reserves are translated at closing rates.
All exchange differences resulting from translation have been recognised
directly as a separate component in equity as translation
reserve.
The restatement and presentation procedures used according with
IAS 21 - The Effects of Changes in Foreign Exchange Rates, could
result in distortion of the figures presented in EUR compared with
real values.
b) Interest
Interest income and expense are recognised in the income statement
using the effective interest method. The effective interest rate
is the rate that exactly discounts the estimated future cash payments
and receipts through the expected life of the financial asset
or liability (or, where appropriate, a shorter period) to the carrying
amount of the financial asset or liability. The effective interest rate
is established on initial recognition of the financial asset and liability
and is not revised subsequently.
The calculation of the effective interest rate includes all fees and
points paid or received transaction costs, and discounts or premiums
that are an integral part of the effective interest rate. Transaction
costs are incremental costs that are directly attributable to the
acquisition, issue or disposal of a financial asset or liability.
Interest income and expense presented in the income statement
include interest on financial assets and liabilities at amortised cost
on an effective interest rate basis and interest on available-for-sale
investment securities calculated on effective interest basis.
c) Fees and commission
Fees and commission income and expenses that are integral to the
effective interest rate on a financial asset or liability are included in
the measurement of the effective interest rate.
Other fees and commission income, including account servicing
fees, foreign currency transactions fees, fees for guarantees given
and opening of letter of credit fees are recognised as the related
services are performed on an accrual basis.
Other fees and commission expense relates mainly to transaction
and service fees, which are expensed as the services are received.
d) Net trading income
Net trading income comprises gains less loss related to foreign exchange
operations.
e) Dividends
Dividend income is recognised when the right to receive income
is established. Usually this is the ex-dividend date for equity securities.
Dividends are reflected as a component of other operating
income based on the underlying classification of the equity
instrument.
Dividends are treated as an appropriation of profit in the period
they are declared and approved by the General Assembly of Shareholders.
The only profit available for distribution is the profit for
the year recorded in the Romanian statutory accounts, which differs
from the profit in these financial statements, prepared in accordance
with IFRS, due to the differences between the applicable
Romanian Accounting Regulations and IFRS.
f) Lease payments made
Payments made under operating leases are recognised in profit or
loss on a straight-line basis over the term of the lease. Lease incentives
received are recognised as an integral part of the total lease
expense, over the term of the lease.
g) Income tax
Financial Statements 53
Income tax comprises current and deferred tax. Income tax is recognised
in the income statement except to the extent that it relates
to items recognised directly in equity, in which case it is recognised
in equity.
Current tax is the expected tax payable on the taxable income for
the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect
of previous years. For the year ended 31 December 2010 the current
profit tax rate was 16% (31 December 2009: 16%).
Deferred tax is provided using the balance sheet method, providing
for temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is not recognised for the
following temporary differences: the initial recognition of goodwill,
the initial recognition of assets or liabilities in a transaction that
is not a business combination and that affects neither accounting
nor taxable profit, and differences relating to investments in
subsidiaries to the extent that they probably will not reverse in the
foreseeable future. Deferred tax is measured at the tax rates that
are expected to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or substantively
enacted by the reporting date. The tax rate used to calculate the
deferred tax position for the Bank at 31 December 2010 is 16% (31
December 2009: 16%).
A deferred tax asset is recognised only to the extent that it is probable
that future taxable profits will be available against which the
asset can be utilised. Deferred tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable
that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends
are recognised at the same time as the liability to pay the
related dividend is recognised.

54
Annual Report 2010
h) Financial assets and liabilities
i. Classification
The Bank classifies its financial instruments in the following categories:
Financial assets or financial liabilities at fair value through profit
or loss. This category has two sub-categories: financial assets or
financial liabilities held for trading, and those designated at fair
value through profit or loss at inception. A financial instrument is
classified in this category if it is:
(i) acquired or incurred principally for the purpose of selling or
repurchasing it in the near term;
(ii) part of a portfolio of identified financial instruments that are
managed together and for which there is evidence of a recent
actual pattern of short-term profit-taking; or
(iii) a derivative (except for a derivative that is a financial guarantee
contract or a designated and effective hedging instrument).
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market,
other than those that the Bank intends to sell immediately or in
the near term, those that the Bank, upon initial recognition, designates
as at fair value through profit and loss, those that the Bank,
upon initial recognition, designates as available for sale or those
for which the holder may not recover substantially all of its initial
investment, other than because of credit deterioration. Loans and
advances comprise loans and advances to banks and customers.
Held-to-maturity investments are non-derivative financial assets
with fixed or determinable payments and fixed maturities that the
Bank’s management has the positive intention and ability to hold
to maturity.
Available-for-sale financial assets are those financial assets that
are designated as available for sale or are not classified as loans
and advances, held-to-maturity investments or financial assets at
fair value through profit or loss.
ii. Recognition
The Bank initially recognises loans and advances, deposits, debt
securities issued and subordinated liabilities on the date that they
are originated. All other financial assets and liabilities (including
assets and liabilities designated at fair value through profit or
loss) are initially recognised on the trade date at which the Bank
becomes a party to the contractual provisions of the instrument.
iii. Derecognition
The Bank derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial asset
in a transaction in which substantially all the risks and rewards of
ownership of the financial asset are transferred. Any interest in
transferred financial assets that is created or retained by the Bank
is recognised as a separate asset or liability. The Bank writes off
the loans and advances to customers when they are determined to
be uncollectible.
The Bank derecognises a financial liability when its contractual obligations
are discharged or cancelled or expire.
iv. Offsetting
Financial assets and liabilities are set off and the net amount presented
in the balance sheet when, and only when, the Bank has a
legal right to set off the amounts and intends either to settle on a net
basis or to realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted
by the accounting standards, or for gains and losses arising from
a group of similar transactions such as in the Bank’s trading activity.
v. 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,
minus principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference
between the initial amount recognised and the maturity amount,
minus any reduction for impairment.
vi. Fair value measurement
Fair value is the amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing parties in
an arm’s length transaction on the measurement date. The determination
of fair values of financial assets and financial liabilities
is based on quoted market prices or dealer price quotations for financial
instruments traded in active markets. A market is regarded
as active if quoted prices are readily and regularly available and
represent actual and regularly occurring market transactions on an
arm’s length basis. For all other financial instruments fair value is
determined by using valuation techniques. Valuation techniques
include net present value techniques, the discounted cash flow
method, comparison to similar instruments for which market observable
prices exist, and valuation models.
The chosen valuation technique makes maximum use of market inputs,
relies as little as possible on estimates specific to the Bank,
incorporates all available factors that market participants would
consider in setting a price, and is consistent with accepted economic
methodologies for pricing financial instruments. Inputs to
valuation techniques reasonably represent market expectations
and measures of the risk-return factors inherent in the financial
instrument. Where a fair value cannot be reliably estimated, unquoted
equity instruments that do not have a quoted market price
in an active market are measured at cost and periodically tested for
impairment (further described in Note 3h vii).
vii. Identification and measurement of impairment
At each balance sheet date the Bank assesses whether there is
objective evidence that financial assets not carried at fair value
through profit or loss are impaired. Financial assets are impaired
when objective evidence demonstrates that a loss event has occurred
after the initial recognition of the asset, and that the loss
event has an impact on the future cash flows on the asset that can
be estimated reliably.
The Bank considers evidence of impairment at both a specific asset
and collective level. All individually significant financial assets are
assessed for specific impairment. All significant assets found not
to be specifically impaired are then collectively assessed for any
impairment that has been incurred but not yet identified. Assets
that are not individually significant are then collectively assessed
for impairment by grouping together financial assets (carried at
amortised cost) with similar risk characteristics.
Impairment losses on assets carried at amortised cost are measured
as the difference between the carrying amount of the financial
assets and the present value of estimated cash flows discounted at
the assets’ original effective interest rate. Losses are recognised in
profit or loss and reflected in an allowance account against loans
and advances. Interest on the impaired asset continues to be recognised
through the unwinding of the discount.
Objective evidence that financial assets (including equity securities)
are impaired can include default or delinquency by a borrower,
restructuring of a loan or advance by the Bank on terms that the
Bank would not otherwise consider, indications that a borrower or
issuer will enter bankruptcy, the disappearance of an active market
for a security, or other observable data relating to a group of assets
such as adverse changes in the payment status of borrowers
or issuers in the group, or economic conditions that correlate with
defaults in the group.

In assessing collective impairment the Bank uses statistical modelling
of historical trends of the probability of default, timing of recoveries
and the amount of loss incurred, adjusted for management’s
judgement as to whether current economic and credit conditions
are such that the actual losses are likely to be greater or less than
suggested by historical modelling. Default rates, loss rates and the
expected timing of future recoveries are regularly benchmarked
against actual outcomes to ensure that they remain appropriate.
When a subsequent event causes the amount of impairment loss
to decrease, the impairment loss is reversed through profit or loss.
Impairment losses on available-for-sale investment securities are
recognised by transferring the difference between the amortised
acquisition cost and current fair value out of equity to profit or loss.
When a subsequent event causes the amount of impairment loss
on an available-for-sale debt security to decrease, the impairment
loss is reversed through profit or loss.
However, any subsequent recovery in the fair value of an impaired
available-for-sale equity security is recognised directly in equity.
Changes in impairment provisions attributable to time value are reflected
as a component of interest income.
If there is objective evidence that an impairment loss has been incurred
on an unquoted equity instrument that is not carried at fair
value because its fair value cannot be reliably measured, or on a
derivative asset that is linked to and must be settled by delivery of
such an unquoted equity instrument, the amount of the impairment
loss is measured as the difference between the carrying amount of
the financial asset and the present value of estimated future cash
flows discounted at the current market rate of return for a similar
financial asset. Such impairment losses shall not be reversed.
i) Cash and cash equivalents
Cash and cash equivalents comprise cash balances on hand, balances
held with National Bank of Romania without minimum reserve
and cash balances in ATM.
For the purposes of the statement of cash flows, cash and cash
equivalents include cash balances on hand, unrestricted balances
held with central bank, and cash balances in ATM, current accounts
with banks and placements with other banks with less than 90 days
original maturity and are used by the Bank in the management of its
short-term commitments.
Cash and cash equivalents are carried at amortised cost in the balance
sheet.
j) Property and equipment
i. Recognition and measurement
Items of property and equipment are measured at cost less accumulated
depreciation and impairment losses (refer to accounting
policy no. 3.l).
Cost includes expenditures that are directly attributable to the acquisition
of the asset. The cost of self-constructed assets includes
the cost of materials and direct labor, any other costs directly attributable
to bringing the asset to a working condition for its intended
use, and the costs of dismantling and removing the items
and restoring the site on which they are located.
When parts of an item of property or equipment have different useful
lives, they are accounted for as separate items (major components)
of property and equipment.
ii. Subsequent costs
The cost of replacing part of an item of property or equipment is
recognised in the carrying amount of the item if it is probable that
the future economic benefits embodied within the part will flow to
the Bank and its cost can be measured reliably. The costs of the
day-to-day servicing of property and equipment are recognised in
profit or loss as incurred.
iii. Depreciation
Depreciation is recognised in profit or loss on a straight-line basis
over the estimated useful lives of each part of an item of property
and equipment. Leased assets are depreciated over the shorter of
the lease term and their useful lives. Land is not depreciated.
The estimated useful lives for the current and comparative year are
as follows:
Buildings 40 years
Leasehold improvements 5 – 10 years
Furniture and equipment 3 – 12 years
Motor vehicles 5 years
Depreciation methods, useful lives and residual values are reassessed
at the reporting date.
k) Intangible assets
Software acquired by the Bank is stated at cost less accumulated
amortisation and accumulated impairment losses (refer to accounting
policy no. 3.l).
Expenditure on internally developed software is recognised as an
asset when the Bank is able to demonstrate its intention and ability
to complete the development and use the software in a manner that
will generate future economic benefits, and can reliably measure
the costs to complete the development.
The capitalised costs of internally developed software include all
costs directly attributable to developing the software, and are amortised
over its useful life. Internally developed software is stated
at capitalised cost less accumulated amortisation and impairment.
Subsequent expenditure on software assets is capitalised only
when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure is expensed
as incurred.
Amortisation is recognised in profit or loss on a straight-line basis
over the estimated useful life of the software, from the date
that it is available for use. The estimate useful life of software is
three years.
l) Impairment of non-financial assets
Financial Statements 55
The carrying amounts of the Bank’s non-financial assets, other
than deferred tax assets, are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such
indication exists then the asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying amounts of an asset
or its cash-generating unit exceed its recoverable amount. A
cash-generating unit is the smallest identifiable asset group that
generates cash flows that largely are independent from other assets
and groups. Impairment losses are recognised in profit or loss.
The recoverable amount of an asset or cash-generating unit is the
greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the
risks specific to the asset. Impairment losses recognised in prior
periods are assessed at each reporting date for any indications that
the loss has decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed only
to the extent that the asset’s carrying amount does not exceed the

56
Annual Report 2010
carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised.
m) Deposits and subordinated liabilities
Deposits and subordinated liabilities are the Bank’s sources of
debt funding. The Bank classifies capital instruments as financial
liabilities or equity instruments in accordance with the substance
of the contractual terms of the instrument.
Deposits and subordinated liabilities are initially measured at fair
value plus transaction costs, and subsequently measured at their
amortised cost using the effective interest method.
n) Provisions
A provision is recognised if, as a result of a past event, the Bank
has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
o) Financial guarantees
Financial guarantees are contracts that require the Bank to make
specified payments to reimburse the holder for a loss it incurs because
a specified debtor fails to make payment when due in accordance
with the terms of a debt instrument.
Financial guarantee liabilities are initially recognised at their fair
value, and the initial fair value is amortised over the life of the financial
guarantee. The guarantee liability is subsequently carried at the
higher of this amortised amount and the present value of any expected
payment (when a payment under the guarantee has become
probable). Financial guarantees are included within other liabilities.
The Bank has no financial guarantees as at 31 December 2010.
p) Employee benefits
iv. Short-term benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided.
Short-term employee benefits include wages, salaries, bonuses
and social security contributions. Short-term employee benefits
are recognised as expense when services are rendered. A provision
is recognised for the amount expected to be paid under short-term
cash bonus or profit-sharing plans if the Bank has a present legal or
constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated
reliably.
v. Defined contribution plans
Obligations for contributions to defined contribution pension plans
are recognised as an expense in profit or loss when they are due.
The Bank, in the normal course of business makes payments to the
Romanian State funds on behalf of its Romanian employees for pension,
health care and unemployment benefit.
All employees of the Bank are members and are also legally obliged
to make defined contributions (included in the social security contributions)
to the Romanian State pension plan (a State defined
contribution plan). All relevant contributions to the Romanian State
pension plan are recognised as an expense in the income state-
ment as incurred. The Bank does not have any further obligations.
The Bank does not operate any independent pension scheme and,
consequently, has no obligation in respect of pensions.
vi. Defined benefit plans
The Bank does not operate any defined benefit plan, thus has no
obligation related to contributions to any such plan.
i. Other long-term employee benefits
The Bank’s net obligation in respect of long-term employee benefits
other than pension plans is the amount of future benefit that
employees have earned in return for their service in the current and
prior periods. The Bank has no contractual obligation to pay any
long-term benefit calculated taking into account the past service.
ii. Termination benefits
The Bank is not committed, without realistic possibility of withdrawal,
to any formal detailed plan to terminate employment before
the normal retirement date.
q) Standards and interpretations not yet adopted
A number of standards, amendments to standards and interpretations
are not yet effective for the year ended 31 December 2010,
and have not been applied in preparing these consolidated financial
statements. None of these will have an impact on the financial
statements of the Bank, with the exception of:
• IFRS 9, “Financial Instruments” (effective for annual periods
beginning on or after 1 January 2013, early adoption is permitted)
is not yet effective for the year ended 31 December
2010, and has not been applied in preparing these financial
statements. This Standard replaces the guidance in IAS 39,
Financial Instruments: Recognition and Measurement, about
classification and measurement of financial assets and liabilities,
and derecognition of financial assets and liabilities. The
Standard eliminates the existing IAS 39 categories of held to
maturity, available for sale and loans and receivable. Financial
assets will be classified into one of two categories on initial
recognition: financial assets measured at amortised cost; or
financial assets measured at fair value. A financial asset is
measured at amortised cost if the following two conditions are
met: the assets are held within a business model whose objective
is to hold assets in order to collect contractual cash flows;
and, its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal outstanding. Gains and losses on re-measurement of
financial assets measured at fair value are recognised in profit
or loss, except that for an investment in an equity instrument
which is not held for trading, IFRS 9 provides, on initial recognition,
an irrevocable election to present all fair value changes
from the investment in other comprehensive income (OCI). The
election is available on an individual share-by-share basis. No
amount recognised in OCI is ever reclassified to profit or loss at
a later date. It also includes those paragraphs of IAS 39 dealing
with how to measure fair value and accounting for derivatives
embedded in a contract that contains a host that is not a financial
asset, as well as the requirements of IFRIC 9, “Reassessment
of Embedded Derivatives”. It is expected that the new
Standard, when initially applied, will have a significant impact
on the financial statements, since it will be required to be retrospectively
applied. However, the Bank is not able to prepare
an analysis of the impact this will have on the financial statements
until the date of initial application. The Bank has not yet
decided on the date that it will initially apply the new Standard.
This standard has not been endorsed by the European Union.

Given the nature of the Bank’s operations, this standard is
expected to have a pervasive impact on the Bank’s financial
statements.
4. Financial risk management
a) Introduction and overview
The Bank has exposure to the following risks from its use of financial
instruments:
• credit risk
• interest rate risk
• currency risk
• liquidity risk
• taxation risks
• operational risks
This note presents information about the Bank’s exposure to each
of the above risks, the Bank’s objectives, policies and processes
for measuring and managing risk.
Risk management framework
The Bank’s approach to risk management, including the internal
control system and internal audit, is in line with the Bank’s risk
profile. The Bank’s risk profile is determined by the business conducted
and Bank’s operating environment.
The risk management policies of ProCredit Bank S.A. establish the
Bank’s risk philosophy and strategy, compliant with the regulations
issued by the Romanian banking supervisory authority. The
risk management policies and strategies are the following:
• Credit Risk Management Policy and Strategy;
• Counterparty Risk Management Policy and Strategy;
• Liquidity Risk Management Policy and Strategy;
• Foreign Currency Risk Management Policy and Strategy;
• Interest Rate Risk Management Policy and Strategy;
• Operational Risk Management Policy and Strategy;
• Reputational Risk Management Policy and Strategy.
These documents set forth minimum standards for risk management
and they were approved by the Board of Administrators (“BoA”).
The BoA has overall responsibility for the establishment and oversight
of the Bank’s risk management framework. The BoA has established
the Risk Management Committee and its subcommittees:
Assets and Liabilities Management Subcommittee (ALCO), Credit
Risk Management Subcommittee, Operational Risk Management
Subcommittee and Subcommittee for Preventing and Combating
Money Laundering and Terrorism Activities Funding (AML&CFT),
which are responsible for implementing the Bank’s risk management
policies and for the management of risks in their specified
areas. All subcommittees report regularly to the Risk Management
Committee which informs the BoA.
The Bank’s risk management policies are established to identify
and analyse the risks faced by the Bank, to set appropriate risk limits
and controls, and to monitor risks and adherence to limits. Risk
management policies and systems are reviewed regularly to reflect
changes in market conditions, products and services offered.
The Bank, through its training and management standards and
procedures, aims to develop a disciplined and constructive control
environment, in which all employees understand their roles and
obligations.
The Bank’s Audit Committee reports to BoA and is responsible for
monitoring compliance with the Bank’s risk management policies
and procedures, and for reviewing the adequacy of the risk management
framework in relation to the risks faced by the Bank. The
Audit Committee is assisted in these functions by Internal Audit.
Internal Audit undertakes both regular and ad-hoc reviews of risk
management controls and procedures, the results of which are reported
to the Audit Committee.
b) Credit risk
Financial Statements 57
Credit risk is the risk of financial loss to the Bank if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Bank’s loans and advances
to customers and other banks and investment securities.
i. Management of credit risk
The Board of Administration has delegated, through the ROF (Internal
Regulation Framework), the responsibility to the management
of the Bank to develop and implement the Credit Procedures and to
set up separate departments of Credit, Credit Risk and Credit Control,
responsible for oversight of the Bank’s credit risk, including:
• Formulating credit procedures in consultation with business
units, covering collateral requirements, credit risk assessment,
risk grading and reporting, documentary and legal procedures,
and compliance with regulatory and statutory requirements
• Establishing the authorisation structure for the approval and
renewal of credit facilities. Authorisation limits are allocated
to five levels of credit committees for very small and small enerprises
and three levels of credit committees for medium enterprises.
Larger facilities require approval by the highest level
Credit Committee or the BoA as appropriate.
• Reviewing and assessing credit risk. Credit Committee assesses
all credit exposures in excess of designated limits, prior to
facilities being committed to customers by the business unit
concerned. Renewals and reviews of facilities are subject to
the same review process.
• Providing advice, guidance and specialist skills to business
units to promote best practice throughout the Bank in the management
of credit risk
The Credit Risk Management Policy and Strategy sets up limits
for the credit risk exposure through the risk profile indicators and
through limits for concentrations of exposure to counterparties, geographic
divisions, industries and products (for loans and advances).
In addition the Credit Risk Management Subcommittee monitors
• The Bank’s risk grading (based on days in arrears: 0-30, 31-90,
91-180, >180) in order to categorise exposures according to
the degree of risk of financial loss faced and to focus management
on the attendant risks. The risk grading system is used
in determining where impairment provisions may be required
against specific credit exposures. The current risk grading
framework consists of five grades reflecting varying degrees
of risk of default. BoA has approved the split of loan portfolio
based on days in arrears in the provisioning policy.
• The risk classification of credit exposures to medium-sized enterprises.
This risk classification is an instrument supporting
the credit assessment for a proposed credit exposure and the
ongoing assessment of the risk associated with outstanding
exposures. The classification takes into account quantitative
and qualitative information of the client which eventually results
in a grade between 1 and 8.
• Reviewing compliance of business units with agreed exposure
limits, including those for selected industries and product
types.
• Regular reports are provided to Credit Risk Management Subcommittee
on the credit quality of portfolios and appropriate
corrective action is taken.

58
Annual Report 2010
Each branch/agency is required to implement Bank’s credit policies
and procedures. Each branch is responsible for the quality and performance
of its credit portfolio and for monitoring and controlling
all credit risks in its portfolios, including those subject to central
approval.
Regular audits of branches/agencies and Bank credit processes are
undertaken by Internal Audit. The Credit Control Department also
conducts reviews in order to assess the compliance with lending
procedures at the level of each branch, to assess the quality of risk
assessments for very small, small and private individual exposures
and to assess the quality of the loan portfolio at branch level.
The Bank monitors the quality of the loan portfolio on an ongoing
basis, using a portfolio at risk definition that includes all exposures
with payments overdue by more than 30 days as the basic measure
of current portfolio quality. The Bank chooses this measure
because the vast majority of all loans have fixed instalments with
monthly payment of principal and interest. Exceptions are credit
lines, overdraft facilities, seasonal agricultural loans and investment
loans, which have a grace period of six months. At 31 December
2010 portfolio at risk stood at 5.4% (as compared to 3.5% in
2009).
The Bank’s primary exposure to credit risk arises through its lending
activity. The amount of credit exposure in this regard is represented
by the carrying amounts of the assets on the balance sheet.
In addition, the Bank is exposed to off balance sheet credit risk
through commitments to extend credit and guarantees issued (see
Note 29).
Concentrations of credit risk that arise from financial instruments
exist for groups of counterparties when they have similar economic
characteristics that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic or
other conditions. The major concentrations of credit risk arise by
individual counterparty and by type of customer in relation to the
Bank’s loans and advances to customers (see Note 17).
ii. Exposure to credit risk
in EUR Loans and advances to customers Loans and advances to banks Investments securities
Assets at amortised cost
Individually impaired
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009
0 days in arrears 1,266,318 982,746 – –
1-30 days in arrears 1,070,450 50,769 – –
31-90 days in arrears 676,840 337,952 – – – –
91-180 days in arrears 591,574 328,733 – – – –
over 180 days in arrears 2,504,885 823,876 – – – –
Gross amount 6,110,067 2,524,076 – – – –
Allowance for impairment (1,168,213) (379,926) – – – –
Carrying amount 4,941,854 2,144,150 – – – –
Collectively impaired
0 days in arrears 162,078,946 167,140,027
1-30 days in arrears 4,621,679 6,731,337
31-90 days in arrears 2,651,025 2,550,166 – – – –
91-180 days in arrears 2,668,700 1,893,070 – – – –
over 180 days in arrears 536,929 403,485 – – – –
Gross amount 172,557,279 178,718,085 – – – –
Allowance for impairment (6,973,048) (6,438,636) – – – –
Carrying amount 165,584,230 172,279,450 – – –
Past due but not impaired – – – – – –
Carrying amount
Neither past due nor impaired
– – – – – –
Carrying amount – – 991,920 1,535,027 86,305 87,460
Carrying amount - amortised cost 170,526,084 174,423,600 991,920 1,535,027 86,305 87,460
Available-for-sale assets
Neither past due nor impaired
Carrying amount – – – – 3,480,127 9,411,905
Carrying amount - fair value – – – – 3,480,127 9,411,905
Total carrying amount 170,526,084 174,423,600 991,920 1,535,027 3,566,432 9,499,365
As at 31 December 2010 the Bank has in balance rescheduled loans
with a gross outstanding amounting to EUR 14,782,709 (31 December
2009: EUR 6,758,150) and related provisions amounting to EUR
2,982,807 (31 December 2009: EUR 829,570).
Impaired loans and securities
Impaired loans and securities are loans and securities for which
the Bank determines that it is probable that it will be unable to
collect all principal and interest due according to the contractual
terms of the loan / securities agreements. Where contractual interest
or principal payments are past due by over 30 days the loans
are considered impaired and assessed individually for exposures

higher than EUR 30,000. These loans are graded 2-4 in the Bank’s
loan loss provision methodology. However, if a loan was restructured
and the restructuring led to a decrease of the interest rate, all
loans granted to the respective client will be classified as impaired,
regardless of the arrears level.
Past due but not impaired loans
Loans and securities where contractual interest or principal payments
are past due but the Bank believes that impairment loss is
not appropriate on the basis of the level of security / collateral available
and / or the stage of collection of amounts owed to the Bank.
Allowances for impairment
The Bank establishes an allowance for impairment losses that
represents its estimate of incurred losses in its loan portfolio. The
main components of this allowance are a specific loss component
that relates to individually significant exposures, and a collective
loan loss allowance established for groups of homogeneous assets
in respect of losses that have been incurred but have not been identified
on loans subject to individual assessment for impairment (refer
to Note 3 (h) (vii) and Note 5).
Write-off policy
The Bank writes-off a loan / security balance (and any related allowances
for impairment losses) when it determines that the loans
/ securities are uncollectible. This determination is reached after
considering information such as the number of days in arrears.
A loan is considered uncollectible when it has more than 180 days in
arrears for loans with principal outstanding amounts plus accrued
interests less unamortised fee (amortized cost) below equivalent
EUR 10,000 or if it has more than 360 days in arrears for loans with
amortised cost greater than equivalent EUR 10,000 but up to EUR
30,000. For loans with amortised cost higher than EUR 30,000 the
write off would be performed after 360 days of arrears. For these
loans in case of pending court transactions, i.e. if it is probable that
the loan will be finally recovered via the execution of collateral the
item will be kept on the balance sheet. Credit Risk Department (in
case the legal execution did not start) or Legal Recovery (in case
the legal execution was initiated) will make the proposal for writing
off (for loans whose amortised cost > EUR 30,000 equivalent) to
Bank’s Managers who will decide upon it.
Collateral
The Bank holds collateral against loans and advances to customers
in the form of pledge over cash deposits, mortgage interests over
property, guarantees and other pledge over equipments and/or receivables.
Estimates of fair value are based on the value of collateral
assessed at the time of borrowing, and generally are not updated
except when a loan is individually assessed as impaired, except for
mortgage interests over property which are reassessed yearly.
Collateral generally is not held over loans and advances to banks.
According to the Counterparty Risk Management Policy and Strategy,
the only type of eligible collateral for these exposures is cash
deposits. Collateral usually is not held against investment securities,
and the Bank did not have such exposures as of 31 December
2010 or 2009.
An estimate of the total value of collateral and other security enhancements
held against financial assets is shown below:
Loans and advances to customers Loans and advances to banks
in EUR
Against individually impaired
31 December 2010 31 December 2009 31 December 2010 31 December 2009
Mortgages 5,662,897 1,202,001 – –
Personal guarantees 3,588,677 1,424,541 – –
Inventories 806,294 189,621 – –
Others – – – –
Against collectively impaired
Financial Statements 59
Mortgages 160,776,403 145,533,854 – –
Personal guarantees 152,004,606 273,356,788 – –
Inventories 44,216,749 42,173,862 – –
Others 500,089 288,860 – –
Total 367,555,717 464,169,527 – –
The Bank’s credit portfolio risk is naturally limited by the credit
strategy resulting from the business model; in particular the focus
on small and very small loans and denominated mostly in RON show
the distribution of loan portfolio by loan destination for 31 December
2010:
in EUR Working capital Agriculture Housing Consumer Other Total
Less than EUR 10,000 27,540,100 20,658,688 2,681,297 293,627 616,248 51,791,959
EUR 10,000 to 30,000 28,104,548 8,192,321 996,421 687,918 325,994 38,307,202
EUR 30,000 to 150,000 37,971,247 8,154,211 780,071 217,878 216,050 47,339,457
More than EUR 150,000 27,635,785 5,200,208 103,394 148,078 – 33,087,466
Total 121,251,680 42,205,427 4,561,183 1,347,502 1,160,291 170,526,084

60
Annual Report 2010
The Bank’s credit portfolio risk is naturally limited by the credit
strategy resulting from the business model; in particular the focus
on small and very small loans and denominated mostly in RON show
the distribution of loan portfolio by loan destination for 31 December
2009.
in EUR Working capital Agriculture Housing Consumer Other Total
Less than EUR 10,000 35,265,329 20,969,838 4,732,846 653,315 984,479 62,605,807
EUR 10,000 to 30,000 35,857,501 7,408,653 1,545,586 945,140 323,069 46,079,949
EUR 30,000 to 150,000 35,993,492 5,942,314 1,117,707 257,997 213,677 43,525,187
More than EUR 150,000 20,420,283 1,391,686 246,278 154,410 – 22,212,657
Total 127,536,605 35,712,491 7,642,417 2,010,862 1,521,225 174,423,600
The prerequisite for the identification of major credit risks is an
awareness of the overall credit exposure to each borrower. For this
purpose, full information about any related parties is collected
prior to lending.
Limits for large-scale loans limit our maximum exposure toward
single clients. As a rule, the sum of the large exposures (exposures
exceeding 10% of bank’s tier I + II capital) may not exceed 150% of
the Bank’s tier I + II capital. All in all, this results in a comparatively
low need for individual impairment.
The structure of the loan portfolio is regularly reviewed within
the Bank in order to identify potential events which could have an
impact on large areas of the loan portfolio (common risk factors)
and if necessary limit the exposure toward certain sectors of the
economy.
c) Interest rate risk
The Bank incurs interest rate risk from its financial intermediation
activity, principally in the form of exposure to adverse changes in
the market interest rates. The main sources of interest rate risk are
imperfect correlation between the maturity (for fixed interest rates)
or re-pricing date (for floating interest rates) of the interest-bearing
assets and liabilities, adverse evolution of the slope and shape of
the yield curve (the unparallel evolution of the interest rate yields
of the interest-earning assets and interest-earning liabilities),
imperfect correlation in the adjustments of the rates earned and
paid on different instruments with otherwise similar re-pricing
characteristics.
The Bank does not aim to earn profits through maturity transformation
or other forms of speculation in the interest rate market.
Rather, the Bank seeks to ensure that the balance sheet structure
is as balanced as possible across all maturities.
The Bank counteracts the loan portfolio risks associated with interest
rate fluctuations through variable interest for its borrowings.
In quantitative terms, the Bank currently limits the risks associated
with interest rate fluctuations by stipulating that the maximum
weighted modified duration gap (Macaulay modified duration) of
the assets and liabilities must be less than 1 (and greater than -1)
while aiming at a modified duration gap of zero. In addition, a parallel
shift in the yield curve of one currency by a shock calculated as
the 99th percentile of the 5 year historical distribution of market/
internal interest rates may not lead to a loss in economic value of
more than 20% of the regulatory capital and to a loss in profit and
loss over three months of more than 2%.
The Bank developed scenarios for normal cases and worst cases
according to Basel II requirements. An overview of the scenario results
as of the end of the year is presented in the following table:
31 Dec 2010 31 Dec 2009
in EUR
200 bp parallel increase (671,335) (876,046)
200 bp parallel decrease 671,335 876,046
100 bp parallel increase (335,668) (438,023)
100 bp parallel decrease 335,668 438,023
The interest rates related to the local currency and the major foreign
currencies as at 31 December 2010 and 2009 were as follows:
Currencies Interest rate 31 Dec 31 Dec
2010 2009
Leu (RON) ROBOR 3 months 6.18% 10.82%
Leu (RON) ROBOR 6 months 6.96% 10.62%
Euro (EUR) Euribor 3 months 1.01% 0.71%
Euro (EUR) Euribor 6 months 1.24% 0.99%
US Dollar (USD) Libor 3 months 0.30% 0.25%
US Dollar (USD) Libor 6 months 0.46% 0.43%
Range of interest rates
The following table shows the interest rates per annum obtained
or offered by the Bank for its interest-bearing assets and liabilities
during financial year 2010:
Range of interest rates RON USD EUR
Assets
Current accounts with the National Bank of Romania 1.56% 3.38% 0.46% 1.19% 0.88% 1.27%
Loans and advances to banks 2.25% 9.00% 0.10% 1.00% 0.10% 1.25%
Loans and advances to customers, net 7.00% 35.00% 5.75% 19.00% 1.89% 25.00%
Treasury bills 3.75% 9.85% – – – –
Liabilities
Deposits from customers 0.50% 14.50% 0.25% 6.00% 0.25% 6.50%
Deposits from banks 3.50% 7.50% – – 0.40% 1.75%
Loans from banks and other financial institutions 8.00% 11.67% – – 1.86% 4.46%
Subordinated liabilities – – – – 9.00% 9.16%

The following table shows the interest rates per annum obtained
or offered by the Bank for its interest-bearing assets and liabilities
during financial year 2009:
Range of interest rates RON USD EUR
Assets
Current accounts with the National Bank of Romania 3.36% 5.90% 0.89% 1.29% 1.26% 2.80%
Loans and advances to banks 4.00% 14.00% 0.10% 1.85% 0.05% 6.00%
Loans and advances to customers 7.00% 35.00% 11.00% 19.00% 2.23% 25.00%
Treasury bills 9.85% 12.50% – – – –
Liabilities
Deposits from customers 1.00% 19.30% 0.15% 6.00% 0.25% 10.50%
Loans from banks and other financial institutions 9.81% 24.50% – – 1.86% 5.33%
Subordinated liabilities – – – – 9.00% 9.16%
A summary of the Bank’s interest rate gap position on non-trading
portfolios as at 31 December 2010 is as follows:
Up to 1 – 3 3 months 1 – 5 Over Non-interest Total
in EUR 1 month months to 1 year years 5 years bearing
Cash and balances with NBR 39,531,175 – – – – 7,350,118 46,881,293
Loans and advances to banks
Investment securities,
991,920 – – – – – 991,920
available-for-sale – – – – – 86,305 86,305
Loans and advances to customers 5,943,909 7,842,703 45,752,458 84,178,147 24,425,425 2,383,441 170,526,084
Treasury bills 2,305,163 1,154,914 – – – 20,050 3,480,127
48,772,166 8,997,617 45,752,458 84,178,147 24,425,425 9,819,863 221,965,728
Deposits from banks 200,000 – – – – 12 200,012
Deposits from customers
Loans from banks and
53,740,546 42,402,110 30,976,223 236,730 – 16,693,792 144,049,401
financial institutions 7,796,891 26,224,524 18,273,317 – – 430,965 52,725,697
Subordinated liabilities – – – – 8,750,000 179,648 8,929,648
61,737,437 68,626,634 49,249,541 236,730 8,750,000 17,304,418 205,904,759
Total interest sensitivity gap (12,965,271) (59,629,017) (3,497,082) 83,941,417 15,675,425 (7,484,554) 16,060,969
A summary of the Bank’s interest rate gap position on non-trading
portfolios as at 31 December 2009 is as follows:
Financial Statements 61
Up to 1 – 3 3 months 1 – 5 Over Non-interest Total
in EUR 1 month months to 1 year years 5 years bearing
Cash and balances with NBR 58,183,178 – – – – 6,697,141 64,880,319
Loans and advances to banks
Investment securities,
1,517,169 – – – – 17,858 1,535,027
available-for-sale – – – – – 87,460 87,460
Loans and advances to customers 6,746,134 9,231,569 49,426,969 92,120,499 17,691,295 (792,866) 174,423,600
Treasury bills 9,411,905 9,411,905
75,858,386 9,231,569 49,426,969 92,120,499 17,691,295 6,009,593 250,338,311
Deposits from customers
Loans from banks and
69,762,939 44,783,417 17,571,983 78,950 – 1,366,462 133,563,751
financial institutions 23,650,726 – 62,525,507 7,955,537 – 205,538 94,337,308
Subordinated liabilities – – – – 8,750,000 178,206 8,928,206
93,413,665 44,783,417 80,097,490 8,034,487 8,750,000 1,750,206 236,829,265
Total interest sensitivity gap (17,555,279) (35,551,848) (30,670,521) 84,086,012 8,941,295 4,259,387 13,509,046

62
Annual Report 2010
d) Currency risk
The Bank is exposed to currency risk through transactions in foreign
currencies against RON. There is also a balance sheet risk that
the net monetary liabilities in foreign currencies will take a higher
value when translated into RON as a result of currency movements.
The principal foreign currencies held by the Bank are EUR and USD.
On the Romanian market, exchange rates have a high volatility;
therefore open foreign exchange positions represent a source of
in EUR
Monetary assets
RON EUR USD Other Total
Cash and balances with Central Bank 23,860,871 25,800,907 699,642 – 50,361,420
Loans and advances to banks 38,672 563,335 357,424 32,488 991,920
Investment securities, available-for-sale 4,240 82,065 – – 86,305
Loans and advances to customers 95,092,972 75,215,408 217,704 – 170,526,084
Other assets 1,416,928 43,383 11,443 214 1,471,968
Deferred tax 1,584,165 – – – 1,584,165
Total monetary assets 121,997,848 101,705,097 1,286,214 32,702 225,021,861
Monetary liabilities
Deposits from banks – 200,012 – – 200,012
Deposits from customers 88,434,934 54,200,139 1,371,797 42,531 144,049,401
Loans from banks and other financial institutions 15,072,922 37,652,776 – – 52,725,697
Other liabilities 862,863 90,328 3,429 – 956,620
Subordinated liabilities – 8,929,648 – – 8,929,648
Total monetary liabilities 104,370,719 101,072,903 1,375,227 42,531 206,861,379
Net currency position 17,627,130 632,193 (89,013) (9,828) 18,160,482
The monetary assets and liabilities held in RON and in foreign currencies
at 31 December 2009 are presented below:
currency risk. The Bank carries out operations in both the local
currency and hard currencies (RON and EUR) and monitors its foreign
currency exposure on a daily basis and closes out its positions
within individually defined limits.
The establishment of foreign currency positions for speculative
purposes is not permitted. Currently the Bank does not use derivative
instruments for hedging purposes. The strategy is to avoid to
the maximum extent possible the foreign exchange risk.
The monetary assets and liabilities held in RON and in foreign currencies
at 31 December 2010 are presented below:
in EUR
Monetary assets
RON EUR USD Other Total
Cash and balances with Central Bank 27,214,698 36,842,600 823,021 – 64,880,319
Loans and advances to banks 29,393 991,202 491,833 22,600 1,535,027
Investment securities, available-for-sale 4,297 83,163 – – 87,460
Loans and advances to customers 104,953,034 69,161,890 308,631 45 174,423,600
Treasury bills 9,411,905 – – – 9,411,905
Deferred tax 1,237,293 1,237,293
Other assets 1,433,736 104,904 31,289 – 1,569,930
Total monetary assets 144,284,357 107,183,759 1,654,774 22,645 253,145,535
Monetary liabilities
Deposits from banks – – – – –
Deposits from customers 89,655,337 42,053,343 1,819,240 35,830 133,563,751
Loans from banks and other financial institutions 40,319,478 54,017,830 – – 94,337,308
Other liabilities 1,278,646 6,719 – – 1,285,365
Deferred tax liabilities – – – – –
Subordinated liabilities – 8,928,206 – – 8,928,206
Total monetary liabilities 131,253,461 105,006,098 1,819,240 35,830 238,114,630
Net currency position 13,030,896 2,177,661 (164,466) (13,185) 15,030,905
The Bank measures the foreign exchange risk based on the ratio
net open position/own funds (including the off balance sheet position),
measured at 1.02% as at 31 December 2010 (31 December
2009: 6.29%).
e) Liquidity risk
Liquidity risk arises in the general funding of the Bank’s activities
and in the management of the asset positions. It includes both the
risk of being unable to fund assets at appropriate maturities and
rates and the risk of being unable to liquidate an asset at a reasonable
price and in an appropriate time frame. The Bank strives to

maintain a balance between continuity of funding and flexibility
through the use of liabilities with a range of maturities. The Bank
continually assesses liquidity risk by identifying and monitoring
changes in funding, and diversifying the funding base. BoA established
through the Liquidity Risk Management Policy and Strategy
the main responsibilities in respect of liquidity risk management.
The daily management of liquidity falls under the responsibility of
Treasury Department who ensures that the Bank has enough intra-
day funds in order to perform its operations. The short term liquidity
management falls under the responsibility of the Assets and Liabilities
Management Subcommittee, while the medium and long
term liquidity management is performed by the management of the
bank. The Bank has a funding plan in line with the business plan objectives
and a liquidity crisis strategy establishing specific measures
to address potential liquidity crisis. The maturity analysis of
monetary assets and liabilities at 31 December 2010 are presented
below:
2010 Carrying Gross* Up to 1 – 3 3 months 1 – 5 Over
in EUR
Financial assets
amount amount 1 month months t0 1 year years 5 years
Cash and cash with Central Bank 46,881,293 46,920,588 46,920,588 – – – –
Loans and advances banks
Investment securities,
991,920 991,920 991,920 – – – –
available-for-sale 86,305 86,305 – – – – 86,305
Loans and advances to customers 170,526,084 233,938,303 12,114,379 11,573,997 77,159,421 101,577,531 31,512,974
Treasury bills 3,480,127 3,500,747 2,333,831 1,166,916 – – –
Deferred tax assets 1,584,165 1,584,165 – – – – 1,584,165
Total financial assets 226,549,894 287,022,027 62,360,718 12,740,913 77,159,421 101,577,531 33,183,444
Financial liabilities
Deposits from banks 200,012 200,012 200,012 – – – –
Deposits from customers
Loans from banks and other
144,049,401 146,507,853 70,170,619 43,629,185 35,435,079 272,969 –
financial institutions 52,725,697 58,078,705 4,672,720 2,121,091 11,881,669 39,403,225 –
Subordinated liabilities
Committed undrawn
8,929,648 13,754,369 – 140,453 656,128 3,233,172 9,724,616
(loans to customers) 5,962,952 5,962,952 309,040 451,602 3,293,515 565,608 1,343,187
Total financial liabilities 211,867,711 224,503,891 75,352,392 46,342,332 48,266,391 43,474,973 11,067,803
Maturity surplus/ (shortfall) 11,682,184 62,518,137 (12,991,673) (33,601,419) 28,893,030 58,102,557 22,115,641
*Undiscounted future cash flows for financial assets and liabilities
The maturity analysis of monetary assets and liabilities at 31 December
2009 are presented below:
2009 Carrying Gross* Up to 1 – 3 3 months 1 – 5 Over
in EUR
Financial assets
amount amount 1 month months t0 1 year years 5 years
Cash and cash with Central Bank 64,880,319 64,949,234 64,949,234 – – – –
Loans and advances banks
Investment securities,
1,535,027 1,535,027 1,535,027 – – – –
available-for-sale 87,460 87,460 – – – – 87,460
Loans and advances to customers 174,423,600 240,744,818 7,300,756 6,266,672 39,402,278 143,509,047 44,266,065
Treasury bills 9,411,905 9,460,290 9,460,290 – – – –
Deferred tax assets 1,237,293 1,237,293 – – – – 1,237,293
Total financial assets 251,575,604 318,014,122 83,245,307 6,266,672 39,402,278 143,509,047 45,590,818
Financial liabilities
Deposits from banks – – – – – – –
Deposits from customers
Loans from banks and other
133,563,751 136,147,661 71,000,619 46,229,587 18,858,207 59,247 –
financial institutions 94,337,308 104,473,552 24,160,439 2,096,138 35,675,134 42,541,842 –
Debt securities issued – – – – – – –
Subordinated liabilities
Committed undrawn
8,928,206 14,736,262 – 239,687 912,831 4,833,744 8,750,000
(loans to customers) 4,157,832 4,157,832 374,872 504,023 2,559,201 395,609 324,127
Total financial liabilities 240,987,097 259,515,307 95,535,930 49,069,435 58,005,373 47,830,442 9,074,127
Maturity surplus/ (shortfall) 10,588,507 58,498,815 (12,290,623) (42,802,763) (18,603,095) 95,678,605 36,516,691
*Undiscounted future cash flows for financial assets and liabilities
Financial Statements 63

64
Annual Report 2010
f) Taxation risk
On 1 January 2007 Romania became a member of the European Union
(”EU”) and therefore has to apply detailed and complex rules
on the basis of the EU Treaties, Regulations and Directives. The
Company has to conform to EU legislation from 1 January 2007 and,
therefore, it has prepared to apply the changes arising from the EU
legislation. These changes have been implemented, however the
tax authorities have up to 5 years to audit the way these changes
were implemented.
Interpretation of the text and practical implementation procedures
of the newly enforced EU tax regulations could vary, and there is
a risk that certain transactions, for example, could be viewed differently
by the tax authorities as compared to the Company’s
treatment.
Furthermore, the Romanian Government has a number of agencies
that are authorised to conduct audits (controls) of companies operating
in Romania. These controls are similar in nature to tax audits
performed by tax authorities in many countries, but may extend
not only to tax matters but to other legal and regulatory matters in
which the applicable agency may be interested. It is likely that the
Bank will continue to be subject to regular controls as new laws and
regulations are issued.
g) Capital management
Regulatory capital
The Bank’s regulator, NBR (National Bank of Romania), sets and
monitors capital requirements. In implementing current capital requirements
NBR requires the Bank to maintain a prescribed ratio of
total capital to total risk – weighted assets (10%).
The Bank’s regulatory capital is analysed into two tiers:
• Tier 1 capital, which includes ordinary share capital, share premium,
retained earnings, legal, statutory and other reserves,
and other regulatory adjustments relating to items that are included
in equity but are treated differently for capital adequacy
purposes;
• Tier 2 capitals, which includes qualifying subordinated liabilities,
other long term debt, fair value reserves for fixed assets
and other regulatory adjustments.
Various limits are applied to elements of the capital base. Qualifying
tier 2 capital cannot exceed tier 1 capital; qualifying term subordinated
loan and preference shares capital may not exceed 50
percent of tier 1 capital.
The Bank complied with all externally imposed capital requirements
throughout the period.
The Bank’s regulatory capital position at 31 December 2010 was as
follows:
2010 2009
in EUR
Tier 1 capital
Ordinary share capital 32,745,906 28,037,508
Share premium 297,278 301,257
Accumulated Loss (15,896,281) (11,664,457)
Less intangible assets
Other regulatory adjustments
(413,093) (513,650)
(equity investments) (1,980) (28,886)
Total 16,731,830 16,131,772
Tier 2 capital
Revaluation reserve (fixed assets) 520 527
Qualifying subordinated liabilities 8,365,915 8,065,886
Total 8,366,435 8,066,413
Total regulatory capital 25,098,265 24,198,185
Capital request 14,186,715 14,503,285
Source: statutory financial statements for the year ended 31 December
2010
Capital allocation
The allocation of capital between specific operations and activities
is driven by the principle that no activity or operation should take
more risk than it can bear. This rule is put into operations using an
“economic capital” or “value at risk” model. At all times, the predefined,
economic Tier 1 and Tier 2 capital has to be available to cover
potential losses.
h) Operational risk
Operational risk is the risk of direct or indirect loss arising from a
wide variety of causes associated with the Bank’s processes, personnel,
technology and infrastructure, and from external factors
other then credit, market and liquidity risk such those arising from
legal and regulatory requirements and generally accepted standards
of corporate behavior. Operational risks arise from all of the
Bank’s operations and are faced by all business entities.
The Bank’s objective is to manage operational risk so as to balance
the avoidance of financial losses and damage to the Bank’s reputation
with overall cost effectiveness and to avoid control procedures
that restrict initiative and creativity.
The primary responsibility for the development and implementation
of controls to address operational risk is assigned to senior
management within each business unit. This responsibility is supported
by the development of overall Bank standards for the management
of operational risk in the following areas:
• Requirements for appropriate segregation of duties, including
the independent authorisation of transactions;
• Requirements for the reconciliation and monitoring of transactions;
• Compliance with regulatory and other legal requirements;
• Documentation of controls and procedures;
• Requirements for the periodic assessment of operational risk
faced, and the adequacy of controls and procedures to address
the risks identified;
• Requirements for the reporting of operational losses and proposed
remedial action;
• Development of contingency plans;
• Training and professional development;
• Ethical and business standards;
• Risk mitigation, including insurance where this is effective.

Compliance with Bank standards is supported by a programme
of periodical reviews undertaken by Internal Audit. The results of
Internal Audit reviews are discussed with the management of the
business unit to which they relate, with summaries submitted to
the Audit Committee and senior management of the Bank.
5. Use of estimates and judgements
The Bank makes estimates and assumptions that affect the reported
amounts of assets and liabilities within the next financial year.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
Management discusses with the Audit Committee the development,
selection and disclosure of the Bank’s critical accounting policies
and estimates, and the application of these policies and estimates.
These disclosures supplement the commentary on financial risk
management (see note 4).
Key sources of estimation uncertainty
Impairment losses on loans and advances
Assets accounted for at amortised cost are evaluated for impairment
on a basis described in accounting policy 3(h)(vii).
The specific counterparty component of the total allowances for
impairment applies to financial assets evaluated individually for
impairment and is based upon management’s best estimate of the
present value of the cash flows that are expected to be received.
In estimating these cash flows, management makes judgements
about counterparty’s financial situation and the net realisable
value of any underlying collateral. Each impaired asset is assessed
on its merits, and the workout strategy and estimate of cash flows
considered recoverable are independently approved by the Credit
Risk function.
Collectively assessed impairment allowances cover credit losses
inherent in portfolios of loans and advances with similar credit
risk characteristics when there is objective evidence to suggest
that they contain impaired loans and advances, but the individual
impaired items cannot yet be identified. In assessing the need for
collective loss allowances, management considers factors such as
credit quality, portfolio size, concentrations and economic factors.
In order to estimate the required allowance, assumptions are made
to define the way inherent losses are modelled and to determine
the required input parameters, based on historical experience and
current economic conditions. The accuracy of the allowances depends
on the estimates of future cash flows for specific counterparty
allowances and the model assumptions and parameters used
in determining collective allowances.
The Bank reviews its loan portfolios to assess impairment at least
on a semi-annual basis. In determining whether an impairment loss
should be recorded in the income statement, the Bank makes judgments
as to whether there is any observable data indicating that
there is a measurable decrease in the estimated future cash flows
from a portfolio of loans before the decrease can be identified with
an individual loan in that portfolio. This evidence may include observable
data indicating that there has been an adverse change
in the payment status of borrowers in a group, or national or local
economic conditions that correlate with defaults on assets in the
group. Management uses estimates based on historical loss experience
for assets with credit risk characteristics and objective evidence
of impairment similar to those in the portfolio when scheduling
its future cash flows. The methodology and assumptions used
for estimating both the amount and timing of future cash flows are
reviewed regularly to reduce any differences between loss estimates
and actual loss experience.
Financial Statements 65
Hence, the Bank has estimated the impairment loss provision for
loans and advances to customers based on the internal methodology
and assessed that no further provision for impairment losses is
required except as already provided for in the financial statements.
Critical accounting judgements in applying the Bank’s accounting
policies
Fair value of financial instruments
The Bank measures fair values using the following fair value hierarchy
that reflects the significance of the inputs used in making the
measurements:
• Level 1: Quoted market price in an active market for an identical
instrument.
• Level 2: Valuation techniques based on observable inputs. This
category includes instruments valued using: quoted market
prices in active markets for similar instruments; quoted prices
for similar instruments in markets that are considered less
than active; or other valuation techniques where all significant
inputs are directly or indirectly observable from market data.
• Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments where the valuation
technique includes inputs not based on observable data
and the unobservable inputs could have a significant effect on
the instrument’s valuation. This category includes instruments
that are valued based on quoted prices for similar instruments
where significant unobservable adjustments or assumptions
are required to reflect differences between the instruments.
The Bank determined the fair value of the treasury bills issued by
the Ministry of Public Finance of Romania, classified as availablefor-sale
financial instruments, using bid quotations in an active
market (e.g. Reuters) at the balance sheet date.
The objective of valuation techniques is to arrive at a fair value determination
that reflects the price of the financial instrument at the
reporting date that would have been determined by market participants
acting at arm’s length.
Availability of observable market prices and model inputs reduces
the need for management judgement and estimation and also reduces
the uncertainty associated with determination of fair values.
Availability of observable market prices and inputs varies depending
on the products and markets and is prone to changes based on
specific events and general conditions in the financial markets.
The fair value of financial instruments that are not traded in an
active market (for example, unlisted treasury securities, bonds
and certificates of deposit) is determined by using valuation techniques.
The management uses its judgment to select the valuation
method and make assumptions that are mainly based on market
conditions existing at each balance sheet date.
Valuation models that employ significant unobservable inputs require
a higher degree of management judgement and estimation in
determination of fair value. Management judgement and estimation
are usually required for selection of the appropriate valuation
model to be used, determination of expected future cash flows on
the financial instrument being valued, determination of probability
of counterparty default and prepayments and selection of appropriate
discount rates.
In determining fair values, the Bank uses averages of reasonably
possible alternative inputs. When alternative assumptions are
available within a wide range, judgements exercised in selecting
the most appropriate point in the range include evaluation of the
quality of the sources of inputs (for example, the experience and
expertise of the brokers providing different quotes within a range,
giving greater weight to a quote from the original broker of the instruments
who has the most detailed information about the instrument)
and availability of the corroborating evidence in respect of
some inputs within the range.

66
Annual Report 2010
The carrying amount of available-for-sale investment securities
would be an estimated RON 402 thousand lower and RON 491 thousand
higher were the discount rate used in the discounted cash
flow analysis to differ by +/- 10% from management’s estimate.
The table below analyses financial instruments measured at fair
value at the end of the reporting period, by the level in the fair value
hierarchy into which the fair value measurement is categorised:
31 December 2010
Tresury bills,
Level 1 Level 2 Level 3
available for sales – 3,480,127 –
– 3,480,127 –
31 December 2009
Tresury bills,
Level 1 Level 2 Level 3
available for sales – 9,411,905 –
– 9,411,905 –
The table below analyses the financial instruments disclosed at fair
value in note 6, by valuation method:
Quoted market Valuation Valuation Total
prices in active techniques – techniques –
markets observable significant unin
EUR
31 December 2010
inputs observable inputs
Cash and balances with NBR – 46,881,293 – 46,881,293
Loans and advances to banks – 991,916 – 991,916
Loans and advances to customers – 177,558,432 – 177,558,432
Treasury bills, available for sale 3,480,127 3,480,127
Investment securities, available for sale – 86,305 – 86,305
Total financial assets – 228,998,073 – 228,998,073
Deposits from banks 200,021 200,021
Deposits from customers – 145,140,242 – 145,140, 242
Loans from banks and other financial institutions – 52,569,418 – 52,569,418
Subordinated liabilities – 8,929,648 – 8,929,648
Total financial liabilities – 206,839,329 – 206,839,329
31 December 2009
Cash and balances with NBR – 64,880,319 – 64,880,319
Loans and advances to banks – 1,535,027 – 1,535,027
Loans and advances to customers – 177,795,883 – 177,795,883
Treasury bills, available for sale 9,411,905 9,411,905
Investment securities, available for sale – 87,460 – 87,460
Total financial assets – 253,710,594 – 253,710,594
Deposits from customers – 134,482,826 – 134,482,826
Loans from banks and other financial institutions – 94,337,308 – 94,337,308
Subordinated liabilities – 8,928,206 – 8,928,206
Total financial liabilities – 237,748,340 – 237,748,340
Although the Bank believes that its estimates of fair value disclosed
in note 6 are appropriate, the use of different methodologies
or assumptions could lead to different measurements of fair value.
As the Bank does not account for any financial instruments at fair
value, except treasury bills, changing one or more of the assumptions
used to arrive at reasonably possible alternative assumptions
(other than those relating to the treasury bills), would have no effects
in the profit and loss or directly in equity but only in the disclosures
made in the note 6 to these financial statements.

6. Financial assets and liabilities
Accounting classifications and fair values
Note Trading Designated Held Loans Available Other Total Fair
at fair to and for amortised carrying value
in EUR
31 December 2010
value maturity receivables sale cost amount
Cash and balances with Central Bank 14 – – – 46,881,293 – – 46,881,293 46,881,293
Loans and advances to banks 15 – – – 991,920 – – 991,920 991,916
Loans and advances to customers 17 – – – 170,526,084 – – 170,526,084 177,558,432
Treasury bills, available for sale – – – 3,480,127 3,480,127 3,480,127
Investment securities, available for sale 16 – – – – 86,305 86,305 86,305
Total financial assets – – – 218,399,297 3,566,432 – 221,965,729 228,998,073
Deposits from banks 25 – – – – – 200,012 200,012 200,021
Deposits from customers
Loans from banks and other
21 – – – – – 144,049,401 144,049,401 145,140,242
financial institutions 22 – – – – – 52,725,697 52,725,697 52,569,418
Subordinated liabilities 24 – – – – – 8,929,648 8,929,648 8,929,648
Total financial liabilities – – – – – 205,904,758 205,904,758 206,839,329
Accounting classifications and fair values
Financial Statements 67
Note Trading Designated Held Loans Available Other Total Fair
at fair to and for amortised carrying value
in EUR
31 December 2009
value maturity receivables sale cost amount
Cash and balances with Central Bank 14 – – – 64,880,319 – – 64,880,319 64,880,319
Loans and advances to banks 15 – – – 1,535,027 – – 1,535,027 1,535,027
Loans and advances to customers 17 – – – 174,423,600 – – 174,423,600 177,795,883
Tresury bills – – – – 9,411,905 9,411,905 9,411,905
Investment securities, available for sale – – – – 87,460 – 87,460 87,460
Total financial assets – – – 240,838,946 9,499,365 – 250,338,311 253,710,594
Deposits from banks – – – – – – – –
Deposits from customers
Loans from banks and other
– – – – – 133,563,751 133,563,751 134,482,826
financial institutions 22 – – – – – 94,337,308 94,337,308 94,337,308
Debt securities issued 25 – – – – – – – –
Subordinated liabilities 24 – – – – – 8,928,206 8,928,206 8,928,206
Total financial liabilities – – – – – 236,829,265 236,829,265 237,748,340

68
Annual Report 2010
7. Net interest income
in EUR
Interest income
Interest and similar income arising from:
Cash and balances with
2010 2009
National Bank of Romania 618,047 1,703,205
Loans and advances to banks
Loans and advances to customers,
68,638 367,488
out of which:
Impaired loans and advances
33,629,841 39,520,699
to customers 203,749 54,123
Treasury bills, available-for-sale 726,647 697,291
Total interest income 35,043,173 42,288,683
Interest expense
Interest expense arising from:
Deposits from banks 1,277,515 5,119,977
Deposits from customers
Loans from banks and other
7,609,492 12,933,895
financial institutions 3,242,431 4,457,298
Debt securities issued – 105,940
Subordinated liabilities 806,827 838,191
Total interest expense 12,936,265 23,455,301
Net interest income 22,106,908 18,833,382
8. Net fee and commission income
in EUR
Fee and commission income
Fees and commission
income arising from:
2010 2009
Transactions
Loan administration and
2,194,470 1,993,721
guarantee issuance 830,051 907,436
Other 25,594 36,377
Total fee and commission income 3,050,115 2,937,534
Fee and commission expense
Fee and commission expense arising from:
Inter-bank transaction fees
Loans and guarantees
413,170 364,657
received from banks 4,415 2,768
Other 90,597 51,013
Total fee and commission expense 508,182 418,438
Net fee and commission income 2,541,933 2,519,096
9. Other operating expenses
in EUR
Advertising and
2010 2009
promotion expenses 260,709 368,242
Consumables expenses
Post and telecommunication
194,609 424,800
expenses 803,463 856,384
Travel expenses
Repairs and
323,819 402,629
maintenance expenses 615,110 608,815
Other tax expenses 1,308,317 1,286,789
Electricity expenses 404,968 313,977
Insurance expenses 177,249 214,638
Representation expenses 23,755 73,609
Other operating expenses 2,602,465 1,439,868
Total 6,714,464 5,989,751
10. Net trading income
In EUR
Net gain from transactions
2010 2009
in foreign currency
Net loss from translation
of foreign currency denominated
1,170,872 1,195,134
assets and liabilities (157,177) (276,844)
Net trading income 1,013,695 918,290
11. Net impairment loss on financial asset
In EUR
Impairment charge on loans
2010 2009
and advances to customers
Release of the impairment for
loans and advances to customers
24,304,509 26,638,180
from change in estimates
Release of the impairment for
loans and advances to
(20,509,262) (21,323,580)
customers through usage (2,282,001) (1,810,598)
Loans written-off expense
Recoveries from loans
5,204,656 3,252,915
and advances to customers
Other impairment loss
(1,916,038) (1,282,000)
for financial assets – (1,442,317)
Net impairment loss on
financial assets 4,801,864 4,032,600
12. Personnel expenses
In EUR
Salaries and social
2010 2009
security contributions 11,498,167 12,071,586
Training and recruiting expenses 154,603 246,175
Total 11,652,770 12,317,761
13. Taxation
In EUR 2010 2009
Current tax expense (9,576) (6,765)
Deferred tax revenue 379,255 1,449,773
Income tax revenue 369,679 1,443,009

Deferred taxes
The deferred tax assets and liabilities are attributable to the items
detailed in the table below:
In EUR
Property and equipment
31 Dec 2010 31 Dec 2009
and intangible assets 18,175 18,404
Loans and advances to customers (691,377) (537,957)
Other assets (424) –
Other liabilities (2,667) –
Banking risk reserve 11,822 (233,338)
Fiscal loss 2,248,636 1,990,184
Deferred tax asset 1,584,165 1,237,293
Reconciliation of income before tax with statement of comprehensive
income
In EUR 2010 2009
Loss before income tax
Taxation at statutory rate
(3,531,756) (6,635,945)
of 16% (2009: 16%) (565,081) (1,061,751)
Non-deductible expenses 46,059 291,796
Non-taxable revenues
Origination and reversal
(149,344) (270,708)
of temporary differences
Tax effect of other
(1,584,165) 1,237,293
non-temporary differences (1,285,478) (1,639,639)
Taxation in the income statement (369,679) (1,443,009)
14. Cash and balances with National Bank of Romania
In EUR 31 Dec 2010 31 Dec 2009
Minimum compulsory reserve 39,315,443 39,318,295
Cash on hand and cash in ATMs
Other balances with
7,350,118 6,697,141
National Bank of Romania 215,732 18,864,883
Total 46,881,293 64,880,319
The cash held with the Central Bank (i.e. Balances with the National
Bank of Romania) ensures compliance with the minimum reserve
requirements. These funds are not available for the Bank’s daily
business. At 31 December 2010 the minimum mandatory reserves
rates established by the National Bank of Romania for raised funds
with maturity lower than 2 years and for funds raised with residual
maturity greater than 2 years, which foresee contractual clauses
regarding reimbursements, withdrawals, anticipated transfers, are
as follows: 15% for funds raised denominated in RON and 25% for
funds raised denominated in foreign currency (31 December 2009:
15% for funds raised denominated in RON and 25% for funds raised
denominated in foreign currency).
15. Loans and advances to banks
In EUR 31 Dec 2010 31 Dec 2009
Current accounts with banks 849,823 1,151,216
Deposits with banks 142,097 383,811
Total 991,920 1,535,027
Current accounts held at other banks are at immediate disposal of
the Bank. The deposits with banks are unencumbered.
16. Investment securities, available-for-sale
In EUR 31 Dec 2010 31 Dec 2009
Unlisted equity investments 86,305 87,460
Total 86,305 87,460
17. Loans and advances to customers
Financial Statements 69
In EUR
Loans and advances
31 Dec 2010 31 Dec 2009
to customers
Out of which:
178,667,346 180,913,560
Accrued interest on impaired loans
Less provision for impairment
losses on loans and advances
68,102 16,683
to customers (8,141,262) (6,489,960)
Total 170,526,084 174,423,600
The Bank’s commercial lending is concentrated on micro and small
size companies domiciled in Romania. Economic sector risk concentrations
within the customer loan portfolio were as follows:
In EUR 2010 2009
Services 50,690,575 5,994,623
Trade 59,718,197 60,497,459
Industry 61,055,166 52,980,088
Individuals, mortgage loans 2,323,401 3,239,437
Individuals, consumer loans 1,449,391 2,264,041
Others
Total loans and advances to
3,430,616 5,937,912
customers before provisions
Less provision for impairment
losses on loans and advances
178,667,346 180,913,560
to customers (8,141,262) (6,489,960)
Total 170,526,084 174,423,600
The provision for impairment losses on loans and advances to customers
can be further analysed as follows:
In EUR 2010 2009
Specific allowances
Balance at the beginning of the year 428,766
Charge of impairment loss
to income statement for individually
4,447
impaired loans and advances
Release of impairment loss to
income statement for individually
811,873 602,322
impaired loans and advances (313,854) (182,841)
Exchange rate differences 241,429 4,839
Balance at the end of the year 1,168,214 428,767
Collective allowances
Balance at the beginning
of the year
Charge of impairment loss to
income statement for collectively
6,061,194 5,711,451
impaired loans and advances
Release of impairment loss to
income statement for collectively
28,697,291 26,035,858
impaired loans and advances (27,682,065) (22,951,337)
Exchange rate differences (103,372) (2,734,778)
Balance at the end of the year 6,973,048 6,061,194

70
Annual Report 2010
18. Intangible assets
in EUR
Cost
Total
At 1 January 2010 2,710,448
Additions 567,690
Effect of exchange rate (35,804)
At 31 December 2010 3,242,334
Accumulated amortisation
At 1 January 2010 2,147,290
Amortisation charge for the year 679,047
Disposal (5,739)
Effect of exchange rate (40,235)
At 31 December 2010 2,780,363
Net book value
At 31 December 2010 461,972
Cost
At 1 January 2009 2,145,039
Additions 688,687
Effect of exchange rate (123,278)
At 31 December 2009 2,710,448
Accumulated amortisation
At 1 January 2009 1,515,097
Amortisation charge for the year 719,267
Effect of exchange rate (87,075)
At 31 December 2009
Net book value
2,147,289
At 31 December 2009 563,158
19. Property and equipment
Leasehold Furniture and Motor Construction Total
in EUR
Cost
improvements computer equipment vehicles in progress
At 1 January 2010 5,329,465 6,189,141 825,116 10,056 12,353,778
Additions 276,421 535,049 91,900 124,150 1,027,521
Disposals (704,792) (320,832) (179,713) (128,360) (1,333,697)
Effect of exchange rate (70,399) (81,755) (10,899) (133) (163,187)
At 31 December 2010 4,830,695 6,321,603 726,404 5,713 11,884,415
Accumulated depreciation
At 1 January 2010 2,270,611 4,090,828 427,068 – 6,788,508
Depreciation charge for the year 825,859 687,427 124,385 – 1,637,671
Disposal (366,770) (140,884) (145,135) – (652,789)
Effect of exchange rate (44,430) (66,054) (7,816) – (118,300)
At 31 December 2010 2,685,270 4,571,317 398,502 – 7,655,089
Net book value
At 31 December 2010 2,145,425 1,750,286 327,902 5,713 4,229,326

Operating leases
Non-cancellable operating lease rentals are payable as follows:
In EUR 31 Dec 2010 31 Dec 2009
Less than one year 3,455,543 3,709,581
Between one and five years 6,234,585 5,357,752
More than five years 818,579 1,198,938
Total 10,508,707 10,266,271
20. Other assets
In EUR 31 Dec 2010 31 Dec 2009
Prepayments 271,775 394,545
Sundry debtors
Advances for fixed
182,761 67,266
assets in progress 242,291 375,919
Other receivables 775,141 732,200
Total 1,471,968 1,569,930
21. Deposits from customers
In EUR
Individuals
31 Dec 2010 31 Dec 2009
Term deposits 96,435,325 100,208,168
Current deposits 10,466,280 9,826,998
Collateral deposit
Corporate customers
203,795 278,652
Term deposits 23,541,499 11,143,980
Current deposits 13,025,616 11,732,146
Collateral deposit 376,886 373,807
Total 144,049,401 133,563,751
Financial Statements 71
Leasehold Furniture and Motor Construction Total
in EUR
Cost
improvements computer equipment vehicles in progress
At 1 January 2009 4,869,840 6,161,983 781,831 347,812 12,161,466
Additions 1,024,733 753,268 206,391 10,056 1,994,448
Disposals (285,233) (371,972) (118,173) (327,822) (1,103,200)
Effect of exchange rate (279,876) (354,137) (44,933) (19,990) (698,936)
At 31 December 2009 5,329,464 6,189,142 825,116 10,056 12,353,778
Accumulated depreciation
At 1 January 2009 1,857,364 3,658,465 428,669 – 5,944,498
Depreciation charge for the year 767,030 985,108 120,348 – 1,872,486
Disposal (247,037) (342,488) (97,313) – (686,838)
Effect of exchange rate (106,745) (210,257) (24,636) – (341,638)
At 31 December 2009 2,270,612 4,090,828 427,068 – 6,788,508
Net book value
At 31 December 2009 3,058,852 2,098,314 398,048 10,056 5,565,270
22. Loans from banks and other financial institutions
In EUR
European Fund for
31 Dec 2010 31 Dec 2009
Southeast Europe (EFSE) (v)
European Bank for Reconstruction
17,058,014 8,736,661
and Development (EBRD) (ii)
International Finance
11,186,815 36,675,898
Corporation (IFC) (iii) 4,673,648 7,006,034
Citibank Romania S A. (iv) – 24,081,024
Dexia Micro-Credit Funds (vii)
Kreditanstalt für
4,788,815 –
Wiederaufbau (KfW) (i)
Pettelaar
7,111,607 9,942,046
Effectenbewaarbedrij N.V. (vi) 7,906,798 7,895,645
Total 52,725,697 94,337,308
(i) Loan from KfW
In May 2008 the Bank concluded a loan agreement with KfW
amounting to EUR 10,000,000 with purpose of refinancing other
loans. The loan bears an interest rate of 6 months Euribor plus
margin and is repayable in equal semi-annual instalments of EUR
1,428,571 each starting from June 2010 till June 2013.
(ii) Loan from EBRD
In October 2008 the Bank signed with EBRD a loan agreement
amounting to EUR 37,000,000 to be drawn in two tranches. The
first tranche was drawn in November 2008 in the amount of EUR
25,000,000. The second tranche EUR 12,000,000 was drawn in January
2009. The loan bears an interest rate of 6 months Euribor plus
margin and is repayable starting from June 2010 until June 2012.The
outstanding principal of the loan as for 31 December 2010 was EUR
11,250,000 (31 December 2009: EUR 37,000,000).
(iii) Loan from International Finance Corporation (IFC)
In June 2007 the Bank concluded with International Finance Corporation
a loan agreement amounting to RON 34,050,000. In May
2009 the Bank concluded with International Finance Corporation
new agreement regarding to shift the loan from RON 34,050,000 to
EUR 8,179,787. The loan bears an interest rate of 6 months Euribor
plus margin and is repayable starting from July 2009 until July 2012.

72
Annual Report 2010
The borrowing contract stipulates the following limit that was
breached as at 31 December 2010:
• aggregate outstanding amount of the ten (10) largest aggregate
Exposures of the Borrower to any Person or Economic
Group (other than a Commercial Bank) (

26. Reserves
In EUR 31 Dec 2010 31 Dec 2009
Statutory reserve (i) 146,219 148,176
General banking risk reserve (ii) 1,439,099 1,458,363
Revaluation reserve 520 528
Total 1,585,838 1,607,067
(i) Statutory reserves represent accumulated transfers from retained
earnings in accordance with local banking regulations that
require 5% of the Bank’s statutory profit to be transferred to a nondistributable
statutory reserve until such time this reserve represents
20% of the Bank’s share capital.
(ii) The general banking risks reserve include amounts set aside
in accordance with local banking regulations for future losses and
other unforeseen risks or contingencies, are separately disclosed
as appropriations of profit. The general banking risks reserve was
appropriated from the statutory gross profit at the rate of 1% of the
balance of the assets carrying specific banking risks until the end
of 2006 as required by local legislation.
27. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents
comprise the following balances with less than 90 days maturity:
In EUR
Cash and other balances
31 Dec 2010 31 Dec 2009
with NBR (Note 14)
Loans and advances
7,565,850 25,562,024
to banks (Note 15) 991,920 1,535,027
Treasury bills (i) 3,480,127 9,411,905
Total 12,037,897 36,508,956
(i) The treasury bills balance amounting to EUR 3,480,127 (31 December
2009: EUR 9,411,905) includes securities with discount issued
by the Government of Romania, that are classified by the Bank
as available for sale and present a remaining maturity of less than
3 months. The treasury bills have an annualised average discount
rate of 6% ( 31 December 2009: 10%).
28. Commitments and contingencies
i) Legal proceedings
As at 31 December 2010 and 31 December 2009 there were no significant
legal proceedings outstanding against the Bank.
ii) Credit related commitments
The primary purpose of these instruments is to ensure that funds
are available to a customer as required. Guarantees and standby
letters of credit, which represent irrevocable assurances that the
Bank will make payments in the event that a customer cannot meet
its obligations to third parties, carry the same credit risk as loans.
Documentary and commercial letters of credit, which are written
undertakings by the Bank on behalf of a customer authorising a
third party to draw drafts on the Bank up to a stipulated amount under
specific terms and conditions, are collateralised by the underlying
shipments of goods to which they relate and therefore have
significantly less risk than a direct borrowing.
Commitments to extend credit represent unused portions of authorisations
to extend credit in the form of loans, guarantees or letters
of credit. With respect to credit risk on commitments to extend
credit, the Bank is potentially exposed to loss in an amount equal
to the total unused commitments. However, the likely amount of
loss is considerably less than the total unused commitments since
most commitments to extend credit are contingent upon customers
maintaining specific credit standards. The Bank monitors the term
to maturity of credit commitments because longer-term commitments
generally have a greater degree of credit risk than shorterterm
commitments.
The following table indicates the maximum accounting loss that
would be recognised at the balance sheet date if counterparties
failed completely to perform as contracted:
In EUR 31 Dec 2010 31 Dec 2009
Guarantees given 1,231,865 892,783
Commitments to extend credit 5,962,952 4,157,832
Total 7,149,817 5,050,615
The Bank issues guarantees and letters of credit on behalf of its
customers. The credit risk on guarantees is similar to that arising
from granting of loans. In the event of a claim on the Bank as a result
of a customer’s default on a guarantee these instruments also
present a degree of liquidity risk to the Bank. At 31 December 2010
no provision has been established for risks arising from off balance
sheet commitments (31 December 2009: nil).
29. Related party transactions
Financial Statements 73
Transactions with shareholders and other related parties from the
group
The Bank entered into a number of banking transactions with the
related parties in the normal course of business. These transactions
were carried out in the normal course of the business on commercial
terms and conditions and at market rate.
The list of related parties and description of the nature of relationship
is as follows:
Name
Commerzbank Aktiengesellschaft
Relationship
(and its subsidiaries) Shareholder
International Finance Corporation Shareholder
ProCredit Holding AG Shareholder
ProCredit Bank Albania Bank of the group
ProCredit Bank Bulgaria Bank of the group
ProCredit Bank Georgia Bank of the group
ProCredit Bank Kosovo Bank of the group
ProCredit Bank Macedonia Bank of the group
ProCredit Bank Ukraine Bank of the group
ProCredit Moldova Group company
ProCredit Academy Group company
ProLease Bulgaria Group company
The parent and ultimate controlling party of the Bank is ProCredit
Holding Germany.

74
Annual Report 2010
During the year ended 31 December 2010 and the year ended 31 December
2009 the following transactions were carried out with the
shareholders and other related parties from the group:
in EUR 2010 2009
Loans and advances* 572,461 990,741
Other receivable 25,536 2,277
Total assets 597,997 993,018
Deposits 12,058,918 –
Borrowings 22,972,070 16,948,080
Other liabilities 3,535 3,808
Subordinated liabilities 8,929,648 8,928,206
Total liabilities 43,964,171 25,880,094
Interest income – 9,501
Net fees and commissions (39,037) (29,739)
Other revenue 5,588 21,025
Income (33,449) (787)
Interest expense (2,448,817) (2,857,737)
Other expense (838,528) (551,662)
Expense (3,287,345) (3,409,399)
* The loans and advances granted in 2010, represents current accounts
placed to related parties, which are free of interest.
Transactions with key management personnel
in EUR 2010 2009
Management salaries (i) 383,276 311,833
Total expenses 383,276 311,833
(i) Included in the key management personnel are the Bank’s Managers
and Division Managers.
30. Reconciliation of profit under IFRS and Romanian Accounting
Standards as stipulated in Order No. 13/2008 issued by the
National Bank of Romania
in EUR 2010 2009
Loss for the year under
Romanian Accounting
Standards (i)
Adjustments for impairment
provisions on loans and
(4,463,936) (9,771,055)
advances to customers 1,079,468 3,302,232
Deferred tax income 369,679 1,443,008
Other items (147,288) (167,121)
Loss for the year under IFRS (3,162,077) (5,192,936)
(i) The loss for the year under Romanian Accounting Standards as
stipulated in Order No. 13/2008 issued by the National Bank of
Romania Governor on the approval of accounting regulations compliant
with EU Directives and applicable to credit institutions presented
above may change due to issuance of the statutory financial
statements pursuant to IFRS financial statements approval.
31. Reconciliation of equity under IFRS and Romanian Accounting
Standards as stipulated in Order No. 13/2008 issued by the
National Bank of Romania
in EUR 2010 2009
Equity under Romanian
Accounting Standards (i) 17,133,658 16,674,834
Loans related adjustments 4,245,569 3,362,223
Fixed assets related adjustments (111,611) (115,017)
Deferred tax asset 1,584,165 1,237,293
Equity under IFRS 22,851,781 21,159,333
(i) The equity as at 31 December 2010 under Romanian Accounting
Standards as stipulated in Order No. 13/2008 issued by the
National Bank of Romania Governor on the approval of accounting
regulations compliant with EU Directives and applicable to credit
institutions presented above may change due to issuance of the
statutory financial statements pursuant to IFRS financial statements
approval.
32. Subsequent events
In February 2011 the Bank closed 9 agencies/branches.
On 11 March 2011, the Bank signed a one year prolongation agreement
related to the “Stand-by line agreement (STB29)” with
ProCredit Holding A.G. The Stand-by line agreement specifies a revolving
loan facility amounting to EUR 10,000,000.
In the context of gradual alignment with the standards of European
Central Bank, Board of Administrators of National Bank of Romania
decided to reduce the rates for minimum compulsory reserves from
25% to 20% applied to resources attracted denominated in foreign
currency and with residual maturity lower than two years starting
with the application period 24 April – 32 May 2011. The minimum
compulsory reserves rates applied to resources attracted denominated
in local currency remained unchanged at 15%.
Starting 1 January 2011, the coverage limit per guaranteed depositor,
per credit institution stands at the equivalent in lei of EUR
100,000.

Financial Statements 75

76
Annual Report 2010
Contact Addresses
Head Office
62-64 Buzesti St., Sector 1
011017 Bucharest
Tel.: (4) 21 201 6000
Fax: (4) 21 305 5663
headoffice@procreditbank.ro
www.procreditbank.ro
Branches in Bucharest
Bucuresti Branch
188 Chitilei St., Sector 1
Bucharest
Tel: (4) 021 206 01 66
Fax: (4) 021 206 01 70
info.chitila@procreditbank.ro
Colentina Branch
346 Colentina St., Sector 2
Bucharest
Tel: (4) 021 204 94 74
Fax: (4) 021 204 94 79
info.colentina@procreditbank.ro
Giurgiului Branch
121 Giurgiului St., Block 5, Sector 4
Bucharest
Tel.: (4) 021 405 04 25
Fax: (4) 021 405 04 26
info.giurgiului@procreditbank.ro
Lacul Tei Agency
126 - 128 Lacul Tei Blvd.,
Block 17 – 18, Sector 2
Bucharest
Tel.: (4) 021 204 95 34
Fax: (4) 021 204 95 37
info.tei@procreditbank.ro
Militari Branch
22 Iuliu Maniu Blvd., Block C15, Sector 6
Bucharest
Tel.: (4) 021 434 62 92
Fax: (4) 021 407 31 72
info.militari@procreditbank.ro
Mosilor Agency
262 Calea Mosilor, Block 8, Sector 2
Bucharest
Tel.: (4) 021 201 65 17
Fax: (4) 021 201 65 18
info.mosilor@procreditbank.ro
Muncii Agency
323 Calea Calarasilor, Block 201, Sector 3
Bucharest
Tel.: (4) 021 308 35 20
Fax: (4) 021 308 35 22
info.muncii@procreditbank.ro
Obregia Agency
25 Alexandru Obregia Blvd., Block 14, Sector 4
Bucharest
Tel.: (4) 021 406 66 37
Fax: (4) 021 406 66 38
info.obregia@procreditbank.ro
Pantelimon Branch
258 Pantelimon St., Block 47, Sector 2
Bucharest
Tel.: (4) 021 200 49 72
Fax: (4) 021 255 30 09
info.pantelimon@procreditbank.ro
Rahova Agency
297 Calea Rahovei, Sector 5
Bucharest
Tel: (4) 021 404 82 73
Fax : (4) 021 404 82 75
info.rahova@procreditbank.ro
Stefan cel Mare Agency
36 Stefan cel Mare St., Block 30B, Sector 2
Bucharest
Tel. (4) 021 201 89 34
Fax: (4) 021 201 89 36
info.stefancelmare@procreditbank.ro
Victoria Branch
62 – 64 Buzesti St., Sector 1
Bucharest
Tel.: (4) 021 300 51 50
Fax: (4) 021 305 56 58
info.victoria@procreditbank.ro
Vitan Agency
17A Calea Vitan, Sector 3
Bucharest
Tel.: (4) 021 308 64 52
Fax: (4) 021 308 64 54
info.vitan@procreditbank.ro
Branches in the Regions
Alexandria Branch
185 Libertatii St.
Alexandria
Tel: (4) 0247 306 281
Fax: (4) 0247 306 288
info.alexandria@procreditbank.ro
Arad Branch
Piata Spitalului, Block H
Arad
Tel.: (4) 0257 306 162
Fax: (4) 0257 306 173
info.arad@procreditbank.ro
Bacau Branch
90 and 104 B Calea Marasesti
Bacau
Tel: (4) 0234 206 330
Fax: (4) 0234 206 332
info.bacau@procreditbank.ro

Baia Mare Branch
9 Unirii Blvd.
Baia Mare
Tel: (4) 0262 206 348
Fax: (4) 0262 206 350
info.baiamare@procreditbank.ro
Braila Branch
49 Mihai Eminescu St.
Braila
Tel: (4) 0239 606 002
Fax: (4) 0239 606 004
info.braila@procreditbank.ro
Brasov Branch
90 Calea Bucuresti
Brasov
Tel: (4) 0268 306 020
Fax: (4) 0268 306 026
info.brasov@procreditbank.ro
Brasov – Toamnei Agency
1-3-5 Zizinului St.
Brasov
Tel.: (4) 0268 306 454
Fax: (4) 0268 306 455
info.toamnei@procreditbank.ro
Cluj-Napoca Branch
4 Nicolae Titulescu Blvd., Apt. 15/1
Cluj-Napoca
Tel.: (4) 0264 406 630
Fax: (4) 0264 406 241
info.cluj@procreditbank.ro
Cluj - Marasti Agency
135 21 Decembrie 1989 Blvd., Block M3
Cluj-Napoca
Tel.: (4) 0264 403 598
Fax: (4) 0264 403 886
info.marasti@procreditbank.ro
Constanta Branch
Soveja St., Block O5-O8, Lot 1
Constanta
Tel.: (4) 0241 508 423
Fax: (4) 0241 508 437
info.constanta@procreditbank.ro
Constanta - Tomis Branch
10 Stefan Mihaileanu St.
Constanta
Tel.: (4) 0241 508 166
Fax: (4) 0241 508 162
info.tomis@procreditbank.ro
Craiova Branch
6 Carol I Blvd., Block 21A, Entrance 1 and 2
Craiova
Tel.: (4) 0251 306 079
Fax: (4) 0251 306 075
info.craiova@procreditbank.ro
Craiova Agency
1 Gogu Constantinescu St., Block E14
Craiova
Tel.: (4) 0251 540 000
Fax: (4) 0251 540 019
info.agentiacraiova@procreditbank.ro
Dabuleni Branch
12 Victoriei St.
Dabuleni
Tel: (4) 0251 306 132
Fax: (4) 0251 306 134
info.dabuleni@procreditbank.ro
Iasi Branch
23 Pacurari St.
Iasi
Tel.: (4) 0232 262 051
Fax: (4) 0232 262 070
info.iasi@procreditbank.ro
Iasi – Podu Ros Agency
198 Soseaua Nationala, Tronson 1, Block B
Iasi
Tel.: (4) 0232 206 733
Fax: (4) 0232 206 735
info.iasipoduros@procreditbank.ro
Pitesti Branch
Zona Centru, Block E3A
Pitesti
Tel.: (4) 0248 206 015
Fax: (4) 0248 206 017
info.pitesti@procreditbank.ro
Ploiesti Branch
2A C.D. Gherea St., Block C
Ploiesti
Tel.: (4) 0244 407 472
Fax: (4) 0244 407 473
info.ploiesti@procreditbank.ro
Ramnicu Valcea Branch
16 General Magheru St., Block H
Ramnicu Valcea
Tel: (4) 0250 702 502
Fax: (4) 0250 702 503
info.rmvalcea@procreditbank.ro
Contact Addresses 77
Sibiu Branch
Parcul Tineretului St., Block 4
Sibiu
Tel: (4) 0269 245 104
Fax: (4) 0269 245 106
info.sibiu@procreditbank.ro
Slatina Branch
7 Primaverii St.
Slatina
Tel: (4) 0249 406 254
Fax: (4) 0249 406 302
info.slatina@procreditbank.ro
Suceava Branch
22A Marasesti St.
Suceava
Tel: (4) 0230 206 409
Fax: (4) 0230 206 429
info.suceava@procreditbank.ro
Timisoara Branch
1 Calea Torontalului
Timisoara
Tel.: (4) 0256 224 422
Fax: (4) 0256 243 799
info.timisoara@procreditbank.ro
Targu Mures Branch
216, 1 Decembrie 1918 Blvd.
Targu Mures
Tel: (4) 0265 206 240
Fax: (4) 0265 206 245
info.tgmures@procreditbank.ro

78
Annual Report 2010

Contact Addresses 79