Annual Report 2010 - ProCredit 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.