Annual Financial Statements 2011 of Bank Austria

Consolidated Financial Statements in accordance with IFRSs
Report of the Supervisory Board for 2011
In the 2011 financial year the Supervisory Board again maintained
good and effective cooperation with the Management Board. In this
context the Supervisory Board performed its duties as defined by law
and in the Articles of Association and the rules of procedure, with due
regard to the Austrian Code of Corporate Governance. The Supervisory
Board held five meetings and passed ten resolutions by written circular
vote. It dealt with the current situation of the bank’s business, focusing
on issues which are of special operational and strategic significance,
and with risk-related issues. Moreover, major issues and forthcoming
decisions were discussed in talks between the Chairman of the Supervisory
Board and the Chairman of the Management Board.
Focus of the Supervisory Board’s activity
In performing its advisory and supervisory functions, the Management
Board regularly informed the Supervisory Board, in writing and
orally and in a timely and comprehensive manner, on business policy,
business management issues, the financial position and performance,
and on events which were of major significance for the bank. On the
basis of these reports, the Supervisory Board provided continuous
advice to the Management Board, supervised the conduct of business,
and passed resolutions on matters within its competence after
appropriate evaluation.
The Supervisory Board issued a statement of compliance with the
Austrian Code of Corporate Governance. The rules of procedure for
the Supervisory Board were modified to reflect the establishment of
the Remuneration Committee and the rules of procedure for the
Remuneration Committee were approved. The rules of procedure for
the Audit Committee were also modified. Furthermore, the applicability
of UniCredit Governance Rules on Complaint Management to members
of the Supervisory Board was formalised.
The Supervisory Board closely monitored the challenging environment
in European and international financial markets and discussed the
development of the exposure to Greece in particular.
Periodical reports dealt with the measures derived from the review of
credit risk by Oesterreichische Nationalbank, Austria’s central bank,
pursuant to Section 70 of the Austrian Banking Act; with the performance
of Ramius; and with the activities of UniCredit Turn-Around
Management CEE GmbH, the special assets holding company for
repossession of assets and equity.
From a legal perspective, the Supervisory Board obtained information on
developments of the Madoff case and on the status of the legal proceedings
concerning Bundesanstalt für vereinigungsbedingte Sonderaufgaben
versus AKB Privatbank Zürich AG. The Supervisory Board was also provided
with a report on Corporate Treasury Sales business in Austria.
Other analyses related to the EuroSIG and All4Quality Austria projects and
the UniCredit Bank Austria Town building project. In this connection, the
Supervisory Board gave its approval to the acquisition of a property.
The Supervisory Board repeatedly dealt with the funding plan of the
Bank Austria Group, reports on restructured loans in CEE, trends in staff
costs, the Group Compensation Policy, and the termination of existing profit
transfer agreements and the conclusion of tax compensation agreements.
Capital measures included capital increases at UniCredit Banka
Slovenija d.d., UniCredit Bank a.d. Banja Luka, PJSC Ukrsotsbank,
UniCredit Securities Group and the acquisition of additional shares in
Zagrebačka banka and in UniCredit Bulbank. Other focal points were a
resolution concerning the recapitalisation of banks of Bank Austria in
CEE and the issue of comfort letters.
Resolutions passed by the Supervisory Board also included those approving
powers to represent and act on behalf of the bank and those giving
advance approval to loans to, and transactions with, members of the
Supervisory Board and of the Management Board as well as other related
parties as defined in Section 28 of the Austrian Banking Act.
Moreover, the Supervisory Board performed a self-evaluation of the efficiency
of its work and discussed the relevant results. To the extent that
this process indicated a need for changes, the Supervisory Board will
take this into account in optimising organisational arrangements and in
its future activities.
In its meetings the Supervisory Board also discussed, on the basis of
written and oral presentations, the main issues dealt with by the Supervisory
Board Committees.
Committee activities
The Credit Committee held five meetings in 2011 and passed eleven
resolutions by written circular votes. Apart from decisions on loans requiring
its approval, the Committee also took note of loans granted under
the Management Board’s approval authority and dealt with exposures of
relevance in connection with Art. 136 of the Italian Banking Act and with
large exposures pursuant to Section 27 of the Austrian Banking Act. In
addition to detailed risk and sector portfolio reports, the Committee dealt
with the overall risk report, the report on the structure of the loan portfolio,
and with risk policy principles. In the past year, the Committee also
intensively discussed CEE funding considerations and passed resolutions
concerning impairment losses on Greek government bonds.
The Audit Committee held four meetings in 2011, with representatives
of the auditors regularly taking part in the meetings. It discussed
the separate financial statements and the consolidated financial statements
as well as the audit reports, including the report on the effectiveness
of risk management, and provided the Supervisory Board with
information on these topics. The Audit Committee also dealt with the
proposal concerning the election of the auditors of the separate financial
statements and of the consolidated financial statements for the
2012 financial year. On the basis of regular reporting, the Audit Committee
satisfied itself about the effectiveness of the internal control and
audit systems and monitored the financial reporting process with due
Bank Austria · Annual Financial Statements 2011
179