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Particularly important audit facts<br />
Particularly important audit facts include any facts that, according to our dutiful discretion, were<br />
most critical for our audit <strong>of</strong> the annual accounts <strong>of</strong> the fiscal year. Said facts were considered here<br />
in connection with our audit <strong>of</strong> the entire annual accounts and in forming our audit opinion, and we<br />
shall not provide any separate audit opinion on said facts.<br />
Recoverability <strong>of</strong> loans and advances to customers<br />
The risk with respect to the annual accounts:<br />
Loans and advances to customers are reported in the balance sheet with an amount <strong>of</strong> EUR 147.9<br />
million. This amount includes value adjustments (impairments) in the amount <strong>of</strong> EUR 2.7 million.<br />
In terms <strong>of</strong> amount (almost 32.3% <strong>of</strong> total assets), loans and advances to customers constitute a<br />
significant balance sheet item. With only few exceptions, primarily loans secured by mortgages,<br />
deposits and securities are granted. The Managing Board <strong>of</strong> the bank describes the procedure to<br />
determine impairments on loans and advances to customers in the Notes to the annual accounts<br />
in the chapter “General principles and information on accounting and valuation”, as well as in item<br />
2B “Risks in the sphere <strong>of</strong> loans and advances to customers”.<br />
Within the scope <strong>of</strong> credit monitoring, the bank assesses once a year whether impairment<br />
indicators exist and whether, accordingly, specific provisions must be formed. Identifying<br />
impairment indicators includes an assessment as to whether any events exist that result in an<br />
impairment <strong>of</strong> contractually agreed payments being made in full and without realizing any<br />
collateral. Specific provisions are determined taking account <strong>of</strong> the collateral available. In doing<br />
so, the collateral is recognized in the amount <strong>of</strong> its respective lending value, i.e. fair values less<br />
haircuts. Accordingly, the recognized collateral values are estimates.<br />
Apart from determination <strong>of</strong> the specific provisions, the portfolio value adjustment for<br />
non-defaulting customers is calculated on the basis <strong>of</strong> a valuation model. Apart from customer<br />
exposure and collateral values, it is primarily the probability <strong>of</strong> default (PD) based on the customer<br />
rating that is relevant. Based on the existing internal customer rating, probabilities <strong>of</strong> default –<br />
obtained externally – are allocated to the blank volumes.<br />
The risk for the annual accounts is in the essential uncertainty <strong>of</strong> discretionary assessments and<br />
estimates associated with the determination <strong>of</strong> impairment indicators and the calculation <strong>of</strong><br />
impairments.<br />
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