Annual Report of Euram Bank 2019


Particularly important audit facts

Particularly important audit facts include any facts that, according to our dutiful discretion, were

most critical for our audit of the annual accounts of the fiscal year. Said facts were considered here

in connection with our audit of the entire annual accounts and in forming our audit opinion, and we

shall not provide any separate audit opinion on said facts.

Recoverability of loans and advances to customers

The risk with respect to the annual accounts:

Loans and advances to customers are reported in the balance sheet with an amount of EUR 147.9

million. This amount includes value adjustments (impairments) in the amount of EUR 2.7 million.

In terms of amount (almost 32.3% of total assets), loans and advances to customers constitute a

significant balance sheet item. With only few exceptions, primarily loans secured by mortgages,

deposits and securities are granted. The Managing Board of the bank describes the procedure to

determine impairments on loans and advances to customers in the Notes to the annual accounts

in the chapter “General principles and information on accounting and valuation”, as well as in item

2B “Risks in the sphere of loans and advances to customers”.

Within the scope of credit monitoring, the bank assesses once a year whether impairment

indicators exist and whether, accordingly, specific provisions must be formed. Identifying

impairment indicators includes an assessment as to whether any events exist that result in an

impairment of contractually agreed payments being made in full and without realizing any

collateral. Specific provisions are determined taking account of the collateral available. In doing

so, the collateral is recognized in the amount of its respective lending value, i.e. fair values less

haircuts. Accordingly, the recognized collateral values are estimates.

Apart from determination of the specific provisions, the portfolio value adjustment for

non-defaulting customers is calculated on the basis of a valuation model. Apart from customer

exposure and collateral values, it is primarily the probability of default (PD) based on the customer

rating that is relevant. Based on the existing internal customer rating, probabilities of default –

obtained externally – are allocated to the blank volumes.

The risk for the annual accounts is in the essential uncertainty of discretionary assessments and

estimates associated with the determination of impairment indicators and the calculation of



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