GB00_erste lage_E - Erste Group

As a supplement to the general credit policy geared towards diversifying risk, in the industrialised
countries additional provisions were established to account for the eventual impact of an economic
slowdown on the credit portfolio, above all in the USA.
Major banking subsidiaries abroad
Nearly two-thirds of the credit risk of Česká spořitelna, a.s. relates to banks and government exposure,
notably the National Bank (minimum reserve balance and repurchase agreements) as
well as liquid assets invested in Czech government bonds. Consistent with the position of Česká
spořitelna, a.s. as the largest retail bank in the Czech Republic, the third largest group of borrow-
ers are households, at about 10% of credit risk. The balance of the exposure is widely diversified
across the other economic sectors. The Czech domestic share in credit risk is close to 90%.
When Erste Bank bought the majority interest in Česká spořitelna, a.s., it was agreed that a large
proportion of the problem loans acquired in the process will be guaranteed by Konsolidační banka,
a government institution through a so-called “ring-fencing agreement”. This involves almost 5%
of the total credit risk of Česká spořitelna, a.s. As these lendings have remained on the Bank’s
balance sheet, the share of non-performing assets amounts to 5% of credit risk. Loans and advances
with elevated credit risk are fully covered by the transfer of risk to Konsolidační banka or
by risk provisions.
While the lending business of Erste Bank Hungary increased substantially, the share of the for-
mer core business of agricultural credit was reduced. Instead, lending to retail customers was ex-
panded. Write-offs reduced the share of non-performing loans to slightly more than 3% of credit
risk. These loans are fully covered by risk provisions.
The overall trend in risk provisions at Group level is described in Notes 15 and 30.
Additional information on risk management at the Erste Bank Group is provided in Note 42 of
the Notes to the Financial Statements.
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