CJSC “Alfa-Bank” International Financial Reporting ...

CJSC “Alfa-Bank”

International Financial Reporting Standards Financial Statements and Independent Auditor’s Report

31 December 2020

CJSC “Alfa-Bank”

CONTENTS Independent Auditor’s Report Financial Statements Statement of Financial Position..................................................................................................................... 1 Statement of Comprehensive Income ........................................................................................................... 2 Statement of Changes in Equity.................................................................................................................... 3 Statement of Cash Flows .............................................................................................................................. 4 Notes to the Financial Statements 1 Introduction ........................................................................................................................................ 5 2 Summary of Significant Accounting Policies ...................................................................................... 6 3 Critical Accounting Estimates, and Judgements in Applying Accounting Policies ........................... 16 4 Adoption of New or Revised Standards and Interpretations ............................................................ 20 5 New Accounting Pronouncements ................................................................................................... 21 6 Cash and Cash Equivalents ............................................................................................................ 24 7 Due from Other Banks ..................................................................................................................... 25 8 Loans and Advances to Customers ................................................................................................. 26 9 Investments in Debt Securities ........................................................................................................ 48 10 Premises, Equipment and Intangible Assets ................................................................................... 52 11 Other Financial Assets ..................................................................................................................... 53 12 Other Assets .................................................................................................................................... 60 13 Due to Other Banks ......................................................................................................................... 61 14 Customer Accounts ......................................................................................................................... 61 15 Debt Securities in Issue ................................................................................................................... 62 16 Other Financial Liabilities ................................................................................................................. 62 17 Other Liabilities ................................................................................................................................ 66 18 Share Capital and Retained Earnings .............................................................................................. 67 19 Other Comprehensive Income Recognised in Each Component of Equity ...................................... 67 20 Interest Income and Expense .......................................................................................................... 68 21 Fee and Commission Income and Expense .................................................................................... 69 22 Other Operating Income .................................................................................................................. 70 23 Administrative and Other Operating Expenses ................................................................................ 72 24 Income Taxes .................................................................................................................................. 72 25 Reconciliation of Liabilities Arising from Financing Activities ........................................................... 74 26 Segment Analysis ............................................................................................................................ 74 27 Financial Risk Management ............................................................................................................ 77 28 Management of Capital .................................................................................................................... 91 29 Contingencies and Commitments .................................................................................................... 92 30 Derivative Financial Instruments ...................................................................................................... 95 31 Fair Value Disclosures ..................................................................................................................... 96 32 Presentation of Financial Instruments by Measurement Category ................................................ 101 33 Related Party Transactions ........................................................................................................... 102 34 Events After the End of the Reporting Period ................................................................................ 104

Unitary Enterprise on Services Rendering “PricewaterhouseCoopers Assurance” 3, Gikalo street, floor 3, office 3, Minsk, Republic of Belarus, 220005 T: +375 (17) 335 4000, F: +375 (17) 335 4111, www.pwc.by

Independent Auditor’s Report

To the Shareholders, the Board of Directors and the Management Board of Closed Joint Stock Company “Alfa-Bank”

Our opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Closed Joint Stock Company “Alfa-Bank” (the “Bank”) as at 31 December 2020, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

The Bank’s location is Minsk, Surganova str., 43-47, 220013, the Republic of Belarus; the Bank is registered by the National Bank of the Republic of Belarus decision dated 28 January 1999 in the Unified State Register of Legal Entities and Individual Entrepreneurs with № 58. The certificate of state registration №101541947.

What we have audited The Bank’s financial statements comprise:

• the statement of financial position as at 31 December 2020; • the statement of comprehensive income for the year then ended; • the statement of changes in equity for the year then ended; • the statement of cash flows for the year then ended; and; • the notes to the financial statements, which include significant accounting policies and other

explanatory information.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.

We believe, that the audit evidence we have obtained, is sufficient and appropriate to provide a basis for our Opinion.

Independence We are independent of the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the ethical requirements that are relevant to our audit of the financial statements in the Republic of Belarus. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code and the ethical requirements of Republic of Belarus.

Our audit approach Overview

• Overall Company materiality: BYN 7 810 thousand, which represents 5%of profit before tax for the year ended 31 December 20120.

• Expected Credit Losses allowance for loans to legal entities.

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Bank’s materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually and in aggregate on the financial statements as a whole.

Overall Bank’s materiality BYN 7 810 thousand

How we determined it 5% of profit before tax for the year ended 31 December 2020.

Materiality

Key audit matters

Rationale for the materiality benchmark applied

We chose the profit before tax as a benchmark for determining the level of materiality, since, in our opinion, this indicator is widely measured by users and shareholders of the Bank, and it is a generally acceptable benchmark. We have established the materiality at the level of 5%, which falls within the range of acceptable quantitative thresholds for materiality.

Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the key audit matter Expected Credit Losses allowance for loans and advances to legal entities

We focused on this matter due to significance of loans to legal entities balance and significance of judgment and estimates required for calculation of the related Expected Credit Losses allowance for loans and advances to legal entities. The allowance represents management’s best estimation of expected credit losses from loans and advances to legal entities as at the balance sheet date. The Bank applies individual and collective assessment models for Expected Credit Losses allowance calculation. Expected Credit Losses allowance is assessed individually for significant customers – legal entities, the total amount of credit exposure of which is significant. The Bank applies judgment to estimate Expected Credit Losses allowance for loans and advances as well as risk and probability that a credit loss occurs taking into consideration reasonably possible and probability-weighted scenarios. Expected Credit Losses allowance is assessed collectively in terms of segments or subportfolios, which include borrowers with similar credit risk characteristics. Key parameters of the collective assessment model: - probability of default (PD). PD is calculated onthe basis of the matrices of the annual migrationof credit ratings, taking into account the macrofactor to take into account the current changes inthe economic environment;- loss given default (LGD). LGD is calculated interms of loan agreements in the Bank's software

We assessed the key methodologies for calculation of Expected Credit Losses allowance for loans and advances to legal entities for compliance with the requirements of International Financial Reporting Standards. We assessed and tested (on a sample basis) the design and operating effectiveness of the controls over data used for Expected Credit Losses allowance calculation for loans and advances to legal entities: the authorization of the loan agreement and the disbursement of money; process of loan agreements data input into the Bank's software; timely transfer of the overdue debt to the accounts for the overdue debt; the reasonableness of the Bank's determination of the value of the collateral taken into calculations; the correctness of the attribution of the problem zone; correctness of determining of the stage of impairment. The Bank calculates an allowance on an individual basis for individually significant clients (legal entities with the total amount of credit exposure not less than 2% of the Bank’s equity in accordance with International Financial Reporting Standards) with rating lower than “A-“, with identified significant increase in credit risk and/or default factors. The model represents an estimation of the recoverable amount of credit exposure based on the method of discounted expected future cash flows. The Bank estimates the recoverable amount of the credit exposure based on the current data on customers’ solvency, factors of their financial instability, negative information, violations of the payment schedule, liquidity of collateral and other relevant information We tested the calculation of Expected Credit Losses allowance for loans and advances to legal entities assessed individually. We checked the list of individually assessed borrowers for completeness. We analysed loan files of individually significant borrowers, their latest financial statements, information on factors of financial instability, debt management procedures and violations of payment schedules. We assessed the liquidity of the collateral for those

Key audit matter How our audit addressed the key audit matter systems and is the estimation of the unrecoverable part of the asset from the projected cash repayment and the existing collateral. The difference between individual and collective assessment models is the calculation of LGD. For individual allowance purposes, the estimated cash flows are estimated at each reporting date considering all contractual terms of the financial instrument throughout the expected life of the financial instrument. The cash flows include cash flows from the sale of collateral held or from other credit enhancements that form an integral part of the contractual terms. Note 2 “Summary of Significant Accounting Policies”, Note 3 “Critical Accounting Estimates, and Judgements in Applying Accounting Policies” and Note 8 “Loans and advances to customers”, included in the financial statements, contain detailed information on Expected Credit Losses allowance for loans and advances to legal entities.

loan agreements where it was relevant. For selected loans classified to stage 3 we assessed assumptions used during forecast cash flows including financial position of the borrowers and the Bank's debt collateral strategy. We also analysed Expected Credit Losses allowance for the collectively assessed loans and advances to legal entities. We tested (on a sample basis) the operating effectiveness of the controls over overdue debt exposure of legal entities. We tested that borrowers have correct stage classification. On a sample basis, we analysed PDs and LGDs applied by the Bank. We recalculated the final allowance amount for expected credit losses on loans and advances to legal entities assessed on collective basis. We performed analytical procedures for the total amount of Expected Credit Losses allowance for loans and advances to legal entities: developed trend lines, analysed the correlation between changes in loan exposure and Expected Credit Losses allowance, reviewed the correctness of the presentation by the Bank in the financial statements of information in relation to Expected Credit Losses allowance for loans and advances to legal entities.

Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Bank’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than for one resulting from error, as fraud mayinvolve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol.

• Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Bank’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related to eventsor conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. Ifwe conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the financial statements or, if such disclosures are inadequate,to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date ofour auditor’s report. However, future events or conditions may cause the Bank to cease to continueas a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions and eventsin a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Bank to express an opinion on the financial statements. We areresponsible for the direction, supervision and performance of the Bank audit. We remain solelyresponsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical and other requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

pwc

Qualification certificate of the Auditor of the Ministry of Finance of the RepuЫic of Belarus No. 2617 of 27 December 2019, without limitation of validity. Certificate of compliance with the qualification requirements for specialists engaged in auditing in banks and nonbank financial institutions No. 120 of 23 April 2020, the expiration date of the certificate is 23 April 2025.

Audit organization: Unitary Enterprise on Services Rendering "PricewaterhouseCoopers Assurance" (Unitary Enterprise "PricewaterhouseCoopers Assurance") Location: 3, Gikalo street, floor 3, office 3, Minsk, RepuЫic of Belarus, 220005 lnformation оп state registration: registered Ьу the Minsk -i · xeeчti_ е Committee оп April 3, 2014 in the Unified State Register of Legal Entities and lndividual Entrepreneurs f 45. -�etti{l,cate of state registration No. 0104031

,:>'1-"?\

·\.·, Dat Магсh 2021.

1·;

D

�:,:=�,

, е Bank: 31 Магсh 2021.

of Closed Joint Stock Company "Alfa-Bank"

CJSC “Alfa-Bank” Statement of Comprehensive Income

The notes set out on pages 5 to 104 form an integral part of these financial statements. 2

In thousands of Belarusian roubles Note 2020 2019 Interest income calculated using the effective interest method 20 206,569 205,217 Other similar income 20 7,112 3,900 Interest expense 20 (89,091) (82,406) Net interest income 124,590 126,711 Credit loss allowance 8 (8,385) (8,865) Net interest income after credit loss allowance 116,205 117,846 Fee and commission income 21 111,697 87,775 Fee and commission expense 21 (41,938) (31,352) Gains less losses from financial derivatives (24,770) 2,202 Gains less losses from trading in foreign currencies 100,677 60,725 Foreign exchange translation gains less losses 137,186 (11,713) Gains less losses from disposals of investments in debt securities 19 (12) (2) Other provisions 11,29 4,113 (2,567) Other operating income 22 1,277 5,093 Administrative and other operating expenses 23 (139,514) (126,331) Profit before tax 264,921 101,676 Income tax expense 24 (65,282) (21,644) PROFIT FOR THE YEAR 199,639 80,032 Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Investments in debt securities: - Gains less losses arising during the year 19 (12) (2) - Gains less losses reclassified to profit or loss upon disposal 19 12 2 Items that will not be reclassified to profit or loss: Revaluation of premises and equipment 19 7,390 388 Income tax recorded directly in other comprehensive income 19 (1,848) (97) Other comprehensive income for the year 5,542 291 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 205,181 80,323

CJSC “Alfa-Bank” Statement of Changes in Equity


In thousands of Belarusian roubles Note Share

capital

Revaluation reserve for

property, plant and equipment

Retained earnings

Total equity

Balance at 1 January 2019 151,061 13,450 203,939 368,450 Profit for the year - - 80,032 80,032 Other comprehensive income 19 - 291 - 291 Total comprehensive income for 2019 - 291 80,032 80,323 Balance at 31 December 2019 151,061 13,741 283,971 448,773 Profit for the year - - 199,639 199,639 Other comprehensive income 19 - 5,542 - 5,542 Total comprehensive income for 2020 - 5,542 199,639 205,181 Balance at 31 December 2020 151,061 19,283 483,610 653,954

CJSC “Alfa-Bank” Statement of Cash Flows


In thousands of Belarusian roubles Note 2020 2019 Cash flows from operating activities Interest received 208,379 204,045 Interest paid (89,587) (81,342) Fees and commissions received 110,991 88,338 Fees and commissions paid (44,408) (31,300) Income received from financial derivatives (24,770) 2,202 Income received from trading in foreign currencies 100,677 60,721 Other operating income received 14,325 15,861 Staff costs paid (82,375) (75,057) Administrative and other operating expenses paid (41,743) (37,053) Income tax paid (37,166) (24,263) Cash flows from operating activities before changes in operating assets and liabilities 114,323 122,152

Net (increase)/decrease in: - mandatory balances in the National bank (6,652) (5,143) - due from other banks 426,910 (387,775) - loans and advances to customers (215,827) (203,648) - other financial assets (5,395) 487 - other assets 2,519 1,834 Net increase/(decrease) in: - due to other banks (50,903) (59,207) - customer accounts 38,795 493,262 - debt securities in issue 62,834 (26,274) - other financial liabilities 4,394 (3,093) - other liabilities 4,162 (3,440) Net cash from operating activities 375,160 (70,845) Cash flows from investing activities Acquisition of debt securities (84,815) (6,677,251) Proceeds from disposal/(redemption) of debt securities 134,740 6,624,298 Acquisition of premises, equipment and intangible assets 10 (17,170) (12,659) Proceeds from disposal of premises, equipment and intangible assets 474 - Net cash used in investing activities 33,229 (65,612) Cash flows from financing activities Repayment of principal of lease liabilities (4,597) (3,639)

Net cash from financing activities (4,597) (3,639) Effect of exchange rate changes on cash and cash equivalents 93,126 (1,259)

Net increase in cash and cash equivalents 496,918 (141,355) Cash and cash equivalents at the beginning of the year 516,882 658,237 Cash and cash equivalents at the end of the year 6 1,013,800 516,882

CJSC “Alfa-Bank” Notes to the Financial Statements – 31 December 2020

5

1 Introduction

These financial statements have been prepared in accordance with International Financial Reporting Standards for the year ended 31 December 2020 for Closed Joint-Stock Company “Alfa-Bank” (the “Bank”).

Closed Joint-Stock Company “Alfa-Bank” (former title “International Trade and Investment Bank”) was registered by the National Bank of the Republic of Belarus (the “National Bank of Belarus”) on 28 January 1999 as a closed joint-stock company with foreign capital participation. In July 2008 the Bank was acquired by the consortium Alfa-Group as a result of which the Bank registered a new name – Closed Joint-Stock Company “Alfa-Bank”.

On 18 December 2012 the parent company of the Bank (ABH Belarus Limited) has acquired 99.999985% of the share capital of CJSC “Alfa-Bank Finance” (former JSC “Belrosbank” which was renamed to CJSC “Alfa-Bank Finance” following the decision of shareholders as at 9 January 2013). On 10 April 2013 the shareholders of both banks have made a decision on a legal merger of CJSC “Alfa-Bank” and CJSC “Alfa-Bank Finance” into a single legal entity named CJSC “Alfa-Bank”. The merger was registered by the National Bank of Belarus on 14 June 2013. In September 2014 the subordinated debt from Joint-Stock Company “Alfa-Bank” (Russia) was converted to the share capital of the Bank, causing an increase in the ownership of Joint-Stock Company “Alfa-Bank” (Russia). In December 2017 the subordinated debt from ABH Belarus Limited (Cyprus) was converted to share capital of the Bank, causing an increase in the ownership of ABH Belarus Limited (Cyprus). On 19 June 2018 the parent company of the Bank (ABH Belarus Limited) has acquired 100% of share capital of JSC “Non-banking credit-financial organization “Home Credit” (NKFO Home Credit). The legal merger of CJSC “Alfa-Bank” and JSC “NKFO Home Credit” under a common name CJSC “Alfa-Bank” was registered by the National Bank on 14 September 2018 (Decree # 414). The Decree entered into force on 28 September 2018.

As at 31 December 2020 and 2019 the following shareholders owned the issued shares of the Bank:

2020 2019

ABH Belarus Limited, Cyprus 69.2 69.2 Joint-Stock Company “Alfa-Bank”, Russia 30.8 30.8 Total 100.0 100.0

The ultimate controlling parties of the Bank as at 31 December 2020 and 2019 were the owners of ABH Holdings S.A. (ABHH), a Luxembourg registered company: Mr. Fridman, Mr. Khan, Mr. Kuzmichev, Mr. Aven, Mr. Kosogov, UniCredit S.p.A., and a non-profit organisation “The Mark Foundation for Cancer Research” (the “Shareholders”). None of the Shareholders individually or jointly controls and/or owns a 50% or more interest in ABHH.

Principal activity. The Bank’s principal business activity is commercial and retail banking operations within the Republic of Belarus. The Bank conducts its business under the license for performing banking operations # 22 issued by the National Bank of Belarus on 22 July 2014. The Bank also has the licence of the State Securities Committee of the Republic of Belarus for intermediary, commercial and consulting activities on securities market of the Republic of Belarus.

The Bank’s primary areas of operations include transferring payments, lending, foreign currency operations upon demand of its customers and on interbank market. The licence allows the Bank to maintain accounts and attract term deposits from individuals and corporate customers. The State Agency of Guaranteed Compensation of Individual Deposits guarantees repayment of 100% of individual deposits in the case of the withdrawal of a licence of a bank or a state imposed moratorium on payments.

As at 31 December 2020 the Bank had 32 banking service offices in the Republic of Belarus (2019: 33).

The average number of employees of the Bank during 2020 and 2019 was 1,774 and 1,849 respectively.

As at 31 December 2020 and 2019 the Bank has neither subsidiaries nor associates.

Registered address and place of business. The Bank’s registered address is: 43-47 Surganova Str., Minsk, Republic of Belarus.


6

Presentation currency. These financial statements are presented in thousands of Belarusian roubles (“BYN”), the currency of the primary economic environment in which the Bank operates, unless otherwise stated.

Republic of Belarus.

The economy of the Republic of Belarus exhibits some characteristics of an emerging market. The legal, tax and regulatory systems continue to evolve and are subject to frequent changes and interpretations. Throughout 2020, the country continued to implement monetary policy aimed at stabilizing the financial market. In 2020, the refinancing rate of the National Bank of the Republic of Belarus decreased by 1.25 percentage points and amounted to 7.75%. In 2020, there was a slight slowdown in economic growth. According to the results of 2020, the volume of GDP decreased by 0.9 ppts, compared with an increase of 1.4ppts in 2019. Inflationary processes remained moderate; the consumer price index amounted to 107.36% at the end of 2020 (104.73% at the end of 2019). With regard to foreign currency, a devaluation of the national currency was observed in relation to foreign currencies: in relation to the US dollar in the amount of 22.59%, in relation to the euro – 34.40%, in relation to the Russian ruble – 2.43% and as a result increase in the state debt, which is almost entirely denominated in foreign currency, and risks for the economic, financial stability and balance of payments of the country have also increased. On 12 March 2020, the World Health Organization declared the COVID-19 epidemic a global pandemic. In connection with the pandemic, the Belarusian authorities have taken several measures aimed at containing the spread and mitigating the consequences of COVID-19, such as restrictions on movement, self-isolation and a mask regime. On 9 August 2020, elections of the President of the Republic of Belarus were held, after which peaceful protests began. The current political uncertainty could drag on, putting pressure on Belarus' medium-term growth prospects. Also, the European Union imposed sanctions against a few individuals (representatives of the country's leadership, including the President of the Republic of Belarus) and some Belarusian companies. The United States and several countries joined the imposed sanctions. On 11 September 2020, S&P Global Ratings changed the outlook on Belarus' long-term sovereign credit ratings in foreign and local currency from stable to negative. At the same time, the agency affirmed its long-term and short-term sovereign credit ratings in foreign and local currency at 'B / B'. As at 31 December 2020, the credit rating of the Republic of Belarus has not changed. The future impact of the current economic environment and the above measures is difficult to predict, and management's current expectations and estimates may differ from actual results.

2 Summary of Significant Accounting Policies

Basis of preparation. These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) under the historical cost convention, as modified by the initial recognition of financial instruments based on fair value, and by the revaluation of premises, financial instruments categorised at fair value through profit or loss and at fair value through other comprehensive income. The principal accounting policies applied in the preparation of these financial statements are set out below.

Financial instruments - key measurement terms. Depending on their classification financial instruments are carried at fair value, cost, or amortised cost as described below.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The best evidence of fair value is price in an active market. An active market is one in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.


7

Fair value of financial instruments traded in an active market is measured as the product of the quoted price for the individual asset or liability and the quantity held by the Bank. This is the case even if a market’s normal daily trading volume is not sufficient to absorb the quantity held and placing orders to sell the position in a single transaction might affect the quoted price.

A portfolio of financial derivatives or other financial assets and liabilities that are not traded in an active market is measured at the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position (i.e. an asset) for a particular risk exposure or paid to transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction between market participants at the measurement date. This is applicable for assets carried at fair value on a recurring basis if the Bank: (a) manages the group of financial assets and financial liabilities on the basis of the Bank’s net exposure to a particular market risk (or risks) or to the credit risk of a particular counterparty in accordance with the Bank’s documented risk management or investment strategy; (b) it provides information on that basis about the group of assets and liabilities to the Bank’s key management personnel; and (c) the market risks, including duration of the Bank’s exposure to a particular market risk (or risks) arising from the financial assets and financial liabilities is substantially the same.

Valuation techniques such as discounted cash flow models or models based on recent arm’s length transactions or consideration of financial data of the investees, are used to measure fair value of certain financial instruments for which external market pricing information is not available. Valuation techniques may require assumptions not supported by observable market data. Disclosures are made in these financial statements if changing any such assumptions to a reasonably possible alternative would result in significantly different profit, income, total assets or total liabilities.

Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial instrument. An incremental cost is one that would not have been incurred if the transaction had not taken place. Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisors, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs.

Amortised cost (“AC”) is the amount at which the financial instrument was recognised at initial recognition less any principal repayments, plus accrued interest, and for financial assets less any allowance for expected credit losses. Accrued interest includes amortisation of transaction costs deferred at initial recognition and of any premium or discount to maturity amount using the effective interest method. Accrued interest income and accrued interest expense, including both accrued coupon and amortised discount or premium (including fees deferred at origination, if any), are not presented separately and are included in the carrying values of related items in the statement of financial position.

The effective interest method is a method of allocating interest income or interest expense over the relevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on the carrying amount.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts (excluding future credit losses) through the expected life of the financial instrument or a shorter period, if appropriate, to the net carrying amount of the financial instrument. The effective interest rate discounts cash flows of variable interest instruments to the next interest repricing date, except for the premium or discount which reflects the credit spread over the floating rate specified in the instrument, or other variables that are not reset to market rates. Such premiums or discounts are amortised over the whole expected life of the instrument. The present value calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate.

Initial recognition of financial instruments. Derivatives are initially recorded at fair value. All other financial instruments are initially recorded at fair value adjusted for transaction costs. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets.

All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention (“regular way” purchases and sales) are recorded at trade date, which is the date on which the Bank commits to deliver a financial asset. All other purchases are recognised when the entity becomes a party to the contractual provisions of the instrument.


8

The Bank uses discounted cash flow valuation techniques to determine the fair value of currency swaps, foreign exchange forwards that are not traded in an active market. Differences may arise between the fair value at initial recognition, which is considered to be the transaction price, and the amount determined at initial recognition using a valuation technique. Any such differences are amortised on a straight line basis over the term of the currency swaps, foreign exchange forwards.

Financial assets – classification and subsequent measurement – measurement categories. The Bank classifies financial assets in the following measurement categories: FVTPL (Fair value through profit or loss), FVOCI (Fair value through other comprehensive income) and AC (Amortised cost). The classification and subsequent measurement of debt financial assets depends on: (i) the Bank’s business model for managing the related assets portfolio and (ii) the cash flow characteristics of the asset.

Financial assets – classification and subsequent measurement – business model. The business model reflects how the Bank manages the assets in order to generate cash flows – whether the Bank’s objective is: (i) solely to collect the contractual cash flows from the assets (“hold to collect contractual cash flows”,) or (ii) to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to collect contractual cash flows and sell”) or, if neither of (i) and (ii) is applicable, the financial assets are classified as part of “other” business model and measured at FVTPL.

Business model is determined for a group of assets (on a portfolio level) based on all relevant evidence about the activities that the Bank undertakes to achieve the objective set out for the portfolio available at the date of the assessment. Factors considered by the Bank in determining the business model include the purpose and composition of a portfolio, past experience on how the cash flows for the respective assets were collected, how risks are assessed and managed, how the assets’ performance is assessed and how managers are compensated. Refer to Note 3 for critical judgements applied by the Bank in determining the business models for its financial assets.

Financial assets – classification and subsequent measurement – cash flow characteristics. Where the business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell, the Bank assesses whether the cash flows represent solely payments of principal and interest (“SPPI”). Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are consistent with the SPPI feature. In making this assessment, the Bank considers whether the contractual cash flows are consistent with a basic lending arrangement, i.e. interest includes only consideration for credit risk, time value of money, other basic lending risks and profit margin.

Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed on initial recognition of an asset and it is not subsequently reassessed. Refer to Note 3 for critical judgements applied by the Bank in performing the SPPI test for its financial assets.

Financial assets – reclassification. Financial instruments are reclassified only when the business model for managing the portfolio as a whole changes. The reclassification has a prospective effect and takes place from the beginning of the first reporting period that follows after the change in the business model. The Bank did not change its business model during the current and comparative period and did not make any reclassifications.

Financial assets impairment – credit loss allowance for expected credit losses (ECL). The Bank assesses, on a forward-looking basis, the ECL for debt instruments measured at AC and FVOCI and for the exposures arising from loan commitments and financial guarantee contracts. The Bank measures ECL and recognises credit loss allowance at each reporting date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions.

Debt instruments measured at AC are presented in the statement of financial position net of the allowance for ECL. For loan commitments and financial guarantees, a separate provision for ECL is recognised as a liability in the statement of financial position. For debt instruments at FVOCI, changes in amortised cost, net of allowance for ECL, are recognised in profit or loss and other changes in carrying value are recognised in OCI as gains less losses on debt instruments at FVOCI.


9

The Bank applies a three stage model for impairment, based on changes in credit quality since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (“12 Months ECL”). If the Bank identifies a significant increase in credit risk (“SICR”) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (“Lifetime ECL”). Refer to Note 27 for a description of how the Bank determines when a SICR has occurred. If the Bank determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL. The Bank’s definition of credit impaired assets and definition of default is explained in Note 27. For financial assets that are purchased or originated credit-impaired (“POCI Assets”), the ECL is always measured as a Lifetime ECL. Note 27 provides information about inputs, assumptions and estimation techniques used in measuring ECL, including an explanation of how the Bank incorporates forward-looking information in the ECL models.

As an exception, for certain financial instruments, such as credit cards, that may include both a loan and an undrawn commitment component, the Bank measures expected credit losses over the period that the Bank is exposed to credit risk, that is, until the expected credit losses would be mitigated by credit risk management actions, even if that period extends beyond the maximum contractual period. This is because contractual ability to demand repayment and cancel the undrawn commitment does not limit the exposure to credit losses to such contractual notice period.

Financial assets – write-off. Financial assets are written-off, in whole or in part, when the Bank exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecognition event. The Bank may write-off financial assets that are still subject to enforcement activity when the Bank seeks to recover amounts that are contractually due, however, there is no reasonable expectation of recovery.

Derecognition of financial assets. The Bank derecognises financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expired or (b) the Bank has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement while (i) also transferring substantially all risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all risks and rewards of ownership, but not retaining control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose restrictions on the sale.

Financial assets – modification. The Bank sometimes renegotiates or otherwise modifies the contractual terms of the financial assets. The Bank assesses whether the modification of contractual cash flows is substantial considering, among other, the following factors: any new contractual terms that substantially affect the risk profile of the asset (eg profit share or equity-based return), significant change in interest rate, change in the currency denomination, new collateral or credit enhancement that significantly affects the credit risk associated with the asset or a significant extension of a loan when the borrower is not in financial difficulties.

If the modified terms are substantially different, the rights to cash flows from the original asset expire and the Bank derecognises the original financial asset and recognises a new asset at its fair value. The date of renegotiation is considered to be the date of initial recognition for subsequent impairment calculation purposes, including determining whether a SICR has occurred. The Bank also assesses whether the new loan or debt instrument meets the SPPI criterion. Any difference between the carrying amount of the original asset derecognised and fair value of the new substantially modified asset is recognised in profit or loss, unless the substance of the difference is attributed to a capital transaction with owners.

In a situation where the renegotiation was driven by financial difficulties of the counterparty and inability to make the originally agreed payments, the Bank compares the original and revised expected cash flows to assets whether the risks and rewards of the asset are substantially different as a result of the contractual modification. If the risks and rewards do not change, the modified asset is not substantially different from the original asset and the modification does not result in derecognition. The Bank recalculates the gross carrying amount by discounting the modified contractual cash flows by the original effective interest rate (or credit-adjusted effective interest rate for POCI financial assets), and recognises a modification gain or loss in profit or loss.


10

Payment holidays granted by the Bank in response to COVID-19 pandemic are treated as contractual modifications of the respective loans and advances, however the effect of such modifications is not significant.

Financial liabilities – measurement categories. Financial liabilities are classified as subsequently measured at AC, except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities), contingent consideration recognised by an acquirer in a business combination and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan commitments.

Financial liabilities – derecognition. Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).

Business combination of companies under common control. Business combination of companies under common control is conducted by merger of interests without adjustment of opening balances. Cash and cash equivalents. Cash and cash equivalents are items which are convertible to known amounts of cash within a day and which are subject to an insignificant risk of changes in value. All short-term placements with other banks, beyond overnight placements, are included in due from other banks. Amounts which relate to funds that are of a restricted nature are excluded from cash and cash equivalents. Cash and cash equivalents are carried at amortised cost because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL.

Mandatory cash balances with the National Bank of Belarus. Mandatory cash balances with the National Bank of Belarus represent mandatory reserve deposits with the Central Bank of the Republic of Belarus, which are not available to finance the Bank’s day to day operations, and hence are not considered as part of cash and cash equivalents for the purposes of the statement of cash flows. Mandatory cash balances with the National Bank of Belarus are carried at amortised cost.

Due from other banks. Amounts due from other banks are recorded when the Bank advances money to counterparty banks with no intention of trading the resulting unquoted non-derivative receivable due on fixed or determinable dates. Amounts due from other banks are carried at AC when: (i) they are held for the purposes of collecting contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL.

Loans and advances to customers. Loans and advances to customers are recorded when the Bank advances money to purchase or originate an unquoted non-derivative receivable from a customer due on fixed or determinable dates, and has no intention of trading the receivable. Based on the business model and the cash flow characteristics, the Bank classifies loans and advances to customers into one of the following measurement categories: (i) AC: loans that are held for collection of contractual cash flows and those cash flows represent SPPI and loans that are not voluntarily designated at FVTPL, and (ii) FVTPL: loans that do not meet the SPPI test or other criteria for AC or FVOCI are measured at FVTPL.

Impairment allowances are determined based on the forward-looking ECL models. Note 27 provides information about inputs, assumptions and estimation techniques used in measuring ECL, including an explanation of how the Bank incorporates forward-looking information in the ECL models.

Repossessed collateral. Repossessed collateral represents non-financial assets acquired by the Bank in settlement of overdue loans. The assets are initially recognised at fair value when acquired and included in premises and equipment or inventories within other assets depending on their nature and the Bank's intention in respect of recovery of these assets, and are subsequently remeasured and accounted for in accordance with the accounting policies for these categories of assets.

Credit related commitments. The Bank issues financial guarantees and commitments to provide loans. Financial guarantees represent irrevocable assurances to make payments in the event that a customer cannot meet its obligations to third parties, and carry the same credit risk as loans. Financial guarantees and commitments to provide a loan are initially recognised at their fair value, which is normally evidenced by the amount of fees received. This amount is amortised on a straight line basis over the life of the commitment, except for commitments to originate loans if it is probable that the Bank will enter into a specific lending arrangement and does not expect to sell the resulting loan shortly after origination; such loan commitment fees are deferred and included in the carrying value of the loan on initial recognition.


11

At the end of each reporting period, the commitments are measured at (i) the remaining unamortised balance of the amount at initial recognition, plus (ii) the amount of the loss allowance determined based on the expected credit loss model, unless the commitment is to provide a loan at a below market interest rate, in which case the measurement is at the higher of these two amounts.

In cases where the fees are charged periodically in respect of an outstanding commitment, they are recognised as revenue on a time proportion basis over the respective commitment period.

Investments in debt securities. Based on the business model and the cash flow characteristics, the Bank classifies investments in debt securities as carried at AC, FVOCI or FVTPL. Debt securities are carried at AC if they are held for collection of contractual cash flows and where those cash flows represent SPPI, and if they are not voluntarily designated at FVTPL in order to significantly reduce an accounting mismatch.

Debt securities are carried at FVOCI if they are held for collection of contractual cash flows and for selling, where those cash flows represent SPPI, and if they are not designated at FVTPL. Interest income from these assets is calculated using the effective interest method and recognised in profit or loss. An impairment allowance estimated using the expected credit loss model is recognised in profit or loss for the year. All other changes in the carrying value are recognised in OCI. When the debt security is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from OCI to profit or loss.

Investments in debt securities are carried at FVTPL if they do not meet the criteria for AC or FVOCI. The Bank may also irrevocably designate investments in debt securities at FVTPL on initial recognition if applying this option significantly reduces an accounting mismatch between financial assets and liabilities being recognised or measured on different accounting bases.

Premises and equipment. From the year 2013 the Bank started to use revaluation model for premises. Premises are stated at revalued amounts, as described below, less accumulated depreciation and provision for impairment, where required.

Premises are subject to revaluation with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. Increases in the carrying amount arising on revaluation are credited to other comprehensive income and increase the revaluation surplus in equity. Decreases that offset previous increases of the same asset are recognised in other comprehensive income and decrease the previously recognised revaluation surplus in equity; all other decreases are charged to profit or loss for the year. The revaluation reserve for premises and equipment included in equity is transferred directly to retained earnings when the revaluation surplus is realised on the retirement or disposal of the asset.

The other categories of fixed assets are stated at cost less accumulated depreciation and provision for impairment, where required.

Costs of minor repairs and day-to-day maintenance are expensed when incurred. Costs of replacing major parts or components of premises and equipment items are capitalised, and the replaced part is retired.

At the end of each reporting period management assesses whether there is any indication of impairment of premises and equipment. If any such indication exists, management estimates the recoverable amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in profit or loss for the year. An impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to determine the asset’s value in use or fair value less costs to sell.

Gains and losses on disposals determined by comparing proceeds with carrying amount are recognised in profit or loss for the year (within other operating income or expenses).

Depreciation. Construction in progress is not depreciated. Depreciation on other items of premises and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives:

Useful lives in years

Premises 1 to 125 Office and computer equipment 4 to 50


12

The residual value of an asset is the estimated amount that the Bank would currently obtain from disposal of the asset less the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Intangible assets. The Bank’s intangible assets have definite useful life and primarily include capitalised computer software.

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. All other costs associated with computer software, e.g. its maintenance, are expensed when incurred. Capitalised computer software is amortised on a straight line basis over expected useful lives of 2 to 10 years.

Accounting for leases by the Bank as a lessee. The Bank leases office premises. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Bank. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is recognised at cost and depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable;

• variable lease payment that are based on an index or a rate;

• amounts expected to be payable by the lessee under residual value guarantees;

• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and

• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability;

• any lease payments made at or before the commencement date less any lease incentives received;

• any initial direct costs, and

• restoration costs.

As an exception to the above, the Bank accounts for short-term leases and leases of low value assets by recognising the lease payments as an operating expense on a straight line basis.

In determining the lease term, management of the Bank considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee.

Finance lease receivables. Where the Bank is a lessor in a lease which transfers substantially all the risks and rewards incidental to ownership to the lessee, the assets leased out are presented as a finance lease receivable and carried at the present value of the future lease payments. Finance lease receivables are initially recognised at commencement (when the lease term begins) using a discount rate determined at inception (the earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease).


13

The difference between the gross receivable and the present value represents unearned finance income. This income is recognised over the term of the lease using the net investment method (before tax), which reflects a constant periodic rate of return. Incremental costs directly attributable to negotiating and arranging the lease are included in the initial measurement of the finance lease receivable and reduce the amount of income recognised over the lease term. Finance income from leases is recorded within interest income in profit or loss for the year.

Credit loss allowance is recognised in accordance with the general ECL model. The ECL is determined in the same way as for loans and advances measured at AC and recognised through an allowance account to write down the receivables’ net carrying amount to the present value of expected cash flows discounted at the interest rates implicit in the finance leases. The estimated future cash flows reflect the cash flows that may result from obtaining and selling the assets subject to the lease.

Due to other banks. Amounts due to other banks are recorded when money or other assets are advanced to the Bank by counterparty banks. The non-derivative liability is carried at amortised cost.

Customer accounts. Customer accounts are non-derivative liabilities to individuals, state or corporate customers and are carried at amortised cost.

Debt securities in issue. Debt securities in issue include bonds and debentures issued by the Bank. Debt securities are stated at amortised cost. If the Bank purchases its own debt securities in issue, they are removed from the statement of financial position and the difference between the carrying amount of the liability and the consideration paid is included in gains arising from early retirement of debt.

Derivative financial instruments. Derivative financial instruments, including foreign exchange contracts, and currency and interest rate swaps are carried at their fair value.

All derivative instruments are carried as assets when fair value is positive, and as liabilities when fair value is negative. Changes in the fair value of derivative instruments are included in profit or loss for the year (gains less losses on derivatives). The Bank does not apply hedge accounting.

Income taxes. Income taxes have been provided for in the financial statements in accordance with legislation enacted or substantively enacted by the end of the reporting period. The income tax charge comprises current tax and deferred tax and is recognised in profit or loss for the year, except if it is recognised in other comprehensive income or directly in equity because it relates to transactions that are also recognised, in the same or a different period, in other comprehensive income or directly in equity.

Current tax is the amount expected to be paid to, or recovered from, the taxation authorities in respect of taxable profits or losses for the current and prior periods. Taxable profits or losses are based on estimates if the financial statements are authorised prior to filing relevant tax returns. Taxes other than on income are recorded within administrative and other operating expenses.

Deferred income tax is provided using the balance sheet liability method for temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. In accordance with the initial recognition exemption, deferred taxes are not recorded for temporary differences on initial recognition of an asset or a liability in a transaction other than a business combination if the transaction, when initially recorded, affects neither accounting nor taxable profit. Deferred tax balances are measured at tax rates enacted or substantively enacted at the end of the reporting period, which are expected to apply to the period when the temporary differences will reverse.

Deferred tax assets for deductible temporary differences are recorded only to the extent that it is probable that future taxable profit will be available against which the deductions can be utilised.

Provisions for liabilities and charges. Provisions for liabilities and charges are non-financial liabilities of uncertain timing or amount. They are accrued when the Bank has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

Trade and other payables. Trade payables are accrued when the counterparty has performed its obligations under the contract and are carried at amortised cost.


14

Share capital. Ordinary shares classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Any excess of the fair value of consideration received over the par value of shares issued is recorded as share premium in equity.

Dividends. Dividends are recorded in equity in the period in which they are declared. Any dividends declared after the end of the reporting period and before the financial statements are authorised for issue, are disclosed in the subsequent events note. The statutory accounting reports of the Bank are the basis for profit distribution and other appropriations. Belarusian legislation identifies the basis of distribution as the current year net profit.

Interest income and expense recognition. Interest income and expense are recorded for all debt instruments, (other than those at FVTPL) on an accrual basis using the effective interest method. This method defers, as part of interest income or expense, all fees paid or received between the parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

Fees integral to the effective interest rate include origination fees received or paid by the entity relating to the creation or acquisition of a financial asset or issuance of a financial liability, for example fees for evaluating creditworthiness, evaluating and recording guarantees or collateral, negotiating the terms of the instrument and for processing transaction documents. Commitment fees received by the Bank to originate loans at market interest rates are integral to the effective interest rate if it is probable that the Bank will enter into a specific lending arrangement and does not expect to sell the resulting loan shortly after origination. The Bank does not designate loan commitments as financial liabilities at fair value through profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for (i) financial assets that have become credit impaired (Stage 3), for which interest revenue is calculated by applying the effective interest rate to their AC, net of the ECL provision, and (ii) financial assets that are purchased or originated credit impaired, for which the original credit-adjusted effective interest rate is applied to the AC.

When loans and other debt instruments become doubtful of collection, they are written down to the present value of expected cash inflows and interest income is thereafter recorded for the unwinding of the present value discount based on the asset’s effective interest rate which was used to measure the impairment loss.

Fee and commission income. Fee and commission income is recognised over time on a straight line basis as the services are rendered, when the customer simultaneously receives and consumes the benefits provided by the Bank’s performance. Such income includes recurring fees for account maintenance, account servicing fees, account subscription fees, premium service package fees, portfolio and other asset management advisory and service fees, etc. Variable fees are recognised only to the extent that management determines that it is highly probable that a significant reversal will not occur.

Other fee and commission income is recognised at a point in time when the Bank satisfies its performance obligation, usually upon execution of the underlying transaction. The amount of fee or commission received or receivable represents the transaction price for the services identified as distinct performance obligations. Such income includes fees for arranging a sale or purchase of foreign currencies on behalf of a customer, fees for processing payment transactions, fees for cash settlements. Loan syndication fees are recognised as income when the syndication has been completed and the Bank retains no part of the loan package for itself, or retains a part at the same effective interest rate as for the other participants.

Sales and purchases of foreign currencies and currency conversion. The Bank sells and purchases foreign currencies in the cash offices and through the bank accounts, as well as exchanges foreign currencies. The transactions are performed at the exchange rates established by the Bank, which are different from the official spot exchange rates at the particular dates. The differences between the official rates and Bank rates are recognised as gains less losses from trading in foreign currencies at a point in time when a particular performance obligation is satisfied.

Foreign currency translation. The functional currency of the Bank is the currency of the primary economic environment in which the entity operates. The functional currency of the Bank and the Bank’s presentation currency, is the national currency of the Republic of Belarus, Belarusian rouble (“BYN”).


15

Monetary assets and liabilities are translated into the Bank’s functional currency at the official exchange rate of the National Bank of Belarus at the end of the respective reporting period. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation of monetary assets and liabilities into the Bank’s functional currency at year-end official exchange rates of the National Bank of Belarus, are recognised in profit or loss for the year (as foreign exchange translation gains less losses). Translation at year-end rates does not apply to non-monetary items that are measured at historical cost. Non-monetary items measured at fair value in a foreign currency, including equity investments, are translated using the exchange rates at the date when the fair value was determined.

The result from dealing in foreign currencies in 2020 comprises BYN 100,677 thousand (2019: BYN 60,725 thousand), while foreign exchange translation gains less losses in 2020 comprise BYN 137,186 thousand (2019: minus BYN 11,713 thousand).

At 31 December 2020, the principal rate of exchange used for translating foreign currency balances was USD 1 = BYN 2.5789 (2019: USD 1 = BYN 2.1036). The principal average rate of exchange used for translating income and expenses was USD 1 = BYN 2.4349 (2019: USD 1 = BYN 2.0914).

Fiduciary assets. Assets held by the Bank in its own name, but on the account of third parties, are not reported in the statement of financial position. Commissions received from fiduciary activities are shown in fee and commission income.

Offsetting. Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts, and there is an intention to either settle on a net basis, or to realise the asset and settle the liability simultaneously.

Staff costs and related contributions. Wages, salaries, contributions to the Republic of Belarus state pension and social insurance funds, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by the employees of the Bank. The Bank has no legal or constructive obligation to make pension or similar benefit payments beyond the payments to the statutory defined contribution scheme.

Segment reporting. Segments are reported in a manner consistent with the internal reporting provided to the Bank’s chief operating decision maker. Segments whose revenue, result or assets are ten percent or more of all the segments are reported separately.

Presentation of statement of financial position in order of liquidity. The Bank does not have a clearly identifiable operating cycle and therefore does not present current and non-current assets and liabilities separately in the statement of financial position. Instead, assets and liabilities are presented in order of their liquidity. Refer to Note 27 for analysis of financial instruments by expected maturity. The following table provides information on for each line item in the statement of financial position which combines amounts expected to be recovered or settled before and after twelve months after the reporting period.


16

31 December 2020 31 December 2019

Amounts expected to be

recovered or settled Amounts expected to be

recovered or settled

In thousands of Belarusian roubles

Within 12 months

after the reporting

period

After 12 months

after the reporting

period

Total

Within 12 months

after the reporting

period

After 12 months

after the reporting

period

Total

ASSETS Cash and cash equivalents 1,013,800 - 1,013,800 516,882 - 516,882 Mandatory cash balances with the National Bank of Belarus - 30,819 30,819 - 24,167 24,167

Due from other banks 20,604 3,363 23,967 391,043 2,732 393,775 Loans and advances to customers 1,515,214 834,054 2,349,268 1,162,466 643,311 1,805,777 Investments in debt securities - 104,368 104,368 71,769 62,645 134,414 Derivative financial assets 652 - 652 1,878 - 1,878 Other financial assets 18,099 39 18,138 9,976 21 9,997 Other assets 6,968 2,292 9,260 9,619 2,488 12,107 Premises, equipment and intangible assets - 92,258 92,258 - 80,899 80,899

TOTAL ASSETS 2,575,337 1,067,193 3,642,530 2,163,633 816,263 2,979,896 LIABILITIES Due to other banks 119,835 42,844 162,679 130,132 62,741 192,873 Customer accounts 2,394,177 90,253 2,484,430 1,915,172 195,599 2,110,771 Debt securities in issue 88,138 122,974 211,112 26,388 114,746 141,134 Derivative financial liabilities 6,934 - 6,934 3,216 - 3,216 Current income tax liability 8,087 - 8,087 6,039 - 6,039 Other financial liabilities 24,859 8,979 33,838 19,513 6,814 26,327 Deferred income tax liability - 51,132 51,132 - 23,217 23,217 Other liabilities 24,450 5,914 30,364 22,217 5,329 27,546 TOTAL LIABILITIES 2,666,480 322,096 2,988,576 2,122,677 408,446 2,531,123 Amendments of the financial statements after issue. The Bank’s shareholders and management have the power to amend the financial statements after issue.

3 Critical Accounting Estimates, and Judgements in Applying Accounting Policies

The Bank makes estimates and assumptions that affect the amounts recognised in the financial statements, and the carrying amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognised in the financial statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include: Going concern. Management prepared these financial statements on a going concern basis.

ECL measurement. Measurement of ECLs is a significant estimate that involves determination of methodology, models and data inputs. Details of ECL measurement methodology are disclosed in Note 27. The following components have a major impact on credit loss allowance: definition of default, SICR, probability of default (“PD”), exposure at default (“EAD”), and loss given default (“LGD”), as well as models of macro-economic scenarios. The Bank regularly reviews and validates the models and inputs to the models to reduce any differences between expected credit loss estimates and actual credit loss experience.


17

The Bank used supportable forward looking information for measurement of ECL, primarily an outcome of its own macro-economic forecasting model. The most significant forward looking assumptions that correlate with ECL level and their assigned weights were as follows at 31 December 2020:

Assigned weight Variable Scenario 2021 2022 2023

Industrial production in current prices (previous year = 100%) Base 60% 101.1% 102.8% 102.8% Upside 20% 103.0% 105.0% 105.0% Downside 20% 96.0% 98.0% 99.5% Inflation rate Base 60% 6.5% 6.0% 6.0% Upside 20% 6.0% 6.0% 6.0% Downside 20% 25.0% 5.0% 5.0% Nominal interest rate on corporate loans (per annum) Base 60% 12.0% 11.5% 11.0% Upside 20% 10.0% 10.0% 10.0% Downside 20% 27.0% 12.0% 12.0%

The assumptions and assigned weights were as follows at 31 December 2019:

Assigned weight Variable Scenario 2020 2021 2022

Industrial production in current prices (previous year = 100%) Base 80% 102.0% 102.0% 102.0% Upside 15% 105.0% 104.0% 104.0% Downside 5% 99.5% 100.0% 100.5% Inflation rate Base 80% 6.5% 7.0% 7.0% Upside 15% 5.5% 6.0% 5.5% Downside 5% 9.0% 9.5% 9.0% Nominal interest rate on corporate loans (per annum) Base 80% 11.2% 11.5% 11.5% Upside 15% 10.0% 10.5% 10.0% Downside 5% 12.0% 12.5% 12.5%

A change in the weight assigned to base forward looking macro-economic set of assumptions by 10% towards the downside level assumptions would result in an increase in ECL by BYN 3,074 thousand at 31 December 2020 (31 December 2019: by BYN 1,951 thousand). A corresponding change towards the upside assumptions would result in a decrease in ECL by BYN 3,395 thousand at 31 December 2020 (31 December 2019: by BYN 6,076 thousand).

A 10% increase or decrease in PD estimates at 31 December 2020 would result in an increase or decrease in total expected credit loss allowances of BYN 2,947 thousand (31 December 2019: BYN 2,678 thousand). A 10% increase or decrease in LGD estimates at 31 December 2020 would result in an increase or decrease in total expected credit loss allowances of BYN 3,504 thousand (31 December 2019: BYN 2,763 thousand).

Significant increase in credit risk (“SICR”). In order to determine whether there has been a significant increase in credit risk, the Bank compares the risk of a default occurring over the life of a financial instrument at the end of the reporting date with the risk of default at the date of initial recognition. The assessment considers relative increase in credit risk rather than achieving a specific level of credit risk at the end of the reporting period. The Bank considers all reasonable and supportable forward looking information available without undue cost and effort, which includes a range of factors, including behavioural aspects of particular customer portfolios. The Bank identifies behavioural indicators of increases in credit risk prior to delinquency and incorporated appropriate forward looking information into the credit risk assessment, either at an individual instrument, or on a portfolio level. Refer to Note 27.


18

Credit exposure on revolving credit facilities (e.g. credit cards, overdrafts). For certain loan facilities, the Bank's exposure to credit losses may extend beyond the maximum contractual period of the facility. This exception applies to certain revolving credit facilities, which include both a loan and an undrawn commitment component and where the Bank's contractual ability to demand repayment and cancel the undrawn component in practice does not limit its exposure to credit losses.

For such facilities, the Bank measures ECLs over the period that the Bank is exposed to credit risk and ECLs are not mitigated by credit risk management actions. Application of this exception requires judgement. Management applied its judgement in identifying the facilities, both retail and commercial, to which this exception applies. The Bank applied this exception to facilities with the following characteristics: (a) there is no fixed term or repayment structure, (b) the contractual ability to cancel the contract is not in practice enforced as a result of day-to-day management of the credit exposure and the contract may only be cancelled when the Bank becomes aware of an increase in credit risk at the level of an individual facility, and (c) the exposures are managed on a collective basis. Further, the Bank applied judgement in determining a period for measuring the ECL, including the starting point and the expected end point of the exposures.

The Bank considered historical information and experience about: (a) the period over which the Bank is exposed to credit risk on similar facilities, including when the last significant modification of the facility occurred and that therefore determines the starting point for assessing SICR, (b) the length of time for related defaults to occur on similar financial instruments following a SICR and (c) the credit risk management actions (eg the reduction or removal of undrawn limits), prepayment rates and other factors that drive expected maturity. In applying these factors, the Bank segments the portfolios of revolving facilities into sub-groups and applies the factors that are most relevant based on historical data and experience as well as forward-looking information.

Business model assessment. The business model drives classification of financial assets. Management applied judgement in determining the level of aggregation and portfolios of financial instruments when performing the business model assessment. When assessing sales transactions, the Bank considers their historical frequency, timing and value, reasons for the sales and expectations about future sales activity. Sales transactions aimed at minimising potential losses due to credit deterioration are considered consistent with the “hold to collect” business model. Other sales before maturity, not related to credit risk management activities, are also consistent with the “hold to collect” business model, provided that they are infrequent or insignificant in value, both individually and in aggregate. The Bank assesses significance of sales transactions by comparing the value of the sales to the value of the portfolio subject to the business model assessment over the average life of the portfolio. In addition, sales of financial asset expected only in stress case scenario, or in response to an isolated event that is beyond the Bank’s control, is not recurring and could not have been anticipated by the Bank, are regarded as incidental to the business model objective and do not impact the classification of the respective financial assets.

The “hold to collect and sell” business model means that assets are held to collect the cash flows, but selling is also integral to achieving the business model’s objective, such as, managing liquidity needs, achieving a particular yield, or matching the duration of the financial assets to the duration of the liabilities that fund those assets.

The residual category includes those portfolios of financial assets, which are managed with the objective of realising cash flows primarily through sale, such as where a pattern of trading exists. Collecting contractual cash flow is often incidental for this business model.

On transition to IFRS 9, the Bank classified its portfolio of AFS securities as a liquidity portfolio and classified as held to collect and sell.

Assessment whether cash flows are solely payments of principal and interest (“SPPI”). Determining whether a financial asset’s cash flows are solely payments of principal and interest required judgement.

The time value of money element may be modified, for example, if a contractual interest rate is periodically reset but the frequency of that reset does not match the tenor of the debt instrument’s underlying base interest rate, for example a loan pays three months interbank rate but the rate is reset every month. The effect of the modified time value of money was assessed by comparing relevant instrument’s cash flows against a benchmark debt instrument with SPPI cash flows, in each period and cumulatively over the life of the instrument. The assessment was done for all reasonably possible scenarios, including reasonably possible financial stress situation that can occur in financial markets. The Bank applied a threshold of 10% to determine whether differences against a benchmark instruments are significantly different.


19

In case of a scenario with cash flows that significantly differ from the benchmark, the assessed instrument’s cash flows are not SPPI and the instrument is then carried at FVTPL.

The Bank identified and considered contractual terms that change the timing or amount of contractual cash flows. The SPPI criterion is met if a loan allows early settlement and the prepayment amount substantially represents principal and accrued interest, plus a reasonable additional compensation for the early termination of the contract. The asset’s principal is the fair value at initial recognition less subsequent principal repayments, ie instalments net of interest determined using the effective interest method. As an exception to this principle, the standard also allows instruments with prepayment features that meet the following condition to meet SPPI: (i) the asset is originated at a premium or discount, (ii) the prepayment amount represents contractual par amount and accrued interest and a reasonable additional compensation for the early termination of the contract, and (iii) the fair value of the prepayment feature is immaterial at initial recognition.

The Bank considered examples in the standard and concluded that features that arise solely from legislation and that are not part of the contract, that is, if legislation changed, the features would no longer apply, are not relevant for assessing whether cash flows are SPPI.

The Bank’s loan agreements allow adjusting interest rates in response to certain macro-economic or regulatory changes. Management applied judgement and assessed that competition in the banking sector and the practical ability of the borrowers to refinance the loans would prevent it from resetting the interest rates at an above-market level and hence cash flows were assessed as being SPPI.

Modification of financial assets. When financial assets are contractually modified (e.g. renegotiated), the Bank assesses whether the modification is substantial and should result in derecognition of the original asset and recognition of a new asset at fair value. This assessment is based primarily on qualitative factors, described in the relevant accounting policy and it requires significant judgment. In particular, the Bank applies judgment in deciding whether credit impaired renegotiated loans should be derecognised and whether the new recognised loans should be considered as credit impaired on initial recognition. The derecognition assessment depends on whether the risks and rewards, that is, the variability of expected (rather than contractual) cash flows, change as a result of such modifications. Management determined that risks and rewards did not change as a result of modifying such loans and therefore in substantially all such modifications, the loans were neither derecognised nor reclassified out of the credit-impaired stage.

In general, loans modified in relation to COVID-19 pandemic should not be derecognised because the primary reason for their modification is to provide relief to borrowers and it is expected that providing such relief generate a loss for lenders, in the absence of full compensation for time value of money. Derecognition of the loan and recognition of a new loan at fair value (and a new EIR) would result in spreading the modification loss, which is not appropriate.

Write-off policy. Financial assets are written-off, in whole or in part, when the Bank exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. Determining the cash flows for which there is no reasonable expectation of recovery requires judgement. Management considered the following indicators that there is no reasonable expectation of recovery: loans of corporate legal entities classified as default under internal policy for more than 5 years or with no practical possibility of recovery (either through repossession of collateral or repayment) depending on which term is earlier; loans of individuals and SME (small and medium enterprises) being past due over 180 days or uncollateralized loans being past due over 90 days if there is no expectation of recovery; liquidation or bankruptcy proceedings; fair value of collateral is less than the costs to repossess it or enforcement activities were completed. Fair value of derivatives. The fair values of financial derivatives that are not quoted in active markets are determined by using valuation techniques. Valuation of financial derivatives is applied to foreign exchange forward contracts and swaps. The fair value of these transactions is determined as the difference between the present value of fixed receivable and the present value of fixed payable. Where valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed by qualified personnel independent of the area that created them. Models use only observable data, however areas such as credit risk (both own and counterparty), volatilities and correlations require Management to make estimates. Changes in assumptions about these factors could affect reported fair values. Any over or under estimation of these future cash flows could require a material adjustment to the carrying value of these derivatives.


20

Initial recognition of related party transactions. In the normal course of business, the Bank enters into transactions with its related parties. IFRS 9 requires initial recognition of financial instruments based on their fair values. Judgement is applied in determining if transactions are priced at market or non-market interest rates, where there is no active market for such transactions. The basis for judgement is pricing for similar types of transactions with unrelated parties and effective interest rate analysis. Terms and conditions of related party balances are disclosed in Note 33.

Accounting for deferred tax from premises revaluation. The Bank believes that there is no clear established relationship between the accounting revaluation and the tax revaluation of premises. Accordingly, the effect of adjustment of the tax base due to accounting revaluation was recognised in other comprehensive income while the effect of adjustment of tax base due to tax revaluation was recognised in profit and loss.

4 Adoption of New or Revised Standards and Interpretations

The following amended standards became effective from 1 January 2020, but did not have any material impact on the Bank:

Amendments to the Conceptual Framework for Financial Reporting (issued on 29 March 2018 and effective for annual periods beginning on or after 1 January 2020). The revised Conceptual Framework includes a new chapter on measurement; guidance on reporting financial performance; improved definitions and guidance - in particular the definition of a liability; and clarifications in important areas, such as the roles of stewardship, prudence and measurement uncertainty in financial reporting.

Definition of a business – Amendments to IFRS 3 (issued on 22 October 2018 and effective for acquisitions from the beginning of annual reporting period that starts on or after 1 January 2020).The amendments revise definition of a business. A business must have inputs and a substantive process that together significantly contribute to the ability to create outputs. The new guidance provides a framework to evaluate when an input and a substantive process are present, including for early stage companies that have not generated outputs. An organised workforce should be present as a condition for classification as a business if are no outputs. The definition of the term ‘outputs’ is narrowed to focus on goods and services provided to customers, generating investment income and other income, and it excludes returns in the form of lower costs and other economic benefits. It is also no longer necessary to assess whether market participants are capable of replacing missing elements or integrating the acquired activities and assets. An entity can apply a ‘concentration test’. The assets acquired would not represent a business if substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets).

Definition of material – Amendments to IAS 1 and IAS 8 (issued on 31 October 2018 and effective for annual periods beginning on or after 1 January 2020). The amendments clarify the definition of material and how it should be applied by including in the definition guidance that until now has featured elsewhere in IFRS. In addition, the explanations accompanying the definition have been improved. Finally, the amendments ensure that the definition of material is consistent across all IFRS Standards. Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.

Interest rate benchmark reform – Amendments to IFRS 9, IAS 39 and IFRS 7 (issued on 26 September 2019 and effective for annual periods beginning on or after 1 January 2020). The amendments were triggered by replacement of benchmark interest rates such as LIBOR and other inter-bank offered rates (‘IBORs’). The amendments provide temporary relief from applying specific hedge accounting requirements to hedging relationships directly affected by the IBOR reform.

COVID-19-Related Rent Concessions Amendment to IFRS 16 (issued on 28 May 2020 and effective for annual periods beginning on or after 1 June 2020). The amendment provides lessees with relief in the form of an optional exemption from assessing whether a rent concession related to COVID-19 is a lease modification. Lessees can elect to account for rent concessions in the same way as if they were not lease modifications. The practical expedient only applies to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions are met: the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; any reduction in lease payments affects only payments due on or before 30 June 2021; and there is no substantive change to other terms and conditions of the lease. During the reporting period there were no cases which qualified for this amendment.


21

5 New Accounting Pronouncements

Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2021 or later, and which the Bank has not early adopted.

IFRS 17 “Insurance Contracts” (issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2023). IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting for insurance contracts using existing practices. As a consequence, it was difficult for investors to compare and contrast the financial performance of otherwise similar insurance companies. IFRS 17 is a single principle-based standard to account for all types of insurance contracts, including reinsurance contracts that an insurer holds. The standard requires recognition and measurement of groups of insurance contracts at: (i) a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash flows in a way that is consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii) an amount representing the unearned profit in the group of contracts (the contractual service margin). Insurers will be recognising the profit from a group of insurance contracts over the period they provide insurance coverage, and as they are released from risk. If a group of contracts is or becomes loss-making, an entity will be recognising the loss immediately. The Bank expects to apply the standard to performance guarantees that it issues and is currently assessing the impact of the new standard on its financial statements. Potential impact on insurance products embedded in loans and similar instruments is also under consideration.

Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual periods beginning on or after 1 January 2023). The amendments include a number of clarifications intended to ease implementation of IFRS 17, simplify some requirements of the standard and transition. The amendments relate to eight areas of IFRS 17, and they are not intended to change the fundamental principles of the standard. The following amendments to IFRS 17 were made: • Effective date: The effective date of IFRS 17 (incorporating the amendments) has been deferred by

two years to annual reporting periods beginning on or after 1 January 2023; and the fixed expiry date of the temporary exemption from applying IFRS 9 in IFRS 4 has also been deferred to annual reporting periods beginning on or after 1 January 2023.

• Expected recovery of insurance acquisition cash flows: An entity is required to allocate part of the acquisition costs to related expected contract renewals, and to recognise those costs as an asset until the entity recognises the contract renewals. Entities are required to assess the recoverability of the asset at each reporting date, and to provide specific information about the asset in the notes to the financial statements.

• Contractual service margin attributable to investment services: Coverage units should be identified, considering the quantity of benefits and expected period of both insurance coverage and investment services, for contracts under the variable fee approach and for other contracts with an ‘investment-return service’ under the general model. Costs related to investment activities should be included as cash flows within the boundary of an insurance contract, to the extent that the entity performs such activities to enhance benefits from insurance coverage for the policyholder.

• Reinsurance contracts held – recovery of losses: When an entity recognises a loss on initial recognition of an onerous group of underlying insurance contracts, or on addition of onerous underlying contracts to a group, an entity should adjust the contractual service margin of a related group of reinsurance contracts held and recognise a gain on the reinsurance contracts held. The amount of the loss recovered from a reinsurance contract held is determined by multiplying the loss recognised on underlying insurance contracts and the percentage of claims on underlying insurance contracts that the entity expects to recover from the reinsurance contract held. This requirement would apply only when the reinsurance contract held is recognised before or at the same time as the loss is recognised on the underlying insurance contracts.

• Other amendments: Other amendments include scope exclusions for some credit card (or similar) contracts, and some loan contracts; presentation of insurance contract assets and liabilities in the statement of financial position in portfolios instead of groups; applicability of the risk mitigation option when mitigating financial risks using reinsurance contracts held and non-derivative financial instruments at fair value through profit or loss; an accounting policy choice to change the estimates made in previous interim financial statements when applying IFRS 17; inclusion of income tax payments and receipts that are specifically chargeable to the policyholder under the terms of an insurance contract in the fulfilment cash flows; and selected transition reliefs and other minor amendments.

The Bank is currently assessing the impact of the amendments on its financial statements.


22

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB). These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business. A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are held by a subsidiary. The Bank is currently assessing the impact of the amendments on its financial statements.

Classification of liabilities as current or non-current – Amendments to IAS 1 (issued on 23 January 2020 and effective for annual periods beginning on or after 1 January 2022). These narrow scope amendments clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities are non-current if the entity has a substantive right, at the end of the reporting period, to defer settlement for at least twelve months. The guidance no longer requires such a right to be unconditional. Management’s expectations whether they will subsequently exercise the right to defer settlement do not affect classification of liabilities. The right to defer only exists if the entity complies with any relevant conditions as of the end of the reporting period. A liability is classified as current if a condition is breached at or before the reporting date even if a waiver of that condition is obtained from the lender after the end of the reporting period. Conversely, a loan is classified as non-current if a loan covenant is breached only after the reporting date. In addition, the amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. ‘Settlement’ is defined as the extinguishment of a liability with cash, other resources embodying economic benefits or an entity’s own equity instruments. There is an exception for convertible instruments that might be converted into equity, but only for those instruments where the conversion option is classified as an equity instrument as a separate component of a compound financial instrument. The Bank is currently assessing the impact of the amendments on its financial statements.

Classification of liabilities as current or non-current, deferral of effective date – Amendments to IAS 1 (issued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023). The amendment to IAS 1 on classification of liabilities as current or non-current was issued in January 2020 with an original effective date 1 January 2022. However, in response to the Covid-19 pandemic, the effective date was deferred by one year to provide companies with more time to implement classification changes resulting from the amended guidance. The Bank is currently assessing the impact of the amendments on its financial statements.

Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and effective for annual periods beginning on or after 1 January 2022). The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of PPE any proceeds received from selling items produced while the entity is preparing the asset for its intended use. The proceeds from selling such items, together with the costs of producing them, are now recognised in profit or loss. An entity will use IAS 2 to measure the cost of those items. Cost will not include depreciation of the asset being tested because it is not ready for its intended use. The amendment to IAS 16 also clarifies that an entity is ‘testing whether the asset is functioning properly’ when it assesses the technical and physical performance of the asset. The financial performance of the asset is not relevant to this assessment. An asset might therefore be capable of operating as intended by management and subject to depreciation before it has achieved the level of operating performance expected by management.

The amendment to IAS 37 clarifies the meaning of ‘costs to fulfil a contract’. The amendment explains that the direct cost of fulfilling a contract comprises the incremental costs of fulfilling that contract; and an allocation of other costs that relate directly to fulfilling. The amendment also clarifies that, before a separate provision for an onerous contract is established, an entity recognises any impairment loss that has occurred on assets used in fulfilling the contract, rather than on assets dedicated to that contract.

IFRS 3 was amended to refer to the 2018 Conceptual Framework for Financial Reporting, in order to determine what constitutes an asset or a liability in a business combination. Prior to the amendment, IFRS 3 referred to the 2001 Conceptual Framework for Financial Reporting. In addition, a new exception in IFRS 3 was added for liabilities and contingent liabilities. The exception specifies that, for some types of liabilities and contingent liabilities, an entity applying IFRS 3 should instead refer to IAS 37 or IFRIC 21, rather than the 2018 Conceptual Framework. Without this new exception, an entity would have recognised some


23

liabilities in a business combination that it would not recognise under IAS 37. Therefore, immediately after the acquisition, the entity would have had to derecognise such liabilities and recognise a gain that did not depict an economic gain. It was also clarified that the acquirer should not recognise contingent assets, as defined in IAS 37, at the acquisition date.

The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment, costs or fees paid to third parties will not be included in the 10% test.

Illustrative Example 13 that accompanies IFRS 16 was amended to remove the illustration of payments from the lessor relating to leasehold improvements. The reason for the amendment is to remove any potential confusion about the treatment of lease incentives.

IFRS 1 allows an exemption if a subsidiary adopts IFRS at a later date than its parent. The subsidiary can measure its assets and liabilities at the carrying amounts that would be included in its parent’s consolidated financial statements, based on the parent’s date of transition to IFRS, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. IFRS 1 was amended to allow entities that have taken this IFRS 1 exemption to also measure cumulative translation differences using the amounts reported by the parent, based on the parent’s date of transition to IFRS. The amendment to IFRS 1 extends the above exemption to cumulative translation differences, in order to reduce costs for first-time adopters. This amendment will also apply to associates and joint ventures that have taken the same IFRS 1 exemption.

The requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41 was removed. This amendment is intended to align with the requirement in the standard to discount cash flows on a post-tax basis. The Bank is currently assessing the impact of the amendments on its financial statements.

Interest rate benchmark (IBOR) reform – phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (issued on 27 August 2020 and effective for annual periods beginning on or after 1 January 2021). The Phase 2 amendments address issues that arise from the implementation of the reforms, including the replacement of one benchmark with an alternative one. The amendments cover the following areas: • Accounting for changes in the basis for determining contractual cash flows as a result of IBOR reform:

For instruments to which the amortised cost measurement applies, the amendments require entities, as a practical expedient, to account for a change in the basis for determining the contractual cash flows as a result of IBOR reform by updating the effective interest rate using the guidance in paragraph B5.4.5 of IFRS 9. As a result, no immediate gain or loss is recognised. This practical expedient applies only to such a change and only to the extent it is necessary as a direct consequence of IBOR reform, and the new basis is economically equivalent to the previous basis. Insurers applying the temporary exemption from IFRS 9 are also required to apply the same practical expedient. IFRS 16 was also amended to require lessees to use a similar practical expedient when accounting for lease modifications that change the basis for determining future lease payments as a result of IBOR reform.

• End date for Phase 1 relief for non-contractually specified risk components in hedging relationships: The Phase 2 amendments require an entity to prospectively cease to apply the Phase 1 reliefs to a non-contractually specified risk component at the earlier of when changes are made to the non-contractually specified risk component, or when the hedging relationship is discontinued. No end date was provided in the Phase 1 amendments for risk components.

• Additional temporary exceptions from applying specific hedge accounting requirements: The Phase 2 amendments provide some additional temporary reliefs from applying specific IAS 39 and IFRS 9 hedge accounting requirements to hedging relationships directly affected by IBOR reform.

• Additional IFRS 7 disclosures related to IBOR reform: The amendments require disclosure of: (i) how the entity is managing the transition to alternative benchmark rates, its progress and the risks arising from the transition; (ii) quantitative information about derivatives and non-derivatives that have yet to transition, disaggregated by significant interest rate benchmark; and (iii) a description of any changes to the risk management strategy as a result of IBOR reform.

The Bank is currently assessing the impact of the amendments on its financial statements. Unless otherwise described above, the new standards and interpretations are not expected to affect significantly the Bank’s financial statements.


24

6 Cash and Cash Equivalents

The data in the table below are presented as of the reporting date of the relevant period.

In thousands of Belarusian roubles 2020 2019 Cash on hand 164,800 120,301 Cash balances with the National Bank of Belarus (other than mandatory reserve deposits) 806,883 372,416

Correspondent accounts and overnight placements with other banks 42,117 24,165 Total cash and cash equivalents 1,013,800 516,882

The credit quality of cash and cash equivalents balances may be summarised based on ratings of international rating agencies as follows at 31 December 2020:


Cash balances with

the National Bank of Belarus

Correspondent accounts and

overnight placements with

other banks

Total

Neither past due nor impaired - National Bank of Republic of Belarus 806,883 - 806,883 - A- to A+ rated - 7,421 7,421 - BBB - 3,404 3,404 - <BBB - 26,373 26,373 - Unrated - 4,919 4,919

Total cash and cash equivalents, excluding cash on hand 806,883 42,117 849,000

The credit quality of cash and cash equivalents balances may be summarised based on ratings of international rating agencies at 31 December 2019, as follows:


Cash balances with

the National Bank of Belarus

Correspondent accounts and

overnight placements with

other banks

Total

Neither past due nor impaired - National Bank of Republic of Belarus 372,416 - 372,416 - A- to A+ rated - 3,570 3,570 - BBB - 4,720 4,720 - <BBB - 13,557 13,557 - Unrated - 2,318 2,318 Total cash and cash equivalents, excluding cash on hand 372,416 24,165 396,581

The credit ratings are based on Standard & Poor’s ratings where available, or ratings by Moody’s and Fitch Ratings converted to the nearest equivalent on the Standard & Poor’s rating scale.

The cash and cash equivalents are not secured with collateral.

As at 31 December 2020 and 2019 cash and cash equivalents included balances in the amount of BYN 806,883 thousand (95%) and BYN 372,416 thousand (94%) placed with 1 bank respectively, which represents significant concentration.


25

Investing transactions that did not require the use of cash and cash equivalents, and were excluded from the statement of cash flows are as follows:

In thousands of Belarusian roubles 2020 2019 Non-cash investing activities Recognition of right of use assets against lease liabilities 8,903 14,707 Non-cash investing activities 8,903 14,707

Financing transactions that did not require the use of cash and cash equivalents, and were excluded from the statement of cash flows are as follows:

In thousands of Belarusian roubles 2020 2019 Non-cash financing activities Initial recognition of lease liabilities 8,903 14,707 Non-cash financing activities 8,903 14,707

Interest rate analysis of cash and cash equivalents is disclosed in Note 27. Refer to Note 31 for the estimated fair value of cash and cash equivalents. Information on related party balances is disclosed in Note 33.

7 Due from Other Banks

The data in the table below are presented as of the reporting date of the relevant period. In thousands of Belarusian roubles 2020 2019 Loans and term deposits with banks 20,604 386,896 Placements with other banks as collateral 3,363 2,732 Loans under reverse repurchase agreements - 4,147 Total due from other banks 23,967 393,775 The following table contains an analysis of due from other banks balances by credit quality at 31 December 2020 based on credit risk grades and discloses due from other banks balances by three stages for the purpose of ECL measurement:


Stage 1 (12-months

ECL)

Stage 2 (lifetime ECL

for SICR)

Stage 3 (lifetime ECL for credit impaired)

Total

Placements with other banks - Excellent 20,418 - - 20,418 - Good - - - - - Satisfactory 3,427 - - 3,427 - Special monitoring - - - - - Default - - - - - Unrated 122 - - 122 Gross carrying amount 23,967 - - 23,967 Credit loss allowance - - - - Carrying amount 23,967 - - 23,967


26

The following table contains an analysis of due from other banks balances by credit quality at 31 December 2019 based on credit risk grades and discloses due from other banks balances by three stages for the purpose of ECL measurement:


Stage 1 (12-months

ECL)


for SICR)


Total

Placements with other banks - Excellent 61,323 - - 61,323 - Good - - - - - Satisfactory 220,532 - - 220,532 - Special monitoring - - - - - Default - - - - - Unrated 111,920 - - 111,920

Gross carrying amount 393,775 - - 393,775

Credit loss allowance - - - -

Carrying amount 393,775 - - 393,775

The primary factor that the Bank considers in determining whether a deposit is impaired is its overdue status. There were no overdue amounts due from other banks at 31 December 2020 and 2019. There was no allowance for impairment of due from other banks in 2020 and 2019.

At 31 December 2020 the Bank had balances with 7 counterparty banks (2019:12 banks)

Refer to Note 31 for the estimated fair value of each class of amounts due from other banks. Interest rate analysis of due from other banks is disclosed in Note 27. Information on related party balances is disclosed in Note 33.

8 Loans and Advances to Customers

The data in the table below are presented as of the reporting date of the relevant period. In thousands of Belarusian roubles 2020 2019 Gross carrying amount of loans and advances to customers at AC 2,432,293 1,873,632 Less credit loss allowance (83,025) (67,855) Total loans and advances to customers 2,349,268 1,805,777

Gross carrying amount and credit loss allowance amount for loans and advances to customers at AC by classes at 31 December 2020 and 31 December 2019 are disclosed in the table below:



Gross carrying amount

Credit loss allowance

Carrying amount

Gross carrying amount

Credit loss allowance

Carrying amount

Loans to corporate customers

Corporate loans 1,646,804 (50,358) 1,596,446 1,214,942 (44,966) 1,169,976 Loans to small and medium enterprises (SME) 412,000 (11,567) 400,433 271,849 (7,081) 264,768

Finance lease receivables 52,562 (1,153) 51,409 49,819 (942) 48,877 Corporate bonds classified as loans and receivables 7,294 (6) 7,288 33,735 (164) 33,571

Loans to individuals Consumer loans 299,849 (19,547) 280,302 289,959 (14,405) 275,554 Mortgage loans 13,784 (394) 13,390 13,328 (297) 13,031 Total loans and advances to

customers at AC

2,432,293

(83,025)

2,349,268 1,873,632 (67,855) 1,805,777


27

The following table discloses the changes in the credit loss allowance and gross carrying amount for loans and advances to customers carried at amortised cost between the beginning and the end of the reporting period. Credit loss allowance Gross carrying amount

In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)

Stage 2 (lifetime ECL for

SICR)


credit im-paired)

Total Stage 1

(12-months ECL)


SICR)


credit im-paired)

Total

Corporate loans At 1 January 2020 10,205 5,757 29,004 44,966 1,087,272 79,051 48,619 1,214,942 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1

and Stage 3 to Stage 2) (1,551) 12,494 (10,381) 562 (45,868) 64,386 (18,518) - - to credit-impaired (from

Stage 1 and Stage 2 to Stage 3) - - - - - - - -

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 160 (759) - (599) 76,418 (76,418) - -

New originated or purchased 17,910 940 210 19,060 3,401,348 40,527 473 3,442,348

Derecognised during the period (12,253) (3,295) (999) (16,547) (3,245,164) (49,981) (485) (3,295,630)

Changes to ECL measurement model assumptions (3,548) (1,944) 1,640 (3,852) - - - -

Changes in category 17 - - 17 11,861 - - 11,861 Total movements with

impact on credit loss allowance charge for the period 735 7,436 (9,530) (1,359) 198,595 (21,486) (18,530) 158,579

Movements without impact on credit loss allowance charge for the period: Write-offs - - (1,082) (1,082) - - (1,082) (1,082) Foreign exchange gains

and losses 1,855 738 3,907 6,500 266,406 677 5,949 273,032 Unwinding of discount

(for Stage 3) - - 1,333 1,333 - - 1,333 1,333

At 31 December 2020 12,795 13,931 23,632 50,358 1,552,273 58,242 36,289 1,646,804


28

Credit loss allowance Gross carrying amount

In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)


SICR)


credit im-

paired)

Total Stage 1

(12-months ECL)


SICR)


credit im-

paired)

Total

Loans to small and

medium enterprises (SME)

At 1 January 2020 4,756 844 1,481 7,081 248,064 22,208 1,577 271,849 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1

and Stage 3 to Stage 2) (244) 496 - 252 (21,671) 21,671 - - - to credit-impaired (from

Stage 1 and Stage 2 to Stage 3) (402) (102) 4,184 3,680 (7,986) (3,265) 11,251 -

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 210 (326) - (116) 19,241 (19,241) - -

New originated or purchased 4,308 578 829 5,715 497,961 45,470 3,850 547,281

Derecognised during the period (2,871) (252) (1,385) (4,508) (387,641) (44,756) (4,662) (437,059)

Changes to ECL measurement model assumptions (198) (389) 502 (85) - - - -

Changes in category (17) - - (17) (11,861) - - (11,861) Total movements with

impact on credit loss allowance charge for the period 786 5 4,130 4,921 88,043 (121) 10,439 98,361

Movements without impact on credit loss allowance charge for the period: Write-offs - (47) (1,394) (1,441) - (47) (1,394) (1,441) Foreign exchange gains

and losses 645 148 157 950 37,865 5,123 187 43,175 Unwinding of discount (for

Stage 3) - - 56 56 - - 56 56 At 31 December 2020 6,187 950 4,430 11,567 373,972 27,163 10,865 412,000


29


In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)


SICR)


credit im-

paired)

Total Stage 1

(12-months ECL)


SICR)


credit im-

paired)

Total

Finance lease

receivables

At 1 January 2020 794 34 114 942 48,346 1,359 114 49,819 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1

and Stage3 to Stage 2) (3) 7 - 4 (209) 209 - - - to credit-impaired (from

Stage 1 and Stage 2 to Stage 3) (10) - 289 279 (372) (5) 377 -

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 3 (2) - 1 441 (441) - -

New originated or purchased 233 - - 233 27,570 - - 27,570

Derecognised during the period (322) (15) (143) (480) (34,605) (676) (167) (35,448)

Changes to ECL measurement model assumptions (82) (19) 37 (64) - - - -

Total movements with

impact on credit loss allowance charge for the period (181) (29) 183 (27) (7,175) (913) 210 (7,878)

Movements without impact on credit loss allowance charge for the period: Foreign exchange gains

and losses 179 6 53 238 10,380 184 57 10,621 At 31 December 2020 792 11 350 1,153 51,551 630 381 52,562


30


In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)


SICR)


credit im-

paired)

Total Stage 1

(12-months ECL)


SICR)


credit im-

paired)

Total

Corporate bonds

classified as loans and receivables

At 1 January 2020 122 42 - 164 7,809 25,926 - 33,735 Movements with impact on credit loss allowance charge for the period: New originated or

purchased 9 - - 9 3,032 - - 3,032 Derecognised during the

period (32) (42) - (74) (5,677) (25,942) - (31,619) Changes to ECL

measurement model assumptions (103) - - (103) - - - -


impact on credit loss allowance charge for the period (126) (42) - (168) (2,645) (25,942) - (28,587)


and losses 10 - - 10 2,130 16 - 2,146 At 31 December 2020 6 - - 6 7,294 - - 7,294


31


In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)


SICR)


credit im-paired)

Total Stage 1

(12-months ECL)


SICR)


credit im-paired)

Total

Consumer loans At 1 January 2020 5,497 3,754 5,154 14,405 275,568 8,110 6,281 289,959 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1

and Stage 3 to Stage 2) (1) 22 - 21 (44) 44 - - - to credit-impaired (from

Stage 1 and Stage 2 to Stage 3) (148) (1,122) 1,341 71 (2,065) (2,095) 4,160 -

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 1 (8) (5) (12) 21 (15) (6) -

New originated or purchased 5,951 4,166 9,263 19,380 279,689 7,690 10,847 298,226

Derecognised during the period (5,284) (2,624) (1,805) (9,713) (271,954) (6,008) (2,490) (280,452)

Changes to ECL measurement model assumptions - (1) 3,287 3,286 - - - -


impact on credit loss allowance charge for the period 519 433 12,081 13,033 5,647 (384) 12,511 17,774

Movements without impact on credit loss allowance charge for the period: Write-offs - - (7,891) (7,891) - - (7,891) (7,891) Foreign exchange gains

and losses - - - - 7 - - 7 At 31 December 2020 6,016 4,187 9,344 19,547 281,222 7,726 10,901 299,849


32


In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)


SICR)


credit im-

paired)

Total Stage 1

(12-months

ECL)


SICR)


credit im-

paired)

Total

Mortgage loans At 1 January 2020 66 - 231 297 12,986 - 342 13,328 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1

and Stage3 to Stage 2) (2) 57 - 55 (446) 446 - - - to credit-impaired (from

Stage 1 and Stage 2 to Stage 3) (1) - 166 165 (177) - 177 -

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 1 - (218) (217) 323 - (323) -

New originated or purchased - - - - - - - -

Derecognised during the period (7) - - (7) (2,440) - (59) (2,499)

Changes to ECL measurement model assumptions 19 1 (44) (24) - - - -


impact on credit loss allowance charge for the period 10 58 (96) (28) (2,740) 446 (205) (2,499)

Movements without impact on credit loss allowance charge for the period: Write-offs - - (2) (2) - - (2) (2) Foreign exchange gains

and losses 21 (1) 107 127 2,846 - 111 2,957 At 31 December 2020 97 57 240 394 13,092 446 246 13,784

*The credit loss allowance charge during 2020 differs from the amount presented in profit or loss for the year due to BYN 7,987 thousand, recovery of amounts previously written off as uncollectible. The amount of the recovery was credited directly to the credit loss allowance line in profit or loss for the year.


33

The following table discloses the changes in the credit loss allowance and gross carrying amount for loans and advances to customers carried at amortised cost during 2019.


In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)


SICR)


credit im-paired)

Total Stage 1

(12-months ECL)


SICR)


credit im-paired)

Total

Corporate loans At 1 January 2019 11,166 4 33,228 44,398 1,022,117 17,902 59,493 1,099,512 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1

and Stage 3 to Stage 2) (1,126) 6,545 (4,260) 1,159 (75,235) 81,848 (6,613) - - to credit-impaired (from

Stage 1 and Stage 2 to Stage 3) (5) - 1,728 1,723 (1,744) - 1,744 -

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 26 (2) - 24 18,891 (18,891) - -

New originated or purchased 16,979 189 1,745 18,913 1,939,275 2,821 2,598 1,944,694

Derecognised during the period (8,875) (547) (6,290) (15,712) (1,790,103) (4,630) (8,425) (1,803,158)

Changes to ECL measurement model assumptions (7,769) (439) 2,021 (6,187) - - - -


impact on credit loss allowance charge for the period (770) 5,746 (5,056) (80) 91,084 61,148 (10,696) 141,536


and losses (191) 7 (269) (453) (25,929) 1 (1,279) (27,207) Unwinding of discount

(for Stage 3) - - 1,731 1,731 - - 1,731 1,731

At 31 December 2019 10,205 5,757 29,004 44,966 1,087,272 79,051 48,619 1,214,942


34


In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)


SICR)


credit im-

paired)

Total Stage 1

(12-months ECL)


SICR)


credit im-

paired)

Total

Loans to small and

medium enterprises (SME)

At 1 January 2019 3,580 369 2,567 6,516 224,702 11,336 2,573 238,611 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1

and Stage 3 to Stage 2) (638) 824 - 186 (36,157) 36,157 - - - to credit-impaired (from

Stage 1 and Stage 2 to Stage 3) - (8) 2,127 2,119 (1,167) (1,268) 2,435 -

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 218 (327) (2) (111) 19,285 (19,284) (1) -

New originated or purchased 3,652 78 150 3,880 338,866 12,831 200 351,897

Derecognised during the period (2,276) (185) (1,303) (3,764) (294,430) (17,634) (1,450) (313,514)

Changes to ECL measurement model assumptions 285 100 123 508 - - - -


impact on credit loss allowance charge for the period 1,241 482 1,095 2,818 26,397 10,802 1,184 38,383

Movements without impact on credit loss allowance charge for the period: Write-offs (23) - (2,116) (2,139) (23) - (2,116) (2,139) Foreign exchange gains

and losses (42) (7) (95) (144) (3,012) 70 (94) (3,036) Unwinding of discount (for

Stage 3) - - 30 30 - - 30 30 At 31 December 2019 4,756 844 1,481 7,081 248,064 22,208 1,577 271,849


35


In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)


SICR)


credit im-

paired)

Total Stage 1

(12-months ECL)


SICR)


credit im-

paired)

Total

Finance lease

receivables

At 1 January 2019 302 35 114 451 32,312 1,442 114 33,868 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1

and Stage3 to Stage 2) (33) 36 - 3 (1,502) 1,502 - - - to credit-impaired (from


- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) - - - - - - - -

New originated or purchased 508 1 - 509 47,435 14 - 47,449

Derecognised during the period (254) (18) - (272) (28,671) (1,536) - (30,207)

Changes to ECL measurement model assumptions 281 (20) - 261 - - - -


impact on credit loss allowance charge for the period 502 (1) - 501 17,262 (20) - 17,242


and losses (10) - - (10) (1,228) (63) - (1,291) At 31 December 2019 794 34 114 942 48,346 1,359 114 49,819


36


In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)


SICR)


credit im-

paired)

Total Stage 1

(12-months ECL)


SICR)


credit im-

paired)

Total

Corporate bonds

classified as loans and receivables

At 1 January 2019 128 327 - 455 13,201 27,228 - 40,429 Movements with impact on credit loss allowance charge for the period: New originated or

purchased - - - - - 31 - 31 Derecognised during the

period (36) - - (36) (4,731) - - (4,731) Changes to ECL

measurement model assumptions 35 (271) - (236) - - - -


impact on credit loss allowance charge for the period (1) (271) - (272) (4,731) 31 - (4,700)


and losses (5) (14) - (19) (661) (1,333) - (1,994) At 31 December 2019 122 42 - 164 7,809 25,926 - 33,735


37


In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)


SICR)


credit im-paired)

Total Stage 1

(12-months

ECL)


SICR)


credit im-paired)

Total

Consumer loans At 1 January 2019 4,107 2,455 3,175 9,737 259,994 6,613 4,576 271,183 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1

and Stage 3 to Stage 2) (182) 1,943 (47) 1,714 (5,486) 5,569 (83) - - to credit-impaired (from

Stage 1 and Stage 2 to Stage 3) (367) (1,311) 5,102 3,424 (9,494) (3,138) 12,632 -

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) 76 (476) (120) (520) 1,640 (1,404) (236) -

New originated or purchased 2,146 862 741 3,749 130,627 1,870 940 133,437

Derecognised during the period (1,447) (436) (463) (2,346) (101,713) (1,400) (971) (104,084)

Changes to ECL measurement model assumptions 1,164 717 7,343 9,224 - - - -


impact on credit loss allowance charge for the period 1,390 1,299 12,556 15,245 15,574 1,497 12,282 29,353

Movements without impact on credit loss allowance charge for the period: Write-offs - - (10,577) (10,577) - - (10,577) (10,577) At 31 December 2019 5,497 3,754 5,154 14,405 275,568 8,110 6,281 289,959


38


In thousands of

Belarusian roubles

Stage 1 (12-

months ECL)


SICR)


credit im-

paired)

Total Stage 1

(12-months

ECL)


SICR)


credit im-

paired)

Total

Mortgage loans At 1 January 2019 38 10 196 244 15,918 70 340 16,328 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1

and Stage3 to Stage 2) - - - - - - - - - to credit-impaired (from

Stage 1 and Stage 2 to Stage 3) (4) (10) 162 148 (282) (65) 347 -

- to 12-months ECL (from Stage 2 and Stage 3 to Stage 1) - - (92) (92) 97 - (97) -

New originated or purchased - - - - - - - -

Derecognised during the period (4) - (3) (7) (2,343) (3) (14) (2,360)

Changes to ECL measurement model assumptions 40 - 201 241 - - - -


impact on credit loss allowance charge for the period 32 (10) 268 290 (2,528) (68) 236 (2,360)


and losses (4) - (4) (8) (404) (2) (5) (411) At 31 December 2019 66 - 231 297 12,986 - 342 13,328

*The credit loss allowance charge during 2019 differs from the amount presented in profit or loss for the year due to BYN 9,637 thousand, recovery of amounts previously written off as uncollectible. The amount of the recovery was credited directly to the credit loss allowance line in profit or loss for the year.

The credit loss allowance for loans and advances to customers recognised in the period is impacted by a variety of factors. Below main movements in the table are described:

• Transfers between Stage 1, 2 and 3 due to balances experiencing significant increases (or decreases) of credit risk or becoming credit-impaired in the period, and the consequent "step up" (or "step down") between 12-month and Lifetime ECL;

• Additional allowances for new financial instruments recognised during the period, as well as releases for financial instruments derecognised in the period;


39

• Impact on the measurement of ECL due to changes to model assumptions, including changes in PDs, EADs and LGDs in the period, arising from update of inputs to ECL models;

• Unwinding of discount due to the passage of time because ECL is measured on a present value basis;

• Foreign exchange translations of assets denominated in foreign currencies and other movements; and

• Write-offs of allowances related to assets that were written off during the period.

Economic sector risk concentrations within the Bank’s loan portfolio are as follows:

In thousands of Belarusian roubles 31 December 2020 31 December 2019

Amount % Amount % Trade and commerce 783,678 32% 620,509 33% Manufacturing 470,524 19% 354,443 19% Individuals 313,633 13% 303,287 16% Construction and real estate 190,851 8% 124,682 7% Food industry 153,880 6% 144,254 8% Oil industry 148,847 6% 35,439 2% Road transport 95,744 4% 58,119 3% Agriculture 60,874 3% 33,928 2% Power generation industry 26,418 1% 88,466 5% Mass media and telecommunications 25,694 1% 44,075 2% Finance and investment companies 14,280 1% 14,166 1% Other 147,870 6% 52,264 2% Total loans and advances to customers (before impairment) 2,432,293 100% 1,873,632 100%

At 31 December 2020 the loans and advances to customers included loans to 5 customers in the amount of BYN 80,292 thousand, BYN 67,496 thousand, BYN 64,782 thousand, BYN 61,326 thousand, and BYN 53,239 thousand respectively, which comprised 4%, 3%, 3%, 3% and 3% of the Bank’s total loans to legal entities portfolio.

At 31 December 2019 the loans and advances to customers included loans to 5 customers in the amount of BYN 73,064 thousand, BYN 64,052 thousand, BYN 44,044 thousand, BYN 41,404 thousand, and BYN 35,439 thousand respectively, which comprised 5%, 4%, 3%, 3% and 2% of the Bank’s total loans to legal entities portfolio.

As at 31 December 2020 the Bank granted loans to 2 customers (2019: 2 customers), amounting to BYN 147,788 thousand (2019: BYN 137,116 thousand), which individually exceeded 10% of the Bank’s equity.


40

The credit quality of loans to corporate customers carried at amortised cost is as follows at 31 December 2020:

In thousands of Belarusian roubles Stage 1

(12-months ECL) Stage 2

(lifetime ECL for SICR)


Total

Corporate loans - Rating A 275,950 - - 275,950 - Rating A - 270,497 - - 270,497 - Rating B 330,307 - - 330,307 - Rating B - 150,214 507 - 150,721 - Rating C 175,053 44,275 - 219,328 - Rating C - 109,561 - - 109,561 - Rating D 150,438 5,998 - 156,436 - Rating E 88,848 7,462 - 96,310 - Unrated 1,405 - - 1,405 - Default - - 36,289 36,289 Gross carrying amount 1,552,273 58,242 36,289 1,646,804 Credit loss allowance (12,795) (13,931) (23,632) (50,358) Carrying amount 1,539,478 44,311 12,657 1,596,446 Loans to small and medium

enterprises (SME)

- Rating A 15,592 - - 15,592 - Rating A - 76,243 6,670 - 82,913 - Rating B 82,392 3,770 125 86,287 - Rating B - 66,246 12,928 1,140 80,314 - Rating C 33,233 2,449 235 35,917 - Rating C - 17,777 - 1,219 18,996 - Rating D 6,530 694 3,673 10,897 - Rating E 32,485 550 1,479 34,514 - Unrated 43,474 102 - 43,576 - Default - - 2,994 2,994 Gross carrying amount 373,972 27,163 10,865 412,000 Credit loss allowance (6,187) (950) (4,430) (11,567) Carrying amount 367,785 26,213 6,435 400,433


41





Total

Finance lease receivables - Rating A 4,060 - - 4,060 - Rating A - 29,771 193 - 29,964 - Rating B 1,031 - - 1,031 - Rating B - 4,316 - - 4,316 - Rating C 1,157 171 262 1,590 - Rating C - 3,236 - - 3,236 - Rating D - 266 - 266 - Rating E 6,878 - - 6,878 - Unrated 1,102 - - 1,102 - Default - - 119 119 Gross carrying amount 51,551 630 381 52,562 Credit loss allowance (792) (11) (350) (1,153) Carrying amount 50,759 619 31 51,409 Corporate bonds classified as

loans and receivables

- Rating A 3,170 - - 3,170 - Rating B 4,124 - - 4,124 Gross carrying amount 7,294 - - 7,294 Credit loss allowance (6) - - (6) Carrying amount 7,288 - - 7,288


42

The credit quality of loans to individuals carried at amortised cost is as follows at 31 December 2020:





Total

Consumer loans - Unrated 281,222 7,726 - 288,948 - Default - - 10,901 10,901 Gross carrying amount 281,222 7,726 10,901 299,849 Credit loss allowance (6,016) (4,187) (9,344) (19,547) Carrying amount 275,206 3,539 1,557 280,302 Mortgage loans - Unrated 13,092 446 - 13,538 - Default - - 246 246 Gross carrying amount 13,092 446 246 13,784 Credit loss allowance (97) (57) (240) (394) Carrying amount 12,995 389 6 13,390


43

The credit quality of loans to corporate customers carried at amortised cost is as follows at 31 December 2019:


Stage 1 (12-months ECL)


for SICR)


Total

Corporate loans - Rating A 143,934 - - 143,934 - Rating A - 190,119 11,387 - 201,506 - Rating B 107,039 13,862 - 120,901 - Rating B - 189,675 - - 189,675 - Rating C 135,205 - - 135,205 - Rating C - 104,273 6,373 - 110,646 - Rating D 117,096 25,615 14,461 157,172 - Rating E 99,928 21,814 4,174 125,916 - Unrated 3 - - 3 - Default - - 29,984 29,984 Gross carrying amount 1,087,272 79,051 48,619 1,214,942 Credit loss allowance (10,205) (5,757) (29,004) (44,966) Carrying amount 1,077,067 73,294 19,615 1,169,976 Loans to small and medium

enterprises (SME)

- Rating A 18,289 - - 18,289 - Rating A - 46,328 4,525 - 50,853 - Rating B 37,041 8,031 - 45,072 - Rating B - 29,309 - - 29,309 - Rating C 27,039 79 260 27,378 - Rating C - 27,754 3,979 382 32,115 - Rating D 18,543 2,187 - 20,730 - Rating E 10,915 3,230 - 14,145 - Unrated 32,846 177 - 33,023 - Default - - 935 935 Gross carrying amount 248,064 22,208 1,577 271,849 Credit loss allowance (4,756) (844) (1,481) (7,081) Carrying amount 243,308 21,364 96 264,768


44





Total

Finance lease receivables - Rating A 8,340 - - 8,340 - Rating A - 13,187 386 - 13,573 - Rating B 14,040 - - 14,040 - Rating B - 2,017 180 - 2,197 - Rating C 5,576 235 - 5,811 - Rating C - 925 - - 925 - Rating D 714 558 - 1,272 - Rating E 2,924 - - 2,924 - Unrated 623 - - 623 - Default - - 114 114 Gross carrying amount 48,346 1,359 114 49,819 Credit loss allowance (794) (34) (114) (942) Carrying amount 47,552 1,325 - 48,877 Corporate bonds classified as

loans and receivables

- Rating A - 7,809 - - 7,809 - Rating B - - 25,926 - 25,926 Gross carrying amount 7,809 25,926 - 33,735 Credit loss allowance (122) (42) - (164) Carrying amount 7,687 25,884 - 33,571


45

The credit quality of loans to individuals carried at amortised cost is as follows at 31 December 2019:





Total

Consumer loans - Unrated 275,568 8,110 - 283,678 - Default - - 6,281 6,281 Gross carrying amount 275,568 8,110 6,281 289,959 Credit loss allowance (5,497) (3,754) (5,154) (14,405) Carrying amount 270,071 4,356 1,127 275,554 Mortgage loans - Unrated 12,986 - - 12,986 - Default - - 342 342 Gross carrying amount 12,986 - 342 13,328 Credit loss allowance (66) - (231) (297) Carrying amount 12,920 - 111 13,031

The following table provides information on carrying value of individually significant loans (that is, individual exposures above 2% of total equity and with rating lower than “A-“), for which the Bank did not recognise any expected credit loss allowance because of significant excess of collateral value over the gross carrying value of these loans.

In thousands of Belarusian roubles 31 December

2020 31 December

2019 Loans to corporate customers

Corporate loans 72,757 111,485 Loans to small and medium enterprises (SME) 34,000 - Finance lease receivables 595 358 Total significantly over-collateralised loans and advances to customers carried at AC 107,352 111,843


46

The extent to which collateral and other credit enhancements mitigate credit risk for individually significant loans (that is, individual exposures above 2% of total equity and with rating lower than “A-“) carried at amortised cost that are credit impaired, is presented by disclosing collateral values separately for (i) those assets where collateral and other credit enhancements are equal to or exceed carrying value of the asset (“over-collateralised assets”) and (ii) those assets where collateral and other credit enhancements are less than the carrying value of the asset (“under-collateralised assets”). The effect of collateral on credit impaired assets at 31 December 2020 is as follows:

Over-collateralised

assets Under-collateralised

assets


Carrying value of the

assets

Value of collateral


assets

Value of collateral

Loans to corporate customers carried at AC Corporate loans 20,837 24,751 7,479 5,698

The effect of collateral on credit impaired assets at 31 December 2019 is as follows:

Over-collateralised

assets Under-collateralised

assets



assets

Value of collateral


assets

Value of collateral

Loans to corporate customers carried at AC Corporate loans 16,566 18,922 20,219 10,233

The values of collateral considered in this disclosure are after a valuation haircut applied to consider liquidity and quality of the pledged assets.

The collateral under loan agreements is represented by property, equipment, finished goods, accounts receivable, etc.

Financial instruments subject to offsetting, enforceable master netting and similar arrangements are as follows at 31 December 2020:

Gross amounts

before offsetting

in the statement

of financial position

(a)

Gross amounts

set off in the

statement of financial

position

(b)

Net amount after

offsetting in the


position

(c) = (a) ‒ (b)

Amounts subject to master netting and

similar arrangements not set off in the

statement of financial position

Net amount of exposure

(c) ‒ (d) ‒ (e)


Financial instru-ments

(d)

Cash collateral received

(e)

ASSETS Loans and advances to

customers - Corporate loans 104,582 - 104,582 - 65,561 39,021 TOTAL ASSETS SUBJECT TO

OFFSETTING, MASTER NETTING AND SIMILAR ARRANGEMENT 104,582 - 104,582 - 65,561 39,021


47

Financial instruments subject to offsetting, enforceable master netting and similar arrangements are as follows at 31 December 2019:

Gross amounts

before offsetting

in the statement

of financial position

(a)

Gross amounts

set off in the


position

(b)

Net amount after

offsetting in the


position

(c) = (a) ‒ (b)

Amounts subject to master netting and

similar arrangements not set off in the

statement of financial position

Net amount of exposure

(c) ‒ (d) ‒ (e)


Financial instru-ments

(d)

Cash collateral received

(e)

ASSETS Loans and advances to

customers - Corporate loans 65,781 1,651 64,130 - 29,585 34,545 TOTAL ASSETS SUBJECT TO

OFFSETTING, MASTER NETTING AND SIMILAR ARRANGEMENT 65,781 1,651 64,130 - 29,585 34,545

As at 31 December 2019 the Bank concluded two agreements with legal entities: deposit agreement under which the deposit is related with the loan agreement. Under the conditions of the agreements the Bank does not have any credit or liquidity risks: the Bank is obliged to return the deposit only after the loan is fully repaid. The deposit balance should be maintained at a level not less than the outstanding loan exposure. As of 31 December 2019 the loan exposure comprised BYN 1,651 thousand (2020 – no such transaction). The arrangement meets all the pass-through conditions in IAS 39.19 and therefore meets the criteria for a transfer under IAS 39.18. The effect of meeting all the pass-through conditions is that the Bank derecognizes the deposit and the loan in the amount of BYN 1,651 thousand, interest income in the amount BYN 95 thousand and interest expenses in the amount BYN 38 thousand at 31 December 2019.The Bank presented in financial statement the net financial result as the agent fee.

The outstanding contractual amounts of loans and advances to customers written off that are still subject to enforcement activity was as follows:


2020 31 December

2019 Loans to corporate customers Corporate loans 38,479 34,766 Loans to small and medium enterprises (SME) 8,460 8,848 Finance lease receivables 91 91 Corporate bonds classified as loans and receivables 3,063 2,498 Loans to individuals Consumer loans 44,523 44,259 Mortgage loans 1,700 1,814 Total 96,316 92,276


48

Finance lease payments receivable (gross investment in the leases) and their present values are as follows:

In thousands of Belarusian roubles 31 December 2020 31 December 2019 Less than one year 35,855 28,945 From one year to two years 17,870 16,671 From two years to three years 4,400 7,231 From three years to four years 1,120 1,045 From four years to five years 545 350 More than five years 526 - Minimum lease payments 60,316 54,242 Less than one year (4,812) (2,820) From one year to two years (2,385) (1,177) From two years to three years (370) (357) From three years to four years (107) (58) From four years to five years (46) (11) More than five years (34) - Less: unearned finance income (7,754) (4,423) Present value of lease payments receivable 52,562 49,819 Credit loss allowance (1,153) (942) Carrying amount 51,409 48,877

Refer to Note 31 for the estimated fair value of each class of loans and advances to customers. Interest rate analysis of loans and advances to customers is disclosed in Note 27. Information on related party balances is disclosed in Note 33.

9 Investments in Debt Securities


In thousands of Belarusian roubles 2020 2019

Governmental bonds 104,368 134,414

Total investments in debt securities 104,368 134,414

The table below discloses investments in debt securities at 31 December 2020 by measurement categories and classes:

In thousands of Belarusian roubles Debt securities at

FVOCI Total


Total investments in debt securities (gross carrying value) 104,368 104,368

Credit loss allowance - -

Total investments in debt securities (carrying value) 104,368 104,368


49

The table below discloses investments in debt securities at 31 December 2019 by measurement categories and classes:

In thousands of Belarusian roubles Debt securities at

FVOCI Total


Total investments in debt securities (gross carrying value) 134,414 134,414

Credit loss allowance - -

Total investments in debt securities (carrying value) 134,414 134,414

The table below contains an analysis of the credit risk exposure of debt securities measured at FVOCI at 31 December 2020, for which an ECL allowance is recognised, based on credit risk grades.


Stage 1 (12-months

ECL)


for SICR)


Total

Governmental bonds - Satisfactory 104,368 - - 104,368

Total AC gross carrying amount 104,368 - - 104,368

Less credit loss allowance - - - - Less fair value adjustment from AC to FV - - - -

Carrying value (fair value) 104,368 - - 104,368

The table below contains an analysis of the credit risk exposure of debt securities measured at FVOCI at 31 December 2019, for which an ECL allowance is recognised, based on credit risk grades.


Stage 1 (12-months

ECL)


for SICR)


Total

Governmental bonds - Satisfactory 134,414 - - 134,414

Total AC gross carrying amount 134,414 - - 134,414

Less credit loss allowance - - - - Less fair value adjustment from AC to FV - - - -

Carrying value (fair value) 134,414 - - 134,414

Refer to Note 27 for the description of credit risk grading system used by the Bank and the approach to ECL measurement, including the definition of default and SICR as applicable to debt securities at FVOCI.

The debt securities at FVOCI are not collateralised.

Movements in the credit loss allowance and in the gross amortised cost amount of debt securities at FVOCI were as follows.


50


In thousands of Belarusian

roubles

Stage 1 (12-

months ECL)


SICR)


credit im-

paired)

Total

Stage 1 (12-months

ECL)


SICR)


credit im-

paired)

Total

Governmental bonds At 1 January 2020 - - - - 134,414 - - 134,414 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1 to

Stage 2) - - - - - - - - - to credit-impaired (from



New originated or purchased - - - - 90,660 - - 90,660 Derecognised during the

period - - - - (141,195) - - (141,195)

Total movements with impact on credit loss allowance charge for the period - - - - (50,535) - - (50,535)

Movements without impact on credit loss allowance charge for the period: FX and other movements - - - - 20,489 - - 20,489

At 31 December 2020 - - - - 104,368 - - 104,368


51


In thousands of Belarusian

roubles

Stage 1 (12-

months ECL)


SICR)


credit im-

paired)

Total

Stage 1 (12-months

ECL)


SICR)


credit im-

paired)

Total

Governmental bonds At 1 January 2019 - - - - 88,597 - - 88,597 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime (from Stage 1 to

Stage 2) - - - - - - - - - to credit-impaired (from



New originated or purchased - - - - 6,658,218 - - 6,658,218 Derecognised during the

period - - - - (6,608,592) - - (6,608,592)

Total movements with impact on credit loss allowance charge for the period - - - - 49,626 - - 49,626

Movements without impact on credit loss allowance charge for the period: FX and other movements - - - - (3,809) - - (3,809)

At 31 December 2019 - - - - 134,414 - - 134,414


52

10 Premises, Equipment and Intangible Assets



Note Premi-ses

Office and computer

equipment

Total premises

and equipment

Intan-gible

assets

Construc- tion in

progress

Right-of-use asset

Total

Cost/valuation at 1 January 2019

38,438 28,092 66,530 32,189 244 - 98,963

Accumulated depreciation

- (15,790) (15,790) (15,079) - - (30,869)

Carrying amount at 1 January 2019

38,438 12,302 50,740 17,110 244 - 68,094

Transfers upon adoption of IFRS 16, Leases

- - - - - 9,401

9,401

Additions - - - - 12,659 5,306 17,965 Transfers 226 3,617 3,843 8,411 (12,254) - - Disposals (5) (20) (25) - (15) (323) (363) Depreciation charge 23 (808) (3,497) (4,305) (6,646) - (3,635) (14,586) Positive revaluation 388 - 388 - - - 388 Carrying amount at 31 December 2019

38,239 12,402 50,641 18,875 634 10,749 80,899

Cost/valuation at 31 December 2019

38,239 31,419 69,658 40,600 634 14,271 125,163


- (19,017) (19,017) (21,725) - (3,522) (44,264)

Carrying amount at 31 December 2019

38,239 12,402 50,641 18,875 634 10,749 80,899 Additions - - - - 17,170 8,903 26,073 Transfers 348 3,835 4,183 13,503 (17,686) - - Disposals (771) (27) (798) - (1) (3,496) (4,295) Depreciation charge 23 (994) (3,933) (4,927) (8,836) - (4,046) (17,809) Positive revaluation 7,390 - 7,390 - - - 7,390 Carrying amount at 31 December 2020

44,212 12,277 56,489 23,542 117 12,110 92,258

Cost/valuation at 31 December 2020

44,212 34,688 78,900 54,086 117 19,027 152,130


- (22,411) (22,411) (30,544) - (6,917) (59,872)

Carrying amount at 31 December 2020

44,212 12,277 56,489 23,542 117 12,110 92,258

Construction in progress consists mainly of construction of the Bank’s premises and refurbishment of branch premises and equipment. Upon completion, assets are transferred to premises and equipment.


53

Premises have been revalued at fair value at 31 December 2020 and 31 December 2019. The valuation was carried out by an independent firm of valuers, who hold a recognised and relevant professional qualification. The basis used for the appraisal was market value, comparative and discounted cash flow method. At 31 December 2020, the carrying amount of premises would have been BYN 22,797 thousand (2019: BYN 24,096 thousand) had the assets been carried at cost less depreciation.

From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability from the date when the leased asset becomes available for use by the Bank.

At 31 December 2020, expenses relating to leases of low-value assets are included in and administrative expenses in the amount of BYN 995 thousand (2019: BYN 829 thousand).

11 Other Financial Assets


In thousands of Belarusian roubles 2020 2019 Other financial assets at AC Other financial debtors 1,527 883 Accrued commission and other income 7,359 5,802 Settlements on conversion and other banking operations 12,355 6,214

Less credit loss allowance (3,103) (2,902) Total other financial assets at AC 18,138 9,997

The table below contains an analysis of the credit risk exposure of other financial assets at AC. The carrying amount of other financial assets at AC at 31 December 2020 below also represents the Bank maximum exposure to credit risk on these assets:

In thousands of Belarusian roubles Lifetime ECL Lifetime ECL for credit impaired Total

Other financial debtors

- Unrated 1,024 - 1,024 - Default - 503 503

Gross carrying amount 1,024 503 1,527

Credit loss allowance - (503) (503)

Carrying amount 1,024 - 1,024 Accrued commission and other income

- Unrated 4,063 - 4,063 - Default - 3,296 3,296

Gross carrying amount 4,063 3,296 7,359

Credit loss allowance (40) (2,560) (2,600)

Carrying amount 4,023 736 4,759


54


Settlements on conversion and other banking operations

- Unrated 12,355 - 12,355 - Default - - -

Gross carrying amount 12,355 - 12,355

Credit loss allowance - - -

Carrying amount 12,355 - 12,355

Analysis of the credit risk exposure of other financial assets at AC at 31 December 2019 is as follows:


Other financial debtors

- Unrated 397 - 397 - Default - 486 486

Gross carrying amount 397 486 883

Credit loss allowance - (486) (486)

Carrying amount 397 - 397 Accrued commission and other income

- Unrated 2,896 - 2,896 - Default - 2,906 2,906

Gross carrying amount 2,896 2,906 5,802

Credit loss allowance (35) (2,381) (2,416)

Carrying amount 2,861 525 3,386


- Unrated 6,214 - 6,214 - Default - - -

Gross carrying amount 6,214 - 6,214

Credit loss allowance - - -

Carrying amount 6,214 - 6,214

The primary factors that the Bank considers in determining whether a receivable is impaired are its overdue status and realisability of related collateral, if any.


55

Movements in the credit loss allowance and in the gross amortised cost amount of other financial debtors were as follows:



Lifetime

ECL

Lifetime ECL for

credit im-paired)

Total Llifetime ECL

Lifetime ECL for

credit im-paired

Total

Other financial debtors At 1 January 2020 - 486 486 397 486 883 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime - - - - - - - to credit-impaired - - - - - - New originated or

purchased - 128 128 1,046 128 1,174 Derecognised during the

period - (52) (52) (419) (52) (471) Changes to ECL

measurement model assumptions - - - - - -


impact on credit loss allowance charge for the period - 76 76 627 76 703

Movements without impact on credit loss allowance charge for the period: Write-offs - (59) (59) - (59) (59) At 31 December 2020 - 503 503 1,024 503 1,527


56



Lifetime

ECL

Lifetime ECL for

credit im-paired)

Total Llifetime ECL

Lifetime ECL for

credit im-paired

Total

Other financial debtors At 1 January 2019 - 854 854 622 854 1,476 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime - - - - - - - to credit-impaired - - - - - - New originated or

purchased - 637 637 381 637 1,018 Derecognised during the

period - (69) (69) (606) (69) (675) Changes to ECL



impact on credit loss allowance charge for the period - 568 568 (225) 568 343

Movements without impact on credit loss allowance charge for the period: Write-offs - (936) (936) - (936) (936) At 31 December 2019 - 486 486 397 486 883


57

Movements in the credit loss allowance and in the gross amortised cost amount of accrued commission and other income were as follows:



Lifetime

ECL

Lifetime ECL for

credit im-paired)

Total Llifetime ECL

Lifetime ECL for

credit im-paired

Total

Accrued commission

and other income

At 1 January 2020 35 2,381 2,416 2,896 2,906 5,802 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime - - - - - - - to credit-impaired (14) 70 56 (486) 486 - New originated or

purchased 40 128 168 4,090 998 5,088 Derecognised during the

period (21) (176) (197) (2,410) (1,381) (3,791) Changes to ECL

measurement model assumptions - 34 34 - - -


impact on credit loss allowance charge for the period 5 56 61 1,194 103 1,297

Movements without impact on credit loss allowance charge for the period:

Write-offs - (161) (161) - (161) (161) FX and other movements - 284 284 - 421 421 At 31 December 2020 40 2,560 2,600 4,090 3,269 7,359


58



Lifetime

ECL

Lifetime ECL for

credit im-paired)

Total Llifetime ECL

Lifetime ECL for

credit im-paired

Total

Accrued commission

and other income

At 1 January 2019 77 2,586 2,663 4,122 3,117 7,239 Movements with impact on credit loss allowance charge for the period: Transfers: - to lifetime - - - - - - - to credit-impaired (8) 37 29 (280) 280 - New originated or

purchased 35 46 81 2,896 247 3,143 Derecognised during the

period (69) (151) (220) (3,842) (554) (4,396) Changes to ECL

measurement model assumptions - 43 43 - - -


impact on credit loss allowance charge for the period (42) (25) (67) (1,226) (27) (1,253)

Movements without impact on credit loss allowance charge for the period:

Write-offs - (139) (139) - (139) (139) FX and other movements - (41) (41) - (45) (45) At 31 December 2019 35 2,381 2,416 2,896 2,906 5,802


59

Movements in the credit loss allowance and in the gross amortised cost amount of settlements on conversion and other banking operations were as follows:



Lifetime

ECL

Lifetime ECL for

credit im-paired)

Total Llifetime ECL

Lifetime ECL for

credit im-paired

Total


At 1 January 2020 - - - 6,214 - 6,214 Movements with impact on

credit loss allowance charge for the period:

Transfers: - to lifetime - - - - - - - to credit-impaired - - - - - - New originated or

purchased - - - 12,355 - 12,355 Derecognised during the

period - - - (6,214) - (6,214) Changes to ECL



impact on credit loss allowance charge for the period - - - 6,141 - 6,141

At 31 December 2020 - - - 12,355 - 12,355


60



Lifetime

ECL

Lifetime ECL for

credit im-paired)

Total Llifetime ECL

Lifetime ECL for

credit im-paired

Total


At 1 January 2019 - - - 24,545 - 24,545 Movements with impact on

credit loss allowance charge for the period:

Transfers: - to lifetime - - - - - - - to credit-impaired - - - - - - New originated or

purchased - - - 6,214 - 6,214 Derecognised during the

period - - - (24,545) - (24,545) Changes to ECL



impact on credit loss allowance charge for the period - - - (18,331) - (18,331)

At 31 December 2019 - - - 6,214 - 6,214

The credit loss allowance charge for 2020 differs from the amount presented in profit and loss statement for the amount of BYN 1,435 thousand (2019: BYN 1,739 thousand) which represents amounts written off directly to profit and loss without creating allowance and recovery of written-off amounts.

Refer to Note 31 for the disclosure of the fair value of each class of other financial assets. Information on related party balances is disclosed in Note 33.

12 Other Assets

The data in the table below are presented as of the reporting date of the relevant period. In thousands of Belarusian roubles 2020 2019 Taxes prepaid other than income taxes 3,582 6,856 Prepayments for assets 4,684 3,913 Repossessed collateral 905 1,220 Other 89 118 Total other assets 9,260 12,107

All of the above assets at 31 December 2020 and 31 December 2019 are expected to be recovered less than twelve months after the year-end, except for prepaid expenses of BYN 82 thousand (2019: BYN 57 thousand).


61

13 Due to Other Banks

The data in the table below are presented as of the reporting date of the relevant period. In thousands of Belarusian roubles 2020 2019 Correspondent accounts and overnight placements of other banks 3,478 3,128 Short-term placements of other banks 89,775 120,300 Long-term placements of other banks 49,426 69,445 Loans received from NBRB secured by debt trading and investment securities 20,000 - Total due to other banks 162,679 192,873

As at 31 December 2020 and 2019 amounts due to other banks included BYN 92,754 thousand (57%) due to five banks and BYN 123,241 thousand (64%) due to five banks, respectively, which represents significant concentration.

Refer to Note 31 for the disclosure of the fair value of each class of amounts due to other banks. Interest rate analysis of due to other banks is disclosed in Note 27. Information on related party balances is disclosed in Note 33.

14 Customer Accounts

The data in the table below are presented as of the reporting date of the relevant period. In thousands of Belarusian roubles 2020 2019 Legal entities and organisations - Current/settlement accounts 995,790 669,973 - Term deposits 474,461 441,809 Individuals - Current/demand accounts 779,621 639,462 - Term deposits 234,558 359,527 Total customer accounts 2,484,430 2,110,771 Economic sector concentrations within customer accounts are as follows:

In thousands of Belarusian roubles 31 December 2020 31 December 2019 Amount % Amount %

Individuals 1,014,179 40.7% 998,989 47.2% Trade and commerce 397,869 16.0% 284,579 13.5% Manufacturing 322,391 13.0% 221,663 10.5% Information technologies 258,126 10.4% 206,249 9.8% Construction and real estate 154,196 6.2% 94,800 4.5% Finance and investment companies 88,213 3.6% 73,223 3.5% Transport 63,652 2.6% 71,401 3.4% Mass media and telecommunication 60,000 2.4% 46,164 2.2% Food industry 38,043 1.5% 20,700 1.0% Science 33,935 1.4% 24,741 1.2% Energy and oil and gas 13,875 0.6% 23,563 1.1% State and public organisations 10,336 0.4% 8,913 0.4% Other 29,615 1.2% 35,786 1.7% Total customer accounts 2,484,430 100% 2,110,771 100%


62

As at 31 December 2020 and 2019 customer accounts amounting to BYN 141,289 thousand (6%) were due to 3 customers, and BYN 109,596 thousand (5%), were due to 3 customers, respectively.

At 31 December 2020, included in customer accounts are deposits of BYN 31,098 thousand (2019: BYN 624 thousand) held as collateral for irrevocable commitments under import letters of credit. Refer to Note 29.

Refer to Note 31 for the disclosure of the fair value of each class of customer accounts. Interest rate analysis of customer accounts is disclosed in Note 27. Information on related party balances is disclosed in Note 33.

15 Debt Securities in Issue

Debt securities in issue are presented by bonds issued on domestic market. The data in the table below are presented as of the reporting date of the relevant period. In thousands of Belarusian roubles Nominal % rate 2020 Nominal % rate 2019 Denominated in BYN with fixed rate 10.62% 145,425 10.65% 96,552 Denominated in BYN with variable rate 6.63% 12,371 8.32% 10,465 Denominated in USD with fixed rate 3.92% 41,474 3.75% 32,990 Denominated in EUR with fixed rate 2.50% 1,381 2.50% 1,127 Denominated in RUR with variable rate 3.25% 10,461 - - Total debt securities in issue 211,112 141,134 As at 31 December 2020 and 2019 the concentration of the placement of issued debt securities was not significant.

Refer to Note 31 for the disclosure of the fair value of each class of debt securities in issue. Interest rate analyses of debt securities in issue are disclosed in Note 27. Information on debt securities in issue held by related parties is disclosed in Note 33.

16 Other Financial Liabilities


In thousands of Belarusian roubles 2020 2019 Other financial liabilities at AC Lease liabilities 14,677 10,632 Settlements on conversion and other banking operations 10,988 5,577 Other financial liabilities 5,849 5,099 Provision for credit related commitments 2,324 5,019 Total other financial liabilities at AC 33,838 26,327

From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability from the date when the leased asset becomes available for use by the Bank.

As at 31 December 2020, interest expense on lease liabilities was BYN 315 thousand (2019: BYN 280 thousand). Total cash outflow for leases in 2020 was BYN 4,912 thousand (2019: BYN 3,919 thousand).


63

Refer to Note 29 for analysis of exposure from financial guarantees and import letters of credit by credit risk grades. Provision for credit related commitments represents specific provisions created for losses incurred on financial guarantees and letters of credit to extend credit to borrowers whose financial conditions deteriorated. Refer to Note 31 for disclosure of the fair value of each class of other financial liabilities.

Movements in the provision for financial guarantees between the beginning and the end of the reporting and comparative periods were as follows:


Stage 1 (12-months

ECL)


SICR)


credit im-paired)

Total provision

Gross guaranteed

amount

Аt 1 January 2020 4,140 353 458 4,951 372,566 Movements with impact on provision for

credit related commitments charge for the period:

Transfers: - to lifetime (from Stage 1 to Stage 2) (1) 2 - 1 - - to credit-impaired (from Stage 1 and Stage

2 to Stage 3) (1) - 2 1 - - to 12-months ECL (from Stage 2 and Stage

3 to Stage 1) 328 (329) - (1) - Issued guarantees (fees charged) 1,169 33 - 1,202 253,314 Derecognised during the period (3,124) (54) - (3,178) (227,074) Changes to model assumptions (806) - (1) (807) - Total charge to profit or loss for the year (2,435) (348) 1 (2,782) 26,240 Movements without impact on provision for


FX movements 99 - - 99 (1,765) At 31 December 2020 1,804 5 459 2,268 397,041


64


Stage 1 (12-months

ECL)


SICR)


credit im-paired)

Total provision

Gross guaranteed

amount

Аt 1 January 2019 958 - 232 1,190 272,076 Movements with impact on provision for


Transfers: - to lifetime (from Stage 1 to Stage 2) (75) 280 - 205 - - to credit-impaired (from Stage 1 and Stage

2 to Stage 3) (4) - 109 105 - - to 12-months ECL (from Stage 2 and Stage

3 to Stage 1) - - - - - Issued guarantees (fees charged) 3,609 73 117 3,799 249,154 Derecognised during the period (422) - - (422) (154,281) Changes to model assumptions 78 - - 78 - Total charge to profit or loss for the year 3,186 353 226 3,765 94,873 Movements without impact on provision for


FX movements (4) - - (4) 5,617 At 31 December 2019 4,140 353 458 4,951 372,566


65

Movements in the provision for import letters of credit between the beginning and the end of the reporting and comparative periods were as follows:


Stage 1 (12-months

ECL)


SICR)


credit im-paired)

Total provision

Gross import

letters of credit

amount Аt 1 January 2020 68 - - 68 27,979 Movements with impact on provision for


Transfers: - to lifetime (from Stage 1 to Stage 2) - - - - - - to credit-impaired (from Stage 1 and Stage

2 to Stage 3) - - - - - - to 12-months ECL (from Stage 2 and Stage

3 to Stage 1) - - - - - Issued import letters of credit (fees charged) 46 - - 46 47,082 Derecognised during the period (33) - - (33) (25,334) Changes to model assumptions (46) - - (46) - Total charge to profit or loss for the year (33) - - (33) 21,748 Movements without impact on provision for


FX movements 21 - - 21 1,016 At 31 December 2020 56 - - 56 50,743


66


Stage 1 (12-months

ECL)


SICR)


credit im-paired)

Total provision

Gross import

letters of credit

amount Аt 1 January 2019 28 1 - 29 51,990 Movements with impact on provision for


Transfers: - to lifetime (from Stage 1 to Stage 2) - - - - - - to credit-impaired (from Stage 1 and Stage

2 to Stage 3) - - - - - - to 12-months ECL (from Stage 2 and Stage

3 to Stage 1) - - - - - Issued import letters of credit (fees charged) 18 - - 18 23,588 Derecognised during the period (19) (1) - (20) (45,346) Changes to model assumptions 42 - - 42 - Total charge to profit or loss for the year 41 (1) - 40 (21,758) Movements without impact on provision for


FX movements (1) - - (1) (2,253) At 31 December 2019 68 - - 68 27,979

17 Other Liabilities


In thousands of Belarusian roubles 2020 2019 Salaries and unused vacation expense accrued 21,984 20,980 Taxes payable other than on income tax 4,569 3,350 Amounts payable to Deposits guarantee fund 1,533 1,509 Other 2,278 1,707 Total other liabilities 30,364 27,546

As at 31 December 2020 all of the above liabilities are expected to be settled less than twelve months after the reporting date, except for BYN 5,860 thousand (2019: BYN 5,250 thousand).


67

18 Share Capital and Retained Earnings

In thousands of Belarusian roubles except for number of shares

Number of outstanding

shares Ordinary

shares Hyperinflation

adjustment Total share

capital At 31 December 2020 2,027,374,539 101,369 49,692 151,061 At 31 December 2019 2,027,374,539 101,369 49,692 151,061

The total authorised number of ordinary shares is 2,027,374,539 shares (2019: 2,027,374,539 shares), with a par value of BYN 0.05 per share (2019: BYN 0.05 per share). All issued ordinary shares are fully paid. Each ordinary share carries one vote.

In accordance with Belarusian legislation, the Bank distributes profits as dividends or transfers them to reserves on the basis of financial statements prepared in accordance with Belarusian Accounting Rules. The Bank’s reserves under Belarusian Accounting Rules at 31 December 2020 amount to BYN 293,572 thousand (2019: BYN 225,170 thousand).

19 Other Comprehensive Income Recognised in Each Component of Equity

An analysis of other comprehensive income by item for each component of equity is as follows:

In thousands of Belarusian roubles Other Comprehensive

Income Year ended 31 December 2019 Investments in debt securities: - Gains less losses arising during the year (2)

- Gains less losses recycled to profit or loss upon disposal or impairment 2 Total items that may be reclassified subsequently to profit or loss - Revaluation reserve for property, plant and equipment 388 Income tax recorded directly in other comprehensive income (97) Total items that will not be reclassified to profit or loss 291 Total other comprehensive income 291 Year ended 31 December 2020 Investments in debt securities: - Gains less losses arising during the year (12) - Gains less losses recycled to profit or loss upon disposal or impairment 12 Total items that may be reclassified subsequently to profit or loss - Revaluation reserve for property, plant and equipment 7,390 Income tax recorded directly in other comprehensive income (1,848) Total items that will not be reclassified to profit or loss 5,542 Total other comprehensive income 5,542


68

20 Interest Income and Expense

The data in the table below are presented for the corresponding reporting period. In thousands of Belarusian roubles 2020 2019 Interest income Loans and advances to legal entities 120,455 102,075 Loans and advances to individuals 67,075 73,424 Due from other banks 13,272 11,555 Investments in debt securities 5,577 17,373 Cash and cash equivalents 190 790

Total interest income 206,569 205,217 Other similar income Finance lease receivables 7,112 3,900 Total other similar income 7,112 3,900 Interest expense Term deposits of legal entities 33,844 26,571 Term deposits of individuals 21,305 27,534 Debt securities in issue 17,700 16,047 Due to other banks 14,907 10,294 Current/settlement accounts of legal entities 973 1,659 Lease liabilities 316 280 Current/settlement accounts of individuals 46 21

Total interest expense 89,091 82,406 Net interest income 124,590 126,711


69

21 Fee and Commission Income and Expense

The data in the table below are presented for the corresponding reporting period. In thousands of Belarusian roubles 2020 2019 Fee and commission income Cash and foreign currency exchange transactions 47,520 36,612 Settlement transactions 47,439 35,776 Documentary operations 8,909 9,031 Factoring 3,925 3,482 Fiduciary activities 2,624 980 Transactions with securities 17 13 Other 1,263 1,881

Total fee and commission income 111,697 87,775 Fee and commission expense International payment systems 15,161 9,511 Cash and foreign currency exchange transactions 11,839 9,402 Settlement transactions 12,145 8,558 Documentary operations 1,827 2,316 Fiduciary activities 505 435 Transactions with securities 45 10 Other 416 1,120

Total fee and commission expense 41,938 31,352 Net fee and commission income 69,759 56,423


70

Segment information for the reportable segments for the year ended 31 December 2020 is set out below:

In thousands of Belarusian roubles Retail

banking Corporate

banking Treasury Unallocated Total Fee and commission income Fee and commission income not

relating to financial instruments at FVTPL:

- Cash and foreign currency exchange transactions 45,581 1,939 - - 47,520

- Settlement transactions 13,010 34,372 57 - 47,439 - Documentary operations - 8,903 6 - 8,909 - Factoring services - 3,925 - - 3,925 - Fiduciary activities - - 2,624 - 2,624 - Transactions with securities - - 17 - 17 - Other commission income 369 903 (9) - 1,263 Total fee and commission income 58,960 50,042 2,695 - 111,697

Fee and commission expense Fee and commission expense not relating to financial instruments at FVTPL

- International payment systems 15,085 76 - - 15,161 - Settlement transactions 7,221 4,924 - - 12,145 - Cash and foreign currency exchange transactions 11,148 445 246 - 11,839

- Documentary operations 9 1,742 76 - 1,827 - Fiduciary activities - - 505 - 505 - Transactions with securities - - 45 - 45 - Other commission expense 180 236 - - 416 Total fee and commission expense 33,643 7,423 872 - 41,938

Net fee and commission income/expense 25,317 42,619 1,823 - 69,759


71



banking Corporate

banking Treasury Unallocated Total Fee and commission income Fee and commission income not

relating to financial instruments at FVTPL:

- Cash and foreign currency exchange transactions 35,580 1,032 - - 36,612

- Settlement transactions 8,306 27,423 40 7 35,776 - Documentary operations - 9,018 13 - 9,031 - Factoring services - 3,482 - - 3,482 - Fiduciary activities - - 980 - 980 - Transactions with securities - - 13 - 13 - Other commission income 581 1,271 4 25 1,881 Total fee and commission income 44,467 42,226 1,050 32 87,775 Fee and commission expense Fee and commission expense not relating to financial instruments at FVTPL

- International payment systems 9,470 41 - - 9,511 - Cash and foreign currency exchange transactions 9,173 229 - - 9,402

- Settlement transactions 5,963 2,592 3 - 8,558 - Documentary operations - 2,313 3 - 2,316 - Fiduciary activities - - 436 - 436 - Transactions with securities - - 10 - 10 - Other commission expense 1,120 - - - 1,120 Total fee and commission expense 25,726 5,175 451 - 31,352

Net fee and commission income/expense 18,741 37,051 599 32 56,423

22 Other Operating Income

The data in the table below are presented for the corresponding reporting period. In thousands of Belarusian roubles 2020 2019 Fines and penalties 3,374 3,385 Unclaimed balances 282 1,033 Other income/ (expense) (2,379) 675 Total other operating income 1,277 5,093


72

23 Administrative and Other Operating Expenses

The data in the table below are presented for the corresponding reporting period. In thousands of Belarusian roubles 2020 2019 Staff costs 65,060 61,998 Statutory social security 16,319 14,731 Computer and telecommunications expenses 15,399 13,734 Depreciation and amortisation 13,762 10,951 Contributions to deposits protection fund 6,245 5,404 Advertising and marketing 5,094 5,344 Depreciation and amortization of leased assets 4,047 3,635 Transport expenses 2,649 2,400 Consulting and professional services 2,189 849 Utilities 1,440 1,286 Materials and Supplies 1,236 363 Rent expenses 995 829 Taxes other than income tax 751 721 Security 685 672 Repairs and maintenance 313 181 Result on disposal of assets 91 25 Other 3,239 3,208 Total administrative and other operating expenses 139,514 126,331

24 Income Taxes

(a) Components of income tax expense

The data in the table below are presented for the corresponding reporting period.

In thousands of Belarusian roubles 2020 2019 Current tax 39,215 25,407 Deferred tax 26,067 (3,763) Income tax expense for the year 65,282 21,644

(b) Reconciliation between the tax expense and profit or loss multiplied by applicable tax rate

The income tax rate applicable to the Bank’s 2020 income is 25% (2019: 25%). Reconciliation between the expected and the actual taxation charge is provided below (the data are presented for the corresponding reporting period).

In thousands of Belarusian roubles 2020 2019 Profit before tax 264,921 101,676 Theoretical tax charge at statutory rate (2020: 25%; 2019: 25%) 66,230 25,419 Tax effect of items which are not deductible or assessable for taxation purposes:

- Income on domestic securities which is exempt from taxation (1,592) (5,069) - Non-deductible expenses 2,590 1,451 Reversal of statutory revaluation of property and equipment (1,946) (157) Income tax expense for the year 65,282 21,644


73

(c) Deferred taxes analysed by type of temporary difference

Differences between IFRS and statutory taxation regulations in the Republic of Belarus give rise to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. The tax effect of the movements in these temporary differences is detailed below, and is recorded at the rate of 25%.


1 January 2020 Credited/

(charged) to profit or loss

Charged to other comprehensive

income 31 December

2020 Tax effect of

deductible/(taxable) temporary differences

Premises and equipment 1,088 3,046 (1,848) 2,286 Credit loss allowance of

securities at AC (23,844)

(7,107)

-

(30,951) Fair value of derivatives (17) (304) - (321) Other (444) (21,702) - (22,146) Net deferred tax liability (23,217) (26,067) (1,848) (51,132)


1 January 2019 Credited/

(charged) to profit or loss

Charged to other comprehensive

income 31 December

2019 Tax effect of

deductible/(taxable) temporary differences

Premises and equipment 1,004 181 (97) 1,088 Credit loss allowance of

securities at AC (24,086) 242 - (23,844) Fair value of derivatives (90) 73 - (17) Other (3,711) 3,267 - (444) Net deferred tax liability (26,883) 3,763 (97) (23,217)

The Bank had no tax loss carry forwards as at 31 December 2020 and 2019.


74

25 Reconciliation of Liabilities Arising from Financing Activities

The table below sets out movements in the Bank’s liabilities from financing activities for the period presented. The items of these liabilities are those that are reported as financing activities in the statement of cash flows.

In thousands of Belarusian roubles Lease liabilities Total Adoption of IFRS 16, Leases 9,401 9,401 Liabilities from financing activities at

1 January 2019 9,401 9,401 Cash flows (3,639) (3,639) Foreign exchange adjustments (436) (436) Initial recognition of lease liabilities 5,306 5,306 Liabilities from financing activities at

31 December 2019 10,632 10,632 Cash flows (4,597) (4,597) Foreign exchange adjustments 3,431 3,431 Initial recognition of lease liabilities 8,903 8,903 Derecognition of lease liabilities (3,692) (3,692) Liabilities from financing activities at

31 December 2020 14,677 14,677

26 Segment Analysis

Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM), and for which discrete financial information is available. The CODM is the person - or group of persons - who allocates resources and assesses the performance for the entity. The functions of the CODM are performed by the Management Board of the Bank.

(a) Description of products and services from which each reportable segment derives its revenue

The Bank is organised on the basis of three main business segments:

• Retail banking – representing private banking services, private customer current accounts, savings, deposits, investment savings products, custody, credit and debit cards, consumer loans and mortgages;

• Corporate banking – representing direct debit facilities, current accounts, deposits, overdrafts, loan and other credit facilities, foreign currency and derivative products;

• Treasury – representing corresponding accounts, deposits, loans and derivative products with other banks.

(b) Factors that management used to identify the reportable segments

The Bank’s segments are strategic business units that focus on different customers. They are managed separately because each business unit requires different marketing strategies and service level and are based on different business and decision-making processes.


75

(c) Measurement of operating segment profit or loss, assets and liabilities

The CODM reviews financial information prepared based on International Financial Reporting Standards.

The CODM evaluates performance of each segment based on profit before tax.

(d) Information about reportable segment profit or loss, assets and liabilities Segment information for the reportable segments for the year ended 31 December 2020 is set out below:


banking Corporate

banking Treasury Unallocated Total External revenues: - Interest income 67,083 120,455 19,031 - 206,569 - Other similar income - 7,112 - - 7,112 - Fee and commission income 58,960 50,042 2,695 - 111,697 - Other operating income 1,291 156 - (170) 1,277 Total revenues 127,334 177,765 21,726 (170) 326,655 Interest expense (21,873) (53,839) (13,063) (316) (89,091) Allowance for impairment of loans to customers, amounts due from other banks, investments in debt securities and credit commitments

(4,278) 1,588 - (1,582) (4,272)

Fee and commission expense (33,643) (7,423) (872) - (41,938) Gains less losses from trading in foreign currencies and translation gains less losses

27,731 72,477 22,617 115,038 237,863

Gains less losses from financial derivatives - - (24,770) - (24,770)

Gains less losses from disposals of investments in debt securities - - (12) - (12)

Administrative and other operating expenses (59,379) (66,568) (12,718) (849) (139,514)

Income tax expense - - - (65,282) (65,282) Segment result 35,892 124,000 (7,092) 46,839 199,639 Segment assets 291,855 2,054,096 1,020,897 275,682 3,642,530 Segment liabilities 1,021,088 1,643,126 214,294 110,068 2,988,576


76



banking Corporate

banking Treasury Unallocated Total External revenues: - Interest income 73,939 102,074 29,204 - 205,217 - Other similar income - 3,900 - - 3,900 - Fee and commission income 44,467 42,226 1,050 32 87,775 - Other operating income 2,962 57 - 2,074 5,093 Total revenues 121,368 148,257 30,254 2,106 301,985 Interest expense (28,113) (43,518) (10,493) (282) (82,406) Allowance for impairment of loans to customers, amounts due from other banks, investments in debt securities and credit commitments

(11,605) (3,693) - 3,866 (11,432)

Fee and commission expense (25,726) (5,175) (451) - (31,352) Gains less losses from trading in foreign currencies and translation gains less losses

13,760 45,526 703 (10,977) 49,012

Gains less losses from financial derivatives - - 2,202 - 2,202

Gains less losses from disposals of investments in debt securities - - (2) - (2)

Administrative and other operating expenses (53,842) (61,675) (9,687) (1,127) (126,331)

Income tax expense - - - (21,644) (21,644) Segment result 15,842 79,722 12,526 (28,058) 80,032 Segment assets 286,772 1,515,390 957,029 220,705 2,979,896 Segment liabilities 1,010,245 1,238,624 209,721 72,533 2,531,123

The types of revenues presented by the reportable segments for the year ended 31 December 2020 and 2019 are recognized on a point in time basis.

(f) Analysis of revenues by products and services

The Bank’s revenues are analysed by products and services in Note 20 (interest income), Note 21 (fee and commission income) and in Note 22 (other operating income).

(g) Geographical information

In 2020 and 2019 revenues were collected mainly from Belarus (more than 90% of total revenues), other major countries is Russia. Revenues comprise interest income, fee and commission income and other operating income.

(h) Major customers

In 2020 revenues above 10% of the total revenue were generated from 10 customers. In 2019 revenues above 10% of the total revenue were generated from 13 customers.


77

27 Financial Risk Management

The risk management function within the Bank is carried out in respect of financial risks, operational risks and legal risks. Financial risk comprises market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits. The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures, in order to minimise operational and legal risks.

Credit risk. The Bank takes on exposure to credit risk, which is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Exposure to credit risk arises as a result of the Bank’s lending and other transactions with counterparties giving rise to financial assets.

The Bank’s maximum exposure to credit risk is reflected in the carrying amounts of financial assets on the statement of financial position. For credit related commitments, the maximum exposure to credit risk is the amount of the commitment. Refer to Note 29.

The main purposes of credit risk management are securing of loan portfolio growth, minimisation of bad debts, and diversification of loan portfolio.

The main instruments of credit risk management are credit risk limits, limits by loan product, internal borrower credit ratings, pricing with an allowance for risk, collateral discounts.

The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to industry segments. Large risks are approved regularly by the Credit Committees. Such risks are monitored on a revolving basis and are subject to review on continuing basis.

The Bank established a number of credit committees which are responsible for approving credit limits for individual borrowers:

The senior credit committee is responsible for:

- making loan decision on credit limits to corporate clients in the amount not exceeding USD 16,000 thousand and meets weekly or twice a week;

- submission to the Bank’s Management Board for consideration a decision on proposed credit limits exceeding USD 16,000 thousand and up to USD 25,000 thousand;

- submission to the Bank’s Management Board for consideration the proposals of establishing country’s limits;

- making a decision on non-standard legal risks and non-standard terms of credit transactions.

The junior credit committee is responsible for:

- review and approving credit limits to medium enterprises in the amount not exceeding USD 3,000 thousand and meets twice a week.

Loan applications originated by the relevant client relationship managers are passed on to the relevant credit committee for approval of the credit limit. Exposure to credit risk is also managed, in part, by obtaining collateral and corporate and personal guarantees. In order to monitor credit risk exposures, regular reports are produced by the Risk Management Department’s officers based on a structured analysis focusing on the customer’s business and financial performance. Any significant exposure to customers with deteriorating creditworthiness are reported to, and reviewed by the relevant Credit Committee.

The Bank also uses internal credit ratings and past due balances to monitor exposure to credit risk. Borrower’s rating determination is based on weighted estimation of two categories of indicators: financial and business. Financial indicators analysis presents an appraisal of borrower’s financial statements in order to establish its financial competitiveness (solvency and financial stability), ability to fulfil its obligations. Estimation of borrower’s financial indicator includes analysis of the following areas: liquidity, property status, financial stability, payables, receivables, profit.


78

Evaluation of business indicators is conducted to clarify borrower’s business potential on market, interrelations with counterparties and banks and an efficiency of working capital usage. Such evaluation supplements analysis of financial indicators in a way that makes it possible to have full information about the borrower for the purpose of making judgement on its investment attractiveness. Estimation of borrower’s business indicator includes analysis of the following areas: economic activity, profitability, sales, and turnover of accounts in banks, credit history, management quality, goodwill, market position and counterparties.

Master scale credit risk grade

Corresponding internal ratings

Corresponding ratings of external international rating agencies (S&P)

Corresponding PD interval

Excellent A, A- AAA to BB+ 0,01% - 0,5% Good B, B-, C BB to B+ 0,51% - 3% Satisfactory C-, D B, B- 3% - 10% Special monitoring E CCC+ to CC- 10% - 99,9% Default Default C, D-I, D-II 100%

Each master scale credit risk grade is assigned a specific degree of creditworthiness:

● Excellent – strong credit quality with low expected credit risk; ● Good – adequate credit quality with a moderate credit risk; ● Satisfactory – moderate credit quality with a satisfactory credit risk; ● Special monitoring – facilities that require closer monitoring and remedial management; and

● Default – facilities in which a default has occurred.

The Risk Management department reviews the ageing analysis of outstanding loans and follows up on past due balances.

Expected credit loss (ECL) measurement. ECL is a probability-weighted estimate of the present value of future cash shortfalls (i.e., the weighted average of credit losses, with the respective risks of default occurring in a given time period used as weights). An ECL measurement is unbiased and is determined by evaluating a range of possible outcomes. ECL measurement is based on four components used by the Bank: Probability of Default (“PD”), Exposure at Default (“EAD”), Loss Given Default (“LGD”) and Discount Rate.

EAD is an estimate of exposure at a future default date, taking into account expected changes in the exposure after the reporting period, including repayments of principal and interest, and expected drawdowns on committed facilities. The EAD on credit related commitments is estimated using Credit Conversion Factor (“CCF”). CCF is a coefficient that shows the probability of conversion of the committed amounts to an on-balance sheet exposure within a defined period. PD is an estimate of the likelihood of default to occur over a given time period. LGD is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from any collateral. It is usually expressed as a percentage of the EAD. The expected losses are discounted to present value at the end of the reporting period. The discount rate represents the effective interest rate (“EIR”) for the financial instrument or an approximation thereof.

Expected credit losses are modelled over instrument’s lifetime period. The lifetime period is equal to the remaining contractual period to maturity of debt instruments, adjusted for expected prepayments, if any. For loan commitments and financial guarantee contracts, it is the contractual period over which the Bank has a present contractual obligation to extend credit.

Management models Lifetime ECL, that is, losses that result from all possible default events over the remaining lifetime period of the financial instrument. The 12-month ECL, represents a portion of lifetime ECLs that result from default events on a financial instrument that are possible within 12 months after the reporting period, or remaining lifetime period of the financial instrument if it is less than a year.


79

The ECLs that are estimated by management for the purposes of these financial statements are point-in-time estimates, rather than through-the-cycle estimates that are commonly used for regulatory purposes. The estimates consider forward looking information, that is, ECLs reflect probability weighted development of key macroeconomic variables that have an impact on credit risk.

The ECL modelling does not differ for Purchased or Originated Credit Impaired (“POCI”) financial assets, except that (a) gross carrying value and discount rate are based on cash flows that were recoverable at initial recognition of the asset, rather than based on contractual cash flows, and (b) the ECL is always a lifetime ECL. POCI assets are financial assets that are credit-impaired upon initial recognition, such as impaired loans acquired in a past business combination.

For purposes of measuring PD, the Bank defines default as a situation when the exposure meets one or more of the following criteria:

• the borrower is more than 90 days past due on its contractual payments;

• international rating agencies have classified the borrower in the default rating class;

• the borrower meets the unlikeliness-to-pay criteria listed below: - the bank was forced to restructure the debt; - the borrower is deceased; - the borrower is insolvent; - the borrower is in breach of financial covenant(s); - it is becoming likely that the borrower will enter bankruptcy.

For purposes of disclosure, the Bank fully aligned the definition of default with the definition of credit-impaired assets. The default definition stated above is applied to all types of financial assets of the Bank.

An instrument is considered to no longer be in default (i.e. to have cured) when it no longer meets any of the default criteria for a consecutive period of one year. This period of one year has been determined based on an analysis that considers the likelihood of a financial instrument returning to default status after curing by using different possible definitions of cures.

The assessment whether or not there has been a significant increase in credit risk (“SICR”) since initial recognition is performed on an individual basis and on a portfolio basis. For loans issued to corporate entities, interbank loans and debt securities at AC or at FVOCI, SICR is assessed on an individual basis by monitoring the triggers stated below. For loans issued to individuals and other financial assets, SICR is assessed either on a portfolio basis or an individual basis, depending on the existence of scoring models. The criteria used to identify an SICR are monitored and reviewed periodically for appropriateness by the Bank’s Risk Management Department. The Bank considers a financial instrument to have experienced an SICR when one or more of the following quantitative, qualitative or backstop criteria have been met.

For interbank operations and bonds issued by banks:

• Deterioration of credit rating issued by international rating agencies;

• Presence of negative information, such as litigations and claims against the bank filed into court, withdrawal of special banking licences for some operations, breach of special banking covenants imposed by the National bank, etc.

For loans issued to legal entities and bonds issued by corporate customers:

• 15 days past due;

• Inclusion of loan into Watch list category according to the internal credit risk monitoring process;

• Deterioration of internal credit rating by three steps and more.

For loans to Individuals:

• 30 days past due as of the reporting date;

• The fact of the history of 30 days past due amounts in the last three months prior to the reporting date.


80

The level of ECL that is recognised in these financial statements depends on whether the credit risk of the borrower has increased significantly since initial recognition. This is a three-stage model for ECL measurement. A financial instrument that is not credit-impaired on initial recognition and its credit risk has not increased significantly since initial recognition has a credit loss allowance based on 12-month ECLs (Stage 1). If a SICR since initial recognition is identified, the financial instrument is moved to Stage 2 but is not yet deemed to be credit-impaired and the loss allowance is based on lifetime ECLs. If a financial instrument is credit-impaired, the financial instrument is moved to Stage 3 and loss allowance is based on lifetime ECLs. The consequence of an asset being in Stage 3 is that the Bank ceases to recognise interest income based on gross carrying value and applies the asset’s effective interest rate to the carrying amount, net of ECL, when calculating interest income.

If there is evidence that the SICR criteria are no longer met, the instrument is transferred back to Stage 1. If an exposure has been transferred to Stage 2 based on a qualitative indicator, the Bank monitors whether that indicator continues to exist or has changed.

The Bank has three approaches for ECL measurement: (i) assessment on an individual basis; (ii) assessment on a portfolio basis: internal ratings are estimated on an individual basis but the same credit risk parameters (e.g. PD, LGD) will be applied during the process of ECL calculations for the same credit risk ratings and homogeneous segments of the loan portfolio; and (iii) assessment based on external ratings. The Bank performs an assessment on an individual basis for the following types of loans: individually significant loans, that is, individual exposures above 2% of total equity and with rating lower than “A-“ as at the last previous reporting date. The Bank performs an assessment on a portfolio basis for the following types of loans: retail loans and loans issued to SMEs (small and medium enterprises), when no borrower-specific information is available, loans to corporate customers with exposures below 2% of equity and loans rated above “A-“. This approach stratifies the loan pool into homogeneous segments based on borrower-specific information.

The Bank performs assessments based on external ratings for interbank loans, debt securities issued by the banks and by sovereigns.

Individual assessment is primarily based on the expert judgement of experienced officers from the Credit Risk and Non-Performing Loan Management Department. Expert judgements are regularly tested in order to decrease the difference between estimates and actual losses.

When assessment is performed on a portfolio basis, the Bank determines the staging of the exposures on individual basis and measures the loss allowance on a collective basis. The Bank analyses its exposures by segments determined on the basis of shared credit risk characteristics, such that exposures within a group have homogeneous or similar risks. The key shared credit characteristics considered are: product type (for individuals), credit risk rating (for legal entities). The different segments also reflect differences in credit risk parameters such as PD and LGD. The appropriateness of groupings is monitored and reviewed on a periodic basis by the Risk Management Department.

In general, ECL is the sum of the multiplications of the following credit risk parameters: EAD, PD and LGD, that are defined as explained above, and discounted to present value using the instrument’s effective interest rate. The ECL is determined by predicting credit risk parameters (EAD, PD and LGD) for each future month during the lifetime period for each individual exposure or collective segment. These three components are multiplied together and adjusted for the likelihood of survival (i.e. the exposure has been repaid or defaulted in an earlier month). This effectively calculates an ECL for each future period that is then discounted back to the reporting date and summed up. The discount rate used in the ECL calculation is the original effective interest rate or an approximation thereof.

The key principles of calculating the credit risk parameters. The EADs are determined based on the expected payment profile that varies by product type. EAD is based on the contractual repayments owed by the borrower over a 12-month or lifetime basis for amortising products and bullet repayment loans. This will also be adjusted for any expected overpayments made by a borrower. Early repayment or refinancing assumptions are also incorporated into the calculation.

Two types of PDs are used for calculating ECLs: 12-month and lifetime PD. An assessment of a 12-month PD is based on the latest available historic default data and adjusted for supportable forward-looking information when appropriate. Lifetime PDs represent the estimated probability of a default occurring over the remaining life of the financial instrument and it is a sum of the 12 months PDs over the life of the instrument. The Bank uses different statistical approaches depending on the segment and product type to calculated lifetime PDs, such as the extrapolation of 12-month PDs based on migration matrixes, developing lifetime PD curves based on the historical default data.


81

LGD represents the Bank's expectation of the extent of loss on a defaulted exposure. LGD varies by the type of counterparty, type and seniority of the claim, and the availability of collateral or other credit support. The 12-month and lifetime LGDs are determined based on the factors that impact the expected recoveries after a default event. The approach to LGD measurement can be divided into three possible approaches:

• measurement of LGD based on the specific characteristics of the collateral;

• calculation of LGD on a portfolio basis based on recovery statistics; or

• individually defined LGD depending on different factors and scenarios.

The Bank calculates LGD based on specific characteristics of the collateral, such as projected collateral values, historical discounts on sales and other factors for loans, which are assessed on individual basis. LGD is calculated on a collective basis based on the latest available recovery statistics for the remainder of the corporate loan portfolio and for retail secured and unsecured products.

ECL measurement for financial guarantees and loan commitments. The ECL measurement for these instruments includes the same steps as described above for on-balance sheet exposures and differs with respect to EAD calculation. The EAD is a product of credit conversion factor (“CCF”) and amount of the commitment (“E𝑥𝑥𝑥𝑥𝑥𝑥𝑥𝑥”). CCF for off-balance sheet commitments is defined based on the guidance of Basel committee, until own statistics is available. CCF for overdrafts is defined as 100% since the limits can be used by the customers at any time.

Principles of assessment based on external ratings. Certain exposures have external credit risk ratings and these are used to estimate credit risk parameters PD and LGD from the default and recovery statistics published by the respective rating agencies. This approach is applied to government and interbank exposures.

Forward-looking information incorporated in the ECL models. The assessment of SICR and the calculation of ECLs both incorporate supportable forward-looking information. The Bank identified certain key economic variables that correlate with developments in credit risk and ECLs. Forecasts of economic variables (the "base economic scenario") are provided by the Bank's Risk department and provide the best estimate of the expected macro-economic development over the next three years.

In addition to the base economic scenario, the Bank's Risk Department also provides other possible scenarios along with scenario weightings. The number of other scenarios used is set based on the analysis of each major product type to ensure that non-linearities are captured. The number of scenarios and their attributes are reassessed at each reporting date. The scenario weightings are determined by a combination of statistical analysis and expert credit judgement, taking into account the range of possible outcomes of which each chosen scenario is representative.

As with any economic forecast, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty, and therefore the actual outcomes may be significantly different to those projected. The Bank considers these forecasts to represent its best estimate of the possible outcomes and has analysed the non-linearities and asymmetries within the Bank's different portfolios to establish that the chosen scenarios are appropriately representative of the range of possible scenarios.

The Bank regularly reviews its methodology and assumptions to reduce any difference between the estimates and the actual loss of credit. Such backtesting is performed at least once a year.

The results of backtesting the ECL measurement methodology are communicated to Bank Management and further steps for tuning models and assumptions are defined after discussions between authorised persons.

Market risk. The Bank takes on exposure to market risks. Market risks arise from open positions in (a) currency, (b) interest rates and (c) equity products, all of which are exposed to general and specific market movements. Management sets limits on the value of risk that may be accepted, which is monitored on a daily basis. However, the use of this approach does not prevent losses outside of these limits in the event of more significant market movements.

The main purpose of market risk management is to minimise the fluctuation of the currencies portfolio and the securities portfolio, admitted in fair value, and to prevent their negative influence on the Bank’s capital by establishing the limits on the amount of unexpected losses with the prescribed level of confidence interval, and establishing the limits on amount of open position.


82

The specific and the general risk analysis uses when the investments in securities are made by the Bank. The specific risk analysis is exercised in purpose of exposure credit risk of security and it is the same as the procedure used in credit analysis. The policy of forming and management of the securities portfolio has been established the minimum international credit rating of issuer for purchasing his bonds, limiting the size of the trading securities portfolio, limiting the share of investments in securities of the same emission.

The general risk analysis directs to the estimation of the market characteristic of risk: calculating modified duration, volatility of interest rates, price sensitivity, and correlation of interest rate with the basic indexes of the securities market.

The limit of risk concentration on securities per issuer is established on the basis of the specific and the general risk analysis.

The policy of forming and management of the securities portfolio determines the stop-loss. The Division of the Transactions in the Financial Markets must stop the position in security when the stop-loss has been achieved.

The portfolio of securities is analysed on a weekly basis by the Asset and Liability Management Committee.

Currency risk. In respect of currency risk, management sets limits on the level of exposure by currency and in total for both overnight and intra-day positions, which are monitored daily.

The table below summarises the Bank’s exposure to foreign currency exchange rate risk at the end of the reporting period:

31 December 2020 31 December 2019 In thousands of Belarusian roubles

Monetary financial

assets

Monetary financial liabilities

Deri-vatives

(net) Net

position Mone-

tary financial

assets

Monetary financial liabilities

Deri-vatives

(net) Net

position

Belarusian roubles 854,838 (864,790) 19,609 9,657 959,585 (1,008,624) 1,785 (47,254)

US Dollars 1,583,617 (1,339,268) 385,844 630,193 1,058,610 (959,508) 386,256 485,358 Euros 791,430 (538,512) (252,288) 630 705,924 (390,931) (339,982) (24,989) Russian roubles 300,470 (139,526) (159,447) 1,497 150,530 (101,806) (49,223) (499)

Other 10,005 (9,963) - 42 10,363 (10,236) (174) (47) Total 3,540,360 (2,892,059) (6,282) 642,019 2,885,012 (2,471,105) (1,338) 412,569 Derivatives presented above are monetary financial assets or monetary financial liabilities, but are presented separately in order to show the Bank’s gross exposure.

Amounts disclosed in respect of derivatives represent the fair value, at the end of the reporting period, of the respective currency that the Bank agreed to buy (positive amount) or sell (negative amount) before netting of positions and payments with the counterparty. The amounts by currency are presented gross as stated in Note 30. The net total represents the fair value of the currency derivatives. The above analysis includes only monetary assets and liabilities. Investments in equities and non-monetary assets are not considered to give rise to any material currency risk.


83

The following table presents sensitivities of profit or loss and equity to reasonably possible changes in exchange rates applied at the end of the reporting period relative to the functional currency of the Bank, with all other variables held constant: 31 December 2020 31 December 2019

In thousands of Belarusian roubles Impact on profit

before taxes Impact on

equity Impact on profit

before taxes Impact on

equity US Dollar strengthening by 10% (2019: strengthening by 10%) 63,019 47,264 48,536 36,402 US Dollar weakening by 5% (2019: weakening by 5%) (31,510) (23,633) (24,268) (18,201) Euro strengthening by 10% (2019: strengthening by 10%) 63 47 (2,499) (1,874) Euro weakening by 5% (2019: weakening by 5%) (32) (24) 1,249 937 Russian roubles strengthening by 10% (2019: strengthening by 10%) 150 113 (50) (38) Russian roubles weakening by 5% (2019: weakening by 5%) (75) (56) 25 19

The exposure was calculated only for monetary balances denominated in currencies other than the functional currency of the Bank.

Interest rate risk. The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest margins may increase as a result of such changes, but may reduce or create losses in the event that unexpected movements arise. The Bank makes use of gap- analysis of assets and liabilities for estimation interest risk rate.

The table below summarises the Bank’s exposure to interest rate risks. The table presents the aggregated amounts of the Bank’s financial assets and liabilities at carrying amounts, categorised by the earlier of contractual interest repricing or maturity dates:


Demand and less

than 1 month

From 1 to 6 months

From 6 to 12 months

More than 1 year

No stated maturity Total

31 December 2020 Total financial assets 1,375,625 975,419 264,615 894,534 30,819 3,541,012 Total financial liabilities 2,251,655 301,567 163,358 182,413 - 2,898,993 Net interest sensitivity gap at 31 December 2020 (876,030) 673,852 101,257 712,121 30,819 642,019

31 December 2019 Total financial assets 1,198,470 838,776 177,265 648,212 24,167 2,886,890 Total financial liabilities 1,810,401 374,515 74,707 214,698 - 2,474,321 Net interest sensitivity gap at 31 December 2019 (611,931) 464,261 102,558 433,514 24,167 412,569

The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Bank’s income statement. The sensitivity of the income statement is the effect of the assumed changes in interest rates on the net interest income for one year, based on the floating rate non-trading financial assets and financial liabilities held at 31 December 2020 and 2019. The sensitivity of other comprehensive income is calculated by revaluing fixed rate available-for-sale financial assets at 31 December 2020 and 2019 for the effects of the assumed changes in interest rates based on the assumption that there are parallel shifts in the yield curve.The following table also presents sensitivities of profit and loss and equity to reasonably possible changes in exchange rates:


84



Impact on net interest income

Impact on other comprehensive

income

Impact on net interest income

Impact on other comprehensive

income Increase by 500 basis points for interest rate in Belarusian roubles (2019: increase by 500 basis points) (813) - (6,042) -

Decrease by 500 basis points for interest rate in Belarusian roubles (2019: Decrease by 500 basis points) 813 - 6,042 -

increase by 200 basis points for interest rate in other currencies (2019: increase by 200 basis points) (765) - (843) -

Decrease by 200 basis points for interest rate in other currencies (2019: decrease by 200 basis points) 765 - 843 -

The Bank monitors interest rates for its financial instruments. The table below summarises weighted average interest rates at the respective reporting date based on reports reviewed by key management personnel.

In % p.a. 31 December 2020 31 December 2019

BYN USD Euro RUR BYN USD Euro RUR Assets Cash and cash equivalents 0% 0% 0% 0% 0% 0% 0% 0% Due from other banks 0% 0% 0% 0% 9% 1% 1% - Loans and advances to customers - loans to individuals 20% 10% 6% - 22% 11% 11% - - loans to legal entities 14% 6% 5% 10% 12% 6% 5% 11% Investments in debt securities 0% 5% 0% 0% 9% 5% - - Other financial assets 0% 0% 0% 0% 0% 0% 0% 0% Liabilities Due to other banks 8% 4% 2% 4% 5% 5% 2% 5% Customer accounts - current and settlement accounts 1% 0% 0% 0% 0% 0% 0% 0% - term deposits 14% 2% 1% 3% 10% 2% 1% 4% Debt securities in issue 10% 4% 3% 3% 10% 4% 3% - Other financial liabilities 0% 0% 0% 0% 0% 0% 0% 0% - lease liabilities 14% 4% 3% - 12% 4% 2% - - other 0% 0% 0% 0% 0% 0% 0% 0%

The sign “-” in the table above means that the Bank does not have the respective assets or liabilities in the corresponding currency.

The Treasury department makes use of currency swap to manage the risk. The Assets and Liability Management Committee regularly revises advisable interest rates of credits and limiting interest rates for deposits to form optimal cost of assets and liabilities.

Other price risk. The Bank has limited exposure to equity price risk.

The Bank is exposed to prepayment risk through providing fixed or variable rate loans, including mortgages, which give the borrower the right to repay the loans early. The Bank’s current year profit (loss) and equity at the end of the current reporting period would not have been significantly impacted by changes in prepayment rates because such loans are carried at amortised cost and the prepayment right is at, or close to, the amortised cost of the loans and advances to customers.


85

Geographical risk concentrations. The geographical concentration of the Bank’s assets and liabilities at 31 December 2020 is set out below:

In thousands of Belarusian roubles Belarus Russia Other CIS Europe USA Other Total

Assets Cash and cash equivalents 986,165 11,420 588 6,624 9,003 - 1,013,800 Mandatory cash balances with the National Bank of Belarus 30,819 - - - - - 30,819

Due from other banks 3,548 - - 17,436 2,983 - 23,967 Loans and advances to customers 2,349,268 - - - - - 2,349,268

Investments in debt securities 104,368 - - - - - 104,368

Derivative financial assets 102 550 - - - - 652 Property, equipment and intangible assets 92,258 - - - - - 92,258 Other financial assets 18,138 - - - - - 18,138 Other assets 9,260 - - - - - 9,260 Total assets 3,593,926 11,970 588 24,060 11,986 - 3,642,530 Liabilities Due to other banks 71,715 13,605 1,311 76,048 - - 162,679 Customer accounts 2,314,870 32,072 6,724 98,837 1,999 29,928 2,484,430 Debt securities in issue 211,112 - - - - - 211,112 Derivative financial liabilities 101 2,782 - 4,051 - - 6,934 Current income tax liability 8,087 - - - - - 8,087 Deferred income tax liability 51,132 - - - - - 51,132 Other financial liabilities 33,838 - - - - - 33,838 Other liabilities 30,364 - - - - - 30,364 Total liabilities 2,721,219 48,459 8,035 178,936 1,999 29,928 2,988,576 Net position 872,707 (36,489) (7,447) (154,876) 9,987 (29,928) 653,954 Credit related commitments, not secured by cash, net of provision 413,859 - - - - - 413,859

Assets, liabilities and credit related commitments have generally been based on the country in which the counterparty is located. Cash on hand have been allocated based on the country in which they are physically held.


86

The geographical concentration of the Bank’s assets and liabilities at 31 December 2019 is set out below:

In thousands of Belarusian roubles Belarus Russia Other CIS Europe USA Other Total

Assets Cash and cash equivalents 500,841 5,718 752 7,126 2,445 - 516,882 Mandatory cash balances with the National Bank of Belarus 24,167 - - - - - 24,167

Due from other banks 248,303 16,829 - 126,221 2,422 - 393,775 Loans and advances to customers 1,805,777 - - - - - 1,805,777

Investments in debt securities 134,414 - - - - - 134,414

Derivative financial assets 1,192 623 - 63 - - 1,878 Property, equipment and intangible assets 80,899 - - - - - 80,899 Other financial assets 9,997 - - - - - 9,997 Other assets 12,107 - - - - - 12,107 Total assets 2,817,697 23,170 752 133,410 4,867 - 2,979,896 Liabilities Due to other banks 35,261 1,974 29 155,609 - - 192,873 Customer accounts 1,886,260 35,873 2,811 82,733 245 102,849 2,110,771 Debt securities in issue 141,134 - - - - - 141,134 Derivative financial liabilities 8 2,894 - 314 - - 3,216 Current income tax liability 6,039 - - - - - 6,039 Deferred income tax liability 23,217 - - - - - 23,217 Other financial liabilities 26,327 - - - - - 26,327 Other liabilities 27,546 - - - - - 27,546 Total liabilities 2,145,792 40,741 2,840 238,656 245 102,849 2,531,123 Net position 671,905 (17,571) (2,088) (105,246) 4,622 (102,849) 448,773 Credit related commitments, not secured by cash, net of provision 394,578 - - - - - 394,578

Liquidity risk. Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Bank is exposed to daily calls on its available cash resources from overnight deposits, current accounts, maturing deposits, loan draw-downs, guarantees and from margin and other calls on cash-settled derivative instruments. The Bank does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. Liquidity risk is managed by Assets and Liability Management Committee of the Bank.

The Bank seeks to maintain a stable funding base primarily consisting of amounts due to other banks, corporate and retail customer deposits and debt securities. The Bank invests the funds in diversified portfolios of liquid assets. The target capital structure of assets and liabilities is assigned and the limits on attraction of resources from one creditor is fixed at the rate of USD 14,000 thousand, in order to be able to respond quickly and smoothly to unforeseen liquidity requirements.


87

The Bank’s Treasury Department requires consideration of the level of liquid assets necessary to settle obligations as they fall due; maintaining access to a range of funding sources; maintaining funding contingency plans; and monitoring liquidity ratios against regulatory requirements. The Financial Department calculates liquidity ratios on a daily basis. These ratios are:

- Liquidity Coverage Ratio (LCR), which is calculated to ensure that the Bank maintains an adequate level of unencumbered, high-quality liquid assets that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario;

- Net Stable Funding Ratio (NSFR), which establishes a minimum acceptable amount of stable funding based on the liquidity characteristics of the Bank’s assets and activities over a one year time horizon.

The Treasury Department receives information about the liquidity profile of the financial assets and liabilities. The Treasury Department then provides for an adequate portfolio of short-term liquid assets, largely made up of short-term liquid securities, deposits with banks and other inter-bank facilities, to ensure that sufficient liquidity is maintained within the Bank.

The daily liquidity position is monitored by the Treasury Department. Regular liquidity stress testing, under a variety of scenarios covering both normal and more severe market conditions, controlling maintenance of management limits on liquidity risk, is performed by the Risk Management Department.

The Treasury Department manages the portfolio of securities.

The table below shows liabilities at 31 December 2020 by their remaining contractual maturity. The amounts of liabilities disclosed in the maturity table are the contractual undiscounted cash flows, gross credit related commitments, and contractual amounts to be exchanged under a gross settled currency swaps. Such undiscounted cash flows differ from the amount included in the statement of financial position because the amount in the statement of financial position is based on discounted cash flows. Financial derivatives are included at the contractual amounts to be paid or received, unless the Bank expects to close the derivative position before its maturity date in which case the derivatives are included based on the expected cash flows.

When the amount payable is not fixed, the amount disclosed is determined by reference to the conditions existing at the end of the reporting period. Foreign currency payments are translated using the spot exchange rate at the end of the reporting period.

The maturity analysis of undiscounted cash flows of financial instruments at 31 December 2020 is as follows:


Demand and less than 1 month

From 1 to 6 months

From 6 to 12 months

More than 1 year Total

Liabilities Due to other banks 12,921 80,100 30,010 47,629 170,660 Customer accounts 2,034,324 219,567 191,944 93,070 2,538,905 Debt securities in issue 10,495 31,200 51,107 144,855 237,657 Gross settled swaps and forwards: - inflow - - - - - - outflows (1,609) (5,624) - - (7,233) Other financial liabilities 16,630 3,047 2,859 8,978 31,514 - lease liabilities 471 2,350 2,757 7,556 13,134 - other 16,159 697 102 1,422 18,380 Guarantees issued 397,041 - - - 397,041 Import letters of credit, not secured by cash 19,142 - - - 19,142 Total potential future payments for financial obligations 2,488,944 328,290 275,920 294,532 3,387,686


88

Liquidity requirements to support calls under guarantees and standby letters of credit are considerably less than the amount of the commitment disclosed in the above maturity analysis, because the Bank does not generally expect the third party to draw funds under the agreement.

The maturity analysis of undiscounted cash flows of financial instruments at 31 December 2019 is as follows:



From 1 to 6 months

From 6 to 12 months

More than 1 year Total

Liabilities Due to other banks 44,007 46,968 42,867 66,815 200,657 Customer accounts 1,419,058 334,056 178,374 207,351 2,138,839 Debt securities in issue 3,888 13,555 8,948 114,746 141,137 Gross settled swaps and forwards: - inflow - - - - - - outflows (711) (2,785) - - (3,496) Other financial liabilities 10,241 2,352 1,931 7,205 21,729 - lease liabilities 325 1,625 1,917 7,185 11,052 - other 9,916 727 14 20 10,677 Guarantees issued 372,566 - - - 372,566 Import letters of credit, not secured by cash 27,031 - - - 27,031 Total potential future payments for financial obligations 1,876,080 394,146 232,120 396,117 2,898,463

Payments in respect of gross settled forwards will be accompanied by related cash inflows. Customer accounts are classified in the above analysis based on contractual maturities. However, in accordance with Belarusian Banking Code, individuals have a right to withdraw their deposits prior to maturity.

The Bank does not use the above maturity analysis based on undiscounted contractual maturities of liabilities to manage liquidity. Instead, the Bank’s Treasury monitors contractual maturities and the resulting expected liquidity gap.


89

The following table represents analysis of assets and liabilities as at 31 December 2020 by their contractual maturities as determined by the Bank:



From 1 to 6 months

From 6 to 12 months

More than 1 year


Assets Cash and cash equivalents 1,013,800 - - - - 1,013,800 Mandatory cash balances with the National Bank of Belarus - - - - 30,819 30,819

Due from other banks 20,604 - - - 3,363 23,967 Loans and advances to customers 266,943 964,317 283,954 834,054 - 2,349,268 Investments in debt securities - - - 104,368 - 104,368 Derivative financial assets 117 535 - - - 652 Premises, equipment and intangible assets - - - - 92,258 92,258

Other financial assets 17,907 192 - 39 - 18,138 Other assets 3,893 2,802 273 82 2,210 9,260 Total assets 1,323,264 967,846 284,227 938,543 128,650 3,642,530 Liabilities Due to other banks 12,515 78,388 28,932 42,844 - 162,679 Customer accounts 2,010,104 200,467 183,606 90,253 - 2,484,430 Debt securities in issue 10,490 30,141 47,507 122,974 - 211,112 Derivative financial liabilities 1,605 5,329 - - - 6,934 Current income tax liability 8,087 - - - - 8,087 Deferred income tax liability - - - - 51,132 51,132 Other financial liabilities 18,953 3,047 2,859 8,979 - 33,838 - lease liabilities 487 2,402 2,823 8,965 - 14,677 - other 18,466 645 36 14 - 19,161 Other liabilities 12,699 5,819 5,932 5,861 53 30,364 Total liabilities 2,074,453 323,191 268,836 270,911 51,185 2,988,576 Net expected liquidity gap (751,189) 644,655 15,391 667,632 77,465 653,954 Cumulative expected liquidity gap (751,189) (106,534) (91,143) 576,489 653,954

Significant mismatch in the liquidity position in category “Demand and less than 1 month” as of 31 December 2020 is caused by significant portion of customer accounts classified into this category. Bank’s management believes that in spite of a substantial portion of customer accounts being in this category, diversification of these deposits by number and type of depositors, and the past experience of the Bank would indicate that these customer accounts provide a long-term and stable source of funding for the Bank. The Bank’s management believes that the Bank will be able to attract sufficient interbank borrowings to finance potential customer short-term funds withdrawal. The Bank has positive cumulative expected liquidity gap for all other maturity periods.


90

The following table represents analysis of assets and liabilities as at 31 December 2019 by their contractual maturities as determined by the Bank:



From 1 to 6 months

From 6 to 12 months

More than 1 year


Assets Cash and cash equivalents 516,882 - - - - 516,882 Mandatory cash balances with the National Bank of Belarus - - - - 24,167 24,167

Due from other banks 391,043 - - - 2,732 393,775 Loans and advances to customers 230,905 748,866 182,695 643,311 - 1,805,777 Investments in debt securities 21,783 49,986 - 62,645 - 134,414 Derivative financial assets 1,427 451 - - - 1,878 Premises, equipment and intangible assets - - - - 80,899 80,899

Other financial assets 9,817 158 1 21 - 9,997 Other assets 7,143 2,270 206 152 2,336 12,107 Total assets 1,179,000 801,731 182,902 706,129 110,134 2,979,896 Liabilities Due to other banks 43,590 45,322 41,220 62,741 - 192,873 Customer accounts 1,423,504 320,571 171,097 195,599 - 2,110,771 Debt securities in issue 3,885 13,555 8,948 114,746 - 141,134 Derivative financial liabilities 672 2,544 - - - 3,216 Current income tax liability 6,039 - - - - 6,039 Deferred income tax liability - - - - 23,217 23,217 Other financial liabilities 15,259 2,336 1,918 6,814 - 26,327 - lease liabilities 324 1,609 1,904 6,795 - 10,632 - other 14,935 727 14 19 - 15,695 Other liabilities 8,272 5,727 8,218 5,250 79 27,546 Total liabilities 1,501,221 390,055 231,401 385,150 23,296 2,531,123 Net expected liquidity gap (322,221) 411,676 (48,499) 320,979 86,838 448,773 Cumulative expected liquidity gap (322,221) 89,455 40,956 361,935 448,773

Significant mismatch in the liquidity position in category “Demand and less than 1 month” as of 31 December 2019 is caused by significant portion of customer accounts classified into this category. Bank’s management believes that in spite of a substantial portion of customer accounts being in this category, diversification of these deposits by number and type of depositors, and the past experience of the Bank would indicate that these customer accounts provide a long-term and stable source of funding for the Bank. The Bank’s management believes that the Bank will be able to attract sufficient interbank borrowings to finance potential customer short-term funds withdrawal. The Bank has positive cumulative expected liquidity gap for all other maturity periods.

The matching and/or controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Bank. It is unusual for banks ever to be completely matched since business transacted is often of an uncertain term and of different types. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the Bank and its exposure to changes in interest and exchange rates.


91

Operational risk. The Bank reviews operational risk by conducting risk self-assessment and control procedures, development and monitoring the Key Risk Indicators (KRI) of the guidelines for the Bank’s activities, by scenario analysis of operational risks and collection of operational incident data. The senior executives of all Bank departments provide the Department of Risk Management with information about operational risks. The Risk Management Department performs an analysis of operating risk accidents and takes part in developing measures to prevent operating risk accidents. Information on operational risk management is reviewed on a monthly basis by a specially established Operational Risk Committee and submitted quarterly to the Management Board.

28 Management of Capital

The Bank’s objectives when managing capital are (i) to comply with the capital requirements set by the National Bank of Belarus, (ii) to safeguard the Bank’s ability to continue as a going concern and (iii) to maintain a sufficient capital base to achieve a capital adequacy ratio based on the Basel Accord of at least 8%. Compliance with capital adequacy ratios set by the National Bank of Belarus is monitored monthly, with reports outlining their calculation reviewed and signed by the Bank’s Chief Executive Officer. Other objectives of capital management are evaluated on a regular basis.

Under the current capital requirements set by the National Bank of Belarus, banks have to maintain a ratio of regulatory capital to risk weighted assets (“statutory capital ratio”) above a prescribed minimum level (10%; including conservation buffer – 12.0%). Regulatory capital is based on the Bank’s reports prepared under Belarusian accounting standards and comprises:


2020 31 December

2019

Net assets under Belarusian GAAP 511,422 390,432 Less intangible assets (16,075) (20,988) Less borrowings granted - (1) Less income accrued in 2020 - either overdue or not received after 30 days from the accrual date (2,593) -

Less income accrued in 2019 - either overdue or not received after 30 days from the accrual date - (2,471)

Less income accrued in the previous years - either overdue or not, but not yet received (6) (4)

Total regulatory capital 492,748 366,968

The minimal level of regulatory capital established by the National Bank of Belarus as at 31 December 2020 amounts to BYN 58,100 thousand (2019: BYN 57,410 thousand).

The Bank’s management also monitors capital adequacy levels calculated in accordance with the requirements of the Basel Accord, as defined in the International Convergence of Capital Measurement and Capital Standards (updated April 1998) and Amendment to the Capital Accord to incorporate market risks (updated November 2005), commonly known as Basel I. The composition of the Bank’s capital calculated in accordance with Basel Accord is as follows:

In thousands of Belarusian roubles 2020 2019

Tier 1 capital Share capital 151,061 151,061 Retained earnings 483,610 283,971 Total tier 1 capital 634,671 435,032 Tier 2 capital Revaluation surplus for buildings and construction in progress 19,283 13,741 Total tier 2 capital 19,283 13,741

Total capital per Basel I 653,954 448,773

Capital Ratios: Tier 1 capital 15.6% 14.9% Total capital 16.1% 15.3%

https://www.multitran.ru/c/m.exe?t=7209175_1_2&ifp=1&s1=conservation%20buffer


92

The Bank has complied with the above mentioned externally imposed capital requirements as of 31 December 2020 and 2019 and over the reporting periods.

29 Contingencies and Commitments

Legal proceedings. From time to time and in the normal course of business, claims against the Bank may be received. On the basis of its own estimates and internal professional advice, management is of the opinion that no material losses will be incurred in respect of claims, and accordingly no provision has been made in these financial statements.

Tax contingencies. Belarusian tax legislation which was enacted or substantively enacted at the end of the reporting period, is subject to varying interpretations when being applied to the transactions and activities of the Bank. Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be successfully challenged by relevant tax authorities. Fiscal periods remain open to review by the authorities in respect of taxes for indefinite period. The Bank's management believes that the Bank applies tax accounting approaches that will be accepted by tax authorities as fully compliant with valid tax legislation of the Republic of Belarus.

As Belarusian tax legislation does not provide definitive guidance in certain areas, the Bank adopts, from time to time, interpretations of such uncertain areas that reduce the overall tax rate of the Bank. While management currently estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible risk that outflow of resources will be required should such tax positions and interpretations be challenged by the relevant tax authorities. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Bank.

Capital expenditure commitments.

At 31 December 2020 and 2019, the Bank has no material contractual capital expenditure commitments in respect of premises and equipment and in respect of software and other intangible assets.

The Bank has already allocated the necessary resources in respect of these commitments. The Bank believes that future net income and funding will be sufficient to cover this and any similar such commitments.

Future cash outflows related to leases

Where the Bank is a lessee, the future cash outflows, to which the Bank is potentially exposed and that are not reflected in the lease liabilities at 31 December 2020, relate mainly to leases of low-value assets; the rent expense recorded for such leases in 2020 is BYN 995 thousand (2019: BYN 829 thousand).

Compliance with covenants. The Bank complies with financial covenants in respect of its borrowings as of 31 December 2020 and 2019 and over the reporting periods.

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 or cash deposits and, therefore, carry 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, if the unused amounts were to be drawn down. However, the likely amount of loss is less than the total unused commitments since all Bank’s commitments to extend credit can be revocable without a material adverse change in the borrower performance. Outstanding credit related commitments are as follows:


93

In thousands of Belarusian roubles Note 2020 2019 Guarantees issued 16 397,041 372,566 Import letters of credit secured by cash and non-risk bearing 16,14 31,600 948

Import letters of credit, not secured by cash 16 19,143 27,031 Total credit related commitments, gross 447,784 400,545

Less: Provision for credit related commitments 16 (2,324) (5,019) Total credit related commitments, net of provision 445,460 395,526

The total outstanding contractual amount of letters of credit, and guarantees does not necessarily represent future cash requirements, as these financial instruments may expire or terminate without being funded.

An analysis of credit related commitments by credit quality based on credit risk grades at 31 December 2020 is as follows.


Stage 1 (12-months

ECL)


for SICR)


Total

Issued financial guarantees

Rating A 47,093 - - 47,093 Rating A - 166,549 819 - 167,368 Rating B 73,755 1,448 - 75,203 Rating B - 4,423 - - 4,423 Rating C 13,762 - 109 13,871 Rating C - 84,735 - - 84,735 Rating D 1,136 - - 1,136 Rating E 1,649 - 8 1,657 Unrated 857 - - 857 Default - - 698 698

Total financial guarantees, gross 393,959 2,267 815 397,041

Provision for financial guarantees (1,804) (5) (459) (2,268)

Total financial guarantees, net of provision 392,155 2,262 356 394,773

Import letters of credit Rating A 1,940 - - 1,940 Rating A - 37,212 - - 37,212 Rating B 6,914 - - 6,914 Rating B - 25 - - 25 Rating C 127 - - 127 Rating C - 2,428 - - 2,428 Rating D - - - - Rating E 1,595 - - 1,595 Unrated 502 - - 502 Default - - - - Total import letters of credit, gross 50,743 - - 50,743 Provision for import letters of credit (56) - - (56) Total import letters of credit, net of provision

50,687 - - 50,687


94

An analysis of credit related commitments by credit quality based on credit risk grades at 31 December 2019 is as follows.


Stage 1 (12-months

ECL)


for SICR)

Stage 3 (lifetime ECL for credit im-

paired) Total

Issued financial guarantees Rating A 179,149 4,017 - 183,166 Rating A - 24,782 26,134 - 50,916 Rating B 7,959 2,558 - 10,517 Rating B - 8,867 2,532 - 11,399 Rating C 8,105 - - 8,105 Rating C - 94,534 942 - 95,476 Rating D 604 1,747 109 2,460 Rating E 3,235 2,115 - 5,350 Unrated 4,479 - - 4,479 Default - - 698 698 Total financial guarantees, gross 331,714 40,045 807 372,566 Provision for financial guarantees (4,140) (353) (458) (4,951) Total financial guarantees, net of provision 327,574 39,692 349 367,615 Import letters of credit Rating A 5,809 - - 5,809 Rating A - 16,386 - - 16,386 Rating B 596 - - 596 Rating B - - - - - Rating C 105 - - 105 Rating C - - - - - Rating D 326 - - 326 Rating E 4,434 - - 4,434 Unrated 323 - - 323 Default - - - - Total import letters of credit, gross 27,979 - - 27,979

Provision for import letters of credit (68) - - (68) Total import letters of credit, net of provision

27,911 - - 27,911

Movement in the provision for losses on credit related commitments were as follows:

In thousands of Belarusian roubles 2020 2019 Provision for losses on credit related commitments at 1 January 5,019 1,219 Provision for credit related commitments during the year (2,815) 3,805 Currency translation differences 120 (5) Provision for losses on credit related commitments at 31 December 2,324 5,019


95

Credit related commitments are denominated in currencies as follows: In thousands of Belarusian roubles 2020 2019 Euro 152,670 183,922 Belarusian roubles 64,866 62,931 US Dollars 65,097 51,315 Russian roubles 163,591 102,348 Other 1,560 29 Total credit related commitments, gross 447,784 400,545

The fair value of credit commitments equals the carrying amount.

Assets pledged and restricted. The Bank had no assets pledged as collateral except for the following:

At 31 December 2020, due from other banks balances of BYN 3,363 thousand (2019: BYN 2,732 thousand) are placed as a cover for letters of credit and international payment cards transactions (Note 7).

In addition, mandatory cash balances with the National Bank of Belarus of BYN 30,819 thousand (2019: BYN 24,167 thousand) represent mandatory reserve deposits which are not available to finance the Bank's day to day operations.

30 Derivative Financial Instruments

The table below sets out fair values, at the end of the reporting period, of currencies receivable or payable under foreign exchange forward and swap contracts entered into by the Bank. The table reflects gross positions before the netting of any counterparty positions (and payments) and covers the contracts with settlement dates after the end of the respective reporting period. The contracts are short term in nature:

Note 31 December 2020 31 December 2019


Contracts with positive

fair value

Contracts with negative

fair value

Contracts with positive

fair value

Contracts with negative

fair value Foreign exchange forwards and swaps: fair values, at the end of the reporting period, of

- USD receivable on settlement (+) 73,536 344,129 242,741 266,337 - USD payable on settlement (-) (31,088) (732) (113,428) (9,395) - Euros receivable on settlement (+) 20,725 2,152 77,715 18,471 - Euros payable on settlement (-) (1,608) (273,558) (225,920) (210,248) - Russian roubles receivable on settlement (+) 415 731 46,784 -

- Russian roubles payable on settlement (-) (71,899) (88,694) (25,840) (70,166)

- Belarusian roubles receivable on settlement (+) 10,571 9,038 - 1,785

- Belarusian roubles payable on settlement (-) - - - -

- Other currencies receivable on settlement (+) - -

68

-

- Other currencies payable on settlement (-) - - (242) -

Net fair value of foreign exchange forwards and swaps 31 652 (6,934) 1,878 (3,216)


96

Foreign exchange derivative financial instruments entered into by the Bank are generally traded in an over-the-counter market. Derivatives have potentially favourable (assets) or unfavourable (liabilities) conditions as a result of fluctuations in market interest rates, foreign exchange rates or other variables relative to their terms. The aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time.

31 Fair Value Disclosures

Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on observable market data (that is, unobservable inputs). Management applies judgement in categorising financial instruments using the fair value hierarchy. If a fair value measurement uses observable inputs that require significant adjustment, that measurement is a Level 3 measurement. The significance of a valuation input is assessed against the fair value measurement in its entirety.

(a) Fair values of financial instruments carried at amortised cost

Fair values of such instruments as cash and cash equivalents, mandatory cash balances with the National Bank of Belarus, due from other banks, other financial assets, debt securities in issue, other financial liabilities approximate carrying values.

Fair values of financial instruments carried at amortised cost are as follows:

FINANCIAL ASSETS Cash and cash equivalents 1,013,800 1,013,800 516,882 516,882 Mandatory cash balances with the National Bank of Belarus 30,819 30,819 24,167 24,167

Due from other banks 23,967 23,967 393,775 393,775 Loans and advances to customers - Corporate loans 1,596,446 1,595,860 1,169,976 1,171,104 - Loans to small and medium enterprises (SME) 400,433 400,391 264,768 262,883 - Finance lease receivables 51,409 51,276 48,877 49,062 - Corporate bonds classified as loans and receivables 7,288 7,195 33,571 33,565 - Loans to individuals 293,692 283,942 288,585 307,606 Other financial assets 18,138 18,138 9,997 9,997 TOTAL FINANCIAL ASSETS CARRIED AT AMORTISED COST 3,435,992 3,425,388 2,750,598 2,769,041

FINANCIAL LIABILITIES Due to other banks 162,679 162,679 192,873 192,873 Customer accounts 2,484,430 2,485,645 2,110,771 2,112,603 Debt securities in issue 211,112 211,112 141,134 141,134 Other financial liabilities 33,838 33,838 26,327 26,327 TOTAL FINANCIAL LIABILITIES CARRIED AT AMORTISED COST 2,892,059 2,893,274 2,471,105 2,472,937

31 December 2020 31 December 2019 In thousands of Belarusian roubles

Carrying amount Fair value Carrying

amount Fair value


97

(b) Recurring fair value measurements Recurring fair value measurements are those that the accounting standards require or permit in the statement of financial position at the end of each reporting period. The level in the fair value hierarchy into which the recurring fair value measurements are categorised are as follows:

Management applies judgement in categorising financial instruments using the fair value hierarchy. If a fair value measurement uses observable inputs that require significant adjustment, that measurement is a Level 3 measurement. The significance of a valuation input is assessed against the fair value measurement in its entirety.

As at 31 December 2020 and 2019 investments in debt securities are categorised under the third level of fair value hierarchy since its fair value is assessed with significant non-observable inputs in the market (Level 3).

31 December 2020 31 December 2019 In thousands of Belarusian roubles Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Assets AT FAIR VALUE FINANCIAL Assets

Investments in debt securities - - 104,368 104,368 - - 134,414 134,414

Derivative financial assets - - 652 652 - - 1,878 1,878

NON-FINANCIAL ASSETS

Premises - - 44,212 44,212 - - 38,239 38,239 Total ASSETS RECURRING FAIR VALUE MEASUREMENTS - - 149,232 149,232 - - 174,531 174,531

LIABILITIES CARRIED AT FAIR VALUE FINANCIAL LIABILITIES

Derivative financial liabilities - - 6,934 6,934 - - 3,216 3,216

Total LIABILITIES RECURRING FAIR VALUE MEASUREMENTS - - 6,934 6,934 - - 3,216 3,216


98

(c) Reconciliation of movements in instruments belonging to level 3 of the fair value hierarchy

A reconciliation of movements in Level 3 of the fair value hierarchy by class of instruments for the year ended 31 December 2020 and 2019 is as follows:

Gains and losses on derivatives are presented separately in profit or loss for the year.

The sensitivity to valuation assumptions disclosed in the table above represents by how much the fair value of derivative financial instruments and investments in debt securities could increase or decrease had management used reasonably possible alternative valuation assumptions that are not based on observable market data, primarily the credit risk premium above the risk free discount rate in the discounted cash flow valuation technique applied by the Bank.

2020 2019


Investments in debt

securities

Derivative financial

assets

Derivative financial liabilities

Investment

securities available

for sale

Derivative financial

assets

Derivative financial liabilities

Fair value at 1 January 134,414 1,878 3,216 88,597 4,007 1,666

Gains or losses recognised in profit or loss for the year (12) 4,971 (29,741)

(2) (1,278) 3,480 Acquisition 111,149 - 33,459 6,658,218 - - Disposal (141,183) (6,197) - (6,612,399) (851) (1,930) Fair value at 31 December 104,368 652 6,934 134,414 1,878 3,216 Cumulative revaluation gains less losses recognised in profit or loss for the current or prior years for assets held at 31 December (12) 4,971 (29,741)

(2) (1,278) 3,480 Sensitivity of fair value at 31 December to reasonably possible changes in assumptions not based on observable market data

Effect on fair value of 2% increase in USD interest rate used to discount future cash flows under derivative (7,817) (122) (1,505)

(4,548) (244) (543) Effect on fair value of 2% increase in EUR interest rate used to discount future cash flows under derivative - 170 988

- 194 311 Effect on fair value of 2% increase in RUR interest rate used to discount future cash flows under derivative - 324 (299)

- (154) (75) Effect on fair value of 2% decrease in BYN interest rate used to discount future cash flows under derivative - 105 (555)

140 (153) (104)


99

(d) Assets and liabilities not measured at fair value but for which fair value is disclosed

Fair values analysed by level in the fair value hierarchy and carrying value of assets not measured at fair value are as follows:


Level 1 fair

value Level 2

fair value Level 3

fair value Carrying

value Level 1

fair value

Level 2 fair

value Level 3

fair value Carrying

value

Fair values analysed by level in the fair value hierarchy and carrying value of liabilities not measured at fair value are as follows:


Level 1 fair

value

Level 2 fair

value

Level 3 fair

value Carrying

value Level 1

fair value

Level 2 fair

value

Level 3 fair

value Carrying

value

FINANCIAL LIABILITIES

Customer accounts - - 2,485,645 2,484,430 - - 2,112,603 2,110,771 TOTAL - - 2,485,645 2,484,430 - - 2,112,603 2,110,771

(e) The methods and assumptions applied in determining fair values

The fair values in level 2 and level 3 of fair value hierarchy were estimated using the discounted cash flows valuation technique, because the quoted market prices were not available. The fair value of floating rate instruments that are not quoted in an active market was estimated to be equal to their carrying amount. The fair value of unquoted fixed interest rate instruments was estimated based on estimated future cash flows expected to be received discounted at current interest rates for new instruments with similar credit risk and remaining maturity.

Level 3 valuations are reviewed on a monthly basis by the Chief financial officer who reports to the Board of Directors on a quarterly basis. The CFO considers the appropriateness of the valuation model inputs, as well as the valuation result using various valuation methods and techniques generally recognised as standard within the financial services industry.


ASSETS Loans and advances to customers

- Corporate loans - - 1,595,860 1,596,446 - - 1,171,104 1,169,976 - Loans to small and medium enterprises (SME) - - 400,391 400,433 - - 262,883 264,768

- Finance lease receivables - - 51,276 51,409 - - 49,062 48,877

- Corporate bonds classified as loans and receivables - - 7,195 7,288 - - 33,565 33,571

- Loans to individuals - - 283,942 293,692 - - 307,606 288,585 TOTAL - - 2,338,664 2,349,268 - - 1,824,220 1,805,777



100

Discount rates used depend on currency, maturity of the instrument and credit risk of the counterparty and were as follows:


Due from other banks US dollar 0% 1% Russian rouble 0% - Euro 0% 1% Belarusian rouble 0% 9%

Loans and advances to customers -Loans to individuals US dollar 10% 11% Russian rouble - - Euro 6% 11% Belarusian rouble 20% 22%

-Loans to legal entities US dollar 6% 6% Russian rouble 10% 11% Euro 5% 5% Belarusian rouble 14% 12%

Due to other banks US dollar 4% 5% Russian rouble 4% 5% Euro 2% 2% Belarusian rouble 8% 5%

Customer accounts - Current/settlement accounts US dollar 0% 0% Russian rouble 0% 0% Euro 0% 0% Belarusian rouble 1% 0%

- Term deposits US dollar 2% 2% Russian rouble 3% 4% Euro 1% 1% Belarusian rouble 14% 10%

Debt securities in issue US dollar 4% 4% Russian rouble 3% - Euro 3% 3% Belarusian rouble 10% 10%


101

32 Presentation of Financial Instruments by Measurement Category

For the purposes of measurement, IFRS 9 “Financial Instruments” classifies financial assets into the following categories: (a) financial assets at FVTPL; (b) debt instruments at FVOCI, (c) equity instruments at FVOCI and (c) financial assets at AC. The following table provides a reconciliation of financial assets with these measurement categories as of 31 December 2020:


AC FVOCI FVTPL Finance

lease recei-

vables Total

ASSETS Cash and cash equivalents 1,013,800 - - - 1,013,800 Mandatory cash balances with the National Bank of Belarus 30,819 - - - 30,819

Due from other banks 23,967 - - - 23,967 Loans and advances to customers Corporate loans 1,596,446 - - - 1,596,446 Loans to small and medium enterprises (SME) 400,433 - - - 400,433 Finance lease receivables - - - 51,409 51,409 Corporate bonds classified as loans and receivables 7,288 - - - 7,288 Loans to individuals 293,692 - - - 293,692 Investments in debt securities - 104,368 - - 104,368 Derivative financial assets - - 652 - 652 Other financial assets 18,138 - - - 18,138 TOTAL FINANCIAL ASSETS 3,384,583 104,368 652 51,409 3,541,012

The following table provides a reconciliation of financial assets with these measurement categories as of 31 December 2019:


AC FVOCI FVTPL Finance

lease recei-

vables Total

ASSETS Cash and cash equivalents 516,882 - - - 516,882 Mandatory cash balances with the National Bank of Belarus 24,167 - - - 24,167

Due from other banks 393,775 - - - 393,775 Loans and advances to customers Corporate loans 1,169,976 - - - 1,169,976 Loans to small and medium enterprises (SME) 264,768 - - - 264,768 Finance lease receivables - - - 48,877 48,877 Corporate bonds classified as loans and receivables 33,571 - - - 33,571 Loans to individuals 288,585 - - - 288,585 Investments in debt securities - 134,414 - - 134,414 Derivative financial assets - - 1,878 - 1,878 Other financial assets 9,997 - - - 9,997 TOTAL FINANCIAL ASSETS 2,701,721 134,414 1,878 48,877 2,886,890

As of 31 December 2020 and 31 December 2019, all of the Bank’s financial liabilities except for derivatives were carried at amortised cost. Derivatives belong to the fair value through profit or loss measurement category.


102

33 Related Party Transactions

Parties are generally considered to be related if the parties are under common control, or one party has the ability to control the other party or can exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.

At 31 December 2020, the outstanding balances with related parties were as follows:

In thousands of Belarusian roubles Parent company Entities under common control

Key management personnel

Cash and cash equivalents - 5,738 - Gross amount of loans and advances to customers and undrawn overdraft facility (contractual interest rate: 5.0 – 11.8%) - 11,487 56 Allowance for impairment of loans and advances to customers at 31 December - 255 1

Derivative financial assets - 550 - Other financial assets 3 - 3 Due to other banks (contractual interest rate: 1.0 - 5.1%) - 4,674 - Customer accounts (contractual interest rate: 0.0 – 14.0%) 180 997 1,168 Derivative financial liabilities - 2,782 - Other financial and non-financial liabilities - (1,177) 8,849

At 31 December 2019, the outstanding balances with related parties were as follows:

In thousands of Belarusian roubles Parent company Entities under common control

Key management personnel

Cash and cash equivalents - 5,138 - Gross amount of loans and advances to customers and undrawn overdraft facility (contractual interest rate: 5.0 – 15%) - 11,783 40 Allowance for impairment of loans and advances to customers at 31 December - 13 1 Derivative financial assets - 619 - Other financial assets 2 - 3 Due to other banks (contractual interest rate: 1.6 - 6.9%) - 26,300 - Customer accounts (contractual interest rate: 0 - 8%) 186 412 4,268 Derivative financial liabilities - 3,169 - Other financial and non-financial liabilities - 3,549 10,793


103

The income and expense items with related parties for 2020 and 2019 were as follows:

2020 2019


Parent company

Entities under

common control

Key manage-

ment per-sonnel

Parent company

Entities under

common control

Key manage-

ment per-sonnel

Interest income - 248 1 - 2,164 7 Interest expense (1) (87) (3) (5) (1,341) (48) Allowance for impairment of loans to customers -

(242) - 429 -

Fee and commission income - 302 7 1 88 8 Fee and commission expense - (217) - - (1,224) - Gains less losses from financial derivatives - (21,540) - - 14,891 - Gains less losses from trading in foreign currencies - (1,355) - - (397) - Other operating income - - - - - - Administrative and other operating expenses - (1) (13,962) (1) (5) (11,870)

The credit commitments with related parties for 2020 and 2019 were as follows:

2020 2019


Parent company

Entities under

common control

Key manage-

ment per-sonnel

Parent company

Entities under

common control

Key manage-

ment per-sonnel

Guarantees issued - 81,962 - - 79,190 - Key management compensation is presented below:

2020 2019

In thousands of Belarusian roubles Expense Accrued liability Expense Accrued

liability Short-term benefits: - Salaries, short-term bonuses and other 4,446 8,848 616 10,793 Post-employment benefits: - State pension and social security costs 667 - 461 - Total 5,113 8,848 1,077 10,793

Short-term bonuses fall due wholly within twelve months after the end of the period in which management rendered the related services.


104

34 Events After the End of the Reporting Period

Based on the results of an unscheduled onsite inspection of the National Bank of the Republic of Belarus in March 2021, the Bank received an Order to rectify the violations. Some violations must be rectified by 1 April 2021, and some others – by 1 July 2021.

On 11 September 2020 the international rating agency Standard & Poor’s changed the outlook for the sovereign long-term credit rating of the Republic of Belarus from Stable to Negative. At the same time, the agency affirmed its long-term and short-term sovereign credit ratings in foreign and local currency at 'B'. As at 31 March 2021, the credit rating of the Republic of Belarus has not changed.

Official exchange rates of Euro and US dollar were 3.1680 BYN and 2.5789 BYN, respectively, as at 1 January 2021. As at 31 March 2021, exchange rates of Euro and US dollar were 3.0809 BYN and 2.6242 BYN, respectively.

As at 1 January 2021, the refinance rate of the National Bank of the Republic of Belarus was 7.75%. A regular meeting on monetary regulation issues was held at the National Bank of the Republic of Belarus on 12 March 2021. Based on its results, it was again decided to keep the refinance rate at the same level of 7.75%. It is expected to remain at the same level until the end of the 1st quarter of year 2021.

CJSC “Alfa-Bank” International Financial Reporting ...

Documents

Transcript of CJSC “Alfa-Bank” International Financial Reporting ...