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APS Bank plc
ANNUAL REPORT &
FINANCIAL STATEMENTS
202 2
TABLE OF CONTENTS
________________________________________________________________________________________
Page
Chairman’s Statement
1
CEO’s Review
3
Board of Directors
7
Executive Management
12
Financial Statements and Other Information
Directors’ Report
16
Remuneration Report
38
Corporate Governance Report
46
Statements of Profit or Loss
61
Statements of Comprehensive Income
62
Statements of Financial Position
63
Statements of Changes in Equity
64
Statements of Cashflows
66
Notes to the Financial Statements
67
Five-Year Summaries
176
Independent Auditor’s Report
182
Our Presence
190
CHAIRMAN’S STATEMENT
__________________________________________________________________________________________
APS Bank plc 1
Welcome
It is a pleasure to be addressing you, our shareholders, through this Annual Report. On behalf of the
Board of Directors and the Management team, I would like to express our thanks and gratitude for the
very strong support shown in our Initial Public Offering (IPO) in June 2022. The strong take-up of the
Bank’s issued share capital reflects the investor communities’ confidence in the APS brand. For this, I
reiterate my thanks.
Backdrop to the year under review
Following Russia’s invasion of Ukraine in February 2022, the global and EU economies were exposed
to a complex set of variables involving an energy crisis with continued stresses in global supply chains
resulting in hikes in prices for many goods and services. Global central banks broke the decade long
experience of a zero-interest rate environment by embarking on interest rate increases in a bid to fight
inflationary pressures which have not been seen in many, many years. The challenge and the main
objective for central banks and for Governments across the globe have been the taming of inflation
without stunting economic growth.
Performance
APS Bank solo performance registered a profit before tax of €28.9 million (versus prior year of €23.7
million) with a Group profit before tax figure of €15.7 million (versus prior year of €24.1 million). The
Bank’s solo performance was dampened by market losses arising out of the Investment activities and
Subsidiaries’ value in the Bank’s books. The dilution in Group profits arises predominantly out of
unrealised investment losses with minimal credit losses experienced. Expected Credit Losses relating
to the Bank’s lending activity in its widest sense, remain unremarkable. The Chief Executive Officer’s
(CEO) report will address the Bank’s performance in more detail. The Bank’s operations will contribute
circa € 10 million in tax payments to the Inland Revenue.
The Bank’s capital position was strengthened by the IPO in June 2022. The Bank’s current level of
capital is strong with a Tier 1 capital of 15.2% (versus prior year of 12.8%) and a Total Regulatory Capital
of €284.1 million up on prior year of €231.3 million. The Board of Directors believes that the Bank's
return on average equity of 8.3% for 2022, up from 7.7% in 2021 is a result that evidences the strength
and sustainability of a robust business model that permits us to grow our core business and support
our published dividend policy.
Apart from the financial results reported, the Bank’s non-Financial performance also continues to be a
very strong one, with sustained touchpoints with society in general, and more specifically through the
established annual event, the Malta Sustainability Forum. The Bank’s extensive Corporate Social
Responsibility (CSR) activities will be reported elsewhere in this Annual Financial Statements report.
The Bank’s commitment to support all cohorts of our society will continue to be a hallmark of our brand.
Rewarding Shareholders
The Board is recommending a gross dividend to shareholders of €9.8 million up from €4.6 million in
2021 equating to a 2022 dividend per share of 2.68 €cents gross or 1.74 €cents net per share. We firmly
believe that shareholders need to participate in the success achieved by the Bank. This dividend
distribution reflects the strong performance of the Bank despite the many challenges faced in both
local and international economic contexts. All regulatory approvals for the payment of this scrip
dividend have been obtained.
Corporate governance
The Board of Directors met 17 times during the year under review. Strategic focus, sustainable business
planning and a strong oversight stance continue to be the guiding principles of your Board. Discussions
and decisions are based on a wealth of experience, diversity, competence, and a forward-looking
mindset, enabling the Board to guide, lead and challenge the Management team in the pursuit of a
successful and compliant outcome. The tried and tested corporate governance structure of the Bank
continues to function effectively not only through the Board meetings but also through the seven Board
Committees that are chaired and led by Directors with the contribution of members of the Management
function.
CHAIRMAN’S STATEMENT
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APS Bank plc 2
Corporate governance (continued)
On behalf of the Board, I would like to thank Mr Victor Gusman for his ten-year contribution to the
success of the Bank. During this time, Mr Gusman has added value to the Board’s discussions and
decisions via his considerable business acumen and his knowledge of the Bank. We wish Mr Gusman a
long and happy retirement. I would also like to welcome Mr Joseph Rapa to the Board. Mr Rapa’s
appointment will broaden and deepen expertise in risk management, internal controls and finance
strategy. I am certain that Mr Rapa will add value to the workings of the Board.
Future focus
The latest growth rates for Malta and the Eurozone region published by the International Monetary
Fund forecast growth rates for 2023 of circa 3% and circa 1% respectively. National Debt to Gross
Domestic Product ratio for Malta is forecast at circa 58% for 2022 reaching circa 61% in 2024. The
recent International Monetary Fund recommendations include an exit strategy for Government
subsidies in relation to energy costs via reforms that continue to protect vulnerable members of society.
The environment that we operate in continues to be a challenging one with complex economic and
financial variables, specific demands by the commercial community and the ongoing need to continue
to service and anticipate retail clients’ needs.
The work of the Board is structured on a forward-looking strategic plan that focuses on sustainable
growth in a compliant manner. Refining a resilient business model, putting the customer first and
accelerating transformation are some of our prioritised strategic objectives. The Board’s agenda is
geared to deliver long term value not only for the benefit of shareholders, but in line with the
stakeholders’ philosophy, the Bank targets all constituent parts of our economy, customers, employees,
National economic wellbeing and helping the vulnerable sections of our community. In addition, your
Board will continue to be guided by a robust set of values and principles.
The very recent outcome of the Financial Intelligence Analysis Unit’s (FIAU) report on the Bank’s anti-
money laundering and combating of financial crime structures and systems, which also acknowledges
the ongoing remedial actions made by the Bank over the past years, gives us the confidence that we
are in a very strong position to fully comply with all regulatory requirements in the immediate future.
We cannot discuss future direction without referring to the ongoing and time-critical importance of
Environmental, Social and Governance (ESG) issues that feed into a sustainable business strategy. Your
Board and the Management team are fully aware of our responsibility to aim for carbon neutrality,
acting not only in line with regulations but also beyond these requirements. A fuller detailed report on
the direction of travel that the APS Group is embarked upon can be found in another section of our
Annual Financial Statements Report for this year.
Acknowledgements
2022 has been yet another successful year notwithstanding the challenges that manifested themselves
in all areas that the Bank operates in. I would like to sincerely thank my colleagues on the Board, the
Management team tirelessly led by our CEO, Marcel Cassar, and all the employees for their
contributions. I am very proud to be part of this successful team.
Finally, I would like to sincerely reiterate my thanks to you all, our shareholders, for your support and
backing.
Martin Scicluna
9 March 2023
CEO’S REVIEW
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APS Bank plc 3
What looked like a promising start to the year on the back of a post-pandemic economic rebound soon
came to face a new series of shocks. Prominently, the Russian invasion of Ukraine and the amplified
supply chain challenges in both energy and food prices fuelled inflationary pressures and resultant
interventions from monetary authorities. As geopolitical tensions continued to heighten the risk of a
recession with cross-border implications, central banks started raising interest rates after a decade
characterised by low, zero or below. One can say that the negative global performance of most of 2022,
the worst since the financial crisis of 2008, is stretching the resilience of even the strongest nations.
Such international developments are felt also in our widely open economy through higher costs of
inputs and imported goods, being partly cushioned by Government subsidies which however contribute
to a build-up in public debt. In this difficult environment, Malta is experiencing higher economic growth,
milder inflation and lower unemployment than its EU counterparts, aided in no small way by a stronger
than expected tourism recovery and buoyant property market. The lifting of the FATF grey listing in
June also helped create a more benign outlook for the Maltese economy. But the challenges of
sustainable progress, weighing under demographic and over-development pressures, plus the search
for new segments of economic activity and expanding the human capital capability, are not to be under-
estimated.
Navigating through these choppy waters we again delivered excellent results and the best Bank solo
performance ever. This is thanks to a highly structured and comprehensive business planning process
that looks over a 3-year horizon, rolled over annually to remain responsive to emerging trends and
changes in the business and market environment. Apart from looking at th e financial and operating
performance of 2022, as usual this Review touches briefly on how we tackled key strategic objectives
to deliver these successful results.
Robust operating fundamentals contrasted by investment market turbulence
In 2022, APS Bank plc posted €15.7 million pre-tax profit at Group level (2021: €24.1 million) and €28.9
million pre-tax profit at Bank level (2021: €23.7 million). These contrasting outcomes evince the trend
already emerging clearly in the first half of the year, as global markets were confronted by persistent
economic instability and rising inflationary pressures. Notwithstanding these challenges, the Bank
delivered strong operating results, offset only by the unrealised negative market trends at Group level.
Net interest income remained a key driver of the revenue mix, growing by 17.6% from €55.4 million in
2021 to €65.1 million in 2022.
An overall expansion of the Group’s home finance and commercial loan books, and in the fixed-income
portfolio, were the main contributors to the growth in interest revenue, as spreads on the syndicated
loan book also improved. Interest income grew by 15.5% from €69.1 million in 2021 to €79.9 million in
the year under review. On the other hand, interest expense of €14.8 million increased by 7.2% on the
€13.8 million of 2021, demonstrating the Group’s efficient management of its asset-liability mix and cost
of funding in a period which saw interest rates move higher in years.
Net fee and commission income for the period was €6.9 million, marginally lower than the €7.0 million
in 2021. While the general growth in local and foreign banking activities, card related commissions and
enlarged customer base brought new sources of fee-based banking income, this was offset by
reductions in investment services fees, negatively impacted by the ongoing market volatility. Net gains
on foreign exchange services also increased, from €0.4 million in 2021 to €1.3 million in 2022. In line with
the trend of the first half of the year, albeit at a slower pace in 4Q, the Group’s results from financial
instruments ended in red territory of €10.3 million. This was mainly due to the high economic uncertainty
and instability of financial markets which negatively impacted the investment in APS Funds SICAV,
consolidated at the level of the Group but not mirrored at the level of the Bank.
CEO’S REVIEW
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APS Bank plc 4
Robust operating fundamentals contrasted by investment market turbulence (continued)
Operating expenses for the year grew by 15.9% to €47.0 million compared to €40.6 million in 2021. The
main contributor to the increase is, as expected, ‘employee compensation and benefits’ which grew by
19.4% to €26.1 million (2021: €21.8 million). The Group’s investment in human capital is intensive and
continuous with no stone left unturned to attract and retain the best talent, and to motivate, re-skill and
up-skill staff in the face of a great attrition that has now become a global phenomenon. This is reflected
in higher salaries at all levels, different benefits schemes (including the introduction of an Employee
Share Incentive Plan (ESIP) in 2022) as well as investment in staff training, continuing education and
well-being.
Increases were recorded across the board in other operating overheads, resulting not least from general
inflation; these included regulatory and compliance costs, insurance, security and the ongoing
investment in technology infrastructure, channels and digitisation, seeking the right balance between
more efficiency and more sustainability (ESG/CSR) initiatives. As a result, the Group’s cost-to-income
ratio deteriorated from 64.3% in 2021 to 72.7% in 2022, in large part also due to the revenue drop
resulting from the unrealised deterioration in fair value instruments. Conversely, the Bank’s cost-to-
income ratio improved from 2021’s 64.1% to 61.5% in 2022.
This year too, impairments against expected credit losses resulted in a writeback of €0.3 million,
reflecting the performance of customer loans and advances and the Group’s high credit underwriting
standards and attitude to risk while still growing the book and actively pursuing new business
opportunities.
As at the end of the reporting period, Group total assets stood at €3.11 billion, a year-on-year growth of
11.3% on the €2.79 billion at the end of 2021. Loans and advances to customers grew by 15.1% to €2.22
billion while the fixed income portfolio, held mainly for liquidity and income diversification purposes,
grew by 40.1% to €459.6 million, as improved yield pick-up opportunities were created especially in 3Q
and 4Q of the year. These quarters also saw significant activity on the syndicated loans and trade
finance desks which had an overall very busy year whilst cash and reserves with the Central Bank of
Malta dropped further to close the year at €85.9 million, reflecting active liquidity management and the
Group’s support of Government borrowing programmes. Corresponding to the increase in the Group’s
asset base, amounts owed to customers grew by 11.5% or €278.9 million, to reach €2.71 billion, despite
4Q pressures arising from competing debt instrument issues in the local market.
Total equity amounted to €261.5 million, compared to December 2021’s €220.8 million. As cautiously
anticipated earlier in the year, market movements resulting from rising interest rates have had a direct,
negative impact on reserves (through ‘other comprehensive income’). These corrections, albeit
unrealised and expected to reverse fully over time, were amply compensated by the €66 million equity
capital raised from the successful IPO of June which was hugely oversubscribed within hours of
opening. The same IPO has had the effect of boosting the Bank’s capital adequacy ratio (CAR) and
CET1 ratio to 18.8% and 15.2% respectively by the end of 3Q, a level which was maintained also at year-
end.
CEO’S REVIEW
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APS Bank plc 5
Robust operating fundamentals contrasted by investment market turbulence (continued)
More numbers and statistics can be found in the ‘Financial Statements’ section of the Annual Report
and in the graphics accompanying this Review. This Review does not delve into performance indicators
in any detail, nor does it repeat the information which is now contained in the Directors’ Report and the
Group communicates on a very regular level across the various types of media. But the focus now turns
on three of the carefully formulated strategic objectives for 2022 and touches very briefly on how we
worked to achieve them.
Refining the business model to withstand the resilience test
Being preoccupied with keeping the customer always central to our activities, we embarked on various
initiatives aimed at enriching the relationship by enlarging and improving our product suite. Having
established investment services as a key area of focus for non-banking, low-capital-consuming income
we refined our target cohorts for the offering of our Pension Plans to reflect better the changing country
demographics – albeit with 2022 turning out to be a turbulent year for investors. At the same time, we
maintained our keen interest, and competitive edge, on the social front with the various schemes in
operation, mainly in partnership with Government.
We continued to improve our customer intelligence and data surveys as these are the cornerstone of
our product proposition strategy. Whether traditional offerings like home finance, commercial loans,
deposits or our investment and wealth management recommendations, or new ideas in the
‘sustainability’ space, our products engine continued being refined both in terms of resources, analytics,
intelligence and centralisation of processes. Further strengthening and re-organisation of various
operational units also took place, drawing efficiencies in tasks and procedures. Efforts were intensified
on scaling up channels ranging from the network to Contact Centre which with a 12x7 offering is now
closer to the description of a virtual branch.
Developing corporate culture and embracing new ways of working
At APS Bank, ‘Culture’ is a concept that cuts across the Group and fuses our corporate philosophy into
one uniform, overarching message. It is r ooted in a sense of engagement with our ‘family’ of staff,
customers, business partners and now, thousands of shareholders and bondholders, and transmitted to
the rest of the market as one culture. All of this is also reflected in our marketing, CSR and, increasingly,
CEO’S REVIEW
__________________________________________________________________________________________
APS Bank plc 6
Developing corporate culture and embracing new ways of working (continued)
ESG campaigning. In an environment that can be best described as a ‘war for talent’, we succeeded in
strengthening various functions and positions, supporting growth and bringing in specialist skills while
offering a well-defined vision, excellent career prospects and employment conditions.
We also continued to provide generous programmes to promote the wholesome development of our
employees, including coaching, training and education opportunities, family-friendly work
arrangements and incentives that go beyond your normal reward structures. Amongst the many events
and initiatives, worthy of highlighting are the highly organised Staff Townhalls, regular offsites at various
management levels, professional staff surveys, talks, breakfasts, new website and enhanced social
media presence, while it was heartening to see both the Social Activities and Sports Committees back
to organising well-attended events for staff and their families.
Harvesting innovation and accelerating transformation
The year under review saw the continuation and acceleration of a growing pipeline of projects that are
driving the Bank’s transformation across many areas. Scrupulous analyses, well-curated proposals and
detailed budgets support the millions of euros of investment in projects that range from backbone
technology to more visible, customer interfacing solutions. The flow that drives the Bank’s
transformation programme is continuous: from smaller scale projects for peripheral systems and
initiatives, to upgrades of existing core technologies, to implementations that are mandated by
regulatory authorities or providers of payment systems infrastructures. Further enhancements were
also carried out to ‘myAPS’ permitting customers more convenience and versatility to bank seamlessly
over the internet and smart phones.
The Bank remained at the forefront in the use of virtual technology that now drives the new ways of
working and communicating, responding to the needs of both staff and customers. 2022 also saw
further rolling out of Robotic Process Automation (RPA) in various areas of operations, and more use
of AI such as the introduction of the APS Virtual Agent AVA, all of which facilitate the automation of
routine tasks and improve efficiency. Worthy of note is the momentum now gained at the Marsa
Digitisation and Documentation Centre, which is the nerve centre of the bank-wide digitisation project.
Concluding remarks
In last year’s Review I had remarked that 2022 was to be a landmark year for APS Bank as we planned
to approach the market to raise equity capital for the first time in our 100+ year history. It was a long-
awaited step that we saw not as some trophy but an integral part of the plan to grow the Bank also
through the diversification of its shareholder base. And what a resoundingly successful, record-breaking
IPO it was! If any confirmation was needed about the leading economic and societal role which the
Bank and Group have assumed in recent years, that was it. We believe to have the vision and tenacity
to fulfil the responsibility of not just widening our product range, technology model and serving the
market, but increasingly of being a mainstay of support for Maltese businesses and families.
2022 saw policy makers and central bankers across borders persist in fighting inflation notwithstanding
the implications for the capital markets and potentially, loan quality. In the Eurozone alone, since July
the ECB increased its deposit rate progressively to 2.50% from -0.5%, making it the largest and fastest
increase in rates in the monetary union’s history. As banks adapt their models to the reality of higher
interest rates, we shall manage this new scenario with the concerns of all our customers in mind. Despite
the fair value impacts which such increases have had on our investment portfolios, we remain
comfortable that they are underpinned by sound credit quality and that the slide in valuations will
continue to be clawed back over the coming financial periods. Above all, we look forward to more
exciting times for the APS Group encouraged by strong customer confidence in our model and as
opportunities to gain further market share continue to unfold.
Marcel Cassar
9 March 2023
BOARD OF DIRECTORS
APS Bank plc 7
1. Martin Scicluna
Chairman of the Board, Non-Executive Director
Appointed to the Board in November 2013 and as Chairman in September 2021.
Committee Memberships: Nominations and Remuneration Committee (Chair)
Bio: Martin held a number of managerial appointments in Mid-Med Bank between 1976 and 1996,
following which he joined Midland Bank plc which later become HSBC Bank Malta plc. From 2006 to
2012, he served on several boards for HSBC Malta-regulated subsidiaries and on its Audit Committee.
Since 2012, he has held directorships in asset management and insurance companies licensed in Malta.
Martin has also been actively engaged in various areas of voluntary work for the last 40 years, including
scouting, the preservation of the built and natural environment, and financial services education. He
has served on the Boards of Administration, in a voluntary capacity, of non-governmental organisations
such as Din l-Art Ħelwa (Malta’s ‘National Trust’) and the HSBC Malta Foundation.
Martin is an Associate of the Chartered Institute of Bankers, holds a Diploma in Financial Studies and
was elected Fellow of the Institute of Financial Services in 1999.
Significant Appointments: Chairman – Accredited Insurance (Europe) Limited;
Non-Executive Director - Merck Capital Asset Management
Limited;
Non-Executive Director, Member of Investments Committee -
Thybo Malta Limited.
2. Victor E. Agius
Non-Executive Director
Appointed to the Board in October 2018.
Committee Memberships: Board Credit Committee (Chair)
Environmental, Social and Governance Committee (Chair)
Risk Committee (Member)
Bio: Victor has an extensive career in financial services and investment banking, which includes 23
years at the World Bank Group in Washington DC, three years at the European Bank for Reconstruction
and Development in London and 17 years with the Council of Europe Development Bank in Paris. Past
appointments include senior directorship positions and extensive mission leadership responsibilities to
over 60 countries in Africa, East Asia, Middle East and North Africa, Europe and in Former Soviet
Republics.
Victor graduated with a BA (Hons) in Economics from the University of Malta, holds an MBA from the
Manchester Business School and completed Senior Finance and Banking Executive programmes at the
Wharton School of Finance and at the Stanford Graduate School of Business.
Significant Appointments: None
3. Joseph C. A ttard
Non-Executive Director
Appointed to the Board in July 2018.
Committee Memberships: Technology and Innovation Committee (Chair)
Board Credit Committee (Member)
Audit Committee (Member)
Bio: Joseph has over 25 years of local and international experience in the information and
communication technology (ICT) sector. Between 2007 and 2015, he was the Chief Technology Officer
of Emirates International Telecommunications LLC and subsequently Chief Technical Officer of GO plc
up till 2020. Since 2002, he has regularly lectured at University College London on ICT-related topics.
BOARD OF DIRECTORS
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APS Bank plc 8
3. Joseph C. Attard (continued)
He holds a BSc (Hons) in Electrical Engineering from the University of Malta, an MSc in Operational
Telecommunications from the University of Coventry (UK) and a PhD in Telecommunications
Engineering from University College London (UK).
Significant External Appointments: None
*Rotated out from Risk Committee (Member) on 31 December 2022 and appointed to the Audit
Committee (Member) as from 1 January 2023.
4. Franco A zzopardi
Non-Executive Director
Appointed to the Board in September 2008.
Committee Memberships: Audit Committee (Chair)
Risk Committee (Member)
Technology & Innovation Committee (Member)
Bio: Franco spent 27 years up until 2007 working in public practice, ten years of which were with
Deloitte Haskins and Sells, and later in a firm he co-founded in 1990. He is the former CEO of a leading
logistics company in Malta. He is today a professional director and a registered fellow member of the
UK Institute of Directors. He serves on Boards of Directors, and Audit and Risk Committees of regulated
companies in various sectors including banking, insurance and payments. Franco also personally
contributed towards the development of the Malta Institute of Accountants.
Franco is a Certified Public Accountant with an MSc in Finance from University of Leicester. He is a
Fellow of the Malta Institute of Accountants, having served on the Council from 2007 until 2019. He
was also elected president of the institute for the term 2015-2017.
Significant External Appointments: Former Director and CEO - Express Trailers Limited;
Former Non-Executive Director, Audit Committee (C),
Member of Risk Committee, Member of Investments
Committee - Atlas Insurance PCC Limited;
Non-Executive Director, Audit Committee (C), Member of
Remuneration Committee - RS2 Software plc;
Non-Executive Director, Audit Committee (C) - Grand
Harbour Marina plc.
*Rotated out from the Risk Committee (Member) on 31 December 2022.
5. Juanito Camilleri
Non-Executive Director
Appointed to the Board in September 2021.
Committee Memberships: Risk Committee (Chair)
Audit Committee (Member)
Environmental, Social and Governance Committee (Member)
Bio: Juanito was successively CEO at GO mobile and at Melita Cable plc, then served as Rector of the
University of Malta from 2006 to 2016. Between September 2014 and January 2017, he served as Non-
Executive Director of HSBC Bank Malta plc, and for a period was also Chairman of its Risk Committee.
Over the years, Juanito served as a Non-Executive Director and consultant on the boards of several
public and private entities. Juanito is the Chairman and Resident Professor at the Centre for
Entrepreneurship and Business Incubation at the University of Malta, serves as a Non-Executive
member of the Board of Governors of St Edward’s College and is the owner of Ta’ Betta Wine Estates
and St Anne’s Clinic.
BOARD OF DIRECTORS
__________________________________________________________________________________________
APS Bank plc 9
5. Juanito Camilleri (continued)
He holds a BSc (Hons) in Computer Science from the University of Kent at Canterbury and a PhD in
Theoretical Computer Science from the University of Cambridge.
Significant Appointments: Non-Executive Chairman - EPIC Malta Limited;
Chairman, Resident Professor at the Centre for Entrepreneurship and
Business Incubation at the University of Malta;
Board Member – Malta University Innovation Portfolio Limited and
Non-Executive Chairman (of its two subsidiaries) - FLASC BV and
DeNovoCell Limited.
6. L aragh C assar
Senior Non-Executive Director
Appointed to the Board in April 2016 and as Senior Independent Non-Executive Director in October
2021.
Committee Membership: Conduct Committee (Chair)
Nominations & Remuneration Committee (Member)
Bio: Laragh held the role of partner at Camilleri Preziosi between 2009 and 2015, after which she
founded the firm Camilleri Cassar Advocates where she now heads the corporate and commercial
practice group. Throughout her career, Laragh has gained extensive experience in many areas of
practice, with a particular focus on mergers and acquisitions, banking, asset management, capital
markets and corporate law restructuring. She has acted for a significant number of publicly listed
companies, structuring the offering/issuance of equity and non-equity securities as well as
subsequently advising on continuing obligations as listed entities, and is often appointed by the Faculty
of Laws of the University of Malta as supervisor and examiner of MAdv dissertations.
Laragh obtained a degree in law from the University of Malta in 2002 and a Master of Law in Banking
and Finance from the University of London in 2003.
Significant External Appointments: Partner - Camilleri Cassar Advocates;
Non-Executive Director – Hili Properties plc;
Non-Executive Director/Company Secretary – MedservRegis
plc.
7. Alfred DeMarco
Non-Executive Director
Appointed to the Board in April 2016.
Committee Memberships: Audit Committee (Member)
Board Credit Committee (Member)
Conduct Committee (Member)
Bio: Alfred is a central banker by profession with more than 40 years’ experience at the Central Bank
of Malta (CBM). He progressed through senior executive positions at the bank including that of Deputy
General Manager and Director of the Economics and External Relations Division. Alfred was a member
of the European Central Bank (ECB)’s Monetary Policy Committee, representing the CBM, from 2004
to 2015. He was appointed Deputy Governor in April 2010, a position he held until end-March 2015. He
is a member of the Kunsill Finanzjarju Djoceżan.
Alfred is an Associate of the London Institute of Banking and Finance (ACIB) and holds a BSc
Economics from the University of London.
Significant External Appointments: Non-Exec utive Director – Abbey Holdings Limited
Member - Kunsill Finanzjarju Djoceżan, Archdiocese of Malta
BOARD OF DIRECTORS
__________________________________________________________________________________________
APS Bank plc 10
8. Michael Pace Ross
Non-Executive Director
Appointed to the Board in November 2015.
Committee Memberships: Conduct Committee (Member)
Environmental, Social and Governance Committee (Member)
Nominations and Remuneration Committee (Member)
Risk Committee (Member)
Bio: Michael served as Director General of the National Statistics Office for six years, sitting on national
and European committees, including the European Statistical Advisory Committee, prior to his current
appointment as Administrative Secretary of the Archdiocese of Malta. He is a council member of the
Malta Employers Association (MEA). He also sits on the board of Discern, a Church research institute
on the signs of the times, and on the board of the Voluntary Solidarity Fund (Malta). In his capacity
as Administrative Secretary, he sits on the Diocesan Representative Council, the Diocesan Pastoral
Council, and the Diocesan Finance Committee. He is also an associate of the London College of Music.
He was vested as Knight in a papal equestrian order by Cardinal Edwin O’Brien in 2019.
Michael holds a BA (Hons) in Economics and Management and an MBA from the University of Malta.
Significant External Appointments: Administrative Secretary - Archdiocese of Malta;
Non-Executive Director - Amalgamated Investments SICAV
plc;
Non-Executive Director – Beacon Media Group Limited;
Company Secretary - AROM Holdings Limited.
*Appointed on the Nominations and Remuneration Committee on 1 July 2022. Rotated out from the
Risk Committee (Member) on 3 1 December 2022.
9. Joseph Rapa
Non-Executive Director
Appointed to the Board in January 2023.
Committee Memberships: Conduct Committee (Member)
Risk Committee (Member)
Bio: Joseph started his career in 1990 at the Economic Policy Department, Ministry of Finance, Malta.
In 2012, he was appointed Director General, responsible for leading teams providing technical,
economic and financial analysis, including advice to the ministry on macroeconomic management,
fiscal policy and on macroprudential issues. Between March 2013 and May 2022, he served as
Permanent Secretary at the Ministry for Health and was responsible for general management functions
within the ministry, with responsibilities for human resources management, strategic management,
financial budgeting/planning and management, as well as for the exercise of internal control. He
currently carries out duties of oversight over the management of EU funds in Malta, within the Ministry
for the Economy, European Funds and Lands.
Joseph holds a BA (Hons) in Public Administration from the University of Malta, and an MBA from the
Rotterdam School of Management Erasmus University.
Significant Appointments: Member - Kunsill Finanzjarju Djoceżan, Diocese of Gozo.
BOARD OF DIRECTORS
__________________________________________________________________________________________
APS Bank plc 11
Retired Director: Victor Gusman; retired on 31 December 2022.
10. Graziella Bray
Company Secretary
Appointed as Company Secretary in July 2018.
Graziella joined APS Bank in 2006. Over the years, she has performed duties in various areas of law,
regulation and compliance, including providing support to the Board, its subsidiaries and various
committees. In 2021, she was elected fellow of the Chartered Governance Institute of UK & Ireland, as
a Chartered Company Secretary and Governance Professional. She also sits on the Board of Directors
of APS Funds SICAV plc. Graziella lectures in company law, regulation and corporate governance at
the Malta Stock Exchange (MSE) Institute and as a freelance trainer.
Graziella graduated with a Doctor of Laws from the University of Malta in 2004.
EXECUTIVE MANAGEMENT
APS Bank plc 12
1. Chief Executive Officer - Marcel Cassar
Committee Memberships: Executive Committee (Chair)
Management Credit Committee (Chair)
Board Credit Committee
Conduct Committee
Environmental, Social and Governance Committee (Non-Voting)
Risk Committee (Non-Voting)
Bio: Marcel joined the Bank in 2016. His career started in 1987 with Price Waterhouse Malta followed
by MIBA/MFSC, now the MFSA (1991-1996). He was General Manager at Lombard Bank Malta plc (1996-
2004) and First Executive Vice President and Chief Financial Officer at FIMBank plc (2004-2015). He
has been a board member of the Malta Bankers’ Association, including as Chairman (2018-2020, again
since 2022), leading to a seat on the board of the Brussels-based European Banking Federation (EBF).
Marcel is a CPA, a fellow of the Malta Institute of Accountants, and holds an MBA from the University
of Wales and Manchester Business School (1995). He has lectured at FEMA and in the MA Financial
Services course, University of Malta.
2. Chief Risk Officer – Giovanni Barto lotta
Committee Memberships: Compliance Committee (Chair)
Board Credit Committee (Non-Voting)
Conduct Committee
Environmental, Social and Governance Committee (Non-Voting)
Risk Committee (Non-Voting)
Assets & Liabilities Committee
Executive Committee
Management Credit Committee
Bio: Giovanni joined the Bank in 2018. Prior to joining, he spent ten years in London working for major
global investment banks, including Kleinwort Benson, JP Morgan Chase & Co and Bear Stearns
International. He then moved to Malta where he spent 14 years at FIMBank plc, as Executive Vice
President and Global Head of Risk. Giovanni is responsible for leading and overseeing the second line
of defence of the Bank, through the fostering of an appropriate risk culture within the institution and
implementing effective risk management and compliance frameworks, within the boundaries of the risk
appetite set by the Board.
He holds a BA in Economics from SDA Bocconi, University of Milan and is currently a member of the
Council of the Malta Association of Credit Management.
3. Chief People Officer – Raymond Bonnici
Committee Memberships: Executive Committee
Bio: Raymond joined the Bank in 2016 as Head of Human Capital and was appointed to his present role
in June 2020. He started his career in aviation, working for KLM, Swissair and Sabena. Following this
period, he worked at Hilton Hotels International, as Director of Human Resources for Malta. Prior to
joining the Bank, he was Director of Human Resources at Premier Capital plc and was a key element in
setting up the group’s human resources function across the company’s business in six EU Member
States. He currently oversees the sourcing of the Bank's employee talent and the human resource
management functions.
Raymond holds a BA in Youth and Community Studies from the University of Malta.
EXECUTIVE MANAGEMENT
APS Bank plc 13
4. Chief Banking Officer – Anthony Buttigieg
Committee Memberships: Board Credit Committee (Non-Voting)
Risk Committee (Non-Voting)
Compliance Committee
Executive Committee
Management Credit Committee
Bio: Anthony joined the Bank in 2016 as Head of Banking and was appointed to his present role in June
2019. His experience in the banking sector spans 45 years. His career started with Mid-Med Bank, which
later became HSBC Bank (Malta) plc, where he held a number of senior and managerial roles. Anthony
is responsible for the Bank’s commercial business division, retail branches, contact centre and electronic
channels.
Anthony is an Associate of the Institute of Bankers.
5. Chief Operations Officer - Edward Calle ja
Committee Memberships: Board Credit Committee (Voting)
Compliance Committee
Executive Committee
Bio: Edward joined the Bank in 1992 and was appointed to his present role in August 2021. Edward
started his career with Mid-Med Bank in 1981. Since then, he held senior managerial positions in lending,
corporate strategy and risk management. He was responsible for the setting up of the Bank’s lending
function and the centralisation of the key operations through the implementation of a Loans Processing
System in 2009. Edward is responsible for the efficient management of the Bank’s operations, including
the customer profiling unit.
He holds a BA (Hons) in Accountancy from the University of Malta (1990), a Diploma in Management
(2003) and an MBA from Henley Management College, UK (2005). He obtained his warrant as CPA in
1991 and became a Fellow of the Malta Institute of Accountants in 2011.
6. Chief Technology Officer – Jonathan Caruana
Committee Memberships: Technology & Innovation Committee
Executive Committee
Bio: Jonathan joined the Bank in 1999 and was appointed to his present role in November 2016. He held
various senior managerial positions in technology. He was appointed Information Systems Manager in
2008 and Head of Technology in 2015. Jonathan is responsible for both the technology and digital
innovation domains of the Bank.
He holds a BSc (Hons) in Computing from the University of Greenwich and an MSc in Software
Engineering from the University of Hertfordshire.
EXECUTIVE MANAGEMENT
APS Bank plc 14
7. Chief Strategy Officer – Liana DeBattista
Committee Memberships: Environmental, Social and Governance Committee
Executive Committee
Bio: Liana joined the Bank in 2003 and was appointed to her present role in October 2021. She held
various managerial positions across multiple areas, including strategy, internal audit, and marketing,
and was promoted to Head of Strategy & Propositions in 2020. Liana is responsible for business
planning, corporate strategy formulation, product development, research, performance management
and ESG.
Liana has a BSc in Business & Computing (2001) and a BCom (Hons) in Management (2002), both from
the University of Malta, and an MSc in Corporate Finance from the University of Liverpool (2015).
8. Chief Investments Officer – N oel McCarthy
Committee Memberships: Risk Committee (Non-Voting)
Executive Committee
Management Credit Committee
Bio: Noel joined the Bank in 2000 and was appointed to his present role in 2020. Noel has successively
served in a number of senior positions, including as Chief Financial Officer. Noel oversees the Investment
Management and Investment Distribution units, the activities of the subsidiary and affiliated companies
and the Bank’s property portfolio. He also serves as a Director in ReAPS Asset Management Ltd.
Noel holds an MA in Financial Services from the University of Malta. He is a CPA and a Fellow of the
Malta Institute of Accountants.
9. Chief Financial Officer – Ronald Mizzi
Committee Memberships: Risk Committee (Non-Voting)
Technology & Innovation Committee
Assets and Liabilities Committee
Executive Committee
Management Credit Committee
Bio: Ronald joined the Bank in 2020. Prior to this, Ronald was Group Chief Financial Officer at FIMBank
plc having spent his earlier career with parallel engagements with PricewaterhouseCoopers in Malta,
the Channel Islands and New York. Ronald is responsible for leading and maintaining the effective
governance and stewardship of the Bank’s finance, asset-liability management and capital management
programme. He is also responsible for the renovation and facility management of the Bank’s head office
and branch network as well as the security of physical assets.
Ronald holds a BA (Hons) in Accountancy from the University of Malta and a Diploma in VAT
Compliance from the Institute of Indirect Taxation (UK). He is a warranted CPA and holds a Practicing
Certificate in Auditing, both issued by the Accountancy Board in Malta. He is a Fellow of the Malta
Institute of Accountants and sits on the Institute’s Financial Services Committee, Financial Reporting
Committee and Disciplinary Appeals Board.
EXECUTIVE MANAGEMENT
APS Bank plc 15
HEADS OF DEPARTMENTS
Wilhelm Attard - Head of Support; (MC)
Kenneth Azzopardi - Head of Human Capital
Rachael Blackburn - Head of Culture
Cynthia Borg - Head of Financial Crime Compliance & MLRO; (CC); (C)
Elaine Calleja - Head of Career Development
Alexander Camilleri - Head of Operations; (T)
Gilbert Caruana - Head of Finance; (AL)
Daniel Cassar - Head of Digital Transformation; (T)
Angele de Mesquita - Head of Transformation; (T)
Marvin Farrugia - Head of Asset Liability Management; (AL) (CH); MC (NV)
Mario Gauci - Head of Commercial; (B) (NV); (MC) (NV)
Kenneth Genovese - Head of Investment Distribution; (AL)
Gordon Gilford - Head of Electronic Channels; (T)
Dione Stephan Gravino - Head of IT Infrastructure & Operations
Nives Grixti - Head of Legal; (E) (NV); (C); (B) (NV); (CC); (MC) (NV)
Zoltan Horvath - Head of Propositions; (AL)
Marco Micallef - Head of Risk; (R) (NV); (B) (NV); (MC) (NV)
Simon Micallef - Head of Customer Profiling; (CC)
Aaron Mifsud - Head of Retail; (AL); (MC)
Rodney Naudi - Head of Operational Risk and Security Governance; (T)
Josef Portelli - Head of Investment Management; (AL)
Ronald Psaila - Head of Business Solutions
Richard Scerri - Head of Internal Audit
Dorianne Tabone - Head of Regulatory Compliance; (C); (CC)
LEGEND
Membership in Committees
Audit Committee
–
(A)
Nominations and Remunerations
Committee – (N)
Technology and Innovation
Committee – (T)
Risk Committee
–
(R) ESG Committee
–
(E) Executive Committee
–
(EX)
Conduct Committee – (C)
Board Credit Committee – (B)
Compliance Committee – (CC)
Assets-Liabilities Committee – (AL)
Management Credit Committee –
(MC)
Chair – (CH) Non-Voting (NV)
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 16
CONSTITUTION AND PRINCIPAL ACTIVITIES
APS Group (the Group) comprises APS Bank plc (the Bank) and its subsidiaries ReAPS Asset
Management Limited (ReAPS) and the APS Diversified Bond Fund. The Group also has a significant
investment in its associates IVALIFE Insurance Limited (IVALIFE), the APS Regular Income Ethical Fund,
the APS Income Fund and the APS Global Equity Fund.
The Bank is a public limited company. It is licensed by the Malta Financial Services Authority (MFSA)
to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of
the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta). The Bank is also
enrolled in the Tied Insurance Intermediaries List in terms of the Insurance Intermediaries Act (Cap. 487
of the Laws of Malta).
ReAPS is a wholly owned subsidiary of the Bank incorporated in October 2016 as a private limited
liability company. The company is a UCITS fund management company and is licenced by the MFSA
to perform investment management services under the Investment Services Act.
APS Funds SICAV plc was incorporated in January 2008 and is licensed by the MFSA as a collective
investment scheme under the Investment Services Act. The company operates under the Retail UCITS
Scheme and has established four sub-funds: the APS Income Fund, the APS Regular Income Ethical
Fund, and the APS Global Equity Fund being associates of the Group; and the APS Diversified Bond
Fund being subsidiary of the Group.
IVALIFE was incorporated in December 2019 as a private limited liability company and is licenced by
the MFSA to undertake insurance business activities in terms of the Insurance Business Act (Cap. 403
of the Laws of Malta).
SHARE CAPITAL STRUCTURE AND MAJOR SHAREHOLDERS
In the first half of 2022, the Bank embarked on Phase 3 of the Capital Development Plan via an IPO. At
the Annual General Meeting (AGM) held on 28 April 2022, the shareholders approved an increase to
the Bank’s authorised share capital to €125,000,000, divided into 500,000,000 shares of €0.25c each,
and the issuance of 110,000,000 shares and the subsequent listing of the said shares on the Official List
of the MSE. Consequently, on 17 June 2022, the Bank listed its entire shareholding on the MSE. Trading
commenced on 20 June 2022. Following an interim dividend distributed in shares in the second half of
2022, the Bank increased its issued share capital to 366,917,168 shares of €0.25c each. The share capital
consists of one class of ordinary shares, with equal voting rights. Further information on the Bank’s
authorised and issued share capital are disclosed in Note 37 to the financial statements.
The shares are freely transferable on the MSE. However, as part of the IPO, AROM Holdings Limited and
the Diocese of Gozo have undertaken not to offer, sell, grant any option, right or warrant to purchase
or otherwise transfer, assign or dispose of, any of the s hares they held in the Bank on 24 May 2022, for
a period of 24 months from the date when the shares were admitted to listing on the Official List, and
this undertaking shall subsist notwithstanding any provisions of the Companies Act and the
Memorandum and Articles of Association and/or the Capital Markets Rules that would otherwise have
permitted such transfer, assignment or disposal. As an exception to the lock-in, AROM Holdings Limited
and the Diocese of Gozo may transfer, sell, assign or dispose of any of these shares in the Bank where
such transfer, sale, assignment or disposal is made (1) consequent to the enforcement, as a result of
default of the underlying obligation by the pledgor, of a bona fide pledge made to a credit institution
licensed in Malta or holding an equivalent authorisation in an EU member state or EEA state; or (2) in
the context of an internal corporate restructuring exercise of either of the said shareholders, where the
beneficial interest in the relevant shares does not change.
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 17
SHARE CAPITAL STRUCTURE AND MAJOR SHAREHOLDERS (continued)
Following the equity listing, AROM Holdings Limited and the Diocese of Gozo are the two shareholders
with a holding exceeding 5%. The below table provides a comparative overview of the shareholding
held throughout 2022.
No. of shares held
1 January 2022
% holding
1 January 2022
No. of shares held
31 December 2022
% holding
31 December 2022
AROM Holdings
Limited
(wholly owned by the
Archdiocese of Malta)
198,367,765
79.44%
202,339,143
55.15%
Diocese of Gozo
45,449,032
18.00%
46,358,922
12.63%
The following table includes the number of shares held by Directors as at December 2022:
Director
No. of shares
Martin Scicluna
30,601*
Joseph C. Attard
32,131
Laragh Cassar
16,524
Alfred DeMarco
12,240
Victor Gusman
28,051
*held jointly with spouse
All of the ordinary shares in the Bank rank pari passu in all respects, including in terms of voting rights,
participation in dividends and other distributions of profits of the Bank or otherwise.
There are no arrangements currently known to the Bank the operation of which may at a subsequent
date result in a change of control in the Bank.
DIRECTORS, THEIR APPOINTMENT AND POWERS
The Articles of Association specify that a shareholding of ten per cent (10%) of the Bank’s shares having
voting rights shall constitute a ‘qualifying shareholding’, and that a shareholder of the Bank that holds,
or shareholders who among them hold (in the aggregate), a qualifying shareholding, shall be entitled
to appoint one Director by letter in respect of each qualifying shareholding held, in every case subject
to regulatory approval. Consequently, at the last AGM held on 28 April 2022, AROM Holdings Limited
held 79.44% shareholding in the Bank and therefore appointed seven Board Directors, whereas the
Diocese of Gozo held 18% shareholding and therefore appointed one Director. The ninth Director was
appointed by aggregating the remaining shareholding percentages of these two shareholders.
Following the IPO, the two shareholders diluted their shareholding and therefore, currently AROM
Holdings Limited is able to appoint five Directors, the Diocese of Gozo one Director, and the other three
Directors are appointed by a combination of aggregation of remaining shareholding and nomination by
the public float. The provisions relating to the appointment of Directors are found in Articles 102 to 115
of the Bank’s Articles of Association.
The Articles of Association also provide that the largest single shareholder of the Bank (holding at least
twenty-five per cent (25%) of the ordinary issued share capital of the Bank) shall be entitled to appoint
the Chairman of the Board from amongst the Directors appointed or elected to the Board.
The Directors who served during the financial year were:
Martin Scicluna
Victor E. Agius
Joseph C. Attard
Franco Azzopardi
Juanito Camilleri
Laragh Cassar
Alfred DeMarco
Victor Gusman
Michael Pace Ross
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 18
DIRECTORS, THEIR APPOINTMENT AND POWERS (continued)
Mr Victor Gusman retired on 31 December 2022. Mr Joseph Rapa was appointed to office on 1 January
2023. All the above Directors, bar Mr Gusman, continue to serve at the date of approval of the Directors’
Report. Bio notes on these Directors are found on pa ges 7 to 11.
The powers of Directors are provided in Articles 128-136 of the Bank’s Articles of Association. In terms
of Article 19 of the said Articles of Association, the Bank may, acquire any of its own shares in line with
the provisions of the Companies’ Act (Cap 86).
There are no agreements between the Bank and the Directors providing for compensation on
resignation or termination of directorship.
EMPLOYEE SHARE INCENTIVE PLAN (ESIP)
At the 2022 AGM, the shareholders approved the establishment of an ESIP (the Plan) and applicable
rules for the period 2022-2026. By virtue of this Plan, the Board of Directors of the Bank may grant
Shares to Eligible Employees subject to ESIP Rules. The Rules provide the conditions on the share
awards released to Eligible Employees over a three-year period, which are then vested at the Eligible
Employee’s discretion. During the vesting period the eligible employee has no voting rights.
COLLECTIVE AGREEMENT
The Bank’s Collective Agreement regulates redundancies, early termination, resignation or termination
of employees. Further information on the Collective Agreement is found in the Remuneration Report.
There are no further disclosures to make under Capital Markets Rules 5.64
NON-FINANCIAL DISCLOSURES
Directive 2014/95/EU – also referred to as the Non-Financial Reporting Directive (NFRD) – lays down
the rules on disclosure of non-financial and diversity information by certain large companies. The
following are the disclosures hereby made pursuant to this Directive:
1. THE BANK’S BUSINESS MODEL
APS Bank plc is an established Maltese credit institution that provides a comprehensive range of
banking and financial services to its personal and corporate customers. Ever since its foundation in 1910,
its aim has been to always fully connect with customers within local communities, where through the
Bank’s professional network, it has been able to assist customers in realising their financial and
economic ambitions, whether for purchasing their new family home, a new car or saving and investing
for their retirement or other goals.
The Bank provides a wide suite of products and services, ranging from basic deposit accounts, credit
and lending facilities and also investment and retirement services. All of this is delivered to customers
through the Bank’s branch network in Malta and Gozo, which the Bank is continuously investing in to
ensure presence and accessibility in various locations.
All the Bank’s customers are also provided access to banking services digitally through myAPS desktop
and mobile app, making it easy to view and perform transactions through their accounts.
The Bank also participates in Syndicated Lending on an ongoing basis, where across the years, it has
managed to secure participations in facilities arranged by renowned international institutions. Being
there for the community and being able to provide banking services effectively to all strata of society
was always a strategic priority for the Bank. In fact, ongoing effort is dedicated to make sure that
families in need, or those who require dedicated assistance, can be provided with a banking experience
through specific products and services provided by the Bank itself or through collaboration with local
and international entities, such as the Malta Development Bank, the Malta Housing Authority, and the
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 19
1. THE BANK’S BUSINESS MODEL (continued)
European Investment Bank. The Bank’s commitment to the betterment of the communities it serves
also extends to its own core product offering.
Early 2023 saw the launch of the Responsible Lending Policy (RLP), a first for Malta. The purpose of
this policy, which brings together practices already adopted by the Bank for some years, is to provide
clear and transparent assessment criteria for evaluating lending proposals from an ESG perspective.
The Bank’s ESG and Executive Committees have approved the implementation and distribution of the
RLP, which has been articulated in line with European Banking Authority (EBA) Guidelines on Loan
Origination and Monitoring, outlining responsible lending standards across Europe.
2. COMMUNICATING BRAND, PURPOSE AND CORPORATE STRUCTURE
The Culture Department is responsible for the Bank’s brand and marketing, CSR, the voice of the
customer (VOC) and corporate culture change programmes. These four units adopt communication
and brand management strategies, to ensure that internal and external communications are aligned
with the Bank’s purpose and strategic priorities.
Brand and Marketing
The APS Bank brand is a vital medium to communicate the Bank’s vision, mission and values. In 2022,
the Brand & Marketing function focused on further elevating the brand in its communication strategy,
whilst complementing product specific messages.
This was done through the launch of the Bank’s new website offering a simple and intuitive user
experience, the continuation of the Bank’s brand campaign across integrated media channels and
multiple product-specific campaigns – such as the launch of the Bank’s new credit cards and IPO.
The brand messaging was further sustained with the launch of a new Christmas advert focusing on the
true meaning and value of Christmas. This year, the focus was on raising awareness about the stark
reality of different experiences of the festive season, whilst encouraging people to support each other
and come together.
Corporate Social Responsibility Programme
CSR is a critical driver in the successful delivery of the Bank’s strategy and a vehicle to communicate
its brand and corporate values: Excellence, Authenticity, Passion, Inclusiveness and being
Contemporary. The annual CSR Programme is made up of curated events and activities, in addition to
donations and sponsorships, which are selected in alignment with three CSR pillars to support arts and
culture, education and sustainability.
The CSR Programme includes a wide range of activities with a broad appeal to reach different
audiences. APS talks and APS Business talks are lectures open to the public and delivered by experts
with the objective of knowledge-sharing, building awareness and encouraging cross-disciplinary
application of best practice. From the sponsorship of diverse book publications, artistic exhibitions and
performances, restoration projects to collaborations with educational institutions, each CSR activity
demonstrates the Bank’s commitment to sustain and celebrate the community, which it serves.
Two of the Bank’s main CSR initiatives in 2022 included the Malta Sustainability Forum (MSF) and the
APS Summer Festival.
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 20
2. COMMUNICATING BRAND, PURPOSE AND CORPORATE STRUCTURE (continued)
Corporate Social Responsibility Programme (continued)
The MSF was launched by the Bank in 2019 with the objective of providing a platform to raise awareness
on the topic of sustainability and empower citizens in making conscious decisions towards a more
sustainable life. Since its inception, MSF has evolved from an annual, calendar event, to a platform
providing year-round communication and a trusted reference on all aspects of sustainability. In 2022,
MSF adopted the overarching theme ‘Sustain tomorrow, today.’ Three events were delivered: two
online, focusing on carbon neutrality and water security and a third as an in-person conference on the
subject of pension adequacy and sustainability. The conference also saw the launch of the first Pension
Engagement Index commissioned by APS Bank.
The third edition of the APS Summer Festival was held during the last fortnight of July 2022, on campus
at the University of Malta. The Festival was designed in line with the Bank’s vision of being the
community bank in Malta. The multidisciplinary programme of performances promoted diversity in the
line-up of artists, the variety of artistic forms and in the delivery of a festival in a safe and sustainable
way. Following a call for applications, the selected performances catered for varied audiences, from
children of tender age, through to older adults.
Voice of the Customer
The Bank’s vision, mission and values are also engrained in the VOC function as it catalyses its ‘Customer
First’ strategy, ensuring that the voices of the Bank's customers are heard and channelled throughout
the organisation to deliver an optimal experience. Responsible for directly assisting customers who
have feedback or complaints on any point in the customer journey, VOC handles each individual case
through to resolution, ensuring a fair outcome for all concerned.
In the spirit of continuous improvement, VOC collates and shares customer feedback with senior
management and develops and delivers ongoing coaching and training on effective customer support,
across the Bank. VOC coordinates various research initiatives annually to identify ways to optimise the
Bank’s customers' experience. These exercises include mystery shopping, regular customer satisfaction
surveys (CSAT) and focus groups. 2022 saw the expansion of the Bank’s feedback touchpads
throughout the Branch network. The customer sentiment feedback collated from the touchpads is now
displayed as a score on the in-branch digital screens.
Corporate Culture Change Programme
The Corporate Culture Change Management Programme, aims to cultivate the Bank’s corporate culture
as defined in the APS Bank Culture Deck through various activities and strategic corporate culture
communications. The Programme is designed to embed the Bank’s vision, mission and values in the
thinking, behaviour and actions of employees, optimising employee experience and engagement. The
2022 Programme included Executive Breakfasts, #APSlife consumer-graded internal communications
such as the Bank’s in-house podcast, workshops, and talks and presentations for senior and middle
management.
2022 also saw the launch of the annual APS Bank Values Awards where awards were given to
employees who walk the talk on living and breathing the Bank’s values.
Developing an Environmental, S ocial and Governance Strategy (ESG)
The ESG strategy is owned by the Chief Strategy Officer and implemented by a dedicated ESG Unit
which was set up in 2022. Oversight of the strategy is provided to both the ESG Committee and the
Executive Committee.
The ESG Unit, within the Strategy Department, is responsible for formulating and executing the Bank’s
ESG strategy across all its functions. The role encompasses formulating an ESG led growth business
DIRECTORS’ REPORT
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APS Bank plc 21
2. COMMUNICATING BRAND, PURPOSE AND CORPORATE STRUCTURE (continued)
Developing an Environmental, S ocial and Governance Strategy (ESG) (continued)
strategy, mapping the delivery of regulatory ESG reporting as well as leading an ESG engagement with
both internal and external stakeholders of the Bank.
The ESG Unit is responsible to serve as secretariat of the ESG Committee and owns the management
of the ESG action tracker.
The Strategy and Propositions functions are responsible for the integration of ESG-related factors
where required within the Bank’s suite of products and services.
The ESG Unit manages the Bank’s participation and membership of the Malta ESG Alliance (MESGA) of
which APS Bank is a founding member. MESGA was set up in July 2022 by 13 founding members from
various sectors across Malta who are committed to collaborate and work collectively to lead and drive
national ESG goals.
3. CLIMATE CHANGE AND ESG RELAT ED RISKS
Transitioning to a low-carbon and circular economy entails both risks and opportunities for the
economy at large and for financial institutions operating in it, while physical damage caused by climate
change and environmental degradation can also have a significant impact on the real economy and the
financial system. Throughout the years, the focus on sustainability has been growing, resulting in the
need for businesses to act and be part of the solution to pressing environmental and social issues.
The Group recognises the pace of such trends and the need for a Sustainable and Responsible banking
strategy in line with the Group’s Vision and Mission, which is that of being the community bank in Malta.
The Group is committed to continue to support business and economic growth, but mindful of the fact
that existential issues such as climate change need to be prioritised if we are to make meaningful
inroads into the sustainability of the environment we live in, for our lives and that of our descendants.
The Group is aware of its exposure to the ESG risks and is closely following regulatory guidelines,
developments, and supervisory expectations. As such, measures to mitigate its exposure to these risks
form an integral part of the Group’s risk management framework.
Climate and environmental risk drivers can result – in terms of monetary and other impacts – into
traditional financial risk categories, rather than representing a new type of risk, thereby climate-related
financial risk is integrated into the Group’s risk management framework through the management of
the various risk types, including Credit risk, Market risk, Liquidity risk, Operational risk and Reputational
risk. Climate risk drivers can affect the Group’s credit risk through its counterparties, its market risk
through the value of financial assets, and its liquidity risk through its deposits, funding costs and
withdrawal of credit or liquidity lines.
The Responsible Lending Policy sets out, in a clear and transparent manner, the assessment criteria to
be used when evaluating lending proposals from an ESG perspective. In line with the mentioned Policy,
the evaluation of proposals using ESG assessment criteria has the ultimate objective of grading a
borrower and its financing proposal against pre-determined ESG sustainability criteria and metrics.
When evaluating new investment opportunities, Management reviews research reports published by
external credit rating agencies to get a better understanding not only on the financial aspect of the
government or company but also with respect to their ESG criteria.
The Group has in place an Environmental & Social Management Systems (ESMS) Policy. The ESMS
Policy aims to ensure compliance with relevant regulatory requirements, including best practice
Exclusion Lists and Standards to actualise environmental and social directives, laws and regulations.
The Sustainability Risk Policy of the Group outlines its approach to sustainability within its risk
management framework. It applies as standard to all investments and advice in financial products
provided by the Group. This ensures that the sustainability risk profile of the Group is fully aligned with
its risk appetite, whilst providing a clear rationale for investment decisions taken. The Treasury bond
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APS Bank plc 22
3. CLIMATE CHANGE AND ESG RELA TED RISKS (continued)
book is mainly composed of high-quality government and supranational bonds and to a lesser extent
investment grade corporate bonds. Before bonds are purchased, the Treasury Unit reviews research
reports published by external credit rating agencies to get a better understanding not only on the
financial aspect of the government or company but also with respect to their ESG criteria. In line with
the Group’s risk appetite and Treasury Policy, the Treasury Unit takes a conservative stance with
respect to the Treasury bond book, hence market and liquidity risk are mitigated as the exposure to
issuers with a low ESG score is heavily curtailed. ESG is also one of the reputational dimensions
considered in the Reputational Risk Management Matrix as part of the Reputational Risk Policy.
Integrated ESG strategy is an integral part of the Group’s Business Plan 2023-2025.
The Risk Department monitors and reports the Bank’s sectorial exposure periodically and benchmarks
this to ESG-related ratings issued by external credit rating agencies. Local exposures within the lending
portfolio are categorised according to the CO
2
emitted by each sector of economic activity in
producing one unit of Gross Value Added (GVA). The Bank performs an internal adequacy assessment
on the Bank’s capital and liquidity positions, with the results being reported in the Bank’s Internal Capital
Adequacy Assessment Process (ICAAP) and the Internal Liquidity Adequacy Assessment Process
(ILAAP) documents. These processes include an assessment of the Bank’s exposure to ESG risk and
the management thereof, to ensure that the risk is managed within the Bank’s risk appetite and that the
Bank’s capital adequately covers its exposure to such risk. As part of the 2023 ICAAP and ILAAP
documents, the Bank will include a tailored and in-depth review of the potential vulnerabilities resulting
from transition risk through stress testing, as mandated by ECB Guidelines. Through this stress scenario
the Bank will understand and monitor its resilience in the context of stressed macro-economic and
financial conditions. The assessment is performed on the basis of both quantitative and qualitative
analysis and consideration is also given to the changing external and internal conditions and supervisory
expectations.
In 2023 the Group published a report which includes regulatory Pillar 3 disclosures on ESG governed
by Part Eight of the Capital Requirements Regulation (CRR) II No. 2019/876 and in line with the
guidelines published by the EBA on prudential disclosures on ESG risks. This report includes data on
climate-material sectors which show how climate risk drivers may impact the balance sheet and how
these risks are being mitigated. This report is available on the Bank’s website.
4. SOCIAL MATTERS
a) Trade Unions
The Bank recognises the Malta Union of Bank Employees (MUBE) as the sole and exclusive bargaining
agency for the managerial, clerical and non-clerical categories of employees. The Bank’s relationship
with the MUBE has been productive throughout the years, with ongoing communication between both
parties on various topical matters. The current Collective Agreement was for a period of three years
2020-2022 with negotiations concluding for the period 2023-2025.
b) Community Relations
The Bank has over the years supported a number of community projects and initiatives and continues
to engage in more on an ongoing basis. These are generally selected for their significance to a specific
sector of society, such as youth or people with special needs, or to support specific areas of Maltese
culture, such as music or visual arts. The Bank’s philosophy is to create partnerships that are just,
sustainable and of mutual value, and preference is given to umbrella organisations, federations, or
collective interest groups over individual endeavours. Through various direct initiatives, substantial
support is given to charitable, voluntary and community projects, in line with the Bank’s social support
philosophy. The Bank’s employees are encouraged to pursue various activities in voluntary work to take
an active role in matters that are so vital to society at large.
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APS Bank plc 23
4. SOCIAL MATTERS (continued)
b) Community Relations (continued)
The Bank contributes to public education and debate by sponsoring seminars and their proceedings
which expound topical themes of general or specific interest. In this way, it provides opportunities for
the exchange of ideas in a structured and cohesive manner and makes them available to a wider
audience. Occasionally, the Bank also publishes studies which consider critically particular issues
concerning the demographic, economic, social and political networks in the Maltese Islands and in the
European Union.
c) Consumer Relationships
The provision of the Bank’s products and services through both its physical and virtual channels, as well
as the ongoing refinement and modernisation of its internal processes lend towards the Bank’s ultimate
objective; that of providing excellent levels of customer experience and service.
The Bank continues to devote increasing attention and resource towards ensuring that its customers
feel comfortable and confident in engaging with the Bank through several physical and virtual
interactive spaces.
Significant investment has gone into upgrading the Bank’s network of Retail branches, making them
more modern in design and experience for its customers and colleagues alike. Branches are now being
equipped with improved office spaces and furniture, modern waiting and meeting areas, as well as
interactive digital display monitors that are available for customers to use.
At the same time, the Bank continued to make a positive difference when it comes to sustainability,
through the choices that were made when the project of branch and offices transformation was
ongoing. This regeneration of the Bank’s premises has, as a matter of fact, been planned to contribute
towards lowering its carbon footprint. Energy efficient lighting and heating and cooling systems have
been installed in several of its locations. Many branches have already passed through this
transformation, with the few remaining renovations planned to follow in short order. The Bank’s flagship
branch and head office premises in Swatar also allows for the recycling of rain and wastewater, as well
as generating renewable energy through several photovoltaic panels. The Bank has also invested in
charging bays on every floor of its latest underground staff and customer parking area, aimed at
encouraging its staff to invest in hybrid and electric cars, which are less harmful to the environment.
5. EMPLOYEE MATTERS
The Bank’s people strategy is aimed at being the ‘Employer of Choice’, maintaining high employee
engagement levels to attract and retain the best talent. The strategy focuses on ensuring all employees
achieve their full potential, through supporting the ongoing development of skills, knowledge and
competence required for today’s and future needs. The Bank is an inclusive and equal opportunity
employer. It aims to provide an inclusive environment that promotes diversity, maintains a healthy
working environment in which the rights and dignity of its staff members are respected.
The Bank’s Collective Agreement governs a wide range of family friendly measures, enhanced by a
policy framework that supports the wellbeing of all its employees. During 2021, the Bank reviewed its
remote working and flexi-time pol icies in line with its investment in collaborative and communication
systems. All its employees have the tools required to work remotely to ensure their wellbeing as well
as business continuation during the pandemic.
In 2021, the Bank also introduced an occupational pension plan for all its employees in support of various
other wellbeing incentives.
In addition, various policies and programmes support the wellbeing of employees. These include a zero-
tolerance policy to cases of bullying, harassment and discrimination, a preventative medical care and
sports activity policy, an employee assistance programme, an employee screening policy, a succession
planning policy, and a performance development programme that provides a holistic approach to
developing employees to achieve their full potential.
DIRECTORS’ REPORT
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APS Bank plc 24
5. EMPLOYEE MATTERS (continued)
Employee Assistance Programme
The Bank’s Employee Assistance Programme (EAP) is an external confidential counselling service
available to all employees. The EAP has been enhanced over the last few years to support the mental
wellbeing of employees. The EAP offers employees the possibility of reaching out for counselling,
guidance and support to assist and resolve work, family and personal issues.
Zero-tolerance Policy
The Bank maintains zero-tolerance to cases of bullying, harassment and unlawful discrimination and
supports a workplace that promotes a dignified working environment and harmonious relations among
its employees based on respect, understanding and appreciation.
Preventative Medical Care and Sports Activity Policy
This policy complements other wellbeing initiatives organised by the Bank to promote the physical,
mental and social health and wellbeing of its employees to achieve their full potential and live a healthy
and active lifestyle.
Employee Screening
The highest standard of integrity and professionalism by employees of financial institutions is critical to
sustain public confidence in the financial sector. Employee screening presents a critical opportunity for
the Bank to ensure prospective and existing employees are aligned with its desired corporate culture,
embrace its values and are ‘fit and proper’ to discharge their duties and responsibilities. The Bank uses
various tools for screening employees as part of its due diligence process. Employees are also expected
to abide with other policies including its Code of Ethics and other regulatory policies and guidelines
that ensure the integrity of its employees.
Succession Planning
This policy details the Bank’s process for identifying and growing talent to fill leadership and business-
critical functions and positions in the future. Succession and talent planning sits inside a much wider
strategic framework encompassing areas such as business strategy and plans, business continuity
management, resource management, required skills and competencies and career development. The
scope of this policy is to complement these areas through a framework for ensuring that the Bank has
the right people in the right place at the right time, and that learning, and development investment is
maximised.
Performance Development
The Bank adopts a clear distinction between fixed and variable remuneration. Its variable remuneration
is based on the performance of staff members taking in consideration both qualitative and quantitative
criteria, the performance of the Bank, the achievement of departmental, team and individual targets in
line with Key Performance Indicators (KPIs), living the Bank’s values and supporting the ongoing
development of skills, knowledge and competency required by each employee. Each employee has
clear objectives and ongoing development discussions so that they can achieve high levels of
performance across the Bank.
Our continued focus on the future of work and customer service saw the completion of the Bank’s
Future Banker Programme focused on the digitisation of banking services as well as sharing of
knowledge on developing and emerging technologies and the launch of the Customer Service Academy
focused on our front-line employees and our service to our customers. These programmes ensure that
as a Bank will continue to remain relevant to our time and that we engage with our communities in a
meaningful way.
DIRECTORS’ REPORT
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APS Bank plc 25
IDENTIFICATION AND MANAGEMENT OF PRINCIPAL RISKS
Credit Risk
Credit Risk is the potential risk that a borrower or counterparty fails to meet the respective obligations
in accordance with, or performing according to, agreed terms. Alternatively, losses may result from
reduction in assets value arising from actual or perceived deterioration in credit quality.
Lending is considered to be APS Bank’s main activity and, as such, assessment of credit risk plays a
pivotal part in the execution of the Bank’s strategy. The Bank’s exposure to credit risk is diversified by
maximum single exposure, by sector, by geography, by tenor and by product, through its engagement
in Retail Lending, Commercial Lending, Trade Finance and selected participations in Syndicated
Lending. The appetite (and tolerance levels) for credit risk which is deemed acceptable by the Bank at
any point in time is defined and evaluated in the Risk Appetite Statement (RAS), which is approved by
the Board and reviewed on an annual basis.
Credit Risk is managed and controlled in various ways, including the regular four-eye approach/risk-
based review of the:
a) credit risk policy, including the policies relating to forbearance and non-performing loans;
b) lending procedures of the first line of defence;
c) new lending products and/or the review/revamp of existing lending products;
d) internal credit scoring systems;
e) internal credit risk grading system based on days past due and other non-financial/qualitative
factors, including cure/probation periods;
f) daily excesses/loan arrears exceeding the encroachment tolerance limits of the
branch/commercial managers and/or the 30 days past due (Significant Increase in Credit Risk
(SICR);
g) non-performing credit exposures graded ‘Doubtful’ and/or ‘Classified’, including monitoring of
the Bank’s NPL ratio;
h) fresh and/or renewal of business and retail credit limits and/or fresh retail credit facilities;
i) six monthly sample of credit facilities sanctioned by the first line of defence;
j) forward-looking expected loss model for quantifying provisions compliant with the IFRS 9
accounting regime;
k) stress testing relating to credit risk;
l) internal limits relating to single-name and sectoral concentration risk;
m) risk-based credit pricing model to determine the Return on Equity of fresh credit limits and/or
new lending products/schemes.
Financial Crime Compliance Risk
APS Bank plc is committed towards combatting financial crime and complying with all applicable laws
and regulations relating to financial crime to protect the Bank, its customers and its employees from
financial crime related risks, namely:
 Money laundering and funding of terrorism;
 Breach of International & Local Sanctions;
 Bribery & Corruption; and
 External Fraud.
The Bank has therefore implemented the highest standard of financial crime risk management practices
to ensure full compliance with applicable anti financial crime laws and regulation.
The Financial Crime Compliance Function is responsible for the design and implementation of a
Financial Crime Compliance (FCC) Framework within APS Group. The FCC Framework is to ensure
consistent management of the above-mentioned risks across Group entities. The programme seeks to
identify, assess, monitor and manage FCC risks in line with the Bank’s risk appetite and statutory
obligations.
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APS Bank plc 26
IDENTIFICATION AND MANAGEMENT OF PRINCIPAL RISKS (continued)
Financial Crime Compliance Risk (continued)
The FCC Function, headed by the Head of FCC and MLRO of the Bank reports to the Chief Risk Officer
of the Bank and the Board of Directors.
The FCC f unction is split into four distinct units which manage the following risks:
 Financial Crime Compliance Anti-Money Laundering (AML)/Fraud Investigations and Transaction
Monitoring – Responsible for the analysis and investigation of unusual or suspicious
transactions/activity;
 Financial Crime Compliance AML Operations – Responsible for adherence with regulatory reporting
obligations emanating from the Prevention of Money Laundering and Funding of Terrorism
Regulation;
 Financial Crime Compliance Monitoring & Advisory (AML & Fraud) – Responsible for the provision
of advice related to AML and Fraud Risks and the monitoring of the same FCC risks; and
 Financial Crime Compliance Monitoring & Advisory (Sanctions & ABC) – Respo nsible for the
provision of advice related to Sanctions and ABC Risks and the monitoring of the same FCC risks.
Operational Risk
The Bank defines Operational Risk as “the risk of loss resulting from inadequate or failed internal
processes, people and systems or from external events” in line with the Basel Committee. This definition
includes legal risk but excludes strategic and reputational risk. Operational risk is inherent in the Bank’s
products, services and activities. The Bank’s operational risk management framework and governance
are fully integrated into the Bank’s overall risk management framework.
The Bank aims to ensure sound operational risk governance practices with the involvement of the
following functions:
 Board of Directors;
 Risk Committee;
 Operational Risk and Security Governance Department;
 Senior Management;
 Business Risk and Control Management; and
 Internal Audit.
The operational risk management process is intended to maintain an overall operational risk level that
meets the Bank’s operational risk appetite.
Risk identification considers internal and external factors and is paramount for the subsequent
development of a viable operational risk monitoring and control system. The Bank has increased its
efforts of risk identification by improving the culture and encouraging all employees from all levels to
report any identified operational risks and incidents in a timely manner.
Following the identification of operational risks, these are measured by quantifying, where possible, the
potential losses from each identified risk and allocation of an adequate amount of capital to cover the
Bank’s exposure to this risk.
The Group maintains a database to regularly quantify and record operational losses and near miss
events, reported electronically by the first line of defence and co-ordinated and analysed by the
Operational Risk and Security Governance department, in order to promote a culture of cooperation,
communication and continuous improvement where lessons are learnt from incidents and near misses.
Once operational risks have been identified, assessed and measured, controls and process
improvements are developed and implemented as necessary to further mitigate identified risks to levels
that are within the risk appetite. The Bank has strengthened this process by appointing Business Risk
and Control Managers in the first line of defence to liaise with the Operational Risk and Security
Governance Department. The Bank also ensures that procedures and processes are documented in the
Bank’s handbooks and reviewed from an Operational Risk perspective.
DIRECTORS’ REPORT
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APS Bank plc 27
IDENTIFICATION AND MANAGEMENT OF PRINCIPAL RISKS (continued)
Operational Risk (continued)
The Bank does regular monitoring of operational risks to quickly detect and correct deficiencies in the
Bank’s policies, processes and procedures. Finally, appropriate reporting mechanisms are in place to
support proactive management of operational risk at Board, Executive and business line level.
Liquidity Risk
Liquidity risk is the risk that the Group cannot meet its financial obligations as they fall due in the short
term and medium term, either at all or without incurring unacceptable losses. Funding risk is the risk
that the Group cannot meet its financial obligations as they fall due in the medium to long term, either
at all or without increasing funding costs unacceptably.
Funding risk can also be seen as the risk that its assets are not stably funded in the medium and long
term.
The Group manages this risk by seeking to match the maturities of assets and liabilities in its balance-
sheet. The management of liquidity and funding is governed by a detailed Liquidity and Funding Risk
Policy. This Policy establishes clear lines of responsibility, limits and guidance on the measurement and
monitoring of the Group’s net funding requirements. The ALM Unit is responsible for implementing the
Policy; whereas ALCO is responsible for monitoring and ensuring the implementation of and adherence
with the Policy, as well as ensuring consistency with the Bank’s Risk Appetite. It also ensures that
adequate liquidity is held to meet both expected and unexpected commitments. This Policy includes a
detailed Liquidity Contingency Plan, which addresses the strategy for handling liquidity crises and
includes procedures for covering cash flow shortfalls in emergency situations.
Market Risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due
to changes in market variables such as interest rates, foreign exchange rates, and prices of equities,
bonds and commodities.
The Group’s exposure to market risk is limited since its trading portfolio is minimal. This is consistent
with the Group’s Risk Appetite. In accordance with Article 94 of the CRR, the Group is exempted from
the trading book capital requirements.
The Group’s exposure to market risk is mainly related to:
i. Interest rate risk – the risk that the Group’s financial position and cash flow are exposed to
unfavourable movements in interest rates;
ii. Foreign exchange risk – the risk that the Group’s financial position and cash flow are exposed
to unfavourable movements in foreign exchange rates.
Solvency Risk
The Group continuously aims at building and sustaining a strong capital base and at applying it
efficiently throughout its activities to attain its strategic objectives, optimise shareholder value whilst
ensuring the sustainability of the Bank’s business model and risk profile. A strong and prudent capital
base is one of the pillars of the Group’s business model and maintaining adequate capital ratios will
continue being key to enable the Group to steer through currently challenging economic conditions.
The Bank performs an ICAAP in compliance with the Pillar II requirements of Banking Rule BR/12/2022
– The Supervisory Review Process of Credit Institutions Authorised Under the Banking Act 1994 and
the CRR. This key decision-making tool is of utmost importance for keeping the Board of Directors
informed about the Bank’s ongoing risk assessment, the mitigation measures adopted and their impact
on the capital requirements. The ICAAP includes an assessment of both Pillar I and Pillar II risks. The
latter includes concentration risk, IRRBB risk, IT and cyber risk, reputation risk and other key risks.
DIRECTORS’ REPORT
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APS Bank plc 28
IDENTIFICATION AND MANAGEMENT OF PRINCIPAL RISKS (continued)
Solvency Risk (continued)
The Bank’s stress testing framework forms an integral part of the ICAAP. A number of severe but
plausible scenarios are developed which test the resilience of the Bank’s business model and risk profile.
Interest Rate Risk
The Group has an Interest Rate Risk Policy approved by the Board, which sets out a comprehensive
risk management process that identifies, measures, monitors and controls interest rate risk exposures,
whilst also ensuring appropriate oversight by Senior Management, Board-appointed committees and
ultimately the Board, to confirm that this risk is consistent with the Group’s risk appetite.
Interest rate risk is measured from two perspectives – the economic value of equity (EVE) and the
earnings-based approach.
The Group’s exposure to interest rate risk is monitored on a monthly basis by the Enterprise Risk
Management Unit (ERMU) and verified by Asset Liability Management (ALM), and is reported to
Executive Committee, ALCO and Risk Committee on a quarterly basis.
Regulatory Compliance Risk
The performance of banking/financial activities exposes the Bank to regulatory risk. The Basel
Committee on Banking Supervision (BCBS) has described Compliance Risk as:
‘The risk of legal or regulatory sanctions, material financial loss, or loss of reputation a bank may suffer
as a result of its failure to comply with laws, regulations, rules, related self-regulatory standards, and
codes of conduct applicable to its banking activities.’
Regulatory Compliance Risks have been identified as:
- Risk to reputation - Risk of damage to the Bank’s integrity or reputation as a result of negative
publicity, whether founded or not, failure to act in accordance with policies and procedures, or
non-compliance with applicable laws, rules, regulations and guidance.
- Regulatory risk - This risk may arise from non-compliance with the applicable laws, rules
regulations and guidelines, including as a result of regulatory developments. There is also a risk
that activities may be carried out on the basis of regulatory interpretation or documents that
are subsequently found to be inaccurate, inadequate or outdated.
In order to mitigate regulatory compliance risk, the Bank has established a Regulatory Compliance Unit
(Regulatory Compliance or RC). Regulatory Compliance is an integral part of good governance. The
Unit’s purpose is to support the Bank in remaining compliant with the applicable rules, regulations, and
guidelines. As a second line of defence function, RC’s role is to identify, evaluate, and address regulatory
risks.
In performing its functions, RC, to the extent applicable, follows the practices indicated in ESMA
Guidance on MiFID II Compliance Function, the EBA Guidelines on Internal Governance and the BCBS
Guidance for the Compliance function of Banks.
DIRECTORS’ REPORT
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APS Bank plc 29
IDENTIFICATION AND MANAGEMENT OF PRINCIPAL RISKS (continued)
Regulatory Compliance Risk (continued)
The key functions of Regulatory Compliance are the following:
 Advice
o Track and advise/update senior management with developments to the current regulatory
framework as may be applicable to the Bank – liaising with the other Units/Departments in
the Bank and the issuing regulatory body as may be appropriate;
o Provide guidance and advice in respect of business initiatives intended to ensure that
activities are carried out within the boundaries of the applicable regulatory framework;
 Identification, measurement and assessment of compliance risk:
o Identify, document and assess compliance risks arising from:
 Business activities – including new products and business practices;
 Establishment of new types of business or customer relationships;
 Material changes to current relationships.
 Monitoring, Testing and Reporting
o Conduct sufficient and representative compliance testing/reviews;
o Report to senior management and the Board of Directors, on a regular basis, the
outcome of monitoring and testing/reviews.
Thereby helping the Bank to carry on business successfully and in conformity with external and internal
standards.
The key areas within scope of RC’s remit as a second line of defence are the following:
 Conduct of business and treating customers fairly;
 Conflicts of Interest;
 Market Abuse;
 Marketing and Promotions;
 Product Oversight Governance; and
 GDPR.
Regulatory Compliance
Regulatory Compliance is headed by the Head of RC and Compliance Officer of the Bank which reports
to the Chief Risk Officer of the Bank and the Board of Directors. The Unit is divided into Regulatory
Development and Regulatory Oversight.
- Regulatory Development Section is in charge of researching and keeping abreast with
regulatory developments. These developments are analysed and communicated to the
respective departments within the Bank, through internal Briefing/Guidance Notes for
implementation in the Banks’ policies and procedures. The Department owning the
implementation of such regulation carries out a gap analysis and the Regulatory Development
Section ensures that the implementation is concluded in a timely manner and that any policies
and procedures adopted ar e in line with the current regulation.
-
Regulatory Oversight Section is in charge of conducting oversight monitoring on the various
functions within the Bank to ensure that the operational procedures are in line with the
regulatory requirements through a set Compliance Monitoring Programme and Ad hoc reviews.
This Section also provides assistance and advice when it comes to new Projects, Product
Launches and Complaints Management and is also responsible for Regulatory Reporting and
Tax Compliance.
Both Sections are interdependent and provide support to each other on an ongoing basis. In addition
to the above, the GDPR function also falls within the remit of RC, and this is represented by the Data
Protection Officer (DPO).
DIRECTORS’ REPORT
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APS Bank plc 30
IDENTIFICATION AND MANAGEMENT OF PRINCIPAL RISKS (continued)
Regulatory Compliance (continued)
The Bank’s Board of Directors retains ultimate responsibility for all the Bank’s identified risks. The Board
Risk Committee ensures implementation of the Bank’s risk management and compliance strategy,
systems and policies that ensure adherence to the Bank’s Risk Appetite Statement.
Reputational Risk
Reputation is one of the Bank’s most important intangible assets, founded on trust from its internal and
external stakeholders. It has a direct impact on the Bank’s value, which falls under the scrutiny of the
Bank’s Board of Directors, employees, existing and prospective customers, business partners, investors,
regulators and legislators.
The Bank established an appropriate reputational risk environment by defining the governance
framework and pertinent responsibilities for managing reputational risk. The framework is established
to provide consistent standards for the identification, assessment, management and monitoring of
reputational risk issues, especially direct reputational risk.
The Operational Risk and Security Governance Unit (ORSG) has developed a framework for the second
line of defence monitoring of Reputational Risk. The framework sets out a risk dashboard which
presents metrics that capture the eight reputational risk dimensions defined by the Reputational Risk
Policy:
 Corporate Governance;
 Strategy and Leadership;
 Financial Performance and Profitability;
 Products and Services;
 Image, Brand, Communications, Marketing and Customer Relations;
 Ethical, ESG and CSR;
 Innovation, Opportunities and Technology; and
 Employee and Corporate Culture.
As of 2023, this risk dashboard will be compiled on a quarterly basis and aims to provide quantitative
measurement of reputational risk as well as providing insight and identifying potential issues or gaps
that can lead to reputational damage.
Reputational risks which may arise from a failure with another risk type, control or process (indirect
reputational risk) are addressed separately via the associated risk type framework.
In addition to the above, other mitigating factors that the Bank adopts to manage reputational risk are
the following:
 Prompt and effective communication with all categories of stakeholders;
 Strong and consistent enforcement of controls on governance, business, legal and compliance;
 Establishment and continual updating of the Business Continuity Plan and Crisis Management Plan,
and the team required to support them;
 Continuous monitoring of threats to reputation;
 Clear core corporate values setting out expected standards of behaviour;
 A strong corporate culture that is open, trusting and supportive;
 A robust and dynamic risk management framework which provides continuous monitoring of
threats to reputational and early warning of developing issues; and
 Organisational learning leading to corrective action where necessary.
The Bank has zero appetite for any form of reputational risk, as articulated in the Bank’s Risk Appetite
Statement. Reputational risks and their implemented/planned controls are recorded in the Bank’s risk
register.
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 31
Key Performance Indicators (KPIs)
The Group has in place a set of KPIs that include:
2022
2021
%
%
CET1
15.2
12.8
Solvency Ratio
18.8
16.8
LCR
127.6
142.9
Profitability ROAE
2.3
7.1
Further analysis and KPIs are found in CEO Review, Financial Overview and Notes to the financial
statements.
TAXONOMY REGULATION (REGULATION (EU) 2020/852)
Content of Taxonomy Regulation and related Delegated Acts
In order to meet the EU’s climate and energy targets for 2030 and reach the objectives of the European
Green deal, the European Commission put forward a number of legislations to direct investments
towards sustainable projects and activities. To achieve this, a common language, and a clear definition
of what is ‘sustainable’ is being formulated at EU level, through the creation of a common classification
system for sustainable economic activities or an “EU Taxonomy”. The EU Taxonomy is a classification
system, establishing a list of environmentally sustainable economic activities through the Taxonomy
Regulation which was published on 22 June 2020 and entered into force on 12 July 2020. It establishes
the basis for the EU Taxonomy by setting out four conditions that an economic activity must meet to
qualify as environmentally sustainable. The Taxonomy Regulation establishes six environmental
objectives, two of which relate to Climate Change Mitigation and Adaption.
The European Commission published a delegated act on sustainable activities for Climate Change
Adaptation and Mitigation objectives defining technical screening criteria for these environmental
objectives. The Bank is monitoring developments in the Taxonomy Regulation through its ESG
Committee. The European Commission is to publish further legislative documentation on the topic for
the other environmental objectives.
Article 8 of the Taxonomy Regulation requires institutions that are in scope of the NFRD to publish
information on how and to what extent the undertaking’s activities are associated with economic
activities that qualify as environmentally sustainable under that Regulation. The European Commission
also published a Delegated Act in this respect, which requires the Bank to publish a number of
indicators, subject to a phase in period. It specifies the content, methodology and presentation of
information to be disclosed by financial and non-financial undertakings concerning the proportion of
environmentally sustainable economic activities in their business, investments or lending activities. This
Delegated Act applies from 1 January 2022 and requires the publishing of such information in the Annual
Report of 2022.
Article 10 paragraph 3 of that Delegated Act requires financial institutions to publish ratios related
economic activities that are Taxonomy Eligible and those which are not. The aim is to indicate the
percentage of assets that would be eligible for the technical screening to determine their alignment
with the EU Taxonomy Classification.
Key Performance Ratios
The below information is consolidated in accordance with the Capital Requirements Regulation (EU)
575/2013.
The proportion in total assets of exposures to Taxonomy eligible economic activities stands at 58.0%.
The proportion in total assets of exposures to Taxonomy-eligible economic activities stands at 3.5%.
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 32
TAXONOMY REGULATION (REGULATION (EU) 2020/852) (continued)
Key Performance Ratios (continued)
These two ratios have been reported in a combined manner for the two Taxonomy objectives adopted
as of 1 January 2022, that is climate change mitigation and climate change adaptation.
The proportion in the total assets of the exposures to central governments, central banks and
supranational issuers stands at 14.7%.
The proportion in the total assets of the exposures to undertakings that are not obliged to publish non-
financial information pursuant to Article 19a or 29a of the NFRD stands at 20%.
Finally, the Bank’s exposure to on demand inter-bank loans as a percentage of total assets stood at
0.9%. The Bank has no trading portfolio.
Taxonomy-Eligible and Non-Eligible economic activities
“Taxonomy-eligible economic activities” refers to the share of economic activities that are described in
the Commission’s Delegated Acts, but that do not yet meet the relevant technical screening criteria.
To identify the taxonomy-eligible economic activities within the Group’s portfolio, reference is made to
the Delegated Act on sustainable activities for the environmental objectives. That Delegated Act
provides the list of economic activities for which the European Commission has provided a common
classification vis-à-vis the environmental objectives. The assessment of Taxonomy eligibility for
calculation of the mandated ratios is made using the Nomenclature of Economic Activities (NACE)
code for loans and advances to identify the exposures that fall into scope. For investments in
transferable securities the industry and sub-industry provided by a Research Portal were reviewed vis-
à-vis the list of economic activities provided in the delegated act on sustainable activities for climate
change adaptation and mitigation objectives.
The “Taxonomy Non-eligible economic activities” refers to the share of economic activities that are not
described in the Commission’s delegated acts, and thus are not subject to technical screening criteria.
These are all those economic activities which have not been identified as Taxonomy-eligible economic
activities as explained above.
Exposures to undertakings not in scope of NFRD
The NFRD applies to large public-interest companies with more than 500 employees. Those
Undertakings which are not subject to the NFRD reporting are not included in the Taxonomy-Eligible
and Non-Eligible economic activities but represented in a separate ratio.
Data limitations
The Group used internal and external data to determine Taxonomy eligible and non-eligible exposures
and exposures not subject to NFRD. Availability of more guidance by the authorities, data and
improvements in data quality over time (as undertakings adopt the Taxonomy requirements for their
own disclosures) will further enhance the quality of disclosure.
The Group is working in developing its capabilities to assess the Taxonomy alignment of its exposures,
also considering the Taxonomy Alignment reporting requirements from 1 January 2024. This will
enhance the Group’s capabilities to adopt the Taxonomy classifications within its systems and
processes.
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 33
FINANCIAL OVERVIEW
Operating Performance
Having seen a strong post-Covid recovery, 2022 started with promising prospects for the Maltese
economy. However, this has been tainted by the pressures from the prolonged Russia-Ukraine war,
hitting the EU economy through high inflationary pressures. Against these strong headwinds, the
Maltese economy performed well in 2022, with gross domestic product (GDP) growing by 6.8%,
according to Central Bank of Malta projections. Factors which contributed to such robust performance
include strong domestic demand – also supported by price-mitigating fiscal measures, which however
added to the public debt burden, and dynamic net exports – aided by a stronger-than-expected
rebound in tourism. The faster recovery in 2022 also leads to a downward reassessment of GDP gro wth
for 2023 (projected however at a still respectable +3.6%), driven by a deterioration in the international
environment and the effects of high inflation on Malta’s trading partners. The removal of Malta from the
FATF grey list in June 2022 should also help supporting financial services and other international
business activities, particular ly inward foreign investments, into 2023.
For the year ended 31 December 2022, APS Bank registered a profit after tax of €19.2 million, an increase
of €4.1 million (27.4%) over the financial year ended 31 December 2021. This strong performance was
offset by unprecedented financial market volatility which impacted the returns of investments held by
the Group - in turn registering €5.8 million in profit after tax and contracting by €9.3 million when
compared to 2021 results.
Net interest income remains the largest driver in the Group’s revenue mix. Total net interest income for
2022 was €65.1 million, €9.7 million or 17.6% higher than 2021. Amidst the current challenging economic
and interest-rate environment, the continued growth in the Group’s lending book created opportunities
for wider spread. Efficient management of cost of funds remains key to the Group, which is further
affirmed through the marginal increase in total interest payable which as at end of December 2022
amounted to €14.8 million, being only 7.2% higher over the €13.8 million registered as at end December
2021.
Fee and commission income increased by 1.5% on 2021, however this was offset by higher related
expenses on the roll-out of new products - mainly card charges, pension scheme fees and payment
fees - amounting to €2.3 million (2021: €2.0 million). As a result, net fee and commission income
amounted to €6.9 million compared to €7.0 million of 2021.
By the end of 2022, the Group’s other operating income remained in red territory of €7.3 million (2021:
+€0.8million) as financial markets performance deteriorated on heightened macro-economic and geo-
political uncertainty which negatively impacted the investment in the Group’s sub funds. Excluding such
net losses, other operating income from business activities amounted to €3.0 million (2021: €0.9
million), mainly attributable to foreign exchange results of €1.3 million, net gains of €1.0 million from
derecognition of financial assets and €0.5 million from other operating income.
Impai rment against expected credit losses consisted of a writeback of €0.3 million (2021: €1.5 million).
This reflects the performance of the Group’s loans and advances book, and its credit quality, even in
such challenging times, further asserting the management’s prudent approach towards risk.
Operating expenditure for the year under review was €47.0 million, up by €6.4 million or 15.9% on 2021.
Employee compensation and benefits remain a key contributor to such increase which has been
brought about by higher labour costs, as the Group remains committed in attracting and retaining
highly skilled resources whilst investing in their training and wellbeing. In addition, the Group increased
its contribution to the Deposit Compensation Scheme (DCS) and incurred higher technology costs -
the latter in line with various initiatives undertaken to improve the customer experience and achieve
greater efficiency through automation, digitisation of records, centralisation of processes and use of
robotics and new technologies.
The cost-to-income ratio for the year is distorted by the impact from the sub funds. Eliminating this,
cost-to-income ratio related to ongoing business activities was of 62.8%, down by 1.3% over the ratio
of 2021.
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 34
FINANCIAL OVERVIEW (continued)
Operating Performance (continued)
ReAPS Asset Management Limited, as the Investment Manager of APS Funds SICAV plc and other
investment portfolios, generated €0.3 million profit before tax (2021: €0.7 million). Largely due to the
financial market instability, total net assets managed by APS Funds SICAV plc as at end of December
2022 stood at €158.2 million, retracting by 19.1% over the comparative period.
Financial Position
During the financial year ended 31 December 2022, Group total assets exceeded the €3 billion mark -
at year-end standing at €3.1 billion, growing by €317.1 million, or 11.3% year-on-year. This expansion was
mainly steered by the increase in the lending book, which reached €2.4 billion (2021: €2.1 billion).
Lending to the household sector remained key to the increase, followed by commercial real estate
activity. Syndicated loans also supported this expansion with further growth as opportunities for spread
improved. The treasury fixed-income portfolio has also seen a significant increase during the year with
total growth of €131.6 million, reaching €459.6 million. Offsetting this increase in the Group’s liquidity
stock and lending portfolio were cash and reserves with the Central Bank of Malta which at the end of
year stood at €85.9 million, decreasing by €121.8 million when compared to the €207.7 million at
December 2021.
At Group level, total liabilities, amounted to €2.9 billion, further expanding by 10.7% over the end-2021
balance of €2.6 billion. Attributing to this were the amounts owed to customers which by end of 2022
stood at €2.7 billion (2021: €2.4 billion). Short-term funding in the form of overnight deposits largely
drove this growth, contributing to 67.7% from the total increase in deposit funding over the 12-month
period, also improving the portfolio mix and the Group’s cost of funding.
The Group’s equity at year-end amounted to €261.5 million, rising by €40.6 million or 18.4% over the
prior year-end. The month of June saw the Bank conclude the final phase of its 2018-2022 Capital
Development Plan, through a highly successful and heavily over-subscribed IPO which raised €66
million of new equity. An interim dividend distributed in October through the issuance of new ordinary
shares further boosted the equity position. At year-end, the Bank’s capital adequacy ratio was 18.8%
(2021: 16.8%) and CET1 ratio of 15.2% (2021: 12.8%).
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 35
FINANCIAL OVERVIEW (continued)
Financial P osition (continued)
Dividend
The Directors are recommending a gross dividend of 2.68 €cents per ordinary share (net dividend of
1.74 €cents per ordinary share) is paid to ordinary shareholders. This dividend is subject to approval by
shareholders at the AGM and has not been included as a liability in these financial statements. The total
gross dividend to be paid is €9,846,153 (total net dividend of €6,400,000) with a recommendation to
pay it as Scrip, that is each shareholder having the option to receive the dividend in cash or through
the issuance of new ordinary shares at an attribution price.
Outlook
The global economy entered 2023 with some positive signs as inflation and energy prices eased from
their peak levels and supply chain disruptions seemed to stabilise. China’s ending of its zero-COVID
policy also provides some growth impulses although its full impact is yet to unfold. But the overall
macroeconomic environment remains challenging for economies, business, and consumers as
persistent inflation, rising interest rates and ongoing geopolitical uncertainties continue to dent private
consumption and investment in many parts of the world.
While a full-blown global recession is a less likely scenario, the outlook for world economic growth is
expected to be the weakest for decades, apart from the outlier years of 2009 and 2020. Closer to
home, economic sentiment in Malta - while not insulated from these difficulties - stayed positive. This is
driven by a good performance in the retail and services sectors, particularly an encouraging rebound
in tourism, and sustained Government support to households and businesses. However, challenges lie
ahead as pressures mount for Malta to reform its corporate tax system and reduce energy subsidies.
The Group approaches this demanding landscape on a solid footing, backed by strong 2022 results,
robust capitalisation and liquidity. But it is also the time to maintain a conservative approach to risk and
a prudent credit underwriting policy in vi ew of the vulnerabilities that may trigger pressures on asset
quality. Interest rate dynamics have also entered a new phase, with intensified competitive pressures
on the funding side, not only from banks but also other economic actors, including Government due to
its borrowing requirements. Pricing pressures are also noticeable from retail and commercial borrowers
while the syndicated loan book should provide further opportunities to find spread. On the whole, a
challenging outlook which will require judicious strategic choices and decision-making firmly anchored
in our values and the overarching aim of providing a simpler, contemporary and complete banking
experience.
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 36
GOING CONCERN
The financial statements are prepared on a going concern basis. The Group prepared financial plans
for the next three years addressing the Group’s operating performance, risks, capital and liquidity.
As required by the Companies Act (Cap 386) and the Capital Markets Rule 5.62, the Directors having
considered the financial performance and position of the Company and its future outlook deem that
the Group is able to continue operating as a going concern for the foreseeable future.
STATEMENT OF RESPONSIBILITY
This Statement of Responsibility is required in terms of the Companies Act (Cap 386) and the Capital
Markets Rule 5.55.2 and set out in the form required by Capital Markets Rules 5.67 to 5.69.
The Companies’ Act requires the Directors to prepare financial statements for each financial year that
give a true and fair view of the state of affairs of the Group and the Bank at end of each financial year
and of its profit or loss for that financial year in accordance with the requirements of International
Financial Reporting Standards as adopted by the European Union (EU).
The Directors are responsible for ensuring that proper accounting records are kept which disclose with
reasonable accuracy at any time, the financial position of the Group and the Bank and which enable
them to ensure that the financial statements comply with the Companies Act and the Banking Act. The
Directors are also responsible for ensuring that:
 Appropriate accounting policies have been consistently applied and supported by reasonable
and prudent judgments and estimates;
 The financial statements are prepared on a going concern basis; and
 Account has been taken of income and charges relating to the accounting period, irrespective
of the date of receipt or payment.
The Directors are also responsible for safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors, through oversight of Management, are responsible to ensure that the Group establishes
and maintains internal controls to provide reasonable assurance with regard to reliability of financial
reporting, effectiveness and efficiency of operations and compliance with applicable laws and
regulations.
Additionally, the Directors are responsible for:
 The preparation and publication of the Annual Financial Report, including the consolidated
financial statements and the relevant tagging requirements therein, as required by Capital
Markets Rule 5.56A, in accordance with the requirements of the European Single Electronic
Format Regulatory Technical Standard as specified in the Commission Delegated Regulation
(EU) 2019/815 (the ESEF RTS);
 Designing, implementing, and maintaining internal controls relevant to the preparation of the
Annual Financial Report that is free from material non-compliance with the requirements of the
ESEF RTS, whether due to fraud or error; and
 Consequently, for ensuring the accurate transfer of the information in the Annual Financial
Report into a single electronic reporting format.
DIRECTORS’ REPORT
________________________________________________________________________
APS Bank plc 37
DISCLOSURE IN TERMS OF THE SIXTH SCHEDULE TO THE COMPANIES’ ACT
During the financial year ended 31 December 2022, no shares in the Bank were:
 Purchased by the Bank itself or acquired by it by forfeiture or surrender or otherwise;
 Acquired by another person in circumstances where the acquisition was the Bank’s nominee,
or by another with the Bank’s financial assistance, the Bank itself having a beneficial interest; or
 Pledged or made subject to other privileges, to a hypothec or to any other charge in favour of
the Bank.
STANDARD LICENCE CONDITIONS
a) During February 2023, the Bank paid an administrative penalty to the FIAU amounting to €
228,706. The penalty was applied following an inspection which was carried out in 2020. The
Bank had fully cooperated with the FIAU during the inspection and had taken immediate
remedial action soon after the review was concluded. The Bank did not appeal this decision
and settled the penalty once notification was received.
There were no breaches of licence requirements nor any other regulatory sanctions against the
Bank.
b) In accordance with Standard Licence Condition 7.28 of the Investment Services Guidelines
issued by the MFSA, licence holders are required to disclose any regulatory breaches of the
Standard Licence Conditions in their annual report. During the year under review, there were
no such regulatory breaches nor were any regulatory sanctions imposed on the Group by the
MFSA.
In accordance with Standard Licence Condition R1-2.1.3 of the Investment Services Guidelines
issued by the MFSA, licence holders are required to disclose any regulatory breaches of the
Investment Standard Licence Conditions in their annual report. During the year under review,
there were no such regulatory breaches nor were any regulatory sanctions imposed on the
Group by the MFSA.
AUDITORS
Deloitte Audit Limited have signified their willingness to continue in office as auditors of the Group and
a resolution proposing their reappointment will be put to the AGM.
The Directors’ report was authorised for issue by the Board of Directors and was signed on its behalf
by:
Martin Scicluna Franco Azzopardi
Chairman Director
9 March 2023
REMUNERATION REPORT
APS Bank plc 38
REMUNERATION POLICY
The Remuneration Policy of APS Group aims to exercise a competent and independent judgement on
its remuneration practices and its incentives created for managing risk, capital and liquidity, and ensure
that they are in line with applicable legislation, directives, regulations and guidelines. The approval of
the Group’s Remuneration Policy is the responsibility of the Board of Directors and covers all categories
of staff including Senior Management (CEO, Chief Officers and Heads of Department), risk takers and
staff engaged in control functions.
The application of the principles of Directive 2013/36/EU, the EBA Guidelines on sound remuneration
policies and Banking Rule 21 (BR21/2022) – Remuneration Policies and Practices, considers the nature
and scale of the Group and the complexity of its activities. A Collective Agreement with the Malta Union
of Bank Employees for the years 2020–2022 covers all staff members (renewal currently under
negotiation), excluding Senior Management. References in this Report to types and modes of
remuneration apply to all staff, but where these refer to staff covered by the Collective Agreement it
shall be construed accordingly.
The Remuneration Policy is reviewed on a regular basis and was last updated and approved on the 24
March 2022 by the Board of Directors to include an ESIP, and applicable Rules for the period 2022–
2026. The Remuneration Policy was approved by the shareholders at the 2022 AGM. The Remuneration
Policy will be updated and submitted to a vote at the general meeting to reflect the provisions under
Chapter 12 of the Capital Markets Rules.
Fixed Remuneration
The base salary provides a predictable base level of income reflecting each staff member’s level of
responsibility, capabilities, skills and experience. Base salaries are reviewed annually, and increases are
granted in line with performance and when a staff member assumes increased responsibilities or
significantly deepens knowledge and expertise. Base salaries may also be reviewed when there is a
material change in the remuneration levels of comparable roles in the respective market. Base salaries
are set for a number of different levels within approved salary ranges. Fixed remuneration includes an
occupational pension scheme for staff members with a fixed contribution in accordance with
established eligibility criteria.
Variable Remuneration
Staff members may have a variable component to their remuneration in addition to their fixed
remuneration. The relation between fixed and variable remuneration shall not exceed twenty-five (25)
per cent of the fixed component for each individual. The variable portion is clearly connected to the
work and performance of the staff member, the performance of their business unit and the overall
performance of the Bank and its subsidiaries. The goals are based on factors that support the Group’s
long-term strategy and business objectives. Staff in Control Functions are adequately compensated in
accordance with their own objectives and not directly tied to the results of any business unit. They are
judged on their success in developing appropriate policies, developing effective risk management
controls and procedures, monitoring risk and building control systems.
Bonuses related to individual performance are based on both quantitative and qualitative targets.
Qualitative criteria consider (i) adherence to the applicable regulatory framework, (ii) treating
customers fairly, and (iii) the on-going provision of a high-quality service to customers. Performance
bonus promotes teamwork and encourages all staff members to perform to the best of their abilities,
for their mutual benefit and the long-term sustainable success of the Group.
The Group ensures that bonuses are fair, transparent, easy to understand and based on the Bank’s
Business Plan and Annual Budgets. Any variable remuneration, be it monetary or non-monetary, outside
the parameters of the Policy is referred to the Nominations and Remuneration Committee for approval.
Variable remuneration does not include “clawback’’ provisions. APS Group does not offer buy out
contracts or share options. Schemes relating to early termination are established within the Collective
Agreement.
REMUNERATION REPORT
APS Bank plc 39
REMUNERATION POLICY (continued)
Employee Share Incentive Plan
During 2022 the shareholders approved the establishment of an ESIP and applicable rules for the period
2022-2026 at its AGM. By virtue of this Plan, the Board of Directors of the Bank may grant Shares to
Eligible Employees subject to Rules. The implementation of these Rules was delegated by the Board of
Directors to the Nominations and Remuneration Committee.
The Rules regulate Share Awards based on an Eligible Employee’s performance for any applicable year.
An Eligible Employee will therefore be awarded Share Awards subject to the attainment of the
stipulated performance criterion for that year. The Plan contemplates loss of benefits to varying
degrees depending on the circumstances, including to those Eligible Employees who do not remain in
the employ of the Group. Share awards have a vesting period of three years.
Link between Pay and Performance
The variable portion of remuneration is linked to the level of profit earned by the Bank during the relative
financial period. The bonus pool allocated to the staff in the clerical, non-clerical and managerial grades
is calculated as determined in the Collective Agreement and based on the profit achieved by the Bank.
The bonus is distributed to employees according to the merit of performance achieved by the individual
and reflecting the respective grade and level of responsibility. Annual bonus entitlements are also
applicable to members of Senior Management in terms of their individual contracts.
Performance Management System
KPIs, by which employees’ performance is measured, provide corporate departmental, unit and
team/individual targets aligned with the strategic objectives and business plan of the Group.
Performance management also takes into consideration leadership competencies required by the
individual positions as well as the Group’s corporate values. Performance targets are reviewed
periodically to ensure that these are aligned to specific strategic and operational objectives set out by
the Board of Directors, covering not only business generation, but also other areas of importance such
as compliance with prevalent regulation and internal policies and procedures, onboarding and customer
due diligence, non-performing borrowing, quality of service and others.
Identified Staff
Additional disclosures on the governance process related to remuneration have been made in this
report. The target population defined as Identified Staff for the purposes of this disclosure represents
6.9% of total number of employees in the Group. Identified staff is determined in line with recommended
EBA Regulatory Technical Standards
1
and includes:
 all members of the management body and senior management;
 staff members with managerial responsibility over the institution's control functions or material
business units; and
 other employees who are members of Committees with collective authority to commit to risk
exposures per transaction beyond 0.5% of CET1 Capital, and employees who, individually or as
part of a Committee take, approve or veto decisions on new products, material processes or
material systems.
For the purposes of remuneration, Identified Staff have been split into business areas according to EBA
guidelines
2
. The tables overleaf show total fixed and variable remuneration for Identified Staff during
the financial year 2022 broken down by business area, Senior Management and members of staff whose
actions have a material impact on the risk profile of the institution. All fixed and variable remuneration
were paid in cash apart from the Occupational Pension Scheme and Share Awards.
1 EBA Final Draft Regulatory Technical Standards EBA/RTS/2020/05 dated 18 June 2020
2 EBA Guidelines on the remuneration benchmarking exercise EBA/GL/2014/08 dated 16 July 2014
REMUNERATION REPORT
APS Bank plc 40
REMUNERATION POLICY (continued)
Identified Staff (continued)
In line with Annex XXXIII of the EBA Implementing Technical Standards on institutions’ public
disclosures of the information referred to in Titles II and III of Part Eight of Regulation (EU) No 575/2013,
the Bank is required to disclose information in respect of special payments made to Identified Staff. No
severance payments or sign-on payments were made and no payments of €1 million and over were
made. Therefore, the REM2 table and the REM 4 table are not required for this Remuneration Report.
Standard contracts for all Identified staff would generally be indefinite following a period of definite
employment with notice periods and retirement from the Bank in line with local legislation.
The below tables presents remuneration disclosures in respect of the Bank’s Remuneration Policy.
Management
Body
Supervisory
function
Management
Body
Management
function
Other Senior
Management
Other
Identified Staff
Fixed
Remuneration
Number of
identified staff
9
9
25
6
Total fixed
remuneration of
which:
418,000
1,872,663
2,473,071
231,413
Cash based
418,000
1,835,253
2,379,647
226,438
Other forms
-
37,410
93,424
4,975
Variable
Remuneration
Number of
identified staff
9
9
25
6
Total variable
remuneration of
which:
-
303,768
517,255
30,659
Cash based
-
216,968
284,755
26,691
Share-linked
instruments or
equivalent non-cash
instruments
-
86,800
232,500
3,968
Total Remuneration
2,176,431
2,990,326
262,072
Deferred and retained
remuneration
Total amount of deferred
remuneration awarded for
previous performance periods
Of which vesting in subsequent
financial years
Management Body
Management function
86,800
86,800
Other Senior management
232,500
232,500
Other Identified staff
3,968
3,968
Total amount
323,268
323,268
REMUNERATION REPORT
APS Bank plc 41
REMUNERATION POLICY (continued)
Identified Staff (continued)
MB
Supervisory
function
MB
Management
function
Total MB
Investment
Banking
Retail
Banking
Asset
management
Corporate
functions
Independent
internal
control
functions
Total
Total number
of identified
staff
9
9
18
2
3
6
11
9
49
Of which:
Other Senior
management
-
-
-
2
3
1
11
8
Other
identified
staff
-
-
-
-
-
5
-
1
Total
remuneration
of identified
staff
418,000
2,176,431
2,594,431
272,924
372,066
343,982
1,247,865
1,015,561
5,846,829
Of which:
Variable
remuneration
-
303,768
303,768
49,934
63,065
44,852
217,422
172,641
Fixed
remuneration
418,000
1,872,663
2,290,663
222,990
309,001
299,130
1,030,443
842,920
Notes to the table:
 Total fixed remuneration comprises benefits, specifically car allowances.
 Fixed occupational pension contribution is subject to eligibility criteria.
 Share awards are vested over the next three years, in line with the vesting periods declared at time of award.
 Variable remuneration for identified staff includes performance related bonuses and share awards.
NOMINATIONS & REMUNERATION REPORT AS AT 31 DECEMBER 2022
1. Terms of Reference and Membership of the Nominations and Remuneration Committee
This Remuneration Report is being prepared in terms of Appendix 12.1 of the Capital Markets Rules. The
Nominations & Remuneration Committee (the Committee) has a two-pronged function: (i) ensuring
that the Directors and senior management of the Bank have the appropriate mix of skills, qualifications,
and experience necessary to fulfil their supervisory and management functions respectively; (ii)
overseeing the development and implementation of the remuneration and related policies of the Group
and to exercise a competent and independent judgement on its remuneration practices.
The Committee is composed of three Non-Executive Directors. The members of the Committee are
Martin Scicluna as Chairman, Victor Gusman, Dr Laragh Cassar and Michael Pace Ross. Michael Pace
Ross was appointed Committee member on 1 July 2022, in preparation for the retirement of Victor
Gusman who retired as Non-Executive Director on 31 December 2022. None of the members participate
in the discussion regarding their own nomination, remuneration or performance. A senior member
within the Human Capital Department acts as Secretary to the Committee.
Further detail on the Terms of Reference of the Committee is found in the “Statement of Compliance
with the Code of Principles of Good Corporate Governance” under Principle 4, on pages 48 and 50.
REMUNERATION REPORT
APS Bank plc 42
NOMINATIONS & REMUNERATION REPORT AS AT 31 DECEMBER 202 2 (continued)
2. Meetings
The Committee held six (6) meetings during the period under review. All members were present at
these meetings, except for Dr Cassar who was absent for two meetings. Dr Cassar’s absence was pre-
authorised. The CEO, Chief People Officer and Company Secretary were invited to the meetings to
contribute as necessary.
3. Nominations
In line with the requirement of the Capital Markets Rule 8.B.7, the work carried out by the Committee
relating to Nominations throughout 2022 is being presented under the following main headings:
Board Composition and Succession
Throughout the year the Committee ensured that the Bank had, and will continue to have, a strong and
effective Board in place, with all the necessary competencies, experience, and skills.
The Committee maintains a Nominations Pool which contains a list of suitable individuals who can be
considered for eventual Board appointments on an “as required” basis. Individuals are not aware that
they are included in the Nominations Pool. Once a vacancy at Board level materialises, appropriate
assessments and approaches are made to identify an individual that displays the required personal
traits and fits in with collective suitability benchmarks. This process complies with both Regulatory
requirements and with best practice Corporate Governance codes generally.
Further to Mr Victor Gusman’s communication of his intention to retire as Non-Executive Director on 31
December 2022, the Committee embarked on the appointment of a replacement Director. In terms of
Article 103 of the Bank’s Articles of Association, the Diocese of Gozo, as Qualifying Shareholder having
originally nominated Mr Gusman, appointed Mr Joseph Rapa as Non-Executive Director in his stead.
This appointment was thoroughly assessed by the Committee, followed by a “fit and proper”
recommendation, which was eventually authorised by the Board of Directors. Mr Rapa’s appointment
became effective as from 1 January 2023 following due process through the MFSA Personal
Questionnaire process. Mr Rapa’s biography may be found on page 10.
Diversity
In line with both Regulatory expectations and in line with Corporate Governance best practices, the
Committee addressed the topics of succession planning with a focus on diversity, particularly diversity
of gender and diversity of age, director appointment tenure and educational and professional
background, always underpinned by the fundamental pre-requisite of competence. Currently, (1) one
member of the Board is female. The Committee is fully aware and cognisant of Regulatory and
Corporate Governance guidelines that require more balance in all aspects of Diversity. The appropriate
action is being taken to ensure improvements in Diversity criteria. Following the appointment of Joseph
Rapa, the average age and the average tenure have both improved.
The Committee approved the Bank’s Diversity, Equity and Inclusion Policy that supports the Bank in
fostering, cultivating, and preserving a culture of diversity, equity, and inclusion amongst all its staff
members. It aims to create an inclusive environment that respects the dignity and diversity of all its
people, in line with the Bank’s Values and its Culture Deck.
REMUNERATION REPORT
NOMINATIONS & REMUNERATION REPORT AS AT 31 DECEMBER 202 2 (continued)
4. Remuneration
Statement
4.
1 Remuneration Policy – Senior Management
The Board of Directors (Board) determines the framework of the overall remuneration policy for
Executives based on recommendations from the Nominations and Remuneration Committee. The
Committee, on the recommendations of the CEO, then establishes the individual remuneration
arrangements of the Group’s Senior Management, namely the Executives and Heads of Departments.
The Remuneration Policy applies consistently to all employees within the Group. Its objective is to align
employees’ remuneration with the Group’s performance, business strategy and business models, risk
appetite framework, values and long-term goals. The overriding principle of the Remuneration Policy is
that individual performance is evaluated according to both quantitative/financial and
qualitative/competency measures.
The Committee considers that the current remuneration packages for Executives are based upon the
appropriate market equivalents and are adequate for the responsibilities involved to enable the Group
to attract, retain and motivate executives having the appropriate skills and qualities, in order to ensure
the proper management of the organisation.
For the purposes of this Remuneration Statement, references to “Executives” shall mean the CEO and
the eight members of the Executive Committee. Executives are in full employment with the Bank on
indefinite contracts. They enjoy health insurance arrangements, death in service benefits, an
occupational pension scheme, as all Bank employees, and participate in the ESIP.
The CEO’s remuneration is reviewed and approved by the Committee. The CEO is eligible for an annual
bonus entitlement by reference to the attainment of pre-established objectives and targets as approved
by the Committee. Executives are also eligible for an annual bonus entitlement and eligible for an annual
salary increase within a maximum salary range approved by the Committee.
Apart from the Occupational Pension Scheme and ESIP no discretionary pensions or other
supplementary pension benefits were payable to the Executives in 2022. Insofar as early retirement
schemes are concerned, the Executives are subject to the schemes which are set out and defined in the
Collective Agreement (for Managerial and Clerical Grades) as may be applicable to employees from
time to time.
Variable Remuneration of Executives
The total Variable Remuneration of Executives including share awards is proposed by the CEO,
reviewed by the Committee, and confirmed by the Board. During 2022 the Executives were awarded a
performance bonus linked to the performance and achievement of their objectives and share awards
vesting over a period of three years 2023-2025. The objectives were based partly on financial targets
and partly on qualitative performance review.
Total emoluments received by Executives during the financial year ended 31 December 2022 are
reported in the Remuneration Report.
4.2 Remuneration Policy – Chief Executive Officer
The CEO’s remuneration is agreed by the Board of Directors. It is composed of fixed and variable
remuneration and other benefits, including a pension scheme and eligibility to the ESIP. Total
remuneration, including all benefits, awarded in 2022 are shown in the table below.
€
Fixed Pay
360,000
Fringe Benefits (Car and Pension Scheme)
33,336
Variable Pay (Performance Bonus and ESIP)
62,400
Aggregate
455,736
APS Bank plc 43
REMUNERATION REPORT
APS Bank plc 44
NOMINATIONS & REMUNERATION REPORT AS AT 31 DECEMBER 2022 (continued)
4. Remuneration
Statement
(
continued
)
4.2 Remuneration Policy – Chief Executive Officer (continued)
The amounts above represents the remuneration package of the CEO accruing for the financial year
ending 31
December 2022.
The CEO is employed on a five-year fixed-term contract expiring on the 31 December 2026. The
performance assessment of the CEO involved the evaluation of the targets achieved against a number
of pre-set objectives and behaviours, including business growth in line with the Bank’s strategic plan,
engagement with other key stakeholders and regulators, and ensuring adherence to risk management
and compliance measures. The extent to which the CEO would have reached each objective is
discussed and reviewed by the Board of Directors. These objectives are reviewed on a quarterly basis
to ensure ongoing review and alignment with expected performance.
4.3 Remuneration Policy – Directors
The Board of Directors is composed in its entirety of Non-Executive Directors. None of the Directors,
in their capacity as Directors of the Bank, are entitled to profit sharing, share awards or pension benefits.
In terms of non-cash benefits, Directors are entitled to health insurance and to a refund of out-of-pocket
expenses. All Directors are non-employees and receive a fee for their services as Directors.
The remuneration of the Chairman and Directors of the Bank for 2022 was approved by the
shareholders at the AGM. The remuneration consists of fixed fees for being appointed as Board of
Director as well as for membership in Board Committees. It is set at a level which broadly reflects:
▪ market practices and rates of compensation at comparable regulated firms;
▪ the competencies and contribution required; and
▪ the extent of responsibilities and the number of board meetings and committee membership/s.
The Directors are appointed at every AGM following their resignation and resubmitting themselves for
re-election. There is no severance payments upon termination of their respective directorship. Directors
are entitled to certain benefits after the termination of their directorship, including discounts on
products and services offered by the Group.
Directors are obliged to avoid conflicts of interest and shall take reasonable steps to keep the Bank’s
matters confidential. Directors’ emoluments are designed to reflect the time committed by Directors to
the Bank’s affairs, including the different Board Committees of which Directors are members, and their
responsibilities on such Committees and confirmed at the AGM.
The Directors’ fees as approved by the Board of Directors are as follows:
€
Board Fees
Chairman
45,000
All other Directors
202,333
Board Committee Fees
Chairman of the Board
5,250
All other Directors
165,417
REMUNERATION REPORT
APS Bank plc 45
NOMINATIONS & REMUNERATION REPORT AS AT 31 DECEMBER 2022 (continued)
4.Remuneration
Statement
(
continued
)
4.3 Remuneration Policy – Directors (continued)
The Bank’s Directors’ Fees for the year ended 31 December 2022 are as follows:
€
Martin Scicluna
50,250
Franco Azzopardi
47,000
Victor E. Agius
51,000
Joseph C. Attard
49,000
Laragh Cassar
46,333
Alfred De Marco
43,000
Victor Gusman
40,000
Michael Pace Ross
46,500
Juanito Camilleri
44,917
TOTAL
418,000
In accordance with the requirements emanating from Appendix 12.1 of the Capital Markets Rules, the
contents of the Remuneration Report within this Remuneration Report have been reviewed by the
external auditor to ensure compliance with such requirements .
CORPORATE GOVERNANCE REPORT
APS Bank plc 46
STATEMENT OF COMPLIANCE WITH THE CODE OF PRINCIPLES OF GOOD
CORPORATE GOVERNANCE
The Board of Directors (Board or Directors) of APS Bank plc (Bank) is presenting this Statement of
Compliance in conformity with the requirements of the Capital Markets Rules 5.94 et seq of the MFSA
and the principles outlined in the Code of Principles for Good Corporate Governance (Code), in
Appendix 5.1 of the Capital Markets Rules. Reference to the Bank also covers the subsidiary
undertakings forming the APS Group as noted in the Directors’ Report on page 16.
The Board is committed to the well-being of the Bank by instilling robust corporate governance
principles, sound management and general supervision of its affairs. The Board acknowledges that the
Code recommends principles for the Board and the Bank’s management to pursue objectives that are
in the interest of the Bank and its shareholders and undertakes to comply fully with it to the extent that
this is considered consistent with the size, nature and operations of the Bank. As at the date of this
Statement, the Board considers the Bank to be in compliance with the Code, save for the exceptions
delineated on page 5 7.
COMPLIANCE WITH THE CODE
Principle 1: The Board
The Board plays a salient role in setting the strategy of the Bank by providing leadership, integrity and
judgement, upholding the highest standards of corporate governance. In doing so, the Board
establishes the required focus on the value-added deliverables, promoting the Bank’s culture, values
and ethics, aiming to safeguard the interests of the institution, shareholders, employees and customers
alike.
As at the date of this Statement, the Board is composed of nine Non-Executive Directors, including the
Chairman, as listed in the Directors’ Report on page 17. There is a strong, value-adding Board, with a
diverse range of skills, experiences, background and competencies, ensuring effective and efficient
decision-making. The Board supports open and honest conversations to ensure that decisions taken
are in the long-term interest of the Bank.
The Board requirements are clearly documented in the Bank’s Articles of Association, which has been
revamped following the Bank’s equity listing in mid-2022, and in the Bank’s Board Charter which has
been updated and approved together with a Schedule of Matters Reserved for the Board.
Furthermore, the Board delegates specific responsibilities to various Board and Management
Committees, as illustrated by the governance structure chart on page 5 1. Supplementary information
on delegated authorities and responsibilities is provided in Principle 4.
The Board is fully supported by a Company Secretary, whose role is separate and independent from
other management bodies. All Directors have unrestricted access to the Company Secretary. The
Company Secretary works closely with the Chairman to ensure effective functioning of the Board and
appropriate information flows between the Board and its Committees. The Company Secretary also
facilitates Board induction and Directors’ professional development. The responsibilities of the
Company Secretary also cover corporate governance and investor relations.
Principle 2: Chairman and CEO
The Bank’s organisational structure incorporates the positions of a Chairman and a CEO, which are
separate and distinct positions, occupied by different individuals, having a clear division of
responsibilities.
The Chairman is appointed from among the Directors by the largest shareholder, holding at least 25%
of the ordinary issued share capital of the Bank. The Chairman is responsible for leading the Board and
setting its agenda for meetings, ensuring that the Directors receive precise, timely and objective
information so that they can properly discharge their duties, while encouraging their active engagement
at meetings and on issues of a complex or contentious nature.
CORPORATE GOVERNANCE REPORT
APS Bank plc 47
COMPLIANCE WITH THE CODE (continued)
Principle 2: Chairman and CEO (continued)
The CEO is responsible for the running of the Bank’s business and to lead the management team,
establishing the required forums to communicate, review and agree on issues and actions of Group-
wide significance, with the exception of those matters reserved for the Board or specifically delegated
by the Board to its Committees. The CEO is also responsible for the recruitment and appointment of
senior management, after consultation with the Nominations & Remuneration Committee.
To allow the respective responsibilities to be discharged effectively and yet ensure an effective flow of
information, the Chair and the CEO maintain regular dialogue outside the Boardroom.
Principle 3: Composition of the Board
The Bank’s Articles of Association, with their detailed provisions, govern the appointment in office, and
the retirement and/or resignations of Board Members. As per practice, Directors hold office from the
close of the AGM at which they are appointed until the end of the subsequent AGM, at which they
become eligible for re-election. The Nominations and Remuneration Committee has the delegated
authority to lead this process, ensuring Board suitability at all times.
All Directors hold office in a non-executive capacity and actively participate in Board Committees. All
Directors are committed to high standards of conduct, ethics and governance practices.
Each Director is expected to be an active participant to ensure that the Board functions effectively as
a whole. The Directors combine broad business and commercial experience, conveying independent
and objective judgement, providing constructive challenge to the executives, and ensuring diligent
monitoring of internal control functions. All Directors have adequate knowledge of the KPIs and have
the required understanding of the business risks involved.
The Board contains a mix of longer-serving Directors and more-recently appointed ones, balancing
good institutional memory with fresh insight and bringing to the Board a broad range of skills, expertise
and experience. This is considered to be a good formula that enables the Board to deal with current
and emerging opportunities and issues and to appreciate effectively the business risk and KPIs affecting
the Bank’s ability to achieve its objectives. This is complemented with an ongoing evaluation of the
skills, competences, knowledge, experience, tenure and independence to fulfil boardroom
responsibilities. The Nominations and Remuneration Committee maintains a skills matrix with key skills,
experiences and attributes that have been identified as particularly valuable to effective oversight of
the Bank and execution of the strategy. The element of diversity is top on the agenda. A diversity policy
governs the principles of diversity, equity and inclusion. The skills matrix is reviewed annually following
the finalisation of the Board and Individual Annual Evaluation. Board succession planning has been a
key area of focus throughout this reporting year, given the retirement of Victor Gusman on 31 December
2022, coupled with two Directors who are not seeking re-election at the 2023 AGM. Further information
on the Nomination and Remuneration Committee proceedings is found in the Nomination and
Remuneration Committee Reports.
In accordance with the Code Provision 3.2, the independent Non-Executive Directors of the Bank as at
31
December 2022 were:
- Martin Scicluna (Chairman)
- Victor E. Agius
- Joseph C. Attard
- Franco Azzopardi
- Laragh Cassar
- Juanito Camilleri
CORPORATE GOVERNANCE REPORT
APS Bank plc 48
COMPLIANCE WITH THE CODE (continued)
Principle 3: Composition of the Board (continued)
In determining the independence or otherwise of its Directors, the Board has considered the principles
emanating from the Code, the Joint EBA and ESMA Guidelines on the Assessment of the Suitability of
Members of the Management Body (2021), as well as general principles of good practice.
The Board has determined that Franco Azzopardi has demonstrated the ability to take objective
decisions independently, notwithstanding his tenure of over 12 years as Director.
Conversely, the Board considers Michael Pace Ross, who holds the role of Administrative Secretary of
the Archdiocese of Malta, and Victor Gusman who until the second quarter of 2021 held the same role
with the Diocese of Gozo, to be non-independent from the Bank. On 31 December 2022, Victor Gusman
retired from the Board. In terms of Article 103 of its Articles of Association, the Diocese of Gozo, as
Qualifying Shareholder having originally nominated Victor Gusman, appointed Joseph Rapa as Non-
Executive Director in his stead. Joseph Rapa is considered to be a non-independent Director. A copy
of Joseph Rapa’s bio is found on page 10. Additionally, Alfred DeMarco sits on the Kunsill Finanzjarju
Djoceżan within the Archdiocese of Malta, and therefore he too is regarded as being non-independent.
This notwithstanding, the Board does not consider that the roles of these Directors with the
shareholders hinder them from maintaining independence of free judgement and character, as they
demonstrably make their own objective, sound and independent decisions and judgements when
performing their Board duties.
Furthermore, Franco Azzopardi and Alfred DeMarco have expressed their intention not to seek re-
appointment at the forthcoming AGM. A process is currently underway for two Non-Executive
Directors to be appointed in their stead.
Principle 4: The Responsibilities of the Board
In its primary responsibility to set the ‘tone at the top’, the Board is responsible for understanding and
for advising management on the processes through which governance occurs and is accountable for
the results of those processes. Hence the Board ensures effective execution of its functions through
clear articulation of the Bank’s purpose and strategy, exercising stewardship and oversight of the
institution. In so doing, the Board works closely with the senior management team, led by the CEO, and
together establish a balance between oversight and strategy execution.
The Board actively oversees the affairs of the Bank by formulating policy in alignment with relevant
laws, regulations, and codes of practice. The Board is responsible to approve major projects, budgets,
capital expenditures and financing, and oversees the adequacy of its corporate governance,
transformation, internal controls systems and risk management, as well as people management.
The Board ensures that the Bank has appropriate policies and procedures in place to lead its employees
in accordance with the highest standards of corporate conduct and to comply at all times with
applicable laws, regulations, business and ethical standards.
Further information on the Board’s responsibilities on internal controls and risk management is found
on pages 5 8 to 59.
As detailed in Principle 1, the Board delegates its authority to various Board and Management
Committees which operate under their respective Terms of Reference, setting out the Committee’s
mandate, scope and working procedure. The below is an infographic on the Bank’s governance
framework.
CORPORATE GOVERNANCE REPORT
APS Bank plc 49
COMPLIANCE WITH THE CODE (continued)
Principle 4: The Responsibilities of the Board (continued)
The Board
The main role of the Board of Directors is to perform the duties of strategic planning and oversight.
The Board Committees
The Board has the following seven Board Committees to which it delegates certain responsibilities.
A more detailed overview of the Terms of Reference and membership of Board Committees is fo und on the Bank’s website
Audit
Committee
Assists the
Board in
monitoring
the
integrity of
the
financial
reporting
process,
including
the audit of
the annual
accounts
and review
of any
interim
reporting,
and
ensuring an
effective
system of
internal
controls
and the
effectivene
ss of the
Internal
and
External
Auditors.
Risk
Committee
Has a wide
mandate for
risk
oversight,
including
credit risk,
market risk,
reputational
risk,
operational
risk,
technology
and cyber
risk,
concentratio
n risk,
liquidity risk
as well as
compliance
and
reputational
matters, and
reviews the
Bank’s risk
management
framework
accordingly.
Nominations
and
Remuneration
Committee
Keeps the
Board
composition
under review
and carries out
the process for
Board
appointments
and assists the
Board on senior
management
appointment
and succession
planning.
Recommends
the
compensation
framework of
Board and
senior
executives.
Conduct
Committee
Acts as first
point of
reference on
Board
governance
policies and
procedures,
codes of
conduct and
conflicts of
interest.
Performs
oversight on
matters of
ethics, brand,
values,
reputation,
and culture
keeping
consumer
(customers’)
protection
primary.
Board Credit
Committee
Reviews
credit
applications
and approves
credit limits
for customers
and
transactions,
within the
parameters
set by the
Board in
terms of the
credit policy
procedures.
Reviews
emerging
issues and
concerns
relating to the
performance
of the
portfolio,
including to
specific
sectoral
exposures.
Environmental,
Social and
Governance
Committee
Considers the
material ESG
issues and
policies
relevant to the
Bank’s business
activities and
promotes
initiatives to
raise ESG
performance.
Oversees the
implementation
of social
sustainability
initiatives a nd
commitments,
including
performance,
challenges and
opportunities,
to ensure their
effectiveness in
delivering
social impact.
Technology &
Innovation
Committee
Oversees
management
with regard to IT-
related risks,
security and
business
continuity plans.
Provides
strategic
leadership
through a steady
flow of
innovative ideas
that will serve as
a catalyst for
innovation at the
Bank as well as
monitoring IT
project
implementation.
The Chief Executive Officer
The CEO is responsible for the development and implementation of the Group’s strategy and overall commercial
objectives. In ensuring that this role is carried out effectively, the Board has set-up the following Management
Committees
A more detailed overview of the Terms of Reference and membership of Management Committees is found on the Bank’s
website.
Executive
Committee
(EXCO)
Acts as
consultative body
and advisor to the
CEO on matters
such as strategy,
operations and
business.
Focuses on the
four Ps, namely
Performance,
Products, Projects
Assets-Liabilities
Committee
Generally
responsible for
the asset liability
management
(ALM) strategy,
policy, surveying
of market
developments,
including the
Bank’s Base Rate
and funding
strategy.
Management
Credit
Committee
Receives and
reviews credit
applications and
approves credit
limits for
customers and
transactions,
within the
parameters set by
the Board in
terms of the
Compliance
Committee
Ensures that
prescribed
regulations, rules,
policies,
guidelines and
procedures are
being followed
and also
anticipated in
advance.
Acts as a
decision point for
Weekly Management
Meeting
Reports to EXCO, with which
it also works very closely.
The Meeting brings together
the senior levels of
management – Chiefs and
Heads – in a weekly forum
where all members share
updates about their respective
areas of responsibility, work
plans as well as matters or
items of significant interest.
CORPORATE GOVERNANCE REPORT
APS Bank plc 50
and People, and
these four broad
areas describe
adequately the
coverage of this
Committee.
Focuses on
liquidity
management and
contingency
planning,
determines the
liquidity strategy.
credit policy and
procedures.
Refers and
recommends to
the BCC limit
applications
where these
exceed its MCC
limits.
business
acceptance, on-
boarding and
dismissal of
customers, in line
with the Bank’s
on-boarding and
exit policies.
The Compliance
Committee
reports to the
Risk Committee.
Principle 5: Board Meetings
The Board meets regularly to discharge its duties effectively, typically monthly. Stemming from the
Bank’s COVID-19 safety protocol, 2022 Board meetings followed a hybrid set-up, that is, a mix of in
person and virtual attendance. This enabled the required flexibility to accommodate uninterrupted
attendance.
During the year under review, the Board met 12 times, with another five additional meetings held on an
ad hoc basis. During 2022, the average rate of attendance was 93%. Due to unforeseen circumstances,
Laragh Cassar was indisposed for seven meetings, having informed the Board of this accordingly, who
took cognisance of this. She appointed the Chairman as her alternate Director throughout her period
of absence.
All Directors are required to attend all meetings of the Board, the meetings of those Committees on
which they serve, and the AGM. All Directors are expected to devote sufficient time to the Bank’s affairs
to enable them to fulfil their duties as Directors, always exercising independent judgement.
The below table provides the attendance of Board members at Board meetings:
Board Attendance at Meetings as at 31 December 2022
Board Member
Attendance out of 17 meetings (including ad hoc meetings)
Martin Scicluna
17/17
Victor E. Agius
17/17
Joseph C. Attard
17/17
Franco Azzopardi
16/17
Juanito Camilleri
17/17
Laragh Cassar
10/17
Alfred DeMarco
17/17
Victor Gusman
16/17
Michael Pace Ross
15/17
CORPORATE GOVERNANCE REPORT
APS Bank plc 51
COMPLIANCE WITH THE CODE (continued)
Membership of Board and Management Committees as at the date of this report.
CORPORATE GOVERNANCE REPORT
APS Bank plc 52
COMPLIANCE WITH THE CODE (continued)
Principle 5: Board Meetings (continued)
Board agendas and packs are circulated in advance to permit Board Directors to prepare themselves
for the discussions that take place during the meetings. Over a 12-month period, Board agendas
covered the following topics: create long-term value; responsibility towards stakeholders; instil values
and shape culture; scrutinise performance; exercise accountability and set strategy. Structured
reporting from the Committees, Subsidiaries and Associates are a regular agenda item of each Board
meeting. The CEO is invited to attend all Board meetings, and other senior management officials attend
Board meetings as required, according to the nature of the discussion and their specific area of
responsibility. This provides the Board with an opportunity to engage directly with senior management
on key issues.
After each Board meeting, minutes are drawn up by the Company Secretary, faithfully recording the
attendance of Directors at said meetings, conflicts raised, matters discussed, considerations made,
decisions taken, and action points agreed upon. Minutes are kept of all the business transacted in the
course of Committee meetings. All Directors have ready access to Committee papers and minutes.
Committee Chairs report on Committee business at the subsequent Board meetings, also through
written briefs.
In 2022, in addition to its scheduled meetings, the Board also met with the Management Team in: July
for the Annual Business Planning brainstorming days; and November for the Business Planning Wrap-
up Workshop, looking into the Bank’s main priorities for the updated 2023-2025 Plan and strategic
initiatives for the same period.
Principle 6: Information and Professional Development
The Directors have access to a wide range of briefing and training sessions and other professional
development opportunities to help them keep abreast of the environment in which the Bank operates.
Training discussions and updates are provided by professional advisors, and external and internal
subject-matter experts. These updates not only cover a range of pertinent strategic, legislative and
regulatory issues but issues relating to the political and economic environment, sustainability and
technological considerations. The Company Secretary also provides regular updates on corporate
governance matters. Directors may also request individual in-depth briefings from time to time on areas
of particular interest.
Directors are also invited to visit key operational facilities and branches of the Bank.
In 2022, the Directors attended two tailor-made training programmes. The first programme was
organised by an international cybersecurity firm which provided insights on cyber-attack scenarios. The
second programme consisted of engaged external professionals who delved into the interpretation of
financial statements and climate risks, and senior management colleagues who tackled financial crime
and the prevention of financial markets abuse. The annual Business Plan & Budget Review Off-Site
Workshops held in July and November also served as a professional development opportunity for the
Directors. Directors attended online seminars and conferences on an array of topics. Directors were
kept abreast of other webinars that were being organised by local and international entities. A training
and development log is maintained by the Human Capital Department.
Upon appointment, all Directors undertake a formal and tailored induction programme providing the
required familiarisation with the Bank. In preparation for his appointment, Joseph Rapa was provided
with an induction programme facilitated by the Company Secretary and tailored to suit his
requirements. This included a series of meetings with senior management, providing an overview of the
Bank’s main functions, namely strategy, finance, risk, people, technology, operations and other internal
control functions. The programme also provided sessions with the Risk and Conduct Committee Chairs
and Secretaries for a familiarisation session on the Committee’s Terms of Reference and proceedings,
given that he is sitting on these Committees.
CORPORATE GOVERNANCE REPORT
APS Bank plc 53
COMPLIANCE WITH THE CODE (continued)
Principle 7: Evaluation of the Board’s Performance
On an annual basis, the Board of Directors – both individually and collectively – take part in a Board
Evaluation exercise that focuses on skills, competencies and experiences in addition to softer attributes
such as strategic thought, communication, external awareness, ability to forge relationships and other
important attributes that make an effective board room. The Board Evaluation process for 2022 was
conducted in-house following the process detailed hereunder. Evaluations are carried out under the
oversight of the Conduct Committee and facilitated by the Company Secretariat. Outcomes are
discussed in detail with the Chairman of the Board.
The Internal Evaluation Process:
It is positive to note the satisfactory outcome of the Board evaluation, which showed that no changes
in the governance and the organisation were required. Outputs of the Board evaluation processes are
actioned via training programmes and/or sharing of feedback at the appropriate forum.
The Board evaluation exercise will be conducted by an external party for 2023, as was the case in 2019.
Regular benchmarking with international practices is considered to be essential in this area.
The Senior Independent Director, Laragh Cassar, carried out a review of the Chairman’s performance
which included meeting the Directors without the Chairman being present. The consolidated feedback
was then shared with the Chairman.
A Committee evaluation exercise will be held in the second half of 2023.
Principle 8: Committees
As explained, the Board places significant reliance on its Committees and therefore it remains crucial
that there are effective linkages between Committees and the Board. There is constant attention to
ensure there are no gaps or unnecessary duplications, and there is a continuous effort to avoid this
happening. References to Board and Management Committees is made throughout this report.
In January 2023, changes in some Board Committee compositions took place to further diversify
knowledge in the memberships.
December 2022
Three online self-
evaluation
questionnaires
formulated by the
Company Secretariat
and discussed with the
Chairman and Senior
Independent Director
have been distributed to
all Board Members.
January 2023 to
February 2023
Directors completed
online questionnaires.
Company Secretariat
prepared report based
on questionnaires
results.
February 2023
Draft report discussed
by the Company
Secretary with the
Chairman and Senior
Independent Director
and tabled at the
Conduct Committee.
March 2023
The report was
presented to the Board
for discussion and
evaluation of Action
Points for finalisation
and implementation.
Ongoing
The Conduct Committee
with the support of the
Company Secretary has
been tasked with
overseeing
implementation of
Action Points.
CORPORATE GOVERNANCE REPORT
APS Bank plc 54
COMPLIANCE WITH THE CODE (continued)
Principle 8: Committees (continued)
Further information on the Audit Committee and Risk Committee is found in the Section below “Internal
Control and Risk Management System”. The function of the Nominations and Remuneration Committee
is covered under Principle 4, when reviewing all the other Bank Committees, and in the Nominations &
Remuneration Report, which also includes the Remuneration Statement in terms of Code Provision
8.A.4 and the Nominations Report in terms of Code Provision 8.B.7.
Principles 9 and 10: Relations with Shareholders and with the Market and Institutional Investors
The Board is aware that its actions and decisions impact the Bank’s shareholders, other stakeholders
and the wider community in which the Bank operates. The Board values the insight gained from
stakeholder engagement and places significant importance on ‘having an ear to the ground’ and taking
decisions in the interest of all stakeholders. The Board continues to listen to stakeholders which helps
in the shaping of the Bank’s strategy and decisions taken.
The table below identifies the Bank’s key stakeholders and how both the Bank and the Board engaged
with them throughout 2022. The Board seeks to understand the needs and the key areas of interest of
each stakeholder group and consider them during deliberations and as part of the decision-making
process.
Key stakeholders
Reason for engagement and key priorities for
2022
Shareholders, Bondholders and Institutional
Investors
The Board always placed engagement with
shareholders foremost. The year 2022, marked
the inception of engagement with a much wider
shareholder base for the Bank. Since the first
quarter of the year, the Bank was heavily
engaged in the execution of its Phase 3 of its
Capital Plan –
the equity listing. This involved
more frequent meetings with the Bank’s four
main shareholders and their consultants.
As the progression of the Capital Plan ensued,
roadshows were conducted with a number of
institutional invest
ors and potential private
investors. In line with regulatory obligations
encompassing these meetings, the senior
management team had the opportunity to
generate interest in the Bank’s performance and
plans.
Following the success of the IPO, the Bank
ensured it kept in touch with its shareholders. On
the second anniversary of the bond issue, the
Bank thought it proper to amalgamate the
recognition of both bondholders’ and
shareholders’ trust in the Bank by launching a
newsletter titled Snapshot together wit
h a
collective Investor Offers & Benefits package.
This will continue to serve as a link between the
Bank and its investor base, ensuring they are
continuously updated with the Bank’s projects.
Meetings with major
shareholders were
organised by the Chairman, along with the CEO
and Company Secretary.
CORPORATE GOVERNANCE REPORT
APS Bank plc 55
The Board is keenly aware of stakeholder
expectations in relation to future dividend
payments. References to 2022 dividend
payments are found on page 98.
The Bank’s
dividend policy prudently balances the dual
objectives of appropriately rewarding risk capital
held by the shareholders through dividends, and
retaining capital in order to maintain healthy
solvency and liquidity ratios to support future
growth. The payments of any dividend will
depend upon, among other factors, the Bank’s
capital requirements, the profits available for
distribution for the relevant year, the Group’s
growth strategy, and its view of the prevailing
market outlook, general economic conditions,
and any regulatory restrictions that may be
imposed by supervisory authorities. The
dividend policy allows for an annual dividend
pay-out not exceeding more than one half of the
Bank’s audited profits after tax for the year. Over
the forthcoming 3-year period (2022-2024) it is
the Bank’s intention to distribute one-third of its
post-tax profits.
Business customers, potential new customers,
financial advisers
The Bank engages with business customers,
potential new customers and financial advisers
through various channels to ensure strong
relationships are maintained allowing its vision,
business model and modus operandi to be
communicated, with emphasis on strategy and
delivery.
Furthermore, the Bank constantly monitors
emerging trends and is responsive to customers’
needs in order to create new
products and
identify future revenue drivers.
The Section “Communicating brand, purpose
and corporate culture” covers the Culture
Department’s Brand & Marketing, CSR, VO
C &
Corporate Culture Change contributions, and is
found on pages 19 to 21.
Employees
The Board monitors and assesses the Bank’s
culture by maintaining an intimate connection
with the Bank’s team, particularly the senior
management team, and through the work of the
various Committees. The Board is very vocal on
the talents of the workforce and commends their
efforts and successes. When opportune, the
Board visits various branches and offices to
observe the Bank’s operations in action and to
reinforce their knowledge.
2022 saw the return of physical Townhall
meetings, adopting a h
ybrid approach. Staff
were encouraged to become more actively
engaged in understanding the Bank’s
progression, strategy and financial results. For
the first time, staff were rewarded who
CORPORATE GOVERNANCE REPORT
APS Bank plc 56
demonstrated themselves to be ambassadors of
the Bank’s corporate culture and values.
Relevant information provided to stakeholders
1. Annual Report and Financial reporting
The Bank’s Annual Report is available to
shareholders and the public at large. The Bank
aims to make the Annual Report as accessible as
possible. Downloa
dable copies are available
from the Bank’s website. A number of printed
copies are available at branches. Interested
parties may also contact the Company
Secretariat to obtain a copy.
This year, the Bank organised three financial
reporting presentations c
overing the annual
financial reporting and two for interim reporting.
The last reporting was held in October 2022, and
was upgraded to a market briefing, expanding
the content, and giving an insight on market and
economic developments apart from the Bank’s
financial performance.
2. Company Announcements
As a listed entity, the Bank is required to issue
Company Announcements, in terms of the
Capital Markets Rules, to bring useful, relevant
and material facts to the attention of the market.
3. Press releases
The Bank issues press releases on a regular basis
in order to inform its customers and other
stakeholders about developments and news. The
widespread use of social media has helped the
Bank to increase the reach and speed of its
communication.
4. Corporate Website
The Bank’s website (www.apsbank.com.mt
) is
the platform through which interested parties
may access Bank information. The website has
been updated to render it more user-friendly.
The Investor R
elations section is consistently
updated with biographies of the members of the
Board and of Executive Management as well as
Annual Reports, Company Announcements,
regulatory reports and investor benefits.
CORPORATE GOVERNANCE REPORT
APS Bank plc 57
COMPLIANCE WITH THE CODE (continued)
Principle 11: Conflicts of Interest
Each Director is expected to act in accordance with the highest standards of ethical behaviour and
fiduciary duties. The Directors are aware of their obligation to avoid conflicts of interest and their
responsibility to act in the wider interest of the Bank and its shareholders, irrespective of which
shareholder nominated him/her to the Board.
The Board Charter contains specific sections dealing with conflicts of interest, starting with the general
precep t that Directors should take all reasonable steps to avoid such situations. However, from time to
time, actual or potential conflicts of interest may arise in which case it needs to be ensured that these
are managed properly by the Board and the interested Director, as also provided in the amended
Conflicts of Interest Policy. Directors are required to inform the Board or Committee of any matter that
may result or has already resulted in a conflict of interest. A record of such declaration is entered into
the meeting’s minute book and the said Director is precluded from voting in any resolution concerning
a matter in respect of which they have declared a direct or indirect interest or asked to absent
themselves when the conflicting matter is discussed.
Board Directors hold external directorships and other outside business interests and these are
recognised as significant benefits that greater boardroom exposure provides for the Bank’s Directors.
However, Directors are expected to report the holding of new directorships and other roles to ensure
that any potential or actual conflicts of interest are mitigated, and that additional appointments will not
adversely impact their time commitment or their ability to continue to fulfil their role as Director.
Directors are informed and reminded of their obligations vis-a-vis dealing in the Bank’s shares and
bonds in line with prevailing legislation and in terms of the Capital Markets Rules. Clearance prior to
dealing is obtained from the Chairman in line with the Bank’s Personal Dealing Policy.
Principle 12: Corporate Social Responsibility
The Board of Directors ensures that sound principles of CSR are adhered to and integrated into the
core ethos of the Bank and embedded in its day-to-day culture and operations. For these reasons also,
the Bank is a prominent supporter of various CSR initiatives at both national and community level aimed
at contributing to economic, societal, environmental and cultural development.
Further details on the Bank’s’ CSR outreach are disclosed separately on pages 19 to 20.
Non-Compliance with the Code
Principle 3 (Composition of the Board): The Board is currently composed of nine Non-Executive
Directors including the Chairman. While the Code of Principles for Good Corporate Governance
provides that the Board should be composed of executive and non-execu tive Directors, there are no
executive Directors presently appointed to the Board. The Board believes that with the required
diversity of knowledge, judgement and experience, it can still adequately perform its functions (even
without the appointment of any executive Directors) and collectively execute the four basic roles of
corporate governance namely: accountability; monitoring; strategy formulation; and policy
development. In addition, the CEO is ordinarily invited to attend meetings of the Board of Directors to
ensure that the Board is adequately supported from an executive management perspective. The Bank’s
Memorandum & Articles of Association includes a clause specifying that executive members are also
eligible to be appointed Directors. Furthermore, with respect to the appointment of non-executive
Directors, the Nominations and Remuneration Committee and Board are guided by the relative
provisions of the Articles of Association, as amended in 2022, as well as the EBA and ESMA Guidelines
on the assessment of the suitability of members of the management body.
CORPORATE GOVERNANCE REPORT
APS Bank plc 58
COMPLIANCE WITH THE CODE (continued)
Internal Control and Risk Management System
Board responsibility
The Board, supported by the Risk Committee and Audit Committee, oversees the system of internal
controls, corporate governance and risk management frameworks, ensuring they are in line with
applicable rules, regulations and guidelines, and assumes responsibility for establishing the purpose of
the Bank, setting its strategy, establishing its culture and determining the values to be observed in
achieving that strategy. The Directors and senior management are committed to maintaining a robust
control framework as the foundation for the delivery of effective risk management. The Directors
acknowledge their responsibilities in relation to the Bank’s risk management and internal control
systems, and for reviewing their effectiveness.
In establishing and reviewing the risk management and internal control systems on an ongoing basis,
the Directors carry out a robust assessment of the most significant and emerging risks facing the Bank,
including those that would threaten its business model, future performance, solvency or liquidity, and
reputation, the likelihood of a risk event occurring and the costs of control. The process for
identification, evaluation and management of the risk events faced by the Bank is integrated into the
Bank’s overall framework for risk governance. The risk identification, evaluation and management
process also cover an assessment of whether the controls in place result in an acceptable level of
residual risk. As mentioned above, the Risk Appetite Statement and Risk Appetite Dashboard are
presented to and reviewed and debated regularly by the Risk Committee and the Board, in the presence
of the Chief Risk Officer, to ensure that the Board is satisfied with the overall risk profile, risk
accountabilities and mitigating actions. Monthly and quarterly Dashboards provide a view of the Bank’s
overall risk profile, key risks and management actions, together with performance against risk appetite
and an assessment of emerging risks which could affect the Bank’s performance over the life of the
operating profile and assists in the strategy that is set up.
Control effectiveness review
The Bank’s control effectiveness is carried out following the ‘three lines of defence’ model with an aim
to evaluate the effectiveness of the Bank’s control framework in its widest sense, with regard to its
material risks, and to ensure management actions are in place to address key gaps or weaknesses in
the control framework. The second line of defence, manifesting itself in reporting to the Risk Committee,
is responsible for the design and implementation of the risk management framework and for risk
reporting to senior management and the Board. As a third line of defence, the Internal Audit function
provides independent assurance to senior management and the Board that the Group’s control
framework and the risk management process are operating effectively. The Audit Committee receives
reports from the Bank’s statutory auditors, Deloitte (which include details of significant internal control
matters that they have identified), and it has discussions with the statutory auditors at least twice a
year, to ensure that there are no unresolved issues of concern.
In terms of Capital Markets Rules 5.117, 5.118 and 5.118A, the Audit Committee is composed of three Non-
Executive Directors, two of whom are considered as independent of the Bank, since they are free from
any business, family or other relationship with the Bank or its management that may create a conflict
of interest such as to impair their judgement (see also Principle 3 on pages 47 to 48). Until 31 December
2022, the Committee was composed of three members, Franco Azzopardi (Chair), Alfred DeMarco and
Juanito Camilleri. As from 1 January 2023, Joseph C. Attard joined the Audit Committee. The Committee
members’ bio may be found on page s 7 to 11. Franco Azzopardi is the member who the Board considers
as competent in accounting. In view of the diverse skills and professional experience of each of the
Audit Committee Members, the Bank considers the Audit Committee as a whole to have the adequate
competence and meet the independence criteria as required by Capital Markets Rule 5.118.
CORPORATE GOVERNANCE REPORT
APS Bank plc 59
COMPLIANCE WITH THE CODE (continued)
Internal Control and Risk Management System (continued)
Control effectiveness review (continued)
Audit Committee:
Membership
2022 Attendance out of 8 meetings
Franco Azzopardi
8/8
Alfred DeMarco
7/8
Juanito Camilleri
8/8
Risk Committee:
Membership
2022 Attendance out of 9 Meetings
Victor E. Agius
8/9
Joseph C. Attard
9/9
Franco Azzopardi
8/9
Michael Pace Ross
8/9
Juanito Camilleri
9/9
The Bank’s risk management and internal control systems are regularly reviewed by the Board and are
consistent with applicable guidance issued by the competent authorities and compliant with the
requirements of Capital Requirements Directive V. More detail on the review of internal controls is found
in the Pillar 3 Disclosures Report found on the Bank’s website.
The below infographic summarises the Bank’s internal control framework:
Board of Directors
1st line of Defence
2nd Line of Defence
3rd Line of Defence
Who is responsible:
Who is responsible:
Who is responsible:
Operational
management/
Employees
Spearheaded by Internal
Control Unit
Compliance/Risk oversight
Functions
Audit Committee
Internal Audit
Activity/controls:
Activity/controls:
Activity/controls:
Policies and procedures
Internal controls
Planning, budgeting,
forecasting processes
Delegated authorities
Business workflows/
IT system controls
Personal objectives
and incentives
Operational/governance/regulatory
compliance
Compliance Committee / Risk
Committee
Controls compliance
monitoring
Management/Board
reporting and review of KPIs
and financial performance
Corporate policies
Approved Internal Audit
plan
Internal Audit reporting
line
to Audit Committee
Regular Internal Audit
updates to Audit
Committee
Capital Markets Rule 5.97.5
The information relating to the Shareholder register required by Capital Markets Rule is found in the
Directors’ Report.
CORPORATE GOVERNANCE REPORT
APS Bank plc 60
COMPLIANCE WITH THE CODE (continued)
General Meetings
General Meetings are the Bank’s highest decision-making body, at which the shareholders exercise their
voting rights. The proceedings are conducted in terms of the Bank’s Articles of Association. A General
Meeting of the Bank is duly convened by providing 21 days prior notice to the shareholders.
Ordinary business is transacted at the Bank’s AGM, that considers the accounts, balance sheets and the
reports of the Directors and the auditors, the appointment or election of Directors, the appointment of
auditors and the fixing of the remuneration of Directors and the auditors. All other business is deemed
to be ‘special’, whether transacted at the AGM or at an Extraordinary General Meeting (EGM).
The Articles relating to General Meetings stipulate that shareholders registered in the Shareholders’
Register on the record date have the right to attend, participate and vote at the General Meeting, and
those owning not less than 5% of the voting issued share capital of the Bank may request the Bank to
include items on the agenda of a General Meeting, and table draft resolutions for items included in the
agenda of a General Meeting, insofar as they are received at least 46 days before the date set for the
relative General Meet ing.
A shareholder who is unable to participate in the General Meeting can appoint a proxy by written or
electronic notification to the Bank. Every shareholder represented in person or by proxy is entitled to
ask questions which are pertinent and related to items on the agenda of the General Meeting and to
have such questions answered by the Directors or such persons as the Directors may delegate for that
purpose.
During the period under review, two General Meetings were held by the Bank. On the 28 April 2022, the
Bank held its AGM. This was the last AGM before the Bank listed its shares on the MSE, and hence the
last AGM for four shareholders. Apart from the standing AGM Agenda Items, which also included a
declaration of a final dividend, the shareholders considered resolutions relating to the issuance of shares
to the public and their listing on the MSE and the issue of an ESIP. This also triggered an entire change
in the Bank's Memorandum and Articles of Association, and the Remuneration Policy. All resolutions
were carried.
On 28 July 2022, the Board declared an interim dividend payable through the issuance of new ordinary
shares. An EGM was held on 19 October 2022 for the capitalisation of profits and allotment of shares to
be approved by the shareholders. Given that there was only one Ordinary Resolution for consideration
and approval, the EGM was held remotely, whereby the Chairman was the only appointed proxy for the
meeting. Shareholders were requested to cast their visiting preferences before the General Meeting.
99.5% of the shareholders who cast their vote through the Chairman voted in favour of the resolution.
Shareholders were invited to submit any questions relating to the items on the agenda prior to the
meeting. The questions received were replied to during the EGM and the questions and answers were
uploaded on the website after the event. The General Meeting was live cast and a recording was also
made available on the Bank’s website after the event.
This Statement was authorised for issue by the Board of Directors on 9 March 2023 and signed on its
behalf by:
Martin Scicluna Franco Azzopardi
Chairman Director
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 61
STATEMENT S OF PROFIT OR LOSS
for the year ended 31 December 2022
The Group
The Bank
2022
2021
2022
2021
Note
€000
€000
€000
€000
Interest and similar income:
On loans and advances, balances with
the Central Bank of Malta and treasury bills
(3)
73, 497
63,2 46
73,497
63,246
On debt and other fixed income instruments
(3)
6,36 2
5,889
4,942
4,394
Total interest and similar income
(3)
79,859
69,13 5
78,439
67,640
Interest expense
(4)
(14,766)
(13,773)
(14,766)
(13,773)
Net interest income
65,093
55,362
63,673
53,867
Fee and commission income
9,115
8,982
8,197
7,909
Fee and commission expense
(2,253)
(1,9 81)
(2,253)
(1,981)
Net fee and commission income
(5)
6,86 2
7,001
5,944
5,928
Dividend income
(6)
131
312
1,477
1,273
Net gains on foreign exchange
(7)
1,30 0
404
860
428
Net gains from derecognition of financial assets
at amortised cost
(8)
984
572
984
572
Net (losses)/gains on financial instruments
(8)
(10,263)
(152)
1,076
215
Other operating income/(loss)
541
(35 6)
541
(356)
Operating income before net impairments
64,648
63,1 43
74,555
61,927
Net reversal of impairment losses
(11)
254
1,488
254
1,488
Net operating income
64,9 02
64,6 31
74,809
63,415
Employee compensation and benefits
(9)
(26,096)
(21, 847)
(25,510)
(21,424)
Other administrative expenses
(10)
(16,140)
(14,6 67)
(15,577)
(14,184)
Depreciation of property and equipment
(27)
(1,911)
(1,6 03)
(1,911)
(1,603)
Amortisation of intangible assets
(28)
(2,264)
(1,9 05)
(2,264)
(1,905)
Depreciation of right-of-use assets
(29)
(618)
(562)
(618)
(562)
Operating expenses
(47,029)
(40 ,584)
(45,880)
(39,678)
Net operating profit before associates’ results
17,87 3
24, 047
28,929
23,737
Share of results of associates, net of tax
(25)
(2,213)
21
-
-
Profit before tax
15,660
24, 068
28,929
23,737
Income tax expense
(12)
(9,893)
(8,967)
(9,773)
(8,696)
Profit for the year
5,767
15,10 1
19,156
15,041
Profit for the year attributable to:
Equity holders of the parent
8,003
14,6 38
19,156
15,041
Non-controlling interest
(2,236)
463
-
-
5,767
15,10 1
19,156
15,041
Basic and diluted e arnings per share
(13)
1.8c
5.9 c
6.1c
5.9c
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 62
STATEMENTS OF COMPREHENSIVE INCOME
for the year ended 31 December 2022
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Profit for the year
5,767
15,101
19,156
15,041
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Change in fair value on debt instruments measured at fair
value through other comprehensive income (FVTOCI)
(28,893)
(7,908)
(28,893)
(7,908)
Fair value gains reclassified to profit or loss on disposal of
debt instruments measured at FVTOCI
5,354
1,236
5,354
1,236
Deferred income tax relating to the components of other
comprehensive income (OCI)
1,186
560
1,186
560
Items that may not be reclassified subsequently to profit or
loss:
Revaluation of land and buildings
-
(863)
-
(863)
Deferred income tax relating to the revaluation on land and
buildings
-
49
-
49
Other comprehensive loss for the year, net of tax
(22,353)
(6,926)
(22,353)
(6,926)
Total comprehensive (loss)/income for the year, net of tax
(16,586)
8,175
(3,197)
8,115
Total comprehensive (loss)/income attributable to:
Equity holders of the parent
(14,35 0)
7,712
(3,197)
8,115
Non-controlling interest
(2,236)
463
-
-
(16,586)
8,175
(3,197)
8,115
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 63
STATEMENTS OF FINANCIAL POSITION
as at 31 December 2022
The Group
The Bank
Note
2022
2021
2022
2021
€000
€000
€000
€000
ASSETS
Cash and balances with Central Bank of Malta
(15)
85,887
207,723
85,887
207,723
Cheques in course of collection
-
2,881
-
2,881
Loans and advances to banks
(16)
72,870
32,296
71,023
30,831
Financial assets at fair value through profit or loss
(17)
41,046
61,846
-
-
Non-current assets held for sale
(18)
1,733
-
1,733
-
Syndicated loans
(19)
135,210
134,262
135,210
134,262
Loans and advances to customers
(20)
2,224,694
1,932,044
2,224,694
1,932,044
Derivative financial instruments
(21)
738
552
738
552
Other debt and fixed income instruments
(22)
459,601
328,041
459,601
328,041
Equity and other non-fixed income instruments
(23)
303
307
303
307
Investment in subsidiaries
(24)
-
-
40,251
45,251
Investment in associates
(25)
13,667
19,803
14,063
16,761
Investment properties
(26)
6,593
6,053
6,593
6,053
Property and equipment
(27)
39,252
40,998
39,252
40,998
Intangible assets
(28)
14,545
11,746
14,545
11,746
Right-of-use assets
(29)
5,040
5,051
5,040
5,051
Other receivables
(30)
8,016
9,152
8,202
8,303
Deferred tax assets
(31)
2,957
2,249
2,957
2,249
TOTAL ASSETS
3,112,15 2
2,795,004
3,110,092
2,773,053
LIABILITIES
Derivative financial instruments
(21)
738
552
738
552
Amounts owed to banks
(32)
50,387
57,208
50,387
57,208
Amounts owed to customers
(33)
2,710,633
2,431,757
2,712,804
2,433,073
Lease liabilities
(29)
5,246
5,348
5,246
5,348
Accruals
(34)
13,621
13,325
13,561
13,224
Debt securities in issue
(35)
54,642
54,597
54,642
54,597
Other liabilities
(36)
13,121
10,450
13,080
10,404
Current tax
2,306
945
2,306
758
TOTAL LIABILITIES
2,850,694
2,574,182
2,852,764
2,575,164
EQUITY
Share capital
(37)
91,729
62,429
91,729
62,429
Share premium
(38)
48,410
10,453
48,410
10,453
Revaluation reserve
(39)
2,981
25,334
2,981
25,334
Retained earnings
(40)
107,209
103,974
114,061
99,673
Other reserves
147
-
147
-
Attributable to equity holders of the parent
250,476
202,190
257,328
197,889
Non-controlling interest
(41)
10,982
18,632
-
-
TOTAL EQUITY
261,458
220,822
257,328
197,889
TOTAL LIABILITIES AND EQUITY
3,112,15 2
2,795,004
3,110,092
2,773,053
MEMORANDUM ITEMS
Contingent liabilities
(42)
21,911
25,356
21,911
25,356
Commitments
(43)
878,787
802,552
878,787
802,552
The financial statements on pages 61 to 1 75 were authorised for issue by the Board of Directors on 9 March
2023 and were signed by:
Martin Scicluna Fr anco Azzopardi M arcel Cassar Ronald Mizzi
Chairman Director Chief Executive Officer Chief Financial Officer
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 64
STATEMENT S OF CHANGES IN EQUITY
for the year ended 31 December 2022
Attributable to the equity holders of the parent
Non-
Share
Share
Revaluation
Retained
Other
controlling
Total
capital
premium
reserve
earnings
reserves
Total
interest
equity
The Group
€000
€000
€000
€000
€000
€000
€000
€000
FINANCIAL
YEAR ENDED
31 December
2022
Balance at 1
January 2022
62,4 29
10,4 53
25,334
103,974
-
202,1 90
18,632
220, 822
Profit for the year - - - 8,003
-
8,00 3 (2,23 6) 5 ,767
Other
comprehensive
loss
-
-
(22, 353)
-
-
(22, 353)
-
(22, 353)
Total
comprehensive
(loss)/income
-
-
(22,353)
8,003
-
(14,350)
(2, 236)
(16,586)
Issue of shares,
net of issue costs
27,5 00
37,9 57
-
-
-
65,4 57
-
65,4 57
Other movements
-
-
-
32
-
32
-
32
Share incentive
plan - Value of
employee
services
-
-
-
-
147
147
-
147
Dividends to
equity holders
(Note 14)
1,80 0
-
-
(4, 800)
-
(3,000)
(309)
(3,309)
Net share capital
issued by
subsidiary
company
-
-
-
-
-
-
1,1 04
1,1 04
Loss of control of
subsidiary
company
-
-
-
-
-
-
(6,2 09)
(6,2 09)
Balance at 31
December 2022
91,7 29
48,410
2,981
107,20 9
147
250, 476
10,98 2
261, 458
FINANCIAL
YEAR ENDED
31 December
2021
Balance at 1
January 2021
62,2 55
10,140
32,260
91,73 6
-
196,3 91
9,828
206, 219
Profit for the year
-
-
-
14,6 38
-
14,6 38
463
15,1 01
Other
comprehensive
loss
-
-
(6,9 26)
-
-
(6,9 26)
-
(6,9 26)
Total
comprehensive
(loss)/income
-
-
(6, 926)
14,638
-
7,71 2
463
8,175
Dividends to
equity holders
(Note 14)
174
313
-
(2,4 00)
-
(1,913)
(218)
(2,131)
Net share capital
issued by
subsidiary
company
-
-
-
-
-
-
8,55 9
8,55 9
Balance at 31
December 2021
62,4 29
10,4 53
25,334
103,974
-
202,1 90
18,632
220, 822
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 65
STATEMENT S OF CHANGES IN EQUITY
for the year ended 31 December 2022
Share
Share
Revaluation
Retained
Other
Total
capital
premium
reserve
earnings
reserves
equity
The Bank
€000
€000
€000
€000
€000
€000
FINANCIAL YEAR ENDED
31 DECEMBER 2022
Balance at 1 January 2022
62,429
10,453
25,334
99,673
-
197,889
Profit for the year
-
-
-
19,15 6
-
19,15 6
Other comprehensive loss
-
-
(22,353)
-
-
(22,353)
Total comprehensive (loss)/income
-
-
(22,353)
19,156
-
(3,197)
Issue of shares, net of issue costs
27,500
37,957
-
-
-
65,457
Other movements
-
-
-
32
-
32
Share incentive plan - Value of employee
services
-
-
-
-
147
147
Dividends to equity holders (Note 14)
1,800
-
-
(4,800)
-
(3,000)
Balance at 31 December 2022
91,729
48,410
2,981
114,061
147
257,328
FINANCIAL YEAR ENDED
31 DECEMBER 2021
Balance at 1 January 2021
62,255
10,140
32,260
87,032
-
191,687
Profit for the year
-
-
-
15,041
-
15,041
Other comprehensive loss
-
-
(6,926)
-
-
(6,926)
Total comprehensive (loss)/income
-
-
(6,926)
15,041
-
8,115
Dividends to equity holders (Note 14)
174
313
-
(2,400)
-
(1,913)
Balance at 31 December 2021
62,429
10,453
25,334
99,673
-
197,889
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 66
STATEMENTS OF CASH FLOWS
for the year ended 31 December 2022
The Group
The Bank
Note
2022
2021
2022
2021
€000
€000
€000
€000
OPERATING ACTIVITIES
Interest and commission receipts
85,7 82
73,552
83,280
71,077
Interest and commission payments
(15 ,18 5)
(11,672)
(14,647)
(11,672)
Cash paid to employees and suppliers
(43,516)
(37,367)
(42,897)
(36,517)
Operating profit before changes in operating
assets and liabilities
27,0 81
24,513
25,736
22,888
(Increase)/decrease in operating assets
Loans and advances to customers/syndicated loans
(295,504)
(266,941)
(295,504)
(266,941)
Loans and advances to banks
(707)
-
-
-
Reserve deposit with Central Bank of Malta
(2,88 0)
(2,878)
(2,880)
(2,878)
Cheques in course of collection
2,88 1
(2,778)
2,881
(2,778)
Other assets
214
(36)
-
-
Increase/(decrease) in operating liabilities
Amounts owed to customers
278, 875
308,312
279,731
308,924
Amounts owed to banks
(1,549)
(1,549)
(1,549)
(1,549)
Other liabilities
3,445
(1,09 5)
2,814
(1,120)
Cash from operating activities before tax
11,856
57,54 8
11,229
56,546
Income tax paid
(8 ,02 1)
(8,51 2)
(7,712)
(8,388)
Net cash flows from operating activities
3,835
49,036
3,517
48,158
INVESTING ACTIVITIES
Dividends received
403
597
1,477
1,273
Interest income from debt securities
7, 328
7,054
7,328
7,054
Purchase of financial assets measured at amortised
cost
(222,644)
-
(222,644)
-
Proceeds on maturity of financial assets measured at
amortised cost
5,987
3,107
5,987
3,107
Purchase of debt instruments measured at FVTOCI
(7,291)
(44,389)
(7,291)
(44,389)
Proceeds on disposal of debt instruments measured
at FVTOCI
67,053
20,73 1
67,05 3
20,731
Purchase of financial assets at FVTPL
(98, 742)
(46,2 41)
-
-
Proceeds on disposal of financial assets at FVTPL
99,653
34,605
-
249
Proceeds on disposal of investments in associates
9,589
-
9,589
-
Additional investment in associate
(500)
(1,500)
(500)
(1,500)
Purchase of property, equipment and intangible
assets
(5,431)
(653)
(5,431)
(653)
Net cash flows used in investing activities
(144,595)
(26,689)
(144,432)
(14,128)
FINANCING ACTIVITIES
Dividends paid
(3,1 70)
(2,144)
(3,000)
(1,913)
Amounts received on creation of shares in
subsidiaries
1, 027
9,386
-
-
Proceeds from issue of new shares, net of issue costs
65, 457
-
65,457
-
Amounts paid on redemption of units in subsidiaries
(630)
(794)
-
-
Cash payment for the principal portion of lease
liability
(761)
(515)
(761)
(515)
Net cash flows from/(used in) financing activities
61,923
5,933
61,696
(2,428)
Net (decrease)/increase in cash and cash
equivalents
(78,8 37)
28,28 0
(79,219)
31,602
Cash and cash equivalents at 1 January
171,101
142,82 1
169,636
138,034
Cash and cash equivalents at 31 December
(44)
92,264
171,101
90,417
169,636
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 67
NOTES TO THE FINANCIAL STATEMENTS
1. REPORTING ENTITY
APS Group comprises APS Bank plc, ReAPS Asset Management Limited and APS Diversified Bond
Fund (sub-fund of APS Funds SICAV plc, in which the Bank holds 99.99% of the founder shares). The
Group also has a significant investment in its associates IVALIFE Insurance Limited and in the following
sub-funds of APS Funds SICAV plc - APS Income Fund, APS Regular Income Ethical Fund and APS
Global Equity Fund.
APS Bank plc is incorporated and domiciled in Malta as a public limited company under the Companies
Act (Cap. 386 of the Laws of Malta). It is licensed by the MFSA to carry out the business of banking
and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment
Services Act (Cap. 370 of the Laws of Malta). The Bank is also enrolled in the Tied Insurance
Intermediaries List in terms of the Insurance Intermediaries Act (Cap. 487 of the Laws of Malta).
The registered office of APS Bank plc is APS Centre, Tower Street, Birkirkara, BKR 4012 with corporate
registration number C2192.
The principal activities of the Group are described in the Directors’ report on page 16.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION
The consolidated and separate financial statements have been prepared on a historical cost basis, except
for derivative financial instruments, certain financial assets and investment property, which have been
measured at fair value and land and buildings c lassified in the s tatements of financial p osition as property
and equipment, which have been measured at their revalued amounts. The consolidated and separate
financial statements are presented in Euro (€), and all values are rounded to the nearest thousand (€000)
except when otherwise indicated.
The Group and the Bank present their statements of financial position in order of liquidity.
Statement of compliance
The consolidated and separate financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), as adopted by the EU and comply with the provisions of the
Banking Act, Cap. 371 and the Companies Act, Cap. 386 of the Laws of Malta.
Basis of consolidation
The consolidated financial statements comprise the financial statements of APS Bank plc and its
subsidiaries, which together are referred to as the ‘Group’. Subsidiaries are fully consolidated from the
date on which the Group achieves control and continue to be consolidated until the date that such control
ceases. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if, and only if, the Group has:
• Power over the investee (i.e., existing rights that give it the current ability to direct the relevant
activities of the investee);
• Exposure, or rights, to variable returns from its involvement with the investee; and
• The ability to use its power over the investee to affect its returns.
Generally, a majority of voting rights results in control to the extent that such substantive rights provide
the investor with the current ability to direct the relevant activities of the investee. When the Group
has less than a majority of the voting or similar rights of an investee, the Group considers all relevant
facts and circumstances in assessing whether it has power over an investee, including:
• The contractual arrangement with the other vote holders of the investee;
• Rights arising from other contractual arrangements; and
• The Group’s voting rights and potential voting rights.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 68
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.1 BASIS OF PREPARATION (continued)
Basis of consolidation (continued)
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins
when the Group obtains control over the subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the
year are included in the consolidated financial statements from the date the Group gains control until
the date the Group ceases to control the subsidiary.
Profit or loss and each component of OCI are attributed to the equity holders of the parent of the
Group and to the non-controlling interests, even if this results in the non-controlling interests having a
deficit balance.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent
company. When necessary, adjustments are made to the financial statements of subsidiaries to bring
their accounting policies in line with the Group’s accounting policies. All intra-group assets and
liabilities, equity, income, expenses and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill),
liabilities, non-controlling interest and other components of equity while any resultant gain or loss is
recognised in profit or loss. Any investment retained is recognised at fair value.
2.2 INTERNATIONAL FINANCIAL REPORTING STANDARDS EFFECTIVE IN THE CURRENT YEAR
AND THOSE IN ISSUE BUT NOT YET EFFECTIVE
Standards, interpretations and amendments to published standards, which are effective in the
current year
The following amendments are effective in the current year:
• Amendments to IAS 37 – Onerous contracts – cost of fulfilling a contract (effective for financial
years on or after 1 January 2022). The amendments deal with costs a company should include
as the cost of fulfilling a contract when assessing whether a contract is onerous.
• Amendments to IFRS 3 – Reference to the conceptual framework (effective for financial years
on or after 1 January 2022). The amendments update an outdated reference in IFRS 3 without
significantly changing its requirements.
• Amendments to IAS 16 – Property, plant and equipment – proceeds before intended use
(effective for financial years on or after 1 January 2022). The amendments address the
proceeds from selling items produced while bringing an asset into the location and condition
necessary for it to be capable of operating in the manner intended by management.
• Amendments to IFRS 9 (as part of the 2018 – 2020 Annual Improvement cycle) – Financial
instruments (effective for financial years on or after 1 January 2022). The amendments clarify
which fees an entity includes when it applies the ’10 per cent test’ in assessing whether to
derecognise a financial liability.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 69
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.2 INTERNATIONAL FINANCIAL REPORTING STANDARDS EFFECTIVE IN THE CURRENT YEAR
AND THOSE IN ISSUE BUT NOT YET EFFECTIVE (continued)
Standards, interpretations and amendments to published standards, which are effective in the
current year (continued)
• Amendments to IAS 41 (as part of the 2018 – 2020 Annual Improvements Cycle) (effective for
financial years on or after 1 January 2022). The amendment removes the requirement in
paragraph 22 of IAS 41 for entities to exclude taxation cash flows when measuring the fair value
of a biological asset using a present value technique, thus ensuring consistency with IFRS 13.
• Amendment to IFRS16 – COVID-19 – Related Rent Concessions beyond 30 June 2021 (effective
for financial years on or after 1 April 2021, earlier application permitted). The Group and the
Bank did not receive any Covid-related rent concessions and accordingly this is not applicable.
Standards, interpretations and amendments to published standards that are in issue but not yet
effective
Up to the date of approval of these financial statements, certain new standards, amendments and
interpretations to existing standards have been published but are not yet effective for the current
reporting period and which have not been adopted early.
The following standards, interpretations and amendments have been issued by the IASB but not all
were endorsed by the EU:
• IFRS 17 Insurance Contracts (effective for financial years on or after 1 January 2023).
• Amendments to IFRS 4 – Extension of the Temporary Exemption from applying IFRS 9 (in
which the fixed expiry date of the amendment was deferred to annual periods beginning on or
after 1 January 2023).
The changes resulting from the above standards, interpretations and amendments are not expected to
have a material effect on the financial statements of the Group or the Bank.
The changes resulting from the following standards, interpretations and amendments are in the process
of being assessed by management to determine their applicability and potential effect on the financial
statements of the Group and the Bank:
• Amendments to IAS 1 – Classification of Liabilities as Current or Non-Current (effective for
financial years on or after 1 January 2024 by virtue of the October 2022 Amendments) and
Non-Current Liabilities with Covenants. The amendments affect only the presentation of
liabilities in the statements of financial position and not the amount or timing of recognition of
any asset, liability income or expenses, or the information that entities disclose about those
items. The amendments:
a) clarify that the classification of liabilities as current or non-current should be based on
rights that are in existence at the end of the reporting period and align the wording in
all affected paragraphs to refer to the "right" to defer settlement by at least twelve
months and make explicit that only rights in place "at the end of the reporting period"
should affect the classification of a liability, and covenants that need to be complied
with after the reporting period should not affect that classification;
b) clarify that classification is unaffected by expectations about whether an entity will
exercise its right to defer settlement of a liability;
c) make clear that settlement refers to the transfer to the counterparty of cash, equity
instruments, other assets or services; and
d) Introduce additional presentation and disclosure requirements for liabilities that are
subject to covenants.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 70
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.2 INTERNATIONAL FINANCIAL REPORTING STANDARDS EFFECTIVE IN THE CURRENT YEAR
AND THOSE IN ISSUE BUT NOT YET EFFECTIVE (continued)
Standards, interpretations and amendments to published standards that are in issue but not yet
effective (continued)
• Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies
(effective for financial years on or after 1 January 2023). The amendments are intended to help
preparers in deciding which accounting policies to disclose in their financial statements.
Material accounting policy information is now required to be disclosed instead of significant
accounting policies. The amendments explain how an entity can identify material accounting
policy information and give examples of when accounting policy information is likely to be
material. Accounting policy information may be material due to its nature and is material if
users of an entity’s financial statements would need it to understand other material information
in financial statements.
In addition, IFRS Practice Statement 2 has been amended by adding guidance and examples
to explain and demonstrate the application of the ‘four-step materiality process’ to accounting
policy information in order to support the amendments to IAS 1.
• Amendments to IAS 8 – Definition of Accounting Estimates (effective for financial years on or
after 1 January 2023). The changes to IAS 8 focus entirely on accounting estimates and
introduces a definition of “accounting estimates”; it also removes the explanation of what
constitutes a change in accounting estimates. Entities develop accounting estimates if
accounting policies require items in financial statements to be measured in a way that involves
measurement uncertainty. A change in accounting estimate that results from new information
or new developments is not the correction of an error and a change in an accounting estimate
may affect only the current period’s profit or loss, or the profit or loss of both the current
period and future periods.
• Amendments to IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (effective for financial years on or after 1 January 2023). The aim of the
amendments is to reduce diversity in the reporting of deferred tax on leases and
decommissioning obligations.
An entity applies the amendments to transactions that occur on or after the beginning of the
earliest comparative period presented. It also, at the beginning of the earliest comparative
period presented, recognises deferred tax for all temporary differences related to leases and
decommissioning obligations and recognises the cumulative effect of initially applying the
amendments as an adjustment to the opening balance of retained earnings (or other
component of equity, as appropriate) at that date.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 71
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recognition of income and expenses
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group
and the revenue can be reliably measured. The following specific recognition criteria must also be met
before revenue is recognised:
Interest and similar income and expense
Interest income and expense are recognised in profit or loss using the effective interest method. The
'effective interest rate' (EIR) is the rate that exactly discounts estimated future cash payments or
receipts, excluding expected credit losses (ECLs), through the expected life of the financial instrument,
or where appropriate, a shorter period, to that instrument’s gross carrying amount on initial recognition.
The calculation of the EIR includes transaction costs and fees and points paid or received that are an
integral part of the EIR.
Fee and commission income
The Group earns fee and commission income from a diverse range of services it provides to its
customers. Fees and commissions that are earned from services provided to customers are accrued
for over that period. These fees include commission income, custody and other management and
advisory fees. Other fee and commission income is recognised on completion of underlying
transactions in the relevant period.
Dividend income
Dividend income from investments is recognised when the right to receive income is established, which
is generally when shareholders approve the dividend.
Net gains on financial instruments
Net gains on financial instruments include realised gains and losses on disposal of financial instruments
and unrealised gains and losses on financial assets at fair value through profit or loss (FVTPL). Realised
gains and losses on disposal of financial assets at FVTPL represent the difference between an
instrument’s cost and disposal amount and are recognised on the trade date of transaction. Unrealised
gains and losses on financial assets at FVTPL represent changes in fair value of financial instruments
during the year and up to the reporting date. Net gains presented in the income statement on financial
instruments also include the reclassification of cumulative fair value movements from OCI to profit or
loss on the derecognition of debt instruments at FVTOCI.
Foreign currency translation
The consolidated financial statements are presented in Euro, which is the functional currency of the
Bank and its subsidiaries. Transactions in foreign currencies are initially recorded by the Group entities
at their respective functional currency spot rates at the date the transaction first qualifies for
recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the
functional currency spot rates of exchange at the reporting date. Differences arising on settlement or
translation of monetary items are recognised in profit or loss. Non-monetary items that are measured
in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates
of recognition.
Net gains or losses resulting from foreign exchange on financial assets and financial liabilities are
recognised in Note 7.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 72
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Share incentive plan
During the year under review, the Group entered into equity-settled share-based payment transactions
which were awarded to eligible employees as an addition to their remuneration. These share-based
payments are recognised on a straight-line basis and charged under employee expenses with a
corresponding increase in the related equity reserves. The Group is accounting for the equity-settled
share-based payments under IFRS 2.
As the standard requires, the fair value of the shares was measured at the market price of the Group’s
shares, adjusted for market performance conditions. In order to assess and measure the cost of these
arrangements, the Group used the Black-Scholes valuation model as the tool to determine the share
fair value. Through using this option pricing model, the Group took into account the spot price at grant
date, vesting time, applicable strike price, volatility percentage, the expected dividend yield and the
risk-free interest rate for the term of the options.
Every award of shares under a plan is subject to the attainment of the objectives set out in the
Remuneration Policy. It shall be a discretion of the Board to determine whether an eligible employee
has attained satisfactory performance or otherwise. The Bank retains flexibility to have awards vesting
on a number of years. Upon each anniversary in accordance of the vesting schedule, the portion of the
share awards which vests in the hands of the eligible employee for that year, shall become
unconditionally due to the eligible employee unless such eligible employee expresses a desire to
postpone such vesting by means of notice to the Bank not later than 30 days prior to the vesting
anniversary. The Bank has no obligation to allot the Shares before vesting date. If employment is
terminated before the vesting date, the awards will lapse unless termination is for a permissible cause
relating to instances when termination is the result of retirement, serious illness, injury or incapacitation,
or any other situation which the Board deems justifiable. All cases of permissible causes shall be
communicated in writing by the Board to the Eligible Employee.
Share Awards do not entitle eligible employees to any voting, dividend, transfer or other rights,
attaching to the Bank's shares until such shares are vested and the eligible employee is listed in the
register of members of the Bank. Any vested shares rank pari passu with all other issued shares. Except
for the transmission of rights on death, share awards granted to eligible employees under a plan are
not transferable and can only be exercised by the eligible employee to whom they were originally
issued.
Financial assets and liabilities
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the
contractual provisions of the instrument. Regular way purchases and sales of financial assets are
recognised on trade-date, the date on which the Group commits to purchase or sell the asset.
At initial recognition, the Group measures a financial asset or financial liability at its fair value plus or
minus in the case of a financial asset or financial liability not at FVTPL, transaction costs that are
incremental and directly attributable to the acquisition or issue of the financial asset or financial liability,
such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at
FVTPL are expensed immediately in profit or loss.
APS BANK PLC
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APS Bank plc 73
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets and liabilities (continued)
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is derecognised when:
• the rights to receive cash flows from the asset have expired; or
• the Group;
(i) has transferred its rights to receive cash flows from the asset, or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under a ‘pass-
through’ arrangement; and
(ii) either (a) has transferred substantially all the risks and rewards of the asset, or (b) has
neither transferred nor retained substantially all the risks and rewards of the asset but has
transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, and has neither transferred nor retained substantially all of the risks and
rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the
Group’s continuing involvement in the asset.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or
expired.
Repurchase and reverse repurchase agreements
Securities sold under agreements to repurchase at a specified future date are not derecognised from
the statements of financial position as the Group retains substantially all of the risks and rewards of
ownership. The corresponding cash received is recognised in the consolidated statements of financial
position as an asset with a corresponding obligation to return it, including accrued interest as a liability
within cash collateral on securities lent and repurchase agreements, reflecting the transaction’s
economic substance as a loan to the Group. The difference between the sale and repurchase prices is
treated as interest expense and is accrued over the life of agreement using the EIR.
Conversely, securities purchased under agreements to resell at a specified future date are not
recognised in the statement of financial position. The consideration paid, including accrued interest, is
recorded in the statement of financial position, within cash collateral on securities borrowed and
reverse repurchase agreements, reflecting the transaction’s economic substance as a loan by the
Group. The difference between the purchase and resale prices is recorded in Net interest income and
is accrued over the life of the agreement using the EIR.
If securities purchased under agreement to resell are subsequently sold to third parties, the obligation
to return the securities is recorded as a short sale within Financial liabilities held for-trading and
measured at fair value with any gains or losses included in net gains on financial instruments.
Offsetting financial instruments
Financial assets and financial liabilities could be offset and the net amount is presented in the
statements of financial position only if there is a currently legally enforceable right to offset the
recognised amounts and there is an intention either to settle on a net basis, or to realise the asset and
settle the liability simultaneously .
APS BANK PLC
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APS Bank plc 74
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets and liabilities (continued)
Financial assets
Classification and subsequent measurement
The Group classifies its financial assets in the following principal categories:
• Fair value through profit or loss (FVTPL);
• Fair value through other comprehensive income (FVTOCI); or
• Amortised cost.
Consequently, all recognised financial assets are subsequently measured in their entirety at either
amortised cost or fair value. Derivatives embedded in hybrid contracts that contain financial asset hosts
within the scope of IFRS 9 are not separated; instead, the hybrid contract is classified and subsequently
measured in its entirety at either amortised cost or fair value.
Classification and subsequent measurement of financial assets depend on:
i. the Group's business model for managing the asset; and
ii. the cash flow characteristics of the asset.
Business model assessment
The business model reflects how the Group manages its financial assets in order to achieve a particular
business objective. That is, whether the Group's objective is solely to hold assets to collect the
contractual cash flows from assets or both to collect the contractual cash flows and to sell the assets.
If neither of these is applicable i.e. financial assets are held for trading purposes or financial assets are
managed and their performance is evaluated on a fair value basis, then the financial assets that meet
the solely payment of principal and interest (“SPPI”) criterion are classified as part of 'other' business
model and measured at FVTPL.
The Bank’s business model does not depend on management’s intentions for an individual instrument
therefore, the business model assessment is performed at a higher level of aggregation rather than on
an instrument-by-instrument basis. Factors considered by the Group in determining the business
model for a group of assets include;
• the stated policies and objectives for the portfolio and the operation of those policies in
practice, including whether management’s strategy focuses on earning contractual interest
revenue, maintaining a particular interest rate profile, matching the duration of the financial
assets to the duration of the liabilities that are funding those assets or realising cash flows
through the sale of assets;
• how the performance of the portfolio is evaluated and reported to the Group’s management;
• the risks that affect the performance of the business model (and the financial assets held within
that business model) and how those risks are managed; and
• past experience i.e. the frequency, volume and timing of sales in prior periods, the reasons for
such sales and expectations about future sales activity. However, information about sales
activity is not considered in isolation, but as part of an overall assessment of how the Group’s
stated objective for managing the financial assets is achieved and how cash flows are realised.
Solely payment of principal and interest (SPPI)
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial
recognition. ‘Interest’ is defined as consideration for the time value of money, for the credit risk
associated with the principal amount outstanding during a particular period of time and for other basic
lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
APS BANK PLC
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APS Bank plc 75
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets and liabilities (continued)
Financial assets (continued)
Solely payment of principal and interest (SPPI) (continued)
Where the business model is to hold assets to collect contractual cash flows or to collect contractual
cash flows and to sell, the Group assesses whether the financial instruments' cash flows represent SPPI
(the SPPI test). In assessing whether the contractual cash flows are SPPI, the Group considers the
contractual terms of the instrument. This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of contractual cash flows such that it would
not meet this condition. In making the assessment, the Group will consider:
• contingent events that would change the amount and timing of cash flows;
• leverage features;
• prepayment and extension terms; and
• features that modify consideration for the time value of money - e.g. periodic reset of interest
rates.
Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic
lending arrangement, the related financial asset fails the SPPI test.
Financial assets with embedded derivatives are considered in their entirety, when determining whether
their cash flows are SPPI. If the hybrid contract contains a host that is a financial asset, then the Group
assesses the entire contract as described in the financial assets section above for classification and
measurement purposes.
All of the Group’s retail loans and certain fixed-rate corporate loans contain prepayment features. A
prepayment feature is consistent with the SPPI criterion if the prepayment amount substantially
represents unpaid amounts of principal and interest on the principal amount outstanding, which may
include reasonable compensation for early termination of the contract.
In addition, a prepayment feature is treated as consistent with this criterion if:
• a financial asset is acquired or originated at a premium or discount to its contractual par
amount;
• the prepayment amount substantially represents the contractual par amount plus accrued (but
unpaid) contractual interest (which may also include reasonable compensation for early
termination); and
• the fair value of the prepayment feature is insignificant on initial recognition.
The Group reclassifies financial assets when and only when the business model for managing those
assets changes. The reclassification takes place from the start of the first reporting period following
the change. Such changes are expected to be very infrequent, and none occurred during the period.
Debt instruments
Amortised cost
Debt financial assets which are held within a business model whose objective is to hold assets for
collection of contractual cash flows where those cash flows give rise on specified dates to cash flows
that are SPPI, and that are not designated at FVTPL, are measured at amortised cost.
Appropriate allowances for ECLs are recognised in profit or loss in accordance with the Bank’s
accounting policy on ECLs. The amortised cost of a financial asset is the amount at which the financial
asset is measured at initial recognition minus the principal repayments, plus the cumulative
APS BANK PLC
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APS Bank plc 76
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets and liabilities (continued)
Financial assets (continued)
Debt instruments (continued)
Amortised cost (continued)
amortisation using the effective interest method of any difference between that initial amount and the
maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the
amortised cost of a financial asset before adjusting for any loss allowance. Interest income from these
financial assets is included in 'Interest and similar income' using the EIR method.
Financial assets classified in this category are principally as follows – Cash and bank balances, loans
and advances to banks and customers, certain debt and fixed income instruments and syndicated
loans.
Fair value through other comprehensive income (FVTOCI)
Debt financial assets that are held within a business model whose objective is achieved by both
collection of contractual cash flows and sale of the assets, where those cash flows give rise on specified
dates to cash flows that are SPPI, and that are not designated at FVTPL, are measured at FVTOCI.
Appropriate allowances for ECLs are recognised in profit or loss in accordance with the Bank’s
accounting policy on ECLs. Movements in the carrying amount are taken through OCI, except for the
recognition of impairment losses and reversal of losses, interest revenue and foreign exchange gains
and losses on the instrument's amortised cost which are recognised in profit or loss. When the financial
asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from
equity to profit or loss and recognised in 'Net (losses)/gains on financial instruments’. Interest income
from these financial assets is included in 'Interest and similar income' using the EIR method. Certain
debt and other fixed income instruments are being classified in this category.
Fair value through profit or loss (FVTPL)
Debt financial assets that are not classified as measured at amortised cost or FVTOCI are measured at
FVTPL. Certain debt and other fixed income instruments are being classified in this category.
In addition, on initial recognition, the Group may irrevocably designate a financial asset that otherwise
meets the requirements to be measured at amortised cost or at FVTOCI as FVTPL if in doing so
eliminates or significantly reduces an accounting mismatch that would otherwise arise. The Group did
not designate any of its debt financial assets in terms of this requirement.
A gain or loss on a debt investment that is subsequently measured at FVTPL is recognised in profit or
loss and presented in the profit or loss statements within 'Net (losses)/gains on financial instruments’
in the period in which it arises. Interest income from these financial assets is included in 'Interest and
similar income' using the EIR method. Foreign exchange movements are recognised in Net gains on
foreign exchange under Note 7.
Equity instruments
The Group subsequently measures all equity investments at FVTPL, except where the Group's
management has elected, at initial recognition, to irrevocably designate an equity investment at
FVTOCI unless the instrument is held for trading. The Group's policy is to designate equity investments
as FVTOCI when those investments are held for purposes other than to generate investment returns.
APS BANK PLC
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APS Bank plc 77
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets and liabilities (continued)
Financial assets (continued)
Equity instruments (continued)
When the FVTOCI election is used, fair value gains and losses are recognised in OCI and are not
subsequently reclassified to profit or loss, including on disposal. Dividends, when representing a return
on such investments, are recognised in profit or loss as ‘Dividend income’ when the Group's right to
receive payments is established.
Gains and losses on equity investments at FVTPL are included in the 'Net (losses)/gains on financial
instruments' line in the statements of profit or loss.
Impairment of financial assets
IFRS 9 is based on a forward-looking ‘ECL’ model. This requires considerable judgement over how
changes in economic factors affect ECLs, which are determined on a probability-weighted basis.
The Group assesses on a forward-looking basis the ECL associated with;
• debt financial assets carried at amortised cost and FVTOCI, comprising mainly debt and other
fixed income securities, loans and advances to customers and banks, syndicated loans and
balances with CBM; and
• irrevocable loan commitments and financial guarantee contracts issued.
The Group recognises a loss allowance for such losses at each reporting date. The measurement of
ECL reflects:
• an unbiased and probability-weighted amount that is determined by evaluating a range of
possible outcomes;
• the time value of money; and
• reasonable and supportable information that is available without undue cost or effort at the
reporting date about past events, current conditions and forecasts of future economic
conditions.
IFRS 9 requires a loss allowance to be recognised at an amount equal to either 12-month ECLs or
lifetime ECLs. Lifetime ECLs are the ECLs that result from all possible default events over the expected
life of a financial instrument, whereas 12-month ECLs are the portion of ECLs that result from default
events that are possible within the 12 months after the reporting date. The Group recognises loss
allowances at an amount equal to lifetime ECLs, except in the following cases, for which the amount
recognised will be 12-month ECLs:
• financial assets, including debt investment securities that are determined to have low credit
risk at the reporting date. The Group considers a debt security to have low credit risk when
its credit risk rating is equivalent to the definition of ‘investment-grade’; and
• other financial instruments for which credit risk has not increased significantly since initial
recognition.
The credit risk note provides more detail of how the ECL allowance is measured. Loss allowances for
ECL are presented as follows:
• financial assets measured at amortised cost: as a deduction from the gross carrying amount of
the assets;
• loan commitments and financial guarantee contracts, generally, as a provision;
• where a financial instrument includes both a drawn and an undrawn component, and the Group
cannot identify the ECL on the loan commitment component separately from those on the
drawn component, the Group presents a combined loss allowance for both components. The
combined amount is presented as a deduction from the gross carrying amount of the drawn
component; and
APS BANK PLC
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APS Bank plc 78
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets and liabilities (continued)
Financial assets (continued)
Equity instruments (continued)
Impairment of financial assets (continued)
• debt instruments measured at FVTOCI: the loss allowance is recognised in profit or loss with a
corresponding entry in OCI; movements in the loss allowance do not reduce the carrying
amount of the financial asset in the statements of financial position, as those assets’ carrying
amount is their fair value.
Under IFRS 9, no impairment loss is recognised on equity investments and on other financial
instruments measured at FVTPL.
Modification of loans
The Group sometimes renegotiates or otherwise modifies the contractual cash flows of loans to
customers. When this happens, the Group assesses whether this modification results in derecognition.
A modification results in derecognition when the new terms are substantially different to the original
terms. The Group does this by considering, among others, the following factors:
• If the borrower is in financial difficulty, whether the modification merely reduces the
contractual cash flows to amounts the borrower is expected to be able to pay;
• Whether any substantial new terms are introduced;
• Significant extension of the loan term when the borrower is not in financial difficulty;
• Significant change in the interest rate; and
• Insertion of collateral, other security or credit enhancements that significantly affect the
credit risk associated with the loan
.
If the terms are substantially different, the Group derecognises the original financial asset and
recognises a 'new' asset at amortised cost and recalculates a new EIR for the asset. The date of
renegotiation is consequently considered to be the date of initial recognition for impairment calculation
purposes, including for the purpose of determining whether a significant increase in credit risk has
occurred. However, the Group also assesses whether the new financial asset recognised is deemed to
be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven
by the debtor being unable to make the originally agreed payments. Differences in the carrying amount
are also recognised in profit or loss as a gain or loss on derecognition.
If the terms are not substantially different, the renegotiation or modification does not result in
derecognition, and the Group recalculates the gross carrying amount based on the revised cash flows
of the financial asset and recognises a modification gain or loss in profit or loss. The new gross carrying
amount is recalculated by discounting the modified cash flows at the original EIR.
Collateral valuation
The Bank uses collateral to mitigate its risks on financial assets. The collateral comes in various forms
such as cash, securities, guarantees and real estate. The fair value is generally assessed at a minimum
at inception date. However, some collateral, for example cash or securities, is valued monthly. To the
extent possible, the Group uses active market data for valuing collateral. Non-financial collateral, such
as real estate, is valued based on data provided by external valuers to the extent that the underlying
loans continue to be recognised.
APS BANK PLC
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APS Bank plc 79
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial liabilities
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Amounts owed to banks and to customers and debt securities in issue
Financial liabilities are classified according to the substance of the contractual arrangements entered
into. Amounts owed to banks, Amounts owed to customers and Debt securities in issue are
subsequently measured at amortised cost using the EIR method.
Modification of financial liabilities
When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability
at fair value. The difference in the respective carrying amounts is recognised in the statements of profit
or loss.
The terms are substantially different if the discounted present value of the cash flows under the new
terms, including any fees paid between the borrower and the lender net of any fees received and
discounted using the original EIR, is at least 10% different from the discounted present value of the
cash flows of the original financial liability. In addition, other qualitative factors, such as the currency
that the instrument is denominated in, changes in the type of interest rate, new conversion features
attached to the instrument and change in covenants are also taken into consideration. If an exchange
of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees
incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or
modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying
amount of the liability and are amortised over the remaining term of the modified liability.
Derivative financial instruments
Derivatives are subsequently re-measured at fair value. All derivatives are classified as assets when
their fair value is positive or as liabilities when their fair value is negative.
Derivatives embedded in hybrid contracts that contain financial asset hosts are not separated; instead,
the hybrid contract is classified and subsequently measured in its entirety at either amortised cost or
fair value. Derivatives embedded in hybrid contracts that contain financial liability hosts are treated as
separate derivatives and measured at fair value if their economic characteristics and risks are not
closely related to those of the host contract and the host contract is not itself measured at FVTPL.
Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due,
in accordance with the terms of a debt instrument. Such financial guarantees are given to banks,
financial institutions and others on behalf of customers to secure loans, overdrafts and other banking
facilities.
APS BANK PLC
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APS Bank plc 80
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial guarantee contracts and loan commitments (continued)
In the ordinary course of business, the Group gives financial guarantees, consisting of letters of credit,
guarantees and acceptances. Financial guarantees are initially recognised in the financial statements
at fair value, being the premium received. Subsequent to initial recognition, the Group’s liability under
each guarantee is measured at the higher of:
(i) the amortised premium and;
(ii) the amount of the loss allowance determined in accordance with IFRS 9 arising as a result of
the financial guarantee.
Any increase in the liability relating to financial guarantees is taken to the statements of profit or loss.
Loan commitments are firm commitments to provide credit under pre-specified terms and conditions.
Loan commitments provided by the Group are considered for loss allowance determined in accordance
with IFRS 9. The Group has not provided any commitment to provide loans at a below-market interest
rate, or that can be settled net in cash or by delivering or issuing another financial instrument.
For loan commitments and financial guarantee contracts, the loss allowance would be recognised as a
provision. However, for contracts that include both a loan and an undrawn commitment and the Group
cannot separately identify the ECLs on the undrawn commitment component from those on the loan
component, the ECLs on the undrawn commitment are recognised together with the loss allowance
for the loan. To the extent that the combined ECLs exceed the gross carrying amount of the loan, the
ECLs are recognised as a provision.
Equity
An equity instrument is any contract that evidences a residual interest in the assets of the company
after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of
direct issue costs. Redemptions or refinancing of equity instruments are recognised as changes in
equity.
Ordinary shares issued by the company are classified as equity instruments.
Property and equipment
Property and equipment are initially recorded at cost.
The Group and the Bank account for subsequent measurement of land and buildings under the
revaluation model. Accordingly, subsequent to initial recognition, land and buildings are stated at fair
value at the date of the revaluation less any subsequent accumulated depreciation and subsequent
accumulated impairment losses. Revaluations are made for the entire class of land and buildings and
with sufficient regularity such that the carrying amount does not differ materially from that which
would be determined using fair values at the end of the reporting period. Any accumulated
depreciation at the date of the revaluation is eliminated against the gross carrying amount of the asset
and the net amount is restated to the revalued amount of the asset.
Any revaluation increase arising on the revaluation is recognised in OCI and accumulated in equity
under the heading of revaluation reserve unless it reverses a revaluation decrease for the same asset
previously recognised in profit or loss, in which case the increase is credited to profit and loss to the
extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation is
recognised in profit and loss to the extent that it exceeds the balance, if any, held in the revaluation
reserve relating to a previous revaluation of the asset.
APS BANK PLC
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APS Bank plc 81
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and equipment (continued)
Other tangible assets are stated at cost less accumulated depreciation and accumulated impairment
in value, if any. Depreciation is calculated using the straight-line method to write off the cost or revalued
amount of each asset to its residual value over its estimated useful economic life. Changes in the
expected useful life are accounted for by changing the amortisation period or method, as appropriate,
and treated as changes in accounting estimates. The annual rates used for this purpose are:
%
Building
1.0
Computer equipment
25.0
Other
5.0 – 20.0
Land is not depreciated by the Group .
Property and equipment are derecognised upon disposal or when no future economic benefits are
expected from its use. Any gain or loss arising on de-recognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) is included in the
statements of profit or loss in the year the asset is derecognised. The asset’s residual value, useful life
and method is reviewed, and adjusted if appropriate, at each financial year end.
Right of use assets, that would be presented within property and equipment if they were owned, are
presented separately in the statements of financial position and their accounting policy is included
below.
Intangible assets
Intangible assets comprise computer software. An intangible asset is recognised only when its cost can
be measured reliably, and it is probable that the expected future economic benefits that are
attributable to it will flow to the Group. Intangible assets are initially measured at cost. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and any
accumulated impairment losses.
Intangible assets are amortised over the useful economic life and assessed for impairment whenever
there is an indication that the intangible asset may be impaired. The amortisation period and the
amortisation method for an intangible asset is reviewed at least at each financial year end. Changes in
the expected useful life or the expected pattern of consumption of future economic benefits embodied
in the asset is accounted for by changing the amortisation period or method, as appropriate, and
treated as changes in accounting estimates. The amortisation expense on intangible assets is
recognised in the statements of profit or loss in the expense category consistent with the function of
the intangible asset.
Amortisation is calculated using the straight-line method to write down the cost of computer software
to its residual value over its estimated useful life of 4 – 8 years.
Development costs
Development costs on an individual project are recognized as an intangible asset when the Group can
demonstrate:
• The technical feasibility of completing the intangible asset so that the asset will be available
for use or sale;
• Its intention to complete and its ability to use or sell the asset;
• How the asset will generate future economic benefits;
• The availability of resources to complete the asset; and
• The ability to measure reliably the expenditure during development.
APS BANK PLC
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APS Bank plc 82
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible assets (continued)
Development costs (continued)
Following initial recognition of the development expenditure as an asset, the asset is carried at cost
less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset
begins when development is complete, and the asset is available for use. It is amortised over the period
of expected future benefit. During the period of development, the asset is tested for impairment
annually.
Investment properties
Investment properties are stated initially at cost, including transaction costs. Subsequent to initial
recognition, investment properties are stated at fair value, which reflects market conditions at the
reporting date. Gains or losses arising from changes in the fair values of investment properties are
included in the statements of profit or loss in the period in which they arise, including the corresponding
tax effect. Fair values are determined based on an annual evaluation performed by an accredited
external independent valuer.
Investment properties are derecognised when either they have been disposed of or when they are
permanently withdrawn from use and no future economic benefit is expected from their disposal. The
difference between the net disposal proceeds and the carrying amount of the asset is recognised in
the statements of profit or loss in the period of derecognition .
Impairment of non-financial assets and investments in subsidiaries and associates
The Group assesses at each reporting date whether there is an indication that an asset may be
impaired. If any such indication exists, or when annual impairment testing for an asset is required, the
Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the
higher of an asset’s or Cash Generating Unit’s fair value less costs to sell and its value in use. Where the
carrying amount of an asset or Cash Generating Unit exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount. Impairment losses are recognised
in the statements of profit or loss in those expense categories consistent with the function of the
impaired asset, unless the asset is carried at a revalued amount, in which case, the impairment loss is
recognised in OCI to the extent that the impairment loss does not exceed the amount in the revaluation
surplus for that asset.
In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used.
An assessment is made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If such indication exists, the
recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its
recoverable amount. The reversal is limited so that the carrying amount of the asset does not exceed
the carrying amount that would have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is recognised in the statements of profit or
loss, unless the asset is carried at a revalued amount, in which case, the impairment reversal is treated
as a revaluation increase in accordance with the accounting policy for that revalued asset.
After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised
carrying amount, less any residual value, on a systematic basis over its remaining useful life.
APS BANK PLC
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APS Bank plc 83
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments in subsidiaries
Investments in subsidiaries are accounted for at cost less any accumulated impairment losses in the
separate financial statements of the Bank.
Investment in associates
The Group
The Group’s investment in its associates is accounted for using the ‘’equity method’’. An associate is an
entity over which the Group has significant influence.
Under the equity method, the investment in an associate is initially recognised at cost in the statements
of financial position. The carrying amount of the investment is adjusted to recognise changes in the
Group’s share of net assets of the associate since acquisition date. Goodwill relating to the associates
is included in the carrying amount of the investment and is neither amortised nor individually tested
for impairment.
The statements of profit or loss reflects the Group’s share of the results of operations of the associates.
When there has been a change recognised directly in the equity of the associates, the Group recognises
its share of any changes and discloses this, when applicable, in the statements of changes in equity.
Unrealised gains and losses resulting from transactions between the Group and the associates are
eliminated to the extent of the interest in the associates.
The financial statements of the associate are prepared for the same reporting period as the Group.
When necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an
additional impairment loss on its investment in its associate. The Group determines at each reporting
date whether there is any objective evidence that the investment in the associate is impaired. If there
is such evidence, the Group calculates the amount of impairment as the difference between the
recoverable amount of the associate and its carrying value and recognises the loss in the share of
results of associate in the statements of profit or loss.
Upon loss of significant influence over the associate, the Group measures and recognises any retaining
investment at its fair value. Any difference between the carrying amount of the associate upon loss of
significant influence and the fair value of the retained investment and proceeds from disposal is
recognised in the statements of profit or loss.
The Bank
The investment in associates is stated in the separate financial statements of the Bank at cost less any
accumulated impairment losses.
Income from the investments is recognised only to the extent of the distributions received by the Bank.
Dividends payable on ordinary shares
Dividends payable on ordinary shares are recognised in the period in which they are declared.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 84
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Taxation
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted by the reporting date.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the
statements of profit or loss.
Deferred income tax
Deferred income tax is provided using the balance sheet liability method on temporary differences at
the reporting date between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax is provided using the balance sheet liability method on temporary differences at
the reporting date between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary
differences, except:
• where the deferred income tax liability arises from the initial recognition of goodwill or of an asset
or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and
• in respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse in
the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of
unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences, and the carry forward of unused tax
credits and unused tax losses can be utilised except:
• where the deferred income tax asset relating to the deductible temporary difference arises from
the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
and
• in respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred income tax assets are recognised only to the
extent that it is probable that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed
at each reporting date and are recognised to the extent that it has become probable that future taxable
profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in
the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the reporting date.
Deferred income tax relating to items recognised directly in equity is recognised in equity and not in
the statements of profit or loss. Deferred income tax assets and deferred income tax liabilities are
offset, if a legally enforceable right exists to set off current tax assets against current income tax
liabilities and the deferred income taxes relate to the same taxable entity and the same taxation
authority.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 85
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Retirement benefit costs
The Group contributes towards the government pension defined contribution plan in accordance with
local legislation and to which it has no commitment beyond the payment of fixed contributions. These
obligations are recognised as an expense in the statements of profit or loss as they accrue.
The Group also contributes towards a defined contribution plan. Under IAS 19, when an employee has
rendered service to the Group during a period, the Group recognises the contribution payable to a
defined contribution plan in exchange for that service as a liability (accrued expense) and as an
expense, unless another Standard requires or permits the inclusion of the contribution in the cost of an
asset.
Other liabilities
Liabilities for other amounts payable are carried at cost which is the fair value of the consideration to
be paid in the future for goods and services received, whether or not billed to the Group.
Cash and cash equivalents
For the purpose of the statements of cash flows, cash and cash equivalents comprise:
• Cash in hand and deposits repayable on call or short notice or with a contractual period
to maturity of less than three months, with any bank or financial institution;
• Short-term highly liquid investments which are readily convertible into known amounts
of cash without notice, subject to an insignificant risk of changes in value and with a
contractual period of maturity of less than three months; and
• Advances to/from banks repayable within three months from the date of the advance .
Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Group has a present legal or constructive obligation as a result of
a past event, and it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the Group’s best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. If the effect of the time value of money is material,
provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate, the risks specific to
the liability. Provisions are not recognised for future operating losses.
A contingent liability is (a) a possible obligation that arises from past events and whose existence will
be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the entity; or (b) a present obligation that arises from past events but is
not recognised because: (i) it is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; or (ii) the amount of the obligation cannot be measured
with sufficient reliability. Contingent liabilities are not recognised. Contingent liabilities are disclosed
unless the possibility of an outflow of resources embodying economic benefits is remote.
A contingent asset is a possible asset that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly
within the control of the entity. Contingent assets are not recognised. Contingent assets are disclosed
where an inflow of economic benefits is probable.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 86
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Non-current assets held for sale
A non-current asset is classified as held for sale if it is available for immediate sale in its present
condition subject only to terms that are usual and customary for sales of such assets and its sale must
be highly probable, that is:
• Management is committed to a plan to sell the asset and an active programme to locate a
buyer and complete the plan have been initiated;
• The asset is being actively marketed for sale at a sales price reasonable in relation to its current
fair value; and
• Actions required to complete the plan indicate that it is unlikely that the plan will be
significantly changed or withdrawn.
Immediately before the initial classification of the asset as held for sale, the carrying amount of the
asset will be measured in accordance with the applicable IFRSs. After classification, non-current assets
held for sale other than investment property that is measured at fair value, are measured at the lower
of the carrying amount and fair value less cost to sell and are not depreciated. Investment property
that is measured at fair value and presented as non-current asset held for sale continues to be
measured at fair value.
Leases
The Group acts both as a lessor and as a lessee. The accounting policies herein address the accounting
treatment of the Group in both instances.
The Group assesses whether a contract is or contains a lease at inception of the contract. A contract
is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a
period of time in exchange for a consideration.
The Group as a lessor
On commencement of the lease, the Group evaluates its classification in accordance with the covenants
in the contract and to the extent to which the lease transfers the risks and rewards from ownership of
the underlying asset. If substantially all the risks and rewards incidental to ownership of the asset are
transferred to the lessee, the contract would classify as a finance lease, whereas all other leases are
classified as an operating lease.
For the year under review, the Group does not hold any finance leases and thus all lease agreements
whereby the Group acts as a lessor are being reported as operating leases. Leased assets are presented
in the statements of financial position according to their nature and are tested for impairment in
accordance with the company’s accounting policy on impairment. Depreciable leased assets are
depreciated in accordance with the Group’s accounting policy on depreciation. Rental income from
operating leases is recognised on a straight-line basis over the term of the relevant lease unless another
systematic basis is more representative of the pattern in which benefit from the use of the underlying
asset is diminished. Initial direct costs incurred in obtaining an operating lease are added to the carrying
amount of the leased asset.
The Group as a lessee
The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term
of 12 months or less) and leases of low value assets. For these leases, the Group has elected to apply
the recognition exemptions and to recognise the lease payments as an expense on a straight-line basis
over the lease term unless another systematic basis is more representative of the pattern of the Group’s
benefit.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 87
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases (continued)
The Group as a lessee (continued)
The Group assesses the value of an underlying asset based on the value of the asset when it is new,
regardless of the age of the asset being leased. The assessment of whether an underlying asset is of
low value is performed on an absolute basis. Leases of low-value assets qualify for the exemption
regardless of whether those leases are material to the Group. The assessment is not affected by the
size, nature or circumstances of the Group.
The Group determines that the following leases qualify as leases of low-value assets on the basis of the
Group’s accounting policy for such items:
(a) Leases of IT equipment; and
(b) Leases of water dispensers.
The lease term is the non-cancellable period of a lease, together with both (a) periods covered by an
option to extend the lease if the Group is reasonably certain to extend that option; and (b) periods
covered by an option to terminate the lease if the Group is reasonably certain not to exercise that
option. In assessing the length of the non-cancellable period of a lease, the Group applies the definition
of a contract to determine the period for which the contract is enforceable. A lease is no longer
enforceable when the Group and the lessor each has the right to terminate the lease without permission
from the other party with no more than an insignificant penalty.
The Group revises the lease term if there is a change in the non-cancellable period of a lease, for
example if it exercises or does not exercise an option or if an event occurs that contractually oblige s
or prohibits the lessee from exercising an option. The Group reassesses whether it is reasonably certain
to exercise or not to exercise an option upon the occurrence of either a significant event or a significant
change in circumstances that: (a) is within its control and (b) affects whether the Group is reasonably
certain to exercise or not to exercise an option.
The lease liability is initially measured at the present value of the lease payments that are not paid at
the commencement date, discounted using the interest rate implicit in the lease. If that rate cannot be
readily determined, the Group uses its incremental borrowing rate. Lease payments included in the
measurement of the lease liability comprise:
• Fixed lease payments, less any lease incentives receivable;
• Variable lease payments that depend on an index or a rate, initially measured using the index
or rate at the commencement date;
• Amounts expected to be payable by the Group under residual value guarantees;
• The exercise price of a purchase option if the Group is reasonably certain to exercise that
option; and
• Payments of penalties for terminating the lease, if the lease term reflects the Group exercising
an option to terminate the lease.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on
the lease liability (using the effective interest method) and by reducing the carrying amount to reflect
lease payments made.
The right-of-use assets at the commencement date comprise the initial measurement of the
corresponding lease liability, any lease payments made at or before the commencement date, less any
lease incentives received and any initial direct costs. They are subsequently measured at cost less any
accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the
site on which it is located or restore the underlying asset to the condition required by the terms and
conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the
costs relate to a right-of-use asset, the costs are included in the related right-of-use asset .
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 88
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases (continued)
The Group as a lessee (continued)
Right-of-use assets are depreciated from the commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over the useful life of the underlying
asset.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any
identified impairment loss as described in the Section entitled ‘Impairment of non-financial assets and
investments in subsidiaries and associates’.
Some property leases contain variable payment terms that depend on an index/rate such as the
Property/retail/consumer price index. The Group measures the index of the lease payments using the
rate at the commencement date. After the commencement date, the Group is required to re-measure
the lease liability to reflect changes to the lease payments arising from changes in the index or rate.
The subsequent remeasurement of the lease liability is adjusted against the right-of-use asset. Variable
lease payments that do not depend on an index or rate are not included in the measurement of the
lease liability and the right-of-use asset. The related payments are recognised as an expense in the
period in which the event or condition that triggers those payments occurs and are included in the line
item in other administrative expenses in profit or loss.
If the Group is reasonably certain to exercise a purchase option, the exercise price is included as a lease
payment. That is, entities consider the exercise price of asset purchase options included in lease
contracts consistently with the evaluation of lease renewal and termination options.
As a practical expedient, the Group may elect, by class of underlying asset, not to separate non-lease
components from lease components, and instead account for each lease component and any
associated non-lease components as a single arrangement. The Group does not apply this practical
expedient. Accordingly, the Group is required to account for each lease component within the contract
as a lease separately from non-lease components of the contract.
The lease liability is remeasu red to reflect any reassessment or lease modifications, or to reflect revised
in-substance fixed lease payments. The amount of the remeasurement of the lease liability is
recognised as an adjustment to the right-of-use asset until this is reduced to zero after which the
corresponding adjustment is recognised in profit or loss. The Group remeasures the lease liability by
discounting the revised lease payments using a revised discount rate if (a) there is a change in the
lease term or (b) there is a change in the assessment of a purchase option. The Group remeasures the
lease liability by discounting the revised lease payments if (a) there is a change in the amounts
expected to be payable under a residual value guarantee or (b) there is a change in future lease
payments resulting from a change in an index or a rate used to determine those payments.
For a lease modification (that is, a change in the scope of a lease, or the consideration for a lease, that
was not part of the original terms and conditions of the lease) that is not accounted for as a separate
lease, the Group remeasures the lease liability by discounting the revised lease payments using a
revised discount rate.
The Group presents lease liabilities and right-of-use assets that are not investment property separately
from other assets and liabilities in the statements of financial p osition. The Group presents interest
expense on the lease liability separately from the depreciation charge for the right-of-use asset. In the
statements of cash flows, cash payments for the principal portion of the lease liability are presented
within financing activities and cash payments for the interest portion of the lease liability are presented
within operating activities . Short-term lease payments, payments for leases of low value assets and
variable lease payments not included in the measurement of the lease liability are presented within
operating activities.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 89
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair value measurement
The Group measures certain financial instruments and certain non-financial assets at fair value at each
reporting date as disclosed in the Basis of Preparation.
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 fair value measurement is
based on the presumption that the transaction to sell the asset or transfer the liability takes place either
in the principal market for the asset or liability or, in the absence of a principal market, in the most
advantageous market for the asset or liability. The fair value of an asset or a liability is measured using
the assumptions that market participants would use when pricing the asset or liability, assuming that
market participants act in their economic best interest.
The fair value for financial instruments traded in active markets at the reporting date is based on their
quoted price or binding dealer price quotations without any deduction for transaction costs. Securities
defined in these financial statements as ‘quoted’ are traded in an active market.
A fair value measurement of a non-financial asset takes into account a market participant's ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable;
• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
External valuers are involved for valuation of non-financial assets. Selection criteria of valuer include
market knowledge, reputation, independence and whether professional standards are maintained.
Significant accounting judgements, estimates and assumptions
In the process of applying its accounting policies, the Group is required to make judgements, estimates
and assumptions that affect the amounts recognised or disclosed in the financial statements. Uncertainty
about these assumptions and estimates could result in outcomes that require a material adjustment to
the carrying amount of assets or liabilities affected in future periods.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 90
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Significant accounting judgements, estimates and assumptions (continued)
Accounting for investments in which the Group controls less than 20%
Management has made the following judgements and estimates which have the most significant effect
on amounts recognised in the consolidated financial statements:
As of 31 December 2022, the Group directly held 9.07% (2021: 15.26%) interest in APS Income Fund,
and 2.90% (2021: 15.29%) interest in APS Regular Income Ethical Fund.
The Group assessed whether it has significant influence over the investees and concluded that
significant influence can be clearly established upon considering the following factors:
• Representation in the board of directors;
• Participation in policy-making processes;
• Material transaction between the investee and the Bank; and
• Provision of technical information and management services.
Therefore, the Group continue to account for the investment in APS Income Fund and APS Regular
Income Ethical Fund as associates (Note 25).
Accounting for investments in which the Group controls less than 50%
During the year under review the Group lost control over the APS Global Equity Fund through a dilution
in its investment. As of 31 December 2022, the Group directly held 43.51% (2021: 51.79%) (Note 25).
The Group assessed whether it still holds control or has significant influence over the investee and
concluded that control is lost upon considering the following factors:
• The Group does not have the ability to direct the relevant activities of the fund;
• Each fund has its own prospectus which can be affected by the majority shareholders; and
• Group does not have the ability to affect the variable returns of the fund.
Fair value of investment properties
The Group and the Bank carry their investment properties at fair value, with changes in fair value being
recognised in the statements of profit or loss. As at end of December 2021, the Group engaged an
independent valuation specialist to assess fair value. During the year under review no valuations took
place given that the property prices maintained an upward trajectory. The valuation specialist
determines the most appropriate methodology (market or/and income approach) depending on the
nature of the property (Note 26) .
Fair value of land and buildings included within property and equipment
Land and buildings owned by the Group are carried at fair value, with changes in fair value being
recognised in the OCI. As at end of December 2021, the Group engaged an independent valuation
specialist to assess fair value. During the year under review no valuations took place given that the
property prices maintained an upward trajectory. The valuation specialist determines the most
appropriate methodology (market/income approach) depending on the nature of the property (Note
27).
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 91
NOTES TO THE FINANCIAL STATEMENTS (continued)
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Significant accounting judgements, estimates and assumptions (continued)
Impairment losses on loans and advances
The Group and the Bank review their loans and advances at each reporting date to assess whether an
impairment loss should be recorded in the statements of profit or loss. In particular, management’s
judgment is required in the estimation of the amount and timing of future cash flows when determining
the impairment loss. These estimates are based on assumptions about a number of factors and actual
results may differ, resulting in future changes to the allowance.
The critical judgements and estimates are explained in Note 48.2 Credit Risk.
Impairment of debt and other fixed income securities.
The Group reviews its debt investments measured at FVTOCI and its debt investments measured at
amortised cost at each reporting date to assess whether they are impaired. This requires similar
judgment as applied to the individual assessment of loans and advances .
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 92
NOTES TO THE FINANCIAL STATEMENTS (continued)
3. INTEREST AND SIMILAR INCOME
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
On loans and advances to banks
396
7
396
7
On loans and advances to customers
73,101
63,239
73,101
63,239
73,497
63,246
73,497
63,246
On debt securities:
Measured at amortised cost
3,061
1,758
3,061
1,758
Amortisation on premiums and discounts on debt
securities measured at amortised cost
(763)
(772)
(763)
(772)
Measured at FVTPL
1,420
1,495
-
-
Measured at FVTOCI
4,163
5,169
4,163
5,169
Amortisation on premiums and discounts on
other debt securities
(1,519)
(1,761)
(1,519)
(1,761)
6,362
5,889
4,942
4,394
79,859
69,135
78,439
67,640
4. INTEREST EXPENSE
The Group / The Bank
2022
2021
€000
€000
On amounts owed to banks
1,268
331
On amounts owed to customers
11,591
11,534
On lease liabilities
119
120
On debt securities in issue
1,788
1,788
14,76 6
13,773
5. NET FEE AND COMMISSION INCOME
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
On loans and advances and other general
banking activities
5,141
4,561
5,141
4,561
On insurance, investments and similar activities
3,247
3,794
2,329
2,721
Other activities
727
627
727
627
9,115
8,982
8,197
7,909
Fee and commission expense
(2,253)
(1,981)
(2,253)
(1,981)
6,862
7,001
5,944
5,928
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 93
NOTES TO THE FINANCIAL STATEMENTS (continued)
6. DIVIDEND INCOME
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
From equity shares held in local and foreign entities
and collective investment schemes
131
312
1,477
1,273
7. NET GAINS ON FOREIGN EXCHANGE
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Net unrealised/realised gains on foreign exchange
1,300
404
860
428
8. NET (LOSSES)/GAINS ON FINANCIAL INSTRUMENTS
During the year under review and in previous year, the Group disposed of an insignificant amount of
financial assets held at amortised cost, realising previously unrecognised gains. The sale of these assets
is very infrequent and the Bank’s business model for managing financial assets at amortised cost has not
changed .
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Realised gains on disposal of financial assets at
amortised cost
984
572
984
572
Realised (losses)/gains on disposal of financial
assets at FVTOCI
(317)
216
1,076
216
Unrealised net fair value movements on financial
assets at FVTPL
(3,680)
(338)
-
46
Realised (losses)/gains on disposal of financial
assets at FVTPL
(6,266)
(30)
-
(47)
(10,263)
(152)
1,076
215
(9,279)
420
2,060
787
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 94
NOTES TO THE FINANCIAL STATEMENTS (continued)
9. EMPLOYEE COMPENSATION AND BENEFITS
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Wages and salaries (short-term):
- key management personnel other than Directors
6,965
4,922
6,965
4,922
- other staff
15,805
14,334
15,805
14,334
- wages recharged to subsidiary at cost
-
-
(586)
(423)
Social security contributions
1,316
1,169
1,316
1,169
Share based payments
147
-
147
-
Other staff costs
1,863
1,422
1,863
1,422
26,096
21,847
25,510
21,424
The average number of persons employed during the year was as follows:
The Group
The Bank
2022
2021
2022
2021
Senior Management
35
34
35
34
Managerial
152
125
152
125
Senior officers and officers
352
340
352
340
Others
9
9
9
9
548
508
548
508
Share Incentive Plan Awards
During the year the Group granted 637,800 share awards to certain employees. The table below summarises
outstanding share awards to employees with the respective vesting period:
Share-based payment awards were granted on 12th August 2022, with a vesting period of three years,
ending June 2025. The estimated fair value of each share award granted is of €0.65 cents and was measured
by applying the Black-Scholes valuation model. The model components inputs were the share price at grant
date of €0.65 cents, no strike price, expected dividend yield of 3.3% and a contractual life of 3 years. After
the vesting period, share awards are allotted to eligible employees for no consideration.
There are no vesting conditions attaching to the awards other than service conditions, and hence such
awards become due as soon as the vesting term ends. If employment is terminated before any vesting date,
the unvested awards will be forfeited unless it is a permissible cause relating to instances when termination
is the result of retirement, serious illness, injury or incapacitation, or any other situation which the Board
deems justifiable. All cases of permissible causes shall be communicated in writing by the Board to the
eligible employee. There were no forfeitures of awards during the year.
At year end, the total expense arising from these share incentive plan awards amounted to €147K and the
remaining contractual life stood at 2.5 years. Furthermore, no share awards were vested and allotted during
the financial year, thus all awards granted remain non-vested.
The Group/The Bank
Vesting year
Vesting date
Vesting percentage
2022
2021
Year 1
30 June 2023
50%
318,900
-
Year 2
30 June 2024
25%
159,450
-
Year 3
30 June 2025
25%
159,450
-
637,800
-
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 95
NOTES TO THE FINANCIAL STATEMENTS (continued)
10. OTHER ADMINISTRATIVE EXPENSES
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Remuneration payable to the statutory auditors for:
- the audit of financial statements
179
175
165
153
- tax advisory services
7
7
5
5
- other non-audit services
65
40
61
35
Directors’ emoluments
496
451
418
383
Insurance
430
332
426
331
Professional fees
1,778
1,613
1,684
1,489
Regulatory fees
3,464
2,853
3,458
2,848
Repairs and maintenance
4,822
4,133
4,782
4,102
Telecommunications
740
748
726
738
Office operating expenses
2,454
2,869
2,406
2,838
Other administrative expenses
1,705
1,446
1,446
1,262
16,140
14,667
15,577
14,184
Additional disclosures on Directors’ emoluments are made on pages 44 to 45 of the Remuneration
Report.
The above administrative expenses are inclusive of applicable VAT under the Maltese legislation.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 96
NOTES TO THE FINANCIAL STATEMENTS (continued)
11. NET REVERSAL OF IMPAIRMENT LOSSES
The Group / The Bank
2022
2021
€000
€000
Charge for the year:
- collective impairment
(739)
(987)
- individual impairment
(1,216)
(2,142)
- bad debts written off
(191)
(521)
(2,146)
(3,650)
Reversal of write-downs:
- collective impairment
1,068
4,555
- individual impairment
1,332
583
2,400
5,138
Net reversal of impairment losses
254
1,488
The Group / The Bank
2022
2021
€000
€000
Cash and balances with Central Bank of Malta
- Stage 1
10
(7)
Loans and advances to banks
- Stage 1
(44)
18
Loans and advances to customers:
- Stage 1
(54)
(88)
- Stage 2
282
3,195
- Stage 3
(74)
(2,080)
154
1,027
Syndicated loans:
- Stage 1
278
(184)
- Stage 2
(64)
590
214
406
Debt securities at amortised cost:
- Stage 1
(141)
13
Debt securities at FVTOCI:
- Stage 1
72
22
- Stage 2
(11)
9
61
31
Net reversal of impairment losses
254
1,488
The majority of the reversal of write-downs are in relation to loans and advances to customers.
Accordingly, the impairment losses gross of reversals for loans and advances to customers amounted
to €2,244K (20 21: €2,695K).
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 97
NOTES TO THE FINANCIAL STATEMENTS (continued)
12. INCOME TAX EXPENSE
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Current income tax
9,413
8,063
9,293
7,792
Deferred income tax
480
904
480
904
Income tax expense
9,893
8,967
9,773
8,696
A reconciliation between tax expense and the product of accounting profit multiplied by the applicable
tax rate in Malta of 35% (20 21: 35%) for the years ended 31 December 2022 and 2021 is as follows:
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Profit before tax
15,660
24,068
28,929
23,737
Theoretical tax expense at 35%
5,481
8,424
10,125
8,308
Tax effect of:
- Non-taxable sale of investments
4,254
(47)
(510)
(202)
- Income taxed at lower rates of tax
(517)
(439)
(517)
(439)
- Depreciation not recovered by way
of capital allowance
169
149
169
149
- Other disallowed expenses
715
1,065
715
1,065
- Other differences
(209)
(185)
(209)
(185)
Income tax expense
9,893
8,967
9,773
8,696
13. EARNINGS PER SHARE
The Group
The Bank
2022
2021
2022
2021
cents per
share
cents per
share
cents per
share
cents per
share
Basic earnings per share
1.8
5.9
6.1
5.9
The basic earnings per share was calculated on profit attributable to shareholders of the Group; €5,767K
(2021: €15,101K) and profit attributable to the Bank €19,15 6K (2021: €15,041K) divided by the weighted
average number of ordinary shares outstanding during the year amounting to 31 5,581K (Dec-21: 254,715K).
The Group
The Bank
2022
2021
2022
2021
cents per
share
cents per
share
cents per
share
cents per
share
Diluted earnings per share
1.8
5.9
6.1
5.9
The diluted earnings per share was calculated on profit attributable to shareholders of the Group; €5,767K
(2021: €15,101K) and profit attributable to the Bank €19,156K (2021: €15,041K) divided by the weighted
average number of ordinary shares outstanding during the year, together with the weighted average
number of ordinary shares that would be issued on conversion of all dilutive potential ordinary shares
into ordinary shares, amounting to 316,251K (Dec-21: 255,158K) .
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 98
NOTES TO THE FINANCIAL STATEMENTS (continued)
14. DIVIDENDS
During the year under review the Bank distributed a final gross dividend of €4,615,385 (net dividend of
€3,000,000) in cash. The Bank also distributed an interim gross dividend of €2,769,812 (net dividend of
€ 1,800,377) in the form of shares.
The Bank
2022
2021
€000
€000
Dividends paid on ordinary shares:
Final gross of income tax for 2021:
1.85 €cents per share (2020: 1.48 €cents per share)
4,615
3,692
Final net of income tax for 2021:
1.20 €cents per share (2020: 0.96 €cents per share)
3,000
2,400
Interim gross of income tax for 2022:
0.77 €cents per share (2021: - €cents per share)
2,769
-
Interim net of income tax for 2022:
0.50 €cents per share (2021: - €cents per share)
1,800
-
During the year Group subsidiaries paid dividends amounting to €1,457,000 (2021: €1,133,000) to their
shareholders, including the Bank.
Details of the recommended final dividen d for 2022 can be found on page 35 in the Directors’ report.
15. CASH AND BALANCES WITH CENTRAL BANK OF MALTA
The Group / The Bank
2022
2021
€000
€000
Cash in hand (Note 44)
13,499
15,165
Balances with Central Bank of Malta
(excluding reserve deposit) (Note 44)
50,011
173,072
Reserve deposit with Central Bank of Malta
22,379
19,498
Gross cash and bank balances
85,889
207,735
Less: allowance for impairment losses
(2)
(12)
Net cash and bank balances
85,887
207,723
Reserve deposits with Central Bank of Malta are mandatory and are not available for use in the Group’s
day-to-day operations. Included in balances with Central Bank of Malta is an amount of €2,506,000 (2021:
€2,281,000) pledged in favour of the MFSA’s Depositors’ Compensation Scheme. During the current and
the prior year, the Bank has been compliant with the reserve deposit requirement.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 99
NOTES TO THE FINANCIAL STATEMENTS (continued)
1 6. LOANS AND ADVANCES TO BANKS
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Repayable on call and at short notice (Note 44)
72,945
32,327
71,098
30,862
Gross loans and advances to banks (i)
72,945
32,327
71,098
30,862
Less: allowance for impairment losses (ii)
(75)
(31)
(75)
(31)
Net loans and advances to banks
72,870
32,296
71,023
30,831
(i) Gross loans and advances to customers analyzed by currency
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
- Euro
38,846
16,780
36,999
15,315
- Foreign
34,099
15,547
34,099
15,547
72,945
32,327
71,098
30,862
(ii) Impairment allowance for loans and advances to banks
The Group / The Bank
2022
2021
€000
€000
At 1 January
31
49
Charge/(reversal) for the year:
44
(18)
At 31 December
75
31
The impairment allowance on loans and advances to banks are recognised on a collective basis.
17. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Fixed income instruments and collective
investment schemes
41,046
61,846
-
-
Analysed by currency:
- Euro
22,522
35,866
-
-
- Foreign
18,524
25,980
-
-
41,046
61,846
-
-
Listing Status:
- Listed on MSE
2,023
2,311
-
-
- Listed elsewhere
39,023
59,535
-
-
41,046
61,846
-
-
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 100
NOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Carrying amount
At 1 January
61,846
50,636
-
251
Disposals
98,742
(34,640)
-
(250)
Acquisitions
(99,655)
46,243
-
-
Movement in fair value/foreign exchange
(9,038)
(393)
-
(1)
Derecognition of subsidiary
(10,849)
-
-
At 31 December
41,046
61,846
-
-
18. NON-CURRENT ASSETS HELD FOR SALE
The Group / The Bank
2022
2021
€000
€000
Property reclassified from investment properties (Note 26)
1,733
-
During the year under review the Group has put for sale one of its properties previously recognised as
investment property. The asset continued to be measured at fair value.
Given that the asset is available for immediate sale, there is an active program to locate a buyer and the
sale is highly probable that it will take place within 12 months, the property has been reclassified from
Investment property to non-current asset held for sale.
19. SYNDICATED LOANS
(i) Gross syndicated loans analyzed by currency
The Group / The Bank
2022
2021
€000
€000
- Euro
93,897
85,816
- Foreign
42,089
49,436
135,986
135,252
The Group / The Bank
2022
2021
€000
€000
Repayable within one year
44,401
61,904
Over one year
91,585
73,348
Gross syndicated loans (i)
135,986
135,252
Less: allowance for impairment losses (ii)
(776)
(990)
Net syndicated loans
135,210
134,262
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 101
NOTES TO THE FINANCIAL STATEMENTS (continued)
19. SYNDICATED LOANS (continued)
(ii) Impairment allowance for syndicated loans
The Group / The Bank
2022
2021
€000
€000
At 1 January
990
1,396
Collective charge for the year
(214)
(406)
At 31 December
776
990
The balance on impairment allowance for syndicated loans as at end of December 2022 and 2021 is all in
respect of collective impairment losses.
Concentration of syndicated loans
The following table shows the risk concentration by industry for syndicated loans, gross of provisions:
The Group / The Bank
2022
2021
€000
€000
Agriculture
4,757
5,931
Manufacturing
48,368
62,106
Financial intermediation
43,236
52,047
Public administration
-
2,652
Real estate, renting and business
21,000
-
Health and social work
18,625
12,516
Gross syndicated loans
135,986
135,252
20. LOANS AND ADVANCES TO CUSTOMERS
The Group / The Bank
2022
2021
€000
€000
Repayable on call and at short notice
80,512
73,155
Term loans and advances
2,163,164
1,878,216
Gross loans and advances to customers (i)
2,243,676
1,951,371
Less: allowance for impairment losses (ii)
(18,982)
(19,327)
Net loans and advances to customers
2,224,694
1,932,044
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 102
NOTES TO THE FINANCIAL STATEMENTS (continued)
20. LOANS AND ADVANCES TO CUSTOMERS (continued)
(i) Gross loans and advances to customers analyzed by currency
The Group / The Bank
2022
2021
€000
€000
- Euro
2,235,635
1,950,259
- Foreign
8,041
1,112
2,243,676
1,951,371
(ii) Impairment allowance for loans and advances to customers
The Group / The Bank
2022
2021
€000
€000
At 1 January
19,327
20,875
(Reversal)/charge for the year:
- Collective
(228)
(3,107)
- Individual
(117)
1,559
At 31 December
18,982
19,327
- Collective impairment losses
17,681
17,798
- Individual impairment losses
1,301
1,529
18,982
19,327
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 103
NOTES TO THE FINANCIAL STATEMENTS (continued)
20. LOANS AND ADVANCES TO CUSTOMERS (continued)
Concentration of loans and a dvances to customers
The following table shows the risk concentration by industry for loans and advances to customers, gross
of provisions:
The Group / The Bank
2022
2021
€000
€000
Agriculture
5,859
4,595
Fishing
6,001
16,089
Mining and quarrying
4
-
Manufacturing
22,523
29,342
Electricity, gas and water supply
5,805
4,519
Construction
92,041
79,943
Wholesale and retail trade
50,722
41,130
Hotels and restaurants, excluding related construction activities
130,139
131,845
Transport, storage and communication
38,187
28,741
Financial intermediation
76,885
80,590
Real estate, renting and business
180,984
120,083
Professional, Scientific and technical
13,191
11,184
Administrative and Support services
7,769
11,588
Public administration
8,043
6,099
Education
7,211
7,590
Health and social work
12,354
10,450
Community, recreational and personal service activities
4,219
4,556
Households and individuals
1,581,739
1,363,027
2,243,676
1,951,371
21. DERIVATIVE FINANCIAL INSTRUMENTS
The Group / The Bank
2022
2021
€000
€000
Derivative assets, designated as at fair value
through profit or loss, not designated as hedges
738
552
Derivative liabilities, designated as at fair value
through profit or loss, not designated as hedges
738
552
Derivative financial liabilities comprise customer deposits on which the return varies with the performance
of reference equity and commodity indices; the Group and the Bank manage the resulting market risks
through purchased warrants that are presented as derivative financial assets. Although the warrants
provide economic hedges, hedge accounting under IFRS 9 has not been applied.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 104
NOTES TO THE FINANCIAL STATEMENTS (continued)
21. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
The table below shows the fair values of derivative financial instruments recorded as assets and liabilities
together with their notional amount. The notional amount represents the basis upon which changes in the
value of derivatives are measured. Notional amount indicates the volume of outstanding transactions as at
the year end.
The Group / The Bank
Notional
Assets
Liabilities
Notional
Assets
Liabilities
2022
2022
2022
2021
2021
2021
€000
€000
€000
€000
€000
€000
Over the counter derivatives:
Equity/commodity-index warrants
purchased
31,600
738
-
25,100
552
-
Equity/commodity-index warrants
written
(31,600)
-
738
(25,100)
-
552
-
738
738
-
552
552
The Group’s exposure under the derivative contracts is closely monitored as part of the overall management
of market risk.
22. OTHER DEBT AND FIXED INCOME INSTRUMENTS
The Group / The Bank
2022
2021
€000
€000
At amortised cost
317,877
101,000
Fair value through other comprehensive income
141,927
227,103
Gross other debt and fixed income instruments (i)
459,804
328,103
Less: allowance for impairment losses (ii)
(203)
(62)
Net other debt and fixed income instruments
459,601
328,041
(i) Gross other debt and fixed income instruments
The Group / The Bank
2022
2021
At amortised cost
€000
€000
Issued by public bodies:
- Local government
43,419
15,941
Issued by other issuers:
- Foreign government
218,095
84,759
- Foreign other
56,363
300
274,458
85,059
Total
317,877
101,000
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 105
NOTES TO THE FINANCIAL STATEMENTS (continued)
22. OTHER DEBT AND FIXED INCOME INSTRUMENTS (continued)
The Group / The Bank
2022
2021
Fair value through other comprehensive income
€000
€000
Issued by public bodies:
- Local government
63,798
89,492
- Foreign government
56,837
62,993
120,635
152,485
Issued by other issuers:
- Foreign banks
5,562
22,548
- Foreign other
15,687
52,024
- Local other
43
46
21,292
74,618
Total
141,927
227,103
Total gross other debt and fixed income instruments
459,804
328,103
Analysed by currency:
- Euro
423,327
286,843
- Foreign
36,477
41,260
459,804
328,103
Unamortised premiums included within the gross other debt and
fixed income instrument
6,651
10,255
The Group / The Bank
2022
2021
€000
€000
Listing status:
- Listed on MSE
107,261
105,478
- Listed elsewhere
352,243
222,325
- Unlisted
300
300
459,804
328,103
Carrying amount– Gross of impairment allowances
The Group / The Bank
2022
2021
€000
€000
At amortised cost
At 1 January
101,000
104,307
Redemptions and disposals
(5,003)
(2,535)
Acquisitions
222,644
-
Amortisation
(764)
(772)
At 31 December
317,877
101,000
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 106
NOTES TO THE FINANCIAL STATEMENTS (continued)
22. OTHER DEBT AND FIXED INCOME INSTRUMENTS (continued)
(ii) Impairment allowance for debt and other fixed income instruments
The Group / The Bank
2022
2021
€000
€000
At 1 January
62
75
Collective charge/(reversal) for the year
141
(13)
At 31 December
203
62
The balance on impairment allowance for other debt and fixed income instruments as at end of December
2022 and 2021 is all in respect of collective impairment losses.
Eligible debt instruments with a nominal value of €225,800,000 (2021: €132,000,000) have been pledged
against the provision of credit lines by the Central Bank of Malta, under the usual terms and conditions applying
to such agreements. Debt instruments with a nominal value of €3,850,000 (2021: €3,850,000) have been
pledged in favour of the MFSA’s Depositors’ Compensation Scheme.
23. EQUITY AND OTHER NON-FIXED INCOME INSTRUMENTS
The Group / The Bank
2022
2021
€000
€000
Equity and other non-fixed income instruments at FVTOCI
303
307
Analysed by currency:
- Euro
228
228
- Foreign
75
79
303
307
Listing status:
- Unlisted
303
307
Carrying amount – Gross of impairment allowances
The Group / The Bank
2022
2021
€000
€000
Fair value through other comprehensive income
At 1 January
227,103
211,751
Redemptions and disposals
(67,209)
(19,756)
Acquisitions
4,117
33,525
Amortisation
(1,596)
(1,887)
Decrease in fair value
(23,635)
(6,692)
Exchange adjustments
3,147
10,162
At 31 December
141,927
227,103
Total
459,804
328,103
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 107
NOTES TO THE FINANCIAL STATEMENTS (continued)
23. EQUITY AND OTHER NON-FIXED INCOME INSTRUMENTS (continued)
The Group/The Bank
2022
2021
€000
€000
Carrying amount
At 1 January
307
303
Exchange adjustment
(4)
4
At 31 December
303
307
These equity investments are not held for trading. As part of the Group’s business model, investments recognised
at FVTOCI do not form part of its core business. No equity instruments measured at FVTOCI were derocognised
during 2022 (2021: same).
24. INVESTMENT IN SUBSIDIARIES
The Bank
2022
2021
€000
€000
Cost
At 1 January
45,251
45,251
Derecognition of a subsidiary to an associate (Note 25)
(5,000)
-
At 31 December
40,251
45,251
The investment in subsidiaries are made up as follows:
Country of
incorporation/
Equity interest
Cost
Name
2022
2021
2022
2021
Principle place
of business
%
%
€000
€000
APS Funds SICAV plc
Malta
99.99*
99.99*
1
1
1,199 founder shares at €1.00
(2021: 1,199 founder shares at €1.00)
APS Diversified Bond Fund
Malta
74.99
76.67
40,000
40,000
40,000,000 investor shares at €1.00
(2021: 40,000,000 investor shares at €1.00)
APS Global Equity Fund**
Malta
-
51.79
-
5,000
2021: 5,000,000 investor shares
at €1.00
ReAPS Asset Management Limited
Malta
100.00
100.00
250
250
250,000 ordinary shares at €1.00
(2021: 250,000 ordinary shares at €1.00)
40,251
45,251
*The 99.99% equity interest pertains solely to the Bank’s share in the total founder shares of APS Funds SICAV plc.
** During the year under review the Group lost control over the APS Global Equity Fund which investment is being
accounted for as an associate.
APS Diversified Bond Fund is held at cost in the Bank’s separate financial statements. Currently the fund is being
carried at an amount in excess than its fair value. Given that this is mainly due to the current interest rate
environment, the Bank is confident that this unrealised loss is only temporary and there will be a recovery in the
investment’s market values during 2023.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 108
NOTES TO THE FINANCIAL STATEMENTS (continued)
24. INVESTMENT IN SUBSIDIARIES (continued)
APS
Diversified
Bond Fund
APS
Diversified
Bond Fund
APS
Global
Equity Fund
APS
Global
Equity Fund
ReAPS Asset
Management
Limited
ReAPS Asset
Management
Limited
2022
2021
2022
2021
2022
2021
€000
€000
€000
€000
€000
€000
Current assets
43,370
52,513
-
11,698
2,604
1,888
Current liabilities
(93)
(261)
-
(108)
(1,107)
(590)
Net assets value
43,277
52,252
-
11,590
1,497
1,298
(Loss)/Income
(7,565)
181
-
1,234
1,785
2,078
Expenses
(498)
(422)
-
(149)
(1,478)
(1,344)
(Loss)/profit before tax
(8,063)
(241)
-
1,085
307
734
Tax
(13)
(13)
-
(1)
(107)
(257)
(Loss)/profit after tax
(8,076)
(254)
-
1,084
200
477
Dividends paid to
non-controlling interest
232
164
77*
54
-
-
*
Dividends paid to non-controlling interest until the date the Group lost control.
Following the loss of control of the APS Global Equity Fund, the Group derecognised retained earnings amounting to €480K. Total assets
derecognised amounted to €11,729K whereas total liabilities amounted to €41K. Derecognition of Non-controlling interest upon loss of
control amounted to €6,209K.
25. INVESTMENT IN ASSOCIATES
The Bank’s investment in associates is as follows:
Equity interest
Cost
Country of
incorporation/Principle
place of business
2022
2021
2022
2021
Name
%
%
€000
€000
APS Income Fund
Malta
9.07
15.26
5,688
9,886
56,880 investor shares at €100.01
(202 1: 98,853.14 investor shares at €100.01)
APS Regular Income Ethical Fund
Malta
2.90
15.29
1,000
5,000
1,000,000 investor shares at €1.00
(202 1: 5,000,000 investor shares at €1.00)
APS Global Equity Fund**
5,000,000 investor shares at €1.00
Malta
43.51
-
5,000
-
IVALIFE Insurance Limited
Malta
25.00
25.00
2,375
1,875
2,375,000 ordinary shares at €1.00
(202 1: 1,875,000 ordinary shares at €1.00)
14,063
16,761
**APS Global Equity Fund has been reclassified to an associate during the year under review and thus, it is showing as a subsidiary in
the comparative year.
APS Regular Income Ethical Fund and APS Global Equity Fund are held at cost in the Bank’s separate financial statements. Currently
the funds are being carried at an amount in excess than their fair value. This is mainly due to the current interest rate environment as
well as inflationary pressures which negatively impacted the market prices. The Bank is confident that this unrealised loss is only
temporary and there will be a recovery in the investments’ market values during 2023 .
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 109
NOTES TO THE FINANCIAL STATEMENTS (continued)
25. INVESTMENT IN ASSOCIATES (continued)
The following table illustrates summarised financial information of the Group’s investment in associates:
APS Income Fund
APS Regular Income
Ethical Fund
APS Global Equity
Fund
IVALIFE Insurance
Limited
2022
2021
2022
2021
2022
2021
2022
2021
€000
€000
€000
€000
€000
€000
€000
€000
Current assets
69,785
88,682
34,353
43,475
11,177
-
4,525
2,311
Non-current assets
-
-
-
-
-
-
14,717
9,243
Current liabilities
(227)
(273)
(104)
(169)
(41)
-
(1,156)
(741)
Non-current liabilities
-
-
-
-
-
-
(11,818)
(4,856)
Net assets value
(NAV)
69,558
88,409
34,249
43,306
11,136
-
6,268
5,957
Split into:
Accumulator shares
17,890
21,569
14,620
16,339
3,587
-
-
-
Distributor shares
51,668
66,840
19,629
26,967
7,549
-
-
-
69,558
88,409
34,249
43,306
11,136
-
-
-
Group’s share of:
- Distributor shares’ NAV
6,311
12,373
992
6,075
4,845
-
-
-
- NAV
-
-
-
-
-
-
1,567
1,490
(Loss)/Income
(6,679)
996
(5,990)
2,389
(1,84 2)
-
912
162
Expenses
(812)
(843)
(505)
(490)
(188)
-
(3,422)
(1,597)
(Loss)/profit before tax
(7,491)
153
(6,495)
1,899
(2,030)
-
(2,510)
(1,435)
Tax
(262)
(211)
(80)
(4)
(37)
-
879
503
(Loss)/profit after tax
(7,753)
(58)
(6,575)
1,895
(2,067)
-
(1,631)
(932)
Group’s share of
(loss)/profit for the year
(705)
(17)
(389)
271
(711)
-
(408)
(233)
Dividends paid to
the Group
216
253
32
105
62
-
-
-
The following table illustrates the movements in the carrying amount of the Group’s investment in associates:
2022
2021
€000
€000
Carrying amount of the investment at 1 January
19,803
18,641
Share of associate’s results, net of tax
(2,213)
21
Investment in associate
500
1,500
Dividend distribution
(3 10)
(359)
Part disposal of investment in associates
(9,589)
-
Retained interest following derecognition of subsidiary (Note 24)
5,476
-
Carrying amount of the investment at 31 December
13,667
19,803
The associates had no contingent liabilities or capital commitments as at 31 December 2022 (2021: the same) .
APS Income Fund, APS Regular Income Ethical Fund and APS Global Equity Fund
The APS Income Fund, APS Regular Income Ethical Fund and APS Global Equity Fund are sub-funds of APS Funds SICAV plc. The
Company is recognised under the laws of Malta as a multi-fund public limited liability company with varia ble share capital pursuant
to the Companies Act. The Company and its sub-funds are authorised in terms of the Investment Services Act (Cap. 370, Laws of
Malta) as an open-ended collective investment scheme qualifying as a Maltese UCITS, and licensed and regulated by the MFSA
.
During the year under review the Group lost control over the APS Global Equity Fund through a dilution in its investment and as
at year end the percentage holding was of 43.5%. In this respect the fund has been classified as an associate given that the Group
still holds significant influence.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 110
NOTES TO THE FINANCIAL STATEMENTS (continued)
25. INVESTMENT IN ASSOCIATES (continued)
The APS Global Equity Fund is not listed on a Stock Exchange and its fair value represents a Level 2
investment in the fair value hierarchy:
APS Global Equity
Fund
2022
2021
€
€
Accumulator
0.9999
1.2036
Distributor
0.9690
1.19970
During the year under review, the Group disposed of a portion in its investment in associates, APS Income
Fund and APS Ethical Income Fund. The proceeds from disposal of the investments amounted to €9.6
million.
As at end of December 2022, the Group held 9.1% and 2.9% in APS Income Fund and APS Ethical Income
Fund respectively. The Group still holds significant influence in these investments and thus, have been
treated as associates as at end of December 2022.
The following are the quoted market prices of the APS Income Fund as at end of December 2022 and
December 2021 and represent Level 1 investments in the fair value hierarchy:
APS Income Fund
2022
2021
€
€
Accumulator
172.1394
189.7413
Distributor
110.9545
125.1633
The APS Regular Income Ethical Fund is not listed on a Stock Exchange and its fair value represents a
Level 2 investment in the fair value hierarchy:
APS Regular Income Ethical
Fund
2022
2021
€
€
Accumulator Class A
1.31910
1.5665
Distributor Class B
0.9924
1.2149
Accumulator Class C
1.31170
1.5589
Distributor Class D
0.9890
1.21120
The fair value of the investments in APS Income Fund (Class D), APS Regular Income Ethical Fund
(Class B) and APS Global Equity Fund (Class D) as at 31 December 2022 amounted to €12,148,492
(2021: €18,447,285). The fair value of the investment in IVALIFE Insurance Limited as at 31 December
2022 amounted to €1,566,806 (2021: €1,489,538).
IVALIFE Insurance Limited
During the financial year ended 31 December 2022, the Group made a further investment of €500,000
(Dec-21: €1,500,000) in IVALIFE Insurance Limited (IVALIFE).
The Group is deemed to have a significant influence in the company and is measuring its investment
as an associate .
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 111
NOTES TO THE FINANCIAL STATEMENTS (continued)
26. INVESTMENT PROPERTIES
The Group’s investment properties consist of commercial and residential properties in Malta. As at 31 December
2022 and 2021 the fair values of investment properties held by the Group were as follows:
The Group / The Bank
2022
2021
€000
€000
As at 1 January
6,053
1,830
Reclassification from property and equipment to investment property,
net of depreciation
2,100
3,998
Improvements to property
59
24
Fair value movement
114
201
Reclassification from investment property to non-current
assets held for sale (Note 18)
(1,733)
-
As at 31 December
6,593
6,053
During the year under review the Group did not repossess or sell any investment properties. However, the Group
reclassified one of its investment properties to non-current assets held for sale. The fair value of the property was to
deemed to be € 1,733K. During 2022 the Group also reclassified one of its properties from property, plant and
equipment to Investment property.
Leased Investment Property
In 2021, the Group entered into an agreement whereby, one of its properties which was previously classified under
property and equipment was leased out to third parties. Consequently, the Group reclassified property with a carrying
amount of € 3,998K from property and equipment to investment property.
The agreement, which was signed in 2021, is for a period of 15 years expiring in 2036. The initial term may be extended
by the mutual written agreement of both parties by an additional 5 years.
The unguaranteed residual value of the property does not represent a significant risk for the Group, as it relates to
property which is situated in a location with a constant increase in value over the past years. The Group did not identify
any indications that the situation will change.
In this respect the Group recorded the amount of €177K (2021: €44K) as rental income on this said property. Direct
operating expenses incurred during the year were mainly professional fees and insurance cover which costs are
deemed to be minimal. No other rental income was received from the other properties.
At the end of the reporting period, the respective lessees had outstanding undiscounted lease payments for operating
leases, which fall due as follows:
The Group / The Bank
2022
2021
€000
€000
Within one year
177
177
Within two years
177
177
Within three years
177
177
Within four years
177
177
Within five years
177
177
Over five years
1,549
1,726
2,434
2,611
Fair value movements are recognised as “Other operating income” in the statements of profit or loss.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 112
NOTES TO THE FINANCIAL STATEMENTS (continued)
27. PROPERTY AND EQUIPMENT
The Group/The Bank
Land and
Computer
Buildings
Equipment
Other
Total
€000
€000
€000
€000
Cost or valuation
At 1 January 2021
35,560
10,155
20,827
66,542
Additions
586
433
1,358
2,377
Disposals
(281)
-
-
(281)
Reclassification to investment
property
(4,000)
-
-
(4,000)
Revaluation decrease of property
(1,784)
-
-
(1,784)
Accumulation of depreciation on
revalued property
(250)
-
-
(250)
At 31 December 2021
29,831
10,588
22,185
62,604
Additions
212
1,163
837
2,212
Reclassification to investment
property
(2,100)
-
-
(2,100)
At 31 December 2022
27,943
11,751
23,022
62,716
Depreciation
At 1 January 2021
1,166
6,657
12,539
20,362
(Reversal)/charge for the year
(135)
987
751
1,603
Reclassification to investment
property
(2)
-
-
(2)
Disposals
(99)
-
-
(99)
Accumulation of depreciation on
revalued property
(258)
-
-
(258)
At 31 December 2021
672
7,644
13,290
21,606
Charge for the year
116
942
853
1,911
Prior year adjustments
(53)
-
-
(53)
At 31 December 2022
735
8,586
14,143
23,464
Net Book Value
At 31 December 2022
27,208
3,165
8,879
39,252
At 31 December 2021
29,159
2,944
8,895
40,998
At 1 January 2021
34,394
3,498
8,288
46,180
2022
2021
€000
€000
Future capital expenditure:
- Authorised by the Directors and contracted
757
89
- Authorised by the Directors but not yet contracted
2,475
2,974
3,232
3,063
The gross carrying amount of fully depreciated property and equipment that are sti ll in use as at 31 December
2022 is of €17,992 K (2021: €16,276K).
The revaluation decrease recognised during 2021 in respect of land and buildings included as part of the
other (loss)/income within the statements of profit or loss amounts to €914K.
The carrying amount of land and buildings at 31 December 2022 that would have been recognised had these
been carried under the cost model is €10,218K (2021: €12,169K) for both the Group and the Bank.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 113
NOTES TO THE FINANCIAL STATEMENTS (continued)
28. INTANGIBLE ASSETS
The Group
The Bank
Computer
Computer
software
software
€000
€000
Cost
At 1 January 2021
22,259
22,255
Additions
4,803
4,803
At 31 December 2021
27,062
27,058
Additions
5,063
5,063
At 31 December 20 22
32,125
32,121
Amortisation
At 1 January 2021
13,411
13,407
Charge for the year
1,905
1,905
At 31 December 2021
15,316
15,312
Charge for the year
2,264
2,264
At 31 December 2022
17,580
17,576
Net book value
At 31 December 20 22
14,545
14,545
At 31 December 2021
11,746
11,746
At 1 January 2021
8,848
8,848
The Group/The Bank
2022
2021
€000
€000
Future capital expenditure:
- Authorised by the Directors and contracted
7,835
3,327
- Authorised by the Directors but not yet contracted
6,661
2,089
14,496
5,416
The gross carrying amount of fully amortised intangible assets that are still in use as at 31 December
2022 is of €10,017K (2021: €9,527K) .
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 114
NOTES TO THE FINANCIAL STATEMENTS (continued)
29. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
The Group leases properties, warehouses, office spaces, vehicles, spaces for the utilisation of parking and
utilisation of space to provide banking related services.
Rental contracts are typically made for fixed periods with the lease term varying from 4 years to 20 years,
with some of the lease agreements containing an extension option. Lease terms are negotiated on an
individual basis and contain a wide range of different terms and conditions.
Extension and Termination Options
Extension and termination options are included in a number of property leases across the Group. These
are used to maximise operational flexibility in terms of managing the assets used in the Group`s
operations. The majority of extension and termination options held are exercisable only after an express
written consent by both parties after expiration of the contract. Where lessor consent is also required, the
Group does not have enforceable rights over the periods covered by the extension options, and these
optional periods are excluded from the lease term.
If the Group has the unilateral right to exercise extension options, the periods covered by the extension
options are only included in the lease term if the Group has economic compulsion to exercise the option;
those periods are excluded from the lease term where the Group could replace the assets without
significant cost or business disruption.
Purchase options
The majority of the Group’s leased vehicles have a term which varies between 5 to 7 years. The Group has
the option to purchase these vehicles, however there is no intention to exercise the option when the lease
term expires.
Moreover, additional vehicle lease agreements were entered into late during 2022 with each having a 5-
year lease term. A purchase option has been granted at the expiration of the agreement, whereby the
lessee has the option to purchase the vehicle. However, the Group has no intention to exercise this option.
The statements of financial position show the following amounts relating to leases:
The Group/The Bank
2022
2021
€000
€000
Right-of-use-assets
Property
4,717
4,782
Equipment
15
19
Vehicles
308
250
5,040
5,051
Lease liabilities
Current
630
469
Non-Current
4,616
4,879
5,246
5,348
Additions to the right-of-use assets during the year ended 31 December 202 2 were €866K (2021: €768K),
whilst derecognised leases for which term has expired in 2022 amounted to €260K (2021: €389K). Total
cash outflows in relation to leases during the year amounted to €921K (2021: €585K).
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 115
NOTES TO THE FINANCIAL STATEMENTS (continued)
29. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued)
The statements of profit or loss shows the following amounts relating to leases:
The Group/The Bank
2022
2021
€000
€000
Depreciation charge on right-of-use assets
Property
544
497
Equipment
4
-
Vehicles
70
65
618
562
Other expenses recognised in profit or loss
Interest expense (included in interest expense)
119
120
Expenses relating to leases of low-value assets
(included in other administrative expenses)
23
75
142
195
Variable Lease payments
During the year under review, the Group recognised a new lease subject to variable lease payments measured at the
rate as specified in the lease agreement whereby the rent is increased on an annual basis or as otherwise indicated in
the contract.
Leases not yet commenced to which the lessee is committed
As at end of December 2022, there were no leases not yet commenced, to which the Group is committed (2021: same).
Residual Guarantees
During the current financial year, there were no leases with residual value guarantees.
Restrictions or covenants
The Group is restricted from assigning, letting or subletting of the premises to third parties. However, there are cases
where the lessee may be able to do so with prior written consent of the lessor and which approval shall remain in the
absolute discretion of the lessor.
Restrictions are also imposed in cases of motor vehicles where the lessee is expressly prohibited from lending, leasing,
hiring or in any other manner transferring control or use of the vehicle to third parties whether gratuitously or against
payment or in any other manner, whether directly or indirectly, using the vehicle for hire and reward purposes.
The Group is expressly precluded from permitting the utilisation of the properties or any part thereof for any other
purpose than that stipulated in the contract.
The following table shows the movement on the Lease liabilities:
The Group/The Bank
2022
2021
€000
€000
At 1 January
5,348
5,365
Additions
933
768
Disposals
(326)
(3)
Interest expense
119
120
Lease term adjustments
-
(386)
Lease liability Payments
(828)
(516)
At 31 December
5,246
5,348
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 116
NOTES TO THE FINANCIAL STATEMENTS (continued)
30. OTHER RECEIVABLES
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Accrued income
6,576
6,491
6,576
6,491
Prepayments and other receivables
1,440
2,661
600
1,489
Amounts due from subsidiaries
-
-
1,026
323
8,016
9,152
8,202
8,303
Amounts due from subsidiaries represent accrued income that is unsecured, do not bear interest,
and will fall due for payment within three months.
31. DEFERRED TAX ASSETS
Deferred income tax at 31 December relates to the following:
The Group / The Bank
2022
2021
€000
€000
Fair value movements on investment securities
709
(496)
Fair value movements on investment properties
(178)
(164)
Impairment allowance for loans and advances
to banks and customers
6,942
7,126
Impairment allowance for investment securities
7
21
Excess of capital allowances over depreciation
(2,009)
(1,756)
Movement on right-of-use assets
72
104
Revaluation of land and buildings
(2,586)
(2,586)
2,957
2,249
Deferred tax arising on the fair value movements on land and buildings classified in the statements
of financial position within property and equipment and on investment securities, amounting to
€1,186K was credited (2021: €609K credited) directly in OCI. For details on other movements refer
to Note 12.
32. AMOUNTS OWED TO BANKS
The Group / The Bank
2022
2021
€000
€000
With agreed maturity dates or periods
of notice, by remaining maturity:
- 3 months or less but not repayable
on demand (Note 44)
44,191
49,463
- over 3 months but less than 1 year
6,196
-
- over 1 year
-
7,745
50,387
57,208
Analysed by currency:
- Euro
6,210
22,228
- Foreign
44,177
34,980
50,387
57,208
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 117
NOTES TO THE FINANCIAL STATEMENTS (continued)
33. AMOUNTS OWED TO CUSTOMERS
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Term deposits
902,252
812,181
902,252
812,181
Repayable on demand
1,808,381
1,619,576
1,810,552
1,620,892
2,710,633
2,431,757
2,712,804
2,433,073
Analysed by currency:
- Euro
2,631,933
2,358,371
2,634,104
2,359,687
- Foreign
78,700
73,386
78,700
73,386
2,710,633
2,431,757
2,712,804
2,433,073
34. ACCRUALS
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Accrued interest payable
4,471
4,244
4,471
4,244
Other accruals
9,150
9,081
9,090
8,980
13,621
13,325
13,561
13,224
35. DEBT SECURITIES IN ISSUE
The Group / The Bank
2022
2021
€000
€000
At 1 January
54,597
54,558
Amortisation of issuance costs
45
39
At 31 December
54,642
54,597
During 2020 the Bank issued 3.25% Unsecured Subordinated Bonds which are due to mature in
2030. The bonds may be early redeemed by the Bank on specific dates, subject to MFSA
approval and subject to the Bank providing at least 30 days’ written notice. The bonds are b eing
classified as a financial liability at amortised cost and are denominated in Euro.
36. OTHER LIABILITIES
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Bills payable
9,679
9,098
9,679
9,098
Other liabilities
3,442
1,352
3,401
1,306
13,121
10,450
13,080
10,404
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 118
NOTES TO THE FINANCIAL STATEMENTS (continued)
37. SHARE CA PITAL
The Group / The Bank
2022
2021
€000
€000
Authorised
500,000,000 ordinary shares at €0.25 each
(2021: 400,000,000 ordinary shares of €0.25 each)
125,000
100,000
Issued and fully paid
366,917,168 ordinary shares of €0.25 each
(2021: 249,715,662 ordinary shares of €0.25 each)
91,729
62,429
The Group / The Bank
Number of
Number of
Shares
shares
2022
2021
2022
2021
€000
€000
‘000
‘000
At 1 January
62,429
62,255
249,716
249,019
Issue of new shares
27,500
-
110,000
-
Scrip dividend (Note 14)
1,800
174
7,201
697
At 31 December
91,729
62,429
366,917
249,716
During 2021, the Bank distributed a final gross dividend amounting to €3.7 million (net dividend of €2.4
million) (Note 14). Equity holders were given the option of a scrip dividend and share capital was
accordingly increased by 696,462 shares. During 2022, the Group made an IPO of 100 million new
ordinary shares subject to an over-allotment option of an additional 10 million new shares. The IPO was
fully subscribed, and the Group’s equity was accordingly increased by €65.8 million, with €27.5 million
being the increase in share capital and €38.0 million being the increase in share premium (Note 38).
Following the publication of the interim results, the Group paid an interim gross dividend amounting to
€2.8 million (net dividend of €1.8 million) (Note 14) payable through the issuance of new ordinary shares.
The share capital was further increased to €91.7 million through capitalisation of retained earnings.
Further information on the Bank’s Shareholders is disclosed in the Directors’ Report and in Note 49.
38. SHARE PREMIUM
The Group / The Bank
2022
2021
€000
€000
At 1 January
10,453
10,140
Scrip dividend (Note 14)
-
313
Issue of new shares
37,957
-
At 31 December
48,410
10,453
The share premium reserve is not available for distribution.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 119
NOTES TO THE FINANCIAL STATEMENTS (continued)
39. REVALUATION RESERVE
The Group and the Bank apply the revaluation model for the subsequent measurement of land and
buildings classified in the statements of financial position within property and equipment.
The Group / The Bank
2022
2021
€000
€000
Revaluation reserve on:
Financial instruments at FVTOCI
(12,085)
10,268
Land and buildings
15,066
15,066
2,981
25,334
The following table shows the movement in the revaluation reserve attributable to the land and buildings
and financial instruments measured at FVTOCI:
The Group / The Bank
Land and buildings
Financial instruments
at FVTOCI
2022
2021
2022
2021
€000
€000
€000
€000
At 1 January
15,066
15,880
10,268
16,380
Revaluation adjustment, gross of tax
-
(863)
(23,539)
(6,672)
Deferred tax thereon
-
49
1,186
560
At 31 December
15,066
15,066
(12,085)
10,268
The revaluation reserve is not available for distribution.
40. RETAINED EARNINGS
The retained earnings represent retained profits which are available for distribution to Shareholders
subject to qualification as realised profits in accordance with the requirements of the Companies Act,
Cap. 386 of the Laws of Malta.
Retained earnings is inclusive of €2,904K (2021: €1,700K) set aside for General Banking Risk under
Banking Rule BR/09/2013.
41. NON-CONTROLLING INTEREST
The following is a reconciliation of the Non-controlling interest:
APS Diversified
Bond Fund
APS Global
Equity Fund
Total
2022
2021
2022
2021
2022
2021
€000
€000
€000
€000
€000
€000
At 1 January
12,837
9,351
5,795
477
18,632
9,828
Creation of shares
1,028
4,453
707
4,900
1,735
9,353
Redemption of shares
(631)
(743)
-
(51)
(631)
(794)
Dividends paid
(232)
(164)
(77)
(54)
(309)
(218)
Profit after tax
(2,020)
(60)
(216)
523
(2,236)
463
Derecognition of
subsidiary
-
-
(6,209)
-
(6,209)
-
At 31 December
10,982
12,837
-
5,795
10,982
18,632
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 120
NOTES TO THE FINANCIAL STATEMENTS (continued)
42. CONTINGENT LIABILITIES
The Group / The Bank
2022
2021
€000
€000
Guarantees
20,610
21,278
Other contingent liabilities
1,301
4,078
21,911
25,356
In the ordinary course of business, the Bank gives financial guarantees, consisting of letters of credit
and guarantees. The measurement of these instruments is disclosed in the accounting policies.
The commitments primarily have one year expiry date to be withdrawn.
43. COMMITMENTS
The Group / The Bank
2022
2021
€000
€000
Undrawn formal standby facilities, credit
facilities and other commitments to lend
878,787
802,552
Capital commitments, if any, are disclosed in Notes 27 – 31.
44. CASH AND CASH EQUIVALENTS
The Group
The Bank
2022
2021
2022
2021
€000
€000
€000
€000
Cash in hand (Note 15)
13,499
15,165
13,499
15,165
Balances with Central Bank of
Malta (excluding reserve deposit)
(Note 15)
50,011
173,072
50,011
173,072
Loans and advances to banks
(repayable within 3 months)
(Note 16)
72,945
32,327
71,098
30,862
Amounts owed to banks (3 months or less)
(Note 32)
(44,191)
(49,463)
(44,191)
(49,463)
Cash and cash equivalents included
in the statements of cash flows
92,264
171,101
90,417
169,636
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 121
NOTES TO THE FINANCIAL STATEMENTS (continued)
45. OPERATING SEGMENTS
An operating segment is a component of the Group that engages in business activities from which it may
earn revenues and incur expenses. Operating results of all operating segments are regularly reviewed by
the chief operating decision maker to make decisions about resources to be allocated to the segment
and assess its performance, and for which discrete financial information is available.
The Group has four reportable segments, as reported below. In identifying segments, Management
follows the Group’s service lines which make up its main products and services.
• Retail: offers a broad range of products and services to meet the personal banking of individual
customers. This includes home loans, personal loans, overdraft facilities and deposits products.
•
Commercial: offers banking products to meet the needs of commercial customers. This includes
all lending facilities falling under the suite of the commercial products as well as deposit products.
• Investment ser vices: provides a range of products and services to meet the investment need of
clients including a broad range of investment and insurance products, as well as the pension plan
product and discretionary investment services.
• Liquidity management and structured loans: includes the management of the financial
investments portfolio, correspondent bank relationships and the trade finance and syndicated
loan portfolios.
Each of these operating segments is managed separately as each requires a different client approach
and expertise. As for intersegment transactions, Retail is being compensated for unutilised deposits
which are being used by other segments as follows; Commercial amounting to €2,367 K (2021: €3,926K)
and Liquidity Management and Structured Loans amounting to €3,98 1K (2021: €6,346K). The
compensation rate is based on the price charged to unrelated customers in a stand-alone sale of identical
services. The total amount of the intersegment transactions amount to €6,348 K (2021: €10,272K).
In addition, several costs, assets, and liabilities which are not directly attributable to the business activities
of any operating segment are not allocated to a segment but rather included within the below table under
the unallocated items. This primarily applies to the following items which are not included in the tables
hereunder:
• Salaries pertaining to staff contributing to other cost centres;
• Recurrent costs of maintenance agreements for software and hardware support, attributed to
other cost centres;
• Depreciation charge of fixed assets attributed to other cost centres;
• Property and Equipment; and
• Other assets and liabilities which include tax liability, accruals and accrued income.
All revenues, investment properties, property and equipment, intangible assets and right-of-use assets
are attributed to Malta. The information in this note is based on internal management reports that are
reviewed by the Group’s Executive Committee.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 122
NOTES TO THE FINANCIAL STATEMENTS (continued)
45. OPERATING SEGMENTS (continued)
Retail
Commercial
Investment
Services
Liquidity Management
and Structured Loans
Total Reportable
Segments
Dec-22
Dec-21
Dec-22
Dec-21
Dec-22
Dec-21
Dec-22
Dec-21
Dec-22
Dec-21
The Group
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
Interest and similar
income from external
customers
40,581
34,330
24,498
23,217
-
-
12,267
9,161
77,346
66,708
Interest expense
(12,114)
(12,042)
(603)
(695)
-
-
(1,960)
(942)
(14,677)
(13,679)
Intersegment
transactions
6,348
10,272
(2,367)
(3,926)
-
-
(3,981)
(6,346)
-
-
Net fee and
commission income
and other income
1,291
955
3,255
2,767
1,790
2,708
1,884
1,939
8,220
8,369
Net (losses)/gains on
financial instruments
-
-
-
-
-
-
(8,870)
420
(8,870)
420
Operating income
before net
impairments
36,106
33,515
24,783
21,363
1,790
2,708
(660)
4,232
62,019
61,818
Impairment
(losses)/gains
(110)
2,970
454
(1,426)
-
-
101
298
445
1,842
Net operating
income
35,996
36,485
25,237
19,937
1,790
2,708
(559)
4,530
62,464
63,660
Personnel expenses
(3,342)
(3,505)
(1,370)
(1,292)
(2,128)
(1,678)
(522)
(397)
(7,362)
(6,872)
Other administrative
and operating
expenses
(521)
(642)
(58)
(31)
(532)
(422)
(260)
(246)
(1,371)
(1,341)
Operating expenses
(3,863)
(4,147)
(1,428)
(1,323)
(2,660)
(2,100)
(782)
(643)
(8,733)
(8,213)
Net operating profit
before associates’
results
32,133
32,338
23,809
18,614
(870)
608
(1,34 1)
3,887
53,731
55,447
Share of results from
associates
-
-
-
-
-
-
(2,213)
21
(2,213)
21
Profit before tax as
per segments
32,133
32,338
23,809
18,614
(870)
608
(3,554)
3,908
51,518
55,468
Less:
Unallocated items
-
-
-
-
-
-
-
-
(35,858)
(31,400)
Profit before tax as
per statements of
profit or loss
32,133
32,338
23,809
18,614
(870)
608
(3,554)
3,908
15,660
24,068
Retail
Commercial
Investment
Services
Liquidity
Management and
Structured Loans
Total Reportable
Segments
Dec-22
Dec-21
Dec-22
Dec-21
Dec-22
Dec-21
Dec-22
Dec-21
Dec-22
Dec-21
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
Total assets as
per segments
1,523,605
1,302,478
701,089
629,567
-
-
809,322
787,710
3,034,016
2,719,755
Add: Unallocated
items
78,136
75,249
Total assets as
per statements of
financial position
3,112,152
2,795,004
Investment in
associates
-
-
-
-
-
-
13,667
19,803
13,667
19,803
Total liabilities as
per segments
2,522,220
2,243,360
188,413
188,397
-
-
105,767
112,357
2,816,400
2,544,114
Add: Unallocated
items
34,294
30,068
Total liabilities as
per statements of
financial position
2,850,694
2,574,182
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 123
NOTES TO THE FINANCIAL STATEMENTS (continued)
45. OPERATING SEGMENTS (continued)
Dec-22
Dec-21
€000
€000
Profit before tax
As per reportable segments
51,518
55,468
Unallocated items:
Interest receivable
2,424
2,340
Net fee and commission income and other income
219
(1,009)
Personnel expenses
(19,150)
(15,357)
Professional fees
(1,559)
(1,313)
Repairs and maintenance
(4,740)
(4,102)
Telecommunications
(713)
(721)
Other administrative expenses
(7,371)
(6,814)
Depreciation and amortisation
(4,777)
(4,070)
Write-offs
(191)
(354)
As per statements of profit or loss
15,660
24,068
Dec-22
Dec-21
€000
€000
Total assets
As per reportable segments
3,034,016
2,719,755
Unallocated items:
Investment properties
6,593
6,053
Non-current assets held for sale
1,733
-
Property and equipment
39,252
40,998
Intangible assets
14,545
11,746
Right-of use assets
5,040
5,051
Deferred tax assets
2,957
2,249
Other receivables
8,016
9,152
As per statements of financial position
3,112,152
2,795,004
Dec-22
Dec-21
€000
€000
Total liabilities
As per reportable segments
2,816,400
2,544,114
Unallocated items:
Current tax
2,306
945
Lease liabilities
5,246
5,348
Other liabilities
13,121
10,450
Accruals
13,621
13,325
As per statements of financial position
2,850,694
2,574,182
46. RELATED PARTY DISCLOSURES
The Group’s structure
The consolidated financial statements of the Group include the financial statements of APS Bank plc and
its subsidiaries and associates, as disclosed in Notes 24 and 25 respectively. During the course of its
normal banking business, the Bank conducts business on commercial terms with its subsidiaries,
associates, shareholders, key management personnel and other related parties.
The registered office of APS Funds SICAV plc, APS Regular Income Ethical Fund, APS Income Fund, APS
Diversified Bond Fund, APS Global Equity Fund and ReAPS Asset Management Limited is APS Centre,
Tower Street, Birkirkara, BKR 4012. The registered office of IVALIFE Insurance Limited is Gaba Building,
Level 2, Naxxar Road, Iklin, IKL 9026.
Information on the Bank’s Shareholders is disclosed in the Directors’ Report and in Note 49.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 124
NOTES TO THE FINANCIAL STATEMENTS (continued)
46. RELATED PARTY DISCLOSURES (continued)
Related party transactions
The following tables provide the total amount of transactions, which have been entered into by the Group
and the Bank with the shareholders, key management personnel, subsidiaries, associates and other
related parties for the year under review:
The Group
The Bank
Dec-22
Dec-21
Dec-22
Dec-21
€000
€000
€000
€000
Interest and similar income:
Shareholders
15
5
15
5
Key management personnel
36
32
36
32
Other related parties
255
63
255
63
Fee and commission income:
ReAPS Asset Management Limited
-
-
803
1,230
APS Income Fund
576
663
-
-
APS Regular Income Ethical Fund
360
382
-
-
APS Global Equity Fund
110
-
-
-
IVALIFE Insurance Limited
37
15
-
-
Shareholders
211
497
-
52
Other related parties
147
183
-
-
Interest expense:
APS Income Fund
7
18
7
18
Shareholders
136
179
136
179
Key management personnel
15
7
15
7
Other related parties
8
38
8
38
Personnel expenses:
Key management personnel
4,938
3,712
4,938
3,712
General administrative expenses:
Shareholders
221
278
221
278
The Group
The Bank
Dec-22
Dec-21
Dec-22
Dec-21
€000
€000
€000
€000
Amounts due (to)/from related parties
ReAPS Asset Management Limited
-
-
(1,145)
(1,002)
APS Income Fund
(738)
(3,097)
(870)
(3,263)
APS Regular Income Ethical Fund
86
105
-
(1)
APS Global Equity Fund
28
-
IVALIFE Insurance Limited
15
18
-
-
Other related parties
40
65
-
-
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 125
NOTES TO THE FINANCIAL STATEMENTS (continued)
46. RELATED PARTY DISCLOSURES (continued)
Related party transactions (continued)
Related party transactions in respect of Shareholders and key management personnel are included in the
below tables.
a) Compensation of key management personnel of the Group/Bank
The amounts disclosed in Note 9 and 10 are recognised as an expense during the reporting year and are
paid to key management personnel of the Group. These include short-term employee benefits as well as
a share incentive plan. (20 21: only short-term employee benefits).
b) Outstanding balances with Directors
2022
2021
€000
€000
Loans and advances
762
690
Commitments
551
197
Facilities granted to Bank Directors are made in the ordinary course of business on substantially the same
terms as for comparable transactions with individuals of a similar standing, or where applicable, other
employees.
c) Outstanding balances with Key Management Personnel
2022
2021
€000
€000
Loans and advances
7,919
7,572
Commitments
1,507
699
Facilities granted to Key Management Personnel are made in the ordinary course of business on the same
terms with other employees.
d) Balances with other related parties
Balances
Interest
Balances
Interest
as at
income
as at
income
31.12.2022
2022
31.12.2021
2021
€000
€000
€000
€000
Amounts due from other related parties:
Shareholders and entities with common
directorship
7,954
252
7,978
246
Balances
Interest
Balances
Interest
as at
expense
as at
expense
31.12.2022
2022
31.12.2021
2021
€000
€000
€000
€000
Amounts due to other related parties:
Shareholders
12,436
136
16,353
179
Bank Directors
1,617
-
1,267
-
Other key management personnel
2,173
15
2,005
7
Other related parties
2,952
8
3,417
8
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 126
NOTES TO THE FINANCIAL STATEMENTS (continued)
46. RELATED PARTY DISCLOSURES (continued)
Related party transactions (continued)
There are no deposits held as collateral for loan commitments and overdraft facilities granted to related
parties (2021: same). Also, included in Amounts owed to customers are term deposits of €10,947,032
(2021: €4,067,231), which bear interest at the prevailing Bank rates. Furthermore, the amounts due from
other related parties include secured facilities of €7,953,687 (2021: €7,975,996) and no (2021: €2,141)
unsecured facilities.
For the year ended 31 December 20 22, the Bank recognised a loss allowance on receivables from related
parties amounting to €3,030 (2021: €2,285).
No guarantees were received by related parties as at end of December 202 2 (2021: nil). Special
guarantees given to related parties amount to €121,121 (2021: €103,414).
47. FAIR VALUES
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 level within which the fair value measurement is categorised is determined based on the lowest level
of input that is significant to fair value measurement.
The reporting of fair values is intended to guide users as to the amount, timing and certainty of cash
flows.
Fair value measurement hierarchy of the Group’s and Bank’s assets and liabilities is as follows:
Fair value measurement hierarchy
The Group
Level 1
Level 2
Level 3
Total
€000
€000
€000
€000
Assets as at 31 December 2022
Property and Equipment (Note 27)
- Land and buildings
-
-
27,208
27,208
Investment properties (Note 26)
- Residential property
-
-
495
495
- Commercial property
6,098
6,098
Non-current assets held for sale (Note 18)
-
-
1,733
1,733
Derivative assets not designated as hedges (Note 21) - 738 - 738
Financial assets at FVTPL (Note 17)
- Fixed income instruments and collective investment
schemes
41,046
-
-
41,046
Financial assets at FVTOCI
- Other debt and fixed income instruments (Note 22)
141,927
-
-
141,927
- Equity and other non-fixed income instruments
(Note 23)
-
-
303
303
Total
182,973
738
35,837
219,548
Liabilities as at 31 December 2022
Derivative liabilities not designated as hedges (Note 21) - 738 - 738
Total
-
738
-
738
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 127
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. FAIR VALUES (continued)
Fair value measurement hierarchy
The Group
Level 1
Level 2
Level 3
Total
€000
€000
€000
€000
Assets as at 31 December 2021
Property and Equipment (Note 27)
- Land and buildings
-
-
29,159
29,159
Investment properties (Note 26)
- Residential property
-
-
495
495
- Commercial property
-
-
5,558
5,558
Derivative assets not designated as hedges (Note 21)
-
552
-
552
Financial assets at FVTPL (Note 17)
- Fixed income instruments and collective investment
schemes
61,846
-
-
61,846
Financial assets at FVTOCI
- Other debt and fixed income instruments (Note 22)
227,103
-
-
227,103
- Equity and other non-fixed income instruments
(Note 23)
-
-
307
307
Total
288,949
552
35,519
325,020
Liabilities as at 31 December 2021
Derivative liabilities not designated as hedges (Note 21)
-
552
-
552
Total
-
552
-
552
Fair value measurement hierarchy
The Bank
Level 1
Level 2
Level 3
Total
€000
€000
€000
€000
Assets as at 31 December 2022
Property and equipment (Note 27)
- Land and buildings
-
-
27,208
27,208
Investment properties (Note 26)
- Residential property - - 495 495
- Commercial property - - 6,098 6,098
Non-current assets held for sale (Note 18)
-
-
1,733
1,733
Derivative assets not designated as hedges (Note 21)
-
738
-
738
Financial assets at FVTOCI
- Other debt and fixed income instruments (Note 22) 141,927 - - 141,927
- Equity and other non-fixed income instruments
(Note 23)
-
-
303
303
Total
141,927
738
35,837
178,502
Liabilities as at 31 December 20 22
Derivative liabilities not designated as hedges (Note 21) - 738 - 738
Total
-
738
-
738
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 128
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. FAIR VALUES (continued)
Fair value measurement hierarchy
The Bank
Level 1
Level 2
Level 3
Total
€000
€000
€000
€000
Assets as at 31 December 2021
Property and equipment (Note 27)
- Land and buildings
-
-
29,159
29,159
Investment properties (Note 26)
- Residential property - - 495 495
- Commercial property - - 5,558 5,558
Derivative assets not designated as hedges (Note 21)
-
552
-
552
Financial assets at FVTPL (Note 17)
- Fixed income instruments and collective investment
schemes
-
-
-
-
Financial assets at FVTOCI
- Other debt and fixed income instruments (Note 22)
227,103
-
-
227,103
- Equity and other non-fixed income instruments (Note 23) - - 307 307
Total
227,103
552
35,519
263,174
Liabilities as at 31 December 2021
Derivative liabilities not designated as hedges (Note 21) - 552 - 552
Total
-
552
-
552
There were no reclassifications made within the fair value hierarchy and there were no changes in valuation
techniques used by the Group during the year, except as disclosed below.
Investment properties
For the year ended 31 December 202 1, an independent architect was engaged to provide the valuations of
the investment properties. The valuations were based on the investment method and the comparative
valuation methodology for both commercial and residential properties. The investment valuation
methodology can be applied to determine the market value of a freehold or leasehold interest in property
from its potential to generate future income. It is typically used for the main forms of properties where a
tenant is providing the landlord with an investment return on his capital cost. Using this method, the
comparable property transactions of sales and lettings are analysed to find the revenue. Under the
comparative valuation methodology, the current value of the property is compared to another property
with similar characteristics. This method involves comparing the subject property with similar properties
that have been recently sold and those that are currently being offered for sale in the vicinity of other
comparable localities. The characteristics, merits and demerits of these properties are noted, and
appropriate adjustments thereof are then made to arrive at the value of the subject property. Market value
in relation to the commercial property was based on the average price of €4,115 per square metre whereas
the price of residential property was of €2,346 per square metre.
For the current financial year, no valuation adjustments were recognised given that the fair value movement
over the last year was not material.
There were no fair value movements on investment properties during the year under review (2021:
€201,000) except for one of the properties which was reclassified to non-current assets held for sale (Note
18). An independent architect was engaged to provide the valuation of the specific property prior to
effecting the reclassification, with the fair value movement amounting to €114,000. Investment properties
are being used in their highest and best use.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 129
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. FAIR VALUES (continued)
Investment properties (continued)
Significant increases/(decreases) in estimated market rates per square meter in isolation would result in
a significantly higher/(lower) fair value of the properties. Significant increases/(decreases) in the
discount rate in isolation would result in a (decrease)/increase in the estimated property values.
As at the end of 31 December 2022 (2021: nil) the Group has no restrictions on the realisation of
investment properties in Note 2 6.
The fair value movement in relation to 2022 is all attributable to assets held at year end and no fair value
movement was recognised in respect of assets disposed during the year.
Residential properties
Commercial properties
2022
2021
2022
2021
€000
€000
€000
€000
At 1 January
495
400
5,558
1,430
Improvements
-
-
59
24
Reclassification from
property and equipment,
net of depreciation
-
-
2,100
3,998
Reclassification from
Investment properties to
non-current assets held for
sale, net of depreciation
-
-
(1,733)
-
Fair value movement
-
95
114
106
At 31 December
495
495
6,098
5,558
Non-current assets held for sale
During the year under review the Group reclassified one of its properties from investment property to
non-current assets held for sale.
The property is available for immediate sale, there is an active program to locate a buyer and the sale is
highly probable that it will take place within 12 months.
Property and equipment – Land and buildings
For the year ended 31 December 2021, the independent architect based the valuations on the investment
method and the comparative valuation methodology. The investment valuation methodology takes into
consideration the rental value of the property by comparison and capitalizes it at an appropriate yield in
order to render the current market value of the property. Under the comparative valuation methodology,
the current value of the property is compared to another property with similar characteristics. This
method involves comparing the subject property with similar properties that have been recently sold and
those that are currently being offered for sale in the vicinity of other comparable localities. The
characteristics, merits and demerits of these properties are noted, and appropriate adjustments thereof
are then made to arrive at the value of the subject property. Market value was based on prices in the
range of €1,444 and €11,240 per square metre.
For the current financial year, in line with the Bank’s revaluation property, a desktop assessment was
carried out and determined that the fair value of the properties is not significantly different than the
carrying amount and thus, no external valuations have been carried out as at end of December 2022.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 130
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. FAIR VALUES (continued)
Property and equipment – Land and buildings (continued)
During 2021, the fair value of the land and buildings decreased by €1,784,000 (Note 27). Significant
increases/(decreases) in estimated market rates per square metre in isolation would result in a
significantly higher/(lower) fair value of the properties.
No valuations have taken place during the year under review. The properties are being used at their
highest and best use.
Other financial instruments
Cash balances, balances with the CBM and loans and advances to banks which are repayable on call and
at short notice are highly liquid assets. The Directors regard the amounts shown in the statements of
financial position for these items as reflecting their fair value as these assets will be realised for cash in
the immediate future. The fair value of the placements with other banks not repayable at short notice is
not materially different from their carrying amount since these carry an arm’s length rate of interest which
is reflective of conditions at year end. The fair value was determined using a Level 2 discounted cash flow
valuation technique using relevant interest rates as the major inputs.
At the reporting date, debt securities classified at amortised cost amounted to €317.9 million (2021: €101.0
million). Their market value amounted to €301.0 million (202 1: €107.7 million) (Level 1), whilst their nominal
value amounted to €316.7 million (2021: €98.3 million). For other details refer to Note 22.
Loans and advances to customers are stated at the amounts contractually due less provision to reflect
the expected recoverable amounts. Their carrying amount is not deemed to differ materially from their
fair value as these are re-priced to take into consideration changes in both the Bank’s base rate and credit
margins. Their fair value measurement is a Level 2 input.
At the reporting date, syndicated loans and trade finance classified at amortised cost amounted to €135.2
million (2021: €134.3 million). Their market value amounted to €134.3 million (2021: €134.6 million) (Level
2), whilst their nominal value amounted to €135.7 million (2021: €124.6 million). For other details refer to
Note 19.
Amounts owed to banks and customers include deposit liabilities. Of this category of liability, 87% (2021:
84%) have contractual re-pricing within one year, whilst 13% (2021: 16%) re-prices between one year and
over. For demand deposits and term deposits within one-year, fair value is taken to be the amount
payable on demand at the reporting date (Level 2). For term deposits after one-year with a carrying
amount of €367.8 million (2021: €401.2 million), fair value is €367.8 million (2021: €401.2 million). All term
deposits at different maturities were revalued to reflect the current interest rates. Their fair value
measurement is a Level 2 input.
Debt securities in issue have a carrying amount of €54.6 million (2021: €54.6 million) at 31 December
2022. The market value, based on quoted prices in an active market (Level 1), amounted to €52.1 million
at 31 December 202 2 (2021: €56.4 million).
The reconciliation of Level 3 fair value measurements of financial instruments is disclosed below.
2022
2021
€000
€000
At 1 January
307
303
Exchange rate movement
(4)
4
At 31 December
303
307
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 131
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT
48.1 Risk management framework
The Board of Directors (hereafter referred to as the Board) has overall responsibility for the establishment
and oversight of the Group’s risk management framework. The Board has established the Risk
Committee. The Risk Committee proposes the risk appetite statement for approval by the Board and
ensures implementation of the Group’s risk management and compliance strategy, systems and policies.
The Group’s Risk Appetite Statement articulates the types and level of risk that the Group is willing to
take in the pursuit of the strategic objectives. The risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the Group’s activities.
The Group’s risk governance framework ensures oversight of, and accountability for, the effective
management of risk. Responsibility for risk lies at all levels within the Group through a three lines of
defence model. Business units, as the first line of defence, are responsible for identifying, assessing and
mitigating the risks to which the Group is exposed in the respective operational function. The
management of the various forms of risk is then coordinated and monitored by the Risk and Compliance
functions. The Internal Audit Department, as the third line of defence, provides independent assurance
to the Board on the adequacy of the risk management framework.
48.2 Credit risk
Credit Risk is the possibility that a borrower or counterparty fails to meet its obligations in accordance
with (or performing according to) agreed terms, causing a financial loss, including losses resulting from
a reduction in portfolio value arising from actual or perceived deterioration in credit quality.
Credit risk arises mainly from interbank, commercial and consumer loans and advances, and loan
commitments arising from such lending activities, but can also arise from credit enhancement provided,
such as financial guarantees, letters of credit, endorsements and acceptances.
To meet the financial needs of customers, the Group and the Bank enter into various commitments and
contingent liabilities, as disclosed below. Even though these obligations are not recognised on the
statements of financial position (being, off-balance sheet items), they are subject to credit risk and are,
therefore, part of the overall risk of the Group and the Bank.
The Group / The Bank
Not later than one year
2022
2021
€000
€000
Loan commitments
878,787
802,552
Guarantees, acceptance and other financial facilities
21,911
25,356
900,698
827,908
The Group is also exposed to credit risk arising from investments in debt securities and other financial
instruments through its trading and investment activities including non-equity portfolio assets and
derivatives as well as settlement balances with market counterparties, reverse repurchase agreements
and balances with CBM.
The Group has a detailed Credit Risk Policy, which lays down the principles for the management of credit
risk. The Group manages and controls its exposure to credit risk by setting limits on the amount of risk it
is willing to accept for individual counterparties and connected entities, as well as by geographical and
industry concentrations.
The Group has established a credit quality review process to provide early identification of possible
changes in the creditworthiness of counterparties, including regular collateral revisions. Counterparty
limits are established by the use of a credit risk classification system, which assigns each counterparty a
risk rating. Risk ratings are subject to regular revision. The credit quality review process aims to allow the
Group to assess the potential loss as a result of the risks to which it is exposed and take corrective action.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 132
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
The Group applies an automated proprietary credit rating system to differentiate the degree of credit
risk inherent in advances extended to its customers. Internal ratings are used to grade loans and advances
with a view to assess the repayment ability of the borrower and to assist in the monitoring and control
of credit risk. The credit rating process also provides a basis for the recognition of any under- performing
or non-performing credit facilities and for the assessment of expected credit losses in line with IFRS9
regulations. Further information on the credit risk grading system is included in Note 48.2.1.1 (‘Credit Risk
Grading’).
48.2.1 Credit Risk Measurement
The estimation of credit exposure for risk management purposes is complex and requires the use of
models, as the exposure varies with changes in market conditions, expected cash flows and the
passage of time. The assessment of credit risk of a portfolio of assets entails further estimations as to
the likelihood of defaults occurring, of the associated loss ratios and of default correlations between
counterparties.
48.2.1.1 Credit Risk Grading
The Group allocates each exposure to a credit risk grade based on a variety of data that is determined
to be predictive of the risk of default and applying experienced credit judgement. The Group uses these
grades in identifying significant increases in credit risk under IFRS 9. Credit risk grades are a primary
input into the determination of the term structure of Probability of Default (“PD”) for exposures.
The Group use internal rating models tailored to the various categories of counterparty. Borrower and
loan specific information collected at the time of application (such as the level of collateral for retail
exposures and turnover and industry type for wholesale exposures) is fed into this rating model. This
is supplemented with external data such as information from the credit risk register. In addition, the
models enable management overlay by the responsible person, to be fed into the final internal credit
rating for each exposure. This allows for considerations which may not be captured as part of the other
data inputs into the model.
The following are additional considerations for each type of portfolio held by the Group:
Retail
After the date of initial recognition, for retail business, the payment behaviour of the borrower is
monitored on a periodic basis to develop a behavioural score. Any other known information about the
borrower which impacts their creditworthiness, such as unemployment and previous delinquency
history, is also incorporated into the internal credit rating system.
Commercial
For commercial business, the rating is determined at the borrower level. A relationship manager will
incorporate any updated or new information/credit assessments into the credit system on an ongoing
basis. In addition, the relationship manager will also update information about the creditworthiness of
the borrower every year from sources such as public financial statements. This will determine the
updated internal credit rating.
Debt securities
For debt securities in the treasury portfolio, external rating agency credit grades are used. These
published grades are continuously monitored and updated. The Probability of Defaults (“PDs”)
associated with each grade are determined based on historical realised default rates, as published by
an external credit rating agency.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 133
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.1 Credit Risk Measurement (continued)
48.2.1.1 Credit Risk Grading (continued)
Syndicated loans
Similar to debt securities, syndicated loans are rated using an external rating agency credit grades.
Again, these credit grades are frequently reviewed and monitored for immediate update where
necessary.
The Group's internal gradings for loans and advances comprise of nine (9) rating levels including three
(3) default classes, whilst the remaining rating levels represent exposures not in default. Each rating
category is assigned a stage under IFRS 9, where the PDs differ according to which stage, the rating
category falls under.
For debt securities and syndicated loans, PDs are obtained from market data provided by a third party.
PDs are assigned to the instruments, according to their external credit rating, region and sector. The
risk of default increase s exponentially at each higher credit risk rating. This means that the difference
in the PD between an A and A- rating grade is lower than the difference in the PD between a B and B-
rating grade.
48.2.2 ECL Measurement
IFRS 9 outlines a 'three-stage' model for impairment based on changes in credit quality since initial
recognition as summarised below:
• A financial instrument that is not credit-impaired on initial recognition is classified in 'Stage
1' and has its credit risk continuously monitored by the Group.
• 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. Note 48.2.2.1 describes how the Group
determines when a SICR has occurre d.
• If the financial instrument is credit-impaired, the financial instrument is then moved to 'Stage
3'. Note 48.2.2.2 describes how the Group defines credit-impairment and default.
• Financial instruments in Stage 1 have their ECL measured at an amount equal to the portion
of lifetime ECLs that result from default events possible within the next 12 months.
Instruments in Stages 2 or 3 have their ECL measured based on ECLs on a lifetime basis.
Please refer to Note 48.2.2.3 for a description of inputs, assumptions and estimation
techniques used in measuring the ECL.
• A pervasive concept in measuring ECL in accordance with IFRS 9 is that it should consider
forward looking information. Note 48.2.2.4 includes an explanation of how the Group has
incorporated this in its ECL models.
Further disclosure is also provided in Note 48.2.2.5 on how the Group determines appropriate
groupings when ECL is measured on a collective basis.
APS BANK PLC
_________________________________________________________________________________________
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.2 ECL Measurement (continued)
48.2.2.1 Significant increase in Credit Risk (SICR)
The following diagram summarises the impairment requirements under IFRS 9:
Ch ange in credit quality since initial recognition
Stage 1
Stage 2
Stage 3
Significant increase in
credit risk since initial
Credit-impaired
Initial Recognition
recognition
assets
12-month ECL Lifetime ECL Lifetime ECL
The key judgements and assumptions adopted by the Group in addressing the requirements of the
standard are discussed in the following notes.
Under IFRS 9, when determining whether the credit risk (i.e. risk of default) on a financial instrument
has increased significantly since initial recognition, the Group considers reasonable and supportable
information that is relevant and available without undue cost or effort, including both quantitative and
qualitative information and analysis based on the Group’s historical experience, expert credit
assessment and forward-looking information.
The main judgements are made by the Group in identifying whether a significant increase in credit risk
has occurred for an exposure are as follows:
• For loans and advances to customers, the Group’s internal credit risk grades are used to assess
whether there has been a significant increase in credit risk, performed by comparing the
internal credit risk grades as at reporting date with the internal credit risk grades on initial
recognition.
• For the loans and advances to banks and balances with CBM, the Group applies low credit risk
simplification to all its exposures, thus to the extent that these investments are considered to
be low credit risk, they are not subject to the significant increase in credit risk assessment.
• The investment and syndicated loans’ portfolios are divided into two separate sub portfolios;
Investment grade and Sub-Investment grade. The low credit risk simplification is applied for
investment grade exposures, thus not subject to significant increase in credit risk assessment.
For the sub-investment grade exposures, a one-notch downgrade in their respective external
credit rating is considered as a significant increase in credit risk.
• In assessing whether there has been a SICR since initial recognition of a loan commitment, the
Group considers changes in the risk of a default occurring on the loan to which a loan
commitment relates; for financial guarantee contracts, the Group considers the changes in the
risk that the specified debtor will default on the contract.
Assessing whether credit risk has increased significantly since initial recognition of a financial
instrument requires identifying the date of initial recognition of the instrument, together with its internal
grading/credit rating on initial recognition. For certain revolving facilities (e.g. overdrafts), the date
when the facility was first entered into, could be a long time ago. Modifying the contractual terms of a
financial instrument may also affect this assessment, as discussed in Note 2.3 Modification of loans.
APS Bank plc 134
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 135
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.2 ECL Measurement (continued)
48.2.2.1 Significant increase in Credit Risk (SICR) (continued)
Determining whether credit risk has increased significantly
The Group has established a framework that incorporates both quantitative and qualitative information
to determine whether the credit risk on a particular financial instrument has increased significantly
since initial recognition. The framework aligns with the Group’s internal credit risk management
process.
The criteria for determining whether credit risk has increased significantly varies by portfolio and
includes a backstop based on delinquency.
Quantitative Criteria:
For financial instruments other than the Group’s investment portfolio, the Group presumptively
considers that a SICR occurs when the borrower is more than 30 days past due on its contractual
payments. The Group determines days past due by counting the number of days since the earliest
elapsed due date in respect of which full payment has not been received. In assessing whether a
financial instrument has experienced a SICR, the Group also considers non-payments on connected
accounts of the same issuer to the Group, which exceed 30 days.
Qualitative Criteria:
Using its expert credit judgement and, where possible, relevant historical experience, the Group may
determine that an exposure has undergone a SICR based on particular qualitative indicators that it
considers indicative of such and whose effect may not otherwise be fully reflected in its quantitative
analysis on a timely basis.
If the borrower meets one or more of the following criteria, the internal grading of the credit facility
falls due to a SICR i.e. transition to Stage 2:
• Excesses over an overdraft limit become fairly frequent and/or exceed the 30 days past due
(latter automated in the core banking system);
• A pattern of cheques returned unpaid;
• Review of borrowing accounts overdue;
• Trading losses that indicate a negative financial trend leading to an unsound financial
position;
• A significant downgrade from a superior credit rating;
• Significant decrease in collateral value which is expected to increase risk of default (for bullet
repayment loans only, such as commercial property-for-resale and/or residential Bridge
Loans repayable from sale of the same collateral); and
• Early signs of cash flow/liquidity problems such as delay in servicing of trade creditors/loans
and/or non-collection of debtors/amounts due.
The assessment of SICR incorporates forward-looking information and is performed on a regular basis.
The Group monitors the effectiveness of the criteria used to identify significant increases in credit risk
by regular reviews to confirm that:
• The criteria are capable of identifying significant increases in credit risk before an exposure
is in default;
• The average time between the identification of a significant increase in credit risk and default
appears reasonable; and
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 136
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.2 ECL Measurement (continued)
48.2.2.1 Significant increase in Credit Risk (SICR) (continued)
• Exposures are not generally transferred directly from 12-month ECL measurement (Stage 1)
to credit-impaired (Stage 3).
The Group has used the low credit risk exemption for the investments’ portfolio in the current and prior
year, meaning that such financial instruments were not subject to the SICR test.
48.2.2.2 Definition of Default and credit impaired
Under IFRS 9, the Group considers a financial asset to be in default when:
• the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by
the Group to actions such as realising security (if any is held);
• with respect to loans and advances to customers, the borrower is more than 90 days past due
on any material credit obligation to the Group. Overdrafts are considered past due once the
customer has either exceeded a sanctioned limit or has been advised of a limit that is smaller
than the current balance outstanding; or
• with regards to investments’ portfolio and syndicated loans’ portfolio, a payment by the
counterparty or issuer is more than 30 days past due.
In assessing whether a borrower is in default, the Group considers indicators that are:
• qualitative: e.g. breaches of covenant;
• quantitative: e.g. overdue status and non-payment of another obligation of the same issuer to
the Group; and
• based on data developed internally and obtained from external sources.
Inputs into the assessment of whether a financial instrument is in default and their significance may
vary over time to reflect changes in circumstances.
At each reporting date, the Group assesses whether financial assets carried at amortised cost, debt
financial assets carried at FVTOCI, loan commitments and financial guarantees are credit-impaired. A
financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
• significant financial difficulty of the borrower or issuer;
• a breach of contract such as a default or past due event;
• the restructuring of a loan or advance by the Group on terms that the Group would not
consider otherwise;
• it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or
• the disappearance of an active market for a security because of financial difficulties.
A loan that has been renegotiated due to a deterioration in the borrower's condition is usually
considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash
flows has reduced significantly and there are no other indicators of impairment.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 137
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.2 ECL Measurement (continued)
48.2.2.2 Definition of Default and credit impaired (continued)
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 three months. This period of three months has been
determined based on an analysis which considers the likelihood of a financial instrument returning to
default status after cure using different possible cure definitions.
48.2.2.3 Measuring ECL – Explanation of inputs, assumptions and estimation techniques
The ECL is measured on either a 12-month (12M) or Lifetime basis depending on whether a SICR has
occurred since initial recognition or whether an asset is considered to be credit impaired.
ECLs are the discounted product of the PD, Exposure at Default (EAD), and Loss Given Default (LGD),
defined as follows:
• PD estimates are estimates at a certain date, which, for loans and advances to customers, loan
commitments and financial guarantees, are calculated based on statistical rating models and
assessed using rating tools tailored to the various categories of counterparties and exposures.
These statistical models are based on internally compiled data comprising both quantitative
and qualitative factors. PDs are estimated considering the contractual maturities of exposures
and estimated prepayment rates. They are adjusted to reflect forward-looking information as
described below. Market data, obtained from a third party service provider, is used for the PD
of investment portfolio, balances with CBM and loans and advances to banks.
• EAD represents the expected exposure in the event of a default. The Group derives the EAD
from the current exposure to the counterparty and potential changes to the current amount
allowed under the contract, including amortisation, and prepayments. The EAD of a financial
asset is the gross carrying amount at default. For lending commitments and financial
guarantees, the EAD considers the amount drawn, as well as potential future amounts that
may be drawn or repaid under the contract, which is estimated based on historical
observations and forward-looking forecasts. For some financial assets, the Group determines
EAD by modelling the range of possible exposure outcomes at various points in time using
scenario and statistical techniques.
• LGD is the magnitude of the likely loss if there is a default. The Group estimates LGD
parameters based on the history of recovery rates of claims, adjusted by the cure rates, against
defaulted counterparties. The LGD models consider the structure, collateral, seniority of the
claim, counterparty industry and recovery costs of any collateral that is integral to the financial
asset. LGD estimates are calibrated for different economic scenarios and, for real estate
lending, to reflect possible changes in property prices. They are calculated on a discounted
cash flow basis using the EIR as the discounting factor.
ECLs are a probability-weighted estimate of credit losses and are measured as follows:
• financial assets that are not credit-impaired at the reporting date: the present value of all cash
shortfalls i.e. the difference between the cash flows due to the entity in accordance with the
contract and the cash flows that the Group expects to receive;
• financial assets that are credit-impaired at the reporting date: the difference between the gross
carrying amount and the present value of estimated future cash flows;
• undrawn irrevocable loan commitments: the present value of the difference between the
contractual cash flows that are due to the Group if the commitment is drawn down and the
cash flows that the Group expects to receive; and
• financial guarantee contracts: the present value of the expected payments to reimburse the
holder less any amounts that the Group expects to recover.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 138
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.2 ECL Measurement (continued)
48.2.2.3 Measuring ECL – Explanation of inputs, assumptions and estimation techniques
(continued)
Subject to using a maximum of a 12-month PD for financial assets for which credit risk has not
significantly increased, the Group measures ECLs considering the risk of default over the maximum
contractual period (including any borrower’s extension options) over which it is exposed to credit risk,
even if, for risk management purposes, the Group considers a longer period. The maximum contractual
period extends to the date at which the Group has the right to require repayment of an advance or
terminate a loan commitment or guarantee.
For retail overdrafts and certain corporate revolving facilities that include both a loan and an undrawn
commitment component, the Group measures ECLs over a period longer than the maximum
contractual period if the Group’s contractual ability to demand repayment and cancel the undrawn
commitment does not limit the Group’s exposure to credit losses to the contractual notice period.
These facilities do not have a fixed term or repayment structure and are risk managed on an individual
basis; these facilities are however collectively assessed for IFRS 9 purposes. Although the Group can
cancel these facilities with immediate effect, this contractual right is not enforced in the normal day-
to-day management, but rather only when the Group becomes aware of an increase in credit risk at
the facility level. This longer period is estimated taking into account the credit risk management actions
that the Group expects to take and that serve to mitigate ECLs. These include a reduction in limits and
cancellation of the facility.
48.2.2.4 Forward Looking Information
Under IFRS 9, the Group incorporates forward-looking information into both its assessment of whether
the credit risk of an instrument has increased significantly since initial recognition and its measurement
of ECLs. The assessment of SICR and the calculation of ECL, both incorporate forward-looking
information. The Group performs a historical analysis and identifies the key economic variables
affecting credit risk and ECLs for each portfolio. These economic variables and their associated impact
on the PD, EAD and LGD may vary by financial instrument. The Group performs expert judgement in
this process.
A third party provider has been engaged to provide, on a regular basis, the forecasted macro-economic
scenarios covering a ten-year time horizon. The ‘base line’ scenario represents the most-likely outcome
and is the same scenario considered by the Group for the purposes of strategic planning and
budgeting. Apart from the ‘base line’ scenario, the Group considers two other macro-economic
scenarios, which represent more optimistic and more pessimistic outcomes.
As with any macro-economic forecasts, the projections and likelihoods of occurrence are subject to a
high degree of uncertainty and therefore, the actual outcomes may be significantly different to those
projected. The Group considers these forecasts to represent its best estimate of the possible outcomes.
The Group has identified key drivers of credit risk and credit losses for each portfolio of financial
instruments and, using an analysis of historical data, has analysed relationships between macro-
economic variables and credit risk and credit losses. These key drivers include inflation rates,
unemployment rates and GDP forecasts.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 139
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.2 ECL Measurement (continued)
48.2.2.4 Forward Looking Information (continued)
The following table illustrates the macro-economic indicators incorporated in the IFRS 9 model, for each
macro-economic scenario:
Scenarios
Macro-Economic Variables
2022
2021
Baseline
Upside
Downside
Baseline
Upside
Downside
Indicators
GDP (%)
8.73
9.34
7.59
7.32
8.02
6.4
Inflation rates (%)
2.03
2.03
2.03
3.06
3.11
2.95
Unemployment rates (%)
3.96
3.94
4.02
4.64
4.63
4.73
This above data is reviewed and updated on a quarterly basis, nevertheless, for the ECL calculation as at the
reporting date, the latest macro-economic data available was incorporated within the IFRS 9 model.
Due to the current macroeconomic environment, including but not limited to the geopolitical situation,
inflationary pressures, expected increase in energy prices and change in interest rates, for the ECL calculation
as at the reporting date, the Management also updated the sensitivities on parameters to different economic
activities, which are normally updated semi-annually. Consequently, these sensitivities reflected the latest
inflationary pressures within the local economy.
Moreover, the Group has determined that there is no material exposure towards Russia and Ukraine, hence
the management concluded that an overlay in this regard was not deemed required.
48.2.2.5 Grouping shared risk characteristics
For ECL provisions modelled on a collective basis, a grouping of exposures is performed on the basis of
shared risk characteristics, such that risk exposures within a group are homogeneous. In performing this
grouping, there must be sufficient information for the group to be statistically credible. The characteristics
and any supplementary data used to determine groupings are outlined below;
• Product type (e.g. residential/buy to let mortgage, credit cards);
• Credit risk grades; and
• Industry – taking into consideration external information;
The groupings selected by the Group are subject to regular review to ensure that exposures within a
particular group remain appropriately homogenous. During the period, the Group has performed a
modification within the segmentation of the loans and advances to customers’ portfolio, as there were no
sufficient historical data for particular segments to produce accurate results and at present, the groups are
classified as follows;
• Loans and advances to customers;
a) Mortgages;
b) Personal;
c) Commercial;
• Loans and advances to banks;
• Debt instruments; and
• Syndicated loans.
The groupings are subject to regular review to ensure that exposures within a particular group remain
appropriately homogeneous.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 140
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.3 Credit Risk Exposure
48.2.3.1 Maximum exposure to credit risk without taking account of any collateral and other credit
enhancements
With respect to financial instruments which expose the Group to credit risk, the maximum exposure
equals the carrying amount of these instruments, except for loan commitments and financial
guarantees.
Credit risks exposures relating to the statements of financial position assets and off-balance sheet
items are as follows:
The Group
The Bank
Maximum exposure
Maximum exposure
2022
2021
2022
2021
€000
€000
€000
€000
Cash and balances with Central Bank of Malta
(excluding cash in hand)
72,388
192,558
72,388
192,558
Cheques in course of collection
-
2,881
-
2,881
Loans and advances to banks
72,870
32,296
71,023
30,831
Financial assets at FVTPL
41,046
61,846
-
-
Syndicated loans (net)
135,210
134,262
135,210
134,262
Loans and advances to customers (net)
1,632,294
1,413,857
1,632,294
1,413,857
Loans and advances to corporate entities (net)
592,400
518,187
592,400
518,187
Derivative financial instruments
738
552
738
552
Other debt and fixed income instruments (net)
459,601
328,041
459,601
328,041
Other receivables
8,014
9,152
8,202
8,303
As at 31 December
3,014,561
2,693,632
2,971,856
2,629,472
Credit risk exposures relating to off-balance sheet
items are as follows:
Financial guarantees and other contingent liabilities
21,911
25,356
21,911
25,356
Commitments
878,787
802,552
878,787
802,552
As at 31 December
900,698
827,908
900,698
827,908
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 141
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.3 Credit Risk Exposure (continued)
48.2.3.2 Concentration of risk
The Group
Concentrations of risk
Financial
Institutio
ns
Manufac
-turing
Real
Estate
Wholesale
and
Retail
Trade
Public
Sector
Other
Industries
Individuals
Total
€000
€000
€000
€000
€000
€000
€000
€000
Cash and balances with
Central Bank of Malta
(excluding cash in hand) (gross)
72,390
-
-
-
-
-
-
72,390
Loans and advances to banks
(gross)
72,945
-
-
-
-
-
-
72,945
Financial assets at FVTPL
7,430
2,301
-
-
17,804
13,511
-
41,046
Syndicated loans (gross)
43,235
48,417
18,000
-
-
26,334
-
135,986
Loans and advances to customers
(gross)
3,018
22,525
269,592
50,722
21,132
294,919
1,581,768
2,243,676
Derivative financial instruments
738
-
-
-
-
-
-
738
Other debt and fixed income
instruments (gross)
56,037
9,325
761
9,259
381,855
2,567
-
459,804
Other receivables
-
-
-
-
-
8,014
-
8,014
As at 31 December 202 2
255,793
82,568
288,353
59,981
420,791
345,345
1,581,768
3,034,599
Financial guarantees and other
contingent liabilities
770
316
4,210
1,651
-
14,400
564
21,911
Commitments
16,418
17,283
161,316
24,969
1,920
123,836
533,045
878,787
As at 31 December 202 2
17,188
17,599
165,526
26,620
1,920
138,236
533,609
900,698
The Group
Concentrations of risk
Financial
Institutio
ns
Manufac
-turing
Real
Estate
Wholesale
and
Retail
Trade
Public
Sector
Other
Industries
Individuals
Total
€000
€000
€000
€000
€000
€000
€000
€000
Cash and balances with
Central Bank of Malta
(excluding cash in hand)
192,570
-
-
-
-
-
-
192,570
Cheques in course of collection
2,881
-
-
-
-
-
-
2,881
Loans and advances to banks
32,327
-
-
-
-
-
-
32,327
Financial assets at FVTPL
10,233
4,320
-
-
17,108
30,185
-
61,846
Syndicated loans (gross)
27,494
68,701
-
-
2,652
36,405
-
135,252
Loans and advances to customers
(gross)
3,726
22,747
200,116
41,121
6,099
314,624
1,362,938
1,951,371
Derivative financial instruments
552
-
-
-
-
-
-
552
Other debt and fixed income
instruments (gross)
38,982
10,298
1,544
10,300
254,131
12,848
-
328,103
Other receivables
-
-
-
-
-
9,152
-
9,152
As at 31 December 202 1
308,765
106,066
201,660
51,421
279,990
403,21 4
1,362,938
2,71 4,054
Financial guarantees and other
contingent liabilities
743
514
7,946
1,155
-
11,903
3,095
25,356
Commitments
14,121
7,984
164,644
16,692
5,288
90,327
503,496
802,552
As at 31 December 202 1
14,864
8,498
172,590
17,847
5,288
102,230
506,591
827,908
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 142
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.3 Credit Risk Exposure (continued)
48.2.3.2 Concentration of risk (continued)
The Bank
Concentrations of risk
Financial
Institutions
Manufac
-turing
Real
Estate
Wholesale
and
Retail
Trade
Public
Sector
Other
Industries
Individuals
Total
€000
€000
€000
€000
€000
€000
€000
€000
Cash and balances with
Central Bank of Malta
(excluding cash in hand) (gross)
72,390
-
-
-
-
-
-
72,390
Loans and advances to banks
(gross)
71,098
-
-
-
-
-
-
71,098
Syndicated loans (gross)
43,235
48,417
18,000
-
-
26,334
-
135,986
Loans and advances to
customers (gross)
3,018
22,525
269,592
50,722
21,132
294,919
1,581,768
2,243,676
Derivative financial instruments
738
-
-
-
-
-
-
738
Other debt and fixed income
instruments (gross)
56,037
9,325
761
9,259
381,855
2,567
-
459,804
Other receivables
-
-
-
-
-
8,202
-
8,202
As at 31 December 2022
246,516
80,267
288,353
59,981
402,987
332,022
1,581,768
2,991,894
Financial guarantees and other
contingent liabilities
770
316
4,210
1,651
-
14,400
564
21,911
Commitments
16,418
17,283
161,316
24,969
1,920
123,836
533,045
878,787
As at 31 December 2022
17,188
17,599
165,526
26,620
1,920
138,236
533,609
900,698
The Bank
Concentrations of risk
Financial
Institutions
Manufac
-turing
Real
Estate
Wholesale
and
Retail
Trade
Public
Sector
Other
Industries
Individuals
Total
€000
€000
€000
€000
€000
€000
€000
€000
Cash and balances with
Central Bank of Malta
(excluding cash in hand) (gross)
192,570
-
-
-
-
-
-
192,570
Cheques in course of collection
2,881
-
-
-
-
-
-
2,881
Loans and advances to banks
(gross)
30,862
-
-
-
-
-
-
30,862
Syndicated loans (gross)
27,494
68,701
-
-
2,652
36,405
-
135,252
Loans and advances to
customers (gross) 3,726 22,747 200,116 41,121 6,099 314,624 1,362,938 1,951,371
Derivative financial instruments
552
-
-
-
-
-
-
552
Other debt and fixed income
instruments (gross)
38,982
10,298
1,544
10,300
254,131
12,848
-
328,103
Other receivables
-
-
-
-
-
8,303
-
8,303
As at 31 December 2021
297,067
101,746
201,660
51,421
262,882
372,180
1,362,938
2,649,894
Financial guarantees and other
contingent liabilities
743
514
7,946
1,155
-
11,903
3,095
25,356
Commitments
14,121
7,984
164,644
16,692
5,288
90,327
503,496
802,552
As at 31 December 2021
14,864
8,498
172,590
17,847
5,288
102,230
506,591
827,908
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 143
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.3 Credit Risk Exposure (continued)
48.2.3.3 Collateral and other credit enhancements
The Group employs a range of policies and practices to mitigate credit risk. The most common of these
is accepting collateral for funds advanced. The Group has internal policies on the acceptability of
specific classes of collateral or credit risk mitigation. Of the total loans and advances to customers,
88.22% (2021: 87.38%) were collateralised.
The Group prepares a valuation of the collateral obtained as part of the loan origination process. This
assessment is reviewed periodically. The principal collateral types for loans and advances are:
• Cash and securities;
• Government guarantees;
• Mortgages over residential properties, with the substantial majority being situated in Malta;
• Charges over business assets such as premises, inventory and accounts receivable; and
• Charges over financial instruments such as debt securities, equities and insurance policies.
Longer-term finance and lending to corporate entities are generally secured, however, revolving
personal credit facilities are, generally, unsecured.
Collateral held as security for financial assets other than loans and advances depends on the nature of
the instrument. Debt securities are generally unsecured, with the exception of covered bonds, which
are mainly secured by residential mortgages.
The Group's policies regarding obtaining collateral have not significantly changed during the reporting
period and there has been no significant change in the overall quality of the collateral held by the Group
since the prior period.
It is the Group’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are
used to reduce or repay the outstanding claim. In general, the Group does not occupy repossessed
properties for business use. During 2022, no new properties have been repossessed (same in 202 1).
The Group also makes use of master netting agreements with counter parties. As at 31 December 2022
and 31 December 2021 there were no financial assets or liabilities arising from these agreements.
A portion of the Group's financial assets originated by the mortgage business has sufficiently low LT V
ratios, which results in no loss allowance being recognised in accordance with the Group's ECL model.
The carrying amount of such financial assets is €1,354 million as at 31 December 2022 (2021 - €1,214
million) .
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 144
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.3 Credit Risk Exposure (continued)
48.2.3.3 Collateral and other credit enhancements (continued)
The Group closely monitors collateral held for financial assets considered to be credit-impaired, as it
becomes more likely that the Group will take possession of collateral to mitigate potential credit losses.
Financial assets that are credit-impaired and related collateral held in order to mitigate potential losses
are shown below.
The Group / The Bank
31 December 2022
Gross
Exposure
Impairment
allowance
Carrying
amount
Fair value of
collateral held
Credit-impaired assets
€000
€000
€000
€000
Loans to individuals:
- Overdraft
2,009
1,686
323
213
- Term Loans
3,144
731
2,413
2,451
- Home Loans
9,392
2,341
7,051
6,955
Loans to corporate
entities:
- Small and medium-
sized enterprises
(SMEs)
65,879
12,923
52,956
53,358
Total credit-impaired
assets
80,424
17,681
62,743
62,977
The Group / The Bank
31 December 2021
Gross
Exposure
Impairment
allowance
Carrying
amount
Fair value of
collateral held
Credit-impaired assets
€000
€000
€000
€000
Loans to individuals:
- Overdraft
1,814
1,521
293
198
- Term Loans
2,699
792
1,908
1,941
- Home Loans
7,808
2,280
5,528
5,490
Loans to corporate
entities:
- Small and medium-
sized enterprises
(SMEs)
65,789
13,204
52,583
53,242
Total credit-impaired
assets
78,110
17,797
60,312
60,871
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 145
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.3 Credit Risk Exposure (continued)
48.2.3.3 Collateral and other credit enhancements (continued)
The Group / The Bank
The following table shows the distribution of LTV ratios for the Group’s home loans and term loans
credit-impaired portfolio:
Credit-impaired
(Gross carrying amount)
Home loans portfolio- LTV distribution
2022
2021
€000
€000
Lower than 50%
2,174
2,736
50 to 60%
1,280
298
60 to 70%
974
576
70 to 80%
2,445
1,384
80 to 90%
1,310
1,372
90 to 100%
551
933
Higher than 100%
658
509
Total
9,392
7,808
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 146
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.3 Credit Risk Exposure (continued)
48.2.3.4 Credit quality
The following table sets out information about the credit quality of financial assets measured at
amortised cost and FVTOCI. Unless specifically indicated, for financial assets, the amount in the table
represents gross carrying amounts.
Explanation of the terms: 12-month ECL, lifetime ECL and credit-impaired are included in previous
notes.
The Bank
12-month
ECL
Lifetime ECL
not credit-
impaired
Lifetime ECL
credit-
impaired
Total
31 December 2022
€000
€000
€000
€000
Loans and advances to customers
at amortised cost
Grade 1-4: Low risk
2,052,270
-
-
2,052,270
Grades 5-6: Watch & substandard
-
110,982
-
110,982
Grade 7: Doubtful
-
-
56,270
56,270
Grade 8: Classified
-
-
24,154
24,154
Loss allowance
(731)
(570)
(17,681)
(18,982)
Carrying amount
2,051,539
110,412
62,743
2,224,694
Debt securities – At amortised cost
Investment grade
315,078
-
-
315,078
Sub-investment grade
2,799
-
-
2,799
Loss allowance
(203)
-
-
(203)
Carrying amount
317,67 4
-
-
317,67 4
Debt securities - FVTOCI
Investment grade
141,696
-
-
141,696
Sub-investment grade
44
187
-
231
Carrying amount
141,740
187
-
141,927
Syndicated loans
Grade 1-4: Low risk
7,318
-
-
7,318
Investment grade
37,253
-
-
37,253
Sub-investment grade
59,327
32,088
-
91,415
Loss allowance
(574)
(202)
-
(776)
Carrying amount
103,324
31,886
-
135,210
Cash and balances with Central
Bank of Malta
Investment grade
85,889
-
-
85,889
Loss allowance
(2)
-
-
(2)
Carrying amount
85,887
-
-
85,887
Loans and advances to banks
Investment grade
71,098
-
-
71,098
Loss allowance
(75)
-
-
(75)
Carrying amount
71,023
-
-
71,023
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 147
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.3 Credit Risk Exposure (continued)
48.2.3.4 Credit quality (continued)
The Bank
12-month
ECL
Lifetime ECL
not credit-
impaired
Lifetime ECL
credit-
impaired
Total
31 December 2021
€000
€000
€000
€000
Loans and advances to customers
at amortised cost
Grade 1-4: Low risk
1,741,052
-
-
1,741,052
Grades 5-6: Watch & substandard
-
132,210
-
132,210
Grade 7: Doubtful
-
-
54,274
54,274
Grade 8: Classified
-
-
23,835
23,835
Loss allowance
(678)
(852)
(17,797)
(19,327)
Carrying amount
1,740,374
131,358
60,312
1,932,044
Debt securities – At amortised cost
Investment grade
100,700
-
-
100,700
Sub-investment grade
300
-
-
300
Loss allowance
(62)
-
-
(62)
Carrying amount
100,938
-
-
100,938
Debt securities - FVTOCI
Investment grade
227,058
-
-
227,058
Sub-investment grade
45
-
-
45
Carrying amount
227,103
-
-
227,103
Syndicated loans
Grade 1-4: Low risk
35,845
-
-
35,845
Investment grade
7,514
-
-
7,514
Sub-investment grade
74,206
17,687
-
91,893
Loss allowance
(849)
(141)
-
(990)
Carrying amount
116,716
17,546
-
134,262
Cash and balances with Central
Bank of Malta
Investment grade
207,735
-
-
207,735
Sub-investment grade
-
-
-
-
Loss allowance
(12)
-
-
(12)
Carrying amount
207,723
-
-
207,723
Loans and advances to banks
Investment grade
30,842
-
-
30,842
Sub-investment grade
20
-
-
20
Loss allowance
(31)
-
-
(31)
Carrying amount
30,831
-
-
30,831
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 148
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.3 Credit Risk Exposure (continued)
48.2.3.4 Credit quality (continued)
The following table provides an analysis of the performing and non-performing exposures of the Group’s
and Bank’s lending portfolio:
The Group/The Bank
Total
Of which
forborne
Total
Of which
forborne
2022
2022
2021
2021
€000
€000
€000
€000
Performing
Stage 1
2,052,270
37,306
1,741,052
24,688
Stage 2
110,982
58,657
132,209
81,628
Non-Performing
Stage 3
80,424
30,985
78,110
48,963
Total gross/forborne exposures
2,243,676
126,948
1,951,371
155,279
48.2.4 Loss Allowance
The loss allowance recognised during the period is impacted by a variety of factors, as described below:
• Transfers between Stage 1 and Stage 2 or 3 due to financial instruments 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 allowance for new financial instruments recognised during the period, as well as
releases for financial instruments derecognised in the period.
• Impact on the measurement of ECL due to changes in PDs, EADs and LGDs in the period,
arising from regular refreshing of inputs to models.
• Impacts on the measurements of ECL due to changes made to models and assumptions.
• Discount unwind within ECL due to passage of time, as ECL is measured on a present value
basis.
• Foreign exchange retranslations for assets denominated in foreign currencies and other
movements.
• Financial assets derecognised during the period and write-offs of allowances related to
assets that were written off during the period.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 149
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.4 Loss Allowance (continued)
The Group/The Bank
Stage 1
Stage 2
Stage 3
Loans and advances to c ustomers
at amortised cost
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2022
677
852
17,798
19,327
Movements in loss allowance
Transfers:
Transfer to/(from) stage 2
-
(87)
-
(87)
Transfer to/(from) stage 3
-
-
(491)
(491)
Write-offs
-
-
(191)
(191)
New financial assets originated or purchased
168
45
974
1,187
Financial assets derecognised during the period
(76)
(175)
242
(9)
(Decreases)/increases due to change in credit risk
(38)
(65)
(651)
(754)
Loss allowance as at 31 December 20 22
731
570
17,681
18,982
The Group/The Bank
Stage 1
Stage 2
Stage 3
Loans and advances to customers
at amortised cost
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2021
589
4,047
16,239
20,875
Movements in loss allowance
Transfers:
Transfer to/(from) stage 1
53
-
-
53
Transfer to/(from) stage 2
-
(3,195)
-
(3,195)
Transfer to/(from) stage 3
-
-
(25)
(25)
Write-offs
-
-
(521)
(521)
New financial assets originated or purchased
205
49
454
708
Financial assets derecognised during the period
(166)
(296)
(37)
(499)
(Decreases)/increases due to change in credit risk
(4)
247
1,688
1,931
Loss allowance as at 31 December 2021
677
852
17,798
19,327
The Group/The Bank
Stage 1
Stage 2
Stage 3
Debt securities at amortised cost
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2022
62
-
-
62
New financial assets originated or purchased
137
-
-
137
Financial assets derecognised during the period
(5)
-
-
(5)
Increases due to change in credit risk
9
-
-
9
Loss allowance as at 31 December 20 22
203
-
-
203
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 150
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.4 Loss Allowance (continued)
The Group/The Bank
Stage 1
Stage 2
Stage 3
Debt securities at amortised cost
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2021
75
-
-
75
New financial assets originated or purchased
(2)
-
-
(2)
Decreases due to change in credit risk
(11)
-
-
(11)
Loss allowance as at 31 December 2021
62
-
-
62
The Group/The Bank
Stage 1
Stage 2
Stage 3
Debt s ecurities at FV TOCI
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2022
215
-
-
215
Movements in loss allowance
Transfers:
Transfer from stage 1
(9)
-
-
(9)
Transfer to stage 2
-
9
-
9
Financial assets derecognised during the period
(83)
-
-
(83)
Increases due to change in credit risk
20
-
-
20
Loss allowance as at 31 December 20 22
143
9
-
152
The Group/The Bank
Stage 1
Stage 2
Stage 3
Debt securities at FVTOCI
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2021
237
9
-
246
Movements in loss allowance
New financial assets originated or purchased
34
-
-
34
Financial assets derecognised during the period
(17)
(9)
-
(26)
Decreases due to change in credit risk
(39)
-
-
(39)
Loss allowance as at 31 December 2021
215
-
-
215
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 151
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.4 Loss Allowance (continued)
The Group/The Bank
Stage 1
Stage 2
Stage 3
Syndicated loans
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2022
849
141
-
990
Movements in loss allowance
Transfers:
Transfer from stage 1
(143)
-
-
(143)
Transfer to stage 2
-
143
-
143
New financial assets originated or purchased
160
-
-
160
Financial assets derecognised during the period
(107)
(26)
-
(133)
Decreases due to change in credit risk
(188)
(53)
-
(241)
Loss allowance as at 31 December 20 22
571
205
-
776
The Group/The Bank
Stage 1
Stage 2
Stage 3
Syndicated loans
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2021
665
731
-
1,396
New financial assets originated or purchased
354
4
-
358
Financial assets derecognised during the period
(152)
(627)
-
(779)
(Decreases)/increases due to change in credit risk
(18)
33
-
15
Loss allowance as at 31 December 2021
849
141
-
990
The Group/The Bank
Stage 1
Stage 2
Stage 3
Loans and advances to banks
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2022
31
-
-
31
New financial assets originated or purchased
1
-
-
1
Financial assets derecognised during the period
(4)
-
-
(4)
Increases due to change in credit risk
47
-
-
47
Loss allowance as at 31 December 2022
75
-
-
75
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 152
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.4 Loss Allowance (continued)
The Group/The Bank
Stage 1
Stage 2
Stage 3
Loans and advances to banks
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2021
49
-
-
49
New financial assets originated or purchased
1
-
-
1
Financial assets derecognised during the period
(2)
-
-
(2)
Decreases due to change in credit risk
(17)
-
-
(17)
Loss allowance as at 31 December 2021
31
-
-
31
The Group/The Bank
Stage 1
Stage 2
Stage 3
Cash and balances with the Central Bank of
Malta
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2022
12
-
-
12
Decreases due to change in credit risk
(10)
-
-
(10)
Loss allowance as at 31 December 2022
2
-
-
2
The Group/The Bank
Stage 1
Stage 2
Stage 3
Cash and balances with the Central Bank of
Malta
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Loss allowance as at 1 January 2021
5
-
-
5
Increases due to change in credit risk
7
-
-
7
Loss allowance as at 31 December 2021
12
-
-
12
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 153
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.4 Loss Allowance (continued)
The following tables further explain changes in the gross carrying amount of each portfolio to help explain
their significance to the changes in the loss allowance for the same portfolio as discussed above:
The Group/The Bank
Stage 1
Stage 2
Stage 3
Loans and advances to c ustomers
at amortised cost
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Gross carrying amount as at 1 January 2022
1,741,053
132,208
78,110
1,951,371
Movements in loss allowance
Transfers:
Transfer to stage 1
4,815
-
-
4,815
Transfer from stage 2
-
(10,265)
-
(10,265)
Transfer to stage 3
-
-
3,880
3,880
Write-offs
-
-
(191)
(191)
New financial assets originated or purchased
419,579
1,248
2,187
423,014
Financial assets derecognised during the period
11,766
(2,392)
(128)
9,246
(Decreases)/increases due to changes in credit risk
(124,943)
(9,817)
(3,434)
(138,194)
Gross carrying amount as at 31 December 202 2
2,052,270
110,982
80,424
2,243,676
The Group/The Bank
Stage 1
Stage 2
Stage 3
Loans and advances to customers
at amortised cost
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Gross carrying amount as at 1 January 2021
1,308,717
355,675
45,486
1,709,878
Movements in loss allowance
Transfers:
Transfer to stage 1
170,022
-
-
170,022
Transfer from stage 2
-
(213,113)
-
(213,113)
Transfer to stage 3
-
-
32,164
32,164
Write-offs
-
-
(521)
(521)
New financial assets originated or purchased
420,899
17,533
1,662
440,094
Financial assets derecognised during the period
(154,694)
(27,264)
(2,675)
(184,633)
(Decreases)/increases due to changes in credit risk
(3,891)
(623)
1,994
(2,520)
Gross carrying amount as at 31 December 2021
1,741,053
132,208
78,110
1,951,37 1
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 154
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.4 Loss Allowance (continued)
The Group/The Bank
Stage 1
Stage 2
Stage 3
Debt s ecurities at amortised c ost
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Gross carrying amount as at 1 January 2022
101,000
-
-
101,000
New financial assets originated or purchased
210,196
-
-
210,196
Financial assets derecognised during the period
(4,086)
-
-
(4,086)
Increases due to change in credit risk
10,767
-
-
10,767
Gross carrying amount as at 31 December 2022
317,877
-
-
317,877
The Group/The Bank
Stage 1
Stage 2
Stage 3
Debt securities at amortised cost
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Gross carrying amount as at 1 January 2021
104,307
-
-
104,307
Financial assets derecognised during the period
(1,011)
-
-
(1,011)
Changes to modifications that did not result in
derecognition
(2,296)
-
-
(2,296)
Gross carrying amount as at 31 December 2021
101,000
-
-
101,000
The Group/The Bank
Stage 1
Stage 2
Stage 3
Syndicated loans
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Gross carrying amount as at 1 January 2022
118,985
16,267
-
135,252
Movements in loss allowance
Transfers:
Transfer from stage 1
(22,518)
-
-
(22,518)
Transfer to stage 2
-
22,518
-
22,518
New financial assets originated or purchased
58,632
-
-
58,632
Financial assets derecognised during the period
(51,420)
(5,855)
-
(57,275)
Decreases due to change in credit risk
(483)
(140)
-
(623)
Gross carrying amount as at 31 December 202 2
103,196
32,790
-
135,986
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 155
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.4 Loss Allowance (continued)
The Group/The Bank
Stage 1
Stage 2
Stage 3
Syndicated loans
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Gross carrying amount as at 1 January 2021
80,335
34,213
-
114,548
New financial assets originated or purchased
83,907
2,142
-
86,049
Financial assets derecognised during the period
(50,159)
(19,110)
-
(69,269)
Increases/(decreases) due to change in credit risk
4,902
(978)
-
3,924
Gross carrying amount as at 31 December 2021
118,985
16,267
-
135,252
The Group/The Bank
Stage 1
Stage 2
Stage 3
Cash and Balances with Central Bank of Malta
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Gross carrying amount as at 1 January 2022
207,735
-
-
207,735
New financial assets originated or purchased
(121,846)
-
-
(121,846)
Gross carrying amount as at 31 December 2022
85,889
-
-
85,889
The Group/The Bank
Stage 1
Stage 2
Stage 3
Cash and Balances with Central Bank of Malta
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Gross carrying amount as at 1 January 2021
108,331
-
-
108,331
New financial assets originated or purchased
99,404
-
-
99,404
Gross carrying amount as at 31 December 2021
207,735
-
-
207,735
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 156
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.4 Loss Allowance (continued)
The Bank
Stage 1
Stage 2
Stage 3
Loans and advances to Banks
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Gross carrying amount as at 1 January 202 2
30,862
-
-
30,862
New financial assets originated or purchased
9,666
-
-
9,666
Financial assets derecognised during the period
(20)
-
-
(20)
Changes in model/risk parameters
30,590
-
-
30,590
Gross carrying amount as at 31 December 2022
71,098
-
-
71,098
The Bank
Stage 1
Stage 2
Stage 3
Loans and advances to Banks
12-month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Gross carrying amount as at 1 January 2021
46,330
-
-
46,330
New financial assets originated or purchased
933
-
-
933
Financial assets derecognised during the period
(12,623)
-
-
(12,623)
Changes in model/risk parameters
(3,778)
-
-
(3,778)
Gross carrying amount as at 31 December 2021
30,862
-
-
30,862
48.2.5 Write-off Policy
The Group writes off financial assets, in whole or in part, when it has exhausted all practical recovery
efforts and has concluded there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include:
• ceasing enforcement activity; and
• situations where the Group's recovery method is foreclosing on collateral and the value of
the collateral is such that there is no reasonable expectation of recovering in full.
The Group does not have any enforcement activities on written-off activities, meaning that the Group
does not seek to recover amounts which it is legally owed in full, once these are written off.
48.2.6 Modification of Financial Assets
The Group sometimes modifies the terms of loans provided to customers. The contractual terms of a
loan may be modified for a number of reasons, including changing market conditions, customer
retention and other factors not related to a current or potential credit deterioration of the customer.
An existing loan whose terms have been modified may be derecognised and the renegotiated loan
recognised as a new loan at fair value.
Under IFRS 9, when the terms of a financial asset are modified but the modification does not result in
derecognition, the determination of whether the asset’s credit risk has increased significantly reflects
comparison of:
• internal grading/credit rating at the reporting date based on the modified terms; with
• internal grading/credit rating on initial recognition at the original contractual terms.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 157
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.2 Credit risk (continued)
48.2.6 Modification of Financial Assets (continued)
The Group renegotiates loans and advances to customers in financial difficulties (referred to as
‘forbearance activities’) to maximise collection opportunities and minimise the risk of default. Under
the Group’s forbearance policy, loan forbearance is granted on a selective basis if:
• the debtor is currently in default on its debt or if there is a high risk of default;
• there is evidence that the debtor made all reasonable efforts to pay under the original
contractual terms; and
• the debtor is expected to be able to meet the revised terms.
The revised terms usually include extending the maturity, revision of interest rate, or changing the
timing of interest payments. Both retail and corporate loans are subject to the forbearance policy. The
appropriate committee, depending on the facility amount and type of facility, reviews reports on
forborne facilities on a regular basis.
For financial assets modified as part of the Group’s forbearance policy, the credit grading reflect s
whether the modification has improved or restored the Group’s ability to collect interest and principal
and the Group’s previous experience of similar forbearance action. As part of this process, the Group
evaluates the borrower’s payment performance against the modified contractual terms and consider
various behavioural indicators.
Generally, forbearance is a qualitative indicator of default and credit impairment and expectations of
forbearance are relevant to assessing whether there is a significant increase in credit risk. Following
forbearance, a customer needs to demonstrate consistently good payment behaviour over a period of
one year before the exposure is no longer considered to be in default/credit-impaired.
48.3 Liquidity risk
Liquidity risk is the risk that Group will encounter difficulty in meeting obligations associated with financial
liabilities that are settled by delivering cash or other financial assets. It arises because of the possibility
that the Group might be unable to meet its payment obligations when they fall due. To limit this risk, the
Group has arranged for diversified funding sources. The Group also manages this risk by matching the
maturities of assets and liabilities.
The Group maintains a portfolio of highly marketable and diverse assets that can be easily liquidated in
the event of an unforeseen interruption of cash flow. The disclosures made in the financial statements
showing maturities are intended to show the timing of cash flows arising from assets and liabilities.
The Group’s Liquidity Coverage Ratio (LCR) remained relatively stable and within the Bank’s risk appetite
and applicable regulatory limit. Further information on the LCR is included in the ‘Pillar 3 Disclosures’
Report as published on the Bank’s website.
The table overleaf analyses the carrying amounts of assets and liabilities into relevant maturity groupings,
based on the remaining period to the contractual maturity date. Repayments which are subject to notice
are treated as if notice were to be given immediately. However, the Bank expects that many customers
will not request repayment on the earliest date it could be required to pay and the table below does not
reflect the expected cash flows indicated by its deposit retention history.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 158
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.3 Liquidity risk (continued)
The Group
Less t han
three
months
Between
three
months
and one
year
Between
one year
and f ive
years
More
than f ive
years
Others
Total
€000
€000
€000
€000
€000
€000
At 31 December 2022
Assets
Cash and balances with
Central Bank of Malta
85,887
-
-
-
-
85,887
Loans and advances to banks
72,870
-
-
-
-
72,870
Financial assets at FVTPL
1,013
126
6,814
19,992
13,101
41,046
Syndicated loans (net)
2,621
46,492
71,452
14,645
-
135,210
Loans and advances to
customers (net)
28,969
90,086
154,431
1,951,208
-
2,224,694
Derivative financial
instruments
-
23
59
656
-
738
Other debt and fixed income
instruments (net)
4,576
16,198
296,304
142,523
-
459,601
Equity and other non-fixed
income instruments
-
-
-
-
303
303
Investment in associates
-
-
-
-
13,667
13,667
Other assets
6,582
1,432
-
-
70,122
78,136
202,518
154,357
529,060
2,129,024
97,193
3,112,152
Liabilities and equity
Derivative financial
instruments
-
23
59
656
-
738
Amounts owed to banks
44,191
6,196
-
-
-
50,387
Amounts owed to customers
1,941,606
398,370
363,327
7,330
-
2,710,633
Lease liabilities
-
508
2,410
2,328
-
5,246
Debt securities in issue
-
-
-
54,642
-
54,642
Other liabilities
3,168
1,248
2,134
233
22,265
29,048
Equity
-
-
-
-
261,458
261,458
1,988,965
406,345
367,930
65,189
283,723
3,112,152
Gap
(1,786,447)
(251,988)
161,130
2,063,835
(186,530)
-
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 159
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.3 Liquidity risk (continued)
The Group
Less than
three
months
Between
three
months
and one
year
Between
one year
and five
years
More
than five
years
Others
Total
€000
€000
€000
€000
€000
€000
At 31 December 2021
Assets
Cash and balances with
Central Bank of Malta
207,723
-
-
-
-
207,723
Cheques in course of
collection
2,881
-
-
-
-
2,881
Loans and advances to banks
32,296
-
-
-
-
32,296
Financial assets at FVTPL
(194)
-
8,767
30,388
22,885
61,846
Syndicated loans (net)
25,582
36,102
50,468
22,110
-
134,262
Loans and advances to
customers (net)
16,007
99,065
111,479
1,705,493
-
1,932,044
Derivative financial
instruments - - 552 - - 552
Other debt and fixed income
instruments (net)
10,949
29,979
153,555
133,558
-
328,041
Equity and other non-fixed
income instruments
-
-
-
-
307
307
Investment in associates
-
-
-
-
19,803
19,803
Other assets
8,110
1,040
-
-
66,099
75,249
303,354
166,186
324,821
1,891,549
109,094
2,795,004
Liabilities and equity
Derivative financial
instruments
-
-
552
-
-
552
Amounts owed to banks
49,463
7,745
-
-
-
57,208
Amounts owed to customers
1,758,809
272,826
399,097
1,025
-
2,431,757
Lease liabilities
-
596
2,068
2,684
-
5,348
Debt securities in issue
-
-
-
54,597
-
54,597
Other liabilities
1,481
794
2,694
220
19,531
24,720
Equity
-
-
-
-
220,822
220,822
1,809,753
281,961
404,411
58,526
240,353
2,795,004
Gap
(1,506,399)
(115,775)
(79,590)
1,833,023
(131,259)
-
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 160
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.3 Liquidity risk (continued)
The Bank
Less than
three
months
Between
three
months
and one
year
Between
one year
and five
years
More
than five
years
Others
Total
€000
€000
€000
€000
€000
€000
At 31 December 2022
Assets
Cash and balances with
Central Bank of Malta
85,887
-
-
-
-
85,887
Loans and advances to banks
71,023
-
-
-
-
71,023
Syndicated loans (net)
2,621
46,492
71,452
14,645
-
135,210
Loans and advances to
customers (net)
28,969
90,086
154,431
1,951,208
-
2,224,694
Derivative financial
instruments
-
23
59
656
-
738
Other debt and fixed income
instruments (net)
4,576
16,198
296,304
142,523
-
459,601
Equity and other non-fixed
income instruments
-
-
-
-
303
303
Investment in subsidiaries
-
-
-
-
40,251
40,251
Investment in associates
-
-
-
-
14,063
14,063
Other assets
5,746
1,432
-
-
71,144
78,322
198,822
154,231
522,246
2,109,032
125,761
3,110,092
Liabilities and equity
Derivative financial
instruments
-
23
59
656
-
738
Amounts owed to banks
44,191
6,196
-
-
-
50,387
Amounts owed to customers
1,943,777
398,370
363,327
7,330
-
2,712,804
Lease liabilities
-
508
2,410
2,328
-
5,246
Debt securities in issue
-
-
-
54,642
-
54,642
Other liabilities
3,168
1,248
2,134
233
22,164
28,947
Equity
-
-
-
-
257,328
257,328
1,991,136
406,345
367,930
65,189
279,492
3,110,092
Gap
(1,792,314)
(252,114)
154,316
2,043,843
(153,731)
-
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 161
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.3 Liquidity risk (continued)
The Bank
Less than
three
months
Between
three
months
and one
year
Between
one year
and five
years
More
than five
years
Others
Total
€000
€000
€000
€000
€000
€000
At 31 December 2021
Assets
Cash and balances with
Central Bank of Malta
207,723
-
-
-
-
207,723
Cheques in course of
collection
2,881
-
-
-
-
2,881
Loans and advances to banks
30,831
-
-
-
-
30,831
Syndicated loans (net)
25,582
36,102
50,468
22,110
-
134,262
Loans and advances to
customers (net)
16,007
99,065
111,479
1,705,493
-
1,932,044
Derivative financial
instruments
-
-
552
-
-
552
Other debt and fixed income
instruments (net)
10,949
29,979
153,555
133,558
-
328,041
Equity and other non-fixed
income instruments
-
-
-
-
307
307
Investment in subsidiaries
-
-
-
-
45,251
45,251
Investment in associates
-
-
-
-
16,761
16,761
Other assets
6,940
1,040
-
-
66,420
74,400
300,913
166,186
316,054
1,861,161
128,739
2,773,053
Liabilities and equity
Derivative financial
instruments
-
-
552
-
-
552
Amounts owed to banks
49,463
7,745
-
-
-
57,208
Amounts owed to customers
1,760,125
272,826
399,097
1,025
-
2,433,073
Lease liabilities
-
596
2,068
2,684
-
5,348
Debt securities in issue
-
-
-
54,597
-
54,597
Other liabilities
1,295
794
2,694
220
19,383
24,386
Equity
-
-
-
-
197,889
197,889
1,810,883
281,961
404,411
58,526
217,272
2,773,053
Gap
(1,509,970)
(115,775)
(88,357)
1,802,635
(88,533)
-
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 162
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.3 Liquidity risk (continued)
Analysis of financial liabilities by remaining contractual maturities
The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2022
and 31 December 2021 based on contractual undiscounted repayment obligations. Repayments which are
subject to notice are treated as if notice were to be given immediately. However, the Bank expects that
many customers will not request repayment on the earliest date it could be required to pay and the table
below does not reflect the expected cash flows:
The Group
Less than
three
months
Between
three
months
and one
year
Between
one year
and five
years
More than
five years
Others
Total
€000
€000
€000
€000
€000
€000
At 31 December 2022
Liabilities
Derivative financial
instruments
-
23
59
656
-
738
Amounts owed to
banks
44,191
6,196
-
-
-
50,387
Amounts owed to
customers
1,942,588
399,602
365,462
7,352
-
2,715,004
Lease liabilities
-
760
2,703
2,493
-
5,956
Debt securities in issue
-
1,788
7,150
59,959
-
68,897
Other liabilities
3,168
1,248
2,134
233
22,265
29,048
1,989,947
409,617
377,508
70,693
22,265
2,870,030
Less than
three
months
Between
three
months
and one
year
Between
one year
and five
years
More than
five years
Others
Total
€000
€000
€000
€000
€000
€000
At 31 December 2021
Liabilities
Derivative financial
instruments
-
-
552
-
-
552
Amounts owed to
banks
49,463
7,745
-
-
-
57,208
Amounts owed to
customers
1,759,437
273,623
401,795
1,034
-
2,435,889
Lease liabilities
-
701
2,387
2,897
-
5,985
Debt securities in issue
-
1,788
7,150
61,747
-
70,685
Other liabilities
1,481
794
2,694
220
19,531
24,720
1,810,381
284,651
414,578
65,898
19,531
2,595,039
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 163
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.3 Liquidity risk (continued)
Analysis of financial liabilities by remaining contractual maturities
The table below summarises the maturity profile of the Bank’s financial liabilities as at 31 December
2022 and 31 December 2021 based on contractual undiscounted repayment obligations:
The Bank
Less than
three
months
Between
three
months
and one
year
Between
one year
and five
years
More
than five
years
Others
Total
€000
€000
€000
€000
€000
€000
At 31 December 20 22
Liabilities
Derivative financial
instruments
-
23
59
656
-
738
Amounts owed to
banks
44,191
6,196
-
-
-
50,387
Amounts owed to
customers
1,944,758
399,602
365,462
7,352
-
2,717,174
Lease liabilities
-
760
2,703
2,493
-
5,956
Debt securities in issue
-
1,788
7,150
59,959
-
68,897
Other liabilities
3,168
1,248
2,134
233
22,165
28,948
1,992,117
409,617
377,508
70,693
22,165
2,872,100
Less than
three
months
Between
three
months
and one
year
Between
one year
and five
years
More
than five
years
Others
Total
€000
€000
€000
€000
€000
€000
At 31 December 2021
Liabilities
Derivative financial
instruments
-
-
552
-
-
552
Amounts owed to
banks
49,463
7,745
-
-
-
57,208
Amounts owed to
customers
1,760,753
273,623
401,795
1,034
-
2,437,205
Lease liabilities
-
701
2,387
2,897
-
5,985
Debt securities in issue
-
1,788
7,150
61,747
-
70,685
Other liabilities
1,295
794
2,694
220
19,383
24,386
1,811,511
284,651
414,578
65,898
19,383
2,596,021
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 164
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.3 Liquidity risk (continued)
Asset encumbrance
In accordance with Appendix 3 of BR07/2014 - Publication of Annual Report and Audited Financial
Statements of Credit Institutions Authorised under the Banking Act 1994 and the CRR, credit
institutions shall ensure compliance with the provisions of the EBA Guidelines on Disclosure of
Encumbered and Unencumbered Assets.
The Bank’s encumbered assets relate to debt securities which are pledged in favour of the European
Central Bank for the purposes of existing and potential long term re-financing operations and also cash
in favour of the Depositor Compensation Scheme.
The Bank
Assets as at 31 December 20 22
Carrying
amount of
encumbered
assets
Fair value of
encumbered
assets
Carrying
amount of
unencumbered
assets
Fair value of
unencumbered
assets
€000
€000
€000
€000
Equity instruments
-
-
54,617
554
Debt securities
228,288
217,984
231,313
224,772
Other assets
2,506
-
2,593,369
-
Assets of the reporting institutions
230,794
217,984
2,879,299
225,326
The Bank
Assets as at 31 December 2021
Carrying
amount of
encumbered
assets
Fair value of
encumbered
assets
Carrying
amount of
unencumbered
assets
Fair value of
unencumbered
assets
€000
€000
€000
€000
Equity instruments
-
-
62,319
558
Debt securities
147,883
154,553
180,158
180,213
Other assets
2,281
-
2,380,412
-
Assets of the reporting institutions
150,164
154,553
2,622,889
180,771
In the above table, the unencumbered assets disclosed under Other Assets include loans and advances,
cash and short- term funds, property, plant and equipment, tax assets and other assets.
The table below discloses the liabilities associated with the Bank’s encumbered assets.
The Bank
2022
2021
Matching
liabilities
Encumbered
Assets
Matching
liabilities
Encumbered
Assets
Encumbered assets/collateral received and
associated liabilities
€000
€000
€000
€000
Carrying amount of selected financial
liabilities
231,734
230,794
1,250,571
150,164
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 165
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.4 Market risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to
changes in market variables such as interest rates, foreign exchange rates, and the prices of equities,
bonds and commodities.
The Group’s exposure to market risk is mainly in the form of interest rate risk and foreign exchange risk.
The risk associated with the Group’s exposure in equities is not considered to be material. Also, as
disclosed in Note 21, the Bank enters into derivative contracts to economically hedge against movement
in certain cash flows on financial liabilities having embedded derivatives which are separately accounted
for.
48.4.1 Interest rate risk
Interest rate risk is the risk of the exposure of the Group’s financial condition to unfavourable
movements in interest rates.
The Group manages its exposure to interest rate risk using interest rates repricing gaps and both
economic value and earnings based measures. The Group’s interest rate risk management framework
is in line with the relevant guidelines issued by the EBA. Further information is provided in the Pillar 3
Disclosures Report as published on the website.
The following tables show the impact on the Group’s economic value and net interest income under
different interest rate scenarios, as mandated by the relevant EBA Guidelines.
Parallel
shock up
Parallel
shock down
Short rates
up
Short rates
down
Steepener
Flattener
€000
€000
€000
€000
€000
€000
Sensitivity of reported equity
to interest rates movements
At 31 December 2022
Average for the period
13,763 (10,008) 17,188 (15,923) (11,506) 14,307
Maximum for the period
33,724 (536) 24,943 (11,727) (8,557) 22,730
Minimum for the period
5,940 (20,827) 11,432 (22,826) (20,834) 10,028
Parallel
shock up
Parallel
shock down
Short rates
up
Short rates
down
Steepener
Flattener
€000
€000
€000
€000
€000
€000
Sensitivity of reported equity
to interest rates movements
At 31 December 2021
Average for the period
7,502
58
21,488 (4,980) (18,356) 20,738
Maximum for the period
12,755
2,265
22,973 (2,696) (16,053) 22,187
Minimum for the period
3,182
(1,846) 20,386 (8,218) (20,292) 18,997
The potential impact on the Group’s economic value is based on the most unfavourable scenario which, as
at 31 December 2022, was brought through the ‘steepener’ scenario. During 2022, global central banks broke
the decade long experience of a zero-interest environment by embarking on interest rate increase in a bid
to fight inflationary pressures.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 166
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.4 Market risk (continued)
48.4.1 Interest rate risk (continued)
Parallel
shock up
Parallel shock
down
€000
€000
Sensitivity of projected net
interest rate income to
interest rates movements
At 31 December 2022
Average for the period
1,489 (547)
Maximum for the period
1,702 702
Minimum for the period
1,349 (1,550)
Parallel
shock up
Parallel shock
down
€000
€000
Sensitivity of projected net
interest rate income to
interest rates movements
At 31 December 2021
Average for the period
1,554 (360)
Maximum for the period
1,662 (166)
Minimum for the period
1,473 (471)
The below tables set out interest sensitive assets and liabilities categorised by repricing dates.
The Group
At 31 December 2022
Up to 1
year
1 – 5 years
5 – 10
years
More than
10 years
Others
€000
€000
€000
€000
€000
Assets
Cash and balances with Central Bank of Malta
50,009
-
-
-
-
Loans and advances to banks
72,870
-
-
-
-
Financial assets at FVTPL
3,274
16,904
14,776
5,329
763
Syndicated loans
135,210
-
-
-
-
Loans and advances to customers
1,731,560
311,816
180,758
560
-
Debt securities
20,773
296,306
136,043
6,479
-
2,013,696
625,026
331,577
12,368
763
Liabilities
Amounts owed to banks
50,387
-
-
-
-
Amounts owed to customers
1,603,247
1,100,056
7,330
-
-
Debt securities in issue
-
54,642
-
-
-
1,653,634
1,154,698
7,330
-
-
Net interest rate risk GAP
at 31 December 2022
360,062
(529,672)
324,247
12,368
763
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 167
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.4 Market risk (continued)
48.4.1 Interest rate risk (continued)
The Group
At 31 December 2021
Up to 1
year
1 – 5 years
5 – 10
years
More than
10 years
Others
€000
€000
€000
€000
€000
Assets
Cash and balances with Central Bank of Malta
173,060
-
-
-
-
Loans and advances to banks
32,296
-
-
-
-
Financial assets at FVTPL
2,215
20,239
20,971
6,090
12,331
Syndicated loans
134,262
-
-
-
-
Loans and advances to customers
1,519,670
239,872
168,461
4,041
-
Debt securities
40,928
153,555
125,220
8,338
-
1,902,4 31
413,666
314,652
18,469
12,331
Liabilities
Amounts owed to banks
57,208
-
-
-
-
Amounts owed to customers
1,287,398
1,142,815
944
600
-
Debt securities in issue - 54,597 - - -
1,344,606
1,197,412
944
600
-
Net interest rate risk GAP
at 31 December 2021
557,825
(783,746)
313,708
17,869
12,331
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 168
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.4 Market risk (continued)
48.4.1 Interest rate risk (continued)
The Bank
At 31 December 2022
Up to 1
year
1 – 5
years
5 – 10
years
More
than 10
years
Others
€000
€000
€000
€000
€000
Assets
Cash and balances with Central Bank of
Malta
50,009
-
-
-
-
Loans and advances to banks
71,023
-
-
-
-
Syndicated loans
135,210
-
-
-
-
Loans and advances to customers
1,731,560
311,816
180,758
560
-
Debt securities
20,773
296,306
136,043
6,479
-
2,008,575
608,122
316,801
7,039
-
Liabilities
Amounts owed to banks
50,387
-
-
-
-
Amounts owed to customers
1,605,418
1,100,056
7,330
-
-
Debt securities in issue
-
54,642
-
-
-
1,655,805
1,154,698
7,330
-
-
Net interest rate risk GAP
at 31 December 2022
352,770
(546,576)
309,741
7,039
-
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 169
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.4 Market risk (continued)
48.4.1 Interest rate risk (continued)
The Bank
At 31 December 2021
Up to 1
year
1 – 5
years
5 – 10
years
More
than 10
years
Others
€000
€000
€000
€000
€000
Assets
Cash and balances with Central Bank of
Malta
173,060
-
-
-
-
Loans and advances to banks
30,831
-
-
-
-
Syndicated loans
134,262
-
-
-
-
Loans and advances to customers
1,519,670
239,872
168,461
4,041
-
Debt securities
40,928
153,555
125,220
8,338
-
1,898,751
393,427
293,681
12,379
-
Liabilities
Amounts owed to banks
57,208
-
-
-
-
Amounts owed to customers
1,288,714
1,142,815
944
600
-
Debt securities in issue
-
54,597
-
-
-
1,345,922
1,197,412
944
600
-
Net interest rate risk GAP at 31
December 2021
552,829
(803,985)
292,737
11,779
-
The carrying amount of assets and liabilities that carry a variable interest rate is €2.0 billion and €1.8
billion, respectively (2021: €1.8 billion and €1.6 billion).
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 170
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.4 Market risk (continued)
48.4.2 Currency risk
Currency risk is the risk of the exposure of the Group’s financial position, financial performance and
cash flow to unfavourable movements in foreign exchange rates.
The Group’s financial assets and liabilities are substantially held in Euro. Limits are set on the level of
exposure, both by individual currency and in total. The exposure is also monitored through regular
sensitivity analysis.
The aggregate amount of assets and liabilities denominated in foreign currencies translated into Euro
are as follows:
2022
USD GBP Other Total
€000 €000 €000 €000
Assets
62,074 36,863 24,068 123,005
Liabilities
62,127 36,877 23,975 122,979
2021
USD GBP Other Total
€000 €000 €000 €000
Assets
19,230 39,398 15,644 74,272
Liabilities
19,227 39,388 15,531 74,146
The minimal currency exposure is not expected to leave any significant impact on the Group’s income.
Additional disclosures on currency composition of year-end balances are disclosed in Notes 16,
19,20,22,23,32,33 .
48.5 Operational risk
Operational risk is the risk of loss arising from systems failure, human error, fraud or external events.
When controls fail to perform, operational risks can cause damage to reputation, have legal or
regulatory implications, or lead to financial loss. The Group cannot expect to eliminate all operational
risks, but through its control framework and by monitoring and responding to potential risks, the Group
is able to manage the risks. Controls include effective segregation of duties, access controls,
authorisation and reconciliation procedures, staff education and assessment processes, including
internal audit verifications. Further information on the Group’s exposure to operational risk, and the
management thereof, is included in the ‘Pillar 3 Disclosures’ Report as published on the Bank’s website.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 171
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.6 Capital management
The Group continuously aims at building and sustaining a strong capital base and at applying it
efficiently throughout its activities to attain its strategic objectives, optimise shareholder value whilst
ensuring the sustainability of the Bank’s business model and risk profile. A strong and prudent capital
base is one of the pillars of the Group’s business model and maintaining adequate capital ratios will
continue being key to enable the Group to steer through currently challenging economic conditions.
During the current financial year, the Group continued to perform the Internal Capital Adequacy
Assessment Process (“ICAAP”), in compliance with Banking Rule BR/12/2022 - The Supervisory Review
Process of Credit Institutions Authorised Under the Banking Act 1994, as mandated by the Capital
Requirements Directive. The objective of the ICAAP is to inform the Board of Directors of the ongoing
assessment of the Group’s risks, how the Group mitigates those risks and how much capital is necessary
having considered other mitigating factors. This process takes into consideration Pillar I risks, as well
as other material risks (Pillar II risks) including concentration risk, interest rate risk, IT and Cyber risks,
ESG risks, reputation risk and other key risks. Thus, the ICAAP serves as a key decision-making tool.
The ICAAP demonstrated that the Group is well capitalised. The document was approved by the Board
of Directors and submitted to the MFSA.
In accordance with the CRR, the Bank calculates its capital requirements for Pillar 1 risks as shown in
the tables below. In addition, the Bank is required to meet a total SREP capital requirement (TSCR) of
12.0%, consisting of 8.0% minimum Pillar 1 requirement and a 4.0% Pillar 2 requirement (P2R). Banking
Rule BR/15/2015 – Capital Buffers of Credit Institutions Authorised Under Banking Act 1994 requires
institutions to maintain capital buffers over and above the Pillar 1 requirements. During 2022 the Bank
operated at all times above the level of capital including the capital buffers. Further information on the
P2R and capital buffers is included in the ‘Pillar 3 Disclosures’ Report as published on the Bank’s
website.
Further information on the Bank’s capital position may be found in the ‘Pillar 3 Disclosures’ Report as
published on the Bank’s website which is prepared in line with the Pillar III requirements of Banking
Rule BR/07/2014 – Publication of Annual Report and Audited Financial Statements of Credit
Institutions Authorised Under the Banking Act 1994 and governed by the CRR II No. 2019/876.
The capital adequacy ratio measures the Bank's own funds as a percentage of the total risk-weighted
assets and off-balance sheet items. The ratio for the year under review has been prepared in
compliance with the CRR and Capital Requirements Directive V. During the year under review and the
prior year, the Bank has complied with the externally imposed capital requirements. The table overleaf
summarises the composition of regulatory capital and the ratios of the Bank as at the reporting date.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 172
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.6 Capital management (continued)
The Bank
2022
2021
€000
€000
Total exposure (on and off-balance sheet)
3,212,972
2,871,279
Risk weighted amounts:
Credit risk calculation - standardised approach
1,393,156
1,273,347
Operational risk - basic indicator approach
119,344
106,307
Foreign exchange risk
14
129
Total credit, operational and foreign exchange risk
1,512,514
1,379,783
CET 1/Tier 1 Capital
229,430
176,722
Tier 2 Capital
54,642
54,597
Total Own Funds
284,072
231,319
Capital Adequacy Ratio
Tier 1 Ratio
15.17%
12.81%
Total Capital Ratio
18.78%
16.76%
The Bank’s capital is composed of Common Equity Tier 1 (CET 1) and Tier 2 capital instruments, as defined
by the CRR. CET 1 capital is the highest quality capital and, therefore, the most effective in absorbing losses.
The Bank’s capital is mainly composed of CET 1 capital, which primarily consists of ordinary share capital and
retained earnings.
In June 2022, the Bank issued an IPO of 110,000,000 new shares at the price of €0.62 per share. The IPO
qualifies as Tier 1 capital, which ranks as shareholders’ equity.
Further information on the composition and features of the Bank’s capital instruments is provided in the
following two tables.
No changes were made in the objectives, policies and processes governing the Bank’s capital management
from the previous years.
The original own funds calculation comprises retained earnings which are adjusted to exclude the amount
specified in favour of the Depositor’s Compensation Scheme Reserve in line with the legislation (Note 22).
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 173
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.6 Capital management (continued)
The Bank
2022
2021
€000
€000
CET1 capital: instruments and reserves
Capital instruments and the related share premium accounts
140,140
72,882
Retained earnings
98,399
88,843
Accumulated other comprehensive income
2,981
25,334
Funds for general banking risk
2,904
1,700
Other reserves
147
-
244,571
188,759
CET1 capital: regulatory adjustments
Intangible assets
(14,545)
(11,746)
Regulatory adjustments due to the requirements for prudent valuation
pursuant to Article 4 of Delegated Regulation (EU) 2016/101
(197)
(291)
Regulatory adjustments due to insufficient coverage for non-performing
exposures
(399)
-
(15,141)
(12,037)
CET 1/Tier 1 Capital
229,430
176,722
Tier 2 capital
Debt securities in issue
54,642
54,597
Total Capital
284,072
231,319
Total Risk Weighted Assets
1,512,514
1,379,783
Capital Ratios
CET1/Tier 1Capital Ratio
15.17%
12.81%
Total Capital Ratio
18.78%
16.76%
Amounts below the thresholds for deduction:
Direct and indirect holdings of the
capital of financial sector entities
where the institution does not have significant investments in those
entities (not included in CET 1 capital)
8,054
8,331
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 174
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.6 Capital management (continued)
In line with the CRR, the following table discloses the main features and the terms and conditions of
Bank’s Tier 1 and Tier 2 instruments.
Capital Instruments Main Features
Issuer APS Bank plc APS Bank plc
Unique identifier
213800A1O379I6DMCU10
213800A1O379I6DMCU10
Governing law(s) of the instrument
Maltese law
Maltese law
Regulatory treatment
Transitional CRR rules
CET 1
Tier 2
Post-transitional CRR rules
CET 1
Tier 2
Eligible at solo/(sub-)consolidated/solo&
(sub-)consolidated
Solo & consolidated
Solo & consolidated
Instrument type
Ordinary shares
Debt securities in issue
Amount recognised in regulatory capital
91,729
55,000
Nominal amount of instrument
91,729
55,000
Issue price
N/A
55,000
Redemption price
N/A
100
Accounting classification
Shareholder’s equity
Amortised cost
Original date of issuance
1 June 1970*
19 November 2020
Perpetual or dated
Perpetual
Dated
Original maturity date
No
19 November 2030
Issuer call subject to prior supervisory approval
No
Yes
Optional call date, contingent call dates and
redemption amount No 19 November 2025 at 100
Subsequent call dates, if applicable
No
19 November 2026,
19 November 2027,
19 November 2028,
19 November 2029
Coupons / dividends
Fixed or floating dividend/coupon
Floating
Fixed
Coupon rate and any related index
N/A
3.25%, no index
Existence of a dividend stopper No No
Fully discretionary, partially discretionary or
mandatory (in terms of timing)
Fully discretionary
Mandatory
Fully discretionary, partially discretionary or
mandatory (in terms of amount)
Fully discretionary
Mandatory
Existence of step up or other incentive to redeem
No
No
Noncumulative or cumulative
Non-cumulative
Non-cumulative
Convertible or non-convertible
Non-convertible
Non-convertible
Write-down features
No
No
Position in subordination hierarchy in liquidation
(specify instrument type immediately senior to
instrument)
Subordinated to creditors
and depositors
Subordinated to creditors,
senior secured and
depositors
Non-compliant transitioned features
No
N/A
*Various, latest date of capital injection was 13 June 2022. Furthermore, during 2022 a scrip dividend
was distributed to shareholders.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 175
NOTES TO THE FINANCIAL STATEMENTS (continued)
48. RISK MANAGEMENT (continued)
48.6 Capital management (continued)
Full Reconciliation of Own Funds Items to Audited Financial Statements of the Bank as at 31 December
2022 is presented below:
Balance in
accordance with
IFRS
€000
Reconciling
items
€000
Balance in
accordance
with regulatory
scope
€000
Share capital (Note 37)
91,729
-
91,729
Debt securities in issue (Note 35)
54,642
-
54,642
Share premium (Note 38)
48,410
-
48,410
Revaluation reserve (Note 39)
2,981
-
2,981
Retained earnings (Note 40)
114,061
(12,756)
101,305
of which general banking reserves (Note 40)
2,904
-
2,904
General reserve
147
-
147
Intangible assets (Note 28)
14,545
-
14,545
Prudent valuation adjustment
-
(228)
(228)
49. ULTIMATE CONTROLLING PARTY
The financial statements of APS Bank plc are included in the consolidated financial statements of AROM
Holdings Limited, a company registered in Malta, a copy of which can be obtained from the Malta Business
Registry. The Bank’s immediate parent is AROM Holdings Limited. The ultimate controlling party of APS
Bank plc is the Archdiocese of Malta.
The registered address of both AROM Holdings Limited and the Archdiocese of Malta is Archbishop’s
Curia, St. Calcedonius Square, Floriana.
50. COMPARATIVE INFORMATION
Certain items of the comparative period have been reclassified to conform to the presentation of the
current year’s financial statements. These include reclassifications in Note 9 and Note 10.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 176
FIVE YEAR SUMMARIES - STATEMENTS OF PROFIT OR LOSS
The Group
2022
2021
2020
2019
2018
€000
€000
€000
€000
€000
Interest and similar income
79,859
69,135
62,280
58,021
49,963
Interest expense
(14,766)
(13,773)
(13,434)
(13,379)
(12,149)
Net interest income
65,093
55,362
48,846
44,642
37,814
Other operating (loss)/income
(445)
7,781
6,298
12,039
6,905
Total operating income
64,648
63,143
55,144
56,681
44,719
Operating expenses
(47,029)
(40,584)
(33,551)
(30,354)
(24,575)
Share of results of associate, net of tax
(2,213)
21
(258)
1,585
38
Net impairment gains/(losses)
254
1,488
(5,538)
(1,074)
(1,555)
Profit before tax
15,6 60
24,068
15,797
26,838
18,627
Income tax expense
(9,893)
(8,967)
(5,707)
(7,268)
(6,043)
Profit for the year
5,767
15,101
10,090
19,570
12,584
The Bank
2022
2021
2020
2019
2018
€000
€000
€000
€000
€000
Interest and similar income
78,439
67,640
61,140
56,674
48,958
Interest expense
(14,766)
(13,773)
(13,434)
(13,379)
(12,182)
Net interest income
63,673
53,867
47,706
43,295
36,776
Other operating income
10,882
8,060
6,600
9,586
8,888
Total operating income
74,555
61,927
54,306
52,881
45,664
Operating expenses
(45,880)
(39,678)
(33,246)
(30,163)
(24,427)
Net impairment gains/(losses)
254
1,488
(5,538)
(1,074)
(1,555)
Profit before tax
28,929
23,737
15,522
21,644
19,682
Income tax expense
(9,773)
(8,696)
(5,589)
(7,182)
(5,974)
Profit for the year
19,156
15,041
9,933
14,462
13,708
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 177
THE GROUP’S STATEMENTS OF FINANCIAL POSITION
2022
2021 2020 2019 2018
€000
€000 €000 €000 €000
ASSETS
Cash, treasury bills and balances
with Central Bank of Malta
13,499
15,165 15,064 11,225 10,387
Balances with Central Bank of Malta
72,388
192,558 93,266 151,178 165,021
Cheques in course of collection
-
2,881 103 128 69
Loans and advances to banks
72,870
32,296 51,068 59,840 50,384
Financial assets at fair value through profit or loss
41,046
61,846
50,636
41,478
36,241
Non-current assets held for sale
1,733
-
-
-
2,600
Syndicated loans
135,210
134,262
113,152
125,953
61,610
Loans and advances to customers
2,224,694
1,932,044 1,689,003 1,458,144 1,253,883
Derivative financial instruments
738
552 499 721 822
Other debt and fixed income instruments
459,601
328,041 315,983 238,166 251,040
Equity and other non-fixed income instruments
303
307 303 308 1,272
Investment in associate
13,667
19,803
18,641
19,257
17,748
Investment properties
6,593
6,053
1,830
1,830
1,860
Property and equipment
39,252
40,998
46,180
43,851
22,286
Intangible assets
14,545
11,746 8,848 7,320 5,861
Right-of-use assets
5,040
5,051 5,235 2,592 -
Other receivables
8,016
9,152 8,619 6,478 6,293
Deferred tax assets
2,957
2,249 2,553 460 3,853
TOTAL ASSETS
3,112,152
2,795,004 2,420,983 2,168,929 1,891,230
LIABILITIES
Derivative financial instruments
738
552
499
721
822
Amounts owed to banks
50,387
57,208
9,304
24,512
74,473
Amounts owed to customers
2,710,633
2,431,757
2,123,446
1,928,971
1,650,308
Lease liabilities
5,246
5,348 5,365 2,629 -
Accruals
13,621
13,325 10,103 8,752 10,102
Debt securities in issue
54,642
54,597 54,558 - -
Other liabilities
13,121
10,450 10,090 10,966 11,892
Current tax
2,306
945
1,399
463
1,389
TOTAL LIABILITIES
2,850,694
2,574,182 2,214,764 1,977,014 1,748,986
EQUITY
Share capital
91,729
62,429
62,255
62,255
57,605
Share premium
48,410
10,453
10,140
10,140
1,770
Revaluation reserve
2,981
25,334
32,260
30,706
12,398
Retained earnings
107,209
103,974 91,736 82,785 68,478
Other reserves
147
- - - -
Non-controlling interest
10,982
18,632 9,828 6,029 1,993
TOTAL EQUITY
261,458
220,822 206,219 191,915 142,244
TOTAL LIABILITIES AND EQUITY
3,112,152
2,795,004 2,420,983 2,168,929 1,891,230
MEMORANDUM ITEMS
Contingent liabilities
21,911
25,356 23,128 22,855 23,269
Commitments
878,787
802,552 786,427 755,638 711,160
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 178
THE BANK’S STATEMENTS OF FINANCIAL POSITION
2022
2021
2020
2019
2018
€000
€000
€000
€000
€000
ASSETS
Cash, treasury bills and balances
with Central Bank of Malta
13,499
15,165
15,064
11,225
9,490
Balances with Central Bank of Malta
72,388
192,558
93,266
151,178
165,021
Cheques in course of collection
-
2,881
103
128
69
Loans and advances to banks
71,023
30,831
46,281
54,841
49,384
Financial assets at fair value through profit or loss
-
-
251
464
879
Non-current assets held for sale
1,733
-
-
-
2,600
Syndicated loans
135,210
134,262
113,152
125,953
61,610
Loans and advances to customers
2,224,694
1,932,044
1,689,003
1,458,144
1,253,883
Derivative financial instruments
738
552
499
721
822
Other debt and fixed income instruments
459,601
328,041
315,983
238,166
251,040
Equity and other non-fixed income instruments
303
307
303
308
1,272
Investment in subsidiaries
40,251
45,251
45,251
40,251
40,251
Investment in associate
14,063
16,761
15,261
15,261
14,886
Investment properties
6,593
6,053
1,830
1,830
1,860
Property and equipment
39,252
40,998
46,180
43,851
22,286
Intangible assets
14,545
11,746
8,848
7,318
5,858
Right-of-use assets
5,040
5,051
5,235
2,592
-
Other receivables
8,202
8,303
7,974
5,907
5,845
Deferred tax assets
2,957
2,249
2,553
460
3,853
TOTAL ASSETS
3,110,092
2,773,053
2,407,037
2,158,598
1,890,909
LIABILITIES
Derivative financial instruments
738
552
499
721
822
Amounts owed to banks
50,387
57,208
9,304
24,512
74,473
Amounts owed to customers
2,712,804
2,433,073
2,124,149
1,929,504
1,653,309
Lease liabilities
5,246
5,348
5,365
2,629
-
Accruals
13,561
13,224
10,031
8,712
10,077
Debt securities in issue
54,642
54,597
54,558
-
-
Other liabilities
13,080
10,404
10,090
10,966
11,892
Current tax
2,306
758
1,354
452
1,321
TOTAL LIABILITIES
2,852,764
2,575,164
2,215,350
1,977,496
1,751,894
EQUITY
Share capital
91,729
62,429
62,255
62,255
57,605
Share premium
48,410
10,453
10,140
10,140
1,770
Revaluation reserve
2,981
25,334
32,260
30,706
12,398
Other reserves
147
-
-
-
-
Retained earnings
114,061
99,673
87,032
78,001
67,242
TOTAL EQUITY
257,328
197,889
191,687
181,102
139,015
TOTAL LIABILITIES AND EQUITY
3,110,092
2,773,053
2,407,037
2,158,598
1,890,909
MEMORANDUM ITEMS
Contingent liabilities
21,911
25,356
23,128
22,855
23,269
Commitments
878,787
802,552
786,427
755,638
711,160
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 179
THE GROUP’S FIVE-YEAR SUMMARY - STATEMENTS OF CASH FLOWS
2022
2021 2020 2019 2018
€000
€000 €000 €000 €000
Net cash flows from/(used in) operating activities
3,835
49,036 (12,347) (57,230) 141,844
Investing activities
Dividends received
403
597 544 195 596
Interest income from debt securities
7,328
7,054 6,684 7,811 9,546
Purchase of debt and other fixed income instruments
(229,935)
(44,389) (134,778) (26,435) (45,614)
Proceeds on maturity and disposal of debt and other
fixed income instruments
73,040
23,838
55,957
40,490
41,197
Purchase of financial assets at FVTPL
(98,742)
(46,241) (39,165) (34,520) (30,124)
Proceeds on disposal of financial assets at FVTPL
99,653
34,605
31,496
34,224
26,741
Purchase of equity and other fixed income instruments
-
-
(950)
-
-
Proceeds on disposal of equity and other non-fixed
income instruments
-
- 1,000 880 397
Proceeds on disposal of investments in associates
9,589
- - - -
Investment in associate
(500)
(1,500) - (375) -
Purchase of property and equipment
(5,431)
(653) (6,034) (6,781) (7,543)
Proceeds on disposal of property and equipment
-
- - - 7
Net cash flows (used in)/from investing activities
(144,595)
(26,689) (85,246) 15,489 (4,797)
Financing activities
Dividends paid
(3,170)
(2,144) (91) (3,171) (2,135)
Amounts received on creation of units in subsidiary
1,027
9,386 4,207 3,865 -
Amounts paid on redemption of units in subsidiary
(630)
(794) (535) (228) (64)
Net proceeds from issue from debt securities in issue
-
- 55,000 - -
Net proceeds from issue of units in subsidiary
- - - 1,017
Proceeds from issue of new shares, net of issue costs
65,457
- - 13,020 -
Cash payment for the principal portion of lease liability
(761)
(515) (496) (394) -
Net cash flows from/(used in) financing activities
61,923
5,933 58,085 13,092 (1,182)
Net (decrease)/increase in cash and cash equivalents
(78,837)
28,280 (39,508) (28,649) 135,865
Cash and cash equivalents at 1 January
171,101
142,821 182,329 210,978 75,113
Cash and cash equivalents at 31 December
92,264
171,101 142,821 182,329 210,978
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 180
THE BANK’S FIVE-YEAR SUMMARY – STATEMENTS OF CASH FLOWS
2022
2021 2020 2019 2018
€000
€000 €000 €000 €000
Net cash flows from/(used in) operating activities
3,517
48,158
(13,136)
(58,177)
141,044
Investing activities
Dividends received
1,477
1,273
1,236
1,572
1,604
Interest income from debt securities
7,328
7,054
6,684
7,811
9,546
Purchase of debt and other fixed income instruments
(229,935)
(44,389)
(134,778)
(26,435)
(45,614)
Proceeds on maturity and disposal of debt and other fixed
income instruments
73,040
23,838
55,957
40,490
41,197
Purchase of equity and other non-fixed income instruments
-
- (950) - -
Proceeds on disposal of equity and other non-fixed income
instruments
-
-
1,000
880
397
Purchase of financial assets at FVTPL
-
-
-
-
(184)
Proceeds on disposal of financial assets at FVTPL
-
249
221
213
221
Purchase of property and equipment
(5,431)
(653) (6,034) (6,781) (7,543)
Proceeds on disposal of property and equipment
-
-
-
-
7
Proceeds on disposal of investments in associates
9,589
- - - -
Investment in associates
(500)
(1,500)
-
(375)
-
Investment in subsidiaries
-
-
(5,000)
-
-
Net cash flows (used in)/from investing activities
(144,432)
(14,128)
(81,664)
17,375
(369)
Financing activities
Dividends paid
(3,000)
(1,913)
-
(3,575)
(2,617)
Proceeds from issue of debt securities in issue
-
- 55,000 - -
Proceeds from issue of new shares, net of issue costs
65,457
-
-
13,020
-
Cash payment for the principal portion of lease liability
(761)
(515)
(496)
(394)
-
Net cash flows (used in)/from financing activities
61,696
(2,428)
54,504
9,051
(2,617)
Net (decrease)/increase in cash and cash equivalents
(79,219)
31,602
(40,296)
(31,751)
138,058
Cash and cash equivalents at 1 January
169,636
138,034
178,330
210,081
72,023
Cash and cash equivalents at 31 December
90,417
169,636
138,034
178,330
210,081
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 181
THE GROUP’S FIVE-YEAR SUMMARY - ACCOUNTING RATIOS
2022
2021
2020
2019
2018
%
%
%
%
%
Net interest income and other operating
income to total assets
2.1
2.3 2.3 2.6 2.4
Operating expenses to total assets
1.5
1.5 1.4 1.4 1.3
Cost to income ratio
72.7
64.3
60.8
53.6
55.0
Profit before tax to total assets
0.5
0.9
0.7
1.2
1.0
Return on average equity after tax
2.3
7.1 5.1 11.7 9.0
2022
2021
2020
2019
2018
Shares in issue (thousands)*
366,917
249,716
249,019
249,019
249,019
Net assets per share
68c
79c
77c
73c
55c
THE BANK’S FIVE-YEAR SUMMARY - ACCOUNTING RATIOS
2022
2021
2020
2019
2018
%
%
%
%
%
Net interest income and other operating
income to total assets
2.4
2.2 2.3 2.5 2.4
Operating expenses to total assets
1.5
1.4 1.4 1.4 1.3
Cost to income ratio
61.5
64.1
61.2
57.0
53.5
Profit before tax to total assets
0.9
0.9
0.6
1.0
1.0
Return on average equity after tax
8.3
7.7
5.3
9.0
10.1
2022
2021
2020
2019
2018
Shares in issue (thousands)*
366,917
249,716 249,019 249,019 249,019
Net assets per share
70c
77c
75c
71c
54c
* Number of shares in issue and the net assets per share for 2018 to 2019 have been restated to reflect the number of shares
in issue as a result of the 2020 re-designation of the ordinary shares.
The Net assets per share for 2018 to 2021 have been restated to include the scrip dividend issued in 2022 in the form of
shares amounting to 7.2 million.
Return on average equity before tax of the Bank is calculated as the return as a percentage of the 12 months ending equity
balances. The average capital employed of the Group is calculated as the average of the opening and closing equity balances.
APS Bank plc 182
Independent auditor’s report
to the members of
APS Bank p.l.c.
Report on the Audit of the Financial Statements
Opinion
We have audited the individual financial statements of APS Bank p.l.c. (‘the Bank’) and the consolidated
financial statements of the Bank and its subsidiaries (together, the Group), set out on pages 61 to 175,
which comprise the statements of financial position as at 31 December 2022, and the statements of
profit or loss, statements of comprehensive income, statements of changes in equity and statements
of cash flows for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies.
In our opinion, the accompanying financial statements give a true and fair view of the financial position
of the Bank and the Group as at 31 December 2022, and of the Bank’s and the Group’s financial
performance and cash flows for the year then ended in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the EU and have been properly prepared in accordance
with the requirements of the Companies Act (Cap.386) and the Banking Act (Cap.371).
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 are independent of the Bank and the Group
in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code) together with the Accountancy Profession (Code of Ethics for
Warrant Holders) Directive (Maltese Code) that are relevant to our audit of the financial statements in
Malta, and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code and
the Maltese Code. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion. In conducting our audit, we have remained independent of the Bank
and the Group and have not provided any of the non-audit services prohibited by article 18A (1) of the
Accountancy Profession Act (Cap. 281).
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 and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that we identified. The key audit matter
described below pertains to the audit of both the Bank and the Group financial statements. This matter
was addressed in the context of our audit of the Bank and the Group’s financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
APS Bank plc 183
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
Impairment of loans and advances to customers
At 31 December 2022 the Bank and Group reported total gross loans and advances to customers
(“assets”) of EUR2,243,676,000 and EUR18,982,000 of expected credit loss provisions.
Management’s judgements and estimates are especially subjective due to significant uncertainty
associated with the assumptions used. The global macroeconomic uncertainties driven by the ongoing
Russia/Ukraine conflict and its consequent implications including but not limited to supply chain
disruptions and increased inflationary pressure, increased the level of judgement in the expected credit
loss (ECL) calculation. Assumptions with increased complexity in respect of the timing and
measurement and disclosure of ECL include:
 Staging - Allocation of assets to stage 1, 2, or 3 on a timely basis using criteria in accordance
with IFRS 9 considering the impact of macroeconomic uncertainties on customer behaviours
and further support measures that were granted following the identification of underlying
significant deterioration in credit risk;

Model estimations - Accounting interpretations, modelling assumptions and data used to build
and run the models that calculate the ECL;
 Economic scenarios – Input s, assumptions and weightings used to estimate the impact of
multiple economic scenarios;

Post model adjustments – Assumptions used to estimate the possible negative impact of
macroeconomic uncertainties and increased inflationary pressure on certain customers and/or
sectors and any resulting model adjustments;
 Individual provisions - Measurement of individual provisions including the assessment of
multiple scenarios on exit strategies, collateral valuations and time to collect; and
 Disclosure - The completeness and preparation of disclosures considering the key judgments,
sources of data and the design of the disclosures.
Our audit response to address the risk of material misstatement arising from the ECL calculation
comprised the following:
Controls testing:
We tested the design, implementation and operating effectiveness of the Bank’s and Group’s key
controls across the processes relevant to the ECL calculation. We reviewed the automated controls
embedded in the ECL system and used data analytics in order to analyse the loan data and the
movements in the various credit risk grading categories and stages in order to identify any anomalies
and possible risk areas. We reviewed the collateral valuation reports including management’s
assessment of the reliability of the valuations being used.
Staging:
We performed an overall assessment of the ECL provision levels by stage to determine if they were
reasonable considering the Bank’s and Group’s portfolio, risk profile, credit risk management policies
and the macroeconomic environment. We challenged the criteria used to allocate an asset to stage 1,
2 or 3 in accordance with IFRS 9 and sample tested assets classified in each of stages 1, 2 and 3 to
verify that they were allocated to the appropriate stage.
Model estimations:
We tested the data used in the ECL calculation by reconciling to source systems in order to gain
reasonable assurance over the data quality. We recalculated the risk ratings (credit grading) for a
sample of performing loans in order to test credit grading. Assumptions and inputs used in ECL models
were tested substantively on a sample basis. This included assessing the appropriateness of model
design and formulas used by recalculating the ECL on a sample basis.
APS Bank plc 184
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
Economic scenarios:
We reviewed the inputs, assumptions and weightings used to estimate the impact of multiple economic
scenarios.
Post model adjustments:
We assessed the completeness and appropriateness of post model adjustments.
Individual provisions:
For a sample of individually impaired loans we evaluated the specific circumstances of the customer,
including latest available information, the basis for measuring the impairment provision, and whether
key judgements were appropriate. We reperformed management’s impairment calculations, which
were largely based on the expected recovery from collateral held. We tested the valuation of collateral
challenging subjective estimates by referring to actual historical recovery data and market information
available.
Disclosure:
We assessed the adequacy and appropriateness of disclosures for compliance with International
Financial Reporting Standards as adopted by the EU and regulatory considerations.
The Bank and Group’s disclosures about impairment are included in Notes 2.3, 11 and 48, which include
the directors’ assessment of the adequacy of the impairment provisions.
Other information
The directors are responsible for the other information. The other information comprises the
Chairman’s Statement, the CEO’s Review, the Board of Directors pages, the Executive Management
pages, Corporate Governance Report which includes the Corporate Governance Statement of
Compliance, the Directors’ Report which includes the statement of directors’ responsibilities, the
Remuneration Report required under Rule 12.26K of the Capital Markets Rules, the Five Year Summaries
and Our Presence page which we obtained prior to the date of this auditor’s report. Other information
also includes the Bank’s Pillar 3 Disclosures which have been published on the Bank’s website.
However, the other information does not include the individual and consolidated financial statements,
our auditor’s report and the relevant tagging applied in accordance with the requirements of the
European Single Electronic Format, as defined in our Report on Other Legal and Regulatory
Requirements.
Except for our opinions on the Directors’ Report in accordance with the Companies Act (Cap. 386),
and on the Corporate Governance Statement of Compliance and on the Remuneration Report in
accordance with the Capital Markets Rules issued by the MFSA, our opinion on the financial statements
does not cover the other information and we do not and will not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated. If, based on the work we have performed on the other information that we
obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this regard.
With respect to the Directors’ Report, we also considered whether the Directors’ Report includes the
disclosure requirements of Article 177 of the Companies Act (Cap. 386), and the statement required by
Rule 5.62 of the Capital Markets Rules on the Bank’s and the Group’s ability to continue as a going
concern.
APS Bank plc 185
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
In accordance with the requirements of sub-article 179(3) of the Companies Act (Cap. 386) in relation
to the Directors’ Report on pages 16 to 37, in our opinion, based on the work undertaken in the course
of the audit:
a) Non-financial statement in the Directors’ Report
 The Directors’ Report includes non-financial information in line with the requirements of
paragraphs 8 and 11 of the Sixth Schedule to the Companies Act (Cap. 386). The proviso to
sub-article 179(3) of that Act requires us to check whether such information is provided, but
not to express any comment thereon;
b) Directors’ Report information other than the non-financial statement
 the information given in the Directors’ Report for the financial year for which the Bank’s and
the Group’s financial statements are prepared is consistent with those financial statements;
and
 the Directors’ Report has been prepared in accordance with the applicable legal requirements.
In the light of the knowledge and understanding of the Bank, the Group and their environment obtained
in the course of the audit, we have not identified any material misstatements in the Directors’ Report.
Responsibilities of the Directors and the Audit Committee for the Financial Statements
As explained more fully in the Statement of directors’ responsibilities on page 3 6, the directors are
responsible for the preparation of financial statements that give a true and fair view in accordance with
IFRSs as adopted by the EU and the requirements of the Companies Act (Cap.386) and the Banking
Act (Cap.371), and for such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Bank’s and the
Group’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 the directors either intend to liquidate
the Bank and/or the Group or to cease operations, or have no realistic alternative but to do so.
The directors have delegated the responsibility for overseeing the Bank’s and the Group’s financial
reporting process to the Audit Committee.
Auditor’s Responsibilities for the Audit of the Financial Statements
This report, including the opinions set out herein, has been prepared for the Bank’s members as a body
in accordance with articles 179, 179A and 179B of the Companies Act (Cap. 386).
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 opinions in accordance with articles 179, 179A and 179B of the Companies Act (Cap.
386). 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.
In terms of article 179A(4) of the Companies Act (Cap. 386), the scope of our audit does not include
assurance on the future viability of the Bank or of the Group, or on the efficiency or effectiveness with
which the directors have conducted or will conduct the affairs of the Bank and the Group. The financial
position of the Bank or the Group may improve, deteriorate, or otherwise be subject to change as a
consequence of decisions taken, or to be taken, by the management thereof, or may be impacted by
events occurring after the date of this opinion, including, but not limited to, events of force majeure.
APS Bank plc 186
I ndependent auditor’s report (continued)
to the members of
APS Bank p.l.c.
As such, our audit report on the Bank’s and the Group’s historical financial statements is not intended
to facilitate or enable, nor is it suitable for, reliance by any person, in the creation of any projections or
predictions, with respect to the future financial health and viability of the Bank and/or the Group , and
cannot therefore be utilised or relied upon for the purpose of decisions regarding investment in, or
otherwise dealing with (including but not limited to the extension of credit), the Bank and/or the Group.
Any decision-making in this respect should be formulated on the basis of a separate analysis,
specifically intended to evaluate the prospects of the Bank and/or the Group and to identify any facts
or circumstances that may be materially relevant thereto.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Bank’s or the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Bank’s and the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report 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 of our auditor’s report. However, future events or
conditions may cause the Bank and/or the Group to cease to continue as a going concern.
Accordingly, in terms of generally accepted auditing standards, the absence of any reference
to a material uncertainty about the Bank’s or the Group’s ability to continue as a going concern
in our auditor’s report should not be viewed as a guarantee as to the Bank’s and/or the Group’s
ability to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the Bank or
the business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.
For the avoidance of doubt, any conclusions concerning the adequacy of the capital structure of the
Bank, including the formulation of a view as to the manner in which financial risk is distributed between
shareholders and/or creditors cannot be reached on the basis of these financial statements alone and
must necessarily be based on a broader analysis supported by additional information.
APS Bank plc 187
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
We communicate with the Audit Committee 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 the Audit Committee with a statement that we have complied with relevant ethical
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 the Audit Committee, 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.
Report on Other Legal and Regulatory Requirements
Report on compliance of the Annual Financial Report with the requirements of the European Single
Electronic Format Regulatory Technical Standard as specified in the Commission Delegated
Regulation (EU) 2019/815 (the "ESEF RTS”)
Pursuant to Capital Markets Rule 5.55.6 issued by the MFSA, we have undertaken a reasonable
assurance engagement in accordance with the requirements of the Accountancy Profession (European
Single Electronic Format) Assurance Directive issued by the Accountancy Board in terms of the
Accountancy Profession Act (Cap. 281), hereinafter referred to as the “ESEF Directive 6”, on the annual
financial report of the Company and the Group for the year ended 31 December 2022, prepared in a
single electronic reporting format.
Solely for the purposes of our reasonable assurance report on the compliance of the annual financial
report with the requirements of the ESEF RTS, the “Annual Financial Report” comprises the Directors’
Report, the Statement of Directors’ responsibilities, the Corporate Governance Statement of
Compliance, the annual financial statements, the prescribed disclosures of material contracts, General
Company Information, and the Independent auditor’s report, as set out in Capital Markets Rules 5.55.
Responsibilities of the Directors for the Annual Financial Report
The directors are responsible for:
 the preparation and publication of the Annual Financial Report, including the consolidated financial
statements and the relevant tagging requirements therein, as required by Capital Markets Rule
5.56A, in accordance with the requirements of the ESEF RTS,
 designing, implementing, and maintaining internal controls relevant to the preparation of the
Annual Financial Report that is free from material non-compliance with the requirements of the
ESEF RTS, whether due to fraud or error,
and consequently, for ensuring the accurate transfer of the information in the Annual Financial Report
into a single electronic reporting format.
APS Bank plc 188
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
Auditor’s responsibilities for the Reasonable Assurance Engagement
Our responsibility is to obtain reasonable assurance about whether the Annual Financial Report,
including the consolidated financial statements and the relevant electronic tags therein comply, in all
material respects, with the ESEF RTS, based on the evidence we have obtained. We conducted our
reasonable assurance engagement in accordance with the requirements of ESEF Directive 6.
The nature, timing and extent of procedures we performed, including the assessment of the risks of
material non-compliance with the requirements of the ESEF RTS, whether due to fraud or error, were
based on our professional judgement and included:
 Obtaining an understanding of the Bank’s and the Group’s internal controls relevant to the financial
reporting process, including the preparation of the Annual Financial Report, in accordance with the
requirements of the ESEF RTS, but not for the purpose of expressing an assurance opinion on the
effectiveness of these controls.
 Obtaining the Annual Financial Report and performing validations to determine whether the
Annual Financial Report has been prepared in accordance with the requirements of the technical
specifications of the ESEF RTS.
 Examining the information in the Annual Financial Report to determine whether all the required
tags therein have been applied and evaluating the appropriateness, in all material respects, of the
use of such tags in accordance with the requirements of the ESEF RTS.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our
reasonable assurance opinion.
Reasonable Assurance Opinion
In our opinion, the Annual Financial Report for the year ended 31 December 2022 has been prepared,
in all material respects, in accordance with the requirements of the ESEF RTS.
This reasonable assurance opinion only covers the transfer of the information in the Annual Financial
Report into a single electronic reporting format as required by the ESEF RTS, and therefore does not
cover the information contained in the Annual Financial Report.
Report on Corporate Governance Statement of Compliance
Pursuant to Rule 5.94 of the Capital Market Rules issued by the MFSA, the directors are required to
include in the Bank’s Annual Financial Report a Corporate Governance Statement of Compliance
explaining the extent to which they have adopted the Code of Principles of Good Corporate
Governance set out in Appendix 5.1 to Chapter 5 of the Capital Markets Rules, and the effective
measures that they have taken to ensure compliance with those principles. The Corporate Governance
Statement of Compliance is to contain at least the information set out in Rule 5.97 of the Capital
Markets Rules.
Our responsibility is laid down by Rule 5.98 of the Capital Markets Rules, which requires us to include
a report to shareholders on the Corporate Governance Statement of Compliance in the Company’s
Annual Financial Report.
We read the Corporate Governance Statement of Compliance and consider the implications for our
report if we become aware of any information therein that is materially inconsistent with the financial
statemen ts or our knowledge obtained in the audit, or that otherwise appears to be materially
misstated. We also review whether the Corporate Governance Statement of Compliance contains at
least the information set out in Rule 5.97 of the Capital Markets Rules.
APS Bank plc 189
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
We are not required to, and we do not, consider whether the directors’ statements on internal control
cover all risks and controls, or form an opinion on the effectiveness of the Company’s corporate
governance procedures or its risk and control procedures.
In our opinion, the Corporate Governance Statement of Compliance set out on pages 46 to 60 has
been properly prepared in accordance with the requirements of Rules 5.94 and 5.97 of the Capital
Markets Rules.
Report on Remuneration Report
Pursuant to Rule 12.26K of the Capital Markets Rules issued by the MFSA, the directors are required to
draw up a Remuneration Report, whose contents are to be in line with the requirements listed in
Appendix 12.1 to Chapter 12 of the Capital Markets Rules.
Our responsibility is laid down by Rule 12.26N of the Capital Markets Rules, which requires us to check
that the information that needs to be provided in the Remuneration Report, as required in terms of
Chapter 12 of the Capital Markets Rules, including Appendix 12.1, has been included.
In our opinion, the Remuneration Report set out on pages 38 to 4 5 includes the information that needs
to be provided in the Remuneration Report in terms of the Capital Markets Rules.
Additional matters on which we are required to report pursuant to the Banking Act (Cap. 371)
In our opinion:
 Proper accounting records have been kept so far as it appears from our examination thereof;
 The financial statements are in agreement with the accounting records; and
 We have obtained all the information and explanations which, to the best of our knowledge and
belief, are necessary for the purpose of our audit.
Matters on which we are required to report by exception pursuant to the Companies Act (Cap. 386)
in addition to those reported above
We have responsibilities to report to you if in our opinion:
 Proper returns adequate for our audit have not been received from branches not visited by us; or
 The financial statements are not in agreement with the accounting records and returns.
We have nothing to report to you in respect of these responsibilities.
Auditor tenure
We were first appointed to act as statutory auditor to audit the Bank’s and the Group’s financial
statements by the members of the Bank on 27 July 2017 for the financial year ended 31 December 2017,
and were subsequently reappointed as statutory auditor by the members of the Bank on an annual
basis. The period of total uninterrupted engagement as statutory auditor is six financial years.
Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee in accordance with
the provisions of Article 11 of the EU Audit Regulation No. 537/2014.
The audit was drawn up on 9 March and signed by:
Sarah Curmi as Director
In the name and on behalf of
Deloitte Audit Limited
Registered auditor
Central Business District, Birkirkara, Malta.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 190
OUR PRESENCE
HEAD OFFICE
APS Centre
Tower Street, Birkirkara, BKR 4012
COMMERCIAL BUSINESS
APS Centre
Tower Street, Birkirkara, BKR 4012
RETAIL BRANCHES
ATTARD
St. Catherine’s Street, Attard, ATD 2609
BIRKIRKARA (SWATAR)
APS Centre
Tower Street, Birkirkara, BKR 4012
MOSTA
9, Rotunda Square, Mosta, MST 9042
PAOLA
146/147, Antoine De Paule Square, Paola, PLA 1260
QORMI
70-72, St. Sebastian Street, Qormi, QRM 2335
RABAT
25, Saqqajja Street, Rabat, RBT 1192
SLIEMA
226, Tower Road, Sliema, SLM 1600
ST. PAUL’S BAY
Mosta Road, St. Paul’s Bay, SPB 3115
VALLETTA
17/18, Republic Street, Valletta, VLT 1111
VICTORIA (GOZO)
10, Main Gate Street, Victoria, VCT 1341
ZEJTUN
12, Republic Square, Zejtun, ZTN 1011
REGISTERED OFFICE
APS Centre
Tower Street, Birkirkara, BKR 4012
E - info@apsbank.com.mt
W – www.apsbank.com.mt
BIC Code- APSBMTMT
Registration number: C2192