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APS Bank plc
ANNUAL REPORT &
FINANCIAL STATEMENTS
2023
TABLE
OF
CONTENTS
________________________________________________________________________________________
Page
Chairman’s Statement
1
CEO’s Review 3
Board of Directors 7
Executive Management 11
Financial Statements and Other Information
Directors’ Report 15
Remuneration Report 51
Corporate Governance Report 61
Statements of Profit or Loss 76
Statements of Comprehensive Income 77
Statements of Financial Position 78
Statements of Changes in Equity 79
Statements of Cashflows 81
Notes to the Financial Statements 82
Five-Year Summaries 178
Independent Auditor’s Report 184
Our Presence 192
CHAIRMAN’S
STATEMENT
__________________________________________________________________________________________
APS Bank plc 1
Welcome
It is a pleasure to be addressing our shareholders once more. During 2023 we continued to register
growth in many areas of the business whilst serving our customers’ needs, be they personal or business
banking requirements.
Our Business Environment
The complexities arising out of high interest rates, inflationary pressures and geo-political tensions have
continued to present stretching challenges. Your Board of Directors continues to address its attention
to all aspects of running a business successfully, sustainably, and responsibly.
Whilst monetary policy interest rate hikes may have plateaued, interest rates will continue to remain
high compared to the last few years. As a socially conscious Bank we have striven to pass on credit
interest income via deposit accounts and keeping personal lending rates, especially house loan lending,
stable.
Inflationary pressures have started to reduce across many parts of the world including Malta. Whilst
there is a correlation between high interest rates and inflation, there are other sources of inflation such
as energy and food products’ pricing that will continue to present economic pressures.
In addition to the war in Ukraine, regretfully we now also have a war in the Middle East with significant
tensions creating humanitarian tragedies and dangers of access to important trade routes, which in turn
completes a vicious circle effecting inflationary pressures filtering into our economy.
Other risks that may have implications for any economy, including Malta, include the emergence of
potential global risks such as misinformation and disinformation. With billions of people going to the
polls in many countries during 2024, these risks could lead to social and political instability. Extreme
weather events and the ever-present risks and dangers associated with cybercrime will continue to be
addressed with considerable investment of time and financial resources at APS.
The Board and the Management of the Bank remain fully attuned to the current and evolving business
needs of all our customers and to the needs and requirements of our wider stakeholder base.
Performance
APS Group Profit Before Tax reached €30.2 million (versus prior year of €15.7 million). Bank solo Profit
Before Tax stands at €27.8 (versus prior year of €28.9). Non-Performing Loans represent a very strong
position at 2.2%. The Chief Executive Officer’s report will address the Bank’s performance in more detail.
The Bank’s financial performance will contribute €9.6 million to local tax revenues during the year under
review.
The Bank’s capital position is strong with a Tier 1 capital of 14.6% and a Total Capital of €358.7 million
up on prior year by €74.6 million. The Board of Directors is pleased to note a Group return on average
equity of 7.5% for 2023.
Rewarding Shareholders
The Board is recommending a gross scrip dividend to shareholders of € 8.4 million, bringing the total
dividend for the year to € 11.7 million, up from € 9.8 million for 2022 - equating to a 2023 dividend per
share of €0.031 gross or €0.020 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 dividend have been obtained.
Corporate governance
The Board of Directors met regularly during the year. In line with best practice and regulatory corporate
governance guidelines the composition, skills and experience of the Board is regularly reviewed, to
ensure that individual and collective suitability remains at the highest levels.
CHAIRMAN’S
STATEMENT
__________________________________________________________________________________________
APS Bank plc 2
Corporate governance (continued)
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 successful and compliant outcomes.
2023 saw the retirement of two longstanding Directors and the appointment of two new Directors to
the Board. On behalf of the Board, I would like to thank the two outgoing directors, Mr Franco Azzopardi
and Mr Alfred Demarco, who have served the Bank faithfully and competently for many years
consistently contributing to the success of the Bank. We augur well for the future for both Mr Demarco
and Mr Azzopardi. I would like to welcome Ms Marisa Xuereb and Mr Noel Mizzi to the Board of
Directors. As described in the published bios, both Mr Mizzi and Ms Xuereb bring a wealth of
competence and experience to the Board. I would like to thank Victor E. Agius, who will retire at the
2024 Annual General Meeting, for the significant contributions that he has made over many years.
Further information on his successor will be provided in due course.
I assure you as shareholders that the Board continues to discharge their individual and collective
responsibilities diligently, responsibly and with total commitment.
Future focus
The latest growth rates for Malta and the Eurozone region published by the International Monetary
Fund forecast growth rates for 2024 of circa 5.1% and circa 0.9% respectively. Social, economic, and
environmental challenges will continue to present risks and opportunities; the Bank’s Board and
Management are determined to continue to contribute to all stakeholders’ needs and requirements.
The Bank is committed to inbuild responsibilities arising out of the United Nations Sustainable
Development Goals and out of Environmental, Social and Governance standards into our strategic and
business plans. Our vison, mission, and values, described elsewhere in this document, remain to be our
primary drivers in making the APS brand the hallmark of sustainable success. The hard work of all our
colleagues will continue to ensure that APS is well placed to succeed and grow sustainably meeting
and exceeding our customers’ needs.
Recognition
2023 has been another successful year. I would like to sincerely thank my colleagues on the Board, the
Management team led by our Chief Executive Officer, Marcel Cassar, and all the employees for their
contributions.
Finally, I would like to sincerely reiterate my thanks to you all, our shareholders, for your support and
backing.
Martin Scicluna
7 March 2024
CEO’S
REVIEW
__________________________________________________________________________________________
APS Bank plc
3
It gives me great pleasure to present this Review for a year in which, despite considerable challenges,
APS Bank once again stood out as a leader in providing outstanding customer service, promoting talent
and a driver of sustainable change in Malta’s economic and social fabric.
Indeed, 2023 saw an increase in the load of geopolitical risk due to the continuing war in Ukraine and
other regional tensions which in October exploded into an unprecedented, full-blown conflict in Gaza and
growing humanitarian emergencies. On top of existing economic sanctions, supply chain shocks re-
appeared thanks to the Red Sea crisis and ensuing disruptions to shipping and trade, inflationary
pressures persist which are causing monetary authorities to remain cautious on their outlook about
interest rate easing. Although the likelihood of a recession with cross-border implications remains
uncertain, a slowdown in global growth for 2024 is anticipated, with a corresponding drop in headline
inflation.
As always, this international backdrop reverberates on Malta’s open economy through higher costs of
inputs and imported goods, being partly cushioned by Government subsidies which contribute to a build-
up in public debt. Overall, Malta continued to experience better economic growth, milder inflation, higher
consumption and lower unemployment than its EU counterparts, aided by a record performance in
tourism and buoyant property market. This benign picture remains weighed by demographic,
infrastructural and over-development pressures that challenge the journey forward for Malta’s sustainable
progress.
Despite this complex picture, our results are the best ever for the APS Bank Group – a performance that
is not accidental but thanks to a highly structured and curated planning process that is kept responsive
to the dynamic business and market environment. As usual this Review touches briefly on how we tackled
key strategic objectives to deliver these outcomes, as well as our ideas for continuing to create and deliver
value to all our stakeholders.
For the year under review, APS Bank plc registered a Group pre-tax profit of €30.2 million (2022: €15.7
million). I attribute such a strong performance to various factors, namely robust operating fundamentals
and a strategy underpinned by ongoing digital transformation, striving to continuously enrich the
customer experience and an eye on business selection in order to maintain asset quality.
As market volatility subsided, we are pleased to report that, consistent with our forecast in last year’s
Review, we have now seen the Group starting to reverse some of the unrealised investments portfolio
losses of 2022, boosting performance and equity. At the same time, we decided to take a prudent view
on commercial real estate (CRE) risk in Central Europe where, despite the investment grade names and
prime portfolios involved, pressures have been mounting leading to an increase in ECL. The impact of this
impairment provisioning was to dent the Bank Solo pre-tax profit down to €27.8 million, from €28.9
million in 2022.
This Review does not delve into performance indicators in any detail, nor does it repeat the information
which is contained in substantial detail in other parts of the Annual Report, including the Directors’ Report.
It is also satisfying to see that the Group communicates with regular frequency about its performance
through company announcements and other media, such as Market Briefings. So I shall here elaborate on
a few main aspects of our performance and focus on some key messages.
CEO’S
REVIEW
__________________________________________________________________________________________
APS Bank plc
4
A year of all-round growth
The year under review saw all-round growth across the main business segments of retail, corporate and
investment services, resulting in record results for interest, fee and commission income. As interest rates
continued to rise, we were also rewarded with better returns on our liquidity stock as well as improved
pricing opportunities on the syndicated loan book. Interest income grew by 32.3% on 2022 to reach €105.7
million, while net fee and commission income went up by 21.0% to €8.3 million.
But as our depositors also came to benefit from the interest rate pass-through, we saw interest cost more
than double to €32.1 million in the year under review. This was due not only to higher repricing on largely
EUR funding but also the effect of the drive to raise MREL, including the issue of a 5.8% Subordinated
Bond, in Q4. Net interest income consequently rose by 13.1% on 2022, our best-ever result despite the
tough competition and compressed conditions.
Even more important is the fact that these results were achieved thanks to robust growth in business
activity, seeing record numbers of retail customers being onboarded across our branch network, both
tellered and tellerless. In fact, 2023 saw retail deposits grow by €427 million with €585 million being
extended in new retail finance (in the main part, home loans), as well as an all-time high of €446 million
in new commercial facilities sanctioned, with the Bank’s domestic market share increasing across all
business lines. This performance was mirrored by growth in corresponding revenue streams, like
advances, card related and other transactional banking fees and commissions.
It was also a strong year for our investment services offering, with growth in retail and private clients
business, as well as private and occupational pensions. I need hardly say that the strength of our
distribution and advisory teams helped in no small way with the success of the MREL-raising exercise,
the Subordinated Bond issue and two new editions of Kapital+. The year under review also saw the Bank’s
return to active transaction business on behalf of clients at the Malta Stock Exchange, alongside a buoyant
primary market particularly in Malta Government paper.
Asset quality remains a priority
In 2022, the Group results had been significantly marked by the high economic uncertainty and financial
markets instability which negatively impacted the investment in APS Funds SICAV, not mirrored at the
level of the Bank. This led the performance to go into red territory with an unrealised loss on financial
instruments of €10.3 million, which also complemented the dreary activity in investment services. Thanks
to active and diligent portfolio investment management, as well as less market volatility, we saw some of
those losses being reversed in 2023 resulting in a net gain of €3.1 million, with further stabilisation
expected in 2024.
The growth in the Bank’s loan portfolio continued to be supported by high credit underwriting standards
leading to a general improvement in the NPL ratio during the year under review, a trend which reversed
slightly in 4Q with the ratio going back to 2.2%. This was due to a shift to Stage 3 of a loan representing
exposure to prime European CRE which has been facing market and valuation strains in recent months.
Consequently, this led to an increase in ECL for a total charge of €3.5 million, in contrast with a net
writeback of €0.3 million in 2022. Aside from these situations, which result from the Bank’s strategy of
diversifying its sectorial and geographical risk through the syndicated loan book, the risk appetite
remained prudent and focused on maintaining preserving quality.
CEO’S
REVIEW
__________________________________________________________________________________________
APS Bank plc
5
A resilient operating and business model
2023 saw the stepping-up and continuation of a pipeline of projects that drive the Bank’s growth across
many areas. Well-curated proposals, rigorous analyses and detailed budgets support the millions of euros
of investment in projects that range from backbone technology to more visible, customer interfacing
solutions, alongside ongoing remediation projects demanded by compliance and risk management
considerations. There is both a flow and a scaling-up of operations that direct the Bank’s transformation
programme, 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 development was rolled out on ‘myAPS’ permitting customers the convenience and versatility of
seamless digital banking, now further enhanced with the introduction of e-statements and the
investments module. Other operational improvements continued relentlessly both at front- and back-end
functions, with technology leading to increased efficiencies. Of particular note is the traction at the Marsa
Digitisation and Documentation Centre, where a team of dedicated staff provide the engine for the Bank-
wide digitisation project. But this is also the right place to highlight the cost increases mainly arising from
licensing and maintenance of technologies, regulatory and compliance requirements, professional and
marketing fees, insurance, and other inflationary pressures. Notwithstanding, we managed to improve the
cost/income ratio from business operations to 61.6%, mainly as a result of a positive denominator effect
thanks to the recovery in net operating income.
Our fascination with ‘culture’
I am often asked why APS Bank has a ‘Culture’ department represented also at senior management level.
‘Culture’ is a concept that cuts right across and fuses our internal corporate beliefs with the external view
of the Bank. This means having a uniform, overarching message that engages all our staff, customers,
business partners and thousands of investors into one culture. All of this is drilled into our active approach
to marketing, CSR, ESG campaigning and delivering the best customer experience. In an environment
where talent is increasingly a scarce resource, our culture also helps us to attract the right individuals and
skills by 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, and dynamic social media presence, complemented by
a busy calendar of events thanks to our Social Activities and Sports Committees.
Interest rate pass-through … and conclusion
Our record numbers are insignificant when compared to the news that Europe’s largest twenty banks
exceeded €100 billion in profit for the first time last year, thanks to the lift from rising interest rates. But
that massive profit surge will be hard to repeat as the tailwind from interest rates subsides and central
banks consider their next policy moves. It is also fair to say that, due to our higher pass-through of interest
rate policy, our bonanza from higher interest rates is relatively less than what some other players in the
market will experience.
CEO’S
REVIEW
__________________________________________________________________________________________
APS Bank plc
6
Interest rate pass-through … and conclusion (continued)
But it is equally pertinent to point out that our business model remains centred around the provision of
credit and financial support to Maltese businesses and families. The Business Plan 2024-26 approved last
year anticipated an outlook that would be challenging and focused on a number of strategic priorities
which still see revenue and profit in home loans and commercial credit, international lending, retail
investments and pensions business. Equally we shall be seeking to secure lower-cost funding and to
reinforce further our capital base as we position ourselves to identify new, exciting opportunities for
growth.
Marcel Cassar
7 March 2024
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 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. Martin held a number of managerial
appointments in Mid-Med Bank between 1976 and 1996, following which he joined Midland Bank plc
which later became HSBC Bank Malta plc. Between 1996 and 2012, Martin held several senior executive
roles in HSBC Malta including Group Head of Internal Audit, Deputy Head of Operations and Head of
Wealth Management. From 2006 to 2012, he served on several boards for HSBC Malta regulated
subsidiaries in Life Insurance, Asset Management and Financial Advisory and on its Audit Committee.
Since 2012, he has held directorships in asset management and insurance companies licensed in Malta.
Martin has contributed to various areas of voluntary work for 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.
Significant External 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)
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 of which at the European Bank for
Reconstruction and Development in London and seventeen years with the Council of Europe
Development Bank in Paris. Past appointments consist of extensive field missions in leadership
responsibilities to over 60 countries in Africa, East Asia, Middle East & 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 External Appointments
:
None
* Rotated out of the Risk Committee (Member) and the Environment, Social and Governance
Committee (Chair) on 31 December 2023.
3.
Joseph C. Attard
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
__________________________________________________________________________________________
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
4.
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.
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. He completed several Executive
Training Programmes at London Business School (LBS) and at Massachusetts Institute of Technology
(MIT).
Significant External Appointments:
Chairman, Resident Professor at the Centre for
Entrepreneurship and Business Incubation at the University of
Malta;
Board Member –Debono Group Holdings Company Ltd;
Board Member – Malta University Innovation Portfolio Ltd and
Non-Executive Chairman (of its two subsidiaries) – FLASC BV
and DeNovoCell Ltd;
Board Member – Prohealth Ltd and its subsidiary TrioMed Ltd.
5.
Laragh Cassar
Senior Independent 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.
BOARD
OF
DIRECTORS
__________________________________________________________________________________________
APS Bank plc 9
5. Laragh Cassar (continued)
Significant External Appointments:
Partner - Camilleri Cassar Advocates;
Non-Executive Director – Hili Properties plc;
Non-Executive Director/Company Secretary – MedservRegis
plc.
6.
Noel Mizzi
Non-Executive Director
Appointed to the Board in May 2023.
Committee Memberships:
Audit Committee (Chair)
Environmental, Social and Governance Committee (Chair)
Risk Committee (Member)
Bio:
Noel graduated as an accountant from the University of Malta in 1988. He is a certified public
accountant and a holder of a practicing certificate in auditing. Noel is a Fellow of the Malta Institute of
Accountants. He commenced his extensive career in 1988.
Upon graduation he joined KPMG Malta and dedicated a 35-year career with the said firm, working on
auditing entities in the financial services industry, particularly banks and asset management companies.
He retired as Partner of the firm in September 2022. Noel was crucial in the setting-up of a dedicated
financial services audit team in the Malta KPMG office. Noel was a council member and an officer of the
Malta Institute of Accountants up to 30 September 2023.
Until retirement, he headed the operations side of the audit practice, which involves the auditing of a
number of banks operating locally. He was a member of the firm’s Executive Management Committee
and the Audit Quality Panel up to the date of his retirement from the firm.
Significant External Appointments:
Non-Executive Director – Embark Malta Limited.
7.
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)
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 trustees of the Richmond Foundation,
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.
BOARD
OF
DIRECTORS
__________________________________________________________________________________________
APS Bank plc 10
8.
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 the Ministry for European Union
Funds, Social Dialogue and Consumer Protection, 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 External Appointments:
Member - Kunsill Finanzjarju Djoceżan, Diocese of Gozo.
9.
Marisa Xuereb
Non-Executive Director
Appointed to the Board in May 2023.
Committee Memberships:
Board Credit Committee (Member)
Technology and Innovation Committee (Member)
Bio:
Marisa commenced her career in 1997 and occupied various senior roles in the manufacturing
industry including that of Managing Director. She carried out a brief stint at the Central Bank of Malta
as an external researcher on Monetary Policy Transmission, and undertook contractual research
assignments relating to economic, social and technological impact of ICT and eServices. In March 2015,
Marisa was appointed Council Member of the Malta Chamber of Commerce, Enterprise and Industry
progressing to President in 2021. By virtue of this appointment, she was nominated to sit on a number
of Boards related to the industry which she relinquished following completion of her terms as President
of the Malta Chamber in March 2023.
Marisa read for a Bachelor of Commerce (Hons) degree in Economics at the University of Malta,
graduating in 2000. She proceeded to read for a Master of Arts in Economics degree from the same
University, graduating in 2002.
Significant External Appointments:
Chairperson – Epic Communications Limited
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 11
1.
Chief Executive Officer - Marcel Cassar
Committee Memberships:
Executive Committee (Chair)
Management Credit Committee (Chair)
Board Credit Committee
Conduct Committee
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 CFO at FIMBank plc (2004-2015). He has served as
Chairman of the Malta Bankers’ Association between 2018-2020, and 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 in Bank Financial
Management jointly from the University of Wales and Manchester Business School (1995). He has
lectured and examined at both FEMA and the MA Financial Services course, University of Malta, and is
a frequent speaker and writer on topics related to financial services.
2.
Chief Risk Officer – Giovanni Bartolotta
Committee Memberships:
Compliance Committee (Chair)
Board Credit Committee (Non-Voting)
Conduct Committee
Risk Committee (Non-Voting)
Assets & Liabilities Committee
Executive Committee
Management Credit Committee
Bio:
Giovanni joined the Bank in 2018. 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. 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. 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 12
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 Calleja
Committee Memberships:
Board Credit Committee (Voting)
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 key operations through the implementation of the Loans Processing
System in 2009. Edward is responsible for the efficient management of the Bank’s operations, and of
Support Services as from 1
January 2024, which is responsible inter alia for the renovation and facilities
management of the Head Office premises, the branch network and other Bank’s properties.
He holds a BA (Hons) 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 member 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 the Bank, including retail banking, payments and clearing, and
technology. He was appointed Information Systems Manager in 2008 and Head of Technology in 2015.
Jonathan is responsible for the technology, project management 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 13
7.
Chief Strategy Officer – Liana DeBattista
Committee Memberships:
Environmental, Social and Governance Committee (Non-Voting)
Executive Committee
Bio:
Liana joined the Bank in 2003 and was appointed in 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 leads the business planning
process and advises the Board of Directors, the CEO and Senior Management on corporate strategy
formulation. In addition, she oversees sustainability and CSR, brand and marketing, customer insight
and performance management. She is also responsible for product oversight and governance,
corporate culture, and customer experience.
Liana has a BSc in Business & Computing (2001) and a BCom (Hons) in Management (2002), both from
the University of Malta, and a M.Sc. in Corporate Finance from the University of Liverpool (2015).
8.
Chief Investments Officer – Noel McCarthy
Committee Memberships:
Environmental, Social and Governance Committee (Voting)
Executive Committee
Management Credit Committee
Bio:
Noel joined the Bank in 2000 and was appointed to his present role in 2020. Since, Noel has
successively served in a number of senior positions, including the role of Chief Financial Officer since
2016. 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 Limited.
Noel holds an MA in Financial Services from the University of Malta. He is a CPA and a Fellow member
of the Malta Institute of Accountants.
9. Chief Financial Officer – Ronald Mizzi
Committee Memberships:
Risk Committee (Non-Voting)
Assets and Liabilities Committee
Executive Committee
Management Credit Committee
Bio:
Ronald joined the Bank in 2020. He 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 business process reengineering, operational
effectiveness and data integrity initiatives at the Bank. Prior to joining the Bank, Ronald was Group Chief
Financial Officer at FIMBank plc having spent his earlier career with PricewaterhouseCoopers in Malta,
the Channel Islands and New York. He is a Council Member of the Malta Institute of Accountants and
sits on the Institute’s Financial Services Committee and Sustainable Finance Committee. 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, and is a Fellow of the Malta Institute of Accountants.
EXECUTIVE
MANAGEMENT
APS Bank plc 14
HEADS OF DEPARTMENTS
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) (NV)
Gilbert Caruana - Head of Finance; (AL) (NV), (T) (NV)
Daniel Cassar - Head of Project Delivery and Innovation; (T)
Joseph Farrugia - Head of Special Projects
Marvin Farrugia - Head of Asset Liability Management; (AL) (CH); MC (NV)
Mario Gauci - Head of Commercial; (B) (NV); (MC) (NV); (AL)
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; (C) (NV); (B) (NV); (CC) (NV); (MC) (NV)
Zoltan Horvath - Head of Propositions; (T) (NV)
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; (R) (NV); (T)
Josef Portelli - Head of Investment Management
Ronald Psaila - Head of Business Solutions; (T) (NV)
Richard Scerri - Head of Internal Audit
Matthew Swain - Head of Sustainability; (E); (MC)
Christine Tabone - Head of Enterprise Risk Management; (AL) (NV)
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 15
CONSTITUTION AND PRINCIPAL ACTIVITIES
APS Bank 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 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 (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).
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. The company also
holds a Registration Certificate pursuant to article 6 of the Retirement Pensions Act (Cap. 514) to carry
out activities as an Investment Manager of retirement schemes.
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.
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
The Bank’s authorised share capital is of €125,000,000, divided into 500,000,000 shares with a nominal
value of €0.25c each, with 377,803,569 ordinary shares in issue. The Bank’s entire shareholding is listed
on the Malta Stock Exchange. The 377,803,569 shares referred to also comprise the shares allotted to
shareholders following two scrip dividends declared in 2023 and the awarding of shares to employees
in terms of the Executive Share Incentive Plan. 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. However, 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 shares they held in the Bank as at 24 May 2022, for a period of 24 months from
the date when the shares were admitted to listing on the Official List, i.e. 17 June 2022, 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 16
SHARE CAPITAL STRUCTURE AND MAJOR SHAREHOLDERS (continued)
AROM Holdings Limited and the Diocese of Gozo are the Bank’s qualifying shareholders, and the only
two shareholders holding more than 5% in the Bank. The below table provides an overview of their
respective shareholding:
No. of shares held
as at 31 December 2023
% holding
as at 31 December 2023
AROM Holdings Limited
(wholly owned by the Archdiocese
of Malta) 208,530,943 55.2%
Diocese of Gozo 47,777,556 12.7%
The following table includes the number of shares held by Directors/Company Secretary as at 31
December 2023:
Director/Company Secretary No. of shares
Martin Scicluna 31,845*
Joseph C Attard 33,437
Laragh Cassar 16,524
Graziella Bray 18,188
*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.
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 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 Annual General Meeting held on 16 May 2023, AROM
Holdings Limited held 55.15% shareholding in the Bank and therefore appointed five Board Directors,
whereas the Diocese of Gozo held 12.63% shareholding and therefore appointed one Director. The
seventh Director was appointed by an aggregation of the remaining shareholding. The eighth and ninth
Directors were appointed by the public float following a call for nominations issued via a Company
Announcement. 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*
Noel Mizzi**
Michael Pace Ross
Joseph Rapa
Marisa Xuereb**
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 17
DIRECTORS, THEIR APPOINTMENT AND POWERS (continued)
*Franco Azzopardi and Alfred DeMarco retired at the AGM on 16 May 2023.
**Noel Mizzi and Marisa Xuereb were appointed to office at the AGM on 16 May 2023. All the above
Directors, bar Messrs Azzopardi and DeMarco, continue to serve at the date of approval of the Directors’
Report. Bio notes on these Directors are found on pages 7 to 10.
The powers of Directors are provided in Articles 128-136 of the Bank’s Articles of Association.
There are no agreements between the Bank and the Directors providing for compensation on
resignation or termination of directorship.
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 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 connect fully with customers within local communities. 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, renewable energy solutions 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 while on the
move.
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.
This is made available 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 European Investment Bank. The Bank’s commitment to the betterment of
the communities it serves also extends to its own core product offering.
Sustainability matters are at the forefront for APS Bank – in early 2023 the Bank launched its
Responsible Lending Policy (RLP) – a first for Malta. The purpose of this policy, which sought to
formalise and add to, practices already adopted by the Bank for some years, is to provide clear and
transparent assessment criteria for evaluating lending proposals from an environmental, social and
governance (ESG), and sustainability perspectives. 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.
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 18
2.
COMMUNICATING BRAND, PURPOSE AND CORPORATE CULTURE
The Culture Department is responsible for the Bank’s brand and marketing, corporate social
responsibility (CSR), corporate culture change and voice of the customer (VOC) programmes. These
four units implement and activate 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 2023,
the Brand and Marketing function continued its focus on further elevating the brand in its
communication strategy to ensure top-of-mind awareness, while complementing product-specific
messages.
This was done through the continuation of the Bank’s brand campaign across integrated media
channels, product-specific campaigns, and various brand initiatives – such as the Bank’s term deposit
offerings, branch experience initiatives, investment chats and bonds issue. Throughout the year, the
Bank also presented five livestreamed Market Briefing sessions to inform the market about important
or material developments and follow up on company announcements. This offered another avenue to
engage with investors and the public, who in turn welcomed this innovative approach.
The brand messaging was further sustained with the Bank’s third Christmas advert, focusing on
rekindling of our life stories together. The power of community is emphasised in the advert as
individuals come together to spread Christmas cheer, share their talent, and companionship.
Corporate Social Responsibility Programme
CSR is a critical driver in the successful delivery of the Bank’s business strategy and a vehicle to
communicate its brand and corporate values. 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 art, lifelong learning and sustainability.
The CSR Programme includes a wide range of activities with a broad appeal to reach different
audiences. From the sponsorship of diverse book publications, artistic exhibitions and performances,
restoration projects, to collaborations with educational institutions and conferences organised by
professional bodies, each CSR activity demonstrates the Bank’s commitment to sustain and celebrate
the community, which it serves. The introduction of a call for CSR 2024 funding proposals was met with
an overwhelming response and marked an evolution in the Bank’s efforts to respond to the community’s
needs.
In 2023, four APS talks and two APS Business talks were delivered online, in hybrid format and in person
by experts with the objective of knowledge-sharing, building awareness and encouraging cross-
disciplinary application of best practices. The Malta Sustainability Forum (MSF) also continued to raise
more awareness and empower citizens to make conscious decisions towards a more sustainable life.
Three MSF events were delivered in 2023: Reconsidering Mobility and Affordable Housing Solutions
which were livestreamed, and Confronting Pension Inequity: Unmasking the silent struggle, presented
as an in-person conference.
Some of the CSR Programme highlights included: the APS Bank Easter Concert, the APS Teatru
Unplugged, and the APS Mdina Cathedral Contemporary Art Biennale. The Bank was also proud to
support the Order of Malta National Art Exhibition, KampuSajf arts festival organised by the Malta
College of Arts, Sciences and Technology, and the Sculptura exhibition in aid of the Malta Community
Chest Fund Foundation.
Following Fondazzjoni Patrimonju Malti’s transformation of the Bank’s former Head Office APS House
in St. Paul Street, Valletta into the state-of-the-art Victor Pasmore Gallery, a significant step was taken
towards recognising and celebrating Malta’s artistic and cultural heritage. This milestone was marked
by the inaugural exhibition titled ‘In Search of Line.’
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 19
2.
COMMUNICATING BRAND, PURPOSE AND CORPORATE CULTURE (continued)
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.
The Bank’s Customer Experience (CX) Strategy was implemented in 2023, through various initiatives,
including: Customer Journey Mapping, a Senior Management CX Offsite and the introduction of CX
Activation Workshops to cascade the strategy across the Bank.
VOC coordinates various external research initiatives annually to identify ways to optimise the Bank’s
customer experience. These exercises include mystery shopping, regular customer satisfaction surveys
(CSAT) and focus groups. Customer feedback touchpads located throughout the Branch network
continue to provide critical customer sentiment data, which is updated regularly and displayed as a
score on the in-branch digital screens.
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
to front-line and operations teams.
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 2023 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. The annual APS Bank Values Awards also recognised employees who walk
the talk on living and breathing the Bank’s values.
Several new initiatives were launched. #APSlife Celebrating Diversity Breakfasts, delivered by speakers
from the Committee on the Rights of Persons with Disabilities (CRPD), provided informative sessions
over breakfast for employees to understand and discuss how to create a more inclusive and accessible
environment for all. All employees were invited to attend a Culture Activator - a one-day offsite, with
the objective of enhancing interdepartmental collaboration and communication, through team-building
activities and facilitated discussions on selected topics from the APS Bank Culture Deck.
An initiative to map the moments that matter in the employee journey was also introduced as part of
the Bank’s ongoing efforts to enhance employee experience, nurture holistic wellbeing, and strengthen
corporate culture. Subsequently, an open communication loop was established, providing employees
with a channel to share their feedback and contribute towards continuous improvement in employee
experience.
Developing an Environmental, Social and Governance Strategy (ESG)
The Sustainability Strategy is owned by the Chief Strategy Officer and implemented by a dedicated
Sustainability Unit which was set back in 2022. Oversight of the strategy is provided to both the ESG
Committee and the Executive Committee. Furthermore, in 2023, APS Bank appointed its first Head of
Sustainability, further solidifying its commitment in this remit. The Bank’s ambitions are to expand to a
wider sustainability strategy, encompassing the UN Sustainable Development Goals (SDGs) as well as
overall responsibility for Emissions Accounting and ESG reporting.
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 20
2.
COMMUNICATING BRAND, PURPOSE AND CORPORATE CULTURE (continued)
Developing an Environmental, Social and Governance Strategy (ESG) (continued)
The Bank has also made three Sustainability & ESG public commitments, namely:
1.
To facilitate EUR250 million of sustainable finance by 2030
The Bank endeavours to finance activities and projects that take into account the
environmental, social, and governance (ESG) factors of an economic activity or project. In
addition, APS Bank wants to be the Bank when it comes to sustainable financing opportunities
and options. Sustainable finance is becoming increasingly important to investors and customers
who are looking to invest in environmentally and socially responsible undertakings.
2.
Reduce the impact of the Bank’s operational emissions by 30% by 2030
Reducing the impact of APS Bank’s operational emissions is important for several reasons. Most
importantly, the Bank recognises its role in contributing to climate change and takes
responsibility to take action to reduce its carbon footprint. At the same time, reducing
operational emissions can help banks save money by reducing energy consumption and
increasing efficiency.
3.
Establish a baseline for APS Bank’s financed emissions to align the Bank’s lending, to reach
carbon neutrality by 2050
The Sustainability Department is responsible for formulating and executing the Bank’s Sustainability
strategy across all its functions. The role encompasses formulating an ESG and sustainability-led growth
business strategy, mapping the delivery of regulatory ESG reporting as well as leading on ESG and
sustainability engagement with both internal and external stakeholders of the Bank.
The Strategy and Propositions functions are responsible for the integration of ESG and sustainability-
related factors where required within the Bank’s suite of products and services, and in also enhancing
the Bank’s green and social product offerings.
The Sustainability Department 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.
Furthermore, the Sustainability Department also provides bespoke training to a multitude of employees
and functions within the Bank, from board members to frontline employees, to raise awareness of ESG
and sustainability topics. This ensures that the Bank’s people are conversant with these vital topics, and
that they are also well-versed when it comes to proposing APS Bank’s Green Products to current and
future customers.
3. CLIMATE CHANGE AND ESG RELATED 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 supporting 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 future generations.
The Group recognises that it has responsibility towards the environment and society beyond legal and
regulatory requirements. It is committed to improve performance in these areas as an integral part of
its business strategy, with regular review points. The Group is aware of its exposure to 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.
DIRECTORS’
REPORT
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APS Bank plc 21
3. CLIMATE CHANGE AND ESG RELATED RISKS (continued)
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 Bank’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 Bank’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 environmental, social and governance sustainability criteria and
metrics. Each of these criteria are assessed during the loan proposal stage, before a report of this grading is
passed on to the Credit Risk Management function, for an independent review in line with the Bank’s policies,
risk appetite and other credit related assessments.
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 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 eight pillars of the Reputational Risk Framework set up by
the CSO’s office and being monitored by the Operational Risk and Security Governance Unit as well as the
reputational dimensions considered in the Reputational Risk Management Matrix as part of the Reputational
Risk Policy.
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 included 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 understands and monitors its resilience in the context of
stressed macro-economic and financial conditions. The assessment is performed based on 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 the regulatory Pillar 3 disclosures on ESG governed by Part Eight of the Capital
Requirements Regulation (CRR) II No. 2019/876 and in line with 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.
Work is ongoing to enhance the reporting around ESG, and the report for 31 December 2023 will be published
on the Bank’s website by June 2024.
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 22
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 Bank has an active Collective Agreement covering the three-
year 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.
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 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.
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 23
5. EMPLOYEE MATTERS
The Bank’s people strategy continues to be aimed at being the ‘Employer of Choice’. It achieves this
through maintaining high employee engagement levels, supported by a competitive remuneration
package, that includes an occupational pension plan. The Bank continued to attract and retain the best
talent. Employee churn rate FY2023 was maintained at less than 7.6% and vacant positions attracted a
good number of applications having the qualifications, skills, competencies, and experience required
for the positions.
Being the ‘Employer of Choice’ means ensuring that all employees are supported in achieving their full
potential. This continued to be achieved through the ongoing support and investment in the
development of employees’ skills, knowledge and competencies, required for todays and future needs.
This strong investment in development is coupled with opportunities for career development and
growth.
During 2023, the Bank continued to support the mental, physical and social wellness of its employees.
The Bank provides a health insurance scheme to all employees, has an on-premises gym and active
sport and social committees. In addition, the Bank has an Employee Assistance Programme (EAP),
which is continually enhanced to support the mental wellbeing of its employees. The EAP offers
confidential counselling, guidance and support to assist employees resolve work, family and personal
issues.
Moreover, the Bank adopts a robust and current policy framework with polices on diversity, equity and
inclusion, zero-tolerance to bullying, harassment and discrimination, preventative medical care and
sports activity, employee screening, succession planning and a performance development review
process.
Diversity, Equity and Inclusion Policy
The Diversity, Equity and Inclusion policy, implemented early in 2023, continued to support the Bank in
fostering, cultivating, and preserving a culture of diversity, equity and inclusion amongst all employees.
It aims to create an inclusive environment that respects the dignity and diversity of all its people, in line
with the Bank’s Values. Throughout an employee’s life cycle – attraction, recruitment, onboarding,
development, retention, and separation – the Bank works hard to give every person an equitable
opportunity to grow and to thrive. The Bank’s employee complement increasingly comprises of a wide
array of nationalities employed in various disciplines, specialisations and roles and a good gender
balance.
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. There were no reported cases of
bullying, harassment or discrimination in FY2023.
Preventative Medical Care and Sports Activity Policy
Every three years each employee has the option of attending a preventive medical examination/check-
up according to their age. 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. The Bank also subsidises sports activities for its
employees.
Employee Screening
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 its 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.
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 24
5. EMPLOYEE MATTERS (continued)
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.
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, connected accounts 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) dual recommendation with Business (first line of defence) by the CRU (second line of defence),
to ensure proper oversight / governance on:
i. fresh and/or renewal of business and retail credit limits;
ii. ESG considerations in credit proposals on a solo or connected basis, in line with the Bank’s
Responsible Lending Policy (RLP);
iii. fresh retail credit facilities with parameters exceeding established delegated criteria;
h) bi-annual snap checks of a sample credit facilities sanctioned by the first line of defence;
i) issuance/checking of EOM data with respect to the monthly Expected Credit Loss (ECL)
calculation done in compliance with the IFRS 9 accounting regime; and
j) internal limits relating to single-name and sectoral concentration risk.
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 25
IDENTIFICATION AND MANAGEMENT OF PRINCIPAL RISKS (continued)
Financial Crime Compliance Risk
Financial crime risk is the potential misuse of the Bank's products and services for unlawful activities,
covering a spectrum of criminal actions such as money laundering, terrorist financing, proliferation
financing, tax evasion, sanction evasions, fraud, bribery, and corruption.
APS Bank plc acknowledges the impact of financial crime on the global economy and society at
large. The Bank is committed to combatting financial crime by meticulously adhering to all relevant
laws and regulations governing financial crime. This unwavering commitment is aimed at safeguarding
APS Bank, its esteemed customers, and dedicated employees from the inherent risks associated with
financial crime.
The management of financial crime risks is systematically addressed through the establishment of a
robust financial crime compliance framework which:
a) establishes guiding principles and policies ensuring a robust approach to the prevention of
financial crime;
b) delineates the roles and responsibilities necessary for the effective management of financial
crime risks;
c) outlines key processes integral to financial crime compliance and meeting local and international
regulatory obligations; and
d) articulates the essential features of financial crime compliance governance.
This framework plays a pivotal role in fostering a consistent and robust fight against financial crime
across Group entities. The programme further seeks to identify, assess, monitor and manage FCC risks
in line with the Bank’s risk appetite and statutory obligations.
The Financial Crime Compliance function is responsible for the design and implementation of the
Framework.
Financial Crime Compliance Function
The structure of the Financial Crime Compliance function remained substantively unchanged in 2023.
That said, the Bank continued to review the effectiveness of its governance framework to manage
financial crime risk. The leadership of the FCC function is held by the Head of Financial Crime
Compliance and MLRO, reporting to the Chief Risk Officer and the Board of Directors.
The FCC function of APS Bank is divided into distinct teams, each focusing of specific aspects of the
FCC Framework as follows:
 Advisory and Monitoring – AML and Fraud
 Advisory and Monitoring – Sanctions/Anti-Bribery & Corruption
 Investigations Team
 Transaction Monitoring Team
 Financial Crime Compliance Operations Team
 Regulatory & AML Solutions Team
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.
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 26
IDENTIFICATION AND MANAGEMENT OF PRINCIPAL RISKS (continued)
Operational Risk (continued)
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
 Voice of the Customer
 Legal
 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.
Through ongoing awareness, the Operational Risk and Security Governance Department continues to
promote a culture of risk identification by encouraging 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.
The Operational Risk and Security Governance Department carries out planned and ad hoc operational
risk assessments throughout the year to allow for a more thorough identification, assessment and
measurement of operational risk. Controls and process improvements are then suggested and
developed, implemented by the first line of defence as necessary to further mitigate identified risks to
levels that are within the risk appetite. The Business Risk and Control Managers’ role in the first line of
defence in liaison with the Operational Risk and Security Governance Department, strengthen this
process. The Bank also ensures that procedures and processes are documented in the Bank’s
handbooks and reviewed from an Operational Risk perspective.
APS Bank has a Business Continuity Plan where three main disruption scenarios
are contemplated:
 Unavailability of the Bank’s main premises
 Staff unavailability
 Supply-Chain disruptions
The Bank also maintains an Operational Losses Databases aligned to ORX taxonomy where one of the
categories is ‘Physical Security and Safety’ which deals with the likelihood of natural disasters and/or
emergencies.
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 levels.
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 27
IDENTIFICATION AND MANAGEMENT OF PRINCIPAL RISKS (continued)
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
1
. 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; and
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 Internal Capital Adequacy Assessment Process (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.
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.
1
As at end December 2023, the Bank had no securities in its Trading Book.
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 28
IDENTIFICATION AND MANAGEMENT OF PRINCIPAL RISKS (continued)
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 Bank provides a wide range of financial services and products in a highly regulated environment.
Thus, it is required to establish an independent, permanent, and effective Regulatory Compliance (RC)
function to manage regulatory compliance risks.
Regulatory Compliance is an integral part of good governance. As a second line of defence function,
RC’s role is to identify, evaluate, and address regulatory risks emanating from the Bank’s Credit
Institution, Investment Services and Tied Insurance Licenses. The Bank is committed to a corporate
culture which promotes high standards of honesty and integrity whilst conducting licensable activities
/ business activities through serving its customer base. Effective compliance risk management is a key
control towards ensuring that the Bank continues to operate within the remit of its operating licenses.
The key areas within scope of RC Unit’s remit as part of the second line of defence are the following:

Conduct of business and treating customers fairly (TCF)

Conflicts of interest

Market Abuse

Marketing and promotions of products and services

Product Oversight Governance (POG)

GDPR
Clear demarcations exist between those persons within the Bank who are responsible for monitoring
regulatory compliance risk and establishing its appropriate limits and thresholds, to those persons who
operationally own the risk.
RC Unit is led by the Head of Regulatory Compliance who is also the Compliance Officer of the Bank as
approved by the MFSA and 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 -
Analyses and tracks in terms of compliance risk those laws,
regulations and standards which are material and relevant to the Bank and fall within the overall
scope of regulatory compliance. Constantly interacts with relevant Units for the implementation
of new/amended laws, regulations, and standards.
-
Regulatory Oversight Section -
Conducts 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,
the GDPR function also falls within the remit of RC, and this is represented by the Data Protection
Officer (DPO).
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 29
IDENTIFICATION AND MANAGEMENT OF PRINCIPAL RISKS (continued)
Regulatory Compliance Risk (continued)
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
 Employee and Corporate Culture
The risk dashboard is compiled on a quarterly basis, and presented to Executive Management and
Conduct Committee. It 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 30
Key Performance Indicators (KPIs)
The Bank has in place a set of KPIs that include:
2023
2022
% %
CET1
14.6
15.2
Capital Adequacy Ratio
20.6
18.8
LCR
140.1
128.5
The Group also has in place a set of other KPIs which include:
2023
2022
% %
Profitability ROAE
7.5
2.3
Further analysis and KPIs are found in CEO’s Review, Financial Overview and Notes to the financial
statements.
Consolidation disclosures pursuant to Article 8 of the EU Taxonomy Regulation
In order to achieve the targets established by the European Union (EU) of reaching net zero greenhouse
gas (GHG) emissions by 2050, with an interim target of reducing GHG emissions by 55%, compared to
1990 levels, by 2030, the EU has developed a classiﬁcation system, by virtue of the EU Taxonomy
Regulation
2
, or (the EU Taxonomy) which establishes the criteria for determining whether an economic
activity qualiﬁes as environmentally sustainable.
The EU Taxonomy establishes criteria in terms of six environmental objectives, against which entities
assess whether economic activities qualify as environmentally sustainable.
In order to qualify as such, an economic activity must be assessed to substantially contribute to at least
one of these environmental objectives, whilst doing no significant harm (DNSH) to the remaining
objectives. This is achieved by reference to technical screening criteria established in delegated acts to
the EU Taxonomy. The economic activity is also required to meet minimum safeguards established in
the EU Taxonomy.
The six environmental objectives established by the EU Taxonomy are the following, where climate-
related environmental objectives (1-2 below) are established in the Climate Delegated Act
3
(CDA),
whilst non-climate environmental objectives (3-6 below) are established in the Environmental
Delegated Act
4
(EDA).
1. Climate change mitigation;
2. Climate change adaptation;
3. Sustainable use and protection of water and marine resources;
4. Transition to a circular economy;
5. Pollution prevention and control; and
6. Protection and restoration of biodiversity and ecosystems.
2
EU Regulation 2020/852
3
Commission Delegated Regulation 2021/2139
4
Commission Delegated Regulation 2023/2486
DIRECTORS’
REPORT
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APS Bank plc 31
Consolidation disclosures pursuant to Article 8 of the EU Taxonomy Regulation
(continued)
A Delegated Act to the EU Taxonomy was issued in 2021, supplementing Article 8 of the Taxonomy
Regulation (the Disclosures Delegated Act
5
), which establishes the disclosure requirements of entities
within the scope of the Taxonomy Regulation.
This currently comprises entities subject to an obligation to publish non-financial information pursuant
to the Non-Financial Reporting Directive (NFRD)
6
, emanating from article 19a or 29a of the Accounting
Directive
7
.
The Disclosures Delegated Act was further updated in 2023 by the Complementary Climate Delegated
Act
8
to include certain energy activities relating to fossil gas and nuclear energy.
Taxonomy eligibility of economic activities have been reported in financial years 2021 and 2022, in
respect of total on-balance sheet assets of APS Bank plc. This is required to be reported on the basis
of prudential consolidation requirements, which do not apply to APS Bank plc and its subsidiaries due
to the application of terms of article 19 of the Capital Requirements Regulation
9
.
The Bank is now also required to disclose its initial Taxonomy alignment of eligible activities in the
Climate Delegated Act based on the current financial year of reporting, in line with the phased-in
approach outlined in the Disclosures Delegated Act, where Taxonomy eligible economic activities are
assessed to determine whether they are environmentally sustainable. The Bank is also required to report
its initial Taxonomy eligibility of exposures in the Environmental Delegated Act based on the current
financial year of reporting.
Comparative templates relating to prior period reporting of EU Taxonomy disclosures are not required
given that this is the Bank’s first EU Taxonomy disclosure in line with mandatory templates required by
the Disclosures Delegated Act. Furthermore, since the Bank’s prior period EU Taxonomy eligibility
disclosure was not required with the same level of detail as the current financial year, and was based
on total assets rather than covered assets, Taxonomy eligibility disclosures are not strictly comparable.
Accordingly, comparative EU Taxonomy information has not been reported.
Scope of Consolidation
Section 1.1.1 of Annex V of the Disclosures Delegated Act scopes credit institutions’ EU Taxonomy
disclosures to their prudential consolidation as determined in article 19 of CRR. In line with previous
disclosures, this EU Taxonomy disclosure is based on assets and activities relating solely to APS Bank
plc, since the Bank is not required to consolidate on a prudential basis.
In this respect, the Bank has considered all complementary guidance, in the form of Frequently Asked
Questions (FAQs) to the EU Taxonomy and its delegated acts, officially published by the European
Commission (EC).
On 21
December 2023, the EC published a Draft Commission Notice
10
in the form of a set of FAQs
specific to financial undertakings’ EU Taxonomy reporting. The Draft Commission Notice is, at the time
of reporting, yet to be adopted into the Official Journal of the European Union. Considering this, and
the recency of the publication of such FAQs, interpretations to the guidance resulting from such FAQs
have been implemented on a best-effort basis. It has therefore not been operationally possible to
5
Commission Delegated Regulation 2021/2178
6
EU Directive 2014/95/EU. NFRD entities are public interest entities exceeding an average of 500 employees during the reporting period.
The introduction of EU Directive 2022/2464/EU (the Corporate Sustainability Reporting Directive, ‘CSRD’, which will replace the NFRD) will
significantly extend the scope of EU Taxonomy reporting.
7
EU Directive 2013/34/EU
8
Commission
Delegated Regulation 2022/1214
9
EU Regulation 575/2013
10
Draft Commission Notice on the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act under
Article 8 of the EU Taxonomy Regulation on the reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets (third
Commission Notice).
DIRECTORS’
REPORT
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APS Bank plc 32
Scope of Consolidation (continued)
implement all aspects of the mentioned FAQs in time for this reporting year. As a result, the following
KPIs are excluded from this report:
- Separate KPIs for the Group’s asset management activities, carried out by ReAPS Asset
Management Ltd, pertaining to Annex III of the Disclosures Delegated Act, in addition to the Bank’s
activities as a credit institution; and
- The inclusion of a consolidated group-level KPI in the form of a weighted average of the
corresponding KPIs for each business segment in the contextual disclosures.
EU Taxonomy KPIs disclosed
The following KPIs are reported in the templates disclosed.
- The green asset ratio (GAR) is a ratio calculated as the percentage of EU Taxonomy aligned assets
as a proportion of total covered assets.
 The numerator of the GAR includes loans and advances, debt securities, equities and
repossessed collateral financing Taxonomy aligned economic activities based on turnover
KPI and CapEx KPI of underlying assets.
 The denominator of the GAR includes total loans and advances, total debt securities, total
equities, total repossessed collaterals and other covered on-balance sheet assets outlined
in the section ‘Assets excluded from the numerator for GAR calculation (covered in the
denominator)’.
- The calculation of the KPI for off-balance sheet exposures relates to APS Bank plc’s assets under
management, excluding those under the management of the Bank’s subsidiaries, reported in
Template 1 relating to GAR as off-balance sheet items and also in Template 5 as off-balance sheet
items in their own right. Other off-balance sheet exposures such as commitments are excluded
from the off-balance sheet KPI.
- The green ratio for assets under management (AuM KPI) is calculated as the percentage of assets
under management from undertakings financing Taxonomy aligned economic activities as a
proportion of the total assets under management of the Bank.
- The green ratio for financial guarantees to financial and non-financial undertakings (FinGuar KPI) is
not calculated since it relates to guarantees supporting loans and advances and debt securities.
The Bank does not issue guarantees in respect of loans and advances and debt securities.
Green Asset Ratio
Covered assets
Covered assets comprise all on-balance sheet assets other than those excluded altogether from the
GAR, where such exclusions relate to exposures to central governments, central banks and
supranational issuers. Lending towards, or financing of, local governments where the use of proceeds
is unknown (i.e. general purpose lending) is also excluded from the GAR.
These assets are all excluded from both the numerator and denominator of the GAR.
Assets excluded from the numerator for GAR calculation (covered in the denominator)
Exposures to undertakings that are not in scope of NFRD, derivatives, on-demand interbank loans, cash
and cash-related assets, as well as other assets including tangible and intangible assets are excluded
from the assessment of Taxonomy eligible economic activities. Similarly, retail exposures, except for
the mortgage lending portfolio, building renovations loans, and credit consumption loans for cars, are
also excluded from the EU Taxonomy framework, and not assessed for Taxonomy eligibility. These
assets are therefore all excluded from the numerator of the GAR but included in the denominator.
DIRECTORS’
REPORT
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APS Bank plc 33
Taxonomy-Eligible and Non-Eligible economic activities
Taxonomy eligible economic activities are those activities which can be assessed as environmentally
sustainable and are therefore included in annexes to the EU Taxonomy with relevant technical screening
criteria available.
Taxonomy aligned economic activities are those activities which have been assessed as environmentally
sustainable, and therefore also comply with the applicable technical screening criteria. Throughout all
templates disclosed, ‘Environmentally sustainable assets’ therefore refers to Taxonomy aligned assets.
Taxonomy eligibility and alignment of general-purpose lending (where the use of proceeds is unknown),
have been assessed using the turnover and CapEx eligibility and alignment ratios published in the most
recently available annual reports by the Bank’s in-scope counterparties.
Taxonomy eligibility and alignment of specific purpose lending, (where the use of proceeds is known),
have been assessed in line with the technical screening criteria established in the EU Taxonomy,
comprising ‘substantial contribution’ and ‘do no significant harm’ criteria. Compliance with minimum
safeguards is required further to this, which is an integral part of assessing EU Taxonomy alignment.
This is applicable to specific purpose lending in the case of financial and non-financial counterparties,
since households and public authorities are not required to meet minimum safeguards under article 18
of the EU Taxonomy. In this respect, the Bank has not yet developed a system of capturing such
information.
In addition, the Bank did not assess car loan exposures which are eligible under the Climate Change
Mitigation objective for Taxonomy alignment, due to core banking system limitations. Such exposures
are categorised as ‘Other categories of assets’ in Template 1 of Annex VI of the Disclosures Delegated
Act.
Data limitations
In the case of general-purpose lending, predominantly to NFRD entities, the Bank relies on published
counterparty eligibility and alignment ratios to assess eligibility and alignment of exposures. In this
respect, the Bank determines whether counterparties are subject to NFRD through the use of a financial
data terminal. Upon identification of relevant counterparties, the Bank researches annual reports of
such entities in order to obtain relevant EU Taxonomy KPIs.
However, in certain cases, the Bank is unable to obtain the required information from counterparties.
This is relevant in the case of counterparties disclosing EU Taxonomy data for the first time in 2024,
particularly:
- Financial undertakings’ Taxonomy alignment disclosures; and
- Financial and non-financial undertakings’ Taxonomy eligibility disclosures in terms of non-climate
environmental objectives. Accordingly, the specific columns in the Bank’s disclosure templates
relating to the non-climate environmental objectives have been excluded from all templates.
As data becomes more available and improvements in data quality take place over time, differences in
the data reported in future financial years, when compared to the current financial year, are expected.
This is as more counterparties adopt the EU Taxonomy requirements for their own disclosures and
enhance their relevant processes relating to EU Taxonomy reporting.
Business Strategy
The sustainability function within the Strategy, Product and Propositions Department is responsible for
the process around EU Taxonomy reporting for the Bank.
The Sustainability Strategy is owned by the Chief Strategy Officer whilst formulated and executed
through a dedicated Sustainability Unit which has been in place since 2022. The strategy is pivoted
toward facilitating green and sustainable growth and raising awareness of the Bank’s strategy on
sustainability through public and internal engagement.
DIRECTORS’
REPORT
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APS Bank plc 34
Business Strategy (updated)
The ESG Committee and the Executive Committee maintain oversight of the Sustainability strategy for
the Bank.
The Sustainability strategy approved in November 2022 by the overseeing committees is a multi-
pronged approach which encompasses several key initiatives which include but are not limited to:
 To facilitate an increase in social and green lending referred to as sustainable finance across
both retail and commercial portfolios;
 Expanding or enhancing our ESG suite of products;
 Expanding our ESG linked investment offerings;
 Enhancing our sustainability reporting and meeting ESG regulatory reporting requirements;
 Integrating ESG across some of the Bank’s activities and decision making; and
 Rolling out dedicated thematic training across the group from board/executive level for
frontline functions.
The activities ultimately contribute to the Bank’s three Sustainability and ESG Public commitments
which are described in detail within the Non-Financial Disclosures Section.
Considering all the points outlined above, these initiatives are intended to be coherent with the
objectives of the EU Taxonomy.
EU Taxonomy templates – Annex VI
This section outlines the templates to be disclosed by credit institutions, such requirement emanating
from Annex VI of the Disclosures Delegated Act.
Each template is duplicated in order to disclose Turnover-based and CapEx-based information, except
for Template 0, which is adjusted to also include CapEx-based information.
The Bank is also required to disclose the Taxonomy eligibility and Taxonomy alignment of its relevant
exposures by climate-related environmental objective. However, until now, certain non-ﬁnancial
undertakings have reported Taxonomy eligibility and Taxonomy alignment of economic activities
without distinguishing between the environmental objectives of Climate Change Mitigation and Climate
Change Adaptation. For the purposes of its GAR calculation, the Bank does not assign exposures to
individual environmental objectives, disclosing respective amounts in ‘total’ columns i.e. ‘TOTAL (CCM +
CCA)'. Neither does the Bank identify which assets and counterparty types are transitional activities or
enabling activities.
In respect of the above, the Bank is still in the process of setting up a data collection system which will
allow it to distinguish between respective environmental objectives and identify exposures as
transitional or enabling activities.
In the case of specific purpose lending towards financial and non-financial counterparties, the
respective use of proceeds has not been identified, therefore such instances are treated as general
purpose lending. Therefore, the ‘known use of proceeds’ column can only be populated in the case of
Taxonomy aligned retail exposures, which the Bank does not currently have.
DIRECTORS’
REPORT
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APS Bank plc 35
Template 0: Summary of KPIs to be disclosed by credit institutions under Article 8 Taxonomy Regulation
Template 0 summarises the KPIs required to be disclosed by the Bank as a credit institution.
As the Trading book KPI and Fees and Commissions KPI are required to be disclosed from 1 January 2026,
the applicable rows for these KPIs are not populated.
0. Summary of KPIs to be disclosed by credit institutions under Article 8 Taxonomy Regulation
Template 1: Assets for the calculation of GAR
Template 1 discloses assets used in the calculation of the GAR disaggregated by counterparty type and asset
class. Total assets are further categorised between the following.
- Covered assets in both numerator and denominator;
- Assets excluded from the numerator for GAR calculation (covered in the denominator); and
- Assets not covered for GAR calculation.
Row 1 of Template 1 ‘Loans and advances, debt securities and equity instruments not HFT eligible for GAR
calculation' relates to the numerator of the GAR, whilst row 48 of Template 1 ‘Total GAR assets’ relates to the
denominator of the GAR.
This template has been duplicated to disclose turnover-based and CapEx-based information.
The gross carrying amount column excludes impairment allowances for all banking exposures. As a result,
total assets reported in this template is not equal to total assets reported in the Bank’s balance sheet, with
the difference amounting to impairment allowances on banking exposures.
Row 34 'SMEs and NFCs (other than SMEs) not subject to NFRD disclosure obligations' also includes non-
NFRD financial undertakings in the EU, in the absence of a more appropriate row for such financial
undertakings.
In the case of off-balance sheet exposures, the Bank does not issue any financial guarantees supporting loans
and advances or debt securities.
The gross carrying amount disclosed for assets under management forms the denominator of the respective
KPIs and includes exposures with both NFRD and non-NFRD counterparties while excluding exposures to
central governments, central banks and supranational issuers. In the case of assets under management which
are funds, these are treated as non-NFRD entities since the Bank does not look through to underlying
investees regarding their status as NFRD entities, given data limitations.
DIRECTORS’
REPORT
____________________________________________________________________________________________________________________________
APS Bank plc 36
1.Assets for the calculation of GAR (Turnover)
DIRECTORS’
REPORT
____________________________________________________________________________________________________________________________
APS Bank plc 37
1.Assets for the calculation of GAR (CapEx)
DIRECTORS’
REPORT
____________________________________________________________________________________________________________________________
APS Bank plc 38
Template 2: GAR Sector information
Template 2 presents eligible and aligned exposures in the banking book to non-financial counterparties subject to NFRD, broken down by sector of economic activities based on the NACE code of the principal
activity of the immediate counterparty.
2. GAR sector information (Turnover)
2. GAR sector information (CapEx)
DIRECTORS’
REPORT
____________________________________________________________________________________________________________________________
APS Bank plc 39
Template 3: GAR KPI Stock
Template 3 discloses the proportion of total covered assets funding Taxonomy relevant sectors in respect of both Taxonomy eligibility and Taxonomy alignment on a stock basis. The Bank’s approach towards
disclosing GAR KPI (stock) ratios in this template is based on the amounts of assets disclosed in Template 1, whereby each ratio’s denominator is equal to the respective gross carrying amount of the particular
counterparty type and asset class. This is in line with guidance provided in the respective sub-sections of section 1.2.1 of the Disclosures Delegated Act.
Template 3 also discloses the particular counterparty type and asset class captured in each relevant row as a proportion of the Bank’s total assets.
3. GAR KPI stock (Turnover)
DIRECTORS’
REPORT
____________________________________________________________________________________________________________________________
APS Bank plc 40
3. GAR KPI stock (CapEx)
DIRECTORS’
REPORT
____________________________________________________________________________________________________________________________
APS Bank plc 41
Template 4: GAR KPI Flow
Template 4 discloses the proportion of total covered assets funding Taxonomy relevant sectors in respect of both Taxonomy eligibility and Taxonomy alignment on a flow basis. The Bank’s approach towards
disclosing GAR (flow) KPI ratios in this template is based on the amounts of new covered assets throughout the financial year, whereby each ratio's denominator is equal to the respective gross carrying amount
of the particular counterparty type and asset class. This is in line with guidance provided in the respective sub-sections of section 1.2.1 of the Disclosures Delegated Act.
Template 4 also discloses the particular counterparty type and asset class captured in each relevant row as a proportion of the Bank’s total new assets throughout the financial year.
4. GAR KPI flow (Turnover)
DIRECTORS’
REPORT
____________________________________________________________________________________________________________________________
APS Bank plc 42
4. GAR KPI flow (CapEx)
DIRECTORS’
REPORT
____________________________________________________________________________________________________________________________
APS Bank plc 43
Template 5: KPI off-balance-sheet exposures
Template 5 presents eligible and aligned off-balance sheet exposures as a proportion of covered assets by Taxonomy environmental objective. The covered assets forming the denominator of each ratio is the
respective off-balance sheet exposure relating to the Bank’s assets under management, including exposures with both NFRD and non-NFRD counterparties while excluding exposures to central governments,
central banks and supranational issuers.
In the case of assets under management which are funds, these are treated as non-NFRD entities since the Bank does not look through to underlying investees regarding their status as NFRD entities, given data
limitations.
5. KPI off-balance sheet exposures (Turnover) (Stock)
5. KPI off-balance sheet exposures (Turnover) (Flow)
DIRECTORS’
REPORT
____________________________________________________________________________________________________________________________
APS Bank plc 44
5. KPI off-balance sheet exposures (CapEx) (Stock)
5. KPI off-balance sheet exposures (CapEx) (Flow)
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 45
EU Taxonomy templates - Annex XII
The following are the templates to be disclosed by credit institutions, such requirement emanating from
Annex XII of the Disclosures Delegated Act.
Template 1: Nuclear and fossil gas related activities
Template 1 indicates whether, or not, the Bank has exposures to nuclear energy and fossil gas related
activities, based on non-financial counterparties’ disclosures in this respect. In the current financial year,
the Bank does not have any exposures to non-financial counterparties which carry out nuclear energy
and fossil gas related activities and that are also required to disclose templates relating to the
Complementary Climate Delegated Act. The Bank consequently does not disclose the remainder of the
nuclear and fossil gas related templates found in Annex XII of the Disclosures Delegated Act (Templates
2 - 5).
Row
Nuclear energy related activities
1
The undertaking carries out, funds or has exposures to research, development,
demonstration and deployment of innovative electricity generation facilities
that produce energy from nuclear processes with minimal waste from the fuel
cycle.
NO
2
The undertaking carries out, funds or has exposures to construction and safe
operation of new nuclear installations to produce electricity or process heat,
including for the purposes of district heating or industrial processes such as
hydrogen production, as well as their safety upgrades, using best available
technologies.
NO
3
The undertaking carries out, funds or has exposures to safe operation of
existing nuclear installations that produce electricity or process heat, including
for the purposes of district heating or industrial processes such as hydrogen
production from nuclear energy, as well as their safety upgrades.
NO
Fossil gas related activities
4
The undertaking carries out, funds or has exposures to construction or
operation of electricity generation facilities that produce electricity using fossil
gaseous fuels.
NO
5
The undertaking carries out, funds or has exposures to construction,
refurbishment, and operation of combined heat/cool and power generation
facilities using fossil gaseous fuels.
NO
6
The undertaking carries out, funds or has exposures to construction,
refurbishment and operation of heat generation facilities that produce
heat/cool using fossil gaseous fuels
NO
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 46
FINANCIAL OVERVIEW
The global economy continues to face multiple challenges, from low growth prospects to heightened
geopolitical risks between wars in Ukraine and Gaza and electoral tests impacting almost half the
world’s population. At the same time supply chain shocks have re-emerged thanks mainly to the Red
Sea crisis and shipping disruptions permitting inflation to persist. The first half of 2023 saw stronger
than expected GDP growth which is now moderating on the back of tighter financial conditions and
lower business and consumer confidence, with excess savings accumulated during the pandemic
rapidly depleting. Global growth is therefore estimated to have been 2.9% in 2023, moderating to 2.7%
in 2024, with the OECD predicting headline inflation to fall gradually to 5.2% and 3.8% in 2024 and 2025,
respectively.
Domestically, economic activity has remained strong and well above the EU average as Malta continues
to maintain a high pace of employment, production, and consumption, mirrored also in population
expansion. While fuelling growth, these are also placing further strain on the country’s infrastructure
and carrying capacity at a time when Government borrowing is at all-time highs due to the post-
pandemic recovery and inflation mitigation measures. The Maltese authorities continue indicating their
commitment to limiting energy inflation until at least 2025, which will put some pressure on the budget
deficit (expected at 4.1% of GDP in 2025), coupled with the costs related to the relaunch of the national
airline.
INCOME STATEMENT
For the year under review, APS Bank plc registered a pre-tax profit of €30.2 million (2022: €15.7 million)
at Group level and €27.8 million (2022: €28.9 million) at Bank level. Such a strong performance is
underpinned by robust operating fundamentals and a growth strategy driven by ongoing digital
transformation, enhancing the customer experience and maintaining asset quality. As market volatility
subsided, the Group also started reversing some of the unrealised investments portfolio losses of 2022,
boosting performance and equity.
a)
Interest income for the year under review amounted to €105.7 million, up by €25.8 million or 32.3%
over 2022. The main contributor is the overall growth in the credit portfolio aided by improved
pricing opportunities business loans and advances and the syndicated loan book.
b)
Interest payable more than doubled, from €14.8 million in 2022 to €32.1 million in the year under
review. The steep rise was due to higher repricing on domestic deposits and non-EUR funding as
interest rates spiked, partly also including the effect of the Subordinated Bond issued in Q4.
c)
Net fee and commission income went up by 21.0% to €8.3 million (2022: €6.9 million). This increase
corresponds with the growth in business activity of the Group across several commission streams,
like advances, card related transactions and investment services.
d)
Other operating income generated was of €3.6 million, mainly a result of the net gains on financial
instruments totalled €3.1 million for 2023, compared to the (unrealised) loss of €10.3 million posted
in 2022.
e)
Net impairment losses of €3.5 million for 2023 contrast with a writeback of €0.3 million posted for
the year 2022. In large part, the 2023 result is due to a credit charge taken on a syndicated loan
which moved from stage 1 to stage 3 in the year under review, increasing the ECL charge.
f)
Operating expenses for the year under review amounted to €52.6 million, up by €5.6 million on the
previous year. Staff costs largely drove this increase as investment in human resources remains one
of the priority drivers in the execution of the Group’s business strategy.
g)
Staff expenses include for the first time a realised cost portion of share-awards granted in August
2023. Other increases were mainly arising from licensing and maintenance of technologies,
regulatory and compliance requirements, professional and marketing fees, insurance, and other
inflationary pressures.
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 47
FINANCIAL OVERVIEW (continued)
INCOME STATEMENT (continued)
h) Cost-to-income ratio from business operations for the year was 61.6%, an improvement of 11.1% over
2022 mainly as a result of a positive denominator effect thanks to the recovery in net operating
income.
FINANCIAL POSITION
i)
Total assets for the Group grew by 17.6% to €3.7 billion.
Key contributors were:
- Net loans and advances to customers and the syndicated loan portfolio which in aggregate
grew by 22.0% to €2.9 billion.
- Home financing remaining a key driver contributing to 56% of the overall increase in the loan
book, followed by commercial and corporate lending.
- Cash and balances with the Central Bank of Malta increased by €45.2 million to reach €131.1
million, also earning higher interest in the process.
- Loans and advances to banks which contracted by €18.4 million to €54.5 million,
counterbalancing the increase in balances with the Central Bank.
j)
Group liabilities reached €3.4 billion, expanding by 18.3% or €0.5 million.
Key contributors were:
- Customer deposits and amounts owed to banks which in a sharply competitive interest rate
environment increased by €427.2 million and €30.3 million, respectively, to €3.1 billion and
€80.7 million, respectively.
- The fund-raising strategy embarked on during 2H 2023 aimed at raising Minimum Required
Eligible Liabilities (MREL), including Tier 2 instruments under the Subordinated Bond issuance
programme.
k)
Equity closed the year at €287.4 million,
up by 9.9% or €26.0 million over last year’s closing of
€261.5 million, mainly attributable to:
- The profit for the period of €20.6 million.
- Changes to the fair value on financial assets of €4.9 million, which also represent a partial
recovery of the losses incurred in 2022.
- Scrip shares for 2022 (final) and 2023 (interim) dividend, with €6.0 million being retained in
equity.
l)
The Bank’s CET1 ratio stood at 14.6%
(2022: 15.2%)
and the Capital Adequacy Ratio at 20.6%
(2022: 18.8%).
DIRECTORS’
REPORT
___________________________________________________________________________
FINANCIAL OVERVIEW (continued)
FINANCIAL POSITION (continued)
DIVIDENDS
The Directors are recommending a final gross dividend of €0 .022 (net dividend of €0.015) per ordinary
share to be paid to ordinary shareholders in the form of scrip. That is, each shareholder will have the
option to receive the dividend in cash or as new ordinary shares at an attribution price to be determined
and announced. Taken together with the interim gross dividend of €3.2 million (net dividend of €2.1
million) paid in October 2023 as scrip, the total gross dividend distribution for 2023 will be of €11.7
million (total net dividend of €7.6 million), or a total gross dividend per share of €0.031 (total net
dividend per share of €0.020).
This final dividend is subject to approval by shareholders at the Annual General Meeting and has not
been included as a liability in these financial statements.
OUTLOOK
Against the many global crosswinds, the Maltese economy is expected to continue performing strongly
in 2024, with GDP growth of 3.8% (2023 - 4.3%) moderating to 3.6% in 2025. Solid domestic demand,
sustained by both private consumption and investment, is expected to be a main driver along with a
positive net exports performance and strong tourism results. Annual inflation is expected to ease from
5.6% in 2023 to 3.0% in 2024, slightly higher than the EU average, due to recent increases in wages.
The general government deficit is expected to moderate in 2024 and subsequent years, with the
Debt/GDP ratio reaching 56.7% by 2026. Overall, risks are tilted to the upside, reflecting better-than-
expected recent economic performance, while risks on the fiscal side tilt to the downside as spending
on energy support measures persists.
APS Bank approaches this relatively challenging outlook on the back of very strong results for 2023,
reinforced by healthy capital, liquidity and asset quality despite higher interest rates and inflation which
increase the general cost of doing business. The last quarter of 2023 was also characterised by the
successful MREL raising exercise which gives the Bank a strong foundation for further growth in 2024
albeit with a more cautious approach to credit underwriting given the tighter prevailing monetary
conditions. Overall, the Bank’s and Group’s strategy continues to be guided by a curated business
model that looks at further opportunities of growth in the home loan and commercial credit market,
including expanding the international lending portfolio, retail investments and pensions business.
APS Bank plc 48
DIRECTORS’
REPORT
___________________________________________________________________________
APS Bank plc 49
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 50
DISCLOSURE IN TERMS OF THE SIXTH SCHEDULE TO THE COMPANIES’ ACT
During the financial year ended 31 December 2023, 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) In 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 and R1-2.1.3 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.
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 Noel Mizzi
Chairman Director
7 March 2024
REMUNERATION REPORT
APS Bank plc 51
REMUNERATION POLICY
The Remuneration Policy of APS Bank 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 (Executives and Heads of Department), material
risk takers and staff engaged in control functions. Remuneration of the Board of Directors and of the
CEO is covered by the Directors’ and CEO’s Remuneration Policy approved by Ordinary Resolution at
the 2023 Annual General Meeting.
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 2023 – 2025 covers all staff members, 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 Group Remuneration Policy is reviewed on a regular basis and was last updated and approved in
2023 by the Board of Directors, following the recommendation of the Nominations and Remuneration
Committee, to cover clawback provisions for variable remuneration of Identified Staff.
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 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.
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 52
REMUNERATION POLICY (continued)
Employee Share Incentive Plan
During the annual general meeting held on 28 April 2022, the shareholders approved the establishment
of an executive share incentive plan for the period 2022 – 2026 (ESIP). By virtue of the ESIP, the Board
of Directors may grant shares to the CEO, and other eligible employees, subject to the rules of the ESIP.
The purpose of the ESIP is to ensure that the Company can continue to properly incentivise its key
employees with a view to aligning their interests to those of the Company’s shareholders. The
implementation of the rules governing the ESIP was delegated by the Board of Directors to the
Nominations and Remuneration Committee.
An eligible employee (including the CEO) may therefore be awarded share awards pursuant to the
ESIP, subject to the attainment of stipulated performance criteria in a particular year. The ESIP
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 and the achievement of corporate targets and other factors that support the Groups’
long-term strategy and business objectives, namely achieving the Group’s ROAE and profit target. 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
Key Performance Indicators (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
8% of total number of employees in the Group. Identified staff is determined in line with recommended
EBA Regulatory Technical Standards
11
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.
11
EBA Final Draft Regulatory Technical Standards EBA/RTS/2020/05 dated 18 June 2020
REMUNERATION REPORT
APS Bank plc 53
REMUNERATION POLICY (continued)
Identified Staff (continued)
For the purposes of remuneration, Identified Staff have been split into business areas according to EBA
guidelines
12
. The tables below (REM 1, REM 3 & REM 5) show total fixed and variable remuneration for
Identified Staff during the financial year 2023 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.
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 REM4 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 Tables below present 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
26
4
Total fixed
remuneration of
which:
433,156
1,644,763
2,400,404
219,455
Cash based
4
33,156
1,
605,13
3
2,
301,500
213,882
Other forms
-
3
9,630
9
8,904
5,573
Variable
Remuneration
Number of
identified staff
9
9
26
4
Total variable
remuneration of
which:
-
436,363
682,551
14,616
Cash based
-
322,903
408,511
13,810
Share
-
linked
instruments or
equivalent non-cash
instruments
-
113,460
274,040
806
Total Remuneration
433,156
2,081,126
3,082,955
234,071
Deferred and retained
remuneration
Total amount of
deferred
remuneration
awarded for previous
performance periods
Of which due to
vest in the financial
year
Of which vesting
in subsequent
financial years
Management Body
Management function
43,400
43,400
156,860
Other Senior management 111,600 111,600 385,640
Other Identified staff 1,984 1,984 2,790
Total amount 156,984 156,984 545,290
12
EBA Guidelines on the remuneration benchmarking exercise EBA/GL/2014/08 dated 16 July 2014
REMUNERATION REPORT
APS Bank plc 54
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
All
other
Total
Total number
of identified
staff
9
9
18
2
3
5
13
7
4
52
Of which:
Other Senior
management
2
3
1
13
7
-
Other
identified
staff
-
-
4
-
-
4
Total
remuneration
of identified
staff
433,156
2,081,126
2,514,282
299,884
375,788
317,835
1,453,096
817,423
53,000
5,831,308
Of which:
Variable
remuneration
-
436,363
436,363
62,282
84,266
44,762
321,431
184,426
-
Fixed
remuneration
433,156
1,644,763
2,077,919
237,602
291,522
273,073
1,131,665
632,997
53,000
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 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; and

Other Identified Staff includes ReAPS Directors.
The table below represents the annual change of remuneration, of the performance of the company,
and of average remuneration on a full-time equivalent basis of employees of the company other than
Directors.
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
Wages and salaries
25,726
22,770
25,042
22,184
Social security costs
1,493
1,316
1,493
1,316
Total 27,219
24,086
26,535
23,500
Profit before tax
30,241
15,660
27,805
28,929
REMUNERATION REPORT
APS Bank plc 55
NOMINATIONS & REMUNERATION REPORT AS AT 31 DECEMBER 2023
1.
Terms of Reference and Membership of the Nominations and Remuneration Committee
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; and (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, Laragh Cassar and Michael Pace Ross. 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 63 to 65.
2.
Meetings
The Committee held 7 meetings during the period under review. The Chief Executive Officer, 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 2023 is being presented under the following main headings:
Board Composition
The second quarter of 2023 saw the retirement of two Directors, Franco Azzopardi and Alfred DeMarco.
As part of ongoing succession planning, the Committee recommended the appointment of Noel Mizzi
and Marisa Xuereb following a public call for nominations. Following the Bank’s listing of its shares on
the Malta Stock Exchange in mid-2022, this was the first time that two Directors were appointed from
the public float. A Company Announcement was issued in January 2023 inviting shareholders holding
50,000 shares or more to submit nominations. Two nominations were received and following
deliberation on their fitness and properness by the Nominations & Remuneration Committee, these two
nominees were recommended for MFSA approval and appointment.
Mr Mizzi’s vast experience in governance, accounting and auditing in the banking and financial services
sector and Ms Xuereb’s significant operations management. commercial and governance experience
have been valued additions to the Bank’s Board. Both Mr Mizzi and Ms Xuereb have brought with them
key skills and competences gathered throughout their careers. Their respective bios may be found on
pages 9 and 10.
The Committee has overseen the recruitment and induction process for both Noel Mizzi and Marisa
Xuereb, with Mr Mizzi also taking on the Chairmanship of the Audit Committee. Updated Letters of
Appointment and ancillary Terms and Conditions as well as an updated Board Charter were
recommended to the Board for approval and made applicable to all appointed Directors following the
AGM.
Furthermore, a process is currently being undertaken by the Committee for the succession of Victor E.
Agius, who is not seeking re-appointment at the forthcoming AGM.
Board Succession Planning
Throughout the year the Committee ensured that the Bank has, and will continue to have, a strong and
effective Board in place, with all the necessary competencies, experience, and skills.
REMUNERATION REPORT
APS Bank plc 56
NOMINATIONS & REMUNERATION REPORT AS AT 31 DECEMBER 2023 (continued)
Board Succession Planning (continued)
To this effect, 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. The Bank issued a
public call via a Company Announcement and social media channels to permit the Bank ‘cast the net’
wider and reach out to potential local and international nominees who believe that they have the
necessary competences to join the Board. This has permitted the Committee evaluate the applications
received and strengthen the Pool with a range of candidates having a suitable, competent and diverse
background with respect to educational and professional competence, age and gender.
Equality, Diversity and Inclusion
The Bank’s focus on equality, diversity and inclusion continues at all levels of the organisation, and was
an area of focus at both Committee and Board level for 2023.
The Board’s Diversity Policy Statement is based on four fundamental principles: (i) individual suitability
based on high skills and competences in the ambit of diversity; (ii) collective suitability Diversity, Equity
and Inclusion Policy supports the Bank in fostering, cultivating, and preserving a culture of diversity,
equity and inclusion amongst all its staff members on the basis that all appointment are merited; and
(iii) zero tolerance to discrimination and bias; (iv) long term social goals.
From this Policy Statement stems the Bank’s Diversity, Equity and Inclusion Policy in fostering,
cultivating, and preserving a culture of diversity, equity and inclusion amongst all its staff members.
The appointment of Noel Mizzi and Marisa Xuereb have decreased the Board’s average age bringing it
to 57, as well as increased the female gender on the Board to 22%.
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 Chief Executive Officer, then establishes the individual
remuneration arrangements of the Group’s Senior Management, namely the Executives and Heads of
Departments in accordance with the Group Remuneration Policy. 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 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 Executive Share Incentive Plan.
Apart from the Occupational Pension Scheme and ESIP, no discretionary pensions or other
supplementary pension benefits were payable to the Executives in 2023. 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.
REMUNERATION REPORT
APS Bank plc 57
NOMINATIONS & REMUNERATION REPORT AS AT 31 DECEMBER 2023 (continued)
4.
Remuneration
Statement (continued)
4.1 Remuneration Policy – Senior Management (continued)
Variable Remuneration of Executives
The total Variable Remuneration of Executives including share awards is proposed by the CEO,
reviewed by the Nominations and Remuneration Committee, and confirmed by the Board. During 2023,
the Executives and Heads of Department were awarded a performance bonus linked to the
performance and achievement of their objectives; eligible employees were granted new awards and
also vested awards granted in 2022. The objectives were based partly on financial targets (financial
ratios) and partly on qualitative performance review.
Total emoluments received by Executives during the financial year ended 31 December 2023 are
reported in the Remuneration Report.
4.2 Remuneration Policy – Directors and the Chief Executive Officer
The Remuneration Policy for Directors and the Chief Executive Officer was established by the Board
and approved by the Shareholders at the 2023 Annual General Meeting, in line with the provisions under
Chapter 12 of the Capital Markets Rules.
The aim of this Policy is to contribute to the business strategy, long-term interests, and sustainability
of the Bank by ensuring that the Bank is able to attract and retain sufficiently qualified directors and a
CEO who are crucial for the formulation and proper implementation of the Bank’s strategic vision.
In order to avoid any conflict of interest, the Bank’s remuneration is managed through well-defined
processes ensuring no individual is involved in the decision-making process related to their own
remuneration. In line with best practice, non-executive Directors’ remuneration is reviewed on an annual
basis by the Nominations and Remuneration Committee, which in turn makes any recommendations
for consideration by the Board. The remuneration of the CEO, including any variable remuneration is
approved by the Board of Directors, upon a recommendation of the Nominations and Remuneration
Committee. In their recommendation to the Board, the Nominations and Remuneration Committee shall
be guided exclusively by the best interests of the Bank.
Remuneration Policy –Chief Executive Officer
The remuneration of the CEO takes into account the Bank’s need to attract, retain and motivate an
individual who possesses the necessary experience, qualities and attributes for this key executive role
within the Bank by offering terms of employment which are competitive within the market. The
remuneration package offered to the CEO also considers the size and scope of the role, the experience
of the individual, market realities, practices or standards for similar positions within regulated entities,
group financial performance, salary levels and increases.
In setting the CEO’s remuneration, the Nominations and Remuneration Committee is guided by the
remuneration framework and reward policies and practices applicable to the rest of the Bank’s
employees. These policies and practices are relevant to today’s labour market and reflect the added
value of each position in line with expertise that supports the Company’s goals and which attracts and
retains highly talented individuals in possession of the right skill sets, aptitude and knowledge to carry
out complex and challenging roles. The Chief Executive Officer’s remuneration is composed of fixed
and variable remuneration.
The fixed (base) salary awarded to the CEO provides a predictable base level of income reflecting level
of responsibility, capabilities, skills, experience and market conditions. The CEO’s base salary is
determined by the terms of the relevant employment contract. Fixed remuneration includes an
occupational pension scheme through a fixed percentage contribution of the base salary.
REMUNERATION REPORT
APS Bank plc 58
NOMINATIONS & REMUNERATION REPORT AS AT 31 DECEMBER 2023 (continued)
4.Remuneration
Statement (continued)
4.2
Remuneration Policy – Directors and the Chief Executive Officer (continued)
Remuneration Policy –Chief Executive Officer (continued)
Variable pay is clearly connected to the work and performance of the CEO, with objectives based on
factors that support the Group’s long-term strategy and business objectives. The variable component
of the CEO’s remuneration takes the form of (i) an annual performance bonus and (ii) share awards in
terms of the ESIP.
The annual performance bonus is contingent on a performance assessment carried out by the
Nominations and Remuneration Committee and approved by the Board of Directors. The assessment
evaluates the extent to which the CEO would have reached pre-set objectives and behaviours set by
the Board of Directors, including business growth in line with the Company’s strategic plan,
engagement with other key stakeholders and regulators, corporate social responsibility, ESG objectives
and ensuring adherence to risk management and compliance measures. All of these objectives, which
form the basis of the Board’s assessment of the CEO’s entitlement to an annual performance bonus,
are aligned with the Bank’s business strategy and long-term interests, and therefore ensure that the
CEO’s performance, and remuneration, is linked to the Company’s long-term success and sustainability.
Clawback provisions apply in line with the Group Remuneration Policy.
Total remuneration, including all benefits, awarded in 2023 and in 2022 are shown in the table below.
2023 2022
€
€
Fixed Pay 360,515 360,000
Fringe Benefits (Car, Expenses and Pension Scheme) 37,376 33,336
Variable Pay (Performance Bonus and ESIP) 96,200 62,400
Aggregate
494,091 455,736
Number of Shares (share price on allotment day - €0.62c) – Awarded
30,000 20,000
Number of Shares (share price on allotment day - €0.62c) – Vested
10,000 nil
The amounts above represent the remuneration package of the CEO accruing for the financial year
ending 31
December 2023.
The CEO is employed on a five-year fixed-term contract expiring on the 31 December 2026. The
performance assessment of the Chief Executive Officer 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 Chief Executive Officer 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.
The CEO is entitled to benefits enjoyed by all employees of the Bank including health insurance, group
life insurance, personal accident insurance, discounts on products or services and a mobile phone
allowance. The CEO is also entitled to the use of a fuelled licenced insured and maintained company
car and meeting expenses in respect of professional and club memberships, subscriptions and similar
up to a maximum of Euro 4,000 per annum.
The CEO is not entitled to any form of payment on resignation or termination of employment apart
from the entitlement at law governed by legal provisions applicable to the termination of definite
employment contracts. Entitlement to a retirement gratuity is based on number of years’ service, as is
the case of all employees, and is equivalent to one time of the terminal monthly salary.
REMUNERATION REPORT
APS Bank plc 59
NOMINATIONS & REMUNERATION REPORT AS AT 31 DECEMBER 2023 (continued)
4.Remuneration
Statement (continued)
4.2
Remuneration Policy – Directors and the Chief Executive Officer (continued)
Remuneration Policy – Non-Executive Directors
The Board of Directors is composed in its entirety of Non-Executive Directors. The remuneration of the
Directors does not include a variable component and none of the Directors, in their capacity as Directors
of the Bank, are entitled to profit sharing, share awards or pension benefits. All Directors are non-
employees and receive a fee for their services as Directors. Directors are entitled to be reimbursed all
travelling, hotel and other expenses properly incurred by them in attending and returning from
meetings of the Board or any committee of the Board or general meetings of the Company or in
connection with the business of the Company. Such expenses shall, subject always to all applicable laws
and/or regulations, not be deemed to form part of the Directors’ emoluments. Directors are entitled to
avail themselves of the health insurance scheme offered by the Company and to certain discounts on
products and services of the Company. This health insurance benefit, if availed of, continues to apply
for the rest of the year after Directors’ resignation from office and for the two calendar years that follow.
The Board proposes the maximum aggregate emoluments that may be paid to the directors of the
Company in any financial year for approval by the shareholders. The remuneration of the Chairman and
Directors of the Bank for 2023 was approved by the shareholders at the Annual General Meeting. 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 Annual General Meeting 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 Annual General Meeting.
2023
2022
€
€
Board Fees
Chairman
75,000
45,000
All other Directors
203,000
202,333
Board Committee Fees
Chairman of the Board
8,746
5,250
All other Directors
146,410
165,417
REMUNERATION REPORT
APS Bank plc 60
NOMINATIONS & REMUNERATION REPORT AS AT 31 DECEMBER 2023 (continued)
4.Remuneration
Statement (continued)
4.2
Remuneration Policy – Directors and the Chief Executive Officer (continued)
Remuneration Policy – Non-Executive Directors (continued)
The Bank’s Directors’ Fees are as follows:
2023
2022
€
€
Martin Scicluna
83,720
50,250
Franco Azzopardi
17,688
47,000
Victor E. Agius
49,267
51,000
Joseph C. Attard
47,000
49,000
Laragh Cassar
47,000
46,333
Alfred De Marco (retired AGM 2023)
16,183
43,000
Victor Gusman (retired 31 December 2022)
-
40,000
Michael Pace Ross
39,000
46,500
Juanito Camilleri
47,000
44,917
Noel Mizzi (appointed AGM 2023)
25,570
-
Joseph Rapa (appointed 1 January 2023)
37,000
-
Marisa Xuereb (appointed AGM 2023)
23,699
-
TOTAL 433,127
418,000
This Directors’ Remuneration Report in terms of Chapter 12 of the Capital Markets Rules is being put
forward to an advisory vote of the 2024 Annual General Meeting in accordance with the requirements
of the Capital Markets Rule 12.26L.
In accordance with the requirements emanating from Appendix 12.1 of the Capital Markets Rules, the
contents of the Directors’ Remuneration Report within this Remuneration Report have been reviewed
by the external auditors to ensure compliance with such requirements.
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APS Bank plc 61
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 Malta
Financial Services Authority (the MFSA) and the principles outlined in the “Code of Principles for Good
Corporate Governance” (the 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 15.
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 72.
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 16. There is a strong, value-adding Board, with
diverse range of skills, experiences, background and competencies, ensuring effective and efficient
decision making. The Board supports open and honest conversation to ensure that decisions taken are
in the long-term interest of the Bank.
Furthermore, the Board delegates specific responsibilities to various Board and Management
Committees, as illustrated by the governance structure chart on page 66. Supplementary information
on delegated authorities and responsibilities is provided in Principle 4 below.
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 Chief Executive
Officer, which are separate and distinct positions, occupied by different individuals, having clear division
of responsibilities.
The Chairman is appointed from amongst the Directors by the largest shareholder, holding at least
twenty-five per cent 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 62
COMPLIANCE WITH THE CODE (continued)
Principle 2: Chairman and CEO (continued)
The Chief Executive Officer is responsible for the running of the Bank’s business and to lead the
management team, establishing the required fora 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 Chief Executive Officer 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 Chairman and the Chief Executive officer 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 Annual General Meeting at which they are appointed until the end of the subsequent
General Meeting, at which they become eligible for re-election. The Nominations and Remuneration
Committee has the delegated authority to lead this process, ensuring at all times Board suitability.
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, ensuring diligent
monitoring of internal control functions. All Directors have adequate knowledge on the key
performance indicators and have the required understanding of the business risks involved.
The Board contains a mix of longer-serving Directors and more-recently appointed ones, ensuring 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 key performance
indicators 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 element of diversity is top on the Agenda. A Diversity Policy Statement
for the Board is in place through which a diversity policy governs the principles of diversity, equity and
inclusion Bank-wide. Diversity is seen through a broader lens than just gender and age.
The Nominations and Remuneration Committee maintains a skills matrix with key skills, experiences and
attributes that have been identified as particularly valuable for effective oversight of the Bank and
execution of the strategy. The skills matrix is reviewed annually following the finalisation of the Board
and Individual Annual Evaluation. When a Board vacancy arises, the skills of the outgoing Director, as
provided in the Skills Matrix are evaluated, and the required individual and collective skills are sourced
from a pool of candidates who have the capacity to hold the role of Director. In the last quarter of 2023,
the Board issued a call for applicants who have the required skills to submit their interest for potential
inclusion in the Nominations Pool, following assessment by the Nominations and Remuneration
Committee. The call attracted applications from diverse backgrounds, geographies and skills and
boosted the current list of names held in the Pool.
Board succession planning has been a key area of focus throughout this reporting year, given the
retirement of Franco Azzopardi and Alfred DeMarco in May 2023, coupled with another Director not
seeking re-election at the 2024 Annual General Meeting. A process is currently underway for a Non-
Executive Director to be appointed in his stead. The process stemmed from an analysis of the skills and
attributes required from the Board as a whole to support the business in line with its strategy and to
meet future challenges. Further information on the Nomination and Remuneration Committee
proceedings is found in the Nomination and Remuneration Committee Reports on pages 55 to 60.
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APS Bank plc 63
COMPLIANCE WITH THE CODE (continued)
Principle 3: Composition of the Board (continued)
The Board believes that each Director who is being put forward for re-appointment at the 2024 AGM
brings considerable knowledge, wide-ranging skills and experience to the Board, makes an effective
and valuable contribution and continues to demonstrate commitment to their role.
In accordance with the Code Provision 3.2, the independent non-executive Directors of the Bank as at
31
December 2023 were:
Martin Scicluna (Chairman)
Victor E. Agius
Joseph C Attard
Laragh Cassar
Juanito Camilleri
Noel Mizzi
Marisa Xuereb
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 considers Michael Pace Ross, who holds the role of Administrative Secretary of the
Archdiocese of Malta, and Joseph Rapa who is an advisor with the Diocese of Gozo, to be non-
independent from the Bank. 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.
Principle 4: The Responsibilities of the Board
In its primary responsibility, in setting 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 doing so, the Board works closely with the senior management team, led by the Chief
Executive Officer, 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 code 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 73 to 74.
As detailed in Principle 1 above, 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.
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APS Bank plc 64
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.
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 /
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
Provides
oversight of
the Bank’s
credit risk
management
and lending
strategies and
objectives;
which
includes: a
review of the
quality and
performance
of the Bank’s
credit
portfolio; the
establishment
of portfolio
limits; the
approval of
loans at
thresholds
determined
by the Bank’s
Credit Policy
as approved
by the Board;
and,
the appraisal
and approval
of credit
limits in
Treasury
products.
Environmental,
Social and
Governance
Committee
Considers the
material
environmental,
social &
governance
issues and
policies
relevant to the
Bank’s business
activities and
promotes
initiatives to
raise ESG
performance.
Oversees the
implementation
of social
sustainability
initiatives and
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.
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 credit policy
and procedures.
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 business
Weekly Management
Meeting
Reports into the 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 65
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.
Refers and
recommends to the
BCC limit
applications where
these exceed its
MCC limits.
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.
An updated list of the Committee members is found on the Bank’s website.
Principle 5: Board Meetings
The Board meets regularly to discharge its duties effectively, typically monthly.
During the year under review, the Board met 12 times, with another 6 additional meetings held on an
ad hoc basis. During 2023, the average rate of attendance was 89.8%.
All Directors are required to attend all meetings of the Board, the meetings of those Committees on
which they serve, and the Annual General Meeting (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.
Board meetings take place in person, with videoconferencing facilities in place to accommodate
uninterrupted attendance, where necessary. Absences from meetings are pre-authorised and most of
the time Directors appoint an alternate Director in their stead for that particular meeting.
The below table provides the attendance of Board members at Board meetings:
Board Attendance at Meetings as at 31 December 2023
Board Member Attendance out of 18 meetings (including ad hoc meetings)
Martin Scicluna 17/18
Victor Agius 17/18
Joseph C Attard 18/18
Franco Azzopardi 6/6**
Juanito Camilleri 15/18
Laragh Cassar 17/18
Alfred DeMarco 6/6**
Noel Mizzi 11/12*
Michael Pace Ross 13/18
Joseph Rapa 18/18
Marisa Xuereb 10/12*
*appointed to the Board on 16 May 2023
** retired from the Board on 16 May 2023
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APS Bank plc 66
COMPLIANCE WITH THE CODE (continued)
Membership of Board and Management Committees as at the date of this report
CORPORATE GOVERNANCE REPORT
APS Bank plc 67
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 twelve-month period, Board Agendas
cover 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 2023, in addition to its scheduled meetings, the Board also met with the Management Team in: a)
July for the Annual Business Planning brainstorming days; and b) November for the Business Planning
Wrap-up Workshop, looking into the Bank’s main priorities for the updated 2024-2026 Plan and
strategic initiatives for the same period.
Principle 6: Information and Professional Development
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 that the Bank operates in.
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 2023, the Directors attended two tailor-made programmes. The first bespoke session was on soft
skills, relating to effective communication aspects in the boardroom. For the second programme,
external professionals were engaged and delved into supervisory expectations on Board involvement
in bank’s strategies and market trends in retail banking, ESG landscape and reporting considerations
and the EU supervisory, regulatory and legislative framework. Furthermore, the directors also attended
the MBA/IFA The Non-Executive Directors’ Training programme held over two days in June. 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 their appointment, Noel Mizzi and Marisa
Xuereb were provided with an induction programme facilitated by the Company Secretary and tailored
to their respective experience, background, Committee membership and 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 Board Credit Committee Secretaries for a
familiarisation session on the Committee’s Terms of Reference and proceedings, given that the newly-
appointed Directors are sitting on these Committees.
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APS Bank plc 68
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.
In terms of good governance practices, the Board Evaluation for 2023 was conducted by an externally
appointed advisor, and facilitated by the Company Secretariat. Outcomes are discussed in detail with
the Chairman of the Board with appropriate action plans adopted, some of which will be implemented
at the forthcoming AGM.
A Board Committees Evaluation exercise was held in the second half of 2023. This exercise covered the
performance of Board and Management Committees so ensure efficient and effective meetings. The
chair of each Committee was mandated to consider the outcomes of this exercise. The main areas of
focus were on more deep-dives / training on new regulations and reporting obligations, induction
programmes for new members of management on Committees and cross-functional Committee
awareness.
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 continuous efforts are done to avoid this
happening. References to Board and Management Committees is made throughout this report. The
governance framework summarises this.
In January 2024, changes in some Board and Management Committee compositions took place to
further diversify knowledge in Committee composition.
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 on 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 2023. 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.
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APS Bank plc 69
COMPLIANCE WITH THE CODE (continued)
Key stakeholders Reason for engagement and key priorities for
2023
Shareholders, Bondholders and Institutional
Investors
The Board always placed engagement with
shareholders foremost. The year 2023, marked
the first anniversary from the Bank’s listing of its
entire holdings on the Official List of the Malta
Stock Exchange.
Meetings with major shareholders were
organised by the Chairman, along with the CEO
and Company Secretary.
The Bank also celebrated resounding success in
the issue of its first tranche of the €150,000,000
5.8% subordinated debt programme. As the
progression of this issue took place, roadshows
were conducted with a number of institutional
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.
The Board gets regular reviews of the Bank’s
share price movements, movements in the share
register, engagements with investors. It also
discusses shareholder issues and expectations as
part of its decision-making.
The Bank believes in the recognition of both
bondholders’ and shareholders’ trust in the Bank
and in 2023 launched an attractive Investor
Offers & Benefits package.
More information is available on
(www.apsbank.com.mt/investor-offers-
benefits/).
The Board is keenly aware of stakeholder
expectations in relation to future dividend
payments. The two dividends paid out in 2023
were in the form of scrip. Further information on
the 2023 dividend payments is found on page
48. 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. This has been achieved
by the three consecutive scrip dividends paid out
in the second half of 2022 and throughout 2023.
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 on the prevailing
market outlook, general economic conditions,
CORPORATE GOVERNANCE REPORT
APS Bank plc 70
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 three-year period (2024 –
2026) 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 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. Beyond customer communications and
brand and marketing messaging, the Bank
maintains a constant flow of information and
updates through press releases, company
announcements, and Market Briefing events held
throughout the year.
By constantly monitoring emerging trends, the
Bank anticipates and responds to customers’
needs by developing new products and
identifying future revenue drivers.
Alignment with the Bank’s corporate culture is
bolstered through the Board’s constant
oversight of the various Committees and active
participation in other events. 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 reinforce their knowledge.
The section “Communicating brand, purpose and
corporate culture” covers the Culture
Department’s Brand and Marketing, Corporate
Culture Change Management, Corporate Social
Responsibility and Voice of the Customer
contributions, and is found on pages 18 to 20.
Employees The strategic approach taken towards
community engagement and corporate
communications, equally applies to employee
engagement and internal communications. In
addition to the ongoing Corporate Culture
Change Management activities, employees are
also invited to various social gatherings
organised by the Social Activities and Sports
Committees. Opportunities to attend various
Bank-sponsored CSR events are also regularly
extended to employees.
The section “Employee Matters” provides more
details on the Bank’s people strategy and is
found on pages 23 to 24.
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APS Bank plc 71
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. Copies are available on 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.
2. Market Briefing
From time to time the Bank organises Market
Briefing events as an important occasion to
inform the market about important or material
developments or to follow up on company
announcements when considered necessary.
These Market Briefings are notified to the public
via a company announcement. They are held
either virtually or hybrid. Questions from
investors and analysts are received to ensure an
open dialogue with the market.
In 2023, four Market Briefings were held, three of
which were in relation to the Bank’s financial
reports.
3. 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.
4. 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 communication media
has helped the Bank to increase the reach and
speed of its communication.
5. Corporate Website
The Bank’s website (www.apsbank.com.mt) is
the platform through which interested parties
may have access to Bank information. The
website has been updated to render it more
user-friendly. The section ‘Investor Relations’
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 72
COMPLIANCE WITH THE CODE (continued)
Principle 11: Conflicts of Interest
Each Director is expected to act to the highest standards of ethical behaviour and fiduciary duties.
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
precept 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 on 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, 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. These obligations
are likewise applicable to further cohorts of the Bank’s staff identified as insiders whereby strict
protocols are adopted.
Principle 12: Corporate Social Responsibility
The Board of Directors ensures that sound principles of corporate social responsibility are adhered to
and integrated into the core ethos of the Bank and embedded into its day-to-day culture and
operations. For these reasons also, the Bank is a prominent supporter of various Corporate Social
Responsibility (CSR) initiatives at both national and community level aimed at contributing to
economic, societal, environmental, and cultural development.
Further details on the Banks’ CSR outreach are disclosed separately on pages 18 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-executive Directors, there are no
executive Directors presently appointed to the Board. The Board believes that with the required
diversity of knowledge, judgment, 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 Chief Executive Officer 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 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 73
COMPLIANCE WITH THE CODE (continued)
Internal Controls 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 and
risk appetite 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. 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 would include details of any significant
internal control matters that they identify), and it has discussions with the statutory auditors at least
four times a year, to ensure that there are no unresolved issues of concern. It also regularly received
audit reports on the Group’s control framework from the Bank’s Group Internal Auditor.
In terms of Capital Markets Rules 5.117, 5.118 and 5.118A, the Audit Committee is composed of three Non-
Executive Directors. All three members of the Audit Committee 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 above). Until 16 May 2023, the Committee was composed of the following four members, Franco
Azzopardi (Chair), Joseph C Attard, Juanito Camilleri and Alfred DeMarco, the latter considered as
being non-independent. As from 16
May 2023, Noel Mizzi (Chair) joined the Audit Committee, and
Messrs Azzopardi and DeMarco retired on 16
May 2023. The Committee members’ bio may be found on
pages 7 to 10. Noel Mizzi 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 74
COMPLIANCE WITH THE CODE (continued)
Internal Control and Risk Management System (continued)
Control effectiveness review (continued)
Audit Committee:
Membership
2023 Attendance
Franco Azzopardi 3/3*
Alfred DeMarco 3/3*
Juanito Camilleri 7/7
Joseph C Attard 7/7
Noel Mizzi 4/4**
* retired on 16 May 2023
** appointed on 16 May 2023
Risk Committee:
Membership
2023 Attendance
Victor Agius 3/3*
Franco Azzopardi 3/3**
Michael Pace Ross 2/3*
Juanito Camilleri 9/9
Noel Mizzi 6/6***
Joseph Rapa 9/9
* rotation of Committee directors on 30 April 2023
** retired on 16 May 2203
*** appointed on 16 May 2023
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 CRD 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
CORPORATE GOVERNANCE REPORT
APS Bank plc 75
COMPLIANCE WITH THE CODE (continued)
Capital Markets Rule 5.97.5
The information relating to the Shareholder register required by Capital Markets Rule is found in the
Directors’ Report.
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 twenty-one days prior notice to the shareholders.
Ordinary business is transacted at the Bank’s Annual General Meeting, 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 Annual General Meeting or at an
Extraordinary General Meeting.
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 five percent (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 forty-six days before
the date set for the relative General Meeting.
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, the Bank held its Annual General Meeting on 16 May. This was the first
Annual General Meeting since the Bank listed its shares on the Malta Stock Exchange, which meeting
was held in person. Apart from the standing Annual General Meeting Agenda Items, which also included
a declaration of a final scrip dividend, the shareholders considered extraordinary resolutions relating to
the Directors’ authority to issue shares limitedly for the purpose of implementing a decision to pay a
scrip dividend, and to affect a capitalisation of profits, and the Directors’ authority to issue debt
securities up to €150,000,000. All resolutions were carried. Shareholders were requested to cast their
visiting preferences before the General Meeting. 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 Annual General Meeting and the questions and answers uploaded on the website after the event.
This Statement was authorised for issue by the Board of Directors on 7 March 2024 and signed on its
behalf by:
Martin Scicluna Noel Mizzi
Chairman Director
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 76
STATEMENTS OF PROFIT OR LOSS
for the year ended 31 December 2023
The Group The Bank
2023
2022
2023
2022
Note
€000
€000
€000
€000
Interest and similar income
:
On loans and advances, balances with
the Central Bank of Malta and treasury bills (3)
98, 664
7 3, 49 7
98,664
73,497
On debt and other fixed income instruments (3)
7,0 20
6 ,3 62
5,499
4,942
Total interest and similar income
(3)
10 5, 684
7 9 , 8 5 9
104,163
78,439
Interest expense (4)
(3 2,096)
(14 ,76 6)
(32,096)
(14,766)
Net interest income
73 ,588
6 5 ,0 93
72,067
63,673
Fee and commission income
10 ,82 0
9 ,1 15
9,850
8,197
Fee and commission expense
(2, 515)
(2 , 2 53)
(2,505)
(2,253)
Net fee and commission income
(5)
8, 305
6 ,8 62
7,345
5,944
Dividend income
(6)
-
1 31
1,252
1,477
Net gains on foreign exchange
(7)
15 4
1 ,3 00
701
860
Net gains from derecognition of financial assets
at amortised cost
(8)
-
9 8 4
-
984
Net gains/(losses) on financial instruments (8)
3, 148
(10 , 2 63)
1,037
1,076
Other operating income
27 1
5 41
271
541
Operating income before net impairments
85, 466
6 4, 64 8
82,673
74,555
Net (impairment losses)/reversal of impairment
losses
(11)
(3 ,497)
25 4
(3,497)
254
Net operating income
81 ,969
6 4, 902
79,176
74,809
Employee compensation and benefits (9)
(28 ,625)
(2 6, 0 96)
(27,941)
(25,510)
Other administrative expenses (10)
(1 8,504)
(16 , 14 0)
(17,929)
(15,577)
Depreciation of property and equipment
(2
7
)
(1, 871)
(1, 9 11)
(1,871)
(1,911)
Amortisation of intangible assets (28)
(3 ,016)
(2 ,26 4)
(3,016)
(2,264)
Depreciation of right-of-use assets (29)
(6 14)
(61 8)
(614)
(618)
Operating expenses
(5 2,630)
(47 ,02 9)
(51,371)
(45,880)
Net operating profit before associates’ results
29, 339
1 7, 8 73
27,805
28,929
Share of results of associates, net of tax (25)
902
(2 , 2 13)
-
-
Profit before tax
30 ,241
15 ,6 6 0
27,805
28,929
Income tax expense (12)
(9 ,6 67)
(9, 89 3)
(9,598)
(9,773)
Profit for the year
20 ,5 7 4
5, 76 7
18,207
19,156
Profit for the year attributable to:
Equity holders of the parent
19, 799
8, 00 3
18,207
19,156
Non-controlling interest
775
(2 , 2 36)
-
-
20 ,5 7 4
5, 76 7
18,207
19,156
Basic and diluted earnings per share
(13)
5. 2 c
2. 5c
4.8c
5.9c
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 77
STATEMENTS OF COMPREHENSIVE INCOME
for the year ended 31 December 2023
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
Profit for the year
20 ,5 7 4
5,767
18,207
19,156
Other comprehensive income/(loss):
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)
6, 67 8
(28,893)
6,678
(28,893)
Fair value (losses)/gains reclassified to profit or loss on
disposal of debt instruments measured at FVTOCI
(1 , 09 9)
5,354
(1,099)
5,354
Deferred income tax relating to the components of other
comprehensive income (OCI)
(6 5 5)
1,186
(655)
1,186
Other comprehensive income/(loss) for the year, net of tax 4, 9 24
(22,353)
4,924
(22,353)
Total comprehensive income/(loss) for the year, net of tax
25 ,4 9 8
(16,586)
23,131
(3,197)
Total comprehensive income/(loss) attributable to:
Equity holders of the parent
24 ,7 2 3
(14,350)
23,131
(3,197)
Non-controlling interest
77 5
(2,236)
-
-
25 ,4 9 8
(16,586)
23,131
(3,197)
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 78
STATEMENTS OF FINANCIAL POSITION
as at 31 December 2023
The Group The Bank
Note 2023
2022
2023
2022
€000
€000
€000
€000
ASSETS
Cash and balances with Central Bank of Malta (15)
13 1 ,0 71
85,887
131,071
85,887
Loans and advances to banks (16)
5 4,4 99
72,870
53,951
71,023
Financial assets at fair value through profit or loss (17)
46 ,4 84
41,046
-
-
Non-current assets held for sale (18)
1 ,7 38
1,733
1,738
1,733
Syndicated loans (19)
18 4, 1 72
135,210
184,172
135,210
Loans and advances to customers (20)
2, 6 94 ,2 29
2,224,694
2,694,229
2,224,694
Derivative financial instruments (21)
53 6
738
536
738
Other debt and fixed income instruments (22)
44 2, 0 32
459,601
442,032
459,601
Equity and other non-fixed income instruments (23)
6, 96 0
303
6,960
303
Investment in subsidiaries (24)
-
-
40,251
40,251
Investment in associates (25)
14 ,7 8 4
13,667
14,563
14,063
Investment properties (26)
6, 7 14
6,593
6,714
6,593
Property and equipment (27)
39 ,8 2 4
39,252
39,824
39,252
Intangible assets (28)
17 , 52 3
14,545
17,523
14,545
Right-of-use assets (29)
4, 38 6
5,040
4,386
5,040
Other receivables (30)
12 , 81 3
8,016
12,180
8,202
Current tax assets
19 5
-
-
-
Deferred tax assets (31)
3, 15 4
2,957
3,154
2,957
TOTAL ASSETS
3, 66 1 ,1 14
3,112,152
3,653,284
3,110,092
LIABILITIES
Derivative financial instruments (21)
53 6
738
536
738
Amounts owed to banks (32)
80 , 68 5
50,387
80,685
50,387
Amounts owed to customers (33)
3, 1 37 ,8 39
2,710,633
3,139,214
2,712,804
Lease liabilities (29)
4, 58 5
5,246
4,585
5,246
Accruals (34)
22 ,8 4 2
13,621
22,787
13,561
Debt securities in issue (35)
10 4, 1 73
54,642
104,173
54,642
Other liabilities (36)
20 , 38 5
13,121
20,339
13,080
Current tax liabilities
2, 6 41
2,306
2,641
2,306
TOTAL LIABILITIES
3, 37 3, 68 6
2,850,694
3,374,960
2,852,764
EQUITY
Share capital (37)
94 , 451
91,729
94,451
91,729
Share premium (37)
51 ,9 07
48,410
51,907
48,410
Revaluation reserve (38)
7, 9 05
2,981
7,905
2,981
Retained earnings (39)
11 8, 50 8
107,209
123,768
114,061
Other reserves
29 3
147
293
147
Attributable to equity holders of the parent
27 3 ,0 64
250,476
278,324
257,328
Non-controlling interest
(40)
14 ,3 64
10,982
-
-
TOTAL EQUITY
28 7, 4 28
261,458
278,324
257,328
TOTAL LIABILITIES AND EQUITY
3, 66 1 ,1 14
3,112,152
3,653,284
3,110,092
MEMORANDUM ITEMS
Contingent liabilities (41)
30 , 63 8
21,911
30,638
21,911
Commitments (42)
1, 0 99 ,5 47
878,787
1,099,547
878,787
The financial statements on pages 76 to 177 were authorised for issue by the Board of Directors on 7 March
2024 and were signed by:
Martin Scicluna Noel Mizzi Marcel Cassar Ronald Mizzi
Chairman Director Chief Executive Officer Chief Financial Officer
APS BANK PLC
_________________________________________________________________________________________
STATEMENTS OF CHANGES IN EQUITY
for the year ended 31 December 2023
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 2023
Balance at 1 January
2023
91 ,7 29
48 ,4 10
2, 98 1
107 ,2 09
14 7
25 0,4 76
10, 9 82
261 ,4 58
Profit for the year - - - 19,799 - 19,799 775 20,574
Other comprehensive
income
-
-
4,924
-
-
4,924
-
4,924
Total comprehensive
income
-
-
4, 92 4
19 ,7 99
-
24 ,7 23
77 5
25 ,4 98
Allotment of shares upon
vesting of share awards
(Note 37)
79
115
-
-
(194)
-
-
-
Share incentive plan -
Value of employee
services
-
-
-
-
340
340
-
340
Dividends to equity
holders (Note 14)
2,643
3,382
-
(8,500)
-
(2,475)
(227)
(2,702)
Net share capital issued
by subsidiary company
-
-
-
-
-
-
2,834
2,834
Total transactions with
owners
2, 722
3, 49 7
-
(8, 50 0)
14 6
(2, 135)
2, 60 7
47 2
Balance at 31 December
2023
94, 45 1
51, 90 7
7, 90 5
118 ,5 08
29 3
27 3,0 64
14 ,36 4
28 7,4 28
FINANCIAL YEAR
ENDED
31 December 2022
Balance at 1 January
2022
62 ,4 29
10, 45 3
25 ,3 34
103 ,9 74
-
202 ,19 0
18 ,6 32
22 0,8 22
Profit for the year - - - 8,003 - 8,003 (2,236) 5,767
Other comprehensive loss - - (2 2,353) -
(22,353) - (22,353)
-
Total comprehensive
(loss)/income
-
-
(2 2,3 53)
8, 003
-
(1 4, 350)
(2, 23 6)
(1 6, 586)
Issue of shares, net of
issue costs
27,500
37,957
-
-
-
65,457
-
65,457
Other movements - - - 32 - 32 - 32
Share incentive plan -
Value of employee
services
-
-
-
-
147
147
-
147
Dividends to equity
holders (Note 14)
1,800
-
-
(4,800)
-
(3,000)
(309)
(3,309)
Net share capital issued
by subsidiary company
-
-
-
-
-
-
1,104
1,104
Loss of control of
subsidiary company
-
-
-
-
-
-
(6,209)
(6,209)
Total transactions with
owners
29 ,3 00
37 ,9 57
-
(4, 7 68)
14 7
62 ,6 36
(5 ,4 14)
57 ,2 22
Balance at 31 December
2022
91 ,7 29
48 ,4 10
2, 98 1
107 ,2 09
14 7
25 0,4 76
10, 9 82
261 ,4 58
APS Bank plc 79
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 80
STATEMENTS OF CHANGES IN EQUITY
for the year ended 31 December 2023
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 2023
Balance at 1 January 2023
91,729 48,410 2,981 114,061 147 257,328
Profit for the year - - - 18,207
- 18,207
Other comprehensive income
-
-
4,924
-
-
4,924
Total comprehensive income
-
-
4,924
18,207
-
23,131
Allotment of shares upon vesting of share
awards (Note 37) 79 115 - -
(194) -
Share incentive plan - Value of employee
services - - - -
340 340
Dividends to equity holders (
N
ote 14)
2,64
3
3,382
-
(8,500)
-
(2,47
5
)
Total transactions with owners 2,722 3,497 - (8,500) 146 (2,135)
Balance at 31 December 2023
94,451
51,907
7,905
123,768
293
278,324
FINANCIAL YEAR ENDED
31 DECEMBER 2022
Balance at 1 January 202
2
62,429
10,453
25,334
99,673
-
197,889
Profit for the year - -
-
19,156
-
19,156
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)
Total transactions with owners
29,300
-
-
(4
,768
)
147
62,636
Balance at 31 December 2022
91,729
48,410
2,981
114,061
147
257,328
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 81
STATEMENTS OF CASH FLOWS
for the year ended 31 December 2023
The Group
The Bank
Note
202
3
2022
2023
2022
€000
€000
€000
€000
OPERATING ACTIVITIES
Interest and commission receipts
11 0,5 5 0
85,782
108,167
83,280
Interest and commission payments
(35,021)
(15,185)
(
34,500
)
(14,647)
Cash paid to employees and suppliers
(
39, 65 1
)
(43,516)
(
38,915
)
(42,897)
Operating profit before changes in operating
assets and liabilities 35 ,87 8
27,081
34,752
25,736
(Increase)/decrease in operating
assets
Loans and advances to customers/syndicated loans
(52 1 ,54 2)
(295,504)
(521,542)
(295,504)
Loans and advances to banks
(5 00)
(707)
(500)
-
Reserve deposit with Central Bank of Malta
(4 ,2 19)
(2,880)
(4,219)
(2,880)
Cheques in course of collection
-
2,881
-
2,881
Other assets
22
214
-
-
Increase/(decrease) in operating liabilities
Amounts owed to customers
42 7,0 9 5
278,875
426
,
299
279,731
Amounts owed to banks
(1 ,5 49)
(1,549)
(1,549)
(1,549)
Other liabilities
6, 91 7
3,445
7,666
2,814
Cash
(used in)/
from
operating activities before tax
(
57 ,8 98
)
11,8 56
(59
,
093
)
11,229
Income tax paid
(10 , 347)
(8,021)
(10,087)
(7,712)
Net cash flows (used in)/from operating activities (68 , 245)
3,835
(69,180)
3,517
INVESTING ACTIVITIES
Dividends received
28 6
403
1,252
1,477
Interest income from debt securities
7 ,01 5
7,328
7,015
7,328
Purchase of financial assets measured at amortised
cost
(14 , 168)
(222,644)
(14,168)
(222,644)
Proceeds on maturity of financial assets measured at
amortised cost
5, 06 4
5,987
5,064
5,987
Purchase of debt instruments measured at FVTOCI
(8 , 629)
(7,291)
(8,629)
(7,291)
Proceeds on disposal of debt
instruments measured at
FVTOCI
38 ,9 58
67,053
38,958
67,053
Purchase of financial assets at FVTPL
(4 6, 678)
(98,742)
-
-
Proceeds on disposal of financial assets at FVTPL
42 ,8 04
99,653
-
-
Proceeds on disposal of
investments in associates
-
9,589
-
9,589
Purchase of equity
and other non
-
fixed income
instruments
(5, 71 8)
-
(5,718)
-
Additional investment in associate
(5 00)
(500)
(500)
(500)
Purchase of property, equipment and intangible assets
(8 ,8 61)
(5,431)
(8,86
1
)
(5,431)
Net cash flows from/(used in) investing activities
9, 57 3
(144,595)
14,413
(144,432)
FINANCING ACTIVITIES
Dividends paid
(2 ,70 3)
(3,170)
(2,475)
(3,000)
Amounts received on creation of shares in subsidiaries
3,459
1,027
-
-
Proceeds from issue of new shares, net of issue costs
-
65,457
-
65,457
Proceeds from issue of debt securities in issue
4 9,48 6
-
49,486
-
Amounts paid on redemption of units in subsidiaries
(6 25)
(630)
-
-
Cash payment for the principal portion of lease liability
(7 22)
(761)
(722)
(761)
Net cash flows from financing activities
48 ,8 95
61,923
46,289
61,696
Net
decrease
in cash and cash equivalents
(9,777)
(78,837)
(8,478)
(79,219)
Cash and cash
equivalents at 1 January
92 ,2 64
171,101
90,417
169,636
Cash and cash equivalents at 31 December
(43)
82,487
92,264
81,939
90,417
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 82
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 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 15.
2. MATERIAL 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 classified in the statements of financial position as property
and equipment, which have been measured at their revalued amounts. Assets held for realisation are
measured at fair value less costs to sell if lower than their cost. 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 83
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (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 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.
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 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies. 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.
With effect from these financial statements for the year ended 31 December 2023, the Group has
consequently limited its disclosure of accounting policies to that information that is material.

Amendments to IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single
Transaction. The aim of the amendments is to reduce diversity in the reporting of deferred tax on
leases and decommissioning obligations.
The amendment results in the recognition of deferred tax balances for all temporary differences
related to leases and decommissioning obligations and entities must recognize 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. As a result of the application
of this amendment, the Group has recognized the following amounts in its financial statements:
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 84
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (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)

At 1 January 2022: deferred tax assets of €1,767,915 and deferred tax liabilities of €1,871,799;

At 31 December 2022: deferred tax assets of €1,763,901 and deferred tax liabilities of €1,836,155.
There was no impact on the Group’s recognized income for the year ended 31 December 2022, and on
the Group’s equity as at 1 January and 31 December 2022 as a result of the amendment to IAS 12.
In addition, the Group also adopted the following standards and amendments to standards and
determined that they did not have a material effect on the financial statements of the Group.

IFRS 17 Insurance Contracts and the amendments to IFRS 4 – Extension of the Temporary
Exemption from applying IFRS 9.

Amendments to IAS 8 – Definition of Accounting Estimates.

Amendments to IAS 12 – Income Taxes. International Tax Reform – Pillar Two Model Rules.
Standards, interpretations and amendments to published standards that are not yet effective
Up to the date of approval of these consolidated 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 and may have
an impact on the Group:

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.
The changes resulting from the above amendment are in the process of being assessed by the Group
to determine their applicability and potential effect on the financial statements of the Group and the
Bank.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 85
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (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 not yet effective (continued)
The following amendments have also been issued, and the Group determined that they will not have a
material effect on its financial statements:

Amendments to IAS 7 – Statements of Cash Flows and IFRS 7 – Financial Instruments Disclosures:
Supplier Finance Arrangements (effective for financial periods beginning on or after 1 January
2024).

Amendments to IFRS 16 Leases – Lease Liability in a Sale and Leaseback (effective for financial
periods beginning on or after 1 January 2024).

Amendments to IAS 21 – The Effects of Change in Foreign Exchange Rates - lack of
exchangeability (effective for financial periods beginning on or after 1 January 2025).
2.3 SUMMARY OF MATERIAL 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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 86
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
2.3 SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
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.
Share incentive plan
During the year under review and the preceding year, 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
share based payments, 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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 87
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
2.3 SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Financial assets and liabilities
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)
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 .
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 88
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
2.3 SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Financial assets and liabilities (continued)
Financial assets (continued)
Solely payment of principal and interest (SPPI) (continued)
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.
Interest income from debt 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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 89
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
2.3 SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Financial assets and liabilities (continued)
Financial assets (continued)
Debt instruments (continued)
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. Any movements in OCI are presented in the financial instruments at FVTOCI
revaluation reserve (Note 38). 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.
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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 90
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
2.3 SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Financial assets and liabilities (continued)
Financial assets (continued)
Impairment of financial assets (continued)
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.
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. 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.
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
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 91
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
2.3 SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Financial assets and liabilities (continued)
Financial assets (continued)
Modification of loans (continued)
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.
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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 92
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
2.3 SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Derivative financial instruments
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 guarantees are given to banks, financial institutions and others on behalf of customers to
secure loans, overdrafts and other banking facilities.
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 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.
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
Ordinary shares issued by the company are classified as equity instruments.
Share premium reserve account represents the excess price for issued shares above their nominal
value. The reserve cannot be used for dividend distribution.
Property and equipment
The Group and the Bank account for subsequent measurement of land and buildings under the
revaluation model.
Any movements in OCI that arise from revaluation of property and equipment are presented within the
land and buildings revaluation reserve (Note 38).
Depreciation on property and equipment 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:
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 93
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
2.3 SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Property and equipment (continued)
%
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. 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.
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. The amortisation period and the
amortisation method for an intangible asset is reviewed at least at each financial year end.
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.
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’’.
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.
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 94
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
2.3 SUMMARY OF MATERIAL 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.
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 also 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.
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 as a lessee
The Group has elected to apply the recognition exemptions for low value assets and to recognise the
lease payments as an expense on a straight-line basis over the lease term.
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 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’.
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 position. T he 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.
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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 95
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
2.3 SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Fair value measurement (continued)
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 and 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.
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 2023, the Group directly held 9.91% (2022: 9.07%) interest in APS Income Fund, and
2.90% (2022: 2.90%) interest in APS 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 continues to account for the investment in APS Income Fund and APS Ethical
Fund as associates (Note 25).
Accounting for investments in which the Group controls less than 50%
During 2022, the Group lost control over the APS Global Equity Fund through a dilution in its
investment. As of 31 December 2023, the Group directly held 39.45% (2022: 43.51%) (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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 96
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. MATERIAL ACCOUNTING POLICIES (CONTINUED)
2.3 SUMMARY OF MATERIAL ACCOUNTING POLICIES (continued)
Significant accounting judgements, estimates and assumptions (continued)
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. The last valuation performed by an independent valuation
specialist was as at end of December 2021. During the year under review and the preceding year, no
valuations took place given that the properties did not gain a material increase in value as a result of
the upward trajectory in fair value since the last valuation date. 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. The last valuation performed by an independent valuation specialist was as at
end of December 2021. The valuation specialist determines the most appropriate methodology
(market/income approach) depending on the nature of the property (Note 27). During the year under
review and the preceding year no valuations took place given that the properties’ carrying amount and
fair value do not differ materially.
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 47.2 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 (Note 11).
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 97
NOTES TO THE FINANCIAL STATEMENTS (continued)
3. INTEREST AND SIMILAR INCOME
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
On loans and advances to banks
5,197
396
5,197
396
On loans and advances to customers
93,467
73,101
93,467
73,101
98,664
73,497
98,664
73,497
On debt securities:
Measured at amortised cost
4,232
3,061
4,232
3,061
Amortisation on premiums and discounts on debt
securities measured at amortised cost
(335)
(763)
(335)
(763)
Measured at FVTPL
1,521
1,420
-
-
Measured at FVTOCI
2,686
4,163
2,686
4,163
Amortisation on premiums and discounts on
other debt securities
(1,084)
(1,519)
(1,084)
(1,519)
7,020
6,362
5,499
4,942
105,684
79,859
104,163
78,439
4. INTEREST EXPENSE
The Group / The Bank
2023
2022
€000
€000
On amounts owed to banks
4,633
1,268
On amounts owed to customers
25,185
11,591
On lease liabilities
101
119
On debt securities in issue
2,177
1,788
32,096
14,766
5. NET FEE AND COMMISSION INCOME
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
On loans and advances and other general
banking activities
5,764
5,141
5,764
5,141
On insurance, investments and similar activities
3,925
3,247
2,955
2,329
Other activities
1,131
727
1,131
727
10
,8
2
0
9,115
9,850
8,197
Fee and commission expense
(2,515)
(2,253)
(2,505)
(2,253)
8
,3
0
5
6,862
7,345
5,944
6. DIVIDEND INCOME
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
From equity shares held in local and foreign entities
and collective investment schemes
-
131
1,252
1,477
APS BANK PLC
_________________________________________________________________________________________
NOTES TO THE FINANCIAL STATEMENTS (continued)
7. NET GAINS ON FOREIGN EXCHANGE
The Group The Bank
2023 2022
2023 2022
€000 €000
€000 €000
Net unrealised/realised gains on foreign exchange
154 1,300
701 860
8. NET GAINS/(LOSSES) ON FINANCIAL INSTRUMENTS
The Group The Bank
2023
2022
2023
2022
€000 €000
€000 €000
Realised gains on disposal of financial assets at
amortised cost
-
984
-
984
Realised gains/(losses) on disposal of financial
assets at FVTOCI
1,036
(317)
1,037
1,076
Unrealised net fair value movements on financial
assets at FVTPL
3,826
(3,680)
-
-
Fair value losses on financial assets at FVTPL
(1,714) (6,266)
- -
3,148 (10,263)
1,037 1,076
3,148 (9,279)
1,037 2,060
During 2022, 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 had not changed as a result of the
disposals.
9. EMPLOYEE COMPENSATION AND BENEFITS
The Group
The Bank
2023
2022
2023 2022
€000
€000
€000 €000
Wages and salaries (short-term):
-
key management personnel other than Directors
5,640
5,474
5,640
5,474
- other staff
20,086 17,296
20,086 17,296
- wages recharged to subsidiary at cost - -
(684) (586)
Social security contributions
1,493 1,316
1,493 1,316
Share based payments
191 147
191 147
Other staff costs
1,215
1,863
1,215
1,863
28,625 26,096
27,941 25,510
The average number of persons employed during the year was as follows:
The Group
The Bank
2023 2022
2023 2022
Senior Management
35
35
35
35
Managerial
180 152
180 152
Senior officers and officers
366 352
366 352
Others 8
9 8 9
589 548
589 548
APS Bank plc 98
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 99
NOTES TO THE FINANCIAL STATEMENTS (continued)
9. EMPLOYEE COMPENSATION AND BENEFITS (continued)
Executive Share Incentive Plan Awards
As at 31 December 2023, the Group’s share incentive plan award had two tranches with outstanding share
awards. Under tranche 1, a total of 637,800 share awards were granted with a grant date of 12 August 2022.
In the second tranche, the Group granted 713,200 share awards with a grant date of 17 August 2023.
The tables below summarize outstanding share awards at the end of the year with the respective vesting
period:
Grant Year Vesting Date 2023
2022
2022
30 June 2023
-
318,900
-
318,900
2022
30 June 2024
155,700
159,450
2023
30 June 2024
356,600
-
512,300
159,450
2022
30 June 2025
155,700
159,450
2023
30 June 2025
178,300
-
334,000
159,450
2023
30 June 2026
178,300
-
178,300
-
Total outstanding share awards 1,024,600
637,800
Share-based payment awards granted on 12 August 2022, had a staged 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.
Similar to the share-based payment awards granted in 2022, another tranche was granted on 17 August
2023, with a staged vesting period of three years, ending June 2026. The estimated fair value of each share
award granted is of €0.62 cents and was measured by applying the Black-Scholes valuation model. The
model components inputs were the share price at grant date of €0.62 cents, no strike price, compounded
risk-free interest rate of 3.9%, annualized volatility rate of 24.0% and a contractual life of 3 years. After the
vesting period, share awards are allotted to eligible employees for no consideration. Accordingly, all
movements in the number of options, as well as options outstanding at the end of the reporting period, had
an exercise price of nil.
Both plans have no vesting conditions attached 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. During the year under review 7,500 share awards were forfeited due to termination of
employment of an eligible employee.
At year-end, the total expense arising from these share incentive plan awards amounted to €191K (2022:
€147K) and the weighted average remaining contractual life 1.17 years. Furthermore, 50% of the first share
incentive plan award amounting to 318,900 were vested and allotted during the financial year. During the
year ended 2022, no shares were vested and allotted, thus all awards granted remained non-vested.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 100
NOTES TO THE FINANCIAL STATEMENTS (continued)
9. EMPLOYEE COMPENSATION AND BENEFITS (continued)
Executive Share Incentive Plan Awards (continued)
A summary of share incentive awards granted is being set out below:
The Group/ The Bank
2023
2022
€000
€000
As at 1 January
637,800
-
Granted
713,200
637,800
Vested
(318,900)
-
Forfeited
(7,500)
-
As at 31 December
1,024,600
637,800
10. OTHER ADMINISTRATIVE EXPENSES
The Group
The Bank
2023
2022
2023
2022
€000
€000
€000
€000
Remuneration payable to the statutory auditors for:
-
the audit of financial statements
189
179
173
165
- tax advisory services
7
7
5
5
- other non-audit services
50
65
48
61
Directors’ emoluments
433
418
433
418
Insurance
522
430
521
426
Professional fees
1,890
1,778
1,779
1,684
Regulatory fees
3,554
3,464
3,548
3,458
Repairs and maintenance
5,429
4,822
5,386
4,782
Telecommunications
897
740
881
726
Office operating expenses
3,464
2,454
3,410
2,406
Other administrative expenses
2,069
1,7
83
1,745
1,446
18,504
16,140
17,929
15,577
Additional disclosures on Directors’ emoluments are made on pages 59 to 60 of the Remuneration Report. The
above administrative expenses are inclusive of the applicable non-recoverable VAT under the Maltese
legislation.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 101
NOTES TO THE FINANCIAL STATEMENTS (continued)
11. NET (IMPAIRMENT LOSSES)/REVERSAL OF IMPAIRMENT LOSSES
The Group / The Bank
2023
2022
€000
€000
Charge for the year:
- collective impairment
(1,584)
(773)
- individual impairment
(6,741)
(1,216)
- bad debts written off
(606)
(191)
(8,931)
(2,180)
Reversal of write-downs:
- collective impairment
1,239
1,101
- individual impairment
4,195
1,333
5,434
2,434
Net (impairment losses)/reversal of impairment losses (3,497)
254
The Group / The Bank
2023
2022
€000
€000
Cash and balances with Central Bank of Malta
- Stage 1
-
10
Loans and advances to banks
- Stage 1
24
(44)
Loans and advances to customers:
- Stage 1
(370)
(54)
- Stage 2
(32)
282
- Stage 3
94
(74)
(308)
154
Syndicated loans:
- Stage 1
2,526
278
- Stage 2
93
(64)
- Stage 3
(5,356)
-
(2,737)
214
Debt securities at amortised cost:
- Stage 1
44
(141)
- Stage 2
(40)
-
4
(141)
Debt securities at FVTOCI:
- Stage 1
(280)
72
- Stage 2
331
(11)
- Stage 3
(331)
-
(280)
61
Fair value loss on equity and other non-fixed
income instruments
(200)
-
Net (impairment losses)/reversal of impairment losses (3,497)
254
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 102
NOTES TO THE FINANCIAL STATEMENTS (continued)
12. INCOME TAX EXPENSE
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
Current income tax
10,510
9,413
10,441
9,293
Deferred income tax
(843)
480
(843)
480
Income tax expense
9,667
9,893
9,598
9,773
A reconciliation between tax expense and the product of accounting profit multiplied by the applicable
tax rate in Malta of 35% (2022: 35%) for the years ended 31 December 2023 and 2022 is as follows:
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
Profit before tax
30,241
15,660
27,805
28,929
Theoretical tax expense at 35%
10,584
5,481
9,731
10,125
Tax effect of:
- Non-taxable sale of investments
(1,146)
4,254
(362)
(510)
- Income taxed at lower rates of tax
(438)
(517)
(438)
(517)
- Depreciation not recovered by way
of capital allowance
338
169
338
169
-
Other
disallowed expenses
580
715
58
0
715
- Other differences
(251)
(209)
(251)
(209)
Income tax expense
9,667
9,893
9,598
9,773
13. EARNINGS PER SHARE
The Group The Bank
2023
2022
2023
2022
cents per
share
cents per
share
cents per
share
cents per
share
Basic earnings per share
5.2
2.5
4.8
5.9
The basic earnings per share was calculated on profit attributable to shareholders of the Group; €19.8
million (2022: €8.0 million) and profit attributable to the Bank €18.2 million (2022: €19.2 million) divided
by the weighted average number of ordinary shares outstanding during the year amounting to 377.8
million (2022: 324.9 million).
The Group
The Bank
2023
2022
2023
2022
cents per
share
cents per
share
cents per
share
cents per
share
Diluted earnings per share
5.
2
2.5
4.8
5
.
9
The diluted earnings per share was calculated on profit attributable to shareholders of the Group; €19.8
million (2022: €8.0 million) and profit attributable to the Bank €18.2 million (2022: €19.2 million) 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 378.8 million (2022: 325.5 million).
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 103
NOTES TO THE FINANCIAL STATEMENTS (continued)
14. DIVIDENDS
The Bank
2023
2022
€000
€000
Dividends paid on ordinary shares:
Final gross of income tax for 2022:
2.68 €cents per share (2021: 1.85 €cents per share)
9,846
4,615
Final net of income tax for 2022:
1.74 €cents per share (2021: 1.20 €cents per share)
6,400
3,000
Interim gross of income tax for 2023:
0.86 €cents per share (2022: 0.75 €cents per share)
3,231
2,769
Interim net of income tax for 2023:
0.56 €cents per share (2022: 0.50 €cents per share)
2,100
1,800
Following the publication of the interim results for 2022, the Group paid an interim gross dividend
amounting to €2.8 million (net dividend of €1.8 million) payable through the issuance of new ordinary
shares (Note 37).
Following the year end results for 2022, the Group paid a final dividend of €9.8 million (net dividend of
€6.4 million). Equity holders were given the option of a scrip dividend and share capital was accordingly
increased by €2.5 million and share premium by €3.2 million. Following the publication of the interim
results for 2023, the Group paid an interim gross dividend amounting to €3.2 million (net dividend of €2.1
million) with the option of a scrip dividend. Share capital was further increased by €0.2 million and share
premium by €0.2 million (Note 37).
During the year Group subsidiaries paid dividends amounting to €1,193,000 (2022: €1,457,000) to their
shareholders, including the Bank.
Details of the recommended final dividend for 2023 can be found on page 48 in the Directors’ report.
15. CASH AND BALANCES WITH CENTRAL BANK OF MALTA
The Group / The Bank
2023
2022
€000
€000
Cash in hand (Note 43)
13,027
13,499
Balances with Central Bank of Malta
(excluding reserve deposit) (Note 43)
91,448
50,011
Reserve deposit with Central Bank of Malta
26,598
22,379
Gross cash and bank balances 131,073
85,889
Less: allowance for impairment losses
(2)
(2)
Net cash and bank balances 131,071
85,887
Reserve deposits with Central Bank of Malta are mandatory and are not available for use in the Group’s
day-to-day operations. During the current and the prior year, the Bank has been compliant with the
reserve deposit requirement.
Included in balances with Central Bank of Malta is an amount of €2,506,000 (2022: same) pledged in
favour of the MFSA’s Depositors’ Compensation Scheme.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 104
NOTES TO THE FINANCIAL STATEMENTS (continued)
16. LOANS AND ADVANCES TO BANKS
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
Repayable on call and at short notice (Note 43)
54,050
72,945
53,502
71,098
Over one year
500
-
500
-
Gross loans and advances to banks (i) 54,550
72,945
54,002
71,098
Less: allowance for impairment losses (ii)
(51)
(75)
(51)
(75)
Net loans and advances to banks 54,499
72,870
53,951
71,023
(i)
Gross loans and advances to customers analysed by currency
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
- Euro
28,797
38,846
28,249
36,999
- Other
25,753
34,099
25,753
34,099
54,550
72,945
54,002
71,098
(ii)
Impairment allowance for loans and advances to banks
The Group / The Bank
202
3
202
2
€000
€000
At 1 January
75
31
(Reversal)/charge for the year:
(24)
44
At 31 December
51
75
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
2023
2022
€000
€000
Fixed income instruments and collective investment schemes
46,484
41,046
Analysed by currency:
- Euro
27,379
22,522
- Other
19,105
18,524
46,484
41,046
Listing Status:
- Listed on Malta Stock Exchange
1,624
2,023
- Listed elsewhere
44,860
39,023
46,484
41,046
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 105
NOTES TO THE FINANCIAL STATEMENTS (continued)
17. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)
The Group
2023
2022
€000
€000
Carrying amount
At 1 January
41,046
61,846
Disposals
(42,804)
98,742
Acquisitions
46,678
(99,655)
Movement in fair value/foreign exchange
1,564
(9,038)
Derecognition of subsidiary
-
(10,849)
At 31 December
46,484
41,046
18. NON-CURRENT ASSETS HELD FOR SALE
The Group / The Bank
202
3
20
22
€000
€000
As at 1 January
1,733
-
Property reclassified from investment properties (Note 26)
-
1,733
Improvements to property
5
-
1,738
1,733
During 2022 the Group has put for sale one of its properties previously recognised as investment property
which 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 it is
highly probable that the sale will take place within 12 months, the property has kept its classification as non-
current asset held for sale.
19. SYNDICATED LOANS
(i)
Gross syndicated loans analysed by currency
The Group / The Bank
2023
2022
€000
€000
- Euro
135,127
93,897
- Other
52,559
42,089
187,686
135,986
The Group / The Bank
2023
2022
€000
€000
Repayable within one year
40,375
44,401
Over one year
147,311
91,585
Gross syndicated loans (i)
187,68
6
135,986
Less: allowance for impairment losses (ii)
(3,514)
(776)
Net syndicated loans
184,172
135,210
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 106
NOTES TO THE FINANCIAL STATEMENTS (continued)
19. SYNDICATED LOANS (continued)
(ii)
Impairment allowance for syndicated loans
The Group / The Bank
2023
2022
€000
€000
At 1 January
776
990
- Collective
64
(214)
- Individual
2,674
-
At 31 December
3,514
776
Concentration of syndicated loans
The following table shows the risk concentration by industry for syndicated loans, gross of provisions:
The Group / The Bank
2023
2022
€000
€000
Agriculture
12,095
4,757
Manufacturing
71,131
48,368
Financial intermediation
48,478
43,236
Real estate, renting and business
25,949
21,000
Health and social work
15,533
18,625
Other industries
14,500
-
Gross syndicated loans 187,686
135,986
20. LOANS AND ADVANCES TO CUSTOMERS
(i)
Gross loans and advances to customers analysed by currency
The Group / The Bank
2023
2022
€000
€000
- Euro
2,680,302
2,235,635
- Other
32,611
8,041
2,712,913
2,243,676
The Group / The Bank
2023
2022
€000
€000
Repayable on call and at short notice
113,990
80,512
Term loans and advances
2,598,923
2,163,164
Gross loans and advances to customers (i)
2,712,913
2,243,676
Less: allowance for impairment losses (ii)
(18,684)
(18,982)
Net loans and advances to customers
2,694,229
2,224,694
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 107
NOTES TO THE FINANCIAL STATEMENTS (continued)
20. LOANS AND ADVANCES TO CUSTOMERS (continued)
(ii)
Impairment allowance for loans and advances to customers
The Group / The Bank
2023
2022
€000
€000
At 1 January
18,982
19,327
Charge/(reversal) for the year:
- Collective
402
(228)
- Individual
(700)
(117)
At 31 December
18,684
18,982
Concentration of loans and advances to customers
The following table shows the risk concentration by industry for loans and advances to customers, gross of
provisions:
The Group / The Bank
2023
2022
€000
€000
Fishing
36,582
6,001
Manufacturing
29,177
22,523
Construction
107,636
92,041
Wholesale and retail trade
58,590
50,722
Hotels and restaurants, excluding related construction activities
126,227
130,139
Transport, storage and communication
65,938
38,187
Financial intermediation
127,129
76,885
Real estate, renting and business
209,566
180,984
Professional, Scientific and technical
27,415
13,191
Administrative and Support services
14,231
7,769
Health and social work
12,043
12,354
Households and individuals
1,875,759
1,581,739
Other industries
22,620
31,141
2,712,913
2,243,676
- Collective impairment losses
1,703
1,301
- Individual impairment losses
16,981
17,681
18,684
18,982
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 108
NOTES TO THE FINANCIAL STATEMENTS (continued)
21. DERIVATIVE FINANCIAL INSTRUMENTS
The Group / The Bank
2023
2022
€000
€000
Derivative assets, designated as at fair value
through profit or loss, not designated as hedges
536
738
Derivative liabilities, designated as at fair value
through profit or loss, not designated as hedges
536
738
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.
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
2023 2023 2023
2022 2022 2022
€000 €000 €000
€000 €000 €000
Over the counter derivatives:
Equity/commodity-index warrants
purchased
31,600 536 -
31,600 738 -
Equity/commodity-index warrants
written
(31,600) - 536
(31,600)
-
738
- 536 536
- 738 738
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
2023
2022
€000
€000
At amortised cost
326,723
317,877
Fair value through other comprehensive income
115,508
141,927
Gross other debt and fixed income instruments (i) 442,231
459,804
Less: allowance for impairment losses (ii)
(199)
(203)
Net other debt and fixed income instruments 442,032
459,601
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 109
NOTES TO THE FINANCIAL STATEMENTS (continued)
22. OTHER DEBT AND FIXED INCOME INSTRUMENTS (continued)
(i)
Gross other debt and fixed income instruments
The Group / The Bank
2023
2022
At amortised cost
€000
€000
Issued by public bodies:
- Local government
43,275
43,419
- Foreign government
215,302
218,095
258,577
261,514
Issued by other issuers:
- Foreign other
68,146
56,363
Total 326,723
317,877
The Group / The Bank
2023
2022
Fair value through other comprehensive income
€000
€000
Issued by public bodies:
- Local government
46,166
63,798
- Foreign government
51,889
56,837
98,055
120,635
Issued by other issuers:
- Foreign banks
9,859
5,562
-
Foreign other
7,550
15,687
- Local other
44
43
17,453
21,292
Total 115,508
141,927
Total gross other debt and fixed income instruments 442,231
459,804
Analysed by currency:
- Euro
409,055
423,327
- Other
33,176
36,477
442,231
459,804
Unamortised premiums included within the gross other debt and
fixed income instrument
4,280
6,651
The Group / The Bank
2023
2022
€000
€000
Listing status:
- Listed on Malta Stock Exchange
89,485
107,261
- Listed elsewhere
352,510
352,243
- Unlisted
236
300
442,231
459,804
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 110
NOTES TO THE FINANCIAL STATEMENTS (continued)
22. OTHER DEBT AND FIXED INCOME INSTRUMENTS (continued)
Carrying amount– Gross of impairment allowances The Group / The Bank
2023
2022
€000
€000
At amortised cost
At 1 January
317,877
101,000
Redemptions and disposals
(5,064)
(5,003)
Acquisitions
14,193
222,644
Amortisation
(328)
(764)
Exchange adjustments
45
-
At 31 December
326,723
317,877
(ii)
Impairment allowance for debt and other fixed income instruments
The Group / The Bank
2023
2022
€000
€000
At 1 January
203
62
Collective (reversal)/charge for the year
(4)
141
At 31 December
199
203
The balance on impairment allowance for other debt and fixed income instruments as at end of December
2023 and 2022 is all in respect of collective impairment losses.
Eligible debt instruments with a nominal value of €202,600,000 (2022: €225,800,000) 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 (2022: the same) have been
pledged in favour of the MFSA’s Depositors’ Compensation Scheme.
Carrying amount – Gross of impairment allowances The Group / The Bank
2023
2022
€000
€000
Fair value through other comprehensive income
At 1 January
141,927
227,103
Redemptions and disposals
(37,587)
(67,209)
Acquisitions
5,730
4,117
Amortisation
(1,188)
(1,596)
Increase/(d
ecrease
)
in fair value
4,173
(23,635)
Exchange adjustments
2,453
3,147
At 31 December
115,508
141,927
Total 442,231
459,804
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 111
NOTES TO THE FINANCIAL STATEMENTS (continued)
23. EQUITY AND OTHER NON-FIXED INCOME INSTRUMENTS
The Group / The Bank
2023
2022
€000
€000
Equity and other non-fixed income instruments at FVTOCI
7,160
303
Less: Fair value loss on equity and other non-fixed income instruments
(200)
-
6,960 303
Analysed by currency:
- Euro
7,090
228
- Other
70
75
7,1
60
30
3
Listing status:
- Listed on Malta Stock Exchange
6,862
303
- Unlisted
298
-
7,160
303
The Group/The Bank
2023
2022
€000
€000
Carrying amount
At 1 January
303
307
Acquisitions
5,718
-
Fair value movement
1,13
9
(4)
At 31 December
7,160
303
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
2023 (2022: nil).
24. INVESTMENT IN SUBSIDIARIES
The Bank 2023
2022
€000
€000
Cost
At 1 January
40,251
45,251
Derecognition of a subsidiary to an associate (Note 25)
-
(5,000)
At 31 December 40,251
40,251
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 112
NOTES TO THE FINANCIAL STATEMENTS (continued)
24. INVESTMENT IN SUBSIDIARIES (continued)
The investment in subsidiaries are made up as follows:
Principle
place of
business and
Equity interest
Cost
Name
2023
2022
2023
2022
country of
incorporation
Parent
%
holding
NCI %
holding
Parent
%
holding
NCI %
holding
€000
€000
APS Funds SICAV plc
Malta
99.99*
0.01
99.99*
0.01
1
1
1,199 founder shares at €1.00
(2022: 1,199 founder shares at €1.00)
APS Diversified Bond Fund Malta 70.14
29.86
74.99
25.01
40,000
40,000
40,000,000 investor shares at €1.00
(2022: 40,000,000 investor shares at
€1.00)
ReAPS Asset Management Limited
Malta
100.00 -
100.00
-
250
250
250,000 ordinary shares at €1.00
(2022: 250,000 ordinary shares at €1.00)
40,251
40,251
*The 99.99% equity interest pertains solely to the Bank’s share in the total founder shares of APS Funds SICAV plc.
APS Diversified Bond Fund is held at cost in the Bank’s separate financial statements. As at end of December 2022, the fund
was carried at an amount in excess than its fair value. This was mainly due to the interest rate environment as well as
inflationary pressures which negatively impacted the market prices. The shortfall was recovered in the investment’s market
values during 2023.
APS
Diversified
Bond Fund
APS
Diversified
Bond Fund
ReAPS Asset
Management
Limited
ReAPS Asset
Management
Limited
2023
2022
2023
2022
€000
€000
€000
€000
Current assets
47,610
43,370
2,055
2,604
Current liabilities
(99)
(93)
(436)
(1,107)
Net assets value 47,511
43,277
1,619
1,497
Income/(loss)
3,085
(7,565)
1,775
1,785
Expenses
(488)
(498)
(1,587)
(1,478)
Profit/(loss) before tax 2,597
(8,063)
188
307
Tax
(3)
(13)
(66)
(107)
Profit/(loss) after tax 2,594
(8,076)
122
200
Dividends paid to
non-controlling interest
227
232
-
-
Dividends paid to non-controlling interest of APS Global Equity Fund until the date the Group lost control in 2022 amounted to
€77K.
Following the loss of control of the APS Global Equity Fund in 2022, 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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 113
NOTES TO THE FINANCIAL STATEMENTS (continued)
25. INVESTMENT IN ASSOCIATES
The Bank’s investment in associates is as follows:
Equity interest
Cost
Principle place of
business and country
of incorporation
2023
2022
2023
2022
Name %
%
€000
€000
APS Income Fund
Malta
9.91
9.07
5,688
5,688
56,880 investor shares at
€100.01
(202
2
:
56,880
investor shares at
€100.01)
APS Ethical Fund Malta 2.90
2.90
1,000
1,000
1,000,000 investor shares at €1.00
(2022: 1,000,000 investor shares at €1.00)
APS Global Equity Fund
5,000,000 investor shares at €1.00
Malta
39.45
43.51
5,000
5,000
(2022: 5,000,000 investor shares at €1.00)
IVALIFE Insurance Limited Malta
25.00
25.00
2,875
2,375
2,875,000 ordinary shares at €1.00
(202
2
:
2,375
,000 ordinary shares at
€1.00)
14,563
14,063
APS Ethical Fund and APS Global Equity Fund are held at cost in the Bank’s separate financial statements. As at end of December
2022, the funds were carried at an amount in excess than their fair value. This was mainly due to the interest rate environment as well
as inflationary pressures which negatively impacted the market prices. The shortfall was recovered in the investments’ market values
during 2023.
The following table illustrates summarised financial information of the Group’s investment in associates:
APS Income Fund
APS Ethical Fund
APS Global Equity
Fund
IVALIFE Insurance
Limited
2023
2022
2023
2022
2023
2022
2023
2022
€000
€000
€000
€000
€000
€000
€000
€000
Current assets
63,050
69,785
36,239
34,353
14,219
11,177
14,736
4,525
Non
-
current assets
-
-
-
-
-
-
3,780
14,717
Current liabilities
(268)
(227)
(109)
(104)
(51)
(41)
(658)
(1,156)
Non
-
current liabilities
-
-
-
-
-
-
(11,385)
(11,818)
Net assets value (NAV)
62,782
69,558
36,130
34,249
14,168
11,136
6,473
6,268
Split into:
Accumulator shares
16,104
17,890
15,401
14,620
5,629
3,587
-
-
Distributor shares
46,678
51,668
20,729
19,629
8,539
7,549
-
-
62,782
69,558
36,130
34,249
14,168
11,136
-
-
Group’s share of:
-
Distributor shares’ NAV
6,222
6,311
1,048
992
5,589
4,845
-
-
-
NAV
-
-
-
-
-
-
1,618
1,567
Income
/(loss)
1,793
(6,679)
3,277
(5,990)
2,283
(1,842)
2,958
912
Expenses
(737)
(812)
(527)
(505)
(222)
(188)
(3,343)
(3,422)
P
rofit
/(loss)
before tax
1,056
(7,491)
2,750
(6,495)
2,061
(2,030)
(385)
(2,510)
Tax
(281)
(262)
(46)
(80)
(54)
(37)
-
879
P
rofit
/(loss)
after tax
775
(7,753)
2,704
(6,575)
2,007
(2,067)
(385)
(1,631)
Group’s share of profit
/
(loss) for the year
87
(705)
76
(389)
835
(711)
(96)
(408)
Dividends paid to
the Group
167
216
24
32
94
62
-
-
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 114
NOTES TO THE FINANCIAL STATEMENTS (continued)
25. INVESTMENT IN ASSOCIATES (continued)
The following table illustrates the movements in the carrying amount of the Group’s investment in associates:
2023
2022
€000
€000
Carrying amount of the investment at 1 January
13,667
19,803
Share of associate’s results, net of tax
902
(2,213)
Investment in associate
500
500
Dividend distribution
(285)
(310)
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 14,784
13,667
The associates had no contingent liabilities or capital commitments as at 31 December 2023 (2022: nil) .
APS Income Fund, APS Ethical Fund and APS Global Equity Fund
The APS Income Fund, APS Ethical Fund and APS Global Equity Fund are sub-funds of APS Funds SICAV plc. The SICAV
is recognised under the laws of Malta as a multi-fund public limited liability company with variable 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 2022, 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. During 2022, 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 2023, the Group held 9.9% (2022: 9.1%) and 2.9% (2022: 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 2023 (2022: same).
The fair value of the investments in APS Income Fund (Class D), APS Ethical Fund (Class B) and APS Global Equity Fund
(Class D) as at 31 December 2023 amounted to €12,858,828 (2022: €12,148,492). The fair value of the investment in IVALIFE
Insurance Limited as at 31 December 2023 amounted to €1,618,356 (2022: €1,566,806).
APS Global Equity Fund
The APS Global Equity Fund represents a Level 2 investment in the fair value hierarchy:
APS Global Equity
Fund
2023
2022
€
€
Accumulator
1.1747
0.9999
Distributor
1.1179
0.9690
APS Income Fund
The following are the quoted market prices of the APS Income Fund as at end of December 2023 and December 2022
and represent Level 1 investments in the fair value hierarchy:
APS Income Fund
2023
2022
€
€
Accumulator
174.3754
172.1394
Distributor
109.3922
110.9545
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 115
NOTES TO THE FINANCIAL STATEMENTS (continued)
25. INVESTMENT IN ASSOCIATES (continued)
APS Ethical Fund
The APS Ethical Fund represents a Level 2 investment in the fair value hierarchy:
APS Ethical Fund
2023
2022
€
€
Accumulator Class A
1.4258
1.31910
Distributor Class B
1.0471
0.9924
Accumulator Class C
1.4168
1.31170
Distributor Class D
1.0429
0.9890
IVALIFE Insurance Limited
During the financial year ended 31 December 2023, the Group made a further investment of €500,000 (Dec-
22: €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.
26. INVESTMENT PROPERTIES
The Group’s investment properties consist of commercial and residential properties in Malta. These properties
consist of a mix of vacant offices and repossessed properties. As at 31 December 2023 and 2022 the fair values
of investment properties held by the Group were as follows:
The Group / The Bank
2023
2022
€000
€000
As at 1 January
6,593
6,053
Reclassification from property and equipment to investment
property, net of depreciation
-
2,100
Improvements to property
121
59
Fair value movement
-
114
Reclassification from investment property to non-current
assets held for sale (Note 18)
-
(1,733)
As at 31 December
6,714
6,593
The Group accounts for its investment properties at fair value in line with IAS 40. Gains or losses arising from
changes in the fair value of the immovable properties are included in the statements of profit or loss in the
period in which it arises.
During the year under review the Group did not repossess or sell any investment properties. During year ended
2022, the Group reclassified one of its investment properties to non-current assets held for sale. The fair value
of the property was 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
The Group leased out one of the investment properties to third parties.
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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 116
NOTES TO THE FINANCIAL STATEMENTS (continued)
26. INVESTMENT PROPERTIES (continued)
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 (2022: €177K) 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.
The lease is classified as an operating lease under IFRS 16.
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
2023
2022
€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
1,370
1,549
2,255
2,434
Fair value movements are recognised as “Other operating income” in the statements of profit or loss.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 117
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 2022 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 202
2
27,943
11,751
23,022
62,716
Additions 1,272 772 399 2,443
Disposals - - (21) (21)
Reclassifications 831 - (831) -
At 31 December 2023
30,046 12,523 22,569 65,138
Depreciation
At 1 January 2022 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
Charge for the year
233 983 655 1,871
Disposals
- - (21) (21)
At 31 December 2023 968 9,569 14,777 25,314
Net Book Value
At 31 December 2023
29,078
2,954
7,792
39,824
At 31 December 2022 27,208 3,165 8,879 39,252
At 1 January 2022
29,159 2,944 8,895 40,998
2023
2022
€000
€000
Future capital expenditure:
-
Authorised by the Directors and
contracted
2,164
757
- Authorised by the Directors but not yet contracted
3,637
2,475
5,801
3,232
The carrying amount of land and buildings at 31 December 2023 that would have been recognised had these
been carried under the cost model is €12,391K (2022: €10,218K) for both the Group and the Bank.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 118
NOTES TO THE FINANCIAL STATEMENTS (continued)
28. INTANGIBLE ASSETS
The Group The Bank
Computer Computer
software software
€000 €000
Cost
At 1 January 2022 27,062 27,058
Additions 5,063 5,063
At 31 December 2022 32,125 32,121
Additions 5,994 5,994
At 31 December 2023 38,119 38,115
Amortisation
At 1 January 2022 15,316 15,312
Charge for the year 2,264 2,264
At 31 December 2022
17,580 17,576
Charge for the year 3,016 3,016
At 31 December 2023 20,596 20,592
Net book value
At 31 December 2023 17,523 17,523
At 31 December 2022 14,545 14,545
At 1 January 2022 11,746 11,746
The Group/The Bank
2023
2022
€000
€000
Future capital expenditure:
- Authorised by the Directors and contracted
360
7,835
- Authorised by the Directors but not yet contracted
1,242
6,661
1,602
14,496
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 119
NOTES TO THE FINANCIAL STATEMENTS (continued)
29. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
The Group leases properties, warehouses, office spaces, vehicles and spaces for the utilisation of parking.
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.
The statements of financial position show the following amounts relating to leases:
The Group/The Bank
2023
2022
€000
€000
Right-of-use-assets
Property
4,144
4,717
Equipment
11
15
Vehicles
231
308
4,386
5,040
Lease liabilities
Current
602
630
Non-Current
3,983
4,616
4,585
5,246
There were no new lease additions during the year ended 31 December 2023. Total increase in the right -
of-use assets amounted to €0.3K and was in relation to lease payments that are linked to the RPI index.
Additions to the right-of-use assets during the year ended 31 December 2022 were €866K. Derecognised
leases for which the term has expired in 2023 amounted to €40K (2022: €260K). Total cash outflows in
relation to leases during the year amounted to €829K (2022: €921K).
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 120
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
2023
202
€000
€000
Depreciation charge on right
-
of
-
use assets
Property
533
544
Equipment
4
4
Vehicles
77
70
614
618
Other expenses recognised in profit or loss
Interest expense (included in interest
expense
)
101
119
Expenses relating to leases of low
-
value assets
(included in other administrative expenses)
111
23
212
142
Variable Lease payments
During the year ended 31 December 2022, 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. There were no new lease agreements subject to variable lease payments during the year ended
31 December 2023.
Leases not yet commenced to which the lessee is committed
As at end of December 2023, there were no leases not yet commenced, to which the Group is committed (2022: 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
202
3
202
2
€000
€000
At 1 January
5,246
5,348
Additions
-
933
Disposals
(40)
(326)
Interest expense
101
119
Lease liability payments
(722)
(828)
At 31 December 4,585
5,246
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 121
NOTES TO THE FINANCIAL STATEMENTS (continued)
30. OTHER RECEIVABLES
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
Accrued income
9,232
6,576
9,232
6,576
Prepayments and other receivables
3,581
1,440
2,595
600
Amounts due from subsidiaries
-
-
353
1,026
12,813
8,016
12,180
8,202
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
2023
2022
€000
€000
Fair value movements on investment securities
63
709
Fair value movements on investment properties
(178)
(178)
Impairment allowance for loans and advances
to banks and customers
7,857
6,942
Impairment allowance for investment securities
13
7
Excess of capital allowances over depreciation
(2,085)
(2,009)
Deferred tax assets on temporary differences on lease liabilities
1,605
1,836
Deferred tax liabilities on temporary differences on right-of-use
assets
(1,535)
(1,764)
Revaluation of land and buildings
(2,586)
(2,586)
3,154
2,957
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
€645K was debited (2022: €1,186K credited) directly in OCI. For details on other movements refer
to Note 12.
32. AMOUNTS OWED TO BANKS
The Group / The Bank
2023
2022
€000
€000
With agreed maturity dates or periods
of notice, by remaining maturity:
- 3 months or less but not repayable
on demand (Note 43)
76,038
44,191
- over 3 months but less than 1 year
-
6,196
- over 1 year
4,647
-
80,685
50,387
Analysed by currency:
- Euro
4,661
6,210
- Foreign
76,024
44,177
80,685
50,387
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 122
NOTES TO THE FINANCIAL STATEMENTS (continued)
33. AMOUNTS OWED TO CUSTOMERS
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
Term deposits
1,242,051
902,252
1,242,051
902,252
Repayable on demand
1,895,788
1,808,381
1,897,163
1,810,552
3,137,839
2,710,633
3,139,214
2,712,804
Analysed by currency:
- Euro
3,067,002
2,631,933
3,068,377
2,634,104
- Other
70,837
78,700
70,837
78,700
3,137,839
2,710,633
3,139,214
2,712,804
34. ACCRUALS
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
Accrued interest payable
12,309
4,471
12,309
4,471
Other accruals
10,533
9,150
10,478
9,090
22,842
13,621
22,787
13,561
35. DEBT SECURITIES IN ISSUE
The Group / The Bank
2023
2022
€000
€000
At 1 January
54,642
54,597
New debt securities issued
50,000
-
Unamortised expenses
(522)
-
Amortisation of issuance costs
53
45
At 31 December 104,173
54,642
During 2020, the Bank issued unsecured subordinated bonds which are 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 earliest redemption date is 19
November 2025. The bonds are classified as a financial liability at amortised cost and are
denominated in Euro.
Nominal
amount
Coupon rate
(p.a.)
Issue date
Maturity date
Status
2020 bond
issue
EUR 55m
3.25%
19 November
2020
19 November
2030
Unsecured
Subordinated
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 123
NOTES TO THE FINANCIAL STATEMENTS (continued)
35. DEBT SECURITIES IN ISSUE (continued)
During 2023, the Bank launched an unsecured subordinated bond programme of up to €150,000,000. 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 earliest redemption date is 1 December 2028. The bonds
are classified as a financial liability at amortised cost and are denominated in Euro.
Nominal
amount
Coupon
rate (p.a.)
Issue
date
Maturity
date
Status
2023 bond issue
EUR 50m
5.80%
1 December
2023
1 December
2033
Unsecured
Subordinated
36. OTHER LIABILITIES
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
Bills payable
14,897
9,679
14,897
9,679
Other liabilities
5,488
3,442
5,442
3,401
20,385
13,121
20,339
13,080
37. SHARE CAPITAL AND SHARE PREMIUM
The Group / The Bank
2023
2022
€000
€000
Authorised
500,000,000 ordinary shares at €0.25 each
(2022: 500,000,000 ordinary shares of €0.25 each)
125,000
125,000
Issued and fully paid
377,803,569 ordinary shares of €0.25 each
(2022: 366,917,168 ordinary shares of €0.25 each)
94,451
91,729
The Group / The Bank
Share
Share
Share
Share
Number of
Number of
Capital
Capital
Premium
Premium
Shares
shares
202
3
202
2
202
3
202
2
202
3
202
2
€000
€000
€000
€000
‘000
‘000
At 1 January
91,729
62,429
48,410
10,453
366,917
249,716
Issue of new shares
-
27,500
-
37,957
-
110,000
Scrip dividend (
N
ote 1
4
)
2,643
1,800
3,382
-
10,568
7,201
Executive Share incentive
plan (Note 9)
79
-
115
-
319
-
At 31 December 94,451
91,729
51,907
48,410
377,804
366,917
Further information on the Bank’s Shareholders is disclosed in the Directors’ Report.
The share premium is not available for distribution.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 124
NOTES TO THE FINANCIAL STATEMENTS (continued)
38. 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
202
3
202
2
€000
€000
Revaluation reserve on:
Financial instruments at FVTOCI
(7,161)
(12,085)
Land and buildings
15,066
15,066
7,905
2,981
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
2023
2022
2023
2022
€000
€000
€000
€000
At 1 January 15,066
15,066
(12,085)
10,268
Revaluation adjustment, gross of tax
-
-
5,579
(23,539)
Deferred tax thereon
-
-
(655)
1,186
At 31 December 15,066
15,066
(7,161)
(12,085)
The revaluation reserve is not available for distribution.
39. RETAINED EARNINGS
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 for the year ended 2022 were inclusive of €2,904K set aside for General Banking Risk
under Banking Rule BR/09/2013. This amount has been reversed as at end of December 2023 given that
this requirement was repealed.
40. NON-CONTROLLING INTEREST
The following is a reconciliation of the Non-controlling interest:
APS Diversified
Bond Fund
APS Global
Equity Fund
Total
2023
2022
2023
2022
2023
2022
€000
€000
€000
€000
€000
€000
At 1 January
10,982
12,837
-
5,795
10,982
18,632
Creation of shares
3,463
1,028
-
707
3,463
1,735
Redemption of shares
(629)
(631)
-
-
(629)
(631)
Dividends paid
(227)
(232)
-
(77)
(227)
(309)
Profit
/(loss)
after tax
775
(2,020)
-
(216)
775
(2,236)
Derecognition of
subsidiary
-
-
-
(6,209)
-
(6,209)
At 31 December
14,364
10,982
-
-
14,364
10,982
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 125
NOTES TO THE FINANCIAL STATEMENTS (continued)
41. CONTINGENT LIABILITIES
The Group / The Bank
2023
2022
€000
€000
Guarantees
28,940
20,610
Other contingent liabilities
1,698
1,301
30,638
21,911
In the ordinary course of business, the Bank gives financial guarantees, consisting of letters of credit and
guarantees. Outflows in respect of these guarantees are possible, given that, whether or not a payment will
be required is not within the Bank’s control. Such guarantees are collateralised either by cash or by property.
The commitments primarily have one year expiry date to be withdrawn.
42. COMMITMENTS
The Group / The Bank
2023
2022
€000
€000
Undrawn formal standby facilities, credit
facilities and other commitments to lend
1,099,547
878,787
Capital commitments, if any, are disclosed in Notes 27 and 28.
43. CASH AND CASH EQUIVALENTS
The Group The Bank
2023
2022
2023
2022
€000
€000
€000
€000
Cash in hand (Note 15)
13,027
13,499
13,027
13,499
Balances with Central Bank of
Malta (excluding reserve deposit)
(Note 15)
91,448
50,011
91,448
50,011
Loans and advances to banks
(repayable within 3 months)
(Note 16)
54,050
72,945
53,502
71,098
Amounts owed to banks (3 months or less)
(Note 32)
(76,038)
(44,191)
(76,038)
(44,191)
Cash and cash equivalents included
in the statements of cash flows 82,487
92,264
81,939
90,417
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 126
NOTES TO THE FINANCIAL STATEMENTS (continued)
44. 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 services:
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 €9,203K (2022: €2,367K)
and Liquidity Management and Structured Loans amounting to €11,844K (2022: €3,981K). 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 €21,047K (2022: €6,348K).
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 127
NOTES TO THE FINANCIAL STATEMENTS (continued)
44. OPERATING SEGMENTS (continued)
Retail
Commercial
Investment
Services
Liquidity Management
and Structured Loans
Total Reportable
Segments
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
The Group
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
Interest and similar
income from
external customers
46,247
40,588
33,857
24,500
-
-
22,925
12,266
103,029
77,354
Interest expense
(25,659)
(12,114)
(676)
(603)
-
-
(5,686)
(1,960)
(32,021)
(14,677)
Intersegment
transactions
21,047
6,348
(9,203)
(2,367)
-
-
(11,844)
(3,981)
-
-
Net fee and
commission
income and other
income
1,043
1,362
3,924
3,273
2,466
1,790
1,447
1,892
8,880
8,317
Net
gains
/(losses)
on financial
instruments
-
-
-
-
-
-
3,148
(8,870)
3,148
(8,870)
Operating income
before net
impairments
42,678
36,184
27,902
24,803
2,466
1,790
9,990
(653)
83,036
62,124
Impairment
(losses)/gains
(305)
(110)
602
454
-
-
(3,189)
101
(2,892)
445
Net operating
income
42,373
36,074
28,504
25,257
2,466
1,790
6,801
(552)
80,144
62,569
Personnel
expenses
(4,477)
(3,806)
(1,728)
(1,487)
(2,361)
(2,128)
(582)
(516)
(9,148)
(7,937)
Other
administrative and
operating
expenses
(597)
(521)
(59)
(58)
(626)
(532)
(290)
(260)
(1,572)
(1,371)
Operating
expenses
(5,074)
(4,327)
(1,787)
(1,545)
(2,987)
(2,660)
(872)
(776)
(10,720)
(9,308)
Net operating
profit before
associates’ results
37,299
31,747
26,717
23,712
(521)
(870)
5,929
(1,328)
69,424
53,261
Share of results
from associates
-
-
-
-
-
-
902
(2,213)
902
(2,213)
Profit/(loss)
before tax as per
segments
37,299
31,747
26,717
23,712
(521)
(870)
6,831
(3,541)
70,326
51,048
Less:
Unallocated items
-
-
-
-
-
-
-
-
(40,085)
(35,388)
Profit/(loss)
before tax as per
statements of
profit or loss
37,299
31,747
26,717
23,712
(521)
(870)
6,831
(3,541)
30,241
15,660
Retail Commercial
Investment
Services
Liquidity Management and
Structured Loans
Total Reportable
Segments
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
Total assets as per
segments
1,826,826
1,523,605
867,404
701,089
-
-
880,537
809,322
3,574,767
3,034,016
Add: Unallocated
items
86,347
78,136
Total assets as per
statements of
financial position
3,661,114
3,112,152
Investment in
associates
-
-
-
-
-
-
14,784
13,667
14,784
13,667
Total liabilities as
per segments
2,964,831
2,522,220
173,008
188,413
-
-
185,394
105,767
3,323,233
2,816,400
Add: Unallocated
items
50,453
34,294
Total liabilities as
per statements of
financial position
3,373,686
2,850,694
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 128
NOTES TO THE FINANCIAL STATEMENTS (continued)
44. OPERATING SEGMENTS (continued)
2023
2022
€000
€000
Profit before tax
As per reportable segments
70,326
51,048
Unallocated items:
Interest receivable
2,581
2,413
Net fee and commission income and other income
(150)
124
Personnel expenses
(19,911)
(1
8,574
)
Professional fees
(1,707)
(1,559)
Repairs and maintenance
(5,386)
(4,740)
Telecommunications
(881)
(713)
Other administrative expenses
(8,525)
(7,371)
Depreciation and amortisation
(5,501)
(4,777)
Write-offs
(605)
(191)
As per statements of profit or loss 30,241
15,660
2023
2022
€000
€000
Total assets
As per reportable segments
3,574,767
3,034,016
Unallocated items:
Investment properties
6,714
6,593
Non-current assets held for sale
1,738
1,733
Property and equipment
39,824
39,252
Intangible assets
17,523
14,545
Right-of use assets
4,386
5,040
Deferred tax assets
3,154
2,957
Income tax
195
-
Other receivables
12,81
3
8,016
As per statements of financial position 3,661,114
3,112,152
2023
2022
€000
€000
Total liabilities
As per reportable segments
3,323,233
2,816,400
Unallocated items:
Current tax
2,641
2,306
Lease liabilities
4,585
5,246
Other liabilities
20,385
13,121
Accruals
22,842
13,621
As per statements of financial position 3,373,686
2,850,694
45. 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 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 Centris Business Gateway II,
Level 1D, Triq is-Salib tal-Imriehel, Central Business District, Birkirkara, CBD 3020.
Information on the Bank’s Shareholders is disclosed in the Directors’ Report.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 129
NOTES TO THE FINANCIAL STATEMENTS (continued)
45. 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-23
Dec-22
Dec-23
Dec-22
€000
€000
€000
€000
Interest and similar income:
Shareholders
2
15
2
15
Key management personnel
4
0
36
4
0
36
Entities of the same Group
227
244
227
244
Other related parties
33
58
33
58
Fee and commission income:
ReAPS Asset Management Limited
-
-
511
539
APS Income Fund
486
576
-
-
APS Ethical Fund
346
360
-
-
APS Global Equity Fund
128
110
-
-
IVALIFE Insurance Limited
49
37
-
-
Shareholders
205
211
-
-
Other related parties
142
147
-
-
Interest expense:
APS Income Fund
-
7
-
7
Shareholders
48
136
48
136
Key management personnel
16
15
16
15
Entities of the same Group
9
17
9
17
Other related parties
11
8
11
8
Personnel expenses:
Key management personnel
4,974
4,938
4,974
4,938
General administrative expenses:
Shareholders
86
221
86
221
The Group
The Bank
Dec-23
Dec-22
Dec-23
Dec-22
€000
€000
€000
€000
Amounts due
(to)/
from related parties
ReAPS Asset Management Limited
-
-
(1,022)
(1,145)
APS Income Fund
86
(738)
(29)
(870)
APS Ethical Fund
89
86
-
-
APS Global Equity Fund
35
28
-
-
IVALIFE Insurance Limited
15
15
-
-
Other related parties
42
40
-
-
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 130
NOTES TO THE FINANCIAL STATEMENTS (continued)
45. 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. (2022: same).
b) Outstanding balances with Directors
2023
2022
€000
€000
Loans and advances
903
762
Commitments
551
551
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
2023
2022
€000
€000
Loans and advances
8,154
7,919
Commitments
512
1,507
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
31.12.2023 2023
31.12.2022 2022
€000 €000
€000 €000
Amounts due from other related parties:
Shareholders and entities with common
directorship
8,124 230
7,954 252
Balances Interest
Balances Interest
as at expense
as at expense
31.12.2023 2023
31.12.2022 2022
€000 €000
€000 €000
Amounts due to other related parties:
Shareholders
6,577 48
12,436 136
Bank Directors
983 -
1,617 -
Other key management personnel
2,048 16
2,173 15
Other related parties
3,212 15
2,952 8
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 131
NOTES TO THE FINANCIAL STATEMENTS (continued)
45. 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 (2022: same). Also, included in Amounts owed to customers are term deposits of €5,051,274
(2022: €10,947,032), which bear interest at the prevailing Bank rates. Furthermore, the amounts due from
other related parties include secured facilities of €8,122,871 (2022: €7,953,687) and €919 (2022: Nil)
unsecured facilities.
For the year ended 31 December 2023, the Bank did not recognise a loss allowance on receivables from
related parties (2022: €3,030).
No guarantees were received by related parties as at end of December 2023 (2022: Nil). Special
guarantees given to related parties amount to €224,366 (2022: €121,121).
46. 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 2023
Property and Equipment (Note 27)
- Land and buildings - - 29,078 29,078
Investment properties (Note 26)
- Residential property - - 495 495
- Commercial property - - 6,219 6,219
Non-current assets held for sale (Note 18) - - 1,738 1,738
Derivative assets not designated as hedges (Note 21) - 536 - 536
Financial assets at FVTPL (Note 17)
- Fixed income instruments and collective investment
schemes
-
46,484
-
46,484
Financial assets at FVTOCI
- Other debt and fixed income instruments (Note 22) 114,985 - 523 115,508
- Equity and other non-fixed income instruments
(Note 23)
6,862
-
98
6,960
Total 121,847 47,020 38,151 207,018
Liabilities as at 31 December 2023
Derivative liabilities not designated as hedges (Note 21) - 536 - 536
Total - 536 - 536
APS BANK PLC
_________________________________________________________________________________________
NOTES TO THE FINANCIAL STATEMENTS (continued)
46. 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 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 141,927 41,784 35,837 219,548
Liabilities as at 31 December 2022
Derivative liabilities not designated as hedges (Note 21) - 738 - 738
Total - 738 - 738
Fair value measurement hierarchy
The Bank Level 1 Level 2 Level 3 Total
€000 €000 €000 €000
Assets as at 31 December 2023
Property and equipment (Note 27)
- Land and buildings - - 29,078 29,078
Investment properties (Note 26)
- Residential property - - 495 495
- Commercial property - - 6,219 6,219
Non-current assets held for sale (Note 18) - - 1,738 1,738
Derivative assets not designated as hedges (Note 21) - 536 - 536
Financial assets at FVTOCI
- Other debt and fixed income instruments (Note 22) 114,985 - 523 115,508
- Equity and other non-fixed income instruments
(Note 23)
6,862
-
98
6,960
Total 121,847 536 38,151 160,534
Liabilities as at 31 December 2023
Derivative liabilities not designated as hedges (Note 21) - 536 - 536
Total - 536 - 536
APS Bank plc 132
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 133
NOTES TO THE FINANCIAL STATEMENTS (continued)
46. 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 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
141,927 738 35,837 178,502
Total
Liabilities as at 31 December 2022
Derivative liabilities not designated as hedges (Note 21) - 738 - 738
Total - 738 - 738
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
The last valuation performed by an independent valuation specialist was as at end of December 2021. The
valuation specialist determines the most appropriate methodology (market or/and income approach)
depending on the nature of the property.
During the year under review and the preceding year, no valuations took place given that the property
prices maintained an upward trajectory. No valuation adjustments were recognised given that the fair value
movement was not material.
There were no fair value movements on investment properties during the year under review (2022: same)
except for one of the properties which was reclassified to non-current assets held for sale during 2022
(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 134
NOTES TO THE FINANCIAL STATEMENTS (continued)
46. 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 2023 (2022: nil) the Group has no restrictions on the realisation of
investment properties in Note 26.
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
2023
2022
2023 2022
€000
€000
€000
€000
At 1 January
495
495
6,098
5,558
Improvements
-
-
121
59
Reclassification from
property and equipment,
net of depreciation
-
-
-
2,100
Reclassification from
Investment properties to
non-current assets held for
sale
, net of
depreciation
-
-
-
(1,733)
Fair value movement
-
-
-
114
At 31 December 495
495
6,219
6,098
Non-current assets held for sale
During 2022, the Group reclassified one of its properties from investment property to non-current assets
held for sale. The property was still classified as non-current asset held for sale as at end of December
2023.
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
The last valuation performed by an independent valuation specialist was as at end of December 2021. The
valuation specialist determines the most appropriate methodology (market or/and income approach)
depending on the nature of the property.
For financial year ended December 2023 and December 2022, in line with the Bank’s revaluation policy, 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.
No valuations have taken place during the year under review. The properties are being used at their
highest and best use.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 135
NOTES TO THE FINANCIAL STATEMENTS (continued)
46. FAIR VALUES (continued)
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 €326.7 million (2022:
€317.9 million). Their market value amounted to €316.9 million (2022: €301.01 million) (Level 1), whilst their
nominal value amounted to €326.2 million (2022: €316.7 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 €184.2
million (2022: €135.2 million). Their market value amounted to €187.0 million (2022: €134.3 million) (Level
2), whilst their nominal value amounted to €174.7 million (2022: €135.7 million). For other details refer to
Note 19.
Amounts owed to banks and customers include deposit liabilities. Of this category of liability, 80% (2022:
87%) have contractual re-pricing within one year, whilst 20% (2022: 13%) 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 €653.4 million (2022: €367.8 million), fair value is €661.6 million (2022: €367.8 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 €104.2 million (2022: €54.6 million) at 31 December
2023. The market value, based on quoted prices in an active market (Level 1), amounted to €107.3
million at 31 December 2023 (2022: €52.1 million).
The reconciliation of Level 3 fair value measurements of financial instruments is disclosed below.
2023
2022
€000
€000
At 1 January
303
307
Fair value movement
(200)
-
Exchange rate movement
(5)
(4)
At 31 December 98
303
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 136
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT
47.1
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.
47.2 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
2023
2022
€000
€000
Loan commitments
1,099,547
878,787
Guarantees, acceptance and other financial facilities
30,638
21,911
1,130,185
900,698
The Group is also exposed to credit risk arising from investments in debt securities and other financial
instruments through its trading
13
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.
13
As at end December 2023, the Bank did not have a Trading Book
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 137
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 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
47.2.1.1 (‘Credit Risk Grading’).
47.2.1 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.
47.2.1.1 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 Central Credit 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.
Syndicated loans
Similar to debt securities, syndicated loans are rated using external rating agency credit grades. Again,
these credit grades are frequently reviewed and monitored for immediate update where necessary.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 138
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.1 Credit Risk Measurement (continued)
47.2.1.1 Credit Risk Grading (continued)
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
increases 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.
47.2.2 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 47.2.2.1 describes how the Group determines when a
SICR has occurred.
 If the financial instrument is credit-impaired, the financial instrument is then moved to 'Stage 3'.
Note 47.2.2.2 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
47.2.2.3 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 47.2.2.4 includes an explanation of how the Group has incorporated this
in its ECL models.
Further disclosure is also provided in Note 47.2.2.5 on how the Group determines appropriate groupings
when ECL is measured on a collective basis.
47.2.2.1 Significant increase in Credit Risk (SICR)
The following diagram summarises the impairment requirements under IFRS 9:
Change in credit quality since initial recognition
The key judgements and assumptions adopted by the Group in addressing the requirements of the standard
are discussed in the following notes.
Stage 1 Stage 2 Stage 3
Initial Recognition
Significant increase in
credit risk since initial
recognition
Credit-impaired assets
12-month ECL Lifetime ECL Lifetime ECL
APS BANK PLC
_________________________________________________________________________________________
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.2 ECL Measurement (continued)
47.2.2.1 Significant increase in Credit Risk (SICR) (continued)
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.
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.
APS Bank plc 139
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 140
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.2 ECL Measurement (continued)
47.2.2.1 Significant increase in Credit Risk (SICR) (continued)
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

Exposures are not generally transferred directly from 12-month ECL measurement (Stage 1)
to credit-impaired (Stage 3).
47.2.2.2 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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 141
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.2 ECL Measurement (continued)
47.2.2.2 Definition of Default and credit impaired (continued)
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.
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.
47.2.2.3 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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 142
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.2 ECL Measurement (continued)
47.2.2.3 Measuring ECL – Explanation of inputs, assumptions and estimation techniques
(continued)

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.
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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 143
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.2 ECL Measurement (continued)
47.2.2.4 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.
The following table illustrates the macro-economic indicators incorporated in the IFRS 9 model, for each
macro-economic scenario:
Scenarios
Macro-Economic Variables
2023
2022
Baseline
Upside Downside
Baseline
Upside Downside
Indicators
GDP
Growth
(%)
3.34
3.51
2.88
3.25
3.95
1.83
Inflation rates (%)
2.50 2.53 2.21
2.68 2.71 2.39
Unemployment rates (%)
3.51 3.49 3.57
3.96 3.94 4.02
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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 144
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.2 ECL Measurement (continued)
47.2.2.5 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.
47.2.3 Credit Risk Exposure
47.2.3.1 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
2023
2022
2023
2022
€000
€000
€000
€000
Cash and balances with Central Bank of
Malta (excluding
cash in hand) (net)
118,044
72,388
118,044
72,388
Loans and advances to banks (net)
54,499
72,870
53,951
71,023
Financial assets at FVTPL
46,484
41,046
-
-
Syndicated loans (net)
184,172
135,210
184,172
135,210
Loans
and advances to customers (net)
1,907,513
1,632,294
1,907,513
1,632,294
Loans and advances to corporate entities (net)
786,716
592,400
786,716
592,400
Derivative financial instruments
536
738
536
738
Other debt and fixed income instruments (net)
442,032
459,601
442,032
459,601
Other receivables
12,813
8,014
12,180
8,202
As at 31 December
3,552,809
3,014,561
3,505,144
2,971,856
Credit risk exposures relating to off-balance sheet items
are as follows:
Financial guarantees and other
contingent liabilities
30,638
21,911
30,638
21,911
Commitments
1,099,547
878,787
1,099,547
878,787
As at 31 December
1,130,185
900,698
1,130,185
900,698
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 145
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.3 Credit Risk Exposure (continued)
47.2.3.2 Concentration of risk
The Group
Concentrations of risk
Financial
Institutions
Manufact
-uring
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) 118,046 - - - - - - 118,046
Loans and advances to banks
(gross) 54,550 - - - - - - 54,550
Financial assets at FVTPL
10,808
1,198
-
-
21,442
13,036
-
46,484
Syndicated loans (gross)
33,768
71,131
18,000
4,000
-
60,786
-
187,685
Loans and advances to
customers (gross) 1,735 29,177 304,338 58,590 39,115 407,099 1,872,859 2,712,913
Derivative financial instruments
536
-
-
-
-
-
-
536
Other debt and fixed income
instruments (gross) 66,799 7,512 785 8,155 356,401 2,579 - 442,231
Other receivables
-
-
-
-
-
12,812
-
12,812
As at 31 December 2023
286,24
2
109,018
323,123
70,745
416,95
8
496,31
2
1,872,859
3,575,257
Financial guarantees and other
contingent liabilities 748 998 8,470 1,634 - 14,486 4,302 30,638
Commitments
63,623
21,267
260,627
32,639
4,808
70,905
645,678
1,099,547
As at 31
December 2023
64,371
22,265
269,097
34,273
4,808
85,391
649,980
1,130,185
The Group
Concentrations of risk
Financial
Institutions
Manufact
-uring
Real
Estate
Wholesale
and
Retail
Trade
Public
Sector
Other
Industries
Individuals
Total
Cash and balances with
Central Bank of Malta
(excluding cash in hand)
72,390
-
-
-
-
-
-
72,390
Loans and advances to banks 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 2022
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 2022
17,188
17,599
165,526
26,620
1,920
138,236
533,609
900,698
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 146
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.3 Credit Risk Exposure (continued)
47.2.3.2 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) 118,046 - - - - - - 118,046
Loans and advances to banks
(gross) 54,002 - - - - - - 54,002
Syndicated loans (gross)
33,768
71,131
18,000
4,000
-
60,78
6
-
187,68
5
Loans and advances to
customers (gross) 1,735 29,177 304,338 58,590 39,115 407,099 1,872,859 2,712,913
Derivative financial instruments
536
-
-
-
-
-
-
536
Other debt and fixed income
instruments (gross) 66,799 7,512 785 8,155 356,401 2,579 - 442,231
Other receivables
-
-
-
-
-
12,179
-
12,179
As at 31
December 20
23
274,88
6
107,820
323,123
70,745
395,516
482,643
1,872,859
3,527,592
Financial guarantees and other
contingent liabilities 748 998 8,470 1,634 - 14,486 4,302 30,638
Commitments
63,623
21,267
260,627
32,639
4,808
70,905
645,678
1,099,547
As at 31 December 20
23
64,371
22,265
269,097
34,273
4,808
85,391
649,980
1,130,185
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 202
2
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 202
2
17,188
17,599
165,526
26,620
1,920
138,236
533,609
900,698
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 147
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.3 Credit Risk Exposure (continued)
47.2.3.3 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,
87.26% (2022: 88.22%) 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 2023, no new properties have been repossessed (same in 2022).
The Group also makes use of master netting agreements with counter parties. As at 31 December 2023
and 31 December 2022 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 LTV
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 €1,657 million as at 31 December 2023 (2022 - €1,354
million).
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.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 148
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.3 Credit Risk Exposure (continued)
47.2.3.3 Collateral and other credit enhancements (continued)
The Group / The Bank
31 December 2023
Gross
Exposure
Impairment
allowance
Carrying
amount
Fair value of
collateral held
Credit-impaired assets €000 €000 €000 €000
Loans to individuals
:
-
Overdraft 2,042 1,635 407 324
-
Term Loans
2,293
538
1,755
1,659
-
Home Loans 8,620 2,333 6,287 6,210
Loans to corporate
entities
:
- Large corporate
entities
10,000
2,682
7,318
-
- Small and medium-
sized enterprise
(SMEs)
32,910
7,297
25,613
26,661
- Other
9,570
5,179
4,391
3,860
Total credit-impaired
assets
65,435
19,664
45,771
38,714
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
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 2023
2022
€000
€000
Lower than 50%
1,896
2,174
50 to 60%
1,519
1,280
60 to 70%
693
974
70 to 80%
1,638
2,445
80 to 90%
2,244
1,310
90 to 100%
-
551
Higher than 100%
630
658
Total 8,620
9,392
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 149
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.3 Credit Risk Exposure (continued)
47.2.3.4 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 2023 €000 €000 €000 €000
Loans and advances to customers
at amortised cost
Grade 1-4: Low risk 2,597,610 - - 2,597,610
Grades 5-6: Watch & substandard - 59,869 - 59,869
Grade 7: Doubtful - - 28,121 28,121
Grade 8: Classified - - 27,313 27,313
Loss allowance (1,101) (602) (16,981) (18,684)
Carrying amount 2,596,509 59,267 38,453 2,694,229
Debt securities – At amortised cost
Investment grade 326,487 - - 326,487
Sub-investment grade 36 200 - 236
Loss allowance (159) (40) - (199)
Carrying amount 326,364 160 - 326,524
Debt securities
-
FVTOCI
Investment grade 114,941 - - 114,941
Sub-investment grade 43 - 524 567
Carrying amount 114,984 - 524 115,508
Syndicated loans
Grade 1-4: Low risk 26,805 - - 26,805
Investment grade 80,100 - - 80,100
Sub-investment grade 57,748 13,032 10,000 80,780
Loss allowance (613) (218) (2,682) (3,513)
Carrying amount 164,040 12,814 7,318 184,172
Cash and balances with Central
Bank of Malta
Investment grade 131,073 - - 131,073
Loss allowance (2) - - (2)
Carrying amount 131,071 - - 131,071
Loans and advances to banks
Investment grade 54,002 - - 54,002
Loss allowance (51) - - (51)
Carrying amount 53,951 - - 53,951
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 150
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.3 Credit Risk Exposure (continued)
47.2.3.4 Credit quality (continued)
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 317,674 - - 317,674
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 151
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.3 Credit Risk Exposure (continued)
47.2.3.4 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
202
3
202
3
202
2
202
2
€000
€000
€000
€000
Performing
Stage 1
2,597,610
21,782
2,052,270
37,306
Stage 2
59,869
405
110,982
58,657
Non-Performing
Stage 3
55,434
23,266
80,424
30,985
Total gross/forborne exposures
2,712,913
45,453
2,243,676
126,948
47.2.4 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 152
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.4 Loss Allowance (continued)
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 2023 731
570
17,681
18,982
Movements in loss allowance
Transfers:
Transfer to/(from) stage 1 (7)
-
-
(7)
Transfer to/(from) stage 2 -
52
-
52
Transfer to/(from) stage 3 -
-
505
505
Write-offs -
-
(605)
(605)
New financial assets originated or purchased
467
86
484
1,037
Financial assets derecognised during the period
(54)
(28)
(1,515)
(1,597)
(Decreases)/increases due to change in credit risk
(36)
(79)
432
317
Loss allowance as at 31 December 2023
1,101
601
16,982
18,684
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 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 2022
731
570
17,681
18,982
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 153
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.4 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 2023 203
-
-
203
Movements in loss allowance
Transfers:
Transfer to stage 1 (40)
-
-
(40)
Transfer from stage 2 -
40
-
40
New financial assets originated or purchased
10
-
-
10
Financial assets derecognised during the period
(1)
-
-
(1)
Decreases due to change in credit risk (13)
-
-
(13)
Loss allowance as at 31 December 2023
159
40
-
199
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 2022 203
-
-
203
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 2023 143
9
-
152
Movements in loss allowance
Transfers:
Transfer from stage 2 -
(331)
-
(331)
Transfer to stage 3 -
-
331
331
New financial assets originated or purchased 1
-
-
1
Financial assets derecognised during the period
(9)
-
-
(9)
Increases due to change in credit risk 288
-
-
288
Loss allowance as at 31 December 2023
423
(322)
331
432
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 154
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.4 Loss Allowance (continued)
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 2022 215
-
-
215
Movements in loss allowance
Transfers:
Transfer to stage 1 (9)
-
-
(9)
Transfer from 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 2022
143
9
-
152
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 2023 571
205
-
776
Movements in loss allowance
Transfers:
Transfer from stage 1 (2,749)
-
-
(2,749)
Transfer to stage 2 -
67
-
67
Transfer to stage 3 -
-
2,682
2,682
New financial assets originated or purchased
160
-
-
160
Financial assets derecognised during the period
(51)
(143)
-
(194)
Increases/(decreases) due to change in credit risk 115
(17)
2,674
2,772
Loss allowance as at 31 December 2023 (1,954)
112
5,356
3,514
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 155
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.4 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 2022
571
205
-
776
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 2023 75
-
-
75
New financial assets originated or purchased
12
-
-
12
Decreases due to change in credit risk
(36)
-
-
(36)
Loss allowance as at 31 December 2023
51
-
-
51
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 156
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.4 Loss Allowance (continued)
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 2023 2 - -
2
Loss allowance as at 31 December 2023
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 2022
12
-
-
12
Decreases due to change in credit risk
(10)
-
-
(10)
Loss allowance as at 31 December 2022
2
-
-
2
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 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 2023
2,052,268
110,982
80,426
2,243,676
Movements in loss allowance
Transfers:
Transfer to stage 1 62,783
-
-
62,783
Transfer from stage 2 -
(47,515)
-
(47,515)
Transfer from stage 3 -
-
(21,524)
(21,524)
Write-offs -
-
(606)
(606)
New financial assets originated or purchased
608,359
6,232
1,285
615,876
Financial assets derecognised during the period
(151,571)
(6,123)
(4,872)
(162,566)
Increases/(decreases) due to changes in credit risk 25,771
(3,707)
725
22,789
Gross carrying amount as at 31 December 2023
2,597,610
59,869
55,434
2,712,913
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 157
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.4 Loss Allowance (continued)
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 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 due to changes in credit risk (124,943)
(9,817)
(3,434)
(138,194)
Gross carrying amount as at 31 December 2022
2,052,270
110,982
80,424
2,243,676
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 2023
317,877
-
-
317,877
Movement in loss allowance
Transfers:
Transfer from stage 1 (200)
-
-
(200)
Transfer to stage 2 -
200
-
200
New financial assets originated or purchased
14,250
-
-
14,250
Financial assets derecognised during the period
(4,999)
-
-
(4,999)
Decreases due to change in credit risk (405)
-
-
(405)
Gross carrying amount as at 31 December 2023
326,523
200
-
326,723
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 158
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.4 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
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
Syndicated loans
12-
month
ECL
Lifetime ECL
Lifetime ECL
(but not
POCI)
Total
€000
€000
€000
€000
Gross carrying amount as at 1 January 2023
103,196
32,790
-
135,986
Movements in loss allowance
Transfers:
Transfer from stage 1 (8,365)
-
-
(8,365)
Transfer from stage 2 -
(1,635)
-
(1,635)
Transfer to stage 3 -
-
10,000
10,000
New financial assets originated or purchased
103,055
-
-
103,055
Financial assets derecognised during the period
(28,027)
(22,518)
-
(50,545)
(Decreases)/increases due to change in credit risk
(908)
97
-
(811)
Gross carrying amount as at 31 December 2023
168,951
8,734
10,000
187,685
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 2022
103,196
32,790
-
135,986
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 159
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.4 Loss Allowance (continued)
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 2023
85,888
-
-
85,888
New financial assets originated or purchased
45,185
-
-
45,185
Gross carrying amount as at 31 December 2023
131,073
-
-
131,073
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
Decreases due to change in credit risk
(121,846)
-
-
(121,846)
Gross carrying amount as at 31 December 2022
85,889
-
-
85,889
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 2023
71,097
-
-
71,097
New financial assets originated or purchased
500
-
-
500
Financial assets derecognised during the period
(763)
-
-
(763)
Decreases due to change in credit risk (16,832)
-
-
(16,832)
Gross carrying amount as at 31 December 2023
54,002
-
-
54,002
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 2022 30,862
-
-
30,862
New financial assets originated or purchased
9,666
-
-
9,666
Financial assets derecognised during the period
(20)
-
-
(20)
Increase due to change in credit risk 30,590
-
-
30,590
Gross carrying amount as at 31 December 2022
71,098
-
-
71,098
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 160
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.2 Credit risk (continued)
47.2.5 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.
47.2.6 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.
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 reflects
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 .
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 161
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.3 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 Bank’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.
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 2023
Assets
Cash and balances with Central
Bank of Malta
131,071 - - - - 131,071
Loans and advances to banks
54,499 - - - - 54,499
Financial assets at FVTPL 217 - 17,035 23,997 5,235 46,484
Syndicated loans (net) 6,005 34,317 143,850 - - 184,172
Loans and advances to
customers (net) 22,082 154,165 183,527 2,334,455 - 2,694,229
Derivative financial instruments
- - - 536 - 536
Other debt and fixed income
instruments (net) 8,058 58,334 281,348 94,292 - 442,032
Equity and other non-fixed
income instruments - - - - 6,960 6,960
Investment in associates
- - - - 14,784 14,784
Other assets
12,81
2
-
-
-
7
3
,
535
86
,
347
234,744 246,816 625,760 2,453,280 100,514 3,661,114
Liabilities and equity
Derivative financial instruments -
-
-
536
-
536
Amounts owed to banks
76,038
4,647
-
-
-
80,685
Amounts owed to customers 2,132,257
360,748
644,234
600
-
3,137,839
Lease liabilities -
602
2,241
1,742
-
4,585
Debt securities in issue -
-
-
104,173
-
104,173
Other liabilities 8,603
985
2,533
2,829
30,918
45,868
Equity -
-
-
-
287,428
287,428
2,216,898
366,982
649,008
109,880
318,346
3,661,114
Gap
(1,982,154) (120,166) (23,248) 2,343,400 (217,832) -
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 162
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.3 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 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 163
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.3 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 2023
Assets
Cash and balances with
Central Bank of Malta
131,071 - - - - 131,071
Loans and advances to banks 53,951 - - - - 53,951
Syndicated loans (net) 6,005 34,317 143,850 - - 184,172
Loans and advances to
customers (net) 22,082 154,165 183,527 2,334,455 - 2,694,229
Derivative financial
instruments - - - 536 - 536
Other debt and fixed income
instruments (net) 8,058 58,334 281,348 94,292 - 442,032
Equity and other non-fixed
income instruments - - - - 6,960 6,960
Investment in subsidiaries - - - - 40,251 40,251
Investment in associates - - - - 14,563 14,563
Other assets 11,825 - - - 73,694 85,519
232,992 246,816 608,725 2,429,283 135,468 3,653,284
Liabilities and equity
Derivative financial
instruments - - - 536 - 536
Amounts owed to banks 76,038 4,647 - - - 80,685
Amounts owed to customers 2,133,632 360,748 644,234 600 - 3,139,214
Lease liabilities - 602 2,241 1,742 - 4,585
Debt securities in issue - - - 104,173 - 104,173
Other liabilities 8,603 985 2,533 2,829 30,817 45,767
Equity
- - - - 278,324 278,324
2,218,273 366,982 649,008 109,880 309,141 3,653,284
Gap (1,985,281) (120,166) (40,283) 2,319,403 (173,673) -
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 164
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.3 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 165
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.3 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 2023
and 31 December 2022 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 202
3
Liabilities
Derivative financial
instruments
-
-
-
536
-
536
Amounts owed to
banks
76,
168
4,64
9
-
-
-
80,
817
Amounts owed to
customers
2,136,647
363,966
649,540
601
-
3,150,754
Lease liabilities - 692 2,601 1,859 - 5,152
Debt securities in issue 67 2,177 8,707 109,694 - 120,645
Other liabilities 8,603 985 2,533 2,829 30,918 45,868
2,221,485
372,46
9
663,381
115,519
30,918
3
,403,772
Loan Commitments
1,099,547
Contingent Liabilities
30,638
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 202
2
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
Loan Commitments
878,787
Contingent Liabilities
21,911
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 166
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.3 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
2023 and 31 December 2022 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 2023
Liabilities
Derivative financial
instruments
- - - 536 - 536
Amounts owed to
banks
76,038 4,647 - - - 80,685
Amounts owed to
customers
2,136,647 363,966 649,540 601 - 3,150,754
Lease liabilities - 692 2,601 1,859 - 5,152
Debt securities in issue 67 2,177 8,707 109,694 - 120,645
Other liabilities
8,603
985
2,533
2,829
30,81
7
45,76
7
2,221,355 372,467 663,381 115,519 30,817 3,403,539
Loan Commitments
1,099,547
Contingent Liabilities 30,637
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
1,944,758 399,602 365,462 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
Loan Commitments
878,787
Contingent Liabilities 21,911
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 167
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.3 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 2023
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
- - 61,773 7,410
Debt securities
204,837 198,624 236,671 233,075
Other assets
2,506 - 3,147,496 -
Assets of the reporting institutions
207,343
198,624
3,44
5
,
940
240,485
The Bank
Assets as at 31 December 2022
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
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.
47.4 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 Bank
2023
2022
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 208,184 207,343
231,734 230,794
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 168
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.4 Market risk (continued)
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, derivative financial liabilities comprise customer deposits on which the return varies with the performance
of reference equity and commodity indices. The Bank manages the resulting market risks through purchased
warrants that are presented as derivative financial assets.
47.4.1 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
14
as
published on the Bank’s website.
The following tables show the impact on the Bank’s economic value under different interest rate scenarios. The
Bank’s interest rate risk management framework follows relevant EBA Guidelines. These Guidelines mandate six
shock scenarios that set out the change in interest rates under which the impact on the economic value of equity
is assessed.
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 2023
Average for the period
13,853
(13,396)
13,935
(
14,264
)
(
8,019
)
10,535
Maximum for the period
27,526 (6,051) 17,209 (11,954) (4,409) 12,394
Minimum for the period
7,560 (28,918) 11,717 (17,695) (10,156) 8,928
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
The potential impact on the Group’s economic value is based on the most unfavourable scenario which, as at 31
December 2023, was brought through the ‘parallel down’ scenario. The scenarios are reviewed periodically by
Management to ensure that these capture all plausible scenarios. As at 31 December 2023,
Management added
a scenario where long term rates drop below short term rate assuming that the market starts to price in
rate cuts, resulting in an ‘inverted steepener’ yield curve. When compared to the other scenarios, this is
the most realistic curve to the current market. This scenario would result in an impact of +€4.96 million on
the Group’s economic value.
14
The Pillar 3 Disclosures Report is not subject to external audit, with the exception of any disclosures that are
equivalent to those made in the Financial Statements.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 169
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.4 Market risk (continued)
47.4.1 Interest rate risk (continued)
The following tables show the impact on the Bank`s net interest income under two different interest rate
scenarios as outlined in the respective EBA Guidelines.
Parallel
shock up
Parallel shock
down
€000 €000
Sensitivity of projected net
interest rate income to
interest rates movements
Financial year ended 31
December 2023
Average for the period
1,961 (1,961)
Maximum for the period
2,167 (1,758)
Minimum for the period
1,758 (2,167)
Parallel
shock up
Parallel shock
down
€000 €000
Sensitivity of projected net
interest rate income to
interest rates movements
Financial year ended 31
December 2023
Average for the period
1,489 (547)
Maximum for the period
1,702 702
Minimum for the period
1,349 (1,550)
The below tables set out interest sensitive assets and liabilities categorised by repricing dates.
The Group
At 31 December 2023
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
91,44
8
-
-
-
-
Loans and advances to banks 54,499 - - - -
Loans and advances to customers
2,693,892
93
194
50
-
Syndicated loans
18
4
,
172
-
-
-
-
Derivative financial instruments
536
Financial assets at
FVTP
L
4,597
21,103
12,095
8,471
21
8
Debt securities
6
6,392
281,
349
87,
770
6,521
-
3,09
5
,
000
303,081
100,059
15,042
218
Liabilities
Amounts owed to banks 80,685 - - - -
Amounts owed to customers
1,752,612
1,384,612
615
-
-
Derivative financial instruments - 536 - - -
Debt securities in issue
-
49,
49
3
54,680
-
-
1,833,297
1,434,641
55,295
-
-
Net interest rate risk GAP
at 31 December 2023
1,261,703
(1,131,560)
44,764
15,042
218
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 170
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.4 Market risk (continued)
47.4.1 Interest rate risk (continued)
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
Derivative financial instruments 23 59 656
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 -
2,013,719 625,085 332,233 12,368 763
Liabilities
Amounts owed to banks 50,387 - - - -
Amounts owed to customers
1,603,247 1,100,056 7,330 - -
Derivative financial instruments 23 59 656
Debt securities in issue - 54,642 - - -
1,653,657 1,154,757 7,986 - -
Net interest rate risk GAP
at 31 December 2022
360,062
(529,672)
324,247
12,368
763
The Bank
At 31 December 2023
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
91,448
-
-
-
-
Loans and advances to banks 53,951
-
-
-
-
Loans and advances to customers 2,693,892
93
194
50
-
Syndicated loans 184,172
-
-
-
-
Loans and advances to customers - 536 - - -
Debt securities 66,392
281,349 87,770
6,521
-
3,089,855
281,978
87,964
6,571
-
Liabilities
Amounts owed to banks 80,685
-
-
-
-
Amounts owed to customers 1,753,987
1,384,612
615
-
-
Derivative financial instruments
- 536 - - -
Debt securities in issue -
49,493 54,680
-
-
1,834,672
1,434,641
55,295
-
-
Net interest rate risk GAP
at 31 December 2023
1,255,183
(1,152,663)
32,669
6,571
-
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 171
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.4 Market risk (continued)
47.4.1 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
-
Derivative financial instruments 23 59 656 -
-
Debt securities
20,773 296,306 136,043 6,479
-
2,008,598 608,181 317,457 7,039 -
Liabilities
Amounts owed to banks
50,387 - - -
-
Amounts owed to customers
1,605,418 1,100,056 7,330 -
-
Derivative financial instruments 23 59 656
Debt securities in issue
- 54,642 - - -
1,655,828 1,154,757 7,986 - -
Net interest rate risk GAP at 31
December 2022 352,770 (546,576) 309,471 7,039 -
The carrying amount of assets and liabilities that carry a variable interest rate is €3.0 billion and €1.9 billion,
respectively (2022: €2.0 billion and €1.8 billion).
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 172
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.4 Market risk (continued)
47.4.2 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:
2023
USD GBP Other Total
€000 €000 €000 €000
Assets
20,148 27,077 23,994 71,219
Liabilities
20,143 27,067 23,883 71,093
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
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, 17, 19, 20,
22, 23, 32 and 33.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 173
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.5 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/15/2022 – Capital Buffers of Credit Institutions Authorised Under Banking Act 1994 requires
institutions to maintain capital buffers over and above the Pillar 1 requirements. During 2023 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 174
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.5 Capital management (continued)
The Bank
2023
2022
€000
€000
Total exposure (on and off-balance sheet) 3,780,199
3,212,972
Risk weighted amounts
:
Credit risk calculation - standardised approach 1,606,050
1,393,156
Operational risk - basic indicator approach 134,918
119,344
Foreign exchange risk 15
14
Total credit, operational and foreign exchange risk 1,740,983
1,512,514
CET 1/Tier 1 Capital 254,503
229,430
Tier 2 Capital 104,173
54,642
Total Own Funds 358,676
284,072
Capital Adequacy Ratio
Tier 1 Ratio 14.62%
15.17%
Total Capital Ratio 20.60%
18.78%
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 110,000,000 new shares via an Initial Public Offering (IPO) at the price of €0.62
per share. The shares qualify as Tier 1 capital, which ranks as Shareholders’ equity. In November 2023, the
Bank issued unsecured subordinated bonds of €50,000,000 represented by 500,000 bonds with a nominal
value of €100 each. The bond qualifies as Tier 2 capital.
In June 2023, the Bank vested 318,900 shares under the Executive Share Incentive Plan, at the allotment
price of €0.62 per share. The shares qualify 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 175
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.5 Capital management (continued)
The Bank 2023
2022
€000
€000
CET1 capital: instruments and reserves
Capital instruments and the related share premium accounts
146,358
140,140
Retained earnings
111,955
98,399
Accumulated other comprehensive income
7,905
2,981
Funds for general banking risk
-
2,904
Other reserves
293
147
266,511
244,571
CET1 capital: regulatory adjustments
Intangible assets
(11,501)
(14,545)
Regulatory adjustments due to the requirements for prudent valuation
pursuant to Article 4 of Delegated Regulation (EU) 2016/101
(215)
(197)
Regulatory adjustments due to insufficient coverage for non-performing
exposures
(292)
(399)
(12,008)
(15,141)
CET 1/Tier 1 Capital
254,503
229,430
Tier 2 capital
Debt securities in issue
104,173
54,642
Total Capital 358,676
284,072
Total Risk Weighted Assets 1,740,983
1,512,514
Capital Ratios
CET1/Tier 1Capital Ratio 14.62%
15.17%
Total Capital Ratio 20.60%
18.78%
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)
16,689
8,054
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 176
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.5 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 APS Bank plc
Unique identifier 213800A1O379I6DMCU10
213800A1O379I6DMCU10 213800A1O379I6DMCU10
Governing law(s) of the instrument Maltese law Maltese law Maltese law
Regulatory treatment
Transitional CRR rules CET 1 Tier 2 Tier 2
Post-transitional CRR rules CET 1 Tier 2 Tier 2
Eligible at
solo/(sub
-
)consolidated/solo&
(sub-)consolidated Solo & consolidated Solo & consolidated Solo & consolidated
Instrument type Ordinary shares Debt securities in issue Debt securities in issue
Amount recognised in regulatory capital
94,451
55,000
5
0
,000
Nominal amount of instrument 94,451 55,000 50,000
Issue price N/A 55,000 50,000
Redemption price N/A 100 100
Accounting classification Shareholder’s equity Amortised cost Amortised cost
Original date of issuance 1 June 1970* 19 November 2020 13 November 2023
Perpetual or dated Perpetual Dated Dated
Original maturity date No 19 November 2030 13 November 2033
Issuer call subject to prior supervisory
approval No Yes
Yes
Optional call date, contingent call dates and
redemption amount No
19 November 2025 at
100
1
3
November 202
8
at
100
Subsequent call dates, if applicable No
19 November 2026,
19 November 2027,
19 November 2028,
19 November 2029
1
3
November 202
9
,
13 November 2030,
13 November 2031,
13 November 2032
Coupons / dividends
Fixed or floating dividend/coupon Floating Fixed Fixed
Coupon rate and any related index N/A 3.25%, no index 5.80%, no index
Existence of a dividend stopper No No No
Fully discretionary, partially discretionary or
mandatory (in terms of timing) Fully discretionary
Mandatory
Mandatory
Fully
discretionary, partially discretionary or
mandatory (in terms of amount) Fully discretionary
Mandatory
Mandatory
Existence of step up or other incentive to
redeem No No No
Noncumulative or cumulative Non-cumulative Non-cumulative Non-cumulative
Convertible or non-convertible Non-convertible Non-convertible Non-convertible
Write-down features No 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
Subordinated to
creditors, senior secured
and depositors
Non-compliant transitioned features No N/A N/A
*Various, latest date of capital injection was 13 June 2022. Furthermore, during 2023 a scrip dividend was distributed to shareholders.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 177
NOTES TO THE FINANCIAL STATEMENTS (continued)
47. RISK MANAGEMENT (continued)
47.5 Capital management (continued)
Full Reconciliation of Own Funds Items to Audited Financial Statements of the Bank as at 31 December
2023 is presented below:
Balance in
accordance with
IFRS
€000
Reconciling
items
€000
Balance in
accordance
with regulatory
scope
€000
Share capital (Note 37)
94,451 - 94,451
Debt securities in issue (Note 35)
104,173 - 104,173
Share premium (Note 37)
51,907 - 51,907
Revaluation reserve (Note 38)
7,905 - 7,905
Retained earnings (Note 39)
123,768 (11,813) 111,955
General reserve
293 - 293
Intangible assets (Note 28)
11,501 - 11,501
Prudent valuation adjustment
- (215) (215)
48. 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.
49. 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, Note 11, Note 22, Note 44,
Note 45 and Note 47.
50. SUBSEQUENT EVENTS
There are no subsequent events up to the date of approval of the consolidated financial statements.
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 178
FIVE-YEAR SUMMARIES - STATEMENTS OF PROFIT OR LOSS
The Group
2023
2022 2021 2020 2019
€000
€000 €000 €000 €000
Interest and similar income
105,684
79,859 69,135 62,280 58,021
Interest expense
(32,096)
(14,766) (13,773) (13,434) (13,379)
Net interest income 73,588
65,093 55,362 48,846 44,642
Other operating income/(loss)
11,878
(445) 7,781 6,298 12,039
Total operating income 85,466
64,648 63,143 55,144 56,681
Operating expenses
(52,630)
(47,029) (40,584) (33,551) (30,354)
Share of results of associate, net of tax
902
(2,213) 21 (258) 1,585
Net impairment (losses)/gains
(3,497)
254 1,488 (5,538) (1,074)
Profit before tax 30,241
15,660 24,068 15,797 26,838
Income tax expense
(9,667)
(9,893) (8,967) (5,707) (7,268)
Profit for the year 20,574
5,767 15,101 10,090 19,570
The Bank
2023
2022 2021 2020 2019
€000
€000 €000 €000 €000
Interest and similar income
104,163
78,439 67,640 61,140 56,674
Interest expense
(32,096)
(14,766) (13,773) (13,434) (13,379)
Net interest income 72,067
63,673 53,867 47,706 43,295
Other operating income
10,606
10,882 8,060 6,600 9,586
Total operating income 82,673
74,555 61,927 54,306 52,881
Operating expenses
(51,371)
(45,880) (39,678) (33,246) (30,163)
Net impairment (losses)/gains
(3,497)
254 1,488 (5,538) (1,074)
Profit before tax 27,805
28,929 23,737 15,522 21,644
Income tax expense
(
9
,
598
)
(9,773)
(8,696)
(5,589)
(7,182)
Profit for the year
1
8
,
207
19,156
15,041
9,933
14,462
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 179
THE GROUP’S FIVE-YEAR SUMMARY - STATEMENTS OF FINANCIAL POSITION
2023
2022 2021 2020 2019
€000
€000 €000 €000 €000
ASSETS
Cash, treasury bills and balances
with Central Bank of Malta
13,027
13,499 15,165 15,064 11,225
Balances with Central Bank of Malta
118,044
72,388 192,558 93,266 151,178
Cheques in course of collection
-
- 2,881 103 128
Loans and advances to banks
54,499
72,870 32,296 51,068 59,840
Financial assets at fair value through profit or loss
46,484
41,046 61,846 50,636 41,478
Non-current assets held for sale
1,738
1,733 - - -
Syndicated loans
184,172
135,210 134,262 113,152 125,953
Loans and advances to customers
2,694,229
2,224,694 1,932,044 1,689,003 1,458,144
Derivative financial instruments
536
738 552 499 721
Other debt and fixed income instruments
442,032
459,601 328,041 315,983 238,166
Equity and other non-fixed income instruments
6,960
303 307 303 308
Investment in associate
14,784
13,667 19,803 18,641 19,257
Investment properties
6,714
6,593 6,053 1,830 1,830
Property and equipment
39,824
39,252 40,998 46,180 43,851
Intangible assets
17,523
14,545 11,746 8,848 7,320
Right-of-use assets
4,386
5,040 5,051 5,235 2,592
Other receivables
12,813
8,016 9,152 8,619 6,478
Current tax assets
195
- - - -
Deferred tax assets
3,154
2,957 2,249 2,553 460
TOTAL ASSETS 3,661,114
3,112,152 2,795,004 2,420,983 2,168,929
LIABILITIES
Derivative financial instruments
536
738 552 499 721
Amounts owed to banks
80,685
50,387 57,208 9,304 24,512
Amounts owed to customers
3,137,839
2,710,633 2,431,757 2,123,446 1,928,971
Lease liabilities
4,585
5,246 5,348 5,365 2,629
Accruals
22,842
13,621 13,325 10,103 8,752
Debt securities in issue
104,173
54,642 54,597 54,558 -
Other liabilities
20,385
13,121 10,450 10,090 10,966
Current tax liabilities
2,641
2,306 945 1,399 463
TOTAL LIABILITIES 3,373,686
2,850,694 2,574,182 2,214,764 1,977,014
EQUITY
Share capital
94,451
91,729 62,429 62,255 62,255
Share premium
51,907
48,410 10,453 10,140 10,140
Revaluation reserve
7,905
2,981 25,334 32,260 30,706
Retained earnings
118,508
107,209 103,974 91,736 82,785
Other reserves
293
147 - - -
Non-controlling interest
14,364
10,982 18,632 9,828 6,029
TOTAL EQUITY 287,428
261,458 220,822 206,219 191,915
TOTAL LIABILITIES AND EQUITY 3,661,114
3,112,152 2,795,004 2,420,983 2,168,929
MEMORANDUM ITEMS
Contingent liabilities
30,638
21,911 25,356 23,128 22,855
Commitments
1,099,547
878,787 802,552 786,427 755,638
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 180
THE BANK’S FIVE-YEAR SUMMARY - STATEMENTS OF FINANCIAL POSITION
2023
2022 2021 2020 2019
€000
€000 €000 €000 €000
ASSETS
Cash, treasury bills and balances
with Central Bank of Malta
13,027
13,499 15,165 15,064 11,225
Balances with Central Bank of Malta
118,044
72,388 192,558 93,266 151,178
Cheques in course of collection
-
- 2,881 103 128
Loans and advances to banks
53,951
71,023 30,831 46,281 54,841
Financial assets at fair value through profit or loss
-
- - 251 464
Non-current assets held for sale
1,738
1,733 - - -
Syndicated loans
184,172
135,210 134,262 113,152 125,953
Loans and advances to customers
2,694,229
2,224,694 1,932,044 1,689,003 1,458,144
Derivative financial instruments
536
738 552 499 721
Other debt and fixed income instruments
442,032
459,601 328,041 315,983 238,166
Equity and other non-fixed income instruments
6,960
303 307 303 308
Investment in subsidiaries
40,251
40,251 45,251 45,251 40,251
Investment in associate
14,563
14,063 16,761 15,261 15,261
Investment properties
6,714
6,593 6,053 1,830 1,830
Property and equipment
39,824
39,252 40,998 46,180 43,851
Intangible assets
17,523
14,545 11,746 8,848 7,318
Right-of-use assets
4,386
5,040 5,051 5,235 2,592
Other receivables
12,180
8,202 8,303 7,974 5,907
Deferred tax assets
3,154
2,957 2,249 2,553 460
TOTAL ASSETS 3,653,284
3,110,092 2,773,053 2,407,037 2,158,598
LIABILITIES
Derivative financial instruments
536
738 552 499 721
Amounts owed to banks
80,685
50,387 57,208 9,304 24,512
Amounts owed to customers
3,139,214
2,712,804 2,433,073 2,124,149 1,929,504
Lease liabilities
4,585
5,246 5,348 5,365 2,629
Accruals
22,787
13,561 13,224 10,031 8,712
Debt securities in issue
104,173
54,642
54,597
54,558
-
Other liabilities
20,33
9
13,080
10,404
10,090
10,966
Current tax liabilities
2,641
2,306 758 1,354 452
TOTAL LIABILITIES 3,374,960
2,852,764 2,575,164 2,215,350 1,977,496
EQUITY
Share capital
94,451
91,729 62,429 62,255 62,255
Share premium
51,907
48,410 10,453 10,140 10,140
Revaluation reserve
7,905
2,981 25,334 32,260 30,706
Other reserves
293
147 - - -
Retained earnings
123,768
114,061 99,673 87,032 78,001
TOTAL EQUITY 278,324
257,328 197,889 191,687 181,102
TOTAL LIABILITIES AND EQUITY 3,653,284
3,110,092 2,773,053 2,407,037 2,158,598
MEMORANDUM ITEMS
Contingent liabilities
30,638
21,911 25,356 23,128 22,855
Commitments
1,099,547
878,787 802,552 786,427 755,638
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 181
THE GROUP’S FIVE-YEAR SUMMARY - STATEMENTS OF CASH FLOWS
2023
2022 2021 2020 2019
€000
€000 €000 €000 €000
Net cash flows (used in)/from operating activities (68,245)
3,835 49,036 (12,347) (57,230)
Investing activities
Dividends received
286
403 597 544 195
Interest income from debt securities
7,015
7,328 7,054 6,684 7,811
Purchase of debt and other fixed income instruments
(22,797)
(229,935) (44,389) (134,778) (26,435)
Proceeds on maturity and disposal of debt and
other
fixed income instruments
44,022
73,040
23,838
55,957
40,490
Purchase of financial assets at FVTPL
(46,678)
(98,742) (46,241) (39,165) (34,520)
Proceeds on disposal of financial assets at FVTPL
42,804
99,653 34,605 31,496 34,224
Purchase of equity and other fixed income instruments
(5,718)
-
-
(950)
-
Proceeds on disposal of equity and other non-fixed
income instruments
-
- - 1,000 880
Proceeds on disposal of investments in associates
-
9,589 - - -
Investment in associate
(500)
(500) (1,500) - (375)
Purchase of property and equipment
(8,861)
(5,431) (653) (6,034) (6,781)
Net cash flows from/(used in) investing activities 9,573
(144,595) (26,689) (85,246) 15,489
Financing activities
Dividends paid
(2,703)
(3,170) (2,144) (91) (3,171)
Amounts received on creation of units in subsidiary
3,459
1,027 9,386 4,207 3,865
Amounts paid on redemption of units in subsidiary
(625)
(630) (794) (535) (228)
Net proceeds from issue from debt securities in issue
49,486
- - 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
(722)
(761) (515) (496) (394)
Net cash flows from financing activities
48,895
61,923 5,933 58,085 13,092
Net (decrease)/increase in cash and cash equivalents (9,777)
(78,837) 28,280 (39,508) (28,649)
Cash and cash equivalents at 1 January
92,264
171,101 142,821 182,329 210,978
Cash and cash equivalents at 31 December
82,487
92,264 171,101 142,821 182,329
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 182
THE BANK’S FIVE-YEAR SUMMARY – STATEMENTS OF CASH FLOWS
2023
2022 2021 2020 2019
€000
€000 €000 €000 €000
Net cash flows (used in)/from operating activities (69,180)
3,517 48,158 (13,136) (58,177)
Investing activities
Dividends received
1,252
1,477 1,273 1,236 1,572
Interest income from debt securities
7,015
7,328 7,054 6,684 7,811
Purchase of debt and other fixed income instruments
(22,797)
(229,935) (44,389) (134,778) (26,435)
Proceeds on maturity and disposal of debt and other fixed
income instruments
44,022
73,040 23,838 55,957 40,490
Purchase of equity and other non-fixed income instruments
(5,718)
- - (950) -
Proceeds on disposal of equity and other non-fixed income
instruments
-
- - 1,000 880
Purchase of financial assets at FVTPL
-
- - - -
Proceeds on disposal of financial assets at FVTPL
-
- 249 221 213
Purchase of property and equipment
(8,861)
(5,431) (653) (6,034) (6,781)
Proceeds on disposal of investments in associates
-
9,589 - - -
Investment in associates
(500)
(500) (1,500) - (375)
Investment in subsidiaries
-
- - (5,000) -
Net cash flows from/(used in) investing activities 14,413
(144,432) (14,128) (81,664) 17,375
Financing activities
Dividends paid
(2,475)
(3,000) (1,913) - (3,575)
Proceeds from issue of debt securities in issue
49,486
- - 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
(722)
(761) (515) (496) (394)
Net cash flows from/(used in) financing activities
46,289
61,696 (2,428) 54,504 9,051
Net (decrease)/increase in cash and cash equivalents
(8,478)
(79,219) 31,602 (40,296) (31,751)
Cash and cash equivalents at 1 January 90,417
169,636 138,034 178,330 210,081
Cash and cash equivalents at 31 December
81,939
90,417 169,636 138,034 178,330
APS BANK PLC
_________________________________________________________________________________________
APS Bank plc 183
THE GROUP’S FIVE-YEAR SUMMARY - ACCOUNTING RATIOS
2023
2022 2021 2020 2019
%
% % % %
Net interest income and other operating
income to total assets
2.3
2.1 2.3 2.3 2.6
Operating expenses to total assets
1.4
1.5 1.5 1.4 1.4
Cost to income ratio
61.6
72.7 64.3 60.8 53.6
Profit before tax to total assets
0.8
0.5 0.9 0.7 1.2
Return on average equity after tax
7.5
2.3 7.1 5.1 11.7
2023
2022 2021 2020 2019
Shares in issue (thousands)*
377,804
366,917 249,716 249,019 249,019
Net assets per share
73c
66c 75c 74c 70c
THE BANK’S FIVE-YEAR SUMMARY - ACCOUNTING RATIOS
2023
2022 2021 2020 2019
%
% % % %
Net interest income and other operating
income to total assets
2.3
2.4 2.2 2.3 2.5
Operating expenses to total assets
1.4
1.5 1.4 1.4 1.4
Cost to income ratio
62.1
61.5 64.1 61.2 57.0
Profit before tax to total assets
0.8
0.9 0.9 0.6 1.0
Return on average equity after tax
6.8
8.3 7.7 5.3 9.0
2023
2022 2021 2020 2019
Shares in issue (thousands)*
377,804
366,917 249,716 249,019 249,019
Net assets per share
74c
68c 74c 72c 68c
* Number of shares in issue and the net assets per share for 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 2019 to 2022 have been restated to include the scrip dividend issued in 2022 and 2023 in the
form of shares amounting to 7.2 million and 10.9 million respectively.
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 184
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 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 76 to 177, which
comprise the statements of financial position as at 31 December 2023, 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 material accounting
policy information.
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 2023, and of the Bank’s and the Group’s financial
performance and cash flows for the year then ended in accordance with IFRS Accounting Standards
as issued by the International Accounting Standards Board (IFRSs) as adopted by the European Union
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), as applicable to audits of financial statements of public
interest entities, together with the Accountancy Profession (Code of Ethics for Warrant Holders)
Directive (Maltese Code) that is relevant to our audit of the financial statements of public interest
entities in Malta. We have also 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).
APS Bank plc 185
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
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.
Impairment allowances on loans and advances to customers
At 31 December 2023 the Bank and Group reported total gross loans and advances to customers
(“assets”) of EUR2,712,913,000 and EUR18,684,000 of expected credit loss provisions (ECL) and total
gross syndicated loans (“assets”) of EUR187,686,000 and EUR3,514,000 of ECL.
The determination of the Bank’s ECL on its loans and advances to customers is subject to a high degree
of estimation uncertainty and management judgement. Assumptions in respect of the timing,
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
– Inputs, 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 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 and analytical procedures:
We evaluated the design and implementation and tested the operating effectiveness of the Bank’s and
Group’s key controls across the processes relevant to the ECL calculation, including testing of the
automated controls embedded in the ECL system. Data analytics was used 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 management’s assessment of the reliability of the
collateral valuation reports being used in the ECL calculation.
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.
APS Bank plc 186
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
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. Assumptions and inputs used in ECL models were tested
substantively, including assessing the appropriateness of model design. Formulas used were
recalculated for mathematical accuracy.
Economic scenarios:
We reviewed the inputs, assumptions and weightings used to
estimate the impact of multiple economic
scenarios.
Post model adjustments:
We assessed the 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 historical recoveries and market information available.
Disclosure:
We assessed the adequacy and appropriateness of disclosures for compliance with IFRSs as adopted
by the EU and regulatory considerations.
The Bank and Group’s disclosures about impairment are included in Notes 2.3, 11 and 47, 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.
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 Malta Financial Services Authority, 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, 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.
APS Bank plc 187
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
Other information (continued)
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.
In accordance with the requirements of sub-article 179(3) of the Companies Act (Cap. 386) in relation
to the Directors’ Report on pages 15 to 50, 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 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 49, 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.
APS Bank plc 188
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
Auditor’s Responsibilities for the Audit of the Financial Statements (continued)
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.
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.
APS Bank plc 189
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
Auditor’s Responsibilities for the Audit of the Financial Statements (continued)
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.
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 Malta Financial Services Authority, 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 2023, 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 190
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 2023 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 Malta Financial Services Authority, 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
statements 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 191
Independent auditor’s report (continued)
to the members of
APS Bank p.l.c.
Report on Corporate Governance Statement of Compliance (continued)
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 61 to 75 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 Malta Financial Services Authority,
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 51 to 60 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 seven 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 7 March 2024 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
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APS Bank plc 192
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