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SOCIETE GENERALE EXPRESSBANK AD

Announcement under Regulation 575/2013 Consolidated base


ANNOUNCEMENT OF ANNUAL CONSOLIDATED RESULTS

PURSUANT TO PART EIGHT

OF REGULATION (EU) NO 575/2013 OF THE EUROPEAN PARLIAMENT AND OF THE

COUNCIL

as at 31.12.2014


Announcement under Regulation 575/2013 consolidated base

2

TABLE OF CONTENTS

І. Scope and methods of consolidation .................................................................................................3

1. Corporate information for the Bank ...................................................................................................3

2. Consolidation base .............................................................................................................................4

II. Policy and rules for risk management ................................................................................................5

ІІІ. Structure and elements of the capital base .......................................................................................10

ІV. Capital Requirements .......................................................................................................................11

1. Internal analysis of the capital ..........................................................................................................11

2. Capital requirements for credit risk under classes of exposures ......................................................12

V. Exposures to credit risk from the counter party ..............................................................................12

VІ. Exposures to credit risk and risk dispersion ....................................................................................12

VІІ. Information for the used recognized Credit Rating Agencies upon implementation of standardized

approach to the credit risk.........................................................................................................................14

VІІІ. Internal market risk models .............................................................................................................15

ІХ. Capital requirements for currency and position risk .......................................................................15

Х. Exposure to operational risk .............................................................................................................16

ХІ Capital Instruments in the Bank Portfolio .......................................................................................17

ХІІ. Interest risk in the Bank Portfolio ....................................................................................................17

ХІІІ. Securitization ...................................................................................................................................18

XІV. Announcement of the encumbered assets ........................................................................................19

ХV. Credit Risk Reduction Techniques ....................................................................................................21

ХVI. Remunerations Policy and Practice ................................................................................................22

XVII. Leverage ……………………………………………………………………………....…………..25

Appendix 1А ………………………………………………………………………………………......…26

Appendix 1B ………………………………………………………………………………………......…27

Appendix 1C ………………………………………………………………………………………......…28

Appendix 1D ………………………………………………………………………………………......…30

Appendix 2 ……………………………………………………………………………………….........…40

SOCIETE GENERALE EXPRESSBANK AD Announcement under Regulation 575/2013

consolidated base

3

І. SCOPE AND METHODS OF CONSOLIDATION

1. Corporate information for the Group

Societe Generale Expressbank AD (the Bank) is a shareholder company founded in Bulgaria in June

1993 as a result of the merger of twelve commercial banks and is registered in the Commercial

Register with Varna District Court by virtue of Decision No 4024 of 26 June 1993.

Since 30 November 1999 the major shareholder in the Bank is Societe Generale Paris holding 99.74 %

that is the parent company of the Bank.

In accordance with the full license issued by BNB Societe Generale Expressbank AD functions as a

universal bank, offering to the bank market full package of bank services and products.

The name of the Bank was changed in 2005 by virtue of a decision of the shareholders from the

former SG Expressbank to Societe Generale Expressbank AD.

The registered seat and management address of the Bank are in the city of Varna, No 92 Vladislav

Varnenchik blvd.

The Bank performs its activity in Bulgaria by a Head Office, 7 regional groups and 147 offices as the

total staff as at 31.12.2014 consists of 1.627 employees.

In 2005 the Bank established the subsidiary Sogelease Bulgaria EOOD that is 100% owned by it.

Sogelease Bulgaria EOOD is a company specialized in the financial and operating lease offering its

services to all of the fields of economy and industry with the exception of the real estate field at this

stage. The Bank accounts its investment in the subsidiary by its prime cost under its financial

statement in the amount of TBGN 4.100.

In 2008 the Bank reduced its participation from 49% to 41.55 % from the capital of Insurance

Shareholder Company Sogelife Bulgaria AD. Subject of activity of the company are the following

types of insurances: Life and rent insurance; Life insurance related to an investment fund, Additional

insurance and Accident insurance.

In 2008 the Bank established the subsidiary Societe Generale Factoring EOOD that is 100% owned by

it. Subject of activity of the company is factoring of client's liabilities. The Bank accounts its

investment in the subsidiary by its prime cost under its individual financial statement in the amount of

TBGN 1.100.

In 2011 the Bank established the subsidiary Regional Urban Development Fund AD that is 52 %

owned by it. Subject of activity of the company is funding urban projects against pay, included in

integrated sustainable development plans for the towns for public-private partnership. The Bank

accounts its investment in the subsidiary by its prime cost under its individual financial statement in

the amount of TBGN 130.

In February 2014 the Bank invested in the amount of 49% of the capital of ALD Automotiv OOD

amounting to BGN 1 960 000. The subject of activity of the company is operating lease, renting out

vehicles, machines and other kind of equipment, vehicle fleet management.

The Bank has two-tier management structure - Management and Supervisory Board. Five of the

members of the Management Board are Executive Officers of the Bank.


consolidated base

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The International Rating Agency Fitch (FitchRatings) confirmed long-term credit rating 'ВВВ+' (IDR)

with stable perspective of the Bulgarian subsidiary of SocieteGenerale - Societe Generale Expressbank

AD. To date this is the highest rating assigned by Fitch to any financial institution in Bulgaria.

The implemented consolidation methods for the purposes of this announcement (supervisory

purposes) and these applied in the public statements of the Bank, prepared pursuant to the

International Financial Reporting Standards are as follows:

Capital participation as at 31. December 2014

Consolidation for Supervisory Purposes Method

Consolidation for Public Purposes Method

SOGELEASE BULGARIA EOOD 100% Full consolidation Full consolidation

SOCIETE GENERALE FACTORING EOOD 100% Full consolidation Full consolidation

REGIONAL URBAN DEVELOPMENT FUND 52% Full consolidation Full consolidation

ALD AUTOMOTIV OOD 49% Equity method Equity method

SOGELIFE BULGARIA AD. 41.55% Equity method Equity method

2. Consolidation base

The announcements as at 2014 complied with the rules and regulatory framework for capital adequacy

of the banks according to Regulation (EU) No 575/2013 of the European Parliament and of the EU

Council, as well as in accordance with the International Financial Reporting Standards (IRFS), issued

by the International Accounting Standards Board (IASB) and the explanations on their application

issued by the International Accounting Standards Committee (IASC) adopted by the European Council

(EU) and applicable in the Republic of Bulgaria.

The consolidated financial statement is presented in Bulgarian leva and all of the indicators are

rounded up to the closest thousand Bulgarian leva (TBGN), unless stated otherwise.

The consolidated financial statement includes the financial statements of the Bank and its subsidiaries

- Sogelease Bulgaria EOOD, Societe Generale Factoring EOOD and Regional Urban Development

Fund AD prepared annually as at 31 December. The financial statements of the subsidiaries are

prepared for the same accounting period as these of the parent company and upon the application of

one and the same accounting policies.

All intragroup balances, transactions, income and expenses, as well as profits and losses being result

of intragroup deals and recognized in assets are eliminated in full.


consolidated base

5

II. POLICY AND RULES FOR RISK MANAGEMENT

Group Risk Management Policy is established in order to ascertain, calculate and analyze the risks

being inherent for its activities, as well as to fix the proper risk limits and to monitor their observance.

In Societe General Group the following risks fully or partially are identified and managed:

Credit Risk

Societe General Expressbank observes the directives and regulations of Societe General Group for

credit risk assessment and management. It has adopted as well the regulations of the Group with

regard to the organization of the internal control - regular monitoring of the development and quality

of the Bank's portfolio conducted by the Credit and Market Risk Committee that meets regularly once

a month. Internal Audit Unit functions as well performing control on the credit risk management

process.

Risk Management Division is responsible for the credit risk assessment. It is directly subordinated to

the Chief Executive Officer of the Bank and in this way the independence of the Division from the

commercial units of the Bank has been achieved. The Director of the Risk Management Division

reports to the Chief Executive Officer of the Bank, where they both report to Risk Management

Division in Societe Generale Paris.

According to the policy of Societe Generale Group, all credit limits shall be approved by Risk

Management Division and by the commercial units, as the Chief Executive Officer of Societe

Generale Expressbank and the Chief Risk Officer who is in charge of Risk Management Division have

personally delegated limit for approval of commercial deals that are credit risk bearers. The credit

limit provided to the Chief Executive Officer allows him to approve commercial deals credit risk

bearers with regard to which Chief Risk Officer (operating his limit) has provided positive assessment

of the respective deal. In case of negative statement on behalf of Risk Management Division, the Chief

Executive Officer may exercise his right to arbitrage (that is limited below the amount of its personal

limit) or to escalate an arbitrage procedure to a higher level - the Head office of Societe Generale

Paris. All credit files exceeding these limits shall be provided to the Head Office of Societe Generale

Paris.

For credit deals with customers - “citizens” and “freelancers” the applied limit is based on three

criteria - credit exposure, maturity and collateral.

The applied limit for credit deals with corporate clients is also based on three criteria - credit exposure,

maturity and internal rating (SG rating).

Risk Management Division exercises the control on the observance of the limits for approval of credit

deals at local level.

During the regular audit missions exercised in the branch network, Internal Audit Unit is also obliged

to perform control over the observance of the limits for approval of credit deals at branch level and at

HO level.

Operational risk

Except the credit risk resulting from the traditional activity of the Bank in our daily work we are

exposed to several other risks grouped under the general name “Operational risks”. These operational

risks may lead to loss or potential losses for the Group, therefore, they should be identified and

reported in the due time.


consolidated base

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A specialized internal committee - Committee on the operational risks and the continuous monitoring

was established in the Bank that meets on quarterly basis.

The identification, monitoring and analysis of the internal events related to operational risk are of

significant importance for the proper management of the exposure to operational risk of the Bank and

Societe Generale Group. Collecting of full and reliable information allows the monitoring of the price

of these operational risks related to internal or external events. The reasons for the losses are analyzed

in order the necessary corrective measures to be identified.

The Bank has defined and already monitors 25 key risk indicators of operational risk.

The employees and the units participating in the process of assessment and monitoring of the

operational risk are all branch managers, regional heads of groups, heads of units, the Head of Quality

Management and Operational Risk Unit, Operational Risk Coordinator and Corporate Secretary.

Internal Audit Unit makes regular checks on the operational risk.

The Bank keeps a register of the events with operational losses - in electronic and paper format and

this activity is regulated by internal rules, instructions and procedures for the centralization of the

operational losses in the Bank. The operational risks management was controlled and monitored by the

Committee on the operational risks and continuous monitoring. The Operational Risk Coordinator

from Quality Management and Operational Risk Unit is responsible for the keeping of the register of

the events of operational losses and the Head of Quality Management and Operational Risk Unit is

responsible for the whole management of the processes related to the centralization of information for

the operational losses.

The Bank applies the following techniques for operational risk reducing:

Keeps a centralized register for occurred operational losses for the Bank and introduction of

corrective measures for the prevention from recurrence of similar events;

Monitors the main risk indicators showing the exposure to risks of the different levels and

providing actual qualitative assessment of the risk;

Self-assessment and preventing from risks and control procedures (Risk Control Self

Assessment - RCSA);

Analyses of scenarios for ascertaining the effects from more serious operating events on the

activity of the Bank;

Keeping information and monitoring on the environment and external losses (operational

losses suffered due to financial and bank institutions external for Societe Generale Group);

Keeping a Business Continuity Plan.

Market Risk

As a part of a global bank group the strategy of Societe Generale Expressbank in relation to

undertaking market risk complies with the strategic trend adopted by Societe Generale Group with

regard to its subsidiaries and could be defined as conservative. Market risks are undertaken only

within markets corresponding to the requirements for organization, transparency and liquidity, for

example - such allowing closing positions within short terms and probably without significant losses

due to insufficient liquidity.

Following the policy of the Group Societe General Expressbank is not expected to use or work with

products available in the international markets, with the exception of the cases of trading with Societe

General Paris. This concerns the centralized obtaining of products - for providing to local counter

parties or for own use. As a result of the above, the rule is that all positions being deliberately left open

and leading to market risk as general are strictly forbidden. Such positions may be permitted only with

regard to a restricted set of market instruments in case they were preliminary identified, approved and

monitored according to the respective procedure.


consolidated base

7

The rules controlling the management of every currency or interest risk require all of risks like these to

be identified and centralized. One position must be managed only by one place and has to be a result

of flows that were not matched before that. The currency risk is controlled through setting position

limits for every separate currency (and its respective equivalence in EUR) on the daily open currency

position, as well as general limit for the general open currency position. The limits are approved and

indicated by Market Risk Division with Societe Generale Paris. The use of daily limits is daily

monitored by Market Risk Management Unit at local level. A report for currency open positions shall

be prepared and sent daily to the management and Societe Generale Paris. Upon every exceeding of

the limits explanation in writing is requested for the sources and on the manner and time of recovery

of the positions within the specific limits. The use of derivatives on foreign currency as futures

contracts is not allowed within the permitted limits. Trade only in such instruments is also strictly

forbidden. Trade at own expense in interest and derivative instruments by Financial Markets Unit on

behalf of the Bank is also strictly forbidden. The permitted use of these instruments has only hedging

and distribution to end clients purposes (the so called back-to-back deals).

Keeping governmental securities with the purpose of sale to end clients may be permitted, but only

after approval by Societe Generale Paris. Such approval usually takes the form of approved limits for

maximum nominal amount allocated in categories according to the maturity by the principle of a

“reversed pyramid”: The approved amount grows in parallel with decreasing the maturity. What shall

also be added to the above is the maximum term of holding the securities that may not be exceeded,

i.e. - 180 days after the date of purchasing. After this period of holding, the securities with fixed

income shall be sold. Additionally sub-limits shall be set for the positions in bonds according to the

currency of the issue as the permitted currencies are only BGN, EUR and USD.

Societe Generale Expressbank keeps commercial portfolio of bonds made and managed within limits

approved by Societe Generale Paris. The composition of the portfolio and the observance of the limits

shall be daily monitored by Market Risk Management Unit and this report shall be sent to the

management of the Bank and to Societe Generale Paris.

With regard to the market activities, each temporary or permanent holding of shares is forbidden.

The Credit Committee and the Assets and Liabilities Committee (ALCO) are internal committees that

aim assisting the senior management in the market risks monitoring and their use against the approved

limits.

Interest rate risk

The interest rate risk arises out of the mismatch between the balance sheet and off-balance sheet

positions as a result of the fluctuations of the interest rates in the market that subsequently leads to

change of the interest income and the economic value of the Bank. The interest risk management is of

crucial significance because one high exposure to interest risk may cause deterioration of the Bank's

results, as well as of its economic value in case of unfavorable movements of the market interest rates.

Societe Generale Expressbank calculates the interest rate level depending on the instructions of the

parent Bank as the interest rate exposures are grouped in different time intervals according to the

nearest date that is either the date of the next change of the contractual interest rate or the date of the

projected repayment of the principal.

The next date of interest rate change is either the next date on which the interest under instrument with

floating interest rate may be changed according to the terms and conditions of the agreement, or the

date of the agreed maturity, depending which of them occurs first. Residual maturity is the period from

the reporting date to the maturity of the instrument pursuant to the agreement.

The interest risk monitoring is differentiated in two aspects:


consolidated base

8

Commercial (market) position

Structural position

The interest rate management under the commercial position is daily monitored by Risk Management

Division through a set of instruments, stress tests, sensitivity limits.

The interest rate management under the structural position of the Bank arising out of the mismatch

between the balance sheet and the off-balance sheet positions shall be monitored by Assets and

Liabilities Department to Financial Division. The structural interest rate management consists of

monitoring, calculation, reporting and execution of activities on the interest rate sensitivity

management.

The reports on the interest rate shall be prepared by Assets and Liabilities Department and discussed

quarterly by Assets and Liabilities Committee.

According to the internal rules of the Bank, the deposit base stability models and the interest rate

profile shall be approved by Societe Generale Paris in order to be used in the calculations. The last

notification by the parent bank for the deposit models is dated November 2014.

Liquidity risk

Societe Generale Expressbank manages its liquidity risk in accordance to the requirements of the

effective local legislation. The control on the liquidity executes by assets' management (providing

liquid assets for satisfying the current need of resources) and liabilities management (attracting

resources on the money market with the purpose of making up for the insufficient cash inflows).

The group established stable strategies, policies, processes and systems for identification, reporting,

management and monitoring of the liquidity risk during suitable time periods, including daily, in order

to ensure the observance of proper liquidity levels. These strategies, policies, processes and systems

are adjusted to the business trends, currencies and structures and involve proper liquidity management

mechanisms.

The Group manages the liquidity risk for match in the maturity structures of the assets and liabilities

through Assets and Liabilities Management Committee. With the purpose of effective liquidity

management the Bank management constantly takes measures for the proper allocation of the liquid

assets and the short-term liabilities, exercising daily control on the liquidity at different levels.

In August 2014 the Bank adopted general policy on liquid risk management.

The policy was established in accordance with all regulatory and group requirements and best

practices, considering the specificities of Societe Generale Expressbank with regard to the business

and economic environment.

The liquid risk management policy defines the management, the practices on the reporting and control

of the liquid risk.

In accordance with this policy early warning indicators have been developed and are observed on

weekly and monthly base with the purpose of ensuring proper and duly reaction in case of liquid crisis.

The new regulatory reports related to LCR and NSFR have been developed on the base of the assets

and liabilities maturity structure and the methodology of the Group for their reporting.

A specialized internal committee functions in Societe Generale Expressbank that is an element of the

liquid risks management structure- Assets and Liabilities Management Committee (ALCO).

ALCO consists of a Chairman - Chief Executive Officer / Deputy Chief Executive Officer and

Members - Chief Financial Officer, Chief Operating Officer, Chief Risk Officer, Head of Financial


consolidated base

9

Markets Department, Head of Assets and Liabilities Department (to Financial Division), Head of

Retail Banking and Commercial Network, Head of Corporate Clients and Financial Markets

Department, Head of Market Risks Department.

The meetings of the Liquidity Management Committee shall be conducted once a month.

III. EQUITY STRUCTURE AND ELEMENTS

The main aim of the Group capital management is to ensure that it maintains a stable credit rating and

proper capital ratios in order to maintain its business and to maximize the added value for the

shareholders.

In 2014 after coming into force of the requirements of Directive 2013/36/EU of the European

Parliament and of the EU Council, Ordinance No 8 of BNB on the capital adequacy of the credit

institutions was revoked and replaced by Regulation (EU) No 575/2013 of the European Parliament

and of the EU Council.

In parallel with the introducing of the new regulatory framework Basel III, BNB in its capacity of

local competent authority and based on Ordinance No. 8 of 24 April 2014 on Banks' Capital Buffers

specified the mandatory maintenance of the following two capital buffers. Capital conservation buffer

equaling 2.5 % of the total amount of the total risk exposure of the Group and systemic risk buffer

amounting to 3%.

Pursuant to the definitions of the regulatory framework Basel III, the equity includes Tier 1 capital and

Tier 2 capital after the respective deductions under art. 36, 56 and 66 of Regulation (EU) 575/2013.

The common capital adequacy of the banks shall not exceed the minimum threshold of 13.50 %. In

2014 and in 2013 the Bank observed the capital adequacy requirements set by the European

Parliament and of the EU Council.

Detailed information about equity on consolidated base of Societe Generale Expressbank AD is

provided in Appendix 1 hereunder pursuant to Commission Implementing Regulation (EU) No

1423/2013 and includes the following:

Appendix 1A - Balance sheet intended for regulatory purposes;

Appendix 1B - Matching the elements of the equity and the financial statements;

Appendix 1C - A sample on the major characteristics of the capital instruments;

Appendix 1D - Announcement of the elements of the equity during the transition period.

The Bank applies two types of buffers:

- Capital conservation buffer amounting to 2.5% of the risk-weighted assets;

- Systemic risk buffer amounting to 3% of the risk-weighted assets;


consolidated base

10

2014 2013

Basel III Basel II

Equity 484.360 459.709

Tier one capital 456.040 421.935

Basic Equity Tier one capital 456.040 -

Tier two capital 28.320 37.774

Risk weighted assets

Risk weighted assets for credit risk 3,208,282 3,135,063

Risk weighted assets for market risk 42.550 20.488

Risk weighted assets for operational risk 318.349 303.878

Total risk weighted assets 3,569,181 3,459,429

Basic Equity Tier one capital ratio 12.78% -

Tier one capital ratio 12.78% 12.21%

Capital adequacy ratio 13.57% 13.31%

Minimum capital requirements for the basic equity tier one capital ratio (4.5%) 160.613 -

Minimum capital requirements for tier one capital (6.0% for 2014, 10.0% for 2013) 214.151 345.943

Minimum general capital requirements (8.0% for 2014, 12.0% for 2013) 285.534 415.131

Additional capital requirements for capital conservation buffer (2.5%) 89.230 - Additional capital requirements for systemic risk buffer (3.0%) 107.075 -

Adjusted minimum capital requirements for the basic tier one capital after buffers

(10%) 295.427 -

Adjusted minimum capital requirements for the tier one capital, including buffers

(11.5%) 241.889 75.992

Adjusted minimum capital requirements after buffers (13.5%) 198.826 44.578

Free capital after buffers 2.521 44.578

IV. CAPITAL REQUIREMENTS

1. Internal analysis of the capital

The Group performs regular internal analysis of the amount, type and allocation of the needed capital

that is sufficient for covering all of the risks on which the Group is or may be exposed, using reliable

and efficient strategies. The responsible authority is the effective Assets and Liabilities Committee.

Every year Group Management approves a plan for capital increase. The estimation of the needed

capital is calculated on the basis of a preliminary prepared business schedule, considering all of the

risks on which the Group is locally exposed.

The main sources for capital increase are the following:

• capitalization of profit;

• subordinated short-term debt;

• share capital increase.

2. Capital requirements for credit risk by classes of exposures

The Group uses standardized approach upon the calculation of capital requirements for credit and

market risk and for defining the capital requirements for operational risk the approach of the basic

indicator has been used.

For the needs of the regulatory reporting under Regulation (EU) No 575/2013 the Bank applies a

simplified approach for reducing the credit risk in the use of financial collaterals.


consolidated base

11

The capital requirements for credit, market and operational risk are provided in Appendix 2

to this document.

V. EXPOSURES TO COUNTERPARTY CREDIT RISK

The Group allocates capital for counterparty credit risk arising out of the transactions in derivative

instruments, by use of the method of market valuation. The requirements of art. 271 of Regulation

575/2013 are observed and upon calculating the current exchange value and the potential future credit

exposure, the methodology set in art. 274 and the respective percents from Table No 1 of the same

article are applied.

As at 31.12.2014 the Bank calculated exposures by classes, as follows:

Classes of exposures

/Derivatives and long settlement transactions/

Value of the

balance sheet

exposure

Value of the off-

balance sheet

exposure

Institutions 799 799

Enterprises 33.305 33.305

Total 34.104 34.104

VI. EXPOSURES TO CREDIT RISK AND DISPERSION RISK

The Group evaluates and classifies its risk exposures in case there is objective evidence for

impairment (when it is likely the Group could not manage to collect, or there are no reasonable

arguments that it could collect all of its receivables pursuant to the contractual terms and conditions of

the Loan Agreement).

Provisions for impairment losses

The major criterion on defining the credit impairment loss is the presence of overdue payments of the

due amounts under principals and interests and deterioration of the financial condition of the client.

By observing the above criterion, the Group classifies the risk exposures in 10 major groups

depending on the level of the existing risk as in case there is objective evidence for need of

impairment, such is performed.

The amount of the impairment is calculated as the difference between the book value and the

recoverable amount of the exposure and the amount of the acceptable collateral according to the

internal rules of the Bank for management of the accepted collaterals.

The Group defines impairment separately for individually significant exposures on portfolio base as

well.

Impairment of individually significant exposures

The Group assesses individually each exposure of the Borrower as upon the calculation of the

impairment analysis of the solvency of the Borrower is performed, of its current financial condition,

its operating capacity during the occurred financial crisis, its possibility to provide backup finance in

order to cover its financial liabilities in case of difficulties. The Group uses the effective interest rate

for discounting the expected cash flows. Impairment is calculated and accounted as at the end of every

accounting period.

The Group identifies as "sensitive" corporate clients the financial status of which requires special

monitoring due to possibility for deterioration of the quality of servicing of their credit exposures.

These clients are considered performing and the provisions allocated for them are calculated and

accounted on portfolio base.


consolidated base

12

Collective base impairment

Collective base impairment shall be made for loans that are not individually significant (portfolios of

individuals and small business). The Bank allocates the loans by internal classification risk groups

depending on the extent of the overdue payments. The expected cash flows are defined on historical

base in accordance to the rate of return from preceding accounting periods. Upon discounting the

Group uses the average effective interest rate for the respective type of credit product. Impairment is

calculated as at the end of each accounting period as the calculated impairment shall be approved at

Group level.

The total amount of the exposures after provisions and adjustments to the value before accounting the

effect of reducing the credit risk and adjusting the off-balance sheet position on conversion ratios as at

31 December 2014 was the following:

TBGN

Class of exposures Value of the

balance sheet

exposure

Value of the off-

balance sheet

exposure

Central governments or central banks; 964.527 0

Regional governments or local authorities; 12.360 8.254

Institutions 181.539 28.208

Enterprises 1.737.701 818.727

Retail exposures; 1.045.097 50.006

Exposures secured by real estate 480.002 13.616

Exposures at default 102.111 27.864

Exposures in capital instruments 1.960 0

Other positions. 173.369 0

Total 4.698.666 946.675

The allocation of the exposures by fields differentiated by classes of exposures before and after

impairment as at 31.12.2014 was as follows:


consolidated base

13

2014

Industry 966.761

Construction 76.463

Agriculture and Forestry 92.485

Transport and Communications 55.580

Trade and Services 573.033

Other fields 387.439

Corporate clients - total amount 2,151,761

Collective base impairment (36,144)

Individual base impairment (83,990)

Corporate clients - net amount 2,031,627

Consumer loans 751.180

Mortgage loans 374.435

Citizens and households - total amount 1,125,615

Collective base impairment - consumer loans (69,385)

Collective base impairment - mortgage loans (3,621)

Citizens and households - net amount 1,052,609

Provided loans to clients - net amount 3,084,236

The concentration of the credit portfolio calculated as a ratio of the ten largest exposures of clients to

the gross amount of the loans provided to clients as at 31.12.2014 was 16,80 %.

VII. INFORMATION FOR THE USED RECOGNIZED CREDIT RATING AGENCIES UPON

IMPLEMENTATION OF STANDARDIZED APPROACH TO THE CREDIT RISK

In implementation of art. 135 of Regulation 575/2013 for ascertaining the risk weights of the

exposures under the standardized approach for credit risk the Group uses the credit assessments of the

rating agencies Standard&Poor’s, Moody’s and Fitch. If for a rating position

there are two credit assessments awarded by recognized agencies and if they correspond to different

risk weights, the highest risk weight is applied.

The classes of exposures for which the Bank uses assessments of external agencies are:

Exposures to central governments or central banks;

Exposures to institutions;

Exposures to enterprises;


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14

The awarded credit assessments shall be equalized to the approved grades of credit quality upon

defining the risk weights of the respective exposures.

VIII. INTERNAL MARKET RISK MODELS

The Group does not apply internal market risk models.

ІХ. CAPITAL REQUIREMENTS FOR CURRENCY AND POSITION RISK

Currency risk is the risk in which the value of the financial instruments is influenced by the change in

the foreign currency exchange rates. As a result of the Currency Board effective in Bulgaria, Bulgarian

lev is fixed to the Euro with ratio BGN 1.95583 to 1 EUR, therefore the positions in this currency do

not lead to currency risk. As the currency in which the Group presents its financial statements is

Bulgarian lev, the financial statements are influenced by the movement of the currency exchange rates

between the currencies out of the Eurozone and the Bulgarian lev. These changes are monitored and

analyzed daily by the Group specialists by using different hedging techniques for maintaining the risk

within the normal range.

The currency risk is controlled through setting position limits for every separate currency (and its

respective equivalence in EUR) on the daily open currency position, as well as general limit for the

general open currency position. The limits are approved and indicated by Market Risk Division with

Societe Generale Paris. The use of daily limits is daily monitored by Market Risk Management Unit at

local level.

The table below shows the sensitivity of the profit before tax and of the equity for the significant

positions by the types of foreign currencies of the Group as at 31.12.2014. The study of the sensitivity

of the significant positions in foreign currency has no influence on the equity because the Group

accounts the currency revaluation in the Income statement in accordance with International

Accounting Standard 21.

Change of the currency

exchange rate in % 2014

Effect on the profit before

tax 2014

Effect on the equity 2014

USD

9%

(26)

-

-8% 23 -

8% (2) - GBP -4% 1 -

As at 31 December 2014 the Group did not account capital requirements for currency risk.

The position risk is the risk of change in the prices of the debt and capital instruments in the

commercial portfolio.

Societe Generale Expressbank AD maintains commercial portfolio of bonds that was made and

managed within limits approved by Societe Generale Paris. The composition of the portfolio and the

observance of the limits shall be daily monitored by Market Risk Management Unit and this report

shall be sent to the management of the Bank and to Societe Generale Paris.


consolidated base

15

The Group examines total position risk that is the risk of change in the price of a financial instrument

as a result of a change in the interest rates level in case of a traded debt instrument or derivative.

The derivative financial instruments include forward, swap deals, etc. and are recognized first at the

moment in which the Group becomes a party under the agreement by the price of acquisition (incl.

acquisition costs) and subsequently are revaluated to their fair value. The fair value is defined on the

grounds of quoted market prices or in case of lack of such it is calculated by other techniques for

reliable defining of the fair value.

Upon calculating the position risk, the Group applies maturity approach for total risk pursuant to art.

339 of Regulation 575/2013.

Х. EXPOSURE TO OPERATIONAL RISK

As at 31.12.2014 the Group used the approach of the basic indicator upon calculating the capital

requirements for operational risk - by multiplying the average annual gross income of the bank by

ratio 0.15.

The average gross income is the sum total of the net interest income and the net non-interest income,

in average for the last three calendar years, based on the audited financial statements for the respective

years.

The annual gross income is calculated before the discounting of the provisions for covering

impairment losses and after the excluding of:

The profit from sale of financial assets intended for disposal.

Other income from the activity

As at 31 December 2014 the Group reported capital requirements for market and operational risk, as

follows:

TOTAL AMOUNT OF RISK EXPOSURES FOR:

TBGN

MARKET RISK 42,550

OPERATIONAL RISK 318,349

XІ. CAPITAL INSTRUMENTS IN THE BANK PORTFOLIO

These assets may be sold as a reply to changes in the market risks or the requirements to liquidity and

include shares and partnerships in local and foreign commercial enterprises, shares in other financial

institutions and governmental securities.

The subsequent assessment is by fair value, with the exception of the cases when the fair

value could not be reliably assessed.

The Group revaluates its capital investments classified as financial assets disposable for sale in case

there is significant or continuous drop of their fair value below their book value or in case there is

objective evidence for revaluation. Defining whether the drop to be significant or continuous requires

evaluation of all of the significant factors as the sensitivity of the prices of capital investments, etc.


consolidated base

16

The non-realized profits and losses due to a change in the fair value of these financial assets shall be

posted under the equity item.

The book value of the capital instruments as of 31. December 2014 was TBGN 639.

The complete amount of the investments in shares was accounted by 100% risk under class of

exposure “Other positions”.

XIІ. INTEREST RISK IN THE BANK PORTFOLIO

The match or the controlled mismatch of the assets and liabilities interest rates is of key significance

for the Group profit management. In order to ascertain the vulnerability of the Group to interest risk

shall be tracked the imbalance of all of the interest rate exposures, including the derivatives. The

interest rate exposures are grouped in different time intervals according to the nearest date that is

either the date of the next change of the contractual interest rate or the date of the projected repayment

of the principal.

The next date of interest rate change is either the next date on which the interest rate under an

instrument with floating interest rate may be changed according to the terms and conditions of the

agreement, or the date of the agreed maturity, depending on which of them occurs first. Residual

maturity is the period starting from the date of accounting until the final agreed maturity of the

instrument.

To avoid the negative results in case of interest rates change, the interest rates of the attracted funds

and the provided loans shall be discussed on a meeting of the Assets and Liabilities Committee, in

case the change is needed due to the market conditions.

The loans with floating interest rates are formed by a floating basic interest rate and a margin fixed

under the agreement. The basic interest rate shall be defined by the Group Management as a reply to

the changes in the market conditions of the country.

The enclosed table shows the sensitivity of the net interest income and the equity as at 31 December

2014 upon reasonable possible change of the interest rates, where all the other indicators in the Income

statement remain unchanged.

Increase in

basic point

Sensitivity of the

net interest

income in TBGN

Equity Sensitivity

From 0

to 6

months.

From 6

months

to 1 year

From 1

year to 5

years

More

than 5

years Total

BGN +100 5.288 (17) (259) (494) (490) (1,260)

EUR +100 10.503 - (611) (53) - (664)

USD +100 481 (658) - - (102) (760)

Other +100 134 - - - - -

Decrease in

basic point

Sensitivity of the

net interest

income in TBGN

Equity Sensitivity

From 0

to 6

months.

From 6

months

to 1 year

From 1

year to 5

years

More

than 5

years Total

BGN -100 (5,288) 17 259 494 490 1.260

EUR -100 (10,503) - 611 53 - 664

USD -100 (481) 658 - - 102 760

Other -100 (134) - - - - -


consolidated base

17

The sensitivity in the Income Statement was calculated based on the net currency effect (result) from

the revaluation of the net currency position upon increase/decrease of the major currencies exchange

rates. The effect of a change in the foreign currency exchange rate is valid upon the assumption that all

of the other parameters remain unchanged. The analysis of the sensitivity in the equity reflects the

change of the fair values of the financial assets disposable for sale upon the above conditions.

XIІI. SECURITIZATION

The Group does not apply securitization.


consolidated base

18

XІV. ANNOUNCEMENT OF THE ENCUMBERED ASSETS

A-assets form

TBGN

Book value of

encumbered

assets

Fair value of

encumbered assets

Book value of

unencumbered

assets

Fair value of

unencumbered

assets

010 040 060 090

010 Assets of the

reporting

institution

53.887 4,833,363

030 Capital Instruments 639

040 Equities 26.190 430.390

120 Other assets 27.697 4,402,334

Form B - Received collateral

Fair value of a

received

encumbered

collateral or issued

own equities

Fair value of a

received collateral

or issued own

equities, accessible

for encumbering.

010 040

130 Received compensation from the reporting institution 51.716

150 Capital Instruments

160 Equities 51.716

230 Other received collaterals

240 Issued own equities different than own covered bonds or

securities secured by assets.


consolidated base

19

Form B - Encumbered assets/received collaterals and liabilities related to them

Corresponding liabilities,

conditional liabilities or

borrowed securities.

Assets, received

collaterals and issued

own equities different

than own covered bonds

or securities secured by

assets.

010 030

010 Book value of selected financial

liabilities 38.016 53.887

D - Information on the significance of the encumbering

1. The data provided in forms A-C are on consolidated base as at 31.12.2014.

2. Form A: Row 040, column 010 accounts blocked securities as collateral for achieved deposits

from budget enterprises.

3. Form A: Row 120 column 010 reports loans provided to clients of Societe Generale

Expressbank under programmes of Bulgarian Bank for Development with established on them

pledge in favour of Bulgarian Bank for Development.

4. Form B: Row 160, column 040 accounts received securities under reversed repo deals. Until the

date of the maturity the securities can be used as collaterals for other deals or sold.

5. Form C: Row 010 column 010 reports the attracted deposits from budgetary enterprises and the

received funds under programmes of Bulgarian Bank for Development.

6. Form C: Row 010 column 030 reports the blocked securities as collateral for the attracted deposits

from budgetary enterprises and the loans with established pledge in favour of the Bulgarian Bank

for Development as a collateral for the received funds under programmes of the Bulgarian Bank for

Development.

7. There are no sources of encumbering at consolidation level.

8. According to the signed agreements with the Bulgarian Bank for Development Societe Generale

Expressbank AD establishes pledges in favour of Bulgarian Bank for Development on the loans

provided with funds under programmes of the Bulgarian Bank for Development. Societe Generale

Expressbank blocks securities as collateral of the funds under accounts of the budgetary enterprises

pursuant to the State Budget of the Republic of Bulgaria Act and the Government Debt Act.

9. Changes in the levels of encumbered assets may be due mainly to dynamics in the volume of the

repo deals. The accounting value of the assets with established pledge in favour of Bulgarian Bank

for Development decreases before their repayment. The level of collateralization of attracted

deposits from budgetary enterprises remains stable.

10. Societe Generale Expressbank does not consider that some part of the assets included in row 120,

column 60 would be encumbered in the process of the normal activity of the Bank.


consolidated base

20

XV. CREDIT RISK MINIMIZATION TECHNIQUES

The Group requests from the Borrowers to provide collaterals eligible with regard to its type, value

and liquidity and corresponds to the risk profile of the Client and the type of the credit deal.

Collaterals can serve as a tool for credit risk minimization and reducing the needed regulatory capital.

The agreements for securing credit deals shall be concluded in the form envisaged by the law for

validity of the collaterals and in case such is not envisaged - in writing.

The Group has adopted rules for evaluating the type of the collateral and its liquidity.

The Group accepts the following types of collaterals:

Mortgage on real property;

Pledge of movable assets and receivables (the pledge may be real and special);

Cash receivables;

Guarantorship and guarantees (corporate, bank or government);

Other collaterals defined by the law.

The Group defines standard criteria for eligibility of the collaterals. Pursuant to these criteria the

collaterals shall be subject to monitoring in the process of credit approval, their legal relatedness shall

be tracked and they shall be subject to regular review and revaluation.

Various rules shall be observed as provision of all of the necessary documents identifying the

collaterals; the amount of the collateral to be sufficient in order to cover the liabilities of the debtor

during the whole term of the loan and last but not least - the collateral should be capable of fast

realization, to be clearly defined, correctly established and accounted as it has direct impact on

minimization of the credit risk for the bank, calculating the concentration in case of risk of the

guarantors.

Highly-liquid collaterals in accordance with the internal rules for managing the credit activity of the

Group are received bank guarantees from foreign banks and received deposits.

In case of collateral in the form of a recognized guarantee, this part of the exposure that is fully

covered by it shall be weighed by the risk weight of the protection guarantor.

All of the loans of corporate clients are 100% secured by guarantees, mortgages or pledges of

equipment or receivables. The collaterals are agreed individually by each corporate client depending

on the financed activity.

Collaterals

The amount and the types of the requested collaterals depend on the assessment of the solvency and

their credit risk profile of the Borrowers. The Group has adopted rules for evaluating the type of the

collateral and its liquidity. The main types of the collaterals are as follows:

Under repo deals - securities or cash funds;

Upon crediting corporate clients - cash funds, securities, mortgage on lands and/or buildings,

special pledge of inventories and/or commercial receivables;

Upon consumer lending - cash funds, mortgage on real property and guarantorship.

If necessary, the Group receives as well guarantees from the parent companies as collateral upon

providing loans to their subsidiaries.


consolidated base

21

The total amount of the exposures after provisions and adjustments to the value before accounting the

effect of reducing the credit risk and adjusting the off-balance sheet position under conversion ratios as

at 31 December 2014 was the following:

TBGN

Class of exposures

Value of the

balance sheet

exposure

Value of the off-

balance sheet

exposure

Central governments or central banks; 1,016,205

Regional governments or local authorities; 12.360 2.125

Institutions 131.578 13.623

Enterprises 1,720,734 191.118

Retail exposures; 1,037,249 2.109

Exposures secured by real property 479.690 0

Exposures at default 102.111 5.370

Exposures in capital instruments 1.960

Other positions. 178.688

Total 4,680,575 214.345

XVI. REMUNERATIONS POLICY AND PRACTICE

1. Bank's remuneration policy

The remuneration policy in Societe Generale Expressbank AD Group was developed in accordance

with the obligatory requirements and takes into consideration the best practices in this field. The

policy and all of its amendments and updates are proposed and adopted by the Management Board of

the Bank and approved by the Supervisory Board.

The Remuneration Committee of Societe Generale Expressbank AD is an authority supporting the

functions of the Supervisory Board related to assessment and independent review of the remuneration

policy of the Bank in accordance with the regulatory requirements, the recommendations of the

European Commission and the international good practices in the field of the corporate management

and the remuneration policies in the financial field. The membership of the committee is presented by

members of the Supervisory Board and independent members having relevant professional expertise

and functional independence from Societe Generale Expressbank AD who are capable of providing an

independent assessment of the remuneration policy, incl. on its impact on the risk management.

The remuneration policy has been developed in three steps:

remunerations of the employees - fair and motivating remuneration against the assigned

responsibilities and in accordance with the grade of fulfillment of the undertaken obligations;

remuneration to these members of the staff who due to their work obligations can influence on

the risk profile of the Bank and its subsidiaries - risk takers;

remuneration to the members of the Management Board and the other authorities representing

the Bank and its subsidiaries - decision makers.

The remuneration policy has been developed in accordance with the following main principles:

the business strategy of the group Societe Generale Expressbank; prudent risk policy, aims,

values and long-term interests of the Group;

transparency within the organization and suitable way of disclosing the policy beyond it;

combined base between the personal contribution of the employee and the general result of the

company;


consolidated base

22

equality - upon structuring the package of incentives no kind of discrimination should be

allowed based on gender, age, race, religion, etc.

According to the system of remunerations they can have constant or variable nature. The wage is a

constant remuneration defined individually for each of the employees considering:

the responsibilities characteristic for the specific position of the employee;

The complexity of the labour functions and qualification in accordance with the knowledge

and skills of the employee and the requirements to his/her position;

The level of pay in the field;

The individual efficiency - the capacity of the employee to fulfill the assigned to him/her

obligations duly and properly, to actively contribute to the continuous improvement of the

work quality;

The elements of the monthly remuneration are:

Basic salary - remuneration for the fulfillment of the assigned functions and responsibilities

inherent to the work position in accordance with the standards for quantity, quality and

duration of the work time. Usually the labour remuneration forms a material part of the whole

package of material incentives;

Extra pay - related to the length of service; night work or overtime or Sunday work or work

during holidays and in other cases stipulated by the legislation. These additional labour

remunerations have actually compensation nature and should not be considered an important

motivating factor.

The bonus forms the floating part of the remuneration. The bonus shall be defined based on the result

of the Group, individual contribution and behaviour. The bonuses are defined on the grounds of two

factors:

- Result of the company:

The result of the company is a combination of the financial result, market shares, reputation

and risk level. The results of SG Group, IBSF and Societe Generale Expressbank Group are

considered;

- Individual contribution:

The individual contribution is related to the achievements. For measuring the individual

contribution specific quality indicators have been introduced as: Achieving the individual

targets for products' realization, observing terms and schedules, characteristic both of the

projects' implementation and fulfillment of the daily functions.

The monthly remuneration shall be paid in cash. With regard to the bonuses, the regulators

recommend that they include a deferred component - financial instruments of the company, tools of

keeping with the system of bonus-malus (a system in which the bonus may be retroactively reduced in

the cases of losses during the following years), etc. Bonuses that are direct expression of the individual

financial result, if any - they should be provided under the condition of providing possibility that they

be refunded, in case it is ascertained that they were deserved as a result of fraudulent activity or were

achieved upon violation of the applicable rules.

A special focus shall be set on the remunerations of the people observing controlling functions or risk

management functions: Current control - credit risk, financial risk, operational risks, etc; regular

control and constant control. The remuneration for these positions is proper and corresponding to the

levels in this sector in order to allow Societe Generale Expressbank AD to attract highly-qualified,

well-experienced professionals and to ensure their independence and loyalty.


consolidated base

23

The remuneration reflects the personal contribution of the employee and the efficiency of these

functions, as well as the level of achievement of the purposes related to the risk management and

control. The remuneration is related to the complete result of the company and is not directly related to

the results of the business units being subject to control.

In implementation of the requirements of Ordinance No 4 related to the variable part of the

remuneration, as well as the principles of Societe Generale Group Remuneration Policy, specific

categories of employees have been identified, to whom the specific requirements to the variable

remuneration to be applied. For the last year there were no employees, the variable remuneration of

whom to exceed the threshold accepted in Societe Generale Group and applicable as well in Societe

Generale Expressbank AD.

2. Summarized quantitative information for 2014 on the remunerations of the persons according

to art. 450 of Regulation (EU) No 575/2013 and Ordinance No 4 of BNB of 2010 on the

requirements to the remunerations in the banks.

- Paid remunerations for 2014 (in TBGN) by activities:

Types of activities Remuneration

paid in 2014

Investment banking 924

Credit activity 17904

Corporate functions 7732

Independent controlling functions 1444

Other 3834

- The amount of the annual remunerations, differentiated in constant and variable remunerations

and the number of their recipients are:

Constant annual remunerations - TBGN 30,692 1632 employees

Variable annual remunerations - TBGN 2,856 1130 employees

- The amount of the annual remunerations of the persons under art. 2 of Ordinance 4 of BNB

totals TBGN 1,711.

- The amount and the type of the variable remunerations is TBGN 2,856 - cash funds;

- There are no unpaid deferred remunerations;

- There are no deferred remunerations, allocated during the accounting year, being paid and

reduced through adjustments based on the achieved results;

- There are no remunerations upon job appointment;

- The amount of the compensations upon dismissal is TBGN 102, as the highest amount of such

compensation allocated to one specific person was TBGN 12.

- We have no employee to receive remuneration amounting to EUR 1 million or more for one

financial year.

XVІІ. LEVERAGE

Societe Generale Expressbank AD calculates the ratio of leverage upon observing the requirements of

Regulation (EU) No 575/2013; It is expressed in percent and is formed by the value of Tier one capital

correlated to the sum total of the amounts of the exposures under all assets and off-balance sheet

positions that have not been deducted upon defining the value of the Tier one capital.

The leverage ratio shall be calculated as arithmetic mean of the monthly values of the leverage ratio

for a quarter.


consolidated base

24

As at 31.12.2014 the value of the leverage ratio upon the use of completely adopted definition of one-

tier capital is 6.27%.

The Bank manages the risk of excessive leverage through current monitoring of the leverage ratio,

performing a constant monitoring in order to prevent mismatch between the assets and liabilities and

applying preventive measures against its possible growth due to reducing the tier one capital in case of

possible losses.


consolidated base

25

APPENDIX 1A

BALANCE SHEET INTENDED FOR REGULATORY PURPOSES

as at 31.12.2014

ASSETS TBGN

Cash and cash balances in central banks and other sight deposits

843,162

Financial tradable assets 178,797

Financial assets disposable for sale. 301,732

Loans and receivables 3,446,809

Investments in subsidiaries, joint ventures and partnerships

6,002

Tangible assets 76,666

Intangible assets 9,787

Deferred tax assets 3,033

Other assets

19,928

Non-current assets and groups of assets for disposing classified as held for sale

1,334

TOTAL ASSETS: 4,887,250

LIABILITIES

Financial liabilities kept for trading 23,977

Financial liabilities assessed by their depreciable value 4,236,893

Provisions 7,195

Tax Liabilities 4,665

Other Liabilities 52,674

TOTAL LIABILITIES: 4,325,404

EQUITY

Capital 33,674

Premium reserves 45,070

Accumulated other comprehensive income 31,984

Undistributed profit 15,213

Other reserves 376,803

Profit or loss concerning the owners of the partner company 58,777

Small participations (non-controlling participations) 324

TOTAL EQUITY 561,846

TOTAL EQUITY and TOTAL LIABILITIES 4,887,250


consolidated base

26

APPENDIX 1B

Methodology for balance sheet matching Announcing pursuant to art. 2 of the Commission Implementing Regulation (EU) No 1423/2013 of

20.12.2013 as at 31.12.2014

TBGN

Balance sheet elements participating in the calculation of the regulatory capital

Amount in the accounting

statements

Companies not falling within the scope of the

regulatory consolidation

Value for the regulatory

purposes

EQUITY

Subscribed capital 33,674 33,674

Premium reserve 45,070 45,070

Other reserves (incl. undistributed profit from previous years)

449,207 1,568 392,341

Revaluation reserve / Accumulated other comprehensive income

33,420 -1,111 31,984

Total equity 561,371 503069

Position: Amount

Equity due to the Balance sheet of the Group 503069

Intangible assets -9787

Investments in subsidiaries, joint ventures and partnerships -4042

Other transitional adjustments of the basic equity and one tier capital -31783

including:

Unrealized gains and losses (art. 468 and 467) and deductions (art. 469-472 and art. 478 of Regulations 575/2013/ -20880

Additional filters and deductions under art. 36 , 469, 472 and 472 of Regulation 575/2013. -10903

Basic Equity Tier one capital 457457

Tier two capital 457457

Tier two capital 28320

Total capital base 485777


consolidated base

27

Appendix 1C

Capital instruments’ main features template

Disclosure according to Article 3 in Commission implementing regulation (EU) No 1423/2013

Capital instruments’ main features template (1)

1 Issuer

Societe Generale Expressbank AD


2

Unique identifier (eg CUSIP, ISIN or Bloomberg identifier for private

placement ISIN BG1100101051

3 Governing law(s) of the instrument Bulgarian legislation Bulgarian legislation

Regulatory treatment

4 Transitional CRR rules

Common Equity Tier 1 capital T i e r 2

5 Post-transitional CRR rules


6 Eligible at solo/(sub-)consolidated/solo

& (sub-)consolidated Solo &consolidated

7 Instrument type (types to be specified by each jurisdiction)

share Tier 2, according to art. 63/Reglement

575/2013

8

Amount recognised in regulatory capital (currency in million, as of

most recent reporting date)

33674

765

9 Nominal amount of instrument 1 BGN 27382

9a Issue price N/A N/A

9b Redemption price

N/A 100% of the instrument's

nominal value

10 Accounting classification Share capital Liabilities -

amortisated value

11 Original date of issuance 13.Jun.93 20.Feb.08

12 Perpeptual or dated Perpeptual dated

13 Original maturity date N/A 7 years

14 Issuer call subjet to prior

supervisory approval N/A N/A

15 Optional call date, contingent call dates, and redemption amount

N/A N/A

16

Subsequent call dates, if applicable

N/A N/A

Coupons / dividends

17 Fixed or floating dividend/coupon Floating dividend Floating

18

Coupon rate and any related index

N/A 3M EURIBOR + 1.2 %

19 Existence of a dividend stopper N/A

20a

Fully discretionary, partially discretionary or mandatory (in

terms of timing

N/A

20b


terms of amount)

N/A


consolidated base

28

21

Existence of step up or other incentive to redeem

N/A

22 Noncumulative or cumulative N/A N/A

23 Convertible or non-convertible N/A N/A

24 If convertible, conversion trigger

(s) N/A N/A

25 If convertible, fully or partially N/A N/A

26 If convertible, conversion rate N/A N/A

27 If convertible, mandatory or

optional conversion N/A N/A

28 If convertible, specifiy instrument

type convertible into N/A N/A

29 If convertible, specifiy issuer of

instrument it converts into N/A N/A

30 Write-down features No No

31 If write-down, write-down trigger

(s)

N/A N/A

32 If write-down, full or partial N/A N/A

33

If write-down, permanent or temporary N/A N/A

34

If temporary write-down,

description of write-up mechanism

N/A N/A

35

Position in subordination hierachy in liquidation (specify instrument

type immediately senior to instrument)

Senior loan Senior loan

36 Non-compliant transitioned

features Не

37 If yes, specifiy non-compliant

features

N/A N/A

(1) 'N/A' inserted if the question

is not applicable


consolidated base

29

Appendix 1D

Transitional own funds disclosure template

Disclosure according to Article 5 in Commission implementing regulation (EU) No 1423/2013 31.12.2014

Common Equity Tier 1 capital: instruments and reserves (1)

KBGN

(B) REGULATION (EU)

No 575/2013

ARTICLE REFERENCE

(C)

AMOUNTS SUBJECT TO

PRE-REGULATION (EU) No 575/2013

TREATMENT

OR PRESCRIBED

RESIDUAL AMOUNT OF REGULATIO

N (EU) 575/2013

1 Capital instruments and the related share premium accounts 78 744

26 (1), 27, 28, 29, EBA list 26 (3) N/A

of which: Instrument type 1 N/A EBA list 26 (3) N/A



2 Retained earnings 15 213 26 (1) (c) N/A

3

Accumulated other comprehensive

income (and any other reserves) 408 787 26 (1) N/A

3a Funds for general banking risk 0 26 (1) (f) N/A

4

Amount of qualifying items referred to in Article 484 (3) and

the related share premium accounts subject to phase out from CET1 0 486 (2) N/A

Public sector capital injections grandfathered until 1 january 2018 0 483 (2) N/A

5

Minority interests (amount allowed

in consolidated CET1) 325 84, 479, 480 N/A

5a

Independently reviewed interim profits net of any foreseeable

charge or dividend 26 (2) N/A

6

Common Equity Tier 1 (CET1) capital before regulatory adjustments 503 069 N/A


consolidated base

30

Common Equity Tier 1 (CET1) capital: regulatory adjustments

7 Additional value adjustments (negative amount) 0 34, 105 N/A

8 Intangible assets (net of related tax liability) (negative amount) -9 787

36 (1) (b), 37, 472 (4) N/A

9 Empty set in the EU 0 N/A

10

Deferred tax assets that rely on future profitability excluding those

arising from temporary difference (net of related tax liability where the conditions in Article 38 (3) are met) (negative amount) 0 36 (1) (c), 38, 472 (5) N/A

11

Fair value reserves related to gains or losses on cash flow hedges 0 33 (a) N/A

12

Negative amounts resulting from

the calculation of expected loss amounts 0

36 (1) (d), 40, 159, 472 (6) N/A

13

Any increase in equity that results from securitised assets (negative amount) 0 32 (1) N/A

14

Gains or losses on liabilities valued at fair value resulting from changes in own credit standing 0 33 (1) (b) (c) N/A

15 Defined-benefit pension fund assets (negative amount) 0

36 (1) (e), 41, 472 (7) N/A

16

Direct and indirect holdings by an institution of own CET1 instruments (negative amount) 0 36 (1) (f), 42, 472 (8) N/A

17

Direct, indirect and synthetic holdings of the CET1 instruments

of financial sector entities where those entities have reciprocal cross holdings with the institution designed to inflate artificially the own funds of the institution (negatvie amount) 0

36 (1) (g), 44, 472 (9) N/A


consolidated base

31

18

Direct, indirect and synthetic holdings of the CET1 instruments of financial sector entities where

the institution does not have a significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative amount) 0

36 (1) (h), 43, 45, 46, 49 (2) (3), 79, 472 (10) N/A

19

Direct, indirect and synthetic holdings of the CET1 instruments of financial sector entities where

the institution has a significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative amount) -4 042

36 (1) (i), 43, 45, 47, 48 (1) (b), 49 (1) to (3), 79, 470, 472 (11) N/A


20a

Exposure amount of the following

items which qualify for a RW of 1250%, where the institution opts for the deduction alternative 0 36 (1) (k) N/A

20b

of which: qualifying holdings outside the financial sector

(negative amount) 0 36 (1) (k) (i), 89 to 91 N/A

20c

of which: securitisation positions

(negative amount) 0

36 (1) (k) (ii) 243 (1) (b) 244 (1) (b)

258 N/A

20d

of which: free deliveries (negative

amount) 0

36 (1) (k) (iii), 379

(3) N/A


consolidated base

32

21

Deferred tax assets arising from

temporary difference (amount above 10 % threshold , net of related tax liability where the conditions in Article 38 (3) are met) (negative amount) 0

36 (1) (c), 38, 48 (1) (a), 470, 472 (5) N/A

22 Amount exceeding the 15% threshold (negative amount) 0 48 (1) N/A

23

of which: direct and indirect holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant

investment in those entities 0

36 (1) (i), 48 (1) (b),

470, 472 (11) N/A


25 of which: deferred tax assets arising from temporary difference 0

36 (1) (c), 38, 48 (1) (a), 470, 472 (5) N/A

25a Losses for the current financial year (negative amount) 0 36 (1) (a), 472 (3) N/A

25b Foreseeable tax charges relating to CET1 items (negative amount) 0 36 (1) (l) N/A

26

Regulatory adjustments applied to

Common Equity Tier 1 in respect of amounts subject to pre-CRR treatment 0 N/A

26a

Regulatory adjustments relating to unrealised gains and losses pursuant to Articles 467 and 468 -20880 N/A

26b

Amount to be deducted from or

added to Common Equity Tier 1

capital with regard to additional filters and deductions required pre CRR 0 481 N/A


consolidated base

33

27

Qualifying AT1 deductions that exceeds the AT1 capital of the institution (negative amount) -10 903 36 (1) (j) N/A

28 Total regulatory adjustments to Common Equity Tier 1 (CET1) -45 612 N/A

29 Common Equity Tier 1 (CET1) capital 457 457 N/A

Additional Tier 1 (AT1) capital: instruments

30 Capital instruments and the related share premium accounts 0 51, 52 N/A

31

of which: classified as equity under applicable accounting standards 0 N/A

32

of which: classified as liabilities under applicable accounting standards 0 N/A

33

Amount of qualifying items referred to in Article 484 (4) and the related share premium accounts subject to phase out from AT1 0 486 (3) N/A


34

Qualifying Tier 1 capital included in

consolidated AT1 capital (including minority interest not included in row 5) issued by subsidiaries and held by third parties 0 85, 86, 480 N/A

35 of which: instruments issued by subsidiaries subject to phase-out 0 486 (3) N/A

36 Additional Tier 1 (AT1) capital before regulatory adjustments 0 N/A

Additional Tier 1 (AT1) capital: regulatory adjustments

37

Direct and indirect holdings by an

institution of own AT1 instruments (negative amount) 0

52 (1) (b), 56 (a), 57, 475 (2) N/A


consolidated base

34

38

Holdings of the AT1 instruments of financial sector entities where those entities have reciprocal cross

holdings with the institution designed to inflate artificially the own funds of the institution (negative amount) 0 56 (b), 58, 475 (3) N/A

39

Direct, indirect and synthetic holdings of the AT1 instruments of

financial sector entities where the institution does not have a

significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative amount) 0

56 (c), 59, 60, 79, 475 (4) N/A

40

Direct, indirect and synthetic holdings of the AT1 instruments of financial sector entities where the institution has a significant

investment in those entities

(amount above 10% threshold and net of eligible short positions) (negative amount) 0

56 (d), 59, 79, 475 (4) N/A

41

Regulatory adjustments applied to Additional Tier 1 capital in respect of amounts subject to pre-CRR treatment and transitional

treatments subject to phase-out as prescribed in Regulation (EU) No 585/2013 (ie. CRR residual amounts) 10903 N/A

41a

Residual amounts deducted from Additional Tier 1 capital with regard to deduction from Common Equity Tier 1 capital during the transitional period pursuant to article 472 of Regulation (EU) No 575/2013 -7830

472, 473(3)(a), 472 (4), 472 (6), 472 (8) (a), 472 (9), 472 (10) (a), 472 (11) (a) N/A

41b

Residual amounts deducted from Additional Tier 1 capital with regard to deduction from Tier 2 capital during the transitional period pursuant to article 475 of

Regulation (EU) No 575/2013 N/A

477, 477 (3), 477 (4)

(a) N/A


consolidated base

35

41c

Amounts to be deducted from added to Additional Tier 1 capital with regard to additional filters and deductions required pre- CRR -3073 467, 468, 481 N/A

42

Qualifying T2 deductions that exceed the T2 capital of the institution (negative amount) 0 56 (e) N/A

43

Total regulatory adjustments to Additional Tier 1 (AT1) capital 0 N/A

44 Additional Tier 1 (AT1) capital 0 N/A

45 Tier 1 capital (T1 = CET1 + AT1) 457 457 N/A

Tier 2 (T2) capital: instruments and provisions

46 Capital instruments and the related share premium accounts 765 62, 63 N/A

47

Amount of qualifying items referred to in Article 484 (5) and the related share premium accounts subject to phase out from

T2 0 486 (4) N/A


48

Qualifying own funds instruments included in

consolidated T2 capital (including minority interest and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third party 0 87, 88, 480 N/A

49 of which: instruments issued by subsidiaries subject to phase-out 0 486 (4) N/A

50 Credit risk adjustments 0 62 (c) & (d) N/A

51

Tier 2 (T2) capital before regulatory

adjustment 765 N/A


consolidated base

36

Tier 2 (T2) capital: regulatory adjustments

52

Direct and indirect holdings by an

institution of own T2 instruments and subordinated loans (negative amount) 0

63 (b) (i), 66 (a), 67, 477 (2) N/A

53

Holdings of the T2 instruments and subordinated loans of financial sector entities where those entities have reciprocal cross holdings with the

institutions designed to inflate artificially the own funds of the institution (negative amount) 0 66 (b), 68, 477 (3) N/A

54

Direct, indirect and synthetic holdings of the T2 instruments and subordinated loans of financial sector entities where the institution does not have a significant

investment in those entities (amount above 10 % threshold and net of eligible short positions) (negative amount) 0 66 (c), 69, 70, 79, 477 (4) N/A

54a

Of which new holdings not subject to

transitional arrangements 0 N/A

54b

Of which holdings existing befor 1 January 2013 and subject to transitional arrangements 0 N/A

55

Direct, indirect and synthetic holdings of

the T2 instruments and subordinated loans of financial sector entities where the institution has a significant investment in those entities (net of eligible short positions) (negative amounts) 0 66 (d), 69, 79, 477 (4) N/A

56

Regulatory adjustments applied to tier 2

in respect of amounts subject to pre-CRR treatment and transitional treatments subject to phase out as prescribed in Regulation (EU) No 575/2013 (i.e. CRR residual amounts) N/A N/A

56a

Residual amounts deducted from Tier 2 capital with regard to deduction from Common Equity Tier 1 capital during the

transitional period pursuant to article 472 of Regulation (EU) No 575/2013 0

472, 472(3)(a), 472 (4),

472 (6), 472 (8), 472 (9), 472 (10) (a), 472 (11) (a) N/A

56b

Residual amounts deducted from Tier 2 capital with regard to deduction from Additional Tier 1 capital during the transitional period pursuant to article 475 of Regulation (EU) No 575/2013 0

475, 475 (2) (a), 475 (3), 475 (4) (a) N/A

56c

Amounts to be deducted from or added to Tier 2 capital with regard to additional

filters and deductions required pre- CRR 27555 467, 468, 481 N/A

57

Total regulatory adjustments to Tier 2

(T2) capital 27 555 N/A

58 Tier 2 (T2) capital 28 320 N/A

59 Total capital (TC = T1 + T2) 485 777 N/A


consolidated base

37

59a

Risk weighted assets in respect of amounts subject to pre-CRR treatment and transitional

treatments subject to phase out as prescribed in Regulation (EU) No 575/2013 (i.e. CRR residual amount) N/A N/A

Of which:… items not deducted from CET1 (Regulation (EU) No 575/2013 residual amounts) (items to be

detailed line by line, e.g. Deferred tax assets that rely on future profitability net of related tax

liability, indirect holdings of own CET1, etc) N/A

472, 472 (5), 472 (8)

(b), 472 (10) (b), 472 (11) (b) N/A

Of which:…items not deducted from AT1 items (Regulation (EU) No 575/2013 residual amounts) (items to be detailed line by line, e.g.

Reciprocal cross holdings in T2 instruments, direct holdings of non-significant investments in the capital of other financial sector entities, etc.) N/A

475, 475 (2) (b), 475 (2) ©, 475 (4) (b) N/A

Items not deducted from T2 items (Regulation (EU) No 575/2013 residual amounts) (items to be

detailed line by line, e.g. Indirect holdings of own T2 instruments, indirect holdings of non-significant investments in the capital of other financial sector entities, indirect holdings of significant investments in the capital of other financial

sector entities etc) N/A

477, 477 (2) (b), 477

(2) (c), 477 (4) (b) N/A

60 Total risk-weighted assets 3 565 119 N/A

Capital ratios and buffers

61

Common Equity Tier 1 (as a percentage of total risk exposure amount 12.83% 92 (2) (a), 465 N/A

62 Tier 1 (as a percentage of total risk exposure amount 12.83% 92 (2) (b), 465 N/A

63

Total capital (as a percentage of

total risk exposure amount 13.63% 92 (2) (c) N/A

64

Institution specific buffer requirement (CET1 requirement in accordance with article 92 (1) (a) plus capital conservation

and countercyclical buffer requirements plus a systemic risk buffer, plus systemically important institution buffer expressed as a percentage of total risk exposure amount)

not yet implemented CRD 128, 129, 140 N/A

65

of which: capital conservation

buffer requirement 2.50% N/A

66

of which: countercyclical buffer

requirement

not yet

implemented N/A

67 of which: systemic risk buffer requirement 3% N/A


consolidated base

38

67a

of which: Global Systemically Important Institution (G-SII) or Other Systemically Important Institution (O-SII) buffer

not yet implemented CRD 131 N/A

68

Common Equity Tier 1 available to meet buffers (as a

percentage of risk exposure amount)

not yet implemented CRD 128 N/A

69 [non-relevant in EU regulation] N/A N/A



Amounts below the thresholds for deduction (before risk-weighting)

72

Direct and indirect holdings of the capital of financial

sector entities where the institution does not have a significant investment in those entities (amount below 10% threshold and net of eligible short positions

36 (1) (h), 45, 46, 472 (10) 56 (c), 59, 60, 475 (4), 66 (c), 69, 70, 477 (4) N/A

73

Direct and indirect holdings of the CET1 instruments of financial sector entities where the institution has a

significant investment in those entities (amount below

10% threshold and net of eligible short positions

36 (1) (i), 45, 48, 470, 472 (11) N/A

74 Empty set in the EU N/A N/A

75

Deferred tax assets arising from temporary difference (amount below 10 % threshold , net of related tax liability where the conditions in Article 38 (3) are met)

36 (1) (c), 38, 48, 470, 472 (5) N/A

Applicable caps on the inclusion of provisions in Tier 2

76

Credit risk adjustments included in T2 in respect of

exposures subject to standardised approach (prior

to the application of the cap) N/A 62 N/A

77

Cap on inclusion of credit risk adjustments in T2 under standardised approach N/A 62 N/A

78

Credit risk adjustments included in T2 in respect of

exposures subject to internal rating-based approach (prior to the application of the cap) 62 N/A

79

Cap for inclusion of credit risk adjustments in T2 under

internal ratings-based

approach 62 N/A

Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2014 and 1 Jan 2022)


consolidated base

39

80

- Current cap on CET1 instruments subject to phase-out arrangements 484 (3), 486 (2) & (5) N/A

81

- Amount excluded from CET1 due to cap (excess over cap after redemptions and

maturities) 484 (3), 486 (2) & (5) N/A

82

- Current cap on AT1 instruments subject to phase-out arrangements 484 (4), 486 (3) & (5) N/A

83

- Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities) 484 (4), 486 (3) & (5) N/A

84

- Current cap on T2 instruments subject to

phase-out arrangements 484 (5), 486 (4) & (5) N/A

85

- Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) 484 (5), 486 (4) & (5) N/A

(1) 'N/A' inserted if the question is not applicable


consolidated base

40

Appendix 1D

Capital instruments’ main features template

Disclosure according to Article 3 in Commission implementing regulation (EU) No 1423/2013

Capital instruments’ main features template (1)

1 Issuer



2

Unique identifier (eg CUSIP, ISIN or Bloomberg identifier for private

placement ISIN BG1100101051

3 Governing law(s) of the instrument Bulgarian legislation Bulgarian legislation

Regulatory treatment

4 Transitional CRR rules


5 Post-transitional CRR rules


6 Eligible at solo/(sub-)consolidated/solo

& (sub-)consolidated Solo &consolidated

7 Instrument type (types to be specified by each jurisdiction)

share Tier 2, according to art. 63/Reglement

575/2013

8

Amount recognised in regulatory capital (currency in million, as of

most recent reporting date)

33674

765

9 Nominal amount of instrument 1 BGN 27382

9a Issue price N/A N/A

9b Redemption price

N/A 100% of the instrument's

nominal value

10 Accounting classification Share capital Liabilities -

amortisated value

11 Original date of issuance 13.Jun.93 20.Feb.08

12 Perpeptual or dated Perpeptual dated

13 Original maturity date N/A 7 years

14

Issuer call subjet to prior supervisory approval

N/A N/A

15 Optional call date, contingent call dates, and redemption amount

N/A N/A

16 Subsequent call dates, if

applicable N/A N/A

Coupons / dividends

17 Fixed or floating dividend/coupon Floating dividend Floating

18

Coupon rate and any related index

N/A 3M EURIBOR + 1.2 %

19 Existence of a dividend stopper N/A

20a


terms of timing

N/A

20b


terms of amount)

N/A


consolidated base

41

21

Existence of step up or other incentive to redeem

N/A

22 Noncumulative or cumulative N/A N/A

23 Convertible or non-convertible N/A N/A

24 If convertible, conversion trigger

(s) N/A N/A

25 If convertible, fully or partially N/A N/A

26 If convertible, conversion rate N/A N/A

27 If convertible, mandatory or

optional conversion N/A N/A

28 If convertible, specifiy instrument

type convertible into N/A N/A

29 If convertible, specifiy issuer of

instrument it converts into N/A N/A

30 Write-down features No No

31 If write-down, write-down trigger

(s)

N/A N/A

32 If write-down, full or partial N/A N/A

33

If write-down, permanent or temporary N/A N/A

34

If temporary write-down,

description of write-up mechanism

N/A N/A

35

Position in subordination hierachy in liquidation (specify instrument

type immediately senior to instrument)

Senior loan Senior loan

36 Non-compliant transitioned

features Не

37 If yes, specifiy non-compliant

features

N/A N/A

(1) 'N/A' inserted if the question

is not applicable


consolidated base

42

Appendix No 2

TBGN

Capital requirements - Risk exposures Amount

TOTAL AMOUNT OF RISK EXPOSURES: 3,565,119

AMOUNT OF THE RISK-WEIGHTED EXPOSURES FOR CREDIT RISK, CREDIT RISK FROM THE COUNTER PARTY.

3,204,219

Standardized approach 3,204,219

Central government or central banks; 75,856

Regional governments or local authorities; 8,585

Institutions 38,867

Enterprises 1,876,198

Retail 779,518

Exposures collateralized by mortgages on real properties; 216,942

Exposures at default 108,984

Capital Instruments 1,960

Other positions. 97,310

TOTAL AMOUNT OF THE EXPOSURES AGAINST POSITION, CURRENCY AND COMMODITY RISK

42,550

Amount of the exposures against position, currency and commodity risk in case of standardized approaches.

42,550

Tradable debt instruments 42,550

Capital Instruments 0

Currency 0

Goods 0

TOTAL AMOUNT OF RISK EXPOSURES FOR OPERATIONAL RISK: 318,349

Approach of the basic indicator for operational risk 318,349

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