AUDIT OF ANNUAL ACCOUNTS. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2022 AUDIT PLAN
Pag 1
MINISTRY OF FINANCE
AND CIVIL SERVICE
COMPTROLLER GENERAL OF
THE STATE ADMINISTRATION
AUDIT OF THE ANNUAL ACCOUNTS
ICO - OFFICIAL CREDIT INSTITUTE
2022 Audit Plan - Financial Year 2021
AUDInet Code 2022/75 PUBLIC AUDIT DIVISION I
AUDIT OF ANNUAL ACCOUNTS. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2022 AUDIT PLAN
Pag 2
TABLE OF CONTENTS
AUDIT OF ANNUAL ACCOUNTS. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2022 AUDIT PLAN
Pag 3
AUDIT REPORT THE ANNUAL ACCOUNTS ISSUED BY THE CONTROLLER GENERAL OF THE STATE
ADMINISTRATION IGAE
To the General Council of Instituto de Crédito Oficial
Opinion
The Comptroller General of the State Administration, using the powers conferred upon it by article
168 of the General Budgetary Law, has audited the annual accounts of the Instituto de Crédito
Oficial (the Institute), which comprise the balance sheet at 31 December 2021, the profit and loss
account, the statement of total changes in equity, the cash flow statement and the notes to the
financial statements for the year then ended.
In our opinion, the accompanying financial statements give, in all material respects, a true and fair
view of the net assets and financial position of the Institute as at 31 December 2021, and of its
results and cash flows for the year then ended, in accordance with the applicable financial reporting
framework (as identified in note 1.2 to the financial statements) and, in particular, with the
accounting principles and policies set out therein.
Basis of the opinion
We conducted our audit in accordance with the standards regulating account auditing activity that
apply to the Public Sector in Spain. Our responsibilities in accordance with these standards are
described below in the Responsibilities of the auditor in relation to the audit of consolidated annual
accounts section of our report.
We are independent from the entity in accordance with the ethical and independence protection
requirements that are applicable to our audit of the annual accounts for the Public Sector in Spain,
as required by the standards regulating Public Sector account auditing activity.
We believe that the audit evidence we have obtained provides a sufficient and appropriate basis
for our opinion.
AUDIT OF ANNUAL ACCOUNTS. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2022 AUDIT PLAN
Pag 4
Key issues of the audit
The key issues of the audit are issues that, in our professional opinion, were of greater significance
in our audit of the annual accounts for the current period. These issues have been dealt with in the
context of our audit of the annual accounts as a whole, and in the formation of our opinion on
these, and we express no separate opinion on those issues.
Estimate of losses due to impairment of the portfolio of loans and advances
The estimate of the impairment of the value of Financial Assets at Amortised Cost is one of the most
significant estimates in the preparation of the accompanying annual accounts.
In order to estimate credit risk coverage, the provisions of Circular 4/2017 of 27 November and
other mandatory rules approved by the Bank of Spain are taken into consideration.
In general, the Institute recognises objective evidence of impairment when, following initial
detection, an event or the combined effect of several events cause a negative impact on the future
cash flows from loans and advances to customers. Objective evidence of impairment is determined
individually for the debt instruments that the Institute has identified as significant and collectively
for the others. The Institute's collective assessment includes groups of debt instruments that have
similar risk characteristics, indicative of the debtors' ability to pay the principal and interest
amounts, the type of instrument, the debtor’s sector of activity, the type of guarantee and the age
of amounts due, among others.
Our audit approach has included both the assessment of the most relevant controls established by
the Institute related to the calculation of impairment, as well as the performance of detailed and
substantive tests. The main audit procedures carried out have included the following:
- The verification of the various internal control policies and procedures established in
accordance with the applicable regulatory requirements.
- Examination of the individual databases used, with a review of their reliability and the
consistency of the data sources used in the calculations.
- Evaluation of the review carried out of borrowers' records to ensure their proper
classification and, where appropriate, possible impairment.
AUDIT OF ANNUAL ACCOUNTS. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2022 AUDIT PLAN
Pag 5
-
For the detailed tests, for a sample of individualised loans we reviewed, , their proper
accounting records and classification, and, where applicable, the corresponding
impairment.
-
Re-calculation of the provisions of loans classified as Normal risk or Normal risk under
Special Surveillance, evaluated on the basis of the alternative solutions established in
the Bank of Spain Circular.
The assessment methods used and the detail of information relating to the aforementioned items
are included in notes 2 and 10 of the accompanying consolidated report.
Risks associated with Information Technology
The very nature of the Institute’s activity and the process of the flow of financial information greatly
depends on Information Systems.
The overall internal control framework for Information Systems in relation to the processing and
recording of financial information is considered key to our assessment of internal control.
In this context, it is considered necessary to evaluate the effectiveness of General Controls of
internal control relating to Information Technology Systems.
Our audit approach has included the following processes:
- The evaluation of the most relevant general controls carried out by the Institute in key
processes. The main procedures carried out have consisted of general control tests on
the main applications, where we reviewed:
• Management of changes
• Physical and logical security
• Back-ups and Continuity
• Computer Systems Operations
- Revision of the existing interfaces between the main applications in the process of
generating accounting information.
AUDIT OF ANNUAL ACCOUNTS. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2022 AUDIT PLAN
Pag 6
The results of the procedures employed have given us sufficient and adequate evidence to consider
that our conclusion on these facts as key issues is appropriate.
Other issues
The audit firm Mazars Auditores, S.L.P. by virtue of the contract signed with the Ministry of Finance,
at the proposal of the Comptroller General of the State Administration, has carried out the audit
work referred to in the first section. In this work, the Comptroller General of the State
Administration applied the Technical Standard for relations with auditors in the public sector of 30
December 2020.
The Comptroller General of the State Administration has drawn up this report on the basis of the
work carried out by the auditing firm Mazars Auditores, S.L.P.
Likewise, Mazars Auditores, S.L.P., in accordance with the stipulations of the second additional
provision of Law 22/2015, of 20 July, on Accounts Auditing, has issued, on 8 April 2022, another
audit report on the annual accounts of the Institute, applying the regulations governing accounts
auditing in force in Spain (ISA-ES). This report, intended to meet certain requirements laid down in
sectoral regulations, as well as for other commercial or financial reasons, has been issued with the
prior authorisation of the Comptroller General of the State Administration, by virtue of the
provisions of the collaboration contract.
The audit report on the Institute's annual accounts includes the "Report on other legal and
regulatory requirements - Single European Electronic Format", where the auditor expresses an
opinion on the digital files examined and whether they correspond in full with the audited annual
accounts, which are presented and have been marked up, in all material respects, in accordance
with the requirements set out in the EUESF Regulation.
Other information
The other information includes the management report for 2021 and the report on the fulfilment
of economic-financial obligations referred to in article 129.3 of the General Budget Law undertaken
by the Institute as a result of belonging to the Public Sector. Their formulation is the responsibility
of the Institute’s Chairman and they do not form an integral part of the annual accounts.
AUDIT OF ANNUAL ACCOUNTS. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2022 AUDIT PLAN
Pag 7
Our audit opinion on the annual accounts does not cover this other information. Our responsibility
for the other information, as required by auditing standards, is to evaluate and report on the
consistency of the other information with the financial statements based on our knowledge of the
Institute obtained in the course of the audit of those financial statements and not including
information other than that obtained as evidence during the audit. In addition, our responsibility
with respect to the other information is to assess and report whether its content and presentation
are compliant with applicable standards. If, based on the work that we have done, we conclude
that there are material misstatements, we are obliged to report this.
On the basis of the work performed, as described in the previous paragraph, we have nothing to
report with respect to the report on compliance with the financial and economic obligations
assumed by state public sector entities subject to the Spanish General Chart of Accounts and its
adaptations as a result of their belonging to the public sector, and the information contained in the
management report is consistent with the annual accounts for the 2021 financial year and its
content and presentation are in accordance with the applicable regulations.
Management's responsibility in relation to the annual accounts
The Chairman is responsible for the preparation of the accompanying annual accounts in a way that
accurately represents the Institute’s equity, financial situation and results, in accordance with the
normative framework of financial information applicable to the Institute in Spain, and with the
internal control that they consider necessary to allow for the preparation of annual accounts free
from material misstatement, as a result of fraud or error.
In the preparation of the annual accounts, the Chairman is responsible for assessing the Institute's
ability to continue as a going concern, disclosing, as appropriate, going concern matters and using
the going concern accounting principle, unless the Chairman intends or has a legal obligation to
liquidate the Institute or cease operations, or if there is no other realistic alternative.
The auditor's responsibilities in relation to the audit of the annual accounts
Our objectives are to obtain reasonable assurance that the annual accounts as a whole are free
from material misstatement, due to fraud or error, and to issue an audit report that contains our
opinion.
AUDIT OF ANNUAL ACCOUNTS. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2022 AUDIT PLAN
Pag 8
Reasonable assurance is a high degree of assurance, but this does not guarantee that an audit
conducted in accordance with the standards regulating account auditing activity for the Public
Sector in Spain always detects a material misstatement when this exists. Misstatements may be
due to fraud or error and are considered material if, individually or at an aggregated level, they may
reasonably be expected to influence users’ economic decisions taken based on the annual accounts.
As part of an audit in accordance with the standards regulating the account auditing activity for the
Public Sector in Spain, we apply our professional judgement and we maintain an attitude of
professional scepticism throughout the audit.
In addition:
•
We identify and evaluate the risks of material misstatement in the annual accounts due
to fraud or error, we design and implement audit procedures to respond to these risks
and we obtain sufficient and appropriate audit evidence to provide a basis for our
opinion. The risk of not detecting a material misstatement due to fraud is higher than in
the case of a material inaccuracy due to error, because fraud may involve collusion,
forgery, deliberate omissions, intentionally erroneous reports or the circumvention of
internal control.
• We obtain knowledge of the relevant internal control for the audit in order to design
audit procedures that are appropriate in the circumstances, and not for the purpose of
expressing an opinion on the effectiveness of the Institute's internal control.
• We assessed the appropriateness of the accounting policies applied and the
reasonableness of the accounting estimates and related disclosures made by
management.
• We establish whether the Chairman’s use of the going concern principle is appropriate
and, based on the audit evidence obtained, we conclude whether or not there is a
material uncertainty related to the facts or conditions that may generate significant
doubts about the Institute's ability to continue as a going concern. If we conclude that
material uncertainty exists, we must report this in our audit report on the corresponding
information disclosed in the annual accounts or, if such disclosures are not adequate,
we must express a modified opinion. Our findings are based on audit evidence obtained
AUDIT OF ANNUAL ACCOUNTS. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2022 AUDIT PLAN
Pag 9
up to the date of our audit report. However, future facts or conditions may cause the
Institute to cease to be a going concern.
•
We assessed the overall presentation, structure and content of the annual accounts,
including disclosed information, and whether or not the annual accounts accurately
represent transactions and underlying facts.
We communicated with the Chairman on, among other issues, the scope and timing of the planned
audit and the audit’s significant findings, as well as any significant shortcomings in internal control
that we identified during the audit.
Among the issues that have been communicated to the Institute’s Chairman, we identified those
that have been of the greatest importance in the audit of the annual accounts for the current period
and that are, consequently, the audit’s key issues.
We describe these matters in our audit report unless legal or regulatory provisions prohibit public
disclosure.
This audit report has been signed electronically through the CICEP.Red application of the
Comptroller General of the State Administration by the Head of Public Audit Division I, in Madrid,
on 8 April 2022.
INSTITUTO DE CRÉDITO OFICIAL
Annual Accounts at 31 December 2021 and
Management Report corresponding to 2021
Free translation of annual accounts originally issued in Spanish.
In the event of a discrepancy, the Spanish-language version prevails.
INSTITUTO DE CRÉDITO OFICIAL
BALANCE SHEETS AT 31 DECEMBER 2021 AND 2020
(Expressed in thousands of Euros)
1
ASSETS
2021
2020
Cash, deposits at central banks and demand deposits (Note 6)
9 379 495
2 729 384
Financial assets held for trading (Note 7)
10 701
61 724
Derivatives
10 701
61 724
Memorandum item: loaned or advanced as collateral
-
-
Financial assets not held for trading obligatorily valued at fair value through profit or loss
(Note 8)
-
-
Financial assets at fair value through other comprehensive income (Note 9)
2 237 145
1 618 994
Equity instruments
1 086 506
905 636
Debt securities
1 150 639
713 358
Loans and advances
-
-
Memorandum item: loaned or advanced as collateral
-
-
Financial assets at amortised cost (Note 10)
25 327 301
29 343 703
Debt securities
6 889 673
7 347 498
Loans and advances
18 437 628
21 996 205
Credit institutions
7 724 368
10 562 681
Customers
10 713 260
11 433 524
Memorandum item: loaned or advanced as collateral
Hedging derivatives (Note 11)
455 009
285 325
Investments in subsidiaries, joint ventures and associates (Note 12)
52 599
49 292
Subsidiaries
1 940
1 940
Joint ventures
-
-
Associates
50 659
47 352
Property, plant and equipment (Note 13)
84 042
85 385
Property, plant and equipment
For own use
84 042
85 385
Memorandum item: Acquired under finance lease
-
-
Intangible assets (Note 14)
6 518
6 865
Other intangible assets
6 518
6 865
Tax assets (Note 15)
184 905
180 413
Current
32 435
32 290
Deferred
152 470
148 123
Other assets (Note 16)
28 421
24 990
Non-current assets and disposable groups of elements qualified as held for sale (Note 17)
-
-
TOTAL ASSETS
37 766 136
34 386 075
INSTITUTO DE CRÉDITO OFICIAL
BALANCE SHEETS AT 31 DECEMBER 2021 AND 2020
(Expressed in thousands of Euros)
2
LIABILITIES
2021
2020
Financial liabilities held for trading (Note 7)
10 580
60 824
Derivatives
10 580
60 824
Financial liabilities at fair value through profit or loss
-
-
Financial Liabilities at amortised cost (Note 18)
30 558 851
27 778 726
Deposits
10 213 100
12 185 596
Deposits from Central Banks
3 444 351
3 155 040
Credit Institution
5 894 436
7 616 532
Customer
874 313
1 414 024
Marketable debt securities
20 087 210
15 294 101
Other financial liabilities
258 541
299 029
Memorandum item: Subordinated liabilities
-
-
Hedging derivatives (Note 11)
331 071
600 770
Provisions (Note 19)
1 390 309
686 745
Pensions and similar obligations
791
656
Provisions for taxes and other legal contingencies
-
-
Provisions for contingent exposures and commitments
48 652
27 855
Other provisions
1 340 866
658 234
Tax Liabilities (Note 15)
81 907
50 301
Current
6 748
1 098
Deferred
75 159
49 203
Other liabilities (Note 16)
39 414
6 334
TOTAL LIABILITIES
32 412 132
29 183 700
EQUITY
Equity (Note 20)
5 380 738
5 327 690
Capital or endowment fund
4 314 480
4 314 204
Accumulated reserves
-
-
Revaluation reserves
19 036
19 948
Other reserves
924 262
923 350
Profit and loss for the period
122 960
70 188
Minus: Dividends and remunerations
-
Other accumulated comprehensive income (Note 21)
(26 734)
(125 315)
Elements that cannot be reclassified at profit and loss
134 557
72 925
Changes in fair value equity inst. at fair value through other comprehensive income
134 557
72 925
Elements that can be reclassified at profit and loss
(161 291)
(198 240)
Cash-Flow hedges
(164 931)
(202 947)
Changes in fair value debt inst. at fair value through other comprehensive income
3 640
4 707
TOTAL EQUITY
5 354 004
5 202 375
TOTAL EQUITY AND LIABILITIES
37 766 136
34 386 075
INSTITUTO DE CRÉDITO OFICIAL
BALANCE SHEETS AT 31 DECEMBER 2021 AND 2020
(Expressed in thousands of Euros)
3
MEMORANDUM ITEM
2021
2020
Granted guarantees (Note 22)
528 275
414 937
Granted contingent commitments (Note 22)
4 329 019
4 587 753
INSTITUTO DE CRÉDITO OFICIAL
PROFIT AND LOSS ACCOUNTS CORRESPONDING TO YEARS ENDED AT 31
DECEMBER 2021 AND 2020
(Expressed in thousands of Euros)
4
2021
2020
Interest and similar income (Note 24)
252 186
290 841
Interest and similar charges (Note 25)
(147 640)
(269 060)
NET INTEREST INCOME
104 546
21 781
Dividends income (Note 26)
5 225
5 344
Fee and Commission income (Note 27)
31 047
37 046
Fee and Commission expense (Note 27)
(7 793)
(6 495)
Gains or losses from financing operations (net)
42 394
37 577
Gains or losses on financial assets and liabilities not measured at fair value through profit or loss (net) (Note 28)
(356)
162
Financial assets at fair value through other comprehensive income
-
-
Financial assets at amortised cost
-
23
Financial liabilities at amortised cost
(356)
139
Gains or losses on financial assets and liabilities held for trading (net) (Note 29)
364
3 385
Gains or losses on financial assets obligatorily at fair value through results (net) (Note 30)
-
-
Gains or losses resulting from hedge accounting (net) (Note 31)
42 386
34 030
Exchange differences (net) (Note 2.4)
5 619
(7 852)
Other operating income (Note 32)
827
817
Other operating expenses (Note 32)
-
-
GROSS MARGIN
181 865
88 218
Administration expenses
(39 987)
(37 604)
Personnel costs (Note 33)
(22 241)
(21 225)
Other administration expenses (Note 34)
(17 746)
(16 379)
Depreciation and amortisation
(4 773)
4 413)
Property, plant and equipment (Note 13)
(2 021)
(1 965)
Intangible assets (Note 14)
(2 752)
(2 448)
Provisions expense or reversal of provisions (Note 19)
(15 609)
72 850
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss
48 435
(22 162)
Financial assets at fair value through other comprehensive income (Note 9)
(8 767)
790
Financial assets at amortised cost (Notes 10)
57 202
(22 952)
Impairment or reversal of impairment on non-financial assets
(81)
(96)
Goodwill and other intangible assets (Note 14)
-
-
Other assets (Note 17)
(81)
(96)
Gains/ (Losses) on non-current assets and groups held for sale of elements classified as held for sale not classified
as discontinued operations (Note 17)
1 848
755
PROFIT OR LOSS BEFORE TAX FROM ONGOING OPERATIONS
171 698
97 548
Income tax expenses (income) from ongoing operations (Note 23)
(48 738)
(27 360)
PROFIT OR LOSS AFTER TAX FROM ONGOING OPERATIONS
122 960
70 188
PROFIT OR LOSS AFTER TAX FROM DISCONTINUED OPERATIONS
-
-
PROFIT OR LOSS FOR THE YEAR
122 960
70 188
INSTITUTO DE CRÉDITO OFICIAL
STATEMENTS OF CHANGES IN EQUITY
I. STATEMENT OF RECOGNISED INCOME AND EXPENSES CORRESPONDING TO
YEARS ENDED AT 31 DECEMBER 2021 AND 2020
(Expressed in thousands of Euros)
5
2021
2020
Profit/(loss) for the year
122 960
70 188
Other comprehensive income
98 581
(104 822)
Elements not reclassified on profit and loss account
61 632
36 009
Variations in fair value equity instruments at fair value through other comprehensive
income (Note 21)
88 046
51 441
Profit or loss hedge accounting
Income tax of elements not reclassified in profit or loss
(26 414)
(15 432)
Elements that can be reclassified in profit or loss
36 949
(140 831)
Hedging of cash flows, effective portion (Note 21)
54 309
(203 944)
Debt instruments at fair value through other comprehensive income (Note 21)
(1 524)
2 757
Income tax of elements that can be reclassified on profit or loss
(15 836)
60 356
TOTAL RECOGNISED INCOME AND EXPENSES (global result)
221 541
(34 634)
INSTITUTO DE CRÉDITO OFICIAL
STATEMENTS OF CHANGES IN EQUITY
II. TOTAL STATEMENT OF CHANGES IN EQUITY CORRESPONDING TO YEARS ENDED AT 31 DECEMBER
2021 AND 2020
(Expressed in thousands of Euros)
6
At 31 December 2021
OWN FUNDS
Capital /
Endowment
fund
Share
premium
Reserves
Other equity
instruments
Minus:
Treasury
shares
Profit/(loss)
for the year
Minus:
dividends and
remunerations
TOTAL
OWN
FUNDS
OTHER
ACCUMULATED
COMPREHENSIVE
INCOME
TOTAL
EQUITY
Closing balance at 31 December 2020
4 314 204
-
943 298
-
-
70 188
-
5 327 690
(125 315)
5 202 375
Total recognised income and expenses
-
-
-
-
-
122 960
-
122 960
98 581
221 541
Other variations of equity:
Capital increases / endowment fund
276
-
-
-
-
-
-
276
-
276
Transfers between equity items
-
-
-
-
-
-
-
-
-
-
Other increases (decreases) equity
-
-
-
-
-
(70 188)
-
(70 188)
-
(70 188)
Total other variations of equity
276
-
-
-
-
(70 188)
-
(69 912)
-
(69 912)
Closing balance at 31 December 2021
4 314 480
-
943 298
-
-
122 960
-
5 380 738
(26 734)
5 354 004
INSTITUTO DE CRÉDITO OFICIAL
STATEMENTS OF CHANGES IN EQUITY
II. TOTAL STATEMENT OF CHANGES IN EQUITY CORRESPONDING TO YEARS ENDED AT 31 DECEMBER
2021 AND 2020
(Expressed in thousands of Euros)
7
At 31 December 2020
OWN FUNDS
Capital /
Endowment
fund
Share
premium
Reserves
Other equity
instruments
Minus:
Treasury
shares
Profit/(loss)
for the year
Minus:
dividends and
remunerations
TOTAL
OWN
FUNDS
OTHER
ACCUMULATED
COMPREHENSIVE
INCOME
TOTAL
EQUITY
Closing balance at 31 December 2019
4 314 033
-
943 298
-
-
106 941
-
5 364 272
(20 493)
5 343 779
Total recognised income and expenses
-
-
-
-
-
70 188
70 188
(104 822)
(34 634)
Other variations of equity:
Capital increases / endowment fund
171
-
171
171
Transfers between equity items
(106 941)
25 000
(81 941)
(81 941)
Other increases (decreases) equity
(25 000)
(25 000)
(25 000)
Total other variations of equity
171
-
(106 941)
(106 770)
(106 770)
Closing balance at 31 December 2020
4 314 204
-
943 298
-
-
70 188
-
5 327 690
(125 315)
5 202 375
INSTITUTO DE CRÉDITO OFICIAL
STATEMENT OF CASH FLOWS CORRESPONDING TO YEARS ENDED AT 31
DECEMBER 2021 AND 2020
(Expressed in thousands of Euros)
8
2021
2020
A. CASH FLOWS FROM OPERATING ACTIVITIES
6 651 451
1 970 595
1. Profit/(loss) for the year
122 960
70 188
2. Adjustments to obtain operating cash flows
15 096
(27 668)
Depreciation and amortisation
4 773
4 413
Other adjustments
10 323
(32 081)
3. Net increase /decrease in operating assets
3 289 454
(699 776)
Trading portfolio
51 023
7 683
Other financial assets at fair value through profit or loss
-
-
Financial assets at fair value through other comprehensive income
(618 151)
207 143
Financial assets at amortised cost
4 016 402
(874 256)
Other operating assets
(159 820)
(40 346)
4. Net increase/decrease in operating liabilities
3 251 055
2 688 303
Trading portfolio
(50 244)
(8 488)
Other financial liabilities at fair value through profit or loss
-
-
Financial liabilities at amortised cost
2 780 125
1 954 003
Other operating liabilities
521 174
742 788
5. Collections/payments for income tax
(27 114)
(60 452)
B. CASH FLOWS FROM INVESTMENT ACTIVITIES
(1 616)
(837)
6. Payments
(3 307)
(2 426)
Property, plant and equipment (Note 13)
-
-
Intangible assets (Note 14)
-
-
Shareholdings (Note 12)
(3 307)
(2 426)
Non-current assets and liabilities associated for sale (Note 17)
-
-
Debt securities at amortised cost
-
-
Other payments related to investing activities
-
-
7. Collections
1 691
1 589
Property, plant and equipment (Note 13)
1 343
1 581
Intangible assets (Note 14)
348
8
Shareholdings (Note 12)
-
-
Non-current assets and liabilities associated for sale (Note 17)
-
-
Debt securities at amortised cost
-
-
Other collections related to investing activities
-
-
INSTITUTO DE CRÉDITO OFICIAL
STATEMENT OF CASH FLOWS CORRESPONDING TO YEARS ENDED AT 31
DECEMBER 2021 AND 2020
(Expressed in thousands of Euros)
9
2021
2020
C. CASH FLOWS FROM FINANCING ACTIVITIES
276
(24 829)
8. Payments
-
(25 000)
Dividends
-
(25 000)
Subordinated liabilities
Amortisation of own equity instruments
Acquisition of own equity instruments
Other payments related to financing activities
9. Collections
276
171
Subordinated liabilities
-
-
Issue of own equity instruments
-
-
Disposal of own equity instruments
-
-
Other collections related to financing activities (Note 20)
276
171
D. EFFECT OF EXCHANGE RATE FLUCTUATIONS
-
-
E. NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS
6 650 111
1 944 929
F. CASH OR CASH EQUIVALENTS AT BEGINNING OF THE YEAR
2 729 384
784 455
G. CASH OR CASH EQUIVALENTS AT END OF THE YEAR
9 379 495
2 729 384
MEMORANDUM ITEM
COMPONENTS OF CASH AND EQUIVALENTS AT THE END OF THE PERIOD
Cash (Note 6)
4
9
Cash equivalent balances with central banks (Note 6)
9 344 958
2 704 007
Other financial balances (Note 6)
34 533
25 368
Minus: bank overdrafts repayable
-
-
10
INSTITUTO DE CRÉDITO OFICIAL
Notes to the Annual accounts corresponding to
the year ended at 31 December 2021
11
1. INTRODUCTION, BASIS OF PRESENTATION AND OTHER INFORMATION
1.1 Introduction
Instituto de Crédito Oficial (hereinafter “the Institute” or “ICO”) created by the Law 13/1971 on
Official Credit Organisation and System was regulated, up until the publication of Royal
Decree Law 12/1995 on Urgent Budget, Tax and Financial Measures, by the provisions of
Article 127 of Law 33/1987 on the General State Budgets for 1988 and some provisions not
repealed of Law 13/1971.
The Institute is domiciled at Paseo del Prado, 4, in Madrid, place where it carries out all of its
activities without having any other office network in Spain.
The Institute is a public business entity of those provided for Article 103 of Law 40/2015 on
Legal Regime of the Public Sector, pertains to the Minister of Economic Affairs and Digital
Transformation, through the Secretary of State for Economy and Company Support; it is a
credit institution by law and is considered to be a State Finance Agency with its own legal
personality, assets and finance, as well as management autonomy to fulfil its purpose.
The Secretary of State for Economy and Company Support is responsible for the strategic
management of the Institute, as well as for the evaluation and control of the results of its
activities.
The Institute is governed by the provisions of the Law 40/2015 on the Legal Regime of the
Public Sector, through Additional Provision Six of Royal Decree-Law 12/1995, on Urgent
Budget, Tax and Financial Measures; by applicable provisions of Law 47/2003, of 26
November, General Budget, by its bylaws, approved by Royal Decree 706/1999, on the
adaptation of Instituto de Crédito Oficial to Law 6/1997 (14 April) and the approval of its bylaws,
and any other matter not covered by the above regulation, are governed by the special
legislation applicable to credit institutions and general civil, mercantile and employment
legislation.
Concerning the Corporate Governance, in addition to the abovementioned Law 40/2015,
Royal Decree 1149/2015, of 18 December, is applicable to the Institute. Since its entry into
force, the General Council is made up by the President and 10 Members (9 until then), in
whose appointment objective selection criteria are applied, such as the prestige and training,
regulating incompatibilities, and establishing a three-year period, renewable (only once) for
three more. Independent Members have double vote in financial business matters and will
therefore be majority in the ICO’s General Council. The Members’ appointment and cessation
is the responsibility of the Council of Ministers, at the proposal of the Minister of Economic
Affairs and Digital Transformation.
12
The requirements to be appointed as independent Director include: recognised commercial
and professional honourability, have appropriate knowledge and experience, not incurring
potential permanent conflicts of interest and refrain from developing activities by self-
employed or employed which involve effective competition with the ICO. Furthermore it is
required not be linked to credit institutions; financial credit establishments; investment firms;
collective investment schemes, risk capital entities, its subsidiaries and the group which they
belong to or associations.
The General Board members will have to perform their functions always attending to the ICO
interest, as well as keeping secret on information, data, reports and confidential backgrounds
to which they have had access in the performance of their duties, even after ceasing their
duties. The dismissal can occur by resignation accepted by the Minister of Economic Affairs
and Digital Transformation, expiry of the mandate for the independent Members or termination
in the case of Members from the public sector. Unexpected lack of suitability in the case of
independent members will be cause of dismissal, just like serious breach of confidentiality
duties or conflict of interest.
The Institute's purposes are to sustain and promote economic activities that contribute to
growth, and the improvement of national wealth distribution, especially, of all those activities
that deserve some support due to their social, cultural, innovative or ecological importance.
When pursuing these aims, the Institute must completely respect the principles of financial
balance and the adaptation of the means to purposes.
The Institute has also the following functions:
a) Contribute to the mitigation of the economic effects deriving from serious economic
recessions, natural catastrophes or similar situations, in accordance with the
instructions received in this aspect from the Council of Ministers or the Government
Commission for Economic Matters.
b) Act as the principal instrument for executing certain economic policy measures, in line
with the fundamental guidelines established by the Council of Ministers or the
Government Commission for Economic Matters, or the Ministry of Economic Affairs
and Digital Transformation, subject to the rules and decisions adopted by its General
Board.
Within the framework of these purposes and duties, the following types of operations are
included:
1. Direct and mediation activities, modalities that count with a wide catalogue of financing
products and collaterals through which ICO contributes to promoting feasible business
projects, favouring the growth of companies, their long-term investments, and
international activity, in order to promote the sustainable growth, employment
13
generation, and wealth distribution.
2. Reciprocal Interest Adjustment Agreement (CARI for its initials in Spanish). This
exportation support system ensures a good performance for the member financial
institution, domestic or foreign. The Institute merely acts as an intermediary in the
transaction, charging the State for its management costs, in accordance with the
provisions of the General State Budget Act for each year.
The net result of interest adjustments with member banks is regularly offset by the
State or through a payment by the Institute to the State, depending on which part is
the debtor or creditor, respectively.
3. Development Promotion fund (FONPRODE for its initials in Spanish). This Fund was
established in 2010 under Act 36/2010. It is designed to finance development projects
and programs in under developed countries in the form of State-to-State grants. The
Institute acts as a Government agent. The structure, administration and accounting of
these transactions is kept separated from all other operations, in independent accounts
maintained by the Institute, and for what the ICO is reimbursed for the cost of
management in accordance with the General State Budget for each year. As of
December 2010, this particular Fund, acquired the Fund for micro-credits granting, also
managed by the Institute since 1998 until its merger into FONPRODE.
4. Companies Internationalisation Fund (FIEM for its initials in Spanish). This Fund was
established in 2010 under Act 11/2010. Its activity consists on providing reimbursable
financing for projects, under concessions or market terms, tied to the acquisition of
Spanish goods and services and to the execution of Spanish investment projects or
those of national interest. The Institute acts as a Government agent and the structuring,
administration and accounting for these transactions is kept separate from all other
operations, in independent accounts maintained by the Institute and for what the ICO
is reimbursed for the cost of management in accordance with the General State Budget
for each year.
5. Water and Sanitation Cooperation Fund. It was created through the Sixty-First
Additional Provision of Law 51/2007, 26 December, of the 2008 General State Budget
to fund water and sanitation projects under the financing arrangements with the
national authorities of the Latin America Countries, considered a priority for the
Spanish cooperation.
6. Finance Fund to Local Entities, resulting from the 17/2014 Royal Decree-Law, of 26
December, measures of financial sustainability of the autonomous communities and
local entities and others of economic nature, in order to ensure financial sustainability
of the municipalities attached, by addressing its financial requirements. The equity of
the Fund is endowed by the result of the liquidation of the Fund for the Financing of
Payments to Suppliers (created by Royals Decrees 4/2012 and 7/2012), which
14
happens in all its rights and obligations, effective January 1, 2015. ICO plays the trader
role, without registering any of these operations on its accounting records. This activity
generates for the Institute a pertinent trading commission.
7. Finance Fund to Autonomous Communities resulting from 17/2014 Royal Decree-Law
of 26 December, measures of financial sustainability of the autonomous communities
and local entities and others of economic nature, in order to ensure financial
sustainability of the autonomous communities attached. The equity of the Fund is
endowed by the result of the liquidation of the Autonomous Region Liquidity Fund
(created by Royal Decree 21/2012), which happens in all its rights and obligations,
effective January 1, 2015. Also it included in the equity part of the funding mechanism
for payment to suppliers in the part corresponding to Autonomous Communities. ICO
plays the trader role, without registering any of these operations on its accounting
records. This activity generates for the Institute a trading commission.
8. ICO COVID-19 surety lines, established and regulated by RD Law 8/2020, of 17 March,
RD Law 25/2020, of 3 July, RD Law 11/2020, of 31 March, RD Law 34/2020, of 17
November and RD Law 5/2021, of 12 March. This regulation, developed through the
corresponding Agreements of the Council of Ministers, approved the establishment of
several State surety lines, for an amount above 140,000 million Euros, in order to ease
the maintenance of employment and palliate the economic effects of the health crisis
caused by the COVID-19. Sureties are granted to financing granted by financial entities
to ease the access to credit and liquidity for businesses and employers (liquidity surety
lines), as well as to face the financial needs derived from the performance of new
investments (investment surety lines). Additionally, specific tranches were enabled,
establishing sureties in issues of promissory notes made by companies in the
Alternative Fixed-Income Market (MARF). Sureties have a term of up to 8 years. Also,
a surety line is contemplated for lessees, in the modality of liquidity loans, guaranteed
and subsidised by the State to face the lease of the families’ main residences. In this
activity, ICO acts on behalf of the State, exercising management and administration
functions, for which the Institute accrues the corresponding commissions, registered
as income in the income statement.
Except for the direct and mediation activity, which is included in the Institute’s accounts, its
remaining functions are management operations of public funds, performed by ICO as State’s
Financial Agency, and therefore are not included in the Institute’s accounts, by virtue of
regulations applicable to them.
15
1.2 Bases of presentation of the annual accounts
Annual accounts of the Institute for the year ended December 31, 2021 are presented in
accordance with the provisions of Bank of Spain Circular 4/2017 of 27 November on public
and confidential financial reporting rules and formats for credit institutions (“Circular 4/2017”)
and subsequent amendments thereto, which implement and adapt to Spanish credit
institutions the International Financial Reporting Standards endorsed by the European Union
(“IFRS-EU”), in accordance with Regulation (EC) No. 1606/2002 of the European Parliament
and of the Council, of 19 July, on the application of international accounting standards. The
other general Spanish business and accounting standards and other applicable Bank of Spain
Circulars and standards were also used in the preparation of these annual accounts, including,
where appropriate, the disclosures required by these standards in these notes to the annual
accounts.
The Institute’s annual accounts for the year ended at December 31, 2021 were prepared
taking into account all accounting principles and standards and mandatory measurement
criteria applicable in order to give a true and fair view, in all material respects, of the equity
and financial position of Institute at December 31, 2021 and of the results of its operations and
cash flows during the financial year then ended, pursuant to the aforementioned applicable
financial information reporting framework, and in particular to the accounting principles and
criteria therein.
The information contained in these annual accounts for the year 2020 is presented only for
comparative purposes with the information relating to the year 2021 and therefore does not
constitute the ICO's annual accounts for the year 2020.
The principal accounting policies and measurement bases applied in preparing the Institute’s
annual accounts for the year ended at December 31, 2021 are summarised in Note 2.
Main regulatory changes during the period from January 1 to December 31, 2021
Circular 5/2021, of 22 December
This standard updates Circular of Bank of Spain 2/2016, of 2 February, and completes the
adaptation of the Spanish legal system to Directive 2013/36/EU and EU Regulation 575/2013,
on supervision and solvency. The standard has not had a significant impact in the ICO.
Circular 6/2021, of 22 December
The Circular amends Circulars 4/2017, of 27 November, and 4/2019, of 26 November, on
financial reporting standards and models of financial statements for credit institutions and
financial credit establishments. The standard updates certain reports to be issued to the
Regulator (FINREP, UEM), which are being complied with by ICO in due time. It also updates
the corresponding provisions in relation to the application of the reform of rates of reference
16
IBOR (accounting hedges, other financial operations and information on the annual accounts),
with a scarcely significant impact in the Institute. Finally, it updates Annex IX, of analysis and
coverage of the credit risk: (i) adapting the standard on the concession and monitoring of loans
to the EBA guidelines (already applied by ICO); (ii) adjusting criteria for the reclassification
outside the doubtful risk of restructured or refinanced operations, to adapt them to EU
Regulation 2021/451 (application from 31/12/21 or optionally from 30/06/21, already applied
by ICO); (iii) amending tables of percentages of alternative solutions for the collective estimate
of hedges, generally increasing them.
RD Law 5/2021, of 12 March, of extraordinary measures to support the business
solvency in response to the COVID-19 pandemic and ACM of May 25, 2021
The standard establishes, among others, three measures to support the business solvency in
relation to the debt guaranteed by the State under RD Law 8/2020 and RD Law 25/2020: (i)
extension of the maturity and/or grace period; (ii) conversion of the guaranteed financing into
participation loan; (iii) direct transfers to reduce of principal of the guaranteed debt, under the
condition that the intermediary financial entity adheres to a Code of Best Practices. These
solvency measures and those corresponding to the Code of Best Practices have been
developed in ACM of May 11, 2021. Moreover, through ACM of May 25, 2021, a new sureties
tranche is released for an amount of up to 15,000 million Euros, to guaranteed financing
granted by credit institutions to companies and freelancers.
The Institute’s annual accounts of 2021 have been formulated by its Chairman on March 30,
2022, awaiting approval by the Institute’s General Board. The present annual accounts, unless
otherwise indicated, are presented in thousands of Euros.
1.3 Responsibility for information and estimates
The information contained in the annual accounts for the year ended December 31, 2021 and
the accompanying Notes regarding those annual accounts are responsibility of the Chairman.
During the preparation of these annual accounts, some estimates have been made by ICO to
quantify certain assets, liabilities, income, expenses, and commitments included in those
statements. These estimates basically refer to:
- Impairment losses on certain assets (Note 2.7).
- Assumptions used in actuarial calculations of liabilities and commitments related to
post-employment benefits and other long-term commitments with employees (Note
2.10.2).
- Useful life of fixed assets and intangible assets (Notes 2.12 and 2.13).
- Losses on future obligations derived from contingent risks (Note 2.14).
17
- The fair value of certain unlisted assets (Note 2.2.3).
- Recoverability of deferred tax assets (Note 2.11).
Although these estimates were made based on the best information available at December
31, 2021 in relation with the analysed facts, future events could lead significant adjustments
to be made (upward or downward) in coming years. These changes would be made
prospectively, to recognise the impact of the change in the estimate of the income statement
for the specific years.
1.4 Transfer of assets and liabilities from the former Argentaria
The extinct entities Argentaria, Caja Postal and Banco Hipotecario, S.A., were the result of
the merger between Corporación Bancaria de España, S.A., Banco Exterior de España, S.A.
(BEX), Caja Postal, S.A. and Banco Hipotecario de España, S.A. (BHE), in accordance with
the public merger document dated September 30, 1998. Banco de Crédito Agrícola, S.A.
(BCA), which was previously taken over by Caja Postal, S.A. and Banco de Crédito Local de
España, S.A. (BCL), which also pertained to the first entity, Argentaria, maintains its legal
personality.
Based on what was established in the A.C.M. on February 15, 1993, the Institute acquired on
December 31, 1992, the assets and liabilities pertaining to BCL, BHE, BCA and BEX derived
from economic policy operations that were guaranteed by the State or the Institute and,
specifically, the loans and guarantees provided to companies in conversion (covered by the
conversion and re-industrialisation legislation). Also they were acquired exceptional loans
granted to victims of floods, the loans granted by these entities prior to their transformation
into public limited liability companies, as well as other assets, rights and equity investments.
Furthermore, on March 25, 1993, a management contract was signed with the relevant banks,
regarding the assets and liabilities transferred, including its administration as well as its correct
accounting in accordance of the current banking legislation.
On January 2019, both the management, and the administration and bookkeeping of
transferred assets and liabilities was assumed by the Institute. At December 31, 2021, the
balance of net assets was of 17 thousand Euros and the amount of results generated in the
year was of 247 thousand Euros (29 thousand Euros of net assets and 161 thousand Euros
of results at December 31, 2020).
18
1.5 Presentation of consolidated annual accounts
Furthermore the operations that the Institute manages directly, the ICO is the leader of a group
conformed by dependent entities, which carry out many diverse activities and, constitute, with
it, the whole ICO Group. Consequently, the Institute has prepared, apart from its own annual
accounts, the consolidated accounts for the ICO Group, following the current legislation
regarding the holdings in joint ventures and associates
.
In accordance with Article 42
nd
of the Spanish Code of Commerce, the Institute has prepared
its consolidated annual accounts the same date as the present annual accounts. The effect of
this consolidation on the balance sheet, income statement, statement of total changes in
equity, and the statement of recognised income and expense as of December 31
,
2021 and
2020, is as follows:
Thousands of Euros
2021
2020
Individual
Consolidated
Individual
Consolidated
Assets
37 766 136
37 790 433
34 386 075
34 406 884
Equity
5 354 004
5 409 434
5 202 375
5 240 946
Profit and loss the period
122 960
139 861
70 188
79 092
Total income and charges recognised in equity
221 541
238 442
(34 634)
(25 730)
Net Increase / (Decrease) in cash or cash
equivalents
6 650 111
6 650 015
1 944 929
1 945 026
1.6 Environmental impact and greenhouse effect gas emission rights
The ICO's global transactions follow the laws on environmental protection. The Institute
considers that it substantially complies with these Laws and that it maintains procedures
designed to ensure and encourage its compliance.
Also, the Institute considers, that it has taken appropriate environmental protection and
improvement measures, and for minimising, when possible, the environmental impact
following the rules regarding this matter. In 2021 and 2020 the Institute has not carried out
significant environmental investments and neither has it considered it necessary to register
any provision for environmental risks and charges. Furthermore, the Institute has not
considered any significant contingencies in relation with environmental protection and
improvement, neither it has had greenhouse effect gas emission rights.
19
1.7 Minimum coefficients
1.7.1 Minimum equity ratio
The Bank of Spain, dated May 22, 2008, has issued Circular 3/2008 on identification and
control of the minimum equity. The aforesaid Circular is the final development in the field of
credit institutions, on the legislation on its equity and supervision on a consolidated basis of
the credit institutions issued from Law 36/2007 of 16 November. It amends Act 13/1985, of
25 May, of the investment ratio, equity and information obligations of financial intermediaries
and other financial system that includes the Royal Decree 216/2008, of February 15 of credit
institutions equity. This also completes the process of adapting the legislation of Spanish
credit institutions to EU directives 2006/48/EC of the European Parliament and the Council
of June 14, 2006 concerning the business of credit institutions (recast) and 2006/49/EC of
the European Parliament and the Council of June 14, 2006 on capital adequacy of investment
services companies and credit institutions (recast). The two Directives have been deeply
revised, following the equivalent agreement adopted by the Basel Committee on Banking
Supervision (known as Basel II), the minimum capital requirements due to credit institutions
and their consolidated groups.
The Law 10/2014 of 26 June, concerning management, supervision and solvency of credit
institutions, has replaced, from January 1, 2014, the former legal body concerning prudential
banking regulation (Law 13/1985, from 25 May, and Circular 3/2008 of the Bank of Spain).
Previously, the European Union moved to its legal system Basel III accords, as of December
2010, by Regulation (EU) No 575/2013 of the European Parliament and of the Council from
26 June on the prudential requirements for credit institutions and investment services
companies, amending Regulation (EU) No 648/2012 and Directive 2013/36/EU of the
European Parliament and of the Council of 26 June, relating to the activity of credit institutions
and the prudential supervision of credit institutions and investment services companies,
amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC as
transposed into our system started with RD Law 14/2013, of 29 November, on urgent
measures for adaptation of Spanish law with the norms of the European Union supervision
and solvency of credit institutions.
The main purpose of the Law 10/2014, of 26 June, has been adapting Spanish law to
regulatory changes imposed on the international stage and the European Union, directly
incorporating the provisions of Regulation (EU) 575/2013 of 26 June (CRR), and making the
proper transposition of Directive 2013/36/EU of 26 June (CRD). These Community rules have
led to a substantial alteration of the rules applicable to credit institutions, since aspects such
as the supervisory regime, capital requirements and penalty system has been extensively
modified.
20
The CRR and CRD regulate capital requirements in the European Union and include the
recommendations set out in the Basel III capital regulatory framework or agreement,
specifically:
- The CRR, which is directly applicable to Member States, contains prudential
requirements for credit institutions and covers, inter alia, the following:
- The definition of elements of eligible own funds, establishing requirements for
hybrid instruments to be included and limiting the eligibility of minority interests.
- The definition of prudential filters and deductions of items in each capital levels.
In this respect, the Regulation includes new deductions compared to Basel II
(deferred tax assets, pension funds) and introduces changes to existing
deductions. Nevertheless, it notes that the Regulation establishes a phase
calendar until its final full implementation between 5 and 10 years.
- Establishment of minimum requirements (Pillar I), with three levels of own funds:
a Common Equity Tier 1 capital ratio of 4.5%, a Tier 1 capital ratio of 6% and a
minimum requirement total capital ratio of 8%.
- Requirement of credit institutions to calculate a leverage ratio, defined as Tier 1
capital divided by total exposure unadjusted for risk. The disclosure requirement
will be applicable from 2016 onwards and the final definition was established in
2017 by supervisors.
- The aim and main purpose of the CRD, which must be transposed into national
legislation by the Member States according to their criteria, is to coordinate national
legislation regarding the access to the activity of credit institutions and investment firms
and their
governance and supervisory framework. The CRD includes, inter alia,
additional capital requirements to those established in the CRR, which will be phased
in gradually until 2019. Failure to comply will imply restrictions on the discretionary
distributions of profit, specifically:
o A capital conservation buffer and a countercyclical capital buffer, extending the
regulatory framework of Basel III, to mitigate pro-cyclical effects of financial
regulation. All credit institutions must maintain a capital conservation buffer of 2.5%
above Common Equity Tier 1 and an institution-specific countercyclical capital
buffer above Common Equity Tier 1.
o A systemic risk buffer. For global systemically important institutions and other
systemically important institutions to mitigate systemic or macro prudential risks;
i.e. risks of disruptions in the financial system with the potential to have serious
negative consequences for the financial system and the real economy in a specific
Member State.
21
o In addition, the CRD, within the oversight responsibilities, states that the
Competent Authority may require credit institutions to maintain a larger amount of
own funds than the minimum requirements set out in the CRR (Pillar II).
Pursuant to the Additional Provision 8
th
of Law 10/2014, of 26 June, on management,
supervision and solvency of credit institutions, Instituto de Crédito Oficial will apply Titles II
(Solvency of credit institutions), III (Supervision) and IV (Legal penalties) of that Law, except
as determined by regulations, and the provisions regarding duty of confidentiality of
information.
From the period 2015, according with Circular 2/2014 of Bank of Spain, capital buffers
established in this norm are applicable. To date no amount has been established for the
specific countercyclical capital buffer by the Banking Supervisor this year. ICO is not an entity
of global systemic importance (EISM for its initials in Spanish) nor is it considered as a
systemically important entity (EIS for its initials in Spanish).
In 2019, Regulation EU 2019/876, of 20 May, was approved, amending Regulation (EU)
575/2013 (CRR II) of Credit Entities’ solvency. Although the standard entered into force, in
general, from June 28, 2021, certain provisions entered into force on June 27, 2019 (field of
application, supervision powers, definitions, equity and admissible liabilities and definitions of
the leverage ratio). These provisions did not affect ICO.
In 2020, Regulation EU 2020/873, of 24 June, was approved, amending Regulations EU
575/2013 and EU 2019/876 concerning certain adaptations made in response to the COVID-
19 pandemic (including, among other measures, the extension of transitory provisions in
relation to the effect of the IFRS 9 on provisions, for the purpose of solvency, establishment
of new temporary prudential filters, and advancement of the new treatment for certain
exposures, and application of the support factor to SMEs and Infrastructures). This standard’s
provisions have had a scarce impact in ICO.
At December 31, 2021 and 2020, the ICO Group’s computable capital is as follows:
Thousands of Euros
2021
2020
Common Equity Tier 1 (*)
4 942 804
5 024 167
Capital
4 314 480
4 314 204
Reserves and prudential filters (**)
628 324
709 963
Tier 2
-
-
Other reserves (**)
-
-
Generic insolvency risk hedging
-
-
Total computable capital
4 942 804
5 024 167
Total minimum capital (***)
2 132 547
2 153 568
22
(*)
The Group has no additional Tier 1.
(**) The total reserves used for the calculation of capital of the Group computable differ from those recorded in the consolidated balance sheet
because in the calculation of capital are given: adjustments for intangible assets and adjustments for reserves.
(***) Calculated as 15.95% of risk-weighted assets (RWA), established by Bank of Spain for the Group for 2021 (same percentage as for the
2020 closing)
At December 31, 2021 and 2020, the most important data of the minimal capital of the Group
are (in thousands of Euros):
Thousands of Euros
2021
2020
Tier 1
4 942 804
5 024 167
Risk-weighted assets (RWA)
13 370 200
13 501 994
Tier 1 ratio (%)
36,97%
37,21%
Computable total Capital
4 942 804
5 024 167
Computable total Capital ratio (%)
36,97%
37,21%
Minimum computable capital ratio (%) (*)
15,95%
15,95%
(*) The total minimum capital ratio from December 31, 2021, established by Bank of Spain for the ICO Group, is 15.95%,
considering both the requirements established by the Regulation EU 575/2013 (8%), and additional capital needs to cover
concentration and business risks and other risks included in the Capital Self-Assessment Report corresponding to 2020
(5.45%) and capital buffers (2.5%).
At December 31, 2021 and 2020, the Group’s computable capital exceeds minimum
requirements required from the entity in 2,810,257 thousands of Euros and 2,870,599
thousand Euros, respectively.
1.7.2 Minimum reserves ratio
The Institute must maintain a minimum level of funds deposited in a central bank of an euro
country to cover the minimum reserve requirements. At December 31, 2021, this level was 2%
of computable liabilities. On November 24, 2011, Regulation (EU) No 1358/2011 came into
effect, requiring 1% for additional computable liabilities (time deposits of over two years
drawable subject to a notice period of more than two years, sales under repurchase
agreements and securities other than shares with maturities of over two years). This
amendment was applied following the maintenance period that started on January 18, 2012.
At December 2021 and 2020, and throughout 2021 and 2020, ICO complied with the minimum
ratios required by applicable Spanish regulations.
23
1.7.3 Capital management
The Institute considers capital, as management purposes, Tier 1 and Tier 2 computable
regulated by the legislation which is applicable to it for solvency purposes (EU Regulation
575/2013).
In this sense, the regulatory capital requirements are incorporated directly in the management,
thereof in order to maintain at all times a solvency ratio higher than the minimum established
for the entity by Bank of Spain. This objective is met through a proper capital planning.
1.8 Subsequent events
In accordance with Additional Provision of Law 24/2001, of 27 December, on Tax,
Administrative and Social Security measures, amended by aforementioned Law 42/2006, the
amounts recovered following the repayment by Central Government of the debts incurred with
ICO as a result of certain credit and guarantee facilities granted by the former Entidades
Oficiales de Crédito and the Institute itself, will form part of the Institute's equity. The amount
estimated for 2021 totals 200 thousand Euros, which will be registered in 2022.
In 2022, Instituto de Crédito Oficial, as a State Financial Agency, has capitalised by
government order, new credit lines for businesses and individuals in order to provide more
liquidity to the Spanish credit system and to address other needs within the framework of the
Institute objectives. The main lines approved are the following:
- ICO Companies and Entrepreneurs Facility: this ICO line provides finance to
freelances and companies performing its investments within the country and that need
to fulfil their liquidity needs. Individuals and landlord communities can also take
advantage of this line for housing restoration.
- ICO SGR/SAECA Guarantee Facility: this ICO line provides finance to freelances and
Spanish or mixed companies, which resources are mainly located in Spain, within a
Reciprocal Guarantee Company (SGR for its initials in Spanish) or the state-owned
corporation of Caución Agraria (SAECA for its initials in Spanish).
- ICO Commercial Facility: this ICO line provides finance to freelances and Spanish or
mixed companies established in Spain, to obtain liquidity through the advance of the
amount of the invoices from their commercial business within the national territory.
- ICO Red.es Acelera Facility: Financing of projects for which the granting of aids by
Red.es is approved, for the experimental development and promotion of digital
technologies.
- ICO International Facility: this ICO line provides finance to freelances and Spanish or
mixed companies with resources mainly Spanish performing productive investments
24
overseas and/or that need to fulfil its liquidity needs.
- ICO Exporters Facility: this ICO line provides finance to freelances and Spanish
companies that have a need of liquidity, and help them though advances in bills coming
from its export activity.
- ICO International Channel Facility: Financing to support the internationalisation
process for self-employed professionals and companies. The main difference between
this product and the ICO International Facility and the ICO Exporters Facility is that the
loans are applied for at local banks or international institutions that have a central office
in the country where the investment projects or export activities are carried out
As every year, during January 2022, the ICO and credit institutions that submitted the
application for membership of these credit lines, handled the drafting and signatures of the
contracts.
The war caused by the Russian invasion in the Ukrainian territory is causing, among others,
an increase in the price of raw materials and energy supplies, as well as the adoption of
penalty measures by Western countries against Russia, affecting, to a greater or lesser extent,
the economy in general and, in particular, those entities operating in the Ukrainian or Russian
territory, or who have any bond with these countries. The ICO does not have a direct exposure
with countries involved in the conflict and, despite the uncertainty it is causing, to date, the
Entity’s Directors do not expect this event to cause any issue in the Entity’s daily activity and
in the compliance with its obligations towards third parties.
No significant events other than those described in the previous paragraphs have occurred
since the end of the reporting period (December 31, 2021) until the date these annual accounts
were issued (March 30, 2022).
1.9 Information per business segment
The Institute's principal activity is the granting of credit lines and direct loans. Therefore, in
accordance with relevant legislation, it is considered that the information regarding the
segmentation of operations into different lines of business at the ICO is not relevant.
In addition, the ICO develops its activity both inside and outside the Spanish territory. All
operations are granted to fund Spanish interests.
1.10 ‘ICO Direct’ lending activities
In June 2010, ICO launched a new business segment known as “ICO Direct”, designed to
provide financing to self-employed individuals, SMEs, and non-profit entities residing in Spain
(which have been operating for more than one year) in order to make new investments in
machinery, furniture, IT equipment and buildings. This business segment complements ICO's
25
normal lending activities conducted through mediation lines to credit institutions and
represents a broadening of the finance channels aimed at SMEs and self-employed
individuals. The ICO Direct line was renewed for 2011 and 2012, finishing at June 2012.
Transactions derived from ICO Direct activities were formally processed and administered by
Banco Santander (BS) and Banco Bilbao Vizcaya Argentaria (BBVA). These credit institutions
were awarded in the public tender held by ICO for this purpose.
The balance at December 31, 2021 of total net assets was of 174 thousand Euros (383
thousand Euros at December 31, 2020). Results generated in 2021 have been of 3,728
thousand Euros (3,763 thousand Euros in 2020).
1.11 ICO local corporation lending activity in 2011
The 2011 ICO-Local Corporation Facility started as a consequence to the Royal Decree-Law
designed to foster the stability of public accounts and social protection approved in July 2011
by the Spanish Minister Council. Its aim was to alleviate the problems of many self-employed
professionals and small businesses that, in light of the struggling economy, were suffering
from major problems settling their charging rights on supplies, works and services provided to
local entities.
This facility was designed to provide local corporations (local and municipal governments) with
liquidity to settle their pending invoices until April 30, 2011. It was mostly designed to help
them repay debts with self-employed individuals and SMEs based on the age of certifications
or documents.
The ICO-Local Corporation Facility was in operation from July 2011 to November 2011. During
this time, the facility enabled 1,029 local, regional and inter-island town councils through Spain
to settle 222,975 outstanding invoices, accounting a total amount of 967 million Euros for
supplies, constructions and services provided by 38,338 self-employed individuals and SMEs
during 2011.
The formalisation and administration of the 2011 ICO-Local Corporation Facility operation is
carried out through several EECC added to the project.
At December 31, 2021, the balance of these assets (classified as doubtful assets) was of
2,557 thousand Euros (3,458 thousand Euros at December 31, 2020).
This line is guaranteed to the Institute with the Participation in State Income (PTE for its initials
in Spanish) of the borrowing EELL. The reduction in the outstanding balance of this line, from
the beginning of it and until December 31, 2021, under the PTE, is 62.79 million Euros (61.89
million Euros at December 31, 2020). Of the 1,029 hosted entities to December 31, 2021, a
total of 409 entities have had to resort to the PTE. At December 31, 2021 are still claiming
deductions of PTE to 7 EELL, for an outstanding amount of 2.6 million Euros.
26
2. ACCOUNTING PRINCIPLES, POLICIES AND VALUATION METHODS APPLIED
During the development of ICO's annual accounts for the year ended at December 31, 2021,
the following accounting principles, policies and valuation methods have been applied
a) Going concern principle
In preparing the annual accounts has been considered that the management of the Institute
will continue in a foreseeable future. Therefore, the application of accounting standards is not
designed to determine the net asset value for the purpose of global or partial transfer in the
event of liquidation.
b) Accruals principle
The annual accounts, except what is related to the cash flow statements, have been prepared
on the basis of the real flow of goods and services, regardless the date of payment or
collection.
c) Other general principles
The annual accounts have been prepared under the historical cost approach, but modified
due to the revaluation, in the case of, land and buildings (only at January 1, 2004) (Note 13),
available for sale financial assets and financial assets and liabilities (including derivatives) at
fair value.
2.1 Shareholdings
2.1.1 Group Companies
Subsidiaries are those over which the Institute has control. It is understood that an entity
controls an investee when it is exposed, or has rights, to variable returns about its involvement
with the investee and has the ability to affect those returns through the power exercised over
the investee.
Consideration as subsidiaries requires:
- Power: An investor has power over an investee when the investor has existing rights
that give it the current ability to direct the relevant activities; i.e. the activities that
significantly affect the investee's returns;
- Returns: An investor is exposed, or has rights, to variable returns from its involvement
with the investee when the investor's returns from its involvement have the potential to
vary as a result of the investee's performance. The investor's returns can be only
positive, only negative or both positive and negative.
27
- Link between power and returns: An investor controls an investee if the investor not
only has power over the investee and exposure or rights to variable returns from its
involvement with the investee, but also has the ability to use its power to affect the
investor's returns from its involvement with the investee.
These shareholdings are presented in these annual accounts under the heading “Investments
in subsidiaries, joint ventures and associates” in the balance sheets and are valued at
acquisition costs, discounted for any impairment that they may have undergone.
Following the provisions of Bank of Spain Circular 4/2017, when there is evidence of
impairment of these shareholdings, the amount of the impairment is estimated as the negative
difference between its recoverable amount (calculated as the larger of the fair value of the
shareholding less necessary selling costs or their value in use, which is defined as the present
value of the cash flows that are expected to be received from the shareholding as dividends
and those relating to their disposal or other use) and their book value. Impairment losses
affecting these shareholdings and the recovery of any such losses are charged or credited,
respectively, under the heading “Gains or losses on financial assets and liabilities” in the
income statement
Accrued dividends during the year on these shareholdings are recorded under the heading
“Dividends income” in the income statement (Note 26).
Note 12 provides information on the accounting data of this heading at December 31, 2021
and 2020.
Appendix I provides relevant information on these entities, all of which close their financial
year at December 31.
2.1.2 Associates
Associates are entities over which the Institute holds significant influence, although they are
not part of a decision unit together with the Institute nor are they under joint control. Normally,
significant influence generally accompanies a direct or indirect shareholding of 20% or more
of the voting rights.
In accordance with the stipulations of the new regulations it is understood by control, the power
of managing a company’s operational and financial policies with the objective of archiving
profits from its operational activities.
Shareholdings in “Associates” are presented in these annual accounts under the heading
“Investments in subsidiaries, joint ventures and associates – Associates” in the balance sheet
and are valued at acquisition costs, adjusted impairment that they may have undergone.
28
When, in accordance with the provisions of Bank of Spain Circular 4/2017, there is evidence
of impairment of these shareholdings, the amount of the impairment is estimated as the
negative difference between the recoverable amount (calculated as the larger amount of the
fair value of the shareholding less necessary selling costs or their value in use, which is defined
as the present value of the cash flows that are expected to be received from the shareholding
as dividends and those relating to their disposal or other use) and their book value. Impairment
losses affecting these shareholdings and the recovery of any such losses are charged or
credited, respectively, under the heading “Gains or losses on financial assets and liabilities”
in the income statement.
Accrued dividends during the year on these shareholdings are recorded under the heading
“Dividends income” in the income statement (Note 26).
Appendix I provides relevant information on these entities.
2.2 Financial instruments
2.2.1 Initial recognition of financial instruments
Financial instruments are initially recognised in the balance sheet when the Institute becomes
part of the relevant contract, in accordance with the terms of that contract. Specifically, debt
instruments such as loans and deposits in cash are recognised as from the date on which, the
legal right to receive or the legal obligation to pay the cash is generated, respectively. In
general, financial derivatives are recognised on the date they have been contracted.
Purchases and sales of financial assets arranged through conventional contracts, understood
as those contracts under the parties' reciprocal obligations must be fulfilled with a timeframe
established by regulations or market conventions and which may not be settled by differences,
such as stock market contracts or currency forwards, are accounted for from the date on which
the benefits, risks, rights and duties inherent in all ownership are transferred to the acquirer.
Depending on the type of financial asset, purchased or sold, this may be the date of the
contract or the date of settlement or delivery. Specifically, transactions effected in the foreign
exchange spot market are recognised at the settlement date, transactions affected using
equity instruments traded in Spanish securities markets are recorded at the contract date and
transactions affected using debt instruments traded in Spanish securities markets are
recognised at the settlement date.
29
2.2.2 Transfers and Disposal of financial instruments
Financial instruments transfers are recorded taking into account the way in which risks and
benefits associated with the transferred financial instruments are transferred, based on the
following criteria:
- If risks and benefits are substantially transferred to third parties, as in unconditional
sales, sales and repurchase at fair value at the date of the acquisition, sales of financial
assets with a purchase option or sales gained issued deeply out of money, the
securitisation of assets in which the grantor retains no subordinate financing or grant
any credit enhancement to the new owners, etc., the transferred financial instrument
is removed off from the balance sheet, recognising both any right or obligation retained
or created as a result of the transfer.
- If risks and benefits associated with the transferred financial instrument are retained,
such as sales of financial assets with repurchase agreements for a fixed price or the
sale price plus interest, the loan contracts of values in which the borrower must return
the same or similar assets, and so on., the transferred financial instrument is not
removed off from the balance sheet and continues being measured with the same
criteria used before the transfer. However, the financial liability associated by an equal
amount to the consideration received is recognised, which is then valued at amortised
cost, the transferred financial asset income, but not recognised and the new financial
liability costs.
- If neither the risks and benefits associated with the transferred financial instrument are
transferred nor retained substantially, such as sales of financial assets with a purchase
option bought or sold that are neither inside nor outside money, securitisations in which
grantor assumes a subordinated financing or other credit enhancements for a share of
the assets transferred, and so on., is distinguished between.
- If the Entity does not retain control over the transferred financial instrument, in
which case it is removed off from the balance sheet and recognises any right or
obligation retained or created as a result of the transfer.
- If the Entity retains control over the transferred financial instrument, in which case
it continues recognising it on the balance sheet at an amount equal to its
exposure to value fluctuations that can experience and a financial liability
associated to an amount equal to the consideration received is recognised. Such
liabilities are subsequently valued at amortised cost, unless it meets the
requirements to be classified as financial liabilities at fair value through profit or
loss. To calculate the amount of this financial liabilities, the amount of its financial
instruments (such as asset-backed securities and loans) which constitute funding
for the entity to which financial assets have been transferred will be deducted, in
the exact amount these financial instruments finance specifically the transferred
30
assets. The net amount between the transferred assets and liabilities associated
to them will be the amortised cost of the rights and obligations retained, if the
transferred asset is measured at amortised cost, or fair value of the rights and
obligations retained, if the transferred asset is measured by its fair value.
Therefore, financial assets are only removed from balance sheet when the cash flows
generated have been extinguished or when the implicit risks and benefits have been
transferred to third parties.
Similarly, financial liabilities are only removed off the balance sheet when the obligations
generated have been extinguished or when they are purchased with the purpose of being
cancelled or repositioned again.
2.2.3 Fair value and amortised cost of financial instruments
Financial assets
The fair value of a financial instrument at a given date is understood as the amount at which
it may be purchased or sold at that same date between some informed parties, in an arm's
length transaction. The most objective and common reference value for a financial
instrument's fair value is the price that would be paid in an organised, transparent and deep
market (“quoted price” or “market price”).
In the absence of a market price for a specific financial instrument, its fair value is estimated
on the basis of recent transactions involving similar instruments or, if failing this, using
valuation techniques that have been accepted from the international financial community,
taking into account the specific features of the instrument to be measured and, above all, the
different types of associated risks.
Specifically, the fair value of a held-for-trading derivative financial instrument traded in
organised, transparent and deep markets is the same as their daily market price. If, in
exceptional circumstances, the price cannot be established on a given date, they are
measured using similar methods to those applied to derivatives not traded in organised
markets.
The fair value of derivatives not traded in organised markets, or traded in organised markets
that are not deep or transparent, is equal to the sum of the future cash flows generated by the
instrument, discounted at the measurement date (“present value” or “theoretical close”),
employing valuation techniques accepted by the financial markets: “net present value” (NPV),
option pricing models, etc.
Amortised cost is the acquisition cost of a financial asset or adjusted liability (upward or
downward) for capital and interest repayments and, when applicable, for the (higher or lower)
portion (recognised in the income statement applying the effective interest method) of the
31
difference between the initial amount and the repayment value of the financial instruments.
The amortised cost of financial assets also includes impairment adjustments that may have
occurred.
The effective interest rate is the discount rate that brings the initial value of a financial
instrument exactly into line with total estimated cash flows through its residual life. In the case
of fixed-income financial instruments, the effective interest rate is equal to the contractual rate
defined on acquisition, adjusted for commissions and transaction costs that, in accordance
with the provisions of Bank of Spain Circular 4/2017, must be included in the calculation of the
effective interest rate The effective interest rate for variable-rate financial instruments is
estimated in the same way as for fixed-income transactions, and is recalculated at each
interest review date stated in the contract, taking into consideration changes in the
transaction's future cash flows.
Other entities shareholdings, whose fair value cannot be determined objectively and financial
derivatives that have this instrument as its underlying assets and are settled by their delivery,
are kept at cost adjusted, where appropriate, for impairment losses they have experienced.
Subsidiaries, joint ventures and associates shareholdings are recorded at cost adjusted,
where appropriate, for impairment losses that have occurred.
Variations in financial assets amounts are registered, in general, with a counterpart in the profit
and loss account, differentiating between them, the ones that are caused by the accrual of
interest and similar items that are recorded in the heading of “Interest and similar income”,
and those corresponding to other causes that are recorded by the net amount under the
heading of “Gains or losses on financial assets and liabilities” of the profit and loss account.
However, changes in instruments value included under the portfolio of financial assets valued
at fair value through other comprehensive income are recorded temporarily in the caption
“Other accumulated comprehensive income”, unless they come from exchange differences.
Amounts in the caption “Other accumulated comprehensive income” for changes in the fair
value of these financial instruments remain part of net equity until they are removed from
balance sheet assets where they are originated, moment when they are registered against a
profit and loss account, unless they are financial instruments which valuation changes are
never reclassified to the income statement.
Also, value changes of the items included under the heading “Non-current assets held for sale”
are recorded under “Other accumulated comprehensive income” as valuation adjustments in
net equity.
32
Related to financial instruments, valuations at fair value reflected in the annual accounts are
classified using the following fair value ranking:
i) Level I: reasonable values are obtained from quoted prices (not adjusted) in active
markets for the same instrument.
ii) Level II: fair values are obtained from valuation techniques in active markets for similar
instruments, recent transaction prices or expected cash flows, or other valuation
techniques in which all significant inputs are based, directly or indirectly, on observable
market data.
iii) Level III: fair values are obtained from valuation techniques in which some significant
inputs are not based on observable market data
In financial assets designated as hedged items and hedging accounting, valuation differences
are recorded taking into account the following criteria:
- In fair value hedges, the differences occurring in hedging items and in hedged items, in
relation to the type of hedged risk are recognised directly in profit and loss account.
- Differences in valuation related to inefficiency of cash flows hedging and net foreign
investments are sent directly to the profit and loss account.
- In cash flow hedges, the valuation differences arising on the effective hedging of the
hedging items are temporarily registered under the heading of ‘Other accumulated
comprehensive income’ as adjustment in net equity.
- In net foreign investments hedging, valuation differences arising on the effective hedging
of the hedging items are temporarily registered under the heading of ‘Other accumulated
comprehensive income’ as adjustment in net equity.
In the last two cases, valuation differences are not included in results until hedged item's gains
or losses are recorded in the profit and loss account or until the hedged item's expiration date.
In interest rate risk's fair value hedges of a financial instruments portfolio, gains or losses that
arise when assessing the hedging instruments are recognised directly in the profit and loss
account, whereas the gains or losses in the amount covered fair value changes, regarding the
hedged risk, are recognised in “Other accumulated comprehensive income” as adjustment in
financial assets by macro hedging.
In interest rate risk cash flows hedging of a financial instruments portfolio, the effective part of
the hedging instrument's value fluctuation is recorded temporarily in “Other accumulated
comprehensive income” as adjustment in net equity until expected transactions occur, being
then recorded in the profit and loss account. The ineffective portion of the hedging derivative's
33
value fluctuation is directly registered on the profit and loss account.
Financial liabilities
Financial liabilities are recorded at amortised cost, as defined for financial assets, except in
the following cases:
- Financial liabilities included in captions ‘Financial liabilities held for trading’ and
‘Financial liabilities at fair value through profit or loss’, are recorded at fair value, as
defined for financial assets. Financial liabilities covered by fair value hedging
operations are adjusted, being registered those fair value variations in relation to the
hedged risk covered by the hedge operation.
- Financial derivatives whose underlying assets are equity instruments whose fair value
cannot be determined in a sufficiently objective and be settled by delivery of these
contracts are valued at cost.
Financial liabilities amount's variations are recorded, in general, offset by the profit and loss
account, differentiating between those that are caused by interest accrual and similar items
that are recorded in the heading of “Interest and similar charges”, and those corresponding to
other causes, which are recorded under the heading ‘Gains or losses on financial assets and
liabilities measured at fair value through profit or loss’.
Financial liabilities designated as hedged items and hedging accounting valuation differences,
are recorded taking into account the above criteria for financial assets, included in the previous
note.
2.2.4 Classification and measurement of financial assets and liabilities
Financial instruments are classified into the following categories in the Institute's balance
sheet:
- Central bank and credit institutions deposits, which are cash balances and amounts
held in Bank of Spain, other central banks and other credit institutions.
- Financial assets and liabilities at fair value through profit or loss: this category is made
up with financial instruments classified as trading portfolio and other financial assets
and liabilities classified at fair value through profit or loss:
x Financial assets are those financial assets included in the trading portfolio
acquired in order to be realised in the short term or which form part of a portfolio
of identified financial instruments for which there is evidence of recent actions
taken to obtain short-term gains. Also, derivative financial instruments not
designated as hedge instruments are considered as part of this category,
34
including instruments segregated from hybrid financial instruments in
accordance with applicable accounting rules.
x Financial liabilities are those liabilities included in the trading portfolio issued in
order to be repurchased in the near future or that form part of a portfolio of
financial instruments identified or jointly managed for which there is evidence of
recent actions to obtain short-term gains, short positions in securities arising from
sales of assets acquired under non-optional repurchase agreements and loans
of securities, and derivative financial instruments not denominated as hedge
instruments, including segregated from hybrid financial instruments. The fact that
a financial liability is used to finance trading assets does not entail its own
inclusion in this category.
x Other financial assets or liabilities at fair value through profit or loss are the
following:
- Financial assets that, not being included in the Trading portfolio, are
considered as hybrid financial assets and are valued at fair value, and
those that are jointly managed with Liabilities under insurance contracts
valued at their fair value or with financial derivatives whose purpose and
effect is to reduce its exposure to fluctuations in fair value or which are
jointly managed with financial liabilities and derivatives in order to reduce
the overall exposure to interest rate risk.
- Financial liabilities designated at its initial recognition by the entity or when
recognising them more relevant information is obtained because:
- With it, inconsistencies in the recognition or appreciation arising from
the asset or liabilities valuation or recognising the gains and losses
will be deleted or significantly reduced, using different criteria.
- A financial liabilities or both financial assets and liabilities group is
managed and their performance is evaluated based on their fair
value, according to a risk management or investment information
strategy. Documented information about groups is issued also on the
basis of the fair value to the key Management staff.
- Assets valued at amortised cost. This category includes the following:
o Debt securities with fixed maturities and cash flows of a determined or
determinable amount. Debt securities included in this category are initially
valued at fair value, adjusted for transaction costs directly attributable to
the acquisition of the financial asset, which are recognised in the income
statement using the effective interest method, defined in applicable
35
accounting legislation as of Bank of Spain, 4/2020. They are subsequently
valuated at amortised cost, based on the effective interest ratios.
o Loans and receivables: this category includes financing provided to third
parties arising from the ordinary credit and loan activities carried out by
the Institute and debts incurred by asset buyers and by service users. It
also includes finance lease transactions in which entities act as lenders.
The financial assets included in this category are initially carried at fair value, adjusted
for commissions and transaction costs directly attributable to the acquisition of the
financial asset and which, under applicable accounting legislation as of Bank of Spain,
4/2020, must be recognised in the income statement using the effective interest rate
method. Once these assets are acquired, they are valued at amortised cost.
Assets acquired at discount are registered for the amount paid and the difference
between the repayment value and that cash amount is recognised as a financial
income, applying the effective interest rate method until maturity.
The accrued interest for the assets included in this category, calculated using the
effective interest rate method, is recognised in the caption “Interest and similar income”
in the income statement. Exchange differences on securities denominated in foreign
currency, other than the euro included in this portfolio, are accounted as it is mentioned
in Note 2.4. Possible impairment losses on these securities are recorded as indicated
in Note 2.7. Debt securities included in fair-value hedging are recorded as mentioned
in Note 2.3.
- Financial assets at fair value through other comprehensive income: this category
includes debt securities not classified as instruments at amortised cost or at fair
value through profit or loss, owned by the Institute, as well as equity instruments
owned by the Institute corresponding to entities which are not subsidiaries, joint
ventures or associated entities, which have not been classified as at fair value
through profit or loss.
The instruments included in this category are initially measured at fair value, adjusted
for transaction costs directly related to the acquisition of the financial asset, which are
recognised in the income statement using the effective interest rate method defined in
applicable accounting legislation as of Bank of Spain, 4/2020, to maturity, unless the
financial assets have no fixed maturities. In such cases, they are taken to the income
statement, when they become impaired or are written off the balance sheet.
Subsequently, the financial assets included in this category are valued at fair value.
Nonetheless, equity instruments whose fair value cannot be determined in a sufficiently
objective way are valued at cost in these annual accounts, net for impairment
calculated as explained in Note 2.7.
36
Products corresponding to interests or dividends accrued from these financial assets
are registered with counterpart on captions “Interests and similar income” (calculated
using the effective interest rate method) and “Dividends income” in the income
statement, respectively. Impairment losses on these instruments are recorded as
mentioned in Note 2.7. Exchange differences on financial assets denominated in
foreign currency other than the euro are accounted as mentioned in Note 2.4. Changes
in fair value of financial assets covered by fair-value hedges are stated as mentioned
in Note 2.3.
The remaining changes in the fair value of financial assets from acquisition are
registered with counterpart in the Institute’s equity under caption “Other accumulated
comprehensive income” as valuation adjustments, until the financial asset is written
off, moment at which the balance registered on such caption is booked on the profit
and loss account under caption “Profit and loss for write-off of financial assets and
liabilities valued at fair value through profit or loss”.
- Financial liabilities at amortised cost: This category of financial instruments includes
financial liabilities that are not included in any of the previous categories.
The financial liabilities included in this category are initially carried at fair value,
adjusted for transaction costs directly attributable to the issue of the financial liability,
which will be recognised in the income statement using the effective interest rate
method, defined in applicable accounting legislation (Bank of Spain Circular 4/2017) to
maturity. Subsequently they are measured at amortised cost, calculated by applying
the effective interest rate method defined in applicable accounting legislation (Bank of
Spain Circular 4/2017).
The interest accrued on these assets, calculated using the effective interest rate
method, is recognised in the caption “Interest and similar charges” in the income
statement. Exchange differences on securities denominated in foreign currency, other
than the euro included in this portfolio, are accounted as mentioned in Note 2.4.
Financial liabilities included in fair-value hedging are recorded as mentioned in Note
2.3.
Nevertheless, those financial instruments that must be classified as non-current assets held
for sale, in accordance with the provisions of Rule Thirty-Four of Circular 4/2017, Bank of
Spain, are included in the annual accounts as explained in Note 2.16.
The classification of financial instruments in these categories will be based in two elements:
(i) the entity’s business model to manage financial assets; (ii) the characteristics of financial
assets’ contractual cash flows:
- A financial asset is classified on the portfolio of financial assets at amortised cost
when two conditions are met: (i) it is managed with a business model which
37
objective is to hold financial assets to perceive contractual cash flows; and (ii)
contractual conditions lead to cash flows at specified dates, which always are
payments of principal and interests on the amount of the outstanding principal;
- A financial asset is classified on the portfolio of financial assets at fair value
through other comprehensive income when the two following conditions are met:
(i) it is managed with a business model which objective combines the perception
of the financial assets’ contractual cash flows and the sale; (ii) contractual
conditions lead to cash flows at specified dates, which always are payments of
principal and interests on the amount of the outstanding principal;
- A financial asset is classified on the portfolio of financial assets held for trading or
financial assets obligatorily at fair value through profit or loss, as long as, due to
the entity’s business model for their management or to the characteristics of its
contractual cash flows, it cannot be classified in any of the portfolios above.
Nonetheless, the entity shall opt, at initial recognition and in an irrevocable
manner, for including on the portfolio of financial assets at fair value through other
comprehensive income investments in equity instruments which should not be
classified as held for trading and which would be classified as financial assets
obligatorily at fair value through profit or loss. This option will be exercised on an
instrument basis.
Also, the entity shall opt, at initial recognition and in an irrevocable manner, for
designating any financial asset at fair value through profit or loss if thus valuation
or recognition incoherencies are eliminated or significantly reduced (also called
«accounting asymmetry») which would otherwise derive from the valuation of
assets or liabilities, or recognition of profit or loss, on different bases. When there
are accounting asymmetries, this option shall be exercised regardless of the
entity’s business model for its management and the characteristics of the
contractual cash flows.
Additionally, and regardless of the above, the entity shall opt, at initial recognition
or subsequently, for designating any financial asset as belonging to the portfolio
of financial assets at fair value through profit or loss, as long as requirements
established on Circular 4/2017 are met.
Reclassifications between financial instruments portfolios are made exclusively, according to
the following assumptions:
- When an entity changes its business model for the management of financial
assets, it will reclassify all financial assets according to the following sections.
Such reclassification will be prospectively performed from the reclassification
date, not requiring a restatement of previously recognised profit, loss or interests.
38
In general, changes in the business model are rare.
- If the entity reclassifies a debt instrument from the portfolio of amortised cost into
fair value through profit or loss, the entity must estimate its fair value at
reclassification date. Any profit or loss generated for the difference between the
previous amortised cost and the fair value will be recognised on the profit and loss
account. If the entity reclassifies a debt instrument from the portfolio of fair value
through profit or loss into amortised cost, the asset’s fair value at reclassification
date will be its new gross carrying amount.
- If the entity reclassifies a debt instrument from the portfolio of amortised cost into
fair value through other comprehensive income, the entity must estimate its fair
value at reclassification date. Any loss or profit generated for differences between
the prior amortised cost and the fair value will be recognised in other
comprehensive income. The effective interest rate and the estimate of expected
credit losses will not be adjusted as a consequence of the reclassification.
- If a debt instrument is reclassified from the portfolio of fair value through other
comprehensive income into amortised cost, the financial asset will be reclassified
at the fair value at reclassification date. The accumulated profit or loss at
reclassification date in other accumulated comprehensive income of equity will be
cancelled using as counterpart the asset’s carrying amount at reclassification
date. Thus, the debt instrument will be valued at reclassification date as if it had
been valued at amortised cost. The effective interest rate and the estimate of
expected credit losses will not be adjusted as a result of the reclassification.
- If the entity reclassifies a debt instrument from the portfolio of fair value through
profit or loss to fair value through other comprehensive income, the financial asset
will continue being valued at fair value, without modification of the registration of
previously registered value changes.
- If the entity reclassifies a debt instrument from the portfolio of fair value through
other comprehensive income into fair value through profit or loss, the financial
asset will continue being valued at fair value. The profit or loss previously
accumulated in «other accumulated comprehensive income» of equity will be
transferred to profit or loss of the period at reclassification date.
- When the investment in a subsidiary, joint venture or associate is no longer
classified as such, the retained investment, if any, will be measured at its fair value
at reclassification date, recognising all profits or losses generated for the
difference between its carrying amount prior to the reclassification and such fair
value in profit or loss or in other comprehensive income, as applicable, based on
the subsequent valuation of the retained investment.
- The investment in an entity prior to its qualification as subsidiary, joint venture or
associate will be valued at fair value until the date when control, joint control or
significant influence is obtained. At this last date, the entity must estimate the fair
value of the prior investment, recognising any profit or loss generated for the
difference between its carrying amount prior to the reclassification and such fair
value, in profit or loss or in other comprehensive income, as applicable. Where
applicable, the accumulated profit or loss in other accumulated comprehensive
39
income of equity will be maintained until the investment is written off from the
balance sheet, moment at which it will be reclassified into an item of reserves.
- The entity will not reclassify any financial liability.
For the purpose of sections above, changes derived from the following circumstances are not
considered as reclassifications:
a) When an element that previously was a designated and efficient hedging instrument
in a cash flow hedging or net investment hedging in a foreign business ceases
complying with requirements to be considered as such.
b) When an element becomes a designated and efficient hedging instrument in a cash
flow hedging or net investment hedging in a foreign business.
c) When there are changes in the valuation of financial instruments because they are
designated, or cease being designated, at fair value through profit or loss.
There were no reclassifications during 2021 or 2020.
2.3 Financial derivatives
Financial derivatives are instruments that provide a loss or gain, and allow, under certain
conditions, the compensation of the totality or part of the credit and / or market risks associated
to transactions and balances, using interest rate and certain rates, individual securities prices,
exchange rate cross-currency or other similar references as underlying assets. The Institute
uses financial derivatives traded in bilateral organised or negotiated markets being the
counterpart out of organised markets (OTC).
The Institute uses financial derivatives as part of its strategy to reduce its exposure to interest
rate, foreign and market exchange rate, among others. When these operations meet certain
requirements of the Rules Thirty-first and thirty-second of Circular 4/2017, Bank of Spain such
operations are considered as “hedging”.
When the Institute designates a transaction as a hedge, it does so from the initial moment of
the transactions or the instruments included in those hedges, that hedge being appropriately
documented. When documenting these hedging transactions the instrument or instruments
hedged and hedging instrument or instruments are properly identified together with the nature
of the risk which is intended to be covered and the criteria or methods followed by the Group
to measure the efficiency of the hedge over its life, taking into account the risk that it must
cover.
The Institute only applies hedge accounting for hedges that are considered highly effective
over their entire lives. A Hedge is considered highly effective if during the envisaged term any
40
changes in fair value or cash flows attributed to the risk covered in the hedging of the financial
instrument or instruments hedged, are virtually fully offset by the changes in fair value or cash
flows, as appropriate, of the hedging instrument or instruments.
In order to measure the efficiency of hedging defined as such, the Institute analyses whether
from the beginning until the end of the defined hedging period, changes in fair value or cash
flows of the hedged item, which may be attributed to the hedged risk may prospectively, be
expected to be offset almost completely by changes in fair value or cash flows, as appropriate,
of the hedging instrument or instruments and that retrospectively the results of the hedge have
fluctuated in a measurement range of 80% to 125% with regard to the results of the item
hedged.
Hedging transactions carried out by the Institute are classified into the following categories:
- Fair-value hedges: They cover the exposure to changes in the fair value of financial
assets and liabilities or firm commitments, or an identified portion of these assets,
liabilities or commitments, attributable to a specific risk, provided that they affect the
income statement.
- Cash-flow hedges: they cover changes in cash-flow that are attributable to a specific
risk associated with a financial asset or liability or a highly-probable planned
transaction, which may affect the income statement.
Measurement differences are recorded in accordance with the following criteria, when
referring specifically to financial instruments designated as hedged components and book
hedges:
- For fair-value hedges, differences in the fair value of both hedges and hedged
components, with regard to the type of risk hedged, are recognised directly in the
income statement.
- For cash-flow hedges, measurement differences arising on the efficient part of the
cover of the hedges are temporarily accounted under “Other accumulated
comprehensive income”. Hedged financial instruments in this type of hedge are carried
in accordance with the criteria explained in Note 2.2, without any modification due to
being considered as such covered instruments.
In the last case, measurement differences are not recognised as results until the gains or
losses on the hedged item are recorded in the income statement, or until maturity.
Differences in the valuation of the hedge instrument, corresponding to the inefficient part of
the hedging cash flow operations, are directly registered as “Gains or losses on financial
assets and liabilities measured at fair value” in the income statement.
41
The Institute interrupts hedge accounting when the hedging instrument expires or is sold,
when a hedge no longer meets the criteria for hedge accounting or when the transaction
ceases to be classed as a hedge.
Where fair-value hedge accounting is interrupted as stated in the preceding paragraph, in the
case of hedged items carried at amortised cost, the value adjustments made for hedge
accounting purposes are recognised in the income statement until the maturity date of the
hedged items, applying the effective interest rate as recalculated on the interruption date.
In the situations in which a cash-flow hedge transaction is interrupted, the accumulated gain
or loss from the hedge is registered under the heading “Other accumulated comprehensive
income” in the balance sheet and it will remain under this heading until the planned hedge
transaction takes place, time at which it will be taken to the income statement, or the cost of
acquiring the asset or liability to be recorded will be adjusted, in the event that the hedged
component is a planned transaction that culminates with the recording of a financial asset or
liability. In the event of planned transactions, when expected not to take place, the entry made
under “Other accumulated comprehensive income” relating to that transaction is immediately
recognised in the income statement.
2.4 Foreign currency transactions and functional currency
The Institute’s functional currency is the Euro. Therefore, all balances and transactions
denominated in currencies other than the euro are considered denominated in foreign
currency.
Set out below are the financial assets and liabilities denominated in foreign currency held by
the Institute, at December 31, 2021 and 2020 (thousands of Euros):
2021
2020
Assets
Liabilities
Assets
Liabilities
Pounds Sterling
438 109
1 070 233
336 569
817 178
US Dollars
2 262 411
9 439 591
2 177 825
6 973 144
Swiss Francs
11
245 988
33
281 764
Japanese Yens
800
99 860
850
269 398
Other currencies
190 516
66 324
147 376
214 903
2 891 847
10 921 996
2 662 653
8 556 387
42
The equivalent value in Euros of assets and liabilities denominated in foreign currency (in
thousands of Euros), classified by nature, recorded by the Institute, at December 31, 2021
and 2020 is as follows:
2021
2020
Assets
Liabilities
Assets
Liabilities
Loans to Credit Institutions
1 191 461
-
1 161 169
-
Loans to Customers
1 682 310
-
1 486 498
-
Other financial assets
18 076
-
14 986
-
Deposits in Credit Institutions
-
2 269 222
-
2 090 789
Debt securities issued
-
8 650 215
-
6 464 716
other financial liabilities
-
2 529
-
882
2 891 847
10 921 996
2 662 653
8 556 387
When initially recognised, debtor and creditor balances accounted in foreign currency are
converted to the functional currency using the spot exchange rate at the date of recognition,
understood as the exchange rate for an immediate delivery. After initial recognition, the
following rules are applied to translate balances registered in foreign currency to the functional
currency:
i) Monetary assets and liabilities are translated at the year-end exchange rate,
understood as the average spot exchange rate at the date to which the annual
accounts refer.
ii) Non-monetary items valued at historic cost are translated at the exchange rate on the
date of acquisition.
iii) Non-monetary items measured at fair value are converted to the exchange rate on the
date its fair value is determined.
iv) Income and expenses are converted by applying the exchange rate existing on the
transaction date. Nonetheless, the average exchange rate for the period is used for all
transactions carried out in that period, unless there have been significant fluctuations.
Depreciation/ amortisation are translated at the exchange rate applied to the relevant
asset.
Exchange differences arising from conversion of debtor and creditor balances denominated
in foreign currency are generally recorded in the income statement. Nonetheless, in the case
of exchange differences that arise from non-monetary items measured at fair value, for which
the fair-value adjustment is recorded under “Other accumulated comprehensive income”, the
component of the exchange rate relating to the revaluation of the non-monetary element is
broken down.
43
Exchange rates used by the Institute to convert balances denominated in the main foreign
currencies in which it operates are the market rates at December 31, 2021 and 2020 published
by the European Central Bank at each of those dates.
The net amount of exchange differences arising from the conversion of receivables and
payables denominated in foreign currency arises up to 5,619 thousand Euros of profits at
December 31, 2021 (7,852 thousand Euros of profits at December 31, 2020).
2.5 Recognition of income and expenses
Below, there is a summary of the most significant accounting policies used by the Institute to
recognise income and expenses:
2.5.1 Interest income and expense, dividends and similar items
In general, interest income and expense and similar items are accounted on an accruals basis,
applying the effective interest rate method defined in applicable accounting legislation, Bank
of Spain Circular 4/2017. Dividends received from other companies are recognised in the
Institute’s income statement when the Institute become entitled to receive them.
2.5.2 Commissions, fees and similar items
Income and expense related to commissions and similar fees, which should not be included
in the calculation of the effective interest rate of operations and/or do not form part of the
acquisition cost of financial assets or liabilities, except for those carried at fair value through
profit or loss, are recognised in the income statement using different methods depending on
their nature. The most significant methods used are explained below:
- Amounts associated with the acquisition of financial assets and liabilities carried at fair
value through profit or loss are recognised in the income statement at the payment
date.
- Amounts arising from long-term transactions or services are recognised in the income
statement over the term of the transactions or services.
- Amounts relating to a one-off event are recorded in the income statement when that
event takes place.
2.5.3 Non-financial income and expenses
These amounts are accounted on an accruals basis.
44
2.5.4 Deferred collections and payments
Deferred collections and payments are recognised at the amount obtained by discounting
forecast cash flows at market rates.
2.6 Offsetting of balances
Only debtor and creditor balances arising from transactions which, under contract or
legislation, provide the possibility to offset and exist in the company, to be settled at their net
amount, or simultaneously realised and paid, are offset and therefore presented in the balance
sheet at their net amount.
2.7 Financial asset impairment
The carrying value of financial assets is generally adjusted against the income statement when
there is objective evidence that there are impairment losses. This is the case where:
- For debt instruments, understood as loans and debt securities, when, following their initial
recognition, there is an event or combined effect of several events which have a negative
impact on the relevant future cash flows.
- For equity instruments, when following their initial recognition, there is an event or the combined
effect of several events, making it impossible to recover their carrying value.
As a general rule, impairment financial instruments value correction is charged to the profit
and loss account of the period in which such impairment takes place and the recovery of
previously recorded impairment losses, if takes place, are recognised in the profit and loss
account of the period during which the deterioration is eliminated or reduced. In the event that
the recovery of any amount in respect of the impairment recorded is considered impossible,
such impairment is written off from the balance sheet, although the Institute may carry out the
necessary actions to attempt to secure collection until the definitive extinguishment of its debt
claims due to lapsing, remission or other reasons.
Debt instruments and contingent risks portfolios, regardless of their owner, warranty or
instrumentation, are analysed to determine the credit risk to which the Entity is exposed and
to estimate hedging requirements for impairment in value. For the annual accounts
preparation, the Institute classifies its operations in terms of its credit risk by analysing,
separately, the insolvency risk due to the customer and country risk to which they are exposed.
Debt instrument's future cash flows estimated are all amounts, principal and interest, the Entity
believes will receive during the instrument's life. All relevant information which provides data
about the possibility of future recovery of contractual cash flows that is available at the time of
annual accounts elaboration is considered in this estimate. Also, in estimating instruments
with security's future cash flows, are taken into account the flows that would result from its
realisation, less the amount of costs for its acquisition and subsequent sale, irrespective of the
45
probability of the guarantee.
In the calculation of the present value of estimated future cash flows, the instrument's original
effective interest rate is used as the update rate, if contract rate is fixed, or the effective interest
rate on the date to which the statements relate determined according to financial conditions of
the contract, if variable.
In the case of debt instruments measured at amortised cost, the amount of impairment losses
incurred is equal to the negative difference between the carrying value and the current value
of future estimated cash flows, using the original effective interest rate as the adjustment rate,
if that rate is fixed, or the effective interest rate at the date of the annual accounts calculated
in accordance with the terms of the contract, when a variable ratio, in the case of listed debt
instruments, market value may be used as a substitute, provided that it is enough reliable to
consider it to be representative of the value the Institute will recover.
Objective evidence of impairment will be determined individually for all debt instruments that
are significant, and individually or collectively for the groups of debt instruments which are not
individually significant. When a specific instrument cannot be included in any group of assets
with similar risk characteristics, it will be analysed solely on an individual basis to determine
whether it is impaired and, if appropriate, estimate the impairment loss.
The collective assessment of a group of financial assets to estimate impairment losses is as
follows:
- Debt instruments are included in groups with similar credit risk characteristics,
indicative of debtor ability to pay all amounts, principal and interest, in accordance with
contractual terms. The characteristics of credit risk, which are taken into account in
order to group together assets, are, for example, the type of instrument, the debtor's
sector of activity, the geographic area of activity, type of guarantee, age of amounts
overdue and any other factor that may be relevant when estimating future cash flows.
- Future cash flows in each group of debt instruments are estimated based on the
Institute’s experience of historical losses for instruments with similar credit risk
characteristics to those of the respective group, following the necessary adjustments
to adapt historical data to current market conditions.
- Impairment losses in each group are the difference between the carrying value of all
the group's debt instruments and the present value of its estimated future cash flows.
Debt instruments not measured at fair value through changes in the income statement,
contingent risks and commitments, are classified based on the insolvency risk attributable to
the client or the transaction, in the categories defined by the Annex IX from the Bank of Spain’s
Circular 4/2017. For debt instruments not classified as normal risk, estimates are made
regarding the specific impairment hedges necessary based on the criteria established in the
46
above mentioned Circular, bearing in mind the age of the unpaid amounts, the guarantees
provided and the client's financial situation and, if appropriate, the guarantors.
Similarly, these financial instruments are analysed to determine the credit risk deriving from
country risk, understood to be the risk affecting clients resident in a certain country due to
circumstances other than normal commercial risks.
In addition to the specific impairment hedges indicated above, the Institute hedges against
losses inherent to debt instruments not measured at fair value through profit or loss and
contingent risks classified as normal through group hedges, calculated based on historical
impairment and other familiar circumstances at the time of evaluation that are related to
inherent losses incurred at the date of the annual accounts, calculated using statistical
methods, that have yet to be assigned to specific transactions.
The Institute has used the parameters established by the Bank of Spain, based on its sector
experience and information, which determine the method and amount to be used to cover
inherent impairment losses incurred in debt instruments and contingent risks classified as
normal risks, which are changed regularly on the basis of the development of the data in
question. This method of determining the hedging for impairment losses is based on the
application of certain percentages set in the applicable accounting legislation, which vary
based on the risk classification of financial instruments as established in the Annex IX from
the Bank of Spain’s Circular 4/2017, and which change depending on the risk classification of
the financial instruments established by the mentioned Annex.
In general, impairment of debt instruments is calculated by applying the following percentages
to the outstanding risk not covered by the amount to be recovered from the effective collateral,
based on the risk segment to which the operation belongs and the seniority of past due
amounts:
From 90
days to 6
months
From 6 to
9 months
From 9
months to 1
year
From 1
year to 15
months
From 15 to
18 months
From 18 to
21 months
More than 21
months
Non-credit institutions and individual
entrepreneurs
Special Financing
Construc. and property develop.
60
70
80
85
90
100
100
Construc. civil work
55
65
70
75
85
90
100
Other espec. financing
50
60
70
85
90
100
100
Non-special Financing
Large companies
50
60
70
85
90
100
100
SMEs
55
65
70
80
85
90
100
Individual entrepreneurs
30
40
50
60
75
90
100
Houses
House purchase
Main residence unpaid
(LTV)
<80%
guarantee
40
45
55
65
75
90
100
Main residence unpaid (LTV) >80%
guarantee
40
45
55
65
75
90
100
Secondary residence
40
45
55
65
75
90
100
Consumer credit (incl. credit card debts)
50
60
70
80
90
95
100
Other
50
60
70
80
90
95
100
47
Generic provisions for operations classified as normal risk will be different to that calculated
for regular risk in the watch-list. Both are calculated by applying the following percentages to
the outstanding exposure not covered with effective guarantees:
Normal
risk
Normal
risk in
watch-list
Non-credit institutions and individual
entrepreneurs
Special Financing
Construc. and property develop.
1.9
27.6
Construc. civil work
1.9
18.8
Other especial financing
0.5
7.5
Non-special Financing
Large companies
0.5
7.5
SMEs
0.9
12.7
Individual entrepreneurs
1.1
11.6
Home
Home purchase
Main home unpaid
(LTV) <80%
guarantee
0.6
13.0
Main home unpaid (LTV) >80%
guarantee
0.6
13.0
Secondary residence
0.6
13.0
Consumer credit
1.5
16.0
Which from: credit card debts
0.8
9.0
Other
1.5
16.0
In estimating effective collateral, for the purpose of calculating hedges, the following estimated
discounts on the reference value of such collateral will be applied:
TYPE OF REAL GUARANTEE
Discount over
reference value
(%)
Mortgage guarantees (first charge)
Buildings and finished building elements
Homes
30
Offices, commercial premises and warehouses
40
Other
45
Urban and developable land ordered
40
Other immovable property
45
Posted collateral of financial instruments
Money deposits
0
Other marketable financial instruments
10
Other non-marketable financial instruments
20
Other real guarantees (for example. second
mortgages, movable assets)
50
In any case, at December 31, 2021, the Institute has decided to apply impairment coefficients
included in Circular 6/2021 for the entire credit portfolio classified in normal situation and
normal under special surveillance, and which is collectively valued. This anticipation of new
48
coefficients has implied an impairment in addition to that resulting from the application of
previous tables, by 48.7 million Euros at December 31, 2021.
In the case of real estate assets foreclosed or received in payment of debts, for the purposes
of valuation of the hedging that may correspond, the following discounts will be applied on the
reference value for said assets:
TYPE OF
FORECLOSED PROPERTIES
Discount over
reference value
(%)
Buildings and finished building elements
Homes
25
Offices, commercial premises and warehouses
27
Other
30
Urban and developable land ordered
30
Other immovable property
35
The recognition in the profit and losses account of the accrued interests on the base of the
contractual terms is interrupted for all the instruments of debt qualified individually and for
those that had calculated collective losses because of the deterioration for having amounts
conquered with an antiquity top to three months.
The amount of impairment losses incurred in debt securities and equity instruments included
under Financial assets at fair value through other comprehensive income is equal to the
positive difference between their acquisition costs, adjusted to any repayment of the principal,
and their fair value less any impairment loss previously recognised in the income statement.
When there is objective evidence that the decline in fair value is attributable to impairment,
the latent losses, recognised directly under ‘Other accumulated comprehensive income’ as
adjustment in net equity, are recorded immediately in the income statement. If, subsequently,
all or part of the impairment losses are recovered, the amount involved is recognised, in the
case of debt securities, in the income statement for the recovery period, and, in the case of
equity instruments, under ‘Other accumulated comprehensive income’ as adjustment in net
equity.
For debt and equity instruments classified under non-current assets held for sale, losses
recorded previously under equity are considered to be realised and are recognised in the
income statement at the date of their classification.
For shareholdings in Associates, joint ventures and subsidiaries, the Institute estimates
impairment losses by comparing the recoverable amount with their carrying value. Such
impairment losses are recorded in the income statement for the period in which they arise
while subsequent recoveries are recorded in the income statement for the recovery period.
49
In the case that probabilities of recovery any amount recorded, like impairment, were
considered impossible, these are eliminated from the balance sheet, although the Institute
could carry out necessary actions to try to recover, as long as, their rights do not extinguish
permanently by expiration, cancellation or other causes.
2.8 Financial guarantees and related provisions
A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the creditor for the loss incurred when a debtor fails to perform specific
payment obligation under the conditions, original or amended of an debt instrument,
regardless of their legal form, which can be, inter alia, of a surety, financial guarantee
insurance contract or credit derivative.
The issuer of financial guarantee contracts recognises them under the heading “Other financial
liabilities” at fair value plus transaction costs, which are directly attributable to its issuance,
except for contracts issued by insurance companies.
At the beginning, the fair value of financial guarantee contracts issued to a third party not
connected within a single transaction in mutual independence conditions, is the premium
received plus, presents cash flows value to receive, using a similar interest rate to the financial
assets issued by the Entity with similar term and risk. Simultaneously, it will be recognised as
a receivable asset the present value of future cash flows to be received at the rate of interest
mentioned above.
Subsequent to the initial recognition, the contracts are treated according to the following
criteria:
i) The financial guarantee's commissions or bonuses value to receive is updated by
recording the difference in the profit and loss account as financial income.
ii) The value of financial guarantee contracts that have not been qualified as doubtful,
is the initially recognised amount less the part charged to the profit and loss
account on straight-line basis over the expected life of the guarantee or by other
criteria, provided that this more accurately reflects economic risks and benefits of
the warranty's perception.
The classification of financial guarantee contracts as doubtful will imply the respective hedging
action under the heading of “Provisions for contingent exposures and commitments”.
50
2.9 Accounting for leases
2.9.1 Finance leases
Finance leases are those in which all the risks and rewards substantially carried by the leased
asset are transferred to the lessee.
Whenever the Institute acts as lessor of an asset in a finance lease transaction, the sum of
the present values of the amount that will be received from the lessee plus the guaranteed
residual value, usually the purchase option price when the lease terminates, are recorded as
financing provided to third parties. It is therefore included in “Loans and receivables” in the
balance sheet, in accordance with the nature of the lessee.
When the Institute acts as the lessee in a finance lease transaction, the cost of the leased
assets is recorded in the balance sheet, on the basis of the nature of the asset leased and a
liability is carried in the same amount, which will be the lower between the fair value of the
leased asset and the sum of the present values of the amounts payable to the lessor, plus, if
appropriate, the purchase option exercise price. These assets are depreciated at similar rates
to those applied to the Institute’s property, plant and equipment for own use (Note 2.12).
In both cases, the financial income and expense on finance leases is credited and charged,
respectively, to the income statement captions “Interest and similar income” and “Interest and
similar charges”, applying the effective interest rate method on the lease to estimate its
accrual, calculated according to the current Spanish legislation (Circular 4/2017 of Bank of
Spain).
2.9.2 Operating leases
In operating leases, ownership of the leased asset and substantially all risks and rewards of
ownership are retained by the lessor.
Where the Institute acts as the lessor in operating lease agreements, the acquisition cost of
the leased asset is registered under “Property, plant and equipment” in “Property investments”
or “Other assets assigned under operating lease”, depending on the nature of the leased
assets. Such assets are depreciated in accordance with the policies adopted for similar
property, plant and equipment for own use. The income from lease contracts is recognised in
the income statement on a straight-line basis in the caption “Other operating income”.
When the Institute acts as the lessee in operating lease agreements, a lease liability is
recognised at the current value of payments to be made (fixed, variable, exercise of call option,
and others), as contract’s initial valuation, and a right-of-use asset valued at cost.
51
2.10 Personnel costs
2.10.1 Short-term remuneration
Short-term remunerations to employees are payments made within twelve months, following
the end of the year in which the employees have rendered services. This remuneration is
measured, without any adjustment, at the amount payable for the services received and
recorded, in general, as personnel costs for the year and a liability accrual account, which is
recorded for the difference between the total expense and the amount already satisfied.
2.10.2 Post-employment commitments
Pension commitments entered into by the Institute with regard to employees are reflected in
the collective wage agreement in force and correspond to defined contribution commitments.
The Institute employees are members of the Joint Employment System Pension Plan offered
by the State Administration and regulated by the Pension Plan and Fund Regulation Act
approved by Legislative Royal Decree 1/2002 (29 November) and enabling regulations
approved by Royal Decree 304/2004 (20 February), which is included in the BBVA Empleo
Pension Fund, managed by Gestión de Previsión y Pensiones, Entidad Gestora de Fondos
de Pensiones and deposited at BBVA.
As defined contribution commitments, the Institute has assumed annual contributions for
employees that have rendered services for more than two years at 1 May of each year,
regardless of whether they are career civil servants or interim government employees,
contracted personnel, temporary employees or senior management. The following parameters
are taken into account when calculating the annual contribution:
x The professional group to which the employee pertains.
x Length of service (understood to be the number of three-year periods the employee
has worked in the Administration, regardless of the contractual arrangement).
The amounts to be contributed are those approved in the General State Budget for each year.
Under the heading “Personnel costs”, there is no cost registered for this year at December 31,
2021 and neither for the previous one at December 31, 2020.
2.10.3 Death and disability benefits and retirement bonuses
Commitments assumed with personnel for retirement bonuses and death or disability
commitments prior to retirement and other similar items, are estimated by calculating the
present value of legal and implicit obligations at the date of the annual accounts, after
deducting any actuarial loss, less any actuarial gain, the cost of past services yet to be
recognised and the fair value of the assets that cover the commitments, including insurance
52
policies. The entire cost of past services and any actuarial gains or losses are immediately
recognised.
At December 31, 2021 a provision was recorded by the Institute for post-employment
commitments amounting to 791 thousand Euros (656 thousand Euros at December 31, 2020).
2.10.4 Severances
Severances are recorded under the heading “Personnel costs” and the accompanying income
statement crediting the accounts “Provisions for pensions and similar obligations” under the
heading “Provisions” in the accompanying balance sheet, only when the Institute is
demonstrably committed to terminating an employee or group of employees before their
normal retirement date, or to pay remuneration as a result of an offer made as an incentive for
the voluntary rescission of the employees.
At December 31, 2021 and 2020, the Institute has not recorded any provisions regarding this
aspect as there is no plan or agreement that would require such an allocation.
2.11 Corporate income tax
Corporate income tax is considered as an expense and is recorded, in general, under the
heading of “Income tax” of the profit and loss account.
Income tax expense for the year is calculated as tax payable on taxable income for the year,
adjusted for variations during the year in asset and liability balances arising from temporary
differences, tax credits and allowances, and any tax-loss carry forwards (Note 23).
The Institute considers that there is a temporary difference when there is a difference between
the carrying amount and the taxable amount of an asset or liability. The amount attributed to
an asset or liability for tax purposes is considered the tax base. A taxable temporary difference
is understood as the one which will generate a future obligation for the Institute to pay to the
relevant Administration. A deductible temporary difference is understood to be the one which
will generate for the Institute some reimbursement right or a decrease in the payment to be
made to the relevant administration in the future.
Tax credits and allowances and tax credits for tax-loss carry forwards are amounts that,
though generated on completion of an activity or obtainment of a result, are not applied for tax
purposes in the relevant tax return until the conditions stipulated in tax legislation are fulfilled,
and providing the Institute the probability of application in future years.
Current tax assets and liabilities are amounts that the Institute expects to recover from or pay
to the corresponding tax authorities within 12 months, from the date on which they were
recognised. Deferred tax assets and liabilities are amounts that the Institute expects to recover
from or pay to the corresponding tax authorities in future years.
53
Deferred tax liabilities are recognised for all taxable temporary differences. Nevertheless the
above, no deferred tax liabilities are recorded based on the recognition of goodwill.
The Institute only recognises deferred tax assets deriving from deductible temporary
differences, tax credits or allowances or any tax-loss carry forwards, if they meet the following
conditions:
- Deferred tax assets are only recognised in the case that the Institute considers it likely
to have enough future taxable against which they may be offset.
- In the case of deferred tax assets deriving from tax losses, they have arisen from
identified causes that are unlikely to be repeated
No deferred tax assets or liabilities are recognised when an asset is initially recorded, when it
is not deriving from a business combination and when, at the time of recognition, there was
no effect on book or taxable profits.
At the time of each accounting closing, deferred tax assets and liabilities are reviewed in order
to verify that they remain valid and that any relevant adjustments are made in accordance with
the results of the analysis performed.
2.12 Property, plant and equipment
2.12.1 Property, plant and equipment for own use
Property, plant and equipment for own use includes those assets that are owned or acquired
under finance leases that the Institute holds for its own current or future use for administrative
purposes or for the production or supply of assets and when they are expected to be used for
more than one financial year. Among other things, this category includes property, plant and
equipment received by the Institute for the total or partial settlements of financial assets that
represent debt claims against third parties which are expected to be used on a continuous and
internal basis. Property, plant and equipment for own use is carried in the balance sheet at
acquisition cost, which consists of the fair value of any compensation paid plus any monetary
payments made or promised, less accumulated depreciation and, if appropriate, any
estimated losses that result from comparing the net value of each item with the relevant
recoverable amount.
For these purposes, the acquisition cost of foreclosed assets that become part of property,
plant and equipment for own use by the Institute, is similar to the net amount of the financial
assets exchanged for foreclosed.
Depreciation is calculated on a straight-line basis based on the acquisition cost of the assets
concerned less any residual value, with the understanding that land on which buildings and
other structures are located, have an undefined life and is therefore not depreciated.
54
Annual allocations to depreciation of property, plant and equipment are charged against the
heading “Depreciation-Property, plant and equipment” in the income statement and basically
equals the following depreciation rates (calculated based on the estimated average useful life
of the assets concerned):
Annual percentage
Buildings
2%
Plant
4 to 15%
Furnishings and office equipment
10%
Data – processing equipment
25%
Transport elements
16%
At each accounting closing, the Institute determines whether or not there are any internal or
external indications that the net value of its property, plant and equipment exceeds their
recoverable value. If so, the book value of the asset concerned is reduced to the recoverable
value and future depreciation charges are adjusted in proportion to the adjusted book value
and the new remaining useful life, if a new estimate is required. This reduction in the book
value of property, plant and equipment for own use is applied, if necessary, by charging the
heading “Impairment or reversal of impairment on non-financial assets” in the income
statement.
Similarly, when there are indications that the value of impaired property, plant and equipment
has been recovered, the Institute recognises the reversal of the impairment loss recorded in
prior years by crediting the heading “Impairment or reversal of impairment on non-financial
assets” in the income statement and, consequently, adjusts future depreciation charges.
Under no circumstances may the reversal of an impairment loss affecting an asset, increases
its book value above that which it would have had if the impairment losses had not been
recognised in prior years.
In addition, the estimated useful life of property, plant and equipment for own use is reviewed
at least on an annual basis in order to detect significant changes in these estimates and, if
any are detected, adjustments will be applied by correcting the depreciation charge made to
the income statement in future years in accordance with the new estimated useful lives.
Repair and maintenance expenses for property, plant and equipment for own use, are charged
against results of the year in which they are incurred under the heading “Other administration
expenses” in the income statement. The financial expense incurred as a result of financing
property, plant and equipment for own use is charged against the income statement at the
time of accrual and these expenses do not form part of their acquisition cost.
2.12.2 Property investments
The balance sheet heading “Property investments” recognises the net value of land, buildings
and other structures that are held for rental or to obtain a capital gain on their sale as a result
of increases in their future market prices.
55
The criteria applied for recognising the acquisition cost of property investments for
depreciation, for the estimate of their respective useful lives and for recording any possible
impairment losses, match with those described with regard to property, plant and equipment
for own use (Note 2.12.1).
2.13 Intangible assets
Intangible assets are considered to be identifiable non-monetary assets that, while not existing
physically, arise as a result of a transaction or have been internally developed by the Institute.
Only intangible assets whose cost may be reasonably estimated on an objective basis and
which the Institute deems likely to provide a future financial benefit, are recognised for
accounting purposes.
Intangible assets, other than goodwill, are recognised in the balance sheet at their acquisition
or production cost, adjusted to accumulated amortisation and any impairment losses they may
have suffered.
Intangible assets may have an “undefined useful life” when the analysis performed on all
relevant factors leads to the conclusion that there is no foreseeable limit to the period over
which they are expected to generate net cash flows for the Institute, and they have an “definite
useful life” in all other cases.
Intangible assets with an indefinite useful life are not amortised, although at the time of each
accounting closing the Institute reviews their respective remaining useful lives in order to
ensure that they continue to be indefinite. If this is not the case, an appropriate action is taken.
Intangible assets with a defined life-span are amortised according to some criteria similar to
those applied to property, plant and equipment. The annual amortisation charge for these
intangible assets is carried in the income statement caption “Amortisation - Intangible assets”.
For intangible assets with both an indefinite and definite useful life, the Institute recognises
any impairment in those assets and uses them as a balancing entry “Impairment or reversal
of impairment on non-financial assets” in the income statement. The methods applied to
recognise impairment losses on these assets and, if appropriate, the recovery of impairment
losses, recognised in prior years, are similar to those applied to property, plant and equipment
(Note 2.12.1).
2.14 Provisions and contingent liabilities
When preparing the annual accounts the Institute differentiates between:
- Provisions: creditor balances that cover obligations that exist in the balance sheet date,
deriving from past events that could give rise to financial losses for the entities.
Although such losses are regarded as probable and are specific in nature, their amount
56
and/or settlement date cannot be determined.
- Contingent liabilities: possible obligations deriving from past events which may
materialise subject to one or more future events beyond the Institute’s control.
The Institute’s annual accounts include all significant provisions for obligations classified as
probable. Contingent liabilities are not recognised in the annual accounts, but rather
information is provided in accordance with the requirements of Circular 4/2017 of Bank of
Spain (Note 19).
Provisions are quantified using the best information available about the consequences of the
event that justifies them and are re-estimated at the year end. They are applied to meet the
specific obligations for which they were originally recognised and fully or partially reversed
should such obligations cease to exist or decrease.
At the 2021 and 2020 year end, a number of legal procedures and claims had been initiated
against the Institute, arising in the ordinary course of business. ICO's legal advisors and its
directors understand that the finalisation of these proceedings and claims will not have a
significant effect other than that provided for, if appropriate, in the annual accounts for the
years in which they finalise.
Accounting provisions that are considered necessary, as stated in the previous criteria, are
charged or credited to the income statement caption “Provisions expense or reversal of
provisions”.
2.15 Statements of cash flows
The terms employed in the cash-flow statements have the following meanings:
- Cash flows: Inflows and outflows of cash and cash equivalents, understood as short-
term investments which are highly liquid and involve a low risk of changes in value.
- Operating activities: typical credit institution activities and other activities that may not
be classified as investing or financing activities.
- Investing activities: acquisition, sale or disposal through other means of noncurrent
assets and other investments not included in cash and cash equivalents.
- Financing activities: activities that cause changes in the size and composition of equity
and liabilities and do not form part of operating activities.
57
2.16 Non-current assets held for sale and liabilities associated with non-current
assets held for sale
The heading “Non-current assets held for sale” on the balance sheet records the book value
of individual items that are very likely to be sold in their actual conditions within one year as
from the date of the annual accounts.
When, in exceptional cases, the sale is expected to occur over a period exceeding one year,
the Institute assesses the updated sale cost, accounting time value fluctuation under the
heading of “Gains/(Losses) on non-current assets held for sale not classified as discontinued
operations” in the profit and loss account.
Consequently, the carrying amount of these items, which may be financial or non-financial in
nature, will foreseeable be recovered through their selling price rather than through their
continued use.
Specifically, the real estate assets or other non-current assets received by the Institute to pay
off all or part of the payment obligations of its debtors regarding to the Institute, are deemed
non-current assets held for sale, unless the Institute has decided to use these assets on an
on-going basis.
Symmetrically, “Liabilities associated with non-current assets held for sale” include the credit
balances associated with groups or for interruption in the operations of the Institute.
Non-current assets held for sale are generally measured at the lower of their carrying amount
when they are recognised as such and their fair value, adjusted for estimated cost of sales.
While included in this category, property, plant and equipment, and intangible assets, subject
to depreciation and amortisation by nature, are not depreciated nor amortised.
In the event that the carrying amount exceeds the fair value of the assets, adjusted for cost of
sales, the Institute adjusts the carrying amount of the assets by the amount of the excess and
makes a balancing entry in the caption “Gains/ (Losses) on non-current assets held for sale
not classified as discontinued operations” in the income statement. In the event that the fair
value of the assets were increased at a later date, the Institute reverses the losses previously
recorded in the accounts, increasing the carrying value subject to the limit of the amount prior
to their eventual impairment, against “Gains/ (Losses) on non-current assets held for sale not
classified as discontinued operations” in the income statement.
The results from the sale of non-current assets held for sale are presented under “Gains/
(Losses) on non-current assets held for sale not classified as discontinued operations” in the
profit and loss account.
However, financial assets, assets from employee salaries, deferred tax assets and assets for
insurance contracts that are part of a group of file or an operation in interruption are not valued
58
in accordance with the previous paragraphs, but in accordance with the principles and rules
applicable to these concepts, which have been explained in the preceding paragraphs of Note
2.
2.17 Business combinations
The Business Combinations which its final result consists on the acquisition of one firm, which
keeps its legal independence status from the Institute, are recorded in this Annual accounts
in the heading “Shareholdings – Subsidiaries” in the Balance Sheet (Note 2.1).
3. CUSTOMER SERVICE
On July 24, 2004, Order ECO 734 regarding customer service operations entered into
operation. This has the purpose of regulating customer services and the defender at banks
services and credit institutions. Regarding this Service, and although the ICO is not obligated
to have a customer service department, the Institute attends to all claims and complaints that
receives during the course of its business, as a financial agency. In order to attain the highest
quality of service, the Institute decided to create a Unit in December 2006 to centralise the
reception, processing, and a response to all complaints and suggestions received from
suppliers, users and clients of ICO.
In 2021, a total of 537 complaints were received (1,493 in 2020), of which were addressed
within an average of 4.4 working days (much lower than the established deadline of 15 working
days). 81% of the total are related to credit transactions in the COVID-19 Surety Lines, and
were therefore passed on to the relevant credit institutions. 16% were related to Mediation
Lines, and the remaining 3% related to other issues, unrelated to products or services
managed by ICO.
4. DISTRIBUTION OF RESULTS
Results from 2021 amount to 122,960 thousand Euros and, at the date of formulation of this
Annual Accounts, its distribution has not yet been established by the Ministry of Economic
Affairs and Digital Transformation. Such distribution will adjust to its Bylaws.
59
5. RISK EXPOSURE AND OTHER INFORMATION
5.1. Risks. General aspects
Risk is inherent to financial activity. Properly measuring, managing and controlling risk must
contribute to attaining adequate margins and to the maintenance of an entity's solvency based
on the confidence of clients, investors and employees.
Without any intention of exhaustively classifying the risks faced by a financial institution, they
may be classified into four categories: Liquidity risk, market risk, credit risk and operating risk.
x Liquidity risk: The risk incurred as a result of an absence of sufficient liquid resources
to comply with obligations. This situation could be thanks to the inadequate assets and
liabilities maturity structure, or due to the exceptional market crisis situation.
x Market risk: Covers the influence on the income statement and equity exercised by
adverse changes in relevant financial variables, such as domestic or foreign currency
interest rates, exchange rates, share prices, etc. This risk may be subdivided into two
large groups: Balance sheet or structural market risk and market risk affecting trading
portfolios.
x Credit risk: This one refers to the risk of not fully recovering the principal and interests
related to our investments within the estimated periods. This risk may also be
subdivided into two broad groups: Counterparty risks with banking institutions and
credit risk regarding investment transactions.
x Operating risk: Incurred as a result of administrative, internal, accounting, computer,
legal or external errors due to unforeseen circumstances.
As a credit institution, the ICO is exposed to these types of risks, which must be identified,
measured and monitored in order to operate efficiently. This is done according to the Risk
Policy Manual approved by the General Board, which contains the different methods,
applicable legislation, procedures and organisational structure.
5.2. Risks – Organisational structure
In order to cover the entire risk spectrum, within its organisational structure, the Institute
(according to Presidential Organisational Circular 2/2021 of 19 November), has created
specialised units under the Directorate for Risk, which reports to the General Directorate for
Risk and Finance.
The Directorate for Risk’s functions include, among others, drafting and proposing internal risk
policies and methods for analysing, managing and monitoring the Institute’s financial and
credit risks, assessing the admissibility of ICO credit risk and overseeing ICO’s adaptation to
national and international risk regulations, while driving, coordinating and supervising the
60
performance of the units under its remit.
The specialised Risk areas are Methodology and Acceptance department, the Global Risks
Control area, and the Follow-up and Recovery Department, each one with specific duties.
The primary duties of the Global Risk Control area are the following:
x Preparing, proposing and controlling financial risk measurement methodologies
applied by the Institute.
x Overseeing the correct compliance of the limits of financial risks and policies previously
approved.
x Analyse, monitor and review periodically credit counterparty lines, analyse them, and
monitor levels with the mediating entities and counterparts.
x Defining and reviewing measurement, back-testing and stress-testing systems.
x Proposing criteria for market valuation of new financial products, establishing
methodologies, risk measurement and potential risk (Add-on).
x Analysing the adaptation of national and international legislation regarding risks within
its competency.
x Value at market price new products and structures and their potential risk (Add-on).
x Supervise the correct application of approved methodologies risks.
x Analysis of credit risk in Liquidity Lines Securitisation Funds operations.
x Propose new Liquidity, Market, Credit and New Products risk limits.
x Reporting and diagnosis of the risk situation for Assets and Liabilities Committee,
Operations Committee, Monitoring Committee and General Council.
x Report statements of interest rate risk, liquidity, large risks and Basel ratios for Bank
of Spain.
x Update and maintain the Risk Adjusted Profitability tool (RAR).
x Update and maintain the ICO Price Control tool in RORAC.
x Risk Appetite Framework (MAR).
61
x Analyse, study and report on Securitisations.
The Methodology and Acceptance department, from which the Risk Methodology and Policies
Area depends, has the following functions, among others:
x Evaluate the risk admissibility for new asset products and direct credit operations not
included in automated procedures.
x Analyse under the assessment of eligibility of direct credit risk limits approved by ICO
with clients and economic groups.
x Analyse and evaluate risks assumed by ICO, under any proposed modification to
transactions already formalised, which require the approval of decision-making bodies.
x Analyse the adaptation to national and international standards regarding risks within
its competence.
x Coordinate the Credit Committee in which agreements regarding the granting of new
ICO direct loans, as well as modifications of operations already formalised are
discussed and adopted.
x Define and propose for approval by ICO internal organs of decision direct credit risk
policies and/ or, where appropriate, policy changes already approved at the ICO.
x Elaborate and update Country Risk reports related to financing operations as required.
x Reports with comparable economic financial data of the analysed client with regard to
other companies in the same sector.
x Develop methodologies, elaborate application manuals and maintain tools related to
the credit valuation in project financing.
x Development of tools to automate processes, as far as possible and necessary.
x Analysis of risks for direct financing operations under the ICO COVID-19 Surety Lines,
including, together with the assessment of the company’s risk profile, a specific
analysis of the financing needs at the short term, the liquidity position, and action
leverages available in the company to mitigate the impact derived from the health
crisis.
x Analysis of risk of issuers in the Fixed Income Alternative Market (MARF), as
alternative corporate financing instrument, through the subscription, by ICO, of the
different debt issues.
62
The Monitoring and Recovery Department, from which the Wholesale Monitoring and
Recovery Area and Retail Monitoring and Recovery Area depend, has the following among its
functions:
The Wholesale Monitoring and Recovery Area:
x Control and follow the risk of direct financing operations, promote recoveries of
balances derived from doubtful operations, resolved and failed, and supervise the
compliance with the portfolio conditions of lines in force or products in the case of
distribution of risks, and the monitoring and control of the recovery of COVID-19 surety
lines.
x Analyse and value, from the ICO’s credit risk point of view, proposals of mediation
lines.
x Control and verify the compliance with non-financial conditions stipulated for ICO’s
mediation lines in case of risk sharing.
x Establish and maintain a system of internal rating, country risk rating, operational risk
methodology and credit risk limit methodology for direct ICO economic groups clients.
Perform control and reporting of large risk exposures.
x Ensure the quality of the ICO portfolio, using all the information needed.
x Coordinate the Monitoring Committee of the portfolio of direct loans from the ICO.
x Propose the allocation/reversal of provisions, based on regulations in force.
x Participate in the Credit Committee in which agreements concerning the granting of
new direct loans from ICO, as well as modifications of already formalised operations,
are discussed and adopted.
x Promote, in coordination with corresponding Legal & business areas appropriate
recuperative actions regarding financing transactions that are in arrears, settled and
failed.
x Respond to requests from regulatory agencies (rating agencies, internal and external
auditors, Court of Auditors, the Bank of Spain, etc.).
x Analyse adaptation to national and international standards regarding risks within its
competence.
63
The Retail Monitoring and Recovery Area:
x Control and monitor the risk of direct operations to retailers, propose refinancing
operations or perform the necessary actions to recover balances derived from
defaulting and failed operations in this segment, as well as monitor and control
recoveries of the COVID-19 surety lines.
x Monitor and Control over the ICO-owned loans recovery actions which management
is outsourced by the Institute to other entities. It is done through services agreements
for SME, micro-SME, freelances and individuals segments.
x Recovery management of those ICO-owned loans which management and
administration is carried out directly by the Institute for SME, micro-SME, freelances
and individuals.
x Proposals preparation for the in-house ICO decision taking bodies, regarding each
area records (resolution proposals, failed, refinancing agreement, cancellation,
operations transfer for its direct management, etc.)
x Preparation and presentation at the Monitoring Committee of the situation of the retail
risk loan portfolio.
x Coordination with the Legal Counselling Department of Financial Operations and
Economic Policy in the response and resolution of incidents that will be transferred to
the entities in which the presentation of contentious recovery services is delegated, as
well as in other types of actions that require the positioning of ICO within the different
phases in judicial claim processes, as well as in bankruptcy proceedings or similar
characteristics.
x Management of requests received through the Customer Service Area, by holders and
/ or guarantors of all loans in the retail portfolio.
x Monitoring, formalisation and design of those direct finance operations which are
Government-traded as a consequence of serious economic crisis, natural disasters, or
any similar events. Later on, the assessment of any initiative or action proposal for its
transfer to the ministerial departments related to that particular situation and of certain
borrowing groups’ action fields.
The ICO has a team of specialised professionals in each type of risk, each one responsible
for his/her own duties and acting in accordance with the inspirational risk principles, the risk
policy manual in force and existing internal procedures.
64
5.3 Liquidity risk at ICO
Community legislation and its development in Spain in this matter only establish general
requirements for the measurement, control and management systems of liquidity risk in
entities, and are contained in the following normative texts:
- Directive 2013/36/EU of 26 June, related to the access to the activity of credit institutions
and to the prudential supervision of credit institutions and investment companies.
- Regulation (EU) No. 575/2013 of 26 June, on prudential requirements of credit institutions
and investment services companies, part six.
- Implementing Regulation 680/2014 of 16 April, establishing the technical implementing
rules in accordance with Regulation No. 575/2013, chapters 7, 7 bis and 7 ter.
- Law 10/2014 of 28 June, on the management, supervision and solvency of credit
institutions, Articles 41, 42 and Additional Provision Eighth.
- RD 84/2015 of 13 February, which develops Law 10/2014, Article 53.
- Delegated Regulation (EU) 2015/61 of the Commission from October 10, 2014, completing
Regulation 575/2013 with regard to the Liquidity Hedging Requirement (LCR).
- Circular 2/2016 of 2 February, which establishes accounting standards, annual accounts,
public annual accounts and reserved statistical information of securitisation funds that
replaces Circular 3/2008 of 22 May (repealed), rule 51, DT6 and Annex VII.
- Execution Regulation (EU) 2016/313 of the Commission, of 1 March, amending the
Execution Regulation (EU) 680/2014 with regard to Additional Control parameters for the
purpose of information on liquidity (ALMM).
- Execution Regulation (EU) 2017/2114, of 9 November, amending Regulation (EU)
680/2014 and 2016-31 with regard to templates and technical instructions on the regulatory
statements of additional parameters of control for the purpose of information on the liquidity
risk (ALMM).
- Circular 4/2017 of 27 November, standards 59 and 60.
- Execution Regulation (EU) 2018/634 of 24 April, updating the list of ECAI authorised by the
UE, as well as the homogenisation per credit quality levels of the different qualifications in
each ECAI.
- Delegated Regulation (EU) 2018/1620 of 13 July, amending several Articles of the
Delegated Regulation (EU) 2015/61, concerning definitions of requirements on
qualifications of liquidity levels and liquid assets
- Delegated Regulation (EU) 2019/0876 of 20 May, amending Regulation (EU) 575/2013 in
several aspects, among others, definitively regulating the NSFR liquidity risk requirement.
- Execution Regulation (EU) 2020/429 of 14 February, substantially amending Execution
Regulation (EU) 2016/322, concerning technical execution standards concerning the
communication of information for supervision purposes on the Liquidity Coverage
requirement (LCR), and also amending Execution Regulation (EU) 2017/2114, concerning
templates and technical instructions on regulatory statements of additional control
parameters for the purpose of information on the liquidity risk (ALMM)
- Execution Regulation (EU) 2021/451 of the Commission, of December 17, 2020,
establishing technical execution standards for the application of the Regulation (EU) no.
65
575/2013 of the European Parliament and the Council in relation to the communication of
information for supervision purposes by entities, and repealing Execution Regulation (EU)
no. 680/2014.
In general, there is no specific requirement for capital for liquidity risk beyond a set of action
standards to be followed (qualitative requirements) contained in Fifty-first Rule of chapter six
of risk treatment of Circular 2/2016 where it is also mentioned the need to report on the actions
carried out in the process of capital self-assessment and supervisory review contained in
chapter 5, all in order to assess whether its internal capital is sufficient to cover its current and
future activities.
Currently, with the publication of the updated version of the Basel III liquidity and solvency
documents: Global regulatory framework to strengthen banks and banking systems and Basel
III: International framework for measurement, the standardisation and monitoring of liquidity
risk is a new step in the direction of guaranteeing more efficient parameters in the
measurement and control of liquidity. As of January 1, 2013, the Basel Committee published:
The liquidity Hedging Ratio and liquidity risk monitoring tools, which advance the definition
and monitoring of the short-term liquidity ratio, and complemented this work with the
publication on January 12, 2014 of the Guidance for Supervisors on Market-Based Indicators
of Liquidity.
In this sense, on January 17, 2015 the Delegate Regulation 2015/61 was published, amending
Regulation CRR 575/2013 of the European Parliament and of the Council is complete with
regard to this ratio (LCR) and by calendar that starts on October 1, 2015 with an obligatory
60%, 70% as of January 1, 2016, 80% as of January 1, 2017, and which entered fully in effect
(100%) from January 1,2018.
On January 2014, “Basel III: Net Stable Financing Ratio” (NSFR) consultation document was
published for the definition and calculation of the ratio of long-term liquidity, which after a
consultation phase, which lasted until April 11, 2014, led to the publication of the final
document in October 2014. As a result it is necessary to calculate a minimum net stable
financing ratio. After the publication, on June 2019, of Regulation 876/2019 is applicable since
the end of June 2021.
During 2013 and following years, the Institute, calculated on a monthly basis, short and long
term liquidity rates, as additional liquidity controls. In every period, the Institute has achieved
results that are within the limits that would be applied in the future.
Furthermore, prospectively throughout 2015 and in following years, based on the document
published by the BIS “Basel III: the Net Stable Financing Ratio” of October 2014, and with
definitions and criteria in force at each moment, the results have been calculated quarterly,
which provide the ICO balance with the introduction of different scenarios handled one year
ahead (2022), in relation to the NSFR ratio.
66
At ICO, it is perfectly defined an organisational structure responsible for reporting, monitoring
and controlling liquidity risk.
The measurement used to monitor balance sheet liquidity risk is the liquidity gap. The liquidity
gap provides information regarding the mismatches between the inflow and outflow of funds
on a daily basis, for periods of up to 12 months covering all balance sheet and off-balance
sheet items that produce cash flows on the actual date occurring.
Liquidity gaps are measured in one week periods, and one, three and six month’s periods.
There is a percentage over the total of Institute’s liabilities that cannot be exceeded for each
period: one week-period: up to 0.5%, one month period: up to 1%, three month period: up to
2.5% and six month period: up to 5%.
Short-term liquidity is monitored on a daily basis. On a weekly basis, and at the end of each
month, this monitoring and control of limits takes place with a horizon of 1 week, 1 month, 3
months and 6 months.
The ICO has established quantitative limits and alerts that allow us to get ahead from possible
situations of liquidity tension.
There is also a policy of diversifying sources of basic finances in order to minimise this risk,
and a regular review of liquidity including any projections for new activity, in order to establish
needs in terms of amounts and dates of financing, for an annual financing plan, sufficiently in
advance.
Likewise, approved by the General Board on February 27, 2018, there is a liquidity
Contingency Plan that establishes a priority order as reference when resorting to financing
sources in stress scenarios. This Contingency Plan was updated and presented, for the last
time, to the Committee of Assets and Liabilities (COAP) last February 2021.
In general, ICO raises liquidity in a variety of ways, including raising the interbank market, repo
and simultaneous liquidity and issuing debt securities in wholesale and retail markets.
The financial crisis that affected international and national markets, rooted in the US sub-prime
market crisis, triggered a sharp downturn by financial markets, causing the resources for
raising financing on which both international and national financial entities rely to decline
sharply. As a result, fund raising on the interbank market or through the issuance of debt
securities was also seriously affected.
Due to this new situation, decisions were taken throughout 2021, as done previously, to adapt
ICO to the new circumstances in order to ensure the liquidity needed to meet its payment
commitments on time and to achieve its strategic operating, investment and growth targets.
Thanks to these measures, ICO's management also does not anticipate any liquidity
shortages in 2022.
67
Maturity Analysis of trading and hedging derivatives denominated in Euros
The following table shows, by notional, the contractual maturities for euro-denominated
derivatives, recognised as financial assets and financial liabilities at December 31, 2021 and
2020 (except for embedded derivatives in hybrid financial instruments) and loan commitments
considered financial derivatives as they can be settled, by adjusting, in cash or with another
financial asset, in which the maturities are deemed essential for understanding the Institute’s
cash flow projections:
At 31 December 2021:
Thousands of Euros
Up to 1 year
From 1 to 5
years
From 6 to 10
years
From 11 to
15 years
From 16 to
20 years
Total
Derivatives held for trading
1,021,100
273,500
1,294,600
-Of which: credit commitments
considered as derivatives
Hedging derivatives
11,046,877
2,693,694
2,184,951
617,000
70,689
16,613,212
12,067,977
2,967,194
2,184,951
617,000
70,689
17,907,812
At 31 December 2020:
Thousands of Euros
Up to 1 year
From 1 to 5
years
From 6 to 10
years
From 11 to
15 years
From 16 to
20 years
Total
Derivatives held for trading
71,188
136,813
248,553
456,554
-Of which: credit commitments
considered as derivatives
Hedging derivatives
8,468,088
2,981,508
1,911,208
200,000
69,554
13,630,358
8,539,276
3,118,321
2,159,761
200,000
69,554
14,086,912
In relation to the information included in charts above, the following must be highlighted:
Where a counterparty can choose when an amount should be paid, the derivative is
assigned in the first period, in which the payment to the Institute may be demanded;
68
The amounts included in the charts, correspond to undiscounted contractual amounts.
Interest-rate swaps are shown at their net amount if settled by differences, loan
commitments considered derivatives at their gross amount and all remaining financial
derivatives at their contractual amount of exchange unsettled by differences;
For derivatives with a non-stated contractual amount at the reporting date, e.g.
because they depend on the performance of an index, the residual maturity,
considered for classification purposes in the preceding tables, was determined based
on prevailing conditions at December 31, 2021 and 2020, respectively;
Liquidity GAP analysis
The purpose of the liquidity management is to ensure that the entity maintains appropriate
liquidity levels to cover its needs, both at the short and long terms, optimising the impact that
the maintenance of its liquid funds could have in the profit and loss account.
On a daily basis, the liquidity profile on the balance is monitored for the purpose of control,
information to management, and analysis of funds’ needs for at least the following twelve
months, additionally incorporating scenarios with the analysis of funds’ needs to cover the
activity foreseen for such period.
As explained above, ICO’s liquidity management is based on the analysis of the difference
between inflows and outflows generated by contractual maturities of operations of its balance
(liquidity gap) and cash flows generated from activity forecasts. This analysis provides the
necessary information on the volume of funds that will be necessary to gain, resorting to
different financing sources available for the entity.
Moreover, the Institute maintains a buffer of high-quality liquid assets that will allow, where
necessary, obtaining liquidity immediately through its discount on the European Central Bank.
The balance of assets that may be used by the Institute as liquidity reserve has sufficient
capacity to cover its negative liquidity gaps, for two purposes:
- Contribute flexibility when planning the volume and timing of the gaining of necessary
funds to cover liquidity gaps.
- Security buffer to face possible tensions or crisis situations in markets.
The tables below compare liquidity inflows and outflows at different maturities (partial and
accumulated liquidity gaps). Inflows and outflows in foreign currency are shown at their
equivalent value in such currency.
Additionally, the evolution of the balance of liquid assets and their level of coverage over
liquidity gaps are incorporated for the different terms.
69
At 31 December 2021:
At 31 December 2020:
As it may be seen in these charts, negative accumulated liquidity gaps are covered by the
available buffer of liquid assets.
In addition to highly liquid assets, there is another series of eligible pledged assets in the ECB
policy as coverage for provisions of funds in TLTRO III which volume at December 31, 2021
is of 3,495,000 thousand Euros.
In relation to the liquidity hedging ratio, a chart is presented below with quarterly averages of
the ratio based on observations at the end of the month in the twelve previous months for each
quarter of the period of 2021, indicating the averages of total liquid assets and averages of
net liquidity outflows, liquidity outflows and liquidity inflows.
Inflows equivalent value Euros 14,281,775 4,604,928 4,237,272 4,833,758 7,188,852 14,306,385 9,598,546
Outflows equivalent value Euros -7,018,343 -9,247,844 -4,411,998 -7,676,236 -8,940,109 -9,979,363 -3,958,298
Partial liquidity gaps 7,263,432 -4,642,915 -174,726 -2,842,479 -1,751,257 4,327,021 5,640,248
Accumulated liquidity gaps
7,263,432 2,620,517 2,445,791 -396,688 -2,147,945 2,179,076 7,819,324
Buffer of highly-liquid assets
4,247,930 3,383,157 3,038,475 3,915,407 2,454,763 1,232,868 -
Difference between buffer of liquid
assets and accumulated liquidity gaps
n.a. n.a. n.a. 3,518,719 306,818 n.a. n.a.
% Coverage of buffer of liquid assets and
accumulated negative liquidity gaps
n.a. n.a. n.a. 987% 114% n.a. n.a.
Thousands of Euros
Up to 1 month
From 1 to 3
months
From 3 to 6
months
From 6 to 12
months
From 1 to 2
years
From 2 to 5
years
More than 5
years
Inflows equivalent value Euros 5,862,401 2,194,084 4,752,066 5,722,815 8,973,232 16,220,140 10,679,896
Outflows equivalent value Euros -4,059,266 -7,706,136 -5,543,916 -3,941,886 -6,424,758 -14,842,788 -4,669,308
Partial liquidity gaps 1,803,135 -5,512,052 -791,850 1,780,929 2,548,473 1,377,352 6,010,588
Accumulated liquidity gaps
1,803,135 -3,708,917 -4,500,767 -2,719,837 -171,364 1,205,988 7,216,576
Buffer of highly-liquid assets
5,563,981 5,792,810 5,453,151 4,484,647 2,374,360 480,097 -
Difference between buffer of liquid
assets and accumulated liquidity gaps
n.a. 2,083,893 952,385 1,764,810 2,202,996 n.a. n.a.
% Coverage of buffer of liquid assets and
accumulated negative liquidity gaps
n.a. 156% 121% 165% 1,386% n.a. n.a.
Thousands of Euros
More than 5
years
Up to 1 month
From 1 to 3
months
From 3 to 6
months
From 6 to 12
months
From 1 to 2
years
From 2 to 5
years
70
Lastly, the following information chart shows the net stable financing ratio at the end of each
calendar quarter of the period of 2021, additionally showing the stable financing available at
the end of each quarter and the financing required at those dates.
5.4. Market risk at ICO
As indicated above, it is possible to distinguish two major groups within this risk: balance sheet
or structural market risk, and the trading portfolio risk. In accordance with its internal policy,
ICO is currently attempting to minimise trading portfolios and hold only those that, following
the current accounting legislation, do not allow their classification as hedging or investment.
Accordingly, market risk results almost exclusively from ordinary activities.
1) There are two basic criteria through which exposure to changes in interest and
exchange rates is revealed: Profitability and Solvency:
Profitability: At the ICO this, mainly derives from the income statement and therefore
the relevant variable here is the Interest Margin or Financial Margin.
Solvency: A company's equity is the primary guarantee for lenders. The value of this
capital or equity is the main criterion for measuring solvency.
Using these considerations, the ICO has implemented a system for measuring market
risk based on three pillars: a) Calculation of the sensitivity of the annual Financial
Margin. b) Calculation of the sensitivity of equity and c) Calculation of hypothetical
trading portfolios’ “Value at Risk”, if any exist.
2) Methodology. In order to measure balance sheet risks relating to the Financial Margin,
LIQUIDITY COVERAGE RATIO (LCR) YEAR 2021
Data in % and thousands of Euros
QUARTERLY AVERAGE
CONCEPT 1Q 2Q 3Q 4Q
LCR RATIO (%) 561.37% 374.86% 553.25% 947.63%
TOTAL LIQUID ASSETS 9,423,762 7,855,580 10,014,828 13,059,103
NET LIQUIDITY OUTFLOWS 2,824,784 2,236,127 2,111,763 2,138,543
- Liquidity outflows 4,558,271 4,764,854 4,378,639 4,596,061
- Liquidity inflows 1,733,487 2,528,728 2,266,876 2,457,518
NET STABLE FINANCING RATIO (NSFR) YEAR 2021
Data in % and thousands of Euros
QUARTERLY AVERAGE
CONCEPT 1Q 2Q 3Q 4Q
NSFR RATIO (%) 112.06% 116.16% 123.65% 125.23%
AVAILABLE STABLE FINANCING 22,959,068 22,803,960 23,821,226 22,209,180
REQUIRED STABLE FINANCING 20,487,732 19,630,862 19,018,578 17,734,606
71
the weighted partial maturity gap method was used before 2015, calculated as the
difference between asset and liability volume and off-balance sheet transactions that
mature or renew interest rates within the following 12 months, weighted by the period
affecting the Margin.
In order to measure the sensitivity of Equity, the duration gap method was used before
2015. The duration gap is obtained as the difference between the duration of assets
and liabilities, and once the difference is obtained, the sensitivity gap may be
calculated.
Both methods were replaced in mid-2014 by other simulations based on Interest
Income and Net Asset.
Regarding the Value at Risk, the methodology to be used will be determined by the
type of portfolio involved and may be based on parametric, historical simulation or
Monte Carlo methodology.
3) Risk degree. The decision regarding the degree of risk assumed by ICO is the Senior
Management’s responsibility, which based on the proposal of the Directorate for Risks
and Accounting, establishes the acceptable limits based on the particular
characteristics of the ICO. These limits are reviewed regularly.
For the purpose of assessing a sensitivity limit of the Financial Margin, it will be
estimated based on implicit rates, calculated on the basis of the market curve and on
the one on which increases or decreases are applied by +/- 200 bps, applying in the
decreasing scenario a floor in -1%. The difference between both calculations, in
absolute value, will be the estimated sensitivity, which amount cannot imply a decrease
of the simulated Financial Margin above -35 million Euros.
In order to determine the sensitivity of the Financial Margin for variations of the
exchange rate in currencies Euro/US Dollar and Euro/Pound Sterling, variations of +/-
10% will be assumed.
The exchange rate risk shall not exceed, in any case, 25% of the global limit
established for the Financial Margin.
As a result of applying these movements of +/- 200 bps, with these shifts in interest
rates, the sensitivity of the balance of ICO to December 31, 2020 was -7,412 million
Euros in total, distributed as follows: -4,535 million Euros for the balance in Euros, -
587 thousand Euros of the balance in US Dollars, and -82 thousand Euros of the
balance in British Pounds. Exchange rate (with movements of +/- 10% on changes in
USD/EUR and GBP/EUR) was -1,941 million Euros in Dollars and -268 thousand
Euros in Pounds.
Likewise, the sensitivity of the ICO’s Financial Margin at December 31, 2021 was of
8,273 million Euros, representing 23.64% of the abovementioned self-imposed limit,
72
with the following distribution: -4.350 for interest rate of the balance sheet in Euros,
-0.802 for interest rate of US Dollar, and -0.630 for interest rate of the balance sheet
in Pound Sterling. Per exchange rate (variations of +/-10% in interest rates USD/EUR
and GBP/EUR), it was of -2.097 million Euros in Dollars and -394 thousand Euros in
Pounds.
For the purpose of establishing a limit in the sensitivity of the net asset value, current
values of our balance will be calculated through a market curve and another to which
increases or decreases are applied by +/- 200 bps with a floor, in the scenario of
decrease of rates, by -1% for immediate maturities, which floor will increase in 5 bps
per year, until 0% is reached for maturities in 20 or more years. Such absolute floor is
displacement. The difference between both values will be considered as the sensitivity
of the net asset value of our balance in absolute value. The percentage (%) implied by
this variation on the net asset value shall not represent a decrease above 10% of the
estimated net asset value.
In order to determine the sensitivity of the net asset value for exchange rate variations
in currencies Euro/US Dollar and Euros/Pound Sterling, movements of +/- 10% will be
assumed.
At December 31, 2020, the values of the sensitivity of the ICO Net Asset reached
-5.65% in value added with a distribution on balances as follows: -5.20% for Euro
interest rate, -0.18% in the US Dollar, and -0.02% in the British Pound. Exchange rate
for Dollar presented a sensitivity of -0.22% and -0.03% for Pounds.
At December 31, 2021 sensitivity values of ICO’s Net Asset Value were of -3.08% with
a balance distribution of: -2,42% for interest rate of Euro, -0,21% in the balance of US
Dollars and -0.03% in the balance of Pound Sterling. Per exchange rate, sensibilities
were of -0.36% in Dollars and -0.06% in Pounds.
In addition to the abovementioned sensibilities and results, the ICO has established a
regular system integrated with the application for the risk measurement, management
and control, in order to verify the impact that could derive from different scenarios of
evolution of relevant financial variables in the Financial Margin or in the Net Asset
Value and, on a monthly basis, other sensitivity estimates are performed, based on
different assumptions of variations of interest rates. For instance, we note the
sensitivity based on estimates of variation of interest rates provided by the Service of
Studies at a one-month horizon, variations of the 5-year historical series of variations
of interest rates or a stressed variation (6 times), historical variations, conversion to a
positive rate curve or inversion of the curve.
4) Risk modification. The last step for efficient risk management is the ability to modify
out maturity and duration gaps in order to bring them into line with desired risk values
at any given moment, using balance sheet or off-balance sheet instruments based on
market opportunities and in accordance with the management decisions taken within
73
the authority granted for this purpose or the Balance Management Department, the
General Finance and Strategy Management or the Operations Committee.
The main currencies used by ICO to present its balance sheet at December 31, 2020
are the Euro and the US Dollar.
If we look at the assets of the balance sheet, the Euro concentrates approximately
92.11% of the total, the US Dollar being of 6.23%, while other currencies distribute the
remaining amount.
Liabilities concentrate around 94.59% of the total balance sheet, with a total of
approximately 71% in Euros, and almost 24% in US Dollars.
For 2021 closing, the ICO’s main currencies in its activity are the Euro and the US
Dollar. In this case, both of them together represent around 98.18% of total assets,
where the Euro represents 92.28% and the Dollar the remaining 5.90%, while they
represent 92.26% of liabilities, distributed in 63.10% in Euro and 29.16% in Dollar
Regarding currencies other than the euro and Dollar with which the Institute operates, its
balance sheets are virtually saved from interest and exchange rate risks either because the
operation involves financing obtained in the currency concerned and converted to Euros using
a derivative instrument that completely covers all currency flows, or because the financial of a
certain asset is designed to avoid these risks.
5.5. Credit risk at ICO
As has already been mentioned about credit risk, there are two broad groups: Counterparty
and country risk.
The first group includes transactions with credit institutions, both on and off the balance sheet.
Monitoring activities are carried out by using a system that integrates the administration of
transactions and the risks deriving from them in real time, providing operators with current
information regarding counterparty credit lines available at any given moment.
The competent bodies at ICO have defined and approved a method for consuming
counterparty credit lines based on the evaluation of the transactions at market prices plus a
potential future or add-on risk, that is measured as a percentage of the nominal value of the
transaction, calculated as a potential maximum loss of 95% of confidence over the life of the
transaction. The methodology is periodically reviewed, and the add-ons are adjusted at least
on a half-yearly basis.
The basic criteria for establishing counterparty lines are also approved by ICO's General
Board on a half-yearly basis and is performed an individualised analysis of them. These
counterparty lines are subdivided into two broad groups as a result of the operating
74
characteristics of the ICO. The first of the counterparty lines is related to cash transactions.
The other counterparty line is related to mediation transactions, operations in which the ICO
finances several investment projects through framework programmes arranged with several
entities such as, for example, lines of Businesses and Entrepreneurs or Internationalisation.
Transactions involving derivatives contracted by ICO have counterparties with high credit
ratings, so that a very high percentage of these, almost 100%, maintain an Agency rating
investment grade. These counterparty institutions operate at the national and international
level.
ICO’s activities with credit institutions, in the area of both second-floor and direct facilities, are
carried out with counterparties that, in more than 91% of cases, have an investment grade
rating.
The ICO has structured several stages of evaluation and control relating to company credit
risk: Acceptance, Monitoring and Recovery.
At the Acceptance stage, the Institute performs an analysis of companies and transactions
based on an on-going concern evaluation, guarantees are analysed in order to issue an
opinion about the risk and the potential client, which is the basis for taking decisions by the
Operations Committee or General Board, as appropriate.
The Monitoring process has the purpose of making the Institute’s credit portfolio to achieve
the highest quality, i.e. ensures that our loans are being repaid on a timely basis, on the agreed
dates. The basic monitoring unit is the client, not the transaction, such that any incident
affecting a transaction affects the rating of a client and its group. This is achieved by a
permanent control, with periodic reviews of the economic and financial situation of the same
and keeping support tools updated for decision-making and it allow for detect warning signs;
as well as promoting action plans against problematic risks in order to maximise the repayment
of financing granted.
Finally, recovery tasks in the Monitoring and Retail Recovery area are focused in the recovery
of defaulted operations via telephone, mail or e-mail. Focused also on payment agreements
talks, once the operation is in legal dispute, and on the study of those operations that went out
to tender in order to establish the Institute’s vote in creditor’s tender.
Under the heading regarding credit risk, special mention must be made to the so-called
country risk. Country risk refers to the solvency of all counterparties characterised as
pertaining to an area geographically, politically and legally defined as a State.
In this sense, ICO has approved a methodology for measuring country risk that follows current
legislation and complies with the objective of evaluating countries by group risk based on
multiple criteria, thereby allowing for a defined policy when recording provisions for that
country risk, evaluating direct loan transactions and segmenting the non-resident loan
portfolio. Rating agency and OECD-CESCE evaluations are used as a source of information
75
when classifying countries into risk groups.
5.6. Operating risk at ICO
It is, increasingly, more important to measure and control operating risks, especially bearing
in mind the New Capital Accord (Basel III). The risk deriving from inadequate processes,
incorrect records, system failures, legal risks or the risk of loss inherent to the formalisation of
transactions is included.
In this area, certain tools have been developed to facilitate the task of covering operating risk.
Specifically, these tools consist of the policies covering the monthly monitoring of the control
panel or activity indicators, the development of processes and internal procedures, the
definition of client and operations monitoring and internal control of incidents, or the existing
contingency plan. It is important to mention that the regular controls applied to procedures and
operations are performed by internal and external auditors.
5.7 Outstanding credit risk with companies
5.7.1 Classification per sector
Taking into account a classification by sector, the distribution of the outstanding risk, (*) is as
follows:
Million Euros
2021
2020
Amount
% s/total
Amount
%
s/total
Amount
Property investment
452
4%
504
4%
Construction of social housing for sale
5
0%
7
0%
Construction of social housing for rent
323
3%
355
3%
Acquisition and development of land
117
1%
140
1%
Others
7
0%
2
0%
Investment property, plant and equipment
8,512
72%
8,520
70%
Renewable energies
1,407
12%
1,340
11%
Water infrastructures
118
1%
144
1%
Electricity infrastructures
1,831
15%
1,272
10%
Gas and fossil fuel infrastructures
714
6%
1,172
10%
Transport infrastructures
3,232
27%
3,511
29%
Tourism and leisure
134
1%
119
1%
Social-health infrastructures
86
1%
87
1%
Telecommunications
100
1%
100
1%
Audio-visual production and exhibition
27
0%
22
0%
Business parks and other constructions
22
0%
9
0%
Other
635
6%
601
5%
Research and Development material investment
206
2%
141
1%
ICO Finance lines AA.CC. Agencies
-
-
-
-
Acquisitions of companies
628
5%
694
6%
General corporate needs
834
7%
524
4%
Restructuring of liabilities
709
6%
1,048
9%
General State Budgets
764
6%
919
8%
76
11,899
100%
12,208
100%
(*) Including customer loans and advances without valuation adjustments or impairment losses (except for
“other financial
assets”). Also includes financial guarantees for customers and debt securities of resident Public Administrations classified
as
loans and advances receivable.
At December 31, 2021 and 2020 the total exposure is mainly concentrated in three sectors:
“Investment property, plant and equipment”, which account for 72% of total risk in 2021 (70%
in 2020); the sector of “Restructuring of liabilities” with 6% of total risk in 2021 (9% in 2020),
and “General State Budgets” for 6% of total risk in 2021 (8% in 2020).
Within the “Investment property, plant and equipment” sector, it is important to highlight the
impact of the sub-sector named “ Transport Infrastructures” on the sector, with 27% of weight
over the risk of 2021 (29% in 2020).
5.7.2 Classification by geographic location of financial investments
The total risk at December 31, 2021 is distributed as follows: 72% in transactions financing
investments in Spain amounting to 8,608 million Euros (76% at 2020 with 9,233 million Euros)
and 28% in transactions aimed at financing investment projects in other countries.
The risk distribution for investment projects in the national territory per Autonomous
Communities in 2021 is the following: Catalonia with 7%, Madrid 6%, Valencia 5%, Andalusia
with 3%, and Extremadura with 2% (7%, 5%, 6%, 5% and 3%, in 2020, respectively).
Transactions taking place in the international market at December 31, 2021 and 2020 are
distributed as follows in accordance with the active foreign risk:
Millions of Euros
2021
2020
Amount
Percentage
Amount
Percentage
European Economic Community
1.168
35%
1.148
38%
Latin America
827
25%
743
25%
United States
146
4%
117
4%
Rest of Europe (not EU)
30
1%
30
1%
Other
1.120
35%
937
32%
3.291
100%
2.975
100%
77
5.8 Information on payment deferrals to suppliers
In compliance with Law 15/2010 of 5 July, amending Law 3/2004 of 29 December, establishing
measures against late payment in commercial transactions, developed by the Resolution of
January 29, 2020 of the Spanish Audit and Accounting Institute (ICAC) on information
concerning late payment to suppliers in commercial transactions to be included in the Notes
to annual accounts, we should point out the following:
- Given ICO’s core business (financial activity), the information presented in this Note
concerning late payment, is exclusively related to payments to services suppliers and
sundry suppliers to ICO other than depositors and holders of ICO securities. With the
latter, the contractual and legal payment deadlines of both liabilities due to demand
and with deferred payment have been met dutifully. Nor is any information provided
concerning payments to suppliers excluded from the scope of this mandatory
disclosure pursuant to the provisions of the aforementioned ICAC Resolution, such as
suppliers of fixed assets that are not considered to be trade creditors.
Regarding the information required by Law 15/2010, of 5 July corresponding to the Institution’s
commercial and service suppliers and considering what it is included in the Article 6 of ICAC
Resolution of January 29, 2020, presented below, with the scope defined in the preceding
paragraph, the information required by those regulations:
2021
2020
(in days)
Ratio of paid operations
7
7
Ratio of operations payable
3.5
3.5
Average payment period to suppliers
6.75
6.75
(in thousands of Euros)
Total amount of settled payments
30,266
25,471
Total amount of outstanding payments
666
1 376
When elaborating the information above, payments corresponding to intercompany credits
and debits have been excluded.
5.9 Risk concentration and other specific regulations of the ICO
At December 31, 2021 and 2020, the Group is exempt from the limits on large exposures set
out in the applicable regulations (Part IV of EU Regulation 575/2013 and Circular 3/2008 of
the Bank of Spain, respectively), according the provisions of the bylaws of the Institute.
Royal Decree-Law 12/2012, of March 31, 2012, established the treatment of exposures to
credit institutions resident in EU Member States.
78
5.10 Information on construction and property development finance and associated
foreclosed properties
Regarding property risk portfolio policies and strategies, the Institute has acceptance
processes with specific policies for this type of product (e.g. experienced developers,
percentages of accredited sales, data on rental demand by independent experts), assessing
the economic and financial feasibility of projects.
Payments for certified work are subsequently validated and controlled, construction progress
is monitored and sales are controlled.
In addition, studies have been conducted to detect the reasons behind the payment difficulties
of customers that have not paid in order to suggest solutions that allow transactions to be
completed successfully.
Information on construction and property development finance is as follows:
- Finance granted for construction and property development and related hedges:
Thousands of Euros
2021
2020
Gross
amount
Excess over
value of
collateral
Specific
allowance
Gross amount
Excess over
value of
collateral
Specific
allowance
Property financing
445 717
-
198 244
502.378
-
216.384
- Out of which doubtful
102 905
-
100 312
117.174
-
114.470
Memorandum item
Defaulted loans
-
-
-
-
-
-
Thousands of Euros
2021
2020
Memorandum item:
Total loans to clients, excluding public administrations
8 427 818
8 907 878
Total assets
37 766 136
34 386 075
Total general allowance for normal risk
145 886
86 998
Total finance for construction and property development at December 31, 2021 represents
1.18% of the total balance sheet (1.46% at December 31, 2020).
79
-
Finance for construction and property development (gross amounts):
Thousands of Euros
2021
2020
1 Without mortgage collateral
115 800
140 578
2 With mortgage collateral
329 917
361 800
2.1 Finished buildings
324 324
352 301
2.1.1 Homes
324 324
352 301
2.1.2 Other
-
-
2.2 Buildings under constructions
5 593
9 499
2.2.1 Homes
5 593
9 499
2.2.2 Other
-
-
2.3 Land
-
-
2.3.1 Developed land
-
-
2.3.2 Other land
-
TOTAL
445 717
502 378
- Home purchase loans:
Thousands of Euros
2021
2020
Gross
amount
Of which:
doubtful
Gross amount
Of which:
doubtful
Home loans
11 864
-
12 648
-
Without mortgage collateral
11 154
-
11 528
-
With mortgage collateral
710
-
1 120
-
- Home purchase loans with collateral mortgage (percentage of risk on latest appraisal
available, LTV):
At 31 December 2021:
Thousands of Euros
LTV<40%
40%<LTV<60%
60%<LTV<80%
80%<LTV<100%
LTV>100%
Gross amount
435
-
275
-
-
- Of which
doubtful
80
At 31 December 2020:
Thousands of Euros
LTV<40%
40%<LTV<60%
60%<LTV<80%
80%<LTV<100%
LTV>100%
Gross amount
917
-
203
-
-
- Of which
doubtful
- Foreclosed assets received as the settlement of debts from construction and property
development loans.
None of the foreclosed assets on the Institute’s balance sheet (Note 17) comes from
financing granted to construction companies and property developers, or mortgage
loans to households for home purchases, nor do they consist on equity instruments,
investments and finance to non-consolidated companies holding the assets.
5.11 Information related to Institute’s refinanced and restructured operations
Presented in the next table, there is the detailed information related to those refinanced and
restructured operations as of December 31,, 2021 and 2020 (gross amounts), as requirement
of Bank of Spain 6/2013 Circular, about financial public and reserved information rules:
At December 31, 2021 (gross amounts, in thousands of Euros):
With real
guarantee
No real
guarantee
TOTAL
amounts
TOTAL hedging
Public Administrations
40 428
75 372
115 800
62 928
Doubtful
40 428
-
40 428
Finance companies (finance
assets)
-
-
-
-
Doubtful
Non Finance companies and
Industrial Business
377 919
37 291
415 210
211 988
Doubtful
214 311
11 342
225 653
202 491
Non-doubtful
38 986
-
38 986
5 808
Property doubtful
118 487
-
118 487
113 406
Rest of individuals
351
-
351
-
TOTALS
418 698
112 663
531 361
274 916
81
At December 31, 2020 (gross amounts, in thousands of Euros):
With real
guarantee
No real
guarantee
TOTAL
amounts
TOTAL hedging
Public Administrations
-
154 716
154 716
69 251
Doubtful
42 894
42 894
42 894
Finance companies (finance
assets)
-
-
-
-
Doubtful
Non Finance companies and
Industrial Business
612 121
20 333
632 454
254 964
Doubtful
241 577
16 096
257 673
249 064
Non-doubtful
4 109
-
4 109
-
Property doubtful
3 016
-
3 016
3 016
Rest of individuals
370
3
373
-
TOTALS
612 491
175 052
787 543
324 215
6. CASH, DEPOSITS AT CENTRAL BANKS AND DEMAND DEPOSITS
The composition of this caption of the balance sheet at December 31, 2021 and 2020 is the
following:
Thousands of Euros
2021
2020
Cash at hand
4
9
Cash in Bank of Spain
9 344 958
2 704 007
Mandatory to comply with minimum reserve ratios
9 344 958
2 704 007
Other demand deposits
34 533
25 368
9 379 495
2 729 384
7. FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING
The total balance under this heading in the balance sheets at December 31, 2021 and 2020
is made up of trading derivatives.
Transactions involving trading derivatives are mainly related to instruments with which the
Institute manages balance sheet positions globally, but which do not meet the requirements
to be designated hedging and are therefore classified in the trading portfolio.
Below, there is a breakdown classified by type of derivative, of the fair value of the Institute’s
trading derivatives and their notional value (amount on which future payments and collections
of these derivatives are based) at December 31, 2021 and 2020:
82
Thousands of Euros
Notional
Assets
Liabilities
2021
2020
2021
2020
2021
2020
By type of market
Organised markets
-
-
-
-
-
-
Non – organised markets
1 294 600
456 554
10 701
61 724
10 580
60 824
1 294 600
456 554
10 701
61 724
10 580
60 824
By type of product
Swaps
1 294 600
456 554
10 701
61 724
10 580
60 824
1 294 600
456 554
10 701
61 724
10 580
60 824
By counterparty
Credit institutions
1 147 217
263 751
-
-
10 580
60 824
Other credit institutions
-
-
-
-
-
-
Other sectors
147 383
192 803
10 701
61 724
-
-
1 294 600
456 554
10 701
61 724
10 580
60 824
By type of risk
Exchange risk
257 282
417 137
9 411
59 521
8 541
58 687
Interest rate risk
1 037 318
39 417
1 290
2 203
2 039
2 137
1 294 600
456 554
10 701
61 724
10 580
60 824
The fair value has been calculated for the 100% of the cases, both in 2021 and 2020, taking
the implicit curve of the money markets and the public debt as a reference.
At December 31,
2021 and 2020 the trading portfolio classification, stated at fair value and
taking the hierarchical order into account as shown in Note 2.2.3, is as follows:
Thousands of Euros
2021
2020
Level I
Level II
Level III
Level I
Level II
Level III
Derivatives held for trading of assets
-
10 701
-
-
61 724
-
Derivatives held for trading of liabilities
-
10 580
-
-
60 824
-
The following chart shows amounts registered on profit and loss accounts of 2021 and 2020
(Note 29) for variations in the fair value of the Institute’s financial instruments included on the
portfolio of assets held for trading, corresponding to unrealised capital gains and losses,
distinguishing between financial instruments which fair value is determined by taking as
reference listings published in active markets (Level 1), is estimated using a valuation
technique which variables are obtained from data observable in the market (Level 2) and
others (Level 3):
83
Thousands of Euros
2021
2020
Profit
Loss
Net
Profit
Loss
Net
Level 1
-
-
-
-
-
-
Level 2
147 721
147 357
364
111 925
108 540
3 385
Level 3
-
-
-
-
-
-
In 2021 and 2020, changes in the fair value of derivatives classified as level 2 were solely the
result of purchase, sales and changes in fair value arising from the application of the valuation
techniques described, with no reclassifications between levels.
8. FINANCIAL ASSETS NOT HELD FOR TRADING OBLIGATORILY VALUED AT
FAIR VALUE THROUGH PROFIT OR LOSS
The breakdown of the net balance included in this chapter, in the balance sheet at December
31, 2021 and 2020, investment is as follows:
Thousands of Euros
2021
2020
Equity instruments
-
-
Debt securities
-
-
At December 31, 2021 and at December 31, 2020, this caption includes a debt instrument,
classified as doubtful risk, with accounting hedging of 100% (amount of 40,167 thousand
Euros), therefore fully registered as provision in both years.
In 2021, no results have been registered for the valuation at fair value in the profit and loss
account for this concept (none in 2020) (Note 30).
84
9. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
The detail of this caption of the balance sheet at December 31, 2021 and 2020, per investment,
is the following:
Thousands of Euros
2021
2020
Equity instruments:
FONDICO Pyme (1)
97 273
82 747
FONDICO Infraestructuras II (2)
131 392
102 239
FONDICO Global (3)
748 437
634 960
FONDICO Next Tech (4)
123
-
FONS MEDITERRANEA FCR (5)
6 330
6 444
FONDO MARGUERITTE MEH (6)
72 504
58 953
FONDO AFS CESCE (7)
8 579
7 044
FEI (8)
21 667
13 079
SWIFT (9)
6
-
EDW (10)
195
170
INVESTMENTS GROUP QUABIT (11)
-
-
INVESTMENTS CELTIC ROADS WATERFORD (12)
-
-
1 086 506
905 636
Debt securities (11)
1 150 639
713 358
2 237 145
1 618 994
The balance, net of the tax effect, of caption “Other accumulated comprehensive income” as
changes in the fair value of these financial instruments at December 31, 2021 and 2020, is
the following (Note 21):
Thousands of Euros
2021
2020
Debt instruments
3 640
4 707
Equity instruments
134 557
72 925
138 197
77 632
85
Variations, during 2021 and 2020, in the caption of Financial assets at fair value through other
comprehensive income are shown below:
Thousands of Euros
2021
2020
Initial balance
1 618 994
1 826 137
Purchase additions
2 625 740
672 325
Sales and amortisations
(2 061 564)
(918 197)
Variations for changes in fair value (Note 21)
60 565
37 939
Allocation impairment provision
(8 767)
-
Variations for impairment losses (application)
2 177
790
Closing balance
2 237 145
1 618 994
(1) FONDICO Pyme. Venture capital fund constituted on May 1993 and in which the
Institute is the sole participant, managed by Axis Participaciones Empresariales. In
2021, the Institute made a new contribution to the Fund by 15,025 thousand Euros (no
variation with regard to contributions or returns during 2020).
(2) FONDICO Infraestructuras. Venture capital fund constituted on 2019, fully invested by
the Institute and managed by Axis Participaciones Empresariales. In 2021, the
Institute’s contributions amounted to 19,000 thousand Euros (21,000 thousand Euros
in 2020).
(3) FONDICO Global. Venture capital fund created in 2014, fully invested by the Institute
and managed by Axis Participaciones Empresariales. In 2021, the Institute’s
contributions amounted to 160,000 thousand Euros (140,000 thousand Euros in 2020).
In 2021, the Fund has decreased equity through refund of contributions by 124,000
thousand Euros (124,000 thousand Euros in 2020). The amount committed by ICO
and to be reimbursed amounts to 679,000 thousand Euros at December 31, 2021
(538,000 thousand Euros at December 31, 2020).
(4) FONDICO Next Tech. Venture capital fund created in 2021, wholly owned by the
Institute and managed by Axis Participaciones Empresariales. In 2021, the Institute’s
contributions amounted to 965 thousand Euros.
(5) FONS MEDITERRANEA. Fund constituted in October 2005 and in which the Institute
participates with other public and private entities. The Fund was created to invest in
projects developed by Spanish companies in the African Maghreb. The allocations for
this fund have a provision hedging of 30% of the total real capital (without including fair
value changes) amounting 1,270 thousand Euros at December 31, 2021 (1,270
thousand Euros at December 31, 2020).
(6) FONDO MARGUERITTE MEH. With the participation of leading European public credit
institutions, this is a European equity fund which seeks to promote investment in
86
infrastructures, in order to implement the key policies of the European Union in the
fight against climate change, with the aim of combining the principle of return to
investors based on market policies and the objectives set by public policies. The Fund
is managed by ICO, although the final result from its eventual liquidation would not
affect the Institute’s balance sheet, since it is fully guaranteed by the Spanish Ministry
of Tax, which provides funds to finance the Fund. In 2021, there were no new
contributions (285 thousand Euros in 2020) and no returns of participations were
registered (6,549 thousand Euros in 2020).
(7) FONDO AFS CESCE. Participation of 9.96% in Fondo AFS Sicav, which main activity
is the discount of commercial invoices with CESCE guarantee. In 2021, the Institute
has not made any contribution (none in 2020). In 2021, there has not been any return
of contributions (1,500 thousand Euros in 2020).
(8) FEI. Participation equal to 0.66% of the total of the European Investment Fund, at
December 31, 2021 (0.72% at December 31, 2020). There have not been any
contributions at 2021 or at 2020. At December 31, 2021 an amount remained payable
by 23,500 thousand Euros (24,000 thousand Euros at December 31, 2020).
(9) SWIFT. Participation of the Institute in 1 share of this entity as a full member of the
same from 2008.
(10) EDW. A 3.57% participation in European Datawarehouse GmbHG, from March
2012.
(11) PARTICIPACIONES GRUPO QUABIT. In 2019, as payment for several loan
operations, ICO foreclosed several shares of QUABIT group, for a foreclosure amount
of 5,700 thousand Euros. In 2020, part of them were disposed of, for an amount of 843
thousand Euros. These shares are fully covered by accounting provisions, and
therefore their net value is null (provision of 4,857 thousand Euros at December 31,
2021).
(12) PARTICIPATIONS CELTIC ROADS WATERFORD. In 2021, the ICO was awarded
a number of shares in this entity in payment for various loan operations, for a net
awarding amount of 6,589 thousand Euros. These participations are 100% covered by
accounting provisions (allocation of 6,589 thousand Euros at December 31, 2021).
(13) As part of its liquidity management policy and business models, the ICO is able to
invest in debt instruments, classified as financial assets at fair value through other
comprehensive income. In general, they are fixed income securities, issued by the
State (Public Debt).
87
The detail of these assets per maturities is the following:
Thousands of Euros
2021
2020
Maturity up to 1 year
-
250 514
Maturity from 1 to 2 years
458 238
-
Maturity from 2 to 3 years
565 842
462 844
Maturity over 3 years
126 559
-
1 150 639
713 358
At December 31, 2021 and 2020, the classification of financial assets at fair value through
other comprehensive income, taking the hierarchical level into account as shown in Note
2.2.3., is as follows:
Thousands of Euros
2021
2020
Level I
Level II
Level III
Level I
Level II
Level III
Debt securities
1 150 639
713 358
Equity instruments
1 086 506
905 636
During 2021, the Institute has not registered on the income statement results from the write-
off of financial assets at fair value through other comprehensive income as a consequence of
the sale of equity instruments (none in 2020) (Note 28).
10. FINANCIAL ASSETS AT AMORTISED COST
The composition of the balance in this caption of the balance sheets, at December 31, 2021
and 2020, is the following (including impairment losses and other valuation adjustments):
Thousands of Euros
2021
2020
Debt securities (Note 10.1)
6 889 673
7 347 498
Loans and advances:
18 437 628
21 996 205
Credit institutions (Note 10.2)
7 724 368
10 562 681
Customers (Note 10.3)
10 713 260
11 433 524
25 327 301
29 343 703
88
Set out below are the movements for 2021 and 2020 in impairment losses recorded to cover
the credit risk and the accumulated amount of such losses at the beginning and end of those
years on the portfolio of financial assets at amortised cost:
Thousands of Euros
Provision for
Country risk
Provision for
doubtful risk
and normal
risk in watch-
list
Provision for
normal risk
Total
Balance at 1 January 2020
4 423
616 174
31 190
651 787
Allocations charged to results
162
51 190
66 244
117 596
Recoveries against results
(1 496)
(81 980)
(434)
(83 910)
Application of funds
-
(4 160)
-
(4 160)
Other variations
-
-
-
-
Adjustments for exchange differences
(241)
290
(170)
(121)
Balance at 31 December 2020
2 848
581 514
96 830
681 192
Allocations charged to results
196
25 212
49 758
75 166
Recoveries against results
(2 321)
(79 003)
(799)
(82 123)
Application of funds
-
(27 949)
-
(27 949)
Other variations
-
-
-
-
Adjustments for exchange differences
174
(41)
97
230
Balance at 31 December 2021
897
499 733
145 886
646 516
The following table details provisions for doubtful risks and normal risks in watch-list based on
determination criteria:
Thousands of Euros
2021
2020
Provision for doubtful risks (with defaults):
355 631
423 634
Default
17 210
113 043
Other than default
338 421
310 591
Provision for normal risk in watch-list
144 102
157 880
TOTALS
499 733
581 514
The provision for normal risk in watch-list corresponds to credit assets for an amount of
741,024 thousand Euros at December 31, 2021 (975,677 thousand Euros at December 31,
2020).
The table below provides a breakdown of financial assets classified as loans and receivables
considered impaired due to their credit risk at December 31, 2021 and 2020, by counterparty
and period elapsed from the amount unpaid at said dates and the age of the risk. Impaired
assets guaranteed by the State are disclosed in Note 10.3.
89
Impaired assets at 31 December 2021
Thousands of Euros
Without
delay
3-6
month
s
6-9
months
9-12
months
12-15
months
15-18
month
s
18-21
month
s
More
than 21
months
TOTAL
By counterparty category -
Non-financial companies
390 457
194
-
-
-
-
-
17 104
407 755
Impaired assets at 31 December 2020
Thousands of Euros
Without
delay
3-6
month
s
6-9
months
9-12
months
12-15
months
15-18
month
s
18-21
month
s
More
than 21
months
TOTAL
By counterparty category -
Non-financial companies
368 108
40 384
10 503
-
-
-
-
54 473
473 468
As of December 31, 2021 there is a balance of assets impaired by country risk of 28,852
thousand Euros, with a hedging per country risk of 897 thousand Euros (169,656 thousand
Euros at December 31, 2020 with a hedging of 2,848 thousand Euros).
The amount of non-impaired past due assets for 2021 and 2020 was of 16,347 thousand Euros
and 178,274 thousand Euros, respectively, with an age in both years of between one and
three months.
The movement of the impaired financial assets derecognised from the asset when their
recovery is deemed to be remote (failed) is as follows:
Thousands of Euros
2021
2020
Opening balance
1 658 430
1 678 116
Additions:
36 994
6 193
Balance recovery
22 644
-
Other causes
14 350
6 193
Recoveries:
(172 437)
(22 818)
Cash collection without additional financing
(50 246)
(10 735)
Asset allocation
Others
(122 191)
(12 083)
Definitive write-offs: other causes:
-
Net variation for exchange difference
2 766
(3 061)
Closing balance
1 525 753
1 658 430
90
The net amount included on the accompanying profit and loss account of 2021 and 2020 as a
consequence of the variation of assets which recovery is deemed remote (failed assets)
amounts to profits by 50,201 thousand Euros and 10,734 thousand Euros, respectively
(caption “Impairment or reversal of impairment on financial assets not measured at fair value
through profit or loss” and “Financial assets at amortised cost (Notes 10)”).
10.1 Debt securities
The caption “Debt securities” includes the amount of fixed-income financial assets valued at
amortised cost, and supported with securities.
At the end of 2013, the Institute’s Operations Committee approved the document Annex V to
the ICO Contract Mediation lines framework 2015, to regulate the conditions and operations
to which the conversion operation is subject to the conversion to bonds of loans made by
Entities in ICO lines in 2015. Such approval included the general specifications for conversion
susceptible lines, amounts, interest accruals, eligible entities, schedule and compensation to
credit institutions were included. Debt securities resulting from the conversion of loans
mediation are also included in the heading “Debt securities”.
The composition of this caption of the balance sheet at December 31, 2021 and 2020, based
on the counterparty category, is the following:
Thousands of Euros
2021
2020
Per counterparty category -
Resident Public Administrations
5 444 417
6 259 098
Resident Credit Institutions
3 394
13 082
Other resident sectors
1 260 802
965 139
Other non-resident sectors
181 060
110 179
6 889 673
7 347 498
The detail per maturity terms at December 31, 2021 and 2020 is the following:
Thousands of Euros
2021
2020
Maturities
Up to 1 year
3 050 281
2 176 833
From 1 to 2 years
1 216 829
2 713 883
From 2 to 3 years
285 439
1 010 498
From 3 to 4 years
353 323
223 598
From 4 to 5 years
264 239
295 639
More than 5 years
1 719 562
927 047
6 889 673
7 347 498
At December 31, 2021, these assets accrued an annual interest rate of 0.53% (0.53% at
December 31, 2020).
91
Interest accrued by these assets in 2021 and 2020 amounted to 41,396 thousand Euros and
43,857 thousand Euros, respectively, included under caption “Interests and similar income” of
the profit and loss account (Note 24).
The Institute has coverage for credit risk at December 31, 2021 (normal risk) of 21,651
thousand Euros for these assets (9,312 thousand Euros at December 31, 2020).
In 2021, the ICO was awarded debt securities in payment for several loan operations, for an
awarding amount of 2,177 thousand Euros. These securities, classified as doubtful assets,
are fully covered by accounting provisions, and therefore their net value is nil.
Variations undergone during 2021 and 2020 in caption of Debt securities at amortised cost
are the following:
Thousands of Euros
2021
2020
Opening balance
7 347 498
7 843 423
Purchase additions
2 819 753
4 423 291
Variations for impairment losses
(14 516)
(7 273)
Amortisations and sales
(3 263 062)
(4 911 943)
Closing balance
6 889 673
7 347 498
At December 31, 2021, the Institute has not registered results from financial operations
derived from the write-off of assets included in the caption of “Debt securities” (profit of 23
thousand Euros at December 31, 2020) (Note 28).
10.2 Loans and advances to Credit Institutions
The composition of this caption of the balance sheet at December 31, 2021 and 2020 is the
following:
Thousands of Euros
2021
2020
By nature -
Deposits in credit institutions (Note 10.2.1)
661 771
1 288 841
National mediation loans (Note 10.2.2)
6 130 929
8 355 157
International mediation loans (Note 10.2.3)
931 123
920 584
Other loans to credit institutions (Note 10.2.4)
8 002
12 435
7 731 825
10 577 017
Impairment losses
Other valuation adjustments (*)
(3 016)
(5 307)
Impairment losses
(4 441)
9 029)
7 724 368
10 562 681
(*) Valuation adjustments mainly correspond to the accrual of interests and similar revenues, as well as a correction for
92
financial commissions.
10.2.1 Deposits in credit institutions
The following table details the balance of “Deposits in credit institutions”, grouped by maturity,
at December 31, 2021 and 2020:
Thousands of Euros
2021
2020
Up to 1 year
661 771
1 288 841
From 1 to 2 years
-
-
From 2 to 3 years
-
-
From 3 to 4 years
-
-
From 4 to 5 years
-
-
More than 5 years
-
-
661 771
1 288 841
During 2021, the caption “Deposits in credit institutions” accrued an average annual interest
of -0.30% (-0.3% during 2020). All deposits included are time deposits as of December 31,
2021 and 2020.
Interests accrued during 2021 and 2020 for these loans have amounted a total of (1,763) and
(5,357) thousand Euros, respectively, which are included under the heading “Interest and
similar charges” of the profit and loss account (Note 25).
10.2.2 National mediation loans
These operations in the Institute, implanted since 1993, has the aim to help finance small and
medium enterprises in the national territory. These lines are instrumented through loans
granted by the Institute to various credit institutions, which formalise loans with the respective
companies. Thus, each year, different lines are approved for different amounts and objectives,
always focusing on the Spanish SMEs.
In general, in these lines, the Institute does not assume any risk of insolvency of final
borrowers. Occasionally, the ICO assumed a part of the risk in certain liquidity lines 2009-
2012, with no risk exposure at December 31, 2021 and 2020. During the years 2021 and 2020
no new lines have been approved in which the Institute assumes risk from final borrowers.
93
The detail of the balance of national mediation loans at December 31, 2021 and 2020 per
years of maturity is the following:
Thousands of Euros
2021
2020
Up to 1 year
2.011.747
2 557 113
From 1 to 2 years
1.359.034
1 979 546
From 2 to 3 years
920.470
1 296 858
From 3 to 4 years
571.806
908 461
From 4 to 5 years
403.195
508 234
More than 5 years
864.677
1 104 945
6 130 929
8 355 157
At December 31, 2021 and 2020, mediation loans accrued an annual average interest rate of
0.64% and 0.80%, respectively.
Interests accrued during 2021 and 2020 for national mediation loans have amounted to 42,587
and 61,706 thousand Euros, respectively, included on caption “Interests and similar income”
of the profit and loss account (Note 24).
10.2.3 International mediation loans
International mediation loans are a new activity in ICO, launched in 2018, in order to support
the internationalisation of the Spanish company through financing banks, instead of through
investment.
The detail of the balance of international mediation loans at December 31, 2021 and 2020
detailed per years of maturity is the following:
Thousands of Euros
2021
2020
Up to 1 year
216.037
172 588
From 1 to 2 years
126.947
147 988
From 2 to 3 years
129.946
117 835
From 3 to 4 years
101.369
121 465
From 4 to 5 years
70.453
91 361
More than 5 years
286.371
269 347
931 123
920 584
At December 31, 2021 and 2020, international mediation loans accrued an annual average
interest rate of 0.64% and 0.80%, respectively.
Interests accrued during 2021 and 2020 by international mediation loans have amounted to
9,101 thousand Euros and 17,954 thousand Euros, respectively, which are included in the
caption "Interests and similar income” of the profit and loss account (Note 24).
94
This caption includes an amount of impairment losses, for risk of bad debt (normal credit risk
and country risk), for a total amount of 3,016 thousand Euros (5,307 thousand Euros at
December 31, 2020) (Note 10.2).
10.2.4 Other loans to credit institutions
This caption includes balances for direct loan operations (without mediation) to credit
institutions, resident and non-resident.
The detail of the balance of these loans at December 31, 2021 and 2020 detailed per years
of maturity is the following:
Thousands of Euros
2021
2020
Up to 1 year
4.309
4 739
From 1 to 2 years
2.455
4 144
From 2 to 3 years
1.238
2 361
From 3 to 4 years
-
1 191
From 4 to 5 years
-
-
More than 5 years
-
-
8 002
12 435
At December 31, 2021 and 2020, loans to credit institutions accrued an annual average
interest rate of -0.30% and -0.33%, respectively.
Interests accrued during 2021 and 2020 by these loans have amounted to 10 thousand Euros
and 61 thousand Euros, respectively, included on caption “Interests and similar income” of the
profit and loss account (Note 24).
10.3 Customer loans and advances
The composition of this caption of the balance sheet at December 31, 2021 and 2020, based
on the counterparty category, is the following:
Thousands of Euros
2021
2020
Counterparty category -
Resident Public Administrations
2 212 678
2 448 796
Non-resident Public Administrations
167 919
163 085
Other resident sectors
7 481 816
8 216 224
Other non-resident sectors
1 377 052
1 158 612
Other financial assets
29 628
4 050
11 269 093
11 990 767
Impairment losses
(621 849)
(666 573)
Other valuation adjustments (*)
66 016
109 330
10 713 260
11 433 524
95
(*) Valuation adjustments mainly correspond to the accrual of interests and similar revenues, as well as to corrections for
financial commissions.
The value of certain investments in some Economic Interest Groupings is included in “Other
resident sectors” (17,806 thousand Euros at December 31, 2021 and 10,908 thousand Euros
at December 31, 2020) considering that are assured-return structures. Profitability of these
shares has a fiscal-financial component due to the fact that these entities negative taxable
bases are included in the Institute’s taxable base. In order to adjust the fiscal-financial profits
obtained along with the final result determined for the investment, a provision is registered
annually on the Income tax heading in the income statement (14,923 thousand Euros at
December 31, 2021, 21,773 thousand Euros at December 31, 2020) (Notes 19 and 23).
Interests accrued, during 2021 and 2020, for these loans have amounted to 127,804 thousand
Euros and 137,927 thousand Euros, respectively, which are included on caption "Interests and
similar income” of the profit and loss account (Note 24).
Of the above balances, information is provided below regarding transactions guaranteed by
the Public Sector, set out by counterparty and type of instrument, included under “Other
resident sectors” and “Resident Public Administrations”, which are classified under the
heading ‘Customer loans and advances’ at December 31, 2021 and 2020:
Thousands of Euros
2021
2020
Balances included under “Resident Public Administrations”
Loans to the national government
1 476 973
1 506 308
Loans to regional governments
735 705
942 487
Valuation adjustments
(124 183)
(115 216)
2 088 495
2 333 579
Balances included under “Other resident sectors”
Doubtful assets
5 400
68 162
Loans to other public entities
2 149 358
2 650 668
Loans to other sectors
134 025
161 340
2 288 783
2 880 170
Total operations guaranteed by the State
4 377 278
5 213 749
The breakdown of “Loans to the national government”, excluding valuation adjustments, is as
follows at December 31, 2021 and 2020:
Thousands of Euros
2021
2020
Loans to the State and its Autonomous Entities
1 475 009
1 504 367
Accounts receivable from the Public Treasury
1 964
1 941
1 476 973
1 506 308
96
The caption of “Accounts receivable from the Public Treasury” includes amounts liquidated by
the Institute to the Public Treasury, pending from being effective under the concept of
Subsidiaries, for the adjustment of interest rates differentials in mediation loans. These
accounts, which are carried at their nominal value, do not accrue any interest.
Interest and similar income contributed to the profit and loss by public sector entities for 2021
and 2020 (Note 24) are the following:
Thousands of Euros
2021
2020
Central government
Regional governments
Other public sector entities
7 726
6 610
16 586
5 928
5 538
19 834
30 922
31 300
The breakdown of the main amounts of loans included under the heading ‘Customer loans
and advances’, including measurement adjustments, and set out by maturity date at
December 31, 2021 and 2020, is as follows:
Thousands of Euros
2021
2020
Maturities
Up to 1 year
1.343.331
1 626 524
From 1 to 2 years
886.246
972 749
From 2 to 3 years
1.307.310
1 405 203
From 3 to 4 years
1.511.308
1 303 005
From 4 to 5 years
1.281.432
1 632 090
More than 5 years
5.005 482
5 160 526
11 335 109
12 100 097
At December 31, 2021 and 2020, loans to clients accrued an annual average interest rate of
0.98% and 1.18%, respectively.
At December 31, 2021, the Institute has not registered profits or losses on the income
statement for financial operations derived from the write-off of assets included on caption
“Loans and receivables” (neither at December 31, 2020) (Note 28).
97
11. HEDGING DERIVATIVES
This caption in the accompanying balance sheet records the hedging instruments carried at
fair value in accordance with the explanation provided in Note 2.3.
The derivatives contracted and the hedged items were fundamentally the following:
- Interest-rate swaps, which hedge financial instruments remunerated at a rate other
than the Euribor, mainly issues from the Group.
- Exchange hedges, which cover changes in fair value and cash flows relating to several
financial instruments.
The measurement methods used to determine the fair value of derivatives have been the
discounted-cash-flow method, to measure interest rate derivatives and exchange risk
derivatives.
The total notional values of derivatives and fair values of financial derivatives designated as
“Hedging derivatives” at December 31, 2021 and 2020, by hedging type, counterparty and risk
(all contracted in non-organised OTC markets), are as follows:
Thousands of Euros
Notional
Assets
Liabilities
2021
2020
2021
2020
2021
2020
By type of hedging
Fair value hedges
10 691 453
10 493 915
433 655
253 887
76 949
279 891
Cash flow hedges
5 921 759
3 136 443
21 354
31 438
254 122
320 879
16 613 212
13 630 358
455 009
285 325
331 071
600 770
By type of product
Swaps
16 613 212
13 630 358
455 009
285 325
331 071
600 770
16 613 212
13 630 358
455 009
285 325
331 071
600 770
By counterparty
Credit institutions
16 613 212
13 630 358
455 009
285 325
331 071
600 770
Other credit institutions
-
-
-
-
-
-
Other sectors
-
-
-
-
-
-
16 613 212
13 630 358
455 009
285 325
331 071
600 770
By type of risk
Risk of exchange
11 672 765
6 418 380
368 356
172 198
222 099
498 632
Interest rate risk
4 940 447
7 211 978
86 653
113 127
108 972
102 138
16 613 212
13 630 358
455 009
285 325
331 071
600 770
98
At December 31, 2021 and 2020, the classification of hedging derivatives, valued at fair value,
based on level hierarchies established on Note 2.2.3., is the following:
Thousands of Euros
2021
2020
Level I
Level II
Level III
Level I
Level II
Level III
Asset hedging derivatives
-
455 009
-
-
285 325
-
Liability hedging derivatives
-
331 071
-
-
600 770
-
The fair value of these items has been calculated in 100% of the cases, both in 2021 and in
2020, taking as reference the implicit curves of the money.
Once the IFRS 13 of January 1, 2013 has become effective, the Institute included for the
derivative instruments valuation, the corresponding risk valuation adjustments from
counterparties and its own (Notes 7 and 29).
12. INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
The variation of this caption of the balance sheets during 2021 and 2020 is the following:
Thousands of Euros
Group
companies
Joint
ventures
Associates
Total
Balance at 1 January 2020
1 940
-
44 926
46 866
Additions
2 426
2 426
Withdrawals
Other variations
Impairment
Balance at 31 December 2020
1 940
-
47 352
49 292
Additions
3 307
3 307
Withdrawals
Other variations
Impairment
Balance at 31 December 2021
1 940
-
50 659
52 599
Annex I contains a breakdown of shareholdings, as well as the most relevant information
regarding these interests at December 31, 2021 and 2020.
99
13. PROPERTY, PLANT AND EQUIPMENT
The variation during 2021 and 2020 in accounts of property, plant and equipment and their
corresponding accumulated amortisation, has been the following:
Thousands of Euros
Buildings of own
use
Furniture, vehicle
and other assets
Property
investments
Total
Balances at 1 January 2021
Additions
114 601
15 875
130 476
Disposals and other write-offs
328
350
678
-
(38)
(38)
Balances 31 December 2021
114 929
16 187
131 116
Accumulated amortisation
Balances at 1 January 2021
Allocations
36 666
7 774
44 440
Transfers and other variations
1 723
298
2 021
-
(38)
(38)
Balances 31 December 2021
38 389
8 034
46 423
Impairment losses
Balances at 1 January 2021
At December 31, 2021
-
651
651
Net property, plant and equipment
Balances 31 December 2021
76 540
7 502
84 042
Cost
Balances at 1 January 2020
114 582
15 510
130 092
Additions
19
365
384
Disposals and other write-offs
-
-
-
Balances 31 December 2020
114 601
15 875
130 476
Accumulated amortisation
Balances at 1 January 2020
34 926
7 549
42 475
Allocations
1 740
225
1 965
Transfers and other variations
Balances 31 December 2020
36 666
7 774
44 440
Impairment losses
At 31 December 2020
651
651
Net property, plant and equipment
Balances 31 December 2020
77 935
7 450
85 385
At December 31, 2021 there are fully-depreciated property, plant and equipment for own use
for a gross amount of approximately 18,488 thousand Euros (18,826 thousand Euros at
December 31, 2020).
100
In compliance with Institute policy, all property, plant and equipment is insured at December
31, 2021 and 2020.
Transitional Provision One, section B).6 of Bank of Spain Circular 4/2004, allows any asset
recorded under Property, plant and equipment to be carried at its fair value. To implement this
measurement adjustment, the Group carried out the relevant appraisals of property used in
operations, which allowed the value of the Group's property, plant and equipment to be
increased by 53,106 thousand Euros. A restatement reserve was recorded for the resulting
capital gain, net of the tax effect. The restated book value will be applied as an attributed cost
at that date.
The revaluation reserve at December 31, 2021 amounted to 19,037 thousand Euros (19,948
thousand Euros at December 31, 2020) (Note 20).
The table below presents the fair value of certain items of property, plant and equipment of
the Group at December 31, 2021 and 2020 by category, along with the related carrying
amounts at those dates:
Thousands of Euros
2021
2020
Carrying value
Fair value
Carrying value
Fair value
Property, plant and equipment for own use
84 042
109 116
85 385
109 042
Buildings
76 090
101 164
77 507
101 164
Other
7 502
7 502
7 450
7 450
Property investments
-
-
Property under construction
450
450
428
428
The fair value of property, plant and equipment in the preceding table was estimated as
follows:
- For those assets for which an updated appraisal by a Bank of Spain-approved value is
not available, fair value was determined based on estimates made by the entity using
market data relating to trends in prices of similar assets.
- For those assets for which an updated appraisal by a Bank of Spain-approved value is
available, fair value was determined based on the appraisal as provided for in the
Ministerial Order 805/2003
All properties for own use were appraised by a Bank of Spain approved appraiser using the
comparison approach, at December 31, 2021 and 2020.
101
14. INTANGIBLE ASSETS
The breakdown of Intangible assets in the balance sheet at December 31, 2021 and 2020
relates exclusively to the account named ‘other intangible assets’.
Thousands of Euros
Estimated useful life
2021
2020
With indefinite useful life
-
-
-
With defined useful life
3 years to 10 years
48 571
46 167
Gross total
48 571
46 167
Of which:
Internal developments
3 years
42 997
40 638
Remainder
10 years
5 574
5 529
Accumulated depreciation
(39 916)
(37 164)
Impairment losses
(2 137)
(2 137)
6 518
6 865
All intangible assets at December 31, 2021 and 2020 related to computer software. Fully
amortised intangible assets at December 31, 2021 amounted to 36,418 thousand Euros
(36,221 thousand Euros at December 31, 2020).
15. TAX ASSETS AND TAX LIABILITIES
The detail of Tax Assets and Liabilities at December 31, 2021 and 2020 is the following:
Thousands of Euros
Assets
Liabilities
2021
2020
2021
2020
Current taxes:
32 435
32 290
6 748
1 098
Corporate income tax (Note 23)
32 258
32 258
5 810
-
VAT
177
32
35
26
Personal income tax withholdings
-
-
553
724
Social Security contributions
-
-
350
348
Deferred taxes:
152 470
148 123
75 159
49 203
Impairment losses on credits, loans and discounts
81 785
61 146
-
Measurement of cash-flow hedges (Note 21)
70 685
86 977
-
-
Restatement of property
-
-
15 932
15 932
Restatement of financial assets at fair value through OCI (Note 21)
-
-
59 227
33 271
184 905
180 413
81 907
50 301
102
Variations undergone, during 2021 and 2020, on balances of deferred tax assets and liabilities
are shown below:
Thousands of Euros
Assets
Liabilities
2021
2020
2021
2020
Opening balance
148 123
95 051
49 203
32 943
Impairment losses on credits, loans and discounts
20 639
(8 111)
-
-
Valuation of cash flow hedges (Note 21)
(16 292)
61 183
-
-
Restatement of property
-
-
-
-
Restatement of financial assets at fair value through OCI (Note 21)
-
-
25 956
16 260
Closing balance
152 470
148 123
75 159
49 203
16. OTHER ASSETS AND OTHER LIABILITIES
The composition of the caption of “Other assets” of the balance sheet at December 31, 2021
and 2020 is the following:
Thousands of Euros
OTHER ASSETS
2021
2020
Other assets
17 289
41
Accruals
11 132
24 949
28 421
24 990
The heading “Accruals” includes, among other items, the accrual of fees receivable by the
Institute, for the Management of Operational mechanisms Fund for the Financing of Payments
to Suppliers and operational management of Autonomous Region Liquidity Fund and for the
operational management of the Financing Fund to Autonomous Communities (Note 1.1). In
2021, the overall amount of these fees receivable for ICO is 5 million Euros per year (15 million
Euros at December 31, 2020), also recorded in the income statement for these amounts within
the section of 'Fee and commission income'“ (Note 27).
This caption also includes commissions paid by the ICO for the COVID guarantee of
operations owned by the Institute (paid to the Fund RDL 12/95, by virtue of applicable
regulations) and to be accrued in the Institute’s income statement (2,877 thousand Euros at
December 31, 2021 and 3,104 thousand Euros at December 31, 2020).
103
The composition of the balance of “Other liabilities” of the balance sheet at December 31,
2021 and 2020 is the following:
Thousands of Euros
OTHER LIABILITIES
2021
2020
Other liabilities
-
-
Accruals
39 414
6 334
39 414
6 334
Under the heading “Accruals” includes the amounts accrued and unpaid, for commissions to
be paid to credit institutions by the concepts of “rappel 2021 mediation lines” by 500 thousand
Euros (1,668 thousand Euros in 2020). It also includes fees for the management of COVID
sureties, which have been charged to the Fund RDL 12/95 (by virtue of applicable regulations)
and which are pending accrual in the Institute’s income statement (34,354 thousand Euros at
December 31, 2021).
17. NON-CURRENT ASSETS HELD FOR SALE
The totality of the balance in this caption corresponds to foreclosed assets. None of these
foreclosed assets recorded on this heading at December 31, 2021 and December 31, 2020
comes from any funding related neither to Property development land nor to any other property
development business.
Movements for years 2021 and 2020 in the balances under this balance sheet heading are
shown below:
Thousands of Euros
Cost
Impairment
Total
Balance at 1 January 2020
67 685
( 67 685)
-
Additions
695
695
Withdrawals/Applications
(2 464)
1 769
(695)
Transfers
Balance at December 31, 2020
65 916
(65 916)
-
Additions
119
(119)
-
Withdrawals/Applications
(3 431)
3 431
-
Transfers
-
Balance at December 31, 2021
62 604
(62 604)
-
Out of the total amount of “Non-current assets held for sale” at December 31, 2021 and 2020,
48,678 thousand Euros correspond to a single asset, which is fully provisioned.
104
In 2021, impairment allocations of these non-financial assets have been registered, for an
amount of 81 thousand Euros (96 thousand Euros in 2020).
In 2021, results from the sale of non-current assets held for sale have been registered, for an
amount of 1,848 thousand Euros (755 thousand Euros in 2020) (Note 17).
The Institute’s Board of Directors body gives its approval annually to the Disinvestment Plan
referred to these assets.
Pursuant to the standard 60
th
of Circular 4/2017 of the Bank of Spain, non-current assets held
for sale are classified into broad categories: soil, urban and urbanising splitting rustic and
constructions, distinguishing between residential, industrial and commercial uses. On the
following chart are included Appraisal Companies, its methodology to appraise the assets and
the amount given to each of it (company/agency):
INDUSTRIAL USE BUILDINGS
Thousands of € last appraisal
Appraiser
Appraisal methodology
882
EUROVALORACIONES
COST AND COMPARISON
882
RESIDENTIAL USE BUILDINGS
Thousands of € last appraisal
Appraiser
Appraisal methodology
85
ALIA TASACIONES
COST AND COMPARISON
587
EUROVALORACIONES
COMPARISON
66
EUROVALORACIONES
COST
381
EUROVALORACIONES
MAXIMUM LEGAL PRICE
12
JLL
COMPARISON
20
JUDICIAL
COMPARISON
47
GRUPO TASVALOR
COMPARISON
258
GRUPO TASVALOR
COST AND COMPARISON
1,456
TERTIARY USE BUILDINGS
Thousands of € last appraisal
Appraiser
Appraisal methodology
784
EUROVALORACIONES
COMPARISON
81
EUROVALORACIONES
COST
30
EUROVALORACIONES
RESIDUAL DYNAMIC
895
RUSTIC LAND
Thousands of € last appraisal
Appraiser
Appraisal methodology
42
ALIA TASACIONES
COMPARISON
44
EUROVALORACIONES
RENT UPDATE
105
69
EUROVALORACIONES
COMPARATION
185
JUDICIAL
OTHERS
38
GRUPO TASVALOR
RENT UPDATE
25
GRUPO TASVALOR
COST AND COMPARISON
17
GRUPO TASVALOR
COMPARISON
420
URBAN AND DEVELOPABLE LANDS
Thousands of € last appraisal
Appraiser
Appraisal methodology
6.366
EUROVALORACIONES
RESIDUAL DYNAMIC
84
GRUPO TASVALOR
RESIDUAL DYNAMIC
50
GRUPO TASVALOR
OTHERS
40
UVE VALORACIONES
RESIDUAL DYNAMIC
6,540
TOTAL
10,193
18. FINANCIAL LIABILITIES AT AMORTISED COST
The items that make up the balances recorded under this balance sheet heading are as
follows:
Thousands of Euros
2021
2020
Counterparty categories
Deposits from Central Banks (Note 18.1)
3 444 351
3 155 040
Deposits from credit institutions (Note 18.2)
5 894 436
7 616 532
Deposits from customers (Note 18.3)
874 313
1 414 024
Issued debt securities (Note 18.4)
20 087 210
15 294 101
Other financial liabilities (Note 18.5)
258 541
299 029
30 558 851
27 778 726
18.1 Deposits from Central Banks
In 2019 and 2020, ICO responded to several LTRO and TLTRO calls from the European
Central Bank. The amount of this caption corresponds to such operations.
106
18.2 Deposits from credit institutions
The composition of this caption of the balance sheets at December 31, 2021 and 2020 based
on the nature of operations is the following:
Thousands of Euros
2021
2020
Nature:
Loans from the European Investment Bank
4 476 130
6 139 758
Interbank loans
178 645
36 041
Loans from other credit institutions
1 211 001
1 384 736
Valuation adjustments – accruals
28 660
55 997
5 894 436
7 616 532
Interbank deposits fall due within less than one year from December 31, 2021 and 2020,
respectively.
Loans from the European Investment Bank present the following final repayment schedule:
Thousands of Euros
2021
2020
Up to 1 year
1.377.669
1 811 832
From 1 to 2 years
808.872
1 360 465
From 2 to 3 years
579.904
789 688
From 3 to 4 years
782.349
563 001
From 4 to 5 years
440.059
744 035
More than 5 years
487.277
870 737
4 476 130
6 139 758
The breakdown by maturity date of “Loans from other credit institutions” is as follows:
Thousands of Euros
2021
2020
Up to 1 year
853.338
338 073
From 1 to 2 years
59.042
671 483
From 2 to 3 years
77.493
78 878
From 3 to 4 years
77.493
78 878
From 4 to 5 years
47.972
78 878
More than 5 years
95.663
138 546
1 211 001
1 384 736
107
18.3 Deposits from customers
The composition of this caption of the balance sheets at December 31, 2021 and 2020 based
on the sector is the following:
Thousands of Euros
2021
2020
Counterparty category
Public Administrations
659 130
1 337 519
Other resident sector (1)
215 143
76 480
Other non-resident sectors
-
-
Valuation adjustments – accruals
40
25
874 313
1 414 024
(1) Out of which, at December 31, 2021 and 2020, 62,980 thousand Euros and 58,699 thousand Euros, respectively, were
demand accounts.
At December 31, 2021 and 2020, the detail by nature of the balance registered on “Public
Administrations” is the following:
Thousands of Euros
2021
2020
Reciprocal Interest Adjustment Agreement (C.A.R.I.)
25 304
19 301
Public Administration Current Accounts and other items
633 826
1 318 218
659 130
1 337 519
18.4 Issued debt securities
The detail of this caption at December 31, 2021 and 2020 is the following:
Thousands of Euros
2021
2020
Bonds and debentures issued
20 070 571
15 049 917
Valuation adjustments (*)
16 639
244 184
20 087 210
15 294 101
(*) Including transaction costs and value corrections for accounting hedging
108
Variations of this caption, during 2021 and 2020, have been the following:
Thousands of Euros
2021
2020
Opening balance
15 049 917
15 499 902
Issues
28 023 011
14 806 982
Amortisations and depreciations
(23 529 344)
(14 766 684)
Exchange differences
526 987
(490 283)
Closing balance
20 070 571
15 049 917
Detailed below are debenture issues outstanding at December 31, 2021 and 2020, grouped
per currency:
Thousands of Euros
Number of
issues
2021
2020
Divisa
2021
2020
0
1
Norwegian Krone
-
47 754
89
36
US Dollar
7 511 081
5 316 541
63
48
Euro
10 414 189
8 601 856
1
2
Swiss Franc
241 990
277 703
23
1
Australia Dollar
948 978
44 021
1
1
Sweden Krone
48 779
49 829
10
3
Pound Sterling
867 205
611 730
1
3
Yen
38 349
100 483
20 070 571
15 049 917
A breakdown of each issue may be consulted on the Institute's webpage (www.ico.es), as the
dominant entity of the Group, in “Investments - Issues of reference”.
In 2021 the total financial cost of debenture loans in both Euros and foreign currency recorded
under the heading ‘Interest and similar charges’ in the income statement was 241,044
thousand Euros, which is an average annual interest rate of 2.40% (0.59% with the effect of
accounting hedges). In 2020 financial costs amounted 305,270 thousand Euros, which was
an average annual interest rate of 2.66% (1.45% with accounting hedges) (Note 25).
As of 2021, the Institute has recorded results for financial operations derived from the
repurchase of financial liabilities at amortised cost (bonds and debentures issued by the ICO),
with losses of 356 thousand Euros (profits of 139 thousand Euros in 2020), included on caption
'Gains or losses on financial assets and liabilities not measured at fair value through profit or
loss, net’. (Note 28).
109
18.5 Other financial liabilities
The composition of this caption of the balance sheets at December 31, 2021 and 2020, is the
following:
Thousands of Euros
2021
2020
Treasury Funds
239 391
286 497
Other concepts
19 150
12 532
258 541
299 029
“Treasury funds” includes funds received by the Group and repayable under the attaching
terms of each. Detailed information on the lines associated with each of these funds can be
found on the Institute’s website www.ico.es .
Funds associated with the most important lines are the following:
- Línea FOMIT – Renove Turismo (FOMIT - Tourism line): this line is to provide financial
support to financial projects aimed to renovation and modernisation of infrastructure
and tourist destinations.
- Línea Loans Renta Universidad: this line is to guarantee a future income for
postgraduate studies as a Doctorate or a Master degree for 2011-2012.
- Línea Futur E: This line is to provide incentives for projects in support of sustainable
tourism, helping to redirect current tourist activity with a view to sustainability and
ecological efficiency, taking into account variables related to the environment and
sustainable development, in order consolidate the position of Spanish tourism at the
vanguard of the rational use of energy, the use of renewable energies, the reduction
of the water footprint, and waste management
Unlike other of the Institute’s mediation lines, which are funded through market fundraising by
the ICO, the financial funds designated to these operations are provided directly by the state,
being instrumented through Institute's opened accounts on behalf of the correspondent
Ministries. These funds balance, corresponds to the amount provided by formal transactions
that are also listed under the heading of ‘Loans and receivables’ (net amounts, less
unamortised willing), so that amount plus the balance of the associated current account (which
reflects the balance of the above lines) is always equal to the amount received by the Institute
for the provisioning of the line.
110
Balances at December 31, 2021 and 2020 of such funds are shown below:
Thousands of Euros
2021
2020
FOMIT – Renove Turismo
49 903
86 068
Loans Renta Universidad
93 684
110 657
Futur E
4 336
10 333
Others
110 618
91 971
258 541
299 029
19. PROVISIONS
At December 31, 2021 and 2020 the detail of this caption of the accompanying balance sheet
is the following:
Thousands of Euros
2021
2020
Provisions for pensions and similar obligations
791
656
Provisions for contingent exposures and commitments
48 652
27 855
Other provisions
1 340 866
658 234
1 390 309
686 745
The composition of the caption of “Other provisions” of the balance sheets at December 31,
2021 and 2020 is the following:
Thousands of Euros
2021
2020
Royal Decree – Law12/1995 Fund
1 316 127
626 471
Fund for amounts recovered from BBVA
160
160
Fund Prestige Facility
8 312
8 304
Fund to compensate AIE shareholdings results (Note 10.3)
14 923
21 773
Other funds
1 344
1 526
1 340 866
658 234
Royal Decree- Law 12/1995
Royal Decree- Law 12/1995 (28 December), published in the Official State Gazette (BOE) on
30 December 1995 and taking effect on January 1, 1996, it is stipulated that Instituto de
Crédito Oficial would create, by charging the resources obtained from the State Loan referred
to by Section 4.1 of the Council of Ministers Resolution (11 December 1987), a Fund totalling
a maximum of 150,253 thousands of Euros to provide provisions and charge the amounts
111
relating to doubtful and default loans that could arise in the future from the activities listed in
Note 1, in accordance with the regulations in force for credit institutions. Additional Provision
4 of Law 66/1997 (30 December) on Tax, Administrative and Social Order Measures stipulated
that notwithstanding the application of these regulations, the Council of Ministers or the
CDGAE could authorise the ICO to charge the Special provision Fund established under RDL
12/1995 for any defaults arising during the course of its business, provided that they did not
receive any specific coverage in the General State Budgets. This Fund was created in 1996
under the heading “Other Provisions”.
Those loans or transactions that, in view of the relevant terms and conditions, require the
application of this Fund are provided for by charge to the same. The Institute's income
statement is therefore not affected.
Since they are already provided for through this Fund, the loans covered by the same are not
therefore included in the calculation of the general and specific bad debt provision.
The Fund is credited, in addition to the initial allocation, with future allocations that the Instituto
de Crédito Oficial makes out of profits obtained and any made or authorised by the State when
assuming or offsetting losses, or through any other appropriate system . Similarly, the Fund is
credited with the amounts of an recoveries obtained from loans for which provisions have been
recorded or any that have been declared to be in default and charged against the fund, that in
2021 and 2020 amounted to 5 thousand Euros and 644 thousand Euros, respectively and the
income obtained on the management of the funds assigned to the Fund itself, in 2021 and
2020, amounted to 5,073 thousand Euros and (1,416) thousand Euros, respectively.
In accordance with the provisions of Law 12/1996 (30 December) on the General State
Budget, in 1997 an additional 150,253 thousand Euros was allocated to this Fund by charging
the Ordinary State Loan.
In 2004 another allocation totalling 249,500 thousand Euros was charged against the State
Loan granted to ICO in accordance with the Council of Ministers Resolution dated at July 30,
2004.
As a consequence of the COVID-19 health crisis and of the implementation of the State’s
surety lines to support the private sector’s financing, the financial entities pay surety
commissions to ICO which, by virtue of procedures established for such purpose, are
registered as direct credits to the Fund RDL 12/95. Also, costs for the necessary contracts
entered into by the Institute to manage this activity are also charged to the Fund RDL 12/95.
The purpose of these allocations is to face future defaults that may derive from the execution
of granted sureties and which, in any case, shall not affect the Institute’s equity (in case of
insufficiency of funds, the State shall directly provide ICO with the necessary amounts).
112
This fund’s variations in 2021 and 2020 included on caption of “Other provisions” of the
balance sheet at December 31, 2021 and 2020 are the following:
Thousands of Euros
Balance at 1 January 2020
182 610
Capitalisation of interests
(1 416)
State Contributions
-
Application ICO results 2018
81 941
Loan recoveries (principal and interests)
644
Applications
-
Credits COVID lines commissions (net of contracting expenses)
362 692
Balance at 31 December 2020
626 471
Capitalisation of interests
(5 073)
State Contributions
-
Application ICO results 2020
70 188
Loan recoveries (principal and interests)
1
Applications
-
Credits COVID lines commissions (net of contracting expenses)
624 540
Balance at 31 December 2021
1 316 127
In 2021 an extraordinary contribution to the Fund of 70,188 thousand Euros has been
registered, as part of the net profit distributed by ICO for 2020.
Fund for amounts recovered from BBVA
An additional provision Eleven of Law 24/2001 (27 December) on Tax, Administrative and
Social Order Measures, was applied by the Institute, the Group's Parent entity, in 2001 and
2002, with regard to the heading “Funds for amounts recovered from BBVA”, to allocate part
of its equity to cancel an amount owed to the Institute by the State as a result of certain loans
and guarantees granted by the former Official Credit Institutions and secured by the State.
Nonetheless, the management of the transactions affected by the cancellation process has
meant that ICO continues receiving collections pertaining to these loans, which, following the
prudence accounting principle, are not generally registered as income in the income
statement. For those accounted as income, in 2021, there is a provision by 160 thousand
Euros (160 thousand Euros at December 31, 2020).
Prestige Line Fund
The Prestige Line Fund has its origins in the ROL 7/2002, 22 November, which authorises to
charge on the Fund Special Provision 12/1995 ROL, the default amounts from loans Prestige
line, with credit to this fund specific provision.
113
Fund to offset results AIE shareholding results
Heading Fund to offset AIE shareholdings includes the provision in order to adjust its profit to
the transactions performance conducted through the Economic Interest Groupings (Note
10.3). This provision has been recognised under the rubric of corporate income tax of the
income account for an amount of 8,922 thousand Euros and 12,258 thousand Euros,
respectively in the years 2021 and 2020 (Note 23).
The following chart shows variations of the caption of Provisions in 2021 and 2020:
Thousands of Euros
Provision for
taxes
Fund for
pensions and
similar
obligations
Provisions for
risks and
contingent
commitments
Other
provisions
Total
Balances at 1 January 2020
-
579
7 778
295 183
303 540
Allocations (1)
-
77
24 416
201
24 694
Recoveries (1)
-
-
(3 810)
(93 734)
(97 544)
Application of funds
-
-
-
(306)
(306)
Transfers and other variations (2)
-
-
-
456 890
456 890
Exchange differences
-
-
(529)
-
(529)
Balances at 31 December 2020
-
656
27 855
658 234
686 745
Allocations (1)
-
135
20 730
5 220
26 085
Recoveries (1)
-
-
(143)
(180)
(323)
Application of funds
-
-
-
-
-
Transfers and other variations (2)
-
-
-
677 592
677 592
Exchange differences
-
-
210
-
210
Balances at 31 December 2021
-
791
48 652
1 340 866
1 390 309
(1) Recoveries charged to results from 2020 (other provisions) include an amount of 92,318 thousand Euros for the
recovery of the provision for liquidity mediation loans with ICO risk, having ended the term available for financial entities
to file their claims.
(2) Transfers and other movements at December 31, 2021, mainly include credits to the Fund RDL 12/95 for the collection
of commissions for COVID-19 sureties (624,540 thousand Euros) and for the provision to the Fund to offset results
from investments in AIE (Note 23), for an amount of 8,922 thousand Euros.
Transfers and other movements at December 31, 2021, mainly include credits to the Fund RDL 12/95 for the collection
of commissions for COVID-19 sureties (362,692 thousand Euros) and for the provision to the Fund to offset results
from investments in AIE (Note 23), for an amount of 12,258 thousand Euros.
114
20. EQUITY
The reconciliation of the opening and closing carrying value in 2021 and 2020 of the heading
“Equity” in the balance sheets is the following:
Thousands of Euros
Share Capital
Restatement
reserves
Other
reserves
Profit/(loss)
Total
Balance at 1 January 2020
4 314 033
20 858
922 440
106 941
5 364 272
Distribution of results
(106 941)
(106 941)
Other variations of reserves
910)
910
-
Profit/(loss) for the period
70 188
70 188
Other variations
171
171
Balance at 31 December 2020
4 314 204
19 948
923 350
70 188
5 327 690
Distribution of results
(70 188)
(70 188)
Other variations of reserves
(912)
912
-
Profit/(loss) for the period
122 960
122 960
Other variations
276
276
Balance at 31 December 2021
4 314 480
19 036
924 262
122 960
5 380 738
At December 31, 2021, the caption of “Distribution of results” includes an amount of 70,188
thousand Euros (81,941 thousand Euros at December 31, 2020), as part of the distribution of
previous year’s results, for contribution to the Fund RDL 12/95 (Note 19).
The caption of “other variations” mainly includes the annual contribution to equity, by virtue of
Law 24/2001, of 27 December, for an amount of 276 thousand Euros in 2021 (171 thousand
Euros in 2020). According to the Additional Eleventh Provision of such Law, amounts
recovered after the cancellation of debts contracted by the State with the ICO, as a
consequence of certain credits and sureties granted by former Official Credit Entities and by
the Institute will become part of the Institute’s equity.
115
21. OTHER ACCUMULATED COMPREHENSIVE INCOME (valuation adjustments)
The balance of this caption detailed by gross and net amount of the tax effect is the following:
Thousands of Euros
2021
2020
Gross
Tax effect (Note
15)
Net
Gross
Tax effect (Note
15)
Net
Financial assets at fair value
through other comprehensive
income (Note 9)
197 425
(59 228)
138 197
110 903
(33 271)
77 632
Cash flows hedging of assets
and liabilities
(235 615)
70 684
(164 931)
(289 924)
86 977
(202 947)
TOTAL
(38 190)
11 456
(26 734)
(179 021)
53 706
(125 315)
The balance of this heading relates to the concepts of available-for-sale financial assets at
fair value through OCI and cash flow hedge derivatives in the accompanying balance sheets.
The first account records the net amount of changes in the fair value of the assets at fair
value through OCI that, in accordance with Note 2.2.4, must be included as part of the
Institute's equity. The second account records the net amount of changes in the fair value of
the cash flow hedge instruments.
Thousands of Euros
2021
2020
Opening balance
(125.315)
(20 493)
Change in fair value of financial assets at fair value through other comprehensive
income (Note 9)
60 565
37 939
Reclassification to financial assets at fair value through profit or loss
Cash flow hedges
38 016
(142 761)
Closing balance
(26 734)
(125 315)
22. GRANTED GUARANTEES AND CONTINGENT COMMITMENTS
These headings in the balance sheets record the amounts that ICO must pay on behalf of
third parties in the event that the obligated parties do not do so, in response to commitments
acquired during the normal course of its business (granted guarantees) and amounts available
to third parties (contingent commitments).
116
The detail of this caption at December 31, 2021 and 2020 is the following:
Thousands of Euros
2021
2020
Granted guarantees
Financial guarantees
528 275
414 937
528 275
414 937
Granted contingent commitments
Available by third parties:
Credit institutions
473 654
720 415
Public Administrations sector
1 739 361
2 054 000
Other resident sectors
1 130 718
773 796
Non-resident sector
189 070
339 848
Other contingent commitments
93 716
92 694
Subscribed values pending disbursement:
702 500
607 000
4 329 019
4 587 753
4 857 294
5 002 690
Income obtained from guarantee instruments (guarantees and other sureties) are recorded
under the heading “Commissions received” in the income statement.
23. TAX POSITION
The Institute is effectively taxed for the Corporate Income Tax, under general regime, since
1999 (previously, it was exempt, by virtue of specific regulations).
The reconciliation of the accounting Institute’s profit, as the Parent firm of ICO, for 2021 and
2020 with the corporate income tax basis is as follows:
Thousands of Euros
2021
2020
Accounting profit before income tax
171 698
97 548
Permanent differences
Foreign taxes paid
554
806
Non-accounted accounting income
-
3 232
Tax-loss carry forwards attributed to invested companies
(38 096)
(49 216)
Deductible expenses from previous years
134 156
52 370
Temporary differences:
Due to impairment losses and provision non-deductible
84 614
92 694
Due to the reversal of temporary differences arising in other years
(15 814)
(119 731)
68 800
(27 037)
117
Tax assessment basis
202 956
25 333
Gross tax payable (30%)
60 887
7 600
Deductions and allowances
(431)
(609)
Withholdings and interim payments
(54 646)
(39 249)
Tax payable (Note 15)
5 810
(32 258)
Corporate income tax
39 816
15 102
Adjustments CIT expense allocated investees’ bases (Note 19)
8 922
12 258
Other adjustments
-
Corporate income tax expense
48 738
27 360
In the year, the allocation of tax losses carried forward in the AIE, in which ICO invests in
different capital proportions, is incorporated: 38,096 thousand Euros in 2021 (allocation of tax
losses by 49,216 thousand Euros in 2020). The allocation of basis has been based on
information supplied by the entities. It was decided to allocate these concepts in the same
year of the closing of AIE’s balances.
There are no tax losses carried forward at 2021 closing.
No tax incentive deductions applied in the year 2021 nor in 2020. There is an international
double tax deduction (taxes borne) amounting to 431 thousand Euros and 609 thousand
Euros, respectively. There are not international double taxation deductions at end 2021.
There are no changes in the methods used to depreciate/amortise fixed assets owing to
exceptional causes.
Taxes and other tax obligations applicable to the Institute are open to inspection by the tax
authorities during last four years.
Due to the possible interpretations of tax legislation that may be afforded to some transactions,
basically related to new subject ability to corporate income tax following the full exemption
from the same, there could be certain contingent tax liabilities. However, in the opinion of the
Institute's tax managers, the possibility of these liabilities crystallising is remote and in any
event, the tax debt that may derive from them would not significantly affect the accompanying
annual accounts.
118
24. INTERESTS AND SIMILAR INCOME
The detail of interests and similar income of 2021 and 2020, based on their origin, is the
following:
Thousands of Euros
2021
2020
Financial assets at fair value through other comprehensive income
99
2 484
Financial assets at amortised cost
224 924
266 946
Derivatives, hedge accounting
(12 173)
(10 408)
Other assets
307
143
Interests and similar income from liabilities
39 029
31 676
252 186
290 841
25. INTERESTS AND SIMILAR CHARGES
The detail of this caption of the profit and loss account during 2021 and 2020 is the following:
Thousands of Euros
2021
2020
Financial liabilities at amortised cost
Derivatives, hedge accounting
Other liabilities
306 947
(181 953)
-
396 153
(135 633)
-
Interests and similar charges from assets
22 646
8 540
147 640
269 060
26. INCOME FROM DIVIDENDS
The totality of yields obtained for this concept corresponds to the portfolio of variable income,
amounting to 5,225 thousand Euros and 5,344 thousand Euros, respectively, in 2021 and
2020.
119
27. FEE AND COMMISSION INCOME AND EXPENSES
The detail of this caption of the profit and loss account is the following:
Thousands of Euros
2021
2020
Commissions received
Contingent risks
5 319
4 041
Availability commissions
3 219
294
Management commissions COVID sureties
6 946
3 166
Other commissions
15 563
29 545
31 047
37 046
Commissions paid
Signature risk
(96)
(96)
Other commissions
(7 697)
(6 398)
(7 793)
6 495)
Net commissions for the year
23 254
30 551
The heading “Other commissions” of commissions income, at December 31, 2021, includes
an amount of 5,000 thousand Euros related to commissions of the Autonomous Communities’
Financing Fund and Local Entities’ Financing Fund for the management of both Funds (25,000
thousand Euros at December 31, 2020) (Note 16).
28. PROFIT OR LOSS ON FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AT
FAIR VALUE THROUGH PROFIT OR LOSS, NET
The detail of this caption of the Profit and loss account, based on the origin of its items is the
following:
Thousands of Euros
2021
2020
Financial assets at fair value through other comprehensive income (Note 9)
-
-
Financial assets at amortised cost, loans and items receivable (Note 10.3)
-
-
Financial assets at amortised cost, debt securities (Note 10.1)
-
23
Financial liabilities at amortised cost (Note 18.4)
(356)
139
( 356)
162
120
29. PROFIT OR LOSS ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING,
NET
The detail of this caption of the Profit and loss account, based on the origin of its items is the
following:
Thousands of Euros
2021
2020
Trading derivatives (Note 7)
364
3 385
364
3 385
Following the entry into force of IFRS 13 (January 1, 2013), the Group did not incorporate the
corresponding adjustment for counterparty and equity credit risk (CVA-DVA) for the valuation
of the derivative instruments. The adjustment made under this heading (including this caption)
at December 31, 2021 amounts to a profit of 357 thousand Euros (profits of 1,836 thousand
Euros at December 31, 2020).
30. PROFIT OR LOSS FOR FINANCIAL ASSETS AND LIABILITIES OBLIGATORILY AT
FAIR VALUE THROUGH PROFIT OR LOSS, NET
The detail of this caption of the Profit and loss account is the following:
Thousands of Euros
2021
2020
Equity instruments at fair value through profit or loss (Note 8)
-
-
-
-
31. PROFIT OR LOSS RESULTING FROM HEDGE ACCOUNTING, NET
The detail of this caption of the Profit and loss account is the following:
Thousands of Euros
2021
2020
Hedging derivatives (Note 11)
42 386
34 030
42 386
34 030
This caption includes results from the variation of fair value both of hedging elements and of
hedged elements.
121
32. OTHER OPERATING INCOME. OTHER OPERATING EXPENSES
The detail of the balance in captions “Other operating income” and “Other operating expenses”
of the profit and loss account is the following:
Thousands of Euros
OTHER OPERATING INCOME
2021
2020
Income from exploitation of estates
34
506
Other concepts (*)
793
311
827
817
(*) It mainly includes expenses recovered from returns of supplies and advances performed for the management of assets by
BBVA.
Thousands of Euros
OTHER OPERATING EXPENSES
2021
2020
Other concepts
-
-
-
-
33. PERSONNEL COSTS
The composition of this caption of the profit and loss account of 2021 and 2020 is the following:
Thousands of Euros
2021
2020
Wages and salaries
16 508
15 926
Employee benefits expense
4 218
3 987
Other expenses
1 515
1 312
22 241
21 225
The number of the Institute’s employees at December 31, 2021 and 2020, distributed per
professional categories and gender, has been the following:
Payroll’s distribution
Men
Women
2021
2020
2021
2020
Management
8
9
6
5
Managers and technicians
110
114
149
149
Administrative staff
6
7
48
47
124
130
203
201
122
The average number of the Institute’s employees in 2021 and 2020, distributed per
professional categories and gender, has been the following:
Average payroll’s distribution
Men
Women
2021
2020
2021
2020
Management
8
9
6
5
Managers and technicians
112
113
149
143
Administrative staff
7
7
46
47
127
129
201
195
NOTE: Since the signing of the Fifth Collective Bargaining Agreement (published in the Official Gazette on October 24, 2008),
general service staff is included under the heading of administrative professionals.
The average number of the Institute’s employees, in 2021, with disability above 33% is of 4
persons (3 persons in 2020).
Remunerations and other benefits for the General Board
In 2021 and 2020 the Institute recorded in Income Statement 137 thousand Euros and 127
thousand Euros (on the section of “Other administration expenses”), respectively, in respect
of remuneration accrued by the members of the General Board in respect of wages,
allowances and other remunerations. These were paid to the Treasury, according to the
applicable regulation law, in the case of General Board members considered as Senior
Positions in the Civil Service.
Remunerations perceived by the Institute’s President and Senior Management, during 2021
and 2020, are the following:
Year 2021:
Salaries and wages
Thousands of Euros
Other
No. persons
Fixed
Variable
Remunerations
Thousands of
Euros
Total
Thousands of Euros
6
695
70
17
782
123
Year 2020 (*):
Salaries and wages
Thousands of Euros
Other
No. persons
Fixed
Variable
Remunerations
Thousands of
Euros
Total
Thousands of
Euros
6
694
96
15
805
(*) Data from 2020 do not coincide with those registered in the annual accounts of 2020, as new concepts have been incorporated
in the caption “Other remunerations”.
At December 31, 2021 and 2020 there were no loans granted to the executive members of
the Institute's General Board. At December 31, 2021 loans granted under internal regulations
on loans to staff, had an outstanding amount of 12,524 thousand Euros and the average
interest rate was 2.51% (13,450 thousand Euros at December 31, 2020, with an average
interest rate of 2.51%).
In addition, at such date, no pension or life insurance obligations had been acquired with
regard to current or former members of the General Board.
34. OTHER ADMINISTRATION EXPENSES
The detail of this caption of the profit and loss account is the following:
Thousands of Euros
2021
2020
Buildings, installations and materials
713
649
Computers
4 979
3 699
Communications
2 089
2 021
Advertising and publicity
1 427
1 371
Rates and taxes
1 573
1 761
Other general administration expenses
6 965
6 878
17 746
16 379
Audit expenses
The annual accounts audit has been made by the General Intervention of the State
Administration (IGAE for its initials in Spanish). Consequently, they do not exist remunerations
to auditors for this concept, as they are assumed by the General Intervention (Treasury and
Public Administrations Minister).
The amount invoiced by companies under the Mazars trademark (who audit, by virtue of a
124
contract formalised with the IGAE to deliver a collaboration service in the performance of the
audit of the annual accounts of 2021 and 2020), for audit-related services amounted to 10
thousand Euros (5 thousand Euros for audit services of the individual annual accounts and 5
thousand Euros for the consolidated accounts); the amount invoiced for non-audit services
during 2021 has been of 42.5 thousand Euros, taxes not included (37.5 thousand Euros in
2020).
35. FAIR VALUE
As mentioned above, financial assets are recorded on the balance sheet at fair value, except
for loans and receivables and equity instruments whose market value cannot be estimated
reliably.
In the same way, financial liabilities are recorded on the balance sheet at amortised cost,
except those included in the trading portfolio.
Part of the assets registered under “loans and receivables” and liabilities registered under the
heading “Financial Liabilities at amortised cost”, from the balance at December 31, 2021 and
2020, are accounted at variable rate, with an annual revision of that rate, so their fair value
coming from movements of interest rates, it is not significantly different from the one registered
in the Institute’s balance sheet. The fair value of these has been obtained using a weighted
average maturity and a weighted average rate through which it has proceeded to calculate the
fair value using discount flows. The value calculated for these operations at December 31,
2021 and 2020 is as follows:
Thousands of Euros
Carrying value
Fair value
ASSETS
2021
2020
2021
2020
Financial assets at amortised cost
25 327 301
29 343 703
25 694 336
29 871 708
LIABILITIES
Financial liabilities at amortised cost
30 558 851
27 778 726
30 605 063
27 944 499
Fair value has been calculated, in all cases, both in 2021 and in 2020, taking as reference
implicit curves in monetary and Public Debt markets.
125
36. OPERATIONS WITH SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
The balance at December 2021 and 2020 of the Company related to the Subsidiaries, Joint
ventures and Associates is as follows:
AXIS
- Deposits to customers (financial liabilities at amortised cost): 33,220 thousand Euros
at December 31, 2021 (18,770 thousand Euros at December 31, 2020);
CERSA
- Deposits to customers (financial liabilities at amortised cost): 110,500 thousand Euros
at December 31, 2021 (13,995 thousand Euros at December 31, 2020).
126
INSTITUTO DE CRÉDITO OFICIAL
MANAGEMENT REPORT
Financial environment and frame of action
The Spanish economy, in line with the international economies as a whole, resumed in 2021
the economic growth interrupted in 2020 by the Covid-19 pandemic. Indeed, the rapid
vaccination campaign, during 2021, was essential for the economic activity to regain
dynamism. Thus, the gradual recovery allowed to end the year, as a whole, with a significant
economic expansion, at the highest pace for the Spanish economy in the last two decades.
The economic growth has been generalised among sectors, and has been reflected at all
levels, such as in employment, where both the quarterly data of the Labour Force Survey and
the monthly data on Social Security enrolment and registered unemployment show that, by
the end of 2021, levels immediately prior to the pandemic had already been exceeded.
Vaccination was a key element, during 2021, that led to an acceleration of activity, from the
second quarter of the year, with an expansion by 1.2% compared to the first quarter, with
activity gradually picking up to reach 2.6% growth in the third quarter of the year. During the
fourth quarter, growth was 2.0%, and thus the average GDP growth during 2021 stood at
5.0%, which contrasts with the 10.8% fall in 2020.
As for growth components, in 2021, both domestic demand (4.6%) and the foreign sector
(in this case, the positive contribution was of 0.4%) made a positive contribution to growth.
These positive contributions contrast with what happened in 2020, when domestic demand
made a negative contribution of 8.6% (with negative components, except for public
consumption) and the foreign sector of -2.2%. Within domestic demand, in 2021, both the
components of consumption and investment were expansionary, with household consumption
and investment in machinery and capital goods having the greatest increase.
The positive contribution of the external sector came against a backdrop of double-digit
growth in both exports and imports of goods and services. This contribution from the foreign
sector was driven by the recovery in world trade and the gradual reopening of tourism, which,
although still below its 2019 levels, increased strongly compared with what happened in 2020.
Thus, the total number of international tourists arriving in Spain stood at 31 million in 2021, up
from 19 million in 2020 but still below the 83.7 million international tourists who entered Spain
in 2019. Exports of goods reached 316,609 million Euros in 2021, representing a growth of
21.2% over the 2020 figure and an all-time high in the volume of exports. The number of
regular exporting companies increased by more than 7% in 2021, with regard to the previous
year, exceeding 59,000. All in all, according to data available from Bank of Spain, the Spanish
economy increased its external financing capacity in 2021 and its current account surplus
compared to 2020. However, the continuity of positive external balances will allow the Net
International Investment Position to continue to improve.
127
The notable progress of the vaccination process has been pointed out as a differentiating
factor, in 2021, together with the effectiveness of measures adopted to maintain the business
fabric, employment and household incomes, in order to achieve a return to economic
growth. Thus, the gradual normalisation of the health situation and economic policy measures
adopted to mitigate the economic and social impact brought to the surface consumption that
had been dormant for several quarters.
The State-guaranteed guarantee programmes approved during 2020, which enabled the
mobilisation of a credit volume of more than 135 billion Euros in more than 1,150,000
operations by the end of 2021, represented a much greater effort in terms of GDP than in other
European countries. These programmes have proven their usefulness in sustaining productive
activity in a crisis situation, facilitating a faster recovery (according to the latest data published
in 2021 by Bruegel and made in relation to each country’s GDP in 2019, in Spain, these
programmes have represented a GDP volume of 10.6%, slightly below Italy’s by 12.2%, but
well above France’s by 5.8% or Germany’s by 1.7%). In addition, the arrival of European funds
from the Next Generation EU programme began to have an impact in 2021, and this is
expected to be even more important in 2022 and 2023. Finally, the fact that the economic
recovery was practically generalised at international level contributed to the boost experienced
by Spanish exports.
With regard to the labour market, during 2021, levels prior to the outbreak of the pandemic
have generally recovered. According to data from the Labour Force Survey (EPA), 840,700
jobs were created in 2021, equivalent to an increase in employment of 4.4%, compared to the
loss of 622,600 jobs during 2020 (which represented a rate of decline of 3.1%). Moreover, the
total number of unemployed stood at 3,103,800 at the end of the year, below the figure for the
fourth quarter of 2019. This brought the unemployment rate to 13.3%, in the fourth quarter of
2021, compared with 16.1% in the last quarter of 2020 and 13.8% in the fourth quarter of 2019.
Thus, more jobs have been recovered in 2021 than those lost during 2020. It should be
recalled that these figures do not include employees affected by ERTE (Temporary Layoff
Plans), who for the purposes of the official figures count as employed at all times. In any case,
they continued to fall during 2021, so that from more than 3.5 million workers in this situation
on April 2020, they fell to just over 100,000 affected by the end of 2021. Thus, even if the
number of workers in ERTE is subtracted from the total number of employed workers, the total
number of “effective” employees at the end of 2021 was already higher than the total number
of employed workers before the pandemic. In this way, ERTE have been confirmed as an
effective tool to facilitate the rapid adjustment of companies’ employment in crisis situations
(and for the rapid reincorporation of employees afterwards), allowing the Spanish economic
fabric to adjust its effectively available workforce without having to resort to redundancies, as
had traditionally been the case.
In 2021, we witnessed a pick-up in inflation at international level, initially transitory. In Spain,
inflation averaged 3.1% in 2021, up from -0.3% in 2020. This pick-up was largely due to higher
energy prices, price pressures stemming from global supply problems for certain components,
such as semiconductors, and also to a base effect stemming from low inflation in the previous
128
year. Looking at the year-on-year rate of change on December, the headline CPI ended 2021
at 6.5%, showing an upward trend throughout the year. For its part, the year-on-year change
in the core CPI (excluding energy goods and unprocessed food, as they are components with
greater price variability) showed a more moderate trend and stood at 2.1% in December (0.6%
on January). Based on these data, inflation was once again the focus of attention, especially
in the second half of the year, although the consensus of analysts and institutions such as the
Bank of Spain pointed to a progressive moderation in inflation throughout 2022.
Concerning public accounts, the public deficit stood at 11.0% of GDP in 2020, as a result of
measures to mitigate the economic and social impact, implemented at the start of the health
crisis, well above the 2.9% in 2019. In 2021, there has been a recovery in public revenue and
a containment of expenditure that anticipates a moderation of the deficit figure with regard to
2020. In the last Budgetary Plan submitted to the European institutions, on October 2021, the
Spanish Government envisaged a deficit of 8.4% for 2021, although the final figure will be
lower, around 7.0 to 7.5% of GDP, according to forecasts by institutions such as Bank of Spain
and AIReF, in view of partial data available. Public debt has behaved along the same lines,
ending 2021 at a GDP of 118.7%, below the 119.5% projected by the Government in its Budget
Plan and the GDP of 120.0%, at which debt ended in 2020. Due to the pandemic context, the
European institutions approved in March 2020 the activation of the general safeguard clause
foreseen in the PEC, which allows for “temporary coordinated and orderly deviations from
normal requirements in situations of generalised crisis, caused by a severe economic
slowdown in the Euro area or in the EU as a whole”. This clause has rendered inapplicable
any actions that might be taken in 2020, 2021 and 2022, with the fiscal rules expected to be
reactivated in 2023, either in their current form or with some reform of rules. In line with the
budgetary flexibility applied at the European level, with respect to the Member States, the
monitoring of the deficit targets applied to the Autonomous Regions and Local Authorities has
also been made more flexible at the Spanish level.
In the European environment, the activity expansion in Spain of 5.0%, during 2021,
continued in line with the average growth in the Euro Area (EA), which was of 5.2% in 2021.
Thus, the EA as a whole also returned to growth in 2021 after its 2020 decline of 6.4%. As
was the case in Spain, GDP growth in the EA in 2021 was also the highest in decades. This
growth at the European level was driven in 2021 by a generalised advance in the components
of domestic demand (public and private consumption and investment grew in 2021), with
notable growth in exports and imports.
With regard to inflation, a very similar trend to that described above for Spain was observed
in the EA as a whole. Thus, average headline inflation in the EA stood at 2.6% in 2021, above
the rate of 0.3% observed in 2020. Core inflation also increased, albeit at much lower levels,
standing at 1.5% in 2021, compared with an average rate of 0.9% in 2020. This average
inflation followed a gradual acceleration of the inflation rate throughout the year: headline
inflation ended the year at 5.0% while core inflation stood at 2.7% in December (in January
2021 the headline rate was 0.9% and the core rate 1.4%).
129
The European Central Bank has maintained, during 2021, expansionary monetary policies
adopted during 2020, in response to the crisis caused by the pandemic. Thus, during 2021,
interest rates have remained unchanged at their current levels since September 2019 (0.0%
for the main refinancing operations, 0.25% for the marginal lending facility and -0.5% for the
deposit facility). The APP asset purchase programmes (20 billion new purchases each month)
also remained unchanged in 2021. The extraordinary asset purchase programme introduced
in response to the situation created by Covid-19, the PEPP programme, continued during
2021 as set out in 2020, with a total maximum amount of 1.85 trillion Euros until March 2022,
with only one-off technical adjustments to the pace of purchases. There were also no
developments with regard to the long-term refinancing operations (TLTRO-III and PELTRO),
which were carried out as announced in December 2020. Thus, the main change during the
year came from the modification in July 2021 of the ECB’s strategy by setting a symmetric
price growth target of 2% over the medium term, making it clear that the medium-term inflation
target allows for positive and negative deviations. Thus, this new target envisages the
possibility of inflation being moderately above the target on a temporary basis, given the
medium-term orientation of the target. It should also be noted that, although no changes were
implemented in 2021, the progressive change in macroeconomic circumstances, in particular
with rising inflation and the consolidation of growth in the face of the lesser impact of the
pandemic, meant that, on December 2021, the end of some of the exceptional instruments
and an incipient change in the current monetary policy stance began to be considered.
Specifically, it was proposed that the PEPP would end on March 2022 (although the amount
corresponding to issues maturing until the end of 2024 would continue to be reinvested), so
that the APP would be temporarily increased until, on October 2022, the APP would return to
its previous level of new purchases. In addition, it has been indicated that, at some point after
October 2022, the APP programme will stop its new purchases, as a prelude to a rate hike,
which the ECB has indicated will not occur before the end of such purchases under the APP.
In any case, any decisions would be taken on the basis of the available data, taking into
account the circumstances at any given time.
Financial markets progressively reacted to the changes in expectations in the different
instruments. Thus, the benchmark 10-year Spanish debt stood at 0.06%, at the beginning of
January 2021. After an upward trend in the first months of the year, it reached 0.6% on May,
before moderating again to 0.14% on August. In the latter part of the year, it rose again, ending
the year at around 0.6%. For its part, the spread between Spanish debt and the German
benchmark increased during the year from 63 basis points at the beginning of 2021 to around
75 basis points at the end of the year, without showing major fluctuations throughout the year
around these levels.
Household and corporate lending rates continued to decline during 2021. Thus, interest rates
on smaller transactions in Spain (less than 1 million Euros, used as a proxy for loans to SMEs)
stood at 1.59% at the end of 2021, down from 1.78% on December 2020. Moreover, as in
2020, the interest rate on these loans in Spain was lower than the interest rate on these same
loans in Germany for virtually the entire year, with the spread standing at 32 basis points on
December 2021.
130
Concerning financing volumes, in 2021, there were setbacks in the amount of new
operations, after many companies had accumulated precautionary liquidity buffers during
2020, through the State-backed loan lines managed by ICO in response to the COVID-19
crisis. In this regard, the annual cumulative amount of operations of more than 1 million fell by
19.5% in 2021, compared to 2020, when operations grew by 5.5%. Meanwhile, cumulative
transactions of less than 1 million Euros fell by 12.6% in 2021 (compared with a fall of 0.5%
in 2020), while transactions of up to 250 thousand Euros fell by 5.9% in 2021 (the fall was
8.9% in 2020). Based on the above, the outstanding amount of bank credit to enterprises
moderated its growth during 2021, which was 1.6% in 2021, down from 4.6% in 2020.
With regard to banks’ asset quality, the doubtful assets ratio continued to decline in 2021. It
stood at 4.3% on December 2021, compared with 4.5% on December 2020. Doubtful assets
thus stood at their lowest rate since March 2009, in a decrease that is mainly explained by the
reduction in the credit volume classified as doubtful.
In the Bank Lending Survey published by the ECB in collaboration with the national central
banks, a certain normalisation in the demand for credit was observed over the course of 2021.
Thus, after a 2020 in which large fluctuations were observed, with a large increase in demand
for credit from Spanish SMEs in the second quarter under the government-approved
guarantee facility and subsequent falls in demand, during 2021, movements were less acute.
Thus, although the year started with a fall in credit demand, thereafter much less pronounced
changes were observed, with slight increases in demand in the second and third quarters, and
a slight contraction in the fourth quarter. With regard to the trend for the coming quarters,
based on this Bank Lending Survey, SME credit demand is expected to grow slightly in the
more immediate future.
At institutional level, 2021 saw the start of the management of the Multiannual Financial
Framework of the European Union (EU) for the period 2021-2027 (MFF 2021-2027) and the
Next Generation EU (NGEU) instrument. The latter, endowed with 750 billion Euros, aims to
underpin the recovery of the European Union by laying the foundations for a transformation of
the economic structures of the member states that will strengthen them in the event of future
crises. In relation to NGEU, Member States presented their plans for using the resources
made available to them and the first disbursements were made. In the specific case of Spain,
the plan for the use of the funds was submitted on time, making it one of the countries whose
plan was first approved. Subsequently, the processing and fulfilment of milestones associated
with the plan followed the established timetable, so that, following receipt of the pre-financing
associated with the approval of the plan, Spain was the first EU country to receive a regular
amount associated with the plan’s implementation. Thus, between the pre-financing and the
first instalment received, Spain received around 19 billion Euros in 2021, in an amount that
has been allocated to the different projects set out in the Recovery, Transformation and
Resilience Plan, drawn up by the Spanish government and approved by the European
institutions. Forecasts by government institutions, the European Commission and Bank of
Spain anticipate that these funds will have an impact on Spanish GDP of close to 2% in both
131
2022 and 2023. Overall, Spain is expected to receive up to 140 billion Euros under the NGEU
for the entire period 2021-2027, half in direct transfers and the other half in repayable loans.
In the European Union as a whole, both the MFF 2021-2027 and the NGEU programme
abound in the European Green Deal initiative, with the progressive digitalisation of the
economy as the other major priority in the use of the funds available in the current budget
period. Thus, according to figures made public by the European Commission after analysing
all the national plans, 39.9% of the funds of the Recovery and Resilience Mechanism (the
main component of the NGEU) are earmarked for climate-related investments, while
investments linked to digitalisation account for 26.4% of the total. In relation to climate, the
EU's target of achieving a 55% reduction in emissions compared to 1990 levels by 2030 was
maintained (this target had been raised in 2020 from a 40% reduction). All this while
maintaining the objective of full decarbonisation of the economy and consequent complete
climate neutrality by 2050.
Thus, during 2021, the deployment of the European budgetary policy package for the period
2021-2027 began. In particular, the InvestEU programme, which receives its funds from both
the MFF 2021-2027 and the NGEU and brings together in a single structure the previously
existing guarantee mechanisms. InvestEU, which will have more than 26 billion Euros
mobilising estimated investments of more than 372 billion Euros through public-private
partnerships across the EU, had during 2021 its first call for proposals, to which accredited
implementing partners such as ICO could apply for approval of their financial products.
InvestEU will focus on four priority areas of action: sustainable infrastructures; research,
innovation and digitalisation; SMEs; and social investments and skills.
For its part, the European Banking Authority (EBA) published its annual report on risks and
vulnerabilities in the European banking sector on December 2021, together with the 2021
transparency exercise, which provides detailed information for 120 banks across the EU.
According to the EBA, banks increased their CET1 liquidity ratio during 2021 thanks to the
use of retained earnings and an increase in reserves, thereby more than surpassing the pre-
pandemic level of this ratio. In addition, the positive disposition of financial markets and central
bank policy allowed banks to maintain “comfortable positions” in terms of liquidity. On the other
hand, the doubtful assets ratio maintained a downward trend at the aggregate level, although,
according to the EBA, the doubtful assets ratio for the sectors most exposed to the pandemic
showed an upward trend. The EBA also highlighted the progress made by institutions with
regard to environmental, social and governance (ESG) risks, as well as the efforts made to
reduce their structural costs. However, the EBA indicated that the structural risks facing the
sector remain. The EBA also published on July 2021 the outcome of the stress tests initially
planned for 2020 for 38 significant banks in the euro area (these banks account for around
70% of the total assets of the euro area banking sector). The ECB also complemented this
exercise by conducting stress tests on 51 additional banks under its supervision. According to
this stress test, the banks were in a better situation than when the last exercise of this type
was carried out three years ago, although the reduction in capital in the system as a whole in
132
the simulated scenarios would be greater than then. The explanation is that the scenario used
for the 2021 exercises was more severe than the one used in the 2018 stress test.
In short, the Spanish economy, in line with what happened in the main European economies,
experienced strong economic growth in 2021, after the contraction in activity experienced in
2020 as a result of the Covid-19 pandemic. Looking ahead to 2022, forecasts of organisations
such as the European Commission and the International Monetary Fund anticipate that GDP
growth will continue in the EA as a whole, with Spain at the forefront of this expansion. Thus,
the European Commission forecasts Spanish GDP growth of 5.6% in 2022, above the 4.0%
expected for 2022 in the EA as a whole. Meanwhile, the International Monetary Fund
estimated Spanish economic growth of 5.8% in 2022, compared with the 3.9% growth forecast
for the EA as a whole. This growth would be driven by a normalisation at the health level, by
the recovery of the international economy as a whole (in particular trade flows) and by the
implementation of the recovery and resilience plans financed by the Next Generation EU
programme. The economic consequences of the war in Ukraine introduce important
uncertainties that will force a revision of previous projections.
Activity
Since its creation, in 1971, the Institute has been working to provide added value to the
financing of the Spanish business fabric, and to respond flexibly to the needs and challenges
posed by the different economic scenarios, all with the aim of contributing to boosting
economic growth and job creation. Likewise, it has played an important role in exceptional
economic situations, the most recent being the one generated by the COVID-19 health crisis,
in which, through an effective public-private partnership model, it has managed the various
COVID-19 Guarantee Lines on behalf of the State.
As highlighted above, the Liquidity and Investment Guarantee Lines are proving to be, since
their launch in 2020, one of the most effective programmes in the countries of the European
Union, in terms of their use and extension in the productive fabric. According to data at the
end of 2021, thanks to this mechanism, more than 136,400 million Euros in business financing
have been injected in more than 1,150,000 operations (98% formalised by the self-employed
and SMEs) and with a mobilisation of more than 103,700 million Euros guaranteed.
In addition, during 2021, Royal Decree Law 5/2021, of 12 March, on extraordinary measures
to support business solvency, established various measures to make loans guaranteed by the
State more flexible. These measures, aimed at facilitating the renegotiation of the financial
debt of companies and the self-employed with financial institutions, establish a set of
extraordinary solutions to support business solvency, protecting the productive fabric and
avoiding a structural impact on the economy and employment.
In addition to the COVID-19 guarantees, in 2021, the Institute continued to manage other
funds and instruments on behalf of the State in three areas of action: promoting the
internationalisation of Spanish companies through the Fund for the Internationalisation of
133
Companies (FIEM) and the Reciprocal Interest Contract (CARI) on behalf of the Ministry of
Industry, Trade and Tourism; financial cooperation for development, through the Fund for the
Promotion of Development (FONPRODE) and the Water Fund (FCAS) on behalf of the
Spanish Agency for International Development Cooperation (AECID); and the financing of the
State’s peripheral administration through the Territorial Funds of Autonomous Communities
and Local Entities on behalf of the Ministry of Finance. At the end of the 2021 financial year,
the total balance managed by the ICO corresponding to these funds amounted to 192,775
million Euros.
o The Autonomous Community Financing Fund, for which the ICO acts as financial
manager, had an outstanding balance of 179,764 million Euros at the end of 2021.
o The Local Entities Financing Fund closed 2021 with a balance of 6,176 million Euros.
o The State Funds for internationalisation and financial cooperation for development
(CARI, FIEM, FONPRODE and FCAS) have a combined balance of 6,836 million
Euros at the end of 2021.
All this, while continuing to accompany and support Spanish companies with its own lines of
financing, both through the mechanism for distributing funds in collaboration with the
intermediary credit institutions operating in Spain (ICO Lines) and through the financing and
guarantee programmes in which the ICO acts directly with customers.
The financing and issue of guarantees allocated by ICO to companies, entrepreneurs and
territorial administrations during 2021 amounts to 2,516,239 thousand Euros, representing a
growth of 3.7% compared to the previous year. Specifically, 41.2% of this amount (1,035,423
thousand Euros) correspond to drawdowns made through the different ICO 2021 mediation
lines, accumulating a total of 10,969 operations. Of these, 73.6% were targeted at micro-SMEs
(companies with up to nine employees) and 44.6% corresponded to loans of 25,000 Euros or
less.
In the mediation activity, there are two distinct strategic areas of action:
x Area of companies and entrepreneurs: lines aimed to finance investment projects and
liquidity needs of employers and companies, in Spain. 9,621 operations have been
granted, for an amount of 651,532 thousand Euros, representing 62.9% of the total
amount applied to mediation lines in 2021.
x International area: these lines are aimed to finance the internationalisation and
exporting activity of Spanish companies. In 2021, 1,348 operations have been granted,
for an amount of 383,891 thousand Euros.
In terms of direct activity, during 2021 the ICO complemented its financing operations through
loans and issue guarantees, with complementary non-banking financing through purchases of
134
different corporate debt instruments: bonds issued by Spanish companies to provide
companies with the necessary financing to undertake their medium- and long-term investment
plans (corporate bonds); through the acquisition of project bonds, as a financing instrument
especially linked to large infrastructure operations; and with purchases of corporate bonds and
promissory notes issued through the Alternative Fixed Income Market (MARF) to provide
issuers (especially SMEs) with access to financing to cover their short and medium-term
liquidity needs.
Through all these direct financing modalities and guarantees, during 2021, ICO has made
available funds and issued guarantees for an amount of 1,480,816 thousand, thereby helping
to meet the liquidity needs of companies as a result of the economic impact of COVID-19 and
continuing to promote the development of major long-term investment projects both in Spain
and abroad, always respecting the principle of complementarity with private initiative.
o Through the direct banking activity, loans and credits have been disposed of, for an
amount of 870,547 thousand Euros, and sureties have been granted, for an amount of
196,436 thousand Euros.
o Through the complementary direct activity, corporate bonds and MARF bonds have
been acquired, for an amount of 136,127 thousand Euros and, at the short term, MARF
promissory notes, for an amount of 277,706 thousand Euros.
Overall, the balance of the total lending activity managed by the ICO (including the amounts
guaranteed by the COVID-19 guarantee lines, the funds managed on behalf of the State and
its own activity) amounted to 315,451 million Euros, 4.3% higher than in December 2020.
In terms of fundraising, medium- and long-term financing was raised in 2021 for 5,764,575
thousand Euros. In 2021, we highlight the issuance of a social bond and a green bond:
o A social bond was issued by 500,000 thousand Euros to finance projects in public-
private collaboration to promote the economic and territorial cohesion and to have a
positive impact over employment.
o The issue of the green bond, the third issue of this kind made by ICO, amounted to
500,000 thousand Euros. Funds will be applied to financing projects made by Spanish
companies to contribute to the promotion of the ecologic transition, one of the axis of
the Spanish Economy’s Recovery, Transformation and Resilience Plan in the
framework of the Next Generation EU programme.
By the end of 2021, ICO had issued eleven sustainable bonds (eight social and three green),
consolidating its position as one of the benchmark issuers in this market at European level
with a total of 4,550 million Euros issued.
Another of the main strategic lines of action in this period has been through the funds, whose
135
sole participant is ICO, and which are managed by AXIS, the ICO Group’s venture capital
subsidiary.
FOND-ICO Global is Spain’s first public "Fund of Funds". Its aim is to promote the creation of
privately managed venture capital funds that invest in Spanish companies to provide
alternative financing channels to banks and boost their capitalisation and growth.
This fund, with an initial endowment of 1,200,000 thousand Euros, has been gradually
expanded given its positive evolution, currently reaching 4,500,000 thousand Euros, with ICO
as the sole participant; extending the Fund’s investment term until May 17, 2026 and extending
the Fund’s duration until May 17, 2034. In 2021, a new call has been resolved with the
selection of 15 funds in which 750,000 thousand Euros will be invested, the largest amount
allocated to date. This call, called Fond-ICO Consolida, multiplies the capacity to mobilise
resources in public-private partnerships, aimed at consolidating the growth of Spanish
companies at all stages, helping to consolidate the economic recovery.
In this line of action, AXIS and the Secretary of State for Digitalisation and Artificial Intelligence
launched Fond-ICO Next Tech, on July 2021, aimed at boosting the development of high-
impact digital projects and consolidating the growth of scale-ups. The aim of Fond-ICO Next
Tech is to mobilise joint resources in public-private collaboration to the tune of 4 billion Euros
(half public funds and half private investment) over an initial period of four years.
In 2020, in response to the COVID-19 crisis, the AXIS Board of Directors approved the COVID-
19 Entrepreneurial Ecosystem Initiative, through FOND-ICO Pyme, for 50,000 thousand
Euros. As part of this initiative, in 2021 Axis participated in the Extension Fund, with a
commitment of 49% up to a maximum of 17,150 thousand Euros. This 35,000 thousand Euro
investment fund was created in 2021, as a vehicle of opportunity to energise the post-Covid
environment.
In addition, with resources from FondICO Pyme, an investment of 5 million euros was made
in BSocial Impact Fund, as part of the Sustainability and Social Impact initiative launched in
2019. This fund was created with the aim of investing in impact start-ups that respond to three
major social and sustainable challenges: improving the quality of life of vulnerable groups,
climate change and school failure.
Through FOND-ICO Infraestructuras II, we have continued with the objective of investing
directly or through other investment funds in sustainable infrastructure projects in Spain and
abroad with Spanish companies, contributing to the national objectives for the ecological
transition.
Balance sheet
ICO Group occupies a prominent position within the Spanish financial system and has an
important role in the Spanish economy.
136
During 2021, there has been an increase in the size of the Institute’s balance sheet, from
34,386,075 thousand Euros at 2020 closing to 37,766,136 thousand Euros in 2021.
The outstanding amount of financial assets at amortised cost has amounted to 25,327,301
thousand Euros (29,343,703 thousand Euros at December 31, 2020):
x Loans to credit institutions amount to 7,724,368 thousand Euros (10,562,681 thousand
Euros in 2020). This caption mainly includes outstanding balances from mediation
operations.
x Loans to customers close the year with a balance of 10,713,260 thousand Euros with
regard to 11,433,524 thousand Euros in the previous year.
x Debt securities amount to 6,889,673 thousand Euros; 7,347,498 thousand Euros at
2020 closing.
The outstanding balance of the portfolio of debt securities at fair value through other results,
aimed to cover possible liquidity needs, amounts to 1,150,639 thousand Euros (713,358
thousand Euros at December 31, 2020). Also, cash and balances in central banks and other
deposits amounts to 9,379,495 thousand Euros (2,729,384 thousand Euros at December
2020).
During 2021, there has been an increase of the balance of financial liabilities at amortised
cost, closing the year in 30,558,851 thousand Euros (27,778,726 thousand Euros in 2020).
Equity in ICO amounts to 5,354,004 thousand Euros at 2021 closing, 14.2% of the balance
sheet. The Institute’s solvency coefficient at year-end closing amounts to 36.94%, much higher
than regulatory minimums.
Risk management policy
The Institute’s actions with regard to liquidity, market, credit and operational risk management
are described on the corresponding Notes 5.3 to 5.6.
Results
Net interest income at the end of December 2021 amounted to 104,546 thousand Euros, an
increase of 82,765 thousand Euros with regard to 2020.
The gross margin in 2021 has significantly increased, with regard to 2020 (181,865 thousand
Euros and 88,218 thousand Euros, respectively).
Operating expenses (administration and depreciation) amounted to 44,760 thousand Euros,
above figures in 2020 (42,017 thousand Euros), but below budget.
137
It should be noted that the financial year 2021 ended with net provision allocations of 15,609
thousand Euros and a reversal of the value of financial assets not measured at fair value of
48,435 thousand Euros.
As a result, profit before tax amounted to 171,698 thousand Euros.
Research and development expenses
No research or development activities were carried out in 2021.
Treasury stock
Not applicable to the Institute.
Personnel
The Institute’s average payroll, in 2021, amounts to 328 employees, with regard to 324 in
2020.
Post-balance sheet events
The war caused by the Russian invasion in the Ukrainian territory is causing, among others,
an increase in the price of raw materials and energy supplies, as well as the adoption of
penalty measures by Western countries against Russia, affecting, to a greater or lesser extent,
the economy in general and, in particular, those entities operating in the Ukrainian or Russian
territory, or who have any bond with these countries. The ICO does not have a direct exposure
with countries involved in the conflict and, despite the uncertainty it is causing, to date, the
Entity’s Directors do not expect this event to cause any issue in the Entity’s daily activity and
in the compliance with its obligations towards third parties.
The coming years will be crucial to consolidate the process of recovery, transformation and
strengthening of Spain’s growth model, as well as to deal with the economic consequences
that may arise from the war in Ukraine. The priorities of the European Union, embodied in the
Multiannual Financial Framework 2021-2027 and the European recovery plan Next
Generation EU, have been transferred to our country through the Recovery, Transformation
and Resilience Plan, which determines the direction of our country's economic policy in the
short, medium and long term.
The transformations that our economy will undergo in the coming years mean that companies
will have to rely on different financing sources, which will require the mobilisation of financial
resources in different modalities.
138
In this area, the ICO group will have to play a very important role in collaboration with the
private banking system, consolidating the process of recovery and transformation of the
Spanish economy, environmental and social sustainability, as well as business growth as a
source of innovation, competitiveness and job creation.
The ICO Group's strategic lines have been reoriented in such a way that they contribute to
strengthening its means and instruments, and develop its autonomy and capacity to anticipate,
adapt and reach, responding at all times to the needs of companies, the self-employed and
social economy entities in line with economic policy priorities.
To this end, in 2021 the Strategic Plan 2022-2027 for the ICO Group is based on the following
four main action lines:
x Boosting business growth, competitiveness and resilience of the economy.
x Promoting the digital transformation of the Spanish productive fabric.
x Boosting the ecologic transition and the environmental, social and governance
sustainability of the business fabric.
x Strengthening the governance in ICO, promoting the organisational transformation and
extending the institutional, communication and business social responsibility activity.
Other significant events that occurred after the reporting date are detailed in Note 1.8.
Annex I: Investments at 31.12.2021 and 31.12.2020 (direct and indirect)
139
The relevant information on shares in associates and subsidiaries at December 31, 2021 and 2020 is the following:
At 31 December 2021:
Shareholding %
Investment’s carrying value
Entity’s details
Address
Activity
Direct
Indirect
Total
Gross
Impairment
Net
Assets
Equity
Results
Associates
CERSA, Compañía Española de
Reafianzamiento, S.A.
Paseo de la Castellana
151 - Madrid
Supporting
guarantee of
guarantee operations
granted by the SGR.
24.34%
-
24.34%
42 193
-
42 193
654 482
501 474
-
COFIDES, Compañía Española
de Financiación del Desarrollo,
S.A.
Príncipe De Vergara,
132 - Madrid
Financial support to
private projects with
Spanish interest
performed in
developing countries
20.31%
-
20.31%
8 466
-
8 466
174 369
167 580
18 490
Subsidiaries
50 659
-
50 659
AXIS Participaciones
Empresariales Sociedad Gestora
de Entidades de Capital Riesgo ,
S.A.
Los Madrazo, 38
- Madrid
Financial
investments
100.00%
-
100.00%
1 940
-
1 940
32 841
31 752
18 146
52 599
-
52 599
Non-audited economic information, referring to December 31, 2021
Annex I: Investments at 31.12.2021 and 31.12.2020 (direct and indirect)
140
At 31 December 2020:
Shareholding %
Investment’s carrying value
Entity’s details
Address
Activity
Direct
Indirect
Total
Gross
Impairment
Net
Assets
Equity
Results
Associates
CERSA, Compañía Española de
Reafianzamiento, S.A.
Paseo de la Castellana
151 - Madrid
Supporting
guarantee of
guarantee
operations
granted by the
SS.GG.RR.
24,30%
-
24,30%
38 886
-
38 886
490 496
343 199
-
COFIDES, Compañía Española
de Financiación del Desarrollo,
S.A.
Príncipe De Vergara,
132 - Madrid
Financial support to
private projects with
Spanish interest
performed in
developing countries
20,31%
-
20,31%
8 466
-
8 4665
155 399
149 742
9 826
Subsidiaries
47 352
-
47 352
AXIS Participaciones
Empresariales Sociedad Gestora
de Entidades de Capital Riesgo ,
S.A.
Los Madrazo, 38
- Madrid
Financial
investments
100,00%
-
100,00%
1 940
-
1 940
19 526
18 518
11 909
49 292
-
49 292
Non-audited economic information, referring to December 31, 2020
General Board
CAYETANA LADO CASTRO-RIAL, SECRETARY OF THE GENERAL BOARD OF INSTITUTO DE
CRÉDITO OFICIAL, BY VIRTUE OF THE POWERS ESTABLISHED IN ARTICLE 13 OF ITS
BYLAWS, APPROVED BY ROYAL DECREE 706/1999, OF 30 APRIL,
CERTIFIES:
That at the General Board session on 28 April, 2022 the following resolution was adopted:
"1) Approve the individual and consolidated annual accounts (balance sheet, profit and loss
account, statement of recognised income and expense, statement of changes in equity, cash
flow statement and notes to the financial statements) and the management report of the
Instituto de Crédito Oficial (ICO) for the financial year 2021.
2) Submit the annual accounts and the management report for the 2021 financial year, together
with the proposed allocation of profits, within one month of approval, for consideration by the
Minister for Economic Affairs and Digital Transformation, who shall approve the allocation of
profits, subject to a non-binding report from the Ministry of Finance and Public Administration
to be issued within ten days of the request.”
It is hereby certified in accordance with the provisions of article 19.5. of Law 40/2015, of 1
October, on the Legal Regime of the Public Sector, in relation to article 9.9 of the Institute's Bylaws,
which has not yet approved the Minutes of the session of 28 April 2022.
For the record, for the appropriate purposes, this certification is issued in Madrid on the
date of electronic signature.
Seen and approved by:
THE CHAIRMAN,
José Carlos García de Quevedo Ruiz
Document electronically signed by:
Jose Carlos Garcia de Quevedo Ruiz – Chairman
Date 28/04/2022
CSV: vxn0nAtq6x5mvoEc/7n90Q==
Document electronically signed by:
Cayetana Lado Castro-Rial
Date 28/04/2022
CSV: vxn0nAtq6x5mvoEc/7n90Q==
STATEMENT OF RESPONSIBILITY FOR
THE ANNUAL FINANCIAL REPORT
José Carlos García de Quevedo Ruiz, Chairman of Instituto de Crédito Oficial,
declares that, to the best of his knowledge, the individual and consolidated
annual accounts for 2021, drawn up on 30 March 2022, prepared in accordance
with the applicable accounting principles, give a true and fair view of the net
worth, financial position and results of Instituto de Crédito Oficial and of the
undertakings included in the consolidation taken as a whole, and that the
individual and consolidated management reports include a fair review of the
development and performance of the business and the position of Instituto de
Crédito Oficial and of the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties that
they face.
Madrid, 28 April 2022
José Carlos García de Quevedo Ruiz,
Chairman of Instituto de Crédito Oficial
Document electronically signed by:
Jose Carlos Garcia de Quevedo Ruiz – Chairman
Date 28/04/2022
CSV: QHMK414j2kdgvvsWFnY16A==