Expenses

Depreciation has been reduced by the part that is charged on to related parties.

Amounts recognised in OCI

The other comprehensive income for Triodos Bank consists of revaluations of equity instruments at fair value through OCI and foreign currency translation differences. Investment securities are the related balance sheet account for the revaluations, for which any realised result will not subsequently be taken into the profit or loss. The foreign currency translation difference relates to the UK subsidiary for the part not subject to the net investment hedge. Tax on both of these items can be subject to the participation exemption under Dutch Tax Law.

Reconciliation of effective tax rate

Triodos Bank is subject to income taxes in the Netherlands and several other jurisdictions which levy corporate income tax at different rates.

The effective tax rate (‘ETR’) amounted to 23.3% (2019: 27.9%) and differs from the theoretical rate that would arise using only the Dutch corporate tax rate (25%).  Other than mentioned differences and changes in applicable local corporate income tax rates, the difference can partly be attributed to the non-taxable release of a provision regarding the closure of the credit intermediation office in France ad EUR 1.7 million in 2020.

Following the decision not to establish a banking branch in France, a provision was recognized of EUR 3.4 million in 2019. This provision was treated as a non-tax deductible expense under local tax legislation and therefore resulted in a higher ETR. The subsequent release of a part of the provision of EUR 1.7 million in 2020, following lower expenditure than originally anticipated, results in non-taxable income and therefore a lower ETR in 2020.

Movement in deferred tax balances

Deferred tax balances

The deferred tax asset relates for an amount of EUR 6.8 million (2019: EUR 7.3 million) to tax losses incurred by the German branch for which it is expected that these will be fully recovered against future profits. Compensation is expected in the coming years. Under the German corporate income tax code tax losses have no expiration date. The remaining deferred tax asset relates to temporary differences because of differences between accounting rules and tax rules.

The deferred tax liability relates for an amount of EUR 1.4 million (2019: 1.5 million) to a taxable temporary difference following the tax losses incurred by the German branch over the period 2009 – 2011 amounting to EUR 6.8 million which have been offset against taxable income in the Triodos Dutch corporate income tax return over the same period. The Dutch corporate income tax act 1969 allowed income tax deduction on losses incurred by foreign branches of a Dutch resident taxpayer in so far that these tax losses could not be recovered in the country of residence till 2011. This Dutch income tax deduction is subsequently reversed when the branch recovers profitability and the incurred tax losses are offset in the local income tax return, resulting in a taxable temporary difference. Under the German corporate income tax code tax losses have no expiration date.

Fiscal unity

Triodos Bank, as a parent company, forms a tax unity for corporate income tax purposes with Triodos Investment Management as subsidiary. The method chosen for the taxation set-off between Triodos Bank and its subsidiary is that of proceeding as if the legal entities were independently liable to pay tax. In fact, the legal entities are jointly and severally liable for the tax liabilities of the companies belonging to the fiscal unity.

Triodos Bank enters into various transactions with related parties, as part of the normal course of business,

Related parties of Triodos Bank include, among others, its subsidiaries, associates and key management personnel. Transactions between related parties include rendering or receiving of services, deposits, transfers under finance arrangements and provisions of guarantees or collateral. All transactions with related parties took place at arm's length.

There are no significant provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances with related parties.

Overview of related parties transactions

Transactions with related parties

The commission income and commission expenses are related to fund management activities. The deposits and interest income are transactions following from regular banking activities, which are offered to the related parties at competitive rates. These transactions are interest fee and unsecured and are to be settled in cash.

Loans

The loan granted to associates is a subordinated loan provided to Merkur Bank. The maturity date of this loan is 30th of April 2026, to be settled in cash. The interest rate charged is 5%.

The loans granted to other related parties are provided to Hivos-Triodos Fund Foundation. The 6.135K consists of two loans that both mature on the 1st of January 2022, to be settled in cash. The interest rates on the loans are 2.63% and 3% respectively.

Loan commitments and facilities off balance

The loan commitments and facilities are off balance sheet credit facilities of TBNL that can be drawn upon by the other related parties.

These facilities are secured by means of collateral in the form of fund assets that cover the facility provided in full.

Key management personnel compensation

Transactions with key management personnel are transactions with related parties. The members of the Executive Board, supervisory board and the board of SAAT are considered to be key management personnel and their compensation is therefore included in the tables below.

The remuneration paid to the members of the Executive Board is as follows:

¹In consultation with the Supervisory Board, Peter Blom announced to step down from his position as a Member of the Executive Board of Triodos Bank N.V. at the AGM 2021. A severance payment of 100% of his yearly salary was granted. This is in line with applicable regulations and will be paid out in 2021. Also in consultation with the Supervisory Board, Pierre Aeby stepped down from his position as a Member of the Executive Board of Triodos Bank N.V. on 18 May 2019. A severance payment of 100% of his yearly salary was granted. This was also in line with applicable regulations. The severance payment was paid out in 2020.

Other emoluments of the Executive Board:

The other emoluments relate to costs associated with relocation to the Netherlands.

Remuneration paid to the Supervisory Board:

Remuneration paid to the Board of SAAT

Loans and advances to key management personnel

The table below provides the loans that have been granted to the members of the Executive Board.

No other loans, advances or guarantees have been granted to members of the Executive Board, Supervisory Board members or members of Board of SAAT. For reasons of principle, no share option scheme is offered to members of the Executive Board, Supervisory Board members or members of Board of SAAT.

The end of 2020 was marked by an increasing number of Covid-19 infections across Europe leading to additional measures taking in the affected countries. The economic consequences for vulnerable individuals and firms resulted into additional governmental support. Triodos Bank monitors the potential and social implications for the countries and sectors where it is active. Mitigating actions have been taken and will be adapted as necessary as we keep on supporting our customers. The uncertainties and sensitivity that accompanies the pandemic is captured in the allowance for expected credit losses as calculated by Triodos Bank. The reflection of this ongoing event has therefore been captured in the financial valuations as per 31 December.

Triodos Bank has temporarily stopped offering depository receipts as from 5 January 2021. A trade pattern has emerged where the number of sell orders outweighs the number of buy orders for Depository Receipts. This trend emerges despite the financial health of the bank, as our capital and liquidity ratios remain well above regulatory minimum levels. The ongoing uncertainty around the Corona crisis and its longer-term economic effects have not disappeared, on the contrary, further lockdown and other restrictions are seen globally. Relevant measures are investigated to achieve balanced trading. The details of possible new measures are considered relevant information for making an informed investment decision.

Peter Blom, our CEO, has decided to step down from his role, having worked at Triodos Bank for forty years. He will leave Triodos Bank at the end of this year’s Annual General Meeting, on 21 May 2021.

Jellie Banga decided to step down from her role as Vice-Chair of the Executive Board and the Chief Operating Officer effective May 1, 2021. In reviewing the scope of Jellie’s role, Triodos Bank has decided to split her role into a COO role – focusing on the operating side of the bank – and a Chief Commercial Officer (CCO) role - focusing on the commercial side of the bank. This will bring the total number of Executive Board members to five.

Fitch Ratings (Fitch) announced on 16 February 2021 it has assigned Triodos Bank a Long-Term Issuer Default rating at ‘BBB’ with a stable outlook and a Viability Rating at ‘bbb’. Fitch’s rating analysis was done at the request of Triodos Bank. The rating gives Triodos Bank a better position on the financial markets should the need arise. It will improve access to institutional debt funding and potentially reduce the cost of funding. Therefore, it supports the banks financial health. The Stable Outlook reflects Fitch’s view that Triodos Bank’s ratings have sufficient headroom at their current level to absorb significant shocks under various scenarios to Fitch’s baseline economic forecast.