Cash and cash equivalents
The balance sheet value of the cash and cash equivalents as at 31 December can be broken down as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
On demand deposit Dutch Central Bank | 1,717,962 | 2,568,297 |
On demand deposit Belgian Central Bank | 278,042 | 513,382 |
On demand deposit German Central Bank | 7,469 | 244,245 |
On demand deposit Spanish Central Bank | 170,719 | 506,584 |
On demand deposit United Kingdom Central Bank | 405,870 | 445,464 |
Interest receivable | 1,078 | -383 |
Balance sheet value as at 31 December | 2,581,140 | 4,277,589 |
More detailed information regarding cash and cash equivalents can be found in the Risk Management chapter, section Liquidity risk, with quantitative information starting on page Liquidity risk.
Accounting policy
Cash and cash equivalents comprises of cash with central banks. Cash and cash equivalents are carried at amortised cost on the balance sheet.
Loans and advances to banks
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
On demand deposits with banks | 186,272 | 145,276 |
Deposits with banks | 146,027 | 120,588 |
Interest receivable | 201 | -44 |
Allowance for ECL | -7 | -24 |
Balance sheet value as at 31 December | 332,493 | 265,796 |
Received cash collateral regarding forward currency contracts and interest rate swaps is presented as loans and advances to banks. The increase in received cash collateral is caused by fair value changes in interest rate swaps.
An amount of EUR 144.7 million of the deposits is encumbered (2021: EUR 118.2 million). These are on demand deposits at Cecabank for the amount of EUR 1.0 million (2021: EUR 1.0 million), ING Bank EUR 13.0 million (2021: EUR 13.0 million), Banco Cooperativo EUR 1.5 million (2021: EUR 1.5 million), the Dutch Central Bank EUR 50.0 million (2021: EUR 50.0 million), Rabobank EUR 6.7 million (2021: EUR 13.5 million), and ABN AMRO EUR 72.5 million (2021: EUR 39.2 million). There were no deposits subordinated (2021: EUR 1.0 million). All other deposits can be freely disposed of.
The balance sheet value of the loans and advances to banks as at 31 December can be broken down as follows by residual maturity:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
On demand | 186,444 | 145,217 |
1 to 3 months | 1,358 | 1,426 |
3 months to 1 year | - | - |
1 to 5 years | - | 1,000 |
Longer than 5 years | - | - |
Encumbered assets without a maturity | 144,691 | 118,153 |
Balance sheet value as at 31 December | 332,493 | 265,796 |
Accounting policy
Loans and advances to banks are financial instruments initially measured at fair value including any incremental direct transaction costs. The loans and advances to banks are held to collect the contractual cash flows and meet the SPPI criteria. Therefore, subsequent measurement is at amortised cost, using the effective interest method in accordance with the Financial instruments paragraph in the accounting principles on page Financial instruments .
Loans and advances to customers
Loans and advances to customers at amortised cost:
| 2022 | ||||||||
---|---|---|---|---|---|---|---|---|---|
Amounts in thousands of EUR | Gross carrying amount | Allowance for ECL | Carrying amount | Net interest | Effective interest rate | ||||
Business loans | 6,270,426 | -47,927 | 6,222,499 | 172,417 | 2.77% | ||||
Mortgage lending | 4,447,170 | -1,414 | 4,445,756 | 67,306 | 1.67% | ||||
Short term loans1 | 60,000 | - | 60,000 | -61 | -0.06% | ||||
Current accounts and credit cards | 159,036 | -1,876 | 157,160 | 5,178 | 3.04% | ||||
Fair value hedge accounting | -289,691 | - | -289,691 | - | - | ||||
Interest receivables | 23,952 | - | 23,952 | - | - | ||||
Balance sheet value as at 31 December | 10,670,893 | -51,217 | 10,619,676 | 244,840 | 2.36% | ||||
|
| 2021 | ||||||||
---|---|---|---|---|---|---|---|---|---|
Amounts in thousands of EUR | Gross carrying amount | Allowance for ECL | Carrying amount | Net interest | Effective interest rate | ||||
Business loans | 6,267,585 | -45,366 | 6,222,219 | 152,760 | 2.51% | ||||
Mortgage lending | 3,621,128 | -1,078 | 3,620,050 | 56,240 | 1.77% | ||||
Short term loans1 | 138,628 | - | 138,628 | -762 | -0.32% | ||||
Current accounts and credit cards | 186,192 | -2,536 | 183,656 | 3,536 | 2.33% | ||||
Fair value hedge accounting | -14,708 | - | -14,708 | - | - | ||||
Interest receivables | 17,953 | - | 17,953 | - | - | ||||
Balance sheet value as at 31 December | 10,216,778 | -48,980 | 10,167,798 | 211,774 | 2.19% | ||||
|
The Expected Credit Loss allowance (ECL) 2022 is 0.48% of the total loan portfolio gross carrying amount at 31 December 2022 (31 December 2021: 0.48%).
The annual incurred loss rate, which is the stage 3 impairment expense over the average loan book per 31 December 2022, is 8bps (2021: 6bps).
The movements of the ECL of Loans and Advances to customers for 2022 is presented below. A further breakdown of the movements of the ECL, split between ECL on business loans and current accounts and ECL on mortgages, including comparatives is included within the current disclosure.
Amounts in thousands of EUR | 2022 | |||
---|---|---|---|---|
Stage 1 | Stage 2 | Stage 3 | Total | |
Balance sheet value at 1 January | 8,675 | 3,418 | 36,887 | 48,980 |
|
|
|
|
|
Net remeasurement of allowance for expected credit losses | -2,750 | 1,859 | 8,076 | 7,185 |
of which: |
|
|
|
|
- Effect of transition between stages | -907 | 2,660 | 510 | 2,263 |
- Macro-economic forward looking impact | -2,567 | -470 | - | -3,037 |
- Individual loan or advance behaviour | 353 | 99 | 7,566 | 8,018 |
- Update ECL model | 371 | -430 | - | -59 |
|
|
|
|
|
Net portfolio growth | 463 | 503 | - | 966 |
Write-offs | - | - | -5,386 | -5,386 |
Exchange rate differences | -74 | -85 | -369 | -528 |
Balance sheet value at 31 December | 6,314 | 5,695 | 39,208 | 51,217 |
Amounts in thousands of EUR | 2021 | |||
---|---|---|---|---|
Stage 1 | Stage 2 | Stage 3 | Total | |
Balance sheet value at 1 January | 8,148 | 9,384 | 33,438 | 50,970 |
|
|
|
|
|
Net remeasurement of allowance for expected credit losses | -985 | -5,899 | 5,613 | -1,271 |
of which: |
|
|
|
|
- Effect of transition between stages | 851 | -266 | 395 | 980 |
- Macro-economic forward looking impact | -3,916 | -6,646 | - | -10,562 |
- Individual loan or advance behaviour | 1,302 | 1,450 | 5,218 | 7,970 |
- Update ECL model | 778 | -437 | - | 341 |
|
|
|
|
|
Net portfolio growth | 1,432 | -168 | - | 1,264 |
Write-offs | - | - | -2,306 | -2,306 |
Exchange rate differences | 80 | 101 | 142 | 323 |
Balance sheet value at 31 December | 8,675 | 3,418 | 36,887 | 48,980 |
The total ECL provision of EUR 49.0 million per 31 December 2021 increased by EUR 2.2 million to EUR 51.2 million per 31 December 2022 due to an increase in Stage 2 of EUR 2.3 million and an increase in Stage 3 of EUR 2.3 million which was offset by a decrease in Stage 1 of EUR 2.4 million. The decrease in Stage 1 is mainly caused by the decrease of EUR 2.6 million due to more favourable macro-economic forward looking parameters compared to 2021. This is partly offset by a net increase of EUR 2.3 million due to transfers from a one-year expected credit loss in Stage 1 to a lifetime expected credit loss in Stage 2 and Stage 3, and an increase in Stage 3 of EUR 8.1 million, offset by write-offs of EUR 5.4 million. This has resulted in a net loss in the profit or loss account of EUR 8.1 million (2021: a net gain EUR 7 thousand).
More detailed information regarding the allowance for ECL and the impairment gain/loss recognised in the profit or loss accounts can be found in the Risk Management chapter, section Credit risk, with quantitative information starting on page Credit risk quantitative disclosures.
The movement of the ECL of Loans and Advances is further split below between the movement of the ECL for Business loans and current accounts and the movement of the ECL for Mortgages.
The following table shows the movements within the ECL for business loans and current accounts. The allowance for expected credit losses in this table includes ECL on off-balance sheet loan commitments for certain retail products such as credit cards and overdrafts, because Triodos Bank determines the ECL per exposure, including any loan commitment component.
ECL loans and advances to customers at amortised cost - Business loans and current accounts | 2022 | |||
---|---|---|---|---|
Amounts in thousands of EUR | Stage 1 | Stage 2 | Stage 3 | Total |
Balance at 1 January | 8,058 | 3,057 | 36,787 | 47,902 |
|
|
|
|
|
Net remeasurement of allowance for expected credit losses | -2,670 | 1,904 | 7,868 | 7,102 |
of which: |
|
|
|
|
- Effect of transition between stages | -906 | 2,642 | 497 | 2,233 |
- Macro-economic forward-looking impact | -2,534 | -415 | - | -2,949 |
- Individual loan or advance behaviour | 400 | 108 | 7,371 | 7,879 |
- Update ECL model | 370 | -431 | - | -61 |
|
|
|
|
|
Net portfolio growth | 308 | 405 | - | 713 |
Write-offs | - | - | -5,386 | -5,386 |
Exchange rate differences | -74 | -85 | -369 | -528 |
Balance at 31 December | 5,622 | 5,281 | 38,900 | 49,803 |
ECL loans and advances to customers at amortised cost - Business loans and current accounts | 2021 | |||
---|---|---|---|---|
Amounts in thousands of EUR | Stage 1 | Stage 2 | Stage 3 | Total |
Balance at 1 January | 7,287 | 9,061 | 32,972 | 49,320 |
|
|
|
|
|
Net remeasurement of allowance for expected credit losses | -610 | -5,868 | 5,979 | -499 |
of which: |
|
|
|
|
- Effect of transition between stages | 853 | -307 | 395 | 941 |
- Macro-economic forward-looking impact | -3,766 | -6,566 | - | -10,332 |
- Individual loan or advance behaviour | 1,365 | 1,462 | 5,584 | 8,208 |
- Update ECL model | 938 | -457 | - | 481 |
|
|
|
|
|
Net portfolio growth | 1,301 | -237 | - | 1,064 |
Write-offs | - | - | -2,306 | -2,306 |
Exchange rate differences | 80 | 101 | 142 | 323 |
Balance at 31 December | 8,058 | 3,057 | 36,787 | 47,902 |
The following table shows the movements within the ECL for mortgage loans.
ECL loans and advances to customers at amortised cost – Mortgages | 2022 | |||
---|---|---|---|---|
Amounts in thousands of EUR | Stage 1 | Stage 2 | Stage 3 | Total |
Balance at 1 January | 617 | 361 | 100 | 1,078 |
|
|
|
|
|
Net remeasurement of allowance for expected credit losses | -80 | -45 | 208 | 83 |
of which: |
|
|
|
|
- Effect of transition between stages | -1 | 18 | 13 | 30 |
- Macro-economic forward-looking impact | -33 | -55 | - | -88 |
- Individual loan or advance behaviour | -47 | -9 | 195 | 139 |
- Update ECL model | 1 | 1 | - | 2 |
|
|
|
|
|
Net portfolio growth | 155 | 98 | - | 253 |
Balance at 31 December | 692 | 414 | 308 | 1,414 |
ECL loans and advances to customers at amortised cost – Mortgages | 2021 | |||
---|---|---|---|---|
Amounts in thousands of EUR | Stage 1 | Stage 2 | Stage 3 | Total |
Balance at 1 January | 861 | 323 | 466 | 1,650 |
|
|
|
|
|
Net remeasurement of allowance for expected credit losses | -375 | -31 | -366 | -772 |
of which: |
|
|
|
|
- Effect of transition between stages | -2 | 41 | - | 39 |
- Macro-economic forward-looking impact | -150 | -80 | - | -230 |
- Individual loan or advance behaviour | -63 | -12 | -366 | -441 |
- Update ECL model | -160 | 20 | - | -140 |
|
|
|
|
|
Net portfolio growth | 131 | 69 | - | 200 |
Balance at 31 December | 617 | 361 | 100 | 1,078 |
Loans and advances to customers classified by residual maturity:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Payable on demand | 160,530 | 186,558 |
1 to 3 months | 451,023 | 520,850 |
3 months to 1 year | 972,909 | 896,227 |
1 to 5 years | 3,672,590 | 3,600,046 |
Longer than 5 years | 5,362,624 | 4,964,117 |
Balance sheet value as at 31 December | 10,619,676 | 10,167,798 |
A total amount of EUR 5.6 million (2021: EUR 9.4 million) of the loans and advances to customers is subordinated.
As part of the interest rate risk management, Triodos Bank entered into interest rate swaps to hedge the interest risk on fixed interest rate loans. Please see Non-trading derivatives and hedge accounting for additional information.
Accounting policy
Loans and advances to customers are financial instruments initially measured at fair value including any incremental direct transaction costs. The loans and advances to customers are held to collect the contractual cash flows and meet the SPPI criteria. Therefore, subsequent measurement is at amortised cost, using the effective interest method in accordance with the Financial instruments paragraph in the accounting principles on page Financial instruments .
Critical judgement and estimates
Triodos Bank determines the ECL which is a critical estimate and includes critical judgements. For more details on the critical judgement and estimate of ECL, refer to Financial instruments .
Debt securities at amortised cost
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Dutch government bonds | 9,940 | 69,667 |
Belgian government bonds | 76,843 | 108,035 |
Spanish government bonds | 98,356 | 51,733 |
United Kingdom government bonds | 153,157 | 125,171 |
Other bonds | 1,343,430 | 1,119,399 |
Interest receivable | 7,736 | 8,738 |
Fair value hedge accounting | 350 | 645 |
Allowance for ECL | -32 | -10 |
Balance sheet value as at 31 December | 1,689,780 | 1,483,378 |
Debt securities with a nominal amount of EUR 975.9 million is placed at the Dutch Central Bank (2021: EUR 207.1 million) that can be used for a credit line. In 2021 an amount of EUR 1,064.7 million of debt securities was posted as collateral at the Dutch Central Bank for the deposits from Central Banks (TLTRO) which was repaid in 2022.
Up to 2020, as part of the interest rate risk management, Triodos Bank entered into interest rate swaps to hedge the interest risk on fixed interest rate bonds. These hedge relationships were discontinued as Triodos Bank now applies macro fair value hedge accounting on its loans and advances to customers. The fair value hedge adjustment on debt securities will amortise over the remaining lifetime of the dedesignated hedge relationship.
The movement in debt securities at amortised cost is as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Balance sheet value as at 1 January | 1,483,378 | 1,317,301 |
Acquisitions | 745,581 | 402,532 |
Repayments | -507,669 | -229,447 |
Sale | - | -6,095 |
Amortisation difference between acquisition price and redemption value | -9,122 | -10,725 |
Exchange rate differences | -21,069 | 10,956 |
Interest receivable movement | -1,002 | -696 |
Fair value hedge accounting movement | -295 | -501 |
Net movement in allowance for ECL | -22 | 53 |
Balance sheet value as at 31 December | 1,689,780 | 1,483,378 |
The increase in the debt securities is mainly caused by an increase in the other bonds of EUR 224 million. The other bonds consists of European regional government and corporate bonds, listed and non-listed. The debt securities including the other bonds are specified below.
The interest bearing securities in the statement below, as at 31 December, are valued at amortised cost. This is the book value without the interest receivable, fair value hedge accounting and the allowance for the ECL.
Amounts in thousands of EUR | 2022 | ||||||||
---|---|---|---|---|---|---|---|---|---|
Issuer | Listed | Non-listed | Maturity <1 year | Maturity >1 year | Of which Green bond1 | ||||
Total public sector entities | 1,420,178 | 41,253 | 403,222 | 1,058,209 | 32,238 | ||||
Total non-public sector entities | 214,295 | 6,000 | 14,716 | 205,579 | 41,486 | ||||
Total | 1,634,473 | 47,253 | 417,938 | 1,263,788 | 73,724 | ||||
|
Amounts in thousands of EUR | 2021 | ||||||||
---|---|---|---|---|---|---|---|---|---|
Issuer | Listed | Non-listed | Maturity <1 year | Maturity >1 year | Of which Green bond1 | ||||
Total public sector entities | 1,166,716 | 66,920 | 447,792 | 785,844 | 32,356 | ||||
Total non-public sector entities | 232,369 | 8,000 | 37,532 | 202,837 | 54,564 | ||||
Total | 1,399,085 | 74,920 | 485,324 | 988,681 | 86,920 | ||||
|
Accounting policy
All debt securities at amortised cost are held in the investment portfolio. These are financial instruments initially measured at fair value including any incremental direct transaction costs. The debt securities are held to collect the contractual cash flows and meet the SPPI criteria. Therefore, subsequent measurement is at amortised cost, using the effective interest method in accordance with the Financial instruments paragraph in the accounting principles on page Financial instruments .
Investment securities
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Participating interests designated at fair value through OCI | 35,990 | 30,143 |
Participating debt at fair value through profit or loss | 190 | 5,463 |
Associates at equity value | 9,436 | 4,285 |
Participating equity at fair value through profit or loss | 102 | 85 |
Balance sheet value as at 31 December | 45,718 | 39,976 |
As part of its mission, Triodos Bank wishes sustainable banking to create more and more impact over the world. In this respect, Triodos Bank provides equity funding to like minded financial institutions in order to increase growth of the sustainable banking sector. No significant influence can be exercised on our participating interests. These investments are of a strategic nature and are not held for trading. The instruments classified as equities, being the participating interests, are designated to be accounted for at fair value though OCI. The instruments classified as debt, being the participating debt, are mandatorily designated to be accounted for at fair value through profit or loss.
The participating interests designated at fair value through OCI can be broken down as follows:
Amounts in thousands of EUR | 2022 | 2021 | |||||||
---|---|---|---|---|---|---|---|---|---|
| Participating interest | Carrying amount | Participating interest | Carrying amount | |||||
Participating interests designated at fair value through OCI |
|
|
|
| |||||
Amalgamated Bank, New York1 | 2.4% | 15,618 | 2.3% | 10,703 | |||||
Merkur Bank KGaA, Copenhagen1 | 3.6% | 3,127 | 6.1% | 3,203 | |||||
Cultura Bank Sparebank, Oslo1 | 1.2% | 95 | 1.2% | 100 | |||||
GLS Gemeinschaftsbank eG, Bochum1 | 1.5% | 10,050 | 1.6% | 10,050 | |||||
Banca Popolare Etica Scpa, Padova1 | 0.1% | 133 | 0.1% | 133 | |||||
Ekobanken Medlemsbank, Järna1 | 0.5% | 49 | 0.6% | 52 | |||||
Social Enterprise Finance Australia Limited, Sydney | 4.5% | 1 | 4.5% | 1 | |||||
Bpifrance Financement S.A., Maisons-Alfort. | 0.0% | 151 | 0.0% | 156 | |||||
Nederlandse Financieringsmaatschappij voor Ontwikkelingslanden N.V. (FMO), The Hague1 | 2.0% | 1,051 | 2.0% | 760 | |||||
Thrive Renewables Plc, Bristol | 5.4% | 3,605 | 6.0% | 3,465 | |||||
Transactie Monitoring Nederland B.V., Purmerend | 3.0% | 1,209 | 3.0% | 780 | |||||
La Société d’Investissement France Active (SIFA), Montreuil | 0.1% | 295 | 0.1% | 295 | |||||
Visa Inc, San Francisco1 | 0.0% | 506 | 0.0% | 345 | |||||
La Bolsa Social, plataforma de financiación participativa, S.A., Madrid | 4.7% | 100 | 4.7% | 100 | |||||
Balance sheet value as at 31 December |
| 35,990 |
| 30,143 | |||||
|
The participating debt at fair value through profit or loss can be broken down as follows:
Amounts in thousands of EUR | 2022 | 2021 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| Participating interest | Carrying amount | Participating interest | Carrying amount | |||||||
Participating debt at fair value through profit or loss |
|
|
|
| |||||||
Sustainability – Finance – Real Economies SICAV-SIF public limited liability company, Luxembourg1 | - | - | 12.8% | 5,112 | |||||||
Visa Inc, San Francisco2 | 0.0% | 190 | 0.0% | 351 | |||||||
Balance sheet value as at 31 December |
| 190 |
| 5,463 | |||||||
|
The associates at equity value can be broken down as follows:
Amounts in thousands of EUR | 2022 | 2021 | |||||||
---|---|---|---|---|---|---|---|---|---|
| Participating interest | Carrying amount | Participating interest | Carrying amount | |||||
Associates at equity value |
|
|
|
| |||||
Triodos Emerging Markets Renewable Energy Fund, Luxembourg | 12.3% | 4,211 | 16.8% | 4,285 | |||||
Triodos Microfinance Fund, Luxembourg1 | 1.4% | 5,225 | - | - | |||||
Balance sheet value as at 31 December |
| 9,436 |
| 4,285 | |||||
|
The movement of the participating interest designated at fair value through OCI is as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Balance sheet value as at 1 January | 30,143 | 26,673 |
Acquisitions | - | - |
Increase of capital | 594 | 691 |
Revaluation | 4,873 | 1,801 |
Repayment of capital | - | - |
Divestments | - | - |
Exchange rate differences | 380 | 978 |
Balance sheet value as at 31 December | 35,990 | 30,143 |
The movement of the participating debt at fair value through profit or loss is as follows:
Amounts in thousands of EUR | 2022 | 2021 | |||||||
---|---|---|---|---|---|---|---|---|---|
Balance sheet value as at 1 January | 5,463 | 4,461 | |||||||
Acquisitions | - | - | |||||||
Increase of capital | - | 16 | |||||||
Revaluation | -542 | 654 | |||||||
Repayment of capital | -156 | - | |||||||
Divestments | -5,2721 | - | |||||||
Exchange rate differences | 697 | 332 | |||||||
Balance sheet value as at 31 December | 190 | 5,463 | |||||||
|
When a new fund is originated, Triodos Investment Management may decide to provide seed capital to get the fund started. Depending on the fund and its needs, this may be an investment for less than one year or for a longer period. In 2021, the Triodos Emerging Markets Renewable Energy Fund was originated in which seed capital was invested. The investment classifies as an associate and is accounted for using the equity method.
The movement of the associates at equity value is as follows:
Amounts in thousands of EUR | 2022 | 2021 | |||||||
---|---|---|---|---|---|---|---|---|---|
Balance sheet value as at 1 January | 4,285 | - | |||||||
Acquisitions | 5,2721 | 4,320 | |||||||
Revaluation | -121 | -35 | |||||||
Sales | - | - | |||||||
Balance sheet value as at 31 December | 9,436 | 4,285 | |||||||
|
The movement of the participating equity at fair value through profit or loss is as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Balance sheet value as at 1 January | 85 | 80 |
Acquisitions | - | - |
Revaluation | 17 | 5 |
Sales | - | - |
Balance sheet value as at 31 December | 102 | 85 |
Accounting policy
Investment securities include participating interests in other financial institutions either in equity or debt form and it includes seed capital investments in own investment funds that are classified as associates. The participating interests in equity are designated at FVOCI as these are strategic long-term investments. The participating interest in debt form are measured at FVTPL as these do not meet the SPPI criteria. The participating interest in associates are measured using the equity method.
For securities that are listed on an active stock exchange, the fair value will be deemed to be equal to the most recently published stock exchange price. If the security is not listed on an active stock exchange or where there is no regular price quotation, the fair value will be determined to the best of one's ability using all available data, including an annual report audited by an external independent auditor, interim financial information from the institution and any other relevant data provided to Triodos Bank.
Unrealised and realised changes in the value of investment securities at FVOCI are recognised in the other comprehensive income and will not be recycled to profit or loss. Unrealised and realised changes in the value of investment securities at FVPL are recognised in the profit or loss.
Critical judgement and estimates
Triodos Bank determines the fair values of those financial instruments measured at FVOCI and FVTPL periodically which is a critical estimate. For more details on the measurement of fair values refer to Fair value of financial instruments .
Intangible assets
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Development costs for information systems | 49,369 | 46,104 |
Management contracts | 756 | 957 |
Computer software | 1,100 | 1,243 |
Balance sheet value as at 31 December | 51,225 | 48,304 |
The development costs for information systems
The development costs for information systems contain costs for internally developed intangible assets related to the Banks ICT systems in The Netherlands, Spain and Germany.
The movement in the development costs for the information systems is as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Purchase value as at 1 January | 81,816 | 69,830 |
Cumulative amortisation as at 1 January | -35,712 | -26,556 |
Balance sheet value as at 1 January | 46,104 | 43,274 |
Internal development | 16,449 | 13,889 |
Amortisation | -13,117 | -10,829 |
Impairments | - | -318 |
Exchange rate differences | -67 | 88 |
Balance sheet value as at 31 December | 49,369 | 46,104 |
|
|
|
Purchase value as at 31 December | 99,074 | 81,816 |
Cumulative amortisation as at 31 December | -49,705 | -35,712 |
Balance sheet value as at 31 December | 49,369 | 46,104 |
Management contracts
The management contracts relate to contracts for the management of funds by Triodos Investment Management. When it acquired its participating interest in Triodos Investment Management in 2006, Triodos Bank paid EUR 4 million for this to Stichting Triodos Holding. No impairment was recognised based on the remaining usefulness of the contracts.
The movement in management contracts is as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Purchase value as at 1 January | 4,030 | 4,030 |
Cumulative amortisation as at 1 January | -3,073 | -2,871 |
Balance sheet value as at 1 January | 957 | 1,159 |
Amortisation | -201 | -202 |
Balance sheet value as at 31 December | 756 | 957 |
|
|
|
Purchase value as at 31 December | 4,030 | 4,030 |
Cumulative amortisation as at 31 December | -3,274 | -3,073 |
Balance sheet value as at 31 December | 756 | 957 |
Computer software
Computer software relates to software that has been purchased. The movement in computer software is as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Purchase value as at 1 January | 4,088 | 3,903 |
Cumulative amortisation as at 1 January | -2,845 | -2,573 |
Balance sheet value as at 1 January | 1,243 | 1,330 |
Purchases | 453 | 583 |
Amortisation | -590 | -656 |
Impairments | - | -15 |
Exchange rate differences | -6 | 1 |
Balance sheet value as at 31 December | 1,100 | 1,243 |
|
|
|
Purchase value as at 31 December | 4,478 | 4,088 |
Cumulative amortisation as at 31 December | -3,378 | -2,845 |
Balance sheet value as at 31 December | 1,100 | 1,243 |
Accounting policy
Intangible assets are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to profit or loss over the asset's estimated economic life using the straight-line method that best reflect the pattern of economic benefits. These estimated useful economic lives are:
Internally developed assets: 5 to 10 years
Computer software: 3 to 5 years
Management contracts: 20 years
Direct costs relating to internally developed assets are capitalised once technical feasibility and economic viability have been established. These costs include co-worker costs and the costs of materials and services. Capitalisation of costs ceases when the asset is capable of operating as intended.
During and after development, accumulated costs are annually reviewed for impairment triggers. If there is an impairment trigger, any impairments will be recognised in the profit or loss in line with the impairment accounting policy for non-financial assets as included on page Impairment of non-financial assets.
The development costs for the banking system will be amortised over the estimated useful life from the moment the system is used, to a maximum of 10 years.
Management contracts paid by Triodos Bank when acquiring the participating interest in Triodos Investment Management B.V. will be written off over a period of 20 years till October 2026. The remaining depreciation period is four years as of the end of 2022.
Computer software that has been purchased will be written off over its useful life. This period will not exceed five years.
Property and equipment
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Property for own use | 68,905 | 71,516 |
Equipment | 19,786 | 23,148 |
Balance sheet value as at 31 December | 88,691 | 94,664 |
The movement in the property for own use is as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Purchase value as at 1 January | 80,297 | 79,196 |
Cumulative revaluation as at 1 January | -1,596 | -1,596 |
Cumulative depreciation as at 1 January | -7,185 | -5,063 |
Balance sheet as at 1 January | 71,516 | 72,537 |
Purchases | - | 212 |
Depreciation | -2,009 | -1,998 |
Impairments | - | - |
Exchange rate differences | -602 | 765 |
Balance sheet value as at 31 December | 68,905 | 71,516 |
|
|
|
Purchase value as at 31 December | 77,960 | 80,297 |
Cumulative revaluation as at 31 December | - | -1,596 |
Cumulative depreciation as at 31 December | -9,055 | -7,185 |
Balance sheet value as at 31 December | 68,905 | 71,516 |
The movement in equipment is as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Purchase value as at 1 January | 57,930 | 56,736 |
Cumulative depreciation as at 1 January | -34,782 | -27,783 |
Balance sheet value as at 1 January | 23,148 | 28,953 |
Purchases | 2,678 | 2,129 |
Sales | -4 | -113 |
Depreciation | -6,080 | -6,551 |
Impairments | 144 | -1,378 |
Exchange rate differences | -100 | 108 |
Balance sheet value as at 31 December | 19,786 | 23,148 |
|
|
|
Purchase value as at 31 December | 57,393 | 57,930 |
Cumulative depreciation as at 31 December | -37,607 | -34,782 |
Balance sheet value as at 31 December | 19,786 | 23,148 |
Fully depreciated equipment with a total purchase value of EUR 2.4 million (2021: EUR 1.4 million) has been disposed of.
Accounting policy
Items of property and equipment are stated at cost less accumulated depreciation and impairment losses.
Depreciation is charged to profit or loss on a straight-line basis so as to write-off the depreciable amount of each item of property and equipment over its estimated useful life. The depreciable amount is the cost of an asset less its residual value. Land for own use is not depreciated.
The estimated useful lives of Triodos Bank’s property and equipment are:
Property and leasehold property: 40 years (or lease term if shorter)
Machinery: 3 to 5 years
Furniture and fixtures: 5 years
The residual value and useful life of property and equipment are reviewed at each balance sheet date and updated for any changes to previous estimates.
Property under development is valued at the lower of the expenditure and the expected realised value upon completion. The expenditure consists of payments made to third parties. The difference between the proceeds on disposal of equipment and net carrying value is recognised in the profit or loss account under Other income.
Property and equipment are annually reviewed for impairment triggers. If there is an impairment trigger, any impairments will be recognised in the profit or loss accounts in line with the impairment accounting policy for fixed assets as included on page Impairment of non-financial assets.
Critical judgement and estimates
In December 2019 Triodos Bank moved in the Netherlands to the newly developed office building de Reehorst. The innovative design is based on principles of the circular economy and biomimicry. The design and production of materials are based on the structure derived from nature. The building is re-mountable and modular, built with sustainable and reusable materials.
Within common accounting policies the residual value of owned offices is set at zero as information on residual value is lacking. Because this building is circular and set up to have value in the future, Triodos Bank has investigated the residual value. This was captured in a report from a third party circular demolishing company, in which the value of several re-useable components has been calculated. The value is achieved if the components are remounted as a whole in a new building, considering costs for removing. Based on this report Triodos Bank currently estimated the residual value of de Reehorst at EUR 3.0 million.
The residual value gets its value from the market in which components from the building can be reused. At this moment in time this market is in development and new building initiatives using re-useable materials as a starting point are few. Developments on these fronts and other changes (e.g. CO2-tax) can impact the residual value of de Reehorst in the future.
Investment property
Triodos Bank sometimes repossesses assets which come from acquisition in public auctions. These assets are collaterals of an executed loan. A part of the repossessed assets however will not be sold immediately because Triodos Bank has opted to add value by renting out these assets and are therefore presented as investment property.
The movement in the investment property is as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Acquisition value as at 1 January | 10,463 | 12,788 |
Cumulative depreciation as at 1 January | -2,558 | -1,874 |
Balance sheet as at 1 January | 7,905 | 10,914 |
New foreclosed assets | 35 | - |
Sales | -1,037 | -1,874 |
Depreciation | -164 | -239 |
Impairments | - | -896 |
Balance sheet value as at 31 December | 6,739 | 7,905 |
|
|
|
Purchase value as at 31 December | 8,699 | 10,463 |
Cumulative depreciation as at 31 December | -1,960 | -2,558 |
Balance sheet value as at 31 December | 6,739 | 7,905 |
Leases as lessor
Triodos Bank leases out its investment properties for the purpose of adding value to the repossessed assets. Triodos Bank has recognised the following items in the profit or loss account.
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Rental income | 70 | 183 |
Operating expenses | -238 | -499 |
Total result on investment properties | -168 | -316 |
Accounting policy
Investment properties comprise land and buildings that are not occupied for use by, or in the operations of Triodos Bank, nor for sale in the ordinary course of business, but are held primarily to earn rental income and/or for capital appreciation. Investment property is initially measured at cost and subsequently stated at cost less accumulated depreciation and impairment losses. Depreciation is determined in accordance with the accounting principles as stated in note 7 Property and equipment. Investment property are annually reviewed for impairment triggers. If there is an impairment trigger, any impairments will be recognised in the profit or loss accounts in line with the impairment accounting policy for fixed assets as included on page Impairment of non-financial assets.
Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
Transfers are made to (or from) investment property only when there is a change in use. When the use of a property changes such that it is reclassified as property and equipment, its carrying value at the date of reclassification becomes its cost for subsequent accounting.
Leases
Triodos Bank leases many assets including land and buildings, vehicles, and IT equipment. Information about leases for which Triodos Bank is a lessee is presented below.
Right-of-use assets
| 2022 | 2021 | ||||||
---|---|---|---|---|---|---|---|---|
Amounts in thousands of EUR | Property | Vehicles | Other | Total | Property | Vehicles | Other | Total |
Balance sheet value as at 1 January | 15,095 | 1,258 | 381 | 16,734 | 17,538 | 1,360 | 448 | 19,346 |
Depreciation | -2,460 | -700 | -55 | -3,215 | -2,537 | -748 | -67 | -3,352 |
Additions | 1,613 | 349 | 318 | 2,280 | 173 | 736 | - | 909 |
Exchange rate differences | -65 | - | - | -65 | 93 | - | - | 93 |
Disposals | -2,187 | - | -220 | -2,407 | -172 | -90 | - | -262 |
Balance sheet value as at 31 December | 11,996 | 907 | 424 | 13,327 | 15,095 | 1,258 | 381 | 16,734 |
Lease liabilities
| 2022 | 2021 | ||||||
---|---|---|---|---|---|---|---|---|
Amounts in thousands of EUR | Property | Vehicles | Other | Total | Property | Vehicles | Other | Total |
Less than one year | 2,250 | 733 | 56 | 3,039 | 2,381 | 891 | 72 | 3,344 |
More than one year | 10,333 | 180 | 372 | 10,885 | 13,397 | 369 | 315 | 14,081 |
Balance sheet value as at 31 December | 12,583 | 913 | 428 | 13,924 | 15,778 | 1,260 | 387 | 17,425 |
The below table shows the maturity analysis for contractual undiscounted cash flows.
| 2022 | 2021 | ||||||
---|---|---|---|---|---|---|---|---|
Amounts in thousands of EUR | Property | Vehicles | Other | Total | Property | Vehicles | Other | Total |
Less than one year | 2,454 | 490 | 56 | 3,000 | 2,772 | 630 | 72 | 3,474 |
One to five years | 5,514 | 421 | 372 | 6,307 | 7,351 | 670 | 211 | 8,232 |
More than five years | 5,557 | - | - | 5,557 | 9,843 | - | 134 | 9,977 |
Undiscounted lease liabilities as at 31 December | 13,525 | 911 | 428 | 14,864 | 19,966 | 1,300 | 417 | 21,683 |
Amounts recognised in profit or loss
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Depreciation | -3,214 | -3,352 |
Interest on lease liabilities | -345 | -408 |
Expenses of short-term leases | -25 | -46 |
Expenses of low-value assets | -20 | -5 |
Sub-lease income | 48 | 48 |
Amounts recognised in the statement of cash flows
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Total cash outflow for leases | 3,443 | 3,675 |
Real estate leases
Triodos Bank leases land and buildings for its office space. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term. Some leases provide for additional rent payments that are based on changes in local price indices.
Other leases
Triodos Bank leases vehicles and equipment, with lease terms of generally three to five years. Triodos Bank also leases IT equipment with contract terms of generally one to three years. Leases with a contract term of less than one year and/or a value of less than EUR 5 thousand or EUR equivalent are considered short-term and/or leases of low-value items.
Triodos Bank has elected not to recognise right-of-use assets and lease liabilities for short-term and low-value leases.
Accounting policy
As a lessee
Triodos Bank assesses whether a contract is or contains a lease, at inception of a contract. Triodos Bank recognises a right of use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, Triodos Bank recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, Triodos Bank uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
Fixed lease payments (including in-substance fixed payments), less any lease incentives;
Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
The amount expected to be payable by the lessee under residual value guarantees;
The exercise price of purchase options, if the lessee is reasonably certain to exercise the options;
Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease; and
Lease payments to be made under reasonably certain extension options.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
Triodos Bank remeasures the lease liability (and makes a corresponding adjustment to the related right of use asset) whenever:
The lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;
The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change due to a change in a floating interest rate, in which case a revised discount rate is used);
A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
The right of use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. The right of use assets are annually reviewed for impairment triggers. If there is an impairment trigger, any impairments will be recognised in the profit or loss accounts in line with the impairment accounting policy for non-financial assets as included on page Impairment of non-financial assets.
Whenever Triodos Bank incurs an obligation for costs to restore a leased asset to the condition required by the terms and conditions of the lease, a provision is recognised.
Right of use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that Triodos Bank expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The periodic impact in the profit or loss accounts are the depreciation charges on the right of use assets and the interest charges on the lease liability.
Triodos Bank elected to use the recognition exemption for lease contracts that, at the commencement date, have a lease term of 12 months or less (‘short term leases’), and lease contracts for which the underlying asset is of low value (‘low value assets’). Payments associated with short term leases and leases of low value assets are recognised on a straight line basis as an expense in the consolidated statement of profit or loss.
As a lessor
Triodos Bank enters into lease agreements as a lessor with respect to some of its office space.
Leases for which Triodos Bank is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases. Triodos Bank does not act as a lessor for any finance leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
When a contract includes lease and non-lease components, Triodos Bank allocates the consideration under the contract to each component.
Judgement and estimate
The lease liabilities are initially measured at the present value of the future lease payments, discounted at the lessee's incremental borrowing rate (IBR) given that the interest rate implicit in the lease cannot be readily determined. The IBR is the rate of interest that Triodos Bank would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what Triodos Bank ‘would have to pay’, which requires estimation and inherently involves significant judgement when no observable rates are available. Triodos Bank estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific adjustments (such as Triodos Bank's stand-alone credit rating).
Non-trading derivatives
Additional hedge accounting disclosures are part of the financial risk management paragraph, please see note Non-trading derivatives and hedge accounting for additional information.
As part of the interest rate risk management, Triodos Bank entered into interest rate swaps to hedge the interest risk on fixed interest rate loans. The fair value of the interest rate swaps with a positive value at the end of the year is represented on the asset side of the balance sheet and the interest rate swaps with a negative value on the liability side. Breakdown of derivatives by remaining term to maturity and fair value is presented below:
Non-trading derivative assets
2022 | Notional amount | Fair value | |||
---|---|---|---|---|---|
Amounts in thousands of EUR | Total | <= 1 year | > 1 year <= 5 years | > 5 years | |
Over-the-Counter (OTC) currency contracts: |
|
|
|
|
|
Forwards | 227,721 | 227,721 | - | - | 5,011 |
Non deliverable forwards | 1,418 | 1,418 | - | - | 375 |
|
|
|
|
|
|
OTC interest rate contracts: |
|
|
|
|
|
Interest rate swaps (hedge accounting only) | 1,415,600 | 36,000 | 84,600 | 1,295,000 | 290,310 |
Total derivatives | 1,644,739 | 265,139 | 84,600 | 1,295,000 | 295,696 |
Average IRS rates: |
| 0.27% | 0.34% | 0.74% |
|
2021 | Notional amount | Fair value | |||
---|---|---|---|---|---|
Amounts in thousands of EUR | Total | <= 1 year | > 1 year <= 5 years | > 5 years | |
OTC currency contracts: |
|
|
|
|
|
Forwards | 5,277 | - | 5,277 | - | 554 |
Non deliverable forwards | 4,453 | 2,969 | 1,484 | - | 1,113 |
|
|
|
|
|
|
OTC interest rate contracts: |
|
|
|
|
|
Interest rate swaps (hedge accounting only) | 868,500 | - | 7,500 | 861,000 | 17,983 |
Total derivatives | 878,230 | 2,969 | 14,261 | 861,000 | 19,650 |
Average IRS rates: |
| n/a | -0.40% | 0.16% |
|
Triodos Bank applies macro fair value hedge accounting, in which the interest rate swaps (IRS) are the hedging instruments. Triodos Bank only enters into these contracts for the purpose of hedging the interest rate risk, no derivatives are used for trading purposes. In 2022, Triodos Bank entered into additional interest rate swaps to further mitigate the interest rate risk. See page Market risk management for further information on interest rate risk for Triodos Bank.
In order to hedge the currency risk of the investment funds of Triodos Investment Management, Triodos Bank entered into non-deliverable currency contracts with third parties and entered into back-to-back non-deliverable currency contracts with the investment funds, including a small margin. As the investment funds are not consolidated, the notional amounts of the long and short position are the same. In 2017, Triodos Bank stopped entering into new currency contract with for the investment funds due to new regulation.
Non-trading derivative liabilities
2022 | Notional amount | Fair value | |||
---|---|---|---|---|---|
Amounts in thousands of EUR | Total | <= 1 year | > 1 year <= 5 years | > 5 years | |
OTC currency contracts: |
|
|
|
|
|
Forwards | 5,605 | 5,605 | - | - | 879 |
Non deliverable forwards | 1,418 | 1,418 | - | - | 370 |
|
|
|
|
|
|
OTC interest rate contracts: |
|
|
|
|
|
Interest rate swaps (hedge accounting only) | - | - | - | - | - |
Total derivatives | 7,023 | 7,023 | - | - | 1,249 |
Average IRS rates: |
| n/a | n/a | n/a |
|
2021 | Notional amount | Fair value | |||
---|---|---|---|---|---|
Amounts in thousands of EUR | Total | <= 1 year | > 1 year <= 5 years | > 5 years | |
OTC currency contracts: |
|
|
|
|
|
Forwards | 226,720 | 221,443 | 5,277 | - | 3,113 |
Non deliverable forwards | 4,453 | 2,969 | 1,484 | - | 1,077 |
|
|
|
|
|
|
OTC interest rate contracts: |
|
|
|
|
|
Interest rate swaps (hedge accounting only) | 233,900 | 124,000 | 102,700 | 7,200 | 2,757 |
Total derivatives | 465,073 | 348,412 | 109,461 | 7,200 | 6,947 |
Average IRS rates: |
| 0.12% | 0.46% | 0.47% |
|
The forward currency contracts relates mainly to GBP contracts that Triodos Bank entered for a notional amount of EUR 222.1 million (2021: EUR 221.4 million) for hedging the currency risk of the UK subsidiary equity participation of Triodos Bank. The forward currency contracts relating to GBP contracts are classified in 2022 as a non-trading derivative asset because the fair value is positive. These contracts are classified in 2021 as a non-trading derivative liability because the fair value was negative in that year.
Accounting policy
Derivative financial instruments, consisting of foreign currency forward contracts and interest rate swaps, are initially recognised at fair value, with subsequent fair value movements recognised in profit or loss. Triodos Bank uses interest rate swaps and foreign exchange forwards as derivatives for hedging purposes. Fair values of interest rate swaps are determined by discounted cash flows against prevailing market interest rates. Foreign exchange forwards fair values are determined by the movement of the foreign exchange rate. Changes in the fair value are included in the profit or loss account.
The effective portion of fair value movements of those derivatives in a cash flow or net investment hedge relationship are recognised in OCI and recycled to the profit or loss when the related result on the hedged item is recognised in profit or loss.
Hedge Accounting
Triodos Bank elected, as a policy choice permitted by IFRS 9, to continue to apply hedge accounting in accordance with IAS 39. Triodos Bank designates certain derivatives held for risk management as well as certain non-trading derivative financial instruments as hedging instruments in qualifying hedging relationships. On initial designation of the hedge, Triodos Bank formally documents the relationship between the hedging instruments and hedged items, including the risk management objective and strategy in undertaking the hedge, together with the method that will be used to assess the effectiveness of the hedging relationship. Triodos Bank makes an assessment, both on inception of the hedging relationship and on an ongoing basis, of whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within the effective range. A hedge is regarded as highly effective if the changes in fair value or cash flows attributable to the hedged risk of the hedging instrument and the hedged item during the period for which the hedge is designated, are expected to offset in a range of 80% to 125%.
Triodos Bank uses derivatives (principally interest rate swaps) for economic hedging purposes in the management of its asset and liability portfolios. The objective of economic hedging is to enter into positions with an opposite risk profile to an identified exposure to reduce that risk exposure. In addition to economic hedging, Triodos Bank also applies hedge accounting. The hedge accounting types are discussed below. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to profit or loss over the period to maturity using a recalculated effective interest rate. If the hedged item is derecognised, any remaining adjustment to the carrying amount is recognised as part of the derecognition gain/loss.
Fair value hedges
Triodos Bank applies macro fair value hedge accounting to the hedges that are in place to hedge the changes in fair value due to changes in interest rates of its longer term fixed-rate financial assets. Under this hedging strategy, interest rates swaps are designated as hedging instruments, which are in an economic hedge relationship with a portfolio of loans and mortgages as hedged item to cover the fair value risk due to changes interest rate. For additional information on the hedge relationship, refer to Non-trading derivatives and hedge accounting .
Net investment hedge of a foreign operation
Triodos Bank hedges its net investment in Triodos Bank UK Limited, its subsidiary in the United Kingdom. The hedged risk is the foreign currency exposure arising from the net investment. Triodos Bank designates the hedged risk as the risk of the GBP spot changes against the Euro, in order to reduce fluctuations in the value of the net investment in its subsidiaries due to movements in the GBP exchange rate. Triodos Bank makes use of foreign exchange forward contracts to hedge this risk. The derivatives are recorded at fair value on the balance sheet.
The fair value movements of these contracts are determined by the changes in spot foreign exchange rate, and the basis spread. The basis spread is the difference between the spot and forward rate in the contract. Triodos Bank elects to use the cost of hedging method for changes in the basis spread and records these in a separate component within equity. The spot rate changes are, together with the changes in the hedge risk, recognised in the translation reserve through OCI. Any ineffective portion of the changes in the fair value of the derivative is recognised immediately in profit or loss. The amount recognised in OCI is fully or partially reclassified to profit or loss as a reclassification adjustment on disposal or partial disposal of the foreign operation, respectively.
Critical judgement and estimates
Triodos Bank determines the fair values of those financial instruments measured at FVOCI and FVTPL periodically which is a critical estimate. For more details on the measurement of fair values refer to Fair value of financial instruments .
Other assets
The balance sheet value of the other assets as at 31 December can be broken down as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Receivable regarding the deposit guarantee scheme | 2,700 | 2,700 |
Other prepayments and accrued income | 36,782 | 35,558 |
Other | 16,759 | 17,226 |
Allowance for ECL | -488 | -1,119 |
Balance sheet value as at 31 December | 55,753 | 54,365 |
The other assets fall due within one year for an amount of EUR 40 million (2021: EUR 46 million).
Accounting policy
Other assets are recognised initially at fair value and subsequently measured at amortised cost.
Critical judgement and estimates
Triodos Bank determines the ECL which is a critical estimate and includes critical judgements. For more details on the critical judgement and estimate of ECL, refer to Financial instruments .
Non-current Assets Held for Sale
The balance sheet value of the assets held-for-sale as at 31 December can be broken down as follows:
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Repossessed assets | 4,750 | 6,544 |
Own property held for sale | - | 6,135 |
Shares in investment funds held for sale | 832 | - |
Balance sheet value as at 31 December | 5,582 | 12,679 |
Triodos Bank can acquire the collateral under non performing loans. All assets acquired are real estate. It is the intention of Triodos Bank to dispose of these assets as they are not part of the primary business of the Bank. If permitted by the underlying contracts of the acquired assets, these assets are presented as real estate for sale, using a realtor.
The sale of own property held for sale has been finalised in May 2022.
Triodos Investment Management has provided seed capital to a new investment fund in March 2022 to improve the product offering and with the intention to exit within a year.
Amounts in thousands of EUR | 2022 | 2021 |
---|---|---|
Cumulative impairments on assets held for sale | -928 | -762 |
Total for the year | -928 | -762 |
Accounting policy
A non-current asset is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. The condition for such classification is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition.
Non-current assets classified as held for sale are initially measured as the lower of;
Carrying amount; and
Fair value less costs to sell.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.