Binck Bank

Notes to the consolidated income statement

44. Financial risks

In the conduct of its operations BinckBank faces a variety of risks. BinckBank aims to minimise the risk profile so

that the impact of unexpected events on both profits and equity is limited. BinckBank devotes considerable

attention to risk management and employs risk management systems. Adequate control measures, reporting

systems and information systems incorporating limits are part of the risk management process. The

identification of risks and the creation and updating of appropriate control measures constitute an ongoing

process within BinckBank. The section on risk management under the notes on Basel II and Pillar III on page 32

of the directors' report describes the risks and control measures relevant to BinckBank.

Credit risk

Credit risk is the risk that a party trading a financial instrument and/or the issuer of the instrument will fail to

discharge an obligation relating to the instrument and consequently cause BinckBank to incur a financial loss.

This credit risk is relevant to the items in the balance sheet included under the headings of banks, financial

assets (including lending against securities) and other assets. With respect to these balance sheet items, the

main concern is the credit rating of the counterparty (except in the case of lending against securities, since

these loans are fully covered by the securities furnished as collateral).

Maximum credit risk

The table below presents the maximum credit risk associated with the various financial instruments. The

maximum credit risk is shown gross, without taking account of the effects of credit risk mitigation provided by

set-off agreements and the collateral that has been furnished.

2008

2007

x € 1,000

Credit Risk

Cash and balances with central banks

39,289

9,522

Due from Banks

244,412

422,028

Financial assets held for trading

Financial assets designated at fair value through the income

statement

37,033

268,617

Available-for-sale financial assets

1,298,233

8,117

Loans and receivables

227,725

497,762

Held-to-maturity investments

12,558

623,498

Associates

1,200

Other assets

9,311

7,689

Prepayments and accrued income

35,774

23,659

1,905,535

1,860,955

Contingent liabilities

3,086

2,423

1,908,621

1,863,378

The tables below present the quality of the loans and advances

and the provision for bad debts.

Not yet due

227,168

497,207

Overdue but not provided for

557

555

Provided for

477

1,105

Total

228,202

498,867

Bad debt provision

(477)

(1,105)

Net loans and receivables

227,725

497,762

The analysis of loans and receivables according to the percentage

covered by the value of the collateral is as follows:

< 25% of the value of the collateral

37,596

Between 25% and 50% of the value of the collateral

97,559

Between 50% and 75% of the value of the collateral

88,601

> 75% of the value of the collateral

4,446

Specific bad debt provision

(477)

227,725

There are no items in arrears or for which provisions have been

recognised in any of the other categories of financial assets.

Loans and receivables under renewed contracts

173

In the case of existing loans and receivables, it is possible for

renewed contracts to be concluded with clients. Such assets are no

longer treated as overdue or bad debts. The new contracts are,

however, periodically assessed for compliance and to determine

whether future payment is probable.

Loans and receivables under renewed contracts

173

Top of the page

Sector concentration risk

The following table presents the credit risk, analysed by sector.

Private

Other

2008

Financial

Government

Total

individuals

private

institutions

bonds/

Government

sector

guaranteed

bonds

Cash and balances at central banks

39,289

Banks

244,412

Financial assets held for trading

Financial assets at

fair value through profit or loss

37,033

Available-for-sale financial assets

645,652

652,581

1,298,233

Loans and receivables

227,725

Held-to-maturity investments

12,558

Investments in associates

1,200

Current tax assets

4,623

Deferred tax assets

5,980

Other assets

9,311

Prepayments and accrued income

15,675

11,151

3,718

5,230

35,774

942,772

726,182

231,443

15,741

1,916,138

Contingent liabilities

2,521

565

3,086

942,772

726,182

233,964

16,306

1,919,224

Private

Other

2007

Financial

Government

Total

individuals

private

institutions

bonds/

Government

sector

guaranteed

bonds

Cash and balances at central banks

9,522

Banks

422,028

Financial assets held for trading

Financial assets at

fair value through profit or loss

144,629

123,988

268,617

Available-for-sale financial assets

8,117

Loans and receivables

5,000

492,762

497,762

Held-to-maturity investments

7,025

616,473

623,498

Investments in associates

Current tax assets

7,396

Deferred tax assets

6,843

Other assets

7,689

Prepayments and accrued income

3,676

1,988

11,409

6,586

23,659

585,475

771,210

504,171

14,338

1,875,194

Contingent liabilities

2,423

585,475

771,210

506,594

14,338

1,877,617

Credit rating of interest-bearing securities

Assessment of the creditworthiness of the investments in securities is based on credit ratings provided by rating

agencies.

The following table analyses the interest-bearing securities based on their Fitch rating or equivalent.

Top of the page

2008

AAA

AA -

A+

A-

Total

Financial assets at fair value through

profit or loss

37,033

Available-for-sale financial assets

1,154,808

21,781

66,343

51,479

1,822

2,000

1,298,233

Held-to-maturity investments

12,558

Total

1,204,399

21,781

66,343

51,479

1,822

2,000

1,347,824

2007

AAA

AA -

A+

A-

Total

Financial assets at fair value through

profit or loss

258,631

9,986

268,617

Available-for-sale financial assets

4,934

3,183

8,117

Held-to-maturity investments

616,473

7,025

623,498

Total

875,104

9,986

11,959

3,183

900,232

Market risk

The only market risk to which BinckBank is exposed is currency risk. This is the risk of fluctuations in the value of

items denominated in foreign currencies due to exchange rate movements. BinckBank does not assume active

trading positions. Currency positions arising in the course of operations are normally hedged on the day on which

they become known. The way in which the system currently operates within BinckBank N.V. means that currency

positions resulting from client transactions are not shown until one working day later. The currency risk on these

positions during this delay of one working day is regarded as an acceptable business risk. Finally, the translation

risk on investments is not normally hedged.

Interest rate risk

Interest rate risk refers to the exposure to movements in the yield curve affecting future profitability. BinckBank

manages this risk in relation to its banking operations by actively matching the maturities of its assets and

liabilities within certain limits.

BinckBank has an investment portfolio made up of fixed-income securities (both held-to-maturity investments

and available-for-sale investments). The actual investments in the portfolio are selected by the Management

Board. The portfolio is susceptible to gains and losses due to movements in the yield curve and the

creditworthiness of the institutions issuing the bonds. BinckBank invests chiefly in bonds issued by central

governments, central banks, regional governments where the loans are central government-guaranteed and credit

institutions.

Top of the page

The following tables present BinckBank's interest rate mix:

2008

< 1 month

> 1 month

> 1 year

> 2 years

> 5 years

Total

x € 1,000

< 1 year

< 2 years

< 5 years

Assets

Cash and balances with central banks

39.283

Banks

244.412

Financial assets held for trading

Financial assets at fair value through

profit or loss

37.033

Available-for-sale financial assets

50.370

546.716

485.027

212.297

3.823

1.298.233

Loans and receivables

227.725

Held-to-maturity investments

4.080

4.228

4.250

12.558

Investments in associates

1.200

Total assets

561.790

550.796

526.288

217.747

3.823 1.860.444

Liabilities

Customer deposits

1.747.699

Financial liabilities measured at

amortised cost

Total liabilities

1.747.699

- 1.747.699

2007

< 1 month

> 1 month

> 1 year

> 2 years

> 5 years

Total

x € 1,000

< 1 year

< 2 years

< 5 years

Assets

Cash and balances with central banks

9,516

Banks

422,028

Financial assets held for trading

Financial assets at fair value through

profit or loss

34,093

105,001

64,159

65,365

268,618

Available-for-sale financial assets

8,117

Loans and receivables

492,762

5,000

497,762

Held-to-maturity investments

599,598

11,179

4,101

8,620

623,498

Total assets

1,557,997

121,180

68,260

73,985

8,117

1,829,539

Liabilities

Customer deposits

1,772,822

Financial liabilities measured at

amortised cost

1,080

Total liabilities

1,772,822

1,080

1,773,902

An increase in interest rates of one percentage point would have the effect of reducing the profit and equity by €

18.3 million. A decrease in interest rates of one percentage point would produce an increase of € 18.3 million.

None of the other items in a balance sheet presented in accordance with IFRS would be materially affected.

The effective interest rate on the portfolio of fixed-income investments classified as available for sale is 4.6%. The

effective interest rate on loans and receivables is 6.0% and 4.0% on held to maturity assets.

Liquidity risk

The liquidity risk is the risk that cash and investments will not be available (or will not be available in sufficient

quantities) for BinckBank to meet its obligations in the short term.

The matching or otherwise of maturities of assets and liabilities is of fundamental importance to BinckBank. It is

unusual for banks to achieve complete maturity matching of assets and liabilities because transactions are

frequently not predictable and are also extremely diverse in nature. The maturities of assets and liabilities and

the scope for replacing interest-bearing liabilities as and when they mature in an economically acceptable

manner are important factors in the assessment of the bank's liquidity and the extent to which the bank is

exposed to movements in interest rates and exchange rates.

Top of the page

The following table presents the maturity calendar of the assets and liabilities as at balance sheet date. Classed

as being available on demand are those securities which can be traded on an active market. Also treated as being

available on demand are assets maturing within two weeks. Depending on the liquidity in the market the value of

the financial assets that can be claimed immediately can differentiate from book value.

Maturity calendar

< 3 months

> 3 months

> 1 year

> 5 years

Total

as at 31 December 2008

demand

< 1 year

< 5 years

Cash and balances with central banks

39,289

Banks

179,412

65,000

244,412

Financial assets held for trading

Financial assets at fair value through

profit or loss

37,033

Available-for-sale financial assets

1,298,233

Loans and receivables

227,725

Held-to-maturity financial assets

4,080

8,478

12,558

Investments in associates

1,200

Current tax assets

4,623

Deferred tax assets

2,148

3,832

5,980

Other assets

9,311

Prepayments and accrued income

35,774

Total assets

1,822,089

74,311

6,228

13,510

1,916,138

Customer deposits

1,747,699

Financial liabilities at amortised cost

Current tax liabilities

Deferred tax liabilities

3,031

1,413

3,672

8,116

Other liabilities

48,069

Accruals and deferred income

23,350

Total liabilities

1,819,118

3,031

1,413

3,672

1,827,234

Liquidity surplus/(deficit)

2,971

74,311

3,197

12,097

(3,672)

88,904

Maturity calendar

< 3 months

> 3 months

> 1 year

> 5 years

Total

as at 31 December 2007

demand

< 1 year

< 5 years

Cash and balances with central banks

9,522

Banks

422,028

Financial assets held for trading

Financial assets at fair value through

profit or loss

268,617

Available-for-sale financial assets

8,117

Loans and receivables

492,762

5,000

497,762

Held-to-maturity financial assets

599,599

11,178

12,721

623,498

Current tax assets

7,396

Deferred tax assets

347

1,041

5,455

6,843

Other assets

100

7,589

7,689

Prepayments and accrued income

23,659

Total assets

1,831,863

7,936

17,219

18,176

1,875,194

Customer deposits

1,772,822

Financial liabilities at amortised cost

1,080

Current tax liabilities

217

Deferred tax liabilities

Other liabilities

31,454

Accruals and deferred income

22,152

Outtrade rekeningen

Total liabilities

1,827,807

Liquidity surplus/(deficit)

4,056

7,936

17,219

18,176

47,387

Derivative positions held on behalf of clients

(note 22)

The cash flows in respect of premiums received and paid relating to derivative positions held on behalf of clients

have already been accounted for in the financial statements. Exercise of contracts giving rise to positions

assumed by clients can lead to future cash flows which BinckBank is unable to predict.

Top of the page

Annual report 2008