MINISTRY
OF FINANCE
AND CIVIL SERVICE
COMPTROLLER GENERAL OF
THE STATE ADMINISTRATION
AUDIT OF ANNUAL ACCOUNTS
ICO - INSTITUTO DE CRÉDITO
OFICIAL
2024 Audit Plan -
Financial Year 2023
AUDInet Code 2024/56
PUBLIC AUDIT DIVISION I
Free translation of the auditor’s report originally issued in Spanish. In the event of a discrepancy, the Spanish-
language version prevails.
ANNUAL ACCOUNTS AUDIT. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2024 AUDIT PLAN
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TABLE OF CONTENTS
I.
OPINION
II.
BASIS FOR OPINION
III.
KEY AUDIT MATTERS
IV.
OTHER MATTER PARAGRAPH
V.
OTHER INFORMATION
VI.
MANAGEMENT’S RESPONSIBILITY FOR THE ANNUAL ACCOUNTS
VII.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE ANNUAL ACCOUNTS
ANNUAL ACCOUNTS AUDIT. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2024 AUDIT PLAN
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AUDITOR’S REPORT OF ANNUAL ACCOUNTS ISSUED BY THE COMPTROLLER
GENERAL OF THE STATE ADMINISTRATION (IGAE)
To the Chairman of the General Council of the Instituto de Crédito Oficial:
Opinion
The Comptroller General of the State Administration, using the powers conferred upon it by article
168 of Law 47/2003, of 26 November, the General Budget Law, has audited the annual accounts
of Instituto de Crédito Oficial (hereinafter, the Institute or the Entity), which comprise the balance
sheet as at December 31, 2023, the profit and loss account, the statement of changes in equity,
the cash flow statement and the notes thereto for the year then ended.
In our opinion, the accompanying financial statements present fairly, in all material respects, the
equity and financial position of the Institute, and of its results and cash flows for the year then
ended, in accordance with the financial reporting framework applicable to the Entity (identified in
note 1.2 to the financial statements) and, in particular, with the accounting principles and policies
set forth therein.
Basis for opinion
We conducted our audit in accordance with audit regulations that apply to the Public Sector in
Spain. Our responsibilities in accordance with these regulations are further described below in the
Auditor’s responsibilities for the audit of annual accounts section of our report.
We are independent of the entity in accordance with ethical and independence protection
requirements that apply to our audit of the annual accounts for the Public Sector in Spain, as
required by the regulations governing the audit activity of the Public Sector.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the annual accounts of the current period. These matters were addressed in the
context of our audit of the annual accounts as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on those matters.
Estimated impairment losses of the portfolio of loans and advances
The impairment estimate of Financial Assets at Amortised Cost is one of the most significant
estimates in preparing the accompanying annual accounts.
In order to estimate credit risk allowances, the provisions of Circular 4/2017, of 27 November, and
other mandatory rules approved by the Bank of Spain are taken into consideration.
ANNUAL ACCOUNTS AUDIT. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2024 AUDIT PLAN
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In general, the Institute estimates objective evidence of impairment when, after initial recognition,
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 those 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 principal and interest amounts, the type
of instrument, the debtor’s sector of activity, the type of collateral and the ageing of past due
amounts, among others.
The main audit procedures carried out have included the following:
•
Verifying the different internal control policies and procedures established in accordance
with applicable regulatory requirements.
•
Examining the different databases used, reviewing their reliability and the consistency of
data sources used in calculations.
•
For the detailed tests, for a sample of individualised loans, reviewing their proper accounting
records and classification, and, where applicable, the corresponding impairment.
•
Recalculating the provisions for loans classified as Normal risk or Normal risk under Special
Surveillance, valued on the basis of alternative solutions established in the Bank of Spain Circular.
Valuation criteria used and the detail of information relating to the aforementioned items are
included in notes 2 and 10 of the accompanying 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 internal control assessment.
In this context, it is considered necessary to assess the effectiveness of General Controls over
internal control on Information Technology Systems, regarding processes supporting the Institute’s
accounting registration and closing, in collaboration with our internal information systems
specialists.
Our audit approach has included the following procedures:
-
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,
reviewing the following:
•
Change management.
•
Logical access
•
IT Systems Operations.
-
Review of the existing interfaces between the main applications in the accounting reporting
process.
-
Analysis of the manual journal entry generation process, and selective testing of extraction and
filtering of unusual entries in the financial information systems.
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The results of procedures have provided us with sufficient and adequate evidence to consider that
our conclusion on these facts as a key matter is appropriate.
Other matter paragraph
The audit firm Mazars Auditores, S.L.P. by virtue of the contract entered into 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 has applied the Technical Standard for relations with auditors in the public sector of
December 30, 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 Auditing, has issued, on April 11, 2024, another auditor’s
report on the annual accounts of the Institute, applying audit regulations 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 auditor’s 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 ESEF Regulation.
Other information
The other information includes the management report 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 are not an integral part of the annual accounts.
Our auditor’s opinion on the annual accounts does not cover this other information. Our
responsibility in relation to the other information, in accordance with the requirements of audit
regulations, is to assess and report the consistency of the other information with the annual
accounts, based on the understanding obtained on the entity, while auditing the aforementioned
accounts, and excluding information other than that obtained as evidence during the audit. In
addition, our responsibility is to assess and report whether the content and presentation of this
other information are compliant with applicable regulations.
ANNUAL ACCOUNTS AUDIT. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2024 AUDIT PLAN
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If, based on the work that we have performed, we conclude that a material misstatement exists,
we are required to report this fact.
On the basis of the work done, as described in the previous paragraph, we have nothing to report
regarding the other information. The information it contains is in line with the annual accounts for
the 2023 financial year, and its content and presentation comply with applicable standards.
Management’s responsibility for the annual accounts
The Institute’s Chairman is responsible for the preparation of the accompanying annual accounts,
such that they fairly present the entity’s equity, financial position and results, in accordance with
the financial reporting framework applicable to the Institute in Spain, and for such internal control
as they determine is necessary to enable the preparation of annual accounts free from material
misstatement, whether due to fraud or error.
In preparing the annual accounts, the management committee is responsible for assessing the
Institute’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis, unless the management committee either intends or
has a legal obligation to liquidate the entity or cease operations, or has no realistic alternative.
Auditor’s responsibilities for the audit of the annual accounts
Our objectives are to obtain reasonable assurance about whether the annual accounts as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with audit regulations for the Public Sector in Spain will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence users’
economic decisions taken on the basis of the annual accounts.
As part of an audit in accordance with audit regulations for the Public Sector in Spain, we exercise
our professional judgement and maintain professional scepticism throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the annual accounts, whether due
to fraud or error, design and perform audit procedures responsive to those risks and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of
internal control.
•
Obtain an understanding of the internal control relevant for the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control.
ANNUAL ACCOUNTS AUDIT. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2024 AUDIT PLAN
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•
Assess the appropriateness of accounting policies used and the reasonableness of
accounting estimates and the related disclosures made by the management committee.
•
Conclude on the appropriateness of the management committee’s use of the going concern
basis of accounting is appropriate and, based on the audit evidence obtained, whether a material
uncertainty exists related to the events or conditions that may cast significant doubt on the entity’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report on the related disclosures in the annual accounts
or, if such disclosures are not adequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the entity to cease to continue as a going concern.
•
Assess the overall presentation, structure and content of the annual accounts, including
disclosures, and whether the annual accounts represent the underlying transactions and events in
a manner that it achieves fair presentation.
We communicate with the Chairman regarding, among other matters, the planned scope and timing
of the audit and the significant audit findings, as well as any significant deficiencies in internal
control that we identify during our audit.
From the matters communicated with the Institute’s Chairman, we determine those matters that
were of the most significance in the audit of the annual accounts of the current period and that are,
therefore, the key audit matters.
We describe these matters in our auditor’s report, unless laws or regulations preclude public
disclosure about the matter.
This auditor’s report was signed electronically through the CICEP.red application of the Comptroller
General of the State Administration by the Audit Director and by the Head of the Public Audits
Division I of the National Audit Office in Madrid on April 11, 2024.
INSTITUTO DE CRÉDITO OFICIAL
Annual Accounts at 31 December 2023 and
Management Report corresponding to 2023
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 2023 AND 2022
(Expressed in thousands of Euros)
1
ASSETS
2023
2022
Cash, deposits at central banks and demand deposits (Note 6)
2 158 980
2 637 435
Financial assets held for trading (Note 7)
24 197
30 637
Derivatives
24 197
30 637
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)
1 624 558
2 460 191
Equity instruments
1 533 557
1 325 031
Debt securities
91 001
1 135 160
Loans and advances
-
-
Memorandum item: loaned or advanced as collateral
-
-
Financial assets at amortised cost (Note 10)
27 204 578
23 866 671
Debt securities
6 302 584
6 781 025
Loans and advances
20 901 994
17 085 646
Credit institutions
8 300 598
6 911 989
Customers
12 601 396
10 173 657
Memorandum item: loaned or advanced as collateral
Hedging derivatives (Note 11)
302 772
438 822
Investments in subsidiaries, joint ventures and associates (Note 12)
57 466
57 466
Subsidiaries
1 940
1 940
Joint ventures
-
-
Associates
55 526
55 526
Property, plant and equipment (Note 13)
82 289
83 087
Property, plant and equipment
For own use
82 289
83 087
Memorandum item: Acquired under lease
-
-
Intangible assets (Note 14)
8 318
6 836
Other intangible assets
8 318
6 836
Tax assets (Note 15)
171 206
178 675
Current tax assets
22 236
4 330
Deferred tax assets
148 970
174 345
Other assets (Note 16)
22 459
15 123
Other assets
22 459
15 123
Non-current assets and disposable groups of elements qualified as held for sale (Note 17)
-
-
TOTAL ASSETS
31 656 823
29 774 943
INSTITUTO DE CRÉDITO OFICIAL
BALANCE SHEETS AT 31 DECEMBER 2023 AND 2022
(Expressed in thousands of Euros)
2
LIABILITIES
2023
2022
Financial liabilities held for trading (Note 7)
23 610
29 714
Derivatives
23 610
29 714
Financial liabilities at fair value through profit or loss
-
-
Financial Liabilities at amortised cost (Note 18)
23 548 296
21 681 827
Deposits
6 513 401
8 060 271
Central Banks
327 075
2 961 320
Credit Institutions
5 722 623
4 704 485
Customers
463 703
394 466
Marketable debt securities
16 920 632
13 374 254
Other financial liabilities
114 263
247 302
Memorandum item: Subordinated liabilities
-
-
Hedging derivatives (Note 11)
583 796
565 619
Provisions (Note 19)
1 581 675
1 764 755
Pensions and similar obligations
836
770
Provisions for taxes and other legal contingencies
-
-
Provisions for contingent exposures and commitments
50 579
59 396
Other provisions
1 530 260
1 704 589
Tax Liabilities (Note 15)
174 420
155 134
Current tax liabilities
1 439
1 493
Deferred tax liabilities
172 981
153 641
Other liabilities (Note 16)
55 958
63 331
TOTAL LIABILITIES
25 967 755
24 260 380
EQUITY
Own funds (Note 20)
5 498 415
5 385 936
Capital or endowment fund
4 314 901
4 314 687
Accumulated reserves
-
-
Revaluation reserves
17 216
18 126
Other reserves
926 083
925 172
Profit and loss for the period
240 215
127 951
Less: Interim dividends
-
-
Other accumulated comprehensive income (Note 21)
190 653
128 627
Elements that cannot be reclassified at profit and loss
365 729
349 635
Changes in fair value equity inst. at fair value through other comprehensive income
365 729
349 635
Elements that can be reclassified at profit and loss
(175 076)
(221 008)
Hedging derivatives. Cash flow hedge reserve
(175 795)
(192 695)
Changes in fair value debt inst. at fair value through other comprehensive income
719
(28 313)
TOTAL EQUITY
5 689 068
5 514 563
TOTAL EQUITY AND LIABILITIES
31 656 823
29 774 943
INSTITUTO DE CRÉDITO OFICIAL
BALANCE SHEETS AT 31 DECEMBER 2023 AND 2022
(Expressed in thousands of Euros)
3
MEMORANDUM ITEM
2023
2022
Granted financial guarantees (Note 22)
553 986
557 812
Other granted commitments (Note 22)
4 286 994
4 473 393
INSTITUTO DE CRÉDITO OFICIAL
INCOME STATEMENTS CORRESPONDING TO YEARS ENDED AT 31 DECEMBER 2023
AND 2022
(Expressed in thousands of Euros)
4
2023
2022
Interest and similar income (Note 24)
1 002 281
326 004
Interest and similar charges (Note 25)
(712 032)
(200 270)
NET INTEREST INCOME
290 249
125 734
Dividends income (Note 26)
16 964
5 480
Fee and Commission income (Note 27)
41 352
31 852
Fee and Commission expense (Note 27)
(9 467)
(9 025)
Gains or losses on financial assets and liabilities not measured at fair value through profit or loss (net) (Note 28)
(21 446)
1 119
Financial assets at fair value through other comprehensive income
(20 946)
-
Financial assets at amortised cost
(500)
172
Other financial assets and liabilities
-
947
Gains or losses on financial assets and liabilities held for trading (net) (Note 29)
940
(259)
Gains or losses on financial assets and liabilities designated at fair value through results (net) (Note 30)
-
-
Gains or losses resulting from hedge accounting (net) (Note 31)
45 568
44 683
Exchange differences (net) (Note 2.4)
(3 744)
4 038
Other operating income (Note 32)
1 081
960
Other operating expenses (Note 32)
-
-
GROSS MARGIN
361 497
204 582
Administration expenses
(44 636)
(42 158)
Personnel costs (Note 33)
(25 448)
(22 835)
Other administration expenses (Note 34)
(19 188)
(19 323)
Depreciation and amortisation
(4 645)
(5 654)
Property, plant and equipment (Note 13)
(2 268)
(2 166)
Intangible assets (Note 14)
(2 377)
(3 488)
Provisions (or reversal of provisions) (Note 19)
9 138
(3 517)
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss and net
losses or gains for modification
12 777
23 468
Financial assets at fair value through other comprehensive income (Note 9)
1 270
-
Financial assets at amortised cost (Notes 10)
11 507
23 468
Impairment (or reversal of impairment) on non-financial assets, net
(4)
(77)
Goodwill and other intangible assets (Note 14)
-
-
Other assets (Note 17)
(4
)
(77)
Gains/ (Losses) from non-current assets and groups held for sale of elements classified as held for sale not
classified as discontinued operations (Note 17)
2 764
1 468
PROFIT OR LOSS BEFORE TAX FROM CONTINUING OPERATIONS
336 891
178 112
Income tax expenses (income) from continuing operations (Note 23)
(96 676)
(50 161)
PROFIT OR LOSS AFTER TAX FROM CONTINUING OPERATIONS
240 215
127 951
PROFIT OR LOSS AFTER TAX FROM DISCONTINUED OPERATIONS
-
-
PROFIT OR LOSS FOR THE YEAR
240 215
127 951
INSTITUTO DE CRÉDITO OFICIAL
STATEMENTS OF CHANGES IN EQUITY
I. STATEMENT OF RECOGNISED INCOME AND EXPENSES CORRESPONDING TO
YEARS ENDED AT 31 DECEMBER 2023 AND 2022
(Expressed in thousands of Euros)
5
2023
2022
Profit/(loss) for the year
240 215
127 951
Other comprehensive income
62 026
155 361
Elements not reclassified on income statement
16 094
215 078
Variations in fair value equity instruments at fair value through other comprehensive
income (Note 21)
22 991
307 254
Profit or loss hedge accounting
Income tax of elements not reclassified in profit or loss
(6 897)
(92 176)
Elements that can be reclassified in profit or loss
45 932
(59 717)
Hedging of cash flows, effective portion (Note 21)
24 143
(39 663)
Debt instruments at fair value through other comprehensive income (Note 21)
41 474
(45 647)
Income tax of elements that can be reclassified on profit or loss
(19 685)
25 593
Total comprehensive income for the year
302 241
283 312
INSTITUTO DE CRÉDITO OFICIAL
STATEMENTS OF CHANGES IN EQUITY
II. STATEMENT OF TOTAL CHANGES IN EQUITY CORRESPONDING TO YEARS ENDED AT 31 DECEMBER
2023 AND 2022
(Expressed in thousands of Euros)
6
At 31 December 2023
OWN FUNDS
Capital /
Endowment
fund
Share
premium
Reserves
Other equity
instruments
Less:
Treasury
shares
Profit/(loss)
for the year
Less: dividends
and
remunerations
TOTAL
OWN
FUNDS
OTHER
ACCUMULATED
COMPREHENSIVE
INCOME
TOTAL
EQUITY
Closing balance at 31 December 2022
4 314 687
-
943 298
-
-
127 951
-
5 385 936
128 627
5 514 563
Total recognised income and expenses
-
-
-
-
-
240 215
-
240 215
62 026
302 241
Other variations of equity:
Capital increases / endowment fund
214
-
-
-
-
-
-
214
-
214
Transfers between equity items
-
-
1
-
-
-
-
1
-
1
Other increases (decreases) equity
-
-
-
-
-
(127 951)
-
(127 951)
-
(127 951)
Total other variations of equity
214
1
-
-
(127 951)
-
(127 736)
-
(127 736)
Closing balance at 31 December 2023
4 314 901
-
943 299
-
-
240 215
-
5 498 415
190 653
5 689 068
INSTITUTO DE CRÉDITO OFICIAL
STATEMENTS OF CHANGES IN EQUITY
II. STATEMENT OF TOTAL CHANGES IN EQUITY CORRESPONDING TO YEARS ENDED AT 31 DECEMBER
2023 AND 2022
(Expressed in thousands of Euros)
7
At 31 December 2022
OWN FUNDS
Capital /
Endowment
fund
Share
premium
Reserves
Other equity
instruments
Less:
Treasury
shares
Profit/(loss)
for the year
Less: dividends
and
remunerations
TOTAL
OWN
FUNDS
OTHER
ACCUMULATED
COMPREHENSIVE
INCOME
TOTAL
EQUITY
Closing balance at 31 December 2021
4 314 480
-
943 298
-
-
122 960
-
5 380 738
(26 734)
5 354 004
Total recognised income and expenses
-
-
-
-
-
127 951
-
127 951
155 361
283 312
Other variations of equity:
Capital increases / endowment fund
207
-
-
-
-
-
-
207
-
207
Transfers between equity items
-
-
-
-
-
-
-
-
-
-
Other increases (decreases) equity
-
-
-
-
-
(122 960)
-
(122 960)
-
(122 960)
Total other variations of equity
207
-
-
-
-
(122 960)
-
(122 753)
-
(122 753)
Closing balance at 31 December 2022
4 314 687
-
943 298
-
-
127 951
-
5 385 936
128 627
5 514 563
INSTITUTO DE CRÉDITO OFICIAL
STATEMENT OF CASH FLOWS CORRESPONDING TO YEARS ENDED AT 31
DECEMBER 2023 AND 2022
(Expressed in thousands of Euros)
8
2023
2022I
A. CASH FLOWS FROM OPERATING ACTIVITIES
(477 987)
(6 609 422)
1. Profit/(loss) for the year
240 215
127 951
2. Adjustments to obtain operating cash flows
62 002
35 864
Depreciation and amortisation
4 645
5 654
Other adjustments
57 357
30 210
3. Net increase /decrease in operating assets
(2 367 120)
1 432 193
Financial assets held for trading
6 440
(19 935)
Other financial assets at fair value through profit or loss
-
-
Financial assets at fair value through other comprehensive income
835 633
(67 684)
Financial assets at amortised cost
(3 337 907)
1 484 098
Other operating assets
128 714
35 714
4. Net increase/decrease in operating liabilities
1 613 670
(8 199 620)
Financial liabilities held for trading
(6 104)
19 134
Other financial liabilities at fair value through profit or loss
-
-
Financial liabilities at amortised cost
1 866 468
(8 877 024)
Other operating liabilities
(246 694)
658 270
5. Collections/payments for income tax
(26 754)
(5 810)
B. CASH FLOWS FROM INVESTMENT ACTIVITIES
(683)
(9 885)
6. Payments
(1 481)
(9 885)
Property, plant and equipment (Note 13)
-
(1 211)
Intangible assets (Note 14)
(1 481)
(3 806)
Investments in subsidiaries and associates (Note 12)
-
(4 868)
Non-current assets and liabilities associated for sale (Note 17)
-
-
Debt securities at amortised cost
-
-
Other payments related to investing activities
-
-
7. Collections
798
-
Property, plant and equipment (Note 13)
798
-
Intangible assets (Note 14)
-
-
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 2023 AND 2022
(Expressed in thousands of Euros)
9
2023
2022
C. CASH FLOWS FROM FINANCING ACTIVITIES
215
(122 753)
8. Payments
-
(122 960)
Dividends
-
-
Subordinated liabilities
-
-
Amortisation of own equity instruments
-
-
Acquisition of own equity instruments
-
(122 960)
Other payments related to financing activities
9. Collections
215
207
Subordinated liabilities
-
-
Issue of own equity instruments
-
-
Disposal of own equity instruments
-
-
Other collections related to financing activities (Note 20)
215
207
D. EFFECT OF EXCHANGE RATE FLUCTUATIONS
-
-
E. NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS
(478 455)
(6 742 060)
F. CASH OR CASH EQUIVALENTS AT BEGINNING OF THE YEAR
2 637 435
9 379 495
G. CASH OR CASH EQUIVALENTS AT END OF THE YEAR
2 158 980
2 637 435
MEMORANDUM ITEM
COMPONENTS OF CASH AND EQUIVALENTS AT THE END OF THE PERIOD
Cash (Note 6)
6
6
Cash equivalent balances with central banks (Note 6)
2 123 983
2 557 390
Other financial assets (Note 6)
34 991
80 039
Less: bank overdrafts repayable
-
-
10
INSTITUTO DE CRÉDITO OFICIAL
Notes to the Annual accounts corresponding to
the year ended at 31 December 2023
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, Spain 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 Ministry of Economy, Commerce and
Business, 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 Economy,
Commerce and Business.
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
12
duties. The dismissal can occur by resignation accepted by the Minister of Economy,
Commerce and Business, 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 Economy,
Commerce and Business, 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
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
operation, 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 operations 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.
13
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 operations 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
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, subject to the regulation on EU State aids, 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
were 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. Lastly, a surety line was also contemplated for
lessees, in the modality of liquidity loans, guaranteed and subsidised by the State to
face the lease of the families’ main residences. By Council of Ministers Agreement of
June 21, 2022, the possibility of extending the maturity of guarantees managed on
behalf of the State, in the liquidity and investments lines, throughout the operations’
life, was enabled. In this activity, ICO acts on behalf of the State, exercising
14
management and administration functions, for which the Institute accrues the
corresponding commissions, registered as income in the income statement.
9. UKRAINE surety line. This line is included in the Plan to respond to the Russian war in
Ukraine, and is allocated with up to 10,000 million Euros. The line is subject to EU state
aid rules and is regulated by Royal Decree Law 6/22 of 19 March and, with regard to
tranches managed by the ICO, by the ACM of May 10, 2022 (subsequently amended
by the ACM of October 11, 2022), and by the ACM of November 22, 2022, the ACM of
December 27, 2022 and the ACM of December 5, 2023, subsequently amended by
the ACM of December 27, 2023. In this activity, ICO also acts for and on behalf of the
State, exercising management and administration functions for which the Institute
accrues the corresponding commission, 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.
1.2 Bases of presentation of the annual accounts
Annual accounts of the Institute for the year ended December 31, 2023 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, 2023 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, 2023 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 2022 is presented only for
comparative purposes with the information relating to the year 2023 and therefore does not
constitute the ICO's annual accounts for the year 2022.
The principal accounting policies and measurement bases applied in preparing the Institute’s
annual accounts for the year ended at December 31, 2023 are summarised in Note 2.
Main regulatory changes during the period from January 1 to December 31, 2023
Bank of Spain Circular 1/2023, of 24 February
This rule establishes information to be sent to Bank of Spain on guaranteed funds and other
loan mobilisation instruments, and amends Circulars 4/2017 and 4/2019. The rule has not had
a significant impact on ICO.
15
Bank of Spain Circular 2/2023, of 17 March
This rule updates Bank of Spain Circular 1/2013, of 24 May, on the Central Risk Information
Centre. It has not had a significant impact on ICO.
Bank of Spain Circular 3/2023, of 31 October
This rule amends Circular 2/2016, of 2 February, completing the adaptation of the Spanish
legal system to Directive 2013/36/EU and Regulation (EU) No 575/2013, and Circular 1/2022,
of 24 January, to financial credit institutions, on liquidity, prudential rules and reporting
obligations. It has not had a significant impact on ICO.
1.3 Responsibility for information and estimates
The information contained in the annual accounts for the year ended December 31, 2023 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).
- 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, 2023 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 y 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
16
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, 2023, the
balance of net assets was of 8 thousand Euros and the amount of results generated in the
year was of 109 thousand Euros (12 thousand Euros of net assets and 112 thousand Euros
of results at December 31, 2022).
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
,
2023 and
2022, is as follows:
Thousands of Euros
2023
2022
Individual
Consolidated
Individual
Consolidated
Assets
31 656 823
31 689 303
29 774 943
29 802 910
Equity
5 689 068
5 776 071
5 514 563
5 589 018
Profit and loss the period
240 215
252 265
127 951
146 832
Total income and charges recognised in equity
302 241
314 291
283 312
302 193
Net Increase / (Decrease) in cash or cash
equivalents
(478 455)
(478 741)
(6 742 060)
(6 742 156)
1.6 Environmental impact and greenhouse effect gas emission rights
The ICO's global operations 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 2023 and 2022 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.
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
17
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.
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%.
18
- 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.
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, EU Regulation 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, EU Regulation 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.
19
At December 31, 2023 and 2022, the ICO Group’s computable capital is as follows:
Thousands of Euros
2023
2022
Common Equity Tier 1
4 749 323
4 897 422
- Capital
4 314 901
4 314 687
- Reserves and prudential filters (*)
434 422
582 735
Tier 2
-
-
- Other reserves (*)
-
-
- Generic insolvency risk hedging
-
-
Total computable capital
4 749 323
4 897 422
Total minimum capital (**)
2 710 544
2 478 267
(*) The sum of the reserves used for the calculation of the Group’s eligible capital differs from those reported in the consolidated balance
sheet because intangible asset adjustments and prudential filter adjustments are being taken into account in the calculation of eligible
capital.
(**) Calculated as 15.16% of risk-weighted assets (RWA), total capital requirement level (OCR) established by Bank of Spain for the Group
for 2023 (17.05% for 2022 closing).
At December 31, 2023 and 2022, the most important data of the minimal capital of the Group
are (in thousands of Euros):
Thousands of Euros
2023
2022
Tier 1
4 749 323
4 897 422
Risk-weighted assets (RWA)
17 879 576
14 535 290
Tier 1 ratio (%)
26,56%
33,69%
Computable total Capital
4 749 323
4 897 422
Computable total Capital ratio (%)
26,56%
33,69%
Minimum computable capital ratio (%) (*)
15,16%
17,05%
(*) The total minimum capital ratio from December 31, 2023, established by Bank of Spain for the ICO Group, is 15.16%,
considering both the requirements of EU Regulation 575/2013 (8%) and the additional capital requirements (4.66%) and
the capital conservation buffer (2.5%).
At December 31, 2023 and 2022, the Group’s computable capital exceeds minimum
requirements required from the entity in 2,038,779 thousand Euros and 2,419,155 thousand
Euros, respectively.
1.7.2 Minimum reserves ratio
The Institute must maintain a minimum level of funds deposited in a central bank of a euro
country to cover the minimum reserve requirements. At December 31, 2023, 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 2023 and 2022, and throughout 2023 and 2022, ICO complied with the minimum
ratios required by applicable Spanish regulations.
20
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
The Council of Ministers of February 27, 2024 has approved an agreement establishing the
general conditions for the implementation of five facilities under the loans of the addendum to
the Recovery Plan, amounting to 40,000 million Euros, and instructing Instituto de Crédito
Oficial (Official Credit Institute) to manage them.
Specifically, the Institute will participate in the following initiatives:
• ICO-Green Facility of 22,000 million Euros
• ICO-Empresas y Emprendedores Facility, of 8,150 million Euros (7,000 million to boost
the business fabric and 1,000 million to finance the tourism sector towards a more
sustainable model)
• 4 billion Next Tech Fund (already existing fund, but with an increased amount in MRR)
• Audiovisual Hub Facility of 1,712 million Euros, and
• Facility for the Promotion of Social Rental Housing of 4,000 million Euros.
This launches the second phase of the Recovery Plan, which will enable the transformation
and modernisation process of the Spanish productive fabric and economy to be completed.
The five approved facilities will be used to finance investment projects that favour the dual
green and digital transition of companies, thereby strengthening their competitiveness.
Specific facilities will also be implemented to boost the audiovisual sector and disruptive
technologies, as well as to increase the stock of public social housing for rent.
On the other hand, on February 13, 2024, the Council of Ministers approved an agreement
establishing the conditions for the Ministry of Housing and Urban Agenda (MIVAU) to sign with
the ICO a line of 2,500 million Euros in guarantees for the purchase of first homes for young
people under 35 years of age and families with dependent minors. The guarantees will be
managed by ICO on behalf of MIVAU under the terms established in the Agreement to be
formalised between both parties for a period of up to 15 years.
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 2023 totals 207 thousand Euros, which will be registered in 2024.
No significant events other than those described in the previous paragraphs have occurred
since the end of the reporting period (December 31, 2023) until the date these annual accounts
were issued (March 26, 2024).
21
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
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.
Operations 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, 2023 of total net assets was nil (35 thousand Euros at December
31, 2022). Net results generated in 2023 have been of 4,346 thousand Euros (3,816 thousand
Euros in 2022), mainly derived from the recovery of bad debt.
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, 2023, the balance of these assets (classified as doubtful assets) was of 28
thousand Euros (2,370 thousand Euros at December 31, 2022).
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
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the beginning of it and until December 31, 2023, under the PTE, is 65.31 million Euros (62.97
million Euros at December 31, 2022). Of the 1,029 hosted entities to December 31, 2023, a
total of 409 entities have had to resort to the PTE. At December 31, 2023 are still claiming
deductions of PTE to 4 EELL, for an outstanding amount of 28 thousand Euros.
2. ACCOUNTING PRINCIPLES, POLICIES AND VALUATION METHODS APPLIED
During the development of ICO's annual accounts for the year ended at December 31, 2023,
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.
- 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.
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These shareholdings are presented in these annual accounts under the heading “Investments
in subsidiaries, joint ventures and associates - Subsidiaries” in the accompanying 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 derecognition of non-financial assets, net”
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, 2023
and 2022.
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 accompanying
balance sheet and are valued at acquisition costs, adjusted impairment that they may have
undergone.
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.
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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, operations effected in the foreign
exchange spot market are recognised at the settlement date, operations affected using equity
instruments traded in Spanish securities markets are recorded at the contract date and
operations affected using debt instruments traded in Spanish securities markets are
recognised at the settlement date.
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.
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- 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
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 operation. 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 operations 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
difference between the initial amount and the repayment value of the financial instruments.
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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 operation 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 operations, and is recalculated at each interest
review date stated in the contract, taking into consideration changes in the operation'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
income statement, 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 income statement.
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
income statement, 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.
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 operation 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:
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- 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 income statement.
- Differences in valuation related to inefficiency of cash flows hedging and net foreign
investments are sent directly to the income statement.
- 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 income statement 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 income
statement, 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 operations occur, being
then recorded in the income statement. The ineffective portion of the hedging derivative's
value fluctuation is directly registered on the income statement.
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 income
statement, 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.
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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:
• 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,
including instruments segregated from hybrid financial instruments in
accordance with applicable accounting rules.
• 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.
• 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:
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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 operation 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
accounting legislation as of Bank of Spain, 4/2022. 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 operations in which entities act as lenders.
The financial assets included in this category are initially carried at fair value, adjusted
for commissions and operation costs directly attributable to the acquisition of the
financial asset and which, under applicable accounting legislation as of Bank of Spain,
4/2022, 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 operation 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, 4/2022, 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.
Products corresponding to interests or dividends accrued from these financial assets
are registered with counterpart on captions “Interest 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
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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 income
statement 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 operation 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
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
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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.
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 income
statement. 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
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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
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 2023 or 2022.
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 operations 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 operation as a hedge, it does so from the initial moment of
the operations or the instruments included in those hedges, that hedge being appropriately
documented. When documenting these hedging operations 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
33
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
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 operations 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 operation,
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 resulting from
hedge accounting, net” in the accompanying income statement.
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 operation 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
34
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 operation 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
operation 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 operation that culminates with the recording of a financial asset or
liability. In the event of planned operations, when expected not to take place, the entry made
under “Other accumulated comprehensive income” relating to that operation is immediately
recognised in the income statement
2.4 Foreign currency operations and functional currency
The Institute’s functional currency is the Euro. Therefore, all balances and operations
denominated in currencies other than the euro are considered denominated in foreign
currency.
Set out below is the equivalent value of financial assets and liabilities denominated in foreign
currency held by the Institute, at December 31, 2023 and 2022 (thousands of Euros):
2023
2022
Assets
Liabilities
Assets
Liabilities
Pounds Sterling
304 035
275 323
380 614
529 340
US Dollars
2 678 621
9 856 669
2 406 034
7 228 720
Swiss Francs
-
274 439
8
258 079
Japanese Yens
666
32 110
741
35 687
Other currencies
374 671
44 716
435 683
61 838
3 357 993
10 483 257
3 223 080
8 113 664
The equivalent value in Euros of financial assets and liabilities denominated in foreign
currency (in thousands of Euros), classified by nature, recorded by the Institute, at December
31, 2023 and 2022 is as follows:
2023
2022
Assets
Liabilities
Assets
Liabilities
Loans to Credit Institutions
1 542 287
1 284 125
Loans to Customers
1 803 731
1 924 671
Other financial assets
11 975
14 284
Deposits in Credit Institutions
3 460 183
2 865 741
Debt securities issued
7 022 652
5 247 278
other financial liabilities
422
645
3 357 993
10 483 257
3 223 080
8 113 664
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
35
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
operation date. Nonetheless, the average exchange rate for the period is used for all
operations 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.
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, 2023 and 2022 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 is of 3,744 thousand Euros of losses, at December
31, 2023 (4,038 thousand Euros of profits at December 31, 2022) and are registered in the
caption of “Exchange profit/(loss), net” in the accompanying income statement.
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 operations or services are recognised in the income
36
statement over the term of the operations 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.
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 operations 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 income
statement of the period in which such impairment takes place and the recovery of previously
recorded impairment losses, if takes place, are recognised in the income statement 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
probability of the guarantee.
37
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 operation, 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
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 operations.
38
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.
70
75
85
90
95
100
100
Construc. civil work
55
65
70
80
95
100
100
Other espec. financing
55
65
75
90
95
100
100
Non-special Financing
Large companies
55
65
75
90
95
100
100
SMEs
65
70
75
85
90
95
100
Individual entrepreneurs
35
45
60
65
80
95
100
Houses
House purchase
Main residence unpaid (LTV) <80%
guarantee
45
50
65
70
85
95
100
Main residence unpaid (LTV) >80%
guarantee
45
50
65
70
85
95
100
Secondary residence
45
50
65
70
85
95
100
Consumer credit (incl. credit card debts)
55
65
80
85
95
100
100
Other
55
65
80
85
95
100
100
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
30,0
Construc. civil work
2,0
18,8
Other especial financing
0,6
9,6
Non-special Financing
Large companies
0,6
9,6
SMEs
1,1
17,8
Individual entrepreneurs
1,4
13,9
Home
Home purchase
Main home unpaid (LTV) <80%
guarantee
0,7
18,0
Main home unpaid (LTV) >80%
guarantee
0,7
18,0
Secondary residence
0,7
18,0
Consumer credit
1,8
20,2
Which from: credit card debts
1,0
11,6
Other
1,8
20,2
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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
The Institute has constituted the corresponding provisions at December 31, 2023 with extreme
caution, and thus to be able to strengthen its balance sheet, with a detailed analysis of each
borrower, when needed, and taking into account uncertainties underlying the financing, due
to the macroeconomic environment.
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
30
Other
32
Urban and developable land ordered
35
Other immovable property
40
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.
40
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.
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 a 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 operation 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 operation 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 income statement 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 income statement
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.”
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 operation, 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
41
sheet, in accordance with the nature of the lessee.
When the Institute acts as the lessee in a finance lease operation, 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.
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,
42
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:
• The professional group to which the employee pertains.
• 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,
2023 and neither for the previous one at December 31, 2022.
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
policies. The entire cost of past services and any actuarial gains or losses are immediately
recognised.
At December 31, 2023, a provision was recorded by the Institute for post-employment
commitments amounting to 836 thousand Euros (770 thousand Euros at December 31, 2022).
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, 2023 and 2022, 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 income statement.
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.
43
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.
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.
44
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.
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 operation or have been internally developed by the Institute.
Only intangible assets whose cost may be reasonably estimated on an objective basis and
45
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 accompanying 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
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 2023 and 2022 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.
46
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.
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 accompanying 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 income statement.
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.
If the carrying amount of assets exceeds their fair value less selling costs, the Institute adjusts
the assets’ carrying amount by the excess amount, with a balancing entry under “Gains
(losses) on non-current assets and disposal groups classified as held for sale not qualifying
as discontinued operations”, in the accompanying income statement. In the event of
subsequent increases in the fair value of assets, the Institute reverses previously recognised
losses by increasing the carrying amount of assets up to the limit of the amount prior to their
47
possible impairment, with a balancing entry under the aforementioned caption. Results from
the sale of non-current assets held for sale are presented under “Gains (losses) on non-current
assets and disposal groups classified as held for sale not qualifying 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
income statement.
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
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 2023, a total of 140 complaints were received (289in 2022), of which were addressed within
an average of 2.7 working days (much lower than the established deadline of 15 working
days). 66% of the total are related to credit operations in the COVID-19 Surety Lines, and
were therefore passed on to the relevant credit institutions. 30% were related to Mediation
Lines, and the remaining 4% related to other issues, unrelated to products or services
managed by ICO.
4. DISTRIBUTION OF RESULTS
Results from 2023 amount to 240,215 thousand Euros and, at the date of formulation of this
Annual Accounts, its distribution has not yet been established by the Ministry of Economy,
Commerce and Business. Such distribution will adjust to its Bylaws.
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
48
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.
• 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.
• 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.
• 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 operations.
• 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 1/2023 of 12 July), 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
performance of the units under its remit.
The specialised Risk areas are Methodology and Credit Risk department, and the Global Risks
Control area, each one with specific duties.
The primary duties of the Global Risk Control area are the following:
• Preparing, proposing and controlling financial risk measurement methodologies
applied by the Institute.
• Overseeing the correct compliance of the limits of financial risks and policies previously
approved.
• Elaborating regulatory reports on interest rate, exchange rate and liquidity.
49
• Analysing, monitoring and reviewing periodically credit counterparty lines, analyse
them, and monitor levels with the mediating entities and counterparts.
• Proposing criteria for market valuation of new financial products, establishing
methodologies, risk measurement and potential risk (Add-on).
• Analysing the adaptation of national and international legislation regarding risks within
its competency.
• Valuing at market price new products and structures and their potential risk (Add-on).
• Supervising the correct application of approved methodologies risks.
• Analysing the credit risk in Liquidity Lines Securitisation Funds operations.
• Proposing new Liquidity, Market, Credit and New Products risk limits.
• Reporting and diagnosis of the risk situation for Assets and Liabilities Committee,
Operations Committee, Monitoring Committee and General Council.
• Reporting statements of interest rate risk, liquidity, large risks and Basel ratios for Bank
of Spain.
• Updating and maintaining the Risk Adjusted Profitability tool (RAR).
• Updating and maintaining the ICO Price Control tool in RORAC.
• Controlling Risk Appetite Framework (MAR) indicators, and attending to meeting to
report the situation to the Board.
• Analysing, studying and reporting on ICO’s participation in securitisation operations
and ICO guarantees to SME portfolio, concerning the credit risk.
The Methodology and Credit Risk department, from which the Risk Methodology and Policies
Area and the ESG Acceptance and Risk Area depends, has the following functions, among
others:
• Developing and maintaining applicable methodologies, in order to assess the risk of new
products and regulatory developments linked to the credit risk, developing the
corresponding regulations, as necessary.
• Analysing and assessing the admissibility of new direct credit operations and potential
customers that are not included in automated procedures; analysing and assessing the
impact on the risk assumed by ICO and the admissibility of proposed modifications to
wholesale direct credit operations that have already been approved or formalised but
are not in arrears.
• Calculating the internal rating for new customers (corporate and project finance) and
updating the rating when required.
• Carrying out an analysis of issuer risks (companies) in the Alternative Fixed Income
Market (MARF) and corporate bonds market, as alternative corporate financing
instrument, by ICO’s underwriting of promissory notes and bonds in the different issues.
Updating, analysing and periodically reviewing debt issuers (MARF and Corporate
50
Bonds) for the maintenance and/or variation of limits when required.
• Participating in credit committees that discuss and adopt concession agreements.
• Analysing the adaptation to national and international standards in risk areas within its
competence.
• Monitoring the Institute’s Direct Risk classified as normal risk for companies and their
economic groups, the country and sector risk, accounting reclassification of operations
in normal risk that have been impaired, and assisting Management in the documentation
and necessary actions to attend the Monitoring Committee and the Board’s
requirements with regard to risks.
• Proposing, maintaining and managing risk assessment tools and direct credit risk rating,
concentration limits by economic group, country and sector risk.
• Proposing the methodology for hedging impaired credit risk and the applicable tools, and
allocations and reversals of customer provisions that fall within its remit.
• Based on applicable regulations and the market practice, developing a model to assess
ESG Risks and to include them in the analysis of direct financing operations that affect
the credit risk.
• Collaborating in the elaboration of budgets and PAPs at the level of estimation of non-
defaulted risk and foreseeable hedges.
• Participating in the Monitoring Committee of the direct loan portfolio of I+CO, with
coordination and presentation of direct non-defaulting risk holders.
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.
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.
- 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) and technical
regulations on liquid assets.
51
- 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 calculation and weighting criteria
and 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.
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.
- Execution Regulation (EU) 2022/2365 of 2 December, updating the list of ECAI authorised
by the EU, a well as the homogenisation per credit quality levels of the different ratings of
each ECAI.
- Update of EBA technical standards COREP templates version 3.2 June 2023. Modification
of liquidity risk templates ALMM and NSFR regulatory statements. Partially amends
technical standards set out in Implementing Regulation (EU) 2021/451.
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.
52
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 applied 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 (2024), in relation to the NSFR ratio.
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
53
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 July 19, 2023.
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.
In this sense, it should be noted that 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 2023, 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 2024.
Maturity Analysis of trading and hedging derivatives
The following table shows, by notional, the contractual maturities for euro-denominated
derivatives, recognised as financial assets and financial liabilities at December 31, 2023 and
2022, other than 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 2023:
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
88.305
165.158
-
83.280
-
336.743
-Of which: credit
commitments considered as
derivatives
Hedging derivatives
7.976.615
4.694.444
2.634.891
5.426
-
15.311.375
8.064.920
4.859.602
2.634.891
88.706
-
15.648.118
At 31 December 2022:
54
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
145.386
210.951
356.337
-Of which: credit commitments
considered as derivatives
Hedging derivatives
4.602.312
3.477.182
2.198.053
619.739
52.882
10.950.168
4.747.698
3.688.133
2.198.053
619.739
52.882
11.306.505
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;
▪ 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, 2023 and 2022, 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 income statement.
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
55
equivalent value in such currency.
It also includes the evolution of the stock of liquid assets of greater liquidity, mainly public debt,
and their hedging level of liquidity gaps at different maturities.
At 31 December 2023 (thousands of Euros):
Up to 1 month
1-3 months
3-6 months
6-12 months
1-2 years
2-5 years
More than 5
years
Inflows equiv. value Euros
3.603.956
768.617
1.251.219
2.212.895
3.951.855
11.341.426
8.226.626
Outflows equiv. value Euros
(1.694.383)
(3.358.442)
(1.997.986)
(4.407.879)
(3.085.007)
(5.888.517)
(4.918.557)
Partial liquidity gaps
1.909.573
(2.589.825)
(746.767)
(2.194.985)
866.849
5.452.909
3.308.069
Accumulated liquidity gaps
1.909.573
(680.253)
(1.427.019)
(3.622.004)
(2.755.156)
2.697.753
6.005.822
High liquidity asset buffer
2.538.718
3.074.243
3.546.049
3.720.182
3.226.296
339.046
-
Difference buffer / negative
accumulated gaps
n.a.
2.393.991
2.119.029
98.178
471.140
n.a.
n.a.
% buffer coverage over
negative accumulated gaps
n.a.
452%
248%
103%
117%
n.a.
n.a.
At 31 December 2022 (thousands of Euros):
Up to 1 month
1-3 months
3-6 months
6-12 months
1-2 years
2-5 years
More than 5
years
Inflows equiv. value Euros
3 872 472
980 073
1 679 182
2 230 049
4 242 749
9 811 713
8 215 213
Outflows equiv. value Euros
(3 337 960)
(4 948 520)
(1 464 627)
(3 014 567)
(3 521 332)
(4 696 093)
(4 026 557)
Partial liquidity gaps
534 512
(3 968 447)
214 555
(784 518)
721 417
5 115 620
4 188 656
Accumulated liquidity gaps
5346 512
(3 433 935)
(3 219 380)
(4 003 898)
(3 282 481)
1 833 139
6 021 795
High liquidity asset buffer
3 487 724
3 634 960
4 282 028
4 033 395
3 405 504
1 076 291
-
Difference buffer / negative
accumulated gaps
n.a.
201 025
1 062 648
29 497
123 023
n.a.
n.a.
% buffer coverage over
negative accumulated gaps
n.a.
106%
133%
101%
104%
n.a.
n.a.
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, 2023
is of 318,000 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 2023, indicating the averages of total liquid assets and averages of
net liquidity outflows, liquidity outflows and liquidity inflows.
56
LIQUIDITY COVERAGE RATIO (LCR) 2023
Quarterly average (in % and thousands of Euros)
1T
2T
3T
4T
LCR RATIO
291,43%
275,71%
614,08%
740,97%
TOTAL LIQUID ASSETS
6.180.226
7.267.338
6.052.571
7.327.155
NET LIQUIDITY OUTFLOWS
2.347.171
2.735.283
1.101.072
1.753.882
Liquidity outflows
(3.755.948)
(5.346.334)
(3.636.757)
(5.170.277)
Liquidity inflows
(1.408.777)
(2.611.051)
(2.535.685)
(3.416.395)
Lastly, the following information chart shows the net stable financing ratio at the end of each
calendar quarter of the period of 2023, additionally showing the stable financing available at
the end of each quarter and the financing required at those dates.
NET STABLE FINANCING RATIO (NSFR) 2023
Quarterly average (in % and thousands of Euros)
1T
2T
3T
4T
NSFR RATIO
116,57%
106,17%
109,39%
111,76%
AVAILABLE STABLE FINANCING
19.722.482
18.398.867
19.974.786
21.109.436
REQUIRED STABLE FINANCING
16.919.464
17.329.884
18.259.908
18.889.025
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,
the weighted partial maturity gap method was used before 2015, calculated as the
difference between asset and liability volume and off-balance sheet operations 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
57
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% of the Gross Margin, provided that it does
not exceed 65% of the Financial Margin established in the annual budget. in any case,
a reduction of 35 million Euros shall be admitted as limit.
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, 2023 was -53,114 million
Euros in total, distributed as follows: -49,832 million Euros for the balance in Euros,
-1,186 thousand Euros of the balance in US Dollars, and -0.235 thousand Euros of the
balance in British Pounds. Exchange rate (with movements of +/- 10% on USD/EUR
and GBP/EUR exchange) was -1,342 million Euros in Dollars and -0.519 thousand
Euros in Pounds.
Likewise, the sensitivity of the ICO’s Financial Margin at December 31, 2022 was of
58,137 million Euros, representing 93.85% of the self-imposed limit of de 61.95 million
Euros (in force at such moment), with the following distribution: -52.281 for interest rate
of the balance sheet in Euros, -1.921 for interest rate of US Dollar, and -0 for interest
rate of the balance sheet in Pound Sterling. Per exchange rate (variations of +/-10% in
USD/EUR and GBP/EUR exchange), it was of -3.641 million Euros in Dollars and -294
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.
58
At December 31, 2023, the values of the sensitivity of the ICO Net Asset reach
-5.75% in value added with a distribution on balances as follows: -5.52% for Euro
interest rate, -0.14% in the US Dollar, and -0.04% in the Pounds Sterling. Exchange
rate for Dollar presented a sensitivity of -0.03% and -0.02% for Pounds.
At December 31, 2022, sensitivity values of ICO’s Net Asset Value were of -4.23% with
a balance distribution of: -3.69% for interest rate of Euro, -0.23% in the balance of US
Dollars and -0.05% in the balance of Pounds Sterling. Per exchange rate, sensibilities
were of -0.25% in Dollars and -0.00% 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.
Moreover, on a quarterly basis, and following EBA guidelines of interest rate risk
management of the balance in activities other than negotiation GL/2018/02, the
variation of the Economic Value of Equity (EVE) is calculated at least for each currency,
when assets or liabilities denominated in such currency represent 5% or more of total
financial assets (excluding property, plant and equipment) or financial liabilities of the
banking book, or less than 5% if the sum of assets or liabilities included in the
calculation is below 90% of total financial assets o financial liabilities of the banking
book, in each of the 6 scenarios marked by it (parallel movement upwards or
downwards of 200 basic points, positivisation, flattening, rising short rates, falling short
rates).
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
the authority granted for this purpose or the Balance Management Department, the
General Finance and Strategy Management or the Operations Committee.
The main currencies in which ICO holds balance sheet positions at December 31, 2023
are the Euro and the US Dollar.
If we look at the assets of the balance sheet, the Euro concentrates approximately
89.82% of the total, the US Dollar being of 8.10%, while other currencies distribute the
remaining amount.
Liabilities concentrate around 97.25% of the total balance sheet, with a total of
approximately 59.30% in Euros, and 37.95% in US Dollars.
For 2022 closing, the ICO’s main currencies in its activity are also the Euro and the US
Dollar. In this case, both of them together represented around 97.09% of total assets,
where the Euro represented 89.13% and the Dollar the remaining 7.96%, while they
represented 94.34% of liabilities, distributed in 64.62% in Euro and 29.72% in Dollar.
Regarding currencies other than the euro and Dollar with which the Institute operates, its
59
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 operations with credit institutions, both on and off the balance sheet.
Monitoring activities are carried out by using a system that integrates the administration of
operations 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 operations at market prices plus a
potential future or add-on risk, that is measured as a percentage of the nominal value of the
operation, calculated as a potential maximum loss of 95% of confidence over the life of the
operation. 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
characteristics of the ICO. The first of the counterparty lines is related to cash operations. The
other counterparty line is related to mediation operations, 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.
Operations 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.
In any case, ICO’s activities with credit institutions, in the area of both second-floor and direct
facilities, are carried out with counterparties that, in virtually 91% of the risk, 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 operations
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 operation, such that any incident
affecting a operation 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.
60
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 the
legislation in force 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 operations and segmenting the non-resident loan portfolio.
Rating agency and OECD-CESCE evaluations are used as a source of information 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 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
operations is included.
Operational risk is broken down into three main risks: technological, business continuity and
conduct risk:
- Technological risk: it is the risk of loss due to inadequate or failed internal systems
processes or external events. In addition, this risk includes cyber security and system
operations.
- Business continuity risk: it is the risk of not continuing to perform the ICO’s essential
functions following a critical situation that has interrupted normal processes.
- Conduct risk: the risk of loss due to staff failures including conduct risk.
In this area, a number of tools have been developed that will facilitate the task of dealing with
operational risk. Specifically, the Strategic Risk Framework or Risk Map, which includes all
the risks detected by ICO and the controls to be carried out for their proper management,
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:
61
Million Euros
2023
2022
Amount
% total
Amount
% total
Property investment
381
3%
413
4%
Construction of social housing for sale
4
0%
5
0%
Construction of social housing for rent
277
2%
298
3%
Acquisition and development of land
87
1%
101
1%
Others
13
0%
9
0%
Investment property, plant and equipment
10.963
78%
8.161
70%
Renewable energies
2.280
16%
1.742
15%
Water infrastructures
77
1%
93
1%
Electricity infrastructures
2.675
19%
1.053
9%
Gas and fossil fuel infrastructures
1.048
7%
939
8%
Transport infrastructures
3.377
25%
3.016
26%
Tourism and leisure
107
1%
151
1%
Social-health infrastructures
89
1%
89
1%
Telecommunications
192
1%
108
1%
Audio-visual production and exhibition
50
0%
32
0%
Business parks and other constructions
25
0%
30
0%
Other
716
5%
661
6%
Research and Development material investment
327
2%
247
2%
ICO Finance lines AA.CC. Agencies
-
-
-
-
Acquisitions of companies
519
4%
603
5%
General corporate needs
1.194
8%
1.421
12%
Restructuring of liabilities
132
1%
407
3%
General State Budgets
896
6%
673
6%
14 085
100%
11 678
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, 2023 and 2022 the total exposure is mainly concentrated in sectors included
in the caption of “Investment property, plant and equipment”, which account for 78% of total
risk in 2023 (70% in 2022). Within this heading, the weight of the “Transport infrastructures”
sectors as a percentage of total risk (25% of the total in 2023 and 26% in 2022), “Electric
infrastructures” (19% of total balance in 2023 and 9% in 2022) and “Renewable energies”,
16% of total risk in 2023 (15% in 2022) are noteworthy.
5.7.2 Classification by geographic location of financial investments
The total risk at December 31, 2023 is distributed as follows: 74% in operations financing
investments in Spain amounting to 10,396 million Euros (69% at 2022 with 8,108 million
Euros) and 26% for an amount of 3,690 thousand Euros (3,570 thousand Euros in 2022) in
operations aimed at financing investment projects in other countries.
The risk distribution for investment projects in the national territory per Autonomous
Communities in 2023 is the following: National scope 77%, Madrid 7%, Catalonia 4%, Valencia
3%, and Andalusia 2% (72%, 5%, 6%, 5%, and 2%, in 2022, respectively).
In turn, the risk of operations taking place in the international market at December 31, 2023
and 2022 is distributed as follows:
62
Millions of Euros
2023
2022
Amount
Percentage
Amount
Percentage
European Economic Community
1.025
28%
800
22%
Latin America
1.036
28%
858
24%
United States
172
5%
246
7%
Rest of Europe
30
1%
357
10%
Multi-region (*)
1.426
38%
1.308
37%
3.689
100%
3.570
100%
(*) It includes the risk of operations whose outward investment takes place in different countries or multiple geographic areas..
5.7.3 Distribution of loans to customers by activity
The distribution, at December 31, 2023, is the following:
Loans real guarantee: carrying amount on LTV
TOTAL
Of which
property
guarantee
Of which
other real
guarantee
Below
40%
40 – 60%
60- 80%
80 – 100%
Above
100%
Public Administrations
2 799 588
105 975
27 176
93 122
39 581
-
-
448
Other financial
corporations (financial
activity)
477 832
-
163 997
63 507
-
44 600
-
55 890
Non-financial corporations
(non-financial activity)
9 229 852
179 441
1 401 783
1 140 855
167 485
47 185
164 021
61 678
Construction / real estate
development
88 679
88 679
-
72 495
-
-
16 184
-
Civil engineering
construction
281 861
-
222 530
179 340
29 645
13 545
-
-
Other purposes
8 859 311
90 762
1 179 253
889 020
137 840
33 640
147 837
61 678
Large companies
7 828 146
63 206
570 990
444 935
118 225
-
39 347
31 689
SMEs and individual
companies
1 031 165
27 556
608 263
444 085
19 615
33 640
108 490
29 989
Rest of households
27 613
5 452
8 044
12 409
-
-
-
1 087
Housing
13 767
463
-
463
-
-
-
-
Consumption
808
-
-
-
-
-
-
-
Other purposes
13 038
4 989
8 044
11 946
-
-
-
1 087
TOTAL
12 534 885
290 869
1 601 000
1 309 894
207 067
91 784
164 021
119 103
The distribution, at December 31, 2022, is the following:
Loans real guarantee: carrying amount on LTV
TOTAL
Of which
property
guarantee
Of which
other real
guarantee
Below
40%
40 – 60%
60- 80%
80 – 100%
Above
100%
Public Administrations
1 608 830
94 523
27 651
77 041
44 611
-
-
522
Other financial
corporations (financial
activity)
609 522
-
169 157
49 990
-
-
-
119 167
Non-financial corporations
(non-financial activity)
7 909 102
174 176
1 381 532
988 977
185 569
78 763
180 151
122 248
Construction / real estate
development
90 452
90 452
-
81 373
-
-
9 079
-
Civil engineering
construction
426 917
11 364
260 909
193 697
28 784
34 767
15 025
-
Other purposes
7 391 733
72 360
1 120 623
713 907
156 785
43 996
156 047
122 248
Large companies
6 187 139
53 725
485 904
331 753
110 264
13 035
39 743
44 834
SMEs and individual
companies
1 204 594
18 635
634 719
382 154
46 521
30 961
116 304
77 414
Rest of households
21 148
3 656
5 064
8 720
-
-
-
-
Housing
12 284
577
-
577
-
-
-
-
Consumption
717
-
-
-
-
-
-
-
Other purposes
8 147
3 079
5 064
8 143
-
-
-
-
TOTAL
10 148 602
272 355
1 583 404
1 124 728
230 180
78 763
180 151
241 937
63
5.8 Information on payment deferrals to suppliers
The information required by the third additional Provision of Law 15/2010, of 5 July, is the
following:
2023
2022
(days)
Average payment period to suppliers
6,75
6,75
Ratio of paid operations
7
7
Ratio of operations payable
3,5
3,5
(thousands of Euros)
Total settled payments
32 147
30 649
Total outstanding payments
1 043
1 744
Amount paid in a period below the maximum (default regulations)
32 147
30 649
(number of invoices)
Invoices paid in a period below the maximum (default regulations)
3 236
3 160
(percentage)
Amount paid in a period below the maximum of total payments
100%
100%
Invoices paid in a period below the maximum of total invoices
100%
100%
By virtue of Law 3/2004, the maximum payment term is of 30 days, extendable if agreed by
the parties, to a limit of 60 calendar days.
The third additional provision of Law 15/2010 of 5 July, amending Law 3/2004 of 29 December,
establishing measures against late payment in commercial operations, amended by the final
second provision of Law 31/2014, of 3 December, and article 9 of Law 18/2022, of 28
September, establishes the duty of unlisted companies that cannot present abridged annual
accounts to expressly include in the notes on their financial statements the average payment
period to suppliers, the monetary volume and number of invoices paid in a period below the
maximum established by default regulations, and their percentage over the total number of
invoices and the total monetary amount of payments to suppliers.
For the purpose of an appropriate understanding of the information contained in this note, as
established on ICAC Resolution of January 29, 2016, on information concerning late payment
to suppliers in commercial operations to be included in the Notes to annual accounts, it should
be noted that "Suppliers" are understood as those who, by nature, are trade payables due to
suppliers of goods and services.
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. When elaborating the information above, payments corresponding to
intercompany credits and debits have been excluded.
For the purpose of elaborating this information, and based on the nature of the Entity’s
activities and operations, when calculating the days of payment and outstanding payment
days, the period between the date of invoice (which in practice is usually the same as or very
close to the date of receipt of the goods or services from the supplier) and the date of actual
payment or the year-end date, respectively, has been taken into account.
5.9 Risk concentration and other specific regulations of the ICO
At December 31, 2023 and 2022, the Group is exempt from the limits on large exposures set
64
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.
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 operations to be
completed successfully.
Information on construction and property development finance is as follows:
- Finance granted for construction and property development and related hedges:
2023
2022
Gross
amount
Excess over
value of
collateral
Specific
allowance
Gross amount
Excess over
value of
collateral
Specific
allowance
Property financing
403 089
-
167 216
415 527
-
182 991
Of which doubtful
87 116
-
85 505
96 570
-
94 156
Memorandum item
Defaulted loans
-
-
-
-
-
-
Thousands of Euros
2023
2022
Memorandum item:
Total loans to clients, excluding public administrations
9 735 297
8 539 773
Total assets
31 656 823
29 774 943
Total general allowance for normal risk
379 169
192 885
Total finance for construction and property development at December 31, 2023 represents
1.27% of the total balance (1.40% at December 31, 2022).
- Finance for construction and property development (gross amounts):
65
Thousands of Euros
2023
2022
1 Without mortgage collateral
88 081
101 679
2 With mortgage collateral
315 008
313 849
2.1 Finished buildings
301 482
305 665
2.1.1 Homes
279 718
305 665
2.1.2 Other
21 764
-
2.2 Buildings under constructions
13 526
8 184
2.2.1 Homes
13 526
8 184
2.2.2 Other
-
-
2.3 Land
-
-
2.3.1 Developed land
-
-
2.3.2 Other land
TOTAL
403 089
415 527
- Home purchase loans:
Thousands of Euros
2023
2022
Gross
amount
Of which:
doubtful
Gross amount
Of which:
doubtful
Home loans
13 864
-
12 371
-
Without mortgage collateral
13 398
-
11 790
-
With mortgage collateral
466
-
581
-
- Home purchase loans with collateral mortgage (percentage of risk on latest appraisal
available, LTV):
At 31 December 2023:
Thousands of Euros
LTV<40%
40%<LTV<60%
60%<LTV<80%
80%<LTV<100%
LTV>100%
Gross amount
298
76
92
-
-
Of which
doubtful
At 31 December 2022:
Thousands of Euros
LTV<40%
40%<LTV<60%
60%<LTV<80%
80%<LTV<100%
LTV>100%
Gross amount
302
73
206
-
-
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
66
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,, 2023 and 2022 (gross amounts), as requirement
of Bank of Spain 6/2013 Circular, about financial public and reserved information rules:
At December 31, 2023 (gross amounts, in thousands of Euros):
With real
guarantee
No real
guarantee
TOTAL
amounts
TOTAL hedging
Public Administrations
-
88 082
88 082
51 844
Doubtful
-
36 844
-
36 844
Finance companies (finance
assets)
-
-
-
-
Doubtful
-
-
-
-
Non Finance companies and
Industrial Business
305 617
133 667
439 284
212 913
Doubtful
197 784
32 017
229 801
195 659
Non-doubtful
-
-
-
-
Property doubtful
3 628
-
-
3 628
Rest of individuals
231
1
231
-
TOTALS
305 848
221 749
527 597
264 757
At December 31, 2022 (gross amounts, in thousands of Euros):
With real
guarantee
No real
guarantee
TOTAL
amounts
TOTAL hedging
Public Administrations
-
101 679
101 679
57 185
Doubtful
38 435
38 435
38 435
Finance companies (finance
assets)
-
-
-
-
Doubtful
Non Finance companies and
Industrial Business
303 375
120 046
423 421
189 963
Doubtful
167 412
26 460
193 872
174 977
Non-doubtful
8 617
-
8 617
5 960
Property doubtful
4 822
-
4 822
4 822
Rest of individuals
229
40
269
-
TOTALS
303 604
221 765
525 369
247 148
At December 31, 2023, the total number of refinanced or restructured operations was 71 (98
at December 31, 2022): 34 unsecured operations (46 at December 31, 2022) and 37 secured
operations (52 at December 31, 2022). Of the total number of refinanced or restructured
operations, 44 are of doubtful risk (60 at December 31, 2022).
6. CASH, DEPOSITS AT CENTRAL BANKS AND DEMAND DEPOSITS
The composition of this caption of the balance sheet at December 31, 2023 and 2022 is the
following:
67
Thousands of Euros
2023
2022
Cash at hand
6
6
Cash in Bank of Spain
2 123 983
2 557 390
Mandatory to comply with minimum reserve ratios
2 123 983
2 557 390
Other demand deposits
34 991
80 039
2 158 980
2 637 435
7. FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING
The total balance under these headings in the balance sheets at December 31, 2023 and
2022 are made up of trading derivatives.
Operations 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, 2023 and 2022:
Thousands of Euros
Notional
Assets
Liabilities
2023
2022
2023
2022
2023
2022
By type of market
Organised markets
-
-
-
-
-
-
Non – organised markets
336 743
356 337
24 197
30 637
23 610
29 714
336 743
356 337
24 197
30 637
23 610
29 714
By type of product
Swaps
336 743
356 337
24 197
30 637
23 610
29 714
336 743
356 337
24 197
30 637
23 610
29 714
By counterparty
Credit institutions
212 524
233 288
-
348
23 610
29 714
Other credit institutions
-
-
-
-
-
-
Other sectors
124 219
123 049
24 197
30 289
-
-
336 743
356 337
24 197
30 637
23 610
29 714
By type of risk
Exchange risk
253 463
221 264
22 794
30 481
22 572
29 580
Interest rate risk
83 280
135 073
1 403
156
1 038
134
336 743
356 337
24 197
30 637
23 610
29 714
The fair value has been calculated for the 100% of the cases, both in 2023 and 2022, taking
the implicit curve of the money markets and the public debt as a reference.
At December 31,
2023 and 2022 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:
68
Thousands of Euros
2023
2022
Level I
Level II
Level III
Level I
Level II
Level III
Derivatives held for trading of assets
-
24 197
-
-
30 637
-
Derivatives held for trading of liabilities
-
23 610
-
-
29 714
-
The following chart shows amounts registered on income statements of 2023 and 2022 (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):
Thousands of Euros
2023
2022
Profit
Loss
Net
Profit
Loss
Net
Level 1
-
-
-
-
-
-
Level 2
26 226
(25 286)
940
81 400
(81 141)
(259)
Level 3
-
-
-
-
-
-
In 2023 and 2022, 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, 2023 and 2022, investment is as follows:
Thousands of Euros
2023
2022
Equity instruments
-
-
Debt securities
-
-
At December 31, 2023 and at December 31, 2022, 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 2023, no results have been registered for the valuation at fair value in the income statement
for this concept (none in 2022) (Note 30).
9. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
The detail of this caption of the balance sheet at December 31, 2023 and 2022, per investment,
is the following:
69
Thousands of Euros
2023
2022
Equity instruments:
FONDICO Pyme (1)
119 024
106 212
FONDICO Sostenibilidad e Infraestructuras (2)
139 980
114 840
FONDICO Global (3)
1 066 870
994 168
FONDICO Next Tech (4)
126 362
20 893
FONS MEDITERRANEA FCR (5)
3 485
3 549
FONDO MARGUERITTE MEH (6)
39 041
42 019
FONDO AFS CESCE (7)
-
12 040
FEI (8)
30 246
29 627
SWIFT (9)
6
6
EDW (10)
206
194
PARTICIPACIONES GRUPO QUABIT (11)
-
-
FONDO MARGUERITTE III INVEST EU (12)
8 337
1 483
1 533 557
1 325 031
Debt securities (13)
91 001
1 135 160
1 624 558
2 460 191
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, 2023 and 2022, is
the following (Note 21):
Thousands of Euros
2023
2022
Debt instruments
719
(28 313)
Equity instruments
365 729
349 635
366 448
321 322
Variations, during 2023 and 2022, in the caption of Financial assets at fair value through other
comprehensive income are shown below:
Thousands of Euros
2023
2022
Initial balance
2 460 191
2 237 145
Purchase additions
417 778
310 006
Sales and amortisations
(1 241 704)
308 000
Variations for changes in fair value (Note 21)
(11 707)
221 051
Allocation impairment provision
-
-
Variations for impairment losses (application)
-
(11)
Closing balance
1 624 558
2 460 191
(1) FONDICO Pyme. Venture capital fund constituted on May 1993 and in which the
Institute is the sole participant, managed by Axis Participaciones Empresariales. The
net contribution has been of 15,025 thousand Euros (no net contribution in 2022). The
amount payable and committed by ICO is of 61,000 thousand Euros at December 31,
2023.
(2) FONDICO Sostenibilidad e Infraestructuras. New venture capital fund constituted on
2019, fully invested by the Institute and managed by Axis Participaciones
Empresariales. In 2023, the Institute’s net contributions amounted to 19,000 thousand
Euros (net returns of 28,528 thousand Euros in 2022). The amount payable and
committed by ICO is of 68,000 thousand Euros at December 31, 2023.
(3) FONDICO Global. Venture capital fund created in 2014, fully invested by the Institute
70
and managed by Axis Participaciones Empresariales. In 2023, the Institute’s
contributions amounted to 170,000 thousand Euros (210,000 thousand Euros in 2022).
In 2023, the Fund has decreased equity through refund of contributions by 91,000
thousand Euros (247,000 thousand Euros in 2022). The amount committed by ICO
and to be reimbursed amounts to 733,000 thousand Euros at December 31, 2023.
(4) FONDICO Next Tech. Venture capital fund created in 2021, wholly owned by the
Institute and managed by Axis Participaciones Empresariales. In 2023, the Institute’s
contributions amounted to 114,300 thousand Euros (24,300 thousand Euros in 2022).
The amount payable and committed by ICO is of 504,000 thousand Euros at December
31, 2023.
(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. No provision at
December 31, 2023 (1,270 thousand Euros at December 31, 2022). No net
contributions in 2023 or 2022.
(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
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 Finance, which provides funds to finance the Fund. In 2023, no contributions were
made (630 thousand Euros in 2022), and returns of participations were made for an
amount of 986 thousand Euros (no returns in 2022).
(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 2023, the Institute
sold this investment, generating results of 287 thousand Euros (Note 28). In 2022,
contributions amounted to 1,500 thousand Euros, with no refunds.
(8) FEI. Participation equal to 0.66% of the total of the European Investment Fund, at
December 31, 2023 (0.66% at December 31, 2022). There have not been net
contributions at 2023 or at 2022. At December 31, 2023, an amount remained payable
by 38,933 thousand Euros.
(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. These shares are fully covered by accounting provisions,
and therefore their net value is null (provision of 3,735 thousand Euros at December
31, 2023).
(12) FONDO MARGUERITTE III INVEST EU. At the end of 2022, ICO acquired shares in
this fund, for an amount of 1,483 thousand Euros, as Implementing Partner of the
European Commission, within InvestEU, the European Commission’s Guarantee
Programme. This investment is guaranteed by the EC to ICO by 50%.
71
(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).
The detail of these assets per maturities is the following:
Thousands of Euros
2023
2022
Maturity up to 1 year
-
448 520
Maturity from 1 to 2 years
70 590
531 671
Maturity from 2 to 3 years
20 411
154 969
Maturity over 3 years
-
-
91 001
1 135 160
At December 31, 2023 and 2022, 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
2023
2022
Level I
Level II
Level III
Level I
Level II
Level III
Debt securities
91 001
1 135 160
Equity instruments
1 533 557
1 325 031
During 2023, losses on derecognition of financial assets at fair value through other
comprehensive income of 21,233 thousand Euros (Note 28) were recognised in the Institute’s
income statement, for an amount of 21,233 thousand Euros (Note 28), which were reclassified
from equity to the extent that they were measured at fair value at the time of sale. In 2022,
there were no disposals with an impact on the income statement.
10. FINANCIAL ASSETS AT AMORTISED COST
The composition of the balance in this caption of the balance sheets, at December 31, 2023
and 2022, is the following (including impairment losses and other valuation adjustments):
Thousands of Euros
2023
2022
Debt securities (Note 10.1)
6 302 584
6 781 025
Loans and advances:
20 901 994
17 085 646
Credit institutions (Note 10.2)
8 300 598
6 911 989
Customers (Note 10.3)
12 601 396
10 173 657
27 204 578
23 866 671
Set out below are the movements for 2023 and 2022 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:
72
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 2022
897
499 733
145 886
646 516
Allocations charged to results
1 025
26 894
47 562
75 481
Recoveries against results
-
(56 818)
(475)
(57 293)
Application of funds
(16 077)
(16 077)
Other variations
Adjustments for exchange differences
(3)
(97)
(88)
(188)
Balance at 31 December 2022
1 919
453 635
192 885
648 439
Allocations charged to results
2 904
137 562
2 881
143 347
Recoveries against results
(35)
(50 439)
(30 946)
(81 420)
Application of funds
(8 771)
(8 771)
Other variations
Adjustments for exchange differences
(84)
339
(25)
230
Balance at 31 December 2023
4 704
532 326
164 795
701 825
The following table details provisions for doubtful risks and normal risks in watch-list based on
determination criteria:
Thousands of Euros
2023
2022
Provision for doubtful risks (with defaults):
421 942
328 666
Default
24 386
16 456
Other than default
397 556
312 210
Provision for normal risk in watch-list
110 384
124 969
TOTALS
532 326
453 635
The provision for normal risk in watch-list corresponds to credit assets for an amount of
544,623 thousand Euros at December 31, 2023 (626,319 thousand Euros at December 31,
2022).
The table below provides a breakdown of financial assets classified as loans and receivables
considered impaired due to their credit risk at December 31, 2023 and 2022, 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.
Impaired assets at 31 December 2023
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
472 560
-
-
-
42 612
-
350
24 035
539 557
Impaired assets at 31 December 2022
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
359 189
-
421
-
-
-
-
-
16 162
375 772
73
As of December 31, 2023 there is a balance of assets impaired by country risk of 240,259
thousand Euros, with a hedging per country risk of 4,704 thousand Euros (91,641 thousand
Euros at December 31, 2022 with a hedging of 1,919 thousand Euros).
The amount of non-impaired past due assets for 2023 and 2022 was of 45,458 thousand Euros
and 32,339 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
2023
2022
Opening balance
1 461 682
1 525 753
Additions:
1 983
1 392
Balance recovery
-
1 392
Other causes
1 983
-
Recoveries:
(86 125)
(67 686)
Cash collection without additional financing
(73 434)
(41 656)
Asset allocation
-
-
Others
(12 691)
(26 030)
Definitive write-offs: other causes:
-
-
Net variation for exchange difference
(1 325)
2 223
Closing balance
1 376 215
1 461 682
The net amount included on the accompanying income statement of 2023 and 2022 as a
consequence of the variation of assets which recovery is deemed remote (failed assets)
amounts to profits by 73,434 thousand Euros and 41,656 thousand Euros, respectively
(caption “Impairment or reversal of impairment on financial assets not measured at fair value
through profit or loss and net profit or loss for modification”).
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, 2023 and 2022, based
on the counterparty category, is the following:
Thousands of Euros
2023
2022
Per counterparty category -
Resident Public Administrations
3 585 044
4 537 261
Resident Credit Institutions
1 193
2 270
Other resident sectors
2 539 761
2 034 102
Other non-resident sectors
176 586
207 392
6 302 584
6 781 025
74
The detail per maturity terms at December 31, 2023 and 2022 is the following:
Thousands of Euros
2023
2022
Maturities
Up to 1 year
850 743
1 552 664
From 1 to 2 years
806 189
303 174
From 2 to 3 years
415 084
548 999
From 3 to 4 years
2 037 649
331 955
From 4 to 5 years
1 202 335
2 024 225
More than 5 years
990 584
2 020 008
6 302 584
6 781 025
At December 31, 2023, these assets accrued an annual interest rate of 2.42% (0.92% at
December 31, 2022).
Interest accrued by these assets in 2023 and 2022 amounted to 145,325 thousand Euros and
60,526 thousand Euros, respectively, included under caption “Interest income” of the
accompanying income statement (Note 24).
The Institute has coverage for credit risk at December 31, 2023 (normal risk) of 40,420
thousand Euros for these assets (42,522 thousand Euros at December 31, 2022).
Variations undergone during 2023 and 2022 in caption of Debt securities at amortised cost
are the following:
Thousands of Euros
2023
2022
Opening balance
6 781 025
6 889 673
Purchase additions
3 677 545
6 003 297
Variations for impairment losses
2 102
(20 870)
Amortisations and sales
(4 158 088)
(6 091 075)
Closing balance
6 302 584
6 781 025
At December 31, 2023, the Institute has registered results from financial operations derived
from the write-off of assets included in the caption of “Debt securities” for an amount of 500
thousand Euros (profits of 172 thousand Euros at December 31, 2022) (Note 28).
10.2 Loans and advances to Credit Institutions
The composition of this caption of the balance sheet at December 31, 2023 and 2022 is the
following:
Thousands of Euros
2023
2022
By nature -
Deposits in credit institutions (Note 10.2.1)
1 441 534
661 014
National mediation loans (Note 10.2.2)
5 721 898
5 184 441
International mediation loans (Note 10.2.3)
1 089 129
1 051 361
Other loans to credit institutions (Note 10.2.4)
1 722
3 819
8 254 283
6 900 635
Impairment losses
(4 738)
(4 006)
Other valuation adjustments (interests and financial fees)
51 053
15 360
8 300 598
6 911 989
75
10.2.1 Deposits in credit institutions
The following table details the balance of “Deposits in credit institutions”, grouped by maturity,
at December 31, 2023 and 2022:
Thousands of Euros
2023
2022
Up to 1 year
1 441 534
661 014
From 1 to 2 years
-
-
From 2 to 3 years
-
-
From 3 to 4 years
-
-
From 4 to 5 years
-
-
More than 5 years
-
-
1 441 534
661 014
During 2023, the caption “Deposits in credit institutions” accrued an average annual interest
of 3.96% (0.77% during 2022). All deposits included are time deposits as of December 31,
2023 and 2022.
Interests accrued during 2023 and 2022 for these loans have amounted a total of 44,093 and
4,475 thousand Euros, respectively, which are included under the heading “Interest income ”
of the income statement (Note 24).
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, 2023 and 2022. During the years 2023 and 2022
no new lines have been approved in which the Institute assumes risk from final borrowers.
The detail of the balance of national mediation loans at December 31, 2023 and 2022 per
years of maturity is the following:
Thousands of Euros
2023
2022
Up to 1 year
1 459 317
1 510 188
From 1 to 2 years
1 160 827
1 121 629
From 2 to 3 years
964 558
785 381
From 3 to 4 years
726 814
579 293
From 4 to 5 years
577 823
391 803
More than 5 years
832 559
796 147
5 721 898
5 184 441
At December 31, 2023 and 2022, mediation loans accrued an annual average interest rate of
2.80% and 0.95%, respectively.
Interests accrued during 2023 and 2022 for national mediation loans have amounted to
112,653 and 39,592 thousand Euros, respectively, included on caption “Interest income” of
the income statement (Note 24).
10.2.3 International mediation loans
International mediation loans are a new activity in ICO, launched in 2018, in order to support
76
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, 2023 and 2022
detailed per years of maturity is the following:
Thousands of Euros
2023
2022
Up to 1 year
253 785
205 045
From 1 to 2 years
148 156
209 092
From 2 to 3 years
111 496
109 576
From 3 to 4 years
90 884
88 025
From 4 to 5 years
87 376
61 890
More than 5 years
397 432
377 733
1 089 129
1 051 361
At December 31, 2023 and 2022, international mediation loans accrued an annual average
interest rate of 2.80% and 0.95%, respectively.
Interests accrued during 2023 and 2022 by international mediation loans have amounted to
61,812 thousand Euros and 21,981 thousand Euros, respectively, which are included in the
caption "Interest income” of the income statement (Note 24).
This caption includes an amount of impairment losses, for risk of bad debt (normal credit risk
and country risk), for a total amount of 4,739 thousand Euros (4,006 thousand Euros at
December 31, 2022) (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, 2023 and 2022 detailed per years
of maturity is the following:
Thousands of Euros
2023
2022
Up to 1 year
1 722
2 539
From 1 to 2 years
-
1 280
From 2 to 3 years
-
-
From 3 to 4 years
-
-
From 4 to 5 years
-
-
More than 5 years
-
-
1 722
3 819
At December 31, 2023 and 2022, loans to credit institutions accrued an annual average
interest rate of 6.46% and 0.33%, respectively.
Interests accrued during 2023 and 2022 by these loans have amounted to 195 thousand Euros
and 22 thousand Euros, respectively, included on caption “Interest income” of the income
statement (Note 24).
10.3 Customer loans and advances
The composition of this caption of the balance sheet at December 31, 2023 and 2022, based
on the counterparty category, is the following:
77
Thousands of Euros
2023
2022
Counterparty category -
Resident Public Administrations
2 898 361
1 639 593
Non-resident Public Administrations
20 551
89 852
Other resident sectors
8 514 519
7 285 523
Other non-resident sectors
1 699 033
1 703 318
Other financial assets
66 511
25 055
13 198 975
10 743 341
Impairment losses
(656 667)
(601 911)
Other valuation adjustments (interests and financial fees)
59 088
32 227
12 601 396
10 173 657
The value of certain investments in some Economic Interest Groupings is included in “Other
resident sectors” (115 thousand Euros at December 31, 2023 and 20,965 thousand Euros at
December 31, 2022) 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 (13,565 thousand Euros at
December 31, 2023, 22,707 thousand Euros at December 31, 2022) (Notes 19 and 23).
Interests accrued, during 2023 and 2022, for these loans have amounted to 536,634 thousand
Euros and 181,789 thousand Euros, respectively, which are included on caption "Interest
income” of the income statement (Note 24).
Of the above balances, information is provided below regarding operations 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, 2023 and 2022:
Thousands of Euros
2023
2022
Balances included under “Resident Public Administrations”
Loans to the national government
2 267 730
1 010 415
Loans to regional governments
630 631
629 178
Valuation adjustments
(119 380)
(120 789)
2 778 981
1 518 804
Balances included under “Other resident sectors”
Doubtful assets
4 733
5 294
Loans to other public entities
2 206 203
1 888 578
Loans to other sectors
431 916
161 751
2 642 852
2 055 623
Total operations guaranteed by the State
5 421 833
3 574 427
The breakdown of “Loans to the national government,” excluding valuation adjustments, is as
follows at December 31, 2023 and 2022:
Thousands of Euros
2023
2022
Loans to the State and its Autonomous Entities
2 267 615
1 008 901
Accounts receivable from the Public Treasury
115
1 514
2 267 730
1 010 415
78
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 2023
and 2022 (Note 24) are the following:
Thousands of Euros
2023
2022
Central government
Regional governments
Other public sector entities
74 756
22 337
59 485
9 322
4 613
20 162
156 578
34 097
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, 2023 and 2022, is as follows:
Thousands of Euros
2023
2022
Maturities
Up to 1 year
3 031 158
1 489 245
From 1 to 2 years
1 267 414
1 344 673
From 2 to 3 years
1 188 015
1 262 703
From 3 to 4 years
1 346 261
1 154 056
From 4 to 5 years
1 461 361
1 270 986
More than 5 years
4 963 854
4 253 905
13 258 063
10 775 568
At December 31, 2023 and 2022, loans to clients accrued an annual average interest rate of
4.64% and 1.58%, respectively.
At December 31, 2023, 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, 2022) (Note 28).
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
79
“Hedging derivatives” at December 31, 2023 and 2022, by hedging type, counterparty and risk
(all contracted in non-organised OTC markets), are as follows:
Thousands of Euros
Notional
Assets
Liabilities
2023
2022
2023
2022
2023
2022
By type of hedging
Fair value hedges
9 783 753
6 240 506
216 605
348 572
246 493
200 090
Cash flow hedges
5 527 622
4 709 662
86 167
90 250
337 303
365 529
15 311 375
10 950 168
302 772
438 822
583 796
565 619
By type of product
Swaps
15 311 375
10 950 168
302 772
438 822
583 796
565 619
15 311 375
10 950 168
302 772
438 822
583 796
565 619
By counterparty
Credit institutions
15 311 375
10 950 168
302 772
438 822
583 796
565 619
15 311 375
10 950 168
302 772
438 822
583 796
565 619
By type of risk
Risk of exchange
8 886 785
5 780 660
171 913
191 002
442 136
319 081
Interest rate risk
6 424 590
5 169 508
130 859
247 820
141 660
246 538
15 311 375
10 950 168
302 772
438 822
583 796
565 619
At December 31, 2023 and 2022, 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
2023
2022
Level I
Level II
Level III
Level I
Level II
Level III
Asset hedging derivatives
-
302 772
-
-
438 822
-
Liability hedging derivatives
-
583 796
-
-
565 619
-
The fair value of these items has been calculated in 100% of the cases, both in 2023 and in
2022, 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 2023 and 2022 is the following:
80
Thousands of Euros
Group
companies
Joint
ventures
Associates
Total
Balance at 1 January 2022
1 940
-
50 659
52 599
Additions
-
-
4 867
4 867
Withdrawals
-
-
-
-
Other variations
-
-
-
-
Impairment
-
-
-
-
Balance at 31 December 2022
1 940
-
55 526
57 466
-
-
-
-
Additions
-
-
-
-
Withdrawals
-
-
-
-
Other variations
-
-
-
-
Impairment
-
-
-
-
Balance at 31 December 2023
1 940
-
55 526
57 466
Annex I contains a breakdown of shareholdings, as well as the most relevant information
regarding these interests at December 31, 2023 and 2022.
13. PROPERTY, PLANT AND EQUIPMENT
The variation during 2023 and 2022 in accounts of property, plant and equipment and their
corresponding accumulated amortisation, has been the following:
Buildings of own
use
Furniture, vehicle
and other assets
Total
Cost
Balances at 1 January 2023
115 950
16 377
132 327
Additions
1 255
215
1 470
Disposals and other write-offs
-
-
Balances 31 December 2023
117 205
16 592
133 797
Accumulated amortisation
Balances at 1 January 2023
40 239
8 350
48 589
Allocations
1 934
334
2 268
Transfers and other variations
-
-
-
Balances 31 December 2023
42 173
8 684
50 857
Impairment losses
Balances at 1 January 2023
-
651
651
At December 31, 2023
Net property, plant and equipment
75 032
7 257
82 289
Cost
Balances at 1 January 2022
114 929
16 187
131 116
Additions
1 021
190
1 211
Disposals and other write-offs
-
-
Balances 31 December 2022
115 950
16 377
132 327
Accumulated amortisation
Balances at 1 January 2022
38 389
8 034
46 423
Allocations
1 850
316
2 166
Transfers and other variations
-
-
-
Balances 31 December 2022
40 239
8 350
48 589
Impairment losses
At 31 December 2022
-
651
651
Net property, plant and equipment
Balances 31 December 2022
75 711
7 376
83 087
81
At December 31, 2023 there are fully-depreciated property, plant and equipment for own use
for a gross amount of 20,304 thousand Euros (19,673 thousand Euros at December 31, 2022).
In compliance with Institute policy, all property, plant and equipment is insured at December
31, 2023 and 2022.
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, 2023 amounted to 17,216 thousand Euros (18,026
thousand Euros at December 31, 2022) (Note 20).
The table below presents the fair value of certain items of property, plant and equipment of
the Group at December 31, 2023 and 2022 by category, along with the related carrying
amounts at those dates:
Thousands of Euros
2023
2022
Carrying value
Fair value
Carrying value
Fair value
Property, plant and equipment for own use
82 289
113 023
83 087
113 023
Buildings
74 577
105 192
75 256
105 192
Other
7 257
7 376
7 376
7 376
Property under construction
455
455
455
455
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, 2023 and 2022.
14. INTANGIBLE ASSETS
The breakdown of Intangible assets in the balance sheet at December 31, 2023 and 2022
relates exclusively to the account of Other intangible assets.
82
Thousands of Euros
Estimated useful life
2023
2022
With indefinite useful life
-
-
-
With defined useful life
3 years to 10 years
56 235
52 376
Gross total
56 235
52 376
Of which:
Internal developments
3 years
44 940
46 215
Remainder
10 years
11 295
6 161
Accumulated depreciation
(45 780)
(43 403)
Impairment losses
(2 137)
(2 137)
8 318
6 836
All intangible assets at December 31, 2023 and 2022 related to computer software. Fully
amortised intangible assets at December 31, 2023 amounted to 44,773 thousand Euros
(42,097 thousand Euros at December 31, 2022).
15. TAX ASSETS AND TAX LIABILITIES
The detail of Tax Assets and Liabilities at December 31, 2023 and 2022 is the following:
Thousands of Euros
Assets
Liabilities
2023
2022
2023
2022
Current taxes:
22 236
4 330
1 439
1 493
Corporate income tax (Note 23)
21 577
3 847
-
-
VAT
659
483
24
31
Personal income tax withholdings
-
-
971
1 041
Social Security contributions
-
-
444
421
Deferred taxes:
148 970
174 345
172 981
153 641
Impairment losses on credits, loans and discounts
73 629
91 761
-
-
Measurement of cash-flow hedges (Note 21)
75 341
82 584
-
-
Restatement of property
-
-
15 932
15 932
Restatement of financial assets at fair value through OCI (Note 21)
-
-
157 049
137 709
171 206
178 675
174 420
155 134
Variations undergone, during 2023 and 2022, on balances of deferred tax assets and liabilities
are shown below:
Thousands of Euros
Assets
Liabilities
2023
2022
2023
2022
Opening balance
174 345
152 470
153 641
75 159
Impairment losses on credits, loans and discounts
(18 132)
9 976
-
-
Valuation of cash flow hedges (Note 21)
(7 243)
11 899
-
-
Restatement of property
-
-
-
-
Restatement of financial assets at fair value through OCI (Note 21)
-
-
19.340
78 482
Closing balance
148 970
174 345
172.981
153 641
83
16. OTHER ASSETS AND OTHER LIABILITIES
The composition of the caption of “Other assets” of the balance sheet at December 31, 2023
and 2022 is the following:
Thousands of Euros
OTHER ASSETS
2023
2022
Other assets
6 590
4 325
Accruals
15 869
10 798
22 459
15 123
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
2023, the overall amount of these fees receivable for ICO is 9 million Euros per year (5 million
Euros at December 31, 2022), also recorded in the accompanying 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 (1,690 thousand Euros at
December 31, 2023 and 2,141 thousand Euros at December 31, 2022).
The composition of the balance of “Other liabilities” of the balance sheet at December 31,
2023 and 2022 is the following:
Thousands of Euros
OTHER LIABILITIES
2023
2022
Other liabilities
-
-
Accruals
55 958
63 331
55 958
63 331
Under the heading “Accruals” includes the amounts accrued and unpaid, for commissions to
be paid to credit institutions by the concepts of “rappel 2023 mediation lines” by 2,000
thousand Euros (750 thousand Euros in 2022). It also includes fees for the management of
COVID and UKRAINE 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
for an amount of 49,706 thousand Euros at December 31, 2023 (57,094 thousand Euros at
December 31, 2022).
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, 2023 and December 31, 2022
comes from any funding related neither to Property development land nor to any other property
development business.
Movements for years 2023 and 2022 in the balances under this balance sheet heading are
shown below:
84
Thousands of Euros
Cost
Impairment
Total
Balance at 1 January 2022
62 604
(62 604)
-
Additions
1 882
(1 882)
-
Withdrawals/Applications
(4 026)
4 026
-
Transfers
-
-
-
Balance at 31 December 2022
60 460
(60 460)
-
Additions
4
(4)
-
Withdrawals/Applications
(48 662)
48 662
-
Transfers
-
-
-
Balance at 31 December 2023
11 802
(11 802)
-
In 2023, impairment allocations of these non-financial assets have been registered, for an
amount of 4 thousand Euros (1,882 thousand Euros in 2022).
In 2023, results from the sale of non-current assets held for sale have been registered, for an
amount of 2,764 thousand Euros (1,468 thousand Euros in 2022) that are recorded under
“Gains (losses) on non-current assets and disposal groups classified as held for sale not
qualifying as discontinued operations”, in the accompanying income statements.
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):
.
85
RESIDENTIAL USE BUILDINGS
Thousands of € last
appraisal
Appraiser
Appraisal methodology
6
ALIA TASACIONES
COMPARISON
31
COHISPANIA
COMPARISON
1,497
EUROVALORACIONES
COMPARISON
140
EUROVALORACIONES
COST
7
GESVALT
RENT UPDATE
9
GESVALT
COMPARISON
150
GRUPO TASVALOR
COMPARISON
1.840
TERTIARY USE BUILDINGS
Thousands of € last
appraisal
Appraiser
Appraisal methodology
79
EUROVALORACIONES
COMPARISON
30
EUROVALORACIONES
RESIDUAL DYNAMIC
109
RUSTIC LAND
Thousands of € last
appraisal
Appraiser
Appraisal methodology
32
EUROVALORACIONES
RENT UPDATE
119
EUROVALORACIONES
COMPARISON
4
GRUPO TASVALOR
COMPARISON
155
URBAN AND DEVELOPABLE LANDS
Thousands of € last
appraisal
Appraiser
Appraisal methodology
3,997
EUROVALORACIONES
RESIDUAL DYNAMIC
44
EUROVALORACIONES
OTHERS
38
GRUPO TASVALOR
RESIDUAL DYNAMIC
4,079
TOTAL
6,183
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
2023
2022
Counterparty categories
Deposits from Central Banks (Note 18.1)
327 075
2 961 320
Deposits from credit institutions (Note 18.2)
5 722 623
4 704 485
Deposits from customers (Note 18.3)
368 001
366 892
Issued debt securities (Note 18.4)
16 920 632
13 374 254
Other financial liabilities (Note 18.5)
114 263
247 302
Monetary market operations (Nota 18.6)
95 702
28 174
23 548 296
21 681 827
86
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.
18.2 Deposits from credit institutions
The composition of this caption of the balance sheets at December 31, 2023 and 2022 based
on the nature of operations is the following:
Thousands of Euros
2023
2022
Nature:
Loans from the European Investment Bank
3 976 291
3 970 102
Interbank loans
194 464
207 780
Loans from other credit institutions
1 375 112
526 848
Valuation adjustments – accruals
176 756
(245)
5 722 623
4 704 485
Interbank deposits fall due within less than one year from December 31, 2023 and 2022,
respectively.
Loans from the European Investment Bank present the following final repayment schedule:
Thousands of Euros
2023
2022
Up to 1 year
584 470
822 513
From 1 to 2 years
793 860
591 713
From 2 to 3 years
445 124
811 362
From 3 to 4 years
134 605
454 854
From 4 to 5 years
574 544
137 281
More than 5 years
1 443 688
1 152 379
3 976 291
3 970 102
The breakdown by maturity date of “Loans from other credit institutions” is as follows:
Thousands of Euros
2023
2022
Up to 1 year
78 750
78 750
From 1 to 2 years
78 750
78 750
From 2 to 3 years
30 000
78 750
From 3 to 4 years
492 896
30 000
From 4 to 5 years
500 000
198 760
More than 5 years
194 716
61 838
1 375 112
526 848
18.3 Deposits from customers
The composition of this caption of the balance sheets at December 31, 2023 and 2022 based
on the sector is the following:
Thousands of Euros
2023
2022
Counterparty category
Public Administrations
353 577
348 650
Other resident sector (1)
12 566
17 131
Other non-resident sectors
-
-
Valuation adjustments – accruals
1 858
511
368 001
366 292
(1) Of which, at December 31, 2023 and 2022, 12,566 thousand Euros and 17,133 thousand Euros, respectively, were
demand accounts.
87
At December 31, 2023 and 2022, the detail by nature of the balance registered on “Public
Administrations” is the following:
Thousands of Euros
2023
2022
Reciprocal Interest Adjustment Agreement (C.A.R.I.)
16 063
8 634
Public Administration Current Accounts and other items
337 514
340 016
353 577
348 650
18.4 Issued debt securities
The detail of this caption at December 31, 2023 and 2022 is the following:
Thousands of Euros
2023
2022
Bonds and debentures issued
16 556 039
13 351 201
Valuation adjustments (*)
364 593
23 053
16 920 632
13 374 254
(*) Including operation costs and value corrections for accounting hedging
Variations of issued bonds and debentures, during 2023 and 2022, have been the following:
Thousands of Euros
2023
2022
Opening balance
13 351 201
20 070 571
Issues
24 024 547
23 490 046
Amortisations and depreciations
(20 561 661)
(30 648 144)
Exchange differences
(258 048)
438 728
Closing balance
16 556 039
13 351 201
Detailed below are debenture issues outstanding at December 31, 2023 and 2022, grouped
per currency:
Thousands of Euros
Number of
issues
2023
2022
Currency
2023
2022
49
59
US Dollar
6 616 445
4 575 090
55
61
Euro
9 583 488
7 683 423
1
1
Swiss Franc
269 978
253 884
2
10
Australian Dollar
54 144
452 347
-
10
Pound Sterling
-
350 909
1
1
Yen
31 984
35 548
16 556 039
13 351 201
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 2023, the total financial cost of debenture loans in both Euros and foreign currency recorded
under the heading ‘Interest and similar charges’ in the accompanying income statement was
878,209 thousand Euros, which is an average annual interest rate of 4.70% (2.58% with the
effect of accounting hedges). In 2022, financial costs amounted to 562,607 thousand Euros,
88
which was an average annual interest rate of 3.65% (0.51% with accounting hedges) (Note
25).
As of 2023, the Institute has not recorded results for financial operations derived from the
purchase of financial liabilities at amortised cost (profits of 947 thousand Euros in 2022),
included on caption 'Gains or losses on financial assets and liabilities not measured at fair
value through profit or loss, net’ of the accompanying income statement (Note 28).
18.5 Other financial liabilities
The composition of this caption of the balance sheets at December 31, 2023 and 2022, is the
following:
Thousands of Euros
2023
2022
Treasury Funds
94 073
170 495
Other concepts
20 190
76 807
114 263
247 302
“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’s degree for 2011-2012.
- Línea FuturE: 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 operations
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.
Balances at December 31, 2023 and 2022 of such funds are shown below:
89
Thousands of Euros
2023
2022
FOMIT – Renove Turismo
13 045
28 012
Préstamos Renta Universidad
60 888
80 717
Futur E
152
511
Other funds and other concepts
40 178
138 062
114 263
247 302
18.6 Monetary market operations
This caption includes temporary assignments of assets, entirely securities representing Public
Debt.
19. PROVISIONS
At December 31, 2023 and 2022 the detail of this caption of the accompanying balance sheet
is the following:
Thousands of Euros
2023
2022
Provisions for pensions and similar obligations
836
770
Provisions for contingent exposures and commitments
50 579
59 396
Other provisions
1 530 260
1 704 589
1 581 675
1 764 755
The composition of the caption of “Other provisions” of the accompanying balance sheets at
December 31, 2023 and 2022 is the following:
Thousands of Euros
2023
2022
Royal Decree – Law12/1995 Fund
1 507 275
1 672 132
Fund for amounts recovered from BBVA
106
200
Fund Prestige Facility
8 326
8 297
Fund to compensate AIE shareholdings results (Note 10.3)
13 565
22 707
Other funds
988
1 253
1 530 260
1 704 589
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
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”.
90
Those loans or operations 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 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
2023 and 2022 amounted to 29 thousand Euros and 15 thousand Euros, respectively and the
income obtained on the management of the funds assigned to the Fund itself, in 2023 and
2022, amounted to 46,521 thousand Euros and (7,688) thousand Euros, respectively. In 2023,
due to their nature, these yields have been recorded in as finance costs net interest income
of the income statement (in 2022 they were recorded as provisions).
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).
This fund’s variations in 2023 and 2022 included on caption of “Other provisions” of the
balance sheet at December 31, 2023 and 2022 are the following:
Thousands of Euros
Balance at 1 January 2022
1 316 127
Capitalisation of interests
(7 688)
State Contributions
-
Application ICO results 2021
122 960
Loan recoveries (principal and interests)
1 227
Applications
-
Credits COVID lines commissions (net of contracting expenses)
239 506
Balance at 31 December 2022
1 672 132
State Contributions
46 521
Application ICO results 2022
-
Loan recoveries (principal and interests)
127 951
Applications
-
Credits COVID lines commissions (net of contracting expenses)
(147)
(339 182)
Balance at 31 December 2023
State Contributions
1 507 275
91
In 2023 an extraordinary contribution to the Fund of 127,951 thousand Euros has been
registered, as part of the net profit distributed by ICO for 2022.
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 operations 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 2023, there is a provision by 106 thousand
Euros (200 thousand Euros at December 31, 2022).
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.
Fund to offset results AIE shareholding results
Heading Fund to offset AIE shareholdings includes the provision in order to adjust its profit to
the operations 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 13,527 thousand Euros and 7,785 thousand Euros, respectively in
the years 2023 and 2022 (Note 23).
Variations of the caption of Provisions in 2023 and 2022 are shown below:
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 2022
-
791
48 652
1 340 866
1 390 309
Allocations
-
-
15 602
8 129
23 731
Recoveries
-
(21)
(4 818)
-
(4 839)
Application of funds
-
-
-
-
-
Transfers and other variations (1)
-
-
-
355 594
355 593
Exchange differences
-
-
(40)
-
(40)
Balances at 31 December 2022
-
770
59 396
1 704 589
1 764 755
Allocations
-
66
6 528
5
6 599
Recoveries
-
-
(15 466)
(270)
(15 736)
Application of funds
-
-
-
(22 764)
(22 764)
Transfers and other variations (1)
-
-
-
(151 300)
(151 300)
Exchange differences
-
-
121
-
121
Balances at 31 December 2023
-
836
50 579
1 530 260
1 581 675
(1) Transfers and other movements mainly include net credits to the Fund RDL 12/95 for the collection of commissions /
payment and recovery of bad debt, for COVID-19 sureties (credit of 239,506 thousand Euros at December 31, 2023 and
charge of 340,845 thousand Euros at December 31, 2022) and for the provision to the Fund to offset results from
investments in AIE (Note 23) (13,527 thousand Euros at December 31, 2023 and 7,785 thousand Euros at December 31,
2022).
92
20. OWN FUNDS
The reconciliation of the opening and closing carrying value in 2023 and 2022 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 2022
4 314 480
19 036
924 262
122 960
5 380 738
Distribution of results
-
-
-
(122 960)
(122 960)
Other variations of reserves
-
(910)
910
-
-
Profit/(loss) for the period
-
-
-
127 951
127 951
Other variations
207
-
-
-
207
Balance at 31 December 2022
4 314 687
18 126
925 172
127 951
5 385 936
Distribution of results
-
-
-
(127 951)
(127 951)
Other variations of reserves
-
(910)
911
-
1
Profit/(loss) for the period
-
-
-
240 215
240 215
Other variations
214
-
-
-
214
Balance at 31 December 2023
4 314 901
17 216
926 083
240 215
5 498 415
At December 31, 2023, the line of “Distribution of results” includes an amount of 127,951
thousand Euros (122,960 thousand Euros at December 31, 2022), as part of the distribution
of previous year’s results, for contribution to the Fund RDL 12/95 (Note 19).
The line of “Other variations” mainly includes the annual contribution to equity, by virtue of
Law 24/2001, of 27 December, for an amount of 214 thousand Euros in 2023 (207 thousand
Euros in 2022). 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.
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
2023
2022
Gross
Tax effect (Note
15)
Net
Gross
Tax effect (Note
15)
Net
Financial assets at fair value
through other comprehensive
income (Note 9)
523 497
(157 049)
366 448
459 032
(137 710)
321 322
Cash flows hedging of assets
and liabilities
(251 136)
75 341
(175 795)
(275 279)
82 584
(192 695)
TOTAL
272 361
(81 708)
190 653
183 753
(55 126)
128 627
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.
93
Thousands of Euros
2023
2022
Opening balance
128 627
(26 734)
Change in fair value of financial assets at fair value through other comprehensive
income (Note 9)
45 126
183 125
Reclassification to financial assets at fair value through profit or loss
Cash flow hedges
16 900
(27 764)
Closing balance
190 653
128 627
22. GRANTED FINANCIAL 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 financial guarantees) and amounts
available to third parties (contingent commitments).
The detail of this caption at December 31, 2023 and 2022 is the following:
Thousands of Euros
2023
2022
Granted guarantees
Financial guarantees
553 986
557 812
553 986
557 812
Contingent commitments
Available by third parties:
Credit institutions
471 864
223 259
Public Administrations sector
328 191
1 966 824
Other resident sectors
1 451 115
1 029 980
Non-resident sector
549 496
337 399
Other contingent commitments
81 395
79 998
Subscribed values pending disbursement:
1 404 933
835 933
4 286 994
4 473 393
4 840 980
5 031 205
Income obtained from guarantee instruments (guarantees and other sureties) are recorded
under the heading “Commissions received” in the accompanying 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 2023 and
2022 with the corporate income tax basis is as follows:
94
Thousands of Euros
2023
2022
Accounting profit before income tax
336 891
178 112
Permanent differences
Foreign taxes paid
1 049
482
Non-accounted accounting income
Tax-loss carry forwards attributed to invested companies
(58 105)
(36 023)
Deductible expenses from previous years
279 835
142 571
Temporary differences:
Due to impairment losses and provision non-deductible
13 896
67 378
Due to the reversal of temporary differences arising in other years
(74 285)
(34 128)
(60 389)
33 250
Tax assessment basis
219 446
175 821
Gross tax payable (30%)
65 834
52 746
Deductions and allowances
(802)
(395)
Withholdings and interim payments
(86 609)
(56 198)
Tax payable (Note 15)
(21 577)
(3 847)
Corporate income tax
83 149
42 376
Adjustments CIT expense allocated investees’ bases (Note 19)
13 527
7 785
Other adjustments
Corporate income tax expense
96 676
50 161
In the year, the allocation of tax losses carried forward in the AIE, in which ICO invests in
different capital proportions, is incorporated for an amount of 58,105 thousand Euros in 2023
(allocation of tax losses by 36,023 thousand Euros in 2022). 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 2023 closing.
No tax incentive deductions applied in the year 2023 nor in 2022. There is an international
double tax deduction (taxes borne) amounting to 802 thousand Euros and 395 thousand
Euros, respectively. There are not international double taxation deductions at end 2023.
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 operations,
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.
24. INTERESTS AND SIMILAR INCOME
The detail of interests and similar income of 2023 and 2022, based on their origin, is the
following:
95
Thousands of Euros
2023
2022
Financial assets at fair value through other comprehensive income
1 226
204
Financial assets at amortised cost
994 937
322 656
Derivatives, hedge accounting
(466)
(7 876)
Other assets
254
242
Interests and similar income from liabilities
6 330
10 778
1 002 281
326 004
25. INTEREST EXPENSE
The detail of this caption of the income statement during 2023 and 2022 is the following:
Thousands of Euros
2023
2022
Financial liabilities at amortised cost
Derivatives, hedge accounting
Other liabilities
1 100 062
(437 877)
46 521
665 632
(487 030)
-
Interests and similar charges from assets
3 326
21 668
712 032
200 270
26. INCOME FROM DIVIDENDS
The totality of yields obtained for this concept corresponds to the portfolio of variable income,
amounting to 16,964 thousand Euros and 5,480 thousand Euros, respectively, in 2023 and
2022.
27. FEE AND COMMISSION INCOME AND EXPENSES
The detail of this caption of the income statement is the following:
Thousands of Euros
2023
2022
Commissions received
Contingent risks
8 257
6 462
Availability commissions
8 444
5 875
Management commissions COVID and UKRAINE sureties
7 726
7 482
Other commissions
16 925
12 033
41 352
31 852
Commissions paid
Signature risk
(4 816)
(5 834)
Other commissions
(4 651)
(3 191)
(9 467)
(9 025)
Net commissions for the year
31 885
22 827
The heading “Other commissions” 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 (5,000 thousand Euros at December 31, 2022) (Note
16).
96
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 Income statement, based on the origin of its items is the
following:
Thousands of Euros
2023
2022
Financial assets at fair value through other comprehensive income (Note 9)
(20 946)
-
Financial assets at amortised cost, loans and items receivable (Note 10.3)
(500)
-
Financial assets at amortised cost, debt securities (Note 10.1)
-
172
Financial liabilities at amortised cost (Note 18.3)
-
947
(21 446)
1 119
29. PROFIT OR LOSS ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING,
NET
The detail of this caption of the Income statement, based on the origin of its items is the
following:
Thousands of Euros
2023
2022
Trading derivatives (Note 7)
940
(259)
940
(259)
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, 2023 amounts to losses of 427 thousand Euros (profits of 1,452 thousand
Euros at December 31, 2022).
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 Income statement is the following:
Thousands of Euros
2023
2022
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 Income statement is the following:
Thousands of Euros
2023
2022
Hedging derivatives (Note 11)
45 568
44 683
45 568
44 683
This caption includes results from the variation of fair value both of hedging elements and of
hedged elements.
97
32. OTHER OPERATING INCOME. OTHER OPERATING EXPENSES
The detail of the balance in captions “Other operating income” and “Other operating expenses”
of the income statement is the following:
Thousands of Euros
OTHER OPERATING INCOME
2023
2022
Income from exploitation of estates
507
818
Other concepts (*)
574
142
1 081
960
Thousands of Euros
OTHER OPERATING EXPENSES
2023
2022
Other concepts
-
-
-
-
33. PERSONNEL COSTS
The composition of this caption of the income statement of 2023 and 2022 is the following:
Thousands of Euros
2023
2022
Wages and salaries
19 106
17 041
Employee benefits expense
4 871
4 256
Other expenses
1 471
1 538
25 448
22 835
The number of the Institute’s employees at December 31, 2023 and 2022, distributed per
professional categories and gender, has been the following:
Payroll distribution
Men
Women
2023
2022
2023
2022
Management
7
8
7
7
Managers and technicians
126
114
174
155
Administrative staff
5
5
50
49
138
127
231
211
The average number of the Institute’s employees in 2023 and 2022, distributed per
professional categories and gender, has been the following:
Average payroll distribution
Men
Women
2023
2022
2023
2022
Management
8
8
7
6
Managers and technicians
121
108
165
150
Administrative staff
5
6
51
48
134
122
223
204
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.
98
The average number of the Institute’s employees, in 2023, with disability above 33% is of 6
persons (4 persons in 2022).
Remunerations and other benefits for the General Board
In 2023 and 2022 the Institute recorded in Income Statement 111 thousand Euros and 134
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 2023
and 2022, are the following:
Financial year 2023:
Salaries and wages
Thousands of Euros
Other
No. persons
Fixed
Variable
Remunerations
Thousands of
Euros
Total
Thousands of Euros
6
732
101
16
849
Financial year 2022:
Salaries and wages
Thousands of Euros
Other
No. persons
Fixed
Variable
Remunerations
Thousands of
Euros
Total
Thousands of Euros
6
720
95
18
833
At December 31, 2023 and 2022 there were no loans granted to the executive members of
the Institute's General Board. At December 31, 2023 loans granted under internal regulations
on loans to staff, had an outstanding amount of 14,686 thousand Euros and the average
interest rate was 2.51% (13,100 thousand Euros at December 31, 2022, 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 income statement is the following:
Thousands of Euros
2023
2022
Buildings, installations and materials
986
745
Computers
6 177
5 327
Communications
2 469
2 210
Advertising and publicity
382
2 577
Rates and taxes
2 069
1 500
Other general administration expenses
7 105
6 964
19 188
19 323
99
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 (Ministry of
Finance).
The amount invoiced by companies under the Mazars trademark (who audit, by virtue of a
contract formalised with the IGAE to deliver a collaboration service in the performance of the
audit of the annual accounts of 2023 and 2022), for audit-related services amounted to 11.3
thousand Euros (5.65 thousand Euros for audit services of the individual annual accounts and
5.65 thousand Euros for the consolidated accounts). The amount invoiced for non-audit
services during 2023 has been of 115.9 thousand Euros, taxes not included (42.5 thousand
Euros in 2022).
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 assets registered under “loans and receivables” and liabilities registered under the
heading “Financial Liabilities at amortised cost,” from the balance at December 31, 2023 and
2022, 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,
2023 and 2022 is as follows:
Thousands of Euros
Carrying value
Fair value
ASSETS
2023
2022
2023
2022
Financial assets at amortised cost
27 204 578
23 866 671
27 466 132
23 994 327
LIABILITIES
Financial liabilities at amortised cost
23 548 296
21 681 827
23 628 324
21 759 973
Fair value has been calculated, in all cases, both in 2023 and in 2022, taking as reference
implicit curves in monetary and Public Debt markets.
36. OPERATIONS WITH SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
The balance at December 2023 and 2022 of the Company related to the Subsidiaries, Joint
ventures and Associates is as follows:
AXIS
- Deposits to customers (financial liabilities at amortised cost): 55,544 thousand Euros,
at December 31, 2023 (47,788 thousand Euros at December 31, 2022);
100
CERSA
- Deposits to customers (financial liabilities at amortised cost): 239,393 thousand Euros
at December 31, 2023 (216,988 thousand Euros at December 31, 2022).
101
INSTITUTO DE CRÉDITO OFICIAL
MANAGEMENT REPORT
Financial environment and frame of action
The Spanish economy continues to grow strongly despite the context of uncertainty at
the global level
In 2023 as a whole, the Spanish economy maintained strong economic growth (2.5%), after
the remarkable post-pandemic recovery observed in 2021 and 2022, with growth of 6.4% and
5.8%, respectively. Spain demonstrated greater strength than its European shareholders
already in 2022 and continued to lead growth in 2023, which has been particularly relevant
given the context of geopolitical tensions and weak external growth, particularly in the
Eurozone, due to the impact of restrictive monetary policy. Specifically, Spanish GDP growth
in 2023 was five times higher than that of the Eurozone average and also that of the main
European economies.
Having surpassed the pre-pandemic GDP in the third quarter of 2022, and after beating the
growth forecasts for 2023, projections for 2024 and 2025 once again place Spanish growth at
levels above the rest of the major Euro Zone economies. According to the latest IMF forecasts,
Spain would grow by 1.5% in 2024 and 2.1% in 2025, compared to the estimated growth for
the Euro Zone as a whole of 0.9% and 1.7%, respectively.
Eurozone growth slowed markedly in 2023 to 0.5% from 3.3% in 2022. The impact of monetary
policy tightening, persistent inflation and geopolitical tensions would have led to this weakness
in growth.
In a context of high uncertainty and lower economic growth at the international level, the
Spanish economy maintains a differential growth thanks to the dynamism of the labour market,
the positive evolution of the foreign sector, the solid assets of households and companies and
the rapid deployment of the Recovery Plan.
With regard to the labour market, job creation in Spain accelerated in 2023. According to data
from the Labour Force Survey (EPA), 783,000 jobs were created in 2023, equivalent to an
increase in employment of 3.8%, thus showing a higher rate of job creation than in 2022
(279,000 new jobs with a growth rate of 1.4%). As a result, the number of employed persons
reached an all-time high (21,246,900). The unemployment rate continued its downward trend,
standing at 11.8% in the fourth quarter of 2023, more than one point below the rate in the
fourth quarter of 2022 (12.9%), while the number of unemployed ended 2023 at 2,830,600,
6.4% lower than in 2022 and its lowest figure at the end of the year since 2007. In terms of
the number of workers affiliated to Social Security, the data also evolved favourably, with an
increase in affiliation in 2023 of 2.7% with respect to 2022, i.e. an increase of 539,739 affiliates,
above the increase in 2022 (an increase of 2.4%, which meant 471,000 more affiliates).
Growth has also been driven by the external sector, thanks to the resilience of trade in goods,
the remarkable recovery in tourism and the dynamism of trade in non-tourism services, with
the sector making a positive contribution of 0.8 pp, although this moderated with respect to
2022; specifically, it contributed 2.1 pp less to growth than in 2022. The favourable
performance of domestic demand contributed 1.7 percentage points (pp) to GDP growth in
2023, although its contribution moderated by 1.2 pp with respect to the previous year. Within
national demand, private consumption slowed, although it remained strong, supported by the
improvement in purchasing power and the good performance of the labour market, while
102
investment grew to a lesser extent than last year. By contrast, government spending increased
again in 2023, following a decline in 2022.
General inflation moderated sharply during 2023 to the lowest levels in two years. The
underlying rate (which excludes energy goods and unprocessed food as these are
components with greater price variability) has also shown a gradual deceleration trend, to
which the lower inflationary pressures in energy prices and raw materials, the restrictive
monetary policy of the European Central Bank and the measures implemented by the
Government to alleviate inflation, such as the VAT rebate on basic foodstuffs, the fuel rebate
and subsidies for public transport, the VAT rebates on electricity and gas, among others, have
contributed. In Spain, average inflation was 3.5% in 2023, correcting part of the sharp price
increase observed in 2022 (annual average 8.4%) and headline CPI ended 2023 at 3.1% y-o-
y in December. Core inflation averaged 6% for 2023 as a whole, above the average for 2022
(5.2%), and ended the year at 3.8% y-o-y in December, progressively narrowing the differential
with the headline index. In the Eurozone as a whole, inflation averaged 5.5% in 2023, higher
than in Spain, but the year-on-year inflation rate as of December was 2.9%, also reflecting the
trend of decelerating prices in the Eurozone during the year. For its part, the underlying
inflation rate in December was higher than the general index, at 3.9%, close to the Spanish
rate, and has also followed a moderating path during 2023.
Forecasts of the main organisations, both for Spain and for the Eurozone as a whole, point to
a continuation of the gradual slowdown in prices in 2024, although they would still be above
the monetary policy target and within a context marked by the high uncertainty linked, mainly,
to the future evolution of energy prices.
The ECB continued to tighten its monetary policy in 2023
The Governing Council of the European Central Bank (ECB) continued in 2023 with the
process of normalising its monetary policy that had already begun in 2022. From July 2022
until September 2023 it decided to undertake ten consecutive policy rate hikes to ensure that
inflation returns to its medium-term objective of 2%. Accordingly, the Governing Council set
the main refinancing rate and the interest rates on the marginal lending facility and the deposit
facility at 4.50%, 4.75% and 4.00% respectively, implying a cumulative increase of 450 basis
points in each of the three benchmarks and bringing them to 22-year highs.
Since September 2023, the ECB has stopped the interest rate hike cycle. The Governing
Council considers that the key ECB interest rates are at levels which, if maintained for a
sufficiently long period of time, make a substantial contribution towards achieving its objective.
Looking ahead, the Governing Council will continue to apply a data-dependent approach to
determine the appropriate level and duration of the interest rate constraint. In particular, its
interest rate decisions will continue to be supported by its assessment of the inflation outlook,
taking into account new economic and financial data, underlying inflation dynamics and the
strength of monetary policy transmission.
In addition to the rate hike decisions, the Governing Council of the ECB has also implemented
a process of reducing the size of the Euro system’s balance sheet during 2023. It decided that
the size of the APP asset purchase programme portfolio would start to decrease at an average
rate of 15 billion Euros per month until June 2023 and ended the reinvestment of maturing
APP securities as from July 2023. In addition, as part of this balance sheet normalisation
process, the Governing Council will start to reduce the pandemic emergency purchase
programme (PEPP) portfolio in the second half of 2024, at a rate of 7.5 billion Euros per month
on average. Until then, it will continue to fully reinvest the principal of maturing securities and
plans to end reinvestments under the PEPP by the end of 2024.
103
Recovery, Transformation and Resilience Plan
The Government of Spain continued to manage European funds from the Next Generation EU
(NGEU) instrument through the Recovery Plan during 2023, which has set in motion an
ambitious schedule of investments and reforms that will have a structural impact on the
Spanish economy. With a strong pace of meeting milestones and targets, Spain has received
three payments from the Recovery and Resilience Mechanism for a total of 37 billion Euros
and has already formally requested the disbursement of the fourth payment for 10 billion
Euros. The pace of investment implementation has been accelerating since the launch of the
Plan, reaching the highest pace in 2022, which has been maintained in 2023. Since the
approval of the Plan in July 2021, calls for aid and tenders have already been resolved for an
amount of more than 30 billion Euros. The economic impact of the Recovery Plan in 2023
translates into 2.5 points in the level of GDP, in line with the forecast.
In October 2023, the European Commission approved the Addendum to the Plan, a decision
ratified by the ECOFIN, and with it the second phase of the Recovery Plan, which has an
additional 94.3 billion Euros, to continue strengthening strategic projects and with a special
focus on the strategic autonomy of Spain and the EU in the fields of energy, agri-food, industry,
technology and digital. Part of the mobilisation of these new funds will be carried out through
the creation of funds and financial instruments, in the implementation of which ICO plays a
very prominent role. The ICO lines will involve up to 40,000 million in loans to support SMEs
in particular, strengthen investment in the green and social sphere, as well as in key future
areas in the digital transition, such as start-ups and the audiovisual sector. In addition, the
Autonomous Community Resilience Fund will be launched, with financing of up to 20 billion
Euros, which will enable sustainable investments to be made in the Autonomous
Communities, in collaboration with the European Investment Bank.
Business rates rose as a result of the prolongation of the monetary policy normalisation
process
The tightening of the ECB’s monetary policy, with interest rates rising until September, has
continued to make new financing more expensive and to weaken credit flows to households
and firms during 2023. Thus, the average interest rate applied to the companies in operations
of less than 1 million Euros, which may be taken as approximation of the rate applied to SMEs,
increased from 3.49% at December 2022 to 5.11% at December 2023. This interest rate was
maintained throughout the year below the rate applied in Germany to these same operations
and, also, this differential with Germany has increased last year as a consequence of the
higher rate increase in Germany. Thus, the Spanish rate is 90 basic points below the German
rate at December 2023, while at December 2022 it was of 54 basic points. In comparison with
the average of the set of the Eurozone, the differential was lower, throughout 2023, but the
differential was negative every month of the year; thus, on December 2023, the Spanish rate
was 29 basic points below the European average (19 basic points at December 2022).
Interest rates for operations of a lower amount (up to 250 thousand Euros) also increased in
2023, from 3.53% at December 2022 to 5.14% at December 2023, also remaining below the
German rate throughout the year, so that, at December, the Spanish rate was 122 basic points
lower than the German rate, representing an increase of spread from the 68 basic points of
December 2022. Additionally, the Spanish interest rate was also lower than the Eurozone rate
in these operations throughout the year, being 44 basic points lower (35 basic points at
December 2022).
In terms of financial sector activity in 2023, the volume of new lending business decreased by
7.3% compared with 2022, following an increase of 19.9% in the previous year, as a result of
a stronger pass-through of monetary policy tightening in 2023. Transactions of less than 250
thousand Euros moderated their increase, compared with the previous year, from 15.7% in
104
2022 to 5.3% in 2023, transactions of less than 1 million Euros from 14.1% in 2022 to 5.1%
and transactions of more than 1 million Euros fell markedly, by 18.8% in 2023, compared with
an increase of 25.7% in the previous year.
The outstanding amount of total credit to enterprises declined by 2.7% in 2023 compared with
2022, while it remained virtually stable in 2022, according to data from the Bank of Spain.
Doubtful assets remained at low levels during 2023
The doubtful assets ratio of Spanish credit institutions remained fairly stable during 2023,
remaining at the lows of December 2008. On December 2023, it stood at 3.54%, the same
ratio as in December 2022. This evolution is explained by a fall in the volume of credit classified
as doubtful offset by the decline in total credit. With regard to credit to productive activities, its
doubtful assets ratio stood at 4.06% in September 2023 (latest available data), lower than in
September 2022 (4.43%).
Activity
The Institute continues to support the Spanish productive fabric through its wide range of
products, prioritising long-term financing, internationalisation and investments aimed at digital
transformation, sustainability and social and territorial cohesion. Thus, ICO responds to the
needs and challenges posed by the different economic scenarios in a flexible manner, in order
to contribute to the sustainable growth, the employment generation, and the wealth distribution
through its three main functions:
o National Promotion Bank: to boost the economic growth and the business activity.
o Financial Economic Policy Instrument: in order to channel the European Union (EU)
funds in their different modalities and to collaborate with Administration bodies, to
transfer resources towards the companies in order to reach economic policy and sector
objectives.
o State’s Financial Agent: managing on behalf of the State different funds and
instruments of a different nature and purpose, and carrying out functions entrusted in
the different economic scenarios to provide an efficient response to the companies’
financing needs.
All of the Institute’s actions in 2023 are framed within its Strategy 2022-2027 and take as
reference the EU Financial Framework 2021-2027 and the Recovery, Transformation and
Resilience Plan, which articulate the Government’s economic policy around green and digital
transition, social and territorial cohesion and equality.
As National Promotion Bank, the Instituto has a comprehensive catalogue of bank financing
products, guarantees and complementary financing for all types of companies and entities,
adapted to their needs and aimed to boost their activity both in Spain an in international
markets.
This offer is specified in different instruments designed by ICO to accompany and provide
support to Spanish companies, articulated through two fund distribution mechanisms: ICO
mediation lines, in collaboration with credit institutions operating in Spain and financing
programmes and guarantees in which the Instituto acts directly with the clients.
The financing and issue of ICO guarantees to companies, entrepreneurs and territorial
administrations during 2023 amounts to 7,530,138 thousand Euros. 33.5% of this amount
(2,520,858 thousand Euros) corresponds to credit disposals made through the different ICO
105
mediation lines, by means of 12,115 operations; 63% aimed to micro-SMEs (companies up to
nine workers) and 31% correspond to loans for an amount equal or below 25,000 Euros.
There are two differentiated strategic areas of action in the mediation activity:
o National: to finance business activities and investment projects related to the activity
in Spain. In 2023, 11,250 operations have been granted, for an amount of 2,104,765
thousand Euros, representing 84% of the total amount of mediation lines.
o International: these lines are aimed to finance the internationalisation and exporting
activity of Spanish companies. In 2023, 865 operations have been granted, for an
amount of 416,093 thousand Euros, in the different lines.
Concerning the direct activity, during 2023, ICO has complemented financing operations
through loans and issue of sureties with the acquisition of other corporate debt instruments.
In particular, bonds issued by Spanish companies have been acquired to facilitate the
financing of its investment plans at the mid and long term (corporate bonds); project bonds,
as financing instrument linked to large infrastructure operations; and bonds and business
promissory notes issued through the Alternative Fixed-Income Market (MARF), aimed to ease
the access to financing of issuers, particularly of SMEs, to cover their short and mid-term
liquidity needs.
By means of these direct financing modalities and guarantees, during 2023, funds have been
disposed of and sureties have been issued, for an amount of 5,009,280 thousand Euros,
attending the companies’ investment and liquidity needs, and continuing with the promotion of
large long-term investment projects both in Spain and abroad, as a complement to the private
initiative. The detail of direct activity volumes made available to the companies is the following:
o Through the direct banking activity, loans and credits have been disposed of, for an
amount of 3,105,446 thousand Euros, and sureties have been issued, for an amount
of 159,200 thousand Euros.
o Through the direct complementary activity, corporate bonds and MARF bonds at mid
and long term have been acquired, for an amount of 266,117 thousand Euros, and
MARF promissory notes at short term, for an amount of 1,478,517 thousand Euros.
Another of the Institute’s main strategic lines of action as National Promotion Bank is carried
out through AXIS, the venture capital subsidiary of the ICO Group, which acts in public-private
collaboration with the venture capital sector through the management of equity of 12,150
million Euros in its four funds: Fond-ICO Global, Fond-ICO Next Tech, Fond-ICO SMEs, and
Fond-ICO Sustainability and Infraestructuras in which the Institute is the sole participant.
These funds will allow a joint mobilisation of public and private resources of more than
18,000 million Euros in the next five years, based on the private sector’s capacity to absorb
resources and materialise projects.
Axis’ investments, which are in any case minority investments and do not imply effective
control of the company, are aimed at promoting the dynamisation and consolidation of the
private venture capital fund ecosystem, both in the early stages: venture capital, incubation
and technology transfer and business angels (together with the European Investment Fund),
and in expansion, growth and debt, thus supporting the creation and growth of highly
innovative and technology-based companies.
Fond-ICO Global is the first public venture capital “fund of funds” created in Spain, which
objective is to promote the creation of private management venture capital funds that carry
106
out investments in Spanish companies, in order to facilitate alternative financing lines,
complementary to banking lines, and to promote their capitalisation and growth.
This fund, with an initial allocation of 1,200 million Euros, has been extended, given its positive
evolution, and currently reaches 4,500 million Euros.
AXIS Board of Directors, held on November 2023, approved the launch of the 16
th
Call, Fond-
ICO Global’s largest ever, to select 12 funds or managers in three categories: incubation and
technology transfer, venture capital and expansion, in which up to 900 million Euros will be
invested.
Through the 15 calls resolved until December 31, 2023, investments have been approved for
a maximum amount of 3,427 million Euros, with a target investment volume of 11,474 million
Euros in Spanish companies. For each Euro of public capital invested by Fond-ICO Global,
the private funds will invest a minimum of 3.3 Euros in Spain.
Fond-ICO SMEs, allocated with 250 million Euros, has as objective to boost the business
fabric and create employment through the participation in Spanish SMEs with capital and quasi
capital instruments. It currently focuses on investment in funds that invest in strategic or
innovating activity segments, such as sustainability and social impact or the entrepreneurial
ecosystem, also promoting the financing complementary to banking, through business angels
or diversified debt (crowdlending/crowdfunding).
During 2023 the Board of directors of Axis has approved operations through Fond-ICO SMEs
by 30 million Euros.
Through Fond-ICO Sostenibilidad e Infraestructuras, a fund endowed with 400 million Euros,
the Institute provides financing to companies through equity participations, subordinated debt
and participating loans. The aim of this fund is to invest directly or through other funds in
sustainable infrastructure projects in Spain and abroad with Spanish companies.
During 2023 the Board of directors of Axis has approved operations through this fund by 32
million Euros.
AXIS and the State Secretariat for Digitalisation and Artificial Intelligence (SEDIA) launched
Fond-ICO Next Tech in 2021. This fund invests in funds, corporate vehicles and companies
that promote innovative high-impact digital projects and investment in growth companies
(scale-ups) with the aim of mobilising 8 billion Euros, half from public funds and half from
private investment, over an initial period of four years.
The ICO General Council, held on February 23, 2023, approved the commitment to increase
the size of FondICO Next Tech by an additional 2 billion Euros, to 4 billion Euros. This increase
was approved by the AXIS Board of Directors at its July 2023 meeting.
Since the start of its investment activity in 2022 and until December 2023, AXIS has approved
Fond-ICO Next Tech's participation in eight funds and five companies, for a cumulative
amount of 5,344 million Euros.
As Financial Economic Policy Instrument, ICO supports the Spanish economy in two ways:
enhancing its role as a channel of EU resources in their different modalities and developing
functions entrusted by the Government to implement the economic policy measures.
The Institute uses its different fund distribution mechanisms as National Promotion Bank to
boost the recovery, transformation and strengthening process of the growth model of Spain,
according to priorities defined in the Recovery, Transformation and Resilience Plan approved
107
by the Government and in line with the Next Generation EU Programme and the Multiannual
Financial Framework 2021-2027 of the European Union.
For this purpose, ICO cooperates by channelling financial resources associated to economic
policy measures together with Ministries, Autonomous Communities, Local Corporations and
their dependent bodies, as well as European Union resources towards Spanish companies
and projects with Spanish interest.
In its role as State Financial Agency, ICO manages official funds and financing instruments
to exportation and development, facilitates the sustainability of autonomic and local
administrations and, since 2020, through an efficient public-private collaboration model,
manages on behalf of the State the public surety lines implemented as a consequence of the
health crisis of the COVID 19 and the war in Ukraine.
Concerning the activity managed by surety lines associated to the COVID-19 crisis, the State
has guaranteed 108,073,024 thousand Euros from the beginning to the end of the validity of
the lines on June 30, 2022.
During the financial year 2023, the Institute continued to manage the various measures agreed
by the Government in relation to COVID guarantee operations formalised during the period of
validity, in particular, the monitoring of the extension of the maturity and grace period of
guaranteed operations regulated in the Council of Ministers Agreement of June 21, 2022.
Similarly, the ICO continues to monitor, control and report on defaults and recoveries under
the line of guarantees.
In 2023, the Institute also managed the line of public guarantees provided by the State as a
result of the war in Ukraine, regulated by Royal Decree Law 6/2022. This line, endowed with
up to 10,000 million Euros, is intended to partially cover the financing granted by financial
institutions to companies and the self-employed. In December 2023, the Council of Ministers
approved the activation of the third tranche of the line of ICO Ukraine Guarantees for the self-
employed and companies for an amount of up to 3,500 million Euros (up to 3,000 million Euros
for the self-employed and SMEs and up to 500 million Euros for companies that do not qualify
as SMEs). This new agreement completes the provision to the self-employed and companies
of all the 10,000 million Euros available for this line of guarantees, with the ICO having been
assigned the management of 9,000 million Euros.
It should also be noted that the Agreement of the Council of Ministers of December 5, 2023
instructed the ICO to extend the maturity of the guarantees granted to companies and the self-
employed under the ICO Ukraine Guarantee line when certain conditions established in the
Agreement are met.
The amount guaranteed at the end of December 2023 is 4,498,564 thousand Euros,
corresponding to 26,840 loan operations with an amount financed of 5,803,128 thousand
Euros.
In addition to sureties of the facilities for the COVID-19 and Ukraine crisis, in 2023, the Institute
has continued managing on behalf of the State other funds and instruments in three areas of
action: financing the State’s peripheric administration through Territorial Funds of Autonomous
Communities and Local Entities, on behalf of the Ministry of Finance; promoting the Spanish
companies’ internationalisation through the Fund for the Business Internationalisation (FIEM)
and the Reciprocal Interest Adjustment Agreement (CARI), on behalf of the Ministry of
Industry, Trade and Tourism; and the financial cooperation to the development, through the
Development Promotion Fund (FONPRODE) and the Water Fund (FCAS), on behalf of the
Spanish Agency of International Cooperation to Development (AECID).
108
At the end of the financial year 2023, the total balance managed by ICO corresponding to
these funds is of 210,684 million Euros:
o The Financing Fund for Autonomous Communities has an outstanding balance of
197,968 million Euros.
o State funds for the internationalisation and financial cooperation to the development
(CARI, FIEM, FONPRODE and FCAS) present a joint balance of 6,432 million Euros.
o The Financing Fund to Local Entities has closed 2023 with a balance of 6,284 million
Euros.
Fundraising
The Institute finances its activity at the mid and long term mainly through debt issues in capital
markets and through bilateral loans of multilateral credit institutions. The ICO is not financed
through the General State Budgets and does not gain deposits from individuals.
During 2023, resources were obtained at mid and long term, for an amount of 7,314 million
Euros. Out of this amount, 1,000 million Euros through two issues of sustainable bonds: one
of green bonds and another of social bonds.
On 7 February, the Institute launched the fifth issue of green bonds for an amount of 500
million Euros for a term of around 5 years. The funds raised will be used to finance projects
carried out by Spanish companies that contribute to boosting the ecological transition and the
development of sustainable finance, in line with the objectives of the National Recovery,
Transformation and Resilience Plan.
In addition, on 27 June, it launched its tenth issue of social bonds, amounting to 500 million
Euros. The funds raised with this operation will be used to finance projects of the self-
employed, SMEs and Spanish companies that generate a positive social impact and boost job
creation.
ICO is a benchmark issuer in the sustainable bond market with fifteen transactions (ten social
and five green) for a global amount of 7,550 million Euros until December 2023.
Balance sheet
ICO occupies a prominent position within the Spanish financial system and has an important
role in the Spanish economy.
The Institute’s balance sheet reaches 31,656,823 thousand Euros at 2023 closing (29,774,943
thousand Euros at 2022 closing). The main reason for the change compared to the previous
year was the increase in financial assets at amortised cost.
The outstanding amount of financial assets at amortised cost has amounted to 27,204,578
thousand Euros (23,866,671 thousand Euros at December 31, 2022):
• Loans to credit institutions amount to 8,300,598 thousand Euros (6,911,989 thousand
Euros in 2022). This caption mainly includes outstanding balances from mediation
operations.
• Loans to customers close the year with a balance of 12,601,396 thousand Euros with
regard to 10,173,657 thousand Euros in the previous year.
109
• Debt securities amount to 6,302,584 thousand Euros; 6,781,025 thousand Euros at
2022 closing.
In 2023, the outstanding balance of the debt securities portfolio at fair value through other
comprehensive income decreased to 91,001 thousand Euros (1,135,160 thousand Euros at
December 31, 2022) and the balance of equity instruments increased to 1,533,557 thousand
Euros (1,325,031 thousand Euros at the end of 2022). This heading mainly includes the
Institute's holdings in venture capital funds managed by AXIS Participaciones Empresariales
S.G.E.I.C., S.A., S.M.E., a management company wholly owned by the Instituto de Crédito
Oficial.
During 2023, there has been an increase of the balance of financial liabilities at amortised
cost, closing the year in 23,548,296 thousand Euros (21,681,827 thousand Euros in 2022).
Equity in ICO amounts to 5,689,068 thousand Euros at 2023 closing, 18% of the balance
sheet. The Institute’s solvency coefficient at year-end closing amounts to 26.56%, 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 2023 amounted to 290,249 thousand Euros, an
increase of 164,515 thousand Euros with regard to 2022.
In the same line, gross margin in 2023 has increased, with regard to 2022 (361,497 thousand
Euros and 204,582 thousand Euros, respectively).
Operating expenses (administration and depreciation) amounted to 49,281 thousand Euros,
above figures in 2022 (47,812 thousand Euros).
The financial year 2023 was closed with a reversal of the value of financial assets not
measured at fair value of 12,777 thousand Euros and net provision recoveries of 9,138
thousand Euros.
As a result, profit before tax amounted to 336,891 thousand Euros.
Treasury stock
Not applicable to the Institute.
Personnel
The Institute’s average payroll, in 2023, amounts to 357 employees, with regard to 326 in
2022.
Post-balance sheet events
The Council of Ministers approved on February 13, 2024 an agreement establishing the
conditions for the Ministry of Housing and Urban Agenda (MIVAU) to sign with ICO a line of
2,500 million Euros in guarantees for the purchase of first homes for young people under 35
years of age and families with dependent minors. The guarantees will be managed by ICO on
110
behalf of MIVAU under the terms established in the Agreement to be formalised between both
parties for a period of up to 15 years.
On the other hand, the Council of Ministers of 27 February approved an agreement
establishing the general conditions for the implementation of five facilities charged to the loans
of the addendum to the Recovery Plan, amounting to 40,000 million Euros, and instructed the
Instituto de Crédito Oficial (Official Credit Institute) to manage them.
The second phase of the Recovery Plan is thus launched, which will allow the transformation
and modernisation process of the productive fabric and the Spanish economy to be completed.
The five facilities approved will be used to finance investment projects that favour the dual
green and digital transition of companies, thereby strengthening their competitiveness.
Specific facilities will also be put in place to boost the audiovisual sector and disruptive
technologies, as well as to increase the stock of public social housing for rent.
Other significant events that occurred after the reporting date are detailed in Note 1.8.
Annex I: Investments at 31.12.2023 and 31.12.2022 (direct and indirect)
111
The relevant information on shares in associates and subsidiaries at December 31, 2023 and 2022 is the following:
At 31 December 2023:
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
24.39%
-
24, 39%
47 060
-
47 060
954 032
775 910
-
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
221 555
215 864
27 404
Subsidiaries
55 526
-
55 526
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
56 347
54 984
24 116
57 466
-
57 466
Non-audited economic information, referring to 31 December 2023
Annex I: Investments at 31.12.2023 and 31.12.2022 (direct and indirect)
112
At 31 December 2022:
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
24.39%
-
24, 39%
47 060
-
47 060
817 669
647 074
-
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
191 444
184 516
16 099
Subsidiaries
55 526
-
55 526
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
48 657
47 356
20 612
57 466
-
57 466
Non-audited economic information, referring to 31 December 2022
General Board
CAYETANA LADO CASTRO-RIAL, SECRETARY OF THE GENERAL BOARD OF THE 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,
C E R T I F I E S:
At the General Board session on 22 April, 2024 the following resolution, among others, was
adopted:
1
2
)
)
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 2023.
Submit the annual accounts and the management report for the 2023 financial year, together with
the
proposed allocation of profits, within one month of approval, for consideration by the Minister
for
Economy, Trade and Business, who shall approve the allocation of profits, subject to a non-
binding report from the Ministry of Finance 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 ICO's Bylaws, which has
not yet approved the Minutes of the session of 22 April 2024.
For the record, to all 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
STATEMENT OF RESPONSIBILITY
OF 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 2023, drawn up on March 26, 2024, 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 companies
included in the consolidation taken as a whole, and that the management
reports, both individual and consolidated, include a true and fair analysis of the
evolution and business results and of the position of Instituto de Crédito Oficial
and of the companies included in the consolidation taken as a whole, along with
a description of the main risks and uncertainties they face.
Madrid, April 24, 2024
José Carlos García de Quevedo Ruiz
Chairman of the Instituto de Crédito Oficial