MINISTRY
OF FINANCE
AND CIVIL SERVICE
COMPTROLLER GENERAL OF
THE STATE ADMINISTRATION
ANNUAL ACCOUNTS AUDIT
ICO - INSTITUTO DE CRÉDITO
OFICIAL
2023 Audit Plan -
Financial Year 2022
AUDInet Code 2023/60
PUBLIC AUDIT DIVISION I
Free translation of the auditors’ report originally issued in Spanish. In the event of a discrepancy, the Spanish-
language version prevails.
ANNUAL ACCOUNTS AUDIT. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2023 AUDIT PLAN
Page 2
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. 2023 AUDIT PLAN
Page 3
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 Of icial:
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 31 December 2022, 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 f inancial reporting f ramework applicable to the Entity (identif ied in
note 1.2 to the f inancial 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 f urther described below in the
Auditor’s responsibilities f or 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 f or 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 signif icant
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. 2023 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
f rom loans and advances to customers. Objective evidenc e of impairment is determined individually
f or those debt instruments that the Institute has identif ied as signif icant and collectively f or 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:
•
Verif yng the different internal control policies and procedures established in accordance with
applicable regulatory requirements.
•
Examining the dif f erent 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 f or 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 inf ormation relating to the af orementioned 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 f ramework f or inf ormation systems in relation to the processing and
recording of financial inf ormation 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 Inf ormation Technology Systems.
Our audit approach has included the f ollowing 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 f ollowing:
•
Change management.
•
Physical and logical security.
ANNUAL ACCOUNTS AUDIT. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2023 AUDIT PLAN
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•
Back-ups and Continuity.
•
IT Systems Operations.
-
Revision of the existing interf aces between the main applications in the process of generating
accounting inf ormation.
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 ref erred 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, 2023, 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 f or other commercial or f inancial 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 f iles 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 f ormulation 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 inf ormation, 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 af orementioned
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 inf ormation are compliant with applicable regulations.
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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 inf ormation. The information it contains is in line with the annual accounts for
the 2022 f inancial year, and its content and presentation comply with applicable standards.
Management's responsibility for the annual accounts
The Institute’s Chairman is responsible f or the preparation of the accompanying annual accounts,
such that they f airly present the entity’s equity, financial position and results, in accordance with
the f inancial reporting framework applicable to the Institute in Spain, and f or such internal control
as they determine is necessary to enable the preparation of annual accounts f ree f rom 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 f or 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 f raud or error, design and perform audit procedures responsive to those risks and obtain audit
evidence that is suf ficient and appropriate to provide a basis f or our opinion. The risk of not
detecting a material misstatement resulting f rom f raud is higher than one resulting f rom error, as
f raud may involve collusion, f orgery, 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 eff ectiveness of the entity’s internal control.
ANNUAL ACCOUNTS AUDIT. ICO - INSTITUTO DE CRÉDITO OFICIAL. 2023 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 disclures 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 signif icant audit f indings, as well as any signif icant def iciencies in internal
control that we identif y 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 Of f ice in Madrid on April 11, 2023.
INSTITUTO DE CRÉDITO OFICIAL
Annual Accounts at 31 December 2022 and
Management Report corresponding to 2022
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 2022 AND 2021
(Expressed in thousands of Euros)
1
ASSETS
2022
2021
Cash, deposits at central banks and demand deposits (Note 6)
2 637 435
9 379 495
Financial assets held for trading (Note 7)
30 637
10 701
Derivatives
30 637
10 701
Memorandum item: loaned or advanced as collateral
-
-
Financial assets not held for trading obligatorily valued at fair value through profit or loss
(Note 8)
-
-
Financial assets at fair value through other comprehensive income (Note 9)
2 460 191
2 237 145
Equity instruments
1 325 031
1 086 506
Debt securities
1 135 160
1 150 639
Loans and advances
-
-
Memorandum item: loaned or advanced as collateral
-
-
Financial assets at amortised cost (Note 10)
23 866 671
25 327 301
Debt securities
6 781 025
6 889 673
Loans and advances
17 085 646
18 437 628
Credit institutions
6 911 989
7 724 368
Customers
10 173 657
10 713 260
Memorandum item: loaned or advanced as collateral
Hedging derivatives (Note 11)
438 822
455 009
Investments in subsidiaries, joint ventures and associates (Note 12)
57 466
52 599
Subsidiaries
1 940
1 940
Joint ventures
-
-
Associates
55 526
50 659
Property, plant and equipment (Note 13)
83 087
84 042
Property, plant and equipment
For own use
83 087
84 042
Memorandum item: Acquired under finance lease
-
-
Intangible assets (Note 14)
6 836
6 518
Other intangible assets
6 836
6 518
Tax assets (Note 15)
178 675
184 905
Current
4 330
32 435
Deferred
174 345
152 470
Other assets (Note 16)
15 123
28 421
Non-current assets and disposable groups of elements qualified as held for sale (Note 17)
-
-
TOTAL ASSETS
29 774 943
37 766 136
INSTITUTO DE CRÉDITO OFICIAL
BALANCE SHEETS AT 31 DECEMBER 2022 AND 2021
(Expressed in thousands of Euros)
2
LIABILITIES
2022
2021
Financial liabilities held for trading (Note 7)
29 714
10 580
Derivatives
29 714
10 580
Financial liabilities at fair value through profit or loss
-
-
Financial Liabilities at amortised cost (Note 18)
21 681 827
30 558 851
Deposits
8 060 271
10 213 100
Deposits from Central Banks
2 961 320
3 444 351
Credit Institution
4 704 485
5 894 436
Customer
394 466
874 313
Marketable debt securities
13 374 254
20 087 210
Other financial liabilities
247 302
258 541
Memorandum item: Subordinated liabilities
-
-
Hedging derivatives (Note 11)
565 619
331 071
Provisions (Note 19)
1 764 755
1 390 309
Pensions and similar obligations
770
791
Provisions for taxes and other legal contingencies
-
-
Provisions for contingent exposures and commitments
59 396
48 652
Other provisions
1 704 589
1 340 866
Tax Liabilities (Note 15)
155 134
81 907
Current
1 493
6 748
Deferred
153 641
75 159
Other liabilities (Note 16)
63 331
39 414
TOTAL LIABILITIES
24 260 380
32 412 132
EQUITY
Own funds (Note 20)
5 385 936
5 380 738
Capital or endowment fund
4 314 687
4 314 480
Accumulated reserves
-
-
Revaluation reserves
18 126
19 036
Other reserves
925 172
924 262
Profit and loss for the period
127 951
122 960
Less: Dividends and remunerations
Other accumulated comprehensive income (Note 21)
128 627
(26 734)
Elements that cannot be reclassified at profit and loss
349 635
134 557
Changes in fair value equity inst. at fair value through other comprehensive income
349 635
134 557
Elements that can be reclassified at profit and loss
(221 008)
(161 291)
Cash-Flow hedges
(192 695)
(164 931)
Changes in fair value debt inst. at fair value through other comprehensive income
(28 313)
3 640
TOTAL EQUITY
5 514 563
5 354 004
TOTAL EQUITY AND LIABILITIES
29 774 943
37 766 136
INSTITUTO DE CRÉDITO OFICIAL
BALANCE SHEETS AT 31 DECEMBER 2022 AND 2021
(Expressed in thousands of Euros)
3
MEMORANDUM ITEM
2022
2021
Granted financial guarantees (Note 22)
557 812
528 275
Granted contingent commitments (Note 22)
4 473 393
4 329 019
INSTITUTO DE CRÉDITO OFICIAL
PROFIT AND LOSS ACCOUNTS CORRESPONDING TO YEARS ENDED AT 31
DECEMBER 2022 AND 2021
(Expressed in thousands of Euros)
4
2022
2021
Interest and similar income (Note 24)
326 004
252 186
Interest and similar charges (Note 25)
(200 270)
(147 640)
NET INTEREST INCOME
125 734
104 546
Dividends income (Note 26)
5 480
5 225
Fee and Commission income (Note 27)
31 852
31 047
Fee and Commission expense (Note 27)
(9 025)
(7 793)
Gains or losses from financing operations (net)
45 543
42 394
Gains or losses on financial assets and liabilities not measured at fair value through profit or loss (net) (Note 28)
1 119
(356)
Financial assets at fair value through other com prehensive incom e
-
-
Financial assets at am ortised cost
172
-
Financial liabilities at amortised cost
947
(356)
Gains or losses on financial assets and liabilities held for trading (net) (Note 29)
(259)
364
Gains or losses on financial assets oblig atorily at fair value throug h results (net) (Note 30)
-
-
Gains or losses resulting from hedge accounting (net) (Note 31)
44 683
42 386
Exchange differences (net) (Note 2.4)
4 038
5 619
Other operating income (Note 32)
960
827
Other operating expenses (Note 32)
-
-
GROSS MARGIN
204 582
181 865
Administration expenses
(42 158)
(39 987)
Personnel costs (Note 33)
(22 835)
(22 241)
Other administration expenses (Note 34)
(19 323)
(17 746)
Depreciation and amortisation
(5 654)
(4 773)
Property, plant and eq uipment (Note 13)
(2 166)
(2 021)
Intangible assets (Note 14)
(3 488)
(2 752)
Provisions expense or reversal of provisions (Note 19)
(3 517)
(15 609)
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss
23 468
48 435
Financial assets at fair value throug h other comprehensive income (Note 9)
-
(8 767)
Financial assets at amortised cost (Notes 10)
23 468
57 202
Impairment or reversal of impairment on non-financial assets
(77)
(81)
Goodwill and other intangible assets (Note 14)
-
-
Other assets (Note 17)
(77)
(81)
Gains/ (Losses) on non-current assets and groups held for sale of elements classified as held for sale not classified
as discontinued operations (Note 17)
1 468
1 848
PROFIT OR LOSS BEFORE TAX FROM ONGOING OPERATIONS
178 112
171 698
Income tax expenses (income) from ongoing operations (Note 23)
(50 161)
(48 738)
PROFIT OR LOSS AFTER TAX FROM ONGOING OPERATIONS
127 951
122 960
PROFIT OR LOSS AFTER TAX FROM DISCONTINUED OPERATIONS
-
-
PROFIT OR LOSS FOR THE YEAR
127 951
122 960
INSTITUTO DE CRÉDITO OFICIAL
STATEMENTS OF CHANGES IN EQUITY
I. STATEMENT OF RECOGNISED INCOME AND EXPENSES CORRESPONDING TO
YEARS ENDED AT 31 DECEMBER 2022 AND 2021
(Expressed in thousands of Euros)
5
2022
2021
Profit/(loss) for the year
127 951
122 960
Other comprehensive income
155 361
98 581
Elements not reclassified on profit and loss account
215 078
61 632
Variations in fair value equity instruments at fair value through other comprehensive
income (Note 21)
307 254
88 046
Profit or loss hedge accounting
Income tax of elements not reclassified in profit or loss
(92 176)
(26 414)
Elements that can be reclassified in profit or loss
(59 717)
36 949
Hedging of cash flows, effective portion (Note 21)
(39 663)
54 309
Debt instruments at fair value through other comprehensive income (Note 21)
(45 647)
(1 524)
Income tax of elements that can be reclassified on profit or loss
25 593
(15 836)
TOTAL RECOGNISED INCOME AND EXPENSES (global result)
283 312
221 541
INSTITUTO DE CRÉDITO OFICIAL
STATEMENTS OF CHANGES IN EQUITY
II. STATEMENT OF TOTAL CHANGES IN EQUITY CORRESPONDING TO YEARS ENDED AT 31 DECEMBER
2022 AND 2021
(Expressed in thousands of Euros)
6
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
STATEMENTS OF CHANGES IN EQUITY
II. STATEMENT OF TOTAL CHANGES IN EQUITY CORRESPONDING TO YEARS ENDED AT 31 DECEMBER
2022 AND 2021
(Expressed in thousands of Euros)
7
At 31 December 2021
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 2020
4 314 204
-
943 298
-
-
70 188
-
5 327 690
(125 315)
5 202 375
Total recognised income and expenses
-
-
-
-
-
122 960
-
122 960
98 581
221 541
Other variations of equity:
Capital increases / endowment fund
276
-
-
-
-
-
-
276
-
276
Transfers between equity items
-
-
-
-
-
-
-
-
-
-
Other increases (decreases) equity
-
-
-
-
-
(70 188)
-
(70 188)
-
(70 188)
Total other variations of equity
276
-
-
-
-
(70 188)
-
(69 912)
-
(69 912)
Closing balance at 31 December 2021
4 314 480
-
943 298
-
-
122 960
-
5 380 738
(26 734)
5 354 004
INSTITUTO DE CRÉDITO OFICIAL
STATEMENT OF CASH FLOWS CORRESPONDING TO YEARS ENDED AT 31
DECEMBER 2022 AND 2021
(Expressed in thousands of Euros)
8
2022
2021
A. CASH FLOWS FROM OPERATING ACTIVITIES
(6 609 422)
6 651 451
1. Profit/(loss) for the year
127 951
122 960
2. Adjustments to obtain operating cash flows
35 864
15 096
Depreciation and amortisation
5 654
4 773
Other adjustments
30 210
10 323
3. Net increase /decrease in operating assets
1 432 193
3 289 454
Trading portfolio
(19 935)
51 023
Other financial assets at fair value through profit or loss
-
-
Financial assets at fair value through other comprehensive income
(67 684)
(618 151)
Financial assets at amortised cost
1 484 098
4 016 402
Other operating assets
35 714
(159 820)
4. Net increase/decrease in operating liabilities
(8 199 620)
3 251 055
Trading portfolio
19 134
(50 244)
Other financial liabilities at fair value through profit or loss
-
-
Financial liabilities at amortised cost
(8 877 024)
2 780 125
Other operating liabilities
658 270
521 174
5. Collections/payments for income tax
(5 810)
(27 114)
B. CASH FLOWS FROM INVESTMENT ACTIVITIES
(9 885)
(1 616)
6. Payments
(9 885)
(3 307)
Property, plant and equipment (Note 13)
(1 211)
-
Intangible assets (Note 14)
(3 806)
-
Shareholdings (Note 12)
(4 868)
(3 307)
Non-current assets and liabilities associated for sale (Note 17)
-
-
Debt securities at amortised cost
-
-
Other payments related to investing activities
-
-
7. Collections
-
1 691
Property, plant and equipment (Note 13)
-
1 343
Intangible assets (Note 14)
-
348
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 2022 AND 2021
(Expressed in thousands of Euros)
9
2022
2021
C. CASH FLOWS FROM FINANCING ACTIVITIES
(122 753)
276
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
207
276
Subordinated liabilities
-
-
Issue of own equity instruments
-
-
Disposal of own equity instruments
-
-
Other collections related to financing activities (Note 20)
207
276
D. EFFECT OF EXCHANGE RATE FLUCTUATIONS
-
-
E. NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS
(6 742 060)
6 650 111
F. CASH OR CASH EQUIVALENTS AT BEGINNING OF THE YEAR
9 379 495
2 729 384
G. CASH OR CASH EQUIVALENTS AT END OF THE YEAR
2 637 435
9 379 495
MEMORANDUM ITEM
COMPONENTS OF CASH AND EQUIVALENTS AT THE END OF THE PERIOD
Cash (Note 6)
6
4
Cash equivalent balances with central banks (Note 6)
2 557 390
9 344 958
Other financial balances (Note 6)
80 039
34 533
Less: bank overdrafts repayable
-
-
10
INSTITUTO DE CRÉDITO OFICIAL
Notes to the Annual accounts corresponding to
the year ended at 31 December 2022
11
1. INTRODUCTION, BASIS OF PRESENTATION AND OTHER INFORMATION
1.1 Introduction
Instituto de Crédito Oficial (hereinafter “the Institute” or “ICO”) created by the Law 13/1971 on
Official Credit Organisation and System was regulated, up until the publication of Royal
Decree Law 12/1995 on Urgent Budget, Tax and Financial Measures, by the provisions of
Article 127 of Law 33/1987 on the General State Budgets for 1988 and some provisions not
repealed of Law 13/1971.
The Institute is domiciled at Paseo del Prado, 4, in Madrid, place where it carries out all of its
activities without having any other office network in Spain.
The Institute is a public business entity of those provided for Article 103 of Law 40/2015 on
Legal Regime of the Public Sector, pertains to the Minister of Economic Affairs and Digital
Transformation, through the Secretary of State for Economy and Company Support; it is a
credit institution by law and is considered to be a State Finance Agency with its own legal
personality, assets and finance, as well as management autonomy to fulfil its purpose.
The Secretary of State for Economy and Company Support is responsible for the strategic
management of the Institute, as well as for the evaluation and control of the results of its
activities.
The Institute is governed by the provisions of the Law 40/2015 on the Legal Regime of the
Public Sector, through Additional Provision Six of Royal Decree-Law 12/1995, on Urgent
Budget, Tax and Financial Measures; by applicable provisions of Law 47/2003, of 26
November, General Budget, by its bylaws, approved by Royal Decree 706/1999, on the
adaptation of Instituto de Crédito Oficial to Law 6/1997 (14 April) and the approval of its bylaws,
and any other matter not covered by the above regulation, are governed by the special
legislation applicable to credit institutions and general civil, mercantile and employment
legislation.
Concerning the Corporate Governance, in addition to the abovementioned Law 40/2015,
Royal Decree 1149/2015, of 18 December, is applicable to the Institute. Since its entry into
force, the General Council is made up by the President and 10 Members (9 until then), in
whose appointment objective selection criteria are applied, such as the prestige and training,
regulating incompatibilities, and establishing a three-year period, renewable (only once) for
three more. Independent Members have double vote in financial business matters and will
therefore be majority in the ICO’s General Council. The Members’ appointment and cessation
is the responsibility of the Council of Ministers, at the proposal of the Minister of Economic
Affairs and Digital Transformation.
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 Economic Affairs
and Digital Transformation, expiry of the mandate for the independent Members or termination
in the case of Members from the public sector. Unexpected lack of suitability in the case of
independent members will be cause of dismissal, just like serious breach of confidentiality
duties or conflict of interest.
The Institute's purposes are to sustain and promote economic activities that contribute to
growth, and the improvement of national wealth distribution, especially, of all those activities
that deserve some support due to their social, cultural, innovative or ecological importance.
When pursuing these aims, the Institute must completely respect the principles of financial
balance and the adaptation of the means to purposes.
The Institute has also the following functions:
a) Contribute to the mitigation of the economic effects deriving from serious economic
recessions, natural catastrophes or similar situations, in accordance with the
instructions received in this aspect from the Council of Ministers or the Government
Commission for Economic Matters.
b) Act as the principal instrument for executing certain economic policy measures, in line
with the fundamental guidelines established by the Council of Ministers or the
Government Commission for Economic Matters, or the Ministry of Economic Affairs
and Digital Transformation, subject to the rules and decisions adopted by its General
Board.
Within the framework of these purposes and duties, the following types of operations are
included:
1. Direct and mediation activities, modalities that count with a wide catalogue of financing
products and collaterals through which ICO contributes to promoting feasible business
projects, favouring the growth of companies, their long-term investments, and
international activity, in order to promote the sustainable growth, employment
generation, and wealth distribution.
2. Reciprocal Interest Adjustment Agreement (CARI for its initials in Spanish). This
exportation support system ensures a good performance for the member financial
institution, domestic or foreign. The Institute merely acts as an intermediary in the
transaction, charging the State for its management costs, in accordance with the
provisions of the General State Budget Act for each year.
The net result of interest adjustments with member banks is regularly offset by the
State or through a payment by the Institute to the State, depending on which part is
the debtor or creditor, respectively.
3. Development Promotion fund (FONPRODE for its initials in Spanish). This Fund was
established in 2010 under Act 36/2010. It is designed to finance development projects
and programs in under developed countries in the form of State-to-State grants. The
Institute acts as a Government agent. The structure, administration and accounting of
these transactions is kept separated from all other operations, in independent accounts
maintained by the Institute, and for what the ICO is reimbursed for the cost of
management in accordance with the General State Budget for each year. As of
December 2010, this particular Fund, acquired the Fund for micro-credits granting, also
managed by the Institute since 1998 until its merger into FONPRODE.
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 transactions is kept separate from all other
operations, in independent accounts maintained by the Institute and for what the ICO
is reimbursed for the cost of management in accordance with the General State Budget
for each year.
5. Water and Sanitation Cooperation Fund. It was created through the Sixty-First
Additional Provision of Law 51/2007, 26 December, of the 2008 General State Budget
to fund water and sanitation projects under the financing arrangements with the
national authorities of the Latin America Countries, considered a priority for the
Spanish cooperation.
6. Finance Fund to Local Entities, resulting from the 17/2014 Royal Decree-Law, of 26
December, measures of financial sustainability of the autonomous communities and
local entities and others of economic nature, in order to ensure financial sustainability
of the municipalities attached, by addressing its financial requirements. The equity of
the Fund is endowed by the result of the liquidation of the Fund for the Financing of
Payments to Suppliers (created by Royals Decrees 4/2012 and 7/2012), which
happens in all its rights and obligations, effective January 1, 2015. ICO plays the trader
role, without registering any of these operations on its accounting records. This activity
generates for the Institute a pertinent trading commission.
7. Finance Fund to Autonomous Communities resulting from 17/2014 Royal Decree-Law
of 26 December, measures of financial sustainability of the autonomous communities
and local entities and others of economic nature, in order to ensure financial
sustainability of the autonomous communities attached. The equity of the Fund is
endowed by the result of the liquidation of the Autonomous Region Liquidity Fund
(created by Royal Decree 21/2012), which happens in all its rights and obligations,
effective January 1, 2015. Also it included in the equity part of the funding mechanism
for payment to suppliers in the part corresponding to Autonomous Communities. ICO
plays the trader role, without registering any of these operations on its accounting
records. This activity generates for the Institute a trading commission.
8. ICO COVID-19 surety lines, established and regulated by RD Law 8/2020, of 17 March,
RD Law 25/2020, of 3 July, RD Law 11/2020, of 31 March, RD Law 34/2020, of 17
November and RD Law 5/2021, of 12 March. This regulation, developed through the
corresponding Agreements of the Council of Ministers, approved the establishment of
several State surety lines, for an amount above 140,000 million Euros, in order to ease
the maintenance of employment and palliate the economic effects of the health crisis
caused by the COVID-19. Sureties are granted to financing granted by financial entities
to ease the access to credit and liquidity for businesses and employers (liquidity surety
lines), as well as to face the financial needs derived from the performance of new
investments (investment surety lines). Additionally, specific tranches were enabled,
establishing sureties in issues of promissory notes made by companies in the
Alternative Fixed-Income Market (MARF). Sureties have a term of up to 8 years. Also,
a surety line is contemplated for lessees, in the modality of liquidity loans, guaranteed
and subsidised by the State to face the lease of the families’ main residences. By
Council of Ministers Agreement of June 21, 2022, the possibility of extending the
maturity of guarantees managed on behalf of the State is enabled. In this activity, ICO
acts on behalf of the State, exercising management and administration functions, for
which the Institute accrues the corresponding commissions, registered as income in
14
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 (at 2022 closing, a tranche of
5,000 million has been activated). The line is subject to the EU State aids regulation,
regulated by RD Law 6/22, of 19 March, Council of Ministers Agreement of May 10,
2022 (amended by Council of Ministers Agreement of October 11, 2022) and Council
of Ministers Agreement of November 22, 2022. 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, 2022 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, 2022 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, 2022 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 2021 is presented only for
comparative purposes with the information relating to the year 2022 and therefore does not
constitute the ICO's annual accounts for the year 2021.
The principal accounting policies and measurement bases applied in preparing the Institute’s
annual accounts for the year ended at December 31, 2022 are summarised in Note 2.
Main regulatory changes during the period from January 1 to December 31, 2022
Bank of Spain Circular 3/2022, 30 March
This standard updates Circular of Bank of Spain 2/2016, of 2 February, and completes the
adaptation of the Spanish legal system to Directive 2013/36/EU and EU Regulation 575/2013,
on supervision and solvency. The standard has not had a significant impact in the ICO.
Royal Decree-Law 6/2022, of 29 March
15
This standard adopts urgent measures within the National Plan of response to the economic
and social consequences of the war in Ukraine, and creates a new public sureties for an
amount of 10,000 million Euros, in order to cover the financing granted by monitored credit
institutions to freelancers and employers, to be able to face liquidity needs in the current
situation. The Council of Ministers Agreement of May 10, 2022 and the 2022 establish
conditions for a first tranche that will be managed by ICO, for an amount of 5,000 million Euros.
The Council of Ministers of December 27, 2022 agreed a new package of measures to
respond to the impact caused by the war of Ukraine during 2023. These measures establish
a second tranche in the surety line of 500 million Euros, which will allow gas-intensive
industries to dispose of financing with public surety up to 90%.
Council of Ministers Agreement of 21 June 2022 (Covid-19 sureties)
The standard establishes the possibility to extend the maturity of sureties managed on behalf
of the State (liquidity and investment COVID-19 sureties), in collaboration with operating credit
institutions.
The Institute’s annual accounts of 2022 have been formulated by its Chairman on March 28,
2023, awaiting approval by the Institute’s General Board. The present annual accounts, unless
otherwise indicated, are presented in thousands of Euros.
1.3 Responsibility for information and estimates
The information contained in the annual accounts for the year ended December 31, 2022 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, 2022 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.
16
(BCA), which was previously taken over by Caja Postal, S.A. and Banco de Crédito Local de
España, S.A. (BCL), which also pertained to the first entity, Argentaria, maintains its legal
personality.
Based on what was established in the A.C.M. on February 15, 1993, the Institute acquired on
December 31, 1992, the assets and liabilities pertaining to BCL, BHE, BCA and BEX derived
from economic policy operations that were guaranteed by the State or the Institute and,
specifically, the loans and guarantees provided to companies in conversion (covered by the
conversion and re-industrialisation legislation). Also they were acquired exceptional loans
granted to victims of floods, the loans granted by these entities prior to their transformation
into public limited liability companies, as well as other assets, rights and equity investments.
Furthermore, on March 25, 1993, a management contract was signed with the relevant banks,
regarding the assets and liabilities transferred, including its administration as well as its correct
accounting in accordance of the current banking legislation.
On January 2019, both the management, and the administration and bookkeeping of
transferred assets and liabilities was assumed by the Institute. At December 31, 2022, the
balance of net assets was of 12 thousand Euros and the amount of results generated in the
year was of 112 thousand Euros (17 thousand Euros of net assets and 247 thousand Euros
of results at December 31, 2021).
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
,
2022 and
2021, is as follows:
Thousand Euros
2022
2021
Individual
Consolidated
Individual
Consolidated
Assets
29 774 943
29 802 910
37 766 136
37 790 433
Equity
5 514 563
5 589 018
5 354 004
5 409 434
Profit and loss the period
127 951
146 832
122 960
139 861
Total income and charges recognised in equity
283 312
302 193
221 541
238 442
Net Increase / (Decrease) in cash or cash
equivalents
(6 742 060)
(6 742 156)
6 650 111
6 650 015
1.6 Environmental impact and greenhouse effect gas emission rights
The ICO's global transactions follow the laws on environmental protection. The Institute
considers that it substantially complies with these Laws and that it maintains procedures
designed to ensure and encourage its compliance.
Also, the Institute considers, that it has taken appropriate environmental protection and
improvement measures, and for minimising, when possible, the environmental impact
following the rules regarding this matter. In 2022 and 2021 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
17
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
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 f rom
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
18
(deferred tax assets, pension funds) and introduces changes to existing
deductions. Nevertheless, it notes that the Regulation establishes a phase
calendar until its final full implementation between 5 and 10 years.
- Establishment of minimum requirements (Pillar I), with three levels of own funds:
a Common Equity Tier 1 capital ratio of 4.5%, a Tier 1 capital ratio of 6% and a
minimum requirement total capital ratio of 8%.
- Requirement of credit institutions to calculate a leverage ratio, defined as Tier 1
capital divided by total exposure unadjusted for risk. The disclosure requirement
will be applicable from 2016 onwards and the final definition was established in
2017 by supervisors.
- The aim and main purpose of the CRD, which must be transposed into national
legislation by the Member States according to their criteria, is to coordinate national
legislation regarding the access to the activity of credit institutions and investment firms
and their
governanc e 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.
19
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.
At December 31, 2022 and 2021, the ICO Group’s computable capital is as follows:
Thousands of Euros
2022
2021
Common Equity Tier 1 (*)
4 897 422
4 942 804
Capital
4 314 687
4 314 480
Reserves and prudential filters (**)
582 735
628 324
Tier 2
-
-
Other reserves (**)
-
-
Generic insolvency risk hedging
-
-
Total computable capital
4 897 422
4 942 804
Total minimum capital (***)
2 478 267
2 132 547
(*) The Group has no additional Tier 1.
(**) The total reserves used for the calculation of capital of the Group computable differ from those recorded in the consolidat ed bal ance sheet
because in the calculation of capital are given: adjustments for intangible assets and adjustments for reserves.
(***) Calculated as 17.05% of risk-weighted assets (RWA), established by Bank of Spain for the Group for 2022 (15.95% for 2021 closing).
At December 31, 2022 and 2021, the most important data of the minimal capital of the Group
are (in thousands of Euros):
Thousands of Euros
2022
2021
Tier 1
4 897 422
4 942 804
Risk-weighted assets (RWA)
14 535 290
13 370 200
Tier 1 ratio (%)
33,69%
36,97%
Computable total Capital
4 897 422
4 942 804
Computable total Capital ratio (%)
33,69%
36,97%
Minimum computable capital ratio (%) (*)
17,05%
15,95%
(*) The total minimum capital ratio from December 31, 2022, established by Bank of Spain for the ICO Group, is 17.05%,
considering both the requirements established by the EU Regulation 575/2013 (8%), and additional capital needs and
capital buffers (2.5%).
At December 31, 2022 and 2021, the Group’s computable capital exceeds minimum
requirements required from the entity in 2,419,155 thousands of Euros and 2,810,257
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, 2022, 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
20
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 2022 and 2021, and throughout 2022 and 2021, ICO complied with the minimum
ratios required by applicable Spanish regulations.
1.7.3 Capital management
The Institute considers capital, as management purposes, Tier 1 and Tier 2 computable
regulated by the legislation which is applicable to it for solvency purposes (EU Regulation
575/2013).
In this sense, the regulatory capital requirements are incorporated directly in the management,
thereof in order to maintain at all times a solvency ratio higher than the minimum established
for the entity by Bank of Spain. This objective is met through a proper capital planning.
1.8 Subsequent events
In accordance with Additional Provision of Law 24/2001, of 27 December, on Tax,
Administrative and Social Security measures, amended by aforementioned Law 42/2006, the
amounts recovered following the repayment by Central Government of the debts incurred with
ICO as a result of certain credit and guarantee facilities granted by the former Entidades
Oficiales de Crédito and the Institute itself, will form part of the Institute's equity. The amount
estimated for 2022 totals 207 thousand Euros, which will be registered in 2023.
In 2023, Instituto de Crédito Oficial, as a State Financial Agency, has capitalised by
government order, new credit lines for businesses and individuals in order to provide more
liquidity to the Spanish credit system and to address other needs within the framework of the
Institute objectives. The main lines approved are the following (National and International):
- ICO Companies and Entrepreneurs Facility: this ICO line provides finance to
freelances and companies performing its investments within the country and that need
to fulfil their liquidity needs. Individuals and property owner communities can also take
advantage of this line for housing restoration.
- ICO SGR/SAECA Guarantee Facility: this ICO line provides finance to freelances and
Spanish or mixed companies, which resources are mainly located in Spain, within a
Reciprocal Guarantee Company (SGR for its initials in Spanish) or the state-owned
corporation of Caución Agraria (SAECA for its initials in Spanish).
- ICO– MAPA SGR/SAECA Guarantee facility: financing for the activity’s general needs,
in view of the profitability loss caused by drought and other adverse weather events.
- ICO Commercial Facility: this ICO line provides finance to freelances and Spanish or
mixed companies established in Spain, to obtain liquidity through the advance of the
amount of the invoices from their commercial business within the national territory.
- ICO Red.es Acelera Facility: Financing of projects for which the granting of aids by
Red.es is approved, for the experimental development and promotion of digital
technologies.
- ICO Red.es Kit Digital facility: financing for the delivery of digitalisation solutions within
the framework of the Kit Digital Programme of Red.es.
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- ICO – MITMA Sustainable Mobility facility: complementary financing for beneficiaries
of competitive tender calls launched by the Ministry to decarbonise and digitalise the
mobility and transportation, charged to NextGenerationEU funds.
- ICO – MITMA Rehabilitation of Residential Buildings facility: financing aimed to carry
out rehabilitation works in housing buildings. Operations will have a MITM A surety.ICO
International Facility: this ICO line provides finance to freelances and Spanish or mixed
companies with resources mainly Spanish performing productive investments
overseas and/or that need to fulfil its liquidity needs.
- ICO Exporters Facility: this ICO line provides finance to freelances and Spanish
companies that have a need of liquidity, and help them though advances in bills coming
from its export activity.
- ICO International Channel Facility: Financing to support the internationalisation
process for self-employed professionals and companies. The main difference between
this product and the ICO International Facility and the ICO Exporters Facility is that the
loans are applied for at local banks or international institutions that have a cent ral office
in the country where the investment projects or export activities are carried out
As every year, during January 2023, the ICO and credit institutions that submitted the
application for membership of these credit lines, handled the drafting and signatures of the
contracts.
No significant events other than those described in the previous paragraphs have occurred
since the end of the reporting period (December 31, 2022) until the date these annual accounts
were issued (March 28, 2023).
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.
Transactions derived from ICO Direct activities were formally processed and administered by
Banco Santander (BS) and Banco Bilbao Vizcaya Argentaria (BBVA). These credit institutions
were awarded in the public tender held by ICO for this purpose.
The balance at December 31, 2022 of total net assets was of 35 thousand Euros (174
thousand Euros at December 31, 2021). Results generated in 2022 have been of 3,816
thousand Euros (3,728 thousand Euros in 2021).
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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, 2022, the balance of these assets (classified as doubtful assets) was of
2,370 thousand Euros (2,557 thousand Euros at December 31, 2021).
This line is guaranteed to the Institute with the Participation in State Income (PTE for its initials
in Spanish) of the borrowing EELL. The reduction in the outstanding balance of this line, from
the beginning of it and until December 31, 2022, under the PTE, is 62.97 million Euros (62.79
million Euros at December 31, 2021). Of the 1,029 hosted entities to December 31, 2021, a
total of 409 entities have had to resort to the PTE. At December 31, 2022 are still claiming
deductions of PTE to 7 EELL, for an outstanding amount of 2.4 million Euros.
2. ACCOUNTING PRINCIPLES, POLICIES AND VALUATION METHODS APPLIED
During the development of ICO's annual accounts for the year ended at December 31, 2022,
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
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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.
These shareholdings are presented in these annual accounts under the heading “Investments
in subsidiaries, joint ventures and associates” in the balance sheets and are valued at
acquisition costs, discounted for any impairment that they may have undergone.
Following the provisions of Bank of Spain Circular 4/2017, when there is evidence of
impairment of these shareholdings, the amount of the impairment is estimated as the negative
difference between its recoverable amount (calculated as the larger of the fair value of the
shareholding less necessary selling costs or their value in use, which is defined as the present
value of the cash flows that are expected to be received from the shareholding as dividends
and those relating to their disposal or other use) and their book value. Impairment losses
affecting these shareholdings and the recovery of any such losses are charged or credited,
respectively, under the heading “Gains or losses on financial assets and liabilities” in the
income statement
Accrued dividends during the year on these shareholdings are recorded under the heading
“Dividends income” in the income statement (Note 26).
Note 12 provides information on the accounting data of this heading at December 31, 2022
and 2021.
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
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not part of a decision unit together with the Institute nor are they under joint control. Normally,
significant influence generally accompanies a direct or indirect shareholding of 20% or more
of the voting rights.
In accordance with the stipulations of the new regulations it is understood by control, the power
of managing a company’s operational and financial policies with the objective of archiving
profits from its operational activities.
Shareholdings in “Associates” are presented in these annual accounts under the heading
“Investments in subsidiaries, joint ventures and associates – Associates” in the balance sheet
and are valued at acquisition costs, adjusted impairment that they may have undergone.
When, in accordance with the provisions of Bank of Spain Circular 4/2017, there is evidence
of impairment of these shareholdings, the amount of the impairment is estimated as the
negative difference between the recoverable amount (calculated as the larger amount of the
fair value of the shareholding less necessary selling costs or their value in use, which is defined
as the present value of the cash flows that are expected to be received from the shareholding
as dividends and those relating to their disposal or other use) and their book value. Impairment
losses affecting these shareholdings and the recovery of any such losses are charged or
credited, respectively, under the heading “Gains or losses on financial assets and liabilities”
in the income statement.
Accrued dividends during the year on these shareholdings are recorded under the heading
“Dividends income” in the income statement (Note 26).
Appendix I provides relevant information on these entities.
2.2 Financial instruments
2.2.1 Initial recognition of financial instruments
Financial instruments are initially recognised in the balance sheet when the Institute becomes
part of the relevant contract, in accordance with the terms of that contract. Specifically, debt
instruments such as loans and deposits in cash are recognised as from the date on which, the
legal right to receive or the legal obligation to pay the cash is generated, respectively. In
general, financial derivatives are recognised on the date they have been contracted.
Purchases and sales of financial assets arranged through conventional contracts, understood
as those contracts under the parties' reciprocal obligations must be fulfilled with a timeframe
established by regulations or market conventions and which may not be settled by differences,
such as stock market contracts or currency forwards, are accounted for from the date on which
the benefits, risks, rights and duties inherent in all ownership are transferred to the acquirer.
Depending on the type of financial asset, purchased or sold, this may be the date of the
contract or the date of settlement or delivery. Specifically, transactions effected in the foreign
exchange spot market are recognised at the settlement date, transactions affected using
equity instruments traded in Spanish securities markets are recorded at the contract date and
transactions affected using debt instruments traded in Spanish securities markets are
recognised at the settlement date.
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:
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- If risks and benefits are substantially transferred to third parties, as in unconditional
sales, sales and repurchase at fair value at the date of the acquisition, sales of financial
assets with a purchase option or sales gained issued deeply out of money, the
securitisation of assets in which the grantor retains no subordinate financing or grant
any credit enhancement to the new owners, etc., the transferred financial instrument
is removed off from the balance sheet, recognising both any right or obligation retained
or created as a result of the transfer.
- If risks and benefits associated with the transferred financial instrument are retained,
such as sales of financial assets with repurchase agreements for a fixed price or the
sale price plus interest, the loan contracts of values in which the borrower must return
the same or similar assets, and so on., the transferred financial instrument is not
removed off from the balance sheet and continues being measured with the same
criteria used before the transfer. However, the financial liability associated by an equal
amount to the consideration received is recognised, which is then valued at amortised
cost, the transferred financial asset income, but not recognised and the new financial
liability costs.
- If neither the risks and benefits associated with the transferred financial instrument are
transferred nor retained substantially, such as sales of financial assets with a purchase
option bought or sold that are neither inside nor outside money, securitisations in which
grantor assumes a subordinated financing or other credit enhancements for a share of
the assets transferred, and so on., is distinguished between.
- If the Entity does not retain control over the transferred financial instrument, in
which case it is removed off from the balance sheet and recognises any right or
obligation retained or created as a result of the transfer.
- If the Entity retains control over the transferred financial instrument, in which case
it continues recognising it on the balance sheet at an amount equal to its
exposure to value fluctuations that can experience and a financial liability
associated to an amount equal to the consideration received is recognised. Such
liabilities are subsequently valued at amortised cost, unless it meets the
requirements to be classified as financial liabilities at fair value through profit or
loss. To calculate the amount of this financial liabilities, the amount of its financial
instruments (such as asset-backed securities and loans) which constitute funding
for the entity to which financial assets have been transferred will be deducted, in
the exact amount these financial instruments finance specifically the transferred
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
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The fair value of a financial instrument at a given date is understood as the amount at which
it may be purchased or sold at that same date between some informed parties, in an arm's
length transaction. The most objective and common reference value for a financial
instrument's fair value is the price that would be paid in an organised, transparent and deep
market (“quoted price” or “market price”).
In the absence of a market price for a specific financial instrument, its fair value is estimated
on the basis of recent transactions involving similar instruments or, if failing this, using
valuation techniques that have been accepted from the international financial community,
taking into account the specific features of the instrument to be measured and, above all, the
different types of associated risks.
Specifically, the fair value of a held-for-trading derivative financial instrument traded in
organised, transparent and deep markets is the same as their daily market price. If, in
exceptional circumstances, the price cannot be established on a given date, they are
measured using similar methods to those applied to derivatives not traded in organised
markets.
The fair value of derivatives not traded in organised markets, or traded in organised markets
that are not deep or transparent, is equal to the sum of the future cash flows generated by the
instrument, discounted at the measurement date (“present value” or “theoretical close”),
employing valuation techniques accepted by the financial markets: “net present value” (NPV),
option pricing models, etc.
Amortised cost is the acquisition cost of a financial asset or adjusted liability (upward or
downward) for capital and interest repayments and, when applicable, for the (higher or lower)
portion (recognised in the income statement applying the effective interest method) of the
difference between the initial amount and the repayment value of the financial instruments.
The amortised cost of financial assets also includes impairment adjustments that may have
occurred.
The effective interest rate is the discount rate that brings the initial value of a financial
instrument exactly into line with total estimated cash flows through its residual life. In the case
of fixed-income financial instruments, the effective interest rate is equal to the contractual rate
defined on acquisition, adjusted for commissions and transaction costs that, in accordance
with the provisions of Bank of Spain Circular 4/2017, must be included in the calculation of the
effective interest rate The effective interest rate for variable-rate financial instruments is
estimated in the same way as for fixed-income transactions, and is recalculated at each
interest review date stated in the contract, taking into consideration changes in the
transaction's future cash flows.
Other entities shareholdings, whose fair value cannot be determined objectively and financial
derivatives that have this instrument as its underlying assets and are settled by their delivery,
are kept at cost adjusted, where appropriate, for impairment losses they have experienced.
Subsidiaries, joint ventures and associates shareholdings are recorded at cost adjusted,
where appropriate, for impairment losses that have occurred.
Variations in financial assets amounts are registered, in general, with a counterpart in the profit
and loss account, differentiating between them, the ones that are caused by the accrual of
interest and similar items that are recorded in the heading of “Interest and similar income ,”
and those corresponding to other causes that are recorded by the net amount under the
heading of “Gains or losses on financial assets and liabilities” of the profit and loss account.
However, changes in instruments value included under the portfolio of financial assets valued
27
at fair value through other comprehensive income are recorded temporarily in the caption
“Other accumulated comprehensive income,” unless they come from exchange differences.
Amounts in the caption “Other accumulated comprehensive income” for changes in the fair
value of these financial instruments remain part of net equity until they are removed from
balance sheet assets where they are originated, moment when they are registered against a
profit and loss account, unless they are financial instruments which valuation changes are
never reclassified to the income statement.
Also, value changes of the items included under the heading “Non-current assets held for sale”
are recorded under “Other accumulated comprehensive income” as valuation adjustments in
net equity.
Related to financial instruments, valuations at fair value reflected in the annual accounts are
classified using the following fair value ranking:
i) Level I: reasonable values are obtained from quoted prices (not adjusted) in active
markets for the same instrument.
ii) Level II: fair values are obtained from valuation techniques in active markets for similar
instruments, recent transaction prices or expected cash flows, or other valuation
techniques in which all significant inputs are based, directly or indirectly, on observable
market data.
iii) Level III: fair values are obtained from valuation techniques in which some significant
inputs are not based on observable market data
In financial assets designated as hedged items and hedging accounting, valuation differences
are recorded taking into account the following criteria:
- In fair value hedges, the differences occurring in hedging items and in hedged items, in
relation to the type of hedged risk are recognised directly in profit and loss account.
- Differences in valuation related to inefficiency of cash flows hedging and net foreign
investments are sent directly to the profit and loss account.
- In cash flow hedges, the valuation differences arising on the effective hedging of the
hedging items are temporarily registered under the heading of ‘Other accumulated
comprehensive income’ as adjustment in net equity.
- In net foreign investments hedging, valuation differences arising on the effective hedging
of the hedging items are temporarily registered under the heading of ‘Other accumulated
comprehensive income’ as adjustment in net equity.
In the last two cases, valuation differences are not included in results until hedged item's gains
or losses are recorded in the profit and loss account or until the hedged item's expiration date.
In interest rate risk's fair value hedges of a financial instruments portfolio, gains or losses that
arise when assessing the hedging instruments are recognised directly in the profit and loss
account, whereas the gains or losses in the amount covered fair value changes, regarding the
hedged risk, are recognised in “Other accumulated comprehensive income” as adjustment in
financial assets by macro hedging.
In interest rate risk cash flows hedging of a financial instruments portfolio, the effective part of
the hedging instrument's value fluctuation is recorded temporarily in “Other accumulated
comprehensive income” as adjustment in net equity until expected transactions occur, being
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then recorded in the profit and loss account. The ineffective portion of the hedging derivative's
value fluctuation is directly registered on the profit and loss account.
Financial liabilities
Financial liabilities are recorded at amortised cost, as defined for financial assets, except in
the following cases:
- Financial liabilities included in captions ‘Financial liabilities held for trading’ and
‘Financial liabilities at fair value through profit or loss,’ are recorded at fair value, as
defined for financial assets. Financial liabilities covered by fair value hedging
operations are adjusted, being registered those fair value variations in relation to the
hedged risk covered by the hedge operation.
- Financial derivatives whose underlying assets are equity instruments whose fair value
cannot be determined in a sufficiently objective and be settled by delivery of these
contracts are valued at cost.
Financial liabilities amount's variations are recorded, in general, offset by the profit and loss
account, differentiating between those that are caused by interest accrual and similar items
that are recorded in the heading of “Interest and similar charges,” and those corresponding to
other causes, which are recorded under the heading ‘Gains or losses on financial assets and
liabilities measured at fair value through profit or loss.’
Financial liabilities designated as hedged items and hedging accounting valuation differences,
are recorded taking into account the above criteria for financial assets, included in the previous
note.
2.2.4 Classification and measurement of financial assets and liabilities
Financial instruments are classified into the following categories in the Institute's balance
sheet:
- Central bank and credit institutions deposits, which are cash balances and amounts
held in Bank of Spain, other central banks and other credit institutions.
- Financial assets and liabilities at fair value through profit or loss: this category is made
up with financial instruments classified as trading portfolio and other financial assets
and liabilities classified at fair value through profit or loss:
x Financial assets are those financial assets included in the trading portfolio
acquired in order to be realised in the short term or which form part of a portfolio
of identified financial instruments for which there is evidence of recent actions
taken to obtain short-term gains. Also, derivative financial instruments not
designated as hedge instruments are considered as part of this category,
including instruments segregated from hybrid financial instruments in
accordance with applicable accounting rules.
x Financial liabilities are those liabilities included in the trading portfolio issued in
order to be repurchased in the near future or that form part of a portfolio of
financial instruments identified or jointly managed for which there is evidence of
recent actions to obtain short-term gains, short positions in securities arising from
sales of assets acquired under non-optional repurchase agreements and loans
of securities, and derivative financial instruments not denominated as hedge
instruments, including segregated from hybrid financial instruments. The fact that
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a financial liability is used to finance trading assets does not entail its own
inclusion in this category.
x Other financial assets or liabilities at fair value through profit or loss are the
following:
- Financial assets that, not being included in the Trading portfolio, are
considered as hybrid financial assets and are valued at fair value, and
those that are jointly managed with Liabilities under insurance contracts
valued at their fair value or with financial derivatives whose purpose and
effect is to reduce its exposure to fluctuations in fair value or which are
jointly managed with financial liabilities and derivatives in order to reduce
the overall exposure to interest rate risk.
- Financial liabilities designated at its initial recognition by the entity or when
recognising them more relevant information is obtained because:
- With it, inconsistencies in the recognition or appreciation arising from
the asset or liabilities valuation or recognising the gains and losses
will be deleted or significantly reduced, using different criteria.
- A financial liabilities or both financial assets and liabilities group is
managed and their performance is evaluated based on their fair
value, according to a risk management or investment information
strategy. Documented information about groups is issued also on the
basis of the fair value to the key Management staff.
- Assets valued at amortised cost. This category includes the following:
o Debt securities with fixed maturities and cash flows of a determined or
determinable amount. Debt securities included in this category are initially
valued at fair value, adjusted for transaction costs directly attributable to
the acquisition of the financial asset, which are recognised in the income
statement using the effective interest method, defined in applicable
accounting legislation as of Bank of Spain, 4/2021. They are subsequently
valuated at amortised cost, based on the effective interest ratios.
o Loans and receivables: this category includes financing provided to third
parties arising from the ordinary credit and loan activities carried out by
the Institute and debts incurred by asset buyers and by service users. It
also includes finance lease transactions in which entities act as lenders.
The financial assets included in this category are initially carried at fair value, adjusted
for commissions and transaction costs directly attributable to the acquisition of the
financial asset and which, under applicable accounting legislation as of Bank of Spain,
4/2021, 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
30
currency, other than the euro included in this portfolio, are accounted as it is mentioned
in Note 2.4. Possible impairment losses on these securities are recorded as indicated
in Note 2.7. Debt securities included in fair-value hedging are recorded as mentioned
in Note 2.3.
- Financial assets at fair value through other comprehensive income: this category
includes debt securities not classified as instruments at amortised cost or at fair
value through profit or loss, owned by the Institute, as well as equity instruments
owned by the Institute corresponding to entities which are not subsidiaries, joint
ventures or associated entities, which have not been classified as at fair value
through profit or loss.
The instruments included in this category are initially measured at fair value, adjusted
for transaction costs directly related to the acquisition of the financial asset, which are
recognised in the income statement using the effective interest rate method defined in
applicable accounting legislation as of Bank of Spain, 4/2021, 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 “Interests and similar income” (calculated
using the effective interest rate method) and “Dividends income” in the income
statement, respectively. Impairment losses on these instruments are recorded as
mentioned in Note 2.7. Exchange differences on financial assets denominated in
foreign currency other than the euro are accounted as mentioned in Note 2.4. Changes
in fair value of financial assets covered by fair-value hedges are stated as mentioned
in Note 2.3.
The remaining changes in the fair value of financial assets from acquisition are
registered with counterpart in the Institute’s equity under caption “Other accumulated
comprehensive income” as valuation adjustments, until the financial asset is written
off, moment at which the balance registered on such caption is booked on the profit
and loss account under caption “Profit and loss for write-off of financial assets and
liabilities valued at fair value through profit or loss.”
- Financial liabilities at amortised cost: This category of financial instruments includes
financial liabilities that are not included in any of the previous categories.
The financial liabilities included in this category are initially carried at fair value,
adjusted for transaction costs directly attributable to the issue of the financial liability,
which will be recognised in the income statement using the effective interest rate
method, defined in applicable accounting legislation (Bank of Spain Circular 4/2017) to
maturity. Subsequently they are measured at amortised cost, calculated by applying
the effective interest rate method defined in applicable accounting legislation (Bank of
Spain Circular 4/2017).
The interest accrued on these assets, calculated using the effective interest rate
method, is recognised in the caption “Interest and similar charges” in the income
statement. Exchange differences on securities denominated in foreign currency, other
than the euro included in this portfolio, are accounted as mentioned in Note 2.4.
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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
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.
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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 profit and loss
account. If the entity reclassifies a debt instrument from the portfolio of fair value
through profit or loss into amortised cost, the asset’s fair value at reclassification
date will be its new gross carrying amount.
- If the entity reclassifies a debt instrument from the portfolio of amortised cost into
fair value through other comprehensive income, the entity must estimate its fair
value at reclassification date. Any loss or profit generated for differences between
the prior amortised cost and the fair value will be recognised in other
comprehensive income. The effective interest rate and the estimate of expected
credit losses will not be adjusted as a consequence of the reclassification.
- If a debt instrument is reclassified from the portfolio of fair value through other
comprehensive income into amortised cost, the financial asset will be reclassified
at the fair value at reclassification date. The accumulated profit or loss at
reclassification date in other accumulated comprehensive income of equity will be
cancelled using as counterpart the asset’s carrying amount at reclassification
date. Thus, the debt instrument will be valued at reclassification date as if it had
been valued at amortised cost. The effective interest rate and the estimate of
expected credit losses will not be adjusted as a result of the reclassification.
- If the entity reclassifies a debt instrument from the portfolio of fair value through
profit or loss to fair value through other comprehensive income, the financial asset
will continue being valued at fair value, without modification of the registration of
previously registered value changes.
- If the entity reclassifies a debt instrument from the portfolio of fair value through
other comprehensive income into fair value through profit or loss, the financial
asset will continue being valued at fair value. The profit or loss previously
accumulated in «other accumulated comprehensive income» of equity will be
transferred to profit or loss of the period at reclassification date.
- When the investment in a subsidiary, joint venture or associate is no longer
classified as such, the retained investment, if any, will be measured at its fair value
at reclassification date, recognising all profits or losses generated for the
difference between its carrying amount prior to the reclassification and such fair
value in profit or loss or in other comprehensive income, as applicable, based on
the subsequent valuation of the retained investment.
- The investment in an entity prior to its qualification as subsidiary, joint venture or
associate will be valued at fair value until the date when control, joint control or
significant influence is obtained. At this last date, the entity must estimate the f air
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:
33
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 2022 or 2021.
2.3 Financial derivatives
Financial derivatives are instruments that provide a loss or gain, and allow, under certain
conditions, the compensation of the totality or part of the credit and / or market risks associated
to transactions and balances, using interest rate and certain rates, individual securities prices,
exchange rate cross-currency or other similar references as underlying assets. The Institute
uses financial derivatives traded in bilateral organised or negotiated markets being the
counterpart out of organised markets (OTC).
The Institute uses financial derivatives as part of its strategy to reduce its exposure to interest
rate, foreign and market exchange rate, among others. When these operations meet certain
requirements of the Rules Thirty-first and thirty-second of Circular 4/2017, Bank of Spain such
operations are considered as “hedging”.
When the Institute designates a transaction as a hedge, it does so from the initial moment of
the transactions or the instruments included in those hedges, that hedge being appropriately
documented. When documenting these hedging transactions the instrument or instruments
hedged and hedging instrument or instruments are properly identified together with the nature
of the risk which is intended to be covered and the criteria or methods followed by the Group
to measure the efficiency of the hedge over its life, taking into account the risk that it must
cover.
The Institute only applies hedge accounting for hedges that are considered highly effective
over their entire lives. A Hedge is considered highly effective if during the envisaged term any
changes in fair value or cash flows attributed to the risk covered in the hedging of the financial
instrument or instruments hedged, are virtually fully offset by the changes in fair value or cash
flows, as appropriate, of the hedging instrument or instruments.
In order to measure the efficiency of hedging defined as such, the Institute analyses whether
from the beginning until the end of the defined hedging period, changes in fair value or cash
flows of the hedged item, which may be attributed to the hedged risk may prospectively, be
expected to be offset almost completely by changes in fair value or cash flows, as appropriate,
of the hedging instrument or instruments and that retrospectively the results of the hedge have
fluctuated in a measurement range of 80% to 125% with regard to the results of the item
hedged.
Hedging transactions carried out by the Institute are classified into the following categories:
- Fair-value hedges: They cover the exposure to changes in the fair value of financial
assets and liabilities or firm commitments, or an identified portion of these assets,
liabilities or commitments, attributable to a specific risk, provided that they affect the
income statement.
34
- Cash-flow hedges: they cover changes in cash-flow that are attributable to a specific
risk associated with a financial asset or liability or a highly-probable planned
transaction, which may affect the income statement.
Measurement differences are recorded in accordance with the following criteria, when
referring specifically to financial instruments designated as hedged components and book
hedges:
- For fair-value hedges, differences in the fair value of both hedges and hedged
components, with regard to the type of risk hedged, are recognised directly in the
income statement.
- For cash-flow hedges, measurement differences arising on the efficient part of the
cover of the hedges are temporarily accounted under “Other accumulated
comprehensive income.” Hedged financial instruments in this type of hedge are carried
in accordance with the criteria explained in Note 2.2, without any modification due to
being considered as such covered instruments.
In the last case, measurement differences are not recognised as results until the gains or
losses on the hedged item are recorded in the income statement, or until maturity.
Differences in the valuation of the hedge instrument, corresponding to the inefficient part of
the hedging cash flow operations, are directly registered as “Gains or losses on financial
assets and liabilities measured at fair value” in the income statement.
The Institute interrupts hedge accounting when the hedging instrument expires or is sold,
when a hedge no longer meets the criteria for hedge accounting or when the transaction
ceases to be classed as a hedge.
Where fair-value hedge accounting is interrupted as stated in the preceding paragraph, in the
case of hedged items carried at amortised cost, the value adjustments made for hedge
accounting purposes are recognised in the income statement until the maturity date of the
hedged items, applying the effective interest rate as recalculated on the interruption date.
In the situations in which a cash-flow hedge transaction is interrupted, the accumulated gain
or loss from the hedge is registered under the heading “Other accumulated comprehensive
income” in the balance sheet and it will remain under this heading until the planned hedge
transaction takes place, time at which it will be taken to the income statement, or the cost of
acquiring the asset or liability to be recorded will be adjusted, in the event that the hedged
component is a planned transaction that culminates with the recording of a financial asset or
liability. In the event of planned transactions, when expected not to take place, the entry made
under “Other accumulated comprehensive income” relating to that transaction is immediately
recognised in the income statement.
2.4 Foreign currency transactions and functional currency
The Institute’s functional currency is the Euro. Therefore, all balances and transactions
denominated in currencies other than the euro are considered denominated in foreign
currency.
Set out below is the equivalent value of financial assets and liabilities denominated in foreign
currency held by the Institute, at December 31, 2022 and 2021 (thousands of Euros):
2022
2021
Assets
Liabilities
Assets
Liabilities
35
Pounds Sterling
380 614
529 340
438 109
1 070 233
US Dollars
2 406 034
7 228 720
2 262 411
9 439 591
Swiss Francs
8
258 079
11
245 988
Japanese Yens
741
35 687
800
99 860
Other currencies
435 683
61 838
190 516
66 324
3 223 080
8 113 664
2 891 847
10 921 996
The equivalent value in Euros of assets and liabilities denominated in foreign currency (in
thousands of Euros), classified by nature, recorded by the Institute, at December 31, 2022
and 2021 is as follows:
2022
2021
Assets
Liabilities
Assets
Liabilities
Loans to Credit Institutions
1 284 125
1 191 461
Loans to Customers
1 924 671
1 682 310
Other financial assets
14 284
18 076
Deposits in Credit Institutions
2 865 741
2 269 222
Debt securities issued
5 247 278
8 650 215
other financial liabilities
645
2 529
3 223 080
8 113 664
2 891 847
10 921 996
When initially recognised, debtor and creditor balances accounted in foreign currency are
converted to the functional currency using the spot exchange rate at the date of recognition,
understood as the exchange rate for an immediate delivery. After initial recognition, the
following rules are applied to translate balances registered in foreign currency to the functional
currency:
i) Monetary assets and liabilities are translated at the year-end exchange rate,
understood as the average spot exchange rate at the date to which the annual
accounts refer.
ii) Non-monetary items valued at historic cost are translated at the exchange rate on the
date of acquisition.
iii) Non-monetary items measured at fair value are converted to the exchange rate on the
date its fair value is determined.
iv) Income and expenses are converted by applying the exchange rate existing on the
transaction date. Nonetheless, the average exchange rate for the period is used for all
transactions carried out in that period, unless there have been significant fluctuations.
Depreciation/ amortisation are translated at the exchange rate applied to the relevant
asset.
Exchange differences arising from conversion of debtor and creditor balances denominated
in foreign currency are generally recorded in the income statement. Nonetheless, in the case
of exchange differences that arise from non-monetary items measured at fair value, for which
the fair-value adjustment is recorded under “Other accumulated comprehensive income”, the
component of the exchange rate relating to the revaluation of the non-monetary element is
broken down.
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, 2022 and 2021 published
by the European Central Bank at each of those dates.
The net amount of exchange differences arising from the conversion of receivables and
36
payables denominated in foreign currency arises up to 4,038 thousand Euros of profits at
December 31, 2022 (5,619 thousand Euros of profits at December 31, 2021).
2.5 Recognition of income and expenses
Below, there is a summary of the most significant accounting policies used by the Institute to
recognise income and expenses:
2.5.1 Interest income and expense, dividends and similar items
In general, interest income and expense and similar items are accounted on an accruals basis,
applying the effective interest rate method defined in applicable accounting legislation, Bank
of Spain Circular 4/2017. Dividends received from other companies are recognised in the
Institute’s income statement when the Institute become entitled to receive them.
2.5.2 Commissions, fees and similar items
Income and expense related to commissions and similar fees, which should not be included
in the calculation of the effective interest rate of operations and/or do not form part of the
acquisition cost of financial assets or liabilities, except for those carried at fair value through
profit or loss, are recognised in the income statement using different methods depending on
their nature. The most significant methods used are explained below:
- Amounts associated with the acquisition of financial assets and liabilities carried at fair
value through profit or loss are recognised in the income statement at the payment
date.
- Amounts arising from long-term transactions or services are recognised in the income
statement over the term of the transactions or services.
- Amounts relating to a one-off event are recorded in the income statement when that
event takes place.
2.5.3 Non-financial income and expenses
These amounts are accounted on an accruals basis.
2.5.4 Deferred collections and payments
Deferred collections and payments are recognised at the amount obtained by discounting
forecast cash flows at market rates.
2.6 Offsetting of balances
Only debtor and creditor balances arising from transactions which, under contract or
legislation, provide the possibility to offset and exist in the company, to be settled at their net
amount, or simultaneously realised and paid, are offset and therefore presented in the balance
sheet at their net amount.
2.7 Financial asset impairment
The carrying value of financial assets is generally adjusted against the income statement when
there is objective evidence that there are impairment losses. This is the case where:
- For debt instruments, understood as loans and debt securities, when, following their initial
recognition, there is an event or combined ef fect of several events which have a negative
37
impact on the relevant future cash flows.
- For equity instruments, when following their initial recognition, there is an event or the combined
eff ect of several events, making it impossible to recover their carrying value.
As a general rule, impairment financial instruments value correction is charged to the profit
and loss account of the period in which such impairment takes place and the recovery of
previously recorded impairment losses, if takes place, are recognised in the profit and loss
account of the period during which the deterioration is eliminated or reduced. In the event that
the recovery of any amount in respect of the impairment recorded is considered impossible,
such impairment is written off from the balance sheet, although the Institute may carry out the
necessary actions to attempt to secure collection until the definitive extinguishment of its debt
claims due to lapsing, remission or other reasons.
Debt instruments and contingent risks portfolios, regardless of their owner, warranty or
instrumentation, are analysed to determine the credit risk to which the Entity is exposed and
to estimate hedging requirements for impairment in value. For the annual accounts
preparation, the Institute classifies its operations in terms of its credit risk by analysing,
separately, the insolvency risk due to the customer and country risk to which they are exposed.
Debt instrument's future cash flows estimated are all amounts, principal and interest, the Entity
believes will receive during the instrument's life. All relevant information which provides data
about the possibility of future recovery of contractual cash flows that is available at the time of
annual accounts elaboration is considered in this estimate. Also, in estimating instruments
with security's future cash flows, are taken into account the flows that would result from its
realisation, less the amount of costs for its acquisition and subsequent sale, irrespective of the
probability of the guarantee.
In the calculation of the present value of estimated future cash flows, the instrument's original
effective interest rate is used as the update rate, if contract rate is fixed, or the effective interest
rate on the date to which the statements relate determined according to financial conditions of
the contract, if variable.
In the case of debt instruments measured at amortised cost, the amount of impairment losses
incurred is equal to the negative difference between the carrying value and the current value
of future estimated cash flows, using the original effective interest rate as the adjustment rate,
if that rate is fixed, or the effective interest rate at the date of the annual accounts calculated
in accordance with the terms of the contract, when a variable ratio, in the case of listed debt
instruments, market value may be used as a substitute, provided that it is enough reliable to
consider it to be representative of the value the Institute will recover.
Objective evidence of impairment will be determined individually for all debt instruments that
are significant, and individually or collectively for the groups of debt instruments which are not
individually significant. When a specific instrument cannot be included in any group of assets
with similar risk characteristics, it will be analysed solely on an individual basis to determine
whether it is impaired and, if appropriate, estimate the impairment loss.
The collective assessment of a group of financial assets to estimate impairment losses is as
follows:
- Debt instruments are included in groups with similar credit risk characteristics,
indicative of debtor ability to pay all amounts, principal and interest, in accordance with
contractual terms. The characteristics of credit risk, which are taken into account in
order to group together assets, are, for example, the type of instrument, the debtor's
sector of activity, the geographic area of activity, type of guarantee, age of amounts
38
overdue and any other factor that may be relevant when estimating future cash flows.
- Future cash flows in each group of debt instruments are estimated based on the
Institute’s experience of historical losses for instruments with similar credit risk
characteristics to those of the respective group, following the necessary adjustments
to adapt historical data to current market conditions.
- Impairment losses in each group are the difference between the carrying value of all
the group's debt instruments and the present value of its estimated future cash flows.
Debt instruments not measured at fair value through changes in the income statement,
contingent risks and commitments, are classified based on the insolvency risk attributable to
the client or the transaction, in the categories defined by the Annex IX from the Bank of Spain’s
Circular 4/2017. For debt instruments not classified as normal risk, estimates are made
regarding the specific impairment hedges necessary based on the criteria established in the
above mentioned Circular, bearing in mind the age of the unpaid amounts, the guarantees
provided and the client's financial situation and, if appropriate, the guarantors.
Similarly, these financial instruments are analysed to determine the credit risk deriving from
country risk, understood to be the risk affecting clients resident in a certain country due to
circumstances other than normal commercial risks.
In addition to the specific impairment hedges indicated above, the Institute hedges against
losses inherent to debt instruments not measured at fair value through profit or loss and
contingent risks classified as normal through group hedges, calculated based on historical
impairment and other familiar circumstances at the time of evaluation that are related to
inherent losses incurred at the date of the annual accounts, calculated using statistical
methods, that have yet to be assigned to specific transactions.
The Institute has used the parameters established by the Bank of Spain, based on its sector
experience and information, which determine the method and amount to be used to cover
inherent impairment losses incurred in debt instruments and contingent risks classified as
normal risks, which are changed regularly on the basis of the development of the data in
question. This method of determining the hedging for impairment losses is based on the
application of certain percentages set in the applicable accounting legislation, which vary
based on the risk classification of financial instruments as established in the Annex IX from
the Bank of Spain’s Circular 4/2017, and which change depending on the risk classification of
the financial instruments established by the mentioned Annex.
In general, impairment of debt instruments is calculated by applying the following percentages
to the outstanding risk not covered by the amount to be recovered from the effective collateral,
based on the risk segment to which the operation belongs and the seniority of past due
amounts:
From 90
days to 6
months
From 6 to
9 months
From 9
months to 1
year
From 1
year to 15
months
From 15 to
18 months
From 18 to
21 months
M o r e th an 21
months
No n-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
45
50
65
70
85
95
100
39
Main residence unpaid (LTV) <80%
guarantee
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
No n-credit institutions and indivi dual
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
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, 2022 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
(%)
40
Bu ildin gs 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.
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 transaction costs, which are directly attributable to its issuance,
except for contracts issued by insurance companies.
At the beginning, the fair value of financial guarantee contracts issued to a third party not
connected within a single transaction in mutual independence conditions, is the premium
received plus, presents cash flows value to receive, using a similar interest rate to the financial
assets issued by the Entity with similar term and risk. Simultaneously, it will be recognised as
a receivable asset the present value of future cash flows to be received at the rate of interest
41
mentioned above.
Subsequent to the initial recognition, the contracts are treated according to the following
criteria:
i) The financial guarantee's commissions or bonuses value to receive is updated by
recording the difference in the profit and loss account as financial income.
ii) The value of financial guarantee contracts that have not been qualified as doubtful,
is the initially recognised amount less the part charged to the profit and loss
account on straight-line basis over the expected life of the guarantee or by other
criteria, provided that this more accurately reflects economic risks and benefits of
the warranty's perception.
The classification of financial guarantee contracts as doubtful will imply the respective hedging
action under the heading of “Provisions for contingent exposures and commitments.”
2.9 Accounting for leases
2.9.1 Finance leases
Finance leases are those in which all the risks and rewards substantially carried by the leased
asset are transferred to the lessee.
Whenever the Institute acts as lessor of an asset in a finance lease transaction, the sum of
the present values of the amount that will be received from the lessee plus the guaranteed
residual value, usually the purchase option price when the lease terminates, are recorded as
financing provided to third parties. It is therefore included in “Loans and receivables” in the
balance sheet, in accordance with the nature of the lessee.
When the Institute acts as the lessee in a finance lease transaction, the cost of the leased
assets is recorded in the balance sheet, on the basis of the nature of the asset leased and a
liability is carried in the same amount, which will be the lower between the fair value of the
leased asset and the sum of the present values of the amounts payable to the lessor, plus, if
appropriate, the purchase option exercise price. These assets are depreciated at similar rates
to those applied to the Institute’s property, plant and equipment for own use (Note 2.12).
In both cases, the financial income and expense on finance leases is credited and charged,
respectively, to the income statement captions “Interest and similar income” and “Interest and
similar charges,” applying the effective interest rate method on the lease to estimate its
accrual, calculated according to the current Spanish legislation (Circular 4/2017 of Bank of
Spain).
2.9.2 Operating leases
In operating leases, ownership of the leased asset and substantially all risks and rewards of
ownership are retained by the lessor.
Where the Institute acts as the lessor in operating lease agreements, the acquisition cost of
the leased asset is registered under “Property, plant and equipment” in “Property investments”
or “Other assets assigned under operating lease,” depending on the nature of the leased
assets. Such assets are depreciated in accordance with the policies adopted for similar
property, plant and equipment for own use. The income from lease contracts is recognised in
the income statement on a straight-line basis in the caption “Other operating income”.
42
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,
regardless of whether they are career civil servants or interim government employees,
contracted personnel, temporary employees or senior management. The following parameters
are taken into account when calculating the annual contribution:
x The professional group to which the employee pertains.
x Length of service (understood to be the number of three-year periods the employee
has worked in the Administration, regardless of the contractual arrangement).
The amounts to be contributed are those approved in the General State Budget for each year.
Under the heading “Personnel costs,” there is no cost registered for this year at December 31,
2022 and neither for the previous one at December 31, 2021.
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, 2022, a provision was recorded by the Institute for post-employment
commitments amounting to 770 thousand Euros (791 thousand Euros at December 31, 2021).
2.10.4 Severances
43
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, 2022 and 2021, the Institute has not recorded any provisions regarding this
aspect as there is no plan or agreement that would require such an allocation.
2.11 Corporate income tax
Corporate income tax is considered as an expense and is recorded, in general, under the
heading of “Income tax” of the profit and loss account.
Income tax expense for the year is calculated as tax payable on taxable income for the year,
adjusted for variations during the year in asset and liability balances arising from temporary
differences, tax credits and allowances, and any tax-loss carry forwards (Note 23).
The Institute considers that there is a temporary difference when there is a difference between
the carrying amount and the taxable amount of an asset or liability. The amount attributed to
an asset or liability for tax purposes is considered the tax base. A taxable temporary difference
is understood as the one which will generate a future obligation for the Institute to pay to the
relevant Administration. A deductible temporary difference is understood to be the one which
will generate for the Institute some reimbursement right or a decrease in the payment to be
made to the relevant administration in the future.
Tax credits and allowances and tax credits for tax-loss carry forwards are amounts that,
though generated on completion of an activity or obtainment of a result, are not applied for tax
purposes in the relevant tax return until the conditions stipulated in tax legislation are fulfilled,
and providing the Institute the probability of application in future years.
Current tax assets and liabilities are amounts that the Institute expects to recover from or pay
to the corresponding tax authorities within 12 months, from the date on which they were
recognised. Deferred tax assets and liabilities are amounts that the Institute expects to recover
from or pay to the corresponding tax authorities in future years.
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
44
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.
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.
45
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 transaction or have been internally developed by the Institute.
Only intangible assets whose cost may be reasonably estimated on an objective basis and
which the Institute deems likely to provide a future financial benefit, are recognised for
accounting purposes.
Intangible assets, other than goodwill, are recognised in the balance sheet at their acquisition
or production cost, adjusted to accumulated amortisation and any impairment losses they may
have suffered.
Intangible assets may have an “undefined useful lif e” when the analysis performed on all
relevant factors leads to the conclusion that there is no foreseeable limit to the period over
which they are expected to generate net cash flows for the Institute, and they have an “definite
useful life” in all other cases.
Intangible assets with an indefinite useful life are not amortised, although at the time of each
accounting closing the Institute reviews their respective remaining useful lives in order to
ensure that they continue to be indefinite. If this is not the case, an appropriate action is taken.
Intangible assets with a defined life-span are amortised according to some criteria similar to
those applied to property, plant and equipment. The annual amortisation charge for these
intangible assets is carried in the income statement caption “Amortisation - Intangible assets.”
For intangible assets with both an indefinite and definite useful life, the Institute recognises
any impairment in those assets and uses them as a balancing entry “Impairment or reversal
of impairment on non-financial assets” in the income statement. The methods applied to
recognise impairment losses on these assets and, if appropriate, the recovery of impairment
losses, recognised in prior years, are similar to those applied to property, plant and equipment
(Note 2.12.1).
2.14 Provisions and contingent liabilities
46
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 2022 and 2021 year end, a number of legal procedures and claims had been initiated
against the Institute, arising in the ordinary course of business. ICO's legal advisors and its
directors understand that the finalisation of these proceedings and claims will not have a
significant effect other than that provided for, if appropriate, in the annual accounts for the
years in which they finalise.
Accounting provisions that are considered necessary, as stated in the previous criteria, are
charged or credited to the income statement caption “Provisions expense or reversal of
provisions.”
2.15 Statements of cash flows
The terms employed in the cash-flow statements have the following meanings:
- Cash flows: Inflows and outflows of cash and cash equivalents, understood as short-
term investments which are highly liquid and involve a low risk of changes in value.
- Operating activities: typical credit institution activities and other activities that may not
be classified as investing or financing activities.
- Investing activities: acquisition, sale or disposal through other means of noncurrent
assets and other investments not included in cash and cash equivalents.
- Financing activities: activities that cause changes in the size and composition of equity
and liabilities and do not form part of operating activities.
47
2.16 Non-current assets held for sale and liabilities associated with non -current
assets held for sale
The heading “Non-current assets held for sale” on the balance sheet records the book value
of individual items that are very likely to be sold in their actual conditions within one year as
from the date of the annual accounts.
When, in exceptional cases, the sale is expected to occur over a period exceeding one year,
the Institute assesses the updated sale cost, accounting time value fluctuation under the
heading of “Gains/(Losses) on non-current assets held for sale not classified as discontinued
operations” in the profit and loss account.
Consequently, the carrying amount of these items, which may be financial or non-financial in
nature, will foreseeable be recovered through their selling price rather than through their
continued use.
Specifically, the real estate assets or other non-current assets received by the Institute to pay
off all or part of the payment obligations of its debtors regarding to the Institute, are deemed
non-current assets held for sale, unless the Institute has decided to use these assets on an
on-going basis.
Symmetrically, “Liabilities associated with non-current assets held for sale” include the credit
balances associated with groups or for interruption in the operations of the Institute.
Non-current assets held for sale are generally measured at the lower of their carrying amount
when they are recognised as such and their fair value, adjusted for estimated cost of sales.
While included in this category, property, plant and equipment, and intangible assets, subject
to depreciation and amortisation by nature, are not depreciated nor amortised.
In the event that the carrying amount exceeds the fair value of the assets, adjusted for cost of
sales, the Institute adjusts the carrying amount of the assets by the amount of the excess and
makes a balancing entry in the caption “Gains/ (Losses) on non-current assets held for sale
not classified as discontinued operations” in the income statement. In the event that the fair
value of the assets were increased at a later date, the Institute reverses the losses previously
recorded in the accounts, increasing the carrying value subject to the limit of the amount prior
to their eventual impairment, against “Gains/ (Losses) on non-current assets held for sale not
classified as discontinued operations” in the income statement.
The results from the sale of non-current assets held for sale are presented under “Gains/
(Losses) on non-current assets held for sale not classified as discontinued operations” in the
profit and loss account.
However, financial assets, assets from employee salaries, deferred tax assets and assets for
insurance contracts that are part of a group of file or an operation in interruption are not valued
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).
48
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 2022, a total of 289 complaints were received (537 in 2021), of which were addressed within
an average of 3.2 working days (much lower than the established deadline of 15 working
days). 81% of the total are related to credit transactions in the COVID-19 Surety Lines, and
were therefore passed on to the relevant credit institutions. 16% were related to Mediation
Lines, and the remaining 3% related to other issues, unrelated to products or services
managed by ICO.
4. DISTRIBUTION OF RESULTS
Results from 2022 amount to 127,951 thousand Euros and, at the date of formulation of this
Annual Accounts, its distribution has not yet been established by the Ministry of Economic
Affairs and Digital Transformation. Such distribution will adjust to its Bylaws.
5. RISK EXPOSURE AND OTHER INFORMATION
5.1. Risks. General aspects
Risk is inherent to financial activity. Properly measuring, managing and controlling risk must
contribute to attaining adequate margins and to the maintenance of an entity's solvency based
on the confidence of clients, investors and employees.
Without any intention of exhaustively classifying the risks faced by a financial institution, they
may be classified into four categories: Liquidity risk, market risk, credit risk and operating risk.
x Liquidity risk: The risk incurred as a result of an absence of suff icient liquid resources
to comply with obligations. This situation could be thanks to the inadequate assets and
liabilities maturity structure, or due to the exceptional market crisis situation.
x Market risk: Covers the influence on the income statement and equity exercised by
adverse changes in relevant financial variables, such as domestic or foreign currency
interest rates, exchange rates, share prices, etc. This risk may be subdivided into two
large groups: Balance sheet or structural market risk and market risk affecting trading
portfolios.
x Credit risk: This one refers to the risk of not fully recovering the principal and interests
related to our investments within the estimated periods. This risk may also be
subdivided into two broad groups: Counterparty risks with banking institutions and
credit risk regarding investment transactions.
x Operating risk: Incurred as a result of administrative, internal, accounting, computer,
legal or external errors due to unforeseen circumstances.
49
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 5/2022 of 1 December), 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 Acceptance department, and the Global
Risks Control area, each one with specific duties.
The primary duties of the Global Risk Control area are the following:
x Preparing, proposing and controlling financial risk measurement methodologies
applied by the Institute.
x Overseeing the correct compliance of the limits of financial risks and policies previously
approved.
x Elaborating regulatory reports on interest rate, exchange rate and liquidity.
x Analysing, monitoring and reviewing periodically credit counterparty lines, analyse
them, and monitor levels with the mediating entities and counterparts.
x Defining and reviewing measurement, back-testing and stress-testing systems.
x Proposing criteria for market valuation of new financial products, establishing
methodologies, risk measurement and potential risk (Add-on).
x Analysing the adaptation of national and international legislation regarding risks within
its competency.
x Valuing at market price new products and structures and their potential risk (Add-on).
x Supervising the correct application of approved methodologies risks.
x Analysing the credit risk in Liquidity Lines Securitisation Funds operations.
x Proposing new Liquidity, Market, Credit and New Products risk limits.
x Reporting and diagnosis of the risk situation for Assets and Liabilities Committee,
Operations Committee, Monitoring Committee and General Council.
x Reporting statements of interest rate risk, liquidity, large risks and Basel ratios for Bank
of Spain.
50
x Updating and maintaining the Risk Adjusted Profitability tool (RAR).
x Updating and maintaining the ICO Price Control tool in RORAC.
x Controlling Risk Appetite Framework (MAR) indicators, and attending to meeting to
report the situation to the Board.
x Analysing, studying and reporting on ICO’s participation in securitisation operations.
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:
x 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.
x Proposing, maintaining and managing risk assessment and direct credit risk rating tools,
concentration limits per group, country and sector risk. Whenever necessary, providing or
receiving technical assistance to/from other Management units.
x 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.
x Based on applicable regulations and the market practice, developing, together with the
Acceptance and ESG Risks Area, a model to assess ESG Risks and to include them in
the analysis of direct financing operations that affect the credit risk.
x Analysing risks of direct financing operations, including those that arise with resources
from COVID-19 surety and similar facilities, requiring, together with the assessment of the
company’s risk profile or Project financing, a specific complementary analysis on the
financing needs at the short term, the liquidity position, and levers for actions available in
the company to mitigate the impact derived from the health crisis, and study of refinancing
operations.
x 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. This analysis
includes the valuation of the maximum risk amount to be assumed by the issuer, the
issuer’s evolution in the market and the valuation of the presentation, under the
Companies’ Direct Financing Programme, through MARF debt, or under the corporate
bonds programme, in force at each moment.
x Based on applicable regulations and the market practice, developing, together with the
Acceptance and Risks Area, a model to assess ESG Risks and to include them in the
analysis of direct financing operations that affect the credit risk.
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.
51
5.3 Liquidity risk at ICO
Community legislation and its development in Spain in this matter only establish general
requirements for the measurement, control and management systems of liquidity risk in
entities, and are contained in the following normative texts:
- Directive 2013/36/EU of 26 June, related to the access to the activity of credit institutions
and to the prudential supervision of credit institutions and investment companies.
- Regulation (EU) No. 575/2013 of 26 June, on prudential requirements of credit institutions
and investment services companies, part six.
- Implementing Regulation 680/2014 of 16 April, establishing the technical implementing
rules in accordance with Regulation No. 575/2013, chapters 7, 7 bis and 7 ter.
- Law 10/2014 of 28 June, on the management, supervision and solvency of credit
institutions, Articles 41, 42 and Additional Provision Eighth.
- RD 84/2015 of 13 February, which develops Law 10/2014, Article 53.
- Delegated Regulation (EU) 2015/61 of the Commission from October 10, 2014, completing
Regulation 575/2013 with regard to the Liquidity Hedging Requirement (LCR).
- Circular 2/2016 of 2 February, which establishes accounting standards, annual accounts,
public annual accounts and reserved statistical information of securitisation funds that
replaces Circular 3/2008 of 22 May (repealed), rule 51, DT6 and Annex VII.
- Execution Regulation (EU) 2016/313 of the Commission, of 1 March, amending the
Execution Regulation (EU) 680/2014 with regard to Additional Control parameters for the
purpose of information on liquidity (ALMM).
- Execution Regulation (EU) 2017/2114, of 9 November, amending Regulation (EU)
680/2014 and 2016-31 with regard to templates and technical instructions on the regulatory
statements of additional parameters of control for the purpose of information on the liq uidity
risk (ALMM).
- Circular 4/2017 of 27 November, standards 59 and 60.
- Execution Regulation (EU) 2018/634 of 24 April, updating the list of ECAI authorised by the
UE, as well as the homogenisation per credit quality levels of the different qualifications in
each ECAI.
- Delegated Regulation (EU) 2018/1620 of 13 July, amending several Articles of the
Delegated Regulation (EU) 2015/61, concerning definitions of requirements on
qualifications of liquidity levels and liquid assets
- Delegated Regulation (EU) 2019/0876 of 20 May, amending Regulation (EU) 575/2013 in
several aspects, among others, definitively regulating the NSFR liquidity risk requirement.
- Execution Regulation (EU) 2020/429 of 14 February, substantially amending Execution
Regulation (EU) 2016/322, concerning technical execution standards concerning the
communication of information for supervision purposes on the Liquidity Coverage
requirement (LCR), and also amending Execution Regulation (EU) 2017/2114, concerning
templates and technical instructions on regulatory statements of additional control
parameters for the purpose of information on the liquidity risk (ALMM).
52
- 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.
In general, there is no specific requirement for capital for liquidity risk beyond a set of action
standards to be followed (qualitative requirements) contained in Fifty-first Rule of chapter six
of risk treatment of Circular 2/2016 where it is also mentioned the need to report on the actions
carried out in the process of capital self-assessment and supervisory review contained in
chapter 5, all in order to assess whether its internal capital is sufficient to cover its current and
future activities.
Currently, with the publication of the updated version of the Basel III liquidity and solvency
documents: Global regulatory framework to strengthen banks and banking systems and Basel
III: International framework for measurement, the standardisation and monitoring of liquidity
risk is a new step in the direction of guaranteeing more efficient parameters in the
measurement and control of liquidity. As of January 1, 2013, the Basel Committee published:
The liquidity Hedging Ratio and liquidity risk monitoring tools, which advance the definition
and monitoring of the short-term liquidity ratio, and complemented this work with the
publication on January 12, 2014 of the Guidance for Supervisors on Market-Based Indicators
of Liquidity.
In this sense, on January 17, 2015 the Delegate Regulation 2015/61 was published, amending
Regulation CRR 575/2013 of the European Parliament and of the Council is complete with
regard to this ratio (LCR) and by calendar that starts on October 1, 2015 with an obligatory
60%, 70% as of January 1, 2016, 80% as of January 1, 2017, and which entered fully in effect
(100%) from January 1,2018.
On January 2014, “Basel III: Net Stable Financing Ratio” (NSFR) consultation document was
published for the definition and calculation of the ratio of long-term liquidity, which after a
consultation phase, which lasted until April 11, 2014, led to the publication of the final
document in October 2014. As a result, it is necessary to calculate a minimum net stable
financing ratio. After the publication, on June 2019, of Regulation 876/2019 is applicable since
the end of June 2021.
During 2013 and following years, the Institute, calculated on a monthly basis, short and long
term liquidity rates, as additional liquidity controls. In every period, the Institute has achieved
results that are within the limits that would be applied in the future.
Furthermore, prospectively throughout 2015 and in following years, based on the document
published by the BIS “Basel III: the Net Stable Financing Ratio” of October 2014, and with
definitions and criteria in force at each moment, the results have been calculated quarterly,
which provide the ICO balance with the introduction of different scenarios handled one year
ahead (2023), 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
53
gap provides information regarding the mismatches between the inflow and outflow of funds
on a daily basis, for periods of up to 12 months covering all balance sheet and off -balance
sheet items that produce cash flows on the actual date occurring.
Liquidity gaps are measured in one week periods, and one, three and six month’s periods.
There is a percentage over the total of Institute’s liabilities that cannot be exceeded for each
period: one week-period: up to 0.5%, one month period: up to 1%, three month period: up to
2.5% and six month period: up to 5%.
Short-term liquidity is monitored on a daily basis. On a weekly basis, and at the end of each
month, this monitoring and control of limits takes place with a horizon of 1 week, 1 month, 3
months and 6 months.
The ICO has established quantitative limits and alerts that allow us to get ahead from possible
situations of liquidity tension.
There is also a policy of diversifying sources of basic finances in order to minimise this risk,
and a regular review of liquidity including any projections for new activity, in order to establish
needs in terms of amounts and dates of financing, for an annual financing plan, sufficiently in
advance.
Likewise, approved by the General Board on February 27, 2018, there is a liquidity
Contingency Plan that establishes a priority order as reference when resorting to financing
sources in stress scenarios. This Contingency Plan was updated and presented, for the last
time, to the Committee of Assets and Liabilities (COAP) last July 2022.
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 2022, 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 2023.
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, 2022 and
2021,
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 2022:
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
54
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
At 31 December 2021:
Thousands of Euros
Up to 1 year
From 1 to 5
years
From 6 to 10
years
From 11 to
15 years
From 16 to
20 years
Total
Derivatives held for trading
1.021.100
273.500
1.294.600
-Of which: credit commitments
considered as derivatives
Hedging derivatives
11.046.877
2.693.694
2.184.951
617.000
70.689
16.613.212
12.067.977
2.967.194
2.184.951
617.000
70.689
17.907.812
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, 2022 and 2021, respectively;
Liquidity GAP analysis
The purpose of the liquidity management is to ensure that the entity maintains appropriate
liquidity levels to cover its needs, both at the short and long terms, optimising the impact that
the maintenance of its liquid funds could have in the profit and loss account.
On a daily basis, the liquidity profile on the balance is monitored for the purpose of control,
information to management, and analysis of funds’ needs for at least the following twelve
months, additionally incorporating scenarios with the analysis of funds’ needs to cover the
activity foreseen for such period.
As explained above, ICO’s liquidity management is based on the analysis of the difference
between inflows and outflows generated by contractual maturities of operations of its balance
(liquidity gap) and cash flows generated from activity forecasts. This analysis provides the
necessary information on the volume of funds that will be necessary to gain, resorting to
different financing sources available for the entity.
55
Moreover, the Institute maintains a buffer of high-quality liquid assets that will allow, where
necessary, obtaining liquidity immediately through its discount on the European Central Bank.
The balance of assets that may be used by the Institute as liquidity reserve has sufficient
capacity to cover its negative liquidity gaps, for two purposes:
- Contribute flexibility when planning the volume and timing of the gaining of necessary
funds to cover liquidity gaps.
- Security buffer to face possible tensions or crisis situations in markets.
The tables below compare liquidity inflows and outflows at different maturities (partial and
accumulated liquidity gaps). Inflows and outflows in foreign currency are shown at their
equivalent value in such currency.
Additionally, the evolution of the balance of liquid assets and their level of coverage over
liquidity gaps are incorporated for the different terms.
At December 31, 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.
At December 31, 2021 (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
14 281 775
4 604 928
4 237 272
4 833 758
7 188 852
14 306 385
9 596 546
Outflows equiv. value Euros
(7 018 343)
(9 247 844)
(4 411 996)
(7 676 236)
(8 940 109)
(9 979 363)
(3 958 298)
Partial liquidity gaps
7 263 432
/4 642 915)
(174 726)
(2 842 479)
(1 751 257)
4 327 021
5 640 248
Accumulated liquidity gaps
7 263 432
2 620 517
2 445 791
(396 688)
(2 147 945)
2 179 076
7 819 324
High liquidity asset buffer
4 247 930
3 383 157
3 038 475
3 915 407
2 454 763
1 232 868
-
Difference buffer / negative
accumulated gaps
n.a.
n.a.
n.a.
3 518 719
306 818
n.a.
n.a.
% buffer coverage over
negative accumulated gaps
n.a.
n.a.
n.a.
987%
114%
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, 2022
56
is of 2,995,000 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 2022, indicating the averages of total liquid assets and averages of
net liquidity outflows, liquidity outflows and liquidity inflows.
LIQUIDITY COVERAGE RATIO (LCR) 2022
Quarterly average (in % and thousands of Euros)
1T
2T
3T
4T
LCR RATIO
348.62%
231.10%
301.96%
327.39%
TOTAL LIQUID ASSETS
11 543 626
8 829 832
6 460 429
6 135 091
NET LIQUIDITY OUTFLOWS
3 330 255
3 803 032
2 184 838
2 233 751
Liquidity outflows
(7 063 337)
(7 654 479)
(6 639 563)
(5 778 281)
Liquidity inflows
3 733 083
4 052 189
4 454 725
3 544 530
Lastly, the following information chart shows the net stable financing ratio at the end of each
calendar quarter of the period of 2022, additionally showing the stable financing available at
the end of each quarter and the financing required at those dates.
NET STABLE FINANCING RATIO (NSFR) 2022
Quarterly average (in % and thousands of Euros)
1T
2T
3T
4T
NSFR RATIO
121.31%
110.82%
110.39%
116.09%
AVAILABLE STABLE FINANCING
20 214 603
19 023 954
18 625 223
18 758 955
REQUIRED STABLE FINANCING
16 664 101
17 167 085
16 871 696
16 159 037
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
57
difference between asset and liability volume and off-balance sheet transactions that
mature or renew interest rates within the following 12 months, weighted by the period
affecting the Margin.
In order to measure the sensitivity of Equity, the duration gap method was used before
2015. The duration gap is obtained as the difference between the duration of assets
and liabilities, and once the difference is obtained, the sensitivity gap may be
calculated.
Both methods were replaced in mid-2014 by other simulations based on Interest
Income and Net Asset.
Regarding the Value at Risk, the methodology to be used will be determined by the
type of portfolio involved and may be based on parametric, historical simulation or
Monte Carlo methodology.
3) Risk degree. The decision regarding the degree of risk assumed by ICO is the Senior
Management’s responsibility, which based on the proposal of the Directorate for Risks
and Accounting, establishes the acceptable limits based on the particular
characteristics of the ICO. These limits are reviewed regularly.
For the purpose of assessing a sensitivity limit of the Financial Margin, it will be
estimated based on implicit rates, calculated on the basis of the market curve and on
the one on which increases or decreases are applied by +/- 200 bps, applying in the
decreasing scenario a floor in -1%. The difference between both calculations, in
absolute value, will be the estimated sensitivity, which amount cannot imply a decrease
of the simulated Financial Margin above 35% 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, 2022 was -58,137 million
Euros in total, distributed as follows: -52,281 million Euros for the balance in Euros,
-1,921 thousand Euros of the balance in US Dollars, and -0 thousand Euros of the
balance in British Pounds. Exchange rate (with movements of +/- 10% on changes in
USD/EUR and GBP/EUR) was -3,641 million Euros in Dollars and -294 thousand
Euros in Pounds.
Likewise, the sensitivity of the ICO’s Financial Margin at December 31, 2021 was of
8,273 million Euros, representing 23.64% of the self -imposed limit of de -35 million
Euros (in force at such moment), with the following distribution: -4.350 for interest rate
of the balance sheet in Euros, -0.802 for interest rate of US Dollar, and -0.630 for
interest rate of the balance sheet in Pound Sterling. Per exchange rate (variations of
+/-10% in interest rates USD/EUR and GBP/EUR), it was of -2.097 million Euros in
Dollars and -394 thousand Euros in Pounds.
For the purpose of establishing a limit in the sensitivity of the net asset value, current
values of our balance will be calculated through a market curve and another to which
increases or decreases are applied by +/- 200 bps with a floor, in the scenario of
decrease of rates, by -1% for immediate maturities, which floor will increase in 5 bps
58
per year, until 0% is reached for maturities in 20 or more years. Such absolute floor is
displacement. The difference between both values will be considered as the sensitivity
of the net asset value of our balance in absolute value. The percentage (%) implied by
this variation on the net asset value shall not represent a decrease above 10% of the
estimated net asset value.
In order to determine the sensitivity of the net asset value for exchange rate variations
in currencies Euro/US Dollar and Euros/Pound Sterling, movements of +/- 10% will be
assumed.
At December 31, 2022, the values of the sensitivity of the ICO Net Asset reach
-4.23% in value added with a distribution on balances as follows: -3.69% for Euro
interest rate, -0.23% in the US Dollar, and -0.05% in the British Pound. Exchange rate
for Dollar presented a sensitivity of -0.25% and -0.00% for Pounds.
At December 31, 2021, sensitivity values of ICO’s Net Asset Value were of -3.08% with
a balance distribution of: -2,42% for interest rate of Euro, -0,21% in the balance of US
Dollars and -0.03% in the balance of Pound Sterling. Per exchange rate, sensibilities
were of -0.36% in Dollars and -0.06% in Pounds.
In addition to the abovementioned sensibilities and results, the ICO has established a
regular system integrated with the application for the risk measurement, management
and control, in order to verify the impact that could derive from different scenarios of
evolution of relevant financial variables in the Financial Margin or in the Net Asset
Value and, on a monthly basis, other sensitivity estimates are performed, based on
different assumptions of variations of interest rates. For instance, we note the
sensitivity based on estimates of variation of interest rates provided by the Service of
Studies at a one-month horizon, variations of the 5-year historical series of variations
of interest rates or a stressed variation (6 times), historical variations, conversion to a
positive rate curve or inversion of the curve.
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 used by ICO to present its balance sheet at December 31, 2022
are the Euro and the US Dollar.
If we look at the assets of the balance sheet, the Euro concentrates approximately
89.13% of the total, the US Dollar being of 7.96%, while other currencies distribute the
remaining amount.
59
Liabilities concentrate around 94.34% of the total balance sheet, with a total of
approximately 64.62% in Euros, and 29.72% in US Dollars.
For 2021 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 98.18% of total assets,
where the Euro represented 92.28% and the Dollar the remaining 5.90%, while they
represented 92.26% of liabilities, distributed in 63.10% in Euro and 29.16% in Dollar.
Regarding currencies other than the euro and Dollar with which the Institute operates, its
balance sheets are virtually saved from interest and exchange rate risks either because the
operation involves financing obtained in the currency concerned and converted to Euros using
a derivative instrument that completely covers all currency flows, or because the financial of a
certain asset is designed to avoid these risks.
5.5. Credit risk at ICO
As has already been mentioned about credit risk, there are two broad groups: Counterparty
and country risk.
The f irst group includes transactions with credit institutions, both on and off the balance sheet.
Monitoring activities are carried out by using a system that integrates the administration of
transactions and the risks deriving from them in real time, providing operators with current
information regarding counterparty credit lines available at any given moment.
The competent bodies at ICO have defined and approved a method for consuming
counterparty credit lines based on the evaluation of the transactions at market prices plus a
potential future or add-on risk, that is measured as a percentage of the nominal value of the
transaction, calculated as a potential maximum loss of 95% of confidence over the life of the
transaction. The methodology is periodically reviewed, and the add-ons are adjusted at least
on a half-yearly basis.
The basic criteria for establishing counterparty lines are also approved by ICO's General
Board on a half-yearly basis and is performed an individualised analysis of them. These
counterparty lines are subdivided into two broad groups as a result of the operating
characteristics of the ICO. The first of the counterparty lines is related to cash transactions.
The other counterparty line is related to mediation transactions, operations in which the ICO
finances several investment projects through framework programmes arranged with several
entities such as, for example, lines of Businesses and Entrepreneurs or Internationalisation.
Transactions involving derivatives contracted by ICO have counterparties with high credit
ratings, so that a very high percentage of these, almost 100%, maintain an Agency rating
investment grade. These counterparty institutions operate at the national and international
level.
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 92% 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 transactions
based on an on-going concern evaluation, guarantees are analysed in order to issue an
opinion about the risk and the potential client, which is the basis for taking decisions by the
Operations Committee or General Board, as appropriate.
60
The Monitoring process has the purpose of making the Institute’s credit portfolio to achieve
the highest quality, i.e., ensures that our loans are being repaid on a timely basis, on the
agreed dates. The basic monitoring unit is the client, not the transaction, such that any incident
affecting a transaction affects the rating of a client and its group. This is achieved by a
permanent control, with periodic reviews of the economic and financial situation of the same
and keeping support tools updated for decision-making and it allow for detect warning signs;
as well as promoting action plans against problematic risks in order to maximise the repayment
of financing granted.
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 transactions 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
transactions is included.
In this area, certain tools have been developed to facilitate the task of covering operating risk.
Specifically, these tools consist of the policies covering the monthly monitoring of the control
panel or activity indicators, the development of processes and internal procedures, the
definition of client and operations monitoring and internal control of incidents, or the existing
contingency plan. It is important to mention that the regular controls applied to procedures and
operations are performed by internal and external auditors.
5.7 Outstanding credit risk with companies
5.7.1 Classification per sector
Taking into account a classification by sector, the distribution of the outstanding risk, (*) is as
follows:
Million Euros
2022
2021
Amount
% total
Amount
% total
Property investment
413
4%
452
4%
Construction of social housing for sale
5
0%
5
0%
Construction of social housing for rent
298
3%
323
3%
Acquisition and development of land
101
1%
117
1%
Others
9
0%
7
0%
Investment property, plant and equipment
8.161
70%
8.512
72%
Renewable energies
1.742
15%
1.407
12%
Water infrastructures
93
1%
118
1%
Electricity infrastructures
1.053
9%
1.831
15%
Gas and fossil fuel infrastructures
939
8%
714
6%
Transport infrastructures
3.016
26%
3.232
27%
Tourism and leisure
151
1%
134
1%
Social-health infrastructures
89
1%
86
1%
Telecommunications
108
1%
100
1%
61
Audio-visual production and exhibition
32
0%
27
0%
Business parks and other constructions
30
0%
22
0%
Other
661
6%
635
6%
Research and Development material investment
247
2%
206
2%
ICO Finance lines AA.CC. Agencies
-
-
-
-
Acquisitions of companies
603
5%
628
5%
General corporate needs
1.421
12%
834
7%
Restructuring of liabilities
407
3%
709
6%
General State Budgets
673
6%
764
6%
11 678
100%
11.899
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, 2022 and 2021 the total exposure is mainly concentrated in the sector of
“Investment property, plant and equipment”, which account for 70% of total risk in 2022 (72%
in 2021). Also, the weight over the total risk of sectors “Transport Infrastructures” (26% of the
total in 2022 and 27% in 2021), “Renewable energies” (15% of total balance in 2022 and 12%
in 2021) and “Gas infrastructures and hydrocarbons”, 8% of total risk in 2022 (6% in 2021), is
to be noted.
5.7.2 Classification by geographic location of financial investments
The total risk at December 31, 2022 is distributed as follows: 69% in transactions financing
investments in Spain amounting to 8,108 million Euros (72% at 2021 with 8,608 million Euros)
and 31% in transactions aimed at financing investment projects in other countries.
The risk distribution for investment projects in the national territory per Autonomous
Communities in 2022 is the following: Catalonia with 76%, Valencia and Madrid 5%, and
Andalusia with 2% (7%, 5%, 6%, and 3%, in 2021, respectively).
Transactions taking place in the international market at December 31, 2022 and 2021 are
distributed as follows in accordance with the active foreign risk:
Million Euros
2022
2021
Amount
Percentage
Amount
Percentage
European Economic Community
1.126
32%
1.168
35%
Latin America
858
24%
827
25%
United States
246
7%
146
4%
Rest of Europe (not EU)
30
1%
30
1%
Other
1.308
36%
1.120
35%
3.568
100%
3.291
100%
5.8 Information on payment deferrals to suppliers
The information required by the third additional Provision of Law 15/2010, of 5 July, is detailed
below:
62
2022
2021
(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
30,649
30,266
Total outstanding payments
1,744
666
Amount paid in a period below the maximum established
in def ault regulations
30,649
30,266
(No. invoices)
Invoices paid in a period below the maximum established in
def ault regulations
3,160
2,659
(Percentage)
Amount paid in a period below the maximum established
in def ault
regulations over total amount of payments to
suppliers
100%
100%
paid in a period below the maximum established in default
regulations over total invoices to suppliers
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 transactions, 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 transactions 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
63
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, 2022 and 2021, the Group is exempt from the limits on large exposures set
out in the applicable regulations (Part IV of EU Regulation 575/2013 and Circular 3/2008 of
the Bank of Spain, respectively), according the provisions of the bylaws of the Institute.
Royal Decree-Law 12/2012, of March 31, 2012, established the treatment of exposures to
credit institutions resident in EU Member States.
5.10 Information on construction and property development finance and associated
foreclosed properties
Regarding property risk portfolio policies and strategies, the Institute has acceptance
processes with specific policies for this type of product (e.g. experienced developers,
percentages of accredited sales, data on rental demand by independent experts), assessing
the economic and financial feasibility of projects.
Payments for certified work are subsequently validated and controlled, construction progress
is monitored and sales are controlled.
In addition, studies have been conducted to detect the reasons behind the payment difficulties
of customers that have not paid in order to suggest solutions that allow transactions to be
completed successfully.
Information on construction and property development finance is as follows:
- Finance granted for construction and property development and related hedges:
2022
2021
Gross
amount
Excess over
value of
collateral
Specific
allowance
Gross amount
Excess over
value of
collateral
Specific
allowance
Property financing
415 527
-
182 991
445 717
-
198 244
- Out of which doubtful
96 570
-
94 156
102 905
-
100 312
Memorandum item
Defaulted loans
-
-
-
-
-
-
Thousands of Euros
2022
2021
Memorandum item:
Total loans to clients, excluding public administrations
8 539 773
8 427 818
Total assets
29 774 943
37 766 136
Total general allowance for normal risk
192 885
145 886
Total finance for construction and property development at December 31, 2022 represents
64
1.40% of the total balance sheet (1.18% at December 31, 2021).
- Finance for construction and property development (gross amounts):
Thousands of Euros
2022
2021
1 Without mortgage collateral
101 679
115 800
2 With mortgage collateral
313 849
329 917
2.1 Finished buildings
305 665
324 324
2.1.1 Homes
305 665
324 324
2.1.2 Other
-
-
2.2 Buildings under constructions
8 184
5 593
2.2.1 Homes
8 184
5 593
2.2.2 Other
-
-
2.3 Land
-
-
2.3.1 Developed land
-
-
2.3.2 Other land
TOTAL
415 527
445 717
- Home purchase loans:
Thousands of Euros
2022
2021
Gross
amount
Of which:
doubtful
Gross amount
Of which:
doubtful
Home loans
12 371
-
11 864
-
Without mortgage collateral
11 790
-
11 154
-
With mortgage collateral
581
-
710
-
- Home purchase loans with collateral mortgage (percentage of risk on latest appraisal
available, LTV):
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
At 31 December 2021:
Thousands of Euros
LTV<40%
40%<LTV<60%
60%<LTV<80%
80%<LTV<100%
LTV>100%
Gross amount
435
-
275
-
-
- Of which
doubtful
- Foreclosed assets received as the settlement of debts from construction and property
65
development loans.
None of the foreclosed assets on the Institute’s balance sheet (Note 17) comes from
financing granted to construction companies and property developers, or mortgage
loans to households for home purchases, nor do they consist on equity instruments,
investments and finance to non-consolidated companies holding the assets.
5.11 Information related to Institute’s refinanced and restructured operations
Presented in the next table, there is the detailed information related to those refinanced and
restructured operations as of December 31,, 2022 and 2021 (gross amounts), as requirement
of Bank of Spain 6/2013 Circular, about financial public and reserved information rules:
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, 2021 (gross amounts, in thousands of Euros):
With real
guarantee
No real
guarantee
TOTAL
amounts
TOTAL hedging
Public Administrations
40 428
75 372
115 800
62 928
Doubtful
40 428
-
40 428
Finance companies (finance
assets)
-
-
-
-
Doubtful
Non Finance companies and
Industrial Business
377 919
37 291
415 210
211 988
Doubtful
214 311
11 342
225 653
202 491
Non-doubtful
38 986
-
38 986
5 808
Property doubtful
118 487
-
118 487
113 406
Rest of individuals
351
-
351
-
TOTALS
418 698
112 663
531 361
274 916
6. CASH, DEPOSITS AT CENTRAL BANKS AND DEMAND DEPOSITS
The composition of this caption of the balance sheet at December 31, 2022 and 2021 is the
following:
Thousands of Euros
2022
2021
Cash at hand
6
4
66
Cash in Bank of Spain
2 557 390
9 344 958
Mandatory to comply with minimum reserve ratios
2 557 390
9 344 958
Other demand deposits
80 039
34 533
2 637 435
9 379 495
7. FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING
The total balance under this heading in the balance sheets at December 31, 2022 and 2021
is made up of trading derivatives.
Transactions involving trading derivatives are mainly related to instruments with which the
Institute manages balance sheet positions globally, but which do not meet the requirements
to be designated hedging and are therefore classified in the trading portfolio.
Below, there is a breakdown classified by type of derivative, of the fair value of the Institute’s
trading derivatives and their notional value (amount on which future payments and collections
of these derivatives are based) at December 31, 2022 and 2021:
Thousands of Euros
Notional
Assets
Liabilities
2022
2021
2022
2021
2022
2021
By type of market
Organised markets
-
-
-
-
-
-
Non – organised markets
356 337
1 294 600
30 637
10 701
29 714
10 580
356 337
1 294 600
30 637
10 701
29 714
10 580
By type of product
Swaps
356 337
1 294 600
30 637
10 701
29 714
10 580
356 337
1 294 600
30 637
10 701
29 714
10 580
By counterparty
Credit institutions
233 288
1 147 217
348
-
29 714
10 580
Other credit institutions
-
-
-
-
-
-
Other sectors
123 049
147 383
30 289
10 701
-
-
356 337
1 294 600
30 637
10 701
29 714
10 580
By type of risk
Exchange risk
221 264
257 282
30 481
9 411
29 580
8 541
Interest rate risk
135 073
1 037 318
156
1 290
134
2 039
356 337
1 294 600
30 637
10 701
29 714
10 580
The fair value has been calculated for the 100% of the cases, both in 2022 and 2021, taking
the implicit curve of the money markets and the public debt as a reference.
At December 31,
2022 and 2021 the trading portfolio classification, stated at fair value and
taking the hierarchical order into account as shown in Note 2.2.3, is as follows:
Thousands of Euros
2022
2021
Level I
Level II
Level III
Level I
Level II
Level III
Derivatives held for trading of assets
-
30 637
-
-
10 701
-
Derivatives held for trading of liabilities
-
29 714
-
-
10 580
-
The following chart shows amounts registered on profit and loss accounts of 2022 and 2021
(Note 29) for variations in the fair value of the Institute’s financial instruments included on the
67
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
2022
2021
Profit
Loss
Net
Profit
Loss
Net
Level 1
-
-
-
-
-
-
Level 2
81 400
(81 141)
(259)
147 721
147 357
364
Level 3
-
-
-
-
-
-
In 2022 and 2021, 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, 2022 and 2021, investment is as follows:
Thousands of Euros
2022
2021
Equity instruments
-
-
Debt securities
-
-
At December 31, 2022 and at December 31, 2021, 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 2022, no results have been registered for the valuation at fair value in the profit and loss
account for this concept (none in 2021) (Note 30).
9. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
The detail of this caption of the balance sheet at December 31, 2022 and 2021, per investment,
is the following:
Thousands of Euros
2022
2021
Equity instruments:
FONDICO Pyme (1)
106 212
97 273
FONDICO Infraestructuras II (2)
114 840
131 392
FONDICO Global (3)
994 168
748 437
FONDICO Next Tech (4)
20 893
123
FONS MEDITERRANEA FCR (5)
3 549
6 330
FONDO MARGUERITTE MEH (6)
42 019
72 504
FONDO AFS CESCE (7)
12 040
8 579
FEI (8)
29 627
21 667
SWIFT (9)
6
6
EDW (10)
194
195
68
PARTICIPACIONES GRUPO QUABIT (11)
-
-
PARTICIPACIONES CELTIC ROADS WATERFORD (12)
-
-
FONDO MARGUERITTE III INVEST EU (13)
1 483
-
1 325 031
1 086 506
Debt securities (14)
1 135 160
1 150 639
2 460 191
2 237 145
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, 2022 and 2021, is
the following (Note 21):
Thousands of Euros
2022
2021
Debt instruments
(28 313)
3 640
Equity instruments
349 635
134 557
321 322
138 197
Variations, during 2022 and 2021, in the caption of Financial assets at fair value through other
comprehensive income are shown below:
Thousands of Euros
2022
2021
Initial balance
2 237 145
1 618 994
Purchase additions
310 006
2 625 740
Sales and amortisations
308 000
(2 061 564)
Variations for changes in fair value (Note 21)
221 051
60 565
Allocation impairment provision
-
(8 767)
Variations for impairment losses (application)
(11)
2 177
Closing balance
2 460 191
2 237 145
(1) FONDICO Pyme. Venture capital fund constituted on May 1993 and in which the
Institute is the sole participant, managed by Axis Participaciones Empresariales. No
net contributions in 2022. In 2021, the Institute made a new contribution to the Fund
by 15,025 thousand Euros. The amount payable and committed by ICO is of 58,000
thousand Euros at December 31, 2022.
(2) FONDICO Infraestructuras. Venture capital fund constituted on 2019, fully invested by
the Institute and managed by Axis Participaciones Empresariales. In 2022, the
Institute’s contributions amounted to 32,472 thousand Euros (19,000 thousand Euros
in 2021) and returns of 61,000 thousand Euros (no returns in 2021). The amount
payable and committed by ICO is of 50,000 thousand Euros at December 31, 2022.
(3) FONDICO Global. Venture capital fund created in 2014, fully invested by the Institute
and managed by Axis Participaciones Empresariales. In 2022, the Institute’s
contributions amounted to 210,000 thousand Euros (160,000 thousand Euros in 2021).
In 2022, the Fund has decreased equity through refund of contributions by 247,000
thousand Euros (124,000 thousand Euros in 2021). The amount committed by ICO
and to be reimbursed amounts to 586,000 thousand Euros at December 31, 2022
(679,000 thousand Euros at December 31, 2021).
(4) FONDICO Next Tech. Venture capital fund created in 2021, wholly owned by the
Institute and managed by Axis Participaciones Empresariales. In 2022, the Institute’s
contributions amounted to 24,300 thousand Euros (965 thousand Euros in 2021). The
amount payable and committed by ICO is of 103,000 thousand Euros at December 31,
69
2022.
(5) FONS MEDITERRANEA. Fund constituted in October 2005 and in which the Institute
participates with other public and private entities. The Fund was created to invest in
projects developed by Spanish companies in the African Maghreb. The allocations for
this fund have a provision hedging of 30% of the total real capital (without including fair
value changes) amounting 1,270 thousand Euros at December 31, 2022 (1,270
thousand Euros at December 31, 2020). No net contributions in 2022 or 2021.
(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 Tax, which provides funds to finance the Fund. In 2022, contributions were made by
630 thousand Euros (no contributions in 2021), and no returns of participations were
registered (no returns in 2021).
(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 2022, contributions
have been made by 1,500 thousand Euros (none in 2021). In 2022, there has not been
any return of contributions (none in 2021).
(8) FEI. Participation equal to 0.66% of the total of the European Investment Fund, at
December 31, 2022 (0.66% at December 31, 2021). There have not been net
contributions at 2022 or at 2021. At December 31, 2022, an amount remained payable
by 39,200 thousand Euros (23,500 thousand Euros at December 31, 2021).
(9) SWIFT. Participation of the Institute in 1 share of this entity as a full member of the
same from 2008.
(10) EDW. A 3.57% participation in European Datawarehouse GmbHG, from March
2012.
(11) PARTICIPACIONES GRUPO QUABIT. In 2019, as payment for several loan
operations, ICO foreclosed several shares of QUABIT group, for a foreclosure amount
of 5,700 thousand Euros. In 2022, part of them were disposed of, for an amount of 11
thousand Euros. These shares are fully covered by accounting provisions, and
therefore their net value is null (provision of 4,846 thousand Euros at December 31,
2022).
(12) PARTICIPATIONS CELTIC ROADS WATERFORD. In 2021, the ICO was awarded
a number of shares in this entity in payment for various loan operations, for a net
awarding amount of 6,589 thousand Euros. These participations are 100% covered by
accounting provisions (provision of 6,589 thousand Euros at December 31, 2022).
(13) 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%.
(14) 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
70
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
2022
2021
Maturity up to 1 year
448 520
-
Maturity from 1 to 2 years
531 671
458 238
Maturity from 2 to 3 years
154 969
565 842
Maturity over 3 years
-
126 559
1 135 160
1 150 639
At December 31, 2022 and 2021, 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
2022
2021
Level I
Level II
Level III
Level I
Level II
Level III
Debt securities
1 135 160
1 150 639
Equity instruments
1 325 031
1 086 506
During 2022, the Institute has not registered on the income statement results from the write-
off of financial assets at fair value through other comprehensive income (none in 2021) (Note
28).
10. FINANCIAL ASSETS AT AMORTISED COST
The composition of the balance in this caption of the balance sheets, at December 31, 2022
and 2021, is the following (including impairment losses and other valuation adjustments):
Thousands of Euros
2022
2021
Debt securities (Note 10.1)
6 781 025
6 889 673
Loans and advances:
17 085 646
18 437 628
Credit institutions (Note 10.2)
6 911 989
7 724 368
Customers (Note 10.3)
10 173 657
10 713 260
23 866 671
25 327 301
Set out below are the movements for 2022 and 2021 in impairment losses recorded to cover
the credit risk and the accumulated amount of such losses at the beginning and end of those
years on the portfolio of financial assets at amortised cost:
Thousands of Euros
Provision for
Country risk
Provision for
doubtful risk
and normal
risk in watch-
list
Provision for
normal risk
Total
Balance at 1 January 2021
2 848
581 514
96 830
681 192
Allocations charged to results
196
25 212
49 758
75 166
Recoveries against results
(2 321)
(79 003)
(799)
(82 123)
Application of funds
-
(27 949)
-
(27 949)
Other variations
-
-
-
-
Adjustments for exchange differences
174
(41)
97
230
71
Balance at 31 December 2021
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
The following table details provisions for doubtful risks and normal risks in watch-list based on
determination criteria:
Thousands of Euros
2022
2021
Provision for doubtful risks (with defaults):
328 666
355 631
Default
16 456
17 210
Other than default
312 210
338 421
Provision for normal risk in watch-list
124 969
144 102
TOTALS
453 635
499 733
The provision for normal risk in watch-list corresponds to credit assets for an amount of
626,319 thousand Euros at December 31, 2022 (741,024 thousand Euros at December 31,
2021).
The table below provides a breakdown of financial assets classified as loans and receivables
considered impaired due to their credit risk at December 31, 2022 and 2021, 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 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
Impaired assets at 31 December 2021
Thousands of Euros
Without
delay
3-6
month
s
6-9
months
9-12
months
12-15
months
15-18
month
s
18-21
month
s
More
than 21
months
TOTAL
By counterparty category -
Non-financial companies
390 457
194
-
-
-
-
-
17 104
407 755
As of December 31, 2022 there is a balance of assets impaired by country risk of 91,641
thousand Euros, with a hedging per country risk of 1,919 thousand Euros (28,852 thousand
Euros at December 31, 2021 with a hedging of 897 thousand Euros).
The amount of non-impaired past due assets for 2022 and 2021 was of 32,339 thousand Euros
and 16,347 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:
72
Thousands of Euros
2022
2021
Opening balance
1 525 753
1 658 430
Additions:
1 392
36 994
Balance recovery
1 392
22 644
Other causes
-
14 350
Recoveries:
(67 686)
(172 437)
Cash collection without additional financing
(41 656)
(50 246)
Asset allocation
Others
(26 030)
(122 191)
Definitive write-offs: other causes:
Net variation for exchange difference
2 223
2 766
Closing balance
1 461 682
1 525 753
The net amount included on the accompanying profit and loss account of 2022 and 2021 as a
consequence of the variation of assets which recovery is deemed remote (failed assets)
amounts to profits by 41,656 thousand Euros and 50,201 thousand Euros, respectively
(caption “Impairment or reversal of impairment on financial assets not measured at fair value
through profit or loss” and “Financial assets at amortised cost (Notes 10)”).
10.1 Debt securities
The caption “Debt securities” includes the amount of fixed-income financial assets valued at
amortised cost, and supported with securities.
At the end of 2013, the Institute’s Operations Committee approved the document Annex V to
the ICO Contract Mediation lines framework 2015, to regulate the conditions and operations
to which the conversion operation is subject to the conversion to bonds of loans made by
Entities in ICO lines in 2015. Such approval included the general specifications for conversion
susceptible lines, amounts, interest accruals, eligible entities, schedule and compensation to
credit institutions were included. Debt securities resulting from the conversion of loans
mediation are also included in the heading “Debt securities.”
The composition of this caption of the balance sheet at December 31, 2022 and 2021, based
on the counterparty category, is the following:
Thousands of Euros
2022
2021
Per counterparty category -
Resident Public Administrations
4 537 261
5 444 417
Resident Credit Institutions
2 270
3 394
Other resident sectors
2 034 102
1 260 802
Other non-resident sectors
207 392
181 060
6 781 025
6 889 673
The detail per maturity terms at December 31, 2022 and 2021 is the following:
Thousands of Euros
2022
2021
Maturities
Up to 1 year
1 552 664
3 050 281
From 1 to 2 years
303 174
1 216 829
From 2 to 3 years
548 999
285 439
From 3 to 4 years
331 955
353 323
From 4 to 5 years
2 024 225
264 239
More than 5 years
2 020 008
1 719 562
73
6 781 025
6 889 673
At December 31, 2022, these assets accrued an annual interest rate of 0.92% (0.53% at
December 31, 2021).
Interest accrued by these assets in 2022 and 2021 amounted to 60,526 thousand Euros and
41,396 thousand Euros, respectively, included under caption “Interests and similar income” of
the profit and loss account (Note 24).
The Institute has coverage for credit risk at December 31, 2022 (normal risk) of 42,522
thousand Euros for these assets (21,651 thousand Euros at December 31, 2021).
In 2021, the ICO was awarded debt securities in payment for several loan operations, for an
awarding amount of 2,177 thousand Euros. These securities, classified as doubtful assets,
are fully covered by accounting provisions, and therefore their net value is zero.
Variations undergone during 2022 and 2021 in caption of Debt securities at amortised cost
are the following:
Thousands of Euros
2022
2021
Opening balance
6 889 673
7 347 498
Purchase additions
6 003 297
2 819 753
Variations for impairment losses
(20 870)
(14 516)
Amortisations and sales
(6 091 075)
(3 263 062)
Closing balance
6 781 025
6 889 673
At December 31, 2022, 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 172
thousand Euros (no results at December 31, 2021) (Note 28).
10.2 Loans and advances to Credit Institutions
The composition of this caption of the balance sheet at December 31, 2022 and 2021 is the
following:
Thousands of Euros
2022
2021
By nature -
Deposits in credit institutions (Note 10.2.1)
661 014
661 771
National mediation loans (Note 10.2.2)
5 184 441
6 130 929
International mediation loans (Note 10.2.3)
1 051 361
931 123
Other loans to credit institutions (Note 10.2.4)
3 819
8 002
6 900 635
7 731 825
Impairment losses
Other valuation adjustments (*)
(4 006)
(3 016)
Impairment losses
15 360
(4 441)
6 911 989
7 724 368
(*) Valuation adjustments mainly correspond to the accrual of interests and similar revenues, as well as a correction for
financial commissions.
10.2.1 Deposits in credit institutions
The following table details the balance of “Deposits in credit institutions”, grouped by maturity,
at December 31, 2022 and 2021:
74
Thousands of Euros
2022
2021
Up to 1 year
661 014
661 771
From 1 to 2 years
-
-
From 2 to 3 years
-
-
From 3 to 4 years
-
-
From 4 to 5 years
-
-
More than 5 years
-
-
661 014
661 771
During 2022, the caption “Deposits in credit institutions” accrued an average annual interest
of 0.77% (-0.33% during 2021). All deposits included are time deposits as of December 31,
2022 and 2021.
Interests accrued during 2022 and 2021 for these loans have amounted a total of 4,475 and
(1,763) thousand Euros, respectively, which are included under the heading “Interest and
similar charges” of the profit and loss account (Note 25).
10.2.2 National mediation loans
These operations in the Institute, implanted since 1993, has the aim to help finance small and
medium enterprises in the national territory. These lines are instrumented through loans
granted by the Institute to various credit institutions, which formalise loans with the respective
companies. Thus, each year, different lines are approved for different amounts and objectives,
always focusing on the Spanish SMEs.
In general, in these lines, the Institute does not assume any risk of insolvency of final
borrowers. Occasionally, the ICO assumed a part of the risk in certain liquidity lines 2009-
2012, with no risk exposure at December 31, 2022 and 2021. During the years 2022 and 2021
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, 2022 and 2021 per
years of maturity is the following:
Thousands of Euros
2022
2021
Up to 1 year
1 510 188
2.011.747
From 1 to 2 years
1 121 629
1.359.034
From 2 to 3 years
785 381
920.470
From 3 to 4 years
579 293
571.806
From 4 to 5 years
391 803
403.195
More than 5 years
796 147
864.677
5 184 441
6 130 929
At December 31, 2022 and 2021, mediation loans accrued an annual average interest rate of
0.95% and 0.64%, respectively.
Interests accrued during 2022 and 2021 for national mediation loans have amounted to 39,592
and 42,587 thousand Euros, respectively, included on caption “Interests and similar income”
of the profit and loss account (Note 24).
10.2.3 International mediation loans
International mediation loans are a new activity in ICO, launched in 2018, in order to support
the internationalisation of the Spanish company through financing banks, instead of through
investment.
75
The detail of the balance of international mediation loans at December 31, 2022 and 2021
detailed per years of maturity is the following:
Thousands of Euros
2022
2021
Up to 1 year
205 045
216.037
From 1 to 2 years
209 092
126.947
From 2 to 3 years
109 576
129.946
From 3 to 4 years
88 025
101.369
From 4 to 5 years
61 890
70.453
More than 5 years
377 733
286.371
1 051 361
931 123
At December 31, 2022 and 2021, international mediation loans accrued an annual average
interest rate of 0.95% and 0.64%, respectively.
Interests accrued during 2022 and 2021 by international mediation loans have amounted to
21,981 thousand Euros and 9,101 thousand Euros, respectively, which are included in the
caption "Interests and similar income” of the profit and loss account (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 4,006 thousand Euros (3,016 thousand Euros at
December 31, 2021) (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, 2022 and 2021 detailed per years
of maturity is the following:
Thousands of Euros
2022
2021
Up to 1 year
2 539
4.309
From 1 to 2 years
1 280
2.455
From 2 to 3 years
-
1.238
From 3 to 4 years
-
-
From 4 to 5 years
-
-
More than 5 years
-
-
3 819
8 002
At December 31, 2022 and 2021, loans to credit institutions accrued an annual average
interest rate of 0.30% and -0.30%, respectively.
Interests accrued during 2022 and 2021 by these loans have amounted to 22 thousand Euros
and 10 thousand Euros, respectively, included on caption “Interests and similar income” of the
profit and loss account (Note 24).
10.3 Customer loans and advances
The composition of this caption of the balance sheet at December 31, 2022 and 2021, based
on the counterparty category, is the following:
Thousands of Euros
2022
2021
Counterparty category -
Resident Public Administrations
1 639 593
2 212 678
Non-resident Public Administrations
89 852
167 919
76
Other resident sectors
7 285 523
7 481 816
Other non-resident sectors
1 703 318
1 377 052
Other financial assets
25 055
29 628
10 743 341
11 269 093
Impairment losses
(601 911)
(621 849)
Other valuation adjustments (*)
32 227
66 016
10 173 657
10 713 260
(*) Valuation adjustments mainly correspond to the accrual of interests and similar revenues, as well as to corrections for
financial commissions.
The value of certain investments in some Economic Interest Groupings is included in “Other
resident sectors” (20,695 thousand Euros at December 31, 2022 and 17,806 thousand Euros
at December 31, 2021) 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-f inancial 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 (22,707 thousand Euros at
December 31, 2022, 14,923 thousand Euros at December 31, 2021) (Notes 19 and 23).
Interests accrued, during 2022 and 2021, for these loans have amounted to 181,789 thousand
Euros and 127,804 thousand Euros, respectively, which are included on caption "Interests and
similar income” of the profit and loss account (Note 24).
Of the above balances, information is provided below regarding transactions guaranteed by
the Public Sector, set out by counterparty and type of instrument, included under “Other
resident sectors” and “Resident Public Administrations,” which are classified under the
heading ‘Customer loans and advances’ at December 31, 2022 and 2021:
Thousands of Euros
2022
2021
Balances included under “Resident Public Administrations”
Loans to the national government
1 010 415
1 476 973
Loans to regional governments
629 178
735 705
Valuation adjustments
(120 789)
(124 183)
1 518 804
2 088 495
Balances included under “Other resident sectors”
Doubtful assets
5 294
5 400
Loans to other public entities
1 888 578
2 149 358
Loans to other sectors
161 751
134 025
2 055 623
2 288 783
Total operations guaranteed by the State
3 574 427
4 377 278
The breakdown of “Loans to the national government,” excluding valuation adjustments, is as
follows at December 31, 2022 and 2021:
Thousands of Euros
2022
2021
Loans to the State and its Autonomous Entities
1 008 901
1 475 009
Accounts receivable from the Public Treasury
1 514
1 964
1 010 415
1 476 973
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
77
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 2022
and 2021 (Note 24) are the following:
Thousands of Euros
2022
2021
Central government
Regional governments
Other public sector entities
9 322
4 613
20 162
7 726
6 610
16 586
34 097
30 922
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, 2022 and 2021, is as follows:
Thousands of Euros
2022
2021
Maturities
Up to 1 year
1 489 245
1.343.331
From 1 to 2 years
1 344 673
886.246
From 2 to 3 years
1 262 703
1.307.310
From 3 to 4 years
1 154 056
1.511.308
From 4 to 5 years
1 270 986
1.281.432
More than 5 years
4 253 905
5.005 482
10 775 568
11 335 109
At December 31, 2022 and 2021, loans to clients accrued an annual average interest rate of
1.58 % and 0.98%, respectively.
At December 31, 2022, 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, 2021) (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
“Hedging derivatives” at December 31, 2022 and 2021, by hedging type, counterparty and risk
(all contracted in non-organised OTC markets), are as follows:
78
Thousands of Euros
Notional
Assets
Liabilities
2022
2021
2022
2021
2022
2021
By type of hedging
Fair value hedges
6 240 506
10 691 453
348 572
433 655
200 090
76 949
Cash flow hedges
4 709 662
5 921 759
90 250
21 354
365 529
254 122
10 950 168
16 613 212
438 822
455 009
565 619
331 071
By type of product
Swaps
10 950 168
16 613 212
438 822
455 009
565 619
331 071
10 950 168
16 613 212
438 822
455 009
565 619
331 071
By counterparty
Credit institutions
10 950 168
16 613 212
438 822
455 009
565 619
331 071
Other credit institutions
-
-
-
-
-
-
Other sectors
-
-
-
-
-
-
10 950 168
16 613 212
438 822
455 009
565 619
331 071
By type of risk
Risk of exchange
5 780 660
11 672 765
191 002
368 356
319 081
222 099
Interest rate risk
5 169 508
4 940 447
247 820
86 653
246 538
108 972
10 950 168
16 613 212
438 822
455 009
565 619
331 071
At December 31, 2022 and 2021, 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
2022
2021
Level I
Level II
Level III
Level I
Level II
Level III
Asset hedging derivatives
-
438 822
-
-
455 009
-
Liability hedging derivatives
-
565 619
-
-
331 071
-
The fair value of these items has been calculated in 100% of the cases, both in 2022 and in
2021, 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 2022 and 2021 is the following:
Thousands of Euros
Group
companies
Joint
ventures
Associates
Total
Balance at 1 January 2021
1 940
-
47 352
49 292
Additions
3 307
3 307
Withdrawals
Other variations
Impairment
Balance at 31 December 2021
1 940
-
50 659
52 599
Additions
4 867
4 867
Withdrawals
Other variations
79
Impairment
Balance at 31 December 2022
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, 2022 and 2021.
13. PROPERTY, PLANT AND EQUIPMENT
The variation during 2022 and 2021 in accounts of property, plant and equipment and their
corresponding accumulated amortisation, has been the following:
Thousands of Euros
Buildings of own
use
Furniture, vehicle
and other assets
Property
investments
Total
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
Balances at 1 January 2022
-
651
651
At December 31, 2022
Net property, plant and equipment
75 711
7 376
83 087
Cost
Balances at 1 January 2021
114 601
15 875
130 476
Additions
328
350
678
Disposals and other write-offs
-
(38)
(38)
Balances 31 December 2021
114 929
16 187
131 116
Accumulated amortisation
Balances at 1 January 2021
36 666
7 774
44 440
Allocations
1 723
298
2 021
Transfers and other variations
-
(38)
(38)
Balances 31 December 2021
38 389
8 034
46 423
Impairment losses
At 31 December 2021
-
651
651
Net property, plant and equipment
Balances 31 December 2021
76 540
7 502
84 042
At December 31, 2022 there are fully-depreciated property, plant and equipment for own use
for a gross amount of 19,673 thousand Euros (18,488 thousand Euros at December 31, 2021).
In compliance with Institute policy, all property, plant and equipment is insured at December
31, 2022 and 2021.
Transitional Provision One, section B).6 of Bank of Spain Circular 4/2004, allows any asset
80
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, 2022 amounted to 18,026 thousand Euros (19,037
thousand Euros at December 31, 2021) (Note 20).
The table below presents the fair value of certain items of property, plant and equipment of
the Group at December 31, 2022 and 2021 by category, along with the related carrying
amounts at those dates:
Thousands of Euros
2022
2021
Carrying value
Fair value
Carrying value
Property, plant and equipment for own use
83 087
113 023
84 042
109 116
Buildings
75 256
105 192
76 090
101 164
Other
7 376
7 376
7 502
7 502
Property under construction
455
455
450
450
Property investments
-
-
-
-
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, 2022 and 2021.
14. INTANGIBLE ASSETS
The breakdown of Intangible assets in the balance sheet at December 31, 2022 and 2021
relates exclusively to the account named ‘other intangible assets’.
Thousands of Euros
Estimated useful life
2022
2021
With indefinite useful life
-
-
-
With defined useful life
3 years to 10 years
52 376
48 571
Gross total
52 376
48 571
Of which:
Internal developments
3 years
46 215
42 997
Remainder
10 years
6 161
5 574
Accumulated depreciation
(43 403)
(39 916)
Impairment losses
(2 137)
(2 137)
6 836
6 518
All intangible assets at December 31, 2022 and 2021 related to computer software. Fully
amortised intangible assets at December 31, 2022 amounted to 42,097 thousand Euros
81
(36,418 thousand Euros at December 31, 2021).
15. TAX ASSETS AND TAX LIABILITIES
The detail of Tax Assets and Liabilities at December 31, 2022 and 2021 is the following:
Thousands of Euros
Assets
Liabilities
2022
2021
2022
2021
Current taxes:
4 330
32 435
1 493
6 748
Corporate income tax (Note 23)
3 847
32 258
-
5 810
VAT
483
177
31
35
Personal income tax withholdings
-
-
1 041
553
Social Security contributions
-
-
421
350
Deferred taxes:
174 345
152 470
153 641
75 159
Impairment losses on credits, loans and discounts
91 761
81 785
-
-
Measurement of cash-flow hedges (Note 21)
82 584
70 685
-
-
Restatement of property
-
-
15 932
15 932
Restatement of financial assets at fair value through OCI (Note 21)
-
-
137 709
59 227
178 675
184 905
155 134
81 907
Variations undergone, during 2022 and 2021, on balances of deferred tax assets and liabilities
are shown below:
Thousands of Euros
Assets
Liabilities
2022
2021
2022
2021
Opening balance
152 470
148 123
75 159
49 203
Impairment losses on credits, loans and discounts
9 976
20 639
-
-
Valuation of cash flow hedges (Note 21)
11 899
(16 292)
-
-
Restatement of property
-
-
-
Restatement of financial assets at fair value through OCI (Note 21)
-
78 482
25 956
Closing balance
174 345
152 470
153 641
75 159
16. OTHER ASSETS AND OTHER LIABILITIES
The composition of the caption of “Other assets” of the balance sheet at December 31, 2022
and 2021 is the following:
Thousands of Euros
OTHER ASSETS
2022
2021
Other assets
4 325
17 289
Accruals
10 798
11 132
15 123
28 421
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
2022, the overall amount of these fees receivable for ICO is 5 million Euros per year (5 million
Euros at December 31, 2021), also recorded in the income statement for these amounts within
the section of 'Fee and commission income'“ (Note 27).
This caption also includes commissions paid by the ICO for the COVID guarantee of
operations owned by the Institute (paid to the Fund RDL 12/95, by virtue of applicable
82
regulations) and to be accrued in the Institute’s income statement (2,141 thousand Euros at
December 31, 2022 and 2,877 thousand Euros at December 31, 2021).
The composition of the balance of “Other liabilities” of the balance sheet at December 31,
2022 and 2021 is the following:
Thousands of Euros
OTHER LIABILITIES
2022
2021
Other liabilities
-
-
Accruals
63 331
39 414
63 331
39 414
Under the heading “Accruals” includes the amounts accrued and unpaid, for commissions to
be paid to credit institutions by the concepts of “rappel 2022 mediation lines” by 750 thousand
Euros (500 thousand Euros in 2021). It also includes fees for the management of COVID
sureties, which have been charged to the Fund RDL 12/95 (by virtue of applicable regulations)
and which are pending accrual in the Institute’s income statement for an amount of 57,094
thousand Euros at December 31, 2022 (34,354 thousand Euros at December 31, 2021).
17. NON-CURRENT ASSETS HELD FOR SALE
The totality of the balance in this caption corresponds to foreclosed assets. None of these
foreclosed assets recorded on this heading at December 31, 2022 and December 31, 2021
comes from any funding related neither to Property development land nor to any other property
development business.
Movements for years 2022 and 2021 in the balances under this balance sheet heading are
shown below:
Thousands of Euros
Cost
Impairment
Total
Balance at 1 January 2021
65 916
(65 916)
-
Additions
119
(119)
-
Withdrawals/Applications
(3 431)
3 431
-
Transfers
-
Balance at 31 December 2021
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)
-
Out of the total amount of “Non-current assets held for sale” at December 31, 2022 and 2021,
48,678 thousand Euros correspond to a single asset, which is fully provisioned.
In 2022, impairment allocations of these non-financial assets have been registered, for an
amount of 78 thousand Euros (81 thousand Euros in 2021).
In 2022, results from the sale of non-current assets held for sale have been registered, for an
amount of 1,468 thousand Euros (1,848 thousand Euros in 2021) (Note 17).
The Institute’s Board of Directors body gives its approval annually to the Disinvestment Plan
referred to these assets.
83
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):
RESIDENTIAL USE BUILDINGS
Thousands of € last
appraisal
Appraiser
Appraisal methodology
6
ALIA TASACIONES
COMPARISON
31
COHISPANIA
COMPARISON
585
EUROVALORACIONES
COMPARISON
69
EUROVALORACIONES
COST
9
GESVALT
COMPARISON
5
JLL
COST
13
JUDICIAL
COMPARISON
379
GRUPO TASVALOR
COMPARISON
1,097
TERTIARY USE BUILDINGS
Thousands of € last
appraisal
Appraiser
Appraisal methodology
784
EUROVALORACIONES
COMPARISON
81
EUROVALORACIONES
COST
30
EUROVALORACIONES
RESIDUAL DYNAMIC
14
JLL
COMPARISON
909
RUSTIC LAND
Thousands of € last
appraisal
Appraiser
Appraisal methodology
31
EUROVALORACIONES
RENT UPDATE
91
EUROVALORACIONES
COMPARISON
38
GRUPO TASVALOR
RENT UPDATE
43
GRUPO TASVALOR
COMPARISON
203
URBAN AND DEVELOPABLE LANDS
Thousands of € last
appraisal
Appraiser
Appraisal methodology
6,117
EUROVALORACIONES
RESIDUAL DYNAMIC
105
GRUPO TASVALOR
RESIDUAL DYNAMIC
44
GRUPO TASVALOR
OTHERS
40
UVE VALORACIONES
RESIDUAL DYNAMIC
6,306
TOTAL
8,515
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
2022
2021
84
Counterparty categories
Deposits from Central Banks (Note 18.1)
2 961 320
3 444 351
Deposits from credit institutions (Note 18.2)
4 704 485
5 894 436
Deposits from customers (Note 18.3)
366 292
874 313
Issued debt securities (Note 18.4)
13 374 254
20 087 210
Other financial liabilities (Note 18.5)
247 302
258 541
Monetary market operations (Nota 18.6)
28 174
-
21 681 827
30 558 851
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, 2022 and 2021 based
on the nature of operations is the following:
Thousands of Euros
2022
2021
Nature:
Loans from the European Investment Bank
3 970 102
4 476 130
Interbank loans
207 780
178 645
Loans from other credit institutions
526 848
1 211 001
Valuation adjustments – accruals
(245)
28 660
4 704 485
5 894 436
Interbank deposits fall due within less than one year from December 31, 2022 and 2021,
respectively.
Loans from the European Investment Bank present the following final repayment schedule:
Thousands of Euros
2022
2021
Up to 1 year
822 513
1.377.669
From 1 to 2 years
591 713
808.872
From 2 to 3 years
811 362
579.904
From 3 to 4 years
454 854
782.349
From 4 to 5 years
137 281
440.059
More than 5 years
1 152 379
487.277
3 970 102
4 476 130
The breakdown by maturity date of “Loans from other credit institutions” is as follows:
Thousands of Euros
2022
2021
Up to 1 year
78 750
853.338
From 1 to 2 years
78 750
59.042
From 2 to 3 years
78 750
77.493
From 3 to 4 years
30 000
77.493
From 4 to 5 years
198 760
47.972
More than 5 years
61 838
95.663
526 848
1 211 001
18.3 Deposits from customers
The composition of this caption of the balance sheets at December 31, 2022 and 2021 based
on the sector is the following:
85
Thousands of Euros
2022
2021
Counterparty category
Public Administrations
348 650
659 130
Other resident sector (1)
17 131
215 143
Other non-resident sectors
-
-
Valuation adjustments – accruals
511
40
366 292
874 313
(1) Out of which, at December 31, 2022 and 2021, 17,131 thousand Euros and 201,643 thousand Euros, respectively, were
demand accounts.
At December 31, 2022 and 2021, the detail by nature of the balance registered on “Public
Administrations” is the following:
Thousands of Euros
2022
2021
Reciprocal Interest Adjustment Agreement (C.A.R.I.)
8 634
25 304
Public Administration Current Accounts and other items
340 016
633 826
348 650
659 130
18.4 Issued debt securities
The detail of this caption at December 31, 2022 and 2021 is the following:
Thousands of Euros
2022
2021
Bonds and debentures issued
13 351 201
20 070 571
Valuation adjustments (*)
23 053
16 639
13 374 254
20 087 210
(*) Including transaction costs and value corrections for accounting hedging
Variations of this caption, during 2022 and 2021, have been the following:
Thousands of Euros
2022
2021
Opening balance
20 070 571
15 049 917
Issues
23 490 046
28 023 011
Amortisations and depreciations
(30 648 144)
(23 529 344)
Exchange differences
438 728
526 987
Closing balance
13 351 201
20 070 571
Detailed below are debenture issues outstanding at December 31, 2022 and 2021, grouped
per currency:
Thousands of Euros
Number of
issues
2022
2021
Divisa
2022
2021
59
89
US Dollar
4 575 090
7 511 081
61
63
Euro
7 683 423
10 414 189
1
1
Swiss Franc
253 884
241 990
10
23
Australia Dollar
452 347
948 978
86
0
1
Sweden Krone
-
48 779
10
10
Pound Sterling
350 909
867 205
1
1
Yen
35 548
38 349
13 351 201
20 070 571
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 2022, the total financial cost of debenture loans in both Euros and foreign currency recorded
under the heading ‘Interest and similar charges’ in the income statement was 562,607
thousand Euros, which is an average annual interest rate of 3.65% (0.51% with the effect of
accounting hedges). In 2021, financial costs amounted 241,044 thousand Euros, which was
an average annual interest rate of 2.40% (0.59% with accounting hedges) (Note 25).
As of 2022, the Institute has recorded results for financial operations derived from the
purchase of financial liabilities at amortised cost (bonds and debentures issued by the ICO),
with profits of 947 thousand Euros (losses of 356 thousand Euros in 2021), included on caption
'Gains or losses on financial assets and liabilities not measured at fair value through profit or
loss, net’ (Note 28).
18.5 Other financial liabilities
The composition of this caption of the balance sheets at December 31, 2022 and 2021, is the
following:
Thousands of Euros
2022
2021
Treasury Funds
170 495
239 391
Other concepts
76 807
19 150
247 302
258 541
“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 Futur E: This line is to provide incentives for projects in support of sustainable
tourism, helping to redirect current tourist activity with a view to sustainability and
ecological efficiency, taking into account variables related to the environment and
sustainable development, in order consolidate the position of Spanish tourism at the
vanguard of the rational use of energy, the use of renewable energies, the reduction
of the water footprint, and waste management
Unlike other of the Institute’s mediation lines, which are funded through market fundraising by
the ICO, the financial funds designated to these operations are provided directly by the state,
87
being instrumented through Institute's opened accounts on behalf of the correspondent
Ministries. These funds balance, corresponds to the amount provided by formal transactions
that are also listed under the heading of ‘Loans and receivables’ (net amounts, less
unamortised willing), so that amount plus the balance of the associated current account (which
reflects the balance of the above lines) is always equal to the amount received by the Institute
for the provisioning of the line.
Balances at December 31, 2022 and 2021 of such funds are shown below:
Thousands of Euros
2022
2021
FOMIT – Renove Turismo
28 012
49 903
Préstamos Renta Universidad
80 717
93 684
Futur E
511
4 336
Other funds and other concepts
138 062
110 618
247 302
258 541
18.6 Monetary market operations
This caption includes temporary assignments of assets, entirely
securities representing Public
Debt.
19. PROVISIONS
At December 31, 2022 and 2021 the detail of this caption of the accompanying balance sheet
is the following:
Thousands of Euros
2022
2021
Provisions for pensions and similar obligations
770
791
Provisions for contingent exposures and commitments
59 396
48 652
Other provisions
1 704 589
1 340 866
1 764 755
1 390 309
The composition of the caption of “Other provisions” of the balance sheets at December 31,
2022 and 2021 is the following:
Thousands of Euros
2022
2021
Royal Decree – Law12/1995 Fund
1 672 132
1 316 127
Fund for amounts recovered from BBVA
200
160
Fund Prestige Facility
8 297
8 312
Fund to compensate AIE shareholdings results (Note 10.3)
22 707
14 923
Other funds
1 253
1 344
1 704 589
1 340 866
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
88
Note 1, in accordance with the regulations in force for credit institutions. Additional Provision
4 of Law 66/1997 (30 December) on Tax, Administrative and Social Order Measures stipulated
that notwithstanding the application of these regulations, the Council of Ministers or the
CDGAE could authorise the ICO to charge the Special provision Fund established under RDL
12/1995 for any defaults arising during the course of its business, provided that they did not
receive any specific coverage in the General State Budgets. This Fund was created in 1996
under the heading “Other Provisions”.
Those loans or transactions that, in view of the relevant terms and conditions, require the
application of this Fund are provided for by charge to the same. The Institute's income
statement is therefore not affected.
Since they are already provided for through this Fund, the loans covered by the same are not
therefore included in the calculation of the general and specific bad debt provision.
The Fund is credited, in addition to the initial allocation, with future allocations that the Instituto
de Crédito Oficial makes out of profits obtained and any made or authorised by the State when
assuming or offsetting losses, or through any other appropriate system . Similarly, the Fund is
credited with the amounts of 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
2022 and 2021 amounted to 15 thousand Euros and 5 thousand Euros, respectively and the
income obtained on the management of the funds assigned to the Fund itself, in 2022 and
2021, amounted to (7,688) thousand Euros and (5,073) thousand Euros, respectively.
In accordance with the provisions of Law 12/1996 (30 December) on the General State
Budget, in 1997 an additional 150,253 thousand Euros was allocated to this Fund by charging
the Ordinary State Loan.
In 2004 another allocation totalling 249,500 thousand Euros was charged against the State
Loan granted to ICO in accordance with the Council of Ministers Resolution dated at July 30,
2004.
As a consequence of the COVID-19 health crisis and of the implementation of the State’s
surety lines to support the private sector’s financing, the financial entities pay surety
commissions to ICO which, by virtue of procedures established for such purpose, are
registered as direct credits to the Fund RDL 12/95. Also, costs for the necessary contracts
entered into by the Institute to manage this activity are also charged to the Fund RDL 12/95.
The purpose of these allocations is to face future defaults that may derive from the execution
of granted sureties and which, in any case, shall not affect the Institute’s equity (in case of
insufficiency of funds, the State shall directly provide ICO with the necessary amounts).
This fund’s variations in 2022 and 2021 included on caption of “Other provisions” of the
balance sheet at December 31, 2022 and 2021 are the following:
Thousands of Euros
Balance at 1 January 2021
626 471
Capitalisation of interests
(5 073)
State Contributions
-
Application ICO results 2020
70 188
Loan recoveries (principal and interests)
1
Applications
-
Credits COVID lines commissions (net of contracting expenses)
624 540
Balance at 31 December 2021
1 316 127
Capitalisation of interests
(7 688)
89
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
In 2022 an extraordinary contribution to the Fund of 122,960 thousand Euros has been
registered, as part of the net profit distributed by ICO for 2021.
Fund for amounts recovered from BBVA
An additional provision Eleven of Law 24/2001 (27 December) on Tax, Administrative and
Social Order Measures, was applied by the Institute, the Group's Parent entity, in 2001 and
2002, with regard to the heading “Funds for amounts recovered from BBVA”, to allocate part
of its equity to cancel an amount owed to the Institute by the State as a result of certain loans
and guarantees granted by the former Official Credit Institutions and secured by the State.
Nonetheless, the management of the transactions affected by the cancellation process has
meant that ICO continues receiving collections pertaining to these loans, which, following the
prudence accounting principle, are not generally registered as income in the income
statement. For those accounted as income, in 2022, there is a provision by 200 thousand
Euros (160 thousand Euros at December 31, 2021).
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 transactions performance conducted through the Economic Interest Groupings (Note
10.3). This provision has been recognised under the rubric of corporate income tax of the
income account for an amount of 7,785 thousand Euros and 8,922 thousand Euros,
respectively in the years 2022 and 2021 (Note 23).
The following chart shows variations of the caption of Provisions in 2022 and 2021:
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 2021
-
656
27 855
658 234
686 745
Allocations
-
135
20 730
5 220
26 085
Recoveries
-
-
(143)
(180)
(323)
Application of funds
-
-
-
-
-
Transfers and other variations (1)
-
-
-
677 592
677 592
Exchange differences
-
-
210
-
210
Balances at 31 December 2021
-
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)
90
Balances at 31 December 2022
-
770
59 396
1 704 589
1 764 755
(1) Transfers and other movements mainly include credits to the Fund RDL 12/95 for the collection of commissions
for COVID-19 sureties (239,506 thousand Euros at December 31, 2022 and 624,540 thousand Euros at December
31, 2021) and for the provision to the Fund to offset results from investments in AIE (Note 23) (7,785 thousand
Euros at December 31, 2022 and 8,922 thousand Euros at December 31, 2021).
20. OWN FUNDS
The reconciliation of the opening and closing carrying value in 2022 and 2021 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 2021
4 314 204
19 948
923 350
70 188
5 327 690
Distribution of results
(70 188)
(70 188)
Other variations of reserves
(912)
912
-
Profit/(loss) for the period
122 960
122 960
Other variations
276
276
Balance at 31 December 2021
4 314 480
19 036
924 262
122 960
5 380 738
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
At December 31, 2022, the caption of “Distribution of results” includes an amount of 122,960
thousand Euros (70,188 thousand Euros at December 31, 2021), as part of the distribution of
previous year’s results, for contribution to the Fund RDL 12/95 (Note 19).
The caption of “other variations” mainly includes the annual contribution to equity, by virtue of
Law 24/2001, of 27 December, for an amount of 207 thousand Euros in 2022 (276 thousand
Euros in 2021). 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
2022
2021
Gross
Tax effect (Note
15)
Net
Gross
Tax effect (Note
15)
Net
Financial assets at fair value
through other comprehensive
income (Note 9)
459 032
(137 710)
321 322
197 425
(59 228)
138 197
Cash flows hedging of assets
and liabilities
(275 279)
82 584
(192 695)
(235 615)
70 684
(164 931)
TOTAL
183 753
(55 126)
128 627
(38 190)
11 456
(26 734)
91
The balance of this heading relates to the concepts of available-for-sale financial assets at fair
value through OCI and cash flow hedge derivatives in the accompanying balance sheets. The
first account records the net amount of changes in the fair value of the assets at fair value
through OCI that, in accordance with Note 2.2.4, must be included as part of the Institute's
equity. The second account records the net amount of changes in the fair value of the cash
flow hedge instruments.
Thousands of Euros
2022
2021
Opening balance
(26 734)
(125.315)
Change in fair value of financial assets at fair value through other comprehensive
income (Note 9)
183 125
60 565
Reclassification to financial assets at fair value through profit or loss
Cash flow hedges
(27 764)
38 016
Closing balance
128 627
(26 734)
22. GRANTED GUARANTEES AND CONTINGENT COMMITMENTS
These headings in the balance sheets record the amounts that ICO must pay on behalf of
third parties in the event that the obligated parties do not do so, in response to commitments
acquired during the normal course of its business (granted guarantees) and amounts available
to third parties (contingent commitments).
The detail of this caption at December 31, 2022 and 2021 is the following:
Thousands of Euros
2022
2021
Granted guarantees
Financial guarantees
557 812
528 275
557 812
528 275
Contingent commitments
Available by third parties:
Credit institutions
223 259
473 654
Public Administrations sector
1 966 824
1 739 361
Other resident sectors
1 029 980
1 130 718
Non-resident sector
337 399
189 070
Other contingent commitments
79 998
93 716
Subscribed values pending disbursement:
835 933
702 500
4 473 393
4 329 019
5 031 205
4 857 294
Income obtained from guarantee instruments (guarantees and other sureties) are recorded
under the heading “Commissions received” in the income statement.
23. TAX POSITION
The Institute is effectively taxed for the Corporate Income Tax, under general regime, since
1999 (previously, it was exempt, by virtue of specific regulations).
The reconciliation of the accounting Institute’s profit, as the Parent firm of ICO, for 2022 and
2021 with the corporate income tax basis is as follows:
92
Thousands of Euros
2022
2021
Accounting profit before income tax
178 112
171 698
Permanent differences
Foreign taxes paid
482
554
Non-accounted accounting income
-
Tax-loss carry forwards attributed to invested companies
(36 023)
(38 096)
Deductible expenses from previous years
142 571
134 156
Temporary differences:
Due to impairment losses and provision non-deductible
67 378
84 614
Due to the reversal of temporary differences arising in other years
(34 128)
(15 814)
33 250
68 800
Tax assessment basis
175 821
202 956
Gross tax payable (30%)
52 746
60 887
Deductions and allowances
(395)
(431)
Withholdings and interim payments
(56 198)
(54 646)
Tax payable (Note 15)
(3 847)
5 810
Corporate income tax
42 376
39 816
Adjustments CIT expense allocated investees’ bases (Note 19)
7 785
8 922
Other adjustments
Corporate income tax expense
50 161
48 738
In the year, the allocation of tax losses carried forward in the AIE, in which ICO invests in
different capital proportions, is incorporated: 36,023 thousand Euros in 2022 (allocation of tax
losses by 38,096 thousand Euros in 2021). 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 2022 closing.
No tax incentive deductions applied in the year 2022 nor in 2021. There is an international
double tax deduction (taxes borne) amounting to 395 thousand Euros and 431 thousand
Euros, respectively. There are not international double taxation deductions at end 2022.
There are no changes in the methods used to depreciate/amortise fixed assets owing to
exceptional causes.
Taxes and other tax obligations applicable to the Institute are open to inspection by the tax
authorities during last four years.
Due to the possible interpretations of tax legislation that may be afforded to some transactions,
basically related to new subject ability to corporate income tax following the full exemption
from the same, there could be certain contingent tax liabilities. However, in the opinion of the
Institute's tax managers, the possibility of these liabilities crystallising is remote and in any
event, the tax debt that may derive from them would not significantly affect the accompanying
annual accounts.
24. INTERESTS AND SIMILAR INCOME
The detail of interests and similar income of 2022 and 2021, based on their origin, is the
93
following:
Thousands of Euros
2022
2021
Financial assets at fair value through other comprehensive income
204
99
Financial assets at amortised cost
322 656
224 924
Derivatives, hedge accounting
(7 876)
(12 173)
Other assets
242
307
Interests and similar income from liabilities
10 778
39 029
326 004
252 186
25. INTERESTS AND SIMILAR CHARGES
The detail of this caption of the profit and loss account during 2022 and 2021 is the following:
Thousands of Euros
2022
2021
Financial liabilities at amortised cost
Derivatives, hedge accounting
Other liabilities
665 632
(487 030)
-
306 947
(181 953)
-
Interests and similar charges from assets
21 668
22 646
200 270
147 640
26. INCOME FROM DIVIDENDS
The totality of yields obtained for this concept corresponds to the portfolio of variable income,
amounting to 5,480 thousand Euros and 5,225 thousand Euros, respectively, in 2022 and
2021.
27. FEE AND COMMISSION INCOME AND EXPENSES
The detail of this caption of the profit and loss account is the following:
Thousands of Euros
2022
2021
Commissions received
Contingent risks
6 462
5 319
Availability commissions
5 875
3 219
Management commissions COVID sureties
7 482
6 946
Other commissions
12 033
15 563
31 852
31 047
Commissions paid
Signature risk
(5 834)
(96)
Other commissions
(3 191)
(7 697)
(9 025)
(7 793)
Net commissions for the year
22 827
23 254
The heading “Other commissions” of commissions income, at December 31, 2022, includes
an amount of 5,000 thousand Euros related to commissions of the Autonomous Communities’
94
Financing Fund and Local Entities’ Financing Fund for the management of both Funds (5,000
thousand Euros at December 31, 2021) (Note 16).
28. PROFIT OR LOSS ON FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AT
FAIR VALUE THROUGH PROFIT OR LOSS, NET
The detail of this caption of the Profit and loss account, based on the origin of its items is the
following:
Thousands of Euros
2022
2021
Financial assets at fair value through other comprehensive income (Note 9)
-
-
Financial assets at amortised cost, loans and items receivable (Note 10.3)
-
-
Financial assets at amortised cost, debt securities (Note 10.1)
172
-
Financial liabilities at amortised cost (Note 18.3)
947
(356)
1 119
( 356)
29. PROFIT OR LOSS ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING,
NET
The detail of this caption of the Profit and loss account, based on the origin of its items is the
following:
Thousands of Euros
2022
2021
Trading derivatives (Note 7)
(259)
364
(259)
364
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, 2022 amounts to a profit of 1,452 thousand Euros (profits of 357 thousand
Euros at December 31, 2021).
30. PROFIT OR LOSS FOR FINANCIAL ASSETS AND LIABILITIES OBLIGATORILY AT
FAIR VALUE THROUGH PROFIT OR LOSS, NET
The detail of this caption of the Profit and loss account is the following:
Thousands of Euros
2022
2021
Equity instruments at fair value through profit or loss (Note 8)
-
-
-
-
31. PROFIT OR LOSS RESULTING FROM HEDGE ACCOUNTING, NET
The detail of this caption of the Profit and loss account is the following:
Thousands of Euros
2022
2021
95
Hedging derivatives (Note 11)
44 683
42 386
44 683
42 386
This caption includes results from the variation of fair value both of hedging elements and of
hedged elements.
32. OTHER OPERATING INCOME. OTHER OPERATING EXPENSES
The detail of the balance in captions “Other operating income” and “Other operating expenses”
of the profit and loss account is the following:
Thousands of Euros
OTHER OPERATING INCOME
2022
2021
Income from exploitation of estates
818
34
Other concepts (*)
142
793
960
827
(*) It mainly includes expenses recovered from returns of supplies and advances performed for the management of assets by
BBVA.
Thousands of Euros
OTHER OPERATING EXPENSES
2022
2021
Other concepts
-
-
-
-
33. PERSONNEL COSTS
The composition of this caption of the profit and loss account of 2022 and 2021 is the following:
Thousands of Euros
2022
2021
Wages and salaries
17 041
16 508
Employee benefits expense
4 256
4 218
Other expenses
1 538
1 515
22 835
22 241
The number of the Institute’s employees at December 31, 2022 and 2021, distributed per
professional categories and gender, has been the following:
Payroll distribution
Men
Women
2022
2021
2022
2021
Management
8
8
7
6
Managers and technicians
114
110
155
149
Administrative staff
5
6
49
48
127
124
211
203
The average number of the Institute’s employees in 2022 and 2021, distributed per
professional categories and gender, has been the following:
96
Average payroll distribution
Men
Women
2022
2021
2022
2021
Management
8
8
6
6
Managers and technicians
108
112
150
149
Administrative staff
6
7
48
46
122
127
204
201
NOTE: Since the signing of the Fifth Collective Bargaining Agreement (published in the Official Gazette on October 24, 2008),
general service staff is included under the heading of administrative professionals.
The average number of the Institute’s employees, in 2022, with disability above 33% is of 4
persons (4 persons in 2021).
Remunerations and other benefits for the General Board
In 2022 and 2021 the Institute recorded in Income Statement 134 thousand Euros and 127
thousand Euros (on the section of “Other administration expenses”), respectively, in respect
of remuneration accrued by the members of the General Board in respect of wages,
allowances and other remunerations. These were paid to the Treasury, according to the
applicable regulation law, in the case of General Board members considered as Senior
Positions in the Civil Service.
Remunerations perceived by the Institute’s President and Senior Management, during 2022
and 2021, are the following:
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
Year 2021:
Salaries and wages
Thousands of Euros
Other
No. persons
Fixed
Variable
Remunerations
Thousands of
Euros
Total
Thousands of
Euros
6
695
70
17
782
At December 31, 2022 and 2021 there were no loans granted to the executive members of
the Institute's General Board. At December 31, 2022 loans granted under internal regulations
on loans to staff, had an outstanding amount of 13,100 thousand Euros and the average
interest rate was 2.51% (12,524 thousand Euros at December 31, 2021, 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.
97
34. OTHER ADMINISTRATION EXPENSES
The detail of this caption of the profit and loss account is the following:
Thousands of Euros
2022
2021
Buildings, installations and materials
745
713
Computers
5 327
4 979
Communications
2 210
2 089
Advertising and publicity
2 577
1 427
Rates and taxes
1 500
1 573
Other general administration expenses
6 964
6 965
19 323
17 746
Audit expenses
The annual accounts audit has been made by the General Intervention of the State
Administration (IGAE for its initials in Spanish). Consequently, they do not exist remunerations
to auditors for this concept, as they are assumed by the General Intervention (Treasury and
Public Administrations Minister).
The amount invoiced by companies under the Mazars trademark (who audit, by virtue of a
contract formalised with the IGAE to deliver a collaboration service in the performance of the
audit of the annual accounts of 2022 and 2021), for audit-related services amounted to 10
thousand Euros (5 thousand Euros for audit services of the individual annual accounts and 5
thousand Euros for the consolidated accounts); the amount invoiced for non-audit services
during 2022 has been of 42.5 thousand Euros, taxes not included (42.5 thousand Euros in
2021).
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, 2022 and
2021, 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 r egistered
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,
2022 and 2021 is as follows:
Thousands of Euros
Carrying value
Fair value
ASSETS
2022
2021
2022
2021
Financial assets at amortised cost
23 866 671
25 327 301
23 994 327
25 694 336
LIABILITIES
Financial liabilities at amortised cost
21 681 827
30 558 851
21 759 973
30 605 063
98
Fair value has been calculated, in all cases, both in 2022 and in 2021, taking as reference
implicit curves in monetary and Public Debt markets.
36. OPERATIONS WITH SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
The balance at December 2022 and 2021 of the Company related to the Subsidiaries, Joint
ventures and Associates is as follows:
AXIS
- Deposits to customers (financial liabilities at amortised cost): 47,788 thousand Euros,
at December 31, 2022 (32,220 thousand Euros at December 31, 2021);
CERSA
- Deposits to customers (financial liabilities at amortised cost): 216,988 thousand Euros
at December 31, 2022 (110,500 thousand Euros at December 31, 2021).
37. EXPLANATION ADDED FOR TRANSLATION TO ENGLISH
These financial statements are presented on the basis of the regulatory financial
reporting framework applicable to the Entity (see Note 2). Certain accounting
practices applied by the Entity that conform to that regulatory framework may not
conform to other generally accepted accounting principles and rules. In the event of a
discrepancy, the Spanish-language version prevails.
99
INSTITUTO DE CRÉDITO OFICIAL
MANAGEMENT REPORT
Financial environment and frame of action
The Spanish economy maintained the pace of growth in 2022, despite the adverse
environment.
In the set of 2022, the Spanish economy maintained the strong economic growth registered
in 2021 (5.5% with regard to the previous year). The important advance of the GDP has been
surprising, in a year marked by the outbreak of the Ukraine war, the high inflation and
increases of interest rates, while the activity recovered after the Covid-19 crisis. Indeed, the
growth has exceeded the successive forecasts by the different bodies and reflects a greater
resilience, backed by measures adopted to face the energy crisis, the strong upturn of tourism
and the dynamism of private consumption, also backed by the positive evolution of the labour
market. For 2023, the economic growth is expected to continue, although at a slower pace,
due to the lower global growth, the still high inflation, and high interest rates, although the
Spanish economy will continue leading the growth among the large Eurozone countries.
Throughout 2022, the GDP increased by 5.5%, which was also the rate growth registered in
2021, thus extending the recovery path after the GDP fall in 2020. The growth in 2022 was
founded over an expansive behaviour both of domestic demand, which summed a positive
contribution of 2.8 percentage points (pp), although it was lower by 2.4 pp than in 2021, and
of the foreign sector, which had a positive contribution of 2.6, much higher than the contribution
in 2021 (0.3 pp). Within the domestic demand, in 2022, the private consumption and the
investment in machinery and capital goods continued growing at high rates, and the
investment in properties increased again. On the other hand, the public expense decreased
in 2022, after the increases registered in 2021 and 2020 to face the Covid-19 crisis.
Concerning the labour market, after the recovery in 2021 of pre-pandemic employment levels,
the labour market continued showing its strength during 2022. According to the data of the
Active Population Survey (EPA), in 2022, 279,000 work posts were created, equivalent to an
employment increase of 1.4%. The unemployment rate was of 12.9% in the fourth quarter of
2022, against the rate of 13.3% in the fourth quarter of 2021. Thus, in 2022, the dynamism in
the employment creation observed in 2021 continued, although with certain moderation with
regard to that year’s vigour. In terms of the number of workers registered in the Social Security,
the data are also positive, exceeding the pre-pandemic levels since mid-2021, and with an
increase of registration in 2022 of 2.4% with regard to 2021, i.e., an increase of 471,000
registered workers.
In the set of the Eurozone, the growth was lower than in Spain, in particular by 3.5% in 2022,
moderating its growth with regard to 2021 (5.2%). Despite the delicate context, the home
consumption and investment mainly boosted the advance of the activity.
In 2022, the inflation continued escalating in a generalised manner among the economies, as
observed throughout 2021, as a consequence of the effects from the bottlenecks of supplies
and the increase of the energy prices, but aggravated with the outbreak of the war in Ukraine.
The inflation upturn intensified to unprecedented levels in several decades in the different
jurisdictions, given the acceleration of energy prices and the cost increase of many raw
materials, although these started to slightly moderate at the end of the summer, in Spain, and
since November in the Eurozone, thanks to measures implemented and to the lower pressure
of some of the causes. In Spain, the average inflation was of 8.4% in 2022, after reaching
3.1% in 2021, and the general CPI closed 2022 with a y- o-y rate of 5.7% at December.
Similarly, the underlying CPI (excluding energy goods and unprocessed food, which are
components with a greater price variability) also showed an upward trend and above 2021,
100
closing the year in 7%, with an annual average of 5.2%. In the Eurozone, the trend was similar
to Spain. The underlying rate of the Eurozone closed 2022 in levels as high as Spain (6.9% in
the Eurozone); however, the general inflation rate was higher in the Eurozone at the end of
2022 (9.2%), given that the moderation of the last months of the year was greater in Spain.
The main analysists and institutions’ forecasts, both in Spain and for the set of the Eurozone,
point that, in 2023, inflationary pressures will continue to weaken and the path of price
moderation that started at the end of 2022 will redirect prices during 2023, although still at
levels above the monetary policy objectives.
The ECB started a standardisation process of its monetary policy in 2022 with
overwhelming increases of interest rates, among other measures.
In this context of ongoing increase of the inflation and high inflation expectations at the mid
term, and as the economies recovered from the most acute phase of the pandemic, the
Governing Council of the ECB started the progressive standardisation process of its monetary
policy in 2022.
The first step was the withdrawal of the extraordinary monetary stimulus implemented at the
beginning of the pandemic, for which, on March 2022, the net asset purchases ended within
the PEPP (Pandemic Emergency Purchase Programme) framework.
On June, the ECB Board concluded that the conditions established in the forward guidance to
start increasing interest rates had been met, and communicated their intention to increase
rates on July, and again on September, and announced that net purchases in the framework
of the asset purchase programme (APP) would end at the beginning of July. That month,
official rates increased by 50 basic points, the first increase of interest rates in 11 years, and
the Board announced the new Transmission Protection Instrument, TPI. In particular, the TPI
guarantees the fluent transfer of the policy’s guidelines to all countries within the Eurozone,
and the volume of purchases in the framework of the TPI depends on the seriousness of risks
to transfer the policy.
On September, the Board approved an unprecedented increase of 75 basic points, which was
applied again on October. These rises were due to excessively high inflation levels and that
would probably remain above the ECB’s objective of 2% at the mid term, during an extended
period of time.
The Governing Council also decided, on its meeting of October, to modify the conditions of
the third series of targeted longer-term refinancing operations (TLTRO III) and decided to
establish the remuneration of minimum reserves in the interest rate of the ECB’s deposit
facility.
At the end of 2022, the ECB increased again its official rates in 50 basic points and announced
the beginning of the reduction of its security holdings acquired under the APP programme
from March 2023.
Lastly, the ECB decided on its meeting of February 2023 to apply the same increase as at
December (50 basic points) to its three official interest rates. With that decision, the interest
rate of the main financing operations and interest rates of the marginal credit facility and of the
deposit facility amount to 3.00%, 3.25% and 2.50%, respectively, with effect from February 8,
2023.
Also, the ECB has anticipated that, on its coming March meeting, official interest rates will be
additionally increased by 50 basic points, responding to pressures on the underlying high
inflation. After the March meeting, the ECB indicates that the future path of its monetary policy
101
will be assessed. In any case, the ECB expects maintaining rates at restrictive levels to reduce
inflation over time, by moderating the demand, to an objective of 2% at the mid-term.
Moreover, these high rates will allow preventing a persistent upward shift of inflation
expectations.
Additionally, the majority of Central Banks have also carried out a forceful turn in the direction
of their monetary policy, making 2022 a turning point year that has put an end to more than a
decade of low rates and of ultra-accommodative policies in most economies. In particular, in
the USA, the Federal Reserve made its first increase of rates on May 2022 and, since June,
the balance reduction process started. After successive interest rate increases, on February
2023, they range from 4.50% to 4.75%. In the United Kingdom, the Bank of England applied
its first rate increase on December 2021 and, after consecutive increases, on February 2023
rates of reference amount to 4%.
At institutional level, during 2022, the management of European funds from the instrument
Next Generation EU (NGEU), which aims mobilising unprecedented resources to boost the
economic growth, continued. The Member States have continued presenting their plans to use
the resources made available, which have been accompanied by the corresponding
disbursements. In the specific case of Spain, in 2022, the second disbursement was
perceived, for an amount of 12,000 million Euros, and on November the third disbursement
was formally requested, for a value of 6,000 million Euros, linked to the compliance with 29
milestones and objectives (23 milestones and 6 objectives), that had been complied with
throughout the first half of 2022. On February 2023, the European Commission has authorised
this third disbursement and, thus, Spain became the first Member State that received the
authorisation for the third disbursement, bringing to light that it is the most advanced country
in the fund execution.
On December 2022, the Government approved the addendum to the Recovery Plan, which
will allow additionally mobilising more than 94,300 million Euros to boost the country’s strategic
reindustrialisation, and which incorporates three important developments: assigning additional
transfers corresponding to Spain, entailing additional grants of 7,700 million, assigning loans
of the Recovery and Resilience Mechanism, from which Spain may request up to a maximum
of 84,000 million Euros from the European Commission, and assigning funds of the
REPowerEU
Plan, which objective is saving energy, increasing clean energy production, and
diversifying European energy sources, with an assignment of 2,600 million Euros. The
addendum will continue ambitious reforms and investments of the Recovery Plan, in line with
its objectives (ecologic transition, digital transformation, social and territorial cohesion and
gender equality), focusing on the strategic autonomy through strategic projects, known as
PERTE. The Government expects these funds to have an effect over the Spanish GDP close
to 3 percentage points in 2023, increasing in 2024 to 3.5 pp with the sum both of reforms and
of investments linked to funds.
Interest rates applied to companies increased in 2022 as a consequence of the
monetary policy’s standardisation process
The ECB’s official rate increases, within a context of a quicker standardisation of the monetary
policy in the Eurozone than expected, in view of the strong inflation increase, have been
reflected in interest rates applied to households and companies during 2022, as these have
undergone increases, in particular during the second half of the year. 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 1.59% at December
2021 to 3.49% at December 2022. 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 to a greater extent in the last months of the year as a consequence
of the higher rate increase in Germany. Thus, the Spanish rate is 54 basic points below the
102
German rate at December 2022, while at December 2021 it was of 32 basic points. In
comparison with the average of the set of the Eurozone, the differential was lower, throughout
2022, but the differential was negative every month, except in January; thus, on December
2022, the Spanish rate was 21 basic points below the European average.
Interest rates for operations of a lower amount (up to 250 thousand Euros) also increased in
2022, from 1.69% at December 2021 to 3.53% at December 2022, also remaining below the
German rate throughout the year, so that, at December, the Spanish rate was 68 basic points
lower. Additionally, the Spanish interest rate was also lower than the Eurozone rate in these
operations throughout the year, being 35 basic points lower at December.
Concerning the financial sector activity, during 2022, the volume of new companies’ loan
operations grew by 19.9%, with regard to 2021; however, this growth slowed down, towards
the end of the year. Operations below 250 thousand Euros increased by 15.7% with regard to
the previous year; those below 1 million increased by 14.1% in 2022; and operations above 1
million increased even further, by 25.7%.
In any case, total credit exposure with companies remain virtually stable during 2022,
according to Bank of Spain data.
Non-performing loans continued decreasing in 2022
Non-performing loan ratio the Spanish credit institutions continued reducing in 2022. On
December 2022, it amounted to 3.5% with regard to 4.3% at December 2021. Thus, the ratio
reached its lowest rate since December 2008. This decrease is explained by the intensification
of the fall of the volume of credit rated as doubtful. In relation to credit to productive activities,
this ratio amounted to 4.43% (at September 2022).
Activity
The Institute works to contribute added value to the financing of the Spanish business fabric
and to respond 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, as well as carrying out functions
entrusted in the different economic scenarios to provide an efficient response to the
companies’ financing needs.
o All of the Institute’s actions in 2022 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,
103
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 the fund distribution in collaboration with
credit institutions operating in Spain (ICO mediation lines) and through the different 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 2022 amounts to 5,034,233 thousand Euros. 31.0% of this amount
(1,560,965 thousand Euros) corresponds to credit disposals made through the different ICO
mediation lines, by means of 12,394 operations; 70% aimed to micro-SMEs (companies up to
nine workers) and 38% correspond to loans for an amount equal or below 25,000 Euros.
Two differentiated strategic areas of action are distinguished in the mediation activity:
o National: to finance business activities and investment projects related to the activity
in Spain. In 2022, 11,247 operations have been granted, for an amount of 1,181,750
thousand Euros, representing 76% of the total amount of mediation lines.
o International: these lines are aimed to finance the internationalisation and exporting
activity of Spanish companies. In 2022, 1,147 operations have been granted, for an
amount of 379,215 thousand Euros, in the different lines.
Concerning the direct activity, during 2022, 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 to facilitate the financing to carry out
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 2022, funds have been
disposed of and sureties have been issued, for an amount of 3,473,268 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 1,774,826 thousand Euros, and sureties have been issued, for an amount
of 141,474 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 354,790 thousand Euros, and
MARF promissory notes at short term, for an amount of 1,202,178 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. Axis acts in public-private
collaboration with the venture capital sector in all activity fields. Currently, commitments have
been assumed to manage up to 9,000 million Euros in its four funds: Fond-ICO Global, Fond-
ICO Next Tech, Fond-ICO SMEs, and Fond-ICO Sustainability and Infrastructures. These
commitments 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.
104
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
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.
On September 2022, the board of directors of AXIS approved the launch of the 15
th
call of
Fond-ICO Global, where seven funds were selected, in which ICO will invest a maximum of
410 million Euros.
Through all the 15 calls resolved until December 31, 2022, 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 2022 the Board of directors of Axis has approved Fond-ICO SMEs participations by
35,400 thousand Euros.
Through Fond-ICO Infrastructures II, ICO has continued with the objective to invest directly or
through other funds in sustainable infrastructure projects in Spain and abroad with Spanish
companies, contributing to national objectives for ecologic transition. The fund provides
financing to companies through minority shares in capital, subordinated debt and participating
loans.
During 2022, the Board of directors of Axis has approved participations through this fund by
55,000 thousand Euros.
On July 2021, AXIS and the State’s Secretary for Digitalisation and Artificial Intelligence
(SEDIA) launched Fond-ICO Next Tech. This fund makes investments in funds, corporate
vehicles and companies that boost innovating high-impact digital projects and the investment
in growing companies (scale-ups).
The board of directors of AXIS has approved in 2022 the fund’s capital increase in 1,500
million Euros, reaching an amount of 2,000 million Euros.
The objective of Fond-ICO Next Tech is to invest both in funds (venture capital funds,
corporate funds or other investment vehicles) and in Spanish growing companies of the
technological sector. The objective is to mobilise joint resources in public-private collaboration
of 4,000 million Euros (half of public funds and the other half of private investment) in an initial
period of four years.
In 2022, ICO has approved the participation of Fond-ICO Next Tech in three funds, reaching
a public investment of 270 million Euros that will mobilise investments in public-private
collaboration in Spain of at least 540 million Euros in digital companies and projects.
Also, in 2022, the participation of Fond-ICO Next Tech in the European Tech Champions
105
Initiative (ETCI) was approved, where Spain will contribute 1,000 million Euros to a new
European fund that will provide financing to European emerging companies to create an
entrepreneur ecosystem that will allow the development of cutting-edge projects with global
power.
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 to implement the Government’s 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
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 and channels 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, with the following distribution:
o Liquidity loans facility, for a guaranteed amount of 92,880,311 thousand Euros,
corresponding to 1,020,575 loans for an amount of 122,377,914 thousand Euros. 98%
correspond to freelancers and SMEs.
o Investment loans facility. 171,909 operations were granted, for an amount of
18,358,748 thousand Euros, with a guaranteed amount of 14,306,600 thousand Euros.
o Guarantee facility for MARF promissory note issues. 858,536 thousand Euros were
guaranteed, corresponding to 119 issues which nominal amounted to 1,255,300
thousand Euros.
During 2021 and 2022, the management of new surety operations requested by credit
institutions has been complemented with the ICO’s implementation of different measures
agreed by the Government in relation to previously formalised surety operations. In particular,
Royal Decrees Law 34/2020, of 17 November, and 5/2021, of 12 March, established
extraordinary measures to support the business solvency, aimed to continue protecting the
productive fabric and prevent a structural impact in the economy and the employment.
Through these measures, the reimbursement term for guaranteed operations was extended,
and a Code of Best Practices was approved, which is allowing ICO to accompany credit
institutions in restricting processes of the financial debt with public guarantee. Some of these
measures, such as the reduction of debt through transfers, remains in force until June 30,
2023.
106
Additionally, the Council of Ministers, on meeting held on June 21, 2022, adopted an
agreement to allow the extension of the term of guarantees granted to freelancers and
businesses, charged to ICO COVID surety facilities, after June 30, after the expiry of the
deadline of the Temporary State Aid Framework approved by the European Commission. The
extension of the deadline may be requested for the entire life of the operations.
Moreover, Royal Decree-Law 6/2022, of 29 March, adopting urgent measures in the
framework of the National Plan of response to the economic and social consequences of the
war in Ukraine, establishes that the Ministry of Economic Affairs and Digital Transformation
may grant sureties for an amount up to 10,000 million Euros for the partial cove rage, on behalf
of the State, of the financing granted by credit institutions to businesses and freelancers.
The Council of Ministers adopted in 2022 the following agreements, in relation to this Surety
facility: to establish the terms and conditions of a first tranche, for an amount up to 5,000
million Euros charged to the surety facility, aimed to guarantee the financing granted to
businesses and freelancers and to incorporate some changes in the facility’s conditions to
adapt it to the European Union’s temporary state aid framework, among which is the extension
of the term to file for sureties until December 1, 2023.
Finally, the Council of Ministers of December 27, 2022 agreed a new package of measures to
respond to the impact of the war in Ukraine during 2023. Among the agreed measures is a
second tranche of the surety facility, for an amount of 500 million Euros, which will allow gas-
intensive industries to obtain financing with a public surety of up to 90%.
The guaranteed amount at December 2022 closing is of 649,122 thousand Euros,
corresponding to 3,999 loan operations for an amount of 838,860 thousand Euros.
In addition to sureties of the facilities for the COVID-19 and Ukraine crisis, in 2022, 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).
At the end of the financial year 2022, the total balance managed by ICO corresponding to
these funds is of 198,951 million Euros:
o The Financing Fund for Autonomous Communities has an outstanding balance of
185,779 million Euros.
o State funds for the internationalisation and financial cooperation to the development
(CARI, FIEM, FONPRODE and FCAS) present a joint balance of 6,920 million Euros.
o The Financing Fund to Local Entities has closed 2022 with a balance of 6,252 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.
107
During 2022, resources were obtained at mid and long term, for an amount of 4,329 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 May, the four issue of green bonds was launched, for an amount of 500 million Euros.
Raised funds will be applied to financing Spanish companies’ sustainable projects to boost
the ecologic transition. The operation rises to 2,000 million Euros the global volume issued by
ICO in green bonds and consolidates the Institute’s commitment to the market development
for this typology of transactions.
On September, the ninth issue of social bonds was launched, for an amount of 500 million
Euros. Funds obtained will be applied to financing, in public-private collaboration, projects that
promote the social and territorial cohesion and generate a positive impact in the employment.
ICO continues consolidating as role as issuer of reference in the market of sustainable bonds,
with thirteen transactions (nine social and four green transactions) for a global amount of 6,550
million Euros, until December 2022. Through these issues, ICO commits to promote
investments that generate a positive social and environmental impact, in line with objectives
established in the Recovery, Transformation and Resilience Plan.
Balance sheet
ICO Group occupies a prominent position within the Spanish financial system and has an
important role in the Spanish economy.
The Institute’s balance sheet reaches 29,774,943 thousand Euros at 2022 closing (37,766,136
thousand Euros at 2021 closing). The cause of the variation with regard to the previous year
mainly responds to a reduction of the caption of cash, deposits at central banks and demand
deposits.
The outstanding amount of financial assets at amortised cost has amounted to 23,866,671
thousand Euros (25,327,301 thousand Euros at December 31, 2021):
x Loans to credit institutions amount to 6,911,989 thousand Euros (7,724,368 thousand
Euros in 2021). This caption mainly includes outstanding balances from mediation
operations.
x Loans to customers close the year with a balance of 10,173,657 thousand Euros with
regard to 10,713,260 thousand Euros in the previous year.
x Debt securities amount to 6,781,025 thousand Euros; 6,889,673 thousand Euros at
2021 closing.
The outstanding balance of the portfolio of debt securities at fair value through other
comprehensive income, aimed to cover possible liquidity needs, amounts to 1,135,160
thousand Euros (1,150,639 thousand Euros at December 31, 2021) and the balance of equity
instruments is of 1,325,031 thousand Euros (1,086,506 thousand Euros at 2021 closing). This
caption mainly includes the Institute’s shares in venture capital funds managed by AXIS
Participaciones Empresariales S.G.E.I.C., S.A., S.M.E, managing entity fully owned by
Instituto de Crédito Oficial.
During 2022, there has been a decrease of the balance of financial liabilities at amortised cost,
closing the year in 21,681,827 thousand Euros (30,558,851 thousand Euros in 2021).
Equity in ICO amounts to 5,514,563thousand Euros at 2022 closing, 18.5% of the balance
108
sheet. The Institute’s solvency coefficient at year-end closing amounts to 33.70%, 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 2022 amounted to 125,734 thousand Euros, an
increase of 21,188 thousand Euros with regard to 2021.
In the same line, gross margin in 2022 has increased, with regard to 2021 (204,582 thousand
Euros and 181,865 thousand Euros, respectively).
Operating expenses (administration and depreciation) amounted to 47,812 thousand Euros,
above figures in 2021 (44,760 thousand Euros).
It should be noted that the financial year 2022 ended with net provision allocations of 3,517
thousand Euros and a reversal of the value of financial assets not measured at fair value of
23,468 thousand Euros.
As a result, profit before tax amounted to 178,112 thousand Euros.
Research and development expenses
No research or development activities were carried out in 2021.
Treasury stock
Not applicable to the Institute.
Personnel
The Institute’s average payroll, in 2022, amounts to 326 employees, with regard to 328 in
2021.
Post-balance sheet events
The coming years will be crucial to consolidate the process of recovery, transformation and
strengthening of Spain’s growth model, as well as to deal with the economic consequences
that may arise from the war in Ukraine. The priorities of the European Union, embodied in the
Multiannual Financial Framework 2021-2027 and the European recovery plan Next
Generation EU, have been transferred to our country through the Recovery, Transformation
and Resilience Plan. The Plan, in which ICO is expected to gain a relevant role as loan conduit,
constitutes a roadmap aimed to achieve sustainable inclusive growth through a consistent and
coordinated strategy, from the time standpoint and also in relation to the set of national and
community economic policy instruments.
The transformations that our economy will undergo in the coming years mean that companies
will have to rely on different financing sources, which will require the mobilisation of financial
resources in different modalities.
In this area, the ICO Group will have to play a very important role in collaboration with the
private banking system, consolidating the process of recovery and transformation of the
109
Spanish economy, environmental and social sustainability, as well as business growth as a
source of innovation, competitiveness and job creation.
Other significant events that occurred after the reporting date are detailed in Note 1.8.
Annex I: Investments at 31.12.2022 and 31.12.2021 (direct and indirect)
110
The relevant information on shares in associates and subsidiaries at December 31, 2022 and 2021 is the following:
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
Annex I: Investments at 31.12.2022 and 31.12.2021 (direct and indirect)
111
At 31 December 2021:
Shareholding%
Investment’s carrying value
Entity’s details
Address
Activity
Direct
Indirect
Total
Gross
Impairment
Net
Assets
Equity
Results
Associates
CERSA, Compañía Española de
Reafianzamiento, S.A.
Paseo de la
Castellana
151 - Madrid
Supporting
guarantee of
guarantee
operations granted
by the SS.GG.RR.
24. 34%
-
24. 34%
42 193
-
42 193
654 482
501 474
-
COFIDES, Compañía Española
de Financiación del Desarrollo,
S.A.
Príncipe de Vergara,
132 - Madrid
Financial support to
private projects with
Spanish interest
performed in
developing countries
20.31%
-
20.31%
8 466
-
8 466
174 369
167 580
18 490
Subsidiaries
50 659
-
50 659
AXIS Participaciones
Empresariales Sociedad Gestora
de Entidades de Capital Riesgo,
S.A.
Los Madrazo, 38
- Madrid
Financial
investments
100.00%
-
100.00%
1 940
-
1 940
32 841
31 752
18 146
52 599
-
52 599
Non-audited economic information, referring to 31 December 2021
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 28 April, 2022 the following resolution, among others, was
adopted:
1)
Approve the individual and consolidated annual accounts (balance sheet, profit and loss account,
statement of recognised income and expense, statement of changes in equity, cash flow
statement and notes to the financial statements) and the management report of the Instituto de
Crédito Oficial (ICO) for the financial year 2022.
2)
Submit the annual accounts and the management report for the 2022 financial year, together with
the proposed allocation of profits, within one month of approval, for consideration by the Minister
for Economic Affairs and Digital Transformation, who shall approve the allocation of profits,
subject to a non-binding report from the Ministry of Finance and Public Administration to be issued
within ten days of the request.
It is hereby certified in accordance with the provisions of article 19.5. of Law 40/2015, of 1
October, on the Legal Regime of the Public Sector, in relation to article 9.9 of the Institute's Bylaws, which
has not yet approved the Minutes of the session of 20 April 2023.
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 2022, drawn up on March 28, 2023, 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, 2023
José Carlos García de Quevedo Ruiz
Chairman of the Instituto de Crédito Oficial
Código Seguro De Verificación Hh5bFDQSNBULphMchuA5hg== Estado Fecha y hora
Firmado Por Jose Carlos Garcia de Quevedo Ruiz - Presidente Firmado 24/04/2023 12:58:09
Observaciones Página 1/1
Url De Verificación https://verifirma.ico.es/verifirma/code/Hh5bFDQSNBULphMchuA5hg%3D%3D
Normativa Este informe tiene carácter de copia electrónica auténtica con validez y eficacia administrativa de ORIGINAL (art. 27 Ley 39/2015).