Members of the Mount Sion Choir perform as part of the Marie Keating Foundation’s Concert4Cancer event in August 2020, which was proudly supported by the Permanent TSB Community FundAnnual Report 2020We are a community serving the community. This document contains certain forward-looking statements with respect to
Permanent TSB Group Holdings plc’s Group’s (the ‘Group’) intentions, beliefs, current goals and
expectations concerning, among other things, the Group’s results of operations, financial condition,
performance, liquidity, prospects, growth, strategies, the banking industry and future capital
requirements.
The words “expect”, “anticipate”, “intend”, “plan”, “estimate”, “aim”, “forecast”, “project”, “target”,
“goal”, “believe”, “may”, “could”, “will”, “seek”, “would”, “should”, “continue”, “assume” and similar
expressions (or their negative) identify certain forward-looking statements but their
absence does not mean that a statement is not forward looking. The forward-looking statements
in this document are based on numerous assumptions regarding the Group’s present and future
business strategies and the environment in which the Group will operate in the future. Forward-
looking
statements involve inherent known and unknown risks, uncertainties and contingencies
because they relate to events and depend on circumstances that may or may not occur in the
future and may cause the actual results, performance or achievements of the Group to be
materially different from those expressed or implied by such forward looking statements. Many
of these risks and uncertainties relate to factors that are beyond the Group’s ability to control or
estimate precisely, such as future global, national and regional economic conditions, levels of
market interest rates, credit or other risks of lending and investment activities, competition and the
behaviour of other market participants, the actions of regulators and other factors such as changes
in the political, social and regulatory framework in which the Group operates or in economic
or technological trends or conditions. Material economic assumptions underlying the forward
looking statements are discussed further in Market and Regulatory context.
Past performance should not be taken as an indication or guarantee of future results, and no
representation or warranty, express or implied, is made
regarding future performance. Nothing in this document should be considered to be a forecast of
future profitability or financial position and none of the information in this document is intended to
be a profit forecast or profit estimate.
The Group expressly disclaims any obligation or undertaking to release any updates or revisions
to these forward-looking statements to reflect any change in the Group’s expectations with regard
thereto or any change in events, assumptions, conditions or circumstances on which any statement
is based after the date of this document or to update or to keep current any other information
contained in this document. Accordingly, undue reliance should not be placed on the forward looking
statements, which speak only as of the date of this document.
Investor and shareholder information and services including these Annual
Reports, are available on-line at www.permanenttsbgroup.ie.
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Strategic Report
Financial Highlights
Non-Financial Highlights
Chairman’s Statement
Chief Executive Review
COVID-19
Market Context
Our Strategy, Business Model and Culture
Responsible And Sustainable Business
Financial Review
Risk Management
Corporate Governance
Directors’ Report
Corporate Governance Statement
Directors’ Report on Remuneration
Statement Of Directors’ Responsibilities
Consolidated Financial Statements
Independent Auditor’s Report
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Company Financial Statements
Company Financial Statements
Notes to the Company Financial Statements
General Information
Alternative Performance Measures
Abbreviations
Definitions
2
3
4
6
9
11
12
22
44
59
84
91
133
137
138
146
152
242
245
249
256
258
Permanent TSB Group Holdings plc - Annual Report 2019
1
Financial Highlights
74
(€109)
Financial Highlights
Financial Performance
Underlying (loss)/profit €m (a)
Financial Highlights
2020
Financial Highlights
2019
Underlying (loss)/profit €m (a)
94
2018
Underlying (loss)/profit €m (a)
2020
(€109)
2020
(€109)
2019
2020: €(109)m
2019
Underlying loss due to a fall in
94
2018
operating income and higher
94
2018
expected credit losses as a
result of increased risk due to
adverse changes in macro-
economic conditions
74
74
Net Interest Margin % (b)
2020
Loss/return on Equity % (c)
2020
(5.4)%
1.73%
1.80%
2019
Net Interest Margin % (b)
1.78%
2018
Net Interest Margin % (b)
2020
1.73%
2020
1.73%
2019
1.80%
2020: 1.73%
2019
1.80%
7bps lower because of margin
1.78%
2018
pressures in the industry.
1.78%
2018
Margin compressed as a
result of the low interest rate
environment impacting yields
on treasury assets
3.1%
2019
Loss/return on Equity % (c)
2018
Loss/return on Equity % (c)
2020
(5.4)%
2020
(5.4)%
2019
2020: (5.4)%
2019
Decreased due to a fall in
2018
operating income as a result
2018
of lower yields from treasury
assets
3.1%
3.1%
4.5%
4.5%
4.5%
75%
64%
68%
Adjusted Cost to Income Ratio (e)
2020
75%
Headline Cost to Income Ratio (d)
2020
88%
Transformation and simplification
2019
80%
Headline Cost to Income Ratio (d)
2018
Headline Cost to Income Ratio (d)
88%
2020
2020
88%
2019
2019
2018
2018
2020: 88%
Increased due to lower total
income while costs remain
stable
2019
Adjusted Cost to Income Ratio (e)
2018
Adjusted Cost to Income Ratio (e)
75%
2020
2020
75%
2019
2019
2018
2018
2020: 75%
Increased due to lower
total income while savings
from cost management has
enabled digital investment,
NPL Ratio (h)
reflecting stable costs
2020
CET Ratio (Transitional basis) (g)
2020
18.1%
68%
68%
80%
80%
64%
64%
75%
75%
7.6%
Investment Spend (f)
2020
€72m
€72m
€72m
€24m
2019
€49m
Investment Spend (f)
2018
Investment Spend (f)
2020
2020
2019
2019
2018
€24m
2018
€24m
2020: € 72m
Reflects significant
reinvestment in the business
€49m
€49m
Risk weighted assets (R.W.A) (i)
2020
8,480
14.7%
2019
17.6%
Sustainability
CET Ratio (Transitional basis) (g)
2018
CET Ratio (Transitional basis) (g)
2020
18.1%
2020
18.1%
2019
17.6%
2019
17.6%
2018
2018
14.7%
14.7%
2019
NPL Ratio (h)
2018
NPL Ratio (h)
2020
2020
2019
2019
2018
2018
6.4%
10.0%
7.6%
7.6%
6.4%
6.4%
10.0%
10.0%
10,012
8,480
8,480
2019
Risk weighted assets (R.W.A) (i)
2018
11,990
Risk weighted assets (R.W.A) (i)
2020
2020
2019
2019
2018
2018
11,990
11,990
10,012
10,012
2020: 18.1%
Increase reflects generation
of organic profits and
deleveraging of non-
performing loans (NPLs)
2020: 7.6%
Increased due to the sale
of a portfolio of performing
loans and the unfavourable
economic outlook reflecting
the impact of COVID-19
2020: € 8,480
Decrease primarily reflects
the de-recognition of
underlying exposures in 2020
Management has provided further information on IFRS and Non-IFRS measures including their calculation in the Alternative Performance Measurements (APM) section on
pages 249 to 255.
(a) Operating (loss)/profit before exceptional items. See table on page 45 for a reconciliation of underlying (loss)/profit to operating (loss)/profit on an IFRS basis.
(b) Defined as net interest income (NII) divided by average interest-earning assets.
(c) Defined as (loss)/profit for the year after tax (excluding exceptional and other non-recurring items) expressed as a percentage of total average equity.
(d) Defined as total operating expenses (excluding exceptional and other non-recurring items) divided by total operating income.
(e) Defined as total operating expenses (excluding exceptional, other non-recurring items, bank levy and regulatory charges) divided by total operating income.
(f) Investment spend includes both capital and operating expenditure.
(g) Total common equity tier 1 (CET-1) capital on a transitional basis divided by total risk weighted assets (RWAs).
(h) Defined as non-performing loans (NPLs) expressed as a percentage of the total gross loans of the bank.
(i) RWAs are the Group’s assets or off balance sheet exposures, weighted according to risk.
2
Permanent TSB Group Holdings plc - Annual Report 2020 Non-Financial Highlights
A new Ambition, ‘To be Ireland’s best personal and
small business bank’
A new Purpose, ‘ To work hard every day to build trust
with our customers – we are a community serving the
community’
71% Employee Engagement Score
A new partnership with Ó Cualann Cohousing Alliance,
contributing €350,000 over three years to support
the development of affordable housing schemes in
communities across the country
A new partnership with the Strategic Banking
Corporation of Ireland (SBCI) providing €50 million in
funding to Irish Small and medium-sized enterprises
(SMEs)
3 training days delivered per employee in 2020,
with more than 900 employees enrolled in banking
education programming
Reductions to our fixed and variable home loan
mortgage interest rates, benefiting more than 70,000
new and existing home loan customers
37% of the Senior Leadership population are Women
100 million logins on both Open24 Web and App in 2020
c.€700,000 invested in Irish community organisations,
supporting local communities across the country
10% reduction in carbon emission intensity in 2020
(-55% reduction since 2009)
Our Commitment
To Responsible And
Sustainable Business
Permanent TSB has a long banking
history in Irish communities, with roots
that stretch back over 200 years to the
building society and Trustee Savings
Bank movements. Throughout this
time, our focus has been on delivering
exceptional customer service and
connecting with our local communities.
Our experiences over two centuries
shape our culture and influence
how we do things today and we are
committed to continuing this long
tradition through our Responsible and
Sustainable Business Strategy.
Awards And
Recognitions In 2020
Ambitions For
2020 And Onwards
• Achievement of the ‘Business
Working Responsibly Mark’ from
Business in the Community
Ireland, recognising best in class
Responsible and Sustainable
Business Programmes in Ireland
• Winner of Best Training and
Development Programme, Customer
Contact Management Association
(CCMA) Awards 2020
• Winner of Best First Time Buyer
Mortgage, Bonkers Awards 2020
• Winner of Best Marketing Campaign,
Bonkers Awards 2020
• Gold for Best Integrated Digital
Campaign, Digital Media Awards
2020
• Silver for Best in Financial Services,
Digital Media Awards 2020
• Silver for Best Native Campaign,
Digital Media Awards 2020
• Highly Commended - Contact
Centre of the Year, Customer
Contact Management Association
(CCMA) Awards 2020
• Delivering on our Purpose to build
trust with customers, through
enhancing our product suite and
providing superior customer
service
• Partnering with small businesses
through our refreshed Business
Banking Strategy, not just in terms
of supporting their banking needs,
but through acting as advisers to
help them to grow
• Continuing to implement and
embed our Culture and Diversity
and Inclusion Strategy across all
areas of our business, as we focus
on evolving our maturity level
•
Increasing our focus on
Climate Change and the Bank’s
Sustainability Agenda
• Supporting the transition to a low
carbon economy and committing
to setting science based carbon
emission targets by 2024
• Deepening our community impact
through the Permanent TSB
Community Fund
3
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Chairman’s Statement
In a year of unprecedented challenge, the
people in Permanent TSB demonstrated an
unwavering commitment to supporting our
customers, our communities and the wider
economy.
Our COVID-19 Response
The pandemic placed an enormous strain
on our society and on our economy but I
can say with certainty that it has brought
out the best in the people who work in
Permanent TSB.
I pay tribute to all my colleagues in the
Bank, who have overcome great challenges
every day to continue to serve our
customers to the very best of their ability.
They have shown tremendous resilience,
professionalism and care in ensuring that
the Bank has been there for our customers
at a time when they needed our support
more than ever.
Through their efforts, the Bank has kept
all 76 of its branches open throughout the
pandemic; it has supported customers
experiencing financial difficulty; it has
continued to provide its products and
services without interruption; and it has
continued the work of building trust with
our customers and striving to be Ireland’s
best personal and small business bank.
Our Commercial Performance
In such challenging circumstances, the
Bank has reported a loss of €162 million
for 2020. This is an unwelcome change
from the improvements to our profitability
over recent years but it reflects the
economic impact of the pandemic which
is evident throughout the banking industry.
The extent of the change in our macro-
economic environment has resulted in the
Bank increasing its impairment provisions.
This is an appropriate response in the
circumstances but it unavoidably results in
a significant impact on our overall financial
performance.
4
The pandemic has also impacted the
quality of our loan book, with our ratio of
non-performing loans (NPLs), increasing
to 7.6%. While part of this increase
was a consequence of a significant
transaction involving the sale of a portfolio
of performing loans during the year, the
Bank still maintains its medium-term
commitment to a mid-single digits NPL
ratio.
Our commitment to supporting our
customers is evident from the fact that the
Bank granted payment breaks to c.12,000
customers whose ability to repay was
affected by the pandemic. This was an
unprecedented intervention that required
enormous effort from our staff to put
in place the necessary structures and
systems at short notice. But it was a much-
needed intervention that has been crucial
for our customers and one that we have
been only too glad to make.
At a time of such uncertainty for our
customers over their families, their health
and their livelihoods, the Bank sent an
important signal that we would be there to
help them.
In addition to supporting customers in
financial difficulty, we also took great care
to keep serving those customers who
continued to need access to our full range
of products and services.
By way of example, mortgage applications
in the second half accounted for 62%
of all applications in 2020 – a far higher
percentage than we see in a conventional
year. This is very positive and shows the
competitiveness and attractiveness of our
offering to mortgage customers, which is
based on excellent service and attractive
rates.
It was equally encouraging to see the
Bank make excellent progress in further
developing its SME offering, which is a
key area of focus for us. As 2020 came
to a close, the Bank made a significant
statement of its intent in the SME sector
with the announcement of a €50 million
low-cost lending partnership with the
Strategic Banking Corporation of Ireland
(SBCI), the State’s SME promotional
lending institution.
This new partnership has been very
successful in its early days, with a very
strong pipeline of applications and a very
favourable reaction from both existing and
new SME customers.
Another area of critical importance
to the Bank’s progress is the ongoing
development and enhancement of our
digital proposition. This continued to
evolve during 2020 as the pandemic saw
us witness a significant migration among
customers to our digital services.
It was very encouraging to see that, despite
a sharp fall-off in new lending in the early
months of the pandemic, the second half
of the year saw a strong rebound that
exceeded our expectations significantly.
We made it as easy as possible for
customers to use our digital channels and
brought in a range of enhancements, such
as an improved app and online services;
enhanced cashback for using debit cards in
the early months of the pandemic; higher
Permanent TSB Group Holdings plc - Annual Report 2020 limits for using contactless payments; and
the introduction of Apple Pay facilitating
even greater take-up of digital payments.
Our multi-year Digital Transformation
Programme is being well received by
customers and will bring benefits to the
Bank, shareholders and customers in the
form of better ways of banking, enhanced
efficiency and a more robust IT platform.
2020 also saw the Bank successfully issue
a €125m AT1 instrument which provides
financial flexibility and further diversifies
funding sources and investor base.
Our Business Environment
During 2020 and the early 2021 we have
been operating in a dramatically changed
business environment that has created
significant headwinds for the Bank.
Notwithstanding these headwinds, our
business performance remains stable and
we have seen a strong rebound in new
business volumes since the early months
of the pandemic.
While significant public health restrictions
on movement and economic activity
continue to be a feature in 2021, the Irish
economy has proven resilient and recent
forecasts from the Central Bank of Ireland
and analysts such as Goodbody are more
favourable than previous forecasts and
obviously an improvement in the Irish
economy will be supportive of the Bank’s
business strategy.
However, the lower for longer interest
rate environment continues to erode the
profitability of the overall financial sector.
The Bank is subject to similar pressures as
other banks arising from the low interest
rate environment, which continues to exert
downward pressure on the Bank’s net
interest margin.
Our Culture Journey
The continuing enhancement of the Bank’s
culture continues to be a priority for the
Board and the Management Team. In 2020
we maintained a strong focus on adopting
and embedding our cultural improvements
that arose from our culture strategy of
Leading at Every Level. This strategy is
being delivered through three cultural
pillars; Living as Leaders, Promoting the
Customer, and Quality Communications.
The Bank has partnered with LIFT Ireland
(Leading Ireland’s Future Together) to
launch our ‘Living As Leaders’ programme,
which aims to promote and encourage the
right behaviours across all levels within the
Bank on the basis of ‘One Conversation at
a Time’.
This has been a significant support in our
efforts to engage with customers and
communities during the pandemic.
During 2020 we continued to promote
our Speak Freely Programme, which
was relaunched in July 2019, to embed
it fully throughout all levels of the Bank,
and to promote a culture in which all our
colleagues feel psychologically safe and
empowered to use their voice.
The Bank has continued its membership
of the Irish Banking Culture Board (IBCB),
established by the five retail banks in 2018
to promote industry-wide cultural change.
I was particularly delighted to welcome
both the Chairman and CEO of the IBCB to
attend a meeting of the Board Nomination,
Culture and Ethics Committee in 2020
to discuss areas of mutual interest. The
Bank has supported colleague participation
in IBCB workshops and has adopted
the DECiDE (Ethical Decision Making)
framework, as part of our Code of Ethics.
The Board is satisfied that we are on the
right path to grow a Diverse and Inclusive,
Risk Aware, Growth Culture. We continue
to strive towards greater gender equality
within the Bank, with a particular emphasis
at increasing the number of women at
Board and Senior Management levels. I
am conscious that we still need to do more
to promote greater gender equality in the
Bank; while it takes time for the changes
we have already implemented to deliver
the outcomes we are looking for, we also
cannot use time as an excuse. We are not
where we should be, but I want to assure all
of our colleagues who work in Permanent
TSB, as well as those who may consider
working for us in the future, that we want
the Bank to be one where everyone has the
same career opportunities regardless of
gender.
Board Of Directors
The composition of the Board is reviewed
regularly. The Bank is committed to
ensuring it has the right balance of Board
knowledge, skill, experience and diversity
to provide the required oversight of Senior
Management. There were a number
of changes to the Board in 2020 and I
would particularly like to thank our former
CEO Jeremy Masding and our Senior
Independent Director Julie O’Neill each of
whom stepped down from the Board in
2020, for their tireless work and dedication
to the Bank during their tenure. I am also
delighted to welcome Paul Doddrell to the
Board as a Non-Executive Director and
member of the Board Audit and Board
Risk and Compliance Committee. Paul
has extensive management and broad
expertise in the area of risk management,
auditing and finance and his appointment
to the Board will no doubt enhance the
effectiveness of Board discussion and
decision making.
Management And Staff
2020 saw the appointment of our new
Chief Executive, Eamonn Crowley. As
I said at the time of his appointment in
June, Eamonn had made an enormous
contribution to the Bank in his role as Chief
Financial Officer and Executive Director
over the previous three years and I have no
doubt that, given his breadth of experience
and his in-depth knowledge of the Bank,
he will successfully lead Permanent TSB
through the challenges of the pandemic
and beyond.
I also extend my thanks to my fellow Board
members for their valuable counsel and
support throughout the year. I acknowledge
the assistance that the Department of
Finance and Central Bank of Ireland
continued to give the Bank throughout
2020.
Outlook
Despite the challenges we face, the
manner in which the people throughout
Permanent TSB have faced up to these
challenges gives me great confidence
about the Bank’s prospects.
We continue to maintain our capital
levels, reduce costs and enhance our
digital offering. We have the resilience,
the commitment, the innovation and the
ambition to be Ireland’s best personal and
small business bank, delivering for our
shareholders while always focused on
our Purpose – of building trust with our
customers and the communities which we
serve.
Robert Elliott
Chairman
5
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Chief Executive Review
It is my honour to present the 2020 Annual Report for
Permanent TSB, the first since I was appointed Chief
Executive last June.
2020 was an exceptionally difficult year that created
upheaval in our personal and professional lives, our society
and our economy. The environment in which the Bank
operates changed dramatically – but the Permanent TSB
community has responded to these changes in a way that we
can all be proud of.
Introduction
For me, nothing has underlined all that is
great about Permanent TSB more than
the immense commitment to serving our
customers and our communities that I
have seen displayed by Permanent TSB
colleagues in the most challenging of
circumstances.
I would like to echo the comments in the
Chairman’s statement paying tribute
to our people; I am very grateful to all
colleagues in the Bank for all their efforts.
I am particularly grateful when I think of
the individual challenges that each of them
has faced, which have included the loss of
loved ones; worries about vulnerable family
members and friends; the difficulties in
performing their jobs while coping with
increased family responsibilities; and being
kept apart from people they want and need
to see in person.
I am very proud of how we have come
together, stronger than ever, providing
support to each other and to our customers
through this unprecedented time.
roots as a building society and trustee
savings banks throughout Ireland.
That tradition of being member-owned or
customer-owned is important because
it created and reinforced a way of doing
things that was particularly customer-
centric and customer-focused; it created
a Bank that was very tuned into a sense
of social purpose and the broader role the
Bank played in the community.
This community and customer service
ethos is something I want to harness and
build on in the months and years ahead
because I strongly believe that maximising
the return for customers is what leads to
maximising the return for shareholders
over the long term.
Throughout 2020 we have put that Purpose
into action by putting in place a range of
supports, including; c.12,000 Mortgage
Payment Breaks; temporary overdraft and
credit card limit increases; and cashback
incentives of more than €1m to our Explore
current account customers.
I will address the Bank’s 2020 financial
performance in more detail but at the
outset I would like to talk about the Bank’s
Purpose.
We kept all 76 of our branches open to
serve our customers and increased our
service footprint by mobilising four new
centres in regions across the country.
Shortly after my appointment I set out a
new Purpose for the organisation. This
is centred on building trust with our
customers and connecting with the Bank’s
community heritage, which has evolved
over the past 200 years from our unique
Despite the upheaval in the market, the
Bank has shown great resilience. We
continued to compete very strongly,
bringing real innovation to the market,
introducing great new customer offerings
and winning new customers.
6
Throughout 2020
we have put that
Purpose into
action by putting
in place a range
of supports,
including; c.12,000
Mortgage Payment
Breaks; temporary
overdraft and
credit card
limit increases;
and cashback
incentives of
more than €1m
to our Explore
current account
customers.
Permanent TSB Group Holdings plc - Annual Report 2020 Our new business volumes and our
financial performance were undoubtedly
impacted by the pandemic, but we saw
a strong rebound in activity as the year
progressed and entering 2021 we are in an
excellent position to support our customers
and the wider economy through the post-
pandemic recovery phase.
Business Performance Overview
Funding
Current Accounts
Current Account balances were €5.8
billion which is an increase of 24% from 31
December 2019. Current Account balances
have been consistently increasing over
the last number of years and this trend
continued throughout 2020. The growth
rate accelerated during the pandemic as
customers tended to spend less and save
more.
Retail Deposits
Retail Deposit balances increased
marginally to €10.5 billion and represent
56% of the Bank’s total funding. We
continue to manage the cost of funds in
line with the low interest rate environment.
Corporate And Institutional Deposits
Corporate and Institutional Deposit
balances decreased marginally to €1.7
billion. We will continue to manage
these resources carefully in line with
the reduction of the Bank’s funding
requirements and its obligation to add
other long term funding sources under
the Single Resolution Board’s Minimum
Requirement for own funds and Eligible
Liabilities (MREL).
Lending
Total new lending in 2020 was €1.4 billion,
a decrease of 15% versus 2019. Mortgage
lending, which represented 90% of total
new lending, decreased by 14% compared
to 2019. This reduction in overall lending
reflects pandemic-related market
movements but, Mortgage Applications
and Mortgage Approvals both recovered
strongly in H2 2020 after a slowdown in H1.
While Mortgage Lending in the market for
2020 was 12% lower year-on-year, with
an increase in demand in Applications in
the market in Q4. Housing supply, which
was already insufficient to meet demand,
was curtailed by the restrictions imposed
to halt the spread of COVID-19. Estimates
before the current crisis for total housing
completions in 2020 were between
24,000 to 26,000 units. The Banking and
Payments Federation Ireland (BPFI) has
estimated that total completions would be
lower, ranging from 19,000 to 20,000 units
in 2020.
The Bank recorded gross new Term
Lending of €97 million in 2020. This is a
decrease of 31% compared to 2019. SME
Lending in 2020, €48m, was broadly in line
with 2019 (€47m), representing a strong
performance in the circumstances.
Financial Performance Overview
The Bank recorded a total loss after tax of
€162 million, which compares to a profit
after tax of €30 million for the same period
in 2019.
While impairment provisions are driving
the decrease, other factors such as the
low interest environment and the effect
of lower transactions have impacted
underlying income.
Impairment
The total Impairment Charge for the year
was €155 million. This compares to a €10m
charge for the same period in 2019. The
impairment charge for the year reflects the
impact of a more negative macroeconomic
outlook together with the increased
uncertainty for some portfolio sectors
impacted by the COVID-19 pandemic.
Operating Income
Overall Net Interest Income has reduced
by 4% from the prior period as a result of
reduced income from a lower level of non-
performing loans (NPLs), due to NPL sales
in 2019 and lower treasury income. The
bank’s NIM has reduced to 1.73%, showing
a decrease of 7 basis points from the full
year 2019. The lower for longer interest
rates environment continues to erode the
profitability of the overall financial sector.
Net Fees and Commission income reduced
by €9 million from the same period in
2019 due to the reduction in transactions
as a result of the COVID-19 pandemic. In
November 2020, the Bank launched Apple
Pay for both Credit and Debit cards, with
approximately 54% of customers who
signed up for the service actively using it in
its first full month of operation.
Net Other Income has reduced due to
lower gains from the sale of properties
in possession, resulting in a gain of €6m
for the period. The stock of properties in
possession has reduced from 406 at the
end of December 2019 to 295 properties,
of which 59 are sale agreed, at the end of
December 2020.
Operating Expenses
We continue to deliver on cost saving
initiatives throughout the period with
operating expenses excluding exceptional
items broadly in line with the prior period.
The reduction in our underlying cost base
created capacity to invest in the business
and enabled a rapid response to the
challenges presented by COVID-19.
Exceptional Costs
The total Exceptional Costs for the year are
€57m which consist of €26m deleveraging
costs and €31m restructuring costs,
primarily associated with the Bank’s
Enterprise Transformation programme.
NPLs
Non-performing loans of €1,128 million
increased marginally from 31 December
2019. The NPL ratio increased to 7.6%
from 6.4% at 31 December 2019, with the
sale of a significant portfolio of buy-to-
let performing assets contributing to the
increase during the period. The Bank
continues to actively manage the NPL
portfolio and is still committed to reducing
the NPL ratio to mid-single digits in the
medium term.
Capital
The Common Equity Tier 1 (CET1) capital
ratio was 15.1% and 18.1%, on a Fully
Loaded and Transitional basis respectively.
This compares to the Bank’s reported CET1
ratio of 14.6% and 17.6% at 31 December
2019, on a Fully Loaded and Transitional
basis respectively.
Capital ratios increased in the year
primarily due to the de-recognition of
exposures (Glas II and Glenbeigh II) which
more than offset the adverse impact of
increased impairment charges.
7
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 advocacy and loyalty of our customers.
• We will continue to enhance our digital
capabilities.
• We will further enhance a culture of
growth that’s both open and inclusive.
• We will keep simplifying our business.
• And, ultimately, we will deliver better and
more sustainable profitability.
We will keep an unrelenting focus on
making Permanent TSB the best bank
it can possibly be, continuing to grow,
continuing to support our customers and
continuing to find new and better ways to
serve them and the communities in which
we operate.
We continue to keep operating costs
relatively stable in this challenging
economic environment and look to further
deliver cost savings in the medium term.
Despite the challenging outlook, we
maintain capital levels comfortably above
the required regulatory and management
minima.
And, I can assure you of the commitment
that my colleagues and I share, to
combining the best of our digital offering
with that of our long history of personal
service, as we continue to rebuild trust,
build a sustainable bank for the future, and
fulfil our Ambition of being Ireland’s best
personal and small business bank.
Eamonn Crowley
Chief Executive
Chief Executive Review
(continued)
Capital ratios remain above both
Management and Regulatory minima. The
Central Bank of Ireland (CBI) has provided
additional flexibility to Banks under their
supervision in the context of the COVID-19
crisis to support the sustainable provision
of credit to the economy.
A Customer Focused Culture
As I said earlier, the Bank’s Purpose is to
work hard every day to build trust with
customers by building a sustainable
organisation that is transparent and fair
with customers.
We have matched our words with actions
during 2020, examples of this include
our Branch colleagues working face to
face with customers daily to provide
an essential service from all 76 of our
branches to people right across the
country. We also introduced priority
banking hours for vulnerable customers to
visit our branches.
2020 also saw us demonstrate our
commitment to our customers with
significant changes to our mortgage pricing
for both new and existing customers. These
changes addressed a discrepancy which
traditionally existed between our pricing
for new and existing mortgage customers
and combined enhanced competitiveness
with increased fairness. We will continue to
evolve our mortgage pricing strategy in this
direction as we go forward in line with our
ambition to build trust with customers.
We are also supporting valuable societal
and citizenship projects, such as our recent
partnership with Ó Cualann Affordable
Housing, an approved housing body that
develops fully integrated, cooperative
and affordable schemes in communities
across the country. The Bank is providing
€350,000 towards this partnership
alongside valuable strategic and
operational support. We hope our support
will accelerate Ó Cualann’s development
plans, which include plans for more than
1,800 family homes across the country.
I am also delighted to announce that the
Bank was awarded the Business Working
Responsibly Mark in 2020, a significant
achievement which demonstrates the
progress we have made on our Responsible
and Sustainable business agenda over the
last number of years.
8
Evolving our culture for the better of our
customers and communities continues to
be a key area of focus. Embedding an open,
inclusive, risk aware and growth culture is
one of the five strategic priorities for the
Bank, as set out in H2 2020.
Permanent TSB is also actively involved
in improving culture across the banking
industry as a member of the Irish
Banking Culture Board (IBCB), which was
established in 2018 by the five Irish retail
banks alongside other stakeholders, with
the aim of rebuilding confidence in the Irish
banking sector.
Digital Transformation
The pandemic has accelerated the move
towards digital channels for both our
customers and our colleagues, evolving the
way we work and the way we bank. While
personal service will remain at the heart of
everything we do, digital will play an ever
increasing role in our service offering and
our future ways of working, as we adapt to
meet changing customer behaviour and
address their preferences and their needs.
At the onset of the pandemic, our
Technology team reacted quickly to
provide significant enhancements for
both customers and colleagues, building a
COVID-19 hub on our website and enabling
over 1,200 of our colleagues to work from
home.
We are also making good progress with
our multi-year Digital Transformation
Programme, with 81% of our Term Loan
applications now being completed online.
During H1, 2021 we will offer an end to
end Current Account - a new, easy digital
process that will allow customers to open a
Current Account from anywhere.
We will also build out key new digital
capabilities for our SME customers,
reflecting the importance of this sector for
our growth plans.
Outlook
Despite the challenges that 2020 brought,
I am confident that the Bank is in a
strong position to make the most of the
opportunities that will arise in the post-
pandemic recovery phase.
To take advantage of these opportunities
we will focus on our strategic priorities:
• We will continue to increase the trust,
Permanent TSB Group Holdings plc - Annual Report 2020 COVID-19
Protecting And Supporting
Our Customers, Colleagues
And Communities Through
COVID–19
Permanent TSB is fully committed to
supporting our customers, colleagues
and communities through the COVID-19
pandemic. Under our “Protect, Adapt,
Renew” approach to planning, proactive
measures were undertaken from early
February 2020 to protect the health and
welfare of our colleagues and customers,
including the mobilisation of the Group’s
Incident Management Team.
These measures included mitigation
of key operational risks and risks to our
customers, our cybersecurity, third party
business partners and mission-critical
systems, as well as enhancements in the
way we work, in our property arrangements
and in our allocation of teams and
resources.
Throughout this period of uncertainty,
we will continue to work closely with
the Government, Regulators and other
authorities and play our part in supporting
Ireland’s recovery.
Scenario Planning
Prior to the onset of the pandemic in Ireland,
the Bank undertook a Business Continuity
COVID-19 scenario exercise to ensure
the Bank was prepared to the greatest
extent possible for potential disruption.
Comprehensive scenario planning
continued as part of the Bank’s response,
with detailed scenario plans prepared in
advance of the Wave 1, Wave 2 and Wave 3
lockdowns. This ensured that the Incident
Management Team was ready to respond
to the evolving situation. While rigorous
scenario planning gives considerable
assurance that the Bank is prepared for
risks posed by unforeseen developments,
the true value of this planning is
demonstrated when such developments
become reality and the resilience of the
Bank’s people, systems and processes is
tested and proven in a live setting.
Mobilising Our Incident Management
Team
From early February, the Incident
Management Team were actively
monitoring and preparing for the onset of
COVID-19. As the situation progressed at
a national level, the Bank established a
dedicated team to manage the day-to-day
running of the response to the pandemic.
This incorporated all elements of the
Bank’s operational response, including:
the implementation of new health and
safety protocols for customers and
colleagues; oversight of the Bank’s mission
critical processes; managing colleague
communications and mobilising remote
working.
Throughout the year, the Incident
Management Team have remained in
situ to ensure adequate oversight of the
Bank’s response, and to ensure sufficient
reporting and escalation of issues to the
Executive Committee, Board and external
stakeholders.
The Incident Management Team has met
weekly since the onset of the pandemic.
As the situation escalated throughout
various stages of the year, the Incident
Management Team has supported a high-
frequency information sharing programme
among the Board, the senior management
team, and key external stakeholders
including our regulator, to manage and
mitigate specific issues related to the
Pandemic on a 24/7 basis. This programme
supported the Bank in demonstrating
agile, responsive and decisive leadership
at all stages as the pandemic evolved and
moved through different phases.
In addition, a COVID-19 response
resourcing forum was established to
optimise colleague resources to ensure
continuity of services for our customers.
Contingency resource plans were activated
at various stages throughout the year.
This forum demonstrated the agility of the
Bank and the flexibility of our colleagues
by creating highly effective mechanisms
to redeploy colleagues from their existing
roles to areas of the business that needed
temporary additional support.
Protecting And Supporting Our
Customers
Our Branches and Customer Contact
Centres
Throughout COVID-19, all 76 branches
have remained open to support and serve
our customers. In addition, we opened four
new regional hubs and redeployed over 100
staff to support in answering the increased
volume of customer queries coming
through our contact centre channels.
We enhanced hygiene measures across
all of our facilities and introduced new
social distancing practices to keep
our customers and colleagues safe.
Additionally, Permanent TSB introduced
priority in-branch hours to support our
elderly and vulnerable customers. We also
created a dedicated COVID-19 support page
on our permanenttsb.ie website to support
customers impacted by the pandemic.
Payment Breaks
Since the onset of the public health
restrictions in March 2020 we have provided
c.12,000 Payment Breaks to our personal
and business customers and circa 90%
of these customers have returned to full
repayments. We are now working to provide
support to those customers that need it
most, working with them on a case-by-
case basis to put in place a solution that
reflects their individual circumstances. As
has always been the case, payment breaks
will continue to be part of the wide range of
solutions offered to customers, as suited to
their needs.
Following the blanket payment break
approach, which was an appropriate
response that reflected the environment
in the early months of the pandemic, we
believe that a case-by-case approach is in
the best interest of our customers, as this
allows both the customer and the Bank
ensure that the solution in place best suits
a customer’s individual circumstances. For
example, for customers with certainty of
future income, we are offering restructure
arrangements based on what they can afford
and with the intention that they will return to
full repayments over an appropriate period of
time. For customers who have no certainty
of future income at present, we are offering
shorter-term alternative arrangements
(c. 9 months) to help with their immediate
challenge, while working with them to assess
their financial circumstances with regular
ongoing interactions and individual one-to-
one engagements.
Giving Back
To give back to our customers during these
unprecedented times, we provided unlimited
10c cashback payments on debit card
transactions for Explore Current Account
customers for the months of April, May
and June 2020. Through our GoRewards
programme, we also offered €5 back for
customers when they spent €30 in any
supermarket during April 2020.
Additionally, we increased the contactless
payment limit to €50, reducing the need for
physical interaction and helping to keep our
customers safe.
Protecting and Supporting Our
Colleagues
The Bank placed a high priority on measures
that recognised the enormous commitment
9
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Covid-19
(continued)
demonstrated by our colleagues to serving
customers face-to-face and through our
digital and phone channels throughout
what has been a protracted period of
uncertainty.
Certainty Of Pay
To support the health and wellbeing of
our colleagues, Permanent TSB made
a commitment to paying all employees
from the onset of the pandemic through
to the end of May in the event they were
impacted by COVID-19 and unable to work.
This certainty of pay for colleagues, which
was subsequently extended throughout
2020, provided peace of mind and security
for those who were directly impacted by
COVID-19.
Remote Working
Over a ten day period throughout March,
the Bank enabled remote working for over
1,200 colleagues. Through the following
weeks and months, we rolled out new video
conferencing technology and provided
staff with ample guidance on the use of
new remote working technology tools
and information security while working
from home. All colleagues working from
home were also provided with a working
from home kit including technology and
facilities equipment. Colleagues who were
able to work from home continued to do so
throughout the remainder of the year.
Health And Wellbeing
Given the nature of this crisis event, we
took significant action to ensure the health,
safety and wellbeing of our workforce for
those working both on and off-site, this
included:
•
Introducing a COVID-19 support page on
our internal intranet, Connect.
• Curating resources, tips and tools with
a focus on Health, Safety and Wellbeing
through COVID-19.
• Rolling out ‘Learning To Adapt To
COVID-19’ courses on our online learning
portal, Compass, including a ‘Safety At
Home’ learning module for colleagues
working remotely.
• Putting in place a network of trained
COVID-19 Safety Representatives across
all sites.
•
Increasing frequency of cleaning and
sanitation across our branch network
and office buildings.
• Upgrading all buildings with queue
management systems, social distancing
protocols and signage.
• Providing Personal Protective Equipment
(PPE) for colleagues in all locations.
10
• Rolling out ‘Working From Home’ Kits.
•
Introducing a virtual home work station
assessment programme.
• Launching a ‘Checking In And Staying
Connected’ survey to understand what
additional supports our teams required
through this period of uncertainty.
• Setting up a Colleague Assistance
COVID-19 Helpline and extended our
Employee Assistance Programme to
now include our colleagues’ immediate
families.
Enhancing Our Operational
Resilience
Operating Model
In responding to the challenges brought
by COVID-19, the Bank implemented
changes to its operating model in early
2020, particularly with respect to Ways
of Working, so as to protect the wellbeing
of our customers and colleagues while
maintaining a focus on continued
operation of all services. The changes
overseen by the Incident Management
Team and supported by a team of full-
time resources included the enablement
of a Work From Home (WFH) solution for
over 1,200 colleagues, and the splitting
of teams performing business critical
activities across multiple sites.
A major focus for us throughout the crisis
has been that our critical IT Systems are
monitored, protected and proactively
managed to ensure that the mission
critical processes of the Bank continue
to operate without issue. This was a
key priority as it goes to the heart of
building trust with our customers and key
stakeholders at a very sensitive time.
Furthermore, we engaged closely with
all suppliers to ensure their ability to
continue supporting the Bank and have
created groups of contingency resources
to support key customer-facing areas in
the event of localised issues emerging,
such as a site specific outbreak.
The steps taken by the Bank, have
endured through the period since
implementation and the Bank continues
to encourage those colleagues who can
work from home, to continue doing so,
while those supporting critical services
are based across our branch network and
key administration buildings. Steps have
also been taken to prepare the workplace
for the safe return of colleagues to on-
site working for when the time and COVID
environment allow for this.
Cyber Security
Our Information Technology Security
Team constantly monitors cyber security
threats, horizon scanning, investing
in infrastructure and implementing
preventative measures when required. To
support our colleagues in navigating the
online world in a safe and responsible way,
the Bank continues to invest in learning
and development programming, with all
employees completing a compulsory cyber
security learning module in 2020.
The Bank recognised that COVID-19
presented a period of heightened cyber
risk and our operational response has been
stepped up accordingly. This has included:
• Reviewing and bolstering our remote
working platforms from a security,
capacity and resilience perspective.
• Enhancing the performance and security
of the remote access endpoints to
ensure effective security patching and
anti-malware management.
• Undertaking phishing simulations and
cyber/other activities to evaluate and
improve our response to these scenarios.
•
Increasing our focus on education and
awareness for staff in ‘safe and secure’
work practices (from home).
• Elevating the levels of monitoring for
critical IT systems/services and cyber
activity, as reported to the Incident
Management Team weekly.
• Ensuring continuity of the Bank’s ‘Secure
and Resilient’ investment programme
across our core IT infrastructure,
including telecommunications, computer
environments and storage systems.
Enhanced Oversight And Reporting
It was critical that the Bank had a clear
picture of the impact of COVID-19
on the Bank’s overall performance.
Commencing in March 2020, the Bank
increased monitoring and reporting to the
Executive Committee (ExCo), Board and
stakeholders, to ensure the continued
operation of critical services. This included:
• Process Performance
• System Operational Performance
• Resource Availability
• Third Party Reliance and Performance
In addition, the Incident Management
Team developed the Incident Impact
Dashboard to monitor key metrics across
our colleagues (people data), customers
(contact centre and complaints data) and
resilience (tech performance data).
Permanent TSB Group Holdings plc - Annual Report 2020 Market Context
Retail Banking Trends in Ireland
The COVID-19 pandemic is reshaping how
people live and work and, accordingly,
is having a significant impact on the
Irish retail banking industry. This can be
evidenced through: changing customer
behaviour; challenging economic
environment; technological disruption; and,
competitive and regulatory pressures.
Prior to 2020, ‘lower for longer interest
rates’ had been putting pressure on the
interest income of banks. This has been
compounded by the pandemic impacting
the incomes of many customers and
decreasing the overall demand for
retail lending in the market. Banks have
supported thousands of customers though
offering payment breaks. At the same
time, many other customers have not
experienced an impact on their income and
have, in fact, grown their savings through
2020. This has resulted in banks having
excess deposits, lower than predicted
lending, reduced profitability and higher
credit loss provisions. In this context, banks
are shifting their focus towards reducing
costs, optimising retail deposits and
growing non-interest income.
The pandemic has accelerated the ongoing
customer shift towards digital channels
and contactless payments over six months
that may otherwise have taken several
years. This can be evidenced from PTSB
customers’ channel usage which shows
60% reduction in cash transactions, 92%
customers using Contactless payments,
c.50k new Apple Pay users in a week since
its launch, etc. National lockdowns and risk
aversion to social contact has encouraged
many more customers to use digital
channels, despite their previous hesitancy
in using this medium. Use of digital
channels has increased amongst both
younger and older customers. It is unclear
whether these behaviours are permanent
shifts.
It is expected that Fintechs, tech giants and
players from other industries will continue
to enter the financial services market
and challenge the loyalty of banking
customers by offering more customer
centric products and better customer
experience. The pandemic has enabled
banks to demonstrate their existing digital
capabilities to their customers, while
also providing an opportunity to close
the digital capability gap with Fintechs
through accelerating digital transformation
programmes. Broadly speaking, the
near-term objectives of established
banks are different and complementary
to the objectives of new digital entrants.
Banks are seeking to improve their ability
to innovate in order to attract and retain
customers; while new digital entrants are
seeking to acquire a customer base and
develop a distribution model through which
to serve. This increases the possibility
of both increased competition and
collaboration in the future.
Regulatory focus, globally and in Europe,
is increasing in areas including: consumer
data protection; cyber security; facial
recognition; artificial intelligence; and
cryptocurrencies. Regulations like Open
Banking, which open up access to
customers’ banking data to third parties,
are likely to lead to more partnership
opportunities for incumbent banks with
Fintechs and may result in the creation
of an improved API based ecosystem.
Regulators will continue to monitor banks’
handling of borrowers in financial distress
while ensuring the resilience of the
financial systems is maintained.
To conclude, while headwinds will continue
to exist in the banking industry for the
foreseeable future, the present moment
offers an opportunity for Irish Banks to
transform their business models in order to
deliver on customer needs by meeting their
expectations in a profitable manner.
SME Banking Trends In Ireland
The last year has been challenging for
small business owners, with many requiring
temporary support during the COVID-19
pandemic and others busy preparing for
the post-BREXIT environment. The recent
rise in unemployment and fall in domestic
demand has undermined confidence and
reduced borrowing demand, while the long-
term economic outlook remains uncertain.
Excluding financial intermediation and
property-related sectors, the Central
Bank reported a 10% reduction in new
SME lending to €3.2bn for the year to
June 2020 and a 10% reduction in total
outstanding amounts to €13.1bn. While
total outstanding amounts had been
declining, the new lending trends had been
positive before the pandemic. Despite this
contraction in the market, Permanent TSB
has continued to grow its business lending
activity through the period while providing
timely support to borrowers in financial
difficulty. The Bank increased both its
new SME lending and total outstanding
amounts by 14% during the year and the
business lending portfolio is well spread
across industry sectors. We continue to
invest in our capabilities. During 2020 we
increased the number of business lending
specialists and enhanced our digital
channels, including the November launch
of online applications for Future Growth
Loans provided in partnership with the
Strategic Banking Corporation of Ireland.
Additional new products are planned for
2021 to further satisfy the banking needs
of SMEs across Ireland. We are confident
that the strength of our proposition and the
additional investment we have made in our
capabilities will generate continued growth
in business lending during 2021.
11
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Our Strategy, Business Model and Culture
Our Purpose
To work hard every day to build
trust with our customers –
We are a community serving a
community
Our Ambition
To be Ireland’s Best Personal and
Small Business Bank
Our Strategic Vision For 2023
Permanent TSB’s Strategic Vision for 2023 has been developed with our customers at
its heart, and in consideration of all other stakeholders (i.e. our Colleagues, Shareholders,
Investors, Regulators and the broader Irish community). It can be articulated through: 1.
Our Business Model, i.e. ‘what’ the organisation will look like in 2023; and, 2. Our Strategy,
i.e. ‘how’ we’ll get there.
i. Our 2023 Business Model – The ‘What’
Digitally-Led
An opti-channel approach, with
digital capabilities on key sales
and service customer journeys.
Routine Services on Digital
Channels
Everyday, routine transactions
will transition to digital channels
and be available at a time that is
convenient for our customers.
Nation-wide
Physical Footprint
A continued physical presence
in our communities in Ireland,
helping our customers in person
when they need our sales
support.
Right Products, Right Price
The right products, at the right
price, with strong market shares
in our target segments.
Our Strategy
Introduction
Under the leadership of our new CEO,
the Bank’s Strategy was reviewed and
rearticulated in 2020. The Strategy that
has been developed builds on the strong
foundations that have been laid in recent
years, while providing a new level of focus
and direction in key strategic areas. The
Bank’s Strategy, when executed in full,
will support delivery of the Bank’s revised
Purpose and Ambition:
Developing The Bank’s Strategy
The Integrated Planning Process (IPP)
is an annual process, which considers,
on an integrated basis, the Bank’s
Strategic Plan, Financial Plan and Budget,
Funding Plan, Internal Capital Adequacy
Assessment Process (ICAAP), Internal
Liquidity Adequacy Assessment Process
(ILAAP), Recovery Plan and Risk Appetite
Statement (RAS); it is the primary vehicle
through which the Bank’s Strategy is
reviewed and updated.
By undertaking this process on an annual
basis, the Bank is in a position to review
and flex its priorities on the basis of
changes in the external market or internal
environment. Most notably in 2020,
this has included the global impact of
COVID-19 and its impact at a local level on
PTSB’s existing and potential customers.
Input during the Strategic Planning
Process is invited from subject matter
experts from all areas of the business. The
Process only commences following the
approval of the Bank’s RAS, facilitating a
clear, risk aware culture during strategy
development, and ensuring that the Bank’s
Strategy Development Tracking & Insights
Team and all Business Unit level strategies
are developed within the strict boundaries
set out in the RAS. In addition, the
Medium Term Plan (‘MTP’ – the financial
articulation of our strategy) is tested
against the RAS, to identify potential or
likely breaches, with the outputs of this
being shared with Senior Management and
the Board.
12
Permanent TSB Group Holdings plc - Annual Report 2020 ii. Our Strategy – The ‘How’
If Our Business Model defines the ‘What’
of our Strategic Vision, Our Strategy
defines the ‘How’. The core activities and
capabilities required to achieve our target
Business Model can be summarised as
follows:
Secure, Resilient &
Accessible Digital
Platform
Operational
Excellence & Risk
Management
Enhanced Focus On:
Mortgages
SME
Core Servicing Journeys
Superior Customer
Experience
Superior Data
Analytics & Economic
Segmentation
Strategic Pillars For 2021-2023
To ensure that the Bank’s Strategy is focused, ambitious, and easily communicable to
all stakeholders, a set of Strategic Pillars is developed by Senior Management. These
Pillars represent the key themes in the Bank’s overarching Strategic Vision for 2023.
Underpinning all of our Strategic Pillars is a commitment to strengthening our Information
Security and Operational Risk capabilities, ensuring the ongoing protection of our
Customer and Colleagues’ data, and maintaining robust systems and processes.
The Strategic Pillars for 2021-23 are:
STRATEGIC PI LL AR S 2021 - 2 023
CUSTOMER
DIGITAL
CULTURE
SIMPLIFICATION
PROFITABILITY
Increasing Trust,
Advocacy & Loyalty
among Customers
Enhancing Digital
Capabilities
Embed an Open,
Inclusive, Risk
Aware & Growth
Culture
Simplying our
Business
Growing
sustainable
Profitability
13
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Our Strategy, Business Model and Culture
(continued)
Our Strategy Brought To Life
Over the coming years, our Strategy will be executed through a series of high priority Strategic Programmes, aligned to our Strategic
Pillars.
Strategic Pillars
Our Strategic Ambition Per Pillar
2020 Achievements
Superior Customer Experience
2020 Achievements:
• Deep understanding of our customer base, with
• €1.28bn in new Mortgage lending in 2020
Customer
Increase Trust,
Advocacy and
Loyalty Amongst
‘Customers’
defined strategies for key segments
• Propositions which meet our customers’ needs,
supported by fair and transparent pricing
• A recognised and trustworthy brand in the
market
• Optimised mix of sales and service channels
• Efficient and effective customer
communications
• €48m in new SME lending in 2020
Payments & Lifestyle Banking
2020 Achievements:
• Giving our customers control over their lifestyle
• Launch of Apple Pay in November 2020
and banking needs
• Align benefit received by customers for services
offered to the fees and charges associated with
those services
• Support the implementation of the Bank’s
Payment Strategy and identify additional
opportunities to provide an enhanced payments
service to our customers in a manner that
generates value for the Bank
• Commencement of Google Pay and P2P Pegasus
commitments
• S149 prepared and approved for personal and
business accounts
Digital Banking
2020 Achievements:
• Market leading digital propositions for Mortgage
• New digital journey for Business Banking
Digital
Enhance Digital
Capabilities
and SME Banking customers
• Digitisation of selected front and back-end
customer journeys, for benefit of both customers
and colleagues
• Enhanced analytical capabilities to support
improved customer engagement and generate
customer-focused insights
customers, supporting new partnership with SBCI
Future Growth Loan Scheme
• End-to-end Overdraft application process in App
Culture
2020 Achievements:
• All colleagues are empowered to develop as
• Rollout of LIFT Ireland ‘Living As Leaders’
leaders
programme to c.600 Colleagues
Cultural
Embed an Open
and Inclusive
Growth Culture
• A mind-set of accountability and risk awareness
is fostered in all teams, and at an individual level;
senior leaders recognise significance of own
accountabilities
• Diversity is celebrated and encouraged; a culture
of openness is embedded throughout the Bank
• Obtained the ‘Business Working Responsibly Mark’,
awarded by Business In The Community Ireland
14
Permanent TSB Group Holdings plc - Annual Report 2020
Strategic Pillars
Our Strategic Ambition Per Pillar
2020 Achievements
Simplification
Simplify Our
Business
Enterprise Transformation
2020 Achievements:
• Sustainable future-fit digitally connected,
• Formal launch of Enterprise Transformation
customer centric organisation
Programme Bank-wide in November including:
• Colleague’s skills and capabilities are aligned
• Launch of Voluntary Severance Scheme with
to the right future-fit organisational, digital and
property structure for PTSB to deliver on Our
Purpose and Ambition
Enhanced Terms
• Launch of Smarter Working Options to support
future Ways of Working
Operational Excellence
2020 Achievements:
• Automated processes and sub-processes will
reduce manual risk and provide efficiencies
• Greater automation and new capabilities to
streamline processes and reduce customer call
times
•
Introduction of Online SFS, accompanied by
enhanced SFS by phone options
• Launched new Customer Correspondence
Management tool, which will be a key enabler for
migration to digital correspondence
Asset Management
2020 Achievements:
• Assets managed in a way which protects and
• Agreed sale of €1.2bn Buy-To-Let (BTL) Portfolio in
generate value for the Bank
October
• Sustainable capital maintained on an ongoing
• €125m raised through issuance of AT1 bonds in
basis
November
Profitability
Grow Sustainable
Profits
Cost Transformation
2020 Achievements:
• Cost-aware culture embedded at all levels of the
• Launch of ‘Project Titan’, large-scale non-payroll
organisation, with real savings realised
cost transformation programme
Information Security & Operational Resilience
2020 Achievements:
• Modern and enduring information and
• Enhanced cyber security testing campaigns run
Information
Security &
Operational
Resilience
technology systems and processes embedded
across the Bank
• Long-term security of all customer and internal
data as a primary focus for the organisation
and completed in H2
• Establishment of Cloud Centre of Excellence
15
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Our Strategy, Business Model and Culture
(continued)
Managing Risk Through Our Strategy
Business Model
Description
Economic activity nationally and globally will continue to be
adversely impacted by COVID-19 and Brexit throughout 2021,
with the macro-economic environment outlook remaining
uncertain. From a financial perspective, the Bank will continue
to see and be required to respond appropriately to significant
cost and capital challenges.
People and Culture
Description
The success of an organisational strategy and the delivery of
fair and transparent outcomes for all customers is predicated
on having a strong organisational culture. An ineffective
organisational culture can result in poor outcomes for
customers, unethical behaviours and increased attrition, all
of which contribute to negative reputational impacts and
excess costs (e.g. legal fees, regulatory breaches, increased
recruitment etc.)
Regulatory Compliance
Description
Ever increasing regulatory expectations throughout the financial
services sector continue to challenge Permanent TSB’s ability
to ensure full compliance, while delivering on its strategic
ambitions. COVID-19 has increased the obligations in this
space, for example through the implementation of Payment
Breaks during 2020. Failure in this space would be of significant
consequence to PTSB, from a financial and overall viability
perspective.
16
Mitigation Through Our Strategy
2020 has proved to be exceptionally challenging, with COVID-19
impacting on the Bank’s ability to generate organic capital as a
result of restricted new lending. Through its revised Strategy,
the Bank is focused on ensuring its Business Model is fit for
the future and sustainable. An enhanced presence in the
SME sector provides diversification in what has previously
been a heavily mortgage focused Bank. The Titan and
Enterprise Transformation Programme will ensure that costs
are reduced in a manageable way, while maintaining a strong
physical presence in the Irish market, and retaining top talent
in the organisation. A strong commitment to our customers,
as evidenced through the Superior Customer Experience
programme, will ensure that we both attract new customers to
the Bank, as well as enhancing existing customer relationships,
with defined segmental strategies and customer focused
propositions.
Mitigation Through Our Strategy
PTSB has invested heavily from a cost, time and resource
perspective to ensure a diverse, inclusive and risk aware culture
is embedded and maintained throughout the organisation.
‘Culture’ is one of the Strategic Pillars for the organisation,
ensuring it will be a key focus for Senior Management and all
Colleagues. The Bank’s People Strategy is focused on to: Ways
Of Working; Organisational Design; and Leadership Behaviours.
Employee Engagement and Experience is tracked through
regular staff surveys and feedback, and in 2021, industry
benchmarks will be used to assess PTSB’s relative performance
in the market.
In addition, a significant programme of activity has been stood
up in preparation for the Senior Executive Accountability
Regime (SEAR), with further detail on requirements expected to
follow in 2021.
Mitigation Through Our Strategy
PTSB has made a firm commitment in its strategy to continue
to comply with all regulatory requirements. There is a renewed
focus on identifying requirements in a timely manner, through
an upstream reporting process. In addition, a ‘Regulatory &
Mandatory Programme’ has been established under which all
key Regulatory and Compliance related programmes of activity
can be executed, tracked and reported on in a similar manner to
the Strategic Programmes set out previously. In 2020, the Bank
has taken strides to open pro-active, on-going communication
channels with the Central Bank.
Permanent TSB Group Holdings plc - Annual Report 2020 Cyber Security
Description
Cyber fraudsters continue to pose a threat to all sectors, not
least Banking and Financial Services. COVID-19 has provided
further opportunities for committing cyber fraud. In addition,
a move towards Cloud based capabilities presents new and
unknown challenges for Banks. Failures in cyber-security
could impact both the Bank and its customers, financially and,
perhaps most consequentially, from a reputation and trust
perspective.
Changing Customer Behaviours
Description
Based on their experiences in other sectors, and the emergence
and increasing prevalence of Fintechs, customers’ expectations
and behaviours are changing in relation to their banking
experience. Increased digitisation and the option of banking at
the most convenient time for the customer will soon be seen
as minimum requirements for banks. If customers’ changing
behaviours are not addressed, we could expect to see increased
customer attrition, and difficulty in attracting new customers.
Increased Competition
Description
Developments in the Fintech space and Payment Services
Directive 2 (PSD2) regulation have lowered barriers to entry into
the financial services market, leading to increased competition
for new business, and challenging our ability to retain existing
customers.
Mitigation Through Our Strategy
Establishment of a Strategic Programme on ‘Information
Security and Operational Resilience’ will provide an increased
focus on the threat of cyber security, and other Technology
related risks. A specific ‘Cyber Security Strategy Roadmap’
will be executed within this Programme, which includes:
a Vulnerability Management Improvement Programme;
Information Security Awareness communications; and, ongoing
investment into developing a secure and resilient banking
environment.
Mitigation Through Our Strategy
The ‘Customer’ and ‘Digital’ Strategic Pillars, underpinned by our
Superior Customer Experience and Direct and Digital Banking
Programmes are heavily focused on meeting the changing
names of our customers, in a sustainable and profitable way.
Significant progress has been made to date and continues to be
made on offering enhanced, digital customer journeys for both
sales and service activities. In addition, as we move forward,
new customer propositions will be developed with customers’
needs at the forefront of decision making. The 2023 ambition of
an ‘opti-channel’ experience will allow our customers to bank in
a way that is most appropriate for them.
Mitigation Through Our Strategy
Each element of our strategy will enhance PTSB’s ability to
respond to the ever increasing competition in the Irish financial
services sector. Our strategy builds on the areas where we
feel we have an existing competitive advantage: our 200 year
heritage in Ireland; our smaller scale and local presence, which
enables us to develop deeper, personal relationships with our
customers; and, our support for customers in their home buying
journey. Where appropriate to do so, we’ll seek to work with
Fintechs to enhance existing and future capabilities, rather
than viewing them explicitly as our competitors. In addition,
our relentless focus on being a safe, secure and resilient
organisation from an IT and Data perspective will provide
comfort to our customers that new competitors may be unable
to provide.
17
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Our Strategy, Business Model and Culture
(continued)
Our Ambition: To becomes Ireland’s best personal and small business bank.
To be Ireland’s
best personal
and small
business bank
To work hard
every day to build
trust with our
customers
We are a
community
serving the
community
Customer
Digital
Culture
Profitability
Simplification
Customer Focus
Open
Straightforward
Courageous
United
In tandem with the re-purposing of the Bank, our ambition was also re-orientated to
reflect our aspiration to best serve our personal and small business customers to further
build trust. We have a long history of supporting customers and communities, and our
new Purpose and Ambition builds upon this legacy. We are an inclusive and adaptive
organisation which personifies our Values of Customer Focus, Courageous, United, Open
and Straightforward that underpin the delivery of our Purpose and Ambition. We live our
Purpose and Ambition by our Values and Behaviours each and every day:
Our Values
Customer Focus
Courageous
United
Open
Lived Every Day Through Our Behaviours
Customer Care and Compassion Always
Courageous, Every Day
United, One team, One PTSB
Open, Every Voice Matters
Straightforward
Straightforward, Keep it Simple
Embedding our Purpose, Ambition and Values in the way we do things will be the key to
our success. Our new Purpose is resonating with our colleagues across the Bank, and we
are continuing to make progress in evolving our culture as evident from the increase in
both our colleague engagement scores and business performance. A further indication
of our progress and level of colleague engagement are the annual colleague-voted
recognition awards, the Values in Practice Awards (VIPs). Now in their fourth year, the
VIPs received 938 nominations in 2020, almost doubling the nominations received in
2019.
Our Culture – Bringing the Lived
Experience to Life
Our Purpose and Values
2020 marked the beginning of a new
chapter of leadership for Permanent
TSB, in our over 200 year history, with
the launch of a new Purpose for the Bank
as set out by our CEO, Eamonn Crowley.
Continuing the cultural evolution, which
has been underway since 2015, this new
Purpose reflects our origins which are
rooted in the building society and Trustee
Savings Banks movements of long
ago, and are firmly anchored within our
communities and the customers that we
serve every day.
Our Purpose:
To work hard every day to build trust with
our customers – we are a community
serving the community
A great culture starts with a Purpose;
one that is sourced from values, orients
our decision making and is expressed
in our actions and products. Our Values
are at the core of our culture. While a
Purpose sets out a clear reason for being,
our Values offer a set of guidelines on
the behaviours and mind-sets needed to
achieve that Purpose and Ambition. To
bring the Purpose and Ambition to life, a
series of virtual face-to-face events were
held by the CEO with every business unit
and function across the Bank, to share our
new direction and focus, and to ensure that
every colleague understands our culture,
the ‘PTSB Way’, and the importance of
building trust with our customers.
Although there are many definitions of
organisational culture it is, in essence,
the collection of values, expectations
and practices, supported by strategy
and structure that guide and inform the
actions of all team members. Culture
epitomises the characteristics that make
an organisation what it is, as a dynamic,
colleague-powered concept. We have
long since recognised the importance
and influence of a great culture in driving
improved performance, and it has been
a key area of focus for the Bank over the
last number of years. At Permanent TSB,
our goal for cultural transformation was,
and is, not for 180° change but to preserve
those positive aspects of the culture
that makes us unique, whilst altering any
habits and behaviours that impede both
the re-building of trust in the Bank and the
delivery of Purpose and Ambition.
18
Permanent TSB Group Holdings plc - Annual Report 2020 Culture Evolution in 2020
Since 2015 and the approval in principle
of the Bank’s Restructuring Plan, evolving
the culture of Permanent TSB has been
a core area of focus. Following a number
of separate culture based initiatives in
the intervening period, Permanent TSB
set-up a universal Organisation Culture
Programme in 2018, with the objective of
bringing the Bank’s culture to life across
the organisation. With representation from
all areas of the Bank, a comprehensive
programme of 65 actions was developed
and implemented, delivering significant
cultural progress and culminating in the
closure of the Behaviour and Culture Audit
and Diversity and Inclusion Assessment
Risk Mediation Plan by the Central Bank
of Ireland in December 2019. In 2020 our
focus shifted to adopting and embedding
our cultural improvements achieved under
the programme back into the business via
our culture strategy of Leading at Every
Level.
In continuing our cultural journey, we
identified the opportunity to create
a strong emotional connection to
our Purpose, through our Values and
Behaviours, by harnessing the inherent
personal leadership traits of all colleagues,
which resonates at every level of the
organisation. Through our Leading at
Every Level Programme our cultural
evolution is being delivered through
three cultural pillars; Living as Leaders,
Promoting the Customer, and Quality
Communications. In considering our Risk
Appetite in 2020 we re-designed our
approach to culture measurement, evolving
from our Culture Scorecard to a dynamic
culture diagnostic to support transparent
tracking, measurement and reporting of
Engagement, Culture and electronic Net
Promoter Scores (eNPS) on a sustained
basis.
Living As Leaders - One Conversation
at a Time
Our Purpose is to work hard every day to
build trust with our customers, to ensure
that we live up to our promise of being a
community that serves the community.
At Permanent TSB we believe that our
Purpose and Values are meaningless if
we are not living them authentically in our
behaviours and actions every day; both
at an individual level and collectively as
an organisation. The consistent actions
and behaviours of everyone every day
is essential to create a better future for
colleagues, customers and communities.
In our goal to create better leaders we
have partnered with LIFT Ireland (Leading
Ireland’s Future Together) to launch our
‘Living As Leaders’ programme, which
aims to promote and encourage the right
behaviours across all levels within the
Bank ‘One Conversation at a Time’. LIFT
Ireland (www.liftireland.ie) is a Not For
Profit Organisation with a vision to make
Ireland a better place to live by creating
better leaders across our society and in our
communities. Every colleague across the
organisation will have the opportunity to
participate in this Leadership Programme,
the first of three voluntary waves of
Leadership Roundtables commenced
in October 2020, involving over 100
Permanent TSB hosts and over 600
colleagues.
In continuing to listen to the voices and
ideas of our colleagues, a new People
Experience Council was established with
representation from right across the
organisation, with a mandate and suite of
accountabilities aligned to the Executive
Committee to drive cultural initiatives
functionally.
Speak Freely
As an organisation, we seek to have a
Speak Freely culture where it is safe and
acceptable for all to raise any concerns that
they may have about practices, processes
or behaviours that do not meet these
standards or align with our Purpose. During
2020 our goal has been to ensure that
our Speak Freely Procedure, which was
relaunched in July 2019, is fully embedded
across the Bank at all levels, ensuring our
colleagues feel psychologically safe and
empowered to use their voice. Our Speak
Freely Procedure, protects colleagues
who wish to raise a concern, or to make a
protected disclosure, relating to an actual
or potential wrongdoing in the workplace.
Speak Freely focuses on encouraging
colleagues to raise a concern via a number
of different channels, and ensures that they
can do so without any fear of retribution or
penalisation.
As part of our embedding plan in 2020 we
took a number of actions, to educate, track
and highlight examples of Speaking Up in
the workplace, including:
CULTURE
SPEAK FREELY
Change behaviour. Start the conversation.
I want to support the Bank in creating an environment of trust and
mutual respect, where colleagues know it is safe to raise any concerns,
and trust that those concerns will be investigated and dealt with
efficiently and effectively – A Bank Where Everyone Can Speak Freely.
My pledge of support will mean that:
•
•
•
•
•
I will take responsibility for my own behaviour, language and actions;
treating others the way I want to be treated.
I will speak out about things that just don’t feel quite right, including
processes, behaviours, ‘banter’ and actions.
I will treat all colleagues with dignity, respect and compassion; valuing
and respecting all differences.
I will listen to a colleague if they have a Speak Freely concern and help
them to raise it through the appropriate channel.
In doing so, I will speak up to a Manager or a Speak Freely Champion
(or other Speak Freely Channels as appropriate) if I see/ hear
inappropriate behaviour, actions or processes that negatively impact
the customer.
I will make a difference. I will be part of changing the Bank for the good of
all. I will play my part to change behaviour and to start the conversation.
NAME:
SIGNED:
19
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Our Strategy, Business Model and Culture
(continued)
• Training all People Managers and Speak
Freely Champions on Speak Freely and
Protected Disclosure procedures
• Completion of Code of Ethics Training
by all colleagues which included further
awareness and a focus on Speak Freely
• Shared regular monitoring and reporting
on Speak Freely concerns to the Board
• Sharing of Speak Freely Management
Information with colleagues and the
launch of a bank-wide Speak Freely
survey and focus groups
• Supporting the one year anniversary of
Speak Freely, a spotlight series aimed
to promote Speak Freely and educate
colleagues on the simplicity of raising a
concern was launched
To encourage the mind-set shift from
colleague awareness to action and
personal accountability, the Speak Freely
Pledge was launched across the Bank.
Endorsed by the Board, the ExCo and
the Senior Leadership team, the Speak
Freely Pledge invites colleagues to be part
of creating an environment of trust and
mutual respect, and provides colleagues
with a way in which they can show support
for Speak Freely.
Living Our Culture Through COVID-19
Permanent TSB has always taken pride
in how it has supported colleagues,
customers and communities. However, it
is in times of crisis, that you see the true
character of an organisation. Throughout
the pandemic, we have supported, and
continue to support our customers, our
colleagues and the communities which
we serve, listening to their concerns and
showing understanding and compassion
for their circumstances. During this
crisis, we have heard many wonderful
stories of colleagues going above and
beyond to support customers and each
other, providing the best examples of us
living our culture. By working together
we provided a vital service for our
customers and the wider community,
underpinned by our commitment to look
after both the welfare of our colleagues
and to support our customers in a fair,
humane and reasonable manner. This
year has presented challenges like no
other, however throughout the year the
Permanent TSB Community has come
together stronger than ever to deliver for
our customers and our communities.
20
Whilst work was in process to develop
new Ways of Working and our Smart
Working Framework, COVID-19 expedited
its delivery for our colleagues, with in
excess of 47% of colleagues moving to
working from home during the pandemic.
Our new Ways of Working were mobilised
across the organisation integrating People,
Process, Property and Technology to
enable Smart working, with extensive
engagement with all colleagues through
two Sentiment Survey’s (April and August
2020), Senior Leadership Team Sentiment
Calls and Working from Home / On Site
Survey’s to support the sustainability of
Permanent TSB through COVID-19 and
beyond. The Sentiment Surveys included
statements relating to Culture, Leadership
and Compliance and Standards which
have remained high, and stable compared
with the April survey, demonstrating
a consistent and positive view from
responding colleagues in terms of how,
as an organisation, we have adjusted, and
supported our colleagues, customers and
communities.
Re-building Trust in the Banking
Industry
In 2020, as one of the five member banks,
Permanent TSB continued it’s active
contribution to and support of the Irish
Banking Culture Board (IBCB) and its
programme of work, to help re-build trust in
the banking sector through demonstrating
a change in behaviour and overall culture.
The strategy of the IBCB is based on
positively changing culture in the industry,
with a focus on customers, colleagues and
society. The Bank has supported colleague
participation in IBCB workshops and has
adopted the DECiDE (Ethical Decision
Making) framework, as part of our Code
of Ethics. Set up in 2018, the IBCB is an
independent industry initiative, established
and funded by the five retail banks in
Ireland, with the aim of rebuilding trust in
the sector through demonstrating a change
in behaviour and overall culture.
Our Culture Ambition 2021
In supporting the delivery of our Purpose
and our Ambition our Culture Ambition
2021 is to grow a Diverse and Inclusive,
Risk Aware, Growth Culture. Our key
activities to continue our culture evolution
will include:
• Living As Leaders: Continuing the
roll-out of our Living As Leaders
Programme, embedding our new Culture,
Values and Leadership Behaviours, one
conversation at a time in partnership
with LIFT Ireland.
• Customer Focus - Building trust-based
relationships with customers with due
care and consideration always.
• Speak Freely - Creating psychological
safety by promoting early awareness,
action and personal accountability
supported by regular reporting.
• Diverse & Inclusive – Fostering an
environment and culture where
colleagues can be themselves and which
values every voice and view as we seek
to move further along the Diversity
and Inclusion maturity curve from
‘awareness’ to ‘integration over the life of
the strategy.
• Risk Awareness – Continuing our Risk
Aware focus with colleagues providing
them with the right supports and tools
integrating risk awareness into all
aspects of our behaviour.
• Wellbeing – Developing a resilient and
productive workforce, where colleagues
are supported to bring their best selves
to work.
• Strong Stakeholder Engagement –
Continuing proactive engagement
with all our stakeholders to align our
colleagues, customers and communities.
• Culture Measurement – Leveraging our
culture diagnostic to deliver actionable
insights to support the delivery of our
Purpose and Ambition.
Our new Purpose centers on building trust
with our customers and connecting with
our 200 year community heritage, as
we continue to rebuild trust and make a
difference in our customer’s lives. As we
look towards 2021, and our culture journey,
we are committed to delivering the right
strategy, the right talent, the right structure
and the right culture to best serve our
customers - we are a community serving
the community.
Gender Gap
In Ireland, the government plans to
introduce legislation for mandatory gender
pay gap reporting for business. This will
obligate businesses to publish statutory
calculations each year showing the extent
of the pay gap between what women earn
as a group and what men earn as a group.
At Permanent TSB, we are committed
to creating a diverse and inclusive, risk
aware, growth culture. We believe in being
Permanent TSB Group Holdings plc - Annual Report 2020 We are making a visible commitment to the
advancement of women in leadership in
order to achieve a greater gender balanced
and inclusive working environment.
We remain confident that all colleagues
are paid equally for doing equivalent roles
across Permanent TSB and that equal pay
is not a contributing factor to our gender
pay gap.
We know from our analysis that our pay
gap is largely driven by the fact that there
are more men in senior roles within the
business, and this is an area of focus for
Permanent TSB. 37% of senior leadership
roles are held by women and we are
committed to achieve greater gender
balance and inclusivity through our HR
practices.
Improving the gender balance across
Permanent TSB is a priority and something
to which our Board is committed. We
are making progress. Improving our
gender balance will take time and require
sustained focus over the long term. Our
plan for 2021 is to further progress on our
committed plan of action, with specific
focus on improving the representation
of females at the Executive and Senior
Leadership levels across Permanent TSB.
* Data used for this analysis as at 31 October 2020
including employees only
transparent about our gender pay gap and
the journey we are on. As a purpose driven
organisation, diversity and inclusion is a
core pillar of our culture. Evidence shows
us that diversity can lead to improved
outcomes in terms of governance,
decision-making, and productivity.
Permanent TSB is voluntarily publishing
our gender pay gap of 14.9%, which
has improved by 0.5% since 2019. The
nationally reported gender pay gap is 14.4%
in Ireland. While it compares favourably to
the reported mean pay gap of 31.9% in the
financial and insurance sector in the United
Kingdom in 2019, we acknowledge we have
more to do. Permanent TSB is committed
to taking action and we have put in place
an action plan which focusses on four key
pillars of activity:
Leadership Development
Focused Inclusive Leadership
Development Initiatives to ensure we have
a gender balanced and inclusive mix of
talent, attending leadership development
programmes to support their career
development.
Smart Working Practices
Promote and role model New Ways of
Working, such as reduced hours, home
working, compressed hours, to enhance
flexibility and work life balance, aimed
at attracting and retaining diverse talent
across Permanent TSB.
HR Policy enhancements
Set ambitious Diversity and Inclusion
targets for all aspects of People Practices
across the organisation to drive better
balance leading to a more inclusive work
environment.
Promoting our Employee Resource Group –
Better Balance Network.
Better Balance Network to set up a Female
Leadership Network Bank-wide as one of a
suite of initiatives, supported by members
of our ExCo, our Senior Leadership Team
and allies at all levels across Permanent
TSB who advocate for the benefits of
inclusion.
At an organisational level, Permanent
TSB is promoting Diversity and Inclusion
through our partnership with Work Equal
and pledging our commitment to the
Women in Finance Charter, Better Balance
for Business and continued support of
the 30% Club and Ernst & Young’s (EY)
Triple Female Fast Forward Mentoring
programme.
21
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business
Responsible
And
Sustainable
Business
People have always been at the heart of our business. Permanent TSB has
a long history of supporting our customers and communities and we are
committed to building upon this legacy.
Through our commitment to Responsible and Sustainable Business we are
focused on delivering on our purpose of working hard every day to build trust
with our customers and playing an active role in communities across Ireland’.
Eamonn Crowley,
Chief Executive Officer
Highlights
Permanent TSB is proud to have had a positive and meaningful impact on
local communities in 2020
COVID-19
5
Supporting our customers, colleagues
and communities through COVID-19
new Community Fund Partners
c.€700,000
in financial contributions to Irish
community organisations in 2020
Ó Cualann
A partnership with Ó Cualann Cohousing
Alliance, contributing €350,000 over
three years to support the development
of affordable housing schemes in
communities across the country
The Mark
Achievement of the Business Working
Responsibly Mark from Business in the
Community Ireland
10%
reduction in carbon emission intensity in
2020 (55% reduction since 2009)
Our Commitment To Building A
22
Permanent TSB Group Holdings plc - Annual Report 2020
Responsible And Sustainable Business
Permanent TSB has a long banking
history in Irish communities, with roots
that stretch back over 200 years to the
building society and Trustee Savings
Bank movements. Throughout this
time, our focus has been on delivering
exceptional customer service and
connecting with our local communities.
Our experiences over two centuries
shape our culture and influence how we
do things today and we are committed
to continuing this long tradition through
our Responsible and Sustainable
Business Strategy. This Strategy is
built around four pillars – Customers,
Colleagues, Community and
Environment – for which the following
overarching objectives have been set:
• Delivering personal customer
experiences and fair outcomes that
set us apart.
• Making Permanent TSB a great place
to work for our colleagues by creating
a diverse, inclusive and supportive
working environment, where our
people feel engaged and valued, and
are given the tools they require to be
the very best they can be.
• Having a positive and meaningful
impact on the communities in which
we live and work.
• Minimising the impact of our
business on the natural environment
by reducing our environmental
footprint.
As we move into the next phase of
our journey, our focus is on long term
sustainability, the role that the Bank
will play in tackling climate change
and supporting the transition to a low
carbon economy.
Sustainability
Given the increased focus on
sustainability not only in Ireland, but
around the world, the Bank commissioned
EY to conduct a comprehensive
sustainability assessment of Permanent
TSB in 2020.
The comprehensive assessment covered
a number of topics including; climate risk,
carbon impact, supporting the transition
to a low carbon economy, setting
science based targets, green products
and services, sustainable procurement,
developments in the regulatory landscape,
reporting and alignment with disclosure
frameworks, and everything in between.
It highlighted the things we are doing
well across the organisation but more
importantly, provided insight into our
areas of opportunity; the places where we
can focus our attention to drive change
and deliver lasting impact.
Following the EY assessment, the Bank
mobilised a Sustainability Committee
with representation from Senior Leaders
from every area of our business. The
Sustainability Committee operates
as a sub-committee of the Executive
Committee and reports progress into the
Nominations, Culture and Ethics Board
Committee at regular intervals throughout
the year.
Led by the Board, the Sustainability
Committee has commenced work on
turning the findings of the EY Report into
an action plan for the organisation. This
work will continue through 2021.
You can read more about our commitment
to climate change and supporting the
transition to a low carbon economy on
page 38.
The ‘Business Working Responsibly’
Mark
Following a comprehensive programme
of work, in 2020 the Bank was honoured
to receive the ‘Business Working
Responsibly Mark’ (The Mark) from
Business in the Community Ireland
(BITCI).
The Mark is an external accreditation
recognising best in class Responsible
Business Programmes in Ireland and as
such, the Bank now joins a prestigious
group of only 40 other companies who
have achieved this accolade.
As part of this accreditation, our CEO,
Eamonn Crowley will sit alongside the
CEOs of other member companies as part
of the Leaders Group on Sustainability
– a collaborative group who work with
key stakeholders to drive Environmental,
Social and Governance (ESG) change
across the country.
We will continue to work alongside
BITCI to develop our Responsible and
Sustainable Business Programme in the
years that lie ahead.
Materiality
Permanent TSB takes a number of
factors into consideration when assessing
materiality and, thereby, where to
prioritise resources for its Responsible
and Sustainable Business activity.
These include, but are not limited to; our
business model and strategy, principal
risks, sectorial issues, public policy and
regulation, and the impact of our activities
on wider society.
In 2021, we will engage with stakeholders
to complete a comprehensive materiality
assessment of our Responsible and
Sustainable Business Programme.
This assessment will offer insights
on the relative importance of specific
Environmental, Social and Governance
(ESG) issues and will assist us as we build
out our Sustainability Strategy.
The following is a summary of progress
made under each of the four pillars of
the Bank’s Responsible and Sustainable
Business Programme in 2020.
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Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business | Customers
Customers
Our ambition is to be Ireland’s best personal and small business bank. Best
doesn’t necessarily mean the biggest, but it does mean being the best at
what we do for both our personal and small business customers. We are
committed to understanding our customers and delivering what matters
most to them through every stage of their financial journey.
Highlights
€30 million
7,000
committed to branch refurbishments in
our Retail Network, introducing the latest
technology and enhancing our customer
service offering
financial reviews completed last year,
supporting customers in taking control of
their financial future
c.€100 million
invested in digital transformation, allowing
us to better serve our customers through a
channel of their choosing
c.100 million
logins on our digital channels in 2020
c.€48 million
in SME lending, including a new partnership
with the SBCI providing €50 million in
funding to Irish SMEs
+8 Relationship Net
Promoter Score*
A customer brand tracking survey
carried out in December 2020 indicated a
Relationship Net Promoter Score* (RNPS) of
+8, up four points on last year and placing
Permanent TSB in second position among
the retail banks in Ireland.
*A Relationship Net Promoter Score (RNPS)
is a measure of customer advocacy towards
a brand and indicates the willingness of
a customer to recommend a company’s
products or services to others. The question
asks customers how likely they are to
recommend their bank to friends or family on
the basis of their own experience. The range
for the scoring is -100 to +100
24
Permanent TSB Group Holdings plc - Annual Report 2020 Supporting Customers Through
COVID-19
COVID-19 has affected all of us – our
families, our business, our communities,
and ultimately, the way we do business.
Permanent TSB is fully committed to
supporting our customers, colleagues
and communities through these
unprecedented times. In early 2020,
proactive measures were undertaken
to protect the health and welfare of
customers and communities, with all 76 of
our branches remaining open to continue
providing a critical service.
The Bank will continue to work closely
with the Government, Regulators and
other authorities and play our part in
supporting Ireland’s recovery.
For more on our COVID-19 response for
customers, please visit page 9.
Rewarding Our Customers Through
COVID-19
The onset of COVID-19 was a national
emergency and the Bank recognised an
opportunity to encourage our customers
to pay using their card as a safer payment
option, and go contactless where possible,
to help slow the spread of the virus.
Because our Explore Current Account
is built around the concept of rewarding
customers, it gives us great flexibility to
do just that – reward our customers when
they need it most.
With that in mind, in March 2020 the
Bank announced a new rewards incentive
linked to our Explore Current Account. As
part of the initiative, all Explore customers
received payments of 10 cent for every
purchase they made using the card
(including contactless) during the months
of April and May.
To support our response further,
customers signed up to the GoRewards
programme linked to all of our Current
Accounts received €5 cash back when
they completed a grocery shop to a value
of €30 or more at any supermarket in the
Republic using their card, both online and
in store during the month of April.
The initiatives built on the move by all the
retail banks in Ireland to raise the limit
for contactless transactions from €30
to €50 and were well received – seeing
Permanent TSB pay more than €1.1m in
cash and rewards to customers.
Evolving Our Culture For Our
Customers
Our ambition to be Ireland’s best personal
and small business bank is only possible
if we continue to work hard every day to
build trust and transform our culture for
our customers.
In addition to our own focus on culture
improvement, Permanent TSB is also
actively involved in improving culture
across the banking industry as a member
of the Irish Banking Culture Board
(IBCB). The IBCB, which operates as an
independent body chaired by Justice
John Hedigan, helps to ensure the
industry is focused on fair outcomes for
our customers and employees, thereby
rebuilding a sustainable banking sector.
The IBCB Board includes representation
from all five of the Irish Retail Banks.
For more on our commitment to evolving
our culture, including the actions we took
in 2020, please visit page 18.
Vulnerable Customers
Permanent TSB is committed to
understanding the needs of our vulnerable
customers, ensuring that they are not only
considered in the financial products and
services we provide, but through every
stage of the customer journey. With a
focus on continuous improvement, the
Bank has processes and procedures
in place to support our vulnerable
customers.
In 2020 the Bank implemented a new set of
principles, our Vulnerable Customer Guiding
Principles, to enable us both to further
support the needs of our customers who
may be vulnerable and to provide guidance
and support to our colleagues.
Following the onset of COVID-19, a range
of additional supports were mobilised
for our vulnerable customers in order to
provide appropriate access and support.
Actions taken include:
• The mobilisation of a cross functional
working group focused on developing
appropriate supports for vulnerable
customers
• The introduction of priority banking
hours across our Retail Network
• The launch of priority banking hours
through Open24, with specialist agents
trained to assist
• The implementation of a third party
withdrawal process in branch for those
customers cocooning at home
• The rollout of communication
campaigns to drive awareness for
colleagues on such items as fraud
prevention, financial abuse and
details of advocacy support groups for
vulnerable customers
• The release of the Safeguarding Ireland
Guide for Customers Cocooning at
Home in collaboration with the BPFI
We look forward to building on this
programme of work in 2021, with a
comprehensive programme of work
planned that is focused on enhancing our
service offering and removing barriers for
our vulnerable customers, while ensuring
that our colleagues are equipped will
the skills they need to better serve our
vulnerable customer cohort.
Permanent TSB is an active member of
the BPFI’s Vulnerable Customer Forum.
Encouraging Financial Wellbeing
At Permanent TSB, we recognise that we
have a responsibility to enable financial
wellbeing among our customers.
As part of our partnership with Irish Life,
all customers are offered a free financial
review, focused on supporting them in
making informed financial decisions. The
financial health check is undertaken by
Irish Life and was traditionally completed
by making an appointment at any of
our branch locations nationwide. Given
the impacts of COVID-19, in 2020 we
moved consultations to virtual channels,
completing nearly 7,000 financial reviews
to support customers in taking control of
their financial future.
Providing Responsible Products And
Services
Our purpose is to work hard every day to
build trust with our customers – we are
a community serving the community. In
order to deliver on our purpose, we are
focused on developing trusted banking
relationships with customers through:
listening to what they have to say;
developing products that matter most to
them; and, delivering a great customer
service experience, whether that be in
our network of branches, through our
customer service centres, online or via
mobile.
Examples of our commitment to
enhancing customer experience include
the introduction of a Voice of the
Customer Programme, our focus on digital
transformation, the continued investment
into our Branch Network and our
commitment to supporting our Business
Banking customers.
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Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business | Customers
Listening To Our Customers And
Acting On Their Feedback
In 2020, Permanent TSB launched a
customer listening programme called Voice
of the Customer (VOC), designed to give
our customers a voice and create a channel
for two-way communication and feedback.
VOC enables us to collect customer
feedback from everyday interactions in our
Customer Contact Centres, Retail Network
and Digital channels in real time and turn
that insight into action.
The data received from the VOC surveys
provides the Bank with a valuable look
at what we are doing well, but more
importantly, highlights the areas of
opportunity available to improve both our
customer service offering and processes.
VOC feedback is reported weekly to key
stakeholders, including our customer
facing teams, Senior Leadership Team and
ExCo.
Evolving Our Digital Service
Customer behaviour is changing.
Customers want the ability to interact with
us at a time and place that works for them,
and through the optimal channel.
The onset of COVID-19 in early 2020
accelerated the pace of change for our
customers and the way they interact with
us has fundamentally changed:
• 72% of customers are now choosing to
bank using online channels
Digital Support Through COVID-19
• The increase of contactless payment
limits to €50, encouraging contactless
as a safer payment option
• The introduction of a COVID-19 Hub on
permanenttsb.ie
• The implementation of an online portal
to facilitate Mortgage and Term Loan
Payment Breaks for more than 12,000
customers
• The mobilisation of four new regional
contact centres to further support in
answering customer queries
Digital Support For Our Customers’
Everyday Banking Needs
• The introduction of Apple Pay
• The launch of video banking, the first of
its kind in Ireland
• The implementation of in App overdraft
application capability
• Transformed secure customer login
to App, removing the complexity of
passwords
• Digital documentation upload
functionality
• The roll out of identity verification and
document uploader technology
• The introduction of Artificial Intelligence
(AI) technology, with a chat bot pilot
underway
• c.500,000 active users of Open24 Web
and App in 2020
Digital Support For Our Business Banking
Customers
• c.100 million logins on both Open24
• The introduction of digital supports
Web and App in 2020
• 81% of our Term Lending applications
are now being completed online
• 92 million contactless payments made
by Permanent TSB customers last year
Personal service will remain at the heart of
everything we do. However, as customer
needs have changed so profoundly, digital
is playing an ever increasing role in our
service offering.
for our Business Banking customers,
including the development of a digital
portal to support credit applications
through our partnership with the SBCI
Digital Support Across Our Workplace
• The retrofitting of our branches to
include the latest in digital technology
• The deployment of a new digital
collaboration platform to enable more
agile ways of working
Permanent TSB has embarked on a
four year journey to deliver a Digital
Transformation Programme, investing
c.€100 million in digital transformation.
• The roll out of digital workplace
technology to enable our colleagues to
support our customers when working
remotely
The programme of work is well underway
and significant progress was made last
year in enhancing our customers’ digital
offering. Actions taken include:
These new service offerings allow us to
support our customers further, allowing
them to bank in a way that is both flexible
and secure. We look forward to building
on this momentum with further rollouts
planned for the year ahead.
Investing In Our Branch Network
Following a significant upgrade of our
flagship Grafton Street location in 2018,
we have continued the investment into our
Retail Network, committing more than €30
million in funding to transform our branches
– allowing us to adapt to changing customer
behaviour and better serve our customers
via a channel of their choosing.
Our refurbished branches now have
enhanced digital capabilities, including:
digital marketing screens that reduce our
reliance on print marketing; iPads with
supporting phone lines into our customer
service centre, Open24; state of the art,
purpose-built customer meeting areas; and,
the latest Automated Teller Machine (ATM)
and Single Supervisory Mechanism (SSM)
technology.
In addition, the Bank introduced additional
ATM functionality that allows us to now
accept cash and cheque lodgements
across many branches in our network. This
follows feedback from both customers
and colleagues, and has been a welcome
addition to our service offering through
COVID-19. The introduction of new ATM
technology is ongoing.
This continued investment in our Branch
Network supports us in delivering on our
ambition to be Ireland’s best personal and
small business Bank. We look forward
to building on this momentum with the
refurbishments of Ennis, Co. Clare and
Portlaoise, Co. Laoise planned this year.
Supporting Our Business Banking
Customers
Permanent TSB’s refreshed Business
Banking strategy is focused on partnering
with small businesses, not just in terms of
supporting their banking needs, but through
acting as advisers to help them to grow.
In 2020, we announced a major expansion
of our SME offering by partnering with the
SBCI to provide €50 million in low-cost
loans under the Irish Government’s Future
Growth Loan Scheme for SMEs.
Through the partnership, SMEs will benefit
from lower borrowing rates and more
attractive borrowing terms as the loans
will be 80% guaranteed by the SBCI, which
was set up by the Irish Government to
enhance access to low-cost finance for
SMEs through banks and other lenders. To
support the partnership, the Bank launched
a new digital journey to help SMEs avail of
SBCI lending through an online portal.
26
Permanent TSB Group Holdings plc - Annual Report 2020 • Continuing to track customer
transactions likely to be impacted by
FTR changes as part of our regular
business practices
The Bank was also part of a joint Banking
and Payments Federation of Ireland (BPFI)
proactive national awareness campaign,
urging Irish businesses to check important
changes to direct debit processing as
Brexit approached.
We continue to work alongside our
customers as we navigate the period of
uncertainty in the weeks and months
ahead. Brexit is now part of the regular
engagement we have with our business
banking customers, and is reflected in all
credit submissions which refer to the risks
associated with Brexit and actions taken
by business to mitigate against those risks
into the future.
Reducing Our Mortgage Rates For
Both New And Existing Home Loan
Customers
In an effort to combine enhanced
competitiveness in the market with
increased fairness for our customers
in 2020, the Bank announced changes
to our fixed and variable home loan
mortgage interest rates, benefiting more
than 70,000 new and existing home loan
customers. The updated offering goes a
long way to addressing the discrepancy
which traditionally existed between our
pricing for new and existing mortgage
customers and is a demonstration of our
purpose in action.
We will continue to evolve our mortgage
pricing strategy in this direction as we
move forward.
Responsible Marketing And
Research
All marketing and communications
activity in the Bank is guided by
regulation, including the Consumer
Protection Code 2012, the Advertising
Standards Association of Ireland (ASAI)
Code 7th Edition and, the values and
operating principles set by the Association
of Irish Market Research Organisations
(AIMRO).
27
The partnership has proven successful,
and we expect the €50 million in funding
to be fully drawn during Quarter 2 this
year, demonstrating our commitment
to supporting our SME customers,
backed by our strong commitment to the
communities in which we operate.
Additional actions taken to support our
Business Banking customers in the last
year include:
focused on putting the necessary
supports in place for our customers
through a suite of ‘Getting Brexit-Ready’
communications.
In addition, we introduced dedicated
supports for both our personal and
business customers via our website and
mobilised a range of other activity to
ensure that our customers were ‘Brexit-
Ready’. These included:
• The launch of a partnership with Digital
• Writing to customers potentially
Business Ireland (DBI), supporting
our SMEs to migrate their business to
online channels through the supports
offered by DBI
• The introduction of Apple Pay for our
Business Customers
• The recruitment of sector and market
expertise to help us further support our
customers
• The sponsorship of the Small
Firms Association (SFA) National
Business Innovator of the Year
Award, encouraging innovation and
driving new business in what was a
challenging year for SMEs
In 2021, we are committed to going
further, with a dedicated programme of
work planned which will include a focus on
digital innovation and the introduction of
new products and services.
Guiding Our Customers Through
Brexit
Permanent TSB is committed to
supporting our customers and assisting
them in navigating Brexit and preparing
for the future. During 2020, we were
impacted by additional information
requirements for Direct Debits and
Credit Transfers coming from the UK
•
•
Implementing technical enhancements
to ensure that all the required
information was contained within the
payment files in respect of payment
transactions from Permanent TSB to
the UK
Issuing proactive communication to
the most impacted business borrowers
by sector, location and debt level
• Delivering a suite of digital ‘Getting
Brexit-Ready’ communications through
our website, SMS and social media
channels
•
Introducing dedicated phone lines for
customers seeking additional Brexit
support
• Offering all customers borrowing in a
business capacity the option of a credit
facility review
• Providing impacted borrowers the
option of temporary payment breaks
and/or increased overdrafts
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business | Colleagues
Colleagues
The Bank’s ambition to be Ireland’s best personal and small business
bank is only possible if we create a diverse, inclusive and supportive
environment where our colleagues feel engaged, valued and are given the
support that they need to be the best they can be.
Highlights
3 out of 4
employees say that they are proud to
work for Permanent TSB
3 training days
delivered per employee in 2020
More than 85%
of employees feel comfortable to be
themselves at work regardless of
background or life experiences
88%
of our employees understand the Bank’s
Purpose and Values
c.200 colleagues
received an Institute Of Banking (IOB)
accreditation, with more than 900
employees enrolled in banking education
programming
c.1000 nominations
to our Values In Practice (VIP) Awards,
Permanent TSB’s colleague recognition
programme. Award nominations were up
100% on 2019.
28
Permanent TSB Group Holdings plc - Annual Report 2020 Supporting Colleagues Through
COVID-19
The COVID-19 pandemic has affected
all of us. Together, we have faced a truly
unprecedented situation and undoubtedly,
it has been a challenging time for our
people.
At the onset of COVID-19, the Bank was
focused heavily on providing a quick
response for colleagues, providing our
people with certainty of pay, extending
our Employee Assistance Programme
service offering to include our colleagues’
immediate families, introducing a
COVID-19 helpline and enabling over 1,200
of our colleagues to work from home.
For more on our COVID-19 response for
colleagues, please visit page 9.
The health, safety and wellbeing of our
colleagues remains our number one
priority and we are focused on continuing
to support our people through this period
of uncertainty.
Ways Of Working
As we work to renew and rebuild the
Bank for the future following the onset of
the global pandemic, it is critical that we
continue to evolve the organisation to be
dependable, capable and relevant. As part
of the next phase of our journey, the Bank
has embraced the introduction of smarter
and more flexible ways of working for
colleagues at all levels of the organisation.
In 2020, Permanent TSB introduced a
Smarter Working Programme to enable
optionality and more flexible ways of
working for colleagues, while encouraging
the use of a broader range of technology.
The range of Smarter Working Options
available to colleagues include: reduced
hours; job sharing; compressed hours;
sabbaticals and career breaks; home
working or working from an alternative
office location.
We will continue to assess and evolve our
colleague offering, and corresponding
policies, supports and technology, with
a view to ensuring that we are driving
openness and collaboration, while
delivering optionality for our people.
Listening To Employees And Acting
On Feedback
The Every Voice Counts Employee
Engagement survey is conducted at
regular intervals and is designed to give
our people an opportunity to provide
feedback on what is working well across
the organisation, while identifying areas
for improvement.
In 2020, we introduced a new diagnostic
tool based on a five point Likert Scale,
enabling us to assess culture, colleague
engagement and trust at regular intervals
through a holistic approach.
Permanent TSB’s 2020 Every Voice
Counts survey results showed that we
increased our Culture Index by 7% to
72%, while our new Engagement Index
registered at 71%, which compares
strongly against industry standards. A
selection of our employee survey results
include:
• 3 out of 4 employees trust Permanent
TSB to do what is right, 1.4% higher
than global benchmarks
• 3 out of 4 employees feel engaged in
the company and are proud to work for
Permanent TSB
• More than 85% of employees feel
comfortable to be themselves at
work regardless of background or life
experiences
Employee feedback from the Every Voice
Counts results also identified three areas
of opportunity for the Bank: Supports
And Tools (which will be delivered
through new ways of working); Living As
Leaders (through which we commit to
deepening our colleagues’ understanding
of behaviour aligned to our Values); and,
Communication And Recognition.
With a focus on continuous improvement,
the Bank is focused on addressing the
feedback and has implemented action
plans across the business.
Through COVID-19, the Bank recognised
the importance of checking in and staying
connected with our colleagues.
To get insight into how our people were
dealing with the period of uncertainty, and
to enable us to learn more about how we
could support them further, the Bank ran
two additional ‘Checking In And Staying
Connected’ Colleague Sentiment Surveys.
A section of the results can be found
below:
• 97% of remote-working employees felt
that Permanent TSB was dealing with
COVID-19 effectively
• 90% of on-site employees felt that
Permanent TSB was dealing with
COVID-19 effectively
• 98% of employees felt that Permanent
TSB cared about customer wellbeing
and thought we were doing everything
we could to support our customers
To further support the above, we
conducted numerous colleague sentiment
calls to check in with our people and also
introduced additional ‘Working From
Home’ and ‘Working On Site’ surveys
at different intervals to ensure that the
right supports were in place to enable
our people to continue to bring their best
selves to work.
Supporting Career Development
Permanent TSB has in place a Career
Development Framework (CDF) to support
our colleagues on the job learning and
development. The framework offers the
tools and techniques both to support our
employees in developing their careers
within Permanent TSB and to enable the
realisation of full potential.
The Bank’s learning and development
philosophy is focused on self-
development, on the job experience and,
formal online and classroom training.
900 employees enrolled
in banking education
programming
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Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business | Colleagues
Investing In Growing Our People
Permanent TSB recognises that both
personal and professional training and
development of the workforce plays a
critical role in delivering on our purpose and
ambition.
With a clear focus on equipping our people
with the skills and behaviours necessary to
adapt and thrive in the changing financial
services landscape, the Bank provides
training, education and personal and
professional development opportunities
to our colleagues at all levels of the
organisation. Our people are supported
both financially and with study leave in
order to pursue professional qualifications
and to assist in their career development.
We are recognised as approved employers
by the Association of Chartered Certified
Accountants, Chartered Accountants
Ireland and the Chartered Institute of
Management Accountants, and have been
recognised at a national level for excellence
in learning and development in financial
services.
Living As Leaders
We believe that the consistent actions
and behaviours of everyone, every day is
essential in creating a better future for one
another and for our Bank.
With that in mind, in 2020, Permanent TSB
were proud to partner with LIFT Ireland
to launch an innovative new Programme,
called ‘Living As Leaders’, which aims
to promote and encourage the right
behaviours across all levels within the
organisation.
LIFT Ireland is a Not For Profit Organisation
with a vision to make Ireland a better place
to live by creating better leaders across
our society and in our communities. LIFT’s
philosophy aligns closely with that of
Permanent TSB’s, as they believe that each
of us is a potential leader; whether that is
within our families, our schools, our sports
teams or our businesses. LIFT believe that
by developing personal leadership qualities
within each individual, we can develop a
generation of stronger and better leaders.
More than 600 colleagues took part in
the Living As Leaders Programme last
year; embracing a growth mind-set and
being open to improving how they do
things for themselves, our customers and
our communities. The Living As Leaders
Programme will continue into 2021.
For more in Living As Leaders, please visit
page 19.
30
Creating A High Performance Culture
The Bank’s Performance Management
Strategy is designed to cultivate an
environment in which employees are:
valued, developed and motivated to use
their talents to the best of their ability;
empowered to perform at their best; and,
provided with regular coaching and open
two-way feedback. Performance for each
employee is evaluated under three criteria:
• What You Do
• How You Do It
• How Your Role And Performance
Delivers The Bank’s Strategic
Performance Priorities
To complement this, the Bank has in
place a set of core competencies for all
colleagues, relevant to their role within the
business. These competencies are aligned
to our Organisational Values - Courageous,
United, Straightforward, Customer Focus
and Open – and describe the mind-set
and behaviours required for all colleagues
within the Bank. The competencies are an
integral part of our career development
framework, supporting our colleagues’
development and on the job career growth
trajectory.
Permanent TSB has in place an online
performance management system,
Performance COMPASS, to encourage
quality conversations and to streamline
the completion of the performance
management process.
Pay And Reward
The Bank has a Pay and Reward Policy
which targets base pay to an acceptable
range around the market median. This
policy is reviewed on a regular basis,
including assessing the competitiveness
of total reward arrangements against
market norms and taking account of State
agreements.
The Bank is committed to ensuring the
ongoing alignment of remuneration
with our overall business strategy and
sustainability objectives, by linking
pay outcomes directly to individual
performance (what our colleagues achieve
but also the manner in which they achieve
it), and how their contribution strengthens
both our shared culture and the long term
sustainability of our business.
Values In Practice Awards
The Bank’s employee recognition
programme, the ‘Values In Practice’ or ‘VIP’
Awards, recognises employees from across
the organisation that are living the Bank’s
Values and are positively impacting the
business.
In 2020, c.1,000 nominations were
received, up 100% on 2019, with
representation from all parts of
the business. In addition to our five
‘Values’ categories, the Bank included
two additional award categories, the
Community Impact Award and the Living
As Leaders Award, recognising those
who are having a positive and meaningful
impact on the communities where they live
and work, and those who consistently live
all five of our Values each and every day.
Diversity And Inclusion
Permanent TSB is an equal opportunities
employer committed to creating a
professional environment in which
our employees feel valued, included
and empowered to succeed in their
career, regardless of gender, age, sexual
orientation, race, religion, ability/disability,
background or life experiences.
In 2018, we launched our Diversity and
Inclusion Strategy to support the above
ambition, with a vision to evolving our
level of maturity from ‘compliance’ to
‘awareness’ on the EY Global Maturity
Model.
Actions we took in 2020 include:
• The launch of an Equality Through
Diversity and Inclusion Charter
• A full review of our HR Policies through a
Diversity and Inclusion lens
• An accessibility review of our premises
and customer processes
• Delivering comprehensive Diversity
and Inclusion training to all colleagues,
with an added layer of training for our
customer facing teams and those in
people management positions
• Launched Smarter Working Options to
enable greater flexibility
• Promoted a culture of psychological
safety through Speak Freely, our
channel for encouraging colleagues to
speak up and raise a concern
In November 2020, EY completed an
external diagnostic review of our Diversity
and Inclusion Strategy. The review
confirmed that the Bank had achieved
a maturity rating of ‘awareness’ on their
Permanent TSB Group Holdings plc - Annual Report 2020
Global Maturity Model and confirmed that
there has been a sea-change in both mind-
set and behaviour over the last two years.
In 2021, we will focus on further
implementing and embedding our Diversity
and Inclusion Strategy across all areas of
our business as we continue to focus on
evolving our maturity level.
Employee Resource Groups
To support the delivery of the Diversity
and Inclusion Strategy, the Bank has
set up a number of Employee Resource
Groups (ERGs), whose aim is to enable
employees to join together based on
shared characteristics or life experiences.
The ERGs help diverse groups obtain a
collective voice within the organisation
and serve as an organised and established
platform that our people can utilise to
promote change.
Gender Balance In The Workplace
Permanent TSB is a member of the 30% Club, a group of c.200 Chairs and CEOs
committed to better gender balance at all levels of their organisations. The Club’s
focus is on gaining visible and practical support for gender balance from business
leaders in private, public, state, local and multinational companies as well as other
interested groups.
The Bank is a member of Triple FS (Female Fast Forward – FS Women in Leadership)
and has actively championed women in leadership development through our
partnership with the Irish Management Institute (IMI). In addition, the Bank has in
place an Early Career Development Programme, supporting our female colleagues
who are only just beginning their career.
Permanent TSB supports Better Balance for Business, and played an active role in
the development of the BPFI’s Women in Finance Charter.
Analysis of our workforce by gender and type of contract is as follows:
Total Headcount At Year End
Analysis By Type Of Contract
Permanent
Fixed Contract
Analysis By Type Of Gender
Gender Analysis
Total
Senior Management
Part-Time/Job Sharers
2018
89%
11%
2018
Male
44%
72%
9%
*excluding Non-Executive Directors and Subsidiaries
2020
2,543*
2020
90%
10%
2020
2019
89%
11%
2019
Female Male
Female Male
Female
56%
28%
91%
47%
70%
12%
53%
30%
88%
47%
63%
10%
53%
37%
90%
Permanent TSB is an equal
opportunities employer
committed to creating a
professional environment
in which our employees
feel valued, included and
empowered to succeed
in their career, regardless
of gender, age, sexual
orientation, race, religion,
ability/disability, background
or life experiences.
31
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business | Colleagues
The WorkEqual Campaign
To further support the work of our
Diversity and Inclusion Strategy, in 2020
Permanent TSB announced a three
year partnership with the WorkEqual
Campaign, promoting gender equality in
workplaces across Ireland.
The WorkEqual campaign is Non-
Governmental Organisation (NGO) led
and aims to both raise awareness of
workplace gender inequalities and related
issues and develop solutions to address
them.
Throughout the month of November,
WorkEqual delivered a series of virtual
panel discussions entitled, ‘The Solutions
Series: a whole-of-society approach to
progressing gender equality’ covering a
range of topics from banishing gender
stereotypes and flexible working, to
increasing female representation in
leadership positions and was open to
anyone who wished to attend, free of
charge.
Our CEO, Eamonn Crowley, represented
Permanent TSB as part of the campaign
and spoke at the last event of the series
addressing female underrepresentation in
positions of leadership and the steps we
need to take to change the conversation.
With the increased challenges of
COVID-19, there has never been a more
important time for businesses across
Ireland to focus on addressing the barriers
to women’s and men’s full and equal
participation in the workplace, taking
direct and proactive steps to make this a
reality across society.
This is the responsibility of every
employer and we are proud to contribute
to this national effort, in partnership with
the WorkEqual campaign.
Health, Safety And Wellbeing
The wellbeing of our employees
throughout all stages of their career and
personal lives is of paramount importance
to us. As part of Permanent TSB’s
investment in employee wellbeing, we
offer a range of programmes and benefits
to assist and support our people.
As part of our Employee Proposition,
our people are provided with a range of
financial, physical and emotional health
and wellbeing programmes and benefits
as outlined:
In 2020, the Bank provided all colleagues
Wellbeing Offering
with a paid Wellbeing Day, encouraging
our workforce to take a day away from
the office to focus on their wellbeing. In
addition, we launched a new set of Mental
Health Guidelines to support our people in
managing their own mental health, and all
colleagues were provided the opportunity
to participate in comprehensive mental
health training.
The Bank has an Employee Health
Screening Programme that is made
available to all colleagues on an annualised
basis. We continued our commitment
to this programme by investing in a free
flu vaccination programme in October
in order to further safeguard the health,
safety and wellbeing of our people.
Physical / Emotional /Mental Health
• Health Screening
• Eye Testing
• Employee Assistance Programme For
Colleagues And Their Spouse, Adult
Dependent Children And Dependent
Parents (Counselling Service)
• Mental Health Training
• Resilience Training
Financial
• Pension Plan
•
Income Protection Benefit
• Sick Pay Scheme
• Staff Banking
• Cycle To Work Scheme
• Annual Travel Pass Scheme
• Employee Discount Scheme
• Lifestyle/Wellbeing Workshops
• Holiday Fund
• Work Station Assessments (Both In
• Life Stage Workshops
Office And At Home)
• Education Support
• Paid Maternity And Paternity Leave
• A Range Of Health And Wellbeing
Related Information Sessions
32
Permanent TSB Group Holdings plc - Annual Report 2020 Wellbeing Committee
The Bank has in place an employee
led Wellbeing Committee that includes
representation from all areas of the
business. Together, the committee focus
on areas of employee wellbeing and
support in the delivery of programming for
our colleagues, including:
• The introduction of an Employee
Wellbeing Homepage on our internal
intranet, Connect
• The mobilisation of Wellbeing Week in
October
• The roll out of the MyLife App,
dedicated to supporting employees to
manage their own wellbeing
• The launch of the ‘At Your Own Pace
Race Series’, a series of virtual running
events that engaged our colleagues
throughout the summer months, while
raising money for our Staff Charity
Partners
In response to the COVID-19 pandemic,
we took early action to ensure the health,
safety and wellbeing of our workforce. You
can read more about Employee Health,
Safety And Wellbeing Through COVID-19
on page 9.
The Bank has a safety statement
in place which documents how the
highest standards of Health and Safety
Management are maintained across the
organisation. The Safety Statement, and
associated policies and processes, have
been prepared in accordance with Section
20 of the Safety, Health and Welfare at
Work Act, 2005 (The Act). The Safety
Statement is reviewed on a regular basis
and is revised as necessary.
All employees receive
regular updates on
organisational matters
through a diverse range
of communication
mechanisms.
Representative Body Relationships
And Employee Consultation
Permanent TSB operates under an
established partnership model with our
formally recognised Representative Bodies
– Unite, Mandate and Services Industrial
Professional and Technical Union (SIPTU).
In addition, we meet with the Management
Association, which is affiliated to the
Financial Services Union (FSU) on a regular
basis in relation to items of interest to our
management population.
Company representatives meet with the
internal committees and the full time
officials on a regular basis. This allows for
matters to be discussed in a structured
way and provides an opportunity to deal
with anything that may arise at inception,
greatly increasing the chances of internal
resolution.
All material organisational changes,
including changes to terms and conditions
of employment (to the extent they arise),
are discussed and negotiated in advance
with the Trade Unions. Throughout the
COVID-19 Pandemic we increased our
communication frequency with our
Representative Bodies as we sought their
input to Health and Safety related matters
and to resolve any concerns arising as a
result of the pandemic.
All employees receive regular updates on
organisational matters through a diverse
range of communication mechanisms.
33
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business | Community
With a presence in more than 80 locations nationwide, Permanent TSB is
a local community bank whose purpose is to work hard every day to build
trust with our customers. We are a community serving the community and
our commitment to having a positive and meaningful impact in communities
across the country is a demonstration of that purpose in action. The
Bank engages with the community through building strong community
partnerships, providing financial support to local charities through the work
of the Staff Charities Fund and Permanent TSB Community Fund, and
through engaging employees in volunteering initiatives.
Community
Highlights
4
Community Partnerships;
• Social Entrepreneurs Ireland
• Ó Cualann Cohousing Alliance
• CyberSafeIreland
• Business In The Community Ireland
3
New Staff Charity Partners
5
Community Fund Partners
c.€700,000
in financial contributions to community
Chambers Ireland
Sustainable
Business Impact
Awards
Shortlisted in two Award Categories –
Leaders in Community (LIC);
• Excellence in Community – Partnership
with Charity: A Partnership with
Barretstown
• Excellence in Community – Community
Programme: Championing Social
Entrepreneurship, a partnership with
Social Entrepreneurs Ireland
c.€340,000
in charitable giving through the
Permanent TSB Community Fund and
the Staff Charities Fund, which included
matched funding by the Bank
34
Permanent TSB Group Holdings plc - Annual Report 2020 Ó Cualann Cohousing Alliance
In July 2020, Permanent TSB announced a three year partnership with Ó Cualann
Cohousing Alliance to support the agency’s work developing fully integrated, co-
operative and affordable housing schemes in communities across the country.
As part of the partnership, the Bank will provide €350,000 to Ó Cualann, which will
be used to fund the resources required to accelerate its development plans, building
more than 1,800 houses across Ireland over the next three years.
The Bank was delighted to welcome the Minister for Housing, Darragh O’Brien TD to
the launch of the partnership at Ó Cualann’s second development at Cranogue Islands,
Ballymun in Dublin.
The Ó Cualann Cohousing Alliance was founded in 2014 with the aim of providing
fully integrated, co-operative, affordable housing in sustainable communities. By
December 2018, all 49 houses of Ó Cualann’s inaugural project in Poppintree in
Ballymun were completed and handed over to residents.
Ó Cualann is a member of the Social Entrepreneurs Ireland Alumni Network and is an
SEI Impact Programme Awardee – a programme recognised as having the potential to
grow and scale its impact.
Changing Ireland: My Big Idea
– A Docuseries For RTÉ One
In Association With Social
Entrepreneurs Ireland
Permanent TSB entered into a five year
partnership with Social Entrepreneurs
Ireland (SEI) in 2017, contributing both
financial support – €375,000 over five
years – and also implementing an extensive
employee engagement programme
between SEI and employees of the Bank.
In March 2020, the Bank was proud to
support Changing Ireland: My Big Idea,
a six-part docuseries produced for RTÉ
One, in association with our community
partner Social Entrepreneurs Ireland. The
documentary followed some of the most
successful social entrepreneurs from
the Social Entrepreneurs Ireland Alumni
Network, showcasing the positive impact
that their work is having across the country
and detailing their journey from start-up to
scale-up.
The docuseries observed considerable
engagement in communities across the
country and provided the entrepreneurs a
platform to tell their story in a way that they
had not done before. Following its success,
Changing Ireland: My Big Idea aired a
second time on RTÉ One in September
2020.
The Community Fund
The Community Fund was established in
2019 to support communities by providing
funding to community organisations that
are having a positive and meaningful
impact on the ground and who are working
hard to make a difference.
With more than 20,000 votes cast by the
Irish public, in January 2020 the Bank
was proud to announce the Jack and Jill
Foundation, Arch Clubs, Aoife’s Clown
Doctors, Mallow Search and Rescue, Mayo
Roscommon Hospice and Milford Care
Centre as its Community Fund Partners for
the inaugural fundraising year.
Numerous fundraising events were
organised and managed by our colleagues
from around the Bank throughout the
year. All money raised was match funded
by the Bank, for an overall donation to our
Community Fund Partners of c.€130,000.
The Community Fund works in tandem
with Staff Charities, and through a
combined effort aims to contribute
c.€300,000 back into local communities
each year.
35
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business | Community
With that in mind, Permanent TSB was
proud to team up with CSI for the launch
of their first Cyber Break, which took
place in October.
Cyber Break, brought to you by the
Permanent TSB Community Fund, was
a 24 hour break for families to swap their
screens and devices for a day filled with
family fun. The campaign was observed
by c.5,000 school children in the CSI
network and saw significant engagement
by the Irish public across social media
channels and online platforms –
reaffirming the message that finding a
healthy balance when using technology is
imperative in this new digital era.
CyberSafeIreland is a member of the
Social Entrepreneurs Ireland Alumni
Network and is an SEI Impact Programme
Awardee – a programme recognised as
having the potential to grow and scale its
impact.
Staff Charities Fund
In 2020, Permanent TSB Staff Charities
donated €210,000 to local charities,
supporting the work of Make-A-Wish
Ireland, Pieta House and CyberSafeIreland.
The charities supported are nominated and
selected by Permanent TSB employees for
the fundraising year.
Numerous fundraising events were
organised and managed by our colleagues
from around the Bank throughout the year
including: Payroll Giving; the Annual Table
Quiz; At Your Own Pace Online Race Series
and Virtual Steps Challenges; together with
various local fundraising initiatives that are
driven by our teams in the Branch Network.
All money raised by employees is match
funded by the Bank.
Since its establishment, the Staff
Charities Fund has donated in excess of €1
million to Irish Charities, supporting local
communities across the country.
National Gallery Of Ireland
Permanent TSB is proud to support the
Arts through our partnership with the
National Gallery of Ireland. The Bank
supports Room 21, a newly refurbished
gallery in the historic wing, containing an
impressive display of Irish portraits and
landscapes.
CyberSafeIreland
Did you know that 93% of 8-12 year olds
own their own smart device, 65% are
on social media and more than 70% are
gaming online? Of these children, 31%
play online games with people they don’t
know and 30% of kids on social media
have friends or followers that they don’t
know in real life.
Our community partner CyberSafeIreland
(CSI) is a not-for-profit organisation that
focuses on works that empower children,
parents and teachers to navigate the
online world in a safe and responsible
manner. Whilst they recognise the many
benefits that technology use brings to
our everyday lives, they also believe it
is essential to find a healthy balance
when using technology; and, in particular,
equipping children and young people with
the tools to stay safe and avoid harm while
online.
36
Permanent TSB Group Holdings plc - Annual Report 2020 A Concert4Cancer Brought To You By
The Permanent TSB Community Fund
Now, more than ever, business has
a profound role to play in supporting
communities to navigate this new,
incredibly disrupted world and
transformed society. The impacts of
COVID-19 have been challenging for the
charity sector and the Marie Keating
Foundation is no different, as the provision
of vital cancer services were impacted
by the onset of a global pandemic. To
help support delivery of these critical
services, the Permanent TSB Community
Fund joined forces with the Marie Keating
Foundation for the Concert4Cancer event
in August 2020.
The Concert4Cancer featured a host
of national and international stars,
including Ronan Keating, Gary Barlow,
Nathan Carter, the Coronas, Kodaline and
Riverdance – raising more than €500,000
on the night, enabling the Foundation to
continue to provide a critical service to
the people of Ireland, at a time when they
need it most.
As cancer incidence continues to grow
across the country, there isn’t a family
anywhere that hasn’t been impacted,
either directly or indirectly. More than
43,000 new cases are diagnosed every
year, with 1 in 2 people being affected.
The Marie Keating Foundation is one of
the leading voices in Ireland for cancer
prevention, awareness and support.
Permanent TSB is proud to support their
commitment to being there for people
diagnosed with cancer, and their families,
at every step of their cancer journey.
Employee Volunteering
Permanent TSB has in place an
Employee Volunteering Programme and
corresponding Volunteering Policy. The
programme is driven by the Responsible
Business Steering Committee and
sees our colleagues from across the
organisation take part in the volunteering
initiatives affiliated with the Bank’s Staff
Charity Partners. Prior to the onset of
COVID-19, more than 500 volunteering
hours were provided on the ground in local
communities in Q1 2020, equating to c.
€12,100 of in-kind giving.
Feedback from our people is
overwhelmingly positive, with 100%
of participants saying that they would
recommend the Volunteering Programme
to a colleague.
The Responsible and Sustainable Business
Team and Staff Charities Committee
manage the engagement with both,
our charity and community partners,
and ensure that effective governance
is in place via the implementation of
comprehensive partnership agreements
as required. In addition, the Bank has
in place a Staff Charities Charter, a
document which governs how we engage
with charities, manage relationships
and includes processes for completing
effective due diligence at regular intervals.
Permanent TSB’s Chief Executive
receives regular updates regarding the
implementation of the Community Pillar
of the Bank’s Responsible and Sustainable
Business Strategy. Progress against Key
Performance Indicator’s (KPIs) is reported
upward to the ExCo and the Nominations,
Culture and Ethics Board Committee on a
quarterly basis.
37
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business | Environment
The Bank recognises our environmental impact and is mindful that making a
positive contribution to the economy through consideration of environmental
issues across each channel of our organisation is fundamental to running our
business in a responsible and sustainable way. In order to achieve this, we are
focused on managing climate risk, supporting the transition to a low carbon
economy and taking action to reduce our environmental footprint.
Environment
Highlights
100%
10%
Renewable electricity supply for the Bank
Reduction in Scope 1 & 2 carbon emission
intensity in 2020, -55% since 2009
Low Carbon Pledge
Signatory of Business In The Community
Ireland’s ‘Low Carbon Pledge’
A Focus On
Sustainability
A Sustainability Committee and
Permanent TSB Green Team
38
Permanent TSB Group Holdings plc - Annual Report 2020 Green Team
Permanent TSB has in place an employee
led Green Team, a cross functional
working group who together, work
on green initiatives and awareness
campaigns that support our green
agenda.
With the support of the wider
Sustainability Steering Committee, the
team are focused on environmental
programming across the following areas:
• Energy efficiency and transition to a
low carbon economy
• Use of resources and recycling
• Green procurement
• Biodiversity and green space
• Volunteering initiatives with an
environmental impact
• Communication and awareness
With a focus on continuous improvement,
the Green Team meet at regular intervals
inviting new ideas and encouraging new
ways of thinking.
Actions taken in 2020 to reduce our
environmental footprint are outlined
below.
Climate Risk
Given the increased focus on
sustainability, both in Ireland and around
the world, the Bank commissioned EY to
conduct a comprehensive sustainability
assessment of Permanent TSB in
2020. The comprehensive assessment
covered a number of topics, including: the
transition to a low carbon economy, green
products and services, the regulatory
landscape; responsible procurement; and,
perhaps most notably, climate risk and
the effect that it will have on all areas of
our business.
Following the assessment, the Bank
mobilised a Sustainability Committee
with representation from Senior Leaders
from each part of the organisation. Led by
the Board, the Sustainability Committee
commenced work on turning the findings
of the EY Report into an action plan for
the Bank across a number of dedicated
work streams.
This work will continue through 2021
and will cover the following in relation to
climate risk:
•
Integrating climate risk into
our existing Risk Management
Frameworks
•
Identifying activities and assets
exposed to climate related risks and
measuring impact, for example,
our suite of loan portfolios
• Assessing our value chain with a view
to limit our exposure and impact
• Monitoring the regulatory landscape
and aligning with reporting disclosure
frameworks
We are conscious of the effect that
climate change has on the Bank and
view it as manifesting itself in two ways,
firstly, through the operations of our
business and secondly the financial risk
it brings to the economy in the longer
term. Climate Change presents both risks
and opportunities to meet new customer
needs for Permanent TSB and we are
preparing for both.
You can read more about our commitment
to long term sustainability on page 23.
We are now
using 100%
renewable
energy
Energy Usage
Energy Consumption
Electricity - Total (Gwh)
Gas (Gwh)
Oil (Gwh)
Total Energy Consumption
CO2 Emissions (tonnes)
Average FTE
CO2 Emissions per FTE (tonnes)
2017
Gwh
9.1
2.1
0.1
11.3
4,100
2,437
1.68
2018
Gwh
9.2
2.3
0.1
11.6
4,283
2,416
1.77
2019*
Gwh
9.2
2.4
0.1
11.7
3,928
2,386
1.65
2020
Gwh
8.8
2.4
0.1
11.3
3,262
2,429
1.34
Estimates are used where actual data is not available *As restated
• Controlling our Head Office locations
by movement sensors, ensuring that
all our non-essential lighting remains
off when the areas are not in use
• Celebrating Earth Hour, raising
awareness and encouraging our
colleagues to reduce their energy
consumption both in the office and
at home
To further support the above, in 2017
Permanent TSB switched energy
provider and we are now using 100%
renewable energy.
Following an in depth piece of work,
Permanent TSB identified the use of
energy as the biggest contributor to our
emission intensity accounting for more
70%.
With this in mind, in 2020 we took
additional action to support our emission
reduction targets and to minimise the
impact that our business has on the
environment, including:
• Upgrading to energy efficient
Light-Emitting Diode (LED) lighting
across all our Head Office locations,
replacing more than 3,000 lightbulbs
across our business
•
Implementing LED lighting across our
branch network as part of our ongoing
branch refurbishment process
39
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business | Environment
Carbon Impact And The Transition To
A Low Carbon Economy
In November 2018, following a significant
programme of work, the Bank joined more
than 54 of Ireland’s leading companies in
signing the BITCI’s ‘Low Carbon Pledge’,
committing to reduce our Scope 1&2
Carbon Emission Intensity by 50% by
2030.
To deepen our commitment, in 2020 the
Bank conducted a review of our value
chain from a Scope 3 perspective and
implemented a programme of work to
measure and track our impact in relation to
selected indirect emissions (water, waste
and business travel).
Using employee Full Time Equivalent (FTE)
as an intensity measure, we estimate
that we have achieved a 55% reduction in
Scope 1&2 carbon emission intensity per
employee since 2009, our baseline year
for the pledge. This reduction reflects an
increase in the use of renewable energy by
electricity providers, efficiencies in energy
use by the business through projects
such as our LED lighting upgrade and the
impacts of COVID-19 last year, which saw
a large portion of our workforce begin to
work remotely.
We will begin reporting on our selected
Scope 3 emission intensity from 2021.
As we look to the future, we are committed
to going further by conducting an in depth
review of all areas of our business, with
a vision to setting science based carbon
emission reduction targets that are in line
with the Paris Agreement by 2024.
Waste Generation
Waste Generation
General Waste
Recycling Waste
Recycled Confidential Shred Waste*
293
Recycled Used Cooking Oil
Recycled Grease
Recycled Lamps
1.8
2.8
1.5
*As restated **LED Lighting upgrade completed in 2020
2017
2018
2019
2020
Tonnes
Tonnes
Tonnes
Tonnes
106
174
86
139
322
1.4
2.8
0.6
138
86
280
1.8
2.9
0.4
86
40
218
1.0
2.8
12.55**
Disclosing Through CDP
In 2020, Permanent TSB furthered
its commitment to environmental
transparency by disclosing its
environmental impact through the Carbon
Disclosure Project (CDP), the non-profit
organisation that runs the world’s leading
environmental disclosure platform.
By completing CDP’s annual request for
disclosure on climate change, the Bank
is demonstrating the transparency and
accountability vital to tracking progress
toward a thriving, sustainable future.
We will continue to disclose our carbon
emissions as part of our annual reporting
process and as part of CDP each year.
40
Permanent TSB Group Holdings plc - Annual Report 2020 Waste Management
A large part of reducing our environmental
impact is minimising waste, with a target
to reduce our impact by 5% annually.
Permanent TSB’s waste management
supplier is committed to maintaining
their environmental ethos by ensuring
that no waste goes to landfill and that it
is diverted and recycled through multiple
resources.
The Bank has in place recycling facilities
across all of our sites, including our Head
Office building, administration sites,
customer services centres as well as
recycling bins in our Branch Network.
Actions taken in 2020 include:
• Replacing more than 600 colleague
uniforms in our Retail Network with
ones made from 95% recycled plastic
bottles
•
Introducing a Travel Mug For Life at the
end of 2019, resulting in a reduction of
more than 850,000 single use paper
cups last year
• Continuing our focus on ‘Go Paperless’,
an initiative to encourage customers
to select the eStatement option in an
effort to manage paper consumption,
limit waste and further reduce the
Bank’s environmental footprint. More
than 800,000 customer accounts
are now registered for eStatements,
resulting in an on-going reduction of
paper by c.5 million pages of paper
annually
• Ongoing integration of a new customer
correspondence management tool,
delivering a range of new functionality
to enable us to continue to migrate
our customer correspondence to
digital channels on a continuous basis,
thereby allowing us to further reduce
our reliance on paper
• Engaging shareholders to encourage
them to receive the Annual Report
by electronic means. The Bank has
c. 130,000 shareholders. In 2021, we
expect to only issue c. 1,000 units of
the Annual Report in hardcopy, saving
more than 16 million pages of paper
• Monitoring water consumption in all of
our branch and administrative sites
• Celebrating Earth Day, raising
awareness and encouraging our
colleagues to reduce, reuse and
recycle, both in the office and at home
Environmental Policy Statement
Permanent TSB’s Environmental Policy Statement outlines the Bank’s
commitment to environmental sustainability through the ongoing identification,
management and improved efficiency of those significant environmental impacts
associated with our business activities, including: energy management, carbon
impact and the transition to a low carbon economy, use of natural resources (paper,
water, oil and natural gas) and recycling and waste management.
The Bank is focused on continuous improvement through the following:
Implementation of our Policy Statement
Supporting the transition to a Low Carbon Economy through our
signature to Business in the Community Ireland’s Low Carbon
Pledge
Focussing on our use of natural resources and ensuring that
our business maintains current levels and identifies areas for
reducing consumption, where possible
Committing to reduce waste across our business by 5% annually
Engaging our workforce in green volunteering initiatives and
awareness campaigns that both, support biodiversity and have a
positive impact on the environment
Measuring environmental performance on an ongoing basis and
identifying areas for continuous improvement
Working with suppliers and sub-contractors to minimise their
environmental impacts
Communicating our environmental progress against KPIs to both
our internal and external stakeholders
This Permanent TSB Environmental Policy Statement is reviewed annually as
part of Senior Management’s review of all Responsible and Sustainable Business
Programming. Permanent TSB’s Chief Executive receives regular updates
regarding the implementation of the Environment Pillar of the Bank’s Responsible
and Sustainable Business Strategy. Progress against KPIs is reported upward to
the ExCo and the Nominations, Culture and Ethics Board Committee on a quarterly
basis.
Responsible Procurement
Permanent TSB continues to enhance its
Procurement and Sourcing Frameworks to
ensure that they support our sustainability
goals and objectives. Our Procurement
Policy sets out a framework for engaging
with our suppliers including a commitment
to procure goods, services and works from
suppliers who can support the needs of
our business in a sustainable manner.
It sets out the key social, ethical and
environmental standards that we want
our suppliers to achieve and is supported
by our procurement processes, supplier
on boarding procedures and ongoing due
diligence practices.
The Bank’s Procurement Policy is reviewed
annually, communicated as required and
made available to our colleagues on our
internal website.
41
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business | Governance
Responsible And Sustainable
Business Governance
The Board approved the Responsible
and Sustainable Business Strategy
and ensures Management have
comprehensive plans in place for
achievement of the Bank’s Responsible
and Sustainable Business objectives.
Permanent TSB’s Chief Executive
receives regular updates regarding the
implementation of the strategy, and
progress against KPIs is reported upward
to both the ExCo and the Nominations,
Culture and Ethics Board Committee on a
quarterly basis.
In 2020 the Bank enhanced its approach
to Responsible and Sustainable
Business Governance and now has
in place a Sustainability Committee.
The Sustainability Committee is an
evolution of the previously established
Responsible Business Committee, and
operates as a Sub-Committee of the
Executive Committee. The Sustainability
Committee is chaired by the Chief Human
Resources Officer (CHRO) and Corporate
Development Director and includes
representation from both Executive
Committee members, and Senior Leaders
representing business units across the
organisation. The Committee meets at
regular intervals throughout the year to
review and direct the development of
programming, with a clear focus on the
Environmental, Social and Governance
(ESG) factors that are core to operating
our business in a responsible and
sustainable way.
A dedicated resource is in place to provide
leadership and coordinate activities,
with the support of the Sustainability
Committee.
For more on Governance, please refer to
the Directors’ Report on page 84.
Operating Responsibly
Permanent TSB is committed to operating
responsibly and conducting our operations
to the highest ethical and professional
standards. We are similarly committed,
under our Responsible and Sustainable
Business Strategy, to rebuilding trust and
playing an active role in the communities
in which we live and work.
42
We are focused on upholding the highest
standard of conduct and behaviour among
our people. This is not just a ‘nice-to-have’
– it is a commitment that underpins how
we work together, our relationship with
society, and, most importantly, how we
rebuild trust with our customers and help
to make a difference.
Colleague Conduct Policy
In 2020, the Bank introduced a Colleague
Conduct Policy, an overarching framework
which includes the policies and
procedures that are integral to upholding
the high standards of colleague conduct
across the organisation. The Policy
sets out the behaviours expected of our
people, and lays out the requirements
for the effective management of those
behaviours within the Bank, to ensure that
our customers and colleagues are treated
with dignity and respect.
Permanent TSB has a zero tolerance
for inappropriate colleague conduct. A
colleague conduct paper is produced
and presented to the Board on a bi-
annual basis that gives qualitative and
quantitative updates on key colleague
related policies and procedures over the
period, in line with our Colleague Conduct
Policy.
The Colleague Conduct Policy takes
into consideration a number of other
documents that encourage appropriate
colleague conduct and behaviour,
including our Code Of Ethics and Speak
Freely.
In addition, the Colleague Conduct Policy
also gives consideration to both, our
Dignity And Respect Code and Equality
through Diversity And Inclusion Charter,
recognising our responsibility to respect
the human rights of every individual that
works for us and ensuring the protection
of our colleagues’ human rights.
Code Of Ethics
The Bank has in place a Code of Ethics
that provides a general framework for
expected behaviours and guides our
workforce in doing the right thing. It
codifies how best to interact with our
stakeholders and provides standards
that colleagues must follow in both
their professional life, and in conducting
their own personal financial affairs. It is
there to protect us from unacceptable
behaviour and minimise opportunities for
misconduct.
Complying with the requirements and
principles of the code is a condition
of employment for our colleagues at
Permanent TSB. The Bank has in place
procedures to deal with breaches of the
Policy and reports to the ExCo and the
Board on a half yearly basis.
The Board supports a very low to zero risk
appetite for deliberate and/or repeated
poor or unfair customer outcomes
(financial or non-financial), or any market
impact which arises through inappropriate
actions, or inactions in the execution of
our business. Any instances of breaches
are reported throughout the year.
Ethics training was delivered to all
employees in 2020.
Speak Freely
To support the cultural evolution of
Permanent TSB, the Bank has developed
an alternative approach to simplifying
and clarifying the channels by which
an employee can speak up and raise a
concern; namely, Speak Freely.
Speak Freely, and associated procedures,
protects employees who wish to make a
protected disclosure, relating to an actual
or potential wrongdoing in the workplace.
The Bank has in place procedures to deal
with any protected disclosures that may
arise as part of Speak Freely and reports
to the ExCo and the Board on a half yearly
basis.
You can read more about our commitment
to Speak Freely in 2020 on page 19.
Permanent TSB Group Holdings plc - Annual Report 2020 Responsible And Sustainable Business | Governance
Human Rights
Permanent TSB recognise our
responsibility to respect the human
rights of every individual who works for
us. The Bank ensures the protection of
our colleagues’ human rights through its
Dignity and Respect Code and Equality
through Diversity and Inclusion Charter.
The Code and the Charter focus on the
prevention of discrimination, the provision
of equal opportunities and ensure that
employees are treated with dignity and
respect in the workplace.
We acknowledge our responsibility to
respect human rights as set out in the
International Bill of Human Rights and the
eight fundamental conventions on which
the United Nations Guiding Principles on
Business and Human Rights are based.
In order to mitigate against human rights
risk, or violations that may occur, the
Bank has comprehensive due diligence
procedures in place, which include: the
implementation of a Colleague Conduct
Policy that establishes the requirements
for the effective management of
appropriate behaviours within the Bank;
procedures for ensuring that we meet all
relevant human rights legislation in the
jurisdictions in which we operate; and, a
suite of reporting mechanisms through
our Speak Freely channels, to support
timely reporting of issues.
The Human Resources team monitor
all nonadherences to these policies.
Procedures are in place for dealing with
suspected human rights allegations and
reported instances are addressed on a
timely basis.
Permanent TSB also has in place
additional requirements set out in other
policy documents that help govern
behaviour, including: Conflict of Interest;
Anti-Money Laundering/Terrorist
financing; Sanctions and, Anti-Bribery
and Corruption.
Conflict Of Interest
Conflict of interest occurs when an
employee’s personal relationships,
participation in external activities or
interest in another venture influence or
could be perceived to influence a business
decision. Permanent TSB has in place
a Conflict of Interest Policy to provide
guidance to employees and to ensure
that the Bank proactively manages both
personal and organisational Conflict of
Interest.
Every employee is responsible for
identifying, reporting and managing
Conflict of Interest and, in doing so, must
comply with the letter and spirit of the
policy.
The Bank has in place procedures to deal
with Conflict of Interest that may arise.
The Human Resources team monitors
adherence to this policy and reports to the
ExCo and the Board on a half yearly basis.
Financial Crime Compliance
Permanent TSB maintains an overarching
Financial Crime Compliance Framework,
which includes three supporting policy
documents relating to Money Laundering/
Terrorist Financing, Sanctions and Bribery
and Corruption Risk. The Framework and
related policies set out how the business
adheres to all laws and regulations relating
to financial crime compliance and how
these risks are managed within the Bank.
An assessment of the specific Money
Laundering/Terrorist Financing and
Sanctions Risk faced by the Bank is
undertaken annually and a review of the
Bribery and Corruption Risk relevant to
the Bank’s business is also completed
on a periodic basis. Financial crime
compliance related training, which covers
Money Laundering/Terrorist Financing,
Sanctions and Bribery and Corruption
Risk, is provided to all employees each
year, with tailored training provided to the
Board of Directors and members of the
Executive Committee.
Permanent TSB is committed to
managing and mitigating the financial
crime compliance risk associated with
its business activities and complying
with all applicable Money Laundering/
Terrorist Financing, Sanctions and Bribery
and Corruption laws and regulations in
the jurisdictions in which it operates. In
order to mitigate against any financial
crime compliance related risk that may
occur, the Bank has comprehensive due
diligence procedures in place, which
include requesting documents such as
proof of identity and proof of address
at account opening and at intervals
thereafter, conducting enhanced due
diligence reviews and undertaking
Politically Exposed Persons (PEPs) and
Sanctions screening in line with our
policies.
Policy Governance
Permanent TSB is committed to
mitigating the social, employee and
environmental risks associated with its
business activities and complying with all
laws and regulations in the jurisdictions
in which it operates. We manage our
social, employee and environmental risk
through the effective implementation
of our Responsible and Sustainable
Business Strategy outlined in this report
and through the effective application of
policies and procedures that are integral
to operating our business in a responsible
way
All policies that the Bank has in place to
protect our workforce meet the relevant
regulatory requirements, adhere to
Permanent TSB’s Document Management
Standards and Procedures Policy and are
reviewed and updated, as appropriate, on
an annual basis.
Policies are monitored by their respective
Policy Owners, communicated as required
and made available to our colleagues on
our internal website.
The Future
As we look to build our Responsible
and Sustainable Business Programme
through 2021 and beyond, our focus is
on long term sustainability, the role that
the Bank will play in tackling climate
change and supporting the transition to
a low carbon economy. We are similarly
conscious of the regulatory landscape,
the legislative changes that shape Non-
Financial reporting, and of international
developments, including: the UN
Sustainable Development Goals; the UN
Principles for Responsible Banking; and,
the Partnership For Carbon Accounting
Financials (PCAF).
We will provide annual updates on our
Responsible and Sustainable Business
Programme through this Non-Financial
Report.
43
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Financial Review
The financial year 2020 was a challenging year globally due to the unprecedented economic uncertainty the COVID-19 pandemic caused,
the effects of which negatively impacted the Irish economy. The trade deal between the UK and the EU has reduced the uncertainty
about the future trade relationship. The potential future impact of the pandemic and how the new trading relationship will impact the Irish
economy is difficult to estimate.
Despite the current difficult trading conditions, the Group has continued to strengthen its capital and liquidity positions. While the Group
continues to be operationally profitable, COVID-19 has adversely impacted the Group’s expected credit losses, resulting in an overall loss
for the year ended 31 December 2020.
As a result of the active reduction of the Group’s non-performing loans over the past number of years the Group has strengthened is core
capital and liquidity positions, and, continues to build a simple and resilient business model. As such, the Group is ready to support its
customer base and the economy to recovery from the challenges that this pandemic has brought upon us.
The asset quality has remained stable and non-performing assets have marginally increased due to the COVID-19 pandemic.
The lower interest rate environment has led to a compression on the Group’s Net Interest Margin (NIM). The Group aims to manage
margin compression through diversifying further its non-interest based income portfolio and continued active management of funding
costs.
Basis of preparation
The financial review is prepared using International Financial Reporting Standards (IFRS) and Non-IFRS measures to analyse the Group’s
financial performance for the financial year ended 31 December 2020.
Non-IFRS measures are used by Management to assess the financial performance of the Group and to provide insights into financial
and operational performance on a consistent basis across various financial years. They also provide details regarding the elements of
performance which the Group considers important in its performance assessment and which it can influence.
Non-IFRS measures are however not a substitute for IFRS measures and IFRS measures should be preferred over Non-IFRS measures
where applicable.
The Group has a tightly drawn accounting policy for exceptional items (see note 1) and exceptional items are considered to include:
• Profit/loss on disposal of businesses;
• Profit/loss on material deleveraging including any increase in impairment arising solely due to the sale of NPLs becoming part of the
Group’s recovery strategy; and
• Material restructuring costs.
However, from time to time certain material non-recurring items occur which do not meet the definition of exceptional items as set
out in the accounting policy. To assist the users of the financial statements and to ensure consistency in reporting with other financial
institutions, these items are disclosed separately from underlying profit in the financial review. These items are clearly identified as Non-
IFRS items and reconciled back to the IFRS income statement.
A reconciliation between the underlying profit and operating profit on an IFRS basis is set out on page 51.
Management has provided further information on IFRS and Non-IFRS measures including their calculation in the Alternative
Performance Measurements (APM) section on pages 249 to 255.
44
Permanent TSB Group Holdings plc - Annual Report 2020
Basis of calculation
Percentages presented throughout the financial review are calculated using absolute values and therefore the percentages may differ
from those calculated using rounded numbers.
Management performance summary consolidated income statement
Net interest income
Net fees and commissions income
Net other income
Total operating income
Total operating expenses (excl. exceptional items, bank levy and other regulatory charges)*
Bank Levy and other regulatory charges
Underlying profit before impairment
Impairment charge on loans and advances to customers
Underlying (loss)/profit
Exceptional and other non-recurring items comprises:
Restructuring and other costs
Impairment on deleveraging of non-performing loans
Charges in relation to legacy legal cases
(Loss)/profit before taxation
Taxation
(Loss)/profit for the year
Year ended
Year ended
Table
31 December
2020
31 December
2019
1
3
4
5
6
7
8
€m
341
28
6
375
(280)
(49)
46
(155)
(109)
(57)
(31)
(26)
-
(166)
4
(162)
€m
356
37
20
413
(282)
(47)
84
(10)
74
(32)
(13)
(16)
(3)
42
(12)
30
* See table 9 on page 51 for a reconciliation of underlying profit to operating profit on an IFRS basis.
Management performance summary consolidated income statement - key highlights
• Total operating income has decreased by €38m during 2020 primarily due to:
- Net interest income decreased by €15m (4%) during 2020 to €341m. The reduction is mainly driven by lower yielding treasury
assets and the deleveraging activity in 2019.
- Net other income was €6m for the year ended 31 December 2020 compared to €20m at 31 December 2019 due to lower sales of
properties in possession during the year.
- Operating expenses (excl. exceptional items, bank levy and other regulatory charges) are €280m for the year ended 31
December 2020 compared to €282m at 31 December 2019. While the overall cost base has remained stable, underlying costs have
decreased reflecting the initial effects of the Group’s Enterprise Transformation programme, offset by significant re-investment into
the business and additional COVID-19 related costs of €5m.
• Underlying profit before impairment has decreased by €38m since 31 December 2019. This is due to a decrease in total operating
income while the cost base has remained stable.
•
Impairment charge is €155m on loans and advances to customers for the year ended 31 December 2020, compared to a charge
of €10m for the year ended 31 December 2019. The impairment charge for the year reflects the impact of a more negative
macroeconomic outlook together with the increased uncertainty for some portfolio sectors impacted by the COVID-19 pandemic.
• Exceptional and other non-recurring items for the year ended 31 December 2020 comprises of €31m in restructuring charges
relating to the Group’s Enterprise Transformation Programme announced in November 2020, and €26m as a result of deleveraging
performed in the second half of the year.
• Loss before tax of €166m for the year ended 31 December 2020 is €208m lower than the year ended 31 December 2019 primarily
driven by the significant impairment charge for the year.
45
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Financial Review
(continued)
Net interest income
Net interest margin
€341m
1.73%
Table 1: Net Interest Income
Interest income
Interest expense
Net interest income
Net interest margin (NIM)
Year ended
Year ended
31 December
2020
31 December
2019
€m
€m
382
(41)
341
1.73%
413
(57)
356
1.80%
Net interest income
Net interest income (NII) decreased by €15m (4%) and the NIM decreased by 7bps to 1.73%. While the interest income from the loan
book declined modestly due to the deleveraging of loan activity in 2019, the overall reduction is mainly driven by the impact of reduced
income from treasury assets as a result of the maturity of high yielding Irish sovereign gilts partially offset by savings in funding costs.
The low interest rate environment continues to challenge the Group’s NIM as of result of balance sheet composition and growth in liquid
assets.
Interest income
Interest income of €382m for the year ended 31 December 2020 decreased by €31m (8%), compared to the prior year. This was mainly
driven by the maturity of higher yielding treasury assets, which were replaced at a lower yield reflecting the subdued interest rate
environment in which the Group operates.
The reduced income from NPLs following the Glas II loan sale in 2019 resulted in a modest reduction in interest income.
Interest expense
Interest expense decreased by €16m (28%) for the year ended 31 December 2020 as a result of active management of the funding costs.
Table 2.1: Average balance sheet
Year ended 31 December 2020
Year ended 31 December 2019
Average Balance
€m
Interest
€m
Rate Average Balance
%
€m
Average Yield/
Interest
€m
Average Yield/
Rate
%
Interest earning assets
Loans and advances to banks
Loans and advances to customers
Debt securities and derivative assets
Total average interest earning assets
Interest bearing liabilities
Customer accounts
Deposits by banks
Debt securities in issue and derivative
liabilities
Lease Liabilities
Loans and advances to banks
Total average interest bearing liabilities
Total average equity attributable to owners
Net Interest Margin
2,087
15,083
2,410
19,580
17,689
10
863
37
-
18,599
1,961
1.73%
-
371
11
382
26
-
11
-
4
41
-
2.46%
0.46%
1.95%
0.15%
-
1.27%
-
-
0.22%
1,587
15,768
2,349
19,704
17,227
561
862
44
-
18,694
1,994
1
378
34
413
40
1
12
-
4
57
0.06%
2.40%
1.45%
2.10%
0.23%
0.18%
1.39%
-
-
0.30%
1.80%
46
Permanent TSB Group Holdings plc - Annual Report 2020
Net interest margin
NIM decreased by 7bps to 1.73% for the year ended 31 December 2020 compared to 1.80% for the prior year. The NIM of the Group
has tightened as a result of the low interest rate environment. This has impacted yields on the new treasury assets and growth in liquid
assets resulting in elevated negative interest charges on deposits with the CBI. This has been partially offset by the lower funding costs.
The Group’s corporate strategy is shifting towards further diversifying its income base with an increase in reliance on non-interest
income.
The main drivers for the 7bps reduction in the NIM include:
Table 2.2: Volume drivers
Volume drivers
Reduction in the average interest bearing assets from deleveraging activity
Yield drivers
Reduced income from treasury assets due to the replacement of high yielding sovereign gilts
Reduced income from loan book due to deleveraging activities
Increase in interest expense due to the issuance of medium term notes
Reduction in NII during the year
Saving through deposit rate cuts during the year
Increase in NII during the year
Overall net reduction NII
Overall movement in the NIM
(€m)
Impact on NIM
(bps)
(59)
(18)
(7)
(4)
(29)
14
14
(15)
1
(9)
(3)
(2)
(15)
8
8
(7)
(7)
Interest income/Average interest earning assets
•
Interest income on loans and advances to customers reduced by €7m for the year ended 31 December 2020 due to reduced income
from deleveraged loans and the impact of fixed rate cuts in the second half of 2019.
• The average balance of loans and advances to customers decreased by €685m as a result of as a result of the capital accretive
Glenbeigh II transaction, the sale of a non-performing book in the second half of 2020 and lower business origination activity due to
COVID-19.
•
Interest income on debt securities reduced by €23m for the year ended 31 December 2020.The reduction of interest income reflects
the impact of the continued challenging interest rate environment impacting yields on new treasury assets.
Interest expense/Average interest bearing liabilities
•
Interest expense on customer accounts decreased by €14m for the year ended 31 December 2020 primarily due to effects of rate
cuts to customer accounts, reflecting market trends. The average balance however increased by €462m to €17,689m from €17,227m
reflecting a change in customer spending behaviour.
•
•
•
Interest expense of deposits by banks was minimal. The average balance reduced by €551m for the year ended 31 December 20
from €561m to €10m in the current year as the Group has reduced reliance on secured financing to support its operational cash flow
requirements. This is in line with the Group strategy to reduce the elevated levels of excess liquidity.
Interest expense on debt securities in issue and derivative liabilities decreased by €1m with average balances increased to €863m at
31 December 2020 from €862m at 31 December 2020. This is due to the issuance of MREL debt in the second half of 2020 offset by
the natural reduction of securitisations.
Interest expense on loans and advances to banks amounted to €4m for the year ended 31 December 2020 as a result of cash held with
the CBI at a negative interest rate and securitisations cash held with external banks.
47
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Financial Review
(continued)
Net fees and
commission income
€28m
Table 3: Net fees and commissions income
Fees and commission income
Retail banking and credit card fees
Brokerage and insurance commission
Other fees and commission income
Fees and commission income
Fees and commission expense (*)
Net fees and commission income
Year ended
Year ended
31 December
2020
31 December
2019
€m
€m
43
9
1
53
(25)
28
51
10
1
62
(25)
37
* Fees and commission expenses primarily comprises retail banking and credit cards fees
Net fees and commission income was €28m for the year ended 31 December 2020, a decrease of €9m from the prior year. This
decrease is due to a lower level of economic activity as a result of the nationwide lockdowns throughout 2020 which adversely affected
consumer spending.
Net other income
€6m
Table 4: Net other income
Other income
Net other income
Year ended
Year ended
Thursday 31
December 2020
Tuesday 31
December 2019
€m
6
6
€m
20
20
Net other income of €6m for the year ended 31 December 2020 decreased by €14m compared to €20m income for the year ended 31
December 2019. This decrease was due to a reduction in sales of properties in possession in 2020 compared to the prior year.
48
Permanent TSB Group Holdings plc - Annual Report 2020
Total operating
expenses (1)
€329m
Adjusted cost
income ratio
75%
1. Excluding exceptional and other non-recurring items.
Table 5: Operating expenses
Staff costs
Wages and salaries including commission paid to sales staff
Social insurance
Pension costs
Total staff costs
General and administrative expenses
Administrative, staff and other expenses
Depreciation of property and equipment
Amortisation of intangible assets
Total operating expenses (excluding exceptional and other non-recurring items and regulatory
charges)
Bank levy
Regulatory charges
Total operating expenses (excluding exceptional and other non-recurring items items)
Headline cost to income ratio*
Adjusted cost to income ratio**
Closing staff numbers***
Average staff numbers
31/12/2020
31/12/2019
€m
€m
122
15
14
151
92
243
21
16
280
24
25
329
88%
75%
2,435
2,429
121
14
13
148
101
249
21
12
282
24
23
329
80%
68%
2,379
2,386
*Defined as total operating expenses (excluding exceptional and other non-recurring items) divided by total operating income.
**Defined as total operating expenses (excluding exceptional, other non-recurring items, bank levy and regulatory charges) divided by total operating income.
***Closing staff numbers are calculated on a FTE basis.
Operating expenses
Management exercises very strict cost controls and the cost base has remained stable with the prior year. Management has also
adopted various cost management initiatives in recent years, the effect of which are now becoming visible partially offset by additional
COVID-19 related costs.
Staff costs
Total staff costs have increased by €3m (2%) from €148m for the year ended 31 December 2019 to €151m for the year ended 31
December 2020. This increase is consistent with the 2% increase in average staff numbers.
General and administrative expenses
General and administrative expenses decreased by €9m for the year ended 31 December 2020 to €92m. Other general and
administrative expenses include legal and professional fees, technology costs, property costs and business as usual administrative
expenses. The year on year decrease is due to the Group’s focus on cost saving initiatives.
Depreciation of property and equipment
Depreciation of property and equipment is in line with the charge for the year ended 31 December 2019.
Amortisation of intangible assets
The increase in the amortisation expense of €4m reflects increased capital spending in software development as a result of various
digitisation projects that the Group commenced in prior years and continues to invest in. The increase in amortisation reflects the
utilisation of the capital spending.
Adjusted cost income ratio
Operating costs (excluding exceptional and other non-recurring items and regulatory charges) of €280m and operating income of €375m
for the year ended 31 December 2020 led to an adjusted cost income ratio of 75% for 2020, compared to an adjusted cost income ratio of
68% for the year ended 31 December 2019. The increase in adjusted cost income ratio was due to lower income in the period as the cost
base has remained stable for the Group.
49
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Financial Review
(continued)
Bank levy and other regulatory
charges
€49m
Table 6: Bank levy and other regulatory charges
Bank levy
Other regulatory charges
Bank levy and other regulatory charges
Year ended
31/12/2020
Year ended
31/12/2019
€m
24
25
49
€m
24
23
47
Bank levy and other regulatory charges amounted to €49m for the year ended 31 December 2020. Other regulatory charges include
€15m for the Deposit Guarantee Scheme (DGS) (31 December 2019: €14m). The Single Resolution Fund (SRF) costs for the year ended
was €5m (31 December 2019: €5m).
Impairment
€155m
Table 7: Impairment
Total impairment charge on loans and advances to customers
Year ended
31/12/2020
Year ended
31/12/2019
€m
155
€m
10
The Impairment charge is €155m on loans and advances to customers for the year ended 31 December 2020, compared to a charge of
€10m for the year ended 31 December 2019. The impairment charge for the year reflects the impact of a more negative macroeconomic
outlook together with the increased uncertainty for some portfolio sectors impacted by the COVID-19 pandemic.
Income tax credit
€4m
The effective tax rate was 2% for 2020 compared to 29% in 2019. The income tax credit for 2020 amounted to €4m compared to a
charge of €12m in 2019. The main drivers of this credit include a current tax charge of €2m arising on non-trading income, a current year
deferred tax credit of €10m which arises due to an increase in tax losses carried forward, and the partial release of a DTA of €3m created
on the introduction of IFRS 9.
50
Permanent TSB Group Holdings plc - Annual Report 2020
Exceptional and other non-
recurring items
€57m
Table 8: Exceptional and other non-recurring items
Restructuring and other charges
Impairment on deleveraging of loans
Charges in relation to legacy legal cases
Exceptional items and other non-recurring items
Year ended
31/12/2020
Year ended
31/12/2019
€m
31
26
-
57
€m
13
16
3
32
Exceptional and other non-recurring items as viewed by Management for the year ended 31 December 2020 of €57m comprise:
Restructuring and other charges
Restructuring and other charges include €31m mainly relating to the Group’s voluntary severance scheme as part of the Enterprise
Transformation Programme announced in November 2020.
Net impairment arising from the deleveraging of loans
Net impairment charge arising from deleveraging of loans for the year ended 31 December 2020 was €26m, of which €32m was as a
result of the capital accretive Glenbeigh II sale offset by a €6m release of provisions in respect of loan sales the Group had executed in
prior years.
Underlying profit in the management income statement is stated before exceptional items and other non-recurring items whereas
operating profit in the IFRS income statement is stated after these items.
Table 9: Reconciliation of underlying profit to operating profit on an IFRS basis
Operating profit per IFRS income statement
Other exceptional items in IFRS total operating expenses
Exceptional impairment in IFRS credit impairment loss
Non-IFRS adjustments
Charges in relation to legacy legal cases*
Underlying (loss)/profit per management income statement
*Included in IFRS administrative, staff and other expenses
Year ended
31/12/2020
€m
(166)
31
26
-
(109)
Year ended
31/12/2019
€m
42
13
16
3
74
51
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Financial Review
(continued)
Summary consolidated statement of financial position
Assets
Home loans
Buy-to-let
Total residential mortgages
Commercial mortgages
Consumer finance
Total loans and advances to customers (net of provisions)
Debt securities
Remaining asset balances
Total assets
Liabilities and equity
Current accounts
Retail deposits
Corporate & institutional deposits
Total customer accounts
Debt securities in issue
Other liabilities
Total liabilities
Total equity
Total equity and liabilities
Liquidity coverage ratio (1)
Loan to deposit ratio (2)
Net stable funding ratio(3)
Return on equity (4)
Table
31 December
2020
31 December
2019
€m
€m
10
12
13
14
15
16
12,145
1,649
13,794
128
291
14,213
2,583
4,190
20,986
5,779
10,516
1,744
18,039
809
187
19,035
1,951
20,986
276%
79%
160%
(5.4%)
12,098
3,077
15,175
127
342
15,644
2,005
2,629
20,278
4,667
10,301
2,222
17,190
923
168
18,281
1,997
20,278
170%
91%
138%
3.1%
(1) Calculated based on the Commission Delegated Regulation (EU) 2015/61.
(2) Defined as the ratio of loans and advances to customers compared to customer accounts as presented in the statement of financial position.
(3) Defined as the ratio of available stable funding to required stable funding.
(4) Defined as (loss)/profit for the year after tax (before exceptional and other non-recurring items) as a percentage of total average equity.
Summary consolidated statement of financial position - key highlights
The Group maintains a strong capital, liquidity and funding position and continues to have the strength to withstand the current adverse
economic climate.
The Group has significantly reduced NPL balances over the past two years continues to invest in a high quality and resilient asset base.
• Loans and advances to customers (net of provisions) were €14,213m as at 31 December 2020, a reduction of €1,431m from
€15,644m at 31 December 2019, which is mainly due to the disposal of the Glenbeigh II performing mortgage portfolio. The
information regarding the disposal of Glenbeigh II loan portfolio is set out in note 41.
• Customer accounts were €18,039m at 31 December 2020, an increase of €849m from 31 December 2019. This is due to the
COVID-19 restrictions which impacted customer spending resulting in higher average customer balances during the year.
• Remaining asset balances were €4,190m as at 31 December 2020, an increase of €1,561m from €2,629m at 31 December 2019,
which was due to increased balances held with the CBI arising from the proceeds of the deleveraging transactions in 2020 and 2019.
52
Permanent TSB Group Holdings plc - Annual Report 2020
Loans and advances to customers
Table 10 (a): Summary of movement in loans and advances to customers
Gross loans and advances to customers 1 January
New lending
Redemptions and repayments of existing loans
Write-offs and restructures
Net movement from non-performing and Other
Gross loans and advances to customers 31 December
Table 10(b): Composition of loans and advances to customers
Residential mortgages:
Home loans
Buy-to-let
Total residential mortgages
Commercial
Consumer finance
Total measured at amortised cost
Of which are reported as non-performing loans
Deferred fees, discounts & fair value adjustments
Provision for impairment losses
Total loans and advances to customers
Total loans and advances to
customers (net)
2020
€m
2019
€m
16,389
1,332
(1,418)
(53)
(1,395)
14,855
16,916
1,594
(1,528)
(87)
(506)
16,389
31 December
2020
31 December
2019
€m
€m
12,338
2,009
14,347
181
327
14,855
1,128
86
(728)
14,213
12,260
3,598
15,858
165
366
16,389
1,050
73
(818)
15,644
€14,213m
Total loans and advances to customers (after provisions for impairment) of €14,213m at 31 December 2020 decreased by €1,431m when
compared to the year ended 31 December 2019. This decrease is mainly due to the disposal of the Glenbeigh II performing mortgage
portfolio.
New lending has reduced by €262m at 31 December 2020 from €1,594m at 31 December 2019 to €1,332m, as a result of the impacts
from COVID-19.
Total new lending (gross)
€1,424m
Total new lending in the financial year 2020 amounted to €1,424m, down by 15% from 31 December 2019. Mortgage lending, which
represented 90% of total new lending, decreased by 14% compared to 2019. This reduction in overall lending reflects the market
uncertainty due to the COVID-19 pandemic. However, Mortgage Applications and Mortgage Approvals recovered strongly in H2 2020.
The Irish mortgage market activity in H1 2020 was impacted by the COVID-19 pandemic with a global decline however demand
increased in H2 2020 following a reopening of the economy after the first lockdown. While Mortgage Lending in the market for 2020
was down 12% year-on-year, pent up demand saw a surge in Applications in the market in Q4. Housing supply, which was already falling
short, has been impacted by the restrictions imposed to halt the spread of COVID-19.
Estimates before the current crisis for total housing completions in 2020 were between 24,000 to 26,000 units. BPFI has estimated that
total completions would be between 19,000 to 20,000 units in 2020.
The Group recorded gross new Term lending of €97m in 2020. This is a decrease of 31% compared to 2019. SME Lending in 2020, €48m,
was broadly consistent with 2019 (€47m).
53
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
NPLs as a % of gross loans
7.6%
Financial Review
(continued)
NPLs
€1,128m
Table 11: NPLs
Home loans
Buy-to-let
Commercial
Consumer finance
Non-performing loans
NPLs as % of gross loans
Foreclosed assets*
Non-performing assets (NPAs) **
NPAs as % of gross loans
31 December
2020
31 December
2019
€m
€m
658
418
35
17
1,128
7.6%
30
1,158
7.8%
614
377
41
18
1,050
6.4%
58
1,108
6.8%
*Foreclosed assets are defined as assets held on the balance sheet, which are obtained by taking possession of collateral or by calling on similar credit enhancements.
**Non-performing assets are defined as NPLs plus foreclosed assets.
The Group’s asset quality has remained stable and it continues to invest in high quality originations under strict credit underwriting
standards.
NPLs increased by €78m in the year ended 31 December 2020 primarily attributed to the impacts of COVID-19.
NPLs as a percentage of gross loans was 7.6% at 31 December 2020, an increase of 1.2% from 6.4% at 31 December 2019 driven
primarily by the deleveraging of the Glenbeigh II performing mortgage portfolio.
Non-performing assets increased by €50m mainly due to €78m increase in NPL loans offset by €20m decrease in foreclosed assets
sold in the year.
Debt securities
Table 12: Debt securities
Government bonds
Corporate bonds
Total debt securities
31/12/2020
31/12/2019
€m
€m
2,477
106
2,583
1,963
42
2,005
The Group purchased Irish, Portuguese, and Spanish sovereign bonds during the year ended 31 December 2020. In addition, during the
year the Group also purchased residential mortgage backed securities. The total cash investment that the Group made in debt securities
was €1,046m and debt securities amounting to €414m matured during the year.
Remaining asset balances
Table 13: Remaining asset balances
Loans and advances to banks
Assets classified as held for sale
Other assets
Total
31/12/2020
31/12/2019
€m
€m
3,312
31
847
4,190
1,556
59
1,014
2,629
The remaining assets balances are in line with the Management expectations. The key movements in the year related to an increase of
€1,756m in loans and advances to credit institutions primarily related to increased balances held with the CBI as a result of the receipt of
proceeds from the sale of the Glenbeigh II transaction.
Other assets reduced by €254m reflecting the receipt of the Glas II proceeds at the start of the year.
54
Permanent TSB Group Holdings plc - Annual Report 2020
Liabilities
The Group continues to optimise its funding profile through capitalising on cost efficient sources of funding while ensuring appropriate
diversification in its funding base. The target growth in customer accounts with a reduction in deposits by banks reflects its core focus
on liquidity management.
Customer accounts
€18,039m
The following table outlines the Group’s customer accounts as at 31 December 2020 and 31 December 2019.
Table 14: Customer accounts
Current accounts
Retail deposits
Total retail deposits (including current accounts)
Corporate deposits
Total customer deposits
Loan to deposit ratio*
31/12/2020
31/12/2019
€m
€m
5,779
10,516
16,295
1,744
18,039
79%
4,667
10,301
14,968
2,222
17,190
91%
*Defined as the ratio of net loans and advances to customers compared to customer accounts as presented in the SOFP.
At 31 December 2020, customer accounts increased to €18,039m from €17,190m at 31 December 2019. Customer account growth
accelerated during the COVID-19 outbreak as a result of a reduction in consumer spending.
In the current period, account openings exceeded the closures resulting into net inflows to the Group. While the Group continues to
closely track the market, its attractive product propositions continue to expand its customer base.
The retail deposits balances remained broadly flat from the prior year reflecting the stable funding source for the Group.
Debt securities in issue
€809m
Table 15: Debt securities in issue
Bonds and medium-term notes
Non-recourse funding
Debt securities in issue
31/12/2020
31/12/2019
€m
351
458
809
€m
308
615
923
Debt securities in issue decreased by €114m for the year ended 31 December 2020. The reduction in non-recourse funding is a result of
natural amortisation of mortgage backed securitisations. The increase in bonds and medium term notes is due to an additional issuance
of €50m MREL debt net of maturity of a €7m medium term notes.
The Group continues to hold sufficient liquidity resulting in a decreased requirement for secured funding.
55
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Financial Review
(continued)
Remaining liabilities
Table 16: Remaining liability balances
Derivative liabilities
Accruals
Current tax liability
Provisions
Other liabilities
Total
31/12/2020
31/12/2019
€m
-
2
1
77
107
187
€m
2
5
2
41
118
168
The Group provisions increased by €36m to €77m at 31 December 2020. The increase is primarily driven by the Group’s voluntary
severance scheme as part of the Enterprise Transformation Programme announced in November 2020 and remediation of historic third
party legal costs offset by the release of other provisions. Other liabilities have decreased due to the natural reduction of lease liabilities.
Funding Profile
The following tables show the Group’s funding profile as at 31 December 2020 and 31 December 2019.
The Group’s funding profile at 31 December 2020 is broadly in line with the position at 31 December 2019. The Group is predominantly
funded by retail deposits, which the Group considers a stable source of the funding.
While the Group is significantly funded by customer accounts, it is cognisant to diversify and optimise it’s funding base and continuing to
manage the NIM in the low interest rate environment in which the Group operates.
December 2020
December 2019
4%
5%
Customer accounts
Debt securities in issue
96%
95%
56
Permanent TSB Group Holdings plc - Annual Report 2020
Capital Management
Capital Management Objectives and
Policies
The objective of the Group’s Capital
Management Policy is to ensure that the
Group has sufficient capital to cover the
risks of its business, support its strategy
and at all times to comply with regulatory
capital requirements. It seeks to minimise
refinancing risk by managing the maturity
profile of non-equity capital. The capital
adequacy requirements, set by the
Regulator, are used by the Group as the
basis for its capital management. The
Group seeks to maintain sufficient capital
to ensure that all regulatory requirements
are met.
CRD IV
Implementation of the CRD IV legislation
commenced on a phased basis from
1 January 2014. The CRD IV transition
rules resulted in a number of deductions
from CET 1 capital being introduced on
a phased basis, all of which are now fully
implemented, with the exception of the
DTA (dependent on future profitability)
deduction which, in the case of the
Group, is phased to 2024. The ratios
outlined in this section reflect the Group’s
interpretation of the CRD IV rules as
published on 27 June 2013 and subsequent
clarifications, including ECB regulation
2016/445 on the exercise of options and
discretions.
Regulatory Capital Developments
The European Commission published an
amendment to the Capital Requirements
Regulation on 28 April 2020 (“the CRR
quick fix”) to bring forward certain changes
made to the CRR announced last year
(“CRR2”) in light of the challenges posed
to the banking sector by the current
COVID-19 crisis. Other amendments not
contained in CRR2 were also announced
to provide further flexibility to banks
in meeting capital requirements. The
European Parliament voted to approve
these measures, which contain some
amendments to the original text, on 18
June 2020.
The key measures in the CRR quick
fix include an extension of the IFRS 9
transitional arrangements by two years,
the introduction of a prudential filter on
sovereign bonds held at fair value, the
acceleration of CRR2 amendments to
exempt certain software assets from
capital deduction1 and to revise the SME
supporting factors.
The Basel Committee has also announced
a delay by one year in the implementation
of revisions to the Basel Framework for
Credit Risk, Credit Valuation Adjustment
(“CVA”) and Operational Risk. These
changes are expected to form part of CRR
3 in the EU with an expected application
date of 1 January 2023 as opposed to
an application date of 1 January 2022
expected pre COVID.
CCyB from 1% to 0% and the accelerated
application of the CRD V amendments
which permits a portion (up to 44%) of P2R
to be met with non-CET1 (AT1 & Tier2)
capital (-1.51%).
The Group’s Total Capital minimum
requirement of 13.95% at 31 December
2020 (31 December 2019: 14.95%) consists
of a Pillar 1 CRR requirement of 8%, P2R
of 3.45%, CCB of 2.5%. The year on year
decrease in the Group’s Total Capital
minimum requirement (-1%) is driven by
the reduction of the CCyB from 1% to 0%.
The Group monitors these changes and
other emerging developments as they
relate to regulatory capital to ensure
compliance with all requirements when
applicable.
Flexibility provided by the Central
Bank of Ireland in the context of the
COVID-19 crisis2
The CBI has provided additional flexibility
to banks under its direct supervision when
meeting its capital requirements. This
includes:
• Allowing banks to use Additional Tier 1
and Tier 2 capital to partially meet Pillar
2 Requirements (“P2R”), bringing forward
a measure due to be implemented in
January 2021 as part of the amendments
to the Capital Requirement Directive
(“CRD V”);
• Announcing a reduction in the
Countercyclical Capital Buffer (“CCyB”)
rate on Irish exposures to 0% at the
beginning of April 2020; and
• Allowing banks to operate temporarily
below the level of capital defined by the
Pillar 2 Guidance (“P2G”) and the Capital
Conservation Buffer (“CCB”).
Regulatory Capital Requirements
The Group’s Common Equity Tier1 (CET1)
minimum requirement of 8.94% (31
December 2019: 11.45%) is comprised
of a Pillar 1 Requirement of 4.5%, Pillar 2
Requirement of 1.94% (31 December 2019:
3.45%), Capital Conservation Buffer (CCB)
of 2.5% and a Countercyclical Capital
Buffer (CCyB) of 0% (31 December 2019:
1.0%).
The year on year decrease in the Group’s
minimum CET1 requirement of (-2.51%) is
due to the aforementioned reduction of the
These requirements exclude Pillar 2
Guidance (P2G) which is not publicly
disclosed.
Capital ratios at 31 December 2020
At 31 December 2020, the regulatory
transitional CET1 was 18.1% (31 December
2019: 17.6%) and Total Capital ratio 21.0%
(31 December 2019: 19.1%), exceeding the
Group’s 2020 minimum requirement of
8.94% and 13.95% respectively.
On a fully loaded basis, the CET1 ratio was
15.1% (31 December 2019: 14.6%) and the
Total Capital ratio was 18.2% (31 December
2019: 16.3%).
During the year the volume of CET1 has
reduced primarily due to losses incurred in
the year, driven by impairment charges of
€155m. Ratios have however improved as
a result of a significant BTL loan disposal
in the year.
In Q4 2020 the Bank successfully executed
an Additional Tier 1 issuance (+€125m incl.
€2m transaction costs) which provided a
further Total Capital uplift.
The leverage ratio on a fully loaded and
transitional basis amounted to 7.1% and
8.2% respectively at 31 December 2020
(31 December 2019: 7.8% and 9.1%).
Movement in leverage ratio was primarily
due to a reduction in Tier 1 capital, driven
by P&L losses and prudential filters.
The following table outlines the Group’s
regulatory (transitional) and fully loaded
capital positions under CRDIV/CRR.
1. https://eur-lex.europa.eu/eli/reg_del/2020/2176/oj
2. https://www.centralbank.ie/regulation/covid19-flexibility-measures/credit-institutions
57
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Capital Management
(continued)
Table 17: Regulatory Capital
Capital Resources:
Common Equity Tier 1
Additional Tier 1*
Tier 1 Capital
Tier 2 Capital
Total Capital
Risk Weighted Assets
Capital Ratios:
Common Equity Tier 1 Capital
Tier 1 Capital
Total Capital
Leverage Ratio**
31/12/2020
31/12/2019
Transitional
Fully Loaded
Transitional
Fully Loaded
€m
€m
€m
€m
1,535
190
1,725
54
1,779
8,480
18.1%
20.3%
21.0%
8.2%
1,282
198
1,480
59
1,539
8,471
15.1%
17.5%
18.2%
7.1%
1,765
85
1,850
61
1,911
1,464
103
1,567
61
1,628
10,012
9,996
17.6%
18.5%
19.1%
9.1%
14.6%
15.7%
16.3%
7.8%
*The amount of Additional Tier 1 (AT1) Capital and Tier 2 instruments included within the consolidated capital of the holding company is restricted within the limits laid down
under the CRR. Effective January 2018, these restrictions are now fully phased in.
** The leverage ratio is calculated by dividing the Tier 1 Capital by gross balance sheet exposure (total assets and off-balance sheet exposures).
Table 18: CET1 Capital
Total Equity
Less: AT1 Capital
Adjusted Capital
Prudential Filters:
Intangibles
Deferred Tax
IFRS 9 (Transitional adjustment)*
Others
Common Equity Tier 1
31/12/2020
31/12/2019
Transitional
Fully Loaded
Transitional
Fully Loaded
€m
€m
€m
€m
1,951
(245)
1,706
(72)
(213)
122
(8)
1,535
1,951
(245)
1,706
(72)
(343)
-
(9)
1,282
1,997
(122)
1,875
-
(66)
(170)
134
(8)
1,765
1,997
(122)
1,875
-
(66)
(337)
-
(8)
1,464
*The CET1 transitional impact to the Group as a result of EU Regulation 2017/2395 mitigating the impact of the introduction of IRFS 9 own funds. This was further amended by
the adoption of Regulation EU 2020/873 (“CRR Quick Fix”).
Transitional (regulatory) capital
The year on year transitional CET1 capital
reduced by €230m to €1,535m at 31
December 2020 (31 December 2019:
€1,765m). This reduction was primarily
driven by P&L losses in the year €(162)m
after tax and the phasing of the prudential
filters €(61)m.
Table 19: RWAs
RWAs
Credit risk
Counterparty credit risk*
Securitisation
Operational risk
Other**
Total RWAs
Fully loaded capital
The year on year fully loaded CET1 capital
reduced by (€182m) to €1,282m at 31
December 2020 (31 December 2019:
€1,464). This reduction was primarily
driven by P&L losses in the year €(162)m
after tax.
Risk Weighted Assets (RWAs)
The following table sets out the Group’s risk
weighted assets (RWAs) at 31 December
2020 and 31 December 2019.
31/12/2020
31/12/2019
Transitional
Fully Loaded
Transitional
Fully Loaded
€m
€m
€m
€m
6,958
137
165
672
548
8,480
6,958
137
165
672
539
8,471
8,341
141
90
695
745
10,012
8,341
141
90
695
729
9,996
*Counterparty credit risk includes Treasury, Repo & CVA RWAs
**Other includes Standardised Exposures including a receivable in 2019 in relation to loan deleveraging (RWAs of €273m)
RWAs reduced by €1,532m (on a transitional basis) during the year ended 31 December 2020. This was primarily driven by de-
recognition of underlying Glas II exposures (€273m) in Q1 2020 and Glenbeigh II exposures (€1,121m) in Q4 2020.
58
Permanent TSB Group Holdings plc - Annual Report 2020
Risk Management
The information in Section 3.1, 3.2 and 3.3
on pages 72 to 83 in Risk Management
identified as audited (with the exception of
the boxed parts of these sections clearly
identified as unaudited), forms an integral
part of the audited financial statements
as described in the basis of preparation
on page 153. All other information in Risk
Management is additional information and
does not form part of the audited financial
statements.
1. Risk Management and Governance
The nature of risk taking is fundamental
to a financial institution’s business profile.
It follows that prudent risk management
forms an integral part of the Group’s
governance structure.
Within the boundaries of the Board-
approved Risk Appetite Statement (RAS),
the Group follows an integrated approach
to Risk Management, to ensure that all
risks faced by the Group are appropriately
identified and managed. This approach
ensures that robust mechanisms are in
place to protect and direct the Group in
recognising the economic substance of its
risk exposure.
The Group implements a risk management
process, which consists of the following
key aspects:
• Risk Identification;
• Risk Assessment and Measurement;
• Risk Mitigation and Control;
• Risk Monitoring and Testing; and
• Risk Reporting and Escalation
Enterprise Risk Management
Framework
The Enterprise Risk Management
Framework (RMF) is the Group’s
overarching Risk Management Framework
articulating the Risk Management Process
governing risks within the following key
risk categories; Capital Adequacy Risk,
Liquidity & Funding Risk, Market Risk,
Credit Risk, Strategic Business Risk,
Operational Risk, Information Technology
(‘IT’) Risk, Model Risk, Compliance Risk,
Conduct Risk and Reputational Risk. The
RMF outlines the Group-wide approach
to the identification; assessment and
measurement; mitigation and control;
monitoring and testing; and, reporting
and escalation of risk across the outlined
risk categories. The Group manages,
mitigates, monitors and reports its risk
exposure through a set of risk management
processes, activities and tools.
The Board Risk and Compliance
Committee (BRCC) provides oversight and
advice to the Board on risk governance
and supports the Board in carrying out its
responsibilities for ensuring that risks are
properly identified, assessed, mitigated,
monitored and reported and that the
Group’s strategy is consistent with the
Group’s Risk Appetite.
Risk Appetite and Strategy
The Group’s RAS documents are owned by
the Board and supported by the CRO. The
RAS describes the Group’s Risk Appetite
at the enterprise level, serving as a
boundary for the Group’s business, support
and control function leaders to; enable a
consistent approach to risk management;
endorses risk discipline; and, integrates risk
management into decision making at all
levels of the organisation. The RAS further
ensures the Group’s risk is communicated
clearly and well understood by both Senior
Management and Group employees so that
risk management is continually embedded
into the Group’s culture.
The structure of the RAS enables the Group
to maintain robust discussions of risk
taking and risk management and provides
a commonly understood baseline against
which management recommendations and
decisions can be debated and effectively
and credibly challenged.
The RAS is an articulation of how the
Group’s appetite for and tolerance of risk
will be expressed. This comes in the form
of qualitative statements about the nature
and type of risk that the Group will take on,
and quantitative limits and thresholds that
define the range of acceptable risk. The
RAS includes component Risk Appetite
statements for each of the distinct key
risk categories including qualitative
expressions of Risk Appetite as well as
quantitative measures which translate the
qualitative expressions of Risk Appetite
into actionable metrics (RAS Metrics) and
supporting key risk indicators (KRIs) that
can be monitored and reported to ensure
prompt and proactive adherence with the
Board-approved Risk Appetite.
The Group has a straight forward business
model to deliver a full-service Retail
and SME Bank with a low Risk Appetite
exclusively focussed on the Republic of
Ireland. In light of this, the Risk Appetite is
not decomposed into individual business
unit-specific statements of Risk Appetite.
Risk Governance
The Group’s risk governance structure
establishes the authority, responsibility,
and accountability for risk management
across the Group and enables effective and
efficient monitoring, escalation, decision-
making, and oversight with respect to risks
by appropriate Board and management-
level governing bodies.
The responsibilities set out below relate to
risk management activities. Further roles
and responsibilities are documented in the
Internal Control Framework (“ICF”), the
Board Manual and the committees Terms
of Reference.
The design of the Group’s risk governance
structure is informed by a set of risk
governance principles that are based on
relevant regulatory guidelines.
These principles include:
• Committee Structure: The number of
committees at Board and Management
levels reflects the nature and types
of risk faced by the Group. Criteria for
establishing risk sub-committees give
due consideration to the: purpose of the
committee; duration of the committee;
proposed membership; committee
reporting line; and flight path for outputs
from the committee.
• Board Committees: Made up of
Non-Executive Directors whose role
is to support the Board in overseeing
risk management and overseeing and
challenging Senior Management’s
decisions.
• Management Committees: Bring
together Senior Managers in the
Group who individually and collectively
possess the requisite skills, expertise,
qualifications, knowledge and experience
to exercise sound, objective judgement,
commensurate with the risk profile of
the Group.
59
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Risk Management
(continued)
•
Independence Safeguards: The
risk governance structure features
safeguards to protect the independence
of key relationships between Senior
Executives and the Board. In this
respect, the ExCo may not override or
modify decisions of the ALCO, GRC
or GCC committees, but may appeal
decisions to the Board (or relevant
Board committee). Additionally, the CRO
is assigned the right to refer/appeal
planned management action agreed
by ExCo risk sub-committees, where
the CRO considers such action to be
inconsistent with adherence to the
Board-approved Risk Appetite.
• Flow of Risk Information: The risk
governance structure establishes
independent reporting lines which
facilitate effective risk oversight by the
Board via the BRCC.
• Communication of Risk Information:
Risk information is prioritised
and presented in a concise, fully
contextualised manner, to enable robust
challenge and informed decision-
making throughout the risk governance
structure.
• Appropriateness: The number of overall
governance committees/fora in the
Group, the length of time per meeting,
the number of meetings per year, and
the number of meetings each Director/
Executive attends should be appropriate
to the Group’s resources and business
model. This should be reviewed on a
regular basis and the feedback of the
committee members should be sought.
The diagram below depicts the Group’s risk
governance structure.
Risk Governance Structure
Board
CEO
Nomination, Culture & Ethics Committee
Audit Committee
Risk & Compliance Committee
Remuneration Committee
Executive Committee
Risk
Committee
Growth
Committee
Capital Adequacy
Committee
Assets and Liabilities
Committee
Customer
Committee
Credit
Committee
Key Risk Governance Roles and Responsibilities
Committee/Role
Key Responsibilities
Board
Responsible for the Group’s business
strategy, financial soundness, key
personnel decisions, internal organisation,
governance structure and practices, risk
management and compliance obligations.
A key role of the Board is to ensure that risk and compliance are properly managed in
the business. Key risk responsibilities of the Board include, but are not limited to:
• Understanding the risks to which the Group is exposed and establishing a
documented Risk Appetite for the Group;
• Defining the strategy for the ongoing management of material risks; and
• Ensuring that there is a robust and effective ICF that includes well-functioning
independent internal risk management, compliance and internal audit functions as
well as an appropriate financial reporting and accounting framework.
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Permanent TSB Group Holdings plc - Annual Report 2020
Committee/Role
Key Responsibilities
The Committee supports the Board in carrying out its responsibilities of ensuring
that risks are properly identified, assessed, mitigated, monitored and reported, and
that the Group is operating in line with its approved Risk Appetite. Key activities of the
BRCC include, but are not limited to:
• Reviewing and making recommendations to the Board on the Group’s risk profile,
both current and emerging, encompassing all relevant risks categories as described
in the RMF;
• Reviewing and making recommendations to the Board in relation to the Group’s
RMF, RAS and the Group Recovery Plan;
• Monitoring and escalating positions outside Risk Appetite to the Board, within
agreed timeframes and approving and overseeing proposed Remediation Plans
aimed at restoring the Group’s risk profile to within the approved Risk Appetite;
• Reviewing and approving the key components of the Group’s Risk Management
Architecture and relevant supporting documents;
• Communicating all issues of material Group reputational and operational risk
directly to the Board;
• Reviewing and approving Credit Policy, Credit related strategy and any material
amendments to Credit Policy;
• Reviewing and making recommendations to the Board on the adequacy of capital
and liquidity in the context of the Group’s current and planned activities (via
reviewing relevant outputs from Internal Capital Adequacy Assessment Process
(ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP)), including in
relation to proposed mergers, acquisitions or disposals; and
• Promoting a sound Risk Culture across the Group.
In the context of Risk Management, the ExCo is primarily responsible for:
• The oversight of strategic risk associated with the development and execution of
the Group’s Management Agenda and Financial Plans. The GRC is a Committee of
the ExCo with delegated responsibility for Group-wide risk management issues.
The ExCo is the ultimate point of escalation for Group-wide specific issues save for
those matters reserved for the Board or its Committees; and
• Ensuring that the operations, compliance and performance (through delivery of
the Management Agenda and Financial Plans, as well as policies, practices and
decisions of the Group) are carried out appropriately, are correctly aligned to
the Group Strategy and the interests of its shareholders while operating within
applicable regulatory and legal requirements.
Board Risk and Compliance
Committee (BRCC)
Oversees and provides guidance to the
Board on risk governance and strategy.
This guidance includes recommendations
to the Board on current and future risk
exposure, tolerance and appetite. The
committee oversees Management’s
implementation of risk strategy including
capital and liquidity strategy, the setting
of risk and compliance policies and the
embedding and maintenance throughout
the Group of a supportive culture in
relation to the management of risk and
compliance.
Executive Committee (ExCo)
ExCo is the Senior Management
Executive Committee for the Group, and
is the custodian of the Group’s collective
Management Agenda, Financial Plans
and Risk Management Architecture as
developed through the annual Integrated
Planning Process (IPP).
ExCo is the accountable body for the
Group’s operations, compliance and
performance; defining the Group’s
organisational structure; ensuring the
adoption, application and maintenance
of all standards set by the Board; and a
Forum for Group-wide colleague and other
functional issues and ensuring that a
robust and resilient operating framework
exists within which the Group’s activities
are undertaken.
The committee is chaired by the CEO who
is accountable to the Board.
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(continued)
Committee/Role
Key Responsibilities
Assets and Liabilities Committee
(ALCO)
ALCO reviews, and is responsible for
overseeing all activities relating to
the management of Asset Liability
Management (ALM), Treasury and Market
Risks including Liquidity Risk, Interest
Rate Risk, Treasury Counterparty Risk
and Foreign Exchange Risk. It is the body
accountable for the evaluation of other
potential drivers of earnings volatility,
including, but not limited to, competitive
and external market pressures, and for
approving optimisation and hedging
strategies against those risks. ALCO is a
sub-committee of the ExCo.
Group Risk Committee (GRC)
GRC is an ExCo sub-committee chaired by
the Chief Risk Officer, who has unfettered
access to the Board Risk and Compliance
Committee (“BRCC”). It serves as a forum
for Group-wide Risk Management issues
and maintains oversight across all of the
Bank’s key Risk Categories, excluding
those which fall under the remit of the
CAC and the ALCO.
Key activities of the ALCO include, but are not limited to:
• Recommending the relevant ALM, Treasury and Market Risk elements of the
Group’s RAS for approval by the Board;
• Refresh and recommend for onward approval a suite of policies;
• Maintaining, monitoring and enforcing adherence to the Group’s Risk Management
Frameworks and policies for all ALM, Treasury and Market Risks;
• Overseeing and monitoring the ALM, Treasury and Market risks to which the Group
is exposed and to consider and approve strategies to mitigate such risks;
• Maintaining and assessing the ALM, Treasury and Market Risk profiles against set
limits and propose remediation plans to restore Risk Appetite where required;
• Reporting any breaches of approved limits in accordance with agreed protocol;
• Managing the capital requirements for the Group’s ALM, Treasury and Market Risks
in line with the capital adequacy directive;
• Ensuring there is adequate and effective segregation of duties within Treasury and
to approve any significant amendment to the responsibilities of Treasury; and
• Approving new products or material changes to existing products which have
interest rate or capital implications;
• Approval of the Funds Transfer Pricing (FTP) methodology and metrics, to ensure
that such process is economically fair, transparent and incentivises appropriate
behaviour in accordance with FTP Policy.
The GRC monitors and enforces adherence to the Group’s Risk Frameworks, Risk
Policies and Risk Limits. It is the guardian of the Group’s Risk Register and Risk
Appetite and is responsible for monitoring the total risk position of the Group.
Key activities of the GRC include, but are not limited to:
• Measuring and monitoring the total risk position of the Group and maintaining a Risk
Register of Top and Emerging risks facing the Group, together with an assessment
of the probability and severity of those risks;
• Monitoring and reporting on regulatory developments and upstream/horizon risk in
relation to all relevant risk categories and communicating all material issues to the
BRCC or the Board as appropriate;
• Monitoring and assessing the Group’s risk profile and action trackers against Risk
Appetite and recommending remediation plans to restore Risk Appetite where
required;
• Reporting any breaches of approved thresholds in accordance with agreed protocol;
• Recommending proposed changes to the Group’s Risk Appetite for Board approval;
• Maintaining, monitoring and enforcing adherence to the Enterprise Risk
Management Framework, for all key risk categories excluding those which fall
directly under the remit of the CAC and the ALCO.
• Responsible for overseeing Resolution Planning activity which involves delivering
the prescribed templates/annual submissions.
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Permanent TSB Group Holdings plc - Annual Report 2020 Committee/Role
Key Responsibilities
Group Growth Committee
The Group’s Growth Committee
(GrowthCo) provides context and
promotes understanding of the
commercial agenda. In this context, the
commercial agenda is defined as the
plans by the organisation to meet both
income and cost targets as set through
the MTP, in the context of the Group’s Risk
Appetite. GrowthCo exists to prioritise
opportunities, resources and capabilities
in order to deliver the first year of MTP,
and make recommendations to maximise
shareholder value in future years which
build on the group ambitions and feed
these recommendations into the ExCo
and the IPP. GrowthCo is an ExCo sub-
committee.
Capital Adequacy Committee (CAC)
CAC is responsible for the detailed
execution and initial oversight
responsibilities for Capital Adequacy.
CAC is also responsible for reviewing the
adequacy of capital on an ongoing basis
and should receive monthly reporting
on the capital position. CAC is a sub-
committee of the ExCo.
Group Credit Committee (GCC)
GCC is the body accountable for
the execution and delivery of the
Group’s system of Portfolio Credit
Risk Management, encompassing the
identification, measurement, monitoring
and reporting of Portfolio Credit Risks.
GCC ensures that the appropriate
operating frameworks governing the
portfolio credit risk management
activities of the Group are approved and
are enforced. It operates as the forum
for Group-wide Portfolio Credit Risk
Management issues across the full Credit
Risk Management Lifecycle. GCC is a sub-
committee of the GRC.
The Group’s Growth Committee is responsible for:
• Prioritising opportunities, resources and capabilities in order to deliver the first year
of MTP. The Committee is also responsible for proposing new Management Agenda
items for consideration by the CEO and the ExCo.
• Acting as a gateway through which all developments to product, price, service or
channels are initiated and reviewed prior to delivery or submission to the Growth
Committee.
• Acting as a steering group to all relevant Group Performance Agenda work.
The CAC is responsible for:
• Monitoring (i) the minimum capital requirements set by the Group’s Regulators; and
(ii) the Basel III minimum Solvency rules, as implemented by the CRD IV Directive
and Regulation, which details the Pillar 1 minimum capital ratios that the Group
needs to hold;
• Reviewing and recommending ICAAP documentation to the BRCC/Board;
• Maintain a level of oversight and management of the ongoing execution of capital-
impacting stress testing exercises and;
• Considering both the quality and quantity of capital held by the Group including the
composition of the Group’s total capital resources (i.e. the preferred split of CET
1, Tier 1 and Tier 2 capital) while remaining within the parameters of the approved
budget and recommending any remedial actions to the ExCo/Board accordingly.
The GCC is responsible for developing and implementing portfolio credit policy
within the Group. The policy addresses all material aspects of the full credit lifecycle,
including Credit Risk assessment and mitigation, collateral requirements, collections
and forbearance and the risk grading of individual credit exposures. Key activities of
the GCC include, but are not limited to:
• Recommending the relevant Portfolio Credit Risk elements of the Group’s RAS for
approval by the Board;
• Recommending approval following challenge of the proposed impairment charge
and approach to high authorities (the BRCC/BAC) for reporting periods;
• Monitoring adherence to the Group’s Credit Policy, including discretion limits and
structure for underwriting, scoring, collections, recoveries and provisioning within
the boundaries of the Group’s RAS (as approved by the Board);
• Monitoring the portfolio credit risks to which the Group is exposed;
• Maintaining and assessing the portfolio credit risk profile against set limits and
proposing remediation plans to restore Risk Appetite limits where required;
• Reporting any breaches of approved limits in accordance with agreed protocol; and
• Acting as the gateway through which decisions required from higher authorities are
reviewed prior to submission (e.g. the BRCC/Board) and they are the forum review
of Group-wide credit risk management issues.
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(continued)
Committee/Role
Key Responsibilities
Group Customer Committee
The Group Customer Committee ensures
that the Group monitors, controls and
mitigates Conduct and Customer
Outcome Risk by embedding a culture
where achieving positive customer
outcomes in order to generate sustainable
long-term shareholder value permeates
the Group’s approach and thinking.
In doing so, it oversees all significant
business strategies and propositions that
may have a material impact on customers,
and in turn, ensures the ‘Customer
Value Equation’ is delivered at all times.
This covers new product development,
product delivery and fulfilment, ongoing
product and customer management, and
customer interaction. Customer Co is a
sub-committee of the GRC.
Role of the Chief Risk Officer
The Chief Risk Officer (CRO) has
overall responsibility for overseeing the
development and implementation of the
Group’s Risk Function, including overseeing
development of the Risk Management
Framework, supporting frameworks,
policies, processes, models and reports
and ensuring they are sufficiently robust
to support delivery of the Group’s strategic
objectives and all of its risk-taking
activities.
The CRO has independent oversight of
the Group’s Risk Management activities
across all key risk categories. The CRO is
responsible for independently assessing,
monitoring and reporting all material risks
to which the Group is, or may become,
exposed. The CRO is a member of the
Group’s Executive Committee and directly
manages the Group’s Risk Function. The
CRO has a shared reporting line to the
BRCC and the Chief Executive Officer
(CEO).
The CRO is accountable for the
development of the Group’s RAS,
which the CRO submits to the GRC for
recommendation to the BRCC, who in
turn recommend approval to the Board.
The CRO is responsible for translating the
approved Risk Appetite into risk limits
which cascade throughout the business.
Together with Management, the CRO
is actively engaged in monitoring the
Group’s performance relative to risk limit
adherence and reporting this to the Board.
The CRO’s responsibilities also encompass
64
The Group Customer Committee is responsible for, but not limited to:
• Providing guidance to Executive Management (including the ExCo and other
ExCo sub-committees) for business and commercial decisions which may have a
material impact on customers and for the endorsement of such proposals;
• Reviews “high impact” customer events, issues and complaints arising, to provide
both guidance on significant individual issues/events, and to analyse trends to
inform future strategy and decision-making with regard to customers;
• Reviews the Conduct Risk that exists within the Group against the Board-approved
Conduct Risk Appetite and Principles; and
• Serving as the central oversight body for all significant customer matters ensuring
fair treatment of customers (via the ‘Customer Value Equation’) is at the heart of
key decisions made by the business.
independent review and participation in
the Group’s Integrated Planning Process
(IPP), capital and liquidity planning and
the development and approval of new
products.
Specifically, the CRO is tasked with:
• Providing Second Line Of Defence
assurance to the Board across all risk
categories;
• Providing independent advice to the
Board on all risk issues, including the
Risk Appetite and risk profile of the
Group;
• Monitoring and enforcing Group-wide
adherence to frameworks, policies, and
procedures, with the aim of ensuring that
risk-taking is in line with the point-in-
time Board approved Risk Appetite;
• Monitoring material risks to which the
Group is, or may become, exposed,
and overseeing development of risk
mitigating responses as appropriate;
• Developing and submitting the
ICAAP, ILAAP, Recovery Planning and
Resolution Planning for Board approval,
and
• Developing and maintaining the Group’s
risk management organisation.
In connection with these responsibilities,
the CRO is assigned the right of appeal
over planned management action agreed
by the ExCo Risk Sub-Committees (such
as the ALCO and the GCC) when the CRO
considers such action to be inconsistent
with adherence to the Board approved Risk
Appetite.
Permanent TSB Group Holdings plc - Annual Report 2020 Three Lines of Defence
A ‘Three Lines of Defence’ model has been adopted by the Group for the effective oversight and management of risks across the Group.
Line Of Defence
High-Level Roles And Responsibilities
First Line of Defence
Functions and teams in the First Line
undertake frontline commercial and
operational activities. In their day-to-day
activities, these teams take risks which
are managed through the effective design
and operation of mitigating controls.
Each Head of First Line Function/Team
is responsible for ensuring that activities
undertaken are within the Board approved
Risk Appetite.
Second Line of Defence
The Group Risk Function is an
independent Risk Management function,
under the direction of the CRO, and is the
key component of the Group’s Second
Line of Defence. The Group Risk Function
is responsible for the ongoing assessment,
monitoring and reporting of risk-taking
activities across the Group.
Third Line of Defence
Group Internal Audit (GIA) comprises
the Third Line of Defence. It plays a
critical role by providing independent
assurance to the Board over the adequacy,
effectiveness and sustainability of the
Group’s internal control, risk management
and governance systems and processes,
thereby supporting both the Board
and Senior Management in promoting
effective and sound risk management
and governance across the Group. All
activities undertaken within, and on
behalf of, the Group are within the scope
of GIA. This includes the activities of risk
and control functions established by the
Group. The Head of GIA reports directly to
the Chair of the Board Audit Committee
(BAC), thus establishing and maintaining
independence of the function.
First Line – Business Units
• Embedding Risk Management Frameworks and sound Risk Management practices
into standard operating procedures. This includes creating explicit links between
maintaining and delivering robust governance, and risk and control processes to
performance management, with clear consequences for non-adherence;
• Adhering to appropriate risk frameworks, policies and procedures;
• Complying with regulatory and legal obligations; Identifying, assessing, measuring,
monitoring and reporting on Risk Management performance in activities; and
• Accounting for the effectiveness of Risk Management in operation including
ensuring that procedures and controls are operated on a consistent and ongoing
basis in order to manage risks.
Second Line – Group Risk Function
• Developing and monitoring the implementation of Risk Management frameworks,
policies, systems, processes and tools;
• Ensuring that Risk Management frameworks, policies, systems, processes,
procedures and tools are updated and reviewed regularly and that these are
communicated effectively to the First Line;
• Ensuring that the above frameworks and tools cover risk identification, assessment,
mitigation, monitoring and reporting;
• Monitoring the effectiveness of the control framework;
•
Influencing or challenging decisions that give rise to material risk exposure; and
• Reporting on all these items, including risk mitigating actions, where appropriate.
Third Line – Group Internal Audit
• Undertaking a risk-based, independent assessment of the adequacy and
effectiveness of the Group’s governance, risk management and control processes,
with the ultimate objective of providing an opinion on the control environment to the
BAC;
• Periodically assessing the Group’s overall risk governance framework including but
not limited to, an assessment of:
- the effectiveness of the Risk Management and Compliance Functions;
- the quality of risk reporting to the Board and Senior Management; and
- the effectiveness of the Group’s system of internal controls;
• Providing independent assurance to the BAC on the above;
• Recommending improvements and enforcing corrective actions where necessary;
• Tracking the implementation of all internal audit recommendations and external
audit management points; and
• Reporting to the BAC on the status and progress of the above.
2. Principal Risks and Uncertainties
Risk registers, containing details of current and emerging risks, from each of the Group Risk functions utilise the ‘top down’ Risk
Identification and ‘bottom up’ Risk and Control Self-Assessment (RCSA) processes and form the basis of the Banks ‘Top and Emerging
Risks’ report. The ‘Top and Emerging Risks’ report is included in the CRO report quarterly, this is presented to Board and is used to ensure
identification, measurement, management and monitoring of all material risks.
The following describes the risk factors that could have a material adverse effect on the Group’s business, financial condition, results of
operations and prospects over the short to medium term.
The risk factors discussed below should not be regarded as a complete and comprehensive statement of all potential risks and
uncertainties as there may be risks and uncertainties of which the Group is not aware or which the Group does not consider significant
65
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Risk Management
(continued)
but which may become significant. As
a result of the challenging conditions
in the global financial environment due
to COVID-19 and the consequences of
Brexit due to ongoing political uncertainty
and economic weakness within the
Eurozone, the precise nature of all risks and
uncertainties that the Group faces cannot
be predicted as many of these risks are
outside of the Group’s control.
Strategic Business Risk
Strategic Business Risk is the risk to
earnings and capital (viability/sustainability
of the Group) arising from adverse strategic
decisions, inadequate or insufficient
implementation of decisions, or a lack of
responsiveness or adaption to external
environment changes.
Business Risk is typically assessed over
a one year horizon while Strategic Risk
generally relates to a longer timeframe
and pertains to volatilities in earnings
arising from a failure to develop and
execute an appropriate strategy. Business
Units are responsible for delivery of their
business plans and management of such
factors as pricing, sales and loan volumes,
operating expenses and other factors that
may introduce earnings volatility. The
development of new markets, products and
services and significant changes to existing
ones is addressed under the Group’s New
Product Approval Process.
Business Unit Strategy is developed within
the boundaries of the Group’s Strategy
as well as the Group’s Risk Appetite
Statement. Monitoring of Strategic
Business Risk is evaluated through regular
updates to the GRC, BRCC and Board. The
Group also reviews Strategic Business Risk
as part of the risk identification process.
COVID-19
The current economic shock as a result
of the COVID-19 virus outbreak poses
a significant challenge to businesses
in Ireland and globally. The outlook
is challenging with the long term
consequences largely dependent on its
severity and the ensuing timeline over
which business activity and employment
levels begin to recover.
Anticipated higher impairments and
in time significantly higher arrears
profile, adjustments to RWAs due to
declining credit quality (impacting the
66
risk parameters), higher costs and lower
income will together negatively impact the
Group’s financial performance, capital and
financial position. In light of the current
economic outlook, the net impairment
charge on the Group’s loan book increased
to €155m.
The ESRI projects growth of 4.9% for the
year while Davy forecasts GDP to grow
by “4.8% in 2021 on the back of resilient
multinational export sectors, but with a
delayed recovery in indigenous sectors
due to COVID-19 restrictions so that GDP
growth accelerates to 5.5% in 2022.”
The unprecedented nature of the
crisis gives rise to an elevated degree
of uncertainty regarding the Group’s
financial and capital outlook at this time.
Management continue to review and
benchmark internal projections against
economic assessments published by
reputable independent sources.
In addition, the COVID-19 virus brought
significant change across the organisation
in relation to our ‘Ways of Working’ with
reliance on remote working and remote
collaboration becoming the new normal
and redeployment and reorganisation
of how teams are setup to work being
required.
The health of all colleagues continues to be
our utmost priority and in this regard work
is being undertaken in designing a ‘future
fit’ organisation for a return to the physical
workplace, as well as an enduring home
working approach. To assist with this, we
are developing longer term technology
solutions and an improved equipment
infrastructure to enable flexible working
Brexit
Whilst a deal between the UK and Europe
has been negotiated, it is nevertheless
widely expected that the UK’s decision
to leave the European Union will have an
adverse impact on the Irish economy in
the near-to-medium term which, in turn, is
likely to negatively impact PTSB’s results
and financial outlook. However, the extent
of the likely impact of ‘Brexit’ on the Irish
economy remains uncertain.
Economic Outlook
The CSO estimates that Irish GDP grew
by 3.3% in 2020 whereas GDP fell by
6.8% in the euro area and 6.4% in the EU
according to Eurostat. This overall figure
disguises an increasingly two-speed Irish
economy, one in which exports grew by
4.3% and industrial and ICT output grew by
17%, while domestic demand, consumer
spending and investment fell by 8.8%,
9.9% and 14% respectively.
Economic projections for 2021 are heavily
dependent on assumptions regarding the
extent of lockdowns and vaccine efficacy.
Mirroring economic developments, the
Department of Finance announced that
Ireland ran a general Government deficit of
€19bn or 5.5% of GDP in 2020 compared
to an 8.9% deficit for the Eurozone. Key
to this better performance has been
the remarkable resilience of income tax
receipts which declined just 1% in the
year and corporation tax receipts which
increased by 9%; these partly offset a
23% increase in public expenditure. Davy
estimates Ireland’s government balance
will narrow modestly to €18bn, 4.6% of
GDP, in 2021 and to €12bn, 3% of GDP,
in 2022. The Central Bank estimates
“Government debt stood at €255bn in
Q3/2020, the highest level in the series for
a second consecutive quarter.”
During 2020, the ECB committed itself
to a ‘lower for longer’ interest rate policy
which saw it maintain its 0% repo rate
and commence a Pandemic Emergency
Purchasing Programme (PEPP) in
addition to expanding its Asset Purchase
Programme (APP). Statista estimates
the Irish inflation rate was -0.2% in 2020
compared to an EU rate of 0.23%.
The Central Bank estimates Irish
household debt had fallen to 104% of GDP
by the end of 2020 leaving Irish households
with the seventh-highest debt level in the
EU. This stands in marked contrast to the
situation in 2011 when the ratio peaked at
210%, the highest in the EU. The Central
Bank also noted that loans for house
purchase grew at 0.9% p.a. in December
2020, less than half the 1.9% rate a year
earlier. It further noted that the year was
also “marked by a significant contraction
in consumer borrowing, with repayments
exceeding new drawdowns” by €2.2 billion,
or 16%.
The pandemic has caused the household
savings ratio almost to double from 12.4%
in 2019 to 23.2% in 2020. The Central Bank
noted that “Irish household deposits in
credit institutions reached a historic high
of €125 billion at end-2020, increasing by
€14.2 billion over the year.” Meanwhile,
corporate deposits grew 18% to €73bn
over the year.
Permanent TSB Group Holdings plc - Annual Report 2020 BPFI notes that 35,617 mortgages to a
value of €8,365 million were drawn down
in 2020 and a total of 43,151 mortgages to
the value of €10,340 million were approved
in 2020. While these were the lowest levels
since 2017 reflecting the impact of the
lockdowns on the market, of particular note
is the level of mortgage approvals in the
final months of the year. BPFI comments:
“Our latest mortgage data is showing
strong year-on-year growth in approvals
and drawdowns in December and Q4,
respectively. In fact, during the final quarter
of 2020, we recorded the highest value
of drawdowns since Q4 2008. This was
driven by first-time buyers who reached
their highest levels in both volume and
value terms since Q3 2007.” The average
mortgage for house purchase which was
over €250,000 in Q4/20, 7% higher than
the €234,000 figure a year earlier, points to
inflationary pressures in the market.
Housing completions in Q4 2020 surged
16% higher than Q4 2019 levels, with the
completion of 7,400 units marking the
best ever quarter for homebuilding in the
available 10 years of CSO data. However,
this only brought the full-year total to
20,700, still 1.9% lower than the 21,100
units built in 2019. The BPFI Housing
Market Monitor for Q3/20 notes that
commencement notices were 20% to 50%
lower during the year compared to 2019.
It concludes that “lower than expected
commencement numbers in 2020 will put
pressure on the number of new dwellings
to be completed in 2021 at a time when
most observers expected housing supply
to catch up with both current and pent-up
demand, estimated to be around 35,000
units. It is now likely that housing output
will not reach these levels until the end
of 2023.” Davy projects “that housing
completions will rise to 21,000 in 2021 and
24,000 in 2022.”
Activity within the existing stock of homes
has been noticeably lower in Ireland
than elsewhere for many years and that
difference became even more pronounced
during 2020. Daft and MyHome both
recorded the lowest number of listings on
their sites for many years. Davy suggests
that “negative equity and borrowers
unwilling to refinance out of favourable
tracker mortgage rates” partly explain this
phenomenon. With mortgages drawn on
just 1.2% of existing homes annually, this
is the lowest level of activity in this market
since the 1970s.
Furthermore, as Goodbody notes, non-
households now account for 40% of new
home purchases. The January 2021 report
from Society of Chartered Surveyors
Ireland (SCSI), The Real Costs of New
Apartment Delivery, outlines the high cost
of apartment delivery makes build-to-rent
the only viable model for many apartment
types and concludes that the private
rented sector (PRS) is now the buyer of
choice for these apartment types. Knight
Frank’s Dublin PRS Report comments that
there “has been a move away from home
ownership to PRS, with 60% of under-35s
now renting in Dublin” and that “interest in
PRS has primarily been driven by pension
funds.” At the last census, the home
ownership rate in Ireland was 67.6%, lower
than the EU average of 69% and far below
the 79.3% peak in 1991.
At the outset of the pandemic, there was
an expectation house prices would drop.
However, after an initial drop, house prices
quickly stabilised and the Residential
Property Price Index (RPPI) increased by
0.2% in the year to end-November. Davy
expects house prices to rise by 3% during
2021. They attribute this growth to the
significant pent-up demand as a result of
the ongoing housing shortfall, Government
incentives such as Help-to-Buy and
the Affordable Purchase Shared Equity
scheme, the increase in deposits and
increased bank willingness to lend. They
note that “the labour market damage has
been concentrated among younger, part-
time and low-paid workers”, groups not
normally considered natural homebuyers.
The impact of COVID-19 is particularly
evident in the rental market. After many
years of very high inflation, the Residential
Tenancies Board report that the “annual
national standardised average rent
increased by 1.4% (or €17 per month),
going from €1,239 in Q3 2019 to €1,256 in
Q3 2020” noting “this is the lowest national
annual growth rate since Q4 2012.”
Banks in Ireland face many challenges
– credit losses due to the impact of
COVID-19, excess deposits, negative
returns on high-quality liquid assets and
on deposits with the Central Bank, and
limited lending opportunities as a result
of constrained construction output, low
housing turnover and the impact of build-
to-rent on the new apartment sector.
These partly explain why all banks in
Ireland and many across Europe trade at a
significant discount to book equity.
Nevertheless, there is hope that with a
successful vaccine rollout, Ireland can
return to growth and many of these
headwinds will abate. Davy expects
“mortgage lending to grow to €9.5bn in
2021 and €11bn in 2022 as housing market
liquidity and homebuilding rebound” which
will see “the stock of mortgage lending
growing by 1.2% in 2022 to €91.4bn.”
When the business and travel restrictions
which have decimated businesses and
employment are finally lifted, the corporate
and SME sectors will need to undertake the
investments which they postponed initially
because of Brexit uncertainty and more
recently on virus concerns. This will afford
Irish banks further opportunities to put
their excess deposits to work.
Climate Risk
The Group is conscious of the effect that
climate change can have and may manifest
itself into two different ways, firstly on the
operations of our business and secondly, in
the longer term, as an associated financial
risk and increased credit risk for the Group.
Retail mortgage portfolios (such is the
Group’s focus) can be impacted by climate
related physical risks through persistent
or chronic changes in the environment.
Climate change can lead to an increase in
storms and flooding events, such events
can subsequently impact property values
and defaults, posing credit risk.
There is also a growing need to transition
to a low carbon economy, with likely major
impacts to reduce oil and gas power
generation and increase wind, solar and
wave technologies. If the pace of change
transition is too slow, a sharper adjustment
will be ultimately required, posing
macroeconomic and financial stability
risks.
Climate Risk and sustainability is captured
across a number of lenses including:
Green Products, Credit Assessment,
Capital allocation, Pricing, Corporate
Social Responsibility (CSR) and Carbon
footprint. Integrating Climate risk into the
broader risk management framework will
require PTSB to measure its potential
exposures to climate change. This
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has been an increasing area of focus
with the Group commissioning EY to
conduct a comprehensive sustainability
assessment of Permanent TSB in 2020.
This assessment covered many areas
but most ostensibly it addressed climate
risk and the effect that it will have on all
areas of the business. As a result of the EY
report a Sustainability Committee of Senior
Leaders from across the organisation was
mobilised and were tasked with turning the
findings of the report into an action plan
to implement across the Group. The work
of this Committee is expected to continue
through to 2021 and will include, amongst
other work streams, integrating climate risk
into the Group’s existing Risk Management
frameworks.
The Group have in place a Business
Continuity Management (BCM) plan
that takes into account adverse weather
conditions that may in some cases cause a
reduction in operational capacity. The BCM
plan is tested annually to ensure the Group
is prepared. The Group also discloses its
Carbon Emission (see page 40) and has
signed the Business in the Community
Low Carbon Pledge, committing to a 50%
reduction in Carbon Emissions by 2030.
Credit Risk
Credit Risk is defined as the risk of financial
loss due to the failure of a customer,
guarantor or counterparty, to meet their
financial obligations to the Bank as they
fall due.
The Group’s customer exposures are
originated and managed in Ireland.
The Group’s principal exposure is to
residential mortgages secured firstly
by a first legal charge on the property.
Economic uncertainty, (however it arises
e.g. Coronavirus, a public health crisis
transferring into an economic risk), as
well as the socio-political environment
adversely impacting or causing further
deterioration in the credit quality of the
Group’s loan portfolios. This may give rise
to increased difficulties in relation to the
recoverability of loans or other amounts
due from borrowers, resulting in further
increases in the Group’s impaired loans and
impairment provisions.
As losses from customer credit risk are
the principal financial risk to which the
Group is exposed more detailed analysis
of the risks, risk management policies and
68
current portfolio segmentation is provided
in section 3.1 of this review.
ordinary shares of the Group which
reduced to c.75% following the successful
capital raise in 2015.
Capital Adequacy Risk
The Group’s business and financial
condition could be affected if the amount
of its capital is insufficient due to:
• Materially worse than expected financial
performance;
•
Increases in risk weighted assets;
• Changes in the prescribed regulatory
framework; or
• Sales of assets.
The core objective of the Group’s Capital
Management Policy is to ensure it complies
with regulatory capital requirements
(Capital Requirements Regulation (CRR and
CRR2), Capital Requirements Directive IV
(CRD IV) and the Banking Recovery and
Resolution Directive (BRRD)) and to ensure
that it maintains sufficient capital to cover
its business risks and support its market
strategy.
The risk is that the Irish Government,
through its direct shareholding of the
Group, uses its voting rights or intervenes
in the conduct and management of the
business in a way that may not be in
the best interests of the Group’s other
stakeholders.
The Minister for Finance and the Group
entered into a Relationship Framework
Agreement dated 23 April 2015. The
Framework Agreement provides that the
Minister will ensure that the investment
in the Group is managed on a commercial
basis and will engage with the Group,
including in respect of the manner in
which he exercises his voting rights,
in accordance with best institutional
shareholder practice in a manner
proportionate to the shareholding interest
of the State in the Group.
As outlined in the Group’s RAS, the
Group undertakes an ICAAP to ensure
that it is adequately capitalised against
the inherent risks to which its business
operations are exposed and to maintain
an appropriate level of capital to meet the
minimum regulatory and SREP capital
requirements. The ICAAP is subject to
review and evaluation by the CBI as part
of its Supervisory Review and Evaluation
Process (SREP).
The management of capital within the
Group is monitored by the BRCC, ExCo,
CAC and ALCO in accordance with Board
approved policy.
Current and future budgetary policy,
taxation, the insolvency regime and other
measures adopted by the State to deal
with the economic situation in Ireland may
have an adverse impact on the Group’s
customers’ ability to repay their loans, the
Group’s ability to repossess collateral and
its overall pricing policy.
Liquidity and Funding Risks
Liquidity Risk is the risk that the Group
has insufficient funds to meet its financial
obligations and regulatory requirements as
and when they arise either through inability
to access funding sources or monetise
liquid assets.
While the key elements of the Basel III
requirements commenced in January
2014 and further rollout is expected to
continue on a phased basis until 2023, the
Group closely monitors other potentially
significant changes to the requirements
including measures which may culminate
in Basel IV regulations replacing or
supplementing Basel III.
Funding Risk is the risk that the Group is
not able to achieve its target funding mix,
is too dependent on particular funding
instruments, funding sources (retail/
wholesale) or funding tenors, fails to meet
regulatory requirements and, in extremis,
is not able to access funding markets or
can only do so at excessive cost and/or
Liquidity Risk.
Government Control and Intervention
In 2011, the Minister for Finance of Ireland
became the owner of 99% of the issued
These risks are inherent in banking
operations and can be heightened by other
factors and changes in credit ratings or
market dislocation. The level of Liquidity
Risk further depends on the size and
Permanent TSB Group Holdings plc - Annual Report 2020 quality of the Group’s liquid asset buffer,
the maturity profile of funding, as well as
broader market factors such as depositor
and investor sentiment/behaviour.
It is likely that risks would be further
exacerbated in times of stress. Given the
nature of the Group’s retail focus which
stems from its business model; liquidity
and funding risk will arise naturally due to
the maturity transformation of primarily
short term contractual deposits, albeit
recognising behavioural stickiness, into
longer term loans predominantly mortgage
lending.
The management of the Group’s Liquidity
and Funding risks are subject to strict
internal controls and reporting procedures
and are monitored by the ALCO and the
BRCC on a regular basis. Group Treasury is
responsible for the management of liquidity
and funding risk. Group Risk and GIA
provide further oversight and challenge to
the liquidity and funding risk framework
For further details on Funding and Liquidity
Risk, see section 3.2.
Market Risk
Market Risk is defined as the risk of losses
in on and off-balance sheet positions
arising from adverse movements in market
prices. Often Market Risk cannot be fully
eliminated through diversification, though
it can be mitigated using hedging.
From the Group’s perspective, Market
Risk consists of three components being
Interest Rate Risk, Credit Spread Risk and
Foreign Exchange Risk. These risks are
covered in detail in section 3.3.
The Group’s Risk Appetite Statement and
the associated Market Risk Framework
set out the Group’s approach to the
management of Market Risk, including
the Group’s approach to Market Risk
identification, assessment, measurement,
monitoring, mitigation and reporting. The
Market Risk Framework is approved by
the BRCC on the recommendation of the
ALCO.
All market risks arising within the Group
are subject to strict internal controls and
reporting procedures and are monitored
by the ALCo and BRCC on a regular basis.
Group Treasury is responsible for the
management of market risk exposures on
the balance sheet. Group Risk and Group
Internal Audit provide further oversight and
challenge of Group Treasury’s compliance
with the Market Risk Framework and
associated Policies.
Interest Rate Benchmarks
The London Interbank Offered Rate
(LIBOR), the Euro Interbank Offered Rate
(EURIBOR) and other rates and indices
which are deemed to be “benchmarks”
are the subject of recent international,
national and other regulatory guidance
and proposals for reform. Some of these
reforms are already effective while others
remain to be implemented. These reforms
may cause such benchmarks to perform
differently from the past or disappear
entirely or have other consequences that
cannot be predicted.
For PTSB this potentially may impact the
payment and receipt of interest on PTSB’s
securitised transactions and interest
rates swaps but the impact is considered
minimal given the low level of exposure.
The Group will continue to monitor and
address potential challenges from any
transition to new reference rates.
Model Risk
Model Risk is defined by the Group as an
adverse outcome (incorrect or unintended
decision or financial loss) that occurs as
a direct result of weaknesses or failures
in the design, implementation or use of
a model. Examples of the consequences
of a poorly functioning model include
inappropriate levels of impairment
allowances or capital, inappropriate credit
or pricing decisions, adverse impacts to
funding or liquidity damage to the Group’s
reputation.
In terms of Risk Appetite, the Group
expects that all material models function as
intended. The key factors which influence
Model Risk within PTSB include:
• Macro-economic risk – the Group’s
suite of models is built on data that
spans the period immediately prior to
the Global Financial crisis through the
recent recovery. The degree to which the
impacts of a new economic downturn
(particularly the current pandemic) will
mirror the last is uncertain. The degree
of risk increases with the speed and
volatility of economic change;
• Regulatory change – the pace of
evolution of regulation and guidance
increases the burden of maintaining the
Group’s regulatory models;
• Competition for skills – significant
competition exists within the Irish
market for those with the experience
and expertise to build, implement and
interpret models; and
• Data – encouraging customers to share
their data, particularly in the area of
environment and sustainability (ESG) is
a strategic area of focus for the Group in
enhancing model risk management.
Model Risk is managed in accordance with
the Group’s Model Risk Framework. This
framework provides the foundation for
managing and mitigating Model Risk within
the Group. Accountability is cascaded from
the Board and Senior Management via
the Group Enterprise Risk Management
Framework. This provides the basis for the
Group Model Governance Policy, which
defines the mandatory requirements for
models across the Group, including:
• the scope of models covered by the
policy, including model materiality;
• roles and responsibilities, including
ownership, independent oversight and
approval;
• key principles and controls regarding
data integrity, development, validation,
implementation, ongoing maintenance
and revalidation, monitoring, and the
process for non-compliance; and
• The Model Owner taking responsibility
for ensuring the fitness for purpose
of the models and rating systems,
supported and challenged by an
independent specialist function within
Risk that reports directly to the CRO.
The above ensures all models in scope
of policy, including those involved
in IFRS 9 and regulatory capital
calculation, are developed consistently
and are of sufficient quality to support
business decisions and meet regulatory
requirements.
The Group Model Governance Committee,
a sub-committee of the GRC is the primary
body for overseeing Model Risk. The Group
Risk Appetite Statement requires that key
performance indicators are monitored
for every model to ensure they remain fit
for purpose or appropriate mitigation is in
place. Material model issues are reported
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to Group and Board Risk Committees
monthly with more detailed papers as
necessary to focus on key issues.
Operational Risk and IT Risk
Operational Risk and IT Risk are defined as
the risk of loss or unplanned gains resulting
from inadequate or failed processes,
people, and systems or from external
events. Any significant disruption to the
Group’s IT systems, including breaches
of data security or cyber security could
harm the Group’s reputation and adversely
affect the Group’s operations or financial
condition materially. Risks from both these
risk categories are inherently present in the
Group’s business.
The Group has a low appetite for
Operational Risk and IT Risk and aims to
minimise the level of serious disruption
or loss caused by Operational or IT issues
to its customers, employees, brand and
reputation. The Group has no tolerance
for data or cyber security breaches
which may result in significant damage
to customer confidence and financial
stability. The Group has no appetite for
non-conformance with laws.
The Operational Risk Management
Committee (“ORMC”) monitors the
Operational and IT risks to which the Group
is exposed and oversees risk mitigation
performance and prioritisation related
to the management and control of these
risks. In fulfilling this role, the ORMC
reviews and discusses the outputs and
results of the RCSA Process, control
testing assessments, and Operational Risk
Event Processes to create awareness of
commonly experienced operational and
IT risk matters, to share learnings and to
enhance the control environment across
the Group. Furthermore, the ORMC reviews
and monitors operational and IT risk
KRIs, the operational and IT Risk Appetite
Statement, emerging risks and other
relevant operational and IT risk metrics on
an ongoing basis.
External events can have a major impact
on the Group’s operations. In 2020 we
experienced the unprecedented world-
wide COVID-19 pandemic and this coupled
with the increased risk of external fraud
and cybercrime as criminals try to exploit
the situation. A number of actions were
taken since Q1 2020 in order to ensure
that day to day business critical processes
were performed without disruption and to
maintain a safe and healthy environment
for staff and customers.
70
Progress continues to be made to improve
the Group’s defences and the Group’s IT
security defence mechanisms, and the
enhanced security programme. Scenario
testing is performed on an annual
basis, as outlined in the Enterprise Risk
Management Framework, for critical
processes including but not limited to:
Payments Systems Failure, Information
Security, Cyber Security, Internal Fraud,
Business Disruption, IT Resilience to ensure
existing processes support timely recovery.
Monitoring and incident management
processes are in place to detect and
recover from both cyber-attacks and IT
issues which may affect the availability
of critical IT systems. Regular disaster
recovery testing of critical systems is
conducted in order to test IT resilience. Any
changes made to the Group’s IT systems
or applications are governed by a change
management process.
From a people perspective, the Group
is challenged in its ability to retain and
nurture a high performing and diverse
workforce due to an extremely competitive
market, in particular the roles that require
key technical skills and those involved
in Control Functions. Our People Growth
Strategy involves a significant focus on
the identification of key talent, retention
and development strategies as well as a
series of programmes aimed at improving
capability at all levels of the Group. Our
Succession Planning processes have
been enhanced, in particular an increased
focus on gender diversity built into our
succession, development and senior talent
acquisition planning.
The Group’s Operational Risk and IT Risk
Management Frameworks outline the
Group’s approach to managing Operational
and IT risks and are applicable Group
wide. The framework defines the roles
and responsibilities for the oversight of
Operational and IT risks, along with the
ownership and processes in place for the
identification, assessment, mitigation,
monitoring, testing and reporting of
Operational and IT risks in the Group.
A RCSA process is in place for the
identification of Operational and IT risk
throughout the Group. It provides a
mechanism for consistently capturing,
measuring, monitoring and reporting
Operational and IT risks, including the
controls and loss mitigation actions
designed to minimise and mitigate
potential risks found in existing procedures.
Internal controls are tested on a continual
basis to provide assurance on the design
effectiveness and operating effectiveness
of controls captured in the RCSA process.
Independent risk based control assurance
reviews are also undertaken mainly in
relation to key processes to provide an
assessment of how effective associated
risks are controlled and managed.
This system of internal control is designed
to provide reasonable, but not absolute,
assurance against the risk of material
errors, fraud or losses occurring.
Weakness in the Group’s internal control
system or breaches/alleged breaches
of laws or regulations could result
in increased regulatory supervision,
enforcement actions and other disciplinary
action, and could have a material adverse
impact on the Group’s results, financial
condition and prospects. To quantify the
potential impact of weaknesses in this
regard, and to strengthen the Group’s
system of internal controls through the
consideration of unexpected events,
scenario analysis and stress testing are
conducted on a regular basis.
A key objective of the Group’s Risk
Management approach is to create a
culture of risk awareness where all staff
have an understanding of Operational
and IT risk and the role they each play
in ensuring that any impacts/losses are
minimised.
Third Party Service Providers
From time to time, the Group may engage
the services of third parties to support
delivery of its objectives or to complement
its existing processes. The risk associated
with these activities is categorised as
‘Outsourcing and Third Party’ risk and
defined as the current or prospective
risk of any loss or reputational damage
connected with the engagement of third
parties contracted internally or externally.
The Group’s Third Party Risk Management
Policy outlines the processes and controls
in place for identifying, assessing,
mitigating and managing third party risks.
Conduct and Reputational Risk
Conduct Risk is the risk that the conduct
of the Group towards customers or the
market leads to poor customer outcomes,
a failure to meet customers’ or regulators’
expectations, or breaches of regulatory
rules or laws.
Permanent TSB Group Holdings plc - Annual Report 2020
Conduct Risk can occur in every aspect of
the Group’s activities, including through:
• The strategy of the Group and how it is
executed;
• The way the Group is run and managed;
• The existence of group think or localised
cultures;
• The design type and pricing of products/
services offered, the customers to whom
they are offered and the distribution
channels used;
• The way sales are made or transactions
are executed;
• The post-sales fulfilment process
throughout the life of the product; and
•
Interactions with customers throughout
the lifetime of the relationship, including
when customers make complaints or
where customer-impacting errors occur.
The Group recognises that the
management and mitigation of Conduct
Risk is fundamental and intrinsically
linked to the achievement of its governing
objective. It recognises that Conduct Risk
can occur in every aspect of the Group’s
activities and is committed to continuing to
achieve best practice in this area.
The Group’s Senior Management are
responsible for the identification and
management of Conduct Risk in their
business areas and for ensuring fair
customer outcomes. The Group has a team
within its Regulatory Compliance function
responsible for second line Conduct Risk
oversight. This team is guided by a Conduct
Risk Management Framework, including
a Board-approved Risk Appetite and
Conduct Risk Principles for the Group. Its
purpose is to help ensure that the Group
achieves its strategic objectives by acting
honestly, fairly and professionally in the
best interests of its customers and the
integrity of the market, and acts with due
skill, care and diligence. In doing so, the
Group is placing the achievement of fair
outcomes for its customers at the heart of
its strategy, governance and operations.
Reputational risk, meaning the risk to
earnings and capital from negative public
opinion, is inherent in the Group’s business.
Negative public opinion can result from
the actual or perceived manner in which
the Group conducts its business activities,
from the Group’s financial performance,
the level of direct and indirect Government
support or actual or perceived practices
in the banking and financial industry. It is
often observed that reputational risk is in
fact a consequence of other risks. Negative
public opinion may adversely affect
the Group’s ability to keep and attract
customers which in turn may adversely
affect the Group’s financial condition and
operations. The Group cannot be sure that
it will be successful in avoiding damage to
its business from reputational risk.
Board and Senior Management have
ensured that there is regular reporting of
metrics and KRIs against the Conduct Risk
Appetite as well as events that could affect
or have already impacted on customers.
The primary governance body responsible
for Conduct issues is the Group Customer
Committee (a sub-committee of the GRC).
Compliance Risk
Compliance Risk is the risk of material
financial loss or liability, legal or regulatory
sanctions, or brand damage arising from
the failure to comply with, or adequately
plan for, changes to official sector policy,
laws, regulations, major industry standards,
compliance policies and procedures, or
expectations of customers and other
stakeholders.
As a financial services firm, the Group is
subject to extensive and comprehensive
legislation and regulation by a number of
regulatory authorities. The Group is classed
as a Less Significant Institution (LSI) and
is directly supervised by the CBI, as the
National Competent Authority.
The Board is responsible for overseeing
the management of Compliance Risk, with
Senior Management having a primary
responsibility to effectively manage
compliance with applicable laws and
regulations and for ensuring that the
Group has and effectively employs the
resources, procedures, systems and
controls, including monitoring, necessary
to ensure compliance with all existing and
forthcoming legislation.
The Regulatory Compliance and Conduct
Risk function is responsible for second line
oversight, including the updating of the
Regulatory Compliance Risk Framework.
This Framework supports the Group
to achieve its strategic priorities while
managing Regulatory Compliance risks
within the Board-approved Regulatory
Compliance Risk Appetite. In addition, it
sets out how the Group manages current
and emerging regulatory compliance
risk, details the key principles, objectives,
and primary components of the Group’s
approach to regulatory compliance
risk management, and sets out
regulatory compliance risk management
responsibilities across the three lines of
defence model.
The Group is exposed to many forms of risk
in connection with compliance with such
laws and regulations, including, but not
limited to:
• The risk that changes to the laws and
regulations under which the Group
operates will materially impact on the
Group’s liquidity, capital, profitability,
product range or distribution channels or
markets;
• The risk that the Group is unable to
respond to the scale of regulatory
change and implement all required
changes in full or on time, or the
challenge of meeting regulatory changes
will impact the Group’s abilities to
undertake other strategic initiatives;
• The level of costs associated with the
regulatory overhead including, but not
limited to, the industry funding levy,
funding the resolution fund established
under the Single Resolution Mechanism
or levies in respect of applicable
compensation schemes (including the
Investor Compensation Scheme and the
Deposit Guarantee Scheme);
• Non-compliance with organisational
requirements, such as the requirement
to have robust governance
arrangements, effective processes to
identify, manage, monitor and report the
risks the Group is or might be exposed
to, and internal control mechanisms,
including sound administrative and
accounting procedures and effective
control and safeguard arrangements for
information processing systems;
• The possibility of mis-selling financial
products or the mishandling of
complaints related to the sale of such
products by or attributed to an employee
of the Group, including as a result of
having sales practices, complaints
procedures and/or reward structures in
place that are determined to have been
inappropriate or the risk that previous
practices are deemed inappropriate
when assessed against current
standards;
• Breaching laws and requirements
relating to data protection, the detection
and prevention of money laundering,
terrorist financing, bribery, corruption
and other financial crime; and
• Non-compliance with legislation relating
to unfair or required contractual terms or
disclosures.
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Regulatory Developments
The level of regulatory change remains
high.
At a European level, amendments to the
Capital Requirements Regulations and
Directive, and the Bank Recovery and
Resolution Directive are scheduled to
be implemented through to 2022. The
amendments include changes to the Net
Stable Funding Ratio, counterparty risk,
market risk, large exposures, reporting
and disclosures and the introduction
of minimum provision coverage for
NPLs. A number of the changes have
been implemented ahead of schedule
as part of the regulatory response to
COVID-19. These changes may impact
the Group’s capital requirements, liquidity
management and market disclosures.
Operational Resilience is receiving
increased focus with draft legislation being
introduced by the European Commission,
recognising increased reliance on third
parties and outsourcing.
At a Global and European level, Sustainable
Finance has emerged as a key priority
for governments and regulators. The
EU Action Plan on Sustainable Finance
sets out the EU’s strategy to integrate
environmental, social and governance
(ESG) considerations into its financial
policy framework and mobilise finance for
sustainable growth. The Plan is broad and
encompasses many elements including:
measures to develop a common European
taxonomy or “classifications system” for
Sustainable Finance, enhanced disclosure
rules to make sustainability risks fully
transparent to investors and measures
to make ESG considerations part of
investment advice.
At a domestic level, the Irish Government
will bring forward legislation to introduce
an Individual Accountability Regime for
Banks and other regulated entities, via a
Senior Executive Accountability Regime
(SEAR). This regime is expected to
include Conduct Standards for Staff and
enhancements to both the Fitness and
Probity and the Administrative Sanctions
Regimes. Following the enactment of the
legislation the Central Bank will undertake
a consultation process. In addition, the CBI
has commenced a review of the Consumer
Protection Code (CPC) and is expected to
undertake a consultation process during
2021.
72
Regulators continue to emphasise the
importance of culture, conduct risk,
diversity practices, IT resilience and
cyber security. These will continue to
be important areas of regulatory focus
especially in light of the response to
COVID-19 on maintaining banking services
and meeting customer needs.
3. Group Risks
The Board has overall responsibility for
the establishment and oversight of the
Group Risk Management Framework
(GRMF). The Board has established the
BRCC, which is responsible for oversight
and advice on risk governance, the current
risk exposures of the Group and future risk
strategy, including strategy for capital and
liquidity management and the embedding
and maintenance of a supportive culture
in relation to the management of risk
throughout the Group. The BRCC, in turn,
delegates responsibility for the monitoring
and management of specific risks to
committees accountable to it such as the
GRC,GCC,CAC and the ALCO.
The BAC, consisting of members of
the Board, oversees how Management
monitors compliance with the Group’s
risk management policies and procedures
and reviews the adequacy of the Risk
Management Framework in relation to the
risks faced by the Group in consultation
with the BRCC. The BAC is assisted in
its oversight role by GIA. GIA undertakes
both routine and ad hoc reviews of risk
management controls and procedures, the
results of which are reported to the BAC.
In line with IFRS 7, the following risks to
which the Group is exposed are discussed
in detail below:
• Credit Risk;
• Liquidity Risk; and
• Market Risk (including foreign currency
exchange risk, credit spread risk and
interest rate risk).
The key financial risks arise in the
underlying subsidiary companies of
Permanent TSB Group Holdings plc
(PTSBGH). All of the Directors of PTSBGH
are also Directors of the Board of
Permanent TSB plc (PTSB).
3.1 Customer Credit Risk - Audited
Definition of Customer Credit Risk
Customer credit risk is defined as the
risk of financial loss due to the failure of
a customer, guarantor or counterparty, to
meet their financial obligations to the Bank
as they fall due. This risk includes but is not
limited to default risk, concentration risk,
migration risk, collateral risk and climate
risk.
Default Risk
Credit Default Risk is the risk that a
customer will not be able to meet the
required payments on their debt obligation
to the Bank when they become due. An
increase in the risk of default may be as
a result of one or a number of factors
including, but not limited to:
• Deterioration observed in an individual
borrower’s capacity to meet payments
as they become due;
• Deterioration observed or expected
in macroeconomic or general market
conditions;
• Regulatory change; and
• Environmental factors that impact on the
credit quality of the counterparty.
Concentration Risk
Concentration Risk is the risk of excessive
credit concentration to an individual,
counterparty, group of connected
counterparties, industry sector, geographic
area, type of collateral or product type
leading to above normal losses.
Migration Risk
Migration Risk is the risk for loss due to
a ratings (internal/external) downgrade
which indicates a change in the credit
quality of an exposure.
Collateral Risk
Collateral Risk is the potential risk of loss
arising from a change in the security value
or enforceability due to errors in nature,
quantity or pricing of the collateral.
Governance
Credit Risk Appetite defines the Group’s
tolerance for risk and its willingness
to grant credit based on product type,
customer type, collateral concerns and
various other risk factors. The Board is
ultimately responsible for the governance
of credit risk across the Group, setting
the Risk Appetite and ensuring that there
are appropriate processes, systems and
reporting lines in place to monitor and
manage risks against the appetite.
The BRCC, a sub-committee of the Board
provides oversight to the Board on the
setting and monitoring of the Risk Appetite
and risk governance. The Group Credit
Risk Management Framework specifies
Permanent TSB Group Holdings plc - Annual Report 2020 those Credit policies that require approval
by the BRCC. Under the Group Credit
Risk Management Framework the BRCC
may also delegate to the GRC, who in turn
delegates to the GCC, the authority to
approve certain Credit policies, subject to
these policies remaining within specified
policy boundaries. Any amendment to
policy which results in a policy breaching
these boundaries requires the BRCC’s
approval.
The GCC is responsible for the execution
and delivery of the Group’s system of
Portfolio Credit Risk Management. The
Board has granted authority to the BRCC
to approve a delegated framework of
lending authority within which the GCC and
Customer Credit function operate.
Credit Risk Management
The Group’s credit risk management
approach is focused on detailed credit
assessment at underwriting together with
early borrower engagement where there
are signs of pre-arrears or delinquency
with a view to taking remedial action to
prevent the loan becoming defaulted.
Where a borrower is in pre-arrears, arrears
or default the Group will consider offering
treatments/options which apply to the
borrower’s circumstance cognisant of
affordability and sustainability.
The Group’s system of Portfolio Credit Risk
Management incorporates the following
key components:
• Credit policy;
• Lending authorisation;
• Credit risk mitigation;
• Credit risk monitoring;
• Arrears management and forbearance;
and
• Credit risk measurement.
Credit Policy
To aid in the management of credit risk, the
Group has put in place credit policies which
set out the core values and principles
governing the provision and management
of credit. These policies take account of
the Group’s RAS, applicable sectorial credit
limits, the Group’s historical experience
and resultant loan losses, the markets
in which the business units operate and
the products which the Group provides.
Each staff member involved in assessing
or managing credit has a responsibility
to ensure compliance with these policies
and effective procedures are in place to
manage the control and monitoring of
exceptions to policy.
Lending Authorisation
The Group’s credit risk management
systems operate through a hierarchy
of lending authorities. Exposures above
certain predetermined levels require
approval by the GCC or the Board. Below
the GCC level, a tiered level of discretion
applies with individual discretion levels
set to reflect the relevant staff members’
level of seniority, expertise and experience
and the Group’s operational needs. All
mortgage lending is currently approved
by experienced credit risk professionals
assisted by scoring models. For Group
unsecured personal lending portfolios,
scoring models and automated processes
are utilised to support the credit decision
process for those segments that present
a lower credit risk. Exposures that present
a higher credit risk, but remain within Risk
Appetite are manually reviewed prior to
approval.
Credit Risk Mitigation
The granting of a loan in the first
instance is always assessed based on
the borrower’s repayment capacity and
proven ability. Credit risk mitigation forms
a key supplementary element of the credit
granting process. Credit risk mitigation
includes the requirement to obtain
collateral, depending on the nature of the
product, as set out in the Group’s policies
and procedures. The Group takes collateral
as a secondary source, which can be called
upon if the borrower is unable or unwilling
to service and repay the debt as originally
assessed. At portfolio level, credit risk is
assessed in relation to name, sector and
geographic concentration.
Collateral
The nature and level of collateral
required depends on a number of factors
including, but not limited to, the amount
of the exposure, the type of facility made
available, the term of the facility, the
amount of the borrower’s own cash input
and an evaluation of the level of risk or
probability of default (PD).
Various types of collateral are accepted,
including property, securities, cash and
guarantees etc., grouped broadly as
follows:
• real estate;
• financial collateral (lien over deposits,
shares, etc.); and
• other collateral (guarantees etc.).
Valuation Methodologies
The valuation methodologies for the
Group’s key portfolios of collateral held are
adjusted for costs to sell, as appropriate:
• Residential property valuations are
based on the CSO RPPI or on a recent
valuation from a professional valuer. In
respect of residential property securing
performing loan exposures of greater
than €0.5m, the Group policy is to ensure
an independent valuation is updated
within the last 3 years. For residential
property securing NPL exposures of
greater than €0.3m, the Group policy is
to ensure an independent valuation is
updated within the last year.
• Commercial property valuations are
based on opinions from professional
valuers, the Investment Property
Database Index, local knowledge of
the properties, benchmarking similar
properties and other industry-wide
available information, including
estimated yields discount rates. In
respect of commercial property securing
performing loan exposures of greater
than €0.5m, the Group policy is to ensure
an independent valuation is updated
within the last 3 years. For commercial
property securing NPL exposures of
greater than €0.3m, the Group policy is
to ensure an independent valuation is
updated within the last year.
The valuation methodologies outlined
above are determined as close to the
SOFP date as is feasible and are therefore
considered by the Group to reflect its best
estimate of current values of collateral
held.
The Group’s requirements in respect of
collateral in relation to (i) completion; (ii)
taking of security; (iii) valuation; and (iv)
ongoing management are set out in credit
policies.
The following table details the loan balance
distribution by indexed Loan to value (LTV)
band for the Group’s residential mortgage
portfolio (home loan and buy-to-let).
73
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Risk Management
(continued)
Residential Mortgage Exposures by Indexed LTV
31 December 2020
Less than 70%
71% to 90%
91% to 100%
Subtotal
Greater than 100%
Subtotal
Total Residential Mortgages
Commercial
Consumer Finance
Total loans and advances to customers
31 December 2019
Less than 70%
71% to 90%
91% to 100%
Subtotal
Greater than 100%
Subtotal
Total Residential Mortgages
Commercial
Consumer Finance
Total loans and advances to customers
Home loans
Buy-to-let
€m
€m
7,119
4,186
455
11,760
578
578
12,338
783
306
189
1,278
731
731
2,009
Home loans
Buy-to-let
€m
€m
7,260
3,738
623
11,621
639
639
12,260
1,025
717
494
2,236
1,362
1,362
3,598
Total
€m
7,902
4,492
644
13,038
1,309
1,309
14,347
181
327
14,855
Total
€m
8,285
4,455
1,117
13,857
2,001
2,001
15,858
165
366
16,389
Credit Risk Monitoring
Credit Risk Appetite Metrics and Limits
are designed to align with the strategic
objectives of the Group to maintain stable
earnings growth, stakeholder confidence
and capital adequacy. This is achieved
through setting concentration limits for
higher risk product segments, ensuring
new business meets pricing hurdle rates
and through monitoring default rates and
losses. Limits are also set in the context of
the peer group, regulatory and economic
landscape, to ensure the Group does not
become an outlier in the market. Monthly
updates are presented to the GCC and the
BRCC which include an overview, trends,
limit categories and detail on mitigation
plans proposed where a particular
parameter is close or at its limit.
Credit Risk Appetite is considered an
integral part of the annual planning/
budget process and reviewed at various
checkpoints in the year to ensure the
appetite is being met and is not expected to
be breached during the budget time frame.
Arrears Management and Forbearance
Forbearance occurs when a borrower
is granted a temporary or permanent
concession or agreed change to a loan
(“forbearance measure”), for reasons
relating to the actual or apparent financial
stress or distress of that borrower.
Forbearance has not occurred where the
concession or agreed change to a loan
does not arise from actual or apparent
financial distress.
The Group is committed to supporting
customers that are experiencing financial
difficulty and seeks to work with those
customers to find a sustainable solution
through proactive arrears management
and forbearance. Group credit policy
and procedures are designed to comply
with the requirements of the CBI Code of
Conduct on Mortgage Arrears (CCMA),
which sets out the framework that must
be used when dealing with borrowers in
mortgage arrears or in pre-arrears.
The Group’s forbearance strategy is built
on two key factors namely affordability
and sustainability. The main objectives
of this strategy are to ensure that arrears
solutions are sustainable in the long
term, that they comply with all regulatory
requirements and where possible keep
customers in their home.
Types of forbearance treatment currently
offered by the Group include short term
temporary arrangements (such as a
payment moratorium) and term appropriate
treatments (such as reduced payment,
arrears capitalisation and term extension).
Requests for concessions in recent
years are arising as a result of temporary
cash flow problems and an inability to
repay at contractual maturity, whereas
during the 2008 financial crisis such
74
Permanent TSB Group Holdings plc - Annual Report 2020 requests reflected more in-depth long-
term affordability issues. This is further
reflected in the change in the volume and
nature of forbearance measures availed.
A request for forbearance is a trigger event
for the Group to undertake an assessment
of the customer’s financial circumstances
prior to any decision to grant a forbearance
treatment. Where a borrower has been
granted a forbearance treatment, the
loan is considered to have experienced a
significant increase in credit risk (SICR) and
is classified as Stage 2 for Expected Credit
Loss (ECL) assessment purposes under
IFRS 9. The customer assessment may
also result in the customer being classified
as Stage 3, credit impaired as a result of
the requirement for a specific impairment
provision.
Further deterioration in the individual
circumstances of the borrower or where
expected improvement in the borrower’s
circumstances fails to materialise may
result in non-compliance with the revised
terms and conditions of the forbearance
measure. In such circumstances the
Group may consider a further forbearance
request or the loan may ultimately prove
unsustainable.
The effectiveness of forbearance
measures over the lifetime of the
arrangements are subject to ongoing
management and review. A forbearance
measure is considered to be effective if the
borrower meets the modified terms and
conditions over a sustained period of time
resulting in an improved outcome for the
borrower and the Group.
COVID-19 Measures
In response to the COVID-19 pandemic,
in accordance with the European
Banking Authority guidelines, the Bank
implemented a number of measures for
customers financially impacted by the
crisis. Subject to certain criteria, impacted
residential mortgage customers were
eligible to apply for a COVID-19 loan
payment break, a temporary repayment
arrangement where the customer makes
no payment, or a partial loan payment
break where the customer repays an
amount they can afford on their mortgage
for an initial period of up to three months
with an option to extend for a further three
months. Personal loan customers were also
eligible to apply for a COVID-19 term loan
payment break for an initial period of up to
three months with an option to extend for
a further three months whereas personal
current account holders were eligible to
apply for an additional overdraft limit of up
to six months.
SME and Commercial customers who
experienced a significant fall in income or
had to temporarily close a business as a
result of COVID-19 were eligible to apply for
a new or additional overdraft facility and/
or COVID-19 loan payment break for up to
six months on their commercial mortgage
or term loan.
For all customers who were granted a
COVID-19 loan payment break, at the
end of the loan payment break their
repayments are adjusted so that the
mortgage or loan will be repaid within its
original term or alternatively the customer
has the option of extending the term of the
mortgage or loan by the number of months
they availed of the COVID-19 payment
break.
Customers experiencing financial difficulty
on exit from a payment break are assessed
on a case by case based on their individual
circumstances prior to any decision to
grant a forbearance treatment.
Since the onset of the COVID-19
restrictions in March 2020 the Bank has
provided c.12,000 payment breaks to its
personal and business customers and
approximately 90% of these customers
have returned to full repayments. At 31
December 2020, c.200 COVID-19 payment
breaks (€ 27m in exposure), had not
expired. For information, at 31 December
2020, the IFRS 9 classification by loan
balance in respect of those facilities
granted a COVID-19 payment break during
2020 was €833m classified as Stage 1,
€598m classified as Stage 2 and €181m
classified as Stage 3.
Credit Risk Measurement
Applications for credit are rated for
credit quality as part of the origination
and loan approval process. The risk,
and consequently the credit grade,
is reassessed monthly as part of a
continuous assessment of account
performance and other customer related
factors.
Credit scoring plays a central role in
the ratings process. Credit scoring
combined with appropriate portfolio risk
segmentation is the method used to assign
grades, and in turn the PDs to individual
exposures under each framework.
The Group, as approved by the Central
Bank of Ireland, has adopted the
standardised approach for calculation of
Risk Weighted exposure amounts for the
Commercial, Corporate and SME portfolios
effective from Q1 2020.
Internal Ratings Based Models
Scorecards have been designed for
each portfolio based on the drivers or
characteristics of default associated
with that portfolio. Typical scoring
characteristics include financial details,
bureau information, product, behavioural
and current account data. For portfolios
where there is not enough data to develop
statistical models, expert judgement-based
models are used.
For each of the Group’s key residential
home loan and buy-to-let mortgage
portfolios, a scorecard combining
application and behavioural factors has
been developed which allows for the
consistent ranking of exposures for risk
through time. These scorecards are used
consistently across IFRS 9 and IRB models
to assign grades and in turn PD, 12 month
and lifetime, to individual exposures.
For capital purposes and in accordance
with the CRR, all of the Group’s exposures
are mapped to a risk rating scale (master
scale) which reflects the risk of default.
The assignment of an exposure to a grade
is based on the probability of an exposure
defaulting in the next year. The credit
risk ratings employed by the Group are
designed to highlight exposures requiring
Management attention. The Group uses
the Basel 25 point scale for the internal
ratings based approach (IRB) for credit
risk. The scale ranges from 1 to 25 where 1
represents the best risk grade or lowest PD
and 25 represents the defaulted exposures
or PD equal to 100% for credit risk. All of
the Group’s exposures are mapped to the
rating scale based on PD.
75
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Risk Management
(continued)
Credit grading and scoring systems
are used by the Group to assist in the
identification of vulnerabilities in loan
quality in advance of arrears. Changes in
scoring information are reflected in the
credit grade of the borrower and where
there is a significant deterioration may
result in pre-arrears engagement activity
on the part of the bank together with a
reclassification of the exposure into Stage
2 for ECL assessment purposes.
The Group’s material scorecards and
models used for risk origination and
ongoing measurement purposes are
subject to annual review by an independent
MVT to ensure that they remain fit for
purpose.
Definition of default and credit risk
assessment
As part of the implementation of IFRS 9,
the Group has sought to reach a single
aligned definition of default for risk
measurement purposes. Full alignment
to this revised definition of default for IRB
purposes took effect on 31 December 2018.
Reaching alignment on a definition of
default allows for the mapping of risk
categories to the IFRS 9 3 stage process as
follows:
Fair can primarily be expected to be
classified as Stage 2
• Fair risk profile (IRB ratings 22 to
The following information has not
been subject to audit by the Group’s
independent auditor.
Satisfactory and above can primarily
be expected to be classified as IFRS 9
Stage 1
•
Investment grade (IRB ratings 1 to 7) –
includes very high quality exposures.
• Excellent risk profile (IRB ratings 8
to 16) – includes exposures whose
general profiles are considered to be
of a very low risk nature.
• Satisfactory risk profile (IRB ratings
17 to 21) – includes exposures whose
general profiles are considered to
be of a low to moderate risk nature.
Accounts are considered satisfactory
or above if they have no current or
recent credit distress, are not more
than 30 days in arrears and there are
no indications they are unlikely to pay.
24) – Accounts of lower quality and
considered as less than satisfactory
are categorised as fair and include the
following;
- Emerging: Accounts exhibiting
weakness and are deteriorating
in terms of credit quality and may
need additional management
attention e.g. missed payments,
deteriorating savings performance;
- Recovery: Includes accounts with
recent default experience, accounts
which are performing as a result of
forbearance measures and need to
complete a probationary period and
accounts with significant terminal
payments; and
- Latent: Accounts that are
performing but exhibit underlying
credit characteristics which could
threaten recoverability should
they become non-performing e.g.
interest only accounts which are
projected to be in negative equity at
maturity.
Non-performing will align to Stage 3
Defaulted (IRB rating 25) – Accounts that
are considered as defaulted or non-
performing.
Credit Exposure
Maximum exposure to credit risk before collateral held or other credit enhancements
The following table outlines the maximum exposure to credit risk before collateral held or other credit enhancements in respect of the
Group’s financial assets as at the SOFP date.
Cash and balances with central banks
Items in course of collection
Debt securities
Derivative assets
Loans and advances to banks
Loans and advances to customers
Other assets (Loans sale receivable)
Commitments and contingencies
Year ended
Note
31/12/2020
13
13
14
16
17
18
23
38
€m
71
20
2,583
-
3,312
14,213
-
20,199
1,069
21,268
Year ended
31/12/2019
€m
63
15
2,005
1
1,556
15,644
251
19,535
873
20,408
Further detail on loans and advances to customers is provided in note 33, Financial Risk Management.
76
Permanent TSB Group Holdings plc - Annual Report 2020 The following tables outline the Group’s exposure to credit risk by asset class
Debt securities
The Group is exposed to the credit risk on third parties where the Group holds debt securities (including sovereign debt). These exposures
are subject to the limitations contained within the Board approved policies, with sovereign debt restricted to those countries that have an
External Credit Assessment Institution (ECAI) rating of investment-grade.
The following table gives an indication of the level of creditworthiness of the Group’s debt securities and is based on an internally set
rating that is equivalent to a Moody’s rating. There are no impaired debt securities as at 31 December 2020 or at 31 December 2019, with
the exception of the corporate bond.
Debt securities neither past due nor impaired
Rating
Aaa
A2
Baa1
Baa3
Unrated
Total
31/12/2020
31/12/2019*
€m
€m
67
1,488
515
474
39
2,583
-
1,436
284
243
42
2,005
*The presentation of the debt securities’ ratings has been updated to include an enhanced disclosure of the Moody’s rating attributable to each banking counterparty with no
material impact as at 31 December 2019.
The following table discloses, by country, the Group’s exposure to sovereign and corporate debt as at:
Country
Ireland
Spain
Portuguese
Total
31/12/2020
31/12/2019
Sovereign debt
Sovereign debt
€m
€m
1,594
515
474
2,583
1,478
284
243
2,005
Loans and advances to banks
The Group has a policy to ensure that loans and advances to banks are held with investment grade counterparties, with any exceptions
subject to prior approval by the BRCC. The following table gives an indication of the level of creditworthiness of the Group’s loans and
advances to banks and is based on the internally set rating that is equivalent to the rating prescribed by Moody’s Investor Services
Limited and Standard & Poors for the CBI.
Rating
Aaa
Aa2
Aa3
A1
A2
Baa2
Total
31/12/2020
31/12/2019*
€m
€m
2,813
209
254
32
3
1
3,312
1,038
240
234
33
9
2
1,556
*The presentation of the loans and advances to banks’ ratings has been updated to include an enhanced disclosure of the Moody’s rating attributable to each banking
counterparty with no material impact as at 31 December 2019.
77
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Risk Management
(continued)
Loan Impairment
Under IFRS 9 an entity is required to
track and assess changes in credit risk
on financial instruments since origination
and determine whether the credit risk on
those financial instruments has increased
significantly since initial recognition. The
change in credit risk should be based on
the change in the risk of default and not
changes in the amount of ECL which may
be expected on a financial instrument.
The standard is a 3-stage model for
impairment, based on changes in credit
risk quality since initial recognition:
Stage 1
Financial assets that have not had a SICR
since initial recognition are classified
as Stage 1. For these assets, 12-month
ECL is recognised. 12-month ECL is the
expected credit losses that result from
default events that are possible within 12
months of the reporting date. It is not the
expected cash shortfalls over the 12-month
period but the entire credit loss on an asset
weighted by the probability that the loss
will occur in the next 12 months. Therefore
all financial assets in scope will have an
impairment provision equal to at least
12-month ECL.
Stage 2
Financial assets that have had a SICR
since initial recognition but that do not
have objective evidence of impairment
are classified as Stage 2. For these assets,
lifetime ECL is recognised, being the
expected credit losses that result from all
possible default events over the expected
life of the financial instrument.
At each reporting date, the Group has
relied on the following measures to identify
a SICR in relation to an exposure since
origination, and classification as Stage 2
within the IFRS 9 ECL framework:
• Delinquency – greater than 30 days past
due;
• Forbearance – reported as currently
forborne in accordance with European
Banking Authority (EBA) NPL guidelines;
• Risk Grade – accounts that migrate to a
risk grade which the bank has specified
as being outside its Risk Appetite for
origination;
78
• Change in remaining lifetime PD –
accounts that have a remaining lifetime
PD that is in excess of the risk at which
the bank seeks to originate risk. For the
purposes of this assessment, credit risk
is based on an instrument’s lifetime PD,
not the losses expected to be incurred;
and
• PD at maturity - For interest only
exposures, all home-loan and
commercial exposures together with
those buy-to-let exposures in excess
of 70% LTV have been assessed as
presenting an increased risk of default at
maturity and are consequently classified
as Stage 2.
The assessment of SICR is performed on a
relative basis and is symmetrical in nature,
allowing credit risk of financial assets to
move back to Stage 1 if the increase in
credit risk since origination has reduced
and is no longer deemed to be significant.
Transition from Stage 3 to Stage 2
Movements between Stage 2 and
Stage 3 are based on whether financial
assets meet the definition of default as
at the reporting date.
Certain long-term forbearance
treatments may transition from Stage
3 to Stage 2 in line with the definition
of default but would not be expected
to transition from Stage 2 to Stage 1
without an unwind of the forbearance
treatment e.g. part capital and interest
treatments.
Transition from Stage 2 to Stage 1
No longer 30 days past due – transition
automatically (i.e. without probation),
where other criteria are met.
Forborne exposures where certain
criteria are met (e.g. no longer
classified as EBA forborne).
Facilities where payment breaks or partial
payment breaks were granted by the Group
in response to the COVID-19 pandemic are
not reported as forbearance in accordance
with regulatory guidance and as a result
are not automatically considered a SICR
solely as a result of being granted the full or
partial loan payment break.
Stage 3
Financial assets that have objective
evidence of impairment at the reporting
date are classified as Stage 3, i.e. are credit
impaired. For these assets, lifetime ECL is
recognised.
The definition of default used in the
measurement of ECL for IFRS 9 purposes
is aligned to the regulatory definition
of default used by the Group for credit
risk management purposes, and which
has been approved for use for capital
management. For the Group’s main
Mortgage Portfolio, this is the definition of
default approved for use under Targeted
Review of Internal Models (TRIM) from 31
December 2018. The definition of default
was implemented under IFRS 9 with effect
from 1 January 2018 in anticipation of this
approval. This definition of default has
been designed to comply with Regulatory
requirements and guidelines on default,
NPLs and forbearance.
IFRS 9 does not define default, but
contains a rebuttable presumption that
default has occurred when an exposure is
greater than 90 days past due. The Group
did not rebut this presumption for any
portfolio.
Under the Group’s definition of default
an exposure is considered defaulted and
is classified as Stage 3 credit-impaired
where an account is greater than 90 days
past due or any material credit obligation
or is otherwise assessed as unlikely to
pay. Where a material amount of principal
on interest remains outstanding at the
reporting date, the counting of days past
due commences from the first date that a
payment, or part thereof, met materiality
thresholds and became overdue.
Key indicators of unlikely to pay include:
• Accounts that have, as a result of
financial distress, received a concession
from the Group with respect to terms or
conditions. Such exposures will remain
in Stage 3 until certain exit conditions
are met and for a minimum probationary
period of 12 months before moving to a
performing classification;
• Accounts that have, as a result of
financial distress, received a concession
from the Group with respect to terms or
conditions which result in a significant
Permanent TSB Group Holdings plc - Annual Report 2020 terminal payment. Such exposures must
fulfil additional conditions in relation to
that terminal payment before moving to
a performing classification; and
• Accounts where the customer is
assessed as otherwise unlikely to
pay, including bankruptcy, personal
insolvency, assisted voluntary sale,
disposal etc.
Exception to the general three stage
impairment model
Purchased or originated credit impaired
assets (POCI) are excluded from the
general 3 stage impairment model in IFRS
9. POCI assets are financial assets that
are credit impaired on initial recognition.
POCI assets are recorded at fair value
at original recognition and interest
income is subsequently recognised on a
credit-adjusted EIR basis. ECLs are only
recognised or released to the extent that
there is a subsequent change in expected
credit losses. The Group purchased the
credit impaired Newbridge Credit Union
(NCU) portfolio in 2013, the NCU portfolio is
accounted for on a POCI basis under
IFRS 9.
Low credit risk exemption
A low risk exemption can be availed
for financial instruments under IFRS 9
for which the Group can demonstrate
objective evidence that these financial
instruments are not subject to a SICR.
The Group considers credit risk on a
financial instrument low if it meets the
following conditions:
• Strong capacity by the borrower to meet
its contractual cash flow obligations in
the near term;
• Adverse changes in economic business
conditions in the longer term may, but
will not necessarily, reduce the ability of
the borrower to fulfil its contractual cash
flow obligations; and
• External rating of investment grade or an
internal credit rating equivalent.
Modified financial assets
Where a financial asset is modified or an
existing financial asset is replaced with
a new one, an assessment is made to
determine if the financial asset should be
derecognised.
If the terms are substantially different, the
Group derecognises the original financial
asset and recognises a new asset at fair
value and recalculates a new effective
interest rate (EIR) for the asset. The date of
renegotiation is consequently considered
to be the date of initial recognition for
impairment calculation purposes, including
for the purpose of determining whether
a SICR has occurred. However, the Group
also assesses whether the new financial
asset recognised is deemed to be credit-
impaired at initial recognition, especially
in circumstances where the renegotiation
was driven by the debtor being unable
to make the originally agreed payments.
Differences in the carrying amount are also
recognised in profit or loss as a gain or loss
on derecognition.
If the terms are not substantially different,
the modification does not result in
derecognition and the date of origination
continues to be used to determine SICR.
ECL Framework
The Group’s IFRS 9 models leverage
the systems and data used to calculate
expected credit losses for regulatory
purposes. In particular, key concepts
such as the definition of default and
measurement of credit risk (i.e. ranking
of exposures for risk) have been aligned
across the impairment (accounting) and
regulatory frameworks. IFRS 9 models,
however, differ from regulatory models in
a number of conceptual ways (e.g. the use
of ‘through the cycle’ (TTC) (regulatory)
versus ‘point in time’ (IFRS 9) inputs, 12
month ECL (regulatory) versus lifetime
ECL (IFRS 9)) and as a result the Group did
not leverage the outputs of its regulatory
models, but instead developed statistical
models tailored to the requirements of IFRS
9.
Measurement
For all material portfolios, the Group has
adopted an ECL framework that takes
cognisance of industry best practice, as set
out in the Global Public Policy Committee
paper, and reflects a component approach
using PD, Loss Given Default (LGD) and
Exposure at default (EAD) components
calibrated for IFRS 9 purposes. To
adequately capture life-time expected
losses, the Group also modelled early
redemptions as a separate component
within the ECL calculation.
IFRS 9 PD
For estimating 12 month and lifetime
default, the Group uses a statistical model
methodology that allows the Group to
estimate the risk that a loan will default
at a given point in time, through grouping
exposures with similar risk characteristics
and measuring the historic rate of default
for exposures of this type. This technique
effectively provides a TTC measure of
likelihood of default. To translate this TTC
probability to a Point in Time probability
and to reflect forward looking information
(FLI) at the balance sheet date, the
Group calibrates the starting point for
the projection to the current Observed
Default Rate (ODR). The Group then uses an
economic response model to reflect future
expected macroeconomic conditions.
Behavioural scorecards, containing key
loan performance indicators for each
customer are used for the purpose of
grouping exposures with similar risk
characteristics as described above. A PD
is calculated for each group (internally
referred to as risk grades) which drives
the PD used for the ECL process. All
components of PD, risk grade, ODR
and economic response model are
independently monitored by the Group’s
MVT to confirm ongoing fitness for
purpose.
IFRS 9 LGD
For the Group’s key mortgage portfolios,
LGD assumes that the Group will have
recourse to collateral in the event that an
exposure fails to return to a performing
state. The LGD model incorporates the
probability of each defaulted account
returning to performing together with the
estimated loss rate should they return to
performing and the estimated loss rate
should they not return to performing. The
Group uses a consistent approach for LGD
estimation for both 12 month and lifetime.
IFRS 9 EAD
For performing loans, the EAD is calculated
for each future period based on the
projected loan balance (after expected
capital and interest payments) at that
future period. A Credit Conversion Factor
(CCF) is then applied to calculate the
percentage increase in balance from
the point of observation to the point of
default including accrued missed interest
payments and any related charges. The
CCF is segmented by the accounts’
repayment type.
79
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Risk Management
(continued)
Expected life
When measuring ECL, the Group must
consider the maximum contractual period
over which the Group is exposed to credit
risk. All contractual terms should be
considered when determining the expected
life, including prepayment options,
extension and rollover options. For most
instruments, the expected life is limited to
the remaining contractual life, adjusted as
applicable for expected prepayments.
Governance
The Group has a detailed framework
of policies governing development,
monitoring and validation of Models.
Model Governance Committee (MGC)
oversees the execution of this framework
and approves model changes and
model validation reports prior to their
consideration by the GRC and/or the ALCO
and the BRCC, where appropriate.
For certain revolving credit facilities that
do not have a fixed maturity (e.g. credit
cards and overdrafts), the expected life
is estimated based on the period over
which the Group is exposed to credit risk
and where the credit losses would not be
mitigated by Management actions.
For instruments in Stage 2 or Stage 3,
loss allowances will cover expected credit
losses over the expected remaining life of
the instrument.
Effective Interest Rate
The discount rate used by the Group
in measuring ECL is the EIR (or ‘credit-
adjusted effective interest rate’ for POCI
financial assets) or an approximation
thereof.
For undrawn commitments, the EIR, or
an approximation thereof, is applied when
recognising the financial assets resulting
from the loan commitment.
Write-off policy
The Group writes off an impaired financial
asset (and the related impairment
allowance), either partially or in full, when
there is no realistic prospect of recovery
or on foot of a negotiated settlement.
Indicators that there is no prospect of
recovery include the borrower being
deemed unable to pay due their financial
circumstances or the cost to be incurred
in seeking recovery is likely to exceed the
amount of the write-off. In circumstances
where the net realisable value of any
collateral has been determined and there
is no reasonable expectation of further
recovery, write-off may be earlier than
collateral realisation. Write-off on those
financial assets subject to enforcement
activity will take place on conclusion of the
enforcement process.
The GCC is responsible for oversight of
changes to credit policies, data or post
model adjustments that would affect
model outcomes. The Impairment
Reporting Governance Group (IRGG), a
sub
for the review and recommendation for
approval of the monthly and cumulative
year
to
the Group.
‐
date actual impairment charge for
committee of the GCC, is accountable
‐
‐
IFRS 9 ECL methodologies are subject to
formal review by IRGG and approval by the
GCC on a monthly basis and by the BRCC
on a half-yearly basis. The adequacy of
ECL allowance is reviewed by the BAC on a
half-yearly basis.
Forward looking information (FLI)
IFRS 9 requires an unbiased and probability
weighted estimate of credit losses by
evaluating a range of possible outcomes
that incorporates forecasts of future
economic conditions. Macroeconomic
factors and FLI are required to be
incorporated into the measurement of ECL
as well as the determination of whether
there has been a SICR since origination.
Measurement of ECLs at each reporting
period should reflect reasonable and
supportable information.
The requirement to incorporate a range
of unbiased future economic scenarios,
including macroeconomic factors, is a
distinctive feature of the ECL accounting
framework, which increases both the
level of complexity and judgement in the
measurement of allowance for credit
losses under IFRS 9.
The Group has developed the capability to
incorporate a number of macroeconomic
impacts and scenarios into the ECL
models.
In subsequent periods, any recoveries of
amounts previously written off are credited
to the provision for credit losses in the
income statement.
The process to determine the FLI applied
in the ECL models leverages existing
ICAAP processes while recognising
that IFRS 9 scenarios are not stress
80
scenarios. The methodology to incorporate
multiple economic scenarios into the
ECL models considers, amongst other
things, the Group’s IPP and the views of
policy makers on longer term economic
prospects and key risks. In developing the
methodology, the Group has referenced
publically available information for
key economic indicators including
the RPPI, unemployment, interest
rates and publically available external
macroeconomic forecasts including from
the Department of Finance (DoF), the CBI
and ESRI. The Group employs the services
of an independent economist to determine
forecast macroeconomic scenarios. The
governance and oversight process includes
the review and challenge by CAC of FLI and
its onward recommendation to the BRCC
for approval.
In general, a review and update of
macroeconomic variables takes place
at least bi-annually. However, given the
unprecedented nature of the COVID-19
pandemic, updates were more frequent
in 2020. Macroeconomic scenarios were
most recently updated in December
2020. A review conducted post year-end
concluded that no further update to the
macroeconomic scenarios for 2020 year-
end reporting was required at that time.
This was recommended by the CAC to the
BRCC where it was approved.
The Group has adopted three
macroeconomic scenarios for ECL
purposes. The Group’s approach applies
extreme-but-plausible economic scenarios
(i.e. underpinned by historical evidence) to
estimate the distribution of ECL to which
the Group is exposed. The central scenario
is at the 50th percentile of the distribution
of scenarios (implying a 50% probability
that the actual outcome is worse than the
central forecast and a 50% probability that
the outcome is better). The Upside scenario
is at the 5th percentile and the Downside
scenario is at the 95th percentile. IRGG
reviewed the scenario probabilities and
recommended them to the BRCC, where
they were approved. Using statistical
techniques combined with expert credit
judgement, the Group then formulates an
unbiased probability weighted estimate
of ECL at the reporting date (see note
2, Critical accounting estimates and
judgements for further detail).
Permanent TSB Group Holdings plc - Annual Report 2020 Expert Credit Judgement
The Group’s ECL accounting framework
methodology, in line with the requirements
of the standard, requires the Group to
use its experienced credit judgement
to incorporate the estimated impact of
factors not captured in the modelled ECL
results, in all reporting period dates (see
note 2, Critical accounting estimates and
judgements for further detail).
At 31 December 2020, the impairment
provision included €172m of Management’s
adjustments to modelled outcomes.
3.2 Liquidity and Funding Risk -
audited
Funding Risk is the risk that the Group is
not able to achieve its target funding mix
or is over-reliant on System Funding/
Wholesale Markets. Funding Risk can also
occur if the Group fails to meet regulatory
requirements and, in extremis, is not able to
access funding markets or can do so only
at excessive cost.
Liquidity Risk is the risk that the Group
has insufficient funds to meet its financial
obligations as and when they fall due,
resulting in an inability to support normal
business activity and/or failing to meet
regulatory liquidity requirements. These
risks are inherent in banking operations
and can be heightened by a number
of factors, including over reliance on a
particular funding source, changes in credit
ratings or market dislocation.
The level of risk is dependent on the
composition of the balance sheet, the
maturity profile and the quantum and
quality of the liquidity buffer. It is likely that
these risks would be further exacerbated
in times of stress. Given the nature of the
Group’s retail focus which stems from its
business model, Liquidity and Funding
risk will arise naturally due to the maturity
transformation of primarily short term
contractual deposits (albeit recognising
behavioural stickiness) into longer term
loans (predominantly mortgage lending).
With 96% of the balance sheet being
deposit funded, exposure to a potential
deposit run represents the primary liquidity
and funding risk.
The following information has not
been subject to audit by the Group’s
independent auditor.
(i) Regulatory Compliance
The Group is required to comply with
the liquidity requirements of the CBI
and the full spectrum of European
regulatory requirements including CRR,
CRD IV and associated Delegated Acts
such as the LCR Delegated Act.
The primary ratios calculated and
reported are the LCR and the NSFR.
In addition, supplementary liquidity
and funding metrics are measured and
monitored on a regular basis
Under the Bank Recovery and
Resolution Directive (BRRD), the Group
is required to adhere to an MREL
target. The Group has proactively
engaged with the CBI to determine
the Group’s MREL requirement, which
represents a quantification of the
eligible liabilities required to act as
a buffer in the event of a resolution
scenario. MREL targets have been
communicated and compliance
becomes binding in 2021. The Group
has a senior unsecured issuance
strategy to meet the MREL target.
(ii) Risk Management, Measurement and
Monitoring
Group Treasury are responsible for the day
to day management of the Group’s liquidity
position and ensuring compliance with the
regulatory requirements. In carrying out
this responsibility, the principal objective
is to ensure that adequate liquid assets
are available at all times to meet the
operational and strategic liquidity needs
of the Group under both normal and
stressed conditions. Liquidity management
focuses on the overall balance sheet
structure together with the control of risks
arising from the mismatch in contracted
maturities of assets and liabilities, undrawn
commitments and other contingent
liabilities.
Liquidity risk is measured on a daily basis
using a range of metrics against the
internally as well as regulatory prescribed
limit framework. The Group primarily
monitors its liquidity position through the
LCR. The objective of the LCR is to promote
the short-term resilience of the liquidity
risk profile of banks. It achieves this by
ensuring that banks have an adequate
stock of unencumbered high-quality liquid
assets (HQLA) that can be converted
easily and immediately in private markets
into cash to meet the liquidity needs for a
30-calendar day liquidity stress scenario.
NSFR, Asset Encumbrance and Liquidity
Stress Survivability constitute additional
core liquidity and funding metrics within
the overarching liquidity management
framework that are measured, monitored
and reported within the Group.
The Group also actively monitors a
comprehensive suite of KRIs and Early
Warning Indicators (EWIs) covering a range
of market wide and Group specific events.
The purpose of these metrics is to provide
forewarning of any potential liquidity
trigger events, ensuring the Group has
sufficient time to intervene and mitigate
any emerging risk.
The Contingency Funding Plan (CFP)
outlines the strategy and action plan
to address liquidity crisis events. The
CFP identifies processes and actions
incremental to the existing daily liquidity
risk management and reporting framework
to assist in making timely, well-informed
decisions.
Stress testing forms a key pillar of the
overall liquidity risk framework and is
conducted from both an economic and
normative perspective (as guided by
the EBA). Overall, the Group takes a
prudent approach in setting the inflow
and outflow parameters at a level which
is appropriate for each stress scenario
with due consideration of the Group’s
business model, liquidity and funding risk
exposures and the liquidity risk drivers, as
outlined in the EBA SREP Guidelines. The
stress testing framework is designed to
reflect the liquidity position impact under
idiosyncratic, systemic and combined
stresses.
The full suite of liquidity metrics and stress
test results are regularly reported to the
ALCO, the BRCC and the Board.
In addition, the Group ILAAP provides
a holistic view of the Group’s liquidity
adequacy. The ILAAP examines both
the short and long term liquidity position
relative to the internal and regulatory limits.
Through the ILAAP process, the Board
attests to the adequacy of the Group’s
liquidity position and risk management
processes on an annual basis.
81
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Risk Management
(continued)
(iii) Liquidity and Funding Risk
Management Framework
The exposure to Liquidity and Funding
risk is governed by the Group’s liquidity
and funding policies, RAS and associated
limits. The Liquidity and Funding
policies are designed to comply with
regulatory standards with the objective
of ensuring the Group holds sufficient
counterbalancing capacity to meet its
obligations, including deposit withdrawals
and funding commitments, as and
when they fall due under both normal
and stressed conditions. The process
establishes quantitative rules and targets
in relation to the measurement and
monitoring of liquidity risk. The Liquidity
and Funding Risk Framework is approved
by the BRCC on the recommendation
of the ALCO. The effective operation of
liquidity policies are delegated to the ALCO,
while Group Risk and GIA functions provide
further oversight and challenge to the
Liquidity Risk Framework.
The Liquidity and Funding Risk Framework
outlines the mechanisms by which
Liquidity and Funding risk is managed
within the Board approved Risk Appetite
and is in line with the overarching liquidity
and funding risk principles as follows:
• Liquidity: maintain a prudent liquid asset
buffer above the internally determined
or regulatory mandated (whichever is
greater) liquidity requirement such that
the Group can withstand a range of
severe yet plausible stress events; and
• Funding: develop a stable, resilient and
maturity-appropriate funding structure,
with focus on customer deposits
augmented by term wholesale funding
sources.
(iv) Minimum Liquidity Levels
The Group maintains a sufficient liquidity
buffer comprising both unencumbered
HQLA and non-HQLA liquidity capacity to
meet LCR and stress testing requirements.
The Group measures and monitors the
NSFR which is designed to limit over-
reliance on short-term funding and
promote longer-term stable funding
sources. The NSFR will become binding
from a regulatory perspective in 2021.
The Group asset encumbrance level is
also monitored and tracked against the
internally prescribed limit on an ongoing
basis.
82
(v) Liquidity Risk Factors
Over reliance and concentration on any
one particular funding source can lead
to a heightened liquidity impact during
a period of stress. The Group relies on
customer deposits to fund a considerable
portion of its loan portfolio. The ongoing
availability of these deposits may be
subject to fluctuations due to factors such
as the confidence of depositors in the
Group, and other certain factors outside
the Group’s control including, for example,
macroeconomic conditions in Ireland,
confidence of depositors in the economy in
general and the financial services industry,
specifically the competition for deposits
from other financial institutions.
The availability and extent of deposit
guarantees are of particular importance
especially for a Retail bank. The Irish
Deposit Guarantee Scheme (DGS) protects
deposits up to a balance of €100,000.
The national DGS together with the
establishment of the European Deposit
Insurance Fund is designed to maintain
depositor confidence and protect against a
potential deposit run. A significant change
to the operation of the DGS could adversely
affect the Group’s ability to retain deposits
under a severe stress event.
The Group remains active in capital
markets, be it secured or unsecured
transactions, and any restrictions on
the Group’s access to capital markets
could pose a threat to the overall funding
position. The inability to adequately
diversify the funding base could lead
to over concentration on the remaining
funding sources.
The Group maintains a significant
liquidity buffer split between HQLA
sovereign bonds, deposits placed with the
Central Bank and ECB eligible retained
securitisations which can be monetised
quickly to safeguard against a liquidity
event. While the quantum of the buffer is
sufficient to provide capacity to withstand
a significant liquidity stress event there is
a concentration in Irish based assets which
could reduce overall capacity in the event
of an idiosyncratic Irish stress event.
Significant progress has been made in
reducing the encumbrance level over
recent years. Following the successful NPL
deleveraging programme and the execution
of the Treasury funding plan, encumbrance
is now well within the target level. A clear
and defined strategy has been developed
to ensure an encumbrance level consistent
with its economic plan is maintained by
the Group. Disruption to unsecured funding
sources and a requirement to revert to
secured funding channels could potentially
pose a threat to this ratio and unsecured
creditors.
A series of liquidity and funding EWIs are
in place in order to alert the Group to any
potential liquidity trigger event therefore
allowing sufficient time for mitigating
actions to be taken.
(vi) Credit Ratings
The Group’s credit ratings have been
subject to change and may change in
the future, which could affect its cost or
access to sources of financing and liquidity.
In particular, any future reductions in long-
term or short-term credit ratings could:
further increase borrowing costs; adversely
affect access to liquidity; require the
Group to replace funding lost arising from
a downgrade, which may include a loss of
customer deposits; limit access to capital
and money markets; and trigger additional
collateral requirements in secured funding
arrangements and derivatives contracts.
These issues are factored into the Group’s
liquidity stress testing.
During 2020, S&P and DBRS downgraded
PTSB plc’s senior unsecured credit ratings
outlook to negative reflecting the view
that the economic contraction will make
the operating environment in Ireland more
challenging, leading to weaker business
and profitability prospects for PTSB Group
and PTSB.
The ratings for PTSB plc are as follows:
• Standard & Poor’s (S&P): Long-Term
Rating “BBB-” with Outlook “Negative”;
• Moody’s: Long-Term Rating “Baa2” with
Outlook “Stable”; and
• DBRS: Long-Term Rating “BBBL” with
Outlook “Negative”.
The ratings for PTSB Group Holdings are
as follows:
• Standard & Poor’s (S&P): Long-Term
Rating “BB-” with Outlook “Negative”;
• Moody’s: Long-Term Rating “Ba1” with
Outlook “Stable”; and
• DBRS: Long-Term Rating “BBH” with
Outlook “Negative”.
For further details on liquidity and funding
risk see note 33.
Permanent TSB Group Holdings plc - Annual Report 2020 3.3 Market Risk - audited
Market Risk can be defined as the risk
of losses in on and off-balance sheet
positions arising from adverse movements
in market prices. From the Group’s
perspective, market risk consists of three
components being Interest Rate Risk, FX
Risk and Credit Spread Risk. Often market
risk cannot be fully eliminated through
diversification, though it can be hedged
against.
The Group’s RAS and the associated
Market Risk Framework set out the Group’s
approach to management of market risk.
The Framework is approved annually by
the BRCC on the recommendation of the
ALCO.
All market risks arising within the Group
are subject to strict internal controls and
reporting procedures and are monitored
by the ALCO and the BRCC on a regular
basis. Group Treasury is responsible for
the management of market risk exposures
on the balance sheet. Group Risk and GIA
provide further oversight and challenge
of Group Treasury’s compliance with the
Market Risk framework and associated
Policies.
(i) Interest rate risk
Interest rate risk is the risk to earnings or
capital arising from a movement in the
absolute level of interest rates, the spread
between rates, the shape of the yield curve
or in any other interest rate relationship.
The risk may be subdivided into gap,
option and basis risk. In line with regulatory
standards, the approved Interest Rate Risk
in the Banking Book (IRRBB) methodology
determined that the Group’s interest rate
risk exposure must be derived from both an
earnings (accrual) (Earnings at Risk (EaR))
and economic value perspective (EV).
The Group separately calculates the
contractual Basis Risk exposure which is
factored into the Pillar II ICAAP process.
The risk position is added to the most
severe of EV or EaR risk levels in order to
ensure all material sources of Interest Rate
Risk are capitalised for.
Interest rate gap analysis is used to capture
re-price risk, the EV approach measures
yield curve risk while EAR is utilised to
calculate the risk to earnings.
The following information has not
been subject to audit by the Group’s
independent auditor.
In defining the level of interest rate risk
the Group applies the most severe of
the 13 core stress scenarios inclusive
of the six scenarios prescribed by
the Basel and EBA Guidelines on the
Management of IRRBB, under both EV
and EAR models and subject to interest
rate flooring assumptions. The results
are measured and reported against the
Board approved risk limits.
The Group also monitors PV01 (impact
of 0.01% movement in interest
rates), duration mismatches and NII
sensitivity when assessing interest
rate risk.
The aim of modelling several types
of interest rate shock scenarios is to
measure the Group’s vulnerability to
loss under multiple stressed market
conditions.
The 31 December 2020 interest rate
risk level, based on the EV calculation
(more severe than EaR), was calculated
as €44m (31 December 2019: €44m).
The risk position has remained at
the same level as the impacts of
the movements in balance sheet
components have offset each other.
Based on the internally derived Basis
Risk calculation methodology, the 31
December 2020 risk level stands at
€16m. A floor of ECB Refi minus 25bps
is applied for the ECB refinance rate
and 100bps for Euribor positions.
(ii) Foreign Exchange Risk
Foreign currency exchange risk is the
volatility in earnings resulting from
the retranslation of foreign currency
denominated assets and liabilities.
Consistent with its business model as
a domestically focused Retail bank, the
Group is predominantly exposed to GBP
and USD positions arising from customer
deposits denominated in these currencies
or branch bureau activities.
Derivatives (FX swaps and forwards) are
executed to minimise the FX exposure.
Overnight FX positions are monitored
against approved notional limits. It is the
responsibility of both Group Treasury
and Group Risk to measure and monitor
exchange rate risk and maintain the
exposure within approved limits. The
aggregate euro denominated 31 December
2020 FX position was €1.9m (31 December
2019 €2.9m).
(iii) Credit Spread Risk
Credit Spread Risk is defined as the risk
of a decline in the value of an asset due to
changes in the market perception of its
creditworthiness over its life to maturity.
This risk applies to the portion of the
Group’s bond portfolio which is classified
as Hold to Collect and Sell (HTC&S) under
IFRS9 classifications.
The Group’s strategy is to hedge, as
much as is practical, the interest rate risk
element of the HTC&S bond volatility. The
remaining Mark-to-Market (MTM) volatility
represents the Group’s Credit Spread Risk
exposure.
For further details on market risk see note
33.
83
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Directors’ Report
The Directors present their Annual Report
and audited Group and Company financial
statements to the shareholders for the year
ended 31 December 2020.
Results
The Group loss for the year was €162m
(2019 profit: €30m) and was arrived at
as presented in the consolidated income
statement.
Dividends
No dividends were paid in 2020.
Review of the Business and likely
Future Developments
A detailed review of the Group’s business
activities, performance for the year and an
indication of likely future developments are
set out in the Strategic Report. Information
on the KPIs and principal risks and
uncertainties of the business are provided
as required by the European Accounts
Modernisation Directive (2003/51/EEC).
The Group’s KPIs are included in the
Strategic Report section. The principal
risks and uncertainties are outlined under
“risk factors” in the Risk Management
section and under “Longer Term Viability”
within the BAC section of the Corporate
Governance Statement.
Accounting Policies
The principal accounting policies, together
with the basis of preparation of the
financial statements are set out in note 1 to
the consolidated financial statements.
Corporate Governance
The report on Corporate Governance, as
outlined in the Corporate Governance
section, forms part of the Directors’ Report.
Principal Risks and Uncertainties
Information concerning the principal risks
and uncertainties of the Group are set out
in the risk management section of the
Strategic Report on page 66 of the Annual
Report.
Financial Instruments
The financial instruments and use thereof
are outlined in the risk management
section, financial risk management and
derivative assets/liabilities note 16.
Going Concern
The Group’s financial statements have
been prepared by the Directors on a going
concern basis having considered that it is
appropriate to do so. The going concern
of the Group has been considered in Note
84
1 of the financial statements and further
information on the assessment of the
going concern position is also set out in
the Governance Statement on page 120
under the BAC’s 2020 significant financial
reporting judgments and disclosures.
Longer Term Viability
Taking account of the Group’s current
position and principal risks, the Directors
have assessed the prospects of the
Group over the period 2021-2023. The
Directors confirm that it is their reasonable
expectation that the Group will be able
to continue in operation and meet its
liabilities as they fall due over this period.
Further detail on the assessment of the
Group’s longer term viability is set out in
the Governance Statement on page 120
under the Board Audit Committee’s 2020
significant financial reporting judgements
and disclosures.
Directors’ Compliance Statement
As required by section 225(2) of the
Companies Act 2014, the Directors
acknowledge that they are responsible for
securing the Company’s compliance with
its relevant obligations (as defined in that
legislation). The Directors have drawn up
a compliance policy statement, and have
put in place arrangements and structures
that are, in the Directors’ opinion, designed
to secure material compliance with the
relevant obligations. A review of these
arrangements was conducted during the
year.
Statement of Relevant Audit
Information
In preparing and approving the 2020
Annual Report and in accordance with
Section 330 (1) of the Companies Act
2014, each of the current Directors of the
Company confirm that;
• So far as the Directors are aware, there
is no relevant audit information of which
the statutory auditors are unaware; and
• The Directors have taken all steps
that they ought to have taken to make
themselves aware of any relevant audit
information and have established that
the statutory auditors are aware of that
information.
Audit Committee
In accordance with Section 167(3)(a) of the
Companies Act 2014, the Directors confirm
that the Board has established an audit
committee.
Directors
The names of the Directors, together
with a detailed description of the key
strengths, skills, expertise and experience
of each Director, are set out in the Board
of Directors section on pages 96 to 100
of the Annual Report. Paul Doddrell was
appointed as a Non-Executive Director on
26 November 2020. Julie O’Neill retired as
a Non-Executive Director on 05 August
2020.
Following a competitive tendering process,
Eamonn Crowley, an existing Board
Executive Director (CFO) replaced Jeremy
Masding as CEO who stepped down from
the Board on the 1 July 2020.
With the exception of Julie O’Neill who
had indicated her intention to retire from
the Board, all of the Directors stood and
were re-appointed by election at the 2020
Annual General Meeting (AGM). All of the
Directors will stand for re-appointment by
election at the Group’s 2020 AGM to be
held on 19 May 2021.
Information on Directors’ remuneration is
detailed in the Remuneration Report on
pages 133 to 136 of the Annual Report and
Directors’ and Secretary interests in shares
are outlined in note 40 to the financial
statements.
Other than the Directors’ interests set out
in note 40, there were no other interests
disclosed to the Company in accordance
with the market abuse regulations
occurring between the period under review
and up to 02 March 2021.
Share Capital and Shareholders
Under the terms of the Credit Institutions
(Stabilisation) Act 2010 (the “Act”) the
Minister for Finance could, in certain
circumstances, direct the Company to
undertake actions that could impact on the
pre-existing legal and contractual rights
of shareholders. The Act had an original
expiry date of 31 December 2012. However,
the Act was subsequently extended to 31
December 2014, but has not since been
extended. The expiry of the Act does
not affect any order already made, or
the variance, termination, enforcement,
variation or revocation of any existing
order nor does it affect the ability of the
Minister to impose certain conditions on
any financial support provided under or in
connection with the Act.
Permanent TSB Group Holdings plc - Annual Report 2020 Relationship Framework with the
Minister for Finance
The Minister for Finance of Ireland owns
and controls 74.92% of the Company’s
issued ordinary share capital. Under the
terms of the Relationship Framework
entered into between the Minister for
Finance and the Company, the Minister
for Finance expects the Board and
Management team of the Group to conduct
the Group’s commercial operations in a
prudent and sustainable manner which
seeks to create a commercially oriented
credit institution that recognises the need
to encourage and enforce implementation
of lessons learned from the financial crisis.
The Minister for Finance recognises that
the Group remains a separate economic
unit with independent powers of decision
and that its Board and Management
team retain responsibility and authority
for determining the Group’s strategy and
commercial policies (including business
plans and budgets) and conducting its
day-to-day operations. The Minister for
Finance will ensure that the investment
in the Group is managed on a commercial
basis and will not intervene in day-to-
day management decisions of the Group
(including with respect to pricing and
lending decisions).
Transactions and arrangements between
the Group and the Minister for Finance
or associates of the Minister for Finance
will be conducted at arms-length and on
normal commercial terms. The Minister
will not, in his capacity as a shareholder in
the Company, take any action that would
have the effect of preventing the Group
from complying with its obligations under
applicable law and regulations, including,
but not limited to, the Listing Rules and will
not propose or procure the proposal of a
shareholder resolution which is intended
to circumvent the proper application of
regulatory requirements.
The Minister engages with the Group,
including in respect of the manner in
which he exercises his voting rights,
in accordance with best institutional
practice in a manner proportionate to the
shareholding interest of the State in the
Company. The views of the Minister for
Finance and the DOF are expected to be
appropriately considered by the Group as
part of any consultation process under
the Relationship Framework. However, the
Board and Management team have full
responsibility and authority for determining
the Group’s strategy and commercial
policies.
The Relationship Framework also provides
that the Minister for Finance and the
Company will review the Relationship
Framework from time to time when either
party reasonably considers that changes
to the Relationship Framework or to the
State Agreements (as defined therein)
would be necessary or desirable to ensure
that the Relationship Framework continues
to reflect certain principles specified in
the Relationship Framework and to enable
the Group to continue to comply with
its obligations under applicable law and
regulations, including, but not limited to,
the Listing Rules.
into ordinary shares of the Company if the
events triggering such conversion arise. A
triggering event arises if the CET1 Ratio of
PTSB or the CET1 Ratio of the Company
falls below 7 per cent. The EU Single
Resolution Board is the resolution authority
for the EU Banking Union. The Company
from 1 January 2019 on classification
as LSI by the ECB became subject to
direct supervision by the CBI as National
Competent Authority. The CBI through
powers vested by the ECB could direct a
write-down or conversion of the Securities
in certain limited circumstances where the
CET1 Ratio is in excess of the trigger level.
The Relationship Framework also imposes
restrictions on the Group undertaking
certain actions without where specified,
providing information to, consulting with,
or obtaining the consent of the Minister for
Finance. The principal restrictions are set
out in the Relationship Framework, a copy
of which is available on the Group website
www.permanenttsbgroup.ie.
The Board is satisfied that the Company
has complied with the relevant
independent provisions set out in the
Relationship Framework. The Board is also
satisfied, in so far as it is aware, that the
Minister for Finance has complied with the
relevant independence provisions set out in
the Relationship Framework.
Authorised Share Capital
The authorised share capital of the
Company is €775,000,000 divided into
1,550,000,000 ordinary shares of €0.50
each.
Issued Ordinary Shares
At 31 December 2020, the Company had
454,695,492 ordinary shares of €0.50
each in issue (2019: 454,695,492). Ordinary
shares represent 100% of the Company’s
issued share capital value. During the
year, one Director bought 50,000 ordinary
shares. No ordinary shares were issued in
2020. Each ordinary share carries one vote
and the total number of voting rights at
31 December 2020 is 454,695,492 (2019:
454,695,492).
At 31 December 2020, the Company holds,
through an employee benefit trust, 4,580
(2019: 4,580) ordinary shares of €0.50
each.
Additional Tier 1 Equity Securities
On 6 May 2015, the Company’s subsidiary,
PTSB plc, issued €125m of AT1 securities.
These AT1 Securities may be converted
European Union Bank Recovery and
Resolution Directive
The BRRD was implemented into Irish law
by the EU (Bank Recovery and Resolution)
Regulations 2015. BRRD provides European
national resolution authorities with
comprehensive and effective powers
for dealing with failing banks and certain
investment firms. BRRD grants a set of
early intervention powers to the Irish
national resolution authority (CBI) that
include the write-down or cancellation of
equity and/or the conversion of certain
eligible liabilities into equity. Further
information on BRRD is available on the
CBI website: https://www.centralbank.ie/
regulation/how-we-regulate/resolution-
framework.
Variation of Rights
Whenever the share capital is divided
into different classes of shares, the rights
attached to any class may be varied or
abrogated with the consent in writing of
the holders of three-quarters in nominal
value of the issued shares of that class or
with the sanction of a special resolution
passed at a separate General Meeting of
the holders of the shares of the class, and
may be so varied or abrogated either whilst
the Company is a going concern or during
or in contemplation of a winding-up.
Allotment of Ordinary Shares
Subject to the provisions of the Articles
of Association relating to new shares,
the shares shall be at the disposal of the
Directors and (subject to the provisions of
the Articles and the Acts) they may allot,
grant options over, or otherwise dispose
of them to such persons on such terms
and conditions and at such times as they
may consider to be in the best interests of
the Company and its shareholders, but so
that no share shall be issued at a discount
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(continued)
and so that, in the case of shares offered
to the public for subscription, the amount
payable on application of each share shall
not be less than one-quarter of the nominal
amount of the share and the whole of any
premium thereon.
Holders of Ordinary Shares Resident
in the USA
The Board may at its discretion give
notice to certain holders resident in the
USA calling for a disposal of their shares
within 21 days or such longer period as the
Board considers reasonable. The Board
may extend the period within which any
such notice is required to be complied
with and may withdraw any such notice
in any circumstances the Board sees
fit. If the Board is not satisfied that a
disposal has been made by the expiry of
the 21 day period (as may be extended), no
transfer of any of the shares to which the
notice relates may be made or registered
other than a transfer made pursuant to a
procured disposal of the said shares by the
Board, or unless such notice is withdrawn.
Refusal to Transfer
The Directors in their absolute discretion
and without assigning any reason therefore
may decline to register:
• any transfer of a share which is not fully
paid save however, that in the case of
such a share which is admitted to listing
on London or Euronext Dublin Stock
Exchanges, such restriction shall not
operate so as to prevent dealings in such
share of the Company from taking place
on an open and proper basis;
• any transfer to or by a minor or person
who is adjudged by any competent court
or tribunal, or determined in accordance
with the Company’s Articles, not to
possess an adequate decision-making
capacity;
• any instrument of transfer that is not
accompanied by the certificate of the
shares to which it relates and such
other evidence as the Directors may
reasonably require to show the right of
the transferor to make the transfer;
• the instrument of transfer, if the
instrument of transfer is in respect of
more than one class of share; and
• any transfer of shares in uncertificated
form only in such circumstances as are
permitted or required by Section 1086 of
the Companies Act 2014.
86
General Meetings
Under the Articles of Association, the
power to manage the business of the
Company is generally delegated to the
Directors. However, the shareholders
retain the power to pass resolutions at a
general meeting of the Company which
may give direction to the Directors as to the
management of the Company.
The Company must hold a general meeting
in each year as its AGM in addition to any
other meetings in that year and no more
than fifteen months may lapse between
the date of one AGM and that of the next.
The AGM will be held at such time and
place as the Directors determine. All
General Meetings, other than AGMs, are
called Extraordinary General Meetings.
Extraordinary General Meetings shall
be convened by the Directors or on the
requisition of members holding, at the
date of the requisition, not less than five
per cent of the paid up capital carrying
the right to vote at General Meetings and
in default of the Directors acting within
21 days to convene such a meeting to be
held within two months, the requisitionists
(or more than half of them) may, but only
within three months, themselves convene
a meeting. An Extraordinary General
Meeting of the Company was held on 12
February 2021 for the purposes of passing
resolutions to facilitate the migration of
the share settlement system used by the
Company from CREST to Euroclear Bank
Belgium. Further details on this event
can be found on the Company’s website
www.permanenttsbgroup.ie/investors/
shareholders/extraordinairy-general-
meeting.
No business may be transacted at any
General Meeting unless a quorum is
present at the time when the meeting
proceeds to business. Three members
present in person or by proxy and entitled
to vote at such meeting constitutes a
quorum.
In the case of an AGM or of a meeting
for the passing of a special resolution or
the appointment of a director, 21 clear
days’ notice at the least, and in any other
case 14 clear days’ notice at the least
(assuming that the shareholders have
passed a resolution to this effect at the
previous year’s AGM), needs to be given in
writing in the manner provided for in the
Company’s Articles of Association to all the
members (other than those who, under the
provisions of the Articles of Association or
the conditions of issue of the shares held
by them, are not entitled to receive the
notice) and to the Auditor for the time being
of the Company. The Company’s Articles
of Association may be amended by special
resolution passed at a General Meeting of
shareholders. Special resolutions must be
approved by not less than 75% of the votes
cast by shareholders entitled to vote in
person or by proxy.
Substantial Shareholdings
As at 31 December 2020, the Directors have been notified of the following substantial
interests in the voting rights of Ordinary shares held:
Name
Interest
Minister for Finance of
Ireland
74.92%
340,661,653 shares
Janus Henderson Group
plc
3.77%
17,181,881 shares
Date Notified
5 May 2015
31 May 2017
There were no other changes to substantial interests in the voting rights of ordinary
shares reported to the Directors as at 2 March 2021.
Permanent TSB Group Holdings plc - Annual Report 2020 Voting Rights of Ordinary Shares
No person holds securities carrying special
rights. There are no particular restrictions
on voting rights. The Company is not aware
of any agreements between shareholders
that may result in restrictions on the
transfer of its shares or on voting rights.
Voting rights at General Meetings of the
Company are exercised when the Chairman
puts the resolution at issue to the vote of
the meeting. A vote may be decided on a
show of hands or by poll. A vote taken on
a poll for the election of the Chairman or
on a question of adjournment is also taken
forthwith and a poll on any other question
or resolution is taken either immediately,
or at such time (not being more than 30
days from the date of the meeting at
which the poll was demanded or directed)
as the Chairman of the meeting directs.
Where a person is appointed to vote for
a shareholder as proxy, the instrument
of appointment must be received by the
Company not less than 48 hours before the
time appointed for holding the meeting or
adjourned meeting at which the appointed
proxy proposes to vote, or, in the case of a
poll, not less than 48 hours before the time
appointed for taking the poll.
Voting at any General Meeting is by a
show of hands unless a poll is properly
demanded. On a show of hands, every
member who is present in person or by
proxy has one vote regardless of the
number of shares held. On a poll, every
member who is present in person or by
proxy has one vote for each share of
which they are the holder. A poll may
be demanded by the Chairman of the
meeting or by at least five members
having the right to vote at the meeting or
by a member or members representing
not less than one-tenth of the total voting
rights of all the members having the right
to vote at the meeting or by a member or
members holding shares in the Company
conferring a right to vote at the meeting,
being shares on which an aggregate sum
has been paid up equal to not less than
one-tenth of the total sum paid up on all the
shares conferring that right. It is current
standing practice at the AGM that voting is
conducted on a poll.
The holders of the ordinary shares have the
right to attend, speak, ask questions and
vote at General Meetings of the Company.
The Company, pursuant to Section 1105 of
the Companies Act 2014 and Regulation 14
of the Companies Act 1990 (Uncertificated
Securities) Regulations 1996 (S.I. 68/1996),
specifies record dates for General
Meetings, by which date shareholders must
be registered in the Register of Members of
the Company to be entitled to attend and
vote at the meeting.
Pursuant to Section 1104 of the Companies
Act 2014, a shareholder, or a group of
shareholders who together hold at least 3
per cent of the issued share capital of the
Company, representing at least 3 per cent
of the total voting rights of all the members
who have a right to vote at the meeting to
which the request for inclusion of the item
relates, have the right to put an item on the
agenda, or to modify an agenda which has
been already communicated, of a general
meeting. In order to exercise this right,
written details of the item to be included
in the general meeting agenda must be
accompanied by stated grounds justifying
its inclusion or a draft resolution to be
adopted at the general meeting together
with evidence of the shareholder or group
of shareholders’ shareholding must be
received, by the Company, 42 days in
advance of the meeting to which it relates.
The Company publishes the date
of its AGM on its website www.
permanenttsbgroup.ie on or before 31
December of the previous financial year
or no later than 70 days before the date of
the AGM.
Director Appointments
Save as set out below, the Group has no
rules governing the appointment and
replacement of Directors outside of the
provisions thereto that are contained in
the Articles of Association. Under the
Relationship Framework entered into
between the Company and the Minister
for Finance, the Board must consult
with the Minister for Finance for the
appointment or re-appointment of the
CEO or Chairman. Upon receipt of written
notice from the Minister for Finance, the
Board shall appoint up to two nominees
of the Minister for Finance as Directors
of the Company and the appointment(s)
shall be deemed to take effect on the
date of the next Board meeting following
receipt of the aforementioned notice (and
regulatory approval). In 2018, the Board
received written notice from the Minister
for Finance of his intention to appoint
two Directors to the Board. In this regard
Marian Corcoran was appointed to the
Board on 24 September 2019 and Paul
Doddrell was appointed to the Board on 26
November 2020.
Powers Granted to Directors at the
AGM
The following is a description of the
resolutions passed by members in
connection with powers granted to the
Directors:
Ordinary Remuneration of Directors
At the 2019 AGM held on 14 May 2019,
shareholders authorised that the Directors
may from time to time determine in
accordance with the Articles of Association
of the Company, the aggregate ordinary
remuneration of the Directors for serving
as Directors of the Company at an amount
not exceeding €750,000.
Allotment of Shares
At the 2015 AGM held on 8 April 2015,
authorisation was provided to the
Directors, to allot shares and dis-apply
statutory pre-emption rights up to a
nominal value of €20,833,333 connected
to the issue of ordinary shares should there
be a conversion of the AT1 Debt instrument
(see page 85).
The Investment Association has issued
guidance which generally supports
resolutions seeking authority to allot up
to a separate and additional 33.33% of a
company’s issued share capital (excluding
treasury shares) in addition to the 33.33%
authority already supported where the
additional authority is applied to allot
shares pursuant to a rights issue.
At the 2020 AGM held on 05 August
2020, the Directors were generally and
unconditionally authorised, pursuant to
section 1021 of the Companies Act 2014, to
exercise all of the powers of the Company
to allot and issue all relevant securities
of the Company (within the meaning of
section 1021 of the Companies Act 2014)
up to an aggregate nominal amount of
€150,049,512 representing 66.66% of
the issued ordinary share capital of the
Company as at 3 July 2020 of which
€75,024,756 (representing the separate
and additional 33.33% of the issued
ordinary share capital of the Company
(excluding treasury shares) as at 3 July
2020 referred to above may be applied
to allot shares pursuant to a rights issue.
The authority conferred commenced
on the 05 August 2020 and will expire
at the conclusion of the 2021 AGM or 05
November 2021 (whichever is earlier)
unless and to the extent that such power
is renewed, revoked, or extended prior to
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(continued)
such date; provided that the Company
may before such expiry make an offer or
agreement which would or might require
relevant securities to be allotted after such
expiry, and the Directors may allot relevant
securities in pursuance of such an offer
or agreement as if the power conferred by
this Resolution had not expired.
Disapplication of Pre-emption Rights
At the 2020 AGM held on 05 August 2020,
the Directors were authorised to allot
equity securities (within the meaning of
section 1023(1) of the Companies Act
2014) for cash as if Section 1022(1) of
the Companies Act 2014 did not apply
to any such allotment, such power to be
effective from 05 August 2020 and shall
expire at the conclusion of the 2021 AGM
or 05 November 2021(whichever is earlier)
unless and to the extent that such power
is renewed, revoked, or extended prior to
such date; and such power being limited to:
(a) the allotment of equity securities in
connection with any offer of securities,
open for a period fixed by the Directors,
by way of rights issue, open offer or other
invitation to or in favour of the holders of
ordinary shares and/or any persons having
a right to subscribe for equity securities
in the capital of the Company (including,
without limitation, any persons entitled or
who may become entitled to acquire equity
securities under any of the Company’s
share option scheme or share incentive
plans then in force) where the equity
securities respectively attributable to the
interests of such holders are proportional
(as nearly as may reasonably be) to the
respective number of ordinary shares held
by them and subject thereto the allotment
in any case by way of placing or otherwise
of any securities not taken up in such issue
or offer to such persons as the Directors
may determine; and generally, subject to
such exclusions or other arrangements
as the Directors may deem necessary or
expedient in relation to legal or practical
problems (including dealing with any
fractional entitlements and/or arising in
respect of any overseas shareholders)
under the laws of, or the requirements of
any regulatory body or stock exchange in,
any territory;
(b) and/or the allotment of equity securities
up to a maximum aggregate nominal
value of €11,367,387, which represents
approximately 5% of the issued ordinary
share capital of the Company as at the
close of business on 3 July 2020.
88
The Directors were also empowered to
allot equity securities (within the meaning
of Section 1023(1) of the Companies Act
2014) for cash as if Section 1022(1) of
the Companies Act 2014 did not apply
to any such allotment, such power to be
effective from 05 August 2020 and shall
expire at the conclusion of the 2021 AGM
or 05 November 2021 (whichever is earlier)
unless and to the extent that such power
is renewed, revoked, or extended prior to
such date and such power being limited to:
(a) the allotment of equity securities
up to a maximum aggregate nominal
value of €11,367,387, which represents
approximately 5% of the issued ordinary
share capital of the Company as at the
close of business on 3 July 2020; and
(b) used only for the purposes of financing
(or refinancing, if the authority is to be
used within six months after the original
transaction) a transaction which the
Directors determine to be an acquisition
or other capital investment of a kind
contemplated by the Statement of
Principles on Disapplying the Pre-Emption
Rights most recently published by the
Pre-Emption Group and in effect prior to 3
July 2020.
Market purchases of own Shares
At the 2020 AGM held on 05 August 2020,
members gave the Company (and its
subsidiaries) the authority to make market
purchases and overseas market purchases
provided that the maximum number of
ordinary shares authorised to be acquired
shall not exceed:
(a) 5% above the higher of the average
of the closing prices of the Company’s
ordinary shares taken from the Euronext
Dublin Daily Official List and the average
of the closing prices of the Company’s
ordinary shares taken from the London
Stock Exchange Daily Official List in each
case for the five business days (in Dublin
and London, respectively, as the case
may be) preceding the day the purchase is
made (the “Market Purchase Appropriate
Price”), or if on any such business day
there shall be no dealing of ordinary shares
on the trading venue where the purchase
is carried out or a closing price is not
otherwise available, the Market Purchase
Appropriate Price shall be determined by
such other method as the Directors shall
determine, in their sole discretion, to be fair
and reasonable; or, if lower,
(b) the amount stipulated by Article 3(2)
of Commission Delegated Regulation (EU)
2016/1052 relating to regulatory technical
standards for the conditions applicable
to buy-backs and stabilisation (being the
value of such an ordinary share calculated
on the basis of the higher of the price
quoted for: (i) the last independent trade;
and (ii) the highest current independent
purchase bid for any number of such
ordinary shares on the trading venue(s)
where the purchase pursuant to the
authority conferred will be carried out). The
authority will expire on close of business on
the date of the next AGM of the Company
or on the 05 November 2021 (whichever is
earlier) unless previously varied, revoked or
renewed. While the Directors do not have
any current intention to exercise this power,
this authority and flexibility was sought as
it is common practice for companies on
the Official List of the Euronext Dublin and/
or London Stock Exchanges. Furthermore,
such purchases would be made only at
price levels which the Directors considered
to be in the best interests of the members
generally, after taking into account the
Company’s overall financial position. In
addition, the authority being sought from
members would provide that the minimum
price (excluding expenses) which may be
paid for such shares would be an amount
not less than the nominal value of the
shares;
(c) the amount stipulated by Article 3(2)
of Commission Delegated Regulation (EU)
2016/1052 relating to regulatory technical
standards for the conditions applicable
to buy-backs and stabilisation (being the
value of such an ordinary share calculated
on the basis of the higher of the price
quoted for: (i) the last independent trade;
and (ii) the highest current independent
purchase bid for any number of such
ordinary shares on the trading venue(s)
where the purchase pursuant to the
authority conferred will be carried out). The
authority will expire on close of business on
the date of the next AGM of the Company
or on the 05 November 2021 (whichever is
earlier) unless previously varied, revoked or
renewed. While the Directors do not have
any current intention to exercise this power,
this authority and flexibility was sought as
it is common practice for companies on the
Official List of the Irish and/or London.
Permanent TSB Group Holdings plc - Annual Report 2020 Change of control of the Company
In the event of a change of control of the
Company there are no agreements (other
than under normal employment contracts)
between the Company, its Directors or
employees providing for compensation for
loss of office that might occur.
Post Balance Sheet Events
Events after the reporting period are
described in note 44 to the financial
statements.
Accounting Records
The measures taken by the Directors to
secure compliance with the Company’s
obligation to keep adequate accounting
records are the use of appropriate systems
and procedures and the employment
of competent persons. The accounting
records are kept at the Company’s
registered office, 56-59 St Stephen’s
Green, Dublin 2.
Disclosure Notice
The Company did not receive a disclosure
notice under section 33AK of the Central
Bank Act 1942 during 2020.
Political Donations
The Directors have satisfied themselves that there were no political contributions during
the year, which require disclosure under the Electoral Act, 1997.
Location of Information required pursuant to Listing Rule 6.8.1C
Listing Rule
Information Included*
LR 6.8.1
(12)
LR 6.8.1
(14)
The Trustees of the Employee Benefit Trust have elected to waive
dividend entitlements.
As stated on page 68, the Minister for Finance has entered into
a Relationship Framework with the Company. A copy of the
Relationship Framework is available at www.permanenttsbgroup.ie
*No information is required to be disclosed in respect of Listing Rules 6.8.1(1), (2), (3), (4), (5), (6), (7), (8), (9), (10), (11),
and (13).
Subsidiary Undertakings
The principal subsidiary undertakings and the Company’s interests therein are shown in
note 42 to the financial statements.
Independent Auditor
In accordance with section 383 (2) of the Companies Act 2014, the Auditor,
PricewaterhouseCoopers (PwC) Chartered Accountants and Statutory Audit Firm, will
continue in office.
Board Diversity Statement
The Board Diversity Statement, as set out in the Corporate Governance Statement (see
page 115) is deemed to be incorporated into this part of the Directors’ Report.
Non-Financial Statement
For the purposes of Statutory Instrument 360/2017 EU (Disclosure of Non-Financial and Diversity Information by certain large
undertakings and groups) Regulations 2017, the following sections of this Annual Report and any cross references made in the Directors’
Report are deemed to be incorporated into this part of the Directors’ Report:
Reporting requirements
Policies and standards which govern our approach
Risk management and additional information
Environmental matters
Environmental statement
Social and Employees
Code of Ethics
Diversity and Inclusion Strategy
Conflicts of Interest Policy
Whistleblowing Policy and associated
procedures
Board Diversity Policy
Colleague Conduct Policy
Environment, pages 38 to 41
Climate Risk. Page 39
Low Carbon Pledge, page 40
Waste Management, page 41
Go Paperless Initiative, page 41
Environmental Policy Statement, page
41
Having an Employee Voice, page 29
Health, safety and wellbeing, page 32
Conflicts of interest, Page 43
Speaking Up, page 19
Board Diversity Policy, page 115
Colleague Conduct Policy, Page 42
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(continued)
Reporting requirements
Policies and standards which govern our approach
Risk management and additional information
Human rights
Dignity and Respect Policy
Equality Through Diversity Policy
Operating Responsibly, page 42
The Business Working Responsibility
Mark, page 23
Social matters
Community Partnerships
Helping communities, page 34
Anti-corruption and anti-bribery
Anti-bribery Policy
Anti-bribery Policy Statement
Anti-money laundering and counter
terrorist financing Policy
Description of principal risks and impact
of business activity
Description of the business model
Non-financial key performance indicators
On behalf of the Board
Customer privacy and data security,
page 70
Responsible conduct and culture, page
42
Operational risk, page 70
Speaking Up, page 19
Risk overview, pages 59
Principal risks, pages 66
Our Strategy, page 12
Our business model, page 12
Non-financial performance indicators,
page 3
Responsible Business Governance,
page 41
Customers, page 24
Colleagues, page 28
Community, page 34
Environment, page 39
Robert Elliott
Chairman
Eamonn Crowley
Chief Executive
Donal Cortney
Audit Committee Chair
Conor Ryan
Company Secretary
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Permanent TSB Group Holdings plc - Annual Report 2020 Corporate Governance Statement
Chairman’s Introduction
Good corporate governance is imperative to enable
the Board to balance the interest of its stakeholders
and promote growth.
Dear Shareholder,
I am pleased to report that the Bank
continues to drive commercial momentum
notwithstanding the challenges presented
by COVID-19 during the year. 2020 was
a year in which the culture of the Bank
continued to evolve centred on a new
corporate purpose “to work hard every
day to build trust with customers – we are
a community serving the community”.
The Board also approved a new ambition
for the Bank to be Ireland’s best personal
and small business bank. The Board set
out a new strategy to achieve its ambition
through: increasing trust, advocacy and
loyalty among customers; enhancing
digital opportunities; embedding and open
and inclusive growth culture; simplifying
our business; and, growing sustainable
profitability. All of this will be achieved
through the continued embedding of a risk
aware system of governance that responds
to the needs of the Bank’s stakeholders,
while upholding the standards expected
of a retail credit institution. The following
report sets out the detail of our approach
to corporate governance principles
and practices, how we implement and
endeavour to achieve compliance with the
UK Corporate Governance Code and how
our Board and its Committees operated
during the year.
The reports from the Chairs of the Board
Audit, Risk and Compliance, Nomination
Culture and Ethics, and Remuneration
Committees on pages 118,123,125 and 128
respectively highlight the key activities and
areas of focus for each Committee.
The Board has responsibility for the
leadership, financial soundness, strategic
direction, operational performance, risk
management and the sustainable long-
term success of the Bank. In pursuing the
objective of delivering on our priorities and
promoting the long-term success of the
Bank, for the ultimate benefit of the Bank’s
shareholders and other key stakeholders,
including colleagues, customers and
communities, the Board observes
the highest standards of corporate
governance, integrity and professionalism.
We keep our governance structures
and arrangements under review on a
continuing basis in the pursuance of
effective risk management and the
provision of assurance and accountability
in a transparent manner. During 2020, I
was particularly pleased with the quality
of reporting and discussions at the Board
Nomination Culture and Ethics Committee
following the addition of responsibilities
in supporting the Board oversight on
culture, ethics, employee engagement and
reputation management.
COVID-19
I am very pleased by the manner in
which both colleagues and board
members responded to the COVID-19
pandemic. Our mind-set during this
time was to do everything we could to
support our customers, many of whom
found themselves in very challenging
circumstances. I am proud of the fact
during 2020 we kept all of our branches
and call centres open in support of our
customers. I would also like to thank the
Bank’s Non-Executive Directors for their
support in attending a total of 30 Board
Meetings during 2020. Our 2020 Board
evaluation has demonstrated that while
COVID-19 necessitated a change in how
Board business was conducted (moving
to virtual board meetings), this did not
diminish the quality of Board engagement
or decision making.
Culture
2020 was the first full year in which the
Nomination Culture and Ethics Committee
carried out its enhanced responsibilities
on the evolving culture journey at the
Bank. While further details are available
on pages 125 to pages 127 on the issues
addressed by the committee during 2020,
I am very pleased with the quality of the
conversations that have taken place at
committee meetings supported by high
quality insightful papers. In particular I
found the experience of attending the
Bank’s People Experience Council, a body
made up of colleagues at every level
from right across the Bank an insightful
experience, to hear first-hand the stories
of colleagues in the day to day running
of the Bank. I look forward to leading the
Board in 2021, on setting the right tone
on culture for the Bank and specifically
the behaviours that will empower our
colleagues to work as one community in
working hard every day to build trust with
our customers.
Diversity and Inclusion
A diverse and inclusive culture is essential
to the sustainable long-term success of
the Bank. Diversity enables our business
to grow by responding to diverse customer
and wider stakeholder needs. At PTSB,
we value each individual’s contribution
to our business and look to ensure that
greater diversity is achieved at all levels.
Following the launch of our Diversity and
Inclusion Strategy in November 2018,
we have progressed our ambition to
build a culture of inclusion and belonging
where employees are engaged, confident
and connected to both their colleagues
and customers. I am very pleased that,
following the completion of a diagnostic
exercise undertaken by EY in November
2020, the Bank has achieved its stated
two year target of achieving ‘awareness’
status. The Board has also set a target of
achieving 30% female representation on
the Board by June 2021 and I am confident
that this objective will be met on or before
this date.
Board Succession Planning
A key focus for the Board in 2020 was
succession planning and ensuring the
composition of the Board continued to
be effective in supporting the Bank’s
updated purpose and ambition. The Board
Nomination, Culture and Ethics Committee
undertook a detailed review of both
Board and Board Committee succession
with a focus on knowledge, experience,
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Chairman’s Introduction (continued)
Details of how the Group applied the main
principles and supporting provisions of
the UK Code are set out in this Corporate
Governance Statement, the Business
Model and Strategy section, the Risk
Management section and in the Directors’
Report on Remuneration. These also
cover the disclosure requirements set
out in the Irish Annex, which supplement
the requirements of the UK Code with
additional Corporate Governance
provisions. The Board confirms that the
Company has complied with the detailed
provisions of the UK Code and Irish
Annex during 2020, save as set out in the
following paragraphs.
Provision 25 and 32 and of the UK Code
requires the audit, risk (where established)
and remuneration committees to consist
of Independent Non-Executive Directors.
Marian Corcoran is a member of the Board
Remuneration and Risk Committees
and Paul Doddrell is a member of the
Board risk and audit committees. Both
Paul Doddrell and Marian Corcoran were
nominated to the Board by the Minister
for Finance of Ireland under the terms of
a Shareholder Relationship Agreement.
Each of the aforementioned committees
is chaired by and has a majority of
independent non-executive directors
within their membership. The Board
believes it appropriate to ensure that the
aforementioned committees consist of
members with appropriate knowledge,
experience and skills and, notwithstanding
the basis of their appointment, can
demonstrate effective contribution through
an independent mind-set.
Planned Board appointments in 2021
will facilitate Ms Corcoran’s move from
the Board Remuneration Committee
to the Board Nomination, Culture and
Ethics Committee. However, the Board
believes it is in the best interest of the
Bank to utilise Mr Doddrell’s and Ms
Corcoran’s considerable risk management
experience on the Board Risk and
Compliance Committee and on the Board
Audit Committee for Mr Doddrell, given
his accounting credentials. If the Board
were to fully comply with the UK Code
provisions on independence, it would
have to further increase the size of the
Board, unnecessarily duplicating existing
skill-sets and creating a risk the Board size
becomes unwieldy. The Board’s ambition
is that no Non-Executive Director would
be a member of more than two Board
Committees to ensure Non-Executive
Directors have appropriate time to allocate
to busy committee activities; we are on
track to achieve this ambition in 2021
when two new independent Non-Executive
Directors are appointed.
The basis on which the Minister for
Finance conducts his relationship with
the Company is set out in a published
shareholder agreement which can be
viewed on the Company’s website www.
permanenttsbgroup.ie.
Provision 33 of the UK Code requires that
the Remuneration Committee shall have
delegated responsibility for setting the
remuneration for all executive directors
and the chairman. However, under
EBA guidelines on sound remuneration
practices, the Remuneration Committee
is designated as being responsible for the
preparation of decisions to be taken by
the Board regarding the remuneration for
executive directors and other identified
staff. The Board’s view is that, from
a regulatory perspective, the Group
is compelled to comply with the EBA
guidelines and therefore its Remuneration
policy reflects this position.
Provision 38 of the UK Code requires that
the pension contribution rates for executive
directors, or payments in lieu, should
be aligned with those available to the
workforce. In 2019, the Board approved
certain enhancements to staff defined
contribution pension schemes where,
following a market benchmarking exercise,
the maximum employer contributions
were increased, with new maxima linked
to increases in each employee’s own
contributions and subject to certain age-
based eligibility criteria. In carrying out
this review, the remuneration committee
paid due cognisance to existing State
Agreements relating to remuneration and
the Group’s ability to provide competitive
reward arrangements to retain and
motivate executive talent in an increasingly
competitive marketplace. Whilst the
maximum pension contribution levels are
consistent across the workforce, members
of the Bank’s Executive Committee
(including the Executive Directors) were
exempted from the age-related eligibility
criteria.
skills, Board tenure, independence and
diversity. In carrying out this review the
Committee was mindful of the dates on
which Directors’ terms of office were due
to expire and the Board’s Gender Diversity
target. Arising from this review, the
Board commenced a process to engage
two new Independent Non-Executive
Directors. It was further agreed that,
having considered the Board’s current
composition and current business
environment, competencies/experience
in: i) Culture/Responsible Business/Ethics
and ii) Technology/IT resilience would be
sought. The recruitment process for these
positions is now well-advanced and the
Company will update the market further
once the appointments have concluded.
Robert Elliott
Chairman
CBI Corporate Governance Code
The 2015 Central Bank of Ireland Corporate
Governance Requirements for Credit
Institutions (the “CBI Code”) imposes
statutory minimum core standards
upon credit institutions, with additional
requirements upon entities designated as
High Impact Institutions. The Company’s
retail banking subsidiary, PTSB, was
subject to the provisions of the CBI Code
during the reporting period. PTSB has
been designated as a High Impact Credit
Institution under the CBI Code and is
subject to the additional obligations set
out in Appendix 1 of the CBI Code. PTSB
has also been designated as LSI for the
purposes of the Capital Requirements
Directive (SI 158/2014) and is subject to the
additional obligations set out in Appendix
2 to the CBI Code. A copy of the CBI Code
is available on the CBI’s website www.
centralbank.ie.
Compliance Statement with UK
Corporate Governance Code and Irish
Annex
The Company’s shares are admitted to
trading on the Main Securities Market of
Euronext Ireland and the London Stock
Exchange and the Company must comply
or explain against the provisions of the
2018 UK Corporate Governance Code
(the “UK Code”) and the Irish Corporate
Governance Annex (the “Irish Annex”). A
copy of the UK Code is available on the
UK Financial Reporting Council’s website
www.frc.org.uk and the Irish Annex is
available at www.ise.ie.
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Permanent TSB Group Holdings plc - Annual Report 2020 Corporate Governance Statement
Stakeholder Engagement
“How the Board ensures
effective engagement with, and
encourages participation from
the Company’s Stakeholders”
Stakeholder Engagement
A key role of the Nomination, Culture and
Ethics Committee is to ensure there is
effective engagement with and participation
from the Bank’s key stakeholders.
Reputation management is an integral part
of the corporate affairs strategy for the
Bank.
What we did in 2020 – Reputation
Audit & Purpose Led Action
In the second half of 2019, the Bank initiated
its first ever reputation audit in order to
gain a better understanding of the Bank’s
reputation amongst key stakeholders.
This work was an important opportunity
to obtain feedback as the Bank worked
to improve culture and strengthen trust
with stakeholders. The reputation audit
incorporated a qualitative multi-stakeholder
audit and a quantitative study with 1,800
members of the general public. This is
the first time the Bank has run a multi-
stakeholder audit of this nature, the purpose
of which was to obtain feedback from key
stakeholders to better understand the
Bank’s reputation and identify areas of focus
required to strengthen trust in the Bank.
The Reputation Audit was completed in
Q1 2020 and findings were reported to the
Nomination, Culture and Ethics Committee.
A set of recommendations for improving the
Bank’s reputation were also presented.
From June 2020, at the direction of the
Bank’s new CEO, the Bank initiated a
programme of activity focused on improving
the Bank’s reputation and further building
trust with stakeholders in line with the
recommendations as set out in the
Reputation Audit.
The first significant step was the
development of a new Purpose for the
organisation, which was centred on building
trust with Customers. This Purpose was
presented to the Board in July 2020 prior to
its internal and external launch.
Shortly thereafter the Bank implemented
a series of proactive external and internal
engagements to put our new Purpose into
action with the aim of further building
trust with customers, colleagues and
communities. This programme of work
encompassed a number of initiatives
including: a new three year partnership
with the Ó Cualann Co Housing Alliance;
mortgage rate cuts for both new and
existing customers; significant financial
and non-financial support for not-for-
profit organisation through the Bank’s
Community Fund; the achievement of the
Business Working Responsibly Mark; and,
support for SME customers through the
SBCI Future Growth Loan Scheme.
The Bank continues to focus on proactive
measures to demonstrate its Purpose in
action and respond to the feedback from
Stakeholders as set out in the Reputation
Audit.
Focus for 2021
The Bank’s focus for 2021 will be to build on
the progress achieved and to continue to
rollout a series of proactive engagements
amongst its key stakeholders that will allow
the Bank to cultivate relationships, gain
trust and build further the reputation of the
Bank. The Bank has also developed a new
Corporate Development and HR Function
which will ensure that feedback from
colleagues, customers and communities is
measured effectively in line with our new
Purpose and that key insights are brought
to the Nomination, Culture and Ethics
Committee on a regular basis.
Shareholder Engagement
In addition to this, the Bank has a dedicated
Investor Relations team, headed by the
CFO. The Bank will continue to have an
active market engagement programme in
place where it reports financial results live
through a webcast twice a year typically
in March/July and updates the market on
trading twice a year typically in May and
November. The Bank publishes all results,
including the webcasts, on its website.
The Bank also reports other relevant
information to the market on a timely basis.
The Investor Relations team, together
with the CEO and the CFO, will continue to
provide regular updates to the Board on the
types of activities mentioned above, along
with market reactions in order to ensure
that the members of the Board continue to
develop an understanding of the views of
major shareholders.
Workforce Engagement
The UK Corporate Governance Code places
an obligation on boards to keep workforce
engagement mechanisms under review so
that they remain effective. Furthermore,
the Code also states that where the
Board chooses to implement alternative
arrangements to those set out in the Code,
it should explain in its Annual Report what
alternative arrangements are in place and
why it considers that they are effective.
During 2020, while COVID-19 impacted on
the capability of the Board to engage with
employees in a face to face manner, the
utilisation of electronic communication
facilitated this engagement:
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Stakeholder Engagement (continued)
There are currently a number of ways the Board engages with the Bank’s workforce and hears the employee ‘Voice’ on an on-going basis. A
summary of these are outlined in the below table.
Mechanism
Detail
Board and Committee Meetings
During 2020 the Board met in total on 30 occasions with focussed attention given
to the impact of COVID-19 on customers and colleagues. This ensured regular Board
engagement with subject matter experts from across the Bank. Throughout 2020 the
Board engagement aligned a core principle of ensuring the health safety and wellbeing of
all colleagues whilst ensuring a resilient and sustainable Bank.
Nomination, Culture and Ethics
Committee
Dedicated Board Committee with accountability for culture, behaviour, ethics and
reputation management oversight in the Bank.
Biannual review of employee ‘Speak Freely’ concerns raised through a Colleague
Conduct Report
Branch Visits
CEO branch visits in line with government (COVID-19) restrictions.
Other Director branch visits during the year in line with government (COVID-19)
restrictions.
Employee Events
Attendance at and participation in employee events on an on-going basis.
Examples include the Institute of Bankers Culture Series Webinars, Speak Freely Pledge,
Employee Resource Group Initiatives such as Wellbeing week, Values in Practice Awards
and CSR events.
Living as Leaders Round Table Series
A series of weekly meetings where Non-Executive Directors individually joined small
groups of colleagues from all levels and from across the bank to reflect on key leadership
themes.
Employee Representative Bodies
CFO bi-annual engagement with Employee Representative Bodies to update them on the
organisational trading position, opportunities and challenges being faced.
CEO, introduction to the Employee Representative Bodies to update them on Permanent
TSB’s new Purpose and on-going Organisational Fit for the Future alignment.
Employee Surveys
The Employee collective voice is shared with the Board Nomination, Culture and Ethics
through a variety of employee surveys that are run.
Examples include the Employee Engagement Survey, COVID Temperature Survey’s,
Working From Home Survey, Leadership Sentiment Calls, Every Voice Counts survey.
Employee Engagement Group
The Company Secretary (Board Nominee) attends the People Experience Council (PEC)
to support the Board and gain a greater understanding of culture/employee sentiment.
The Board Chairman attended PEC in November 2020 to engage with all representatives
across the Bank to discuss culture and employee sentiment.
94
Permanent TSB Group Holdings plc - Annual Report 2020 As noted in the table above a People
Experience Council was incepted in 2020
to support the embedding of Culture with
a mandate and a set of accountabilities.
Their role is to lead out on culture across the
Bank, provide a collective voice (qualitative
data) to the organisation and solicit People
Experience Leads across their functions
to champion organisational engagements.
Leads are made up of colleagues from
all areas of the business, representing a
diverse group of employees at all levels. The
Nomination Culture and Ethics committee
identified an opportunity for the Board to
engage with this group and to be updated on
the employee sentiment and mood on the
ground. As part of this group, the Board will
not only gain a deeper understanding of the
drivers behind the employee engagement
survey results (COVID Sentiment, Every
Voice Counts), they also gain diverse
perspectives on what actions will address
the areas for development and also
any emerging areas of discontent from
employees. Following attendance by the
Chairman to the November 2020 monthly
PEC meeting, it is intended that further
attendance by Non-Executive Directors will
occur in 2021.
Having reviewed the series of employee
engagement during 2020, the Nomination,
Culture and Ethics Committee was satisfied
that this engagement was effective.
Board Decision Making
The Board has a clear understanding of
the Bank’s key stakeholders and how
the operations of the Bank effect the
environment and communities in which
it operates. The Bank’s Stakeholder
Engagement Programmes facilitate a clear
and unfettered information flow to and from
the Board. This allows the Board to make
informed decisions that are both in the best
interest of the Company and facilitate a clear
understanding of how decisions impact on
the Bank’s stakeholders, wider community
and environment.
A key focus for the Nomination Culture
and Ethics Committee is to ensure that
directors are able to make a positive
contribution to the long term sustainable
success of the Company. Directors
are more likely to make good decisions
and maximise the opportunities for the
Company’s success if the right skillsets
and breadth of perspectives are present
on the Board. The Nomination Culture
and Ethics Committee, aligned with the
Bank’s Purpose and Ambitions, considers
the appropriate skillsets and perspectives
and sets them out in a Board approved
Suitability Matrix. Appointments to the
Board are recommended in accordance with
the Suitability Matrix. The key skillsets and
experience that each of the Directors bring
to the Board are set out in the Biographies on
next page.
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Board of Directors
A key focus for the Nomination Culture and Ethics Committee is to ensure that directors are able to make a positive contribution to the
long term sustainable success of the Company. Directors are more likely to make good decisions and maximise the opportunities for
the Company’s success if the right skillsets and breadth of perspectives are present on the Board. The Nomination Culture and Ethics
Committee, aligned with the Bank’s Purpose and Ambitions, considers the appropriate skillsets and perspectives and sets them out in
a Board approved Suitability Matrix. Appointments to the Board are recommended in accordance with the Suitability Matrix. The key
skillsets and experience that each of the Directors bring to the Board are set out in the Biographies below:
ROBERT ELLIOTT (68)
CHAIRMAN
NON-EXECUTIVE
DIRECTOR INDEPENDENT
ON APPOINTMENT
Appointed Chairman:
31 March 2017
Nationality:
British
Committee Membership:
Nomination, Culture and Ethics
Committee (Chair)
Remuneration Committee
External Appointments:
Chairman of Saranac Partners
Ltd and Chairman of Windship
Technology Ltd
EAMONN CROWLEY (51)
CHIEF EXECUTIVE OFFICER
Appointed to Board
10 May 2017
Nationality:
Irish
Committee Membership:
None
External Appointments:
Banking and
Payments Federation Ireland CLG
Key Strengths, Skills and Experience
The breadth of Robert’s knowledge and experience of advising
corporates on strategy and governance, building teams and
driving culture enables Robert to contribute to the strategic
and cultural direction, and the long-term sustainable success
of the Bank. Robert also has extensive legal, banking and
leadership experience and a track record of championing
greater inclusiveness and diversity.
Robert is an experienced Chairman and Lawyer, having
advised on major UK and international banking and
restructuring projects. Robert is a former Chairman and
Senior Partner of Linklaters LLP, the global law firm with a
partnership of 490 members and approximately 5,500 staff. In
his role as the firm’s ambassador, he also contributed widely to
industry and City organisations, think tanks and community-
led initiatives. Robert previously chaired the Nomination and
Governance Committee for the TheCityUK, which champions
UK-based financial and related professional services.
• Certified Bank Director
Key Strengths, Skills and Experience
Eamonn brings to the Board extensive international banking,
accounting, corporate treasury and leadership experience with
a significant customer focus which is reflected in the Bank’s
Purpose, Ambitions and Strategy to build trust and grow a
sustainable Bank for the longer-term.
Before joining PTSB as Chief Financial Officer in 2017, Eamonn
worked as Chief Financial Officer at Bank Zachodni WBK S.A.
(“BZ WBK”), Banco Santander’s publicly listed Polish retail
and commercial bank. (BZ WBK was formerly 70% owned
by AIB. Banco Santander acquired that AIB stake in 2010.)
During his period as CFO, Eamonn executed the merger of BZ
WBK with Kredyt Bank to form Poland’s number three bank,
placed over 20% of the bank on the Warsaw Stock Exchange
through a Euro 1.2bn secondary IPO and led the acquisition of
a controlling stake in Poland’s number one Consumer Bank.
Prior to joining Santander, Eamonn worked for the AIB Group in
a variety of different roles.
• MBA Smurfit Business School
• Certified Accountant (FCCA) and Member of Association of
Corporate Treasurers
96
Permanent TSB Group Holdings plc - Annual Report 2020 MIKE FRAWLEY (48)
CHIEF RISK OFFICER
Appointed to Board:
29 October 2019
Nationality:
Irish
Committee Membership:
None
External Appointments:
None
RONAN O’NEILL (67)
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR
Appointed to Board:
26 July 2016
Nationality:
Irish
Committee Membership:
Risk & Compliance
Committee(Chair)
Nomination, Culture and Ethics
Committee
External Appointments:
Woodland Advisers Limited
Key Strengths, Skills and Experience
Mike has extensive international risk management and senior
management experience in commercial and retail banking
sectors. Mike provides the Board with significant risk oversight
and regulatory engagement capabilities enabling the Bank to
sustain appropriate levels of banking and operational risk in the
development of its strategic objectives. Mike’s appointment as
an Executive Director demonstrates a key focus for the Board
in providing robust oversight of risk management and internal
control at the Bank.
Mike joined the Bank in December 2018 and has a depth of
experience in the Commercial and Retail banking sectors,
having spent 19 years with HSBC in positions in Asia, U.K.,
Latin America, U.S.A. and Bermuda, most recently as Chief
Risk Officer at HSBC Bermuda.
• Chartered Financial Analyst (CFA)
• Bachelor of Commerce from UCC
• MBA from Columbia Business School
Key Strengths, Skills and Experience
Ronan brings to the Board extensive banking and leadership
experience with a particular competency in risk and treasury.
His strong strategic and corporate development insights enable
Ronan to provide challenge and support to the development of
the Bank’s organisational change programmes. His previous
experience as a member of the Group Risk Committee at
AIB is of particular benefit to the Board Risk and Compliance
Committee which Ronan chairs.
Prior to retiring from AIB in 2013, Ronan was Chief Executive
Officer of AIB (UK) plc and a member of the AIB Group
Leadership Team. Ronan had responsibility for SME Business
in the UK and the retail banking business of First Trust in
Northern Ireland. He put in place a strategic plan to revitalise
AIB’s UK and NI businesses and oversaw its implementation.
• Fellow Chartered Accountants Ireland
• Certified Bank Director
• Bachelor of Commerce from UCD
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Board of Directors (continued)
KEN SLATTERY (72)
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to Board:
30 August 2013
Nationality:
Irish
Committee Membership:
Remuneration Committee (Chair)
Audit Committee
Nomination Culture and Ethics
Committee
External Appointments:
Director of Home Building Finance
Ireland, Home Building Finance
Ireland (Lending) DAC, National
Shared Services Office, Acorn
Housing, Choice Housing Ireland
Ltd and Oaklee Housing
PAUL DODDRELL (53)
NON- EXECUTIVE
DIRECTOR
Appointed to Board:
26 November 2020
Nationality:
British
Committee Membership:
Risk & Compliance Committee
Audit Committee
External Appointments:
Director of 3 to 48 Ltd and Cabot
Financial Ireland Ltd
Key Strengths, Skills and Experience
Ken has wide-ranging experience of the Irish Financial
Services landscape and his retail banking experience
complements the key markets in which the Bank operates.
Ken has a deep understanding of the legal and regulatory
environment for Irish Banks and his previous role at MABS
provides the Board with the customer advocacy skills in order
to fulfil PTSB’s purpose to build trust and grow a responsible
and sustainable business. Ken also has significant experience
serving as chair and member of various Board Committees
which is of particular benefit as Chair of the Board
Remuneration Committee and is well versed in the challenges
of ensuring employee talent is both attracted to and retained
by the Bank.
Ken is an experienced banker having retired from Bank of
Ireland in 2006 following a career spanning 40 years in both
Commercial and Retail banking. Ken has held non-executive
director positions with a number of Irish and Northern Ireland
government departments, including chair positions on audit
and risk committees. He is also a former director of MABS
and Realex Financial Services where he was chair of the
Company’s audit and risk committees until 2013.
• Fellow, Institute of Bankers
• Certified Bank Director
Key Strengths, Skills and Experience
Paul has significant executive leadership experience spanning
finance, lending, operations, sales with specific management
expertise in business strategy development and execution;
risk management and change management. Paul’s strategic
insights, and experience in organisational transformation
programmes complements the existing skillset on the Board.
Paul is a highly experienced financial services executive and
Board member who has successfully operated at executive
management level in a number of organisations globally.
Paul served as Pepper Group’s Managing Director for Shared
Services, and led the successful establishment and growth of
Pepper’s financial services operations in Ireland. Previously
Paul held a number of key executive roles at GE Capital. Paul is
currently a Non-executive Director and chair of the Audit and
Risk committees at Cabot Financial Ireland.
• Chartered Management Accountant – ACMA, CGMA
• Certified Six Sigma Master
• BA(Hons) Business Studies
98
Permanent TSB Group Holdings plc - Annual Report 2020 ANDREW POWER (64)
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to Board:
26 September 2016
Nationality:
British
Committee Membership:
Audit Committee
Remuneration Committee
External Appointments:
Director of Andrew Power
Consultancy Limited and The
Tennis & Rackets Association Ltd.
DONAL COURTNEY (56)
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to Board:
3 October 2018
Nationality:
Irish
Committee Membership:
Audit Committee (Chair)
Nomination, Culture and Ethics
Committee
Risk and Compliance Committee
External Appointments:
Director of Dell Bank International
and IPUT plc
Key Strengths, Skills and Experience
Andrew has wide-ranging experience as industry subject
matter expert across banking, insurance, wealth management
and investment management. Andrew’s extensive retail
financial services experience particularly around strategy
development and operational model transformation and
process improvement is a major benefit to the Board’s
collective skillset.
Andrew is a former partner in the Consulting arm of Deloitte
UK, where he specialised in providing strategic advice. Andrew
has advised many of the world’s major financial services
companies and has significant know-how of major financial
markets and the regulatory landscape around the globe.
• MBA Harvard Business School
• MA Economics
• Certified Bank Director
Key Strengths, Skills and Experience
Donal is highly experienced finance and accounting
professional across leasing, lending and property financing
with a particular competence in financial reporting, governance
and internal controls. Donal brings to the Board experience
of asset financing funding vehicle structures such as
collateralised loans, securitisations, aircraft leasing and non-
performing loan assets. Donal also has extensive experience
serving as an audit committee chair at Dell Bank International
and IPUT plc and brings essential leadership capability to the
Board Audit Committee.
Donal is a former SVP and CFO at Capmark Bank Europe, a
licensed real estate financing bank with operations in UK,
France and Germany. Prior to this, Donal held Executive
Director roles with the Irish operations of Orix Corporation,
Airbus Industrie and GMAC Commercial Mortgage where he
gained extensive experience in the aircraft leasing, financing
and commercial property sectors. Donal is a qualified
Chartered Accountant and started his career with Arthur
Andersen where he went on to become a practice manager
in its financial services division working with a broad range of
clients across the leasing and banking industries.
• Fellow of Chartered Accountants Ireland
• BBS Trinity College, Dublin
• Certified Bank Director
• Accredited Funds Professional, Institute of Bankers
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Board of Directors (continued)
RUTH WANDHÖFER, (44)
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to Board:
30 October 2018
Nationality:
German
Committee Membership:
Risk and Compliance Committee
Remuneration Committee
External Appointments:
Director of Digital Identity Net
Ltd, Gresham Technologies plc,
Leximar Ltd and Sinonyx
MARIAN CORCORAN,
(56)
NON- EXECUTIVE
DIRECTOR
Appointed to Board:
24 September 2019
Nationality:
Irish
Committee Membership:
Risk and Compliance Committee
Remuneration Committee
External Appointments:
Director of the Industrial
Development Authority and
Managing Director of MC2 Change
Limited
Key Strengths, Skills and Experience
Ruth has substantial banking and leadership experience with
extensive experience of both regulatory and market strategy,
and together with her insight on regulatory and financial
technology innovation provides invaluable insight for the Board
as it provides oversight for the next phase of the Bank’s digital
transformation development.
Ruth was Head of Regulatory and Market Strategy at Citi from
2007 to 2018 where she drove regulatory and industry dialogue
in addition to developing product/market strategy in line with
the evolving regulatory and innovation landscape. Prior to
joining Citi, Ruth was Policy Advisor for Securities Services and
Payments at the European Banking Federation.
• MA in Financial Economics (UK)
• MA in International Politics (FR)
• LLM in International Economic Law (UK)
Key Strengths, Skills and Experience
Marian has extensive experience in technology and
business transformation, executive leadership and strategy
development. Marian brings to the Board wide-ranging
experience in advising and leading transformational
programmes in multiple industries including banking. Marian’s
experience of executive remuneration and risk management
brings invaluable experience to the Board Remuneration, and
Risk and Compliance Committees.
Marian’s cross-industry skills in stakeholder management, risk
management, corporate governance and technology-enabled
transformation benefits the existing skillset on the Board.
Marian has a strong track record in championing inclusion and
diversity.
Marian is a former partner and board member in Accenture
Ireland where she served in numerous management and
executive roles delivering major strategy, technology and
business transformation programmes both locally and
internationally. During her career in Accenture Ireland she
operated in a number of key senior executive positions
including as Executive Director on the Board. Marian was also a
member of the Irish Public Service Pay.
• BSc Biotechnology
• Chartered Director
• Certified Bank Director
• Professional Certificate in Leadership Coaching
CONOR RYAN,
COMPANY SECRETARY
Conor joined the Bank in 1989 and was appointed Company Secretary in 2017. As Company
Secretary, Conor is responsible for advising the Board, through the Chairman, on all governance
matters. The role of Company Secretary is to align the interests of different parties around the
boardroom table, facilitate dialogue, gather and assimilate relevant information, and support
effective decision-making. Conor is a fellow of the ICSA: The Governance Institute and was
President of the Institute in Ireland from 2014 to 2016.
100
Permanent TSB Group Holdings plc - Annual Report 2020 2020 Board Meeting Attendance and Directorships
Member
Appointed
Ceased
Number of Years on
Board
2020 meetings
Number of
Directorships held
Non-Executive Directors
Robert Elliott
Ken Slattery
Paul Doddrell
Ronan O’Neill
Andrew Power
Donal Courtney
Ruth Wandhöfer
Marian Corcoran
Julie O’Neill
Executive Directors
Eamonn Crowley
Mike Frawley
Jeremy Masding
31 Mar 2017
30 Aug 2013
26 Nov 2020
26 Jul 2016
26 Sep 2016
03 Oct 2018
30 Oct 2018
24 Sep 2019
28 Jan 2014
-
-
-
-
-
-
-
-
05 Aug 2020
10 May 2017
29 Oct 2019
28 Feb 2012
-
-
01 July 2020
3.9
7.4
0.1
4.5
4.3
2.2
2.2
1.3
6.8
3.7
1.2
8.5
30/30
30/30
2/2
30/30
29/30
30/30
28/30
30/30
20/21
30/30
29/30
19/19
7/3
8/3
4/2
3/1
4/1
5/3
6/3
4/2
7/4
8/1
2/1
6/1
Notes:
PTSB is the sole direct subsidiary of PTSBGH. During 2020, the composition of the Boards of PTSBGH and PTSB were identical. Meetings of the Boards of PTSB and PTSBGH
run concurrently. Concurrent Board meetings or consecutive Board meetings of PTSB or PTSBGH held on the same day are counted as a single attendance above.
Number of Directorships: the first number stated is the total number of directorships held followed by directorships as counted under Article 91(3) and (4) of Directive
2013/36/EU (for the purposes of calculating these directorships, multiple directorships within a group are counted as a single directorship and directorships in organisations
which do not predominantly pursue commercial objectives are also not included). Directorships are those held at 31 December 2020 or at time of cessation from the Board.
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Leadership and Effectiveness
Division of Responsibilities
The roles and responsibilities of the Board collectively, the Executive and Non-Executive Directors, the Chairman, Senior
Independent Director and Company Secretary, are clearly laid out and documented in a Board Manual, which is reviewed and
updated on a regular basis by the Board and at least annually.
The Chairman
Robert Elliott’s responsibility as Chairman is to ensure the efficient and effective working of the Board. His role is to lead and
manage the business of the Board, promoting the highest standards of corporate governance and ensuring accurate, timely and
clear information for the Board, and to lead the process for the annual performance evaluation of the Board, its Committees and the
Non-executive Directors. The Chairman promotes a culture of openness and debate by facilitating the effective contribution of Non-
Executive Directors in particular, and ensuring constructive relations between Executive and Non-Executive Directors. The Chairman
has a strong working relationship with the CEO, Eamonn Crowley, and acts as a confidential sounding board for the Directors. Robert
Elliott is also Chairman of the Nomination Culture and Ethics Committee.
The Senior Independent Director
Ronan O’Neill is the Board’s Senior Independent Director and his primary role is to support the Chairman on all governance related
matters. In addition, he specifically leads the annual appraisal of the Chairman’s performance, acts as an intermediary for other
Directors, and ensures that the views of the Non-Executive Directors are heard. He is available to shareholders, should they wish to
raise any matter directly.
The CEO
The Board delegates executive responsibility to Eamonn Crowley, the CEO, for the Bank’s operations, compliance and performance.
The role of the CEO is to select and lead an effective team to manage the Bank. The executive management team is called the
Executive Committee, details of which are set out on pages 103 to 104. The CEO is responsible for the formulation of the Group’s
strategic, operating and financial plans, for review and presentation to the Board, and for the implementation of these plans. The CEO
is also required to provide information to the Board that is reliable, relevant, timely, clear and balanced, in order to assist the Board in
monitoring the performance of the Group and in making well informed and sound decisions.
The Company Secretary
Conor Ryan, Company Secretary and Head of Corporate Governance, assists the Chairman in promoting the highest standards of
corporate governance. He supports the Chairman in ensuring Directors receive timely and clear information so that the Directors are
properly equipped for constructive debate and informed decision making. He is a central source of guidance and advice on policy,
procedure and governance. He co-ordinates, when necessary, access to independent professional advice for Directors. He oversees
compliance with all of the Group’s governance related legal and regulatory obligations. In addition, he has responsibility for providing
a high quality service on all shareholder related matters. All Directors have access to the advice and services of the Company
Secretary and Head of Corporate Governance.
102
Permanent TSB Group Holdings plc - Annual Report 2020 EXECUTIVE COMMITTEE
EAMONN
CROWLEY
CHIEF
EXECUTIVE
MIKE
FRAWLEY
CHIEF RISK
OFFICER
GER MITCHELL
CHRO & CORPORATE
DEVELOPMENT
DIRECTOR
Ger has been a member of the Executive Committee since 2012. Ger is an experienced
Commercial Leader who has held a number of senior Commercial and Customer roles prior to
his appointment as HR Director in 2017. In 2020, Ger’s role was expanded to include ‘Corporate
Development’ which brings the strategic disciplines of; Customer Marketing, Brand, Corporate
Affairs, Sustainability and Communications together with Talent Development, Employee
Experience and Culture Evolution. The newly created HR and Corporate Development Function
leads the embedding of the Bank’s purpose; to build trust by making a difference in the lives of
customers, colleagues and communities, every day. The function has mobilised four current
strategic programmes of work through which key initiatives are managed and delivered, they are;
Brand, Culture and Reputation; Customer Strategy and Experience; Enterprise Transformation;
and, Citizenship and Sustainability.
ANDREW WALSH
LEGAL COUNSEL
Andrew has extensive legal advisory experience, in both private practice and in-house roles.
Andrew joined the Bank in 2014 and became a member of the Executive Committee in 2015. Prior
to joining the Bank, Andrew was a partner in a leading corporate Irish law firm, where he worked for
over 10 years. While in private practice, Andrew advised a number of Irish and international banks
and financial services institutions.
In his role as Legal Counsel, Andrew leads the Bank’s Legal function. The Legal function is
responsible for overseeing all legal aspects of the Bank’s business, as well as inputting into the
Bank’s strategic decisions and identified growth opportunities. The Legal function also provides
support to ensure that the Bank’s operations, products and service strategies are designed to
consistently adhere to legislative/regulatory requirements and best practice.
PAUL MCCANN
CHIEF FINANCIAL
OFFICER (interim)
Paul joined the Bank on an interim basis from Grant Thornton where he is a senior partner in
that firm’s Financial Services Advisory team in Dublin. Paul has extensive corporate finance,
restructuring and financial advisory experience. Paul spent six years as the firm’s Managing
Partner, from 2012-2018.
The Group Finance Function includes the following span of operations: Investor Relations; Finance
Operations; Bank Property; Central Data Office; Treasury; Strategy Development, Tracking &
Insights Strategy and Planning; Financial Reporting; Financial Accounting, Statutory Reporting
and Tax; and, Regulatory Reporting.
103
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Leadership and Effectiveness (continued)
TOM HAYES
CHIEF TECHNOLOGY
OFFICER
Tom is an accomplished business change leader with extensive experience in Digital and
Technology enabled transformation. Tom joined the Bank in 2017 from AIB where he had worked
since 1992, and where he was most recently Head of Digital Transformation Delivery. Tom has
held various senior roles including: Head of Customer Engagement Technology, AIB Digital and
Group Head of IT Infrastructure & Operations.
Group Technology has responsibility for the development and delivery of the Bank’s Technology
roadmap, Digital capability, and the day-to-day protection of technology enabled services for our
customers... This involves working closely with the Retail Banking and Operations teams to design
and deliver the Banks Digital Transformation and IT Re-Architecture agendas.
BREEGE TIMONEY
PRO DUCT ASSURANCE
DIRECTOR
Breege is an experienced financial services professional having spent over 20 years in the
financial services industry. Breege joined the Bank in 2014 and was Head of Finance before
joining the Executive Committee in 2017, when becoming director of the Bank’s Tracker Mortgage
Examination. Breege previously worked in senior finance roles in Bank of Ireland and Ulster Bank
as well as infrastructure finance advisory roles in the public service.
Product Assurance is responsible for monitoring and reviewing the Bank’s products to ensure
that they meet customer needs in addition to responsibility for overseeing the resolution of
customer impacting issues. This function was established in 2018 in line with the Bank’s ongoing
commitment to delivering fair customer outcomes.
PATRICK FARRELL
RETAIL SALES DIRECTOR
Patrick has over 20 years’ experience across the banking industry. Patrick joined the Bank in
December 2018 from AIB where he held the position of Head of Retail Area South. Patrick has
previously held senior management roles in Strategy, Product and Proposition Development,
Marketing, Private Banking and, Retail Sales and Service Distribution.
The Retail Sales Division is responsible for all sales channels and the Bank’s product management
strategy. The Function has multi-channel oversight across sales and service with a focus on
enabling income growth and delivery. The division closely collaborates with the Corporate
Development and HR Team on customer propositions and experience.
PAUL REDMOND
HEAD OF INTERNAL AUDIT
Paul is an experienced banker providing insights and guidance to the Group Executive Committee
and Board on all risk related matters. Paul joined the Bank in 2012 and has over 25 years’
experience in financial services. He previously held senior internal audit positions in Goodbody
Stockbrokers, AIB and RBS in both Ireland and the UK.
Internal Audit provides independent assurance to the Board over the adequacy and effectiveness
of the governance, risk management and control processes in operation across the Bank. Paul
is a regular attendee at Group Executive Committee meetings but, in accordance with good
governance practice, has no voting rights. Paul has a direct reporting line to the Chairman of the
Board Audit Committee.
Executive Committee Vacancies
Shane O’Sullivan retired from the Bank as Director of Group Operations at the end of January 2021 and the Bank is well progressed in the
recruitment process to fill this vacancy.
Eamonn Crowley ceased as Chief Financial Officer upon his appointment to the Chief Executive Officer role in June 2020. Paul McCann
was appointed to fill this position on an interim basis and as above, the Bank’s recruitment process to fill the position on a permanent
basis is well progressed.
104
Permanent TSB Group Holdings plc - Annual Report 2020 Corporate Governance Statement
Governance Structure, Roles and Responsibilities
Board
CEO
Nomination, Culture & Ethics Committee
Audit Committee
Risk & Compliance Committee
Remuneration Committee
Executive Committee
Risk
Committee
Growth
Committee
Capital Adequacy
Committee
Assets and Liabilities
Committee
Customer
Committee
Credit
Committee
Board
The Board retains primary accountability for corporate governance within the Bank at all times. The Board has reserved for itself a
documented schedule of matters for its own approval. The Board delegates executive responsibility to the CEO for the Bank’s operations,
compliance and performance. The CEO is the principal executive accountable to the Board for the day to day management of the Bank.
The CEO has established the Executive Committee whose terms of reference are approved by the Board.
Without prejudice to the powers delegated to it, the Board, directly or through its Committees, has exclusive powers regarding a
number of matters including acting on behalf of the shareholders to oversee the day-to-day affairs of the business, ensuring the Bank’s
sustainability by collectively directing the company’s affairs, whilst meeting the appropriate interests of its shareholders, customers,
colleagues and other key stakeholders. In addition to business and financial issues, the Board will determine the business strategies and
plans that underpin the corporate strategy, whilst ensuring that the Bank’s organisational structure and capability are appropriate for
implementing the chosen strategies. The Board must deal with challenges and issues relating to corporate governance, sustainability
and corporate ethics.
Board
• Sets and oversees performance against strategy.
• Ensures the Company adheres to governance protocols.
• Oversees all risk, financial, compliance and performance
In line with its legal and regulatory obligations, the Board has
established Audit, Risk, Remuneration and Nomination committees
as described below. Being composed of the same members and in
managing a common agenda, Board Committee meetings of the
Company and PTSB run concurrently.
standards.
• Demonstrates leadership.
Nomination, Culture and
Ethics Committee
Robert Elliott (C)
Ken Slattery
Ronan O’Neill
Donal Courtney
• Reviews structure,
effectiveness and
composition of the Board.
• Reviews all new Director
and senior management
appointments.
• Oversees succession
planning.
• Performance Evaluations
of CEO, Executive Directors
and CEO’s assessment
of Performance of the
Executive Committee.
• Oversees the Company’s
Culture, Ethics, Workforce
Engagement, and
Responsible and Sustainable
Business Programmes.
Audit
Committee
Donal Courtney(C)
Paul Doddrell
Andrew Power
Ken Slattery
Risk and Compliance
Committee
Ronan O’Neill (C)
Paul Doddrell
Donal Courtney
Ruth Wandhöfer
Marian Corcoran
Remuneration Committee
Ken Slattery (C)
Robert Elliott
Andrew Power
Ruth Wandhöfer
Marian Corcoran
• Oversees internal financial
• Oversees financial and non-
• Oversees remuneration and
controls.
financial risks.
reward strategies.
• Reviews full year and half-
year financial statements.
• Approves and monitors risk
framework and risk appetite.
• Oversees all relevant
• Oversees credit, funding and
matters pertaining to the
external auditors.
liquidity policies.
• Review and make
• Monitors the output of
internal audit findings
• Monitors the effectiveness
of the Internal Audit
Function.
• Reviews discoveries of fraud
and violations of laws and
regulations as raised by the
head of GIA.
recommendations to
Board on Internal Capital
and Liquidity Adequacy
Assessments including
Stress testing (via outputs
from ICAAP and ILAAP).
• Recovery and Resolution
Planning
• Ensures remuneration
Strategy is aligned with
recruitment and risk
appetite.
• Oversees senior
management compensation.
• Monitoring relevant external
benchmarks for posts within
the scope of Committee.
105
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Corporate Governance Statement
Governance Structure, Roles and Responsibilities (continued)
Executive Committee
The Executive Committee report upward through the CEO to the Board, and where delegated, have the power to act on behalf of the
Board. The Executive Committee advise the Board on matters ranging from business performance, strategy planning, policy, investment
and risk. The Executive Committee is accountable for the operations, compliance and performance of the Bank. They are responsible for
delivery all delegated governance commitments. The terms of reference of the Executive Committee are approved by the Board.
The Executive Committee has established six sub-committees made up of senior management with relevant expertise to address the
delegated obligations of each sub-committee. The duties of these sub-committees are based on providing organisational direction
on behalf of the Executive Committee. Each Executive Committee member provides relevant leadership to the sub-committees,
making sure objectives are met. The Executive Committee member which chairs the respective sub-committee provides updates to
the Executive Committee, serving as a conduit between the sub-committees and the Executive Committee. The Board has delegated
oversight of Bank Wide Risk Management Issues to the Group Risk Committee and an important safeguard in exercising this delegation
is the requirement that all members of the Executive Committee be concurrent members of the Group Risk Committee.
Executive Committee
• Developing and implementing (as approved by the Board) the Bank’s Strategy, Strategic Direction and Management Model
• Allocating, and re-allocating, the Bank’s resources (financial and people) to ensure that commitments are executed and delivered
• Accountable for the Group’s operations, compliance and performance
• Oversees day-to-day management of the Group
• Forum for Group-wide functional issues
Capital Adequacy
Committee
• Reviews the ongoing
capital adequacy for
the Group
• Reviews the output
from internal capital
stress testing
programmes
Customer
Committee
• Central oversight
body for significant
business / commercial
propositions and
strategies that have
a material customer
impact
• Oversees the Capital
Risk related activities
and supporting
Policies
• Approval body for
product governance
arrangements
• Review body for all
high impact customer
events, issues and
complaints
Growth
Committee
• Provides context
and promotes
understanding of the
commercial agenda
• Monitors performance
against key targets
and is responsible for
identifying, initiating,
and executing on
activities/ projects to
achieve those targets
based on customer
insight
Risk
Committee
• Oversight of
Bank wide Risk
Management Issues
• Developing the
structure and
content of the Bank’s
Risk Management
Architecture
• Maintains, monitors
and enforces
adherence to
risk policies and
frameworks
• Recommends
changes to risk
appetite and internal
capital and liquidity
levels
• Measure and
monitor the total
risk position of the
Bank and to maintain
a Risk Register of
top risks facing the
Bank, together with
an assessment of
the probability and
severity of those risks
Assets and
Liabilities
Committee
• Manages assets and
liabilities, treasury
investments, capital
management and
asset allocation
• Manages risks,
hedging and ALM
systems
• Refresh and
recommend to Risk
and Compliance
Committee for
approval a number of
Treasury and Liquidity
related Policies
• Reviews the ongoing
capital adequacy for
the Group
• Reviews the output
from internal capital
stress testing
programmes
Credit
Committee
• Recommends relevant
Portfolio Credit
Risk elements of
the Group’s RAS for
approval by the Board
• Monitors adherence
to the Group’s Credit
Policy
• Monitors the portfolio
Credit risks to which
the Group is exposed
• Escalation point for
customer lending
decisions
• Maintains and
assesses the
portfolio Credit Risk
profile against set
limits and approves
(within governance)
remediation plans to
restore Risk Appetite
where required
• Oversees the Capital
Risk related activities
and supporting
Policies
• Reports any breaches
of approved limits
in accordance with
agreed protocol
106
Permanent TSB Group Holdings plc - Annual Report 2020 Corporate Governance Statement
Board Leadership and Effectiveness
“The Board has overall governance responsibility for the operations of the Bank”
Board Role and Responsibilities
The Board as a whole is collectively responsible for the leadership, strategic direction and policy, operational performance, financial
matters, risk management and compliance of the Bank. The Board exercises leadership, integrity and judgement in directing the Bank,
based on transparency, accountability and responsibility. The Board is also the focal point for the implementation of best practice
corporate governance within the Bank. All Directors must take decisions objectively in the interests of the Bank. The key responsibilities
of the Board as a whole are to:
Key Responsibilities of the Board
Customers
Ensure that the Bank’s culture, systems and practices promotes the fair and transparent
treatment of customers, both existing and new.
Deliver a positive customer-focused culture that is both embedded through adherence to the
Bank’s purpose, ambition and values and can be effectively demonstrated through regular
updates from Management.
Culture and Diversity
Setting the Bank’s purpose, ambition and values, and monitoring culture and alignment to the
established purpose and values.
Strategy
Embedding the Bank’s Organisational Culture and Diversity and Inclusion Programmes.
Question, challenge, assist in the development of, and approve the strategic and operating
plans proposed for the Bank by Management. Ensure that an appropriate level of balance exists
between its strategic contribution and that of its monitoring and policing activity.
Stakeholders
Ensure effective engagement with and understanding of stakeholders views.
Risk Appetite and Risk
Management
Define the strategy for the ongoing management of material risks and ensure that the Board is
sufficiently briefed on major risk factors by ensuring that there is a robust and effective internal
control framework that includes well-functioning risk management, compliance and internal audit
functions as well as an appropriate financial reporting and accounting framework.
Provide leadership for the Bank within a framework of prudent, ethical and effective controls
which enable risk and compliance to be assessed and managed.
Capital Structure
Set and oversee the amounts, types and distribution of both internal capital and own funds
adequate to cover the risks of the Bank.
Be accountable, particularly to those who provide the Bank’s capital.
People and Reward Strategy
Ensure that there is a remuneration framework that is in line with the risk strategies of the Bank.
Ensure that there is a robust and transparent organisational structure with effective
communication and reporting channels.
Ensure that Management create and develop a performance culture that drives value creation
without exposing the Bank to excessive risk of value destruction.
Ensure that workforce policies and practices are consistent with the Company’s values and
support its long-term sustainable success and that the workforce should be able to raise any
matters of concern.
Oversight
Make well informed and high quality decisions based on a clear line of sight into the business.
Ensure that the Bank has a robust finance function responsible for accounting and financial data.
Governance Arrangements
Review regularly the appropriateness of its own governance arrangements and conduct internal
as well as external evaluation of the Board’s effectiveness.
Review corporate governance matters such as Group policies, terms of reference and succession
plans.
Directors must also act in a way they consider, in good faith, would promote the success of the Bank for the benefit of shareholders as
a whole and, in doing so, have regard (amongst other matters) to the likely consequences of any decision in the long-term; the need to
foster the Bank’s business relationships with customers, suppliers and others; interests of the Bank’s employees; impact of the Bank’s
operations on the community, environment and tax payer; and desirability of the Bank maintaining a reputation for high standards of
business conduct.
107
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Board Leadership and Effectiveness (continued)
Board Decisions
There is an effective Board to lead and
control the Bank with members who have
diverse expertise in various aspects of the
Bank’s business. The Board has reserved
to itself for decision, a formal schedule
of matters pertaining to the Bank and
its future direction, such as the Bank’s
commercial strategy, major acquisitions
and disposals, Board membership, the
appointment and removal of senior
executives, executive remuneration, trading
and capital budgets, risk management and
compliance frameworks. This schedule
is updated on a regular basis and at least
annually. On an annual basis, the Board
approves a RAS together with its strategic,
operating and financial plans. The RAS is a
description of the level and types of risk the
Bank is willing to accept or to avoid, in order
to achieve its business objectives.
The Board delegates day-to-day
management of the Bank to the CEO.
The Board relies on the Risk Appetite and
the delivery of strategic, operating and
financial plans to be implemented by the
CEO, the Bank’s Executive Management
Committee and their Management sub-
committees. All strategic decisions are
referred to the Board. Documented rules
on management authority levels and on
matters to be notified to the Board are
in place, supported by an organisational
structure with clearly defined authority
levels and reporting responsibilities.
Board Focus Areas and Priorities
During the course of 2020, against the
back drop of COVID-19, a priority focus
for the Board was oversight of the Bank’s
operational effectiveness to support
the Bank’s customers during a very
challenging period. This included oversight
on supports put in place for customers
that included Mortgage Payment Breaks, a
fully operational and open branch network,
resourcing of call centres and availability
of online banking services. The Board also
continued to focus on ensuring the Bank
was evolving its culture, strengthening
its balance sheet, adapting its corporate
strategy, conforming to effective, prudent
and ethical standards of corporate
governance and effectively managed in the
areas of risk and compliance.
The priorities for the Board during 2021
will be to continue to monitor and address
the impacts of COVID-19 on the Bank’s
customers and on its own commercial
performance. The Board will ensure the
Bank will continue to invest in systems,
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transform its business and support enhanced operational resilience and business
performance.
“The Board is responsible for setting, approving and overseeing
the implementation of the overall business strategy taking
into account the Bank’s long-term financial interests and
sustainability”
Strategy Development
The Board has responsibility for developing the Bank’s purpose, ambition, values and
strategy, ensuring these are the drivers of the Bank’s evolving culture.
The Board has approved five strategic pillars through which key transformational
programmes of work will be executed to ensure the Bank’s strategy is aligned to its stated
purpose and ambition.
The Board annually approves a rolling three year strategic and rolling five year financial
and operating plan (Medium Term Plan or MTP) that links through an integrated planning
process to the Bank’s ICAAP, ILAAP, Recovery Plan and Risk Appetite Statement.
The role of the Non-Executive Directors is to help Management develop, constructively
challenge and critically review proposals on strategy, oversee and monitor strategy
implementation and address any weaknesses identified regarding its implementation.
While there is a formalised strategy development and approval process as set out below,
there is regular and ongoing Director discussion and challenge on strategy development
and execution at Board meetings. The effectiveness of the strategy development process
is a key element of the annual Board review where feedback is sought from each of the
directors on the effectiveness of the strategy development and execution process during
the year in review.
3 Stage Annual Strategy Development Process
Strategy Session 1 (October 2020)
This is a standalone strategy session which sets the internal and external operating
environment through presentations from Management and the Bank’s external
economist. This session outlines the key challenges facing the Bank over the planning
period. The Board discuss and debate the key areas of strategic focus for the Bank
over the coming years and discuss the relevant priorities of the Bank and discuss
strategic trade-offs that may have to be made. This is a key opportunity for Non-
Executive Directors to provide feedback and input to the strategy planning process
before Management formally present the Bank’s financial plans to the Board at strategy
Session 2.
Strategy Session 2 (Early November 2020)
The Board is presented with a draft five year financial plan (MTP). This plan sets the
key risks and opportunities faced by the Bank, the key assumptions underpinning
the plan and a summary of profit and loss, balance sheet and capital performance
over the planning period. This affords the Board the opportunity to challenge the key
assumptions underpinning financial performance, seek assurance on elements of the
plan, discuss the aforementioned risks and opportunities and suggest changes to the
plan over the planning period.
Strategy Session 3 (Late November 2020)
Management presents how Board feedback from Strategy Sessions 1 and 2 have been
addressed in a set of strategic and financial plans presented for approval. The Board
also considers a full risk assessment of the plans and considers separate papers which
stress test financial performance over the planning period. This includes a full review
and challenge of available management actions to correct off track performance.
The Board is responsible for overseeing the implementation of the overall business
strategy, and receives reports on the execution of the Bank’s strategy as a standing
item on the Board agenda.
Permanent TSB Group Holdings plc - Annual Report 2020 Independence
The independence status of each Director
on appointment is considered by the
Board. In addition, the independence
status of each Director is reviewed
on an annual basis to ensure that the
determination regarding independence
status remains appropriate. In determining
independence, the Board will consider
whether any Director has, or has had within
the last three years, a material business
relationship with Permanent TSB directly,
or as a partner, shareholder, director or
senior employee of a body that has such a
relationship with Permanent TSB.
The Board has carried out its annual
evaluation of the independence of each
of its Non-Executive Directors, taking
account of the relevant provisions of the
UK Code, namely whether the Directors
are independent in character and
judgment and free from relationships or
circumstances which are likely to affect,
or could appear to affect the Directors’
judgment.
With the exception of Marian Corcoran
and Paul Doddrell, who were each
appointed to the Board under the terms of
a Relationship Framework with the Minister
for Finance of Ireland, the Board is satisfied
that each of the current Non-Executive
Directors including the Chairman fulfil the
independence requirements of the UK
Code.
Each of the Chairman and all of the Non-
Executive Directors bring independent
challenge and judgement to the
deliberations of the Board through their
character, objectivity and integrity.
Board Size and Composition
The Composition of the Board and
its Committees is reviewed by the
Nomination, Culture and Ethics
Committee and the Board annually, to
ensure that there is an appropriate mix
of knowledge, experience and skills. This
review considers tenure, succession
planning, Board gender diversity targets
and assessment of continued collective
suitability of the Board. The Board has a
target size of 12 Directors. In addition to
having Directors with a broad range of
knowledge, experience and skill, a principal
consideration used to determine the size of
the Board is the ability to resource all of the
Board’s Committees with at least four Non-
Executive Directors and without need for
over reliance on any one Director or small
group of Directors.
Save where a Director is nominated for
appointment by the Minister for Finance
under the Relationship Framework, the
Board requires that all Non-Executive
Directors are Independent Non-Executive
Directors. The Board believes that there is
an appropriate combination of Executive
and Non-Executive Directors so that there
is sufficient independent challenge and
oversight of the Executive Directors and
such that no individual or small group of
individuals can dominate Board decision
making.
At close of business on 31 December
2020, the Board comprised ten Directors:
the Chairman, who was independent
on appointment (and continues to be
so), the CEO, the CRO and eight Non-
Executive Directors, six of whom have
been determined by the Board to be
independent Non-Executive Directors.
Changes to the Board during 2020 included
the appointment of Mr. Paul Doddrell as a
Non-Executive Director on 26 November
2020 and the cessation of both Jeremy
Masding as CEO and Executive Director
on 1 July 2020 and Julie O’Neill as a Non-
Executive Director on 5 August 2020.
Biographies of each of the Directors are
set out in the Board of Directors section
on pages 96 to 100. The wide range of
qualifications, skills and experience that
is encapsulated in the biographies is
harnessed to the maximum possible effect
in the deliberations of the Board. Having
Directors with diverse backgrounds in
areas such as risk management, banking,
change management, digital/IT, strategy
and planning, finance, and auditing
provides both subject matter expertise and
facilitates a broad spectrum of review and
challenge at Board meetings, particularly
when addressing major issues affecting
the Bank.
During 2020, the Board approved an
updated Board Suitability Matrix (the
optimal knowledge, experience and skills
needs of the Board) and arising from this
review identified the need to appoint two
new Independent Non-Executive Directors.
The desired knowledge and experience
sought for the first of these board
positions was in the area of Technology/
Cyber/IT Resilience. The second position
sought candidates with experience that
would provide the Board with insight on
culture evolution, ethical behaviour and
responsible business. The recruitment
process for these appointments is well
advanced with expected appointments to
be filled in late Q1 or early Q2 2021. The
Board is also at an advanced stage in the
recruitment process for the Board position
of CFO with an expected announcement in
Q2 2021.
Decisions on Board membership are
taken by the Board or by shareholders
with recommendations coming from the
Nomination, Culture and Ethics Committee.
Term of Office
The term of office of Non-Executive
Directors is three years, (with an option
for a further three years) and is subject to
satisfactory performance that is reviewed
annually. In accordance with the UK
Code, all Directors are required to seek
re-appointment by election at the AGM.
Non-Executive Directors will automatically
retire from the Board after six years. It is
always at the discretion of the Board to
invite a Non-Executive Director to continue
for a further period but this discretion
will only be exercised in exceptional
circumstances. During 2019, Ken Slattery
accepted an invitation from the Board to
serve a third three year term of office. This
extension was granted following a review of
Board succession plans carried out by the
Nomination, Culture and Ethics Committee
and the need to ensure the retention of
Board corporate memory.
The Chairman is proposed for re-
appointment by the Directors on an annual
basis. The term of office of the Chairman is
six years.
Executive Directors’ service contracts are
reviewed by the Remuneration Committee
and approved by the Board. Existing
Executive Directors’ contracts provide for
a rolling 11.5 month notice period to be
provided, however, this has been reduced
to six months for all future Executive
Director Board appointments. Holders of
Executive office in the Company will vacate
the office of Director on ceasing to hold
Executive office. Directors who hold any
directorship in a subsidiary of the Company
will vacate said directorship on ceasing
to be a Director of the Company and no
Director will receive compensation for loss
of office as a Director of a subsidiary of the
Company.
Board Performance Evaluation
The Board has a formal and rigorous
performance evaluation process to
assess the effectiveness of the Board,
its Committees, and individual Directors.
The performance evaluation is conducted
internally on an annual basis, and externally
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Board Leadership and Effectiveness (continued)
facilitated every three years. An externally
facilitated evaluation of performance last
took place in 2018 and is due again in 2021.
The evaluation of the Board and its
Committees considers the balance of
skills, experience, independence and
knowledge of the company on the board,
its diversity, including gender, how the
Board works together as a unit, and other
factors relevant to its effectiveness.
The process for the 2020 Board
performance evaluation is set out
below. The methodology used for the
evaluation sets out to ensure that there
was a formalised approach to the Board
evaluation that took into account both
the views of the Directors and Senior
Management. The rationale for the
approach taken also ensured that the
performance evaluation of individuals
and of the Board collectively was brought
together into one integrated process.
Individual Director evaluations aimed to
show whether each Director continued to
contribute effectively and to demonstrate
commitment to the role (including
commitment of time for Board and
Committee meetings and any other duties)
was also completed. The value of ensuring
that Committee membership is refreshed
and that undue reliance is not placed on
particular individuals is taken into account
in deciding chairmanship and membership
of Committees. In addition, the evaluation
ensures that Committees have the
requisite expertise to properly discharge
their duties, such as the Audit Committee
as a whole is required to have competence
relevant to the sector in which the Bank
operates.
2020 Board Evaluation Process
During 2020
The Board Chairman met collectively with the Non-Executive
Directors without the presence of the Executive Directors.
November 2020
Full governance and internal stakeholder engagement as part
of review of Board and Committee meeting packs, Terms of
Reference, Board Manual, and Governance documents.
A questionnaire based on key governance related themes
was issued to the Board to assess the performance of the
Board and its Committees. A separate questionnaire on Board
performance was also issued to the Executive Committee.
December 2020 - January 2021
Non-Executive Directors: The Chairman held private one-to-
one interactions with each of the Non-Executive Directors to
evaluate their performance and agree developmental areas
relating to their own individual performance. These interactions
also provided a forum for the Chairman to obtain views of
individual Directors with regard to the effectiveness of the Board
and that of its Committees and to assess training requirements
for individual directors and collectively for the Board.
Chairman: Led by the SID, the Non-Executive Directors carried
out the performance evaluation of the Chairman, taking into
account the views of Executive Directors. The Chairman was not
present at the meeting when dealing with the evaluation of his
performance.
February 2021
The Nomination, Culture and Ethics Committee’s review of
2020 Board performance took place on 15 February 2021. At
this meeting, the members of the Committee received and
discussed the following reports:
The Chairman presented his report on individual Non-Executive
Director performance;
• The SID, without the presence of the Chair, presented his
report on the performance of the Chairman;
• The Chairman, without the presence of the CEO, presented his
report on the performance of the CEO;
• The CEO presented his assessment of performance of the
Bank’s ExCo members;
• The CEO presented his report on the review of the Executive
Directors’ performance;
• Each of the Committee Chairs presented their review of the
performance of their respective Committee;
• The Chair of the Audit Committee confirmed that he had
undertaken, with input from the members of the Audit
Committee, an assessment of the performance of the Head of
GIA to the Audit Committee and presented a summary of his
report;
• A governance discussion document prepared by the Company
Secretary and which included;
• A Board and Committee tenure report;
CEO: The Chairman obtained feedback from the Non-Executive
Directors and subsequently presented his evaluation of the
CEO’s performance against agreed objectives to the Nomination,
Culture and Ethics Committee.
• An attendance schedule for 2020 Board and Board
Committee meetings;
• An independence assessment of the Non-Executive Directors;
• An outline of the responsibilities of the Board, Chairman and
Executive Directors: The Board met collectively with the Non-
Executive Directors with the CEO present.
CEO;
• An assessment of External Directorships; and
• Details of any declared Conflicts of Interests of the Directors.
During a Board meeting held on 2 March 2021, the Chairman presented the 2020 Board performance evaluation for consideration by the
Board.
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Permanent TSB Group Holdings plc - Annual Report 2020 Outcomes of 2020 Board Performance Evaluation
The Board was satisfied that the Non-Executive Directors, the Chairman and the Executive Directors contributed effectively to Board
debate and discussion and demonstrated a knowledge and understanding of the business, its risks and material activities. A number of
actions, arising from the Chairman’s report, were agreed which will be overseen by the Chairman during the year.
2020 Board Performance Action Plan
Quality and Timeliness of
Papers
Continued drive by Group Secretariat and Management to enhance the quality and timeliness of
Board papers during 2021.
Agenda Management
Group Secretariat and the Chairman will review the approach to agenda prioritisation to ensure
optimisation of content and sufficient time for discussion.
More reporting on Strategic
Priorities
Linked to the above point, a Board agenda with enhanced focus on the Bank’s priority issues with
more frequent reporting/discussion on strategy setting/execution.
Director Training &
Development
Increased Reporting on
Culture/Sustainability at
Board
Board Dynamics
Provision of additional topic specific training and development sessions for Directors on both an
individual and collective basis and to further enhance the director induction and ongoing training
processes.
The Board has requested more integrated reporting and discussion of both culture and
sustainability at Board meetings.
With three appointments to the Board in 2021, consideration to be given to developing a process
to explore Board ‘team’ dynamics with the aim of setting objectives to enhance Board interaction
and effectiveness.
Director Induction and On-Going Business Awareness
On appointment to the Board or to any Board Committee, all Directors receive an induction training schedule tailored to their individual
requirements. The induction, which is designed and arranged by the Company Secretary in consultation with the Chairman, will include
meetings with Directors, Senior Management and key external advisors, to assist Directors in building a detailed understanding of the
Bank’s operations, management and governance structures, including the functioning of the Board and the role of Board Committees
and key issues facing the Bank. Directors will also be encouraged, where appropriate, to make site visits to see the Bank’s operations first
hand. Where appropriate, additional business awareness briefing sessions and updates on particular issues identified in consultation
with the Chairman and Non-Executive Directors will be arranged by the Company Secretary. These will be held regularly to ensure
that Non-Executive Directors have the knowledge and understanding of the business to enable them to contribute effectively at Board
meetings. The business awareness and development needs of each Non-Executive Director will be reviewed annually as part of the
performance evaluation process.
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Board Leadership and Effectiveness (continued)
2020 Board Training and On-Going Business Awareness
Board Training Sessions
A number of online in-house Board training sessions were facilitated during 2020 to support on-going business awareness and
Director development. Given the challenges of COVID-19 these sessions were typically delivered through electronic channels.
Members of the Executive Committee were invited to attend these Board training sessions where relevant. Topics for Board training
sessions are recommended by the Board Nomination, Culture and Ethics Committee and include a balance of technical, governance
and professional development. Training delivered during 2020 included: Anti-Money Laundering; Cyber Security; Market Abuse; and
Corporate Legal developments.
Board Briefings
In addition to formal Board training sessions, a number of Board briefings were presented to the Board during 2020. The purpose
of these briefings is to ensure Directors have the knowledge and understanding of the business to enable them to contribute
effectively to meetings, by providing insight into impending changes which may impact on the Board’s responsibilities, the Bank’s
progress in implementing such changes, or to present industry updates. Board briefings presented during 2020 included: Brexit;
macro-economic outlook; equity market performance/outlook; capital and liquidity planning, recovery planning; and, technology
spotlights.
Individual Director Development
An individual training plan is developed for each Director on appointment, and reviewed annually by the Chairman. The purpose of
individual training plans is to support individual Director development. Each Director is required to undertake the Institute of Bankers
Certified Bank Director programme. Directors are also offered the option of attending suitable external educational courses, events
or conferences designed to provide an overview of current issues of relevance to Directors. Led by the Chair, the Non-Executive
Directors met on occasion without the Executive Directors present.
Each of the Board Committees has Terms
of Reference, under which authority is
delegated by the Board and which is
reviewed annually. The Terms of Reference
of each Committee are available on the
Bank’s website www.permanenttsbgroup.
ie. Where permitted on Health and Safety
grounds (COVID-19), the Committee Chairs
attend the AGM and are available to answer
questions from shareholders.
Board Meetings
The Board held 30 Board meetings during
2020. Further details on the number of
meetings of the Board, its Committees and
attendance by individual Directors are set
out on page 101.
Agendas and papers are circulated to
Directors electronically via a secure online
Board portal in sufficient time to facilitate
review by the Directors. The Chair of each
committee reports on the Committee’s
proceedings at Board meetings.
The Board receives formal reports on Bank
risk and compliance matters together with
its strategic, commercial and financial
performance at each of its meetings.
The minutes of Board committees are
made available to all Directors through
a designated reading room in the Board
portal. The Board portal also contains an
extensive document repository and is the
primary method of communication with
Directors.
Board Committees
The Board has established four permanent
Committees to assist in the execution of its
responsibilities. These Committees are:
• Audit
• Risk and Compliance
• Nomination, Culture and Ethics
• Remuneration
Other Committees are formed from time to
time to deal with specific matters. During
2020 all of the Board’s Committees were
composed of Non-Executive Directors,
a majority of whom are considered by
the Board to be independent. The Board
acknowledges this not to be in compliance
with the UK Corporate Governance
Codes (which requires all directors to be
independent) and has set out is rationale
on page 92 as to why the Board is satisfied
this does not inhibit the committees
effectively executing their responsibilities.
Membership and the Chairmanship of each
committee are reviewed annually.
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Permanent TSB Group Holdings plc - Annual Report 2020
Corporate Governance Statement
Risk Management and Internal Control
Board Responsibilities
The Board has overall responsibility for
maintaining a system of risk management
and internal control which provides
reasonable assurance of effective and
efficient operations, internal financial and
operational control and compliance with
laws and regulations.
The Group’s business involves the
acceptance and management of a range
of risks, consistent with its Corporate
Purpose. The Group’s system of risk
management and internal control is
designed to ensure the delegation of
responsibility for risk oversight and
management is appropriate to the nature
and type of risk faced by the Group.
Provision 29 of the UK Code requires the
Board to review annually the effectiveness
of the Group’s system of risk management
and internal control. This requires a review
to cover all material controls including
financial, operational and compliance
controls. The Board confirms that a
detailed review on the effectiveness
of the Group’s risk management and
internal control systems during 2020
was undertaken by the Board Risk and
Compliance Committee. This review took
into account a review of risk management
and internal control across the Bank’s
three lines of defence. In 2019 the Board
had identified 10 key risk categories
against which a series of controls were
implemented to effectively manage risk
within the Bank. Over the course of 2020,
the Board Risk and Compliance Committee
continued to monitor the risk profile of the
Bank. In assessing the effectiveness of
the Bank’s systems of risk management
and internal control during 2020, the
Committee received assurance from the
CRO (second line of defence) and each
of the accountable Executive Committee
members (first line of defence) that a suite
of documented controls were in place to
effectively manage each of the Bank’s
key risks. Supporting this assurance, the
Board Risk and Compliance Committee
also considered the opinion of the Head of
Group Internal Audit (third line of defence)
in his assessment on the adequacy and
effectiveness of key controls within the
Bank during 2020 which were found to be
effective.
The above review also took into account
the operational resilience demonstrated
by the Bank in the stressed environment
of the COVID-19 global pandemic. While
the review indicated there were areas of
the Bank’s control environment that would
require enhancement, the effectiveness
of the Bank’s control environment during
2020 was a contributing factor in the
Board’s determination of compliance with
Principle C of the UK Code which requires
the Board to establish a framework of
prudent and effective controls, which
enable risk to be assessed and managed.
The Board also considers the effectiveness
of the Group’s system of risk management
and internal control on an on-going basis.
In this context, the Board has a particular
focus on ensuring that appropriate
governance structures are in place to
address issues raised through internal
review and by feedback from stakeholders,
including regulators. There was no
significant failure of the Group’s system
of risk management and internal control
during 2020 leading to a material financial
loss.
Internal Control Procedures
The Group’s internal control procedures
are designed to safeguard the Group’s net
assets, support effective management
of the Group’s resources, and provide
reliable and timely financial and operational
reporting both internally to Management
and those charged with governance, and
externally to other stakeholders. They
include the following:
• An organisational structure with formally
defined lines of responsibility and
delegation of authority;
• Established systems and procedures
to identify, control and report on key
risks. Exposure to these risks will be
monitored mainly by the BRCC. The CRO
is a member of ExCo and Chairs the GRC.
The CRO reports directly to the BRCC
on the activities of these committees
and other ExCo committees, details of
which are further described in the Risk
Management section;
• The preparation and issue of financial
reports, including the consolidated
Annual Report, is managed by the Group
Finance department, with oversight from
the BAC. The Group’s financial reporting
process is controlled using documented
accounting policies and reporting
formats issued by the Group Finance
department to all reporting entities
(including subsidiaries) within the Group
in advance of each reporting period
end. The Group Finance department
supports all reporting entities in the
preparation of financial information. Its
quality is underpinned by arrangements
for segregation of duties to facilitate
independent checks on the integrity of
financial data. The financial information
for each entity is subject to a review
at reporting entity and Group level by
Senior Management. In addition to
reviewing and approving the full year
Annual Report, the Interim and Annual
Report are also reviewed by the BAC in
advance of being presented to the Board
for their review and approval;
• Comprehensive budgeting systems are
in place, with annual financial budgets
and a four year MTP prepared and
considered by the Board. Actual results
are monitored and there is monthly
consideration by the Board of progress
compared with budgets and forecasts;
• There are clearly defined capital
investment control guidelines and
procedures set by the Board;
• Responsibilities for the management
of credit, investment and treasury
activities are delegated within limits to
line management. In addition, Group
and divisional Management have been
given responsibility to set operational
procedures and standards in the areas
of finance, tax, legal and regulatory
compliance, human resources and
information technology systems and
operations;
• GIA is responsible for the independent
assessment of the Group’s corporate
governance, risk management and
internal control processes. The Head
of GIA reports directly to the Board of
Directors through the BAC;
• The BAC reviews the scope and nature
of the work of GIA on an on-going basis
to confirm its independence;
• Compliance in the Group is controlled
centrally under the Group CRO who
reports to the Group CEO as well as
independently to the Chairman of the
BRCC, in addition to also having direct
access to that committee; and
• There is a Risk Management Framework
in place within each business throughout
the Group whereby Executive
Management reviews and monitors, on
an on-going basis, the controls in place,
both financial and non-financial, to
manage the risks facing that business.
The BAC reviews the GIA programme.
The Head of GIA reports regularly to the
BAC. The BAC also reviews the Interim
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Risk Management and Internal Control (continued)
and Annual Report and the nature and
extent of the external audit. There
are formal procedures in place for the
external auditors to report findings and
recommendations to the Audit Committee.
Any significant findings or identified risks
are examined so that appropriate action
can be taken.
The BRCC reviews the compliance and risk
management programmes and monitors
the risk profile of the Group. The BRCC
supports the Board in carrying out its
responsibilities for ensuring that risks are
properly identified, reported, assessed and
controlled, and that the Group’s strategy is
consistent with the Group’s Risk Appetite.
The Group CRO reports regularly to the
BRCC.
The Bank is committed to nurturing a
Speak Freely culture where it is safe and
acceptable for all to raise any concerns
that they may have about practices,
processes or behaviours that do not
meet these standards or align with the
Bank’s Purpose. The Bank’s Speak Freely
Procedure protects colleagues who wish
to raise a concern, or to make a protected
disclosure, relating to an actual or potential
wrongdoing in the workplace. Speak Freely
focuses on encouraging colleagues to
raise a concern via a number of different
channels, and ensures that they can
do so without any fear of retribution or
penalisation. In addition, the Bank also has
in place a Code of Ethics, which outlines
the standards of responsibility and ethical
behaviour to be observed by all employees
of the Group.
Internal Control over Financial
Reporting
The Group operates an Internal Control
Framework over financial reporting to
support the preparation of the consolidated
financial statements. The main features
are as follows:
• A comprehensive set of accounting
policies are in place relating to the
preparation of the interim and annual
financial statements in line with IFRS, as
adopted by the EU;
• A control process is followed as part
of the interim and annual financial
statements preparation, involving the
appropriate level of Management review
of the significant account line items,
and where judgments and estimates are
made, they are independently reviewed
to ensure that they are reasonable
and appropriate. This ensures that
the consolidated financial information
required for the interim and annual
financial statements is presented fairly
and disclosed appropriately;
• The Interim and Annual Report are
subject to detailed review and approval
through a process involving senior and
executive finance personnel;
• Summary and detailed papers are
prepared for review and approval by the
BAC covering all significant judgmental
and technical accounting issues together
with any significant presentation and
disclosure matters; and
• A GIA function with responsibility for
providing independent, reasonable
assurance to key internal committees
and Senior Management, and to external
stakeholders (regulators and external
auditors), on the effectiveness of the
Group’s risk management and Internal
Control Framework.
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Permanent TSB Group Holdings plc - Annual Report 2020 Corporate Governance Statement
Board Diversity Report
PTSB recognises the benefits of having a diverse Board and
sees increasing diversity at Board level as an important element
in maintaining a competitive advantage.
Diversity
A diverse and inclusive culture is essential
to the long-term success of Permanent
TSB and enables the Bank to respond to
diverse customer and wider stakeholder
needs. Further details on the Bank’s
Organisational Culture, Diversity and
Inclusion Programmes are set out on page
30.
Board Diversity Policy
The Board has a Diversity Policy, which
applies to all members of the Board and
sets out the approach to diversity of
Board members. The Bank recognises the
benefits of having a diverse Board and
sees increasing diversity at Board level
as an important element in maintaining a
competitive advantage.
A diverse Board includes and makes
good use of differences in the knowledge,
experience and skills (in particular those
identified as relevant to the business and
culture of PTSB) as set out in the Board
Suitability Matrix, including regional
and industry experience, educational,
professional, social and ethnic background,
nationality, gender, age, cognitive and
personal strengths and other qualities
of Directors. These differences are
considered in determining the optimum
composition of the Board and where
possible balanced appropriately.
Objective of Board Diversity Policy
The Nomination, Culture and Ethics
Committee discuss and agree annually
all measurable objectives for achieving
diversity on the Board and recommends
them to the Board for adoption. When
setting diversity objectives, the Board will
consider diversity benchmarking results
published by competent authorities, the
EBA or other relevant international bodies
or organisations. At any given time, the
Board may seek to improve one or more
aspects of its diversity and measure
progress accordingly.
The Board had set a target to achieve 30%
female representation on the Board by
30 June 2021. The Bank is committed to
having a diverse Board, to achieving the
target set in this regard and to ensuring an
open and fair recruitment process.
The Board has set an objective that
approximately 50% of Non-Executive
Directors, including the Board Chair,
together with the Chairs of the Audit
and Risk and Compliance Committee,
should have relevant banking and/
or financial experience and this will be
taken into account when recommending
appointments.
How the Board Diversity Policy was
implemented during 2020
All Board appointments are made on merit,
in the context of the knowledge, experience
and skills that the Board as a whole
requires to be effective. The balance and
mix of appropriate knowledge, experience
and skills of Non-Executive Directors are
taken into account when considering a
proposed appointment.
As part of the annual performance
evaluation on the effectiveness of the
Board, Board Committees and individual
Directors; the Nomination, Culture and
Ethics Committee will consider the
diversity needs of the Board through
examining the balance of knowledge, skills,
experience, independence and industry
knowledge of the Directors.
The behaviours likely to be demonstrated
by potential Non-Executive Directors
are also considered when interviewing
for new appointments to ensure that
an environment in which constructive
challenge is expected and achieved, is
maintained in the Boardroom. In reviewing
Board composition, the Nomination,
Culture and Ethics Committee considers
the benefits of diversity, including
gender, and looks to ensure that there is
appropriate representation from other
industry sectors.
The Board considers skills, experience
and expertise, including education and
professional background, in areas relevant
to the operation of the Board. The Board’s
objective Banking and/or financial
experience is also taken into account
when recommending appointments.
All candidates for appointment need to
demonstrate the financial literacy required
for a proper understanding of the Bank’s
activities and associated risks. The
Nomination, Culture and Ethics Committee
seeks to ensure that a proportion of
the Board has a deep understanding
of financial products and has written
guidelines to ensure that Board candidates
are selected on merit, based on their skills,
competencies, qualifications and ability to
commit sufficient time to the role.
2020 Board Diversity Progress
Gender Diversity
A minimum of 20% female representation
on the Board was maintained during 2020
and at year-end this percentage remained
at 20%. The committed target to achieve
30% female representation on the Board
featured regularly at Board Nomination,
Culture and Ethics committee meetings
during 2020 and plans have been put in
place to achieve this target by 30 June
2021.
Skills, Experience and Expertise
The Board achieved its objective of 50% of
Non-Executive Directors having Banking
and/or financial experience, and achieved
its target that all Directors demonstrate
financial literacy.
115
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Corporate Governance Statement
Board Diversity Report (continued)
2021 Board Diversity
Gender
Board Diversity by Tenure
0-3 years
Board Diversity by Tenure
3-6 years
Board Diversity by Tenure
6-9 years
Nationality
Age Profile
1
3
Irish
British
German
Independence
2
2
6
6
1
2
4
3
40-49
50-59
60-69
70-79
Executive & Non-Executive Directors
2
8
Independent Non-Executive Directors
Non-Executive Directors
Executive Directors
Non-Executive Directors
Executive Directors
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Permanent TSB Group Holdings plc - Annual Report 2020 2021 Board Diversity Priorities
Board Objective
2021 Board Action
Gender
The Board remains
committed to
achieving 30% female
representation.
Board Diversity
Policy
Board
Recruitment and
Selection and
Suitability
The Board recognises that
there are many aspects
of diversity such as
gender, social and ethnic
backgrounds, cognitive
and personal strength,
skills and experience,
and the importance of
ensuring wider diversity
is considered for Board
appointments.
The Board remains
committed to having a
diverse range of skills,
experience and expertise,
including education and
professional background,
in areas relevant to the
operation of the Board,
while ensuring that the
recruitment and selection
process for members of the
Board is an open and fair
process.
Board Succession
Planning
The Board is responsible
for overseeing succession
plans for the Board and
Senior Executives.
•
Increase the current 20% female representation to 30% by 30 June 2021;
• Retain the Board gender diversity target of 30% female representation;
and
• Encourage initiatives that promote broader inclusive gender diversity
across the Bank, in line with the Organisational Culture, Diversity and
Inclusion Programmes.
• Consider the aspects of diversity relevant to the operation of the Bank,
such as gender, age, social and ethnic backgrounds, cognitive and personal
strength, educational background, professional background;
• Review the Board Diversity Policy, to ensure all relevant aspects of
diversity are included in the Policy;
• Review the Board Suitability Matrix to ensure that the diverse range of
skills required by the Bank is represented at Board level; and
• Encourage initiatives that promote broader inclusive gender diversity at
Board level.
• Maintain a minimum of 50% of Non-Executive Directors, including
the Board Chairman, together with the Chairs of the Audit and Risk
Committees, to have Banking and/or financial experience and this will also
be taken into account when recommending appointments;
• Given the focus of the Bank’s business model in Ireland, to achieve a circa
70%-30% balance between of the Irish and Non-Irish domiciled directors;
• Retain the requirement that all candidates for appointment need to
demonstrate the financial literacy required for a proper understanding of
the Bank’s activities and associated risks;
• Ensure that a proportion of the Board has a deep understanding of
financial products;
• Review Board Recruitment and Selection procedures, to ensure Board
candidates are selected on merit, based on their skills, competencies,
qualifications and ability to commit sufficient time to the role, with due
regard to relevant aspects of diversity; and
• Undertake an assessment of individual and collective suitability, taking into
account relevant aspects of diversity to determine the continued individual
and collective suitability of members of the Board.
• Review Succession Plans of the Board and Senior Executives, to ensure
that the Bank pipeline of successors has adequate diversity.
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Corporate Governance Statement
Board Audit Committee
The Audit Committee ensures that the financial and
internal control policies, practices and decisions
of the Bank are carried out appropriately, and are
properly aligned to strategy and the interests of its
Shareholders.
Dear Shareholder,
I am pleased to introduce the Board Audit Committee Report for
the year ended 31 December 2020, which has been prepared by
the Committee and approved by the Board. The purpose of this
report is to provide an overview of matters considered by the
Committee during 2020. Firstly, I welcome the appointment of
Paul Doddrell to the Committee during the year. Paul, a qualified
accountant, has extensive management and board expertise in
the area of auditing and finance and this will be of benefit to the
collective knowledge, experience and skills of the Committee.
The Committee carefully monitored activity within the Bank’s
control environment as the business responded to the impact
of COVID-19. During the year, the Head of Group Internal Audit
reported to the Committee on a series of rapid response reviews
aimed at supporting the business by identifying the key categories
which held a heightened risk due to COVID-19. Key areas of focus
and review by the Committee included:
• Mortgage Payment Break activity
•
IT Availability and the impact of remote working
• Cybersecurity
• Payment Processing and Fraud Monitoring Operations
• Capital, Liquidity & Financial Planning Management
• Third Party Risk Management
For each of these risk categories, GIA undertook a series of
rapid reviews providing Management with observations and
recommendations that will continue to be monitored by the
Committee.
A further key focus for the Committee during the year was
the continued oversight and challenge of Management on the
sustained enhancement of the risk and control environment within
the Bank. This included spotlight presentations from both the
First and Second Lines of Defence on how risks and controls were
managed and internal audit actions effectively addressed.
Finally, during the year the Committee carefully monitored the
impact of COVID-19 on the wider macro-economic environment,
the Bank’s commercial performance and how each of these
indicators impacted the Bank’s overall level of loan loss
provisioning.
In 2021, the Committee will continue to focus attention on
the impact of COVID-19 and oversee how the Bank’s control
environment evolves to ensure the continued operational
effectiveness of the Bank.
On behalf of the Board Audit Committee
Donal Courtney
Chair, Board Audit Committee
Composition and Operation
The Committee currently consists of four Non-Executive Directors.
The biographical details of each member are set out on pages 96
to 100. Neither the Board Chair nor the CEO is a member of the
BAC. The Board requires that the Chair of the BAC has recent
and relevant financial experience. The Chair of the Committee is
responsible for leadership of the Committee and for ensuring its
effectiveness. Together, the members of the Committee bring
a broad range of relevant experience and expertise contributing
towards effective governance.
The members of the BAC meet together at the start of each
scheduled meeting. The head of GIA is then invited to join the
meeting so that the Committee can review and discuss internal
audit activity without Senior Management present. Subsequent
attendance by the CEO, CFO, Board Chairman, external auditors
and others is by invitation only and managed to ensure the ongoing
independence of the Committee. The Board requires that a
minimum of one member is common to the BAC and the BRCC.
The Chair is a member of both Committees.
2020 Committee Meeting Attendance
Member
Donal Courtney*
Ken Slattery
Paul Doddrell
Andrew Power
Appointed
3 Oct 2018
30 Aug 2013
26 Nov 2020
26 Sept 2016
*Chair
Number
of Years
on the
Committee
2.2
7.4
0.1
4.3
2020
Meeting
Attendance
11/11
11/11
1/1
11/11
Ceased
-
-
-
-
118
Permanent TSB Group Holdings plc - Annual Report 2020 • Approved the GIA plan for 2021;
• Reviewed the governance and
approval arrangements underlying
the fair, balanced and understandable
assessment of the Annual Report;
• Reviewed a refreshed Audit Plan for
2020 to take into account COVID-19
Rapid Response Audits;
• Assessed the Longer Term Viability and
Going Concern Statements;
• Reviewed the disclosures on compliance
with the UK Corporate Governance Code;
• Reviewed provisions including legacy,
legal and compliance liabilities; and
• Reviewed the basis, background and
level of Non-Audit fees paid to PwC.
Financial Reporting and Significant
Financial Judgments and Disclosures
During the year, the BAC reviewed the
external auditors’ findings, and the
following significant financial judgments
made, the related disclosures for the 2020
Financial Statements as set out on the
current and the following page.
Expected Credit Loss Provisions
The Committee considered the Group’s
methodology including assumptions
and parameters for generating the
Group’s allowance for ECL for its secured
portfolios. The Committee discussed
with Management in detail any changes
and revisions made to the Group’s
IFRS 9 ECL models, macro-economic
scenarios, the impact of COVID-19 on
provisions, significant increase in credit
risk and payments breaks, and post model
adjustments.
Multiple scenarios
The Committee reviewed and approved
the macro-economic scenarios for use in
IFRS 9 ECL estimation, which included the
central scenario used for financial planning
purposes, a more favourable scenario, and
an adverse scenario.
Role and Responsibilities
The BAC monitors the effectiveness and
adequacy of internal control, internal
audit and IT systems and reviews the
effectiveness of risk management
procedures, in addition to reviewing
the integrity of the Company’s internal
financial controls. The BAC reviews
the arrangements by which staff of the
Group may, in confidence, raise concerns
about possible improprieties in matters
of financial reporting or other matters.
The BAC monitors and reviews the
effectiveness of the Group’s internal audit
function and also considers the external
auditor’s independence and objectivity and
the effectiveness of the audit process. The
BAC also reviews discoveries of fraud and
violations of laws and regulations as raised
by the head of GIA.
The BAC monitors the integrity of the
Financial Statements of the Company,
reviewing significant financial reporting
judgements contained therein, to ensure
that they give a “true and fair view” of
the financial status of the Group and to
recommend to the Board whether to
approve the Annual and Interim Reports
and to recommend to the Board that it
believes that the Annual Report, taken as a
whole, is fair, balanced and understandable
and provides the necessary information
for shareholders to assess the Group’s
position, performance, business model and
strategy.
In considering whether the Annual Report
is fair, balanced and understandable, the
Committee reviewed the Annual Report
and considered whether the Financial
Statements were consistent with the
financial review elsewhere herein. The
Committee also reviewed governance
and approval processes in place within
the Group as they were relevant to the
Financial Statements. These included the
completion by Management of disclosure
checklists to ensure all required disclosures
required by applicable company law, listing
requirements and accounting standards
are included in the draft Annual Report
which was reviewed by various Executives
and Management of the Group.
The Committee also had regard to the
significant issues relating to the Financial
Statements that are set out in this report.
Each of these significant issues were
addressed in papers received by the
Committee from Management and in the
report received by the Committee from the
external auditors and were discussed in
the Committee’s meeting with the external
auditors.
The BAC also had regard to the
assessment of internal control over
financial reporting, details of which are
outlined in the Risk Management and
Internal Control section of the Corporate
Governance Statement.
Matters considered by the
Committee in 2020
During 2020, the Committee spent a
significant amount of time considering
those issues set out in the Significant
Financial Reporting Judgments and
Disclosures and, recommending for
approval to the Board, the Annual Report
and Interim Report.
During 2020, the Committee also:
• Reviewed GIA activity throughout the
year, including a review of performance
against the 2020 internal audit plan;
• Received presentations on all internal
audit findings and action plans
• Reviewed instances on cases of reported
fraud
• Received presentations from First and
Second Line representatives on plans to
address internal audit findings
• Reviewed the accounting and regulatory
treatment of the sale of loan assets, in
line with IFRS;
• Reviewed the Group’s Pillar 3 policy and
disclosures;
• Reviewed External Auditor
Independence;
•
Invited members of Senior Management
to report on progress to remediate open
internal audit actions;
• Reviewed the continued recognition of a
Deferred Tax Asset (DTA) on tax losses
carried forward;
• Approved changes within International
Financial Reporting Standards (IFRS)
and International Accounting Standards
(IAS);
• Reviewed impairment provisions;
• Reviewed the effectiveness of internal
control over financial reporting;
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Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Corporate Governance Statement
Board Audit Committee (continued)
Expert credit judgements
At 31 December 2020, the impairment
provisions included €172 million of
Management’s adjustments to modelled
outcomes. A key focus of the Committee
during the year was an assessment of the
level and rationale for such adjustments.
The Committee concluded that a robust
governance framework existed to monitor
provisioning adequacy and that the
assumptions and judgements applied
by Management were appropriate. The
Committee was satisfied that the provision
and related disclosures in the financial
statements were appropriate.
Recognition and Recoverability of
Deferred Tax Assets
The Committee considered the extent of
DTAs recognised by the Group in respect
of unutilised tax losses, and in particular,
the future profits of PTSB against which
losses may be utilised in future years. The
Committee noted that while the Group’s
performance and strategic outlook has
been affected by the impact of COVID-19,
the macro-economic environment during
Q4 2020 has improved, as outlined in more
detail under “Going Concern” and “Longer
Term Viability” below.
Accordingly, in line with the requirements
of IAS 12 “Income Taxes,” Management
have formed the view that the carried
forward tax losses within PTSB could
be utilised against future profits, which
will be generated by PTSB. This requires
significant judgments to be made about
the projection of long-term profitability
because of the period over which recovery
extends.
Having considered the above, the
Committee agreed with Management’s
assessment that it was probable that the
level of DTAs recognised in the financial
statements at 31 December 2020 would be
recovered. The Committee noted that IFRS
does not allow for the DTA recognised to
be discounted notwithstanding that it will
likely take a significant number of years to
be fully recovered.
Impairment review of the Group’s
subsidiary undertaking
The Company carries its investment in
its subsidiary undertaking at cost less
impairment and reviews whether there
is any indication of impairment at each
reporting date. Impairment testing involves
comparing the carrying value of the
investment to its recoverable amount. The
recoverable amount is the higher of the
investment’s fair value or its value in use
(VIU). An impairment charge arises if the
carrying value exceeds the recoverable
amount.
Management provided the Committee
with a paper that detailed the recoverable
amount of the investment. The Committee
reviewed the paper and calculations and is
satisfied with the recoverable value of the
subsidiary and the resultant impairment in
the investment.
IT Access
Certain matters in relation to IT access
controls have been communicated to the
BAC through the external audit process.
The Committee is however satisfied there
are sufficient mitigating controls in place
from a financial reporting perspective.
Going Concern
Note 1 of the financial statements includes
details of the going concern of the Group,
which outlines the Directors’ view that the
Group will continue as a going concern for
a period of 12 months following the signing
of this report.
In making the judgment, the Committee
was provided with detailed papers
containing Management’s considerations
of the risks and uncertainties as they may
pertain to going concern. The Committee
reviewed these judgments, and agree
with Management’s view that the Group
continues on a going concern basis and
that there are no material uncertainties.
Longer Term Viability
In accordance with the requirements of
the UK Corporate Governance Code, the
Directors are required to issue a viability
statement of the prospects of the Groups
taking in account Group’s current and
projected financial position taking in
account the principal risks facing the
Group.
The period over which we confirm longer-
term viability
The Directors have assessed the viability of
the Group over the three year term which
falls within the time horizons considered
for the Group’s strategic planning and
the regulatory stress testing frameworks
employed by the Group. The Directors are
satisfied that this is an appropriate period
of assessment.
Assessing the governance and prospects
of the company
In making this assessment, the Directors
have assessed the key factors that are
likely to affect the Group’s business model
and medium term plan which have been
stress tested and sensitised for a downside
scenario to reflect the challenges that the
Group is facing, particularly the COVID-19
related considerations and its impact on
capital, solvency and liquidity while taking
into account other emerging and principal
risks.
The Board has reviewed the medium term
plan and the outputs from stress testing of
capital and liquidity positions both pre and
post management actions.
The Directors have carried out a robust
assessment of the principal risks facing the
Group, including those that would threaten
its business model, future performance,
solvency or liquidity. The stress testing is
designed to explore the resilience of the
Group to the potential impact of principal
risks set out in the Annual Report, including
in particular funding and liquidity, capital
adequacy, the economic environment,
regulatory risks and or a combination of
these risks.
The medium term plan is reviewed annually
and with increased frequency when
necessitated by significant changes in the
external environment and is approved by
the Board each year.
The medium term plan closely aligns to
Group’s Risk Appetite Statement and
Risk Management Framework and details
the Group’s future profitability, cash flow
projections, capital requirements and
the Group’s key performance measures.
Management’s performance against
the medium term plan is reviewed on an
ongoing basis by the Board.
The Group made a loss for the 2020
financial year and its performance was
significantly impacted by COVID-19 in
line with the overall market. While the
Group remains strongly capitalised and
has significant liquidity at the year-end,
the future projections in the medium term
plan which were sensitised for a downside
scenario indicate no breaches in either
regulatory capital and liquidity positions in
the planning horizon.
120
Permanent TSB Group Holdings plc - Annual Report 2020 The assumptions underpinning the stress
testing to determine the resilience of the
Group’s balance sheet, profitability and
robustness of the business model were
significantly conservative. While, the
downside scenario marginally pushes out
profitability, there were no breaches of
regulatory requirements with a marginal
recourse to internal buffers in the outer
years of the plan.
There are certain key assumptions that
are critical to the viability of the Group and
these are outlined below:
Capital Adequacy
Due to the dynamic nature of COVID-19,
the full impact on the future profitability
is difficult to estimate. The government
response to curtail the virus and changing
customer behaviours may impact the
future performance.
The Group has therefore sensitised its
projection to cater for the downside
and has used increasingly conservative
economic inputs to develop its medium
term strategy.
The Directors and Management have
considered the capital forecast for
the Group, and its ability to withstand
additional stress scenarios such as
the economic environment in Ireland
deteriorating and a further negative
outcome stemming from increased
restrictions imposed by the Government
to curtail the COVID-19 virus. The Group
expects to be in a position to meet its
minimum regulatory capital requirements
in the period to 2023.
Funding & Liquidity
The Group’s liquidity position remains
strong at 31 December 2020 with the
Group holding a significant liquidity buffer
at 31 December 2020.
A key assumption in determining the longer
term viability is that the Group will continue
to be able to access the required liquidity
and funding across all channels during the
period of assessment.
The Group continues to undertake a
number of initiatives to improve its liquidity
position in the areas of deposits, collateral
optimisation, and wholesale markets
activity.
The Directors and Management are aware
that the Group’s ability to monetise its
contingent counterbalancing capacity is
dependent on the underlying collateral
remaining eligible.
Our funding plans assume, based on our
interaction with wholesale markets and
deposit trends, that the required liquidity
and funding will be available to the Group
over the medium term.
Confirmation of longer-term viability
Based upon the above assessment, the
Directors have a reasonable expectation
that the Company will be able to continue
in operation and meet its liabilities as they
fall due over the three year period of their
assessment to December 2023.
Provisions for Liabilities
The Committee considered the provisions
made in the Financial Statements in order
to assess the appropriateness of the
underlying liabilities.
Management presented a paper outlining
the requirements of IAS 37 and the basis of
the provisions proposed. The Committee is
satisfied that the provisions represent the
best estimate of the potential liabilities at
31 December 2020.
Accounting Treatment of Project
Glenbeigh II
The key accounting requirements for
Project Glenbeigh II follow the same
principles that the Committee considered
in the prior year in relation to Project
Glenbeigh. Management assessed the
transaction, considering transfer of
contractual rights and transfer of risks
and rewards. The Committee reviewed
the technical accounting paper presented
by Management outlining the accounting
treatment of the transaction and is
satisfied that it is in line with IFRS 9.
Relationship with External Auditors
The Group’s External Auditors are PwC who
were appointed by shareholders in 2013.
The BAC provides a link between the Board
and the external auditors, independent of
the Company’s Management. The external
auditors regularly attend BAC meetings
and the Committee meets with the external
auditors at least once a year without
Management present to discuss their remit
and any issues arising from the audit.
The BAC reviewed the external audit plan
prior to the commencement of the 2020
audit. The BAC met with the external
auditor to review the findings from the
audit of the Group financial statements.
The BAC has an approved policy on the
provision on non-audit services by the
external auditor. The policy seeks to ensure
that processes are in place to make sure
that the independence and objectivity
of the external audit process is not
compromised. This includes monitoring the
nature and extent of the services provided
by the external auditor through its quarterly
review of fees paid to the external auditor
for audit and non-audit work, seeking
confirmation from the external auditor
that they are in compliance with relevant
ethical and professional guidance and that,
in their professional judgment, they are
independent of the Group.
The BAC reviews all fee arrangements with
the external auditor. Fees paid in respect
of audit, other assurance services, tax
advisory services and non-audit services
are outlined in note 8 to the financial
statements.
Other assurance services are services
carried out by the auditors by virtue of their
role as auditors and include assurance
related work, reporting to the regulator
and other assurance services. In line with
best practice, the auditors do not provide
services such as financial information,
system design and valuation work which
could be considered inconsistent with the
audit role.
The amount of fees payable to external
auditors for their audit services for the year
2020 was €1.3m (excluding VAT) payable
to PwC Ireland. €0.1m (excluding VAT)
was paid in respect of non-audit services,
which relate to various assurance works.
The Company’s external auditor generally
performs these services.
The external auditor is required to rotate
audit partner every five years. The current
audit partner is John McDonnell who was
appointed in 2018. The Committee also
reviews the effectiveness, independence,
and objectivity of the external auditor. The
Committee also considered a paper by
Management regarding auditor’s efficiency
and effectiveness.
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Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Corporate Governance Statement
Board Audit Committee (continued)
Committee regularly reviews the available
skills and resources within the Internal
Audit Function in order to ensure that the
function has the necessary capabilities to
provide a quality audit service. Through
these measures the Audit Committee has
assessed the effectiveness of internal
audit function and is satisfied that the
quality, experience and expertise of the
function is appropriate to the needs of the
Group.
The BAC reviews the effectiveness of the
external auditor through discussion and
assessment of its performance. The BAC
has concluded that it was satisfied with the
external auditor’s performance.
The last competitive tendering process
for the appointment of the external auditor
took place in 2012. This development
followed a Board decision that the position
of auditors should be subject to regular,
competitive tendering. The Board intends
to, via a competitive tending process,
rotate the external auditor for the audit of
the Bank’s 2023 Financial Statements.
Review of Group Internal Audit
The BAC approves the annual work
programme for the GIA function and
ensures that it is adequately resourced
and has appropriate standing within the
Group. The Head of Internal Audit has a
direct reporting line to the Chair of the
BAC and the BAC meets with the Head of
Internal Audit on a regular basis without
the presence of Management. The BAC
receives regular reports from GIA, which
include summaries of the key findings of
each audit in the period. The BAC ensures
co-ordination between GIA and the
external auditor.
As set out in the Risk Management Section
a ‘Three Lines of Defence’ model has been
adopted by the Group for the effective
oversight and management of risks across
the Group, with GIA being the Third Line of
Defence.
In line with the Institute of Internal Auditors
(IIA) Standards (1300), the Head of GIA is
required to develop and maintain a quality
assurance and improvement programme
that covers all aspects of internal audit
activity. An internal quality assessment
must be completed on an annual basis
with an independent external assessment
undertaken every five years to evaluate
the Internal Audit Function’s conformance
with IIA Code of Ethics and Standards.
The Group’s Internal Audit function
was reviewed by the IIA in 2016. The
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Permanent TSB Group Holdings plc - Annual Report 2020 Corporate Governance Statement
Risk and Compliance Committee
The Committee supports the Board in ensuring
risks are properly identified, reported, assessed, and
controlled, and that the strategy is consistent with the
risk appetite.
Dear Shareholders,
As Chair of the Board Risk and Compliance Committee, I am
pleased to report on how the Committee has discharged its
responsibilities for the year ended 31 December 2020. Firstly, I
welcome the appointment of Paul Doddrell to the committee during
the year. Paul has extensive management and board expertise in
the area of risk management and change and this will benefit the
collective knowledge, experience and skills of the Committee.
Oversight and challenge on the control environment within the Bank
has been a key focus for the Committee during 2020 with particular
emphasis on requesting attendance at Committee meetings of
business function owners (first line of defence). The purpose of
these sessions is to seek assurance on and provide constructive
feedback to Management on the maturity of the risk and control
environment within their respective business functions. During the
year, the committee also received a number of presentations from
the Non-Financial Risk Team (second line of defence). Embedding
second line guidance and systems to support first line in the
management of operational risk has been a key objective for the
committee during 2020.
I am also pleased with the progress that the Bank has made during
2020 in strengthening the control environment within the Bank.
The Committee carried out a 2020 review on the effectiveness of
the Group’s system of risk management and internal control which
is reported upon on page 113 to 114. A key part of this review took
into account the demonstrated operational resilience of the Bank
in the stressed environment of the COVID-19 global pandemic.
While the review indicated there were areas of the Bank’s control
environment that required enhancement, the effectiveness of the
Bank’s control environment during 2020 was a contributing factor
in the Board’s determination of compliance with Principle C of the
UK Code which requires the Board to establish a framework of
prudent and effective controls, which enable risk to be assessed
and managed.
The Committee had a busy schedule of meetings in 2020 meeting
15 times. Key focus areas included: COVID-19 impacts; Loan loss
provisions, AML risk, technology resilience, digital transformation;
mortgage payment break implementation; asset deleveraging; and,
the continued embedding of the Bank’s Internal Control Framework.
Further details are set out below.
On behalf of the Board Risk & Compliance Committee
Ronan O’Neill
Chair, Board Risk & Compliance Committee
Composition and Operation
The BRCC is composed of a majority of Independent Non-
Executive Directors. Neither the Board Chairman nor the CEO is
a member of the BRCC. The Board ensures that the Chairman of
the Committee has relevant risk management and/or compliance
experience. The Board requires that at least one member of
the Committee is common to each of the BAC and the Board
Remuneration Committee. On an annual basis, the Committee
reviews its own terms of reference and the Board Nomination,
Culture and Ethics Committee conducts a review of the
committee’s effectiveness and recommends changes considered
necessary to the Board. The Committee meets in private session
at the start of each meeting.
2020 Committee Meeting Attendance
Member
Ronan O’Neill*
Donal Courtney
Ruth Wandhöfer
Marian Corcoran
Paul Doddrell
*Chair
Appointed
26 Jul 2016
3 Oct 2018
30 Oct 2018
29 Oct 2019
26 Nov 2020
Number
of Years
on the
Committee
4.5
2.2
2.2
1.3
0.1
2020
Meeting
Attendance
15/15
14/15
14/15
14/15
1/1
Ceased
-
-
-
-
-
Responsibilities of the Committee
The Committee is responsible for monitoring adherence to the
Group RAS. Where exposures exceed levels established in the
RAS, the Committee is responsible for ensuring that appropriate
responses are developed. This is facilitated by the periodic review
of a key risk indicators report calibrated to the RAS.
The Committee is responsible for monitoring compliance with
relevant laws, regulatory obligations and codes of conduct. This
is facilitated by regular reporting on compliance risks to the
Committee. The Committee also spent a substantial amount
of time tracking the continuing regulatory agenda and received
updates on Management’s activities to implement new and
updated regulation and on the on-going engagement with the
Group’s Regulators.
The Committee is also responsible for oversight and advice to
the Board on risk governance, the current risk exposures of the
Group and future risk strategy, including strategy for capital and
liquidity management, the setting of compliance policies and
principles and the embedding and maintenance throughout the
Group of a supportive culture in relation to the management of
risk and compliance. The BRCC supports the Board in carrying out
its responsibilities for ensuring that risks are properly identified,
123
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Governance in Action: Change
Perhaps the most significant challenge
facing any organisation is the ability to
implement change in an effective, timely
and cost efficient manner. A key challenge
for implementing any change programme is
to maintain a stable and effective operating
environment while delivering the expected
benefits on time and in a cost effective
manner to the Bank and its customers. The
Board Risk and Compliance Committee
recognised this as a key risk for the Bank
and, during 2020 implemented monthly
reporting on the implementation of the
Bank’s digital transformation programme
(Forte). This enabled the Committee to
understand how the Bank was delivering
against its strategic ambitions while
maintaining a resilient and safe operating
environment.
Corporate Governance Statement
Risk and Compliance Committee (continued)
reported, assessed and controlled, and that
the Group’s strategy is consistent with the
Group’s Risk Appetite. It seeks to review
key aspects of the Group’s risk profile
and provide appropriate challenge on the
adequacy of their management.
The Committee independently monitors
the extent to which the Bank complies
with relevant rules and procedures. This
includes raising and maintaining awareness
of, for example, financial regulations,
compliance procedures and fraud and anti-
corruption measures. The Company has
internal policies, rules and procedures to
guarantee that Management complies with
relevant laws and regulations regarding
customers and business partners. External
aspects of the Committee are primarily
concerned with monitoring financial
transactions and preventing money
laundering. Internal aspects primarily
concern checking private transactions by
employees and directors, preventing and,
where necessary, transparently managing
conflicts of interest and safeguarding
confidential information.
In addition to meeting legal requirements,
the Committee reviews its own Terms
of Reference annually and its own
effectiveness, recommending any changes
considered necessary to the Board.
Matters considered by the
Committee in 2020
During 2020, the Committee continued to
focus considerable attention on the Bank’s
systems of risk management and internal
control and supported work undertaken
by the Three Lines of Defence to further
embed the Bank’s Internal Control
Framework. The Committee undertook
regular reviews of the Bank’s systems
of risk management and internal control
during the year. In addition to the monthly
reporting from the CRO, Head of Regulatory
Compliance and Head of GIA, the
Committee also considered a wide range
of risk related policies, frameworks and
reports. Among the matters considered by
the Committee during 2020 were:
• A review of the Bank’s COVID-19
• A number of Compliance Monitoring and
Customer Conduct reviews;
• Monthly monitoring on development of
a new End-to-End Liquidity Reporting
Programme;
• Monthly monitoring of Technology and
Change Risk;
• AML Risk including the review findings
and action plan in response to an AML
Regulatory inspection;
• Mortgage Payment Break
Implementation and Operation;
•
Implementation of PSD2 regulatory
obligations;
• Risk Appetite reviews;
• Recovery Plan reviews;
• Brexit Risk monitoring;
• Treasury Limit Reviews;
• Monthly monitoring of Top Risks and
quarterly reviews thereto;
• Complaints Management Reviews;
•
ICAAP and ILAAP design and approval;
• A review of the Bank’s provision models
and expected credit loss outcomes;
• A review of the Bank’s Risk and Control
Self-Assessment Refresh project;
• Mortgage Loan Asset Deleveraging;
• Digital Transformation spotlights;
• A review of compliance with the UK Code
and Central Bank of Ireland Corporate
Governance Code;
• Multiple control environment spotlights
from business functions and Group Non-
Financial Risk;
• Oversight and continued development of
the Group Risk Function;
• Data Protection Officer’s Report;
• Reviews of obligations and activity under
the CBI Code on Lending to Related
Parties;
• A review of the Bank’s revised approach
to the new Internal Control Framework
(ICF) and the overall structuring of Risk
Frameworks and Policies;
• Private sessions held separately
with the CRO and Head of Regulatory
Compliance; and
Response and an examination of the
COVID-related capital scenarios/stress
testing scenarios;
• A new Credit Risk Framework and
consideration on a number of large SME
credit propositions.
• Reviews of the Bank’s Resolution
Planning capabilities and documentation;
• Oversight for the remediation of SREP
related Risk Mitigation Plans;
124
Permanent TSB Group Holdings plc - Annual Report 2020 Corporate Governance Statement
Nomination, Culture and Ethics Committee
The Board Nomination, Culture and Ethics Committee
evaluate the skills and characteristics required of
Board members and to ensure the tone on culture and
leadership is set from the top.
Dear Shareholder,
As Chair of the Board Nomination, Culture and Ethics Committee,
I am pleased to present the report of the Committee for the year
ended 31 December 2020. This report has been prepared by
the Committee and approved by the Board. The report provides
further context and insight into the role and responsibilities of the
Committee together with a description of the work undertaken
during 2020 as set out below.
Committee Responsibilities
In 2019, the Board approved a revised governance structure for
the Bank allocating additional responsibilities to the Committee
for oversight on culture, ethics, reputation management and
employee engagement. I am very pleased with the progress the
Committee has made during 2020 in this regard. The Committee
now plays a leading role in supporting the Board on setting the
tone on culture while monitoring the cultural evolution of the Bank
in a very real and meaningful way. The meeting agenda, time
allocation and number of scheduled committee meetings were
enhanced to accommodate these important new responsibilities
during 2020. I was also very pleased that both the Chairman
and CEO of the Irish Banking Culture Board could meet with the
Committee during 2020 and this facilitated a valuable opportunity
to exchange views and perspectives on the evolution of culture in
Irish Banking.
Succession Planning
The Committee is responsible for evaluating the structure,
size, composition and succession planning needs of the Board,
Executive Committee and Senior Leadership Team in making
recommendations with regards to any changes thereto. The
Committee ensures that the necessary talent is in place so that
the Bank has the requisite combined core skill set to support the
long term aims of the Bank and provide leadership to achieve
these aims. Further details on the activity of the Committee on
succession planning are set out in the Committee report.
Diversity
In reviewing Board composition, the Committee considered the
benefits of diversity, including gender, with the aim of having
diversity of thought at Board and to ensure there is appropriate
representation of different skills, personal strengths and other
qualities relevant to the business and culture of the Bank. Diversity
was considered during the recruitment and selection of new
members to the Board during 2020, further details are set out on
page 117. The Committee also reviewed the Board Diversity Policy
and its implementation, which is set out in the Board Diversity
Report on pages 115 to 117.
As stated in the Board Diversity Report, the Committee will
continue to consider diversity during recruitment, selection and
ongoing suitability assessments, and the Board will continue to
support initiatives that promote gender diversity on the Board.
The Board expects that once all planned Board appointments
are completed in 2021, it will achieve its target of achieving 30%
female representation on the Board.
The Committee will review succession plans for senior leadership
positions to ensure that the Bank pipeline of successors includes
adequate diversity. Further details of the Bank’s Diversity and
Inclusion Strategy are set out in pages 30 to 31 of the Responsible
Business Review and page 91 of the Corporate Governance Report.
Board Performance Evaluation
In 2020, the Committee oversaw the annual performance
evaluation of the Board and its Committees and individual
Directors, to understand how effectively they were performing
while providing assurance to the regulatory authorities,
stakeholders and investors of our commitment to the highest
standards of governance and probity.
I look forward to leading the Committee during 2021 and to
executing its expanded remit in a meaningful manner.
On behalf of the Nomination Culture, and Ethics Committee
Robert Elliott
Chair, Board Nomination Culture, and Ethics Committee
125
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Corporate Governance Statement
Nomination, Culture and Ethics Committee (continued)
Composition and Operation
The Committee is composed of four independent Non-Executive Directors. The Board
requires that the Board Chairman and the Senior Independent Director are members of
the Committee.
2020 Committee Meeting Attendance
Member
Robert Elliott*
Ronan O’Neill
Donal Courtney
Ken Slattery
Julie O’Neill
*Chair
Appointed
31 Mar 2017
26 Jul 2016
3 Oct 2018
28 September 2020
Ceased
-
-
-
-
28 Jan 2014 05 Aug 2020
Number
of Years
on the
Committee
3.9
4.5
2.2
0.3
6.6
2019
Meeting
Attendance
9/9
9/9
9/9
3/3
6/6
Responsibilities of the Committee
The Board Nomination, Culture and Ethics
Committee is responsible for bringing
recommendations to the Board regarding
the appointment of new Directors and
of a new Board Chairman. The Board
Chairman does not attend the Committee
when it is dealing with the appointment
of a successor to the Board Chairman.
Decisions on Board appointments are
taken by the full Board. All Directors are
subject to re-appointment by election by
the shareholders at the first opportunity
after their appointment. The Committee
keeps under review the leadership
needs of the Bank, both Executive and
Non-Executive, with a view to ensuring
the continued ability of the Bank to
compete effectively in the marketplace.
The Committee is also responsible for
reviewing the effectiveness of the Board’s
operations, including the Chairmanship
and composition of Board Committees.
The Committee also has responsibilities
for supporting the Board on oversight on
culture, ethics, reputation management
and employee engagement.
Board Changes
There was one appointment to the Board
during 2020 and two departures. Julie
O’Neill retired from the Board at the 2020
AGM on 5 August 2020 having completed
her second three year term in office.
Jeremy Masding stepped down as CEO and
a Board member on 1 July 2020.
Paul Doddrell was appointed as a Non-
Executive Director on 26 November
2020 and subsequently appointed to the
Board Audit Committee and the Risk
and Compliance Committee. In 2018, the
Minister for Finance, in accordance with
the terms of a Shareholder Relationship
Framework, indicated his intention to
appoint two Nominees to the Board. The
first such appointment was completed
in 2019 with the appointment of Marian
126
Corcoran. In 2020 the Minister for Finance
nominated Paul Doddrell to fill the second
Board position. The following sets out a
description of the process followed in the
appointment of Paul Doddrell.
The Department of Finance, through the
utilisation of the Public Appointments
Service (PAS) carried out the recruitment
process. The PAS is the independent
centralised recruitment, assessment and
selection body for the Civil Service, Health
Service, Local Authorities, the Garda
Síochána, Prison Service and other public
service bodies. An Assessment Panel
was convened by the PAS in conjunction
with the DOF to consider and assess the
expressions of interest received for the
role. The panel reviewed and discussed the
expressions of interest received against
the specific appointment criteria for the
role. The Assessment Panel arrived at a
shortlist of ranked preferred applicants
which was sent forward for consideration
by the Minister for Finance. Following
consideration, the Minister recommended
Paul Doddrell for the position of Non-
Executive Director.
Following nomination by the Minister
for Finance and in considering Paul
Doddrell’s background, knowledge, skills
and experience, the Board carried out
extensive due diligence through a full
suitability assessment on Paul Doddrell
including examination of selection criteria
set out in EBA Guidelines. This review
included detailed consideration of other
commitments, including any matters that
would likely create any actual or perceived
conflict of interests.
Paul Doddrell is an experienced executive
and professional with over 30 years’
experience working in the financial services
industry at Executive management level
and as a Board member. He has strong
people and leadership experience and
demonstrated proven executive leadership
spanning finance, lending, operations, sales
and overall business management.
Paul Doddrell also has a track record working
with senior executives across multiple
organisations, demonstrating strong
governance experience and successfully
delivering strategic and operational change.
Furthermore, he has considerable experience
in people, organisation and cultural changes
given his cross jurisdictional experience.
In addition to extensive risk management
and internal control experience, Paul Doddrell
has chaired audit and risk committees at
another financial institution. This aligns with
the Board objective that approximately 50%
of Non-Executive Directors, including the
Board Chairman together with the Chairs of
the Board Audit and Risk Committees, have
relevant banking and/or financial experience.
Paul Doddrell therefore has considerable
risk management, internal control and
oversight experience to enable him to make
valuable contributions to the audit and risk
committees of the Board.
Succession Planning
A key focus of the Bank’s succession
planning was to ensure an orderly succession
for the former CEO of the Bank Jeremy
Masding when it was announced in 2019 that
he would be stepping down from that role in
2020. The Bank engaged the global search
firm Heidrick and Struggles (H&S) to support
it in identifying a new CEO. H&S presented
a target group of over 204 prospects for the
role to the Board Nomination, Culture and
Ethics Committee. This was a global search
process driven through H&S offices in Dublin
and London and leveraged off consultants
in Paris, Madrid, Hong Kong, Singapore,
Sydney, New York and Boston. A detailed role
profile was developed and approved by the
Nomination, Culture and Ethics Committee.
Diversity was an important consideration
when undertaking the CEO review and the
search highlighted a number of Irish and
international female candidates who were
approached about the opportunity.
Following the market mapping stage, formal
approaches were made to 63 candidates.
Through engagement with the Chairman
and Committee members, 10 candidate
profiles were presented for review and
challenge to the Nomination Culture and
Ethics Committee. All 10 candidates were
pre-interviewed by H&S and put through
the firm’s assessment process. Following
further review and short-listing by the
Nomination, Culture and Ethics Committee,
six candidates attended round one
Permanent TSB Group Holdings plc - Annual Report 2020 interviews with the Senior Independent
Director, Board Risk and Compliance
Committee Chair and HR Director. Round
one interviews encompassed a deep
experiential and competency assessment
of each of the candidates.
Five candidates subsequently completed
a full psychometric assessment and a
second presentation based interview with
the Board Chairman, Senior Independent
Director, Board Audit Committee Chair and
the HR Director.
Following thorough discussion on
the merits of each candidate, the
Nomination, Culture and Ethics Committee
recommended the appointment of Eamonn
Crowley (then the Bank’s CFO) and this
recommendation was approved by the
Board subject to regulatory approval which
was subsequently received.
In 2020 the Committee undertook a full
review of Board composition and tenure
and approved an updated Board Suitability
Matrix (the optimal mix of knowledge,
experience and skills on the Board). This
review identified the need to appoint two
new Independent Non-Executive Directors.
The desired knowledge and experience
sought for the first of these board
positions was in the area of Technology/
Cyber/IT Resilience. The second position
sought candidates with experience that
would provide the Board with insight on
culture evolution, ethical behaviour and
responsible business. These appointments
will support the Board as the Bank
continues to both evolve its culture and
build digital capability.
These appointments will increase
the Board size to 13 in 2021 once the
vacant CFO Board position is filled.
The recruitment process for these
appointments is well advanced with
expected appointments for the two
Non-Executive Director positions to be
filled in late Q1 or early Q2 2021 and an
announcement on the appointment of the
CFO role in Q2 2021.
Finally, the Nomination Culture and ethics
committee also considered the succession
planning requirements for the departure
of Julie O’Neill from the Board in 2020.
Following a careful internal assessment
process, Ken Slattery was appointed as
Chair of the Remuneration Committee and
Ronan O’Neill as the Company’s Senior
Independent Director.
During 2021, succession planning
will continue to be a key focus for the
Committee as new talent is identified that
will ensure continued diversity of thought
and fresh thinking at Board meetings.
The Committee will also ensure the Bank
maintains a strong leadership team to drive
the long-term success of the Bank.
Board Performance Evaluations
As required under the UK Corporate
Governance Code, an externally facilitated
Board performance evaluation will take
place every three years. The last externally
facilitated evaluation of performance took
place in 2018 and the next scheduled
external Board evaluation will be conducted
on 2021 performance.
In 2020, the Committee oversaw the annual
performance evaluation of the Board and
its Committees and individual Directors,
to understand how effectively they were
performing while providing assurance to
the regulatory authorities, stakeholders
and investors of our commitment to the
highest standards of governance and
probity. The Committee also provided
oversight of the implementation of the
action plan arising from the externally
facilitated Board performance evaluation in
2019. The process undertaken for the 2020
annual Board performance evaluation and
the resulting action plan are set out in page
127.
Culture, Ethics and Stakeholder
Engagement
During 2020, there was intense focus at the
Committee on the evolution of the Bank’s
culture. The Bank undertook its first full
audit on culture, carried out by the Bank’s
Group Internal Audit function.
During 2020, the Committee received
presentations on and discussed:
execution of the Bank’s Diversity and
Inclusion Strategy; delivery of the Bank’s
Organisational Culture Programme;
development of an organisational culture
scorecard; reviewing the standard of
employee engagement under the UK
Code; the output from the ‘every voice
counts’ and ‘COVID-19’ employee surveys;
review of the Bank’s CSR programmes;
Stakeholder Engagement Updates; and,
consideration of a report on Sustainability
Report.
Other Matters considered by the
Committee in 2020
• Review of the succession plan for Board
and Senior Management positions
across the Group;
• Review of its own terms of reference;
• Review of the Bank’s CSR programmes;
• Review of on an externally commissioned
report on PTSB business sustainability;
• Provided oversight to the mobilisation
of a Sustainability Committee as a sub-
committee of the Executive Committee
and reporting to the Nomination Culture
and Ethics Committee on Responsible and
Sustainable Business matters;
• Approval of the recruitment process
and appointment for a number of Senior
Management positions;
• Recruitment and selection process for the
CEO and CFO positions;
• Review of Fitness and Probity Applications
and Suitability Assessments for three
Non-Executive Board positions and one
Executive Board position:
• Review and consideration of a
commissioned report on the Bank’s
reputation;
• Review of COVID-19 impacts and wellbeing
of colleagues (including review of new
Smart working arrangements);
• Review of Board Policies (Diversity, Conflict
of Interest, Assessment & Suitability,
Induction and Training);
• Review and approval of the Bank’s Fitness
and Probity Policy;
• Review and approval of the Bank’s Speak
Freely Policy;
• Review of Colleague compliance with the
Bank’s Code of Ethics policy;
• Review and approval of Board training
schedules;
• Review of the effectiveness of the Directors,
the Board and that of its Committees;
• Approval of the 2019 Board Evaluation
action plan;
• Review of the size and composition of the
Board and that of its Committees;
• Review and approval of appropriate
workforce engagement mechanisms;
• Review of Diversity and Inclusion, Learning
and Talent and Employee Survey updates;
• Reviewed progress on the Bank’s Diversity
and Inclusion and Organisation Culture
programmes of work;
• Review of Corporate Affairs, Reputation
Audit and Stakeholder Engagement
updates;
• Review and approval of an updated Board
Suitability Matrix; and
• Updates on the planned Individual
Accountability Regime.
127
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Corporate Governance Statement
Remuneration Committee
The Board Remuneration Committee ensures that
remuneration arrangements support the strategic aims
of the Bank and enable the recruitment, motivation
and retention of staff whilst also complying with the
Bank’s regulatory and legal requirements.
Chair’s Overview
Dear Shareholders,
As Chair of the Board Remuneration Committee, I am pleased to
present the Directors’ Remuneration Report for the year ended 31
December 2020 which has been prepared by the Committee and
approved by the Board.
The Committee’s report contains certain regulatory information
required under the applicable legislation in respect of the Bank’s
status as a listed company and credit institution, as well as
under the EBA Guidelines on Internal Governance, the amended
EU Directive on the encouragement of long-term shareholder
engagement, as transposed in Ireland (the “Shareholder Rights
Directive”, or the “Directive”) and the UK Corporate Governance
Code. In addition to meeting its legal requirements, the Committee
reviews its own Terms of Reference on an annual basis as well
as its own effectiveness, recommending any changes deemed
appropriate to the Board. The report also provides further detail on
the composition of the Committee and its role and responsibilities,
a description of the work undertaken by the Committee during
the year, and details of the Remuneration Policy criteria and the
components of the Bank’s reward offering, with a focus on the
Bank’s Directors (Executive and Non-Executive).
During 2020, and in line with its responsibilities under the terms
of the Shareholder Rights Directive, the Bank published its first
Directors’ Remuneration Policy (the “Policy”), as applicable to the
Board of Directors, for shareholder approval on an advisory basis.
The Policy formed part of the Bank’s published Annual Report for
the period ending 31st December 2019 and was approved at the
AGM in 2020. No material changes have been made to the Policy
since its approval. The Policy is published in full on the Bank’s
website: www.permanenttsbgroup.ie.
In exercising its duties, the Remuneration Committee considers
the long-term interests of shareholders, investors and other
interested parties, and the public interest, as well as regulatory
requirements. During 2020, our Directors’ remuneration was
implemented in accordance with the Bank’s approved Policy, and
no derogations from the Policy were availed of during the year.
In respect of the Bank’s broader remuneration policies, in 2020,
the Committee continued to review how our approach serves to
reward individual performance (what our colleagues achieve but
also the manner in which they achieve their objectives), and its
contribution to the strengthening of our culture and driving the
long-term sustainability of our business. In this regard, during
2020, the Bank continued to embed performance ratings which
link directly to pay outcomes.
During the year, the Committee also reviewed the competitiveness
of the Bank’s reward offering including assessing the salaries
of the Executive Directors in the context of each individual’s
performance against agreed objectives and position versus the
market. In performing this review, and in accordance with our
approved Policy, the Committee paid due cognisance to existing
State Agreements relating to remuneration and the impact on the
Bank’s ability to provide a competitive reward package. Based on
its review, and following consultation with the Bank’s shareholders,
in early 2020 the Remuneration Committee recommended to the
Board that the CRO’s base salary be increased from €330,000
to €335,775, an increase of 1.75%. This was below the average
increase awarded for all staff across the Bank during 2020 (2.6%).
The Committee also reviewed the circumstances of the departure
of the former CEO during 2020 and recommended approval by the
Board of remuneration arrangements required to fulfil contractual
obligations relating to that departure. Finally, as regards the
Executive Directors, the Committee also reviewed and agreed to
recommend approval by the Board of the remuneration terms that
applied upon the appointment of the current CEO, who assumed
office in July 2020. Details of the remuneration of each of the
Executive Directors for 2020 are provided on page 133.
2020 has been a year of unprecedented challenge for our
colleagues across the Bank. The Committee has continued to
monitor the competitiveness and effectiveness of our reward
policy and structures to take account of the particular challenges
that 2020 has presented. In particular, in response to the pandemic
as it emerged in March 2020, the Committee recommended to the
Board the implementation of an Emergency Customer Support
Allowance. This cash allowance was paid to all frontline staff,
below senior management level, and was intended to recognise the
specific, short-term challenges which presented at the outset of
the crisis, as colleagues sought to perform their roles and support
Permanent TSB to fulfil its obligations as an essential service
provider to our customers and our communities. As the COVID-19
situation developed, and the Bank and wider society sought to
transition to a “living with COVID” scenario, the need for this
allowance receded and it was withdrawn on 31 May 2020.
Macro-economic conditions, including the challenges presented
by the pandemic and heightened uncertainty resulting from the
final outcome of ‘Brexit’ and its potential impacts, have prompted
the Board to implement an Enterprise Transformation programme.
This programme aims to allow the Bank renew itself and so
rebuild Permanent TSB for the future. As part of the programme
design, and in line with agreements in place with the Irish State,
the Committee approved a Voluntary Redundancy scheme, which
alongside certain initiatives relating to smarter, more flexible
working practices and arrangements, is designed to provide
optionality for colleagues, at all levels, who wish to avail of such
128
Permanent TSB Group Holdings plc - Annual Report 2020 smart working/flexible options on a sustained basis or, who instead
wish to consider career progression beyond Permanent TSB.
At this point, notwithstanding the cost challenges which the Bank
faces as a result of the challenged economic environment, it is
appropriate once again to reference the significant risk Permanent
TSB faces as a result of certain constraints which apply to the
Bank’s ability to remunerate its staff. The Bank’s Remuneration
Policy, while set and governed by the Board, remains subject to
certain agreements and commitments in place with the Irish State.
These agreements restrict the terms of remuneration for Directors
and employees of the Bank, and as such inhibit the Bank’s ability
to provide a comprehensive, modern reward package, including
the operation of variable pay elements that might better support
the delivery of the Bank’s short and long term strategic objectives
(for example, via the provision of Long Term Incentive Plans, Bonus
Schemes, Profit Share arrangements and so on). In the context of
these factors, the Committee awaits the outcome of the Banking
Remuneration Review as such remains under consideration by
the Department of Finance. The findings of the review will inform
the ongoing development of the Bank’s remuneration policies and
processes, throughout 2021 and beyond.
Finally, this is my first year as Chair of the Board Remuneration
Committee. I would like to thank my predecessor, Julie O’Neill, for
her positive advice and guidance prior to her departure, and my
fellow Board and Committee members, our colleagues across the
Bank and our shareholders for their support.
On behalf of the Board Remuneration Committee:
Ken Slattery,
Chair, Remuneration Committee
Annual Report on Remuneration - 2020
Remuneration Committee Composition and Operation
The members of the Board Remuneration Committee are
experienced in the management and oversight of large
organisations where the remuneration and motivation of staff and
executives is of crucial importance.
Remuneration Committee Role and Responsibilities
The purpose, duties and membership of the Committee are set
out in the Committee’s Terms of Reference, which can be found
on the Bank’s website www.permanenttsbgroup.ie. The Terms
of Reference are reviewed by the Committee on an annual basis.
No material changes were enacted following a review of the
Committee’s Terms of Reference in 2020.
The main roles and responsibilities of the Committee include:
• Recommending the Bank’s remuneration policies, including that
applicable to the Board of Directors, to the Board for approval
on an annual basis and ensuring they comply with applicable
regulatory and legal requirements;
• Supporting the Board in overseeing remuneration policies,
practices and processes and compliance with the Bank’s
Remuneration Policy (both as applicable to the Directors and the
wider population);
• Ensuring the remuneration policies and procedures do not
promote excessive risk taking and are aligned with the
Company’s overall corporate governance framework, corporate
culture, risk appetite and related governance processes, and
take into account liquidity and capital levels;
• Recommending the design, eligibility and performance
measures for any incentive schemes to the Board for approval;
• Setting and assessing performance targets for any incentive
schemes;
• Recommending remuneration proposals (including joining and
termination arrangements) in respect of the Chairman, CEO,
Executive Directors, Company Secretary, Executive Committee,
Group Treasurer, Customer Credit Director, and Heads of Control
Functions for approval by the Board;
• Overseeing remuneration proposals in respect of any other
identified staff (Material Risk Takers) as defined under the
Capital Requirement Directive (CRD) IV and, going forward, CRD
V; and
• Overseeing the annual review of the implementation of the
Remuneration Policy applicable across the Bank.
Remuneration Committee Advisers
During 2020, the Committee used the services of its external
consultant, Deloitte LLP, for advice on remuneration trends in the
external market and for perspective on remuneration regulatory
compliance matters. During the year, Deloitte also provided limited
support to the Bank in relation to PSD2 project-related work.
The Committee had eleven meetings during 2020.
2020 Committee Meeting Attendance
The Committee also employed the services of Willis Towers
Watson who provided market benchmarking data and
remuneration trend analysis.
Ceased
Appointed
Member
28 Jan 2014
-
Ken Slattery*
15 Jun 2016 5 Aug 2020
Julie O’Neill**
-
31 Mar 2017
Robert Elliott
-
Andrew Power
26 Sept 2016
-
Ruth Wandhofer 01 Feb 2019
-
Marian Corcoran 29 Oct 2019
*Appointed as Chair 08/09/2020
**Retired as Chair 05/08/2020
2020
Meeting
Attendance
(of which
eligible to
attend)
11/11
5/5
11/11
11/11
10/11
11/11
Number of
Full Years
on the
Committee
6
4
3
4
1
1
In addition to the use of external advice in designing its approach
to pay, the Committee also takes account of appropriate input
from the Bank’s HR, Risk, Compliance, Finance and Internal Audit
functions to ensure that the decision making process is aligned
with the Bank’s financial performance, risk appetite, regulatory
guidelines and stakeholder interests.
Matters considered by the Committee in 2020
During 2020, and within the terms of State Agreements, the
Remuneration Committee kept the impact of the Bank’s
129
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Remuneration Committee (continued)
Remuneration Policy (including that
applicable to the Directors), and
movements in the external market,
under review. As part of this process,
the Committee reviewed the Bank’s
Remuneration Policy and strategy
to assess the appropriateness of
the approach to reward and the
competitiveness of current arrangements,
and future direction, to take account of
market developments including amongst
the Bank’s peer group. The Committee
also considered whether the Directors’
Remuneration Policy operated as intended
in terms of company performance and
quantum. The Committee also kept under
review all aspects of remuneration for the
Board Chairman, CEO, Executive Directors,
members of the Executive Committee and
the wider employee population.
In determining remuneration arrangements
for Executive Directors, the Committee
takes account of the pay and employment
conditions of the wider workforce to ensure
consistency. Wider workforce engagement
on pay arrangements at the Bank took
place with the Bank’s Staff Representative
Bodies during 2020.
It remains the policy of the Bank – to
the extent possible given the current
remuneration restrictions – to ensure that
all employees are remunerated fairly and
to encourage and reward our colleagues
appropriately as we work together to
build a valuable and sustainable business,
operating within the Bank’s Risk Appetite
and underpinned by a strong culture
which manifests itself in responsible and
accountable behaviours in our day-to-day
interactions and decision making with our
customers and each other.
To this end, the policy has been designed
based upon a number of principles
including the linking of pay levels against
median base pay available across market
peer groups, and so to ensure that the
Bank’s offering is sufficiently competitive
so as to attract and retain the required
talent and skills to deliver the return of
value to the Company’s shareholders.
During 2020, the Committee with the
supporting perspective of its external
independent advisors, performed a review
of pay and benefits packages available
across the Bank. The review consisted of
a comprehensive benchmarking exercise
involving the comparison of remuneration
with that available from comparable
organisations across industry. Based on
130
the output of this review, the Committee
approved pay increases to staff at all
levels based on individual staff members’
performance and their position versus the
relevant market median salary. Decisions
relating to pay were also informed by the
emerging COVID-19 situation and the need
to engage and motivate colleagues to play
their part in the provision of Retail and SME
banking services as had been identified as
forming an essential part of the national
response to COVID-19.
As part of the pay and benefits review, the
Committee also considered the salaries
of the Executive Directors in the context
of each individual’s performance against
agreed objectives and position versus
the relevant market median salary. In
performing this review, the Committee
also paid due cognisance to existing State
Agreements relating to remuneration (in
particular, the salary cap of €500,000
and restrictions on variable pay) and the
impact for the Bank’s ability to provide a
competitive reward package, reflective
of individual skills and experience, such
that we might retain and motivate key
talent in an increasingly competitive
Irish market. Based on its review, the
Remuneration Committee recommended
to the Board that the CRO’s base salary be
increased in a manner consistent with the
approach applied across all staff levels,
including backdating of the revised salary
level to 1 January 2020. The Committee
also reviewed the circumstances of the
departure of the former CEO during 2020
and recommended approval by the Board
of remuneration arrangements required to
fulfil contractual obligations relating to that
departure. Finally, as regards the Executive
Directors, the Committee also reviewed
and agreed to recommend approval by
the Board of the remuneration terms
that applied upon the appointment of the
current CEO, who assumed office in July
2020. Details of the remuneration of each
of the Executive Directors are provided on
page 133.
In respect of Staff Pensions, the Bank
makes available maximum employer
pension contribution rates which are
consistent across all staff levels including
the Executive Directors. However, and as
announced in the 2019 Annual Report,
following a review of the Bank’s pension
arrangements the Committee determined
that Executive Directors should not be
subject to certain age-related eligibility
criteria which apply to the availability of
the revised contribution rates to the wider
workforce. This decision was arrived at
based on the output of a review of the
Bank’s pension arrangements versus
corresponding arrangements available
from comparable organisations across
industry, but also in recognition of the
particular challenges the Bank faces
regarding the attraction and retention
of the most senior talent, partly as a
result of the remuneration restrictions
which inhibit the Bank’s ability to offer a
more comprehensive reward package.
Overall, the Committee believes that
the remuneration arrangements are
appropriate due to the various reasons
stated above.
During 2020, the Committee continued
to apply significant oversight to ensure
compliance with the UK Corporate
Governance Code and CRD IV related
regulations and guidelines, including
focussing on reviewing the remuneration
arrangements in place for Material Risk
Takers. The Committee re-approved the
process and approach for the identification
of Material Risk Takers in line with these
requirements. It is of note that CRD V was
transposed into Irish Legislation on 28th
December 2020 and thus will inform the
Bank’s approach to the remuneration and
MRT identification from 1 January 2021.
In 2020, the Committee also reviewed the
Bank’s established variable commission
scheme, as well as principles and practices
to ensure full alignment with regulatory
requirements, particularly CRD IV, the
EBA’s Guidelines on sound remuneration
policies and practices related to the sale
and provision of retail banking products
and services, the Central Bank of Ireland’s
Guidelines on Variable Remuneration
Arrangements for Sales Staff, and relevant
market practice. On foot of this review,
it was agreed to extend the operation of
the scheme for 2021, subject to certain
enhancements designed to reflect the
challenged trading environment and to
leverage the Bank’s increasing capabilities
in respect of customer and conduct
management and to increase governance
and oversight of scheme-related
performance data.
The Committee is satisfied that the
Bank has continued to operate within its
Remuneration Policy (both as applicable to
the Directors and the wider population) and
in line with the remuneration requirements
of the framework agreement between the
Minister for Finance and the Bank, and
Permanent TSB Group Holdings plc - Annual Report 2020 No material changes have been made to the Policy since its approval. The Policy is
published in full on the Bank’s website: www.permanenttsbgroup.ie. A summary of the key
components of the Policy as it relates to the Executive Directors is set out below:
Remuneration Component
Summary of Policy
Basic Salary
Basic salaries are set so as to attract and retain key talent of the calibre required to
develop, lead and deliver the Bank’s long-term strategy.
Basic salaries are normally reviewed by the Remuneration Committee annually, taking
into consideration:
• the individual’s skills, responsibilities and experience;
• the scope of the role;
• pay and conditions elsewhere in the Group;
• overall business performance and affordability; and
• market competitiveness by reference to relevant comparator groups.
Any increases for Executive Directors will normally be in line with the range of
increases for other employees in the wider Group.
Benefits
Benefits are provided to ensure the overall package is competitive and in accordance
with local market practice.
The Committee’s policy is to provide Executive Directors with a market competitive
level of benefits, taking into consideration benefits offered to other employees in the
Group, the individual’s circumstances and market practice at similar companies.
Benefits may include, but are not limited to, the provision of a car allowance (or cash
allowance in lieu) and subsidised house purchase loans provided on the same terms
and conditions as loans to other eligible PTSB employees.
Pensions
Pension arrangements are intended to provide competitive post-retirement benefits
aligned with market practice.
Executive Directors are eligible to participate in the PTSB Defined Contribution
Pension Scheme.
Executive Directors may receive a maximum allowance of 15% of basic salary.
Maximum contribution rates are consistent across the Group, however, in recognition
of the remuneration restrictions currently in place as a result of the agreements
and commitments in place with the Irish State, in order to ensure a competitive
overall package, Executive Directors are not subject to certain age-related eligible
criteria which apply to the availability of the maximum contribution rate for the wider
workforce.
that the Directors’ Remuneration Policy
operated as intended in terms of company
performance and quantum. Other than as
set out elsewhere in the Annual Report
on page 92, the Committee is satisfied
that the Bank is in compliance with the
provisions of the UK Corporate Governance
Code and the Shareholder Rights Directive.
With specific reference to the UK Code,
the table on page 134 sets out how the
Remuneration Committee has addressed
the principles set out in the Code.
Additional regulatory disclosures in relation
to Remuneration Policy and strategy are
set out in the Bank’s Pillar 3 Report.
As previously mentioned, the Bank awaits
the findings of the review of Banking
Remuneration Policy being undertaken
by the Department of Finance, which will
inform the ongoing development of the
Bank’s Remuneration Policy, throughout
2021 and beyond.
Directors’ Remuneration Policy
As set out in the Chair’s letter, during
2020, in line with its responsibilities
under the terms of the Shareholder
Rights Directive, the Bank published its
first Directors’ Remuneration Policy (the
“Policy”), as applicable to the Board of
Directors, for shareholder approval on an
advisory basis. The Policy formed part of
the Bank’s published annual report for the
period ending 31 December 2019 and was
approved by shareholders at the AGM in
2020.
The Policy, in alignment with the
Remuneration Policy applicable across
the Bank, is based on a set of agreed
basic principles which are applied to all
employees:
• Aligning remuneration with the
Bank’s risk appetite, approaches and
governance framework;
• Ensuring our approach is in compliance
with all applicable regulatory
requirements;
• Aligning remuneration with our business
strategy, objectives, purpose and values,
and promoting the achievement of long-
term Bank and stakeholder objectives
and interests;
• Focusing on the attraction, engagement
and retention of key talent of the calibre
required;
• Ensuring that our Policy and each
element of Directors’ remuneration is
as transparent, simple and clear as is
possible.
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Remuneration Committee (continued)
The following section sets out how the Remuneration Committee addresses the principles set out in the UK Corporate Governance Code
in respect of the Directors’ Remuneration Policy.
Provision
Approach
Clarity
Remuneration arrangements should
be transparent and promote effective
engagement with shareholders and the
workforce.
Simplicity and predictability
Remuneration structures should avoid
complexity and their rationale and
operation should be easy to understand.
The range of possible values of rewards
to individual directors and any other limits
or discretions should be identified and
explained at the time of approving the
policy.
Risk
Remuneration arrangements should ensure
reputational and other risks from excessive
rewards, and behavioural risks that can
arise from target-based incentive plans, are
identified and mitigated.
Proportionality and alignment to culture
The link between individual awards, the
delivery of strategy and the long-term
performance of the company should be
clear. Outcomes should not reward poor
performance.
Incentive schemes should drive behaviours
consistent with company purpose, values
and strategy.
The Committee regularly engages and consults with key stakeholders to take
feedback into account and to ensure that our approach to Executive Remuneration is
as transparent, simple and clear as is possible.
Our employees are informed about our approach to remuneration. Our Remuneration
Policy, applicable throughout the Bank and which includes details of the approach to
Director remuneration, is published internally for all staff to view and our approved
Directors’ Remuneration Policy is published in full on the Bank’s website www.
permanenttsbgroup.ie.
Due to certain agreements and commitments in place with the Irish State, the Bank
currently only operates fixed remuneration among Executive Directors, consisting
of basic salary, pension and benefits. As a result, the Committee’s ability to apply
discretion with respect to outcomes for this population is limited; however, the
simplicity of our approach enhances its predictability.
To the extent that the restrictions on the operation of variable remuneration plans are
lifted in future, the Bank will review Executive Director remuneration arrangements
from the perspective of ensuring that our approach continues to avoid complexity,
and is predictable in its nature, as well as reviewing the Committee’s powers of
discretion over remuneration outcomes.
Remuneration arrangements are designed to align pay with the Bank’s risk appetite,
approaches and governance and regulatory framework.
While the Bank is currently only permitted to operate fixed remuneration among
the Executive Directors, it is committed to ensuring the ongoing alignment of
remuneration with strategy and long-term sustainable performance and the
recognition of positive behaviours.
To the extent that the restrictions on the operation of variable remuneration plans are
lifted in future, the Bank will review Executive Director remuneration arrangements
from the perspective of ensuring that any awards are designed to promote the
achievement of our long-term strategic ambitions while driving behaviours
consistent with our purpose, values and strategy.
132
Permanent TSB Group Holdings plc - Annual Report 2020 Directors’ Report on Remuneration
Executive Director Remuneration - 2020
Directors’ remuneration for 2020 was implemented in accordance with the Bank’s Directors’ Remuneration Policy, as approved by
shareholders at the 2020 AGM, no derogations from the Policy were availed of during the year and no deviations from the procedure for
the implementation of the Policy were applied. The Policy was designed – to the extent possible given the remuneration restrictions in
place as a result of the agreements and commitments in place with the Irish State – to ensure alignment between our approach to reward
and our business strategy and to promote long-term sustainable success, and our Directors’ total remuneration for 2020 reflects this
objective, including by ensuring that the Bank is able to reward and retain key talent of the calibre required to develop, lead and deliver
the Bank’s long-term strategy.
In line with certain agreements and commitments in place with the Irish State, during 2020 all Bank employees were subject to a salary
cap of €500,000 per annum. In addition, the Bank did not operate any variable remuneration arrangements for its Executive Directors.
No bonus payments and long term incentive arrangements were made to Executive Directors during 2020 or 2019.
The two tables below identified as audited form an integral part of the audited financial statements as described in the basis of
preparation on page 153. All other information in the Directors’ Report on Remuneration is unaudited.
Executive Directors’ Remuneration and Pension Benefits – Audited
As a result, 2020 remuneration for Executive Directors who held office for any part of the 2020 financial year was entirely fixed in nature,
consisting of basic salary, certain benefits and defined contribution pension entitlements as follows:
Name of Executive
Director, Position
Note
1. Fixed
Remuneration
2. Variable
Remuneration
3.
Extraordinary
items
4. Pension
Expense
5. Total
Remuneration
2020
2019
6. Proportion
of Fixed and
Variable
Remuneration
Total
Remuneration
Base Salary
Fees
Fringe
Benefits
One-year
variable
Multi-year
variable
Eamonn Crowley, CEO
1 €455,625 €0 €20,485
Jeremy Masding, CEO
2 €241,290 €0 €11,192
Michael Frawley, CRO
3 €335,775 €0 €20,048
€0
€0
€0
€0
€0
€0
€0 €68,344
€544,454 100% Fixed
€510,924
€575,859 €36,194 €864,535 100% Fixed €569,969
€70,574
€406,189 100% Fixed
€0 €50,366
Notes:
1. Mr Crowley served as CFO up to 1 July 2020 at which point he was appointed as CEO. Fringe Benefits consist of Car Allowance (€20k) and Benefit In Kind (€0.5k).
2. Mr Masding departed the role of CEO on 1st July 2020. Contractual payments of €575,859 (Payment in Lieu of Notice relating to basic salary, pension and Car Allowance and
payment in lieu of holidays) were paid to him and are captured under “Extraordinary Items” above. Fringe Benefits consist of Car Allowance (€10k) and Benefit In Kind (€1k).
3. Fringe Benefits consist of Car Allowance (€20k). Mr. Frawley was appointed to the Board on 29 October 2019.
Aggregate Executive Director compensation (excluding Extraordinary items) increased from €1,151,467 to €1,239,319 from 2019 to 2020
as a result of changes to the Executive Director membership during the period under review.
No Executive Director was in receipt of any remuneration from any undertaking within the Group other than Permanent TSB Group
Holdings plc.
Components of Executive Director Remuneration - 2020
Basic salary
During 2020, the Remuneration Committee reviewed general salary levels within the Bank and arising therefrom, approved pay increases
to all staff based on each individual staff member’s performance and position versus the market median. The increases ranged from 0%
up to 7.5%, with individual awards determined with reference to the individual’s performance against agreed objectives and their salary
level as benchmarked using appropriate market data. The average increase for all staff equated to 2.6% and all increases were effective
from 1 January 2020.
In 2020, based on its review, with due cognisance to the Bank’s ability to provide a competitive reward package, the impact for the Bank’s
ability to provide a competitive reward package, reflective of individual skills and experience, such that we might retain and motivate key
talent in an increasingly competitive Irish market, the Remuneration Committee recommended to the Board that the CRO’s base salary
be increased from €330,000 to €335,775, an increase of 1.75%. In this regard, and in line with our approved Directors’ Remuneration
Policy, the approach adopted was consistent with that applied across all staff levels, including the backdating of the revised salary level
to 1 January 2020.
133
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Directors’ Report on Remuneration
(continued)
The Committee also reviewed the circumstances of the departure of the former CEO during 2020 and recommended approval by the
Board, of remuneration arrangements required to fulfil contractual obligations relating to that departure.
Finally, as regards the Executive Directors, the Committee also reviewed and agreed the remuneration terms that applied to the
appointment of the current CEO who assumed office in July 2020. Upon his appointment, the salary of the new CEO was set at
€480,000; in line with the salary paid to the former CEO and representing an increase of €48,750 versus his previous salary, paid in
respect of his former role as CFO.
Details of the remuneration of each of the Executive Directors are provided on page 133.
Pensions
The current Executive Directors are members of the PTSB Defined Contribution Pension Scheme. The Bank contributed up to 15% of
basic salary into this pension scheme during 2020. Other than basic salary, there are no other elements of Director’s remuneration which
are pensionable.
Benefits
During 2020, Executive Directors received benefits in line with policy. This included an allowance of €20,000 in lieu of a company car and
eligibility for subsidised house purchase loans provided on the same terms and conditions as loans to other eligible PTSB employees.
Bonus and Long-term Incentive Plans
The Remuneration Policy does not provide for the payment of variable remuneration to Executive Directors. No bonus payments were
made to Executive Directors during 2020 or 2019. Neither were there any long term incentive arrangements in place for Executive
Directors in 2020 or 2019.
Share Options Schemes - Audited
No share options were granted in 2020 or 2019. There were no share options in existence at the end of the period and the Bank’s sole
remaining share option scheme is now closed.
Loss of Office Payments
The Remuneration Policy requires that any payments on termination of employment are made in accordance with the provisions of CRD
IV and applicable Irish legislation. Any payments in relation to termination reflect performance achieved over time and will not reward
failure or misconduct. Leavers will receive any payments required under the terms of their contract. The Committee reviewed the
circumstances of the departure of the former CEO during 2020 and recommended approval by the Board of remuneration arrangements
required to fulfil contractual obligations relating to that departure. This resulted in contractual payments of €575,859 (including, in line
with our approved Policy, Payment in Lieu of Notice relating to basic salary, pension and benefits and payment in lieu of holidays) being
paid to him.
Payments to Former Directors
No such payments were made to former Executive Directors during 2020.
Directors’ Fees from another Company
The Bank operates established polices, practices and procedures that are designed to identify, document and manage conflicts of
interest. It is the policy of the Bank that where an Executive Director of the Bank is remunerated for service as a Non-Executive Director
of a non-Bank company and retains such remuneration, the amount of this remuneration is disclosed. No Executive Director was in
receipt of fees from external appointments during the period under review.
134
Permanent TSB Group Holdings plc - Annual Report 2020 Non-Executive Directors’ Remuneration – Audited
The level of fees paid to the Chairman and Non-Executive Directors in 2020 is outlined in the table below. Aggregate fees paid to Non-
Executive Directors decreased from €842,869 (2019) to €804,076 (2020) as a consequence of timing variation in the appointment and
cessation of Non-Executive Directors.
Name of Director,
Position
Note
1. Fixed
Remuneration
Robert Elliott
Ken Slattery
Julie O’Neill
Andrew Power
Ronan O’Neill
Donal Courtney
Ruth
Wandhofer
Marian
Corcoran
Paul Doddrell
1
2
3
4
5
6
7
8
Base
Salary
Basic Fees
Fringe
Benefits
Fees Paid
€0
€0 €290,000 €290,000
€0
€54,675 €70,300
€0
€53,516 €3,470
€54,675
€0
€54,675
€0
€0
€67,175
€54,675 €89,786 €395
€0
€0
€54,675
€0
€92,175
€0
€54,675
€67,175
€0
€0
€54,675
€54,675
€67,175
€6,774
€0
€0
€0
2020
2. Variable
Remuneration
3.
Extraordinary
items
4.
Pension
Expense
5. Total
Remuneration
One-
year
variable
Multi-year variable
2019
6. Proportion
of Fixed and
Variable
Remuneration
Total
Remuneration
€0 €0
€0 €0
€0 €0
€0 €0
€0 €0
€0 €0
€0 €0
€0 €0
€0 €0
€0
€0
€0
€0
€0
€0
€0
€0
€0
€0 €290,000 100% Fixed €290,000
€67,215
€0
€90,340
€0
€67,175
€0
€84,675
€0
€92,175
€0
€70,300 100% Fixed
€56,986 100% Fixed
€67,175 100% Fixed
€90,181 100% Fixed
€92,175 100% Fixed
€0
€0
€0
€67,175 100% Fixed
€66,758
€67,175 100% Fixed
€6,774 100% Fixed
€16,916
€0
Notes:
1. Additional fees paid as chair of the Board Remuneration Committee (appointed 8 September 2020) and as member of the Board Audit Committee and Nomination, Culture
and Ethics Committee.
2. Additional fees paid as the chair of the Board Remuneration Committee, member of the Board Nomination, Culture and Ethics Committee and Board Risk and Compliance
Committee and Senior Independent Director. Ceased as member of the Board, Senior Independent Director, Chair of the Board Remuneration Committee, member of the Board
Risk and Compliance Committee and member of the Board Nomination, Culture and Ethics Committee on 5 August 2020. Fringe benefits comprise Benefit in Kind €3,470.
3. Additional fees paid as member of the Board Audit Committee and member of the Board Remuneration Committee.
4. Additional fees paid as chair of the Board Risk and Compliance Committee and member of the Board Nomination, Culture and Ethics Committee and Senior Independent
Director (appointed 6 August 2020). Fringe benefits comprise Benefit in Kind €395.
5. Additional fees paid as chair of the Board Audit Committee, member of the Board Nomination, Culture and Ethics Committee and member of the Board Risk and Compliance
Committee.
6. Additional fees paid as member of the Board Remuneration Committee and Board Risk and Compliance Committee.
7. Additional fees paid as member of the Board Remuneration Committee and Board Risk and Compliance Committee.
8. Appointed to the Board and member of the Board Risk and Compliance Committee and the Board Audit Committee on 26 November 2020.
The base fee and further fees for additional Board duties such as chairmanship of membership of a committee received by the directors
remained unchanged in 2020 and were as follows:
Position
Chairman
Non-Executive Director (Base Fee)
Senior Independent Director
Board Audit and Board Risk Committees
Remuneration Committee
Remuneration Committee and Nomination Culture & Ethics Committee
Chair
Member
Chair
Member
2020 fees
(€)
290,000
54,675
20,000
25,000
7,500
10,000
5,000
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Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Directors’ Report on Remuneration
(continued)
Comparison of Directors’ and employees’ pay
The following table provides information regarding the annual change in the total remuneration of members of the Bank’s Board of
Directors, as compared with our Company performance as well the average change in remuneration, on a full-time equivalent basis, of
our employees, between 2019 and 2020.
Annual Change
Directors’ Remuneration – Executive Directors
Eamonn Crowley, CEO
Jeremy Masding, CEO
Michael Frawley, CRO
Directors’ Remuneration – Non-Executive Directors (NEDs)
Robert Elliot, Chairman
Ken Slattery, Independent NED
Julie O’Neill, Independent NED
Andrew Power, Independent NED
Ronan O’Neill, Independent NED
Donal Courtney, Independent NED
Ruth Wandhofer, Independent NED
Marian Corcoran, Independent NED
Paul Doddrell, Independent NED
Company performance
Underlying loss
Adjusted Cost to Income Ratio
Average remuneration on a full-time equivalent basis of employees
Employees of the company
Note
Change in 2020
1
2
3
4
5
6
7
8
9
10
11
12
6.6%
0.6%
0.7%
0.0%
4.6%
3.6%
0.0%
6.5%
0.0%
0.0%
0.0%
N/A
€109m
75%
2.6%
Notes:
1. Mr Crowley served as CFO up to 1st July 2020 at which point he was appointed as CEO.
2. Mr Masding departed the role of CEO on 1st July 2020. Remuneration for 2020 has been annualised for the purposes of the above and excludes extraordinary items as set out
in the Executive Director Remuneration table for 2020.
3. Mr Frawley was appointed to the Board on 29th October 2019. Remuneration for 2019 has been annualised for the purpose of the above.
4. Mr. Slattery was appointed as Chair of Remuneration Committee on 8th September 2020.
5. Ms O’Neill resigned from the Board on 5th August 2020. Remuneration for 2020 (including Benefit in Kind of €3,470) has been annualised for the purposes of the above.
6. Mr O’Neill was appointed as Senior Independent Director on 6th August 2020.
7. Ms Wandhofer was appointed as a member of the Board on 1st February 2019. Remuneration for 2019 has been annualised for the purposes of the above.
8. Ms Corcoran was appointed as a member of the Board on 24th September 2019. Remuneration for 2019 has been annualised for the purposes of the above.
9. Mr Dodrell was appointed as a member of the Board on 26th November 2020. Hence, no 2019 data is available for comparative purposes.
10. Operating loss before exceptional items. See table 9 on page 51 for a reconciliation of underlying loss to operating loss on an IFRS basis. Corresponding operating profit for
2019 was €74m.
11. Defined as total operating expenses (excluding exceptional, other non-recurring items, bank levy and regulatory charges) divided by total operating income. Corresponding
cost income ratio for 2019 was 68%.
12. The change in average remuneration for all employees shown reflects the average increase in base salary awarded to employees as part of the annual pay review.
Voting Results from the Annual General Meeting
At the 2020 AGM, in accordance with the Shareholder Rights Directive, shareholder approval on an advisory basis was sought for both
the 2019 Directors’ Report on Remuneration and the Directors’ Remuneration Policy. The Bank takes the views of our shareholders on
our approach to remuneration into account on an ongoing basis and welcomed the strong support received for both resolutions.
At the AGM in 2020, 99.99% of votes cast were in favour of both resolutions.
136
Permanent TSB Group Holdings plc - Annual Report 2020 Statement of Directors’ Responsibilities
The Directors are responsible for
preparing the Annual Report and the
financial statements in accordance with
International Financial Reporting Standards
(IFRS) adopted by the European Union (EU)
and with those parts of the Companies
Act 2014 applicable to companies
reporting under IFRS and in respect of the
consolidated financial statements, Article 4
of the IAS Regulation.
Under Irish law the Directors shall not
approve the Group’s and Company’s
financial statements unless they are
satisfied that they give a true and fair view
of the Group’s and the Company’s assets,
liabilities and financial position as at the
end of the financial year and of the profit or
loss of the Group for the financial year.
In preparing these financial statements,
the Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and estimates that are
reasonable and prudent;
• state whether the financial statements
have been prepared in accordance with
IFRS adopted by the EU and ensure that
they contain the additional information
required by the Companies Act 2014; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the Group
and Company will continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to:
• correctly record and explain the
transactions of the Company;
• enable, at any time, the assets, liabilities,
financial position of the Company to be
determined with reasonable accuracy;
and
• enable the Directors to ensure that the
financial statements comply with the
Companies Act 2014, and as regards
the Group financial statements, article 4
of the IAS Regulation and enable those
financial statements to be audited.
The Directors are also responsible for
safeguarding the assets of the Group
and the Company and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
Under applicable law and the requirements
of the Listing Rules issued by the Irish and
London Stock Exchanges, the Directors are
also responsible for preparing a Directors’
Report and reports relating to Directors’
remuneration and Corporate Governance.
The Directors are also required by the
Transparency (Directive 2004/109/EC)
Regulations 2007 and the Transparency
Rules to include a management report
containing a fair review of the business
and a description of the Principal Risks and
Uncertainties facing the Group.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website www.permanenttsb.
ie. Legislation in the Republic of
Ireland governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
The Directors confirm that, to the best of
each Director’s knowledge and belief:
• they have complied with the above
requirements in preparing the financial
statements;
• the financial statements, prepared in
accordance with IFRS as adopted by the
European Union, give a true and fair view
of the assets, liabilities, financial position
of the Group and the Company and of the
loss of the Group;
• the Group’s Chairman Statement, the
Group’s Chief Executives Review and
the Operating and Financial Review set
out in the Strategic Report includes
a fair review of the development and
performance of the business and
the position of the Group and the
Company, together with a description
of the Principal Risks and Uncertainties
that they face as set out in the Risk
Management Section of the Strategic
Report; and
• the Annual Report and the financial
statements, taken as a whole, is
fair, balanced,understandable and
provides the information necessary
for shareholders to assess the Group’s
position and performance, business
model and strategy.
On behalf of the Board
Robert Elliott
Chairman
Eamonn Crowley
Chief Executive
Donal Courtney Conor Ryan
Board Audit
Committee Chair
Company
Secretary
02 March 2021
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Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Independent auditors’ report to the members of
Permanent TSB Group Holdings plc
Report on the audit of the financial statements
Opinion
In our opinion, Permanent TSB Group Holdings plc’s Consolidated financial statements and Company financial statements (the “financial
statements”):
• give a true and fair view of the Group’s and the Company’s assets, liabilities and financial position as at 31 December 2020 and of the
Group’s loss and the Group’s and the Company’s cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European
Union and, as regards the Company’s financial statements, as applied in accordance with the provisions of the Companies Act 2014;
and
• have been properly prepared in accordance with the requirements of the Companies Act 2014 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the Annual Report, which comprise:
• the Consolidated and Company Statements of Financial Position as at 31 December 2020;
• the Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the year then ended;
• the Consolidated and Company Statements of Cash Flows for the year then ended;
• the Consolidated Statement of Changes in Equity and Company Statements of Changes in Equity for the year then ended; and
• the notes to the financial statements, which include a description of the significant accounting policies.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements.
These are cross-referenced from the financial statements and are identified as audited.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (“ISAs (Ireland)”) and applicable law. Our
responsibilities under ISAs (Ireland) are further described in the Auditors’ responsibilities for the audit of the financial statements section
of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Ireland, which includes IAASA’s Ethical Standard as applicable to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by IAASA’s Ethical Standard were not provided to
the Group or the Company.
Other than those disclosed in note 8 to the financial statements, we have provided no non-audit services to the Group or the Company in
the period from 1 January 2020 to 31 December 2020.
Our audit approach
Overview
Materiality
• €11 million (2019: €11 million) - Consolidated financial statements
• Based on c. 0.55% of net assets.
Materiality
• €9.5 million (2019: €9.8 million) - Company financial statements
• Based on c. 1% of net assets.
Audit scope
Audit scope
• We have conducted an audit of the complete financial information of Permanent TSB plc which
is the main trading entity of the Group and accounts for in excess of 95% of the net assets of the
Group and in excess of 95% of total operating income of the Group.
Key audit
matters
Key audit matters
• Expected Credit Loss (ECL) provision for residential mortgages (Group).
• Recoverability of deferred tax assets (Group).
•
•
IT controls (Group).
Impairment assessment in respect of the investment in Permanent TSB plc (Company only).
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Permanent TSB Group Holdings plc - Annual Report 2020
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed
the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
With the assistance of our internal credit modelling specialists,
we understood and critically assessed the overall methodology
applied, including individual models used, in the measurement
of ECL for the residential mortgage portfolio to ensure that
the provision was in accordance with IFRS 9. This included an
end-to-end review to understand the key systems and controls
in the process. We also considered the impact of COVID-19 on
ECL as part of our overall assessment.
We tested the accuracy of critical data inputs used in the
impairment models on a sample basis by agreeing inputs to
source systems and supporting documentation.
We considered the overall control framework and tested key
controls including controls relating to model performance,
approval of model changes, approval of SICR triggers, approval
of material macroeconomic variables for forward looking
information and approval of post model adjustments.
We compared the base case forward looking macroeconomic
assumptions, provided by management’s external economic
consultant, to publicly available information where applicable,
including the impact of COVID-19. We also considered the
reasonableness of management’s downside and upside
assumptions.
We assessed the SICR triggers identified by management for
appropriateness and completeness and we re-performed key
aspects of the SICR calculation. We also selected a sample
of loans to ensure that they were allocated to the appropriate
Stage.
We understood and assessed the appropriateness of material
post model adjustments made by management to adjust their
model output for known limitations and specific risk aspects of
the portfolio, including those which were applied as a result of
COVID-19.
We concluded that the ECL provision for residential mortgages
is within an acceptable range of reasonable estimates
Expected Credit Loss (ECL) provision for residential
mortgages (Group)
Refer to note 1 (Significant accounting policies), note 2
(Critical accounting estimates and judgements) and note
19 (Impairment provisions) to the Consolidated financial
statements).
IFRS 9 requires impairment models where losses are
recognised on an expected, forward looking basis
including reflecting the Group’s view of potential future
economic events.
We determined the ECL calculation to be a key audit
matter as it is a complex estimation which requires
significant management judgement. Uncertainty
associated with COVID-19 and its consequent
implications, including lockdowns, recovery assumptions
as well as government intervention and the impact
on macroeconomic variables, increased the level of
judgement in determining ECL provisions as at 31
December 2020.
We focussed on the areas which required the greatest
level of management judgement in relation to residential
mortgages as detailed below:
1. The application of forward-looking information
is a critical part of the determination of ECL.
The consideration and selection of appropriate
macroeconomic variables and in particular determining
the appropriate economic scenarios (base, downside
and upside) and their associated probability weightings
is a key driver of the overall ECL provision.
2. The determination of when there has been a
significant increase in credit risk (SICR) is one of
the key judgements in the ECL process because a
SICR requires the related impairment provision to be
measured using a lifetime ECL rather than 12 month
ECL. The completeness of the identification of SICR
triggers and their correct application has a significant
impact on the overall provision.
3. The consideration of the need for post model
adjustments to address known model limitations,
latent risks and emerging trends. These adjustments
are by their nature inherently uncertain and require
significant judgement.
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Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Independent auditors’ report to the members
of permanent tsb Group Holdings plc (continued)
Key audit matter
How our audit addressed the key audit matter
Recoverability of deferred tax assets (Group)
Refer to note 1 (Significant accounting policies), note
2 (Critical accounting estimates and judgements) and
note 22 (Deferred taxation) to the Consolidated financial
statements.
The Group has net deferred tax assets of €349 million
that primarily arise due to historical operating losses. A
key judgement in the recognition of these net deferred
tax assets is whether there is convincing evidence of
sufficient future taxable profits against which those
losses can be utilised.
This judgement relies on the assessment of the
probability and the sufficiency of future taxable profits,
which in turn is based on assumptions concerning
future economic conditions and business performance
including the impact of Covid-19 on profitability.
The Group’s considerations in respect of the recognition
of the net deferred tax assets are outlined in the financial
statements, which also provides an overview of the key
assumptions underpinning the financial projections.
We determined this to be a key audit matter due to the
level of judgement involved.
IT controls (Group)
The IT framework of the Group incorporates a number of
IT systems which have been in place for many years.
We determined IT controls, and in particular, deficiencies
in the IT control environment, to be a key audit matter
as deficiencies in access controls over a number of
applications on certain systems could have a significant
impact on financial reporting controls and systems.
Management prepares a Medium Term Plan to forecast
financial performance over a five year period. We understood
and tested key controls over the production and approval of the
Group’s Medium Term Plan.
We assessed the forecast of taxable profits which informed
management’s decision to recognise a deferred tax asset in
respect of tax losses arising from historic operating losses.
We considered whether the forecast of taxable profits provides
convincing evidence that sufficient taxable profits will be
available to utilise unused tax losses. We assessed the relevant
macroeconomic assumptions and growth assumptions
underlying the projections in the context of economic
consensus forecasts.
We also evaluated the growth assumptions for reasonableness
by reference to historic performance, future plans and external
data as appropriate. We also considered the appropriateness
of the growth rate used to extrapolate the forecast profits over
the period beyond the detailed plan.
We concluded that the Group’s net deferred tax assets meet
the requirements for recognition under IAS 12.
We have also considered the disclosures included in
the financial statements and concluded that they were
appropriate.
We involved our IT audit specialists to update our
understanding of the Group’s IT environment and of changes
made to it during 2020.
To the extent required for our audit, we assessed and tested
the design and operating effectiveness of IT controls over
financial reporting systems relating to access security,
IT operations and change control management, including
assessing and testing mitigating controls where relevant.
Where deficiencies identified affected specific applications
within the scope of our audit we tested mitigating controls and
performed other procedures as we considered necessary for
the purposes of our audit.
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Permanent TSB Group Holdings plc - Annual Report 2020
Key audit matter
How our audit addressed the key audit matter
Impairment assessment in respect of the investment
in Permanent TSB plc (Company only)
Refer to note 1 (Significant accounting policies) and note
2 (Critical accounting estimates and judgements) to the
Consolidated financial statements, and note C to the
Company financial statements.
As noted in the accounting policies, the investment in
subsidiary is shown at cost in the Company financial
statements unless there is evidence of impairment,
in which case it is shown at the lower of cost and
recoverable amount.
In assessing the recoverable amount of the investment at
year end, management determined that the investment
was impaired and accordingly recorded an impairment
charge of €145 million.
We determined this to be a key audit matter due to
the judgement associated with the assessment of the
recoverable amount of the investment at 31 December
2020.
We evaluated management’s assessment of the recoverable
amount of the investment and the resulting impairment of
€145 million at 31 December 2020.
The assessment of the recoverable amount of the investment
was based on the Company’s value in use calculation. We
assessed the forecast of free cash flows which informs
management’s calculations and concluded that they were
consistent with the Group’s Medium Term Plan. We assessed
the relevant macroeconomic assumptions underlying the
projections in the context of economic consensus forecasts.
We evaluated the growth assumptions by reference to historic
performance, future plans and external data as appropriate.
We considered the appropriateness of the growth rate used
to extrapolate the forecast profits over the period beyond the
detailed plan.
We challenged management’s calculation of the discount rate
used by recalculating an acceptable range of discount rates
using observable inputs from independent external sources
and concluded the discount rate used by management fell
within that range.
We concluded that the impairment in respect of the
investment in Permanent TSB plc is within an acceptable
range of reasonable estimates.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group
operates.
Permanent TSB plc is the main trading entity of the Group. The Group has no other significant subsidiaries. We determined that an audit
of the full financial information of Permanent TSB plc should be performed, which represents in excess of 95% of the net assets of the
Group and in excess of 95% of the total operating income of the Group. The nature and extent of audit procedures was determined by our
risk assessment for each account balance.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for benchmark applied
Consolidated financial statements
Company financial statements
€11 million (2019: €11 million).
€9.5 million (2019: €9.8 million)
c. 0.55% of net assets.
c. 1% of net assets.
Given the volatility in profit / loss before
taxation arising over recent years from
elevated impairments and reductions and
the scale of losses arising from exceptional
activities, we believe that net assets, rather
than profitability, provide us with a more
appropriate and consistent year on year
basis for determining materiality.
Given the activity of the Company is
mainly limited to its investment in PTSB
plc, a benchmark based on net assets
rather than profitability is considered more
appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €550,000 (Group
audit) (2019: €550,000) and €475,000 (Company audit) (2019: €490,000) as well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
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Independent auditors’ report to the members
of permanent tsb Group Holdings plc (continued)
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group and Company’s ability to continue to adopt the going concern basis of
accounting included:
• Performing a risk assessment to identify factors that could impact the going concern basis of accounting, including the impact of
Covid-19.
• Understanding and evaluating the group’s financial forecasts and the group’s stress testing of liquidity and regulatory capital. In
evaluating these forecasts we considered the Group’s financial position, historic performance, its past record of achieving strategic
objectives and management’s assessment of the likely impact which COVID-19 may have on financial performance, capital and
liquidity for a period of 12 months from the date on which the financial statements are authorised for issue.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s or the Company’s ability to continue as a going concern for a period of at least
twelve months from the date on which the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s or the
Company’s ability to continue as a going concern.
In relation to the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate
to adopt the going concern basis of accounting.
We are required to report if the directors’ statement relating to going concern in accordance with Rule 9.8.6R(3) of the Listing Rules of
the UK Financial Conduct Authority is materially inconsistent with our knowledge obtained in the audit. We have nothing to report in
respect of this responsibility.
We are required to report if the directors’ statement relating to going concern in accordance with Rule 6.1.82 (3) (a) of the Listing Rules
for Euronext Dublin is materially inconsistent with our knowledge obtained in the audit. We have nothing to report in respect of this
responsibility.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any
form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Directors’ Report, we also considered whether the disclosures required by the Companies Act 2014 (excluding the
information included in the “Non Financial Statement” as defined by that Act on which we are not required to report) have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (Ireland), the Companies Act 2014
(CA14) and the Listing Rules applicable to the Company (Listing Rules) require us to also report certain opinions and matters as described
below (required by ISAs (Ireland) unless otherwise stated).
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Permanent TSB Group Holdings plc - Annual Report 2020 Directors’ Report
•
In our opinion, based on the work undertaken in the course of the audit, the information given in the Directors’ Report (excluding
the information included in the “Non Financial Statement” on which we are not required to report) for the year ended 31 December
2020 is consistent with the financial statements and has been prepared in accordance with the applicable legal requirements.
(CA14)
• Based on our knowledge and understanding of the Group and Company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Directors’ Report (excluding the information included in the “Non Financial
Statement” on which we are not required to report). (CA14)
Corporate governance statement
•
In our opinion, based on the work undertaken in the course of the audit of the financial statements,
- the description of the main features of the internal control and risk management systems in relation to the financial reporting
process; and
- the information required by Section 1373(2)(d) of the Companies Act 2014;
included in the Directors’ Report which includes the Corporate Governance Statement, is consistent with the financial statements
and has been prepared in accordance with section 1373(2) of the Companies Act 2014. (CA14)
• Based on our knowledge and understanding of the Company and its environment obtained in the course of the audit of the
financial statements, we have not identified material misstatements in the description of the main features of the internal control
and risk management systems in relation to the financial reporting process and the information required by section 1373(2) (d) of
the Companies Act 2014 included in the Directors’ Report which includes the Corporate Governance Statement. (CA14)
•
In our opinion, based on the work undertaken during the course of the audit of the financial statements, the information required
by section 1373(2)(a),(b),(e) and (f) of the Companies Act 2014 and regulation 6 of the European Union (Disclosure of Non-Financial
and Diversity Information by certain large undertakings and groups) Regulations 2017 is contained in the Directors’ Report which
includes the Corporate Governance Statement. (CA14)
The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity
of the Group
We have nothing material to add or to draw attention to regarding:
• The directors’ confirmation on page 120 of the Annual Report that they have carried out a robust assessment of the principal risks
facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The directors’ explanation on pages 120 and 121 of the Annual Report as to how they have assessed the prospects of the Group,
over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the
period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment of
the principal risks facing the Group and the directors’ statement in relation to the longer-term viability of the Group. Our review was
substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting
their statements; checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code
(the “Code”); and considering whether the statements are consistent with the knowledge and understanding of the Group and the
Company and their environment obtained in the course of the audit. (Listing Rules)
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Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Independent auditors’ report to the members
of permanent tsb Group Holdings plc (continued)
Other Code provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the directors on page 137 that they consider the Annual Report taken as a whole to be fair, balanced and
understandable and provides the information necessary for the members to assess the Group’s and Company’s position and
performance, business model and strategy is materially inconsistent with our knowledge of the Group and Company obtained in
the course of performing our audit.
• The section of the Annual Report on pages 119 and 120 describing the work of the Audit Committee does not appropriately
address matters communicated by us to the Audit Committee.
• The directors’ statement relating to the Company’s compliance with the Code and the Irish Corporate Governance Annex does not
properly disclose a departure from a relevant provision of the Code or the Annex specified, under the Listing Rules, for review by
the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 137, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair
view.
The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as
a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ 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 ISAs (Ireland) 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 the economic decisions of users taken on the basis of these financial statements.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We
will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to
enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the IAASA website at:
https://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description_of_auditors_responsibilities_for_audit.pdf
This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with section 391
of the Companies Act 2014 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior
consent in writing.
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Permanent TSB Group Holdings plc - Annual Report 2020
Other required reporting
Companies Act 2014 opinions on other matters
• We have obtained all the information and explanations which we consider necessary for the purposes of our audit.
•
In our opinion the accounting records of the Company were sufficient to permit the Company financial statements to be readily and
properly audited.
• The Company Statement of Financial Position is in agreement with the accounting records.
Other exception reporting
Directors’ remuneration and transactions
Under the Companies Act 2014 we are required to report to you if, in our opinion, the disclosures of directors’ remuneration and
transactions specified by sections 305 to 312 of that Act have not been made. We have no exceptions to report arising from this
responsibility.
We are required by the Listing Rules to review the six specified elements of disclosures in the report to shareholders by the Board on
directors’ remuneration. We have no exceptions to report arising from this responsibility.
Prior financial year Non Financial Statement
We are required to report if the Company has not provided the information required by Regulation 5(2) to 5(7) of the European Union
(Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017 in respect of the prior
financial year. We have nothing to report arising from this responsibility.
Appointment
We were appointed by the members on 22 May 2013 to audit the financial statements for the year ended 31 December 2013 and
subsequent financial periods. The period of total uninterrupted engagement is 8 years, covering the years ended 31 December 2013 to 31
December 2020.
John McDonnell
for and on behalf of PricewaterhouseCoopers
Chartered Accountants and Statutory Audit Firm
Dublin
2 March 2021
145
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Year ended
Year ended
Note
31 December
2020
31 December
2019
€m
382
(41)
341
53
(25)
1
5
375
(243)
(49)
(21)
(1)
(15)
(31)
(360)
15
(155)
(26)
(181)
(166)
4
(162)
(162)
€m
413
(57)
356
62
(25)
3
17
413
(252)
(47)
(21)
-
(12)
(13)
(345)
68
(10)
(16)
(26)
42
(12)
30
30
€ Cent
€ Cent
(38.0)
(38.0)
4.2
4.2
4
4
5
5
6
7
8
9
20
20
21
10
19
10
11
12
12
Consolidated Income Statement
For the year ended 31 December 2020
Interest income
Interest expense
Net interest income
Fees and commission income
Fees and commission expense
Net trading income
Net other operating income
Total operating income
Administrative, staff and other expenses (excluding exceptional items)
Bank levy and other regulatory charges
Depreciation of property and equipment
Impairment of property and equipment
Amortisation of intangible assets
Exceptional items
Restructuring and other charges
Total operating expenses
Operating profit before charge for credit impairment and taxation losses
Credit Impairment Losses
Loans and advances to customers
Exceptional impairment arising from deleveraging of loans
Total credit impairment losses
Operating (loss)/profit before taxation
Taxation
(Loss)/profit for the year
Attributable to:
Owners of the holding company
(loss)/earnings per ordinary share
Basic (loss)/earnings per share of €0.5 ordinary share
Diluted (loss)/earnings per share of €0.5 ordinary share
146
Permanent TSB Group Holdings plc - Annual Report 2020
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
Year ended
Year ended
Note
31 December
2020
31 December
2019
(Loss)/profit for the year
Items that will not be reclassified to the income statement in subsequent periods
Fair value reserve (equity instruments)
Change in fair value of equity instruments
Revaluation of property
Tax relating to items that will not be reclassified to the income statement
Items that may be reclassified to the income statement in subsequent periods
Change in fair value of debt instruments
Amortisation of discontinued hedges
Tax relating to items that may be reclassified to the income statement
Other comprehensive income/(expense), net of tax
Total comprehensive (expense)/income for the year, net of tax
Attributable to:
Owners of the holding company
31
11
31
31
11
€m
(162)
9
(2)
(3)
(3)
3
-
4
(158)
(158)
€m
30
2
5
(1)
(17)
8
1
(2)
28
28
147
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Consolidated Statement of Financial Position
As at 31 December 2020
Assets
Cash at bank
Items in the course of collection
Debt securities
Equity securities
Derivative assets
Loans and advances to banks
Loans and advances to customers
Property and equipment
Intangible assets
Deferred taxation
Other assets
Prepayments and accrued income
Assets classified as held for sale
Total assets
Liabilities
Customer accounts
Debt securities in issue
Derivative liabilities
Accruals
Current tax liability
Other liabilities
Provisions
Total liabilities
Equity
Share capital
Share premium
Other reserves
Retained earnings
Shareholders’ equity
Other equity instruments
Total equity
Total liabilities and equity
On behalf of the Board:
Note
31 December
2020
31 December
2019
€m
€m
13
13
14
15
16
17
18
20
21
22
23
24
40
25
26
16
27
28
30
30
30
30
30
71
20
2,583
24
-
3,312
14,213
190
102
349
5
86
31
20,986
18,039
809
-
2
1
107
77
19,035
227
333
(791)
1,937
1,706
245
1,951
63
15
2,005
15
1
1,556
15,644
201
66
345
259
49
59
20,278
17,190
923
2
5
2
118
41
18,281
227
333
(795)
2,110
1,875
122
1,997
20,986
20,278
Robert Elliott
Chairman
Eamonn Crowley
Chief Executive
Donal Courtney
Board Audit Committee Chair
Conor Ryan
Company Secretary
148
Permanent TSB Group Holdings plc - Annual Report 2020 Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
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149
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Consolidated Statement of Cash Flows
For the year ended 31 December 2020
Cash flows from operating activities
Operating (loss)/profit before taxation
Adjusted for non-cash items and other adjustments:
Depreciation, amortisation and impairment of property, equipment and intangibles
Loss on revaluation of property
Impairment charge on:
- Loans and advances to customers
Unrealised (gains)/losses on financial assets
Other mortgage related adjustments
Other provisions
Visa equity share
Other non-cash items
(Increase)/decrease in operating assets:
Loans and advances to customers
Debt securities
Other assets
Prepayments and accrued income
Increase/(decrease) in operating liabilities:
Deposits by banks (including central banks)
Customer accounts
Debt securities in issue
Derivative liabilities
Other liabilities and accruals
Provisions
Net cash (outflow)/inflow from operating activities before tax
Tax paid
Net cash (outflow)/inflow from operating activities
31 December
31 December
Note
2020
€m
2019
€m
(166)
36
1
181
(1)
16
52
(9)
47
157
1,256
(1)
282
(37)
-
841
(114)
(2)
(14)
(16)
2,195
2,352
(1)
2,351
42
33
-
26
(4)
18
18
(2)
28
159
221
(1)
1,042
44
(1,552)
170
(172)
(11)
2
(51)
(308)
(149)
(2)
(151)
150
Permanent TSB Group Holdings plc - Annual Report 2020 Consolidated Statement of Cash Flows (Continued)
For the year ended 31 December 2020
Cash flows from investing activities
Purchase of property and equipment
Purchase of intangible assets
Maturities of debt securities - HTC&S
Maturities of debt securities – HTC
Purchase of debt securities- HTC
Movement in restricted cash holdings
Deferred consideration received on equity securities
Net cash flows from investing activities
Cash flows from financing activities
Issuance of AT1 securities
Payment of lease liabilities
AT1 coupon payment
Net cash flows from financing activities
Increase/(decrease) in cash and cash equivalents
Analysis of changes in cash and cash equivalents
Cash and cash equivalents as at 1 January
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents as at 31 December*
*The cash and cash equivalents exclude restricted cash as per note 13.
Reconciliation of liabilities arising from financing activities
1 January
Financing cash flows
Other changes
31 December
31 December
31 December
2020
€m
(10)
(44)
200
214
(1,046)
47
-
(639)
123
(8)
(11)
104
2019
€m
(13)
(23)
338
578
(319)
42
2
605
-
(8)
(11)
(19)
1,816
435
1,231
1,816
3,047
796
435
1,231
31 December
31 December
2020
€m
42
(8)
-
34
2019
€m
46
(8)
4
42
151
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Notes to the Consolidated Financial Statements
Note
1. Corporate information, basis of preparation and significant accounting policies
2. Critical accounting estimates and judgements
3. Operating segments
4. Net interest income
5. Fees and commission income
6. Net trading income/(expense)
7. Net other operating income
8. Administrative, staff and other expenses (excluding exceptional items)
9. Bank levy and other regulatory charges
10. Exceptional items
11. Taxation
12. Earnings/(loss) per ordinary share
13. Cash and cash equivalents
14. Debt securities
15. Equity Securities
16. Derivative assets/liabilities
17. Loans and advances to banks
18. Loans and advances to customers
19. Impairment provisions
20. Property and equipment
21. Intangible assets
22. Deferred taxation
23. Other assets
24. Prepayments and accrued income
25. Customer accounts
26. Debt securities in issue
27. Other liabilities
28. Provisions
29. Leases
30. Share capital, reserves and other equity instruments
31. Analysis of other comprehensive income
32. Measurement basis and fair values of financial instruments
33. Financial risk management
34. Capital management
35. Current/non-current assets and liabilities
36. Transfer of financial assets
37. Offsetting financial assets and financial liabilities
38. Commitments and contingencies
39. Related parties
40. Assets and liabilities classified as held for sale
41. Sale of loans and advances
42. Principal subsidiary undertakings and interest in subsidiaries
43. Reporting currency and exchange rates
44. Events after the reporting period
152
Page
153
171
177
179
179
180
180
180
181
182
182
183
184
184
185
186
187
187
189
193
195
196
196
196
197
197
198
198
199
201
203
204
209
228
230
231
231
232
233
237
237
237
239
239
Permanent TSB Group Holdings plc - Annual Report 2020 1. Corporate information, basis of preparation and significant accounting policies
1.1 Corporate information
Permanent TSB Group Holdings plc (the Company) is a holding company domiciled in Ireland (registration number 474438). Its registered
office is situated at 56 - 59, St. Stephen’s Green, Dublin 2, Ireland. The Company’s shares are listed on the main market of the Irish and
London Stock Exchanges.
The consolidated financial statements include the financial statements of the Company and its subsidiaries (together referred to as the
Group) and are prepared up to the end of the financial year, 31 December 2020.
Permanent TSB plc (PTSB), a 100% owned subsidiary of the Company, is the main trading entity of the Group which is involved in retail
banking.
These consolidated financial statements for the year ended 31 December 2020 were approved by the Board and authorised for issue by
the Directors on 02 March 2020.
The accounting policies applied in the preparation of the financial statements for the year ended 31 December 2020 are set out below.
1.2 Basis of preparation
Statement of compliance
These consolidated financial statements comprise the consolidated income statement, the consolidated statement of comprehensive
income, the consolidated and the Company SOFP, the consolidated and the Company statement of changes in equity, the consolidated
and the Company statement of cash flows and the notes to the consolidated and the Company financial statements, and have been
prepared in accordance with IFRS and interpretations issued by the IFR Interpretations Committee (IFRIC) as adopted by the EU and
those parts of the Companies Act 2014 applicable to companies reporting under IFRS and EU (Credit Institutions: Financial Statements)
Regulations 2015.
The accounting policies have been consistently applied by the Group entities and are consistent with the previous year, except as
indicated in section 1.4 below.
The financial statements include the information that is described as being an integral part of the audited financial statements contained
in the Directors’ Report on Remuneration and in Risk Management. Certain tables and related information in the notes to the financial
statements, included in boxes and clearly identified as unaudited do not form part of the audited financial statements.
The individual financial statements of the holding company have also been prepared in accordance with IFRS and interpretations issued
by IFRIC as adopted by the EU and those parts of the Companies Act 2014 applicable to companies reporting under IFRS. In accordance
with section 304(2) of the Companies Act 2014, the Company is availing of the exemption from presenting its individual income
statement and related notes to the AGM and from filing it with the Registrar of Companies. See note 42 for further information.
The Company’s loss after tax for the year ended 31 December 2020 was €145m (31 December 2019: €0.06m). The Company issued
€50m of MREL debt in 2020 (€300m in 2019). The Company also issued €125,000,000 Fixed Rate Reset Additional Tier 1 Perpetual
Contingent Temporary Write Down Securities on 25 November 2020.
For further information, see the Company financial statements on pages 242 to 244.
Basis of measurement
The consolidated and Company financial statements have been prepared on the historical cost basis as modified to include the fair
valuation of certain financial instruments, financial assets classified as HTC&S and land and buildings.
Functional and presentation currency
These financial statements are presented in Euro, which is the Company’s functional currency. Except where otherwise indicated,
financial information presented in Euro has been rounded to the nearest million (m).
Use of estimates and judgements
The preparation of these consolidated financial statements, in conformity with IFRS, requires Management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income,
expenses and related disclosures. While the actual results may differ from the estimates made, the Directors believe that they are
reasonable in the current circumstances based on the best available information at the date of the approval of these consolidated
financial statements.
153
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Notes to the Consolidated Financial Statements
(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
Additional information about key assumptions and judgements are disclosed in the relevant notes for the following areas including
significant estimation uncertainty:
• Allowance for credit impairment losses (note 19);
• Deferred taxation (notes 11 and 22);
• Fair value of financial instruments (note 32);
•
Impairment review of subsidiary undertaking (note 42).
The estimates and assumptions are reviewed on an on-going basis and where necessary are revised to reflect current conditions.
The principal estimates and assumptions made by Management relate to impairment of loans and advances to customers, deferred
taxation, impairment of investment in subsidiary undertakings and financial instruments. Judgements made by Management that have a
significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed
in note 2.
1.3 Going Concern
In considering Management’s assessment of the Group and Company’s ability to continue as a going concern, Management considered
the principal risks and uncertainties as they might pertain to the going concern assumption, particularly the liquidity, profitability, and
capital position. Management considered these items over the course of the year to date and into 2021, their current status, and future
projections.
In doing so, Management considered each risk in turn, and the likelihood of the risk precipitating in the going concern assumptions
becoming invalid over the period of assessment, being twelve months from the date of the approval of the financial statements for the
year ended 31 December 2020. Management considered realistic alternatives, including downside scenarios applied by the Group to test
assumptions and potential outcomes.
Assessment basis
The time that the Directors and Management have considered in evaluating the appropriateness of the going concern basis in preparing
the consolidated financial statements for the twelve months ended 31 December 2020 is a period of twelve months from the date of
approval of these financial statements (02 March 2022).
In making this assessment, the Directors and Management have considered the Group’s 2021-2025 MTP, profitability forecasts, funding
and capital resource projections. These projections were stress tested to reflect the COVID-19 considerations and downside scenarios
were applied to the Group’s balance sheet and profitability to determine the resilience of the business and future projections.
COVID-19 and the economic environment
Due to COVID-19 pandemic, the market environment within which the Group operates has changed drastically, and the situation
continues to evolve since March 2020. The lower interest rate environment continues to erode the profitability of the overall financial
sector in which the Group operates having a resultant impact on the Group’s Net Interest Margin.
Measures adopted to contain the virus, include business closures, social restrictions and social distancing which have had a resultant
impact on the current financial and operational performance of the Group. The uncertainty that is risen from the second wave of the
virus resurgence and slow deployment of vaccines in Euro zone is likely to impact future performance of the Group in the near term.
The Group reassessed the financial impacts of COVID-19 through a refreshed IPP process and believes it is reasonably well position to
withstand any future shocks arising from virus resurgences and reduced efficacy of vaccines, particularly given the Group’s continued
progress with NPL reduction and ability to raise capital as and when needed.
The Group continues to be materially reliant on the Irish government and European Union policy in relation to the Irish economy and the
financial services sector. The trade deal between the UK and the EU has reduced the uncertainty about the future trade relationship
however the full impact of the Brexit on the Irish and EU economics continues to evolve. The Group has however, considered the impact
of the Brexit and believes it is reasonably well positioned to withstand any near term-volatility caused by it.
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1. Corporate information, basis of preparation and significant accounting policies (continued)
Funding & liquidity
The Group continues to have sufficient liquidity throughout 2020, and continues to undertake initiatives to improve its liquidity position in
the areas of deposits, collateral optimisation, and wholesale markets activity.
The Directors and Management have also considered forecasts of the liquidity position over the going concern period, under a range of
stress scenarios.
The Group continues to hold a significant liquidity buffer at 31 December 2020 that can be easily and readily monetised in a period of
stress. The Directors and Management are aware that the Group’s ability to effectively utilise its contingent counterbalancing capacity is
dependent on the underlying collateral remaining eligible.
However, the Directors and Management are satisfied, based on a review of funding plans, interaction with wholesale markets and
deposit trends that the required liquidity and funding will be available to the Group during the period of assessment. There are no material
uncertainties, which would cast significant doubt on the ability of the Group to continue as a going concern basis over the period of
assessment.
Profitability and capital adequacy
The Group made a loss for the year ended 31 December 2020 however, it does expect to return to profitability in the near term. Directors
and Management have reviewed the MTP and based on this, the near-term macro-economic conditions of the country and the resolution
of legacy issues, the Directors and Management are satisfied that the Group is well positioned to deliver profits in future years.
The Directors and Management have also considered the Group’s forecast capital position, including the potential impact of deleveraging
further NPLs and a deterioration in economic conditions as might arise from an uncertainty from the resurgence of the virus and slower
deployment of vaccines and interaction of various principal risks. Based on the above considerations, the Directors and Management
have assessed and concluded that this does not give rise to a material uncertainty, which would cast significant doubt on the ability of
the Group to continue on a going concern basis for the period of assessment.
Conclusion
As required by IFRS as adopted by the EU, the Directors and Management have considered the principal risks and uncertainties facing
the Group as outlined above. Based on the latest and projected financial performance and position, and the options available to the
Group, the Directors have concluded that the Group and Company have no material uncertainties, which would cast significant doubt on
the going concern assumption and have considered it appropriate to prepare the financial statements on a going concern basis.
1.4 Comparative information
The comparative information for 2019 has been prepared on a consistent basis with 2020.
1.5 Summary of significant accounting policies
(i) Basis of consolidation
Subsidiaries
Subsidiaries are those entities (including special purpose entities) controlled by the Group. Control exists when the Group has:
• the power, directly or indirectly, over the relevant activities of the investee, for example through voting or other rights;
• exposure to, or rights to, variable returns through involvement with the investee; and
• the ability to use its power over the investee to affect the Group’s return from the entity.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences
until the date that control ceases. Financial statements of subsidiaries are prepared up to the financial position date. Intercompany
transaction balances and unrealised gains/losses on transactions between the Group’s companies are eliminated on consolidation.
The Company carries its investment in its subsidiary undertaking at cost in the Company financial statements and reviews whether
there is any indication of impairment at each reporting date. Impairment testing involves comparing the carrying value of the investment
to its recoverable amount. The recoverable amount is the higher of the investment’s fair value or its VIU. If impairment occurs, this loss is
recognised in the income statement.
Details of principal subsidiaries are included in note 42.
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(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
(ii) Business combinations and goodwill
(a) Business combinations
Business combinations, other than those under common control are accounted for using the acquisition method. The consideration
transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners
and equity interest issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from
a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially, at their fair values at the acquisition date.
The results of subsidiaries acquired are included in the consolidated income statement from the date of acquisition. Profits or losses of
subsidiary undertakings acquired or sold during the year are included in the consolidated results from the date of gaining control or up to
the date of disposal.
For each business combination, the Group elects on a transaction-by-transaction basis whether to measure a non-controlling interest
at its fair value or at its proportionate share of the recognised amount of identifiable net assets. The assets and liabilities arising on a
business combination are measured at their fair value at the acquisition date.
Business combinations under common control are accounted for prospectively from the date the Group obtains the ownership interest
in the acquired entity. Assets and liabilities are initially recognised upon consolidation based on their carrying amount in the financial
statements of the acquired entity (or holding entity, if applicable). Any difference between the fair value of the consideration paid and the
amounts at which the assets and liabilities are initially recorded is recognised directly in equity in retained earnings.
(b) Goodwill
The Group measures goodwill as the excess of the (i) consideration transferred; (ii) the amount of any non-controlling interest in the
acquired entity; and (iii) acquisition date fair value of any previous equity interest in the acquired entity over the fair value of the net
identifiable assets acquired. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the
difference is recognised directly in profit or loss as a bargain purchase.
Acquisition costs are expensed to the income statement as incurred. Any contingent consideration to be transferred to the acquirer is
recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to
be an asset or liability are recognised in accordance with IFRS 9.
Goodwill arising on associates is shown as part of the investment in the associate.
Goodwill is subject to an impairment review at least annually, and, if events or changes in circumstances indicate that the carrying
amount may not be recoverable, it is written down through the income statement by the amount of any impairment loss identified in the
year.
(iii) Foreign currencies
Foreign currency transactions are translated into the functional currency of the entity, being the currency of the primary environment
in which the entity operates at the exchange rate prevailing at the date of the transaction or valuation where items are remeasured.
Monetary assets and liabilities denominated in foreign currency are translated at the exchange rates prevailing at the reporting date.
Exchange movements are recognised in the income statement.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the
spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on historical cost in a
foreign currency are translated using the spot exchange rate at the date of the transaction.
The results and financial position of the Group’s subsidiaries which have a functional currency different from Euro are translated into
Euro as follows:
• Assets and liabilities, including goodwill and fair value adjustments, are translated at the rates of exchange ruling at the reporting date;
•
Income and expenses are translated at the average exchange rates for the year; and
• All resulting exchange differences are recognised in Other Comprehensive Income (OCI) and as a separate component of equity
(currency translation adjustment reserve).
On consolidation, exchange differences arising from the translation of borrowings and currency instruments designated as hedges of
the net investment in overseas subsidiaries, are also recognised in OCI to the extent to which the hedge is deemed to be effective. The
ineffective portion of any net investment hedge is recognised in the income statement immediately. On disposal, or partial disposal of an
overseas subsidiary, the appropriate portion of the currency translation adjustment reserve is included in the gain or loss on disposal.
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(iv) Recognition of income and expenses
(a) Interest and similar income and expenses
For all interest bearing financial instruments, interest income or expense is recorded using the EIR method.
The EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial
instrument to:
• the gross carrying amount of the financial asset; or
• the amortised cost of the financial liability.
The calculation of the EIR includes transaction costs, premiums or discounts, and fees paid or received that are an integral part of the
EIR. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or financial
liability.
Interest income is calculated by applying the EIR to the gross carrying amount of financial assets, except for:
(a) POCI financial assets, for which the original credit-adjusted EIR is applied to the amortised cost of the financial asset; and,
(b) Financial assets that are not ‘POCI’ but have subsequently become credit-impaired (or ‘Stage 3’), for which interest revenue is
calculated by applying the EIR to their amortised cost (i.e. net of ECL provision).
(b) Fees and commission income and expense
As outlined above, fees and commission income and expense that are integral to the EIR on a financial asset or liability are included in the
measurement of the EIR.
Where collateralised financing agreements for financial assets are sold with agreement to repurchase (repos) or are acquired under
agreement to resell (reverse repo), the difference between the sale and purchase price is amortised over the life of the agreement using
EIR.
Other fees and commission income are recognised as the related services are performed. Other fees and commission expenses relate
mainly to transaction and service fees, which are expensed as the services are received.
(c) Net trading income/(expense)
Net trading income/(expense) comprises gains and losses relating to trading assets and trading liabilities and includes all realised and
unrealised fair value changes and FX differences.
(d) Exceptional items
Certain items, by virtue of their nature and amount are disclosed separately in order for the user to obtain appropriate understanding of
the financial information. These items would not ordinarily occur while carrying out normal business activities.
Exceptional items include gains or losses on the disposal of businesses, gains or losses on material deleveraging (including additional
impairment arising solely as a result of a sale) and material restructuring costs.
(e) Bank levy and other regulatory charges
Bank levy and other regulatory charges consist of DGS fees, Central Bank Industry Funding levy, BRRD levy, ECB fees and a bank levy.
A bank levy payable to the Government, is provided for on the occurrence of the event identified by the legislation that triggers the
obligation to pay the levy.
(v) Employee Benefits
(a) Defined contribution pension plan
The Group operates a number of defined contribution pension schemes, under which the Group pays fixed contributions to a separate
entity.
The contribution payable to a defined contribution plan is recorded as an expense under administration, staff and other expenses. Unpaid
contributions are recorded as a liability.
(b) Short term employee benefits
Short term employee benefits, such as salaries and other benefits, are accounted for on an accruals basis over the period in which the
employee’s service is rendered. Bonuses are recognised where the Group has a legal or constructive obligation to employees that can be
reliably measured.
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(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
(c) Termination payments
Termination benefits may be payable when employment is terminated by the Group before the normal retirement date, or whenever
an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier
of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs
for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made
to encourage voluntary redundancy, the termination benefits are measured based on the number of employees where the offer is
irrevocable. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.
(vi) Current and deferred taxation
Taxation comprises both current and deferred tax. Taxation is recognised in the income statement except to the extent it relates to items
recognised in either OCI or equity. In the former case, taxation is recognised in OCI while in the latter case, taxation is recognised directly
in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively
enacted at the reporting date and any adjustment to tax payable in respect of previous years (ROI: 12.5% from 1 April 2015).
Deferred tax is provided using the liability method on all temporary differences except those arising on goodwill not deductible for tax
purposes, or on initial recognition of an asset or liability in a transaction that is not a business combination and which at the time of the
transaction affects neither accounting, nor taxable, profit or loss.
Deferred tax is measured at the tax rates enacted or substantively enacted by the reporting date that are expected to be applied to the
temporary differences when they reverse.
DTAs and liabilities shall be offset if, and only if:
• there is a legally enforceable right to set off current tax assets and liabilities; and
• the DTAs and liabilities relate to income taxes levied by the same taxation authority on either:
- the same taxable entity; or
- different taxable entities which intend to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be
settled or recovered.
A DTA is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future
taxable profits will be available against which they can be utilised. DTAs are reviewed at each reporting date and are recognised only
to the extent that it is probable that the related tax benefit will be realised. Deferred tax assets and liabilities are not discounted in
accordance with IAS 12.
Unrecognised DTAs are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable
profits will be available against which they can be used.
(vii) Financial instruments
(a) Classification of financial assets
Financial assets are recorded at fair value and are classified, on initial recognition, as amortised cost, fair value through OCI (FVOCI), fair
value through profit or loss (FVTPL), elected at FVOCI or designated at FVTPL. Purchases and sales of financial assets are recognised on
the trade date, being the date on which the Group commits to purchase or sell the asset.
With the exception of assets classified as FVTPL, the initial fair value of a financial asset includes direct and incremental transaction
costs. The fair value of assets traded on an active market will be the price that would be received if an asset were to be sold in an orderly
transaction between market participants at the measurement date. In the absence of an active market, the Group establishes a fair value
using various valuation techniques that use observable and unobservable inputs. These include recent transactions in similar items,
discounted cash flow projections, option pricing models and other valuation techniques used by market participants.
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Debt instruments
Debt instruments, including loans and debt securities, are classified into one of the following measurement categories:
• Amortised cost; or
• FVOCI; or
• FVTPL; or
• Designated at FVTPL.
Classification and subsequent measurement of debt instruments depend on:
(i) The Group’s business model for managing the asset; and
(ii) The cash flow characteristics of the asset.
(i) Business model assessment
The business model reflects how the Group manages the assets in order to generate cash flows. That is, whether the Group’s objective
is solely to collect the contractual cash flows from the assets (HTC) or is to collect both the contractual cash flows and cash flows arising
from the sale of assets (HTC&S). If neither of these is applicable, then the financial assets are classified as part of ‘other’ business model
and measured at FVTPL.
The Group assesses its business model at a portfolio level based on how it manages groups of financial assets to achieve its business
objectives. The observable factors considered include:
• How the performance of the business model and the financial assets held within that business model are evaluated and reported to
Group ExCo;
• How risks that affect the performance of the business model are managed;
• How business managers are compensated; and
• The timing, frequency and volume of sales.
(ii) Cash flow characteristics assessment
The Group carries out the cash flow characteristics assessment using the contractual features of an instrument to determine if they
give rise to cash flows that are consistent with a basic lending arrangement. Contractual cash flows are consistent with a basic lending
arrangement if they represent cash flows that are solely payments of principal and interest (the ‘SPPI’ test). Principal, for the purpose
of this test, is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset,
for example, due to repayments or amortisation of the premium/discount. Interest is defined as the consideration for the time value
of money and credit risk, which are the most significant elements of interest within a lending arrangement. If the Group identifies any
contractual features that could significantly modify the cash flows of the instrument such that they introduce exposures to risk or
volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at FVTPL.
The Group carries out the SPPI test based on an assessment of the contractual features of each product on origination and subsequently
at every reporting period. Derivative instruments and equity instruments are not covered by this assessment as they are held at FVTPL
(except when equities are accounted for at FVOCI).
Based on the above assessments, the Group classifies its debt instruments into one of the following four measurement categories:
(i) Debt instruments measured at amortised cost
Debt instruments are measured at amortised cost if they are held within a business model whose objective is to hold the assets to collect
contractual cash flows, where those cash flows represent solely payments of principal and interest. After initial measurement, debt
instruments in this category are measured at amortised cost. Interest income on these instruments is recognised in interest income
using the EIR method. The EIR is the rate that discounts estimated future cash payments or receipts through the expected life of a
financial asset to the gross carrying amount of a financial asset. Amortised cost is calculated by taking into account any discount or
premium on acquisition, transaction costs and fees that are an integral part of the EIR.
Impairment on debt instruments measured at amortised cost is calculated using the ECL approach. Loans and debt securities measured
at amortised cost are presented net of allowance for ECL in the SOFP.
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Notes to the Consolidated Financial Statements
(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
(ii) Debt instruments measured at FVOCI
Debt instruments are measured at FVOCI if they are held within a business model whose objective is to both hold the assets to collect
contractual cash flows and to sell the financial assets, where the assets’ cash flows represent payments that are solely payments
of principal and interest. Subsequent to initial recognition, unrealised gains and losses on debt instruments measured at FVOCI are
recorded in OCI, unless the instrument is designated in a fair value hedge relationship. When designated in a fair value hedge relationship,
any changes in fair value due to changes in the hedged risk are recognised in interest income in the income statement. On derecognition,
realised gains and losses are reclassified from OCI and recorded in other operating income in the statement of comprehensive income.
FX gains and losses that relate to the amortised cost of the debt instrument are recognised in the income statement. Premiums,
discounts and related transaction costs are amortised over the expected life of the instrument to interest income in the income
statement using the EIR method.
Impairment on debt instruments measured at FVOCI is calculated using the ECL approach. The ECL on debt instruments measured at
FVOCI does not reduce the carrying amount of the asset in the SOFP, which remains at its fair value. Instead, an amount equal to the
allowance that would arise if the assets were measured at amortised cost is recognised in OCI with a corresponding charge to provision
for credit losses in the income statement. The accumulated allowance recognised in OCI is recycled to the income statement on
derecognition of the debt instrument.
(iii) Debt instruments measured at FVTPL
Debt instruments measured at FVTPL include assets held for trading purposes, assets held as part of a portfolio managed on a fair value
basis and assets whose cash flows do not represent payments that are solely payments of principal and interest. These instruments
are measured at fair value in the SOFP, with transaction costs recognised immediately in the income statement as part of net trading
income. Realised and unrealised gains and losses are recognised as part of other operating income in the income statement.
(iv) Debt instruments designated at FVTPL
Debt instruments are designated at FVTPL only if doing so eliminates, or significantly reduces, an accounting mismatch that would
otherwise arise. The designation is only available on initial recognition and the designation is irrevocable. Debt instruments designated at
FVTPL are recorded in the SOFP at fair value and changes in fair value are recorded in the income statement.
Equity instruments
Equity instruments are measured at FVTPL, unless an election is made to designate them at FVOCI upon purchase. For equity
instruments measured at FVTPL, changes in fair value are recognised as part of other operating income in the income statement.
The Group can elect to classify non-trading equity instruments at FVOCI. The FVOCI election is made upon initial recognition, on an
instrument-by-instrument basis and once made is irrevocable. Gains and losses on these instruments including when derecognised/
sold are recorded in OCI and are not subsequently reclassified to the income statement. Dividend received is recorded in the income
statement.
(b) Impairment of financial assets
The Group recognises loss allowances for ECL for the following financial instruments that are not measured at FVTPL:
• Financial assets at amortised cost;
• Loan commitments;
• Financial assets at FVOCI (excluding equity); and
• Guarantees.
Measurement
ECL is measured by the Group in a way that reflects:
• an unbiased probability weighted amount that is determined by evaluating a range of possible outcomes;
• the time value of money; and
• reasonable and supportable information that is available without undue cost or effort at the reporting date and past events, current
conditions and forecast of future economic conditions.
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The amount of ECL recognised as a loss allowance depends on the change in credit risk of the financial instrument since origination
and whether the credit risk on those financial instruments has increased significantly since initial recognition. In order to determine the
appropriate ECL, a financial instrument is allocated to a stage dependent on the credit risk relative to when the financial instrument was
originated:
• Stage 1 – includes financial instruments that have not had a SICR since initial recognition. For these assets, 12-month ECL is
recognised. 12-month ECL is the ECL that results from default events that are possible within 12 months of the reporting date. It is not
the expected cash shortfalls over the 12-month period but the entire credit loss on an asset weighted by the probability that the loss
will occur in the next 12 months. Therefore, all financial assets in scope will have an impairment provision equal to at least 12-month
ECL;
• Stage 2 – includes financial instruments that have had a SICR since initial recognition but that does not have objective evidence of
impairment. For these assets, lifetime ECL is recognised, being the ECL that results from all possible default events over the expected
life of the financial instrument; and
• Stage 3 – includes financial assets that have objective evidence of impairment at the reporting date, i.e. are credit-impaired. For these
assets, lifetime ECL is recognised.
The Group has adopted an ECL framework that reflects a component approach using PD, EAD and LGD components calibrated for IFRS
9 purposes. To adequately capture life-time expected losses, the Group also models early redemptions as a separate component within
the ECL calculation.
The expected cash flows included in the ECL calculation are derived from cash flows arising from the loan contract or on the disposal
of collateral. As the sale of loans is not part of the Group’s normal recovery strategy, cash flows from this source are not considered a
part of the ECL calculation, with the exception of expected cash flows arising from deleveraging of NPLs which are included in the ECL
calculation from the point they meet the following three conditions:
• Selling the loans becomes a recovery method that the Group expects to pursue in a default scenario;
• The Group is neither legally nor practically prevented from realising the loans using the recovery method; and
• The Group has reasonable and supportable information upon which to base its expectations and assumptions.
As a consequence, exceptional impairment losses arising from deleveraging are included in the impairment charge under IFRS 9.
Credit loss is the difference between all contractual cash flows that are due to an entity in accordance with the contract and all the cash
flows that the entity expects to receive (i.e. all cash shortfalls), discounted at the original EIR.
Purchased or originated credit-impaired assets (POCI)
POCI are excluded from the general 3 stage impairment model in IFRS 9. POCI assets are financial assets that are credit-impaired on
initial recognition. POCI assets are recorded at fair value at original recognition and interest income is subsequently recognised on a
credit-adjusted EIR basis. ECL are only recognised or released to the extent that there is a subsequent change in ECL.
Expected life
When measuring ECL, the Group must consider the maximum contractual period over which the Group is exposed to credit risk. All
contractual terms should be considered when determining the expected life, including prepayment options, extension and rollover
options. For most instruments, the expected life is limited to the remaining contractual life, adjusted as applicable for expected
prepayments.
For certain revolving credit facilities that do not have a fixed maturity (e.g. credit cards and overdrafts), the expected life is estimated
based on the period over which the Group is exposed to credit risk and where the credit losses would not be mitigated by Management
actions.
For instruments in Stage 2 or Stage 3, loss allowances will cover ECL over the expected remaining life of the instrument.
Expert Credit Judgement
The Group’s ECL accounting framework methodology, in line with the requirements of the standard, requires the Group to use its
experienced credit judgement to incorporate the estimated impact of factors not captured in the modelled ECL results, in all reporting
periods.
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1. Corporate information, basis of preparation and significant accounting policies (continued)
Effective Interest Rate
The discount rate used by the Group in measuring ECL is the EIR (or ‘credit-adjusted effective interest rate’ for a POCI financial assets) or
an approximation thereof.
For undrawn commitments, the EIR, or an approximation thereof, is applied when recognising the financial assets resulting from the loan
commitment.
Low credit risk exemption
The Group applied the low credit risk exemption to sovereign debt securities, reverse repurchase agreements, loans and advances to
banks and certain intercompany positions in scope for impairment under IFRS 9.
The Group considers credit risk on a financial instrument low if it meets the following conditions:
• Strong capacity by borrower to meet its contractual cash flow obligations in the near term.
• Adverse changes in economic business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to
fulfil its contractual cash flow obligations.
• External rating of investment grade or an internal credit rating equivalent.
These exposures are in Stage 1 with a very low credit risk requiring 12-month ECL and contributing minimally to overall ECL.
Modification Policy for Financial Assets
The Group sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the
Group assesses whether or not the new items are substantially different to the original terms. The Group does this by considering, among
others, the following factors:
•
If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower
is expected to be able to pay;
• Whether any substantial new items are introduced such as a profit share/equity-based return that substantially affects the risk profile
of the loan;
• Significant extension of the loan term when the borrower is not in financial difficulty;
• Significant change in the interest rate;
• Change in the currency the loan is denominated in; and
•
Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan.
If the terms are substantially different, the Group derecognises the original financial asset and recognises a new asset at fair value and
recalculates a new EIR for the asset. The date of renegotiation of the new financial asset is consequently considered to be the date of
initial recognition for impairment calculation purposes, including for the purpose of determining whether a SICR has occurred. However,
the Group also assesses whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially in
circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed payments. Differences in the
carrying amount are also recognised in profit or loss as a gain or loss on derecognition.
If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Group calculates
the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in profit or
loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the original EIR (or credit-adjusted EIR for
POCI financial assets).
Write-off policy
The Group writes off an impaired financial asset (and the related impairment allowance), either partially or in full, when there is
no realistic prospect of recovery or on foot of a negotiated settlement. Indicators that there is no prospect of recovery include the
borrower being deemed unable to pay due their financial circumstances or the cost to be incurred in seeking recovery is likely to exceed
the amount of the write-off. In circumstances where the net realisable value of any collateral has been determined and there is no
reasonable expectation of further recovery, write-off may be earlier than collateral realisation. Write-off on those financial assets subject
to enforcement activity will take place on conclusion of the enforcement process.
In subsequent periods, any recoveries of amounts previously written off are credited to the provision for credit losses in the income
statement.
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Presentation of ECL allowance in the statement of financial position
The ECL on financial assets measured at amortised cost is presented as a deduction from the gross carrying amount.
The ECL on debt instruments measured at FVOCI does not reduce the carrying amount of the asset in the SOFP, which remains at fair
value. Instead an amount equal to the allowance that would arise if the assets were measured at amortised cost is recognised in OCI with
a corresponding charge to provision for credit losses in the income statement.
Off-balance sheet credit risks include certain undrawn lending commitments, letters of credit and letters of guarantee as a provision in
the SOFP.
(c) Financial liabilities
Financial liabilities are classified either as amortised cost or designated at FVTPL.
Financial liabilities measured at amortised cost
Financial liabilities include deposits by banks (including Central Banks), customer accounts, debt securities and subordinated debt.
Derivative liabilities are dealt with under separate accounting policies.
Debt securities and subordinated debt issued are initially recognised on the date that they originated, while all other financial liabilities
are recognised initially on the trade date. Both the date of origination and the trade date is the date the Group becomes a party to the
contractual provisions of the instrument.
All financial liabilities are recognised initially at fair value, less any directly attributable transaction costs and are subsequently measured
at amortised cost and the related interest expense is recognised in the income statement using the EIR method.
Financial liabilities designated at FVTPL
Financial liabilities classified in this category are those that have been designated by the Group on initial recognition.
Financial liabilities are designated at FVTPL when one of the following criteria is met:
• The designation eliminates, or significantly reduces, an accounting mismatch which would otherwise arise;
• A group of financial liabilities are managed and their performance is evaluated on a fair value basis, in accordance with a documented
risk management strategy; or
• The financial liability contains one or more embedded derivatives which significantly modify the cash flows otherwise required.
Financial liabilities designated at FVTPL are recorded in the SOFP. For liabilities designated at FVTPL, changes in fair value are
recognised in non-interest income in the income statement, with the exception of movements in own credit.
For financial liabilities designated at FVTPL, gains or losses attributable to changes in own credit are presented in OCI. The Group has not
and does not expect to invoke the fair value option for financial liabilities.
A financial liability that is classified as a compound financial instrument, containing both debt and equity features, is separated into its
equity and debt components on initial recognition. The equity component is recognised initially as the difference between the fair value
of the compound financial instrument as a whole and the fair value of the debt component. The instrument is fair valued at the date of
issue using an appropriate valuation technique if there is an absence of quoted market prices. Any directly attributable transaction costs
are allocated to the liability and equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the
EIR method, with related interest recognised in the income statement. The equity component of a compound financial instrument is
not re-measured subsequent to initial recognition. On conversion, the financial liability is reclassified to equity and no gain or loss is
recognised in the income statement.
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(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
(d) Derecognition of Financial instruments
Financial assets
The Group derecognises a financial asset when the contractual right to the cash flow from the financial asset expires, or it transfers
the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the
financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership
and it does not retain control of the financial asset. Control over the assets is represented by the practical ability to sell the transferred
asset.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the
portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability
assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is recognised in profit or loss.
Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated as at FVOCI is not recognised in profit
or loss on derecognition of such securities. Any interest in transferred financial assets that qualify for derecognition that is created or
retained by the Group is recognised as a separate asset or liability.
The Group enters into transactions whereby it transfers assets recognised on its SOFP, but retains either all or substantially all of the
risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognised. Examples of
such transactions are securities lending and sale-and-repurchase transactions.
When assets are sold to a third party with a concurrent total rate of return swap on the transferred assets, the transaction is accounted
for as a secured financing transaction similar to sale-and-repurchase transactions, because the Group retains all or substantially all of
the risks and rewards of ownership of such assets.
In transactions in which the Group neither retains nor transfers substantially all of the risks and rewards of ownership of a financial asset
and it retains control over the asset, the Group continues to recognise the asset to the extent of its continuing involvement, determined
by the extent to which it is exposed to changes in the value of the transferred asset.
In certain transactions, the Group retains the obligation to service the transferred financial asset for a fee. The transferred asset is
derecognised if it meets the derecognition criteria. An asset or liability is recognised for the servicing contract if the servicing fee is more
than adequate (asset) or is less than adequate (liability) for performing the servicing.
The Group securitises various loans and advances to customers and investment securities, which generally result in the sale of these
assets to securitisation vehicles and in the Group transferring substantially all of the risks and rewards of ownership. The securitisation
is generally retained in the form of senior or subordinated tranches, or other residual interests (retained interests). Retained interests are
recognised as debt securities.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled, or expire. This may happen when
payment is made to the lender; the borrower legally is released from primary responsibility for the financial liability; or if there is an
exchange of debt instruments with substantially different terms or a substantial modification of the terms of an existing debt instrument.
Derecognition conditions are also satisfied when an entity repurchases its own debt instruments issued previously. When a financial
liability is extinguished, any difference between the carrying amount of the financial liability and the consideration paid is recognised in
the income statement.
(e) Determination of fair value of financial instruments and other assets
The Group measures financial instruments, such as, derivative financial instruments, trading financial instruments and other financial
instruments at FVTPL. Certain risks in hedged financial instruments, financial assets classified as FVOCI, property and equipment, and
collateral in possession are measured at fair value on initial recognition.
Fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset, or
transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most
advantageous market for the asset or liability which is accessible to the Group.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair
value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
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All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value
hierarchy based on the lowest level input that is significant to the fair value measurement as a whole and is described as follows:
• Level 1: Quoted market prices in active markets for identical assets or liabilities (unadjusted);
• Level 2: Valuation techniques such as discounted cash flow method, comparison with similar instruments for which market observable
prices exist, options pricing models, credit models and other relevant valuation models for which the lowest level input that is
significant to the fair value measurement is directly or indirectly observable; or
• Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers
have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each reporting period. The Group recognises transfers between levels of the fair value
hierarchy as of the end of the reporting period during which the change has occurred.
An analysis of the fair values of financial instruments, and further details as to how they are measured, are provided in note 32.
(viii) Derivative instruments and hedging
The Group follows the IFRS 9 model for hedge accounting.
Derivative instruments used by the Group primarily comprise interest rate swaps and currency forward rate contracts. Such derivative
financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair
value is negative.
For the purpose of hedge accounting, hedges are classified as:
• Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability, or an unrecognised firm
commitment;
• Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a
recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment;
or
• Hedges of a net investment in a foreign operation.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply
hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification
of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will assess whether the hedging
relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge
ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
• There is ‘an economic relationship’ between the hedged item and the hedging instrument;
• The effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship; and
• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually
hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
(a) Fair value hedges
The change in the fair value of a hedging instrument is recognised in the statement of profit or loss as NII. The change in the fair value of
the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the
statement of profit or loss as NII.
For fair value hedges relating to items carried at amortised cost, any adjustment to carrying value is amortised through profit or loss over
the remaining term of the hedge using the EIR method. The EIR amortisation may begin as soon as an adjustment exists and no later than
when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss.
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(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
(b) Embedded derivatives
A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for
as a separate derivative if:
• The economic characteristics and risks are not closely related to the host;
• A separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and
• The hybrid contract is not measured at FVTPL.
Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if
there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a
reclassification of a financial asset out of the FVTPL category.
A derivative embedded within a hybrid contract containing a financial asset host is not accounted for separately. The financial asset
host, together with the embedded derivative, is required to be classified in its entirety as a financial asset at FVTPL.
(c) Credit valuation adjustment
The Group is engaged in over the counter (OTC) derivative transactions and considers whether a fair value adjustment for credit risk
is required. CVA is considered to reflect the counterparty’s default risk and debit valuation adjustment (DVA) to reflect own credit risk.
There is no specific guidance on the methods used to calculate CVA or DVA which creates challenges in estimation.
As a result, IFRS 13 requires entities to consider the effects of credit risk when determining a fair value measurement, e.g. by calculating
a CVA on their derivatives. Estimation can be complex and requires the use of significant judgement which is often influenced by various
qualitative factors, such as:
• The materiality of the entity’s derivative’s carrying value to its financial statements;
• The number and type of contracts for derivatives in the entity’s portfolio;
• The extent to which derivative instruments are either deeply in or out of the money;
• The existence and terms of credit mitigation arrangements (e.g. collateral arrangements in place);
• The cost and availability of technology to model complex credit exposures;
• The cost and consistent availability of suitable input data to calculate an accurate credit adjustment; and
• The credit worthiness of the entity and its counterparties.
The Group mitigates the majority of its derivative positions through the use of netting and Credit Support Annex collateral arrangements.
The Group does not operationally net positions. The netting and collateral arrangements may be called upon in the event of a default.
This allows a counterparty to net all assets and liabilities outstanding with the defaulting counterparty, subject to the agreement when
the default event occurs. The collateral arrangements in place require the counterparty in a liability position to place collateral to
cover that shortfall. The Group considers and discounts the necessity for any amendments to the valuations to reflect the CVA when
calculating the fair value of the derivative positions.
The Group monitors this position at every reporting period and assesses if material CVAs become appropriate to be recognised.
(ix) Cash and cash equivalents
Cash comprises cash on hand and demand deposits and cash equivalents include liquid investments that are readily convertible to
known amounts of cash which are subject to an insignificant risk of change in value and with an original maturity of less than three
months.
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(x) Leases
(a) Classification of Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract
conveys the right to control the use of an identified asset, the Group assesses whether:
• the contract involves the use of an identified asset; this may be specified explicitly or implicitly, and should be physically distinct or
represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the
asset is not identified;
• the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
• the Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights that are most
relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the
asset is used is predetermined, the Group has the right to direct the use of the asset if either:
- the Group has the right to operate the asset; or
- the Group designed the asset in a way that predetermines how and for what purpose it will be used.
Unless the lease is of short-term and of low-value assets, where the Group has the right to obtain substantially all of the economic
benefits from use of identified assets and has the right to direct the use of the identified asset, a right-of-use asset is recognised in
property and equipment and a lease liability is in other liabilities.
As a lessee
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to
restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end
of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined
on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if
any, and adjusted for certain remeasurements of the lease liability.
The lease liability is measured at amortised cost using the incremental borrowing rate. Incremental borrowing rate is the rate of interest
that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a
similar value to the right of use asset in a similar economic environment. For its incremental borrowing rate, the Group uses its FTP,
which comprises its base cost of funds with add-ons related to regulatory requirements, and term liquidity premium based on the slope
of swap curve as a proxy of time value of money. The Group FTP is fully reflective of its funding profile and therefore considers it an
appropriate reflection of the Group’s borrowing cost. For retail properties, property yield is added as a lease specific adjustment.
Lease payments included in the measurement of the lease liability comprise the following:
• Fixed payments, including in-substance fixed payments;
• Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• Amounts expected to be payable under a residual value guarantee;
• The exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal
period if the Group is reasonably certain to exercise an extension option; and
• Penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
The lease liability is remeasured, if there is a change in future lease payments arising from a change in index-linked considerations, if
there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes
its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset,
or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
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(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of vehicles that have a lease term of
twelve months or less and leases of low-value assets, including office equipment. The Group recognises the lease payments associated
with these leases as an expense on a straight-line basis over the lease term.
As a lessor
When the Group acts as a lessor, it determines at lease inception, whether each lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards
incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As
part of this assessment, the Group considers certain indicators such as, whether the lease is for the major part of the economic life of the
asset.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses
the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the
underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the
sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, the Group applies IFRS 15 to allocate the consideration in the contract.
The Group recognises lease payments received under operating leases as income, on a straight-line basis, over the lease term, as part of
other income.
The accounting policies applicable to the Group as a lessor in the comparative period were not different from IFRS 16. However, when the
Group was an intermediate lessor the sub-leases were classified with reference to the underlying asset.
The Group presents right-of-use assets in property and equipment and lease liabilities in other liabilities in the SOFP.
(xi) Property and equipment
Leasehold premises with initial lease terms of less than 50 years and all other equipment are stated at cost less accumulated
depreciation and impairment losses. Depreciation is calculated on a straight-line basis to write off the costs of such assets to their
residual value over their estimated useful lives, which are assessed annually.
Freehold premises (including land) are revalued at least annually by external professional valuers. Any accumulated depreciation (on
freehold premises excluding land) at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net
amount is restated to the revalued amount of the asset. Any resulting increase in value is credited to OCI and shown as revaluation
reserves in shareholders’ equity. Any decrease in value that offsets previous increases of the same asset are charged in OCI and debited
against the revaluation reserves directly in equity while all other decreases are charged to the income statement. The revalued premises,
excluding the land element, are depreciated to their residual values over their estimated useful lives, which are assessed annually.
Subsequent costs are included in the asset’s carrying amount, only when it is probable that increased future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably.
Property and equipment are assessed for impairment where there is an indication of impairment. Where impairment exists, the carrying
amount of the asset is reduced to its recoverable amount and the impairment loss is recognised against the revaluation reserve to the
extent it is available and any remainder is recognised in the income statement. The depreciation charge for the asset is then adjusted to
reflect the asset’s revised carrying amount.
The estimated useful lives are as follows:
50 years
50 years or term of lease if less than 50 years
5 – 15 years
3 – 10 years
5 years
Freehold Buildings
Leasehold Buildings
Office Equipment
Computer Hardware
Motor Vehicles
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Permanent TSB Group Holdings plc - Annual Report 2020 1. Corporate information, basis of preparation and significant accounting policies (continued)
(xii) Intangible assets (other than goodwill)
Computer software is stated at cost, less amortisation and provision for impairment, if any. The external costs and identifiable internal
costs of acquiring and developing software are capitalised where it is probable that future economic benefits that exceed its cost will
flow from its use over more than one year.
Capitalised computer software is amortised on a straight-line basis over a period of between three to seven years.
Software is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An asset’s carrying value is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount. The estimated recoverable amount is the higher of the asset’s fair value less costs to sell or VIU.
(xiii) Collateral in possession
In certain circumstances, property is repossessed following foreclosure on loans that are in default. When a property is repossessed, the
associated loan relating to that property is derecognised and any provision on that loan is reversed. On initial recognition the collateral in
possession is valued at its fair value.
Subsequent to initial recognition, the property is carried at the lower of its cost and net realisable value.
(xiv) Assets and liabilities classified as held for sale
An asset or a disposal group is classified as held for sale if the following criteria are met:
•
•
Its carrying value will be recovered principally through sale rather than continuing use;
It is available for immediate sale; and
• The sale is highly probable within the next 12 months.
When assets (or disposal groups), other than financial assets as classified under IFRS 9, or rights under an insurance contract, are
initially classified as held for sale, they are measured at the lower of the carrying amount or fair value less costs to sell at the date of
reclassification.
Impairment losses subsequent to classification of such assets (or disposal groups) are recognised in the income statement. Increases
in fair value less costs to sell of such assets (or disposal groups) that have been classified as held for sale are recognised in the income
statement to the extent that the increase is not in excess of any cumulative loss previously recognised in respect of the asset (or disposal
group).
Where the above conditions cease to be met, the assets (or disposal group) are reclassified out of held for sale and included under the
appropriate SOFP classifications.
Financial assets within the scope of IFRS 9, DTAs and income taxes within the scope of IAS 12 continue to be measured in accordance
with these standards.
(xv) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
A restructuring provision is recognised when there is an approved detailed and formal Restructuring Plan, and the restructuring either
has commenced or has been publicly announced. Future operating losses are not permitted to be recognised.
Present obligations arising under onerous contracts are recognised and measured as provisions at the present value of the lower of the
expected cost of terminating the contract and the expected net cost of continuing with the contract. An onerous contract is a contract in
which the unavoidable cost of meeting the obligation under the contract exceeds the economic benefits expected to be received under it.
Contingent liabilities are either possible obligations that arise from past events whose existence is dependent on whether some
uncertain future events occur which are not wholly within the control of the entity or are a present obligation that arises from a past
event but is not recognised because:
•
It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
• The amount of the obligation cannot be measured with sufficient reliability.
Contingent liabilities are not recognised but are disclosed unless the probability of their occurrence is remote.
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(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
(xvi) Dividends
Final dividends on ordinary shares are recognised in equity in the period in which they are approved by the Company’s shareholders.
Interim dividends are recognised in equity in the period in which they are paid.
(xvii) Operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, whose operating
results are reviewed regularly by the Group Executive Committee (being the chief operating decision maker (CODM)) to make decisions
about resources allocated to each segment and assess its performance, and for which discrete financial information is available.
Transactions between the operating segments are on normal commercial terms and conditions unless stated otherwise. Internal charges
and transfer pricing adjustments have been reflected in the performance of each segment. Revenue from external parties is measured in
a manner consistent with the income recognition policy of the Group.
(xviii) Sales and repurchase agreements
Financial assets may be lent for a fee or sold subject to a commitment to repurchase them. Such assets are retained on the SOFP when
substantially all the risks and rewards of ownership remain with the Group. The liability to the counterparty is included separately on the
SOFP as appropriate.
Similarly, where financial assets are purchased with a commitment to resell, or where the Group borrows financial assets but does not
acquire the risks and rewards of ownership, the transactions are treated as collateralised loans, and the financial assets are not included
in the SOFP.
The difference between the sale and repurchase price is recognised in the income statement over the life of the agreements using the
EIR. Fees earned on stock lending are recognised in the income statement over the term of the lending agreement. Securities lent to
counterparties are also retained on the SOFP.
(xix) Collateral
The Group enters into master agreements with counterparties to ensure that in the event of a default, all amounts outstanding with
those counterparties will be settled on a net basis. The Group obtains collateral in respect of customer liabilities where this is considered
appropriate. The collateral normally takes the form of a lien over the customers’ assets and gives the Group a claim on these assets for
both existing and future liabilities. The collateral is not recorded on the Group’s SOFP.
The Group also receives collateral in the form of cash or securities in respect of other credit instruments, such as stock borrowing
contracts and derivative contracts, in order to reduce credit risk. Collateral received in the form of securities is not recorded on the SOFP.
Collateral received in the form of cash is recorded on the SOFP, with a corresponding liability recognised within deposits from banks or
deposits from customers. Any interest payable arising is recorded as interest expense.
In certain circumstances, the Group pledges collateral in respect of liabilities or borrowings. Collateral pledged in the form of securities
or loans and advances continues to be recorded on the SOFP. Collateral placed in the form of cash is recorded in loans and advances to
banks or customers. Any interest receivable arising is recorded as interest income.
1.6 Application of new and revised IFRSs
In 2020, the Group assessed the impact of new and revised pronouncement of IFRSs which took effect during the year. The changes
to IFRS during 2020 did not have a material impact on the Group’s financial statements. The Group has not early adopted any of the
changes described below.
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Permanent TSB Group Holdings plc - Annual Report 2020
1. Corporate information, basis of preparation and significant accounting policies (continued)
1.7 Impact of other accounting standards with effective periods beginning on or after 1 January 2021
Accounting Standard
Update
Change
Key effects for PTSB
Effective
Date
Amendments to IFRS 9, IAS
39, IFRS 7, IFRS 4 and IFRS
16 - Interest Rate Benchmark
Reform Phase 2
Annual Improvements to
IFRS Standards 2018–2020
Cycle
Amendments to IFRS 3 –
Reference to the
Conceptual Framework
Amendments to IAS 16 –
Property, Plant and
Equipment: Proceeds
before Intended Use
Provides relief for issues that might arise
when an interest rate benchmark has
been replaced by introducing a practical
expedient for modifications to financial
contracts resulting directly from IBOR
reform, and a series of exemptions
from some of the hedge accounting
requirements.
Minor amendments to IFRS 1, IFRS 9 and
IAS 41.
Updates certain references to the
Conceptual Framework for Financial
Reporting without changing the
accounting requirements for business
combinations.
Requires amounts received from selling
items produced while the company is
preparing the asset for its intended use
to be recognised in profit or loss, and not
as an adjustment to the cost of the asset.
These changes are not expected
significantly impact the current
or future financial reporting.
Annual periods
beginning on or after 1
January 2021.
These changes are not expected
significantly impact the current
or future financial reporting.
Annual periods
beginning on or after 1
January 2022.
These changes are not expected
significantly impact the current
or future financial reporting.
Annual periods
beginning on or after 1
January 2022.
These changes are not expected
significantly impact the current
or future financial reporting.
Annual periods
beginning on or after 1
January 2022.
Amendment to IAS 37 –
Onerous Contracts: Cost of
Fulfilling a Contract
Specifies which costs to include when
assessing whether a contract will be
loss-making.
These changes are not expected
significantly impact the current
or future financial reporting.
Annual periods
beginning on or after 1
January 2022.
Amendment to IAS 1 –
Classification of Liabilities
as Current or Non-current
Clarifies that the classification of
liabilities as current or non-current
should be based on rights that exist at
the end of the reporting period.
These changes are not expected
significantly impact the current
or future financial reporting.
Annual periods
beginning on or after 1
January 2022.
2. Critical accounting estimates and judgements
The preparation of these consolidated financial statements, in conformity with IFRS, requires Management to make assumptions,
estimates and judgements that affect the reported amounts of income, expenses, assets and liabilities and the accompanying
disclosures. Uncertainty about these assumptions and estimates could result in outcomes that may require a material adjustment to the
carrying amount of the assets or liabilities affected in future periods. Assumptions, estimates and judgements are revised on an ongoing
basis and updated where new information is available.
The COVID-19 pandemic has increased the uncertainty associated with judgements, estimates and assumptions made by Management
due to the extent, depth, and evolving nature of the impacts of the pandemic. The measures adopted to contain the virus by the
Government and the resulting business actions from the Group, including customer behaviours and their evolving nature has increased
the estimation uncertainty.
The estimation uncertainty is further increased by the effectiveness of measures introduced by the Government, the CBI, and the EBA,
which in turn affects the forecasts that Management has prepared to support the judgements, estimates, and assumptions made in
preparation of these condensed consolidated financial statements.
The impact of these uncertainties on judgements, estimates, and assumptions are outside the control of the Group and can significantly
change in due course. The impact of these uncertainties can change, Management however, has sensitised its forecasts to cater for the
downside scenario of the COVID-19 pandemic.
Critical accounting estimates and judgements made by Management in applying accounting policies are set out below.
(a) Allowance for credit losses under IFRS 9
IFRS 9 requires an impairment allowance to be recorded for ECL on financial assets regardless of whether there has been an actual
loss event. There is a requirement to track and assess changes in credit risk on financial instruments since origination and determine
whether the credit risk on those financial instruments has increased significantly since initial recognition.
171
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Notes to the Consolidated Financial Statements
(continued)
2. Critical accounting estimates and judgements (continued)
The COVID-19 pandemic has increased the uncertainty with regard to judgements, estimates and assumptions made in respect of
ECL amounts. Macroeconomic parameters have become more challenging and the Bank has revised its scenarios most recently in
December 2020. The Bank has reviewed the segment of customers that had received COVID-19 payment breaks for latent risk and
has also considered delayed default emergence. The uncertainty arising from COVID-19 has increased the necessity for Post Model
Adjustments.
The following concepts introduce significant judgement within impairment and have a tangible impact on the level of ECL allowances:
Determination of significant increase in credit risk (SICR)
The determination of whether a loan has experienced a significant increase in credit risk may have a material impact on the level of ECL
impairment allowance as a 12-month ECL is recognised for Stage 1 loans whereas a lifetime ECL is recognised for Stage 2 loans.
Migration of loans between Stage 1 and Stage 2 can cause some volatility in the amount of the recognised ECL allowances and the
provision for expected credit losses in any accounting period.
The Group has relied on a number of measures including delinquency, forborne status, risk grade, change in remaining lifetime
Probability of Default (PD) and PD at maturity to determine SICR.
Facilities where payment breaks or partial payment breaks were granted by the Group in response to the COVID-19 pandemic are not
reported as forbearance in accordance with regulatory guidance and as a result are not automatically considered a SICR solely as a result
of being granted the full or partial loan payment break.
Forward Looking Information
The Group has adopted an ECL framework that reflects a component approach using PD, EAD and LGD components calibrated for IFRS
9 purposes. To adequately capture lifetime expected credit losses, the Group also modelled early redemptions as a separate component
within the ECL calculation.
Judgement is combined with statistical evidence in determining which forward-looking variables are relevant for the Group’s loan
portfolios and in determining the extent by which through-the-cycle parameters should be adjusted for forward-looking information to
determine point-in-time parameters.
Changes in FLI variables applied to convert through-the-cycle PD and LGD into point-in-time parameters can either increase or decrease
ECL impairment allowances in a particular accounting period. On update, increases in the level of optimism in the FLI variables will cause
a decrease in ECL while increases in the level of pessimism in the FLI variables will cause an increase in ECL. These movements could be
significant in the accounting period of update.
The estimation and application of FLI requires significant judgement. In its calculation of ECL, the Group considers multiple scenarios
and possible outcomes together with their probability of occurrence. Scenarios are designed to capture a range of possible outcomes.
Each macroeconomic scenario in the Group’s ECL calculation includes a projection of all relevant macroeconomic variables applied in the
models for a five year period (where the relevant period extends to five years), subsequently reverting to long-run averages.
The Group’s approach applies extreme-but-plausible economic scenarios (i.e. underpinned by historical evidence) to estimate the
distribution of ECL to which the Group is exposed. Three scenarios are currently considered in the Group’s calculation of ECL. In addition
to the central or Base scenario, the Group considers one scenario that represents a macroeconomic environment that is more favourable
to the central scenario and one scenario that represents a macroeconomic environment that is less favourable to the central scenario.
Macroeconomic scenarios were most recently updated in December 2020. The updated macroeconomic scenarios and their probability
weightings were approved by the BRCC. Given the unprecedented nature of the economy arising from COVID-19 impacts and uncertainty
with regard to BREXIT negotiations, a review conducted post year end concluded that no further update to the macroeconomic scenarios
for 2020 year-end reporting was required at that time.
The following table details the key macroeconomic variables applied to model credit losses together with the associated percentiles and
probability weightings for Stages 1 and 2 at 31 December 2020.
Percentile
Scenario probability weighting
Irish Residential House Prices
Irish unemployment
Irish GDP
Consumer price Index
ECB Base Rate
172
Base Case
50th
56%
Upside Scenario
Downside Scenario
5th
22%
95th
22%
Average value
over the first year
of forecast
-5%
10%
4%
3%
0%
Average value
over the first 5
years of forecast
1%
7%
3%
2%
0%
Average value
over the first
year of forecast
18%
6%
8%
1%
0%
Average value
over the first 5
years of forecast
14%
4%
5%
2%
0%
Average value
over the first
year of forecast
-20%
16%
-5%
1%
0%
Average value
over the first 5
years of forecast
-8%
12%
-1%
2%
1%
Permanent TSB Group Holdings plc - Annual Report 2020
2. Critical accounting estimates and judgements (continued)
The Base, Upside and Downside scenarios are described as follows:-
Base scenario
In the Base scenario, the Level 5 restrictions arising from the third COVID-19 wave have a severe impact on the Irish economy with
unemployment predicted to average at c. 10% in 2021, after which a more stable and normalised economy results in a modest recovery in
unemployment numbers. Residential house prices, which showed a much greater level of resilience than expected in 2020, are projected to
fall by 5% in 2021 and stabilise at an average growth rate of 2% from year 2 of the five year forecast.
As the economy recovers on foot of the roll-out of a vaccine, GDP is projected to recover from a low in 2020 to average 3% over the five
year forecast. Similarly, inflation is predicted to stabilise at 2% over the medium term with interest rates forecast to remain at current levels
over the short term.
Upside scenario
In this scenario the Irish economy recovers swiftly in 2021. GDP increases to 8% in the short term with the rate of growth easing in the
medium term whilst unemployment, at an average of 5% over the medium term, reflects an extreme positive of effective full employment.
The overall HPI move, averaging 14% per year over the first five years of the forecast, replicates a number of key periods such as from
1975 to 1980 and the late 1990s early 2000s period. Substantially below trend CPI growth continues in the Irish economy over the forecast
horizon with inflation trends remaining highly supportive of economic growth and a flatter yield curve reflecting the continued impact of
lower inflation and growth expectations in Europe and a supportive ECB monetary policy for macro recovery in the Euro-zone.
Downside scenario
The Downside scenario is an extreme scenario backed by Irish historical context and international comparatives. In this scenario, a
prolonged period of mid-teen unemployment persists quickly reaching a peak of 16% in 2021.
House prices reach a low of 38% from current levels by 2023 by which time GDP has commenced to recover from a low of
-5% in 2021. Inflation steadily increases from 2020 as external cost factors impact domestic pricing. Eventual higher interest rates in
Europe, with rates increasing from 2022 onwards, reflect both slow economic conditions in Europe in 2020 and 2021 combined with a sharp
slowdown in US economic activity, directly impacting the Irish economy.
The Group applies statistical techniques combined with expert credit judgement to formulate an unbiased probability weighted estimate
of ECL at the reporting date. A review of the methodology to calculate the final weighted estimate of ECL based on three scenario inputs
(Base, Upside and Downside scenarios) by reference to challenger methods and supplementary benchmarks was conducted in H2 2020.
The review concluded that the methodology remains in compliance with IFRS 9.
Given the relative sizes of the portfolios, the key judgemental area for the Group is in relation to the level of ECL calculated for the
residential mortgage portfolio.
Determining probability weightings of the scenarios and forecasting FLI in respect of those scenarios requires a significant degree of
Management judgement. The reported ECL allowance reflects the probability weighting attributed to each macroeconomic scenario.
•
If the Group were to only use its Base Case Scenario for the measurement of ECL for the secured mortgage portfolio, excluding
Management’s adjustment to modelled outcomes, the ECL impairment allowance would be €57m less than reported at 31 December
2020.
• Similarly, excluding Management’s adjustment to modelled outcomes, if the Group were to only apply its Upside Scenario for the
measurement of ECL for the secured mortgage portfolio, the ECL impairment allowance would be €330m less than reported at 31
December 2020.
• Whereas, if the Group were to only use its Downside Scenario, the ECL impairment allowance would be €540m greater than reported at
December 2020.
•
Management assessed the impact of an increase in credit risk to those secured mortgage accounts that were granted a COVID-19 payment
break in 2020. If the entire population of secured mortgage portfolio accounts that were granted a COVID-19 payment break, classified as
IFRS 9 Stage 1 at 31 December 2020 transitioned to IFRS 9 Stage 2, and those accounts classified as IFRS 9 Stage 2 transitioned to IFRS 9
Stage 3 the reported ECL impairment allowance, excluding Management’s adjustment to modelled outcomes, would increase by €47m.
173
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
2. Critical accounting estimates and judgements (continued)
Management’s adjustment to modelled outcomes
The adequacy of ECL allowance is reviewed by the BAC on a half-yearly basis. At 31 December 2020, the total impairment provision
included €172m of management’s adjustments to modelled outcomes (31 December 2019: €60m) which primarily comprises the following:
• €65m of management adjustment in respect of Stage 3 residential mortgage loans that are in default for greater than seven years and
for which management consider the modelled impairment to be insufficient to cover resolution;
• Arising from the unprecedented nature of COVID-19, management are of the view that the modelled impairment allowance may not fully
reflect expected credit losses for certain cohorts of borrowers. At the reporting date, a €69m management overlay is applied in respect
of loans for which ECL is maintained until the future performance is established comprising €19m in respect of the consumer portfolio,
€10m in respect of the commercial portfolio and €40m in respect of the residential mortgage portfolio;
• A €20m overlay to reflect the uncertainty associated with residential mortgage loans exiting COVID-19 payment breaks granted by
the Bank. The management adjustment is applied to Stage 2 residential mortgage loans to reflect the risk that a proportion of these
borrowers may be unable to return to the contractual terms in place prior to being granted the temporary COVID-19 payment break; and
• A management adjustment of €9m to reflect the tail risk of payment at maturity of a cohort of loans which cannot be reflected in the
residential mortgage model due to lack of empirical data.
(b) Deferred taxation
At 31 December 2020, the Group had a net deferred tax asset of €349m (31 December 2019: €345). See note 22 for further details.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised. The recognition of a deferred tax asset relies on Management’s judgements surrounding the probability and adequacy of
future taxable profits and the reversals of existing taxable temporary differences.
The most important judgement relates to Management’s assessment of the recoverability of the deferred tax asset relating to carried
forward tax losses, being €370m at 31 December 2020. It should be noted that, with the exception of an amount of €95k relating to
PTSBGH, the full deferred tax asset on tax losses relates to tax losses generated in the PTSB legal entity (i.e. no deferred tax asset is being
recognised on tax losses carried forward in any other Group company).
The assessment of recoverability of this asset requires significant judgements to be made about the projection of long-term profitability
because of the period over which recovery extends. In addition, given PTSB’s loss in 2020, in accordance with IAS 12, there must be
convincing other evidence to underpin this assessment.
In making the assessment, the Board considered the following factors:
• The current macroeconomic environment and external forecasts for the Irish economy particularly in light of the COVID-19 pandemic;
• The significant progress made on the Group’s NPL strategy and the deleveraging of the Group’s non-core portfolios in recent years;
• The current expected trajectory of the Group’s financial performance;
• The impairment performance;
• The Group’s projected liquidity and capital position;
• The absolute level of deferred tax assets on tax losses compared to the Group’s equity;
• The quantum of profits required to be generated to utilise the tax losses and the extended period of time over which these profits are
projected to be generated;
• The challenge of forecasting over an extended period and in particular taking account of external factors such as the COVID-19
pandemic, global political uncertainty, particularly the impact of Brexit, the level of competition and disruptors to the market and market
size;
• Consideration of the assumptions underpinning the Group’s financial projections (on which analysis of the recoverability of the deferred
tax asset on tax losses are based). The key relevant assumptions considered being:
- No material change to the Group’s business activities in the medium-term;
- Further progress in addressing the Group’s legacy, non-performing assets;
- NIM is expected to be positively impacted by the evolution of the Group’s lending book as new lending volumes are added and lower
yielding tracker mortgages pay down; however, further material reductions in cost of funds are considered unlikely;
- An expectation that mortgage market size will continue to return to normalised levels of activities; together with further anticipated
growth in the Group’s market share;
- Continued focus on cost management;
- The cost of risk will continue its return to normalised levels reflecting the Group’s assessment of the medium to long term average; and
- No material change to the Group’s business activities in the medium term.
• Consideration of forecasting risks including a sensitivity analysis on the financial projections. This sensitivity analysis considers the
effect of higher than expected impairments, the cost of funds or operating expenditure, as well as lower than expected asset yields, new
lending or ECB rates.
174
Permanent TSB Group Holdings plc - Annual Report 2020 2. Critical accounting estimates and judgements (continued)
Taking the above factors into account, and in the absence of any expiry date for the utilisation of carried forward tax losses in Ireland, the
Board have concluded that it is more likely than not that there will be sufficient taxable profits against which the losses can be utilised
and on the basis of the assessment above, continue to recognise €370m of a deferred tax asset on tax losses on the statement of
financial position as at 31 December 2020.
In this regard, the Group has carried out an exercise to determine the likely number of years required to utilise the deferred tax asset
arising on tax losses carried forward. Based on the Group’s latest forecast plans to 2025 and assuming a level of profitability growth
consistent with GDP growth of approximately 2.5%, it will take c. 22 years for the deferred tax asset on tax losses of €370m to be
utilised. A level of profitability consistent with GDP growth continues to be considered by Management to be appropriate given the
Group’s primarily domestic retail focus and the expectation arising therefrom that, over the long-term, the Group’s performance would
be expected to broadly track the performance of the Irish economy. While the COVID-19 pandemic has significantly impacted GDP in
the short-term it is expected that, over the medium-term, GDP will recover and Management are of the view that a long-term assumed
growth rate of 2.5% is reasonable in this context.
IFRS does not allow for the deferred tax asset recognised to be discounted notwithstanding that it is likely to take a number of years for it
to be recovered.
The expected period of time to full utilisation of the deferred tax asset has increased since 31 December 2019 from 20 years to 22 years.
This is mainly due to the impact of the COVID-19 pandemic on forecasted profitability in the short to medium term. These revised
profitability figures also impact the assumed long-term projections for the Group with the result that the expected utilisation period has
increased. Other assumptions underpinning the deferred tax asset recoverability analysis are broadly in line with prior periods.
It should be noted that Management make certain judgements in the process of applying the Group’s accounting policies which may
impact on amounts recognised in the financial statements and consequently on taxable profits and the utilisation of tax losses. As set
out in note 22, analysis carried out demonstrates that were certain adverse events to arise (see below for further detail of the adverse
events considered) it continues to be Management’s view that there would be sufficient future taxable profits against which the full
quantum of tax losses carried forward could be utilised, albeit that the period of time over which such utilisation would occur would be
extended.
It should be further noted that the analysis of the estimated utilisation of the deferred tax asset arising on tax losses carried forward in
PTSB is based on the current business model of the Group. There is no expectation of a major change in the business which would have a
significant impact on the net deferred tax asset as currently recognised.
The recognition of this asset is dependent on the Group earning sufficient profits to utilise the tax losses. The quantum of and timing of
these profits is a source of significant estimation uncertainty.
However, as a principle, the Group is expecting to be profitable in the medium term. Consequently the key uncertainty relates principally
to the time period over which these profits will be earned. Whilst the Group may be more or less profitable in certain periods owing to
various factors such as the interest rate environment, loan loss provisions, operating costs and the regulatory environment, Management
expect that, notwithstanding these, the Group will be profitable over the long term. Consequently, any change to these factors which
would ultimately impact on profitability, are highly subjective, but will only impact on the time period over which this asset is recovered.
As set out above, in assessing the appropriateness of recognising a deferred tax asset on tax losses carried forward, Management
has considered the impact of various stress case scenarios on the period of recoverability. The three scenarios identified as having
potentially significant implications for the deferred tax asset recoverability are (i) adverse changes in the interest rate environment, (ii)
declining house prices leading to increased loan defaults and therefore increased impairment charges and (iii) increases in operating
costs. These stress case scenarios are intended to simulate a situation where there is an economic downturn. If any one of the stress
case scenarios were to occur, within a reasonably possible range, it is our expectation that the time period over which these assets might
be recovered could extend from between 1 to 4 years. If all adverse assumptions were to arise the period of recoverability would be
extended by a further 13 years (i.e. full utilisation by 2055).
However, Management consider this scenario unlikely. Changes in these assumptions are most impacted by changes to house prices and
unemployment, which represent the majority of any expected stress loss which could occur. This position will continue to be reviewed
for each reporting period; however, much of this estimation uncertainty may not be resolved for a number of years. However, as noted,
based on the Group’s latest forecast plan, it is Management’s estimate that the expected time period for recovery of the deferred tax
asset on tax losses to be 22 years, i.e. full utilisation is expected by 2042.
175
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Notes to the Consolidated Financial Statements
(continued)
2. Critical accounting estimates and judgements (continued)
(c) Financial instruments
The Group’s accounting policy for the determination of fair value of financial instruments is set out in note 1(iv)(e). The best evidence of
fair value is quoted prices in an active market. The absence of quoted prices increases reliance on valuation techniques and requires the
use of judgement in the estimation of fair value. This judgement includes evaluating available market data, determining the expected
cash flows for the instruments, as well as identifying and applying an appropriate discount rate and credit spread.
Valuation techniques that rely on non-observable data require a higher level of Management judgement in estimating the fair value
compared to those based on observable data.
The quality of market data, valuation techniques and other inputs into the valuation models used are subject to internal review and
approval.
The Group carries certain financial assets at fair value. In estimating the fair value of these assets and derivatives, the Group seeks to
use quoted market prices (level 1). Where quoted market prices are not available, the Group uses internally developed valuation models
and valuations from external experts. Inputs to these models are taken from observable market data where possible (level 2) but where
this is not possible, a degree of judgement is used (level 3). Such judgement considerations typically include items such as interest rate
yield curves, equity prices, option volatilities and currency rates.
Further details of the fair value of financial assets and liabilities are set out in note 32.
(d) Impairment review of its subsidiary undertaking
The Company carries its investment in its subsidiary undertaking at cost and reviews whether there is any indication of impairment
at each reporting date. Impairment testing involves comparing the carrying value of the investment to its recoverable amount. The
recoverable amount is the higher of the investment’s fair value or its value-in-use (VIU).
An impairment charge arises if the carrying value exceeds the recoverable amount and where the carrying value is not supported by
the estimated discounted future cash flows of the underlying business. The recoverable amount of the investment is the higher of its
fair value less costs to sell or its VIU. The carrying value of the subsidiary undertaking before adjusting for impairment was €1,101m and
recoverable amount based on the VIU was €956m resulting in a €145m impairment charge for the year (2019: €nil).
While the recoverable amount based on the VIU exceeds market capitalisation at the 31 December 2020, the depressed share price
is result of the overall subdued banking environment currently in which the entity operates along with various entity specific factors
including significant control premium as a result of majority shareholding by the Irish Government that affect the liquidity of the shares.
The impairment charge reflects the impact of the sensitised future projections catering for downside scenario for COVID-19 impacting
the financial performance of the Group in the medium term.
The VIU is the present value of the future free cash flows expected to be derived from the investment, based upon a VIU calculation
discounted at an appropriate rate for the investment.
The recoverable amount reflecting Management’s best estimate is sensitive to changes in the following key assumptions:
Cash flow forecasts
Cash flow forecasts are based on internal management information used for strategic planning for a period of up to four years, after
which a long-term growth rate appropriate for the business is applied. The key cash flows in these forecasts are as follows:
• Forecasted net lending growth, which is based on historical experience of the Group, strategic priorities and direction;
• Forecasted SME business and increase in fee based income portfolio based on the targets for the coming years;
• Operating profits based on historical experience, average margins adjusted for impacts of cost saving initiatives and future operating
models;
•
Impairment charge based on historical experience and forecasted general macro-economic outlook;
• Deposits projections based on the liquidity funding needs of the Groups; and
•
Issuance / redemptions of the debt issued and other capital raising activities.
The projected cash flows are stress tested with actual performance and verifiable economic data annually to reflect current market
conditions and Management’s best estimates of future projections.
176
Permanent TSB Group Holdings plc - Annual Report 2020 2. Critical accounting estimates and judgements (continued)
Growth rate
Growth rate is determined by reference to long-term economic growth and does not exceed the relevant long-term average growth rate
of the industry in which it operates. A growth rate of 2.5% was used.
Discount rate
The discount rate used is a post-tax weighted average cost of capital of the Group of 10% (2019: 10%) as the cash flows used in
impairment assessment are post tax cash flows. The discount rate includes an additional risk premium to account for various specific
risks. These specific risks are not reflected in the cash flows projected for impairment analysis.
The discount rate is used for various internal pricing models and is benchmarked with the industry averages to cater for the any changes
in risk profile of the Group.
The Group uses post-tax discount rate as the cash flows generated by the subsidiary are post tax cash flows.
Sensitivity analysis
The impact of changes in the growth rate, the discount rate and cash flows has been assessed by the Directors:
• A decrease of 1% in long term growth rate would have resulted in an additional €115m impairment charge;
• An increase of 1% in long term growth rate would have resulted in no impairment charge;
• An increase of 1% of the discount rate would have resulted in an additional €145m impairment charge;
• A decrease of 1% of the discount rate would have resulted in no impairment charge;
• An increase of 15% in cash flows would have resulted in no impairment charge;and
• A decrease of 15% in cash flows would have resulted in an additional €153m impairment charge.
3. Operating segments
The Group reports one operating segment which is in accordance with IFRS 8 ‘Operating segments’.
In line with IFRS 8, the Group also reports revenue from external customers for each major group of products and services. The amount
of revenue reported is based on the financial information used to produce the Group’s financial statements. The Group also reports
revenue and non-current assets on a geographical basis; Ireland and Isle of Man (IOM).
The ExCo as the Chief Operating Decision Maker (CODM) is responsible for implementing the strategic management of the Group as
guided by the Board. The ExCo reviews key performance indicators and internal management reports on a monthly basis.
3.1 Revenue from external customers split by products and services
The main products from which the Group earns external revenue include: mortgages, consumer finance, treasury assets, deposits and
current accounts, and wholesale funding. The net interest income from these products is set out in the table below.
Net interest income from external customers split by product:
Mortgages
Consumer finance*
Treasury assets
Deposits and current accounts
Wholesale funding
Total
*Consumer finance comprises income from term loans, credit cards and overdrafts.
31 December
2020
31 December
2019
€m
€m
336
35
9
(26)
(13)
341
343
35
26
(40)
(8)
356
177
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
3. Operating segments (continued)
3.2 (Loss)/profit for the year based on geographical location
During the years ended 31 December 2020 and 31 December 2019, the majority of the Group’s loss was incurred in Ireland. Immaterial
losses (less than €1m) were earned outside of Ireland in the Group’s IOM subsidiary PBI Ltd during the years ended 31 December 2020
and 31 December 2019.
The main products from which the Group earns external revenue include: mortgages; consumer finance; treasury assets; deposits and
current accounts and; wholesale funding. The net interest income from these products is set out in the table below.
3.3 Assets and liabilities based on geographical location
31 December 2020
Assets
Held for sale
Other assets
Total segment assets
Total segment liabilities
Capital expenditure
*This is based on geographical locations and constitutes business conducted in the IOM through PBI Ltd.
31 December 2019
Assets
Held for sale
Other assets
Total segment assets
Total segment liabilities
Capital expenditure
*This is based on geographical locations and constitutes business conducted in the IOM through PBI Ltd.
Ireland
€m
31
20,953
20,984
19,033
65
Ireland
€m
59
20,217
20,276
18,279
57
IOM*
€m
Of which inter-
group balances
€m
Total
€m
-
2
2
2
-
-
(55)
(55)
31
20,955
20,986
(55)
19,035
-
65
IOM*
€m
Of which inter-
group balances
€m
Total
€m
-
2
2
2
-
-
(114)
(114)
59
20,219
20,278
(114)
18,281
-
57
178
Permanent TSB Group Holdings plc - Annual Report 2020 4. Net interest income
Interest income
Loans and advances to customers
Loans and advances to banks
Debt securities and other fixed-income securities
- Hold to collect (HTC)
- Hold to collect and sell (HTC&S)
Interest expense
Deposits from banks (including central banks)
Due to customers
Interest on debt securities in issue
Amortisation of discontinued hedges on financial assets
Loans and advances to banks
Net interest income
Year ended
Year ended
31 December
2020
31 December
2019
€m
€m
371
-
-
8
3
382
-
(26)
(9)
(2)
(4)
(41)
341
378
1
20
14
413
(1)
(40)
(4)
(8)
(4)
(57)
356
Included in net interest income is €2m (31 December 2019: €8m) relating to the amortisation of discontinued hedges in respect to a
portion of the Group’s HTC&S debt securities portfolio.
Net interest income includes a charge in respect of deferred acquisition costs on loans and advances to customers of €16m (31
December 2019: €18m).
5. Fees and commission income
Fees and commission income
Retail banking and credit card fees
Brokerage and insurance commission
Other fees and commission income
Fees and commission income
Fees and commission expense (*)
Net fees and commission income
* Fees and commission expenses primarily comprises retail banking and credit cards fees
Year ended
Year ended
31 December
2020
31 December
2019
€m
€m
43
9
1
53
(25)
28
51
10
1
62
(25)
37
179
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
6. Net trading income/(expense)
Held-for-trading
Interest rate instruments
Foreign exchange gains
Net trading income
7. Net other operating income
Other income
Other operating income
8. Administrative, staff and other expenses (excluding exceptional items)
Staff costs (as detailed below)
Other general and administrative expenses
Administrative, staff and other expenses (excluding exceptional items)
Year ended
Year ended
31 December
2020
31 December
2019
€m
€m
-
1
1
2
1
3
Year ended
Year ended
31 December
2020
31 December
2019
€m
5
5
€m
17
17
Year ended
Year ended
31 December
2020
31 December
2019
€m
151
92
243
€m
148
104
252
Administrative, staff and other expenses (excluding exceptional items) includes costs of €5m related to COVID-19.
Statutory auditor’s remuneration (including expenses and excluding VAT)
- Audit of the individual and the Group financial statements
- Other assurance services*
- Other non-audit services**
Year ended
Year ended
31 December
2020
31 December
2019
€m
€m
1.1
0.1
0.2
1.1
0.3
0.1
*Other assurance services in 2020 and 2019 includes assurance relating to Section 27b.
**Other non-audit services in 2020 principally relate to the letters of comfort in respect of the EMTN programme and AT1 securities issuance. Other non-audit services in 2019
principally relate to the letters of comfort in respect of the EMTN programme and €300m debt issuance.
180
Permanent TSB Group Holdings plc - Annual Report 2020
8. Administrative, staff and other expenses (excluding exceptional items) (continued)
Staff costs
Wages and salaries (including commission payable to sales staff)
Social insurance
Pension costs
- Payments to defined contribution pension schemes
Total staff costs
Year ended
Year ended
31 December
2020
31 December
2019
€m
122
15
-
14
151
€m
121
14
13
148
Staff redundancy costs associated with exceptional items for the year ended 31 December 2020 and 31 December 2019 are included as
part of note 10 exceptional items.
Staff costs of €11m (31 December 2019: €7m), have been capitalised to intangible assets (see note 21), as the cost incurred was directly
related to developing software and it is probable that future economic benefits that exceed its cost will flow from its use over more than
one year. Therefore these costs are not included in this note.
Staff numbers
The number of staff employed is broken down by geographical location and by their operating segments for 31 December 2020 and 31
December 2019 in the table below:
Ireland
*Closing staff numbers are calculated on a FTE basis.
9. Bank levy and other regulatory charges
Bank levy
Other regulatory charges
Bank levy and other regulatory charges
Closing staff numbers
Average staff numbers
2020
2019
2020
2019
2,435
2,435
2,379
2,379
2,429
2,429
2,386
2,386
Year ended
Year ended
31 December
2020
31 December
2019
€m
24
25
49
€m
24
23
47
Other regulatory charges include €15m for the Deposit Guarantee Scheme (DGS) (31 December 2019: €14m), €5m for the Single
Resolution Fund (SRF) (31 December 2019: €5m), €3m for the Central Bank Industry Funding Levy (31 December 2019: €3m) and €2m
related to other regulatory charges (31 December 2019: €2m).
181
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
10. Exceptional items
Restructuring and other charges (a)
Impairment arising from deleveraging of loans (b)
Exceptional items
Year ended
Year ended
31 December
2020
31 December
2019
€m
31
26
57
€m
13
16
29
(a) Restructuring and other charges of €31m (31 December 2019: €13m) comprises of costs relating to the Group’s Enterprise
Transformation Programme announced in November 2020.
(b) Under the Group’s accounting policy, exceptional items include profits/losses arising on deleveraging. Under IFRS 9 when the sale of
a loan becomes part of the Group’s recovery strategy and meets the other conditions as set out in the accounting policy, the expected
cash flows from the loan sale (including costs of sale) are included in the IFRS 9 impairment calculation. During 2020, impairment
provisions increased by €32m relating to costs associated with the sale of the Glenbeigh II mortgage portfolio. This loss was offset by a
€6m release of provisions on loan sales that the Group executed in prior years in line with its NPL reduction strategy. This treatment is
consistent with the treatment of losses on deleveraging of non-performing loans in prior years.
11. Taxation
(a) Analysis of taxation charge
Current taxation
Charge for current year
Deferred taxation
Origination and reversal of temporary differences
Deferred taxation recognised in the income statement (note 22)
Taxation (credited)/charged to income statement
Effective tax rate
Year ended
Year ended
31 December
2020
31 December
2019
€m
€m
2
2
1
1
(6)
(6)
11
11
(4)
12
2%
29%
Group taxation credit for the year ended 31 December 2020 was €4m (31 December 2019: €12m charge). The main drivers of this credit
include (i) a current tax charge of €2m arising on non-trading income, (ii) a current year deferred tax credit of €10m which arises due to
an increase in tax losses carried forward, and (iii) the partial release of a DTA of €3m created on the introduction of IFRS 9.
(b) Reconciliation of standard to effective tax rate
(Loss)/profit on the Group activities before tax
Tax calculated at standard ROI corporation tax rate of 12.5% (2019: 12.5%)
Tax effect of non-deductible expenses and non-trading income
Utilisation of current year tax losses
Other
Adjustment to tax losses carried forward
Taxation (credited)/charged to income statement
182
Year ended
Year ended
31 December
2020
31 December
2019
€m
(166)
(21)
3
13
3
(2)
(4)
€m
42
5
2
-
5
-
12
Permanent TSB Group Holdings plc - Annual Report 2020
11. Taxation (continued)
(c) Tax effects of each component of other comprehensive income
Revaluation of property
Currency translation adjustment reserve
Fair value reserve:
- Change in fair value of equity instruments
- Change in fair value of debt instruments
- Transfer to income statement on amortisation of discontinued hedges
31 December 2020
Revaluation of property
Currency translation adjustment reserve
Fair value reserve:
-Change in fair value of equity instruments
-Change in fair value of debt instruments
- Transfer to income statement on asset disposal
31 December 2019
12. (Loss)/earnings per ordinary share
(a) Basic (loss)/earnings per ordinary share
Year ended 31 December 2020
Gross
€m
(2)
-
-
9
(3)
3
7
Tax
€m
-
-
-
(3)
-
-
(3)
Year ended 31 December 2019
Gross
€m
5
-
2
(17)
8
(2)
Tax
€m
(1)
-
-
2
(1)
-
Net
€m
(2)
-
-
6
(3)
3
4
Net
€m
4
-
2
(15)
7
(2)
Year ended
Year ended
31 December
2020
31 December
2019
Weighted average number of ordinary shares in issue and ranking for dividend excluding treasury shares
454,690,912
454,690,912
(Loss)/profit for the year attributable to equity holders
Less AT1 coupon paid (see note 30)
(Loss)/profit for the period attributable to equity holders less AT1 coupon paid
Basic (loss)/earnings per ordinary share (€ cent)
(b) Diluted (loss)/earnings per ordinary share
(€162m)
(€11m)
(€173m)
€30m
(€11m)
€19m
(38.0)
4.2
Year ended
Year ended
31 December
2020
31 December
2019
Weighted average number of ordinary shares excluding treasury shares held under employee benefit
trust used in the calculation of diluted earnings per share and including the potential ordinary shares from
the AT1 conversion feature
Diluted (loss)/earnings per ordinary share (€ cent)
454,690,912
(38.0)
454,690,912
4.2
Diluted (loss)/earnings per ordinary share is calculated by adjusting the weighted average number of ordinary shares outstanding to
assume conversion of all dilutive potential ordinary shares.
No adjustment to the weighted average number of ordinary shares for the effects of dilutive potential ordinary shares was required for
the year ended 31 December 2020 or 31 December 2019 as the AT1 securities were assessed due to the conversion feature within the
security, and were found to have an anti-dilutive effect.
183
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
12. (Loss)/earnings per ordinary share (continued)
Weighted average number of ordinary shares*
2020
2019
Number of ordinary shares in issue at 1 January (note 30)
454,695,492
454,695,492
Treasury shares held (note 30)
(4,580)
(4,580)
Net movements during the period
Weighted average shares redesignated
Weighted average shares issued
Weighted average number of ordinary shares at 31 December
-
-
454,690,912
-
-
454,690,912
* When calculating the earnings per share the weighted average number of ordinary shares outstanding during the period and all periods presented shall be adjusted for events
other than the conversion of potential ordinary shares that have changed the number of ordinary shares without a corresponding change in reserves.
13. Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise of following:
Cash at bank
Items in the course of collection
Loans and advances to banks repayable on demand (maturity of less than 3 months) (note 17)
Restricted cash included in loans and advances to banks repayable on demand
Cash and cash equivalents as per statement of cash flows
31 December
2020
31 December
2019
€m
€m
71
20
3,312
3,403
(356)
3,047
63
15
1,556
1,634
(403)
1,231
At 31 December 2020, restricted cash of €356m (31 December 2019: €403m) consists of cash of €355m (31 December 2019: €402m)
held by the Group’s securitisation entities and €1m (31 December 2019: €1m) which relates to cash collateral placed with counterparties
in relation to derivative positions and repurchase agreements.
14. Debt securities
Government bonds
Corporate bonds
Gross debt securities
31 December 2020
31 December 2019
HTC
€m
2,477
106
2,583
HTC&S
€m
-
-
-
Total
€m
2,477
106
2,583
HTC
€m
1,754
42
1,796
HTC&S
€m
209
-
209
Total
€m
1,963
42
2,005
As at 31 December 2020, all debt securities are available to be used and are eligible as collateral (though eligibility will depend on the
criteria of the counterparty) in sale and repurchase agreements.
Debt securities that are managed on a HTC business model basis are accounted for at amortised cost. Debt securities that are managed
on a HTC&S basis are accounted for at FVOCI.
Government bonds of €2.5bn (31 December 2019: €1.8bn) comprise Irish, Spanish and Portuguese government bonds which are
designated as HTC. Corporate bonds comprise of Residential Mortgage Backed Securities (RMBS), including a retained note in the
Glenbeigh securitisation 2018-1 DAC, all RMBSs are designated as HTC. The HTC securities represent a portfolio of securities purchased
for the purpose of collecting contractual cashflows to maturity.
The HTC&S securities which the Group held as at 31 December 2019 matured during 2020.
All debt securities at 31 December 2020 are stage 1 apart from the Glenbeigh securitisation which is POCI.
184
Permanent TSB Group Holdings plc - Annual Report 2020
14. Debt securities (continued)
(A) HTC and HTC&S
The movement in HTC and HTC&S securities is classified as follows:
As at 1 January
Change in fair value
Additions
Maturities/disposals
Interest net of cash receipts
Amortisation of premium / (discount)
At 31 December
2020
HTC
€m
1,796
-
1,046
(214)
(3)
(42)
2,583
HTC&S
€m
209
(3)
-
(200)
(6)
-
-
2019*
HTC
€m
2,090
-
321
(564)
(9)
(42)
1,796
HTC&S
€m
557
(23)
-
(320)
(5)
-
209
*The presentation of the movement in HTC and HTC&S securities has been updated to include to include the amortisation of premiums/(discounts) on securities. As a result,
the prior period movement in HTC and HTC&S securities has been updated to reflect the change to the comparative. Change in fair value has decreased by €12m, additions has
increased by €2m, maturities/disposals has increased by €32m, interest net of cash receipts has increased by €20m and amortisation of premium/(discount) has decreased by
€42m. Management consider this presentation to be more appropriate to reflect the movement in the debt securities.
(B) Amounts arising from impairment provisioning on debt securities:
(i) Held at amortised cost
As at 31 December 2020, the amount arising from ECL on debt securities measured at amortised cost is €0.7m (31 December 2019:
€0.4m). The ECL on debt instruments measured at amortised cost is offset against the carrying amount of the assets in the statement of
financial position.
(ii) Held at Fair Value through Other Comprehensive Income (FVOCI)
As at 31 December 2020, the amount arising from ECL on debt securities measured at FVOCI is Nil (31 December 2019: Negligible).
15. Equity securities
As at 1 January
Revaluation
Total equity investments
The carrying value of equity securities can be analysed as follows:
Unlisted
Gross equity securities
31 December
2020
31 December
2019
€m
15
9
24
€m
13
2
15
31 December
2020
31 December
2019
€m
24
24
€m
15
15
PTSB Group holds Series A and Series B preferred stock in Visa Inc. at 31 December 2020 with a value of €24m. The Series A preferred
stock was acquired during 2020 upon the conversion of Series B preferred stock by Visa Inc. These were fair valued at €16m and €8m
respectively at 31 December 2020 (31 December 2019: €15m) and are recognised in the Statement of Financial Position at FVOCI.
The fair value of the preferred stock Series A is classified as Level 1 and the fair of the preferred stock Series B is classified as Level 3, as
the valuation of these preferred stock includes inputs that are based on unobservable data (refer to note 32 for further details).
185
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
16. Derivative financial instruments
Derivative instruments are used by the Group to hedge against interest rate risk and foreign currency risk.
Certain derivative instruments do not fulfil the hedge accounting criteria under IFRS 9 and are consequently classified as held for
trading. All derivatives are carried at fair value.
The derivative instruments used by the Group include:
• Currency forward rate contracts, which are commitments to purchase and sell currencies, including undelivered spot transactions; and
•
Interest rate swaps which are commitments to exchange one set of cash flows for another.
Further details on the Group’s risk management policies are set out in the risk management section of the report.
Derivatives held by the Group are analysed as follows:
31 December 2020
31 December 2019
Total
amount
€m
Fair
value
asset
€m
Fair
value
liability
€m
Total
amount
€m
Fair
value
asset
€m
Fair
value
liability
€m
5
5
83
7
90
95
-
-
-
-
-
-
-
-
-
-
-
-
22
22
105
14
119
141
-
-
1
-
1
1
1
1
-
1
1
2
Fair value hedges
Interest rate swaps
Held for trading
Forwards
Interest rate swaps
Derivative financial instruments as per
the statement of financial position
Fair value hedges
Fair value hedges are used by the Group to protect it against changes in the fair value of financial assets and financial liabilities due to
movements in interest rates. The financial instruments hedged for interest rate risk include fixed rate loans, fixed rate debt issued and
other borrowed funds. The Group uses interest rate swaps to hedge interest rate risk.
The gains/(losses) recognised in net interest income on the hedging instruments are designated as fair value hedges. The hedged items
attributable to the hedged risk are analysed below:
Gains on hedging instruments
(Losses) on hedged items attributable to hedged risk
Net gains / (losses)
31 December
2020
31 December
2019
€m
€m
-
-
-
6
(6)
-
186
Permanent TSB Group Holdings plc - Annual Report 2020
17. Loans and advances to banks
Held at amortised cost
Placed with central banks
Placed with other banks
Loans and advances to banks
31 December
2020
31 December
2019
€m
€m
2,813
499
3,312
1,038
518
1,556
Placements with other banks includes restricted cash of €356m (31 December 2019: €403m) of which €355m (31 December 2019:
€402m) is held by the Group’s securitisation entities and €1m (31 December 2019: €1m) which relates to cash collateral placed with
counterparties in relation to derivative positions and repurchase agreements.
Loans and advances to banks amounting to €3,312m as at 31 December 2020 (31 December 2019: €1,556m) have a maturity of less
than three months, and therefore have been treated as cash and cash equivalents, with the exception of restricted cash as noted above.
18. Loans and advances to customers
Loans and advances by category are set out below:
Residential mortgages
- Held through special purpose entities
- Held directly
Commercial mortgage loans
Consumer finance (term loans/other)
Gross loans and advances to customers
Less: provision for impairment (note 19)
Deferred fees, discounts and fair value adjustments
Net loans and advances to customers
31 December
2020
31 December
2019
€m
€m
5,724
8,623
14,347
181
327
14,855
(728)
86
14,213
7,627
8,231
15,858
165
366
16,389
(818)
73
15,644
Note 41 provides detail of deleveraging of loans and advances to customers.
Loans and advances can be analysed into tracker, fixed and variable rate loans as follows:
Tracker rate
Variable rate
Fixed rate
Deferred fees, discounts and fair value adjustments
Total
Gross loans and advances to
customers
Net loans and advances to
customers
31 December
2020
31 December
2019
31 December
2020
31 December
2019
€m
€m
€m
€m
6,986
3,314
4,555
14,855
86
14,941
8,941
4,019
3,429
16,389
73
16,462
6,474
3,140
4,513
14,127
86
14,213
8,291
3,876
3,404
15,571
73
15,644
The Group has established a number of securitisation entities. This involved transferring the Group’s interest in pools of residential
mortgages to a number of special purpose entities which issued mortgage-backed floating-rate notes to fund the purchase of the
interest in the mortgage pools. The notes are secured by a first fixed charge over the residential mortgages in each pool and may be sold
to investors or held by the Group and used as collateral for borrowings.
187
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
18. Loans and advances to customers (continued)
Details of the residential mortgage pools sold to special purpose entities and the notes issued by the special purpose entities are included
below:
Residential mortgages held through special purpose entities
Notes issued by special purpose entities
- rated
- unrated
The notes issued by these special purpose entities comprise the following:
31 December
2020
31 December
2019
€bn
5.7
2.9
2.8
€bn
7.7
4.9
2.8
31 December
2020
31 December
2019
€bn
€bn
Sold to third parties and included within debt securities in issue (non-recourse) on the Statement of
financial position (note 26)
- Other
- Available collateral*
- Unrated notes
*The eligibility of available collateral will depend on the criteria of the counterparty.
0.5
2.4
2.8
5.7
Non-credit impaired
Credit impaired
Stage 1
€m
Stage 2
€m
Stage 3
€m
POCI
€m
Balance as at 1 January 2020
10,999
4,340
1,048
New assets originated*
1,245
86
1
Stage Transfers:
Transfers from Stage 1 to Stage 2
Transfers to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 3
Net movement arising from transfer of Stage
Redemptions and repayments
Decrease due to write offs
Disposals
(932)
(55)
485
2
(500)
(1,116)
(1)
(52)
932
(273)
(485)
141
315
(237)
(9)
(1,343)
-
328
-
(143)
185
(64)
(43)
-
Balance as at 31 December 2020
10,575
3,152
1,127
*Loan originations are net of repayments in the year.
2
-
-
-
-
-
-
(1)
-
-
1
0.6
4.3
2.8
7.7
Total
€m
16,389
1,332
-
-
-
-
-
(1,418)
(53)
(1,395)
14,855
188
Permanent TSB Group Holdings plc - Annual Report 2020
18. Loans and advances to customers (continued)
Non-credit impaired
Credit impaired
Stage 1
€m
Stage 2
€m
Stage 3
€m
POCI
€m
Balance as at 1 January 2019
10,519
4,701
1,692
New assets originated*
1,496
98
-
Stage Transfers:
Transfers from Stage 1 to Stage 2
Transfers to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 3
Net movement arising from transfer of Stage
Redemptions and repayments
Decrease due to write offs
Disposals
(361)
(25)
588
1
203
(1,216)
(1)
(2)
361
(146)
(588)
213
(160)
(245)
(8)
(46)
-
171
-
(214)
(43)
(65)
(78)
(458)
Balance as at 31 December 2019
10,999
4,340
1,048
*Loan originations are net of repayments in the year.
4
-
-
-
-
-
-
(2)
-
-
2
Total
€m
16,916
1,594
-
-
-
-
-
(1,528)
(87)
(506)
16,389
19. Impairment provisions
(a) Loans and advances to customers
The following table reflects non-performing loans for which ECL provisions are held and an analysis of Stage 1, Stage 2 and Stage 3 ECL
provisions across the loans and advances to customers portfolio.
The non-performing loan balance as at 31 December 2020 was €1,128m (31 December 2019: €1,050m). Refer to note 33 for further
details.
31 December 2020
Residential:
-Home loans
-Buy-to-let
Commercial
Consumer Finance:
-Term loans/other
Total gross loans
Impairment provision
Deferred fees, discounts and fair value
adjustments
Balance as at 31 December
Loans and
advances to
customers
€m
NPLs
€m
NPL % of
total loans
Stage 1
Stage 2
Stage 3
%
€m
€m
€m
Total ECL
provisions
as % of total
loans
%
Total
€m
ECL provisions
658
418
35
5.3%
20.8%
19.3%
17
1,128
5.2%
7.6%
40
2
-
13
55
61
183
32
10
286
178
175
21
13
387
279
360
53
36
728
2%
18%
29%
11%
5%
12,338
2,009
181
327
14,855
(728)
86
14,213
189
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
19. Impairment provisions (continued)
31 December 2019
Residential:
-Home loans
-Buy-to-let
Commercial
Consumer Finance:
-Term loans/other
Total gross loans
Impairment provision
Deferred fees, discounts and fair value
adjustments
Balance as at 31 December
Loans and
advances to
customers
€m
NPLs
€m
NPL % of
total loans
Stage 1
Stage 2
Stage 3
%
€m
€m
€m
Total ECL
provisions
as % of total
loans
%
Total
€m
614
377
41
5.0%
10.5%
24.8%
18
1,050
4.9%
6.4%
31
8
2
3
44
58
363
12
6
439
146
150
24
15
335
235
521
38
24
818
2%
14%
23%
7%
5%
12,260
3,598
165
366
16,389
(818)
73
15,644
A reconciliation of the provision for impairment losses for loans and advances is as follows:
2020
Total by portfolio
ECL as at 1 January 2020
Redemptions and repayments
Net remeasurement of loss allowance
Loan originations
Net movement excluding derecognition
Derecognition-disposals
Derecognition-repossessions
Derecognition-write offs*
Derecognition
ECL as at 31 December 2020
Residential
mortgages
€m
Commercial
€m
Consumer
finance
€m
756
(12)
117
9
114
(209)
(1)
(21)
(231)
639
38
(11)
21
9
19
-
-
(4)
(4)
53
24
(1)
12
6
17
-
-
(5)
(5)
36
Net movement excluding derecognition (from above)
Interest income booked but not recognised
Write offs net of recoveries
Impairment charge on customer loans and advances for the year ended
31 December 2020
* See note 1 Corporate information, basis of preparation and significant accounting policies for detail of the Group write-off policy.
Total
€m
818
(24)
150
24
150
(209)
(1)
(30)
(240)
728
150
(8)
13
155
190
Permanent TSB Group Holdings plc - Annual Report 2020
19. Impairment provisions (continued)
2019
Total by portfolio
ECL as at 1 January 2019
Redemptions and repayments
Net remeasurement of loss allowance
Loan originations
Net movement excluding derecognition
Derecognition-disposals
Derecognition-repossessions
Derecognition-write offs*
Derecognition
ECL as at 31 December 2019
Residential
mortgages
€m
1,013
(12)
19
9
16
(227)
(12)
(34)
(273)
756
Commercial
€m
42
(1)
(1)
5
3
(5)
-
(2)
(7)
38
Net movement excluding derecognition (from above)
Interest income booked but not recognised
Write offs net of recoveries
Impairment charge on customer loans and advances
* See note 1 Corporate information, basis of preparation and significant accounting policies for detail of the Group write-off policy.
Consumer
finance
€m
Total
€m
28
1,083
(3)
3
2
2
-
-
(6)
(6)
24
Total by stage
ECL as at 1 January 2020
Transfer to Stage 1
Transfer to Stage 2
Transfer to Stage 3
Stage transfers
Redemptions and repayments
Net remeasurement of loss allowance
Loan originations
Net movement excluding derecognition
Derecognition-disposals
Derecognition-repossessions
Derecognition-write offs*
Derecognition
ECL as at 31 December 2020
Stage 1
€m
44
Stage 2
€m
Stage 3
€m
439
335
22
(9)
-
13
(4)
(9)
12
(1)
(1)
-
-
(1)
55
(22)
35
(32)
(19)
(7)
71
12
76
(208)
-
(2)
(210)
-
(26)
32
6
(14)
89
-
75
-
(1)
(28)
(29)
286
387
Net movement excluding derecognition (from above)
Interest income booked but not recognised
Write offs net of recoveries
Impairment charge on customer loans and advances for the year ended
31 December 2020**
* See note 1 Corporate information, basis of preparation and significant accounting policies for detail of the Group write-off policy.
** Impairment charge excludes exceptional impairment arising from deleveraging of loans.
(16)
21
16
21
(232)
(12)
(42)
(286)
818
21
(14)
3
10
Total
€m
818
-
-
-
-
(25)
151
24
150
(209)
(1)
(30)
(240)
728
150
(8)
13
155
191
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Notes to the Consolidated Financial Statements
(continued)
19. Impairment provisions (continued)
Total by stage
ECL as at 1 January 2019
Transfer to Stage 1
Transfer to Stage 2
Transfer to Stage 3
Stage transfers
Redemptions and repayments
Net remeasurement of loss allowance
Loan originations
Net movement excluding derecognition
Derecognition-disposals
Derecognition-repossessions
Derecognition-write offs*
Derecognition
ECL as at 31 December 2019
Net movement excluding derecognition (from above)
Interest income booked but not recognised
Write offs net of recoveries
Impairment charge on customer loans and advances
Stage 1
€m
Stage 2
€m
Stage 3
€m
Total
€m
35
12
(3)
-
9
(2)
(6)
8
-
-
-
-
-
411
(12)
47
(17)
18
(5)
8
8
11
-
-
(1)
(1)
637
1,083
-
(44)
17
(27)
(9)
19
-
10
(232)
(12)
(41)
(285)
-
-
-
-
(16)
21
16
21
232
(12)
(42)
(286)
44
439
335
818
21
(14)
3
10
* See note 1 Corporate information, basis of preparation and significant accounting policies for detail of the Group write-off policy.
Modified Financial Assets
At 31 December 2020 there have been no significant modified financial assets for which the loss allowance has changed from lifetime to
12-month ECL.
192
Permanent TSB Group Holdings plc - Annual Report 2020 20. Property and equipment
2020
€m
€m
€m
€m
€m
Held at fair
value land and
buildings
Held at cost
buildings
Held at cost
office and
computer
equipment
Leased buildings
Leased motor
vehicles
Right-of-use assets*
Cost or valuation
At 1 January
Additions
Revaluations
Depreciation write-back on revaluation
Disposals/lease exits or cancellations
At 31 December
Accumulated depreciation
At 1 January
Provided in the year
Revaluations
At 31 December
Net book value at 31 December
*For further details on right-of-use assets refer to note 29.
102
-
(3)
(1)
-
98
-
(1)
1
-
98
102
5
-
-
-
107
(65)
(6)
-
(71)
36
77
8
-
-
-
85
(55)
(6)
-
(61)
24
46
-
-
-
-
46
(7)
(7)
-
(14)
32
2
-
-
-
-
2
(1)
(1)
-
(2)
-
Total
€m
329
13
(3)
(1)
-
338
(128)
(21)
1
(148)
190
Of the €3m revaluation loss, €1m is recognised in the income statement due to impairment on land and buildings and €2m is included in
the revaluation reserve in the statement of comprehensive income.
2019
€m
€m
€m
€m
€m
Held at fair
value land and
buildings
Held at cost land
and buildings
Held at cost
office and
computer
equipment
Leased buildings
Leased motor
vehicles
Right-of-use assets*
Cost or valuation
At 1 January
Adoption of IFRS16 as at 1 January
Additions
Revaluations
Disposals/lease exits or cancellations
At 31 December
Accumulated depreciation
At 1 January
Provided in the year
Revaluations
At 31 December
Net book value at 31 December
100
-
-
2
-
102
-
(3)
3
-
102
96
-
6
-
-
102
(60)
(5)
(65)
37
68
-
9
-
-
77
(50)
(5)
(55)
22
-
44
4
-
(2)
46
-
(7)
(7)
39
-
1
1
-
-
2
-
(1)
(1)
1
Total
€m
264
45
20
2
(2)
329
(110)
(21)
3
(128)
201
Of the €5m revaluation gain, €nil is recognised in the income statement due to impairment write-back on land and buildings and €5m is
included in the revaluation reserve in the statement of comprehensive income.
193
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
20. Property and equipment (continued)
The net book value of land and buildings includes the following:
Land
Buildings - freehold fair value
Buildings - freehold cost
Buildings – leasehold
31 December
31 December
2020
€m
31
67
23
45
166
2019
€m
33
69
24
52
178
Land and buildings at 31 December 2020 held at fair value was €98m (31 December 2019: €102m). The historic cost of land and
buildings is €107m (31 December 2019: €107m).
Fair value measurement of Group’s land and buildings
The Group’s freehold land and buildings are stated at their revalued amounts, being the fair value at the date of revaluation less any
accumulated depreciation recognised from the date of the latest revaluation. On the date of revaluation any accumulated depreciation is
eliminated. The fair value measurements of the Group’s freehold land and buildings as at 31 December 2020 and 31 December 2019 were
performed by independent professional valuers having appropriate qualifications and recent experience in the fair value measurement of
properties in the locations and categories being valued. The effective date of revaluation is 31 October 2020 and 31 October 2019.
The fair value of the freehold land and buildings was determined based on a market comparable approach that reflects recent
transaction prices for similar properties using capitalisation yields ranging from 5.25% to 11%.
Details of the freehold land and buildings and information about the fair value hierarchy as defined in the Group’s accounting policy as at
31 December 2020 are as follows:
Level 1
€m
Level 2
€m
-
-
-
31
67
98
Level 1
€m
Level 2
€m
-
-
-
33
69
102
Level 3
Total fair value
€m
-
-
-
€m
31
67
98
Level 3
Total fair value
€m
-
-
-
€m
33
69
102
31 December 2020
Land
Buildings – freehold
31 December 2019
Land
Buildings - freehold
194
Permanent TSB Group Holdings plc - Annual Report 2020
21. Intangible assets
Software
Cost
At 1 January
Additions
At 31 December
Accumulated amortisation
At 1 January
Provided in the year
At 31 December
Net book value at 31 December
22. Deferred taxation
Deferred tax liabilities
Deferred tax assets
Net deferred tax assets
31 December
2020
31 December
2019
€m
€m
127
51
178
(61)
(15)
(76)
102
90
37
127
(49)
(12)
(61)
66
31 December
2020
31 December
2019
€m
€m
(27)
376
349
(22)
367
345
Net deferred tax assets are attributable to the following:
2020
Property and equipment
Unrealised gains/(losses) on assets/liabilities
Losses carried forward
Other temporary differences
Recognised
in income
statement
Recognised
in equity
Recognised
in other
comprehensive
income
At 31 December
At 1 January
€m
€m
€m
€m
€m
(20)
(2)
360
7
345
(1)
-
10
(3)
6
-
(3)
-
-
(3)
-
-
-
1
1
(21)
(5)
370
5
349
2019
Property and equipment
Unrealised gains/(losses) on assets/liabilities
Losses carried forward
Other temporary differences
At 1 January
€m
(19)
(3)
366
11
355
Recognised in
income
statement
Recognised
in equity
Recognised in
other
comprehensive
income
At 31 December
€m
-
-
(6)
(5)
(11)
€m
€m
€m
-
-
-
1
1
(1)
1
-
-
-
(20)
(2)
360
7
345
195
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
22. Deferred taxation (continued)
In line with the requirements of IAS 12 “Deferred Tax Assets”, Management and Directors formed the view that there should be sufficient
future taxable profits within the PTSB legal entity against which PTSB tax losses carried forward can be used. Management and
Directors have reviewed this position as at 31 December 2020 and remain of the view that it is appropriate to continue to recognise
a deferred tax asset on the full quantum of tax losses carried forward in PTSB. This information is based on the following supporting
evidence: (i) A review of the quantum of tax losses carried forward in PTSB in conjunction with forecasted profitability (the projections
used having been approved by the Board of Directors). This review demonstrated that it is probable that there will be sufficient future
taxable profits within PTSB against which the full quantum of tax losses carried forward can be utilised; (ii) The consideration of
forecasting risks, including sensitivity analysis on the financial projections used (including an analysis of the effects of higher than
expected impairment levels and lower than expected net interest margin). This analysis demonstrated, were certain adverse events
to occur, it would remain probable that there would be sufficient future taxable profits within PTSB against which the full quantum of
tax losses carried forward could be utilised, albeit that the period of time over which such utilisation would occur would be extended;
and (iii) The consideration of a number of other factors which may impact the utilisation of the tax losses including the macroeconomic
environment, progress made on the Group’s NPL strategy and the Group’s financial position. These factors are set out in further details in
note 2, Critical accounting estimates and judgements.
It should also be noted that under current Irish tax legislation there is no time restriction on the utilisation of trading losses. Therefore, the
tax losses carried forward in PTSB are available for utilisation against profits of the same trade in any future period. Also, the Directors
are satisfied that taxable future profits should be available to recover the remaining deferred tax assets.
The total unrecognised deferred tax assets on carried forward tax losses at 31 December 2020 amounted to €20m (31 December 2019:
€20m) which relates to the Group’s subsidiaries. Included in the overall deferred tax asset is a deferred tax asset of €95k in relation to
PTSBGH (31 December 2019: €71k).
In accordance with IFRS these balances are recognised on an undiscounted basis.
23. Other assets
Loan sale receivable
Other
31 December
2020
31 December
2019
€m
€m
-
5
5
251
8
259
Loan sale receivable at 31 December 2019 relates to the amount due from the purchaser of the Glas II portfolio, which was received in the
first half of 2020.
24. Prepayments and accrued income
Visa prepayments
Other prepayments
31 December
2020
31 December
2019
€m
72
14
86
€m
28
21
49
196
Permanent TSB Group Holdings plc - Annual Report 2020
25. Customer accounts
Term deposits
Demand deposits
Current accounts
Notice and other accounts
Customer accounts
31 December
2020
31 December
2019
€m
€m
3,062
7,132
5,779
2,066
18,039
4,701
5,836
4,667
1,986
17,190
There are no deposits placed by a Government institution at 31 December 2020 (31 December 2019: €0.1bn).
An analysis of the contractual maturity profile of customer accounts is set out in the liquidity risk section of note 33 of the consolidated
financial statements.
26. Debt securities in issue
At amortised cost
Bonds and medium-term notes
Non-recourse funding
Maturity analysis
Repayable in less than 1 year
Repayable in greater than 1 year but less than 5 years
Repayable in greater than 5 years
31 December
2020
31 December
2019
€m
€m
351
458
809
2
349
458
809
308
615
923
9
299
615
923
Bonds & Medium Term Notes (MTNs)
In February 2020 PTSBGH issued an additional €0.05bn of Senior Unsecured 2.125% Notes maturing on 26 September 2024 as part of
the MREL securities programme. Interest is payable on the nominal amount annually in arrears on the coupon date.
In October 2020, a €7m MTN matured.
Non-Recourse funding
As at 31 December 2020 the Group had advances of €0.5bn (31 December 2019: €0.6bn) collateralised on residential property loans
of €0.4bn (31 December 2019: €0.6bn) subject to non-recourse funding by way of residential mortgage securitisations. Residential
mortgage securitisations involve transferring the interest in pools of mortgages to special purpose entities which issue mortgage-
backed floating rate notes to fund the purchase of the interest in mortgage pools. These loans, which have not been de-recognised, are
shown within loans and advances to customers while the non-recourse funding is shown as a separate liability.
Non-recourse funding reduced by €0.1bn between 31 December 2019 and 31 December 2020 to €0.5bn, primarily due to pay down of
non-recourse funding during the year. The Group did not have any defaults of principal or interest or other breaches with respect to non-
recourse funding during 2020.
Under the terms of these securitisations, the rights of the providers of the related funds are limited to the mortgage loans in the
securitised portfolios, together with any related income generated by the portfolios and the subordinated loans provided by the Group,
without further recourse to the Group. During the term of the transactions, any amounts realised from the portfolios in excess of that
due to the providers of the funding, less any related administrative costs, will be paid to the Group. The providers of this funding have
agreed in writing (subject to the customary warranties and covenants) that they will seek repayment of the finance, as to both principal
and interest, only to the extent that sufficient funds are generated by the mortgages and related security and any subordinated loans
provided by the Group, and that they will not seek recourse in any other form.
197
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
27. Other liabilities
Amounts falling due within one year
PAYE and social insurance
Other taxation including deposit interest retention tax (DIRT)
Other
Lease liability (See note 29 for further information on lease liabilities)
Total amounts falling due within one year
Amounts falling due greater than one year
Lease liability (See note 29 for further information on lease liabilities)
Total amounts falling due greater than one year
Total other liabilities
31 December
2020
31 December
2019
€m
€m
4
1
68
7
80
27
27
107
4
2
70
8
84
34
34
118
Total
€m
74
22
(3)
(52)
41
Other include accruals for sundry creditors of €48m at 31 December 2020 (€63m: 31 December 2019) and miscellaneous liabilities.
28. Provisions
2020
Provision
for legacy,
legal and
compliance
liabilities
Restructuring
costs
€m
2
28
(1)
(1)
28
€m
25
21
(2)
(15)
29
2019
Provision
for legacy,
legal and
compliance
liabilities
Restructuring
costs
€m
5
13
(2)
(14)
2
€m
55
6
-
(36)
25
Other
€m
14
11
(5)
-
20
Total
€m
41
60
(8)
(16)
77
Other
€m
14
3
(1)
(2)
14
As at 1 January
Provisions made during the year
Write-back of provisions during the
year
Provisions used during the year
As at 31 December
The provision at 31 December 2020 is €77m (31 December 2019: €41m) which is comprised of the following:
Restructuring costs
During 2020, the Group announced an Enterprise Transformation programme. A detailed restructuring plan was developed and
announced to all staff in November 2020.
Following this announcement, various structural actions, including detailed discussions at a business unit level with the impacted staff,
were taken in advance of 31 December as part of the Group’s implementation of the restructuring plan.
As a result of the above announcement and actions, a constructive obligation was created in advance of 31 December 2020. At 31
December 2020, a provision for restructuring of €27m was recognised based on the estimate of the costs of this programme.
This programme is expected to conclude during 2021.
During 2018 the Group announced a voluntary severance scheme. As at 31 December 2020, provisions of €0.5m were utilised as part
of Phase 1 and Phase 2 (31 December 2019: €12m). The remaining provision of €0.3m is based on an estimate of the remaining costs to
bring Phase 1 and Phase 2 to a conclusion.
The Group remains a lessee on a number of non-cancellable leases over properties that it no longer occupies following a restructure in
2013. During 2019, provisions of €2m were written back in line with IFRS 16. The remaining provision of €0.7m relates to dilapidation
costs associated with the remaining properties.
Provision for legacy, legal and compliance liabilities
As at 31 December 2020, the Group has provisions of €29m relating to legal, compliance and other costs of on-going disputes in relation
to legacy business issues (31 December 2019: €25m).
198
Permanent TSB Group Holdings plc - Annual Report 2020
28. Provisions (continued)
A provision of €14m was made during 2020 relating to a change in the treatment of third party legal costs charged to customers in
mortgage arrears. Additional provisions of €7m were made during 2020 relating to legal, compliance and other costs of on-going
disputes in relation to legacy business issues.
Management has exercised judgment in arriving at the estimated provision in respect of the potential liabilities.
Other
As at 31 December 2020, the provision of €20m (31 December 2019: €14m) primarily relates to indemnities and guarantees provided by
the Group, together with further costs, relating to deleveraging of various asset portfolios.
29. Leases
Right-of-use assets
As at 1 January 2020
Additions
Lease exits or cancellations
Depreciation of right-of-use assets
Balance as at 31 December 2020
As at 1 January 2019
Additions
Lease exits or cancellations
Depreciation of right-of-use assets
Balance as at 31 December 2019
Lease liabilities
As at 1 January 2020
Additions
Lease exits or cancellations
Repayment of lease liabilities
Balance as at 31 December 2020
As at 1 January 2019
Additions
Lease exits or cancellations
Repayment of lease liabilities
Balance as at 31 December 2019
Land and
buildings
Motor vehicles
€m
39
-
-
(7)
32
€m
1
-
-
(1)
-
Land and
buildings
Motor vehicles
€m
44
4
(2)
(7)
39
€m
1
1
-
(1)
1
Land and
buildings
Motor vehicles
€m
41
-
-
(7)
34
€m
1
-
-
(1)
-
Land and
buildings
Motor vehicles
€m
45
4
(2)
(6)
41
€m
1
1
-
(1)
1
Total
€m
40
-
-
(8)
32
Total
€m
45
5
(2)
(8)
40
Total
€m
42
-
-
(8)
34
Total
€m
46
5
(2)
(7)
42
199
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
29. Leases (continued)
Lease liabilities
Maturity analysis - contractual undiscounted cash flows*
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities
Lease liabilities included in the statement of financial position
Current lease liability
Non-current lease liability
*The maturity analysis of undiscounted lease liabilities are disclosed in note 33.
Amounts recognised in income statement*
Interest on lease liabilities
Expenses relating to short-term leases
Depreciation of right-of-use assets
Total charge in profit or loss
31 December
2020
31 December
2019
€m
€m
7
18
11
36
34
7
27
8
19
17
44
42
8
34
31 December
2020
31 December
2019
€m
€m
(1)
-
(8)
(9)
(1)
-
(8)
(9)
*Interest expense on the lease liabilities amounted to €0.5m (31 December 2019: €0.5m) whereas expenses relating to short-term leases amounted to €0.3m (31 December
2019: €0.4m).
Amounts recognised in statement of cash flow
Cash outflow for leases
Total
31 December
2020
31 December
2019
€m
€m
(8)
(8)
(8)
(8)
As a lessee
i. Real estate
The Group leases retail properties for its branch operations. The lease term of retail properties typically run for a period of 10-35 years.
The Group does not have variable lease payments and its leases do not contain extension options.
ii. Vehicles
The Group leases vehicles with lease terms of three to five years. The Group has no option to purchase the assets at the end of the
contract term and it does not guarantee the residual value of the leased assets at the end of the contract term.
iii. Sub-leases
Two of the properties that the Group lease are vacant and surplus to its requirements. These two units are with agents for disposal by
way of assignment or sub-let. These sub-leases have been classified as finance leases because the sub-lease is for the whole of the
remaining term of the head lease and treated separately from their head lease.
200
Permanent TSB Group Holdings plc - Annual Report 2020 30. Share capital, reserves and other equity instruments
Share capital
Share capital is the funds raised as a result of a share issue and comprises the ordinary shares of the holding company Permanent TSB
Group Holdings plc.
Authorised share capital
31 December 2020
Ordinary shares of €0.50 each
31 December 2019
Ordinary shares of €0.50 each
Issued share capital
The movement in the number of paid up ordinary and deferred shares is as follows:
Balances as at 31 December 2020
As at 1 January 2020
Movement
As at 31 December 2020
Issued share capital (€m)
Shares held under employee benefit trust
% of Authorised capital issued
Balances as at 31 December 2019
As at 1 January 2019
Movement
As at 31 December 2019
Issued share capital (€m)
Shares held under employee benefit trust
% of Authorised capital issued
Number of shares
1,550,000,000
Number of shares
1,550,000,000
31 December
2020
€m
775
31 December
2019
€m
775
€ 0.50 Ordinary
shares
Total
454,695,492
-
454,695,492
227
4,580
€ 0.50 Ordinary
shares
454,695,492
-
454,695,492
227
4,580
227
29%
Total
227
29%
Share Premium
The share premium reserve represents the excess of amounts received for share issues over the par value of those shares of the
Company.
Other Reserves
Revaluation reserve (Non-distributable)
The revaluation reserve is a non-distributable reserve comprising unrealised gains or losses, net of tax, on the revaluation of owner
occupied properties.
Fair value reserve (Non-distributable)
The fair value reserve comprises unrealised gains or losses, net of tax and hedge accounting, on debt and equity instruments measured
at FVOCI, less the ECL allowance recognised in the income statement.
Other capital reserves (Non-distributable)
Other capital reserves include €7m capital redemption reserve arising from the repurchase and cancellation of shares. It also includes
the cancellation of the share capital and share premium of PTSB on the incorporation of the Company of €224m and issue of share
capital by the Company of €1,087m.
201
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
30. Share capital, reserves and other equity instruments (continued)
Retained earnings
Retained earnings include distributable and non-distributable earnings. This reserve represents the retained earnings of the holding
company and subsidiaries after consolidation adjustments.
Furthermore €11m (2019: €11m) coupon interest on the AT1 securities was paid from this reserve during 2020.
Other equity instruments - Non-distributable
At 1 January
Issued in the year:
Additional Tier 1 Securities – net of the transaction costs
Redemption
At 31 December
31 December
2020
31 December
2019
€m
122
123
-
245
€m
122
-
-
122
On 25 November 2020, the permanent tsb Group holding plc (‘Company’) issued €125m AT1 securities as part of capital raise. The first
reset date for the fixed rate is 25 May 2026.
The principal terms of the AT1 securities issued on 25 November 2020 are described below:
The AT1 securities are perpetual and redeemable financial instruments with a semi-annual coupon of 7.8725%. The Company may elect
at its full discretion at any time to cancel permanently (in whole or in part) the interest amount otherwise scheduled to be paid on an
interest payment date.
The Company may use such cancelled payments without restriction, including to make distributions or any other payments to the
holders of its shares or any other securities issued by the Company. Any cancellation of interest payments will be permanent and on a
non-cumulative basis and such cancellation will not give rise to or impose any restriction on the Company.
On the occurrence of a trigger event, at any time, any accrued and unpaid interest up to (but excluding) the write down date shall be
automatically and irrevocably cancelled, and the then Prevailing Principal Amount of each Security shall be automatically and irrevocably
reduced by the write down amount. This will occur if the Common Equity Tier 1 Capital Ratio of PTSB or the Group at any time falls below
7%.
On 6 May 2015, PTSB issued €125,000,000 fixed rate resettable AT1 securities as part of the Capital Raise. The first reset date for the
fixed rate is 1 April 2021.
The AT1 securities are perpetual and redeemable financial instruments with an annual coupon of 8.625%. PTSB may elect at its full
discretion at any time to cancel permanently (in whole or in part) the interest amount otherwise scheduled to be paid on an interest
payment date. PTSB may use such cancelled payments without restriction, including to make distributions or any other payments to the
holders of its shares or any other securities issued by the Company. Any cancellation of interest payments will be permanent and on a
non-cumulative basis and such cancellation will not give rise to or impose any restriction on PTSB.
On the occurrence of a Trigger Event, the AT1 securities will convert into ordinary shares in the Company at a conversion price of €3 per
share subject to certain anti-dilution adjustments. This will occur if the CET 1 Capital Ratio of PTSB or the Company at any time falls
below 7%. This conversion feature provides the necessary loss absorption for regulatory capital purposes under the CRR. AT1 securities
are included in the regulatory capital base of the Group on a fully loaded basis.
Although the AT1 securities are perpetual, PTSB may, in its sole discretion, redeem the AT1 securities in full on the first reset date, being 1
April 2021 and on every interest payment date thereafter (subject to the approval of the Supervisory Authority).
€11m coupon interest on the AT1 Securities was paid in April 2020 (April 2019: €11m) and was classified as a distribution payment. This
is paid out of distributable retained earnings on an annual basis.
202
Permanent TSB Group Holdings plc - Annual Report 2020
31. Analysis of other comprehensive income
The analysis of other comprehensive income below provides additional analysis to the information provided in the primary statements
and should be read in conjunction with the consolidated statement of changes in equity.
31 December 2020
Other comprehensive income/(expense) (net of tax)
Revaluation of property
Fair value reserve (equity instruments):
Change in fair value of equity instruments
Fair value reserve (debt instruments):
Change in fair value of debt instruments
Amortisation of discontinued hedges
Total other comprehensive income/(expense), net of tax
31 December 2019
Other comprehensive income/(expense) (net of tax)
Revaluation of property
Fair value reserve (equity instruments):
Change in fair value of equity instruments
Fair value reserve (debt instruments):
Change in fair value of debt instruments
Amortisation of discontinued hedges
Total other comprehensive expense, net of tax
Revaluation
reserve
€m
Fair value
reserve
€m
Total
€m
(2)
-
-
-
(2)
-
6
(3)
3
6
Revaluation
reserve
€m
Fair value
reserve
€m
4
-
-
-
4
-
2
(15)
7
(6)
(2)
6
(3)
3
4
Total
€m
4
2
(15)
7
(2)
203
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
32. Measurement basis and fair values of financial instruments
(a) Measurement basis and fair value of financial instruments
31 December 2020
€m
€m
€m
€m
€m
Held at
amortised
cost
At fair value
through OCI
At fair value
through
profit or loss
Designated
as fair value
hedges
Total carrying
value
Note
Financial assets
Cash at bank
Items in course of collection
Debt securities
Equity securities
Derivative assets
Loans and advances to banks
Loans and advances to customers
Financial liabilities
Customer accounts
Debt securities in issue
Derivative liabilities
13
13
14
15
16
17
18
25
26
16
71
20
2,583
-
-
3,312
14,213
18,039
809
-
-
-
-
24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Fair value
€m
71
20
2,662
24
-
3,312
13,558
71
20
2,583
24
-
3,312
14,213
18,039
809
-
18,044
808
-
31 December 2019
€m
€m
€m
€m
€m
Held at
amortised
cost
At fair value
through OCI
At fair value
through
profit or loss
Designated
as fair value
hedges
Total carrying
value
Note
Financial assets
Cash at bank
Items in course of collection
Debt securities
Equity securities
Derivative assets
Loans and advances to banks
Loans and advances to customers
Financial liabilities
Customer accounts
Debt securities in issue
Derivative liabilities
13
13
14
15
16
17
18
25
26
16
63
15
1,796
-
-
1,556
15,643
17,190
923
-
-
-
209
15
-
-
-
-
-
-
-
-
-
-
1
-
-
-
-
1
-
-
-
-
-
-
1
-
1
63
15
2,005
15
1
1,556
15,644
17,190
923
2
Fair value
€m
63
15
2,030
15
1
1,556
14,472
17,201
926
2
204
Permanent TSB Group Holdings plc - Annual Report 2020
32. Measurement basis and fair values of financial instruments (continued)
The following table sets out the fair value of financial instruments that the Group holds at 31 December 2020. It categorises these
financial instruments into the relevant level on the fair value hierarchy.
The fair values of financial instruments are measured according to the following fair value hierarchy:
Level 1 – financial assets and liabilities measured using quoted market prices (unadjusted).
Level 2 – financial assets and liabilities measured using valuation techniques which use observable inputs including quoted prices of
financial instruments themselves or quoted prices of similar instruments in either active or inactive markets.
Level 3 – financial assets and liabilities measured using valuation techniques which use non-observable inputs.
Basis and fair values of financial instruments
31 December 2020
Financial assets
Cash at bank
Items in course of collection
Debt securities
Equity securities
Derivative assets
Loans and advances to banks
Loans and advances to customers
Financial liabilities
Customer accounts
Debt securities in issue
Derivative liabilities
31 December 2019
Financial assets
Cash at bank
Items in course of collection
Debt securities
Equity securities
Derivative assets
Loans and advances to banks
Loans and advances to customers
Financial liabilities
Customer accounts
Debt securities in issue
Derivative liabilities
Note
Total carrying
Value
€m
Level 1
€m
Level 2
€m
Level 3
€m
13
13
14
15
16
17
18
25
26
16
71
20
2,583
24
-
3,312
14,213
18,039
809
-
71
-
2,621
16
-
-
-
-
350
-
-
20
-
-
-
3,312
-
18,044
458
-
-
-
41
8
-
-
13,558
-
-
-
Note
Total carrying
Value
€m
Level 1
€m
Level 2
€m
Level 3
€m
13
13
14
15
16
17
18
25
26
16
63
15
2,005
15
1
1,556
15,644
17,190
923
2
63
-
1,989
-
-
-
-
-
303
-
-
15
-
-
1
1,556
-
17,201
623
2
-
-
41
15
-
-
14,472
-
-
-
Total fair
value
€m
71
20
2,662
24
-
3,312
13,558
18,044
808
-
Total fair
value
€m
63
15
2,030
15
1
1,556
14,472
17,201
926
2
205
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
32. Measurement basis and fair values of financial instruments (continued)
(b) Fair value measurement principles
The Group’s accounting policy on valuation of financial instruments is described in note 1 and note 2 which contains details on the critical
accounting estimates and judgements made by management in relation to the fair value measurement of financial instruments. The fair
value of a financial instrument is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Where possible, the Group calculates fair value using observable market prices in an active market. Where market prices are not
available, fair values are determined using valuation techniques. These techniques are subjective in nature and may involve assumptions
which are based upon management’s view of market conditions at year end, which may not necessarily be indicative of any subsequent
fair value. Any changes in the assumptions used could have a significant impact on the resulting estimated fair values and, as a result, it
may be difficult for the users to make a reasonable comparison of the fair value information disclosed in this note, against that disclosed
by other financial institutions or to evaluate the Group’s financial position and, therefore, are advised to exercise caution in interpreting
these fair values. Also, the fair values disclosed above do not represent, nor should it be interpreted to represent, the underlying value of
the Group as a going concern at the reporting date.
Financial assets and financial liabilities not subsequently measured at fair value
Other than the HTC&S debt securities, derivative assets and liabilities and equity securities, all other financial assets and liabilities are
not measured at fair value at the reporting date. A description of the methods and assumptions used to calculate fair values of these
assets and liabilities is set out below.
Cash at bank
The fair value of these financial instruments is equal to their carrying value due to these instruments being repayable on demand and
short-term in nature in an active market.
Items in course of collection
The fair value of these financial instruments is equal to their carrying value due to these instruments being repayable on demand and
short-term in nature.
Loans and advances to banks
For the purposes of fair value valuation, Loans and advances to banks have been treated as cash and cash equivalents. These loans and
advances are repayable on demand and short-term in nature; hence, the fair value of each financial instrument is equal to their carrying
value.
Loans and advances to customers
Loans and advances to customers are carried net of impairments. The Group uses a discounted cash flow valuation model to estimate
the fair value for the ROI residential and commercial mortgages. Cash flows are discounted using the current weighted average interest
rate based on the specific portfolio. The fair value calculation also takes into account loan impairment provisions at the balance sheet
date. The carrying value of the consumer finance portfolio is considered equal to its fair value due to its short duration.
Debt securities (HTC securities)
Debt securities as at 31 December 2020 are €2,583m (31 December 2019: €1,796m) of which wholly consists of HTC securities. HTC
securities are derived from observable inputs through independent pricing sources such as Bloomberg, apart from one corporate bond
€39m (31 December 2019: €42m) which is derived using unobservable inputs. A weighted average method is used to apply these prices
to the Group’s retained holding in the securitisation.
Deposits by banks/customer accounts
The estimated fair value of deposit liabilities and current accounts with no stated maturity which are repayable on demand (including
non-interest bearing deposits), approximates to their book value. The estimated fair value of fixed-interest bearing deposits and other
borrowings is based on discounted cash flows using interest rates for new deposits with similar remaining maturities.
Debt securities in issue/subordinated liabilities
The fair values of debt securities in issue/subordinated liabilities are estimated using market prices of instruments that are substantially
the same as those issued by the Group. Where a readily available market price is unavailable in relation to the instrument, an estimated
price is calculated using observable inputs for similar instruments. If observable inputs are not available, an appropriate credit spread
linked to similar instruments, is used within the valuation technique.
206
Permanent TSB Group Holdings plc - Annual Report 2020
32. Measurement basis and fair values of financial instruments (continued)
Financial assets and financial liabilities subsequently measured at fair value
On initial recognition, all financial instruments are measured at fair value. Following this, the Group measures HTC&S financial assets at
fair value through other comprehensive income. Derivative assets and liabilities are held for trading and fair valued through the income
statement.
Debt securities (HTC&S Securities)
The HTC&S securities which the Group held as at 31 December 2019 matured during 2020.
Derivative assets and liabilities
The fair values of derivatives are determined using valuation techniques such as discounted cash flow and pricing models which
are commonly used by market participants. These valuations are provided by third party brokers and the models used incorporate
observable inputs such as current interest rate, time to maturity, forward foreign exchange rates, yield curves and volatility measures.
Equity securities
PTSB Group holds Series A and Series B preferred stock in Visa Inc. at 31 December 2020. The Series A preferred stock was acquired
during 2020 upon the conversion of Series B preferred stock by Visa Inc.
The fair values of the preferred stock in Visa Inc. is classified as Level 1 and the fair value of the preferred stock series B is classified as
Level 3, as the valuation of these preferred stock includes inputs that are based on unobservable data.
Fair value measurements recognised in the Statement of financial position
31 December 2020
Financial assets measured at fair value
Debt securities - HTC&S
Equity instruments
Derivative assets
Financial liabilities measured at fair value
Derivative liabilities
31 December 2019
Financial assets measured at fair value
Debt securities - HTC&S
Equity instruments
Derivative assets
Financial liabilities measured at fair value
Derivative liabilities
14
15
16
16
14
15
16
16
Level 1
€m
Level 2
€m
Level 3
€m
Total
€m
-
16
-
-
-
-
-
-
-
8
-
-
-
24
-
-
Level 1
€m
Level 2
€m
Level 3
€m
Total
€m
209
-
-
-
-
-
1
2
-
15
-
-
There were no transfers between Level 1 and Level 2 of the fair value hierarchy during 2020 and 2019.
209
15
1
2
207
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
32. Measurement basis and fair values of financial instruments (continued)
Reconciliation of level 3 fair value measurements of financial assets
Equity Instruments
As at 1 January
Revaluation movement
As at 1 January
2020
€m
2019
€m
15
9
24
13
2
15
There has been no transfers in/out of Level 3 per the fair value hierarchy in the financial year-ended 31 December 2020.
Equity securities
PTSB Group holds Series A and Series B preferred stock in Visa Inc. at 31 December 2020. The Series A preferred stock was acquired
during 2020 upon the conversion of Series B preferred stock by Visa Inc.
Level 3 sensitivity analysis
The table below sets out information about significant unobservable inputs used in measuring financial instruments categorized as Level
3 in the fair value hierarchy.
Financial instruments
31 December 2020
Valuation
technique
Significant
unobservable
inputs
Range of
estimates for
unobservable
inputs
Fair value
€m
Ranges of
estimates
changes in the
fair value
Visa Inc. Series B Preferred Stock
Quoted
market price
(Discounted)*
Final share
conversion
rate
0 - 90%
8
0 - 90%
* Discount has been applied for illiquidity and the conversion rate variability of the Visa Inc. Series A and B Preferred stock.
31 December 2019
Visa Inc. Series B Preferred Stock
Valuation
technique
Significant
unobservable
inputs
Range of
estimates for
unobservable
inputs
Fair value
€m
Ranges of
estimates
changes in the
fair value
Quoted
market price
(Discounted)*
Final share
conversion
rate
0 - 90%
15
0 - 90%
* Discount has been applied for illiquidity and the conversion rate variability of the Visa Inc. Series B Preferred stock.
Significant unobservable inputs
Visa Inc. Series A and Series B preferred stock
The Visa Inc. Series A preferred stock held by PTSB was acquired during 2020 upon the partial conversion of Series B preferred stock by
Visa Inc. These Series A and B preferred stock were fair valued at €16m and €8m respectively at 31 December 2020 (31 December 2019:
€15m) and are recognised in the Statement of Financial Position at FVOCI.
Valuation Methodology: The Visa Inc. Class A Common stock price and conversion ratios were applied to the PTSB shareholding of Visa
Inc. Series A and Series B preferred shares at 31 December 2020. Future conversions are calculated using discounted cash flows. The
stock was revalued at the year-end exchange rate.
Unobservable input: The unobservable inputs are the discount factor used to discount the future conversions of Series B preferred
stock.
• The Visa Inc. Series A and Series B preferred stock is denominated in US dollars and is exposed to FX risk.
208
Permanent TSB Group Holdings plc - Annual Report 2020
33. Financial risk management
Maximum exposure to credit risk before collateral held or other credit enhancements
The following table outlines the maximum exposure to credit risk before collateral held or other credit enhancements in respect of the
Group’s financial assets as at the statement of financial position date.
Cash and balances with central banks
Items in course of collection
Debt securities (i)
Derivative assets
Loans and advances to banks (ii)
Loans and advances to customers (iii)
Other assets (Loan sale receivable)
Commitments and contingencies
Note
31 December
2020
31 December
2019
€m
€m
13
13
14
16
17
18
23
38
71
20
2,583
-
3,312
14,213
-
20,199
1,069
21,268
63
15
2,005
1
1,556
15,644
251
19,535
873
20,408
The following tables outline the Group’s exposure to credit risk by asset class
(i) Debt securities
The Group is exposed to the credit risk on third parties where the Group holds debt securities (primarily sovereign debt). These exposures
are subject to the limitations contained within Board approved policies, with sovereign debt restricted to those countries that have an
External Credit Assessment Institution (ECAI) rating of investment grade.
The following table gives an indication of the level of creditworthiness of the Group’s debt securities and is based on the Group’s internal
rating policy which was approved by the CBI. The inputs to the ratings are prescribed by Moody’s Investor Services Limited.
(i) Debt securities
Rating
Aaa
A2
Baa1
Baa3
Unrated
Total
The following table discloses, by country, the Group’s exposure to sovereign debt and corporate debt as at:
Country
Ireland
Portugal
Spain
Total
31 December
2020
31 December
2019
€m
€m
67
1,488
515
474
39
2,583
-
1,436
284
243
42
2,005
31 December
2020
31 December
2019
€m
€m
1,594
474
515
2,583
1,478
243
284
2,005
209
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
33. Financial risk management (continued)
(ii) Loans and advances to banks
The Group has a policy to ensure that, where possible, loans and advances to banks are held with investment grade counterparties
with any exceptions subject to prior approval by the BRCC. The following table gives an indication of the level of creditworthiness of the
Group’s loans and advances to banks and is based on the Group’s internal rating policy which was approved by the CBI. The inputs to the
ratings are prescribed by Moody’s Investor Services Limited and Standard & Poors.
Rating
Aaa
Aa2
Aa3
A1
A2
Baa2
Total
31 December
2020
31 December
2019
€m
€m
2,813
209
254
32
3
1
3,312
1,038
240
234
33
9
2
1,556
*The presentation of the loans and advances to banks ratings has been updated to include an enhanced disclosure of the Moody’s rating
attributable to each banking counterparty with no material impact as at 31 December 2019
The following sections detail additional disclosures on Asset Quality.
(iii) Loans and advances to customers
Gross customer loans and advances
The tables below outline total loans and advances to customers for the Group analysed by home loan, buy-to-let, commercial and
consumer finance.
Measured at amortised cost
Residential mortgages:
Home loan
Buy-to-let
Total residential mortgages
Commercial
Consumer finance
Total measured at amortised cost
Analysed by ECL staging:
Stage 1
Stage 2
Stage 3
POCI
Total measured at amortised cost
Of which at the reporting date
Neither past due nor Stage 3
Past due but not Stage 3
Stage 3
Total measured at amortised cost
Of which are reported as non-performing loans
Deferred fees, discounts and other adjustments
210
31 December
2020
31 December
2019
€m
€m
12,338
2,009
14,347
181
327
14,855
10,575
3,152
1,127
1
14,855
13,692
35
1,128
14,855
1,128
86
12,260
3,598
15,858
165
366
16,389
10,999
4,340
1,048
2
16,389
15,295
44
1,050
16,389
1,050
73
Permanent TSB Group Holdings plc - Annual Report 2020
33. Financial risk management (continued)
31 December 2020
Stage 1
Excellent
Satisfactory
Fair risk
Standardised
Stage 2
Excellent
Satisfactory
Fair risk
Standardised
Stage 3
Defaulted
Total measured at amortised cost
Home Loans
Buy-to-let
€m
€m
Total
Residential
Mortgages
€m
Commercial
Consumer
€m
€m
Total
€m
6,596
3,548
13
-
10,157
260
421
842
-
101
46
-
-
147
407
674
363
-
1,523
1,444
658
12,338
418
2,009
6,697
3,594
13
-
10,304
667
1,095
1,205
-
2,967
1,076
14,347
4
-
-
-
4
3
58
81
-
142
35
181
172
70
7
18
267
1
9
28
5
43
17
327
6,873
3,664
20
18
10,575
671
1,162
1,314
5
3,152
1,128
14,855
* The information in the shaded box has not been subject to audit by the Group’s independent auditor.
Home Loans
Buy-to-let
€m
€m
Total
Residential
Mortgages
€m
Commercial
Consumer
€m
€m
Total
€m
31 December 2019
Stage 1
Excellent
Satisfactory
Fair risk
Standardised
Stage 2
Excellent
Satisfactory
Fair risk
Standardised
Stage 3
Defaulted
Total measured at amortised cost
6,515
3,378
26
-
9,919
333
469
925
-
1,727
614
12,260
471
266
1
-
738
689
1,186
608
-
2,483
377
3,598
6,986
3,644
27
-
10,657
1,022
1,655
1,533
-
4,210
991
15,858
4
23
14
-
41
1
29
53
-
83
41
165
199
82
20
-
301
1
12
34
-
47
18
366
* The information in the shaded box has not been subject to audit by the Group’s independent auditor.
7,189
3,749
61
-
10,999
1,024
1,696
1,620
-
4,340
1,050
16,389
211
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Notes to the Consolidated Financial Statements
(continued)
33. Financial risk management (continued)
The following table provides an aged analysis of secured customer loans and advances which are past due but not Stage 3.
31 December 2020
€m
€m
€m
Home loans
Buy-to-let
Commercial
0-30 days
31-60 days
61-90 days
Total past due not Stage 3
Fair value of collateral held
Fair value of collateral held
31 December 2020
0-30 days
31-60 days
61-90 days
Total past due not Stage 3
15
3
2
20
20
2
1
-
3
3
-
-
-
-
-
Home loans
Buy-to-let
Commercial
€m
15
3
2
20
€m
€m
2
1
-
3
-
-
-
-
Total
€m
17
4
2
23
23
Total
€m
17
4
2
23
Collateral held against residential mortgages is principally comprised of residential properties; their fair value has been estimated based
upon the last actual valuation, adjusted to take into account subsequent movement in house prices and is capped at the lower of the loan
balance or the valuation amount.
31 December 2019
0-30 days
31-60 days
61-90 days
Total past due not Stage 3
Fair value of collateral held
Fair value of collateral held
31 December 2019
0-30 days
31-60 days
61-90 days
Total past due not Stage 3
Home loans
Buy-to-let
Commercial
€m
11
6
5
22
21
€m
€m
6
2
1
9
8
-
-
-
-
-
Home loans
Buy-to-let
Commercial
€m
11
6
4
21
€m
€m
5
2
1
8
-
-
-
-
Total
€m
17
8
6
31
29
Total
€m
16
8
5
29
Non-performing loans
Non-performing loans (NPLs) are loans which are credit impaired or loans which are classified as defaulted in accordance with the
Group’s definition of default. The Group’s definition of default considers objective indicators of default including the 90 days past due
criterion, evidence of exercise of concessions or modifications to terms and conditions is designed to be consistent with European
Banking Authority (EBA) guidance on the definition of forbearance.
Foreclosed assets are assets held on the balance sheet which are obtained by taking possession of collateral or by calling on similar
credit enhancements.
Non-performing assets are defined as NPLs plus foreclosed assets.
212
Permanent TSB Group Holdings plc - Annual Report 2020
33. Financial risk management (continued)
31 December 2020
NPL is < 90 days
NPL is > 90 days and < 1 year past due
NPL is 1-2 years past due
NPL is 2-5 years past due
NPL is > 5 years past due
POCI
Non-performing loans
Foreclosed assets*
Non-performing assets
NPLs as % of gross loans
Home loans
Buy-to-let
Commercial
Consumer
finance
Stage 3
€m
464
42
42
21
89
-
658
25
683
5.3%
€m
€m
319
32
14
4
49
-
418
5
423
20.8%
28
1
-
2
4
-
35
-
35
19.3%
€m
1
9
1
1
4
1
17
-
17
5.2%
*Foreclosed assets are held on the balance sheet which, are obtained by taking possession of collateral or by calling on similar credit enhancements.
31 December 2019
NPL is < 90 days
NPL is > 90 days and < 1 year past due
NPL is 1-2 years past due
NPL is 2-5 years past due
NPL is > 5 years past due
POCI
Non-performing loans
Foreclosed assets*
Non-performing assets
NPLs as % of gross loans
Home loans
Buy-to-let
Commercial
Consumer
finance
Stage 3
€m
420
46
20
19
109
-
614
13
627
5.0%
€m
294
12
4
8
59
-
377
45
422
10.5%
€m
29
-
-
4
8
-
41
-
41
24.8%
€m
1
7
1
2
5
2
18
-
18
4.9%
Total
€m
812
84
57
28
146
1
1,128
30
1,158
7.6%
Total
€m
744
65
25
33
181
2
1,050
58
1,108
6.4%
* Foreclosed assets are held on the balance sheet which are obtained by taking possession of collateral or by calling on similar credit enhancements.
Non-performing loans as a percentage of total loans and advances were 7.6% at 31 December 2020, an increase from 6.4% at 31
December 2019.
Total portfolio Loss allowance: statement of financial position
The tables below outline the ECL loss allowance total at 31 December 2020 in respect of total customer loans and advances.
The impairment charge in respect of the total loans and advances for year ended 31 December 2020 was €155m, compared to an
impairment charge of €10m for the year ended 31 December 2019.
Loss allowance - statement of financial position
Stage 1
Stage 2
Stage 3
Total loss allowance
Provision coverage ratio*
Stage 1
Stage 2
Stage 3
Total provisions/total loans
*Provision coverage ratio is calculated as loss allowance/impairment provision as a percentage of gross loan balance.
31 December
2020
31 December
2019
€m
€m
55
286
387
728
44
439
335
818
31 December
2020
31 December
2019
%
%
0.5%
9.1%
34.3%
4.9%
0.4%
10.1%
31.9%
5.0%
213
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
33. Financial risk management (continued)
Origination profile
Loan origination profile of the residential mortgage loan portfolio before provision for impairment:
The table below illustrates that €3bn or 18% of the residential mortgage portfolio originated before 2006. Between 2006 and 2008
origination was €6bn or 44% of the residential mortgages. The residual of 38% of the residential mortgages were originated between
2009 and 2020.
Residential mortgages portfolio
Stage 3 residential mortgages
portfolio
Number
1,249
844
1,340
2,634
3,855
5,652
8,383
12,101
17,346
14,773
9,511
2,350
955
660
350
791
1,657
1,855
2,021
3,616
5,651
6,542
5,246
109,382
Balance
€m
18
24
48
79
165
331
681
1,302
2,514
2,363
1,396
221
76
51
24
77
181
211
266
588
1,128
1,397
1,206
14,347
Number
Balance
€m
128
83
110
208
217
285
406
726
1,264
1,259
750
125
27
10
3
10
20
45
34
39
43
30
40
5,862
3
4
6
9
14
26
49
120
292
350
153
15
3
1
1
1
3
3
5
4
7
6
1
1,076
31 December 2020
1998 and before
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total
214
Permanent TSB Group Holdings plc - Annual Report 2020
33. Financial risk management (continued)
Residential mortgages portfolio
Stage 3 residential mortgages
portfolio
31 December 2019
1997 and before
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Total
Number
956
559
942
2,633
2,909
4,207
6,051
8,994
13,566
19,468
17,025
10,465
2,513
1,092
714
378
882
1,840
2,052
2,283
4,090
5,919
6,672
116,210
Balance
€m
12
13
29
62
98
199
384
790
1,545
3,204
3,194
1,689
246
86
59
27
89
211
245
317
713
1,224
1,422
15,858
Number
Balance
€m
99
50
94
167
193
207
301
408
680
1,137
1,154
693
108
31
12
5
6
22
41
25
32
39
41
5,545
2
2
4
6
9
14
29
52
114
274
304
142
12
3
1
1
1
3
4
4
3
5
2
991
Loan-to-value profile
Loan-to-value (LTV) of mortgage lending (index linked):
The LTV ratio is calculated at a property level and is the average of indexed property values in proportion to the outstanding loan balance.
LTV is a key input to the impairment provisioning process. The tables below outline the composition of this ratio for the residential loan
portfolio.
Actual and average LTVs across principal mortgage portfolios:
The tables below outline the weighted average LTVs for the total residential mortgage portfolios analysed across home loan and buy-to-
let facilities by value. The weighted average LTV on the residential mortgage portfolios is 66% at 31 December 2020 compared to 69%
at 31 December 2019.
215
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
33. Financial risk management (continued)
The Group’s residential mortgage lending LTVs at December 2020 reflect updated valuations obtained on high-exposure NPLs (largely
impacting on high-exposure buy-to-let properties).
31 December 2020
Less than 50%
51% to 70%
71% to 90%
91% to 100%
Subtotal
101% to 110%
111% to 120%
121% to 130%
131% to 140%
141% to 150%
151% to 160%
161% to 170%
171% to 180%
Greater than 180%
Subtotal
Total
Weighted average LTV:
Stock of residential mortgages
New residential mortgages
Stage 3 mortgages
31 December 2019
Less than 50%
51% to 70%
71% to 90%
91% to 100%
Subtotal
101% to 110%
111% to 120%
121% to 130%
131% to 140%
141% to 150%
151% to 160%
161% to 170%
171% to 180%
Greater than 180%
Subtotal
Total
Weighted average LTV:
Stock of residential mortgages
New residential mortgages
Stage 3 mortgages
216
Home loans
Buy-to-let
%
%
32%
26%
34%
3%
95%
2%
1%
1%
-
-
-
-
-
1%
5%
24%
15%
15%
10%
64%
11%
8%
5%
3%
2%
2%
1%
-
4%
36%
Total
%
31%
24%
31%
5%
91%
3%
2%
1%
1%
-
1%
-
-
1%
9%
100%
100%
100%
63%
75%
91%
89%
55%
131%
66%
75%
106%
Home loans
Buy-to-let
%
%
33%
26%
31%
5%
95%
2%
1%
1%
-
-
-
-
-
1%
5%
15%
13%
20%
14%
62%
12%
9%
6%
3%
2%
1%
1%
1%
3%
38%
Total
%
29%
23%
28%
7%
87%
4%
3%
2%
1%
1%
1%
-
-
1%
13%
100%
100%
100%
62%
74%
93%
92%
59%
128%
69%
74%
106%
Permanent TSB Group Holdings plc - Annual Report 2020
33. Financial risk management (continued)
Loan-to-value profile (continued)
Analysis by LTV of the Group’s residential mortgage lending which is neither past due nor Stage 3:
The tables below illustrates that 97% of residential home loan mortgages (31 December 2019: 97%) and 71% of residential buy-to-let
mortgages (31 December 2019: 65%) that are neither past due nor Stage 3 are in positive equity as at 31 December 2020.
31 December 2020
Less than 50%
51% to 70%
71% to 90%
91% to 100%
Subtotal
101% to 110%
111% to 120%
121% to 130%
131% to 140%
141% to 150%
151% to 160%
161% to 170%
171% to 180%
Greater than 180%
Subtotal
Total
31 December 2019
Less than 50%
51% to 70%
71% to 90%
91% to 100%
Subtotal
101% to 110%
111% to 120%
121% to 130%
131% to 140%
141% to 150%
151% to 160%
161% to 170%
171% to 180%
Greater than 180%
Subtotal
Total
Home loans
Buy-to-let
%
%
33%
26%
35%
3%
97%
1%
1%
1%
-
-
-
-
-
-
3%
29%
17%
16%
9%
71%
10%
7%
4%
2%
1%
1%
1%
1%
2%
29%
Total
%
32%
25%
33%
4%
94%
2%
1%
1%
1%
-
-
-
-
1%
6%
100%
100%
100%
Home loans
Buy-to-let
%
%
34%
27%
31%
5%
97%
2%
1%
-
-
-
-
-
-
-
3%
16%
14%
21%
14%
65%
12%
9%
5%
3%
2%
1%
1%
-
2%
35%
Total
%
30%
24%
29%
7%
90%
4%
2%
2%
1%
-
-
-
-
1%
10%
100%
100%
100%
217
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
33. Financial risk management (continued)
Loan-to-value profile (continued)
Analysis by LTV of the Group’s residential mortgage lending which are classified as Stage 3:
The tables below illustrates that 63% of residential home loan mortgages (31 December 2019: 60%) and 34% of residential buy-to-let
mortgages (31 December 2019: 37%) that are classified as Stage 3 are in positive equity as at 31 December 2020.
31 December 2020
Less than 50%
51% to 70%
71% to 90%
91% to 100%
Subtotal
101% to 110%
111% to 120%
121% to 130%
131% to 140%
141% to 150%
151% to 160%
161% to 170%
171% to 180%
Greater than 180%
Subtotal
Total
Stage 3
31 December 2019
Less than 50%
51% to 70%
71% to 90%
91% to 100%
Subtotal
101% to 110%
111% to 120%
121% to 130%
131% to 140%
141% to 150%
151% to 160%
161% to 170%
171% to 180%
Greater than 180%
Subtotal
Total
Stage 3
218
Home loans
Buy-to-let
%
%
22%
16%
16%
9%
63%
9%
5%
5%
4%
2%
3%
1%
1%
7%
37%
5%
7%
13%
9%
34%
17%
11%
7%
5%
5%
5%
3%
1%
12%
66%
Total
%
15%
13%
15%
9%
52%
12%
7%
6%
4%
3%
4%
2%
1%
9%
48%
100%
100%
100%
€m
658
€m
418
€m
1,076
Home loans
Buy-to-let
%
%
21%
15%
15%
9%
60%
9%
6%
5%
4%
3%
2%
3%
1%
7%
40%
5%
6%
13%
13%
37%
13%
12%
10%
5%
5%
3%
3%
2%
10%
63%
Total
%
15%
12%
14%
10%
51%
10%
8%
7%
5%
4%
2%
3%
2%
8%
49%
100%
100%
100%
€m
614
€m
377
€m
991
Permanent TSB Group Holdings plc - Annual Report 2020
33. Financial risk management (continued)
(iv) Group Portfolios: Collateral in possession
Collateral in possession occurs where the obligor either (i) voluntarily surrenders the property or (ii) the Group takes legal ownership due
to non-repayment of the loan facility. The following tables outline the main movements in this category during the year.
Stock of collateral in possession
Residential collateral in possession
Home loans
Buy-to-let
Commercial
Total
31 December 2020
31 December 2019*
Number
Balance
outstanding
at transfer of
ownership
€m
Number
Balance
outstanding
at transfer of
ownership
€m
41
207
-
248
13
56
-
69
100
371
4
475
32
105
1
138
*Collateral in possession assets are sold as soon as practicable. These assets which total €30m as at 31 December 2020 (31 December 2019: €58m) are included in assets held
for sale (see note 40 for further details).
During the year the ownership of 45 properties were transferred to the Group.
The details of the transfers are provided in the tables below:
Home loans
Buy-to-let
Commercial
Total
During the year 272 properties were disposed.
The details of the disposals are provided in the tables below:
Home loans
Buy-to-let
Commercial
Total
31 December 2020
Collateral in possession
Home loans
Buy-to-let
Commercial
Year ended 31 December 2020
Number of
disposals
Balance
outstanding at
transfer of
ownership
€m
Gross sales
proceeds
€m
Costs to sell
Pre
provisioning
loss on sale*
€m
€m
62
206
4
272
18
52
1
71
9
28
-
37
0
1
-
1
9
25
1
35
*Calculated as gross sales proceeds less balance outstanding at transfer of ownership less costs to sell. These losses are provided for as part of the impairment provisioning
process.
.
219
Number
3
42
-
45
Number
62
206
4
272
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
33. Financial risk management (continued)
31 December 2019
Collateral in possession
Home loans
Buy-to-let
Commercial
Year ended 31 December 2019
Number of
disposals
Balance
outstanding at
transfer of
ownership
€m
Gross sales
proceeds
€m
Costs to sell
Pre
provisioning
loss on sale*
€m
€m
258
641
9
908
67
159
5
231
34
88
3
125
2
4
-
6
35
75
2
112
*Calculated as gross sales proceeds less balance outstanding at transfer of ownership less costs to sell. These losses are provided for as part of the impairment provisioning
process.
(v) Additional disclosures on forborne loans
The Group operates a number of mechanisms which are designed to assist borrowers experiencing credit and loan repayment
difficulties, which have been developed in accordance with the current Code of Conduct on Mortgages Arrears (CCMA).
The tables below set out the asset quality and volume of loans for which the Group has entered formal temporary and permanent
forbearance arrangements with customers for the years ended 31 December 2020 and 31 December 2019. The number and balances of
loans in forbearance arrangements for residential home loan mortgages and buy-to-let residential mortgages are analysed below.
(a) Asset quality
The following tables provide detail of asset quality by IFRS 9 stage.
31 December 2020
Stage 2
Excellent
Satisfactory
Fair risk
Standardised
Stage 3
Defaulted
Total measured at amortised cost
Home Loans
Buy-to-let
€m
€m
Total
Residential
Mortgages
€m
Commercial
€m
22
114
152
-
288
438
726
-
29
51
-
80
151
231
22
143
203
-
368
589
957
-
1
5
-
6
14
20
Total
€m
22
144
208
-
374
603
977
* The information in the shaded box has not been subject to audit by the Group’s independent auditor.
Where a borrower has been granted a forbearance treatment, the loan is considered to have experienced a significant increase in credit
risk and is classified as Stage 2 for Expected Credit Loss assessment purposes under IFRS 9.
31 December 2019
Stage 2
Excellent
Satisfactory
Fair risk
Standardised
Stage 3
Defaulted
Total measured at amortised cost
Home Loans
Buy-to-let
€m
€m
Total
Residential
Mortgages
€m
Commercial
€m
29
153
243
-
425
401
826
-
8
48
-
56
145
201
29
161
291
-
481
546
1,027
-
2
-
-
2
17
19
Total
€m
29
163
291
-
483
563
1,046
* The information in the shaded box has not been subject to audit by the Group’s independent auditor.
220
Permanent TSB Group Holdings plc - Annual Report 2020 33. Financial risk management (continued)
(v) Forborne loans (continued)
(b) Weighted Average – LTV
LTV on total portfolio in forbearance
The tables below illustrates that 72% of residential home loan mortgages (31 December 2019: 72%) and 47% of residential buy-to-let
mortgages (31 December 2019: 49%) that are in forbearance are in positive equity as at 31 December 2020.
31 December 2020
Less than 50%
51% to 70%
71% to 90%
91% to 100%
Subtotal
101% to 110%
111% to 120%
121% to 130%
131% to 140%
141% to 150%
151% to 160%
161% to 170%
171% to 180%
Greater than 180%
Subtotal
Total
Weighted average LTV:
Stock of residential mortgages
New residential mortgages
Stage 3 mortgages
31 December 2019
Less than 50%
51% to 70%
71% to 90%
91% to 100%
Subtotal
101% to 110%
111% to 120%
121% to 130%
131% to 140%
141% to 150%
151% to 160%
161% to 170%
171% to 180%
Greater than 180%
Subtotal
Total
Weighted average LTV:
Stock of residential mortgages
New residential mortgages
Stage 3 mortgages
Home loans
Buy-to-let
%
22%
19%
21%
10%
72%
7%
5%
3%
2%
2%
2%
1%
1%
5%
28%
%
6%
9%
20%
12%
47%
16%
12%
6%
3%
1%
3%
2%
2%
8%
53%
Total
%
19%
17%
21%
10%
67%
9%
7%
4%
2%
2%
2%
1%
1%
5%
33%
100%
100%
100%
82%
76%
93%
107%
-
110%
Home loans
Buy-to-let
%
22%
19%
20%
11%
72%
8%
4%
4%
2%
2%
1%
2%
1%
4%
28%
%
5%
8%
18%
18%
49%
13%
12%
8%
4%
3%
2%
1%
-
8%
51%
88%
76%
97%
Total
%
19%
16%
20%
12%
67%
9%
6%
5%
3%
2%
1%
1%
1%
5%
33%
100%
100%
100%
84%
72%
99%
109%
-
112%
89%
72%
102%
221
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
33. Financial risk management (continued)
(c) Forbearance arrangements - residential mortgages
The Group operates a number of mechanisms which are designed to assist borrowers experiencing credit and loan repayment
difficulties, which have been developed in accordance with the existing CCMA. These are set out in the table below.
Residential mortgages
The tables below set out the volume of loans for which the Group has entered formal temporary and permanent forbearance
arrangements with customers as at 31 December 2020 and 31 December 2019.
(i) Residential home loan mortgages:
The incidence of the main type of forbearance arrangements for residential home loan mortgages are analysed below:
31 December 2020
Interest only
Reduced payment (less than interest only)
Reduced payment (greater than interest only)
Payment moratorium
Arrears capitalisation
Term extension
Hybrid*
Split mortgages
Total
* Hybrid is a combination of two or more forbearance arrangements.
31 December 2019
Interest only
Reduced payment (less than interest only)
Reduced payment (greater than interest only)
Payment moratorium
Arrears capitalisation
Term extension
Hybrid*
Split mortgages
Total
* Hybrid is a combination of two or more forbearance arrangements.
All loans
Stage 3
Number
Balances
Number
Balances
€m
30
12
391
15
88
42
65
83
726
111
41
1,369
61
367
263
204
434
2,850
€m
23
7
213
7
48
20
37
83
438
138
71
2,694
119
668
557
385
434
5,066
All loans
Stage 3
Number
Balances
Number
Balances
€m
22
2
481
4
132
60
39
87
827
102
8
1,313
15
356
261
96
451
2,602
€m
19
1
212
2
43
20
16
88
401
119
15
3,244
25
977
749
208
451
5,788
The tables above reflect a decrease of 722 cases in the year to 31 December 2020 for the Group in the number of residential home loan
mortgages in forbearance arrangements, a decrease of €101m in balances. The average balance of forborne loans is €0.143m at 31
December 2020 (31 December 2019: €0.143m).
222
Permanent TSB Group Holdings plc - Annual Report 2020 33. Financial risk management (continued)
(ii) Residential buy-to-let mortgages:
The incidence of the main type of forbearance arrangements for residential buy-to-let mortgages only is analysed below:
31 December 2020
Interest only
Reduced payment (less than interest only)
Reduced payment (greater than interest only)
Payment moratorium
Arrears capitalisation
Term extension
Hybrid*
Split mortgages
Total
* Hybrid is a combination of two or more forbearance arrangements.
31 December 2019
Interest only
Reduced payment (less than interest only)
Reduced payment (greater than interest only)
Payment moratorium
Arrears capitalisation
Term extension
Hybrid*
Split mortgages
Total
* Hybrid is a combination of two or more forbearance arrangements.
All loans
Stage 3
Number
Balances
Number
Balances
€m
33
2
94
2
35
11
27
27
231
44
6
239
7
24
15
42
101
478
€m
15
2
76
2
10
3
16
27
151
79
7
311
10
68
34
69
101
679
All loans
Stage 3
Number
Balances
Number
Balances
€m
24
-
84
1
35
14
14
29
201
55
1
139
3
63
13
28
103
405
€m
22
-
43
1
34
3
13
29
145
64
1
259
4
71
54
33
103
589
The tables above reflect an increase of 90 cases in the year to 31 December 2020 for the Group in the number of residential buy-to-let in
forbearance arrangements, an increase of €30m in balances. The average balance of forborne loans is €0.340m at 31 December 2020
(31 December 2019: €0.341m).
Commercial mortgages
The incidence of the main type of forbearance arrangements for commercial mortgages are analysed below:
Commercial mortgages
Interest only
Reduced payment (less than interest only)
Reduced payment (greater than interest only)
Payment moratorium
Arrears capitalisation
Term extension
Hybrid*
Split mortgages
Total
*Hybrid is a combination of two or more forbearance arrangements.
31 December 2020
31 December 2019
Number
Balances
Number
Balances
€m
-
-
7
-
1
5
7
-
20
1
-
15
-
2
11
15
-
44
€m
-
-
10
-
1
3
5
-
19
1
-
14
-
3
10
10
-
38
The table above reflects an increase of 6 cases in the year to 31 December 2020 for the Group in the number of commercial mortgages
in forbearance arrangements, an increase of €1m in balances.
223
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Notes to the Consolidated Financial Statements
(continued)
33. Financial risk management (continued)
(d) Reconciliation of movement in forborne loans for all classes
The tables below provide an analysis of the movement of total forborne loans and Stage 3 forborne loans during the year. It outlines the
number and balances of forbearance treatments offered, expired and loans paid down during the year.
(i) Reconciliation of movement of total forborne loans
Residential mortgages
Home loans
cases
Home loans
balances
Buy -to-let
cases
Buy-to-let
balances
Commercial
cases
Commercial
balances
Total cases
31 December 2020
Opening balance 1 January 2020
New forbearance extended during the year*
Deleveraged loans
Exited forbearance
- exited forborne to non-forborne Stage 3
- expired forbearance treatment
- expired loan paid down
Balance shift**
Closing balance of loans in forbearance as
at 31 December 2020
€m
827
186
-
(6)
(228)
(34)
(19)
589
240
(26)
(4)
(80)
(40)
-
€m
201
79
(11)
(1)
(23)
(9)
(5)
5,788
1,323
-
(42)
(1,679)
(324)
-
5,066
726
679
231
*Balance movements are stated net of portfolio re-classification.
** Balance movements in respect of loans which are in forbearance at the start and end of the year.
38
10
-
-
(1)
(3)
-
44
€m
19
7
-
-
-
(5)
(1)
6,415
1,573
(26)
(46)
(1,760)
(367)
-
Total
balances
€m
1,047
272
(11)
(7)
(251)
(48)
(25)
20
5,789
977
31 December 2019
Opening balance 1 January 2019
New forbearance extended during the year*
Deleveraged loans
Exited forbearance
- exited forborne to non-forborne Stage 3
- expired forbearance treatment
- expired loan paid down
Balance shift**
Closing balance of loans in forbearance as at
31 December 2019
Residential mortgages
Home loans
cases
Home loans
balances
Buy -to-let
cases
Buy-to-let
balances
Commercial
cases
Commercial
balances
Total cases
€m
1,416
46
(278)
(22)
(251)
(57)
(27)
1,763
23
(335)
(122)
(602)
(138)
-
€m
699
7
(117)
(58)
(278)
(45)
(7)
9,759
394
(1,405)
(220)
(2,185)
(555)
-
70
4
(20)
(5)
(4)
(7)
-
€m
29
1
(5)
(1)
(3)
(2)
-
11,592
421
(1,760)
(347)
(2,791)
(700)
-
Total
balances
€m
2,144
54
(400)
(81)
(532)
(104)
(34)
5,788
827
589
201
38
19
6,415
1,047
*Balance movements are stated net of portfolio re-classification.
** Balance movements in respect of loans which are in forbearance at the start and end of the year.
224
Permanent TSB Group Holdings plc - Annual Report 2020 33. Financial risk management (continued)
(ii) Reconciliation of movement in forborne loans Stage 3
31 December 2020
€m
€m
€m
Home loan
cases
Home loan
balances
Buy-to-let
cases
Buy-to-let
balances
Commercial
cases
Commercial
balances
Total cases
Total
balances
€m
Opening balance 1 January 2020
New Stage 3 forbearance extended during
the year*
Deleveraged loans
Exited forborne Stage 3, now performing
forborne
Exited forbearance
- exited forborne Stage 3 to non-forborne
Stage 3
- expired forbearance treatment
- expired loan paid down
Balance shift**
Closing balance of loans in forbearance
as at 31 December 2020
2,602
401
405
145
33
17
3,040
563
845
-
119
-
172
-
53
-
(335)
(38)
(66)
(34)
(32)
(56)
(174)
-
(6)
(8)
(22)
(8)
(4)
(5)
(24)
-
(1)
(1)
(7)
(4)
2,850
438
478
151
6
-
-
-
-
(3)
-
36
3
-
-
-
-
(5)
(1)
1,023
-
175
-
(401)
(72)
(36)
(61)
(201)
-
(7)
(9)
(34)
(13)
14
3,364
603
*Balance movements are stated net of portfolio re-classification.
** Balance movements in respect of loans which are in forbearance at the start and end of the year.
31 December 2019
Opening balance 1 January 2019
New Stage 3 forborne during the year*
Deleveraged loans
Exited forborne Stage 3, now performing
forborne
Exited forbearance
- exited forborne Stage 3, to non-forborne
Stage 3
- expired forbearance treatment
- expired loan paid down
Balance shift**
Closing balance of loans in forbearance as
at 31 December 2019
Home loan
cases
Home loan
balances
Buy-to-let
cases
Buy-to-let
balances
Commercial
cases
Commercial
balances
Total cases
€m
862
36
(273)
(157)
-
(19)
(3)
(38)
(7)
974
18
(315)
(38)
-
(104)
(16)
(114)
-
€m
349
6
(104)
(10)
-
(45)
(5)
(41)
(5)
5,239
363
(1,375)
(1,068)
-
(173)
(39)
(345)
-
64
4
(20)
(3)
-
(5)
-
(7)
-
€m
26
1
(6)
(1)
-
(1)
-
(2)
-
6,277
385
(1,710)
(1,109)
-
(282)
(55)
(466)
-
Total
balances
€m
1,237
43
(383)
(168)
-
(65)
(8)
(81)
(12)
2,602
401
405
145
33
17
3,040
563
*Balance movements are stated net of portfolio re-classification.
** Balance movements in respect of loans which are in forbearance at the start and end of the year.
225
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Notes to the Consolidated Financial Statements
(continued)
33. Financial risk management (continued)
(vi) Funding profile
The ALCO monitors sources of funding and their respective maturities with a focus on establishing a stable and cost effective funding
profile. Excluding equity, the Group’s funding profile as at the 31 December 2020 can be broken down into the below component parts:
Customer accounts
Long-term debt
Short-term debt
31 December
2020
31 December
2019
%
%
96
4
-
100
95
5
-
100
Long-term debt refers to debt with a maturity greater than 12 months from year-end and short-term debt is that which has a maturity of
less than 12 months from year-end.
In accordance with IFRS 7, Financial Instruments: Disclosures, the following tables present the maturity analysis of financial liabilities on
an undiscounted basis, by remaining contractual maturity at the statement of financial position date. These will not agree directly with
the balances on the consolidated statement of financial position due to the inclusion of future interest payments. In this table, derivative
liabilities represent the carrying value of derivative instruments that are held for trading and as hedging instruments in respect of
financial liabilities.
31 December 2020
Liabilities
Customer accounts
Debt securities in issue
Derivative liabilities
Lease liabilities
Total liabilities
31 December 2019
Liabilities
Customer accounts
Debt securities in issue
Derivative liabilities
Lease Liabilities
Total liabilities
Up to
1 month
€m
14,149
1
-
2
14,152
Up to
1 month
€m
12,690
1
-
2
12,693
1-3
months
€m
3-6
months
€m
6-12
months
€m
1,565
1
-
-
1,566
490
2
-
2
494
1-3
months
€m
3-6
months
€m
903
1
-
-
904
801
2
-
2
805
777
4
-
3
784
6-12
months
€m
1,203
11
-
4
1,218
1-2
years
€m
555
8
-
5
568
1-2
years
€m
755
7
2
7
771
Over 2
years
€m
524
851
-
24
1,399
Over 2
years
€m
878
982
-
29
1,889
Total
€m
18,060
867
-
36
18,963
Total
€m
17,230
1,004
2
44
18,280
When managing the Group’s liquidity and funding profile, for products where the contractual maturity date may be different from actual
behaviour, the Group uses statistical methodologies to manage liquidity on an expected or behaviourally adjusted basis.
The following table details the Group’s liquidity analysis for derivative instruments that do not qualify as hedging instruments. The table
has been drawn up based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net
basis and the undiscounted gross inflows and outflows on those derivatives that require gross settlement. When the amount payable or
receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates from the yield curves at
the end of the reporting year.
226
Permanent TSB Group Holdings plc - Annual Report 2020
33. Financial risk management (continued)
31 December 2020
Net settled:
Interest rate swaps
Gross settled:
FX forwards
- inflow
- outflow
Balance at 31 December
2020
31 December 2019
Net settled:
Interest rate swaps
Gross settled:
FX forwards
- inflow
- outflow
Balance at 31 December
2019
Up to
1 month
€m
1-3
months
€m
3-6
months
€m
6-12
months
€m
1-2
years
€m
Over 2
years
€m
-
83
(83)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Up to
1 month
€m
1-3
months
€m
3-6
months
€m
6-12
months
€m
1-2
years
€m
Over 2
years
€m
-
104
(104)
-
(1)
-
-
(1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
€m
-
83
(83)
-
Total
€m
(1)
104
(104)
(1)
(vii) Interest rate gap position
Gap analysis is a technique for measuring the Group’s interest rate risk exposure beginning with a maturity/re-pricing schedule that
distributes interest sensitive assets, liabilities, and derivative positions into “time bands” according to their maturity (if fixed rate), time
remaining to their next re-pricing (if floating rate) or behavioural convention in order to identify any sources of significant mismatches.
The below December 2020 IRRBB profile also includes interest cash flows based on the next re-price date i.e. one month’s interest
included for variable rate products and lifetime interest for fixed rate products
A summary of the Group’s interest rate gap position is as follows:
Interest rate re-pricing
31 December 2020
€m
€m
€m
€m
€m
Not more than 3
months
Over 3 months
but not more
than 6 months
Over 6 months
but not more
than 1 year
Over 1 year but
not more than 5
years
Over 5 years
Assets
Liabilities
Derivatives
Interest rate re-pricing gap
12,856
(11,230)
(83)
1,543
295
(875)
-
(580)
726
(1,280)
-
(554)
5,535
(5,550)
-
(15)
1,080
(1,193)
-
(113)
Cumulative interest rate re-pricing gap
1,543
963
409
394
281
Total
€m
20,492
(20,128)
(83)
281
227
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
33. Financial risk management (continued)
31 December 2019
€m
€m
€m
€m
€m
Not more than 3
months
Over 3 months
but not more
than 6 months
Over 6 months
but not more
than 1 year
Over 1 year but
not more than 5
years
Over 5 years
Assets
Liabilities
Derivatives
Interest rate re-pricing gap
13,906
(10,256)
(77)
3,573
611
(1,020)
(8)
(417)
545
(1,633)
(3)
(1,091)
4,548
(5,410)
(12)
(874)
235
(1,151)
-
(916)
Total
€m
19,845
(19,470)
(100)
275
Cumulative interest rate re-pricing gap
3,573
3,156
2,065
1,191
275
34. Capital management
The core objective of the Group’s capital management policy is to ensure that the Group complies with its regulatory capital
requirements and maintains sufficient capital to cover its business risks and support its strategy. The Group has established an Internal
Capital Adequacy Assessment Process (ICAAP) to ensure that it is adequately capitalised against the inherent risks to which its business
operations are exposed and to maintain an appropriate level of capital to meet the minimum capital requirements. The ICAAP is subject
to review and evaluation by the Regulator. The management of capital within the Group is monitored by the Board Risk and Compliance
Committee (BRCC) and the Capital Adequacy Committee (CAC) in accordance with Board approved policy.
The Group’s regulatory capital comprises of three tiers:
1. CET1 capital, which includes ordinary share capital, share premium, retained earnings and other regulatory adjustments relating to
items that are included in equity but are treated differently for capital adequacy purposes;
2. Additional Tier 1 Capital, which includes qualifying convertible perpetual financial instruments with discretionary coupons; and
3. Tier 2 Capital, which includes qualifying subordinated liabilities, revaluation reserves and other regulatory capital adjustments.
The Group’s 2020 regulatory CET1 (transitional) minimum requirement was 8.94% (December 2019: 11.45%). The CET1 ratio
requirement of 8.94% consists of a Pillar 1 CRR requirement of 4.50%, a Pillar 2 Requirement (P2R) of 1.94% (December 2019: 3.45%),
Capital Conservation Buffer (CCB) of 2.50% and the Countercyclical Capital Buffer (CCyB) of 0% (December 2019: 1.0%).
The year on year decrease in the Group’s minimum CET1 requirement of (-2.51%) is due to the aforementioned reduction of the CCyB
from 1% to 0% and the accelerated application of the CRD V amendments which permits a portion (up to 44%) of P2R to be met with
non-CET1 (AT1 & Tier2) capital (-1.51%). The regulatory changes (“the CRR quick fix”) were introduced in light of the challenges posed to
the banking sector by the COVID-19 pandemic.
The Group’s Total Capital minimum requirement of 13.95% at 31 December 2020 (31 December 2019: 14.95%) consists of a Pillar 1 CRR
requirement of 8%, P2R of 3.45%, CCB of 2.5%. The year on year decrease in the Group’s Total Capital minimum requirement (-1%) is
driven by the reduction of the CCyB from 1% to 0%.
These requirements exclude Pillar 2 Guidance (P2G) which is not publicly disclosed. The minimum requirement is subject to an annual
review by the Regulator. The following table summarises the composition of regulatory capital and the ratios of PTSB, the primary
regulated entity of the Group as at 31 December 2020 and 31 December 2019 which are calculated in accordance with CRD IV regulatory
capital requirements.
During the year the volume of CET1 has reduced primarily due to losses incurred in the year, driven by impairment charges of €155m.
Ratios have however improved as a result of a significant BTL loan disposal in the year.
In Q4 2020 the Bank successfully executed an Additional Tier 1 issuance (+€125m incl. €2m transaction costs) which provided a further
Total Capital uplift.
228
Permanent TSB Group Holdings plc - Annual Report 2020
34. Capital management (continued)
The following information has not been subject to audit by the Group’s independent auditor.
Common Equity Tier 1 capital
Share capital and share premium
Reserves
Prudential filters
Total qualifying CET1 capital
Additional Tier 1 Capital
Total qualifying Tier 1 capital
Tier 2 capital
Subordinated liabilities
Other
Total qualifying Tier 2 capital
Total own funds
Risk weighted assets
Total risk-weighted assets
- Credit Risk (including CVA)
- Operational Risk
Capital Ratios
Common Equity Tier 1 capital ratio (Transitional basis)
Total capital ratio (Transitional basis)
The CET1 and Total Capital ratios are calculated and reported to the CBI on a quarterly basis.
The movement in the Group’s regulatory capital is summarised below:
Balance as at 1 January
Operating (loss)/profit after tax
Other intangible assets deduction
Deferred tax assets deduction
IFRS 9 phase-in
AT1 Securities*
Other movements
Balance as at 31 December
*AT1 issuance in November 2020 +€125m (incl. €2m transaction costs).
**Prior year (December 2019) has been amended to provide comparative information.
31 December
2020
31 December
2019
€m
€m
561
1,145
(171)
1,535
190
1,725
13
41
54
1,779
€m
8,480
7,808
672
561
1,314
(110)
1,765
85
1,850
10
51
61
1,911
€m
10,012
9,317
695
18.1%
21.0%
17.6%
19.1%
2020
€m
1,911
(162)
(6)
(43)
(12)
108
(17)
1,779
2019**
€m
1,921
30
(25)
(27)
24
(4)
(8)
1,911
229
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
35. Current/non-current assets and liabilities
The following table provides an analysis of certain asset and liability line items as at 31 December 2020 and 31 December 2019. The
analysis includes amounts expected to be recovered or settled no more than 12 months after the statement of financial position date
(current) and more than 12 months after the statement of financial position date (non-current).
31 December 2020
31 December 2019
Note
Current Non-current
€m
€m
Total
€m
Current Non-current
€m
€m
Total
€m
Assets
Cash and balances at central banks
Items in the course of collection
Debt securities
Equity Securities
Derivative assets
Loans and advances to banks
Loans and advances to customers
Assets classified as held for sale
Prepayments and accrued income
Other assets
Liabilities
Customer accounts
Debt securities in issue
Derivative liabilities
Accruals
Other liabilities
Provisions
13
13
14
15
16
17
18
40
24
23
25
26
16
27
28
71
20
27
-
-
3,312
1,678
31
86
5
-
-
2,556
24
-
-
12,535
-
-
-
71
20
2,583
24
-
3,312
14,213
31
86
5
63
15
449
12
1
1,556
1,793
59
49
258
-
-
1,556
3
-
-
13,851
-
-
1
63
15
2,005
15
1
1,556
15,644
59
49
259
16,978
2
-
2
80
51
1,061
807
-
-
27
26
18,039
809
-
2
107
77
15,587
9
1
5
84
10
1,603
914
1
-
34
31
17,190
923
2
5
118
41
36. Transfer of financial assets
In the ordinary course of business, the Group enters into transactions that result in the transfer of financial assets of loans and advances
to customers. In accordance with note 1.5 (vii), the transferred financial assets continue to be either recognised in their entirety or to the
extent of the Group’s continuing involvement, or are derecognised in their entirety.
The Group transfers financial assets primarily through the following transactions:
(i) sale and repurchase of securities; and
(ii) securitisation activities in which loans and advances to customers are sold to Structured Entities (SEs) that in turn issue notes to
investors which are collateralised by purchased assets.
(a) Transferred financial assets that are not derecognised in their entirety
(i) Sale and repurchase agreements
Sale and repurchase agreements are transactions in which the Group sells a security and simultaneously agrees to repurchase it (or an
asset that is substantially the same) at a fixed price on a future date. The Group continues to recognise the securities in their entirety
in the statement of financial position as loans and advances to customers (note 18) and debt securities (note 14) because it retains
substantially all the risks and rewards of ownership. The cash consideration received is recognised as a financial asset and a financial
liability is recognised for the obligation to pay the repurchase price. As the Group sells the contractual rights to the cash flows of the
securities it does not have the ability to use or pledge as collateral the transferred assets during the term of the arrangement. The Group
had no sale and repurchase agreements as at 31 December 2020 and 31 December 2019
230
Permanent TSB Group Holdings plc - Annual Report 2020
36. Transfer of financial assets (continued)
(ii) Securitisations
The Group sells loans and advances to customers to SEs that in turn issue notes to investors which are collateralised by the purchased
assets. For the purpose of disclosure in this note, a transfer of such financial assets may arise if the Group sells assets to a consolidated
SE, the transfer of financial assets is from the Group (that includes the consolidated SE) to investors in the notes issued by the SE. The
transfer is in the form of the Group assuming an obligation to pass cash flows from the underlying assets to investors in the notes.
Although the Group does not own more than half of the voting power of the Fastnet entities, it has the power to control the relevant
activities of the SE and the ability to affect the variable returns of the investee and hence these SEs are consolidated. In these cases, the
consideration received from the investors in the notes in the form of cash is recognised as a financial asset and a corresponding financial
liability is recognised. The investors in the notes have recourse only to the cash flows from the transferred financial assets.
When the Group transfers assets as part of the securitisation transactions it does not have the ability to use or pledge as collateral the
transferred assets during the term of the arrangement.
The table below sets out an overview of carrying amounts and fair values related to transferred financial assets that are not
derecognised in their entirety and associated liabilities.
Carrying amount of assets
Carrying amount of associated liabilities
Liabilities that have recourse only to the transferred financial assets
Fair value of assets
Fair value of associated liabilities
Net position
31 December 2020
31 December 2019
Securitisations
Securitisations
€m
-
-
-
-
-
€m
434
458
406
457
(51)
€m
-
-
-
-
-
€m
571
615
539
616
(77)
(b) Transferred financial assets that are derecognised in their entirety
The Group has not transferred any financial assets that were derecognised in their entirety where the Group has continuing involvement
in a transferred asset.
37. Offsetting financial assets and financial liabilities
In accordance with IAS 32, Financial Instruments: Presentation, the Group reports financial assets and financial liabilities on a net
basis on the statement of financial position only if there is a legally enforceable right to set off the recognised amounts and there is an
intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.
The tables below provide the impact of master netting agreements on all derivative financial instruments that are subject to master
netting agreements or similar agreements, but do not qualify for netting on the balance sheet. It highlights the amounts that have been
offset on the statement of financial position and those amounts covered by collateral placed with or by counterparties to these trades.
It does not highlight where right of offset is available in the event of a default, as allowed under International Swaps and Derivatives
Association (ISDA) master agreements.
231
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
37. Offsetting financial assets and financial liabilities (continued)
The tables below also provide analysis of derivative financial assets and liabilities subject to offsetting, enforceable master netting
agreements and similar agreements:
Effect of offsetting on the statement of financial
position
Related amounts not offset in the statement of
financial position
31 December 2020
€m
€m
€m
€m
€m
Gross financial
assets/
(liabilities)
recognised
Gross financial
(liabilities)/
assets offset
Net amounts
reported on the
statement of
financial position
Financial
instruments
collateral
Amounts subject
to master netting
agreements
Assets
Derivative assets
Total
Liabilities
Derivative liabilities
Repurchase agreements
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net amount
€m
-
-
-
-
-
Effect of offsetting on the statement of financial
position
Related amounts not offset in the statement of
financial position
31 December 2019
€m
€m
€m
€m
€m
Gross financial
assets/
(liabilities)
recognised
Gross financial
(liabilities)/
assets offset
Net amounts
reported on the
statement of
financial position
Financial
instruments
collateral
Amounts subject
to master netting
agreements
Assets
Derivative assets
Total
Liabilities
Derivative liabilities
Repurchase agreements
Total
1
1
(2)
-
(2)
-
-
-
-
-
1
1
(2)
-
(2)
-
-
-
-
-
-
-
1
-
1
Net amount
€m
1
1
(1)
-
(1)
38. Commitments and contingencies
The table below gives the contractual amounts of credit commitments. The maximum exposure to credit loss under commitments is the
contractual amount of the instrument in the event of non-performance by the other party where all counter claims, collateral or security
prove worthless. The transfer of economic resources is uncertain and cannot be reasonably measured to be recognised on the SOFP.
Credit commitments
Guarantees and irrevocable letters of credit
Commitments to extend credit
- less than 1 year
- 1 year and over
Total commitments to extend credit
Total credit commitments
232
31 December
2020
31 December
2019
€m
2
985
82
1,067
1,069
€m
2
782
89
871
873
Permanent TSB Group Holdings plc - Annual Report 2020
38. Commitments and contingencies (continued)
Other contingencies
The Group, like all other banks, is subject to litigation in the normal course of its business. Based on legal advice, other than matters
referred to in note 28, the Group does not believe that any such litigation will have a material effect on its income statement or SOFP.
A number of different statutory and regulatory bodies, including the CBI, commenced investigations into a series of transactions
involving deposits placed by Irish Life Assurance plc with Irish Bank Resolution Corporation (formerly Anglo Irish Bank) on 31 March
2008, 26 September 2008, 29 September 2008 and 30 September 2008. While these investigations commenced a number of
years ago, they were put on hold pending the determination of criminal proceedings against a number of individuals in respect of the
same transactions. The Bank understands that those criminal proceedings have concluded and so the Bank is waiting to see if the
investigations, which, from the Bank’s perspective, have been dormant for some time will now be re-commenced.
As part of the agreement in August 2011 to dispose of Irish Life International Limited, the Group provided certain indemnities and
warranties to the purchaser under a number of identified scenarios. At 31 December 2020, the Group believes that the crystallisation of
any claim against the Group is unlikely and as a result has not included a provision.
Like other banks, in the normal course of business, customers bring complaints to the Financial Services and Pensions Ombudsman
(FSPO) in relation to a variety of issues. The Bank considers the applicability of FSPO decisions and findings to other customers in similar
circumstances. It is not practicable to predict the final outcome of FSPO decisions, their timing and their likely impact, if any on the
Group.
ECL held against commitments are reported under loans and advances to customers.
39. Related parties
Related parties include individuals and entities that can exercise significant influence on operational and financial policies of the Group.
The Group has a related party relationship with its Directors, Senior Executives, the Group’s pension schemes, the Minister for Finance
and with the Irish Government, and Irish Government related entities on the basis that the Irish Government is deemed to have control
over the Group.
(a) Directors’ shareholdings
The interests of the Directors and the Company Secretary, including interests of their close family members in the share capital of the
Company are as follows:
Number of beneficial ordinary shares held
Position
Robert Elliot
Eamonn Crowley (appointed 17 June 2020)
Jeremy Masding (retired 1 July 2020)
Michael Frawley
Conor Ryan
Donal Courtney
Julie O’Neill
Ronan O’Neill
Andrew Power
Ken Slattery
Ruth Wandhofer
Marian Corcoran
Paul Doddrell (appointed 26 November 2020)
Richard Pike (retired 17 December 2019)
Chairman
Chief Executive
Chief Executive
Chief Risk Officer
Company Secretary
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
31 December
2020
31 December
2019
Ordinary
shares
Ordinary
shares
16,500
50,000
13,611
-
10
-
10,000
4
-
10,000
-
-
-
-
16,500
-
13,611
-
10
-
10,000
4
-
10,000
-
-
-
12,975
Conor Ryan, as trustee of the employee benefit trust set up under the terms of the long-term incentive plan, has non-beneficial interest
in 4,580 shares held in the plan (31 December 2019: 4,580).
There were no transactions in the above Directors’ and Secretary’s interests between 31 December 2020 and 02 March 2021.
Details of the Directors’ remuneration is included in the Directors’ Remuneration Report on pages 132 to 134.
233
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
39. Related parties (continued)
(b) Transactions with key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of
the Group. Key management personnel include Non-Executive Directors, Executive Directors and members of the ExCo. The Executive
Directors and members of the ExCo are listed below:
Members of the ExCo at 31 December 2020
Eamonn Crowley
Paul McCann
Michael Frawley
Patrick Farrell
Tom Hayes
Ger Mitchell
Shane O’Sullivan
Breege Timoney
Andrew Walsh
Chief Executive
Interim Chief Financial Officer
Chief Risk Officer
Retail Banking Director
Chief Technology Officer
HR Director
Director of Operations
Product Assurance Director
Chief Legal Officer
During the year ended 31 December 2020, the following key management personnel changes occurred: Jeremy Masding retired as
Chief Executive and Eamonn Crowley was appointed Chief Executive; Paul Doddrell was appointed as Non-Executive Director; and Paul
McCann was appointed as interim Chief Financial Officer.
Richard Pike was considered to be key management personnel during 2019 and his details have been included in the 2019 disclosures.
Non-Executive Directors are compensated by way of fees. In certain circumstances, expenses incurred by Non-Executive Directors
during the normal course of business are paid by the Group and are included in taxable benefits. The compensation of Executive
Directors and members of the ExCo comprises salary and other benefits together with pension benefits. Previously they also
participated in the Group’s profit sharing, share option schemes and long-term incentive plans. No awards have been issued under these
schemes and plans since 2008.
Number of key management personnel as at year end is as follows:
Non-Executive Directors
Executive Directors and Senior Management
31 December
2020
31 December
2019
8
9
17
8
9
17
234
Permanent TSB Group Holdings plc - Annual Report 2020
39. Related parties (continued)
(b) (i) Total compensation to Executive and Non-Executive Directors is as follows:
Fees
Taxable benefits
Salary and other benefits
Pension benefits
- defined contribution
Total
Total compensation to other key management personnel is as follows:
Taxable benefits
Salary and other benefits
Pension benefits
- defined contribution
CFO fees
Total
Year ended
Year ended
31 December
2020
31 December
2019
€’000
€’000
804
6
1,083
155
2,048
843
3
1,040
135
2,021
Year ended
Year ended
31 December
2020
31 December
2019
€’000
€’000
3
1,983
277
152
2,415
1
2,208
294
-
2,503
There were no connected persons to key management personnel employed by the group during 2020 or 2019.
(b) (ii) Balances and transactions with key management personnel:
In the normal course of its business, the Group had loan balances and transactions with key management personnel and their connected
persons. The loans are granted on normal commercial terms and conditions with the exception of certain home loans where Executive
Directors and Senior Managers may avail of subsidised loans on the same terms as other eligible management of the Group. All of the
loans in the scope of the related party guidelines as outlined under the Companies Act 2014, the Central Bank Related Party lending code
2013 and IAS 24 Related party disclosures are secured, and all interest and principal due at the statement of financial position date has
been repaid on schedule and therefore, no provision for loan impairment is required. Total outstanding balances of loans, credit cards,
overdrafts and deposits are as follows:
Balances
Loans
Unsecured credit card balances and overdrafts
Deposits
Transactions during the year
Loan advances
Loan repayments
Interest received on loans
Interest paid on deposits
31 December
2020
31 December
2019
€’000
€’000
1,583
7
2,876
2,315
10
2,524
Year ended
Year ended
31 December
2020
31 December
2019
€’000
€’000
-
553
45
(2)
282
101
53
(4)
235
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
39. Related parties (continued)
Loans to Directors
31 December 2020
Marian Corcoran
Ronan O’Neill*
31 December 2019
Jeremy Masding
Marian Corcoran**
Ronan O’Neill*
Balance as at
1 Jan
Advances during
year
Principal repaid
€’000
€’000
€’000
271
445
716
-
-
-
23
445
468
Balance as at
1 Jan
€’000
Advances
during
year
€’000
Principal repaid
€’000
21
282
452
755
-
-
-
-
10
11
8
29
Balance
as at
31 Dec
€’000
248
-
248
Balance
as at
31 Dec
€’000
11
271
445
727
Interest
paid
€’000
Maximum
balance
€’000
3
8
11
271
445
716
Interest
paid
€’000
Maximum
balance
€’000
1
2
14
17
21
282
-
303
*Represents a loan for a person connected with this Director in accordance with section 307(3) of the Companies Act 2014.
**Balance as at 1 Jan represents balance as at 24 September 2019 on appointment.
(c) Irish Government and Irish Government related entities
The Minister for Finance continues to be the majority shareholder of the Group (and the ultimate controlling party per IAS 24). The
Irish Government is recognised as a related party as the Government is deemed to have control over the Group as defined by IAS 24.
The Group has applied the amended IAS 24 which exempts an entity from the related party disclosure requirements in respect of the
Government and Government related entities unless transactions are individually or collectively significant. In the normal course of
business, the Group has entered into transactions with the Government and Government related entities involving deposits, senior debt
and dated subordinated debt.
The following are transactions and balances between the Group and the Government and Government related entities that are
collectively significant:
• The Group holds securities issued by the Government of €1,488m (31 December 2019: €1,436m).
• At 31 December 2020 the Group had €nil deposits placed by a Government institution (31 December 2019: €0.1bn). Further details on
these deposits are provided in note 25.
• The Group entered into banking transactions in the normal course of business with local Government and Semi-State Institutions such
as local authorities and county councils. These transactions principally include the granting of loans, the acceptance of deposits and
clearing transactions.
• A bank levy imposed by the Government through the Finance Bill 2014 is payable in the second half of each calendar year. A bank levy
payable to government, is provided for on the occurrence of the event identified by the legislation that triggers the obligation to pay the
levy. In 2020, the amount recognised in the income statement was €24m (31 December 2019: €24m). As announced by the Minister by
Finance in October 2015, the bank levy was extended to 2021.
• During 2020, the Group also paid €15m DGS fees to the CBI (2019: €14m) as part of the DGS.
• During 2013, following the Transfer Order requested by the Central Bank and issued by the High Court dated 10 November 2013, the
Group acquired certain assets, liabilities, books and records of NCU and all its employees transferred to the Group. As part of this
transaction, along with the assets and liabilities of NCU, a cash financial incentive of €23m was paid from the Credit Institutions
Resolution Fund, which forms part of the Financial Incentives Agreement (FIA) signed between the Central Bank and the Group dated
10 November 2013. It was also agreed in the FIA that the Central Bank will use the Credit Institution Resolution Fund to compensate
the Group for 50% of any future impairment losses incurred on NCU loans and advances to customers. Similarly, it was also agreed
that if any provision write-backs or future recoveries of previously written off NCU loans and advances to customers occurs, the Group
will pay a cash amount equivalent to 50% of the provision write-back or the recoveries to the Credit Institutions Resolution Fund.
As per the FIA, this arrangement will continue for ten years from the transfer date. At 31 December 2020, the Group had recorded a
payable of €0.7m due under the FIA (31 December 2019: €1.2m).
• At 31 December 2020 the Company had an intercompany balance of €351m (31 December 2019: €300m) with its principal subsidiary
PTSB plc relating to the MREL issuance.
•
In November 2020, the Company invested €123m in PTSB. This investment was financed through the issuance of AT1 securities by
the Company
236
Permanent TSB Group Holdings plc - Annual Report 2020
39. Related parties (continued)
The Government also has a controlling interest in Allied Irish Bank plc including EBS Limited and also has significant influence over Bank
of Ireland. Due to the Group’s related party relationship with the Irish Government as described above, balances between these financial
institutions and the Group are considered related party transactions in accordance with IAS 24.
The following table summarises the balances between the Group and these financial institutions:
Loans and
advances to
Banks
Debt securities
held
€m
€m
Derivative
assets
€m
Derivative
liabilities
€m
Deposits by
banks
€m
Bank of Ireland
31 December 2020
31 December 2019
2
5
-
-
-
-
-
-
-
-
40. Assets classified as held for sale
At 31 December 2020, assets classified as held for sale amounted to €31m (31 December 2019: €59m). This consists of the following:
1. €30m (31 December 2019: €58m) relates to collateral in possession, these properties are expected to be sold within the next 12
months.
2. €1m (31 December 2019: €1m) relates to two branch properties (31 December 2019: two branch properties) which are no longer
occupied by the Group, the sale of these properties are expected to complete within the next 12 months.
41. Sale of loans and advances to customers
Project Glenbeigh II
On 31 July 2020, the Group agreed the sale of a Buy-to-let loan portfolio (“Glenbeigh II”) to Citibank NA London. The portfolio has a gross
value of €1.4bn and a net book value of €1.2bn.
In line with IFRS 9, the assets have been derecognised from the Statement of Financial Position.
As a result of the transaction, a loss on the sale of the portfolio of €32m was recorded through the impairment line of the income
statement as required by IFRS 9.
42. Principal subsidiary undertakings and interest in subsidiaries and structured entities
Under IFRS 10 ‘Consolidated financial statements’, the Group has control over an entity when it has the power to direct relevant activities
that significantly affect the investee return, it is exposed or has rights to variable returns from its involvement in the investee and has the
ability to affect those returns through its powers over the entity.
A subsidiary is considered material if the value of the consolidated total assets at the end of the financial year of the subsidiary and the
entities it controls (if any) is more than 1% of the total assets of the Group.
The key subsidiary of the parent meeting the criteria outlined above is:
Name and registered office
Held directly by the company:
Permanent TSB plc
56-59 St. Stephen’s Green, Dublin 2
Nature of
Incorporated
% of ordinary
business
in
shares held
Retail banking
Ireland
100
237
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Consolidated Financial Statements
(continued)
42. Principal subsidiary undertakings and interest in subsidiaries and structured entities (continued)
In presenting details of the principal subsidiary undertakings, the exemption permitted by section 315 (a) (i) of the Companies Act 2014
in relation to disclosing related undertaking net assets or profit or loss, has been availed of, and the Company will annex a full listing of
Group undertakings to its annual return to the Companies Registration Office.
The liquidation of the following entities for which the Group lost control in 2019 as part of the overall simplification of the Group’s
structure was completed in 2020:
• Erin Executor & Trustee Company Limited;
• Mars Nominees Limited;
• Kencarol Limited; and
• Irish Permanent Property Company Ltd DAC (IPPC).
The liquidation of the following entities are still ongoing and the Group aims to close these liquidations in due course:
• Guinness & Mahon Ireland Limited; and
• Blue Cube Personal Loans Limited:
The reporting date for each of the Group’s principal subsidiary entities is 31 December.
The principal country of operation of each company is the country in which it is incorporated.
The registered office of Permanent TSB Group Holdings plc is 56-59 St. Stephen’s Green, Dublin 2.
(a) Company’s interest in subsidiary undertakings
The Company is the ultimate holding company of the Group while PTSB is a 100% subsidiary of the Company. The investment in PTSB
is carried at the recoverable amount in the holding company statement of financial position. The investment amounted to €956m (31
December 2019: €978m). During 2020 the Group carried out an impairment assessment using a combination of internal group models,
and externally available date to inform their view of the recoverable amount of the investment. As the value in use is greater than the
carrying value, in line with IAS 36, no impairment has been recognised on the investment
(b) Structured entities (SEs)
A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding control. SEs are generally created
to achieve a narrow and well defined objective with restrictions around their on-going activities. Depending on the Group’s power to
direct the relevant activities of the investee and its exposure or rights to variable returns from its involvement in the investee and the
ability to use its power over the investee to affect the amount of the investor’s return, it may consolidate the entity.
Control and voting rights
The Directors of the individual SEs are independent of the Group and neither the Group nor any of its subsidiaries have voting rights
in the share capital of these entities. The Group initiated the setup of these SEs and, as architect dictated the terms relating to the
operation of these SEs. The Group, as administrator, provides services to the individual SEs. The Group, as administrator, has power to:
• Exercise rights, powers and discretions of the issuers in relation to the mortgage loans and their related security and to perform its
duties in relation to the mortgage loans and their related securities: and
• Do or cause to be done any and all other things which it reasonably considers necessary, convenient or incidental to the administrator
of the mortgage loans and their related security or the exercise of such rights, powers and discretions.
The key activities performed by the Group’s subsidiaries as administrator is:
• To manage the credit risk associated with the mortgages contained in the individual SEs; and
• To determine and set rates of interest applicable to loans on each rate setting date in accordance with the terms of the loans and
negotiate the cost of funds associated with these mortgages which may result in a variable return in the entity.
These two items highlight the power the Group has to direct the relevant activities of these entities that significantly affect the investee
returns and the ability to use its power to affect variable returns of investors.
The Group provides funding to each of these vehicles by way of a subordinated loan and has an entitlement to deferred consideration.
Through the subordinated loan and the deferred consideration the Group is exposed to the variable returns of the SE’s.
238
Permanent TSB Group Holdings plc - Annual Report 2018
Permanent TSB Group Holdings plc - Annual Report 2020
42. Principal subsidiary undertakings and interest in subsidiaries and structured entities (continued)
The Group currently has eight SEs in issue in the Republic of Ireland the details of which are outlined below.
SEs setup with Residential Mortgages
- Fastnet 5 DAC
- Fastnet 6 DAC
- Fastnet 10 DAC
- Fastnet 11 DAC
- Fastnet 12 DAC
- Fastnet 13 DAC
- Fastnet 14 DAC
- Fastnet 15 DAC
Sub loan
provided
√
√
√
√
√
√
√
√
Although the Group does not own more than half of the voting power, it has the power to control the relevant activities of the SE and the
ability to affect the variable returns of the investee and hence these SEs are consolidated. In these cases, the consideration received
from the investors in the notes in the form of cash is recognised as a financial asset and a corresponding financial liability is recognised.
The investors in the notes have recourse only to the cash flows from the transferred financial assets.
When the Group transfers assets as part of the securitisation transactions it does not have the ability to use or pledge as collateral the
transferred assets during the term of the arrangement.
At 31 December 2020, restricted cash of €356m (31 December 2019: €402m) relates to cash held by the Group’s securitisation entities.
43. Reporting currency and exchange rates
The consolidated financial statements are presented in millions of Euro.
The following table shows the closing and average rates used by the Group for the current year-end and prior year-end:
€ / £ exchange rate
Closing
Average
€ / US$ exchange rate
Closing
Average
31 December
2020
31 December
2019
0.8990
0.8895
0.8508
0.8760
1.2271
1.1473
1.1234
1.1194
44. Events after the reporting period
No items, transactions or events that would materially impact the consolidated financial statements and require adjustment or disclosure
to these consolidated financial statements have occurred between the reporting date of 31 December 2020 and the date of the approval
of these financial statements by the Board of Directors of 02 March 2021.
The recent developments with the COVID-19 pandemic resulting in additional disruption of economic activity may impact the Group’s
ability to meet its medium term strategy and may result in higher than expected credit losses. While the potential impact of the
pandemic continues to evolve, and given the uncertainty of the governmental response and potential containment of the virus by the
new vaccines, the Directors, in their opinion, have significantly reflected the current and future affairs of the Group based on the best
available information at the date of approval for these consolidated financial statements.
Permanent TSB Group Holdings plc - Annual Report 2018
239
Permanent TSB Group Holdings plc - Annual Report 2020
THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK
240
Permanent TSB Group Holdings plc - Annual Report 2020 Company Financial Statements and Notes to the Company Financial Statements
Index:
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash flows
A
B
C
D
E
F
G
Accounting policies
Loans and advances to banks
Investment in subsidiary
Debt securities in issue
Share capital and reserves
Related Parties
Audit Fees
Page
241
242
243
244
244
244
245
245
245
245
241
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Company Statement of Financial Position
As at 31 December 2020
Assets
Loans and advances to banks - subsidiary
Investments in subsidiary undertakings
Total assets
Liabilities
Debt securities in issue
Total liabilities
Equity
Share capital
Share premium
Retained earnings
Shareholders’ equity
Other equity instruments
Total equity
Total liabilities and equity
On behalf of the Board:
Notes
31 December
2020
31 December
202019
€m
€m
B
C
D
E
E
E
E
351
956
1,307
351
351
227
333
270
830
126
956
300
978
1,278
300
300
227
333
415
975
3
978
1,307
1,278
Robert Elliott
Chairman
Eamonn Crowley
Chief Executive
Donal Courtney
Board Audit Committee Chair
Conor Ryan
Company Secretary
242
Permanent TSB Group Holdings plc - Annual Report 2020 Company Statement of Changes in Equity
For the year ended 31 December 2020
Company
Balance as at 1 January 2019
Loss for the year ended 31 December 2019
Other comprehensive income, net of tax
Total comprehensive income for the year
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners
Cancellation of deferred share capital
Total contributions by and distributions to owners
Balance as at 31 December 2019
Loss for the year ended 31 December 2020
Other comprehensive income, net of tax
Total comprehensive income for the year
Transactions with owners, recorded directly in equity:
Issue of other equity instruments (note E)
Issuance cost of share capital and other equity
Contributions by and distributions to owners
Total contributions by and distributions to owners
Balance as at 31 December 2020
Attributable to owners of the holding company
Share capital
Share premium
€m
€m
Retained
earnings
€m
Other equity
instrument
€m
227
-
-
-
-
-
-
-
227
-
-
-
-
-
333
-
-
-
-
-
-
-
333
-
-
-
-
-
-
227
-
333
415
-
-
-
-
-
-
-
415
(145)
-
(145)
-
-
-
270
3
-
-
-
-
-
-
-
3
-
-
-
125
(2)
123
126
Total
€m
978
-
-
-
-
-
-
-
978
(145)
-
(145)
125
(2)
123
956
243
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 31 December
31 December
2020
€m
2019
€m
(145)
-
(145)
-
-
-
(51)
22
(300)
-
51
(123)
-
(123)
-
-
123
123
-
-
-
-
-
300
-
-
-
-
-
-
-
-
-
-
-
-
Company Statement of Cash Flows
For the year ended 31 December 2020
Cash flows from operating activities
Operating (loss)/profit before taxation
Adjusted for non-cash items and other adjustments:
(Increase)/decrease in operating assets
Loans and advances to banks
Investment in subsidiary undertakings
Increase/(decrease) in operating liabilities
Debt securities in issue
Net cash flow from operating activities before tax
Tax paid
Net cash flow from operating activities
Cash flow from investing activities
Net cash flow from investing activities
Cash flow from financing activities
Issuance of new AT1 Securities
Net cash flow from financing activities
Increase in cash and cash equivalents
Analysis of changes in cash and cash equivalents
Cash and cash equivalents as at 1 January
Increase in cash and cash equivalents
Effect of exchange translation adjustments
Cash and cash equivalents as at 31 December
244
Permanent TSB Group Holdings plc - Annual Report 2020 Notes to the Company Financial Statements
A. Accounting policies
The accounting policies adopted by Permanent TSB Group Holdings plc (‘Company’) are the same as those of the Group as set out in note
1 to the consolidated financial statements where applicable. These financial statements reflect the financial position of the Company
only and do not consolidate the results of any subsidiaries.
The individual financial statements of the ultimate holding company, Permanent TSB Group Holdings plc have also been prepared in
accordance with IFRS as adopted by the EU and comply with those parts of the Companies Act 2014. In accordance with section 315(a)
(i) of the Companies Act 2014, the Company is availing of the exemption from presenting its individual income statement to the Annual
General Meeting and from filing it with the Registrar of Companies. The Company’s loss for the financial year determined in accordance
with IFRS was €145m (2019: €0.06m).
B. Loans and advances to banks
Held at amortised cost
Funds placed with subsidiary, Permanent tsb plc (‘PTSB’)
ECL allowance
Loans and advances to banks
31 December
2020
31 December
2019
€m
€m
351
-
351
300
-
300
Funds placed with the principal subsidiary, PTSB are stage 1 under IFRS 9. The ratings for PTSB are as follows:
• Standard & Poor’s (S&P): Long-Term Rating “BBB-” with Outlook “Negative”;
• Moody’s: Long-Term Rating “Baa2” with Outlook “Stable”; and
• DBRS: Long-Term Rating “BBBL” with Outlook “Negative”.
The Company subscribed to the €51m Non-Preferred Senior loan issued by PTSB to meet the subsidiary’s internal MREL requirements,
which represents down streaming of the proceeds raised by the Company via the external Senior Unsecured issuance.
The terms of the Non-Preferred Senior loan were a placement at a base rate of 1.659% plus a margin of 0.211% per annum maturing on
26 September 2024. The interest is received annually in arrears on 26 September.
Previously the Company subscribed to the €300m Non-Preferred Senior loan issued by PTSB to meet the subsidiary’s internal MREL
requirements, which represents down streaming of the proceeds raised by the Company via the external Senior Unsecured issuance.
The terms of the Non-Preferred Senior loan were a placement at a base rate of 2.149%, plus a margin of 0.211% per annum maturing on
26 September 2024. The interest is received annually in arrears on 26 September.
The maximum exposure to credit risk for financial assets carried at amortised costs at 31 December 2020 is €351m (31 December 2019:
€300m).
The expected credit losses on these placements were immaterial at 31 December 2020 and at 31 December 2019.
The fair value of the loans and advances to banks closely equates to their amortised costs.
245
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Notes to the Company Financial Statements
(continued)
C. Investment in subsidiary
At 1 January
Additional investment
Impairment of investment in subsidiary
At 31 December
31 December
2020
31 December
2019
€m
978
123
(145)
956
€m
978
-
-
978
The Company is the ultimate holding company of the Group while PTSB is a 100% subsidiary of the Company. The investment in PTSB
is carried at the recoverable amount in the holding company’s statement of financial position. At 31 December 2020, the investment
amounted to €956m (31 December 2019: €978m).
The Company invested €123m of additional capital in its principal subsidiary PTSB that it raised through issuance of Additional Tier 1
Securities on 25 November 2020.
The Company carries its investment in its subsidiary undertaking at cost and reviews whether there is any indication of impairment
at each reporting date. Impairment testing involves comparing the carrying value of the investment to its recoverable amount. The
recoverable amount is the higher of the investment’s fair value or its value-in-use (VIU).
An impairment charge arises if the carrying value exceeds the recoverable amount and where the carrying value is not supported by the
estimated discounted future cash flows of the underlying business. The recoverable amount of the investment is the higher of its fair
value less costs to sell or its VIU. The carrying value of the subsidiary undertaking before adjusting for impairment was €1,103m and
recoverable amount based on the VIU was €956m resulting in €145m impairment charge and a transaction cost of €2m for the year
(2019: €nil).
While the recoverable amount based on the VIU exceeds market capitalisation at 31 December 2020, the depressed share price is the
result of the overall subdued banking environment in which the entity currently operates, along with various entity-specific factors that
affect the liquidity of the shares.
The VIU is the present value of the future free cash flows expected to be derived from the investment, based upon a VIU calculation that
discounts expected post-tax free cash flows at a discount rate appropriate to the investment.
See note 2 to the consolidated financial statements for a sensitivity analysis on the key assumptions used in the calculation.
D. Debt securities in issue
At amortised cost
Bonds and medium-term notes
Maturity analysis
Repayable in less than 1 year
Repayable in greater than 1 year but less than 5 years
31 December
2020
31 December
2019
€m
€m
351
351
2
349
351
300
300
1
299
300
Bonds & Medium Term Notes (MTNs)
In February 2020, PTSBGH issued an additional €50m of Senior Unsecured 2.125% Notes maturing on 26 September 2024 as part of the
MREL securities programme. Interest is payable on the nominal amount annually and is receivable in arrears on the coupon date.
E. Share capital and reserves
The share capital of Permanent TSB Group Holdings plc is detailed in note 30 to the consolidated financial statements, all of which
relates to Permanent TSB Group Holdings plc.
246
Permanent TSB Group Holdings plc - Annual Report 2020
In 2020, The Permanent TSB Group Holdings plc issued €125m of Additional Tier 1 Securities (AT1). See note 30 in the consolidated
financial statements additional details.
F. Related parties
Related parties include individuals and entities that can exercise significant influence on operational and financial policies of the Group.
The Group has a related party relationship with its Directors, Senior Executives, the Group’s pension schemes, the Minister for Finance
and with the Irish Government and Irish Government related entities on the basis that the Irish Government is deemed to have control
over the Group.
Related parties of the Company include subsidiary undertakings, associated undertakings, joint undertakings, Key Management
Personnel and connected parties. The Irish Government is also considered a related party by virtue of its effective control of PTSB. See
note 39 of the consolidated financial statements for further details.
At 31 December 2020, the Company had an intercompany balance of €351m (31 December 2019: €300m) with its principal subsidiary
PTSB relating to the MREL issuance.
Additionally in November 2020, the Company invested €123m in PTSB. This investment was financed through the issuance of AT1
securities by the Company.
G. Audit Fees
€nil audit fees were paid to the auditors, PwC, for services relates to the audit of the financial statements of PTSBGH during the year to
31 December 2020 (31 December 2019: €nil).
247
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 APPENDIX
248
Permanent TSB Group Holdings plc - Annual Report 2020 Alternative Performance Measures
The financial performance of the Group is assessed by Management using various financial measures, some of which are not defined
by IFRS and do not have a standard guidance for calculation. Therefore, these measures may not be directly comparable to other peers.
Management believes that these measures provide useful information in assessing the Group’s financial performance. Preference
should be given to IFRS measures over non-IFRS measures when assessing financial performance of the Group.
The definitions and calculation methodology for the Alternative Performance Measures noted below are consistent with the prior year.
1. Underlying profit
The underlying profit is the measure of adjusted profits realised by the Group. This measure is used by the Group for its strategic
planning process and reflects the true economic substance of the Group’s financial performance. The table below details the calculation
of underlying profit. Exceptional items are excluded from the operating expenses as Management considers these items as non-
reflective of core operating costs.
Total operating income
Total operating expenses (excluding exceptional items)
Underlying profit before impairment
Impairment charge on loans and advances to customers
Underlying profit
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Income Statement
Income Statement
Income Statement
Income Statement
Income Statement
375
(329)
46
(155)
(109)
413
(329)
84
(10)
74
2. Exceptional costs
Exceptional costs are unusually large non-recurring items that distort the financial performance of the Group. The table below details the
exceptional costs incurred by the Group in 2020 and 2019 allowing users to understand the nature of items that Management considers
to be outside of the normal course of business.
Restructuring Charges*
Legacy legal compliance CBI investigations costs*
Impairment charge arising from deleveraging of loans
Exceptional costs
* These exceptional costs are adjusted in operating expenses for the calculation of underlying profit above.
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Income Statement
Financial Review
Income Statement
Note 10
31
-
26
57
13
3
16
32
3. Adjusted cost income ratio
Operating expenses (excluding exceptional, other non-recurring items and regulatory charges) divided by total operating income.
Management considers adjusted cost income ratio to be an important metric to assess the profitability of the Group after adjusting for
non-controllable costs.
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Total operating expenses (after exceptional and regulatory charges)
Exceptional items
Bank levy
Regulatory charges
Total operating expenses (excluding exceptional items and regulatory charges)
Total operating income
Income Statement
Note 10
Note 9
Note 9
Income Statement
Income Statement
Adjusted cost income ratio
386
(57)
(24)
(25)
280
375
361
(32)
(24)
(23)
282
413
75%
68%
249
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Alternative performance measures
(continued)
4. Headline cost income ratio
Total operating expenses (excluding exceptional items) divided by total operating income. The difference between adjusted cost to
income ratio and headline cost income ratio is due to regulatory charges and bank levy.
Total operating expenses
Exceptional items
Total operating expenses (excluding exceptional items)
Total operating income
Headline cost income ratio
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Income Statement
Note 10
Income Statement
Financial Review
386
(57)
329
375
88%
361
(32)
329
413
80%
5. CET 1 fully loaded basis*
Total CET 1 capital on a fully loaded basis divided by total RWAs on a fully loaded basis. CET1 ratio provides an insight into how well the
Bank can withstand financial stress and remain solvent.
Common equity tier 1
Risk weighted assets
CET 1 fully loaded
Source / Cross
Reference
31 December
2020
31 December
2019
Fully Loaded
Fully Loaded
€m
€m
Capital Management
Capital Management
Capital Management
1,282
8,471
15.1%
1,464
9,996
14.6%
*The full year profits recognised in the year end capital ratios remain subject to approval by the Regulator.
6. CET 1 transitional basis*
Total CET 1 capital on a transitional basis divided by total RWAs on a transitional basis. CET1 ratio provides an insight into how well the
bank can withstand financial stress and remain solvent.
Common equity tier 1
Risk weighted assets
CET 1 transitional
31 December
2020
31 December
2019
Source / Cross
Reference
Transitional
Transitional
€m
€m
Capital Management
Capital Management
1,535
8,480
18.1%
1,765
10,012
17.6%
*The full year profits recognised in the year end capital ratios remain subject to approval by the Regulator.
7. Leverage ratio*
The leverage ratio is calculated by dividing Tier 1 capital by the leverage ratio exposure measure (total assets and off balance sheet
exposures). Leverage ratios give an insight to the Group’s financial health and its capability to meet its financial liabilities and obligations.
Source / Cross Reference
31 December 2020
31 December 2019
Transitional
€m
Fully
Loaded
€m
Transitional
€m
Fully
Loaded
€m
Tier 1 Capital
Capital Management
1,725
1,480
1,850
1,567
Gross balance sheet exposures
Leverage Ratio Exposure Measure
Leverage ratio
Capital Management
Capital Management
21,082
20,829
20,389
20,087
8.2%
7.1%
9.1%
7.8%
*The full year profits recognised in the year end capital ratios remain subject to approval by the Regulator.
250
Permanent TSB Group Holdings plc - Annual Report 2020
8. Liquidity coverage ratio (LCR)
Calculated based on the Commission Delegated Regulation (EU) 2015/61. The Group uses this measure to assess the resistance of the
liquidity profile of the Group over a 30 day stressed horizon.
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Liquidity coverage ratio
Financial Review
276%
170%
9. Net stable funding ratio (NSFR)
Defined as the ratio of available stable funding to required stable funding. The NSFR is a liquidity standard requiring banks to hold
sufficient stable funding over a 1 year time horizon. A minimum 100% requirement becomes binding in June 2021.
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Net stable funding ratio (minimum 100%)
Financial Review
160%
138%
10. Loan to deposit ratio (LDR)
Ratio of loans and advances to customers compared to customer accounts as presented in the statement of financial position. LDR
reflects the Group’s ability to cover loan losses and withdrawals by its customers. Management considers LDR to be an important metric
for assessing liquidity.
Loans and advances to customers
Customer accounts
Loan to deposit ratio
Source / Cross
Reference
Balance Sheet
Balance Sheet
31 December
2020
31 December
2019
€m
€m
14,213
15,644
18,039
17,190
79%
91%
11. Net interest margin (NIM)
NIM is derived by dividing the net interest income by the average interest earning assets. Management considers NIM to be an important
operating metric and reflects the differential yield over the average interest earning assets and cost of funding those assets.
Net interest income
Total average interest earning assets
Net interest margin (NIM)
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Income Statement
Financial Review
341
19,580
1.73%
356
19,704
1.80%
251
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Alternative performance measures
(continued)
12. Non-performing loans (NPLs)
NPLs are loans which are credit impaired or loans which are classified as defaulted in accordance with the Group’s definition of default.
Management considers NPLs to be an important metric as it reflects the risk profile of the Group.
Residential:
-Home loans
-Buy to let
Commercial
Consumer finance
Non-Performing loans
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Note 19
Note 19
Note 19
Note 19
658
418
35
17
614
377
41
18
1,128
1,050
13. Foreclosed Assets
Foreclosed assets are defined as assets held on the balance sheet, which are obtained by taking possession of collateral or by calling on
similar credit enhancements.
Foreclosed Assets
14. Non-performing assets (NPAs)
NPAs are NPLs plus foreclosed assets.
Source / Cross
Reference
Note 33
31 December
2020
31 December
2019
€m
30
€m
58
Foreclosed assets are defined as assets held on the balance sheet, which are obtained by taking possession of collateral or by calling on
similar credit enhancements.
Non-performing loans
Foreclosed assets
Non-Performing assets
Source / Cross
Reference
Note 19
Note 33
31 December
2020
31 December
2019
€m
€m
1,128
30
1,158
1,050
58
1,108
15. Return on equity
Loss for the year after tax (before exceptional items) expressed as a percentage of total average equity. Management considers return on
equity to be an important metric for assessing profitability.
(Loss)/profit for the year after tax
Exceptional items
Profit for the period after tax (before exceptional items)
Total average equity
Return on equity
Source / Cross
Reference
Income Statement
Income Statement
Financial Review
31 December
2020
31 December
2019
€m
(162)
57
(105)
1,961
(5.4)%
€m
30
32
62
1,994
3.1%
252
Permanent TSB Group Holdings plc - Annual Report 2020
16. Risk weighted assets (RWAs)
RWAs are the Group’s assets or off balance sheet exposures, weighted according to risk.
Risk weighted assets
Note 34
8,480
10,012
17. Total capital ratio (fully loaded basis)*
The total capital ratio is the ratio of a bank’s total capital (Tier 1 and Tier 2 capital) to its RWAs.
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Tier 1 Capital
Tier 2 Capital
Total Capital
Risk weighted assets
Total capital ratio (fully loaded basis)
Source / Cross
Reference
31 December
2020*
31 December
2019
€m
€m
Capital Management
Capital Management
Capital Management
Capital Management
Capital Management
1,480
59
1,539
8,471
18.2%
1,567
61
1,628
9,996
16.3%
*The full year profits recognised in the year end capital ratios remain subject to approval by the Regulator.
18. Total capital ratio (transitional basis)*
The total capital ratio is the ratio of a bank’s total capital (Tier 1 and Tier 2 capital) to its RWAs.
Tier 1 Capital
Tier 2 Capital
Total Capital
Risk weighted assets
Total capital ratio (transitional basis)
Source / Cross
Reference
31 December
2020*
31 December
2019
€m
€m
Capital Management
Capital Management
Capital Management
Capital Management
Capital Management
1,725
54
1,779
8,480
21.0%
1,850
61
1,911
10,012
19.1%
*The full year loss recognised in the year end capital ratios remain subject to approval by the Regulator.
19. Average interest earning assets
Interest earning assets include loans and advances to banks, loans and advances to customers, debt securities and derivative assets.
Average balances on interest earning assets are calculated as the average of the monthly interest earning asset balances from
December 2019 to December 2020, thirteen months in total.
Average interest earning assets
Loans and advances to banks
Loans and advances to customers
Debt securities and derivative assets
Total average interest earning assets
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Financial Review
Financial Review
Financial Review
2,087
15,083
2,410
19,580
1,587
15,768
2,349
19,704
253
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Alternative performance measures
(continued)
20. Average interest bearing liabilities
Interest bearing liabilities include customer accounts, deposits by banks, debt securities in issue, derivative liabilities and lease liabilities.
Average balances on interest bearing liabilities are calculated as the average of the monthly interest bearing liabilities balances from
December 2019 to December 2020, thirteen months in total.
Average interest bearing liabilities
Customer accounts
Deposits by banks
Debt securities in issue and derivative liabilities
Lease liabilities
Total average interest bearing liabilities
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Financial Review
Financial Review
Financial Review
Financial Review
17,689
10
863
37
18,599
17,227
561
862
44
18,694
21. Average yield on average interest earning assets
Average yield on average interest earnings assets is defined as the average interest income on interest earning assets, divided by the
total average interest earning assets balances.
Average interest income on interest earning assets is calculated as the average of the interest income arising on each of the interest
earning assets from December 2019 to December 2020, thirteen months in total.
Average interest income on interest earning assets
Loans and advances to banks
Loans and advances to customers
Debt securities and derivative assets
Total average interest income on interest earning assets
Total average interest earning assets
Average yield on average interest earning assets
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Financial Review
Financial Review
Financial Review
Financial Review
Financial Review
-
371
11
382
19,580
1.95%
1
378
34
413
19,704
2.10%
254
Permanent TSB Group Holdings plc - Annual Report 2020
22. Average rate on average interest bearing liabilities
Average rate on average interest bearing liabilities is defined as average interest expense on interest bearing liabilities divided by the total
average interest bearing liabilities balances.
Average interest expense on interest bearing liabilities is calculated as the average of the interest expense arising on each of the interest
bearing liabilities from December 2019 to December 2020, thirteen months in total.
Average interest expense on interest bearing liabilities
Customer accounts
Deposits by banks
Loans and advances to banks
Debt securities in issue and derivative liabilities
Lease Liabilities
Total average interest income on interest earning assets
Total average interest bearing liabilities
Average rate on average interest bearing liabilities
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
Financial Review
Financial Review
Financial Review
Financial Review
Financial Review
Financial Review
26
-
4
11
-
40
1
-
4
12
41
18,599
0.22%
57
18,694
0.30%
23. NPLs as % of gross loans
NPLs as % of gross loans are defined as NPLs divided by gross loans and advances to customers. Management considers NPLs as % of
gross loans to be an important metric as it reflects the risk profile of the Group.
Non-performing loans
Gross loans and advances to customers
NPLs as % of gross loans
Source / Cross
Reference
Note 19
Note 18
31 December
2020
31 December
2019
€m
€m
1,128
14,855
7.6%
1,050
16,389
6.4%
24. Average equity attributable to owners
This is an average of the equity position of each individual month from December 2019 to December 2020, thirteen months in total.
Management considers average equity attributable to owners to be an important metric for assessing profitability and generation of
returns from its investments.
Average equity attributable to owners
Financial Review
1,961
1,994
Source / Cross
Reference
31 December
2020
31 December
2019
€m
€m
255
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Abbreviations
AFS Available For Sale
AGM Annual General Meeting
AIMRO Association of Irish Market
Research Organisations
ALCO Asset and Liability Committee
ALM Asset Liability Management
AML Anti-Money Laundering
API Application Programming Interface
APP Application Software
ASAI Advertising Standards Association of
Ireland
AT1 Additional Tier 1
ATM Automated Teller Machine
BAC Board Audit Committee
BCM Business Continuity Management
BITCI Business in the Community Ireland
BPFI Banking and Payments Federation of
Ireland
BRCC Board Risk and Compliance
Committee
BRRD Banking Recovery and Resolution
Directive
BTL Buy-To-Let
CAC Capital Adequacy Committee
CBI Central Bank of Ireland
CCB Capital Conservation Buffer
CCF Credit Conversion Factor
CCMA Code of Conduct on Mortgage
Arrears
CCyB Counter Cyclical Buffer
CDF Career Development Framework
CDP Carbon Disclosure Project
CEO Chief Executive
CET 1 Common Equity Tier 1
CFO Chief Financial Officer
CFP Contingency Funding Plan
CODM Chief Operating Decision Maker
COVID-19 Coronavirus Disease
CPC Consumer Protection Code
CPI Consumer Price Index
CRD IV Capital Requirements Directive IV
CRO Chief Risk Officer
CRR Capital Requirements Regulation
CRR2 Capital Requirements Regulation 2
CSA Credit Support Annexes
CSI CyberSafeIreland
CSO Central Statistics Office
CSR Corporate Social Responsibility
CVA Credit Valuation Adjustment
DBI Digital Business Ireland
DDI Debt to Disposable Income
DDR Direct Debit Request
DGS Deposit Guarantee Scheme
DoF Department of Finance
DTA Deferred Tax Asset
DVA Debit Valuation Adjustment
EAD Exposure at Default
EAR Earnings at Risk
EBA European Banking Authority
ECAI External Credit Assessment
Institution
ECB European Central Bank
ECL Expected Credit Loss
EIR Effective Interest Rate
ELG Eligible Liabilities Guarantee
ERG Employee Resource Group
ESG Environmental Social Governance
EU European Union
EURIBOR Euro Interbank Offered Rate
EV Economic Valuation
EWI Early Warning Indicator
ExCo Executive Committee
EY Formerly Ernst & Young
FIA Financial Incentives Agreement
FLI Forward looking information
FSPO Financial Services and Pensions
Ombudsman
FTE Full Time Equivalent
FTP Funds Transfer Pricing
FTR Foreign Trust Receipt
FVOCI Fair value through other
comprehensive income
FVTPL Fair value through profit or loss
FX Foreign Exchange
GCC Group Credit Committee
GDP Gross Domestic Product
GIA Group Internal Audit
GRC Group Risk Committee
GRMF Group Risk Management Framework
GrowthCo Group Growth Committee
H&S Heidrick & Struggles
HPI House Price Index
HQLA High Quality Liquid Assets
HTC Hold to Collect
HTC&S Hold to Collect and Sell
IAS International Accounting Standards
IASB International Accounting Standards
Board
IBCB Irish Banking Culture Board
ICAAP Internal Capital Adequacy
Assessment Process
ICF Internal Control Framework
IFRIC International Financial Reporting
Standards Interpretations Committee
IFRS International Financial Reporting
Standards
IIA Institute of Internal Auditors
ILAAP Internal Liquidity Adequacy
Assessment Process
IMI Irish Management Institute
IOB Institute of Banking
IOM Isle of Man
IPP Integrated Planning Process
IRB Internal rating based approach
IRGG Impairment Reporting Governance
Group
IRRBB Interest Rate Risk in the Banking
Book
ISA International Standards on Auditing
ISDA International Swaps and Derivatives
Association
IT Information Technology
KPI Key Performance Indicator
KRI Key Risk Indicator
LCR Liquidity Coverage Ratio
LDR Loan to Deposit Ratio
LED Light-Emitting Diode
LGD Loss Given Default
LIBOR London Interbank Offered Rate
LIFT Leading Ireland’s Future Together
LSI Less Significant Institution
LTV Loan to value
MBS Mortgage Backed Securities
MCO Maximum Cumulative Outflow
MGC Model Governance Committee
MREL Minimum Requirement for own
funds and Eligible Liabilities
MTM Mark to Market
MTN Medium Term Note
MTP Medium Term Plan
MVT Model Validation Team
NCU Newbridge Credit Union
NFC Non-Financial Corporate
NGO Non-Governmental Organisation
NII Net Interest Income
NIM Net Interest Margin
NPL Non Performing Loan
NPS Net Promoter Score
NSFR Net Stable Funding Ratio
OCI Other Comprehensive Income
ODR Observed Default Rate
ORMC Operational Risk Management
Committee
256
Permanent TSB Group Holdings plc - Annual Report 2020 SIPTU Services Industrial Professional and
Technical Union
SME Small and medium sized enterprises
SOFP Statement of Financial Position
SPP Strategic Performance Priorities
SREP Supervisory Review & Evaluation
Process
SSM Single Supervisory Mechanism
TCPID Trinity Centre for People with
Intellectual Disabilities
TME Tracker Mortgage Examination
TRIM Targeted Review of Internal Models
TTC Through The Cycle
UK United Kingdom
VIP Values in Practice
VIU Value in Use
OTC Over the counter
P&L Profit & Loss Account
P2R Pillar 2 Requirement
PAS Public Appointments Service
PBI Ltd. PBI Limited (formerly Permanent
Bank International Limited)
PCAF Partnership For Carbon Accounting
Financials
PD Probability of Default
PEPP Pandemic Emergency Purchasing
Programme
POCI Purchased or Originated Credit
Impaired
PRS Private Rented Sector
PSD2 Payment Services Directive 2
PTSB Permanent TSB plc.
PTSBGH Permanent TSB Group Holding
plc.
PwC PricewaterhouseCoopers
RAF Risk Appetite Framework
RAS Risk Appetite Statement
RCA Root Cause Analysis
RCSA Risk and Control Self-Assessment
RMF Enterprise Risk Management
Framework
RNPS Relationship Net Promoter Score
ROI Republic of Ireland
RP Restructuring Plan
RPPI Residential Property Price Index
RWA Risk Weighted Assets
S&P Standard & Poor’s
SBCI Strategic Banking Corporation of
Ireland
SCSI Society of Chartered Surveyors
Ireland
SE Structured Entities
SEAI Sustainable Energy Authority of
Ireland
SEAR Senior Executive Accountability
Regime
SEI Social Entrepreneurs Ireland
SICR Significant increase in Credit Risk
SID Senior Independent Director
257
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020
Definitions
The following information has not been
subject to audit by the Group’s Independent
Auditor.
AFS Available for sale (AFS) are non-
derivative financial investments that are
designated as available for sale and are not
classified as a (i) loan receivable (ii) held
to maturity investments or (iii) financial
assets at fair value through profit or loss.
Arrears Arrears relates to any interest
or principal payment on a loan which
has not been received on its due date.
When customers are behind in fulfilling
their obligations with the result that an
outstanding loan is unpaid or overdue, they
are said to be in arrears.
Basel III Basel III is a global, voluntary
regulatory framework on bank capital
adequacy, stress testing and market
liquidity risk.
Basis point One hundredth of a per cent
(0.01%), so 100 basis points is 1%. It is the
common unit of measure for interest rates
and bond yields.
Brexit is an abbreviation of the term
“British Exit”. It refers to the United
Kingdom’s withdrawal from the European
Union.
Buy-to-let Residential mortgage
loan provided to purchase residential
investment property to rent it out.
CET 1 ratio Ratio of a bank’s core equity
capital compared to its total risk-weighted
assets.
Company Permanent TSB Group Holdings
plc or PTSBGH
Commercial property Commercial
property lending focuses primarily on the
following property segments:
a) Apartment complexes;
b) Develop to sell;
c) Office projects;
d) Retail projects;
e) Hotels; and
f) Selective mixed-use projects and special
purpose properties.
258
Common Equity Tier 1 Common Equity
Tier 1 (CET1) capital is recognised as the
highest quality component of capital.
It is subordinated to all other elements
of funding, absorbs losses as and when
they occur, has full flexibility of dividend
payments and has no maturity date. It
is predominately comprised of common
shares; retained earnings; undistributed
current year earnings; but may also
include non-redeemable, non-cumulative
preferred stock.
Concentration Risk The risk that any
single (direct or indirect) exposure or group
of exposures has the potential to produce
losses large enough to threaten the
institution’s health or its ability to maintain
its core business.
Contractual Maturity Date on which a
scheduled payment is due for settlement
and payable in accordance with the terms
of a financial instrument.
CVA Credit Valuation Adjustment (CVA)
is the difference between the risk-free
portfolio value and the true portfolio value
that takes into account the possibility of
counterparty default.
Customer accounts Money deposited
with the Group by counterparties other
than banks and classified as liabilities.
This includes various types of unsecured
deposits, credit current and notice
accounts.
Debt securities Instruments representing
certificates of indebtedness of credit
institutions, public bodies and other
undertakings. Debt securities can be
secured or unsecured.
Debt securities in issue Transferable
certificates of indebtedness of the Group to
the bearer of the certificates. They include
commercial paper, certificates of deposit,
bonds and medium-term notes.
Cost to Income ratio Total operating
expense divided by total operating income.
Credit Default Risk The event in which
companies or individuals will be unable to
make the required payments on their debt
obligations.
Default When a customer fails to make
timely payment of interest or principal on
a debt security or to otherwise comply
with the provisions of a bond indenture.
Depending on the materiality of the default,
if left unmanaged it can lead to loan
impairment.
CRD Capital Requirements Directives
(CRD) is statutory law implemented by the
European Union for capital adequacy. CRD
have introduced a supervisory framework
in the European Union which reflects
the Basel II and Basel III rules on capital
measurement and capital standards.
Credit Commitments Commitments to
extend credit, standby letters of credit,
guarantees, and acceptances that are
designed to meet the requirements of the
customers.
Credit Risk The risk of loss resulting
from a counterparty being unable to meet
its contractual obligations to the Group
in respect of loans or other financial
transactions.
Credit Risk Mitigation Methods to reduce
the credit risk associated with an exposure
by the application of credit risk mitigants.
Examples include: collateral; guarantee;
and credit protection.
DVA Debt Valuation Adjustments (DVA)
An adjustment made by an entity to the
valuation of over-the-counter derivative
liabilities to reflect, within fair value, the
entity’s own credit risk.
Eurozone The Eurozone, is a monetary
union of 19 of the 27 European Union
(EU) Member States which have adopted
the euro (€) as their common currency
and sole legal tender. The other eight
members of the European Union continue
to use their own national currencies. The
Eurozone consists of Austria, Belgium,
Cyprus, Estonia, Finland, France, Germany,
Greece, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, the Netherlands,
Portugal, Slovakia, Slovenia and Spain.
Exposure at Default Exposure at default
(EAD) is the gross exposure under a facility
upon default of an obligor.
Fair Value The price that would be received
to sell an asset, or paid to transfer a liability,
in an orderly transaction between market
participants at the measurement date.
Permanent TSB Group Holdings plc - Annual Report 2020 ILAAP Internal Liquidity Adequacy
Assessment Process (ILAAP) is a
supervisory review and an evaluation
process to assess the Group’s own
calculations and the adequate liquidity
which the Group consider necessary to
cover the risks they take and which they
are exposed to.
IRBA The Internal Ratings Based Approach
(IRBA) allows banks to use their own
estimated risk parameters for the purpose
of calculating regulatory capital for credit
risk to estimate probability of default
(PD), loss given default (LGD), exposure
at default (EAD), maturity (M) and other
parameters required to arrive at the total
risk weighted assets (RWA).
ISDA Master Agreements A standard
agreement used in over-the-counter
derivatives transactions. The ISDA Master
Agreement, published by the International
Swaps and Derivatives Association
(ISDA), is a document that outlines the
terms applied to a derivatives transaction
between two parties. Once the two parties
agree to the standard terms, they do
not have to renegotiate each time a new
transaction is entered into.
Loan to deposit ratio The ratio of loans
and receivables compared to customer
accounts, as presented in the statement of
financial position.
LCR Liquidity Coverage Ratio (LCR) is the
ratio to ensure that bank has an adequate
amount of high quality liquid assets in
order to meet short-term obligations under
a stress scenario lasting for 30 days. The
LCR minimum requirement is 100%.
LGD Loss Given Default (LGD) is the share
of an asset that is lost when a borrower
defaults on a loan.
Liquidity Risk The risk that the Group may
experience difficulty in financing its assets
and/or meeting its contractual obligations
as and when they fall due, without incurring
excessive cost.
LTV Loan to Value (LTV) is a lending risk
assessment ratio of mortgage amount to
value of property.
Forbearance Forbearance occurs when
a borrower is granted a temporary or
permanent concession, or agreed change
to a loan, for reasons relating to the actual
or apparent financial stress or distress
of that borrower. Forbearance strategies
are employed in order to improve the
management of customer relationships,
maximise collection opportunities and, if
possible, avoid foreclosure or repossession.
Such arrangements can include extended
payment terms, a temporary reduction in
interest or principal repayments, payment
moratorium and other modifications.
Foreclosed assets Foreclosed assets are
defined as assets held on the balance
sheet and obtained by taking possession
of collateral or by calling on similar credit
enhancements.
Foreign currency exchange risk The risk
of volatility in earnings resulting from
the retranslation of foreign currency (e.g.
Sterling and US dollar) denominated assets
and liabilities from mismatched positions.
GDP Gross Domestic Product (GDP) is a
monetary measure of the value of all final
goods and services produced in a period of
time (quarterly or yearly). GDP estimates
are commonly used to determine the
economic performance and standard of
living of a whole country or region, and to
make international comparisons.
Group Permanent TSB plc Group Holdings
plc and its subsidiary undertakings.
Guarantee A formal pledge by the Group to
pay debtor’s obligation in case of default.
HTM Held to maturity (HTM) non derivative
financial assets with fixed or determinable
payments and fixed maturity that an entity
has the positive intention and ability to hold
to maturity.
Home loan A loan provided by a bank,
secured by a borrower’s primary residence
or second home.
Hybrid A combination of two or more
forbearance arrangements.
ICAAP Internal Capital Adequacy
Assessment Process (ICAAP) is a
supervisory review and an evaluation
process to assess the Group’s own
calculations and the adequate capital
which Group considers necessary to cover
the risks they take and which they are
exposed to.
Market Risk The risk of change in fair value
of a financial instrument due to adverse
movements in equity prices, property
prices, interest rates or foreign currency
exchange rates.
Medium term notes Medium term notes
(MTNs) are debt notes issued by the Group
which usually mature in five to ten years.
They can be issued on a fixed or floating
coupon basis.
NII Net Interest Income (NII) is the
difference between interest earned on
assets and interest paid on liabilities.
NIM Net Interest Margin (NIM) is a
performance metric that measures the
difference between interest income
generated on lending and the amount of
interest paid on borrowings relative to the
amount of interest-earning assets.
Non-performing assets Non-performing
assets are defined as NPLs plus foreclosed
assets.
NPLs Non-performing loans are loans
which are credit impaired or loans which
are classified as defaulted, in accordance
with the Group’s definition of default. The
Group’s definition of default considers
objective indicators of default including
the 90 days past due criterion, evidence of
exercise of concessions or modifications
to terms and conditions; and are designed
to be consistent with European Banking
Authority (EBA) guidance on the definition
of forbearance.
NSFR Net Stable Funding Ratio (NSFR) is
designed to act as a minimum enforcement
mechanism to complement the shorter
term focused liquidity coverage ratio.
Operational Risk The risks inherently
present in the Group’s business, including
the risk of direct or indirect loss resulting
from inadequate or failed internal and
external processes or systems and human
error, fraud, or from external events.
PD Probability of Default (PD) is a financial
term describing the likelihood that a
borrower will be unable to meet its debt
obligations.
RMBS Residential Mortgage Backed
Securities (RMBS) are debt obligations that
represent claims to the cash flows from
pools of mortgage loans, most commonly
on residential property.
259
Strategic ReportGovernance Financial StatementsOther informationPermanent TSB Group Holdings plc - Annual Report 2020 Tier 1 capital A term used to describe the
capital adequacy of a bank. Tier 1 capital
is core capital; this includes equity capital
and disclosed reserves.
Tier 2 capital Tier 2 capital is
supplementary bank capital that includes
items such hybrid instruments and
subordinated term debt.
Tracker mortgage A mortgage which
follows the base rate of interest set by the
European Central Bank and will be fixed at
a certain percentage above this rate.
Definitions
(continued)
RWAs Risk Weighted Assets (RWAs)
measures the amount of the bank’s assets
or off-balance sheet exposures which are
weighted according to risk on prescribed
rules and formulas as defined in the under
Basel Banking Accord.
Securitisation Securitisation is the
process of taking an illiquid asset, or
group of assets, and through financial
engineering, transforming them into a
security.
Settlement Risk The risk that the
Group delivers a sold asset or cash to a
counterparty and then does not receive the
corresponding cash or purchased asset as
expected.
SSM The Single Supervisory Mechanism
(SSM) is a mechanism which has granted
the European Central Bank (ECB) a
supervisory role to monitor the financial
stability of banks based in participating
states. The main aims of the SSM are to
ensure the safety and soundness of the
European banking system and to increase
financial integration and stability in Europe.
SPE/SPV Special purpose entity (SPE)
is a legal entity which can be a limited
company or a limited partnership created
to fulfil specific or temporary objectives.
SPEs are typically used by companies to
isolate the firm from financial risk. This
term is used interchangeably with SPV
(Special Purpose Vehicle).
Stress testing A technique used to
evaluate the potential effects on an
institution’s financial condition of an
exceptional but plausible event and/or
movement in a set of financial variables.
Structured securities Structured
securities are complex lending
arrangements created to meet needs that
cannot be met from traditional financial
instruments available in the markets,
through the structuring of assets or debt
issues in accordance with customer and/
or market requirements. Structured debt
securities have the potential to decrease
risk, create liquidity, and increase yield.
260
Permanent TSB Group Holdings plc - Annual Report 2020 e
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