Annual
Report
2021
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We are a community serving the community. This document contains certain forward-looking statements with respect to Permanent
TSB Group Holdings plc’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 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.
Contents
Strategic Report
Financial Highlights
Non-Financial Highlights
Chairman’s Statement
Chief Executive Review
Market Context
Our Strategy, Business Model and Culture
Sustainability
Financial Review
Capital Management
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
10
26
54
66
69
96
103
146
151
152
160
166
257
260
264
271
272
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Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Financial Highlights
Financial Performance
Underlying (loss)/profit €m (a)
Underlying (loss)/profit €m (a)
Net Interest Margin % (b)
Net Interest Margin % (b)
Loss/return on Equity % (c)
Loss/return on Equity % (c)
2021
€17m
2020
(€109m)
2021
2020
2019
€74m
2019
1.51%
1.73%
1.80%
2021
2020
2019
(5.4)%
0.97%
3.1%
2021: €17m
Underlying profit due to organic growth
of our loan book and stability in our
impairment stack.
2021: 1.51%
22bps lower due to deleveraging activities
and negative interest rate charges.
2021: 0.97%
Increase due to stabilisation of impairment
charge.
Transformation and simplification
Adjusted cost to income ratio (d)
Adjusted Cost to Income Ratio (d)
Customer deposits (e)
Customer deposits €m(e)
2021
2020
2019
82%
75%
68%
2021
2020
2019
€19.1bn
€18.1bn
€17.2bn
2021: 82%
Increase due to lower total income and an
increase in costs primarily due to higher
depreciation arising from the significant
investment in the digital transformation
programme over the last number of years.
2021: €19.1bn
Reflects an increase in current accounts.
Loan to deposit ratio of 75% provides the
Bank with a strong liquidity position and
significant potential to lend.
Sustainability
CET Ratio (Transitional basis) (f)
CET Ratio (Transitional basis) (f)
NPL Ratio (g)
NPL Ratio (g)
Risk weighted assets (R.W.A) (h)
Risk weighted assets (R.W.A) (h)
2021
2020
2019
16.9%
18.1%
17.6%
2021
2020
2019
5.5%
7.6%
6.4%
2021
2020
2019
€8,600
€8,480
€10,012
2021: 16.9%
Decrease is primarily due to the transitional
phasing of the Group’s DTA balance and the
prudential phase-in of IFRS 9.
2021: 5.5%
Decrease primarily due to deleveraging
during 2021 together with organic and
technical cures offsetting new defaults.
2021: €8,600
Increase primarily driven by new lending
volumes.
Management has provided further information on IFRS and Non-IFRS measures including their calculation in the Alternative Performance Measurements (APM) section on
pages 264 to 270.
(a) Operating profit/(loss) before exceptional items. See table 8 on page 61 for a reconciliation of underlying profit/(loss) to operating loss on an IFRS basis.
(b) Defined as net interest income (NII) divided by average interest-earning assets.
(c) Defined as profit/(loss) 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, other non-recurring items, bank levy and regulatory charges) divided by total operating income.
(e) Defined as customer deposits.
(f) Total common equity tier 1 (CET-1) capital on a transitional basis divided by total risk weighted assets (RWAs).
(g) Defined as non-performing loans (NPLs) expressed as a percentage of the total gross loans of the bank.
(h) RWAs are the Group’s assets or off balance sheet exposures, weighted according to risk.
2
Permanent TSB Group Holdings plc - Annual Report 2021 Non-Financial Highlights
An increased focus on Sustainability, with the
establishment of a Sustainability Committee, the
completion of a Materiality Assessment and the
introduction of a Sustainability Strategy
Signature to the ‘Low Carbon Pledge’, committing
to setting science-based carbon emission reduction
targets (SBTs) by 2024
1% reduction in carbon emission intensity in 2021
(a cumulative reduction of 56% since 2009)
36% of the Senior Leadership population are Women
2.5 training days delivered per employee in 2021, with
more than 400 employees enrolled in banking education
programming
+10 Relationship Net Promotor Score (RNPS)*, placing
Permanent TSB in second position among the retail
banks in Ireland
c.€600,000 invested in Irish community organisations in
2021, supporting local communities across the country
Significant improvement in reputation score for the
Bank, moving up 24 places to 69th position in the annual
Ireland RepTrak Top 100 List**
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
71% Culture Index Score
Expansion of our Business Banking offering through
new partnerships with Bibby Financial Services,
the Strategic Banking Corporation of Ireland, Digital
Business Ireland and Worldpay
87% of employees feel comfortable to be themselves at
work regardless of background or life experiences
New hybrid ways of working and the creation of 300 new
positions across key growth areas
A further €50 million invested in Digital Transformation,
the launch of a new Digital Current Account and the
introduction of Apple Pay and Google Pay
116 million logins on both Open24 Web and App in 2021
Our Commitment To Responsible
And Sustainable Business
Awards And
Recognitions In 2021
Ambitions For
2022 And Onwards
Our Purpose is to work hard
every day to build trust with
our customers – we are
a community serving the
community.
Our Sustainability Strategy
gives us an opportunity
to put our purpose into
action - enabling us to play
our part in addressing the
global climate crisis, elevate
our social impact, enhance
our culture and deliver
what matter most to our
customers and colleagues.
Ultimately, building a
sustainable organisation
that is fit for the future.
• Winner in the Excellence in the Community
– Community Programme Category for
our partnership with Ó Cualann Cohousing
Alliance, Chambers Ireland Sustainable
Business Impact Awards, 2021
• Winner in the Employee Empowerment and
Trust Category, CIPD Awards, 2021
• Winner in the CX Impact in Financial Services
Category for Blackbelt - our coaching, training
and education programme for frontline
colleagues, Irish CX Impact Awards, 2021
• Winner of Established Loyalty Programme of
the Year, Irish Loyalty Awards, 2021
• Winner of the Best First Time Buyer Mortgage,
Bonkers Awards, 2021
• Shortlisted in the Excellence in Community
– Partnership with Charity Category for the
Concert4Cancer in partnership with the
Marie Keating Foundation, Chambers Ireland
Sustainable Business Impact Awards, 2021
• Shortlisted in the Embedding a Culture of
Workplace Wellbeing Category, CIPD Awards,
2021
• Shortlisted for Best Integrated Marketing
Campaign, All Ireland Marketing Awards, 2021
• Shortlisted for Best Benefits or Loyalty
Scheme, UK&I Card and Payments Awards
2021
• Embedding our Sustainability Strategy
•
Increasing our focus on Climate Risk
Management
• Engaging a rating agency to produce
an ESG Risk Rating for the Bank
• Launching a green product to the
market
•
Introducing a Sustainable
Procurement Framework and
Sustainable Supplier Charter
• Elevating our social impact through
partnerships and continuing to
support local communities through
the Permanent TSB Community Fund
* 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.
** The annual Ireland Reptrak study is the largest
and longest running study of reputation in Ireland
and is based on the perceptions of over 6500
members of the public. The study measures the
level of trust, respect, admiration and esteem the
public has for 100 organisations in Ireland, along
with close to 100 other reputation and brand
indicators.
3
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Chairman’s Statement
The ambition and resilience displayed by Permanent
TSB colleagues was evident through the Bank’s
achievements in 2021. While the pandemic continued
to generate significant challenges for customers and
colleagues throughout the year, it was encouraging to
see the ambition demonstrated by the Bank in seeking
to scale up significantly through the transformational
agreement to acquire certain elements of Ulster Bank’s
retail and SME businesses.
This was a major statement of intent by the
Bank and one that matched its ambition
to be Ireland’s best personal and small
business bank with concrete action to
make this ambition a reality.
As the year came to a close, the immense
effort put in by so many of our colleagues
culminated in the Bank reaching a legal
agreement with NatWest, the parent of
Ulster Bank, on one of the biggest banking
transactions in recent history in Ireland.
While there is still significant work to be
done to obtain the necessary shareholder
and regulatory approvals, we are working
hard to complete the execution of the
transaction, embracing the once-in-a-
generation opportunity that it has created.
Our intention is to use the transaction as
a powerful springboard to accelerate the
Bank’s growth, complementing our organic
growth strategy and driving much-needed
competition in the Irish retail banking
market.
The Ulster Bank transaction will increase
our mortgage book by approximately 40%
relative to its end-2021 level; our branch
network by approximately 30%; and it will
triple our business lending when Ulster’s
asset finance and micro-SME lending
businesses are incorporated into the Bank.
However, 2021 was also a year of great
resilience. It was the second year in which
our society, our economy, our customers’
lives and those of our colleagues
suffered disruption that would have been
unimaginable before the onset of the
pandemic.
As I did in last year’s annual report,
I want to pay tribute once again to
the professionalism, dedication and
4
commitment displayed by colleagues
throughout the Bank every single day.
and winning new personal and SME
customers, while improving our financial
performance.
It is they who made it possible for the Bank
to keep all branches open throughout the
pandemic; to maintain our IT systems and
networks to ensure that our customers’
needs continued to be met; and to offer
help and support to customers who needed
it.
While the pandemic will undoubtedly have
many legacies, I believe the Bank made
positive progress in rebuilding trust with
our customers; by being open; by listening
and by matching our words with our actions
to demonstrate that Permanent TSB is a
community serving the community.
Our Commercial Performance
We are reporting a significant improvement
in our financial performance in 2021. Our
underlying profit of €17 million for 2021
compares favourably with the €109 million
loss of 2020 but we know we have to do
better.
Our shareholders have every right to expect
that the Bank will deploy their capital in
a manner that generates a sustainable
positive return and that the Bank will do
this consistently over the long term to
maximise the value in the Bank.
It is my strong view that the Bank is making
good progress in the right direction. The
economic impact of the pandemic has
been a significant contributing factor in
our losses but we are not content to use
Covid-19 as an excuse.
As the Irish economy recovers and enters
the post-pandemic phase, the Bank is
well placed to play a significant role in
cementing the wider recovery, meeting
more and more of our customers’ needs
The Bank’s underlying metrics give
me cause for great optimism and
this is compounded by the extent of
the opportunity that the Ulster Bank
transaction has presented.
One such metric is non-performing loans
(NPLs) as a percentage of gross loans,
which fell from 7.6% at end December
2020 to 5.5% at end December 2021, a
decrease of 2.1 percentage points. The
ongoing reduction in our NPL ratio over
the last number of years from a peak of
close to 27% has materially enhanced
the Bank’s stability. It demonstrates our
commitment to taking and implementing
difficult decisions that get the balance
right in managing the requirements of
our customers, our shareholders and our
regulator.
Another encouraging metric is the Bank’s
share of the new mortgage market, which
continued to grow, reaching 17.8% at
the end of 2021. This represents further
consolidation of the Bank’s competitive
proposition and its success in winning new
mortgage customers with a combination of
competitive and innovative products and
outstanding levels of service.
The steady increase in mortgage market
share that has been an established pattern
over much of the last decade is a welcome
reminder that this is an area of significant
opportunity for the Bank. More and more
customers are realising the strength of
our competitive proposition. We have an
excellent platform from which we can build
further and the Ulster Bank transaction
offers us scope to accelerate this building
process.
Permanent TSB Group Holdings plc - Annual Report 2021
Our culture and commitment to
sustainability
2021 was a milestone year for the Bank in
committing to doing things in a sustainable
way, as we launched our first sustainability
strategy during the year.
The strategy is based around four pillars:
addressing climate change and supporting
the transition to a low carbon economy;
elevating the Bank’s social and community
impact; enhancing Permanent TSB’s
culture and investing in its people culture;
and championing small business and
creating an organisation that is fit for the
future.
A key element of the new strategy is the
Bank joining the global Task Force on
Climate-related Financial Disclosures
(TCFD) network, which includes more than
2,700 major companies worldwide and
over 30 in Ireland. By joining this network,
Permanent TSB has committed to support
the TCFD’s programme of enhancing
the quality and detail of climate-related
financial disclosures.
Over the coming years, the new strategy
will result in a wide range of tangible
initiatives to enhance the Bank’s
sustainability.
We will launch a range of sustainable
finance products. We will set science-
based emission reduction targets by 2024
in line with the Paris Agreement and the
latest Intergovernmental Panel on Climate
Change (IPCC) findings.
We will complete the job of achieving a
cumulative reduction of 60% in our carbon
emissions over the 15-year period to 2024.
Other measures will include honouring our
commitment to maintaining a nationwide
branch presence in communities
throughout Ireland; targeting social issues
through the Bank’s partnership with Social
Entrepreneurs Ireland; transparently
reporting our progress in reaching
sustainability targets; supporting local
community initiatives throughout Ireland;
and promoting more sustainable business
practices, such as ongoing hybrid working
arrangements for our colleagues.
“In 2021 we maintained a
strong focus on adopting
and embedding our cultural
improvements that arose from
our culture strategy of Leading
at Every Level.”
Governance and management
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. The Board was pleased
to welcome two new directors, Celine
Fitzgerald and Anne Bradley, during
2021. These appointments reflected a
need identified by the Board to enhance
its collective knowledge and experience
with specific skills in technology change
and resilience, as well as in culture and
sustainability.
The level of female representation at Board
level now stands at 33%. While this is a
higher level of female representation than
in previous years, we remain some way
from where we should be in terms of having
more women at senior management.
As I have stated previously, there is
no excuse for the Bank not being one
where everyone has the same career
opportunities, irrespective of gender. As
a purpose driven organisation, Diversity
and Inclusion is a core pillar of our culture.
For the second year in a row, we are
publishing our gender pay gap voluntarily
and in advance of the introduction of
relevant legislation. This forms part of our
commitment to hold ourselves accountable
by tracking our progress against our action
plan which we put in place as part of our
Board approved Diversity and Inclusion
Strategy. Our 2021 gender pay gap sits at
16.5%. The nationally reported gender pay
gap is 14.4% in Ireland.
While there is no reported mean pay gap
for the Irish Financial Services Sector,
our position compares favourably to the
reported mean pay gap in the Financial and
Insurance Sector in the United Kingdom in
2021, which stood at 33.4%.
We acknowledge that we have more to
do to close our gap and have a dedicated
action plan in place as part of our Board
approved Diversity and Inclusion Strategy.
Outlook
I signalled earlier this year that I will step
down as Chairman when my 6-year term
reaches its scheduled end in March 2023.
It is the right time for a new Chairman
as it will coincide with the substantial
conclusion of the Ulster Bank transaction.
There is a lot I want to achieve over the
remainder of my term but I am hugely
excited for the future of the Bank as it
prepares to get bigger, to welcome new
customers across Ireland and to make
a home in 25 new communities where
existing Ulster Bank branches will reopen
under the Permanent TSB name.
This is a good time to reflect on how far
the Bank has come in recent years; on the
growth in the business, the improvement in
its underlying strength and the progress in
the new products and the better services
that we provide.
For their role in achieving that progress I
thank my fellow Board members and the
Bank’s management team. I acknowledge
the assistance that the Department of
Finance and Central Bank of Ireland
continued to give the Bank throughout
2021.
I thank in particular Eamonn Crowley,
our Chief Executive, for his leadership at
a time of great challenge for the Bank,
the economy and our wider society. I am
also very grateful to every member of
the Permanent TSB team, whether in our
branches, our customer contact centres,
our support offices and our headquarters.
In my tenure with the Bank I have always
been impressed at the focus on customers
and the sense of community that existed
within the organisation, but the last two
years have shown to me the extent to
which customers and the community are at
the heart of everything we do.
It is this customer focused mind-set that
gives me such confidence the Bank will
prosper, building trust, serving customers,
being part of the community, and building
value for our shareholders.
Robert Elliott
Chairman
5
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Chief Executive Review
It is my honour to present the 2021 Annual Report for
Permanent TSB, the second since I was appointed Chief
Executive in June 2020.
2021 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
We are entering the post-pandemic phase
with great optimism, as we prepare for
the transformational opportunity that the
Ulster Bank transaction presents.
I am struck by the sense of excitement that
exists in the Bank since we first announced
our intention to acquire approximately €7.6
billion in personal and SME lending assets.
It means Permanent TSB will soon be a
bigger Bank. An even better Bank. A Bank
with many more customers and a branch
presence in 25 more communities. This
greater reach and greater scale will enable
us to compete even more strongly.
It is good news for our existing customers,
good news for the 100,000-plus new
customers we will be welcoming to the
Bank, and good news for the additional
communities that Permanent TSB will be
joining soon.
stronger community, more unified than
ever and one that is ready to make the
integration of Ulster Bank customers,
colleagues and branches a great success.
But while our Annual Report is a good time
to think about the future opportunities, it is
also a time to reflect on the performance
that brought us to where we are today.
I will address the main aspects of that
performance now.
The mortgage market as a whole
rebounded strongly in 2021. Pent up
demand saw a surge in applications in late
2020 and this strong momentum continued
into 2021. Total mortgage drawdowns
from all mortgage providers increased
from €8.4bn in 2020 to €10.5bn in 2021.
However, housing supply continued to be
impacted by pandemic-related restrictions
on activity, particularly in H1 2021. There
were 20.4k completions in 2021, broadly in
line with the 20.5k completions in 2020.
Business Performance Overview
Funding
Customer Accounts
At 31 December 2021, customer accounts
increased to €19,089m from €18,039m
at 31 December 2020. Customer account
growth accelerated during the pandemic
lockdowns, with much of the increase
driven by consumers spending less during
Covid-related lockdowns and consequently
saving more than they normally would.
SME lending in 2021 was €98m, a 104%
increase compared with 2020. The
increase was largely driven by lending
through the Strategic Banking Corporation
of Ireland (SBCI) Future Growth Loan
Scheme that launched in late 2020. The
Bank will participate in the SBCI Brexit
Impact Loan Scheme in 2022.
We recently announced ambitious plans to
scale up our SME lending, with the launch
of a new €1bn SME lending fund which we
aim to deploy over the next 3 years. The
Ulster Bank transaction will add significant
momentum to our SME growth plans by
adding Ulster’s asset finance and micro-
SME lending businesses to our organic
growth.
The Group recorded gross new Term
lending of €93m in 2021. This is a 4%
decrease compared to 2021, largely driven
by reduced consumer demand.
Financial Performance Overview
The Bank reported an underlying Profit
Before Tax of €17m1 for 2021 which
represents an improved performance
following the €109m loss recorded for
2020. We saw a significant improvement
in macro-economic projections but the
benefits of this were offset by continued
pressures on Net Interest Income.
It will benefit our shareholders, support
much-needed competition in the market
and show we mean business when we say
our ambition is to be Ireland’s best personal
and small business bank.
Retail Deposits
Retail deposit balances remained broadly
flat from the prior year, reflecting the
stability of the Group’s funding sources.
Despite the challenges of the pandemic,
I am encouraged to see the Bank looking
ahead with such confidence. What
makes this possible is the quality of our
colleagues.
I think often of the individual struggles
faced by each of them over the past
two years, both on a professional and a
personal level.
Thanks to each of their efforts, the Bank
has weathered an unprecedented storm.
We emerge from the pandemic as a
6
Lending
Total new lending in the financial year
2021 amounted to €2,051m, an increase
of 44% from 31 December 2021. The
increase largely reflects a strong increase
in mortgage lending relative to 2020, when
pandemic-related uncertainty caused a
fall-off in mortgage activity.
Mortgage lending in 2021 was €1,859m,
representing a 45% year on year increase
and significantly outperforming the wider
market, which grew by 25%. This resulted
in our mortgage drawdown market share
increasing from 15.3% in 2020 to 17.8% in
2021.
Permanent TSB Group Holdings plc - Annual Report 2021
Impairment
The Bank recorded a flat impairment
charge on loans and advances to
customers for 2021, compared to a charge
of €155m for 2020. The reduction reflects
that while the economic outlook has
stabilised, uncertainty remains and the
Bank retains a cautious outlook.
Operating Income
Net interest income (NII) decreased by
€28m (8%) and our Net Interest Margin
(NIM) decreased by 22bps to 1.51%. The
overall reduction is mainly driven by the
impact of reduced income on loans and
advances to customers, as a result of
deleveraging activity in 2020 and 2021
as well as the impact of rate cuts. The
pandemic has impacted the level of
excess cash reserves held, resulting in a
significant increase in negative interest
in the year. This was partially offset by
savings in deposit funding costs.
Net fees and commission income was
€35m for 2021 compared to €28m in 2020.
The increase is mainly due to increased
transactional spending during 2021.
Net other income was €13m for 2021
compared to €6m in 2020. This is mainly
driven by revaluation gains and gains from
the sale of properties in possession.
Operating Expenses
Operating expenses excluding exceptional
and other non-recurring items of €345m
are higher than prior year, primarily due to
the acceleration of investment in the Banks
digital banking programme and higher
depreciation arising from the significant
expenditure on technology and business
programmes over the last number of years.
Exceptional and other non-recurring
items
The total Exceptional and non-recurring
items for 2021 are €38m1, which
consist of €16m relating to restructuring
and other costs, €28m in relation to
advisory costs incurred in relation to
the Ulster Bank business, a €19m net
impairment release from deleveraging and
€15m in relation to legacy legal cases.
NPLs
Non-performing loans (NPL) as a
percentage of gross loans were 5.5% at 31
December 2021, a decrease of 2.1% from
7.6% at 31 December 2020 driven primarily
by the deleveraging of a non-performing
mortgage portfolio. The Bank continues
to actively manage the NPL portfolio and
is committed to reducing the NPL ratio to
low-single digits in the medium term.
Capital
The Common Equity Tier 1 (CET1) capital
ratio was 15.1% and 16.9%, on a pro-
forma Fully Loaded2 and Transitional basis
respectively. This compares to the Bank’s
reported CET1 ratio of 15.1% and 18.1% at
31 December 2020, on a Fully Loaded and
Transitional basis respectively.
customers and to support those working
with them. It is not enough just to talk
about this. As an organisation, the Bank
has a duty to do things that make a real and
tangible difference for its people.
That is why we were proud to invest in a
range of measures aimed at acknowledging
what our people do, the sacrifices they
make, their need for greater work/life
balance an our collective desire to foster a
work environment that contributes to both
individual and collective success.
The reduction in the transitional CET1 ratio
(-1.2%) in the year is primarily due to the
transitional phasing of the Group’s Deferred
Tax Asset balance and the prudential
phase-in of IFRS9 which was partially
offset by an increased capital add-back
related to intangible software assets in use,
reflecting the investment in the Bank's
Digital Banking Programme.
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 pandemic
to support the sustainable provision of
credit to the economy.
“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.”
Culture
From my first day as Chief Executive I have
looked to implement a range measures,
both small and large, aimed at enhancing
the organisational culture within the Bank
with the aim of further improving both our
colleague and customer experience.
This was due to a number of factors, not
least the urgency of the task of building
trust with our customers, but it also
reflected the extent of the contribution
made by colleagues every day to building
the Bank and making our ambition a reality.
The onset of the pandemic, however,
has highlighted the commitment of our
colleagues like never before; every day I
have seen evidence of the lengths that
our colleagues will go to both to serve
Our Smarter Working Initiative is
particularly noteworthy because it offers
a range of options that colleagues can
tailor to suit their individual circumstances.
Among the options we offer are reduced
hours; job sharing; giving colleagues
greater flexibility to spread their workload
over 5 days or 4; sabbaticals and career
breaks; and working from home or an
alternative office location.
We have repurposed offices in a number
of locations to create remote working
hubs. We have embraced technology
that facilitates people doing their jobs
irrespective of where they are. We
have cultivated a spirit of collaboration,
understanding and teamwork to make new
ways of doing things possible. And we have
shown that we, as an organisation, are
as willing to be as innovative, flexible and
resourceful as our colleagues are.
We are far from finished in this regard.
Through initiatives such as Every Voice
Counts, our forum for collecting and
applying feedback throughout the Bank;
Living as Leaders, a programme to foster
better leadership at all levels; and our
intensive engagement with and support
for the Irish Banking Culture Board, we
are demonstrating the importance of our
culture and how serious we are about
making it better.
Digital Transformation
We are a Bank that is deeply committed
to the personal service that we offer to our
customers. This customer service ethos is
embedded for more than 200 years from
our building society and trustee savings
bank roots.
But we never lose sight of the fact that, as
our customers’ needs and their ways of
doing business with us change, we need to
be ready to adapt to give them what they
want – whether in person, by phone or
online.
7
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Chief Executive Review
(continued)
That means we must strive to offer
customers the best of both worlds in
modern banking, combining outstanding
personal service in branches and contact
centres with the best digital banking
services available in the market.
This requires investment that we are
only too happy to make. We have already
committed to investing €150m in major
upgrades of our digital capabilities and this
is translating into significant improvements
in our digital offering.
The Digital Banking Transformation
Programme is well underway and
significant progress was made last
year in enhancing our digital offering
for customers. Actions taken include;
modernising our technology architecture,
renovating our core banking platforms;
enhancing security for customers;
introducing new digital customer journeys,
such as our digital current account and
digital mortgage application journey.
We also indicated plans to hire 300
additional colleagues in support of better IT
and support systems, enhanced customer-
facing operations, an even better banking
app, and new and easier ways to apply for
our products from a PC, tablet or phone. In
2022, we will also be hiring an additional
200 colleagues to support the on boarding
of new customers to the Bank.
We will never lose sight of the advantage
that we have thanks to the people in our
branches and contact centres – indeed,
we are matching our words with actions by
increasing our branch footprint by 30% as
part of the Ulster Bank transaction. But we
can further differentiate ourselves through
excellence in digital and I am pleased to say
that journey to consolidate that excellence
will continue.
To customers who have not yet tried our
digital banking services, I would urge you
to consider them – not to replace your
existing experience with us but to enhance
it. And to the 570,000 customers who are
already actively using these services on
a regular basis, up from 500,000 in 2020,
I offer a steady pipeline of improvements
that we are planning over the coming years,
reflecting the huge importance that we
attach to digital. Our exciting new Digital
Current Account is just the start.
8
We will also build out key new digital
capabilities for our SME customers,
reflecting the importance of this sector for
our growth plans.
Outlook
Looking to the year ahead, I will reiterate
what I have said in the past about what we
try to do every day:
• We aim to keep increasing the trust,
advocacy and loyalty of our customers;
• We continue to enhance our digital
capabilities;
• We enhance a culture of growth that is
both open and inclusive;
• We continue our work of simplifying our
business to the greatest extent possible;
and
• We strive to deliver better and more
sustainable profitability.
And ultimately we are building a
sustainable organisation for the future.
We have learned over the past two years
that the world can change quickly and in
ways few people could ever have foreseen.
But we have also learned that our ability
to deal with disruption, change and the
unexpected is far greater than we would
have imagined.
I would like to echo the Chairman’s
comments on the great resilience
displayed by our people and to pay tribute
to the commitment, flexibility, ingenuity
and passion that are on display every day
throughout the Bank.
Now we are on the cusp of another big
change, with the Ulster Bank transaction
propelling us towards a future with
greater resources and scale to serve our
customers in new and better ways, to
bring even greater competitive force to
everything we do, to keep building trust
with our customers, and to realise our
ambition of being Ireland’s best personal
and small business bank.
It is a change we can look forward to,
embrace and thrive on.
Eamonn Crowley
Chief Executive
1 See table 8 on page 61 for a reconciliation of
2
underlying profit to operating loss on an IFRS basis.
Includes c.0.4% uplift for ‘Glenbeigh III’ NPL sale
completed in Q1’22
Permanent TSB Group Holdings plc - Annual Report 2021
Market Context
Retail Banking Trends In Ireland
Over the last year we have been working
hard on becoming a bank that brings
technology and people together to make
everyday banking easy, and enable
customers to do big things. As a bank
we are focused on what’s next and the
opportunities that lie ahead. The Covid-19
pandemic continues to challenge us on how
we think and operate to ensure we protect
and serve our customers, colleagues and
our businesses.
With significant structural changes
proposed in the Irish Financial market, this
will result in 1.4m underserved customers
and leaving Permanent TSB as one of only
three remaining full-service Retail banks
in Ireland. These changes have resulted
in significant opportunities while creating
new resource demand. Arising from these
challenges and opportunities, we have
updated our strategy to better meet the
needs of our customers and look at ways
on how we can keep them protected. Our
Retail Bank Strategy brings to life the
Bank’s Ambition & Purpose by delivering
on our promise bring technology and touch
together through strategic initiatives to
meet the banking needs of our customers.
Permanent TSB are making significant
progress on our digital banking journey
as our customer’s Digital expectations
have rapidly grown over the course of the
pandemic. With the easing of restrictions,
card transaction volumes have increased
by over 50%. While cash transactions
experienced a slight increase in line with
easing of restrictions, overall transaction
levels continue to decrease in line with
pre-pandemic levels. We recently launched
Google Pay, completing our mobile
payment portfolio for our Personal and
SME customer base. Since the launch of
Apple Pay in November 2020 and Google
Pay in October 2021, transaction count has
exceeded 10.5m and transaction spend just
over €265m. The use of digital channels
continues on the upward trajectory with
over 87m logins on our Open 24 app where
our customers can complete applications
for a Current Account, Overdraft, Credit
Card and Term Loan. Our App has received
over 44k in customer product applications
since January 2021.
continues to evolve the channel mix by
moving more towards Digital Channels
while maintaining the crucial role the
physical network (Branch & Phone) plays in
on boarding, lead generation & supporting
customers that fall off Digital journeys. In
2021, we updated our Digital Capabilities
to offer Current Accounts, Mortgages and
Business Banking through our Voice and
Online Channels.
Strong economic growth is expected and
is attributed to the easing of Covid-19
restrictions following the rollout of the
government vaccination programme. The
2021 mortgage market has bounced back
from the impact of Covid-19 last year.
Mortgage Pay-outs across the market
are up 32% YOY. This pay-out growth
is expected to continue into 2022 and
beyond, as we are also seeing strong
growth in applications and approvals.
Applications are up 22% YOY. There has
been a significant increase in approvals
which are up 46% YOY. One of the most
notable changes to the mortgage market
in 2021, was the announcement that 2
major lenders will be exiting the mortgage
market. This leaves 3 main lenders in the
market with a number of non-bank lenders
operating through the Intermediary market,
some of which have announced plans to
expand beyond the intermediary market
with a direct mortgage offering, which is
expected sometime in 2022.
To conclude, whilst challenges will continue
to arise in the banking sector, our main
purpose and ambition is to continue to
work hard to build trust with our customers
and work towards a simplified, intuitive
customer experience.
SME Banking Trends In Ireland
The Irish economy is recovering swiftly,
with domestic economic activity expected
to reach its pre-pandemic level by the end
of this year. Covid-19 continues to be a
challenge for businesses, particularly those
operating in the hospitality sector, with
many requiring temporary support during
the Covid-19 pandemic. The recovering
economy is forecast to generate around
160k jobs, which in turn will reduce the
unemployment rate and support continued
growth in the SME market.
We continue to deliver directly to our
customers by offering a combination of
Tech & Touch sales and services through
our nationwide network covering 76
Branches, Intermediary Channel and
Digital & Direct Channels. Retail Banking
The most significant challenge impacting
the SME market across all sectors is
staffing, with companies requiring to
recruit and attract talent from abroad.
Further to this Brexit continues to disrupt
key supply chains in the SME sector. SME
credit demand remained low during the
pandemic compared to previous years,
with SMEs borrowing to meet liquidity
demands in favour of investment spend. A
key challenge for SME is how they adapt
their sustainability agenda to meet the
demands of ESG conscious customers.
There is an opportunity for Permanent
TSB to support SMEs to become more
sustainable, particularly in Agricultural
sectors.
Annualised gross new lending to non-
financial non-real-estate SMEs was €3bn
for the trailing 12 months to Q3 2021, which
was on a par with the same period in 2020.
While total loan repayments have exceeded
new lending resulting in an overall decline
in SME loan balances in the industry, new
lending in the sector continues to grow
steadily. Permanent TSB has continued to
grow its business lending activity through
the period while providing support to
borrowers in financial difficulty. The Bank
increased new SME lending by 100%
during the year and its business lending
portfolio is appropriately spread across
industry sectors.
During 2021 we continued to invest in
and grow our Business Banking team
capabilities, Permanent TSB now have
an experienced team of specialists in
place to support the market and position
Permanent TSB as one of 3 Business
Banks in the market.
9
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Our Strategy, Business Model and Culture
Our Strategy
Introduction
As part of the Bank’s operating rhythm, Our Strategy is refreshed on an annual basis, allowing
us flexibility and adaptability to market changes. The annual refresh solidifies our Strategy, and
ensures it is fit for purpose, supporting Permanent TSB as a key player in an evolving market
place. The Bank’s current Strategy - re-articulated in full in 2020 and refreshed most recently in
Q4 2021 - builds on the strong foundations that have been laid in recent years. It provides a direct
focus over the coming years on key strategic areas such as Customer Journeys & Experience,
Digital Platforms, Cyber-Security & Resilience and, Data. It also ensures that the Bank is
positioning strategically to make the most of the opportunity presented by the exit of Ulster Bank
and KBC from the domestic market, both through the Ulster Bank transaction as well as organic
growth opportunities. The Bank’s Strategy, when executed in full, will support delivery of the
Bank’s Purpose and Ambition:
Our Purpose
To work hard every day
to build trust with our
customers – We are a
community serving the
community
Our Ambition
To be Ireland’s Best
Personal and Small
Business Bank
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, ICAAP, 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 in response to
changes in the external market or internal
environment. Most notably in 2021, this has
included the departure of two significant
challenger banks from the market in
Ulster Bank and KBC Ireland, as well as
the continued impact of Covid-19 on the
economy and for our customers, colleagues
and communities.
Input during the Strategic Planning Process
is invited from subject matter experts from
all areas of the business. The first step in
the IPP is the approval of the Bank’s Risk
Appetite Statement (RAS), facilitating a
clear, risk aware culture during strategy
development, and ensuring that the
Bank’s Corporate and Business Unit level
strategies are developed within the strict
boundaries set out in the RAS.
Our Strategic Vision For 2024
Permanent TSB’s Strategic Vision for 2024
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). Our Strategic
Vision is articulated through: 1. Our
Business Model, i.e. ‘what’ the organisation
will look like in 2024; and, 2. Our Strategy,
i.e. ‘how’ we will get there.
10
Permanent TSB Group Holdings plc - Annual Report 2021
Our 2024 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 transaction
services are digitally enabled,
ensuring that they’re available at
a time that is convenient for our
customers
Digitally-Led
Routine Services
on Digital
Channels
Nation-wide
Physical
Footprint
Right Products,
Right Price
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 propositions, at the
right price, with strong market
shares in our target segments
Our Strategy – The ‘How’
Our Business Model defines the ‘What’ of our Strategic Vision, while Our Strategy defines the ‘How’. We will deliver our Strategy through
five Strategic Pillars and three Foundational Capabilities. The five pillars represent the key themes in the Bank’s overarching Strategic
Vision for 2024 and are: Customer, Digital, Culture, Simplification and Profitability. Underpinning our Strategic Pillars are foundational
capabilities in Information Security and Operational Resilience, Data and Analytics, and Risk and Regulation:
Purpose
We work hard every day to build trust with our customers. We are a community serving
the community
Ambition
To be Ireland’s best Personal and Small Business Bank
Strategic
Pillars
Customer
Increasing Trust,
Advocacy and
Loyalty among
Customers
Digital
Enhancing Digital
Capabilities
Culture
Embedding a
Risk-Aware,
Open & Inclusive
Growth Culture
Simplification
Simplifying our
Business
Profitability
Growing
Sustainable
Profitability
Foundational
Capabilities
Risk & Regulation
Information Security & Operational Resilience
Data & Analytics
11
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Our Strategy, Business Model and Culture
(continued)
Our Strategy Brought To Life
Over the medium-term horizon, our Strategy will be executed through a series of high priority Strategic Programmes, aligned to our
Strategic Pillars. The highest value, highest priority strategic and regulatory programmes are included within this Strategic Portfolio. This
ensures that management time and bank resources are directed towards executing the right combination of Programmes to deliver our
strategy.
Strategic Pillar
Customers
Increasing Trust, Advocacy and Loyalty Amongst Customers
Our Strategic
Ambition
Superior Customer Experience
• Building a deep understanding of our customer base, with defined strategies for key segments
• Developing propositions which meet our customers’ needs, supported by fair and transparent pricing
• Reinforcing our position as a recognised and trustworthy brand in the market
• Optimising our mix of sales and service channels
•
Issuing efficient and effective customer communications
KPIs / Measures of Success - by Y/E 2024:
2021 Achievements:
• 98 Branches (29% increase)
• 1.4m customers (27% increase)
• 76 Branches
• 1.1m customers
• 1.01m Current Accounts, 880k of which are
engaged, 38% increase from 640k who are
engaged today
• 650k Active Digital Customers (30% increase)
• Balance Sheet growth of ~€10bn, a significant
portion of which will come from the SME business
following the announcement of our €1bn loan
fund.
• 783k Current Accounts (82% engaged)
• €1.86bn in new Mortgage Lending (18% market
share)
• €98m in new SME lending (up 104% from 2020)
• €93m in new Term Lending (down 4% from 2020)
• 36,000 new Current Account customers (up 46%
from 2020)
• Transformation of 44 Branches
•
Introduced JAM Card and Sunflower Lanyard to
support our Vulnerable Customers
Payments & Lifestyle Banking
• Giving our customers control over their lifestyle banking needs
• Aligning benefits received by customers for services offered to the fees and charges associated with those
services
• Supporting the implementation of the Bank’s Payments Strategy and identifying additional opportunities
to provide an enhanced payments service to our customers in a manner that generates value for the Bank
KPIs / Measures of Success - by Y/E 2024:
2021 Achievements:
• Synch Person to Person Mobile Payments (joint
investment with AIB, BOI and KBC to develop
a mobile phone app which will facilitate instant
mobile payments for Irish banking customers)
• Persistent Debt - Proactive engagement with
credit card customers to drive education and
awareness with regards to fees and charges
• Enhanced Control and Financial Management
Capability
• Enhanced Mobile and Digital Offering
• Revamped and enhanced rewards
• New in-app Current Account Customer Journey
which means customers now have a full Personal
Banking suite available E2E online
• Launch of Google Pay in November 2021 to
complete mobile payment offering
• Strong Customer Authentication (SCA)
enhancements which ensures greater protection
for our customers in line with PSD2 regulation
12
Permanent TSB Group Holdings plc - Annual Report 2021 Strategic Pillar
Our Strategic
Ambition
Digital
Enhancing Digital Capabilities
Digital Banking
• Delivering a market leading digital platform and new digital propositions for our customers
• Transforming the customer journey - combining digital with a human touch
• Renovating and integrating existing legacy systems
• Enhancing analytical capabilities to support improved customer engagement and generating customer-
focused insights
KPIs / Measures of Success - by Y/E 2024:
2021 Achievements:
• 650k active Digital customers
• 65% of sales originating via Digital Channels
• 87% of Service transactions carried out via Digital
Channels
• A modern and resilient Digital platform that
enables future growth
•
Improved Customer experience with a new,
modern and consistent web and mobile channel,
designed with simplicity, usability and enhanced
self-service capabilities in mind
• End–to-end digital journeys for Mortgage,
Consumer and SME products
• 570k active Digital Customers
•
81% of FY21 new Term Lending drawdowns
through our direct channels, a 6% increase YoY
and 15% increase since 2019
• €50 million investment in technology and digital
services announced in April
• End-to-end Digital Current Account launched in
May enabling existing and new customers to open
an account in c.6 minutes on the PTSB Mobile
App
• Digital Mortgage Application journey launched
on a phased basis in September 2021 enabling
customers to complete their mortgage application
and upload all supporting documentation online
• Customer Correspondence Management
(CCM) platform, successfully migrating c. 500k
customer letters to the new platform
13
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Our Strategy, Business Model and Culture
(continued)
Strategic
Pillar
Cultural
Embedding a Risk Aware, Open and Inclusive Growth Culture
Our Strategic
Ambition
Culture, Brand and Reputation
• Building a customer-centric, open, inclusive, risk integrated, growth culture characterised by integrity,
innovation and accountability
• Empowering all colleagues to develop as leaders
• Fostering a mind-set of accountability and risk awareness in all teams, and at an individual level; senior
leaders recognise significance of own accountabilities
• Celebrating and encouraging diversity; embedding a culture of openness throughout the Bank. Evolving our
culture to ensure that our colleagues feel psychologically safe and empowered to share their voice
• Striving to grow a Speak Freely environment where it is safe and acceptable to raise genuine concerns about
practices, processes or behaviours that do not meet our standards or align with our Purpose
KPIs / Measures of Success - by Y/E 2024:
2021 Achievements:
• Achieve a Culture Index of 70% or above on an annual
• Culture Index is at 71% (+1%)
basis
• Achieve the next level of Diversity & Inclusion
maturity - Integration
• Over 1,500 colleagues have participated in the
LIFT Ireland ‘Living As Leaders’ Roundtables
which will continue in 2022
• +1% Speak Freely measure by 2025 – aligned to
employee honesty, integrity, accountability and
compliance
• Accreditation to the Business Working
Responsibly Mark, awarded by Business In The
Community Ireland
• Strive towards 50:50 Gender Balance at Senior
Leadership by 2025 (striving for a year on year
improvement in female participation from a baseline
of 36% F : 64% M)
• Winner of the CIPD Employee Empowerment and
Trust – 2021
• Current Gender Balance at Senior Leadership is
36% F : 64% M
Sustainability
• Embedding our recently launched Sustainability Strategy, recognising our significant role in supporting our
stakeholders to navigate the green transition and to embrace the opportunities that sustainability brings
• Our Sustainability Strategy is built around four pillars:
- Addressing Climate Change & Supporting The Transition To A Low Carbon Economy
- Elevating Our Social Impact & Connecting With Local Communities
- Enhancing Our Culture & Investing In Our People
- Championing Small Business & Creating A Bank That Is Fit For The Future
KPIs / Measures of Success - by Y/E 2024:
2021 Achievements:
• Embedding our Sustainability Strategy
• Launching a green product to the market
•
Introducing a Climate Risk Management Framework
• Engaging a rating agency to produce an ESG Risk
Rating for the Bank
•
Introducing a Sustainable Procurement Framework
and Sustainable Supplier Charter
• Elevating our social impact through partnerships and
continuing to support local communities through the
Permanent TSB Community Fund
• Continuing to implement and embed our Culture and
Diversity and Inclusion Strategy (D&I) across all areas
of our business, as we focus on evolving our maturity
level from ‘Awareness’ to ‘Integration’ by 2023
• 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 their business
•
Introduction of a Sustainability Strategy and the
mobilisation of a Sustainability Committee
• Signature to: ‘Low Carbon Pledge’, committing to
setting science-based carbon emission reduction
targets by 2024; and, the Task Force on Climate-
Related Financial Disclosures (TCFD)
• Disclosure through Carbon Disclosure Project
• Delivered a 1% reduction in Scope 1 and 2
carbon emission intensity in 2021 (a cumulative
reduction of 56% since 2009)
• Winner in the Excellence in the Community
– Community Programme Category for our
partnership with Ó Cualann Cohousing Alliance,
Chambers Ireland Sustainable Business Impact
Awards, 2021
• Achievement of the Guaranteed Irish symbol for
the Bank’s contribution to local communities
14
Permanent TSB Group Holdings plc - Annual Report 2021 Strategic Pillar
Simplification
Simplifying Our Business
Our Strategic
Ambition
Hybrid Workforce Capability
• Building a sustainable, future-fit, digitally connected, customer centric organisation
• Optimising our workforce planning, capabilities and tooling, to respond to changing needs of colleagues
and customers
KPIs / Measures of Success - by Y/E 2024:
2021 Achievements:
• Design a Fit for the Future Operating Model in line
• Significant Bank-Wide Organisational Redesign
with our Strategic ambitions
completed
•
Implement Strategic Workforce Capability
Management
• Significant Investment in new skills and
capabilities across the organisation
• Launch and implementation of SMART working
options for colleagues, including home working,
job share and compressed hours – c.1,300
colleagues on hybrid arrangements
Operational Excellence
• Driving end to end automation of targeted processes and sub-processes, reducing manual risk, generating
resource and capacity efficiencies, and improving overall customer and colleague experience
KPIs / Measures of Success - by Y/E 2024:
2021 Achievements:
• Embed a culture of continuous change and
improvement across our business so we are
constantly evolving and changing in pace with our
customer’s needs
• Continued expansion of robotic processing of
high volume back office tasks to drive efficiency
• Deployed automated capacity planning toolkit
across back office teams
• Redesign of online SFS to improve speed of
processing for customers
• Based on customer feedback, we redesigned our
bereavement services processes and introduced
a dedicated change of address team to simplify
the customer outcome
• Finalised the design for deploying eStatements
for Credit Cards in H1 2022, allowing 100,000
customers switch over from paper
15
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Our Strategy, Business Model and Culture
(continued)
Strategic Pillar
Profitability
Growing Sustainable Profits
Our Strategic
Ambition
Asset Management
• Managing assets in a way which protects and generates value for the Bank
• Managing sustainable capital maintained on an ongoing basis
KPIs / Measures of Success - by Y/E 2024:
2021 Achievements:
• Net Interest Margin of ~1.9%
• Cost Income Ratio ~65%
• Return On Equity >5%
• Balance Sheet Growth ~+€7 billion in relation to
the Ulster Bank transaction
• NPL Ratio of <5%
• CET1 >14%
• Signed legally binding agreement with NatWest
regarding the acquisition of c.€7.6bn assets from
Ulster Bank DAC
• Agreed sale of €0.4bn Non Performing Loans in
November
• €250m raised through issuance of Tier2 bonds in
May 2021
• €22bn of performing assets (57% increase from
€14bn today)
Cost Transformation
• Embedding a cost-aware culture at all levels of the organisation
• Realising real-time savings through key process reviews
• Transforming structures to ensure long-term sustainability
KPIs / Measures of Success - by Y/E 2024:
2021 Achievements:
• Operating costs of c.€400m reflecting
• Completion of ‘Enterprise Transformation’
normalised base for enlarged organisation
• CIR (based on Operating Costs) of 65% (or 59%
programme which will result in c.300 FTE exiting
the Bank (Full Year Savings of c. €18 million)
based on Underlying Operating Costs)
• Completion of Wave 1 and Wave 2 of ‘Cost
Optimisation’ programme with full year savings
embedded of c. €11m by 2023
• PTSB’s procurement partnership with Efficio
nominated at The National Procurement Awards
Strategic Pillar
Information Security & Operational Resilience
Our Strategic
Ambition
Information Security & Operational Resilience
• Building and maintaining modern, enduring information and technology systems and capabilities
throughout the Bank
• Protecting our customers with robust and resilient cyber-security processes
KPIs / Measures of Success - by Y/E 2024:
2021 Achievements:
• Maintain the availability and resilience of the
Bank’s critical IT exceeding business defined
SLAs
• Enhance cyber maturity benchmark in line with
global banks
• Enhanced cyber security control environment
• Safe adoption of public cloud in support of
enhanced customer experience
• Upgrade completed of Online Banking and Open
Banking channels enhancing the resilience,
performance and capacity of these channels
16
Permanent TSB Group Holdings plc - Annual Report 2021 Strategic Pillar
Data & Analytics
Our Strategic
Ambition
Data & Analytics
• Deepening our understanding of our customers, leading to improved customer engagement and defined,
value-generating strategies for key segments
• Embedding an enterprise wide approach, where data is accurate, up to date, and utilised to support better
decision making in all areas
KPIs / Measures of Success - by Y/E 2024:
2021 Achievements:
• Significant IT Infrastructure and software
• Detailed development of a medium-long term
licencing savings
• Analytics integrated into digital platforms, helping
to personalise customer journeys, and driving
next best actions
• Trusted Data Hub
• New revenue streams
Data & Analytics Strategy which will commence
implementation in 2022
• Orion platform investment which provides a single
source of the truth for data and supports PTSB in
serving customers faster and more accurately
Managing Risk Through Our Strategy
Business Model
Description
Mitigation Through Our Strategy
With the easing of almost all Covid-19
restrictions in Ireland in January, the
outlook for the domestic economy in
2022 is positive. As a result, the CBI
has forecasted growth in the domestic
economy of 7% for 2022; however,
challenges do remain at a macro-
economic level. Inflation is expected
to average out at 4.5% in 2022 and
unemployment remains high across
a number of sectors. Such challenges
pose a threat to our Business Model from
financial risk, market risk and customer
acquisition perspectives.
Through our annual planning process and resulting Strategy refresh, the Bank
focuses on ensuring its Business Model is fit for the future and sustainable over the
longer term.
Our financial plan underpins our Strategy. Through preparation of the medium-term
financial plan which projects our income statement and market position over a 4-year
horizon, the Bank continues to manage and respond appropriately to cost, capital,
macro and regulatory challenges.
The purpose of the Bank’s Strategic Portfolio is to execute strategies that enhance
our business model and ensure that we remain relevant to the market, communities
and customers we serve. The Superior Customer Experience programme ensures
that we both attract new customers to the Bank, as well as enhance our existing
customer relationships, with defined segmental strategies and customer focused
propositions. Our Simplification programme ensures that our processes and services
– both internal and customer facing – are efficient and cost effective.
The recent agreement for the acquisition of certain elements of the Ulster Bank
business provides a significant example of how we are strengthening our current
Business Model, by enhancing our long term sustainability, both from a financial and
customer acquisition perspective. This agreement also enhances our position in the
SME sector, providing more diversification to our offerings.
17
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Our Strategy, Business Model and Culture
(continued)
Increased Competition
Description
Mitigation Through Our Strategy
While two incumbent banks are leaving
the Irish Financial Services Market,
competition remains high from elsewhere
in the banking and financial services
sector, in terms of attractive FinTech
propositions, potential disruption from
BigTech players and lower barriers to
entry brought on by certain regulatory
developments over the past 12-24
months. This has led to increased
competition for new business, particularly
in the everyday banking and consumer
lending market segments. It also
challenges the Bank’s ability to remain an
attractive proposition for new customers
while continuing to retain existing
customers.
People and Culture
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. Additionally, one of the core pillars of our
Strategy is the delivery of new and enhanced Digital capabilities that allow us to
compete across all channels. This will also enable our customers to do business with
the Bank via the channel of their choice. Where opportunities exist to do so, we’ll
seek to work with FinTechs to enhance existing and future capabilities, rather than
viewing them explicitly as our competitors. An example of this can already be seen
from our partnership with FIS in the Summer of 2021 for the benefit of our Business
Banking customers. Finally, 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.
Description
Mitigation Through Our Strategy
The success of an organisational strategy
and the delivery of fair and transparent
outcomes for all customers is predicated
on building a culture that: protects
our staff; ensures adequate skills and
resources across each business unit; and,
consistently applies adequate succession
planning processes across the Bank.
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.)
PTSB continues to invest 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: Ways Of Working; Organisational Design;
and, Leadership Behaviours. Employee Engagement and Experience is tracked
through regular staff surveys and feedback, and in 2022, industry benchmarks will be
used to assess PTSB’s relative performance in the market.
In addition, a significant strategic programme has commenced in preparation for
the Senior Executive Accountability Regime (SEAR) and Individual Accountability
Framework (IAF) which will be integral elements of PTSB’s effective organisational
culture.
Corporate Development (CD) & HR continues to work closely with ExCo, Board and
the wider business to deliver four core initiatives that serve to propel our Trust-led
Culture: Brand, Culture and Reputation; Customer Strategy and Experience; Hybrid
Workforce Capability; and, Sustainability.
Regulatory Compliance
Description
Mitigation Through Our Strategy
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.
Climate Change Risk and Operational
Resilience have emerged as two key areas
of focus for regulators and legislators in
2021, with a consequential increase in
regulations. Failure in this space would be
of significant consequence to PTSB.
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 governed by two Risk
committees (GRC and BRCC) to ensure effective Regulatory Compliance. In addition,
two critical strategic programmes of work, namely ‘Regulatory Projects & Assurance’
and ‘Mandatory’ Programmes have been refreshed within our Strategic portfolio for
2022 under which all key Regulatory and Compliance related programmes of activity
can be executed, tracked and reported on. The tracking of these programmes within
our Strategic Portfolio will ensure high-priority and maximum visibility amongst senior
management. The Bank continues to maintain pro-active, on-going communication
channels with the Central Bank and other key regulatory stakeholders.
18
Permanent TSB Group Holdings plc - Annual Report 2021 Cyber Security
Description
Mitigation Through Our Strategy
Information Security and Operational Resilience is a key foundational Programme
on our Bank’s Strategic Portfolio. It provides an increased focus on the threat of
cyber security, and other Technology related risks. A number of Projects within this
Programme exist together to enhance our cyber security effectiveness, including the
Cyber Security Roadmap project, Critical Service Resilience Project and updates to
our core systems.
Our primary focus in this regard is to build modern, effective and enduring IT systems
that protect our customers.
Cyber fraudsters continue to pose a
threat to all sectors, not least to Banking
and Financial Services, both in terms
of sophistication and volume. Covid-19
and the Ulster Bank transaction have
provided further challenges for the Bank
in protecting our customers against 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.
Data Management Risk
Description
Mitigation Through Our Strategy
Recent years have witnessed the fast-
paced adoption of new technologies, both
in businesses and in our personal lives.
As a result, the role of Data Management
in the Financial Services industry has
never been so important. If not managed
effectively, customers’ trust will be
breached, regulatory obligations can be
impacted and financial and reputational
penalties can impact an organisation’s
overall sustainability.
Data is a critical component of our Bank’s strategy, underpinning every strategic
decision we make. We hold a privileged position as custodians of our customers’
data. In addition, the data we hold represents a significant opportunity for us
to better understand our customers, and offer them the right propositions and
services to them at the right time. To ensure we are optimising our approach to Data
Management, the Bank undertook a significant Data & Analytics Strategy project in
2021. The programme of work that will deliver new capabilities, technology solutions,
and develop our skills and culture will commence implementation in 2022. The
programme will ensure robust Data Management processes, controls and transparent
reporting. As a result, we expect to see a reduction in the risk of data quality issues,
data breaches and incorrect use of data. The Bank now has a clear pathway over
the medium to longer term in respect of Data & Analytics management, focused on
enhancing our customer experience, reducing errors and maximising the value our
data can deliver within the boundaries we are set.
Climate Risk
Description
Mitigation Through Our Strategy
With the increased focus on climate-
related and environmental risks across
all sectors, there is an expectation on
companies to contribute to the transition
to a low-carbon economy. With the level
of spotlight becoming greater in this
regard, it is important that we manage
such levels of risk and exposure.
In Q4 2021, the Bank launched its first Sustainability Strategy, demonstrating our
commitment to the sustainability of our communities, country and planet.
While significant steps have been taken in recent years to enhance our position in
respect of ESG issues, 2022 will mark the formal commencement of the execution
of our Sustainability Strategy. A core component of this is the Bank’s commitment to
play our part in reducing the impact globally of climate change. The Bank will actively
reduce its carbon footprint, having signed the Low Carbon Pledge, where we have
committed to setting science-based carbon emission reduction targets by 2024. We’ll
continue to demonstrate our transparency and commitment for change through our
signature to the Task Force on Climate-Related Financial Disclosures (TCFD).
19
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Our Strategy, Business Model and Culture
(continued)
Our Culture – Bringing the Lived Experience to Life
We want to build on the progress
already made and continue to
improve our culture, to consistently
live our Values every day.
Culture is a word that can cause confusion.
Simply put, it gives organisations a sense
of identity. It defines the way in which
‘things are done around here’, divined from
many things; our heritage, behaviours,
beliefs, Values, processes and language.
It includes both how we say we get things
done, and the reality of how we really
get things done. In PTSB, our Purpose,
Ambition and Values orient our culture
and how we evolve our culture. It is our
behaviours, and the way colleagues
work together, with our customers and
our communities. It is how we handle
day-to-day operations, our everyday
communication and tasks that create the
PTSB way. Our culture is made up of many
sub-cultures; whether that be from our
heritage, various acquisitions and mergers,
geographies, or the different leadership
styles. We aspire for a consistent cultural
experience for all colleagues at Permanent
TSB. We want a culture that preserves
all the positive elements of our heritage,
whilst actively changing any poor habits
and behaviours that do not align to
our Values. We have been proactively
committed to improving our culture since
2015, and as we look forward, our goal
for culture remains 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.
We want to build
a culture of trust.
Trust is the foundation
of all relationships.
A culture where we care for our
customers, communities, and each other
– where we are proud to work for PTSB.
A culture where we work hard to live our
Values every day through our actions
and our words. A culture where ethical
decision making, fair customer outcomes
and risk awareness are integrated into
everything that we do every day.
All strong relationships are built on trust.
Real and genuine trust is the single most
important element of any relationship;
personal or professional. Trust is at the
heart of all meaningful communication
and without it, no relationship can survive.
It is our privilege to be the custodian of our
customers’ financial interests. This honour
is based on the principle of trust; being our
ability to demonstrate to our customers
that we consider their interests in all that
we say and do, every day.
We are making improvements
to our culture.
Good culture makes a difference. We
are doing a lot, and have more to do to
ensure that everyone has the same
colleague experience regardless of
where they work thereby improving
trust with our customers.
2021 Culture Reflection
We are building a responsible & sustainable
business to deliver for our customers,
colleagues & communities. We are
committed to building on the cultural
improvements made, and to achieve
our cultural goal to have a customer-
centric, open, inclusive, risk integrated,
growth culture characterised by, integrity,
innovation and accountability.
In 2020, our new CEO re-purposed the
organisation “To work hard every day to
build trust with our customers – we are
a community serving the community”.
We developed a new diagnostic (our Every
Voice Counts Engagement Survey) to
enable Permanent TSB to assess colleague
culture, engagement, eNPS and trust on a
holistic and periodic basis. As a member
of the Irish Banking Culture Board (IBCB),
we participated in the Éist Staff Survey
to listen to and take action on colleague
feedback on the culture within the Bank.
20
Permanent TSB Group Holdings plc - Annual Report 2021
We are making improvements to our culture:
Our Purpose and Values are
resonating with colleagues
Over 85% of colleagues tell us that they understand our Purpose and Values.
We have improved our culture Index
It is 71% (+70% for the past 2 years) however we have inconsistencies by function
which we are focused on addressing (Source: Every Voice Counts 2021).
We are committed to improving our
Gender Pay Gap
It is 16.5% compared to the national average of 14.4%, below the latest ROI reported
score of Retail Banks (23.8%) and below the latest aggregated score of major UK
financial institutions (33.4%) (Source:Reuters.com)
We have achieved a Diversity &
Inclusion (D&I) status of Awareness.
We’re making progress towards becoming a more inclusive organisation moving from
Compliance in 2018 to Awareness in 2020, with an ambition for Integration by 2023.
Our progress is assessed by an external independent third party (Source: EY D&I Audit
2020). We were also awarded the bronze award for investors in D&I in 2021 from the
Irish Centre for Diversity.
Our People Managers are supporting
colleagues, the PTSB community, to
increase Trust in our Bank
81.8% (+4.7%) of colleagues believe our People Managers genuinely care about
colleagues at a time of global turbulence. (Source: Every Voice Counts 2021).
We won the CIPD Award for Employee Empowerment and Trust for our ‘Ways of
Working’ programme.
Our colleagues have told us that our
Purpose and Values resonate strongly
with them (85% of colleagues understand
our Purpose and Values). Colleagues
understand their role and want to serve
customers, and they believe that the
leadership team is moving the Bank in the
right direction.
As an evolution from our Banking Blueprint,
in April 2021, the Board approved our
‘Culture Charter’ which sets out our cultural
ambition for PTSB. Our Culture Charter
outlines our goal for culture, and the
enablers necessary for us to achieve our
Purpose and Ambition, whilst overcoming
any cultural blockers which might impede
our success. We want to have a customer-
centric, open, inclusive risk integrated,
growth culture characterised by integrity,
innovation and accountability. The Culture
Charter has been launched across the
organisation to every colleague, to help
them connect and understand the role
of each of our cultural enablers and
the part that they can play individually
and collectively to build trust with our
customers.
Making Permanent TSB a Place for
Everyone
At permanent tsb we want to build a
culture of trust, with each other and with
customers. A culture where we work hard
to live our Values every day through our
actions, behaviours and words. Living our
Values builds trustworthiness, honours our
customer promise and is central to how
we will achieve our Ambition to be Ireland’s
best personal and small business bank.
We will enable this by nurturing an open
and welcoming environment where
you can safely be yourself, your best
self. An environment where you are
respected, valued and recognised for
your contribution. A psychologically safe
environment, where you feel safe to speak
up without fear of negative consequences
and where diverse thinking leads to
constructive debate. It is a privilege to be
the trusted custodian of our customers’
financial wellbeing and our ability to
demonstrate to our customers that we
consider their interests in all that we say
and do is at the heart of our customer
promise.
In building a culture of trust, we will
consistently deliver ethical decision
making, fair customer outcomes and
integrate risk management into everything
that we do.
21
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Our Strategy, Business Model and Culture
(continued)
We are building a Permanent TSB for everyone. One PTSB.
Purpose We work hard every day to build trust with our customers. We are a community
serving the community.
Ambition
To be Ireland’s best Personal and Small Business Bank.
Our
Values
Lived Every Day through Our Behaviours
Customer Focus
We take due
care and
consideration for
our customers
always.
United
We reinforce
accountable
leadership
through our
behaviour.
Courageous
We Speak
Freely without
fear of negative
consequences &
welcome diverse
perspectives to
mitigate group
think.
Open
We innovate and
continuously
improve.
Straightforward
We aim to get it
right first time
every time.
We have focused on improving our culture by embracing the enablers and being committed to identifying and over-coming the blockers.
Our dynamic culture diagnostic, enables us include transparent tracking, measurement and reporting of Engagement, Culture and eNPS
on a sustained basis as part of our Risk Appetite.
These cultural enablers will help shape and guide our cultural journey include:
titles or positions; it’s about embracing
a growth mind-set and being open to
improving how our colleagues do things
for themselves, each other, our customers
and our communities. 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. Our Living as Leaders Programme is
part of our Induction Programme for all new
joiners and will continue in 2022.
“It’s a privilege to lead people and leadership is really about
positively influencing people whether that is at home, in our
communities, with our peers, in our relationships and in our
workplace. What matters more than anything else in leadership
is the character – the integrity, accountability and dependability -
of our people leaders”.
Ger Mitchell, Chief Human Resources and Corporate Development Director
Living as Leaders - Join the
Conversation
2021 marked the second year of our
partnership with LIFT Ireland (Leading
Ireland’s Future Together) for our ‘Living
As Leaders’ Programme, which aims
to promote and encourage the right
leadership behaviours across all levels of
the organisation, aligned to our Purpose
and Values.
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 peer groups,
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.
Since the launch in 2020, over 1,500
colleagues across the organisation have
participated. This programme isn’t about
22
Permanent TSB Group Holdings plc - Annual Report 2021 The spokesperson in this illustration is
Saoirse, meaning ‘freedom’ in Irish.
To continue our embedding plan in 2021 we
delivered a number of initiatives to further
educate, track and highlight examples of
speaking up, including:
• Training People Managers and Speak
Freely Champions on Speak Freely and
Protected Disclosure procedures,
• Completion of Colleague Conduct
Training by all colleagues which included
further awareness and focus on Speak
Freely.
•
Implementation of the Irish Banking
Culture Boards’ DECiDE Framework on
ethical decision making,
• Regular Reporting on Speak Freely
concerns to the Board, and
• Developing and sharing of Speak
Freely Management Information with
colleagues and the launch of a bank-
wide Every Voice Counts – ‘Speak Freely’
Micro-Pulse survey and subsequent
focus groups.
Ways of Working (Hybrid Working)
Since the onset of the pandemic,
Permanent TSB has worked at pace
to adapt to and embrace new ways of
working. We are committed to creating
an environment for our colleagues which
is “Safe, Supported and Connected”. Our
Ways of Working was launched over three
phases:
1. Respond and Stabilise
2. Adapt and Support
3. Review and Evolve
As we continue to evolve the organisation
to be dependable, capable and relevant,
in 2020 the Bank introduced a Smarter
Working Programme to enable optionality
and to provide more flexible ways of
working for colleagues, while encouraging
the use of a broader range of technology at
all levels of the organisation.
Over 1,280 colleagues have opted for
Smarter Working, with the range of options
available including: reduced hours; job
sharing; compressed hours; sabbaticals
and career breaks; home working or
working from an alternative office location.
To support our colleagues as we
transitioned to a new way of working,
Team Commitment Charters were
developed and rolled out across every
team, empowering colleagues to agree
how to work and communicate together
in a hybrid environment. Further supports
including a weekly ‘no meeting slot’ and a
series of new ways of working infographics,
including tips for remote working, your
right to disconnect, and tips for holding
effective meetings and one to ones, have
been created to help colleagues adapt.
To support our wider community, we
also shared all of our ways of working
infographics across our social media
channels.
In recognition of our ‘Ways of Working’
programme, Permanent TSB won the
prestigious CIPD Award for Employee
Empowerment and Trust in 2021. We
will continue to assess and evolve our
colleague offering, and corresponding
Tips to Help you Disconnect:
Email
WhatsApp
Notifications
Out of Hours
Communications
Try turning off notifications for any
work group chats when you are outside
of work hours to help ‘switch off’.
Limit the amount of communications
sent outside of core working hours by
using the ‘delay’ email function.
Set appropriate boundaries to separate
work from home. If you have a mobile
device, try leaving your work phone in
another room, or mute email notifications
when you are finished work for the day.
Commute
If you’re working remotely, why not reintroduce
your ‘Commute’ to break the association
between home and work? E.g. a short walk at the
start and end of each day.
E-Signature
If you send emails or other communications outside
of core working hours, you should note on your
correspondence that an immediate response is not
expected, where possible.
Team
Commitments
Charter
Team Meetings
Each team is different. Have open
conversations with your team
about how to engage with one
another in the most effective
way. Agree with your team and
document these in a Team
Commitments Charter.
1:1s
Set up a well-structured weekly
team meeting and try not to
change the time.
Collaboration Tools
Make sure you and your team have access to
the right tools to communicate and collaborate
effectively.
Organise well structured
individual 1:1’s, this will help you
keep close to your teams needs
and anticipate any challenges.
23
Speak Freely – Change Behaviour By
Starting The Conversation.
Our goal is to evolve our culture to ensure
that our colleagues feel psychologically
safe and empowered to share their voice.
As an organisation, we are striving to
grow a Speak Freely environment where
it is safe and acceptable to raise genuine
concerns about practices, processes or
behaviours that do not meet our standards
or align with our Purpose. 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,
and ensures that they can do so without
any fear of retribution or penalisation.
We have a number of different channels
through which a concern can be raised.
The Bank has in place procedures to
deal with any protected disclosures that
may arise as part of Speak Freely and
reports to the Executive Committee
and Board on a half yearly basis. Our
“Speak Freely Pledge” invites colleagues
to show their commitment to creating
psychological safety by encouraging a
mind-set shift from awareness to action
and personal accountability. As part of
our ongoing series of communications
surrounding Speak Freely and through
our Every Voice Counts – ‘Speak Freely’
Micropulse, colleagues had asked us to
provide examples of Speak Freely concerns
raised and the actions taken as a result.
In response, we developed a series of
illustrations based on actual Speak Freely
concerns which occurred in the past to
help explain how the concern was raised,
what happened and the ultimate result.
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 has adopted the DECiDE (Ethical Decision
Making) framework, as part of our Code
of Ethics as well as the IBCB Change
Framework.
We look forward to continuing our work
with the IBCB in 2022 and beyond, as we
work hard to re-build trust in the banking
sector together.
What our colleagues said -
71% (+5pts v’s sector) of the words used
to describe our culture were positive
including:
• Customer/ Client Focused
• Friendly
• Risk Aware
• Always looking to improve
• Learning/ Development
• Collaboration
• Supportive
• Respectful
29% (-5pts v’s sector) of words colleagues
used were negative:
• Long hours
• Bureaucratic
• Hierarchical
Our Strategy, Business Model and Culture
(continued)
policies, supports and technology, with
a view to ensuring that we are driving
openness and collaboration, while
delivering optionality for our people.
Our colleagues tell us that the culture
and people is what they enjoy most
about working for Permanent TSB. As a
community-minded, collaborative and
people-focused organisation, we are
working hard to ensure that our culture
continues to be at the heart of what makes
us who we are, whether that be in person,
virtually or hybrid. As the world of work
continues to evolve and the pace and
impact of digitisation continues, we are
placing our customers, colleagues and
communities at the centre of our decision
making to ensure that we continue to build
trust and make a positive impact in their
lives.
UNITED
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Values in Practice Awards
At Permanent TSB our colleague
recognition programme, the ‘Values In
Practice’ or ‘VIP’ Awards, recognises
colleagues from across the organisation
who are living the Bank’s Values and are
making a positive impact to the business,
our customers and the community. Our
annual VIP Awards, enables colleagues
to recognise each other for their great
work over the year. 2021 witnessed the
second successive year where over 1000
nominations were received. Colleagues
from all across the organisation were
recognised by their peers under our five
‘Values’ categories, and the additional
categories of Community Impact Award
and Living as Leaders Award. In 2021, we
extended our annual Values in Practice
(VIP) Programme, with the launch of the
VIP Every Day Programme, to create a
culture of on-going recognition throughout
24
the year. Since launch in May 2021,
there have been over 900 VIP Every Day
Recognitions.
The Irish Banking Culture Board
(IBCB)
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. 2021 saw the continued
contribution to and support of the Irish
Banking Culture Board (IBCB) and its
programme of work by Permanent TSB. As
one of the five member banks, Permanent
TSB is committed to its mission of re-
building trust in the banking sector by
delivering a positive change in behaviour
and overall culture.
In 2021, we participated in the IBCB Éist
Staff Survey to continue to listen and act
upon the feedback from our colleagues on
culture within the Bank and the industry
as a whole. Éist is an Irish language
word which means listen. The IBCB
expressly selected this word as since the
establishment of the IBCB, one of the most
consistent pieces of feedback received
from bank staff and bank customers alike
is that they want banks to listen to them
more and to then act on that feedback.
Along with the other member banks,
Permanent TSB is committed to listening
to this feedback and working collectively
and individually to address this through
actions aimed at rebuilding trust in the Irish
banking sector.
Over 55% (+6pt v’s sector) of colleagues
in Permanent TSB colleagues shared their
views on culture in the Bank. The results
for Permanent TSB were very positive,
with colleagues saying that we have a
highly customer-focused, friendly culture,
where colleagues act ethically and work
with purpose. This feedback from our
colleagues demonstrates the impact of the
improvements made which form the basis
of a healthy and customer focused culture
in the Bank.
The Bank has supported colleague
participation in the IBCB workshops,
including vulnerable customers, services
to bereaved customers, respectful and
transparent communications, and financial
education and awareness to name but
a few. In addition, Permanent TSB has
support the initiatives of the IBCB, and
Permanent TSB Group Holdings plc - Annual Report 2021
• Strong Stakeholder Engagement:
Continuing proactive engagement
with all our stakeholders to align our
colleagues, customers and communities.
• Quality Communications (Internal):
Connecting with our colleagues on key
messages and embedding the Culture
Charter across the organisation to
ensure consistency of understanding
and alignment on our strategy.
• Reputation Management (External):
Proactively engaging and managing
our reputation in the market to build a
responsible and sustainable Bank for the
future.
• Brand: Achieving our ambition of
becoming Ireland’s best personal
and small business bank by having a
distinctive and relevant positioning in the
market.
• Culture Measurement: Leveraging our
culture diagnostic to deliver actionable
insights to support the delivery of our
Purpose and Ambition.
Making a positive and lasting impact in
our customers’ lives has been at the core
of Permanent TSB throughout our over
200 year history. Our new Purpose centres
on building trust with our customers
and connecting with our over 200 year
community heritage, as we continue to
rebuild trust and make a difference in our
customers’ lives. As we look towards 2022,
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.
Culture in 2022 and Beyond
We are committed to living our Values
every day, as they orient our behaviours
and guide our decision making. We will
continue our culture journey in 2022, to
support the delivery of our Purpose and our
Ambition by creating an Open, Inclusive,
Risk Aware and Growth Culture.
Our key activities to continue our culture
evolution will include:
• Living as Leaders: Partnering with LIFT
Ireland to continue the roll-out of our
Living as Leaders Programme to embed
our purpose, Values and Leaderships
Behaviours for all colleagues at
Permanent TSB.
• Speak Freely: Continuing to embed
communications, training and awareness
initiatives to create an environment
where colleagues feel psychologically
safe and empowered to share their voice
and have increased trust in the process.
• Diversity & Inclusion: Creating a more
inclusive Permanent TSB, and continuing
to nurture an environment and culture
where colleagues can bring their best
self to work, safe in the knowledge that
they are welcomed and encouraged
to share their voice and views as we
seek to progress from ‘Awareness’
to ‘Integration’ on the Diversity and
Inclusion maturity curve by the end of
2023.
• Smart Working Framework: Embracing
a blended workplace of the future, and
continuing to assess and evolve our
colleague offering, to ensure that they
have the tools, technologies, supports
and flexibility for hybrid work.
• Wellbeing: Supporting our colleagues
in bringing their best selves to work,
improving the colleague experience and
creating a resilient workforce.
• Customer Focus: Building trust-based
relationships with customers with due
care and consideration always, and
making a difference in the lives of our
customers.
•
Integrating Risk Awareness: Promoting
risk culture & awareness to ensure fair
customer outcomes across the Bank,
by providing colleagues with the right
supports and tools, and integrating
risk awareness into all aspects of our
behaviour and actions.
25
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Sustainability
Our Commitment To Building A
Sustainable Business
‘Now more than ever businesses, such as Permanent TSB, have a
significant role to play in supporting our stakeholders to navigate the
green transition and to embrace the opportunities that sustainability
brings. Our Purpose is to work hard every day to build trust with
our customers – we are a community serving the community. Our
Sustainability Strategy gives us an opportunity to put our purpose into
action - enabling us to play our part in addressing the global climate
crisis, elevate our social impact, enhance our culture, and deliver what
matter most to our customers and colleagues. Ultimately, building a
sustainable organisation that is fit for the future.’
Eamonn Crowley, Chief Executive
26
Permanent TSB Group Holdings plc - Annual Report 2021 Our Impact In Action
• Sustainability Committee and a Permanent
TSB Green Team
• An increased focus on Climate Risk
Management
• Signature to the ‘Low Carbon Pledge’,
committing to setting science-based carbon
emission reduction targets (SBT’s) by 2024
• Disclosed through CDP
• Co-sponsor of the Sustainability Revolution
Virtual Conference Series
• A partnership with DCU Access Programme
• 7,000 financial reviews completed last year,
supporting customers in taking control of their
financial future
• A 5 year partnership with Social
Entrepreneurs Ireland, tackling some of
Ireland’s most important social issues
• A 3 year partnership with Ó Cualann
Cohousing Alliance, supporting the
development of affordable housing schemes
in communities across the country
• 2021 Winner of the Chambers Ireland
Sustainable Business Impact Award in the
Excellence in Community Category for our
partnership with Ó Cualann Cohousing
Alliance
The launch of a
new Sustainability Strategy
for the Bank
Signature to the Task Force on
Climate-related Financial
Disclosures
(TCFD)
1% reduction
in carbon emission intensity
last year (a cumulative
reduction of 56% since 2009)
c.€600,000
in financial contributions to
Irish community organisations
in 2021
Accreditation to the
‘Business Working
Responsibly Mark’
A commitment to
maintaining our branch
presence
in communities across Ireland
27
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Sustainability
(continued)
• Winner in the Employee Empowerment and
Trust Category, CIPD Awards, 2021
• 2.5 training days delivered per employee last
year, with more than 400 employees enrolled
in banking education programming
• Partnered with LIFT Ireland to deliver ‘Living
as Leaders’ to more than 1500 colleagues,
bringing our Values to life
• c.1,000 nominations to our Values In Practice
(VIP) Awards, the Bank’s colleague recognition
programme
• A Diversity and Inclusion Strategy supported
by 5 Employee Resource Groups – LIFE,
PRISM, DiCE, Better Balance and The Change
Collective
• 71% Culture Index Score
New hybrid ways of working
and the creation of 300 new
positions across key growth
areas
36% of Senior Leadership
Positions
are filled by Women
87% of employees feel
comfortable
to be themselves at work
regardless of background or life
experiences
The first Irish Retail Bank
to be awarded the Guaranteed
Irish Symbol, recognising our
contribution to local communities
across the country
Significant improvement in the
Bank’s reputation score moving
up 24 places to 69th position in
the annual Ireland RepTrak Top
100 List**
• +10 Relationship Net Promoter Score* (RNPS),
placing Permanent TSB in second position
among the retail banks in Ireland
• Expansion of our Business Banking offering
through new partnerships with Bibby
Financial Services, the Strategic Banking
Corporation of Ireland, Digital Business Ireland
and Worldpay
• €30 million committed to branch
refurbishments in our Retail Network,
introducing the latest technology and
enhancing our customer service offering
• A new Digital Current Account and the
introduction of Apple Pay and Google Pay
• A focus on cyber security and data protection
with training delivered to all colleagues
A further €50 million
investment in technology
infrastructure and digital
services
* 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.
** The annual Ireland Reptrak study is the largest and longest running study of reputation in Ireland and is based on the perceptions of over 6500 members of the public.
The study measures the level of trust, respect, admiration and esteem the public has for 100 organisations in Ireland, along with close to 100 other reputation and brand
indicators.
28
Permanent TSB Group Holdings plc - Annual Report 2021 “At Permanent TSB, we
recognise that building
strong relationships with our
stakeholders, and ensuring
that we engage with them
regularly, plays a fundamental
role in informing our Business
Strategy.”
Increasing Our Focus On
Sustainability
Permanent TSB has a long banking history
in Irish communities, with roots that
stretch back over 200 years. 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.
Given the increased focus on sustainability
not only in Ireland, but around the world,
the Bank commissioned a third party to
conduct a comprehensive sustainability
assessment of Permanent TSB in 2020.
The comprehensive assessment covered
a number of topics, including; climate
risk; carbon impact and 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 assessment, the Bank
mobilised a Sustainability Committee with
representation from senior leaders from
every area of our business.
The Sustainability Committee commenced
work on turning the findings into an
overarching Sustainability Strategy for
the organisation last year, beginning with
engaging our stakeholders to conduct an
exercise in materiality.
Engaging With Our Stakeholders
At Permanent TSB, we recognise that
building strong relationships with our
stakeholders, and ensuring that we engage
with them regularly, plays a fundamental
role in informing our Business Strategy. It
guides our reporting, allows us to identify
risk and emerging trends, while helping
us to prioritise investment and resourcing
- ultimately, enabling us to conduct and
manage all areas of our business in a more
sustainable way.
In 2021, we completed a materiality
assessment to support us in identifying
the Environmental, Social and Governance
(ESG) issues that are not only material
to our business, but important to our
stakeholders. The assessment was
undertaken by an independent third party
to ensure complete confidentiality and
29
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Sustainability
(continued)
impartiality. It used both quantitative and qualitative tools and was completed across the
following three phases:
Phase 1 Conducting Desktop Research And Developing A Survey
Conducting research into existing documentation, including, our business
strategy, strategic priorities, purpose, values, existing internal and external
stakeholder surveys, peer benchmarking and current and emerging
regulation.
Determining the extent of stakeholder engagement required across each
stakeholder group.
Phase 2
Assessing Stakeholder Engagement Needs
Mapping stakeholders and identifying stakeholder engagement channels.
Conducting surveys and 1:1 interviews with key stakeholders.
Phase 3
Identifying Materiality
Analysing data from documentation and stakeholder engagement to identify
key themes
Developing a materiality matrix, whereby material topics were mapped
As part of the process, we worked with the
third party to compile a longlist of topics
that are material to our business. These
topics were comprehensive and wide
ranging.
Using the longlist of topics, our
stakeholders were asked for their
perspectives on what they felt were the
most important issues that the Bank
should be considering. Stakeholders were
also invited to put forward any topics that
may have not been represented on the list
in order for us to capture a holistic view.
c.200 of our stakeholders participated in
the materiality exercise.
Customer
Wellbeing &
Literacy
Accessibility
Of Products &
Services
Cyber Security
Corporate
Governance,
Compliance & Fair
Business Conduct
Climate Risk Management
Customer Trust
Digital Transformation
& Innovation
Community Investment
Social Issues
(Social & Affordable Housing)
High Quality Products
& Superior Customer
Experience
Carbon Footprint
Employee Development
Employee Wellbeing
Sustainable Products
& Services
Branch Presence
Sustainable Profitability
Sustainable Procurement
Supporting SMEs
l
s
r
e
d
o
h
e
k
a
t
S
o
T
t
n
a
t
r
o
p
m
I
Impact On Permanent TSB
Data Protection
Diversity & Inclusion
Environmental Impact
Social & Community Impact
Economic Impact
Purpose & Culture
Permanent TSB’s
Materiality Matrix
The findings of the materiality
assessment exercise with
stakeholders were consolidated
to form a materiality matrix,
with the position of material
issues being plotted relative
to the degree of stakeholder
importance and potential
business impact.
It is important to note, that
the 20 issues that were
deemed as being material
to our stakeholders, are also
considered as important areas
of focus for us at Permanent
TSB, regardless of their
position within the matrix.
As such, each material issue
has been given representation,
in one form or another, in our
overall Sustainability Strategy.
30
Permanent TSB Group Holdings plc - Annual Report 2021
Our Sustainability Strategy
The materiality assessment findings and associated stakeholder insight have played an important role in the development of an
overarching Sustainability Strategy for the organisation across 4 key areas.
Sustainability Strategy
4 Key Areas
Of Focus
We’re
Committed
To
Addressing
Climate Change
& Supporting The
Transition To A Low
Carbon Economy
• Managing Climate Risk
• Delivering sustainable
products and services
• Ensuring responsible
procurement practices
• Minimising our
carbon impact and
managing our wider
environmental
footprint
Elevating Our
Social Impact &
Connecting With
Local Communities
Enhancing Our
Culture & Investing
In Our People
Championing Small
Business & Creating
A Bank That Is Fit
For The Future
• Maintaining our
branch presence
• Enabling accessibility
of our products and
services
• Encouraging customer
financial wellbeing and
literacy
•
Investing in local
community initiatives
• Encouraging the right
cultural behaviours
• Embedding our values
and creating a culture
of ‘Speaking Freely’
• Focusing on Diversity
•
and Inclusion
•
Investing in employee
learning and
development
• Delivering high quality
products and a superior
customer experience
• Supporting our Business
Banking customers
Investing in digital
transformation and
innovation
• Ensuring cyber security
• Managing data protection
• Delivering long-term,
sustainable profitability
• Ensuring transparency
• Addressing social
• Fostering employee
through reporting
issues, such as social
and affordable housing
wellbeing
OUR STRATEGY IS UNDERPINNED BY
Living Our Purpose And Ensuring Strong Corporate Governance, Compliance And Fair Business Conduct
The 6 United Nations Sustainable Development Goals (SDGs) At The Core Of Our Strategy
The Sustainable Development Goals
The United Nation’s Sustainable Development Goals (SDGs) were launched in 2015 to provide a plan of action for people, planet and
prosperity. The 17 goals act as an urgent call for action for countries to work together to develop strategies to tackle some of the world’s
most critical issues. While we recognise that we may contribute to all 17 SDGs in some way, the following 6 have been identified as being
core to our Strategy.
Ensure inclusive and
equitable quality
education and promote
lifelong learning
opportunities for all
Achieve gender equality
and empower all women
and girls
Ensure inclusive and
sustainable economic
growth, employment and
decent work for all
Make cities and human
settlements inclusive,
safe, resilient and
sustainable
Reduce inequality in and
among countries
Take urgent action to
combat climate change
and its impacts
The following is a summary of progress made under each of the 4 pillars of the Bank’s Sustainability Strategy in 2021.
31
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Sustainability
(continued)
Addressing Climate Change &
Supporting The Transition To A Low
Carbon Economy
Overview
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 focussed on managing climate
risk, supporting the transition to a low carbon economy, taking action
to reduce our own environmental footprint and continuing to disclose
transparently.
Highlights:
An increased focus
on Climate Risk
1% reduction in Scope 1 and 2 carbon
emission intensity in 2021, a cumulative
reduction of 56% since 2009
Signatory to the Task Force on Climate-
Related Financial Disclosures (TCFD)
A Sustainability Committee and a
Permanent TSB Green Team
Signatory to the ‘Low Carbon Pledge’,
committing to setting science-based
carbon emission reduction targets by
2024
Co-sponsor of the Sustainability
Revolution Virtual Conference Series
32
Permanent TSB Group Holdings plc - Annual Report 2021 Sustainability Revolution
In October 2021, Permanent TSB
was proud to be a co-sponsor of the
Sustainability Revolution, a three day
virtual conference series aimed at
providing the insight needed to help sustain
the business transformation required to
address the climate crisis.
Led by Business in the Community Ireland,
the conference was delivered across three
key themes, Revolutionary Leadership,
Revolution in Action and Revolutionary
Conversations and included a mix of panel
discussions and presentations by leading
industry experts all focussed on embedding
sustainability at the heart of businesses
and driving appropriate action.
Climate Risk
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 Risk is a key area of focus for
Permanent TSB and is an integral part
of the Bank’s Sustainability Strategy
under the ‘Addressing Climate Change &
Supporting the Transition to a Low Carbon
Economy’ Pillar.
We made good progress in 2021, including:
• Mobilising a Sustainability Committee.
The Deputy Chair of the Committee is
the Chief Risk Operating Officer who has
overall responsibility for Climate Risk
within the Bank;
•
Introducing Climate Risk as a sub-risk
category within the Bank’s Operational
Risk and Credit Risk Frameworks;
• Establishing procedures to assess
new business applications through
an ESG lens, enabling the Bank to
identify factors which may impact the
Sustainability of the trading cash flow
of the business and/or presence on the
proposed exclusion list; and,
•
Increasing transparency by adding our
signature to the Task Force on Climate-
Related Financial Disclosures (TCFD).
Climate Change presents both risks and
opportunities to meet new customer needs
for Permanent TSB and we are preparing
for both with a dedicated programme of
work in place for 2022.
You can read more about our commitment
to Climate Risk on page 19.
The Task Force On Climate-Related
Financial Disclosures
In 2021, Permanent TSB became a
supporter of the Task Force on Climate-
Related Financial Disclosures (TCFD).
The TCFD is a voluntary climate-related
financial disclosure framework designed to
promote more informed investment, credit,
and insurance underwriting decisions
and, in turn, enable stakeholders to better
understand the concentrations of carbon-
related assets in the financial sector
and the financial system’s exposures to
climate-related risks.
The disclosure recommendations are
structured around four thematic areas
that represent core elements of how
an organisation operates including,
governance, strategy, risk management,
metrics and targets.
We look forward to issuing our first
disclosure aligned to the TCFD as part of
our 2022 annual reporting cycle.
Taxonomy Regulation
In accordance with Article 8 of the EU
Taxonomy Regulation and the underlying
Disclosures Delegated Act, Permanent
TSB is required to disclose the proportion
of taxonomy-eligible and taxonomy
non-eligible activities related to the
environmental objectives of climate
change adaptation and climate change
mitigation for year-end 2021. The
Disclosures Delegated Act came into force
on 1 January 2022. As the Bank continues
to develop an accurate classification of
assets to adhere to this taxonomy and
other climate related disclosures, we have
assumed that all covered assets are non-
eligible for the purposes of this disclosure.
The percentage of eligible activities is
therefore expected to increase in future
reporting periods.
Taxonomy Regulation – Mandatory reporting at 31 December 2021 in % Content of Regulatory Metric:
As at 31 December 2021
1. Taxonomy-eligible activities as a proportion
of total covered assets
2. Taxonomy non-eligible activities as a
proportion of total covered assets
3. Exposures to sovereigns as a proportion of
total covered assets
4. Derivatives as a proportion of total covered
assets
5. Exposures to corporates not subject to
NFRD as a proportion of total covered assets
6. Trading book as a proportion of total covered
assets
7. On-demand interbank exposures as a
proportion of total covered assets
%
0
100
40
0
1
0
0
Exposures in the on-demand interbank market divided by total covered assets
Activities with Financial and Non-financial corporates subject
to NFRD, households and local governments covered by the EU
Taxonomy Climate Delegated Act divided by total covered assets
Activities with Financial and Non-financial corporates subject to
NFRD, households and local governments not covered by the EU
Taxonomy Climate Delegated Act divided by total covered assets
Exposures to sovereigns divided by total covered assets. Sovereigns
include exposures to central governments, central banks and
supranational issuers
Derivatives in the non-trading portfolio divided by total covered
assets
Exposures to entities not obliged to report under the NFRD divided
by total covered assets
Exposures in the trading book divided by total covered assets
Exposures in the on-demand interbank market divided by total
covered assets
8. Total covered assets (millions)
15,197
Total assets excluding exposures to sovereigns and trading book
33
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Sustainability
(continued)
Carbon Impact And The Transition To
A Low Carbon Economy
In November 2018 the Bank signed
Business in the Community Ireland’s
(BITCI) ‘Low Carbon Pledge’, committing to
reduce our scope 1 and 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 FTE as an intensity
measure, we estimate that we have
achieved a 56% reduction in scope 1
and 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 continue to
work remotely.
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.
Energy Usage
Energy Consumption
Electricity - Total
Gas
Oil (GWh equivalent)
Motor Fuels
2018
GWh
9.2
2.3
0.1
2.9
2019
GWh
9.2
2.4
0.1
2.7
2020*
GWh
8.8
2.4
0.1
2.0
Total Energy Consumption
14.5
14.4
13.3
CO2 Emissions (tonnes)
4,283
3,928
3,262
Average FTE
2,416
2,386
2,429
CO2 Emissions per FTE (tonnes)
1.77
1.65
1.34
Estimates are used where actual data is not available
*As restated
2021
GWh
8.7
2.9
0.0
1.4
13.1
3,077
2,318
1.33
We are committed to going further and
reset our target last year, now aiming to
reduce our scope 1 and 2 emission intensity
by 60% by 2024.
At Permanent TSB, we know that the use
of energy is the biggest contributor to our
emission intensity, accounting for c.70%.
Science Based Targets (SBTs)
In 2021, we deepened our commitment to
long-term sustainability and committed to
new climate action goals by signing Phase
2 of the Low Carbon Pledge. The refreshed
Pledge focusses on setting carbon
emissions reduction targets based on
science by 2024 and will include measuring
and reducing our entire carbon footprint
in line with the Paris Agreement and the
latest IPCC findings.
The Bank was proud to add our signature
to the Pledge, joining 67 other Irish
businesses in committing to set robust
carbon emissions reduction targets based
on science, ultimately achieving a net-zero
economy by 2050.
Climate Disclosure Project (CDP)
In 2021, we continued to further our to
environmental transparency by disclosing
the Permanent TSB’s environmental
impact through CDP, the non-profit that
runs the world’s leading environmental
disclosure platform.
With this in mind, in 2021 we took
additional action to minimise the carbon
impact of our operations through
continuing to invest in energy efficiency
initiatives and programming, including:
• Using a 100% renewable energy supply
for the Bank;
• Completing comprehensive energy
audits across all of our office and branch
locations in accordance with SI426
energy regulation;
• Finalising the upgrade to energy efficient
LED lighting across all of our office
locations, replacing more than 3000
lightbulbs across our business;
•
Implementing LED lighting across our
branch network as part of our ongoing
branch refurbishment process;
• Controlling our head office locations by
movement sensors, ensuring that all our
non-essential lighting remains off when
the areas are not in use; and,
• Celebrating Earth Hour, raising
awareness and encouraging our
colleagues to reduce their energy
consumption both in the office and at
home.
34
Permanent TSB Group Holdings plc - Annual Report 2021
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 facilities in our branch network.
Actions taken in 2021 include:
• 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
c.900,000 customer accounts are now
registered for eStatements, resulting in
an on-going reduction of paper by c.6
million pages of paper annually;
• Ongoing integration of a new customer
correspondence management tool,
delivering a range of new functionality
to enable us to migrate our customer
correspondence to digital channels,
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
issued c.1,000 units of the Annual Report
in hardcopy. The remaining copies were
issued in digital form, saving more than
16 million pages of paper;
• Monitoring water consumption in all of
our branch and administrative sites; and,
• Celebrating Earth Day, raising awareness
and encouraging our colleagues to
reduce, reuse and recycle, both in the
office and at home.
At the end of 2021, we commenced
a programme of work on a recycling
programme refresh with a view to further
reduce our impact. The programme will roll
out across all areas of our business during
2022, and include an awareness campaign
for colleagues designed to encourage a
shift in mind set and behaviour aligned to
our waste management objectives.
Waste Generation
General Waste
Recycling Waste
Recycled Confidential Shred Waste
Recycled Used Cooking Oil
Recycled Grease
Recycled Lamps
*LED Lighting upgrade completed in 2020
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 including, adherence
to our Third Party Risk Management
Policy and our Supplier Code of Conduct.
In addition we hold membership to the
Financial Supplier Qualification System
(FSQS), an online platform where suppliers
submit their compliance data and
information relating to their organisation,
allowing us to have a consistent view of our
suppliers to ensure they meet our minimum
standards.
The Bank’s Procurement Policy is reviewed
annually, communicated as required and
made available to our colleagues on our
internal website.
At the end of 2021, we commenced a gap
analysis of our supply chain in order to
limit our exposure an impact. The findings
have informed a programme of work
which is currently underway, focussed on
integrating and embedding sustainability
criteria further into our procurement
processes, segmenting our suppliers based
on mission criticality and potential risks
to our service delivery and introducing a
Sustainable Procurement Framework and
Sustainable Supplier Charter.
2018
Tonnes
2019
Tonnes
2020
Tonnes
2021
Tonnes
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
12.6*
84
42
191
0.9
3.0
0.2
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
Committee, the team are focused on
environmental programming including,
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 and
communication and awareness.
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 Environmental Policy Statement
is reviewed annually as part of senior
management review of all Sustainability
Programming. Progress against our
Strategy is reported upward to the Chief
Executive, Executive Committee and the
Nominations, Culture and Ethics Board
Committee on a quarterly basis.
35
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Sustainability
(continued)
Elevating Our Social Impact &
Connecting With Local Communities
Overview
With a presence in more than 76 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 maintaining our branch footprint, ensuring
the accessibility of our products and services and investing in local
communities initiatives across the country is a demonstration of that
purpose in action.
Highlights:
A commitment to maintaining our
branch footprint in communities across
Ireland
Launch of the JAM Card
A five year partnership with Social
Entrepreneurs Ireland
36
c.€600,000 in financial contributions to
Irish community organisations in 2021
c.€200,000 in charitable giving through
the Permanent TSB Community Fund,
which included matched funding by the
Bank
Winner of a 2021 Chambers Ireland
Sustainable Business Impact Award
in the Excellence in the Community
– Community Programme Category
for our partnership with Ó Cualann
Cohousing Alliance
Permanent TSB Group Holdings plc - Annual Report 2021 have been granted status under the
International Protection Act 2015, and
providing training to all of our customer
facing colleagues;
• Embedding a cross functional working
group focused on developing appropriate
supports for customers, including those
who may be vulnerable;
• Continuing to provide priority banking
hours across our Retail Network and our
Customer Contact Centres;
• Rolling out communication campaigns to
drive awareness for colleagues on such
items as fraud prevention, safeguarding
and financial abuse awareness and
prevention; and,
• Conducting an accessibility review of our
• Delivering comprehensive Diversity
main customer processes;
• Commencing an accessibility review of
both our office and branch locations;
• Promoting and raising awareness of
the Sunflower Lanyard, a lanyard that
discretely indicates to those around
them that the wearer has a hidden
disability, and as such they may need a
little extra support or time to complete
their transaction;
• Launching the ‘Just A Minute’ (JAM)
Card across our 76 locations nationwide;
and Inclusion training to all colleagues,
with an added layer of training for our
customer facing teams and those in
people management positions.
Permanent TSB ensures that accessibility
standards are embedded into our online
and mobile channels, as well as in the
development of its digital platforms.
In our retail network, our new branches
are designed with accessibility in mind. In
2021, we reviewed the in-branch SSBM
(Self Service Banking Machine) customer
experience, with a view to enhancing the
service for all customers.
JAM Card
In 2021, Permanent TSB was proud to launch the ‘Just A Minute’ (JAM) Card across
our 76 locations nationwide.
JAM Card is a growing initiative that allows customers with a learning difficulty,
autism or communication barrier tell others they need ‘Just A Minute’ discreetly and
easily when in public settings like shops, public transport or their local Permanent
TSB branch.
The JAM Card is a welcome addition to the Bank’s growing supports for vulnerable
customers, allowing our customer facing teams to give JAM Card users a bit of extra
support and time when conducting their transaction.
Maintaining Our Branch Footprint
In 2021, we announced our commitment
to maintaining our branch presence in
communities across Ireland. We will
continue to invest in digital transformation
and innovation in order to provide our
customers with a seamless digital
experience online, but providing a personal
service will remain at the heart of
everything we do.
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. In 2021
we completed more than 7000 financial
reviews, both in person and through our
digital channels, to support customers in
taking control of their financial future.
Enabling Accessibility Of Our
Products And Services
Permanent TSB is committed to
understanding the needs of our customers
and to ensuring that the products and
services we provide allow all people,
including those who may be vulnerable or
underrepresented, equal opportunity to
access them.
To support the above, the Bank has in
place a set of Vulnerable Customer Guiding
Principles, to enable us to remove barriers,
meet the needs of customers who may
require additional support and care and
to provide guidance and support to our
colleagues.
In 2021, we introduced additional
programming in order to provide
appropriate access and support. Actions
taken include:
Ongoing participation in the BPFI’s
Vulnerable Customer Forum;
• Participating in the development and
launch of the BPFI’s industry wide ‘Guide
to Opening Bank Accounts in Ireland’ for
those seeking asylum, or who have been
granted status under the International
Protection Act 2015;
• Updating our account opening processes
and corresponding documentation to
support those seeking asylum, or who
37
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Investing In Local Community Initiatives Through 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 150,000 votes cast by the Irish public through both our website
and mobile App, in 2021 the Bank was proud to announce Women’s Aid, Royal
National Lifeboat Institution (RNLI), Solas Cancer Support (South Eastern Cancer
Foundation), Irish Guide Dogs For The Blind, Oranmore Maree Coastal Search Unit
and Breast Cancer Ireland as its Community Fund Partners for the fundraising year.
Numerous fundraising events were organised and managed by our colleagues from
around the Bank throughout the year including: the At Your Own Pace Race Series;
Payroll Giving Campaign; Christmas Mega Raffle; and, the Dive For Donations – a
fundraising skydive which saw 20 of our colleagues jump from a plane in support of
our Community Fund Partners .
All money raised during the year was match funded by the Bank, for an overall
donation to our Community Fund Partners of c.€200,000.
During 2021, the Bank worked closely with
SEI to deepen our partnership by getting
our colleagues involved in SEI’s annual
Awards review and selection process,
broadening our impact through our
sponsorship of the Community Connect
Programme and continuing to offer pro-
bono support to the SEI community of
Alumni, whereby we match the skills of our
people with the organisations that need
them most.
“Permanent TSB entered into
a five year partnership with
Social Entrepreneurs Ireland
(SEI) in 2017, contributing both
financial support – €375,000
over five years”
Sustainability
(continued)
Dublin City University Access
Scholarship Programme And Access
To The Workplace Programme
In 2021, Permanent TSB was proud to
partner with Dublin City University’s (DCU)
Access Scholarship Programme, providing
funding support that enables DCU to put
students through 3rd level education
programming and realise their full potential.
As part of the partnership, the Bank are
also actively involved in the DCU Access
to the Workplace Programme, providing
paid work placement opportunities
and professional career guidance and
support to talented students from
socioeconomically disadvantaged
backgrounds.
The Access to the Workplace Programme
was established in 2019, with the aim of
providing Access students high quality
internship opportunities within leading Irish
businesses, in order to support them in
gaining work experience that is related to
their degree endeavours. To complement
the above, Access to the Workplace
provides students with a range of personal,
financial and academic support to enable
students to thrive and excel in their studies
during their time at DCU.
More than 1200 students went through
the programme during the 2020/2021
academic year making it the largest of its
kind in Ireland.
Tackling Social Issues Through
Our Partnership 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.
Social Entrepreneurs take an
entrepreneurial approach to solving social
issues such as improved mental health and
wellbeing, social inequality, food waste,
climate action and everything in between.
Over the past 17 years, SEI has supported
c.435 social entrepreneurs and their
programmes, invested €7.5 million in social
projects, and provided extensive pro-
bono expertise to entrepreneurs worth on
average c.€500,000 per year.
38
Permanent TSB Group Holdings plc - Annual Report 2021 Chambers Ireland Sustainable
Business Impact Awards
The Sustainable Business Impact Awards
showcase best practice in sustainable
development and social responsibility
undertaken by companies of all sizes
across Ireland. The United Nations
Sustainable Development Goals are at
the heart of the Awards, celebrating
sustainable business practices and
championing Chambers Ireland’s alignment
with the Goals.
In September 2021, Permanent TSB was
proud to win a Sustainable Business Impact
Award in the Excellence in Community –
Community Programme Category for our
partnership with Ó Cualann Cohousing
Alliance, recognising our commitment to
addressing the affordable housing crisis
in Ireland and supporting the Agency’s
important work.
The Bank was also shortlisted in
an additional category at the event
in the Excellence in Community –
Partnership with Charity Category for the
Concert4Cancer, in partnership with the
Marie Keating Foundation.
community partners, and ensure that
effective governance is in place via
the implementation of comprehensive
partnership agreements. In addition, the
Bank has in place a Community Fund
Constitution, a document which governs
how we engage with charities, manage
relationships and includes processes for
completing effective due diligence at
regular intervals.
We are honoured to have been recognised
at the Awards, alongside so many
other deserving organisations, whose
programmes are having a positive and
meaningful impact on communities across
Ireland.
Progress against KPIs is reported
upward to the Chief Executive, Executive
Committee and the Nominations, Culture
and Ethics Board Committee on a quarterly
basis.
The Sustainability Team and the
Community Fund Committee manage
the engagement with our charity and
“In September 2021,
Permanent TSB was proud to
win a Sustainable Business
Impact Award in the Excellence
in Community – Community
Programme Category for our
partnership with Ó Cualann
Cohousing Allianc”
Addressing Affordable Housing Through Our Partnership with Ó Cualann
Cohousing Alliance
In 2021, Permanent TSB entered the second year of 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 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.
39
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Sustainability
(continued)
Enhancing Our Culture
& Investing In Our People
Overview
The Bank’s ambition to be Ireland’s best personal and small business
Bank is only possible if we create a diverse and inclusive, risk aware,
growth culture, where our colleagues feel engaged, valued and are given
the support that they need to be the best they can be.
87% of employees feel comfortable to
be themselves at work regardless of
background or life experiences
71% Culture Index Score
2.5 training days delivered per employee
in 2021, c.300 colleagues received an
Institute of Banking (IOB) accreditation,
with c.400 employees enrolled in
banking education programming
Delivering ‘Living as Leaders’ to more
than 1500 colleagues, bringing our
values to life in partnership with LIFT
Ireland
36% of Senior Leadership Positions are
filled by Women
Winner of the CIPD Award for Employee
Empowerment and Trust
Highlights:
40
Permanent TSB Group Holdings plc - Annual Report 2021 by developing personal leadership qualities
within each individual, we can develop a
generation of stronger and better leaders.
the organisation, while identifying areas for
improvement.
Irish Banking Culture Board
Permanent TSB is an actively involved
in improving culture across the banking
industry as a member of the Irish Banking
Culture Board (IBCB). In 2018, the five Irish
Retail Banks came together to establish
the IBCB, aimed at rebuilding confidence in
the Irish banking sector.
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 Board includes representation from all
five of the Irish Retail Banks.
Throughout 2021, we continued our
contribution to and support of the IBCB and
its programme of work, including:
• Playing an active role in a number of
IBCB workshops focussed on addressing
key challenges across the sector;
• Participating in the IBCB Éist Staff
Survey to continue to listen and act on
feedback from our colleagues on culture
within the Bank, and across the industry
as a whole; and,
• Adopting and embedding the industry
wide DECiDE (Ethical Decision Making)
Framework, as part of our Code of
Ethics.
For more on the progress made in our
cultural evolution during 2021, please visit
page 24.
More than 1500 colleagues have taken
part in the Living as Leaders Programme
to date; embracing a growth mind-set
and being open to improving how they do
things for themselves, our customers and
our communities. The Programme will
continue into 2022.
For more on Living as Leaders, please visit
page 22.
Ways Of Working (Hybrid 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 2021, Permanent TSB continued
embedding our 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; and, home
working or working from an alternative
office location.
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.
In recognition of our ‘Ways of Working’
Programme, Permanent TSB were proud
to win the prestigious CIPD Award for
Employee Empowerment and Trust in
2021.
With that in mind, in 2021, Permanent TSB
were proud to partner with LIFT Ireland
(Leading Ireland’s Future Together) for
the second year to continue our ‘Living
As Leaders’ Programme, 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
Programme rollout will continue into 2022
as part of our new Hybrid Workplace. 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. For
more on Ways of Working, please visit page
23.
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
Permanent TSB’s most recent Every Voice
Counts Survey results showed that we
maintained our Culture Index at 71%, +1%
above our Culture Index Target of 70%. A
selection of our survey results include:
• 2 out of 3 employees trust Permanent
TSB to do what is right;
• 3 out of 4 employees feel engaged in
the company and are proud to work for
Permanent TSB; and,
• 87% of employees feel comfortable to
be themselves at work regardless of
background or life experiences.
With a focus on continuous improvement,
Permanent TSB is focused on addressing
the feedback and will implement action
plans across the business during 2022.
The Bank recognises the importance of
checking in and staying connected with our
colleagues at regular intervals throughout
the year outside of our Every Voice Counts
cycle. With that in mind, in 2021 we
launched a series of micro-pulse surveys to
check in with our people and to get insight
into how we could assist them further in
their role.
The micro-pulse surveys covered a
number of key themes including, Wellbeing,
Recognition and Speaking Freely. The
findings enabled us to evolve our action
plans, ensuring that we were focussed
on the right things in order to support our
colleagues.
Investing In Learning And
Development
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 ACCA, Chartered Accountants Ireland
and CIMA and have been recognised at a
41
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 “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.”
Sustainability
(continued)
national level for excellence in learning and
development in financial services.
With the onset of the Covid-19 pandemic
in 2020, the Bank worked to successfully
migrate all of our learning programming
onto digital platforms. The migration
proved successful, ensuring that all
colleagues were able to take part in
learning and development opportunities,
regardless of where they were located. We
continued to deliver our programming via
digital platforms throughout 2021.
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; and,
• 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 Focused, 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.
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 2021, more than 1,000 nominations
were received, with representation from
all parts of the business. In addition to
our five ‘Values’ categories, the Bank
has 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 their local communities, and
those who consistently live all five of our
Values each and every day.
In 2021, we built on the success of the
‘VIP’ Awards and introduced ‘VIP Every
Day’ Programme, enabling colleagues
to recognise each other’s outstanding
contribution all year long, and outside of
our annual award cycle. Since launch, more
than 900 colleagues have been recognised
for their contribution through ‘VIP 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 on the Ernst and Young (EY)
Global Maturity Model.
We have made great progress and actions
we took in 2021 include:
• Signing ‘Elevate’, Business in the
Community Ireland’s ‘Inclusive
Workplace Pledge’;
• Embedding our Equality Through
The Bank is committed to ensuring the
ongoing alignment of remuneration
Diversity and Inclusion Charter and
rolling out initiatives such as our Gender
42
Permanent TSB Group Holdings plc - Annual Report 2021 Transitioning Guidelines and Pronoun
Usage Guidelines;
• 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;
• Better Balance – The Network works
with us to strive for gender balance
within our organisation;
• LIFE – The Network aims to promote
and improve work-life balance and
experience for all colleagues through
positive connection and support;
• Continuing to introduce Smarter Working
• DiCE – The Network promotes and
Options through our Hybrid Working
Model to enable greater flexibility;
celebrates people of all races, ethnicities,
nationalities and cultural heritage; and,
• Completing a review of all people-related
processes in order to ensure they were
inclusive;
• Taking action on the findings of our
accessibility review programme that was
conducted in 2020;
•
Introducing supports for parents, as
well as delivering coaching for people
managers of new parents, to help them
support their team members as they
enter a new stage of life;
• Promoting a culture of psychological
safety through Speak Freely, our channel
for encouraging colleagues to speak up
and raise a concern;
• Publishing our Gender Pay Gap and
setting gender balance targets; and,
• Receiving a Bronze accreditation from
the Irish Centre for Diversity, recognising
the progress made across Diversity and
Inclusion.
In 2022, 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 on EY’s Global
Maturity Model from ‘Awareness’ to
‘Integration’ by 2023.
Employee Resource Groups
To support the delivery of the Diversity
and Inclusion Strategy, the Bank has in
place 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.
There are currently five ERGs in place:
• PRISM – Our LGBTQ+ Network for
colleagues and allies. The Network
promotes and values individual
differences no matter how our people
identify;
• Change Collective – A collective for our
Millennial and Gen Z colleagues who
want to take action and make positive
change happen for our customers,
colleagues and communities.
The ERGs continue to champion the cause
of each group, promoting and encouraging
conversations with colleagues, while
celebrating key dates such as International
Women’s Day, International Men’s Day,
PRIDE, National Coming Out Day and
Cultural Diversity Day, to name a few.
The Elevate Inclusive Workplace
Pledge
In 2021, Permanent TSB added our
signature to Business in the Community
Ireland’s ‘Elevate Pledge’, committing to
building inclusive workplaces that are
representative of all members of our
society.
Workplaces have become more diverse,
incorporating a multiplicity of backgrounds,
experiences and identities. This has
brought huge benefits to Irish business.
However, diversity alone is not enough.
Workplace inclusion is about creating a
culture where everyone feels welcome,
has access to opportunities and is
supported to thrive. By signing the Pledge,
we are committing to building a truly
inclusive workplace, while supporting the
broader values of inclusion, equality and
opportunity in Irish society.
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 Balance for
Better Business, and played an active role
in the development of the Banking and
Payment Federation of Ireland’s (BPFI)
Women in Finance Charter.
The WorkEqual Campaign
To further support the work of our Diversity
and Inclusion Strategy, in 2021 Permanent
TSB entered year two of our three year
partnership with the WorkEqual Campaign,
promoting gender equality in workplaces
across Ireland.
The WorkEqual campaign is NGO-led and
aims to both raise awareness of workplace
gender inequalities and related issues and
develop solutions to address them.
During November, WorkEqual delivered a
series of events in support of the above
ambition, culminating in their flagship
seminar which took place virtually at the
end of the month. ‘Entitled ‘Reimagining
Childcare Provision’, the event explored
how Ireland can learn from other countries
to improve our childcare system and
promote family-friendly work cultures.
It featured international guest speakers,
showcasing best practice in public
childcare provision and was open to anyone
who wished to attend, free of charge.
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.
Analysis of our workforce by gender and
type of contract is as follows:
43
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Sustainability
(continued)
Total Headcount At Year End
*excluding Non-Executive Directors and Subsidiaries
Analysis By Type Of Contract
Permanent
Fixed Contract
Gender Analysis
Total
Senior Management*
Part-Time/Job Sharers
2019
89%
11%
2020
90%
10%
2019
2020
2021
Male
47%
63%
12%
Female
53%
37%
88%
Male
47%
63%
12%
Female
53%
37%
88%
Male
48%
64%
9%
2021
2318
2021
94%
6%
Female
52%
36%
91%
* Senior Management include the Senior Leadership Team and their direct reports.
Gender Pay Gap
We believe in being 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.
For the second year in a row, we are proud
to publish our gender pay gap voluntarily,
and in advance of the introduction of
relevant legislation. This forms part of our
commitment to hold ourselves accountable
by tracking our progress against our action
plan which we put in place as part of our
Board approved Diversity and Inclusion
Strategy.
Encouraging Employee 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:
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 last year in order
to further safeguard the health, safety and
wellbeing of our people.
Our 2021 gender pay gap sits at 16.5%.
The nationally reported gender pay gap is
14.4% in Ireland.
While there is no reported mean pay gap
for the Irish Financial Services Sector,
our position compares favourably to the
reported mean pay gap in the Financial and
Insurance Sector in the United Kingdom in
2021, which stood at 33.4%.
We acknowledge that we have more to
do to close our gap and have a dedicated
action plan in place as part of our Board
approved Diversity and Inclusion Strategy.
Wellbeing Offering
Financial
Pension Plan
Physical/Emotional/Mental Health
Health Screening
Income Protection Benefit
Eye Testing
Sick Pay Scheme
Staff Banking
Employee Assistance Programme For Colleagues
And Their Spouse, Adult Dependent Children And
Dependent Parents (Counselling Service)
Mental Health Training Addressing A Variety Of
Themes
Cycle To Work Scheme
A Range Of Health And Wellbeing Related Information
Sessions
Annual Travel Pass
Scheme
Employee Discount
Scheme
Lifestyle/Wellbeing Workshops
Work Station Assessments (Both In Office And At
Home)
Holiday Fund
Education Support
Paid Maternity And Paternity Leave
MyLife App
44
Permanent TSB Group Holdings plc - Annual Report 2021 “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.”
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 management of an Employee
Wellbeing Homepage on our internal
intranet, Connect;
• The mobilisation of Wellbeing Month
in October, with a series of events and
communications dealing with topics
such as pension planning, bereavement,
reflexology and more; and,
• The launch of the ‘At Your Own Pace
Race Series’ for a second year, a series
of virtual running events that engaged
our colleagues throughout Q3 and Q4,
while raising money for our Community
Fund Partners.
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.
Representative Body Relationships
And Employee Consultation
Permanent TSB operates under an
established partnership model with our
formally recognised Representative Bodies
– Unite, Mandate and SIPTU. In addition, we
meet with the Management Association,
which is affiliated to the 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 Representative Bodies.
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.
45
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Sustainability
(continued)
Championing Small Business &
Creating A Bank That Is Fit For The
Future
Overview
Our ambition is to be Ireland’s best personal and small business bank.
Best doesn’t necessarily mean the biggest, but it does mean the
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:
Relationship Net Promoter Score
A customer brand tracking survey
carried out in December 2021 indicated a
Relationship Net Promoter Score* (RNPS)
of +10, up 2 points on last year and placing
Permanent TSB in second position among
the retail banks in Ireland
A further €50 million investment in
technology infrastructure and digital
services
The introduction of a new Digital Current
Account
c.116 million logins on our digital channels
in 2021
Expansion of our Business Banking
offering through partnerships with Bibby
Financial Services, the Strategic Banking
Corporation of Ireland, Digital Business
Ireland and Worldpay
The first Irish Retail Bank to achieve the
Guaranteed Irish Symbol, recognising our
contribution to local communities across
the country
*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.
46
Permanent TSB Group Holdings plc - Annual Report 2021 Delivering High Quality Products
And A Superior Customer
Experience
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.
ensure that we can meet any increase in
demand into the future.
We are committed to continuing to
provide an essential service for our
customers and have kept our business
open throughout the pandemic, including
all of our branches and customer contact
centres. From time to time throughout
the year, the Bank experienced increased
spikes in customer calls, largely due to
the pandemic. Customer service wait
times have now normalised and we are
continuing to monitor call volumes to
Examples of our commitment to
delivering high quality products and a
superior customer experience include,
the ongoing delivery of our Voice of the
Customer Programme, our enhanced
focus on digital transformation, the
continued investment into our branch
network and our commitment to
supporting our Personal and Business
Banking customers.
Listening To Our Customers And
Acting On Their Feedback
Permanent TSB has in place 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
Executive Committee.
47
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Sustainability
(continued)
Investing In Digital Transformation
And Innovation
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.
In 2021, our customers continued to
increase their engagement with us
through digital channels:
• c.570,000 active users of Open24 Web
and App
• c.116 million logins on both Open24
Web and App
• 87% of our Term Lending applications
are now being completed online
• 100 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.
Permanent TSB has embarked
on a journey to deliver a Digital
Transformation Programme and in
2021 committed a further €50 million
investment in technology infrastructure
and digital services.
The Digital Banking Transformation
Programme is well underway and
significant progress was made last year
in enhancing our customers’ digital
offering. Actions taken include:
Digital Support For Our Customers
• Modernising our technology
architecture;
• Renovating our core banking
platforms;
• Enhancing security for customers
in our mobile app and online portal
services;
• Deploying new digital payment tools,
such as Apple Pay and Google Pay;
•
Introducing new digital customer
journeys, such as our Digital Current
Account and our ‘Own A Home’ Digital
Mortgage application journey; and,
• Leveraging Artificial Intelligence (AI)
technology within some of our key
customer journeys.
Digital Support Across Our Workplace
• Continuing to retrofit our branches to
include the latest in digital technology;
• Embedding of a new digital
collaboration platform to enable more
agile ways of working;
• Ongoing introduction of digital
workplace technology to support our
colleagues as they transition into our
new hybrid working model; and,
•
Introducing PITCH, our first bankwide
colleague innovation programme,
inviting new ideas and encouraging
new ways of thinking.
These new service offerings allow
us to support our customers further,
allowing them to bank in a way that is
more convenient, flexible and secure.
We look forward to building on this
momentum with further digital rollouts
planned for the year ahead, including:
the introduction of the next generation of
our mobile app and online banking portal;
and, the implementation of the first
release of our digital customer journey
for SMEs.
48
Permanent TSB Group Holdings plc - Annual Report 2021 Transforming Our Retail Network
At Permanent TSB, we believe that our
branches are a vital part of our business
model and the key to safeguarding their
future is to make them efficient and give
customers valid reasons for using them.
That’s less about cash in this day-and-age
and more about delivering digital services
and providing in-person support.
Over the last number of years, Permanent
TSB has committed more than €30 million
in funding to transform our branches,
allowing us to 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 ATM and SSBM technology.
In addition, the Bank has introduced
additional ATM functionality that allows
us to now accept cash and cheque
lodgements across many branches in our
network 24/7. The introduction of new ATM
technology is ongoing.
We remain committed to providing a
personal service for customers, and
combining that personal service with the
best that digital technology has to offer. We
look forward to building on this momentum
with further refurbishments planned this
year.
Introducing A New 4-Year Fixed Rate
Mortgage Product
In 2021, Permanent TSB was proud to
launch a new 4-year fixed rate mortgage
product for new customers.
The updated offering followed feedback
from our customers, who told us that
they wanted to choose the mortgage
that worked best for them based on their
preferences, and would be willing to forego
cash back in return for a lower rate. This
new offer still enables customers to benefit
from the 2% monthly cashback when
they pay their mortgage using an Explore
Current Account, but offers no lump sum
cash back at drawdown.
As part of rollout, the Bank introduced a
new rate options comparison document
into the sales journey in order to increase
transparency. The document advises
customers of the products available to
them and includes detail on important,
relevant information, in order to support
them in making more informed financial
decisions.
Supporting Our Business Banking
Customers
Permanent TSB’s 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 their business. Business Banking is a
key area of focus for Permanent TSB and
we have ambitious growth plans.
In 2021, we continued the expansion of
our business customer offering through
deepening our partnership with the
Strategic Banking Corporation of Ireland
(SBCI), committing €32 million in low-
cost loans under the Irish Government’s
Brexit Impact Loan Scheme for SMEs.
The additional funding brings our total
commitment to €82 million, to date.
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.
The partnership has proven successful
with more than €38 million in funding
drawn down during 2021.
Additional actions taken to support our
Business Banking customers last year
include:
• Collaborating with new partners to
enable us to broaden our service
offering, including Bibby Financial
Services for invoice finance and
Worldpay for merchant acquiring;
• Renewing our partnership with Digital
Business Ireland (DBI) for a second year,
supporting our SMEs to migrate their
business to online channels through the
supports offered by DBI;
• Sponsoring the 2021 National Digital
Business Ireland Awards;
• Supporting the Small Firms Association
(SFA) National Business Manufacturing
Category Award, encouraging innovation
and driving new business in what was a
challenging year; and,
• Ongoing recruitment of sector and
market expertise to help us further
support our customers.
In 2022, 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, propositions and services.
We will continue to improve our existing
Current Account proposition by focusing
on enhancing our Business customers’
payments capability online, with a view to
introduce additional capability in the first
quarter of the year.
To support the above, in 2021 the Bank
announced the creation of 300 new
positions across both senior and graduate
level in key growth areas, including:
Technology; Business Banking; Risk
Management; and, Data Analytics. These
new positions will support the rollout of
the next phase of the Bank’s Digital and
Business Banking Growth Strategy, as
it prepares for a significant expansion of
personal and business customers and
services over the coming years.
“In 2022, 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,
propositions and services.”
49
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 “In 2021, we were proud to
announce the renewal our
partnership with Digital
Business Ireland (DBI),
Ireland’s dedicated e-business
representative body, for a
second year.”
on a mission to help Ireland unlock
the financial, economic and social
opportunities that come from
sustainability, and aims to highlight
the opportunities that adapting to
sustainability practices will present for Irish
businesses.
The onset of the global pandemic has
elevated the sustainability agenda not only
in Ireland, but around the world. We see it
in the continued shift in consumer trends
and the growing demand for sustainable
products and services – not only in the
financial services industry, but more
broadly across other sectors. The Bank
was proud to support DBI with the launch
of their Sustainability Guide, encouraging
SMEs to harness the opportunity
sustainability brings to meet consumer
demand, while supporting them to grow
and scale their business in a responsible
way.
Guaranteed Irish
In 2021, Permanent TSB was proud to be awarded the Guaranteed Irish Symbol for
our contribution to local communities across the country.
Since 1974, Guaranteed Irish has been a business membership networking
champion in Ireland. Their network consists of 1,600 member businesses,
employing over 100,000 people across the country and generating an annual
combined Irish turnover of €10 billion. The Guaranteed Irish Symbol is only awarded
to businesses that contribute to Irish communities, make a commitment to Irish
provenance and support local jobs.
Throughout our 200 year history we have been committed to delivering exceptional
customer service and connecting with local communities. We are honoured to be
the first Retail Bank to have received the prestigious Guaranteed Irish Symbol.
We look forward to deepening our partnership with Guaranteed Irish through our
support of the inaugural Guaranteed Irish Business Awards in 2022, celebrating
businesses that support jobs, communities and provenance, while contributing to
Ireland, its people, and its economy on a national scale.
Sustainability
(continued)
Digital Business Ireland
In 2021, we were proud to announce
the renewal our partnership with Digital
Business Ireland (DBI), Ireland’s dedicated
e-business representative body, for a
second year.
Through the partnership, Permanent TSB
provides programme funding to support
Digital Business Ireland, as it continues to
work in tandem with its membership, to
help businesses grow, scale and digitally
transform, post-pandemic.
The ongoing collaboration between the
Bank and DBI will enable the agency to
further grow its extensive network of over
6000 members, providing an enhanced
suite of supports and opportunities.
These include its complimentary advisory
services, training events, and its annual
National Digital Awards programme, of
which Permanent TSB is the title sponsor.
Throughout the last year, we have built
a really special partnership with DBI
delivering supports for Irish Business
throughout the pandemic, including:
• c.800 businesses received training on
digital strategy which helped them to
turbo-charge their online growth;
• 5 bricks and mortar businesses were
able to pivot their business to a digital
sales channel through support provided
by Permanent TSB;
• 1000s of SMEs received advice and
support, through collaboration with
Digital Business Ireland affiliate
membership bodies;
• More than 300 businesses entered
the National Digital Business Ireland
Digital Awards, proudly supported by
Permanent TSB, with 26 winners and
runners-up spotlighted across three
categories; Website, Innovation and
People; and,
• The launch of the ‘Click Green, Buy
Nearby’ campaign to encourage
consumers to purchase from Irish
businesses during the holiday period.
We look forward to building on this
momentum and continuing to support Irish
businesses to scale and grow.
Sustainability Guide For SMEs
In 2021, Permanent TSB joined forces with
Digital Business Ireland (DBI) to publish a
Sustainability Guide for SMEs.
The Guide was produced in collaboration
with Sustainability Works, a consultancy
50
Permanent TSB Group Holdings plc - Annual Report 2021 Implementing organisation-wide
programmes, raising awareness and
providing ongoing education and training
to our people are critical ways in which we
mitigate against data protection risk. Data
Protection training was delivered to all
colleagues last year.
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).
“In today’s digital era, and
with the unique challenges
brought on by the global
pandemic, data protection
threat continues to evolve.
As such, protecting and
safeguarding our customers’
and our colleagues’ personal
data remains one of our key
priorities.”
Cyber Security
The Irish banking landscape is changing
rapidly and the Bank recognises the
fundamental role that we play in protecting
both our customers and our business
from online security threats. The Covid-19
environment increased threat levels, as
cyber-attackers continued to evolve their
techniques, tactics and targets. Led by our
Chief Technology Officer, our Technology
Team constantly monitor cyber security
threat levels, in addition to completing
horizon scanning.
Based on threat intelligence, the Bank
prioritises investment in cyber defences
and implements preventative measures
accordingly. Proactive planning, ongoing
vigilance and enhanced monitoring are key
to our approach to cyber safety within the
organisation.
In order to set out our commitments to
protect both customers and the Bank,
control requirements are defined within
Permanent TSB’s Information Security
Policy.
Additionally, to support our colleagues in
navigating the online world in a safe and
responsible way, the Bank continues to
invest in learning and development, with
compulsory cyber security training and
awareness campaigns delivered each year.
Data Protection
At Permanent TSB, building trust with
customers is at the heart of our purpose.
In today’s digital era, and with the
unique challenges brought on by the
global pandemic, data protection threat
continues to evolve. As such, protecting
and safeguarding our customers’ and our
colleagues’ personal data remains one of
our key priorities.
Our day-to-day business activities require
the processing of personal data. While
Data Protection is a fundamental right
under the EU Charter of Fundamental
Rights, protected by both European
and Irish legislation of which the Bank
complies, Permanent TSB has its own Data
Protection Policy in place which sets out
our approach.
Complying with the requirements and
principles of the Policy is a condition of
employment for our people. The Bank
has in place procedures to deal with data
security breaches and reports regularly to
the Executive Committee and Board.
51
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Sustainability
(continued)
Living Our Purpose & Ensuring
Strong Corporate Governance
The Board of Directors approved the Sustainability Strategy and ensures
Management have comprehensive plans in place for achievement of
the Bank’s sustainability 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 Executive
Committee and the Nominations, Culture and Ethics Board Committee
on a quarterly basis.
build trust with our customers and play an
active role in the communities in where we
live and work.
Colleague Conduct Policy
The Bank has in place a Colleague Conduct
Policy, an overarching framework which
includes the policies and procedures
that are integral to upholding 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 in the right way.
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
gives consideration to our Dignity and
Respect Code and our Equality through
Diversity and Inclusion Charter, recognising
the responsibility we have to respect
and protect the human rights of every
individual that works for us.
Code Of Ethics
The Bank has in place a Code of Ethics that
provides a general framework for expected
behaviour 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 people. The Bank has
in place procedures to deal with breaches
of the Policy and reports to the Executive
Committee and 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.
To further support the above, in 2021 the
Bank introduced the industry wide DECiDE
(Ethical Decision Making) Framework. This
was incorporated into Ethics training which
was delivered virtually to all employees last
year.
To support the above, the Bank has in
place a Sustainability Committee (SusCo)
which operates as a Sub-Committee of
the Executive Committee. The SusCo is
chaired by the Chief Human Resources
and Corporate Development Director and
includes representation from 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 Sustainability Team is in
place to provide leadership and coordinate
enterprise-wide activity, with the support
of the SusCo.
For more on Governance, please refer to
the Directors’ Report on page 96.
Operating Responsibly
Permanent TSB is committed to operating
responsibly and conducting our business
to the highest ethical and professional
standards. We are similarly committed,
under our Sustainability Strategy, to
rebuilding trust and playing an active role in
communities across the country.
We are focussed 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
52
Permanent TSB Group Holdings plc - Annual Report 2021 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.
In addition, the Bank has in place additional
requirements set out in other policy
documents that help to encourage the right
behaviour, including: Conflict of Interest;
Anti-Money Laundering (AML)/Terrorist
Financing; Sanctions and, Anti-Bribery and
Corruption.
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 Executive Committee and Board on a
half-yearly basis.
You can read more about our commitment
to Speak Freely in 2021 on page 23.
Human Rights
Permanent TSB recognise our
responsibility to respect the human rights
of every individual. 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 the
timely reporting of issues.
The Human Resources Team monitor
all nonadherences to the Code and the
Charter. Procedures are in place for dealing
with suspected human rights allegations
and reported instances are addressed on a
timely basis.
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
Executive Committee and 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
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 PEPs
and Sanctions screening in accordance
with our Policies.
Policy Governance
Permanent TSB is committed to mitigating
the environment, social and governance
risks associated with its business activities
and complying with all laws and regulations
in the jurisdictions in which it operates.
We manage our environment, social and
governance risk through the effective
implementation of our Sustainability
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.
Looking Ahead
As we look to continue to elevate our
impact and grow our programming through
2022 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 and the legislative
changes that shape non-financial
reporting.
We will provide annual updates on our
sustainability programming through this
Non-Financial Report.
53
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Financial Review
The Group’s financial performance has remained steady during 2021 with a focus on continuing to manage the quality of the Bank’s loan
book through deleveraging and maintaining strong capital and liquidity positions. As the Bank prepares for a step change in 2022 with
the purchase of certain elements of Ulster Banks Retail, SME and Asset Financing business in the Republic of Ireland there has been an
impact on the short term profitability of the Group.
As the Bank’s excess liquidity has continued to grow, it has resulted in downward pressure on the Group’s NIM through negative interest
charges. Further to this, the Bank has absorbed a significant amount of acquisition costs in 2021 on the Ulster Bank transaction. These
costs have resulted in the Bank making a loss in 2021.
The Bank continues to invest in its Opti-channel offerings resulting in continuing high operating costs, however, the Group has continued
to manage the costs line with a significant reduction in staff costs as a result of the successful voluntary severance programme over the
past two years.
The Bank’s asset quality has remained stable with strong provisioning across our loan books, this is evidenced through recent loan sales
at close to net book value. The Group’s impairment stack has also remained stable in 2021, with a flat charge reflecting caution around
latent uncertainties as the Irish economy recovers and enters the post-pandemic phase.
The Banking sector continues to be impacted by the low interest rate environment, which continues to pressure the NIM however the
Bank is well poised to improve its profitability significantly if interest rates increase in the future.
Ulster Bank Transaction
On 17 December 2021, the Bank entered into a legally binding agreement with NatWest Group Plc to acquire approximately €7.6 billion
of the Ulster Bank Retail, SME and Asset Finance business in the Republic of Ireland. The transaction is due to complete and control will
transfer in the second half of 2022, subject to necessary regulatory and shareholder approvals. As such, the business and assets have
not been recognised in the Group’s statement of financial position as at 31 December 2021. The Bank incurred costs of c€28m on the
transaction in 2021, these costs have been recognised as exceptional costs in the income statement.
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 2021.
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
• Material restructuring costs; and
• Material transaction, integration and restructuring costs associated with acquisitions (including potential acquisitions).
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 61.
Management has provided further information on IFRS and Non-IFRS measures including their calculation in the Alternative
Performance Measurements (APM) section on pages 264 to 270.
54
Permanent TSB Group Holdings plc - Annual Report 2021
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 and other non-recurring items, bank
levy and other regulatory charges)*
Bank levy and other regulatory charges
Underlying profit before impairment
Impairment write-back/(charge) on loans and advances to customers
Underlying profit/(loss) before exceptionals and other non-recurring items
Exceptional and other non-recurring items comprises:
Restructuring and other costs
Advisory costs incurred in relation to Ulster Bank transaction
Impairment arising from deleveraging of loans
Charges in relation to legacy legal cases
Loss before taxation
Taxation
Loss for the year
* See table 8 on page 61 for a reconciliation of underlying profit to operating profit on an IFRS basis.
Year ended
Year ended
Table
31 December
2021
31 December
2020
1
3
4
5
6
7
€m
313
35
13
361
(295)
(50)
16
1
17
(38)
(14)
(28)
19
(15)
(21)
1
(20)
€m
341
28
6
375
(280)
(49)
46
(155)
(109)
(57)
(31)
-
(26)
-
(166)
4
(162)
Management performance summary consolidated income statement - key highlights
• Total operating income has decreased by €14m during 2021 primarily due to:
- Net interest income decreased by €28m (8%) during 2021 to €313m. The reduction is mainly driven by deleveraging activity
resulting in lower interest income and a significant increase in negative interest on excess cash reserves due to an increase in
customer deposits.
- Net fees and commission income was €35m for the year ended 31 December 2021 compared to €28m at 31 December 2020. The
increase is mainly due to increased transactional spending during 2021.
- Net other income was €13m for the year ended 31 December 2021 compared to €6m at 31 December 2020. This is mainly driven
by revaluation increases and gains on sale of properties in possession totalling €6m. Other income also includes €3m generated as
a result of the early redemption of the retained note in the Glenbeigh 2018-1 securitisation in November 2021.
• Operating expenses (excl. exceptional items and other non-recurring items, bank levy and other regulatory charges) are €295m
for the year ended 31 December 2021 compared to €280m at 31 December 2020. The increase is driven by significant investment in
digital and strategic projects in 2021 and increased amortisation of capitalised digital costs from previous years. This is offset by a
reduction in staff costs stemming from the effects of the Group’s 2020 voluntary severance programme.
• Underlying profit before impairment has decreased by €30m since 31 December 2020. This is due to a decrease in total operating
income while operating expenses have increased.
•
Impairment write-back is €1m on loans and advances to customers for the year ended 31 December 2021, compared to a charge
of €155m for the year ended 31 December 2020. The reduction reflects that while the economic outlook has improved, uncertainty
remains and the bank retains a cautious outlook.
• Exceptional and other non-recurring items for the year ended 31 December 2021 of €38m, comprises €28m of costs related to the
Ulster Bank transaction, €14m in relation to restructuring and other costs relating to the Group's voluntary severance programme and
costs arising in respect of previous disposals of business and €15m relating to legacy legal cases. This is offset by a gain of €11m on
the deleveraging of loans due to the Glenbeigh III transaction and an €8m gain relating to write-back of provisions on past deleveraging
activity.
• Loss before tax of €21m for the year ended 31 December 2021 is €145m lower than the year ended 31 December 2020 primarily due
to the improvement in the macro-economic projections in the current period offset by the continued pressures on NII.
55
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Financial Review
(continued)
Net interest income
Net interest margin
€313m
1.51%
Table 1: Net Interest Income
Interest income
Interest expense
Net interest income
Net interest margin (NIM)
Year ended
Year ended
31 December
2021
31 December
2020
€m
€m
354
(41)
313
1.51%
382
(41)
341
1.73%
Interest income
Interest income of €354m for the year ended 31 December 2021 decreased by €28m (7%), compared to the prior year. This is mainly
driven by the impact of reduced income on loans and advances to customers as a result of deleveraging activity in 2020 as well as the
impact of rate cuts.
Interest expense
Interest expense remained in line with the prior year. Deposit costs reduced by €14m as a result of active management of the deposit
funding costs through a reduction in deposit rates. This was offset by a significant increase in negative interest of €10m as a result of
excess liquidity as well as additional wholesale funding costs of €5m relating to increased debt issuances in 2021.
Table 2.1: Average balance sheet
Year ended 31 December 2021
Year ended 31 December 2020
Average
Balance
€m
Interest
€m
Average Yield/
Rate
%
Average
Balance
€m
Interest
€m
Average Yield/
Rate
%
Interest-earning assets
Loans and advances to customers
Debt securities and derivative assets
Total average interest-earning assets
Negative interest earning assets
Loans and advances to banks
Total average negative interest earning assets
Interest earning assets
Interest-bearing liabilities
Customer accounts
Debt securities in issue
Lease liabilities
Subordinated Liabilities
Total average interest bearing liabilities
Negative interest earning liabilities
Deposits by banks
Total average negative interest earning liabilities
Interest-bearing liabilities
Total average equity attributable to owners
Net Interest Margin
14,258
2,533
16,791
3,940
3,940
20,731
18,606
705
31
155
19,497
134
134
19,631
1,853
1.51%
346
7
353
(14)
(14)
339
14
8
-
5
27
(1)
(1)
26
2.43%
0.28%
2.10%
(0.36%)
(0.36%)
1.64%
0.08%
1.13%
-
3.23%
0.14%
(0.75%)
(0.75%)
0.13%
15,083
2,410
17,493
2,087
2,087
19,580
17,689
863
37
-
18,589
10
10
18,599
1,961
1.73%
371
11
382
(4)
(4)
378
26
11
0
-
37
-
-
37
2.46%
0.46%
2.18%
(0.19%)
(0.19%)
1.93%
0.15%
1.27%
-
-
0.20%
-
-
0.20%
* The above table is based on the average balances of assets and liabilities and will not agree to gross interest income and gross interest expense. The overall interest amount
will agree to NII.
56
Permanent TSB Group Holdings plc - Annual Report 2021
Net interest margin
NIM decreased by 22bps to 1.51% for the year ended 31 December 2021 compared to 1.73% for the prior year. The Group’s NIM has
mainly reduced as a result of deleveraging activities in 2020 and 2021 and the low interest rate environment. This has impacted yields
on the new treasury assets and growth in liquid assets resulted in elevated negative interest charges on deposits with the CBI. This has
been partially offset by the lower deposit funding costs.
The main drivers for the 22bps reduction in the NIM include:
Table 2.2: Volume drivers
Increase in volume of excess liquidity
Impact from net deleveraging
Yield drivers
Net impact from deleveraging
Reduction in interest income as a result of mortgage rate cuts
Increased cost of excess liquidity
Reduced income from treasury assets due to the lower interest rate environment
Reduction in Consumer Finance Lending
Increase cost of Tier 2 issuance
Other adjustments
Reduction in NII during the year
Saving through deposit rate cuts
Wholesale funding
Increase in NII during the year
Overall net reduction NII
Overall movement in the NIM
(€m)
Impact on NIM
(bps)
1,853
(825)
(3)
(6)
(€m)
(13)
(5)
(10)
(3)
(3)
(5)
(5)
(44)
12
4
16
(28)
bps
5
(8)
(4)
(5)
-
(3)
(7)
(22)
7
2
9
(13)
(22)
Yield/Average interest earning assets
• The average balance of loans and advances to customers reduced by €825m mainly due to deleveraging activity in 2020 (Glenbeigh II)
and 2021 (Glenbeigh III). There was also a reduction in the average Consumer Finance balances in 2021 due to lower consumer finance
lending during the pandemic. This is partly offset by increases in origination of new mortgage lending business.
• The yield on loans and advances to customers decreased in the year due to rate reductions on certain mortgage products, an increase
in deferred acquisition costs and provisions relating to legacy business issues. This is partly offset by an increase in yield due to the
sale of lower yielding loans in the capital accretive Glenbeigh II loan sale in 2020.
• The average balance of loans and advances to banks increased by €1,853m during the year. This balance consist of excess cash
reserves with the CBI, its movement is driven primarily by increases in customer deposits along with proceeds from deleveraging
activity.
• The yield on loans and advances to banks decreased during the year due to the increase in excess cash reserves with the CBI. This
increased the balance subject to negative interest rates in the year.
• The yield on debt securities reduced during the year due to higher yielding debt securities being replaced by lower yielding assets due
to the lower for longer interest environment.
Yield/Average interest bearing liabilities
• The yield on customer accounts decreased during the year despite the average balance increasing by €917m in the year. The
reduction in yield is due to rate cuts on retail deposits.
• The average balance of subordinated liabilities increased during the year due to the issuance of €250m of Tier 2 notes in May 2021.
Average equity attributable to owners
• The average equity attributable to owners decreased in the year mainly due to the call of the AT1 security issued in 2015 on its first call
date 1 April 2021.
57
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Financial Review
(continued)
Net fees and
commission income
€35m
Table 3: Net fees and commissions income
Fees and commission income
Retail banking and credit card fees
Brokerage and insurance commission
Other fees and commissions income
Fees and commission income
Fees and commission expense*
Net fees and commission income
Year ended
Year ended
31 December
2021
31 December
2020
€m
€m
52
11
1
64
(29)
35
43
9
1
53
(25)
28
* Fees and commission expenses primarily comprises retail banking and credit cards fees.
Net fees and commission income was €35m for the year ended 31 December 2021 compared to €28m at 31 December 2020. The
increase is mainly due to increased transactional spending during 2021.
Net other income
€13m
Table 4: Net other income
Other income
Net other income
Year ended
Year ended
31 December
2021
31 December
2020
€m
13
13
€m
6
6
Net other income was €13m for the year ended 31 December 2021 compared to €6m at 31 December 2020. This is mainly driven
by a revaluation gain on properties in possession during the year and gains on sale of properties in possession totalling €6m and the
recognition of a gain of €3m on the early redemption of the retained note in the Glenbeigh 2018-1 securitisation in November 2021.
58
Permanent TSB Group Holdings plc - Annual Report 2021
Total operating
expenses (1)
€345m
Adjusted cost
income ratio
82%
(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 and impairment 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
Year ended
Year ended
31 December
2021
31 December
2020
€m
€m
115
14
13
142
106
248
21
26
295
22
28
345
96%
82%
2,236
2,286
122
15
14
151
92
243
22
15
280
24
25
329
88%
75%
2,435
2,429
* 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
Staff costs
Total staff costs have decreased by €9m (6%) from €151m for the year ended 31 December 2020 to €142m for the year ended 31
December 2021 primarily as a result of the staff cost savings due to the Group’s 2020 voluntary severance programme.
General and administrative expenses
General and administrative expenses increased by €14m for the year ended 31 December 2021 to €106m. Other general and
administrative expenses include legal and professional fees, technology costs, property costs and business as usual administrative
expenses. The year on year increase is primarily due to the Group’s focus on accelerating spending on digital investments.
Depreciation of property and equipment
Depreciation of property and equipment is in line with the charge for the year ended 31 December 2020.
Amortisation of intangible assets
The increase in the amortisation expense of €11m 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 from previous years.
Adjusted cost income ratio
Operating costs (excluding exceptional and other non-recurring items and regulatory charges) of €295m and operating income of €361m
for the year ended 31 December 2021 led to an adjusted cost income ratio of 82% for 2021, compared to an adjusted cost income ratio of
75% for the year ended 31 December 2020. The increase in adjusted cost income ratio was due to both lower income in the period as well
as an increase in costs due to ongoing investment.
59
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Financial Review
(continued)
Bank levy and other regulatory charges
Bank levy and other regulatory charges amounted to €50m for the year ended 31 December 2021. Other regulatory charges include
€17m for the Deposit Guarantee Scheme (DGS) (31 December 2020: €15m). The Single Resolution Fund (SRF) costs for the year ended 31
December 2021 was €4m (31 December 2020: €5m).
Impairment
€(1)m
Table 6: Impairment
Total impairment (write-back)/charge on loans and advances to customers
Year ended
Year ended
31 December
2021
31 December
2020
€m
(1)
€m
155
The impairment write-back is €1m on loans and advances to customers for the year ended 31 December 2021, compared to a charge of
€155m for the year ended 31 December 2020. The reduction reflects that while the economic outlook has improved, uncertainty remains
and the bank retains a cautious outlook.
Exceptional and other
non-recurring items
€38m
Table 7: Exceptional and other non-recurring items
Restructuring and other costs
Advisory costs incurred in relation to Ulster Bank transaction
Impairment arising from deleveraging of loans
Charges in relation to legacy legal cases*
Exceptional and other non-recurring items
*Included in IFRS administrative, staff and other expenses.
Year ended
Year ended
31 December
2021
31 December
2020
€m
14
28
(19)
15
38
€m
31
-
26
-
57
Exceptional and other non-recurring items as viewed by Management for the year ended 31 December 2021 of €38m comprise:
Restructuring and other costs
Restructuring and other costs of €14m relate to costs incurred as a result of the phase 2 of the Group’s voluntary severance programme
and costs arising in respect of a previous disposal of a business.
Advisory costs incurred in relation to Ulster Bank business
Advisory costs of €28m relate to costs incurred on advisory fees in relation to the Ulster Bank transaction.
Impairment arising from the deleveraging of loans
Impairment write-back arising from deleveraging of loans for the year ended 31 December 2021 was €19m, of which €11m was as a
result of the Glenbeigh III loan transaction as well as a €8m write-back of provisions in respect of legacy deleveraging activities.
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.
60
Permanent TSB Group Holdings plc - Annual Report 2021
Table 8: Reconciliation of underlying profit to operating loss on an IFRS basis
Operating loss per IFRS income statement
Other exceptional items in IFRS total operating expenses
Exceptional impairment in IFRS credit impairment write-back/charge
Non-IFRS adjustments
Charges in relation to legacy legal cases*
Underlying profit/(loss) per management income statement
*
Included in IFRS administrative, staff and other expenses
Summary consolidated statement of financial position
Year ended
Year ended
31 December
2021
31 December
2020
€m
(21)
42
(19)
15
17
€m
(166)
31
26
-
(109)
Table
31 December
2021
31 December
2020
€m
€m
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)
Net stable funding ratio (minimum 100%)(2)
Loan to deposit ratio (3)
Return on equity (4)
9
11
12
13
14
15
12,456
1,325
13,781
143
332
14,256
2,494
5,485
22,235
7,104
10,637
1,348
19,089
524
833
20,446
1,789
22,235
274%
170%
75%
0.97%
(1) Calculated based on the Commission Delegated Regulation (EU) 2015/61.
(2) Defined as the ratio of available stable funding to required stable funding.
(3) Defined as the ratio of loans and advances to customers compared to customer accounts as presented in the statement of financial position.
(4) Defined as (loss)/profit for the year after tax (before exceptionals and other non-recurring items) as a percentage of total average equity.
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%
160%
79%
(5.4%)
61
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Financial Review
(continued)
Summary consolidated statement of financial position - key highlights
The Group maintains a strong capital, liquidity and funding position.
The Group has significantly reduced NPL balances over the past three years and continues to invest in a high quality and resilient asset
base.
• Loans and advances to customers (net of provisions) were €14,256m as at 31 December 2021, an increase of €43m from €14,213m
at 31 December 2020, which is mainly due to net new lending in 2021, offset by deleveraging activity from the Glenbeigh III transaction.
• Customer accounts were €19,089m at 31 December 2021, an increase of €1,050m from €18,039 at 31 December 2020. 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 €5,485m as at 31 December 2021, an increase of €1,295m from €4,190m at 31 December 2020,
which is due to increased balances held with the CBI arising from net issuances of capital instruments and higher customer account
balances and a loan sale receivable for the Glenbeigh III transaction.
Loans and advances to customers
Table 9 (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
* New lending during the year is stated net of repayments during the year.
Table 9 (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 and fair value adjustments
Provision for impairment losses
Total loans and advances to customers
Total loans and advances to
customers (net)
€14,256m
31 December
2021
31 December
2020
€m
€m
14,855
1,956
(1,607)
(65)
(394)
14,745
16,389
1,332
(1,418)
(53)
(1,395)
14,855
31 December
2021
31 December
2020
€m
€m
12,568
1,623
14,191
196
358
14,745
817
115
(604)
14,256
12,338
2,009
14,347
181
327
14,855
1,128
86
(728)
14,213
Total loans and advances to customers (after provisions for impairment) of €14,256m at 31 December 2021 increased by €43m when
compared to the year ended 31 December 2020. This increase is mainly due to the strong performance of new business in the year to 31
December 2021 offset by deleveraging activity from the Glenbeigh III transaction.
New lending has increased by €624m at 31 December 2021 from €1,332m at 31 December 2020 to €1,956m, as a result of increased
mortgage lending in 2021.
62
Permanent TSB Group Holdings plc - Annual Report 2021
Total new lending (gross)
€2,051m
Total new lending in the financial year 2021 amounted to €2,051m, an increase of 44% from 31 December 2020. The increase largely
reflects the increase in mortgage lending after the uncertainty in 2020 due to the Covid-19 pandemic. The Group’s mortgage lending in
FY21 was €1,859m, representing a 45% year on year increase. The Group’s mortgage drawdown market share is up from 15.3% in 2020
to 17.8% in 2021, indicating that the Group’s growth (+45%) out-stripped broader mortgage market growth (+25%).
The Irish mortgage market re-bounded in 2021 after 2020 was severely impacted by the Covid-19 pandemic. Pent up demand saw a
surge in applications in the market in late 2020 and momentum continued into 2021. Mortgage drawdowns in the market grew by 25% in
2021, increasing from €8.4bn in 2020 to €10.5bn in 2021. Housing supply however continued to be impacted by the restrictions imposed
to halt the spread of Covid-19, particularly in H1 2021. There were 20.4k completions in 2021, broadly in line with the 20.5k completions in
2020.
SME Lending in 2021 is €98m, which is a 104% increase compared with 2020. The increase is largely driven by lending through the
Strategic Banking Corporation of Ireland (SBCI) Future Growth Loan Scheme that launched in late 2020. The Group will participate in the
SBCI Brexit Impact Loan Scheme in 2022.
The Group recorded gross new Term lending of €93m in 2021. This is a 4% decrease compared to 2020, largely driven by reduced
consumer demand.
NPLs
€817m
Table 10: NPLs
NPLs as a % of gross
loans
5.5%
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
2021
31 December
2020
€m
€m
420
339
44
14
817
5.5%
28
845
5.7%
658
418
35
17
1,128
7.6%
30
1,158
7.8%
* 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 as a percentage of gross loans was 5.5% at 31 December 2021, a decrease of 2.1% from 7.6% at 31 December 2020 driven
primarily by the deleveraging of the Glenbeigh III portfolio in the second half of 2021.
63
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Financial Review
(continued)
Debt securities
Table 11: Debt securities
Government bonds
Corporate bonds
Total debt securities
31 December
2021
31 December
2020
€m
€m
2,434
60
2,494
2,477
106
2,583
There were no acquisitions of debt securities in the year ended 31 December 2021. During the year the Glenbeigh securitisation 2018-1
DAC was wound up. This resulted in the Group’s retained note in this securitisation being called in November 2021. The gain on the call
was recognised in Other income (€3m). The remaining movement is due to the amortisation of Residential Mortgage Backed Securities
(RMBS) securities held.
Remaining asset balances
Table 12: Remaining asset balances
Loans and advances to banks
Assets classified as held for sale
Other assets
Total
31 December
2021
31 December
2020
€m
€m
4,174
28
1,283
5,485
3,312
31
847
4,190
Loans and advances to banks has increased by €862m during 2021 primarily due to increased balances on customer accounts and the
tier 2 capital issuance in Q2 2021.
Other assets increased due to the amount due from the purchaser of the Glenbeigh III loan transaction.
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
€19,089m
Table 13: Customer accounts
Current accounts
Retail deposits
Total retail deposits (including current accounts)
Corporate deposits
Total customer deposits
Loan to deposit ratio*
31 December
2021
31 December
2020
€m
€m
7,104
10,637
17,741
1,348
19,089
75%
5,779
10,516
16,295
1,744
18,039
79%
*Defined as the ratio of loans and advances to customers compared to customer accounts as presented in the SOFP.
At 31 December 2021, customer accounts increased to €19,089m from €18,039m at 31 December 2020. Customer account growth
accelerated during the pandemic lockdowns as a result of a reduction in consumer spending.
Retail deposits balances remained broadly flat from the prior year reflecting the stable funding source for the Group.
64
Permanent TSB Group Holdings plc - Annual Report 2021
Debt securities in issue
€524m
Table 14: Debt securities in issue
Bonds and medium-term notes
Non-recourse funding
Debt securities in issue
31 December
2021
31 December
2020
€m
352
172
524
€m
351
458
809
Debt securities in issue decreased by €285m for the year ended 31 December 2021. The reduction in non-recourse funding is a result of
natural amortisation of mortgage backed securitisations as well as the winding up of a securitisation in October 2021. There has been no
material movement in bonds and medium-term notes in 2021.
The Group continues to hold sufficient liquidity resulting in a decreased requirement for secured funding.
Remaining liabilities
Table 15: Remaining liability balances
Deposits by banks
Accruals
Current tax liability
Provisions
Other liabilities
Subordinated liabilities
Total
31 December
2021
31 December
2020
€m
347
8
1
55
170
252
833
€m
-
2
1
77
107
-
187
The remaining liability balances increased by €646m in the year ended 31 December 2021 primarily due to the Tier 2 capital issuance of
€250m in May 2021 and an increase in sale and repurchase agreements funding during the year.
Funding Profile
The Group’s funding profile for the year ended 31 December 2021 is broadly in line with the position at year end 31 December 2020. The
Group is predominantly funded by retail deposits, which the Group considers a stable source of the funding. Refer to note 37 for further
details on funding profile.
While the Group is significantly funded by customer accounts, it is cognisant to diversify and optimise its funding base and continuing to
manage the NIM in the low interest rate environment in which the Group operates.
65
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
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.
Regulatory Framework
The Group’s regulatory capital
requirements, are contained within EU
Regulation 575/2013 (‘the CRR’), which is
directly applicable in all EU countries and
Directive 2013/36/EU (‘CRD IV’) which was
transposed into Irish law through S.I. No.
158 of 2014, as well as various technical
standards and EBA guidelines. Under these
requirements, the Group’s total capital for
Pillar 1 must be adequate to cover its credit,
market and operational risks, including
capital buffers. The Group must also hold
sufficient capital to cover the additional
risks identified under the Pillar 2 process
including any add-on’s imposed on the
Group as part of the Supervisory and
Evaluation Process (SREP) assessment.
Implementation of the CRR and CRD IV
commenced on a phased basis from 1st
January 2014. The CRD IV regulations
include transitional rules which 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 Deferred Tax Asset
(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 CRR/CRD IV rules and
subsequent clarifications, including ECB
regulation 2016/445 on the exercise of
options and discretions.
Regulatory Capital Developments
The revised Capital Requirements
Regulation (‘CRR 2’) and amendments to
the Directive (‘CRD V’) came into effect
during 2021. The CRR2 amendments
include but are not limited to:
• A minimum 3% Leverage Ratio
requirement; and
66
• A revised Large Exposure limit which is
now capped at a maximum of 25% of the
Bank’s Tier1 Capital rather than eligible
own funds.
Regulatory capital requirements
The Group’s 2021 capital requirements
remain unchanged relative to the prior year
as set out below.
The amendments are in addition to those
changes introduced in April 2020 as part of
the “CRR quick-fix” which brought forward
certain CRR 2 changes in light of the
challenges posed to the banking sector by
the Covid-19 crisis.
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 deduction and the revision of the
SME supporting factors.
In October 2021, the European Commission
published the long awaited legislative
proposal, in the form of amendments to
the CRR and CRD, to implement the final
revisions to the Basel Framework which,
amongst other things, will see changes
to the Credit Risk and Operational Risk
capital requirements frameworks. The
Commission expects the new rules will
ensure that EU banks become more
resilient to potential future economic
shocks while contributing to Europe's
recovery from the Covid-19 pandemic
and the transition to climate neutrality.
The expected application date for the
implementation of these changes is 1st
January 2025.
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 crisis
The CBI continues to provide flexibility to
banks under its direct supervision when
meeting its capital requirements. As well
as allowing banks to operate temporarily
below the level of capital defined by the
Pillar 2 Guidance (“P2G”) and the Capital
Conservation Buffer (“CCB”), the CBI
recently reiterated that the reduction
of the Countercyclical Capital Buffer
(“CCyB”) rate on Irish exposures to 0%
at the beginning of April 2020 remains
appropriate at year end.
The Group’s Common Equity Tier1
(CET1) minimum requirement of 8.94%
is comprised of a Pillar 1 Requirement of
4.5%, Pillar 2 Requirement (P2R) of 1.94%,
and a Capital Conservation Buffer (CCB) of
2.5%. The Group’s Total Capital minimum
requirement of 13.95% consists of a Pillar
1 CRR requirement of 8%, P2R of 3.45%,
CCB of 2.5%.
These requirements exclude Pillar 2
Guidance (P2G) which is not publicly
disclosed.
Capital ratios at 31 December 2021
As at 31 December 2021, the regulatory
transitional CET1 ratio was 16.9% (31
December 2020: 18.1%) and Total Capital
ratio 21.8% (31 December 2020: 21.0%),
exceeding the Group’s 2021 minimum
requirements of 8.94% and 13.95%
respectively.
The reduction in the transitional CET1
ratio (-1.2%) in the year is primarily due
to the transitional phasing of the Groups
Deferred Tax Assets, the prudential
phase-in of IFRS9, and loss in the year
primarily driven by exceptional spend on
Ulster Bank transaction and restructuring-
related exceptional costs. This was partially
offset by an increased capital add-back
related to intangible software assets
in use reflecting the investment in the
Bank's Digital Banking Programme. The
Commission Delegated Regulation (EU)
2020/2176 published at the end of 2020
allows intangible software assets in use
to be amortised over 3 years rather than
deducted in full from CET1 capital.
In Q2 2021 the Bank successfully executed
a Tier 2 subordinated debt issuance of
(+€250m incl. c.€1m transaction costs).
Following regulatory approval, the Tier 2
instrument has been recognised in the
Groups Own Funds, increasing the Total
Capital ratio by c.+3.0%.
This was partially offset by the Q1 2021
redemption and derecognition of the AT1
Securities (€125m issued in April 2015).
Permanent TSB Group Holdings plc - Annual Report 2021
In Q4 2021 the Bank successfully recalled the loan-backed securities under the Glenbeigh I loan disposal, resulting in an uplift of
c.+30bps in transitional CET1 ratio. In the same quarter, the Bank also successfully executed a €390m loan disposal known as Glenbeigh
III, at a gain of €11m before tax, resulting in an uplift of c.+60bps in the transitional CET1 ratio, the majority of which (+50bps) will be
recognised in Q1 2022 when the remaining proceeds are received and the underlying risk weighted assets are derecognised.
On a fully loaded basis, the CET1 ratio was 14.7% (31 December 2020: 15.1%) and the Total Capital ratio was 19.5% (31 December 2020:
18.2%).
The December 2021 leverage ratio on a fully loaded and transitional basis amounted to 6.3% and 7.1% respectively (31 December 2020:
7.1% and 8.2%). The movement in the leverage ratio was primarily due to a reduction in Tier 1 capital, driven by the redemption and
derecognition of the 2015 AT1 securities and increased exposures through Balance Sheet growth in the year.
The following table outlines the Group’s regulatory (transitional) and fully loaded capital positions under CRDIV/CRR.
Table 16: 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 December 2021
31 December 2020
Transitional
Fully Loaded
Transitional
Fully Loaded
€m
€m
€m
€m
1,457
123
1,580
290
1,870
1,265
123
1,388
290
1,678
1,535
190
1,725
54
1,779
1,282
198
1,480
59
1,539
8,600
8,603
8,480
8,471
16.9%
18.4%
21.8%
7.1%
14.7%
16.1%
19.5%
6.3%
18.1%
20.3%
21.0%
8.2%
15.1%
17.5%
18.2%
7.1%
* The amount of Additional Tier 1 (AT1) Capital and Tier 2 instruments included within the 2020 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. These restrictions do not apply in 2021 as the current AT1 and Tier2 instruments are
issued out of the Holding Company (HoldCo)
** The leverage ratio is calculated by dividing Tier 1 Capital by gross balance sheet exposure (total assets and off-balance sheet exposures).
The following table reconciles the statutory shareholders’ funds to the Group’s regulatory (transitional) and fully loaded CET1 Capital.
Table 17: CET1 Capital
Total Equity
Less: AT1 Capital
Adjusted Capital
Prudential Filters:
Intangibles
Deferred Tax
IFRS 9 (Transitional adjustment)*
Others
Common Equity Tier 1
*
The CET1 transitional impact to the Group as a result of EU Regulation 2017/2395 mitigating the impact of the introduction of IFRS 9 own funds.
31 December 2021
31 December 2020
Transitional
Fully Loaded
Transitional
Fully Loaded
€m
€m
€m
€m
1,788
(123)
1,665
(53)
(249)
94
-
1,457
1,788
(123)
1,665
(53)
(347)
-
(1)
1,265
1,951
(245)
1,706
(72)
(213)
122
(8)
1,535
1,951
(245)
1,706
(72)
(343)
-
(9)
1,282
67
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Capital Management
(continued)
Transitional (regulatory) capital
The December 2021 transitional CET1 capital reduced by (€78m) to €1,457m (31 December 2020: €1,535m). This reduction was
primarily due to the phasing of the prudential filters (-€64m), loss in the year (-€20m) and other reserves movements (-€13m) (incl. AT1
Distributions) partially offset by an increased capital add-back in respect to intangible software assets (+€19m).
Fully loaded capital
The December 2021 fully loaded CET1 capital reduced by (€17m) to €1,265m (31 December 2020: €1,282m). This reduction was
primarily due to loss incurred in the year (-€20m), and other reserves movements (incl. AT1 Distributions) (-€16m) partially offset by an
increased capital add-back of intangible software assets (+€19m).
Risk weighted assets
The following table sets out the Group’s risk weighted assets (RWAs) at 31 December 2021 and 31 December 2020.
Table 18: Risk weighted assets
RWAs
Credit risk on customer loans
Counterparty credit risk*
Securitisation risk**
Operational risk
Other credit risk***
Total RWAs
31 December 2021
31 December 2020
Transitional
Fully Loaded
Transitional
Fully Loaded
€m
€m
€m
€m
6,823
380
12
639
746
8,600
6,823
380
12
639
749
8,603
6,958
137
165
672
548
8,480
6,958
137
165
672
539
8,471
* Counterparty credit risk includes Glenbeigh III receivable (RWAs €240m) Treasury, Repo & CVA RWAs
** Redeemed the loan-backed securities relating to the Glenbeigh I loan disposal (RWAs €160m)
***Other credit risk consists primarily of Property and Equipment and Prepayments
The December 2021 RWAs increased by €120m (on a transitional basis) to €8,600m (31 December 2020: €8,480m). This was primarily
driven by an increase in Credit Risk (+€105m) due to new lending volumes and Other RWAs (+€198m) partially offset by a reduction in
Securitisation RWAs (-€153m) primarily attributable to the recall of the Glenbeigh I V-Note and Operational Risk RWAs (-€33m).
The increase in Counterparty Credit Risk (+€243m) is primarily due to the Glenbeigh III receivable (which settled in February 2022) and is
offset by a decrease in Credit Risk due to the derecognition of the underlying mortgage loans from the balance sheet.
68
Permanent TSB Group Holdings plc - Annual Report 2021
Risk Management
The information in Section 3.1, 3.2 and 3.3
on pages 84 to 95 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 167. 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 (ERMF)
Within the Internal Control Framework
(ICF) the Enterprise Risk Management
Framework (RMF) is the Group’s
overarching Risk Management Framework
articulating the management process
governing risks within the following key
risk categories: Capital Adequacy Risk;
Liquidity and Funding Risk; Market Risk;
Credit Risk; Strategic Business Risk;
Operational Risk; Information Technology
(‘IT’) Risk; Model Risk; Regulatory
Compliance Risk (including AML); 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 risks 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.
not decomposed into individual business
unit-specific statements of risk appetite.
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 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.
Risk Appetite and Strategy
The Group’s RAS documents are owned
by the Board, supported by the Chief Risk
Officer (CRO), and describe the Group’s risk
appetite at the enterprise level. The RAS
serves as a boundary to business, support,
and control function leaders; enables 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). This
further outlines key risk indicators (KRIs)
which 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 focused on the Republic of
Ireland. In light of this, the risk appetite is
The responsibilities set out below relate to
risk management activities. Further roles
and responsibilities are documented in the
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 which 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 gives
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 (NEDs) whose role
is to support the Board in overseeing
risk management and overseeing and
challenging Senior Management’s
decisions.
• Management Committee: 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.
•
Independence Safeguards: The
risk governance structure features
safeguards to protect the independence
of key relationships between the
Senior Executives and the Board. In
this respect ExCo may not override
or modify decisions of the Asset and
Liabilities Committee (ALCO), Group
Risk Committee (GRC) or the Group
Credit Committee (GCC), but may appeal
69
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Risk Management
(continued)
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 is appropriate to the Group’s resources and business
model. This is reviewed on a regular basis and the feedback of the committee members sought.
The diagram below depicts the Group’s risk governance structure.
Risk Governance Structure
Board of Directors
Board Nominations, Culture
and Ethics Committee
Board Risk and Compliance
Committee (“BRCC”)
Board Audit
Committee (“BAC”)
Board Remuneration
Committee
Group Executive
Committee (“ExCo”)
Assets and Liability
Committee (“ALCO”)
Group Risk
Committee (“GRC”)
Sustainability
Committee
Customer Growth
Committee
Operational Risk Management
Committee (“ORMC”)
Group Credit
Committee (“GCC”)
Board Level Committees
Management Level Committees
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.
70
Permanent TSB Group Holdings plc - Annual Report 2021
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 and Resolution 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, 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 ExCo
with delegated responsibility for Group-wide risk management issues. The ExCo is the
ultimate point of escalation for Group-wide specific issues saved 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 colleagues 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
Chief Executive Officer (CEO) who is
accountable to the Board.
71
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Risk Management
(continued)
Committee/Role
Key Responsibilities
Assets and Liabilities Committee (ALCo)
ALCo reviews, and is responsible for
overseeing, all activities relating to Asset
& Liability Management (ALM), Treasury
and Market Risks (including Liquidity Risk,
Interest Rate Risk, Treasury Counterparty
risk and Foreign Exchange (FX) Risk), and
Capital Management. ALCo 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 ExCo.
Group Risk Committee (GRC)
GRC is an ExCo sub-committee chaired by
the CRO, who has unfettered access to the
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 ALCO.
Customer Growth Committee
Customer Growth Committee is a sub-
committee of ExCo and is chaired by the
Retail Banking Director. The purpose of
the Committee is to support commercial
growth while ensuring that fair customer
outcomes remain at the forefront of
decision making, in the context of building
customer trust and executing a purpose-
led, customer growth strategy.
Key activities of the ALCo include, but are not limited to:
• Maintaining, monitoring and enforcing adherence to the Group’s Risk Management
Frameworks and Policies for all Liquidity, Market, and Capital related risks;
• Overseeing and monitoring the ALM, Treasury and Market and Capital 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 and Capital Risk profiles
against set limits and propose remediation plans to restore Risk Appetite where
required;
• Monitoring the minimum capital requirements set by the Group’s Regulators, and
the Basel III minimum Solvency rules, as implemented by the CRD IV Directive and
Regulations;
• Approve Funds Transfer Pricing (FTP) methodology, and ensuring such process is
economically fair, transparent and incentivises appropriate behaviour in accordance
with FTP Policy; and
• Responsible for overseeing Resolution Planning activity which includes delivering
prescribed templates/annual submissions.
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 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; and
• Maintaining, monitoring and enforcing adherence to the ERMF, for all key risk
categories excluding those which fall directly under the remit of the ALCo.
To ensure that consideration of the customer is a key part of its decision making process,
the Committee allocates sufficient time to facilitate meaningful discussions of the
customer, with the aim of improving customer experience, delivering better outcomes
and enabling relationship growth.
It has a number of key remits, namely to:
• Prioritise opportunities, resources and capabilities in order to deliver sustainable
commercial growth;
• Provide guidance to Executive Management (including ExCo and ExCo sub-
committees) on business and commercial proposals which may have a material impact
on customers and on the endorsement of such proposals;
• Review and action, where required, customer performance indicators;
• Review relevant significant customer events, issues and complaints, when escalated
by relevant sub-committees and forums, in order to provide guidance on significant
issues/events, and in order to delegate appropriate action by relevant sub-committees;
• Review and action, where required, Conduct Risk indicators that exist within the Bank
against the Board-approved Conduct Risk Appetite and Principles; and
• Serve as the central oversight body for all significant customer matters ensuring fair
treatment of customers.
72
Permanent TSB Group Holdings plc - Annual Report 2021 Committee/Role
Key Responsibilities
Sustainability Committee (SusCo)
Led by the Board, and on delegated
authority from the ExCo, the Sustainability
Committee is in place to provide
oversight of all activity relating to the
Environmental, Social and Governance
(ESG) factors that are core to operating
our business in a responsible and
sustainable way. SusCo is chaired by the
Corporate Development and HR Director
and includes representation from both
ExCo members, and Senior Leaders
representing business units across the
organisation.
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 GRC.
The Sustainability Committee is responsible for the delivery of Permanent TSB’s
Sustainability Strategy by ensuring that there is sufficient governance, oversight,
and challenge of activity across the key area of focus of the Bank’s Sustainability
Programme.
Key activities of SusCo include, but are not limited to:
• Supporting the execution of the Bank’s Sustainability Strategy by ensuring that there
is a comprehensive plan in place to deliver on strategy, objectives and sustainability
regulatory requirements, including reporting;
• Prioritising sustainability activity and ensuring that there is a focus on the ESG
activity that will drive change and deliver lasting impact for our customers, colleagues,
communities and environment;
• Assigning business owners to manage and deliver sustainability programming across
the material issues set out within the Sustainability Strategy;
• Developing Sustainability KPIs and implementing processes that enable the Bank to
effectively measure, manage and report progress against Sustainability objectives;
and
• Monitoring and reporting progress to the Board and Executive Committees at regular
intervals throughout the year.
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 higher authorities (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 BRCC/Board) and they are the forum review of
Group-wide credit risk management issues.
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Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Risk Management
(continued)
Committee/Role
Key Responsibilities
Operational Risk Management
Committee (ORMC)
ORMC is the body responsible for
supporting GRC in monitoring Operational
and IT Risks and overseeing risk
mitigation performance and prioritisation
related to the management and control
of these risks. ORMC is a sub-committee
of GRC
The ORMC reviews and discusses the outputs and results of the Risk and Control
Self-Assessment (RCSA) Process, Operational Risk Event Reporting and various other
assessment, monitoring and testing activities to create awareness of commonly
experienced Operational and IT risk matters, to share learnings and to enhance the
control environment across the Group. The key responsibilities of the ORMC include, but
are not limited to:
• Oversee the implementation of the Bank’s Operational and IT Risk Management
Frameworks, including compliance with relevant Operational and IT risk policies and
procedures;
• Review and approve Operational and IT policies, as agreed with the Chair of GRC, (via
delegated authority from GRC) and recommend approval of Operational and IT Risk
Frameworks to the GRC (and subsequently BRCC);
• Review and recommend approval of qualitative and quantitative Operational and IT risk
appetite metrics and limits / thresholds to the GRC; report any breaches in accordance
with agreed protocol and recommend remediation plans to restore Risk Appetite
regarding Operational & IT risk where required;
• Review and approve the top ten Operational and IT risks facing the Group for reporting
to the Regulator;
• Appraise significant Operational and IT risk events, identify and report on the
underlying root causes of these events, share lessons learned and ensure that
measures or controls have been put in place to mitigate the occurrence and severity of
any future risk events;
• To develop, review and recommend approval of scenarios relating to potential
Operational and IT risk events in order to inform the Group’s capital assessment
processes (e.g. ICAAP and Stress Testing) and submit these to the GRC for their review
and approval;
• Promote a bank-wide culture of responsibility for Operational and IT risk, and customer
focus, across every member of staff; and
• Oversight and assessment of the outputs from Customer Impacting Errors (CIE) and
Customer Complaints, including identification of any required reviews or negative
trends.
• 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
ExCo Risk Sub-Committees (such as ALCO
and the GCC) when the CRO considers such
action to be inconsistent with adherence to
the Board approved risk appetite.
Role of the CRO
The 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.
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
independent review and participation in the
Group’s IPP, capital and liquidity planning
and the development and approval of new
products.
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 ExCo
and directly manages the Group’s risk
function.
The CRO is accountable for the
development of the Group’s RAS, which the
CRO submits to GRC for recommendation
to BRCC, who in turn recommend approval
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 Board approved
risk appetite;
74
Permanent TSB Group Holdings plc - Annual Report 2021 Three Lines of Defence
A ‘Three Lines of Defence’ model has been adopted by the Group as defined in the ICF 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 on-going
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;
• Developing business unit control frameworks in line with the Risk Management
Framework;
• 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 effectively.
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.
75
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Risk Management
(continued)
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’ RCSA processes and form the basis
of the Group’s ‘Top and Emerging Risks’
report. The ‘Top and Emerging Risks’
report is presented to Board, BRCC and
GRC quarterly, 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 for the next 12 months and over
the medium term.
The risk factors discussed below should
not be regarded as a complete and
comprehensive statement of all potential
risks and uncertainties. There may be
risks and uncertainties of which the Group
is not aware or which the Group does
not consider significant, but which may
become significant. As a result of the
challenging conditions in global markets
due to COVID-19, the growing threat from
cyber-attack and unknown risks, 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.
At 31st December 2021 we have three
emerging risks within the Top & Emerging
Risks report ‘New Digital Based Banks’,
‘Geopolitical Risk (Tax Implications)’ and
Energy Supply Shortages’.
• New Digital Based Banks -
Developments in the FinTech space and
Open Banking mean there is increased
competition for new business and
challenge our ability to retain existing
customers. Our Digital Transformation
will help ensure that we maintain
pace in offering digital services to our
customers and enable us to compete and
leverage the same/similar data of other
institutions under Open Banking.
• Geopolitical Risk (Tax Implications)
- The country’s corporation tax will
increase to 15% for companies with
a turnover of more than €750m. High
levels of government debt levels are
becoming a greater cause for concern
in light of rising inflation levels and
the prospect of higher interest rates.
Additionally, supervisory authorities
76
have noted concerns around corporate
debt levels and excessive risk-taking/
asset price bubbles in certain markets.
The impact of this risk is indirect, any
impact would likely be felt through a
reduction domestic economic activity
and the second-order impacts that it
might have on employment levels and
property prices. As the risk relates
to matters beyond the control of
Management, mitigation will likely need
to focus on managing its impact should
it materialise. Our existing stress testing
programme, part of which incudes
consideration of contingency plans
to protect capital, captures general
economic downside risks of this nature.
• Energy Supply Shortages - There is
currently high demand on energy supply
in Ireland, due to an increase in data
centres, hybrid cars etc., combined
with power plant shutdowns, low wind
speeds and the export of a large quantity
of electricity to the UK. If this trend
continues and the frequency of power
outages increase, there is an increased
risk of data loss, reduced productivity,
security breaches and potentially a
negative consequence on profits.
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
environmental 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 the delivery of their
business plans and management of such
factors as pricing, sales/lending volumes,
operating expenses and other variables
that may impact earnings volatility. Pricing
decisions, and changes thereto, are
reviewed and approved by the Bank’s
Assets and Liabilities Committee. 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. The
Group reviews Strategic Business risk as
part of the risk identification process.
COVID-19
The economic shock as a result of
the COVID-19 virus outbreak posed
a significant challenge to businesses
in Ireland and globally. The outlook is
becoming clearer with the high levels of
vaccination contributing to the country
reopening. However, the long-term
consequences are largely dependent on
the ensuing timeline over which business
activity and employment levels continue
to recover and the potential occurrence of
new variants.
In light of the current more positive
economic outlook and the level of forward-
looking impairment taken in 2020, a net
impairment release of €1m has been
booked on the Group’s loan book for the
year to December 2021 (€155m charge
December 2020). The risk of greater
impairment is driven by uncertain
economic outcomes, particularly inflation,
rather than actual observed portfolio
deterioration to date.
As the recovery continues to gather pace,
uncertain economic outcomes including
inflation is now the largest threat to the
continued pace of the global recovery.
Economic Outlook & Growth
Despite the emergence of the Omicron
wave of Covid-19, the economy overall
is proving resilient. Continued strong
growth in output and employment are
forecast, with the economy converging
on its potential level of activity. The ESRI
(Economic & Social Research Institute)
notes that Modified Domestic Demand
(MDD) - which it suggests is the most
accurate indicator of domestic economic
activity - increased by 6.2% in 2021. The
Central Bank forecasts that MDD, having
surpassed its pre-pandemic level by the
end of 2021, will expand by more than 17%
from 2022 to 2024, “buoyed in the main
by a recovery in personal consumption.”
It expects consumption to be supported
by “growth in disposable incomes, the
normalisation of savings rates, and the
unwinding of some savings accumulated
during the pandemic.” Davy highlights the
“enormous decline in jobless claims”.
The ESRI expects GDP to grow by 7.0%
in 2022 having grown by 13.6% in 2021.
The growth is driven by the multinational
sector. However, the indigenous sector,
which had yet to recover to pre-pandemic
levels by end-2021, is expected to recover
as consumer spending rebounds.
Permanent TSB Group Holdings plc - Annual Report 2021 Government Finances
The Central Bank anticipates the deficit
on the General Government Balance will
reduce from 3.7% of Gross National Income
(GNI) in 2021 to 1.5% in 2022 before moving
to a surplus of 1.3% and 1.8% in 2023
and 2024, respectively. This will see the
General Government Gross Debt decline
from 102.1% of GNI% in 2021 to 84.9% in
2024. As the Irish Fiscal Advisory Council
cautioned: “Given low interest rates,
strong growth and the improving general
government balance, government debt
is projected to fall at a steady pace but
to remain high.” While gross government
debt has risen from €204 billion in 2019
to €238 billion in 2021, an increase of
16%”, the Central Bank commented the
decline in the General Government Gross
Debt percentage “reflected the favourable
impact of the interest-growth differential,
with nominal GNI growing at a very strong
pace and the effective interest rate
remaining low.”
The Government continues to benefit from
favourable debt market developments. The
NTMA reported that the average interest
rate on the stock of debt was 1.4% at end-
2021, down from 2.2% in 2019. It further
notes that the average maturity of Ireland’s
debt is one of the longest in Europe. The
ECB’s Pandemic Emergency Purchase
Programme (PEPP) has helped keep
interest rates low. The country’s improved
fiscal position has prompted Fitch and
DBRS to raise Ireland’s sovereign rating to
AA-.
The ESRI commented that the
“combination of robust economic
activity allied to the sharp decline in
the unemployment rate means that the
COVID-19 related pressures on the public
finances have eased considerably.”
The General Government Balance is
significantly less than what had been
expected a year ago. But it notes that if
“inflation continues to increase, public
expenditure may be under pressure to
increase social payments to assist lower-
income households.”
The Department of Finance reported tax
revenue of €68.4bn in 2021, a record high
and up 19.7% year on year. This resulted in
an Exchequer deficit of €7.4bn, an almost
€5bn improvement on 2020. It noted: “At
€26.7 billion, income tax receipts have
recovered to above pre-pandemic levels
reflecting inter alia the ongoing recovery in
the labour market, alongside the strength
of wages in sectors less affected by the
pandemic. Reflecting the rebound in
consumer spending, VAT receipts were
€15.4 billion, up 24% on the same period in
2020. Corporation tax receipts remained
very strong last year at €15.3 billion, up
almost 30% on 2020.”
Employment
The Central Bank commented that “the
overall strength of the labour market
recovery has been encouraging.” By Q3
2021, some 113,000 more were employed
than before the pandemic. Employment
grew by 5.5% in 2021 to 2.47 million,
and labour force participation increased
strongly. It noted that female labour force
participation, at 60.1%, is at its highest
level on record, with “this increase being
driven by those with a third-level education
entering full-time jobs in high-skilled
sectors.” It forecast employment would
grow by 3.1% in 2022, 2.1% in 2023 and
1.7% in 2024, generating 167,000 new jobs
and bringing the unemployment rate down
to 4.6% by end-2024.
As the labour market has begun to
tighten, staff shortages are beginning
to emerge across a number of sectors.
The job vacancy rate has increased to
a high of 1.5%. The Central Bank noted
“the emergence of further and more
broad-based wage growth over time” and
expects real incomes to rise through 2023
and 2024. It saw wage inflation of 2.3% in
2021 and expects wage inflation of 3.3%,
4.5% and 5.0% in 2022, 2023 and 2024,
respectively.
Inflation
The CSO reported that prices on average,
as measured by the EU Harmonised Index
of Consumer Prices (HICP), increased by
5.7% in December 2021 compared with
a year earlier. The most notable changes
in the year were Transport (+18.5%), and
Housing, Water, Electricity, Gas & Other
Fuels (+14.1%). It commented: “This is the
largest annual change in prices since April
2001.”
While the NTMA comments that “there
are transitory and pandemic elements” to
this increase, it warns that core inflation
is also rising. However, it suggests that
inflation is unlikely to remain above 4%.
The Central Bank comments: “Disruption
to global supply chains, surging demand
and the rise in energy prices remain key
factors in explaining the higher rates of
consumer price inflation in Ireland and the
euro area. These are expected to remain
relevant over much of 2022, but still to
ease later in the year. Therefore, while the
rate of inflation is expected to decline, it
will remain above pre-pandemic levels and
risks to the inflation forecast are judged to
be on the upside.” It noted in particular that
“the prices of construction materials like
concrete, steel, timber and cement have
increased substantially as global demand
surged.”
The Central Bank estimates average
annual HICP inflation was 2.4% in 2021,
and will be 4.5% in 2022, 2.4% in 2023 and
2.1% in 2024.
Banking
The Central Bank data confirms that
banks remained under pressure in 2021 as
deposits continued to surge while lending
volumes remain subdued.
While the annual deposit growth rate had
declined from its pandemic high of 14%
in early 2021 to 8.8%, nevertheless the
stock of household deposits was €22 billion
greater at the end of 2021 than at the start
of the pandemic. The level of household
lending has recovered from the lows seen
in 2020, driven by a recovery in the level
of mortgage lending. The Central Bank
notes that the “volume of new mortgage
agreements in recent months is in line
with seasonal pre-pandemic volumes” but
comments that “the recovery in consumer
lending has not materialised.” It surmises
that households “may, in part, be using
accumulated savings in place of consumer
loans (e.g. cars, education, and travel).”
The decline in the number of properties
available for purchase, and hence new sale
completions, “is likely constraining the
volume of new mortgage lending.”
Net lending to businesses in 2021, it
noted, “has been positive, if somewhat
subdued”. It contrasted with 2020, “when
companies deleveraged with repayments
significantly outpacing drawdowns of new
credit.” It commented: “The rate of deposit
accumulation by businesses has slowed
throughout 2021 relative to the rapid
accumulation of saving observed during
the height of the pandemic.” It surmises
that “the recovery in consumption towards
its trend, as well as higher consumer price
inflation, will gradually bring the savings
ratio just below 8% in 2024.
The mortgage market is unlikely to
be affected by the tapering of income
supports, “as mortgage borrowers are
employed in sectors that have been
less exposed to the economic disruption
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Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Risk Management
(continued)
caused by COVID-19”, it notes. “Mortgage
borrowers have also proved resilient
since the expiry of payment breaks, with
mortgage arrears levels falling throughout
the pandemic, and new flows into either
loan default or forbearance falling sharply
since March 2021.”
The Central Bank noted that profitability
“continues to be hampered by long-
standing structural challenges relating to
a reliance on net interest income, falling
interest margins in the context of the low-
rate environment, and a high-cost base”.
It continued: “The decline in the Irish NIM
has been particularly pronounced in 2021
falling from 1.9% in 2020 Q4 to 1.64% in
2021 Q2, which is now only marginally
higher than the European median of 1.53%
at the same point in time. The sharp decline
in the NIM over the past year has largely
been the result of the sector absorbing a
large surge in deposits in light of increased
liquidity in the real economy. Higher
deposits have largely been funnelled
into central bank reserves and sovereign
bonds.” It further noted “the structural
challenges facing the sector as well as the
pandemic-related excess liquidity” and
highlighted that “system-wide RoE stood
at 5% in 2021 Q2, which remains lower
than the level observed between 2015
and 2018.” It commented: “The solvency
position of the sector remains resilient with
ample headroom above regulatory minima,
reflected in participating banks’ capacity
to absorb the adverse scenario in the EBA
stress test.”
The European Commission noted the
challenge facing banks: “As a result of
the higher credit loss experience, and
difficulties enforcing collateral in Ireland,
banks’ internal risk models attach elevated
risk weights to Irish mortgages, leading to a
high risk weighted asset density compared
to most other European countries, and
consequently increasing their cost of
capital. This is further compounded by the
difficulties enforcing collateral in Ireland.
High capital requirements have also likely
played a role in the decision by two foreign-
owned banks to announce their intention to
withdraw from the Irish market.”
Housing
The CSO reported that there were 20,433
houses built in 2021, down from 20,526
in 2020. “The number of apartments
completed rose 30.3% to 5,107 in 2021,
with apartments accounting for a quarter
of all completions, the highest proportion
since the series began in 2011”. Meanwhile,
78
the Property Services Regulatory
Authority (PRSA) indicates that there
were approximately €18.5bn of residential
transactions in 2021, up from €16.2bn in
2020.
The Central Bank forecasts approximately
25,000 houses will be built in 2022,
30,000 in 2023 and 35,000 in 2024. “With
substantial increases in both public and
private outlays on housing expected in
the years ahead, capacity constraints and
other factors could limit the extent to which
increased expenditure translates into more
housing units”, it cautions.
BPFI reported that 43,494 mortgages to a
value of €10.5bn were drawn down in 2021.
First-time buyers remained the single
largest segment by volume (54.4%) and
by value (54.2%). The data show lending
volumes are now slightly above pre-
pandemic levels, with house price inflation
adding to the size of the mortgage market.
The average approval for house purchase
rising to a fresh cyclical high of €272,000,
up 7.5%.
Davy forecast new lending of €12.0bn and
€14.2bn in 2022 and 2023, respectively.
The stock of mortgages, which fell from
€90.2bn in 2020 to €89.4bn in 2021 is
expected to rise to €91.2bn and €94.6bn in
2022 and 2023.
House Prices
House price inflation has returned in 2021.
The CSO reports: “Residential property
prices increased by 14% nationally in the
year to November. This compares to an
increase of 13.3% in the year to October
and an increase of 0.4% in the twelve
months to November 2020.” The average
housing transaction in 2021 was €342,000,
up from €329,000 in 2020 and €317,000
in 2019.
Daft.ie comments: “Fewer than 11,500
homes were available to buy online on 1
December 2021, the lowest figure recorded
since the rise of online listings … The
underlying dynamic of weak supply given
strong demand hasn’t gone away. While
supply seems set to improve over coming
years, easing pressure in the market, we
will no doubt see more signs of a system
under pressure before things turn.”
Davy elaborates: “The lack of housing
supply in Ireland is well understood, with
the 21,500 completions we expect in
2021 still well below structural demand of
30-35,000 units per annum. However, it
is becoming clearer that Ireland’s strong
labour market performance is contributing
to pressure on housing. Employment is
already above pre-pandemic levels with
pay growth now running at 5%. In October
2021, the average mortgage approval
was €269,000, up 8% on the year. This
demonstrates that jobs growth in highly
paid sectors is adding to housing demand,
pushing up prices.” Davy reckons its
forecast for 4.5% RPPI inflation in 2022 is
“now looking conservative.”
BPFI comments that “the lower-than-
estimated supply, due to the pandemic, in
2020 and 2021 has put further pressure
on average prices and affordability is
becoming challenging with average rents
also at their highest levels, more than one
third higher than their peak in 2008.”
Overall Position
Ireland has been less adversely affected by
Covid-19 than most other countries. It has
been better able to withstand this crisis
than the 2008 crisis because, as the NTMA
notes, household debt stood at 135% of
GNI in 2008 whereas now it’s 68%. The
Central Bank comments: “Both aggregate
debt to income ratios and interest payment
burdens have continued their downward
trends since the end of the previous
financial crisis.” The latest data from the
Quarterly Financial Accounts for Q2 2021
show household net worth at a new series
high of €935 billion, or 13% higher than
prior to the beginning of the pandemic
(end-2019).
The Central Bank notes: “The economy
continued to pick up momentum during
most of the second half of 2021, with
strong employment growth and domestic
spending. The resilience of the economy
through the pandemic, alongside positive
surprises in corporation tax revenues, has
seen the public finances recover markedly.
With the favourable economic outlook over
the coming years, a surplus on the General
Government Balance is now expected
to emerge sooner, in 2023, with a larger
surplus and related improvement in the
debt position in 2024.”
The European Commission comments: “All
in all, Ireland’s economy is set to grow very
strongly, driven by both the domestic and
multinational sides. The domestic recovery
is clearly gathering speed. High frequency
indicators signal strong growth in the third
quarter of 2021. Pent-up demand, coupled
with ample private sector financial buffers,
elevated economic confidence and a
Permanent TSB Group Holdings plc - Annual Report 2021 tentatively improving external environment
have set the preconditions for strong
growth in the final quarter of 2021 and
into 2022. At the same time, exports of
multinational corporations that had been
the driving force behind positive growth in
2020 remained very strong in the first half
of 2021.”
However, as IFAC notes, there’s no cause
for complacency: “Ireland faces several
medium-term challenges, including an
ageing population, alongside tackling
climate change, and improving public
services. The over-reliance on corporation
tax receipts to fund public services that has
built up in recent years should be reduced.
One-in-five euros of tax receipts were
from corporation tax in 2020, and more
than a half of those receipts were from ten
corporate groups.”
The ESRI highlights its concerns: “The
ongoing negotiations between the British
Government and the European Union
concerning the Withdrawal Agreement and
the implementation of the Northern Ireland
Protocol has led to more uncertainty
in terms of the nature of the trade
relationship between the EU and the UK
and the UK and Ireland. The possibility of
significant disruption in EU-UK trade would
have particularly adverse implications for
the Irish economy given its small open
nature.”
It identifies “persistence in high inflation
rates” as a key risk. “Given longer-term
persistence, inflation may feed into
wage setting, with workers demanding
compensation for past and future expected
inflation. There is some evidence that wage
pressures have already materialised where
the gap between supply and demand is
most acute.”
The Central Bank notes that the outlook for
bank NIM “will be affected by the evolution
of the stock of deposits accumulated
over the pandemic. To the extent that
households and businesses begin to
unwind their savings to fund consumption
and investment amid an improving
economic outlook, this should provide
support to Irish NIMs”.
Climate Risk
PTSB is committed to climate risk
management aided by regulatory guidance
and a willingness to play our part as
corporate citizens. Understanding of
how best to respond to climate change
is continually evolving and with this our
knowledge of associated risks continues to
develop.
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.
There are two climate-related risks,
these are physical risk and transition risk.
Both risk types may impact the financial
services sector to varying degrees over the
short, medium and long term. The extent to
which the impact of physical and transition
risk might impact a financial services
firm will vary depending on firm business
model, customer base, location as well
as the transition process to a low-carbon
economy.
Physical risk is the risk of economic
costs and financial losses resulting from
more extreme weather events brought
about by climate change. For a financial
institution, property values might be
impacted depending on property location,
for example, located in a low-lying coastal
areas.
Transition risk is the risk of economic or
policy changes resulting from the transition
to a low-carbon economy. For example,
certain sectors might be more vulnerable
to transition risk as the economy and
customer demand alters during the
transition.
We have a team dedicated to developing
our Sustainability agenda considering the
Bank’s approach to environmental, social
and governance (ESG) issues (See page
29), and the Group Risk Function is closely
aligned with this initiative.
Managing Climate Risk is a key area of
focus under the ‘Addressing Climate
Change and Supporting the Transition to a
Low Carbon Economy’ Pillar of the Bank’s
Sustainability Strategy.
We have increased our focus on Climate
Risk and added Climate Risk as a sub-risk
category within the Bank’s Operational
Risk and Credit Risk Frameworks.
In 2022 we will implement the following
actions:
• Develop of a climate risk definition
tailored to the Bank with clear examples
of both transition and physical climate
risks for consideration and the impact
that these may have on the bank’s
portfolio and business model
• Establish climate risk as its own
risk category within the Bank’s Risk
Management Framework
•
•
•
Identification of climate risk factors
relevant to the Bank and high-level
potential impacts
Introducing a suite of climate risk
metrics
Introduce a new key risk category
for climate risk and an associated
framework to identify climate risk
factors that may impact loan portfolios
• Develop an approach to measure the
impact Assessment of climate risk
(including data requirements and
identification of data proxies from
external sources) on the business model.
• Consider a Sustainability exclusion
category for our Credit Policy, which
will limit exposures to entities which we
believe cause irreversible environmental
and/or social harm to our local
communities and wider society; and,
• Monitor the regulatory landscape and
beginning to align with.
The Bank will consider these risks in
2022 against our business model as part
of the work to be completed and design
a framework for assessing the impact of
these risks on the Bank.
You can read more about our commitment
to climate risk on page 32.
The Task Force on Climate-Related
Financial Disclosures
In 2021, Permanent TSB became a
supporter of the Task Force on Climate-
Related Financial Disclosures (TCFD).
The TCFD is a voluntary climate-related
financial disclosure framework designed to
promote more informed investment, credit,
and insurance underwriting decisions
and, in turn, enable stakeholders to better
understand the concentrations of carbon-
related assets in the financial sector
and the financial system’s exposures to
climate-related risks.
The disclosure recommendations are
structured around four thematic areas
that represent core elements of how
an organisation operates including,
governance, strategy, risk management
and metrics and targets.
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We look forward to issuing our first
disclosure aligned to the TCFD as part of
our 2022 annual reporting cycle.
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, as well as the socio-political
environment adversely impact or cause
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
current portfolio segmentation is provided
in section 3.1 of this review.
Capital Adequacy Risk
Capital Adequacy Risk is the risk that the
Group does not have sufficient capital to
cover the risks of its business, support
its strategy, and comply with regulatory
capital requirements at all times.
The Group’s business and financial
condition could be negatively 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 framework 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 that it maintains sufficient
capital to cover its business risks and
strategy.
80
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 Supervisory
Review and Evaluation Process (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
and ALCO in accordance with the Board
approved framework.
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 result
in Basel IV regulations replacing or
supplementing Basel III.
Government Control and Intervention
In 2011, the Minister for Finance of Ireland
became the owner of 99% of the issued
ordinary shares of the Group which
reduced to c.75% following the successful
capital raise in 2015.
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.
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.
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.
These risks are inherent in banking
operations and can be heightened by
other factors including changes in credit
ratings or market dislocation. The level of
Liquidity Risk further depends on the size
and quality of the Bank’s liquidity 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 levels of Liquidity and Funding risk
within the Group have been positively
impacted by the increase in Retail Deposit
balances, the execution of the NPL strategy
and will continue to benefit from further
NPL deleveraging in the years ahead.
For further details on Funding and Liquidity
Risk, see section 3.2.
Market Risk
Market risk can be 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 hedged against.
From the Group’s perspective, Market
Risk consists of three components being
Permanent TSB Group Holdings plc - Annual Report 2021 Interest Rate Risk, Credit Spread Risk and
FX Risk.
The Group’s RAS 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, ExCo and 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
within the Market Risk Framework.
The London Interbank Offered Rate
(LIBOR), the Euro Interbank Offered Rate
(EURIBOR) and other benchmark rates
and indices 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.
The impact was considered and the
outcome of Managements internal
processes concluded that the impact was
minimal given the low level of exposure. All
relevant changes have been successfully
implemented in advance of regulatory
guidance.
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. The consequences of
a poorly functioning model can include
inappropriate levels of impairment
allowances or capital and inappropriate
credit or pricing decisions causing adverse
impacts to funding or liquidity and causing
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;
risk. The Group RAS 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
to Group and Board Risk Committees
monthly with more detailed papers as
necessary to focus on key issues.
• 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 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 RMF. 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
(MGC), a sub-committee of the GRC is
the primary body for overseeing model
Operational Risk and IT Risk
Operational Risk is defined as the risk of
loss or unplanned gains resulting from
inadequate or failed processes, people,
and systems or from external events. This
includes business continuity; outsourcing
and third party; business process; climate;
fraud; legal; people; and property risk.
IT Risk includes risks associated with
poor IT governance, oversight and risk
management as well as security risks
resulting from inadequate or failed internal
processes or external events including
cyber-attacks or inadequate physical
security. Industry related risks are also a
focus from a cyber threat perspective and
the Group collaborates across financial
services to ensure we understand and
remediate vulnerabilities.
Risks from both these risk categories are
inherently present in the Group’s business.
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.
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 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, 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
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(continued)
and monitors Operational and IT risk KRIs,
the Operational and IT RAS, 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 Operational and IT Risk
profile. 2020 saw an unprecedented
world-wide COVID-19 pandemic which
has continued into 2021. During this time,
the Banking industry has experienced
an increased risk of external fraud and
cybercrime as criminals try to exploit the
situation.
External fraud is elevated with customers
of Financial Institutions being targeted
through fraudulent SMS messages,
phone calls and accessing fake websites.
2021 saw a significant increase in fake
Permanent tsb websites shut down, when
compared to last year. In 2021, the Group
along with other Irish Issuers and as part
of a BPFI initiative signed up to a one
year Trial of a Mobile Ecosystem Forum
designed to reduce the impact of Smishing
on customers.
While the PTSB cyber defences have
proven robust to-date, the external threat
environment is challenging and for this
reason cyber risk is considered to be
elevated. Continuous improvement in
our cyber defences is a strategic priority
with investment accordingly to enhance
the control environment. A number of
measures were implemented throughout
2021, including:
• The Vulnerability Management
Improvement Programme;
•
Information Security Awareness
communications;
•
Increased use of penetration testing;
• Enhanced monitoring for threats; and
•
Increased Information Security
Governance and reporting
Work continues to ensure business critical
services perform without disruption and
enhancements are being made to our
various platforms and fraud systems
throughout this year. Enhancements to our
system progressed in H1 to make remote
working more effective across the Group
and continued cyber security awareness
training is also a focus.
Operational & IT Risk continuously review
Group Technology IT incidents, including
cyber, and there were no breaches of
data security or cyber security that could
significantly harm the Group’s reputation
82
and adversely affect the Group’s operations
or financial condition materially.
Scenario testing is performed on an annual
basis, as outlined in the RMF, for critical
processes including but not limited to:
Payments Systems Failure, Information
Security, Cyber Security, Internal Fraud,
Business Disruption and 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, in 2021 a
Bank-wide Enterprise Transformation
Programme was put in place to support our
purpose of building trust with customers
and delivering our strategic priorities;
reassessing how work is allocated, how
we are organised and how work gets done.
Work continues across the Group to help
achieve the deliverables with a dedicated
Programme Office in place to support the
business in managing the transition to
the new operating model. An enhanced
Change Risk oversight Framework is
being developed along with recruitment
within Operational and IT risk to ensure
change oversight is robust across the most
significant changes being undertaken
within PTSB.
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.
An RCSA methodology is used to identify,
measure and control Operational Risk,
IT Risk, Compliance Risk, Conduct and
Reputational Risks across the Group
which aids the consistent approach to
risk management and aids the business
in their decision making process. It also
supports tracking of deficiencies related
to control design and control effectiveness
and any associated remediation plans. The
RCSA methodology outlines the actions,
procedures, roles and responsibilities
relating to the Group’s RCSA process. We
have enhanced our processes in this area
as we progress plans have implemented a
new Governance Risk & Compliance (GRC)
system for the management of Operational
and IT risk. The RCSA methodology
outlines the actions, procedures, roles
and responsibilities relating to the Group’s
RCSA process.
The Group acts to mitigate potential risk
found in existing procedures through the
use of controls. A control is any process,
policy, device, practice or other action that
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.
This system of internal control is designed
to provide reasonable, but not absolute,
assurance against the risk of material
errors, fraud or losses occurring. Effective
controls will work to reduce the likelihood of
a risk occurring and/or the impact should
the risk materialise.
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.
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
The Group may engage the services of
third parties to support delivery of its
Permanent TSB Group Holdings plc - Annual Report 2021 objectives or to complement its existing
processes. The risk associated with these
activities is categorised as ‘Outsourcing
and Third Party’ risk and is defined as
the current or prospective risk of loss
or reputational damage connected with
the engagement and management of
Third Parties contracted internally or
externally (for example, for the purposes of
customer engagement, data processing,
systems development, Cloud services or
Information & Communication Technology
(ICT) systems), including lack of third
party diversification, inadequate third
party business continuity plans or
insufficient monitoring and oversight of the
engagement.
The Group’s Third Party Risk Management
Policy sets out the minimum requirements
and roles and responsibilities necessary
to ensure consistent and continuous
management of Third Party and
Outsourcing risks across the Group,
as defined in the Group’s RMF, and
Operational and IT Risk Management
Frameworks. The policy outlines the
processes and controls required 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.
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
either directly or through the Financial
Services and Pensions Ombudsman or
where customer-impacting errors occur.
See note 31 and note 42 to the financial
statements for further information on
legacy legal cases.
The Group recognises that the
management and mitigation of Conduct
Risk is fundamental and intrinsically linked
to the achievement of our purpose ‘To
work hard every day to build trust with
our customers - we are a community
serving the community’. 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.
Board and Senior Management have
ensured that there is regular reporting of
metrics and Key Risk Indicators 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 Growth Committee (a
sub-committee of ExCo).
Reputational Risk is the risk of brand
damage and/or financial loss arising from a
failure to meet stakeholders’ expectations
of the Group or the failure of organisational
structure and governance arrangements
within the Group to embed desired
behaviours and culture. The reputation
of PTSB is founded on trust from its
employees, customers, shareholders,
regulators and from the public in general.
Isolated events can undermine that
trust and negatively impact the Group’s
reputation. 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.
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 Central Bank
of Ireland, 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 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
83
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Risk Management
(continued)
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, 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 (DGS));
• 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, sanctions, bribery,
corruption and other financial crime; and
• Non-compliance with legislation relating
to unfair or required contractual terms or
disclosures.
Regulatory Developments
The level of regulatory change remains
high and continues to be an area of focus.
84
Sustainable Finance is a key priority for
Governments and regulators. The EU
Action Plan on Sustainable Finance sets
out the EU’s strategy to integrate 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.
The European Commission has introduced
draft legislation on Operational Resilience,
recognising increased reliance on third
parties and outsourcing. In addition,
it presented a package of legislative
proposals designed to strengthen the EU’s
anti-money laundering and countering the
financing of terrorism (AML/CFT) rules.
The Irish Government has published
legislation, to introduce an Individual
Accountability Regime for Banks and other
regulated entities, via a Senior Executive
Accountability Regime (SEAR). This regime
will also 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 Central Bank has
commenced a review of the Consumer
Protection Code (CPC) and is expected to
undertake a consultation process during
2022.
Regulators continue to emphasise the
importance of culture, conduct risk,
diversity practices, IT resilience, cyber
security, financial crime and climate risk.
Group Risks
The Board has overall responsibility for
the establishment and oversight of the
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 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
Permanent TSB Group Holdings plc - Annual Report 2021 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.
Climate Risk
Climate Risk has been defined within
the Bank’s Credit Risk Management
Framework as the risk of a decline in
the value of the Bank’s collateral on
customer loans due to the impacts from
climate change, and the imposition of
increased capital requirements if the
Bank’s borrowers do not comply with the
Stakeholder, Regulatory and Legislative
expectations to contribute to the transition
to a low carbon economy.
Climate related risk modelling capabilities
are still evolving and in it’s infancy.
However, the Bank currently has low
exposure to SME lending when considering
high risk sector exposure to Climate Risk,
with the majority of the Bank’s portfolio
comprising Residential mortgages.
Lending officers do consider Climate and
Sustainability Risks on each SME lending
application, and assessment criteria
for new Residential property lending
incorporate an evaluation of potential
physical risks including flood, subsidence,
coastal and environmental risks as part of
the valuation process. Lending should not
proceed where the Valuer identifies risks
at individual property level which might
potentially restrict the customer's ability to
obtain home insurance.
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
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.).
85
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Risk Management
(continued)
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).
Residential Mortgage Exposures by Indexed LTV
31 December 2021
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
Deferred fees, discounts and fair value adjustments
Gross loans and advances to customers
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
Deferred fees, discounts and fair value adjustments
Gross loans and advances to customers
86
Home loans
Buy-to-let
€m
€m
9,048
3,146
157
12,351
217
217
12,568
778
333
182
1,293
330
330
1,623
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
Total
€m
9,826
3,479
339
13,644
547
547
14,191
196
358
14,745
115
14,860
Total
€m
7,902
4,492
644
13,038
1,309
1,309
14,347
181
327
14,855
86
14,941
Permanent TSB Group Holdings plc - Annual Report 2021
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
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.
During 2020, in response to the COVID-19
pandemic, in accordance with the
European Banking Authority (EBA)
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 a period of up to six
months (initial period of three months with
the option to extend up to six). Personal loan
customers and personal current account
holders were also eligible to apply for a
COVID-19 term loan payment break for 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. 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. Such arrangements are
classified as Stage 3.
All payment breaks have expired at 31
December 2021. For information, at 31
December 2021, the IFRS 9 classification
by loan balance in respect of those facilities
previously granted a COVID-19 payment
break was €871m classified as Stage 1 (31
December 2020: €833m), €374m classified
as Stage 2 (31 December 2020: €598m), and
€178m classified as Stage 3 (31 December
2020: €181m).
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.
87
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Risk Management
(continued)
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.
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.
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 a reclassification of the exposure
into Stage 2 for ECL assessment purposes.
88
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.
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.
Fair can primarily be expected to be classified as Stage 2
• Fair risk profile (IRB ratings 22 to 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 statement
of financial position date.
Cash and balances with central banks
Items in course of collection
Loans and advances to banks
Other assets (Loans sale receivable)
Debt securities
Derivative assets
Loans and advances to customers
Commitments and contingencies
Year ended
Year ended
Notes
31 December
2021
31 December
2020
13
13
14
16
18
15
21
42
€m
57
20
4,174
310
2,494
1
14,256
21,312
1,181
22,493
€m
71
20
3,312
-
2,583
-
14,213
20,199
1,069
21,168
Further detail on loans and advances to customers is provided in note 37, Financial Risk
Management.
Permanent TSB Group Holdings plc - Annual Report 2021
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 the ratings prescribed by Moody’s Investor Services Limited.
There are no impaired debt securities as at 31 December 2021 or at 31 December 2020,
with the exception of the corporate bond.
Debt securities neither past due nor impaired
Rating
Aaa
A2
Baa1
Baa3
Unrated
Total
31 December
2021
31 December
2020
€m
€m
60
1,463
506
465
-
2,494
67
1488
515
474
39
2,583
The following table discloses, by country, the Group’s exposure to sovereign and corporate
debt as at:
Country
Ireland
Spain
Portugal
Total
31 December
2021
31 December
2020
€m
€m
1,523
465
506
2,494
1,594
515
474
2,583
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 Central Bank of Ireland.
Rating
Aaa
Aa2
Aa3
A1
A2
Baa2
Total
31 December
2021
31 December
2020
€m
€m
3,709
199
258
2
6
-
4,174
2,813
209
254
32
3
1
3,312
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;
89
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Risk Management
(continued)
• 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.
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;
Transition from Stage 2 to Stage 1
• Accounts that have, as a result of
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).
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
financial distress, received a concession
from the Group with respect to terms or
conditions which result in a significant
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
90
original recognition and interest income
is subsequently recognised on a credit-
adjusted effective interest rate (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 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.
Permanent TSB Group Holdings plc - Annual Report 2021 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.
thereof. For undrawn commitments, the
EIR, or an approximation thereof, is applied
when recognising the financial assets
resulting from the loan commitment.
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.
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 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
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.
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.
The GCC is responsible for oversight of
changes to credit policies, data or post
model adjustments that would affect
model outcomes. The Impairment
Reporting Review Forum (IRRF), a sub-
committee of the GCC, is accountable
for the review and recommendation for
approval of the monthly and cumulative
year-to-date actual impairment charge for
the Group.
IFRS 9 ECL methodologies are subject to
formal review by IRRF 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.
91
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Risk Management
(continued)
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.
The process to determine the FLI applied
in the ECL models leverages existing
ICAAP processes while recognising
that IFRS 9 scenarios are not stress
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 ALCo 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. Macroeconomic
scenarios were most recently updated in
December 2021. Continued high levels of
monetary and fiscal support for the global
economy have driven better than expected
economic outturns in 2021, offsetting the
continued extreme impact of COVID. As
a result of the strength of the economic
rebound, all major economic indicators
are strongly ahead of expectations from
December 2020.
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. IRRF
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).
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 2021, the impairment
provision included €118m of
Management’s adjustments to modelled
outcomes.
3.2 Funding and Liquidity Risk -
audited
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
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 94% of the balance sheet being
deposit funded at the year end, 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 CRR2, CRD V and
associated Delegated Acts such as the
Liquidity Coverage Ratio (LCR) Delegated
Act.
The primary ratios calculated and
reported are the LCR and the Net Stable
Funding Ratio (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 formally communicated and
compliance becomes binding in 2022.
The Group has a senior unsecured
issuance strategy to ensure ongoing
compliance with the MREL requirement.
92
Permanent TSB Group Holdings plc - Annual Report 2021 (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 in order to meet the liquidity needs for
a 30-calendar day liquidity stress scenario.
NSFR and Liquidity Stress Survivability
constitute additional core liquidity and
funding metrics within the overarching
Liquidity and Funding Risk Management
Framework that are measured, monitored
and reported within the Group.
The Group also actively monitors a
comprehensive suite of Key Risk Indicators
(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 and funding 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,
including those outlined in the EBA SREP
Guidelines. The stress testing framework is
designed to reflect the liquidity and funding
impact under idiosyncratic, systemic and
combined stresses.
The full suite of liquidity and funding
metrics and stress test results are regularly
reported to the ALCo, the BRCC and the
Board.
In addition, the Group Internal Liquidity
Adequacy Assessment (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.
(iii) Liquidity Risk Management
Framework
The exposure to liquidity and funding risk
is governed by the Group’s Liquidity and
Funding Risk Management Framework
and underlying policies, RAS and
associated limits. The framework and
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 Management
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 and ensure compliance with
the framework.
The Liquidity and Funding Risk
Management 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
High Quality Liquid Assets (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 became binding from a
regulatory perspective in June 2021.
(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 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.
93
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Risk Management
(continued)
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 levels that were
reached in the period following the financial
crisis. Following the successful NPL
deleveraging programme and the execution
of the Treasury Funding Plan, encumbrance
is now at a low base historically and 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 an
overreliance on secured funding channels
could potentially pose a threat to this ratio
and unsecured creditors.
A series of liquidity and funding early
warning indicator’s (EWI’s) 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 losses arising
from a downgrade, which may include
94
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.
a loss of customer deposits; limited
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 2021, DBRS upgraded PTSB
Plc’s and PTSB Group Holdings senior
unsecured credit ratings outlook to stable
from negative and S&P upgraded the
outlook to positive from negative. These
outlook upgrades reflect: the view that
the financial disruptions of the Covid-19
pandemic on the Group has been less
severe than initially anticipated; the
continued progress on reducing the
stock of NPLs; and the potential material
opportunities following the signing of legal
agreements for the acquisition of certain
elements of Ulster Bank’s business.
The ratings for PTSB plc are as follows:
• Standard & Poor’s (S&P): Long-Term
Rating “BBB-” with Outlook “Positive”;
• Moody’s: Long-Term Rating “Baa2” with
Outlook “Stable”; and
• DBRS: Long-Term Rating “BBBL” with
Outlook “Stable”.
The ratings for PTSB Group Holdings are
as follows:
• Standard & Poor’s (S&P): Long-Term
Rating “BB-” with Outlook “Positive”;
• Moody’s: Long-Term Rating “Ba1” with
Outlook “Stable”; and
• DBRS: Long-Term Rating “BBH” with
Outlook “Stable”.
For further details on liquidity and funding
risk see note 37.
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.
Permanent TSB Group Holdings plc - Annual Report 2021 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 Ea 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 2021 interest rate risk
level, based on the EV calculation (more
severe than EaR), was calculated as
€40m (31 December 2020: €44m). The
risk position has reduced as the Bank
has reduced its net liability position for
terms greater than one year.
Based on the internally derived Basis
Risk calculation methodology, the 31
December 2021 risk level stands at
€14m. 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
2021 FX position was €0.8m (31 December
2020 €1.9m).
(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. 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.
The Group held no HTC&S bonds as at
31 December 2021 (31 December 2020:
nil) and as such had no exposure to credit
spread risk.
For further details on market risk see note
37.
95
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Directors’ Report
The Directors present their Annual Report
and audited Group and Company financial
statements to the shareholders for the year
ended 31 December 2021.
going concern position is also set out in
the Governance Statement on page 135
under the Board Audit Committee’s 2021
significant financial reporting judgments
and disclosures.
Results
The Group’s loss for the year was €20m
(2020 loss: €162m) and was arrived at
as presented in the consolidated income
statement.
Dividends
No dividends were paid in 2021.
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 Board Audit Committee 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 Corporate Governance Statement,
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 76 of the Annual
Report.
Financial Instruments
The financial instruments and use thereof
are outlined in the risk management
section, financial risk management note 37
and derivative financial instruments note 15.
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
1 of the financial statements and further
information on the assessment of the
96
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 2022-2024. 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
Corporate Governance Statement on page
135 under the Board Audit Committee’s
2021 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 2021 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 107 to 112 of
the Annual Report. Celine Fitzgerald was
appointed as a Non-Executive Director
on 30 March 2021. Anne Bradley was
appointed as a Non-Executive Director
on 30 March 2021. In January 2022, the
Board Chairman Robert Elliott advised the
Board that he will not seek an extension
to his term of office which is due to expire
in March 2023 and a recruitment and
selection process has commenced to
identify his successor. Further information
on the appointment process is included
in the Nomination, Culture and Ethics
Committee section of the Corporate
Governance Statement.
All of the Directors stood and were re-
appointed by election at the 2021 Annual
General Meeting (AGM). All of the Directors
will stand for re-appointment by election at
the Group’s 2022 AGM.
Information on Directors’ remuneration
is detailed in the Directors Report on
Remuneration on pages 146 to 150 of the
Annual Report and Directors’ and Secretary
interests in shares are outlined in note 43
to the financial statements.
Other than the Directors’ and Secretary’s
interests as set out in note 43, 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 01 March
2022.
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.
Relationship Framework with the
Minister for Finance
The Minister for Finance of Ireland owns
and controls 74.92% of the Company’s
Permanent TSB Group Holdings plc - Annual Report 2021 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.
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 2021, the Company had
454,695,492 ordinary shares of €0.50
each in issue (2020: 454,695,492).
Ordinary shares represent 100% of the
Company’s issued share capital value.
No ordinary shares were issued in 2021.
Each ordinary share carries one vote and
the total number of voting rights at 31
December 2021 is 454,695,492 (2020:
454,695,492).
At 31 December 2021, the Company holds,
through an employee benefit trust, 4,580
(2020: 4,580) ordinary shares of €0.50
each.
Additional Tier 1 Equity Securities
On 23 November 2020, the Company
issued €125m of AT1 securities. These AT1
Securities contain no conversion rights in
to ordinary shares of the Company.
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
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
97
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Directors’ Report
(continued)
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.
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.
98
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 convened by the
Directors 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.
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 2021, the Directors
have been notified of the following
substantial interests in the voting rights of
Ordinary shares held:
There were no other changes to substantial
interests in the voting rights of ordinary
shares reported to the Directors as at 01
March 2022.
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,
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
Permanent TSB Group Holdings plc - Annual Report 2021 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. Celine Fitzgerald was
appointed as a Non-Executive Director
on 30 March 2021. Anne Bradley was
appointed as a Non-Executive Director on
30 March 2021.
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 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
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 2021 AGM held on 19 May 2021,
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 30 March 2021 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 30 March
2021 referred to above may be applied
to allot shares pursuant to a rights issue.
The authority conferred commenced on
the 19 May 2021 and will expire at the
conclusion of the 2022 AGM or 19 August
2022 (whichever is earlier) unless and to
the extent that such power is renewed,
revoked, or extended prior to 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 2021 AGM held on 19 May 2021,
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 19 May 2021 and shall expire at the
conclusion of the 2022 AGM or 49 August
2022 (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;
99
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 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 47 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 2021.
Political Donations
The Directors have satisfied themselves
that there were no political contributions
during the year, which require disclosure
under the Electoral Act, 1997.
Directors’ Report
(continued)
(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 30 March 2021.
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 19 May 2021 and shall expire at the
conclusion of the 2022 AGM or 19 August
2022 (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 30 March 2021; 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 30
March 2021.
Market purchases of own Shares
At the 2021 AGM held on 19 May 2021,
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
100
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 2022 AGM of the Company
or on the 19 August 2022 (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 2022 AGM of the Company
or on the 19 August 2022 (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 2021 Location of Information required pursuant to Listing Rule 6.1.77
Listing Rule
Information Included*
LR 6.1.77
(12)
LR 6.1.77
(14)
The Trustees of the Employee Benefit Trust have elected to waive dividend
entitlements.
As stated on page 80 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 6.1.77 (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 45 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 127) 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
Addressing Climate Change and Supporting the
Transition to a Low Carbon Economy, page 32
Climate Risk, page 33
Task Force on Climate Related Financial
Disclosure (TCFD), page 33
EU Taxonomy Regulation, page 33
Science Based Targets, page 34
Energy Management, page 34
Waste Management, page 35
Responsible Procurement, page 35
Environmental Policy Statement, page 35
Enhancing our Culture and Investing in our
People, pages 40
Code of Ethics, page 52
Listening to Employees and acting on feedback,
page 41
Diversity and Inclusion, page 42
Health, Safety and wellbeing, page 44
Conflict of interest, Page 53
Speak Freely, page 23, 53
Board Diversity Policy, page 127
Colleague Conduct Policy, Page 52
Human rights
Human Rights
Dignity and Respect Policy
Equality Through Diversity Policy
Human Rights Charter, page 53
Living Our Purpose and Ensuring Strong
Corporate Governance, page 52
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Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Directors’ Report
(continued)
Reporting requirements
Policies and standards which govern our approach
Risk management and additional information
Social matters
Elevating our Social Impact and
Connecting with Local Communities
Elevating our Social Impact and Connecting
with Local Communities, page 36
Anti-corruption and anti-
bribery
Anti-bribery Policy
Anti-bribery Policy Statement
Anti-money laundering and counter
terrorist financing Policy
Financial Crime Compliance, page 53
Data Protection, page 51
Responsible Conduct and Culture, page 52
Operational Risk, page 81
Speak Freely, page 23, 53
Description of principal risks
and impact of business activity
Description of the business
model
Non-financial key performance
indicators
On behalf of the Board:
Risk Overview, pages 69
Principal Risks, pages 76
Our Strategy, page 10
Our Business Model, page 11
Non-financial Performance Indicators, page 3
Living our Purpose and Ensuring Strong
Corporate Governance, page 52
Championing Small Business and Creating a
Bank that is Fit for the Future, page 46
Enhancing our Culture and Investing in our
People, page 40
Elevating our Social Impact and Connecting
with Local Communities, page 36
Addressing Climate Change and Supporting the
Transition to a Low Carbon Economy, page 32
Robert Elliott
Chairman
Eamonn Crowley
Chief Executive
Ronan O’Neill
Board Audit Committee Chair
Conor Ryan
Company Secretary
102
Permanent TSB Group Holdings plc - Annual Report 2021 Corporate Governance Statement
Chairman’s Introduction
Dear Shareholder,
I am pleased to report that the Bank continues to drive
commercial momentum notwithstanding the ongoing
challenges presented by COVID-19 during the year.
2021 was a busy period for the Board who met on a total of 29
occasions. This increased Board activity was driven by the
planned acquisition of certain elements of the Ulster Bank
business together with intense focus by the Board on change
within the organisation, particularly in the area of technology,
workforce strategy, customer service and planning for growth.
During 2021 the Board established a committee of the Board
to provide support and guidance to the Board on the process
to agree the commercial and legal terms for the acquisition of
certain elements of the Ulster Bank business. This committee
will remain constituted during 2022 as the Board continues
towards finalisation of the transaction announced to the Market in
December 2021.
2021 was also a year where preparations commenced for the
introduction of the Individual Accountability Framework which
is currently progressing through the legislative process. The
Board will continue to provide oversight on this important piece of
governance legislation to ensure any enhancements required to
the Bank’s governance processes are effectively implemented in
good time.
During 2021 the culture of the Bank continued to evolve centred
on our purpose “to work hard every day to build trust with
customers – we are a community serving the community”. I am
very pleased with the work the Board Nomination, Culture and
Ethics Committee has carried out in this regard with key focus on
diversity and inclusion, culture, colleague wellbeing, sustainability
and the reputation of the Bank.
Our customers are at the heart of Board decision making and it
has been exciting to see this reflected in new brand, sustainability
and customer experience strategies all of which had active Board
involvement in their development. But not all developments during
the year were satisfactory. The Board acknowledged the levels
of customer service through the Bank’s call centre channel were,
at times, not acceptable and significant Board time was spent
in addressing this issue including onsite visits to the call centre
by members of the Board. I am pleased that through investment
and focus, service levels have considerably improved, but there is
more to be done in 2022.
The Board also approved an updated culture charter setting out
how Bank would like to evolve its culture and using language
that resonates with our colleagues. The Board has also been
much focussed on the wellbeing of bank colleagues in what has
continued to be a testing year in terms of ongoing remote working
coupled with the level of change at the Bank. Listening to the
voice of colleagues has been a key activity for the Board during
the year.
Change brings risk and this has been a key focus for the Board
during the year. It is important that change can be managed
in a manner that minimises risk to the organisation and
without impacting ongoing business as usual operations that
are necessary to support customers in terms of service and
safety. During the year, the Board focussed considerable time
on strengthening the Bank’s change management processes,
the continued embedding of risk awareness within change
management programmes and ensuring the Bank has capacity
to deliver on its ambitions. All of this was 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 Board is aware that it needs to have the collective knowledge,
experience and skills in order to provide effective governance
oversight for the Bank. Therefore, succession planning and Board
refreshment is both an active and well defined process. During
2021, the Board appointed Celine Fitzgerald and Anne Bradley
to the Board, rotated the chairs of the Board Risk and Audit
Committees and made several changes to the Board Committee
composition. All of these changes were made to ensure the
knowledge, experience and skills of the Board and its committees
were maximised to deliver on the Bank’s strategic ambitions.
Indeed, to ensure an orderly succession for my own position as
Chairman, the Board have commenced a process to identify my
replacement when I step down from the Board at the end of my
term of office in March 2023.
The purpose of this short introduction is to provide assurance
to stakeholders that the Board has an engaging and committed
approach to corporate governance and, while respecting executive
responsibility, has an active role in all key decisions that are made.
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 133, 138, 130 and 141 respectively highlight
the key activities and areas of focus for each Committee.
Robert Elliott
Chairman
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Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
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 maximums
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.
Corporate Governance Statement
(continued)
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.
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 2021, save as set out in the following
paragraphs.
Provision 25 of the UK Code requires
the audit and risk (where established)
committees to consist of Independent
Non-Executive Directors. Marian
Corcoran is a member of the Board
Risk and Compliance committee and
Paul Doddrell is a member of the Board
104
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. The Board
Remuneration Committee consists fully
of independent Non-Executive Directors
following changes to the committee’s
composition in May 2021.
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 finance and accounting credentials.
If the Board complied with the UK Code
provision 25 on independence, Mr Doddrell
and Ms Corcoran would have to step
down from aforementioned committees
and this creates a challenge for the Bank
in that it would have to recruit to replace
their knowledge and experience on the
committees (and unnecessarily duplicate
same on the Board) and as a consequence
would make the size of the Board unwieldy
(15 members). The Board is also satisfied
that while Mr Doddrell and Ms Corcoran
do not meet the criteria for independence
under the UK Code, like all Directors, they
were positively assessed (annually) for
independence of mind (a concept set out in
the Capital Requirements Directive).
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
Permanent TSB Group Holdings plc - Annual Report 2021 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 2021 – Sustainability
Materiality Assessment
The Bank takes a number of factors into
consideration when assessing where to
prioritise resources for its sustainability
activity. These include, but are not limited
to: the Bank’s business model and strategy;
principal risks; sector issues; public policy
and regulation; and, the impact of the
Bank’s activities on wider society.
To understand the issues that are
important to stakeholders, the Bank
engaged a sample of stakeholders to
complete a comprehensive Materiality
Assessment of the Bank’s Sustainability
programming.
The assessment offered insight into
the relative importance of specific
Environmental, Social and Governance
(ESG) issues relevant to conducting
business in a responsible way, and assisted
the Bank in building out a Sustainability
Strategy which was launched in November
2021. Central to the Bank’s Sustainability
Strategy is a focus on climate change and
supporting the transition to a low carbon
economy.
Reference to the Bank’s stakeholders
includes the Bank’s customers (personal
and small business), colleagues (Board,
management, employees and unions),
the Bank’s investors, suppliers, society
(community partners and industry
influencers) and the Bank’s regulators.
Outside of the materiality exercise, the
Bank interacts with stakeholders at regular
intervals during the year through the
following:
• Customers – Voice of the Customer
Programme, focus groups, surveys, in
person through the branch network
and through the Bank’s online digital
channels (website, App, customer
contact centres etc.);
• Colleagues – Every Voice Counts
employee engagement survey, regular
micro-pulse surveys, team meetings,
virtual networking forums, internal
intranet platform, a bank-wide
newsletter, in-house digital screens, five
Employee Resources Groups, People
Experience Council and other channels
as appropriate;
•
Investors – AGM and shareholder
services, financial reporting, roadshows,
industry conferences and other channels
as appropriate;
• Suppliers – Regular supplier engagement
processes and procedures, supplier
on boarding and contracting and other
channels as appropriate;
• Society – Community Partners, Media,
Government Officials and industry
influencers such as the BPFI and Irish
Banking Culture Board; and
• Regulators – Regular engagement and
regulatory reporting and other channels
as appropriate.
Focus for 2022
The Bank’s focus for 2022 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’s Corporate Development
and HR Function will continue to ensure
that feedback from colleagues, customers
and communities is measured effectively
in line with the Bank’s 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 2021, 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.
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
through alternative arrangements to those set out in the UK Code. A summary of these alternate arrangements are outlined in the below
table:
Mechanism
Detail
Board and Committee Meetings
During 2021 the Board met in total on 29 occasions and this facilitated regular Board
engagement with subject matter experts from across the Bank. Throughout 2021
the Board engagement aligned a core principle of ensuring the health safety and
wellbeing of all colleagues whilst ensuring a resilient and sustainable Bank.
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Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Corporate Governance Statement
Stakeholder Engagement (continued)
Mechanism
Detail
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.
Employee Events
Attendance at and participation in employee events on an on-going basis.
Living as Leaders Round Table Series
Examples include the Employee Resource Group Initiatives such as Wellbeing week,
Better Balance Webinars, Values in Practice Awards and Sustainability events.
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, strategy, 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.
Employee Engagement Group
Examples include the Every Voice Counts Annual Survey and Every Voice Counts
Micro-pulse, Irish Banking Culture Board (Éist).
The Company Secretary (Board Nominee) attends the People Experience Council
(PEC) to support the Board and gain a greater understanding of culture / employee
sentiment.
Nominations Culture and Ethics Committee met with the Bank’s People Experience
Council incorporating two formal engagements with the Council in 2021.
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 not only gains a deeper
understanding of the drivers behind the
employee engagement survey results
(Every Voice Counts, Éist), they also gain
diverse perspectives on what actions will
address the areas for development and
also any emerging areas of discontent from
employees. It is intended that periodic
attendance by Non-Executive Directors will
occur again in 2022.
All material organisational changes are
discussed and consulted on in advance
with employee representative bodies.
It is important in the context of these
discussions that colleagues understand
and can provide feedback on the financial
and strategic position of the Bank over
its 5 year planning period. During 2021,
the CEO attended engagement sessions
with Employee representative bodies to
explain and provide context to the Bank’s
current and medium term outlook as part
of negotiations on reward.
Having reviewed the series of employee
engagement during 2021, the Nomination,
Culture and Ethics Committee was
satisfied that this engagement was
effective and in compliance with the UK
Code.
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 Ambition, 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 Board
Biographies section.
106
Permanent TSB Group Holdings plc - Annual Report 2021 Corporate Governance Statement
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 Ambition, 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 (69)
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
Chairman Tonbridge School Ltd
EAMONN CROWLEY
(52)
CHIEF EXECUTIVE OFFICER
Appointed to Board
10 May 2017
Nationality:
Irish
Committee Membership:
None
External Appointments:
Banking and
Payments Federation Ireland CLG
Institute of Banking
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, cultural evolution and 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 an
industry-led body which represented UK-based financial and
related professional services.
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, Ambition 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
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Board of Directors (continued)
MIKE FRAWLEY (49)
CHIEF RISK OFFICER
Appointed to Board:
29 October 2019
Nationality:
Irish
Committee Membership:
None
External Appointments:
None
RONAN O’NEILL (68)
SENIOR INDEPENDENT
NON-EXECUTIVE
DIRECTOR
Appointed to Board:
26 July 2016
Nationality:
Irish
Committee Membership:
Audit 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
• Certified Bank Director
Key Strengths, Skills and Experience
Ronan, a chartered accountant, brings to the Board extensive
banking and leadership experience with a particular
competency in finance, 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 Audit 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
• Fellow, Institute of Bankers
108
Permanent TSB Group Holdings plc - Annual Report 2021 RUTH WANDHÖFER,
(46)
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,
(57)
NON-EXECUTIVE
DIRECTOR
Appointed to Board:
24 September 2019
Nationality:
Irish
Committee Membership:
Risk and Compliance Committee
Nominations, Culture and Ethics
Committee
External Appointments:
Director of IDA Ireland, Member
of DCU Governing Authority, and
Director of MC2 Change Limited
Key Strengths, Skills and Experience
Ruth has substantial banking and leadership experience with
extensive knowledge 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 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)
• PhD Finance
• Certified Bank Director
Key Strengths, Skills and Experience
Marian has broad 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 risk management brings invaluable experience
to the Board Risk and Compliance Committee. Marian’s cross-
industry skills in stakeholder management, risk management,
corporate governance and technology-enabled transformation
benefits the Board as the Bank’s strategy and change
programmes evolves at an ever increasing pace. Marian has a
strong track record in championing inclusion and diversity.
• Marian is an experienced non-executive director and a
former executive director and partner in Accenture Ireland.
Marian has extensive experience in strategy delivery,
delivery of technology-enabled change and business
transformation 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 serves on the Board of IDA Ireland, is a
member of the Governing Authority at DCU and was also a
member of the Irish Public Service Pay Commission.
• Chartered Director
• Certified Bank Director
• Professional Certificate in Leadership Coaching
• BSc Biotechnology
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Board of Directors (continued)
DONAL COURTNEY (57)
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to Board:
3 October 2018
Nationality:
Irish
Committee Membership:
Audit Committee
Risk and Compliance Committee
(Chair)
External Appointments:
Director of Dell Bank
International and IPUT plc
PAUL DODDRELL (54)
NON-EXECUTIVE
DIRECTOR
Appointed to Board:
26 November 2020
Nationality:
British
Committee Membership:
Audit Committee
Risk & Compliance Committee
External Appointments:
Director of 3 to 48 Ltd and Cabot
Financial Ireland Ltd
Key Strengths, Skills and Experience
Donal is highly experienced finance, accounting and risk
professional across leasing, lending and property financing
with a particular competence in financial reporting,
governance and internal controls. Donal brings to the Board
experience in asset financing and funding vehicle structures
such as collateralised loans and securitisations. Donal has
extensive risk and audit experience holding audit and risk
committee chair positions at Dell Bank International, IPUT plc
and formerly at Unicredit Bank Ireland plc.
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
Key Strengths, Skills and Experience
Paul has significant executive leadership experience
spanning finance, asset servicing, lending, operations, sales
with specific management expertise in business strategy
development and execution; risk management and change
management. Paul’s strategic insights and experience
particularly in the area of mortgage servicing and credit
provide core skills which the Board requires.
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
• Certified Bank Director
110
Permanent TSB Group Holdings plc - Annual Report 2021 CELINE FITZGERALD
(59)
NON- EXECUTIVE
DIRECTOR
Appointed to Board:
30th March 2021
Nationality:
Irish
Committee Membership:
Nominations, Culture and Ethics
Committee
Remuneration Committee
External Appointments:
Director of Vhi Health And
Wellbeing DAC
and of Vhi Health And Wellbeing
Holdings DAC
Chair, Pieta House
ANNE BRADLEY (63)
NON-EXECUTIVE
DIRECTOR
Appointed to Board:
30th March 2021
Nationality:
Irish
Committee Membership:
Audit Committee
Risk and Compliance Committee
External Appointments:
Director of Northern Trust
International Fund Administration
Services Ireland Ltd
Director Pieta House
Key Strengths, Skills and Experience
Celine is a former Non-Executive Director at the commercial
semi-state company Ervia and has previous senior executive
experience in the telecommunications (senior executive at
Vodafone 1999 – 2007) and the managed services (CEO of
Rigney Dolphin 2007 - 2012) industries. Celine was a Non-
Executive Director on the VHI Main Board between 2010 and
2020 and was General Manager at the charity Goal between
2016 and 2018. Celine has also contributed her time to many
other charitable foundations and is the current Chair of the
charity Pieta House.
Celine is an experienced senior executive and Independent
Non-Executive Director and has led culture transformation in
challenging environments. Celine has had practical experience
of handling ethical challenges in the charity sector during her
time as Managing Director of Goal. Celine has an in-depth
understanding of strategic differentiation to deliver customer
value. Celine’s knowledge and experience will be of significant
benefit for the Board in its role to lead on evolving an open
ethical, risk aware and inclusive culture which is focussed on
building trust with customers, colleagues and communities.
• BA Management
• Chartered Director
Key Strengths, Skills and Experience
Anne's experience is centred on transformation and business
change and her cross industry knowledge and experience will
support the Board as the Bank continues to implement its
digital transformation strategy while maintaining resilient and
reliable IT systems.
Anne’s has extensive experience in technology and has
operated at senior levels, leading on IT resilience, emergency
response, technology evaluation, crisis management,
operational efficiency and IT infrastructure.
Anne worked with Aer Lingus/IAG Group until 2020 where,
during a 40 year career she held a number of senior executive
roles. Between 2015 and 2018 she was Director of IT with
Aer Lingus and thereafter Head of Group IT Delivery/Digital
Development (2018 -2020) with IAG Group. Anne was an
Independent Non-Executive Director at Bus Eireann from 2015
to 2018 and more recently joined the Board of Northern Trust
International Fund Administration Services Ireland Ltd.
• Fellow of the BCS The Chartered Institute for IT
• Chartered Director Certified Bank Director
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Corporate Governance Statement
Board of Directors (continued)
KEN SLATTERY (73)
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed to Board:
30 August 2013
Nationality:
Irish
Committee Membership:
Nomination, Culture and Ethics
Committee
Remuneration Committee (Chair)
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
Trust
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.
ANDREW POWER (65)
INDEPENDENT NON-
EXECUTIVE DIRECTOR
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
Corporate, 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
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, 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
CONOR RYAN,
COMPANY SECRETARY
Conor joined the Bank in 1989 and was appointed Company Secretary in 2017. As Company
Secretary and Head of Corporate Governance, 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.
112
Permanent TSB Group Holdings plc - Annual Report 2021 2021 Board Meeting Attendance and Directorships
Member
Non-Executive Directors
Robert Elliott
Ken Slattery
Paul Doddrell
Ronan O’Neill
Andrew Power
Donal Courtney
Ruth Wandhöfer
Marian Corcoran
Anne Bradley
Celine Fitzgerald
Executive Directors
Eamonn Crowley
Mike Frawley
Appointed
Ceased
Number of Years on
Board
2021 meetings
Number of
Directorships held
31 Mar 2017
30 Aug 2013
26 Nov 2020
26 Jul 2016
26 Sep 2016
03 Oct 2018
30 Oct 2018
24 Sep 2019
30 Mar 2021
30 Mar 2021
10 May 2017
29 Oct 2019
-
-
-
-
-
-
-
-
-
-
-
-
4.9
8.4
1.1
5.5
5.3
3.3
3.2
2.3
0.8
0.8
4.7
2.2
29/29
29/29
29/29
28/29
28/29
28/29
28/29
29/29
22/22
22/22
29/29
28/29
7/3
5/3
6/2
3/2
4/1
6/3
7/3
5/2
4/2
5/2
8/1
2/1
Notes:
PTSB is the sole direct subsidiary of PTSBGH. During 2021, 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 and the second number is the number of 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 2021 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 115 to 116. 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.
114
Permanent TSB Group Holdings plc - Annual Report 2021 EXECUTIVE COMMITTEE
EAMONN CROWLEY
CHIEF EXECUTIVE
GER MITCHELL
CHRO & CORPORATE
DEVELOPMENT
DIRECTOR
MIKE FRAWLEY
CHIEF RISK
OFFICER
Ger has been a member of the Executive Committee since 2012. Ger is an experienced
commercial leader who has held a number of senior retail, 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; marketing, brand, corporate affairs,
customer experience, sustainability and communications together with organisation design,
talent development, people experience and culture evolution. The 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. HR and Corporate Development lead
a number of strategic programmes focused on Brand, Culture and Reputation; Customer Strategy
and Experience; Enterprise Transformation, including Hybrid Workplace; 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.
CLAIRE HEELEY
HEAD OF INTERNAL
AUDIT
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.
Claire, a Chartered Accountant with over 20 years’ experience, joined the Bank in 2021 as the Bank’s
Head of Group Internal Audit from KPMG, where her most recent role was Managing Director, Risk
& Regulatory Consulting. In this role Claire led major risk transformation projects and the delivery
of internal audit services to a portfolio of financial services clients for over six years. Prior to her
role as Managing Director, Risk & Regulatory Consulting, Claire held a number of senior roles
including: Retail Division Audit Partner in the Group Internal Audit division of Bank of Ireland and
Deputy Group Secretary of Bank of Ireland.
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. Claire
is a regular attendee at Group Executive Committee meetings but, in accordance with good
governance practice, has no voting rights. Claire has a direct reporting line to the Chairman of the
Board Audit Committee.
115
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Corporate Governance Statement
Leadership and Effectiveness (continued)
DECLAN NORGROVE
CHIEF FINANCIAL
OFFICER (interim)
Declan joined the Bank in 1982 and was appointed Interim Chief Financial Officer in 2021. Declan
is an accomplished finance leader having previously held a number of senior risk and finance roles
at the Bank including Group Head of Finance and Head of Risk Governance & Strategy. Declan
has proven expertise in financial reporting, financial management, regulatory reporting, treasury,
risk management and has provided leadership on many of the corporate action programmes
undertaken by the Bank over the last decade.
The Group Finance Function includes the following span of operations: Investor Relations; Finance
Operations; Central Data Office; Treasury; Financial Reporting; Financial Accounting, Statutory
Reporting and Tax; and, Regulatory Reporting.
TOM HAYES
CHIEF TECHNOLOGY
OFFICER
Tom is an experienced business change and IT leader with wide experience of 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 technology leadership roles including: Head of Customer Engagement Technology,
AIB Digital and Group Head of IT Infrastructure & Operations.
Group Technology has responsibility for the development and implementation of the Bank’s
Technology strategy, the implementation of the Digital Transformation roadmap and the full
portfolio of IT Change Delivery. This involves close collaboration with the Retail Banking and
Group Operations teams to design and deliver on the Bank’s Digital Transformation. The Division
also has responsibility for the day-to-day critical operations and protection of technology enabled
customer services.
PATRICK FARRELL
RETAIL SALES DIRECTOR
Patrick has over 25 years’ experience across the banking industry. Patrick joined the Bank in
December 2018 as Retail Banking Director. Patrick has previously held senior management roles in
Strategy, Product and Proposition Development, Marketing, Private Banking and, Retail Sales and
Service Distribution.
PETER VANCE
CHIEF OPERATING
OFFICER
The Retail Banking Division is responsible for all sales and service channels and the Bank’s
product management strategy. The Function has multi-channel oversight across sales and service
with a focus on improving customer experience, meeting customer needs and wants, enabling
income growth and delivery. The division closely collaborates with the Corporate Development and
HR Team on customer propositions and experience.
Peter joined the Bank as Chief Operations Officer in 2021 from AIB, where his most recent role
was Head of Customer Services. In this role, Peter was responsible for leading multiple activities
in both Ireland and the UK including; including; Payments, Treasury services, Financial Crime, SME
Lending and the Customer Service Centre. Prior to his role as Head of Customer Services, Peter
held a number of other senior executive positions at AIB including; Head of Payments, Cards and
Treasury Services, Head of Payments and Head of Payments Transformation.
Group Operations encompasses Banking Operations, Collections & Recoveries and other key
functions. The business unit is focussed on consolidating, standardising and simplifying activity
so as to enable the Bank to deliver an exceptional customer experience, while also generating
efficiencies.
Executive Committee Vacancies
Declan Norgrove was appointed to fill the Chief Financial Officer role on an interim basis, the Bank’s recruitment process to fill the
position on a permanent basis is progressing.
116
Permanent TSB Group Holdings plc - Annual Report 2021
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
Customer Growth
Committee
Sustainability
Committee
Assets and Liabilities
Committee
OP Risk
Committee
Credit
Committee
Board
The Board retains 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 business activity aligns with the Company’s stated
Purpose, Ambition, Values and Culture.
• Set and oversees all risk, financial, compliance and
performance standards.
• Demonstrates leadership (sets the tone from the top)
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.
Nomination, Culture and
Ethics Committee
Robert Elliott (C)
Ken Slattery
Ronan O’Neill
Marian Corcoran
Celine Fitzgerald
• Reviews structure, effectiveness
and composition of the Board.
• Reviews all new Director and
Audit
Committee
Ronan O’Neill (C)
Donal Courtney
Paul Doddrell
Andrew Power
Anne Bradley
• Oversees internal financial
controls.
Risk and Compliance
Committee
Donal Courtney (C)
Paul Doddrell
Ruth Wandhöfer
Marian Corcoran
Anne Bradley
• Oversees financial and non-
financial risks.
• Reviews full year and half-year
• Monitors and makes
senior management appointments.
financial statements.
• Oversees succession planning
• Oversees all relevant matters
recommendations to the Board on
the Company’s appetite for risk.
Remuneration Committee
Ken Slattery (C)
Robert Elliott
Andrew Power
Ruth Wandhöfer
Celine Fitzgerald
• Oversees remuneration and
reward strategies.
• Ensures remuneration strategy
is aligned with the Company’s
appetite for risk.
and performance for directors and
senior management.
pertaining to the external auditors.
• Oversees credit, funding and
• Oversees senior management
• Monitors the output of internal
liquidity policies.
reward.
• To review/monitor the design,
audit findings
• Reviews the Company’s regulatory
• Monitoring relevant external
implementation and effectiveness
of the Company’s Purpose,
Ambition and Values.
• Oversees the Company’s Culture,
Ethics, Diversity, Workforce
Engagement, and Responsible
Business Programmes.
• 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.
obligations and treatment of
customers.
benchmarks for posts within the
scope of Committee.
• Review and provide guidance
to the Board on the Company’s
capital and liquidity position for
use in strategic decision making.
• Oversight and guidance to the
Board on Recovery and Resolution
Planning.
• To assess the impact of Climate
Risk on the Bank’s overall Risk
Profile
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Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Corporate Governance Statement
Governance Structure, Roles and Responsibilities (continued)
Executive Committee
The Executive Committee reports 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, people and
culture, investment and risk. The Executive Committee is accountable for the operations, compliance and performance of the Bank. It is
responsible for delivery of all delegated governance commitments. The terms of reference of the Executive Committee is approved by
the Board.
The Executive Committee has established a number of 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
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
• Oversees the Capital
Risk related activities
and supporting
Policies
Credit
Committee
Operational Risk
Management
Committee
Customer
Growth
Committee
Sustainability
Committee
• Recommends
• Monitors the
• Prioritise
• Oversight of
relevant Portfolio
Credit Risk elements
of the Group’s RAS
for approval by the
Board
• Monitors adherence
to the Group’s
Credit Policy and
Framework
• 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
• Reports any breaches
of approved limits
in accordance with
agreed protocol
Operational and IT
risks to which the
Company is exposed
• Oversees risk
mitigation,
performance and
prioritisation related
to the management
and control of risk
• Reviews and
discusses the outputs
and results of control
testing
• Creates awareness
of commonly
experienced
operational & IT
risk matters, to
share learnings and
enhance the control
environment across
the Company
• Review and monitor
KRIs and the
operational and
IT Risk Appetite
Statement
• Review emerging
risks and other
relevant operational
and IT risk metrics
opportunities,
resources and
capabilities to
deliver sustainable
commercial growth
• Oversight of
development and
implementation
of the Bank’s
Sustainability
Strategy and related
KPIs
significant business
propositions and
strategies that have
a material customer
impact
• Monitor and report
progress against
Sustainability
objectives
• Oversees the
Sustainability related
activities and provide
support and guidance
into sustainability
activities across
the Bank, including
regulatory
compliance; risk
management
frameworks; and
green products and
services
• Approval body for
product governance
arrangements
• Review body for all
high impact customer
events, issues and
complaints
• Monitor and report
on customer
performance
indicators aligned to
the Banks strategic
pillars
• Monitor and report
on conduct risk
indicators against the
Board approved risk
appetite and conduct
risk principles
• Serve as the central
oversight body for all
significant customer
matters ensuring
fair treatment of
customers
118
Permanent TSB Group Holdings plc - Annual Report 2021 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.
Embedding the Bank’s Organisational Culture and Diversity and Inclusion Programmes.
Strategy
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 Frameworks, 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.
119
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 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 also 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 on the process’
effectiveness during the year in review.
4 Stage Annual Strategy Development Process
Strategy Session 1 (October 2021)
This is a standalone strategy
session which sets out the internal
environment in which the Bank
operates. The session is structured
around presentations from
management and the Bank’s external
economist, and also includes input
from other relevant speakers on
particular topics of interest. For
example, in 2021, the session included
an externally led deep-dive into Digital
Banking. The first strategy session
outlines the point of departure for the
Bank, as well as key challenges facing
the Bank over the planning period. The
Board discusses and debates the key
areas of strategic focus for the Bank
over the coming years and discusses
the relevant priorities of the Bank,
including trade-offs that may have to
be made over the planning period. This
is a key opportunity for Non-Executive
Directors to provide feedback and
input to the strategy planning process
before the first advanced draft of the
Strategic Portfolio is presented to
Board at Strategy Session 3.
Corporate Governance Statement
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 2021 a key focus for the Board was
managing the Bank’s change agenda. The
transaction to acquire certain elements
of the Ulster Bank business together with
the opportunity presented for customer
acquisition following the withdrawal of both
Ulster Bank and KBC from the Irish market
was a key focus for the Board. Ensuring
the Ulster Bank business acquisition
created value, overseeing the resultant
due diligence process and ensuring the
adequate allocation of resources to execute
the project were all key focus areas for
the Bank. A key enabler to drive customer
acquisition for the Bank was continued
investment in technology to drive digital
innovation and ensuring this work was
undertaken in managed and risk aware
manner while maintaining resilient day to
day operations, this was a key focus area
for the Board. The Board 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
120
of corporate governance and effectively
managed in the areas of risk and
compliance.
The priorities for the Board in 2022
will include oversight of the migration
programme for the transfer of Ulster Bank
business and colleagues to the Bank
(subject to regulatory and competition
approval) customer allocation strategy
and execution and launch of new digital
capability. The Board will also focus on
developing the Bank’s SME Strategy
to complement the acquisition of the
Lombard and Ulster business which will
be supported through digital enablement
and personal customer service. The Board
will also be focussing on the execution of
its newly launched sustainability strategy
and working with stakeholders towards
to development and execution of a new
brand proposition. The Board will continue
to ensure that this is done in a prudent
manner which ensures the Bank can
execute change while maintaining resilient
systems and customer service.
“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 and a series of foundational
capabilities through which key
transformational programmes of work are
executed. These programmes are executed
via the Bank’s ‘Strategic Portfolio’ – a
tool for managing, tracking and reporting
strategy execution. This ensures that the
Bank’s strategy is aligned to its stated
purpose and ambition.
The Board annually approves a five year
strategic 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.
Permanent TSB Group Holdings plc - Annual Report 2021 4 Stage Annual Strategy Development Process
Strategy Session 2 (Early November
2021)
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
2021)
The Bank’s Executive Management
Team presents how Board feedback
from Strategy Sessions 1 and 2 have
been addressed, as incorporated into
a revised draft financial plan and draft
Strategic Portfolio. This session is the
last formal checkpoint that Board has
to provide input and challenge to the
strategic and financial plans (including
an assessment of capacity to deliver),
in advance of formal approval of
the plans by year end. The third
session also provides an opportunity
for the Second Line of Defence to
present their emerging challenge and
assessment of the proposed plans. The
session includes a significant deep-
dive into key strategic programmes
or themes, and is supplemented by
external inputs if required. For example,
in 2021 the session included an
external spotlight on Sustainability.
Final Sign-Off (Mid-December 2021)
Following completion of the third
strategy session, and with continued
engagement with the Bank’s
Management Team, the final draft
Strategic and Financial plans are
presented to Board for formal approval.
This takes place in mid-December as
part of the agenda for the standing
monthly Board meeting.
The Board is responsible for overseeing
the implementation of the overall
business strategy and receives reports
on the execution of the Bank’s strategy
on a monthly basis as a standing item
on the Board agenda.
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 remains
appropriate. In determining independence,
the Board will consider guidance on
independence provided within the UK
Code.
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 the continued collective suitability of
the Board. The Board has a target size
of 12-13 Directors. In addition to having
Directors with a broad range of knowledge,
experience and skills, 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 31 December 2021, the Board comprised
twelve Directors: the Chairman, who was
independent on appointment, the CEO,
the CRO and ten Non-Executive Directors,
eight of whom have been determined
by the Board to be independent Non-
Executive Directors. On appointment in
2022, the successful CFO candidate will
join the Board. Changes to the Board
during 2021 included the appointment of
Ms Anne Bradley and Ms Celine Fitzgerald
as Non-Executive Directors on 30 March
2021. Biographies of each of the Directors
are set out in the Board of Directors
section on pages 107 to 112. The wide
range of knowledge, experience and skills
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, culture evolution,
change management 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.
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.
The Chairman is proposed for re-
appointment by the Directors on an annual
basis. The term of office of the Chairman
121
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Corporate Governance Statement
Board Leadership and Effectiveness (continued)
is six years. The Chairman has informed
the Board he will not seek an extension to
his term of office which is due to expire in
March 2023 and a process to identify his
successor is now underway.
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 was reduced
to six months for all Executive Director
Board appointments from 2020. 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
facilitated every three years. An externally
facilitated evaluation of performance last
took place in 2018 and was completed
again in 2021.
The evaluation of the Board and its
Committees considers the balance of skills,
experience, independence and knowledge
of the Board, its diversity, including gender
balance, how the Board works together
as a unit, and other factors relevant to its
effectiveness. In addition, the evaluation
ensures that Board committees have the
requisite expertise to properly discharge
their duties.
The process for the 2021 Board
performance evaluation is described
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.
2021 Board Performance Evaluation
In line with the provisions of the UK Code
an externally facilitated evaluation of
122
Board performance took place in 2021.
This performance evaluation process
was externally facilitated by Promontory
Financial Group (Promontory). Promontory
provides other services to the Bank in
the area of Risk governance and Director
training and Promontory has no other
connections with the Bank or with
individual directors.
The scope of Promontory’s review
included:
• an assessment of the current
performance and cohesion of the
Board, its directors, and its principal
committees in light of PTSB’s structure,
business model and strategy;
• an assessment of the Board’s evolution
and how recommendations from the
last Board Effectiveness Review by
Promontory (conducted in 2018) have
been considered;
• evidence strengths of the Board and
Board processes, and identify any areas
Promontory considered the Board could
be more effective; and
• Propose a set of recommendations,
if appropriate, to enhance Board
performance.
The Promontory evaluation which
commenced in September 2021 and
concluded in January 2022 compromised
the following activities:
• Meeting with the Chairman and
Company Secretary to discuss the scope
and objectives of the review;
• One to one interviews with all Directors,
the Company Secretary, Head of Group
Internal Audit and Head of Compliance;
• A desktop review of relevant documents
including a detailed analysis of Board
papers;
• Attendance in an observer capacity at
the November meetings of the Board,
Risk Committee and Audit Committee;
and
• Attendance at a meeting of the
Nomination, Culture and Ethics
Committee on the 14 February 2022 to
present their findings.
The externally facilitated evaluation was
also supported by a number of internal
actions:
• The issue to Board of a questionnaire
based on key governance related themes
to assess the performance of the Board
and its Committees.
• 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;
• The Senior Independent Director met
with each of the Directors and Company
Secretary to seek feedback on the
performance of the Chairman;
• The Chairman obtained feedback from
the Non-Executive Directors on the
CEO’s performance; and
• Preparation of a governance compliance
document providing analytics on Board
tenure, Board committee meeting
attendance, assessment of director
independence, assessment of director
time/external commitments and
conflicts of interest.
The output from the above actions
together the report from Promontory were
considered at a meeting of the Nomination,
Culture and Ethics Committee’s on the 14
February 2022 and by the Board on the 1
March 2022.
Outcomes of 2021 Board
Performance Evaluation
During a meeting held on 14 February
2022, the Nomination Culture and Ethics
Committee received a report from both
Promontory and the Company Secretary
on the performance evaluation of the
Board for 2021. The Promontory report
found that the Board had operated in a
cohesive, respectful and collegiate manner;
demonstrating thoughtful and good levels
of challenge and oversight to the Bank’s
management team and was focused on
the most material matters for the Bank.
The report further stated how there were
very good levels of engagement from
all directors, who exhibited a significant
level of commitment and focus during
an intensive period for the Bank that
included a range of significant activities
beyond business-as-usual such as
the Ulster Bank transaction, Covid-19,
major change projects and recruitment
activity relating to key members of the
Executive. Furthermore, the Board had
maintained good corporate governance
discipline despite a demanding number
of meetings and full agenda throughout
the past three years and directors had
shown commitment to addressing issues
and seeking to secure the long-term
Permanent TSB Group Holdings plc - Annual Report 2021 future of the Bank. The Board continues to interact with a wide range of staff from across the Bank, which is evident from the diverse
set of presenters at Board and committee meetings. Directors actively encouraged Board exposure for staff who are at the forefront of
conducting the work being overseen by the Board.
The promontory report also set out a series of recommendations which have been considered and endorsed by the Board and which are
summarised below:
2021 Board Performance Recommendations
Culture
Risk
Change
Management
Board
Committees
Board, Cycle
frequency and
agenda
IAF and SEAR
Enhanced focus on developing, maintaining and monitoring the desired culture of the Bank as it becomes a larger organisation through the
acquisition of parts of the Ulster Bank business.
To cement the gains made in progressing risk culture of the Bank, the Board should continue to prioritise its
focus on overseeing the continued embedding of the Risk Management Framework across all three lines of
defence.
To keep under review options for alleviating stretch on certain key senior members of management who are
simultaneously charged with both running and transforming the bank.
Implementation of a standing item at the end of each board committee meeting to agree the key matters to be
raised at the subsequent Board meeting.
Following 29 meetings in 2021, the Board should consider the point at which it would likely make a viable return
to a more traditional schedule of meetings and furthermore accelerate a return to both in-person and virtual
meetings (Hybrid meeting model).
In light of the impending introduction of IAF and SEAR, the Company Secretary should conduct a review of
board processes and documentation once the legislative detail is made clear.
Board Reporting
The Board should continue to encourage more explicit and proactive raising of risks and issues in management
reporting to the Board and its committees.
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.
2021 Board Training and On-Going Business Awareness
Board Training Sessions
A number of Board training sessions were facilitated during 2021 to support on-going business awareness and Director development.
Given the challenges of COVID-19 these sessions were typically delivered through electronic channels. 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 2021 included: a Loan Impairment spotlight; Board Reporting with clarity
and Impact; Sustainability; Anti-Money Laundering; Cyber Security; Market Abuse; and Corporate Legal and Regulatory latest
Developments.
Board Briefings
In addition to formal Board training sessions, a number of Board briefings were presented to the Board during 2021. 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 2021 included: Covid-19 Impacts;
Government of Ireland Housing for all plan; post Brexit environment; macro-economic outlook; equity market performance/outlook;
capital and liquidity planning, recovery planning; and, future of banking 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 their work on the Board. Led by the Chair, the Non-
Executive Directors met without the Executive Directors present.
123
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Board Leadership and Effectiveness (continued)
During 2021, two of the Board’s
permanent committees were composed
of Independent Non-Executive Directors
and two were composed of a majority
Independent Non-Executive Directors.
The Board acknowledges it is not to be
in compliance with the UK Code (which
requires all directors to be independent)
with regard to the membership of its
Audit and Risk & Compliance committees
and has set out is rationale on page
104 as to why the Board is satisfied
this does not inhibit these committees
effectively executing their responsibilities.
Membership and the Chairmanship of each
committee are reviewed annually.
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 29 Board meetings during
2021. Further details on the number of
meetings of the Board, its Committees and
attendance by individual Directors are set
out on page 113.
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, customer experience,
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 & Compliance
• Nomination, Culture & Ethics
• Remuneration
Other Committees are formed from time to
time to deal with specific matters. During
2021, the Board established a committee
of the Board to provide support on the
corporate transaction to acquire certain
elements of the Ulster Bank business in
Ireland. This committee operates within
a Board approved terms of reference and
consists the following members: Robert
Elliott (Chair), Eamonn Crowley, Mike
Frawley, Marian Corcoran, Anne Bradley,
Paul Doddrell, Ronan O’Neill and Donal
Courtney.
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Permanent TSB Group Holdings plc - Annual Report 2021 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 2021 was
undertaken jointly by the Board Risk and
Compliance and Board Audit Committees.
In assessing the effectiveness of the
Bank’s systems of risk management
and internal control during 2021, the
Committees 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
Committees also considered the opinion
of the Head of Group Internal Audit (third
line of defence) in their assessment on the
adequacy and effectiveness of key controls
during 2021 which for the Bank were found
to be effective.
While the review indicated there were
areas of the Bank’s control environment
that would continue to require
enhancement, the overall effectiveness
of the Bank’s control environment during
2021 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 2021 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;
• The preparation and issue of financial
reports, including the consolidated
Annual Report, is managed by the Group
Finance department, with oversight
from the Board Audit Committee. 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 Board
Audit Committee 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 five 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’s responsibility for the independent
assessment of the Group’s corporate
governance, risk management and
internal control processes. The Head of
GIA reports directly to the Chair of the
BAC;
• The reviews by Board Audit Committee
on the scope, nature and independence
of the work of undertaken by GIA;
• The reviews by Board Audit Committee
the internal audit programme of work.
The Head of GIA reports regularly to the
BAC. The BAC also reviews the Interim
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;
• Under the Group’s Internal Control
Framework, there are divisional control
frameworks in place within each
business unit under which 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 monitoring of regulatory compliance
within the Group by the Head of
Regulatory Compliance who reports
to the CRO and who also provides
regular updates to the Board Risk and
Compliance Committee; and,
• Established systems and procedures to
identify, control and report on key risks.
Exposure to these risks is monitored
at Board level by the Board Risk and
Compliance Committee. As a standing
item on both Board Risk and Compliance
Committee and Board agendas, the CRO
regularly reports on all material issues
related to activity within the Bank’s risk
and control environment. The CRO is a
member of ExCo, Chairs the Group Risk
Committee and has reporting lines to
the CEO and Chair of Board Risk and
Compliance Committee.
125
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Corporate Governance Statement
Risk Management and Internal Control (continued)
• 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.
The Board Risk and Compliance
Committee reviews the compliance
and risk management programmes and
monitors the risk profile of the Group. The
Board Risk and Compliance Committee
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 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 Ambition, Purpose and Values. 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 by
creating a psychosocially safe environment
in which to do so. In addition, the Bank
also has in place a Colleague Conduct
Policy, 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 a Financial Control
Framework (a divisional framework of
the Bank’s Internal Control Framework)
over financial reporting to support the
preparation of the consolidated financial
statements. The effectiveness of the
Bank’s systems of control over financial
reporting are reported on to the Board
Audit Committee on an annual basis. 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;
126
Permanent TSB Group Holdings plc - Annual Report 2021 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
42.
Board Diversity Policy
The Board has a Diversity Policy which is
reviewed annually. The Board Diversity
Policy sets the target for gender diversity
as described below in the “Objective of the
Board Diversity Policy” section and also
sets guidance on the appropriate mix of
financial versus non-financial knowledge
and experience on the Board as well as
the geographic location/background of
Directors. The Policy also describes how
the Board will consider other key metrics
such as age and the demographic makeup
of the Bank’s customer base when carrying
out succession planning activities or Board
recruitment/Refreshment.
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 social and
ethnic background, regional and industry
experience, educational, professional,
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
Nomination, Culture and Ethics Committee
considered diversity benchmarking results
published by competent authorities, the
EBA, or other relevant international bodies
or organisations. At any given time, the
Nomination, Culture and Ethics committee
may seek to improve one or more aspects
of its diversity and measure progress
accordingly.
The Board has set a target of maintaining
a minimum 30% female representation
on the Board. The Bank is committed to
having a diverse Board, to maintaining 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. The Board have also agreed
that directors domiciled in Ireland should
constitute a minimum of 70% of Board
membership to reflect the Company’s
Ireland only business model while allowing
scope for geographic diversity.
How the Board Diversity Policy was
implemented during 2021
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 and is reviewed
annually.
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,
experience, skills and independence as well
as other diversity measures set out in the
Board Diversity policy such as gender and
age.
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. On industry diversity,
Anne Bradley and Celine Fitzgerald were
recruited to the board in 2021 bringing
with them knowledge and experience from
the aviation, healthcare, communications
and charities sectors. In addition to
core financial services knowledge and
experience, the Board also can draw from
expertise in law, technology, change and
risk management, customer advocacy,
strategy development and governance.
The Board considers skills, experience
and expertise, including education
and professional background in areas
relevant to the operation of the Board.
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.
2021 Board Diversity Progress
The Board gender diversity ratio stands
at 33% (40%for Non-Executive Directors)
and it is the Board’s intention to, at a
minimum, maintain its current target and
to build on same over the coming period.
The Board achieved its objective of 50% of
Non-Executive Directors having Banking
and/or financial experience and is satisfied
all Directors have attained the required
financial literacy threshold.
127
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 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
1
2
4
8
5
40-49
50-59
60-69
70-79
Independence
Executive & Non-Executive Directors
2
2
2
8
10
Independent Non-Executive Directors
Non-Executive Directors
Non-Executive Directors
Executive Directors
Executive Directors
128
Permanent TSB Group Holdings plc - Annual Report 2021 2022 Board Diversity Priorities
Board Objective
2022 Board Action
Gender
The Board remains committed
to gender diversity on the
Board.
Alignment to
customer base
Board Diversity
Policy
Board
Recruitment and
Selection and
Suitability
The Board acknowledges the
Bank has a diverse customer
base and should take account
of same in considering the
diversity requirements of the
Board.
The Board recognises that
there are many aspects of
diversity such as social and
ethnic backgrounds, gender,
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
knowledge, experience and
skills, 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.
• 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.
• The Board Diversity Policy will be updated to ensure the Board has a
clear line of sight on the diverse makeup of the Bank’s customer base
when considering appointments to the Board.
• Customer diversity metrics such as age, nationality and gender should
influence how the Board thinks about its own construct.
• Consider the aspects of diversity relevant to the operation of the Bank,
such as gender, age, cognitive, social/ethnic background, personal
strength, educational background and 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
knowledge, skills and experience 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
• Ensure the Bank pipeline of successors takes account of the Bank’s
diversity measures and ambitions.
129
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
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.
and highlighted the things the Bank was doing well across the
organisation, but more importantly, provided insight into areas of
opportunity, places where the Board could focus its attention to
drive change and deliver lasting impact.
Following the assessment, in 2021 the Bank mobilised a
management Sustainability Committee with representation from
senior leaders across the Bank. Led by the Nomination, Culture
and Ethics Committee, the Bank commenced work on turning
the findings into an overarching Sustainability Strategy for the
organisation.
In 2021, the Bank engaged stakeholders to complete a materiality
assessment to support the Bank in identifying the Environmental,
Social and Governance (ESG) issues that were material to the
Bank’s business. The findings were insightful, and helped the
Nomination, Culture and Ethics committee guide and inform
the development of the Strategy which was approved by the
Board late last year. Please see further information on the Bank’s
Sustainability Strategy on page 29.
Board Performance Evaluation
In 2021, the Committee oversaw an independent, external
evaluation of the Board, 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.
On behalf of the Nomination Culture, and Ethics Committee
Robert Elliott
Chair, Board Nomination Culture, and Ethics Committee
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 2021. 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 2021 as set out below.
Evolving 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. It has been interesting to see how the
agenda for the committee has evolved over the last two years with
meetings now focussed on both the ‘Nomination’ and ‘Culture’
related responsibilities of the committee in equal parts. The
Committee has used its updated responsibilities to engage in
a meaningful way to shape and support evolution of the Bank’s
espoused culture which is to have a customer-centric, open,
inclusive, risk integrated, growth culture characterised by integrity
innovation and accountability. In this regard we have heard from
many of the Bank’s colleagues and have had discussion and
debate on matters such as agreeing a new sustainability strategy
for the Bank, developing a psychologically safe environment for
colleagues to ‘speak freely’ and moving towards the next stage on
the Bank’s Diversity and Culture maturity journey. The Committee
has also actively engaged in understanding and supporting
colleague wellbeing through attendance at People Experience
Council (representative group on culture evolution and colleague
wellbeing) meetings and hearing feedback from the Irish Banking
Culture Board and management respectively on the outcome of
the ‘Eist’ and ‘Every Voice Counts’ colleague surveys.
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.
Sustainability Strategy
The Bank has a significant role to play in supporting stakeholders
to navigate the green transition and to embrace the opportunities
that sustainability brings.
In 2020, the Bank commissioned a third party to conduct a
comprehensive sustainability assessment of Permanent TSB.
The comprehensive assessment covered a number of topics
130
Permanent TSB Group Holdings plc - Annual Report 2021 Composition and Operation
The Committee is composed of five independent Non-Executive Directors. The Board
requires that the Board Chairman and the Senior Independent Director are members of
the Committee.
2021 Committee Meeting Attendance
Member
Robert Elliott*
Ronan O’Neill
Donal Courtney
Ken Slattery
Marian Corcoran
Celine Fitzgerald
* Chair
Ceased
-
-
30 Mar 2021
-
Appointed
31 Mar 2017
26 Jul 2016
3 Oct 2018
28 Sept 2020
30 Mar 2021
30 Mar 2021
Number of
Years on the
Committee
4.9
5.5
2.5
1.3
0.8
0.8
2021 Meeting
Attendance
7/7
7/7
2/2
7/7
5/5
5/5
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, and reputation
management and employee engagement.
Executive Committee Appointments
The Committee oversaw the appointment
of Peter Vance as Chief Operations Officer,
and member of the Executive Committee.
In his new role, Peter is responsible
for Banking Operations, Collections &
Recoveries and other key functions. The
business unit is focussed on consolidating,
standardising and simplifying activity so as
to enable the Bank to deliver an exceptional
customer experience, while also generating
efficiencies.
The Committee also oversaw the
appointment of Claire Heeley to the role
of Head of Internal Audit. In her new
role, Claire is responsible for providing
independent assurance to the Board
over the adequacy and effectiveness of
the governance, risk management and
control processes in operation across
the Bank. Claire is a regular attendee at
Group Executive Committee meetings
but, in accordance with good governance
practice, has no voting rights. Claire has a
direct reporting line to the Chairman of the
Board Audit Committee.
Director Appointments
A key function of the Committee is
succession planning for the Board. There
were two appointments to the Board during
2021. Anne Bradley, was appointed as a
Non-Executive Director to the Board in
March 2021. Ms Bradley is a member of
the Board Audit Committee and Board Risk
and Compliance Committee. Additionally,
Celine Fitzgerald was appointed as Non-
Executive Director to the Board in March
2021. Ms Fitzgerald is a member of the
Nomination, Culture and Ethics Committee
and Remuneration Committee. Full details
of the appointment process for both
positions are set out below.
The Committee are responsible for
overseeing the on-going process to
identify suitable candidates and make
recommendations to the Board in this
regard. On an annual basis the committee
reviews the Board Suitability Matrix which
set the desired mix of director knowledge,
experience and skills appropriate to the
current circumstances of the Bank.
In this context, knowledge examines
achievement in education, training
and practice. Experience looks at the
practical and professional experience
gained and skills are the desired personal
attributes, how the director is capable of
behaving and acting. As part of this annual
review, the committee also considers
the diversity requirements of the Board
(see page 127 for more details on Board
diversity approach). Arising from the
aforementioned review, the committee
identified the need to recruit two new
directors and approved roles profiles
seeking candidates with knowledge and
experience respectively in technology/
cyber/IT resilience (technology role) and
culture evolution, ethical behaviour and
responsible business (culture role).
The Committee utilised the services of the
external search agency ‘Odgers Berndston’
to support the recruitment process.
The Company nor any of the Directors
have any commercial relationship with
Odgers Berndston outside of recruitment
services that are provided from time to
time to fill designated board and senior
management positions. A long list of
potential candidates was generated by
the search firm and presented to the
Committee. The Committee then agreed a
short list of candidates to be approached
for the roles. Six candidates completed
first round interviews with the Chairman
or Senior Independent Director and
the Company Secretary for the Culture
role and 3 candidates completed first
round interviews with Head of Talent
and Non-Executive Director Marian
Corcoran for the Technology role. A second
round of interviews was held for culture
candidates successful from round 1 and
these were conducted by the Chairman
or Independent Non-Executive Director
(alternating from first round interviews)
and the Bank’s Head of Talent. The
Bank’s Company Secretary and Chairman
undertook second round interviews
for the Technology role. Following
Round 2 Interviews, an assessment
of the candidates was undertaken by
the interview panels and a preferred
candidate for each role recommended
to the Committee. The Committee next
undertook an individual and collective
suitability assessment of both the
candidates and Board. The suitability
assessment undertakes a review of the
candidate’s fit to the role profile and EBA
general banking experience requirements.
The Committee also considered the
candidate’s reputation/honesty and
integrity; bandwidth to undertake the role
effectively; independence of mind; and any
conflicts that would impede their ability to
undertake the role. Following a successful
assessment, each of the candidates was
put forward to the Board for appointment
subject to the approval of the Central Bank
which was subsequently received.
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Nomination, Culture and Ethics Committee (continued)
Succession Planning
During 2021 and early 2022 the Committee
undertook a full review of Board
composition and tenure and approved
an updated Board Suitability Matrix. The
Committee also agreed that the Board
should maintain a minimum of 10 Non-
Executive Directors for the purposes of
providing sufficient resourcing of the
Board’s Committees.
During 2022, 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.
Board succession planning will include
a future assessment for the renewal or
otherwise for two Independent Non-
Executive Director terms of office that
expire in late 2022 (Andrew Power and Ken
Slattery). The Committee will also ensure
the Bank maintains a strong leadership
team to drive the long-term success of the
Bank.
Committee Composition
During 2021 the Committee undertook a
review of Committee composition in light
of changes to the Board and the need to
refresh the knowledge and experience of
the Board’s Committees. Marian Corcoran
stepped down from the Remuneration
Committee and was appointed to
the Nomination, Culture and Ethics
Committee which brought the Company
into compliance with the UK Code for
the Remuneration Committee to consist
entirely of Independent Non-Executive
Committee members. Upon appointment
to the Board, Anne Bradley joined the
Board Audit and Risk & Compliance
Committees and Celine Fitzgerald joined
the Nomination, Culture and Ethics
and Remuneration Committees. Donal
Courtney stepped down as Chair (remains
a member) of the Audit Committee and
member of the Nomination, Culture and
Ethics Committee and was appointed
as Chair of the Board Risk & Compliance
Committee where he was an existing
member. Ronan O’Neill stepped down
as Chair and member of the Risk &
Compliance Committee and joined the
Board Audit Committee as Chair. Each of
the aforementioned changes were carefully
considered by the Nomination Culture and
Ethics Committee to ensure the individual
knowledge and experience of the Directors
was mapped to the collective competency
requirements of each Board Committee.
The changes also ensured that no Director
132
is a member of more than two Board
standing Committees.
• 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 2020 Board Evaluation
action plan;
• Review of the size and composition of
the Board and that of its Committees;
• Consideration of workforce engagement
mechanisms under the UK Code;
• 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;
• Approval of the Bank’s Diversity and
Inclusion Strategy 2021 - 2023
• Review of the Bank’s Citizenship and
Sustainability Reporting
• Development of and approval of the
Bank’s Sustainability Strategy
• Review of internal audit culture findings
• Consideration of the IBCB DECiDE
Framework and ethical decision making
• Review of the Board Suitability Matrix;
and
• Oversight of the Bank’s preparations for
the Individual Accountability Regime.
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; consequently an external
review of Board performance took place
during 2021.
The process undertaken for the 2021
annual Board performance evaluation and
the resulting recommendations are set
out in page 122 of this report. The next
scheduled external Board evaluation will be
again conducted on 2024 performance.
In 2021, 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.
Other Matters considered by the
Committee in 2021
• Review of the succession plan for Board
and Senior Management positions
across the Group;
• Review of Talent Acquisition
Management;
• Review of its own terms of reference;
• Provided oversight to the Sustainability
Committee as a sub-committee of
the Executive Committee on 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;
• Review of the Bank’s updated Culture
Charter
• Review on reports concerning the Bank’s
reputation;
• Colleague Wellbeing spotlights
(including review of new Smart working
arrangements)
• Feedback on Board Policies (Diversity,
Conflict of Interest, Assessment &
Suitability, Induction and Training);
• Review and approval of the Bank’s
Fitness and Probity Policy;
Permanent TSB Group Holdings plc - Annual Report 2021 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 present my first report as Chair of the Audit
committee following my appointment to the committee in 2021.
I wish to acknowledge the leadership of my predecessor Donal
Courtney who remains on as a member of the committee while
taking over as chair of the Board Risk and Compliance Committee.
I am also very pleased to welcome the appointment of Anne
Bradley to the Committee during 2021. Operating a business
model that’s ever more focused on a digital experience, it is timely
to add the deep technology knowledge that Anne brings to the
committee.
A key focus for the Committee during the year was oversight and
challenge of management on the risk and control environment
within the Bank. This included spotlight presentations from
both the First and Second Lines of Defence on how the control
environment was being managed and internal audit actions
effectively addressed. In that regard I was very pleased to see
the appointment of Claire Heely as the Bank’s new Head of Group
Internal Audit. Claire is an experienced audit professional and I look
forward to working with her in 2022 as the Bank drives an ambition
to enhance its internal control effectiveness ratings. I would also
like to thank Claire’s predecessor, Paul Redmond for his valuable
contribution over the past 8 years. Paul has moved internally to a
senior role in the Bank’s Group Risk function.
Another key area of focus for the Committee during 2021 included
the technical analysis of the transaction with Ulster bank and in
particular the application of business combination accounting
under IFRS 3 to the acquisition of the business, once complete.
This will be a continued focus for the Committee in 2022 as the
Bank finalises this transaction which remains subject to obtaining
the required regulatory and shareholder approvals. Other key
areas of focus during 2021 included consideration of impairment
provisioning particularly in light of the enduring and evolving
nature of the Covid-19 pandemic. These will continue to be areas
of focus in 2022.
Finally, in light of the requirement for external auditor rotation
after 10 years, the committee has commenced a process to bring
forward proposals to shareholders in 2023 on the rotation of the
external auditor.
On behalf of the Board Audit Committee
Composition and Operation
The Committee currently consists of five Non-Executive Directors.
The biographical details of each member are set out on pages
107 to 112. 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.
Donal Courtney, Anne Bradley and Paul Doddrell are members of
both Committees.
2021 Committee Meeting Attendance
Member
Ronan O’Neill*
Donal Courtney
Ken Slattery
Paul Doddrell
Anne Bradley
Andrew Power
Ceased
Appointed
-
02 Nov 2021
03 Oct 2018
-
30 Aug 2013 30 Mar 2021
-
26 Nov 2020
-
30 Mar 2021
-
26 Sept 2016
Number
of Years
on the
Committee
0.2
3.3
8.4
1.1
0.8
5.3
2021
Meeting
Attendance
2/2
11/12
4/4
12/12
8/8
12/12
* Appointed as Chair 02/11/2021 (was in attendance at meetings since April 2021).
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.
Ronan O’Neill
Chair, Board Audit Committee
133
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Board Audit Committee (continued)
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 judgements 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 2021
During 2021, 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 2021, the Committee also:
• Reviewed GIA activity throughout the
year, including a review of performance
against the 2021 internal audit plan;
• Analysed Business Combination
Accounting Treatment for the Ulster
Bank business acquisition
• 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 and Effectiveness;
• 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;
• Approved the GIA plan for 2022;
• Selection of the Chartered Institute of
Internal Auditors to carry out an External
Quality Assessment (EQA) of GIA
• Review of EQA findings and approval of
action plan to address the findings of the
report.
• Reviewed the governance and
approval arrangements underlying
the fair, balanced and understandable
assessment of the Annual Report;
• 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;
• Reviewed the basis, background and
level of Non-Audit fees paid to PwC; and
• Reviewed and approved external audit
tender approach
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 2021
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 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.
Expert credit judgements
At 31 December 2021, the impairment
provisions included €118 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 2021 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
134
Permanent TSB Group Holdings plc - Annual Report 2021 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 2021 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 primarily on the Group’s
capital, solvency and liquidity position
while taking into account other principal
and emerging risks.
The Board has reviewed the medium term
plan and the BRCC reviewed 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 emerging and 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.
A description of the Bank’s principal risks
together with the Bank’s approach to risk
identification and control are set out in the
Risk Management section.
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 2021
financial year. 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 viability
period of assessment to December 2024.
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 viability
period.
There are certain key assumptions that
are critical to the viability of the Group and
these are outlined below:
Capital Adequacy
The Group made a loss for the year ended
31 December 2021 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
considered the Group’s forecast capital
135
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Corporate Governance Statement
Board Audit Committee (continued)
position, including the potential impact of
further deleveraging and a deterioration in
economic conditions as might arise from
an uncertainty from the resurgence of the
virus. The Group expects to be in a position
to meet its minimum regulatory capital
requirements in the period to 2024.
Funding & Liquidity
The Group continued to have sufficient
liquidity throughout 2021, and continues to
undertake initiatives to improve its liquidity
position in the areas of deposits, collateral
optimisation, and wholesale markets
activity.
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 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. The Directors are
also satisfied that the Bank has sufficient
access to funding to proceed with the
Ulster Bank transaction.
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 2024.
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 2021.
are outlined in note 8 to the financial
statements.
Accounting Treatment of Project
Glenbeigh III
The key accounting requirements for
Project Glenbeigh III 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 2021
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
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 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
2021 was €1.2m (excluding VAT) payable
to PwC Ireland. €0.2m (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.
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.
Due to the mandatory firm rotation
requirements, the Independent Auditors,
PricewaterhouseCoopers, Chartered
Accountants and Statutory Audit Firm will
be required to resign from office once they
have completed the 31 December 2023
audit.
136
Permanent TSB Group Holdings plc - Annual Report 2021
A new Group Head of Internal Audit, Claire
Heeley joined the Bank in 2021. Claire is
a chartered accountant and senior leader
who brings extensive experience from
a number of industries, including; retail
banking, insurance, professional advisory
services and healthcare.
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 Chartered Institute of
Internal Auditors (IIA) in 2021 and an action
plan has been approved by the BAC to
address the findings of the IIA Report. The
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.
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Board 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 risk appetite.
Group Risk. The purpose of this approach is to further embed risk
culture within the business and facilitate risk oversight by the Risk
function. One example of this was the requested attendance by
first line management to address committee challenge on the level
customer complaints and by seeking assurance that resourcing
and focus was in place to both address customer complaint
volumes and improve customer experience through robust root
cause analysis. A key focus for the committee at all meetings is
to ensure risk management is meaningful in terms developing a
risk culture that supports the Bank’s purpose of building trust with
customers.
I am also pleased with the progress that the Bank has made during
2021 in strengthening the control environment within the Bank.
The Committee carried out a 2021 review on the effectiveness of
the Group’s system of risk management and internal control which
is reported upon on page 125 to 126. While the review indicated
there were areas of the Bank’s control environment that required
additional enhancement, the Bank’s control environment during
2021 overall remained effective and the Board is satisfied that it
has complied 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 2021
meeting 15 times. Key focus areas included: Ulster Bank business
acquisition, Loan loss provisions, AML risk, technology resilience,
digital transformation; 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
Donal Courtney
Chair, Board Risk & Compliance Committee
Dear Shareholders,
As Chair of the Board Risk and Compliance Committee
(the “Committee” or “BRCC”), I am pleased to report on the
Committee’s activities for the year ended 31 December 2021.
While a member of the Committee since 2018, in November 2021,
I was appointed as Chair of the Committee and would like to thank
my predecessor, Ronan O’Neill (who moves to Chair the Audit
Committee) for his valuable contribution as Chair over the past 5
years during a critical and often challenging period in the oversight
of risk management and internal control at the Bank.
I would also like to report on another membership change
during the year. I welcome the appointment of Anne Bradley to
the Committee; Anne has extensive experience in technology
transformation and business change and her cross industry
knowledge and experience will benefit the collective knowledge,
skills and experience of the Committee as the Bank continues to
implement its digital transformation strategy while maintaining
resilient and reliable IT systems.
Advising and supporting the Board in monitoring Risk Governance
and ensuring the Bank’s risks are properly identified, reported
and assessed has been a key focus for the Committee during
2021. This has included extensive oversight on the development and
implementation of a new automated risk management system for
the Bank which will enhance the process of risk identification and
control at the Bank. A key area of attention has been the Bank’s
transformation and growth agenda, with particular emphasis
on oversight and challenge as the Company explored executing
a transaction with Natwest for the purpose of acquiring certain
parts of the Ulster Bank business. The Committee played a central
role in assessing the risks associated with this transaction and
analysing the impact of same on capital levels over the Bank’s five
year planning period.
A further area of focus has been oversight of the Bank’s
Operational and IT resilience, its change management capability
and prioritisation and planning of resources/skills against the
backdrop increased demand on resources.
A key theme throughout 2021 centred on the level and pace
of change at the Bank. The Committee continued to play an
active role to ensure risk awareness and control continued to be
embedded within the Bank’s key change programmes through a
coordinated and integrated approach by the Bank’s Three Lines of
Defence (business owners, Group Risk, Group Internal Audit).
The Committee has continued to oversee and challenge first line
in the embedding of operational risk and ensuring second line
provide effective oversight, guidance and challenge to first line
in that regard. The Committee placed increased emphasis on
attendance at Committee meetings by the first line owners of
risk in the business with appropriate views and commentary by
138
Permanent TSB Group Holdings plc - Annual Report 2021
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 holds a member only
session at the start of each meeting following which the CRO subsequently attends for
a private session with the Committee and thereafter other invited members of senior
management attend as required.
During 2021 the Board established a Board Committee to provide guidance and support
to the Board and Management as the Company explored executing a transaction with
Natwest for the purpose of acquiring certain parts of the Ulster Bank business. Given
this committee’s focus on risk considerations as well as commercial matters, the Board
determined that cross membership with BRCC was important and four Risk Committee
members sit on this new committee.
2021 Committee Meeting Attendance
Member
Ronan O’Neill*
Donal Courtney**
Ruth Wandhöfer
Marian Corcoran
Paul Doddrell
Anne Bradley
Appointed
26 Jul 2016
3 Oct 2018
30 Oct 2018
29 Oct 2019
26 Nov 2020
30 Mar 2021
Ceased
2 Nov 2021
-
-
-
-
-
Number of
Years on the
Committee
5.5
3.3
3.2
2.3
1.1
0.8
2021 Meeting
Attendance
13/13
15/15
15/15
15/15
15/15
12/12
* Chair from 1 January 2021 until 2 November 2021
** Chair from 2 November 2021
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 remediation
plans 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, 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 2021
During 2021, 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 frameworks and
reports. Among the matters considered by
the Committee during 2021 were:
• Ulster Bank business acquisition Risk
and capital Assessments;
• Reviews of the Bank’s Resolution
Planning capabilities and documentation;
• Oversight for the remediation of SREP
related Risk Mitigation Plans;
• Monthly monitoring on development of
a new End-to-End Liquidity Reporting
Programme;
• Monthly monitoring of Technology
and Change Risk, including a review of
Business Unit Led IT
• AML Risk including risk assessment for
digital current account on-boarding
•
Implementation and oversight of PSD2
regulatory obligations;
• Risk Appetite reviews;
• Oversight and approval of the Banks
Non-Performing Asset Strategy
• Recovery Planning Preparedness and
Scenario Planning
• Spotlights on Cyber Security and IT
resilience;
• Climate Risk Assessment;
• Review of Funding Plan and Deposit
Strategies;
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Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Corporate Governance Statement
Risk and Compliance Committee (continued)
Governance in Action: Climate Risk
During 2021 the Committee analysed the
ECB’s expectations on climate-related
and environmental risks. The Committee
oversaw the appointment of Mazars to
support Management in assessing the
Bank’s approach to climate risk within
its decision making and governance
processes. An action plan to address
identified gaps has been prepared and
the Committee will provide oversight
through 2022 to ensure this action plan is
effectively implemented.
• 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;
• Updates on the Bank’s Risk and Control
Self-Assessment Refresh project;
• RAS breaches and Remediation plans;
• Risks reviewed on Mortgage Loan Asset
Deleveraging;
• Digital Transformation spotlights;
• A review of compliance with the UK Code
and Central Bank of Ireland Corporate
Governance Code;
• Multiple Operational and IT Risk
Monitoring Reports;
• Data Protection Officer’s Report;
• Reviews of obligations and activity under
the CBI Code on Lending to Related
Parties;
• An Update on Embedding Conduct Risk
• Operational and IT Risk Management
Reports
• Private sessions held separately
with the CRO and Head of Regulatory
Compliance; and
• Approval of a Credit Risk Framework and
consideration on a number of SME credit
propositions,
140
Permanent TSB Group Holdings plc - Annual Report 2021 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 2021 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).
In line with its responsibilities under the terms of the Shareholder
Rights Directive, the Bank published its Directors’ Remuneration
Policy (the “Policy”), as applicable to the Board of Directors in
2020 No material changes have been made to the Policy since its
approval at the 2020 AGM. 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 2021, 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 2021,
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), its
contribution to the strengthening of our culture, including our risk
culture, and driving the long-term sustainability of our business.
Our approach was also reviewed from the perspective of ensuring
that all employees, regardless of gender, age or social or ethnic
background are remunerated fairly. In this regard, during 2021, the
Bank continued to embed performance ratings which link directly
to pay outcomes and to review the Bank’s remuneration policies
and practices through a gender-neutral lens.
2021 has been another year of considerable change for the Bank
and challenge for our colleagues. In response to challenges
to our business performance resulting from the pandemic,
the Committee oversaw the implementation of a partial pay
freeze, with the suspension of pay increases for colleagues
at management level including our Executive Directors, and the
granting of relatively modest increases for colleagues at other,
non-management grades. Details of the remuneration of each of the
Executive Directors are provided on page 146.
As flagged in last year’s report, in 2020 the Board implemented an
Enterprise Transformation programme. As part of that programme,
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, provided optionality for colleagues,
at all levels, who wished to avail of such smart working/flexible
options on a sustained basis or, who instead chose to pursue career
progression beyond Permanent TSB. I and my colleagues on the
Remuneration Committee were closely involved in the oversight of
that programme which completed during 2021.
In December 2021, the Bank entered into a legally binding agreement
with NatWest and Ulster Bank regarding the acquisition of certain
parts of Ulster Bank’s Retail, SME and Asset Finance business. This
marked a significant milestone in the history of Permanent TSB. The
Remuneration Committee was involved heavily in aspects of the
preparatory work underpinning that agreement and will remain close
to the implementation of the Bank’s planning towards welcoming our
new Ulster Bank colleagues into Permanent TSB.
At this point, it is appropriate once again to reference the significant
and increasing risk that Permanent TSB faces as a result of certain
constraints which apply to the Bank’s ability to remunerate its
staff. The extent of current State agreements on reward and
remuneration restricts significantly our ability to offer a competitive,
market-aligned, performance-based remuneration package. As
such we are severely challenged in our ability to reward our staff
for strengthening our corporate culture, our values and our risk
culture, delivering on our environmental, social and governance
agenda and in our efforts to promote individual, team and Bank-
wide performance. In that regard, we continue to be restricted in
our ability to leverage pay and reward towards the achievement
of our strategic objectives, whilst also operating within the Bank’s
risk appetite, and in our ability to deliver long-term sustainable
performance by fulfilling our responsibilities to our customers,
colleagues and communities.
I would like to thank my fellow Board and Committee members
and acknowledge the contribution of Celine Fitzgerald who joined
the Remuneration Committee during the year, and thank Marian
Corcoran for her valuable input and support during her time on the
Committee. I’d also like to express my gratitude to colleagues across
the Bank for their support during what has been another extremely
busy year.
On behalf of the Board Remuneration Committee:
Ken Slattery, Chair.
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Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Corporate Governance Statement
Remuneration Committee (continued)
Annual Report on Remuneration - 2021
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.
The Committee had eight meetings during 2021.
2021 Committee Meeting Attendance
Member
Ken Slattery
Robert Elliott
Andrew Power
Ruth Wandhöfer
Marian Corcoran
Celine Fitzgerald
Appointed
28 Jan 2014
31 Mar 2017
26 Sept 2016
01 Feb 2019
29 Oct 2019
30 Mar 2021
Ceased
-
-
-
-
30 Mar 2021
Number of Full
Years on the
Committee
7
4
5
2
1
N/a
2021 Meeting
Attendance (of
which eligible to
attend)
8/8
8/8
8/8
8/8
3/3
5/5
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 2021.
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 and remain free
from any form of bias relating to gender,
age or social or ethnic background.
• 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
culture and attitude to and appetite for
risk and related governance processes,
and takes into account the need to
maintain all capital and liquidity ratios
including buffer requirements;
• 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, Chief
Credit Officer, 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 fifth Capital Requirements Directive
(CRD V); and,
• Overseeing the annual review of the
implementation of the Remuneration
Policy applicable across the Bank.
Remuneration Committee Advisers
During 2021, 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 support to the Bank in relation to
PSD2 project-related work, Sustainability
and a Finance related project
The Committee also employed the
services of Willis Towers Watson who
provided market benchmarking data and
remuneration trend analysis.
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 2021
During 2021, and within the terms of
State agreements, the Remuneration
Committee kept the impact of the
Bank’s 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 2021.
The Bank’ Directors’ Remuneration Policy
was approved by our shareholders on
an advisory basis at our 2020 AGM. As
no material changes have been made to
the Policy since its approval by the 2020
AGM, no shareholder engagement was
undertaken on our approach during 2021,
however, the Committee was kept up
to date on external developments from
an executive remuneration perspective
through our external advisors.
It remains the policy of the Bank – to
the extent possible given the current
remuneration restrictions – to ensure
that all employees regardless of gender,
142
Permanent TSB Group Holdings plc - Annual Report 2021 was taken 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
pension arrangements continue to remain
appropriate due to the various reasons
stated above.
During 2021, the Committee continued
to apply significant oversight to ensure
compliance with the UK Corporate
Governance Code, CRD IV and CRD
V 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 the Bank’s
approach to the remuneration and MRT
identification has been updated to reflect
the new requirements where appropriate.
During the year, 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 V, 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
2022, subject to certain enhancements
designed to reflect 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
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 104, 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 144 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.
Directors’ Remuneration Policy
The Bank has in place a Directors’
Remuneration Policy (the “Policy”), as
applicable to the Board of Directors which
was approved by our shareholders on
an advisory basis at our 2020 AGM. 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.
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.
age or social or ethnic background 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 to ensure that the Bank’s
offering is competitive so as to attract
and retain the required talent and skills to
deliver the return of value to the Company’s
shareholders.
During 2021, the Committee with the
supporting perspective of its external
independent advisors, performed a
review of pay and benefits packages
available across the Bank. In the context
of the continuing challenges to business
performance presented by the COVID-19
pandemic, the Committee recommended
the implementation of a pay freeze for 2021
which consisted of a full suspension of
scheduled pay increases for colleagues at
management level, including the Executive
Directors, and relatively modest increases
for staff at all other grades. The granting
of increases to staff at non-management
levels was, as in previous years, based on
individual staff members’ performance
and their salary position versus the
relevant market median. The decision to
provide these increases formed part of the
Bank’s overall response to the continuing
COVID-19 situation and reflected the need
to engage and motivate colleagues across
the wider workforce to play their part in
the provision of Retail and SME banking
services which were identified as forming
an essential part of the national response
to the pandemic.
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 originally 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
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Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Corporate Governance Statement
Remuneration Committee (continued)
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.
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.
144
Permanent TSB Group Holdings plc - Annual Report 2021 Provision
Approach
Clarity
Remuneration arrangements should be transparent and
promote effective engagement with shareholders and the
workforce.
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.
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.
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 culture, attitude to and appetite for risk and our
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.
145
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Director’s report on remuneration
Executive Director’ Remuneration and Pension Benefits
Directors’ remuneration for 2021 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. However, the nature and scope of the State agreements and
commitments limit to a significant degree our ability to apply the Policy as intended and challenge our capacity to achieve the required
linkage between reward and performance. Within those constraints, it remains our Policy to ensure that the Bank rewards and retains
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 2021 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 2021 or 2020.
The two tables covering 2021 and 2020 and the share option schemes paragraph below identified as audited form an integral part of
the audited financial statements as described in the basis of preparation on page 167. All other information in the Directors Report on
Remuneration is unaudited.
Executive Directors’ Remuneration and Pension Benefits – Audited
2021 remuneration for Executive Directors who held office for any part of the 2021 financial year was entirely fixed in nature, consisting
of basic salary, certain benefits and defined contribution pension entitlements as follows:
1.
Fixed Remuneration
2.
Variable Remuneration
2021
Note
Base Salary
Fees
Fringe
Benefits
One-year
variable
Multi-year
variable
3. Extraordinary
items
4.
Pension
Expense
5.
Total
Remuneration
6.
Proportion
of Fixed and
Variable
Remuneration
1 €480,000 €0 €20,120
2 €335,775 €0 €20,000
€0
€0
€0
€0
€0
€72,000
€572,120
100% Fixed
€0 €50,366
€406,141
100% Fixed
Name of Executive
Director, Position
Eamonn Crowley,
CEO
Michael Frawley,
CRO
Notes:
1. Fringe Benefits consist of car allowance benefits (€20k) and benefit in kind (€0.1k).
2. Fringe Benefits consist of car allowance benefits (€20k).
For comparison, 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:
1.
Fixed Remuneration
2.
Variable Remuneration
Note
Base
Salary
Fees
Fringe
Benefits
One-year
variable
Multi-year
variable
3. Extraordinary
items
4.
Pension
Expense
5.
Total
Remuneration
6.
Proportion of
Fixed and Variable
Remuneration
2020
1 €455,625 €0 €20,485
2 €335,775 €0 €20,048
3 €241,290 €0
€11,193
€0
€0
€0
€0
€0
€0
€0 €68,344
€544,454
100% Fixed
€0 €50,366
€406,189
100% Fixed
€575,859
€36,194
€864,535
100% Fixed
Name of Executive
Director, Position
Eamonn Crowley,
CEO
Michael Frawley,
CRO
Jeremy Masding,
CEO
Notes:
1. Mr Crowley served as CFO up to the 1 July 2020 at which point he was appointed as CEO. Fringe Benefits consist of car allowance benefit (€20k) and benefit in kind (€0.5k)
2. Fringe benefits consist of car allowance benefit (€20k). Mr Frawley was appointed to the Board on 29 October 2019.
3. Mr Masding departed the role of CEO on 1 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).
Aggregate Executive Director Compensation stood at €978,261 in 2021, down from €1,239,319 in 2020 (which excluded Extraordinary
items) as a result of changes to the Executive Director membership during the period.
No Executive Director was in receipt of any remuneration from any undertaking within the Group other than Permanent TSB Group
Holdings plc.
146
Permanent TSB Group Holdings plc - Annual Report 2021 Components of Executive Director Remuneration - 2021
Basic salary
During 2021, in response to the continuing challenges to business performance presented by the COVID-19 pandemic, the Committee
recommended the implementation of a pay freeze for 2021. This consisted of a full suspension of standard pay increases for colleagues
at management level, including the Executive Directors, and the granting of relatively modest increases for staff at all other grades.
As in previous years, pay increases to eligible staff were based on each individual staff member’s performance and salary position
versus the relevant market median. The increases ranged from 0% up to 5% with an average increase of 1.3% and all increases were
effective from 1 January 2021.
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 2021. Other than basic salary, there are no other elements of Director’s remuneration which
are pensionable.
Benefits
During 2021, 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 2021 or 2020. Neither were there any long term incentive arrangements in place for Executive
Directors in 2021 or 2020.
Share option schemes - Audited
No share options were granted in 2021 or 2020. 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
V 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.
No payments for loss of office were made to Executive Directors during 2021. In 2020, and in order to fulfil the contractual obligations
arising upon the departure of the former CEO, contractual payments of €575,859 were made to him (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).
Payments to Former Directors
No such payments were made to former Executive Directors during 2021.
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.
147
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Director’s report on remuneration
(continued)
Non-Executive Director Remuneration – Audited
The level of fees paid to the Chairman and Non-Executive Directors in 2021 is outlined in the table below. Aggregate fees paid to
Non-Executive Directors increased from €807,941 (2020) to €947,993 as a consequence of the timing variations in the appointment
and cessation of Non-Executive Directors and the remuneration arrangements attaching to the establishment of a new Board sub-
committee tasked with overseeing the Ulster Bank transaction (the “Project Sun Oversight Committee”).
1.
Fixed Remuneration
2021
2.
Variable Remuneration
Name of
Director,
Position
Note
Base
Salary
Basic Fees
Fees Paid
Fringe
Benefits
One-year
variable
Multi-year
variable
3.
Extraordinary
items
4.
Pension
Expense
5.
Total
Remuneration
6.
Proportion
of Fixed and
Variable
Remuneration
Robert Elliott
€0 €290,000 €290,000
€0
Ken Slattery
Andrew
Power
Ronan O’Neill
Donal
Courtney
Ruth
Wandhöfer
Marian
Corcoran
Paul Doddrell
Celine
Fitzgerald
Anne Bradley
1
2
3
4
5
6
7
8
9
€0
€54,675
€71,510
€375
€0
€54,675
€67,175
€0
€0
€54,675 €109,050
€375
€0
€54,675
€92,773
€435
€0
€54,675
€67,175
€435
€0
€54,675
€71,550
€355
€0
€54,675
€70,925
€0
€54,675 €48,854
€0
€54,675
€57,006
€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
€0
€71,885
100% Fixed
€0
€0
€67,175
100% Fixed
€109,425
100% Fixed
€0
€0
€93,208
100% Fixed
€0
€0
€67,610
100% Fixed
€0
€0
€0
€0
€0
€0
€0
€0
€71,905
100% Fixed
€70,925
100% Fixed
€48,854
100% Fixed
€57,006
100% Fixed
Notes:
1. Additional fees paid as chair of the Remuneration Committee, member of the Board Audit Committee (ceased 30 March 2021) and member of the Nomination, Culture and
Ethics Committee. Fringe benefits comprise Benefit in Kind €375 relating to the payment of professional body subscriptions.
2. Additional fees paid as member of the Board Audit Committee and member of the Remuneration Committee.
3. Additional fees paid as chair of the Board Risk and Compliance Committee (ceased 2 November 2021), chair of the Board Audit Committee (appointed 2 November 2021),
member of the Board Nomination, Culture and Ethics Committee and Senior Independent Director and member of Project Sun Oversight Committee (appointed 1 June 2021).
Fringe benefits comprise Benefit in Kind €375 relating to the payment of professional body subscriptions.
4. Additional fees paid as chair of the Board Audit Committee (ceased 2 November 2021), member of the Board Risk and Compliance Committee (ceased 2 November 2021),
chair of the Board Risk and Compliance Committee (appointed 2 November 2021), member of the Board Nomination, Culture and Ethics Committee (ceased 30 March 2021)
and member of Project Sun Oversight Committee (appointed 1 June 2021). Fringe benefits comprise Benefit in Kind €435 relating to the payment of professional body
subscriptions.
5. Additional fees paid as member of the Board Risk and Compliance Committee and member of the Remuneration Committee. Fringe benefits comprise Benefit in Kind €435
relating to the payment of professional body subscriptions.
6. Additional fees paid as member of the Board Risk and Compliance Committee, member of the Remuneration Committee (ceased 30 March 2021), member of the Board
Nomination, Culture and Ethics Committee (appointed 30 March 2021) and member of Project Sun Oversight Committee (appointed 1 June 2021). Fringe benefits comprise
Benefit in Kind €355 relating to the payment of professional body subscriptions.
7. Additional Fees paid as member of the Board Risk and Compliance Committee, Board Audit Committee and Project Sun Oversight Committee (Appointed 1st November
2021)
8. Appointed on 30 March 2021. Additional fees paid as member of the Remuneration Committee and Nomination, Culture and Ethics Committee.
9. Appointed on 30 March 2021. Additional fees paid as member of the Board Audit Committee and Board Risk and Compliance Committees (appointed 30 March 2021) and
member of Project Sun Oversight Committee (Appointed 1 June 2021).
148
Permanent TSB Group Holdings plc - Annual Report 2021 For comparison, the level of fees paid to the Chairman and Non-Executive Directors in 2020 is outlined in the table below.
1.
Fixed Remuneration
2020
2.
Variable Remuneration
Name of
Director,
Position
Note
Base
Salary
Basic Fees
Fees Paid
Fringe
Benefits
One-year
variable
Multi-year
variable
3.
Extraordinary
items
4.
Pension
Expense
5.
Total
Remuneration
6.
Proportion
of Fixed and
Variable
Remuneration
Robert Elliott
€0 €290,000 €290,000
Ken Slattery
Julie O’Neill
Andrew
Power
Ronan O’Neill
Donal
Courtney
Ruth
Wandhöfer
Marian
Corcoran
Paul Doddrell
1
2
3
4
5
6
7
8
€0
€0
€0
€54,675 €70,300
€0
€54,675
€53,516
€3,470
€0
€54,675
€67,175
€0
€0
€54,675 €89,786
€395
€0
€54,675
€92,175
€0
€54,675
€67,175
€0
€54,675
€67,175
€0
€54,675
€6,774
€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
€0
€0
€0
€0
€290,000 100% Fixed
€70,300 100% Fixed
€56,986 100% Fixed
€67,175 100% Fixed
€90,181
100% Fixed
€0
€0
€92,175 100% Fixed
€0
€0
€67,175 100% Fixed
€0
€0
€0
€0
€67,175 100% Fixed
€6,774 100% Fixed
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 2021 (other than the introduction of the fee payable in respect of membership of the Project Sun Oversight
Committee) and were as follows:
Position:
Chairman
Non-Executive Director (Base Fee)
Senior Independent Director
Board Audit Committee and Board Risk & Compliance Committee
Remuneration Committee
Remuneration Committee and Nomination, Culture & Ethics Committee
Project Sun Oversight Committee
2021 Fees
€290,000
€54,675
€20,000
€25,000
€7,500
€10,000
€5,000
€7,500
Chair
Member
Chair
Member
Member
149
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Director’s 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 2021.
Annual Change
Directors’ Remuneration – Executive Directors
Eamonn Crowley, CEO
Michael Frawley, CRO
Directors’ Remuneration – Non-Executive Directors (NEDs)
Robert Elliot, Chairman
Ken Slattery, Independent NED
Andrew Power, Independent NED
Ronan O’Neill, Independent NED
Donal Courtney, Independent NED
Ruth Wandhöfer, Independent NED
Marian Corcoran, Independent NED
Paul Doddrell, Independent NED
Celine Fitzgerald, Independent NED
Anne Bradley, Independent NED
Average remuneration on a full-time equivalent basis of employees
Employees of the company
Company performance
Underlying profit/(loss)
Adjusted Cost to Income Ratio
Note
Percentage
change in 2021
Percentage
change in 2020
1
2
3
4
5
6
7
8
9
10
11
12
5.1%
0.0%
0.0%
2.3%
0.0%
21.3%
1.1%
0.6%
7.0%
1.8%
N/A
N/A
1.7%
2021
€17m
82%
6.6%
0.7%
0.0%
4.6%
0.0%
6.5%
0.0%
0.0%
0.0%
N/A
N/A
N/A
2.6%
2020
(€109m)
75%
Notes:
1. Mr Crowley served as CFO up to 1st July 2020 at which point he was appointed as CEO. The year on year increase in 2021 reflects this appointment to CEO.
2. Mr Frawley was appointed to the Board on 29th October 2019. Remuneration for 2019 has been annualised for the purpose of the above.
3. Mr. Slattery was appointed as Chair of Remuneration Committee on 8th September 2020. The year on year increase in 2021 reflects this appointment and the payment of
fringe benefits during 2021.
4. Mr O’Neill was appointed as Senior Independent Director on 6th August 2020. The year on year increase in 2021 reflects this appointment, and other committee membership
changes during 2021.
5. Ms Wandhöfer was appointed as a member of the Board on 1st February 2019. Remuneration for 2019 was annualised for the purposes of the above. The year on year
increase in 2021 reflects payment of fringe benefits during 2021.
6. Ms Corcoran was appointed as a member of the Board on 24th September 2019. Remuneration for 2019 was annualised for the purposes of the above. The year on year
increase in 2021 reflects committee membership changes during 2021.
7. Mr Doddrell was appointed as a member of the Board on 26th November 2020 and therefore no pre-2020 data is available for comparative purposes. Remuneration for 2020
was annualised for the purposes of the above. The year on year increase in 2021 reflects committee membership changes during 2021.
8. Ms. Fitzgerald was appointed as a member of the Board on 30th March 2021 and therefore no pre-2021 data is available for comparative purposes.
9. Ms. Bradley was appointed as a member of the Board on 30th March 2021 and therefore no pre-2021 data is available for comparative purposes.
10. The change in average remuneration is based on the annual employee costs (excluding social welfare and directors remuneration) divided by the average number of employees.
11. Operating profit/loss before exceptional items and non-recurring items. See table 8 on page 61 for a reconciliation of underlying profit to operating loss on an IFRS basis.
Corresponding operating loss for 2020 was €109m.
12. Defined as total operating expenses (excluding exceptional, other non-recurring items, bank levy and regulatory charges) divided by total operating income.
Voting Results from the Annual General Meeting
At the 2021 AGM, shareholder approval on an advisory basis was sought for the 2021 Directors’ Report on Remuneration. At the AGM in
2021, 99.9% of votes cast were in favour of the resolution.
Also, in accordance with the Shareholder Rights Directive, every four years, shareholder approval on an advisory basis is sought on the
Directors’ Remuneration Policy. Shareholder approval for the Directors’ Remuneration Policy was last granted at the AGM in 2020 which
was approved by 99.9% of shareholders at that time.
The Bank takes the views of shareholders on our approach to remuneration into account on an ongoing basis and welcomed the strong
support received for both of these resolutions.
150
Permanent TSB Group Holdings plc - Annual Report 2021 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.
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.
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.
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.
In preparing these financial statements,
the Directors are required to:
The Directors confirm that, to the best of
each Director’s knowledge and belief:
• select suitable accounting policies and
• they have complied with the above
then apply them consistently;
• make judgements and estimates that are
requirements in preparing the financial
statements;
reasonable and prudent;
• 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
and Company’s position and performance,
business model and strategy.
• 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
On behalf of the Board
Robert Elliott
Chairman
Eamonn Crowley
Chief Executive
Ronan O’Neil Conor Ryan
Board Audit
Committee Chair
01 March 2022
Company
Secretary
151
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 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 2021 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 2021;
• 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 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 2021 to 31 December 2021.
Our audit approach
Overview
Materiality
• €10 million (2020: €11 million) - Consolidated financial statements
• Based on c. 0.56% of net assets (2020: c. 0.55% of net assets).
Materiality
• €9.5 million (2020: €9.5 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).
152
Permanent TSB Group Holdings plc - Annual Report 2021
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
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 22 (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.
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.
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.
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.
153
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
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 26 (Deferred
taxation) to the Consolidated financial statements.
The Group has net deferred tax assets of €350 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.
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.
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 determined this to be a key audit matter due to the level of
judgement involved.
We concluded that the Group’s net deferred tax assets meet the
requirements for recognition under IAS 12.
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.
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
2021.
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.
154
Permanent TSB Group Holdings plc - Annual Report 2021
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 (Investment in
subsidiary) 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
€66 million.
We evaluated management’s assessment of the recoverable
amount of the investment and the resulting impairment of €66
million at 31 December 2021.
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 determined this to be a key audit matter given the scale of
the investment and because the determination of whether an
impairment charge for the investment was necessary involves
significant judgement in estimating the future results of the
business and determining the appropriate discount rate to use.
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 charge 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
€10 million (2020: €11 million).
€9.5 million (2020: €9.5 million).
Consolidated financial statements
Company financial statements
How we determined it
c. 0.56% of net assets (2020: c. 0.55% of net assets).
c. 1% of net assets.
Rationale for
benchmark applied
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 €504,280 (Group
audit) (2020: €550,000) and €476,500 (Company audit) (2020: €475,000) as well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
155
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
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.
• 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 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 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).
156
Permanent TSB Group Holdings plc - Annual Report 2021 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 2021 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 135 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 135 and 136 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)
157
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 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 151 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 134 and 135 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 151, 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.
158
Permanent TSB Group Holdings plc - Annual Report 2021 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.
Prior financial year Remuneration Report
We are required to report if the Company has not provided the information required by Section 1110N of the Companies Act 2014 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 9 years, covering the years ended 31 December 2013 to 31
December 2021.
John McDonnell
for and on behalf of PricewaterhouseCoopers
Chartered Accountants and Statutory Audit Firm
Dublin
1 March 2022
159
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Year ended
Year ended
Notes
31 December
2021
31 December
2020
€m
354
(41)
313
64
(29)
2
11
361
(263)
(50)
(21)
-
(26)
(14)
(28)
(402)
(41)
1
19
20
(21)
1
(20)
€m
382
(41)
341
53
(25)
1
5
375
(243)
(49)
(21)
(1)
(15)
(31)
-
(360)
15
(155)
(26)
(181)
(166)
4
(162)
(20)
(162)
€ Cent
€ Cent
(9.0)
(9.0)
(38.0)
(38.0)
4
4
5
5
6
7
8
9
24
24
25
10
10
22
10
11
12
12
Consolidated Income Statement
For the year ended 31 December 2021
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 costs
Advisory costs incurred in relation to the Ulster Bank transaction
Total operating expenses
Operating (loss)/profit before credit impairment and taxation
Credit impairment
Loans and advances to customers
Exceptional impairment arising from deleveraging of loans
Total credit impairment write-back/(charge)
Operating loss/loss before taxation
Taxation
Loss/loss for the year
Attributable to:
Equity holders of the parent
Loss per ordinary share
Basic loss per share of €0.5 ordinary share
Diluted loss per share of €0.5 ordinary share
160
Permanent TSB Group Holdings plc - Annual Report 2021
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
Loss/loss 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, net of tax
Total comprehensive loss for the year, net of tax
Attributable to:
Equity holders of the parent
Year ended
Year ended
Notes
31 December
2021
31 December
2020
€m
(20)
€m
(162)
35
35
11
35
35
11
2
2
-
-
-
-
4
9
(2)
(3)
(3)
3
-
4
(16)
(158)
(16)
(158)
161
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Consolidated Statement of Financial Position
As at 31 December 2021
Assets
Cash at bank
Items in the course of collection
Loans and advances to banks
Derivative assets
Other assets
Assets classified as held for sale
Debt securities
Equity securities
Prepayments and accrued income
Loans and advances to customers
Interests in associated undertakings
Property and equipment
Intangible assets
Deferred taxation
Total assets
Liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Other liabilities
Accruals
Current tax liability
Provisions
Subordinated liabilities
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:
Notes
31 December
2021
31 December
2020
€m
€m
13
13
14
15
16
17
18
19
20
21
23
24
25
26
27
28
29
30
31
32
34
34
34
34
34
57
20
4,174
1
310
28
2,494
26
205
14,256
2
190
122
350
22,235
347
19,089
524
170
8
1
55
252
20,446
227
333
(787)
1,893
1,666
123
1,789
71
20
3,312
-
5
31
2,583
24
86
14,213
-
190
102
349
20,986
-
18,039
809
107
2
1
77
-
19,035
227
333
(791)
1,937
1,706
245
1,951
22,235
20,986
Robert Elliott
Chairman
Eamonn Crowley
Chief Executive
Ronan O’Neill
Board Audit Committee Chair
Conor Ryan
Company Secretary
162
Permanent TSB Group Holdings plc - Annual Report 2021 Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
m
€
l
a
t
o
T
)
2
6
1
(
7
9
9
1
,
4
)
8
5
1
(
5
2
1
)
2
(
)
1
1
(
2
1
1
1
5
9
,
1
)
0
2
(
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163
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
Cash flows from operating activities
Operating loss/loss 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 (write-back)/charge on:
- Loans and advances to customers
Unrealised (gains)/losses on financial assets
Other income
Other mortgage related adjustments
Other provisions
Visa equity share
Other non-cash items
(Increase)/decrease in operating assets:
Derivative assets
Other assets
Debt securities
Prepayments and accrued income
Loans and advances to customers
Increase/(decrease) in operating liabilities:
Deposits by banks
Customer accounts
Debt securities in issue
Derivative liabilities
Other liabilities and accruals
Provisions
Net cash inflow from operating activities before tax
Tax paid
Net cash inflow from operating activities
31 December
31 December
2021
€m
2020
€m
(21)
(166)
47
-
(20)
4
(10)
17
27
(2)
6
48
4
22
51
(131)
(374)
348
1,032
(294)
-
63
(49)
672
720
(1)
719
36
1
181
(1)
-
16
52
(9)
47
157
-
282
(1)
(37)
1,256
-
841
(114)
(2)
(14)
(16)
2,195
2,352
(1)
2,351
164
Permanent TSB Group Holdings plc - Annual Report 2021 Consolidated Statement of Cash Flows
For the year ended 31 December 2021 (continued)
Cash flows from investing activities
Maturities of debt securities - HTC&S
Maturities of debt securities - HTC
Purchase of debt securities- HTC
Movement in restricted cash holdings
Purchase of property and equipment
Purchase of intangible assets
Investment in subsidiary undertakings
Investment in Associated undertakings
Net cash flows from investing activities
Cash flows from financing activities
Issuance of AT1 securities
Redemption of AT1 securities
Payment of lease liabilities
AT1 coupon payment
Issuance of Tier 2 capital notes (including interest)
Net cash flows 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
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 2021
Financing cash flows:
Lease liability
Issuance of Tier 2 capital notes (including interest)
31 December
31 December
31 December
2021
€m
2020
€m
-
49
-
26
(13)
(11)
3
(2)
52
-
(125)
(3)
(21)
252
103
874
3,047
874
3,921
200
214
(1,046)
47
(10)
(44)
-
-
(639)
123
-
(8)
(11)
-
104
1,816
1,231
1,816
3,047
31 December
31 December
2021
€m
34
(3)
252
283
2020
€m
42
(8)
-
34
165
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
Notes
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
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. Loss per ordinary share
13. Cash and cash equivalents
14. Loans and advances to banks
15. Derivative financial instruments
16. Other assets
17. Asset classified as held for sale
18. Debt securities
19. Equity securities
20. Prepayments and accrued income
21. Loans and advances to customers
22. Impairment provisions
23. Interest in associated undertakings
24. Property and equipment
25. Intangible assets
26. Deferred taxation
27. Deposits by banks
28. Customer accounts
29. Debt securities in issue
30. Other liabilities
31. Provisions
32. Subordinated liabilities
33. Leases
34. Share capital, reserves and other equity instruments
35. Analysis of other comprehensive income
36. Measurement basis and fair values of financial instruments
37. Financial risk management
38. Capital management
39. Current/non-current assets and liabilities
40. Transfer of financial assets
41. Offsetting financial assets and financial liabilities
42. Commitments and contingencies
43. Related parties
44. Sale of loans and advances to customers
45. Principal subsidiary undertakings and interest in subsidiaries and structured entities
46. Reporting currency and exchange rates
47. Events after the reporting period
166
Page
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249
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253
254
254
Permanent TSB Group Holdings plc - Annual Report 2021 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 2021.
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 2021 were approved by the Board and authorised for issue by
the Directors on 01 March 2022.
The accounting policies applied in the preparation of the financial statements for the year ended 31 December 2021 are set out below.
1.2 Basis of preparation
Statement of compliance
These consolidated financial statements comprise of the consolidated income statement, the consolidated statement of comprehensive
income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of
cash flows, the Company SOFP, the Company statement of changes in equity, the Company statement of cash flows and the notes to the
consolidated and the Company financial statements 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.
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 45 for further information.
The Company’s loss after tax for the year ended 31 December 2021 was €56m (31 December 2020: loss €145m). The Company issued
€250,000,000 additional tier 2 MREL eligible debt on 19 May 2021. For further information, see the Company financial statements on
pages 256 to 259.
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 classified as HTC&S, equity securities classified as FVOCI, derivative financial instruments,
assets classified as held for sale, financial assets and liabilities designated as hedged items in qualifying fair value hedge relationships,
and land and buildings accounted for using the revaluation model.
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.
167
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
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 22);
• Deferred taxation (notes 2 and 26);
• Fair value of financial instruments (note 36);
•
Impairment review of subsidiary undertaking (note 45).
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’s 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 2022, 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 2021. 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 2021 is a period of twelve months from the date of
approval of these financial statements (01 March 2023).
In making this assessment, the Directors and Management have considered the Group’s 2022-2026 MTP, profitability forecasts, funding
and capital resource projections. These projections include both base and stress scenarios applied by the Group together with a number
of factors such as Covid-19 and the Irish Economy, Government fiscal policies, the availability of collateral to access funding through third
parties and the euro-system, and on-going changes in the regulatory environment.
Economic and political environment
As a result of the pandemic, the market environment within which the Group operates has continued to evolve in 2021. Measures
adopted to contain the virus, include business closures, social restrictions and social distancing which have had an impact on the current
financial and operational performance of the Group.
The low 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. Further to this, the Group continues to be materially reliant on Government and
EU policy and other geopolitical events such as continuing uncertainty around the Northern Ireland Protocol and the introduction of the
global minimum corporation tax rate to a sector of the Irish market.
However, the economic performance and outlook has continued to improve with the lifting of economic restrictions in early 2022. The
Group reassessed the financial impacts of the economic and political environment through the Group’s integrated planning process and
believes it is reasonably well positioned to withstand any volatility from a resurgence of the virus or other economic events, particularly
given the Group’s continued management of its financial position through NPL reduction and capital management.
Funding & Liquidity
The Group continued to have sufficient liquidity throughout 2021, 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 2021 that can be easily and readily monetised in a period of stress.
168
Permanent TSB Group Holdings plc - Annual Report 2021 1. Corporate information, basis of preparation and significant accounting policies (continued)
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 2021, 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 further
deleveraging and a deterioration in economic conditions as might arise from an uncertainty from the resurgence of the virus. 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 and Company 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 2020 has been prepared on a consistent basis with 2021.
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 45.
Interest in associated undertakings
Interest in associated undertakings encompass investments in entities whereby the Group has significant influence over the financial
and operating policy decisions of the entity but does not have control. It is presumed that significant influence exists if the Group holds
more than 20% of the voting rights in the entity unless it can be demonstrated otherwise. Conversely the Group may hold less than 20%
of the voting rights but could be demonstrated to have significant influence.
Interest in associated undertakings are initially recognised at cost and subsequently accounted for using the equity method whereby the
investment is increased or decreased each year by the Group’s share of the post-acquisition profit or loss of the associate. The Group’s
share of the post-acquisition profit or loss of the associate is recognised in profit or loss and OCI.
The Group continues to decrease the carrying amount of the investment for its’ share of post-acquisition losses until the carrying
amount is zero unless the Group has incurred a legal or constructive obligation or made payments on behalf of the associate. These
additional losses are provided for and a liability is recognised in this instance.
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1. Corporate information, basis of preparation and significant accounting policies (continued)
(ii) Business combinations and goodwill
(a) Business combinations
The Group accounts for business combinations, other than those under common control, using the acquisition method when the
acquired set of activities and assets meets the definition of a business and control is transferred to the Group (see 1.5(i)).
In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities
acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.
The consideration transferred in the acquisition is generally measured at the fair value of the assets transferred, the liabilities incurred to
the former owners and equity interest issued by the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair values at the acquisition date. Transaction costs are expensed as incurred,
except if related to the issue of debt or equity securities (see (c) and (xx)). The consideration transferred does not include amounts
related to the settlement of pre-existing relationships. Such amounts are generally recognised in the income statement. Any contingent
consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition
of a financial instrument is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, other
contingent consideration is re-measured at fair value at each reporting date and subsequent changes in the fair value of the contingent
consideration are recognised in the income statement.
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. However, exchange movements arising from the translation of the
following items are recognised in OCI:
• equity investments in respect of which an election has been made to present subsequent changes in fair value in OCI (see (vii)(a));
• a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and
• qualifying cash flow hedges to the extent that the hedges are effective.
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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.
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.
(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 effective interest rate of a financial asset or financial liability is calculated on initial recognition of a financial asset or a financial
liability. In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when
the asset is not credit-impaired) or to the amortised cost of the liability. The effective interest rate is also revised for fair value hedge
adjustments at the date on which amortisation of the hedge adjustment begins. 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:
1. POCI financial assets, for which the original credit-adjusted EIR is applied to the amortised cost of the financial asset (the calculation of
interest income does not revert to a gross basis, even if the credit risk of the asset improves); and
2. 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). If the asset is no longer credit-impaired, then the
calculation of interest income reverts to the gross basis.
Interest income and expense calculated using the effective interest method presented in the statement of profit or loss includes:
•
•
interest on financial assets and financial liabilities measured at amortised cost;
interest on debt instruments measured at FVOCI;
• the effective portion of fair value changes in qualifying hedging derivatives designated in cash flow hedges of variability in interest
cash flows, in the same period as the hedged cash flows affect interest income/expense;
• the effective portion of fair value changes in qualifying hedging derivatives designated in fair value hedges of interest rate risk;
• negative interest on financial liabilities measured at amortised cost;
• negative interest on financial assets measured at amortised cost; and
•
interest expense on lease liabilities.
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1. Corporate information, basis of preparation and significant accounting policies (continued)
(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.
Other fees and commission income are recognised as the related services are performed. 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, dividends and FX differences.
Dividend income is recognised when the right to receive income is established.
(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), material restructuring costs and material transaction, integration and restructuring costs
associated with acquisitions (including potential acquisitions).
(e) Bank levy and other regulatory charges
Bank levy and other regulatory charges consist of DGS fees, Central Bank Industry Funding levy, Single Resolution Fund 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.
(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 as income or expenses and included in the income statement
except to the extent it relates to a business combination, or 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. In a business combination the tax amounts are
recognised as identifiable assets or liabilities at the acquisition date.
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).
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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.
Deferred tax liabilities and assets are offset only when they arise in the same tax reporting group and where there is the intention to
settle on a net basis, or to realise the asset and settle the liability simultaneously.
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.
The classification requirements for debt and equity instruments are described on the following page.
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.
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1. Corporate information, basis of preparation and significant accounting policies (continued)
(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.
(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.
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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.
Reclassifications
Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Group changes its business
model for managing financial assets.
(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 instruments); 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.
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;
• 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.
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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 a) the loan contract b) on the disposal
of collateral or c) sale of loans arising from deleveraging of NPLs which are included in the ECL calculation from the point that 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.
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.
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.
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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 to 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.
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 and equity
Financial liabilities are classified as amortised cost unless mandatorily required to be classified at FVTPL, for example derivatives, 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.
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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.
The classification of instruments as a financial liability or an equity instrument is dependent upon the substance of the contractual
arrangement. Instruments which carry a contractual obligation to deliver cash or another financial asset to another entity are classified
as financial liabilities. The coupons on these instruments are recognised in the income statement as interest expense using the effective
interest method. Where the Group has absolute discretion in relation to the payment of coupons and repayment of principal, the
instrument is classified as equity and any coupon payments are classified as distributions in the period in which they are made.
If the Group purchases its own debt, it is removed from the balance sheet and the difference between the carrying amount of the liability
and the consideration paid is included in other operating income, net of any costs or fees incurred.
Equity
Financial instruments classified as equity are accounted for directly in equity less any transaction costs deducted directly from equity.
Equity instruments are not subsequently re-measured.
(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.
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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 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, 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. The
securitisation is generally retained in the form of senior or subordinated tranches, or other residual interests (retained interests) however,
these securitisations may also occur with entities external to the Group. Retained interests are recognised as debt securities. The Group
sells loans and advances to customers to SEs that are not consolidated SEs and the Group retains no interest in these assets and they
are derecognised in their entirety.
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.
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 36.
(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.
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(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
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.
Certain derivative instruments do not fulfil the hedge accounting criteria under IFRS 9 and are consequently classified as held for
trading. The fair value movement and any interest income/(expense) are included in Net trading income/(expense).
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.
(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.
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(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 do 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.
(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.
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Notes to the Consolidated Financial Statements
(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
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 recognised in other liabilities.
If a lease is assumed as part of a business combination the Group, subject to not meeting the recognition exemptions as detailed below,
will recognise a right-of-use asset and a lease liability as if the lease were a new lease at the acquisition date. The right-of-use assets and
lease liability are then measured consistently with the Groups accounting policy as detailed above with the lease commencement date
being the acquisition date.
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
appropriate reflection of the Group 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; and
• 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.
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.
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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 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.
If an item of property, plant and equipment is disposed of, any gains or losses are recognised in the profit or loss before tax. If the asset
being disposed of had previously been revalued then any amount in OCI relating to that asset is reclassified directly to retained earnings
on disposal rather than the income statement.
The estimated useful lives are as follows:
Freehold Buildings
Leasehold Buildings
Office Equipment
Computer Hardware
Motor Vehicles
50 years
50 years or term of lease if less than 50 years
5 – 15 years
3 – 10 years
5 Years
(xii) Intangible assets (other than goodwill)
Acquired computer software is stated at cost, less amortisation and provision for impairment, if any. The external costs and identifiable
internal costs of bringing to use the computer 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 has a finite life and is amortised on a straight-line basis over a period of between three to seven years.
Expenditure on internally developed software is recognised as an asset when the Group is able to demonstrate: that the product is
technically and commercially feasible, its intention and ability to complete the development and use the software in a manner that will
generate future economic benefits, and that it can reliably measure the costs to complete the development. The capitalised costs of
internally developed software include all costs directly attributable to developing the software and capitalised borrowing costs, and
are amortised over its useful life. Internally developed software is stated at capitalised cost less accumulated amortisation and any
accumulated impairment losses.
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.
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(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
Costs associated with research activities or maintaining computer software programmes are recognised as an expense as incurred.
Acquired intangible assets
Customer related intangible assets and brands acquired in a business combination are recognised at fair value at acquisition date.
Customer related intangible assets and brands have a finite useful life and are carried at cost less accumulated amortisation and
provision for impairment, if any. Amortisation is calculated using the straight line basis to allocate the cost over their estimated useful life.
(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 (RP) is recognised when there is an approved detailed and formal RP, 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 exceed 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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Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss that it incurs
because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument.
Loan commitments are firm commitments to provide credit under pre-specified terms and conditions.
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.
ECL held against commitments are reported under loans and advances to customers.
Financial guarantees issued or commitments to provide a loan at a below-market interest rate are initially measured at fair value.
Subsequently, they are measured at the higher of the loss allowance determined in accordance with IFRS 9 and the amount initially
recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15.
Other loan commitments issued are measured at the sum of (i) the loss allowance determined in accordance with IFRS 9 and (ii) the
amount of any fees received, less, if the commitment is unlikely to result in a specific lending arrangement, the cumulative amount of
income recognised. Derecognition policies in (d) are applied to loan commitments issued and held.
The Group has issued no loan commitments that are measured at FVTPL
(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 (“repos”). Such assets are retained on the
SOFP when substantially all the risks and rewards of ownership remain with the Group. The assets are reclassified as pledged assets
when the transferee has the right by contract to sell or repledge the collateral. The liability to the counterparty is included separately on
the SOFP as appropriate in either Deposits by banks or Customer accounts.
Similarly, where financial assets are purchased with a commitment to resell (“reverse repos”), 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 collaterialised loan asset is included separately on the SOFP as appropriate in either Loans and
advances to banks or Loans and advances to customers.
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.
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(continued)
1. Corporate information, basis of preparation and significant accounting policies (continued)
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.
(xx) Offsetting
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is currently a legally enforceable
right of set off and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. No impairment
loss allowance for ECL is recognised on a financial asset, or portion thereof, which has been offset.
1.6 Application of new and revised IFRSs
In 2021, the Group assessed the impact of new and revised pronouncement of IFRSs which took effect during the year. The changes
to IFRS during 2021 did not have a material impact on the Group’s financial statements. The Group has not early adopted any of the
changes described below.
1.7 Impact of other accounting standards with effective periods beginning on or after 1 January 2022
Accounting Standard
Update
Description of Change
Key Impacts for PTSB
Effective
Date
Minor amendments to IFRS 1,
IFRS 9, IAS41 and IFRS 16.
This amendment is expected to have
no significant impact on the 2021
Annual Report or future reporting.
Annual periods
beginning on or after 1
January 2022
The amendments clarify
that a change in accounting
estimate that results from
new information or new
developments is not the
correction of an error.
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.
Specifies which costs to
include when assessing
whether a contract will be
loss- making.
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.
This amendment is expected to have
no significant impact on the 2021
Annual Report or future reporting.
Annual periods
beginning on or after 1
January 2022
This amendment is expected to have
no significant impact on the 2021
Annual Report or future reporting.
Annual periods
beginning on or after 1
January 2022
This amendment is expected to have
no significant impact on the 2021
Annual Report or future reporting.
Annual periods
beginning on or after 1
January 2022
This amendment is expected to have
no significant impact on the 2021
Annual Report or future reporting.
Annual periods
beginning on or after 1
January 2022
This amendment is expected to have
no significant impact on the 2021
Annual Report or future reporting.
Annual periods
beginning on or after 1
January 2022
Annual Improvements to
IFRS Standards 2018– 2020
Cycle
Amendments to IAS 8 -
Definition of Accounting
Estimates
Amendments to IFRS 3 –
Reference to the Conceptual
Framework
Amendments to IAS
16 – Property, Plant and
Equipment: Proceeds before
Intended Use
Amendment to IAS 37 –
Onerous Contracts: Cost of
Fulfilling a Contract
Amendment to IAS 1 -
Classification of Liabilities
as Current or Non-current
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Permanent TSB Group Holdings plc - Annual Report 2021 1. Corporate information, basis of preparation and significant accounting policies (continued)
Accounting Standard
Update
Disclosure of Accounting
Policies (Amendments to
IAS 1 and IFRS Practice
Statement 2
Amendments to IAS 8 –
Definition of Accounting
Estimates
Amendments to IAS 12 –
Deferred Tax
Description of Change
Key Impacts for PTSB
Effective
Date
Amendments are intended
to help preparers in deciding
which accounting policies
to disclose in their financial
statements.
This amendment is expected to have
no significant impact on the 2021
Annual Report or future reporting.
Annual periods
beginning on or after 1
January 2023
Distinguishes between
accounting policies and
accounting estimates.
This amendment is expected to have
no significant impact on the 2021
Annual Report or future reporting.
Annual periods
beginning on or after 1
January 2023
Clarifies how to account for
deferred tax on transactions
such as leases and
decommissioning obligations.
This amendment is expected to have
no significant impact on the 2021
Annual Report or future reporting.
Annual periods
beginning on or after 1
January 2023
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.
The ongoing pandemic and associated Government, Group and customer responses continues to elevate the uncertainty associated with
judgements, estimates and assumptions made by Management. The Irish economy demonstrated resilience in 2021 and results of the
actions taken by the Government, the EBA and the CBI point toward a positive trajectory of recovery. The Directors and Management,
however, remain cautious and risk remains in the medium to long-term that the Irish Banking sector will continue to face challenges,
particularly due to the lower interest rate environment, and higher capital requirements and new and emerging risks.
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.
Assumptions, estimates and judgements are revised on an ongoing basis and where necessary are revised to reflect current conditions and
updated information.
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.
Government-led customer support initiatives in response to the pandemic have weakened established relationships between model inputs
and outputs, reducing the ability to forecast using models alone. In addition, models are constructed based on a single economic cycle. As a
result a greater level of management judgement is required to reflect the current nature and uncertainty of the economic outlook.
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.
At December 2021, management judgement has been applied to specified non-standard mortgages classified as Stage 1 by Impairment
models and these loans were transferred to Stage 2 with a lifetime impairment loss allowance applied. The impact of this staging
adjustment is a c. €79m increase in Stage 2 volumes.
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Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
2. Critical accounting estimates and judgements (continued)
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. Using statistical techniques combined with expert credit judgement the Group then
formulates an unbiased probability weighted estimate of ECL at the reporting date
Three scenarios are currently considered in the Group’s calculation of ECL. The base scenario is used for financial planning purposes.
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. Three scenarios are currently
considered in the Group’s calculation of ECL at the reporting date.
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 2021. Macroeconomic scenarios were most recently updated in December 2021.
The update in the Base Case Scenario reflects the improvement in the outlook for the Irish economy in future years, with higher forecast
HPI and GDP growth, and headwinds as a result of higher forecast inflation.
IFRS 9 Upside and Downside scenarios have been updated to present extreme ‘1-in-20’ scenarios relative to the updated Base scenario.
Given the severity of these scenarios (5th Percentile upside and 95% Percentile downside), their combination captures the macroeconomic
uncertainty arising from COVID-19.
31 December 2021
31 December 2020
Base Case
Average value
over Year 1
Average value
over forecast
period
Upside
Scenario
Average
value over
the forecast
period
Down side
Scenario
Average
value over
the forecast
period
Average value
over Year 1
Base Case
Average
value over
the forecast
period
Upside
Scenario
Average
value over
the forecast
period
Down side
Scenario
Average
value over
the forecast
period
Percentile
Scenario Probability
Weighting
Irish Residential House
Prices
Irish Unemployment
Irish GDP
Consumer Price Index
ECB Base Rate
50th
54%
3%
6%
4%
2%
0%
5th
23%
13%
4%
6%
2%
0%
95th
23%
-8%
12%
-1%
3%
2%
4%
7%
6%
3%
0%
50th
56%
1%
7%
3%
2%
0%
5th
22%
14%
4%
5%
2%
0%
95th
22%
-8%
12%
-1%
2%
1%
-5%
10%
4%
3%
0%
The Base, Upside and Downside scenarios are described as follows:
188
Permanent TSB Group Holdings plc - Annual Report 2021 2. Critical accounting estimates and judgements (continued)
Base scenario
In the Base scenario, continued high levels of monetary and fiscal support for the global economy have driven much better than
expected economic outturns in 2021, offsetting the continued extreme impact of COVID. As a consequence of high levels of monetary
and fiscal support for the global economy and the sharp rebound in global demand, weakness in the global supply chain has pushed
inflationary forces to multi-decade highs.
Residential house prices, which showed a much greater rebound than expected in 2020, are projected to increase by 4% in 2022 and an
average growth rate of 2% from year 2 of the five year forecast.
Ireland is expected to show the strongest growth of any western world economy for 2021, benefiting from buoyant multinational export
sector, and a strong domestic rebound from the local economy. GDP is projected to continue to remain strong over the five year forecast,
averaging at 4% per annum.
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
This is an extreme positive scenario developed to reflect a much stronger outcome for the Irish economy than in the base scenario.
There is both historical context and statistical backing to the key forecasts, but at a positive extremity.
GDP increases to 10% in the short term with the rate of growth easing in the medium term whilst unemployment, at an average of 4%
over the medium term, reflects an extreme positive of effective full employment.
Consistent with the longer term nominal house price average gain of 9.3% since 1970 and 6.4% globally during that period, the HPI
forecast for the extreme positive scenario, puts average HPI increases during the scenario under review, at 13% per annum.
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. The scenario captures
a statistical extreme in unemployment, GDP and HPI, while maintaining credibility as a single scenario. A prolonged period of mid teen
unemployment, extends quickly, reaching a peak of 16% in 2023.
GDP is depressed across the forecast horizon, a sharp reversal from current expected growth levels. House prices reach a low of 37%
from current levels (end 2021) is as extreme as the 2013 trough by level on an inflation adjusted basis. Eventual higher interest rates in
Europe, reflect higher inflationary forces in Europe in the forecast horizon.
The threat of CPI moving ahead at a much faster pace than expected is less extreme than previously given current climate where the
weakness in the global supply chain which has pushed inflationary forces to multi-decade highs.
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 2021.
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 is impacted by 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 €69m less than reported at 31 December
2021.
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 €142m less than reported at 31
December 2021. Whereas, if the Group were to only use its Downside Scenario, the ECL impairment allowance would be €298m greater
than reported at December 2021.
189
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 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 2021, the total impairment provision
included €118m of management’s adjustments to modelled outcomes (31 December 2020: €172m) which primarily comprises the
following:
• €72m of Management’s adjustment in respect of Stage 3 residential mortgage loans that are in default for a prolonged period and for
which Management consider the modelled impairment to be insufficient to cover resolution; €54m of which are in default for greater
than seven years;
• Arising from the unprecedented nature of COVID-19 and other matters, 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 €43m management
overlay is applied in respect of loans for which ECL is maintained until the future performance is established comprising €3m in
respect of the consumer portfolio, €6m in respect of the commercial portfolio and €34m in respect of the residential mortgage
portfolio and associated model risk;
• A Management adjustment of €3m 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; and
• Certain prior year PMAs are now incorporated in model enhancements.
At December 2021, management judgement has been applied to specified non-standard mortgages classified as Stage 1 by Impairment
models and these loans were transferred to Stage 2 with a lifetime impairment loss allowance applied. The impact of this staging
adjustment is a c. €79m increase in Stage 2 volumes.
(b) Deferred taxation
At 31 December 2021, the Group had a net deferred tax asset of €350m (31 December 2020: €349m). See note 26 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 €373m at 31 December 2021. It should be noted that 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 history of recent losses, 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;
190
Permanent TSB Group Holdings plc - Annual Report 2021 2. Critical accounting estimates and judgements (continued)
- 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
- Continued focus on cost management; and
- The cost of risk will continue its return to normalised levels reflecting the Group’s assessment of the medium to long term average;
and
• Consideration of forecasting risks, including sensitivity analysis on the financial projections, such sensitivity analysis including the
effect of higher than expected impairments, cost of funds or operating expenditure, and lower than expected asset yields, new lending
or ECB rates.
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 €373m of a deferred tax asset on tax losses on the statement of
financial position as at 31 December 2021.
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 2026 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 €373m 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 not unreasonable 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 remained the same since 31 December 2020 at 22 years.
This is mainly due to slight changes in the 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 decreased. 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 26, 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. The Ulster Bank acquisition is expected to be profit generative and if
completed, would reduce the deferred tax asset utilisation period.
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)
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 6 years. If all adverse
191
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
2. Critical accounting estimates and judgements (continued)
assumptions were to arise the period of recoverability would be extended by a further 39 years (i.e. full utilisation by 2060). 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 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 2043.
(c) Fair Value of 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 36.
(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 it’s VIU. The carrying value of the subsidiary undertaking before adjusting for impairment was €954m and
recoverable amount based on the VIU was €888m resulting in a €66m impairment charge for the year (31 December 2020: €145m).
The increase in impairment is as a direct result of a slower recovery from the pandemic and deleveraging. The Ulster Bank transaction, if
completed, is expected to be profit generative.
While the recoverable amount based on the VIU exceeds market capitalisation at 31 December 2021, the depressed share prices is
a 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 the majority shareholding by the Irish Government 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
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 five 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.
192
Permanent TSB Group Holdings plc - Annual Report 2021 2. Critical accounting estimates and judgements (continued)
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.
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% (2020: 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:
• An increase of 1% in long-term growth rate would have resulted in no impairment charge;
• A decrease of 1% in long-term growth rate would have resulted in a €177m impairment charge;
• An increase of 1% in the discount rate would have resulted in a €204m impairment charge;
• A decrease of 1% in the discount rate would have resulted in no impairment charge;
• A decrease in SME growth by 90% would result in a reduction of €485m in the value of use; and
• A decrease in fee based income growth by 90% would result in a reduction of €758m in the value of use.
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
31 December
2021
31 December
2020
€m
315
31
7
(14)
(26)
313
€m
336
35
9
(26)
(13)
341
* Consumer finance comprises income from term loans, credit cards and overdrafts.
3.2 Loss for the year based on geographical location
During the years ended 31 December 2021 and 31 December 2020, the majority of the Group’s loss was incurred in Ireland. Immaterial
losses (less than €1m) were incurred outside of Ireland in the Group’s IOM subsidiary PBI Ltd during the years ended 31 December 2021
and 31 December 2020.
193
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Notes to the Consolidated Financial Statements
(continued)
3. Operating segments (continued)
3.3 Assets and liabilities based on geographical location
31 December 2021
Assets
Held for sale
Other assets
Total segment assets
Total segment liabilities
Capital expenditure
* This is based on geographical location and reflects Group Intercompany activity with PBI Ltd.
31 December 2020
Assets
Held for sale
Other assets
Total segment assets
Total segment liabilities
Capital expenditure
* This is based on geographical location and reflects Group Intercompany activity with PBI Ltd.
4. Net interest income
Interest income
Loans and advances to customers
Debt securities and other fixed-income securities
- Hold to collect (HTC)
- Hold to collect and sell (HTC&S)
Deposit from banks
Interest expense
Due to customers
Interest on debt securities in issue
Amortisation of discontinued hedges on financial assets
Loans and advances to banks
Interest on subordinated liabilities
Net interest income
Ireland
€m
28
22,205
22,233
20,444
65
Ireland
€m
31
20,953
20,984
19,033
65
IOM*
€m
Of which inter-
group balances
€m
-
(59)
(59)
(59)
-
2
2
2
-
IOM*
€m
Of which inter-
group balances
€m
-
2
2
2
-
-
(55)
(55)
(55)
-
Total
€m
28
22,207
22,235
20,446
65
Total
€m
31
20,955
20,986
19,035
65
Year ended
Year ended
31 December
2021
31 December
2020
€m
€m
346
7
-
1
354
(14)
(8)
-
(14)
(5)
(41)
313
371
8
3
-
382
(26)
(9)
(2)
(4)
-
(41)
341
Net interest income includes a charge in respect of deferred acquisition costs on loans and advances to customers of €17m (31
December 2020: €16m).
194
Permanent TSB Group Holdings plc - Annual Report 2021
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 expense primarily comprises retail banking and credit cards fees.
6. Net trading income
Held-for-trading
Foreign exchange gains
Net trading income
7. Net other operating income
Other income
Net other operating income
Year ended
Year ended
31 December
2021
31 December
2020
€m
€m
52
11
1
64
(29)
35
43
9
1
53
(25)
28
Year ended
Year ended
31 December
2021
31 December
2020
€m
€m
2
2
1
1
Year ended
Year ended
31 December
2021
31 December
2020
€m
€m
11
11
5
5
195
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Notes to the Consolidated Financial Statements
(continued)
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
2021
31 December
2020
€m
142
121
263
€m
151
92
243
Administrative, staff and other expenses (excluding exceptional items) includes costs of €15m relating to legacy legal cases in 2021.
Fees paid to the Bank’s auditors for services outlined below:
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
2021
31 December
2020
€m
€m
1.1
0.1
0.3
1.1
0.1
0.2
* Other non-audit services in 2021 and 2020 include letters of comfort and other services in relation to the Fastnet securitisations, the Group's Euro Note Programme and
subsequent debt and capital issuances.
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
2021
31 December
2020
€m
115
14
13
142
€m
122
15
14
151
Staff redundancy costs associated with exceptional items for the year ended 31 December 2021 and 31 December 2020 are included as
part of note 10 exceptional Items.
Staff costs of €13m (31 December 2020: €11m), have been capitalised to intangible assets (see note 25), 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
Closing and average number of staff (including Executive Directors) employed during the year:
Ireland
Total number of staff
* Closing staff numbers are calculated on a FTE basis.
Closing staff numbers*
Average staff numbers
2021
2020
2021
2020
2,236
2,236
2,435
2,435
2,286
2,286
2,429
2,429
196
Permanent TSB Group Holdings plc - Annual Report 2021 9. Bank levy and other regulatory charges
Bank levy
Other regulatory charges
Bank levy and other regulatory charges
Year ended
Year ended
31 December
2021
31 December
2020
€m
22
28
50
€m
24
25
49
Other regulatory charges include €17m for the Deposit Guarantee Scheme (DGS) (31 December 2020: €15m), €4m for the Single
Resolution Fund (SRF) (31 December 2020: €5m), €5m for the Central Bank Industry Funding Levy (31 December 2020: €3m) and €2m
related to other regulatory charges (31 December 2020: €2m).
10. Exceptional items
Restructuring and other costs (a)
Advisory costs incurred in relation to the Ulster Bank transaction (b)
Impairment arising from deleveraging of loans (c)
Exceptional items
Year ended
Year ended
31 December
2021
31 December
2020
€m
14
28
(19)
23
€m
31
-
26
57
(a) Restructuring and other costs of €14m (31 December 2020: €31m) relate to additional costs incurred as a result of phase 2 of the
Group’s Enterprise Transformation Programme which was originally announced in 2020 and costs arising in respect of a previous
disposal of a business.
(b) On 17 December 2021, the Bank entered into a legally binding agreement with NatWest Group Plc to acquire approximately €7.6 billion
of the Ulster Bank Retail, SME and Asset Finance business in the Republic of Ireland. The transaction is due to complete and control will
transfer in the second half of 2022, subject to necessary regulatory and shareholder approvals. As such, the business and assets have
not been recognised in the Group’s statement of financial position as at 31 December 2021. The Bank incurred costs of c€28m on the
transaction in 2021, these costs have been recognised as exceptional costs in the income statement.
(c) 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 2021 an impairment write-back of €11m has been recognised as a result of the sale of the Glenbeigh III mortgage portfolio which
met the conditions as noted above.
Warranty provisions of €4m were written back in relation to loan transactions which the Group executed in prior years. An indemnity
provision of €4m was also written back relating to the sale of the Glenbeigh II loan sale. The Group considers these items to be
exceptional as the warranty and indemnity provisions were previously recorded through exceptional impairment. This treatment is
consistent with the treatment of losses on deleveraging of loans in prior years.
197
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
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 26)
Taxation credited to income statement
Effective tax rate
Year ended
Year ended
31 December
2021
31 December
2020
€m
€m
1
1
(2)
(2)
(1)
2
2
(6)
(6)
(4)
5%
2%
The Group taxation credit for the year ended 31 December 2021 was €1m (31 December 2020: €4m). The main drivers of this charge/
credit include (i) a current tax charge of €1m arising on non-trading income, (ii) a current year deferred tax credit of €4m 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
Year ended
Year ended
31 December
2021
31 December
2020
Loss on the Group activities before tax
Tax calculated at standard ROI corporation tax rate of 12.5% (2020: 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 to income statement
(c) Tax effects of each component of other comprehensive income
Revaluation of property
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 2021
€m
(21)
(3)
2
-
-
-
(1)
Year ended 31 December 2021
Gross
€m
Tax
€m
2
2
-
-
4
-
-
-
-
-
€m
(166)
(21)
3
13
3
(2)
(4)
Net
€m
2
2
-
-
4
198
Permanent TSB Group Holdings plc - Annual Report 2021
11. Taxation (continued)
Revaluation of property
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 2020
12. Loss per ordinary share
(a) Basic losses per ordinary share
Year ended 31 December 2020
Gross
€m
(2)
9
(3)
3
7
Tax
€m
-
(3)
-
-
(3)
Net
€m
(2)
6
(3)
3
4
Year ended
Year ended
31 December
2021
31 December
2020
Weighted average number of ordinary shares in issue and ranking for dividend excluding treasury shares
454,690,912
454,690,912
Loss for the year attributable to equity holders
Less AT1 coupon paid (see note 34)
Loss for the period attributable to equity holders less AT1 coupon paid
Basic loss per ordinary share (€ cent)
(b) Diluted loss per ordinary share
(€20m)
(€21m)
(€41m)
(9.0)
(€162m)
(€11m)
(€173m)
(38.0)
Year ended
Year ended
31 December
2021
31 December
2020
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 available in the AT1 securities that the Group redeemed in April 2021
Diluted loss per ordinary share (€ cent)
454,690,912
(9.0)
454,690,912
(38.0)
Diluted (loss)/earning 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 2021 or 31 December 2020 as the AT1 securities were assessed due to the conversion feature within the
security, and were found to have an anti-dilutive effect.
There are no instruments with a potential to be converted to ordinary shares at 31 December 2021 as the AT1 security issued in 2015 was
redeemed on the first call date of 1 April 2021 (see note 34 for further detail). The AT1 issued in 2020 has no conversion features within the
security.
Weighted average number of ordinary shares*
Number of shares in issue at 1 January (note 34)
Treasury shares held (note 34)
Net movements during the year
Weighted average shares redesignated
Weighted average shares issued
Weighted average number of ordinary shares
2021
2020
454,695,492
454,695,492
(4,580)
(4,580)
-
-
454,690,912
-
-
454,690,912
* When calculating the loss 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.
199
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Notes to the Consolidated Financial Statements
(continued)
13. Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise of following:
Cash and balances with central banks (un-restricted)
Items in the course of collection
Loans and advances to banks repayable on demand (maturity of less than 3 months) (note 14)
Restricted cash included in loans and advances to banks repayable on demand
Cash and cash equivalents as per statement of cash flows
31 December
2021
31 December
2020
€m
€m
57
20
4,174
4,251
(330)
3,921
71
20
3,312
3,403
(356)
3,047
At 31 December 2021, restricted cash of €330m (31 December 2020: €356m) consists of cash of €329m (31 December 2020: €355m)
held by the Group’s securitisation entities and €1m (31 December 2020: €1m) which relates to cash collateral placed with counterparties
in relation to derivative positions and repurchase agreements.
14. Loans and advances to banks
Held at amortised cost
Placed with central banks
Placed with other banks
Loans and advances to banks
31 December
2021
31 December
2020
€m
€m
3,709
465
4,174
2,813
499
3,312
Placements with other banks includes restricted cash of €330m (31 December 2020: €356m) of which €329m (31 December 2020:
€355m) is held by the Group’s securitisation entities and €1m (31 December 2020: €1m) which relates to cash collateral placed with
counterparties in relation to derivative positions and repurchase agreements. The fair value of collateral pledged by counterparties in
relation to reverse repurchase agreements at 31 December 2021 is €433m (31 December 2020: nil).
Loans and advances to banks amounting to €4,174m (31 December 2020: €3,312m) 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.
200
Permanent TSB Group Holdings plc - Annual Report 2021 15. 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
(HFT). 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 Report.
Derivatives held by the Group are analysed as follows:
31 December 2021
31 December 2020
Fair value hedges
Interest rate swaps
Held for trading
Forwards
Interest rate swaps
Derivative assets and liabilities as per
the statement of financial position
Contract/
notional amount
€m
-
-
84
-
84
84
Fair
value
asset
€m
Fair
value
liability
€m
-
-
1
-
1
1
-
-
-
-
-
-
Contract/
notional amount
€m
5
5
83
7
90
95
Fair
value
asset
€m
Fair
value
liability
€m
-
-
-
-
-
-
-
-
-
-
-
-
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. At 31 December 2021, the Group did not have any
interest rate swaps.
The gains/(losses) recognised in net interest income on the hedging instruments are designated as fair value hedges.
16. Other assets
Loan sale receivable
Other
31 December
2021
31 December
2020
€m
310
-
310
€m
-
5
5
Loan sale receivable at 31 December 2021 relates to the amount due from the purchaser of the Glenbeigh III portfolio, which was received
in the first quarter of 2022. See note 44 for further details.
201
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
17. Assets classified as held for sale
At 31 December 2021, assets classified as held for sale amounted to €28m (31 December 2020: €31m). This consists of the following:
1. €28m (31 December 2020: €30m) relates to collateral in possession, these properties are expected to be sold within the next 12
months.
2. €nil (31 December 2020: €1m) relates to one branch property (31 December 2020: two branch properties) which is no longer occupied
by the Group, the sale of this property is expected to complete within the next 12 months.
18. Debt securities
Government bonds
Corporate bonds
Gross debt securities
31 December 2021
31 December 2020
HTC
€m
2,434
60
2,494
Total
€m
2,434
60
2,494
HTC
€m
2,477
106
2,583
Total
€m
2,477
106
2,583
As at 31 December 2021, all unpledged 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 €2.4bn (31 December 2020: €2.5bn) comprise of Irish, Spanish and Portuguese government bonds which
are designated as HTC. Corporate bonds comprise of Residential Mortgage Backed Securities and are designated as HTC. The HTC
securities represent a portfolio of securities purchased for the purpose of collecting contractual cashflows to maturity.
During the year the Glenbeigh securitisation 2018-1 DAC was wound up. This resulted in the Group's retained note in this securitisation
being called in November 2021. The gain on the call was recognised in Other income (€3m).
At 31 December 2021, debt securities at amortised cost with a fair value of €732m (31 December 2020: €nil) had been pledged to third
parties in sale and repurchase agreements. The Group has not derecognised any securities delivered in such sale and repurchase
agreements on the statement of financial position.
The HTC&S securities which the Group held matured during 2020.
All debt securities at 31 December 2021 are stage 1.
(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
31 December 2021
31 December 2020
HTC
€m
2,583
-
-
(46)
-
(43)
2,494
HTC&S
€m
-
-
-
-
-
-
HTC
€m
1,796
-
1,046
(214)
(3)
(42)
2,583
HTC&S
€m
209
(3)
-
(200)
(6)
-
-
(B) Amounts arising from impairment provisioning on debt securities:
Held at amortised cost
As at 31 December 2021, the amount arising from ECL on debt securities measured at amortised cost is €0.7m (31 December 2020:
€0.7m). The ECL on debt instruments measured at amortised cost is offset against the carrying amount of the assets in the statement of
financial position.
202
Permanent TSB Group Holdings plc - Annual Report 2021 19. 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
2021
31 December
2020
€m
24
2
26
€m
15
9
24
31 December
2021
31 December
2020
€m
26
26
€m
24
24
PTSB Group holds Series A and Series B preferred stock in Visa Inc. at 31 December 2021 with a value of €26m. 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 €17m and €9m
respectively at 31 December 2021 (31 December 2020: €16m and €8m) 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 36 for further details).
20. Prepayments and accrued income
Visa prepayments
Other prepayments
21. 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 22)
Deferred fees, discounts and fair value adjustments
Net loans and advances to customers
31 December
2021
31 December
2020
€m
182
23
205
€m
72
14
86
31 December
2021
31 December
2020
€m
€m
7,337
6,854
14,191
196
358
14,745
(604)
115
14,256
5,724
8,623
14,347
181
327
14,855
(728)
86
14,213
203
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
21. Loans and advances to customers (continued)
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
2021
31 December
2020
31 December
2021
31 December
2020
€m
€m
€m
€m
6,027
2,820
5,898
14,745
115
14,860
6,986
3,314
4,555
14,855
86
14,941
5,605
2,688
5,848
14,141
115
14,256
6,474
3,140
4,513
14,127
86
14,213
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.
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:
Sold to third parties and included within debt securities in issue (non-recourse)
on the Statement of financial position (note 29)
- Available collateral*
- Rated notes, unavailable for collateral
- Unrated notes
* The eligibility of available collateral will depend on the criteria of the counterparty.
31 December
2021
31 December
2020
€bn
7.3
6.1
1.2
€bn
5.7
2.9
2.8
31 December
2021
31 December
2020
€bn
€bn
0.2
0.5
5.3
0.6
1.2
7.3
2.4
-
2.8
5.7
204
Permanent TSB Group Holdings plc - Annual Report 2021 21. Loans and advances to customers (continued)
Loans and advances balance movement for the year ended 31 December 2021 and the year ended 31 December 2020 is set out in the
following tables:
Non-credit impaired
Credit impaired
Stage 1
€m
Stage 2
€m
Stage 3
€m
POCI
€m
Balance as at 1 January 2021
10,575
3,152
1,127
New assets originated*
1,843
111
2
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
Other movements
Balance as at 31 December 2021
*Loan originations are net of repayments in the year
(311)
(23)
875
5
546
(1,270)
-
(5)
-
11,689
311
(257)
(875)
185
(636)
(259)
(5)
(124)
-
2,239
-
280
-
(190)
90
(78)
(60)
(266)
-
815
1
-
-
-
-
-
-
-
-
-
1
2
Total
€m
14,855
1,956
-
-
-
-
-
(1,607)
(65)
(395)
1
14,745
During 2021 Stage 2 balances declined by €636 million. The decline is primarily attributable to:
• PD refinements incorporating greater segmentation of default information for mortgage customers distinguishing between non-
standard mortgage defaults and standard mortgage defaults (€404m move to stage 1); and
•
Improvements in risk grade and reduction in forborne accounts (€163m move to stage 1).
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
Other movements
Balance as at 31 December 2020
*Loan originations are net of repayments in the year
(932)
(55)
485
2
(500)
(1,116)
(1)
(52)
-
10,575
932
(273)
(485)
141
315
(237)
(9)
(1,343)
-
3,152
-
328
-
(143)
185
(64)
(43)
-
-
1,127
2
-
-
-
-
-
-
(1)
-
-
-
1
Total
€m
16,389
1,332
-
-
-
-
-
(1,418)
(53)
(1,395)
-
14,855
205
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
22. Impairment provisions
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 customer’s portfolio.
The non-performing loan balance as at 31 December 2021 was €817m (31 December 2021: €1,128m). Refer to note 37 for further
details.
ECL provisions
NPL % of total
loans
Stage 1
Stage 2
Stage 3
%
€m
€m
€m
3.3%
20.9%
22.5%
3.9%
5.5%
55
1
-
5
61
45
152
30
11
238
127
145
23
10
305
ECL provisions
NPL % of total
loans
Stage 1
Stage 2
Stage 3
%
€m
€m
€m
5.3%
20.8%
19.3%
5.2%
7.6%
40
2
-
13
55
61
183
32
10
286
178
175
21
13
387
Total ECL
provisions
as % of total
loans
%
1.8%
18.4%
27.0%
7.3%
4.1%
Total
€m
227
298
53
26
604
Total ECL
provisions
as % of total
loans
%
2.3%
17.9%
29.3%
11.0%
4.9%
Total
€m
279
360
53
36
728
31 December 2021
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
2021
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
2020
Loans and
advances to
customers
€m
12,568
1,623
196
358
14,745
(604)
115
14,256
Loans and
advances to
customers
€m
12,338
2,009
181
327
14,855
(728)
86
14,213
NPLs
€m
420
339
44
14
817
NPLs
€m
658
418
35
17
1,128
206
Permanent TSB Group Holdings plc - Annual Report 2021 22. Impairment provisions (continued)
A reconciliation of the provision for impairment losses for loans and advances is as follows:
2021
Total by portfolio
ECL as at 1 January 2021
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 2021
Net movement excluding derecognition (from above)
Interest income booked but not recognised
Write offs net of recoveries
Impairment write-back on customer loans and advances for the year
ended 31 December 2021
Residential
mortgages
Commercial
Consumer
finance
€m
€m
€m
639
(45)
35
16
6
(84)
(1)
(35)
(120)
525
53
(4)
(4)
13
5
(2)
-
(3)
(5)
53
36
(3)
(8)
5
(6)
-
-
(4)
(4)
26
Total
€m
728
(52)
23
34
5
(86)
(1)
(42)
(129)
604
5
(8)
2
(1)
* 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. 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.
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
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
Residential
mortgages
Commercial
Consumer
finance
€m
€m
€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
Total
€m
818
(24)
150
24
150
(209)
(1)
(30)
(240)
728
150
(8)
13
155
* 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. 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.
207
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
22. Impairment provisions (continued)
Total by stage
ECL as at 1 January 2021
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 2021
Net movement excluding derecognition (from above)
Interest income booked but not recognised
Write offs net of recoveries
Impairment write-back on customer loans and advances for the year
ended 31 December 2021
Stage 1
€m
Stage 2
€m
Stage 3
€m
55
23
(4)
-
19
(4)
(26)
17
(13)
-
-
-
-
61
286
(23)
42
(44)
(25)
(27)
(9)
17
(19)
(2)
-
(2)
(4)
238
387
-
(38)
44
6
(21)
58
-
37
(84)
(1)
(40)
(125)
305
Total
€m
728
-
-
-
-
(52)
23
34
5
(86)
(1)
(42)
(129)
604
5
(8)
2
(1)
* 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. 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.
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
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
Stage 1
€m
Stage 2
€m
Stage 3
€m
44
22
(9)
-
13
(4)
(9)
12
(1)
(1)
-
-
(1)
55
439
335
(22)
35
(32)
(19)
(7)
71
12
76
(208)
-
(2)
(210)
286
-
(26)
32
6
(14)
89
-
75
-
(1)
(28)
(29)
387
Total
€m
818
-
-
-
-
(25)
151
24
150
(209)
(1)
(30)
(240)
728
150
(8)
13
155
* 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. 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.
208
Permanent TSB Group Holdings plc - Annual Report 2021 22. Impairment provisions (continued)
Modified Financial Assets
At 31 December 2021 there have been no significant modified financial assets for which the loss allowance has changed from lifetime to
12-month ECL.
23. Interest in associated undertakings
Synch Payments and Clearpay
31 December
2021
31 December
2020
€m
€m
2
2
-
-
During 2021, the Group acquired a non-controlling interest in Synch Payments DAC (25%) and Clearpay DAC (33%). These investments
are accounted for under the equity method in the consolidated financial statements and have a carrying value of €2m (31 December
2020:€nil).
These investments will be increased or decreased by the Group’s share of the profit or loss which will be assessed annually.
24. Property and equipment
2021
€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
At 31 December
Accumulated depreciation
At 1 January
Provided in the year
Eliminate on revaluation
At 31 December
Net book value at 31 December
* For further details on right-of-use assets refer to note 33.
98
-
2
(1)
99
-
(1)
1
-
99
107
10
-
-
117
(71)
(6)
-
(77)
40
85
6
-
-
91
(61)
(8)
-
(69)
22
46
3
-
-
49
(14)
(6)
-
(20)
29
2
-
-
-
2
(2)
-
-
(2)
-
Total
€m
338
19
2
(1)
358
(148)
(21)
1
(168)
190
Of the €2m revaluation gain, no impairment write-back is recognised on land and buildings in the income statement and €2m is included
in the revaluation reserve in the statement of comprehensive income.
209
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
24. Property and equipment (continued)
2020
€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
Additions
Revaluations
Depreciation write-back on revaluation
At 31 December
Accumulated depreciation
At 1 January
Provided in the year
Eliminate on revaluation
At 31 December
Net book value at 31 December
* For further details on right-of-use assets refer to note 33.
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.
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
2021
€m
32
67
26
43
168
2020
€m
31
67
23
45
166
Land and buildings at 31 December 2021 held at fair value was €99m (31 December 2020: €98m). The historic cost of land and buildings
is €117m (31 December 2020: €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 2021 and 31 December 2020 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 2021 and 31 October 2020.
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%. There has been no change to the valuation
techniques during the year.
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 2021 are as follows:
31 December 2021
Land
Buildings - freehold
210
Level 1
€m
Level 2
€m
-
-
-
32
67
99
Level 3
Total fair value
€m
-
-
-
€m
32
67
99
Permanent TSB Group Holdings plc - Annual Report 2021 24. Property and equipment (continued)
31 December 2020
Land
Buildings - freehold
25. 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
26. Deferred taxation
Deferred tax liabilities
Deferred tax assets
Net deferred tax assets
Level 1
€m
Level 2
€m
-
-
-
31
67
98
Level 3
Total fair value
€m
-
-
-
€m
31
67
98
31 December
2021
31 December
2020
€m
€m
178
46
224
(76)
(26)
(102)
122
127
51
178
(61)
(15)
(76)
102
31 December
2021
31 December
2020
€m
(26)
376
350
€m
(27)
376
349
Net deferred tax assets are attributable to the following:
2021
Property and equipment
Unrealised losses on assets/liabilities
Losses carried forward
Other temporary differences
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
€m
€m
€m
1
-
3
(2)
2
-
(1)
-
-
(1)
-
-
-
-
-
At 31 December
€m
(20)
(6)
373
3
350
At 1 January
€m
(21)
(5)
370
5
349
At 1 January
€m
Recognised
in income
statement
€m
Recognised in
equity
Recognised
in other
comprehensive
income
At 31 December
€m
€m
€m
(20)
(2)
360
7
345
(1)
-
10
(3)
6
-
(3)
-
-
(3)
-
-
-
1
1
(21)
(5)
370
5
349
211
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
26. 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 2021 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 2021 amounted to €20m (31 December 2020:
€20m) which relates to the Group’s subsidiaries.
Included in the overall deferred tax asset is a deferred tax asset of €42k in relation to permanent tsb Group Holdings plc (31 December
2020: €95k).
In accordance with IFRS these balances are recognised on an undiscounted basis.
27. Deposits by banks
Placed by other banks and institutions on repurchase agreements
Deposits by banks
31 December
2021
31 December
2020
€m
347
347
€m
-
-
Securities which are sold under agreements to repurchase are secured by Irish and other eligible Government bonds. These agreements
are completed under market standard Global Master Repurchase Agreements. The fair value of the financial assets pledged under
existing agreement to repurchase is €732m at 31 December 2021 (31 December 2020: €nil).
28. Customer accounts
Term deposits
Demand deposits
Current accounts
Notice and other accounts
Customer accounts
31 December
2021
31 December
2020
€m
€m
2,226
7,657
7,104
2,102
19,089
3,062
7,132
5,779
2,066
18,039
At 31 December 2021, the Group held corporate deposits of €1.4bn (31 December 2020: €1.8bn).
An analysis of the contractual maturity profile of customer accounts is set out in the liquidity risk section of note 37 of the consolidated
financial statements.
212
Permanent TSB Group Holdings plc - Annual Report 2021 29. 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
2021
31 December
2020
€m
€m
352
172
524
2
350
172
524
351
458
809
2
349
458
809
Non-recourse funding
As at 31 December 2021 the Group had advances of €0.2bn (31 December 2020: €0.5bn) collateralised on residential property loans
of €0.2bn (31 December 2020: €0.4bn) 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 €0.3bn between 31 December 2020 and 31 December 2021 to €0.2bn, primarily due to the
accelerated redemption of a securitisation during the year. The Group did not have any defaults of principal or interest or other breaches
with respect to non-recourse funding during 2021.
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.
30. Other liabilities
Amounts falling due within one year
PAYE and social insurance
Other taxation including deposit interest retention tax (DIRT)
Creditor Accruals
Other*
Lease liability (see note 33 for further information on lease liabilities)
Total amounts falling due within one year
Amounts falling due greater than one year
Lease liability (see note 33 for further information on lease liabilities)
Total amounts falling due greater than one year
Total other liabilities
31 December
2021
31 December
2020
€m
€m
4
-
79
56
5
144
26
26
170
4
1
48
20
7
80
27
27
107
* Other includes €48m relating to the deposit received by the Group on 11 November 2021 as part of the purchase price for the sale of Glenbeigh III portfolio (31 December
2020:€nil) and miscellaneous liabilities.
213
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
31. Provisions
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
2021
Provision
for legacy,
legal and
compliance
liabilities
Restructuring
costs
€m
28
7
-
(29)
6
€m
29
21
(3)
(19)
28
2020
Provision
for legacy,
legal and
compliance
liabilities
Restructuring
costs
€m
2
28
(1)
(1)
28
€m
25
21
(2)
(15)
29
Other
€m
20
9
(7)
(1)
21
Total
€m
77
37
(10)
(49)
55
Other
€m
Total
€m
14
11
(5)
-
20
41
60
(8)
(16)
77
The provision at 31 December 2021 is €55m (31 December 2020: €77m) which is comprised of the following:
Restructuring costs
During 2020, the Group announced an Enterprise Transformation programme. At 31 December 2020, a provision for restructuring of
€27m was recognised based on the estimate of the costs of this programme. During 2021 an additional provision of €7m was made and
an amount of €29m was utilised as part of this programme. The remaining provision of €5m is based on an estimate of the remaining
costs to bring the programme to a conclusion. This programme is expected to conclude within the next 12 months.
The Group remains a lessee on a number of non-cancellable leases over properties that it no longer occupies following a restructure in
2013. The remaining provision of €1m relates to dilapidation costs associated with the remaining properties.
Provision for legacy, legal and compliance liabilities
As at 31 December 2021, the Group has provisions of €28m relating to legal, compliance and other costs in relation to legacy business
issues (31 December 2020: €29m).
A provision of €21m was made during 2021 relating to legal, compliance and other costs 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 2021, the provision of €21m (31 December 2020: €20m) primarily relates to indemnities and guarantees provided by
the Group, together with further costs, relating to deleveraging of various asset portfolios.
32. Subordinated liabilities
At amortised cost:
€250m Tier 2 capital notes due August 2031, callable 2026
Maturity Date
Repayable in less than 1 year
Repayable in greater than 1 year but less than 5 years
Repayable in greater than 5 years
214
31 December
2021
31 December
2020
€m
€m
252
252
-
-
31 December
2021
31 December
2020
€m
€m
3
-
249
252
-
-
-
-
Permanent TSB Group Holdings plc - Annual Report 2021 32. Subordinated liabilities (continued)
Tier 2 capital notes – PTSBGH
In May 2021, PTSBGH issued €250m of Tier 2 capital notes at a fixed rate of 3% per annum. The notes mature on 19 August 2031 with a
call date of any date from and including 19 May 2026 to and including 19 August 2026 with the call subject to approval of the regulatory
authorities, with approval conditional on meeting the requirements of the EU CRR.
The interest rate will be reset, in the event that the securities are not called, on 19 August 2026 to Euro 5 year Mid Swap rate plus a
margin of 3.221% per annum. The loan is subordinated and ranks as Tier 2 capital with interest paid annually in arrears on 19 August
(short first coupon period). The loan may be subject to the exercise of Irish Statutory loss absorption powers by the relevant resolution
authority.
In the event of winding up of PTSBGH, the Tier 2 capital notes will be:
•
junior in right of payment to all Senior Claims;
• pari passu with all other subordinated claims against PTSBGH which constitute, or would but for any applicable limitation on the
amount of such capital constitute, Tier 2 capital notes or that rank or are expressed to rank pari passu with the obligations of PTSBGH
under Tier 2 capital notes; and
•
in priority to PTSBGH ordinary shares, preference shares and junior subordinated obligations or other securities of PTSBGH which by
law rank, or by their terms are expressed to rank, junior to the Tier 2 capital notes.
33. Leases
Right-of-use assets*
As at 1 January 2021
Additions
Depreciation of right-of-use assets
Balance as at 31 December 2021
Right-of-use assets*
As at 1 January 2020
Additions
Depreciation of right-of-use assets
Balance as at 31 December 2020
Lease liabilities
As at 1 January 2021
Additions
Repayment of lease liabilities
Balance as at 31 December 2021
Land and
buildings
€m
Motor vehicles
€m
32
3
(6)
29
Land and
buildings
€m
39
-
(7)
32
-
-
-
-
Motor vehicles
€m
1
-
(1)
-
Land and
buildings
€m
Motor vehicles
€m
34
3
(6)
31
-
-
-
-
Total
€m
32
3
(6)
29
Total
€m
40
-
(8)
32
Total
€m
34
3
(6)
31
215
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
33. Leases (continued)
Lease liabilities
As at 1 January 2020
Additions
Repayment of lease liabilities
Balance as at 31 December 2020
* right-of-use assets are included in PPE and lease liabilities are included in Other liabilities.
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 37.
Amounts recognised in income statement*
Interest on lease liabilities
Expense relating to short-term leases
Depreciation of right-of-use assets
Total charge in income statement
Land and
buildings
€m
41
-
(7)
34
Motor vehicles
€m
1
-
(1)
-
Total
€m
42
-
(8)
34
31 December
2021
31 December
2020
€m
€m
6
16
10
32
31
5
26
7
18
11
36
34
7
27
31 December
2021
31 December
2020
€m
€m
-
(1)
(6)
(7)
(1)
-
(8)
(9)
*
Interest expense on the lease liabilities amounted to €0.4m in interest income (31 December 2020: €0.5m) whereas expenses relating to short-term leases amounted to
€0.6m and is included in Administrative, staff and other expenses (excluding exceptional items) (31 December 2020: €0.3m).
Amounts recognised in statement of cash flow
Cash outflow for leases
Total
31 December
2021
31 December
2020
€m
(6)
(6)
€m
(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.
216
Permanent TSB Group Holdings plc - Annual Report 2021 34. 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.
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at
meetings of the Bank.
All ordinary shares rank equally with regard to the Bank’s residual assets.
Authorised share capital
31 December 2021
Ordinary shares of €0.50 each
31 December 2020
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 2021
As at 1 January 2021
Movement
As at 31 December 2021
Issued share capital (€m)
Shares held under employee benefit trust
% of Authorised capital issued
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
Number of shares
1,550,000,000
Number of shares
1,550,000,000
€m
775
€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:
• the cumulative net change in the fair value of equity securities measured at FVOCI; and
•
the cumulative net change in the fair value of debt securities measured at FVOCI until the assets are derecognised or reclassified.
This amount is increased by the amount of loss allowance
217
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
34. Share capital, reserves and other equity instruments (continued)
Other capital reserves (Non-distributable)
Other capital reserves includes €1,087m capital issued by the Company net of €7m capital redemption reserve from the repurchase and
cancellation of shares and €224m incurred in the cancellation of the share capital and share premium of PTSB on the incorporation of
the Company.
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.
On 1 April 2021 a loss of €3m was recognised in the retained earnings on the redemption of the AT1 securities issued in 2015 which
related to the costs associated with the issuance of the AT1 security.
Furthermore €21m (2020: €11m) coupon interest on the AT1 securities was paid from this reserve during 2021.
Other equity instruments - Non-distributable
As at 1 January
Issued during the period
Additional Tier 1 securities - net of the transaction costs
Redemption during the period
Additional Tier 1 securities (issued 2015)
Additional Tier 1 securities
31 December
2021
31 December
2020
€m
245
-
(122)
123
€m
122
123
-
245
On 25 November 2020, PTSBGH plc (‘Company’) issued €125m nominal value of AT1 Perpetual Temporary Write Down Securities as part
of capital raise. The transaction costs incurred were €2m. The first reset date for the fixed rate is 25 May 2026.
The AT1 securities are perpetual and redeemable financial instruments with a semi-annual coupon of 7.875% paid in arrears on 25
May and 25 November. On the first reset date on 25 May 2026, in the event the securities are not redeemed, interest will be reset to
Euro 5 year Mid Swap rate plus a margin of 8.468% (converted from an annual to a semi-annual rate). 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.
Although the AT1 securities are perpetual, the Company may, in its sole discretion, redeem the AT1 securities in full on any day falling
in the period commencing 25 November 2025 and the first reset date above and on every interest payment date thereafter (subject to
the approval of the Supervisory Authority) at the prevailing principal amount together with accrued but unpaid interest. In addition, the
securities are redeemable at the option of the Company for certain regulatory or tax reasons, subject to regulatory approval.
The securities, which do not carry voting rights, rank pari passu with holders of other tier 1 instruments (excluding the Company’s
ordinary shares). They rank ahead of the holders of ordinary share capital of the Company but junior to the claims of senior creditors and
to Tier 2 capital of the Company.
Under the EU (Bank Recovery and Resolution) Regulations 2015, these securities are loss absorbing at the point of non-viability.
218
Permanent TSB Group Holdings plc - Annual Report 2021
34. Share capital, reserves and other equity instruments (continued)
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 CET1 Capital Ratio of PTSB or the Group at any time falls below 7%. Subsequent
to any write-down event the Company may, at its sole discretion, write-up some or all of the written-down principal amount of the AT1
instrument provided regulatory capital requirements and certain conditions are met.
On 6 May 2015, PTSB issued €125m fixed rate resettable ‘AT1 securities’ as part of a capital raise. The AT1 securities were redeemed
in full on the first reset date for the fixed rate being 1 April 2021, following the attainment of the required approval of the Supervisory
Authority.
35. 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 2021
Other comprehensive income (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, net of tax
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 expense, net of tax
Revaluation
reserve
€m
Fair value
reserve
€m
Total
€m
2
-
-
-
2
-
2
-
-
2
Revaluation
reserve
€m
Fair value
reserve
€m
(2)
-
-
-
(2)
-
6
(3)
3
6
2
2
-
-
4
Total
€m
(2)
6
(3)
3
4
219
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
36. Measurement basis and fair values of financial instruments
The Group’s accounting policy on valuation of financial instruments is described in note 1. The table below sets out an overview of
financial instruments held by the Group and their fair values.
(a) Measurement basis and fair value of financial instruments
Note
Held at
amortised cost
At fair value
through OCI
At fair value
through
profit or loss
Designated as
fair value hedges
Total carrying
value
€m
€m
€m
€m
€m
31 December 2021
Financial assets*
Cash at bank
Items in course of
collection
Loans and advances to
banks
Derivative assets
Debt securities
Equity securities
Loans and advances to
customers
Financial liabilities*
Deposits by banks
Customer accounts
Debt securities in issue
Subordinated liabilities
31 December 2020
Financial assets
Cash at bank
Items in course of
collection
Loans and advances to
banks
Derivative assets
Debt securities
Equity securities
Loans and advances to
customers
Financial liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Subordinated liabilities
13
13
14
15
18
19
21
27
28
29
32
57
20
4,174
-
2,494
-
14,256
347
19,089
524
252
-
-
-
-
-
26
-
-
-
-
-
-
-
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13
13
14
15
18
19
21
27
28
29
32
71
20
3,312
-
2,583
-
14,213
-
18,039
809
-
-
-
-
-
-
24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,256
13,982
347
19,089
524
252
347
19,092
530
256
Fair value
€m
57
20
4,174
1
2,526
26
Fair value
€m
71
20
3,312
-
2,662
24
57
20
4,174
1
2,494
26
71
20
3,312
-
2,583
24
14,213
13,558
-
18,039
809
-
-
18,044
808
-
* In addition the Group has an other asset of €310m and an other liability of €48m in respect to the sale of Glenbeigh III, both of which
were settled in early 2022 (see note 44).
Note
Held at
amortised cost
At fair value
through equity
At fair value
through
profit or loss
Designated as
fair value hedges
Total carrying
value
€m
€m
€m
€m
€m
The following table sets out the fair value of financial instruments that the Group holds at 31 December 2021. 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).
220
Permanent TSB Group Holdings plc - Annual Report 2021 36. Measurement basis and fair values of financial instruments (continued)
Level 2 – financial assets and liabilities measured using valuation techniques which use observable market 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 unobservable market inputs.
Basis and fair values of financial instruments
31 December 2021
Note
Total carrying
value
€m
Financial assets
Cash at bank
Items in course of collection
Loans and advances to banks
Derivative assets
Debt securities
Equity securities
Loans and advances to customers
Financial liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Subordinated liabilities
13
13
14
15
18
19
21
27
28
29
32
57
20
4,174
1
2,494
26
14,256
347
19,089
524
252
31 December 2020
Note
Total carrying
value
Financial assets
Cash at bank
Items in course of collection
Loans and advances to banks
Derivative assets
Debt securities
Equity securities
Loans and advances to customers
Financial liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Subordinated liabilities
€m
71
20
3,312
-
2,583
24
14,213
-
18,039
809
-
13
13
14
15
18
19
21
27
28
29
32
Level 1
€m
57
-
-
-
2,526
17
-
-
-
357
256
Level 2
€m
Level 3
€m
-
20
4,174
1
-
-
-
347
19,092
173
-
-
-
-
-
-
9
13,982
-
-
-
-
Level 1
€m
Level 2
€m
Level 3
€m
71
-
-
-
2,621
16
-
-
-
350
-
-
20
3,312
-
-
-
-
-
18,044
458
-
-
-
-
-
41
8
13,558
-
-
-
-
Total fair
value
€m
57
20
4,174
1
2,526
26
13,982
347
19,092
530
256
Total fair
value
€m
71
20
3,312
-
2,662
24
13,558
-
18,044
808
-
(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 minor 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.
221
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Notes to the Consolidated Financial Statements
(continued)
36. Measurement basis and fair values of financial instruments (continued)
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)
Included in debt securities at 31 December 2021 are €2,494m (31 December 2020 €2,583m) of HTC securities. HTC securities are
derived from observable market data through independent pricing sources such as Bloomberg. 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 market data for similar instruments. If observable market data is not available, an appropriate credit
spread linked to similar instruments, is used within the valuation technique.
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.
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 market 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 2021. 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 €26m at 31 December 2021 (31
December 2020: €24m) and are recognised in the statement of financial position at FVOCI.
The fair values of the Series A preferred stock in Visa Inc. is classified as Level 1 and the fair value of the Series B preferred stock is
classified as Level 3, as the valuation of these preferred stock includes inputs that are based on unobservable data.
222
Permanent TSB Group Holdings plc - Annual Report 2021
36. Measurement basis and fair values of financial instruments (continued)
Fair value measurements recognised in the statement of financial position
31 December 2021
Notes
Level 1
€m
Level 2
€m
Level 3
€m
Financial assets measured at fair value
Derivative assets
Equity instruments
31 December 2020
Financial assets measured at fair value
Derivative assets
Equity instruments
15
19
-
17
1
-
-
9
Notes
Level 1
€m
Level 2
€m
Level 3
€m
15
19
-
16
-
-
-
8
There were no transfers between level 1 and level 2 of the fair value hierarchy during 2021.
Reconciliation of level 3 fair value measurements of financial assets
Equity Instruments
As at 1 January
Revaluation movement in OCI – Fair value reserve (equity instruments)
Transfer to Level 1
As at 31 December
2021
€m
8
1
-
9
Total
€m
1
26
Total
€m
-
24
2020
€m
15
9
(16)
8
There has been no transfers in/out of level 3 per the fair value hierarchy in the financial year ended 31 December 2021. 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. The
Series A preferred stock is classified as Level 1 and was transferred from Level 3 to Level 1.
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 2021
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%
9
0 - 90%
* Discount has been applied for illiquidity and the conversion rate variability of the Visa Inc. Series B Preferred stock.
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 B Preferred stock.
223
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
36. Measurement basis and fair values of financial instruments (continued)
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 €17m and €9m respectively at 31 December 2021 (31 December 2020:
€16m and €8m) 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 2021 and 31 December 2020. Future conversions are calculated using
discounted cash follows. 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.
37. 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
Loans and advances to banks (iii)
Derivative assets (ii)
Debt securities (i)
Loans and advances to customers (including loans and advances to customers classified
as held for sale (iv)
Commitments and contingencies
Notes
31 December
2021
31 December
2020
€m
€m
13
13
14
15
18
21
42
57
20
4,174
1
2,494
71
20
3,312
-
2,583
14,256
14,213
21,002
1,181
22,183
20,199
1,069
21,268
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 used in the table below are those prescribed by Moody’s Investor
Services Limited.
224
Permanent TSB Group Holdings plc - Annual Report 2021 37. Financial risk management (continued)
(i) Debt securities
Rating
Aaa
A2
Baa1
Baa2
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
(ii) Derivative assets
31 December
2021
31 December
2020
€m
€m
60
1,463
506
465
-
-
2,494
67
1,488
515
-
474
39
2,583
31 December
2021
31 December
2020
€m
€m
1,523
465
506
2,494
1,594
474
515
2,583
The Group has executed standard ISDA agreements with all of its counterparties. The Group has also executed CSAs with all of its
counterparties in respect of the majority of derivative instruments to mitigate its credit risk. As part of these agreements, the Group
exchanges collateral in line with movements in the market values of derivative positions daily. All interest rate swap derivative assets are
covered by netting agreements. FX forward derivatives are settled gross. The cumulative positive market value of derivative assets at 31
December 2021 was €1m (31 December 2020: €nil). The Group manages its collateral derivative positions with counterparties on a net
basis. The uncollaterised derivative positions are all held with investment grade counterparties.
(iii) 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 ratings prescribed by Moody’s Investor Services Limited and Standard and
Poor's for the CBI.
Rating
Aaa
Aa2
Aa3
A1
A2
Baa2
Total
The following sections detail additional disclosures on Asset Quality.
31 December
2021
31 December
2020
€m
€m
3,709
199
258
2
6
-
4,174
2,813
209
254
32
3
1
3,312
225
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
37. Financial risk management (continued)
(iv) 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.
31 December
2021
31 December
2020
€m
€m
12,568
1,623
14,191
196
358
14,745
11,689
2,239
815
2
14,745
13,885
43
817
14,745
817
115
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
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 & fair value adjustments
226
Permanent TSB Group Holdings plc - Annual Report 2021 37. Financial risk management (continued)
31 December 2021
Asset Quality
Stage 1
Excellent
Satisfactory
Fair
Standardised
Stage 2
Excellent
Satisfactory
Fair
Standardised
Home loans
Buy-to-let
Total residential
mortgages
Commercial
Consumer
€m
€m
€m
€m
€m
7,096
3,807
20
-
10,923
146
344
735
-
1,225
184
289
1
-
474
209
334
267
-
810
7,280
4,096
21
-
11,397
355
678
1,002
-
2,035
1
10
-
-
11
7
58
76
-
141
44
196
160
65
6
50
281
2
17
29
15
63
14
358
Stage 3
Defaulted
Total measured at amortised cost
420
12,568
339
1,623
759
14,191
* The information in the shaded box has not been subject to audit by the Group’s independent auditor
31 December 2020
Asset Quality
Stage 1
Excellent
Satisfactory
Fair
Standardised
Stage 2
Excellent
Satisfactory
Fair
Standardised
Stage 3
Defaulted
Total measured at amortised cost
Home loans
Buy-to-let
Total residual
mortgages
Commercial
Consumer
€m
€m
€m
€m
€m
6,596
3,548
13
-
10,157
260
421
842
-
1,523
658
12,338
101
46
-
-
147
407
674
363
-
1,444
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
* The information in the shaded box has not been subject to audit by the Group’s independent auditor
Total
€m
7,441
4,171
27
50
11,689
364
753
1,107
15
2,239
817
14,745
Total
€m
6,873
3,664
20
18
10,575
671
1,162
1,314
5
3,152
1,128
14,855
227
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
37. Financial risk management (continued)
The following table provides an aged analysis of customer loans and advances which are past due but not Stage 3.
31 December 2021
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
0-30 days
31-60 days
61-90 days
Total past due not Stage 3
€m
18
4
2
24
24
€m
€m
3
1
2
6
6
-
-
-
-
-
Home loans
Buy-to-let
Commercial
€m
18
4
2
24
€m
€m
3
1
2
6
-
-
-
-
31 December 2020
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
€m
15
3
2
20
20
€m
€m
2
1
-
3
3
-
-
-
-
-
Fair value of collateral held
Home loans
Buy-to-let
Commercial
0-30 days
31-60 days
61-90 days
Total past due not Stage 3
€m
15
3
2
20
€m
€m
2
1
-
3
-
-
-
-
Total
€m
21
5
4
30
30
Total
€m
21
5
4
30
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.
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.
228
Permanent TSB Group Holdings plc - Annual Report 2021 37. Financial risk management (continued)
Non-performing assets are defined as NPLs plus foreclosed assets.
31 December 2021
Stage 3
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
€m
€m
€m
€m
251
32
39
36
62
-
420
4
424
3.3%
177
89
25
10
38
-
339
24
363
20.9%
40
1
-
-
3
-
44
-
44
22.5%
1
6
2
1
2
2
14
-
14
3.9%
31 December 2020
Stage 3
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
€m
€m
€m
€m
464
42
42
21
89
-
658
25
683
5.3%
319
32
14
4
49
-
418
5
423
20.8%
28
1
-
2
4
-
35
-
35
19.3%
1
9
1
1
4
1
17
-
17
5.2%
Total
€m
469
128
66
47
105
2
817
28
845
5.5%
Total
€m
812
84
57
28
146
1
1,128
30
1,158
7.6%
Non-performing loans as a percentage of total loans and advances were 5.5% at 31 December 2021, a reduction from 7.6% at 31
December 2020
Total portfolio Loss allowance: statement of financial position
The tables below outline the ECL loss allowance total at 31 December 2021 in respect of total customer loans and advances.
The impairment write-back in respect of the total loans and advances for year ended 31 December 2021 is €1m, compared to a charge of
€155m for the year ended 31 December 2020.
Loss allowance - statement of financial position
Stage 1
Stage 2
Stage 3
Total loss allowance
31 December
2021
31 December
2020
€m
€m
61
238
305
604
55
286
387
728
229
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Notes to the Consolidated Financial Statements
(continued)
37. Financial risk management (continued)
Provision coverage ratio*
Stage 1
Stage 2
Stage 3
Total provisions/total loans
31 December
2021
31 December
2020
%
%
0.5%
10.6%
37.3%
4.1%
0.5%
9.1%
34.3%
4.9%
* Provision coverage ratio is calculated as loss allowance/impairment provision as a percentage of gross loan balance.
Origination profile
Loan origination profile of the residential mortgage loan portfolio before provision for impairment:
The table below illustrates that €2bn or 15% of the residential mortgage portfolio originated before 2006. Between 2006 and 2008
origination was €5bn or 38% of the residential mortgages. The residual of 47% of the residential mortgages were originated between
2009 and 2021.
Residential mortgages portfolio
Stage 3 residential mortgages
portfolio
Number
967
754
1,204
1,561
3,485
5,145
7,697
11,173
15,474
13,532
8,712
2,135
889
550
315
716
1,497
1,648
1,811
3,202
4,974
6,282
5,153
7,099
105,975
Balance
€m
13
18
38
61
132
273
574
1,105
2,125
2,005
1,207
193
67
44
21
67
156
179
227
487
924
1,306
1,184
1,785
14,191
Number
Balance
€m
75
53
73
103
120
189
259
487
881
842
513
79
23
8
5
8
14
39
25
31
48
40
21
18
3,954
2
2
4
6
6
18
32
76
215
239
111
8
3
1
-
1
3
3
4
5
10
8
1
1
759
31 December 2021
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
2021
Total
230
Permanent TSB Group Holdings plc - Annual Report 2021 37. Financial risk management (continued)
31 December 2020
Residential mortgages portfolio
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
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
Stage 3 residential mortgages
portfolio
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
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 58% at 31 December 2021 compared to 66% at
31 December 2020.
231
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
37. Financial risk management (continued)
The Group’s residential mortgage lending LTVs at December 2021 reflect updated valuations obtained on high-exposure NPLs (largely
impacting on high-exposure buy-to-let properties).
31 December 2021
Less than 50%
50% 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 2020
Less than 50%
50% 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
232
Home loans
Buy-to-let
%
%
38%
34%
25%
1%
98%
1%
-
-
1%
-
-
-
-
-
2%
32%
16%
21%
11%
80%
6%
4%
3%
2%
1%
1%
1%
-
2%
20%
Total
%
37%
32%
25%
2%
96%
1%
1%
1%
1%
-
-
-
-
-
4%
100%
100%
100%
56%
69%
78%
74%
54%
105%
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%
58%
69%
90%
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%
Permanent TSB Group Holdings plc - Annual Report 2021 37. Financial risk management (continued)
Analysis by LTV of the Group’s residential mortgage lending which is neither past due nor Stage 3:
The tables below illustrates that 99% of residential home loan mortgages (31 December 2020: 97%) and 87% of residential buy-to-let
mortgages (31 December 2020: 71%) that are neither past due nor Stage 3 are in positive equity as at 31 December 2021.
31 December 2021
Less than 50%
50% 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 2020
Less than 50%
50% 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
%
%
39%
34%
25%
1%
99%
1%
-
-
-
-
-
-
-
-
1%
39%
19%
20%
9%
87%
5%
3%
2%
1%
1%
-
-
-
1%
13%
Total
%
39%
34%
25%
2%
99%
1%
-
-
-
-
-
-
-
-
1%
100%
100%
100%
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%
233
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
37. Financial risk management (continued)
Analysis by LTV of the Group’s residential mortgage lending which are classified as Stage 3:
The tables below illustrates that 75% of residential home loan mortgages (31 December 2020: 63%) and 53% of residential buy-to-let
mortgages (31 December 2020: 34%) that are classified as Stage 3 are in positive equity as at 31 December 2021.
31 December 2021
Less than 50%
50% 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 2020
Less than 50%
50% 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
234
Home loans
Buy-to-let
%
%
29%
19%
20%
7%
75%
6%
4%
4%
3%
2%
1%
1%
-
4%
25%
100%
€m
420
7%
8%
21%
17%
53%
12%
6%
8%
6%
4%
2%
3%
1%
5%
47%
100%
€m
339
Home loans
Buy-to-let
%
%
22%
16%
16%
9%
63%
9%
5%
5%
4%
2%
3%
1%
1%
7%
37%
100%
€m
658
5%
7%
13%
9%
34%
17%
11%
7%
5%
5%
5%
3%
1%
12%
66%
100%
€m
418
Total
%
19%
14%
20%
11%
64%
9%
5%
6%
4%
3%
1%
2%
1%
5%
36%
100%
€m
759
Total
%
15%
13%
15%
9%
52%
12%
7%
6%
4%
3%
4%
2%
1%
9%
48%
100%
€m
1,076
Permanent TSB Group Holdings plc - Annual Report 2021 37. Financial risk management (continued)
(v) 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 2021
31 December 2020
Balance
outstanding
at transfer of
ownership
Balance
outstanding
at transfer of
ownership
Number
Number
€m
10
42
-
52
41
207
-
248
€m
13
56
-
69
27
165
-
192
Collateral in possession assets are sold as soon as practicable. These assets which total €28m as at 31 December 2021 (31 December
2020: €30m) are included in assets held for sale (see note 17 for further details).
During the year the ownership of 81 properties were transferred to the Group.
The details of the transfers are provided in the tables below:
Home loans
Buy-to-let
Total
During the year 137 properties were disposed.
The details of the disposals are provided in the tables below:
Home loans
Buy-to-let
Total
31 December 2021
Collateral in possession
Home loans
Buy-to-let
Commercial
Year ended 31 December 2021
Number
9
72
81
Number
23
114
137
Number of
disposals
Balance
outstanding at
transfer of
ownership
Gross sales
proceeds
Costs to sell
Pre
provisioning
loss on sale*
€m
€m
€m
€m
23
114
-
137
7
25
-
32
5
16
-
21
-
1
-
1
2
10
-
12
* 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.
235
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
37. Financial risk management (continued)
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
Gross sales
proceeds
Costs to sell
Pre
provisioning
loss on sale*
€m
€m
€m
€m
62
206
4
272
18
52
1
71
9
28
-
37
-
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.
(vi) 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 2021 and 31 December 2020. 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 method of splitting the forborne loans and advances to customers over the different asset quality categories:
• Neither past due nor Stage 3
• Past due but not Stage 3
• Stage 3
31 December 2021
Home Loans
Buy-to-let
Mortgages
Commercial
€m
€m
€m
€m
Total Residential
Stage 2
Excellent
Satisfactory
Fair Risk
Standardised
Stage 3
Defaulted
Total measured at amortised cost
6
76
96
-
178
289
467
5
37
30
-
72
94
166
11
113
126
-
250
383
633
1
-
3
-
4
33
37
Total
€m
12
113
129
-
254
416
670
* 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 2020
Home Loans
Buy-to-let
Mortgages
Commercial
€m
€m
€m
€m
Total Residential
Stage 2
Excellent
Satisfactory
Fair Risk
Standardised
Stage 3
Defaulted
Total measured at amortised cost
22
114
152
-
288
438
726
-
29
51
-
80
151
231
22
143
203
-
368
589
957
-
1
5
-
6
14
20
* The information in the shaded box has not been subject to audit by the Group’s Independent Auditor.
236
Total
€m
22
144
208
-
374
603
977
Permanent TSB Group Holdings plc - Annual Report 2021 37. Financial risk management (continued)
(b) Weighted Average – LTV
LTV on total portfolio in forbearance
The tables below illustrates that 84% of residential home loan mortgages (31 December 2020: 72%) and 67% of residential buy-to-let
mortgages (31 December 2020: 47%) that are neither past due nor Stage 3 are in positive equity as at 31 December 2021.
31 December 2021
Less than 50%
50% 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 2020
Less than 50%
50% 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
%
%
33%
25%
20%
6%
84%
4%
3%
2%
2%
1%
1%
1%
-
2%
16%
7%
11%
30%
19%
67%
12%
8%
1%
4%
2%
1%
1%
1%
3%
33%
Total
%
26%
21%
23%
9%
79%
6%
4%
2%
2%
1%
1%
1%
1%
3%
21%
100%
100%
100%
70%
47%
78%
95%
-
104%
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%
76%
47%
84%
Total
%
19%
17%
21%
10%
67%
9%
7%
4%
2%
2%
2%
1%
1%
5%
33%
100%
100%
100%
82%
76%
93%
107%
-
110%
88%
76%
97%
237
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
37. 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 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 2021 and 31 December 2020.
(i) Residential home loan mortgages:
The incidence of the main type of forbearance arrangements for owner occupied residential mortgages are analysed below:
31 December 2021
All loans
Stage 3
Number
Balances
Number
Balances
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
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.
€m
12
5
255
8
66
38
55
28
467
52
33
1,015
47
264
245
190
164
2,010
€m
8
5
157
6
36
20
29
28
289
61
35
1,815
64
524
483
378
164
3,524
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
The tables above reflect a decrease of 1,542 cases in the year to 31 December 2021 for the Group in the number of residential home loan
mortgages in forbearance arrangements, a decrease of €259m. The average balance of forborne loans is €0.133m at 31 December 2021
(31 December 2020: €0.143m).
238
Permanent TSB Group Holdings plc - Annual Report 2021 37. 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 2021
All loans
Stage 3
Number
Balances
Number
Balances
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
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.
€m
27
-
58
-
31
6
37
7
166
31
-
121
2
21
13
56
23
267
€m
15
-
38
-
11
3
20
7
94
54
-
190
2
62
32
86
23
449
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
The tables above reflect a decrease of 230 cases in the year to 31 December 2021 for the Group in the number of residential buy-to-let in
forbearance arrangements, a decrease of €65m. The average balance of forborne loans is €0.370m at 31 December 2021 (31 December
2020: €0.340m).
Commercial mortgages
The incidence of the main type of forbearance arrangements for commercial mortgages are analysed below:
Commercial mortgages
31 December 2021
31 December 2020
Number
Balances
Number
Balances
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.
€m
-
-
23
-
7
4
3
-
37
-
-
13
-
5
9
10
-
37
€m
-
-
7
-
1
5
7
-
20
1
-
15
-
2
11
15
-
44
The table above reflects a decrease of 7 cases in the year to 31 December 2021 for the Group in the number of commercial mortgages in
forbearance arrangements, an increase of €17m in balances.
239
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
37. 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
31 December 2021
Residential mortgages
Home loans
cases
Home loans
balances
Buy -to-let
cases
Buy-to-let
balances
Commercial
cases
Commercial
balances
Total cases Total balances
€m
5,066
726
679
458
(845)
(16)
(753)
(386)
-
62
(115)
(3)
(139)
(49)
(15)
76
(214)
(1)
(58)
(33)
-
€m
231
30
(48)
-
(29)
(13)
(5)
€m
€m
20
24
(3)
-
(1)
(2)
(1)
5,789
977
541
(1,063)
(17)
(814)
(426)
-
116
(166)
(3)
(169)
(64)
(21)
44
7
(4)
-
(3)
(7)
-
3,524
467
449
166
37
37
4,010
670
Opening balance 1 January
2021
New forbearance extended
during the period*
Deleveraged loans
Exited forbearance
- re-classified to Stage 3 non-
forborne
- expired forbearance
treatment
- expired loan paid down
Balance shift**
Closing balance of loans
in forbearance as at 31
December 2021
* 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 2020
Residential mortgages
Home loans
cases
Home loans
balances
Buy -to-let
cases
Buy-to-let
balances
Commercial
cases
Commercial
balances
Total cases Total balances
Opening balance 1 January
2020
New forbearance extended
during the period*
Deleveraged loans
Exited forbearance
- re-classified to Stage 3 non-
forborne
- expired forbearance
treatment
- expired loan paid down
Balance shift**
Closing balance of loans
in forbearance as at 31
December 2020
€m
827
186
-
5,788
1,323
-
(42)
(6)
(1,679)
(324)
-
(228)
(34)
(19)
589
240
(26)
(4)
(80)
(40)
-
€m
201
79
(11)
(1)
(23)
(9)
(5)
€m
€m
19
6,415
1,047
7
-
-
-
(5)
(1)
1,573
(26)
(46)
(1,760)
(367)
-
272
(11)
(7)
(251)
(48)
(25)
38
10
-
-
(1)
(3)
-
5,066
726
679
231
44
20
5,789
977
* 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.
240
Permanent TSB Group Holdings plc - Annual Report 2021 37. Financial risk management (continued)
(ii) Reconciliation of movement in forborne loans Stage 3
31 December 2021
Home loan
cases
Home loan
balances
Buy-to-let
cases
Buy-to-let
balances
Commercial
cases
Commercial
balances
Total cases Total balances
Opening balance 1 January
2021
New Stage 3 forborne
extended during the year*
Deleveraged loans
Exited forborne Stage 3, now
performing forborne
Exited forbearance
- exited forborne Stage 3, now
Stage 3 non-forborne
- expired forbearance
treatment
- expired loan paid down
Balance shift**
Closing balance loans
in forbearance as at 31
December 2021
€m
2,850
438
478
538
-
74
-
77
-
(392)
(46)
(32)
(12)
(2)
(1)
(112)
(862)
-
(25)
(146)
(4)
(76)
(179)
-
€m
151
31
-
(13)
-
(19)
(55)
(1)
€m
14
25
-
(1)
-
(1)
(4)
-
€m
603
130
-
(60)
3,364
621
-
(425)
(13)
(2)
(189)
(1,049)
-
(45)
(205)
(5)
36
6
-
(1)
-
(1)
(8)
-
2,010
289
267
94
32
33
2,309
416
* 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 2020
Home loan
cases
Home loan
balances
Buy-to-let
cases
Buy-to-let
balances
Commercial
cases
Commercial
balances
Total cases Total balances
Opening balance 1 January
2020
New Stage 3 forborne
extended during the year*
Deleveraged loans
Exited forborne Stage 3, now
performing forborne
Exited forbearance
- exited forborne Stage 3, now
Stage 3 non-forborne
- expired forbearance
treatment
- expired loan paid down
Balance shift**
Closing balance of loans
in forbearance as at 31
December 2020
€m
401
119
-
(38)
(6)
(8)
(22)
(8)
405
172
-
(66)
(4)
(5)
(24)
-
€m
145
53
-
(34)
(1)
(1)
(7)
(4)
€m
€m
33
17
3,040
563
6
-
-
-
-
(3)
-
3
-
-
-
-
(5)
(1)
1,023
-
(401)
(36)
(61)
(201)
-
175
-
(72)
(7)
(9)
(34)
(13)
2,602
845
-
(335)
(32)
(56)
(174)
-
2,850
438
478
151
36
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.
241
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
37. Financial risk management (continued)
(vii) 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 2021 can be broken down into the below component parts:
Customer accounts
Long-term debt
Short-term debt
31 December
2021
31 December
2020
%
94
4
2
100
%
96
4
-
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.
31 December 2021
Up to
1-3
3-6
6-12
Liabilities*
Deposits by banks
Customer accounts
Debt securities in issue
Lease liabilities
Subordinated liabilities
Total liabilities
1 month
months
months
months
€m
€m
€m
€m
347
16,032
1
2
1
16,383
-
1,416
1
-
1
1,418
-
454
2
1
2
459
-
575
4
3
4
586
1-2
years
€m
-
221
7
4
7
239
Over 2
years
€m
-
405
537
22
304
1,268
Total
€m
347
19,103
552
32
319
20,353
* In addition the Group has an other liability of €48m in respect to the sale of Glenbeigh III. This was settled in early 2022 (see note 44).
31 December 2020
Up to
1-3
3-6
6-12
Liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Lease liabilities
Subordinated liabilities
Total liabilities
1 month
months
months
months
€m
€m
€m
€m
-
14,149
1
2
-
14,152
-
1,565
1
-
-
1,566
-
490
2
2
-
494
-
777
4
3
-
784
1-2
years
€m
-
555
8
5
-
568
Over 2
years
€m
-
524
851
24
-
1,399
Total
€m
-
18,060
867
36
-
18,963
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.
242
Permanent TSB Group Holdings plc - Annual Report 2021
37. Financial risk management (continued)
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.
31 December 2021
Up to
1-3
3-6
6-12
1 month
months
months
months
€m
€m
€m
€m
1-2
years
€m
Over 2
years
€m
Gross settled:
FX forwards
- inflow
- outflow
Balance at 31 December 2021
84
(84)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31 December 2020
Up to
1-3
3-6
6-12
1 month
months
months
months
€m
€m
€m
€m
1-2
years
€m
Over 2
years
€m
Gross settled:
FX forwards
- inflow
- outflow
Balance at 31 December 2020
83
(83)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
€m
84
(84)
-
Total
€m
83
(83)
-
(viii) 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 2021 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 2021
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
€m
€m
€m
€m
€m
Assets
Liabilities
Derivatives
Interest rate re-pricing gap
12,608
(11,769)
84
923
Cumulative interest rate re-pricing gap
923
587
(973)
-
(386)
537
1,264
(1,395)
-
(131)
6,505
(6,137)
-
368
1,079
(1,546)
-
(467)
406
774
307
Total
€m
22,043
(21,820)
84
307
243
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
37. Financial risk management (continued)
31 December 2020
Assets
Liabilities
Derivatives
Interest rate re-pricing gap
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
€m
€m
€m
€m
€m
12,856
(11,230)
(83)
1,543
295
(875)
-
(580)
963
726
(1,280)
-
(554)
5,535
(5,550)
-
(15)
1,080
(1,193)
-
(113)
409
394
281
Total
€m
20,492
(20,128)
(83)
281
Cumulative interest rate re-pricing gap
1,543
38. 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 Assets and Liabilities Committee (ALCo) 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 2021 regulatory CET1 (transitional) minimum requirement is 8.94% (December 2020: 8.94%). 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 2020: 1.94%) and the Capital
Conservation Buffer (CCB) of 2.50%.
The Group’s Total Capital minimum requirement of 13.95% at 31 December 2021 (31 December 2020: 13.95%) consists of a Pillar 1 CRR
requirement of 8%, P2R of 3.45%, and CCB of 2.5%.
These requirements exclude Pillar 2 Guidance (P2G) which is not publicly disclosed.
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 2021 and 31 December 2020 which are calculated in accordance with CRD IV regulatory capital requirements.
244
Permanent TSB Group Holdings plc - Annual Report 2021 38. 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 (incl. 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 after tax
Other intangible assets add-back/(deduction)
Deferred tax assets deduction
IFRS 9 phase-in
AT1 Securities**
Tier 2 Capital Notes***
Other movements
Balance as at 31 December
* Presentation of prior year (December 2020) has been amended to provide comparative information
** AT1 Securities issued in May 2015 by PTSB redeemed in full in April 2021 (€125m less minority interest €45m)
*** In May 2021 PTSBGH issued €250m of Tier2 Capital Notes
31 December
2021
31 December
2020
€m
€m
561
1,104
(208)
1,457
123
1,580
250
40
290
561
1,145
(171)
1,535
190
1,725
13
41
54
1,870
1,779
31 December
2021
31 December
2020
€m
€m
8,600
7,961
639
16.9%
21.8%
8,480
7,808
672
18.1%
21.0%
31 December
2021
31 December
2020*
€m
€m
1,779
(20)
19
(36)
(28)
(80)
250
(14)
1,870
1,911
(162)
(6)
(43)
(12)
108
-
(17)
1,779
245
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
39. Current/non-current assets and liabilities
The following table provides an analysis of certain asset and liability line items as at 31 December 2021 and 31 December 2020. 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).
Assets
Cash and balances at central banks
Items in the course of collection
Loans and advances to banks
Derivative assets
Other assets
Assets classified as held for sale
Debt securities
Equity Securities
Prepayments and accrued income
Loans and advances to customers
Liabilities
Deposits by banks
Customer accounts
Debt securities in issue
Other liabilities
Accruals
Provisions
Subordinated liabilities
31 December 2021
31 December 2020
Note
Current
Non-current
€m
€m
Total
€m
Current
Non-current
€m
€m
Total
€m
13
13
14
15
16
17
18
19
20
21
27
28
29
30
31
32
57
20
4,174
1
310
28
214
-
205
2,071
347
18,476
2
144
8
19
3
-
-
-
-
-
-
2,280
26
-
12,185
-
613
522
26
-
36
249
57
20
4,174
1
310
28
2,494
26
205
14,256
347
19,089
524
170
8
55
252
71
20
3,312
-
5
31
27
-
86
1,678
-
16,978
2
80
2
51
-
-
-
-
-
-
-
2,556
24
-
12,535
-
1,061
807
27
-
26
-
71
20
3,312
-
5
31
2,583
24
86
14,213
-
18,039
809
107
2
77
-
40. 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 (vi), 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:
1. sale and repurchase of securities; and
2. 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
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 21) and debt securities (note 18) 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
carrying value of repurchase agreements at 31 December 2021 is €347m (31 December 2020: €nil).
246
Permanent TSB Group Holdings plc - Annual Report 2021
40. Transfer of financial assets (continued)
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.
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 and associated liabilities
that are not derecognised in their entirety.
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 2021
31 December 2020
Sale and
repurchase
agreements
Securitisations
€m
724
745
732
745
(13)
€m
153
172
150
172
(22)
Sale and
repurchase
agreements
€m
-
-
-
-
-
Securitisations
€m
434
458
406
457
(51)
(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.
41. 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. This is disclosed in the table below in the
“Effect of offsetting on the statement of financial position” section.
The gross amounts of financial assets and financial liabilities and their net amounts disclosed in the above tables have been measured in
the statement of financial position on the following bases:
• derivative assets and liabilities: fair value;
• assets and liabilities resulting from sale-and-repurchase agreements, reverse sale-and repurchase agreements: amortised cost.
The tables below also disclose (in the “Related amounts not offset in the statement of financial position” section) the impact of master
netting agreements and other similar agreements on all derivative financial instruments and similar financial instruments that are
subject to master netting agreements or similar agreements, but do not qualify for netting on the balance sheet. The similar financial
agreements include securitisations and sale and repurchase agreements. The similar agreements include global master repurchase
agreements. It highlights the amounts that have could be potentially offset on the statement of financial position and those amounts
covered by collateral placed with or by counterparties to these trades.
The tables highlight 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 ISDA master agreements.
247
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
41. Offsetting financial assets and financial liabilities (continued)
The tables below 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 2021
Gross financial
assets/
(liabilities)
recognised
Gross financial
(liabilities)/
assets offset
Net amounts
reported on
the statement
of financial
position
Financial
instruments
Cash collateral
Net amount
€m
€m
€m
€m
€m
€m
1
1
-
-
-
-
-
-
1
1
-
-
-
-
-
-
-
-
-
-
1
1
-
-
31 December 2020
Effect of offsetting on the statement of financial position
Gross financial
assets/
(liabilities)
recognised
Gross financial
(liabilities)/
assets offset
Net amounts
reported on the
statement of
financial position
Related amounts not offset in the statement of financial
position
Financial
instruments
Cash collateral
Net amount
€m
€m
€m
€m
€m
€m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Assets
Derivative assets
Total
Liabilities
Derivative liabilities
Total
Assets
Derivative assets
Total
Liabilities
Derivative liabilities
Repurchase agreements
Total
42. 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
248
31 December
2021
31 December
2020
€m
2
1,113
66
1,179
1,181
€m
2
985
82
1,067
1,069
Permanent TSB Group Holdings plc - Annual Report 2021 42. 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 31, 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.
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. The Bank provides for these cases, where based on legal advice, the directors believe that it is more likely than not that
an outflow of resources embodying economic benefits, will be required to settle a present obligation arising from a past event. The Bank
has recently commenced appeals against two FSPO decisions in tracker mortgage related complaints to the High Court and, while the
timing and outcome of these appeals is uncertain, based on legal advice received, no provision has been made for these cases. However,
if the Bank is unsuccessful in these appeals the impact on the financial statements could be material.
ECL held against commitments are reported under loans and advances to customers.
43. 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’ and Secretary’s interest
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
31 December
2021
31 December
2020
Robert Elliott
Eamonn Crowley
Michael Frawley
Conor Ryan
Donal Courtney
Ronan O’Neill
Andrew Power
Ken Slattery
Ruth Wandhöfer
Marian Corcoran
Paul Doddrell
Celine Fitzgerald (appointed 30 March 2021)
Anne Bradley (appointed 30 March 2021)
Julie O’Neill (retired 5 August 2020)
Position
Chairman
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
Non-Executive Director
Ordinary
shares
16,500
50,000
-
10
-
4
-
10,000
-
-
-
-
-
-
Ordinary
shares
16,500
50,000
-
10
-
4
-
10,000
-
-
-
-
-
10,000
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 2020: 4,580).
There were no transactions in the above Directors’ and Secretary’s interests between 31 December 2021 and 01 March 2022.
Details of the Directors’ remuneration is included in the Directors’ Report on Remuneration on pages 146 to 150.
249
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
43. 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 Executive Committee
(ExCo). The Executive Directors and members of the ExCo are listed below:
Members of the ExCo at 31 December 2021
Eamonn Crowley
Michael Frawley
Declan Norgrove
Patrick Farrell
Tom Hayes
Ger Mitchell
Andrew Walsh
Peter Vance
Chief Executive
Chief Risk Officer
Interim Chief Financial Officer
Retail Banking Director
Chief Technology Officer
Group Corporate Development and HR Director
Chief Legal Officer
Chief Operations Officer
During the year ended 31 December 2021, the following key management personnel changes occurred; Declan Norgrove was appointed
as the Interim Chief Financial Officer following the retirement of Paul McCann as the Interim Chief Financial Officer; Breege Timoney
retired as Product Assurance Director; Shane O’Sullivan retired as Director of Operations; Peter Vance was appointed Chief Operations
Officer; Celine Fitzgerald and Anne Bradley were appointed as Non-Executive Directors while Julie O’Neill retired as a Non-Executive
Director.
Julie O’Neill was included in the Director’s shareholding in the current year for comparison as her details have been included in the 2020
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
(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:
250
31 December
2021
31 December
2020
10
8
18
8
9
17
Year ended
Year ended
31 December
2021
31 December
2020
€’000
€’000
946
2
856
122
1,926
804
6
1,083
155
2,048
Permanent TSB Group Holdings plc - Annual Report 2021 43. Related parties (continued)
Taxable benefits
Salary and other benefits
Pension benefits
- defined contribution
CFO Fees
Total
Year ended
Year ended
31 December
2021
31 December
2020
€’000
€’000
2
2,221
282
359
2,864
3
1,983
277
152
2,415
There were no connected persons to key management personnel employed by the group during 2021 or 2020.
(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 and overdrafts
Deposits
Transactions during the year
Loan advances
Loan repayments
Interest received on loans
Interest paid on deposits
Loans to Directors
31 December 2021
Marian Corcoran
Ronan O’Neill*
31 December 2020
Marian Corcoran
Ronan O’Neill*
Balance as at
1 Jan
Advances during
year
Principal repaid
€’000
€’000
€’000
248
-
248
-
660
660
248
8
256
Balance as at
1 Jan
€’000
Advances
during
year
€’000
Principal repaid
€’000
271
445
716
-
-
-
23
445
468
Balance
as at
31 Dec
€’000
-
652
652
Balance
as at
31 Dec
€’000
248
-
248
* Represents a loan for a person connected with this Director in accordance with section 307(3) of the Companies Act 2014.
31 December
2021
31 December
2020
€’000
€’000
1,948
-
4,663
1,583
7
2,876
Year ended
Year ended
31 December
2021
31 December
2020
€’000
€’000
660
327
43
(1)
-
553
45
(2)
Interest
paid
€’000
Maximum
balance
€’000
2
11
13
248
660
908
Interest
paid
€’000
Maximum
balance
€’000
3
8
11
271
445
716
251
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
43. Related parties (continued)
(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 and senior
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 €1,463m (31 December 2020: €1,488m).
•
In May 2021, PTSB plc borrowed €250m from the Group at a fixed rate of 3% per annum plus a margin of 0.181% per annum which
mature on 19 August 2031. The loan is subordinated and ranks as Tier 2 capital notes with interest paid annually in arrears on 19
August.
• The Group made an investment in associated undertakings of €2m for the year ended 31 December 2021 involving participants that
are deemed related parties due to the common ownership by the Government. The amount and nature is referenced in note 23.
• 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 2021, the amount recognised in the income statement was €22m (31 December 2020: €24m). As announced by the Minister by
Finance in October 2015, the bank levy was extended to 2021.
• During 2021, the Group also paid €17m DGS fees to the CBI (2020: €15m) as part of the Deposit Guarantee Scheme.
• 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 2021, the Group had recorded a
payable of €2m due under the FIA (31 December 2020: €0.7m).
• At 31 December 2021, the Company had an intercompany balance of €352m (31 December 2020: €351m) with its principal subsidiary
PTSB plc relating to the MREL issuance.
•
In November 2020, the Company made an additional investment of €123m in PTSB. This investment was through the issuance of AT1
securities by the Company
The Government also has a controlling interest in Allied Irish Bank plc including EBS Limited. 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. There are no balances between these entities as at 31 December 2021 or 31 December 2020. As
at 31 December 2021, the Irish Government no longer has significant influence over Bank of Ireland. At 31 December 2020, the Group had
€2m in loans and advances to Banks which was held by Bank of Ireland.
44. Sale of loans and advances to customers
Project Glenbeigh III
On 9 November 2021, the Group agreed the sale of a predominately NPL portfolio (“Glenbeigh III”). The portfolio gross balance on the
Statement of Financial Position was €390m with a net book value of €305m.
In line with IFRS 9, the assets have been derecognised from the statement of financial position and a receivable of €310m has been
recorded for the outstanding cash consideration. As a result of the transaction, an impairment write-back on the sale of the portfolio
of €11m was recorded through the impairment line of the income statement as required by IFRS 9. On 21 February 2022, the deal
completed with the receipt of the sales proceeds.
252
Permanent TSB Group Holdings plc - Annual Report 2021 45. 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
business
Incorporated
% of ordinary
in
shares held
Retail banking
Ireland
100
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 Groups structure
was completed in 2021:
• Guinness & Mahon Ireland Limited;
• 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’s statement of financial position.
At 31 December 2021 the investment amounted to €888m (31 December 2020: €956m). The Group carried out an impairment
assessment using a combination of internal group models and externally available data to inform their view of the recoverable amount
of investment. As the value in use was lower than the carrying value, in line with IAS 36, an impairment charge of €66m was taken (31
December 2020: €145m)
(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
• To 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.
253
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Consolidated Financial Statements
(continued)
45. Principal subsidiary undertakings and interest in subsidiaries and structured entities (continued)
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 SEs.
The Group currently has six SEs in issue in the ROI the details of which are outlined below. During 2021, Fastnet Securities 5 DAC, Fastnet
Securities 6 DAC, and Fastnet Securities 10 DAC were collapsed and subsequently went into liquidation in 2022, Fastnet Securities 12
DAC was also collapsed. Fastnet Securities 16 DAC and Fastnet Securities 17 DAC were set up during 2021.
SEs setup with ROI Residential Mortgages
- Fastnet Securities 11 DAC
- Fastnet Securities 13 DAC
- Fastnet Securities 14 DAC
- Fastnet Securities 15 DAC
- Fastnet Securities 16 DAC
- Fastnet Securities 17 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.
At 31 December 2021, restricted cash of €329m (31 December 2020: €355m) relates to cash held by the Group's securitisation entities.
46. 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
2021
31 December
2020
0.8403
0.8583
0.8990
0.8895
1.1326
1.1814
1.2271
1.1473
47. 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 2021 and the date of the approval
of these financial statements by the Board of Directors of 01 March 2022. Subsequent to the statement of financial position date, as
outlined in note 44, the Glenbeigh III sale proceeds were received.
254
Permanent TSB Group Holdings plc - Annual Report 2021
THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK
255
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Company Financial Statements and Notes to the Company Financial Statements
Page
257
258
259
260
260
261
261
262
262
262
262
Index:
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash flows
A Accounting policies
B Loans and advances to banks
C Investment in subsidiary
D Debt securities in issue
E Subordinated liabilities
F Share capital and reserves
G Related parties
H Audit fees
256
Permanent TSB Group Holdings plc - Annual Report 2021 Company Statement of Financial Position
As at 31 December 2021
Assets
Loans and advances to banks - subsidiary
Investments in subsidiary undertakings
Total assets
Liabilities
Debt securities in issue
Other Liabilities
Subordinated liabilities
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:
Notes
31 December
2021
31 December
2020
€m
€m
B
C
D
E
604
888
1,492
352
1
252
605
227
333
-
204
764
123
887
351
956
1,307
351
-
-
351
227
333
-
270
830
126
956
1,492
1,307
Robert Elliott
Chairman
Eamonn Crowley
Chief Executive
Ronan O’Neill
Board Audit Committee Chair
Conor Ryan
Company Secretary
257
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Company Statement of Changes in Equity
For the year ended 31 December 2021
Company
Attributable to equity holders of the parent
Share capital
Share premium
Retained
earnings
Other equity
instrument
Balance as at 1 January 2020
Loss for the year ended 31 December 2020
Other comprehensive income, net of tax
Total comprehensive expense for the year
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners
Issue of other equity instruments (note E)
Issuance cost of share capital and other equity
Total contributions by and distributions to owners
Balance as at 31 December 2020
Loss for the year ended 31 December 2021
Other comprehensive income, net of tax
Total comprehensive expense for the year
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners
AT1 coupon paid
Loss on redemption of AT1 securities
Total contributions by and distributions to owners
Balance as at 31 December 2021
€m
227
.
-
-
-
-
227
-
-
-
-
-
-
227
€m
333
-
-
-
-
333
-
-
-
-
-
-
333
€m
415
(145)
-
(145)
-
270
(56)
-
(56)
(10)
(10)
204
€m
3
-
-
-
125
(2)
123
126
-
-
-
(3)
(3)
123
Total
€m
978
(145)
-
(145)
125
(2)
123
956
(56)
-
(56)
(10)
(3)
(13)
887
258
Permanent TSB Group Holdings plc - Annual Report 2021 Company Statement of Cash Flows
For the year ended 31 December 2021
Cash flows from operating activities:
Operating loss/loss 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
Other liabilities
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
Issuance of Tier 2 capital notes (including interest)
AT1 coupon payment
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
Reconciliation of liabilities arising from financing activities
1 January 2021
Financing cash flows:
Issuance of Tier 2 capital notes (including interest)
31 December
31 December
31 December
2021
€m
(56)
65
9
(253)
-
1
1
(242)
-
(242)
-
-
-
252
(10)
(242)
-
-
-
-
-
2020
€m
(145)
145
-
(51)
(123)
51
-
(123)
-
(123)
-
-
123
-
-
123
-
-
-
-
-
31 December
31 December
2021
€m
-
252
252
2020
€m
-
-
-
259
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 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 €56m (2020: €145m).
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
2021
31 December
2020
€m
€m
605
(1)
604
351
-
351
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 “Positive”;
• Moody’s: Long-Term Rating “Baa2” with Outlook “Stable”; and
• DBRS: Long-Term Rating “BBBL” with Outlook “Stable”.
During 2021, the Company subscribed to the €250m of subordinated 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 subordinated Tier 2 capital note
issuance. The terms of the subordinated loan were a placement at a base rate of 3% plus a margin of 0.181% per annum maturing on 19
August 2026. The interest is received annually in arrears on 19 August.
During 2020, 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.
During 2019, 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 2021 is €604m (31 December 2020:
€351m).
The expected credit losses on these placements were €1m at 31 December 2021 (31 December 2020: €nil).
The fair value of the loans and advances to banks closely equates to their amortised costs.
260
Permanent TSB Group Holdings plc - Annual Report 2021 C. Investment in subsidiary
At 1 January
Additional investment
AT1 securities redeemed during 2021
Impairment of Investment
At 31 December
31 December
2021
31 December
2020
€m
€m
956
-
(2)
(66)
888
978
123
-
(145)
956
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 2021 the investment
amounted to €888m (31 December 2020: €956m).
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 it’s VIU. The carrying value of the subsidiary undertaking before adjusting for impairment was €954m due to
a €2m adjustment to the 2015 AT1 Instrument issued by PTSB which was redeemed on 1 April 2021. The recoverable amount based on
the VIU was €888m resulting in €66m impairment charge for the year (31 December 2020: €145m).
While the recoverable amount based on the VIU exceeds market capitalisation at the 31 December 2021, the depressed share price is
result of the overall subdued banking environment currently in which the entity 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
Repayable in greater than 5 years
31 December
2021
31 December
2020
€m
€m
352
352
2
350
-
352
351
351
2
349
-
351
261
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Notes to the Company Financial Statements
(continued)
E. Subordinated liabilities
At amortised cost
€250m Tier 2 capital notes due August 2031, Callable 2026
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
2021
31 December
2020
€m
€m
252
252
3
-
249
252
-
-
-
-
-
-
Tier 2 capital notes – PTSBGH
In May 2021, PTSBGH issued €250m of Tier 2 capital notes at a fixed rate of 3% per annum. The notes mature on 19 August 2031 with a
call date of any date from and including 19 May 2026 to and including 19 August 2026 with the call subject to approval of the regulatory
authorities, with approval conditional on meeting the requirements of the EU CRR.
The interest rate will be reset, in the event that the securities are not called, on 19 August 2026 to Euro 5 year Mid Swap rate plus a
margin of 3.221% per annum. The loan is subordinated and ranks as Tier 2 capital with interest paid annually in arrears on 19 August
(short first coupon period). The loan may be subject to the exercise of Irish Statutory loss absorption powers by the relevant resolution
authority.
In the event of winding up of PTSBGH, the Tier 2 capital notes will be:
•
junior in right of payment to all Senior Claims;
• pari passu with all other subordinated claims against PTSBGH which constitute, or would but for any applicable limitation on the
amount of such capital constitute, Tier 2 capital notes or that rank or are expressed to rank pari passu with the obligations of PTSBGH
under Tier 2 capital notes; and
•
in priority to PTSBGH ordinary shares, preference shares and junior subordinated obligations or other securities of PTSBGH which by
law rank, or by their terms are expressed to rank, junior to the Tier 2 capital notes.
F. Share capital and reserves
The share capital of Permanent TSB Group Holdings plc is detailed in note 34 to the consolidated financial statements, all of which
relates to Permanent TSB Group Holdings plc.
G. 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 Permanent TSB plc include subsidiary undertakings, associated undertakings, joint undertakings, post-employment
benefit schemes, Key Management Personnel and connected parties. The Irish Government is also considered a related party by virtue
of its effective control of Permanent TSB. See note 43 of the consolidated financial statements for further details.
At 31 December 2021 the Company had an intercompany balance of €352m (31 December 2020: €351) with its principal subsidiary
PTSB relating to the MREL issuance and €252m (31 December 2020: €nil) relating to Tier 2 capital issuances.
H. Audit Fees
€0.04m 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 2021 (31 December 2020: €nil).
262
Permanent TSB Group Holdings plc - Annual Report 2021 APPENDIX
263
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 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 and non-recurring items are excluded from the operating expenses as Management considers
these items as non-reflective of core operating costs.
Operating loss per IFRS income statement
Other exceptional items in IFRS total operating expenses
Exceptional impairment in IFRS credit impairment write-back/charge
Non-IFRS adjustments
Charges in relation to legacy legal cases*
Underlying profit/(loss) per management income statement
*
Included in IFRS administrative, staff and other expenses
Year ended
Year ended
31 December
2021
31 December
2020
€m
(21)
42
(19)
15
17
€m
(166)
31
26
-
(109)
2. Exceptional and Other Non-Recurring Items
A reconciliation of exceptional costs as set out in the financial statements and exceptional and other non-recurring costs as set out in the
Financial Review is detailed below.
Restructuring and other costs
Advisory costs incurred in relation to Ulster Bank business
Exceptional impairment arising from deleveraging of loans
Exceptional items
Charges in relation to legacy legal cases
Exceptional and other non-recurring items
Source/Cross
Reference
Income Statement
Income Statement
Income Statement
Financial Review
Financial Review
31 December
2021
31 December
2020
€m
14
28
(19)
22
15
38
€m
31
-
26
57
-
57
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.
Total operating expenses (after exceptional, other non-recurring items and regulatory
charges)
Exceptional and other non-recurring items
Bank levy
Regulatory charges
Total operating expenses (excluding exceptional, other non-recurring items and
regulatory charges)
Total operating income
Adjusted cost income ratio
264
Source/Cross
Reference
Income statement
Financial Review
Note 9
Note 9
Financial Review
Income statement
31 December
2021
31 December
2020
€m
€m
383
(38)
(22)
(28)
295
361
82%
386
(57)
(24)
(25)
280
375
75%
Permanent TSB Group Holdings plc - Annual Report 2021
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 and other non-recurring items
Total operating expenses (excluding exceptional and other non-recurring items)
Total operating income
Headline cost income ratio
Source/Cross
Reference
Income statement
Financial review
Income statement
Financial review
31 December
2021
31 December
2020
€m
€m
383
(38)
345
361
96%
386
(57)
329
375
88%
5. CET 1 fully loaded basis*
Total common equity tier 1 capital on a fully loaded basis divided by total risk weighted assets 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
* The full year profits recognised in the year end capital ratios remain subject to approval by the Regulator.
31 December
2021
31 December
2020
Fully Loaded
Fully Loaded
€m
€m
1,265
8,603
14.7%
1,282
8,471
15.1%
Source/Cross
Reference
Capital Management
Capital Management
Capital Management
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 basis
* The full year profits recognised in the year end capital ratios remain subject to approval by the Regulator.
31 December
2021
31 December
2020
Transitional
Transitional
€m
€m
1,457
8,600
16.9%
1,535
8,480
18.1%
Source/Cross
Reference
Capital Management
Capital Management
Capital Management
265
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 Alternative Performance Measures
(continued)
7. Leverage ratio*
The leverage ratio is calculated by dividing Tier 1 capital by gross balance sheet exposures (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.
31 December 2021
31 December 2020
Transitional
Fully Loaded
Transitional
Fully Loaded
Source/Cross
Reference
€m
€m
€m
€m
Tier 1 Capital
Gross balance sheet exposures
Leverage ratio exposure measure
Leverage ratio
Capital Management
1,580
1,388
1,725
1,480
Capital Management
22,323
7.1%
22,132
6.3%
21,082
8.2%
20,829
7.1%
* The full year profits recognised in the year end capital ratios remain subject to approval by the Regulator.
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
2021
31 December
2020
€m
€m
Liquidity coverage ratio
Financial Review
274%
276%
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 2022.
Source / Cross
Reference
31 December
2021
31 December
2020
€m
€m
Net stable funding ratio (minimum 100%)
Financial Review
170%
160%
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
Note 21
Note 28
31 December
2021
31 December
2020
€m
€m
14,256
19,089
75%
14,213
18,039
79%
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)
266
Source / Cross
Reference
Income Statement
Financial Review
31 December
2021
31 December
2020
€m
€m
313
20,731
1.51%
341
19,580
1.73%
Permanent TSB Group Holdings plc - Annual Report 2021
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
2021
31 December
2020
€m
€m
Note 22
Note 22
Note 22
Note 22
420
339
44
14
817
658
418
35
17
1,128
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 37
31 December
2021
31 December
2020
€m
28
€m
30
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 22
Note 37
31 December
2021
31 December
2020
€m
€m
817
28
845
1,128
30
1,158
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 for the year after tax
Exceptional items and other non-recurring items
Profit/(loss) for the period after tax (before exceptional items)
Total average equity
Return on equity
Source / Cross
Reference
Income Statement
Financial Review
Financial Review
31 December
2021
31 December
2020
€m
€m
(20)
38
18
1,853
0.97%
(162)
57
(105)
1,961
(5.4%)
267
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Alternative Performance Measures
(continued)
16. Risk weighted assets (RWAs)
RWAs are the Group’s assets or off balance sheet exposures, weighted according to risk.
Risk weighted assets
Note 38
8,600
8,480
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
2021
31 December
2020
€m
€m
Tier 1 Capital
Tier 2 Capital
Total Capital
Risk weighted assets
Total capital ratio (fully loaded basis)
Source / Cross
Reference
Capital Management
Capital Management
Capital Management
Capital Management
Capital Management
31 December
2021*
31 December
2020
€m
€m
1,388
290
1,678
8,603
19.5%
1,480
59
1,539
8,471
18.2%
*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
Capital Management
Capital Management
Capital Management
Capital Management
Capital Management
31 December
2021*
31 December
2020
€m
€m
1,580
290
1,870
8,600
21.8%
1,725
54
1,779
8,480
21.0%
*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 2020 to December 2021, thirteen months in total.
Source / Cross
Reference
Financial Review
Financial Review
Financial Review
31 December
2021
31 December
2020
€m
€m
3,940
14,258
2,533
20,731
2,087
15,083
2,410
19,580
Average interest earning assets
Loans and advances to banks
Loans and advances to customers
Debt securities and derivative assets
Total average interest earning assets
268
Permanent TSB Group Holdings plc - Annual Report 2021
20. Average interest bearing liabilities
Interest bearing liabilities include customer accounts, deposits by banks, debt securities in issue, and lease liabilities.
Average balances on interest bearing liabilities are calculated as the average of the monthly interest bearing liabilities balances from
December 2020 to December 2021, thirteen months in total.
Average interest bearing liabilities
Customer accounts
Debt securities in issue and derivative assets
Lease liabilities
Subordinated liabilities
Deposits by banks
Total average interest bearing liabilities
Source / Cross
Reference
Financial Review
Financial Review
Financial Review
Financial Review
Financial Review
31 December
2021
31 December
2020
€m
€m
18,606
705
31
155
134
19,631
17,689
863
37
-
10
18,599
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 2020 to December 2021, thirteen months in total.
Average interest income on interest earning assets
Loans and advances to customers
Debt securities and derivative assets
Total average interest income from interest-earning assets
Negative interest earning assets – loans and advances to banks
Total average interest from assets
Total average earning assets
Average yield on average interest earning assets
Source / Cross
Reference
Financial Review
Financial Review
Financial Review
Financial Review
Financial Review
31 December
2021
31 December
2020
€m
€m
346
7
353
(14)
339
20,731
1.64%
371
11
382
(4)
378
19,580
1.93%
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 2020 to December 2021, thirteen months in total.
Average interest expense on interest bearing liabilities
Customer accounts
Negative interest earning assets – loans and advances to banks
Debt securities in issue
Subordinated liabilities
Total average interest income on interest bearing liabilities
Negative interest earning liabilities – deposits by banks
Total average interest from liabilities
Total average bearing liabilities
Average rate on average interest bearing liabilities
Source / Cross
Reference
31 December
2021
31 December
2020
€m
€m
Financial Review
14
26
Financial Review
Financial Review
Financial Review
Financial Review
8
5
27
(1)
26
19,631
0.13%
11
-
37
-
37
18,599
0.20%
269
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021
Alternative Performance Measures
(continued)
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 22
Note 21
31 December
2021
31 December
2020
€m
€m
817
14,745
5.5%
1,128
14,855
7.6%
24. Average equity attributable to owners
This is an average of the equity position of each individual month from December 2020 to December 2021, 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
1,853
1,961
Source / Cross
Reference
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2021
31 December
2020
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Permanent TSB Group Holdings plc - Annual Report 2021
Abbreviations
The following information has not been
subject to audit by the Group’s Independent
Auditor.
ALCO Asset and Liability Committee
AFS Available For Sale
AGM Annual General Meeting
AIMRO Association of Irish Market
Research Organisations
ALM Asset Liability Management
API Application Programming Interfaces
ASAI Advertising Standards Association of
Ireland
AT1 Additional Tier 1
BAC Board Audit Committee
BCM Business Continuity Management
BITCI Business in the Community Ireland
BRCC Board Risk and Compliance
Committee
BRRD Banking Recovery and Resolution
Directive
BTL Buy-to-let
C&M Classification & Measurement
CAC Capital Adequacy Committee
CBI Central Bank of Ireland
CCB Capital Conservation Buffer
CCMA Code of Conduct on Mortgage
Arrears
CCyB Counter Cyclical Buffer
CDF Career Development Framework
CEO Chief Executive
CFO Chief Financial Officer
CET 1 Common Equity Tier 1
CFP Contingency Funding Plan
CODM Chief Operating Decision Maker
CPI Consumer Price Index
CRD IV Capital Requirements Directive IV
CRE Commercial Real Estate
CRO Chief Risk Officer
CRR Capital Requirements Regulation
CSAs Credit Support Annex
CSO Central Statistics Office
CSR Corporate Social Responsibility
CVA Credit Valuation Adjustment
DDI Debt to Disposable Income
DGS Deposit Guarantee Scheme
DIRT Deposit Interest Retention Tax
DoF Department of Finance
DTA Deferred Tax Asset
DVA Debit Valuation Adjustment
EAR Earnings at Risk
EBA European Banking Authority
EC European Commission
ECAI External Credit Assessment
Institution
ECB European Central Bank
ECL Expected Credit Loss
EIR Effective Interest Rate
ELG Eligible Liabilities Guarantee
ESG Environmental Social Governance
ESMA European Securities and Markets
Authority
ESRI Economic & Social Research Institute
EU European Union
EV Economic Valuation
EWI Early Warning Indicator
ExCo Executive Committee
FIA Financial Incentives Agreement
FLI Forward looking information
FSPO Financial Services and Pensions
Ombudsman Bureau of Ireland
FTE Full Time Equivalent
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
GPPC Global Public Policy Committee
GRC Group Risk Committee
GRMA Group Risk Management
Architecture
GRMF Group Risk Management Framework
HFT Held for Trading
HICP Harmonised Index of Consumer
Prices
HPI House Price Index
HTC Hold to Collect
HTC&S Hold to Collect and Sell
HTM Held to Maturity
HQLA High Quality Liquid Assets
IAS International Accounting Standards
IASB International Accounting Standards
Board
IBCB Irish Banking Culture Board
IBNR Incurred But Not Reported
ICAAP Internal Capital Adequacy
Assessment Process
IFRIC International Financial Reporting
Standards Interpretations Committee
IFRS International Financial Reporting
Standards
IIA Institute of Internal Auditors
ILAAP Internal Liquidity Adequacy
Assessment Process
IMF International Monetary Fund
IOB Institute of Banking
IOM Isle of Man
IPP Integrated Planning Process
IRB Internal rating based approach
IRRBB Interest Rate Risk in the Banking
Book
ISA International Standards on Auditing
ISDA International Swaps and Derivatives
Association
LCR Liquidity Coverage Ratio
LDR Loan to Deposit Ratio
LGD Loss Given Default
L&R Loans and Receivables
LSI Less Significant Institution
LTIP Long Term Incentive Plan
LTV Loan to value
MCO Maximum Cumulative Outflow
MGC Model Governance Committee
MREL Minimum Requirement for own
funds and Eligible Liabilities
MRP Mortgage Redress Programme
MTN Medium Term Note
MTP Medium Term Plan
NCU Newbridge Credit Union
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
OTC Over the counter
P2G Pillar 2 Guidance
P2R Pillar 2 Requirement
PBI PBI Limited (formerly Permanent Bank
International Limited)
PD Probability of Default
PDH Principal Dwelling House
POCI Purchased or Originated Credit
Impaired
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
RMBS Residential Mortgage Backed
Securities
RNPS Relationship Net Promoter Score
ROI Republic of Ireland
RP Restructuring Plan
RPA Robotic Process Automation
RPPI Residential Property Price Index
RWA Risk Weighted Assets
SBCI Strategic Banking Corporation of
Ireland
SE Structured Entities
SEAI Sustainable Energy Authority of
Ireland
SEI Social Entrepreneurs Ireland
SFS Standard Financial Statement
SFT Securities Financing Transaction
SICR Significant increase in Credit Risk
SID Senior Independent Director
SME Small and medium sized enterprises
SOFP Statement of Financial Position
SPP Strategic Performance Priorities
SPPI Solely Payments of Principle and
Interest
SPV Special Purpose Vehicle
SREP Supervisory Review & Evaluation
Process
SSM Single Supervisory Mechanism
TCPID Trinity Centre for People with
Intellectual Disabilities
TLTRO Targeted Long-Term Refinancing
Operations
TME Tracker Mortgage Examination
TRIM Targeted Review of Internal Models
UK United Kingdom
VIP Values in Practice
VIU Value in Use
WTO World Trade Organisation
271
Strategic ReportGovernance Financial StatementsGeneral InformationPermanent TSB Group Holdings plc - Annual Report 2021 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.
272
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 a
counterparty’s 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-related commitments
Commitments to extend credit, standby
letters of credit, guarantees and
acceptances which 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 28 European Union
(EU) member states which have adopted
the euro (€) as their common currency
and sole legal tender. The other nine
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 2021 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.
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 will be phased in over a number of
years, with credit institutions obliged to
hold 60% of their full LCR in 2015, 70% in
2016, 80% in 2017 and 100% in 2018, as
per CRD IV.
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.
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.
NAMA National Asset Management
Agency (NAMA) was established in 2009
as one of a number of initiatives taken by
the Irish Government to address the Irish
financial crisis and the deflation of the Irish
bubble.
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.
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(continued)
Repurchase agreement A short term
funding agreement that allows a borrower
to create a collateralised loan by selling
a financial asset to a lender. As part of
the agreement, the borrower commits to
repurchase the security at a date in the
future repaying the proceeds of the loan.
For the counterparty to the transaction, it is
termed a reverse repurchase agreement or
a reverse repo.
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.
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 as revaluation reserves,
undisclosed reserves, 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.
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.
RWAs Risk weighted assets (RWAs) is a
measure of amount of 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.
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