Content. 1. Letter from the CEO 2. Corporate Group profile 3. The Management of Piraeus Bank Romania

Transcription

1 ANNUAL REPORT

2 Content 1. Letter from the CEO 2. Corporate Group profile 3. The Management of Piraeus Bank Romania 4. Financial overview of Market Overview 4.2. Financial Statements for Key Objectives of Human Resources evolution 6. Business Segment Activity 6.1. Branch Network Retail Banking 6.3. Corporate Banking 6.4. SME Sector 6.5. Treasury & Financial Markets Division 6.6. Marketing Division 6.7. Corporate social responsibility 7. Financial Statements

3 1. Letter from the CEO 3

4 1. Letter from the CEO To Shareholders, Customers and Staff We all see the world is changing, we all feel the different upbeat of doing things but how far did we go and how far will we go? In less than a decade, the whole European banking market changed radically. This is a finding of the study issued by Piraeus Group s specialized research department at the end of April this year. The analysis, which assesses the financial strength, balance sheet quality and capital adequacy of a large number of -mostly European- financial institutions reveals that most of them got through deleveraging, re-profiling and losses. The changes were inevitable and related with the effects of the 2008 crisis. The next big transformations, of magnitudes yet uncharted, are related with the impact of the technology in our clients lives and in new business models. 4

5 1. Letter from the CEO The Romanian market is connected with all these trends to which it offers now a favorable macroeconomic framework. The economic growth rate of the country was during 2016 the biggest on the continent. Growth hit a post-crisis peak in 2016 (at 4.8%) and is set to remain robust over the forecast horizon at 4.4% in 2017 and 3.7% in The Romanian banking sector, represented by 37 active banks, succeeded to maintain stability, without state intervention throughout this whole period of time. During 2016 average solvability was placed at a level over 18%, more than the required 8% by banking rules. The process of portfolio cleaning and reducing the non-performing loans continued. Thus, at December 31, 2016, the average rate of bad loans (NPE ) for the entire banking sector fell to 9.62 percent, from 10 percent in September 2016 and percent in December Banks assets in Romania increased by 4.4 percent last year from RON billion at the end of 2015, while profitability has cut. The lending activity re-started based on the significant liquidity in the market, thus generating a high competition on pricing. In this context, 2016 was another very challenging year. The Bank performed well on the deposits side (deposits expanded in 2016 by 13% million), while prudently managing its liquidity and capital positions. We also succeeded in providing a steady and sufficient liquidity buffers, an improved self-financing capacity and an improved funding mix. This allowed us to meet our commitments towards the Group by repaying the large amounts which have been planned for 2016 ( 204 million) and still maintain a very comfortable Quick Ratio levels (57% vs. 54% as of December 2015). The non-performing loans ratio dropped to 4% (from 4.3% at the end of 2015), as a result of continuous cleaning up (off balance-sheet booking of loans fully provided with provisions), but also of the active and efficient management through recovery business units. of income generating engines. Our strategy is based on the willingness to be placed in the front row of the changes the future will bring. To implement it we need investments, rethinking our processes and ideas to be closer to our clients continuously changing way of life. We just launched the first video online banking service in Romania. It is a 2017 novelty but it was considered and started as a project during The service is just a glimpse of the future and is quite explicit in its construction: convenience and diversity of choice at higher and higher speeds, all based on a technical infrastructure and digitalization. I am optimistic that we are prepared to deal with the changes brought by the future because we took in due time all the necessary measures to consolidate our position, to be stable and to propose a coherent vision. Please take a look at the 2016 description- besides figures you ll see this path to transformation and continuous re-invention. Thank you all for being with us and for your credit of trust which encourages us to have a response to the question regarding how far will we go. As much as you, our clients and our partners will need. Cătălin Pârvu Chief Executive Officer We remained fully engaged in the execution of our strategic objectives, placing an increased focus towards the reinforcement 5

6 2. Corporate group profile 6

7 2. Corporate group profile Who we are Headquartered in Athens, Greece, with approximately 18.1thds employees in 8 countries, Piraeus Bank Group offers a full range of financial products and services to approximately 5,6 mn customers. Total assets of the Group amounted to 81.5bn, net loans to 49.7bn and customer deposits to 42.4 bn on December 31, Founded in 1916, Piraeus Bank operated as a private credit institution for many decades, while it went through a state ownership for the period until it was privatized in December Since then, it has rapidly grown in size and activities, representing today the leading Bank in Greece with 30% market share in terms of loans and 29% of deposits billion Assets 49.7 billion Net Loans 42.4 billion Deposits 17.0% CET-1 ratio* 921 Branches 18.1 thousand Employees 5.6 million Customers Our course Along with its organic growth during the decades of 1990 and 2000, Piraeus Bank has made a series of strategic acquisitions and mergers aiming to establish a strong presence in the domestic market. Thus, in 1998, the Bank absorbed the activities of Chase Manhattan in Greece, took over controlling interest in Macedonia-Thrace Bank and acquired the specialized bank Credit Lyonnais Hellas. At the beginning of 1999, the Bank acquired Xiosbank and absorbed the activities of National Westminster Bank Plc in Greece. In June 2000, Piraeus Bank absorbed its two commercial banks in Greece (Macedonia -Thrace Bank and Xiosbank). In 2002, Piraeus Bank acquired the Hellenic Industrial Development Bank (ETBA bank), which was absorbed in December Piraeus Bank Group, in the context of implementing its strategy for expansion in Southeastern Europe and Eastern Mediterranean markets, first reached an agreement on the acquisition of Pater Credit Bank in Romania (integrated into the Group in April 2000 as Piraeus Bank Romania SA). In 2005 acquired the Bulgarian Eurobank (renamed into Piraeus Βank Bulgaria), strengthening its 12 year presence in Bulgaria. Furthermore, in 2005, Piraeus entered the Serbian market by acquiring Atlas Bank (renamed into Piraeus Bank Beograd). Finally, in 2007, Piraeus Group expanded its international presence in Ukraine by acquiring the International Commerce Bank (renamed into Piraeus Bank ICB) and in Cyprus by establishing Piraeus Bank Cyprus through the acquisition of the Arab Bank Cypriot network. In 2012, Piraeus Bank acquired the good part of Agricultural Bank (selected assets and liabilities) and Geniki Bank, a former subsidiary of Societe Generale. In March 2013, Piraeus Bank acquired the Greek banking operations of Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank. 7

8 2. Corporate group profile In June 2013, Piraeus Bank acquired Millennium Bank Greece, a subsidiary of BCP. In April 2015, Piraeus Bank acquired the carve-out part of Panellinia Bank healthy assets. These transactions comprise important steps towards the restructuring of the Greek banking system, in which Piraeus Bank has participated from the very beginning as a core pillar. Piraeus Bank has successfully completed the integration of all the aforementioned banking acquisitions in its systems offering to all its customers a unique banking experience. In December 2015, Piraeus Bank announced the full coverage of the share capital increase by an amount totaling to 2.6 bn. Furthermore, the Bank issued Contingent Convertible Bonds under the provisions of the Law in favour of the HFSF and the CA 36 / for an amount of 2.0 bn. The Group s total equity amounted to 9.8 bn at end of December The Group s Common Equity Tier-1 ratio reached 17.0% at the same period, while the fully loaded Basel III Common Equity Tier- 1 ratio reached 16.2%. Accordingly, current capital ratios render Piraeus Bank as one of the strongest capitalized banks in Europe. What we do Piraeus Bank today leads a group of companies covering all financial activities in the Greek market (universal bank). Piraeus Bank possesses particular know-how in the areas of medium-sized and small enterprises, in agricultural banking, in consumer and mortgage credit and green banking, capital markets and investment banking, as well as leasing and factoring. These services are offered through nation-wide network of 660 branches and 1,880 ATMs, and also through its innovative electronic banking network of winbank. Piraeus Bank Group possesses an international presence consisting of 261 branches focused on Southeastern Europe and Eastern Mediterranean. In particular, the Group operates in Romania through Piraeus Bank Romania with 101 branches, in Bulgaria through Piraeus Bank Bulgaria with 75 branches, in Albania through Tirana Bank with 39 branches, in Serbia with 26 branches of Piraeus Bank Beograd, in Ukraine with 18 branches of Piraeus Bank ICB, in London and Frankfurt with a branch of Piraeus Bank each. What we stand for Piraeus Bank Group possesses a well-trained and experienced workforce. The Group s vision is the continuous development of a humane and responsible organization, where each employee, with competencies and personal inspiration works collectively and with dedication, capitalizing on diversity and creating value in every action. In the selection and utilization process of human resources, objective criteria and methodology are incorporated with specific emphasis on equal opportunities and respect for people. The Group invests in the continuous training and development of its 18,075 people with innovative measures and methods. At the same time the Group created a work environment where innovation, the exchange of ideas, creativity are supported and team spirit is promoted. Through concrete evaluation systems, the Group ensures that the performance of its people are aligned with the Group s objectives and has created the necessary framework for recognition and reward both at an individual and team level. The open communication and the necessary support of the people are enhanced, in many different areas and in different aspects of life, ensuring an organization that is both and human and dynamic. Piraeus Bank Group, combining business development and social responsibility, endorses systematically its relations with its social partners through specific actions, while special emphasis is placed on the protection of the natural environment and preservation of cultural heritage. Piraeus Bank has built significant expertise and market share in the field of green banking with dedicated branches and products, addressing both business and individual needs. At the same time, the Piraeus Bank Group Cultural Foundation carries out culture-related activities, which are part of the Piraeus Bank Group s corporate social responsibility and operates a series of thematic museums in Greece, which is constantly growing and has the ability to convey to the Greek rural regions cultural activities of high standards with effective and efficient manner. As one of systemic banks in Greece, Piraeus Bank takes initiatives that support sound business plans and the evolution of the Greek economy into a new model of sustainable development. 8

9 3. The management of Piraeus Bank Romania 9

10 3. The Management of Piraeus Bank Romania Stavros Lekkakos Catalin Parvu Ilias Milis George Papaioannou Viorel Mischie Athanasios Psathas Konstantinos Paschalis Georgios Mantakas Pedro Miguel Weiss PIRAEUS BANK ROMANIA S.A BOARD OF DIRECTORS Chairman Member & Chief Executive Officer Member Member Member & Deputy General Manager Member and General Manager - dceo Member Member Independent Member Update: non-executive member executive member non-executive member non-executive member executive member executive member non-executive member non-executive member non-executive member EXECUTIVE COMMITTEE Update: COMMITTEES AUDIT COMMITTEE Update: Catalin Parvu Chief Executive Officer Pedro Miguel Weiss Chairman Viorel Mischie Deputy General Manager Konstantinos Paschalis Member Athanasios Psathas General Manager (Deputy CEO) George Papaioannou Member Madalina Otilia Teodorescu Nikolaos Chaniotis General Manager (Deputy CEO) Deputy General Manager RISK COMMITTEE STRUCTURE FOR ALL THE RISKS MANAGEMENT Update: Peter Weiss Member Georgios Mantakas Chairman Konstantinos Paschalis Member 10

11 4. Financial Overview of

12 4.1. Market Overview Romanian economy posted a solid growth of 4.8% YoY in 2016, following a 3.9% GDP expansion in On utilization side, household consumption remained the main driver (climbing by 7.3% YoY while contributing 5% to GDP s growth) supported by the favorable prices evolution following the tax cuts in the last two years and by the increase of disposable income prompted by public wages hike. Gross fixed capital formation dropped by 3.3% YoY negatively contributing 0.8% to GDP growth jeopardizing economy s competitiveness and questioning the sustainability of economic growth.net trade had also a negative contribution of 0.7% to GDP growth showing consumers propensity to acquire imported goods. On formation side, trade and leisure sectors contributed together 1.9% while growing by 11.3% YoY. IT sector brought 0.7% to economic expansion although it stays only for 5.5% of GDP after growing by 13.8% YoY. Industry, staying for 23.1% of total GDP inched up by 1.8% in 2016 contributing 0.5% to economic growth. Net taxes contributed 0.5% to GDP advance weighting 10.2% in GDP formation following a 6.5% rise YoY. Constructions inched up by 1.8% YoY while contributing 0.1% to economic growth. Current account deficit continued to widen in 2016 reaching EUR 4.11bn. Trade deficit grew by 19.3% YoY to EUR 9.30bn as exports growth was slower than imports advance supported by households consumption. The negative growth was capped by the significant improvement of services exports. Foreign direct investments climbed in 2016 to EUR 3.91bn from EUR 2.96bn in 2015 but remained subdued. Budget deficit widened to 2.41% of GDP as a result of fiscal policy relaxation while staying way below the 2.75% annual target. Fiscal policy was also the main driver of yearly inflation rate evolution which closed the year for the second time in a row in the negative territory at -0.54%. In 2016 Central Bank kept the key rate at the historical minimum of 1.75% while reducing to 10% required reserve ratios on foreign exchange denominated deposits. RON denominated government papers yields curve slipped during the first three quarters of the year and inching up moderately in the last three months of 2016 in line with the global evolution. Sovereign yields grew globally pushed by the outcome of US presidential elections and by expectations over the monetary policy of major central banks (ECB, Federal Reserve). Banking system continued to consolidate in 2016, supported by solid economic growth and by the diminishing stock of non performing loans. Total net earnings of the industry stood above RON 4.3bn. Total capital ratio (gauging system s solvency) of the banking system dipped marginally to 18.33% from 19.16% registered at the end of Domestic credit increased in real terms by 2,1% YoY in 2016 to RON 313.4bn. Loans to the private sector climbed by 1.2% while government loans advanced by 4.3% during last year. Foreign currency denominated loans weight in total loans continued to diminish, RON denominated loans appeal to customers increased due to betterinterest rates. At the end of 2016, deposits of non-government residents inched up by 8.2% YoY to RON 274.2bn. Deposits remained the main financing source for banks, Romania enjoying a higher level of financing assets from non-banking customers than euro zone does. Loans-to-deposits rate dropped more than five percentage points during 2015 reaching 79.3%. 12

13 4.2. Financial Statements for 2016 The financial statements of Piraeus Bank Romania SA (the Bank) for the years 2016 and 2015 were audited by PricewaterhouseCoopers Audit SRL. The following comments on the financial position and the performance of the Bank are based on the IFRS financial statements and related notes prepared for the December 31, Balance Sheet Evolution Assets Year 2016 was another very challenging year, the Bank being in the position to recover part of the deposits lost during the 2015, while prudently managing its liquidity and capital positions. The Bank remained fully engaged in the execution of its strategic objectives, placing an increased focus towards the reinforcement of income generating engines. During the year, the efficient management of non-performing loans continued to be a priority for the Bank. Concrete actions have been initiated for solving historical issues associated to CHF loans and contractual clauses, which potentially might be considered as abusive. Also, the Bank continued the process of cleaning up the balance sheet by moving off balance sheet the non-performing loans fully covered with IFRS provisions. At the end of 2016, the total assets of Piraeus Bank Romania amounted 1,445.4 million compared to 1,566.3 million as of December 31, The downward movement was mainly driven by the repayments performed in Q4 to the parent, and by loans, which despite significant efforts done for gearing up lending activity, remained on a descending trend. Also as of December the Bank was managing assets amounting 1,284.2 million on behalf of Piraeus Bank - London Branch. Piraeus Bank Romania acts as agent for the London Branch, ensuring services of loans and repossessed collateral administration, while the risks and rewards substantially belong to PBG s subsidiary in London. In terms of assets structure, the Bank managed to maintain a high share of high liquid assets (cash and trading securities) and to slightly improve the contribution of net loans in total assets. The Net Loans decreased by 7.9% in absolute terms, but remained stable as a share in total assets. In the context of the decrease of total assets at the end of 2016 compared to 2015 (7.7%), the currency analysis of assets shows an increase of assets in local currency, reaching a share of 41.1% in total assets ( million in 2016 compared to million in 2015), compared with the decrease of assets denominated in foreign currency, reaching a share of 58.9% in total assets ( million in 2016 compared to 995 million in 2015). Loans Within increased efforts for recouping the operating profitability, a core focus has been placed towards new lending. Contraction has been stopped in companies segments, but in retail area, loan sales remained significantly below repayments and off B/S bookings. Overall, the loan portfolio positioned bellow previous year figure ( 59.8 million or 7.3%). Bank s total loan portfolio as of December 31, 2016 was in amount of million compared to 819 million at the end of previous year. 13

14 4.2. Financial Statements for 2016 The decrease was triggered by the large repayments and prepayments ( 200 million), which overpassed the disbursements ( 144 million), sub-participation by PBG, London branch ( 44 million) and write-offs ( 28 million). The net movement of revolving loans positively impacted the loans value ( 65 million). Reverting loans to a positive trend remains critical for the Bank which should attentively align its commercial offer and risk appetite in order to efficiently operate. In the context of the decrease of the loan portfolio, the structure shifted the trend from the previous year, as in 2016 the share of retail segment decreased to the detriment of companies segment: 46.4% loans to companies (42.7% in 2015) and 53.6% (57.3% in 2015) loans to individuals. Regarding the structure of individual loans, mortgage portfolio slightly increased as a percentage of total loans (19% compared to 17.5% in the previous year) whereas the consumer loans and overdrafts decreased (33.8% compared to 39% in the previous year). Currency structure of the loan portfolio continued the same trend as in the previous year, meaning an increase of the share of local currency loans (from 37.9% in 2015 to 44% in 2016) and a decrease of the share of foreign currency loans (from 62.1% in 2015 to 56% in 2016). The active and efficient management of non-performing loans remained essential aiming to maximize the recoveries. The Bank has made constant efforts to find the most appropriate solutions for the collection, restructuring, workout and enforcement. The process considered also an accelerated path of forced executions / recoveries. The non-performing loans ratio dropped to 4% (from 4.3% at the end of 2015). NPE ratio (EBA definition) increased from 10.2% in 2015 to 11.5% in The decrease of the nonperforming loans ratio are the result of continuous cleaning up (off balance-sheet booking of loans fully provided with provisions), but also of the active and efficient management through recovery business units. The loan provisions stock slightly increased to 55.6 million as of December 2016 compared to the end of the previous year ( 55 million). On top of the pressures induced in retail segment by new legislative initiatives (with a significantly diluted impact after the last decisions of Constitutional Court), additional burden was associated to some individually significant exposures towards companies debtors, which entered in insolvency. The coverage with provisions increased slightly in 2016 reaching a level of 7.3% (compared to 6.7% as of December 31, 2015). Besides of IFRS provisions, the Bank recorded as of December 31, 2016 prudential provisions (used in the calculation of own funds) amounting to 58.9 million, decreasing by 7.7 million compared to the previous year. According to prudential regulations for 2016 filters are calculated as 40% of the difference between the IFRS and prudential provisions, this percentage gradually decreasing with 20% each following year. 14

15 4.2. Financial Statements for 2016 Liquid assets During 2016 the Bank continued to attentively manage the liquidity position, succeeding in providing a steady and sufficient liquidity buffers, an improved self-financing capacity (a reduced dependency on parent funding) and an improved funding mix. The improved liquidity position, allowed the Bank to meet its commitments towards the Group by repaying the large amounts which have been planned for 2016 ( 204 million). Despite large repayments made to the parent, Quick Ratio remained at very comfortable levels (57% vs. 54% as of December 2015) proving both, the cautious management of liquidity position and still weak performance in disbursing new loans. Carefully managing liquidity position, the Bank maintained a significant portfolio of government securities (Romanian sovereign risk), as one of the main instruments for liquidity management. The portfolio was managed dynamically and traded in accordance with the evolution of the bond market. On December 31st 2016, the Bank held a portfolio of government securities of million, with a decrease of 8.6% from the end of the previous year ( million). As concerns the structure of portfolio, 50.7% of total government securities have been held for trading ( million), while the rest were in the category of assets available for sale ( million), with a slightly decreased share of the available for sale portfolio. During 2016 the Bank did not classified any portfolio of securities as held to maturity. The outstanding of the amounts held with the Central Bank amounted to million, with an increase of 12 million compared to the previous year mainly due to improved base of customers deposits. In general, the cash position was managed prudently and effectively, paying attention to operational needs (and costs), while discouraging large cash reserves. As of December 2016, placements with other banks amounted million. The amounts were placed mainly in euro (76% of total) and on short-term tenors. The net funding provided by the parent, decreased by 132 million following the reimbursement of funds from the last quarter of 2016, reaching 162 million at the end of Liabilities Deposits expanded in 2016 by 13% ( 109 million) reaching a level close to 1 billion ( 971 million). Within a context of calmer environment comparing with 2015, when large outflows have been recorded due to very high volatility induced by the developments in Greece, the Bank succeeded re-gathering deposits, showing robust accumulations in all segments. The Bank remained focused towards an improved mix, targeting a reduced concentration. Core deposits significantly improved their contribution reaching 25% of total deposits ( 240 million). Proactive measures have been adopted aiming to minimize the impact of branch closures. Good developments have been registered in all business areas, but individuals and small companies segments remained the best performers, with increases over 40 million. The process of closing branches was properly managed, the impact on deposits being minimized ( 12.5 million). 15

16 4.2. Financial Statements for 2016 The Bank remained focused to increase deposits base in the most efficient way. A balanced pricing policy was constantly promoted, covering both, competitiveness needs and profitability objectives. Aligning the pricing to the downward trend of the interest rates, taking advantage on the reduced risk adversity and gradual recovery of the deposits, the Bank successively decreased the interest rates, even though, the recovery in deposits remained robust enough. At the end of 2016, loans to deposits ratio (net of provisions) reached 73% (89% at the end of 2015). In terms of deposit segmentation, at the end of 2016 retail deposits account for 51% of total deposits, deposits from SME sector 22%, while deposits of institutional clients account for 16% and corporate deposits 11%. Deposits from banks decreased in 2016 by 49% from 463 million on the back of the repayments towards the parent ( 204 million). The maturity of the 15 million subordinated debt received was extended with 2 years (until May 2018). Profit and loss account In 2016, the Bank registered a loss before tax of 7 million. The decrease by 63% of profit before provisions (amounting -2.8 million) was mainly due to a negative evolution of the net operating income ( -5.2 million). Profitability remains the key weakness of the Bank. Core focus should continue to be placed for gearing up income engines, aiming to substantially reinforce recurring Pre-provision Income, allowing an increased maneuver space for dealing with credit and operational risks. Income During 2016, the interest income dropped by 35% ( million) due to interest related to loans and advances to customers and also to low remuneration of alternative investments (interbank deposits, government securities). The decrease in financing costs was important ( million), but doesn t succeed to offset the reduction on the income side. The loan related interest income decreased compared with the previous year by 39% ( -30 million). The decrease is mainly associated to both, performing ( million) and nonperforming loans ( -9.6 million) mainly due to decreased volumes and the alignment to the downward trend of interest rates (low/negative indices). Interest income related to the securities portfolio slightly dropped by 8% ( -0.8 million) compared with the previous year. The increase of intragroup investments was reflected in the higher income from banks with 0.9 million. Interest income related to amounts placed at Central Bank slightly decreased ( -0.1 million), mainly due to the level of minimum reserve requirements and associated interest rate reductions. Interest rates on deposits from customers were objectively aligned to the downward trend of the market, and also to the profitability requirements. Consequently the associated costs have decreased compared with the previous year by 42% ( -7.6 million), mainly through successive corrections applied to the RON and EUR deposits rates, balancing pricing promoted by the Bank and improving funding mix (increased share of core deposits). 16

17 4.2. Financial Statements for 2016 The operational commissions income increased compared with the previous year by 17% ( 4.5 million). The improvement of commissions income was primarily determined by the management fee associated to London portfolio which had a large impact in the overall profitability ( 2.9 million) and to third parties administration portfolio commissions ( +1.3 million). Good YoY developments have been seen in bancassurance ( +0.6 million), commissions related to factoring activity ( +0.3 million), account administration ( +0.1 million), leasing product ( +0.1 million) and gold transactions commissions ( +0.1 million). SME segment had the largest contribution in money transfer commissions (63%), justifying the Bank s attention towards this segment. Commissions related to card transactions dropt (-8%, -0.2 million). Compared to previous year, the net trading result dropped by 13% ( -1.6 million), affecting the overall profitability of the Bank. A large deterioration was recorded in the result of FX trading by 7.8 million comparing with previous year, owing to clients transactions including exchange house. Profits related to derivative financial instruments in amount of 7.8 million succeed to offset the losses. Costs Operating expenses (without considering the impact of oneoff costs) decreased from the previous year by 7%. Targeting to achieve long-term profitability and to align the infrastructure to the current business needs, the Bank has continued during 2016 to optimize processes and rationalize the footprint by closing 19 branches. Staff expenses recorded a 6% lower level compared to previous year s figures ( 25.2 million in total), showing a 1.8 million decrease if the impact of one-off expenses is excluded. Although headcount decreased YoY by 92 employees (-6.5%), no other tighter rationalization measures were implemented in terms of staff costs, due to increased turnover. Administrative expenses (without taking into account one-off expenses) have decreased by 7% compared to last year s figures ( -2.5 million). The decrease in administrative expenses is mainly attributable to rental expenses ( -0.8 million), utilities ( -0.3 million), lower contribution to the Deposits Guarantee Fund ( -1.2 million). Important savings have been also registered in relation to services from third parties (-6%, -0.3 million respectively) and collection of loans and receivables expenses (-24%, respectively -0.2 million). Amortization and depreciation expenses have decreased by 13% compared to last year s figures, although the Bank has recorded expenses with accelerated depreciation resulting from closing of 19 branches (i.e. 0.4 million). Provisions Net Loan provisions (at 8.7 million) decreased YoY by million. The methodology used for computing IFRS provisions is permanently adjusted in order to align with both, standards requirements and behavior of loan portfolio. The loan related collaterals are revalued annually. The value of collaterals used in provisions is adjusted according with historical realization values. It should be mentioned that in 2015, cost of risk was under large pressure, especially in retail segment, following the appreciation of CHF. Pressures persisted in 2016 too, being related to legislative changes / initiatives (DIP, CHF conversion law), but also to quality deterioration in case of some exposures which are individually significant. 17

18 4.3. Key Objectives of Gross provision charges amounted 28.2 million, showing a large YoY correction ( 38.2 million) which reflects that cost of risk has generally stabilized due to previous years cleaning up actions. The result would have been better if we consider that it was affected by an impairment associated to a large corporate client which surprisingly entered into insolvency in Feb 2017 (being considered impaired as of Dec.16, IAS 10). Good recoveries during 2016 ( 10.1 million, with large contribution of settlement transactions) and incomes from sale (by 9.4 million) of loans off B/S booked significantly contributed to a downward alignment of cost of risk (net), close to a normal /desirable level. Other provisions have been registered an increase of 3.4 million YoY. Provisions for litigations recorded a level of 2.3 million, posting a decrease of 0.8 million. Provisions stock for litigations reached 5.3 million covering mainly litigations with retail clients claiming back amounts derived from margin increase, granting, administration and restructuring commissions, but also the conversion of CHF loans. In addition, provisions in amount of 6 million have been provided in 2016, covering part of the potential losses associated to some contractual clauses, which can be qualified as abusive. Releases in other provisions were related to amounts used for covering disposals of obsolete stocks or some compensatory payments. Last year level is explained by some staff related provisions built to support Group strategic objectives. Also releases in provision for impairment of leasehold improvements were recognized. In 2016 HFS had been reclassified in repossessed assets from foreclosed loans contracts. During 2016 a net income has been recognized in amount of 1.5 million compared with previous year when a loss of 10.2 million was booked. Strategic objectives for Strategic Objectives / Initiatives The Bank is committed to implement a set of initiatives around 6 key strategic pillars: 1. Commercial and digital transformation around the customer; 2. Operational excellence: high quality customer service and increased efficiency; 3. Boosting income generation: expand lending and diversify the revenue sources; 4. Solid liquidity position: build a sustainable funding strategy; 5. Strong capital position: prepare to deliver organic capital generation; 6. Invest in people: retain and attract qualified and dedicated professionals. 18

19 4.3. Key Objectives of Under the strategic pillars, as key strategic initiatives the Bank will focus on: (1) Commercial and digital transformation around the customer Initiatives: a. Embed customer-focused thinking in our frontline and back office functions; b. Offer excellence & convenience to customers in an omnichannel environment; c. Enhance cross-channel distribution, facilitating customers to use their channels of choice and directing them to use the most efficient channels from Bank s perspective; d. Create seamless journeys between channels with ability for client to pause and continue through another channel; e. Ensure a consistent experience across all channels (digital, branches); better understand what fosters customer engagement; f. Adapt our branch model to meet customer s needs (multiformat branch proposition, adapted to digital experience); g. Provide simple messaging to enable frontline employees to articulate the value of the offer in a language that is easy to understand; h. Provide the frontline with adequate tools and information, to enable frontline staff to take quick and correct decisions that help to resolve queries at the first point of contact; i. Promote simple and standard products for retail mass segment. Develop a modular product development process, to create segment customized products; j. Define campaign business models and gradually enhance them; k. Unlock organic profitable growth potential through customer loyalty. Develop loyalty and reward programs for customers; l. Promote a customer-based, value-driven measurement and rewarding systems; m. Establish a formal process to obtain and diligently react to customer feedback; n. Deliver a truly omni-channel experience, with seamless journeys between channels; o. Develop anticipatory services, supported by big data analytics, moving closer to client expectations; p. Provide collaborative advice (online); q. Build an agile IT infrastructure (core & client interaction systems); r. Invest in digital across the value chain, starting investments in areas that create the most value; s. Security: building customer trust in our digital infrastructure and our ability to protect customer data; t. Redesigning the role of branches, as part of omnichannel experience i.e. branches should not only provide the physical choice of channels, but also deliver the same customer experience as digital channels. 19

20 4.3. Key Objectives of (2) Operational excellence Initiatives: a. Embed excellence in the mentality of the entire organization, keeping people aligned to Bank s vision and strategy; b. Strive for high service quality in all interaction touch-points to win customer preference; c. Continue to streamline processes and simplify procedures in order to improve the response time to our customers and generate sustainable savings; d. Continue optimizing the customer- journeys, eliminating inconsistencies and potential sources of customer dissatisfaction; e. Create journey maps for critical back-office / support processes to identify the optimization needs and rationalization ways; f. Build core competency in advancing information architecture and analytical skills to improve management decision making and economic performance; g. Encourage the migration of branch-based customers to digital channels (web & mobile banking), enhancing in the same time the digital capabilities of our branches; h. Enhance Bank s technological ability to effectively support growth strategies while managing operational complexity and risks; i. Improve the allocation of resources, correctly sizing the headcount, in line with real operational needs; j. Continuously benchmark our customer related journeys and processes; k. Align our infrastructure and costs to real income generation capacity of the Bank (improved Cost-to-Income ratio); l. Maintain a tight control over costs and headcount, striving for an increased cost accountability (supported by a transparent cost allocation); m. Strive to embed efficiency-based thinking as standard behavior of the entire organization. (3) Boosting income generation Initiatives: a. Focus on SMEs, mid-market corporate, HH affluent and mass; b. Focus on sectors with promising outlook (sustainable liquidity and profitability potential) and on lending relationship with a good risk-return and parallel / transactional business; c. Omni-channel approach in the sale process, leveraging on positive customer experience across channels; d. Achieve a stable mass of productive assets, safeguarding steady recurring core income, well in excess of operating costs; e. Increase in commissions, striving for high service quality and streamlined journeys for customers; f. Leverage distribution capacity to capitalize on bancassurance opportunity; g. Increase revenue contribution from existing customer base with effective cross-selling and upselling; h. Ensure an adequate management of NIM, while promoting a risk-based pricing on our lending products; i. Encourage pricing schemes which reward clients good repayment and transactional behavior; j. Enlarge our funding base in an efficient way, constantly promoting a balanced pricing policy; k. Pursue for a stable funding position, striving for a reduced concentration, to avoid liquidity shortfalls and potential high retention premiums; l. Promote prudent credit-risk policies; m. Enhance profitability measurement at customer and segment level. 20

21 4.3. Key Objectives of (4) Solid liquidity position Initiatives: a. Promote a proactive liquidity management, continuously testing / up-dating the liquidity contingency plans; b. Self-finance the B/S development by observing the needs for income reinforcement, but keeping a firm grip on liquidity; c. Remain focused to increase customer deposits, targeting to expand in an efficient way the self-financing component, while reducing dependency on parent funding; d. An increased focus towards small and standard deposits, which are less volatile and help to reduce concentration; e. Strive to increase the core deposits establishing and deepening the Bank as the primary banking relationship of our clients; f. Target large deposits, as well (to consolidate the liquidity buffers), but keep them under attentive liquidity management; g. Promote a mindful pricing, targeting a competitive offer, but aligned to profitability needs; h. Enhance data analytics to support segmental strategies and pricing; i. Continue streamlining deposit related journeys, encouraging the migration to digital channels; j. Pursue to identify alternative sources of funding and to expand the counterparty limits granted by banks and institutional clients; k. Improve communication to better promote PBR values and risk profile; l. Incentivize business units by promoting a transfer pricing that reflects deposits profitability, with a special emphasis on core deposits; m. Maintain appropriate volumes in high liquid assets (nonencumbered), but without encouraging excessive liquidity buffers. (5) Strong Capital Position Initiatives: a. Pursue for adequate capital buffers, keeping the capital well in excess of regulatory requirements; b. Continue promoting a proactive capital management, in an organic inter-dependency with business objectives and Bank s risk profile; c. Address from very early stages any issue with a potential material impact on capital e.g. conversion of CHF loans, Deed in Lieu law, abusive clauses, IFRS9 implementation; d. Align the business objectives and the risk appetite to real availability of the capital, considering the objective limitation in capital formation and acquisition; e. Attentively follow the linear path towards fully loaded CET1, Tier 1 capital and total capital ratios; f. Promote a conservative risk appetite, encouraging an efficient use of the capital; g. Improve the internal capital allocation, striving for an increased accountability of business areas; h. Continue optimizing the RWAs, with special emphasis on credit and operational risks; i. Enhance the ICCAP, targeting to avoid the misstatement or overstatement of capital requirements; j. Leverage on existing Tier 2 capital aiming its long term availability (extending the maturity or converting in Tier 1 capital); k. Promote a prudent dividend policy, with the aim not to grant dividends in the next three years. 21

22 4.3. Key Objectives of (6) Invest in people Initiatives: a. Ensure that appropriate skills are resourced and trained to fit customer focused culture; b. Pursue to embed customer based culture and behaviors, high professional and ethical standards; c. Improve internal communication aiming to keep people aligned to Bank s vision and strategy; d. People mapping and talent identification, with focus on their motivation and retention; e. Ensure the successful fulfillment of critical positions on the basis of Succession Planning; f. Improve the organization and planning of work, making it more efficient and collaborative, getting more out of technology; g. Incentivize the high performance, recognize and reward employees engagement and dedication; h. Increase the awareness of work-life balance in order to preserve the employees holistic health; i. Remain engaged in CSR actions in order to enhance image as employer of choice, by active involvement of employees in volunteer activities. 22

23 5. Human Resources Evolution 23

24 5. Human Resources Evolution Piraeus Bank perceives Human Resources management as a firm promise of achieving Group s strategy through its high-trained and skilled employees who account for a major key success factor in business performance and increased profitability. The main Human Resources Division s initiatives for year 2016 consisted in both maximising the ambitious budget targets, preserving a positive working environment, reducing turnover of high performers, attracting valuable candidates from outside the organisation, focusing on supporting employees through mentoring and coaching programmes and rewarding them based on their merits. Aiming to consolidate the image of a flexible organisation in the Romanian banking system, Piraeus Bank management keeps the interest in a healthy organisational stability. Its focal objective is to bring out the potential of people and ensure their commitment to attain excellent results. In 2016, the pivotal challenge of Human Resources Division was to create a strong team of professionals capable of performing within the competitive environment on the banking market, being, at the same time, an attractive employer. This is achieved by modernising organisational structures, training systems and rational management of human resources, concentrated on building a culture among its staff members based on values, such as: team spirit, professionalism, effectiveness, entrepreneurial vision and continuous learning programmes. Active staff At the end of 2016, Piraeus Bank had active employees compared to in 2015, thus recording a 7% decrease. The active staff number recorded at December 2016 was compared to at the end of 2015 indicating a drop of 9%. During 2016, it has been registered a rise of 36% in the suspended contracts due to maternity leaves Allocation of human resources by gender, age and area 75% of Bank s employees are female while 25% are male. There are 48% of employees within Headquarters while 52% are allocated in the Branch Network and Business Centers. 69% of total workforce is located in Bucharest while 31% is distributed in other areas AGE DISTRIBUTION < > % 25%

25 5. Human Resources Evolution These tools may vary according to the candidate s educational and experience level and include both competencies and professional tests. In 2016, Piraeus Bank made great effort to cover the hiring needs that had arisen. In doing so, 466 positions were covered out of which 70% through external recruitment process filling the vacancies with new hirings, 24% through internal recruitment [transfers and promotions within the company] and 6% were covered by employees transferred from other Group companies. This was achieved by means of transparency and open communication. Of the total recruited personnel, 23% were men and 77% women. Given both the age composition, the average age of about 37 years and the high rate of graduate and post-graduate degree holders [86%], Piraeus Bank presents a great advantage through its high quality and educated employees, who essentially contribute to the introduction and implementation of new technologies, methods and targets and, therefore, to the achievement of its business objectives. Recruitment & Career advancement For Piraeus Bank respect of human value, ethos and integrity of character carry special weight. This is reflected in the philosophy and practices of Human Resources management, starting from the selection and recruitment stage. Recruitment process is based on adequate recruitment procedures free of discrimination, utilising specific candidate selection systems by using modern appraisal and selection tools. Regarding career advancement, irrespective of level of management, 97 employees out of which 30 men [31%] and 67 women [69%] were promoted in The Bank has a clear orientation towards the effective development of its people, enabling new managers to sharpen up their skills and become leaders. As a result it creates and identifies suitable candidates for vacancies. 25

26 5. Human Resources Evolution Continuous learning & professional development Following Group s policy, Piraeus Bank consistently invest in development of its employees with the main focus on exploiting their full potential. Its objective for the Training & Development area is to have motivated, committed and proficient employees within the organisation. Learning programmes were designed to enrich employees abilities and knowledge being implemented both by dedicated internal trainers and external providers. Allocation of training man-hours based on training delivery method Total number of training man-hours in 2016 was with a total number of participants in any training event of , meaning an average of 31 training man-hour / employee. From the total number of training man-hours, 68% were performed in classroom both with external training providers and internal trainers, 31% represented e-learning training through internal and external platform and 1% training manhours were delivered on distance learning training programme. 5% 2% On the e-learning platform were enrolled online training sessions which were intended for increasing employees knowledge in Compliance and Fraud Prevention, Operations, Retail Product Knowledge, Know your client, Major Risks, Physical Security and Operational Risk. Another alternative for professional skills development are the online SkillSoft courses developed by professionals internationally renowned for their expertise. For a better understanding of Retail Products, Individuals Loans and Banking Operations, internal trainers provided Training On Job to employees from branches and agencies in Bucharest. Allocation of training man-hours by category Out of the total man-hours, 51% were dedicated to development of financial and banking knowledge, 15% focused on business development skills selling skills, communication and other topics, 8% dedicated to managerial & leadership skills development, 13% for banking information systems, 5% dedicated to compliance and fraud prevention, 6% were designed to the specialised technical training [courses aiming to provide specialised technical knowledge not directly connected to the core activities of the Bank]. The 2% depicts the actions developed for corporate social responsibility area and work-life balance workshops. 8% 13% 15% 51% (T) Specialised technical training (BD) Business developement (M) Managerial & leadership skills developement (I) Banking information system (C) Compliance and fraud prevention (R) Corporate social responsability 6% 26

27 5. Human Resources Evolution The total number of employees who participated in at least one training course related to developing selling skills, customer care, negociations, results orientation, team work, people management, mentoring, creativity, problem solving and decision making is around Additionally, in order to offer a better informational support for new comers, an induction programme is offered to employees on all hierarchical levels which is also presented as an interactive tool on the e-learning platform. Employees survey on banking market Piraeus Bank acknowledges that has to attract and retain the appropriate people with the required knowledge and skills in order to achieve its strategic goals. The Bank participates every year in a salary and compensation&benefits survey as a means to have access to benchmark indicators. On the basis of the equal opportunities policy, there is established a minimum pay level salary for entry level position applying no distinction between men and women, the Bank integrally respecting and following legal procedures in place. Human Rights Following the Group Human Rights framework according to the United Nation Global Compact, since 2009 Piraeus Bank commits to 5 human rights principles: Forced labour; Child labour; Equal opportunities; Health and safety in the workplace; Working conditions. All Human Resources regulations are driven by these principles which underpin the Bank s ethical behaviour. All employees acknowledged the Human Rights Policy and benefit from a dedicated team for guidance in case of any possible difficulty encountered in their working environment. During year 2016, the Bank did not receive any human rights violation complains on behalf of its employees. Performance Appraisal Performance appraisal process in Piraeus Bank replicates the Group s models in terms of performance appraisal concept and assessment criteria. The appraisal is performed through a new online platform, Ourbank. This platform gives the possibility to have an integrated performance appraisal process for both performance and competencies in which both supervisor and employee can interact besides the appraisal. The managerial competencies are assessed based on 360 model. The main purpose of the appraisal process is continuous development of employees by identifying the strong development areas and the aspects that need improvement. This approach from our employees helps the Bank to foster a performance culture, subsequently reinforcing and supporting the business strategy. Corporate Social Responsibility In 2016 CSR actions were focused on the pylons already established in the previous years- education and ecology, trying to increase the awareness of Bank s causes, to involve more people in Bank s actions and spread inside and outside the organisation Bank s CSR mission. 27

28 5. Human Resources Evolution Bank s CSR initiatives & destination of funds 1. 1st of June - Children s Day celebrated at the Palace - an event which gave us the chance to support Princess Margareta Foundation and Special Fund for Children event which involved our internal volunteers. Thanks to our staff members Piraeus Bank wishes to thank its employees for their dedication, professional behaviour and participation to progress and performance growth. 2. School backpack action - internal actions in collaboration with Princess Margareta Foundation and Special Fund for Children which had as main objective to help several families with children from urban and rural areas. Through this activation we hope to support the education in families where the lack of resources leads to school abandon. 3. The Courage Book - creating a book inspired by the True Values gathered from real people s tales and transformed into children book represents another action which is developed to support the education and the evolution of new generations. 4. Christmas fair event - internal volunteers created Christmas dedicated items which were sold internally and all the funds were redirected to the Princess Margareta Foundation and Special Fund for Children. The actions aiming contribution to society cumulated in 2016 over 700 internal volunteers which supported through direct donations 100 children and through indirect donations (Princess Margareta Foundation) approximately 500 children. Except the above actions, Piraeus Bank Romania maintained active the CSR Facebook page - Curaj Romania with its concept promoting the Romanian values. Internally, we continued our eco-friendly strategy in recycling paper, batteries and plastic by installing dedicated bins. 28

29 6. Business segment activity 29

30 6.1. Branch Network 2016 During 2016, the PBR Branch Network has been focused on increasing sales, deleveraging operational in favor of sales, a new operating model project started, optimization of activities and developing new projects in order to be in line with market development and to become more competitive. The optimization process of the network has been continued for complying with the expected profit level. This was translated by reducing the number of operational territorial units to 101 (98 branches and 13 agencies). 41% of the territorial units are based in Bucharest (32 branches and 9 agencies); 59% of the territorial units are distributed in 35 counties out of 41 (56 branches and 4 agencies). In 2016, 19 territorial units have been closed in accordance with the Branch Network optimization process model that is based on profit and performance criteria. The PBR Branch Network is divided in 6 regions coordinated from the level of Regional Centers, as depicted below. * as of 1st of January 2016; source: 30

31 6.1. Branch Network 2016 During 2016 PBR has continued extensively the usage of Portfolio Management actions as an effective tool for increasing penetration and loyalty among the existing customers and new business generation. Various sales actions have been organized during the year in this respect. We have enhanced the sales management by implementing a series of programs/initiatives in order to improve the sales efficiency and the individual productivity therefore we implemented the Performance Management Platform in order to improve employee performance across network and we have also improved the integrated performance assessment at the unit level and individual level (KPI s system). During 2016 were launched several actions in order to improve sales results such as rallies, sales campaigns and promotions and a series of competitions with prizes such as: Business Packages Campaign, New HH Customers acquisition Rally, Onboarding preapproved 1 salary - organized in two editions, Reactivating expayroll clients Campaign, Payroll Campaign - Savings products - organized in three editions, Increasing the number of paid clients on the active payroll conventions Campaign, Overdraft and Credit Cards - preapproved 1 salary Campaigns, TOP-UP campaign, Star 100 Deposits Campaign and several sales campaign carried out in partnership with PIRB. Also, several sales campaigns were launched all over the year, with very good results. Other actions taken at the network level with direct impact on increasing productivity, profitability and effectiveness were consisting of: Restructuring, optimizing and rationalizing the Branch Network footprint; Implementing the Universal Banker position by unifying Cashier / CSO / BO roles and providing specific training in order to ensure the integration of the new position (working with cash and noncash); Updating the training structure; Special focus on MICRO companies; Strict cost control at all levels (administrative and staff expenses); Active and constant involvement in foreclosures and selling of patrimonial executed properties; The constant follow-up and monitoring performed at Branch Network HO level has improved all areas of Audit; Initiatives to increase operational efficiency by optimizing activities and processes in collaboration with Ernst&Young; Specific projects which have been developed at Branch Network level in order to improve operational activity. The Bank has always paid a close attention to its customers needs by implementing specific programs for increasing loyalty and usage of its products and services and to expand the clients portfolio. Based on this, in February 2016, it was launched MyVoice project in 50 territorial units considered to be the most representative through the installation of devices with the purpose of capture both positive and negative customers feedback, in order to improve the customer experience with the bank. In Q3 have been launched a contest with prizes jointly with Marketing Division, aimed to increase the number of respondents on tablets and the competition spirit between units. During MyVoice Rally (Jul - Oct 16) over 19,000 customers have given us feedback; 18 territorial units were awarded. All initiatives and actions implemented in 2016 have helped the Branch Network to achieve its goals, increasing productivity, sales and effectiveness and continued to emphasize on the technological enhancements for bringing real value to its clients despite the international economic context and the constraints of the market. 31

32 6.2. Retail Banking In 2016, Piraeus Bank focused on placing the satisfaction of its individual clients as core target for all main actions. This is why technological enhancements and overall streamlining of the processes were treated with high priority. Piraeus Bank continued to emphasize on the cards business as one of the drivers in facilitating the day-to-day transactional activity of its customers. Aiming to achieve this goal, we were among the first banks in Romania to have the entire cards portfolio contactless, making easier the usage and increasing the attractiveness of the products for the customers. Additionally, in order to further boost customers experience when paying their purchases with a Piraeus Bank card, we deployed all through the year various activation campaigns, offering cash-back functionality for both debit and credit cards for individuals, discounts granted in cooperation with important strategic partners (e.g. Cora Hypermarket) and automatic interest free installments for specific merchant categories. All these campaigns supported constant increase in the overall usage of both debit & credit cards for purchases in merchant locations (e.g. the automatic interest free installment campaigns powered a 43% increase in transactions volume). The bank paid specific attention also to its borrowers, not only to the cardholders. This is why, in order to facilitate the access to lending solutions, Piraeus Bank launched 1 minute offer campaign. During the promotional period, the customers were able to obtain online estimations of the amount they were eligible for and to continue the process without being obliged to visit a Piraeus Bank branch, until the moment of contract conclusion. One stop shop became a standardized approach for consumer loans, the customers being able to sign the credit contracts when actually applying for the facility, so that in the moment of the approval to be able to directly access the funds marked also the re-start of the usage of alternative sales channels (e.g. brokers, direct sales agents) for the consumer lending activity and the revitalization of strategic partnerships with important players in the financial intermediation market. Such actions contributed to the significant increases in the loans disbursement to individuals, which almost tripled in 2016 vs The above mentioned approach to lending clients was a natural continuation of the one stop shop concept for opening accounts and delivering on the spot all the necessary access tools (e.g. Visa Shop & Cash debit card, winbank), implemented in This simple and straightforward enrollment process was also one of the drivers in the 70% increase of the balances kept by Piraeus Bank individual clients in their movement accounts held with the bank. Taking care of the needs of its customers, Piraeus Bank implemented a dedicated program for the secured lending borrowers with exposures in CHF, who were negatively impacted by the unfavorable evolution of the FX rate. The offer included haircuts and conversion in RON at preferential interest rates, aiming to reduce their monthly burden, while ensuring a correct repayment behavior (e.g. the haircut was granted in sequential tiers, conditioned by not registering overdue amounts). Piraeus Bank continued to focus on powering the bancassurance activity and launched two health insurance products addressed to the employees of the companies having payroll conventions. The products are providing national coverage in case of illness, accident injuries/ medical procedures, as well as treatment abroad in case of serious illness and life insurance, paid by the company for its employees and subject to fiscal benefits. 32

33 6.2. Retail Banking Since bancassurance became a core focus area and the bundling with lending facilities of the already launched products was a constant preoccupation, empowered bancassurance position as an important income generator: 70% increase in bancassurance commissions in 2016 vs The flourishing retail business development activity was achieved even if the changes in the regulatory environment were actually adverse to the natural progress and growth (e.g. giving in payment legislation, cards organization mandates with direct impact on bank s revenues, implementation of EU Directive). 33

34 6.3. Corporate Banking In line with the strategy of the bank, Corporate division focused on increasing lending activity aiming in the same time at improving profitability. Thus, 2016 was a remarkable year, the volume of new loans increasing by 12% while the operational commissions of the corporate clients were enhanced by 12%. The increase was done both by developing businesses with the existing clients as well as by attracting new customers maintaining in the same time a balanced structure of the portfolio in terms of financed industries, with focus on the industries as manufacturing, trade, agriculture and construction. factoring turnover reached EUR 82 MIO, the export generating 9% of the volume. Non-recourse factoring counted for 88% of the business. Factoring is a product offered by Piraeus Bank Romania to its corporate and SME clients. For an improved efficiency and quality, the division reorganized by creating a team in charge with the credit analysis process which shall furthermore produce significant results in the years to come assuring better risk assessment, promptness and faster response to our customers. Apart from the lending products constantly offered by the Division such as: short term business loans for working capital, long term loans for capital expenditure or other investment projects, project financing, municipalities and state owned companies financing, trade finance products for import / export financing, Corporate division continued its emphasis on the cross sale process including installing POS and ATM machines, issuing payroll cards, attracting deposits but also the cooperation with the other subsidiaries of the group such as evaluation services and insurance. Factoring business continued to grow, both in terms of volumes and in terms of products offered was the year of launching export factoring through Factors Chain International, in twofactor system, covering exports of Romanian companies in Europe. Also, in 2016 we started factoring deals with suppliers of the big retailers (key accounts). The clients are offered a user-friendly online interface with the factoring software. The 34

35 6.4. SME Sector During 2016, the strategy for SME segment in alignment with the bank overall strategy was oriented towards revenues growth and new business models integration, keeping its focus on active areas, network efficiency and rigorous cost control. Although PBR has reduced in 2016 the number of its branches (from 120 to 101) it increased the efficiency, achieving better results. At the same time, the active management of nonperformant loans portfolio has strengthened the stability and solvency parameters. As a continuity of the initiatives implemented in 2015 on the transactional part, by new operational packages launching, tailor made based on the clients transactional behavior, 2016 was focused on lending component. PBR has a well - designed strategy for SME sector continuously striving to diversify and update the range of products and services offered to the SME customers. The product and service offer was established in line with market competition and the value proposition towards our customers through a dedicated Relationship Manager supporting the client business providing financial assistance. The products were fully reshaped, we diversified the product catalogue and align the standard pricing offer to market. investment loans to be connected with EU Financing programs preferred financing in the local currency; for foreign currency financing hedging would be an important aspect of the decision OPERATIONAL SUPPORT focus on: Training for EU Funds products Product selector tool Pricing tool MARKET OPPORTUNITIES for PIRAEUS: The long-term potential of the country remains high as Romania has the highest economic growth in EU in Agriculture (and related food industry) holds a very high potential, which is still under-exploited. Huge potential in infrastructure development. Local market has a large potential for goods producers. The country holds an important potential in the green energy. The decrease of the interest rates would fuel the credit demand. The Government will continue the state financing programs, forward supporting SMEs. On the SME segment, the CLIENT (PORTFOLIO) PROFILE - focus was on: Companies with a strong financial standing activating in sectors with growth potential consistent with the bank s low to medium risk appetite; Export oriented firms taking advantage of the newly developed product: Factoring; Expand relationships with existing trustworthy clients which proved their creditworthiness and commitment; RISK APPETITE focus on: short term financing, revolving facilities (overdraft) (70/30%) 35

36 6.5. Treasury & Financial Markets Division 2016 was a better year for PBR s Treasury, as market conditions improved significantly versus 2015, main focus being to place excess liquidity and managing bond portfolio. Clients continued to increase their trading activity with Piraeus Bank Romania, all retail, Private Banking and companies. The Bank repaid to the Group in Q4 almost half of the long term funding, with minor effect on liquidity ratios, as excess liquidity was more than enough. Along with improved image in the market, some interbank counterparties granted back lines and also Private banking clients returned to 2014 levels. Global Markets Sales The Sales team within Treasury maintained its focus on bank s clients, on their needs and requirements coming from different areas of activity, either pricing, investment alternatives or operational solutions. The efforts were directed towards a closer relation, either with corporate or with existing or prospects SMEs through meetings or round table presentations, having representatives from Bank s top Management as well. In a digitalized era, we aim to adapting our products and services, trying to enter all possible channels for better targeting and matching client s needs and preferences. In this sense, we managed to finalize and make it permanent the selling of physical gold through online platform by having a continuous partnership with the largest Romanian online seller emag. Our effort was to capture this clients segment and cross sell all our bank s products when clients are presenting into our branches. Due to diminishing tensions regarding Greece and close local relations with clients, we saw good rewarding of liquidities compared to the market, the deposits from customers registered at the year-end an increase of 13% relative to the beginning of the year. While the balances showed increases, the cost decreased on average by approx. 1 pcpa for RON and 70 bp for foreign currency, showing our alignment with overall market trend. The business picked up compared to 2015 in FX activity as well, where utilization of platforms improved and showed competitive pricing and easiness of trading for both clients and branches. Both number of new users of Piraeus Electronic Trading System and volumes increased during the year, driving FX activity higher and positioning the bank for the next year on a better base. Private Banking activity in 2016 regained the pre Greek crisis levels with assets under management over 60% higher compared to The portfolio structure improved to a more diversified range of investment products, significant increase in bond holdings was noticed. In 2016 Private Banking clients entered new markets through bond acquisition on higher risk countries. Overall profitability from investment products represented 60% of the total year profitability for the segment. Trading & ALM After most of 2015 developing under the Greek crisis auspices, 2016 can be seen as a recovery year from ALM perspective. PBR s liquidity position showed significant improvements starting Q4 2015, the trend being confirmed in The Bank s over-liquid position mostly in foreign currencies in a low and negative rates environment was seen in excess amounts being kept on nostro accounts, while efforts were made though out the year to find placement alternatives at higher interest rates, especially by making use of the notional and risk limits towards the Romanian state in order to keep a consistent portfolio of Government securities during the year, also as a source of liquid assets. 36

37 6.5. Treasury & Financial Markets Division Interbank funding in CHF decreased constantly along with the loans portfolio, thus freeing market limits for other possible funding needs. The granting back of limits to the Bank from some counterparties improved market access and confirmed effort to maintain a strong market presence. Liquidity buffers were comfortable enough to sustain the awaited repayment to the mother bank of roughly 50% of the borrowed long term deposits and loans in November and December 2016, amounting to roughly 205 mn EUR equivalent. The year s many volatility generating events provided excellent opportunities for FX prop trading, the desk again accomplished its profitability targets having as main focus the local EURRON pair. Since the volumes have been quasi unchanged from 2015, despite a pick-up in customer flows, the management of positions has been more precise and efficient. So, even though the actual range of EURRON has not been excessive (as it has been the case in the past years as well), roughly less than 3%, between and , the FX desk has managed to properly exploit the many up and down swings generated by Brexit, FED rates normalization pace, US elections etc. the ECB and the BOE) committed to protect their economies and have consequently, extended their easing policies. The landslide victory of Donald Trump in the US Presidential Elections in November was another shock for the markets, albeit of a lower amplitude after the Brexit surprise earlier in the year. This time, market s reaction was the opposite, with the bonds yields being pushed higher, as Trump s promises of growth-promoting policies were expected to lead to a more inflationary global environment. Piraeus Bank Romania continued to be an important player in the Romanian Fixed Income market. The very good relations with the local and international players, be it banks or institutional clients, were brought forward in Though the counterparty limits are still a sensible issue, Piraeus Bank Romania maintained its competitive player status through better and aggressive pricing to all counterparties, from both a market-making of market-taking perspective. With the two events which overthrew all bets, namely the Brexit Referedum and the Presidential elections in the USA, 2016 was a year characterized by significant volatility and the Romanian fixed income space was no exception. However, PBR s Fixed Income desk managed to achieve better than budget results, after a similar performance in the previous year, thanks to a thorough understanding of and active presence in the market. Although we had local and general elections in June and December, the global events were the market movers in Despite the totally unexpected Leave result of the Brexit referendum and the initial spike in yields induced, the event turned to be bullish for the bonds as the central banks (mainly 37

38 6.6. Marketing Division Keeping an eye set on the business strategy and the other on the micro and macro-economic environment, the Marketing Division of Piraeus Bank Romania managed once again, for 2016, to develop a fluid, rich and relevant set of activities dedicated to improve the client-bank relationship. Our mission and promise The true values is you, the red line unifying all the communication actions, created a more powerful identity for us, increasing the reliability indicator of our brand, therefore the trust in our organization. From projects point of you, spring season gave us the opportunity to boost the number of clients through a 360 integrated Campaign - The Personal Needs Loan, one of the communication pillars of our strategy of commercial and digital transformation. During the summer, our focus switched to the development of an innovative tool which serviced the fall campaign -1 Minute Offer. This activation, an unique on the market loan offer simulator, became a centerpiece for another fully integrated campaign via TV and online channels. As we managed to do year after year, the credit cards clients were rewarded with our special offers via special online campaigns such as: Rates without installments, Cashback or Salary Cards. Serving as a brand booster, the Social Media Channels of Piraeus Bank Romania, the corporate and CSR Facebook Pages and the Corporate LinkedIn profile, managed to create a better synergy between the clients and the bank, and kept us on top of the financial industry Social Media presence. Speaking of CSR, 2016 represented a rich and creative year for this area of our activity, getting us involved more into the community by launching a book for kids inspired by our mission and philosophy translated in 10 captivating stories about courage. The Courage Book targeted, at the beginning, the kids from the poor communities of Romania, as a first step of a national coverage project for supporting the education of children from the rural area, and improve the literacy levels of our children. 38

39 6.7. Corporate Social Responsibility In 2016 our CSR actions were focused on the pylons already established in the previous years - education and ecology, trying to increase the awareness of our causes, to involve more people in our actions and spread inside and outside the organization our CSR mission. The actions aiming contribution to society cumulated in 2016 over 700 internal volunteers which supported through direct donations 100 children and through indirect donations (Princess Margareta Foundation) approximately 500 children. Except the above actions, Piraeus Bank Romania maintained active the CSR Facebook page Curaj Romania, with its concept promoting the Romanian values. Internally, we continued our eco-friendly strategy in recycling paper, batteries and plastic, by installing dedicated bins. The main CSR initiatives: 1. 1st of June - Children s Day celebrated at the Palace - an event which gave us the chance to support Princess Margareta Foundation and Special Fund for Children event which involved our internal volunteers. 2. School backpack action - internal actions in collaboration with Princess Margareta Foundation and Special Fund for Children which had as main objective to help several families with children from urban and rural areas. Through this activation we hope to support the education in families where the lack of resources leads to school abandon. 3. The Courage Book - creating a book inspired by the True Values gathered from real people s tales and transformed into children book represents another action which is developed to support the education and the evolution of new generations. 4. Christmas fair event - internal volunteers created Christmas dedicated items which were sold internally and all the funds were redirected to the Princess Margareta Foundation and Special Fund for Children. 39

40 7. Financial Statement 40

41 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY EUROPEAN UNION This version of om report/the accompanying documents is a I ranslation from the original, whir.h was prepared in Romanian. All possible care has been taken lo ensure that the translation is :m accurate representation of the. original. HO\vever, in all matters of interpretation of information,,-iews or opinions, the original language version of our report takes precedence over this translation.

42 FINANCIAL STATEMENTS AS AT 31 DECEMBER (all amounts in RON thousand unless otherwise stated) CONTENTS PAGE Independent auditor's report to the shareholders Statement of Financial Position Statement of Profit or Loss and Other Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements NOTES TO FINANCIAL STATEMENTS l 2 3 THE BANK AND ITS OPERATIONS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CRITICAL ACCOUNTING ESTIMATES, AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS 46 5 CASH AND BALANCES Willi CENTRAL BANK so 6 TRADING SECURITIES 50 7 OTHER FINANCIAL ASSETS AND LIBILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS DUE FROM OTHER BANKS LOANS AND ADVANCES TO CUSTOMERS INVESTMENT SECURITIES AV AILABI.E FOR SALE RF.PURCHASE RECEIVABLES DERIVATIVE FINANCIALASSETSAND DERIVATIVE LIA131LITIES INVESTMENT PROPERTY PREMISES AND EQUIPMENT INTANGIBLE ASSETS OTHER ASSETS REPOSSESSED ASSETS FROM LOAN CONTRACTS REPOSSESSED ASSETS FROM LOAN CONTRACTS(CONTINUED) DUE TO OTHER BANKS CUSTOMER ACCOUNTS OTHER LIABILITIES PROVISIONS FOR RISKS AND CI IARGES This version of om repmt/the ar.com1>anying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the tfan.slation is an acc.urate representation of the original. However, in all matters of interpretation nf infc:n,rn\tion, views or opinions, the original language version of our report takes pn,-c.edcncc over this translation.

43 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2016 (all amom1ts in RON thousand unless other.wise stated) 22 SUBORDINATED DEBT 23 TRANSFERRED FINANCIAL ASSETS 23 TRANSFERRED FINANCIAL ASSETS(CONTINUED) 24 SHARE CAPITAL 25 OTHER RESERVES 26 NET INTEREST INCOME 27 NET FEE AND COMMISSION INCOME 28 GAINS LESS LOSSES FROM DERIVATIVES 29 GAINS LESS LOSSES FROM TRADING IN FOREIGN CURRENCIES 30 OTHER OPERATING INCOME 31 ADMINISTRATIVE AND OTHER OPERATING EXPENSES 32 INCOME TAX EXPENSE 33 FINANCIAL RISK MANAGEMENT 34 COMMITMENTS AND CONTINGENCIES 35 FAIR VALUE DISCLOSURES 36 RELATED PARTY TRANSACTIONS This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that lhc translation is an accurate represenlalion of the original. However, mall matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

44 INDEPENDENT AUDI1'OR'S REPORT TO THE SHAREHOLDERS OF PIRAEUS BANK ROMANIA SA Our opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Piraeus Bank Romania SA (the "Bank") as of 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with the International Financial Repmting Standards as adopted by the European Union ("IFRS") and the requirements of the Order of National Bank of Romania ("NBR") no. 27/2010 "for approving accounting Regulations in accordance with International Financial Reporting Standards, applicable to credit institutions" and subsequent amendments ("NBR Order 27 /2010"). What we have audited The Bank's financial statements, set out on pages 1 to 138, comprise: the statement of financial position as at 31 December 2016; the statement of profit or loss and other comprehensive income for the year then ended; the statement of changes in equity for the year then ended; the statement of cash flows for the year then ended; and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the "Auditor's 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. This version of our report is a translation from the original, which was prcpare<l in Romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. 1 of 4

45 Independence We are independent of the Bank in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants ("IESBA Code") and the ethical requirements that are relevant to our audit of the financial statements in Romania. We have fulfilled our other responsibilities in accordance with these requirements and the IESBA Code. Other information The Administrators are responsible for the preparation and fair presentation of the Administrators' Report in accordance with the requirements of NBR Order 27/2010, articles 11-14, and for such internal control as Management determines is necessary to enable the preparation of an Administrators' Report that is free from material misstatement, whether due to fraud or error. The Administrators' Report is presented on page 1 to 23 and is not a pa1t of the financial statements. Our opinion on the financial statements does not cover the Administrators' Report. In connection with our audit of the financial statements for the year ended 31 December 2016, our responsibility is to read the Administrators' Report and, in doing so, consider whether there are any significant inconsistencies between the Administrators' Report and the financial statements, whether the Administrator's Report includes, in all material respects, the information required by the NBR Order 27/2010, a1ticles 11-14, and whether, in light of our knowledge and understanding acquired during the audit of the financial statements for the year ended 31 December 2016 in respect of the Bank and its environment, the information included in the Administrators' Report is materially misstated. We are required to report in regard to these aspects. Based on the work undertaken in the course of our audit, we report that: a) we have not identified in the Administrators' Report information which is not consistent, in all material respects, with the information included in the financial statements; and b) the above mentioned Administrators' Report includes, in all material aspects, the information required by the NBR Order 27/2010, articles Also, in the light of our knowledge and understanding acquired during the audit of the financial statements for the year ended 31 December 2016 in respect of the Bank and its environment, we have not identified material misstatements in the Administrators' Repo1t. This version of our report is a translation from the original, which was prepared in Romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original, However, in all matters of interpretation of information, views or opinions, the original language version of our repo11 takes precedence over this translation. 2of 4

46 Responsibilities of Management and Those Charged with Governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the IFRS and the NBR Order 27/2010, and for such internal control as Management determines 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, Management is responsible for assessing the Bank'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 Management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. Those Charged with Governance are responsible for overseeing the Bank's financial reporting process. Auditor's 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 auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs 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. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and pe1form audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The 1isk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of intemal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. Conclude on the appropriateness of Management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a mate1ial uncertainty This version of our report is a translation from the original, which '"'-as prepared in Romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation. 3 of 4

47 exists related to events or conditions that may cast significant doubt on the Bank's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Bank to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underl}ing transactions and events in a manner that achieves fair presentation. We communicate with Those Charged with Governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in intemal control that we identify during our audit. Ref er to the original signed Romanian version Ana-Maria Butucaru Statutory auditor registered with the Chamber of Financial Auditors of Romania under no 3378/17 February 2010 Kenneth Spiteri Administrator On behalf of PricewaterhouseCoopers Audit SRL Audit firm registered with the Chamber of Financial Auditors of Romania under no 6/25 June 2001 Bucharest, 10 May 2017 This version of our report i,; a translation from the original, which was prcpi:ll'ed in Romanian. All possible care has been taken to ensure that the translation is an accurat<! representation of the original. However, in all matters of interpretation of information, "iews or opinions, the original language version of our report takes precedence over this translation. 4of4

48 STATEMENT OF FINANCIAL POSITION (all amounts in RON thousand unless other-wise stated) Note 31 December 2016 Cash and balances.vith Central Bank 5 936,057 Trading securities 6 642,605 Derivative financial assets 12 1,370 Other financial assets at fair value through profit or loss 7 1,994 Due from other banks 8 972,835 Loans and advances to customers 9 3,194,998 Investments securities available for sale ,557 Repurchase receivables 11 68,824 Investment property 13 30,879 Current income tax prepayment 32 13,025 Other financial assets ,167 Other non-financial assets ,747 Deferred income tax asset 32 14,591 Intangible assets 15 26,511 Premises and equipment 14 33,167 Repossessed assets from foreclosed loans contracts 17 37,492 Non-current assets held for sale 17 Total assets 6, Due to other banks 18 1,081,180 Customer accounts 19 4,411,421 Derivative financial liabilities 12 10,034 Financial liabilities at fair value through profit or loss 7 1,992 Other financial liabilitie.s 20.l 44,111 Provisions for risks and charges 21 53,391 Other non-financial liabilities ,643 Suhordinated debt ,822 Total liabilities s Share capital 24 1,163,834 (Accumulated loss)/ Retained earnings (570,658) Other re.serves 25 82,049 Total shareholders' equity 675,225 Total liabilities and shareholders Equity p,563.8ta 31 December , , ,172 1,124,276 3,456, , ,247 30,969 13,024 21,892 15,727 15,649 22,255 52,724 54,426 ~ 14 2,095,562 3,901,717 27,414 2,172 51,533 19,903 38, , fill 1,163,834 (539,113) 76, , ,543 The financial statements on pages 1 to 138 were signed on hehalf of the Board of Directors on 4 May 2017 by: Catalin Parvu Executive General.. Viorel Misf hi~ Deputy Gen~~~l_.~ ~llt g~f.,,,,.,,~-~ \ \' _.,,-~ The accompanying notes set out on pages 7 to 138 form an integral pa1t ofthe'.<:e financial stakmcnts. 1 of 138 This version of our report/the accompanying dor.nments is a translation from the original, which was prepared in romanian. All possible care has ht>.en taken to ensure tbat the translalinn is an accurate representation of the original. However, in all matters of interpretation of infomiation, views or opinions, the original language version of our report takes precedence over this translation.

49 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (all amounts in RON thousand unless otherwise stated) Note Year ended Year ended a1 December December 2015 Interest and similar income 253,744 Interest expense and similar charges {91,121) Net interest income ,623 PrO\,;sion for loan impai1ment 9 (39,078) Net interest income after provision for ~ loan impairment 384,144 (137,543) 246,601 ( ) 36.s-32 Fee and commission income ,277 Fee and commission expense 27 (20,085) Net fee and commission income ,92 Gains less losses from trading in foreign currencies 29 28,687 Gains less losses from financial derivatives 28 24,151 Gains less losses from disposal of financial 25 3,062 instruments available for sale Gains less losses from trading securities (8,175) held to maturity Gains less losses from investment property valuation at fair value (89) Other operating income 30 8,314 Administrative and other operating expenses 31 (337,200) Cost of sales for repossessed assets from foreclosed loans contracts 17.2 (29,382) Sales of repossessed assets from foreclosed loans contracts ,287 Gain.sf (losses) from assets held for sale 17.1 Profit/(Loss)beforeincometax (31.608) Income tax (expense)/ credit Profit / (Loss) for the year (31.545) 117,938 (16,304) A_ 62,987 (11,017) 2,683 (432) (737) 7,782 (344,049) (45,415) {190,025) ( } J252,445) The accompanying notes sel 0111 on pages 7 to 138 form an integral part ofthese financial statements. 2 of138 This version of our report/the accompanying documents is a translation from the original, which,vas prepared in romanian. All possible care has been taken lo ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information,,iews or opinions, the original language version of our repo1i takes precedence over this translation.

50 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (alj amounts in RON thousand unless otherwise stated) Year ended 31 December 2016 Year ended 31 December 2015 Other comprehensive income Items that may be reclassified suhsequently to profit or loss: Available-for-sale investments result, net of tax, out of which: Gains less (losses) arising during the year (8,691) (7,663) (Gains) less losses reclassified to profit and loss upon disposal 25 (3,062) (2,683) Income tax recorded directlv in other comprehensive income Total comprehensive income/ooss) For the period The financial statements on pages 1 to 138 were signed on behalf of the Board of Directors on 4 May 2017 by: Catalin Parvu Executive General The acr.ompanying notes set out on pages 7 to 138 foim an integral part of these fin;mcial slalcmcnts. 3 of 138 This version of 0111 re1,ort/thr accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in 111\ matters ofinlcrprc.tation of infornrntion, views or opinion~, the original language version of our report takes precedence over this translation.

51 STATEMENT OF CHANGES IN EQUITY (all amounts in RON thousand unless othenvise stated) Share ~ Retained Note capital reserves earnings Total Balance as at 31 December D57.92.Z ~ (286.66zl,---856,113 Loss for the year (252,445) (252,445) Other comprehensive income for the period.ffi.&91} (8,691) Total comprehensive income (8,691) (252,445) (261,136) Share capital increase from subordinated loan , ,907 Balance as at 31 December , ,1&2. (539,112) Loss for the year (31,545) (31,545) Other comprehensive income for the period 5,887 5,887 Total comp1 eliensive income 5,887 (31,545) (25,658) Balance as at 31 December ,163.83~ 82_,Q-:ffi (570~57,l 675,22(2 The financial statements on pages 1 to 138 were signed and on behalf of the Board of Directors on 4 May 2017 by: Catalin Parvu Executive General Manager 0.:!::~~~1:y Deputy,,.... ' The accompanying notes set out on pages 7 Lo 138 form an integral pa1t of these financial statements. 4 of 138 l11is version of our report/the ar.r.om1mnying documents is a translation from the original, which was prepared in romanian. All possible care. has been taken to ensure that the l.rnnsllllion is an accurate rcprcs~.ntation of the original. However, in all matters of interpretation of info1 mation, views or 01,inions. the original language version of our report takes precedence over thi.~ trausllltion.

52 STATEMENT OF CASH FLOWS (all amounts in RON thousand unless otherwise stated) Note Year ended 31 December 2016 Year ended 31 December 2015 Cash flows from opet'ating activities Interest received Interest paid Fee and commission received Fee and commission paid Income received from trading securities Income received from financial derivatives Income received from trading in foreign currencies Income received from investment securities available for sale Other Operating lncomc/(expenses) Recoveries on loans previously written off Cash payments to employees Cash payments to third parties (suppliers) Net cash flows from operating activities before changes in operating assets and liabilities Change in operating assets: (Increase)/Dccrease in due from other banks (Incrcase)/Decrease in loans and advances to customers (Increase) /Decrease in trading securities Decrease in trading securities (Increa.se) /Decrease in other assets Total changes in operating assets Change in operating liabilities : (Decrease)/ Increase in deposits due to other banks (Decrease)/ Increase in amounts due to customers (Decrease)/ Increase in other liabilities Total changes in operating liabilities Net cash from/(used in) in operating activities 255,458 (88,741) 147,212 (28,998) (4,784) 6,236 21,545 3,062 (23,141) 87,598 (111,826) (160,232) , ,466 (1,964,254) 1,996,531 32,091 _945.6'36 (673,903) 498,170 4,288 ( ) 822, ,979 (139,351) 109,147 (14,916) 2,541 (2,325) 17,829 2,683 (40,489) 85,216 (121,054) (162,853) 14~~oz (747,647) 1,420,558 (361,133) 442,515 28, ,243 (372,439) (1,321,462) sz,892 (l.!2~f?~poal <206, 358) 111c accompanying notes.set out on pages 7 lo 138 form an integral pa1t of these financial statements. 5 of 138 l11is version of our report/the accompanying documenl~ is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original lang11age version of our report takes pm:.cdencc over this translation.

53 STATEMENT OF CASH FLOWS (all amounts in RON thousand unless otherwise stated) Year ended Year ended Note 31 December December 2015 Cash flows from investing activities Acquisition of investment securities available for sale 10 Proceeds from sale of investment (338,054) (731,333) securities available for sale Interest from investment securities , ,492 available for sale 10 1,097 7,868 Acquisition of propc1ty, equipment and intangible assets 14, (13,810) Net cash from/(used in) investing activities ( 415,78.3,) Cash flows from financing activities Drawdm... ns from borrowing 3,470 Repayment of borrm"'ings (367,919) (4,435) Cash out from interest for horro\o\-ing (7,025) (6,573) Net cash from/(used in) financing activities (371,47'3) --- (11.0Q.8.} Effect of exchange rate changes on cash and cash equivalents Net increase/(decrease) in cash and 391 2,456 cash equivalents 615,274 (1,130,694) Cash and cash equivalents at 1 January 4 1,222,997 2,353,692 Cash and cash equivalents at 31 December 4 1, ,998 The financial statements on pages 1 to 138 were signed and on behalf of the Board of Directors on 4 May 2017 by: Catalin Parvu / Executive Genera' l, Viorel Misc!ief Deputy General Manatet/ ~ , I., The accompanying notes set out on pages 7 lo 138 fom1 an inte.gral part of these financial.statements. 6 of 138 This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible can: ha.s been taken to ensure that the translation i.s an accurate representation of the original. However, in all matters of interpretation of inform;il.ion, views or opinions, the original language version of our repo,-t takes precedence over this translation.

54 (all amounts in RON thousand unless otherwise stated) t THE BANK AND ITS OPERATIONS Piraeus Bank Romania SA ("Piraeus Bank" or the "Bank") is registered in Romania since 1995 as a joint stock Company and is licensed by the National Bank of Romania to conduct banking activities. The Bank is primarily engaged in wholesale and retail banking operations in Romania having 1,322 employed members of staff in 2016 (2015: 1,414). The Bank operates through its head office located in Bucharest and a network of 101 branches and offices (31 December 2015: 120) located in Romania. The registered office of the Bank is: Piraeus Bank Romania SA Sos. Nicolae Titulescu nr Bucharest, Sector t ROMANIA The Board of Directors composition as at 31 December 2016 was: Mr. Stavros Lckkakos, Chairman Members: Mr. Catalin Parvu, member and CEO Mr. [)jas Milis, member Mr. George Papaioannou, member Mr. Viorel Mischie, member and Deputy General Manager Mr. Pedro Miguel Weiss, independent member Mr. Athanasios Psathas, member and General Manager Mr. Konstantinos Paschalis, member Mr. Georgios Mantakas, member The parent company of the Bank is Piraeus Bank SA (Greece) ("Parent Bank" or "Piraeus Bank Greece"), which is listed on the Athens Stock Exchange. The address of its registered office is 4, Amerikis Str, Athens, Greece. On 6 November 2015, the General Shareholders' Meeting of the Bank and the General Shareholders' Meeting of Piraeus Leasing Romania IFN SA ("Piraeus Leasing") approved the transfer to Piraeus Bank Romania of a ce1tain part of Piraeus Leasing business. of 1 :i8 Th is version of our report/the accompanying documents is a translation from the original, which was pre.pared in romanian. All possibler.are has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

55 FOR THE YEAR ENDED 31 DECEMBER (all amormts in RON thousand unless otherwise stated) 1 THE BANK AND ITS OPERATIONS (CONTINUED) The decision was taken in the context that Piraeus Leasing incurred significant accumulated losses and had a large stock of non-interest earning assets, without real chances of a healthy recovery. These factors indicated the existence of a material unce1tainty which casted significant douht about the ability of Piraeus Lea.sing to continue as a going concern. The transfer of business was effectively done in h anches, in 2015 and The transfer ofhusincss implied also the transfer of selected Piraeus Leasing employees to the Bank. The assets transferred from Piraeus Leasing to Piraeus Bank during 2016 were: Asset.~ Transferred Assets/ Liabilities Loans and advances to customers: Real estate leasing portfolio Vehicles leasing portfolio Total Assets The assets and liabilities transferred from Piraeus Leasing to the Piraeus Bank in 2015 were: Asset~ Loans and advances to customers: Real estate leasing portfolio Equipment leasing portfolio Loan to Piraeus Leasing from the Bank Property, plant and equipment Total Assets Transferred Assets/ Liabilities 32,061 19,982 (52,051) 8 The rest of the Piraeus Leasing performing leasing portfolio was transferred to the Bank during 2016, when all the formalities related to the legal transfer of the leased assets have been completed. 8 of 138 Thii; version of our report/the accompanying documents is a translation from the original, which was preparerl in romanian. All possible ca re has been taken lo ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report t;iki-.-; prececlence over l his translation.

56 (all amounts in RON thousand unless otherwise stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (''IFRS") and National Bank of Romania 01 dcr 27/2010, as amended ("NBR Order 27/2010"), under the historical cost convention as modified by the revaluation of available-for-sale investments (through other comprehensive income), trading securities and derivative transactions at fair value through profit and loss account. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless othenvise stated. 2.2 Functional and presentation currency a) Functional and presentation cun ency Functional curren<-'y of the Bank is the currency of the primary economic environment in which it operates. The financial statements arc presented in Romanian Leu ("RON") which is the Bank's functional and p1 esentation cmtency. h) Transactio11 and balances Transactions denominated in foreign currency are translated into the functional currency at the official exchange rate valid at the transaction date. Exchange differences resulting from the settlement of transactions denominated in foreign currency are included in profit or loss at the time of settlement using the exchange rate ruling on that date. Moneta1y assets and liahilitics denominated in foreign currene,-y are expressed in RON as at the balance sheet date. At 31 December the exchange rate used for translating foreign currency balances was USO 1 = RON (2015: USD 1 = RON ) and EUR 1 = RON (2015: EUR 1 = RON ). Foreign currency gains and losses arising from the translation of monetary assets and liabilities are reflected in the prnfit or loss for the year. Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed by comparison benveen translation differences resulting from changes in the amortised cost of the security and other changes in the canying amount of the security. Translation differences on non-monetary items, such as equities classified as available for sale financial assets, are included in the fair value reserve in other comprehensive income. 9 of is version of our report/the accompanying documents is a translation from the original, which \vas prepared in romanian. All possible care has b(.,-cn taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, U1c oriiilllll language version of our report takes precedence over this translation.

57 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3 Use of estimates and judgments The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Bank's accounting policies. The areas invohing a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3. The significant accounting methods and policies set out below have been applied consistently to all periods presented in these financial statements. 2.4 New Accounting Pronouncements - based on IASB effective dates Defined Benefit Plans: Employee Contributions Amendments lo IAS 19 (issued on 21 November 2013 and ~ffectivefor annual periods beginning 1 July 2014). The amendment allows entities to recognise employee contributions as a reduction in the service cost in the period in which the related employee service is rendered, instead of attributing the contributions to the periods of service, if the amount of the employee contributions is independent of the number of years of service. The Bank is currently assessing the impact of the amendments on its financial statements. Annual Imp> ovements to IFRSs 2012 (issued on 12 December 2013 and ~ffectivefor annual periods beginning on or after 1 July 2014, unless otherwise stated below). The improvements consist of changes to seven standards. IFRS 2 was amended to clarify the definition of a 'vesting condition' and to define separately 'performance condition' and 'service condition'; The amendment is effective for share-based payment transactions for which the grant date is on or after 1 July IFRS 3 was amended to clarify that (1) an obligation to pay contingent consideration which meets the definition of a financial instrument is classified as a financial liability or as equity, on the basis of the definitions in IAS 32, and (2) all non equity contingent consideration, both financial and non-financial, is measured at fair value at each reporting date, with changes in fair value recognised in profit and loss. Amendments to IFRS 3 are effective for business combinations where the acquisition date is on or after 1 July of1 8 This version of our report/the accompanying document~ is a translation from the original, which was prepared in romanian. All possibler.are has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the origin,1i language version of our report takes precedence over this translation.

58 (all amounts in RON thousand unless othenvise stated) 2 S UMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) IFRS 8 was amended to require (1) disclosure of the judgements made by management in aggregating operating segments, including a description of the segments which have been aggregated and the economic indicators which have been assessed in determining that the aggregated segments share similar economic characteristics, and (2) a reconciliation of segment assets to the entity's assets when segment assets are reported. The basis for conclusions on IFRS 13 was amended to clarify that deletion of certain paragraphs in Li\S 39 upon publishing of IFRS 13 was not made with an intention to remove the ability to measure short-term receivables and payables at invoice amount where the impact of discounting is imm aterial. IAS 16 and IAS 38 were amended to clarify how the gross carrying amount and the accumulated depreciation are treated where an entity uses the revaluation model. IAS 24 was amended to include, as a related party, an entity that provides key management personnel services to the reporting entity or to the parent of the reportin g entity ('the management entity'), and to require to disclose the amounts charged to the reporting entity by the management entity for services provided. The Bank is currently assessing the impact of the amendments on its financial statements. Clarification of Acceptable Methods of Depreciation and Amorli~ation - Amendment.~ to LAS 16 and LAS 38 (issued on l 2 May.2014 and e.ffectivef or the periods beginning on or after 1 January 2016). In this amendment, the IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the as.set. The Bank is currently as.sessing the impact of the amendments on its fi nancial statements. Annual Improvem ents to IFRS.~ 2oi4 (issued on 2 5 September 2014 and effectivefor annua l period.~ beginning on or q/ter 1 January 2016). The amendments impact 4 standard..c;. IFRS 5 was amended to clarify that change in the manner of disposal (reclassification from "held for sale" to "held for distribution" or vice versa) does not constitute a change to a plan of sale or distribution, and does not have to be accounted for as such. The amendment to lfrs 7 adds guidance to help management determine whether the terms of an arrangement to service a financial asset which has been transferred constitute continuing involvement, for the purposes of disclosures required by TFRS 7. The amendment also clarifies that the offsetting disclosures of IFRS 7 are not.specifically required for all interim periods, unless required by IAS of 1 8 Th is version of o\lr n:portjthe accompanying documents is a translalion from lhe original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an ar.mrate representation ofth<: original. H.ow1:v1:r, in all matte.rs of interpretation of information, vip.ws or opinions, I he original languag<: version of our r1:po1i takes prt.'cedence. over this translation.

59 (all amounts in RON thousand unless otherwise stated) 2 SUl\llMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The amendment to IAS 19 clarifies that for post-employment benefit obligations, the decisions regarding discount rate, existence of deep market in high-quality corporate bonds, or which government bonds to use as a basis, should be based on the currency that the liabilities are denominated in, and not the country where they misc. IAS 34 will require a cross reference from the interim financial statements to the location of "information disclosed elsewhere in the interim financial report''. The Bank is currently assessing the impact of the amendments on its financial statements. Disclosure Initiative Amendments to IAS 1 (issued on 18 December 2014 and effective for annual pei iods on or after I January 2016). The Standard was amended to clarify the concept of materiality and explains that an entity need not provide a specific disclosure required by an IFRS if the information resulting from that disc1osure is not material, even if the IFRS contains a list of specific requirements or describes them as minimum requirements. The Standard also provides new guidance on subtotals in financial statements, in particular, such subtotals (a) should be comprised of line items made up of amounts recognised and measured in accordance with IFRS; (b) be presented and labelled in a manner that makes the line items that constitute the subtotal clear and understandable; (c) be consistent from period to period; and (d) not be displayed with more prominence than the subtotals and totals required by IFRS standards. The Bank is currently assessing the impact of the amendments on its financial statements. 2.5 Other revised standards and interpretations (not yet endorsed by the EU or not early adopted by the Bank) IFRS 9 "Financial Instruments" (issued on 24 July 2014 and effective for annual periods beginning on or ajtei 1 January 2018). Key features of the new standard are: Financial assets are required to be classified into three measurement categories: those to be measured subsequently at amortised cost, those to be measured subsequently at fair value through other comprehensive income (FVOCI) and those to be measured subsequently at fair value through profit or loss (FVfPL). Classification for debt instruments is driven by the entity's business model for managing the financial assets and whether the contractual cash flows represent solely payments of principal and interest (SPPI). If a debt instrument is held to collect, it may be carried at amortised cost if it also meets the SPPI requirement. Debt instruments that meet the SPP[ requirement that are held in a portfolio where an entity both holds to collect assets' cash flows and sells assets may be classified as FVOCI. Financial assets that do not contain cash flows that are SPPI must be measured at FVTPL (for example, derivatives). Embedded derivatives are no longer separated from financial assets but will be included in assessing the SPPJ condition. 12 of 1J8 111i.~ version of our report/the accompanying documents is a translation from the origin~\, wh_ich wa~ i;,repared in ron!anian. All possihle care has been taken to ensure that the translation is an accurate representation of the ongmal. However, mall matters of interpretation of information, views or opinions, the original language version of our report tnkes precedence over this translation.

60 NOTES TO THE FINANCIALSTATEMENTS (all amounts in RON thousand unless otherwise stated) 2 SUl\fMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investments in equity instruments are always measured at fair value. However, management can make an irrevocable election to present changes in fair value in other comprehensive income, provided the instrument is not held for trading. If the equity instrument is held for trading, changes in fair value are presented in profit or loss. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The key change is that an entity will he required to present the effects of changes in o¼n credit risk of financial liabilities designated at fair value through profit or loss in other comprehensive income. IFRS 9 introduces a new model for the recognition of impairment losses - the expected credit losses (ECL) model. There is a 'three stage' approach which is based on the change in credit quality of financial assets since initial recognition. In practice, the new rules mean that entities ""ill have to record an immediate loss equal to the 12-month ECL on initial recognition of financial assets that are not credit impaired (or lifetime ECL for trade receivables). Where there has been a significant increase in credit risk, impairment is measured using lifetime ECL rather than 12-month ECL. The model includes operational simplifications for lease and trade receivables. Hedge accounting requirements were amended to align accounting more closely '"'ith risk management. The standard provides entities with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 and continuing to apply IAS 39 to all hedges because the standard currently does not address accounting for macro hedging. The Bank is currently assessing the impact of the new standard on its financial statements. IFRS 15, RevenueJi om Contracts with Customers (issued on 28 May 2014 and e.ffectivefor the periods beginning on or after 1 January 2018). The new standard introduces the core principle that revenue must be recognised when the goods or services are transferred to the customer, at the transaction price. Any bundled goods or services that are distinct must be separately recognised, and any discounts or rebates on the contract price must generally be allocated to the separate elements. When the consideration varies for any reason, minimum amounts must be recognised if they are not at significant risk of reversal. Costs incurred to secure contracts with customers have to be capitalised and amortised over the period when the benefits of the contract are consumed. 1 of 138 TI1is v~rsion of om report/the accompanying documents is a translation from the ori)l;inal, which was prepared in ro~anian. All possible care has he.en t11k~n to ensme that the translation is an accurate representation of the original. However, mall mailers of interpr~tation of information, views or opinions, the original language version of our report takes precedence over this translation.

61 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Bank is currently assessing the impact of the new standard on its financial statements. IFRS 16 "Leases" (issued on 13 January 2016 and effectfoefor annual periods beginning on or after 1 January 2019). The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases: All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to recognise: (a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is oflow value; and (b) depreciation oflease assets separately from interest on lease liabilities in the income statement. IFRS 16 substantially can-ies forward the lessor accounting requirements in las 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. The Bank is currently assessing the impact of the amendments on it.<; financial statements. Recognition of l>eferred Tax Assets fo1 Unreali~ed l,osses - Amendments to las 12 (l<,sued on 19 January 2016 and effective for annual periods beginning on or aft.er 1 Januai-y 2017). The amendment has clarified the requirements on recognition of deferred tax assets for unrealised losses on debt instruments. The entity will have to recognise deferred tax asset for unrealised losses that arise as a result of discounting cash flows of debt instruments at market interest rates, even if it expects to hold the instrnment to maturity and no tax vvill be payable upon collecting the principal amount. The economic benefit embodied in the deferred tax asset a1ises from the ability of the holder of the debt instrument to achieve future gains (unwinding of the effects of discounting) without paying taxes on those gains. The Bank is currently assessing the impact of the amendments on its financial statements. Disclosm e Initiative -Amendments to IAS 7 (issued on 29 January 2016 and effective for annualpe1+iods beginning on or after 1 January 2017). The amended IAS 7,v:itl require disclosure of a reconciliation of movements in liabilities arising from financing activities. The Bank is currently assessing the impact of the amendment on its financial statements. 14 of 138 This version of our report/the accompanying documents is a t~anslation from the origin~!, which was prepared in romanian. All possible care has been taken to ensure that the translation 1s an accurate representation of the ongmal. However, m all matters of :interpretation of info1mation, vie,vs or opinions, the original language version of our repo1t takes precedence over this translation.

62 NOTES TO THE FINANCIALSTATEMENTS FOR TIIE YEAR ENDED 31 DECEMBER 2016 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Amendments to IFRS 15, Revenuefrom Contracts with Customers (issued on 12 April 2016 and effective for annual periods beginning on 01 after 1 Janua ). The amendments do not change the underlying principles of the Standard but clarify how those principles should be applied. The amendments clarify how to identify a pe1fonnance obligation (the promise to transfer a good or a service to a customer) in a contract; how to determine whethe1 a company is a principal (the provider of a good or senicc) or an agent (responsible for arranging for the good or service to be provided); and how to determine whether the revenue from granting a licence should be recognised at a point in time or over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new Standard. The Bank is currently assessing the impact of the amendments on its financial statements. Applying IFRS 9 Financial Instruments with IFRS 4 Insm ance Conh acl;'i - Amendments to IFRS 4 (issued Septembe and effective, depending on the approach,fm annual periods beginning on or ofter 1 January 2018fm entities that choose lo apply tempm my exemption option, or when the entity first applies.lfrs 9for entities that clwose to apply the overlay appi oach). The amendments address concerns arising from implementing the new financial instruments Standard, IFRS 9, before implementing the replacement Standard that the IASB is developing for IFRS 4. These concerns include temporary volatility in reported results. The amendments introduce two approaches: an overlay approach and a deferral approach. The amended Standard,viii give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts Standard is issued. In addition, the amended Standard will give companies whose activities are predominantly connected ½1th insurance an optional temporary exemption from applying IFRS 9 until The entities that defer the application of IFRS 9 will continue to apply the existing financial instmments Standard-IAS 39. The amendments to IFRS 4 supplement existing options in the Standard that can already be used to address the temporary volatility. The Bank is currently assessing the impact of the amendments on its financial statements. This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possibk <:arc has been taken to ensure that the translation is an accurate representation of the original. Mowever, 111 all matters of interpretation of information, views or opinions, the original language version of our repo1t takes ptcccdcncc over this translation.

63 NOTES TO TIIE FINANCIAL STATEMENTS (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Annual Imp1 ovements to IFRSs 2014-::w16 cycle (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2017 for amendments lo IFRS 12, and on or aftei 1 January 2018 for amendments to IFRS 1 and IAS 28). The improvements impact three standards. The amendments clarify the scope of the disclosure requirements in IFRS 12 by specifying that the disclosure requirements in lfrs 12, other than those relating to summa1ised financial information for subsidiaries, joint ventures and associates, apply to an entity's interests in other entities that are classified as held for sale or discontinued operations in accordance with IFRS 5. IFRS 1 was amended and some of the short-term exemptions from IFRSs in respect of disclosures about financial instruments, employee benefits and investment entities were removed, after those short-term exemptions have se1ved their intended purpose. The amendments to IAS 28 clarify that an entity has an investment-by-investment choice for mcasming investees at fair value in accordance v..ith IAS 28 by a venture capital organisation, or a mutual fund, unit trust or similar entities including investment linked insurance funds. Additionally, an entity that is not an investment entity may have an associate or joint venture that is an investment entity. IAS 28 permits such an entity to retain the fair value measurements used by that investment entity associate or joint venture when applying the equity method. The amendments clarify that this choice is also available on an investment-by-investment basis. The Bank is currently assessing the impact of the amendments on its financial statements. IFR1C 22 -,.~oreign Currency ~l'ransactio11s and Advance Consideration (issued on 8 December 2016 and effective jot annual periods beginning on 01 aft.er 1 January 2018). The interpretation addresses how to determine the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part thereot) on the derecognition of a nonmonetary asset or non-monetary liability arising from an advance consideration in a foreign currency. Under TAS 21, the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part thereof) is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple pa;ments or receipts in advance, then the entity must determine the date of the transaction for each payment or receipt of advance consideration. IFRIC 22 only applies in circumstances in which an entity recognises a non-monetary asset or non-monetary liability arising from an advance consideration. 16 of 138 This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has heen taken to ensure that the translation is an accurate representation of the original. However, in all mailers of inlcrprclalion of infoanalion, views or opinions, the otiginal lang,rnge version of our report takes precedence over this translation.

64 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) IFRIC 22 does not provide application guidance on the definition of monetary and nonmonetary items. An advance payment or receipt of consideration generally gives rise to the recognition of a non-monetary asset or non-monetary liability, however, it may also give rise to a monetary asset or liability. An entity may need to apply judgment in determining whether an item is monetary or non-monetary. The Rank is currently assessing the impact of the amendments on its financial statements. Tmn.<;jers of Investment Properf1J -Amendments to IAS 40 (issued on 8 December 2016 and effective for annual periods beginning on or aftei 1 January 2018). The amendments clarify the requirements on transfers to, or from, investment property in respect of properties under construction. Prior to the amendments, there was no specific guidance on transfers into, or out of, investment properties under construction in IAS 40. The amendment clarifies that there was no intention to prohibit transfers of a property under construction or development, previously classified as inventory, to investment property when there is an evident change in use. IAS 40 was amended to reinforce the principle of transfers into, or out of, investment property in IAS 40 to specify that a transfer into, or out of investment property should only be made when there has been a change in use of the property; and such a change in use would involve an assessment of whether the property qualifies as an investment property. Such a change in use should be supported by evidence. The Bank is currently assessing the impact of the amendments on its financial statements. Early adoption of standards The Bank did not early-adopt new or amended standards in Going concern The Bank's financial statements have been prepared based on the going concern principle, which assumes that the Rank will continue to operate in the foreseeable future. Developments in the Greek Economy and the Greek Banking System The volatile macroeconomic and financial environment in Greece remain the main risk factors for the Greek banking sector. 17 of 138 TI1is version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our rcpo1t takes pn,-cl-<lcncc over this translation.

65 (all amormts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Even though 2016 was marked by a series of positive developments for the Greek economy - such as the successful conclusion of the first r~;ew for the third economic policy program, further relaxation of capital controls, reinstatement of the waiver for ECB refinancing v,ith Greek bonds collateral and short term measures for the relief of Greek public debt - that limited the uncertainty and improved the economic sentiment, it was not enough to completely restart the economy and push it towards positive growth. The Greek banking system, follo""ing the completion of the recapitalization at the end of 2015, has gained significant buffers of additional capital that further strengthen the balance sheet of its banks, despite the prevailing conditions in the domestic economy. Exposure of all Greek banks to the Eurosystem decreased to EUR 67 billion at the end of December 2016, from EUR 108 billion a year before, of which EUR 44 billion were covered through ELA liquidity mechanism (EUR-25 billion annually) and EUR 23 billion from ECB refinancing (EUR-16 billion annually). On 22 June 2016, the European Central Bank has decided to reinstate the waiver regime for the eligibility of tradable securities issued or guaranteed by the Greek State, making Greek bonds eligible as collateral for the refinancing of Greek hanks. Additionally, the European Financial Stability Facility (EFSF) has allowed Greek banks, that had previously received notes as part of their recapitalization, to sell said notes under the ECB quantitative casing program. Greek banks participated in the long term TLTRO (targeted longer-term refinancing operations) programme of ECB, which was announced on March 10th, 2016, conditional on the existence of eligible collatera1. The high level of non-performing loans remains the biggest challenge for the Greek banking system. In late November 2016, the Bank of Greece in cooperation with the Single Supervisory Mechanism (SSM) of the European Central Bank set quarterly and annual operational targets for the reduction of non-performing exposures of Greek banks. Events that regard Piraeus Bank Group On the business level, the most important events for Piraeus Bank Group during 2016 and up to the publication of the Group consolidated 2016 annual financial statements, were the following: 18 of138 This version of our report/the accompan}ing documents i.s a translation from the original, which was prepared in romanian. All possihle care has heen taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of infonnation,,iews or opinions, the original language version of our repoit takes precedence over this translation.

66 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Common Equity Tier 1 ratio of the Group was 17.0% at the end of The fully loaded CET-1 ratio stood at 16.2%. Customer deposits reached EUR42.4bn at the end of 2016, higher by EUR:3bn annually, following further capital controls relaxation in Greece in mid 2016, clearance of State arrears towards private sector providers, as well as Piraeus Bank's targeted product offering and client campaigns. Gross loans before impairments and adjustments amounted to EUR 66.6 bn at the end of December 2016, while net loans amounted to EUR 49,7 bn. Total gross loans in Greece stood at EUR 63.0 bn, while loans from international operations amounted to EUR 3.7 bn. Net loans to deposits ratio substantially improved to 113% from 126% respectively excluding the seasonal OPEKEPE ag1i-loan. Following EFSF's decision in April 2016, Greek banks that had received EFSF notes in previous years in the framework of their recapitalisation and/or the consolidation of the hanking sector, started to participate in the quantitative easing program ("QE") established by the ECB by selling the respective notes. Up to December 31, 2016 Piraeus Bank has sold EFSF notes vvith a nominal value of EUR 3.7 billion ¼ithin the framework of the QE program. On 28 April 2016, the last remaining guarantees of Greece under Pillar II used by Piraeus Bank Greece for liquidity purposes were redeemed. Piraeus Bank already repaid the Preferred Shares (Pillar[) held by the Greek Government in Piraeus Bank Greece's share capital in May 2014, while it returned the "Special Bonds" (Pillar III) to the Government in September Upon redemption of Pillar II bonds, Piraeus Bank Greece no longer had any reliance on the measures of Greek Law 3723/2008, and therefore it was no longer subject to the restrictions of the support scheme, which, among others, required the appointment of a Greek State representative in its Board of Directors, as was the case during the last seven years. It is noted that Piraeus Bank Greece has fully repaid all the Pillars of L. 3723/2008, ""ithout any loss occurring to the Greek State as to the guarantees and capital it offered, while the Greek State earned approximately EUR 675 million fees from Pillars II & III. ECB's decision on 22 June 2016 to reinstate the waiver affecting the eligibility of marketable debt instruments issued or fully guaranteed by the Hellenic Republic as collateral for the supply of liquidity su~ject to special "haircuts" (put into force on 29 June 2016), resulted to the reduction of Piraeus Bank Greece's funding from the ELA mechanism by EUR 1 billion. 19 of 138 This version of our repot1/the accompanying documents is a translation from the original, which was prepared in 1 omanian. All possible care has been taken to ensure that the trnnsfation is an accurate representation of the original. However, m all matters of interpretation nf infnrmalion, views nr opinions, the original language version nf nm report takes precedence over this translation.

67 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Eurosystem funding significantly reduced by EUR 16,4 billion to EUR 20.9 billion at the end of 2016 from EUR 37.3 billion at the end of June 2015 (peak of uncertainty). In particular, ELA funding dropped to EUR 11.9 billion at the end of 2016 from EUR 16.7 billion at the end of 2015, while ECB to EUR 9 billion from EUR 16 billion respectively. Interbank repo balances increased further to EUR 5.9 billion in December 2016 versus EUR 1.7 billion a year earlier. At the end of March 2017, Eurosystem funding was further reduced to EUR 15 billion,,..,ith both a reduction of ELA (-EUR 1 billion) and ECB financing (-EUR 5 billion) vs. the end of On 2 August 2016, S&P Global Ratings upgraded the credit rating of Piraeus Bank to "CCC+" with Stable outlook from "SD" before During,January 2017,,vithin the framework of ECB's QE Program, Piraeus Bank sold bonds worth EUR 0.7 billion nominal value. After 23 January 2017, Greek banks' participation in the program stopped, as a result of sending a binding letter of participation in the hond exchange program, within the framework of short-term relief measures of Greek public debt. In Febrnary 2017, within the framework of the shmt term measures for the relief of the Greek public debt, the exchange of variable rate EFSF and ESM notes held from the Bank with European Stability Mechanism (ESM) fixed rate notes was initiated. Until the date of the publication of the Bank's year 2016 financial statements, notes ¼ith a total nominal value of EUR 1.95 billion held by the Bank were exchanged with new notes. On 16 February 2017, \vi.thin the framework of its Covered Bond program, Piraeus Bank issued EUR 1 billion, through a new (3rd) series of Covered Bonds,,vi.th Greek residential mortgages as a cover. The issue was retained by the Bank and is planned to be used as a collateral for providing liquidity in the interbank repo market The Piraeus Bank Greece's strategic pillars going forward have heen set and are the following: a) best practices in corporate governance,.vith substantial presence of experts,,vith extensive international experience on the Board of Directors; b) sustained profitability of the core business; c) swift implementation of the restructuring goals; d) exit from nonstrategic activities that will free-up resources strengthening the core banking platform; and e) initiatives related to digitalization and innovation, which will reduce operating costs and further enhance operational efficiency and customer experience. 20 of 138 This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our repo11 takes precedence over this translation.

68 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Gro.ss and Net Loans-to-Deposits ratios significantly improved year on year, posting very comfortable levels of78% and 73% respectively. The Bank significantly improved its funding mix, reducing dependency on parent funding (EUR205m repayments in Q4). On the back ofrobust accumulations and reduced funding from the parent, non-group deposits improved their contribution in the funding mix. Despite large repayments made to the parent, Quick Ratio remained at very comfortable levels (57%). The liquidity indicator as at 31 December 2016 is 1.58, above the minimum level of 1.00 established by the National Bank of Romania. More details are desc1;bed in Note A<; such, based on the above, the management of the Bank considers adequate the application of the going concern principle in the preparation of these financial statements. 2.7 Accom1ting for the effect of hyperinflation Prior to 1 J anuaiy 2004 the adjustments and reclassifications made to the statutory records for the purpose of IFRS presentation included the restatement of balances and transactions for the changes in the general purchasing power of the RON in accordance with IAS 29 ("Financial Reporting in Ilypcrinflationary Economies''). TAS 29 requires that the financial statement.s prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the balance sheet date. As the characteristics of the economic environment in Romania indicate that hyperinflation has ceased, effective from 1 January 2004 the Bank no longer applies the provisions of IAS 29. Accordingly, the amounts expressed in the measuring unit current at 31 December 2003 are treated as the basis for the carrying amounts in these financial statements. The restatement was calculated using the conversion factors derived from the Romanian Consumer P1ice Index ("CPI"), published by the National Statistics Commission. 22 of138 This version of our repo1t/the accompan}ing documenl~ is a tmnslation from the origin~i. wh.ich wa~ ~rcparcd in ronymian. AJI possible C'.are has been taken to ensure that the translation is an acc.urate representation ot the ongmal. However, mall matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this Lranslalion.

69 (alll amowits in RON thousand unless otherwise stated) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.8 Financial assets and liabilities Financial assets a) Classification The Bank classifies its financial assets into the follo½-ing categories: financial assets held at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets. The Bank determines the classification of its investments at initial recognition. (i) Financial assets at/air value through profit or loss (''J<YI'PL") This category has two sub-categories: financial assets held for trading and those designated at fair value through profit or loss upon initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. (ii) Loans and receivables Loans and receivables are non-derivative financial asset-. with fixed or determinable payments that are not quoted in an active market, other than: (a) those that the entity intends to sell immediately or in the short term, which are classified as held for trading, and those that the entity upon initial recognition designates as at fair value through profit or loss; (b) those that the Bank upon initial recognition designates as available for sale; or (c) those for which the Rank may not recover substantially all of its initial investment, other than because of credit deterioration. 23 of 138 This version of our report/the accompanying documents is a t1:3nslation from the origin~!, which wa~ prepared in romanian. All possible care has been taken to ensure that the translation 1s an accurate representation of the onginal. However, m all matters of interpretation of informalion, views or opinions, the original language version of our report takes precedence over this translation.

70 FOR THE YEAR ENDED 31. DECEMBER 2016 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (iii) Available-for-sale Investments ("AFS") AFS investments are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. Investment securities available for sale are carried at fair value. Interest income on available-for-sale debt securities is calculated using the effective interest method, and recognized in profit or loss for the year. Sale and repurchase agreements and lending of securities. Sale and repurchase agreements ("repo agreements"), which effectively provide a lender's return to the counterparty, a1 c treated as secured financing transactions. Securities sold under such sale and repurchase agreements are not derecognized. The corresponding liability is presented within amounts due to other banks or due to customers. b) Recognition, de-recognition and initial measurement Regular way purchases and sales of financial assets FVTPL and AFS are recognised on trade-<late - the date on which the Bank commits to purchase or sell the asset. I,oans are recognised when cash is advanced to the borrowers. Financial assets are initially recognised at fair val.ue plus transaction costs for all financial assets not carried at fair value through profit and loss. Financial assets ca1ried at fair value through profit or loss arc initially recognised at fair value, and transactions costs are expensed in the profit or loss. Financial assets ai:c derecognised when the rights to receive cash flows from the financial assets have expired or where the Bank has transferred substantially all risks and rewards of ownership and does not retain control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without neecling to impose restrictions on the sale. 24 of 138 This version of our report/the accompan:,,ing document,; i.<; a translation (rom the original, which w~<; 1,1repared in ron:ianian. All possible care has hl'.p.n taken to ensure that the translation is an nccurate representation of the ongmal. However, m all matters of interpretation of infom1ation, views or opinions, the original language version of our repo1t takes precedence over this traru;lation.

71 PIRAEUS BANK ROM ANJA SA FOR THE YEAR ENDED 31 DECEMBER (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) c) Subsequent measurement AFS financial assets and fi nancial assets FVTPL are subsequently carried at fair value. I,0ans and receivables are carried at amortised cost using the effective interest method. Gains and losses arising from changes in the fair value of the 1:<YTPL category are included in the profit and loss in the period in which they arise. Gains and losses arising from changes in the fair value of AFS financial assets are recognised directly in the other comprehensive income, until the financial asset is derccogniscd or impaired at which time the cumulative gain or loss previously recognised in the other comprehensive income should be recognised in profit or loss. However, interest calculated using the effective interest method is recognised in the profit and loss. Dividends on AFS equity instruments are recognised in the profit and loss when the Bank's right to receive payment is established. d) Fair value measurement principles The fair values of quoted investments in active markets are based on current bid prices in case of bonds and mid prices in case of derivatives. If the market for a financial asset is not active (and for unlisted securities and derivatives), the Bank establishes fair value by using valuation techniques and internally developed models. These include the use of discounted cash flow analysis after developing a theoretical zero yield curve and applying a spread to quantify liquidity risl~. The theoretical zero yield curve is calculate.d by using market prices from Reuters (bid prices for bonds), determining by a recursive procedure the yield curve with 9 nodes for RON and 4 nodes for EUR Financial liabilities The Bank classifies its financial liabilities as financial liabilities at fair value through profit or loss (including fi nancial liabilities held for trading and those designated at fair value through profit or loss at inception) and financial liabilities at amortised cost. Financial liabilities are derecognised when they are extinguished - that is, when the obligation is discharged, cancelled or expires. a) Financial liabilities at fair value through profit or loss ("FVTPL") This catcgo1y has two sub-categories: financial liabilities held for trading and those designated at fair value through profit or loss upon initial recognition. A financial liability is classified in this category if acquired or incurred principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. 25 of 138 This version of our reportithe accompanyin& doc.wnents is a translation from the origin~l. which w3:<; i;irepared in roman inn. All possible care has heim taken to ensure that the translation is an accu1 atc rcprcst'dt~t1on of the ongmal. However, 1n all matters of interpretation of information, views or orinions, the original language version of our report take:a: 1.1rec<~dt'.ncc ovn Lhis translation.

72 {all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) b) Other liabilities measured at amortised cost Financial liabilities that are not classified as at fair value through profit or loss are measured at amortised cost. Financial liabilities measured at amortised cost are due to other banks, due to customers' balances, subordinated debt and other financial liabilities Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Such a right of set off (a) must not be contingent on a future event and (b) must be legally enforceable in all of the follovving circumstances: (i) in the normal course of business, (ii) the event of default and (iii) the event of insolvency or bankruptcy. Income and expenses are presented on a net basis only when permitted by the accounting standards, or as gains and losses arising from a group of similar transactions such as those from the Bank's trading activity Derivative financial instruments Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. The methods of estimating the fair values are detailed in Note 35. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. The Bank has in portfolio the following types of derivatives: currency swaps and fmward, interest rate swaps and currency options. Certain derivatives embedded in other financial instruments, such as the conversion option in a convertible bond, are treated as separate derivatives when their economic characteristics and risks arc not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss. 26 of 1~8 This ver.~ion of onr re1>011/the accompanying documents is a translation from the originnl, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate represent~tion of the original. However, 111 all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over U1is translation.

73 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTlNUED) These embedded derivatives are measured at fair value,,.,ith changes in fair value recognised in the profit and loss. The Bank held no embedded derivatives as at the reporting date. The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Bank did not designate any derivative transaction as a hedging instrument during the its existence and, consequently, did not use hedge accounting. The fair value gain or loss has been recognised by the Bank through profit or loss in the line "Gains less losses from derivatives". The Bank offers to its customers a product - Gold account (e-gold) - allowing customers to buy gold without actually taking physical delivery, hut having exposure to price movements. For the Bank there is no open position, all deals are immediately matched with deals of opposite sign concluded "'rith the bank which is the gold supplier. The net gain from this product is presented within Gains less losses from derivatives (Note 7) - Gold accounts (egold) line Interest income and expense Interest income and expense are recognised in profit or loss for all instruments measured at amortised cost using the effective interest method. Interest income includes coupons earned on fixed income investment securities and accrued discount and premium on treasury securities. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant pedod. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset or a group of financial assets has been written dmffl as a result of an impainnent loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accm11te representation of the original However, in all matters of inlerj)ret11t.ion of infotmation, views or opinions, the original language version of our repmt takes precedence over this translation.

74 NOTES TO THE 'FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER (aji amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.12 Fee and commission income Fees and commissions are generally recognised on an accrual basis when the service has been pro,~ded. Loan origination fees for loans which are probable ofheing drawn down, are deferred and recognised as adjustments to the effective yield on the loan. Fee and commission income consh,ts mainly of fees and commissions received for the transfers of money for customers, trading of securities and foreign exchange, issuance of guarantees and letters of credit and fees charged for current accounts. The Bank's fee and commission income also comprises commission charged to insurance companies for insurance intermediation. The Bank's fee and commission income also comprises fees for payments transactions and card transactions. Revenue from such services is recognised in the period the services are provided and revenue earned. Certain loan agreements concluded by the Bank were transferred under funded participation and assignment agreements to Piraeus Bank S.A. - London Branch at a different moment, after concluding the loan agreement. All risks and benefits related to these loans are transferred and the loans are derecogniscd in the balance sheet. After the transfer, the Bank acts as an agent of Piraeus Bank London Branch and is paid for these services (recognized as management fee). The commission income is computed as a percentage applied to the daily gross exposure of sub-participated/assigned portfolio and to the daily balance of net receivables related to the "Repossessed assets from foreclosed loan contracts" derived from the 111ubpa1ticipated/ assigned portfolio. The management fee is computed daily and paid by Piraeus Bank London Branch on a monthly basis Dividends Dividends on ordinary shares are recognised in the other comprehensive income in the period in which they are approved by the Annual General Meeting of shareholders. Di\-idends are recorded in equity in the period in which they are declared. Any dividends declared after the end of the reporting period and before the financial statements are authorized for issue, are disclosed in the subsequent events note. The statutory accounting reports of the Bank arc the basis for profit distribution and other appropriations. 28 of 138 This version of our report/the accompanying documents is a u anslation from the original, which wa~ prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the onginal However, m all matters of intej pretation of information, views or opinion.~, the original language version of our report take.~ precedence over this translation.

75 FOR THE YEAR EN DED 31 DECEMBER 2016 (all amounts in RON thousand w1less otherwise stated) 2 SUMMARY OF SIGNIFl('A.NT ACCOUNTING POLICIES (CONTINUED) 2, l4 Sale and repurchase agreements Securities sold under such sale and repurchase agreements arc not derecogniscd. The securities are reclassified as repurchase receivables in the statement of financial position if the Bank (the transferee) has the right by contract or custom to sell or repledgc the securities. The cottesponding liability is presented within amounts due to other banks or other borrowed funds. Securities purchased under agreements to resell ("reverse repo agreements"), which effectively provide a lender's return to the Bank, are recorded as due from other banks or loans and advances to customers, as approp1iate. The difference between the sale and repurchase price, adjusted by intere.<;t and dividend income collected by the counterparty, is treated as interest income and accrued over the life of repo agreements using the effective interest method Impairment of financial assets a) Assets earned at amortised cost The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses arc incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on th e estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Bank uses to determine that there is objective evidence of an impairment loss include: a) significant financial difficulty of the obligor; b) a breach of contract, such as a default or delinquency in interest or principal payments; c) the Bank granting to the borrower, for economic or legal reasons relating to the borrower's financial difficulty, a concession that the lender would not otherwise consider; d) is becoming probable that the borrower will enter bankruptcy or other financial reorganization; e) significant value decrease of the guarantees made by the debtor; f) significant decrease of the borrower's turnover; or g) debtor operates in an industry facing major financial difficulties. 29 of 138 Tiiis version of our rcpo1t/ the accompnnying documents is a translation from the original, which Ml5 prepart>.d in romanian. All possible cart~ has been taken to en~ure that the translation is an accurate representation of the origmal. However, in all matters of inlerpr<..-tation of infmmation, views or opinions, the originnl language version of our report takes precedence over this translation.

76 PIRAEUS BANK ROMANlA SA (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The estimated period benveen a loss occurring and its identification is determined by the management fo r each identified portfolio. The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exi.sts for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets,-vith similar credit risk characteristics and collectively assesses them for impairment. As.sets that are individually assessed for impairment and for which an impairment loss is or continues to he recognised are not included in a collective assessment of impairment. The amount of the lo.<is is measured a,<; the difference between the asset's carrying amount and the present value of estimated future cash flo w,<; (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced through the u,<;e of an allowance account and the amount of the loss is recognised in the profit and 1oss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristic.c; ( e.g. on the basis of the industry and product type). Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors' ability to pay all amounts due according to the contractual terms of the assets being evaluated. Future cash flows in a group of :financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the a,<;sets in the Bank and historical loss experience for assets with credit risk characteristics similar to those in the Bank. Historical loss experience is adjusted on the basis of current obsexvable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. o of 1~8 This vers ion of our report/ the accompanying documents is a translation from the origin~l. which wa~ rrepared in l'oll:'ani.in. All possible care has been La ken to ensure that the translation is an accura Le representation of the ongmal. However, m all matters of interpretation of information, views or opinions, the origioal language vc'l"sion of our repo11 take.~ precedence over th is translalion.

77 (all amounts in RON thousand unless other.wise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes in related observable data from period to period (for example, changes in unemployment rates, property prices, payment status, or other factors indicative of changes in the probability of losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Bank to reduce any differences between loss estimates and actual loss experience. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related o~jectively to an event occurring after the impairment was recognised (such as an improvement in the dehtor's credit rating), the pre"iously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in profit or loss. In Note 9, "Net impairment charge for loans" line presents the net of provision for loan impairment recognised in the current year and the release of provisions recognised in prior period. Written-off loans The primary requirement for a credit to be written-off is when the likely prospects of generating future cash flows from the loans have disappeared and therefore total related loan outstanding exposure was fully covered '"'ith provisions for impairment calculated in accordance with IFRS. The Bank continues however the legal actions against the debtors in order to collect the outstanding Loans. Subsequent recoveries of amounts previously,vritten off are recognised in the period in which they occur and decrease the amount of the impairment charge for credit losses in profit and loss. Credit related commitments The Bank assesses individually the impairment for off balance sheet credit commitments and letters of credit, considering the financial performance, debt service, legal status of the customer and collateral coverage. Impairment provisions are calculated based on the credit conversion factor into balance sheet exposures during the loss identification period. 1 of 138 This version of ou1 report/the accompanying documents is a translation from the origin~!, which wa~ "!'repared in ro~anian. All possihlecare has he.en t11ken lo ensure that the translation is an accurate representation ofthcongmal. However, mall mal ters of inkr1,rctatio11 of information, views or opinions, the original language version of our report takes precede.nee over this translation.

78 NOTES TO IBE FINANCIAL STATEMENTS FOR IBE YEAR ENDED 31 DECEMBER 2016 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) b) Assets classified as available for sale The Bank assessc-.s at each balance.c;hcet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. If any such evidence exists for available-for- sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from the other comprehensive income and recognised in the profit and loss. Im pairment losses recognised in profit or loss on equity instruments are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increa.c;e can be objectively related to an event occurring after the impairment loss,,vas recognised in profit or loss, the impairment loss is reversed through profit or loss Repossessed collateral Repossessed collateral represents financial and non-financial assets acquired by the Bank in settlement of overdue loans. The assets are initially recognised at fa ir value when acquired and included in property, plant and equipment, other financial assets or inventories,vi.thin other assets depending on their nature and the Bank's intention in res pect of recovery of these assets and are subsequently re-meas ured and accoun ted for in accordance with the accounting policies for these categories of asset.-;, Repossessed assets are classified in the statement of financial position as 'non-current assets held for sale' if their carrying amount ¼rill be recovered principally through a sale transaction, including loss of control of a subsidiary holding the assets, within twelve months after the end of the reporting period. A.~sets are reclassified when all of the followin g conditions are met: (a) the assets are available for immediate sale in their present condition ; (b ) the Bank's management approved and initiated an active program to locate a buyer; (c) the assets are actively marketed for sale at a reasonable price; (d) the sale is expected v1,ithin one year and (e) it is unlikely that significant changes to the plan to sell will be made or th at the plan will be withdrawn. Non-current assets or disp osal groups classified as held for sale in the current period's statement of financial position are not reclassified or re-presented in the comparative statement of financial position to reflect the classification at the end of the current period. 32 of 1. 8 n1is version of our 1-eport/thc a <X'.Ompanying documents is a lranslalion from the ori~, which wa.,; prepared in roma niao, All possihle care has been lakcn to ensure that the translation is an accurate rcpnt.sentation of the original. However, in all matters of interpretation of infmmation, views or opinions, the original language version of our report takes prcccdcn('c over this translation,

79 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) If the.bank has classified the repossessed collateral as held for sale but the IFRS 5 criteria above are no longer met, the Bank ceases to classify the asset as held for sale. The proceeds from sale of repossessed collaterals are presented in statement of profit and loss in line sales of repossessed assets from foreclosed loans contracts. The de-recognition of the assets once the sales are completed together with any provision movement are presented in cost of sales of repossessed assets from foreclosed loans contracts. Repossessed collaterals are measured at the lower of their carrying amount and fair value less costs to sell Gold The Bank trades physical gold ¼ith its customers. The balance of gold acquired for further sale are presented in inventory,vithin other non-financial assets. The Bank applied the weighted average cost method to measure its gold stock. Net gains/losses from the transaction are presented in fee and commission income in profit or loss (Note 27) Intangible assets Costs that are directly associated vvith the production of identifiable and unique software products controlled by the Bank, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Acquired computer software licenses arc capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on the basis of the expected useful lives which is typically three years. Computer software development costs, including software development employee costs and an appropriate portion of relevant overheads, are recognised as assets are amortised using the straight-line method over their useful lives which is typically three years. Capitalised costs include staff costs of the software development team and an appropriate portion of relevant overheads. All other costs associated 1Nith computer software, e.g. its maintenance, are expensed when incurred. 33 of 138 This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible cal'e has h~n L!lken to en.sure that the translation is an accurate representation of the original. However, in all matters of intcq,rctation of infonnation, "iews Ol' opinions, the original lan!,'1.tagc version of our report takes pl'ecedence over thi.s translation.

80 (al) amounts in RON thousand unless otherwise stated) 2 SUM.I.\IARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.19 Premises and equipment Cost Premises and equipment are stated at cost, restated to the equivalent purchasing power of the Romanian Leu at 31 December 2003 for assets acquired prior to 1 January 2004, less accumulated depreciation and provision for impairment, where required. Cost includes horrovving costs incun-ed on specific or general funds borrowed to finance construction of qualifying assets. Costs of repairs and day-to-day maintenance are expensed when incurred. Cost of replacing major parts or components of premises and equipment items are capitalised and the replaced part is retired. Gains and losses on disposals determined by comparing proceeds with carrying amount are n~cogniscd in profit or loss. Depreciation Land is not depreciated. Depreciation on other items of premises and equipment is calculated using the straight-line method to allocate their cost less their residual values over their estimated useful livc'.s. Useful lives in years Leasehold improvements over the term of the underlying lease Buildings Office equipment, fixtures and fittings Vehicles of 1 8 This version of our repo1t/ the acr.(lm1,1an.ying documents is a translation from the origin~!, which w ds l?repared in ron:ianian. All possihle care has been taken to ensure that the translation i.~ an acl'.l>ratc rcpresentat1on_ofthe 1)r1g1oal. However, m all matlcrs of interpretation of information, views or opinions, the origmal language version of Ollf n~port takes precedence over this translation.

81 NOTES TO THE FINANCtAL STATEMENTS (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.20 Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. The Bank didn't hold such assets in the reporting period. Assets that are subject to amo1tisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial asset-; other than good-will that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date Finance lease liabilities Where the Bank is a lessee in a lease which transferred substantially all the risks and rewards incidental to ov,;nership to the Bank, the assets leased are capitalised in premises and equipment at the commencement of the lease at the lower of the fair value of the leased asset an<l the present value of the minimum Lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of future finance charges, are included in borrowings. The interest cost i.s charged to profit or loss over the lease period using the effective interest method. The assets acquired under finance leases are depreciated over their useful life or the shorter lease term if the Hank is not reasonably certain that it,'fill obtain ovn1ership by the end of the lease term Operating Leases The leases entered into by the Bank are primarily operating leases. The total payments made under operating leases arc charged to the profit and loss on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor hy way of penalty is recognised as an expense in the period in vvhieh termination takes place. 35 ofl 8 This version of our report/ the accompanying documents is a translation from lhc original, which was prepared in roroanian. All possible c,-ue has been taken to ensure thal the trdnslation is an accurate representation of the original. However, in all m11tters or interpretation of infon-n~ lion, vicwi; or opinions, the origin11! language version of our rep01t take.q prete<knce over this tra11slation.

82 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.23 Finance lease receivables Where the Bank is a lessor in a lease which transfers substantially all the risks and re,vards incidental to o wnership to the lessee, the assets leased out arc presented as a finance lease receivable and carried at the present value of the future lease payments. Finance lease receivables are initially reco~ised at commencement (when the lease term begins) using a discount rate determined at inception (the earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease). The difference between the gross receivable and the present value represents unearned fi nance income. This income is recognised over the term of the lease using the net investment method (before tax), which reflects a constant periodic rate of return. Incremental costs directly attributable to negotiating and arranging the lease are included in the initial measurement of the finance lease receivable and reduce the amount of income recognised over the lease term. Finance income from leases is recorded '""ithin "interest income" in profit or loss for the year. Impairment losses arc recognised in profit or loss for the year when incurred as a result of one or more events ("loss events") that occurred after the initial recognition of finance lease receivables. The Bank uses the same principal criteria to determine whether there is objective evidence that an impairment loss has occurred, as for loans carried at amortised cost. Impairment losses are recognised through an allowance account to write down the receivables' net carrying amount to the present value of expected cash flows (which exclude future credit losses that have not been incurred), discounted at the interest rates implicit in the finance leases. The estimated future cash flows reflect the cash flows that may result from obtaining and selling the as.sets subject to the lease Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months' maturity from the date of acquisition: cash; non-restricted balances with central banks, including minimum mandatory reserves; treasury bills and other eligible bills; due from other banks and short-term government securities. Amounts subject to a potential significant change in value due to high credit risk or other reasons are not cash and cash equivalents unless whole or significant part of the balance have been used in subsequent period without any restrictions or change in the value. 6 of 1 8 This version of our rcpo1t/the accompanying documents is a translation from the otiginal, wh ich w~ prepal'ed in ron:ianian. All po.s.~ible care has been taken to ensme that the translation is an accurate reprcstntat10n of the ongmal. However, m Dll maners of intt'l pretation of information, views or opinions, t he original language version of our report takes prer.edence over this translation.

83 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.25 Provisions Provisions are recognised when the Bank has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be.'lmall. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense Financial guarantees contracts Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities. Financial guarantees are initially recognised in the financial statements at fair value on the date the guarantee was given. Subsequent to initial recognition, the bank's liabilities under such guarantees are measured at the higher of the initial measurement, less amortisation calculated to recognise in the profit and loss the fee income earned on a straight line basis over the life of the guarantee and the best estimate of the expenditure required to settle any financial obligation arising at the balance sheet date. These estimates are determined based on experience of similar transactions and history of past losses, supplemented by the judgment of management. Any increase in the liability relating to guarantees is taken to profit or loss under administrative and other operating expenses. 37 of 138 lbis ve.rsion of our report/ the accomp,1nying documents is a trooslation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an occurate reprc.-scntation of the original. However, in all matters of int.erprct,ttion of inf01mation, views or opinions, the original language version of our repo1t takes prer.edencc over this translation.

84 (all amounts in RON thousand unless otherwise stated) 2 S UlVIMARY OF SIGNIFICANT ACCOUNTIN G POLICIES (CONTINUED) 2.27 Performance guarantees Performance guarantees are contracts that provide compensation if another party fails to perform a contractual obligation. Such contracts transfer non-financial performance risk in addition to credit risk. Pctformance guarantees are initially recognised at their fair value, which is n ormally evidenced by the amount of fees received. This amount is amortised on a straight line basis over the life of the contract. At the end of each reporting period, the performance guarantee contracts are measured at the higher of (i) the unam ortised balance of. the amount at initial recognition and (ii) the bem: estimate of expenditure required to settle the contract at the end of each reporting period, discounted to present value. Where the Bank has the contractual right to revert to its customer for recovering amounts paid to settle the performance guarantee contracts, such amounts wi11 be recognised as loans and receivables upon transfer of the loss compensation to the guarantee's beneficiary Pension obligations and other post-retirement benefits The Bank, in the normal course of business makes payments to the Romanian State funds on behalf of its Romanian employees for pension, health care and unemployment benefit. Substantially all employees of the Bank are members of the State pension plan. The Bank does not operate any other pension scheme and, consequently, has no obligation in respect of pensions. Nevertheless, in case of retirement for age limit, the Bank grants to former employees the equivalent of two family cate allowances' approved limit Income taxes a) Current income tax The Bank records profit tax upon net income from the financial statements in accordance,vith International Financial Reporting Standards as adopted by the European Union and Order 27/ 2010 issued by the National Bank of Romania and profit tax legislation. Romanian profits tax legislation is based on a fiscal year ending on 31 December. In recording both the current and deferred income tax charge for the year ended, the Bank has computed the annual income tax charge based on Romanian profits tax legislation enacted (or substantially enacted) at the balance.sheet date. 8 of1 8 This version of our report/ the accompanying cloc.umcnts is a translation from the original, which wa~ i;irepared in ron~anian. All possible CI\T'e has bllen taken to en~ure that the translation is an accurate representation of the ongmal. However, mall mattel's of interpretation of information, views or opinions, the original language ve.rsion of our report takes precedence over th.is translation.

85 FOR THE YEAR ENDED 31 DECEMBER (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) b) Deferred income tax Differences between financial reporting under International Financial Reporting Standards and Romanian fiscal regulations give rise to differences between the carrying value of ce1tain assets and liabilities and income and expenses for financial reporting and income tax purposes. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. The principal temporary differences arise from depreciation of hyperinflation of premises and equipment, revaluation of certain financial assets and liabilities, different treatment ofloan loss provisions between the fiscal legislation and IFRS, and tax losses carried fon,vard. Deferred tax related to fair value re-measurement of available-for-sale investments, which are charged or credited to the other comprehensive income, is also credited or charged to the other comprehensive income and subsequently recognised in profit or loss together with the deferred gain or loss Bor1 owings Borro¼ings are recognised initially at fair value net of transaction costs incurred. Borro\o\~ngs are subsequently stated at amortised cost; any difference between proceeds net of transaction costs and the redemption value is recognised in profit or loss over the period of the borro'a-ings using the effective interest method. J9 of1~8 This version of our re.pot1/the accompanying documents is a trnnslalion from Lhe original, which was prepared in romanian. All possible can: has b(,-cn taken to en.sure that the translation is an accurate representation of the original. However, in all matte.rs of interpretation of information, views or opinions, lhe original language version of our report takes prcccdcnc.c over this translation.

86 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNlFICANT ACCOUNTING POLICIES (CONTINUED) 2.31 Investment property Investment property is property held by the Bank to earn rental income or for capital appreciation, or both, and is not occupied by the Bank. Investment property is initially recognised at cost, including transaction costs, and subsequently re-measured at fair value updated to reflect market conditions at the end of the reporting period. Fair value of investment property is the price at which the p1 operty could be sold in an orderly transaction in the principal market. An orderly transaction is not a forced transaction or a distress sale. The best evidence of fair value is given by current prices in an active market for similar property in the same location and condition. In the absence of current prices in an active market, the Bank considers information from a variety of som ccs, including: (a) (b) (c) (d) (e) current prices in an active market for properties of different nature, condition or location, adjusted to reflect those differences; recent prices of similar properties on less active markets, ½ith adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and discounted cash flow projections based on reliable estimates of future cash flows, suppo1ted by the terms of any existing lease and other contracts and (when possible) by external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the unce1tainty in the amount and timing of the cash flows. The fair value of the Rank's investment property is determined based on reports of independent appraisers, who hold a recognised and relevant professional qualification, and who have had recent experience of the valuation of property in similar locations and of similar category. Earned rental income is recorded in profit or loss for the year within other operating income. Gains and losses resulting from changes in the fair value of investment property are recorded in profit or loss for the year and presented separately. 40 of 138 This version of our repot1/the accompanying documents is a translation from the original, which was prepared in romanian. All possible c;11 e has heen taken to ensure that the translation is an accurate rcprcscntalion of the original. Howcv(:r, in all matters of interpretation of infotmation, views or opinion.s, the miginal language version of our report takes precedence over this translation.

87 {all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.:32. Bancassurance commissions The Bank provides Bancassurance products to customers through partnerships ¼ith insurance companies by which the Bank earns a commission from selling the insurance products whereas the insurance company benefits from an extended customers base to sell its products. Depending on the type of the product provided, the Bank either collects the insurance premium from the customers or hooks as expense the insurance premium and pays the gross or net insurance premium to the insurance company, being compensated by the insurance company ¼1th a commission for providing these services. The Bank recognizes the revenue from Bancassurance commissions as the services are provided Business combinations between entities under common control In business combinations between entities under common conb ol, the Bank uses predecessor value method. The transfer under the predecessor value method is considered more relevant to the decision making needs of the main users, i.e. Piraeus Bank Greece, of these financial statements, because the transferred elements/ activities were already included in the consolidated financial statements of Piraeus Bank Greece, at their historical values. By applying the predecessor value method the Bank considers the follo\l\llllg: a. The assets and liabilities transfen-cd to the Bank are not restated to their fair values and instead they arc incorporated at the transferor IFRS carrying values that are generally those from the IFRS consolidated financial statements of the highest entity that has common control (i.e. Piraeus Bank Greece) for which consolidated financial statements are prepared; b. If there are differences in the IFRS accounting policies applied by the transferor and the Bank then the carrying values of the asset,; and liabilities of the transferor (transferred to the Bank) will have to be restated to align vvith the IFRS accounting policies of the Bank, with a corresponding adjustment to the carrying value of the net assets transferred; 1 of 118 This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the trllnslation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report take.~ precedence over this translation.

88 (all amounts in RON thousand unless otherwise stated) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) c. The carrying values of the assets and liabilities (determined as in points i) and ii) a hove) will be incorporated line by line in the balance sheet of the Bank and presented in the notes to the financial statements as a transfer, such as, for example, when transferring the carrying values of the property, plant and equipment and loans, in the notes to the financial statements will present both the cost and accumulated depreciation and impairment losses, if the case, and the gross carrying amounts and provision balance, respectively; and d. As no new shares are issued in exchange for the assets transferred, the transfer is done at no consideration Comparatives Comparatives have been amended, where applicable, in accordance ¼-ith IFRS presentations of the current year. 4 2 of 1 8 This version of our rp.port/ thc accompanying documents is a t ranslation from lhe original, which was prepare.din romanian. All possible care has heen taken to l'nsure that lhe translation is an accurale representation of tbe original. However, in all matters ofintcrprelntion ofinfonnation, views or opinions, the original languag~ version of our report takes precede.ncl~ over this translation.

89 PlRAEUS BANK ROMANIA SA (all amount.~ in RON thousand unless otherwise stated) 3 CRITICAL ACCOUNTING ESTIMATES, AND JUDGEMENTS IN APPL YING ACCOUNTING POLICIES The Bank makes estimates and assumptions that affect the reported amounts of assets and liabihties within the next financial year. Estimates and judgments are continually evaluated and are based on histor.ical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. a) Future fiscal losses realization Defen-ed income tax assets arc recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through the future taxable profits is probable. The future taxable profits and the amount of tax benefits that are probable in the future are based on a business plan prepared by Management. The business plan takes into consideration the development of a steady income base through organically gwwing and assuming moderate risks, tight control over costs and increased efficiency and maintenance of a good capital base and a steady liquidity position. The Bank recognized deferred income tax asset of RON 14,030 thousand (2015: RON 14,030 thousand) which refers to a fiscal loss carried fonvard amounting to RON 87,688 thousand that can be carried fonvard against future taxable income. In Romania, tax pe1i ods remain open for 7 years. Management estimates that the Bank will record sufficient taxable profit in the future periods from normal banking operations to cover the recogni7.cd deferred income tax asset. More details are presented in Note 32. b) De-recognition of financial a.ssets The Bank derecognises an asset if it substantially transfers all the risks and rewards of ownership of the as.set. The transfer of risks and rewards is evaluated taking into consideration the Bank's exposure, before and after the transfer, the variability in amount and timing of the expected future cash flows. The Bank continues to recognise the asset if it retain.s substantially all the risks and rewards of ownership of the asset. The de-recognition criteria imply substantial changes to the transferor's exposure towards the risks and rewards of ownership Th is ve.rsion of our report/ the accompan)'ing documents is a translation from the original, which was preparnd in romanian. All possible care has he.en taken to ensure that the translation is an accurate representation of the original. However, in all matter.~ of interpretation ofinfom1ation, views or opinions, the original lanb'\jagc version of our report takes precedence over this tr1mslation.

90 (all amounts in RON thousand. unless otherwise stated) 3 CRITICAL ACCOUNTING ESTIMATES, AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES (CONTINUED) The Bank determines whether it has retained control of the asset. Control is defined as the transferee's ability to sell the asset. The transferee has this ability if it can unilaterally sell the asset in its entirety to an unrelated third party without needing to impose further restiictions on the transfer. A transferee has the ability to sell the asset if it is traded in an active market because, should it need to return the a..,c;ets to the transferor, the transferee could purchase it in the market. The asset is derecognised if the Bank has lost control over it. The Bank continues to recognise the asset to the extent of its continuing involvement and its retained control. Specifica lly, the Bank transfers to Piraeus Bank London Branch loans on the basis of the sub participation or assignment agreements, receiving cash in exchange. Management considers that all the risks and rewards related to those loans are substantially transferred to Piraeus Bank London Branch and hence de-recognition criteria are met. Specific j udgements include assessment over the commission income received by the Bank from administration of transferred 1oans, disclosed in Note 23, which are considered by management to be both an adequate and expected compensation for the servicing of the transfe1ted portfolio peiformed by the Bank as it covers the costs inherent to the servicing activities performed such as collection, accounting, monitoring, and other administrative tasks). c) Impairment losses on loans and advances The Bank re\~cws its loan portfolio to assess impairment on a monthly basis. In determining whether an impairment loss should be recorded in the profit and loss, the Bank makes judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified "vith an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status or the financial performance of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the group. The Bank uses estimates based on histo1ical loss expe1ience for assets v.i.th credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. 4 of 138 This version of our re.port/the accompanying documents is a trani;lation from the original, whir.h was prepared in romaninn. All pos.-.ihle care has been taken to ensure that the t ranslation is 1111 accurate representation of the original. Howc vcr, in all matters of interpretation of infonnation, views or opinions, the 01iginal language version of our report takes precedence over this translation.

91 (all amounts in RON thousand unless otherwise stated) 3 CRITICAL ACCOUNTING ESTIMATES, AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES (CONTINUED) Estimates of impairment for certain categories of mortgage loans were impacted in 2016 by the new Law 77/ 2016 regarding deed in payment for some real estate assets for cancelling/writing-off the obligations assumed by debtors through loans (Deed in Payment La,"' ) and subsequent rulings by the Romanian Constitutional Court related to this law requiring the debtors to prove the hardship element in order to be able to apply the law, which increased the uncertainty around the probability of default for affected clients of the Bank and the degree of judgement required by management to assess the required level of provision for such loans. The Bank has individually assessed for impairment all debtors that requested the Bank to cancel their outstanding loan exposure in exchange of the real estate collateral. The rest of the portfolio for which the pro\.isions of the law might be applicable was collectively assessed for impairment. The Bank made judgements regarding the mortgage loans portfolio for which the ''hardship'' may apply and the probability of default for them. In estimating the population the Bank analysed the Loan to Value of the loans and behavioural aspects related to mo1t gage loan portfolio. The PD's were constructed based on Loan to Value thresholds and by extrapolating past behaviour of the customers. The Bank is closely monitoring any relevant developments to update the estimate of the effect on its financial statements in accordance,vith its accounting policies. At 31 December and 2015, if all other variables are held constant and only the below listed ones will shift, the provisions will change according with the following table: Effect on provisions Effect on provisions % in collateral market value -10% in collateral market value 6 months later shift in cash-flow realization 6 months earlier shift m cash-flow realization (9,847) 11,689 (6,019) (3,266) 3,296 33,989 (6,049) of 138 TI1is version of our reprnt/the accompanying documents is a t r-cmslation from the original, whir.h was prepared in romanian. All possible care lrns be<,n take.n to ensure that the translation is an ~c.curatc representation of the origidal However, in all matter.~ of interprc.tation of information, views or opinions, the original language version of our report takes precedenr.e ovc1 this translation.

92 (all amounts in RON thousand unless othcnrise stated) 3 CRITICAL ACCOUNTING ESTIMATES, AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES (CONTINUED) d) Risk provisions for potential claims derived from loan contracts The Bank recorded at the end of 2016 provisions for clauses existing in the loan contracts follm.\-ing the entering into force of the OUG 50/2010 (see note 21), changes which can be qualified as "abusive". The Bank developed a methodology to estimate the required provision for such clauses making assumptions based on more recent history (2016 evolution of new started litigations and the results of closed ones). The methodology also involves making assumptions about the number of future legal cases to be brought against the Rank and the likely outcome of current and possible future cases. These assumptions are inherently difficult to estimate, and the estimation uncertainty was higher in 2016 due to the publicity that existed around the proposed law to enforce banks to convert S\"li.ss Franc denominated loans into local currency (Proposed S½iss Franc Law) which was declared as unconstitutional on procedural and content grounds. Details regarding risk provisions for potential claims derived from loan contracts are presented in Note CASH AND CASH EQUIVALENTS Cash on hand (Note 5) Cash and balances v,ith Central Banks (Note 5) Due from other hanks (Note 8) (iii) Less collateral deposits (i) Less placements \'\'ith Parent Bank (ii) Total non-including collateral deposits and placements \'\'ith Parent Rank , ,835 (63,330) Cz,291) ~.838,2z , ,438 1,124,276 (60,634) (734,988) 1.222,.9.91 (i) The placements in amount of RON 63,330 thousand (31 December 2015: RON 60,634) represent collateral deposits with EBRD (RON 58,267 thousand) for swap transactions, with Nomura International (RON 3,043 thousand) for repurchase agreements transactions and \'\'ith HSBC (RON 2,021 thousand) for cards activity. Thi.~ v~rsion of OUl' report/the accompanying documents is a translation from the original, which was prepared in romanian. All possihle cart'. has 1.>t~:n t<1ken to cnsun~ that the translation is an accurate representation of the original. I lowcvcr, in all matters of intcrprctatiori of infonnation,,..;e.ws or opinions, the original language version of our repo11 takes precedence over I.his translation.

93 (all amounts in RON thousand unless otherwise stated) 4 CASH AND CASH EQUIVALENTS (CONTINUED) (ii) Due to the capital controls imposed in Greece, the placements amounting RON 7,291 thousand (2015: RON n4,988 thousand) have been removed from cash and cash equivalents. This amount was adjusted in Cash Flow statement line "(Increase)/Decrease in due from other banks" (iii) In "Due from other bank.c;" line are included placements to Parent Bank in amount of RON 3,453 thousand (2015: RON 37,954 thousand) having cash nature as these funds have been available to the Bank ¼ithout being affected by the rules imposed by capital control. 47 of 138 This version of our report/the accompanying docmnents is a translation from the original, which was prepared in romanian. All possible care has bc,-cn tal(cn to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of info1mation, views or opinions, the original language version of our rep011 takes precedence over this translation.

94 (all amounts in RON thousand unless otherwise stated) 4 CASH AND CASH EQUIVALENTS (CONTINUED) The credit quality of cash and cash equivalents balances may be summarised based on Moody's ratings as follows at 31 December 2016: Cash balances, Placements with the NBR, including Correspondent accounts and with mandatoo:: reserves overnight 12lacements other banks Total Neither past due nor impaired - National Bank ofthc Romania 773, ,549 Al :35,164 2,021 37,185 A Aaa 58,267 58,267 ll Bat Baal ,597 3,043 93,640 Baa2 193, ,255 Baa3 11,883-11,883 Caa3-486, ,143 Not rated Total cash and cash equivalents, - 90,742 ~ excluding cash on hand 773,54fi gp9.505 ~ k,'i'.4_6,:385 In 2016, the unrated exposure in amount of RON 90,742 thousand corresponds to placements to financial institutions from Romanian banking market This version of onr rcpo1t/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of i.nfom1ation, vi<- ws or opinions, the original language version of our repo11 tak~ precedence over this translation.

95 (all amounts in RON thousand unless otherwise stated) 4 CASH AND CASH EQUIVALENTS (CONTINUED) The credit quality of cash and cash equivalents balances analysed based on Standard and Poor's, Fitch and Moody's ratings at 31 December 2015, is as follows: Cash balances, with the NBR, including CoITespondent accounts and Placements with mandatory reserves ovemight placements other banks Total Neither past due 11or impaired - National Bank of Romania 716, ,438 A - 31,240 1,948 33,188 AAA - 51,266 51,266 Ba naa3-41,692-41,692 BBB ,822 7, ,24 2 Caa2 - n o Caa3-320, , ,941 Not rated - ~ - 4,525 Total cash and cash equivalents, excluding cash on hand Zl.6,438 ~ J 8~ z1~ 49 of 1:~8 This version of nur report/the accompanying documents is a translation from ll-tc original, which was prepared in ronianian. All possible r.nrc has been tak1.:n to ensure that the translation is an accurate representation of the original. However, in all matters of interpretalion of information, ~iews or opinions, the original language version of our report takes prcct:dence over this translation.

96 (all amounts in RON thousand unless otherwise stated) 5 CASH AND BALANCES WITH CENTRAL BANK Cash 162, ,905 Current account, out of which: 608, ,490 - in RON 365, ,873 - in Foreign curtency 242, ,617 Overnight deposits Hi5,480 5,948 Total ~ ~ Current accounts are required to satisfy the mandatory minimum reserve requirements imposed by the National Bank of Romania. This reserve represents a minimum average deposit ¼ith a holding pe1iod of one month, computed based on resources attracted in the previous month. Dming 2016, the interest rate ranged between 0.14 % at the beginning of the year, reaching 0.9% hy the end of the year (2015: 0.26%-0.14%) for reserves held in RON, and b etween 0.09 % and 0.04 % for reserves held in EUR (2015: 0.38 % %). The interest rates for overnight deposits ¼ith National Bank of Romania ranged from -0.55% in,january 2016 to a minimum of -0.65% at the end of the year (during 2015 this interest rate ranged between 0.29% and 0.09%). All these balances were included in cash and cash equivalents (Note 4 ). 6 TRADING SECURITIES Treasury securities issued by Romanian Government - in RON -in EUR , , , ,080 S:Z.1~.Q of 138 This version of our report/ the accompanying ctocuments is a translation from the original, which was prepored in rom:minn. All possiblec,1re has been taken to ensure that the Lranslation is an accurate representation of the original. However, in all matters of interpretation ofinfotmation, views or opinions, the original lang\lagcvcrsion of our report tak1>.s precedence over this translation.

97 (all amounts in RON thousand rmless otherwise stated) 6 TRADING SECURITIES (CONTINUED) The table below presents an analysis of trading portfolio by rating as at 31 December 2016 and 31 December 2015, based on Standard & Poor's rating. Rated securities from the portfolio are issued by the Romanian Government and have a low credit risk. As of 31 December 2016 the Romanian credit rating was BBB- 'With stable outlook. Analysis by credit quality of debt trading.securities is as follows at 31 December; Neither past due nor impaired ( at f air value) Trading securities Tr ding securities BBB- 642,605 fi75,043 Total 642,6Q5 ~ In addition, at 31 December 2016 trading securities with a fair value of RON 13,657 thousand (2015: RON 27,465 thousand) have been pledged for the clearing and cards activity of the Bank. The honds classified by the Bank as trading portfolio consist in EURO bonds i.ssued by Ministry of Finance Romania, having a nominal interest rate between 1.25% and 4.88% and RON Bonds issued by Mini~try of Finance Romania, having a nominal interest rate benveen 2.25% and 6.75% 51 of is version of our report/ the a(,'colll[lanying documents is a translation from the original, which was prepared in r-umanian. All possible care has been taken to ensure that the translation is :m accurate representation of the or iginal. However, in all matters of inter1>1 elation of information, views or opinions, the original language version of our report takes precedence over this translation.

98 {all amounts in RON thousand unless otherwise stated) 7 OTHER FINANCIAL ASSETS AND LIBTLITIES AT FAIR VALUE THROUGH PROFIT ORWSS Gold Accounts (E-Gold) Total other financial assetc;/liabilitics at fair value through profit or loss At 31 December 2016 and 31 December 2015, included in other financial assets at fair value through profit or loss, respectively financial liabilities at fair value through profit or loss is included gold account due to the existence of the derivative component, the settlement of the transaction depending on the market price of the gold. 8 DUE FROM OTHER BANKS CmTent account~ Placements with banks ¼ith original maturity of more than three months Total 909,505 1,063,642 63,330 60, ,8-35 J.,1~,226 The average interest rates in 2016 for EUR placements stood at 0.39%, lower compared to the average of 1.00% in 2015, ranging from -0.10% to 1.34%. For RON placements the average interest rate stood at 0.31%, also lower compared to previous year's average of 1-49%, fluctuating from 0.25% to 2.35%. With respect to the USD placements, the average interest rate stood at 0.11%, going between a low of 0.00% and a high of 0.80% (in 2015, ranging from 0.20% to 0.50%). Current accounts, sight deposits and term deposits included in Due from other banks with an original maturity lower than 3 months were included in cash and cash equivalents (Note 4). The credit quality of the balances is presented in Note of 138 This ver.sion of om report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate repre,;entation of the original. However, in all matters of inte111retation of information, views or opinions, the original language version of our repot1 takes precerlenr.e over thi.~ transl11tion.

99 PIRAEUS BANK ROMANIA SA (all amounts in RON thousand unless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS Companies (i) 1,598,261 1,580,877 Individuals - consumer loans 552, ,327 Individuals - personal needs (secured) 574, ,518 Indh,iduals - other Mortgage loans 655, ,974 Overdraft 37,741 31,327 Credit Cards 28,236 31,040 Total gross value ;k , Less provision for impairment (252,259) (248,847) Total 3.194,9_98 3,456,58l At 31 December 2016 the loans outstanding transferred from Piraeus Leasing Romania are presented below:.2016 gfils Companies 67,094 49,795 Individuals - consumer loans ~ Total 68,241 ~ 53 of 138 n,is version of our repo1t/the accompanying documents is a translation from the original, which was prepared in rnmanian. All possible care has been taken to ensure thal the translation is an accurate representation of the original. However, in all matters of interpretation of infonnation, views or opinions, the original language ve1:sion of our repo1t takes precedence over this translation.

100 (all amounts in RON thousand unless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) (i) (ii) (iii) During December 2016 the subordinated loans granted to Piraeus Leasing Romania was sub-participated to Piraeus Bank London Branch. As of December 2015 the loans to companies' balance include subordinated loans granted to Piraeus Leasing Romania amounting RON 140,092 thousand. Ce1tain loans granted by the Bank were transferred under the sub-participation and assignment agreements to Piraeus Bank London Branch. In these circumstances, the loans are derecognised from the balance sheet, \"Ii.th all risks and related benefits being transferred to the Piraeus Bank London Branch. After the transfer, the Bank acts as an agent of Piraeus Bank London Branch in servicing the transferred portfolio for which it receives a remuneration (recognised as fee and commission income) which is computed as 1.25% on the daily gross exposure of the subparticipated/assigned po1tfolio or 1.25% on the daily balance of net receivables related to the repossessed asset<; derived from sub-participated/assigned loans. The balance of the leasing pmtfolio transferred from Piraeus Leasing Romania as of December 2016 is presented below: Due within! Due between Due after year 1 andq~ears 5 ~ears Total GrossinvestJncntinlease at 31 December ,131 42,532 19,673 85,336 Unearned finance income 3,955 7,356 1,981 13,292 Impairment loss provision (1,029) (1,893) (875) (3,798) Present value of minimum lease payments receivable at 31 December ,147 33,283 16,817 68,247 The leasing portfolio transferred from Piraeus Leasing as of December 2015 is presented below: Due within Due between 1 Due after 1ycar and syears 5 years Total Gross investment in lease at 31 December ,106 35,328 19,315 66,749 Unearned finance income 2,927 7,206 2,70J 12,834 Impairment loss provision (538) (1,649) (974) (3,161) Present value of minimum lease payments receivable at 31 December ,641 26,473 15,640 50, of 138 This version of our report/the accompan:i,ing documents is a translation from the original, which was prepared in rnmanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matte.rs of interpretation of infonnation, views or opinions, the original language version of our report takes precemnce over this translation.

101 FOR THE YEAR ENDED 31 DECEMBER (all amounts in RON thousand unless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) Movements in the provision for loan impairment during 2016 are as follows: Large Small Consume1 / corporate medium personal Credit Public entities entities Mortgages loans cards sector Total Provision for loan impairment at ,615 21, ,755 1, ,846 1 January Impairment loss during the year (i) 42,592 61,400 15,043 78,897 1, ,395 Reversal of impairment allowances (642) (11,484) (4,239) (56,038) (155) (1) (72,559) Amounts ¼'Titten off during the year as uncollectible - (29,473) (6,102) (86,454) (1,945) (2) (123,976) Loans sold (218) - (218) Foreign currency exchange effect l _.ll3.65q l Provision for loan impairment at ~ 5?,292 ~ 125, ~2, December 2016 (i) (ii) The provision for impairment during 2016 differs from the amount presented in profit or loss for the year due to RON 87,758 thousand, from which RON 45,577 representing recoveries of amounts previously \o\-titten off as uncollectible and RON 42,213 thousand representing income from sold loans (out of which RON 42,180 thousand representing income from already written off sold loans) During June 2016, a loan portfolio in amount of RON 739,289 thousand gross outstanding value was sold. During 2016, the Bank has continued the transfer ofloans within Group to Piraeus Bank London Branch with no related releases of provisions. 55 of138 1bis version of onr rep01t/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has bl--cn taken to ensure that the translation is an accurate representation of the original. However, in all matters of interprl1ation of infom1ation, views or opinions, the original language version of our repo1t takes precedence over this translation.

102 (all amounts in RON thousand unless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) Movements in the provision for loan impairment during 2015 are as follows: Large corporate entities Small medium entities Mortgages Consumer/ personal loans Credit cards Public sector Total Provision for loan impairment at 1 January 2015 Impairment loss during the year (i) Reversal of impairment allowances Amounts written off during the year as uncollectible Loans sold (ii) Foreign currency exchange effect Other movements Provision for loan impairment at 31 December (80) - (737) ~ 796, ,594 (47,381) (334,846) (541,311) 4,636 1,523 =16.&14 49,143 32,833 (3,076} (34,186) (28,455) 5,123 21, , ,647 (43,012) (411,u4) (153,221) 43,041 4Q l88,zss 3, (741) (2,097) (132) (1) ,404, ,568 (94,291) (782,243) (723,856) 53,050 2, ,84:Z (i) (ii) The provision for impairment during 2015 differs from the amount presented in profit or loss for the year due to RON 85,216 thousand from wlrich RON 32,943 thousand representing recoveries of amounts previously \11,Titten off as uncollectible and RON 52,273 thousand representing income from loans sold (during May 2015, a written-off loan portfolio in amount of RON 875,069 thousand gross outstanding value was sold). During 2015, the Bank has continued the transfer of loans within the Group, to Piraeus Bank London Branch. The release of provision from transferred loans is in amount of RON 686,729 thousand. The release of provision from loans sold to other parties was RON 37,127 thousand. 56 of 138 This version of our report/the accompanying documents is a translation from the original, which was prepared in mmanian. All pos.~ible 01re has been taken to ensure that the translalion is an accurate representation of I.he original. However, in all matters of interpretation of infmmation, views or opinions, the original language version of our report lakes precedence over this translation.

103 (All amounts in RON thousand unless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) Analysis hy sector %of.2016 total 2015 % of total Companies Trade 411,616 12% 436,039 12% Tourism 72,601 2% 59,717 2% Manufacturing 336,178 10% 242,931 7% Construction and Real Estate 281,866 8% 312,714 8% Transportation 65,923 2% 64,992 2% Agriculture 114,478 3% 97,957 3% Energy 71,370 2% 50,243 1% Other 244,229 7% % Total 1,59, t5.fl_g_,_8:z:z Individuals Mortgage loans 655,909 19% 648,974 18% Consumers loam;, personal needs loans and overdrafts 1,164,851 34% 1,444,539 39% Credit cards 28,236 1% 31,040 1% Total J, g,124,553 Total portfolio before provision 3,447,257 3,705,430 Less allowance for loan impairment (252,259) (248,847) Total portfolio, net 3,194,998 'J,456,583 According to the Bank's policy, each borrower is rated when their credit limit is initially determined and thereafter, they are systematically re-rated on at least an annual basis. The ratings are also updated in cases when there is updated available information that may have a significant impact on the level of credit risk. The Bank regularly tests the predictive capability of the credit worthiness evaluation and rating models used for retail credit, while for corporate loans the rating application is managed directly by Piraeus Bank Greece, thus ensuring its potential of accurately depicting any credit risk and allmv:ing for the timely implementation of measures addressing problems as they arise. of138 This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. Howt->vcr, in all matters of inlerpretation of information, views or opinions, the original language version of our report takes prec.cdcnce over this translation.

104 NOT.ESTO THE FINANCIALSTATEMENTS (AJJ amounts in RON thousand unless otherwise stated) 9 LOANSANDADVANCESTOCUSTOMERS (CONTINUED) Corporate Credit All credit limits are reviewed at least once annually and the responsible approval authorities are determined, based on the size and the category of the total credit risk exposure assumed hy the Bank for each debtor or group of inte1telated debtors (one obligor principle). As far as Corporate Loans are concerned (both for large companies as well as for small and medium sized companies), the Bank applies the Moody's Risk Advisor borrower credit rating system (MRA). The scoring is updated when the Bank receives new information about customers' creditwo1thiness, and at least once a year. The credit ratings of the t 9 rating grades of MRA models correspond to the follo'wing categories: Standard monitoring, which includes customers with credit rating from 1 to 19 according to MRA models or Manual Rating from 1 to 19 and Special monitoring, which includes customers with credit rating of 20 to 23. Retail Credit As far as retail loans are concerned, the Bank is focusing on the application of modern credit risk and fraud prevention measurement methods, using also scoring models, tailored to the profile of the Bank retail lending customer portfolio. The approval of a loan is possible only if the calculated score for the applicant is above a certain threshold, established as to ensure that the performance of the retail lending portfolio is according to Bank's risk strategy and profile. The specific score is calculated based on a set of characteristics, each characteristic having a weight correlated with its potentially triggered delinquency rate as resulting from the Bank's actual portfolio. 58 of 138 This version of our report/the accompan}ing documents is a translation from the original. which was prepared in romanian. All possible care has been taken to ensure that the translation i.~ an accurate representation of the original. However, in all matters of interpretation of infonnation, views or opinions, the original langu11ge vp.rsion of our report takes precedence over this translation.

105 NOTESTOTHE FINANCIALSTATEMENTS 9 (All amounts in RON thousand unless otherwise stated) LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) The disclosure below represents the lower of the carl)ing value of the loan or collateral taken; the remaining part is disclosed within the unsecured exposures. The carrying value of loans was allocated based on liquidity of the assets taken as collateral. Information ahout collateral 31 December 2016 Small Consumer _Large corporate medium / personal Credit entities entities Mortgages loans cards Overdraft Total Loans guaranteed by other banks residential real estate 13, , , , ,023 - other real estate 44, ,941 4,055 11, ,245 - cash deposits 4,489 18,415 2, ,144 - Guarantee Fund 5.illtl 10, ,936 Total secured exposures 6z , ,? = '3,029 Unsecured exposures 1 37, ,591 85, ,256 ll,519 ~ 1,451,969 Total loans and advances to customers ,292if~1_1_ 629,szs ~oz,523 ~ ~ 3,12~b@~8 59 of 138 TI1is version of our report/the accompanying <locuments is a translation from the original, which was prepared in romanian. All possible r.'lre has been taken to c11sure that the translation is an accurate representation of the original. However, in all matters of interpretation of informalion, views or opinions, the original language version of our report takes precedence over this translation.

106 FOR TIIE YEAR ENDED 31 DECEMBER 2016 (All amounts in RON thousand unless otherwise stated} 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) Information about collateral Large Small Consumer/ corporate medium personal Credit entities entities 31 Decembc loans cards Overdraft Total Mortgages Loans guaranteed by other banks Loans collateralised by: - residential real estate , , , ,819 - other real estate 45, ,155 11,548 12, ,379 - cash deposits 5,183 21,054 2, ,890 - Guarantee Fund 5,248 21, Total secured exposures.. S61@~~ Z3Q,Oilll 523,J.08 -~94,391 =.:.:=..2 l,:zq~,448 Unsecured exposures 341,372 ~114,127 10=1, Q,l1Q ~ 1,752,135 Total loans and advances to customers 398, u3!,1_4_4,7~2 62:z,593 ~29,z82 ~ ±S, of 13.8 This version of our report/the accompanying documents is a translation from the original, which was ptepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of inte1 pretation of information,,..;ews or opinions, the original language version of our repo1t takes precedence over this translation.

107 (All amounts in RON thousand unless otherwise s tated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) The loans and advances to customers and to banks are classified as follo ws: Loans and advances to customers 31-Dec-16 Loans and advances to banks Loans and advances to customers 31-Dec-15 Loans and advances to banks Loans neither past due nor impaired 2,566, ,835 2,917,916 1,124,::q6 Loans past due but not impaired 375,309 Impaired loans , ,111 Gross 3-44? 25z gz2,s3s. :3.,:ZQ5,!!13g J,124 2:zg Less: allowance for impairment (252,259) - (248,847) Net 3, z;.:,835 3,4S6 ~ ' of This version of our report/the acc.:omilan~ing documents is a translation from the original, which w ru; prepared in mmanian. Al I possible care has been taken to cn:;ure that the translation is an accurate representation of the original. How vcr, in all matters of interpret1tion of information, vit:ws or opinions, the original language version of our repo1t takes precedence over Lhis translation.

108 (All amounts in RON thousand unless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) The loans and advances classified as neither past due nor impaired represent 79.63% at the end of 2016 from the total exposure of loans and advances (31 December 2015: 83.31% restated according to new definition of impaired category), the loans and advances classified as past due but not impaired represent 9.56% at 31 December 2016 (31 December 2015: 6-45%), while the loans and advances impaired represent 10.81% at 31 December 2016 (31 December 2015: 10.24%, according to new impaired definition). a) Loans neithe1 pasl due nor impaired: For the loans neither past due nor impaired, the large corporate entities and small medium entities loans as at 31 December 2016 are covered by collaterals in proportion of 41% and 93%, respectively (2015: 15% and 100%, respectively). The equity loans included in consumer loans were in amount of RON 303,515 thousand as at 31 December 2016 (2015: RON 356,080 thousand). The credit quality of the portfolio of loans and advances that were neither past due nor impaired at 31 December 2016 and 2015 can he assessed by reference to the borrowers' credit history with the Bank. Analysis hy credit quality of loans neither past due nor impaired outstanding at 31 December 2016 is as follows Grades Borrowers with credit histo1y less than two years Bonowers ½1th credit history over n,vo years Credit cards 2,805 19A4.Q Loans to individuals Consumer/ personal loans 100,65:3 687,725 Mortgages 57, ,070 corporate entities Small/ medium entities 202, , December 2016 Loans to Total loans and Large advances corporate to entities customers 35, , ,807 2,168,444 Total 22,251 :W.8.,3:z8 543,1,90. kq,59.7-m , Provision for impairment 81 14,283 3,275 4, , of 138 This version of our report/the accompanying documents is a translation from the original, whir.h was prepared in romanian. All possible care has been lak~n to ensure that the translation is an accurate representation of the original. However, in all matters of interprdation of infc:, mation, views or opinions, th~ original language version of our repo1t takes prccedenr.e over this translation.

109 (All amounts in RON thousand unless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) Analysis by credit quality of loans neither past due nor impaired outstanding at 31 December 2015 is as.follows: Grades Loans to individuals Credit Consumer/ personal cards loans Mortgages corporate entities Small/ medium entities 31 December 2015 Loans to Large corporate entities Total loans and advances to customers Borrowers with credit history less than two years Borrowers..v:ith credit histo1y over two yea rs 3,549 99,294 87,849!9JlQs 852, , , ,734 84, , ,231 2,295,685 Total ~ ~ ~913, ?.J 2.91z,91_6 Provision for impairment 40 33,757 3,170 1, ,216 Renegotiated Joans The outstanding gross exposure of renegotiated loans that were neither past due nor impaired as at 31 Oecember 2016 and 31 December 2015 is as follows: ;u-dec-15 Loans to companies Loans to small/medium entities Loans to large corporate entities Loans to individuals Loans to individuals Consumer/personal loans Mortgages Credit cards 86, ,618 _?}},' Dec ,201 15, ! 124, ,422 1, , , Dec ,777 19,450 _.1tJ of 1 8 This ve1:sion of our report/the accompanying documents is a tr:anslation from the original, which was prepared in romanian. All possihle care has be:en tal<cn to ensure that the translation is an accurate rcpn;senlation of the original. Hnwever, in all matters of interpretation of info11nation, views or opinions, the original language version of our report takes precedenr.e over this translation.

110 NOTES TO THE FINANCIALSTATEMENTS (All amounts in RON thousand unless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) b) l,oans and advances past due but nol impaired: Grades In 2016, the impaired criteria were revised by bank's management. Past due but not individually impaired loans are loans with respect to which the interest or principal payments are past due, but the Bank believe that an individual impairment is not appropriate considering the value of the security/collateral available, the stage of collection of the amounts owed to the Bank, the beha.,ioural profile of the customer and the pe1forming status of the customers with concessions granted. Classification of the loans and advances past due but not impaired based on the type of client and number of days past due: Credit cards Consume1 / personal loans Loans to individuals Mortgages Loans to corporate entities Small/ medium entities 31 December 2016 Large Total loans corporate and advances entities to customers - less than 30 days overdue 5, to 90 days overdue to 180 days overdue to 360 days overdue 7 - over 360 days overdue --- Total ~ 128,129 41, ~ 171.4?6 51,403 19,871 ~ 107,190 14,514 1, ,288 ~.25,5()1 1,769 ~ 293,539 76,511 2, ,816 '375,'309 Provision for impairment ,720 4,934 2, ,945 Fair value of collateral 86,660 63, , ,894 With respect to mortgage loans the reported fair value of collateral takes into account only properties on which the Bank holds a mortgage. In cases where the property value exceeds the remaining balance of the loan the repo1ted fair value of collateral takes into account the property value up to the amount of the remaining balance of the loan. 64 of 138 This version of our repo11/the accompanying documents is a translation from the original, \vhich was!)tcparc<l in romanian. All possible care has bl.-cn taken to ensure that the translation is an accumte representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

111 (All a!_nounts in RON thousand unless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) Loans to individuals 31 December 2015 Loans to corporate entities Consumer/ Small/ Large Total loans Credit personal medium corporate and advances Grades cards loans Mortgages entities entities to customers - less than 30 days overdue 5, ,929 51,198 74,623 5, ,662 - :w to 90 days overdue ,895 12,517 6,971-68, to 180 days overdue ,341-1, to 360 days overdue ,680 3, over 360 days overdue ,834 Total ~ 208 ~ ~ ~ ~.'.Ul,,4.Ql Provisions for impairment 71 17,198 1, ,408 Fair value of collateral 89,464 55, , ,719 With respect to mortgage loans the reported fair value of collateral takes into account only properties on which the. Bank holds a mortgage. In cases where the property value exceeds the remaining balance of the loan the reported fair value of collateral takes into account the property value up to the amount of the remaining balance of the loan of 138 This vr:.rsion of our rej)mt/the acc:ompanying documents is a translation from the original, which was prepared in rnmanian. All po:;sible care has been taken to ensure that the tn1n,,;lation is an accurate representation of the original. However, in all matters of inte11)retatioo of information, vie'\'\ s or opinions, tlie. original language version of our report takes prcce<lence over this translation.

112 FOR TiiE YEAR ENDED 31 DECEMBER 2016 (All amounts in RON thousand unless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) c) Loans and advances individually im1,aired: In 2016, the impaired criteria were revised hy Bank's management. Individually impaired loans are loans with respect to which the Bank considers that difficulties may occur in collecting the principal and interest due according to the contractual terms of the loan agreement. Classification of the loans and advances individually impaired based on the type of client/loan and number of days past due 31 December 2016 Loans to individuals Loans to corporate entities Grades Past due 0-90 days Past due days Past due > 180 days Credit cards :382!l30 85 Consumer/ pe1 sonal loans Mortgages 164,618 31,640 15,550 5,042 24,792 4,765 Small/ Large Total loans medium corporate and advances entities entities to customers 108,735 84, ,124 21,004 8,972 50,798 35,133-64,775 Impaired loans Less: allowance for impairment ~ 13Q5} ~ (88,450) (18,124) 164.8z2 ~ 5.q5.692 (51,187) (42,162) (200,288) Net 332 tj6.510 ~ S!,5S_9 '{05-~ Fair value of collateral 102,005 21, ,998 8, , of138 This version of our report/the accompanying documents is a translation from the original, which was prepar.cd in romanian. All po.s.<;ihle care ha.s been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of infonnation, views or opinions, the original langnage vcn;ion of om repo11 takes precedence over this translation.

113 (All amounts in RON thousand unless othervvise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) 31 December 2015 Loans to corpot ate Loans to individuals entities Total loans Consumer/ personal Small/medium and advances Grades Credit cards loans Mm't~a1tes_ entities to customers Past due 0-90 days ,071 29,007 33, ,023 Past due days ,757 2,231 7,299 29,563 Past due > 180 days 1,488 78,102 7,110 48, ,524 Impaired loans 2, ,930 38,348 89, ,110 Less: allowance for impainnent fl..1zfil (137,787) (16,222) ( 35,62.2) (191,007) Net ~ , z Fair value of col1ateral 91,988 18,215 42, , of 13.8 This vel sion of our report/the accompan~ing documents is a translation from the original, which was prepared in rou,anian. All possible r,1re has been taken to ensure that the u anslation is an accurate representation or the original. However, in all matters of interpretation of information, views or opinions, the original limb'uage version of our r~poi1 takes precedence over this translation.

114 (All amounts in RON thousand unless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) Jn the calculation of the allowance for impairment fair values of the collaterals have heen used as presented in this note, and, where applicable, future cash flows estimated repayments were considered as well. The financial effect of collateral is presented by disclosing collateral values separately for (i) those assets where collateral and other credit enhancement<; are equal to or exceed carrying value of the asset ("over-collateralised assets") and (ii) those assets where collateral and other credit enhancements are less than the carrying value of the asset ("under-collateralised assets"). 31 December 2016 Over-collateralised assets Carrying value of the assets Fair value of collateral Under-collateraliscd assets Carrying value of the assets Fair value of collateral Large corporate entities Small medium 18,677 20,544 entities 480, ,936 Loans to individuals Mo1tgages 201,977 Consumer/ personal loans 169, ,455 Credit card Overdraft 187, , , ,085 27,579 31,869 49, , , ,828 Total 1,554,825 2,324,~ 68 of 138 This version of our repmt/the accompanying documents is a translation from the original, which was prepared in romanian. All possihle care has been taken to en.sure that the translation is an accurate representation of the original. However, in all matters of inte1vretation of info1mation, views or opinions, the original lanj,i;liage version of our report takes 1>re.cedencc over this transhltion.

115 (All amounts in RON thousand rmless otherwise stated) 9 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED) 31.December Over-collateralised assets Under-collatc1 aliscd assets Carrying value of Fair value of Carrying value Fair value the assets collateral of the assets of collateral Large corporate entities 398,313 56,941 Small medium entities 460,091 1,005, , ,909 Loans to individuals: Mortgages 158, , , ,882 Consumer / personal loans 162, ,321 1,066, ,577 Credit card 30,170 Overdraft Total i.sa~.8Af1 2.,_675, INVESTMENT SECURITIES AVAILABLE FOR SALE EUR Bonds issued by Ministiy of Finance of Romania (i) Equity investments - unlisted (ii) Total amounts 554,165 1, SS'Z 562,988 1,392 (i) (ii) EUR Bonds is.sued by the Romanian Ministry of Public Finance had nominal interest rate between 1,25% and 6,50%. Investment securities available for sale include equity securities \o\-ith a carrying value of RON 1,392 thousand (2015: RON 1,392 thousand) which are not publicly traded. Due to the nature of the local financial markets, it is not possible to obtain current market value for these investmentc,. 69 of 1 8 This version of our repo11/thc accompanying clocuments is a translation froin the original, which was prepared in romanian. All possible care has bt~1:n lll ken lo ensme that the translation is il n ncc1m1te representation of the origina I. However, in all matters of interprdation of information, views or opinions, the original language version of our report lakes pre.cedence over this translation.

116 (All amounts in RON thousand unless otherwise stated) 10 INVESTMENT SECURITIES AVAILABLE FOR SALE (CONTINUED) Analysis by credit quality of debt securities outstanding at 31 December 2016 and 2015 is as follows: 31-Dcc Dec-15 Investment Invesbnent securities/afs securities/afs BBB- 554, ,988 Total ,988 Rated securities from the portfolio are issued by the Romanian Government, have a low credit risk and are neither past due nor impaired. As of 31 December 2016 the Romanian credit rating was BBB- with stable outlook from Standard & Poor's. The primary factor that the Bank considers in determining whether a debt security is impaired is its overdue status. As a result, the Bank has no overdue debt securities. The movement in the investment securities available for sale is presented below: At 1 Janua1-y 2016 Additions Disposals (sold or matured) Income from accrued interest Income from cashed interest Foreign exchange impact Reclassification from Rcpo transactions (once the Repo matured) Gains/ (losses) from changes in fair value (Note 25) At 31 December 2016 At 1 January 2015 Additions Disposals (sold or matured) Income from accnted interest Income from cashed interest Foreign exchange impact Reclassification from Repo transactions (once the Repo matured) Gains/ (losses) from changes in fair value (Note 25) 338,054 (430,429) 23,282 (18,873) 1,790 70,345 2, ,557 40, ,333 (321,492) 15,746 (12,718) (1,276) 123,080 (10,346) At 31 December of 1. 8 This version of our report/the accompanying document.~ is a translation from the original, which was prepared in romanian. All possible r,1re has heen taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of infonnation, views or opinions, the original language version of our report takes precedence over this translation.

117 (All amounts in RON thousand unless otherwise stated) 11 REPURCHASE RECEIVABLES Repurchase receivables represents securities sold under sale and repurchase agreements which the counterparty has the right, by contract or custom, to sell or re-pledge. The repurchase agreements are short-term in nature Trading securities sold under sale and repurchase agreements Romanian government bonds 103,077 Total repurchase receivables representing trading securities 103,077 Available-for-sale securities sold under sale and repurchase agreements 68, ,170 Romanian government bonds 68, ,170 Total repurchase receivables 1 epresenting availahle for-sale securities 68, ,170 Total 1 epurchase receivables 68, ,247 Trading securities and available-for-sale securities reclassified to repurchase receivables continue to he carried at fair value in accordance 1.vith accounting policies for these categories of assets. Rated securities from the portfolio are issued by the Romanian C'.r0vernment, have a low credit risk and are neither past due nor impaired. As of :31 December 2016 the Romanian credit rating was BBB-with stable outlook (Standard & Poor's). 71 of 138 This v~rsion of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the miginal. However, in all matters of interpretation of infmmation, views or opinions, the original language version of our repo1t takes precedence over this translation.

118 (All amounts in RON thousand unless otherwise stated) 12 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE LIABILITIES At 31 December 2016 Contract/ Notional amount Assets Fair values Liabilities Derivative held for trading Currency swaps Interest Rate Swaps 3,115,910 1,417 1, ,032 2 ;p1z,32z The countcrparties with whom the Bank has derivatives agreements as of 31 December 2016 are presented below: Notional amount as of 31 December 2016: Currency swaps Interest Rate Swaps Private Companies Piraeus Dank Greece Other Financial Institutions Total Derivatives 92,505 1,799,711 1,223.69s 3,115,9lll This version of om rcpo11/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure th.at the translation is an accurate representation of the ori)l;inal. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

119 NOTES TO THE FINANCIALSTATEMENTS {All amounts in RON thousand unless othc1,.v.ise stated) 12 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE LIABILITIES (CONTINUED) At 31 December 2015 Contract/ Notional amount Assets Fair values Liabilities Derivative held for tj ading Currency fonvards Currency swaps Interest Rate Swaps Total 20,406 3,410,606 32,811 3,4.63, , The counterparties with whom the Bank has derivatives agreements as of 31 December 201!1 are presented below: Notional antount as of 31 December 2015: Currency forwards Currency swaps Interest Rate Swaps Private Companies 20,406 Piraeus Bank Greece 2,176,047 Other Financial Institutions Total Derivatives 1,234,829 20,406 ~~ 4,940 27, ,8ll The Bank uses derivative instruments for non-hedging purposes. The Rank has derivatives subject to offsetting, enforceable master netting and similar arrangements as follows :. of138 This version of our rcport/thte accompanying documents is a translation from the original. which was prepare.din romanian. All possible care has been taken to ensure that the translation is an accurate representation of the 01iginal. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

120 (All amounts in RON thousand unless otherwise stated) 12 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE LIABILITIES (CONTINUED) At 31 December 2016 Contract/ notional amount Assets Fair values Liabilities Derivative held for trading currency swaps Net asset/oiability) after offsetting(*) 1,824,213 8:n 8,155 7,3~4 At 31 December 2015 Contract/ notional amount Assets Fair values Liabilities Derivative held for trading currenc,-y swaps Net asset/oiability) after offsetting(*) 144 (*) The Bank presented gross amounts before offsetting in the statement of financial position. The Bank systematically monitors and controls the exposure and duration of its net open positions in the derivative markets. Credit exposures from positions in the derivative markets are part of the overall credit limits set for any counterparty and are taken into consideration during the approval procedure. Usually, no guarantees or securities are taken against exposures in derivative products, except when the Bank demands the application of a safety margin from a counterparty. Credit risk arises also from the settlement of trades in derivative products. The Bank has established and systematically monitors, daily settlement limits for derivative products transactions, which are included in the overall credit limit of any counterparty. 74 of 1 8 This version of our rcporl/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to cnsul'e that the translation is an accurate representation of the original. However, in all matters of interpretation of info11nation, views or opinions, the original language version of our report tal,cs precedence over this translation.

121 (All amounts in RON thousand unless otherwise stated) 13 INVESTMENT PROPERTY Investment properties at fair value at 1January Expenditure on technical enhancements Transfer from fixed assets (reclassification) Fair value loss 31, (131) lnvesbncnt properties at fail value at 31 December The investment properties are valued annually at fair value, by an independent, professionally qualified valuator who has recent experience in valuating similar properties in Romania. ¼'here the Bank is the lessor, the future minimum lease payments receivable under non-cancellable operating leases, are as follows: Not later than 1 year Later than 1 year and not later than 5 years Total opc1 ating lease payment.4> receivable 3,077.fi..!55 3,067 9, of 138 This version of our rep01t/the accompanying documents is a tran.~lation from the original, which was prepared in romanian. All possible care has heen taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of i11f01matio11, views or opinions, the original language version of our report takes precede.nee over this tmnslation.

122 (AU amounts in RON thousand unless ot herwise stated) 14 PREMISES AND EQUIPMENT Ful"nitm c Leasehold and improvements equipment Assets in course of construction Total Year ended 31 December 2016 Opening net book amount Additions Transfers Disposals Depreciation charge Accumulated depreciation for disposals and transfers Closing net book amount 21, (16,110) (8,349) 30,391 2, (17,025) (11,901) (423) 52,725 3, (33,135) (20,250) 30,596 ~ At 31. December 2016 Cost Accumulated depreciation Net hook amount 142, , , , J4QZ 76 ofl 8 TI1is version of our report/ the accumpan;i ng documents i.~ a translation from the origi.n~l, whkh wa~ prepared in ron:ianian. All possible car(~ has been taken ICJ en.sure that th1~ translat ion is an accurate represent,1tion of the ongmal. However, m all matters of interpretation of information, ~iews or opinions, the original language version of our report takes precedence over th is translation.

123 FOR THE YEAR ENDED 31 DECEMBER 20:16 (All amounts in RON thousand unle.<.s othenvise stated) 14 PREMISES AND EQUIPMENT (CONTINUED) Furniture Assets in Leasehold a:nd course of improvements equipment construction Total Year ended 31 December 2015 Opening net book amount 32,616 38, ,476 Restated Opening net Book amount 515 3,653 1,187 5,356 Additions (1,229) 38 Transfers (9,665) (3,121) (12,786) Disposals (12,125) (12,943) (25,068) Depreciation charge 9,647 2,956 12,603 Accumulated depreciation for disposals and transfers Impairment provision Closing net book..,2~ 3Q.3.9J ~ 5~1224 amount At 31 December 2015 Cost 99, , ,086 Accumulated depreciation (27,573) (126,789) (204,362) Net book amount 21,45,9. 30,391 ~ 5~.:z~ In 2016, accumulated depreciation includes accelerated depreciation for leasehold improvements for branches closed during the year. In compensation a provision of RON 1,587 thousand was released (:w15: RON 1,511 thousand) and no expense (2015: no expense) was accrned. The net amount is included in note 31 "Administrative and other operating expenses" - line "Other provisions". Premises and equipment have not been pledged to third parties as collateral. of138 Tnis version of our rcpmt/ the accompanying documents i~ a translation from the original, which was prepared in romanian. All possihle care has been taken to ensure that the translation is an accurate representation of the original. However, in 111\ matters of interpretation of infomiation, views or opinions, the original language version of our report takes precedence over this translation.

124 PIRAEUS BANK ROMANlA SA NOTES TO THE FINANCJAL STATEMENTS (All amow1ts in RON thousand unless otherwise stated) 15 INTANGIBLE ASSETS The changes recorded during 2016 and 2015 in the intangible assets are presented below: Computer software Software in course of construction Total Year ended 31 December 2016 Opening net book amount Additions Transfers Disposal Amo1tisation charge Accumulated depreciation for disposals and transfers Closing net book amount 13,630 3,445 6,022 (14,111) (9,708) 8,625 10,529 (6,021) 22,255 13,974 l (14,111) (9,708) At 31 December 2016 Cost Accumulated amortisation Net hook amount 13, ,916 1MQ5. ~ Vear ended 31 December 2015 Opening net book amount Additions Transfers Amortisation charge Closing net book amount 19,938 3,768 (896) (9,180) ~ 3,870 4,942 (188) ~ 23,808 8,710 (1,084) ~ 22,255 At 31 December 2015 Cost Accumulated amortisa tion Net book amount 94,426 (80,796) ~ 8,625 ~ 103,051 (80,796) 22~ 8 of 138 This verl>ion of our report/the accompanying documents is a translation from the original, whicli was prepared in romanian. All possible care has been t,1ken to ensme that the translation is an accurate representation of the (mginal. Howevf\r, 1n all matters of ioterprf\tation of infonnation, views or opinions, the original language version of our report take.'> precedence over this translation.

125 NOTES TO THE FINANCIALSTATEMENTS (All amounts in RON thousand unless otherwise stated) 16 OTHER ASSETS 16.1 Other financial assets Guarantees-deposits 2,273 1,818 Other assets and receivables (i) ~39. Total Less provision Total other financial assets ~ ~ M951 (2,465) ~ ~ (i) Other assets and receivables refers to claims to debtors for various services of RON 14,002 thousand (31 December 2015: RON 18,052 thou.sand), overdue commissions of RON 2,235 thousand (31 December 2015: RON 2,916 thousand), amounts to be recovered from WESTERN UNION of RON 400 thousand (31 December 2015: RON 186 thousand), other receivables related to cards operations of RON 1,668 thousand (31 December 2015: RON 1,090 thousand). Movements in provision for other financial assets are as follows: Balance at beginning of the year Charge/(release) of provision to income statement Transfers Write-off of provisions Foreign exchange differences Balance at end of year (3,678) Q 1,~ ~ 10, (10,793) 667 2, of 138 This version of our repmt/the accompan)~ng documenls is a translation from the original, which was pl'epared in romani.an. All possible care ha.~ heen la ken to ensure that the translation is an accurate representation of the ol'iginal. Howt.-vcr, in all matters of interpretation of infonnation, vic,vs or opinions, the original language version of our repot1 takes precedence over this translation.

126 (All amounts in RON thousand unless otherwise stated) t6 OTHER ASSETS (CONTINUED) 16.2 Other non-financial assets Prepayments 4,428 4,759 Invcnto1y (i) 4,042 4,171 Gold 2,370 2,586 Receivable from State 4,726 4,207 Other non-financial m;scts Total ~!S.m Less provisions (2,856) Total ~ ~ (i) Inventories in amount of RON 4,042 thousand in 2016 (2015: RON 4,171 thousand) contains mainly consumables related to cards activity and other equipment from closed branches that are intended to be used for the existing network. Movements in provision for other non-financial assets are as follows: = Balance at beginning of the year Charge/(rclease) of provision to income statement Transfers Write-off of provisions Foreign exchange differences Balance at end of year 2, of 138 1i1is ve1 sion of our report/the accompanying documents is a translation from the original, whir.h was prepared in romanian. All possihl~ ca r e has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report ta kcs precedence over this translation.

127 NOTES TO THE FINANCIALSTATEMENTS FOR TI{E YEAR ENDED 31 DECEMBER 2016 (All amounts in RON thousand unless otherwise stated) 17 REPOSSESSED ASSETS FROM LOAN CONTRACTS 17.1 Non curt~cnt assets held for sale Opening (gross book value) Additions Disposals Reclassification into Repossessed assets category (Note 17.2) Accumulated provision Accumulated provision - transferred to Repossessed assets category (Note 17.2) Closing net book amount 143,793 12,798 (63,777) (92,814) 55,323 (55,323) 177,380 50,531 (84,118) Income Statement - Held for sale Impairment charges of held for sale Gain/ (Losses) from sale of held for sale Re.suit from non-current assets held for sale (39,559) (5,856) (45,415) In 2016, the Bank reclassified the assets previously recognised as non-current assets held for sale into Repossessed assets from foreclosed loans contracts category as they no longer meet the criteria ofifrs 5. The following table presents the Bank's held for sale portfolio at their net book amounts, split by category type: Residential real estate 39,359 Commercial real estate 8,091 Agriculture 2,815 Industrial Area 2,726 Hotel 363 Forestry 78 Other Total held for sale assets - = ~ 81 of 138 This version of our report/the accompanying documents is a translation from the miginal, which was prepared in romanian. All possible care has l,ccn taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of infomrntion, views or opinions, the original language version of our report takes precedence over this translation.

128 (All amounts in RON thousand unless otherwise stated) 17 REPOSSESSED ASSETS FROM LOAN CONTRACTS (CONTINUED) 17.2 Repossessed assets from foreclosed loans contracts Opening (gross book value) Additions Disposals Reclassification from Held for sale category (Note 17.1) Accumulated provision - transferred from Held For Sale Category (Note 17.1) Closing net book amount 92,81.4 (55,323) 3:M9J Movement in provision for repossessed assets from foreclosed loans contracts Opening (gross book value) Charge of the year Release of pro\,;sions due to HFS 89,367 (34,044) Closing net book amount 82 of 1:l8 This version of report/the accompanying docnmenls is a translation from the original, which was prepared in romanian. All po.s.sibk care has been lakt:n to en.sure that the translation is an accurate representation of the original. HowL-VCJ', in all matters of i11te1 prel.alion of information, views or opinions, the original language version of our report takes precedence over this translation.

129 (All amounts in RON thousand unless otherwise stated) 17 REPOSSESSED ASSETS FROM LOAN CONTRACTS (CONTINUED) Income Statement - Repossessed assets from foreclosed loans contract.,; Expenses from sale of repossessed as.sets Incomes from sale of repossessed assets Result from non-current assets held for sale (63,426) 36,287 W,139) The following table presents the Bank's repossessed assets from loan contracts at their net book amounts, split by category type: Residential real estate Commercial real estate Agriculture Industrial Area Hotel Forestry Other Total Repossessed assets from foreclosed loans contracts 26,827 4,052 4,864 1, DUE TO OTHER BANKS l5 Sight deposits Term deposits Sale and repurchase agreements with other banks Loans 72, ,417 62,932 3,470 31,683 1,487, , Total ~1, ,Sfl~ DUiing 2016, interest rates ranged from -0.1% to 2.7%, and during 2015 from 0% to 3%. 83 of 1 8 This version of our report/the accompan)~ng documents is a lranslation from the orija!;ullll, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. Howeve,r, in all matter.~ of interpretation of infonnation, views or opinions, the original language version of our repott takes precedence over this translation.

130 NOTESTOTHE FINANCIAL STATEMENTS (All amounts in RON thousand unless otherwise stated) 19 CUSTOMER ACCOUNTS Current accounts Term deposits Collateral deposits Total ,090,261 3,248,129 73, ,046 3,022,684 72,987 3,901,:z1:z During 2016, interest rates ranged from 0.9% to 3.75 %, ¼1th the maximum level paid for 6 months on RON denominated term deposits and from 0.10 % to 1.65 %, with the maximum level paid for 3 months on EUR denominated term deposits. Economic sector concentrations within customer accounts are as follows: Amount ~ Amount ~ Agriculture 35,719 1% 39,606 1% Construction 206,217 5% 226,216 6% Energy 207,419 5% 183,511 5% Financial Sector 518,414 12% 393,780 10% Manufacturing 154,390 3% 106,345 3% Public sector 9,943 0% 9,800 0% Real Estate Companies 112,415 3% 113,713 3% Tourism 33,654 1% 13,469 0% Trade 252,283 6% 207,385 5% Transport 101,752 2% 31,495 1% Individuals 2,262,202 51% 2,081,789 53% Other % 494,608 ~ Total customer accounts 4,411,,tg! 100% 3,901.7! 100% At 31 December 2016, the first 10 depositors of the Bank had balances above RON 965,216 thousand representing 22% of total customer accounts. Also, at 31 December 2015, the first 10 depositors of the Bank had balances above RON 790,821 thousand representing 20% of total customer accounts. 8 of138 This version of our report/the accompan}ing documents is a trnnslalion from the original, which was J)repared in roma.nian. All possible care has been taken Lo ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of in formation, views or opinions, the origina I language version of our report takes precedence over this translation.

131 NOTESTOTHE FINANCIAL STATEMENTS (All amounts in RON thousand unless othet'wise stated) 20 OTHER LIABILITIES 20.1 Other financial liabilities Finance lease liabilities Prccontracts for repossessed assets Payable to State Payables to suppliers( Other payables Total ,144 1,849 10,322.!6.7QQ ~ ,572 2, ,607.u.m Sl Finance lease liabilities are analysed as follows: Minimum lease payments as at 31 December Not later than 1 year Later than 1 year and no later than 5 years Later than 5 years Less Future finance charges on finance leases 5,512 15,498 Present value of finance lease liabilities 20.3 Other non-financial liabilities 19.5z2 Other taxes and social contributions payable and payables Other accruals related to employees Other liabilities Non-financial liabilities ,069 26, @ ~ ,856 28,330 ~ ~ TI1is version of our ni1>orl/the. accompanying documents is a translation from the original, whi~h was prepared in romanian. All possible c-are has been taken to ensure lhat the translation is an accurate representation of the original. However, in all matters of interprclation of infonnalion, views or opinions, the original language version of our rt~port takes precedence over this translation.

132 (All amounts ln RON thousand unless otherwise stated) 21 PROVISIONS FOR RISKS AND CHARGES Provisions for (>,xisting litigations 24,202 13,960 Provisions for penalty rents 2,192 5,943 Provisions fo r potential claims ~ ---- Provisions for risks and charges ~ ~ 'lne amount of the provisions for risk and charges is the best estimate of the amount required to settle the ohligation, taking into account the associated risks. Provisions were recognised for all the situations when: a legal or implicit obligation as a result of a past event appeared, the possibility that an outflow of resources embod,ing economic benefits required to settle the obligation was more likely than the possibility of not being required and a reliable estimation could be made for the amount of the obligation. Movements in provisions for risks and charges are presented below: Balance at beginning of the year Charge of provision to income statement Release of provision to income statement Balance at end of year 19,903 40,803 (7,315) 16,006 25,303 (21.407) 86 of 1 8 TI1is version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure thnt the translation is an accurate reprc'~l'.dtation of the original. However, in all matters of interpretation or information, views or opinions, the originnl language version < four report takes pn.u>dence ove r this translation.

133 FOR THE YEAR ENDED 31 DECEMBER (All amounts in RON thousand unless otherwise stated) 22 SUBORDINATED DEBT Subordinated debt W,822 The Bank contrac.tcd a subordinated loan of EUR 15,000 thousand on 15 N ovcmber 2005 from Piraeus Bank Greece. The loan carries variable interest rate (3M Euribor+o.5%) and is repayable in a single instalment in In 2 013, during the transfer of business from ATE Bank Romania the Rank took over two other subordinated loans in amount of EUR 24,ooo thousand and EUR 40,000 thousand. The subordinated loan in amount of EUR 24,000 thousand was converted in share capital during The remaining one in amount of EUR 40,000 thousand carries a variable interest rate (3M Euribor+2.5%) and is repayable in The Rank is not subject to any covenants from the subordinated loans agreement. 23 TRANSFERRED FINANCIAL ASSETS The B,mk enters into transactions by which it transfers financial assets directly to third parties or to Piraeus Uank London Branch. These transfers may give rise to the full, partial or no derecognition of the financial assets concerned. A. Transfers offinancial assets not qualifying f or derecogniti<m 1. Sale and repurchase agreements The Bank sells, in exchange for cash, securities under an agreement to repurchase them ('repos') and assumes a liability to repay to the counterparty the cash received. The Bank has determined that it retains suhstantially all the risks and rewards of these financial assets and therefore has not derecognised them. The canying amount of secmities sold under repurchase agreements at 31 December 2016 was RON 69 million (2015: RON 242 million) of which, securities with a carrying amount of RON o million (2015: RON 103 million) and RON 69 million (2015: RON 139 million), were classified as held fo r trading and investment secmities available for sale) respectively. For more details, please refer to Note 11. The carrying amount of the associated liabilities under repurchase agreements at 31 December 2016 was RON 63 million (2015: RON 226 million) (Note 18). 8 of1 8 Th is version of our report/ the accompanying documents is a translation from the 01iginal, which was prepared in mmanian. All possible care has been taken to ensure that t he translation is an accurate representation of the original. 1-lowcver, in all mattera of interpretation of information, views or opinions, the original language version of our report takes precedence over this tt:\nslation.

134 (All amounts in RON thousand unless otherwise stated) 23 TRANSFERRED FINANCIAL ASSETS (CONTINUED) B. Transfer8 of financial assets qualifying for de-recognition Transferred financial assets that are derecognized in their entirety and where the Bank has transferred substantially all risks and rewards associated to the transferred assets. 1. Disposal of non-performing loans. During 2016, the flank has not concluded any transfer of assets that are qualified for derecognition with external third parties in respect of performing/ non-performing loans (2015: two transfer agreements '"'ith an external third parties took place, having a nominal value of RON 49,900 thousand at the transfer date, while the sale value of these loans was RON 6,062 thousand). ii. Sub-participation transaction. During 2016, the Bank has continued the transfer of loans within the Group. Substantially risks and rewards associated '"ith the related portfolios were transferred from the Bank. In total there was no net gain or loss recognized in the profit or loss resulting in respect of these transactions. As a consequence, the Bank derecognized during gross contractual receivables with a nominal value of RON 248,336 thousand (::20 15: RON 1,556,079 thousand). The Bank has the option to transfer back the financial assets in case the countcrparty default on any contractual obligations. The repurchase price ½ill be the fair value of the financial assets as at that date. The Bank did not use the call option until now. Post transfer, the Bank acts as an administrator for the subpartidpated financial assets for which it receives a service fee. 88 of 138 Thi.s version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possihle care has her.n taken to ensure that the translation is an accurate representation of the original. However, in all mmters of interpretation of information,,i e.ws or opinions, the original longuagc version of oor report takes prcc<.>.dence ove.r tltis translotion.

135 (All amounts in RON thousand unless otherwise stated) 24 SHARE CAPITAL Subscribed share capital at the beginning of the year Restatement for hyperinflation (IAS 29) 1,106,141 sz,693 1,106,141 57,693 Total Shareholder _g_fil5 Piraeus Bank Greece Individuals 99.99% 0.01% 99.99% 0.01% Total % lq_o.oq2(i At 31 December 2016, the registered share capital of the Bank consists of 222,608,563 (31 December 2015: 222,608,563) allotted and fully paid ordinary shares of RON 5 each. The difference in the value of share capital disclosed and the nominal value of the shares issued relates to the shares issued based on the revaluation reserve recognised under the Romanian Accounting Standards (and not recognised under IFRS) in 2004 carried forward. 25 OTHER RESERVES ~ 2015 Statutory reserve (i) 25,795 25,795 Statutory reserve ATE (i) 8,956 8,956 General reserve for banking risks (ii) 10,992 10,992 General reserve for banking risks ATE (ii) 2,661 2,661 Other reserves ATE 32,165 32,165 Available for sale reserve/ (deficit) ~ (4,407) Total z.6, of 138 This ver!;ic,n of our report/ the accompanyini docum1mts i-~ a translation from the original, which was prepared in romonian. All possible c,,rt'. has been Uken to ensure lhat the translation is an accurat~ representation of the original. However, in all matters of interpretation of information, vie\.\'s or opinions, the original language version of nur report take., pretcdc11ce over this translation.

136 (All amow1ts in RON thousand unless otherwise stated) 25 OTHER RESERVES (CONTINUED) The movement in the other reserves is detailed below by each category of reserve: Statutory reserve At the beginning of the year At the end of the year General reserve for banking risks At the beginning of the year At the end of the year 34,750 34, QS.1 ~ 34,750 34, ~ Available for sale reserve/ (deficit) At the beginning of the year Changes in fair value of investments securities gain/(losses) (Note 10) Deferred tax (expense)/credit Recycling of AFS Reserve through P&L gain/(losses) (Note 10 Deferred tax expense/(credit) At the end of the year 2016 (4,407) 10,070 (1,6u) (3,062) 49Q y8q ,284 (7,663) 1,226 (2,683) ~ ~ 90 of1~8 This version of our report/the 11ccompanying documents is a translation from the original, w~ich w~ l:'repared in ron:ianian. All possible care has been taken to ensure that the translation is an accurate rt~prcsentatlon ot the or1gmal. However, mall matters of interpretation of information, views or opinions, the original language version of oui- repo11 takes prllr.edene.c over this translation.

137 (All amounts in RON thousand unless otherwise stated) 25 OTH ER RESERVES (CONTINUED) In accordance with the Romanian law on banks and banking activities, the Bank must distribute the profit as dividends or make a transfer to retained earnings or reserves on the basis of the financial statements. Amounts transferred to reserves must be used for the purposes designated when the transfer is made. (i) (ii) Starting with 2004, under Romanian banking legislation the Bank is required to create the statutory reserve, appropriated at the rate of 5% of the gross profit, until the total reserve is equal to 20% of the issued and fully paid up share capital. Until 2007 the Bank was required to create the general reserve for banking risk, appropriated from the gross profit at the rate of 1% of assets bearing banking risks. Thi.s version of our report/ the accom panying documents is a translation from the original, whicll was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the 01i ginal. However, in all matter.s of interpretation of info!11lation, views or opinions, the original language version of our report takes precedence over this tronslation.

138 PIRAEUS BANK ROl\ilANIA SA (All amounts in RON thousand unless otherwise stated) 26 NET INTEREST INCOME Interest income Loans and advances to customers Cu1Tcnt accounts and deposits due from banks Reverse repo v.ith banks Investment securities available for sale Trading securities Finance lease receivables Total Interest expense Deposits to other banks Customer deposits Subordinated debt Finance lease expenses Total Net interest income 201, ,034 10,10:~ 6, ,506 7,868 31,803 32, Q ~-4!1 ~ 38,817 49,174 46,879 80,861 4,314 6, !, ,543 ~.62,3 2~6,6Q:\_ Interest income on impaired financial assets is RON 24,602 thousands in 2016 (2015: RON 73,965 thousand). 92 of138 This version of our rt~port/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care ha.~ been taken to ensure that the translation i.~ an accurate represen~1tion_of lhc original. Howev~r, in all matters of interpr~tation of info11nation, views or opinions, the original language version ol our report takes precedencr. over this translation.

139 (All amounts in RON thousand unless othet"\vise stated) 27 NET FEE AND COMMISSION INCOME 27. t Fee and commission income Administration fee for: sub-participated loans - group related (2) 72,701 58,964 sold loans - other parties (2) 7,719 1,750 Payments transactions 31,527 33,146 Letters of guarantee 1,410 1,697 Gold transactions (1) Banca.ssurance 7,349 4,459 Cards transactions 12,179 13,056 Factoring 1, Leasing 661 Other commissions 2,926 3,641 Total nz,938 (1) The cost of sale and income related to gold transactions where the Hank is acting as an agent are presented below: 31-Dec Dcc-15 Gold cost of sale (7,338) (8,480) Gold sale income 8,285 ~ Net result ==:MZ 6.43 (2) The commission income from administration fees for transferred loans represents mainly the commission related to the portfolio of loans transferred to Piraeus Bank London Branch, for which the Bank continues to render an administration service and earn this commission. 93 of 138 This version of our report/the accompanyini doemnenti; is a translation from the original, whiclt was prepared in romanian. All possible C'.are has been taken to en.sure that the translation isan accurate rcptcscntation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

140 (All amounts in RON thousand unless otherwise stated) 27 NET FEE AND COMMISSION INCOME (CONTINUED) 27.2 Fee and commission expense Payments transactions 3,055 2,747 Cards transactions 9,508 8,797 Funding commitment 1,388 Factoring Leasing 535 Other commission 6,825 3,334 Total 20.Q ,3.0.4 Net fee and commission income ll9,l , GAINS LESS LOSSES FROM DERIVATIVES Foreign exchange derivatives 24,117 (11,021) I ntcrest rate swaps 4 (28) Gold accounts (e-gold) ~ ll Total ~ Cu,01z} 29 GAINS LESS LOSSES FROM TRADING IN FOREIGN CURRENCIES Foreign Exchange Gains less losses from spot transactions Gains less losses from revaluation of assets and liabilities denominated in foreign currency 16,120 17,829 Total of1 8 TI1is version of our report/the accompanying dor.uments is a translation from the original, which was prepared in romanian. All possible care has been talc en to ensure that the u anslation is an accurate representation of the original. H owcvet, in all matters of interpretation of information, views or opinions, the original language version of our repo1t takes precedence over th is transfation.

141 (All amounts in RON thousand unless otherwise stated) 30 OTHER OPERATING INCOME 2016 JQ!5 Dividend income 695 2,21l Gain on disposal of fixed assets 255 Other income L.2!.9 5,3.12 Total.8..3.M ~ Dividend income of RON 695 thousand represents incomes from: Biroul De Credit - RON 218 thousand (2015: nil), Transfond - RON 470 thousand (2015: RON 2,211 thousand) and from Dcpozitarul Central SA- RON 7 thousand (2015: nil). 31 ADMINISTRATIVE AND OTHER OPERATING EXPENSES 2016 Salaries 91,274 Social.security and other contiibutions 20,552 Defined benefit cont1ibutions (1) Other staff cost 1,425 Rent 56,737 Insurance premium 1,638 Depreciation and amortisation (Notes 15 and 16) 29,957 Advertising expenses 7,196 Services from third parties 18,473 Postal and telecommunication 7,571 Security expenses 3,229 Collection of loans and receivables 2,490 Consumables 2,282 Transportation expenses 988 Contribution to Deposits Guarantee Fund and Resolution Fund 11,l65 Maintenance of fixed a.ssets 11,841 Repairs 4,251 Utilities 4,715 Cards operations 3,506 Other provisions (i) 35,185 Other operating expenses i~.:z26 ~ 97,242 22,225 (1,504) 1,587 59,684 1,540 ~4,247 5,692 19,519 7,539 2,980 3,261 2, ,526 9,433 3,992 5,8l7 3,505 l9,742 2:z,518 Total 337, of 138 This version of our report/the accompan}ing documents is a translation from the original, which was prepared in romanian. All possible care has heen taken to ensure that the translation is an accurate representation of the original. However, in all matteri: of inlcrpretation of inf01m~lion, views or opinion.~, the original language version of our repo11 takt'.s precedence over this translation.

142 FOR THE YEAR ENDED 31 DECEMBER 2ot6 (All amounts in RON thousand unless otherwise stated) 31 ADMINISTRATIVE AND OTHER OPERATING EXPENSES {CONTINUED) (i) Other provisions include: Net penalties for early cancellation ofrental agreements Net provision for impairment of leasehold improvements in closed branches Provisions for off balance sheet credit commitments Provision for other penalties Provision for sundry debtors Provisions for litigations (Note 21) Provisions for potential claims (Note 21) Other provisions Total (4,339) (1,105) 2,166 10,242 26, MS ~ ,810 (1,178) (12,941) 3,454 13,827!l.!93 ~ 32 INCOME TAX EXPENSE The income tax consists of current and deferred income tax as follows: Current tax expense Deferred income tax credit/ (expense) (62,420) (62,420) 96 of138 This ve.rsion of out report/the acr.ompanving documents is a translation from the original, which was prepared in romanian. All possibler.are ha.s been taken to ensure that the translation is an ar.curate l'cprescntation of the original. However, in all matters of interpretation of information, views or opinions, the Ol'iginal language version of our report takes precedence over this translation.

143 (All amounts in RON thousand u11lcss otherwise stated) 32 INCOME TAX EXPENSE (CONTINUED) The tax on Bank's profit before tax differs from the theoretical amount that would arise using the basic tax rate as follows: (Loss)/ Profit before in come tax Theoretical tax (charge)/ er.edit at the applicable statutory rate at 16% Tax effect of: Non-deductible expenses Income which is exempt of taxation Derecognition of deferred tax asset in respect v.ith fiscal losses carried for,..,;ard considered not recoverable Unrecognised other potential deferred tax assets Unrecognised tax loss carried fonvard Income tax (expense)/ credit for the year 5,057 (14,172) 10, i1&34l ~ 30,404 (20,164) 12,336 (62,029) (391) (22,576) fd.2 ~2QJ Current income tax is calculated by applying a rate of 16 %. Defen-ed income taxes are calculated on temporaiy differences under the liability method using a profit tax rate of 16%. The accounting loss recorded by the Bank in 2016 of RON 31,607 thousand was adjusted for the fiscal profit \-vith RON 21,:~92 thousand. Furthermore, at fiscal loss recorded by the Bank in 2016 of RON 10,215 thou~and wa.s added the fiscal loss carried forwards from previous periods of RON 616,470 thousand. The ftscal loss carry fon,vards by the Bank as at 31 December 2016 of RON 626,685 thousand corresponds to a potential deferred tax asset of RON 100,270 thousand. The Banl<. has recognised in the statement of financial positions a deferred tax asset of only RON 14,030 thousand, based on the Bank's projections related to future profits. Please sec Note 3 for details. of138 This version of our repo1t/the accompanying documents is a translation from the original, which was prepared in romanian. All possihle <'.arc has been t,1.ken to ensme that tht: translation is an accumte representation of the original. However, 1 n all matters of inkrpretation of infonnation, views or opinions, the original language version of our report takes precedence over this translation.

144 FOR THE YEAR ENDED ;31 DECEMBER 2016 (All amounts in RON thousand unless otherwise stated) 32 INCOME TAX EXPENSE (CONTINUED) Deferred income tax assets and liabilities are attributable to the following items: 31-Dec-16 Tax expense/ (credit) recognized in income statement Tax expense/ ( credit) recognized in equity 31-Dec-15 Tax eff cct of deductih1e/ (taxable) temporary differences Other acciuals Gain on fair value of investment Hyperinflation affixed assets and equity investments Fiscal Loss Net tax effect of temporary differences (1,120) ~ -63 ~ JA..Q3Q ~ 1his version of our report/ the accompanying document$ is a trnnslation from tht: original, which was prepared in romanian. All possible care has been taken to ensure that lhc translation is an accun1te representation of the 01iginal. However, in all matters of interpretation of information, views or opinions, the original language v~rsion of our report tak~s precedence over this translation.

145 (All amounts in RON thousand unless otherwise stated) 32 INCOME TAX EXPENSE (CONTINUED) Deferred im:ome tax assets arc recognised for tax losses carried fonvard only to the extent that realisation of the related tax benefit is probable. As of 31 December 2016 the Bank has tax losses carried fo1ward, therefore deferred income tax assets are recognised proportionally with the Rank's management estimate of probable positive results within the foreseeable future. ;u-dec-15 Tax expense/ (credit) recognized in profit or loss Tax expense/ (credit) recognized inoci 31-Dec-14 Tax effect of deductible/ (taxable) temporary differences Other accruals Gain on fair value of investment Securities available for sale Hyperinflation of fixed assets and equity investments Fiscal Loss (391) (62,029) 1,655 1,114 (816) 57 Net tax effect of temporary differences ~.420) JOO ofi38 This version of our report/ the accompan,;ng documents is a translation from the original, which was prepared in r01nanian. All Jl0$ible care bas been taken to ensure t hat the translat ion is an accurate repre;entation of the original. However, in all matters of interpretation of information, views or opinions, the original language. version of our report takes prcccdence over this tran,;lation.

146 FOR THE YEAR ENDED 31 DECEMBER (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT Financial risk management is inter.twined with the Bank's business activity. The management, aiming to maintain the stability and continuity of its operations, places high priority on the goal of implementing and continuously improving an effective risk management framework to minimize potential negative effects on the Bank's financial results. The Bank's Board of Directors is fully responsible for the development and supervision of the risk management framework. In order to coordinate and timely addres!s all risks, a Risk Committee has been established at the level of Board of Directors. The Risk Committee is, responsible for the implementation and supervision of the risk management policies and principles. Both the principles and the existing risk management policies have been created to identify and analyse on a timely basis the risks assumed by the Bank, establishing the appropriate limits and risk control systems, as well as systematically monitoring the risks and ensuring compliance ½ith established limits. The Bank re-examines annually the adequacy and effectiveness of the risk management framework in order to ensure that it keeps pace with market dynamics, changes in the banking products offered, and international good practices. The Bank's Risk Department operates as an independent unit, entrusted with the responsibility for planning and implementing of the risk management framework, according to the directions of the Risk Committee. The I3ank systematically monitors the follo,'lfing risks resulting from the use of financial instruments: credit risk, market risk, liquidity risk and operational risk Credit risk The Bank is exposed to credit risk, which is defined as the present or future risk of loss in returns or capital as a result of a borrower's failure to repay a loan or otherwise meet a contractual obligation. Impairment provisions are provided where there is objective evidence that the Bank will not be able to collect all amounts due. Significant changes in the economy, or in the health of a particular industry segment that represents a concentration in the Bank's portfolio, could result in additional evidence apart from that provided for at balance sheet date. The Bank therefore carefully manages its exposure to credit risk. 101 of 138. This version of our report/the accompanying documents is a tnu1s.lation from the origin~!, wh_ich wa~ 1_irepar('.O in ron~aman. All possible care has been takr.n to ensure ~hat the tr~n~lation is a.i:i ~ccurote reprcsent~t10n ot the ongmal. How:~c1, mall,, matters of interpretation of infonnation, views or opm10ns, the ongmal language version of our report takes prc.ccdence O\ er this translation.

147 .PIRAEUS BANK RO.MANIA SA FOR THE YEAR ENDED 31 DECEMBER (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) Credit risk is considered the most significant for the Bank, and its efficient monitoring and management constitutes a top priority for the Management. The Bank's overall exposure to credit risk mainly results from the approved credit limits and financing of CO!])orate and retail loans, from the Bank's investment and trading acfr.,;ties, from trading activities in the derivative markets, as well as from the settlement of financial instruments. The level of risk associated \vi.th any credit exposure depends on various factors, including the general economic and market conditions prevailing, the debtors' financial condition, the amount, type, and duration of the exposure, as well as the collateral/ guarantee coverage. The Bank mitigates credit risk using a set of expected limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, clients, industry segments and currencies. Such tisks are monitored on a regular basis and are subject to annual debtors review Ol' when needed. Exposure to credit risk is monitored through regular analysis of the ability of borrowers and potential debtors to meet interest and principal repayment obligations and through review of lending limits where appropriate. Exposure to credit risk is also mitigated through collateral, and corporate and personal guarantees. The split of the portfolio of Loans and advances to customers by industry is detailed in Note 9 ("Loans and advances to customers"). The Bank's exposure with Central Bank is sho..,vn in Notes (see "Balances with Central Bank"). The Bank applies on a uniform basis the policy and practice with respect to the credit assessment, approval, renewal and monitoring procedures. All credit limits are reviewed at least once a year. and the individual in charge,vi.th the approvals are determined based on the size and total exposure category to credit risk assumed by the Bank for each debtor or group of interrelated debtors (one obligor principle) Market risk Market risk is the risk of incurring on-ha lance and off-balance sheet losses due to adverse market movements in prices (such as, for example, the share prices, the interest rates and the foreign-exchange rates). Market risk can generally affect both trading and banking book positions, as well as both the asset and the liability side of the balance sheet. The Bank applied generally accepted techniques for the measurement of market risk, such as Sensitivity Indicators and GAP analysis and VaR (Value-at-Risk) measures. 102 of 138 TI1i.~ version of our rcport/thp- accompanying documents is a translation from the original, which was preparp-d in run:1anian. All possible care has been taken to ensure that the tnmslalion is an accurate repre.~enlalion of the orii;inal. However, mall matter:; of interpretation of information, views or opinions, the orii;inal langua,e;e version of our report takes precerlellcc over this translation.

148 FOR THE YEAR ENDED 31 DECEMBER.2016 (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) Sensitivity calculation parameters Interest Rate Sensitivity: calculation is based on IR Gap report equivalent duration measures. Based on the last year interest rate fluctuation and Treasury Division forecasts analysis the interest rate can va1y between 100 ± bps. FX Rates Sensitivity: calculations based on open foreign currency positions Currency risk The Bank is exposed to the effects of fluctuations in the main foreign currency exchange rates on its financial position and cash flows. The Bank sets limits on the level of exposure by currency and for both overnight and intra-day positions, which are monitored daily. The Bank traded,-vith the Parent Bank swap transactions in order to hedge the balance sheet mismatches in different currencies (RON and EUR), although not using hedge accounting. All transactions were performed strictly for liquidity purposes and not for tracling. Exce.sil liquidity in one currency was converted into the currency that was in deficit. Regarding the foreign exchange rate ris k, the Bank has established a limit system monitored on a daily basis by the Risk Management Department. The limit scheme includes: an intraday net aggregate position limit; an intraday position limit for each authorized ClllTency; an overnight net aggregate position limit; an overnight position limit for each authoiized cmtency; a daily loss notifir.ation & stop loss limit; a monthly Joss notification & stop los.s limit. In order to quantify the foreign exchange risk the Bank uses a VaR methodology. The Value-at-Risk (VaR) measure represents an estimation of the potential maximum loss for a pre-specified time horizon with a given statistical confidence level. These two VaR parameters are chosen as 10 days - time horizon and confidence level. Given the Bank's foreign exchange position as of December 2016, the estimated maximum loss for a time horizon of 10 days is EUR 312 thousand. 103 of iis version of our reporl/the accompanying document,; is a translation from the origi n11l, which was?repared in ron:_ianian, All possible care has b~t~n taken to ens ure that the translation is a.r.i accurate rcpre.,;ent~tion_of the origmal However, mall matters of interpretation of infom1ation, views or opinions, the ong1nal language version of our report takes prccedenr.e over this translation.

149 (All amounts in RON thousand mt.less otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) Sensitivity analysis Alt amounts in RON thousand. RON EUR USD CHF TOTAL Interest rate (± 100 b.p.) 31-Dec-16 Effect on profit or loss +12,199/-12,199 +8,910/-8, ::l/ / :?,7 204/-27.20& 31-Dec-15 Effect on profit or loss +11,690/-11, ,978/-10, /-rno +7,300/-7,300 Effect on available for sale financial instruments in EUR - lnterest rate(± 100 h.p.).effect on Other comprehensive income 31-Dec ,905/-13,905 Effect on Other comprehensive income 31-Dec ,505/-15,!';05 EUR USD CHF 0TH 31-Dec-16 Effect on profit or loss +298,756/-298, /-9n +84,612/-84, / Dec-15 Effect on profit or loss +288,934/-288,9:l4-412/ ,122/-96, /-395 TOTAL Foreign exchange(± 20%) +385,0_6z(-3s,s,06z / of138 This version of our repoi1/thc::. accompanying documents is a translation from the original, which was prepared in romanian. All possible care h11s been taken to ensure that the translation is an accurate representation of the origin11\. However, in all matters of interpretation of information, vie.ws or opinions, the original langirngt~ version of om reporl l:11kcs precedence over this translation.

150 (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) At 31 December 2016, if market interest rates had been 100 basis points higher and v.ith all other variables held constant, the net profit for the year would have been RON 27,205 thousand higher (2015: RON 30,068 thousand higher). At 3 1 December 2016, if RON had weakened by 20% against other relevant currencies (all other variables held constant) net profit for the year would have been RON 385,066 thousand higher (2015: RON 385,0~9 thousand higher). The majority of assets and liabilities in foreign currencies arc in EUR. The table below summarises the Bank's exposure to foreign currency exchange rate risk at 31 December. Included in the tahle arc the Bank's assets and liabilities at carrying amounts, categorised by currency. 31-Dec-16 RON EUR USD CHF Other Total Cash and balances with Central Bank 461,m 449,676 11,574 8,649 4, ,057 Loans and advances to the banks 26, , ,432 5,733 14, ,835 Loans and advances to customers, net of provisions 1,423,852 1,237,682 39, , ,194,998 De1ivative Assets 1,155 (159) 374 1,370 Financial assets FVTPL 1,994 1,994 Trading and available for sale securities 601, ,310 1,198,162 Repurchase receivables 68,824 68,824 Other financial assets 16,219 4,823 --A l67 Total assets a.,,531.un ~96,06:z 2.38,1SJ 5.0~ 19.Q. ~ 1'395,~0;l 105 of 1, 8 This version of our repo>rl/thc acc.ompan),fog document~ is a translation from the original, which was prepared in romanian. All po~ible care has been taken to ensure 1hat the tr-1nslation is an accurate representation of the original. However, in all 1n-1lll\f~ of interpr<'.lation of information, views or opinions, the original langua,l(e version of our rcpo1t takes precedence over this translation.

151 (All amounts in RON thousand wtless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) 31-Dec-16 RON EUR USD ~ Other Total Due to other banks 954,383 48,885 7,691 70, ,081,180 Deposits due to customers 2,861,605 1,293, ,808 16,018 14,698 4,411,421 De1ivativc liabilities 10, ,034 Financial liabilities FVTPL 1,992 1,992 Borrov.:ings from banks and other financial institutions 249, ,822 Other financial liabilities 33,ZOl 10, n _lq 44,111 Total liabilities 3.859, ?,29.l 233,592 86,133_ ~ - 5,798,560 Net on balance sheet position (1, ) 1, S osz 3.&U Net off balance sheet position 1.946,775 (1,546,190) (1,682) (405,871) LM.l (5,526) N ct currency position..!ils!?m _(52 a.w 2,8:z2 ----,17, l,8,6 ~ 5.~l,32J. 106 of 1. 8 TI1is version of our rej:>ort/lhe accompanying documents is a translation from the original, whkh was prepared in rnmanian. All possible co re has been tllkcn to ensure that the translation is an accurate representation of the original. However, ii\ all matters of interpretation of information, views or opinions, the oliginol language version of our report takes precedence over this translation.

152 (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RJSK MANAGEMENT (CONTINUED) 31-Dec-15 RON EUR USD CHF Other Total Cash and balances with Central Bank 476, ,071 10,722 7,815 4, ,343 Loans and advances to the banks Loans and advances to customers, 7, , ,204 10,790 2,526 1,124,276 net of provisions 1,355,078 1,456,776 38, , ,456,583 Derivative Assets Financial assets FVTPL 2,172 2,172 Trading and available for sale securities 422, ,211 1,139,422 Repurchase receivables 103, , ,247 Other financial assets ~ ~ 4.9 ~ Q 21,892 Total assets ~:Z :3, , sz 9.M3 u.881,:z:z.o 10 ofl. 8 This version of our report/ the accompanying documents is a translation from the original, whir.h was prepared in romanian. All possible <:.are has been taken to Msure that the tra11.~lation is an accurate representation of the original. However, in all matters of interpretation of infonnation, vie\..-s or opinions, the original language version of our repo11 takes precedence over this t ranslation.

153 (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RlSK MANAGEMENT (CONTINUED) Due to other banks Customer Accounts Derivative liabilities 31-Dec-15 RON EUR USD CHF Oth~r Total 1,166, ,823 2, , ,095,561 2,509,131 1,215, ,893 15,923 4,599 3,901,717 27, (275) 27,414 Financial liabilities FVTPL 2,172 2,172 Borro¼ings from banks and other financial institutions 248, ,934 Other financial liabilities 47,292 3, ,533 Total liabilities 3,zso,36:z 2,2!;26, , ,628 ufil3 Q,322,331 Net on balance sheet position (1, ,S..f2.059} 480,69_2 b: l2 Net off balance sheet position 1,952,049 (1,443,564) 1MQ {48z,goo) ~ Net currency position 586,~ P QS (1,{U9.J lz,291} ~ 581,a~~- 108 of 1 8 TI1is version of our report/the accompanying documents is n translation from the original, which was prepared in romanian. All possible care has h~n taken to (ensure that the translation is an ncc.urate representation of the original. However, in all matters of interpretation of infonnation, views or opinions, the original language version of OUf repo1t takes precedence over this translation.

154 (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) In the category "Other currencies" are included mainly the equivalent in RON for the GBP. The Rank takes on exposures to benefit from fluctuations in foreign currency exchange rates and interest rates in Romanian Government Bonds and Bills. ALCO sets limits on the level of exposure hy currency for both overnight and intra-day positions, as well as notifications for stop losses, which arc monitored daily and monthly. The Bank uses currency forwards and currency swaps to manage the gap between assets and liabilities in different currencies. 33,4 Interest rate risk Interest sensitivity of assets, liabilities and off balance sheet items - 1'epricing analysis Cash t1m-r interest rate risk is the risk that the future cash flows of a financial instrument \\~\] fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrnment will fluctuate because of changes in market interest rates. The Bank is exposed to the effects of market fluctuations of the main interest rates on both its fair value and cash flow. Interest margins may increase as a res ult of such changes but may reduce or create losses in the event that unexpected movements arise. The Bank sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored daily. The Bank quantifies and monitors the interest rate risk by calculating a set of risk measures such as Earnings at Rjsk, PV100 and the potential variation of the Bank's economic value. The gamings at Risk (Ea R) measure, also known as the repricing GAP, expresses the modification of the net interest income as a reaction to an interest rate shock of 100 bps, for a pre-defined period of one year. In accordance with the Bank's "Market risk management policy", the EaR cannot exceed EUR 4.5 million (2015: EUR 4.5 million). PV100 measures the impact of a parallel shift of the yield curves by 100 bps on the present value of the Bank's assets and liabilities. According to the currently applied limits PV100 cannot exceed EUR 7.0 million (2015: EUR 7.0 million). 109 of 138. This version of our repmt/the accompanying documents is a translation from U H\ origin~!, which wa~ ~repared in ro~aman. All possible care has heen taken to ensure tl:la\ the translation is an accurate representat1on_ot the or1g1nal. However, m all matters of interpret11tion of information, views or opinion.~, the original language version of our report takes precedence over this translation.

155 PIRAEUS BANK ROM.ANIA SA (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) The potential modification of the Bank's economic value (duration GAP) measures the market value change of the Bank's capital due to a pre-specified interest rates shock (2oobps). The impact of the assumed shock on the market value of the capital depends on the modified duration (sensitivity) of the assets and liabilities of the Bank. FollO\'lling the regulatory requirements, the potential variation of the Bank's economic value must not exceed 20% of its Own Funds. In addition to the risk measures, the Risk Management Department also monitors a set of limits imposed internally to its bond portfolio. These limits refer to the maximum open position by currency, the maximum maturity, sensitivity (portfolio's modified duration) and also daily and monthly loss notifications. The table below summarises the Bank's exposure to interest rate risks. Included in the table are the Bank's assets and liabilities at carrying amounts, categor ised by the earlier of contractual repricing or maturity dates. 110 of138 This version of our report/the accompn nying documents is a translation from the origill'.11, whir.h wa~ ~re pared in romanian. All possihle care has been tuken to ensure that the translation is an accurate representation of the ongmal. However, m all matter 5 of interpretation of infonnation, views or opinions, the original language vcn;ion of our report takes precedence over this translation.

156 FOR THE YEAR ENDED 3 1 DECEMBER (All amounts in RON tbousand u nless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) Upto 1 m onth to 3 months 1 year to Over s Non-interest At 31 December month months to 1 year 5years years Bearing(*) Total Assets Cash and balances with Central Bank 778, , ,057 Due from other banks 963,325 9, ,835 L<ians an d advances to customers 990,789 1,708, , ,467 52,926 16,172 3,194,998 Derivative financial assets 1,370 1,370 Other fi nancial assets at fair value through profit or loss 1,994 1,994 Trading and available for sale securities 9,814 4,255 56,099 1,126,601 1,393 1,198,162 Repurchase receivables 68,824 68,824 Other financial assets 21,167 21,167 Total financial assets 2, ,712.69~ 368,29_2 1, ~ ~ 9,110 6,395,421 Liabilities Due to other banks 659,162 3, ,915 17,633 1,081,180 Deposits due to customers 2,095,490 1,009,007 1,255,108 45,182 4,509 2,125 4,411,421 Derivate fi nancial liabilities 10,034 10,034 Subordinated debt 249, ,822 Other financial liabilities 44,111 44,111 Total financial liabilities _ ,1.8-2 ~ ~ 5,796,568 Total interest rate gap U2,171} ~ i:jqo (1,28:z,124} 1.~fl~.:zrn ~ JJ.5,2Q ~ *The value includes exposures to clients in insolvency or bankruptcy for which, according to law, nominal interest is not charged any longer. 111 of 138 This version of our repmt/the ;iccompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that lhc translation is an accurate representation of the origirutl. However, in all matters of interpretation of in formation, view.s or opinions, the original language version of our report takes precedence over this translation.

157 (All amounts in RON tl1ousand unless othe rwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) Upto 1month to 3months 1year to Overs Non-interest At 31 December month 3 months to 1year sycars years Bearing(*) A'>sets Cash and balances with Central Bank 721, ,392 Due from other banks 1,113,963 10,313 Loans and advances to customers 1,053,524 1,846, , ,682 46,223 6,962 Derivative financial assets 835 Other financial assets at fair value through profit or loss 2,172 Trading and available for sale investment 15, ,567 28, ,558 1,392 securities Repurchase receivables 242,247 Other financial assets ~ Total financial assets 2, ,991,_5,Q, ,48:z ~ Liabilities Due to other banks 1,466, , ,127 20,247 Customer Accounts 1,937, ,586 1,088,492 45,694 6, Derivate financial liabilities 27,414 Subordinated debt 248,934 Other financial liabilities.!9., l,9Q!. Total financial liabilities ,A ~~ ~ ~ ~ Total interest rate gap k-'l:t8,o~ Sl9,Q3_4.(~33,128). J Z9.3 ~ Total 894,343 1,124,276 3,456, ,172 1,139, ,247 21,892 fl.881.po 2,095,561 3,901,717 27, , , ssc 6.11 * The value includes exposures to clients in insolvency or bankruptcy for which, according to law, nominal interest is not charged any longer. 112 of 138 This version of our rep011/the accompanying documents is a translation from the original, whicb was prepared in romaniao. All possible care has been taken to ensure that the translation is an a<:euratc representation of the original. However, in all matters of interpretation of information, viev, s or opinions, the original language version of our report takes precedence over this translation.

158 (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) 33.5 Liquidity risk Liquidity risk is the cun-ent or future risk of negative impact on profits and capital, determined by the Banks inability to meet its obligations when they become due. The consequence may be the failure to meet obligations to repay depositors and fulfil commitments to lend. The Bank is exposed to daily calls on its available cash resources from overnight deposits, current accounts, maturing deposits, loan dra,"' -downs and guarantees. The Bank does not maintain cash resources to meet all of these needs, as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. The Bank sets limits on the minimum proportion of maturing funds available to meet such calls and on the minimum level of inter-bank and other borrowing facilities that should be in place to cover '"'ith drawals at unexpected levels of demand. The liquidity risk is also monitored as per NBR requirements and the reported liquidity indicators were in compliance with NBR requi.rements as at 31 December 2015 and as at 31 December The Bank's liquidity management process, as carried out \.'1-i.thiu the Bank and monitored by a team from Treasury and Financial Markets Division and Risk Management Depa1tment includes: Day-to-day funding, managed by monitoring future cash flows in various currencies and in total to ensure that requirements can be met. These include replenishment of funds as they mature or are borrowed by customers. The Bank maintains an active presence in global money markets to enable this to happen; Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruption to cash tlow; Monitoring balance sheet liquidity ratios against internal and regulatory requirements; Performing periodic stress tests on liquidity; Establishing funding plans to he applied in case of a liquidity crisis and testing them periodically; Monitoring the cost of funds of the bank and the factors that lead to it decreasing/increasing; and Managing the concentration and profile of debt maturities. a) Non derivative cash flows The table below presents, the undiscounted cash flows payable by the Bank under non -derivative financial liabilities on their contractual maturities. 11 of 138 This version of our repmt/the accompanying documents ii; a translation from the origin~\, \,-hich was l?rcpared in romanian. All possible care has been taken lo ensure that the translation is an accurate representation oft he origmal. However, mall matters of interpretation of infonnation, views or opinions, the original language vel'sion of our rr.po1t takes precedence over this translation.

159 {All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) At 31 December 2016 Upto 3montbs Over s ~ to 1 1..: month months year years years Total Financial liabilities Due to other banks 170,290 3, ,357 1,097,124 Customer Accounts 2,157, ,358 1,262,591 45, ,423,417 Subordinated debt 986 3,126 84, , ,104 Other liabilities 11,128 27,097 5,886 44,111 Credit commitments 600, ,911 Letters of guarantee and letters of credit 94,509 94,509 Total finandal liabilities {contractual maturity dates) Total financial ,2 ~ 9.aB 9,1.li 2.;194,96!:~ l.'.lo,ql.3 188,0~6 6,536 l'.zq assets ( contractual maturity dates) 1, ~5 75!2!,Pl4, ,z1s 1, 'i z,009, Net position Cumulated liquidity ( ~ WJ 1 168) u, ) 216_4,zo5 l.d:15, ,520 {gap)/surplus (1,132,3JQ} (1,4Q5 ~981!2.l~~6,:304) (481,599} 563,520 The Bank has a short net position less than 1 year due to the short maturity ofliabilities to customers and to credit institutions. The Bank does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted,\'ith a high level of certainty; based on the history of prolongation of clients' deposits the Bank considers these sources of funding to be reasonable stable. Furthermore the Bank has an undrawn stand-by facility from the Parent Bank in amount of EUR 2so million. 114 of 138 This version of our repot1/lhc accompan,-ing documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

160 (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) At 31 December 2015 Financial Liabilities Due to other banks Customer Accounts Subordinated debt Other liabilities Credit commitments Letters of guarantee and letters of credit Uplo months 1...:...5 Over s 1 month months to 1 year years vears Total 258, , ,787 (1,297) 2,097,876 1,949, ,167 1,068,100 45,184 2,268 3,919, ,612 3, , ,056 32, ,103 15,498 52, ,647 7!.J94 740,647 2!...!94 Total financial liabilities ( contractual maturity dates) Total financial 3,052,4:i.2 ~ 2.oz3~ ,296. Z, 13a,Q3.6 assets ( contractual maturity dates) 2,555, ,m 9zo,30_5 2, ,344-,091 7,711,049- Net position Cumulated liquidity!:496,465} (522,081) Ll,J.03,351) 1, ~,795 5Z3,0l3_ (gap)/surplus (~96.4_6,sl (1,0~8,5~6l (2,121,s~rz) (586,z82)_ sz 3,0_1=3 h) Derivative cash flows The table below analyses, at balance sheet date, the derivative financial liability instruments that \<\-ill be settled on a gross basis (i.e. currency forward and swaps) based on their remaining period according to the contract. The total pay leg (outflow) and receive leg (inflow) and for each type of derivative and for each maturity group are clisclosed at their contractual undiscounted amounts. 115 of 1. 8 This version of our rcpo1t/the accompanying documents is a translation from the original, which \WlS prepared in romanian. All possihle r.are has been taken to ensure that the translation is an accurate representation of the original. However, in all matters ofinterpretation of infom1ation, views or opinion.~, the original language version of om rep011 lakes precedence over this translation.

161 (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) Derivatives held for trading Foreign exchange derivatives Upto tmonth At 31 December 2016 Gross settled swaps and fonvards: Outflow (1,164,568) Inflow 1,163, months (372,401) 368, months Total (898,796) (2,435,765) 900,000 2,431,571 At 31 December 2015 Gross settled swaps and forwards: Upto tmonth OuttlO\ v (1,792,578) Inflow 1,779, months (1,638,705) 1,628, months Total (3,431,283) 3,407, of1 8 This version of our report/the accompan}ing documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the tra11slation is an accurate representation of the original. However, in all matters of interpretation of i nfo1mation, views or opinions, the original language version of our reporl takes precedence ovc r this translation.

162 (All amounts in RON thousand unless othenvisc stated) 33 FINANCIAL RlSK MANAGEMENT (CONTINUED) 33.6 Financial instruments by measurement category At31 December 2016 Financial assets at fair value through profit and loss Loans and receivables Available -for-sale financial assets Financial liabilities at fair value through profit and loss Financial liabilities measured at amortised cost Total Cash and balances with Central Bank Due from other banks Loans and advances to customers Derivative financial assets Financial assets FVTPL Trading securities Investments securities available for sale Repurchase receivables Other financial assets Total financial assets Due to other banks Customer Accounts Derivative financial liabilities Financial liabilities FVTPL Subordinated debt Other financial liabilities Total financial liabilities 1,370 1, ,605 -= 936, ,835 3,194,998 5, ,557 68, l -= l0,034 1,992 1,081,180 4,411, ,822 5, , ,835 3,194,998 1,370 1, , ,557 68, ,081,180 4,411,421 10,034 1, ,822 5,798, of 138 TI1is version of our report/the accompanying <locumcnt.s is a translation from the origin?i, wh_ich w~ ~repared in ro11:anian. All possihle care has been tal<en to ensure that the translation is an accurate represen1'.1tton ot the original. However, mall mailers of interpretation of infonnatiot,, views or opinions, the ongmal language version of our report takes precedence over this translation.

163 (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) At31 December 2015 Financial Financial assets Loans and Available liabilities Financial at fair at fair value receivables -for-sale value liabilities measured through financial through at Rrofit and nrofit amortised loss assets and loss cost Total Cash and balances ½ith Central Rank Due from other 894, ,343 banks Loans and 1,124,276 1,124,276 advances to customers Derivative 3,456,583 3,456,583 financial assets 835 Financial assets 835 FVTPL 2,172 2,172 Trading securities Investments 575, ,043 securities available for sale Repurchase 564, ,380 receivahles Other financial 103, , ,247 assets ,892 Total financial assets 68.I,m 5,497,0M_ ZQJ,~ ~ -- -.f2.b81.zzo Due to other banks Customer 2,095,561 2,095,561 Accounts Derivative 3,901,717 3,901,717 financial liabilities Financial 27,414 27,414 liabilities FVTPL Subordinated 2,172 2,172 debt Other financial 248, ,934 liabilities Total financial 5.L.533 5!..533 liabilities ~ 6.297, z, ft, 8 This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possihle <','lre has t,ccn tal<rn to ensure that the translation is an accurale representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our reµmt take.~ precedence over this translation.

164 (All amormts in RON thousand unless otherwise stated) 33 FINANCIAL RISK l\'lanagement (CONTINUED) 33.7 Capital adequacy Capital adequacy and the use of regulatory capital of the Bank are on a regular basis monitored by the Rank and is filed, in a quarterly basis, with the supervisory authorities namely the NBR. The supervisory authority requires each bank to hold a minimum level of the regulatory capital according to the sum of risk which the institution undertakes. The Bank's main objectives which determine the use of the regulatory capital are: To comply with the regulato1y requirements; The preservation of the Bank's ability to continue unhindered its operations, thus to continue to provide returns and benefits to its shareholders; To retain a vigorous and stable capital base in order to be able to support the Bank's business strategy. 'lbe regulatory capital of the Rank, as defined by the National Bank of Romania is differentiated into two tiers, Tier I and Tier II capital. In order for the regulatory capital to be determined, own share capital must undergo some regulatory adjustments, such as the deduction of intangible assets and goodwill, the deduction of the revaluation gain of investment property, the deduction of part of the available of sale reserve, the deduction of the proposed distribution of dividend etc. 119 of 138 This version of our repo11/the accompanying documents is a t1 an.slation from the original, which was prepar ed in romanian. All possibler.are has been taken to ensure that the translation is an accurate representation of the original. However, mall matters of interpretation of information, views or opinions, the original language version of our report take$ prp.c.edence over this translation.

165 . (All amounts in RON thousand unless otherwise stated) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) The capital adequacy is calculated on the basis of the financial information in accordance,,vith Romanian Accounting Standards. 31-Dec Dec-15 Tier I capital 657,445 Tier n Capital Total capital 200: , ~ Risk - weighted assets: On - balance sheet Off - balance sheet 4,202,523 61,474 4,349,791 54,655 Total risk - weighted assets 4,263,997 4,404,446 Total Capital Adequacy ratio (Basel II) 19.57% 17.30% Staiting,January 2014, the Bank calculates the capital adequacy according to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and according to the Regulation 5/ of the National Bank of Romania on pmdential requirements for credit institutions. The prudential filters and the related tax calculated for the fiscal year 2016 are taken into account in proportion of 40% and the unreali1,:ed gains resulted from the valuation at fa ir value are taken into account in propo1tion of 60% d uring For 2016 Piraeus Bank Romania had to maintain on an individual basis a total capital adequacy ratio of 10.63% a Tier 1 capital ratio of 7.97% and a Common Tier 1 capital ratio of 5.95%, as these ratios are defined in Regulation (EU) No 575/ of 138 This version of our report/ the accompa nying documents is a translation from the original, which was prepared in rornanian. All possible care has been taken to ensure that the translation is an accurate represe.ntation of tbe original. However, in all matters uf interpretation of information, views or opinions, the original language version of our repo1t takes prcec<lence over this translation.

166 PIRAEUS BANK ROMANlA SA (All amounts in RON thousand unless otherwise state d) 33 FINANCIAL RISK MANAGEMENT (CONTINUED) The minimllm Common Equity Tier 1 capital ratio of 5.95% includes: (i) the minimum Common Equity Tier 1 ratio required to be maintained to all times in accordance,,...;th Article 92(1)(a) of EU Reg. 575/2013 (ii) the Common Equity Tier 1 ratio required to be held in excess in accordance v.ith Article 16(2)(a) of EU Reg. 1024/2013, and (iii) the capital conservation buffer required under Article 129 Dir. 2013/ 36/ EU as implemented in the national law of Romania The Bank has a Common Equity Tier 1 ratio of 14.87% as at 31 December 2016 (31 December 2015: 14.92%) and a total capital ratio of 19.57% as at 31 December 2016 (31 December 201s: 17.29%). The increase in the capital adequacy levels is due to a decrease of risk weighted assets, relaxation in prudential filters and the sub-participation of the subordinated loan granted to Piraeus Leasing Romania. 34 COMMITMENTS AND CONTINGENCIES Credit related commitments The Bank granted loans that were not fully drawn by the clients. The validity pe1iod of these commitments does not exceed the contractual maturity The Bank ha.s commitments for loan granting. These commitments take the form of approved loans and credit line facilities. The amounts reflected in the commitments for loan granting arc based on the assumption that all the amounts may be withdrawn v,,ithout restrictions. The primary purpose of these instruments is to ensure that funds arc available to a customer as required. Guarantees and standby letteri:; of credit, which represent irrevocable assurances that the Bank will make payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, which are v.titten undertakings by the Bank on behalf of a customer authori7.ing a third party to draw drafts on the Bank up to a stipulated amount under specific terms and conditions, are collaterali?:cd by the underlying shipments of goods to which they relate and therefore carry less risk than a direct borrowing. 121 ofl 8 This version of our report/the accompanying document<; is a translation from the original, which was prepared in romanian. All possible care has been takc r1 to ensure that the transl11tion is an accurate representation of the 01iginal. H owcvcr, in all matters of interpretation of inform11tion, views or opinions, the original language version of our report takes precedence over this translation.

167 (All amounts in RON thousand unless otherwise stated) 34 COMMITMENTS AND CONTINGENCIES (CONTINUED) Commitments to extend credit represent unused portions of authorizations to extend credit in the form ofloans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Bank is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments since most commitments to extend credit are contingent upon customers maintaining specific credit standards. The l3ank monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments. Credit related commitments Unused credit facilities Financial guarantees Letters of credit Less Provisions I.ess cash collateral Net credit related commibncnts 600, ,647 60,466 51, (746) (2,340) (21,513) (13,886) 639,462 zzo,8(!4 Movement in inovisions for credit related commitments Opening provision 2,340 2,774 Losses charged in P&L Unused amounts reversed.(u3jj f.l.llru Closing provision w. ~ 122 of 138 This version of our repo1t/the accompanying documents is a translation from the origin~!, which was i;irepared in rnn:111nian. All possible r,1re has been taken to ensure that the translation is an accurate representation of the origmal. However, mall matters or inlcrpn:tation of information, views or opinions, the original language version of our repoi1 takes precedence over this translation.

168 NOTES TO THE FINANCIALSTATEMENTS (All amounts in RON thousand unless otherwise stated) 34 COMMITl\ilENTS AND CONTINGENCIES (CONTINUED) Perfortnance guarantees The pcrfo1mance guarantees breakdown as of 31 December 2016, respectively 31 Decembe 2015 is as follows: 31-Dcc Dec-15 Letter of Guarantees -Executions Letter of Guarantees -Auctions Letter of Guarantees -Other 29,056 14,010 3,531 3,752 1, Less Provisions (1,980) (1,494) Less cash collateral (5,618) (3,784) N ct performance guarantees ~ ~ Movement in provisions for performance guarantees 2016 ~ Opening provision 1,494 2,244 Losses charged in P&L Unused amounts reversed (108) ilj&.sl Closing provision 1,980 J...MM 123 of 138 This version of our n:po1t/the accompanying documents i.~ a translation from the original, which was prepared in rornanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all mattc::i s of interpretation of info1mation, views or opinions, the originlll language version of our report takes precedence over thil:i translation.

169 (All amounts in RON thousand unless otherwise stated) 34 COMMITMENTS AND CONTINGENCIES (CONTINUED) Taxation risk The Romanian taxabon system has just undergone a process of consolidation and harmonl<;ation \o\ith European Union legislation. However, there are still different interpretations of the fiscal legislation. In various circumstances, the tax authorities may have different approaches to certain issues, and assess additional tax liabilities, together v,ri.th late payment interest and penalties (accruing at a rate of % p.a. in 2016, 22% for 2015). In Romania, tax periods remain open for 7 years. The Bank's management considers that the tax liabilities included in these financial statements are fairly stated, and they are not aware of any circumstances which may give rise to a potential mate1ial liability in this respect. During 2016, a Fiscal Audit was performed in respect of VAT and no significant findings have been identified. Transfer pricing Romanian tax legislation includes the arm's length principle according to which transactions between related parties should be cattied out at market value. Local taxpayers engaged in related party transactions have to prepare their transfer pricing documentation file. Failure to present the transfer pricing documentation file, or presenting an incomplete file, may lead to non-compliance penalties; additionally, not \ vith standing the contents of the transfer pricing documentation, the tax autho1ities may interpret the facts and transactions differently from management and impose additional tax liabilities resulting from transfer price adjustments. The Bank's management believes that the Bank will not suffer losses in case of a fiscal inspection on the subject of transfer ptices. However, the impact of any challenge by the ta."x autho1ities cannot be reliably estimated. Compliance with covenants The Bank is subject to certain covenants primarily relating to its borrowings. Non-compliance with such covenants may result in negative consequences for the Bank including grov,1:h in the cost of bon-owings. The Bank was in compliance with covenants at 31 December of 138 TiiiR,,ersion of our repmt/the acc'.ompan:,-i ng documents is a translation from the origin~!, which wa~ prepared in roil:lanian. All possible care has heen taken to ensure that the translation is an accurate rcpn:sentation of the,mg1nal. However, m all matters of interpretation of infonnation, views or opinions, the original language version of our n:port takes preceden c.e over this translation.

170 FOR THE YEAR ENDED 31 DECEMBER (All amounts in RON thousand unless otherwise stated) 34 COMMITMENTS AND CONTINGENCIES (CONTINUED) Assets pledged/ restricted The secu1ities pledged represer.t RON 68,824 thousand (2015: RON 242,247 thousand) rcpo transactions presented in Note n and RON 13,657 thousand (2015: RON 27,462 thousand) - guarantee.s for the Bank's oper,.tions through Clearing House and Transfond. In the committed rent contracts for the branches, where the Bank is the lessee, the future minimum lease payments under non-cancellable building operating leases are as follows: ~ gfil_fi No later than 1 year 46,270 55,779 Later than 1 year and no later than 5 years 144, ,443 Later than 5 years 30,703 59,243 Total ~1 181 ~ While the future minimum lease receivables under non-cancellahlc buildin g operating ]eases are as follows: No later than 1 year 3,868 5,706 Later than t year and no later than 5 years 7,610 10,624 Later than 5 years --- _.59 Total ~ ~ Most contracts may be unilaterally terminated by the Bank \N:ith a 3 to 6 months prior notice. In case of unilateral termination of the contract by the Bank, it is required a penalty fee, usually no more than 3 month rent value. Some of the contracts were negotiated "'1th advance payment which usually does not excee<l 3 months. 125 of 1 8 This version of our rep0t1/ t hc accompanying documents is a tr anslation from the original, which wn~ prepared in ron_innian. All possible care has heen taken to ensure that t he translation is an accurate repre~cntahon of the original. However, mall mallcrs of intp.rpretalion of information, views or opinions, the original longuage version of our!'(:port takes precedenr.p. over lhis translation.

171 (All amounts in RON thousand unless otherwise stated) 35 FAIR VALUE DISCLOSURES Fair values of financial assets and liabilities Analysis by fair value hierarchy of financial instruments carried at fair value Level 1: includes instruments quoted in active markets for identical assets or liabilities. Quoted prices must be readily and regularly available from an exchange or active index/market location and prices must represent actual and regularly occurring market transactions on an arm's length basis. Level 2: includes instruments whose fair value is determined using inputs that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. Derived from prices); and Level 3: includes instruments whose fair value is determined using inputs that are not based on observable market data (unobservable inputs). 31 December 2016 Level 1 Level2 Level3 Total Trading securities Treasury bills and bonds 642, ,605 available for sale 554, ,165 Repurchase receivables 68,824 68,824 Derivative financial assets 1,370 1,370 Other financial assets at fair value through profit or loss Equity investments 1,994 1,994 available for sale 1,392 1,392 Investment property 3.Q Q&zQ Total assets 1 268,958 ~ 1,3.01,229 Derivative financial liabilities Financial liabilities at fair 10,034 10,034 value through profit or loss 1,992 1,992 Total liabilities fi - = 12, of 138 This version of our report/the accompanying document.~ is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all mallen; of interprdation of inf01mation, views or opinions, the original language version of our report takes precedence over this translation.

172 (All amounts in RON thousand unless otherwise stated) 35 FAIR VALUE DISCLOSURES {CONTINUED) Level 1 Level 2 31 Decemhe Level 3 Total Trading securities Treasury bills and bonds available for sale Repurchase receivables 575, , , , , ,247 Derivative financial assets Other financial assets at fair value through profit or loss Equity investments available for sale Investment property 835 1,392 3.Q ,172 1,392 3.MQ9 Total assets Derivative financial liabilities Financial liabilities at fair value through profit or loss Total liabilities 1, ,414 ~ MJ.s,646 27,414 Financial instruments not carried at fair value The following table summarizes the fair values and the carrying amounts of those financial assets and liabilitles not presented on the Bank's balance sheet at their fair value. This version of our repo11/the accompanying docmncnts is a translatio n from the original, which wa.~ prepared in rom anian. AJl possible care has b<--cn taken to ensure that the translation is an accurate representation of the original. liowever, in all orntters of i.nterµretation of information, views or opinions, the original language Vt'.rSJon of our report takes precedence over this translation.

173 FOR THE YEAR ENDED,31 DECEMBER 2016 (All amounts in RON thousand unless otherwise stated) 35 FAIR VALUE DISCLOSURES (CONTINUED) 31 December 2016 Lev~l 1 Lc:yel 2 Level 3 Total Cash and balances... ith Central Bank 162, ,549 36,057 Due from other hanks 972, ,835 Loans and advances to customers 3,194,998 3,194,998 Other financial assets ,167 ~ Total assets lp2 508 J.~~.384 3,21.16.s 5,.125,0S7. Due to other banks 1,081,180 1,081,180 Customer Accounts 4,411,421 4,411,421 Subordinated debt 249, ,822 Other financial liabilities 44,111 44,111 Total liabilities _1, ,354 5.,2.86, December 2015 Level 1 Level2 Level3 Total Cash and balances with Central Bank 177, , ,343 Due from other banks 1,124,276 1,124,276 Loans and advances to customers 3,456,583 3,456,583 Other financial assets ~ ~ Total assets ,714 '3.478,4.15 5,497,094. Due to other banks 2,095,561 2,095,561 Customer Accounts 3,901,717 3,901,717 Subordinated debt 248, ,934 Other financial liabilities 51,533 Sl.53.1 Total liabilities --= 2,095,561 14,202,l~ 6 2~:z; :z: of138 This vp.rsion of our report/the accompany; ng rlocumeuts is a I ranslation from the original, which was prepared in romanian. AJ! possible care h:is t,een taken to cn~mre that the translation is an accurate rcptc>$entation of the, original. However, in all matters of intcrprdation of information, views or opinions, the original languuge ve rsion of our report takes precc<lcnc;p over this I rn nslation.

174 (All amounts in RON thousand unless othenvise stated) 35 FAIR VALUE DISCLOSURES (CONTINUED) a. Due from other banks Due from other banks includes inter-bank placements and items in the course of collection. The fair value of floating rate placements and overnight deposits is their carrying amount. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts \<\'ith similar credit risk and remaining maturity. Considering that the products are priced based on variable interest rates, there are no significant differences between fair value and carrying value. b. Loans and advances to customers Loans and advances are net of provisions for impairment. The estimated fair value of loans and advances represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted at current market rates to determine fair value. Considering that the products are priced based on variable interest rates, there are no significant differences between fair value and carrying value. c. Deposits and borrowings The estimated fair value of deposits with no stated maturity, which includes non-interestbcai;ng deposits, is the amount repayable on demand. The estimated fair value of fixed interest-bearing deposits and other borrowings without quoted market price is based on discounted cash flows using interest rates for new debts ¼1th similar remaining maturity. Considering that the products are priced based on variable interest rates, there are no significant differences between fair value and carrying value. 129 of 138 This version of our report/the ar.compan;ing documents is a trnnslation from the original, which was prepared in romanian. All possible care has been taken lo ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views 01 opinions, the original language version of our report take>.~ precedence over this trnnslation.

175 (All amounts in RON thousand unless otherwise stated) 35 FAIR VALUE DISCLOSURES (CONTINUED) d. Available for sale and trading investment securities Fair value of investment securities is established by using valuation techniques and internally developed models. These include the use of discounted cash flow analysis after developing a theoretical zero yield curve and applying a spread to quantify liquidity risk. The theoretical zero yield curve is calculated by using market prices from Reuters (bid prices for bonds), determining by a recursive procedure the yield curve with 9 nodes for RON denominated fi nancial instmments and 4 nodes for EUR denominated financial instruments that would minimize the difference between results obtained and market prices. e. Derivat ive financial assets and liabilities As of 31 December 2016, the present value of the derivative financial instruments is computed using Euribor/Libor interest rates for foreign currencies as published on Reuters. Interest rates for the local currency are determined based on Euribor/ Lihor interest rates and on the EUR/RON swap points that are taken from Reuters as mid-market of the arithmetic average of two of the largest banks in Romania. The management of the Bank considers the rates published by these two banks as reliable, given their size, importance for the Romanian banking system and active presence on the market. Using the average of the two banks' quotes alleviates the effect of possible outliers. The two banks arc important counterparties of the Bank. By using these swap points, the EUR/ RON spot exchange rate and the Euribor/Libor for EUR/RON the implied rate is extracted and consequently used to calculate swap points for USD/ RON, CHF/RON, GBP/ RON, JPY/RON. Further these interest rates and CCY /RON spot exchange rates published by NBR are used to determine the fon-vard/ swap points that are considered in the valuation of currency swaps and forwards. f. Financial assets at fair value through profit or loss ("FVTPL") The mark-to-market for the Gold Account product is done at NBR rate (RON/gram) valid for the day and transformed into ounces. For gold account there is no opened position, all client deals are immediately closed with the provider financial institution. 1 o of 1 8 This version of our report/ lhe nccompanying documents is a tran.slation from the ol'iginal, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of info1mation, views or opinions, the original language version of our report takes precedence over this translation.

176 (All amounts in RON thousand wtless otherwise stated) 35 FAIR VALUE DISCWSURES (CONTJNUED) g. Equity inve.stments available for sale Investment securities available for sale include equity securities v.ith a carrying value of RON 1,392 thousand (2015: RON 1,392 thousand) which are not publicly traded. Due to the nature of the local financial markets, the current market value for these investments is not available. Management could not reliably estimate the fair value of the Bank's investment in shares of Biroul de Credit SA, Transfond SA, Casa de Compensare Bucuresti SA, Fondul de Compensare a Investitorilor SA., S\.VIFf, Dcpozitarul Central an d Piraeus Leasing. The investments are carried at cost of RON 462 thousand, RON 326 thousand, RON 3 thousand, RON 2 thousand, RON 144thousand, RON 398 thousand, respectively RON 58 t housand. The investees have not published recent financial information about their operations, their shares are not quoted and recent trade prices are not publicly accessible. Management does not intend to dispose these investments in the foreseeable future. h. Investment property Investment property is property held by the Bank to earn rental income or for capital appreciation, or both and which is not occupied by the Uank. The fair value is determined based on discounted cash flow projections based on reliable estimates of future cash flows, supported by the tenns of any existing lease and other contracts and ( when possible) by external evidence such as current market rents for similar properties in the same location and condition, and using discount r-ates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. 131 of 1 8 This version of om report/the accompanying documents is II tran slation from th e original, which was prepared in romanian. All possible care has bt'*- n taken to c:ns ure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over th is tmnslation.

177 NOTES TO THE FINANCIALSTATEMENTS (All amom1ts in RON thousand unless otherwise stated) 36 RELATED PARTY TRANSACTIONS The nature of the related party relationships for those related parties with whom the bank entered into significant transactions or had significant balances outstanding at 31 December arc detailed below. Piraeus Bank Greece has concluded \-vith the Bank a real movable contract that covers the losses related to the exposures originated by the Bank with all the related parties companies (Debtors) Piraeus Bank S.A. Group (Greece). This real movable guarantee granted to the Bank is established in order to irrevocably and unconditionally guarantee the payment of the present and future debts of the Debtors to the Bank, representing present and future exposures of the Bank towards the Debtors up to the maximum amount of the outstanding of the deposits initially placed under 25 month agreement and loan received from Piraeus Bank Greece. The guarantee is specific to the exposures covered. A<:, at 31 December 2016 the outstanding value of the guarantee contract was RON 900,000 thousand, while the specific exposures covered were in amount of 499,011 thousand RON. The related parties considered for reporting purposes comprise of: Shareholders: Piraeus Bank SA (Greece) - current accounts, deposits, subordinated debt, derivatives, interest income, interest expense, commission expense; Others: Piraeus Bank SA (Greece) - current accounts, deposits, subordinated debt, derivatives, interest income, interest expense; Piraeus Bank London Branch, branch of Piraeus Bank SA (Greece) - current accounts, deposits, transferred loans (sub-participation), servicing fee for transferred loans; Piraeus Leasing, fellow subsidiary of Piraeus Bank SA (Greece) - current accounts, deposits, finance lease agreements, loans granted, subordinated loan, interest income, fee and commission income, income and interest expense for finance lease; Piraeus Bank Egypt, no longer subsidiary of the Group since March interest expense; Piraeus Bank Bulgaria, fellow subsidiary of Piraeus Bank SA (Greece) - current accounts; Piraeus Bank AD Beograd, fellow subsidiary of Piraeus Bank SA (Greece) -deposits, interest expense; Piraeus Real Estate Consultants, fellow subsidiary of Piraeus Bank SA (Greece) - current accounts, deposits, liabilities, collaterals' valuation services, fee and commission income, interest expense; Piraeus Bank Cyprus, no longer subsidiary of the Group since December 2016; ATE Insurance Romania, fellow subsidiary of Piraeus Bank SA (Greece) - deposits, interest expense; 1~2 of138 This version of our report/the acr.ompanying documents is a transl11tion from the orii,;inal, which was prepared in romanian. All possible. care has been l;1ken to ensure that the tnmslation i.~ an accurate representation of the original. However, in all matters of interpretation of information, "iews or opinions, the original language version of our report takes prec.edcnec over this translation.

178 (All amounts in RON thousand unless otherwise stated) 36 RELATED PAR1YTRANSACTIONS (CONTINUED) Project Season Residence SRL, fully o wned subsidiary of a fellow subsidiary of Piraeus Bank SA (Greece) - loans granted, current accounts, interest income and expense, fee and commission income; Daphne Real Estate Consultancy SRL, fully owned subsidiary of a fellow subsidiary of Piraeus Bank SA (Greece) - loans granted, interest expense, fee and commission income; Alecsandri Estates SRL, fully owned subsidiary of a fellow subsidiary of Piraeus Bank SA (Greece) - loans granted; Geniki Information S.A. - fee and commission income; General Business Management Investitii SRL- cunent accounts, fee and commission income; and Bank management - current accounts, deposits, and loans granted, interest income and interest expense. The other related pa1ties are included \.Vithin Group entities in the table below. Transad:ions ½1th local management are presented separately. The Bank's management is defined according to regulatory frame (OUG 99/2006 modified & Regulations/ ) and identified as: Members of management body in its supervisory function (BoD), Members of management body (ExCo), Senior management, Middle management for significant activities and Key function holder. 1, of 138 TI1is version of our report/the accompanyin){ docmuent~ i.: a t1:anslation from the original, wh_ich wa~ 1:'repared in ron:ianian. All possible care has been taken to ensure that the translauon 1s an accurate rej>resentat1on ot the ongmal. However, mall mattel's of intcrpr<-1ation of information, views or OJ>inions, thl\ ongmal language version of our report takes precedence over this translation.

179 (All amounts in RON thousand unless otherwise stated) 36 RELATED PARTY TRANSACTIONS (CONTINUED) Key Management Group entities Key Parent Management Group entities Parent Assets Current accounts at banks Placements with banks 85 22, , ,484 Loans to management 13,211 8,650 Loans to customers Derivative instruments Subordinated loans (companies) 821 1, , Other assets Total assets 486,880 ~ ZZ3,33Q l ' This version of our report/the accompanying documents is a translation from the. origini.tl, which was prepared i11 romanian. All possible care has been token to ensure t hat the translation is an accurate representation of the original. However, in all matters or interpretation of infonnation,,iews or opinions, the original language version of our report takes precedence over this translation.

180 NOTES TO TIIE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER (All amounts in RON thousand unless otherwise stated) 36 RELATED PARTY TRANSACTIONS (CONTINUED) Key Management Group entities Parent Key Management Group entities Parent Liabilities Current accounts and due to other banks Asset management liabilities , ,844,403 (principal and interest) 62,481 15,486 Due to customers 39,505 44,616 Subordinated debt 249, ,934 Deposits from management 3,884 3,547 Derivative instruments 9,945 24,904 Other liabilities 442 4ilil 2Z9. g,661 Total liabilities ~ ~ 112~3,.~ ~ ~ g,143, of 138 This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of infmmation, views or opinions, the original language version of our repmt t11kes precedence over this translation.

181 (All amounts in RON thousand unless otherwise stated) 36 RELATED PARTY TRANSACTIONS (CONTINUED) Revenues Jnterest on loans Interest on money market Placements Key Group Key Group Management entities Parent Management entities Parent ,401 8,746 4,809 Gains less losses related to swaps Commission income from 21,220 28,905 administration of transferred loans 72,987 59,683 Other commission income Trading income (FX swaps) Interest on subordinated debt ,407 5,869 6,871 Rental income Total revenues :z ~ W?. 95.'.! ~ 1s.ao? =93..l2.Z 36 of 1 8 This version of our report/the accompanying documents is a translation from the original, which was pr~pa1 ed in romani1\n. All possi\ik care has been taken to ensure that the l.ranslation is an accurate representation of the original. However, in all matters of interpretation of infonnation, views or opinions, the original language version of our report lakes precedence over this translotion.

182 (All amounts in RON thousand unless otherwise stated) 36 RELATED PAR1YTRANSACTIONS (CONTINUED) Key Groun Key Group Management entities Parent Management entities Parent Expenses Interest on deposits from customers ,036 Interest on deposits from banks Interest expense with loans Expense,vith management salaries Fees an d third parties expenses 12,467 12, ,824 50,477 Commission expense 3 1,388 Rental expense Qg --- ~ Total expenses ~ g.tzj.'.z ~ ~ ~ 13 of 1 8 This version of our report/the accompanying documents is a translation from the original, which was prepared in romanian. All possible care has been token Lo ensure that the translation is an accurate representation of the originnl. However, in all matters of interpretation of information, views or opi nions, the original language ve1-i;ion of our 1-eport takes p recedence ove.r this translation.

183 (All amounts in RON thousand unless otherwise stated) 36 RELATED PAR1Y TRANSACTIONS (CONTINUED) Average interest rates Deposits due to Parent RON EUR GBP Deposits due from Parent RON EUR USD Deposits due to Piraeus Leasing RON EUR USD Subordinated loans to Piraeus Leasing RON (margin over Robor) Deposits due to Piraeus Insurance Reinsurance RON Deposits due to ATE Insurance Reinsurance RON EUR Deposits due to Piraeus Real Estate Consultants RON 2016 Min 2.50% 0.19% 0.75% 2.35% -0.35% 0.00% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 2015 Max Min Max 2.70% 0.02% 3.00% 2.18% 0.01% 2.50% 0.75% 0.75% 0.90% 2.35% 0.00% 0.00% 1.50% 1.50% 1.50% 0.00% 0.00% 0.00% 1.59% 0.05% 1.60% 0.90% 0.05% 1.60% 0.80% 0.10% 1.50% 3.25% 3.50% 0.05% 340% 1.70% 0.05% 0.50% 1.50% 0.05% 2.50% 1.60% 0.05% 2.80% The level of interest rates for the management transactions is according with the retail standard products for deposits and according with staff loans procedure in relation to loans. The financial statements on pages 1 to 138 were signed on behalf of the Board of Directors on 4 May 2017 by: eaulin,vu I} Executive Generl i, ;V\ ~nt ger Viorel MiJ~.f Deputy General Man:\g,~, 138 of 138 ll1is version of our report/the accompan;~ng documents is a tra11.~lation from the original, which was prepared in romanian. All possible ccjre has been taken to ensure that the translation is an accur:ite representation of the original. However, in all matters of interpretation oi information, views or opinions, the original language version of our report takes pn.'cedence over this trnnslnt.ion. \.

184 PIRAEUS BANK Piraeus Bank Romania S.A. BOARD OF DIRECTORS' MANAGEMENT REPORT 2016

185 PIRAEUS BANK Table of Contents: 1. Overview of the Romanian Market 1.1 Macroeconomic Developments 1.2 Romanian Banking System 2. Developments in the Greek Economy and the Greek Banking System Results of Piraeus Bank Group (the parent company) 4. Bank's Financial Statements for Balance Sheet Evolution 4.2 Profit and Loss Account 5. Risk Management 6. Business development - innovation 7. Human Resources 8. Corporate Social Responsibility 9. Strategic objectives for Page 12

186 PIRAEUS BANK 1. Overview of the Romanian Market 1.1 Macroeconomic Developments Romanian economy posted a solid growth of 4.8% YoY in 2016, following a 3.9% GDP expansion in On utilization side, household consumption remained the main driver (climbing by 7.3% YoY while. contributing 5.0% to GDP's growth) supported by the favorable prices evolution following the tax cuts in the last two years and by the increase of disposable income prompted by public wages hike. Gross fixed capital formation dropped by 3.3% YoY negatively contributing 0.8% to GDP growth, jeopardizing economy's com petitiveness and questioning the sustainability of economic growth. Net trade had also a negative contribution of 0.7% to GDP growth showing consumers' propensity to acquire imported goods. On formation side, trade and leisu re sectors contributed together 1.9% while growing by 11.3% YoY. IT sector brought 0.7% to economic expansion although it stays only for 5.5% of GDP after growing by 13.8% YoY. Industry, staying for 23.1% of total GDP inched up by 1.8% in 2016 contributing 0.5% to economic growth. Net taxes contributed 0.5% to GDP advance weighting 10.2% in GDP formation following a 6.5% rise YoY. Constructions inched up by 1.8% YoY while contributing 0.1% to economic growth. Current account deficit continued to widen in 2016 reaching 4.11 billion. Trade deficit grew by 19.3% YoY to 9.30 billion as exports' growth was slower than imports' advance supported by household's consumption. The negative growth was capped by the sign ificant improvement of services exports. Foreign direct investments climbed in 2016 to 3.91 billion from 2.96 billion in 2015 but remained subdued. Budget deficit widened to 2.41% of GDP as a result of fiscal policy relaxation while staying way below the 2.75% annual target. Fiscal policy was also the main driver of yearly inflation rate evolution which closed the year for the second time in a row in the negative territory at -0.54%. In December 2016, the public debt-to-gdp ratio declined to 37.6% from 38% at end The largest cont ribution to the decline in public debt stock came from t he external debt component, which dropped YoY from 18.91% of GDP to 18.2% of GDP, wherea s the domestic debt rose slightly in the above mentioned period (up 0.3pps, to 19.4% of GDP). Consumer confidence index remained on a positive trend. Increase of private consumption and investments are expected to be the main engine of GDP advance in Page I 3

187 PIRAEUS BANK In its Winter Forecast, the European Commission indicates swifter expansion in 2017, i.e. 4.4%. Specifically, in 2017, Romania is expected to have the second-fastest GDP growth rate in the EU, standing also significantly higher than the EU average (1.6%). The pick-up in economic activity is estimated to be powered by stronger domestic demand, which may translate into import growth outpacing export growth. Thus, in 2017, the current account imbalance is estimated to worsen to -2.9% from -2.4% in The public budget deficit estimated by European Commission for 2017 is estimated to be well over the initial budget projection of 2.99%, reaching 3.6%. In the absence of economic policies that should ensure sustainable growth, a significant risk of overheating of the economy emerges. The risk emerges especially from the rapid growth of GDP, well over the economy's potential, which has demonstrated that can lead to major imbalances and massive corrections. Against this background, a coherent fiscal policy stance and the further pursuit of reforms to ensure an investment-friendly environment are top priorities in the coming period. 1.2 Romanian Banking System In 2016 Central Bank kept the key rate at the historical minimum of 1.75% while reducing to 10% required minimum reserve ratios on foreign exchange denominated deposits. This released around 530 million in the banking system. Expectations are the NBR to maintain the monetary policy rate unchanged at 1.75% until Q RON denominated government papers yields curve slipped during the first three quarters of the year and inching up moderately in the last three months of 2016 in line with the global evolution. Sovereign yields grew globally pushed by the outcome of US presidential elections and by expectations over the monetary policy of major central banks (ECB, Federal Reserve). Banking system continued to consolidate in 2016, supported by solid economic growth and by the diminishing stock of non-performing loans. Profitability is in positive territory at aggregate level, yet the banking sector displays heterogeneity in terms of individual banks' profit-making capacity. In particular, the first 3 banks account for more than 70% of the sector's RON 4.3 billion profit reported at year-end. 27 banks out of 37 reported positive result for Return on equity reached 10.7% in 2016, compared to 11.8% in Return on assets declined from 1.24% in 2015, to 1.10% in Banks' results were hampered by two laws enforced in 2016 which negatively impacted the activity of banks, i.e. Giving in Payment law (DIP) and CHF conversion loans. However, given the recent rulings of Constitutional Court, final impact of the two laws being lower than initially estimated. Constitutional Court decided that DIP must respect the Civil Code, so the debtor must prove that: he/she entered into default because of unpredictable circumstances (the debtor can't pay); and that he/she tried to settle with the bank; and a court of law must decide that. Therefore, the law is no longer a loss event for banks at the moment of adoption, but only on a case by case situation, when a court decides so. Losses are phased-out over many years. However, problems remain: debt does not go away, and the need for a solution remains. There is no standard for what unpredictable means. Common understanding and common practice is still needed. Page 14

188 PIRAEUS BANK CHF conversion law was adopted by the Parliament, but the Constitutional Court decided that the law is not constitutional. NBR advocated for a bilateral negotiation between banks and debtors with CHF loans. One size fits all is not the best option, each particular case requires individual solution. Romanian banking system continues to report adequate capital adequacy indicators. The substantial capital reserves of banks ensure a high absorption capacity of potential losses stemming from exogenous shocks and lay the groundwork for a sustainable resumption of lending to the real economy. Total capital ratio (gauging system's solvency) of the banking system dipped marginally to 18.33% from 19.16% registered at the end of Domestic credit increased in real terms by 2.1% YoY in 2016 to RON billion. Loans to the private sector climbed by 1.2% while government loans advanced by 4.3% during last year. Foreign currency denominated loans' weight in total loans continued to diminish, RON denominated loans' appeal to customers increased due to better interest rates. The disbursements made through "Prima Casa" Governmental program still had a strong contribution to the advance of the housing loans, while the DIP law enforcement generated a reduction in demand for these types of loans, following the increase in the down payment by most of the banks. At the end of 2016, deposits of non-government residents inched up by 8.2% YoY to RON billion. Deposits remained the main financing source for banks, Romania enjoying a higher level of financing assets from non-banking customers than euro zone does. Banking sector liquidity remained abundant, with institutions holding enough resources for both securing robust lending to the economy and withstanding potentially negative liquidity shocks. The loan-to-deposit ratio across the system stayed on the downtrend that began in 2012, dropping more than five percentage points during 2016 reaching 79.3%. The group of banks with majority Greek capital succeeded to regain part of the deposits lost during the peak of financial crisis in Greece from the mid The ratio of non-performing loans, according to European Banking Authority definition, declined from 20.7% at 2014 end to 13.5% at 2015 end and further to 9.5% at 2016 end, supported by balance sheet cleaning operations. In 2016 the quality of bank assets improved: (i) the non-performing loan ratio posted a downward trend, while (ii) net provision charges declined markedly. These developments had a favorable and important impact on the Romanian banking sector's profitability. Foreign financing kept shrinking, being offset by higher domestic resources. The share of foreign liabilities in total liabilities came in at 11.8% (YoY down by 3.7 pp) as of December Page I S

189 PIAA US BANK 2. Developments in the Greek Economy and the Greek Banking System The volatile macroeconomic and financial environment in Greece remains the main risk factors for the Greek banking sector. Even though 2016 was marked by a series of positive developments for the Greek economy - such as the successful conclusion of the first review for the third economic policy program, further relaxation of capital controls, reinstatement of the waiver for ECB refinancing with Greek bonds collateral and short term measures for the relief of Greek public debt - that limited the uncertainty and improved the economic sentiment, it was not enough to completely restart the economy and push it towards positive growth. During 2016, the Greek economy declined by a marginally rate of 0.1% (versus a -0.3% in 2015; seasonally adjusted data}. GDP grew during Q2 and Q3 but it recorded a 1.2% drop in Q4. Domestic demand had a positive contribution in 2016, mainly due to the increase in private consumption, whereas the contribution of international trade was negative. Inflation continued its deflating trend albeit at a slower pace (-0.8% versus -1.7% in 2015). For the first time after 45 months of decline, YTD inflation was zero in December and entered positive territory in January & February. The unemployment rate slightly improved to 23.5% in 2016 versus 24.9% in Current account balance posted a deficit of -1.1 billion (-0.6% of GDP), compared to a surplus of around 0.2 billion {0.1% of GDP} in Travel receipts declined by 6% (an 11% reduction in average spending per trip) while incoming travel traffic increased by 5%. On a fiscal level, a primary surplus for the state budget of approximately ( 4.4 billion is anticipated for 2016, exceeding the target of 0.5% of GDP and reaching 1.1%, while the estimate for 2017 is to attain 2.0% of GDP. At the end of 2016, the economic sentiment index stood at 91.8 points, compared to 89.7 points in 2015, but the negotiations for the completion of the second review led to a renewed heightened uncertainty and to a decline in the index during the first two months of The conclusion of the second program review, the timely disbursement of the program installments for debt repayment and reimbursing state arrears to private sector suppliers and the implementation of debt relief measures, all remain critical to the process of economic recovery in 2017, at both macroeconomic and fiscal level. The Greek banking system, following the completion of the recapitalization at the end of 2015, has gained significant buffers of additional capital that further strengthen the balance sheet of its banks, despite the prevailing conditions in the domestic economy. On the lending side, the annual adjusted reduction rate of domestic private sector financing reached 1.5% ( 195 billion) in December 2016 (from -2.0% in 2015). The loans to deposits ratio improved to 120% in December 2016 from 128% in December Deposits in the domestic market increased by 4% and amounted to 139 billion. Page I 6

190 PIRAEUS BANK Exposure of all Greek banks to the Euro system decreased to 67 billion at the end of December 2016, from 108 billion a year before, of which 44 billion were covered through ELA liquidity mechanism ( -25 billion annually) and 23 billion from ECB refinancing( -16 billion annually). On June 22nd 2016, the European Central Bank has decided to reinstate the waiver regime for the eligibility of tradable securities issued or guaranteed by the Greek State, making Greek bonds eligible as collateral for the refinancing of Greek banks. Additionally, the European Financial Stability Facility (EFSF) has allowed Greek banks that had previously received notes as part of their recapitalization, to sell said notes under the ECB quantitative easing program. Greek banks participated in the long term TLTRO (targeted longer-term refinancing operations) program of ECB, which was announced on March 10th, 2016, conditional on the existence of eligible collateral. The high level of non-performing loans remains the biggest challenge for the Greek banking system. In late November 2016, the Bank of Greece in cooperation with the Single Supervisory Mechanism (SSM) of the European Central Bank set quarterly and annual operational targets for the reduction of non-performing exposures of Greek banks. These measures are estimated to decrease the non-performing exposures from approximately 107 billion in September 2016 to approximately 67 billion by the end of 2019 (a 38% decrease). The downward trend in non-performing exposures (NPEs) was already visible during the first two quarters of implementing the operational targets {Q3 and Q4 of 2016) due to the implementation of effective restructuring arrangements and write-offs Results of Piraeus Bank Group {the parent company) On the business level, the most important corporate events for Piraeus Bank Group during 2016 and up to the publication of the 2016 annual financial statements were the following: The Common Equity Tier 1 ratio of the Group was 17.0% at the end of The fully loaded CET-1 ratio stood at 16.2%. At the end of 2016, total equity amounted to { 9,824 million vs. 10,021 million at the end of In Q4.2016, the capital position was affected by the interest coupon payment( 118 million) for the 2,040 million contingent convertible bonds (Cocos). On 19 February 2016, Moody's upgraded the credit rating of the senior debt of Piraeus Bank to 'Ca' with a stable outlook from 'C', and affirmed the credit rating of its deposits to 'Caa3', changing the outlook to stable from negative. Page I 7

191 PIRAEUS BANK Customer deposits reached { 42.4 billion at the end of 2016, higher by C 3 billion annually, following further capital controls relaxation in Greece in mid 2016, clearance of State arrears towards private sector providers, as well as Piraeus Bank's targeted product offering and client campaigns. All the increase was recorded in the second half of the year. Deposits in Greece recorded a 2.8 billion increase in 2016 and amounted to 39.3 billion, while international deposits reached 3.0 billion at the end of 2016 from 2.8 billion at the end of Gross loans before impairments and adjustments amounted to 66.6 billion at the end of December 2016, while net loans amounted to 49.7 billion. Total gross loans in Greece stood at 63.0 billion, while loans from international operations amounted to 3.7 billion. Net loans to deposits ratio substantially improved to 113% from 126% respectively excluding the seasonal OPEKEPE agri-loan. Following EFSF's decision in April 2016, Greek banks that had received EFSF notes in previous years in the framework of their recapitalization and/or the consolidation of the banking sector, started to participate in the quantitative easing program ( QE") established by the ECB by selling the respective notes. Up to December 31, 2016 Piraeus Bank has sold EFSF notes with a nominal value of 3.7 billion within the framework of the QE program. On 28 April 2016, Piraeus Bank's last remaining guarantees of the Hellenic Republic under Pillar II used by the Bank for liquidity purposes were redeemed. Piraeus Bank already repaid the Preferred Shares (Pillar I) held by the Greek Government in the Bank's share capital in May 2014, while it returned the 11 Special Bonds" (Pillar Ill) to the Government in September Upon redemption of Pillar II bonds, Piraeus Bank no longer had any reliance on the measures of Greek Law 3723/2008, and therefore it was no longer subject to the restrictions of the support scheme, which, among others, required the appointment of a Greek State representative in its Board of Directors, as was the case during the last seven years. It is noted that Piraeus Bank has fully repaid all the Pillars of L. 3723/2008, without any loss occurring to the Greek State as to the guarantees and capital it offered, while the Greek State earned approximately 675 million fees from Pillars II & Ill. ECB's decision on 22 June 2016 to reinstate the waiver affecting the eligibility of marketable debt instruments issued or fully guaranteed by the Hellenic Republic as collateral for the supply of liquidity subject to special "haircuts" (put into force on 29 June 2016), resulted to the reduction of Piraeus Bank's funding from the ELA mechanism by 1 billion. Euro system funding has significantly reduced by 16.4 billion to 20.9 billion at the end of 2016 from C 37.3 billion at the end of June 2015 (peak of uncertainty). In particular, ELA funding dropped to 11.9 billion at the end of 2016 from 16.7 billion at the end of 2015, while ECB to 9 billion from 16 billion respectively. Interbank repo balances increased further to 5.9 billion in December 2016 versus 1.7 billion a year earlier. Page 18

192 PIRAEUS BANK At the end of March 2017, Euro system funding was further reduced to 15 billion, with both a reduction of ELA( -1 billion} and ECB financing( -5 billion) vs. the end of 2016, while interbank repos increased to 8 billion. On 2 August 2016, S&P Global Ratings upgraded the credit rating of Piraeus Bank to "CCC+" with Stable outlook from "SD" before. During December 2016, Piraeus Bank was first to launch in the Greek market a new model of a fully automated e-branch, which offers a comprehensive range of banking transactions, initially in three points within the Attiki region. Among the pioneering services offered is the "virtual cashier", through which customers can perform through a video call with a cashier of the Bank at least 90% of transactions provided at a conventional cashier teller Piraeus Bank. During January 2017, within the framework of ECB's QE Program, Piraeus Bank sold bonds worth 0.7 billion nominal value. After January 23, 2017, Greek banks' participation in the program stopped, as a result of sending a binding letter of participation in the bond exchange program, within the framework of short-term relief measures of Greek public debt. In February 2017, within the framework of the short term measures for the relief of the Greek public debt, the exchange of variable rate EFSF and ESM notes held from the Bank with European Stability Mechanism (ESM) fixed rate notes was initiated. On 16 February 2017, within the framework of its Covered Bond program, Piraeus Bank issued 1 billion, through a new (3rd) series of Covered Bonds, with Greek residential mortgages as a cover. The issue was retained by the Bank and is planned to be used as collateral for providing liquidity in the interbank repo market. The Bank's strategic pillars going forward have been set and are the following: a) best practices in corporate governance, with substantial presence of experts with extensive international experience on the Board of Directors; b) sustained profitability of the core business; c) swift implementation of the restructuring goals; d) exit from non-strategic activities that will free-up resources strengthening the core banking platform; e) initiatives related to digitalization and innovation, which will reduce operating costs and further enhance operational efficiency and customer experience. 4. Bank's Financial Statements for 2016 The financial statements of Piraeus Bank Romania SA (the Bank) for the years 2016 and 2015 were audited by PricewaterhouseCoopers Audit SRL. The following comments on the financial position and the performance of the Bank are based on the IFRS financial statements and related notes prepared for the December 31, The equivalent in ( of figures from the profit and loss account was calculated using the average exchange rates RON / { published by the National Bank of Romania for 2016 and 2015 (2019: RON / 1, 2015: RON / 1). Page I 9

193 PIRAEUS BANK The equivalent in { of the figures in the balance was calculated using the RON / exchange rates at the end of the year, published by the National Bank of Romania (December 31, 2016: RON / { 1, December 31, 2015: RON / 1}. 4.1 Balance Sheet Evolution Assets Year 2016 was another very challenging year, the Bank being in the position to recover part of the deposits lost during the 2015, while prudently managing its liquidity and capital positions. The Bank remained fully engaged in the execution of its strategic objectives, placing an increased focus towards the reinforcement of income generating engines. During the year, the efficient management of non-performing loans continued to be a priority for the Bank. Concrete actions have been initiated for solving historical issues associated to CHF loans and contractual clauses, which potentially might be considered as "abusive". Also, the Bank continued the process of cleaning up the balance sheet by moving off balance sheet the non-performing loans fully covered with IFRS provisions. At the end of 2016, the total assets of Piraeus Bank Romania amounted 1,445.4 million compared to 1,566.3 million as of December 31, The downward movement was mainly driven by the repayments performed in Q4 to the parent, and by loans, which despite significant efforts done for gearing up lending activity, remained on a descending trend. Also as of December the Bank was managing assets amounting 1,284.2 million on behalf of Piraeus Bank - London Branch. Piraeus Bank Romania acts as agent for the London Branch, ensuring services of loans and repossessed collateral administration, while the risks and rewards substantially belong to PBG's subsidiary in London. In terms of assets structure, the Bank managed to maintain a high share of high liquid assets (cash and trading securities) and to slightly improve the contribution of net loans in total assets. The Net Loans decreased by 7.9% in absolute terms, but remained stable as a share in total assets. In the context of the decrease of total assets at the end of 2016 compared to 2015 (7.7%), the currency analysis of assets shows an increase of assets in local currency, reaching a share of 41.1% in total assets (( million in 2016 compared to million in 2015), compared with the decrease of assets denominated in foreign currency, reaching a share of 58.9% in total assets { million in 2016 compared to { 995 million in 2015). Page I 10

194 PIRAEUS BANK loans Within increased efforts for recouping the operating profitability, a core focus has been placed towards new lending. Contraction has been stopped in companies segments, but in retail area, loan sales remained significantly below repayments and off B/S bookings. Overall, the loan portfolio positioned bellow previous year figure( 59.8 million or 7.3%). Bank's total loan portfolio as of December 31, 2016 was in amount of million compared to 819 million at the end of previous year. The decrease was triggered by the large repayments and prepayments( 200 million), which overpassed the disbursements ( 144 million), sub-participation by PBG, London branch ( 44 million) and write-offs ( 28 million). The net movement of revolving loans positively impacted the loans value( 65 million). Reverting loans to a positive trend remains critical for the Bank which should attentively align its commercial offer and risk appetite in order to efficiently operate. In the context of the decrease of the loan portfolio, the structure shifted the trend from the previous year, as in 2016 the share of retail segment decreased to the detriment of companies' segment: 46.4% loans to companies (42.7% in 2015} and 53.6% (57.3% in 2015) loans to individuals. Regarding the structure of individual loans, mortgage portfolio slightly increased as a percentage of total loans (19% compared to 17.5% in the previous year) whereas the consumer loans and overdrafts decreased {33.8% compared to 39% in the previous year). Currency structure of the loan portfolio continued the same trend as in the previous year, meaning an increase of the share of local currency loans (from 37.9 % in 2015 to 44% in 2016) and a decrease of the share of foreign currency loans (from 62.1% in 2015 to 56% in 2016). The active and efficient management of non-performing loans remained essential aiming to maximize the recoveries. The Bank has made constant efforts to find the most appropriate solutions for the collection, restructuring, workout and enforcement. The process considered also an accelerated path of forced executions/ recoveries. The non-performing loans ratio dropped to 4% (from 4.3% at the end of 2015}. NPE ratio (EBA definition) increased from 10.2% in 2015 to 11.5% in The decrease of the nonperforming loans ratio are the result of continuous cleaning up (off balance-sheet booking of loans fully provided with provisions), but also of the active and efficient management through recovery business units. The loan provisions stock slightly increased to 55.6 million as of December 2016 compared to the end of the previous year( 55 million). On top of the pressures induced in retail segment by new legislative initiatives (with a significantly diluted impact after the last decisions of Constitutional Court), additional burden was associated to some individually significant exposures towards companies debtors, which entered in insolvency. Page I 11

195 PIRAEUS BANK The coverage with provisions increased slightly in 2016 reaching a level of 7.3% (compared to 6.7% as of December 31, 2015). Besides of IFRS provisions, the Bank recorded as of December 31, 2016 prudential provisions (used in the calculation of own funds} amounting to 58.9 million, decreasing by 7.7 million compared to the previous year. According to prudential regulations for 2016 filters are calculated as 40% of the difference between the IFRS and prudential provisions, this percentage gradually decreasing with 20% each following year. Liquid assets During 2016 the Bank continued to attentively manage the liquidity position, succeeding in providing a steady and sufficient liquidity buffers,an improved self-financing capacity (a reduced dependency on parent funding) and an improved funding mix. The improved liquidity position, allowed the Bank to meet its commitments towards the Group by repaying the large amounts which have been planned for 2016 ( 204 million). Despite large repayments made to the parent, Quick Ratio remained at very comfortable levels (57% vs. 54% as of December 2015) proving both, the cautious management of liquidity position and still weak performance in disbursing new loans. Carefully managing liquidity position, the Bank maintained a significant portfolio of government securities (Romanian sovereign risk), as one of the main instruments for liquidity management. The portfolio was managed dynamically and traded in accordance with the evolution of the bond market. On December 31 st 2016, the Bank held a portfolio of government securities of million, with a decrease of 8.6% from the end of the previous year( million). As concerns the structure of portfolio, 50.7% of total government securities have been held for trading( 141.S million), while the rest were in the category of assets available for sale ( million}, with a slightly decreased share of the available for sale portfolio. During 2016 the Bank did not classified any portfolio of securities as held to maturity. The outstanding of the amounts held with the Central Bank amounted to million, with an increase of 12 million compared to the previous year mainly due to improved base of customers' deposits. In general, the cash position was managed prudently and effectively, paying attention to operational needs (and costs), while discouraging large cash reserves. As of December 2016, placements with other banks amounted million. The amounts were placed mainly in euro {76% oftotal} and on short-term tenors. The net funding provided by the parent, decreased by 132 million following the reimbursement of funds from the last quarter of 2016, reaching 162 million at the end of Tangible and intangible assets As of December 31, 2016, the Bank's tangible assets continued to decrease, reaching 7.3 million from 11.7 million at the end of last year. The decrease from the previous year is mainly due to the yearly Page I 12

196 PIRAEUS BANK depreciation charges and to the write off of fixed assets and leasehold improvements related to branches closed in Intangible assets slightly increased compared to the previous year, reaching the value of 5.8 million from 4.9 million the previous year due to moderate investments made in order to streamline operational processes. Liabilities Deposits expanded in 2016 by 13% ( 109 million) reaching a level close to 1 billion ( 971 million). Within a context of calmer environment comparing with 2015, when large outflows have been recorded due to very high volatility induced by the developments in Greece, the Bank succeeded re-gathering deposits, showing robust accumulations in all segments. The Bank remained focused towards an improved mix, targeting a reduced concentration. Core deposits significantly improved their contribution reaching 25% of total deposits ( 240 million). Proactive measures have been adopted aiming to minimize the impact of branch closures. Good developments have been registered in all business areas, but individuals and small companies' segments remained the best performers, with increases over 40 million. The process of closing branches was properly managed, the impact on deposits being minimized( 12.5 million). The Bank remained focused to increase deposits base in the most efficient way. A balanced pricing policy was constantly promoted, covering both, competitiveness needs and profitability objectives. Aligning the pricing to the downward trend of the interest rates, taking advantage on the reduced risk adversity and gradual recovery of the deposits, the Bank successively decreased the interest rates, even though, the recovery in deposits remained robust enough. At the end of 2016, loans to deposits ratio (net of provisions) reached 73% {89% at the end of 2015). In terms of deposit segmentation, at the end of 2016 retail deposits account for 51% of total deposits, deposits from SME sector 22%, while deposits of institutional clients account tor 16% and corporate deposits 11%. Deposits from banks decreased in 2016 by 49% from 463 million on the back of the repayments towards the parent( 204 million}. The maturity of the 15 million subordinated debt received was extended with 2 years (until May 2018). Equity At the end of 2016 the Bank's equity decreased from million to million, the decrease being generated mainly by the negative impact of the loss of the year 2016 amounting 7 million. In December 2016, the subordinated loans granted to Piraeus Leasing Romania which accounted for 31 million have been sub-participated by PBG, London branch, having a significant positive impact on Bank's capital position. Page I 13

197 PIRAEUS BANK Despite negative bottom line, capital ratios significantly improved in 2016, mainly on the back of optimized structure of Tier 2 capital (releasing the 16.5 million deductions associated to subordinated loans granted to Piraeus Leasing Romania) and decrease in Risk Weighted Assets (operational risk calculated using observed data from the last 12 months). The Bank continuously met the regulatory requirements for capital adequacy, recording a solvency rate well above the minimum limit established by the NBR/ECB (10.63%). At the end of the year 2016 the capital adequacy ratio of the Bank was 19.57% {31 December 2015: 17.3%) and CETl ratio at 15.1% (an increase of 0.2pps compared to the end of 2015). The Bank will continue to promote a pro-active capital management, taking into account real capital availabilities as well as objective limitation for capital formation and acquisition. 4.2 Profit and loss account In 2016, the Bank registered a loss before tax of 7 million. The decrease by 63% of profit before provisions (amounting -2.8 million) was mainly due to a negative evolution of the net operating income ( -5.2 million). Profitability remains the key weakness of the Bank. Core focus should continue to be placed for gearing up income engines, aiming to substantially reinforce recurring Pre-provision Income, allowing an increased maneuver space for dealing with credit and operational risks. Income During 2016, the interest income dropped by 35% ( million) due to interest related to loans and advances to customers and also to low remuneration of alternative investments (interbank deposits, government securities). The decrease in financing costs was important{ million}, but doesn't succeed to offset the reduction on the income side. The loan related interest income decreased compared with the previous year by 39% ( -30 million). The decrease is mainly associated to both, performing( million) and non-performing loans( -9.6 million) mainly due to decreased volumes and the alignment to the downward trend of interest rates {low/negative indices). Interest income related to the securities portfolio slightly dropped by 8% ( -0.8 million) compared with the previous year. The increase of intragroup investments was reflected in th.e higher income from banks with 0.9 million. Interest income related to amounts placed at Central Bank slightly decreased ( -0.1 million), mainly due to the level of minimum reserve requirements and associated interest rate reductions. Interest rates on deposits from customers were objectively aligned to the downward trend of the market, and also to the profitability requirements. Consequently the associated costs have decreased compared with the previous year by 42% { -7.6 million), mainly through successive corrections applied to the RON and EUR deposits' rates, balancing pricing promoted by the Bank and improving funding mix (increased share of core deposits). Page! 14

198 PIRAEUS BANK It should be mentioned that in 2015, cost of risk was under large pressure, especially in retail segment, following the appreciation of CHF. Pressures persisted in 2016 too, being related to legislative changes/ initiatives (DIP, CHF conversion law), but also to quality deterioration in case of some exposures which are individually significant. Gross provision charges amounted { 28.2 million, showing a large YoY correction ( 38.2 million) which reflects that cost of risk has generally stabilized due to previous years' cleaning up actions. The result would have been better if we consider that it was affected by an impairment associated to a large corporate client which surprisingly entered into insolvency in Feb 2017 (being considered impaired as of Dec.16, IAS 10). Good recoveries during 2016 ( 10.1 million, with large contribution of settlement transactions) and incomes from sale (by 9.4 million) of loans off 8/S booked significantly contributed to a downward alignment of cost of risk (net), close to a normal /desirable level. Other provisions have been registered an increase of { 3.4 million YoY. Provisions for litigations recorded a level of 2.3 million, posting a decrease of 0.8 million. Provisions stock for litigations reached 5.3 million covering mainly litigations with retail clients claiming back amounts derived from margin increase, granting, administration and restructuring commissions, but also the conversion of CHF loans. In addition, provisions in amount of 6 million have been provided in 2016, covering part of the potential losses associated to some contractual clauses, which can be qualified as abusive. Releases in other provisions were related to amounts used for covering disposals of obsolete stocks or some compensatory payments. Last year level is explained by some staff related provisions built to support Group strategic objectives. Also releases in provision for impairment of leasehold improvements were recognized. In 2016 HFS had been reclassified in repossessed assets from foreclosed loans contracts. During 2016 a net income has been recognized in amount of 1.5 million compared with previous year when a loss of 10.2 million was booked. 5. Risk Management An efficient risk management is considered vital for the Bank in order to achieve its strategic objectives and to ensure quality returns to its shareholders, on an ongoing basis. In this context, the Risk Strategy defines the framework for the identification, assessment, monitoring and control of risks, in order to maintain their level within the risk appetite and risk-bearing capacity of the Bank. The Risk Strategy is the way to identify and manage significant risks of the Bank, which would occur in the normal business conditions and to formalize a robust framework for managing and controlling their conformity with the objectives of the general business strategy. The risks allocation system is developed to facilitate their identification at the levels of transaction and portfolio and, also, to allow structuring and prioritizing of the risks, based on the possible impact on the current activity of the Bank. Page I 16

199 PIRAEUS BANK The main objectives of the Risk Strategy are the following: Strong liquidity base, maintenance of capital adequacy and NPLs resolution are key objectives in this context; Constant enhancement of the Risk Management Framework and monitoring of control implementation and effectiveness; Developing and maintaining the risk awareness and culture across all levels {strategic, tactical, operational) of the Bank; Compliance with the current regulatory framework, supervisory requirements on risk management and adherence to the international best practices; Establishment of limits that maintain risks within acceptable levels according to the risk appetite of the Bank; Strong interaction between counterparties in the development and operations of the Risk Strategy. Alignment of strategic/business/capital and other planning processes with the RAF; Implementation of best practices in risk management that correspond to the size, the risk profile, the business strategy of the Bank and the continuous alignment and compliance with the regulatory requirements; Contribution in the improvement of the Bank's Internal Control System and Corporate Governance models; Constant monitoring and improvement of control mechanisms of the Bank's operations, in terms of risk management; Support of optimal capital allocation and the risk adjusted yield per business unit/customer; Involvement of the Risk Management Department in the Business Plan's Development. The Risk Strategy is approved by the Board of Directors and it is strongly connected to the Internal Capital Adequacy Assessment Process (ICAAP). ICAAP ensures proper link between the risk profile, the risk management and the capital owned by the Bank, representing an integral part of the management and decision-making processes of the Bank. Through ICAAP, the management body is able to assess the risk profile of the Bank and the adequacy of internal capital. ICAAP formalizes an integrated approach to the assessment of all risks, to which the Bank is exposed (not only Pillar I risks, but also all other risks, along with their potential interrelationship), and internally determines the amount of financial resources that the Bank should maintain in order to be aligned with the Bank's risk appetite, while also taking into account the Bank's peers. ICAAP includes: Pillar 1 risks of Basel II (risks which are set forth mandatory requirements of capital): credit risk, market risk and operational risk; Risks associated with the credit risk, such as: concentration risk, residual risk, counterparty credit risk, foreign exchange risk; Risks such as: banking book risk, liquidity risk, reputational risk, strategic risk, macroeconomic risk, regulatory risk; Page 117

200 PIRAEUS BANK Potential underestimation of operational risk, considering that standard approaches are used. ICAAP takes into account the Bank's strategic plans and the way they are related to the macroeconomic factors. The Bank has developed an internal strategy in order to maintain capital levels to certain limits. This strategy includes a number of factors such as: The projected evolution of the loans size; future sources and ways of use the funds, as well as any pro-cyclical change in the Pillar 1 minimum requirements. 6. Business development ~ innovation In 2016, the Bank sta rted a complex Digital Transformation initiative in order to create a unique customer experience for its clients. The whole initiative consists of 3 projects (Virtual Advisory, Natural Language Understanding and Quick Wins). The Virtual Advisory project is more advanced, being in testing phase, while the Natural Language Understanding is in the developing stage. The projects are estimated to go live in Piraeus Bank was among the first banks in Romania to have the entire cards portfolio contactless, making easier the usage and increasing the attractiveness of t he products for the customers. Additionally, in order to further boost custom ers' experience when paying their purchases with a Piraeus card, the Bank deployed all through the year variou s activation campaigns, offering cash-back functionality for both debit and credit cards for individuals, discounts granted in cooperation with important strategic partners (e.g. Cora Hypermarket) and automatic interest free installments for specific merchant categories. In order to facilitate the access to lending solutions, Piraeus Bank launched "1 minute offer" campaign. During the promotional period, the customers were able to obtain online estimations of the amount they were eligible for and to continue the process without being needed to visit a Piraeus Bank branch, until the moment of contract conclusion. "On e stop shop" became a standardized approach for consumer loans, the customers being able to sign the credit contracts when actually applying for the facility, so that in the moment of the approval to be able to directly access the funds. This approach was a natural continuation of the "one stop shop" concept for opening accounts and delivering on the spot all the necessary access tools (e.g. Visa Shop & Cash debit card, win bank), implemented in Taking care of the needs of its customers, Piraeus Bank implemented a dedicated program for the secured lending borrowers with exposures in CHF, who were negatively impacted by the unfavorable evolution of the FX rate. The offer included haircuts and conversio n in RON at preferential interest rates, aiming to reduce their monthly burden, while ensuring a correct repayment behavior (e.g. the haircut was granted in sequential tiers, conditioned by not registering overdue amounts). Piraeus Bank continued to focus on powering the bancassurance activity and launched two health insurance products addressed to the employees of the companies having payroll conventions. The products are Page I 18

201 PIRAEUS BANK providing national coverage in case of illness, accident injuries /medical procedures, as well as treatment abroad in case of serious illness and life insurance, paid by the company for its employees and subject to fiscal benefits. Throughout 2016, the PBR Branch Network has been focused on increasing sales, increasing the efficiency of operations and optimization of activities in order to adapt to the market restraints, as well as preserving the customer base and acquiring new clients. During 2016 PBR has continued extensively the usage of Portfolio Management actions as an effective tool for increasing penetration and loyalty among the existing customers and new business generation. 7. Human Resources The Bank reached a number of 1,322 employees at the end of 2016, comparing to 1,414 in The number of active employees as of December 2016 was 1,217, 8.9% below the same period of 2015 (1,337 employees). The recruitment process is made based on adequate procedures, without discrimination, using specific candidate selection systems and modern evaluation and selection instruments. These instruments may vary considering education level and experience of the candidate and include both competency tests and professional tests. The distribution of the employees based on age is a major advantage of the Bank, the average age being 37 years. 8. Corporate Social Responsibility In 2016 CSR actions were focused on the pillars already established in the previous years- education and ecology, trying to increase the awareness of causes, to involve more people and spread inside and outside the organization our CSR mission. The actions aiming contribution to society cumulated in 2016 over 700 internal volunteers which supported through direct donations 100 children and through indirect donations (Princess Margareta Foundation) approximately 500 children. The main CSR initiatives have been related to: 1. 1st of June- Children's Day celebrated at the Palace- an event which gave us the chance to support Princess Margareta Foundation and Special Fund for Children event which involved our internal volunteers. Page I 19

202 PIRAEUS BANK 2. School backpack action- internal actions in collaboration with Princess Margareta Foundation and Special Fund for Children which had as main objective to help several families with children from urban and rural areas. Through this activation we hope to support the education in families where the lack of resources leads to school abandon. 3. The Courage Book- creating a book inspired by the True Values gathered from real people's tales and transformed into children book represents another action which is developed to support the education and the evolution of new generations. 4. Christmas fair event- internal volunteers created Christmas dedicated items which were sold internally and all the funds were redirected to the Princess Margareta Foundation and Special Fund for Children. Except the above actions, PBR maintained active the CSR Facebook page - Curaj Romania, with its concept promoting the Romanian values. Internally, the Bank continued the eco-friendly strategy in recycling paper, batteries and plastic, by installing dedicated bins. 9. Strategic objectives for Strategic Objectives/ Initiatives The Bank is committed to implement a set of initiatives around 6 key strategic pillars: 1. Commercial and digital transformation around the customer; 2. Operational excellence: high quality customer service and increased efficiency; 3. Boosting income generation: expand lending and diversify the revenue sources; 4. Solid liquidity position: build a sustainable funding strategy; 5. Strong capital position: prepare to deliver organic capital generation; 6. Invest in people: retain and attract qualified and dedicated professionals. under the strategic pillars, as key strategic initiatives the Bank will focus on: (1) Commercial and digital transformation around the customer Initiatives: a. Embed customer-focused thinking in our frontline and back office functions; b. Offer excellence & convenience to customers in an omni-channel environment; c. Enhance cross-channel distribution, facilitating customers to use their channels of choice and directing them to use the most efficient channels from Bank's perspective; d. Create seamless journeys between channels with ability for client to pause and continue through another channel; e. Ensure a consistent experience across all channels (digital, branches); better understand what fosters customer engagement; f. Adapt our branch model to meet customer's needs (multi-format branch proposition, adapted to digital experience); Page I 20

203 PIRAEUS BANK g. Provide simple messaging to enable frontline employees to articulate the value of the offer in a language that is easy to understand; h. Provide the frontline with adequate tools and information, to enable frontline staff to take quick and correct decisions that help to resolve queries at the first point of contact; i. Promote simple and standard products for retail mass segment. Develop a modular product development process, to create 11 segment" customized products; j. Define campaign business models and gradually enhance them; k. Unlock organic profitable growth potential through customer loyalty. Develop loyalty and reward programs for customers; I. Promote a customer-based, value-driven measurement and rewarding systems; m. Establish a formal process to obtain and diligently react to customer feedback; n. Deliver a truly omni-channel experience, with seamless journeys between channels; o. Develop anticipatory services, supported by big data analytics, moving closer to client expectations; p. Provide collaborative advice (online); q. Build an agile IT infrastructure (core & client interaction systems}; r. Invest in digital across the value chain, starting investments in areas that create the most value; s. Security: building customer trust in our digital infrastructure and our ability to protect customer data; t. Redesigning the role of branches, as part of omni-channel experience i.e. branches should not only provide the physical choice of channels, but also deliver the same customer experience as digital channels. (2) Operational excellence Initiatives: a. Embed excellence in the mentality of the entire organization, keeping people aligned to Bank's vision and strategy; b. Strive for high service quality in all interaction touch-points to win customer preference; c. Continue to streamline processes and simplify procedures in order to improve the response time to our customers and generate sustainable savings; d. Continue optimizing the customer- journeys, eliminating inconsistencies and potential sources of customer dissatisfaction; e. Create journey maps for critical back-office/ support processes to identify the optimization needs and rationalization ways; f. Build core competency in advancing information architecture and analytical skills to improve management decision making and economic performance; g. Encourage the migration of branch-based customers to digital channels (web & mobile banking), enhancing in the same time the digital capabilities of our branches; h. Enhance Bank's technological ability to effectively support growth strategies while managing operational complexity and risks; i. Improve the allocation of resources, correctly sizing the headcount, in line with real operational needs; j. Continuously benchmark our customer related journeys and processes; Page I 21

204 PIRAEUS BANK k. Align our infrastructure and costs to real income generation capacity of the Bank (improved Cost-to-Income ratio); I. Maintain a tight control over costs and headcount, striving for an increased cost accountability {supported by a transparent cost allocation); m. Strive to embed efficiency-based thinking as standard behavior of the entire organization. (3) Boosting income generation Initiatives: a. Focus on SM Es, mid-market corporate, HH - affluent and mass; b. Focus on sectors with promising outlook (sustainable liquidity and profitability potential) and on lending relationship with a good risk-return and parallel / transactional business; c. Omni-channel approach in the sale process, leveraging on positive customer experience across channels; d. Achieve a stable mass of productive assets, safeguarding steady recurring core income, well in excess of operating costs; e. Increase in commissions, striving for high service quality and streamlined journeys for customers; f. Leverage distribution capacity to capitalize on bancassurance opportunity; g. Increase revenue contribution from existing customer base with effective cross-selling and upselling; h. Ensure an adequate management of NIM, while promoting a risk-based pricing on our lending products; i. Encourage pricing schemes which reward clients' good repayment and transactional behavior; j. Enlarge our funding base in an efficient way, constantly promoting a balanced pricing policy; k. Pursue for a stable funding position, striving for a reduced concentration, to avoid liquidity shortfalls and potential high retention premiums; I. Promote prudent credit-risk policies; m. Enhance profitability measurement at customer and segment level. (4) Solid liquidity position Initiatives: a. Promote a proactive liquidity management, continuously testing / up-dating the liquidity contingency plans; b. Self-finance the B/S development by observing the needs for income reinforcement, but keeping a firm grip on liquidity; c. Remain focused to increase customer deposits, targeting to expand in an efficient way the self-financing component, while reducing dependency on parent funding; d. An increased focus towards small and standard deposits, which are less volatile and help to reduce concentration; e. Strive to increase the core deposits establishing and deepening the Bank as the primary banking relationship of our clients; f. Target large deposits, as well (to consolidate the liquidity buffers}, but keep them under attentive liquidity management; g. Promote a mindful pricing, targeting a competitive offer, but aligned to profitability needs; h. Enhance data analytics to support segmental strategies and pricing; Page 122