ANNUAL REPORT OF THE BANKART d.o.o. COMPANY FOR THE JANUARY-DECEMBER 2011 PERIOD

Transcription

1 ANNUAL REPORT OF THE BANKART d.o.o. COMPANY FOR THE JANUARY-DECEMBER 2011 PERIOD This Annual Report was compiled on the basis of the Company s development plan, the audited financial statements for the 2011 business year and the human resources organisation plan. TRANSLATION NOTE: These financial statements and the accompanying audit report have been translated from the Slovenian original. This translation is provided for reference purposes only and is not to be signed. Ljubljana, 27 March 2012 Aleksander Kurtevski Managing Director

2 TABLE OF CONTENTS GENERAL ORGANISATION...3 MANAGEMENT BODIES...5 BUSINESS AREAS OF THE COMPANY...6 THE COMPANY S ORIENTATIONS...12 THE COMPANY S FINANCIAL OPERATIONS...13 MANAGING DIRECTOR S REPORT...14 BUSINESS AND FINANCIAL REPORT...18 PERSONNEL AND THE ORGANISATION...24 PERFORMANCE INDICATORS...26 FINANCIAL STATEMENTS WITH NOTES STATEMENT OF MANAGEMENT RESPONSIBILITY...27 AUDITOR'S REPORT...28 FINANCIAL STATEMENTS...30 SIGNIFICANT ACCOUNTING POLICIES...35 NOTES TO FINANCIAL STATEMENTS...40 OTHER DISCLOSURES Annual Report 2

3 Data on the Group The Company has the status of associated company of the NLB Group. The consolidated financial statements are available at the headquarters of NLB d.d. General organisation By combining the basic, classic and rigid organisational structure and the creative project system, Bankart successfully strikes and maintains a balance between its continuity and innovativeness. Its project organisational units encompass all departments. As most employees are included in them, these units can be regarded as a parallel structure. The basic structure corresponds to the production aspect of Bankart s operations, whereas the creative project system brings benefits to the innovative and creative aspects of operations. Organisational structure Bankart is headed by the Managing Director. Apart from the Managing Director, the management is composed of the officer authorised by the Managing Director, Director of Technology Department, Director of Financial- Accounting General Department, and Director of Information Technology Department. In terms of organisation, the Company is divided in four departments, consisting of a number of sections and management support services Annual Report 3

4 Project system In Bankart, development management is placed in the hands of the Company s management. The Project Office forms part of the Risk Management Department and is in charge of operational monitoring and control. Based on the project management methodology, the Company has introduced guidelines for organised project implementation with clear predefined criteria. The Internal Audit (IA) Bankart s Internal Audit was established in 2004 as an autonomous, independent and advisory function employing a systematic professional approach to risk assessment and management, control system and management of operations. The aim of the IA is to increase the efficiency of business risk management and to contribute to attainment of the Company s business goals. The main task of the IA is to provide to the Company s management and the Supervisory Board an objective and impartial assurance with regard to the risk management efficiency as well as an assessment of the adequacy of managing the key risks and the efficiency of the internal control system. The IA operates in compliance with the International Standards for the Professional Practice of Internal Auditing and adheres to the principles of independence, professionalism and impartiality as well as ethical principles as the fundamental principles of the auditing profession. Risk Management Department (RMD) The Risk Management Department implements activities which encompass management of risks, business continuity, the Central Documentation System and the Project Office. The core responsibility of the RMD is to ensure a comprehensive management of the risk process and business continuity and, by identifying risks and introducing efficient mechanisms and controls, reduce these risks so as to contribute to the achievement of the Company s business goals. The RMD administrates the Central Documentation System and manages the development and operations of the Project Office. Information Security Department (ISD) The mission of the Information Security Department is to protect the Company s information. Its basic task is to ensure a systematic development of the function of managing and ensuring information security as well as to design a comprehensive information security system. The latter enables the Company s management to systematically deal with adverse events and adopt measures as well as monitor the implementation of the measures and their effect on the Company s operations. Bankart s key business areas ATM operation processing, card operation processing, SEPA credit payment processing, SEPA direct debit processing, E-Invoice system processing (from 1 June 2011) and operations of the Bankart Collection Centre Annual Report 4

5 Management bodies General Meeting The members exercise their rights related to the Company's affairs at General Meetings. The General Meeting s resolutions are passed with a simple majority of the votes cast, except in cases of amendments to the Memorandum of Association, appointment and discharge of Supervisory Board members and decisions about a change in the Company s status or its termination, for which a three-quarter majority of the votes of all members is required. As a rule, the management convenes the regular General Meeting once a year. Supervisory Board The Company's Supervisory Board is composed of five members. The members are elected and discharged by the General Meeting. The Supervisory Board s resolutions are adopted with a simple majority of the votes cast by the members present. Members of the Supervisory Board Chairman: Miran Vičič Deputy Chairperson: Vlasta Brečko Members: Srečko Korber Robert Vrenko Marija Kordiš The Company s management Bankart s management body is the Managing Director who organises and manages the Company s operations, is responsible for lawfulness, and represents and acts as an agent of the Company. The Company's Managing Director is appointed and discharged by the Supervisory Board. Managing Director: Aleksander Kurtevski Officer authorised by the Managing Director, and Director of Division for Business Operations: Ivica Zemljak Director of Technology Division: Tomaž Borštner Director of Financial, Accounting & General Division: Maja Usnik Director of Information Technology: Gregor Pirc 2011 Annual Report 5

6 Business areas of the Company ATM operations Bankart controls and manages the ATM network for commercial banks and savings banks dealing in retail operations in Slovenia, and has a 95% market share. It continuously develops technological and technical solutions for the ATM network for both members and other users, and is responsible, in technological terms, for ATMs and the related software solutions. In the past period, it has expanded the ATM operation processing to the markets of SE Europe. In Bosnia and Herzegovina, it performs processing for NLB Tuzlanska banka d.d. and, in Kosovo, for NLB Prishtina sh.a. and BPB Prishtina. Services provided to ATM users Quick cash withdrawal, selected amount withdrawal, information on personal account balances, change of personal identification numbers, purchase of GSM prepaid cards, automatic cash deposit, electronic execution of payment orders (special payment order, universal payment order), printing out of personal account statement, cash deposit order, order to execute payment orders and information on credit card balance. Additional activities ensuring uninterrupted operation of the ATM network To provide a comprehensive range of products and services related to payment instrument processing, Bankart also provides the following additional services: authorisation of domestic and international payment instruments, advisory services in relation to ATM operations, generation and distribution of personal identification numbers (PINs), compilation of various instructions concerning ATMs and their management, training and education of bank employees in the field of ATM operations, submission of data for effecting payments, entry of keys and parameters required for ATM operations (installation), solving of complaints etc. Number of ATMs in Bankart s ATM network The number of ATMs in the ATM network has been increasing with years. Since 2000, the number of ATMs in Bankart s ATM network has more than doubled Annual Report 6

7 Chart 1: Number of ATMs by year (units) ATM and card types that can be used in the ATMs within Bankart s ATM network Bankart s ATM network comprises the Diebold, NCR and Wincor Nixdorf types of ATMs. These accept BA Maestro and Activa Maestro cards as well as major international cards MasterCard, Visa and Diners. Commercial banks and savings banks included in Bankart s ATM network: Abanka Vipa d.d., Banka Celje d.d., Banka Koper d.d., Banka Sparkasse d.d., Banka Volksbank d.d., Delavska hranilnica d.d., Deželna banka Slovenije d.d., Gorenjska banka d.d., Hranilnica LON, Hypo Alpe-Adria-Bank d.d., KD Banka d.d., Nova Ljubljanska banka d.d., Nova KBM d.d., Poštna banka Slovenije d.d. banking group NKBM d.d., Probanka d.d., Raiffeisen banka d.d., SKB d.d., UniCredit Banka Slovenija d.d., NLB Tuzlanska banka d.d., NLB Priština sh. a. and BpB Prishtina. ATM Settlement payment system In co-operation with banks and the Bank of Slovenia, Bankart has formally set up the ATM Settlement payment system. Based on the approved rules of operation of the ATM Settlement" payment system, it provides the services related to calculation of mutual receivables and liabilities of the banks participating in this payment system and the services related to the management of this system. Card service processing Bankart holds a 46% share of the card-operations market in Slovenia. Card processing services are provided to Abanka Vipa d.d., Banka Sparkasse d.d., Delavska hranilnica d.d., Hypo Alpe-Adria-bank d.d., KD Banka d.d., Nova Ljubljanska banka d.d., SKB banka d.d., UniCredit Banka Slovenija d.d. and NKBM d.d. Debit cards are processed for all banks mentioned above, whereas other card products (MasterCard, Visa, Karanta) for the majority of them. Card processing on the SE European markets Bankart successfully provides card processing services also on the SE European markets. It processes Maestro, MasterCard and VISA card products for NLB Tuzlanska banka (BiH) in terms of both card and ATM operations, as well as provides processing services for POS terminals accepting Visa and MasterCard card products. For NLB Prishtina sh.a. the Company processes Maestro, MasterCard and VISA card products in terms of both card and ATM operations and for BPB Prishtina it processes Visa card products in terms of both card and ATM operations Annual Report 7

8 These card products feature chip technology, which is accepted by the appropriately upgraded ATMs and POS terminals. Card Settlement payment system In co-operation with banks and the Bank of Slovenia, Bankart has formally set up the Card Settlement payment system. Based on the approved rules of operation of the Card Settlement" payment system, it provides services related to calculation of mutual receivables and liabilities of the banks participating in this payment system and services related to the management of this system. SEPA Small-Value Payment Infrastructure (SIMP) In 2009 Bankart established the SEPA Small-Value Payment Infrastructure (SIMP). This is SEPA-compliant infrastructure used by the SEPA (payment) systems to process SEPA payment instruments in line with the SEPA schemes. Payment systems and SEPA systems within the SIMP SEPA Internal Credit Payments (SEPA ICP) intended for the processing of credit payments in the SEPA standard within the country; SEPA External Credit Payments (SEPA ECP) intended for the processing of cross-border credit payments in the SEPA standard; SEPA Internal Direct Debit under the core SEPA scheme (SEPA IDD CORE) intended for the processing of SEPA direct debits under the core SEPA scheme within the country; SEPA Internal Direct Debit under the business-to-business (B2B) SEPA scheme (SEPA IDD B2B) intended for the processing of SEPA direct debits under the business-to-business (B2B) SEPA scheme within the country; SEPA External Direct Debit under the core SEPA scheme for SEPA direct debits (SEPA EDD CORE) - intended for the processing of cross-border direct debits in the SEPA standard; SEPA External Direct Debit under the business-to-business (B2B) scheme for SEPA direct debits (SEPA EDD B2B) - intended for the processing of cross-border direct debits in the SEPA standard where only a legal entity can be the payer. Benefits of establishing payment systems and SEPA systems By establishing SEPA ICP and SEPA ECP Bankart enabled the banks and savings banks in Slovenia to offer their clients a single standard of payment using SEPA credit payment orders according to the SEPA standards, regardless of whether the recipient of the payment is located in Slovenia or in any other euro area country. By establishing SEPA IDD CORE, SEPA IDD B2B, SEPA EDD CORE and SEPA EDD B2B Bankart enabled the banks and savings banks in Slovenia to: offer their clients a single standard for making and receiving direct debit payments, regardless of whether the payer or the recipient of the payment is located in Slovenia or in any other euro area country; and ensure accessibility for cross-border direct debits according to the SEPA standard under the CORE and B2B schemes. Joining other European clearing companies By unifying the standard for paying with SEPA credit payment orders and the standard for SEPA direct debiting within the euro area, any clearing company in Europe can provide processing of payments between banks and/or providers of payment services in a competitive environment. By establishing the SEPA systems, Bankart has joined other European clearing companies which provide processing of SEPA credit payments according to a single standard and processing of SEPA direct debits according to a single standard Annual Report 8

9 SEPA credit payment processing On behalf of the banks and savings banks Bankart has acquired an authorisation from the Bank of Slovenia to establish the payment system SEPA Internal Credit Payments (SEPA ICP). Bankart, as a clearing house, also acquired an authorisation from the Bank of Slovenia for performing the SEPA ICP payment system management services. The SEPA ICP payment system enables the execution of credit payment orders between participants in the system under the SEPA standard. The banks and savings banks participating in the SEPA ICP system can offer their clients domestic payments under the single standard of SEPA credit payments which is currently used by more than 4,500 banks and savings banks in Europe. The use of this single standard has simplified the execution of payment orders among banks and savings banks in different SEPA countries and has been facilitated by the connectedness between the clearing houses in this area. Therefore, Bankart also provides (through its complementary SEPA External Credit Payment system SEPA ECP and the Bank of Slovenia as the agent bank in the SEPA ECP system) connection with the STEP2-SCT trans-european payment system which is managed by EBA Clearing; thus it ensures to the Bankart system participants access (making and receiving of payments) to transaction accounts kept by over 5,800 banks and savings banks in Europe and their subsidiaries. Participants in the SEPA Internal Credit Payment system: Abanka Vipa d.d., Banka Celje d.d., Banka Koper d.d., Banka Slovenije, Banka Sparkasse d.d., Banka Volksbank d.d., BKS Bank AG, Delavska hranilnica d.d., Deželna banka Slovenije d.d., Factor banka d.d., Gorenjska banka d.d., Hranilnica Lon d.d., Hranilnica Vipava d.d., Hypo Alpe-Adria bank d.d., KD Banka d.d., Nova kreditna banka Maribor d.d., Nova Ljubljanska banka d.d., Poštna banka Slovenije d.d., Probanka d.d., Raiffeisen banka d.d., SKB banka d.d., UniCredit banka Slovenija d.d. and the Bank Association. Participants in the SEPA External Credit Payment system: Abanka Vipa d.d., Banka Celje d.d., Banka Slovenije, Banka Sparkasse d.d., Banka Volksbank d.d., BKS Bank AG, Delavska hranilnica d.d., Deželna banka Slovenije d.d., Factor banka d.d., Gorenjska banka d.d., Hranilnica Lon d.d., Hranilnica Vipava d.d., Hypo Alpe-Adria bank d.d., KD Banka d.d., Nova kreditna banka Maribor d.d., Nova Ljubljanska banka d.d., Poštna banka Slovenije d.d., Probanka d.d. and Raiffeisen banka d.d. SEPA direct debit processing In November 2010 Bankart established two new SEPA systems for processing cross-border SEPA direct debits: SEPA External Direct Debit under the core SEPA scheme for SEPA direct debits (SEPA EDD CORE) - intended for the processing of cross-border direct debit in the SEPA standard; SEPA External Direct Debit under the business-to-business (B2B) scheme for SEPA direct debits (SEPA EDD B2B) - intended for the processing of cross-border direct debits in the SEPA standard where only a legal entity can be the payer; in November 2011 also two SEPA payment systems for processing domestic SEPA direct debits: SEPA Internal Direct Debit under the core SEPA scheme (SEPA IDD CORE) intended for the processing of SEPA direct debits under the core SEPA scheme within the country, and SEPA Internal Direct Debit under the business-to-business (B2B) SEPA scheme (SEPA IDD B2B) intended for the processing of SEPA direct debits under the business-to-business (B2B) SEPA scheme within the country. The objective of the establishment of the SEPA EDD CORE and SEPA EDD B2B systems was to set up a system for processing cross-border SEPA direct debits so as to enable the banks to offer cross-border accessibility within the core scheme (SEPA EDD CORE) and the business-to-business scheme (SEPA EDD B2B) and thus comply with legal requirements. The establishment of the systems for processing domestic SEPA direct debits (SEPA Internal Direct Debit CORE SEPA IDD CORE and SEPA Internal Direct Debit B2B SEPA IDD B2B) envisaged the setting up of two new 2011 Annual Report 9

10 payment systems for which Bankart had to separately for each payment system and in compliance with the provisions of the Payment Services and Systems Act (ZPlaSS) acquire, on behalf of the banks, an authorisation from the Bank of Slovenia for establishing a payment system and, in its own name, an authorisation for performing the payment system management services. The setting up of the abovementioned payment systems has enabled the payers to settle their obligations to the recipients of payments throughout the SEPA area based on an authorisation by the payer to the recipient to perform a SEPA direct debit, whereas the recipients of payments can, based on appropriate authorisations, perform direct debits to the accounts of the payers throughout the SEPA area. Participants in the SEPA IDD CORE system: Abanka Vipa d.d., Banka Celje d.d., Banka Koper d.d., Banka Sparkasse d.d., Banka Volksbank d.d., BKS Bank AG, Delavska hranilnica d.d., Deželna banka Slovenije d.d., Factor banka d.d., Gorenjska banka d.d., Hranilnica Lon d.d., Hranilnica Vipava d.d., Hypo Alpe-Adria bank d.d., KD banka d.d., Nova kreditna banka Maribor d.d., Nova Ljubljanska banka d.d., Poštna banka Slovenije d.d., Probanka d.d., SKB banka d.d., UniCredit banka Slovenija d.d. Participants in the SEPA IDD B2B system: Abanka Vipa d.d., Banka Celje d.d., Banka Koper d.d., Banka Volksbank d.d., Factor banka d.d., Gorenjska banka d.d., Hypo Alpe-Adria bank d.d., Nova kreditna banka Maribor d.d., Nova Ljubljanska banka d.d., Probanka d.d., UniCredit banka Slovenija d.d. Participants in the SEPA EDD CORE system: Abanka Vipa d.d., Banka Celje d.d., Banka Slovenije, Banka Sparkasse d.d., Banka Volksbank d.d., BKS Bank AG, Delavska hranilnica d.d., Deželna banka Slovenije d.d., Factor banka d.d., Gorenjska banka d.d., Hranilnica Lon d.d., Hranilnica Vipava d.d., Hypo Alpe-Adria bank d.d., KD banka, d.d., Nova kreditna banka Maribor d.d., Nova Ljubljanska banka d.d., Poštna banka Slovenije d.d., Probanka d.d., SKB banka d.d. Participants in the SEPA EDD B2B system: Abanka Vipa d.d., Banka Celje d.d., Banka Slovenije, Banka Volksbank d.d., Factor banka d.d., Gorenjska banka d.d., Hypo Alpe-Adria bank d.d., Nova kreditna banka Maribor d.d., Nova Ljubljanska banka d.d., Probanka d.d. E-Invoice System processing On 1 June 2011 Bankart established the E-Invoice System for exchanging electronic invoices between invoice issuers and recipients. The establishment of a new, single E-Invoice System in Bankart enables the banks and the Public Payments Administration of the Republic of Slovenia (UJP) to efficiently exchange electronic documents. The E-Invoice System is designed so that the received electronic documents are processed by the central processor, i.e. Bankart, every day in three daily clearing cycles and features the option of subsequent upgrading of functionalities, such as exchange of other electronic documents related to the issuing and receiving of e- invoices. The establishment of the E-Invoice System results in considerable savings in the handling and postal costs, simplifies the existing invoice exchange processes in companies and receipt by consumers, while also facilitating environmentally friendly operations. Bankart generates a Register of E-Invoice Issuers for the banks and the UJP, listing all companies that enable their clients to receive electronic invoices Annual Report 10

11 By establishing the E-Invoice System Bankart expanded its processing services to the area of electronic invoice exchange. Banks using the E-Invoice System: Abanka Vipa d.d., Banka Celje d.d., Banka Koper d.d., Banka Sparkasse d.d., Banka Volksbank d.d., Delavska hranilnica d.d., Deželna banka Slovenije d.d., Gorenjska banka d.d., Hypo Alpe-Adria bank d.d., KD banka, d.d., Nova kreditna banka Maribor d.d., Nova Ljubljanska banka d.d., Poštna banka Slovenije d.d., Probanka d.d., Raiffeisen banka d.d. in UniCredit banka Slovenije d.d. The area of operation of the Collection Centre The Bankart Collection Centre was established by the banks and savings banks which are members of the Bank Association of Slovenia so as to standardise the procedures entailing the use of new payment instruments between the participants in the payment system. The Bankart Collection Centre is tasked with receiving, sorting and forwarding of electronic data or information to all participants in the system and, at the same time, statistically monitoring of operations. Until the end of 2011, the Collection Centre processed transactions involving special payment orders, direct credits and direct debits. On 31. December 2011 the processing of special payment orders and direct credits through the Bankart Collection Centre was abolished. With the abolishment of the paper-form special payment order and the migration to the paper-form UPN (universal payment order) the processing of special payment orders was transferred to the SEPA Internal Credit Payment system. The processing of direct credits was also transferred to the SEPA Internal Credit Payment system. Today only direct debits are being processed through the Bankart Collection Centre and this processing will be abolished at the end of The direct debit payments will migrate in the SEPA Internal Direct Debit CORE or SEPA Internal Direct Debit B2B payment system. On 31 December 2012 the operations of the Bankart Collection Centre will terminate completely. Bankart as the manager of the Collection Centre system (CC system) The CC system is a system for processing and exchanging data about new payment instruments among the members of the Bankart s CC system. The CC system is managed by Bankart which provides to the CC system members the following services, besides the basic processing services: data exchange services for checking accounts; CC register management; compilation and transmission of data exchange statistics, ensuring access to the Meduza web application for the CC system members banks and their business partners and the Public Payments Administration (UJP) and its budget users. Additional areas of Bankart s operations support functions With the aim of providing a complete range of products and services, Bankart also implements a series of support functions such as: POS service tasked with preparing, installing, servicing and maintaining POS terminals, call centre for holders and merchants, resolving of financial complaints, fraud detection and prevention, drawing up of reports for the Bank of Slovenia, international card systems etc. Bankart supervises and manages the POS terminal network round the clock, 365 days a year. It holds a 49% market share in Slovenia and is expanding its business to the SE European markets Annual Report 11

12 POS terminals in Bankart's POS network are adapted to accept cards with chip technology (EMV), international card products (Maestro, MasterCard, Visa, American Express, Diners) and various local card products (Karanta, Activa, Zegin). The Company s orientations Mission Bankart's core mission is to provide reliable, safe and cost-efficient processing of transactions involving various bank payment instruments. Moreover, its mission is to enable all clients through planned development, construction and maintenance of an adequate information environment to use Bankart services in an ongoing and high-quality manner. Vision Bankart s vision is focused on the search for new opportunities and challenges in the SE European region. The Company strives to set up an organisation that is capable of coping with the challenges brought about by the laws of the market and the modern competitive environment. Objectives The Company s objective is to strengthen its position of the top Slovenian processing centre, by providing highquality and state-of-the-art technological services, and thus become one of the leading international processing centres in the region. Business orientations The Company s business orientations are based on constant development and technical perfection, compliance with the wishes and needs of banks and other financial institutions, implementation of development trends in the field of contemporary payment transactions and implementation of the requirements of international card organisations. The basic objective is further constant growth and independence, which Bankart achieves through the following long-term goals: develop new activities and provide a comprehensive service range, streamline its operations and continuously boost operating efficiency, further develop a comprehensive information system and internal communication infrastructure, promptly adjust the personnel and organisational structure to the market conditions and new technologies, increase the Company's visibility in a broader social environment, continuously expand the volume of operations Annual Report 12

13 The Company s financial operations The Company successfully concluded the past financial years and attained positive business results. Income statement Year Business result (in EUR) , , , , , ,662, ,039, ,014, ,147, , , , , ,717 Revenues from ATM and card operations Chart 3: Revenues from ATM and card operations since the Company s establishment (in EUR million) 2011 Annual Report 13

14 Managing Director s report The 2011 profit amounts to EUR 408,717 and thus facilitates the Company s growth and development as well as its capital structure in compliance with the requirements of the Bank of Slovenia which functions as the regulator of Bankart as a payment transaction administrator. Operations In 2011 the Company invested EUR 2,860,000 (it regularly monitors the realisation of the invested funds based on concluded agreements), accounting for 14% of its total revenues. Projects account for the bulk of investments. In line with its strategic orientations, the Company successfully completed the following projects in 2011: upgrading and supplementing of the SEPA Direct Debit system functionalities within the SIMP infrastructure, implementation of the MasterCard and VISA mandates in the card (CMS) and ATM (B24) operations and automation of inputs in the acquiring segment within the Development of new solutions to meet the requirements of banks migrating their card operations to Bankart project. In the area of information technology, all planned activities in Bankart s communication network and server and disk platforms were successfully completed. A new technology has been introduced the SOA system enabling administration of the information in the authorisation system. To ensure compliance with the Payment Card Industry Data Security Standard (PCI DSS), Bankart in 2010 conducted an audit of the processes and controls related to information security, and redesigned them. In April 2011, after an external PCI DSS audit, Bankart was awarded for the first time the certificate of compliance with the PCI DSS standard, Ver The introduction of this standard increases the level of security, maintains confidence, protects against loss events (abuses) and, consequently, prevents financial losses and loss of reputation. Thus, the Company fulfilled the condition and was allowed to continue processing the transactions performed by means of MasterCard and Visa cards. Compliance with the standard is requested in all areas; it is verified and renewed every year, through own assessments and those by certified assessors. The annual verifications and renewals prove that Bankart s compliance with the PCI safety standard requirements has become its way of doing business. Bankart launched the project of acquiring the ISO/IEC standard at the beginning of It was awarded the ISO/IEC 20000:2005 certificate in October The establishment of the ISO/IEC standard enables an efficient implementation of the information technology processes and ensures a controlled and coordinated provision of services to the internal users and final buyers. In the past period, cash withdrawals were enabled to the Diners credit card holders on the ATMs of the following: Nova Ljubljanska banka, Abanka, NKBM, Banka Celje, Deželna banka Slovenije, Hypo Alpe-Adria- Bank, Poštna banka Slovenije, Raiffeisen Banka, Volksbank and SKB banka, whereas in 2011 Bankart ensured that the Diners credit card holders were able to withdraw cash on the ATMs of Delavska hranilnica as well. In 2011 a new ATM service was introduced, namely Personal Account Statement, which enables the users to quickly and simply view the transactions on their personal account, and the solution also features the option of multiple print-outs of transactions. This service has already been introduced by Abanka, NKBM and NLB; they enable each other s clients to print out the statement of their personal account at all ATMs owned by the three banks (Abanka's clients at the ATMs of NKBM and vice versa). In cooperation with Abanka, Bankart has developed the ATM automatic cash deposit service. Today, this solution is offered to the clients also by NLB and SKB. The clients of the abovementioned banks holders of BA Maestro debit cards can use this service on the designated ATMs of their home bank. Moreover, in agreement with Abanka and NLB, the automatic cash deposit service also enable banks to offer this service to their clients holders of BA Maestro business debit cards Annual Report 14

15 The first banks which started offering their clients the SMS Alert service were NLB, Abanka, Delavska hranilnica, UniCredit Banka Slovenije, Gorenjska banka and NKBM. In 2011 the above banks were also joined by Hypo Alpe-Adria-bank. In 2010 the processing of standing orders by the Bankart Collection Centre was abolished, and on 31. December 2011 also processing of special payment orders and direct credits. Direct debits will be processed by the Bankart Collection Centre only until the end of 2012 when the centre will cease to operate, in compliance with the legislation. Direct credit and special payment order are credit payment instruments which according to the Slovenian SEPA National Programme are bound to migrate in the SEPA credit payments, namely in the SEPA Internal Credit Payment (SEPA ICP) system. By abolishing the processing of special payment orders and direct credits by the Bankart Collection Centre the processing of these payment instruments was transferred to the SEPA ICP system. On 1 November 2011 Bankart established two SEPA payment systems for processing SEPA direct debits: SEPA Internal Direct Debit under the core SEPA scheme (SEPA IDD CORE) intended for the processing of SEPA direct debits under the core SEPA scheme within the country; SEPA Internal Direct Debit under the business-to-business (B2B) SEPA scheme (SEPA IDD B2B) intended for the processing of SEPA direct debits under the business-to-business (B2B) SEPA scheme within the country. The establishment of the systems for processing domestic SEPA direct debits (SEPA IDD CORE and SEPA IDD B2B) envisaged setting up of two new payment systems for which Bankart had to in compliance with the provisions of the Payment Services and Systems Act (ZPlaSS) acquire, on behalf of the banks, an authorisation from the Bank of Slovenia for establishing a payment system and, in its own name, an authorisation for performing the payment system management services. By establishing SEPA IDD CORE and SEPA IDD B2B, Bankart enabled the banks and savings banks in Slovenia to offer their clients a single standard of making and receiving direct debits, regardless of whether the payer or the recipient of the payment is in Slovenia or any other euro area country. As regards information technology, investments were made in line with Bankart s mission and goals in various server platforms, communication networks, a central disc array and a data archiving system so as to ensure reliable, safe and cost-effective processing. To cater the clients needs for online data administration and a modern application protocol for accessing the authorisation system, a new technology was introduced, i.e. the SOA system, which enables administration of the information in the authorisation system. In 2011 the Company continued cooperating with NLB Tuzlanska banka (BiH), BpB Prishtina and NLB Prishtina sh.a. (Kosovo). For NLB Tuzlanska banka and NLB Prishtina sh.a. the Company processes Maestro, MasterCard and VISA card products, both in terms of card and ATM operations. The processing for NLB Tuzlanska banka also includes transactions through POS terminals accepting VISA and MasterCard products. The Company processes VISA card products for BPB Prishtina, both in terms of card and ATM operations. These card products feature chip technology, which is accepted by appropriately upgraded ATMs and POS terminals Annual Report 15

16 Forecasts Besides those projects which were not completed in 2011 Bankart will carry out the following in the field of ATM operations, in line with its 2012 Business Development Plan: Small-Value Payment Infrastructure (SIMP) web interface Bankart proposed the setting up of a web interface to enable the banks access to specific interactive data, statistics and documentation related to the systems functioning within the SIMP infrastructure. The proposal was discussed at the 5 th meeting of the SIMP Committee where it was decided that Bankart should first obtain information on banks interest in the service and then prepare an offer or a proposal for a concrete solution. Upgrading and optimisation of the SEPA systems in the framework of the SIMP infrastructure and E-Invoice system The following SEPA systems are established in the framework of the SIMP infrastructure: SEPA ICP, SEPA IDD CORE and SEPA IDD B2B payment systems and SEPA ECP, SEPA EDD CORE and SEPA EDD B2B systems. The SIMP infrastructure also features the electronic invoice exchange system (E-Invoice System). In 2012, each individual system will undergo various upgrades and optimisations that are either mandatory or asked for based on banks business requests. Establishment of the central authentication system with support to different authentication methods Banks use authentication systems in different segments of operations (online card operations 3D secure, electronic bank, m-bank, contact centres etc.). Bankart has offered the authentication system for card operations to banks but it cannot be expanded to other areas of use or offered to all interested banks that are already using Bankart s services. Within the project Bankart will examine different possible solutions and offer to the banks with which it cooperates a central authentication system that the banks will be able to use in all segments of operations. The starting points in the design of the new system will include ensuring a high (security) level of verification of a persons identity, enabling different methods of authentication, supporting different authentication devices as well as cost efficiency. Implementation of the MasterCard and Visa mandates MasterCard and Visa issue mandates several times a year on the basis of which the operation of the support software solutions linked to international card systems must be adjusted. As a rule, they are introduced twice a year, i.e. in March and September. Establishment of a new debit card management system For the purpose of debit card management Bankart uses from the very beginning a software solution operating on IBM Host. In the framework of this project Bankart will establish a new, modern solution for debit card management. Inclusion of VISA debit cards in the ATM Settlement payment system Visa and individual banks using Bankart s ATM network have shown interest that Visa debit cards be included in the ATM Settlement payment system. The representatives of Visa showed their readiness to changing the processing model according to the principle of Maestro cards (where authorisations and settlements are implemented only within the ATM Settlement payment system). In the event an agreement is reached between the banks and a decision made to include Visa debit cards in the ATM Settlement payment system, the legal framework of the payment system will have to be adjusted within the project, along with the development of technological solutions that support the change in the processing method (authorisations and settlements) and support to additional transactions for Visa debit cards. Introduction of the ATM service Transfer of funds between accounts On the banks initiative, Bankart plans to develop a new service (in the first phase for the NCR ATMs) enabling the transfer of funds between different accounts (within and outside the bank which issued the card) and thus facilitating additional ATM transactions. Next year, a portion of investments will be allocated to the upgrade i.e. modernisation of the IT equipment Annual Report 16

17 Server platform, disk systems and personal computers In the area of server and disk systems and personal computers, we plan to replace the servers the capacities and efficiency of which are no longer adequate, upgrade the existing server infrastructure and disk systems as well as regularly replace personal computers. Thus continuous operations and uninterrupted work process will be ensured in line with the users requests. Bankart s communication networks In the area of communication networks, the Company plans to upgrade the network equipment for connecting servers and server segments within the internal network, the internal firewalls and the MPLS network so as to ensure a sufficient number of connections and an appropriate band-width to include servers in the Company s network, improve the safety of connections between the internal networks of Company s IT system and adequately increase the MPLS infrastructure to enable connections with partners. The Company also plans to install IPS modules for 3D Secure so as to improve the security of the system for processing online transactions in line with the PCI DSS requirements Annual Report 17

18 Business and financial report The analysis of operations was performed based on planned revenues and expenses of the Company for 2011, which were approved at the 18 th General Meeting on 1 July The assets, liabilities, financial position and business result of the Company are presented below according to the principle of true and fair presentation. Realised investment activity of the Company summarised development plan Table 1: Investments in 2011 in EUR Plan 2011 Real. in 2011 Intangible assets - software 800, ,000 - licences 400, ,000 Property, plant and equipment - hardware 2,200,000 1,356,000 - other equipment 200,000 54,000 TOTAL 3,600,000 2,860,000 In 2011, 79% of investments were realised. Upgrades and supplements to the functionalities of SEPA ICP and SEPA ECP In 2011, we successfully implemented the modification of the algorithm of the settlement guarantee scheme (SGS) and supplemented the functionality of Hal E-Clearing console. In 2011, software was upgraded owing to the upgrade of the SEPA ECP the SEPA ECP system was aligned with the latest applicable standards (SEPA Credit Transfer version 5.0), while the SEPA ECP will be upgraded by the end of February 2012 (mandate). Upgrades and supplements to the functionalities of SEPA Direct Debit systems in the framework of SIMP infrastructure Hal E-Clearing SDD SVT was successfully upgraded and the SGS functionalities were effectively implemented in the SEPA IDD system (CORE/B2B). Implementation of MasterCard and Visa mandates The required mandatory changes of MasterCard and Visa were in 2011 successfully implemented on the authorisation system and card management. To provide compliance with mandates, we made adjustments to the authorisation system by installing software for proper processing of "Money send" transactions. SEPA in card operations The new version of SEPA FAST documents has not been published yet. The document on SEPA conformity certification has not been published yet either and is relevant for decisions about technical adjustments to SEPA requirements. It has not yet been announced when the final versions containing the expected elements needed for ATM development planning will be published. Immediately after publication of the new SEPA FAST versions and other documents defining specific development requirements, Bankart will study the documents and provide information to banks. Migration to new central authorisation system All introductory activities were completed on the project in 2011 (project design, GAP analysis, plan preparation, technical concept design) and the environment was established. The preparation of the environment and connection to the existing system are in progress. The first test involving the connection of the existing and new authorisation system (EPS) is scheduled for May As a result, depending on the test 2011 Annual Report 18

19 result, a new implementation deadline will be set for Network certification as well as for transfer to production. Upgrade of user interface on ATMs The testing and implementation of software for configuration files on ATMs have been successfully completed. The software designed for the development and testing of configuration files has already been incorporated in the work process of ATM configuration management. For banks that would in addition to modified user interfaces wish to introduce the HTML and graphic interface technology we will start developing this functionality in cooperation with respective ATM suppliers. Upgrade of the interface for resolving complaints in CMS In 2011 we received the CBCK interface, prepared the test environment and test scenario, and conducted parameterisation in the relevant tables in CMS base for the purpose of upgrading the interface for resolving complaints in CMS. In 2012, this will be followed by testing, informing banks about the altered processing method and transfer to production. Developing new solutions to meet the requirements of banks that are migrating card operations to Bankart Due to automation of entries on the acquiring side we supported electronic data exchange for the purpose of connecting or replacing POS terminals. Thus, banks send to Bankart only files with the necessary data and no longer requests on paper or via . We developed support for automatic capture (import/export) of requests regarding installations, disconnections, replacements, etc., via a text file. We successfully completed general development of the functionality involving XML file import. Server and disk platform In the area of server and disk systems we replaced servers with unsuitable capacity, upgraded disk systems and the tape-archiving system. Communication networks In 2011, we successfully upgraded network equipment and analysed the possibility of setting up an entry point for POS terminal connection via the Internet. Introduction of new technologies To cater the clients needs for on-line data administration and a modern application protocol for accessing the authorisation system, a new technology was introduced, the SOA system, which enables administration of the information in the authorisation system. As regards introducing the data comparison system on MS SQL bases and GoldenGate, we successfully conducted an analysis and evaluation of solutions on the market, whereas other activities will be carried out in Annual Report 19

20 Assets and financial position Revenues In the January December period the Company generated revenues from the sales of services in the amount of EUR 20,018,373 (2010: EUR 19,638,541), and EUR 67,998 of other revenues which means that the 2011 plan was exceeded by EUR 207,371 or 1%. Volumes and revenues arising from the five main transactions in 2011 Volumes B011 B012 K011 K012 K122 Plan Jan.-Dec. 62,150,120 19,425,304 20,498,914 50,345,139 75,135,964 Real. Jan.-Dec. 62,239,053 19,534,985 20,144,381 53,087,502 76,999,362 Deviations Values (in EUR) B011 B012 K011 K012 K122 Plan Jan.-Dec. 4,454,399 1,402,392 1,984,492 2,217,938 3,241,542 Real. Jan.-Dec. 4,403,204 1,402,785 1,892,705 2,287,752 3,319,170 Deviations Key: B011 - cash withdrawal B012 - balance inquiry K011 - credit card K012 - debit card K122 - capture of transactions, electronic Chart 4: Structure of significant transactions generating the Company s revenues in Annual Report 20

21 Revenues arising from ATM and card operations Chart 5: Revenues arising from ATM operations by month compared to the plan Generated ATM revenues accounted for 100% of the plan. Chart 6: Revenues arising from card operations by month compared to the plan Card revenues were EUR 296,000 or 3.5% above the plan Annual Report 21

22 Costs Chart 7: Share of individual types of costs in total expenses of the Company The costs of materials and services incurred in the process of producing goods and services depend on the growth in operations and involve the costs of projects by type. Net profit for 2011 totalled EUR 408,717 or 95% of the plan. Chart 8: Planned and realised expenses and revenues of the Company in 2011 (in thousands of EUR) 2011 Annual Report 22

23 Financial intermediation position BS RATIO (Regulation Offic. Gaz. 41/07) PLAN 1-12/11 REAL 1-12/11 equity/fixed assets = 60% 100% 112% equity+long-t. liab.=75% fixed and long-t. curr. assets 110% 122% ACCOUNTING RATIOS Current assets calculation (in EUR) PLAN 1-12/11 REAL 1-12/11 long-term assets 13,332,000 12,185,000 - equity 13,289,000 13,610,000 - long-term provisions 590, ,000 - long-term liabilities 790, ,000 working capital 1,337,000 2,735,000 Indebtedness (in EUR) PLAN 1-12/11 REAL 1-12/11 short-term receivables 1,801,000 2,001,000 - short-term operating liabilities -1,428,000-1,499,000 - short-term financial liabilities -378, ,000 = net short-term debt -5,000-9,000 long-term receivables 179, ,000 - long-term operating liabilities long-term financial liabilities -790, ,000 = net long-term debt -611, ,000 = net debt -616, ,000 debt to non-current assets 5% 3% debt to equity 5% 2% The basic principles pursued by the Company in financing are chiefly the principle of matching the maturity of assets with that of liabilities, along with the principles of profitability and liquidity. The Company s objective is to generate profit which, in the long run, ensures growth and development and the appropriate structure in compliance with both the Financial Operations of Companies Act and the requirements and regulations of the Bank of Slovenia. The risks relating to the financial operations of companies in general (liquidity, interest rate, currency, credit and other market risks) at Bankart are not significant. An ever more important risk is the impact of the measures taken by the banks on Bankart s revenues. By changing their operations as regards card, ATM and POS transactions, for example by terminating the possibility of account balance inquiry for clients of other banks or by charging a commission for ATM cash withdrawals made by clients of other banking groups, they can have a considerable impact on the revenues earned by Bankart Annual Report 23

24 Personnel and the organisation As at the end of 2011, Bankart had 209 staff, 202 of whom were permanently employed and 7 under fixedterm contracts. The average age of the employees compared to the preceding year increased from 38 to 40 years. A downward trend is notable in the share of women employees. In the last seven years, their share has fallen from 54% to 42%. Due to the specific nature of work at Bankart, special attention is paid to the permanent further training of employees. In the past year, altogether 0.6% of total revenues was allocated to employee education and training. The total number of training hours was 1104, while each employee s average training duration was 5.3 hours. Altogether 24 employees participated in programmes to obtain formal qualifications. The pension scheme launched in 2002 involves 149 or 71.2% of all employees. Sick leave level in 2011 stood at 3.75%. Due to the Company s specific work, conventional injuries at work are insignificant. One minor injury at work was recorded in Educational structure of employees Education level II. IV. V. VI. VII. VIII. Number of employees Annual Report 24

25 Fluctuation The number of employees rose by 10 or 4.8% compared to the preceding year. The staff turnover rate stood at 3.2%, having fallen by 0.2% from the preceding year. The majority of new recruitments were recorded in the field of information and business technology, which constitutes the core of the Company s operations. On the other hand, excessive human resources, which are due to the improved organisation of work and automation of operations in operative sectors, are managed via internal relocations while simultaneously limiting new recruitments. Chart 9: Growth in the number of employees Promotion In the area of promotion we prepared interactive material presenting ATM services, their advantages and the advantages of SMS Alert service. We developed an ATM simulator and on the Company s website established a classroom on ATM use where general public can access material. We are actively involved in the Raising the Literacy Level project, conducting lectures and workshops all over Slovenia together with the providers of the Computer and Digital Literacy for the Elderly course. The presentation of ATM use and SMS Alert service carried out during the Lifelong Learning Week met with a positive public response. In November 2011, at the Slovenian Institute for Adult Education, we successfully presented the material for independent learning of ATM use to the managers of independent learning centres in Slovenia and the Ljubljana City Library Annual Report 25